Chapter 1 - Introduction


Chapter 1 - Introduction

Referral to the committee

1.1        On 9 August 2007, the Senate referred the Water Bill 2007 (hereafter 'the bill') and the Water (Consequential Amendments) Bill 2007 to the Senate Environment, Communications, Information Technology and the Arts (ECITA) Committee for inquiry and report by 14 August 2007.

1.2        The committee directly contacted a number of relevant organisations and individuals to invite submissions by 10 August 2007.  Due to the tight reporting timeframe it was not possible to advertise the inquiry in the press.

1.3        Submissions were received from 12 organisations and individuals, as listed in Appendix 1. The committee also held a public hearing in Canberra on Friday, 10 August 2007. A list of those who gave evidence at this hearing is at Appendix 2.

Acknowledgments

1.4        The committee thanks all those who contributed to its inquiry by preparing written submissions and appearing at the public hearing, especially in light of the tight reporting timeframe established for the inquiry. Their work has been of considerable value to the committee.

Background – water policy initiatives

1.5        Under the Constitution, the management of water resources in Australia is a state responsibility.[1] However, Commonwealth involvement in water management issues has a long history. In 1915, the Commonwealth became involved as a facilitator in the negotiations and signing of the River Murray Waters Agreement between NSW, Victoria, South Australia and the Commonwealth. That Agreement evolved into the Murray-Darling Basin Agreement signed by the same parties initially in 1987 and again, as a new Agreement, in 1992. Queensland joined the original signatories in 1996 and the ACT joined in 1998.

1.6        The 1992 Agreement established the Murray-Darling Basin Ministerial Council and the Murray-Darling Basin Commission (MDBC), which replaced the River Murray Commission. The MDBC advises the Ministerial Council and implements its decisions. The Agreement aims to promote and coordinate effective planning and management for the equitable, efficient and sustainable use of the water, land and other environmental resources of the Murray-Darling Basin.

1.7        In the 1980s, increasing environmental awareness led to a recognition that there was a need for a national approach to environmental issues generally. The Council of Australian Governments (COAG) became the key policy forum on natural resource issues, including the management of water. In 1992, COAG adopted the National Strategy for Ecologically Sustainable Development, which established natural resource development and management on a national basis. In 1994, COAG announced its water reform agenda that included the National Water Quality Strategy. A joint Commonwealth, states and territories initiative, the strategy consists of a number of guideline documents for managing key elements of the water cycle.[2]

National Water Initiative

1.8        The National Water Initiative (NWI) was signed by the Commonwealth and all states and territories on 25 June 2004 (except Tasmania and Western Australia which signed in June 2005 and April 2006 respectively). The NWI represents the Commonwealth government and state and territory governments' shared commitment to water reform. It built on the previous COAG's framework for water reform that had operated since 1994. In December 2004, the National Water Commission, now an independent statutory body in the Environment and Water Resources portfolio, was established to implement the national water reform agenda and to provide advice to COAG on national water issues.[3] The principal goals of the NWI are to increase the productivity and efficiency of Australia's water use for the benefit of urban and rural users and to ensure the health of river and groundwater systems.[4]

A National Plan for Water Security

1.9        On 25 January 2007 the Prime Minister announced a National Plan for Water Security (the Plan) in response to the protracted drought and the prospect of long-term climate change. The Plan recognised the need for a radical change in Australia's water management practices and aims to ensure that rural water use is placed on a sustainable footing within the next decade. The Commonwealth announced its intention to invest $10 billion over ten years to significantly improve water management across the nation, with a special focus on the Murray-Darling Basin (MDB), where the bulk of the nation's agricultural water use takes place.[5]

1.10      The Plan includes:

  • a nationwide investment in Australia’s irrigation infrastructure to line and pipe major delivery channels;
  • a nationwide programme to improve on-farm irrigation technology and metering;
  • the sharing of water savings on a 50:50 basis between irrigators and the Commonwealth government to ensure greater water security and increased environmental flows;
  • addressing water over-allocation in the MDB;
  • a new set of governance arrangements for the MDB;
  • a sustainable cap on surface and groundwater use in the MDB;  
  • major engineering works at key sites in the MDB;
  • expanding the role of the Bureau of Meteorology to provide the water data necessary for improved decision making by governments and industry;
  • a Taskforce to explore future land and water development in northern Australia; and  
  • completion of the restoration of the Great Artesian Basin.[6]

The key features of the Plan are discussed below.

