Murrumbidgee Ground-Water Preservation Assocation v Minister for Natural... [2004] NSWLEC 122 | Case summary | Zoe

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Murrumbidgee Ground-Water Preservation Assocation v Minister for Natural Resources

[2004] NSWLEC 122

Land and Environment Court (NSW)|2004-07-01|Before: McClellan CJ, Clellan J

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Source facts

Court

Land and Environment Court (NSW)

Decision date

2004-07-01

Before

McClellan CJ, Clellan J

Source

Original judgment source is linked above.

Judgment (99 paragraphs)

[1]

Introduction 1 HIS HONOUR: The applicants seek a declaration that the Water Sharing Plan for the Lower Murrumbidgee Groundwater Sources 2003 ("Plan") made by the Minister under s 50 of the Water Management Act 2000 (NSW) is invalid. The Plan has, like many other Plans made for the surface waters and groundwaters of the State, been the subject of considerable controversy. To date, there have been eleven legal challenges to various Plans commenced in this Court. 2 The history of the management of the available water in Australia has been documented by others (see eg: Barr & Cary, Greening a Brown Land, 1992). There is a view, still advanced by some commentators, that Australia has virtually unlimited water which only needs to be effectively harvested to make the vast area of semi-arid land within the country productive. From the late 19th century to the latter part of the 20th century this was the typical view both of those responsible for managing water resources and of the farmers who utilised the water. Although no doubt made with the best of intentions, management decisions designed to facilitate the maximum utilisation of water for farming purposes have proved to be unsustainable. Change to water management policy has been necessary, often with serious financial consequences for those who have invested capital on the assumption that water would be available. As recently as 1981, this Court was urged by the South Australian Government to refuse an application for a water licence on the Murray River but instead, the Court accepted the submission of the New South Wales Water Resources Commission that water was available and granted the licence: see Water Resources Commission of New South Wales & Ors v The State of South Australia & Ors (unreported, Land & Environment Court, 9 October 1981). That decision, like many others, has later proved to be at odds with the proper management of water resources within the state. The mistakes and identified problems are not unique to Australia. They have led in part to contemporary approaches to environmental issues including the development of the "precautionary principle". 3 For a number of years the relationship between the use of water for irrigation and salinity problems has become increasingly apparent. This is the case in the Lower Murrumbidgee Groundwater Management Area ("LMGMA" or "Area"). This Area lies mainly between the towns of Narrandera, Booligal, Balranald and Jerilderie and covers an area of approximately 3.3 million hectares. Significant salinity problems have been experienced in the south-western portion of the Area. There are, for relevant purposes, two groundwater sources in the Area. One is known as the Shepparton and the other as the Calivil and Renmark. The Shepparton is between 50 and 70 metres below the surface. The Calivil and Renmark extends from the bottom of the Shepparton to the bedrock and is typically 100 to 300 metres thick. 4 During the earlier part of the 1990s the approach taken by the Department of Land and Water Conservation (now incorporated into the Department of Infrastructure, Planning and Natural Resources) to increasing salinity in the Area was to encourage farmers to take water from the deep groundwater sources. The expectation was that this would lower the water table to the benefit of the arable land by reducing the salt content of the water at or near the surface. Commonly referred to as a "controlled groundwater depletion policy", it led, together with the impact of drought, to a significant increase in the water taken from the aquifers from about 1991 onwards. Entitlements in 1990/1991 totalled 211,300 ML/yr with usage of 96,923 ML. By 2002/2003 (a drought year) entitlements had risen to 520,000 ML/yr with usage of 380,000 ML in that year. These numbers reflect not only increased utilisation of water but also a major change in the expectation of those people who use irrigation as part of an agricultural enterprise. 5 In general terms, the consequence of the Plan under challenge is to significantly reduce both "theoretical" entitlements and the amount of water actually made available to users. The management strategy of depleting the groundwater source has been abandoned. Some farmers who have recently made capital investments with the expectation of receiving water will probably lose part of the benefit of that investment unless they can acquire water entitlement from others who either cannot or chose not to use the whole or part of their entitlement. They must, of course, pay the market price for that entitlement. The applicants allege that the Plan as made produces inequities, benefiting some farmers and damaging others. It is submitted that these inequities are extreme and that the Plan has no rational basis and is invalid.

[3]

The evidence of Dr Drury 9 Dr Len Drury, an hydrogeologist, gave detailed evidence. The Minister objected to his evidence but I am satisfied it should be admitted. The basis for the objection was that Dr Drury failed to explain how his opinions are wholly or substantially based upon his expertise (see Makita Pty Ltd v Sprowles (2001) 52 NSWLR 704). The opinions were said to be "simply ipse dixit and do not fall within the exception to the hearsay rule." 10 Dr Drury's report, which was tendered in evidence, was accompanied by a detailed curriculum vitae. He holds a Bachelor of Science degree from the University of New South Wales, a Diploma in Hydrology and a Doctorate of Philosophy. Commencing employment as a cadet hydrologist with the Water Resources Commission New South Wales he has worked in government and private practice in relation to both surface and groundwater problems for many years. He has worked in 27 countries participating in over 30 international water resources and development projects. 11 Dr Drury's report expresses a number of opinions. It is not possible in these reasons to capture them all. Some matters I have analysed in greater detail. I am satisfied that he is qualified to hold the opinions he has expressed and they are derived from the application of his specialised knowledge as an hydrogeologist to the available information with respect to the structure and historical performance of the relevant water bodies. Dr Drury concludes that some outcomes of the Plan are "irrational". I understand these opinions to reflect his understanding as an hydrogeologist. 12 I am satisfied that the facts and circumstances to which Dr Drury has applied his learning have been adequately explained in his report. When considering whether the Plan fails because it is irrational, the Court must undertake a different task to that completed by Dr Drury. But that does not make his opinion as to the operation of the existing groundwater systems and the likely impact of the water management regime proposed by the Plan irrelevant or inadmissible. 13 Dr Drury explained the relationship of the groundwater aquifers to the river system and the difference in quality of groundwater in the low salinity area and that in the high salinity area west of Hay. He also identified the extent to which, in his opinion, the aquifer functions as an integrated unit. His conclusions are as follows: "From the data available, I would conclude that the general overall trends in groundwater behaviour are:-

[50]

The evidence of Mr Lawson 31 Mr Scott Lawson is an hydrogeologist with the Department of Infrastructure, Planning and Natural Resources. He has been involved since 1990 in contributing to the development of the Lower Murrumbidgee groundwater flow model and, since 2001, in the preparation of the Plan. He has been the Department's representative on the Murrumbidgee Groundwater Management Committee since July 1998. His evidence as to the nature and hydrological performance of the Area was not significantly different to the evidence of Dr Drury. The disagreement between them is essentially limited to a debate about the appropriate response to the identified problems. 32 Like Dr Drury, Mr Lawson accepts that recharge in the Area may be site-specific and does not occur at equal rates throughout. He believes that, at present, the long-term groundwater levels at Darlington Point are reasonably stable due to the recovery of the aquifer after extraction. However, he said that this did not mean current levels of extraction were sustainable. Mr Lawson suggests that the source of the recharge was the Murrumbidgee River, which is itself part of the highly stressed Murray Darling Basin river system. Accordingly, although the aquifer is adequately recharged this may be at a cost to the Murray Darling system. 33 Mr Lawson believes the appropriate response to the identified problem is to make a uniform reduction in entitlements for all irrigators irrespective of whether they are in a high or low recharge location. He justifies this approach because of his understanding that the aquifers in the Area form one unified source of water. He described the aquifer in the following terms: "Groundwater travels via throughflow to all parts of the groundwater system, with the result that extraction does not have to be precisely proportioned to match local recharge. While it is accepted that aquifer recharge and potential groundwater extraction are not evenly distributed across the Plan area, each of the aquifer system components is inter-connected. An activity in one area, or at one depth, will result in changed conditions elsewhere in the aquifer system. It was because of this unevenness but interconnectedness that the groundwater model [being the one used for the Plan] was developed." 34 When cross-examined, Mr Lawson accepted that little is known about the degree of connection between different parts of the groundwater system. To the extent that connectivity is known to exist, it varies between different parts of the system. He acknowledges that the movement of water occurs at a very slow rate. When it was suggested to him that a molecule of water might take 150,000 years to move through the Area he responded by saying it would take "a long time". 35 Mr Lawson also accepted that the extraction of groundwater in one location may have no measurable impact upon water in another location. He accepted that there may be no hydrogeological rationale for a reduction of the level of extraction in the Darlington Point area itself, but emphasised that there was a hydrogeological justification for reduction of extraction in that location as part of an effort to control extraction throughout the whole groundwater system. 36 The view Mr Lawson expressed is that "[w]e're not dealing with separate systems that operate independently. We are dealing with one large groundwater system. The approach has been taken that all users would contribute to the reductions required to get that basin onto a long-term sustainable basis."

[55]

(d) to recognise the role of the community, as a partner with government, in resolving issues relating to the management of water sources, (e) to provide for the orderly, efficient and equitable sharing of water from water sources, (f) to integrate the management of water sources with the management of other aspects of the environment, including the land, its soil, its native vegetation and its native fauna, (g) to encourage the sharing of responsibility for the sustainable and efficient use of water between the Government and water users, (h) to encourage best practice in the management and use of water." 41 Chapter 2 of the Act, entitled "Water management planning", commences with a statement of water management principles. General principles, as well as principles in relation to specific activities are provided. The general principles include: "5(2) Generally: … (c) the water quality of all water sources should be protected and, wherever possible, enhanced, and … (g) the social and economic benefits to the community should be maximised, and … ." 42 In relation to water sharing the principles are: "(3) … (a) sharing of water from a water source must protect the water source and its dependent ecosystems, and (b) sharing of water from a water source must protect basis landholder rights, and (c) sharing or extraction of water under any other right must not prejudice the principles set out in paragraphs (a) and (b)." 43 The Act contemplates the making of a State Water Management Outcomes Plan ("the State Plan"). The State Plan is to provide for over-arching policy context targets and strategic outcomes, promote the water management principles in the Act and give effect to any government policy statement in relation to salinity strategies (s 6). The State Plan must be consistent with the State government's obligations arising from any inter-governmental agreement or government policy, including any policy in relation to the environmental objectives for water quality and river flow. 44 Section 9 obliges persons exercising functions under the Act to "take all reasonable steps to do so in accordance with, and so as to promote, the water management principles of [the] Act." Section 9(1)(b) obliges the relevant person to give priority, as between the principles for water sharing in s 5(3), to those principles in the order in which they are set out in the subsection. Accordingly, priority must be given to protecting the water source as against protecting landholder rights. All functions are to be exercised to give effect to the State Plan. 45 The Act provides for the creation of management committees. They must have at least 12 but not more than 20 members of whom: "(a) at least two are to be persons appointed to represent the interests of environmental protection groups, and (b) at least two are to be persons appointed to represent the interests of water user groups, and (c) at least two are to be persons appointed to represent the interests of local councils, and (d) at least one is to be a person appointed to represent the interests of catchment management boards and trusts, and (e) at least two are to be Aboriginal persons appointed to represent the interests of Aboriginal persons, and (f) at least one is to be a member of staff of the Department, and (g) at least one is to be a person nominated by the Minister for the Environment, and (h) such other persons as are appointed to represent such interests as the Minister considers require representation, and (i) one is to be a person (not being a member of staff of the Department) who is appointed as an independent chairperson for the committee." 46 The tasks of a committee may include: "(a) to prepare a draft management plan for the water management area, (b) to review a management plan that is in force for the water management area, (c) to investigate such matters affecting the management of the water management area as the Minister refers to it for investigation, (d) to report to the Minister on such matters affecting the management of the water management area as the Minister refers to it for report, (e) to advise the Minister on such matters affecting the management of the water management area as the Minister refers to it for advice." 47 A management committee is required to exercise its functions "consistently with the principles of ecologically sustainable development." S 14(3).

