BILLS DIGEST NO. 79, 2015–16              5 February 2016

Water Amendment (Review Implementation and Other Measures) Bill 2015

Bill McCormick and Sophie Power
Science, Technology, Environment and Resources Section

Date introduced: 3 December 2015

House:  House of Representatives

Portfolio: Agriculture and Water Resources

Commencement:

Item 1 of Schedule 1 on 1 January 2020.

Items 2 to 9 of Schedule 1, Parts 2 to 6 of Schedule 1 and Part 3 of Schedule 2 on the day after Royal Assent.

Part 1 of Schedule 2 on 15 December 2008 (immediately after commencement of Schedule 1 of the Water Amendment Act 2008).

Part 2 of Schedule 2 on the commencement of Schedule 1 to the Acts and Instruments (Framework Reform) Act 2015, or the day after Royal Assent, whichever is later.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

Purpose of the Bill

The purpose of the Water Amendment (Review Implementation and Other Measures) Bill 2015 (the Bill) is to amend the Water Act 2007 to give effect to the recommendations of a review of the Water Act conducted in 2014.[1]

Structure of the Bill

The Bill contains two schedules. Schedule 1 contains amendments arising from the review of the Water Act and comprises six parts:

•       Part 1 contains amendments to ‘rephase’ or postpone review and reporting arrangements

•       Part 2 amends provisions relating to the accreditation of water resource plans

•       Part 3 contains amendments to provide for greater incorporation of Indigenous expertise in the governance of the Murray-Darling Basin’s water resources

•       Part 4 amends provisions relating to trading by the Commonwealth Environmental Water Holder

•       Part 5 repeals provisions relating to the Murray-Darling Basin Water Rights Information Service and

•       Part 6 contains miscellaneous amendments to the Water Act.

Schedule 2 comprises three parts containing minor, technical amendments.

Background

The Murray-Darling Basin (MDB) is the catchment for Australia’s largest river system, comprising the Murray and Darling rivers and their tributaries. Ranked fifteenth in the world in terms of length (3,780 km) and twentieth for area (covering 1,056,000 km2), it extends across 14 per cent of Australia’s landmass.[2] Over the years there has been an over-allocation of water entitlements in many areas of the Murray-Darling Basin (MDB). Water resources have not been able to meet the water needed for environmental flows and human requirements.[3] In 2007 the Commonwealth intervened to address over-allocation and establish the Murray-Darling Basin Authority (MDBA). The MDBA is a statutory authority established under the Water Act that, with the Basin state and territory governments, manages the MDB’s water resources.

The Murray-Darling Basin Plan

As required under the Water Act, the MDBA has prepared a Basin Plan, which was adopted in November 2012, to provide for the integrated management of the MDB’s water resources in a sustainable manner.[4] Key elements of the Basin Plan include:

•       long-term average sustainable diversion limits (SDLs) to the quantities of surface water and ground water that can be taken from the Basin's water resources for consumptive use

•       an environmental watering plan

•       a water quality and salinity management plan

•       water resource plan requirements and

•       water trading rules.

Sustainable Diversion Limits

The SDLs are intended to reflect an environmentally sustainable level of water use (or ‘take’) of both surface water and groundwater for each catchment and aquifer in the MBD, as well as for the Basin as a whole.[5] Essentially SDLs are a cap[6] on consumptive water use in the MDB and ‘will commence in 2019, by which point they will be incorporated in state water resource plans’.[7]

The Basin-wide long-term average SDL for surface water is 10,873 gigalitres per year (GL/y), comprising 3,468 GL/y in the northern Basin and 7,405 GL/y in the southern Basin, and represents a Basin-wide reduction of 2,750 GL/y of water from the 2009 baseline diversion level of 13,623 GL/y. The Basin-wide long-term average total SDLs for groundwater was determined to be 3,334 GL/y, representing an increase of 949 GL/y of water from baseline diversion level of 2,385 GL.[8] The 2,750 GL of surface water entitlements are to be recovered through a combination of investment in infrastructure efficiency and water buybacks, with at least 600 GL to be recovered through infrastructure efficiency improvements. As at 31 December 2015, Commonwealth environmental water holdings in the MDB were 1,664 GL: 1,383 GL in the Southern Connected Basin and 281 GL in the non-Southern Connected Basin.[9]

Under the Basin Plan, the MDBA can propose adjustments to the surface water SDLs if infrastructure changes and other measures are planned by 30 June 2016 and will come into operation by 30 June 2024.[10] These are adjustments due to the impacts of a ‘supply measure’ or an ‘efficiency measure’. Supply measures permit an increase in the SDL while efficiency measures permit a reduction in the SDL:

a ‘supply measure‘ is a measure that increases the quantity of water available before take for consumptive use. The measure may do this either by making water available for environmental management without reducing consumptive take (e.g. through reducing evaporation losses at suitable storages) or by allowing environmental managers to achieve equivalent outcomes more efficiently, thus reducing the amount of water needed for the environment. Supply measures allow equivalent environmental outcomes to be achieved without needing to reduce consumptive take as much as originally anticipated in the Basin Plan.

The additional water provided by supply measures will be made available for consumptive use (as it will no longer need to be recovered from such use). An adjustment made because of supply measures will increase the SDL (decrease the reduction amount).

An ‘efficiency measure’ is one that makes savings in the amount of water required for consumptive purposes. Examples include investment in more efficient irrigation infrastructure. The water saved by efficiency measures will be allocated to environmental use but, due to the nature of efficiency measures, this will achieve neutral or improved social and economic impacts. An adjustment made because of efficiency measures will decrease the SDL (increase the reduction amount).[11]

Since the contributions from the efficiency measures will vary over time as water access entitlements are acquired, these water access entitlements will be converted to a common unit by using ‘long-term equivalent factors’. These have already been used to calculate the long-term average annual yield from the water access entitlements in the Commonwealth environment water holdings. The 31 December 2015 holdings of 2,396 GL in entitlements were converted into 1,664 GL of Long Term Average Annual Yield.[12]

Water entitlements and water allocation

A water access entitlement is defined in the National Water Initiative[13] as a ‘perpetual or ongoing entitlement to exclusive access to a share of water from a specified consumptive pool as defined in the relevant water plan’, while a water allocation is defined as the ‘specific volume of water allocated to water access entitlements in a given season, defined according to rules established in the relevant water plan’.[14]

Environmental watering plans

The environmental watering plan specifies: the environmental objectives for the water-dependent ecosystems of the MDB; targets to measure progress towards achieving these objectives; an environmental management framework for environmental water; methods to identify environmental assets; and principles to be used to determine priorities for applying environmental water.[15] The 2014 Basin-wide environmental watering strategy, prepared by the MDBA, listed the expected environmental outcomes and outlined water management strategies for maximising environmental outcomes.[16]

The water quality and salinity management plan sets out the key causes of water quality degradation in the MDB, the water quality objectives for the MDB’s water resources and the water quality targets.[17]

Water resource plans

Water resource plans set out how water will be managed in an area. The Basin Plan outlines the requirements for the water resource plans that are to be developed by the relevant Basin state and accredited by the Australian minister responsible for water. There are 36 water resource plan areas which generally correspond with existing Basin state water management areas and will cover the 110 surface water and groundwater sustainable diversion limit units.[18] The requirements include:

•       the long-term annual diversion limit for each SDL resource unit in the water resource plan area and the sustainable use and management of water resources of the water resource plan area within these limits

•       the regulation of water interception activities with a significant impact on Basin water resources

•       planning for environmental watering

•       water quality objectives

•       the circumstances and conditions under which tradeable water rights in the water resource plan area may be traded

•       approaches to addressing risk to water resources of the water resource plan area

•       information about measuring the water taken from the water resource plan area and monitoring the water resources of the water resource plan area

•       reviews of the water resource plan and amendments of the plan arising from those reviews

•       the scientific information or models on which the water resource plan is to be based

•       planning for extreme events and

•       Indigenous values and uses.[19]

Basin water market and trading objectives and principles

The Basin water market and trading objectives and principles are set out in Schedule 3 of the Water Act. The Basin Plan’s water trading rules, contained in Chapter 12 of the Basin Plan, outline:

•       the restrictions on the trade of tradeable water

•       information about water delivery rights and irrigation rights that must be given to irrigation infrastructure operators

•       approval processes for trade of water access rights and

•       the information that must be made available by the states and irrigation infrastructure operators.[20]

The Basin Plan water trading rules commenced in July 2014 and a series of guidelines have been developed for these rules. There are also Basin state water trading rules and water trading rules within irrigation networks.[21]

Independent review of the Water Act

Section 253 of the Water Act required a review of the operation of the Act, and the extent to which its objects have been achieved, to be conducted before the end of 2014. Accordingly, an independent review of the Water Act was conducted, with a final report released in December 2014 (the Water Act review).[22] The review considered that overall, the Water Act is ‘an effective legislative framework’ but there is nevertheless ‘scope to improve the ways in which the objects of the Act are being delivered’.[23] The review also acknowledged that ‘many of the reforms established under the Act and the Basin Plan are in transition and are yet to be fully implemented’.[24]

The Water Act review made 23 recommendations, including recommendations for amendments to the Water Act. These recommendations are considered as relevant in the ‘key issues and provisions’ section of this Digest.

