Arnold v Minister Administering the Water Management Act 2000 (No 6)
[2013] NSWLEC 73
•31 May 2013
Land and Environment Court
New South Wales
- Amendment notes
Medium Neutral Citation: Arnold v Minister Administering the Water Management Act 2000 (No 6) [2013] NSWLEC 73 Hearing dates: 2-19, 24 April 2013 Decision date: 31 May 2013 Jurisdiction: Class 4 Before: Biscoe J Decision: Proceedings dismissed with costs
Catchwords: JUDICIAL REVIEW - Water Sharing Plan for Lower Murray Groundwater Source made by Minister pursuant to s 50 Water Management Act 2000 and the linked Water Management (General) Amendment (Lower Murray) Regulation 2006 substantially reduce former water extraction entitlements of farmer licence holders - whether Plan and Amending Regulation invalid - whether mandatory for Minister when making the Plan to consider a sound and reliable hydrogeological numeric model to calculate sustainable use and recharge and whether Minister failed to consider that matter - whether Minister when making the Plan had regard to a prohibited irrelevant consideration being an inter-governmental agreement's targeted reductions in water entitlements - whether Plan's adoption of a specified extraction limit was irrational or manifestly unreasonable because the hydrogeological model on which it was based was fundamentally flawed and because the zones in it were hydrogeologically separate from the rest of the water management areas - whether Minister under a duty to have due regard to socio-economic impacts of the proposed Plan and whether breached duty by not assessing socio-economic impacts in a formal study or at the farm-by-farm level or in other respects - whether Plan bad in form because, contrary to 2000 Act, it failed to deal with the requirements for water extraction under access licences - principles of judicial review - admissibility of expert evidence in judicial review proceedings. Legislation Cited: Administrative Decisions (Judicial Review) Act 1977 (Cth)
Land Acquisition (Just Terms Compensation) Act 1991
Protection of the Environment Administration Act 1991 s 6(2)
Water Act 1912 Part 5
Water Act 2007 (Cth)
Water Management Act 2000
Commonwealth Constitution ss 51(xxxi), 100
Water Management (General) Regulation 2004
Water Management (General) Regulation 2011
Water Management (General) Amendment (Lower Murray) Regulation 2006
Water Sharing Plan for the Lower Murray Groundwater Source
Water Sharing Plan for the Lower Murray Shallow Groundwater Source
Land and Environment Court Rules 2007 r 4.3
Uniform Civil Procedure Rules 2005 Pt 59 r 59.9
Land and Environment Court Practice Note Class 4 [14(b)]
Practice Note No. SC CL 3 Administrative Law List [23]Cases Cited: Arnold v Minister Administering the Water Management Act 2000 [2007] NSWLEC 531, (2007) 157 LGERA 379
Arnold v Minister Administering the Water Management Act 2000 (No 2) [2009] NSWLEC 55
Arnold v Minister Administering the Water Management Act 2000 (No 3) [2009] NSWLEC 56, (2009) 165 LGERA 329
Arnold v Minister Administering the Water Management Act 2000 (No 4) [2009] NSWLEC 87
Arnold v Minister Administering the Water Management Act 2000 (No 5) [2013] NSWLEC 42
Arnold v Minister Administering Water Management Act 2000 [2008] NSWCA 338, (2008) 73 NSWLR 196
Arnold v Minister Administering the Water Management Act 2000 [2010] HCA 3, (2010) 240 CLR 242
Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223
Attorney-General (NT) v Minister for Aboriginal Affairs (1989) 23 FCR 536
Austral Fisheries Pty Ltd v Minister for Primary Industries and Energy (1992) 37 FCR 463
Australian Broadcasting Tribunal v Bond [1990] HCA 33, (1990) 170 CLR 321
Australian Retailers Association v Reserve Bank of Australia [2005] FCA 1707, (2005) 148 FCR 446
Australians for Sustainable Development Inc v Minister for Planning [2011] NSWLEC 33, (2011) 182 LGERA 370
Azzopardi v Tasman UEB Industries Ltd [1985] 4 NSWLR 139
Bienke v Minister for Primary Industries and Energy (1994) 125 ALR 151
Bienke v Minister for Primary Industries and Energy (1996) 63 FCR 567
Bruce v Cole (1998) 45 NSWLR 163
Calardu Penrith Pty Ltd v Penrith City Council [2010] NSWLEC 50
Caldera Environment Centre Inc v Tweed Shire Council [1993] NSWLEC 102
Capital Airport Group Pty Ltd v Director-General of the NSW Department of Planning [2011] NSWLEC 22
Corporation of the City of Enfield v Development Assessment Commission [2000] HCA 5, (2000) 199 CLR 135
D'Amore v Independent Commission Against Corruption [2012] NSWSC 473
Friends of King Edward Park Inc v Newcastle City Council [2012] NSWLEC 113
Fullerton Cove Residents Action Group Inc v Dart Energy Ltd (No 2) [2013] NSWLEC 38
Gibson v Minister for Finance, Natural Resources and the Arts [2012] QSC 132, (2012) 192 LGERA 118
Gilbank v Bloore (No 2) [2012] NSWLEC 273
Harvey and Tubbo Pty Ltd v Minister Administering the Water Management Act 2000; [2008] NSWLEC 165, (2008) 160 LGERA 50
House v The King [1936] HCA 40, (1936) 55 CLR 499
ICM Agriculture Pty Ltd v Commonwealth [2009] HCA 51, (2009) 240 CLR 140
Jones v Dunkel [1959] HCA 8, (1959) 101 CLR 298
King v Great Lakes Shire Council (1986) 58 LGRA 366
Luu v Renevier (1989) 91 ALR 39
McCormack v Deputy Commissioner of Taxation Large Business & International [2001] FCA 1700, (2001) 114 FCR 574
McHugh Holdings Pty Ltd v Director General Communities NSW [2009] NSWSC 1359
Marrickville Metro Shopping Centre Pty Ltd v Marrickville Council [2010] NSWCA 145, (2010) 174 LGERA 67
Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40, (1986) 162 CLR 24
Minister for Immigration and Citizenship v Li [2013] HCA 18
Minister for Immigration and Citizenship v SZGUR [2011] HCA 1, (2011) 241 CLR 594
Minister for Immigration and Citizenship v SZIAI [2009] HCA 39, (2009) 259 ALR 429
Minister for Immigration and Citizenship v SZMDS [2010] HCA 16, (2010) 240 CLR 611
Minister for Immigration and Ethnic Affairs v Teoh [1995] HCA 20, (1995) 183 CLR 273
Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21, (1999) 197 CLR 611
Minister for Immigration and Multicultural and Indigenous Affairs v Huynh [2004] FCAFC 256, (2004) 139 FCR 505
Minister for Immigration and Multicultural and Indigenous Affairs v SGLB [2004] HCA 32, (2004) 207 ALR 12
Minister for Primary Industries & Energy v Austral Fisheries Pty Ltd (1993) 40 FCR 381
Moolarben Coal Mines Pty Ltd v Director-General, Department of Industry and Investment (NSW) (Agriculture Division) [2011] NSWLEC 191, (2011) 186 LGERA 342
Murrumbidgee Groundwater Preservation Association Inc v Minister for Natural Resources [2005] NSWCA 10, (2005) 138 LGERA 11
Murrumbidgee Groundwater Preservation Association v Minister for Natural Resources [2004] NSWLEC 122
NA & J Investments Pty Ltd v Minister Administering the Water Management Act 2000; Arnold v Minister Administering the Water Management Act 2000 [2011] NSWLEC 51, (2011) 181 LGERA 166
NA & J Investments Pty Ltd v Minister Administering the Water Management Act 2000; Arnold v Minister Administering the Water Management Act 2000 (No 2) [2011] NSWLEC 115
NA & J Investments Pty Ltd v Minister Administering the Water Management Act 2000; Arnold v Minister Administering the Water Management Act 2000 (No 3) [2011] NSWLEC 171
NA &J Investments Pty Ltd v Minister Administering the Water Management Act 2000; Arnold v Minister Administering the Water Management Act 2000 (No 4) [2012] NSWLEC 120
Nature Conservation Council of New South Wales Inc v Minister Administering Water Management Act 2000 [2005] NSWCA 9, (2005) 137 LGERA 320
Notaras v Waverley Council [2007] NSWCA 333, (2007) 161 LGERA 230
Oates v Attorney-General for the Commonwealth of Australia [2001] FCA 84, (2001) 181 ALR 559
Onesteel Reinforcing Pty Ltd v Sutton [2012] NSWCA 282
Prasad v Minister for Immigration and Ethnic Affairs [1985] FCA 46, (1985) 6 FCR 155
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28, (1998) 194 CLR 355
Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 [2003] HCA 30, (2003) 198 ALR 59
Schroders Australia Property Management Ltd v Shoalhaven City Council [2001] NSWCA 74
Schroders Australia Property Management Ltd v Shoalhaven City Council [1999] NSWLEC 251, (1999) 110 LGERA 130
SZMYO v Minister for Immigration and Citizenship [2010] FMCA 963
Telstra Corporation Ltd v Australian Competition and Consumer Commission [2008] FCA 1436, (2008) 171 FCR 174
The Queen (on the application of Mavalon Care Ltd) v Pembrokeshire County Council [2011] EWHC 3371 (Admin)
Tickner v Bropho (1993) 40 FCR 183
Tubbo Pty Ltd v Minister Administering the Water Management Act 2000 [2008] NSWCA 356
Vasiljkovic v Honourable Brendan O'Connor [2010] FCA 1246, (2010) 276 ALR 326
Videto v Minister for Immigration & Ethnic Affairs [1985] FCA 449, (1985) 8 FCR 167
Visa International Service Association v Reserve Bank of Australia [2003] FCA 977, (2003) 131 FCR 300
Waterford v The Commonwealth [1987] HCA 25, (1987) 163 CLR 54
Westfield Management Ltd v Perpetual Trustee Company Ltd [2006] NSWCA 245
Woolworths Ltd v Pallas Newco Pty Ltd [2004] NSWCA 422, (2004) 61 NSWLR 707Texts Cited: Pearce and Argument, "Delegated Legislation in Australia" (4th ed, 2012) Category: Principal judgment Parties: Alan Arnold & Ors (Applicants)
Minister Administering the Water Management Act (First Respondent)
State of New South Wales (Second Respondent)Representation: COUNSEL:
F Corsaro SC and P E King for the Applicants
S Lloyd SC, J Hutton and J Lucy for the Respondents
SOLICITORS:
Taylor & Whitty (Applicants)
Crown Solicitor's Office (Respondents)
File Number(s): 40049/97
Judgment
CONTENTS Paragraphs
INTRODUCTION
1-12
HISTORY OF THESE PROCEEDINGS
13-16
EARLIER CHALLENGES TO VALIDITY OF OTHER WATER SHARING PLANS
17
BACKGROUND TO THE 2000 ACT, PLAN AND AMENDING REGULATION
18-66
The 1912 Act
18-19
The 1990s
20-24
2000-2001
25-30
2002-2003
31-33
2004
34-42
2005
43-58
2006
60-66
THE WATER MANAGEMENT ACT 2000
67-85
Preamble and objects
17-69
Water Management Principles
70
State Water Management Outcomes Plan
71-73
Duties: s 9
74
Groundwater Management Areas and Management Committees
75
Part 4 "Minister's Plan" or Part 3 "Management Plan"
76-82
Access licences
83-84
THE PLAN
86-104
Core Provisions
87
Applicable Area
88
Vision, objectives, strategies and performance indicators
89-90
Basis for water sharing
91-92
Storage component
93-94
Environmental water and basic landholder rights
95
Bulk access regime
96
Requirements for water for extraction under access licences: s 20(1)(c) 2000 Act
97
Rules for granting access licences
98
Extraction Limit
99-103
SWMOP targets
104
PRINCIPLES OF JUDICIAL REVIEW
105-118
ADMISSIBILITY OF EXPERT EVIDENCE IN JUDICIAL REVIEW PROCEEDINGS
119-139
THE SCIENCE ISSUE: THE PLAN'S EXTRACTION LIMIT OF 83,700 ML/YEAR
140-203
Hydrogeological reports prior to the Minister's 2006 decision to make the Plan
145-154
The expert evidence at the hearing
155-174
Ground 1: Mandatory Relevant Considerations
175-186
Ground 2: Mandatory Irrelevant Consideration
187-192
Ground 3: Irrationality or manifest unreasonableness
193-203
THE SOCIO-ECONOMIC ISSUE
204-229
THE FORM ISSUE
230-236
THE CONSTITUTIONAL ISSUE
237-240
CONCLUSION
241
INTRODUCTION
In Australia, water is a valuable, finite and fluctuating resource. Rights to use water are of critical importance not just to those who are interested in particular water entitlements but to society as a whole. Access to water requires sustainable and efficient management that balances environmental, economic and social considerations. In the case of groundwater, it has come to be accepted that use should be limited by the sustainable yield from the aquifer system. The objects of the Water Management Act 2000 (the 2000 Act) are to "provide for the sustainable and integrated management of the water sources of the State for the benefit of both present and future generations". The 2000 Act empowers the Minister to make water management plans, which are tools to implement the objects and water management principles set out in ss 3 and 5, including in relation to water sharing: s 15(1)(a). The Minister has made many water sharing plans including for the six major groundwater systems in New South Wales: the Lower Murray - with which these proceedings are concerned - the Lower Gwydir, the Lower Lachlan, the Lower Macquarie, the Upper and Lower Namoi and the Lower Murrumbidgee. The water sharing plans for the major groundwater systems greatly reduced entitlement to extract groundwater under licences to the level of the estimated sustainable yield of each system. This prompted unsuccessful legal challenges to the validity of a number of the water sharing plans for the major groundwater systems by those affected by the reductions. These proceedings are the latest legal challenge.
