Water Regulator flexes its muscles in NSW prosecution against Whitehaven

The introduction of the NSW Natural Resources Access Regulator (NRAR) in 2017 marked a shift towards far greater scrutiny of compliance by water users with the complex web of water laws and regulations in NSW. Now, as at August 2020, the NRAR has recently commenced its first ever prosecution against a mining company in relation to the surface water licensing and harvestable rights provisions in NSW.  

Functions of the NRAR and recent compliance activities

The NRAR is a NSW Government agency and primarily has functions relating to the enforcement of water legislation in NSW (being the Water Management Act 2000 (NSW) (WMA) and Water Act 1912 (NSW)), and potentially other natural resources management legislation. The objectives of the Regulator are to:

• ensure effective, efficient, transparent and accountable compliance and enforcement measures for the natural resources management legislation; and
• maintain public confidence in the enforcement of the natural resources management legislation.

Since its inception in 2017, the NRAR has substantially increased its compliance activities. For the period March 2019 to March 2021, the NRAR’s regulatory priorities are on unauthorised water extractions and controlled activities at locations where there is high ecological and hydrological value. In April 2020 alone the NRAR:

• Conducted 18 inspections;
• Issued 95 alleged breach notifications;
• Finalised 139 investigations;
• Issued 25 advisory letters;
• Issued 29 formal warnings;
• Issued 16 statutory notices;
• Issued 23 Penalty Infringement Notices; and 
• Finalised 1 prosecution (relating to the Macquarie–Bogan Unregulated and Alluvial Water Sources).

The NRAR utilises a graduated and proportionate approach to non-compliance, based on the severity of the non-compliance (its impact on the environment and potential harm to people or property), the regulated entity’s culpability, cooperation and approach to the non-compliance, and the public interest. The NRAR uses a suite of tools to respond to an alleged breach of water law. These tools may include one, or a combination, of the following:

• using the alleged breach as part of the intelligence to develop future monitoring and audit programs;
• education and information campaigns;
• incident management—stopping any significant, ongoing effect and remediating it where appropriate;
• investigations and enforcement; and
• amending conditions in licences issued by the NRAR.

Whilst a suite of enforcement options are available to the NRAR, in recent times there has been an increase in prosecutions commenced by the regulator with eight prosecutions filed to date primarily focussed on the agricultural and irrigation industries. Of the new prosecutions commenced in 2019 in the Land and Environment Court, 38% were by the NRAR, the highest out of any NSW regulator. 

Focus on the mining sector

As the NRAR increasingly ‘flexes its muscles’ as a regulator, we have seen an increase in the number of compliance audits and inspections being conducted of mining operations in NSW. Under the WMA, inspections may be announced or unannounced and the NRAR has noted in its Regulatory Policy that the compliance monitoring program “also plans to include the use of remote surveillance techniques such as aerial photography and satellite images, land and river surveys”. 

The NRAR may also conduct follow-up audits or ramp up the instances of inspections if a company has been identified by the NRAR as a poor performer or conducts high-risk activities. 

Compliance audits typically focus on a mine site’s total water take, its water licensing entitlements and compliance with water licence conditions and may relate to both surface water and ground water. Under the WMA, the NRAR has broad investigative powers and during audits or inspections may ask site personnel questions, request copies of documents, inspect premises, take photographs and take samples.  

Relevantly for mining operations, section 60I of the WMA requires that any person who takes water in the course of carrying out a mining activity must hold an access licence authorising the take of that water. A person ‘takes water in the course of carrying out a mining activity’ if, ‘as a result of or in connection with, the activity or a past mining activity carried out by the person, water is removed or diverted from a water source (whether or not water is returned to that water source) or water is re-located from one part of an aquifer to another part of an aquifer’. Importantly ‘mining’ includes mining as well as mineral and petroleum exploration. Mining includes both the removal of materials for the purpose of obtaining minerals or petroleum but also includes:

1. the construction, commissioning, operation and decommissioning of associated works, 
2. the stockpiling, processing, treatment and transportation of materials extracted, and
3. the rehabilitation of land affected by mining.

It is therefore critical that a mining operation considers all aspects of its water take in assessing its water licensing obligations, including incidental water take (including dewatering activities) and water take involved with post mining activities.  

In NSW, various licensing exemptions are available for surface water take if the take falls within the harvestable rights provisions of the water laws or is otherwise a result of an exempt activity under the water regulations. The harvestable rights areas and the rules for capturing rainfall run-off in those areas are specified in Harvestable Rights Orders (Orders) which include (but are not limited to) how much run-off can be captured, where harvestable rights dams may be located as well as the classes of dams that are exempt from the Orders (such as dams solely for the control or prevention of soil erosion). The Orders refer to a ‘minor stream’ being a term that is defined in the Water Management (General) Regulation 2018 (NSW), but is often subject to a significant amount of uncertainty and ambiguity in its application. 

First prosecution of a mine 

On 2 July 2020 the NRAR commenced a prosecution in the Land and Environment Court of Whitehaven Coal Mining Ltd (Whitehaven) over two alleged breaches of section 60A(2) of the WMA for taking water at its Maules Creek Mine without an access licence over a three-year period between 2016 and 2019, or in the alternative section 60C(2) for taking water for which there was no, or insufficient, water allocation. The alleged breaches relate to the failure to divert clean water from major streams on the site, with Whitehaven accused of capturing the water on the mine site without approval to do so. 

The NRAR and the Environmental Defenders Office have stated the action arose following numerous complaints from local farmers and council members who have indicated a lack of water in the area. In response, a Whitehaven spokeswoman has stated that Whitehaven has publically addressed the NRAR investigation which commenced in 2018, has detailed the complexity of the water management system in NSW and has noted that some of the alleged non-compliances concern practices widely observed in the NSW coal mining sector. 

As at the time of writing, we understand that Whitehaven are yet to put on their evidence in the matter, but if found guilty, the maximum penalty for the breach of the provisions is over $2 million. 

The recent action against Whitehaven serves as a reminder to the NSW mining industry of the complexity of water management laws in NSW including the harvestable rights provisions and the various exemptions for the need to hold a water access licence and water approvals under the water regulations. NSW mining companies are encouraged to review their own practices and procedures relating to water management, and keep up to date with all relevant environmental laws, including the outcome of the Whitehaven case, to ensure continued compliance particularly given the complexity of the regulatory system in this area.

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