Posted on March 6, 2025 by Stuart Simington 13

Water Allocation Decision Under Water Management Act Upheld

In a significant decision for water resource management in New South Wales, the Land and Environment Court recently dismissed a challenge to the Minister’s reduction of water allocations for supplementary licences in the Lower Namoi Regulated River Water Source. The case, Phelps and Ors v Minister Administering the Water Management Act 2000 [2025] NSWLEC 4, centered on the validity of a 2023 decision that reduced biaswater entitlements using a new hydrological model.

Background: Why Was the Decision Challenged?

The applicants—holders of supplementary water access licences—sought judicial review of the Minister’s 2023 decision to reduce their annual water allocation from 1.0 to 0.36 megalitres per unit share.

This reduction was based on a new hydrologic computer model, the Namoi Source Model, which replaced the older IQQM Model. The model calculated that current water extractions (including floodplain harvesting) exceeded sustainable limits, necessitating cuts to supplementary allocations.

The applicants argued the decision was invalid on three main grounds:

1. Improper Approval of the Namoi Source Model: The model was allegedly unapproved or misapplied.
2. Inclusion of Floodplain Harvesting Data: They claimed this was irrelevant to assessing water extraction limits.
3. Apprehended Bias: A senior official approving the model had a conflict of interest.

Issue 1: Was the Namoi Source Model Properly Approved?

Applicants’ Argument:
The Namoi Source Model was only approved for the 2021/22 water year, not 2023/24. They also argued assessments under the Water Sharing Plan (WSP) must occur after the water year ends (30 June), but the 2023 decision relied on pre-July data.

Court’s Findings:

• The WSP requires assessments post-water year, but the timing of the decision aligned with the need to set allocations at the start of the new water year (1 July). Delaying assessments would leave licence holders without allocations which Robson J considered would be a “perverse outcome.”
• The model’s approval wasn’t restricted to a specific year. The Department’s briefing notes confirmed that it was the “best available” model for compliance assessments, regardless of the year.

Outcome: Grounds 1 and 4 dismissed.

Issue 2: Could Floodplain Harvesting Be Included in Calculations?

Applicants’ Argument:
Floodplain harvesting (capturing water from floodplains) isn’t a “proclaimed water source” under the WM Act. Including it in the model unlawfully expanded the regulatory scope and skewed extraction limits.

Court’s Findings:

• The Namoi WSP explicitly mandates including floodplain harvesting in calculating long-term extraction limits (clause 29(3)(d)). This ensures accurate auditing of sustainable water use, even if floodplain harvesting itself isn’t regulated under the Act.
• The WSP’s definition of “water sources” (confined to river channels) didn’t exclude floodplain data from assessments. Historical models, including the IQQM, implicitly accounted for it. The Source Model simply provided a more precise representation.
• Policy documents, like the NSW Floodplain Harvesting Policy, supported the need to factor in floodplain impacts to protect downstream ecosystems.

Outcome: Grounds 2, 3, 5, 6, and 7 dismissed.

Issue 3: Was There Apprehended Bias?

Applicants’ Argument:
Mitchell Isaacs, the Department’s Chief Knowledge Officer who approved the model, was a director of eWater Ltd—the nonprofit that developed the Source software. This dual role created a conflict of interest.

Court’s Findings:

• The decision to adopt the Source Model predated Isaacs’ directorship and was part of a national strategy (since 2008) to modernize water modelling. Transitioning from IQQM to Source was recommended by experts and endorsed by COAG.
• eWater Ltd, jointly owned by Australian governments, didn’t profit directly from the model’s adoption. Isaacs’ declaration of a conflict (managed by delegating financial decisions) didn’t taint the approval process.
• Independent reviews validated the Source Model’s superiority, negating any suggestion of apprehended bias.

Outcome: Ground 8 dismissed.

Implications of the Decision

1. Clarity on Hydrological Model Use: Agencies can adopt updated models without reapproval for each water year, provided they meet legislative standards.
2. Floodplain Harvesting’s Role: Even unregulated activities affecting water availability can or should be factored into sustainability assessments.
3. Conflict of Interest Management: Transparent declarations and adherence to pre-existing policies mitigate bias risks in technical decisions.

Conclusion

The Court’s dismissal of all grounds reinforces the importance of adaptive water management in the face of climate and developmental pressures. By upholding the Namoi Source Model, the decision supports the use of advanced tools to balance agricultural needs with environmental sustainability. For licence holders, it underscores the need to engage with evolving regulatory frameworks.

This case is also a reminder that judicial review focuses on the legality of decisions, not their merits. As water scarcity intensifies, such rulings will likely shape how Australia navigates competing demands on a vital resource.

You can read the decision here: Phelps and Ors v Minister Administering the Water Management Act 2000 [2025] NSWLEC 4

If you have any questions or need assistance in light of this decision, please contract Stuart Simington.