Government response to the independent review

The government response to the Water Act review was released on 3 December 2015.[25] The government response accepted all the recommendations of the Water Act review, with recommendations 9 and 21 agreed in part.[26]

Committee consideration

Selection of Bills Committee

On 4 February 2016, the Selection of Bills Committee referred the provisions of the Bill to the Senate Rural and Regional Affairs and Transport Legislation Committee for inquiry and report by 10 March 2016.[27]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills had no comment on the Bill.[28]

Policy position of non-government parties/independents

At the time of writing, no non-government parties or independents have commented on the Bill.

Position of major interest groups

The Australian Conservation Foundation (ACF) is critical of the amendment that will allow water trade revenue to be used for environmental activities other than buying water for the environment, saying that this would create incentives to defund existing programs that pay for environmental works such as fish ladders and shift funding responsibility over to the Commonwealth Environmental Water Holder.[29] ACF was also reported as saying that the ‘Water Holder should not have to sell its environmental water to pay for essential works’[30] and called on the Minister to:

… explain how the proposed changes will not result in a net loss of environmental water and to reveal where ongoing funding for the Commonwealth Environmental Water Holder and the revived Sustainable Rivers Audit will come from.[31]

Financial implications

According to the Explanatory Memorandum, the Bill will have no financial impact and ‘[a]ll new measures are being implemented within existing resourcing of relevant portfolios and within existing Environmental Water Holdings Special Account’ arrangements.[32]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[33]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights considers that the Bill does not raise human rights concerns.[34]

Key issues and provisions

Review and reporting requirements

The Water Act contains a number of review and reporting requirements. These include:

•       annual reports by the MDBA, to include an analysis of the effectiveness of the Basin Plan[35]

•       a requirement for the MDBA to give advice to the MDB Ministerial Council (the Council) on the impacts of the Basin Plan five years after the Basin Plan takes effect[36]

•       five yearly reviews of the water quality and salinity management plan targets and the environmental watering plan and[37]

•       ten yearly reviews of the Basin Plan.[38]

These requirements are also reflected in the Basin Plan, including Chapter 13, which outlines a program for monitoring and evaluating the effectiveness of the Basin Plan, and Schedule 12, which lists matters against which the effectiveness of the Basin Plan will be evaluated.

As the Water Act review observed, ‘a total of 16 reviews (or similar processes…) are scheduled to occur between 2014 and 2024’.[39]

‘Rephasing’ or postponement of reviews

Part 1 of Schedule 1 of the Bill proposes to amend a number of the review and reporting requirements under the Water Act. The proposed amendments would:

•       postpone the first five yearly reviews from 2017 to 2020 (items 1 and 2)

•       postpone the first ten year review of the Basin Plan by the MDBA to 2026 instead of 2022 (items 3 and 4)

•       provide for a further review of the Water Act, to be conducted in 2024 (item 7) and give the Minister discretion to determine the terms of reference for the review, in consultation with the states (item 8)

•       remove the requirement for the MDBA to include an analysis of the Basin Plan’s effectiveness in its annual report, allowing the analysis to be contained in a separate report (items 5 and 6) and

•       add a requirement for the five yearly reviews of the impacts of the Basin Plan to consider the social and economic impacts of the Basin Plan (in addition to water and salinity targets and the environmental water plan) (item 1).

These amendments are explained in further detail below. A ‘Timeline of Key Review and Milestones in the Water Act and Basin Plan’ from the Water Act review is included in Appendix 1 of this Digest.

Part 1 of Schedule 1 reflects a number of recommendations in the Water Act review which considered that ‘rephasing and aligning’ of the review requirements in the Water Act would ‘provide a simpler and more effective approach’.[40] In particular, the Water Act review found that ten-yearly reviews of the Basin Plan should be informed by five-yearly evaluations in the year immediately prior to the ten year reviews. The Water Act review also suggested that ‘by delaying commencement of these activities a few years the results would be more meaningful, given that full implementation of the Basin Plan will not be achieved until 2019, or in the case of sustainable diversion limit adjustment measures, 2024’.[41] The proposed changes are shown in the timeline from the Water Act review that is included in Appendix 1.

In his second reading speech, the Minister explained in relation to these amendments that:

In line with the review panel's recommendations, a further review of the Water Act will be conducted in 2024. Furthermore, the first legislated review of the Basin Plan, previously set for 2022, will now take place in 2026, with 10-yearly reviews thereafter. This strikes the appropriate balance between regulatory certainty and allowing the Basin Plan to be reviewed when its outcomes can be better assessed.[42]

Five yearly reviews

Section 49A of the Water Act provides that the MDBA must give advice to the MDB Ministerial Council (the Council) on the impacts of the Basin Plan as soon as possible after the end of the first five years after the Basin Plan takes effect (that is, from 2017). Item 2 of Part 1 of Schedule 1 of the Bill amends this so that the MDBA must give that advice to the Council before the end of 2020, effectively postponing this advice by three years. Note that the five year review is a one-off: there are no subsequent reviews under this section, although section 50 provides for regular ten yearly reviews of the Basin Plan (this is discussed further below).

In addition, the Basin Plan itself is required to provide a program for monitoring and evaluating the effectiveness of the Basin Plan. This must include five yearly reviews of water quality and salinity targets, and the environmental watering plan.[43] Item 1 amends this requirement to provide that the first five yearly review must be completed ‘before the end of 2020’.[44] Given that the Basin Plan commenced in November 2012, this means the first five-yearly review would actually occur eight years after the commencement of the Basin Plan. The Explanatory Memorandum notes that this will also require consequential amendments to Chapter 13 of the Basin Plan, which sets out the program for monitoring and evaluating the Basin Plan, to delay the timing of existing five yearly reviews.[45]

The items are consistent with recommendation 4 of the Water Act review, which recommended that the first five yearly report on the Basin Plan be postponed from 2017 to 2020.[46] The Water Act review considered that this would ‘ensure that the advice is undertaken after sustainable diversion limits take effect’ and ‘better inform the review of the Act (recommended to occur in 2024)’.[47]

Ten yearly reviews

Section 50 of the Water Act currently provides for regular ten yearly reviews of the Basin Plan by the MDBA, and paragraph 50(1)(a) indicates that the first review should take place during the tenth year after the Basin Plan first takes effect (that is, 2022). Item 3 of Part 1 of Schedule 1 of the Bill amends paragraph 50(1)(a) to specify that the first ten yearly review will occur during 2026, effectively delaying the first ten yearly review by four years. This is consistent with recommendation 4 of the Water Act review, that the first scheduled review of the Basin Plan should be in 2026, with ten yearly reviews thereafter.[48]

Under subsection 50(5) of the Water Act, the MDBA must prepare a report of the results of the ten year review, which must be given to the Commonwealth Minister and the relevant State Minister for each Basin State, and made available on the MDBA’s website. Item 4 inserts a new subsection 50(6) which provides that the requirements in subsection 50(5) must be complied with before the end of the year during which the ten yearly review is conducted. So, for example, the first ten year review must be finalised, published and provided to relevant Ministers before the end of 2026.

Review of the operation of the Water Act

As noted in the background section of this Digest, section 253 of the Water Act required a review of the operation of the Act, and the extent to which its objects have been achieved, to be conducted before the end of 2014. Item 7 of Part 1 of Schedule 1 amends section 253 to repeal the date ‘2014’ and substitute it with ‘2024’. This means that another review of the Water Act will now be required in 2024.

