Northern Territory Water Regulatory Reform

The Northern Territory Government is reforming the Water Act to make sure we have a strong regulatory framework for the sustainable and accountable management of our water resources now and into the future.

The reform process has begun and there’s an opportunity for you to have your say.

A Directions Paper has been drafted to provide an overview of the existing regulatory framework, the case for reform and the proposed areas for reform.

How to have your say

Have your say by completing the online feedback form below by the 31 March 2019.

What happens next

Following feedback on the Directions Paper, a series of position and draft policy papers will be developed and provided to stakeholders and the community to generate discussion, test options and develop acceptable reform policies.

The Northern Territory Government is reforming the Water Act to make sure we have a strong regulatory framework for the sustainable and accountable management of our water resources now and into the future.

The reform process has begun and there’s an opportunity for you to have your say.

A Directions Paper has been drafted to provide an overview of the existing regulatory framework, the case for reform and the proposed areas for reform.

How to have your say

Have your say by completing the online feedback form below by the 31 March 2019.

What happens next

Following feedback on the Directions Paper, a series of position and draft policy papers will be developed and provided to stakeholders and the community to generate discussion, test options and develop acceptable reform policies.

Northern Territory Water Regulatory Reform Feedback Form

Please read the Directions Paper prior to completing the online feedback form below.

This will take approximately 15 minutes.

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1.1 Improving the NT Water Allocation Planning Framework

The NT Water Allocation Planning Framework (the Framework) provides the policy basis for determining the ‘estimated sustainable yield’ in connection with a water allocation plan, which in turn determines the volume of water that can be allocated for consumptive use. The Framework was implemented in 2000 and since then has provided the guiding principles for water allocations in the Northern Territory. The Framework accommodates the different climate zones of the Northern Territory and is based on contingent allocation rules, which means that in instances where there is not sufficient science to determine the allocation for a specific system or aquifer, the following rules apply: • In the northern zone, it requires at least 80 per cent of surface water flow (at any time in any part of the river) or annual groundwater recharge to be allocated for environmental and other non-consumptive uses (the so-called ‘80:20 Rule’); and • In the arid zone where surface water flows and recharge are sporadic, at least 95 per cent of surface water flow must be reserved for non-consumptive purposes. Furthermore, total groundwater extraction over a period of at least 100 years is not to exceed 80 per cent of the total aquifer storage at the start of extraction and there are to be no deleterious change in groundwater discharges to dependent ecosystems. The Framework has meant that regulated water use has generally been controlled at sustainable levels in the Top End, with the exception of the Darwin Rural Area. The Darwin Rural Area has had limited regulation of water extraction as a result of longstanding exemptions applicable in the area, and as a result many groundwater systems in this area are over-allocated against the ‘80:20 Rule’. For the arid zone, where consumptive water is supplied from groundwater resources, the Framework allows for groundwater to be progressively extracted through storage depletion, or ‘mining’, over a defined period, providing there is no detrimental impact on groundwater dependent ecosystems. Storage depletion currently only occurs to support the town of Alice Springs, with the public water supply for Alice Springs sourced from the non-renewable Amadeus basin aquifers via the Roe Creek Borefield. Supply from this aquifer is expected to last at least another 250 years. The Framework is a key policy supporting the regulation of water resources. The addition of further detail to the Framework could support more consistent decision-making in relation to water allocations. The following issues have been raised by stakeholders involved in the water planning process and could be considered, among other issues, in a review of the policy, to be further developed in a detailed position paper: • What is the ‘sustainable’ use of water resources; • How climate zones are classified under the Framework; • Clarification on the use of conservation buffers/zones to prevent degradation of water quality and/or water-dependent ecosystems; • How cultural water values are considered; • How are water dependent ecosystems classified and what are their values; and • Revision of the Framework as it applies to the arid zone, possibly requiring water available for consumptive purposes such as public water supply, industry or agriculture being based on maintaining storage.

