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Leading policy and reform in sustainable water management

Water Management (General) Regulation 2011

Regulatory Impact Statement

Publisher

NSW Office of Water

Level 18, 227 Elizabeth Street GPO Box 3889 Sydney NSW 2001

T 02 8281 7777 F 02 8281 7799

[email protected]

www.water.nsw.gov.au

The NSW Office of Water manages the policy and regulatory frameworks for the state’s surface water and groundwater resources to provide a secure and sustainable water supply for all users. The Office of Water also supports water utilities in the provision of water and sewerage services throughout New South Wales.

Water Management (General) Regulation 2011: Regulatory Impact Statement

September 2011

ISBN 978 0 7313 3920 4

© State of New South Wales through the Department of Trade and Investment, Regional Infrastructure and Services, 2011

This material may be reproduced in whole or in part for educational and non-commercial use, providing the meaning is unchanged and its source, publisher and authorship are clearly and correctly acknowledged.

Disclaimer: While every reasonable effort has been made to ensure that this document is correct at the time of publication, the State of New South Wales, its agents and employees, disclaim any and all liability to any person in respect of anything or the consequences of anything done or omitted to be done in reliance upon the whole or any part of this document.

NOW 11_211

Acknowledgment

Part 6 of this Regulatory Impact Statement has substantially replicated the structure and content of earlier work by Rolyat Services Pty Ltd, 113 Oxley Drive, Mt Colah NSW, who were commissioned in 2003 by the former Ministry for Energy and Utilities, to prepare a regulatory impact statement for the current Water Management (Water Supply Authorities) Regulation 2003. [Cited as: Rolyat Services Pty Ltd, 2003, Regulatory Impact Statement – Water Management (Water Supply Authorities) Regulation 2003 – Under the Water Management Act 2000].

Water Management (General) Regulation 2011 Regulatory Impact Statement

Contents

1 ....................................................................................................................... 1 Executive summary

Consultation .................................................................................................................................. 2

2 ...................................................................... 4 Regulatory framework for water extraction in NSW

3 ......................................................................... 7 Requirements for Regulatory Impact Statements

3.1 ........................................................................................................................ 8 Methodology

3.1.1 ................................................................................................. 9 Option assessment

3.2 .................................................................................................. 9 Structure of this document

4 ................................................................................................................................ 10 Consultation

5 ............................................................................. 12 The Water Management General Regulation

5.1 ......................................................................................... 12 Amnesty for pre-existing works

5.2. ...................................................................................... 14 Form and content of applications

5.3 ............................................................................................................... 16 Access Licences

5.3.1 ........................................................................... 16 Exemptions for access licences

5.3.2 .................................................................. 26 Security interests and access register

5.4 .......................................................................................................................... 27 Approvals

5.4.1 ................................................................. 28 Exemption from advertising approvals

5.4.2 ............................................................................ 30 Security deposits for approvals

5.4.3 ..................................................................................... 31 Exemptions for approvals

5.4.4 .................................. 35 Proposed new exemptions – water supply work approvals

6 ................................................................................. 48 Water Supply Authorities Regulation 2004

6.1 ........................................................................................................................... 48 Summary

6.2 ....................................................................................................................... 48 Introduction

6.3 ............................................. 51 Outline of the new Regulation - Part 9 – Supply Authorities

6.4. ....................................................................... 54 Objectives of Part 9 of the new Regulation

6.5. .................................................................................................... 55 Options for assessment

6.6 ................................................................ 55 Assessment of options in relation to objectives

6.6.1 ..................................................................... 55 Option 1 – Do Nothing (Base Case)

6.6.2 .................................................... 56 Option 2 – Alternative Regulatory Frameworks

6.6.3 ............................................................. 57 Option 3 – Remake the 2004 Regulation

6.7 .................................................................................... 58 Assessment of costs and benefits

6.7.1 ...................................................................... 58 Option 1 - Do Nothing - Base Case

6.7.2 .................................................... 61 Option 2 – Alternative Regulatory Frameworks

6.7.3 ............................................................. 64 Option 3 – Remake the 2004 Regulation

i | NSW Office of Water, September 2011


ii | NSW Office of Water, September 2011

6.8 ................................................................................ 65 Results of costs and benefit analysis

6.9 .................................................................................. 65 Conclusions and recommendations

7 .......................................................................................................................... 67 Proposed option

8 ................................................................................................................................... 68 Conclusion

9 ........................................................................................................................ 70 Table of Changes

Appendix A ......................................................................... 71

List of key stakeholders consulted during targeted consultation for development of draft regulation and RIS (2010)

List of key stakeholders consulted during public consultation of draft regulation and RIS (2011) .......................................................................................................................................... 72

Appendix B ......................................................................................................... 74 Methodology

Appendix C .................................................................. 76 Base Case – Option 1 – “Do Nothing”

Appendix D ................................................. 77 Option 2 – “Alternative Regulatory Frameworks”

Appendix E ........................................................... 78 Option 3 – “Remake the 2004 Regulation”

Appendix F ....................................................................... 79 Descriptions of Costs and Benefits

Appendix G .............. 83 Summary of key changes following public exhibition of draft regulation


1 Executive summary

The Water Management Act 2000 (the Act) establishes a framework for the sustainable management of water in New South Wales. It provides for the development of statutory plans that share water

between the environment and water users and it establishes the basis for water trading. The Act establishes and empowers a number of irrigation infrastructure providers and water supply authorities.

Section 400 of the Act enables the making of Regulations to support implementation. Two current

Regulations are the:

• Water Management (General) Regulation 2004

• Water Management (Water Supply Authorities) Regulation 2004.

The above Regulations are due for staged repeal (and will lapse) on 1 September 2011 in accordance with the Subordinate Legislation Act 1989 which requires that Regulations be repealed on their fifth

anniversary. The Regulations were initially due for staged repeal in 2009 but have been deferred twice for one-year periods on each occasion.

The Subordinate Legislation Act 1989 requires that a Regulatory Impact Statement (RIS) be prepared

for all new Regulations (including replacement Regulations). The RIS must demonstrate that the Regulation will result in an improvement in community welfare (benefits must exceed costs) and that the Regulation provides the greatest net benefit of all options that meet the stated objectives.

The Water Management (General) Regulation 2004 provides the administrative direction for the management of the State’s water resources under the provisions of the Act. This Regulation is the joint responsibility of the Minister for Primary Industries and the Minister for Regional Infrastructure.

The Water Management (Water Supply) Authorities Regulation 2004 provides the declared water supply authorities with powers to undertake activities delegated to them by the Minister. Insofar as it relates to the Upper Parramatta River Catchment Trust and the Sydney Olympic Park Authority, this

Regulation is the responsibility of the Minister for Finance and Services. The remaining provisions are the joint responsibility of the Minister for Primary Industries and the Minister for Regional Infrastructure and Services.

To consider remaking the above Regulations, the NSW Office of Water commissioned GHD, a specialist water consultant, to assist with the preparation of this RIS. The RIS explains the need for and the objectives of government action. It establishes and analyses the costs and benefits of a range

of options. The options analysed are as follows:

• Option 1 (the base case) – allow the Water Management (General) Regulation 2004 and

Water Management (Water Supply Authorities) Regulation 2004 to lapse (Note: the Act, the Water Act 1912 and the water sharing plans and other statutory orders would remain in force).

• Option 2 – reinstate the Water Management (General) Regulation and the Water Management (Water Supply Authorities) Regulation without any change.

• Option 3 – reinstate and amalgamate the Water Management (General) Regulation and the

Water Management (Water Supply Authorities) Regulation with amended provisions.

Option 3, preferred by NSW Office of Water, would retain the Water Management (General) Regulation

and Water Management (Water Supply Authorities) Regulation with some amendments that:

• consolidate the two Regulations into a single, Water Management (General) Regulation 2011

• remove the amnesty for pre-1999 works on 31 December 2011

1 | NSW Office of Water, September 2011


• provide the Minister with powers to allow water to be made available for approved basic

human water needs and approved environmental work construction

• clarify and amend previously existing exemptions from the need to hold water access licences

• clarify and amend previously existing exemptions from the need to hold water supply work, water use and controlled activity approvals

• remove duplication of government processes

• make application processes more efficient

• improve transparency by making information more readily available to the public.

To achieve the objectives of the Act, an assessment of the costs and benefits of the measures available to the State, rural landholders, local government and industry was carried out. The

assessment identifies that the benefits of the proposed Regulation will outweigh the anticipated costs of maintaining a rigid regulatory framework requiring substantive government involvement, with minimal adverse impacts to the State’s resources. It also provides the largest net benefits of any

alternative available.

Table 1 summarises the net benefits and costs of quantified impacts from remaking the Regulations with their current provisions and the incremental impact of making changes or amendments.

Table 1 - Summarised costs and benefits

Options Option 1 Basecase

Regulation lapse

Option 2 Remake existing

regulation

Option 3 Proposed Regulation

General Regulation 2004 (cost) $ million

(20.72) 20.72 25.2

Water Supply Authorities Regulation 2004 (cost) $ million

(9,907) 9,907 9,907.7

Total (9,927.7) 9,927.7 9,932.2

Note: Figures in parentheses are costs.

The analysis shows that there is a quantified benefit of $9,932.2 million from making the proposed

Regulation under Option 3. This benefit is in addition to the unquantified benefits of increased flexibility to manage water during drought and enhanced decision making transparency derived from the proposed Regulation.

Consultation

Targeted stakeholder consultation in relation to the development of the draft Regulation and RIS was undertaken in March 2010. Industry groups impacted by the Regulations and their peak stakeholder

bodies (see Appendix A) were invited to provide feedback on the current Regulations and many of the draft amendments – through face-to-face meetings, telephone discussions and written responses. All feedback and concerns are considered in the option assessment throughout the RIS.

During the public exhibition period in June and July 2011, the NSW Office of Water conducted additional targeted consultation with key stakeholders and government agencies whose regulatory functions may be impacted by the Regulation (see Appendix A). All feed back and concerns were

considered and where necessary revisions to the Regulation have been made. See Section 4 of this RIS for more information.



The public exhibition of the proposed Regulation and the draft Regulatory Impact Statement ran from 22 June 2011 to 20 July 2011. The NSW Office of Water received 43 submissions from persons or organisations during the public exhibition.

During the public exhibition phase, copies of the proposed Regulation and this Regulatory Impact Statement were able to be downloaded from the NSW Office of Water website at www.water.nsw.gov.au under Water management > Law and policy > Legal reform.

Copies were also available for viewing at the following locations:

• Sydney Level 18, 227 Elizabeth Street

• Parramatta Level 11, Macquarie Tower, 10 Valentine Avenue

An invitation to comment was placed in the Sydney Morning Herald and the Daily Telegraph, and in the NSW Government Gazette.

Submissions were received by email or post at:

By email Subject line: Water Management General Regulation Review [email protected]

By post Water Management General Regulation Review NSW Office of Water Attn: Manager, Strategic Development PO Box 3720 Parramatta NSW 2124


http://www.water.nsw.gov.au/

mailto:[email protected]


2 Regulatory framework for water extraction in NSW

The Act is the principal statute providing for the management and allocation of water resources (both

surface water and groundwater) in NSW. The Act, which is being phased in across the State via the introduction of new water sharing plans, replaces the Water Act 1912. Prior to 2000, the Water Act 1912 was the principal piece of legislation for management of the State’s water resources.

NSW is a signatory to the Intergovernmental Agreement on a National Water Initiative (NWI), which amongst other things defines a framework for water planning, water licensing and trade, the establishment of water registers, and urban water reforms. As a signatory to the NWI, NSW water

legislation, in particular the Act (and any associated Regulations) needs to provide a framework upon which that agreement can be implemented.

A fundamental and significant change arising from the introduction of the Act was the establishment of

a transparent, statutory-based water planning framework. The State’s water sources are progressively being covered by water sharing plans which specify the rules for the sharing of water between the environment and water users and between water users themselves. Water sharing plans also specify

rules for the trade and management of water access licences. Whilst such rules may vary between water sharing plans (and in fact even differ between categories of water access licences or water management zones within a water source) all are subject to the overarching provisions of both the Act

and the Water Management (General) Regulation 2004.

The Act requires water users to hold a water access licence to take water, a water supply work approval to construct and use a water supply work (pumps, dams, etc), a water use approval to use

water for a particular purpose at a particular location (provides limitations around where and for what purpose the extracted water may be used e.g. irrigation, town water supply etc) and a controlled activity approval to carry out a controlled activity (extracting material from a river bed, etc) at a

particular location in, on or under waterfront land.

The Act further provides for the creation of categories of water access licences and issuing of new water access licences of particular categories, the registration of financial interests in those water access

licences, and the trade and transfer of those water access licence entitlements and water allocations.

The Act also establishes various private irrigation and water bodies, and water supply authorities.

Section 400 of the Act enables Regulations to be made covering any matter required or permitted by

the Act. In addition, the Act (in a number of instances) explicitly enables Regulations to be made to address how specific issues (which may not be common to all circumstances) are to be managed at the local level.

The Regulations must complement the Act, which is based on the concept of ecologically sustainable development – that is, development that will not threaten the ability of future generations to meet their needs. It requires the effective integration of economic and environmental considerations in decision-

making processes. The Act recognises that:

• the fundamental health of our rivers and groundwater systems and associated wetlands,

floodplains and estuaries has to be protected

• the management of water must be integrated with other natural resources such as vegetation,

soils and land

• to be properly effective, water management must be a shared responsibility between the government and the community

• water management decisions must involve consideration of environmental, social, economic,

cultural and heritage aspects



• social and economic benefits to the State will result from the sustainable and efficient use of

water.

The Regulations assist in implementing and defining the provisions of the Act by:

• defining various procedural matters

• specifying exemptions from the need to hold a water access licence or an approval in certain

circumstances; and

• prescribing savings and transitional arrangements such as specifying the changeover

formulae applying to the new category of supplementary water access licences (formerly off–allocation water).

The Water Management (General) Regulation 2004 and the Water Management (Water Supply Authorities) Regulation 2004 make key elements of the Act operational – including but not limited to

the following areas:

• recognising other State and Local government activities which involve water resource

access/use or works approvals. In these cases the Regulation reduces the incidence of red tape by prescribing exemptions (conditional and unconditional)

• adopting a risk management approach by exempting various persons from the need for a water access licence, water use, water supply work or controlled activity approval in respect of

circumstances and activities which do not materially impact upon the Objects of the Act

• providing transitional arrangements from the Water Act 1912 thus allowing for existing water

licences to be replaced with equivalent water access licences and approvals which are subject to the rules prescribed in the water sharing plan that covers the water source in which the

licence/ water supply work is located

• specifying the categories of new water access licences that can be applied for

• extending the categories of water access licences

• specifying the form and process requirements for applications for water access licences and

approvals

• keeping public registers and details of the places and locations at which such may be viewed

• specifying arrangements for private entities named in the Act (irrigation corporations, water trusts, irrigation trusts and irrigation districts)

• defining water supply authority functions, areas of operation, financing, the rights of

customers, good practice in operation and administration and governance.

These Regulations have a significant impact on water users both within NSW and interstate and the

NSW Office of Water licensing programs. They set a clear direction which, if adhered to, empowers the user/operator with a lawful right to operate within the requirements of the Act.

The NSW Office of Water is responsible for both the implementation of the Act (and Regulations) and

the enforcement of compliance therewith which extends from individual users to large corporations. The Regulations form the basis upon which the agency is able to effectively manage its operations in so far as:

• clearly articulating certain activities to which the agency shall not have to allocate operational resources (e.g. exemptions)

• clarifying the operational activities/requirements of the agency to deliver in accordance with

the provisions of the Act

• managing potentially conflicting areas where multiple government agency involvement could

occur.



It is important to note that the Act, the Water Management (General) Regulation, the Water Management (Water Supply Authorities) Regulation and the associated water sharing plans are only a few of a number of statutes and regulations that affect the water related environment in NSW,

however they are most certainly the ones associated with the greatest percentage of water use.

The NSW Office of Water also supports the NSW Government in the administration of the following NSW Acts and Regulations and policy instruments:

• Dams Safety Act 1978

• Googong Dam Catchment Area Act 1975

• Hawkesbury-Nepean River Act 2009

• Menindee Lakes Storage Agreement Act 1964

• New South Wales–Queensland Border Rivers Act 1947

• Pipelines Act 1967

• Public Works Act 1912 (section 34 (3) and (4))

• State Water Corporation Act 2004

• Sydney Water Catchment Management Act 1998

• Sydney Water Catchment Management Regulation 2008

• Water Act 1912

• Water (Commonwealth Powers) Act 2008

• various orders including the harvestable rights orders.



3 Requirements for Regulatory Impact Statements

The objective of the Subordinate Legislation Act 1989 is to improve the quality of regulatory proposals

by assessing the economic and social impacts of proposed Regulations and their alternatives prior to introduction.

The Subordinate Legislation Act 1989 requires the preparation of a RIS prior to making principal

Regulations. A RIS must state the objective of the Regulation and the costs and benefits of alternatives available to achieve these objectives. In considering alternatives, the impact of not proceeding with any Regulation must also be evaluated.

Social and economic costs and benefits, both direct and indirect, need to be considered and impacts on resource allocation, administration and compliance with statutory requirements evaluated. Wherever possible, these costs and benefits should be quantified. If quantification of anticipated

impacts is not possible, the RIS should facilitate the comparison of alternatives. The Subordinate Legislation Act 1989 requires that an assessment of the alternative which involves the greatest net benefit, or the lowest net cost to the community, be included in the RIS.

In making statutory instruments, the NSW Guide to Better Regulation identifies seven principles to cut red tape and reduce costs to business. The table below summarises how this Regulatory Impact Statement complies with the Better Regulation Principles.

Table 2 - Summary of RIS compliance with the Better Regulation Principles

Number Principle Summary of RIS Compliance

Principle 1 The need for government action should be established

Because of the broad nature of the Regulation for each section the need for government action and objectives are established in the objective and general background

Principle 2 The objective of government action should be clear

Because of the broad nature of the Regulation for each section the regulatory objectives are established in the objective and general background information

Principle 3 The impact of government action should be properly understood by considering the costs and benefits of a range of options, including non-regulatory options

Costs and benefits of options are identified and where possible quantified. Because of the broad nature of the Regulation each section is evaluated separately. Summary information is included in Table 46.

Principle 4 Government action should be effective and proportional

Many of the amendments are designed to ensure that small activities that do not impact significantly on the environment or others are exempt from the need for regulatory action

Principle 5 Consultation with business and the community should inform regulatory development

Details of the consultation program undertaken is provided in Section 4 and Appendix A.

Principle 6 The simplification, repeal, reform or consolidation of existing Regulation should be considered

A number of modifications have been proposed and evaluated that consolidate two Regulations, clarify existing exemption provisions and simplify lodgement of applications.

Principle 7 Regulation should be periodically reviewed, and if necessary reformed to ensure its continued efficiency and effectiveness

The Regulation is regularly reviewed to ensure it meets the changing needs of the community of NSW.



3.1 Methodology

This RIS relates to the proposed remaking of the Water Management (General) Regulation 2004 and the Water Management (Water Supply Authorities) Regulation 2004. It does not include consideration

of the following:

• by-laws for private irrigation districts under Part 2 of Chapter 4 of the Act on the basis that

these are excluded instruments under Schedule 4 of the Subordinate Legislation Act 1989

• Parts 6 - 9 of the existing Water Management (General) Regulation 2004 in relation to joint

private works. This is because substantial amendments were made to the relevant joint private works provisions of Chapter 4 of the Act by the Water Management Amendment Act 2010.

Those amendments have not yet commenced as work is underway to develop the necessary Regulations to facilitate their implementation. Once the amendments commence many of the provisions in Parts 6–9 of the existing Regulation will no longer be required. Accordingly, for now

those provisions will appear unchanged in the new Regulation (see Parts 4–7 of the Regulation)

• aquifer interference activities, aside from one clarification made in relation to the water access

licence exemption provisions to remove an existing provision (clause 18 (2) of existing Regulation) so as to ensure consistency with the Act (see section 5.3.1) and a new provision

in respect of defined classes of monitoring bores. A cross-agency working group is currently involved in developing an aquifer interference policy which may require the current provisions of the Regulation which deal with aquifer interference to be modified. As a preliminary step to

the aquifer interference policy, on 30 June 2011 the Water Management (General) Amendment (Aquifer Interference) Regulation 2011 commenced. This Regulation amended the exemption from the requirement for an access licence in clause 18 (1) (e) of the Water

Management (General) Regulation 2004. There is now a maximum volume of 3ML of water that can be taken for prospecting or fossicking under the Mining Act 1992 or the Petroleum (Onshore) Act 1991. Aside from the amendment to clause 18 (1) (e), clause 18 (2) of the

existing Regulation is removed to ensure consistency with the Act and a new provision in respect of exempt monitoring bores is included (clause 36 (1) (c) and clause 10 in Schedule 5 of the new Regulation). For now the other provisions of the existing Regulation which deal with

aquifer interference (clauses 30, 33, 38 (2) and 39 (4)) will appear unchanged in the new Regulation (clauses 22, 26, 33 and 36 (1) (d) in the new Regulation).