With effect from 1 November 2006, total long-term groundwater extraction entitlements from the Lower Murray Groundwater Source were reduced by 68 per cent in order to achieve an estimated sustainable yield. This was effected by the Water Sharing Plan for the Lower Murray Groundwater Source (the Plan) made by the respondent Minister under the 2000 Act, the consequential Water Management (General) Amendment (Lower Murray) Regulation 2006 (the Amending Regulation), and the extension by proclamation under s 55A of the 2000 Act of the access licence provisions of the 2000 Act to each water source to which the Lower Murray Groundwater Source applies and to all categories and subcategories of access licences in relation to any such water source. Borehole licences issued under Part 5 of the Water Act 1912 (the 1912 Act) (known as Part 5 entitlements) were replaced by aquifer access licences with much reduced entitlements and, in most cases, temporary supplementary water access licences issued under the 2000 Act.
In these proceedings about 113 farmers affected by the reductions in entitlements challenge the lawfulness of the Plan and the Amending Regulation. The respondents are the Minister who made the Plan and the State of New South Wales. The Amending Regulation has been replaced by the Water Management (General) Regulation 2011 (2011 Regulation), which substantially adopts the wording of the 2004 Regulation as amended by the amending regulation. It is common ground that if the Plan is invalid, so is the Amending Regulation and the 2011 Regulation.
The proceedings are not a review of the merits of the reduction in entitlements: the Court has no relevant merits review jurisdiction. The limited role of the Court is to determine the lawfulness of the Plan and, consequently, the Amending Regulation and the 2011 Regulation.
The Plan covers the water in the deep regional aquifers of the area described as the Lower Murray Groundwater Source shown in Schedule 2 of the Plan. In 2001 this area was declared a groundwater management area (GWMA 016) under s 11 of the 2000 Act. GWMA 016 is an area of some 17,900 square kilometres in south-western NSW and the eastern part of the Murray Geological Basin. This area is bounded on the south by the Murray River, on the north by Billabong Creek, on the east by the Corowa-Urana Road, and on the west by the confluence of the Wakool and Murray Rivers close to Tooleybuc. Its deep aquifers comprise the Calivil Formation and the Renmark Group, which extend to a depth of some 350 metres, and a relatively insignificant part (deeper than 12 metres) of the overlying Shepparton Formation. The waters of the shallow regional aquifer are covered by a separate water sharing plan made in 2012 under s 50 of the 2000 Act, the Water Sharing Plan for the Lower Murray Shallow Groundwater Source.
An understanding of the nature of water management plans under the 2000 Act is informed by the high level, political nature of the instruments with which they are required to be consistent; namely, "government policy" including the State Water Management Outcome Plan (which sets the overarching policy context, targets and strategic outcomes of the management of the State's water sources having regard to the broadest environmental, social and economic issues) as well as inter-governmental agreements and international agreements: s 6(2) and (3), s 16.
In making the Plan, the Minister was obliged to give priority to protection of the water source and, if there were any (which there were not), groundwater dependent ecosystems: ss 9(1)(b) and 5(3) of the 2000 Act. This is fortified by the objects in s 3(a) and (b) "to apply the principles of ecologically sustainable development", which include the precautionary principle, and "to protect, enhance and restore water sources".
The Plan is for a period of about 10 years and 8 months. Its principal provisions include the following:
(a) The extraction limit by the end of the Plan comprises the average annual recharge of 83,700 ML/year plus the requirements for "basic landholder rights" (defined in the 2000 Act as non-licence domestic and stock rights, harvestable rights or native title rights) estimated at 1,525 ML/year at the commencement of the Plan: cll 16, 21. The figure of 83,700 ML/year represents the sustainable yield: cll 11(b), 12(d), schedule 3 target 1e. It may be noted that that figure, which is based on a 2001 hydrogeological model by Ecoseal as adjusted by other hydrogeologists, represents a reduction in entitlements of about 68 per cent compared with total Part 5 entitlements of about 261,000 ML/year under the 1912 Act, but exceeds actual total water extraction in each of five of the preceding six years (the remaining year being drought -affected).
(b) The Plan's method of achieving sustainable use of groundwater was by a formula involving reductions in entitlements for aquifer access licence holders based principally on historical use of groundwater: cl 27. This history of use (also called history or extraction) method, which the applicants attack as inequitable, reflects a change in government policy from the method of across-the-board reductions in entitlements that the Minister had adopted in some earlier water sharing plans. Inevitably, each method creates different winners and losers. Those who could demonstrate a use of their entitlements within the relevant period were likely to be better off under a history of use formula than under a formula based on acrss-the-board cuts. Those who had entitlements that had not been used within the relevant period would be likely to be worse off: Murrumbidgee Groundwater Preservation Association Inc v Minister for Natural Resources [2005] NSWCA 10, (2005) 138 LGERA 11 at [144] per Spigelman CJ; Harvey and Tubbo Pty Ltd v Minister Administering the Water Management Act 2000; [2008] NSWLEC 165, (2008) 160 LGERA 50 at [64] per Jagot J.
(c) In order to smooth the transition to the lower level of entitlement, a formula was prescribed for calculating the share component of supplementary water access licences issued for a period of 8 years and 8 months and estimated to total 48,480 ML/year, reducing in volume over that period, to those licence holders whose history of use exceeded their entitlements under aquifer licences: cll 28, 29(3).
The Amending Regulation inserts into the Water Management (General) Regulation 2004 (the 2004 Regulation) a new Division 5 (cll 29F-29J) of Part 3 and a new Schedule 4B. The new cl 29G provides that borehole licences issued under Part 5 of the 1912 Act (called Part 5 entitlements) in relation to the Lower Murray are taken to have been replaced by aquifer access licences and supplementary water access licences under the 2000 Act in the amounts specified in Schedule 4B. Clause 29G(3) provides that the volumes specified in Schedule 4B had been calculated in accordance with the methodology set out in cll 27 and 28 of the Plan. Upon proclamation, the applicants' licences under Part 5 of the 1912 Act are "taken to have been replaced" by access licences under the 2000 Act: cl 3(l)(a)(ii) of Schedule 10 of the 2000 Act.
This scheme gave effect to a $110 million joint funding agreement entered into in 2005 between the State and the Commonwealth for a project called "Achieving Sustainable Groundwater Entitlement" (ASGE Agreement), which requires water extraction entitlements for the six major groundwater sources to be greatly reduced after 10 years to sustainable yield by a methodology that takes account of each licence holder's history of extraction. For the Lower Murray Groundwater Source the specified reduction is 167,000 ML (or 68 per cent) after 10 years. Although not referred to in the Plan, financial assistance to farmers and communities affected by the water extraction reductions was funded by the NSW and Australian governments under the ASGE Agreement, and has been offered by the NSW government on an ex gratia basis to eligible licence holders. This recognised that groundwater extraction entitlements under the 1912 Act, whether used or not, had a value represented in the value of the land. Consistently with the history of use approach, it attributes a greater value to active water than inactive water, as determined by independent valuations.
The pleaded grounds of invalidity of the Plan comprise the following four judicial review grounds with a host of sub-grounds, many of which were ultimately conflated or not pressed, and one Commonwealth constitutional ground (another pleaded ground concerning s 100 of the Commonwealth Constitution was not pressed). They are:
Judicial review grounds
(1) The Minister failed to have regard to mandatory relevant matters.
(2) The Minister had regard to a prohibited or mandatory irrelevant matter.
(3) Irrationality in reasoning and fact finding or manifest unreasonableness.
(4) The Plan failed to deal with mandated matters.
Constitutional ground
(5) The replacement of bore licences under the 1912 Act with aquifer access licences under the 2000 Act involved an acquisition of property other than on just terms within the meaning of s 51(xxxi) of the Commonwealth Constitution.
The judicial review grounds generally relate back to the objects of the 2000 Act in s 3, the water management principles in s 5, the core provisions in s 20, and the duties in s 9. The applicants' judicial review case falls into three parts. First, a science case which attacks the Plan's extraction limit of 83,700 ML/year primarily on the basis that it is derived from a hydrogeological model that is said to be so flawed that the Minister's adoption of that figure was irrational. Secondly, a socio-economic case that the Minister failed to have regard to mandatory socio-economic considerations because there was no formal socio-economic study or no regard to socio-economic considerations on a farm-by-farm basis. Thirdly, a form case that the Plan failed to deal with prescribed matters.
HISTORY OF THESE PROCEEDINGS
Although the proceedings were commenced in 2007, they stalled until 2010 as against the present respondents due to the applicants' unsuccessful appeals to the Court of Appeal and the High Court against the decision of this Court in 2007 summarily dismissing the proceedings against the then third respondent, the Commonwealth of Australia: Arnold v Minister Administering the Water Management Act 2000 [2007] NSWLEC 531, (2007) 157 LGERA 379; Arnold v Minister Administering Water Management Act 2000 [2008] NSWCA 338, (2008) 73 NSWLR 196; Arnold v Minister Administering the Water Management Act 2000 [2010] HCA 3, (2010) 240 CLR 242. The High Court held that there had been no acquisition of the applicants' property within the meaning of s 51(xxxi) of the Constitution, applying ICM Agriculture Pty Ltd v Commonwealth [2009] HCA 51, (2009) 240 CLR 140 which concerned the same statutory scheme. Secondly, the High Court held that the reduction of entitlements in consequence of the Commonwealth entering into the funding ASGE agreement which led to the adoption of the Plan did not abridge the applicants' right to "the reasonable use of the waters of rivers" within the meaning of s 100 of the Constitution.