[56]

Management Plans 48 Part 3 of Chapter 2 provides for the making of management plans. 49 Pursuant to s 15 the Minister may direct a management committee to prepare a draft management plan on any aspect of water management and may set terms of reference according to which such a plan is to be prepared. 50 Section 16 provides that a management plan is to be consistent with the State Plan, various regulations and policies, including "government policy in relation to the environmental objectives for water quality river flow" (s 16(1)(e)). 51 Pursuant to s 16(2) government policy "includes such matters as are declared by the Regulations to be government policy." Section 17 of the Act provides for matters which may be included in a plan. It states as follows: "A management plan for a water management area may contain the following kinds of provisions: (a) provisions with respect to the preservation and enhancement of the quality of water in the water sources in the area, (b) provisions with respect to the kinds of monitoring and reporting requirements that should be imposed as conditions of approvals having effect within the area, (c) provisions with respect to the conditions to which access licences and approvals having effect within the area are to be subject ( mandatory conditions ), (d) provisions indicating the circumstances in which, the matters in respect of which and the extent to which the management plan may be amended by the Minister during the period for which it is in force, (e) provisions with respect to such other matters as may be authorised by the regulations." 52 When a plan is being formulated by a management committee, it must have "due regard to the socio-economic impacts of the proposals considered for inclusion" and to the "effect within each water management area or water source to which the plan applies of activities occurring, or likely to occur, outside each area or water source" (s 18). 53 Section 20 provides a statement of "core water sharing provisions" which must be included in a plan. These are as follows: "(1) The water sharing provisions of a management plan for a water management area or water source must deal with the following matters: (a) the establishment of environmental water rules for the area or water source in relation to each of the classes of environmental water referred to in section 8(1), (b) the identification of requirements for water within the area, or water source, to satisfy basic landholder rights, (c) the identification of requirements for water for extraction under access licences, (d) the establishment of access licence dealing rules for the area or water source, (e) the establishment of a bulk access regime for the extraction of water under access licences, having regard to the rules referred to in paragraphs (a) and (d) and the requirements referred to in paragraphs (b) and (c). (2) The bulk access regime referred to in subsection (1)(e): (a) must recognise and be consistent with any limits to the availability of water that are set (whether by the relevant management plan or otherwise) in relation to the water sources to which the regime relates, and (b) must establish rules according to which access licences are to be granted and managed and available water determinations to be made, and (c) must recognise the effect of climatic variability on the availability of water, and (d) may establish rules with respect to the priorities according to which water allocations are to be adjusted as a consequence of any reduction in the availability of water, and (e) may contain provisions with respect to the conditions that must (as mandatory conditions) be imposed on access licences under section 66(1), including conditions providing for the variation, from time to time, of the share and extraction components of access licences, and (f) must be consistent with the water management principles. (3) The rules referred to in subsection (2) (d) must comply with the priorities established under section 58. (4) The access licence dealing rules established under subsection (1)(d): (a) must comply with the access licence dealing principles, and (b) subject to those principles, may regulate or prohibit any dealing under Division 4 of Part 2 of Chapter 3." 54 Additional matters which may be included in a management plan are provided by s 21. 55 Provision is made in Division 3 of Part 3 of Chapter 2 for water use. Section 23 provides core provisions for water use as follows: "The water use provisions of a management plan for a water management area must deal with the following matters: (a) the identification of existing and potential water use practices and related activities, (b) the identification of those uses and activities which have adverse impacts, including cumulative impact, on water sources or their dependent ecosystems or on other water users, (c) the identification of the occurrence of land degradation, including soil erosion, compaction, geomorphic instability, contamination, acidity, waterlogging, decline of native vegetation or, where appropriate, salinity within the area and any impacts on water sources." 56 Section 24 makes additional provisions for water use in the following terms: "The water use provisions of a management plan for a water management area may also deal with the following matters: (a) best practice for water conservation, water efficiency and total water cycle management, (b) prevention of off-site impacts of water use, (c) requirements for the restoration or rehabilitation of land or water sources or their dependent ecosystems, (d) protection of the habitats or pathways of animals and plants, (e) the preservation and enhancement of the quality of water of the water sources in the area affected by water use and related practices, (f) structural or operational modifications for existing works, (g) other measures to give effect to the water management principles and the objects of this Act, (h) such other matters as are prescribed by the regulations." 57 Express provision is also made in s 32 and s 33 in relation to activities described as "controlled activities" and "aquifer interference activities." Particular provision is made in s 34 for environmental protection. 58 After complying with the requirements of the Act, the Minister may make a plan (s 41) which, subject to s 43, is to have effect for ten years.

[59]

The Plan is a water sharing plan 65 It is important to appreciate that the Plan under challenge is a water sharing plan, there being other types of plans contemplated in s 15 of the Act. The Plan was intended to commence on 1 July 2003 but this has been altered to 1 July 2004. The Plan has a life of ten years. It applies to the Lower Murrumbidgee Groundwater sources which are the Shepparton and the Calivil and Renmark water sources, and includes all water contained in the unconsolidated alluvial aquifers. The method of drafting is complex making the Plan difficult to understand which has been made worse by some acknowledged drafting anomalies. 66 As I have indicated, s 20 of the Act requires a water management plan to deal with a number of matters. It must, inter alia, establish environmental water rules (s 20(1)(a)), identify water for basic landholder rights (s 20(1)(b)), identify the requirements for water extraction under access licences (s 20(1)(c)) and establish a bulk access regime for the extraction of water under access licences (s 20(1)(e)). Section 20(2) mandates the elements which must be incorporated within a bulk access regime. The bulk access regime must be consistent with the water management principles provided in s 5 of the Act. Section 5(3) gives priority to protecting "the water source and its dependent ecosystems." 67 The vision of the Plan is stated to be "the optimal, equitable and sustainable management of groundwater for environmental, economic and social purposes in the Lower Murrumbidgee." 68 Clause 11 of the Plan provides its objectives, all of which are significant in the present case. The objectives are stated to be: "(a) share groundwater sustainably between users and the environment (b) share groundwater equitably amongst extractive users, (c) provide for basic landholder rights and priorities o f use, (d) protect groundwater quality, (e) maximise the social, economic and environmental benefits of groundwater management strategies, and (f) minimise the negative social and economic impacts of groundwater management strategies." 69 The Plan defines the strategies by which it is intended to operate. They include: "(c) establish an extraction limit for each groundwater source, taking into account the requirements of the environment. (d) reduce the total share component of access licences in the Calivil and Renmark to 125% of the extraction limit in that groundwater source." 70 Because the total of existing entitlements far exceeds the extraction limit, the consequence will be a significant reduction in many entitlements. Part 3 of the Plan is entitled "Basis for water sharing" and is intended to define the volume of water which may be extracted from the aquifers. The volume nominated has been identified as the volume of the recharge of the aquifer in any year. The theory is that if the water removed is confined to the extent of the recharge, the whole system can be kept in balance and provide a sustainable water regime in the long term. 71 The creation of environmental water rules under the Plan is undertaken by first setting aside for the environment the long-term average storage component of each groundwater source minus basic landholder rights (cl 18(1)(a)). In addition, 55,000 ML/yr of the average annual recharge to the Shepparton and 65,000 ML/yr of the average annual recharge to the Calivil and Renmark are reserved for the environment (cl 18(1)(b) & (c)). For reasons I shall explain later, from the total sum of all these volumes must be deducted any supplementary water provided to irrigators during the life of the plan. Supplementary water (provided pursuant to cl 25(9)) is intended to ease the burden of the Plan's impact on substantial users of water. 72 Basic landholder rights are defined in Part 5 of the Plan and include stock and domestic and native title rights. 73 The Plan identifies that the overall basis for water sharing in the Plan is the average annual recharge of each groundwater source being 65,000 ML/yr to the Shepparton and 335,000 ML/yr to the Calivil and Renmark (Cl 16). 74 Accordingly, as priority must be given to water for the environment (section 5(3)), 10,000 ML/yr from the Shepparton and 270,000 ML/yr from the Calivil and Renmark are available to be distributed to irrigators. 75 Part 6 of the Plan contains a general description of the elements of the bulk access regime required by s 20(1)(e). It includes environmental water, basic landholder rights and "the requirements for water for extraction under access licences identified under Part 7 of the Plan." 76 Part 7 is comprised of only one clause - clause 25. It is the source of much difficulty in understanding the Plan. The clause commences by identifying that at the commencement of the plan "the requirements identified for extraction under access licences" is 0 ML/yr in the Shepparton and 522,233 ML/yr in the Calivil and Renmark. The water for the Calivil and Renmark is stated to include 2,210 ML/yr for Carrathool, Coleambally and Darlington Pont. All that is in fact being said is that the total of all of the water which is theoretically available to be lawfully taken under existing licences is 522,233 ML/yr in the Calivil and Renmark. The number is merely theoretical for, as the evidence of Dr Drury indicates, neither that total, or anything like it, has been extracted in any year. In fact the average extraction for the last five years is 280,000 ML/yr. 77 Clause 25(4) provides the mechanism for the reduction in the share components of each licence. A share component defines the amount of water which a licence holder may access in any year, provided that water is available. The reduction is stated to be pursuant to s 42(2) of the Act which contemplates amendments of the Plan. The purpose is to reduce the total share components after the plan has been operating for five years. 78 The full text of cl 25(4) is as follows: "Pursuant to section 42 (2) of the Act, and at the commencement of year six of this plan the Minister should reduce the total share components of aquifer access licences specified in subclause (2) in the Calivil and Renmark to 125% of the extraction limit determined in clause 27, according to the following;

[60]

Amended access access licence share (1.25 (recharge = EHW)) = LWU licence share = component prior to x Total access licence share component amendment components prior to amendment - LWU" 79 The components of the equation are defined as follows: "(5) Recharge in subclause (4) is the recharge established in clause 16(1), as amended by clause 16(2). (6) EHW in subclause (4) is the volume of recharge reserved as environmental health water in the Calivil and Renmark in clause 18(1), as amended by clause 18(2). (7) LWU in subclause (4) is the total of local water utility access licence share components in the Calivil and Renmark existing prior to any access licence amendments under subclause (4)." 80 The proper construction of the clause has caused difficulties. However, the parties are agreed that it is intended that the amended access licence share component will be 64 percent of the component prior to amendment. 81 Clause 25(9) provides for supplementary water which is to be provided during the first 9 years of the plan, although decreasing (see cl 29(j)(k)(l)) until it is nil in year 10. This supplementary water is intended to ameliorate the impact of the proposed reduction in available water on those who have been intensively using their licence entitlement. 82 The water available under the supplementary licence is to be calculated pursuant to cl 25(9) and (10). It will have a share component in the first year of the volume historically extracted less 80% of the amended licence share component, which is in fact 51.2% of that original share component. 83 Accordingly, if you assume a licence of 100ML/yr, historically used to 100%, the supplementary entitlement will be 48.8% or 48.8ML, subject to the operation of cl 29 (j)(k)(l). The effect of those provisions will progressively reduce the supplementary entitlement to nil in the last year of the Plan. 84 Although in the future the Plan will reduce each licence holder's share component of the available water, the amount of water actually available for irrigation in each year will be controlled by the available water determination made by the Minister pursuant to s 59 of the Act. The rules for that determination are provided in clause 29 of the Plan. With respect to the total water available under access licences, cl 29(2)(d) provides that it will be the annual recharge minus environmental water and water available under utility access licences. 85 As I understand the position, when the whole of the legislation comes into force it is proposed to issue licences for a volume of water equivalent to the holder's current entitlement. However, the holder will only be able to extract water equivalent to their share of the total available water as determined by the Minister pursuant to s 59. 86 The effect will be that because the available water is far less than the total of existing share components, the theoretical volume of every holder's water will be immediately reduced. The reduction will not be as a proportion of the water they may have historically been using but rather as a proportion of their theoretical entitlement, being their access licence share component. Accordingly, irrigators who have been using a high proportion of their existing theoretical entitlement, now called share component, will receive less water than previously. Irrigators who have used only a small proportion of their allocation may not suffer any reduction in their actual water. 87 An essential element for the effective operation of the Plan is the potential for one licence holder to sell part or all of his or her water entitlement. Any transfer of entitlement is dependent on the approval of the Minister (see 71A), which will be given if the location to which the entitlement is to be transferred can sustain additional water extraction. By the creation of a market for entitlements it is believed that the available water will be put to its most productive use. However, it is not necessary that the whole or any portion of any entitlement has been used before it may be transferred. It may be that because there is simply no suitable water available on a particular parcel of land, a licence entitlement which could never be used by the holder of that entitlement is available to be sold to another irrigator who can use it.