• Part 5 of the Water Management (Water Supply Authorities) Regulation 2004 which relates to plumbing fittings, plumbing works and plumbing permits. This is because it is anticipated that

these provisions will be overridden later in 2011 as the Government is in the process of developing a separate Bill for these matters that will be consistent with nationally-agreed standards to enable these provisions to be administered by a single regulator. It is anticipated

that once that has taken place, these provisions will be repealed from the Regulation. Accordingly, for now those provisions will appear unchanged in the new Regulation (Division 5 of Part 9 of the new Regulation).

The following steps were undertaken to prepare this evaluation for each of the main sets of

provisions:

1. The Office identified general objectives for making Regulations and possible alternatives for

each provision.

2. Data relevant to each option was collected from NSW Office of Water databases.

3. Preliminary consultation was conducted with a number of organisations to assist information

gathering. Organisations approached are listed in Appendix A.



4. Costs and benefits were quantified where appropriate using the assumptions outlined in Appendix B.

In a number of areas it was not possible to quantify the costs and benefits of options so these are

defined qualitatively.

The assessment of options uses a Cost Benefit methodology consistent with guidance provided by the Better Regulation Office. Costs and benefits are measured as the marginal change arising from an

option when compared with the Do Nothing (Base case) option.

Structural changes to the Regulations are not assessed as they are excluded under the Subordinate Legislation Act 1989. Structural changes include administrative changes to machinery clauses (except

for material changes to definitions), redundant clauses, the referral of material to Schedules, and the consolidation of the Regulations. By their nature, these only have intrinsic value to the form of the Regulation.

3.1.1 Option assessment

The base case option involves no government action. Under this option, the Water Management (General) Regulation 2004 and the Water Management (Water Supply Authorities) Regulation 2004 will lapse from 1 September 2011. The Act, the Water Act 1912, the water sharing plans and the

various statutory orders would continue to have effect but without the administrative clarity provided by the Regulations.

Each substantive clause of the Regulations is considered with regard to:

• remaking the Regulations in their existing form

• remaking the Regulations with the proposed amendments

• other regulatory and non regulatory options where these are available.

Marginal changes in the cost to business, cost to government and net social benefit (or cost) are measured quantitatively against the Base case option.

Possible issues that call for future government consideration, generally arising from the targeted

consultation process, are noted where relevant.

3.2 Structure of this document

The RIS and the examination of alternatives is structured around the existing Clauses, Parts and

Divisions of the Water Management (General) Regulation 2004 and the Water Management (Water Supply Authorities) Regulation 2004 as set out below.

In relation to the Water Management (General) Regulation 2004:

• Amnesty for pre-1999 existing works (see section 5.1 of this RIS)

• Access licences, including exemptions from the requirement for an access licence (see section 5.3 of this RIS)

• Approvals, including exemptions from the requirement for an approval (see section 5.4 of this

RIS).

In relation to the Water Management (Water Supply Authorities) Regulation 2004:

• Areas of operation and functions, Water supply, Sewerage, Plumbing, Special Areas, Finance and Pensioner concessions (see section 6 of this RIS).



4 Consultation

As the Regulations affect a broad range of institutions, businesses and persons across NSW, broad

consultation on the proposed options is appropriate.

Targeted stakeholder consultation in relation to the development of the draft Regulation and RIS was undertaken in March 2010. Industry groups impacted by the Regulations and their peak stakeholder

bodies (see Appendix A) were invited to provide feedback on the current Regulations and many of the draft amendments through face-to-face meetings, telephone discussions and written responses. Of the 37 stakeholders, 22 requested to participate and nominated a preferred method of discussion and

their availability.

Of those responding stakeholders, 18 requested additional information. These requests were made in order for the stakeholders to make informed decisions regarding their participation, to provide a basis

for canvassing their staff and/or members, and to develop their response prior to discussions with GHD. This involved:

• three face-to-face meetings

• seven teleconferences

• two email responses

• six stakeholders preparing responses or nominated to await the public exhibition process.

The 2010 targeted consultation provided opportunities to:

• raise awareness of the regulatory review and the need for Government action

• collate views on the existing Regulations and on possible changes to the Regulations identified by GHD and the Office

• provide other possible options to improve the functionality of the Regulations and cut costs to

businesses and agencies

• provide information to assist in the identification of impacts.

The feedback and concerns of stakeholders are considered in the option assessment throughout this

RIS.

The 2010 consultation occurred at a time when many irrigation groups and other peak stakeholders were focused on the National and Murray-Darling Basin water reforms. Some stakeholders indicated

that due to competing demands they would use the public exhibition process, when they have more time to consider the relevant matters and the amendment proposals would be clearly defined for them to consider.

In many instances discussions with stakeholders involved the clarification of issues in the existing Regulations, or issues in the Act to which the Regulations relate. There were few suggestions on how the Regulations might be improved beyond concerns regarding roles and cost sharing between

government entities.

It is noted that there was general recognition of the need for the Regulations to continue and for water management to be regulated in order to protect existing interests in water access and use. Some

noted that the very significant reforms occurring in water management made it inappropriate for large-scale changes to the existing processes prior to the settling of broader policy issues. There were some concerns regarding possible changes to exemptions. These were provided to the Office for

consideration and resolution.

Feedback from the 2010 consultation has been incorporated into this RIS by expanding some explanations of existing clauses to address issues of concern. Most stakeholders were unable to



identify the extent to which their members afford themselves of the provisions of the Regulations nor the administrative burden on their members or the Office.

This RIS and the proposed new Regulation were displayed for public exhibition and comment for 28

days between 22 June 2011 and 20 July 2011. During the public exhibition, the Office also conducted additional targeted consultation with government agencies whose regulatory functions may be impacted by the proposed Regulation and key stakeholders (see Appendix A). This involved letters,

telephone and email communication and face-to-face meetings (see Appendix A).

During the public exhibition phase, copies of the proposed Regulation and the RIS were made available. An invitation to comment was placed in the Sydney Morning Herald and the Daily Telegraph

and in the NSW Government Gazette.

The documents were also accessible in print at the NSW Office of Water’s Sydney head office, Parramatta Office and online on the NSW Office of Water website at www.water.nsw.gov.au.

Submissions were received from 43 persons or organisations. All comments were given careful consideration and as a result of the submissions received, a number of changes have been incorporated into the Regulation. These changes are summarised in Appendix G.

Comments contained in submissions relating to Aquifer Interference were provided to staff of the Office of Water who are working on the draft of this Policy.


http://www.water.nsw.gov.au/


5 The Water Management General Regulation

The Water Management (General) Regulation assists in implementing and defining the provisions of

the Act in that it:

• defines various procedural matters

• specifies exemptions from the need to hold a water access licence or an approval in certain

circumstances

• specifies the changeover formulae applying to the new category of supplementary water

access licences (formerly off–allocation water).

It specifically provides the regulatory framework for the transition from the Water Act 1912. The Regulation deals substantively with:

• Part 1 - Preliminary - the amnesty for pre-1999 works

• Part 2 - Management Plans - the withdrawal of water from water allocation accounts and the

delivery of water

• Part 3 - Access licences – additional categories, specific purpose access licences, applications, publication of available water determination and supplementary water orders, the

form, details and operation of registers, transitional arrangements and exemptions

• Part 4 - Approvals – applications, advertising, the form, details and operation of registers,

transitional arrangements and exemptions

• Part 5 – Fees and charges - the waiving or reducing of fees and charges

• Parts 6–9 – Irrigation corporations - private corporations, boards and trusts – constitutional and governance arrangements, operational arrangements, fees and charges, and other

matters.

The primary objectives of Parts 1 to 4 are to enable the implementation of the Act’s principal water

management instruments (access licences and approvals).

The proposed Water Management (General) Regulation 2011 includes a number of amendments to the current provisions of the Regulations. The main focus of the changes is on:

• the removal of the amnesty on pre-1999 unlicensed works on 31 December 2011

• changes to the administrative processes, and to the parameters of exemptions, for water access licences

• changes to the administrative processes, and to the parameters of exemptions, for approvals.

The amendments are intended to take into account the finalisation of some transitional issues, changes in the nature of exemptions from the need to hold a water access licence or approval, and

other administrative matters such as the increasing availability and use of electronic information.

5.1 Amnesty for pre-existing works

Objective

The objective is to remove the existing amnesty for pre-existing works contained in clause 5 of the

current Regulation on 31 December 2011 and to include a new transitional provision so that any applications that are made up to or on that date may still be processed.



General Background

The Act requires a water access licence to take water and a water supply work approval for the works

used to take and store water.

Clause 5 of the current Regulation allows for the making of applications for the relevant approvals and access licences in relation to certain existing works. It applies to specified works only – dams that

exceed the Harvestable Right, and other works that were constructed by or with the approval of a government agency or that previously did not requite a licence. The construction of the work must have been completed prior to 1 January 1999.

The clause operates like an amnesty provision to enable pre-existing works to become licensed and recognised in the licensing regime.

The rationale for the existing clause is to ensure that applications for certain existing works which are

not likely to have a substantial environmental impact are not subject to the usual advertising requirements, not referable to a Commission of Inquiry or caught by any embargo under the Act and that the holder is able to apply for any category or subcategory of water access licence for water taken

by means of the work, despite section 61 of the Act.

Option 1 – Base case – removal of amnesty for pre-1999 works

In the last 10 years the NSW Office of Water estimates that approximately 2800 of these works (farm dams, pumps used for irrigation, stock and domestic and farming purposes) have been identified across the State. Primarily the works identified have all been located on rivers. Of these it is estimated

that 10 percent were required to modify, remove or purchase water entitlements.

With the removal of the amnesty the owners of any remaining undeclared works could legally maintain their access to water through trading. Any remaining works that exceed the harvestable rights limit and

are not authorised by a water supply work approval will need to obtain the necessary authorisation. Some may need to be modified to obtain an approval or in the extreme case be removed if a water supply work approval cannot be obtained. In many cases the landholder would also need to purchase

a water access licence in relation to those works.

Based on current levels of resourcing, it is assumed for this analysis that approximately 50 pre-1999 works (inclusive of hillside storages) which are not authorised by a water supply work approval (and

which require one) are identified each year. Of these it is expected that only 5 percent may need to be modified/removed with the owners entering the water market to maintain their access to water.

Removal of the amnesty provision will result in landholders having to comply with the same legislative

requirements which would apply if they were seeking to construct a new work of that type, including being subject to public comment and objection.

The cost to business of modifying or disabling the works and/or acquiring water rights is estimated to

have a total present value of $0.32 million. Some of these costs represent transfers between businesses for the purchase of water and modification of works.

Modifying or disabling works exceeding the harvestable rights may improve reliability of supply to

downstream licensed water users and the environment. These benefits are difficult to cost given existing information.



Table 3 - Removal of the amnesty – economic impact ($ million)

Identified impacts Annual Units Net present value

Number of works identified per year 50

Number of works modified/disabled 3

Average cost to disable a work $2,000

Number of new dealings required 50

Hours to prepare dealing application 3

Government charge per dealing *includes advertising

$1195

Cost to Government ($0.2) ($0.2)

Cost to business with pre 1999 works $0.07 ($0.32)

* Includes basic access, advertising, administration

Option 2 - Remaking amnesty for pre-1999 works

If the Regulation is remade, owners of these works avoid some of the usual costs associated with acquiring the relevant approvals and the costs of legally maintaining their water access through water

trading or the cost of disabling the works. It would also allow those owners to continue to apply for any category or subcategory of water access licence for water taken by means of the work.

Government would incur a cost of $0.2 million in processing applications received pursuant to the

amnesty clause.

The present value of the avoided cost to businesses with pre-1999 works is $0.32 million. Allowing some water users to exceed the harvestable right reduces the reliability of supply to licensed water

users downstream and the environment.

Preferred option – remove amnesty on 31 December 2011

It is considered that all remaining works which were in existence pre 1999 are now, or should now, have been assessed and the appropriate approval and access licence obtained, particularly given that the application requirements for these works have been very lenient when compared to the

requirements for works of the same type that were constructed after 1999.

The NSW Office of Water considers that the amnesty for pre-1999 works should be continued until 31 December 2011 and then removed. This will give the Office of Water sufficient time to inform the

community that the amnesty will cease.

It is proposed to include a new transitional provision (clause 23 in Part 6 of Schedule 9) to continue clause 5 of the current Regulation until 31 December 2011 and to enable any applications for access

licences and approvals that are made up to 31 December 2011 to be processed. In addition it is proposed to add a requirement that applicants will need to provide proof with any application that the construction of the work was completed prior to 1 January 1999.

5.2. Form and content of applications

Objectives

To retain the requirement for applications for water access licences and approvals to be made in the approved form and to provide for electronic lodgement on the basis that standardising documentation

and simplifying processes reduces costs and increases transparency. This requirement is contained in clause 11 and 31 of the existing Regulation.



Option 1 - Base case - lapsing of the Regulation

In the base case, the Regulation would lapse and with it the procedures and requirements for the

making of applications for new water access licences and approvals contained in clauses 11 and 31 of the existing Regulation.

Without standardised information requirements on what details are required to accompany

applications:

• applicants will spend additional time to find out exactly what information is needed

• the NSW Office of Water will spend additional time processing applications that do not provide

sufficient information.

Option 2 – remaking the Regulation in current format

Clauses 11 and 31 of the existing Regulation (clauses 9 and 23 in the new Regulation) prescribe the approved form, content and method of making applications for new water access licences and

approvals. The following costs and benefits are associated with remaking the Regulation:

• business avoids the cost of $1.1 million in excess time to complete an application and lost

production through consequential delays

• Government avoids the cost of rejecting non-conforming applications

• the present value of net economic benefits is estimated at $1.4 million.

Table 4- Benefit of prescribing form and content of applications

Annual Units Net Present Value

Total number of applications 1250

Avoided additional non complying applications 10 percent

Avoided hours to revise and resubmit 2

Avoided days of lost production 7

Avoided cost to business $0.3 $1.4

Hours to assess additional non-complying 2

Cost to Government $0.01 $0.05

Net Social Benefit (Cost) $1.4

Option 3 – Regulation with amended provision for electronic lodgement

The existing Regulation does not expressly provide for the electronic lodgement of applications. It is proposed to include clauses 9 (1) (d), 23 (1) (f) and 229 in the new Regulation to expressly provide for

the electronic lodgement of applications for new access licences and approvals in accordance with the requirements of the Electronic Transactions Act 2000.

The proposed amendment will bring the requirements of the Regulation into line with the Electronic

Transactions Act 2000. It will also reduce costs and increase transparency for those persons wanting to lodge application documents electronically.

The costs and benefits associated with this option are as follows:

• business avoids cost of accessing information and paper lodgement expenses of $1.2 million

• Government incurs a cost of $0.4 million to support and maintain the electronic portal

• the present value of net economic benefits is $0.8 million.



Table 5 - Benefit of electronic lodgement of applications

Annual Units Net Present Value

Number of applications lodged 1250

Change in hours to access and lodge 4


Cost to government of maintaining portal ($0.1) ($0.4)

Net Social Benefit (Cost) $0.8

Preferred option

In view of these demonstrated benefits, the Office considers that remaking the Regulation with the

proposed amendment to allow electronic lodgement (Option 3) would provide the greatest net benefit at the least cost to the people of NSW and will ensure the system retains relevance into the future.

5.3 Access Licences

The Act provides for the distribution of the water made available for extraction between categories of water access licences (access licences) in accordance with the rules of a water sharing plan. In

practice, water sharing plans prescribe rules for the identification of water that is available for extraction and the distribution of that water between water users and the environment. A water access licence specifies the number of shares of available water held by a person in relation to a particular

water source and entitles its holder to take water at specified times, specified rates and circumstances and from specified areas or locations.

The ownership of, and security interests in, a water access licence are recorded on a public register

administered by the NSW Land Titles Office. Water access licences have an associated water allocation account reflecting the amount of water the holder is entitled to take at a particular point in time.

The Act enables the issuing of particular types of water access licences, and allows for the trade and transfer of water access licence shares and allocations through access licence dealings.

5.3.1 Exemptions for access licences

Objective

The objective of having exemptions for access licences is to allow the NSW Office of Water to:

• minimise the regulatory burden on minor or small-scale water users commensurate with the

small volume of water taken and the low level of associated impact

• manage its regulatory responsibilities in a cost-effective and practical manner.

General Background

Exemptions from the requirement to hold a water access licence provide a net social benefit by avoiding transaction costs for both Government and water users, where:

• the risks to the environment and other water users are low, or

• those risks are already managed through a different mechanism (such as an approval), and/or

• there are distinct socio-economic or environmental benefits, such as drought relief or dust suppression.



The existing clause 18 (1) (which will be replaced by clause 18 and Part 1 of Schedule 5 in the new Regulation) provides that the following persons are exempt from the requirement to hold a water access licence for the taking of water from a water source:

(a) a roads authority engaged in the construction and maintenance of roads

(b) any person lawfully engaged in the carriage and use of water for drought relief

(c) any person lawfully engaged in using water for dust suppression

(d) any person lawfully engaged in hydrostatic testing of gas pipelines, in relation to water required for that purpose

(e) any person lawfully engaged in prospecting or fossicking for minerals or petroleum, in

relation to water required for that purpose

(f) any landholder, in relation to water required for generating electricity for domestic consumption provided that the water is returned to the water source from which it was

taken

(g) any person lawfully engaged in the testing of a new bore, in relation to water required for that purpose during the week following completion of the bore’s construction

(h) any person lawfully engaged in the operation of a hydro-electric power station in connection with a water supply work owned by the Ministerial Corporation

(i) all persons in relation to the taking water from or by means of an excluded work.

(j) any person taking water from an artificial channel where:

i. the water is used to establish sugar cane plantings

ii. the volume taken does not exceed 0.05 ML per hectare of land on which sugar

cane is being established in any continuous 12-month period

iii. the channel was constructed for the primary purpose of draining water from the land on which sugar cane is grown

iv. the channel does not have banks that are above ground level

v. the channel is located in an area to which either the Water Sharing Plan for the Tweed River Area Unregulated and Alluvial Water Sources 2010 or the Water

Sharing Plan for the Richmond River Area Unregulated, Regulated and Alluvial Water Sources 2010 applies

vi. any work used to take the water is not fixed to the land.

The rationale for including such exemptions in the Regulation includes the minor or temporary nature of the take of water, the minimal impact of the water taken and the high social, and/or economic, and/or environmental values associated with not licensing this take of water. In addition, the

exemptions generally cater to situations where there is only a very small volume of water taken and where the take will be only for a limited period and/or on a periodic basis.

There would be little, if any, advantage, but significant disadvantages for both Government and

affected water users if the exemptions were allowed to lapse or were removed from the Regulation. If the exemptions were allowed to lapse or were removed, significant practical difficulties will confront both the Office and affected water users. There would be a large increase in demand for licensing

which would affect the Office based on its current level of resourcing, whilst affected water users would encounter significant costs associated with having to apply for and obtain a water access licence which (in many cases) will only be required for a short-term period. Further, many affected




persons would find it difficult, and perhaps impossible, to satisfy their water requirements because of a range of legislative, market and environmental impediments.

Option 1 – Base case

If the base case is adopted and the Regulation is allowed to lapse, the exemption provisions in the Regulation and all types of take that are currently exempted would no longer be exempt. Under the

Act, all water that is taken from a water source requires a water access licence. It is an offence to take water from a water source without holding a water access licence for that take. The defences available are where the water is taken pursuant to a basic landholder right under the Act (this type of take does

not require a water access licence), an interstate assignment of allocation, an authorisation to take water from uncontrolled flows or if the person was exempt, pursuant to the Act or the Regulations, from any requirement for a water access licence in relation to the taking of water from that water

source. The Regulation currently contains all of the exemptions from the requirement for a water access licence.

As discussed above, if the Regulation was allowed to lapse and the exemptions for access licences no

longer applied, then all of those exempt types of take would require a water access licence. However, the Act strictly limits the categories of new access licences that may be applied for. The Regulations and water sharing plans provide for applications to be made for limited categories of specific purpose

access licences only. Accordingly, in the absence of an amendment to the Act, the water requirements for those persons that are currently exempt could only be met by the purchase of existing water entitlements on the open market, either on a permanent or temporary basis. In most cases, this will

not be achievable.

In some water sources there are established water trading markets. Historically these are the regulated river systems, but there are recognised markets in a smaller number of unregulated river

and groundwater sources. In many other unregulated river and groundwater areas there is no history of trading and as a consequence the purchase of water, on either a permanent or temporary basis, is problematic. However, even in the well established areas there may be no water for sale at the time it

is required or the prospective purchaser may consider the market price to be unviable having regard to the purpose for which they require the water.

For all water sources there are other obstacles that must be negotiated even if the affected persons

are successful in acquiring access licences:

i. water may only be taken in accordance with the conditions of a water access licence

ii. access licences must nominate a water supply work through which water may be taken

iii. users must hold a water use approval that authorises the use of the water for a particular purpose at a particular location1

iv. there must be a credit balance in the water allocation account for the water access licence

before water may be taken.

