May 2011
Transforming water entitlements from a
Private Irrigation District or Private Water Trust
BACKGROUND
The Water Management Amendment Act 2010 (the Amending Act) was passed by Parliament in late 2010.
A feature of these amendments to the Water Management Act 2000 (WM Act) was to facilitate transformation of
water entitlements by Private Irrigation Districts (PIDs) and Private Water Trusts (Trusts).
The Amending Act allows for changes to the powers of PIDs and Trusts to be commenced in 2 stages:
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Stage 1: Schedule 1 of the Amending Act contains minor amendments to the existing powers of PIDs and
Trusts for the sole purpose of enabling them to comply with the Commonwealth’s Water Market Rules 2009.
These amendments commenced on 17 December 2010. The amendments in schedule 1 are an interim measure
only and do not address all potential issues for PIDs and Trusts that may arise from the Commonwealth’s Water
Market Rules.
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Stage 2: Schedule 2 of the Amending Act contains more significant reforms to the governance structures
for PIDs and Trusts to give them more flexibility to set their own internal rules, independent of Government, in
the medium to long term. The amendments in schedule 2 will not commence until after further stakeholder
consultation has occurred in relation to supporting regulations and processes.
This fact sheet only considers the Trust and PID transformation powers contained in the Stage 1 amendments.
THE REQUIREMENT TO DETERMINE A LANDHOLDER’S WATER ENTITLEMENTS
Sections 190A and 237A of the WM Act require PIDs and Trusts, respectively, to determine a landholder’s water
entitlement if requested to do so in writing.
These provisions are designed to enable Trusts and PIDs to comply with Commonwealth requirements and so do
not specify what information must accompany a request to a PID or Trust application to determine a landholder’s
water entitlements. Trusts and PIDs should check the Commonwealth Water Market Rules to identify what
information a PID or Trust may require.
“Landholder’s water entitlement” is defined:
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for PIDs as: “the part of the share component of a private irrigation board’s access licence that is available to a
landholder of an irrigated holding within the private irrigation district” (s140); and
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for Trusts, as: “the part of the share component of an access licence held by or on behalf of a private water trust
that is available to a landholder for irrigation” (s221).
This means that PIDs and Trusts are only required to determine water entitlements where water is supplied to
irrigated holdings. Where water is supplied to an irrigated holding for both irrigation and other purposes, these other
purposes may be specified.
To avoid conflicts of interest, sections 190A and 237A prevent a Trust or PID Board member from participating in a
determination of a landholder’s water entitlement if the person or a member of the person’s immediate family has an
interest in the entitlement. The phrase “member of a person’s immediate family” is defined in the Water Management
(General) Regulation 2004 (the Regulation) as a spouse or de facto partner or former spouse or de facto partner; a
child or step-child; a grandchild or step-grandchild; a parent or step-parent; a grandparent or step-grandparent; or
a brother, sister, step-brother or step-sister.
www.water.nsw.gov.au
NSW Office of Water | May 2011
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Transforming water entitlements from a Private Irrigation District or Private Water Trust
WHAT MUST BE CONSIDERED WHEN DETERMINING THE LANDHOLDER’S WATER
ENTITLEMENT?
Sections 190A (for PIDs) and 237A (for Trusts) deal with how a landholder’s water entitlement is to be determined
and are in very similar terms. When determining a landholder’s water entitlement a board (for PIDs) or members of
the trust (for Trusts) must consider the following matters:
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the nature of agricultural activities on the land
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the amount of water currently supplied to the landholder
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any present or past water sharing arrangements applicable to the landholder
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any other matter they consider relevant
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any other matter prescribed by the regulations.
At the date of publication of this fact sheet, there were no additional considerations prescribed by the Regulation.
It is important to emphasise that PIDs and Trusts have broad discretion to determine the water entitlement and can
consider “any matter they consider relevant”. This is appropriate as very different factual circumstances may apply
to the determination of each water entitlement.
The PID or Trust needs to consider the entitlement very carefully to ensure that if this water permanently leaves the
PID or Trust, they would still have sufficient water to meet their other commitments including the amount of water
they need to convey water to the remaining members or ratepayers. Once the PID or Trust has determined the
entitlement this may only be varied or redetermined in limited circumstances.
WHAT FORM MUST THE DETERMINATION TAKE?
