• water law;
  • risk assignment;
  • economic adjustment costs
  • Q25;
  • Q28

This article demonstrates that the current Australian approach to allocating risk associated with policies for recovering water for the environmental water reserve is unworkable. It reveals the legal uncertainties the current approach creates for policy-makers, water entitlement holders and for judges in seeking to resolve disputes between stakeholders, particularly disputes over liability for economic adjustment costs. It ultimately calls for an abandonment of the current approach and legislative attention to correct the inherent uncertainties and ensure that authorities charged with managing the environmental water reserve can do so with the ongoing support and cooperation of irrigators and Murray–Darling Basin communities.