30 Oct 2014

New water authority for New South Wales, and renewed focus on infrastructure

by Nick Thomas, Stuart Cosgriff

The new water authority should increase efficiency in bulk water management and improve sharing of expertise in dam safety, dam operations and maintenance, and incident management.

New South Wales may soon have a new water authority, responsible for bulk water management across the State, if the Water NSW Bill 2014 continues its way through Parliament.

The Bill proposes combining State Water Corporation, which is responsible for bulk water delivery in regional NSW, and Sydney Catchment Authority (SCA), into an authority called Water NSW. This new authority will combine the existing functions of the two existing authorities, but will be given a greater role in bulk water infrastructure delivery.

The Bill was introduced a week before the Federal Government issued its Agricultural Competitiveness Green Paper, which identifies 27 potential sites for water infrastructure projects, including dam infrastructure works in NSW and other States and Territories. The Federal Government held a National Water Infrastructure roundtable with a broad range of stakeholders (including irrigators, mining and energy generation industry representatives, construction firms, investors, and State and Territory government representatives) on 29 October in Canberra.

Why create a new authority?

The NSW Government undertook a comprehensive Bulk Water Delivery Review in 2013 to determine the best approach to bulk water provision, catchment management and water quality protection across the State. The review recommended combining State Water and SCA.

The move should increase efficiency in bulk water management and allow for better sharing of expertise in areas such as dam safety, dam operations and maintenance, and incident management. It also provides an opportunity to manage rural bulk water more effectively, utilising key functions of each existing authority across the State.

Structure and management of the new authority

The Bill provides for State Water to become Water NSW, and to assume the functions of SCA. The assets, rights and liabilities of SCA will be transferred to Water NSW.

The Bill continues most of the provisions of each of the State Water Corporation Act 2004 and the Sydney Water Catchment Management Act 1998, so that the new authority will retain most of the functions of the two existing authorities, in combined form.

Water NSW will be a statutory State owned corporation, and so it will be governed by the State Owned Corporations Act 1989. This means that it will not represent the Crown, and it has many features of a non-statutory corporation.

The Boards of State Water and SCA were aligned earlier this year and the two authorities have had the same CEO for several months. The Minister for Natural Resources, Lands and Water, Kevin Humphries, has indicated that the current Board and CEO will be retained for Water NSW.

Catchment management

An important consequence of combining State Water and SCA is that new declared catchment areas, special areas and controlled areas may be established and regulated across NSW in much the same way as the Sydney catchment area (and associated special area and controlled area) currently is.

The focus of declaring these areas is on the management of water quality. Once a catchment area is declared, catchment health indicators are adopted and catchment health is then assessed against those indicators in three-yearly audits. Special areas are managed in accordance with a plan of management, and the use of, and dealing in, land in a special area is strictly controlled under the Bill. Regulations will provide further controls for declared special areas and controlled areas.

Operating licences and price regulation

The Government proposes to keep separate operating licences for the current Sydney catchment area and the rest of the State, at least initially. The Bill provides for the grant of further operating licences in future.

IPART and the ACCC will continue to regulate pricing for bulk water services which Water NSW provides, as they do now for State Water and SCA.

Following a recommendation of the Bulk Water Delivery Review, the Government proposes to ring-fence the costs of providing services in the Sydney catchment area from the costs of providing services elsewhere in NSW, in recognition of the differences in the nature of, and cost structures for, these services. This will allow separate price regulation and, according to the Minister's second reading speech, will "ensure that the … activities required in the Sydney catchment are not subsidised by rural and regional water users".

Regulatory functions

The Sydney Water Catchment Management Act confers on SCA various regulatory functions, given SCA's status as an authority representing the Crown. The Bill proposes to give these "regulatory functions" to a "regulatory authority", which is either the Minister or a public authority or head of a public service agency whom the Minister appoints.

The Minister has indicated that, in most cases, he will appoint Water NSW to exercise the relevant regulatory functions, but some functions will be conferred on others, because Water NSW, as a SOC, will not represent the Crown.

Some provisions in the Sydney Water Catchment Management Act will not apply to the whole area of operations for Water NSW. For example, the exemption from planning approval requirements for certain infrastructure activities which are required for water quality protection, public health or safety, or other urgent purposes, which appears in that Act, has been carried over to the Bill, but only for the Sydney catchment area.

What's next?

The Bill has been passed by the Legislative Assembly and is now in the Legislative Council. If passed, it will commence on a day appointed by proclamation.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.