Dubbo's access to its full entitlement of groundwater has been guaranteed by the Department of Planning, Industry and Environment.
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The 4.3 gigalitres (GL) annual entitlement is critical to Dubbo Regional Council's plan to provide the city with about 6.5 GL of water under level four restrictions and in the absence of river water.
"Local water utility entitlement, or town water, is the highest priority water access licence category as set out in the Water Management Act 2000," a department spokesman said.
"As town water is prioritised above any other water user, the council is able to take its full entitlement in any water year.
"Dubbo Regional Council has received a full allocation for this water year under their local water utility access licence.
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"Additionally, the NSW government has provided $30 million to the council to enhance groundwater supply infrastructure."
Dubbo has been using only 2GL of its water entitlement from the Upper Macquarie alluvial aquifer where according to the council groundwater has been "over allocated".
The department did not respond to questions from the Daily Liberal seeking clarification as to the impact of Dubbo taking more water on the aquifer and its other users.
The council will seek to boost the 4.3 GL by buying more groundwater.
The department manages the aquifer where groundwater is owned by the Crown.