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Focus: New stormwater licencing in the pipeline

22 September 2014

In brief: New legislation that seeks to establish a statutory framework for the access to and use of stormwater in Victoria is an attempt to increase the use of stormwater in urban areas and furthers the Victorian Government's policy of limiting the diversion of water from rural areas for urban use. The process to access this alternative water source appears, at first glance, to be straightforward. However, uncertainty still exists. Partner Kate Axup (view CV) and Lawyer Danielle Atkin report.

How does it affect you?

  • Water corporations will be given a statutory right to water in their stormwater infrastructure so long as that infrastructure is within a declared urban area. Rights to water in a water corporation's infrastructure located elsewhere are not clear.
  • Local councils will be given a statutory right to water in their stormwater infrastructure and can enter into agreements with third parties to access water in stormwater infrastructure that is outside specified stormwater areas. However, their role, if any, in granting statutory 'take and use' licences to water in their infrastructure within specified stormwater areas is yet to be determined.
  • Third parties wishing to access stormwater can do so:
    • under a take and use licence, where the water is located in a water corporation's stormwater infrastructure or a local council's stormwater infrastructure within a specified stormwater area; or
    • by agreement with the local council, where the water is located in a local council's stormwater infrastructure outside a specified stormwater area.

    Third parties should note that a take and use licence offers a more secure right to the water than a third party agreement.

Background

If passed, the Water Bill 2014 (Vic) will repeal the Water Act 1989 (Vic) and the Water Industry Act 1994 (Vic) and will become the primary legislation governing water use and management in Victoria. The Water Bill largely restates the Water Act and the Water Industry Act in what is intended to be a more 'concise, flexible and enabling' way.1  

In addition, the Water Bill allows the Victorian Government to implement elements of its Living Victoria policy, which includes the aim of increasing the use of water available within urban areas, rather than diverting water from rural areas for urban use. One of the key ways the Government wants to do this is by creating clear statutory rights around the take and use of water within stormwater infrastructure.

Key features of the Bill

Use, flow and control of water in stormwater infrastructure vests in the Crown

Section 39 of the Water Bill vests the right to the use, flow and control of all water in stormwater infrastructure2 in the Crown. In addition, any common law rights to water in stormwater infrastructure that may exist under the Water Act will be abolished.3 Consequently, s39 of the Water Bill creates the foundation that allows the Crown to control access to water in stormwater infrastructure. The Water Bill then sets out how that water may be accessed and makes it an offence to access that water except in accordance with the Water Bill.

Water corporations and local councils are granted statutory rights to water in their stormwater infrastructure

Water corporations and local councils are granted a statutory right to take and use water in their stormwater infrastructure.4 This right is subject to any applicable water resource management order and any take and use licence issued by the Minister.5 These statutory rights to stormwater do not extend to water in a waterway.6

As such, water corporations and local councils are able to access water within their stormwater infrastructure without the need to apply for any further licence or approval. This access right does not apply to water in a waterway, making the distinction between 'stormwater infrastructure' and 'waterways' significant.

Third parties must apply for a take and use licence or have an agreement with the local council

The Water Bill makes it an offence to take water from stormwater infrastructure without appropriate authorisation.7

In most cases the appropriate authorisation for third parties to take and use water from a water corporation's stormwater infrastructure in an urban area is a take and use licence.8 A take and use licence is also required for all third parties wishing to access water from a local council's stormwater infrastructure that is located in a specified stormwater area.9

An agreement with the local council must be sought when a third party wishes to access water from a local council's stormwater infrastructure that is located outside a specified stormwater area.10

The application process for take and use licences is set out in Division 2 of Part 4.5 of the Water Bill. In contrast, the Water Bill is silent on how third party agreements with local councils are to be created, presumably leaving it to the parties to negotiate access agreements on a case-by-case basis.

Comment

No definition of 'stormwater'

The Water Bill does not attempt to define stormwater or grant rights over stormwater, per se. Instead, the Water Bill uses the location of the water as the starting point in creating rights to that water. That is, the Water Bill creates rights to water that is located in waterways, aquifers or stormwater infrastructure.11

This distinction means, for example, that once water is in a waterway it is irrelevant whether that water has come from stormwater runoff, groundwater discharge or surface water flow. It is the fact that the water is located in a waterway that is the defining factor in determining the rights to that water.

