Arnold v Minister Administering the Water Management Act 2000.

The appellants held bore licences in the Lower Murray in New South Wales under the Water Act 1912 (NSW) that were superseded with aquifer access licences under the Water Management Act 2000 (NSW). The appellants’ entitlements were less under the new aquifer access licences. Under the Water Act the appellants’ bore licences were subject to change from the time they were granted. The Water Management Act provided for the Minister to determine water management policies and allowed the Minister to convert previous water licences to new licences under new terms as provided for under the Act. In 2004 the Commonwealth and the each of the States and Territories (except Western Australia) entered the Intergovernmental Agreement on a National Water Initiative which providing for the creation of a National Water Commission. The agreement included objectives relating to water management in the Murray-Darling Basin. As a result of this and corresponding agreements, the NSW Government accepted Commonwealth funding ($55 million) to reduce the allocations of groundwater licences in the Lower Murray region using the powers of the Water Management Act. The Commonwealth funding was intended to help assist the NSW Government in offsetting the impact to licence holders. Commonwealth funding was administered through the National Water Commission under the National Water Commission Act 2004 (Cth). The appellants challenged the removal and replacement of their licences on the basis that the replacement of their water licences by the Government of NSW as the result of funding by the Commonwealth, was an acquisition of property not on just terms in breach of s 51(xxxi) of the Constitution; The funding by the Commonwealth is a “regulation of trade or commerce” which is in breach of s 100 of the Constitution.Section 100 prohibits the Commonwealth abridging 'the rights of a State or the residents therein to the reasonable use of the waters of rivers for conservation or irrigation'. The judges comprising the majority rejected this argument on the basis that the phrase, 'waters of rivers' does not include the underground waters at issue in this case. The majority summarily dismissed the appellants claims that there had been an acquisition of property that fell within the confines of s 51(xxxi), referring directly and without further comment to the reasoning in ICM case.