If any of these elements are not met then water cannot be taken.

Inevitably, affected persons will incur significant costs and effort if they are no longer entitled to the

benefit of an exemption. For some it will not be worthwhile for them to go through the steps necessary to obtain a water access licence (and approvals if these are needed). For others, barriers such as water sharing plan rules or inability to obtain the necessary access licences or approvals may stymie

their endeavours to obtain authorisation for activities that were previously exempt.

1 In most cases under the current Regulation activities that are exempt from the requirement for a water access licence are also exempt from the need for a water use approval.


There will also be an increased cost to Government in regard to processing the additional transaction applications that will occur as a result of removal of the exemption provisions, although this could be offset by application fees.

The analysis below includes an estimate of costs based on the need to apply for purchase of water on the open market, notwithstanding that not all affected persons will be able to buy water to meet their needs.

The following costs and benefits are associated with removing the exemptions:

• business incurs a cost of $1.1 million for application fees per year associated with allocation

assignment dealings

• transfers of small amounts of water between businesses are valued at approximately $1.1

million per year

• the time taken to prepare the additional applications is the major social cost at $1.3 million per year.

These transfers represent a cost to individual enterprises that currently enjoy an exemption. However

from the perspective of the society as a whole there are benefits as well. Where water was available for sale existing licence holders will benefit from additional water sales revenue.

The major social costs associated with the removal of the exemption would be incurred where water was not available for sale. In these circumstances, activities such as dust suppression – that have well

established social, health and environmental benefits – would not take place.

Table 6 - Cost of removing exemptions for water access licences


Number of exempt activities 2000

Exempt activities defined as excluded works 3000

Average exemption volume per annum (1 ML) 1

Delays in undertaking specified activities Week per application

Not costed

Delays in undertaking activities until market water becomes available

Significant but not able to be quantified

Entitlement cost per ML of diversion 200

Government fees and charges * $233.36

Cost to currently exempt business $3.5 m $15.4 m

*Costed on basis of fee associated with issue of zero share water access licence and standard unregulated water source dealing.

Option 2 – Remaking the exemption provisions

The following benefits are associated with remaking the exemptions:

• business conducting small-scale activities avoid a cost of $2.4 million for application fees and the time taken to complete documentation associated with allocation assignment dealings;

• the present value of the net social benefit is $1.3 million

• Government also avoids the considerable cost that would be incurred in processing additional

water access licence and water supply work approval and use approval applications that would arise if the exemption provisions were removed

• business avoids significant costs and red tape that would arise through removal of the exemptions.



Option 3 – Proposed amendments to the exemption provisions

The exemptions from the need for an access licence have been in place for 10 years. It is proposed

that they can be clarified, extended, limited or eliminated to better meet operational management requirements.

While it is proposed that many exemptions be retained, amendments to some provisions are proposed

and some additional new exemptions are also proposed, as discussed below. These exemptions are all contained in clause 18 and Part 1 of Schedule 5 of the new Regulation.

Removal of the aquifer interference exemption:

As discussed in section 3.1, while generally there are no changes being made in respect of aquifer interference activities as there is a separate process whereby the current provisions of the Regulation

dealing with aquifer interference may be superseded, it is proposed to remove existing clause 18 (2). Clause 18 (2) provides an exemption from the requirement for a water access licence for a person who is engaged in an aquifer interference activity in connection with the mining or extraction of any

material in relation to the taking of water from an aquifer if the water is taken in accordance with an aquifer interference approval with respect to that activity.

Its removal is necessary because the clause is inconsistent with section 60I of the Water Management

Amendment Act 2010 which will be commencing shortly. The new section confirms that a water access licence is required to take water from a water source in the course of carrying out a mining activity, including the removal, diversion or relocation of water within an aquifer. To avoid any

inconsistency with the Act, clause 18 (2) is proposed to be removed.

Clause 18 (1) (e) in the existing Regulation which was amended by the Aquifer Interference Regulation 2011 will be carried forward into the new Regulation (clause 18 (1) and clause 7 in Part 1

of Schedule 5 in the new Regulation).

New aquifer interference exemption:

While generally there are no changes being made in respect of aquifer interference activities, the new Regulation does make provision for exempting the taking of water by means of an exempt monitoring bore (as defined) for the purposes of measuring water levels, water pressure or water quality (clause

18 (1) and clause 10 in Part 1 of Schedule 5).

Changes to multiple exemptions:

There are a small number of proposed amendments that will affect multiple exemptions, as follows:

• the definition of public authority, for the exemptions for water access licences, will no longer

include Landcom and the Superannuation Administration Corporation. This will affect the existing exemptions for dust suppression (clause 5 in Part 1 of Schedule 5) and excluded works under clause 3 of Schedule 1, as well as the new exemption for approved watering for

environmental work construction

• there has been some tightening of the wording of the exemptions to ensure that water that is

taken is only water that is taken and required for the purpose exempted and not for any other purpose. This amended wording clarifies, but does not change the intent of, the provisions and

accordingly there is no incremental economic impact.

Changes to dust suppression exemption:

It is proposed to amend existing clause 18 (1) (c) (replaced by clause 18 (1) and clause 5 in Part 1 of Schedule 5 of the new Regulation) so that the exemption will only apply to water taken for dust



suppression by a public authority excluding Landcom and the Superannuation Administration Corporation. Currently the exemption applies to any person.

The estimated costs and benefits over five years associated with this proposed change include:

• businesses transfer $86,000 in allocations to meet dust suppression needs

• Government receives $101,000 in allocation assignment fees.

Under the proposal, dust suppression activities undertaken by non-public authorities Landcom and the Superannuation Administration Corporation will be required to obtain a water access licence. Industries such as housing developments, quarries, feedlots and mines could be impacted by this

change in that water in excess of the property’s harvestable right will no longer be able to be used for this purpose. The amount of water used at each site is estimated to be 5 ML per year.

Rationale for the proposed amendment:

Dust suppression is part of the normal day to day operations of many industries. It is an activity that is undertaken for the following reasons:

• it is mandated by a licence granted by a government agency or the conditions of a local government development consent

• it is a requirement of an industry code of practice

• animal welfare and/or OH&S considerations, or

• a combination of any or all of these elements.

Purchase of water to meet these operational needs is simply a cost of doing business. Whilst the community and/or the environment may benefit from dust suppression, this is balanced by the fact that

if commercial operations such as feedlots, etc were not being undertaken, dust suppression would not be necessary. Continuation of the exemption for non-public authorities would be like providing a subsidy to these industries.

On the other hand, activities undertaken by public authorities that require dust suppression are almost exclusively focussed on the public interest rather than a profit motive. It follows that it would not be in the public interest to compel public authorities to acquire water entitlements for dust suppression as

the costs of such acquisitions would have to be met from the public purse.

An assessment of the cost to impacted business is set out in Table 7 below. The overall social impact over five years is small at $0.65 million. While water transfers represent a cost to those impacted

industries they represent a benefit to those able to sell their water.

Table 7 - Benefit of modifying water access licence exemption for dust suppression


Total number of sites 2000

Average volume per site (ML) 5

Impacted activities may include quarries, feedlots, mines or subdivisions 5 percent

Entitlement cost per ML of diversion * $200

Government fees and charges $233

Time taken to prepare applications 5

Cost to business undertaking dust suppression $150,000 $0.65 m

* Note the price of water per ML will vary according to market conditions



Changes to domestic electricity generation exemption:

It is proposed to amend existing clause 18 (1) (f) (replaced by clause 18 (1) and clause 8 in Part 1 of Schedule 5 of the new Regulation) so that the exemption will only apply if the water is returned to the

same water source and within 50 metres of the point at which it was taken. In addition there will be a requirement that the water returned must be of the same quality (where quality means the water has the same chemical makeup, temperature, sediment content and salinity as the water taken). Currently

the exemption only requires the water to be returned to the same water source.

The anticipated impacts associated with this proposed change include:

• where water is not to be returned to the originating water source and within 50 metres from the

point at which it was taken, the landholder will be required to acquire a water access licence, or modify their works so that water is returned within this distance. The cost of any required re-

engineering or licence/allocation purchases to ensure that all water is returned to the same water source and within 50 metres of the point at which it was taken cannot be readily quantified although it is likely that most landholders are already doing this in practice

• the impact on the environment will be reduced as the new requirements will assist in

preventing starvation of the water source from which water is being taken (as water will need to be returned to the same water source and to substantially the same location) and it will also assist in preventing modification of flows in other water sources (or other parts of the same

water source) which can occur from the introduction of unnatural flows into those other water sources (or other parts of the same water source)

• impacts on the environment may also be reduced in circumstances where the water quality is changed during electricity generation. For example water may be heated during the process

and returned to the water course at a high temperature which may have negative impacts on fauna.

• other water users, businesses and the environment benefit from the lower risk of reduced access due to impoundment, diversion or transmission losses, as water will be returned to

almost the same location from where it was taken

• Government is unaffected.

Table 8 - Potential impacts of domestic electricity exemption amendment


Total number of sites 10-30

Average volume per site (ML) Water returned to source

0

Cost to modify work to ensure water is replaced to the source within 50 m

Possibly minor costs associated with minor pipe work

Changes to water bore testing exemption:

It is proposed to amend existing clause 18 (1) (g) (replaced by clause 18 (1) and clause 9 in Part 1 of Schedule 5 of the new Regulation) to make the following changes:

• the exemption will be limited to pump tests required under, and carried out in accordance with,

a water supply work approval for the bore, or an aquifer interference approval with respect to that activity or the conditions of an approved project under Part 3A or an approval under Part

5.1, of the Environmental Planning and Assessment Act 1979. Currently the exemption is unconnected to the relevant approval



• the exemption will apply to water required for that purpose during the week following

completion of the installation of the bore or during any other period for which such testing is required to be carried out by the relevant approval. Currently the exemption only applies to the

week following the construction of the bore.

Pump testing is a discretionary requirement of the Minister in circumstances where there is uncertainty

over the ability of a particular groundwater source to produce a specified volume of water on an ongoing basis. The exemption means that water taken in conjunction with compulsory pump testing is not deducted from the water allocation account of the affected access licence holder and,

consequently, the licence holder avoids paying for the water taken in this process.


• Water users and business will need to operate within the tighter parameters of the proposed

amended exemption by ensuring any water taken is for a pump test that is required and carried out in accordance with a relevant approval. Pump testing other than that which is

compulsory under an approval will not be covered by this exemption.

• water users and business benefit from greater flexibility in the timeframe for the taking of

water to test the bore. The quantification of this benefit is not readily possible

• The proposed amendments also give greater flexibility to the Minister to formulate specific pump testing conditions without unduly penalising the water user or business. For example, the

proposed amendment enables the Minister to specify pump testing conditions that extend for more than one week or at certain intervals during the ongoing operation of the bore.

Table 9 - Potential impacts of water bore testing exemption amendment

Identified impacts Annual Units

Net present value


Average volume per site (ML) <1

Minority of cases (ML) where aquifer impacts are required to be assessed

50

Benefit allows bores to be tested in accordance with approval conditions

Not costed

Benefits greater flexibility and fewer replicate applications Not costed

Changes to excluded works exemption:

It is proposed to amend existing clause 18 (1) (i) (replaced by clause 18 (1) and clause 12 in Part 1 of Schedule 5 of the new Regulation) to clarify that the exemption only applies to water that is taken by

the person specified (where relevant) and for the purpose and in the circumstances prescribed for the particular excluded work as set out in Schedule 1 of the Regulation. Currently the exemption simply refers to water taken by means of an excluded work. This change is merely a clarification and does

not change the intent of the exemption. However, the objective of this change is to ensure that the exemption clearly applies only to those persons specified and for the purpose and in the circumstances intended (as set out in Schedule 1).


• water users and business will be required to ensure that the take of water by means of an

excluded work is by the person specified (where relevant) and for the purpose and in the circumstances prescribed for the particular excluded work as set out in Schedule 1, and not some other person or purpose of circumstances. The cost of this clarification cannot be readily

quantified



• Government is unaffected

• there is no quantified net social benefit or cost.

Table 10 - Potential impacts of excluded works exemption amendment



Average volume per site (ML) 1

Clarifies that only the landholder is authorised to take water

No identified impact

Changes to hydro-electric power stations exemption:

It is proposed to amend existing clause 18 (1) (h) (replaced by clause 18 (1) and clause 11 in Part 1 of Schedule 5 of the new Regulation) to make the following changes:

• the exemption will now apply to water supply works owned by State Water Corporation or the Water Administration Ministerial Corporation. Currently the exemption only applies to water

supply works owned by the Ministerial Corporation. The reason for this change is that many of those works have now been transferred to State Water Corporation

• Clarify that State Water or the Ministerial Corporation must have consented to the operation of the hydro-electric power station in connection with that water supply work

• the exemption will be limited to water taken for the purposes of generating hydro-electric

power, but only if the water is returned to the same water source from which it was taken. Currently there are no requirements for the water to be returned to the same water source from which it was taken

• water must be returned in the same quality as it was taken - where quality means the water

has the same chemical make-up, temperature, sediment content and salinity as the water that was taken.


• where water is not to be returned to the originating water source, the person will be required to

acquire a water access licence. The cost of any required re-engineering or licence/allocation purchases to ensure that all water is returned to the same water source cannot be readily quantified although it is anticipated that in the majority of cases this is already taking place in

practice.

• the impact of the environment will be reduced as the new requirements will assist in

preventing starvation of the water source from which water is being taken (as water will need to be returned to the same water source) and it will also assist in preventing modification of

flows in other water sources which can occur from the introduction of unnatural flows into those other water sources

• other water users, businesses and the environment benefit from the lower risk of reduced access due to impoundment, diversion or transmission losses, as water will be returned to the

same water source


Table 11 - Potential impacts of hydro power stations exemption amendment





Average volume per site (ML) <1 All affected hydro power stations return water to the same source

Not quantified

New exemption – transport authorities:

It is proposed to include a new exemption (clause 18 (1) and clause 3 in Part 1 of Schedule 5 of the new Regulation) for transport authorities as follows:

• the exemption will apply to water required for the construction or maintenance of rail

infrastructure facilities within the meaning of the Transport Administration Act 1988

• the exemption will only apply where the construction or maintenance has already been considered under section 111 of the Environmental Planning and Assessment Act 1979, or is

exempt from the need for such consideration under section 110E of that Act

• the exemption will apply only to a transport authority, defined as RailCorp, the Transport

Construction Authority, the Country Rail Infrastructure Authority, the Australian Rail Track Corporation Ltd, and the Director-General within the meaning of the Transport Administration

Act 1988.

The anticipated impacts associated with this proposed new exemption include:

• reduction in costs for transport authorities who will no longer be required to obtain a water access licence for this take of water

• reduction in red tape on the basis that a water access licence will not be required where the

environmental impact of the construction or maintenance has already been considered (or is not required to be considered) under the Environmental Planning and Assessment Act 1979

• reduction in administration costs for Government as the above transport authorities will no longer require a water access licence. There will however also be a reduction in fees

associated with applications for such water access licences (which will no longer be required).

Table 12 - Potential impacts of transport authorities’ new exemption


Total number of sites <100

Average volume per site (ML) <1

Cost avoided to transport authority N/A Not quantified

New exemption – approved watering for basic human water needs:

It is proposed to include a new exemption (clause 18 (1) and clause 14 in Part 1 of Schedule 5 of the new Regulation) which will apply to the Water Administration Ministerial Corporation in relation to the

taking of water for approved watering for basic human water needs. Approved watering for basic human water needs means watering that has been approved by the Minister in writing because the Minister is satisfied that the watering is in the public interest and is urgently required for basic human

water needs. It is important to note that the proposed exemption will only operate in special circumstances approved by the Minister in writing (namely where the watering is in the public interest and is urgently required for basic human water needs) and it will not cover any normal type of take of

water, such as for town water supply purposes, which will still require a water access licence.

It will be a condition of the exemption that, when required to do so by an authorised officer, the person must produce a copy of the Minister’s written approval to that officer either immediately or within the

period, and at the place, specified by the officer.




• reduction in costs and red tape enabling the Water Administration Ministerial Corporation to

get water urgently to persons requiring it for basic human water needs

• benefits to the persons and towns receiving approved watering for basic human water needs. These people may otherwise have no other access to water for their basic human water

needs. This exemption is likely to be relevant only during times of drought when water supplies are very low, or in some cases not available at all.

Table 13 - Potential impacts of approved watering for basic human water needs new exemption


Total number of sites in extreme drought year <10

Estimated volume per site (ML) 1-10

Domestic users reliant on riparian extractions N/A Not quantified costs of tankering water to remote areas

New exemption – approved watering for environmental work construction:

It is proposed to include a new exemption (clause 18 (1) and clause 15 in Part 1 of Schedule 5 of the new Regulation) which will apply to a public authority, with the exception of Landcom and the Superannuation Administration Corporation, in relation to the taking of up to 0.5 megalitres of water for

approved watering for environmental work construction. Approved watering for environmental work construction means watering that has been approved by the Minster in writing because the Minister is satisfied that the watering is for the purpose of constructing a water supply work on waterfront land

where the water supply work will have an environmental benefit.

It will be a condition of the exemption that, when required to do so by an authorised officer, the person must produce a copy of the Minister’s written approval to that officer either immediately or within the

period, and at the place, specified by the officer.


• reduction in costs for constructing such water supply works for environmental purposes who

would otherwise be required to obtain a water access licence for the water

• benefit to the environment from the constructed water supply work which may not have been able to be constructed if water for its construction was not available on the market or not

available at a feasible price.

5.3.2 Security interests and access register

Objective

To ensure that there are exemptions in relation to access licence dealings and security interest holders, where the interests of the security interest holder are not affected.

General background

Persons with a security interest in a water access licence (such as a financial institution) must consent

to changes being made to information contained in the Access Register in regard to the water access licence in which the security interest is held. However, where those changes do not adversely affect the security interest, such consent is not required. Clauses 21 and 21B (clauses 20 and 21 in the new

Regulation) provide exemptions in relation to security interests in access licences. Clause 21 provides exemptions from the requirement for a security holder to consent to the recording of certain dealings under sections 71U and 71Q of the Act in the Access Register. Clause 21B exempts a person

claiming a security interest in a replacement access licence from having to advise the holder of the



licence of the existence of the security interest claimed and give written notice of the advice to the Director-General, if the licence holder requests the Director-General, in writing, to register the security interest.

Option 1 – Base case – lapsing of the Regulation

Lapsing of the Regulation would result in the exemptions also lapsing which would add to the cost and

processing times of some dealings in access licences by requiring the consent of security interest holders or notification by persons claiming to be a security interest holder to the holders of replacement access licences.

Option 2 - Remaking the Regulation

Remaking clauses 21 and 21B of the existing Regulation (clauses 20 and 21 in the new Regulation)

maintains the existing exemptions. This avoids the unnecessary impost on security interest holders of having to consent to access licence dealings, or notify holders in relation to replacement access

licences, where the interests of the security interest holder are not affected. This option meets the objective of ensuring that there are exemptions in relation to access licence dealings and security interest holders, where the interests of the security interest holder are not affected.

The anticipated benefits associated with this clause:

• business would avoid registration costs of around $0.2 million

• Government would not incur any cost as registration is done on fee for service

• the present value of the social benefit is $0.2 million.

Table 14 - Avoided cost of security interest lodgements

Annual Units Net present value

Number of dealings 750

Portion involving increase in shares 50%

Hours to prepare lodgement 1

Register fees $91


5.4 Approvals

Background

A water access licence entitles its holder to specified shares in the available water from a particular

water source and to take water at specified times, rates or circumstances, and in specified areas or from specified locations. From time to time the Minister may make an available water determination which prescribes the actual volume of water that is credited to the water allocation account for a water

access licence and that may be taken from that water source.

The Act establishes a set of approvals to separately manage third party and environmental risks that may arise from the construction or use of water supply works, the use of water and activities that

directly interfere with a water source. The relevant approvals are:

a. a water supply work approval which authorises its holder to construct and use a specified water supply work at a specified location (for example, bores, pumps and dams)

b. a water use approval which confers a right on its holder to use water for a particular purpose at a particular location (for example, irrigation)



c. a controlled activity approval which confers a right on its holder to carry out a specified controlled activity at a specified location in, on or under waterfront land (for example, the removal or deposition of material in a river bed or on the bank of a river)

d. an aquifer interference approval which confers a right on its holder to carry out one or more specified aquifer interference activities at a specified location, or in a specified area, in the course of carrying out specified activities.

Part 4 of the existing Regulation relates to approvals and covers matters such as applications for approvals, objections, register of approvals, security deposits and exemptions from the requirement for an approval.

The objective is to retain the existing approval provisions in the Regulation so that business and other water users can continue to function in accordance with those provisions.