[73]

(ii) near Narrandera is likely to induce water level declines to a new constant steady state condition, water level drawdown will be less than for the bore west of Hay, water level recovery will return close to original levels in the non-pumping period, reduce low salinity water availability to the ecosystem of the Shepparton Formation, deliver low salinity water to the soil, and induce low salinity water from the Shepparton Formation to the deep aquifers. Groundwater yield reduction according to the WSP will have different impacts across the LMGMA. Where current aquifer groundwater levels recover readily to long-term historical levels and long-term drawdown trends are fairly stable, the magnitude of groundwater drawdown will be reduced but water levels will return to current non-pumping levels. Limiting groundwater withdrawal in these areas will deprive users of groundwater, where historical records have proven it to be available. In other areas, where large groundwater extraction occurs with significant water level drawdown and small recovery, the magnitude in water level decline may reduce but the declining trend in groundwater level may continue but at a lesser slope. For these areas the WSP Equation 1 may not effectively ameliorate existing problems in progressive and continuing water level declines." 89 Dr Drury's ultimate conclusion is that the uniform approach adopted by the Plan is inappropriate from a hydrological perspective. He suggested that either management of the Area by imposing different rules in each zone, or by monitoring and allowing extraction at rates which did not excessively exploit the aquifer (a "bandwidth approach"), would be preferable. He expressed his opinion in the following terms: "In my opinion it is irrational to anticipate that a single equation applied regionally can address site specific hydrogeological problems within the LMGMA. It impacts on all irrigators within the LMGMA. The application of Equation 1 will inevitably result in different effects at site-specific locations, depending on the hydrogeological, hydrochemical and environmental situation. In some cases the irrigators will be reduced in water allocation where historically little water level problems exist. Some results may be environmentally undesirable (rising water levels, aquifer salinisation, waste water disposal, soil salinisation, declining water levels, etc), and in other areas the current problem of water level decline may not be adequately ameliorated.

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Mr Lawson's response to Dr Drury and his proposal for future management 90 Mr Lawson responded to Dr Drury. Although he did not entirely reject a zoned approach to management of the aquifer, he believes it would prove difficult to implement. 91 Mr Lawson's evidence was that: "[W]hile it is not impossible to zone the aquifer system, determining the zones will be a matter of personal opinion influenced by a range of criteria and hydrogeological interpretation. This is because, from a technical perspective, the hydrogeology is a continuum - there are no clear internal boundaries." 92 He said that this characteristic of the groundwater source made it difficult to reach an arrangement which would be equitable and which would satisfy groundwater users. 93 Mr Lawson also agreed that if boundaries between regions could not be established, this may be a persuasive reason for adopting a "bandwidth" approach to management of the resource. He acknowledged that the provision in the Plan for "management of local impacts" - which allows for special measures for highly stressed areas - was equivalent to a bandwidth approach (see cl 39). However, he accepted that this approach gave no consideration as to whether it was appropriate to reduce entitlements by the same proportion in all areas. 94 Mr Lawson accepted that the effect of the Plan was that, by year ten, each user would be subject to the same proportional reduction of their entitlements, when measured against the total of the maximum historical extraction from the Area. 95 The extent of this reduction would be that, after year 9 when supplementary water licences would be phased out, users would be entitled to about 52% of their original theoretical entitlement, although this figure could vary slightly according to the available water determination. 96 Mr Lawson accepted that some users may end up with the theoretical potential to use more water than they are currently using. For example, a user who currently uses only five to ten per cent of their entitlement might ultimately be restricted to 52% of their entitlement which would still allow for a greater level of extraction than their current usage. Others will find that their entitlement is significantly less than the water they have historically been using. 97 Clause 36 of the Plan allows for restrictions on extraction in particular areas, but does not reduce entitlements under the licence. Mr Lawson accepted that the effect may be that users with historically high rates of extraction could have their entitlements halved with the consequence that they would need more water, for which they would have to pay, to be able to continue operating at current levels, while in an area such as Carrathool, entitlements would be similarly reduced although the historical rate of usage and the appropriate extraction limit might be much lower. Users with historically low rates of extraction would be given entitlements which they themselves could not use but which they could sell to users with the capacity to benefit from them. 98 Senior counsel for the applicant put to Mr Lawson the example of a farmer at Darlington Point, who is currently extracting 1,000ML/year but facing a reduction to 500ML/yr in ten years time, and who, to make up the shortfall decides to purchase extra entitlements from a farmer in an area outside of Darlington Point. Although, as Mr Lawson pointed out, the Department would only approve the transfer if the aquifer on the farmer's property could sustain the higher level of extraction, this would be likely in Darlington Point. He conceded that the consequence would be that the farmer would be purchasing back part of an entitlement to use the water under his own property which, at least on hydrogeological principles, did not need to be taken away. And the entitlement purchased may be from someone who, because of the lack of groundwater resource on their own property, could never have utilised the entitlement which they have sold. 99 Mr Lawson said that the Department accepted that the Plan would have a negative impact upon the financial position of some persons who had been encouraged to develop their farms by increasing the level of irrigation. He also accepted that the Plan may have an unfair impact upon people who have only recently obtained their licences and who may have made a significant investment in infrastructure although they have not yet utilised all of the available water. Under the plan some of the infrastructure investment may be lost. However, his opinion was that of the available options for the future management of the water resource, uniform reductions with supplementary water in the early years for those with a history of more intense use was the most appropriate approach, and that any environmental problems in local areas could be effectively managed by imposing local controls.

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The evidence of Mr Young 105 Mr Gregory Young has lived in the Griffith/Darlington Point area for 40 years and is employed by AgReserves Australia Limited. He works AgReserves' properties Bringagee, Benerembah and Kooba Stations. Kooba Station is largely irrigated and grows maize, corn, seed crops, tomatoes, wheat, canola, barley, faba beans as well as breeding cattle and trading sheep. 106 Mr Young gave evidence about the Department's policy of encouraging water users to pump more water. He recalled Mr Scott Lawson saying at one meeting of users, "What do I have to do to get you guys to pump more water?" 107 Mr Young gave evidence that AgReserves has invested $70 million to purchase the three properties and, with the upgrade of infrastructure and further development, their total investment has increased to about $100 million. 108 Mr Young said that the Plan would reduce AgReserves' groundwater entitlements by 10,000 ML/yr and that the proposed reduction by year 6 to 64% of entitlements would cut AgReserves' profits by around 50 percent. His evidence was that the number of staff would have to be reduced from 83 to 27 because of reduced cropping, and the company might withdraw from the area due to the adverse impact on profits. The evidence of Mr Middleton 109 Mr Rodney Middleton purchased the property "Delta Park" in Jerilderie in 1996. He has developed it substantially since that time and it now has a bore, 600 acres of lasered ground, 800 acres of contours and 400 acres of dry farming area. Wheat barley and rice are grown and sheep are grazed on the property. The total extraction entitlement at Delta Park is 2,790 ML/yr and usage is currently 2,200 ML/yr. Mr Middleton's evidence was that if the groundwater allocation was cut by 48 percent, as stated in the Plan, Delta Park would not be a viable operation and his loans would not be able to be serviced. 110 Mr Middleton is also a drilling contractor specialising in large irrigation bores and has drilled more than 50 bores in the area between 1982 - 1986. In 1997, while testing two bores at Carrathool, he noticed that the recovery levels were very slow. He discussed this with Mr Lawson and gave evidence that Mr Lawson said: "I don't think there is a problem. Carrathool is at the end of the basin and is an area of limited connectivity."

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The making of the Plan 114 The Plan was made by the Minister on 24 February 2003 and gazetted on 26 February 2003. The Plan was preceded by the State Water Management Outcomes Plan made on 20 December 2002. Target 6(a) of the State Plan provides for a uniform reduction of the water available under an access licence to 125% of the sustainable yield. 115 Evidence was tendered of the investigation and consultation processes undertaken during the course of preparing the Plan. It is unnecessary to relate them in detail. However, I am satisfied that they were extensive and involved consideration of the possible approaches to protecting the aquifers and raised the possible social and economic impacts of the approach adopted in the Plan. 116 Amongst other matters considered was a report from the Economic and Social Policy Branch of the Department of Land and Water Conservation. Prepared in December 2002, the report is entitled "Socio-economic Impacts of Lower Murrumbidgee Groundwater Sharing Plan." 117 The report looks at the potential impacts of the proposed changes to water entitlements both at an individual and regional level and concludes that the major impacts will be felt in the Darlington Point area with the reduction in gross margin of an irrigator increasing proportionally as the level of reduction increases. 118 The report expresses the following conclusions: "Impacts on Individual Properties When individual History of Use is compared against individuals' share of 100% of the Sustainable Yield of the Lower Murrumbidgee groundwater source, there are 86 individual properties impacted by the Plan. The sum of the individual impacts is a reduction of 65,797 ML. The median reduction is 540 ML while the average is 756 ML. This indicates that the higher volume users account for a large proportion of the total reduction of 65,797 ML. In particular, one license holder alone accounts for 10,044 ML. The short-run impact of the Plan may see a reduction in agricultural activity. A number of factors will reduce this impact. The Plan allows, under certain circumstances for irrigators to use up to 125% of their share of the sustainable yield (independently of the guaranteed pathway). In addition, the plan will be implemented in stages to allow adjustment; includes carry-over rules that allow for greater business flexibility over time; and allows for water trading. The annual cost to the 86 individuals of replacing the lost water on the temporary market would be approximately $2.5 million assuming a temporary transfer price of $40/ML which is considered to be a high estimate. (the Valuer General estimated a permanent transfer price of $250/ML. This supports the assertion that $40/ML for temporary transfers is a high estimate). In addition to the mitigation strategies included in the Plan, the NSW Government has agreed to a groundwater structural adjustment program being developed for the Lower Murrumbidgee. When approved, this program will provide high level groundwater users with incremental annual reductions in use over ten years and financial assistance to allow them to undertake structural adjustment. High level users will be reimbursed for expenditure on approved on-farm investment to improve their water use efficiency, the purchase of water licences, and farm business diversification up to the value of their approved assistance package. 6.3.2 Regional Impacts After allowing for a pessimistic utilisation of the share of SY and a higher multiplier effect than used in the Agricultural Consultants Incorporated Limited report, the job losses associated with the reduction in entitlement range from 0-23 full time equivalents across the region. The regional impacts are likely to be neutral in the long-term as development and/or trading by underdeveloped licenses will mean that the current level of water use can be maintained at a regional level. The Plan itself allows for adjustment through a staged implementation of the Plan rules. This will mitigate potential short-run impacts of the Plan, as will the implementation of the structural adjustment program. In addition, the analysis does not include the positive benefits of the rules allowing sustained use of the groundwater resource by all those who have been granted licenses for the aquifer." 119 A further report from NSW Agriculture was obtained. The report, entitled "The on-farm impacts of groundwater management scenarios in the Lower Murrumbidgee", was forwarded to the Chairman of the Murrumbidgee Groundwater Management Committee by a letter from the Program Leader, Economic Resource Policy of the Department of Agriculture which summarised some of the conclusions of the report. The letter reads as follows: "As you would be aware, the Murrumbidgee Groundwater Management Committee (MGMC) requested NSW Agriculture to undertake an analysis of the impact of three interim allocation scenarios proposed by the Committee (90%, 70% and 50% announced allocations). For the purposes of the study, two representative farms were developed for the analysis to represent groundwater irrigators in the Darlington Point area (Groundwater management Zone 2). The study utilised information from collaborating farms on physical and financial farm characteristics and incorporated likely short-term adjustment responses to allocation reductions. The results of the analysis show progressively more significant financial effects as irrigation allocations decline, with the more severe scenarios likely to pose viability questions for some farms. This is a particular concern for those farms utilising a high proportion of their allocation (similar to the representative farms assessed). Effects were also found to be quite sensitive to the types of adjustment responses made by irrigators. The purchase of water on the transfer market was clearly shown to reduce the adverse impacts of lower groundwater allocation levels. This finding highlights an important task for the MGMC to develop water-trading facilities and appropriate carry-over provisions for the LMGMA as a way of mitigating the effects of policy changes. It is important to note that this analysis did not attempt to quantify the long-term benefits and costs of moving to sustainable use of the groundwater resource. This was taken as an agreed policy position. Rather, the analysis focussed on quantifying the short-term financial impacts of achieving sustainable resource use under several scenarios on the current resource sustainability. These short-term adjustment costs cannot therefore, be used to make a judgment on the broader issue of whether sustainable groundwater management should or should not be pursued. Previous drafts of the report have been circulated to collaborating farmers who participated in the study, members of the socio-economic working group and to the MGMC. The feedback we received from the socio-economic working group of the MGMC has been incorporated into this report. I would be happy to answer any further questions you have on the analysis and its implications for future water management planning. Finally, I would also like to mention that the models developed for this analysis are available to assist the committee in evaluating options for implementing sustainable resource management and to consider strategies to mitigate the impacts of those options in the future." 120 I am satisfied that the approach taken by the Plan, namely that entitlements should be reduced on a pro-rata basis without distinguishing for history of use or the location of the licence, reflects a decision taken by the State Cabinet. It is the policy which is reflected in the State Plan. In a background briefing note for the Minister before he interviewed Mr Burgess, the following is stated. It provides some insight into the difficulties in preparing the Plan. s "Under the Water Management Act 2000, the New South Wales Government has determined the following principles for groundwater: - Total use will be (on average) no more than 100% sustainable yield by year 10 of the Water Sharing Plan. - Total entitlements will be equal to 125% of the sustainable yield by year 10 of the Plan. - Entitlement reductions will be on a pro-rata basis, not distinguishing for history of use. - Each plan will include a mechanism and timeframe for reviewing recharge (or sustainable yield) estimates during the Plan. Any further adjustments to entitlements resulting from this (either up or down) will be applied on a "pro-rata" basis. s The brochure, 'Water Management Act 2000 - Groundwater Update', was released late August 2001 confirming the process for groundwater entitlement reduction in over-allocated groundwater systems, with no consideration towards history of use. s Groundwater entitlements in the Lower Murrumbidgee Groundwater Management Area currently total 533,000 ML. Under the Water Sharing Plan being developed, groundwater users face reductions of at least 25% (to 400,000 ML), and possibly 36% (to 340,000 ML). s Current usage is generally about 240,000 ML/yr - considerably less than proposed entitlement targets." 121 The particular complaints of Mr Burgess are also addressed in the following terms: s "Mr Burgess is a 'high level' user. Historically, he has used a large proportion of his groundwater entitlement and his new reduced entitlement will be less than his typical levels of usage. s Groundwater users such as Mr Burgess find it difficult to accept the proposed entitlement reduction, especially the lack of consideration towards historical use in applying reductions. This is because: - the proposed reduction represents a significant swing in policy direction, whereby an entitlement ceiling of 650,000 ML was specified for the Lower Murrumbidgee in the 1991 allocation guidelines for this area and was still supported by MDBC Groundwater Working Group in 1996. - groundwater users have, in the past, been actively encouraged to take up entitlements and use groundwater to help alleviate salinity problems in the Murray Basin. - overall usage does not have to decrease in the Lower Murrumbidgee, however due to the reduction mechanism recently announced, individual users such as Mr Burgess will have to reduce usage, or buy entitlement via permanent transfer. · The MGPA submitted a proposal for reducing entitlements to 400,000 ML to the MGMC in June 2001. This proposal allowed for historical usage levels to be maintained. · Following the 'Water Management Act 2000 - Groundwater Update' release, the MGPA submitted a second proposal to the MGMC on 24 September 2001 for reducing entitlements to 400,000 ML. This second submission ensured that all groundwater users would incur some entitlement reduction, but reductions would be less for those with high levels of historic use. · Groundwater entitlement reduction has been discussed at length within the MGMC, and has proven a difficult topic upon which to reach consensus and even majority decisions. · The MGMC is currently working towards implementing the requirements of the New South Wales Government's groundwater management principles. In so doing the Committee will be required to consider: - the pattern of entitlement reduction. - the pattern of usage reduction. - -determination of history of use as the basis of usage reduction. This may be the average history of use, the maximum, average of recent maximums, etc. or some other proxy for history of use, such as extractable entitlement. · The MGMC will also have to consider local 'hot spot' management which may necessitate differing groundwater entitlement reductions for individual aquifers within the Lower Murrumbidgee Groundwater Management Area."

