Challenging the tragedy of the water commons

Senate Inquiry into Co-operative and Mutual structures
July 23, 2015
Peri-urban water law dilemmas
July 23, 2015

Challenging the tragedy of the water commons

Challenging the tragedy of the water commons through facilitating water recycling: New rules impacting peri-urban water use


In NSW there are a myriad of regulatory instruments relating to use of ‘recycled water’. Recycled water is variously defined to include greywater, stormwater, blackwater, wastewater or sewage, notwithstanding acknowledgment of policy guidelines. The WIC Act, Water Industry Competition (General) Regulation 2008, the LG Act and the Protection of the Environment Operations Act 1997 (NSW) are the primary regulatory instruments overseeing recycled water use. However, historic and continuing problems led to confusion as to what approvals needed to be sought, as well as higher costs for applicants and more administrative work for officials. This was especially as regards the differing licensing requirements in the WIC Act and the LG Act. As a result of a legislatively mandated review, recommendations were made and, in conjunction with public consultation, an amended bill was tabled and passed in 2014. These were focussed at creating a more efficient and competitive system that adequately protected public health.

This paper considers two key amendments to the WIC Act: the new requirement for a licence and new approval procedures for ‘high risk’ water recycling or stormwater schemes; and the regulation of metropolitan council-led schemes under a WIC Act licence. Other Australian states’ approaches to regulating water schemes will also be considered in order to provide broader context to the NSW system. As of writing (early April 2015), the majority of the amending Act had not commenced, nor have updated regulations been created.[1]

History of the amendment

The WIC Act requires the Minister to review the Act as soon as possible after a five year period to determine whether the policy objectives of the Act remain valid and whether the terms of the Act remain appropriate for securing the Act’s objectives. The review process entailed the NSW Government publishing a Discussion Paper, released in November 2012, and a Position Paper released in February 2014. Public consultation was also sought on the review process. This culminated in the Water Industry Amendment (Review) Bill 2014 being tabled in June 2014 and the subsequent passing of the amended Act in October of 2014. It is also worth noting that the NSW Government published its ‘Better Regulation Statement’ in July 2014, which analyses the interaction between the WIC Act and the LG Act and focussed on water recycling.

High risk water recycling and stormwater harvesting schemes

Under the amending Act, ‘high risk’ and ‘utility like’ schemes will require a licence. Hence, entities that wish to provide recycled water and do not reach the ‘high risk’ or ‘utility like’ scheme threshold will not need a licence under the WIC Act. The changes are centred on the reduction of red tape because, if changes had not been made and the transitional arrangements expired, licensing requirements under the WIC Act would encompass a multitude of schemes that would include those already approved under the LG Act. Clearly, this would be an inefficient and costly process for all stakeholders, so the changes present an opportunity for the irrigation industry to become suppliers of peri-urban recycling water facilities. They also mean that understanding how ‘high risk’ and ‘utility like’ schemes are defined is crucial.

Section 5 of the amending Act states that the following all require a licence: category A schemes; water industry infrastructure with sewerage treatment capacity for more than 750 kilolitres; and water industry infrastructure declared by the regulations to be water industry infrastructure to which the part applies.The category A scheme is defined as “water industry infrastructure comprising an integrated system for providing water or sewerage services to 30 or more small retail customer premises in an area or building, including any treatment works, pumping stations and reticulation networks that form part of the system”. Although this is a straightforward definition, determining what constitutes a ‘high risk’ scheme is not. The Position Paper proposed that a transparent risk matrix should be designed to define what a high risk scheme is.

The matrix for determining high risk water infrastructure was not universally popular. Many stakeholders provided submissions to both the discussion and position papers and, while categorising risk as a way of determining whether a licence was required was well received, there was concern regarding how the matrix determined whether a scheme was high risk.The submission by the Southern Sydney Regional Organisation of Councils (‘SSROC’) provides a pertinent example of this concern. SSROC suggested that the proposed risk matrix put too many types of end-uses in the high risk category (depending on water source). They speculated that this would result in schemes that are run for community benefit being unviable due to the heavy regulatory requirements that come with being categorised as high risk water infrastructure.