As discussed in the methodology in section 3.1 of this RIS, aquifer interference activities are not

considered in this RIS as a cross-agency working group is currently involved in developing new aquifer interference policy. On 30 June 2011 the Water Management (General) Amendment (Aquifer Interference) Regulation 2011 commenced. This Regulation amended the exemption from the

requirement for an access licence in clause 18 (1) (e) of the Water Management (General) Regulation 2004. There is now a maximum volume of 3ML of water that can be taken for prospecting or fossicking under the Mining Act 1992 or the Petroleum (Onshore) Act 1991. The finalisation of the Aquifer

Interference policy may require further changes to the Regulation. The existing provisions of the Regulation relating to aquifer interference activities with respect to approvals appear unchanged in the Regulation.

5.4.1 Exemption from advertising approvals

The requirement to advertise applications for approvals ensures that the community is made aware of approval applications. Clause 32 (clause 24 in the new Regulation) identifies the types of applications for an approval that must be advertised. These include river pumps, production bores, and works

within a river (weirs and dams). Also set out is the means by which the Minister publishes, and the contents of, the advertisement. The administrative actions associated with advertising take a minimum of 35 days.

Exemptions from the requirement to advertise are prescribed for particular works with short or limited timeframes - such as drought relief, dust suppression, road construction or maintenance, prospecting or fossicking for minerals or petroleum, any environmental purpose authorised by a plan approved by

the Minister under section 8E (7) of the Act and the hydrostatic testing of gas pipelines. Aside from environmental purposes under a plan approved by the Minister under section 8E (7) of the Act, all of these purposes are also exempt from the requirement to hold a water access licence under clause 18

(1) of the Regulation (clause 18 (1) and clauses 2, 3, 4, 5, 6 and 7 in Part 1 of Schedule 5 of the new Regulation).

Objective

To ensure that the regulatory burden associated with minor works approval applications is commensurate with the low level of associated impact.

Option 1 – Base case - lapsing of the Regulation

If the Regulation were to lapse there would be no exemption from the requirement to advertise applications for works approvals. All works even minor works approvals would require advertising.

The costs to businesses for this additional advertising is estimated at $1.2 million for application and

advertising fees. There would be no social benefits. In fact advertising insignificant activities could generate social costs and confusion.



Option 2 – Remaking the Regulation without change

Clause 32 (clause 24 in the new Regulation) requires that prescribed types of applications for approvals be advertised. Where these activities are to be undertaken for a period of three months or less there is an exemption available from the requirement to advertise. The following impacts are

associated with remaking this provision:

• business avoids $1.2 million in minor works advertising fees

• Government not affected on the assumption of full cost recovery

• the present value of net social benefit is $1.2 million

• there is a social benefit of remaking the exemptions from the increased transparency afforded

by only actively notifying potentially affected businesses, households and other water users where there are significant impacts anticipated

Table 15 - Benefit of exempting works approval advertising


Number of approval applications 500

Government charges for advertising $531

Reduced availability of information

Benefit to business of exempting advertising $0.3 $1.2

Option 3 – Remake Regulation with amended advertising exemptions

It is proposed to amend clause 32 (2) (a) (clause 24 (2) (a) in the new Regulation) to extend the exemption from advertising for specified short-term water supply works from works to be used for a

period of not more than three months to works to be used for a period of not more than 6 months.

The following impacts are associated with this amendment:

• business avoids $0.12 million in advertising costs

• business benefits because the assessment process is accelerated by removing the

advertising window of 35 days

• Government not affected on the assumption of full cost recovery

• the present value of net social benefit is $0.12 million

• the possible social cost is minor as the number of applications for particular works which would not be advertised is estimated to be approximately 75 per year.

Table 16 - Benefit of extending period of approval exemptions


Number of activities <3 months 50

Number of activities < 6 months 125

Increase in number of activities exempted 75

Government charge for advertising $531




5.4.2 Security deposits for approvals

Objective

To ensure that persons undertaking projects under the authority of approvals granted by the Minister take all requisite care in the conduct of operations and that the land is satisfactorily remediated once

the project is complete.

Background

There are a significant number of projects undertaken across NSW under the authority of approvals

granted by the Minister. Many of these projects have the potential to cause environmental harm and detrimental third party impacts if they are not carried out in accordance with approval conditions which include any required site rehabilitation after completion of operations.

In order to minimise that risk, clause 36 (clause 28 in the new Regulation) allows the Minister to impose a condition that compels the proponent to provide security for the cost of performing the holder’s obligations under an approval should the holder fail to comply with the conditions of that

approval. If the holder does default the Minister is able to access those funds to meet any costs incurred because of the holder’s failure to comply with conditions of consent. This relates to such things as the rehabilitation of land after the conclusion of an activity or construction of works in a

prescribed manner. The financial effect of this provision is to require a capital commitment prior to the commencement of works.

Based on recent figures from the NSW Office of Water there are approximately 50 projects per year

that are subject to security deposits. The amount of the deposit varies according to the anticipated cost of remediation. On average the cost of a security deposit is $45,000 and it is held for a duration of between one - two years.


Under this option the conditions of approval requiring remediation of land would stand on their own without the backing of a security deposit. Should a proponent choose not to conduct remediation to

the standards required there would be:

• legal costs to the government and proponent associated with litigation; and

• third party impacts associated with ongoing waterway or landscape damage.

Option 2 - Remaking the current Regulation

Clause 36 (clause 28 in the new Regulation) enables the Minister to require security deposits for

approval obligations. The following impacts are associated with remaking this provision:

• business that conducts remediation to the standards required is unaffected. The deposit (and

accrued interest) is released to the approval holder when works are satisfactorily completed

• the social benefit of remaking is to provide protection against unwarranted transfers of costs

from businesses to Government in the event that the works are not satisfactorily completed

Option 3 – Remaking the Regulation with amendments

Cases have arisen where such work has become necessary because of the activities of business but there was no legal mechanism by which those responsible could be held to account after the expiry of

the approval. In most such cases Government does not have the resources to fund this rehabilitation, therefore, the work that should be done, such as revegetation, instream works or stream bank



stabilisation, does not occur. This can have significant impacts on the environment, public authorities (and by extension the community generally) and adjoining/downstream landholders.

It is proposed to amend clause 36 (clause 28 in the new Regulation) to make the processes for

providing, calling upon and returning security deposits clearer. The following changes are proposed:

• to ensure that the Minister has the authority to retain a security deposit until satisfied that the

holder of the approval has fulfilled the holder’s obligations prescribed in the approval (new clause 28 (4))

• to provide that funds from a security deposit may be paid out, or a guarantee may be enforced, to meet the cost of performing the holder’s obligations under the approval and that

any remaining balance may then be refunded to, or at the direction of, the person who provided the security, together with any interest accrued on the deposit as a consequence of its investment (new clause 28 (5))

• to confirm that obligations prescribed by an approval that are required to be fulfilled after the

expiry of that approval remains in force do not cease merely because the approval ceases to be in force (new clause 28 (6))

• to provide that a security deposit may be retained and dealt with, and a guarantee may be enforced, even though the approval is no longer in force (new clause 28 (7))

• to provide that a person who has provided a security deposit is entitled to a refund of the

amount together with any interest accrued on the deposit as a consequence of its investment (less any amount paid out) if the person makes a written request to the Minister that satisfies the Minister that all obligations under the approval have been fulfilled (new clause 28 (8)).

These provisions are similar to the security deposit requirements that operate in respect to other forms of development, such as remediation associated with the mining industry.

The following impacts are associated with these amendments:

• The social, economic and environmental benefit is to provide protection against the

unwarranted transfer of costs to Government from approval holders who have failed to fulfil their obligations as prescribed by an approval.

Table 17 - Impacts of security deposits amendments

Identified impacts Annual Units Net Present Value

Number of security deposits lodged 50

Average value of deposit $43,000

Number of abandoned sites at 5 per cent 3

Avoided cost to society Improved instream and stream side conditions

Net Social Benefit (Cost) $0.129 $0.6

5.4.3 Exemptions for approvals

Objective

To retain exemptions for approvals in the Regulation to allow the Office to:

• manage its regulatory responsibilities in a cost-effective and practical manner by exempting

prescribed activities from the requirement to hold aquifer interference approvals, controlled activity approvals, water supply work approvals and water use approvals

• minimise the regulatory burden on persons undertaking exempt activities commensurate with

the low level of associated impact.



General Background

Exemptions from the requirement to hold an approval are appropriate where the risk of impacts arising

from a particular work or activity are:

• managed via other processes; or

• have only limited and/or short term impacts.

This minimises transaction costs and reduces red tape by eliminating unnecessary duplication and recognising the proportionate risk of a proposed work or activity.

The Regulation currently exempts people in certain circumstances from the offences contained in sections 91A (1), 91B (1) and 91E (1) of the Act in relation to:

• the use of water

• the construction or use of a water supply work

• the carrying out of a controlled activity.

As noted in Section 3.1 of this RIS, aquifer interference activities are not considered in this RIS as a

cross-agency working group is currently involved in developing a new aquifer interference policy which may require the current provisions of the Regulation which deal with aquifer interference to be modified. Accordingly, aside from a new provision in respect of exempt monitoring bores (Clause 10 in

Part 1 of Schedule 5 in the new Regulation) the existing provisions of the Regulation relating to exemptions for aquifer interference activities with respect to approvals will appear unchanged in the Regulation.

Exemptions – use of water (water use approvals):

Clause 38 (1) of the existing Regulation exempts a person from the offence under section 91A (1) of

the Act of using water without a water use approval in the following situations:

• where a Development Consent is in force under the Environmental Planning and Assessment

Act 1979 other than the use of water for power generation by a major utility

• for road construction and road maintenance by a roads authority

• drought relief

• dust suppression

• water taken from or by means of an excluded work

• water for domestic consumption and stock watering

• water for the purpose of prospecting or fossicking for minerals or petroleum

• water for the purpose of operating a hydro-electric power station in connection with a water

supply work owned by the Ministerial Corporation

• hydrostatic testing of gas pipelines

• Aboriginal cultural purposes, other than a use pursuant to an adaptive environmental water condition on a water access licence (as referred to in section 8 (1) (b) of the Act).

Exemptions – construction or use of a water supply work (water supply work approvals):

Clause 39 of the existing Regulation exempts a person from the need to hold a water supply work approval for the construction and/or use of water supply works in certain circumstances, provided that, for new works, the work is not on specified lands with high conservation value (e.g. parks and reserves).



Clause 39 of the existing Regulation exempts a person from the offence under section 91B (1) of the Act of constructing a water supply work without a water supply work approval in relation to the construction or use of:

• an excluded work (listed in Schedule 1 of the Regulation)

• a dam or water bore used solely for the purpose of exercising domestic and stock rights in relation to a water source to which Part 3 of Chapter 3 of the Act does not apply

• a water supply work to be used solely for the purpose of prospecting or fossicking for minerals

or petroleum

• a water pipe for use solely for conveying water from one place to another

• a water reticulation work on land the subject of a water use approval.

People are also exempt from section 91B (1) of the Act in relation to the use of:

• a water storage work, water reticulation work, or water impounding work that was in use before 1 July 2004 in relation to water taken pursuant to the former riparian rights provisions of

the Water Act 1912; and

• a water supply work owned by the Ministerial Corporation for generation of hydro-electric power.

The exemptions in relation to construction do not apply to water supply works that are constructed on

lands specified in clause 39 (2).

Exemptions – carrying out a controlled activity (controlled activity approvals):

Clause 39A of the existing Regulation exempts a person from the offence under section 91E (1) of the Act of carrying out a controlled activity without a controlled activity approval.

Under the existing Regulation, public authorities (excluding Landcom) and local councils are exempt in

relation to all controlled activities that they carry out in, on or under waterfront land.

Other persons are exempt from requiring a controlled activity approval in relation to the carrying out of the following controlled activities in, on or under waterfront land:

• activities carried out in accordance with any lease, licence, permit or other right in force under the Mining Act 1992, the Crown Lands Act 1989, or the Crown Lands (Continued

Tenures) Act 1989

• activities comprising the excavation of the bed of a river, lake or estuary for the purpose of

facilitating the use of a water supply work

• activities carried out pursuant to section 52 (domestic and stock rights) of the Act

• activities carried out, in accordance with a harvestable rights order, in connection with the

construction or use of a dam on land within the harvestable rights area constituted by the order

• activities carried out in connection with the construction or use of a work to which Part 2 of

the Water Act 1912 applies in accordance with a licence issued under that Part in relation to that work

• activities carried out in connection with the construction or use of a controlled work within

the meaning of Part 8 of the Water Act 1912 in accordance with an approval issued under that Part in relation to that work

• activities carried out in connection with the erection, alteration, addition to or the provision

of ancillary facilities for a dwelling house or dual occupancy building provided they comprise exempt development or are subject of a development consent or complying



development certificate and are not being carried out in, on or over the bed of any river, lake or estuary

• activities comprising nothing more than the removal of vegetation in circumstances that

would otherwise be lawful

• the carrying out of development in accordance with a specified Development Control Plan (DCP) and Master Plan referred to in that DCP

• the carrying out of development in accordance with the Oran Park and Turner Road Waterfront Land Strategy 2009.

Clause 40 of the Regulation (clause 41 of the new Regulation) provides that section 106 of the Act

(which provides that an approval is taken to be held by, and for the benefit of, each successive landholder for the time being of the land specified in the approval as the land benefited by the approval) does not apply to a water management work approval for a work used by a person referred

to in clause 18 (1) (a), (b), (c) or (d) solely for taking water for a purpose for which the person is exempt by clause 18 from the requirement for a water access licence, or a water use approval for the use of water for such a purpose. This means that the benefit of the approval remains with the holder of

the approval and does not transfer to the landholder of the land specified on the approval.


Adoption of the base case would result in the lapse of the existing exemption provisions in the Regulation which would mean that all works, uses and activities that are currently exempted would require approvals.

This would result in the following additional burdens on business:

• additional costs including application fees, the expense of preparing applications and the cost

of the relevant approval (also noting that approvals will require renewal from time to time which is an additional cost). The cost of preparing applications could be quite significant especially if the proponent is forced to engage the services of a consultant

• there will be duplication of effort for those works, uses and activities which also require

development approval from a local council or other consent authority as the work or activity will now require an approval as well as development consent

• there may be additional delay in the commencement of projects as a result of the additional time required to process approval applications that are submitted to the Office.

There will also be an increased cost to Government in regard to processing the additional transaction applications that will occur as a result of the lapsing of the exemption provisions, although this

increased cost will be offset by application fees. However, there will also be a significant increase in compliance costs relating to monitoring and enforcing the various conditions of the new approvals required for those works, uses and activities that were previously exempt (this is as opposed to the

previous compliance cost of simply ensuring that a work or activity meets the particular parameters of the relevant exemption).

Table 18 - Cost of removing exemptions for water works approvals


Number of exempt activities 200

Exempt activities defined as excluded works 300

Delays in undertaking specified activities Week per application Not costed

Government fees and charges * $1018

Cost to currently exempt business $0.5 m $2.2 m



*Costed on basis of fee associated with works and use approvals

Option 2 – Remaking the approvals exemptions without change

Remaking the exemptions contained in the existing Regulation ensures that water users avoid the cost of obtaining an approval for the exempted works, uses and activities.

The following impacts are associated with remaking clause 38 (1) which contains the exemptions from

the requirement to hold a water use approval:

• business avoids $27 million in costs, mainly associated with delayed production

• Government is unaffected on the assumption of cost recovery

• the present value of the net benefit to society is $27 million.

The same costs and benefits associated with remaking clause 38 (1) apply to remaking clause 39 which contains the exemptions from the requirement to hold a water supply work approval. The

present value of the net social benefit is $27 million.

The following impacts are associated with remaking clause 39A which contains the exemptions from the requirement to hold a controlled activity approval:

• business and other private water users avoid the cost of obtaining a controlled activity approval

• Government agencies avoid the cost of obtaining controlled activity approvals

o the trade-off of these avoided costs is the risk to the environment (particularly within

stream or estuary) of exempting those controlled activities, however this is a calculated risk as only particular controlled activities are considered appropriate to exempt

o there is probably a net social benefit.

Option 3 – Remaking the approval exemptions with amendments

It is proposed to retain many of the existing exemptions for approvals. However, since the original

introduction of the exemptions, a number of opportunities to make improvements have been identified. It is proposed to make amendments to some exemption provisions and also to include some additional new exemptions, as discussed below. The exemptions for approvals are all contained in clauses 31 –

40 and Schedule 5 of the new Regulation.

There are some changes that will affect multiple exemptions, which are discussed below. The other more specific changes are considered in terms of water use approvals, water supply work approvals

and controlled activity approvals.

5.4.4 Proposed new exemptions – water supply work approvals

Changes affecting multiple exemptions:

There are a small number of proposed amendments that will affect multiple exemptions, as follows:

• the definition of a public authority, for the purpose of the exemptions for approvals, will

include statutory State owned corporations (and their subsidiaries) within the meaning of the State Owned Corporations Act 1989, aside from Landcom and the Superannuation Administration Corporation This amendment ensures that Landcom, which is in direct

competition with private developers does not have an unfair advantage. The Superannuation Administration Corporation due to its functions is unlikely to ever need to use these exemptions, so it is appropriate to exclude this State owned corporation. This

amendment will affect the following exemptions which refer to public authorities:



o the existing exemption for carrying out a controlled activity (clause 39A (1) of the

existing Regulation, clause 38 of the new Regulation)

o the existing exemption for the use of water for dust suppression (clause 38 (1) (d) of the existing Regulation, clause 5 in Part 1 of Schedule 5 in the new

Regulation). This is discussed in more detail below

o the existing exemption for the use or construction of an excluded work listed in

item 3 of Schedule 1 (clauses 38 (1) (e) and 39 (1) (a) of the existing Regulation, clause 31 (1) and 36 (1) (a) - (b) in the new Regulation).

• there has been some tightening of the wording of each of the exemptions to ensure that

each exemption applies to a person for the particular work, use or activity exempted and not for any other purpose. This amended wording clarifies but does not change the intent of the provisions and accordingly there is no incremental impact. More specifically, this

amendment affects the exemptions relating to excluded works contained in clauses 18 (1), 31 (1), clause 36 (1) (a) – (b) and clause 12 in Part 1 of Schedule 5 of the new Regulation (clauses 38 (1) (e), 39 (1) (a) and 39 (3) (a) of the existing Regulation) by making it clear

that:

o all exemptions relating to the excluded works listed in items 1, 2, 3, 4, 6, 7 or 9 in

Schedule 1 are limited to the landholder on whose land the work is situated and only for the purposes and in the circumstances specified in Schedule 1 in respect

of the particular work

o all exemptions relating to the excluded works listed in items 5 or 8 in Schedule 1

are limited to the landholder on whose land the work is situated.

Exemptions for water use approvals:

Changes to ensure consistency with the water access licence exemptions

It is proposed to amend a number of existing exemptions concerning the requirement to hold a water use approval to make these consistent with the exemptions for access licences. To achieve this, it is proposed to include clause 31 (1) in the new Regulation which provides that a person who is exempt

under clause 18 (1) (access licence exemptions) from the requirement to hold an access licence in relation to the taking of water for specified purposes and circumstances is exempt from section 91A (1) of the Act in relation to the use of the water for those purposes and in those circumstances. The

purpose of this amendment is to promote consistency across the take and use exemptions. This amendment will affect the following exemptions:

• There will be a new exemption from the requirement to hold a water use approval for transport

authorities for the construction and maintenance of rail infrastructure facilities if the environmental impact of the construction or maintenance has been considered under section

111 of the Environmental Planning and Assessment Act 1979 or is exempt from the need for such consideration under section 110E of that Act (clause 31 (1) and clause 3 in Schedule 5 of the new Regulation).

• The existing exemption from the requirement to hold a water use approval for the use of water

for drought relief (clause 38 (1) (c) of the existing Regulation) will now apply to any person lawfully engaged in the carriage of water for drought relief (clause 31 (1) and clause 4 in Schedule 5 of the new Regulation).

• The existing exemption from the requirement to hold a water use approval for the use of water

for dust suppression will now apply to a public authority with the exception of Landcom and the Superannuation Administration Corporation (clause 31 (1) and clause 5 in Schedule 5 of



the new Regulation). The existing exemption (clause 38 (1) (d) of the current Regulation) applies to any person.

• There will be a new exemption from the requirement to hold a water use approval for water for domestic electricity generation (clause 31 (1) and clause 8 in Schedule 5 of the new

Regulation).

• There will be a new exemption from the requirement to hold a water use approval for water

bore testing (clause 31 (1) and clause 9 in Schedule 5 of the new Regulation).

• There will be a new exemption from the requirement to hold a water use approval for exempt monitoring bores (clause 31 (1) and clause 10 in Schedule 5 of the new Regulation).

• The existing requirement to hold a water use approval for hydro-electric power stations will be

amended in the same way as for access licences, namely (see clause 31 (1) and clause 11 in Schedule 5 of the new Regulation):

o The exemption will now apply to water supply works owned by State Water Corporation or the Water Administration Ministerial Corporation. Currently the exemption only

applies to water supply works owned by the Ministerial Corporation. The reason for this change is that many of those works have now been transferred to State Water Corporation. State Water or the Ministerial Corporation must have consented to the

operation of the hydro-electric power station in connection with that water supply work

o The exemption will be limited to the use of water taken for the purpose of generating

hydro-electric power, but only if the water is returned to the same water source from which it was taken. Currently there are no requirements for the water to be returned to

the same water source from which it was taken.

o The returned water must be of the same quality as it was when it was taken (in terms of

chemical composition, temperature, sediment content and salinity).

