Surface water and groundwater

Water legislation

Surface water

Key legislation for managing surface water in the Melbourne region are Victoria's Water Act 1989 (the Water Act) and Victoria's Water Industry Act 1994 (the Water Industry Act).

Under the Water Act, the Victorian Government retains the overall right to use and control flows of Victoria's surface water and to issue entitlements. The Water Act establishes the water entitlement framework for the allocation and management of the state's water resources. It sets out the functions, powers and governance for Victoria's rural and regional water corporations and Melbourne Water.

The Water Industry Act governs how Melbourne's government owned retail and regional water authorities are licensed and operate.


Groundwater in Victoria is managed through the 'take and use' licensing of water abstracted for irrigation and commercial purposes. Aquifers are also protected through a bore construction licensing framework that controls the standards of bore construction.

Licensing powers are derived from the Water Act and are delegated by the Victorian Minister for Water. The act provides for:

  • licensing of drillers
  • licensing of bore construction
  • licensing of groundwater used for irrigation and commercial purposes
  • continuation of private rights to groundwater for domestic and stock use
  • preparation of management plans in water supply protection areas.

New bore construction and groundwater extraction licence applications are assessed taking into account any adverse impacts on existing users, waterways, wetlands and aquifers.

The Water Act allows individuals to extract water for domestic and stock purposes from a range of surface water and groundwater sources without a licence. These domestic and stock rights are defined under sections 8(1) and 8(4)(c) of the Water Act and are not formally licensed.

Water management plans

Victoria's water entitlement and allocation framework provides the basis for the management of Victoria's water resources and governs the way water can be abstracted and used in Victoria. The framework takes a whole-of-system approach to water management in that it considers all water resources (surface water and groundwater) for both consumptive and environmental purposes at all phases of the water cycle.

The main planning documents which influenced water management in the Melbourne region during the 2011–12 year were:

  • the Central Region Sustainable Water Strategy 
  • bulk entitlements authorising abstraction of water from Melbourne's rivers for urban and rural use, the environmental entitlements and the surface groundwater licences
  • urban water corporations' water supply demand strategies
  • urban water corporations' drought response plans
  • rural water corporation drought response strategy
  • management plans for managing licensed diversions on unregulated streams and groundwater where the resource is in a declared water supply protection area.

Streamflow management plans in the Melbourne region are discussed in the Environmental water provisions section.

Under Division 3 of Part 3 of the Water Act groundwater management plans must be developed when a groundwater management unit is declared a water supply protection area. In the Melbourne region, a groundwater management plan is in place for the Koo Wee Rup Water Supply Protection Area. It outlines the potential risks to groundwater in the area and management actions, including the permanent trading zones and rules. It also aims to protect water quality by managing use near the coast to reduce the likelihood of seawater intrusion to the aquifers.

In water supply protection areas management rules are developed which describe:

  • the resource
  • management objectives
  • specific rules for restrictions in times of shortage, carryover (if applicable) and trade.

Local management rules cannot amend licence conditions.

Environmental water management

Environmental water legislation

The Victorian Environmental Water Holder (VEWH) was established on 1 July 2011 through an amendment to Victoria's Water Act 1989 (the Water Act). The VEWH is an independent statutory body responsible for making decisions on the best use of Victoria's environmental water entitlements. It collaborates with catchment management authorities and Melbourne Water to achieve the best environmental outcomes with the existing environmental entitlements.

Within the State of Victoria, the environment's share of water is called the Environmental Water Reserve.

The Environmental Water Reserve is defined in section 4A of the Water Act and is made up of:

  • entitlements for the environment
  • water set aside for the environment through the operation of conditions on consumptive water entitlements and provisions in water supply management plans
  • above cap water that includes water left over after limits on diversions are reached and unregulated flows that cannot be held in storage.

Environmental water provisions

Environmental entitlements

An environmental entitlement is a right to water made by the Victorian Minister for Water and held by the Victorian Environmental Water Holder. As with bulk entitlements, environmental entitlements provide a range of conditions and obligations relating to the abstraction and use of water. 