There followed three decisions of mine on matters between the applicants and the Commonwealth concerning costs and an unsuccessful charge by the applicants that the Commonwealth was in contempt of court: Arnold v Minister Administering the Water Management Act 2000 (No 2) [2009] NSWLEC 55; Arnold v Minister Administering the Water Management Act 2000 (No 3) [2009] NSWLEC 56, (2009) 165 LGERA 329; Arnold v Minister Administering the Water Management Act 2000 (No 4) [2009] NSWLEC 87.
Thereafter, in relation to the balance of the proceedings against the Minister and the State, this Court delivered four substantial interlocutory judgments which (among other things) struck out parts of the Points of Claim, reconstituted a claim under the Land Acquisition (Just Terms Compensation) Act 1991 (which could only arise, if at all, if these proceeding are unsuccessful) as a separate proceeding in Class 3 of the Court's jurisdiction, and made advance rulings on evidence, both in these proceedings and other similar proceedings running in tandem for interlocutory purposes brought by farmers in the Lower Murrumbidgee River region against the same respondents: NA & J Investments Pty Ltd v Minister Administering the Water Management Act2000; Arnold v Minister Administering the Water Management Act2000 [2011] NSWLEC 51, (2011) 181 LGERA 166 (Craig J); NA & J Investments Pty Ltd v Minister Administering the Water Management Act 2000; Arnold v Minister Administering the Water Management Act 2000 (No 2) [2011] NSWLEC 115 (Craig J); NA & J Investments Pty Ltd v Minister Administering the Water Management Act 2000; Arnold v Minister Administering the Water Management Act 2000 (No 3) [2011] NSWLEC 171 (Craig J); NA &J Investments Pty Ltd v Minister Administering the Water Management Act 2000; Arnold v Minister Administering the Water Management Act 2000 (No 4) [2012] NSWLEC 120 (Biscoe J). The applicants abandoned their claims for compensation under the 2000 Act and for damages for conduct alleged to be unconstitutional: NA &J Investments (No 4) at [21]. The only damages claim which the applicants continue to press is based on the common law tort of conversion. The respondents deny that such a claim is pleaded. A consent order has been made that all issues concerning that claim will await determination of the applicants' challenge to the validity of the Plan and Amending Regulation since if that challenge fails the damages claim must also fail: NA&J (No 4) at [30].
During the hearing I ruled that a claim advanced by the applicants in their opening submissions of ineffectual cancellation of conjunctive use rights under the 1912 Act and consequential judicial review grounds, had not been properly pleaded and particularised and I declined to entertain it: Arnold v Minister Administering the Water Management Act 2000 (No 5) [2013] NSWLEC 42.
EARLIER CHALLENGES TO VALIDITY OF OTHER WATER SHARING PLANS
Earlier challenges to the validity of Minister's plans under s 50 of the 2000 Act relating to other major groundwater sources, which reduced water extraction entitlements under licences, were unsuccessful: Nature Conservation Council of New South Wales Inc v Minister Administering Water Management Act 2000 [2005] NSWCA 9, (2005) 137 LGERA 320, affirming Nature Conservation Council (NSW) Inc v Minister for Sustainable Natural Resources [2004] NSWLEC 33, (2004) 133 LGERA 168 (Talbot J); Murrumbidgee Groundwater Preservation Association Inc v Minister for Natural Resources [2005] NSWCA 10, (2005)138 LGERA 11, affirming Murrumbidgee Ground-Water Preservation Association v Minister for Natural Resources [2003] NSWLEC 322 (McClellan CJ); Tubbo Pty Ltd v Minister Administering the Water Management Act 2000 [2008] NSWCA 356, affirming Harvey and Tubbo Pty Ltd v Minister Administering Water Management Act 2000 [2008] NSWLEC 165, (2008) 160 LGERA 50 (Jagot J). Principles established by those decisions are relevant in the present proceedings.
BACKGROUND TO THE 2000 ACT, PLAN AND AMENDING REGULATION
The 1912 Act
The history of restriction of access to and use of water in New South Wales was addressed in ICM Agriculture Pty Ltd v Commonwealth [2009] HCA 51, (2009) 240 CLR 140. French CJ, Gummow and Crennan JJ said at [3]:
Successive governments of the State of New South Wales (the State) have long monitored, regulated and restricted access to and use of both groundwater and surface water. Policies have been formulated and pursued so as to achieve equitable access among water users, to mitigate adverse effects on the environment, and to ensure that water, as a finite and fluctuating natural resource, is able to be replenished for future use. The extraction and use of water has been regulated by statute since 1896, and, in particular, from 1912 principally by the Water Act 1912 (NSW) (the 1912 Act or the Water Act). The Water Management Act 2000 (NSW) (the 2000 Act) provided (s 401 and Sch 7) for the repeal of the 1912 Act. This litigation follows upon the replacement of the one statutory regime with the other.
Up until the Plan's commencement on 1 November 2006, access to groundwater in the Lower Murray was regulated under Part 5 of the 1912 Act. Part 5 established a licensing scheme for the sinking of bores and the taking and use of groundwater. Water was allocated on a "needs basis", with the maximum entitlement available under a licence calculated by reference to the total property area to which that licence attached. Hydrogeological assessment of water availability and bore density in the area were also taken into account when determining an application for a Part 5 licence. The applicants to these proceedings held bore licences under Part 5 entitling them to draw groundwater in a defined amount on a yearly basis.
The 1990s
In 1994 the Council of Australian Governments (COAG) established the Water Reform Framework. In the Water Reform Framework it was agreed that action needed to be taken to arrest natural resource degradation caused in part by water use. One of the key reforms was an agreement that would implement systems of water entitlements backed by separation of water property rights from land title, and the institution of trading arrangements. COAG also determined that management arrangements relating to groundwater be considered by the Agricultural and Resource Management Council of Australia and New Zealand (ARMCANZ), a Ministerial Council.
In 1996 ARMCANZ produced a document called "Allocation and Use of Groundwater: A National Framework for Improved Groundwater Management in Australia". One of its recommendations was that the States develop groundwater management plans which provide for water for the environment. It recommended that these "should be developed from an understanding of the relationship between sustainable yield, allocation and use on an aquifer basis, as a primary basis for management decision making".
In 1997 the State published "The NSW State Groundwater Policy Framework Document", which stated that it was "to manage the State's groundwater resources so that they can sustain environmental, social and economic uses for the people of NSW". It expressed concern about the declining condition of the State's water resources and over-exploitation of some aquifers. It provided that "Groundwater Management Plans will apply the goals and principles of the State Groundwater Policy at local level...[and] will be progressively developed across the State, with priority given to those aquifers most at risk or stressed". It said that plan formulation will normally require undertaking a number of initial studies, which it listed, including an assessment of storage and recharge.
In 1998 the Lower Murray Alluvium, an area which later was declared as GWMA 016 under s 11 of the 2000 Act, was identified as one of a number of "highest risk aquifers" in an "Aquifer Risk Assessment Report" undertaken by the Department of Land and Water Conservation (the Department) in collaboration with the Environment Protection Authority. The report stated that aquifers at high risk are to have priority management attention with groundwater management plans started immediately. Following this assessment, an embargo was imposed on the issue of new irrigation and industrial bore licences for a period of two years. According to a 1999 Status Report, a total of 287 licences were issued for the Lower Murray Alluvium, allocating 329,840ML of groundwater annually, of which 98.2 per cent was allocated to irrigation. While it had previously been thought that around 400,000ML of low salinity groundwater was available for extraction, more recent estimates of sustainable yield were in the vicinity of 140,000ML.
Around this time the NSW Government announced it would be setting up Groundwater Management Committees for high risk groundwater systems to develop groundwater management plans.
2000-2001
The 2000 Act commenced on 1 January 2001 but its access licensing provisions did not at that time apply to the Lower Murray Groundwater Source.
In 2000 the Murray Groundwater Management Committee (MGMC) was formed with representatives from various State government departments, the NSW Nature Conservation Council, local government, the local Aboriginal Land Councils, and groundwater users. The MGMC held its inaugural meeting in November 2000.
By letter dated 26 March 2001, the Minister designated the MGMC as an advisory committee, pursuant to s 388 of the 2000 Act, "for the purpose of preparing advice on recommendations for a water sharing plan for the Lower Murray groundwater system". Section 388 provides: "The Minister may establish advisory and other committees for the purposes of this Act". Initially, the Minister asked that the MGMC provide its final advice by August 2001 with a view to the Minister formally making the plan in December 2001. The timeframe for the MGMC's advice was subsequently extended on a number of occasions.
As part of its deliberations, the MGMC considered a broad range of matters including the recharge factor for GWMA 016, the level of sustainable yield, the amount of water that should be reserved for the environment, methodologies for reducing entitlements and measures that could be implemented to minimise the impact of entitlement reductions. The MGMC wished to depart from Government policy in place at that time, which was that the reduction in the amount of water to be available for extraction under water sharing plans would be shared proportionately amongst all licence holders "across-the-board" (that is, entitlements would be reduced by a uniform percentage for all licence holders). In a letter to the Minister in August 2001, the MGMC noted that the Department's estimated sustainable yield for the aquifer was considerably less than licensed entitlements and proposed an alternative methodology for reducing allocations that considered infrastructure capacity along with existing licensed entitlements. This proposal stalled, however, as it was considered inconsistent with the policy in place at that time.
In 2001 GWMA 016 was declared as a groundwater management area under s 11 of the 2000 Act.
In 2001 Ecoseal provided the Department with a numeric groundwater model which estimated the sustainable yield for the deep Calivil/Renmark aquifers as 66GL/year. Later that year a Department hydrogeologist, Mr Mike Williams, and a consultant hydrogeologist, Professor Prathapar, because of flaws in the Ecoseal model, adjusted the Ecoseal model for the MGMC and estimated that the maximum sustainable yield was 83.7GL/year (which they rounded to 84GL/year). This was the basis of the 2006 Plan's long-term extraction limit component of 83.7GL/year. Later, in 2002, Aquaterra identified further flaws in the Ecoseal model.
2002-2003
In 2002 the State Water Management Outcomes Plan (SWMOP) was established by order pursuant to s 6 of the 2000 Act. It is the duty of all persons involved in the administration of the Act to exercise their functions under the Act in a manner that gives effect to the SWMOP: s 9(2). A management plan must be consistent with the SWMOP: s 16(1)(a). The stated aim of the SWMOP is "to provide for the sustainable and integrated management of the water sources of the State for the benefit of both present and future generations". Among its five year management targets are the following:
Target 1: Limits on the total volume of water that can be extracted [in order, among other things, to maintain groundwater levels].
Target 1e: The long term average annual extractions for groundwater limited (or being phased down) to an ecologically sustainable level (the Sustainable Yield) as determined by detailed assessment of each groundwater source and consultation with the relevant management committee. In the absence of such an assessment, the following to apply: 100 percent of average annual recharge for a groundwater source where there is no significant ecosystem dependency; 70 percent of average annual recharge where there is significant ecosystem dependency.
Target 6a: For groundwater sources, the total volume of water specified on access licences reduced over the term of a water sharing plan to no more than 125 per cent of the Sustainable Yield.
Target 11: Groundwater dependent ecosystems identified and mapped for all priority aquifers, and the ecological water requirements assessed to enable local groundwater extraction rates and/or Sustainable Yields to be reviewed.