• There will be a new exemption from the requirement to hold a water use approval for the establishment of sugar cane plantings which will cease to apply when the sugar cane is above

50cm in height (clause 31 (1) and clause 13 in Schedule 5 of the new Regulation).

• There will be a new exemption from the requirement to hold a water use approval for

approved watering for basic human water needs (clause 31 (1) and clause 14 in Schedule 5 of the new Regulation).

• There will be a new exemption from the requirement to hold a water use approval for

approved watering for environmental work construction (clause 31 (1) and clause 15 in Schedule 5 of the new Regulation).

Table 19 - Potential impacts of sugar cane water use approval exemption amendment



Cost of approval 272

Hours to prepare 2

As is the case for the take of water (access licence) exemptions, it will be a condition of the

exemptions relating to approved watering for basic human water needs and approved watering for environmental work construction that, when required to do so by an authorised officer, the person must produce a copy of the Minister’s written approval to that officer either immediately or within the

period, and at the place, specified by the officer (clause 31 (2) of the new Regulation).



Modification to requirements for a water use approval for dust suppression

Under the proposed new Regulation, dust suppression activities undertaken by persons who are not public authorities (this will include Landcom and the Superannuation Administration Corporation) will

require a water use approval. Industries such as housing developments, quarries, feedlots and mines could be impacted by this change. The rationale and impacts of this change to the dust suppression exemption are similar to those noted earlier in section 5.3.1 Exemptions for access licences.

The impacts associated with the change to the dust suppression exemption are as follows:

• Affected business incurs $0.65 million applying for water use approvals.


Table 20 - Dust suppression use approvals

Impacts identified Annual Units Net present value

Number of dust suppression sites per annum 2000

Proportion no longer -exempted 5%

Hours to prepare application 5

Government charges $1,018

Cost to affected business $0.16 $0.655

Changes to the Aboriginal cultural purposes exemption

It is proposed to amend the existing exemption from the requirement to hold a water use approval for Aboriginal cultural purposes (clause 38 (1) (j) of the existing Regulation) to:

• remove the reference to an adaptive environmental water condition on a water access licence

(as referred to in section 8 (1) (b) of the Act)

• to provide that the exemption will apply to the use of water by, or on behalf of, the holder of a specific purpose access licence for Aboriginal cultural purposes for any purpose for which

water may be taken under the licence (clause 32 (c) of the new Regulation). The purpose of this amendment is to tighten the exemption to ensure that it only applies to the use of water for Aboriginal cultural purposes by the holder of a specific purpose access licence for Aboriginal

cultural purposes, in accordance with the purposes for which water may be taken under that particular access licence. The previous exemption was not constrained to the holder of the water access licence, or the particular purposes for which water may be taken under that

access licence.

Table 21 - Aboriginal cultural use approvals

Impacts identified Annual Units Net present value

Number of approval per year 5


Net social benefit (cost) Not quantified

New exemption for the use of water in accordance with a plan approved under section 8E (7) of the Act

It is proposed to include a new exemption from the requirement to hold a water use approval for the use of water for any environmental purpose authorised by a plan approved by the Minister under section 8E (7) of the Act.

The rationale for this new exemption is that a water use approval should not be necessary for water that is used in accordance with a plan for the implementation of an adaptive environmental water



condition on a water access licence that has been approved by the Minister under section 8E (7) of the Act, in so far as the plan approved by the Minister under section 8E (7) of the Act already details the limitations of the use of that water. A number of such plans have been approved by the Minister,

covering the Gwydir, Lachlan, Lake Brewster and Murrumbidgee water sources. This proposed exemption will eliminate unnecessary duplication of the consent processes designed to minimise harm to the environment.

The following impacts are associated with this new exemption:

• Environmental water managers avoid the cost of obtaining both an approved plan and water

use approval from the Minister, for water arising from a licence that carries an effective covenant requiring the water to be used for environmental purposes.

• Business is unaffected unless, through the absence of advertisement, a landholder is unaware of the risk and/or occurrence of a watering event that affects leasehold or freehold riparian

lands.

• The net social cost or benefit is not readily quantified, particularly given uncertainties

associated with the intended management of the Commonwealth Environmental Water Holdings.

Exemptions for water supply work approvals:

Exemptions that have been removed

It is proposed to remove the following existing exemptions from the new Regulation:

• The exemptions from the requirement to hold a water supply work approval for the

construction or use of a dam or water bore to be used solely for the purpose of exercising domestic and stock rights in relation to a water source to which Part 3 of Chapter 3 of the Act

does not apply (clauses 39 (1) (b) and 39 (3) (b)). It is proposed to remove this exemption because domestic and stock rights apply across the whole of the State (there is no area to which they do not apply).

Changes to the hydro-electric power exemption

It is proposed to amend the existing exemption from the requirement to hold a water supply work approval for the use of any hydro-electric power station that is operated in connection with a water supply work owned by the Ministerial Corporation (clause 39 (3) (g) in the existing Regulation) as

follows:

• The exemption will now apply to water supply works owned by State Water Corporation or the

Water Administration Ministerial Corporation. Currently the exemption only applies to water supply works owned by the Ministerial Corporation. The reason for this change is that many of those works have now been transferred to State Water Corporation. State Water or the

Ministerial Corporation must have consented to the operation of the hydro-electric power station in connection with that water supply work

• The operation of the exemption will be limited to only water taken by the work that is returned in the same quality to the same water source from which it was taken and is used for the

purpose of generating hydro-electric power.

• The returned water must be of the same quality as it was when it was taken (in terms of

chemical composition, temperature, sediment content and salinity).

The exemption is contained in clause 35 (d) of the new Regulation and ensures that the exemptions concerning the requirement to hold a water use approval are consistent with the exemptions for access licences evaluated earlier.



Table 22 - Potential impacts of hydro-electric power stations approval exemption amendment




All affected hydro power stations return water to the same source

2 Minor

New exemption for exempt monitoring bores

It is proposed to include a new exemption from the requirement to hold a water supply work approval

for any person to construct or use an exempt monitoring bore for measuring water levels, water pressure or water quality. The exemption is contained in clause 36 (1) (c) of the new Regulation.

An exempt monitoring bore is defined as a monitoring bore constructed in accordance with the

Minimum Construction Requirements for Water Bores in Australia that is:

• required by an order, or approved voluntary management proposal, under Part 3 of the

Contaminated Land Management Act 1997, or

• required by a development consent under Part 4, or the conditions of an approved project

under Part 3A, of the Environmental Planning and Assessment Act 1979, or required or undertaken as a result of an environmental assessment under Part 5 of that Act, or

• required by a condition of an environment protection licence under the Protection of the

Environment Operations Act 1997, or

• required under the Protection of the Environment Operations (Underground Petroleum

Storage Systems) Regulation 2008, or

• constructed and operated only by the Ministerial Corporation.

The rationale for this new exemption is to remove the requirement for an exempt monitoring bore to be authorised by a water supply work approval where the bore is required for groundwater monitoring purposes in connection with approvals or consents issued under other legislation and takes only very

minimal amounts of water (if any) for monitoring purposes.

The exemption will not apply to monitoring bores that are required by the Minister under the Act. These monitoring bores will still require a water supply work approval.

Table 23 - Exemption for monitoring bore approvals

Identified impact Annual Units Net present value

Number of monitoring bores 750


Cost of works approval $1018

Avoided cost to business $1 $3.7


• reduction in costs and red tape for persons constructing or using an exempt monitoring bore to measure water levels, water pressure or water quality and who would otherwise be required to

hold a water supply work approval for the construction and use of that work



New exemption for works for approved watering for basic human water needs

It is proposed to include a new exemption from the requirement to hold a water supply work approval for the Ministerial Corporation in relation to the construction or use of a water supply work used for

approved watering for basic human water needs within the meaning of clause 14 of Part 1 of Schedule 5. The exemption is contained in clause 36 (1) (e) of the new Regulation.

Approved watering for basic human water needs is defined in clause 14 of Part 1 of Schedule 5 as

being watering that has been approved by the Minister in writing because the Minister is satisfied that the watering is in the public interest and urgently required for basic human water needs.

The rationale for this new exemption is to remove the requirement for the Ministerial Corporation to

obtain a water supply work approval for any water supply works required to carry out approved watering for basic human water needs.

It will be a condition of the exemption that, when required to do so by an authorised officer, the person

must produce a copy of the Minister’s written approval to that officer either immediately or within the period, and at the place, specified by the officer.


Table 24 - Potential impacts of approved basic human water needs approval exemption


Total number of sites in extreme drought year <10

Estimated volume per site (ML) 1-10

Domestic users reliant on riparian extractions Not quantified

Exemptions for controlled activity approvals:

Change affecting all exemptions

Clause 39A (3) of the current Regulation provides that specific controlled activity exemptions are subject to a condition requiring the person by whom the relevant controlled activity is carried out to comply with any direction that the Minister may give to the person for the protection of (a) the

waterfront land on which the activity is carried out, or (b) any river, lake or estuary to which that land has frontage.

It is proposed that this provision be amended and extended to apply to all controlled activity

exemptions. Clause 37 of the new Regulation provides that it is a condition of a controlled activity exemption that the person carrying out the controlled activity must comply with any requirements of the Minister that are published in the Gazette, or notified in writing to the person, that are for the

protection of (a) the waterfront land on which the activity is carried out, or (b) any river, lake or estuary to which that land has frontage.

Changes to the domestic and stock rights exemption

Clause 39A (2) (c) of the existing Regulation exempts persons from the requirement for a controlled activity approval for activities carried out pursuant to section 52 (Domestic and stock rights) of the Act.

The purpose of this exemption is to enable small scale excavation. There are concerns in its current form there are not appropriate restrictions on excavations that may be undertaken in the bed or bank of a stream.



It is proposed to clarify the parameters of this exemption so that it will only apply to the following controlled activities for the purpose of enabling a person to take, or facilitating a person’s taking of, water pursuant to section 52 of the Act:

• the removal of alluvial material from the bed of a river to enable or facilitate the taking of water, if:

o any excavation:

is no deeper than 1 metre, and

is no wider than 1/3 of the width of the river at that point or 6 metres

(whichever is lesser), and

is no longer than its width; and

o the only alluvial material that is removed is material that has been deposited on the

riverbed by the flow of water in the river such as sand, silt or gravel; and

o no material is removed within 1 metre of the bank of the river; and

o any alluvial material that has been removed is placed in the bed of the river, immediately upstream of the excavation.

• any controlled activity in, on or under the bank of a river to enable or facilitate the installation

of a pipe, if:

o the pipe is above ground or in a trench that is the minimum size necessary to hold the

pipe but is no more than 0.3 metres wide and 0.3 metres deep, and

o any material that is removed is used to backfill the trench within 48 hours after its removal.

• any controlled activity in, on or under waterfront land to enable or facilitate the installation of a

water supply work that is a pump, if:

o the controlled activity is not on the bed or bank of a river, and

o any material removed is the minimum amount necessary to establish a suitable pump site

but is no more than 1 cubic metre, and

o the area of land from which any material is removed is no greater than 4 square metres.

If a proposed activity differs to, or falls outside of the parameters specified above, then the person will need to apply for and obtain a controlled activity approval before carrying out the activity.


Table 25 - Controlled activities stock and domestic exemption


Licence stock and domestic 1000 per year

Cost avoided for landholder 272


Benefits to landholders $0.2 $1

Changes to the mining and crown lands exemption

It is proposed to amend the existing exemption from the requirement to hold a controlled activity approval for any activity carried out in accordance with any lease, licence, permit or other right in force under the Mining Act 1992, the Crown Lands Act 1989 or the Crown Lands (Continued Tenures) Act

1989 (clause 39A (2) (a) of the existing Regulation), to also include activities carried out under the



Western Lands Act 1901 and the Petroleum (Onshore) Act 1991. The exemption is contained in clause 39 and clause 16 in Part 2 of Schedule 5 of the new Regulation.


• business avoids having to apply for a controlled activity approval where its activities are consistent with the conditions on a Crown land lease issued under the Western Lands Act

1901

• Government avoids the cost of duplicative assessment

• this would reduce the cost to business of applying for a controlled activity approval to

undertake an activity that is approved as part of the lease.

Table 26 - Controlled activities on lands administered under Western Lands Act 1901 and the Petroleum (Onshore) Act 1991

Identified Impacts Annual Units Net present value

Leaseholders in western division 10 per year

Petroleum Onshore Act 10 per year


Ancillary costs to complete approval 4hrs

Cost avoided $0.02

Changes to activities under water supply work approval exemption

Objective

To clarify the parameters of the existing exemption as it is currently very broad and there is the capacity for harm to be caused to water sources if controlled activities to facilitate the use of a water

supply work are carried out without any restriction.

Background

It is proposed to amend the existing exemption from the requirement to hold a controlled activity

approval for any activity comprising the excavation of the bed of a river, lake or estuary for the purpose of facilitating the use of a water supply work (clause 39A (2) (b) of the existing Regulation) so that the exemption is limited to an activity that is detailed in the conditions of the water supply work

approval for the water supply work, and that is carried out in accordance with those conditions (clause 39 and clause 18 in Part 2 of Schedule 5 to the new Regulation).

The amended exemption in the new Regulation is limited to activities detailed in the conditions of the

water supply work approval for that work. This means that if there are no conditions about controlled activities on the relevant water supply work approval or the activity that is proposed to be carried out is beyond what is described in the condition of the relevant water supply work approval, then the person

will need to apply for and obtain a controlled activity approval before carrying out the activity.

It is expected that the impacts of this tightening of the exemption will only occur during drought years and apply to activities such as during drought channelling in a water source to create one big pool

from which to pump water.


Table 27 - Controlled activities water supply work


Licence stock and domestic 10 per year



Hours to prepare 2

Cost incurred of approval by landholder 120

Cost incurred during drought years $1,200

The same amendment is made to the controlled activity exemption for activities carried out in

connection with the construction or use of a work to which Part 2 of the Water Act 1912 applies, or a controlled work under Part 8 of the Water Act 1912 (clause 39A (2) (e) and (f) in the existing Regulation.

The new Regulation limits these to activities that are detailed in the conditions of the respective Water Act 1912 licence or approval and that are carried out in accordance with those conditions (clause 39 and clause 22 in Part 2 of Schedule 5 to the new Regulation).

Changes to the dwelling house and dual occupancy exemption

Objective

To remove duplication of approval processes for small-scale activities that are already subject to Local Council approval processes.

Proposed amendment

It is proposed to amend the existing exemption from the requirement to hold a controlled activity approval carried out in connection with the erection of a dwelling house or dual occupancy building contained in clause 39A (2) (g) of the existing Regulation.

The proposed new exemption (clause 39 and clause 27 in Part 2 of Schedule 5 to the new Regulation) differs to the existing exemption in the following ways:

• the new exemption expressly applies to the demolition of a dwelling house or dual occupancy

building, whereas the existing exemption does not

• the existing exemption excludes activities carried out in, on or over the bed of any river, lake or estuary, however the new exemption will exclude activities carried out on or in the bed or

bank of any river, the bed or shore of any lake or the bed or land lying between the bed and the mean high water mark of an estuary.


• business avoids $0.5 million in costs associated with obtaining an approval for demolition of a

dwelling – which would generally arise from rebuilding (already exempt) or removal of a dwelling

• the net social benefit is estimated at $0.5 million

• Government is not impacted on a cost recovery basis

• a positive net social benefit is expected.

Table 28 - Dwelling house and dual occupancy exemption

Annual Units Net present value

Number of activities per year 50 per year

Cost avoided for landholder 2hrs

Cost of approval $272

Cost avoided Minor - not costed

New exemption - network operators



Objective

To reduce red tape through enabling private network operators to undertake specified controlled activities provided the environmental impact has been considered.

Background

It is proposed to include a new exemption from the requirement to hold a controlled activity approval for network operators licensed or authorised under the Water Industry Competition Act 2006 or the

Gas Supply Act 1996, or licensees under the Pipelines Act 1967 (a pipeline licensee), in relation to the construction, modification, repair or maintenance of, or emergency work on:

• in the case of a network operator, the network operator’s water or gas infrastructure

• in the case of a pipeline licensee, the pipeline the subject of the licence and its associated

infrastructure

being activities that:

• are carried out in, on or under waterfront land relating to a river, estuary or lake (other than in

or on the bed or banks of a river, the bed or shore of a lake, or the bed or land lying between the bed and the mean high water mark of an estuary)

• do not cause any change in the course of the river

• the environmental impact of which has been considered under section 111 of the Environmental Planning and Assessment Act 1979 (or is exempt from the need for such

consideration under section 110E of that Act).

The proposed new exemption is contained in clause 40 of the new Regulation.

The Department of Trade and Investment, Regional Infrastructure and Services is responsible for the oversight of legislative requirements for licensing of cross-country transmission pipelines under the Pipelines Act 1967 within the state of New South Wales. Predominantly these pipelines convey oil,

gas and petroleum and the Department oversees the safety and integrity of the pipelines once they are licensed.

Pipelines licensed under the Pipelines Act 1967 are subject to environmental assessment in

accordance with Part 3A of the Environmental Planning and Assessment Act 1979 prior to licensing (Department of Planning). Based on the outcomes of the environmental assessment, the Pipeline Licensee is normally required to develop and implement an Environmental Management Plan (EMP)

for the construction and operation of the pipeline.


• business avoids the duplication of assessment costs

• Government avoids the duplication of assessment

• there is potential for a future net social benefit.

Table 29 - Network operators exemption


Number of network operators 8 Benefit from level playing field

Cost avoided Potential net social benefit

New exemption Maritime Authority or Port Corporation

It is proposed to include a new exemption from the requirement to hold a controlled activity approval for any activity:



• carried out in accordance with any lease, licence, permit or other right in force in respect of

land under the ownership or control of the Maritime Authority of NSW or a Port Corporation (within the meaning of the Ports and Maritime Administration Act 1995), or

• for which the Minister administering the Ports and Maritime Administration Act 1995 is the

consent authority under the Sydney Regional Environmental Plan (Sydney Harbour Catchment) 2005.

The proposed new exemption is contained in clause 39 and clause 17 in Part 2 of Schedule 5 of the new Regulation.

The new exemption avoids duplication of assessment processes as the NSW Maritime and Port

Corporation have their own assessment process. Additional benefits to individuals and businesses developing affected land may include a reduction in the time taken to assess applications. The following impacts are associated with this new exemption:

Table 30 – Maritime Authority or Port Corporation - Controlled activity exemption


Numbers of activities 50

Cost avoided for landholder and government $272

Cost avoided Minor

New exemption fencing, crossings and tracks

It is proposed to include a new exemption from the requirement to hold a controlled activity approval for any activity carried out in connection with the construction or use of fencing, or of a vehicular

crossing or an access track, that does not impound water, being an activity carried out in, on or under waterfront land:

• relating to a minor stream, and

• within a rural zone (other than a rural village) under an environmental planning instrument.

The proposed new exemption is contained in clause 39 and clause 21 in Part 2 of Schedule 5 of the

new Regulation.

Table 31 - Controlled activity - new exemption fencing, crossings and tracks



Cost avoided for landholder and $272

Hours to prepare 4

Cost avoided Minimal – not costed

New exemption concrete-lined or piped channels

It is proposed to include a new exemption from the requirement to hold a controlled activity approval for any activity carried out on waterfront land relating to a river where the channel of the river is fully

concrete lined or is a fully enclosed pipe channel.

The proposed new exemption is contained in clause 39 and clause 26 in Part 2 of Schedule 5 of the new Regulation.




• predominately these activities occur in urban or industrial situations. As such they will require

development consent from Local Government. Any environmental impact, which by definition is low as a result of the highly modified environment, will be dealt with under the EPA Act

• the proposed exemption makes current practice more efficient. It saves the need for Local

Government to obtain concurrence from the NSW Office of Water for these works.

Table 32 - Controlled activity – concrete-lined or piped channels exemption



Cost avoided for government 2hrs

Cost avoided for landholder $272

Cost to business avoided $0.38m $2m



6 Water Supply Authorities Regulation 2004

6.1 Summary

The Water Management (Water Supply Authorities) Regulation 2004 is due for repeal on 1 September 2011. The current Regulation was originally due for repeal on 1 September 2009 but two one-year

extensions were granted by the Governor.

In-principle approval was provided by then Minister for Water, the Hon. Phillip Costa, to remake the Regulation and to consolidate this Regulation with the Water Management (General) Regulation.

This Regulatory Impact Statement considers three options:

Option 1 – Do nothing

This is the base case. The base case assumes that the Regulations are allowed to lapse and no

further action is taken. This would result in water supply authorities not being able to perform their functions. Households and businesses would have to make their own arrangement for the supply of water supply and sewerage services.

The net present value (NPV) of this option is negative $10,009 million (at 7% real discount rate).