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The grounds of attack 122 The amended application sets forth the grounds upon which it is claimed that the Plan is invalid. Ultimately the amended application was replaced by a further amended application. 123 The first ground pleaded is that by treating the whole Area as a single area subject to uniform regulation and control, the Minister was in error. The ground is pleaded as follows: "1. In treating the whole of the area identified in clause 4 of the Plan as a single area subject to uniform regulation and control, the Respondent Minister - (a) erred in law in failing to exercise his power under s.50 in accordance with s.9 of the Act; (b) exercised a discretionary power at the behest of another or in accordance with a rule or policy in disregard of the circumstances and matters relevant to the area before him; (c) exercised the power in a manner that was so unreasonable that no reasonable person, acting according to law, could have so exercised the power, and the Plan was invalid. Particulars 1. The Minister was obliged by s.9(1) of the Act in making a plan pursuant to s.50 of the Act, to act in accordance with and so as to promote the water management principles of the Act. 2. The water management principles identified in s.5 of the Act are, relevantly for present purposes - (i) generally, to maximise the social and economic benefits to the community (s.5(2)(g)); (ii) in relation to water sharing, sharing of water from a water source must protect the water source and its dependent ecosystems (s.5(3)(a)); (iii) in relation to water sharing, sharing or extraction of water under any right (other than basic landholder rights) must not prejudice the principles set out in pars (a) and (b) of subs (3) (subs (3)(c)); and (iv) in relation to water use, water use should avoid or minimise land degradation, including salinity (s 5(4)(a)). 3. There was no evidence before the Minister upon which he could reasonably conclude that extraction of groundwater from a bore at a particular location within the area would significantly affect the groundwater resource in all other parts of the area (lack of connectivity). 4. There was before the Minister evidence which clearly demonstrated the contrary of particular 3. 5. The material before the Minister demonstrated that there were (i) areas where it would be inappropriate to allow the extraction of water; (ii) areas where current levels of extraction reached steady state conditions in the resource, and (iii) areas where there has been a reduction in some parts of the resource which might reasonably be attributed, at least in part, to extraction by licence holders. 6. The material before the Minister demonstrated that actual and potential salinity problems would decrease by increasing water extraction from the aquifer known as "the Shepparton". 7. In relation to sub-ground (b), the power was exercised at the direction of the Cabinet." 124 Secondly it is pleaded that in purporting to impose uniform cuts on access licence entitlements the Minister acted contrary to law. The pleading takes the following form: "In purporting to impose uniform cuts on access licence entitlements, the Minister - (a) acted in contravention of his obligations under s.9 of the Act; (b) exercised a discretionary power at the behest of another or in accordance with a rule or policy in disregard of the circumstances and matters before him; (c) exercised the power in a manner that was so unreasonable that no reasonable person, acting according to law, could have so exercised the power, and the Plan was invalid. Particulars 1. The applicant repeats the Particulars in par 1 above. 2. The impact of such a principle was manifestly inequitable because - (i) it had no immediate impact on licence holders who did not use a significant proportion of their entitlement; (ii) it had immediate and serious social and economic impacts on licence holders who used all or nearly all of their entitlement; (iii) it failed to distinguish between extraction which had little or no long term impact on the water resource and that which had a significant impact on the water resource." 125 In the amended application, the third ground pleaded recognises that the operation of the Plan is dependent, in practice, upon its future amendment. It was pleaded that because the Plan was made as a Minister's Plan it could not be amended, as the Plan contemplates, by the Minister's exercise of the power in s 42. 126 This claim has not been pursued and by a further amended application a challenge was made to cl 25 of the Plan. That claim, identified as ground 3A, is particularised as follows: "3A (1) A declaration that clause 25 of the Plan is invalid; (2) An order setting aside clause 25; (3) On the basis that clause 25 is not severable from the remainder of the Plan, (i) a declaration that the Plan as a whole is invalid and of no effect, and (ii) an order setting aside the Plan." 127 The fourth ground pleaded is that by exercising the power under s 50 to make a Minister's Plan, rather than initiating the process and making a plan pursuant to s 41, the Minister abused his power. 128 The pleading is as follows: "4. The making of the Plan by the Minister was an abuse of the power conferred on him by s.50 of the Act and the Plan was therefore invalid, because - (a) the scheme of the Act was to provide for the preparation of management plans in accordance with the procedures set out in Part 3 of the Act; (b) failure to comply with the scheme of the Act was in breach of the statutory requirements of procedural fairness in relation to extractive users; (c) the reason why no management plans have been prepared in relation to the Lower Murrumbidgee Ground Water Source is because the Minister failed to establish a management committee to carry out any specific task, in accordance with s.12(1) of the Act; (d) the failure to establish management committees under Part 2 of the Act was done for the purpose of permitting the Minister to exercise his powers under s.50. (e) such a purpose was an improper purpose and the exercise of power under s.50 in relation to the Plan was thus an exercise of discretionary power for an improper purpose."

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Commencement of the Plan 129 Before turning to consider the various detailed submissions, one difficulty which relates to the commencement date for the Plan needs consideration. 130 Clause 3 of the Plan, as originally made, states that it takes effect on 1 July 2003 and ceases ten years after that date. Clauses 16(2), 18(2) and 28(1) of the Plan refer to specific dates which are calculated by reference to a commencement date of 1 July 2003 for the ten year operation of the Plan. 131 The Minister subsequently acted to amend the Plan and provide that it will commence on 1 July 2004. However, the specific dates referred to in other parts of the Plan were not amended. The position is made more complex by the fact that before the Plan can effectively operate, Part 2 of Chapter 3 of the Act relating to Access Licences must be in operation. Presumably this was originally intended to occur on 1 July 2003 but is now expected to occur on 1 July 2004. 132 The applicants have had difficulty in articulating a consistent submission with respect to these difficulties. Only during the latter part of their argument, and then somewhat faintly, did the applicants suggest that the amendment to the commencement date rendered the Plan invalid. The final written submission was that: "For the purposes of these proceedings, it is sufficient to say that the Plan currently has no operation and cannot have any relevant operation until the commencement of Part 2 of Chapter 3 of the Act." 133 In my opinion, this submission is sound. As the operation of the Plan is dependent upon the provision in Part 2 of Chapter 3 of the Act, the reference to commencement date in the Plan is of no practical effect. The Plan should be construed to commence when it can operate and relevant dates adjusted accordingly. 134 I accept that this is a less than satisfactory position and that the document should be capable of being read as a whole without adjustments made necessary by the previously unforeseen circumstances. If possible, steps should be taken to rectify the position.