1.2 Protecting future public water supplies

There is currently no specific power for the Minister or Controller of Water Resources to set aside water resources for future public water supplies outside of a water plan area, even in cases where there is an identified risk that the relevant water resource may be allocated to other consumptive users prior to an application being lodged by the relevant water utility. This means that there is a risk that water resources needed to support anticipated growth of our communities, towns and cities will be allocated to other uses and not be available when needed, and/or that any available water may not be of suitable quality for public water supply. This issue could be addressed by the introduction of a power to specifically reserve water for future public water supply security. An assessment of approaches taken in other jurisdictions will inform the further development of proposed reforms to address this risk.

2.1 Water for purpose principle

The Northern Territory Government’s Sustainable Water Use policy paper commits to the installation of “a ‘water for purpose’ principle within the allocation and licensing provisions [of the Act] to stop claiming of water for profit only”. While a range of reforms proposed below would support this principle, including the proposal to identify alternative allocation approaches (page 11), this reform program could also consider how to better account for strategic factors in licensing decisions. An assessment of how other jurisdictions consider the merits of a potential allocation from the perspective of broader community or regional benefits (in consideration of agreed local economic and social goals and objectives) could be undertaken as a starting point.

2.2a Longer licence tenure for some circumstances and systems

Water licences are currently issued for a period of 10 years, with an option of renewal. This practice accommodates uncertainties about the water resource and provides flexibility in responding to changing circumstances (e.g. climate change, or increased knowledge of the resource). In regions where licences have been in place for some time and where a body of evidence exists about the impact of those extractions and where development is likely to be long-term there may be a case for increased licence tenure beyond 10 years. There also appears to be a case for longer licences for some beneficial use types, specifically for public water supply, where water extraction will be required for a longer period. Harmonisation of licence tenure with the period of non-pastoral use permits issued under the Pastoral Land Act, could support the commercial viability of projects developed on the pastoral estate. Consideration of increased tenure could be regionally specific (noting this has the potential to add commercial complexity). Such licences may need to be subject to increased transparency due to their potential longer-term impact on water resources and dependent ecosystems.

2.2b Perpetual entitlements untied to land in some systems

While some other jurisdictions do have ‘permanent’ water licences, which is an instrument with perpetuity which can be mortgaged or bequeathed (i.e. a permanent water entitlement) this is not currently available in the Northern Territory. In the longer term, the Territory could, in line with the NWI, consider statutory-based entitlement arrangements in fully allocated systems that provide for water-access entitlements that are not tied to land, and are tradeable. The rationale for this reform is that the automatic coupling of licences to land, and the deemed transfers associated with transfer of interests in land, could limit the development of an efficient market in water entitlements. An unbundled water entitlement becomes an asset which can be mortgaged in line with other property rights (e.g. land). Other Australian jurisdictions, with more mature water markets, have introduced similar reforms, generally in regulated river systems. Detailed consideration would need to be given to whether the conditions in the Territory are currently suitable for a move to perpetual entitlements and to ensure that such a move considers the ‘water for purpose’ principle, to avoid the risk of ‘water for profit’. In the Territory, this ‘unbundling’ of water licences from land could be limited to particular water resources that are fully allocated and are subject to high demand for trade. These systems would need to be identified through a clear risk assessment process (e.g. specific surface water systems which are well understood by science). Equally, it could be linked to the introduction of charges for water where the cost of water is offset by longer-term security of tenure. Relatedly, longer licence tenure (see above) could be considered as an alternative to perpetual entitlements – or as a pathway to ‘unbundling’ in the future.

3.1a Alternative allocation approaches

Demand for increasingly scarce water resources poses challenges for the existing ‘first-in-first-served’ process for considering water licence applications. ‘First-in-first-served’ does not always lead to water being granted to uses that will provide the largest benefits to the Territory. While the ‘first-in-first-served’ approach is a pragmatic one, for new resources and for systems at risk or near maximum allocation alternatives to the ‘first-in-first-served’ approach should be considered. Some stakeholders have suggested that a strategic ‘expression of interest’ process should be explored as an alternative approach to granting licences. Legislative and policy changes would be needed to define when and how alternative processes would be applied – for instance, to newly released water and in line with a broader economic development framework so that water allocations more strongly support the strategic priorities of the Territory. A new power to declare Ministerial Reserves could provide flexibility in allocation approaches, so that newly identified water resources are subject to an alternative approach to licence application assessment to ‘first-in-first-served’. Further work is required to assess the fairness and efficiency of alternative approaches to allocation, including through an examination of systems already implemented in other jurisdictions.

