A senior water official and the state's former water minister, Kevin Humphries, will be referred to the state corruption watchdog over their relationship to irrigators and lobbyists, Labor said, following an expose into alleged mismanagement of the Murray Darling Basin plan by the ABC.
Four Corners on Monday aired leaked recordings of a top NSW water bureaucrat, Gavin Hanlon, apparently offering to share confidential information with irrigation lobbyists, including a possible plan to withdraw the state from the Murray Darling Basin plan altogether.
The Berejiklian government's pledge to provide "an urgent overview" of compliance issues raised in the Four Corners investigation of alleged water theft in the Murray Darling Basin was described as "lame and inadequate" by green groups, including the Australian Conservation Foundation.
On Tuesday, Niall Blair, the NSW primary industries minister, said he had "asked for a clarification around the circumstances" of the briefing given by Mr Hanlon, in the head of the department's water division.
"I have directed the secretary of the NSW Department of Industry to provide an urgent overview of all the compliance matters raised in the program," Mr Blair said in a media statement.
The Four Corners report raised other issues including the apparent gutting of a strategic investigations unit set up in the wake of previous reviews by the state's ombudsman to strengthen compliance of water restrictions.
The unit identified several cases by large cotton farming combines that indicated billions of litres of water had been diverted into huge dams at periods of low river flow even when major downstream centres, such as Broken Hill, were at risk of running dry.
"Last night's revelations on Four Corners were truly harrowing," said shadow water minister Chris Minns. "It's not good enough for the NSW government to announce an internal inquiry.
"We can't trust them. The farmers, communities and municipal governments up and down those water networks need to know what happened and whether the minister knew."
The state government said it would refer the allegations to the secretary of the Primary Industries department and also approach the NSW ombudsman following the program, something green groups had already slammed as inadequate.
But Mr Minns said: "They are not there to get to the bottom of potentially corrupt or inappropriate behaviour. We are lucky in NSW, we have the ICAC just for that purpose".
Meanwhile, South Australian senator Sarah Hanson-Young said on Tuesday she would seek to establish a federal senate inquiry into the allegations, which would offer whistleblowers the protections of parliamentary privilege.
"I'm disgusted that rich corporate cotton growers upstream have taken water that was meant for the environmental survival of the Murray Darling," Senator Hanson-Young said. "This plan cost $13 billion in taxpayer money and years to establish".
Mr Minns said Labor would seek an investigation into claims made by one irrigator that he and others were essentially given the OK to ignore a "gazetted ban" on pumping water from a reservation marked for storage.
The program alleged Mr Hanlon removed or "debadged" departmental markings from confidential documents that were then shared with lobbyists.
Mr Minns called for Mr Hanlon to stand down while investigations took place.
"There had been major worries about abuses for four to five years," he said. "Nothing was done."
Mr Blair said his department's secretary would seek advice from the Ombudsman to "maximise the effectiveness of the investigation" into regulation implementation launched a year ago.
"The NSW government remains committed to the Murray Darling Basin plan, while seeking the best deal for NSW communities within that framework," he said, referring to claims by Mr Hanlon caught on tape that there was a "Plan B" to pull the state out of the plan.
Mr Humphries, who was dumped from cabinet in 2015, independently announced this month he would not recontest his seat of Barwon at the 2019 state election.
Fairfax has contacted Mr Humphries for comment.
"We have had detailed legal advice on what walking away means," Mr Hanlon told the group described by the ABC as made up by irrigators and their lobbyists.
"Before we walk away we would dare them to step in over the top of what we're doing if we're acting in good faith, delivering on what we should, and they start carrying on, we would say we dare you to bloody step in over the top of us," Mr Hanlon is heard to say, offering a one-page legal summary.
He is also heard offering to supply information to support the lobbyists' cause as "ammunition" but stripped of the department's logo to conceal its source.
Paul Sinclair, campaign director of the Australian Conservation Foundation, said Mr Blair's response was "lame and inadequate".
His organisation would be contacting the state's Independent Commission Against Corruption to begin an investigation into the allegations and for a senate inquiry to probe the effective diversion of a large share of the billions of dollars spent on improving the health of the river amid excess water extraction across the basin.
"Instead of saving the river, it looks like the Murray Darling Basin plan has made a fortune for a lucky few. The government has to step in to fix abuses now if we are going to save our most precious water system," Mr Sinclair said.
Kate Smolski, chief executive of the NSW Nature Conservation Council, called on Premier Gladys Berejiklian to remove National Party MPs from natural resources portfolios and refer the issues raised to ICAC.
"The government has turned a blind eye to illegal behaviour like meter tampering water theft," Ms Smolski said. "This scandal has happened on the watch of National Party ministers who must be held to account for their mismanagement of one of the key natural resource agencies in NSW."
Fairfax Media has sought to speak to Mr Hanlon.
According to the media release announcing his appointment on December 9, 2014, Mr Hanlon joined the government from Goulburn Murray Water where he had been managing director.