Gundungurra Elder Aunty Sharyn Halls from NSW's Blue Mountains said the report, which was leaked to the ABC, recognised the concerns Aboriginal people had been raising for about 18 months.

"I am glad it's come out and I'm glad there's a leaked document so people can see what we've been trying to get through to people," Aunty Sharyn, of Katoomba, said.

Raising the dam wall by 14 metres will inundate Blue Mountains bushland, destroying hundreds of sites of significant cultural heritage, including rock art, sandstone shelters, axe grinding grooves, engravings and scar trees, traditional owners say.

The report found that further cultural heritage studies were necessary to "accurately assess the cultural landscape and the direct or indirect damages to Indigenous cultural heritage sites as a result of the project."

"The department disagrees with the estimates that the proposed action will result in only a partial or no loss of heritage value from the initial inundation and the longer-term effects of infrequent flooding events," the report reads.

The department found the sampling strategy and percentage of Indigenous sites surveyed was inadequate, and that "Indigenous heritage sites and their respective significance should be determined by the traditional owners and their representative bodies."

The report also found that traditional owners' concerns had not been effectively addressed.

Traditional owners have sent a letter to Ken Wyatt, the federal Minister for Indigenous Australians, and Premier Gladys Berejiklian, saying they do not consent to the project going ahead.

Aunty Sharyn drew parallels between Rio Tinto destroying two ancient rock caves at Juukan Gorge in the Pilbara in May, and the potential destruction of hundreds of Aboriginal sites if the raising of the dam wall goes ahead.

"It's brought it 100 per cent home that this is what's happening all over Australia," Aunty Sharyn said.

"There is no difference here. People try and destroy Aboriginal sites instead of protecting them."

She said the state government weren't following the Indigenous Land Use Agreement, where country, or ngurra, must be protected.

"That's about taking in everything within the physical, cultural and spiritual landscapes, landforms, water, air, trees, rocks, plants, animals, food, medicines, minerals, stories and significant places. This includes cultural practices, knowledge, songs, story and art, as well as spiritual beings and peoples past and present," Aunty Sharyn said.

The dam wall proposal was announced in June 2016 as flood mitigation for the Hawkesbury-Nepean Valley. The EIS (environmental impact statement) for the project is still being developed.

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Blue Mountains MP Trish Doyle raised the issue in parliament on September 16, describing the wall raising as wiping out recognised Aboriginal heritage sites and causing irreparable damage and loss of country.

"The traditional owners have not given their consent and that cannot and must not be pushed aside. Our traditional owners have firmly said in a letter that they do not give consent for the raising of the Warragamba Dam wall," Ms Doyle said.

Stuart Ayres, the Minister for Western Sydney said: "The Aboriginal cultural heritage assessment for the Warragamba Dam Raising EIS has been prepared in line with all relevant guidelines."

He said the draft EIS was undergoing review by the NSW Department of Planning, Industry and Environment, and comments from agencies on earlier drafts will be taken into account in finalising the EIS.

"The NSW government looks forward to the EIS pubic exhibition which will allow for the proposal to be assessed on its merits and for all interested stakeholders to provide comment," Mr Ayres said.

"Importantly, the final decision on the dam raising proposal will only be made after all environmental, cultural, financial and planning assessments are complete."