3.1b Staged allocations linked to development milestones

The management of licensed water entitlements could be improved through requiring development milestones to be met before further entitlements are released. Some water dependent developments, generally of a larger scale, may require smaller volumes of water to commence development, with larger volumes required in subsequent years to support the development at or near maturity. These larger developments can provide significant regional economic and social benefits, including transforming towns and regions. However, as setting aside large volumes of water for the future use of these developments would prevent other users from accessing the resource in the short term, a clear mechanism is needed to ensure the water is used according to an approved schedule. This will reduce the possibility of licensed water entitlements being obtained for speculative reasons, while providing the security that large scale and/or expanding developments require. The introduction of clearer guidance for staged allocations could support this aim. Other jurisdictions, such as Western Australia, have included this approach in their regulatory framework and an assessment of the lessons learnt elsewhere would assist in the development of such guidance.

3.1c Management of unused water

The Act has some provisions that support the management of unused water, so that where a licensee has no current genuine need for or capacity to use the water entitlements they have been granted, water can be returned to be allocated to other beneficial uses. There are conditions in current water extraction licences to prevent the practice of water ‘banking’ and usage is regularly reviewed against licensed entitlements in areas with high competition for groundwater resources. In practice, amendments to licence conditions to reflect changing development plans are not easily achieved. However, while these licence conditions are already in place to address under-utilised water, there is a need for an overarching policy to guide consistent decision-making in relation to this issue. DENR has developed a draft Management of Unused Water Policy, to provide clearer guidance on the application of the policy in relation to unused water, including ensuring that licence holders who have legitimate reasons for not being able to utilise their entitlements can trade that entitlement either temporarily or permanently.

3.1d Developing a robust and efficient water trading system

The Water Act currently requires water trading be facilitated under a Water Allocation Plan (WAP) with the declared plan establishing the trading rules and arrangements for trade. Plan areas are where a market for water trading is most likely to develop. However, there are circumstances where licensees outside a WAP area may wish to trade. In some cases, a plan is declared in relation to part of a Water Control District. As the Act currently only allows trade within a WAP area, introducing the ability to trade in areas without a declared water allocation plan would mean that trade could occur when 1) a plan has lapsed or is in draft form, or 2) in areas outside of the plan area. Government has considered legislative reforms to significantly improve the administrative efficiency of trading under the current Act. Part 6A was included as an amendment to the Water Act in 2007 to improve the transparency and accountability provisions of the Act. These provisions require a non-discretionary public notification and comment process to be applied to water extraction licence decisions that lead to new licences and to licences that involve an increase in the quantity of water to be taken under an existing licence. The policy rationale for this is to ensure that the public can comment where there is potential for increased extraction from a specific water resource. As an unintended consequence of this provision, licences that result from transfers and trades have been subject to the provisions of Part 6A, despite there being no overall increase or impact in extraction from the resource. This reform will mean that once an entitlement has been granted under a licence, that entitlement whether transferred, traded or renewed is not subject to Part 6A. Licences granted that do not increase a licensed water entitlement (in terms of quantity taken and impact on a resource or other users) are not proposed to continue to be subject to Part 6A. DENR has also developed a draft Trade Policy, which in conjunction with WAPs, provides clarity for water users and regulators in the application of the existing Act. This policy will support consistent decision making and the development of robust and efficient procedures to deal with applications for trade in water.

