Australia's Murray-Darling Basin Authority acted unlawfully, committed gross maladministration and took a "head in the sand approach" to climate change, a royal commission has found.
The inquiry's report released on Thursday found river allocations were driven by politics rather than science and called for a complete overhaul of the Murray-Darling Basin Plan.
It argues a scientific approach must instead be taken to determine how much water should be returned to the environment.
But the authority says it is confident the basin plan has been developed lawfully and based on the best available science.
"There is extensive documentation in our published reports to support this," it said in a statement following the release of the report.
"The MDBA rejects any assertion by the Commission that it has acted improperly or unlawfully in any way."
The South Australia-based royal commission's 746-page final report includes 111 findings and 44 recommendations, and aims to improve the effectiveness of the scheme.
The plan was signed into law in 2012 by the federal government and basin states, and aimed to return water to the water system for the benefit of the environment.
Commissioner Bret Walker SC found the authority "completely ignored" climate change projections when it decided how much water should be returned to the environment.
"That is unlawful. It ignores the best available scientific knowledge," the report said, before adding the board's disregard amounted to maladministration.
The authority, which fought to ensure its employees were not compelled to give evidence before the commission, was also slammed as secretive.
ABC's Four Corners in 2017 revealed allegations upstream irrigators in NSW were taking billions of litres of water designated for the environment.
Mr Walker was appointed commissioner by the previous SA Labor government and is expected to pocket about $1 million for leading the inquiry, which came in about $3 million under its $8.45 million budget.
Greens senator Sarah Hanson-Young has called for his recommendations to be adopted in full.
"This report is another dire warning that the survival of our nation's most important river system hangs in the balance," she said.
But South Australian Premier Steven Marshall said the commission had strayed from its initial task of investigating theft allegations.
The Liberal leader vowed to look at the legality of the plan and respond later in the year.
Mr Marshall will ask Prime Minister Scott Morrison to convene a meeting of the Basin states to look at the inquiry findings.
"I don't want to be drawn on providing commentary at this early stage," the premier told reporters in Adelaide.
"But I can assure every single person in this state, we are taking this royal commission report extraordinarily seriously."
SA Water Minister David Speirs was disappointed with the commission's criticism of his actions, which were labelled a "capitulation" to the Commonwealth contrary to the interests of the state.
"It is an isolated comment that doesn't consider all the other things that occurred," he said.
Australian Associated Press