Kangaroo Valley is a drinking water supply catchment for Kangaroo Valley village, parts of the Southern Highlands and Sydney. It is also a popular recreation area both for swimming and canoeing. Land use has traditionally been dominated by dairy farming but there has been significant and continuing development of land for hobby farms and rural residential subdivision. Dairy industry restructuring has affected the viability of some farms in the Valley and created additional pressure for subdivision. River health is a function of flows, water quality, riparian vegetation, geomorphology and aquatic habitat and riverine biota. River flows in the Kangaroo River are affected by water extraction and storage for urban water supply and extraction by commercial irrigators and riparian land holders which have a significant impact at low flows. Current water quality often does not meet ANZECC Guidelines for primary contact and recreation and the river is a poor source of raw drinking water. Key sources of contaminants are wastewater runoff from agriculture, and poorly performing on-site sewage management systems. Riparian vegetation, which is critical to the maintenance of in-stream ecosystems suffers from uncontrolled stock access and weed infestation. The management of land use and resulting diffuse pollution sources is critical to the long term health of the river. The Healthy Rivers Commission of New South Wales Independent Inquiry into the Shoalhaven River System Final Report July, 1999 found that the longer term protection of the health of the Kangaroo River is contingent upon achievement of patterns of land use that have regard to land capability and also to the capability of the river to withstand the impacts of inappropriate or poorly managed land uses. This micro case study of Kangaroo Valley examines the complex legal and administrative arrangements with particular reference to the management of diffuse pollution for river health. In the past, diffuse pollution has fallen through the gaps in legislation and its administration. Although water pollution legislation is broad enough to embrace diffuse pollution, in practice the Environment Protection Authority has focused on regulating point sources. Water legislation has traditionally been concerned with issues of water quantity rather than water quality. Legislation which allows agency intervention in relation to land degradation has grown from soil conservation roots, neglecting the flow-on effects upon water quality. Under the land use planning system existing land uses are protected from new regulatory requirements. A number of recent developments in NSW law and its administration have set the scene for addressing this past neglect. Water planning provisions in the Water Management Act 2000 have the potential to enable community based Water Management Committees to move away from a narrow focus on water quantity to the broader issues of river health, including water quality. Improved management of on-site sewage management systems is expected as a result of the Local Government (Approvals) Amendment (Sewage Management Regulation) 1998. A draft Regional Environmental Plan prepared for the Sydney Catchment Authority aims to improve the assessment of new development in terms of its impact on drinking water quality. It also moves away from an exclusive concern with controlling new development towards grappling with existing uses. Proposed amendments to the Environmental Planning and Assessment Act, 1979 as detailed in the White Paper, Plan First (2001) include the integration of imperatives derived from catchment strategies and water management plans into local land use plans.

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