Sections 190A and 237A require that the determination must be in writing. Clause 108 of the Regulation requires
that a determination of a landholder’s water entitlement must specify the proportion of the share component of an
access licence that is available to the landholder, and the licence category to which this relates. PIDs and Trusts
should check the Commonwealth’s Water Market Rules to see whether these impose any additional requirements.
WHAT IS THE SIGNIFICANCE OF PAST WATER SHARING ARRANGEMENTS?
While there was previously no power in the WM Act for Trust members to determine a ratepayer’s share, there were
often arrangements in place. For example, after their first election, PID board members were required to determine
the quantity of water, if any, to be allocated for irrigation to each holding within the private irrigation district. However,
an allocation of water is not the same as a share of an entitlement. In addition, there may have been private
transfers of water within an area, sales out of an area on behalf of a member or ratepayer and different treatment of
conveyance losses.
For these reasons the Act requires the PID or Trust to take previous arrangements into account but does not require
that the landholder’s water entitlement must be the same as any past sharing arrangements.
CAN A LANDHOLDER APPEAL IF THEY ARE UNHAPPY WITH THE DETERMINATION?
A landholder currently has no right of merit appeal to the Land and Environment Court in relation to the
determination of the water entitlement. However, judicial review proceedings may be available. This means that a
member could take legal action if they consider that the determination has not complied with the law but there is no
right to appeal merely because they don’t like the decision.
This is considered appropriate in the interim period when a Trust will not have the members Rules in place that will
be available under the broader Stage 2 reforms. Appeal rights will exist when the Stage 2 reforms are commenced.
HOW QUICKLY MUST AN APPLICATION TO DETERMINE A LANDHOLDER’S WATER
ENTITLEMENT BE DETERMINED?
These provisions are designed to facilitate compliance with Commonwealth requirements and so do not impose
time limits on Trusts or PIDs.
If a ratepayer or member of a PID considers that the Trust or PID is not dealing with their application to determine
their water entitlement in a reasonable time, they can make a complaint to the Australian Competition and Consumer
Commission (ACCC) or commence their own legal proceedings to enforce the Commonwealth Water Market Rules.
www.water.nsw.gov.au
NSW Office of Water | May 2011
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Transforming water entitlements from a Private Irrigation District or Private Water Trust
POWER TO TRANSFORM WATER ENTITLEMENTS
Transformation is defined in s97 of the Commonwealth Water Act 2007. In broad terms it is the conversion of a PID
member’s or Trust ratepayer’s interest in the group licence (their landholder’s water entitlement) into an individually
held water access licence.
Sections 190B and 237B give the PID and Trust, respectively, the power to make an application to transform a
member’s or ratepayer’s water entitlement into an access licence.
These sections do not require PIDs and Trusts to lodge an application to transform entitlements. Whether or not a
Trust or PID is required to transform part of the group entitlement into an individual licence is determined by whether
they are an “irrigation infrastructure operator” as defined in the Commonwealth Water Act 2007 and the application
of the Commonwealth Water Market Rules.
If a Trust or PID is unsure about whether or how the Commonwealth requirements apply to them they should obtain
independent legal advice or contact the ACCC.
HOW IS TRANSFORMATION IMPLEMENTED?
The WM Act contains a number of mechanisms for water trading which are referred to as “dealings”. There is no
specific “transformation dealing” in the WM Act. Transformation occurs either by:
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a subdivision of an existing licence (under s71P of the WM Act) and transfer of one of the resulting licences to the
landholder (under s71M) or a nominated third party; or
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where the landholder (or nominated third party) already holds an access licence, by assigning a share
component of the entitlement from the PID/Trust licence to the landholder’s licence (under s71Q).
Applications for dealings are not automatically approved. Section 71Y of the WM Act requires that they be dealt with
in accordance with the water management principles, the access licence dealing principles, and any access licence
dealing rules established by the relevant management plan. Dealings necessary for transformation only take effect
when registered in the Access Register under the WM Act.
In addition, sections 190B and 237B only enable a PID or Trust to make an application to transform a landholder’s
water entitlement into an access licence under the WM Act. It is not possible in one dealing to transfer the water
entitlement interstate. Transformation of licences that are still under the Water Act 1912 is also not possible.