Option 2 – Alternative regulatory framework

This option assumes that the Regulation is allowed to lapse and an alternative regulatory framework is

created for each of the seven water supply authorities examined. The frameworks would provide all the necessary powers for the water supply authorities to carry out their functions

This option generates a net benefit with a NPV of $9,993 million (at 7% real discount rate).

Option 3 – Remake the 2004 Regulation

This option assumes that the provisions of the 2004 Regulation are included in the new Regulation.

This option generates a net benefit with a NPV of $9,995 million (at 7% real discount rate).

This option is the least cost option by a small margin. It is the preferred option because:

• It retains the status quo and its renewal would be administratively simple.

• The 2004 Regulation has worked successfully in its seven years of operation enabling the

efficient operation of water supply authorities.

• The remaking of the 2004 Regulation would avoid approximately $2 million of expenditure to

establish new regulatory structures without additional, offsetting benefits.

6.2 Introduction

The Act and water supply authorities

The Act provides for the protection, conservation and ecologically sustainable development of the

water sources of the State.

Water supply authorities are dealt with principally under Part 2 of Chapter 6 and Schedules 3 and 5 of the Act.

The power to make regulations is contained in sections 289, 304, 305, 306, 310, 313, 314, 316, 321, 322 and 400 of the Act. The new Regulation is prepared in accordance with those provisions.

The new Regulation applies to eight water supply authorities:

1. Cobar Water Board



2. Country Energy (Broken Hill)

3. Gosford City Council

4. State Water (Fish River Water Supply Scheme)

5. Sydney Olympic Park Authority

6. Wyong Shire Council

7. Benerembah Irrigation District Environmental Protection Trust

8. Upper Parramatta River Catchment Management Trust

The first six water supply authorities listed above are functionally different from the last two. The Benerembah Irrigation District Environmental Protection Trust and Upper Parramatta River Catchment

Management Trust do not provide water supply, sewerage or storm water services. The Benerembah Irrigation District Environmental Protection Trust, although still listed as a water supply authority, is defunct.

The Water Management (Water Supply Authorities) Regulation 2004

The current Water Management (Water Supply Authorities) Regulation 2004 (referred to in this section as the 2004 Regulation), deals exclusively with water supply authorities. The 2004 Regulation

contains no provisions specifically applicable to Benerembah Irrigation District Environmental Protection Trust.

The 2004 Regulation reached the end of its five-year life in 2009. The repeal of the 2004 Regulation

was deferred twice for a one-year period by the former Minister for Water and is now set for repeal in September 2011.

The 2004 Regulation was designed to meet certain objectives and to address significant shortcomings

of the regulatory framework for water supply authorities that existed prior to 2004.

The objectives were to:

• define the areas of operations of water supply authorities

• provide for the service and charging functions of water supply authorities in a manner that

integrates natural resource management outcomes into water supply authority functions and achieves greater consistency with other authorities undertaking similar functions

• provide for, and control activities in, special areas

• promote operational and administrative best practice.

The significant shortcomings of the regulatory framework prior to 2004 were:

• lack of uniform provisions when compared with similar functions of other urban water

authorities resulting in an inconsistent approach to the supply of water, plumbing, sewerage and charging functions across the State

• lack of clarity for trade waste matters, operations beyond areas of operations, approvals and

directions of the Minister

• insufficient flexibility in relation to addressing non-paying customers and penalties and

offences

• relevant water sources of Australian Inland Energy Water Infrastructure (now Country Energy) were insufficiently protected

• lack of provision for the promotion of best practice and the management of natural resources

in the respective areas of operations.



Prior to 2004, there were six separate Regulations dealing with various aspects of water supply authorities’ operations. The 2004 Regulation replaced these separate Regulations.

The 2004 Regulation has met the objectives outlined above and addressed the shortcomings also

outlined above. The current water supply authorities are operating efficiently within the existing framework and no regulatory related hindrances to operations or significant regulatory gaps have been identified in the seven year operation of the 2004 Regulation.

Relevant reform proposals

Two reform processes currently underway will impact directly on the Regulation of water supply authorities.

1. Plumbing reform

The 2004 Regulations contain plumbing provisions. Water supply authorities with urban water functions regulate plumbing within their areas of operations.

The regulation of plumbing in NSW is currently subject to a separate review by the Minister for Fair Trading. The Plumbing Bill 2010 provides for a single plumbing regulator for NSW and establishment of a single plumbing regulatory framework. The Bill, when enacted, will

repeal the plumbing provisions within the Local Government Act 1993 and Regulations, the Act and Regulations, the Sydney Water Act 1994 and Regulations and the Hunter Water Act 1991 and Regulations.

The Plumbing Bill is likely to be considered by Parliament in 2011. The current plumbing provisions of the 2004 Regulation will be carried forward without amendment into the new Regulation that is created as a result of the process that is the subject of this regulatory

impact statement.

2. Local water utility inquiry

The recommendations of the “Independent Inquiry into Secure and Sustainable Urban Water

Supply and Sewerage Services for Non Metropolitan NSW”, if implemented, will have a direct impact on water supply authorities with urban water functions. The relevant recommendations that are likely to require amendments to regulations for water supply

authorities are:

• mandatory compliance with the Best Practice Management for Water Supply and Sewerage Guidelines

• mandatory implementation of risk-based management of water quality plans in accordance with the Australian Drinking Water Guidelines

• independent review of water supply authority pricing

• referral of unresolved consumer complaints to an independent complaint resolution body such as the NSW Ombudsman and the Energy and Water NSW Ombudsman services.

These matters are subject to a separate review process by the Minister for Primary

Industries and consequent amendments to legislation will be addressed as part of that process.



6.3 Outline of the new Regulation - Part 9 – Supply Authorities

Division 1 - Preliminary

Division 1 of Part 9 contains the definitions of terms used in Part 9 of the new Regulation.

Division 2 – Areas of operations and functions

Division 2 of Part 9 defines water supply authorities’ areas of operations and specifies which functions (that is, water, sewerage, plumbing and so on) apply to each water supply authority.

This division:

• allows water supply authorities to exercise functions beyond their area of operations providing

that the capacity to exercise within the area of operations is not limited

• requires water supply authorities to carry out their functions in accordance with a strategic

business plan that is approved by the Minister

• exempts water supply authorities from the requirement under section 292(1)(a) of the Act to obtain the Minister’s approval to construct, maintain and operate water supply works with the

exception of dams, water treatment and sewage treatment works.

Division 3 – Water Supply

Division 3 of Part 9 provides a framework for the provision of water services by the water supply authorities that have urban water functions. Water services cover the water supply pipe-work from its point of connection to a water supply authority’s water supply system up to and including its outlet

valves.

The new Regulation specifies:

• owner responsibilities with respect to installation and maintenance of water services

• limitations on water services sharing

• provisions for fire-fighting services

• activities that constitute misuse and waste of water

• the requirement for water to be taken only through approved stop-taps

• the requirement for information regarding the quantity of water taken to be supplied to water

supply authorities

• that consents relating to water supply may be conditional, varied or revoked

• information relating to water meters, including measurement of supply, access rights, care of meters, notifications regarding discontinuance of the use of meters and the installation and

testing of meters and installation and testing of meters

• penalties that apply if owners relocate meters or if they are improperly treated or disconnected

• fire hydrants matters, including installation, maintenance, use and supply of water to them

• water restrictions – all water utilities will be able to regulate or restrict water supply in order to

conserve water supplies in time of drought or other emergency

• penalties that apply for failing to comply with a notice given by the water supply authority for water restrictions

• installation and maintenance of water services is to be done in compliance with the edition of

the Plumbing and Drainage Code of Practice specified in the definitions.



Division 4 – Sewerage

Divison 4 of Part 9 provides a framework for controlling sewerage system operations and for regulating discharges into sewers.

Sewerage system provisions apply to Country Energy, Gosford City Council and Wyong Shire Council. Discharges to the sewer only apply to Country Energy. Discharges to the sewers of Gosford and Wyong Councils are regulated by the Local Government (General) Regulation 2005.

Provisions applicable to Country Energy, Gosford City Council and Wyong Shire Council cover:

• owner responsibilities with respect to installation and maintenance of sewerage services

• limitations on sharing sewerage services

• consents relating to sewerage services which may be conditional, varied or revoked.

Provisions applicable to Country Energy only, relating to discharges to the sewer include:

• the authority’s ability to prepare a discharge or trade waste policy that would be subject to

approval by the Minister

• approvals required for discharge of certain matter to the sewer

• application for discharge approval must be accompanied by certain information

• discharge approvals will contain certain conditions

• discharge approvals will be valid for a specified period and can be renewed

• discharge approvals can be suspended or cancelled.

Division 5 – Plumbing fittings, plumbing work and plumbing permits

Division 5 of Part 9 provides a framework for plumbing to connect to water supply authorities’ systems. This Division applies to Country Energy, Cobar Water Board, State Water (Fish River Water Supply

Scheme) and Sydney Olympic Park Authority.

In relation to plumbing works, Subdivision 2 of Division 5 of Part 9 requires:

• plumbing work be carried out in accordance with a permit

• plumbing work comply with the Plumbing and Drainage Code of Practice

• authorized plumbing fittings are to be used in such work

• a certificate of compliance is to be provided to the water supply authority following the

completion of plumbing work

• the water supply authority to be informed of damage if it occurs during the work

• rectification of defective plumbing work can be required

• the water supply authority may exempt certain people from various requirements outlined in this Division of the Regulation if appropriate

• plans of plumbing work undertaken are to be supplied to owners and the water supply

authority.

Subdivision 3 outlines provisions associated with plumbing permits, including application

requirements, reasons for refusal, conditions of permits, duration of permit and suspension cancellation of permits.

Subdivision 4 allows water supply authorities to authorize plumbing fittings. The water supply authority

must ensure that plumbing fittings comply with Australian Standards AS 3500 and AS 5200 and any variations in the Plumbing and Drainage Code of Practice.

Penalties apply for failing to comply with the provisions of the Regulation.



Division 6 – Special Areas

Division 6 of Part 9 controls activities within important water catchment areas termed “special areas”. Division 6 only applies to Country Energy.

This Division of the Regulation applies to:

• special areas generally which include rural and restricted areas – these include restrictions on livestock farming, slaughtering methods, stock control, sewage disposal and

requirements to notify Country Energy of infectious disease

• rural portions of special areas - within the rural portions of special areas restrictions are placed on timber removal, waste and pollutants, buildings and pesticide use

• restricted portions of special areas – restricted portions of special areas are key storage and catchment areas needing stricter water protection. These areas have entry and access limitations and fees may be charged for entry. Certain activities are prohibited while others

are strictly controlled.

Miscellaneous provisions deal with consents given by the authority for the purpose of this Part, investigation of suspected contraventions, and information required by the authority when assessing

the proposed use of special areas by public agencies under section 304(1) of the Act.

Division 7 – Finance Generally

Division 7 of Part 9 of the new Regulation provides for the financial functions of water supply

authorities and it applies to all water supply authorities.

Division 7:

• requires that fees and charges imposed for the financial functions of water supply authorities

be determined by resolution

• allows water supply authorities to classify land for the purpose of charging

• requires water supply authorities to levy service charges according to one or more bases that are aimed at promoting user pays charges and eliminating land based charges

• provides for methods for levying service charges on dwellings under company title

• requires that determinations of service charges not be made unless a strategic business plan

has been approved by the Minister within the past three years and an annual performance report on the water supply authority’s functions has been provided to the Minister

• specifies that payments of charges are due as notified by the water supply authority and may be made in any manner – payment by installment is allowed for

• allows for charges to be deferred or waived by the water supply authority if reasonable cause

can be shown

• provides for adjustments to be made to service charges if land classifications are incorrectly

classified – appeals may be made in the Land and Environment Court.

Division 8 – Concessions for eligible pensioners and others

Division 8 of Part 9 of the new Regulation provides for the reduction of service charges payable by pensioners and certain other eligible people.

Subdivisions 1 to 4 of Division 8 apply to Country Energy, Cobar Water Board, State Water (Fish River Water Supply Scheme) and Sydney Olympic Park Authority. Subdivision 5 of Division 8 applies to water supply authorities that are also local councils, that is, Gosford City Council and Wyong Shire

Council.



Subdivisions 1 to 4 of Division 8 provide for reduction in charges for pensioners. The new Regulation specifies when entitlement for concessions arise, the amounts of these reductions, and how to adjust charges if someone becomes eligible after the charges have been levied. Other reductions will apply

in circumstances of hardship. The new Regulation also sets out general provisions concerning reductions including how to make applications, refunding overpayments, recovery of payments falsely obtained and limitation of liability statements for eligible pensioners.

Subdivision 5 of Division 8 addresses the situation of water supply authorities that are also local councils. The new Regulation states that the provisions of the Local Government Act 1993 associated with the reduction and postponement of rates and charges apply to these water supply authorities.

Division 9 – Miscellaneous

Division 9 of Part 9 contains provisions for the following miscellaneous matters:

• the supply of sewerage plans by a water supply authority on request on behalf of an owner

• information that must accompany applications for certificates of compliance under section

305(2) of the Act

• a list of developments that are subject to the requirements of section 306 of the Act

• penalty notices – the provision of penalty notices refers to the penalty notice provisions specified in Schedule 2 column 1 and the amount of the penalty in column 2 – penalty

provisions are shown throughout the new Regulation and these are listed in Schedule 2

• prescribes Peak Gold Mines Pty Ltd as a mining company that can nominate a member of the

Cobar Water Board.

6.4. Objectives of Part 9 of the new Regulation

The Subordinate Legislation Act 1989 requires that the objectives of legislation be clearly identified and the reasons the objectives are considered important be clearly formulated and expressed.

The objectives identified that need to be achieved through governmental action are as follows:

1. define the areas of operation of the water supply authorities

2. provide for the service and charging functions of water supply functions

3. provide for, and control activities in, special areas

4. promote operational and administrative best practice.

In the process of evaluation of options each option will be examined to determine whether or not the option achieves the individual objective either wholly or substantially. Options that do not satisfactorily

meet the objectives will be discarded.

The above four objectives have been examined to ascertain if they:

• are reasonable and appropriate

• accord with the objectives, principles, spirit and intent of the Act

• are consistent with other legislation and government policy.

The identified objectives meet all the above criteria. The objectives accord with the Act and have been

found to be not inconsistent with other legislation and Government policy.



6.5. Options for assessment

Three options are considered:

Option 1 – Do Nothing (Base Case)

The Base Case in this Regulatory Impact Statement assumes that the 2004 Regulation lapses. It is not replaced with a new Regulation or other statutory rules that would give effect to provisions similar to that of the 2004 Regulation.

Option 2 – Alternative Regulatory Frameworks

In this option water supply authorities operate under alternative legislation to perform their functions. Alternative frameworks considered are:

• the Local Government Act 1993 and Regulations

• customised legislation similar to the Sydney Water Act and Hunter Water Act.

Option 3 – Remake the 2004 Regulation

The 2004 Regulation is replaced by a 2011 Regulation with similar provisions.

6.6 Assessment of options in relation to objectives 6.6.1 Option 1 – Do Nothing (Base Case)

The Act confers powers and responsibilities on water supply authorities in relation to their functions. The Act also provides for Regulations to be made. While the Act provides the broad principles for

water supply authorities’ operations, the Regulations contain the necessary details to ensure that the Act’s provisions operate successfully.

If the 2004 Regulation lapsed and its provisions were not renewed, most of the powers and

responsibilities conferred on water supply authorities could not be implemented. Consequently, most water supply authorities – particularly those with water supply, sewerage and drainage functions – would be unable to function. Consumers dependent on water supply authorities’ functions would have

to make their own water supply and sewage disposal arrangements.

6.6.1.1 Objective 1 – basic functions and areas of operations

Section 285 of the Act establishes water supply authorities. Under this option all water supply authorities would continue to exist as statutory entities.

Section 289 of the Act states that water supply authorities’ areas of operations may be prescribed by

the Regulations.

In the absence of Regulations, water supply authorities’ areas of operations cannot be defined. Objective 1 would not be met by this option.

6.6.1.2 Objective 2 – details of service and charging functions

The functions of water supply authorities are set out in section 292 of the Act and these would continue. Chapter 6, Part 2 Division 3 of the Act sets out supporting powers of water supply authorities including powers associated with commercial operations, entry onto land, power to break up roads

and alter positions of conduits, power to act where obstructions or pollution occur. All of these would also continue.

Powers that could not be exercised without Regulations are:

• section 306 of the Act – requiring developer contributions or water management works that serve the development to be a precondition to granting a certificate of compliance for

development (this section applies to developments prescribed by the Regulation)



• section 310(1) of the Act – levying service charges since a precondition is classifying land

according to the Regulations under section 313 of the Act

• section 310(1) of the Act – imposing fees and charges since these must be imposed in accordance with the Regulations.

Objective 2 would not be met by this option.

6.6.1.3 Objective 3 – protect water in special areas

Section 322(1)(j) of the Act permits Regulations to be made in respect to “the control and management of special areas”. The 2004 Regulation and the proposed 2011 Regulation specifies the

activities that may not be undertaken, or may not be undertaken without consent of Country Energy. The Regulations provide for penalties for non-compliance.

In the absence of Regulations, Country Energy is not able to specify the prohibitions on activities it

considers necessary to protect its water resource nor is it able to impose penalties to deter “prohibited” activities.

Although some protections are available under other legislation in relation to crown lands within

special areas, no legislative controls would be available for non-crown lands within special areas.


6.6.1.4 Objective 4 – operational and administrative best practice

The Act provides opportunities for legislative control of water supply authorities. However water supply authorities could not operate effectively and efficiently under the “Do Nothing” option since initiating

action is required under the Regulation.

The following operations all require initiating actions by the Regulations:

s289 – areas of operations

s304 – exercise of certain functions in special areas

s305 – applications for certificate of compliance (developer contributions)

s306 – authority may impose certain requirements before granting certificate of compliance

s310 – fees and charges

s313 – classification of lands for the purpose of levying service charges

s314 – levying of service charges

s316 – assessment of service charges

s321 – appointment of administrator - facilitation

s322 – regulations

Consequently, there would be limited opportunity to promote operational and administrative best practice without a Regulation in place.


6.6.2 Option 2 – Alternative Regulatory Frameworks

Under this option, new enabling acts and associated subordinate or delegated legislation provide water supply authorities with a regulatory framework to operate efficiently and effectively.

The frameworks would be designed to ensure that the four Regulation objectives identified in section 3

of this paper are satisfied.



6.6.3 Option 3 – Remake the 2004 Regulation

6.6.3.1 Objective 1 – basic functions and areas of operations

The new Regulation would result in:

• the areas of operations of the six relevant water supply authorities being defined

• functions that each water supply authority may exercise being specified

• functions beyond areas of operations being clarified to ensure that these functions are not compromised within areas of operations.

Objective 1 would be met by the new Regulation.

6.6.3.2 Objective 2 – details of service and charging functions

Functions that the new Regulation would allow include:

• Water, sewerage and plumbing functions including:

o a framework for water functions of water supply authorities

o water restrictions for all water supply authorities

o options to deal with non-paying customers

o a framework for sewage treatment functions of water supply authorities

o a framework for plumbing functions of water supply authorities.

• Trade waste matters

• Financial functions including:

o a framework for charging functions of water supply authorities

o restricting or cutting off water supplies

o provision of concessions to eligible customers

o specifying provisions for concessions.

The pricing framework encourages responsible management of water as a limited resource.


6.6.3.3 Objective 3 – protect water in special areas

The new Regulation would:

• define special areas (which are found only in Country Energy’s area of operations)

• protect water quality in special areas.


6.6.3.4 Objective 4 – operational and administrative best practice

The new Regulation will promote operational and administrative best practice through the following measures:

• planning and reporting requirements:

o providing for mandatory strategic business planning

o providing for mandatory annual reporting.

• only significant works to be subject to ministerial approval and direction

• framework for offences and penalties to ensure

o the water resource and related land resource is protected



o infrastructure is protected

o water is used appropriately.


6.7 Assessment of costs and benefits

6.7.1 Option 1 - Do Nothing - Base Case

The net present value of this option is negative $10,009 million (@ 7% discount).

Under this option the authorities would still maintain their existence and some functions under the Act.

However, without the application of the Regulations there would be a substantially increased economic burden for local communities and the wider NSW community.

If the 2004 Regulation is allowed to lapse water supply authorities would lose their powers to charge

customers for water supplied or sewerage service provided. This will have serious detrimental impacts on Gosford City Council, Wyong Shire Council, Country Energy, State Water (Fish River Water Supply Scheme) and Cobar Water Board. Without revenues, these bodies will not be able to operate. Sydney

Olympic Park Authority and the Upper Parramatta River Catchment Trust will also be affected but to a substantially lesser extent.

The customers of these water supply authorities, excluding Sydney Olympic Park and the Upper

Parramatta River Catchment Trust, will need to make alternative arrangements for the supply of water and sewerage services. The cessation of water supply and sewerage services by water supply authorities and the “mothballing” of associated infrastructure would have substantial impacts on the

cost of water supply and sewerage, property values, regional growth and statewide electricity prices.