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Grounds 1 and 2 135 It is convenient to consider grounds 1 and 2 together. There is no disagreement between the parties as to the intended effect of the Plan, although I have adverted to the difficulty in understanding its complex provisions. It is regrettable that a Plan intended to control a farmer's access to water has been expressed in a manner so complex that anyone seeking to understand it is given an extraordinarily difficult task. I very much doubt whether most people affected by the plan could ever understand it. As will emerge, an already complex document is made more difficult by the fact that if the literal meaning of some clauses is adopted, the plan cannot operate. 136 As I have already indicated, the total water available for irrigation from the underground aquifers is intended in future to be confined to the average annual recharge of the aquifers, less the water provided for other identified purposes, including both water for the environment and supplementary water, the latter reducing during the life of the Plan (see cl 29(2)(d)). The individual entitlements to shares in that water have also been uniformly reduced so that after five years the entitlement under a licence is intended to be reduced to 64 percent of any previous licence entitlement (cl 25(4)). However, by the mechanism of available water determinations, the water which can actually be taken will, with the addition of some supplementary water, be reduced to the average recharge. 137 The fundamental principle is that there will be uniform reduction in the water which can be taken for irrigation, subject to supplementary water entitlements. 138 The applicants submit that as the environmental problems for the Area are not uniform, a response to the environmental problems in some parts of the Area, which involves a uniform reduction in entitlements for every irrigator in the Area, is not rational and is contrary to the principles which the Act requires the Minister to follow when making a Plan. 139 The applicants emphasise the fact that s 9 of the Act imposes a duty on the Minister to act in accordance with and so as to promote the water management principles of the Act. Those principles include that "the social and economic benefits to the community should be maximised" (s 5(2)(g)) and that "water use should be consistent with the maintenance of productivity of land in the long term and should maximise the social and economic benefits to the community" (s 5(4)(b)). 140 The applicants also emphasise that the Plan contains a statement of objectives in cl 11, which provides: "The objectives of this Plan are to: (a) share groundwater sustainably between users and the environment, (b) share groundwater equitably amongst extractive users, (c) provide for basic landholder rights and priorities of use, (d) protect groundwater quality, (e) maximise the social, economic and environmental benefits of groundwater management strategies, and (f) minimise the negative social and economic impacts of groundwater management strategies." 141 It is submitted that any Minister obliged to act in accordance with the objectives in cl 11, in particular sharing groundwater equitably (b) and maximising the economic benefits (e), could not reasonably have made the Plan. 142 The applicants' argument is reflected in the evidence of Dr Drury. Although he accepts that it is appropriate to limit the water taken from the aquifers where adequate recharge is not available or the environment may be damaged by excessive irrigation, Dr Drury holds the view that there is no reason to impose similar limitations where aquifer recharge is adequate and there are no environmental problems. Although in theory the Area is comprised of aquifers which extend throughout the Area, each being a discrete body of water, the applicants submit that the actual performance of the aquifer in parts of the Area should determine the appropriate water management response. Accordingly, where, as in the Darlington Point area, annual recharge will sustain a higher level of extraction of water than at Carrathool, it is submitted that it is irrational to confine both areas to the same maximum level of extraction by the imposition of an arbitrary uniform reduction in irrigator entitlements. 143 The applicants' argument is reinforced by the fact that it is contemplated that by the process of water transfer (see s 71A), water allocations may be sold by an irrigator in one part of the Area to an irrigator in another part of the Area. Because a transfer requires consent, it will only be allowed if that part of the Area to which the allocation is proposed to be transferred has adequate water and if the extraction will not have adverse environmental consequences. However, it is likely that the transfer may be of a licence allocation which, because of the circumstances in that part of the Area in which it is held, could never be utilised (see cl 39 of the Plan). It is submitted that, if this occurs, the transferor will receive a windfall by obtaining consideration for an asset, being the entitlement which they may never have used and which in the future could not use. The transfer of entitlements provides no environmental benefit, it could never have been utilised, but the holder of the licence receives financial consideration (which may be quite substantial) from the transferee who can utilise the licence. 144 The effect is that the transferee suffers a financial detriment which is to the benefit of the transferor. In these circumstances, although there may be windfall gains and losses, there is no net benefit for the aquifer or the environment. Because water will not be allowed to be extracted from any site in a volume which cannot be sustained (irrespective of the allocation) and because an upper limit has been imposed on the water which may be extracted in any year (appropriately averaged), all that the Plan will do is redistribute wealth to the advantage of those holding licences which they cannot presently use. 145 It is submitted that the absurdity of the Plan is emphasised by the fact that many of those who will acquire water will have expended considerable sums in developing their properties, in some cases with the active encouragement of the government, only to now pay money for water rights without which part of their capital investment in infrastructure may be lost. 146 In summary, the applicants submit that the consequence of the Plan is to give a windfall to some and inflict financial hardship on others. This will occur in circumstances where the total water taken from the aquifers under the Plan will remain at approximately the level taken in the previous year of greatest usage (2002/2003). Accordingly, the plan will not achieve a reduction in water taken from the total volume taken in the past but will inflict significant financial hardship on some people. 147 The applicants' argument is not dependent on a resolution of the debate as to the precise performance of the aquifer. Whether or not the aquifer is integrated so that water taken from one location will ultimately result in a reduction of water in another location, or whether the aquifer in one part of the Area is recharged from the Murrumbidgee River, it is contemplated that by the transfer system a greater volume of water per square kilometre may be taken from some areas than from others, although the total water taken is kept below the available water determination. Consequently, the applicants submit that the Plan fails to maximise the social and economic benefits to the community and does not reflect the requirements of the Act. Indeed, it is submitted that because of the economic disadvantage to some, the effect of the Plan will be to inflict negative economic impacts with discordant social and economic outcomes. 148 The applicants submit that the approach to water management reflected in the Plan fails to recognise that although the aquifer may be one water body, parts of it perform differently and, as is inherent in the contemplated transfer arrangements, may be managed differently. Consequently, it is submitted that it is illogical to impose uniform reductions on an Area which will not thereafter be uniformly managed but will in fact be managed by reference to the quality and performance of the aquifer in particular parts of the Area. These may be thought of as the zones by which the Area has been managed in the past and, it is submitted, by which it should be managed in the future. 149 Counsel for the applicants accepted that by providing for supplementary water, the Minister had attempted to ameliorate the otherwise arbitrary and irrational consequences of the Plan. However, it was submitted that supplementary water did not address the underlying inequities and, in any event, would be phased out during the life of the Plan. In particular, because any entitlement to supplementary water was dependent on the history of water used, farmers who had invested in infrastructure which was not yet fully developed and not yet requiring access to the full volume of water which may ultimately be required, may lose the benefit of that infrastructure because their history of water usage did not entitle them to adequate supplementary water or supplementary water at all. 150 Counsel further submitted that, if the Minister's aim was to limit extraction, it was irrational to do so by reference to entitlements, because entitlements were merely an arbitrary figure. Entitlements are not legal entitlements in any sense, because the amount which may be extracted is limited to the available water determination.

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The response of the Minister to grounds 1 and 2 151 The Minister submits that the applicants place excessive emphasis on the principle in s 5(2)(g) of the Act that "the social and economic benefits to the community should be maximised.". It is submitted that the subsection does not impose any enforceable duty and the Legislature did not intend "that each principle in s 5(2) is to be achieved by the Minister in an absolute sense. One principle may only be capable of being pursued at the expense or pursuit of another. The principles are aspirational and there is a need for balancing pursuit of each principle in relation to the others." 152 It was further submitted that s 5(2)(g) does not require the absence of adverse economic impact but only provides an expectation that the social and economic benefits to the community should be maximised. The Minister, it was argued, is required to balance all of the water management principles and derive the outcome in the Plan which the Minister considers to be appropriate. Although managing the resource by defining zones or utilising a bandwidth approach may have been available, the Minister was entitled to reject these approaches in favour of the method adopted in the Plan. 153 With respect to the uniform reduction of access licence entitlements the Minister points out that this was required by the State Water Management Outcomes Plan which s 9(2) of the Act requires be given effect. However, it is submitted that the adverse consequences claimed to occur from this reduction will be ameliorated by the provision of supplementary water. 154 The Minister submitted that the evidence of Mr Lawson made plain that it was not feasible to administer the Area using a zonal approach. It was submitted that the Plan operates in a rational manner because it provides for a "uniform" cut in entitlements in proportion to existing entitlements, makes provision for supplementary water, provides for local input management and includes a water transfer system. These "four layers" of the Plan are said to minimise the adverse socio-economic impacts. 155 The Minister further submitted that: "the claim of 'manifest inequity' in the impact of uniform cuts on access licence entitlements does not rise above a contention that some water users affected by the restrictions introduced by the Plan disagree with the content of the Plan. A change in government policy may adversely affect the interests of some sectors of the community. It does not follow that the policy is not made in accordance with the objects of the statute under which it is made. Nor does it follow that the policy is Wednesbury unreasonable."

