Controlled allocation of aquifer access licences - FAQs

What were the key changes made by the 2018 amendment order?

The Controlled Allocation Amendment Order (Various Groundwater Sources) 2018 changes the 2017 order by:

  1. changing the date of the second registration of interest period to 8 October 2018 and the date of the third registration of interest period to 8 October 2019,
  2. extending the end date of the order to 31 May 2021,
  3. replacing all references to ‘the Deputy Director General of the Department of Primary Industries, Water’ with ‘the Executive Director Water in the Department of Industry, and
  4. replacing all references to ‘DPI Water’ with ‘DoI Water’.

These amendments were made to allow adequate time for processing and issuing licences resulting from the third controlled allocation and reflect administrative changes within our department

What is the 2017 controlled allocation order?

The 2017 controlled allocation order is different to the 2013 and 2014 orders in the following ways:

  • The three year period of the order is longer than previous orders. After the first registration of interest, further registration of interests may be run annually for any water that is still available under the order.
  • A successful participant can now choose to apply for an aquifer access licence immediately or pay to defer their application for up to three years.
  • Stronger protections for participants against defaults and misconduct by other participants are now included.

How will the controlled allocation process work?

The first step is for a person to submit a registration of interest form during the registration of interest period, with details including:

  • the water source where they wish to purchase water
  • the amount of water they wish to purchase in unit shares (for example: 1 unit share)
  • the price per unit share (at or above the minimum price) they are willing to pay.

Determining successful participants

After the registration of interest end date, the Department of Industry will assess all registrations received, in accordance with the order’s terms and conditions. The terms and conditions provide that:

  • the participants who put in a registration of interest application offering to pay the highest price per unit share (at or above the minimum price) will be identified as ‘successful.’
  • if water is still available after satisfying the highest priced applications, the applications that are willing to pay the next highest price (at or above the minimum price) may also be successful, and so on.
  • if more than one application offers the same price per unit share in the same groundwater source and there is insufficient water to be allocated, the water will be allocated proportionately among the applications that are at that price.

Notifying participants

After the Department of Industry has determined the outcome of the registration of interest process, the department will write to all participants both successful and unsuccessful.

Successful participants pay for the water

Once a participant is notified by the Department of Industry their registration of interest has been successful they have 28 days to pay the department for:

  • the total purchase price for that water or
  • an annual holding fee (20% of the total purchase price) to defer purchasing their water.

If a participant does not pay the total purchase price or the annual holding fee to the Department of Industry within the 28 days, or does not withdraw, they will be considered in default under the order’s terms and conditions.

Successful participants make access licence application

When a participant has paid the total purchase price for the access licence, they have another 28 days to make a valid access licence application to the licensing authority (in most cases this will be WaterNSW). Customers will be notified by the Department of Industry in cases where the department remains their licensing authority.

Licence application determined

The licensing authority will process the participant’s licence application and notify the participant of the outcome.

Can I withdraw from the process at any stage?

You may withdraw from the process up until 28 days from the date the Department of Industry records you have been notified as successful or unsuccessful, by notifying the Deputy Director General you are withdrawing. If you do not withdraw and are successful, you must either pay the total purchase price and make your licence application or pay the first annual holding fee also within this 28 day period. If you do not withdraw, apply for your licence or pay the first annual holding fee, after the 28 days you will be considered in default under the order’s terms and conditions.

After this initial 28 day period you may be able to withdraw but only in very limited circumstances. You must write to the Deputy Director General setting out the reasons why you are requesting to withdraw. If the Deputy Director General is not satisfied with the reasons you may be dealt with under the default terms and conditions even if you withdraw.

See Schedule 2 of the order  for the terms and conditions dealing with withdrawing and default.

These terms and conditions ensure the process does not disadvantage other genuine participants.

Your registration of interest application fee, licence application fee and annual holding fees will not be refunded if you choose to withdraw or you are dealt with under the default provisions.

How is unassigned water determined?

A water source has unassigned water when current water users’ requirements (including licensed volumes and water to meet basic landholder rights) are:

  • less than the long term average annual extraction limit (extraction limit) in the water sharing plan and,
  • for water sources in the Murray-Darling Basin, those requirements are also less than the sustainable diversion limit in the Basin Plan.

Unassigned water occurs mainly in groundwater sources.

The extraction limits and sustainable diversion limits have been set after ensuring that water is reserved for the environment.

Why are the minimum prices in the 2017 order different from minimum prices in 2013 and 2014?

A new minimum price setting method was developed for 2017 onwards. In some cases this methodology results in lower minimum prices than those set for water sources included in the 2013 and 2014 controlled allocation orders.

Setting a minimum price for each groundwater source aims to ensure the NSW Government obtains value for money on the sale of water. The minimum price does not preclude significantly higher prices being paid under the competitive process required by legislation. The new minimum prices will still deliver a cost recovery plus return for the NSW Government.

For more information on the method for setting the minimum prices see the Strategy for the controlled allocation of groundwater (PDF, 33.08 KB).

How much water was released under this controlled allocation order?

Demand for water in the groundwater sources included in the order cannot always be met through trading as there may be little or no water market. A proportion of unassigned water in these groundwater sources is being made available under controlled allocation as part of the process of implementing water sharing plans.

A precautionary approach is being taken, consistent with the Strategy for the controlled allocation of groundwater (PDF, 33.08 KB), by only releasing up to 80% of the relevant extraction limit or sustainable diversion limit of groundwater under controlled allocation orders.