3.1e A pricing framework for water

There are currently no fees or charges for licence and permit applications or for administrative variations to licences or permits, with these transaction costs met by Government (and ultimately the public). The only costs recovered at present are the advertising costs associated with the public notice of intention provisions in Part 6A of the Act. The recovery of reasonable costs for administrative fees and charges are applied in other jurisdictions and it is appropriate this is considered in the Northern Territory. Nationally, the sustainable management of water resources has been impeded by inefficient pricing frameworks. The development of water resources in southern Australia was historically characterised by the use of water allocations to promote the expansion of European settlement and economic development. A focus on economic development combined with limited scientific knowledge and poor regulation led to high levels of over allocation and enormous water infrastructure liabilities arising from governments undercharging for water use. The National Water Initiative supports the user-pays principle such that the beneficiary pays for the cost of receiving that benefit – i.e. access to water for commercial purposes. The NWI suggests that fees should go towards the cost of water management and administration and should therefore be based on the cost of providing these services. This is reflected in the current Water Act but has not been fully implemented. The challenge for the Northern Territory is to continue to learn from what has and has not worked in other jurisdictions and to implement a pricing framework that ensures that the management and regulation of water resources are supported by adequate financial and other resources, and that the development of water-dependent enterprises are not impeded by perverse or unintended pricing outcomes. Over the longer term, contribution to the significant and growing costs of environmental research, monitoring and planning could be made by those benefiting from economic use of the water extracted. These costs are currently funded by Government. The Scientific Inquiry into Hydraulic Fracturing in the Northern Territory recommended in its Final Report that Government introduce a charge on water for all onshore shale gas activities. Options to implement this recommendation are currently being developed by Government. The development of a pricing framework needs to consider that the economic inputs of developing projects in remote areas can be significantly higher than urban areas.

4.1a Adaptive management

While there is a significant body of knowledge about the Territory’s water resources, and the ecosystems that depend on our water, there are areas where there are gaps in this knowledge. In many cases, extraction from the resource will help inform these knowledge gaps. Adaptive management could allow for extraction to be altered (e.g. increased or decreased) either at the plan level or licence level if there is enough scientific evidence to suggest that these changes will not cause deleterious effects. Under this approach, as new scientific knowledge about specific resources and water-dependent ecosystems is developed, whether through extraction or through monitoring and assessment activities, this knowledge is integrated into plans as well as licence decisions and licence conditions. Adaptive management considers the precautionary principle while enabling economic development that is supported by a careful expansion of the scientific knowledge of a water resource. The proposal to introduce staged allocations (see page 12) is an example of integrating an adaptive management approach into the conditions of some licences. Clearer guidance about the adaptive management of water resources would likely lead to increased confidence in licence decisions.

4.1b Interchange of ground and surface water extraction in inter-connected systems

Many water resources in the Territory are inter-connected. Both groundwater and surface waters can be replenished from rain events, and river flows are often sustained by groundwater between rain events. In some areas there is a very strong relationship between groundwater and surface water (such as the Katherine, Daly and Roper Rivers within the Tindall Limestone aquifer). Where surface water and groundwater resources are inter-connected, they need to be managed as an integrated system because extracting groundwater may have an impact on the availability and quality of surface water and vice versa. Recognising this connectivity in future planning is important for long-term sustainable use of both surface and groundwater. Where environmental and cultural values associated with this water can be maintained and protected there may be a case for enabling trade or other transfers of water between inter connected water resources. Similarly, where a licensee has both groundwater and surface water entitlements from inter connected systems (under two or more separate licences), some flexibility could be introduced so that the Controller has a power to increase extraction from one source where extraction from another source has decreased. This is a particularly relevant consideration for public water supply. For example, working within the overall entitlement, but allowing for increased surface water extraction offset by decreased groundwater extraction, in situations similar to Katherine in response to PFAS contamination.

4.1c Surface water harvesting

There are a number of proposals for surface water harvesting and capture of Wet season flows across the Top End for agriculture, mining and public water supply. These proposals seek to realise an opportunity to make use of abundant water in the Top End during the Wet season by storing it for use in the Dry season when less water is available. The challenge is to determine how, when and where water can be taken during the Wet without having an impact on groundwater recharge, surface water base flows, and environmental and cultural values associated with water, especially during the Dry season. Clear and transparent regulatory mechanisms are required to schedule the take of water so that users do not over tax the environmental limits of the system. These mechanisms should be referenced in the NT Water Allocation Planning Framework.