Instead, SSROC submitted that council schemes for stormwater harvesting and recycled water for irrigation could be considered to be medium risk (depending on volume of water). They suggested that such schemes could, for example, be self-regulated subject to meeting requirements under the Australian Guidelines for Recycled Water. Further, they disagreed that stormwater harvesting schemes should be regulated under the WIC Act on the basis that they are considered to be a public health risk, an argument that was ultimately contradicted by the Minister and NSW Health. SRROC disputed that there was any evidence of health incidents due to stormwater harvesting schemes and to potentially require such schemes to be licensed and approved under the high risk scheme would make numerous schemes that are of high community value unviable.

The concern over the viability of non-commercial projects is not limited to Councils, as illustrated by the submission of the University of Western Sydney (‘UWS’). UWS argued that its recycled water program was focused on providing irrigation to its land for amenity, research and teaching, and that the annual cost for a licence would be an ‘unjustified burden’. UWS noted that, while there is supply infrastructure to the Hawkesbury Race Club, this was only as a drought backup for the stormwater harvesting infrastructure on the race club grounds. It further contended that fees paid by the race club to UWS would not cover the annual licensing fees as the volume supplied is too low. UWS proposed that it should be allowed to continue its scheme without the WIC Act licence instead of having its water recycling scheme being potentially classified as high risk water infrastructure. Further, UWS proffered that it would maintain legal and technical obligations provided in water use agreements and risk management plans to the organisations that it supplies with recycled water.

The proposed matrix is indicative of what shape the regulations might ultimately take. However, as per the Explanatory Note to the amending Act, the regulations will set out the criteria for what will constitute ‘high risk’ water infrastructure and consequently be subject to Part 2 of the WIC Act.

Confusion over regulation of existing schemes under the LG Act and regulation of metropolitan local councils under the WIC Act

Section 68 of the LG Act gives councils broad powers of approval over activities relating to water, such as carrying out a water supply work or a stormwater supply work. However, statutory interpretation of this section is troublesome. The section requires council approval for management of waste and stormwater drainage generally but does not refer to recycling water or stormwater harvesting schemes specifically. Therefore, only recycling schemes involving effluent or industrial waste are covered, while stormwater harvesting and reuse schemes are not. Further, the Local Government Regulations make clear that approval under section 68, Part C(5) of the LG Act is not required when done under an Environmental Protection Licence (EPL) conferred by the Protection of the Environment Operations Act 1997 (NSW). The effect is that licensing would still occur through an EPL but would focus on the environmental impacts, rather than matters of public health.

This is a profound distinction for an irrigator as it permits irrigators to operate water recycling schemes in place of councils. The Discussion Paper noted the relevance of this distinction to the industry.The NSW Government Position Paper suggested that recycled water schemes and stormwater harvesting schemes could be referred to directly in the section in order to reduce uncertainty and unnecessary costs regarding the requirements under the LG Act. As of April 2015 this has not occurred. The questions regarding the need for council approval for types of water recycling or stormwater harvesting and reuse schemes under section 68 are thus left unresolved.

Under the LG Act, a council required approval from the Minister for Primary Industries if it wished to construct or extend water treatment works or provide sewerage facilities.The rationale behind this was the presumption that the Sydney Water Corporation and the Hunter Water Corporation would always provide these services. Further, there is no provision in the Act requiring the council to ensure the proper safety, maintenance and working of stormwater reuse schemes run by metropolitan councils. This is despite section 61 permitting the Minister to direct a council to ensure the proper safety, maintenance and working of water and sewerage treatment works. The distinction is due to the definition of ‘water’, which for the purposes of s 60 of the LG Act refers only to drinking water. Consequently, there was no statutory approval process for council-run stormwater harvesting schemes and therefore no capacity for regulatory oversight.

The amending Act addresses this inconsistency through redefining ‘public water utility’. It removes from the definition councils that provide water or sewerage services in the Sydney Water Corporation or Hunter Water Corporation areas of operation. This has the further effect of removing the exemption that councils within the Sydney Water Corporation or Hunter Water Corporation area of operation had previously relied on in order to not utilise these schemes.

The change is premised on public health concerns; as the schemes grow in popularity the possibility of something going wrong has necessarily increased. The change also means that if a council-run stormwater harvesting scheme triggers the threshold licensing requirements under the WIC Act then they will automatically be regulated the same as private schemes. This had not occurred previously.