Target 1e, that long term average annual extractions are to be 100 per cent of average annual recharge for a groundwater source where there is no significant ecosystem dependency, applies only in the absence of detailed assessment of the water source. In the present case there was a detailed assessment of the groundwater source.
In June 2003 a draft plan was circulated among members of the MGMC with a view to providing it to the Minister for his consideration in July. However, also in June 2003, the Minister announced the deferral of implementation of water sharing plans in New South Wales until 1 January 2004. This deferral followed the Commonwealth's announcement of a national water plan, details of which were to be released at the COAG meeting in August of that year. Accordingly, the draft plan formulated by the MGMC was not forwarded to the Minister at that time, and the MGMC awaited further advice regarding revisions to government policy.
2004
In March 2004, State Cabinet decided to depart from its previous policy of equal "across-the-board" reductions in entitlements to groundwater, to an approach "tailored for each groundwater system that, where appropriate, recognises historical extraction." This revised approach was to be implemented as part of a State-wide Groundwater Assistance Program that would cover groundwater sharing plans for the six major groundwater systems.
On 25 June 2004 the Intergovernmental Agreement on a National Water Initiative was entered into by the governments of the Commonwealth, New South Wales, Victoria, Queensland, South Australia, the Australian Capital Territory and the Northern Territory. One of its objects was to "complete the return of all currently over-allocated or overused systems to environmentally-sustainable levels of extraction" (italics in original). It noted that governments have a responsibility "to ensure that water is allocated and used to achieve socially and economically beneficial outcomes in a manner that is environmentally sustainable". It noted the need "to ensure the health of river and groundwater systems by establishing clear pathways to return all systems to environmentally sustainable levels of extraction". The parties agreed to the establishment of a National Water Commission, to be responsible for providing advice to COAG on national water issues and to assist in the implementation of the agreement. It stated:
Recognising that settling the trade-offs between competing outcomes for water systems will involve judgments informed by the best available science, socio-economic analysis and community input, statutory water plans will be prepared for surface water and groundwater management units in which entitlements are issued.
On the same day, the Commonwealth, New South Wales, Victoria, South Australia and the Australian Capital Territory entered into the Intergovernmental Agreement on Addressing Water Overallocation and Achieving Environmental Objectives in the Murray-Darling Basin.
In August 2004 the Groundwater Adjustment Committee (GAC), formed by the NSW Government, held its inaugural meeting. The membership of the GAC comprised the Chairs of Catchment Management Authorities (CMAs), the Chief Executive of the NSW Irrigators Council, an Australian Government representative, the Director General of the Department and various Regional Directors and Directors of the Department. The GAC's terms of reference indicated that it would report to the Deputy Director of the Department and the Minister. Its stated objectives were "(a) to consider proposals for alternative entitlement reduction methods...and consequent changes to groundwater sharing plans; and (b) to review the details and processes for the new assistance package for over-allocated inland groundwater systems...". The six major groundwater systems under review were identified, including the Lower Murray. At the inaugural meeting of the GAC on 5 August 2004, it was indicated that the exercise would not be about amending the basic rules of the water sharing plans or sustainable yields but instead would focus on the revised entitlement methodology and assistance arrangements. The Chair advised that neither GAC nor CMA's were being asked to consult on whether history of use methodology should be used; that this would be a decision made by Governments; and that CMAs would be asked to consult with water users on the implementation of that decision and in particular consider anomalies and the need for an equivalent approach where history of use data was not readily available.
On 2 September 2004, the Minister announced in Parliament that, in view of the National Water Initiative, commencement of the six groundwater sharing plans had been suspended again until 1 July 2005 to:
allow time to rework the plans to have greater regard for history of use as well as to incorporate the work we have done with key rural community groups and the Commonwealth Government over the past year. Part of that work was the negotiations with the Commonwealth around a new financial assistance package to assist those half a dozen valleys to manage the historic overallocation to ensure that water is used within sustainable levels in the future.
By letter dated 10 September 2004, the Minister advised the Chair of the MGMC that the deferred commencement of the Plan until July 2005 would allow review of the policy of reducing entitlements "equally 'across the board', irrespective of historical extraction", as well as allow time for the formulation of a new financial assistance package, and for public consultation to be undertaken by the relevant Catchment Management Authorities. By letters dated 17 September to the Director-General of the Department and 8 October 2004 to the Minister, the Chair of the MGMC expressed his support for the government's review of the method of reducing groundwater entitlements.
On 13 September 2004 the Commonwealth announced a "Water Smart Australia" program involving the establishment of an "Australian Water Fund" from which funding would be available in order to advance the objectives of the National Water Initiative. Also on 13 September 2004, the Deputy Prime Minister announced that the Australian Government would assist the NSW Government financially in relation to "structural adjustment for historically over-allocated groundwater systems".
In a letter of 8 October 2004 to the Minister, the Chair of the Murray GMC wrote:
(a) The aquifer for GMWA016 has an estimated sustainable yield of 83,700 ML/year and a current licence entitlement (under the 1912 Act) of about 260,934 ML. On this basis the aquifer was rated as highly stressed, yet groundwater usage since metering commenced in 1999 has only exceeded estimated sustainable yield in one year. The average use for the past five years was 79,000 ML/year.
(b) Water extraction from the Lower Murray Alluvium must be maintained at about estimated sustainable yield.
(c) The new proposed method for weighting history of use differently from unused entitlement is very appropriate for the Murray groundwater region and has been endorsed by the Murray GMC.
(d) He expected that if the State were to adopt a pro-rata reduction in groundwater entitlement, any plan produced by the Murray GMC would not have community support and would be challenged in court.
On 17 December 2004 the National Water Commission Act 2004 (Cth) commenced. The Act created a National Water Commission. One of the Commission's functions was to assist in the implementation of the National Water Initiative.
2005
In early 2005 the NSW Premier forwarded to the Prime Minister a funding proposal titled "Achieving Sustainable Groundwater Entitlements". It noted that it sought to address concerns that the previously proposed reduction methodology did not achieve sufficient socially and economically beneficial outcomes, and that consideration of history of use should be included in groundwater entitlement reductions.
On 9 June 2005 the Prime Minister announced the Achieving Sustainable Groundwater Entitlements (ASGE) project relating to the six major groundwater systems in NSW, including the Lower Murray. The announcement was that the Commonwealth and NSW governments would each provide $55 million to:
assist groundwater licence holders and their communities adjust to reductions in their water access entitlements. The entitlement reductions, which will be phased in over ten years, will lead to sustainable levels of groundwater extraction and, in turn, contribute to the achievement of outcomes of the National Water Initiative.
In or around July 2005 the GAC was re-formed as the Groundwater Adjustment Advisory Committee (GAAC), with the objectives of considering proposals for alternative methods for reducing groundwater entitlements giving consideration to "history of extraction" (and consequent changes to groundwater sharing plans), and to review the details under review, including the Lower Murray. The Chair of the MGMC and the Chair of the Murray CMA were both members of the GAAC.
The Groundwater Adjustment Officials Committee (GAOC) was also established in or around July 2005 comprising representatives of the State and Commonwealth, to provide for "joint NSW-Australian Government administration and decision making in respect of the jointly-funded NSW Groundwater Adjustment and Assistance Project".
A Department briefing note to the Minister in August 2005 noted in relation to groundwater entitlements reduction that current water sharing plans have equal proportional entitlement reductions but that the Government's amended methodology includes:
- Where possible, recognise water-dependent investment made by entitlement holders
- Ensure fairness, by recognising that all groundwater entitlements, whether extracted or not, have assumed a "value", represented in the value of the land to which the entitlement belongs.
As touched upon above at [10], on 4 November 2005 a $110 million joint funding agreement (ASGE Agreement) for a project called "Achieving Sustainable Groundwater Entitlement" was executed by the Commonwealth and New South Wales. The Commonwealth agreed to pay New South Wales $55 million. In return, New South Wales promised to fulfil the goals of the National Water Initiative, to implement Water Sharing Plans which greatly reduced the entitlements of water licence holders in respect of the six major groundwater systems, and to convert bore licences under the 1912 Act to aquifer access licences under the 2000 Act. The ASGE Agreement provides for the establishment of the following bodies:
(a) The Groundwater Adjustment Officials Committee (GAOC) to consider advice from the Groundwater Adjustment Advisory Committee (GAAC) and provide recommendations to the Prime Minister and NSW Premier regarding reductions in licence holders' entitlements, provision of structural adjustment payments to those licence holders, the guidelines and eligibility criteria for the community development funding, and the award of that funding. The GAOC comprises two senior officials of the NSW government and two National Water Commission representatives.
(b) The GAAC to provide advice to the GAOC. The GAAC comprises representatives of both governments, chairs of the Catchment Management Authorities of the six affected catchments and at least two representatives of the irrigation industry.
(c) The Groundwater Working Group, comprising government officials, to provide technical support to the GAAC regarding the achievement of sustainable groundwater entitlements.
The ASGE Agreement provides in clauses 1.6, 1.7 and 1.8 of its Schedule (emphasis added):
Project Overview
1.6 The Project requires the State to:
a. implement, from 1 July 2006, Water Sharing Plans (as provided for in the Water Management Act 2000 (NSW)) that reduce (over a 10 year period) the water entitlements of water licence holders in the Lower Gwydir, the Lower Lachlan, the Lower Macquarie, the [L]ower Murray, the Lower Murrumbidgee and the Upper and Lower Namoi groundwater systems (all of which are referred to in this Schedule as 'the Groundwater Systems') to ensure sustainable future use of those Groundwater Systems;
b. ensure that after sufficient consultation with licence holders and other stakeholders, the Water Sharing Plans for the Groundwater Systems include a method for reducing entitlements to sustainable yield and take account of, among other things, each licence holders' history of extraction of the relevant Groundwater System;
c. make up-front ex gratia structural adjustment payments to licence holders of the Groundwater Systems to allow them to better manage the transition to reduced and sustainable water entitlements; and
d. establish and administer a Community Development Fund.
Objectives
1.7 The Objectives of the Project are to:
a. reduce the level of licence holders water entitlements to the Groundwater Systems in order to achieve long-term sustainable water use of the Groundwater Systems; and
b. assist communities located in the Groundwater Systems' catchments by funding projects conducted by local industry that improve the local infrastructure and strengthen the local economy.