In this base case, residential and commercial premises would be retrofitted with rainwater tanks, wastewater tanks and pumps. Water would be carted from the nearest alternative source and sewage

carted to the nearest alternative treatment plant or land disposal area.

The capital and recurrent costs for this are significant at about $10 billion for capital and about $1.5 billion for annual recurring costs. The largest single capital cost is the estimated $8 billion loss of

property values resulting from the replacement of reticulated water supply and sewerage services by onsite water and sewage collection tanks for developed properties.

Rolyat Services Pty Ltd stated the following on residential property values in its 2003 regulatory impact

statement: “A study undertaken in 1999 for Hornsby Shire Council by Rolyat Services Pty Ltd indicated that a general property improvement of $30,000 per residence would be gained in the Galston area if it were sewered.

The reduction in value from an average residential property if it lost existing centralised water supply and sewerage services is conservatively estimated currently at $50,000.”

In relation to non-residential properties, Rolyat Services Pty Ltd states:

“The loss of centralised water supply and sewerage systems and the inconvenience caused by the retrofitting of water tanks and wastewater holding tanks with reduction in open space areas and car parking spaces, increased odours, traffic noise and access problems from tankers would also have a

substantial impact on non-residential values. A loss value of $100,000 per property has been included in the calculations for non-residential properties. Property owners would suffer substantial losses in their equity, with little hope of recovery. In many cases, their properties would be unsaleable.”

If no loss of property values is assumed, this option would produce a negative net present value of $2,986 million.




Another significant impact is the closure of Wallerawang Power Station owing to unavailability of water from Oberon Dam and the consequent effect on electricity prices which are estimated to increase by up to 5% or $119 million. Only the price effect is considered in this cost benefit analysis and

employment impacts are not quantified.

The approach adopted by Rolyat Services Pty Ltd in its 2003 regulatory impact statement (2003 RIS) for the current Regulation is used for the assessment of this option with the inputs updated to reflect

the changes in values and the effect of the addition, in 2005, of State Water (Fish River Water Supply Scheme) to Schedule 3 of the Act as a water supply authority.

The benefits of this option are avoided water and sewerage rates that residents and businesses no

longer pay to water supply authorities, the net income derived from supply of tanks, cartage services and pumping costs and the residual value of tanks, pumps and stranded assets.

Net income refers to the producers’ margin on the production of rainwater tanks, pumps and

wastewater tanks and service providers’ margins on cartage and wastewater disposal. The margins are treated as a benefit because it represents income generated from production and services. They are not transfer payments. The margins are assumed to be 25% of the price.

No costs or benefits are included for the Sydney Olympic Park Authority and the Upper Parramatta River Catchment Management Trust. It is assumed:

• that the Government will fund the operating deficit of the Sydney Olympic Park Authority

caused by the inability of the Authority to levy charges

• that the Government will determine the fees and charges for the services of the Upper Parramatta River Catchment Management Trust and continue to direct Sydney Water to

collect the fees and charges on the Trust’s behalf.

Costs and benefits of the base case are shown below in Tables 38 and 39.

A discounted cash flow analysis is shown at Appendix E.

A full description of costs and benefits is included at Appendix F.


Table 33 - Base Case (Option 1) - Costs

(current dollars)($m)

ITEM Gosford City

Council

Wyong Shire

Council

Cobar Water Board

Country Energy

State Water

(FRWSS)

TOTAL

Capital costs

Retrofitting of rainwater tanks and bulk water tanks

363 316 5 42 83 809

Railhead discharge equipment 0 0 1 0 0 1

Retrofitting of wastewater tanks

568 489 0 79 0 1,136

Loss of property value 3,665 3,138 0 413 825 8,041

Total capital costs 4,596 3,943 6 534 908 9,987

Recurrent Costs p.a.

Water price 11 12 1 2 2 28

Water cartage costs 136 144 54 54 32 420

Wastewater disposal 341 361 0 49 0 751

Pumping related costs 5 6 0 2 1 14

“Mothball” water supply and sewerage works

8 22 1 4 3 38

Loss of development margin

13 112 0 0 0 125

Electricity cost increases n/a n/a n/a n/a 119 119

Total recurrent costs p.a 514 657 56 111 157 1,495



Table 34 - Base Case (Option 1) - Benefits


WATER SUPPLY AUTHORITY Gosford

City Council

Wyong Shire

Council

Cobar Water Board

Country Energy

State Water

(FRWSS) TOTAL

Capital related benefits

Residual value of water authority water supply and sewerage services assets

504 525 52 37 124 1,242

Residual value of water supply tanks and pumps

302 264 5 39 28 638

Residual value of waste water tanks and pumps

474 407 0 66 0 947

Margin on supply of water tanks (25%)

91 79 1 12 21 204

Margin on supply of waste water tanks (25%)

142 122 0 20 0 284

Total capital related benefits 1,513 1,397 58 174 173 3,315

Recurrent benefits

Avoided water charges 24 20 2 3 6 55

Avoided sewerage charges 33 27 0 4 0 64

Margin on water cartage (25%) 34 36 14 14 8 106

Margin on pumping (25%) 1 1 0 1 1 4

Margin on wastewater cartage (25%) 85 90 0 12 0 187

Total recurrent benefits 177 174 16 34 15 416

Table 35 - Base Case (Option 1) – Summary – Costs and Benefits


Capital costs 9,987

Recurrent costs 1,495

Benefits 3,721

6.7.2 Option 2 – Alternative Regulatory Frameworks

The net present value of this option is $9,993 million (@ 7% discount).

6.7.2.1 Framework Development Costs

The suggested alternative regulatory options for the seven water supply authorities are shown in Table 40. Also shown are the estimated costs of these options. The costs include those incurred by the

water supply authority to restructure and the cost of developing the new regulatory framework.

Restructuring costs include project, project management, due diligence and legal. These costs are incurred by the water supply authority in transition. Regulatory framework development costs are those

incurred in the drafting of legislation, associated administrative processes and the parliamentary process.

Framework development costs are estimated to be $1.69 million.




6.7.2.2 Recurrent Administration Costs

Water supply authorities’ annual costs of administering the Regulations are estimated to be $4

million2.

6.7.2.3 Water supply and sewerage charges

Costs of ongoing annual payments by customers to water supply authorities are $119 million.

The benefits of this option are the avoided costs from the “Do Nothing” Base Case less the benefits of the “Do Nothing” Base Case.

A discounted cash flow analysis is shown at Appendix D.

Table 36 - Option 2 - Alternative Regulatory Frameworks Development Costs

(current dollars - $’000)

Water Supply Authority

Alternative Regulatory Framework

Restructuring Administrative Total

Gosford City Council3

Local Government Act 1993 Nil Nil Nil

Wyong Shire Council

Local Government Act 1993 Nil Nil Nil

Cobar Water Board

Legislation specific to the Authority providing the necessary powers necessary to operate as a water services utility.

300 110 350

Country Energy Statutory Corporation.

Legislation transferring the water supply and sewerage assets, staff and functions to a new entity and providing the powers necessary to operate as a water services utility.

300 110 350

State Water Local Government Act 1993.

Transfer assets, staff and functions to Oberon Shire Council.

300 Nil 250

Sydney Olympic Park Authority

Legislation specific to the Authority providing the powers necessary to conduct its functions as a water services utility.

125 110 200

Upper Parramatta River Catchment Management Trust

Trust established under legislation specific to the Trust providing the powers necessary to conduct its functions.

125 110 200

TOTAL 1,150 440 1,690

2 These costs are identified by Rolyat Services Pty Ltd to be $2.67 million for the four water supply authorities that were subject to the regulations at that time. 3 Gosford and Wyong Councils have jointly established a corporation under the Central Coast Water Corporation Act 2006. The corporation is intended to be a water supply authority under the Water Management Act 2000 when the Councils’ responsibilities are transferred to the corporation. When this occurs, the Central Coast Water Corporation Act 2006 would be amended to provide the corporation with the powers needed to operate as a water utility.


Table 37 - Option 2 - Alternative Regulatory Frameworks – Summary of Benefits

(current dollars - $m)

WATER SUPPLY AUTHORITY

Gosford City

Council

Wyong Shire

Council

Cobar Water Board

Country Energy

State Water (FRWSS)

TOTAL

Avoided capital costs

Retrofitting of rainwater tanks and bulk water tanks

363 316 5 42 83 809

Retrofitting of wastewater tanks

568 489 0 79 0 1,136

Railhead discharge equipment

0 0 1 0 0 1

Loss of property value 3,665 2,844 0 413 825 8,041

Total capital costs 4,596 3,943 6 534 908 9,987

Avoided recurrent costs p.a.

Water price 11 12 1 2 2 28

Water cartage costs 136 144 54 54 32 420

Wastewater disposal 341 361 0 49 0 751

Pumping related costs 5 6 0 2 1 14

“Mothball” water supply and sewerage works

8 22 1 4 3 38

Loss of development margin

13 112 0 0 0 125

Electricity cost increases 0 0 0 0 119 119

Total avoided recurrent costs

514 657 56 111 157 1,495



Table 38 - Option 2 - Alternative Regulatory Frameworks – Summary of Costs

(current dollars - $m) (Benefits identified in Option 1 and not gained in Option 2)

WATER SUPPLY AUTHORITY

Gosford City Council

Wyong Shire

Council

Cobar Water Board

Country Energy

State Water (FRWSS)

TOTAL

Capital related benefits not gained

Margin on supply of water tanks (25%)

91 79 1 12 21 204

Margin on supply of waste water tanks (25%)

142 122 0 20 0 284

Residual value assets 1280 1196 57 142 152 2,827

Total capital related benefits not gained

1,513 1,397 58 174 173 3,315

Recurrent benefits not gained

Avoided charges 24 20 2 3 6 55

Avoided waste water charges

33 27 0 4 0 64

Margin on water cartage (25%)

34 36 14 14 8 106

Margin on pumping (25%)

1 1 0 1 1 4

Margin on wastewater cartage (25%)

85 90 0 12 0 187

Total recurrent benefits not gained

177 174 16 34 15 416

Other Benefits not gained

Framework development costs

n/a n/a n/a n/a n/a 1

Recurrent administration costs


Total other benefits not gained


6.7.3 Option 3 – Remake the 2004 Regulation

The net present value of this option is $9,995 million (@ 7% discount).

The benefits of this option are the avoided costs from the “Do Nothing” Base Case less the benefits of the “Do Nothing” Base Case. These are the same as for Option 2.

The costs of this option comprises:

• framework development costs - the estimated costs incurred by Government of preparing and

issuing the new Regulation and the costs incurred by water supply authorities in the consultation process, $80,000

• recurrent administration costs are the same as option 2, $4.0 million.



Table 39 - Option 3 – Remake the 2004 Regulation – Annual Costs

(current dollars - $’000)

Framework development costs Recurrent administration costs

80 4,000

A discounted cash flow analysis is shown at Appendix E.

6.8 Results of costs and benefit analysis

Table 45 below sets out the results of the cost benefit analysis. The full analysis of costs and benefits is contained in the Appendices.

The analysis has been conducted so that the costs and benefits of Options 2 and 3 are incremental to

Options 1, the “Do Nothing” base case option.

Quantifiable costs considered comprise capital and operating and maintenance costs for the five-year evaluation period.

The analysis demonstrates that Options 2 and 3 are superior to Option 1, the “Do Nothing” base case and are both strongly economic.

Treasury Guidelines require that the “Do Nothing” base case” should be considered a starting point for

all cost benefit analyses on NSW Government projects.

Table 45 summarises the economic evaluation of the three options considered.

Table 40 - Economic Evaluation of Options

($m)

NPV @ 7% (5 years)

Option Capital costs

Recurrent costs

Other Costs

Benefits Net

1. Base case -8,842 -5,053 0 3,886 -10,009

Capital costs

(avoided)

Recurrent costs

(avoided)

Other Costs

Benefits (not

realized)

Net

2. Alternative regulatory framework

8,842 5,053 -420 -3,482 9,993

3. Remake 2004 Regulation 8,842 5,053 -418 -3,482 9,995

Table 45 shows that the “Do Nothing” option generates a net cost of $10,009 million (NPV @ 7%) whereas option 2 and 3 generate net benefits of $9,993 million and $9,995 respectively (NPV @ 7%).

6.9 Conclusions and recommendations

The Do Nothing option, if adopted, would have substantial unacceptable social, financial, environmental and health impacts on communities currently serviced by water supply authorities.

Affected communities would principally be those in Gosford, Wyong, Broken Hill, Cobar, parts of Lithgow, Glen Davis, Portland, Cullen Bullen and parts of the upper Blue Mountains.



Some of the major impacts of this option are:

• water supply authorities would cease to function

• increased health risks owing to increased dependence on untreated rainwater for drinking

water

• increased risk of environmental harm caused by increased dependence of onsite storage of

wastewater and increased incidence of illegal wastewater dumping

• sharp decline in property values owing to the unavailability of reticulated water supply and sewerage services

• detrimental impacts on roads, traffic safety and pollutant emission levels arising from more

than 900 “B double” equivalent truck movements per day to supply water to former customers of water supply authorities

• possible shutdown of Wallerawang power station owing to discontinuance of water supplies from cost-effective sources resulting in national electricity price increases of between 5 and 10

percent

• potential for mine closures in Cobar and Broken Hill owing to substantially higher prices for

water resulting in loss of royalty revenue to the State

• severe impacts on employment and communities’ incomes arising from closure or reduced production of manufacturing businesses dependent on low cost high quality water supplies

and wastewater services

• decreased effectiveness of fire fighting services in localities formerly serviced by water supply

authorities owing to unavailability of reticulated water supply systems thereby increasing the risk of property damage, personal injury and loss of life.

The estimated cost of option 1 is substantially understated with environmental, health and community wealth impacts not included. Nevertheless, the net costs of this option as measured by this analysis

are substantial at $10,009 million (NPV).

Option 2 (Alternative Regulatory Frameworks) and Option 3 (Remake the 2004 Regulation) are both highly viable options.

Option 2 assumes that the Regulation is allowed to lapse and an alternative regulatory framework is created for each of the seven water supply authorities. The frameworks would provide all the necessary powers for the water supply authorities to carry out their functions and avoid the high costs

of water supply and sewerage management under the base case.

The net benefit of this option, relative to the base case, is $9,993 million (NPV@7%).

Option 3 assumes that the provisions of the 2004 Regulation are included in the new Regulation and

this too would avoid the high costs of water supply and sewerage management under the base case.

The net benefit of this option, relative to the base case, is $9,995 million (NPV@7%).

This option is the least cost option by a small margin. It is the preferred option because:

• It retains the status quo and its renewal would be administratively simple.

• The 2004 Regulation has worked successfully in its seven years of operation enabling the efficient operation of water supply authorities.

• The remaking of the 2004 Regulation would avoid approximately $2 million of expenditure to

establish new regulatory structures without additional, offsetting benefits.

Recommendation

It is recommended that Option 3, “Remake the 2004 Regulation” be implemented.



7 Proposed option

The proposed option is to:

• remake the General Regulation with amendments

• remake the Water Supply Authorities Regulation

• consolidate those Regulations into a single Water Management (General) Regulation 2011.

Table 46 shows the estimated benefits of the options of remaking and/or amending the Regulations compared to allowing the Regulations to lapse (base case).

The proposed benefit of remaking, amending and consolidating the General and Water Supply

Authorities Regulations into the Water Management (General) Regulation 2011 is quantified at $9,934.78 million.

The major contributing factors are:

• avoiding production delays arising from requirements to obtain water supply work approvals and water use approvals for currently exempt works

• reducing the regulatory burden on minor or small-scale water users

• retention of the existing Water Supply Authorities operational capabilities.

The largest beneficiaries are the customers of the Water Supply Authorities, who avoid the cost of re-establishing their access to water supply and sewerage services.

The net incremental impact of the proposed amendments to existing clauses is modest – a net benefit of around $7.3 million. This comprises various positive and negative impacts. While the incremental quantified impacts of the amendments is relatively small it must be recognised that they will generally

clarify, limit or extend exemptions so that they better reflect their original intent or reduce duplication with other assessment processes.

In addition to the quantified benefits, there are various unquantified impacts, the majority of which are

expected to be positive.



8 Conclusion

The objectives of the proposed new Regulation are to remake, with various changes (where

appropriate), the provisions of the:

• Water Management (General) Regulation 2004

• Water Management (Water Supply Authorities) Regulation 2004.

The above Regulations are due to be automatically repealed under clause 10 of the Subordinate Legislation Act 1989 on 1 September 2011 and the intention is to continue to have Regulations in

place that support the relevant provisions of the Act. The Regulation, the subject of this RIS, provides the preferred regulatory framework for achieving this objective.

The Regulation remakes the existing Regulations, with the following key areas of change:

1. amendments to exemptions for water access licences, water use approvals, water supply work approvals and controlled activity approvals

2. removal of the amnesty for pre-1999 unlicensed works on 31 December 2011. Continuation

of the amnesty until this date allows time for the NSW Office of Water to make a dedicated public announcement on the removal of the amnesty

3. administrative improvements, including new provisions for the electronic lodgement of applications for licences and approvals and objections to provide for faster and simpler

transactions for the public.

The focus of these changes relates to exemptions. These changes have been made to ensure better

consistency across exemptions, create some new exemptions that will require the Minister’s approval, create some new exemptions to reduce red tape and clarify the parameters of some existing exemptions. Other changes include the provision for electronic lodgement of certain applications.

The objective of having exemptions for access licences and approvals is to allow the NSW Office of Water to:

• manage its regulatory responsibilities in a cost-effective and practical manner by exempting

certain takes of water from the requirement to hold an access licence and certain activities from the requirement to hold a water supply work approval, water use approval, controlled

activity approval or aquifer interference approval

• minimise the regulatory burden on such persons taking water or undertaking exempt activities

commensurate with the low level of associated impact.

The RIS assesses the costs and benefits, of measures available to the State, rural landholders, local government and industry to achieve the objectives of the Act and identifies the benefits of the Regulation. The benefits of the Regulation, will outweigh the anticipated costs of maintaining a rigid

regulatory framework requiring substantive government involvement. There will be minimal adverse impacts to the State’s resources and it provides the largest net benefits of the available alternatives.



Table 41 - Summary of major identified impacts – net present value over five years ($million)

Clause – substantive matter Remake existing

Regulation

Proposed amendments

Proposed Regulation

General Regulation 2004

the Amnesty to cease 31st December 2011

$0.32 ($0.32) ($0.32)

Benefit of prescribing form and content of applications

$1.4 $1.4

Benefit of electronic lodgement of applications

$0.8 $0.8

Benefit of exemptions for water access licences

$15.4 $15.4

Benefit of modifying water access licence exemption for dust suppression

($0.65) ($0.65)

Avoided cost of security interest lodgements

$0.2 $0.2

Benefit of exemptions for works approval advertising

$1.2 $1.2

Benefit of extending period of approval exemptions

$0.12 $0.12

Benefit of security deposits amendments

$0.6 $0.6

Benefit from fewer abandoned sites

Benefit of exemptions for water works approvals

$2.2 $2.2

Cost of amendment to dust suppression - works approvals

($0.65) ($0.65)

Benefit of exemption for monitoring bores approvals

$3.7 $3.7

Bores used only for monitoring – petrol stations, etc. – no longer require approvals

Cost of controlled activities stock and domestic amendment

($1) ($1)

Benefits of controlled activities – mining and crown lands amendment

$0.2 $0.2

Benefit of controlled activity – concrete lined and piped rivers amendment

$2 $2

Activities adjoining concrete channels

Water Supply Authorities $9,907 $9,907

Total $9,927.7 $4.8 $9,932.2

Note: Figures in parentheses are costs.




9 Table of Changes

The provisions of the Water Management (General) Regulation 2004 and the Water Management

(Water Supply Authorities) Regulations 2004 are listed in the left column of the table below and the corresponding reference in the proposed Water Management (General) Regulation 2011 is listed in the right column of the table below.