The amendments provide the irrigation industry with an important opportunity. Councils that do not wish to have their schemes licensed can engage a private entity to establish and administer the scheme on their behalf. A practical example of this approach is the City of Sydney engaging a private entity (Green Square) to operate a stormwater reuse scheme at Green Square. To varying degrees, the irrigation industry can be that private entity.

Does concern over public health come at the cost of over-regulating water recycling schemes?

As stormwater harvesting schemes grow in popularity it has become clear that a balance must be struck between protecting public health and encouraging projects that improve water use efficiency. SSROC’s submission is an exemplar of councils’ concerns that such schemes have negligible public health concerns and therefore should not be imposed with heavier regulatory standards. Conversely, the Minister’s second reading speech and a submission by NSW Health illustrated the opposite view that there are pertinent health concerns.

Ostensibly, the requirements for an operator’s licence are not particularly onerous. Wealthier and well-resourced councils and private entities could easily absorb the extra cost imposed by new licensing standards. However, it is questionable whether smaller councils and private entities would be able to do the same. The problem is the likely high compliance costs. In the case of water industry infrastructure that satisfies the threshold requirements established in section 5 of the amending Act, a design approval,operational approval and an operator’s licence will all be required.

The Independent Pricing and Regulatory Tribunal (IPART) must consent to these approvals, and periodic fees are also required. Further, discretionary powers of IPART can be triggered. These include requiring security for maintaining compliance with conditions of the approval, relevant plans of action for different contingencies or the requirement to submit incident reports, financial reports or other reports relating to infrastructure. The compliance requirements would be markedly less for an existing scheme that comes under the amending act (which therefore would not require design approval), however new projects would have numerous obligations and costs.

Interestingly, the Minister noted that most stormwater irrigation schemes would only require operational approval rather than also requiring a licensed operator. This ignores the fact that licensed operator/s will need to be employed at the cost of the entity that holds the operational approval, or that there will be extra costs if a design approval is required. It should also be noted that design approval is required if alteration of water industry infrastructure occurs, not just construction or installation.Clearly, the costs involved are both administrative and substantive and have the potential to grow in complexity.

Based off the draft risk matrix in Figure 1, the Amendments arguably stop short of achieving a balance between protecting public health and encouraging projects that improve water use efficiency. This is primarily because the regulatory costs of compliance do not appear to be commensurate with the risk of some schemes. This would also be in contrast with the neo-liberal approach that NSW planning law generally has taken in the last 20 years by streamlining approval processes and outsourcing government functions to the private sector.

Comparable regulation in water recycling for irrigation use in other states

It is instructive to juxtapose regulation across Australian jurisdictions to provide useful context to the discussion. Queensland, Victoria and South Australia are all pertinent examples.


Regulations of recycled water in Queensland underwent reform in May 2014. The focus was simplifying the regulation of recycled water and reducing regulation requirements for recycled water providers who provide water to recycled water schemes under the Water Supply (Safety and Reliability) Act. Recycled water from greywater, stormwater or coal seam gas water is not regulated under this Act. Instead, greywater is regulated under the Plumbing and Drainage Act and coal seam gas water is regulated variously under the Environmental Protection Actand the Waste Reduction and Recycling Act. This regulation is dependent on whether the coal seam gas water is of such a quality that it can be approved as a resource. If it is of sufficient quality then its use does not need to be regulated under the Environmental Protection Act.

Interestingly in an irrigation context, stormwater harvesting schemes are not strictly regulated by any legislation. Although guidelines such as the Stormwater Guideline: Environmentally Relevant Activities have been published by the Queensland Government, their focus is more on the dangers of stormwater run-off rather than the utilisation of stormwater for water recycling schemes.

South Australia

In South Australia, recycled water projects are governed to different degrees under the Public Health Act, the Environment Protection Act and the Natural Resources Management Act.The Public Health Act deals with recycled water through its definition of ‘wastewater’. This is defined as any water that has been used in any form of human activity and includes water containing any form of waste or other matter or substance that may detract from its safety or from public health, or human waste either alone or in combination with water. This is a broad definition and while it applies to treated sewerage and greywater, it does not apply to rainwater and stormwater. The Public Health (Wastewater) Regulations do not provide any further guidance.