Project Activities
1.8 The Project requires the State to undertake the following activities to the Commonwealth's satisfaction, including all actions that are incidental to the achievement of the following:
Development of Groundwater Entitlement Reduction Methodology and Provision of Structural Adjustment Payments
a. The State agrees to manage the Project, including the process for determining the reduction in licence holders' water entitlements in the Groundwater Systems and the making of structural adjustment payments;
b. The State is responsible for determining:
A. the history of water extraction for all licence holders in each Groundwater System;
B. the proportion of water entitlement referred to as 'inactive' water for all licence holders in the Groundwater Systems; and
C. the value of 'active' and 'inactive' water for each Groundwater System;
c. The State agrees to obtain an independent, fair and reasonable valuation for tradeable 'active' water for each Groundwater System;
d. The State agrees to conduct open and transparent consultations with all licence holders of the Groundwater Systems regarding:
A. the process for amending or developing the relevant Water Sharing Plan;
B. the methodologies (including the history of extraction methodology) to be used to determine the reductions of water entitlements and the structural adjustment payments relating to the Groundwater Systems;
e. After the State has conducted the consultation referred to in paragraph d. the State agrees to develop a proposed methodology for reducing water entitlements to the Groundwater Systems that takes into account a licence holder's historical extraction of water from the relevant Groundwater System(s), and achieves after 10-years the following overall reductions in water entitlements in respect of each of the Groundwater Systems:
A. A reduction of 37,809 ML (or 57%) in the Lower Gwydir
B. A reduction of 119,417 ML (or 56%) in the Lower Lachlan;
C. A reduction of 70,303 ML (or 56%) in the Lower Macquarie;
D. A reduction of 167,000 ML (or 68%) in the Lower Murray;
E A reduction of 252,233 ML (or 49%) in the Lower Murrumbidgee; and
F. A reduction of 271,700 ML (or 62%) in the Upper and Lower Namoi.
f. The State agrees that the GAAC and the GAOC must review the methodology for reducing licence holders' water entitlements for the Groundwater Systems and that the initial methodology used to establish the entitlement reduction must be agreed to by the Prime Minister and the NSW Premier.
g. The State agrees to develop a package of upfront ex gratia structural adjustment payments to licence holders of Groundwater Systems for the purpose of assisting those licence holders manage the impact of their reduced water entitlements. The State acknowledges that GAAC and GAOC must review the methodology for the making of structural adjustment payments to licence holders. The State agrees that the methodology used to establish the bulk structural adjustment required for each water source must be approved by the Prime Minister and the NSW Premier.
h. The State agrees that in reviewing the reduction in entitlement and structural adjustment methodologies, the GAAC and the GAOC may require the State to provide further information regarding, or recommend changes to, the methodologies the State has developed. Both parties acknowledge that the GAAC or the GAOC cannot change the total entitlement available for distribution nor the total amount of structural adjustment payments available (being $100 million).
i. The State agrees to convert all water licences in the Groundwater Systems to licences under the Water Management Act 2000;
j. The State agrees to gazette new or amended Water Sharing Plans for the Groundwater Systems that:
A. commence on 1 July 2006;
B. implement the water entitlement reduction methodology for the Groundwater Systems approved by the NSW Minister for Natural Resources (which is consistent with the methodology approved by the Prime Minister and the NSW Premier); and
C. provide for the structural adjustment payments to adversely affected licence holders of the Groundwater Systems as approved by the Prime Minister and the NSW Premier.
Clause 5.1 refers to the State's agreement to carry out the project. Clause 4.1 deals with the Commonwealth's provision of funding for the project and Item 2 of the Schedule sets out in detail the financial contribution of the Commonwealth.
It can be seen that the ASGE Agreement contemplates a methodology for reducing water entitlements that takes into account a licence holder's historical extraction of water (cll 1.6 b, 1.8 b, d and e of the schedule) and has three major elements:
(a) to achieve sustainable yield by reducing extraction entitlements under water extraction licences. It introduces weighting for prior groundwater extractions by dividing all existing entitlements into two components: "active water" based on history of extraction from representative years (a measure of past use of groundwater) and "inactive water" (i.e. non-developed water);
(b) upfront financial assistance to help eligible licence holders adjust to changes in groundwater access over the initial ten years of a water sharing plan; and
(c) a community development fund to strengthen communities' economic and social capacity to adjust to structural change in the regions affected.
By recognising history of extraction, the ASGE Agreement replaces the earlier approach in water sharing plans to reduce all groundwater entitlements in over-allocated groundwater sources equally, that is, by across-the-board cuts.
The level of financial assistance provided under the ASGE Agreement is two thirds of the loss in value of water assets up to a maximum of $100 million for the six major groundwater sources. As at January 2006, valuations indicated that the loss in value of the water assets for those sources was $132.758 million; therefore, the total level of financial assistance was $88.505 million. Of the latter sum, $5.915 million related to the Lower Murray. The levels of financial assistance for each groundwater valley were provided to the CMAs for their use to facilitate consultation with licence holders before the water sharing plans were finalised.
Towards the end of 2005 preparation began for implementation of a water sharing plan for the Lower Murray as part of the ASGE project. In December 2005, the Department wrote to all Part 5 licence holders in the Lower Murray to advise about the ASGE program. The letter explained that the ASGE program aimed to reduce extractions to the sustainable yield of groundwater components and that it had three components:
- reducing entitlements with the introduction of 'weighting' for prior groundwater extraction. It also recognises that all groundwater entitlements, whether extracted or not, have a 'value' represented in the value of the land to which the entitlement belongs;
- providing financial assistance in the first year of the water sharing plan to help eligible licence holders adjust to changes in groundwater access over the initial ten years of the water sharing plan; and
- a Community Development Fund to strengthen communities' economic and social capacity in the affected regions.
This letter explained that the introduction of the ASGE program would affect licence holders in two ways: first, with the implementation of the water sharing plan, and, secondly, with the resulting conversion of groundwater licences under the 1912 Act to access licences under the 2000 Act.
A brochure enclosed with the letter explained:
(a) The level of entitlement and usage from some NSW groundwater sources exceeded sustainable yield and had to be reduced in order to achieve long-term sustainability.
(b) The NSW and Australian governments had jointly invested $110 million in a new program, the ASGE program, announced in June 2005, to ensure that the six major groundwater systems in NSW are sustainable in the long term. Those governments were offering financial assistance to eligible licence holders to help them adjust to the changes.
(c) The estimated annual recharge had been calculated for each of the major groundwater systems in NSW. Recharge is the total volume of water that enters the groundwater system each year.
(d) The proportion of the recharge which can be extracted each year having considered the socio-economic, environmental factors and the long-term sustainability of the resource is the sustainable yield.
(e) The ASGE program has four main components:
(i) the reduction of water entitlements based on historical extraction;
(ii) a financial assistance package for licence holders of up to $100 million;
(iii) a Community Development Fund of up to $9 million to help strengthen communities;
(iv) up to $1 million for the implementation of the ASGE program including the costs for valuations and consultation.
(f) The ASGE program is related to Water Sharing Plans. The Plans specify the management rules that will apply to each groundwater source over ten years. The Plans have been tailored for individual groundwater sources and consider the needs of water user, local communities and the environment. The Plans set out details for how entitlements in the groundwater source will be reduced to the sustainable yield. Each Water Sharing Plan will be amended to include the changes resulting from consultation with the Local Catchment Management Authority. However the sustainable yield currently gazetted in the Water Sharing Plans will not be amended as part of this program. Water sharing plans for other regions have been gazetted. The Lower Murray Plan is in draft but will be finalised for public exhibition, to enable commencement on 1 July 2006. Within the Water Sharing Plans and in conjunction with the ASGE program, the level of entitlements will be reduced to equal the sustainable yield. The available extraction will be gradually reduced from current levels to the sustainable yield over the ten years of the Plan.
(g) The key principles for the ASGE program included the principle that, where possible, the methodology recognise water-dependent investment made by licence holders.
(h) CMAs will facilitate consultation with affected groundwater licence holders in relation to implementation of the ASGE program, including "valley-specific processes for the reduction of access to groundwater". Reductions based on history of extraction replaces the approach in the current water sharing plans that reduced entitlements "across the board". Where users wished to use an alternative model, the relevant CMA would need to submit the proposal to the Department for approval. The alternative proposal will then be tested against the ASGE program's principles, with the level of support by licence holders being taken into account. The proposal must be able to be carried out within the program's overall timeframe. The history of extraction process would be the default process for entitlement reduction.
Attached to the 21 December 2005 letter was an "ASGE Program Groundwater Extraction Confirmation Form" for each licence holder, setting out the Department's record of the licence holder's metered extraction. The form allowed licence holders to identify discrepancies between their own and the Department's records, and to advise the Department of any such discrepancies by return of the form by 1 March 2006. Where a returned form indicated a disagreement with the Department's figures, the Department conducted an internal review of its records and the licence holder's claims.
A Regional Groundwater Verification Committee (RGVC) was established for the Lower Murray (separate Committees were established for each water management system forming part of the ASGE program), constituted by representatives of the Murray CMA, the NSW Irrigators Council and the Department. The RGVC considered those cases where licence holders were not satisfied with the Department's determination of their history of extraction following internal review. The RGVC reviewed history of use-related appeals against the Department's figures by reference to the "Definitions and Rules for History of Extraction" for the Lower Murray Groundwater Source. According to the RGVC's report to the GAAC, a total of seventy-five licence-holders in the Lower Murray initially returned their history of use confirmation forms indicating disagreement with the Department's records. Following the Department's internal review, thirty-seven of these cases were referred to the RGVC for its consideration.
From late 2005 to about April 2006, the Murray CMA consulted with licence holders regarding implementation of the ASGE program. As part of this process, the Murray CMA formed an Advisory Group of licence holders to assist in identifying, developing and assessing options for reducing entitlements and providing financial assistance and access to supplementary licences. The Advisory Group was also to assist in the identification and development of projects to assist other parts of the community affected by entitlement reductions. The Murray CMA also conducted a series of public meetings and issued a number of discussion papers and information bulletins over this period to explain different elements of the ASGE program and the matters that were open to consultation.
2006
An information bulletin of 3 February 2006 explained that the Murray CMA had capacity to influence issues of how available water was to be shared, how available financial assistance was to be shared, and the timeframe available for licence holders to adjust to reduced water availability through supplementary water access licences. Matters outside the CMA's influence included the calculation of sustainable yield, water quality management, the total amount of financial assistance available, the time of payment of financial assistance, taxation of financial assistance, and the timing of entitlement reductions.
On 9 March 2006 a Department briefing to the Minister recommended, and the Minister later accepted, that the draft Plan and supporting package be approved for public exhibition. One of the documents prepared for public exhibition was a guide to the draft Plan, which included the following:
The basis for determining how water is to be shared in a groundwater source is the average annual recharge. The average annual recharge is the volume added to the groundwater source, usually by infiltration from rainfall and river flows, over a long-term average basis. An average figure is used as climate and the level of recharge to a groundwater source varies from year to year.
To ensure that long-term damage to the aquifer is not caused, it is essential that groundwater extractions do not exceed the average annual recharge. The average annual recharge for the Lower Murray groundwater source is assessed at 83,700 megalitres per year (ML/yr).
With total entitlements currently equalling over 262,000 ML/yr, the Lower Murray groundwater source is classified as a high risk of over-extraction. If everyone extracted water to the level of their licensed entitlement, there would not be enough water for all existing water users and to protect the groundwater source in the medium-to long-term.
Further studies of the recharge will be undertaken in the first half of the plan term, and the recharge figures may be varied from year 5 of the plan.
...
Except for basic landholder rights, all other water extraction must be authorised under a water access licence. Currently entitlement in the Lower Murray groundwater source for the water users who will receive a water access licence under this Plan totals in excess of 262,000 ML/yr. This water is mainly used for irrigation, but there are also licences for industrial uses such as commercial feedlots. There are approximately 183 licence holders who will be issued with general licences known as aquifer access licences. Rather than as a volume, aquifer access licences will be issued with a share component expressed as a unit share in the water available each year.
In addition to this volume, there are 88 ML/yr allocated for water supply to the towns within the Shire of Conargo. This shire will be issued with a local water utility access licence with an equivalent volume share component.
The current level of entitlements in this groundwater source exceeds the average annual recharge or sustainable yield by approximately 70%. Total entitlements are in excess of 262,000, and the sustainable yield of the system is 83,700 ML/year.
However, in most years, water extraction has been significantly less than entitlement. This is because most groundwater pumpers have not activated or used all of their entitlement. The average extraction over the past 6 years was 79,000 ML. The last 6 years of record are presented in the table and chart below, and it can be seen that during this period the system was only over-extracted on one occasion, which correlates with a major drought year. The nature of aquifer systems with a large storage volume allows for years of extraction above the sustainable yield provided that the long term average extraction is equal to the sustainable yield.
...