Subsection 253(2) currently sets of the terms of reference for reviews of the operation of the Water Act. For example, they currently require an assessment of matters including:

•       the extent to which:

–      management objectives and outcomes of the Basin Plan, long-term average sustainable diversion limits, and targets in the Basin Plan are being met

–      water trading is occurring effectively and efficiently

–      other key elements of the Basin Plan are being implemented and

–      water is being used in higher value uses

•       the level of Basin-wide consistency in water charging regimes and the contribution made by those charging regimes to achieving the Basin water charging objectives and

•       the progress in the implementation of improved water information systems, including the National Water Account.

The terms of reference may also include any other requirements and matters determined by the Minister in consultation with the states.

Item 8 repeals the existing subsection 253(2), and proposes to substitute it with a statement that ‘the terms of reference for the review are to be determined by the Minister in consultation with the States’.

These items are consistent with recommendation 23 of the Water Act review, which recommended that section 253 of the Water Act be amended to provide for a review of the Act in 2024 and to repeal the mandatory terms of reference for that and other such reviews.[49] The review suggested that mandatory terms of reference should not be subscribed ‘to provide flexibility for tailoring to the needs of the review at the time’.[50] It will be a matter for Parliament to consider whether it is appropriate to provide the Minister, in consultation with the states, with total discretion to determine the matters that might be addressed in the next review of the Water Act.

Annual reporting and analysis of the Basin Plan

Items 5 and 6 of Part 1 of Schedule 1 of the Bill amend the requirement in paragraph 214(3)(a) of the Water Act for the MDBA’s annual report to include an analysis of the effectiveness of the Basin Plan. Item 6 repeals paragraph 214(3)(a) and item 5 then inserts a new section 52A into the Water Act which will require the MDBA to conduct an annual analysis of the Basin Plan’s effectiveness. The report of the analysis must be provided to the Minister within six months after the end of the financial year (that is, by 31 December). The report must also be tabled in Parliament within 15 sitting days of the Minister receiving the report, and be given to each other member of the Murray-Darling Basin Ministerial Council.[51]

In effect, this breaks the link between the MDBA’s annual report and its analysis of the Basin Plan’s effectiveness: the analysis will now be contained in a separate report. This gives effect to recommendation 22 of the Water Act review, which recommended an amendment:

…to de-link the requirement for the Murray–Darling Basin Authority to produce an annual effectiveness report on the Basin Plan from the Murray–Darling Basin Authority’s annual report requirements, with the effectiveness report to be submitted to the Minister by 31 December annually for tabling in Parliament.[52]

The Water Act review explained that the current requirement for the analysis to be included in the MDBA annual report is problematic, given that under Australian Government annual reporting requirements, the Annual Report is usually provided to the Australian Government Minister by October, and must be provided by the end of December. However:

The analysis of the effectiveness of the Basin Plan relies on information provided by Basin States following the end of the water year (30 June). The Basin Plan recognises that this information may take considerable time to process and therefore provides a reporting date to the MDBA of 31 October each year. Section 13.18 of the Basin Plan requires the MDBA to provide the proposed evaluation findings and recommendations arising out of the analysis of effectiveness to Basin States, the Australian Government Department of the Environment, and the Commonwealth Environmental Water Holder for comment before the Report can be published.

Given this, it is not possible for the MDBA to analyse the information, prepare the report on effectiveness and consult on the findings in time to include it in the MDBA Annual Report, which is generally provided to the Minister in October and tabled by December.[53]

While neither the new section 52A nor the existing paragraph 214(3)(a) provide any further detail as to how the analysis of the Basin Plan’s effectiveness might be conducted, further guidance is contained in Chapter 13 and Schedule 12 of the Basin Plan, including key evaluation questions and principles to be applied.

Five yearly reviews to consider social and economic impacts of the Basin Plan

Subsection 22(1) of the Water Act contains a table listing certain matters that must be included in the content of the Basin Plan. Item 13 in that table states that the Basin Plan must include a program for monitoring and evaluating the effectiveness of the Basin Plan. This program must include five yearly reviews of the water quality and salinity targets in the water quality and salinity management plan; and the environmental watering plan.

Item 1 of Part 1 of Schedule 1 of the Bill amends item 13 of the table in subsection 22(1) to add that the five yearly reviews must also consider the social and economic impacts of the Basin Plan (in addition to the water and salinity targets and environmental watering plan).

This item reflects recommendation 2 of the Water Act review.[54] In making this recommendation, the Water Act review stated its belief that ‘five-yearly reviews provide a chance to look at all outcomes, including the opportunity to assess social and economic impacts’. The review panel noted:

This amendment, while consistent with existing Basin Plan requirements, would ensure that this monitoring endures beyond this version of the Basin Plan and appropriately elevates recognition of this requirement to the Act. It also recognises that the social and economic impacts of the Basin Plan are inextricably linked with the environmental outcomes: while the community needs sustainable environmental objectives achieved to maintain a healthy river system, sustainable environmental objectives can only be achieved when there is community confidence in the objectives and support for how they are to be met.

This represents a practical amendment in response to many stakeholders’ concerns about the balance of considerations in the Act and the need to consider the impacts on industries and the community. It is critical that the social and economic outcomes can be measured and assessed against broader Basin Plan outcomes when the Basin Plan is reviewed.[55]

The Basin Plan already contains similar requirements for the MDBA to consider how the Basin Plan has contributed to changes to the environmental, social and economic conditions in the MDB, for example, when evaluating the effectiveness of the Basin Plan in its annual reports.[56]

In his second reading speech, the Minister suggested that this amendment is ‘incredibly important’ and ‘responds to many stakeholders' concerns that insufficient attention is being paid to the social and economic impacts of the Basin Plan’.[57]

Accrediting water resource plans

Part 2 of Schedule 1 of the Bill amends provisions of the Water Act relating to the accreditation of water resource plans.

About water resource plans and their accreditation

Section 54 of the Water Act provides for water resource plans to be prepared for each water resource plan area in the Basin. The Basin Plan defines 36 water resource plan areas, which generally correspond with existing Basin state water management areas.[58] Water resource plans must be consistent with the Basin Plan and the relevant long-term annual diversion limit (that is, the maximum quantity of water that can be taken for consumptive purposes) for the area.[59]

Water resource plans may be prepared by a Basin State and then accredited by the Minister under the process set out in section 63 of the Water Act.[60] Under this process, the Basin State provides the proposed plan to the MDBA for its consideration. The MDBA makes recommendations for the Minister as to whether the proposed water resource plan should be accredited. The final decision on whether to accredit the plan (or not) is made by the Minister, although the Minister must accredit the plan if satisfied that the plan is consistent with the relevant Basin Plan.[61]

The MDBA is working with Basin States to prepare water resource plans to be accredited under the Water Act by 1 July 2019.[62]

Amendments to the Basin Plan and accreditation of water resource plans

Sections 45 to 49 of the Water Act set out the process for amending the Basin Plan. In short, the MDBA may prepare an amendment of the Basin Plan to give to the Minister for adoption, following certain consultation requirements. Item 11 adds a new subsection 48(8) which would provide that if an amendment to the Basin Plan is prepared by the MDBA as a result of a ten year review of the plan (under section 50), then the Minister must, by notifiable instrument,[63] determine that the amendment ‘affects water resource plan accreditations’.[64]

Section 56 of the Water Act sets out the general basis for accrediting and making water resource plans. For example, subsection 56(1) provides that the MDBA and the Minister must have regard to the Basin Plan and the extent to which the water resource plan is consistent with the Basin Plan.