However, it is important to note that Parts 6 and 7 of the Public Health Act (entitled ‘general duty’ and ‘general public health offences’ respectively) would apply to a rainwater and stormwater reuse project. Therefore, in order to avoid breaches under Part 6 or Part 7 applicants are encouraged to seek the advice of SA Health who will then assess the proposal in accordance with the Australian Guidelines for Water Recycling. If found to be safe, SA Health will provide a “letter of comfort” stating that the project is “safe” from a public health perspective.

The Environment Protection Act focuses on the protection of the environment rather that the protection of human health. Recycled water schemes may require a licence from the Environment Protection Authority in some circumstances, although this is unlikely as recycled water schemes are not included within the definition of activities of ‘Environmental Significance’. The Natural Resources Management Act may also be relevant to regulation of water recycling schemes under water allocation plans. Like Queensland’s regulatory structure, South Australia’s approach can be confusing to understand, particularly as the definition of ‘wastewater’ under the Public Health Act does not clearly define what types of water recycling are included in the definition. The regulatory gap is beneficial to irrigators, however, who have the opportunity to use stormwater as a basis for a water recycling scheme and incur less regulatory requirements than other categories of water recycling.


In Victoria, and with exceptions, works approvals or licences from the Environment Protection Authority (Victoria) are required for premises on or from which sewage effluent is treated, discharged or deposited that exceeds a flow rate of 5000 litres per day. This requirement also applies to industrial wastewater effluent not generated at the premises that exceeds a flow rate of 5000 litres per day, and is treated, discharged or deposited,although there are no exceptions in this category. As greywater is included in the definition of industrial wastewater, stormwater and rainfall are the only two categories of water recycling that are not regulated under the Environmental Protection Act.They are therefore not regulated aside from potentially requiring a planning permit from the responsible authority (generally local council but can also be the Minister for Planning depending on the type of project). Again, this provides irrigators with an opportunity use a more relaxed regulatory climate to utilise stormwater harvesting schemes.

Conclusion: what does this mean for irrigation in a peri-urban context?

The amending Act is an attempt by the NSW Government to address regulatory confusion on the basis of protecting public health. Regulation of recycled water schemes, particularly stormwater reuse schemes, in states around Australia is not on par with what might occur in NSW. This is curious when considered in the context of NSW planning law over the last 20 years, which has moved towards a neo-liberal approach to planning, and maintains a focus on economic rather than environmental and social outcomes. In accordance both with this neo-liberal approach and cogent submissions made by both private and public stakeholders, it is possible that the final iteration of what constitutes ‘high risk’ and ‘utility like’ in the regulations will more subtly reflect this standpoint.

If this were to be the case peri-urban irrigation would benefit in the following ways:

  • there would be a clear indication of whether a licence under the WIC Act would be required, creating certainty to counteract the previous confusion;
  • the establishment and use of the recycled water schemes would be easier in circumstances where the licensing threshold under section 5 of the amending Act is not reached, which would encourage uptake of the schemes, particularly stormwater harvesting schemes;
  • councils can engage a third-party (such as an irrigator entity) to be the licensee for the scheme where projects trigger threshold requirements, rather than continue the existing trend of allowing council stormwater reuse schemes to run unregulated.

Conversely, concerns regarding the balance between over-regulation and protecting public health should be raised if the threshold for ‘high risk’ and ‘utility like’ remains as was proposed in the Position Paper. This is particularly given that other Australian states do not deem stormwater reuse projects to be of a sufficient public health risk to regulate them from that perspective or, if they do, it is done based on the Australian Guidelines for Water Recycling. Further, if the threshold is set lower than necessary it will not serve to reduce red-tape or simplify the approval process as more water recycling projects than necessary will be caught by it, many of which are run for the benefit of local communities.

The impacts of climate change necessarily require serious consideration to be given to the use of recycled water. Depending how the WIC Act and its subsidiary regulations define ‘high risk’ and ‘utility like’, this approach could be used as a model for the next generation of water regulation, or as a case study of what to avoid.


[1] Paper presentation by Jeremy Fisher, Principal, to the Irrigation Australia Regional Conference 2015.  Paper written by Andrew Kimbell in association with Jeremy Fisher, with editing assistance from Dr Madeleine Hartley. Any errors remain the responsibility of Jeremy Fisher.

© Jeremy Fisher 2015


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