4.2 Definition of stock and domestic use

The Act establishes a right for the owner and occupier of land to take water from a waterway on or adjacent to the land (section 11) and groundwater from beneath the land (section 14) for ‘stock and domestic’ purposes. Stock and domestic purposes are described in sections 11 and 14 of the Act as water for: • The use of the owner, occupier or their family and employees for domestic purposes; • Drinking water for the grazing of stock on the land; or • Irrigating a garden, not exceeding 0.5 hectares, which is part of the land and used solely in connection with the dwelling. (0.5 hectares is 5,000 square metres). All Australian States/Territories in allow for largely unregulated stock and domestic water use, which is not subject to controls on use in the same way as licensed water extraction. The definitions that exist in other water legislation interstate are very similar to the definition used in the Northern Territory. Reform of the stock and domestic provisions in the Act is required to revisit and assess the relevance of the definition of stock and domestic use. Further, it is important that the Act prioritises protections for those stock and domestic water users who have no other options for their potable water supply. The feasibility of mechanisms for doing this requires investigation. There is increasing concern in peri-urban areas of the Northern Territory about long term water security, with the volumes extracted by stock and domestic users perceived as threats to water supplies in the outer areas of towns and cities. As an example, the Darwin Rural Area has around 5,000 blocks with water bores supplying household use in the area. This figure could double if all land owners exercised their statutory rights to access groundwater for stock and domestic use, which is provided for in the Act, or should further subdivision occur. Areas surrounding Katherine are also affected by this issue, on a smaller scale. The description of stock and domestic use in the Act has been subject to community commentary and concern because it describes the way the water is used rather than establishing volumes or limits on the take of water. For example, there have been concerns raised by rural residents who are reliant on stock and domestic use for their household water supply that the definition of stock and domestic water in the Act does not discern between careful and excessive uses (e.g. on gardens). As demonstrated by this example, the concerns being expressed are not about the definition itself, but about the lack of utility in the definition to the wide range of stock and domestic uses. Further subdivision of land, including that overlying over-allocated groundwater systems, is currently controlled by the provisions of the Planning Act and the NT Planning Scheme, which mandate that the consent authority must, where relevant, take information regarding access to water into account when determining a subdivision application. The Water Act does not allow for limits to be placed on access to rural stock and domestic water use in situations where the owner or occupier is or can be connected to an alternative secure water source such as a reticulated public water supply. Similarly, the Planning Act and NT Planning Scheme, taken together, do not support subdivision of land overlying over allocated groundwater systems or for subdivision of land where alternative sources of potable water are available, such as through public supply or rainwater harvesting. As work is already underway to assess options for improved controls and interactions between the Water Act and the Planning Act in relation to future subdivisions and access to alternative water supplies, this issue of out of the scope of the broader water regulatory reform process outlined in this Directions Paper. This matter is being progressed separately.

5.1a Risk assessment of water resources

While it is recognised that some water resources in the Territory are subject to greater risks than others, all resources are managed and regulated according to the same rules. The current Act does not readily allow for risk based licence assessment and reporting processes, all decisions are subject to the same process. A mechanism is required that provides for varying levels of management and assessment based on risk to the resource. This could be the introduction of a power to declare, based on a risk assessment framework, a schedule of areas that require a higher and/or different standard of management and regulation. This could improve the sustainable management of water resources and would mean that licensees would be subject to a level of regulation commensurate with the risk their extraction poses to a particular water resource system.

5.1b Fit and proper person test

The inclusion of a clear and objective ‘fit and proper person’ test in the licensing decision making framework would ensure that the Territory’s resources are allocated to persons or companies in line with public expectations about the responsible use of water resources. For instance, this test could preclude water entitlements being granted to persons found guilty of serious criminal offences consistent with the provisions in the proposed environment protection Act.