Duration of water resource plans

Under section 64 of the Water Act, water resource plans may currently be accredited for a period of ten years or until the plan ceases to have effect under the State water management law, whichever is the earlier.[65] Item 17 proposes to amend subsection 64(1) to provide that the accreditation of a water resource plan ceases to have effect at the earlier of:

•       when the water resource plan ceases to have effect (under State water management law) or

•       three years after an amendment to the Basin Plan that ‘affects water resource plan accreditations’ (which, as defined in the new subsection 48(8) is any amendment made as a result of a ten year review of the Basin Plan under section 50).[66]

In other words, an amendment to the Basin Plan made as a result of ten yearly review will cause all water resource plan accreditations to expire after three years.[67] The Explanatory Memorandum explains that:

Changes to the Basin Plan as a result of section 50 reviews will be adopted by all water resource plans within three years. This means that changes to Basin Plan water management approaches will be reflected in Basin State water management plans in a timely manner, consistent with adaptive management principles.[68]

However, these amendments also mean that, if the Basin Plan is not amended following a ten year review, accreditation will continue indefinitely unless the water resource plan cases to have effect under State law. The Explanatory Memorandum states that:

This will reduce the regulatory burden associated with having to reaccredit water resource plans simply because they are older than 10 years, even though they remain consistent with the Basin Plan and relevant for state water management purposes.[69]

Version of the Basin Plan to be used for accrediting water resource plans

Subsection 56(2) of the Water Act contemplates the possibility of the Basin Plan being amended and clarifies the version of the Basin Plan that must be used for the purposes of accreditation. Currently, if the water resource plan is submitted within two years after the Basin Plan first takes effect (on 24 November 2012), then it is the original version of the Basin Plan that is used.[70] After that time, it is the version of the Basin Plan that was in effect two years before the water resource plan is given to the Minister.[71] This approach was:

… intended to give Basin States certainty that their water resource plans would be assessed against the Basin Plan that was in place at the time the water resource plan was prepared and provided to communities for consultation. This avoided the possibility that a water resource plan might be prepared based on one set of requirements, and assessed against another more recent set of requirements in a recently revised version of the Basin Plan.[72]

However, during the Water Act review, the MDBA proposed that subsection 56(2) be amended to provide Basin States with flexibility to nominate a more recent version of the Basin Plan that the MDBA should use when assessing water resource plans for accreditation. The review supported this proposal, suggesting that it:

… may be beneficial to a Basin State as the increased flexibility may provide an opportunity to consider water resource plans in line with any improvements made to the Basin Plan, in cases where doing so accords with state processes and timeframes. It could also provide a more efficient and effective management of Basin water resources by allowing water resource plans to incorporate the most current and up-to-date requirements under the Basin Plan.[73]

Recommendation 5 of the Water Act review therefore proposed that subsection 56(2) be amended to provide flexibility for Basin States to nominate a more recent version of the Basin Plan for the MDBA to use when assessing water resource plans for accreditation.[74] The review panel noted that Basin States should ‘still be able to elect the version of the Basin Plan in place two years prior to accreditation if this is preferred’.[75]

The government response agreed with this recommendation for the current phase of water resource plan accreditations but further proposed that:

For the accreditation of second and subsequent generation water resource plans, the Government will propose amendments to align accreditation processes with Basin Plan reviews. This approach will ensure that future water resource plans are accredited against the Basin Plan as amended consequential to a 10 yearly section 50 review. This will ensure that changes are adopted in state water resource plans in an efficient and consistent manner.[76]

This recommendation is reflected in item 15 of Schedule 1 of the Bill, which proposes to repeal subsection 56(2) and replace it with new subsections 56(2) and (2A).

New subsection 56(2) will provide general guidance by providing that, subject to subsection 56(2A), when the MDBA and Minister are exercising powers or performing functions in relation to water resource plans, the version of the Basin Plan to be applied is the Basin Plan in effect when the power is exercised or when the function is performed.

New subsection 56(2A) then sets out a table with four specific scenarios and specifies which version of the Basin Plan will apply in each case:

•       Scenario One is where the proposed water resource plan is given to the Minister before the first ten year review of the Basin Plan. In this case, the Basin Plan to be applied is the version that was in effect two years before the proposed water resource plan is given to the Minister, unless the Basin State makes a nomination which is covered under scenario four (see below). This is a continuation of the current approach.

•       Scenario Two is where the proposed water resource plan is given to the Minister after the first ten year review of the Basin Plan AND an amendment of the Basin Plan that affects water resource plan accreditations came into effect within three years before the proposed water resource plan was given to the Minister. In this case, the Basin Plan to be applied is the version that was in effect immediately after that amendment, unless the Basin State makes a nomination under scenario four (see below). This scenario reflects amendments in items 17–20 (as discussed above) which mean that water resource plan accreditations expire three years after an amendment to the Basin Plan that affects water resource plan accreditations.

•       Scenario Three is where the proposed water resource plan is given to the Minister after the first ten year review of the Basin Plan AND within three years of a ten year review report AND no amendment to the Basin Plan has been made as a result of that review. In this case, the Basin Plan to be applied is the version that was in effect immediately before the report was provided to the Minister unless the Basin State makes a nomination which is covered by scenario four (see below). The Explanatory Memorandum states that this recognises that ‘Basin States may nevertheless wish to review and revise some or all of their water resource plans’, even in the absence of an amendment that affects water resource plans.[77]

•       Scenario Four is where the Basin State nominates a version of the Basin Plan to be applied. In this case, the nominated version of the Basin Plan applies provided that the version is not older than the version that would apply under scenarios one, two or three. This gives effect to recommendation 5 of the review, by providing flexibility for Basin States to nominate a more recent version of the Basin Plan to be applied.

The Explanatory Memorandum suggests that the amendments are consequential to the postponement of the first ten year review of the Basin Plan to 2026 and are:

… necessary because, under the current accreditation arrangements, the 2026 review and any subsequent amendments are unlikely to be complete before many water resource plans require remaking (noting that plans accredited as early as 2016 will require reaccreditation by 2026).[78]

The Explanatory Memorandum also suggests that ‘the new arrangements’ proposed in Part 2 of Schedule 1 of the Bill will have ‘a number of benefits’. According to the Explanatory Memorandum, these benefits include that ‘all water resource plans will be accredited against the same version of the Basin Plan’, which ‘will improve the consistency of water management approaches across the Murray-Darling Basin’.[79] In his second reading speech, the Minister similarly suggested that the Bill will ‘streamline the Water Act by improving regulatory clarity, [and] simplifying the process of water resource plan accreditation’.[80] However, it is questionable as to whether these amendments improve clarity and simplify the processes for accreditation. Rather, the proposed provisions seem to provide a potentially more complicated and convoluted process for determining which version of the Basin Plan might apply to the accreditation of a proposed water resource plan.

The Water Act review found that the accreditation processes in the Water Act are ‘generally sound’ and was ‘cognisant that they have not yet been tested in practice’. Indeed, the Water Act review took a ‘cautious approach to recommending changes to the current accreditation process’.[81] For this reason, the Water Act review recommended that the Australian Government consult with Basin States on amendments ‘to streamline accreditation processes for water resource plan amendments with the aim of ensuring that implementation of the Basin Plan through Basin State frameworks is as responsive as possible’.[82] The Basin States were consulted on an exposure draft of this Bill.[83] Nevertheless, it appears arguable that this process will streamline and simplify the accreditation processes as suggested.

However, scenario four, which allows the Basin State to nominate the version of the Basin Plan to be applied (provided it is a more recent version), is consistent with the Water Act review.

Indigenous matters relevant to Basin water resources

Part 3 of Schedule 1 of the Bill amends the Water Act to provide for greater incorporation of Indigenous expertise in the governance of the Basin’s water resources. There are a number of existing provisions in the Water Act and Basin Plan which incorporate Indigenous involvement or require Indigenous matters to be considered. For example, membership of the Basin Community Committee established under section 202 of the Water Act must include an individual with expertise in Indigenous matters and the Basin Community Committee must establish an Indigenous water subcommittee to guide the consideration of Indigenous matters relevant to the Basin’s water resources.[84]

However, the Water Act review ‘heard a strong desire from a number of Indigenous and environmental groups for greater recognition of Indigenous interests’ in the Water Act. The review panel expressed general support for amendments to ‘facilitate more effective incorporation of Indigenous interests and expertise in the [Water] Act’s planning and management framework’.[85]

Indigenous expertise in Basin governance

Section 172 of the Water Act sets out the functions of the MDBA. Item 23 proposes to insert a new paragraph 172(1)(ia) to add a new function for the MDBA of engaging the Indigenous community on the use and management of Basin water resources.

Section 178 provides for the appointment of members to the MDBA. Under subsection 178(2), to be eligible for appointment as an MDBA member, an individual must have a high level of expertise in one or more fields relevant to the MDBA’s functions (and not be a member of the governing body of a relevant interest group). Subsection 178(3) lists fields relevant to the MDBA’s functions. Item 24 proposes to amend this list to add ‘Indigenous matters relevant to Basin water resources’ as a field relevant to the MDBA’s functions.

