In the historic mining town, where the beer flowing from the pubs' taps seems a surer drop than local water, theories are rife. Everyone has a view – from shoppers in the new Coles to a bloke working at the local Indian restaurant. It is those thirsty cotton farmers up north, says the latter. It's the "bloody" Murray Darling Basin Authority, say others. Kevin Humphries says someone blaming the former NSW water minister.

Very soon the outback town will run out of freshwater from the nearby lakes for the first time in anyone's memory. With rain unlikely, in late January the last water that can be treated conventionally will run out.

To buy another year, the town will switch to reverse osmosis to treat the remaining and increasingly salty and dirty lake water. After that the town will need to switch to bore water.

In the past, the city had been almost guaranteed a supply of lake water, said Broken Hill's mayor, Wincen Cuy, in a recent submission asking for more water in the lakes. "That is no longer the case." There have been highs and lows during times of severe drought to major floods, but nothing like this.

When full, the seven lakes that comprise the Menindee Lake System – ephemeral natural lakes where weirs and dams were added in the late 1940s – hold three times more water than Sydney Harbour. Now they are virtuallyempty.

In the past, the trip south from the Hill to the lakes was often a happy one – full of excitement for a weekend on the water. These days, the 110-kilometre road is marked with the sort of crosses that grieving families erect where a loved one has been killed in a car crash.

Barely a few kilometres south, the first cross appears: "Lake Killers." The crosses pop up in clusters on hill tops and roadsides near the turn off to the lakes: The handmade signs on crosses say "RIP Menindee Lakes"; "RIP Darling River".

On Lakeview Road, Sunset Strip – an address too optimistic for these times – retro beachside homes with romantic names from an era when this was the "oasis of the outback" are going cheap.

The signs are the work of volunteers in the Broken Hill Menindee Lakes: We Want Action, a Facebook action group that has had up to 16,000 members since it was formed in fury more than a year ago. The group believes the lakes fell victim to a plan by the NSW government to move Broken Hill and Menindee from surface water to bore water.

One of the many signs locals have erected protesting the loss of water from the lakes. Photo: Peter Rae

Menindee was always a meeting place for Aboriginal people in the west of NSW because of the fishing and the supply of water as the Darling ran south through the wetlands and lakes. Earlier explorers stopped there for the same reason: Sir Thomas Mitchell in 1835; Charles Sturt who travelled up the Darling from the Murray in 1844; and Burke and Wills, who in 1860 carved an arrow in the doorway of the Menindee pub to indicate where they were heading.

Now the Darling is far from mighty: it is a muddy trickle, too shallow and dirty to swim in or drink.

The only sign of water at Lake Menindee, one of the largest lakes, are mirages. Any boats are up on trailers, and cows graze on the lake bed. Occasionally a truck darts back and forth in the distance. NSW water engineers are drilling for bore water that will soon supply Broken Hill if the forecasts of continuing lack of rain and El Nino dry weather prove correct.

Inside the lakeside home of small business man Ross Leddra​, a framed photo shows a full lake. For generations of locals, this lakeside strip was to Broken Hill what Bondi is to Sydney.

Sunset Strip, on Lake Menindee, in 2010. Photo: Edwina Pickles

Before intensive farming by cotton farmers upstream – the Murray-Darling Basin Authority records show they account for much of the increased usage upstream – the lakes were full of birds, fish and people sailing and swimming in the middle of the driest country in NSW.

"We are looking at an empty lake," says Leddra, with characteristic directness. Grabbing cold beers, we head down to watch a spectacular sunset in a spot that used to be perfect for a dip.

"It was emptied in late 2013, so they [NSW government] could drill and locate underground water."

Leddra and his mate, Darryn Clifton are active members of the Facebook action group. They claim that in four months the governments drained the lake of water that would have supplied Broken Hill and Menindee for seven years.

Under the existing Murray-Darling Basin Agreement between basin governments, when the lakes are filled to 640 billion litres (about 256,000 Olympic pools) the Murray-Darling Basin Authority can put in an order for water that NSW has agreed to share with downstream states. When it drops below 480 billion litres, the water reverts to NSW control.

Because evaporation in Menindee's shallow lakes is so much greater than areas in the upper reaches of the Murray system – a claim that exasperates Leddra and Clifton who point to a smaller, deeper lake that still has water but is not connected to the water supply – the basin authority has a use it or lose it policy.

The authority stresses that the NSW government at all times manages the Menindee Lakes, yet any changes to the way water is shared under the agreement need to be negotiated with the other partners to the agreement: Victoria, South Australia and the federal government.

Back in October 2013, the basin authority exercised its responsibility to manage water efficiently on behalf of basin governments by ordering water from Menindee, and the NSW government distributed about a third of what was left. The rest, 405 billion litres, evaporated.

"We are facing dire straits with drinking water," says Clifton. "We need water now. We are on level two water restrictions."

