A NSW Government website

How water is allocated

Principles for allocating regulated river water in NSW

There are a range of factors that influence how water is allocated in regulated river systems.

Allocating water in NSW

To manage the variability of water available each year in a river system, water is allocated to users in accordance with the rules set out in the relevant water sharing plan and based on the water available, and forecast to be available, in the water source. This process of making an allocation is known as an Available Water Determination (AWD).

These allocations are dependent on a range of factors including:

  • dam storage levels
  • carryover water from the previous water year (in water sources that have carryover provisions)
  • the condition of the catchment and river system river (wet/dry) and forecast inflows
  • the estimated volume required to run the river, including end of system flows, transmission losses and evaporation losses
  • other requirements, such as storage reserves and environmental water allowances

AWDs are made for all water sources at the start of each water year on 1 July and published in water allocation statements page on the department's website. Water allocation statements for regulated river water sources also note the reserves set aside for essential supplies. If allocations announced on 1 July for a water source do not equal 100% of entitlement for a particular licence category, subsequent AWDs may be made throughout the year to announce additional allocations if conditions improve. The department provides regular updates to water users on system conditions throughout the water year to assist in forward planning.

Rules for allocating water

The key piece of legislation for the management of water in NSW is the Water Management Act 2000 (the Act). The Act sets out water management principles and establishes water licence categories and the priorities between these categories. It also provides for the preparation of water sharing plans, which prescribe the allocation of water to licence categories in priority order. The Act provides for the making of Available Water Determinations.

Water sharing plans are statutory instruments created under the Act. These plans set out, in detail, how water is to be shared between consumptive users and the environment, and how it is to be shared amongst the consumptive users in a particular water source or group of connected water sources. These plans ensure water is shared fairly amongst groups of users and that total water extraction from a water source/s is kept within sustainable limits over the long term. The rules in a water sharing plan mirror the general rules and priorities set by the Act.

Water sharing plans are made for 10 years to provide certainty to water users about how water will be managed, so that long-term business decisions and investments can be made with confidence. They are developed by the department in consultation with a broad cross-section of the community including water users, key stakeholder groups, businesses and government agencies, and are approved by the Minister for Water with concurrence from the Minister for the Environment.

Water is allocated in line with water sharing priorities

Water is allocated to licence holders based on the priority of water access licence categories under the Act. However, the water allocation process also considers important non-licensed water needs such as promoting the protection of water sources and their dependent ecosystems as well as basic landholder rights to water.

The main regulated river licence categories in order of priority are:

  1. town water supply, and domestic and stock
  2. high security
  3. conveyance (which is that water needed to deliver ordered water)
  4. general security

If there is not enough water to provide full allocations to all licensed users, allocations for higher priority licences must be reduced to a lesser extent than those of lower priority licences. For example, if town water supply can only receive an allocation of 80% of entitlement, high security licences must receive less than 80%, and so on.

As a general rule, the last allocations to be affected or restricted due to a water shortage are the first to get relief as water availability conditions begin to improve.

Planned versus held environmental water

Planned environmental water (PEW) is water set aside under water sharing plan rules to meet environmental needs. Held environmental water (HEW), otherwise known as licensed environmental water, is water held under licences by environmental water holders. HEW is managed in line with the same rules and principles as any other licensed water and has the same priority as the entitlement type upon which it is based (for example, general security licences).

PEW is considered higher priority than HEW. PEW often accrues in storages over time, and its release is often designed to be triggered around natural events, for example transparent and translucent releases which require some or all of dam inflows to be released under certain conditions. More information visit transparent and translucent flows.

While PEW has very high priority, to protect critical supplies under extreme water shortages, PEW rules have been suspended recently, and in the past, to ensure water is available for essential town services. Section 60 of the Act allows for this.

Balancing certainty and flexibility

The NSW water allocations process is designed to limit the discretion of water managers and provide water users with as much certainty as possible while also providing them flexibility in how they manage their own water and risks.

Rather than simply allocating water that is already sitting in storage at the start of the water year, the department looks at likely inflows to a system based on historical records and seasonal outlooks. Allocations can also consider a range of other factors including current river conditions, likely demands and historical water use patterns.

In making allocations, the lowest recorded inflow sequence as at the commencement of the first water sharing plan, otherwise known as the ‘drought of record’ for the relevant water source/s, is used so that the department only allocates water that is very likely to flow into storages.

Regular updates on observed conditions and any changes to predicted inflows are also provided to water users via water allocation statements throughout the water year. It is important to note that the allocations process looks across the historical rainfall and flow records to find the ‘drought of record’. It does not look forward at climate change scenarios to identify a potentially worse ‘design drought’.

