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Water: Regulatory Frameworks in Rural NSW

Water: Regulatory Frameworks in Rural NSW

Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion.
Briefing Paper 04/2010 by Daniel Montoya

This briefing paper summarises the legislative and administrative arrangements for water management in rural NSW.

History of water management in NSW

Water regulation commenced in NSW with the Water Act 1912. Substantial water reforms have taken place within the past 20 years, with the Commonwealth Government playing a major role. [2.0]

Two themes have predominated in these reforms: (1) governance of the Murray-Darling Basin; and (2) a reform agenda for water in Australia set by COAG that has focused on maximising water use efficiency in order to optimise economic, social and environmental outcomes. The first theme commenced with a Murray-Darling Basin Agreement in 1992 that set out to co-ordinate management of the Murray-Darling Basin by Queensland, NSW, Victoria, South Australia, the ACT and the Commonwealth Governments. This Agreement was superseded in 2008 by the Agreement on Murray-Darling Basin Reform. State powers were referred to the Commonwealth to enable it to assume primary responsibility for the Murray-Darling Basin. [2.0]

The second theme was set by the COAG 1994 meeting, at which a strategic framework for the efficient and sustainable reform of the Australian water industry was agreed to. This framework was instrumental in the creation of the Water Management Act 2000 (NSW), and was renewed in the form of the National Water Initiative in 2004. More recently, this theme was manifest in the National Plan for Water Security in 2007, and found legislative expression in the Water Act 2007 (Cth) and its 2008 amendment. [2.0]

Water Management Act 2000 (NSW)

The Water Management Act 2000 (NSW) repealed the Water Act 1912 (NSW); however, the Water Act 1912 (NSW) still applies in those areas of NSW not yet covered by a Water Sharing Plan. The Water Management Act 2000 (NSW) abolished common law riparian rights and vested all water rights in the Crown. Water rights can now only be acquired through possession of an access licence, with the exception of some domestic and stock rights, harvestable rights and native title rights. [4.1.1]

The objects and principles of the Act reflect the COAG goals for water reform and the principles of ecologically sustainable development. An important means of achieving these objects is the creation of two classes of environmental water: planned environmental water; and adaptive environmental water. Water management plans provide for the allocation and distribution of both types of environmental water. [4.1.4]

Water planning in NSW

Provision is made in the Water Management Act 2000 (NSW) for a State Wide Management Outcomes Plan. This was intended to provide an over-arching policy context, targets and strategic outcomes for the management of the State’s water sources. However, the first version ceased to be in force in December 2007 and a new plan has not been released as yet. [4.1.3]

The Water Management Act 2000 (NSW) provides for the creation of several types of water management plan. The only type that has so far been made is the Water Sharing Plan. Water Sharing Plans apply to a specific water management area. They establish environmental water rules, identify water requirements for all stakeholders in the management area, establish access licence dealing rules and establish a bulk access regime for the extraction of water under access licences. [4.1.5]

Water management plans have a lifespan of 10 years and must be audited at least every 5 years. Implementation programs set the framework through which the water management plan will be implemented. The Minister may suspend a management plan during severe water shortage. Three Water Sharing Plans are currently suspended: the Murrumbidgee Regulated River, Lachlan Regulated River and NSW Murray – Lower Darling Regulated Water Sharing Plans. [4.1.5]

Water access licences and approvals in NSW

Water access licences have two components: a share component and an extraction component. These components are separate. A share component entitles its holder to a specified share in the available water within a specified water management area. An extraction component entitles its holder to take water at specific times, rates and/or circumstances from specified areas or locations. [4.1.6]

An access licence does not provide permission for the physical acquisition or actual use of water. Three types of approvals are available for the physical acquisition and use of water. A water use approval confers a right on its holder to use water for a particular purpose at a particular location. A water management work approval confers a right on its holder to construct and use a specified work at a specified location. An activity approval confers on its holder the right to carry out activities that will impact a groundwater source or that are located adjacent to a water source. [4.1.10]

The Water Management Act 2000 (NSW) and Water Management (General) Regulation 2004 (NSW) provide for a number of categories and subcategories of water access licence. These are normally prioritised in the following order: (1) domestic and stock, local water utility and major utility access licences; (2) regulated river (high security) access licences; (3) all access licences other than those referred to in parts (1), (2) and (4); and (4) supplementary water access licences. However, the order of priority changes during times of severe water shortage to the following: (1) basic domestic water rights and essential town services; (2) the environment; (3) stock purposes under basic landholder rights, regulated river (high security) access licences, commercial and industrial activities, domestic and stock access licences and conveyance access licences that are connected to any of the other licences in section (3); and (4) all other access licences. Water allocations are made according to the priority awarded to access licences, any applicable rules in a Water Sharing Plan, and available water determinations made by the Minister. An available water determination is a determination as to the availability of water for one or more access licence categories for a specific water management area. [4.1.6]