Modernising irrigation

1.11      A major element of the Plan is a commitment of almost $6 billion over ten years to modernise irrigation infrastructure both on-and off-farm to save water and increase efficiency of water use. While national in scope, the prime focus will be the MDB, where 85 per cent of irrigation takes place. The aim is to achieve efficiency gains of approximately 25 per cent of total irrigation water use.[7]

1.12      The main features include:

  • improved delivery system efficiency – piping or lining channels and adoption of more efficient watering methods to achieve on-and off-farm efficiency gains;
  • the adoption of more accurate water meters to improve measurement; and
  • improving river operations and storage management, for example, by reducing evaporation at some storages in the lower MDB.

Addressing over-allocation

1.13      Water resources of a number of catchments and aquifers within the MDB are seriously over-allocated and over-used. 'Over-allocation' refers to situations where more entitlements have been issued in a system that can be sustained. 'Over-use' is where more water is allocated to irrigators or other users within a given period that can be sustained. This situation has arisen as a result of past decisions to issue more entitlements than can be delivered by water systems, and by a failure of water sharing plans to set the pool of water available for consumption at sustainable levels.

1.14      Water availability to irrigators in the MDB is also declining because of climate change and the unregulated growth in farm dams, bores and reafforestation. These changes have eroded the security of water entitlements, making it harder for irrigators to manage their enterprises in times of drought.[8]

1.15      The Commonwealth government announced it would invest up to $3 billion over ten years to address over-allocation in the MDB. Planned in conjunction with the modernisation programme, this is to be achieved by providing assistance to irrigation districts to reconfigure irrigation systems and retire non-viable areas.

1.16       Assistance will be provided to help relocate non-viable or inefficient irrigators, or help them with exiting the industry. Where necessary, the Commonwealth will also purchase entitlements on the market. Water that accrues to the Commonwealth government through these measures will be managed to restore the health of the rivers and wetlands in the MDB.[9]

New governance arrangements in the MDB

1.17      The Commonwealth suggested that new governance arrangements are needed to improve water management in the MDB:

Existing arrangements centring on the MDB Agreement and the MDB Ministerial Council are unwieldy and not capable of yielding the best possible Basin-wide outcomes. One government needs to take control and be responsible for water management in the MDB to ensure key Basin-wide outcomes are realised.[10]

1.18      The existing mechanism for the management of the Basin is the Murray-Darling Basin Commission (MDBC). The National Plan document stated that decisions taken by the MDBC often reflect 'parochial interests and do not reflect the best interest of the Basin as a whole'.[11]

1.19      Under the Plan, the Commonwealth government aims to reconstitute the MDBC as a Commonwealth government agency reporting to a single minister. The new Commission would have responsibility for setting a sustainable cap on the extraction of surface and ground water within the Basin, and accrediting catchment and aquifer water plans to ensure they comply with that cap. The new arrangements were expected to cost an additional $600 million over ten years.

1.20      A new strategic plan for the Basin will be established, incorporating a revised cap on diversions, taking into account groundwater use and other factors that will reduce river flows in the Basin in the future. The Plan will be informed by the 2007 MDB Sustainable Yields Assessment being undertaken by the CSIRO, which will report on the current and future water availability in the MDB, based on a number of scenarios.[12]

1.21      These arrangements were contingent on the referral of state and territory powers in relation to the MDBC to enable the Commonwealth government to have oversight of water management in the MDB. The governments of NSW, Queensland, and South Australia agreed to the transfer of powers. Victoria, however, did not. Subsequently, the Commonwealth announced its intention to use Commonwealth powers under the Constitution to introduce a revised Plan, including the establishment of a Murray-Darling Basin Authority, which is discussed later in the chapter.

Upgrading water information

1.22      The National Plan identifies the need for improved water data and forecasting services to provide the basis for informed policy decisions. Inadequacies in the current water information base means that it is not possible to accurately measure and monitor the resource and its use.

