18 January 2022
#Planning, Environment & Sustainability
In most jurisdictions, water rights are the backbone of the framework that regulates the use and development of water resources. The role of water rights is especially important in areas of water scarcity. Australia and California are already experiencing the economic and ecological impacts of increased aridity and drought, with 90 per cent of California experiencing ‘extreme drought’ in 2021 and Australia having the distinction of the driest inhabited continent and the most variable rainfall.
In this article, we describe the legal systems of Australia and California, and the impact their different approaches might have on litigation in the future.
Despite both Australia and California being similar in that they are being affected by increasing aridity, each has approached water rights using a different legal framework. One of the key differences is the existence of water plans in Australia, which are a feature of our legal framework that limit allocations to levels proportionate to available water and account for the effects of climate change. California lacks this element of the regulatory framework, raising the question of whether California is appropriately prepared to face the challenges of climate change.
We also predict increased litigation over Australian water resources, in light of the Californian experience.
Over time, the common law in both Australia and the United States has developed to manage the impact of human activities and development on the hydrological cycle. The first feature of water management under the common law is an understanding that water is a vital resource that cannot be ‘owned’ in a traditional sense and should be available to all. The second feature is private rights of access to water.
The riparian doctrine developed in England and was then adopted around the common law world, including in Australia. Riparian rights provide an incidental right of owning land to access and use the water that touches that land. This means a riparian water right cannot travel and is tied to the owner of the relevant land. This system of riparian rights was not necessarily well suited to Australia, nor the arid Western United States. Justice Windeyer of the High Court of Australia noted the foreignness of our inherited laws in Gartner v Kidman (1961–62) 108 CLR 12, saying “the conditions of settlement, of climate and of geography in which this body of customary law developed are very different from those prevailing in many parts of Australia.”
Prior appropriation rights
In California the riparian doctrine has developed alongside another common law water right unique to the United States, namely, prior appropriation rights. The right to access water applies a ‘first in time, first in right’ ranking system, with the right to access water based on the quantity and use of the initial take. This means when less water is available, junior right holders are expected to give up their water right so senior water users can continue business as usual. This is subject to some limitations – for example, on the condition that the public trust is not violated through adverse impacts to lakes and rivers, and that any use must be both ‘reasonable’ and ‘beneficial’.
The key water law reform in Australia occurred under the National Water Initiative. The National Water Initiative is a federal and state government blueprint that was agreed to by the Council of Australian Governments in 2004 with two key pillars – water markets and water resource planning. Together these features seek to provide for increased water use efficiency and environmental sustainability.
Water plans seek to ensure the allocation of water rights is consistent with available water. They provide environmental regulation by specifying requirements for water trading and catchment management strategies. The Murray-Darling Basin Plan is an example of a water plan, albeit on a grand scale, with the catchment being the entire Murray-Darling Basin. Basin states are then responsible for preparing water plans for catchments within the Murray-Darling Basin. The combined effect of these various instruments is to manage water resources in a sustainable way.
Water markets operate in conjunction with these instruments to incentivise water’s highest and best use. In 2019-20, water market turnover in Australia was A$7 billion, driven by record entitlement and allocation prices due to low water availability and high demand.
California’s approach to water management law is very different. Its State Water Resources Control Board has been managing appropriation rights since 1914 and still broadly follows the common law prior appropriation model. California has a system to trade water rights, but the state’s annual turnover from water trading is just a fraction of Australia’s water market turnover, at US$295 million, with no central trading forum. Like Australian rivers, Californian rivers experience over-extraction and over-allocation. Among 27 major rivers in California, 16 had allocation levels greater than 100 per cent of natural supplies.
Climate change is a multiplier of existing social, economic and environmental challenges, so any existing challenges in managing water in arid jurisdictions like Australia and California are likely to be magnified as regions grow hotter, drier and experience increasingly severe droughts. Australia has already experienced an increase in heat extremes and droughts. Similarly, in California temperatures and extreme high temperatures are virtually certain to continue to increase under all emissions scenarios.
The Australian legal framework based on water plans places us in a superior position to continue to reform and tackle over-extraction and sustainability issues. California may do well to borrow from this aspect of the Australian system. The catchment for California’s water resources does not follow that state’s borders. Therefore, there is a strong case for federal intervention under a water plan, like the Basin Plan, to manage the interstate and international catchments that incorporate California.
While California could learn from Australia, there also are lessons we could learn from the Californian experience.
Perhaps the most important is the Californian experience of water litigation. In recent years there has been a large increase in water-related litigation, with the Climate Case Database recording over 100 water-related cases in the past five years alone in the United States, with a significant number in Californian courts and all dealing with issues related to disputes between competing users of a scarce resource.
Australia naturally shares this in common with California, and disputes will be more likely as water resources become scarcer due to climate change. We can therefore expect more litigation in Australia between, for example, irrigators and other irrigators, irrigators and government environmental water holders, towns and cities, as well as between states, and between the states and the Commonwealth. Australia has seen few water rights cases compared to California, but we expect the trend towards increased litigation to continue as the consumptive pool of available water diminishes.
Despite its shortcomings, the Australian system of water rights and regulation provides some important lessons for California with respect to its system of water rights. In particular, California might benefit from an instrument like the Murray–Darling Basin Plan to provide for cross-jurisdictional management and water allocations that are proportionate to availability. Australia, in turn, needs to be prepared for more water rights litigation, which we predict will increase in the context of climate change.
Authors: Joseph Monaghan & Christopher Watt
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.