Section 202 establishes the Basin Community Committee, the function of which is to advise the MDBA about the performance of its functions. The Basin Community Committee consists of a Chair and up to 16 other members. Under subsection 202(5), the Basin Community Committee’s membership must include:

•       at least one MDBA member

•       at least eight individuals who are water users or representatives of one or more water users and

•       an individual with expertise in Indigenous matters relevant to the Basin’s water resources.

Item 25 proposes to amend this last requirement to require at least two Indigenous persons with expertise in Indigenous matters relevant to the Basin’s water resources to be included on the Basin Community Committee. In turn, item 21 inserts a definition of ‘Indigenous person’ into the definitions in subsection 4(1) of the Water Act. This increases the requirement for members with expertise in Indigenous matters from one to two and also means that these members must now be Indigenous.

All the above amendments reflect recommendation 20 of the Water Act review, which recommended amendments to these sections of the Water Act in order to increase the recognition of Indigenous interests and expertise in the management of the MDB.[86]

However, item 25 goes further than the review, which did not specify that the individuals with expertise in Indigenous matters appointed to the Basin Community Committee be Indigenous.[87] The government response indicated it would be amending the Water Act so as to require the individuals with expertise in Indigenous matters to be Indigenous.[88]

Water resource plans and Indigenous matters

Subsection 22(1) of the Water Act contains a table listing certain matters that must be included in the content of the Basin Plan. Under item 11 of this table, the Basin Plan must include the requirements for a water resource plan area to comply with in order for the plan to be accredited or adopted. Subsection 22(3) then lists a number of requirements for water resource plans. Item 22 proposes to amend subsection 22(3) to add a new paragraph 22(3)(ca) to require water resource plans to have regard to ‘social, spiritual and cultural matters relevant to Indigenous people in relation to the water resources of the water resource plan area in the preparation of the water resource plan’.

The Explanatory Memorandum notes, for clarity, that ‘nothing in this amendment will require specific water entitlements or reduce availability or affect the reliability of existing water access rights’.[89]

The amendment in item 22 reflects recommendation 1 of the review, which recommended that consideration be given to amending subsection 22(3) to reflect ‘existing Basin Plan water resource plan requirements dealing with Indigenous values and uses’. However, the review recommended that this consideration occur after 1 July 2019 when water resource plans have been accredited.[90] The government response indicated that the government would ‘seek to amend the Act to require that water resource plans are prepared having regard to Indigenous values and uses’.[91] Neither the government response nor the Explanatory Memorandum specifically explain why the amendment is being made now, rather than after 1 July 2019 as recommended by the review.

However, the Explanatory Memorandum does note that this amendment reflects and acknowledges existing water resource plan requirements in Part 14 of Chapter 10 of the Basin Plan.[92] For example, section 10.52 of the Basin Plan requires water resource plans to identify the objectives of Indigenous people in relation to managing the water resources of the water resource plan area, having regard to the social, spiritual and cultural values and uses of the water resources of the water resource plan area for and by Indigenous people.

Trading by Commonwealth Environmental Water holder

Part 6 of the Water Act establishes the Commonwealth Environmental Water Holder (CEWH). The functions of the CEWH are set out in section 105 of the Water Act.[93] In short, they involve managing the ‘Commonwealth environmental water holdings’ — that is, water (in the form of water rights) recovered by the Commonwealth to protect and restore environmental assets such as rivers, wetlands and floodplains.[94] Commonwealth water holdings are the result of government purchases of entitlements and investment in more efficient water infrastructure in the MDB.[95]

The functions of the CEWH are to be performed ‘for the purpose of protecting or restoring the environmental assets of the Murray-Darling Basin ... so as to give effect to relevant international agreements’.[96] The CEWH must also manage the Commonwealth environmental water holdings in accordance with certain planning documents, including the MDB environmental watering plan, set out in Chapter 8 of the Basin Plan.[97]

Commonwealth environmental water holdings are actively managed, which means water may be:

•       delivered to meet current environmental needs

•       carried over to future years to meet future environmental needs or

•       traded (disposed of or acquired).

As the Water Act review explains:

Trade of Commonwealth environmental water, either allocations or entitlements, is one of the management tools that enhance the capacity of the portfolio to meet environmental watering requirements. For example, trade can be used to manage variability in water availability and environmental water demand across the Basin by selling allocations in one catchment where environmental watering needs have largely been met and purchasing in another catchment or at a later time when additional environmental water would provide a net improvement in environmental outcomes. It can also be used to re-balance the portfolio of entitlements based on improvements in knowledge of environmental watering requirements.[98]

However, section 106 of the Water Act limits the disposal of Commonwealth environmental water holdings. The CEWH may only dispose of water which is not currently required to meet objectives of the environmental watering plan or any applicable environmental water schedules and would otherwise be forfeited.[99] The reason for imposing the limitation was to ensure that the CEWH operates to meet environmental objectives rather than as a profit making enterprise.[100] However, the limitation does not apply in circumstances where proceeds from any sale can be used by the CEWH to acquire other water or water holdings which will better protect or restore environmental assets.[101]

Item 27 of Part 4 of Schedule 1 of the Bill proposes to repeal and replace section 106 in order to amend the limits on disposal of water by the CEWH. This reflects recommendations 15 and 16 of the Water Act review.[102]

Use of proceeds for non-water acquisition

Proposed subsection 106(3) in item 27 provides that the CEWH may dispose of water or Commonwealth environmental water holdings if the CEWH uses the proceeds of the disposal for acquiring water or Commonwealth environmental water holdings. In the case of disposal of a water allocation, the CEWH may use the proceeds for environmental activities, provided the long-term annual diversion limit has been complied with in relation to the disposal.[103]

However, the CEWH must reasonably believe, at the time of the disposal, that using the proceeds would improve the capacity of the Commonwealth environmental water holdings to be applied to meet the objectives of relevant plans, including the Murray-Darling Basin environmental watering plan.

In short, the objective of the new subsection 106(3) is to provide ‘increased flexibility’ for the CEWH to sell water allocations and use the proceeds for other activities to meet environmental objectives, as well as the purchase of other water or water holdings. As the Explanatory Memorandum states, this recognises that:

…in some circumstances, the intended environmental outcomes from the application of Commonwealth environmental water can be more effectively achieved by investing in works and measures that are complementary to environmental water use, and not always by purchasing additional water.[104]

The Explanatory Memorandum gives the examples of ‘fish-ways or carp exclusion screens that support the delivery of water to off-river wetlands’, suggesting that:

By selling a small volume of allocations in one year to fund the construction of such works, it could improve the effectiveness of larger volumes of environmental water delivered over several years, thereby improving environmental outcomes. Particular environmental activities are not prescribed or defined, which provides the flexibility to respond to changing priorities and invest in the activities that provide the best environmental outcomes possible based on conditions at the time. This provision is intended to enable additional targeted activities that complement, rather than duplicate or replace, natural resource management programmes implemented by other entities.[105]

The Minister reiterated this in his second reading speech:

The flexibility will enable the Commonwealth Environmental Water Holder to get the best environmental outcomes possible, as efficiently as possible, whilst also assisting in the socioeconomic requirements of Basin communities.

This recognises that achieving environmental outcomes in the Basin will often require both water and complementary environmental activities. We know it is not just about adding water, because the lack of environmental works and measures, such as fish ladders and carp screens, can be a real barrier to maximising environmental outcomes.[106]

Under proposed subsection 106(4), the proceeds of trade cannot be used to pay fees and charges for holding and delivering Commonwealth environmental water. This subsection is designed to ensure that the CEWH’s operating costs continue to be met from Commonwealth consolidated revenue, rather than from the sale of Commonwealth environmental water holdings.[107]

These amendments are consistent with recommendation 15 of the Water Act review, which supported the suggestions that the CEWH should have greater flexibility and discretion in using the proceeds of allocation trade in achieving environmental outcomes, subject to stringent safeguards and limitations. The review report explained that this ‘could involve investment in fish ladders,[108] complementary natural resource measures such as carp eradication, or investment in works and measures that make watering more efficient’.[109]

The review therefore recommended that section 106 of the Water Act be amended to allow water trading revenue to be used for other environmental activities in addition to water acquisitions to maximise environmental outcomes from the use of Commonwealth environmental water, subject to the following safeguards:

•       only revenue generated from the trade of Commonwealth environmental water allocations (not Commonwealth environmental water entitlements)[110] may be used for environmental activities other than acquisitions

•       any disposal of water and use of proceeds for non-water acquisition purposes must reasonably be expected to improve environmental outcomes from the use of Commonwealth environmental water

•       trading activity should not impact on the achievement of sustainable diversion limits in the long-term and

•       trade revenue cannot be used to fund operational expenses of the Commonwealth Environmental Water Holder such as holding and delivery fees and charges.[111]

It appears, however, that not all stakeholders agreed with the proposed changes to section 106. The report of the Water Act review states that, while some submissions supported changes to the limits on the CEWH’s ability to trade, ‘other submissions took the contrary view that the needs of the environment are best served by continuation of the current limitations on the use of proceeds of trade’.[112] The report does not identify which stakeholders held which view on this matter.