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Unreasonable or irrational 156 Recourse to any contemporary textbook on administrative law will reveal both the origins and the current state of the robust debate as to the parameters of judicial intervention on the ground that an administrative decision is unreasonable or irrational. 157 In "Rationality and Judicial Review of Administrative Action" (2000) 24(3) MULR 543, Dr Airo-Farulla traces the origins of judicial review of administrative action. Originally concerned exclusively with jurisdictional questions, the common law permitted the courts to intervene to quash an administrative decision made without power. That position changed in the 20th century and in varying ways the courts have accepted jurisdiction to review the quality of some administrative decisions. These intrusions have not only created tension between judges but have led to strong statements of concern about "judicial activism". The reality is that the developing doctrines are an inevitable response to the complexity of a modern democratic state where a bureaucratic decision, even one made following a complex process of review, has the potential to inflict significant injustice on an individual. 158 Significant impetus for the courts to develop doctrines permitting a review of the quality of the reasons for an administrative decision came from the reasoning of Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. As Dr Airo-Farrulla points out, one of the striking aspects of Lord Greene's analysis "is the identification of a family resemblance between the doctrines of reasonableness, proper purposes, relevant consideration and so on." Lord Greene's reasons are well known but it is useful to repeat them here (at KB 229): "It is not to be assumed prima facie that responsible bodies like local authorities will exceed their powers, and the court, whenever it is alleged that the local authority have contravened the law, must not substitute for the local authority. It is only concerned with seeing whether or not the proposition is made good. When an executive discretion is entrusted by Parliament to a local authority, what purports to be an exercise of that discretion can only be challenged in the courts in a very limited class of case … The law recognises certain principles on which the discretion must be exercised, but within the four corners of those principles the discretion is an absolute one and cannot be questioned in any court of law … It is true the discretion must be exercised reasonably … It is frequently used as a general description of the things that must not be done. For instance, a person entrusted with a discretion must direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to the matter that he has to consider … Similarly, you may have something so absurd that no sensible person could ever dream that it lay within the powers of the authority. Warrington, LJ, I think it was, gave the example of the red-haired teacher, dismissed because she had red hair. That is unreasonable in one sense. In another sense it is taking into consideration extraneous matters. It is so unreasonable that it might almost be described as being done in bad faith. In fact, all these things largely fall under one head … Theoretically it is true to say - and, in practice it may operate in some cases - that, if a decision on a competent matter is so unreasonable that no reasonable authority could ever have come to it, then the courts can interfere. That, I think, is right, but that would require overwhelming proof, and, in this case the facts do not come anywhere near such a thing." 159 Lord Greene MR's remarks have been understood as allowing review by the courts of the decision-maker's reasons for decision rather than the decision itself. Review on the basis of the type of unreasonableness referred to by Lord Greene MR, now commonly referred to as Wednesbury unreasonableness, has been interpreted by some as being synonymous with irrationality: Gamaethige v Minister for Immigration and Multicultural Affairs (2001) 183 ALR 59 at 61 (per Hill J) and at 63 (per Finkelstein J); Council of Civil Service Unions & Ors v Minister for Civil Service [1984] 3 All ER 935 at 951. 160 In 1972 the High Court was invited in Parramatta City Council v Pestell (1972) 128 CLR 305 to set aside a decision by Parramatta City Council to impose a local rate in part of its area, known as the Dundas Ward. The problem for the Council was that although it could impose a local rate which was designed to raise money to improve part of its local government area, it wanted to exclude some properties within the area to be rated from the obligation to pay the rate, even though those properties would also benefit from the facilities funded from the rate revenue. The area was generally industrial, but the excluded areas were residential. 161 The Court found the decision to impose the rate to be invalid, Barwick CJ saying (at CLR 314): "I have come to share the Supreme Court's view that, bearing in mind the nature of the proposed works or services, no rational basis could exist for holding at the same time an opinion that the land surrounding these island lots would derive a special benefit from the execution of these works and services and the opinion that those island lots would not." 162 As I understand the Chief Justice, when the essential elements of an administrative decision are defined by statute or in some other manner, the decision may be invalid unless the defined elements are present. If there is no basis upon which an opinion essential to the decision could be supported, the ultimate exercise of the discretion is not lawful. 163 Menzies J put the matter in these words (at CLR 322): "If it could be shown that the portion defined included land about which the Council concerned could not in reason hold the opinion that it would be specially benefited by the execution of the works, the section would not authorise the making and levying of a local rate." 164 Defining the ultimate question as a matter of power, Menzies J said (at CLR 323): "A court may interfere only when it appears that the portion defined is so obviously not the land which the execution of the works benefits specially that the court can say that the council's professed opinion that it is, is one that is not in keeping with the section so that the making and levying of a rate on the basis of that opinion is outside its power: Bankstown Municipal Council v Fripp (1919) 26 CLR 385; Coal Miners' Industrial Union of Workers of Western Australia v Amalgamated Collieries of Western Australia Ltd (1960) 104 CLR 437." 165 Since Pestell there have been numerous decisions in which courts have been urged to strike down decisions of an administrative tribunal or government official on the basis of Wednesbury unreasonableness. Some have succeeded but many have failed. The failures have generally been those cases where the decision, although perhaps operating unfairly in the eyes of some people, was nevertheless not deemed to be so irrational as to have been made beyond the authority of the decision-maker. (See Minister for Aboriginal Affairs & Anor v Peko-Wallsend Ltd & Ors (1986) 162 CLR 24.) 166 In Peko the High Court provided a comprehensive statement of the basis upon which a court can intervene and overturn an administrative decision. Mason J confirmed the limits of the court's power, defining it as "to set limits on the exercise of that discretion, and a decision made within those boundaries cannot be impugned" (at CLR 40-41). 167 Although well known, the discussion by Mason J of the approach courts should take when considering a challenge to an administrative decision, where the decision-maker was required to weigh differing considerations, is of such significance in the present matter that it should be repeated. His Honour said (at CLR 41-43): "It follows that, in the absence of any statutory indication of the weight to be given to various considerations, it is generally for the decision-maker and not the court to determine the appropriate weight to be given to the matters which are required to be taken into account in exercising the statutory power: Sean Investments Pty Ltd v. MacKellar (1981) 38 ALR 363, at p 375; Reg. v. Anderson; Ex parte Ipec-Air Pty Ltd (1965) 113 CLR 77, at p 205; Elliott v. Southwark London Borough Council [1976] 1 WLR 499, at p 507; [1976] 2 All ER 781, at p 788;Pickwell v. Camden London Borough Council [1983] QB 962, at p 990. I say "generally" because both principle and authority indicate that in some circumstances a court may set aside an administrative decision which has failed to give adequate weight to a relevant factor of great importance, or has given excessive weight to a relevant factor of no great importance. The preferred ground on which this is done, however, is not the failure to take into account relevant considerations or the taking into account of irrelevant considerations, but that the decision is "manifestly unreasonable". This ground of review was considered by Lord Greene M.R. in Wednesbury Corporation, [1048] 1 KB 223, at pp.230, 233-234, in which his Lordship said that it would only be made out if it were shown that the decision was so unreasonable that no reasonable person could have come to it. This ground is now expressed in ss 5(2)(g) and 6(2)(g) of the AD(JR) Act in these terms. The test has been embraced in both Australia and England: Parramatta City Council v Pestell (1972) 128 CLR 305, at p.327; Bread Manufacturers of N.S.W. v Evans (1981) 56 ALJR 89, at p 96; 38 ALR 93, at p 106; Re Moore; Ex parte Co-operative Bulk Handling Ltd (1982) 56 ALJR 697; 41 ALR 221, at pp 221-222; Hall & Co. Ltd v Shoreham-By-Sea Urban District Council [1964] 1 WLR 240, at pp.248, 255;[1964] 1 All ER 1, at pp.8, 13; Reg. v Hillingdon London Borough Council; Ex parte Royco Homes Ltd [1974] QB 720, at pp 731-732; Newbury District Council v Secretary of State for the Environment [1981] AC 578, at pp 599-600, 608. However, in its application, there has been considerable diversity in the readiness with which courts have found the test to be satisfied: cf, eg, Wednesbury Corporation, at p.230, and Parramatta City Council, at p.328, with the conclusions reached in South Oxfordshire District Council v Secretary of State for the Environment [1981] 1 WLR 1092, at p 1099; [1981] 1 All ER 954, at p 960; Shoreham-By-Sea Urban District Council, and Minister of Housing and Local Government v Hartnell [1965] AC 1134, at p 1173. But guidance may be found in the close analogy between judicial review of administrative action and appellate review of a judicial discretion. In the context of the latter, it has been held that an appellate court may review a discretionary judgment that has failed to give proper weight to a particular matter, but it will be slow to do so because a mere preference for a different result will not suffice: Lovell v Lovell (1950) 81 CLR 513, at p 519; Gronow v Gronow (1979) 144 CLR 513, at pp 519-520, 534, 537-538; Mallet v Mallet (1984) 156 CLR 605 at 614-615, 622. So too in the context of administrative law, a court should proceed with caution when reviewing an administrative decision on the ground that it does not give proper weight to relevant factors, lest it exceed its supervisory role by reviewing the decision on its merits. … The principles stated above apply to an administrative decision made by a Minister of the Crown: Murphyores Incorporated Pty Ltd v The Commonwealth (1976) 136 CLR 1; Re Hunt; Ex parte Sean Investments Pty Ltd (1979) 53 ALJR 552; 25 ALR 497; Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997; Secretary of State for Education and Science v Tameside Metropolitan Borough Council [1977] A.C. 1014. However, in conformity with the principle expressed in (b) above, namely that relevant considerations may be gleaned from the subject-matter, scope and purpose of the Act, where the decision is made by a Minister of the Crown, due allowance may have to be made for the taking into account of broader policy considerations which may be relevant to the exercise of a ministerial discretion. 168 At times, a divergence of opinion is apparent as to the approach which may be taken by a court where the revealed reasoning process of a decision-maker can be shown to be illogical, in particular in relation to the fact-finding tasks of an administrative tribunal. A finding of fact based on no evidence is an error of law: Hope v Bathurst City Council (1980) 144 CLR 1. Wilcox J has held that where a finding of fact was met by overwhelming evidence to the contrary, the court could interfere: Taveli v Minister for Immigration, Local Government and Ethnic Affairs (1989) 86 ALR 435. It may be debated whether this decision is consistent with the observation by Mason CJ in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 that "[s]o long as there is some basis for an inference - in other words, the particular inference is reasonably open - even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error has taken place" [emphasis added] (at CLR 356). However, it may be doubted that an inference is reasonably open if there is overwhelming evidence to the contrary. 169 Spigelman CJ took a different approach to the problem in Bruce v Cole (1998) 45 NSWLR 163 and Hall v Green (1999) 48 NSWLR 161. The Chief Justice indicated that when legislation confers a defined discretion on an administrator it should be presumed that the decision-maker would reach a decision by a process of logical reasoning. In my opinion, it is a short step from this proposition to the conclusion that any power given to an administrative decision-maker cannot be validly exercised if the reasoning process supporting the decision is wholly illogical. But this may be to say no more than that the decision is irrational. (See also the decisions of the High Court in: Abebe v Commonwealth of Australia (1999) 197 CLR 510 and Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611). 170 The need for judicial caution was emphasised by Mason J in Peko at 42: "… in the context of administrative law, a court should proceed with caution when reviewing an administrative decision on the ground that it does not give proper weight to relevant factors, lest it exceed its supervisory role by reviewing the decision on its merits." 171 As I understand the law, the position is that a decision cannot be overturned unless it can be said to be unreasonable or irrational when assessed against objective criteria. To be overturned as irrational, the relevant decision must be incapable of justification. It is not sufficient for the court to simply disagree with the reasons or reasoning process of the decision-maker. Aronson and Dyer summarise the position in these words (at 284): "[S]o Wednesbury invites a qualitative assessment of the impugned decision, but does not allow an appeal to the judicial review judge's subjective sense of reasonableness. In so far as it appeals to a normative sense, it is to a shared normative sense or even to a range of commonly shared norms. That is, reasonableness is used in an objective sense." (Aronson & Dyer, Judicial Review of Administrative Action, 2nd ed)

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(2) It is the duty of all persons involved in the administration of this Act to exercise their functions under this Act in a manner that gives effect to the State Water Management Outcomes Plan." 173 I have previously referred to the water management principles and the principles in relation to aquifer interference activities. 174 Beyond those matters, the Minister is required to act in a manner consistent with and so as to further the objects of the Act. I have already set out the objects of the Act. 175 By providing that one of the objects of the Act is the application of the principles of ecologically sustainable development ("ESD"), the Water Management Act takes an approach which is now common in environmental legislation. The Dictionary of the Act adopts the principles of ESD as defined in s 6(2) of Protection of the Environment Administration Act 1991 (NSW). That definition requires: "…the effective integration of economic and environmental considerations in decision-making processes. Ecologically sustainable development can be achieved through the implementation of the following principles and programs: (a) the precautionary principle - namely, that if there are threats of serious or irreversible environmental damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation. In the application of the precautionary principle, public and private decisions should be guided by: (i) careful evaluation to avoid, wherever practicable, serious or irreversible damage to the environment, and (ii) an assessment of the risk-weighted consequences of various options, (b) inter-generational equity - namely, that the present generation should ensure that the health, diversity and productivity of the environment are maintained or enhanced for the benefit of future generations, (c) conservation of biological diversity and ecological integrity - namely, that conservation of biological diversity and ecological integrity should be a fundamental consideration. (d) improved valuation, pricing and incentive mechanisms - namely, that environmental factors should be included in the valuation of assets and services, such as: (i) polluter pays - that is, those who generate pollution and waste should bear the cost of containment, avoidance or abatement, (ii) the users of goods and services should pay prices based on the full life cycle of costs of providing goods and services, including the use of natural resources and assets and the ultimate disposal of any waste, (iii) environmental goals, having been established, should be pursued in the most cost effective way, by establishing incentive structures, including market mechanisms, that enable those best placed to maximise benefits or minimise costs to develop their own solutions and responses to environmental problems." 176 In Leatch v National Parks and Wildlife Service (1993) 81 LGERA 270 at 282, Stein J said that the precautionary principle is "a statement of commonsense". His Honour went on to remark: "It is directed towards the prevention of serious or irreversible harm to the environment in situations of scientific uncertainty. Its premise is that where uncertainty or ignorance exists concerning the nature or scope of environmental harm (whether this follows from policies, decisions or activities), decision-makers should be cautious." 177 The precautionary principle has not always been accorded such significance in the decision making process. See Nicholls v Director-General of National Parks and Wildlife Service (1994) 84 LGERA 397 (Talbot J); Greenpeace Australia Ltd v Redbank Power Company Pty Ltd (1994) 86 LGERA 143 (Pearlman CJ). 178 However, as I have indicated the precautionary principle is now given statutory recognition not only in the Water Management Act but in numerous NSW Statutes. Some examples are: the Protection of the Environment Administration Act 1991 (NSW); the Protection of the Environment Operation Act 1997 (NSW); the National Parks and Wildlife Act 1974 (NSW); the Fisheries Management Act 1994 (NSW) and the Coastal Protection Act 1979 (NSW). It is a central element in the decision making process and cannot be confined. It is not merely a political aspiration but must be applied when decisions are being made under the Water Management Act and any other Act which adopts the principles. 179 The fundamental complaint in the present case is that the Plan operates to the disadvantage of those who have, because of the location and the attributes of their land, been able to use, or who can expect to be able to use, the greater proportion of the water allocated to them in the past without any identifiable detriment for the groundwater within the Area. Ultimately, the likely consequence of the water transfer arrangements is that water will be taken from those areas in the same total volumes as it is today. 180 Although the evidence discloses that over a great many years the aquifer may function as a single body of water which would justify a uniform reduction in entitlements, there are obvious anomalies in basing the Plan on these principles. The reason for this is that the water which will in future be allowed to be taken for irrigation will be confined to the volume of the annual average recharge. In other words, only the water that will be replaced by natural processes in any year can be taken. In some areas, the controls will be imposed by the natural features - wells which have been made may simply be dry or the water may be unfit for use for agriculture. In other areas, the control on the volume of water taken will be imposed by the Minister so that the water taken from part of an area will not deplete the long term average storage component of the aquifer and cause damage to the environment. Of course in areas where the recharge is plentiful, high levels of extraction, which may have to be authorised by the acquisition of additional licences, are likely to continue. 181 I am in no doubt that the Minister could have achieved the intended environmental outcome by either imposing appropriate and different controls on parts of the Area or managing the aquifer by a bandwidth approach. I accept Mr Lawson when he says that there may be some difficulty in defining the boundaries between zones, but those problems have been faced and addressed under the existing management regime and I am not persuaded that they would be insurmountable. 182 I am also satisfied that by imposing a uniform reduction on all irrigators, irrespective of their capacity to use the water theoretically available under the licence, the Plan will operate unfairly on some irrigators in a manner which could have been avoided. However, an approach which was based entirely on historical usage would also have been unfair to those who were still developing their properties and may have rewarded inefficient irrigators more than efficient users unless detailed rules in relation to the method of irrigation were imposed. 183 As I have indicated, the fundamental object of the Plan is to confine water taken for irrigation to the capacity of the annual recharge of the aquifers. However, recharge is not uniform across the Area. Accordingly, to impose a regime of uniform reductions has the consequence that the identified objective, of allowing the water taken to be the equivalent of the annual recharge, will not be achieved by the plan. That will only occur by the operation of the market to be created for water allocations and then with the obvious inequities which I have discussed. 184 Notwithstanding these matters and accepting the identified anomalies I am not persuaded that bearing in mind the confined role for a court in judicial review proceedings the applicants are entitled to relief. It was for the Minister, and not the Court to balance the desired environmental outcome, and the chosen method of achieving it, with the beneficial and adverse social and economic consequences. 185 As Mason J said in Peko (at 42) when the decision-maker is required to balance disparate matters when making a decision, a court should be cautious when asked to intervene for otherwise it may inadvertently be engaging in merit review. Perhaps, in the present case, if the Minister had not addressed the potential anomalies by providing a regime for supplementary water, a case for intervention could be made out. However, by providing for supplementary water the Minister has acknowledged the harm which may be occasioned to some irrigators and provided a regime designed to ameliorate it. It is not for the court to determine whether the regime adopted is the best which could have been provided. It is plain that the difficulties were considered and that the Minister, balancing the competing interests, is of the opinion that he has appropriately provided for the social, economic and environmental benefits from the available groundwater. The Minister's decision to provide a management regime which imposed hardship on some in the interests of achieving a satisfactory future regime for the management of the whole of the aquifers cannot be described as irrational. 186 When deciding to make the Plan the Minister had the ultimate objective of providing for the long term sustainability of the underground water. His decision was required to be informed by, inter alia, the precautionary principle which required a regime to be put in place which was likely to sustain the water source even if, as is the case, full scientific knowledge of the structure and behaviour of the aquifer is not available. 187 By ensuring the long-term health of the aquifer, the Minister has ensured both an appropriate environmental outcome and sustainable agriculture with the associated social and economic benefits. The mechanism adopted is faithful to the principle in s 5(3)(a) of the Act "that sharing of water from a water source must protect the water source and its dependent ecosystems" which must not be prejudiced by extraction of water (s 5(3)(c)). By providing supplementary water, the Minister has allowed for a lengthy period of adjustment during which those who can sustain an agricultural enterprise may, although at a cost, acquire water rights. 188 Others who lose part of their present rights to water and who could not justify, for economic or environmental reasons, the acquisition of additional entitlement may receive some moneys from the sale of entitlement, which they will presumably invest in some manner. To the extent that the Plan impacts adversely on those persons, the sale of the entitlement will ameliorate their position. 189 Having regard to all of these matters, I am not satisfied that the approach which has been taken is so lacking in logical structure or so fails to have regard to the parameters which the Act imposes on the Minister that it could be said that it was not open to the Minister and that the Minister's discretion in making the Plan has miscarried. 190 By providing a uniform approach to reducing entitlements, the Minister has ensured that ultimate control over the performance of the aquifers can be managed by available water determinations and close supervision of the transfer applications. The fact that there may be windfall gains or losses which could have been avoided does not mean that the Plan is founded upon judgments which were not open to the Minister. Some may believe it to be preferable, if possible, to manage the water without those consequences, but that was a decision for the Minister and not for the Court.

