Minority Report by Independent Senator Nick Xenophon

Minority Report by Independent Senator Nick Xenophon

Background

1.1      The inquiry into sustainable management by the Commonwealth of water resources was established to look into the ability of the Commonwealth, across state borders, to sustainably manage water resources in the national interest.

1.2      In particular, the Committee was asked to address:

i.          the issuing, and sustainability of water licences under any government draft resource plans and water resource plans;

ii.          the effect of relevant agreements and Commonwealth environmental legislation on the issuing of water licences, trading rights or further extraction of water from river systems;

iii.          the collection, collation and analysis and dissemination of information about Australia's water resources, and the use of such information in the granting of water rights;

iv.          the issuing of water rights by the states in light of Commonwealth purchases of water rights; and

v.          any other related matters.

1.3      Unfortunately, as a result of a lack of participation and cooperation by some key stakeholders, this Senate Inquiry was unable to thoroughly assess issues such as overland flows, water speculation and the decision-making process around licences, particularly those issued in Queensland.

1.4      Further, while there are a number of existing intergovernmental agreements relating to Murray-Darling water resources – the National Water Initiative 2004, the Australian Government Water Fund 2004, the National Plan for Water Security 2007, the Water Act 2007, Water for the Future 2008 and Water Amendment Act 2008 – these do not provide for the allocations of water resources to be managed at a Federal level in the national interest.

Rather, they continue to allow states and territories to manage water resources in their own interests, to the detriment of the Murray-Darling system as a whole.

1.5      South Australia is particularly impacted by the 'each-state-for-itself' approach as it is inevitably reliant on the eastern states – New South Wales, Victoria and Queensland – to effectively manage and allow water to flow to the southern catchments.

1.6      This was demonstrated first hand following flood events in December 2009 and January 2010 in the north-east of New South Wales.

Approximately 300 gigalitres of water was injected into the Murray-Darling River system as a result of the floods. However, a significant proportion of this water was to be dammed and diverted upstream for New South Wales' use only, with none allowed to flow into the drought-affected South Australian catchments.

Following pressure from the Federal, Victorian and South Australian governments, the New South Wales Government agreed to release 148 gigalitres of the floodwaters, which was diverted into the Lower Lakes where water levels have dropped to dangerously low levels.

1.7      This event made it apparent that, despite the existence of intergovernmental agreements, individual states make water management decisions in the interests of themselves, not necessarily in the interests of the Murray-Darling Basin as a whole.

1.8      It was also revealed during the Additional Senate Estimates in February 2010 that the States have the power to veto any Federal Government decisions regarding the management of the Murray-Darling River.

1.9      This matter was identified in relation to the 640-gigalitre rule applied to water storage arrangements at Menindee Lakes in New South Wales.

Senator XENOPHON—Dr Horne, if the New South Wales government, for whatever reason, did not want to review the 640-gigalitre rule, what would that mean? If New South Wales did not want to review that rule, how could it be changed and at what point could it be changed? Would the Basin Plan have to come into force for that rule to be reviewed if one party did not want it to be reviewed?

Dr James Horne [Deputy Secretary, Department of the Environment, Water, Heritage and the Arts]—The review of the agreement requires consensus. So any agreement will need an overall package of changes. New South Wales clearly has, if you like, the largest issue or leverage chip, and that is the Menindee clause. And it will no doubt use that clause.

Senator XENOPHON—So an absent agreement from the New South Wales government, and that 640 gigalitre rule could be with us for many years to come?

...

Senator XENOPHON—But, essentially, in the absence of New South Wales agreeing to change the rule, we are kind of stuck with it for the current period, I think you said.

Dr Horne—That is right.

...

Senator XENOPHON—I am just trying to understand in relation to the 640-gigalitre rule, in the absence of New South Wales agreeing to change that rule, if that could be overridden by the new water-sharing plan in several years time. Is that something that New South Wales could still have a veto power over in relation to that 640-gigalitre rule? That is my discrete question. I think the answer is that it is—

Senator Penny Wong [former Minister for Climate Change and Water]—The Murray-Darling Basin agreement requires consent by the parties to be altered, and this is an aspect of that.[1]

1.10         Ultimately, the long-term survival of the Murray-Darling Basin as a whole relies on its water resources being responsibly managed from the head waters in Queensland to the Murray mouth in South Australia.

1.11         Dr Robert Morrish, Chairman of the Cooper's Creek Protection Group, says that management of the system as a single river, rather than based on jurisdiction, in crucial to ensuring the survival of the Murray-Darling Basin:

There is clearly a need for rationalisation of water management across all the states, in the view of the current crisis of over-allocation by different states acting independently and in their own interests. The ecological integrity of rivers and wetlands can only be achieved by whole-of-catchment management, and for rivers which span several states there is an obvious need for a broader set of policies and principles of river management with which the states should conform.[2]

1.12         The Murray Valley Water Diverters Advisory Association (NSW) agrees and says that:

Unless there is a fundamental shift in government policy on water matters as relates to productive use and environmental needs, I [Mr Neil Eagle AO, Chairman] have grave concerns for Australia's irrigation industry and future national food security.[3]

1.13         The Murray-Darling Basin contains over 40 per cent of all Australian farms and produces one third of Australia's food supply and, therefore, it is crucial that the river system be managed as a single system to ensure its sustainability into the future.