However, as discussed below, identifying the location of water for this purpose is not always clear.

Distinction between 'stormwater infrastructure' and 'waterways' unclear

There is a degree of overlap in the definitions of 'stormwater infrastructure' and 'waterway' under the Water Bill.

Consequently, the distinction between 'stormwater infrastructure' and 'waterways' is not always clear. This is particularly true in an urban environment, where many natural waterways are used as drains. For example, Moonee Ponds Creek and Gardiners Creek both have sections where extensive modifications have occurred to allow water to drain away quickly from the local environment and, in some reaches, the bed and banks of the creek have been covered in concrete. These creeks appear to fall within the definitions of both a waterway and stormwater infrastructure in the Water Bill. It is unclear in these situations which definition prevails.

It is particularly important to be able to distinguish between stormwater infrastructure and waterways in areas where access to water from waterways is limited by a cap, currently known as a 'permissible consumptive volume' under the Water Act.12 Demand for alternative sources of water, such as stormwater, has, in part, been driven by a lack of available access to water entitlements, with allocation levels in many catchment areas at, or exceeding, the permissible consumptive volume.

Permissible consumptive volumes are replaced by maximum entitlement amounts under the Water Bill.13 As such, it is likely to continue to be difficult to access rights to water from waterways in many catchments across Victoria under the Water Bill. However, in order to achieve its aim of increasing the use of stormwater, a maximum entitlement amount is, presumably, unlikely to apply to water in stormwater infrastructure.14 Therefore, if the distinction between waterways and stormwater infrastructure cannot be easily made, it may not be clear whether there is water available for use within a catchment or not.

In addition, the Water Bill expressly states that the statutory right of water corporations and local councils to water in stormwater infrastructure does not extend to waterways.15 Therefore, the lack of clarity between the definitions of 'stormwater infrastructure' and 'waterways' may result in uncertainty around whether the statutory right exists.

'Urban areas' limitation

For water corporations, the definition of stormwater infrastructure is limited to infrastructure in 'urban areas'. 'Urban area' is defined by the Water Bill as an area declared under s823. In his second reading speech, the Minister for Water indicated that urban areas could include subregional and local urban areas and that the purpose of creating them was to allow the Minister to develop whole of water cycle management plans within a specified area.16

However, the issue with this limitation is that it creates uncertainty in relation to access to stormwater outside urban areas. Take and use licences and bulk entitlements can be granted for water (other than recycled water) from any infrastructure of an Authority.17 In addition, s456 of the Water Bill allows a water corporation to agree to supply water from its infrastructure, subject to the Water Bill and having regard to the core considerations. These provisions may cover situations where water is located in a water corporation's stormwater infrastructure outside an urban area. However, as the use, flow and control of water in a water corporation's stormwater infrastructure outside an urban area is not vested in the Crown, it is arguable that common law rights to this water continue to exist, as they have not been expressly extinguished. As such, water in a water corporation's stormwater infrastructure outside an urban area seems to sit outside the management framework created by the Water Bill and the current confusion over rights to this water that exists under the Water Act may continue.

In addition, it may not be readily apparent to third parties whether or not an area has been declared as an urban area. Presumably, the water corporation and local council will be informed, but for those wishing to access stormwater, knowing whether an area is or is not an urban area and which management framework applies may not be easy.

Security for third parties

The Water Bill creates different rules for local councils' stormwater infrastructure depending on whether that infrastructure is located inside or outside a specified stormwater area. Specified stormwater areas are declared under water resource management orders and result in water being brought within the take and use licencing regime. Third party access to water contained in stormwater infrastructure located outside a specified stormwater area only requires agreement from a local council.18

The distinction is aimed at providing a more robust licencing regime in areas of current or expected demand for stormwater, the taking of which may impact the environment or third parties. In areas of lower demand, it allows local councils and existing users to continue accessing that water on a less formal basis.19

However, third parties wishing to access water in stormwater infrastructure may be better off securing their right, where possible, through a take and use licence.