1.23      The Plan envisages improvements in the coverage, quality and utility of Australia's water information base. The role of the Bureau of Meteorology (the Bureau) will be extended to perform the following functions:

  • hold and manage all of Australia’s water data;
  • report on the status of Australia’s water resources, patterns of water use and forecasts of future water availability;
  • maintain a comprehensive set of water accounts for the nation;
  • set national standards for water use metering and hydrologic measurements;
  • influence and support state-based investments in water monitoring and water use metering programs; and
  • commission strategic investigations and procure special data sets to improve our understanding of Australia’s water resources.[13]

1.24      The Commonwealth government announced funding of $400 million over the next ten years to enable the Bureau to undertake these new functions. Over the next five years, it will also provide an additional $80 million to enable water data collecting agencies to modernise and extend their water resource monitoring systems.[14]

Northern Australia

1.25      The Commonwealth government has established a Taskforce chaired by Senator the Hon Bill Heffernan to examine the potential for further land and water development in northern Australia. [15]

Great Artesian Basin

1.26      The Commonwealth government has announced that it will fund the third and final phase of the bore-capping and piping program in the Great Artesian Basin. It intends to seek ongoing commitments from participating state and territory governments and pastoral bore owners. This proposal will cost around $85 million over ten years.[16]

National Plan for Water Security – Commonwealth-only model

1.27      Following the Prime Minister's initial announcement on 25 January 2007, the Commonwealth government worked with states and territories to negotiate a referral of powers to ensure implementation of the Plan. As noted above, all MDB states other than Victoria agreed to a referral of constitutional powers.

1.28      On 21 February 2007, the Victorian government published a paper outlining its alternative proposal for national water reform, critical of the Commonwealth's approach.[17] The Victorian government model would be implemented through an Intergovernmental Agreement, rather than a referral of constitutional powers.

1.29      On 24 July 2007, the Prime Minister announced the Commonwealth government's decision to proceed with legislation giving effect to the National Plan for Water Security using the Commonwealth's powers under the Constitution after negotiations with the Victorian government failed. The government announced its continued commitment to the $10 billion funding for the Plan.[18]

The Water Bill 2007 and related bill

1.30      The Water Bill 2007 (the bill) gives effect to a number of key elements of the Commonwealth government’s $10.05 billion National Plan for Water Security, announced by the Prime Minister on 25 January 2007. The bill relies solely on the Commonwealth’s constitutional powers, which is discussed later in the chapter.[19] The bill has been informed by the Intergovernmental Agreement on a National Water Initiative.

1.31      The principal elements of the bill include:

  • establishment of a Murray-Darling Basin Authority;
  • establishment of Basin-wide planning through a Basin Plan;
  • a role for the ACCC in water trading and pricing; and
  • the expansion of the Bureau of Meteorology's functions in relation to water information and standards.

1.32      The Water (Consequential Amendments) Bill 2007, deals with consequential amendments to the Meteorology Act 1955, the National Water Commission Act 2004 and the Trade Practices Act 1974 to provide for the functions of the Bureau of Meteorology, the National Water Commission and the Australian Competition and Consumer Commission.

1.33      Key elements of the Water Bill 2007 are outlined below.

Murray-Darling Basin Authority

1.34      The bill establishes an independent Murray-Darling Basin Authority with the functions and powers, including enforcement powers, needed to ensure that Basin water resources are managed in an integrated and sustainable way.

1.35      The Second Reading Speech stated that:

For the first time in the Basin's history, one Basin-wide institution will be responsible for planning the Basin's water resources – requiring planning decisions to be made in the interests of the Basin as a whole and not along state lines.[20]

1.36      Key functions of the Authority include:

  • preparing a Basin Plan for adoption by the Minister, including setting sustainable limits on water that can be taken from surface and groundwater systems across the Basin;
  • advising the Minister on the accreditation of state water resource plans;
  • developing a water rights information service which facilitates water trading across the Murray-Darling Basin;
  • measuring and monitoring water resources in the Basin;
  • gathering information and undertaking research; and
  • engaging the community in the management of the Basin’s resources.[21]

1.37      The Authority will report to the Commonwealth Minister for the Environment and Water Resources and will be comprised of a full-time Chair and four part-time members. The Authority members must have significant relevant expertise to be eligible for appointment, for example in fields such as water resource management, hydrology, freshwater ecology, resource economics, irrigated agriculture, public sector governance and financial management.

