A Tale of Two Countries: Lessons from Australia for Water Law in the United States?

by Yee Huang

March 22, 2010

This post is the first in a monthly series on topics of international environmental law and environmental laws in other countries. Today’s post looks at the evolution of Australia’s water laws.

Australia is one of the driest continents on the planet, making the country a necessary laboratory for innovative approaches to water management and governance. Australia is characterized by a sparsely populated, semi-arid interior that is dominated by agriculture and the relatively water-abundant coastal edges that are home to the country's urban areas. Nearly 40 percent of Australia’s agriculture is in the Murray-Darling River Basin, which straddles four states, with the vast majority located in New South Wales (NSW). Like many other countries, including the United States, Australia has dealt and is dealing with myriad challenges in water resources management, including high extraction and diversion levels; lack of awareness of water as a finite resource; the need to retain instream water for aquatic ecosystem health; and current and impending climate change impacts, which are predicted to decrease water availability. Its response is a water law system based on administrative permits that are sufficiently flexible to deal with a range of water uses, a potential model for water law reform in the United States.



Early water rights in the six colonies that would later form Australia were based in the same Roman and other ancient law concepts that the United Kingdom used, in which water was a common resource and there was a collective, public ownership of water. Under this system of “riparian” law, water use is tied to the land adjacent to the water body. While riparianism was suited for the relatively water-rich U.K., settlers in Australian quickly realized—as did the first western settlers in the United States—that riparian law was ill-suited for arid lands, where water was needed apart and at great distances from the land.

The first comprehensive piece of modern water legislation in NSW was the Water Act of 1912. This Act replaced common law riparian rights with statutory law to grant water use rights through an administrative process. This new system of water use rights required a license for water withdrawal, and the license was of limited duration and specified both use conditions and renewal procedures. The rights were granted on a first-come, first-served basis, but unlike the prior appropriation system in the United States, seniority or priority did not attach to these rights. Thus, all water use rights were viewed equally. Interestingly, the Act specifically excluded the payment of compensation for any changes in the volume of water allocations, based on the principle that water is a natural resource and owned collectively by the public.

During the years between 1912 and 2002, problems from overallocation of water resources arose with the introduction of irrigated cotton and large-scale farming operations. With this intense use of water, evidence of environmental harms began to appear, including irrigation-induced salinity in the waters of the Murray-Darling River Basin and declines of native fish and vegetation. Amidst the debate over the best uses of water, the discussion also turned to viewing water as a commodity, especially in the early 1980s, when Australia suffered a severe drought.

The most recent comprehensive water law reform was the Water Management Act of 2000. This Act created separate rights for extraction or diversion of surface water or groundwater and for the right to use water at a particular place for a particular purpose. These are access license and water use approvals, respectively. The Act also prioritized water uses in times of shortage, from highest to lowest: domestic, environmental, commercial and urban uses, and irrigation.

The Act also adopts principles of adaptive management, an iterative learning process that constantly monitors, adjusts, and reevaluates management goals and targets. Under the Act, the government gives licenses and approvals for a ten-year period, which include all conditions and restrictions for that period. However, on renewal, the state has the option to amend the license or approval without having to pay compensation for altering water allocation for the benefit of the public. This aspect of the water use right retains the concept that water is subject to public ownership and should be managed for the public good.

One of the most intriguing aspects of the Act is how NSW dealt with equity issues as water law transitioned to this new system. The state used intensive public participation to gain consensus among water stakeholders on the priorities and curtailments of water uses, but ultimately the primary outcome has been to create some windfall gains, to grandfather old uses, or to progressively reduce older uses to the extent economically equitable.

The evolution of water law and water resources management in Australia and NSW in particular has benefited from an early adoption of a use-based, administrative system that retains features of public ownership of water. In many ways, Australian water law represents the optimal hybrid of the riparian and prior appropriation systems in the United States. Australian water law retains the marks of certainty found in prior appropriation and the communal aspect of riparianism. By viewing all rights equally without regard for priority or seniority, Australian water law has created more flexibility to meet environmental or other water use considerations.

Most notably, the process of water law evolution in Australia has resulted in a wider realization, among the public, developers, irrigators, and politicians, that widely available, inexpensive water resources are finite and must be managed according to a diverse palette of interests. Says Brian Haisman of the World Bank, “This is nothing short of a revolution in public thinking in a country with a strong economic development ethic and bodes well for the future evolution of sustainable water management policies in Australia.”

The United States would do well to have its own revolution in public thinking and water law reform. The western United States’ climate and system of prior appropriation are most analogous to Australia, except that prior appropriation has serious limits that will be tested as future demands increase and climate changes makes water supplies increasingly uncertain. The “prior” aspect of prior appropriation may have a particularly harsh implication: as noted by CPR Member Scholar Robert Adler, historically junior appropriators have retained their water allocations because of an extensive network of water storage infrastructure. In the future, however, their fortunes may change. If senior appropriators fully exercise their water rights in times of water scarcity, the junior appropriators may be left high and dry with potentially severe economic and social consequences. Prior appropriation’s tendency to freeze arcane or inefficient uses based on seniority alone has been overcome by the permit renewal process and the equal nature of water use rights in NSW. Perhaps prior appropriation states should look to Australia—where water also has deep visceral resonance—for inspiration to reform.

For more information, see Brian Haisman, “Impacts of Water Rights Reform in Australia,” in WATER RIGHTS REFORM: LESSONS FOR INSTITUTIONAL DESIGN 113 (Bryan Randolph Bruns et al., eds. 2005), and Robert W. Adler, Climate Change and the Hegemony of State Water Law, 29 STANFORD ENVIRONMENTAL LAW JOURNAL 1 (2010).
 

Could you please explain more about what happens in New South Wales under this system of water law, when there is not enough water to meet all demands? I understand from your article that certain uses are prioritized over others in terms of granting a license (domestic,environmental, etc.). However, I did not gather much regarding whether this same order applies when there is not enough water to meet all demands. If this order applies, then how are particular permittes ordered within each category? (i.e. There is enough water to satisfy all domestic permittes, but not enough to satisfy all environmental uses. Do the remaining categories after environmental, such as municipal and irrigation, just get nothing?) Also, what system of water law is in place in the other Australian States and Territories?
— Aaron Goldman
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