While the department does what it can to provide an accurate prediction of likely inflows into a system at the start of a water year, water users must assess conditions based on the updates provided and their own circumstances to decide how they wish to manage their water.

Water entitlements can be traded between water users (permanent trade), as can account water (temporary trade), in accordance with rules in the relevant water sharing plan. Most plans allow general security entitlement holders, within limits, to ‘carryover’ unused allocation to the next water year. These rules allow water users to manage their water more flexibly based on climatic conditions and business needs.

Planning ahead

When determining water allocations for the start of the water year on 1 July, the department needs to consider potential future conditions and plan for the supply of water beyond just the next 12 months, particularly for the highest priority entitlements. Decisions around how water is managed this year can impact on the condition of the water source/s for the next water year and observed conditions may not always match up to what was predicted. Water is budgeted to ensure that it can be delivered where and when it is needed according to priority of entitlement.

The planning approach may differ slightly between water sources due to their different characteristics including catchment size, inflow patterns, the distribution of entitlements, water user profiles and system demands. However, for consistency, the Department tends to plan to meet high priority water requirements for the next 24 months, including unused allocation that has been carried over. This approach focuses on being confident there is enough water to meet high priority needs ‘next year’, including the needs of the environment prescribed by the water sharing plan, basic landholder rights and high priority licences (domestic and stock, town water supply) and high security licences and water carried over in general security accounts, before further allocation to general security licences ‘this year’.

If the situation arises where a lack of water is forecast for next year’s allocations, then restrictions to general security water in accounts and reduced allocations to high priority commitments may eventuate. The allocation process is designed to meet all high priority commitments in all years except the most extreme, with the balance of water made available to general security water users.

Managing water allocations during extreme events

The management of limited water resources during an extreme event is undertaken in line with the NSW Extreme Events Policy. The policy is structured and transparent and describes the use of increasingly severe measures that water managers may need to apply as an event worsens. For more information visit the Extreme Events Policy.

During a severe water shortage, such as a drought, the protection of remaining water resources for critical human needs becomes the highest priority. This approach dictates that securing critical town water supplies and domestic supplies for rural landholders (outside of towns), which are sometimes delivered by truck, are the highest priority. The priorities are then the critical needs of the environment such as attempting to provide some refuge pools, and then other high priority licensed entitlements (including stock water and high security entitlements).

This focus on critical needs will typically result in reductions to allocations for certain categories of licences and temporary water restrictions as conditions deteriorate. General security allocations will be impacted first, followed by high security and conveyance licences. Depending on the conditions and water source, allocations to high security licences may be reduced before general security allocations are reduced to zero, however, higher security licences must be reduced to lesser extent than lower security licences.

Restricting account water

While every effort is made at the start of the water year to make accurate allocations in regulated rivers based on all available information, conditions may change unforeseeably throughout the year. If predicted inflows do not eventuate, licence holders’ access to water already allocated to them (i.e. account water) may need to be restricted so that the water can be used to underpin higher priority entitlements, including critical needs.

Drought management strategies are discussed within Critical Water Advisory Panels, where significant decisions, such as suspending replenishment flows, blocking flow at the end of regulated rivers and restricting access to water in accounts are carefully considered and discussed.

Resuming access to restricted account water

Once conditions improve sufficiently and critical needs can be met over the planning period, access to water will be increased in priority order in accordance with the Act. Improved water availability must accrue to higher security licence categories at a rate greater than general security licences, including the return of any suspended carryover water.

If temporary water restrictions commence toward the end of a water year, they can extend to the end of the next water year. In some circumstances, it might be necessary to further restrict water in general security accounts to help secure critical needs if conditions extend further into drought. If in this instance, water availability then improves, restrictions are first eased among the highest priority categories following the Extreme Events allocation rules above. Once all higher priority commitments have been met and all restrictions eased, then further improvement can accrue to new general security allocation.

While the department will aim to provide water to licence holders as soon as possible to minimise long-term social and economic impacts, allocations will be provided, and restrictions will be lifted in accordance with the principles and priorities of the Extreme Events Policy and the Act. The Policy supports a conservative, risk-based approach during recovery from a severe water shortage to build resilience and avoid the chances of having to revert back to more severe restrictions straight away if conditions deteriorate.

Watch this video

How is water prioritised for different uses?

More information

More information on how water is allocated in NSW and fact sheets on water sharing in particular river systems (including the Hunter, NSW Murray and Murrumbidgee) can be found by visiting resource assessment process.