However, when the Bill was introduced to Parliament, the Australian Conservation Foundation issued a media release expressing concern that the proposed changes ‘would shift the burden of paying for important environmental works like fish ladders and carp exclusion devices onto the underfunded’ CEWH. ACF explained:

The proposed changes create an incentive for government agencies to defund existing programs and make the Environmental Water Holder responsible for funding unlimited ‘environmental activities’. There is nothing in the legislation to prevent cost-shifting.

If the government was serious about environmental health it would restore funding to the Native Fish Strategy and other important programs, not expect the environment to auction off its only asset, water, in order to pay for basic infrastructure.[113]

In his second reading speech, the Minister stated:

The Government wishes to make it clear that the Commonwealth Environmental Water Holder will not use this new flexibility to invest in natural resource management activities that are already being funded by other programmes, whether at the local, state or federal level.[114]

Forfeited or forgone water allocations

Currently, section 106 applies to water which is likely to be forfeited because it cannot be carried over to the next water year, due to carryover limits which apply in parts of the southern Murray-Darling Basin. However, in the northern parts of the Basin, which use continuous accounting systems, allocations remain until used or sold. This means that the holder can be prevented from receiving additional allocations that would exceed the account limit. As such, allocations may be forgone due to account limits, rather than forfeited due to carryover limits.[115]

Proposed subsection 106(2) in item 27 aims to cover water that is likely to be forfeited and water that is likely to be forgone by providing that the CEWH may dispose of water during a water accounting period if he or she reasonably believes the water is not required to meet the objectives of relevant plans, including the environmental watering plan or any applicable environmental watering schedules and either:

•       the water or the water holdings cannot be carried over into the next water accounting period or

•       a water allocation in respect of particular Commonwealth environmental water holdings is likely to be reduced if the disposal does not occur.[116]

This proposed amendment reflects recommendation 16 of the Water Act review, which recommended that section 106 of the Water Act be amended to ‘remove the restriction on disposal of allocations that could be reasonably expected to result in forgoing future allocations, such as in continuous accounting systems’.[117]

In his second reading speech, the Minister explained that this amendment will:

…bring the conditions of the sale of water allocations in systems with continuous accounting into line with systems which have an annual accounting framework. This means that if the water is not required to meet environmental objectives in a water period, the Commonwealth Environmental Water Holder will have the option to sell the water rather than forego allocations due to account limits.[118]

Additional reporting requirements for water trading

Item 28 of Part 4 of Schedule 1 amends the annual reporting requirements of the CEWH in section 114 of the Water Act to add a requirement for the CEWH to publish information in its annual report detailing each disposal of water, the amount of the proceeds from each disposal and the purposes for which the proceeds were used.[119]

This is consistent with recommendation 17 of the Water Act review, which noted that the CEWH already publishes information relating to each trade on its website and a summary of trading activity in its annual report. However, the Panel considered that amending section 114 to require the CEWH to report annually on trading decisions will ‘provide greater confidence that trade is improving environmental outcomes by increasing the legislated transparency of trading decisions’.[120]

Murray-Darling Basin Water Rights Information Service

Part 5 of the Water Act 2007 provides that the Murray–Darling Basin Authority (MDBA) may establish an information service (the ‘Water Rights Information Service’) providing access to registrable water rights information for the Basin. ‘Registrable water rights’ include water access rights, water delivery rights, irrigation rights and other rights that relate to access to, or the use of, Basin water resources.[121]

Item 31 of Schedule 1 will repeal Part 5, thus repealing the provisions for the establishment of the Water Rights Information Service. Item 32 consequentially repeals a reference to Part 5 and the Water Rights Information Service in the list of the MDBA’s functions in section 172 of the Water Act, while item 30 repeals the reference in the definitions in section 4 of the Water Act to ‘registrable water rights’.

The Explanatory Memorandum states that ‘the Water Rights Information Service has not been established and there are no plans to establish it in the future’ and:

Prime responsibility for water access rights information, including responsibility for keeping information up to date, has and will continue to rest with Basin States.[122]

The repeal of Part 5 is consistent with recommendation 14 of the Water Act review, which noted that the Water Rights Information Service had not been established, but if it were ‘there are likely to be regulatory impacts for businesses and Basin State government agencies associated with any information reporting requirements imposed on these bodies’.[123] The review stated that the aim of the Water Rights Information Service was to facilitate the operation of efficient water markets and minimise transaction costs for market participants by providing information about the Basin that is easy to access and consistent. In recommending the repeal of Part 5, the review suggested that:

Other policy settings, such as the Basin Plan water trading rules, which commenced on 1 July 2014, are expected to contribute to open and efficient Basin water markets. A Water Rights Information Service might also duplicate Basin States’ responsibilities and existing Basin State water registers, require Basin State cooperation and require funding, resourcing and commitment by all Basin jurisdictions to support its establishment.[124]

The review was also ‘cognisant of the Australian Government’s deregulation agenda’ and concerns raised in submissions to the review about existing information reporting requirements under the Act and associated costs for businesses. The review found that:

Should such a service be considered in future, it should be assessed against other possible policy options, including the relative benefits of a Basin-wide rather than a national solution, and be supported by a full cost–benefit analysis to ensure that any regulatory impacts are necessary and are outweighed by the benefits to the market and market participants. Any necessary legislative amendments could be prepared at that time and be tailored to the delivery of the preferred option.[125]

However, according to the Explanatory Memorandum to the Water Bill 2007, the original aim of establishing the Water Rights Information Service’ was to link to the registers of registrable water rights kept by State-based agencies and infrastructure operators in order to:

…bring together all of the information contained in various registers and provide a single information service. The intent is to support distribution of information about water access rights and to facilitate trading in these rights.[126]

The repeal of provisions for the Water Rights Information Service comes on top of the termination of the National Water Markets System program. A key component of the National Water Markets System program was the establishment of a national common registry system, including increased interoperability of state and territory water registers and the automated exchange of information between state and territory water registers to facilitate efficient interstate trade, particularly in the Murray-Darling Basin.[127] However, the National Water Markets System program was terminated in the 2014–15 Budget ‘following an assessment that the remaining work would exceed the resources available’.[128]

Indeed, there would seem to be value in a centralised source for information on water rights, especially in light of the fact that the Government is committed to introduce legislation to establish a national register of foreign ownership of water entitlements.[129] Currently, each state and territory publishes its own water register.[130]

The Government accepted the Water Act review’s recommendation for the establishment of an interagency working group led by the Bureau of Meteorology to report on:

(a)              current water information reporting requirements under the Act and associated regulatory burdens for data providers, including an estimate of current costs

(b)               the benefits of the suite of information products with reference to associated costs borne by data providers

(c)               options to reduce the regulatory burden imposed on data providers in the order of 20 per cent or more compared to current regulatory burdens. [131]

The Interagency Working Group on Commonwealth Water Information Provision completed this review in June 2015 but there has been no government response to date.[132]

Other provisions

Miscellaneous amendments

Duration of water charge determinations

Section 92 of the Water Act provides that the Minister may make rules to regulate water charges in the Basin States (‘water charge rules’). These water charge rules may provide for the Australian Competition and Consumer Commission (ACCC) to make a determination or approval of regulated water charges. Under subsection 92(4), the effect and duration of a particular ACCC determination or approval relating to regulated water charges may be specified in the water charge rules.