5.1c Ability not to assess applications

The current Act requires all licence and permit applications to be subject to the same assessment process. All complete applications must be accepted, considered and a decision made. This can make a relatively simple decision the subject of a long and protracted process at the expense of the applicant and Government and, in turn, the community. For example, in a system where water is not available, currently under the Act that application will still need to be subject to advertising for public consultation before the Controller can make a decision not to grant a licence. There is a need to streamline the process of assessing licence applications that relate to resources at risk. Consideration could be made of the inclusion in the Act of a power to not assess licence applications for a particular system that is declared at risk. This would substantially streamline the current regulatory process whereby the Act requires the entire rigorous assessment process be undertaken for all completed applications lodged, even those for which there is a very limited prospect of a favourable decision because the knowledge of the resource indicates that an increased level of extraction is not sustainable. Clear guidelines would be required to ensure that there is consistent decision-making.

5.1d Consistency for beneficial uses

Beneficial uses are currently declared under two different sections of the Act (sections 22A and 73), which has caused confusion and generated inconsistency in their declaration within Water Control Districts. Legislative reform is required to create a single point of reference in the Act for the declaration of beneficial uses; to ensure consistent reference to beneficial uses throughout the Act; and to improve the definitions of beneficial uses. This would in turn support a more comprehensive approach to managing water systems, where both volume and quality aspects are considered, and all water use is accounted for.

5.1e Clarification of role of Controller

The powers and functions of the Act are vested in the responsible Minister (for Environment and Natural Resources). The Minister may appoint a Controller of Water Resources (Controller) under section 18 of the Act. The Controller can delegate her or his powers. The currently appointed Controller is also the Chief Executive Officer (CEO) of DENR. The Controller has wide ranging powers under the Act, including issuing water extraction licences, waste discharge licences, aquifer recharge licences, powers to grant a range of permits, powers to direct certain actions, obligations to undertake assessment and notification and advertising responsibilities (amongst others). The challenge associated with the CEO holding the appointment of Controller is that the person responsible for approving policy advice is also the person responsible for considering that advice in their decision making. While this current arrangement is functional due to careful adherence to the principles of administrative law, other relevant Government decision-making functions, such as liquor licensing and environment assessment, are undertaken with a clearer separation of powers. An option for ensuring separation between Minister and the CEO and/or the agency advising the Controller is for the Minister to appoint a Controller as an independent statutory officer; or alternatively appoint an existing statutory authority such as Northern Territory Civil and Administrative Tribunal or the NT Environment Protection Authority or an individual member of such - as the Controller of Water Resources. These approaches may mitigate any perception of a conflict of interest in decision-making. Both options achieve separation and a singular focus on administrative law. In order to manage workload demands, the bulk of the more straightforward powers could be delegated back to the CEO or Executive Director Water Resources, leaving only the activities associated with water extraction licensing (for example) with the independent statutory body.

5.1f Review provisions

The Act includes provisions for the review of certain actions and decisions made by the Controller or the Minister. Under the Act the Minister may refer a matter to a Water Resources Review Panel for advice. These review provisions have been determined by the Supreme Court to be in the nature of a merits review of decisions. However, the Act does not expressly state this, and consideration will be given as to what kind of review is appropriate for various decisions that may be made under the Act. Reviews generally comprise of one of the following: • internal review is the process where an officer not involved in the original decision making reviews the merits of a decision made by a delegate of the Controller. The outcome of an internal review process is that the primary (original) decision may be upheld or replaced; • judicial review, which is a common law right, which is undertaken by the Supreme Court and considers the lawfulness of a decision and the decision-maker’s authority to make it; or • merits review, which is a statutory process whereby a new decision-maker generally reconsiders all relevant facts and evidence and makes a new decision in place of the original decision-maker. Reform of the review process could consider the Northern Territory Civil and Administrative Tribunal (NTCAT) – which currently has broad responsibilities in the review of the merits of decisions by statutory office holders – as an appropriate reviewing body.

5.1g Inclusion of Objects

The Act does not include an ‘Object’ provision which expressly articulates the underlying purpose of the Act. Following feedback from community members on this Directions Paper, a position paper will be developed on a proposed Object provision for the Act.