To ensure the long-term sustainability of groundwater resources, the Government's policy is to bring entitlements into line with sustainable yield through the provisions of the water sharing plan. This will not only protect the aquifer but ensure that entitlements properly reflect the water that is available for extraction.
Because of the extent of over-allocation, the draft plan proposes that entitlements (ie the share component) for all aquifer access licences be reduced from the first day of the water sharing plan.
The guide to the draft Plan also stated:
In recognition of the impacts of entitlement reductions on other aquifer access licence holders, particularly those that have developed their business and historically used a high proportion of their entitlement, the following measures will be introduced to assist adjustment:
1. The entitlement reduction method will give a higher weighting to the proportion of a licence holders' active entitlement (that is the proportion of the entitlement that has been extracted in the past).
2. Financial assistance under the Achieving Sustainable Groundwater Entitlements Program will be provided to licence holders who are affected by entitlement reductions.
3. Supplementary water access licences will also be granted to licence holders who have a history of extraction greater than their amended entitlement or share component on their aquifer access licence. Supplementary licences will be issued for a volume equivalent to the difference between these two numbers (ie history of extraction and amended share component). Supplementary licences will be withdrawn over the term of the plan.
...
To assist highly developed water users to adjust, supplementary water access licences will be issued to those with a history of use greater than their amended share component of their aquifer access licence. There is likely to be between 90 and 100 licence holders who will receive a supplementary water access licence in addition to their aquifer access licence. These supplementary licences will have a total share component equivalent to about 20,000 ML. The final number of supplementary licence holders and volume of water under supplementary licence will be dependent on the final CMA recommendations on the weightings for active and inactive entitlement.
Supplementary licences, however, are only a temporary measure. Over the term of the Plan, the water available under supplementary water access licences will be reduced until these licences no longer exist.
As part of the consultation process, the Murray CMA developed a model for sharing available water under the Plan, with a weighting of 78 per cent of sustainable yield being allocated to the "active portions" of licences (that is, those portions which were being used to extract water), and 22 per cent to be shared amongst the "inactive" portions. For individual licence holders, this meant that approximately 54 per cent of the active component of their licences and 15 per cent of their inactive component were retained. The model also distinguished between low, middle and high percentage users, with this classification then impacting on the level of financial assistance to be provided, and the amount of water entitlements allocated under the supplementary water access licence. This model was presented to licence holders at meetings on 9 and 10 March 2006 and 10 -13 April 2006, and formed the basis of the Murray CMA's report and recommendations to the GAAC forwarded on 19 May 2006. The Murray CMA recommended this locally derived model as "shar[ing] the burden of entitlement reduction as equitably as possible among all licence holders and reflect[ing] the best mix of provisions given the nature of the adjustment program". The Murray CMA's recommendations were subsequently passed on to the Minister for his consideration.
On 6 June 2006 the Department made a recommendation to the Minister that he sign an attached letter to Ms Kay Hull MP, which referred as follows to the reduction in entitlements that considered history of extraction rather than across-the-board cuts:
The reduction in entitlements that considers history of extraction (HOE) replaces the "across-the-board" cuts approach which reduced entitlements with no consideration of dependence on extraction or the level of investment in irrigation development. It was after consultation with irrigators that the current approach was agreed to minimise potential impacts on rural communities.
Throughout the development and implementation of the ASGE program, both the department and CMAs have received representations from users with a low HOE, seeking a return to "across-the-board" cuts. This would generally provide users with a low HOE with a higher revised entitlement than they would receive under the agreed process and reduce the revised entitlement of those with a greater dependence on the use of groundwater. The NSW Government does not consider this equitable.
Licence holders were requested to confirm their HOE with the department. Many used this as an opportunity to present their case as a "late developer" or to highlight special circumstances. Despite your comments to the contrary, these submissions have been examined by the department and by regional groundwater verification committees.
Between 9 April 2006 and 19 May 2006, the draft Plan for the Lower Murray was exhibited in various public places and published on the Department's website. Submissions from the public were received. The MGMC convened on 22-23 June 2006 to consider submissions about the draft Plan and to make recommendations to the Minister. The MGMC sent its final recommendations to the Minister on 24 July 2006. The Chair of the MGMC sent a further letter to the Minister on or around 15 September 2006 regarding the need to limit changes to the sustainable yield available for extraction as entitlements over the life of the Plan.
On 20 October 2006, the Plan was published in the Government Gazette and it commenced on 1 November 2006. The Plan formed part of an integrated scheme that came into effect on 1 November 2006, as mentioned above at [2].
THE WATER MANAGEMENT ACT 2000
The grounds of judicial review are largely reliant on the objects of the 2000 Act in s 3, the water management principles in s 5, the duty in relation to the water management principles imposed by s 9 on all persons (including the Minister) exercising functions under the Act, and the core provisions in s 20. References in this judgment to the 2000 Act are to its provisions as they were when the Plan was made in 2006. Since then the 2000 Act has been amended.
Preamble and objects
The preamble to the 2000 Act says that it is an "Act to provide for the protection, conservation and ecologically sustainable development of the water sources of the State, and for other purposes".
Section 3 sets out the objects of the Act (emphasis added):
3 Objects
The objects of this Act are to provide for the sustainable and integrated management of the water sources of the State for the benefit of both present and future generations and, in particular:
(a) to apply the principles of ecologically sustainable development, and
(b) to protect, enhance and restore water sources, their associated ecosystems, ecological processes and biological diversity and their water quality, and
(c) to recognise and foster the significant social and economic benefits to the State that result from the sustainable and efficient use of water, including:
(i) benefits to the environment, and
(ii) benefits to urban communities, agriculture, fisheries, industry and recreation, and
(iii) benefits to culture and heritage, and
(iv) benefits to the Aboriginal people in relation to their spiritual, social, customary and economic use of land and water,
(d) to recognise the role of the community, as a partner with government, in resolving issues relating to the management of water sources,
(e) to provide for the orderly, efficient and equitable sharing of water from water sources,
(f) to integrate the management of water sources with the management of other aspects of the environment, including the land, its soil, its native vegetation and its native fauna,
(g) to encourage the sharing of responsibility for the sustainable and efficient use of water between the Government and water users,
(h) to encourage best practice in the management and use of water.
The "principles of ecologically sustainable development" referred to in s 3(a) are defined in the Dictionary to the 2000 Act by reference to the familiar s 6(2) of the Protection of the Environment Administration Act 1991. The s 6(2) definition nominates the precautionary principle, inter-generational equity, conservation of biological diversity and ecological integrity, and improved valuation, pricing and incentive mechanisms (each as explained in the statutory definition) as principles and programs through which the effective integration of economic and environmental considerations in the decision-making process can be achieved. The statutory definition is in the following terms:
(2) ...ecologically sustainable development requires the effective integration of economic and environmental considerations in decision-making processes. Ecologically sustainable development can be achieved through the implementation of the following principles and programs:
(a) the precautionary principle-namely, that if there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation.
In the application of the precautionary principle, public and private decisions should be guided by:
(i) careful evaluation to avoid, wherever practicable, serious or irreversible damage to the environment, and
(ii) an assessment of the risk-weighted consequences of various options,
(b) inter-generational equity-namely, that the present generation should ensure that the health, diversity and productivity of the environment are maintained or enhanced for the benefit of future generations,
(c) conservation of biological diversity and ecological integrity-namely, that conservation of biological diversity and ecological integrity should be a fundamental consideration,
(d) improved valuation, pricing and incentive mechanisms-namely, that environmental factors should be included in the valuation of assets and services, such as:
(i) polluter pays-that is, those who generate pollution and waste should bear the cost of containment, avoidance or abatement,
(ii) the users of goods and services should pay prices based on the full life cycle of costs of providing goods and services, including the use of natural resources and assets and the ultimate disposal of any waste,
(iii) environmental goals, having been established, should be pursued in the most cost effective way, by establishing incentive structures, including market mechanisms, that enable those best placed to maximise benefits or minimise costs to develop their own solutions and responses to environmental problems.
Water Management Principles
Chapter 2 (ss 5-51) of the 2000 Act is titled "Water management planning". Section 5 sets out the following water management principles of the Act and provides in part (emphasis added):
5 Water management principles
(1) The principles set out in this section are the water management principles of this Act.
(2) Generally:
(a) water sources, floodplains and dependent ecosystems (including groundwater and wetlands) should be protected and restored and, where possible, land should not be degraded, and
(b) habitats, animals and plants that benefit from water or are potentially affected by managed activities should be protected and (in the case of habitats) restored, and
(c) the water quality of all water sources should be protected and, wherever possible, enhanced, and
(d) the cumulative impacts of water management licences and approvals and other activities on water sources and their dependent ecosystems, should be considered and minimised, and
(e) geographical and other features of indigenous significance should be protected, and
(f) geographical and other features of major cultural, heritage or spiritual significance should be protected, and
(g) the social and economic benefits to the community should be maximised, and
(h) the principles of adaptive management should be applied, which should be responsive to monitoring and improvements in understanding of ecological water requirements.
(3) In relation to water sharing:
(a) sharing of water from a water source must protect the water source and its dependent ecosystems, and
(b) sharing of water from a water source must protect basic landholder rights, and
(c) sharing or extraction of water under any other right must not prejudice the principles set out in paragraphs (a) and (b).
For these reasons, I do not accept Ground 3 of the applicants' science case.
I would add a merits observation. When the Ecoseal model is recalibrated and refined, as cl 15 of the Plan notes that it will be, or if the Plan is otherwise reviewed on its merits by or on behalf of the Minister, no doubt it would be appropriate to give consideration to the CSIRO model that post-dated the creation of the Plan when determining whether the Plan's extraction limit might be increased. That would of course be a merits review, in which the Court cannot engage.
THE SOCIO-ECONOMIC ISSUE
The applicants socio economic case is that:
(a) The Minister was bound to have due regard to socio-economic impacts of the proposed Plan: ss 18(1) and 50(2A) of the 2000 Act. This required that socio-economic impacts be assessed in a formal study or at a farm-by-farm level. Supporting this construction is s 5(2)(g) which required the Minister to maximise "the social and economic benefits to the community" and s 20(1)(c) which required the water sharing provisions of the Plan to deal with "the identification of requirements for water extraction under access licences";
(b) No formal socio-economic study or on a farm-by-farm basis was conducted and the Minister thereby failed to properly consider the socio-economic impacts of the Plan.
By s 50(2A), s 18 applies to a Minister's Plan. Sections 18(1), 5(2)(g) and 20(1)(c) provide:
18 Matters for consideration
(1) In formulating a draft management plan, the management committee must have due regard to the socio-economic impacts of the proposals considered for inclusion in the draft plan.
5 Water management principles
...
(2) Generally:
...
(g) the social and economic benefits to the community should be maximised, and
...
20 Core provisions
(1) The water sharing provisions of a management plan for a water management area or water source must deal with the following matters:
...
(c) the identification of requirements for water for extraction under access licences,
...
In my opinion, as the respondents accept, by reason of ss 18(1) and 5(2)(g) the Minister was bound to have due regard to the socio-economic impacts of the proposals considered for inclusion in the Plan.
I do not accept the applicants' submission that the Minister was under a duty to maximise the social and economic benefit to the community. A duty framed in such terms overlooks that s 9(1) requires the Minister to "take all reasonable steps", when making a water management plan, to do so in accordance with the water sharing principles in s 5, and that s 5(2) commences with the word "Generally". The water sharing principles compete to some extent. In my opinion, the Minister's obligation, which requires an evaluation, is to take all reasonable steps to generally promote those principles as a whole.