However, during the Water Act review, the ACCC suggested that subsection 92(4) be amended to enable regulators to set the duration of a pricing determination or approval ‘in order to be more responsive to wider economic conditions, or other factors that may influence the efficiency and operation of existing or future determinations’.[133] The Water Act review therefore recommended that subsection 92(4) be amended to give regulators applying the water charge rules discretion to determine or vary regulatory periods, ‘so long as the regulatory periods are longer than those already provided for in the rules’.[134]

Item 37 gives effect to this recommendation by proposing a new subsection 92(4) which provides that the water charge rules may:

•       specify the effect and the period of effect of a determination or approval by the ACCC and

•       allow the ACCC to extend the period of effect of a particular determination or approval beyond that period.

The Explanatory Memorandum suggests that this amendment will enable the water charges rules to be amended to ‘reduce regulatory burden through greater alignment of regulatory processes’ and to ‘set the regulatory period having regard to issues relevant to a particular infrastructure operator, to the water industry or to the wider economy’.[135]

Allocation of risks

Item 36 amends section 74 of the Water Act, which sets out a simplified outline of the provisions relating to ‘risks arising from reductions in diversion limits’. In short, these provisions provide that when the long-term average sustainable diversion limit for the water resources of a water resource plan area is reduced, despite Commonwealth efforts to manage that reduction, a water access entitlement holder may be entitled to compensation in certain circumstances.

Item 36 proposes to replace subsection 74(4) to clarify that the Commonwealth may make a payment in certain circumstances if there is a reduction in, or change in reliability of, a water entitlement holder’s allocations. This change will provide clarity and more accurately reflect the relevant provisions in the Water Act, particularly section 77 (which relates to payments for water access entitlement holders).

The Explanatory Memorandum states that this item gives effect to ‘the Government’s response to recommendation 7 of the Water Act review’.[136] Recommendation 7 actually recommended that section 77 be amended to provide a ‘presumption that a water access entitlement holder should be fully compensated for any reduction in the market value of the entitlement that is reasonably attributable to the Commonwealth share of the diversion limit reduction’.[137]

The Government response agreed with this recommendation, but indicated:

The Australian Government will amend the Act to clarify further that the holder of a water access entitlement who qualifies for a payment under section 77 of the Act is entitled to receive a payment equal to the reduction in market value of the holder’s water access entitlement that is reasonably attributable to the Commonwealth’s share of the diversion limit reduction.

The Government is committed to avoiding any such reduction in value by ‘bridging the gap’, prioritising on-farm and off-farm infrastructure investment.[138]

So, while this amendment does not exactly correspond to recommendation 7 of the Water Act review, it does give effect to the general spirit of the recommendation and is line with the government response to the review.

Other amendments

Items 33 to 35 of Part 6 of Schedule 1 of the Bill make minor amendments to clarify a number of definitions in the Water Act, in line with recommendation 13 of the Water Act review.[139]

Schedule 2 of the Bill contains a number of minor technical amendments, including to the definition of ‘referring State’ to align with Basin State legislation and to repeal spent provisions (relating to the application of the Water Act before the Basin Plan came into effect).

Concluding comments

The Bill makes a number of procedural amendments to the Water Act, which are largely consistent with the recommendations of the review of the Water Act in 2014.

Appendix 1: Timeline of Key Review and Milestones in the Water Act and Basin Plan

Source: Water Act review, op. cit., p. 31.

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[1].              E Moran et al, Report of the Independent Review of the Water Act 2007 (Water Act review), report prepared for the Department of the Environment, Department of the Environment, November 2014, accessed 11 January 2016; see also Department of Agriculture and Water Resources, Report of the Independent Review of the Water Act 2007: Australian Government response (Government response), Department of Agriculture and Water Resources, December 2015, accessed 11 January 2016. The Government accepted 21 of the 23 recommendations of the panel in full and two of the recommendations in part.

[2].              Murray-Darling Basin Authority (MDBA), Basin-wide environmental watering strategy, MDBA, 24 November 2014, p. 1, accessed 11 January 2016.

[3].              B McCormick, ‘Murray-Darling Basin water issues’, Briefing Book: key issues for the 43rd Parliament, Parliamentary Library, Canberra, 12 October 2010, accessed 2 February 2016.

[4].              Basin Plan 2012, accessed 11 January 2016. The Basin Plan is made under subsection 19(3) of the Water Act. See also section 20 of the Act which sets out the purpose of the Basin Plan. For further information on the development of the Basin Plan, see MDBA, ‘Developing the Basin Plan’, MDBA website, accessed 11 January 2016.

[5].              MDBA, ‘Sustainable diversion limits’, MDBA website, accessed 27 January 2016.

[6].              Prior to the development of SDLs, there was a limit on the amount of surface water taken for consumptive use called a ‘cap’ which was set based on historic use rather than what was sustainable.

[7].              MDBA, ‘Sustainable diversion limits’, op. cit.

[8].              Ibid.

[9].              Department of the Environment, ‘Environmental water holdings’, Department of the Environment website, accessed 4 February 2016.

[10].              Basin Plan, Chapter 7.

[11].              Basin Plan, p. 36.

[12].              Department of the Environment, ‘Environmental water holdings’, op. cit.

[13].              The National Water Initiative is an Intergovernmental Agreement that was signed at the Council of Australian Governments meeting on 25 June 2004. It is a blueprint for water reform that set out to achieve a nationally compatible market, regulatory and planning based system. This system is intended to manage surface and groundwater resources for rural and urban use, and optimise economic, social and environmental outcomes: National Water Commission, ‘National Water Initiative’, National Water Commission website, accessed 4 February 2016.

[14].              Bureau of Meteorology (BoM), ‘Water rights’, BoM Water Market Information website, accessed 27 January 2016.

[15].              Basin Plan, Chapter 8.

[16].              MDBA, Basin-wide environmental watering strategy, MDBA, 24 November 2014, accessed 25 January 2016.

[17].              Basin Plan, Chapter 9.

[18].              MDBA, ‘Water resource plans’, MDBA website, accessed 27 January 2016.

[19].              Basin Plan, Chapter 10.

[20].              Basin Plan, Chapter 12.

[21].              MDBA, ‘Basin Plan water trading rules’, MDBA website, accessed 25 January 2016.

[22].              E Moran et al, Report of the Independent Review of the Water Act 2007, op. cit.

[23].              Ibid., p. i.

[24].              Ibid., p. ix.

[25].              B Joyce (Minister for Agriculture and Water Resources), Water Act improvements deliver greater certainty for Basin communities, media release, 3 December 2015, accessed 12 January 2016.

[26].              Department of Agriculture and Water Resources, Report of the Independent Review of the Water Act 2007 Australian Government response, (Government response), op. cit., p. 2.

[27].              Senate Selection of Bills Committee, Report, 1, 2016, The Senate, Canberra, 4 February 2016, p. 3, accessed 4 February 2016.

[28].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 1, 2016, The Senate, Canberra, 3 February 2016, p. 49, accessed 4 February 2016.

[29].              Australian Conservation Foundation, Water Act changes could result in cuts to environmental programs, media release, 3 December 2015, accessed 21 January 2016.

[30].              ABC News, ‘Mixed response to Water Act review proposal on changes to Commonwealth Water Holder’, ABC News, (online edition), 23 December 2014, accessed 1 February 2016.

[31].              Australian Conservation Foundation, op. cit.

[32].              Explanatory Memorandum, Water Amendment (Review Implementation and Other Measures) Bill 2015, p. 4.

[33].              The Statement of Compatibility with Human Rights can be found at pages 5–6 of the Explanatory Memorandum to the Bill.

[34].              Parliamentary Joint Committee on Human Rights, Thirty-third report of the 44th Parliament, The Senate, Canberra, 2 February 2016, p. 2, accessed 4 February 2016.

[35].              Water Act, paragraph 214(3)(a).

[36].              Water Act, section 49A.

[37].              Water Act, subsection 22(1), item 13.

[38].              Water Act, subsection 50(1).

[39].              Water Act review, op. cit., p. 30 and see also Figure 2.1 which provides a timeline of key reviews and milestones in the Water Act and Basin Plan (and as also set out in Appendix 1 of this Digest).

[40].              Ibid.

[41].              Ibid.

[42].              B Joyce, ‘Second reading speech: Water Amendment (Review Implementation and Other Measures) Bill 2015’, House of Representatives, Debates, 3 December 2015, p. 14623, accessed 18 January 2016.

[43].              Water Act, subsection 22(1), item 13.

[44].              Note that item 1 also adds a requirement to consider social and economic impacts: this is discussed further below.

[45].              Explanatory Memorandum, op. cit., p. 8.

