1.1        On 16 August 2017, the following matter was referred to the Rural and Regional Affairs and Transport References Committee for inquiry and report by 5 December 2017:

The integrity of the water market in the Murray-Darling Basin, with particular reference to:

1. the allegations of theft and corruption in the management of water resources in the Murray-Darling Basin,
2. the investigation and public disclosure by authorities, including the New South Wales Government and the Murray-Darling Basin Authority, of reported breaches within the Murray-Darling Basin, including the Barwon-Darling Water Sharing Plan,
3. the actions of member states in responding to allegations of corruption and the potential undermining of the Murray-Darling Basin Plan,
4. the use of Commonwealth-owned environmental water for irrigation purposes, and the impact on Basin communities and the environment,
5. the operation, expenditure and oversight of the Water for the Environment Special Account, and
6. any other related matters.[1]

Background

1.2        On 24 July 2017, the ABC Four Corners program aired allegations about water theft and corruption in the Murray‑Darling Basin. The episode made a number of negative assertions about the manner in which the Murray‑Darling Basin Plan (MDBP) is working, and included 'accusations of illegal water use, pumping water from fragile rivers and tampering with [water] metres'.[2]

1.3        The program also aired claims that top NSW Government officials deliberately assisted wealthy irrigators along the Barwon and Darling Rivers, around Bourke and Brewarrina, to undermine the MDBP. There was also discussion about NSW possibly withdrawing from the MDBP.[3]

Allegations aired on the ABC Four Corners program

1.4        A number of the allegations raised by the program concerned a prominent cotton farmer from the Brewarrina and Bourke area. Further allegations were made about other large property owners and irrigators breaching water use rules. Some of the information and allegations presented in Four Corners included that:

• large volumes of water were being extracted beyond licensed limits;
• pumping of large volumes of water was occurring at times when pumping was not allowed;
• appropriate records and log books were not maintained in instances where water meters were not working, as required under NSW water legislation;
• water channels and other structures were being constructed by large property owners, on Crown land, without approval;
• water pumping was occurring during embargo periods;
• water meters appeared to have been tampered with and had parts removed;
• the relevant NSW Government agencies had no appetite for water compliance activities;
• a senior officer in the NSW Department of Primary Industries (DPI) shared confidential departmental documents with irrigator lobbyists; and
• irrigation companies were making money by selling water at a profit.[4]

Relevant developments

1.5        The allegations described in the Four Corners program have given rise to a number of inquiries and investigations, particularly within NSW. The inquiries underway to date include:

• an independent investigation into NSW water management and compliance, by Mr Ken Matthews AO, examining the allegations raised by Four Corners that involve the responsibilities of DPI‑Water and its employees. An interim report was presented on 8 September, with a final report due end of November 2017;[5]
• a NSW Ombudsman investigation into water compliance and enforcement. An interim report was presented on 15 November, with a final report due no earlier than April 2018;[6]
• a NSW Independent Commission Against Corruption investigation into the allegations raised by Four Corners and the actions of senior government officers;[7] and
• the announcement by the Premier of South Australia, on 26 November 2017, of a state royal commission into the allegations of water theft in the Murray‑Darling Basin. The royal commission is set to begin in early 2018.[8]

1.6        On 28 November 2017, the Australian National Audit Office released its audit report into New South Wales' Protection and use of Environmental Water under the National Partnership Agreement on Implementing Water Reform in the Murray‑Darling Basin.[9] The committee will consider this report and its findings as it progresses its inquiry.

Purpose of this inquiry

1.7        This inquiry was instigated by the Senate to examine, from a federal perspective, the management of water resources in the Murray‑Darling, the allegations of theft and corruption within the Basin, and the actions of Basin states which may be undermining the MDBP.

1.8        In progressing its inquiry, the committee has also been tasked with identifying possible solutions that would address issues with compliance and transparency in the water market. This may include improved enforcement measures, better water metering and monitoring systems, and timely public disclosures about breaches of water use rules along the Murray‑Darling.

1.9        On 25 November 2017, the Murray‑Darling Basin Authority (MDBA) and an Independent Review Panel released reports considering the legislative, policy and practical implementation of water management across the Murray‑Darling Basin, as part of a Basin-wide review. The reports found that Basin states had significant and concerning differences in compliance and enforcement policy and activity, and that the MDBA had not given 'sufficient attention' to compliance or dealt appropriately with allegations of compliance breaches.[10]

1.10      These reports examined important issues of compliance and transparency in the water market, and made a number of valuable recommendations for both the MDBA and Basin states to action. Given their alignment with the committee's objectives, the committee will closely examine these reports and the progress of implementation of the recommendations.