Is there a limit to the amount of aquifer access licence shares that can be purchased?

Yes, a specified number of shares are being released in particular groundwater sources. Applicants are able to register interest in any amount of water up to the total number of shares made available in these groundwater sources.

One unit share equates to 1 megalitre if the available water determination for the licence category or subcategory is 100%. See the order  for details of the number of shares being released for each particular groundwater source.

What if an enterprise requires more water than can be acquired through this controlled allocation process?

Following this order, the Minister may make further controlled allocation orders in groundwater sources with unassigned water.

Alternatively, demand for water may be met through trading

Are there restrictions on taking groundwater under the new aquifer access licences?

The aquifer access licences allocated under this order will only allow water to be taken from a particular groundwater source. However, in some of the groundwater sources included in the order, there are management restrictions which mean that in most cases groundwater cannot be taken from the following water management zones:

  • the Lachlan Fold Belt MDB (Mudgee) Management Zone in the Lachlan Fold Belt MDB Groundwater Source, or
  • the Gunnedah-Oxley Basin MDB (Spring Ridge) Management Zone in the Gunnedah-Oxley Basin MDB Groundwater Source, or
  • the Nepean Management Zone 1 in the Sydney Basin Nepean Groundwater Source.

Also, holding an aquifer access licence alone does not allow water to be physically taken from the groundwater source or used. A successful participant must nominate a water supply work or extraction point, and must also usually hold a water use approval to use the water, as described in FAQ 11.

What other approvals are required before the water can be taken?

Approvals under the Water Management Act 2000

Before water can be taken from a groundwater source, a water supply work approval is usually required. Water supply work approvals allow a person to construct and use a work, such as a pump or bore, to take water at a specified location.

water use approval is also usually required to use water for a specific purpose (such as irrigation) at a specific location.

Approvals under the Water Management Act 2000 (WM Act) are not required for State significant development (SSD), including mining projects, or State significant infrastructure (SSI). SSD and SSI still need a water access licence and for that licence to nominate a work or extraction point under the WM Act.

Approvals for State significant development or State significant infrastructure

Both SSD and SSI require separate approvals under the Environmental Planning and Assessment Act 1979 (EP&A Act). However, as for all other types of development, water taken in SSD and SSI must still be licensed under the WM Act.

Approval may also be required under relevant Commonwealth legislation.

Depending on the existing level of development in the groundwater source and the predicted impacts of the proposed activity, extraction from the work may have limits placed on it that are designed to ensure that the impacts on other users or the environment are within acceptable limits.

Can an aquifer access licence obtained under this controlled allocation process be traded?

Yes. The aquifer access licence can be traded in accordance with the rules in the relevant water sharing plan and the Access Licence Dealing Principles Order 2004.

How will water sharing plans apply to aquifer access licences obtained through the controlled allocation?

Water sharing plan rules will apply to these aquifer access licences in the same way that they apply to any other aquifer access licence in the groundwater source.

Water sharing plans include rules specifying the circumstances in which water can be taken from a water source, e.g. rules for the crediting of water allocations to the water allocation account of an aquifer access licence through available water determinations.

Can the controlled allocation order be extended or repealed? If so, what happens then?

Yes. The controlled allocation order can be extended if necessary. It can also be repealed at any time. Another order can also be made by the Minister to apply to these or other water sources at any time. If an order is amended or repealed, arrangements will be made for any licence applications that have been started or deferral contracts which have been entered under the order.

How does this controlled allocation order relate to the Aquifer Interference Policy?

Aquifer interference activities under the NSW Aquifer Interference Policy (PDF, 505.49 KB) include mining and exploration or extraction activities.

The Policy sets out the water licensing requirements for aquifer interference activities, to ensure the water taken by these activities is properly licensed and accounted for in all affected water sources.

Anyone who takes water in the course of carrying out a mining activity must hold a water access licence. A mining activity includes mineral exploration and mining operations.

The Policy also defines minimal impact considerations for assessing other kinds of impact associated with aquifer interference activities in different types of groundwater sources.

For State significant development and State significant infrastructure these minimal impact considerations will be used by the Department of Industry to develop the advice on aquifer impacts that will be provided to the relevant body – usually the Department of Planning and Environment.

Will the release of licences with a share component under this controlled allocation process affect the water available for food production or the environment?

No. The process will not affect existing entitlement in a groundwater source and will not reduce the amount of water able to be taken and used to grow food, or planned environmental water.

Water entitlements are only being made available in groundwater sources with unassigned water and the release of only a portion of the unassigned water ensures that total water extractions in a groundwater source will remain below the limits set in the Basin Plan or the relevant water sharing plan.

Will the release of water under this controlled allocation process allow water to be taken from connected surface water systems?

No. All groundwater systems that are highly connected to surface water are fully committed. Water is only being released through this order from groundwater systems that are not highly connected to surface water.

Water sharing plans for groundwater set rules to manage impacts of groundwater extraction on surface water.

In addition, the potential impacts of any new proposal on highly connected river systems must be considered when an environmental assessment is being undertaken as part of the proposal’s approval process.

Why would a participant be offered less unit shares than what they registered interest for?

In accordance with the order’s terms and conditions, if there is insufficient water available to satisfy successful bids at the same price point in the same groundwater source, then the available water will be allocated proportionately among the applications that are at that price. This may be a lesser amount that what the participant has bid for in their registration of interest application form.