NSW moves ahead on NWI implementation

Implementation of the National Water Initiative has moved along with the passage of NSW’s Water Management Amendment Act 2005, which clarifies trading and validates water management plans. The Amendment Act makes some significant changes to the State's flagship water legislation, the Water Management Act 2000. In this Alert we’ll cover the main features of the Amendment Act.

Environmental water

The Amendment Act changes the way that a management plan commits planned environmental water. Now, it can do so by combining any two of the following three criteria:

• the commitment of the physical presence of water in the water source,
• the long-term average annual commitment of water as planned environmental water,
• the water that is not committed after the commitments to basic landholder rights and for sharing and extraction under any other rights have been met.

Under the new section 8C, the Minister can grant an access licence to public bodies without the need for an application to water if that water is saved in the system (meaning water that is subject to a management plan and is not needed for trading, extraction, or for landholders). That access licence must have an "adaptive environmental water condition" applied to it. The benefit of this is that access licences to which an adaptive environmental water condition is applied can then be temporarily traded when it is not required for the environment (as long as the management plan allows it). The difficulty, of course, will be determining when water is not required for the environment in a particular case.

Adaptive water conditions can also be applied to access licences if the licence holder asks for one, or to surrendered licences.

Assignment framework for future risk

The NWI requires a risk assignment framework to be implemented for compensation, which is not to commence until after 2014 (so plans currently in place are not affected). The framework is being introduced now to assist with future planning. The key change here is that while the Government will still compensate for reductions in water allocations caused by its policy changes, it will not do so for climate change. The licence holder thus bears the risk for losses caused by climate change.

Another category of risk - changes caused by improvements in knowledge or science which reduce water allocations - will be borne by both parties, but only above a minimum. The first 3 percent of change over a 10 year period is to be borne by the licence holder, and then changes above 3 percent will be borne by various levels of Government.

This is one area of NWI implementation which we indicated was yet to come, when we commented on the previous amendments to the Water Management Act.

Validating plans

The NSW Court of Appeal decision earlier this year in Nature Conservation Council of New South Wales Inc v The Minister Administering the Water Management Act 2000 [2005] NSWCA 9 has caused some uncertainty about the validity of water management plans under the Water Management Act (see our Alert here). This was one of several legal challenges to water sharing plans which have been commenced by irrigators and environmental groups since water sharing plans became operational in 2004.

In an apparent attempt to forestall challenges, the Amendment Act inserts a new transitional provision which says that any management plan published in the Gazette before that provision commences will be valid, and that anything done pursuant to a plan is likewise valid.

Water trading

Some procedural changes to water trading have been made, including:

• term transfers can now be extended before the current period expires
• when a water access licence is changed through a water dealing, new conditions can be added to the works and water use approval
• the Government will be able to auction or tender the right to transfer a licence into a water source or zone that has a limit on the quantity of licences within it

The rules governing the Water Access Licence Register have also changed, affecting water trading.

If a licence has more than one holder, the consent of all holders is required for any dealing in relation to the licence. If, however, the co-holders want the Minister to extinguish the access licence and issue a new one, only the consent of co-holders with a majority share is required.

The Register also must now record the time and date of a dealing (previously these details were only endorsed on the dealing).

Water tagging

"Tagging" already exists for trading between states, but the Act now extends it to intrastate trading. Basically, it means if a water access licence is traded to another river system, the holder can nominate the original source as the system from which the water is extracted. The water supply works need not be in the same water management area as the access licence concerned. This, however, is subject to the source being in a water tagging zone, either in NSW or interstate.

When do the changes take effect?

The provisions validating water management plans and revising certain transitional measures commenced on the Governor's assent to the Amendment Act (7 December). The remaining provisions will commence on 1 January 2006.