During the 2011–12 year the VEWH held three environmental entitlements in the Melbourne region:

  • Yarra Environmental Entitlement 2006
  • Tarago and Bunyip Rivers Environmental Entitlement 2009
  • Werribee River Environmental Entitlement 2011.
Water access entitlements: environmental water provisions

In addition to environmental entitlements, the Environmental Water Reserve comprises:
  • water set aside for the environment through the operation of passing flows released as a condition of consumptive bulk entitlements held by the Melbourne retail water companies, Southern Rural Water, Western Water and Central Highlands Water;
  • water set aside for the environment through the operation of passing flow conditions on licensed diversions (regulated and unregulated waterways);
  • water set aside for the environment through the operation of streamflow management plans including operation of passing flow conditions on licensed diversions, and
  • all other water not allocated for consumptive use (i.e. water above the cap).
Waterway management

Waterway management and general river health management is the responsibility of the Catchment Management Authority and Melbourne Water. 

Streamflow management plans are managed by Melbourne Water. Streamflow management plans in place for the 2011–12 year include:

  • Diamond Creek
  • Hoddles Creek
  • Olinda Creek
  • Plenty River
  • Stringybark Creek
  • Pauls, Steels and Dixon creeks.

A further two streamflow management plans were published in 2012 but did not apply to the 2011–12 year: Woori Yallock Creek and Little Yarra and Don Creeks.

For more information on the individual plans, please refer to Melbourne Water's Stream Flow Management Plan website.

Organisations responsible for water management

Table A1 lists the organisations responsible for water management and their specific roles within the Melbourne region.

Table A1  Organisations responsible for water management
Major storages operated within the region
Victorian Department of Sustainability and Environment

(merged with the Department of Primary Industries on 1 July 2013 to form the Department of Environment and Primary Industries)
  • providing advice on policy, performance and compliance to the Minister for Water;
  • implementation of government policy; and
  • acts as a liaison between the Minister for Water and each water business

not applicable

Melbourne Water


  • undertakes waterways services, including flood and drainage management, waterway management and water quality protection to the greater Melbourne metropolitan area;
  • administers diversion licences for the Yarra and Maribyrnong catchments;
  • supplies bulk water to:
           – City West Water
           – South East Water
           – Yarra Valley Water
           – Western Water
           – Gippsland Water;
  • provides sewerage collection and treatment to:
           – City West Water
           – South East Water
           – Yarra Valley Water;
  • operates Eastern Treatment Plant and Western Treatment Plant;
  • supplies recycled water to a number of authorities for a variety of uses; and
  • operates inter-basin transfers including the North–South Pipeline and the Thomson–Yarra Tunnel
  • Upper Yarra Reservoir
  • O'Shannassy Reservoir
  • Maroondah Reservoir
  • Sugarloaf Reservoir
  • Silvan Reservoir
  • Yan Yean Reservoir
  • Greenvale Reservoir
  • Cardinia Reservoir
  • Tarago Reservoir


Yarra Valley Water


  • provides water supply and sewerage services to over 1.6 million people in the northern and eastern suburbs of Melbourne; and
  • operates nine sewage treatment plants

not applicable

South East Water


  • provides water and sewerage services to 1.3 million customers in the southeast of Melbourne; and
  • operates eight sewage treatment plants

not applicable

City West Water


  • provides water and sewerage services to Melbourne's central business district and its inner and western suburbs; and
  • operates Altona sewage treatment plant

not applicable

Southern Rural Water

  • supplies water to irrigation districts at Bacchus Marsh and Werribee;
  • supplies bulk water from Rosslynne, Pykes and Merrimu reservoirs to Western Water for supply to Myrniong, Melton, Macedon, Mt Macedon, Sunbury, Gisborne and Bacchus Marsh;
  • manages groundwater extraction licences in the Melbourne region; and
  • administers take and use licences (surface and groundwater) within the Bunyip catchment
  • Rosslyne Reservoir
  • Pykes Creek Reservoir
  • Melton Reservoir
  • Merrimu Reservoir

Western Water


  • provides urban retail supply to towns outside metropolitan Melbourne and some which are outside the region;
  • operates seven recycled water treatment plants; and
  • operates seven drink water treatment plants

Several minor storages

Gippsland Water


  • holds an entitlement to water within Tarago Reservoir that provides urban supply to the towns of Drouin and Neerim South in the east of the region and also supplies some urban areas outside the Melbourne region; and
  • operates a wastewater treatment plant at Drouin

not applicable

Central Highlands Water


  • provides urban supply to the towns of Blackwood and Ballan in the west of the region; and
  • operates a wastewater treatment plant at Ballan

not applicable

Port Phillip and Westernport Catchment Management Authority


  • responsible for coordinated catchment management within the Melbourne region; and
  • provides leadership to a range of stakeholder groups to deliver integrated catchment management and sustainability of the region's catchments. These groups include Melbourne Water, government agencies, local government and community groups

not applicable