A take and use licence is a statutory licence with proprietary right characteristics. For example, it is able to be traded and it can be enforced against other parties.20 In contrast, an agreement with a local council to take and use water is simply a contractual right, enforceable only against the local council.

In addition, an increase in demand for stormwater in non-specified stormwater areas may lead to the Government declaring that area to be a specified stormwater area. In those situations, any third parties agreements may be adversely affected. As such, third party agreements offer limited long-term water supply security.

Uncertainty in the role of local councils

Under the Water Act, take and use licences are approved by the Minister,21 although in practice, this function has been delegated to water corporations. Similarly, under the Water Bill, take and use licences will be approved by the Minister22 and presumably water corporations will continue to act as the Minister's delegate in this respect.

This effectively means that water corporations have the right to grant a third party a take and use licence to water in stormwater infrastructure owned by a local council and located in a specified stormwater area. The Water Bill appears to contemplate this situation by requiring the water corporation, as the Minister's delegate, to have regard to advice and comments received from a body in accordance with any rules made by the Minister under s825.23 Presumably, local councils will be included as a body under those rules.

Until such rules are drafted, it is unclear exactly what role local councils will play in this process. Local councils will want to ensure that, when the time comes for those rules to be drafted, their needs are adequately addressed.

Parliamentary timeline

The Water Bill was introduced into Parliament on 24 June 2014 and received its second reading speech on 26 June 2014. It is currently listed as one of the last items in the notice papers, which means, with only one sitting week left until the election, it may not be passed this year.

Footnotes
  1. Victoria, Parliamentary Debates, Legislative Assemble, 26 June 2014, 2371 (The Hon. Peter Walsh MP). 
  2. Stormwater infrastructure means infrastructure constructed or installed to collect or transport water run-off that is –
    (a)  owned by a water corporation and used to collect or transport water in or from an urban area; or
    (b) vested in a council under s198 of the Local Government Act 1989 (Vic) or otherwise owned by it. 
  3. Water Bill, s42.
  4. Ibid., ss 41(1) and (2).
  5. Ibid., s41(3). 
  6. Ibid., s41(4). 
  7. Ibid., ss 65 and 66. 
  8. Water Bill, ss 47(1)(a), 47(2)(b) and 65. Water corporations, electricity generation companies, the Environment Minister and the Water Holder can also access water within a water corporation's stormwater infrastructure under a bulk entitlement. See Water Bill, ss 45(1), 45(2)(b) and 81. A take and use licence is a tradeable statutory licence that authorises the holder of the licence to take and use an amount of water from a specified water source for up to 20 years, with an option for renewal.
  9. Water Bill, ss 47(1)(b) and 66; Specified stormwater area means the area constituted by a municipal district of a local council or a part of a municipal district of a local council specified under a water resource management order as a specified stormwater area.
  10. Water Bill, s66(3). 
  11. Ibid., s39. 
  12. Water Act, s22A. 
  13. Victoria, Parliamentary Debates, Legislative Assemble, 26 June 2014, 2373 (The Hon. Peter Walsh MP); Water Bill, sch 3.
  14. In his second reading speech, the Minister for Water stated that maximum entitlement amounts will apply across Victoria in relation to groundwater and across southern Victoria in relation to surface water, but makes no mention of them applying to water in stormwater infrastructure, see Victoria, Parliamentary Debates, Legislative Assemble, 26 June 2014, 2373 (The Hon. Peter Walsh MP). 
  15. Water Bill, s41(4). 
  16. Victoria, Parliamentary Debates, Legislative Assemble, 26 June 2014, 2372 (The Hon. Peter Walsh MP). 
  17. Water Bill, ss 45 and 47. Authority, in this context, means a water corporation or a catchment management authority. 
  18. Water Bill, s66(3). 
  19. Victoria, Parliamentary Debates, Legislative Assemble, 26 June 2014, 2372-2373 (The Hon. Peter Walsh MP).
  20. Water Bill, s5(a). 
  21. Water Act, s55.
  22. Water Bill, s131. 
  23. Ibid., ss 131(2)(c) and 172(2).

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