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The Plan and Government Policy 194 It was further submitted that, in making the plan, the Minister was required by s 16(1)(e) to make a plan which is consistent with government policy. Government policy is not defined, although s 16(2) says that it includes such matters as are declared by the regulations to be government policy. There is no relevant regulation. 195 The government policy said to be relevant in the present case is that contained in a document published by the Department of Land and Water Conservation entitled "Water Management Act 2000 - Groundwater Update". That document identifies the significance of groundwater to rural communities and the problem of over extraction. It identifies the fact that the use of "aquifers across the state must be kept within or returned to sustainable yields - that is, balancing the water taken out by pumping and the environment against the water that flows into an aquifer through the ground." Identifying the need for change, the document states that "Water Management Committees and the Government are developing a system of fairly sharing these groundwater resources." 196 Under the heading "The Challenges of Change", the document considered the circumstances of all groundwater systems in New South Wales to establish a fair and transparent system for sharing groundwater in the future. As to how this will be achieved the documents says: "The continuing existence and fundamental health of groundwater systems must take priority over providing access to meet current levels of licensed groundwater extraction. Existing licences will continue, but the total entitlement of each aquifer will be set so that the long-term average extractions match the long-term sustainable yield of the aquifer." 197 To this point of course, the applicants have no criticism of the stated objective. However, it is the next statement in which it is said that future entitlements will be based "on a pro-rata level of licensed entitlements" which causes difficulty. The complete statement is as follows: "Shares of groundwater resources from an aquifer will be based on a pro-rata level of licensed entitlements, not on users' levels of development or history of use. Most groundwater licence holders are expected to receive a share of the aquifer's sustainable yield that can support their recent levels of extraction, and in some cases enable further development. Volumetric licence conditions will be adjusted accordingly to reflect those shares." 198 The document continued with a discussion of the instigation of a groundwater trading market and seeks to explain the justification for the approach to the adjustment of entitlements. The document states: "Where total licence entitlements for an aquifer exceed a sustainable level, initial volumetric shares will be distributed to existing licence holders in proportion to their current licence entitlements. In those aquifers where licence entitlement is currently at or below sustainable levels, shares will reflect existing licence entitlements and new licences will not be issued beyond the total sustainable extraction for the aquifer. Community consultations advised that history of use or levels of development should be taken into account when adjusting allocations. However, because these concepts are loosely interpreted and there are no clear and consistent ways agreed to measure them, they cannot provide a fair way to adjust licence entitlements. The risk was that efficient users would be penalised and inefficient users rewarded." 199 This paragraph contains the heart of the debate in the present matter. It is criticised by the applicants because no attempt is made to consider managing the aquifers, and adjusting entitlements by zones and no consideration is given to a bandwidth approach. Whatever be the difficulties in adjusting entitlements by reference to investment, no consideration is given to the fact that the chosen method for adjustment of entitlements will almost certainly penalise efficient users as well as some inefficient users, and at the same time give windfall gains to people who, by reason of their location, have not been utilising their present entitlement. 200 I accept that this document does relevantly reflect the policy of the government within the meaning of s 16(1)(e). During the course of submissions, many difficulties were identified in the application of the subsection because of difficulties in identifying government policy. No doubt there will be cases where statements are made by ministers or government departments which may be unclear or even contradictory. There may be difficulties in identifying the authority of any particular statement. In the present case, the statements in the document are clear and, being published by the Department, may be accepted as reflecting government policy. 201 It was submitted that a plan made in compliance with government policy may nevertheless be unlawful if the policy itself could not be the foundation for a lawful plan. Although it is unnecessary to resolve the matter, my view is that the submission is correct. The mere fact that the Act requires the plan to be consistent with government policy does not have the consequence that if the policy is itself relevantly irrational, a plan made in conformity with it will be lawful. Compliance with s 16(1)(e) does not make a plan immune from judicial review. 202 As I have indicated, I accept that the requirement for a uniform reduction was also the subject of a Cabinet determination. A determination by Cabinet would normally be reflected in government policy and a Minister would be expected to act in accordance with it. However, in my opinion, obedience to a Cabinet decision could, in various circumstances, lead to invalidity in relation to a plan. In the present case, the Cabinet decision is consistent with and reflected in the approach adopted in the Groundwater Update document, with the consequences I have already identified.

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Construction of the Plan and problems with cl 18(1)(c) 203 As I have indicated, before the Plan can work it is necessary to be able to calculate the reduced total share components of access licences in the Calivil and Renmark after year five. Clause 25(4) of the Plan provides the formula by which this calculation is intended to be made. 204 One element of the equation in cl 25(4) is the volume of recharge reserved as environmental health water in cl 18(1). Clause 18(1) says that environmental health water in the Calivil and Renmark is 65,000 ML/yr minus supplementary water. However, before supplementary water can be calculated, the calculation required by cl 25(4) must be completed (see cl 25(9)). Accordingly, if cl 18(1)(c) is to be read as it is literally written, the calculation in cl 25(4) is impossible and the Plan must fail as a matter of law. So much was accepted by the Minister, who in a supplementary submission said: "There is no doubt that the literal construction of clause 18(1)(c) propounded by the applicant has an absurd result. As is demonstrated by the applicant's latest round of submissions, if that construction is accepted, the Plan simply does not work. At each level there must be certainty as to the amount of environmental health water but that cannot be achieved until other factors (themselves reliant on the environmental health water) are known. The result of the construction is a circular definition which ends up going nowhere. This cannot have been the intention of the Minister. The clear intention is that the entitlement for each licence will be able to be calculated in advance so as to give economic certainty and stability with regard to the sustainability of the physical resource as far as possible." 205 It is submitted that the difficulty created by cl 18(1)(c) is removed if cl 18(1)(c) is construed in the context of cl 18 as a whole. The proposition is that the water in cl 18(1)(a), (b), and (c) should be added together and supplementary water deducted from the total instead of only the water from the Calivil and Renmark. 206 It is submitted that the fact that cl 18 was intended to operate in this manner can be ascertained from cl 27(2) which provides: "27(2) The long-term average extraction limit for each groundwater source each year of this Plan is the recharge established in clause 16, plus the total supplementary access provided for in clause 25, as varied by clause 29, minus the proportion of recharge reserved as environmental health water in clause 18, and is as follows: (a) 10,000 ML/yr in the Shepparton, and (b) 270,000 ML/yr in the Calivil and Renmark, plus the total supplementary access provided for in clause 25, as varied by clause 29." 207 Application of the formula in cl 27(2) with respect to the Calivil and Renmark leads to the conclusion that the amount of environmental water (at least for the purpose of the clause) is 65,000 ML/yr. The calculation required may be expressed as follows:

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This calculation shows that the Plan intends the environmental water reserved in the Calivil and Renmark to be 65,000 ML/yr without the deduction of supplementary water. 208 The consequence is that cl 18(1) should be understood as providing for four elements which together allow identification of the volume of water set aside as environmental health water. After identifying each of subsections (a), (b) and (c) of cl 18(1), the amount of supplementary water is to be deducted for so long as that water is to be made available. Supplementary water is to be deducted from the total environmental water not just from the 65,000 ML/yr set aside from the Calivil and Renmark. 209 If cl 18(1)(c) is construed in this manner, the problem with the calculation in cl 25(4) is removed. The amount which is to be deducted as environmental health water is 65,000 ML/yr without the necessity to bring into account any allowance for supplementary water. 210 The Minister accepts that a literal construction of cl 18(1)(c) produces absurd results, but submits that a purposive approach to its construction will avoid the problem. In Cooper Brookes (Wollongong) Pty Limited v Commissioner of Taxation (Cth) (1981) 147 CLR 297 the High Court considered difficulties in construing provisions of the Income Tax Assessment Act. In the context of construing a statute, Mason and Wilson JJ said (at CLR 320): "The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction." 211 Describing the rules of statutory construction as no more than rules of common sense, their Honours said (at CLR 320-321): "The rules, as D C Pearce says in Statutory Interpretation , are no more than rules of common sense, designed to achieve this object. They are not rules of law. If the judge applies the literal rule it is because it gives emphasis to the factor which in the particular case he thinks is decisive. When he considers that the statute admits of no reasonable alternative construction it is because (a) the language is intractable or (b) although the language is not intractable, the operation of the statute, read literally, is not such as to indicate that it could not have been intended by the legislature. On the other hand, when the judge labels the operation of the statute as 'absurd', 'extraordinary', 'capricious', 'irrational' or 'obscure' he assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions. Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended." 212 The present case does not raise difficulties in construing the statute but with provisions of the Plan made under it. However, in my opinion the same approach to its construction as that sanctioned in Cooper Brookes should be adopted. The document should be construed having regard to all of its provisions and the purpose intended to be achieved. Unless repugnant to the language used, a construction of cl 18(1) which is consistent with the apparent purpose of the Minister in including that clause in the Plan should be adopted. In R v Young (1999) 46 NSWLR 681 the Chief Justice said (at NSWLR 687-688): "If a court can construe the words actually used by the parliament to carry into effect the parliamentary intention, it will do so notwithstanding that the specific construction is not the literal construction and even if it is a strained construction. The process of construction will, for example, sometimes cause the court to read down general words, or to give the words used an ambulatory operation. So long as the court confines itself to the range of possible meanings or of operation of the text - using consequences to determine which meaning should be selected - then the process remains one of construction." 213 Notwithstanding that the construction of cl 18(1) contended for by the Minister does, as his counsel submitted "some violence to the grammar of cl 18(1)(c)", I am satisfied that it should be adopted. The purpose of the Plan is made clear by cl 27(1), and by interpreting cl 18(1) in the manner indicated, cl 25 can operate. However, it scarcely need be said that a document intended to provide a statement of the rights of irrigators so that they, and those who deal with them, which will include mortgagees, should be prepared with meticulous care so that it can be clearly understood and applied. Concern about the fairness of the proposed new arrangements is not diminished if the plan which implements them does not make sense without adopting a construction of some of its central provisions at the limits of that which is permissible.