As early as 2001 the MGMC discussed commissioning a formal socio-economic study, whether it should compare a "no plan" scenario relative to what would happen under the proposed Plan, and whether it was possible to conduct a farm-by-farm analysis of the impact of the proposed Plan. In 2002 the MGMC established a socio-economic sub-committee to pursue this further. The MGMC was unable to arrive at a consensus as to methodology for a socio-economic study and no consultant was engaged or formal study conducted. The MGMC did consider the ways that the effects of the proposed reduction in entitlements could be minimised or distributed more fairly between licence holders, including consideration of representations of a large piggery business in the area regarding the impact on its operations.
No formal socio-economic study was carried out on a farm-by-farm basis or otherwise. This was brought to the Minister's attention in a letter dated 24 July 2006 from the MGMC after public exhibition of the draft Plan and the MGMC's consideration of public submissions. The letter summarised the submissions and brought to the Minister's attention the "lack of socio-economic consideration of the impact of the plan or individual licence holders in the region". The MGMC recommended that "a comprehensive socio-economic study to investigate the impact of entitlement reduction on the viability of affected farms and the region" be carried out "during the first five years of the plan".
In my opinion, the statutory obligation on the Minister to have due regard to the socio-economic impacts of a proposed plan did not include a mandatory requirement to conduct a formal socio-economic study nor to consider individual impacts on a farm-by-farm basis.
In my view, the applicants' socio-economic case is premised on a misunderstanding of s 20(1)(c). That provision is directed to requirements for licences under the Plan and not the needs, desires or intentions of landholders more generally. The applicants' contrary concept was rejected by the Court of Appeal in Murrumbidgee Groundwater at [103] - [108].
In Harvey and Tubbo v Minister Administering the Water Management Act 2000; [2008] NSWLEC 165, (2008) 160 LGERA 50 at [74] it was unsuccessfully alleged that the amendment of a water sharing plan by the Minister under s 45 of the 2000 Act was invalid because of failure to have regard to socio-economic impacts. Jagot J held that the s 18 obligation did not burden the Minister in exercising the amendment power in s 45. Her Honour said at [74]:
As noted, the "public interest" is a broad concept and, no doubt, would often include consideration of the socio-economic impact of proposals (as contemplated by s 18). However, consideration of that matter does not require the Minister to have regard to submissions about the particular impact of the plan on the financial position of individuals. Consistent with the respondent's submissions, the level of generality or specificity at which the Minister approaches the socio-economic impacts of proposals in a plan, as part of the public interest, is not prescribed by the statute and thus is a matter for the Minister.
In these very proceedings in NA & J Investments Pty Ltd v Minister Administering the Water Management Act 2000; Arnold v Minister Administering the Water Management Act 2000 [2011] NSWLEC 51, (2011) 181 LGERA 166 at [58], Craig J said with reference to Harvey:
Although her Honour was addressing socio-economic impacts of a plan in the context of a requirement to consider the "public interest" her observations are, with respect, equally apt to the specific requirements for consideration identified in s 18(1). If, as in the case of Harvey, consideration of socio-economic impacts did not compel consideration of the "devastating effect on the applicants" (at [73]), as had been represented to the Minister would be the case, so also is it the case that the particular representations made to the Arnold Applicants do not engage the statutory provision in the sense of mandating their consideration by the Minister prior to the making of a plan.
The applicants submit that Harvey and NA &J are distinguishable or, alternatively, should not be followed. I do not accept either submission. They are contrary to the applicants' case and consistent with Murrumbidgee Groundwater.
The concept of socio-economic impacts in the 2000 Act itself is very broad. Section 3(c) provides that one of the Act's objects is "to recognise and foster the significant social and economic benefits to the State that result from the sustainable and efficient use of water", including "benefits to the environment". Thus, the legislature has recognised that social and economic benefits may include environmental benefits. When considering the socio economic impacts of a proposed plan, the Minister is therefore entitled to consider that the environmental benefits may also have a positive socio-economic impact.
The overarching way in which the Minister had due regard to socio-economic impacts was the recognition that entitlements had to be reduced to ensure the sustainable long-term use of the resource. Although no formal or farm-by-farm socio-economic impacts study was conducted, the MGMC and the Minister considered a wide range of socio-economic factors including the following:
(a) The move from across-the-board cuts to history of extraction was done out of a concern to offer greater assistance to, and hence reduce the impacts on, those who had actively used their historical water entitlements (as distinct from those who had entitlements that were not significantly used). For example, the Minister wrote in a 2006 letter to the Parliamentary Secretary to the Prime Minister that this move was "to minimise economic and social disruption".
(b) The ASGE program was adopted that would provide substantial ex gratia payments to eligible licence holders to alleviate impacts of entitlement reductions.
(c) Supplementary water access licences, provided for in the Plan, were to be issued to alleviate the impact on those who had actively used their water entitlements in the past.
(d) The MGMC commented on the public submissions and provided a summary to the Minister.
(e) The Murray CMA consulted the community on the basis for water entitlement reductions, availability of supplementary water access licences, and access to ASGE Program funds.
The evidence before the Court is replete with examples of consideration of socio-economic impacts by the Minister and others involved in developing the Plan (the respondents have listed examples in a 30 page list forming part of their submissions).
The applicants seek to diminish the significance of offers of ASGE payments by submitting that they were weighted in favour of high and low users rather than the average user, that the compensation offer was "not reasonable", and that the community component was "negligible". The applicants seek to exemplify the alleged inadequacy of the amounts offered in the case of six of the applicants by tendering a schedule comparing the offer amount with higher amounts that would result if there were to be adopted the value of inactive water at $85/ML and active water at $304/ML in a 2006 valuation advice by Mr Peter Spackman to the Department of Lands. The applicants justify this approach by citing the reference to "detriment" in Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40, (1986) 162 CLR 24 at 44.8 per Mason J who said: "Once it is accepted that the subject-matter, scope and purpose of the Act indicate that the detriment that may be occasioned by a proposed land grant is a factor vital to the exercise of the Minister's discretion, it is but a short and logical step to conclude that a consideration of that factor must be based on the most recent and accurate information that the Minister has at hand". In the present case, I do not see a relevant detriment. If it be the case that the amount offered was less than a valuation that had been obtained, that does not establish that the Minister thereby did not take the offer of those payments into account as a socio-economic consideration. It is for the decision-maker and not the Court to determine the appropriate weight be given to matters required to be taken into account.
The applicants submit that as neither the Chair of the MGMC nor the Minister was called to give evidence in the respondents' case, it should be inferred, in accordance with the principle in Jones v Dunkel [1959] HCA 8, (1959) 101 CLR 298, that their evidence would not have assisted the respondents, first, as to satisfying the Court that "due regard" was given to socio-economic impacts, and secondly, in refuting the applicants' submission that "due regard" to the socio-economic impacts necessitated a formal socio-economic study involving a no-plan versus plan scenario or a farm-by-farm study. Although a Jones v Dunkel inference may be drawn in judicial review proceedings, the circumstances in which it will be drawn are limited. Judicial review proceedings generally proceed on the documents and it is not the usual practice to call the decision-maker. In any event, the respondents called the Executive Officer of the Water Sharing Plan for the Murray/ Lower Darling Regulated River and the Lower Murray Alluvium (Mr Digby Jacobs) and the then chairman of the CMA (Mr Kelvin Baxter), both of whom figured in the making of the Plan. I think that the case should be decided, as far as possible, on the contemporaneous documents and objective probabilities. The principle in Jones v Dunkel concerning the effect of an omission to call a witness is concerned with the strengthening of an inference that is otherwise available: Visa International Service Association v Reserve Bank of Australia [2003] FCA 977, (2003) 131 FCR 300 at [647]. I do not consider that any inference to enliven the operation of this principle should be drawn.
Brief reference was made in submissions to written expert affidavit evidence from Professor Curtis and Mr Nichol tendered by the applicants and admitted subject to the respondents' objections, including an objection that it was irrelevant. The applicants submit that these experts identify the elements of socio-economic impact that were relevant to the Minister's consideration.
Professor Curtis is experienced in undertaking social impact statements. He cannot give evidence as to what the 2000 Act requires, only as to what he would do if engaged to do a statement. Mr Nichol really only indicates what his company might do if asked to do a statement. Their evidence is irrelevant to determining the content of the obligations imposed by s 18 of the Act. Their evidence appears to me to be based on a misconstruction of the Act as it assumes that the Minister was required to conduct a formal socio-economic impact study or to have regard to specific socio-economic impacts. In my opinion, even if their evidence is admissible (which it is unnecessary to decide), the consideration that was in fact given to socio-economic matters, to which I have earlier referred, was sufficient to satisfy the Minister's statutory duty to have due regard to the socio-economic impacts of the proposed Plan.
The applicants also submit that the Minister did not have due regard to the socio-economic impacts because (a) the Plan failed to identify "the requirements for water for extraction under access licences" as required by s 20(1)(c) of the 2000 Act, (b) therefore the Plan's bulk access regime did not have "regard" to that requirement as required by s 20(1)(e). I do not accept the first of those two steps in the applicants' reasoning process for the reasons discussed below when considering the Form issue.
Consultation by the Murray CMA as to the potential socioeconomic impact of various proposals of the Plan, and ways to minimise socio-economic disruption, was generally thorough. It included forming and consulting with an Advisory Group of licence holders and holding public meetings of licence holders in relation to the ratio of active to inactive water for the purposes of a history of use formula, provision of supplementary water access licences and distribution of financial assistance. By early December 2005, following nominations from licence holders, the CMA had formed a ten member Advisory Group whose members represented a range of water users, levels of dependency and geographic spread of licences. One of the criteria for selection to the Advisory Group was "demonstration of...an understanding of social and economic issues" and one of the objectives of the Advisory Group was community engagement to result in recommendations to "minimise social economic impacts of entitlement reductions". The Advisory Group met on five occasions. As regards the relative weightings to be given to active and inactive use, the Advisory Group recommended a ratio of 28:22 and this was adopted.
However, the applicants submit that the Murray CMA's consultation with licence holders from late 2005 to about May 2006 did not have due regard to socio-economic impacts because across-the-board cuts were an option but Mr Baxter, the Chair of the Murray CMA, understood and indicated to licence holders that it was not part of the Murray CMA's brief to consult with them on whether the across-the board cuts methodology of reducing water extraction entitlements should be adopted.
There was no statutory duty on the Minister or the Murray CMA to consult with licence holders on this matter. Under the 2000 Act it is mandatory for a water management plan to be consistent with government policy and inter-governmental agreements: above at [6]. An across-the-board cuts methodology seems inconsistent with government policy and the principles of the intergovernmental ASGE Agreement: above at [49], [51]. What Mr Baxter told licence holders and his understanding appear to be consistent with the following:
(a) At a meeting of the GAC on 5 August 2004, attended by Mr Baxter, Mr Peter Sutherland, who was both the Chair of the GAC and a Departmental representative, advised that "neither the GAC's or CMA's were being asked to consult on whether History of Use (HOU) should be used" and that "this would be a decision made by Governments".
(b) A draft paper dated 14 July 2004 titled "Information for CMA Chairs on Groundwater Adjustment Committee" set out the draft parameters, principles and process for review of entitlement reductions methodologies and financial assistance in the six valleys. The CMAs were to "consult with water user groups and licence-holders on the review of the entitlement reduction and assistance package methodologies". The paper stated:
"The Government has agreed to amend the approach agreed in 2001 from reducing all entitlements in over-allocated groundwater sources equally, to an approach tailored for each groundwater system that, where appropriate, recognises historical extraction."