The poor quality of the water is increasing the incidence of rashes, local doctors have said. Others are concerned there is not enough water to wash away dangerous levels of lead, which is mined in the outback town.

NSW Water says nobody should drink untreated water or swim in the lakes, yet some Aboriginal families still do because it's part of their heritage.

"It's filth," says Leddra of the remaining water in the lakes.

The action group claims the government is trying to move Broken Hill on to bore water by stealth, so more water can be given to farmers up north, while satisfying NSW's commitment in the Murray-Basin Darling Authority Agreement. It wants the government to finish the Menindee Lakes system by connecting Lake Speculation, which it says would provide another few years' supply. They also want Lake Menindee to be deepened to provide for ongoing water recreation.

"If they keep less water in the lakes, that's more water they keep upstream and downstream," says Clifton. He doesn't understand why water was ever released when there were no signs of rain. "What idiot would let the water go? It's mismanagement, it's mismanagement to a tee," Clifton told ABC.

The NSW government and the Murray-Darling Basin Authority say they are sticking to the terms of the agreement between the states on how the water is shared across the states.

NSW's top water bureaucrat, Gavin Hanlon, stresses water is a shared resource. "It is not all NSW's water," he says. "Our challenge is how do we optimise operations so Broken Hill doesn't run out of water ... and so we also maintain the best possible outcome for the whole state.

"These are the lowest inflows into the lakes in recorded history. We are in record drought territory," says Hanlon, the Deputy Director-General (Water) with the Department of Primary Industries. There have been three extreme droughts in 15 years including the millennium drought.

Critics such as Howard Jones – an irrigator and environmentalist – says others upstream had shored up their supply at the expense of Broken Hill, which he describes as "unjust and un-Australian".  He accuses NSW government ministers of allowing flows to be pirated above Bourke, for example.

"This is all about the northern irrigators, and water savings for NSW to absolve its commitments to the MDBA," he says. He is also dismissive of the action group's focus on Lake Menindee as a way of life. "Aesthetics," he says scornfully.

But Hanlon says allocating water is always a balancing act, which has sometimes favoured Broken Hill over other towns. In May, it got water when a bypass prevented farmers upstream in Walgett – who'd been unable to plant crops because of the drought – from using water they'd already bought.

On Friday, the NSW government announced it had selected three options from a list of 19 as part of its longer term  $500 million plan to secure water for the Hill. To be finalised by March 2016, they are:

• a pipeline of treated water coming from Whyalla, South Australia;
• a pipeline with raw water coming from the Murray River and treated at Broken Hill;   
• supplementing surface water from the Menindee lakes system with treated shallow groundwater.  

Hanlon says two bores – one on Lake Menindee with an estimated year's supply and another 20 kilometres away at Talywalka, which could have a longer supply – will supplement lake water.  He stresses that the treated water will meet Australian standards.

After visiting Broken Hill the NSW Minister for Water, Niall Blair, said on Facebook – the mouthpiece of choice in this battle – the Menindee Lakes would not be decommissioned under any proposal for the region's water supply.

"There is no proposed long-term option that would see Broken Hill move to a permanent bore water supply."

He promised a shake-up in negotiations with other states. "We also know the way the Menindee Lakes are managed needs a shake-up and in order to change the way the lakes operate we need negotiation and agreement with Victoria, South Australia and Commonwealth government – and NSW makes no apologies for leading those discussions."

The positive and negative impacts of the Murray-Darling Basin Plan on irrigators are also being investigated by a Senate select committee headed by Senator David Leyonhjelm.

After the first emotional hearings in rural towns, the basin authority's chair Neil Andrew said he was very conscious that dry times are continuing in the north and now, in the southern basin, had created a new set of challenges. But he believed that water reform over the past 15 years had helped prepare for drier conditions, and the basin was in a "much better position" than at the start of the millennium drought.

A map detailing the Menindee Lakes scheme. Photo: Peter Rae

Between lakes Menindee and Pamamaroo is Copi Hollow, a small artificial lake.

Soon the water from Copi Hollow will also run out, and the system will flick over to Lake Wetherell. NSW will use every last drop of that lake water to supply Broken Hill, and use bore water as necessary to supplement.

Hanlon says, supplemented by the reverse osmosis treatment facility now being commissioned, there is sufficient surface water to last until early 2017.

In the meantime, tourists undertaking the 13-hour-plus trip to Broken HIll to see the lakes and visit the mining town, which earlier this year became Australia's first heritage town, are stunned by what they don't find.

Menindee Tourist Association's Karen Page recently dealt with a furious woman who had seen tourist brochures promising abundant bird life and water sports. Unable to find the water, the woman asked for directions to it.

"I told her it was gone," says Page, who was raised in a farmhouse between the Darling River and the Lakes.

"But you've got more water than Sydney Harbour," the woman replied, citing the promotion.

Note: This story was corrected to replace Lake Pamamaroo with Lake Speculation. Lake Speculation is not connected to the Menindee Lake System.