Malcolm Gardiner has been observing waterways in the Otway region for more than 50 years and said he had seen dramatic falls in surface water flows during that period.

He said there were several factors contributing to the problem, and the Gellibrand River, which was the main source of drinking water for most of the great south coast, hadn't been immune to the general decline.

"The Gellibrand surface water has been over-allocated for 20-odd years. Really there's not enough water for the licences that have already been issued to keep the river flowing during dry periods," he said.

"Extending the pipeline to Port Fairy would be speeding up an inevitable disaster."

The Port Fairy Pipeline Supply Support Group renewed its call in January for the seaside town to be hooked into the Otway supply.

The group has collected 2200 signatures on a petition supporting the proposal and enlisted the support of federal and state Liberal MPs Dan Tehan and Roma Britnell.

Founder John Konings said the group had put forward a detailed technical proposal that he said showed a pipeline was a superior and cost-effective option. He said Wannon Water, which manages the water supply for the region, ought to sit down with the group and present its own study in order to assess the best option.

"We've developed a pipeline proposal and they haven't provided a counter proposal," he said.

Wannon Water recently made a price submission to the Essential Services Commission in September 2022 that will determine how much money is available to spend on various projects. In its submission the water authority put aside $16 million for its Great Tasting Water project, which aims to address the drinking water in Port Fairy, Portland and Heywood.

The two options for fixing Port Fairy's drinking water are a desalination plant to treat the local ground water, or a connection to the Otway pipeline. A spokesperson for the water authority said there would be no update until Wannon Water's price submission was approved.

Mr Gardiner said he would be deeply concerned if Wannon Water added to the strain on the Gellibrand.

"Back in 1993 Khori and Duncan from the engineering company HydroTechnology did a study of the Otway supply system," he said.

"They found if you gave the Gellibrand it's basic environmental flow (the quality and quantity of water flow necessary to maintain the integrity of the river system) then during drought periods towns like Camperdown and Terang would completely run out of water."

Mr Gardiner said flows in the Gellibrand had only decreased since 1993, thanks to water extraction by neighbouring water authority Barwon Water.

"The bore field at Barwon Downs has created a cone of depression which spreads out 480 square kilometres, which has now spread to the Gellibrand," he said.

"The Gellibrand only flows all year because the aquifer under Barwon Downs is overflowing, but the bores have taken 3 cubic kilometres of water out of the system and there has been a dramatic change to the Gellibrand flows as a result.

"Wannon Water has a licence to extract roughly 12 megalitres a day at the north off-take and the south off-take of the river. If they took their full allocation from either of those off-takes they could dry up the Gellibrand."

Mr Gardiner said the Barwon Downs bore field also provided a cautionary tale about what happens if certain watercourses were left to dry out.

The wetlands above the Barwon Downs aquifer were composed of acid sulfate soils. When they are wet, and kept away from oxygen, the soil chemistry is harmless; but if they dry out the iron sulfide in the soil reacts with oxygen to produce highly corrosive sulfuric acid.

"Now that was a 7 hectare swamp and when it dried out it was pouring half a tonne of pure sulfuric acid into the Barwon River each day," Mr Gardiner said.

"There's 1000 hectares of swamp in the Lower Gellibrand, so if you were to let that dry out... we are talking about desert creation."

Wannon Water has been acutely aware of the limits of the Gellibrand River, especially since farmers and irrigators also have licences to tap into the catchment.

The water authority produced a detailed report into strategies for safeguarding the river's environmental flows back in May 2016. It said it had been taking less and less water from the Gellibrand since 2006 "due to demand management", but warned the booming population in the region would put further pressure on the system regardless.

The report listed eight options for "augmenting" the Gellibrand's natural flow during the dry summer months. The potential projects involved pumping water from aquifers elsewhere in the region, with the alternatives ranging from an additional 6 to 40 ML/day, costing anywhere from $50,000 to nearly $5m.

Wannon Water produced a further report in 2019, noting some of the bore options raised in 2016 were much more expensive than first thought. It concluded the best plan in the medium term was to focus on water efficiency and drawing down alternative water storages during dry periods.

In its 2022 Urban Water Strategy the water authority again canvassed a range of augmentation options including harvesting water from residential roofs, but said the next major move would be to expand an existing reservoir at Ewen's hill north of Cobden, scheduled for 2031.

The complexity and "significant capital cost" of any major bores to augment the Gellibrand would make any additional load on the Otway system - such as hooking Port Fairy into it - a potentially risky proposition.

Mr Konings said Port Fairy would represent an additional 7 per cent on top of Wannon Water's current extraction, and insisted there were "ways and means" of accommodating that extra load.

"People have to put some concerted research and effort and study into how they can make water available for places like Port Fairy," he said.

"It certainly adds to the argument that Wannon Water should sit down an have a round table discussion with us about the options."

Mr Gardiner said he thought it would be unwise to add strain to an already overburdened system.

"If you want my opinion about Port Fairy, treat the water there, don't take more from the Gellibrand, it's under enormous pressure as it is. To be honest if you give Warrnambool a few years it's going to be in strife" he said.

"The whole system is hanging on a knife's edge."