The Basin Plan

1.38      The bill requires the Authority to prepare a strategic plan for the integrated and sustainable management of water resources in the Murray-Darling Basin. This plan is referred to as the Basin Plan.

1.39      The bill establishes mandatory content for the Basin Plan, including:

  • limits on the amount of water that can be taken from Basin water resources on a sustainable basis – known as long-term average sustainable diversion limits. These limits will be set for Basin water resources as a whole and for individual water resources;
  • identification of risks to Basin water resources, such as climate change, and strategies to manage those risks;
  • requirements that a water resource plan will need to comply with if it is to be accredited under this bill;
  • an environmental watering plan to optimise environmental outcomes for the Basin by specifying environmental objectives, watering priorities and targets for Basin water resources;
  • a water quality and salinity management plan which may include targets; and
  • rules about trading of water rights in relation to Basin water resources.[22]

1.40      The Basin Plan will be complemented through water resource plans prepared by Basin states and provided to the Commonwealth Minister for accreditation. The Authority will provide advice to the Minister on whether to accredit such plans. Water resource plans will only be accredited if they are consistent with the Basin Plan, including the long-term average sustainable diversion limits.

1.41      The Basin Plan will also play a key role in identifying responsibilities for managing risks associated with reductions in water availability and changes in reliability. Where the Basin Plan specifies a reduction in the long-term average sustainable diversion limit, the Basin Plan will also identify the percentage of that reduction for which the Commonwealth is responsible. This percentage relates to the risk sharing arrangements set out in the bill, which are modelled on those agreed through the National Water Initiative in June 2004.

1.42      The Commonwealth government has made a commitment to respect water sharing arrangements that are provided for in existing water resource plans. This commitment is implemented through the transitional arrangements set out in the bill.

1.43      The Basin Plan will be prepared in consultation with Basin States and communities. It is intended that the first Basin Plan will be completed within two years of the Authority being established.

Commonwealth Environmental Water Holder

1.44      The bill establishes a Commonwealth Environmental Water Holder. Water recovered through the roll-out of the irrigation efficiency programme and the structural adjustment programme of the National Plan will be used for environmental water purposes across Australia. The Commonwealth Environmental Water Holder will manage the Commonwealth’s environmental water to protect and restore the environmental assets of the Murray-Darling Basin, and outside the Basin where the Commonwealth owns water.[23]

1.45      The Commonwealth government’s water holdings will include the Commonwealth’s share of water savings made through the National Plan.

Australian Competition and Consumer Commission (ACCC)

1.46      The bill provides the ACCC with a key role in developing and enforcing water charge and water market rules along the lines agreed in the National Water Initiative. The aim of these new functions is to ensure that water markets are able to operate freely across state boundaries and that perverse outcomes from inconsistent water charging arrangements are avoided.

1.47      The Second Reading Speech stated that:

The ACCC will monitor and enforce water charges and market rules in the Basin. The rules will reflect the water charging and trading principles in the National Water Initiative, ensuring that the water market in the Basin works efficiently and that there are no inappropriate barriers to trade.[24]

Bureau of Meteorology

1.48      The bill gives the Bureau of Meteorology water information functions that are in addition to its existing functions under the Meteorology Act 1955. The Bureau will be authorised to collect and publish high-quality water information. The publications will include a National Water Account and periodic reports on water resource use and availability. The Bureau will also be empowered to set and implement national standards for water information. [25]

Other aspects

The $10.05 billion of funding under the National Plan is not specifically addressed in the bill. However, the funding is integral to the overall package and includes funding for modernising Australia’s irrigation infrastructure; addressing over-allocation in the Murray-Darling Basin; reforming management of the Murray-Darling Basin; and new investments in water information.[26]

1.49      As noted above, the Commonwealth indicated that it will honour its commitment to existing state water plans for the life of those plans (which will conclude in 2010 for South Australia, 2014 for NSW, Queensland and the ACT, and 2019 for Victoria).[27] The current state water shares under the Murray-Darling Basin Agreement will also be maintained. The Murray Darling Basin Commission will remain although it will need to abide by decisions of the Murray-Darling Basin Authority.