The need for a national approach

1.14         The Murray-Darling River covers 1 061 469 square kilometres across Queensland, New South Wales, the Australian Capital Territory, Victoria and South Australia. There are 23 catchments along the entire length of the system and entitlements differ according to the jurisdiction concerned and whether the water supply is regulated or not.

1.15         In Queensland, for example, water management, allocation and trading rules are determined depending on climate and geography within the state.

In New South Wales, the allocation process differs between the northern and southern regions, based on measurement of water in storage, prediction of likely water inflow, review of historical water data and deduction of removals.

Meanwhile, in South Australia, existing users have priority access to water over new users and are allocated water based on a land and water use survey, taking environmental needs into account. South Australia also issues water permits, which are different to water licences, and are for water affecting activities such as weirs, dams and wells.

Finally, in Victoria, there are four types of water entitlements which change seasonally and sometimes by decision of the water authorities through bans, rosters or restrictions.[4]

1.16         These variations between how water entitlements are determined in the four key states which the Murray-Darling Basin covers clearly indicate a lack of consistency along the river system, and also confusion around who gets access to what water resources and when.

1.17         Furthermore, water allocation trading is restricted between states, which means irrigators, particularly in New South Wales and Victoria, are at a disadvantage in terms of being able to sell water licences, and South Australian farmers are unable to purchase the water they need from their interstate counterparts.

1.18         Victoria currently has 4 per cent annual limit on permanent trade out of irrigation areas, although it has been agreed that this will be phased out from July 2011, and removed entirely by 2014.

1.19         The cap constrains willing buyers and sellers, and its immediate removal has been called for by the ACCC, the National Water Commission and the Productivity Commission.

1.20         Professor Ian Falconer, member of the Basin Community Committee of the Murray-Darling Basin Authority, stated in his submission to the Committee that:

The present constraints on the purchase of water licences by the Commonwealth, which are imposed by the States, are counter-productive for both the licence owners and the Commonwealth environmental water purchase.[5]

1.21         Professor Falconer also argues that:

...the current State water plans do not provide the speed of response that is necessary for concerted action in the face of continuing drought.[6]

1.22         The crisis in the Murray-Darling Basin has shown that a lack of a uniform national approach is not in the interest of the Murray-Darling river system and the communities that rely on it.

Each state for itself

1.23         In July 2008, the New South Wales Government announced it would develop a draft floodplain harvesting policy across the state, which was finalised in 2010.

1.24         The draft Floodplain Harvesting Policy Framework is intended to “put a stop to the unconstrained harvesting of flood waters”[7] by way of stopping farmers from building channels to illegally divert floodwaters to their dams.

1.25         Critics, however, have said that the rules under this draft plan can be rorted by NSW irrigators.

1.26         The Australian Conservation Foundation’s healthy rivers campaigner, Arlene Buchan, says the scheme, which is essentially an honesty system of recording what is taken by individual NSW farmers, will not stamp out the practice.

Without adequate metering and monitoring by the government, this policy is ridiculous.[8]

1.27         In May 2010, I, along with Senator Sarah Hanson-Young, introduced a Private Senator's Bill – the Water (Crisis and Floodwater Diversion) Bill 2010 – which provides that, in the event of extreme rainfall in the north of the system and drought in the south, state/territory powers for the management of water flows would be transferred to the Federal Government to authorise the Murray-Darling Basin Authority to manage the water resources in the interest of the river as a single system, rather than on a state-by-state basis.

This Bill was re-introduced into the 43rd Parliament.

1.28         The manner in which water rights have been granted in Queensland, Cubbie Station a prime example, highlights the need for a robust national approach.

1.29         According to a report by Melaleuca Media:

Cubbie Station, with enough capacity to more than swallow up Sydney Harbour. Cubbie holds licences which mean that in a good year, even more water than this can be taken from the river, for the total payment to the State of just $3700 a year.

“Effectively, their water is free,” said former Queensland Natural Resources and Environment Minister, Mr Rod Welford.[9]

Infrastructure versus Water Buybacks

1.30         The Sustainable Rural Water Use and Infrastructure Program provides $5.8 billion to the upgrading of out-dated and/or ineffective irrigation systems. $3.7 billion has already been allocated, subject to due diligence requirements.

1.31         However there are concerns that the focus on infrastructure is not an effective approach.

1.32         The Productivity Commission concluded in its March 2010 report, Market Mechanisms for Recovering Water in the Murray-Darling Basin, that the money being spent on infrastructure could be better spent on water buybacks, especially in instances where the infrastructure investment would not improve the viability of a location's water saving ability.

Conclusion

1.33         As one river system, there needs to be one set of rules to ensure that the Murray-Darling Basin is sustainable into the future.

1.34         Decisions need to be made at a Federal level because States have in the past failed to act in the national interest.

Recommendation 1

That there be an immediate full Federal takeover of the Murray-Darling Basin to ensure that there is a uniform and consistent approach to water licences in the Basin.

Recommendation 2

That the Committee re-visit this issue following the release of the Murray-Darling Basin Authority's draft Basin Plan.

Nick Xenophon
Independent Senator for South Australia
07 October 2010

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