The NSW state government is relying on modelling that shows there will be enough water in the Hunter River system to allow mining and power generators to continue operating even if the drought worsens.
The two sectors, which hold the vast majority of the region's high security water licences, would be unaffected, however, the agriculture sector and other general water licence holders would be progressively squeezed to reduce their water consumption.
The Upper Hunter's major storage dams presently stand at 40 per cent, down 18 per cent on the same time last year.
At the same time water consumption is becoming increasingly intense as the competing sectors vie for the rapidly dwindling reserves.
Upper Hunter Mining Dialogue figures show the industry, which has has traditionally relied on ground water and surface water for washing coal and dust suppression, used eight per cent or 15 gigalitres of the 188 gigalitres of water that entered the Hunter River in 2018-19 period .
The previous year, it used three per cent or 6.12 gigalitres of the 204 gigalitres of water that entered the river.
Bayswater and Liddell power stations use about 62 gigalitres of water annually, however, some of this water is recycled.
Under previous drought conditions, such as at the height of the Millennium Drought in 2007, the government created a strategic water reserve to ensure sufficient water for Bayswater and Liddell power stations.
At the time the power stations were publicly-owned assets and produced less power than they do today.
However, the government is hoping that its 2016 water sharing plan for the Hunter River, combined with the new modelling will ensure the mining and power generation sectors are not threatened.
A NSW Planning, Industry and Environment spokeswoman said the modelling was designed to ensure there were sufficient reserves to satisfy the rules of the water sharing plan.
"These rules ... require that sufficient water be reserved for domestic and stock rights, native title rights, domestic and stock licences, local water utility licences, and major utility licences to allow them to be provided with their entitlements through a repeat of the worst drought for which records were available at the time the plan was made."
"In order to achieve this, at the start of each year, sufficient water is reserved to provide 100 per cent access to the major utility licence for the coming year, with a further 100 per cent being set aside for the future seasons before any allocations are made to general security licence accounts."
General water licence holders on the Hunter River are operating on 95 cent of their entitlements.
By comparison, licence holders on the regulated Peel River near Tamworth have received zero allocation. General security licence holders on the Namoi River have also received zero.
Hunter Valley Water Users Association vice president Ken Bray said general water users were preparing for a 'significant' reduction in next year's allocation, to be made on July 1.
"It's very much an unknown what we are going to get," he said.
"Overall I think the mines and AGL are fairly responsible with the amount of water they use."
"I'm sure the government would act if it got to a point where people lives were at risk due to water shortage."
The Planning, Industry and Environment spokeswoman confirmed general security licence holders should expect periods of reduced allocation during an extended drought."
"High security allocations are prioritised and general security is allocated based on remaining availability," she said.
An AGL spokeswomanconfirmed the company had been in talks with the government about water security for the power stations.
"Water is an invaluable resource and we understand the critical role water has across the Hunter region, through urban, mining, viticulture and agriculture industries," she said.
"For AGL it is an essential input to ensure we can deliver reliable energy supply from our assets. In order to operate Bayswater and Liddell power stations, AGL Macquarie holds a series of water licences. We also own and operate a complex onsite water infrastructure system which serves ongoing generations."
She said AGL was proceeding on the basis that that it would not have its water restricted.
"Recent modelling suggests water supply limits may not require variation under the current drought trajectory forecasts," she said.
A critic of the modelling, who did not wish to be named, said an extreme events policy, similar to the one developed for the Murrary-Darling Basin would have been a more appropriate response to extreme drought in the Hunter.
"It (the modelling) doesn't factor in the water that will be used in the Murrurundi pipeline or consider the worst case for extreme bushfires where large amounts of water would be needed," they said.
The story The last drop: government puts its faith in Hunter River water modelling first appeared on Newcastle Herald.