Water Minister Terry Redman fears some commercial water users are deliberately wasting millions of litres of supplies to hang on to their licences.
Amid efforts to overhaul the archaic laws governing the State's water stocks, Mr Redman said it seemed some major licensees were running sprinklers just to use a minimum quota of their allocation.
He said the practice was endangering WA's development and he had sought advice on what "legislative options" he had to stop it.
Under WA's water legislation, prospective users are required to seek a licence from the Department of Water, which then permits or refuses it, depending on availability of water in an area.
Licences typically last for about 10 years. But Mr Redman said he was aware of instances in which licensees in some areas were not properly using their water, preventing others from having access to the resource and hindering growth.
"Presently, I've probably got a bigger issue with those that have a water licence that are not using it, while there are others next door, up the road, that want a water licence but can't get it," he said. "I have an issue with water licences that are not being used and it's holding up development or growth somewhere else in that area - I think it's a problem.
"I'm hearing that some are pumping that water out or using it by putting the sprinklers on to loosely say that they're using it.
"You certainly don't want anybody wasting water for the sake of demonstrating to anybody that it's being used and, therefore, keeps the Department of Water and the minister from taking the water away from them."
Jim Turley, executive officer of VegetablesWA, whose members include many big water users, said he had never heard of such abuses and insisted they would be "pretty rare".Mr Turley said the Government needed to maintain flexibility in water licences because holders often might have legitimate excuses not to use their allocations for a period.