Queensland Premier Peter Beattie has accused the federal government of trying to sabotage the Traveston Crossing Dam by ordering an inquiry into the project.

The federal government is to hold a Senate inquiry into the controversial dam, which the Queensland government wants to build near Gympie, north of Brisbane, to secure water supply for the state's south-east.

Residents are fighting the proposal on social and environmental grounds, and oppose the 1,500 property resumptions required to make way for the $1.7 billion dam.

In Canberra today for water reform talks with Prime Minister John Howard, Mr Beattie hit out at the inquiry, initiated by Queensland Nationals senator Ron Boswell.

"The National and Liberal parties have agreed to try, through a Senate inquiry, (to) sabotage the building of the Traveston Crossing Dam," Mr Beattie told reporters.

"I just say to the prime minister, who has had some criticism of dams not built elsewhere: we want to build a dam.

"We'd like the prime minister to work with us to build a dam in Queensland, for water."

The premier's outburst came after the Greens tried unsuccessfully in federal parliament to expand the inquiry's terms of reference to examine the dam's impact on residents and the environment.

During debate, Nationals senator Barnaby Joyce warned the dam could cripple the dairy industry, and called for it to be built elsewhere.

"People in Brisbane like to drink milk," he said. "When the dam goes forward, one of the main dairy areas of south-east Queensland is taken out of production."

Senator Joyce said he was not against dams, but the Traveston Dam would be built in the wrong spot.

"If you're going to build a dam, best to build one in the right area," he said.

A desalination plant to provide drinking water for south-east Queensland could be built for just $500 million, he said.

Queensland Liberal senator Russell Trood branded the dam "a fundamentally ill-conceived proposal".

"This is creating an enormous amount of uncertainty in the community, it is creating an enormous amount of anxiety," he said.

"A Senate inquiry will expose the limitations of this proposal for what it is. It is a public policy sham."

Federal Labor said it supported the Senate inquiry but did not want the probe to delay construction of the dam.

Yesterday, Queensland Deputy Premier Anna Bligh said the state government had nothing to fear from the inquiry.

Senator Boswell is due to set up the inquiry on February 26.

Source: Australian Associated Press General News