(c) On 19 May 2006 the Murray CMA sent its report to the GAAC. The covering letter states:
"Given a draft Water Sharing Plan had not been made publicly available prior to consultation commencing, it was agreed that the Authority would consult licence holders on the following:
- Sharing available water, by defining History of Extraction (HOE) and a weighting of active to inactive water)
- Sharing available financial assistance
- Access to Supplementary Water Access Licence (SWAL) by defining a reduction profile and access."
The report stated that its package met "licence holder expectations and broader community interests... while keeping within the two key principles of the Program". The report advised that although "a sector of licence holders were strongly in favour of an 'across the board' cut, the CMA did not present this as one of the options given it would not satisfy the two principles of the [ASGE] Program", namely:
to recognise water-dependent investments made by licence holders, and
to recognise that all groundwater entitlements, whether extracted or not, have a value.
(d) These two key principles were communicated to licence holders in a Murray CMA discussion paper at meetings in February 2006 and identified in a brochure to be sent to licence holders included in a ministerial briefing in October 2005.
(e) The option of 'across the board' cuts was not included in the brochure about the ASGE program sent to licence holders in late 2005, which referred only to the CMAs' ability to submit a proposal for an "alternative method to the HOE process" and stated that this would be tested against the "ASGE Program's principles and the level of support by licence holders." According to that brochure, if "the alternative process does not meet this criteria, the HOE will be the default process." Since across-the-board cuts did not fulfil the principle of recognising water-dependent investment, any proposal to use such a methodology would not meet the criteria, and the default process of history of use would therefore apply instead.
(f) GAAC's terms of reference suggest that it was expected to consider proposals which were alternatives to "across the board" cuts. One of GAAC's objectives was to "consider proposals for alternative entitlement reduction methods, giving consideration to history of use (HOU) or equivalent methodology, and consequent changes to groundwater sharing plans". "Alternative" referred to alternatives to the previous policy of "across the board" cuts and an "equivalent methodology" to HOU would likely be one which recognised water-dependent investment. GAAC's specific functions included providing advice to GAOC on "alternative entitlement reduction methodology, giving consideration to HOU or equivalent methodology, and assistance methodologies consistent with level of funding available and key principles guiding the review." It was also required to assist the Chairs of the CMAs in the task of consulting about and reviewing the Water Sharing Plans "and ensure that the changes are consistent with the principles of the review." It was not consistent with GAAC's functions to consider or endorse an "across the board" cuts methodology, since this would not be consistent with the review principles.
(g) Mr Baxter indicated in evidence that at meetings he was told by Mr John Verhoeven, one of the senior government officials involved in the process, that the model was to be one of history of extraction, that there was 6.3 million dollars to be apportioned for that model, or a history of use default model, or, within the same guidelines, a better proposal that the CMA deemed to be more equitable and that had the support of the majority of land holders.
(h) An Information Bulletin published by the Murray CMA on 3 February 2006 indicated that the Murray CMA could consider alternative options to history of use "provided they fulfil the principles of the Achieving Sustainable Groundwater Entitlements Program, can be undertaken in the time period available, and have licence holder support."
(i) In March 2006, in an Information Bulletin, the Murray CMA reported that it had "developed a model that responds to licence holders' feedback while keeping within the constraints of Sustainable Yield, financial assistance available and the principles of the Achieving Sustainable Groundwater Entitlements Program." One of the ways in which the model was said to be consistent with those principles was that it recognised "water dependent investment through weighting water availability towards History of Extraction".
As the applicants submit, there was some indication in two documents that the across-the-board reduction method remained open. The first is a draft 2004 document titled "Information for Consultation by Catchment Management Authorities (CMAs) with Groundwater Licence Holders". It indicated that the starting point was "the policy preference for weighting to History of Extraction". History of extraction was also the "default methodology". Other methodologies (such as history of reliance) could be adopted, but valleys wishing to depart from history of extraction would "need to put a very strong case to the GAAC through their CMAs". "If a valley decides on the earlier 'across the board' cuts approach, the indicative funding for the valley calculated using the HOE methodology and the Valuer-General's valuation will be retained by governments and redistributed to other valleys if required". This document was endorsed at a GAAC meeting of 21 September 2005 as a "work in progress". There is nothing to suggest it was adopted in final form. Its statement about the option of "across the board" cuts should therefore be treated with caution and understood in light of other documents to which I have referred indicating that this option was not available.
The second document to which the applicants refer is related to the first. It is an email dated 7 March 2006 to Mr Baxter and others in which Mr Verhoeven said that GAAC had "agreed at its meeting of 21 September 2005 that if a valley decides on the across-the-board cuts approach, the indicative funding will be retained by governments and distributed to other valleys if required". Mr Baxter did not recall such an agreement. It is unclear why Mr Verhoeven thought that it had been "agreed" that a valley could adopt across-the-board cuts. It may have been because the GAAC meeting of 21 September 2005 endorsed the draft document entitled "Information for Consultation by Catchment Management Authorities (CMAs) with Groundwater Licence Holders" as a work in progress (see above). This email was part of an email exchange initiated by the Murrumbidgee CMA and, understood in context, it is doubtful that it supports the applicants' position given the following:
(a) On 3 March 2006 Mr Verhoeven emailed GAAC members (including Mr Baxter) to say that the Murrumbidgee CMA had forwarded a pro rata reduction proposal for consideration as an alternative to history of use, which was "the same as across-the-board cuts, having active:inactive weightings of 50:50". Mr Verhoeven proposed to advise the Murrumbidgee CMA that this was not approved because it did not meet the ASGE principles of recognising water dependent investment and recognising that all entitlements have a value. The NSW Irrigators Council declined to support the proposal for the same reason.
(b) On 5 March 2006 the Chair of the Murrumbidgee CMA, Mr Jim McDonald, emailed Mr Verhoeven, members of GAAC (including Mr Baxter) and a representative of the Minister's Office, saying "it is not the role of the GAAC to take, or be seen to be taking, positions"; however, he agreed to GAAC recommending that the proposal "does not meet the principles for participation in the ASGE program for the funding portion".
(c) On 7 March 2006, in the email to the GAAC members (including Mr Baxter), Mr Verhoeven made the statement to which the applicants refer (above). However, he remained firm in his opinion that this approach was inconsistent with the governments' two key principles and made clear that the GAAC's objectives were to consider proposals giving consideration to history of use or equivalent methodology (not to proposals for "across the board" cuts).
(d) A review of the Draft Meeting Outcomes of the GAAC meeting of 21 September 2005 (a meeting attended by Mr Baxter), which were adopted at the GAAC meeting of 18 October 2005, does not record any such agreement being reached. On the contrary, GAAC considered a proposal from the Lachlan CMA to use a history of reliance model, and it was agreed that this "approach is consistent with governments' two principles, and that the Lachlan CMA could proceed with the HOR surveys". This suggests that GAAC was proceeding consistently with its terms of reference in testing proposed methodologies against the government principles.
Looking at the evidence as a whole, I am not satisfied that the across-the-board method of reducing entitlements was still open or that Mr Baxter was in error in indicating to licence holders that it was not part of the Murray CMA's brief to consult with them about it. Even if I am in error, in the circumstances, I do not consider that this establishes the alleged ground of judicial review. Consultation with licence holders on a history-of-use methodology was not mandated by the 2000 Act. As discussed earlier, there was a great deal of consideration of socio-economic impacts by the Minister and the Murray CMA. The Minister had the Murray CMA's May 2006 report that a sector of licence holders was strongly in favour of across-the-board cuts. The Minister expressly indicated that he had taken into account that some users with a low history of extraction sought a return to across-the-board cuts, and that the government considered this method to be inequitable (eg above at [64]).
For these reasons, I do not accept the applicants' socio-economic case.
THE FORM ISSUE
The applicants form case is that the Plan is defective in form because its water sharing provisions fail to deal with "the identification of the requirements for water for extraction under access licences" as mandated by ss 20(1) and 50(2) of the 2000 Act. The applicants place reliance on the fact that whereas cl 21(1) of the Plan says that at the commencement of the Plan "the water requirements" of holders of "domestic and stock rights" (a species of "basic landholder rights" as defined in the 2000 Act) are estimated to be a total of 1,525 ML/year, there is no equivalent provision referring to "the water requirements" of holders of access licences. The applicants' argument (at least implicitly) acknowledges that cl 21(1) of the Plan satisfies the requirements of s 20(1)(b) of the 2000 Act (that the Plan must deal with "the identification of requirements for water...to satisfy basic landholder rights"), but the applicants submit that the absence of an equivalent provision in relation to the "identification of requirements for water for extraction under access licences" leaves s 20(1)(c) unsatisfied.
It is convenient to repeat ss 20(1)(b) and (c) and 50(2) of the 2000 Act:
20 Core provisions
(1) The water sharing provisions of a management plan for a water management area or water source must deal with the following matters:
...
(b) the identification of requirements for water within the area, or from the water source, to satisfy basic landholder rights,
(c) the identification of requirements for water for extraction under access licences,
50 Minister's plan
...
(2) A Minister's plan must in general terms deal with any matters that a management plan is required to deal with, and may also deal with any other matters that a management plan is authorised to deal with, other than matters that are already dealt with by a management plan.
Section 20 matters are among the matters that a Part 3 management plan is required to deal with. Therefore, by s 50(2) the Plan had to deal with s 20 matters, but only "in general terms".
Clause 21(1) of the Plan provides:
At the commencement of this Plan, the water requirements of holders of domestic and stock rights are estimated to be a total of 1,525 ML/yr.
Part 7 (cll 24-29) of the Plan expressly says that it is made in accordance with s 20(1)(c) of the 2000 Act: cl 24. Clauses 27 and 28 (set out above at [97]) provide formulae for the share components of aquifer access licences and supplementary water licences that include factors for history of use.
As discussed above at [211] - [213], in my opinion the applicants' submission is based on a misconstruction of s 20(1)(b) and (c) of the 2000 Act. The word "requirements" in those subsections refers to what the water itself is required for under the Plan, namely, "to satisfy basic landholder rights" or "for extraction under access licences": s 20(1)(b) and (c). Those requirements are set out in Part 7 of the Plan, and in relation to access licences in, relevantly, cll 27 and 28. Section 20(1)(c) does not require the Plan to identify the needs, desires or intentions of groundwater users.
Accordingly, I do not accept the applicants' form case.
THE CONSTITUTIONAL ISSUE
The constitutional ground of the applicants' challenge to the Plan is that the replacement of bore licences under the 1912 Act with aquifer access licences under the 2000 Act involved an acquisition of property other than on just terms within the meaning of s 51(xxxi) of the Constitution. That section provides:
The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:
...
(xxxi) The acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws.
The applicants contend that the water rights in issue are "property" within the meaning of s 51(xxxi), and that there has been an "acquisition" of that property within the meaning of that section.
In my opinion, the applicant's challenge based on s 51(xxxi) must fail. In these very proceedings in Arnold v Minister Administering the Water Management Act [2010] HCA 3, (2010) 240 CLR 242 the High Court addressed this issue and decided that the replacement of bore licences involved no acquisition of property within the meaning of s 51 (xxxi): at [3] per French CJ, at [48] per Gummow and Crennan JJ, at [72] per Hayne, Kiefel and Bell JJ.
Accordingly, I reject the applicants' constitutional ground of challenge.
CONCLUSION
The proceedings are dismissed with costs. The exhibits may be returned.
Amendments
18 June 2013 - Punctuation errors in paras [106], [176], [185], [194], [204(a)], [225(c)], [227(a)], [237] Repetitive words deleted in second sentence of para [180].
Amended paragraphs: [106], [176], [180], [185], [194], [204(a)], [225(c)], [227(a)], [237]
Decision last updated: 18 June 2013
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