Evidence

1.11      The committee has received substantial evidence asserting support for the allegations made in Four Corners, along with claims of other alleged instances of water theft, over‑extraction and insufficient water metering.[11]

1.12      The committee has also received submissions disputing the claims made by Four Corners and other media outlets. A number of submitters have argued that water users along the Murray-Darling, and in particular irrigators, comply with water extraction rules.

1.13      A large number of submitters have stressed the need for improved water monitoring throughout the Basin, and in particular in the Northern Basin. Submitters have called for improved water use compliance regimes, including more effective metering and enforcement mechanisms. Similar concerns have been raised in the interim reports of Ken Matthews and the NSW Ombudsman, and in the Basin-wide compliance review undertaken by the MDBA.   

Conduct of the inquiry

Further hearings

1.14      As part of its inquiries to date, on 31 October 2017 the committee travelled to Broken Hill and undertook a site visit around the region. This was followed by public hearings in Broken Hill on 1 November 2017, and Adelaide on 2 November 2017.

1.15      The committee plans to conduct additional public hearings in Sydney and Canberra, to receive evidence from witnesses. Further, the committee intends to travel to Brewarrina, NSW, for a further site visit and public hearing.

1.16      The purpose of these hearings is to hear first‑hand what possible steps can be taken to strengthen compliance with water use rules, and the adequacy of those rules. Additionally, the hearings will help to clarify the role of the MDBA regarding its compliance and enforcement activities across the Basin, and how it operates alongside the rules and regulations of Basin states.

Existing inquiries

1.17      The committee holds a keen interest in the findings of the inquiries and investigations already in train.

1.18      The Matthews interim report from September, and the NSW Ombudsman report from November, highlight the important issues under consideration by these inquiries, particularly with regard to compliance, enforcement and transparency in the water market. The finding of these reports have been supported by the findings of the MDBA Water Compliance Review and Independent Review Panel, which found serious flaws in the compliance regime of both the MDBA and Basin states.

1.19      Many of the current investigations are due to report by the end of 2017, and will greatly assist the committee in its deliberations. Many of these reviews are examining individual jurisdictional issues, and will make appropriate recommendations in that context. The committee will take the opportunity to apply any relevant findings to improving the Commonwealth approach to water management and the MDBP.

Further evidence

1.20      The evidence so far received, coupled with the material gathered by the respective reviews and investigations, has provided the committee with considerable insight into the concerns of the communities along the Barwon‑Darling and greater Murray‑Darling systems.

1.21      This evidence has given the committee a thorough understanding of the key issues with regard to water use, over-extraction, protection of low flows, as well as insufficient metering, monitoring and compliance across the Murray‑Darling Basin.

1.22      The site visit around Broken Hill allowed the committee to see and hear first‑hand the devastating impacts of inadequate water flows. The committee appreciates that many individuals have come forward during this inquiry, and in contribution to the other ongoing reviews, to detail their individual experiences and hardships in operating within the Murray‑Darling water market.

1.23      The committee recognises the seriousness of the allegations raised to date, and the impact such allegations have on water users across the Basin. Inadequate water supply along the Murray‑Darling presents considerable risks to river communities and industries, and to individual livelihoods. The committee understands why many stakeholders are therefore calling for, at the least, a judicial inquiry to investigate the overall integrity of the water market.

1.24      Underpinning the respective allegations of water theft and corruption are issues of transparency and compliance, and the need for appropriate repercussions in instances of water rule breaches. While there is near‑universal agreement on the need to maintain the integrity of the water market in the Murray‑Darling Basin, the evidence suggests that considerable improvements to compliance and monitoring regimes are required.

1.25      The committee stresses that it is not in a position to investigate individual cases of alleged water theft. Nor can the committee provide any legal remedy for matters, many of which are already before the courts or subject to other legal proceedings. However, the individual matters raised by submitters will assist in illustrating systemic or wider policy issues across the Murray‑Darling Basin.

1.26      Moving forward, the committee will be keen to acquire evidence about how to improve compliance, transparency and monitoring of water use across the Basin. The committee will consider matters such as:

• areas of the Murray-Darling Basin that are not metered and monitored and whether they should be;
• water compliance obligations, including recording methods for water use and reporting requirements;
• the adequacy of compliance and enforcement powers, especially for the MDBA;
• the benefits to more transparent, real-time water monitoring systems;
• improvements to public disclosures and reporting on breaches of water use in the Murray‑Darling;
• practices within the water trading market, including buybacks; and
• the transparency around the expenditure of public money in the water market.

1.27      The committee hopes the evidence received at future hearings, in additional to the findings of the other inquiries, will help to address the issues above. It is the committee's view that sufficient time should be provided to allow the hearings to occur and to properly consider the findings of the other reviews.

1.28      Therefore, the committee recommends that the final reporting date for the inquiry be extended to 28 March 2018.

Recommendation 1

1.29      The committee recommends that the Senate grant an extension of time for the committee to report, to 28 March 2018.

Senator Glenn Sterle
Chair

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