By Ballanda Sack & Marlon Shou
On 18 May 2026, the Water NSW Act 2014 (Water NSW Act) was amended by the Water Management Amendment (Easements for Inundation) Act 2026 (Amendment Act). These amendments, passed under cover of facilitating environmental flows to the Murrumbidgee and Murray Darling Basins, go well beyond the ambit of protecting Water NSW from responsibility for inundation where it has acted in good faith.
Key changes made by the Amendment Act:
- Introduces new statutory functions for Water NSW which has implications for the scope of Water NSW’s liability in tort;
- Alters the existing statutory right of compensation under the Water NSW Act such that compensation is no longer available for damage caused by inundation occuring ‘as a consequence of anything done, or omitted to be done, by Water NSW’;
- Potentially absolves Water NSW from liability for damage it causes when exercising its functions as a dam operator.
Background
Releases of “water for environmental purposes” (Environmental Flows)are effectively controlled releases of held environmental water (purchased by the Commonwealth or held by the State) from upstream storages at specific times. These Environmental Flows are designed to create peak flows of sufficient duration to inundate wetlands and other targeted environmental sites. To achieve the required environmental outcomes, the Environmental Flows will need to exceed riverbank constraints and thus inundate private and public land adjoining the river system.
The scale of the Environmental Flows is significant, and the water delivery mechanism is crude. For example, the Murrumbidgee River is approximately 1,500km long with water taking on average 25 days to reach the South Australian border. Environmental Flows on the Murrumbidgee (released from dams in the Snowy Mountains) are proposed to inundate the many wetlands along the Murrumbidgee River (principally between Wagga Wagga and Hay), water wetlands and forests in the Lowbidgee area and for water to flow through to the Murray River to the South Australian border system. The current channel capacity constraint in the Murrumbidgee River is equivalent to a flow rate of 22,000ML at Wagga Wagga. To achieve the required environmental outcomes, it is proposed to periodically release water to increase the flow rate to 40,000ML at Wagga Wagga (flow peak for 3-5 days and in excess of 22,000ML for 14 days).
Landholders assessed as being likely to be impacted by inundation from Environmental Flows can enter into negotiations with the State Government for the acquisition of “flow easements” under a new compensation scheme under the Water Management Act 2000.
Statutory right of compensation for excessive inundation caused by Water NSW removed
Section 37 of the Water NSW Act requires Water NSW to do ‘as little damage as practicable’ when exercising its functions and provides a statutory right of compensation to persons who suffer damage where it has breached this duty. It provides:
(1) Water NSW, in exercising its functions under this Part, is to do as little damage as practicable and is, subject to this Part, to compensate all persons who suffer damage by the exercise of its functions.
This duty to minimise harm when exercising functions and compensate affected persons is on similar terms to that imposed on Hunter Water, Sydney Water and various rail authorities. It is also imposed on authorised officers of virtually all government agencies when they are exercising powers of entry or investigation.
The Amendment Act removes this duty in relation to the impacts of inundation of land by adding a new subsection 37(4) and a new definition to section 3 as follows:
37(4) No compensation is payable under this section for damage resulting from the inundation of land as a consequence of anything done, or omitted to be done, by Water NSW.
3(1) inundate, in relation to land, includes—
(a) inundate private land, and
(b) move water to or across land, including private land
Critically, this exculpation from liability is not limited to inundation caused by Environmental Flows but to any inundation. Unplanned or emergency releases from water storages can cause significant damage. For example, as outlined in Queensland Bulk Water Supply Authority t/as Seqwater v Rodriguez & Sons Pty Ltd [2021] NSWCA 206 (Wivenhoe Dam case), significant areas of Brisbane and Ipswich suffered from inundations in 2011 caused by inflows from downstream tributaries and water released from the Wivenhoe Dam in response to heavy rainfall.
Water NSW’s statutory functions expanded to further protect it from liability
The Amendment Act also inserts the following three additional statutory functions for Water NSW in section 7(1) of the Water NSW Act:
(l) to release or supply water, including environmental water, to inundate land for an environmental purpose,
(m) to operate works to inundate land for an environmental purpose, (n) in the exercise of a function, to inundate land.
The express inclusion of these statutory functions has implications for the application of Part 5 of the Civil Liability Act 2002 to Water NSW’s liability in tort for claims relating to damage or loss caused by inundation of land caused or contributed by Water NSW. The express exclusion also has implications for any defence of statutory duty to a claim in nuisance.
Under Part 5 of the Civil Liability Act 2002, section 42 requires consideration of the “financial and other resources that are reasonably available to the authority” in determining whether an authority has a duty of care or has breached that duty. Section 43 reduces the standard of care, in limited circumstances, to an obligation to not exercise (or not fail to exercise) its duty/power in a manner that is “so unreasonable that no authority having” that duty/power “could properly consider the act or omission to be a reasonable exercise” of it. In the Wivenhoe Dam case, the Court considered that the equivalent provision in the Queensland Civil Liability Act 2003 to section 43 had the effect that for an authority to be liable, the exercise of a power must be so unreasonable that the court cannot envisage any authority in that position considering it to be a reasonable exercise of the power.
Conclusion
The Amendment Act is in a suite of legislative changes intended to facilitate Environmental Flows and to shift risk from government to private landholders. The June 2025, amendments made to the Water Management Act 2000which extended an existing statutory exclusion of Crown liability to matters arising from Environmental Flows are discussed in the linked article in the Law Society Journal.[1]
The Amendment Act also proposes to add a new section 399C to the Water Management Act 2000. Section 399C will specifically authorise the creation of environmental flow easements and expand the category of “river operators” benefits by such easements to include the Crown in right of the Commonwealth and any person prescribed by the regulations. Section 399C has been enacted but has not yet commenced.
The scale of environmental flow releases funded by the federal government is significant and the river systems impacted are complex and dynamic. One such program funded by the federal government is the Reconnection River Country Program, which involves both additional water releases within the Murray and Murrumbidgee valleys and a program of “constraints” removal. It is inevitable, particularly when coupled with dynamic weather systems, that predictive modelling undertaken now or over the past few years will not always be right and that decisions on water releases may cause or contribute to unanticipated impacts.
It is extremely disappointing that the NSW Government has not been upfront about the challenges in predicting impacts of environmental flows and allowing for a flexible consultative process. Instead, the NSW Government has chosen to implement a rigid process for negotiating flow easements which shifts risk and cost on landholders, and to implement statutory amendments which seek to absolve dam operators of their basic responsibility to act with due care.
[1] First published at LSJ Online Legal Updates June 2026: Can the Crown intentionally cause harm in ‘good faith’?’