Unbundled Water Rights
This page provides a general introduction to unbundled water rights in South Australia. It provides information about the context of unbundling water rights, the advantages and potential disadvantages, the key elements of an unbundled water rights system and the process for implementing unbundled water rights. It is aimed at people who work in, or have an interest in water planning and management in South Australia. It does not substitute the legislative requirements of the Natural Resources Management Act 2004 (NRM Act) or reference to provisions of the NRM Act.
• Water allocation: the right to take a specific volume of water for a given period of time, not exceeding 12 months, based on the volume of water available for allocation in that period;
• Delivery capacity entitlement: the ongoing right to access a proportion of the capacity of a water distribution system;
• Water resource works approval: the permission to construct, operate and maintain works for the purpose of taking prescribed water at a particular location, in a particular manner; and
• Site use approval: the permission to use the water at a particular site in a particular manner.
• Water affecting activity permits already exist alongside water licences and can authorise a number of activities, such as construction of wells and dams or the use of effluent and imported water. These permits continue to exist after water rights are unbundled, but in some cases a water resource works approval can replace the water affecting activity permit. What is the legislative basis for unbundling water rights?
The NRM Act was amended on 1 July 2009 to allow for a scheme whereby five instruments, rather than one instrument are used to manage each of the key aspects of water access, taking and use. The unbundled water rights system cannot fully operate for a water resource unless an existing water allocation plan has been amended or a new water allocation plan adopted incorporating the unbundled system requirements.
Figure 1 (below) illustrates the four water management authorisation of the unbundled water rights system currently used .
Potential advantages of an unbundled system
• Clarification of the ownership attributes of the water separate from the commitments and obligations associated with its taking and use.
• Improved ability to trade water rights both within South Australia and between South Australia and other states.
• Ensures commitments under intergovernmental agreements such as the National Water Initiative and the Water Management Partnership Agreement are met.
• The ability to more easily trade the seasonal volume of water (the water allocation) independently of the ongoing water right (the water access entitlement).
• Greater flexibility in the options for managing water including dealing with variability in a water resource through providing a transparent mechanism for dealing with varying water allocations that are dependent on the condition of the resource. Unbundling makes the actual reliability more explicit through the water allocation planning process.
• The purchase and transfer of water allocations or water access entitlements can occur more quickly and efficiently than in a bundled system, because they are free from site and technical assessments.
• Site use approvals or water resources works approvals require a site or technical assessment; however, they can be obtained prior to the purchase of a water access entitlement or a water allocation.
Potential disadvantages of an unbundled water rights system
• Unbundling results in the requirement of up to four authorisations, rather than one water licence, and can be perceived as increased bureaucracy.
• Unbundling requires a thorough understanding of a number of complex concepts, such as consumptive pools, shares and annual allocations.
• The benefits of unbundling can only be realised where there is sufficient understanding and confidence in a water market and in management of approvals.
The NRM Act and associated Regulations provide for a staged implementation of unbundling water rights across South Australia. The transitional provisions of the Natural Resources Management (Water Resources and Other Matters) Amendment Act 2007 together with Regulation 47 of the Natural Resources Management (General) Regulations 2005 provide flexibility in the timing of unbundling of water rights.
They allow for:
• the adoption of water allocation plans that commenced development prior to 1 July 2009, without explicitly providing for unbundling of water rights;
• the continuation of existing water licences that are not explicitly unbundled;
• the issuing of new water licences that are not explicitly unbundled, until a water allocation plan is developed for the prescribed water resource that provides for unbundling.
The Natural Resources Management (General) Regulations 2005 expire in September 2016.
Implementation of unbundling water rights
The Policy on the Implementation of Unbundling Water Rights in South Australia outlines how unbundling will be implemented. It provides for flexibility in the timing and extent of unbundling for each prescribed water resource, subject to the outcomes of a feasibility and benefit assessment. The process to implement unbundling will be undertaken as part of the normal water allocation plan review and amendment cycle, subject to the outcome of a feasibility assessment. Unbundling will be implemented through the full statutory water allocation plan amendment process as detailed in the NRM Act, which allows for substantial stakeholder engagement. Unbundling of water rights will not occur for an existing prescribed water resource through any other mechanism.