Under the WM Act, the term “landholder” includes either the owner or the lawful occupier of the land. This means
there may be four or more “landholders” where, for example, a husband and wife own the land and lease it to
another couple. When determining a landholder’s water entitlement or lodging an application for transformation, a
PID or Trust should be very careful to ensure that the person to whom the entitlement is being transferred, or the
person authorising transfer to a third party, is the person with the appropriate interest in the water.
WHAT HAPPENS TO THE WATER ALLOCATION?
Transformation and these dealings do not give the member or ratepayer any rights to have the water allocation that
accrued to the PID or Trust licence before transformation transferred to their transformed private licence.
A transfer of water allocations under s71T can currently only occur if the Trust complies with s234 or the PID
complies with s180.
A transfer of water allocations will be possible when the Stage 2 amendments commence. In the interim, the PID
member or Trust ratepayer would still be able to make use of “their” share of the PID or Trust allocation through the
delivery contract. After the next Available Water Determination following transformation, the allocation would then
accrue to the individually held licence.
HOW DOES TRANSFORMATION AFFECT THE PID MEMBER OR TRUST RATEPAYER?
The rights of the PID member or Trust ratepayer following transformation will depend on whether they have
terminated their rights to access water or whether they have ongoing delivery rights.
The WM Act does not address the delivery rights of the landholder after transformation. This is a contractual matter
that is governed by the Commonwealth Market and Charge Rules and subject to regulation by the ACCC.
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NSW Office of Water | May 2011
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Transforming water entitlements from a Private Irrigation District or Private Water Trust
Both parties should carefully consider whether they need independent legal advice as to whether a formal delivery/
termination contract is appropriate. The ACCC has published A guide to the Water Market Rules 2009 and water
delivery contracts which identifies issues a delivery contract should address but does not contain a template
contract.
Sections 190B and 237B enable PIDs and Trusts, respectively, to impose termination and delivery charges and
also require a landholder to provide security as a condition of consent to transformation of the whole or part of the
landholder’s water entitlement. The WM Act does not specify the fees that may be charged or the security that can be
imposed. This is governed by the Commonwealth Market and Charge Rules and is subject to regulation by the ACCC.
Transformation will also affect that landholder’s voting rights as a member of the PID or ratepayer in the Trust. There
are two scenarios:
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Any person who transforms their entitlement is prevented from voting on any matter relating to the transformation
of one or more other landholders’ water entitlements or the supply of water to landholders who have not
transformed their water entitlements.
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If a person has transformed their entitlement and terminated their delivery rights they are no longer entitled to
vote on any matter.
INTERACTIONS WITH EXISTING PROVISIONS IN THE WM ACT
“Transformation dealings” are different to a sale of water or entitlement in that the landholder is converting their
interest in the group entitlement into a personal interest pursuant to a statutory right; they are not purchasing the
entitlement from the PID or Trust. The PID or Trust is therefore not constrained by sections 180 or 234, respectively,
which deal with the sale of surplus water. However, when the Office of Water receives a dealing application under
s71Q from a Trust or PID it will need to be satisfied either that:
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the dealing is a transformation dealing and the requirements of s234 do not apply; or,
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the dealing relates to a sale of water and the requirements of s234 have been met.
To prevent delays in the processing of applications it is important that, when lodging the application, the PID or Trust
states in writing in a letter accompanying the application:
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whether the application relates to a transformation proposal or a sale of surplus water; and,
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if the application relates to transformation, the PID or Trust should certify in this letter that the transferee is the
member or ratepayer whose water entitlement is being transformed or is a person nominated by that member or
ratepayer.
The PID or Trust should take care to ensure that the information in the application is accurate as providing false or
misleading information in relation to an application is an offence under s344 of the Water Management Act 2000.
MORE INFORMATION
Find out more about water licensing at www.water.nsw.gov.au
Contact us
Freecall the licensing information line on 1800 353 104 or email [email protected]
www.water.nsw.gov.au
NSW Office of Water | May 2011
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© State of New South Wales through the NSW Government 2011
This fact sheet is provided for general information purposes only. It is summary only and should not be relied on as legal advice. While every reasonable effort
has been made to ensure that it is correct at the time of publication, the State of New South Wales, its agents and employees, disclaim any and all liability to any
person in respect of anything or the consequences of anything done or omitted to be done in reliance upon the whole or any part of this document.