The Hunter could run out of water in three years of extreme dry weather under a worst-case scenario outlined in a new drought response plan.
Hunter Water published the Lower Hunter Drought Response Plan on Thursday, announcing staged water restrictions in the event dam storage drops below set levels.
"Our water supplies could fall from normal operating levels (above 70% storage) to empty within three years in the event of a severe drought, even with drought response measures in place," the plan says.
"Whilst highly unlikely, the consequences of this would be catastrophic for our region."
The Lower Hunter's water storage level across Grahamstown and Chichester dams sits at 82 per cent.
The Department of Primary Industries has declared most of the Hunter in drought or severe drought and some farmers have started selling stock at rock-bottom prices, astonished at how quickly conditions have changed.
The drought response plan says the region should start "preparing" for water conservation when storage drops below 70 per cent and start restrictions when it hits 60 per cent.
Restrictions would then increase with each 10 per cent drop in storage until the region is in "severe drought" below 30 per cent storage.
"Community engagement undertaken in the development of the Lower Hunter Water Security Plan confirmed that our communities support the staged introduction of restrictions in response to drought but expect a minimum supply of water of 100L/person/day in a severe drought," the plans says.
"This minimum supply level may not be met in the event of a severe drought with our current system."
The level-one restrictions have a target of 160 litres a day per person by banning sprinklers and irrigation systems and limiting garden watering to trigger-fitted hoses before 10am and after 4pm.
Pool covers must be installed at this stage and showers should be limited to four minutes.
Stage two targets 140 litres a day per person and limits hose watering to 15 minutes every second day.
Cars and boats must be washed with a bucket in stage two.
Under stage-three restrictions, which come into effect when dam levels drop below 40 per cent, all outdoor water use is banned and showers are limited to three minutes or less.
The plan says Hunter Water will start fast-tracking the proposed Belmont desalination plant if dam levels fall below 70 per cent.
The Newcastle Herald reported in October that the plant would take four years to build once Hunter Water obtained planning approval for the project.
Minister for Water Rose Jackson said the impact of drought was already evident in the Lower Hunter "so we're stepping up to ensure we have a clear path forward".
"We know Lower Hunter's water supply can fall from normal operating levels to critically low levels within three years during a severe drought, so we're being proactive, launching a comprehensive plan while water storages remain high.
"This plan means we can all go into this dry period with clarity and confidence in the region's water supply."