1.50      The principal difference between the new proposal and the original one is that the Commonwealth government will not be able to get involved in individual river operations or seasonal allocations of water. However, the new Murray-Darling Basin Authority will still set Basin-wide caps on water, develop salinity plans and accredit individual water plans in catchments.[28]

1.51      Under the revised arrangements the role of the MDB Authority will differ from the MDB Commission:

The two bodies have clearly different roles. The new MDB Authority will prepare the Basin Plan in consultation with the Basin States and the wider community. The Plan will cover the new cap on diversions, water quality and salinity targets, and the environmental watering plan. The MDB Authority will also accredit state water resource plans to ensure they will deliver on the Basin Plan, and ensure there is compliance. These have never been roles of the Commission.[29]

1.52      The MDB Commission will continue to run the River Murray, coordinate the management of salinity interception works, and undertake its natural resource management activities including the Living Murray Initiative. The Commonwealth will continue to be a member of the MDBC and, through its contribution in these arrangements, will aim to ensure consistency in the actions of the MDBA and MDBC. The Commonwealth stated that the new MDBA will fulfil a strategic water planning role considering the Basin as a whole – work that is not currently being done – 'accordingly, the new arrangements will add capacity to water management in an area that requires increased attention'.[30]

The Water Bill – constitutional basis

1.53      As discussed previously, the management of water resources in Australia has historically been a state responsibility. Nonetheless, the Commonwealth has had considerable involvement in the management of water resources.

1.54      In his second reading speech the Minister for Environment and Water Resources, the Hon. Malcolm Turnbull MP, outlined the constitutional basis for the bill:

This Water Bill relies on a range of powers which are provided to the Commonwealth under the Constitution. These comprise powers in relation to external affairs, interstate trade and commerce, corporations and powers to collect information and statistics.[31]

1.55      Mr Turnbull explained that as agreement had not been reached on a referral of power from the state governments, the original 'comprehensive' water bill had been modified to fit within the Commonwealth's existing constitutional powers:

The Water Bill 2007 bill draws heavily on the comprehensive water bill that had been negotiated with most states in the basin over the past five months. The new bill reflects these negotiations in relation to the parts of the comprehensive bill for which the Commonwealth has constitutional power. Thus, a referral of powers from the states is not required for this bill, as was proposed for the comprehensive water bill.[32]

1.56      The Explanatory Memorandum reiterates this point:

This Bill relies solely on the Commonwealth’s constitutional powers. The Commonwealth’s original intention was that the Bill would address a broader range of issues, and would in respect of that broader coverage be reliant on referrals of power from Basin states. However, agreement could not be reached, in particular with the State of Victoria, on referral arrangements to allow the Commonwealth Parliament to enact the full range of measures.[33]

1.57      The bill includes a mechanism to allow for the scope of the bill to be broadened to what was originally envisaged when the Plan was announced, in the event of future referral of state powers by New South Wales, Victoria, Queensland and South Australia.[34] In the absence of a referral of power from the states, the Commonwealth is relying on a number of express Commonwealth powers that are outlined in clause 9 of the bill.

1.58      The constitutional basis for the bill can be broadly divided into two categories: water resource management; and water monitoring and data collection. In relation to the management of basin water resources (including the development of the Basin Plan, the water resource plans, and the water charge and market rules) the following five constitutional powers are relied on:

  • trade and commerce – paragraph 51(i);
  • postal, telegraphic, telephonic and other like services – paragraph 51(v);
  • corporations – paragraph 51(xx);
  • external affairs – paragraph 51(xxix); and
  • territories power – section 122.

1.59      Regarding water monitoring and data collection, clause 119 sets out the following six constitutional bases: meteorological observations under paragraph 51(viii); census and statistics under paragraph 51(xi); and weights and measures under paragraph 51(xv); corporations under paragraph 51(xx); external affairs under paragraph 51(xxix); and the Commonwealth's implied power to make laws with respect to nationhood.

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