[46].              Water Act review, op. cit., pp. 30–32; see in particular paragraph (b)(i) of recommendation 4.

[47].              Ibid., p. 30.

[48].              Ibid., p. 32.

[49].              Ibid., p. 111. By deleting subsection 253(2), item 8 also implements recommendation 10: that section 253 be amended to remove the term ‘higher value uses’, which the review found to be ‘misleading’. The review found ‘there are a range of factors that influence water use and that what might be considered a high-value use in one year may not be so the next’. The review panel considered that it would be more appropriate to refer to ‘optimal use’. Water Act review, op. cit., p. 57.

[50].              Water Act review, op. cit., p. 111.

[51].              Item 9 of Part 1 of Schedule 1 clarifies the application of the amendments in items 5 and 6 in their first year.

[52].              Water Act review, op. cit., p. 108.

[53].              Ibid., p. 107.

[54].              Ibid., p. 20.

[55].              Ibid.

[56].              Basin Plan, section 13.06.

[57].              B Joyce, ‘Second reading speech: Water Amendment (Review Implementation and Other Measures) Bill 2015’, House of Representatives, Debates, 3 December 2015, p. 14623, accessed 18 January 2016.

[58].              For further information, see MDBA, ‘Water resource plans’, op. cit.

[59].              Water Act, subsection 55(2). For further information on sustainable diversion limits, see MDBA, ‘Sustainable diversion limits’, op. cit.

[60].              Alternatively, the plans may be developed by the MDBA and then adopted by the Minister under sections 68-69 (these are known as the ‘step-in’ powers). Water resource plans are legislative instruments, but those accredited under section 63 are not subject to disallowance: see Water Act, subsection 63(7).

[61].              Water Act, subsection 63(6).

[62].              MDBA, ‘Water resource plans’, op. cit.

[63].              A notifiable instrument is an instrument described or declared by law and registered on the Federal Register of Legislation. Unlike a legislative instrument, notifiable instruments are not subject to parliamentary scrutiny nor are they subject to automatic repeal ten years after registration: see section 11 of the Legislation Act 2003 (which at the time of writing, was yet to commence), at item 12 of Schedule 1 to the Acts and Instruments (Framework Reform) Act 2015, accessed 4 February 2016.

[64].              Note that item 10 is a consequential amendment which inserts new definitions of ‘notifiable instrument’ and ‘affects water resource plan accreditations’ into subsection 4(1) of the Water Act.

[65].              Note that the accreditation period may be extended under subsection 64(2) for up to one year.

[66].              Explanatory Memorandum, op. cit., p. 14. Items 18-20 of Part 2 of Schedule 1 are consequential amendments relating to this amendment.

[67].              See also the note to new subsection 48(8) in item 11; and Explanatory Memorandum, op. cit., p. 11. Note that the three year period may still be extended for up to one year.

[68].              Explanatory Memorandum, op. cit., p. 11.

[69].              Ibid., p. 10.

[70].              Water Act, paragraph 56(2)(a).

[71].              Water Act, paragraph 56(2)(b).

[72].              Water Act review, op. cit., p. 32.

[73].              Ibid., p. 33.

[74].              Ibid.

[75].              Ibid.

[76].              Government response, op. cit., p. 5.

[77].              Explanatory Memorandum, op. cit., p. 13.

[78].              Ibid., p. 10.

[79].              Ibid., p. 11.

[80].              B Joyce, ‘Second reading speech: Water Amendment (Review Implementation and Other Measures) Bill 2015’, op. cit.

[81].              Water Act review, op. cit., p. 35.

[82].              Ibid., p. 36 (recommendation 6).

[83].              Explanatory Memorandum, op. cit., p. 4.

[84].              Water Act, paragraphs 202(3)(c) and 202(5)(c).

[85].              Water Act review, op. cit., pp. 5–6.

[86].              Ibid., pp. 104–105.

[87].              Ibid., p. 105.

[88].              Government response, op. cit., p. 13.

[89].              Explanatory Memorandum, op. cit., p. 14.

[90].              Water Act review, op. cit., p. 19.

[91].              Government response, op. cit., p. 3.

[92].              Explanatory Memorandum, op. cit., p. 14.

[93].              Further information about the Commonwealth Environmental Water Holder is available at Department of the Environment, ‘The role of the Commonwealth Environmental Water Holder’, Department of the Environment website, accessed 18 January 2016.

[94].              See section 108 of the Water Act for the full definition of ‘Commonwealth environmental water holdings’.

[95].              Department of the Environment, ‘About Commonwealth environmental water’, Department of the Environment website, accessed 15 January 2016.

[96].              Water Act, subsection 105(3).

[97].              The purposes of the environmental watering plan are set out in section 28 of the Water Act.

[98].              Water Act review, op. cit., p. 75.

[99].              Water Act, subsection 106(1).

[100].              Explanatory Memorandum, Water Bill 2007, p. 31.

[101].              Water Act, subsection 106(2) and see also subsection 86AE(2).

[102].              Water Act review, op. cit., p. 78.

[103].              Proposed subsections 106(3)(a)(ii) and 106(3)(b). Proposed subsections 106(5) and (6) provide further detail as to when the long-term annual diversion limit condition is satisfied, including, for example, if before the disposal, the MDBA had published information indicating that the limit had been complied with in the area where the disposal will occur.

[104].              Explanatory Memorandum, op. cit., p. 16.

[105].              Ibid., p. 17.

[106].              B Joyce, ‘Second reading speech: Water Amendment (Review Implementation and Other Measures) Bill 2015’, House of Representatives, Debates, 3 December 2015, p. 14621, accessed 18 January 2016.

[107].              Explanatory Memorandum, op. cit., p. 18. This is also in line with finding 6.2 of the Water Act review, op. cit., p. 77.

[108].              A fish ladder is a structure placed on or around constructed barriers (such as dams or weirs) to give native fish the opportunity to migrate.

[109].              Water Act review, op. cit., p. 77.

[110].              For further information on different types of water rights, see Bureau of Meteorology (BOM), ‘Water rights’, op. cit.

[111].              Water Act review, op. cit., p. 77.

[112].              Ibid., p. 76.

[113].              Australian Conservation Foundation, ‘Water Act changes could result in cuts to environmental programs’, media release, 3 December 2015, accessed 18 January 2016.

[114].              B Joyce, ‘Second reading speech: Water Amendment (Review Implementation and Other Measures) Bill 2015’, op. cit., p. 14622.

[115].              Water Act review, op. cit., p. 78; see also Government Response, op. cit., p. 11.

[116].              A water allocation is the specific volume of water allocated to a water access entitlement in any given water accounting period: Water Act, section 4.

[117].              Water Act review, op. cit., p. 78.

[118].              B Joyce, ‘Second reading speech: Water Amendment (Review Implementation and Other Measures) Bill 2015’, op. cit., p. 14622.

[119].              Item 29 provides that the new requirement only applies to the disposal of water on or after the commencement of these amendments.

[120].              Water Act review, op. cit., p. 82.

[121].              Water Act, section 101.

[122].              Explanatory Memorandum, op. cit., p. 19.

[123].              Water Act review, op. cit., p. 69.

[124].              Ibid., p. 70.

[125].              Ibid.

[126].              Explanatory Memorandum, Water Bill 2007, accessed 12 January 2016.

[127].              Department of the Environment, ‘National Water Market System’, Department of the Environment website, accessed 14 January 2016. See also Water Act review, op. cit., p. 69.

[128].              Water Act review, op. cit., p. 69; see also B McCormick, ‘Water’, Budget Review 2014–15, Parliamentary Library, Canberra, accessed 2 February 2016.

[129].              B Joyce, ‘Second reading speech: Water Amendment (Review Implementation and Other Measures) Bill 2015’, op. cit., p. 14622–14623.

[130].              Bureau of Meteorology (BoM), ‘Water registers and accessing market information’, BoM Water Market Information website, accessed 3 February 2016.

[131].              Government response, op. cit., p. 12.

[132].              Ibid.

[133].              Water Act review, op. cit., p. 65.

[134].              Ibid., p. 66 (recommendation 12).

[135].              Explanatory Memorandum, op. cit., pp. 21–22.

[136].              Explanatory Memorandum, op. cit., p. 21.

[137].              Water Act review, op. cit., p. 39.

[138].              Government response, op. cit., p. 6.

[139].              Water Act review, op. cit., p. 66.