All existing licensees will be issued with the unbundled water rights instruments upon adoption of the water allocation plan. The existing licence conditions will need to be captured and reflected in the unbundled rights and will need to be consistent with the water allocation plan.
Water access entitlements and consumptive pools
The definition of a consumptive pool (or pools) and water access entitlements as an entitlement to a share of the water available in a consumptive pool, is considered to be beneficial for all prescribed water resources. This is because it provides a clearer definition of water rights and provides a more transparent and robust mechanism for dealing with short-term variability in the water resource or potential long-term changes as a result of climate change.
A consumptive pool refers to the water available on a sustainable basis for authorised or statutory rights to access water in accordance with Chapter 7 of the NRM Act. This includes water licences, authorisations under section 128 of the NRM Act and unlicensed stock and domestic water use. There needs to be at least one consumptive pool for each prescribed water resource, but multiple pools are possible, to recognise different aquifers, catchments, different water resource properties (confined or unconfined, different salinity levels) or in some cases different purposes (environmental or critical human needs).
The water allocation is an actual volume of water that is available during a specified period, usually a water use year. It can only be taken if the holder has the relevant approvals to take and use the water (see below). Water allocations can be transferred to another person and the buyer does not need to have a water licence to hold a water allocation.
Water allocations are recorded on a water account. A water account is similar to a bank account: it lists all the transactions relating to water allocations, including allocations bought and sold, used and/ or received on account of a water access entitlement. The Minister makes a determination under section 146(4) and (5) of the NRM Act about the volumes available for allocation.
Conditions for the taking and use of water
In accordance with Section 127 (5a) of the NRM Act a site use approval is required allow the use of water from a prescribed water resource and a water resource works approval is required to construct, operate and maintain works for the purpose of taking water from a prescribed water resource. However Section 127 (5b) allows regulations to be developed to create exemptions from the requirements of the approvals. Such a regulation already exists for the taking of water from prescribed water resources that does not require a water allocation; for example, unlicensed stock and domestic use and use authorised under Section 128 of the NRM Act. However, it is possible to reverse this exemption in a water allocation plan.
If someone holds a water licence with water access entitlements and/or a water allocation, but has no approvals to take and/or use the water, that person is not authorised to take or use the water. The person still holds an asset that can be transferred. It can be considered equivalent to a holding allocation in the bundled water rights system.
For certain prescribed water resources it may be necessary to link conditions for “taking and use” to the water licence and/or water allocation, either as an interim or ongoing arrangement. This is because the potential benefits of fully unbundling water rights, particularly in relation to the transferability of the water rights, cannot be realised without creating complexity or increased risks to the water resource or third parties.
Where this is found to be the case, an exemption regulation from the need for separate water resource works approvals and/or site use approvals will be considered, to avoid duplication or inconsistency between the water licence/water allocation on the one hand and the site use approval and water resource works approval on the other. A water affecting activity permit would then continue to apply for the construction and maintenance of works.
Depending on the water resource, there are four options for the placement of conditions relating to the take and use of water and the construction and maintenance of works, such as wells and dams for taking water (also displayed in tables 1-4 below):
1. no conditions relating to taking and/ or using water are attached to the water licence and/or water allocation. Conditions for the construction and maintenance of works and the manner of taking water are on a separate water resource works approval and conditions for the use of water are on a separate site use approval;
2. conditions for the use of water are attached to the water licence and/or water allocation and the conditions for the construction and maintenance of works and the manner of taking water are on a separate water resource works approval;
3. conditions for the manner of taking water are attached to the water licence and/or water allocation, the conditions for construction and maintenance of works are on a water affecting activity permit and the conditions for the use of water are on a separate site use approval; or
4. conditions for the take and use of water are attached to the water licence and/or water allocation and conditions for the construction and maintenance of works are attached to the water affecting activity permit.