Legal Insights

Important changes to how water is accessed and licensed in NSW

By Joshua Same

• 26 September 2014 • 8 min read
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The Water Management Amendment Act 2014 (amending Act) was passed without ammendment on 17 September 2014 and includes some important changes to how water is accessed and licensed in NSW.

Water resources in NSW are primarily regulated under the Water Management Act 2000 (NSW) (Water Management Act). The amendments are intended to ease the regulatory burden on water users and assist the Government to meet challenges arising in the management of the State's water resources.

The key changes proposed include:

  • clarifying terminology and defining terms to be used in the Water Management Act, for example, defining the term 'overland flow water'
  • expanding the matters dealt with by harvestable rights orders
  • creating two new categories of access licences for 'floodplain harvesting'
  • providing greater certainty for holders of access licences including by permitting such licences to continue when they are removed from the water management plan and by providing compensation rights for licence holders whose allocations are reduced or revoked
  • creating a new dealing for licence holders called a 'term water allocation transfer' to enable licence holders to trade their right to future water allocations for a specified term of no more than ten years
  • amending water sharing plans to standardise the term 'worst period of low inflows'.

New definition: overland flow water

The amending Act clarifies that 'overland flow water' is included within the State’s water rights under the Water Management Act.

The amending Act defines 'overland flow water' to mean:

…water (including floodwater, rainfall run-off and urban stormwater) that is flowing over or lying on the ground as a result of:

(a) rain of any other kind of precipitation, or

(b) rising to the surface from underground, or

(c) any other process or action of a kind prescribed by the regulations.

The definition includes water flowing over the ground by means of artificial structures such as roads, canals or road gutters, but does not include water collected from a roof (including using a rainwater tank) or water flowing over or lying on the bed of a river, lake or estuary.

The NSW Office of Local Government (OLG) has expressed concern that this amendment will require existing urban stormwater harvesting projects to be licensed. In response, the State Government has indicated that the purpose of the amendment is not to expand the State’s water rights but to clarify them and bring these rights in line with the terminology used in other States’ Water Acts. It is likely that the OLG and the NSW Office of Water will develop an urban stormwater harvesting policy to facilitate stormwater harvesting, which may include the creation of licence exemptions where required.

Harvestable rights

Under the Water Management Act, rural landholders are able to construct and use dams to capture and store rainwater run-off in accordance with harvestable rights orders issued by the Minister. The amending Act expands this entitlement to enable other water supply works, in addition to dams, to be constructed and used under such orders. The amending Act also clarifies the kinds of matters that may be dealt with in a harvestable rights order and enables maps referred to in such orders to be made available online.

Floodplain harvesting access licences

The amending Act creates two new categories of access licences, which will apply in relation to the diversion and capture of water flowing across a floodplain:

  • floodplain harvesting (regulated river) access licences
  • floodplain harvesting (unregulated river) access licences.

It is proposed that the Regulations will provide for matters relating to these new licence categories, including the circumstances in which a landowner's actual or proposed floodplain water usage will be converted into floodplain harvesting access licences and the terms and conditions of such floodplain harvesting access licences. The Independent Member for Sydney, Alex Greenwich, has spoken out against this amendment suggesting that these new licences will operate to 'grandfather' illegal and inefficient floodplain diversion works into the regulatory system, rather than implement the system provided for under the NSW Floodplain Harvesting Policy of assessing existing floodplain works before providing retrospective approval.

Increased certainty for holders of supplementary water licences

Previously, under the Water Management Act, supplementary water licences entitled the licence holder to shares of water from a regulated river. The Minster was required to cancel a supplementary water licence if a water management plan ceased to make provision for the extraction of water under that licence. Licence holders had no compensation rights if allocations were cancelled due to a change in a water management plan. The Water Management Act has been criticised in relation to this lack of security for water users (namely farmers) who may be reliant upon supplementary water licences for the conduct of their business operations.

The amending Act proposes to create an exemption from the requirement that the Minister cancel supplementary water licences in circumstances where the water licence is a regulated river supplementary water access licence.

Holders of supplementary water licences (and floodplain harvesting licences) are also be granted compensation rights under the amending Act. This means that where the licensed water allocation is either reduced or cancelled, the licence holder will be entitled to compensation for that loss. These changes are intended to deliver greater certainty for irrigators, allowing them to plan for the future of their business enterprises in the longer term.

Term water allocation transfer

Each year, the NSW Office of Water makes 'Available Water Determinations', often referred to as 'water allocations', which specify how much of their entitlement a licence holder can extract from a water source within the next twelve months. Previously, a licence holder could trade a water licence under the Water Management Act either permanently or for a fixed term, but the water allocations under a licence could only be traded once the allocation had been made. This effectively prevented the trade of future water allocations.

The amending Act will create a new general dealing with an access licence called a 'term water allocation transfer'. This dealing enables licence holders to trade their right to future water allocations for a specified term, capped at a maximum of ten years. The trade is allowed to take effect up to five years in the future. Under the trade, the seller will retain the share component of the access licence, but the purchaser will be entitled to have the use of all or part of the seller's water allocation for the term of the trade. It is anticipated that this new dealing will afford water users greater flexibility in how they use their water allocation.

Water sharing plans

Pursuant to the Water Management Act, regulated river water sharing plans require that water be set aside within a storage reserve, such as a dam. This is done to ensure entire or near entire water allocations to high-security licences in regulated rivers can be sustained should the worst drought on record be repeated. This water sharing procedure was created prior to 2004 and so omits the data relating to the more recent record 'Millennium Drought'. The Millennium Drought saw water allocations being granted in excess of water availability and resulted in high-security licence holders suffering reduced allocations and environmental water provisions being suspended.

Modelling indicates that when the Millennium Drought data is included, the implementation of the water sharing plan would result in significant quantities of water being withdrawn from regulated rivers and held in storage reserves in case a drought of equivalent severity occurs again. This would likely limit the amount of water available to holders of general security licences.

The amending Act proposes to continue to use the data on the worst drought that occurred prior to the commencement of each of the current water sharing plans as the basis for determining the size of the storage reserve. It is intended that this will have the effect of maintaining the water shares between high-security licences and general security licences, and the environment, as decided when the water sharing plans were first established.

Concerns have been raised that this amendment ignores the effects of climate change and future drought events which may occur.


The amending Act is a package of amendments to the Water Act which seeks to clarify and improve the legislative framework for water in NSW. It will introduce important reforms to a variety of areas of water management in NSW, including licences and trading, which have been designed to ease the regulatory burden on water users and add greater flexibility to water markets and increased certainty to water users.


Sophie Jacobs, Associate, Jessica Mort, Lawyer and Joshua Same, Senior Associate, Planning & Environment Group

By Joshua Same

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