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The cap set the use of water for consumptive purposes (e.g., for irrigated agriculture, stock and domestic and urban needs) to a level reflecting the 1993/1994 levels of development.

2.3 Current Water Resource Management

Current water resource management consists of two separate yet closely interdependent activities: the water sharing plans and licensing of individual water users. Water sharing plans provide the legal policy framework for the allocation, use and transfer of water that is consistent with the COAG's principles for water reform. A water sharing plan needs to define both consumptive and non-consumptive entitlements. The main objectives of a water sharing plan are to describe water availability from the source, to protect or reserve a sufficient amount of water for important unlicensed uses (e.g., domestic and stock needs, wetlands, aquatic life), and to make remaining water available, at a reasonable assurance level, to licensed users (DLWC 2001). During the water allocation planning process, water for the environment is set aside and cannot be allocated to any other user if this would compromise the environmental health of the catchment in question. Once the balance of water is allocated, users may then trade.

Water sharing arrangements are backed up by a consistent licensing system. The licensing system under the water act is the mechanism by which the government permits access to water and regulates the security of access. Water licensing ascribes the rights and responsibilities of a specific water user operating specific works at a specific location. License categories define the priorities and conditions of access to water. A share component is the core of the license, which specifies the holder's right to extract a share of the water available from a certain water source. Water access licenses are subject to any conditions and obligations imposed by the water sharing plans. For example, license holders will not be able to pump water until a minimum environmental flow level is reached.

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