Grant Barnes, NRAR’s chief regulatory officer, said the watchdog had revisited the case after an initial probe of the diversion structures failed to identify a breach by MI.

“The informant has provided further information which has resulted in NRAR reopening its investigation,” Mr Barnes confirmed. “The allegation is that water may have been taken in contravention of the Water Management Act 2000.”

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The issue has a wider resonance because the Berejiklian government has been knocked back twice in the Upper House in its efforts to introduce regulations for so-called floodplain harvesting, including last month.

While the bulk of the harvesting of overland flows during floods is captured in the north, such as from the Gwydir and Macquarie rivers, critics such as the Shooters, Fishers and Farmers Party’s Helen Dalton, say the south also needs to be looked at closely.

“There is a complete lack of regulation of irrigation corporations and a total lack of transparency over what they’re doing,” Ms Dalton said.

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“What we need is an independent oversight body with teeth who can investigate complaints about Murrumbidgee Irrigation and issue penalties where required.”

Ms Dalton’s husband is chair of MI, and also owns property in the Murrumbidgee region.

A spokeswoman for NSW Minister for Water, Melinda Pavey said: “NRAR investigations are a matter for NRAR who are an independent body.”

The Herald has approached MI for comment.

Sarah Wheeler, a professor of water economics at the University of Adelaide, said government grants particularly from the $13 billion Murray-Darling Basin Plan, had given irrigators such as MI incentives to expand production even though overall water use was supposed to be decreasing.

Professor Wheeler said MI had tapped Mirrool Creek, turned a swamp into a dam, claim water-efficiency savings, and then been allowed to trade the valuable water.

“They end up using more water,” she said.

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