There are three types of water access licence tenure: continuing, specific purpose and supplementary. Access licences with continuing tenure are issued in perpetuity, and are generally used for commercial purposes. Access licences with specific purpose tenure have higher priority than continuing tenure licences, eg. town water or domestic and stock purposes. Access licences with supplementary tenure have the lowest priority and are only created when a Water Sharing Plan makes provision for them. The NSW Government Land and Property Management Authority maintains a Register of all access licences and relevant transactions. [4.1.6 and 4.1.8]

Water trading in NSW

The Water Management Act 2000 (NSW) provides for two generic types of water dealings: (1) general water dealings and (2) water allocation assignment dealings. General water dealings involve the transfer (permanent or temporary) or alteration of a share of water. A water allocation assignment dealing involves the sale of a volume of water. Water dealings may only occur if they comply with the water management principles of the Act, the access licence dealings principles laid out in the Access Licence Dealing Principles Order 2004 (NSW), and the access licence dealing rules established by the relevant Water Sharing Plan. The Act also makes provision for interstate transfers. These transfers require the consent of the responsible NSW Minister and the responsible Minister from the other State or Territory. [4.1.8]

Ministerial influence in access licences and compensation

There are five ways in which the NSW Minister can impact upon access licences, some of which may result in the payment of compensation: (1) temporary water restrictions; (2) embargoes on applying for licences; (3) cancellation and suspension of licences; (4) acquisition of licences; and (5) variation of the bulk access regime. No compensation is payable under the first three categories. Compensation, as determined with reference to the current market value, is payable in the case of the fourth category. Payment of compensation in cases arising under the fifth category involves a complex set of roles. [4.1.9]

NSW water management administration and policies

Several NSW administrative bodies are involved in water management in rural NSW. State Water is NSW’s rural bulk water delivery corporation, delivering water in accordance with Water Sharing Plans to all users including the environment. The NSW Office of Water carries out the majority of water planning and management in NSW, and implements a number of policies including the Draft Floodplain Harvesting Policy 2010, Water Compliance Policy and Water Extraction Monitoring Policy. The prices charged by both of these bodies for their services are regulated by the Independent Pricing And Regulatory Tribunal. Other bodies involved in water management include: the Department of the Environment, Climate Change and Water; NSW Government Land and Property Management Authority; Natural Resources Commission; Catchment Management Authorities; and the Dumaresq-Barwon Border Rivers Commission. [4.2]

Water (Commonwealth Powers) Act 2008 (NSW)

The Water (Commonwealth Powers) Act 2008 (NSW) refers State powers to the Commonwealth in order that it might implement the Water Act 2007 (Cth). This Act also amended the Water Management Act 2000 (NSW) and repealed the Murray-Darling Basin Act 1992 (NSW). Equivalent legislation was passed by the other Basin States. The Water Act 2007 (Cth) is not intended to exclude or limit the concurrent operation of any State law. [4.1.12 and 5.1.9]

Water Act 2007 (Cth)

The Water Act 2007 (Cth) was designed to address the deteriorating environmental condition of the Murray-Darling Basin by enabling the Commonwealth, in conjunction with the Basin States, to manage the Basin water resources in the national interest in a way that will optimise economic, social and environmental outcomes. The Act also establishes two national level institutions for water management: the Commonwealth Environmental Water Holder manages all Commonwealth environmental water holdings; and the Bureau of Meteorology will create and manage a National Water Account. [5.1.1, 5.1.7 and 5.1.8]

The planning regime implemented by the Water Act 2007 (Cth)

The Murray-Darling Basin Authority is established by the Act to prepare and implement the Basin Plan, advise the Commonwealth Minister for Climate Change, Energy Efficiency and Water on the accreditation of State water resource plans (NSW Water Sharing Plans), develop a water rights information service to facilitate water trade in the Basin and several other water management activities. The Basin Plan will set sustainable diversion limits for the Basin as a whole and for each individual water management area, set water trading rules, and contain an Environmental Watering Plan and a Water Quality and Salinity Management Plan for the Basin. Water Sharing Plans in the Basin will need to become consistent with the Basin Plan once their current version expires. Both the Water Sharing Plans and Basin Plan will be audited by the National Water Commission. [5.1.3 and 5.2]

The operation of the water market in the Murray-Darling Basin is also altered by the Water Act 2007 (Cth). Risk allocation in relation to changes in water access entitlements corresponds with the Water Management Act 2000 (NSW). However, water market and water charge rules may be made by the Commonwealth Minister for Climate Change, Energy Efficiency and Water. The rules are based on advice received from the Australian Competition & Consumer Commission. The Commission will also regulate compliance with these rules. [5.1.3, 5.1.4, 5.1.5 and 5.2]