An unsolicited modification of licences for irrigators on the Macquarie River has allowed water earmarked for protecting one of the most important wetlands in the Murray-Darling Basin to be diverted for a cotton crop.

Documents obtained by the Herald show farmers were alerted a year ago by the NSW Department of Industry's water division to changes of the conditions on their unregulated water licences. That prompted the Office of Environment and Heritage to seek to nullify the changes' impact.

Cotton farms, including Kiameron, are green even as drought limits flows to the nearby Macquarie Marshes. Credit:Jeremy Buckingham

One stakeholder, who declined to be named, said he "sat here in shock" when the letter from the water department arrived. "It was like a gift from heaven."

The change effectively gave permission for the licence holders to extract environmental water flows even though they had been paid for by taxpayers in both NSW and the Commonwealth.