General 2004 Proposed 2011

PART 1 – Miscellaneous

Clause 4 Deleted

Clause 5 clause 23 in Part 6 of Schedule 9

PART 2 – Management Plans

Clause 6 Clause 226

Clause 7 Deleted

PART 3 – Access Licences

Clause 8 Clause 4

Clause 8A Clause 5

Clause 9 Clause 6

Clause 10 Clause 7

Clause 10A Clause 8

Clause 11 Clause 9

Clause 12 Clause 11

Clause 13 Clause 12

Clause 14 Clause 13

Clause 15 Clause 14

Clause 16 Clause 15

Clause 17 Clause 16

Clause 18 Clause 18 and Part 1 of Schedule 5

Clause 18 (2) Deleted

Clause 19 Clause 10

Clause 20 Clause 19

Clause 21 Clause 21

Clause 21A Deleted

Clause 21B Clause 21

Divisions 3 - 15 Schedule 4

PART 4 – Approvals

Clause 30 Clause 22

Clause 31 Clause 23

Clause 32 Clause 24

Clause 33 Clause 26

Clause 34 Clause 25

Clause 35 Clause 27

Clause 36 Clause 28

Clause 37 Clause 29

Clause 38 Clause 31-33 and Part 1 of Schedule 5

Clause 39 Clause 34-36

Clause 39A Clause 37-40 and Part 2 of Schedule 5

Clause 40 Clause 41

PART 5 - Fees Clause 227

PART 6 – Irr Corps PART 4

PART 7 - Elections PART 5

PART 8 - PDBs PART 6

PART 9 – PW Trusts PART 7

PART 10 – HVFM Wks

Clause 104-105

PART 11 – Lowbidgee FC&I

Clause 106

PART 12 – Penalty notice offences

Clause 228

PART 13 – Misc. PART 10

Schedule 1 Schedule 1

Schedule 2 Deleted


Schedule 4 Part 4 of Schedule 4

Schedule 4AA Division 2 of Part 4 of Schedule 4

Schedule 4A Division 3 of Part 4 of Schedule 4

Schedule 4B Division 4 of Part 4 of Schedule 4

Schedule 4C Division 5 of Part 4 of Schedule 4

Schedule 4D Division 6 of Part 4 of Schedule 4




Water Supply Authorities 2004

Proposed 2011

PART 1 Division 1, Part 9










Appendix A List of key stakeholders consulted during targeted consultation for development of draft regulation and RIS (2010)

PRIVATE IRRIGATION CORPORATIONS

Western Murray Irrigation

Murray Irrigation Limited

Murrumbidgee Irrigation Limited

Coleambally Irrigation Co-Operative Limited

Jemalong Irrigation Limited

PRIVATE TRUSTS, BOARDS AND DISTRICTS

Bama Irrigation Trust

Bringan Irrigation Trust

Bungunyah Koraleigh Irrigation Trust

Glenview Irrigation Trust

Goodnight Irrigation Trust

West Cadell Irrigation Trust

West Corurgan Private Irrigation

Moira Private Irrigation District

Broke Fordwich Private Irrigation District

Gumly Gumly Private Irrigation District

Hay Private Irrigation District

Hunter Wine Country Private Irrigation District

Pomona Irrigation Trust

Puah Irrigation Scheme

PEAK STAKEHOLDER BODIES

NSW Irrigators' Council

NSW Farmers Association

Local Government and Shires Association

NSW Minerals Council

Nature Conservation Council

Environmental Defenders Office NSW

WATER SUPPLY AUTHORITIES

Country Energy

Gosford City Council

Wyong Shire Council

Cobar Water Board

State Water Corporation – Fish River water supply scheme

Upper Parramatta River Catchment Trust

Communities NSW (Sydney Olympic Park Authority)

OTHER GOVERNMENT BODIES

Murray-Darling Basin Authority

SA Water

Goulburn-Murray Water



List of key stakeholders consulted during public consultation of draft regulation and RIS (2011)

In addition to the public exhibition of the Draft Regulation and RIS, targeted consultation was

undertaken with the following stakeholders:

STAKEHOLDER CONSULTATION TYPE

Bama Irrigation Trust Letter

Bringan Irrigation Trust Letter

Broke Fordwich Private Irrigation District Letter

Bungunyah Koraleigh Irrigation Trust Letter

Cobar Water Board Letter

Coleambally Irrigation Co-Operative Limited Letter

Communities NSW (Sydney Olympic Park Authority) Letter

Department of Industry and Investment (Country Energy) Letter

Department of Primary Industries Letter

Environmental Defenders Office NSW Letter – extension provided

Glenview Irrigation Trust Letter

Goodnight Irrigation Trust Letter

Gosford City Council Letter and telephone – extension provided

Gumly Gumly Private Irrigation District Letter

Hay Private Irrigation District Letter

Hunter Wine Country Private Irrigation District Letter

Jemalong Irrigation Limited Letter

Local Government and Shires Association Letter and telephone

Minerals and Energy Division (D.T.R.I.S.) Letter, email and telephone

Moira Private Irrigation District Letter

Murray Irrigation Limited Letter

Murray-Darling Basin Authority Letter

Murrumbidgee Irrigation Limited Letter

Nature Conservation Council Letter and telephone

NSW Department of Local Government Letter

NSW Department of Planning Letter

NSW Department of Transport Letter and telephone – extension provided

NSW Farmers Association Letter, telephone and meeting – extension provided

NSW Irrigators’ Council Letter, telephone and meeting

NSW Minerals Council Letter

NSW Roads & Traffic Authority Letter and telephone – extension provided

Office of Environment and Heritage Letter and telephone

Pomona Irrigation Trust Letter

Puah Irrigation Scheme Letter

State Water Corporation Letter, telephone and meeting

Sydney Metropolitan Catchment Management Authority Letter




STAKEHOLDER CONSULTATION TYPE

West Cadell Irrigation Trust Letter

West Corurgan Private Irrigation Letter

Western Murray Irrigation Letter

Wyong Shire Council Letter and telephone – extension provided


Appendix B Methodology

The relative merits of each option are described in terms of:

• the cost to businesses and/or households, and their distribution where significant and possible to identify

• the cost to government (excluding fees and charges paid to it)

• the present value of net social costs or benefits is the sum of the two, excluding transfers

between them

• unquantified impacts are identified where possible

Fees and charges paid to government for licensing and approvals are identified in any costs to

Business. They are do not impact on Government, which is assumed to provide the service on a cost recovery basis.

Direct transfers between groups within the Business (and/or household) sector are noted where

possible.

Costs and benefits are estimated for the period - five years – that any remade Regulations would apply, prior to their next review.

For quantified impacts it estimates the net present value of all future costs or benefits.

The calculation of present values uses a 7 percent (real) discount and, consistent with the use of a real discount rate, costs and benefits are not inflated.

The present value is calculated using a constrained capitalisation multiple (CCM), based on the following calculation:

CCM = 1

7%

−

1− 7%( )5

7%

= 4.347 times

There is an uncertainty surrounding many of the activities affected by the Regulations. As a result assumptions are clearly stated, constant unit values for annually recurring items are used, and

quantified impacts are reported in millions of dollars rounded to one decimal place.

In many situations the volume of water made available for extraction across all water users is limited by rules which arise under water sharing plans for defined water sources under the Act. This means

that any increase or decrease in water access by a particular group of water users may result in a corresponding decrease or increase in the water available to another group. The result is that many of the impacts arising from the Regulation reflect wealth transfers rather than net economic impacts.

Alternatively, in some situations Government is already providing the service mandated by the Regulation. For instance, many of the electronic record keeping and public display of information provisions reflect activities already undertaken by Government and there is no economic impact.

Wealth transfers do not represent economic costs or benefits. However, they determine the distribution of impacts. Transfers between Business (and/or households) and Government are not double counted in the present value of net social costs and benefits.

Institutional arrangements concerning internal State Government and/or Local Government cost sharing and financing are generally not considered or assessed. Where the responsibility for providing existing services is shifted from one government entity to another as a result of an assessed option,

an equivalent change in appropriation and funding within Government is assumed.




Option 1 - Base case

This base case explains what would happen if the Regulation was not in place.

Option assessment

The assessment of the option to remake the Regulation(s) without change measures net avoided costs and foregone benefits when compared with the do nothing option – in other words the results reflect the costs and benefits of remaking the Regulation(s).

The assessment of the amendments reflected in the proposed Water Management (General) Regulation 2011 measures incremental changes in the remaking avoided costs and foregone benefits.

Both quantifiable and non-quantifiable costs and benefits are identified where possible.



Appendix C Base Case – Option 1 – “Do Nothing” Net Present Value Expenditure and Revenue ($m)

4% 7% 10% 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016

Capital costs

Retrofitting of rainwater tanks 809 0 0 0 0

Railhead discharge equipment 1 0 0 0 0

Retrofitting of wastewater tanks 1,136 0 0 0 0

Loss of property value 0 8,041 0 0 0

TOTAL INVESTMENT -9,306 -8,842 -8,415 1,946 8,041 0 0 0

Annual recurrent costs

Electricity cost increases 30 119 119 119 119

Water price 7 28 28 28 28

Water cartage costs 105 420 420 420 420

Wastewater disposal 188 751 751 751 751

Pumping related costs 4 14 14 14 14

Loss of development margin 0 125 125 125 125

"Mothball" water and sewerage assets 10 38 38 38 38

TOTAL RECURRENT COSTS -5,547 -5,053 -4,619 343 1,459 1,459 1,459 1,459

Benefits

Avoided water charges 14 55 55 55 55

Avoided sewerage charges 16 64 64 64 64

Margin on supply of water tanks (25%) 204 0 0 0 0

Margin on supply of waster water tanks (25%) 284 0 0 0 0

Margin on water cartage (25%) 27 106 106 106 106

Margin on pumping (25%) 1 4 4 4 4

Margin on wastewater cartage (25%) 47 187 187 187 187

Residual value of assets 0 0 0 0 2,827

TOTAL RECURRENT BENEFITS 4,345 3,886 3,492 592 416 416 416 3,243

NET CASH FLOW -10,508 -10,009 -9,542 -1,697 -9,120 -1,079 -1,079 1,748



Appendix D Option 2 – “Alternative Regulatory Frameworks”

Net Present Value Expenditure and Revenue ($m)

4% 7% 10% 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016






TOTAL AVOIDED CAPITAL COSTSINVESTMENT 9,306 8,842 8,415 1,946 8,041 0 0 0

Avoided annual recurrent costs








TOTAL AVOIDED RECURRENT COSTS 5,547 5,053 4,619 343 1,495 1,495 1,495 1,495

Benefits not gained







TOTAL RECURRENT BENEFITS NOT GAINED -3,901 -3,481 -3,122 562 297 297 297 3,124

Recurrent Costs

Water charges 14 55 55 55 55

Sewerage charges 16 64 64 64 64

Framework development 2

Recurrent Administration costs 1 4 4 4 4

OTHER COSTS -461 -420 -384 33 123 123 123 123

NET CASH FLOW 10,491 9,993 9,527 1,694 9,116 1,075 1,075 -1,752


Appendix E Option 3 – “Remake the 2004 Regulation”

Net Present Value Expenditure and Revenue ($m)

4% 7% 10% 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016






TOTAL AVOIDED CAPITAL COSTS INVESTMENT 9,306 8,842 8,415 1,946 8,041 0 0 0

Avoided annual recurrent costs








TOTAL AVOIDED RECURRENT COSTS 5,547 5,053 4,619 343 1,495 1,495 1,495 1,495

Benefits not gained







TOTAL RECURRENT BENEFITS NOT GAINED -3,901 -3,481 -3,122 562 297 297 297 3,124

Recurrent Costs

Water charges 14 55 55 55 55

Sewerage charges 16 64 64 64 64

Framework development 0

Recurrent Administration costs 1 4 4 4 4

OTHER COSTS -459 -418 -382 31 123 123 123 123

NET CASH FLOW 10,493 9,995 9,529 1,696 9,116 1,075 1,075 -1,752


Appendix F Descriptions of Costs and Benefits

1. Retrofitting of rainwater tanks and bulk water tanks to replace water services provided by water

supply authorities:

• for customers serviced by Gosford Council, Wyong Council, Country Energy and State Water

(Fish River Water Supply Scheme).

• rainwater tanks installed in:

o residential premises (22 500 litre capacity @ $5,100 each)

o units (blocks of four) and commercial premises (90 000 litre capacity @ $11,300 each)

• Gosford – 60,852 single residences, 6,388 unit residences (1 tank per 4 residences) and 3030

commercial premises

• Wyong – 53,752 single residences, 3,128 unit residences (1 tank per 4 residences), 2,940 commercial premises

• Broken Hill – 7,105 single residences, 512 unit residences (1 tank per 4 residences), 381

commercial premises

• State Water (Fish River) – 13,989 single residences, 981 unit residences (1 tank per 4

residences), 763 commercial premises

• bulk water delivered to Cobar by rail tank wagons from Nyngan, Cobar Shire Council continues reticulated supply to customers

• 450 million litre capacity tanks installed at three mine sites in Cobar at cost of $1.5 million

each.

2. Railhead discharge equipment to unload rail tank wagons carrying water to replace water supplied

by Cobar Water Board:

• Cobar railhead water discharge facilities at cost of $500,000.

3. Retrofitting waste water tanks:

• wastewater tanks installed in residential premises @ $6,600 each and units (blocks of four)

and commercial premises @ $36,000 each – for customers serviced by Gosford Council, Wyong Council and Country Energy.

4 Water price:

• water price to replace potable water supplied by water supply authorities (excluding cartage):

o Gosford and Wyong, $1.51 kl (ex Hunter Water)

o Cobar, Lithgow (parts), Cullen Bullen, Portland, Glen Davis, upper Blue Mountains and

Broken Hill, $0.82 kl

o annual water purchases – Gosford 7572 megalitres, Wyong 8016 megalitres, Cobar 2502 megalitres, Fish River Scheme 3000 megalitres and Broken Hill 3102 megalitres

o Note: 40% of Gosford and Wyong’s demand met from rainwater

5. Water cartage costs:

• road cartage costs for water - $18/kl. (Gosford, Wyong, Cullen Bullen, Portland, Glen Davis,

upper Blue Mountains); $6/kl from railhead to premises and $12/kl to railhead from South Australia (Broken Hill)

• rail cartage costs for water (Nyngan to Cobar) $21.60/kl.


6. Waste water disposal:

• $36/kl for Gosford and Wyong (disposal in Hunter Water STP)

• $21.60/kl for Broken Hill – land disposal.

The waste water disposal costs are calculated on 75% of total water requirements.

7. Loss of property values:

• residential properties - $50,000

• commercial properties - $100,000.

Based on estimates by Rolyat Services Pty Ltd, 2003.

8. Pumping related costs:

• electricity costs for pumping water to premises from tanks:

o single residence is $12 per week

o units and commercial is $24 per week.

9. Mothball water supply and sewerage works:

• decommission existing water supply and sewerage works (per year):

o Gosford $3.6m water supply and $4.2m sewerage

o Wyong $10.8m water supply and $10.8 sewerage

o Country Energy $3m water supply and $0.78m sewerage

o Cobar Water Board water supply $0.2m

o State Water (Fish River) $2.7m.

10. Loss of development margin:

• loss of margin from construction of new residential and commercial premises resulting from

zero growth caused by loss of reticulated water supply and sewerage services in Gosford and Wyong local government areas. Other areas are assumed to have negligible growth and would not be affected

• estimated developers’ margins are $80,000 for residential premises and $50,000 for

commercial premises

• estimated annual growth:

o Wyong 1216 residential developments; 304 commercial developments

o Gosford 138 residential developments; 35 commercial developments.

11. Electricity cost increases:

• closure of State Water’s Fish River Water Supply Scheme results in closure of Wallerawang power station owing to insufficient water supply

• impact on National Electricity Market electricity price is estimated at 5-10% increase

• 2010 NEM price is $30.89 MWh

• assume 5% price impact

• NSW 2010 consumption is 77150950 MWh

• impact on NSW consumers is $119.2m.

12. Residual value of water authority water supply and sewerage services assets:

• assets are assumed to have a 30 year life


• the economic evaluation of the options assumes a five-year project period

• consequently there will be residual asset values that need to be recognized in the cost-benefit

analysis in the RIS

• asset values used as a basis for calculating the residual asset values are:

o Gosford $605m

o Wyong $630m

o Country Energy (Broken Hill) $53.8m

o State Water Fish River Water Supply Scheme $149m

o Cobar Water Board $61.8m.

13. Residual value of water tanks and pumps:



• consequently there will be residual asset values that need to be recognized in the cost-benefit

analysis in the RIS


o Gosford $363m

o Wyong $316m

o Country Energy (Broken Hill) $46m

o State Water Fish River Water Supply Scheme $33m

o Cobar Water Board $5m.

14. Residual value of waste water tanks and pumps:



• consequently there will be residual asset values that need to be recognized in the cost-benefit analysis in the RIS


o Gosford $568m

o Wyong $489m

o Country Energy (Broken Hill) $79m.

15. Margin on supply of water tanks:

• this represents the suppliers’ margin on water tanks and pumps which is assumed to be 25%

of total cost. Total costs are shown in Item 13.

16. Margin on supply of waste water tanks:

• this represents the suppliers’ margin on waste water tanks and pumps which is assumed to be

25% of total cost. Total costs are shown in Item 14.

17. Avoided water charges:

• this refers to the water charges that consumers no longer pay water supply authorities under Option 1 – Base Case

• this is calculated on the following basis:

o Gosford – average annual water bill $338 and 70,270 properties


o Wyong – average annual water bill $328 and 59,820 properties

o Country Energy – average annual water bill $382 and 7,998 properties

o State Water (Fish River) – average annual water bill $376 and 15,733 properties

o Cobar Water Board – annual water revenue from Cobar Shire Council and three mining

companies.

18. Avoided sewerage charges:

• this refers to the sewerage charges that consumers no longer pay water supply authorities

under Option 1 – Base Case

• this is calculated on the following basis:

o Gosford – average annual sewerage bill $466 and 70,270 properties

o Wyong – average annual sewerage bill $454 and 59,820 properties

o Country Energy – average annual sewerage bill $528 and 7,998 properties.

19. Margin on water cartage:

• this represents the suppliers’ margin on water cartage which is assumed to be 25% of total cost.

20. Margin on pumping related costs:

• this represents the suppliers’ margin on pumping which is assumed to be 25% of total cost.

21. Margin on waste water cartage:

• this represents the suppliers’ margin on waste water cartage which is assumed to be 25% of total cost.

22. Framework development costs:

• estimated cost of legislation development and implementation.

23. Recurrent administration costs:

• estimated Regulation compliance costs incurred by water supply authorities.


Appendix G Summary of key changes following public exhibition of draft regulation

Note: Unless otherwise specified, the clause numbering and references in this table refer to the

clause numbering and provisions of the draft Regulation that was placed on public exhibition in June–July 2011.

Clause in draft regulation Proposed change

Clause 18, Clause 31, Clause 1 in Part 1 of Schedule 5 (Definition of public authority)

Revert to the definition of public authority used in the Dictionary to the Act which includes all State Owned Corporations. However exclude Landcom and Superannuation Administration Corporation for the purpose of the exemption provisions of the Regulation.

Clause 19 (4), Clause 32 (3), 37 (1) (h) and (3) and Clause 16 in Part 1 of Schedule 5 (Approved critical human needs watering)

Change the term from “Approved critical human needs watering” to “Approved watering for basic human water needs” to clarify purpose

Amend clause 16 in Schedule 5 to refer to water that is “urgently required for basic human water needs”.

Clause 25 (Exemption from advertising approvals)

Amend the time a water supply work can be granted without advertising to 6 months.

Clause 37 (1)(g) and Clause 15 in Part 1 of Schedule 5 (Approved native revegetation watering)

Remove proposed new exemption for approved native revegetation watering.

Clause 37 (1)(f) and Clause 14 in Part 1 of Schedule 5 (Approved emergency environmental watering)

Remove proposed new exemption for approved emergency environmental watering

Clause 38 (2) Apply the condition in clause 38 (2) which enables the Minister to publish requirements for carrying out relevant controlled activities or issue requirements to a person to all controlled activity exemptions

Clause 40 (a) (Network operators) Include new and existing infrastructure in this proposed new exemption.

Clause 234 Leave amnesty in current clause 5 of the Water Management (General) Regulation 2004 in force until 31 December 2011.

Enable applications for approvals and licences received up to that date to be processed

Clause 6 in Part 1 of Schedule 5 (Hydrostatic testing of gas pipelines)

Add a limit of 7ML for taking water to hydrostatically test gas pipelines.

Clause 8 in Part 1 of Schedule 5 (Domestic electricity generation)

Include a requirement in that water must be returned in the same quality as it was taken (where quality means the water has the same chemical make-up, temperature, sediment content and salinity as the water that was taken).

Clause 9 in Part 1 of Schedule 5 (Water bore testing)

Extend the exemption for pump testing of a water bore to circumstances where bores are approved under Part 3A of the Environmental Planning and Assessment Act 1979 or its replacement provisions.

Clause 11 in Part 1 of Schedule 5 (Hydro-electric power stations)

Add in that water must be returned in the same quality as it was taken (where quality means the water has the same chemical make-up, temperature, sediment content and salinity as the water that was taken).

Clarify that State Water or the Ministerial Corporation must have consented to the operation of the hydro electric power station in connection with the water supply work.

Clause 13 in Part 1 of Schedule 5 Amend to provide that sugar cane is established (and the exemption ceases to apply) when the sugar cane is above 50 cm in height.

Clause 14 in Part 1 of Schedule 5 Remove exemption.



Clause in draft regulation Proposed change

(Approved emergency environmental watering)

Clause 17 in part 1 of Schedule 5 (Approved watering for environmental work construction)

Limit the amount of water that can be taken under this proposed new exemption to 0.5 ML

Clause 18 in Part 2 of Schedule 5 (Activities under mining, crown lands or western lands legislation)

Add the Petroleum (Onshore) Act 1991 to this exemption.

Clause19 in Part 2 of Schedule 5 (Activities on land of Maritime Authority or Port Corporation)

Redraft the exemption to capture any activity for which the Minister administering the Ports and Maritime Administration Act 1995 is the consent authority under the Sydney Regional Environmental Plan (Sydney Harbour Catchment) 2005.

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