[97]

Supplementary licences 214 Fundamental to the operation of the Plan is the provision made in cl 25(9) for those who have a history of relatively intense use of their existing entitlement to a supplementary water access licence. Although provided for in the Plan the Act makes no provision for the grant of such a licence. Chapter 3, Part 2, Division 2 of the Act contains the mechanism for the grant and renewal of access licences but does not contemplate supplementary licences. The Minister accepts that this is the case, with the consequence that if another mechanism by which they can be granted is not available, the Plan must fail. It will be incapable of implementation. 215 The Minister's submission draws attention to the fact that s 57(f) of the Act recognises one category of access licence as being "supplementary water access licences" and relies upon the "Savings and Transitional Provisions" to create a supplementary licence. 216 Section 403 of the Act provides that Schedule 9 to the Act has effect. Schedule 9 provides that the regulation "may contain provisions of a savings or transitional nature" and, by cl 1(4) of Schedule 9, the relevant regulation has "effect despite other provisions" of the Schedule. Clause 9 of Schedule 9 provides for the creation of access licences when Part 2 of Chapter 3 of the Act comes into operation. 217 At present, only cl 1 of Schedule 9 is in operation, the remainder, including cl 9 is intended to be brought into operation when Part 2 of Chapter 3 comes into force, now likely to be on 1 July 2004. 218 The Minister accepts that cl 9 of Schedule 9 does not authorise the grant of a supplementary licence but submits that by exercising the power to make regulations pursuant to cl 1(4) the Minister may amend cl 9 and provide, as part of the grant of entitlements in lieu of entitlements under the Water Act 1912 (NSW), a supplementary licence. Clause 1(4) is said to be a "Henry VIII clause" for it effectively contemplates that the provisions of an Act may be amended by the making of delegated legislation. The capacity to make regulations with this effect was confirmed by the High Court in Pyramid Building Society v Terry (1997) 189 CLR 176. See also Randwick City Council v Minister for the Environment (1999) 167 ALR 115 at [16]. It is submitted that if, before it comes into operation, cl 9 in Schedule 9 is amended to authorise the grant of a supplementary licence, then cl 25(9) of the Plan will be expressly supported by cl 9. 219 It appears that the difficulty identified by the applicants was not foreseen when the Act was drafted. The acknowledgement by the Minister that the Plan in its present form could not have legal effect without amendment, at least of the transitional provisions, has the consequence that it is not appropriate to consider this aspect of the matter further. The court is aware that amendment of the legislation is proposed by the Minister before 1 July 2004 and presumably, whether as part of those amendments or, as was suggested, by the making of regulations, the present difficulty will be addressed. Whether the measures taken are effective to deal with the problems will depend upon the method which is adopted and the precise terms of any amendment. 220 During argument it was suggested that a provision which authorised the grant of a supplementary licence may not be a "transitional provision" but rather a substantive provision in aid of the operation of the Plan made pursuant to the Water Management Act. After reflection I am satisfied that the matter could be dealt with by a transitional provision but its effectiveness may depend upon the care with which it is drafted. 221 The argument that there is no authority for the grant of a supplementary licence was first raised during the hearing and is pleaded in a proposed amendment to the application in para 3A. No relevant prejudice is caused to the Minister if leave to amend the application is granted and I will accordingly make an order to that effect.

[98]

Issues arising from the exercise of power under section 50 222 The applicants emphasise the fact that water management plans are to be made in accordance with a statutory process identified in the Act. In the ordinary course this will involve the Management Committee established under s 12 preparing a draft Plan pursuant to s 15. The procedure to be followed includes the notification of particular individuals and bodies when a draft plan is being formulated (s 36), public exhibition (s 38), and receipt of submissions (s 39). 223 The applicants submit that against this background the provision for a Minister's plan in s 50 should be seen as a backup mechanism. By utilising the power as he did, it is submitted that the Minister acted for an improper purpose seeking to avoid the input of a management committee appointed in accordance with the Act. 224 The applicants point out that the Minister has established only one committee within the whole of the State pursuant to s 12 of the Act. That committee has authority with respect to the Cox's River water source. It is submitted that the failure to establish management committees under s 12 for the remainder of the State clearly did not flow from a decision not to have plans which would operate in respect of the other water sources. Indeed, one might infer that Cox's River was one of the least significant water sources within the State. Accordingly, it is submitted the only inference available is that the Minister deliberately declined to establish committees under s 12, either in order to avoid the statutory procedures which those committees were required to follow, or because he wished to reserve to himself the power to promulgate plans under s 50. 225 The applicants further submit that, given the structure of the Act, the existence of the power in s 12 carries with it the implied obligation to establish committees in order to give effect to the scheme of the Act with respect to the making of management plans. To fail to undertake that task for a reason of the kind referred to is to act for an extraneous purpose. In the absence of any answer to this complaint, it was argued that the Minister should be ordered to establish a management committee pursuant to s 12 with respect to the LMGMA. 226 It is further submitted that the use of s 50 to create Minister's plans, in place of the general scheme for management plans provided under the Act, may be inferred (in the absence of evidence to the contrary from the Minister or any person acting on his behalf) to be part of a deliberate scheme to avoid the operation of Parts 2 and 3 of Chapter 2 of the Act. To exercise a power for such a purpose is to exercise the power for an extraneous purpose in accordance with the analysis of Aickin J in R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170. It also constitutes a classic example of the course taken by the Minister in Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997, a case in which a Minister with statutory power to hold an inquiry desisted from doing so because he did not wish to be put in a position where he might be pressed to give effect to its recommendations. 227 I do not accept the applicants' submission. A finding that the Minister acted for an improper purpose is not lightly to be inferred: see Haines v Annwrack Pty Ltd (1980) 39 LGRA 404; Industrial Equity Ltd v Deputy Federal Commissioner of Taxation (1990) 170 CLR 649. There is no evidence as to the reason why the Minister did not appoint a committee under s 12 of the Act and require it to prepare a plan. However, the evidence makes plain that there was a committee in place under the Water Act 1912 which had undertaken consultation and deliberation processes similar to those which would have occurred if a committee had been established under s 12 of the Act. The appointment of a committee with a requirement to begin the task afresh may have been thought to be unnecessary. 228 The evidence does not disclose the Minister's reasons for exercising his power under s 50. However, he took that course aware of the concern as to the present environmental difficulties in parts of the Area and conscious of the extent to which the future management of the Area had already been considered by the Department and others. 229 I am satisfied that providing the relevant circumstances exist, the Parliament intended that the power under s 50 may be exercised by the Minister at his or her discretion. As the preconditions for the exercise of the power are expressed in the section, it would be inappropriate to introduce some further precondition such as that the power may only be exercised in exceptional circumstances or as some sort of "backup mechanism". 230 There is no doubt, as the applicants assert, that a management plan made pursuant to s 41 can only be made after formal processes of drafting, exhibition and consideration of submissions has been undertaken. However, the fact that a similar preparation process is not provided by s 50 indicates that the Minister can make a plan which must, of course, be consistent with and further the objects of the Act, but which does not have to meet the requirements of a s 41 plan. 231 In any event, the process which was adopted in the preparation of the Minister's Plan reflected the statutory process required to make a s 41 plan. The Committee, which had been established prior to the Act in 1998, consisted of various interest groups and met regularly. In March 2001 the Minister reconstituted the committee under s 388 of the Act and requested it to build on the work it had already done, advise on a draft plan, review public submissions and recommend changes to it. The committee's work was actively considered following which the draft plan was placed on exhibition and submissions were received and reviewed. The Minister also had available to him the detailed advice of officers of the Department and other Departments in relation to hydrogeology, economic and social impacts and the environmental consequences of the proposed Plan. 232 This ground of challenge fails. 233 The orders I make are: 1. Grant leave to the applicants to file a further amended application. 2. Application is dismissed. 3. Costs may be argued. **********

Parties

Applicant/Plaintiff:

Murrumbidgee Ground-Water Preservation Assocation

Respondent/Defendant:

Minister for Natural Resources

Legislation Cited (7)

Environment Administration Act 1991(NSW)

Environment Operation Act 1997(NSW)

Coastal Protection Act 1979(NSW)

Water Management Act 2000(NSW)

Water Act 1912(NSW)

National Parks and Wildlife Act 1974(NSW)

Fisheries Management Act 1994(NSW)

Cases Cited (33)

CITATION : Murrumbidgee Ground-Water Preservation Assocation v Minister for Natural Resources [2004] NSWLEC 122 PARTIES : Murrumbidgee Ground-Water Preservation Association (Appl) Minister for Natural Resources (Resp) FILE NUMBER(S) : 40583 of 2003 CORAM: McClellan CJ Water Rights :- Minister's water sharing plan Water management principles Water entitlements Share components under access licences Water for the environment Supplementary water KEY ISSUES: Transfer of water entitlements Available water determinations Administrative Law: Error of law Failure to have regard to relevant considerations Exercise of a discretionary power for an improper purpose Wednesbury unreasonableness and irrationality Water Management Act 2000 (NSW) LEGISLATION CITED: Protection of the Environment Administration Act 1991 (NSW) Water Act 1912 (NSW) Abebe v Commonwealth of Australia (1999) 197 CLR 510 ; Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223; Australian Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; Bruce v Cole (1998) 45 NSWLR 163 ; Cooper Brookes (Wollongong) Pty Limited v Commissioner of Taxation (Cth) (1981) 147 CLR 297; Council of Civil Service Unions & Ors v Minister for Civil Service [1984] 3 All ER 935 ; Gamaethige v Minister for Immigration and Multicultural Affairs (2001) 183 ALR 59; Greenpeace Australia Ltd v Redbank Power Company Pty Ltd (1994) 86 LGERA 143; Haines v Annwrack Pty Ltd (1980) 39 LGRA 404; Hall v Green (1999) 48 NSWLR 161; Hope v Bathurst City Council (1980) 144 CLR 1; Industrial Equity Ltd v Deputy Federal Commissioner of Taxation (1990) 170 CLR 649; CASES CITED: Leatch v National Parks and Wildlife Service (1993) 81 LGERA 270; Makita Pty Ltd v Sprowles (2001) 52 NSWLR 704; Minister for Aboriginal Affairs & Anor v Peko-Wallsend Ltd & Ors (1986) 162 CLR 24; Minister for Aboriginal Affairs v Peko Wallsend Ltd (1986) 162 CLR 42; Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611; Nicholls v Director-General of National Parks and Wildlife Service (1994) 84 LGERA 397; Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997; Parramatta City Council v Pestell (1972) 128 CLR 305; Pyramid Building Society v Terry (1997) 189 CLR 176; R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170; R v Young (1999) 46 NSWLR 681; Randwick City Council v Minister for the Environment (1999) 167 ALR 115; Taveli v Minister for Immigration, Local Government and Ethnic Affairs (1989) 86 ALR 435; Water Resources Commission of New South Wales & Ors v The State of South Australia & Ors (unreported, Land & Environment Court, 9 October 1981) DATES OF HEARING: 15-18 December 2003; 5 February 2004; 24 February 2004; 19 March 2004 DATE OF JUDGMENT: 04/07/2004

(1999) 197 CLR 510

(1990) 170 CLR 321

(1998) 45 NSWLR 163

(1981) 147 CLR 297

(2001) 183 ALR 59

(1994) 86 LGERA 143

(1999) 48 NSWLR 161

(1980) 144 CLR 1

(1990) 170 CLR 649

(1993) 81 LGERA 270

(2001) 52 NSWLR 704

(1986) 162 CLR 24