Chapter 2
Surface water
2.1
The Murray-Darling Basin Authority (MDBA) established a baseline from
which to measure reductions in diversions which is known as the Baseline
Diversion Limit (BDL). The surface water BDL is defined as 'the sum of the
long-term annual average limits (or where there is currently no limit, the
long-term annual average take) for all forms of take from a surface-water [Sustainable
Diversion Limit] SDL resource unit.'[1]
The MDBA determined the total 2009 BDL to be 13 623 gigalitres per year
(GL/y) for surface water.[2]
2.2
The Basin Plan estimates the long-term Environmentally Sustainable Level
of Take (ESLT) of water from its rivers is 10 873 GL/y.[3] The MDBA
explains this ESLT is the 'amount of water that can be used for irrigation,
agriculture, drinking and so forth (known as 'consumptive use') on average' and
still ensure there is sufficient water in the Basin to meet environment needs,
and therefore meet the objectives of maintaining the Basin as a healthy,
working river system.[4]
2.3
To achieve the ESLT, the plan sets environmentally sustainable limits on
the quantity of surface water that may be taken from an SDL resource unit.[5] The long‑term
average SDLs for water resources will come into effect in 2019[6] through state-based accredited
water resource plans.[7]
The MDBA describes the SDLs as:
...limits on the volumes of water that can be taken for human
uses (including domestic, urban and agricultural use) and are set at both a
catchment and Basin scale.[8]
2750 GL/y reduction figure
2.4
The Basin Plan indicates consumptive use of surface water needs to be
reduced by 2750 GL/y.[9]
The MDBA has indicated that in recovering 2750 GL/y of water that '2360 GL/y
should be sourced from the southern Basin' and '390 GL/y should be sourced from
the northern Basin.'[10]
MDBA's rationale for the 2750 GL/y
figure
2.5
The MDBA's rationale for the 2750 GL/y is unclear to the committee as
well as to many of the key stakeholders who presented evidence to the inquiry.
The most direct explanation that the committee received from the MDBA was in
response to a question on notice from its public hearing on 24 April 2012. In
this instance, the MDBA claimed that as a result of its hydrological modelling
and socio‑economic testing, it considered that the 2750 GL/y figure was:
...sufficient to achieve most of the key ecological targets
and objectives set by the Authority, while also ensuring that social and
economic impacts on the Basin community are manageable.[11]
2.6
The MDBA claimed that it undertook 'sensitivity analysis' of water
reduction scenarios of 2400 GL/y and 3200GL/y. It stated that the analysis of the
2400 GL/y figure would not achieve a number of key ecological targets and
outcomes. On the other hand, the MDBA stated that the 3200 GL/y scenario only
had marginal improvements on the 2800 GL/y scenario and that this did not
justify the potential additional socio-economic impacts.[12]
2.7
In addition, the MDBA referred to a number of system constraints having
an impact on the prospect of using the additional environmental water that
would be available under the 3200 GL/y (and other) scenarios. These constraints
include physical and legal barriers to delivering water, for example, due to
preventing the flooding of roads, bridges and private property, among other
things.[13]
Criticisms of the 2750 GL/y figure
2.8
Despite the rationale provided by the MDBA for the setting of the 2750 GL/y,
there has been significant criticism for many different groups about the figure
and how it was developed.
2.9
The most common criticism received by the committee was that the MDBA
had not provided sufficient details in support of its decision. Many key stakeholders,
including peak bodies, told the committee that the reasoning for the decision
to set the 2750 GL/y figure was not based on information that the MDBA has made
available for their consideration.[14]
2.10
This criticism was highlighted by the CSIRO discussion of the science
behind the a 2800 GL/y scenario, in a review commissioned by the MDBA:
The panel [of CSIRO scientists that conducted the review of
the MDBA's modelling] understands that other reduction scenarios have been
modelled, but the panel has not seen modelling results for these other
scenarios, and thus it is not clear how the 2800 GL/y reduction proposal was
arrived at. The panel assumes this proposal was arrived at as a result
of socio-economic considerations by MDBA...[15]
[emphasis added]
2.11
The Wentworth Group of Concerned Scientists (Wentworth Group) also
criticised the rationale for the 2750 figure. Its representatives told the
committee that the 2750 figure has no scientific justification and that this
has not changed across the various iterations of the plan and the supporting documentation
released by the MDBA.[16]
Mr Stubb's gave this colourful description:
Just to be clear, that model did
not tell [the MDBA] that 2,750 was the number. You select a number and plug it
into the model. It is like a sausage machine. So if you put good mince in, you
will get nice sausages. If you put bad mince in, you will get bad sausages.[17]
2.12
The MDBA's statements that the 2750 figure is a result of 'sensitivity
analysis' is considered by the committee to need further explanation given that
alternative modelling scenarios were not clearly articulated to even the CSIRO
as part of the MBDA commissioned review, or made available to the public and Parliament
for debate.[18]
The committee notes that the MDBA is currently modelling a 3200 GL/y scenario,
which it plans to provide to the Ministerial Council on the Murray-Darling
Basin before the Basin Plan is tabled.
Reliance on historical data
2.13
Another key criticism of the 2750 GL/y and related modelling is that it
relies on historical data up to 2009. When asked why more recent periods have
not been used, especially a date that would include the extensive rainfall and
runoff in the basin of the last two years, the MDBA claimed that it would have little
impact. However, the committee considers this to be an unsatisfactory explanation
given the claims by the MDBA to use the 'best available science' to develop the
Basin Plan.[19]
Climate change impacts omitted
2.14
The absence of specific climate change assumptions in the modelling of
the Basin Plan is of great concern to the committee. Climate change was
identified by the MDBA as a significant issue in the development of the Guide
to the Proposed Basin Plan (the Guide, released October 2010), and
considered it 'essential that the proposed Basin Plan appropriately addresses
the impacts of climate change.'[20]
2.15
Specifically, the Guide goes on to state:
In light of the various issues associated with climate
change, the Authority has determined that 3% is an appropriate allowance to
account for the effect of climate change in the proposed Basin Plan. That is,
the reduction being considered as necessary to achieve an environmentally
sustainable level of take is inclusive of a 3% reduction in the current
surface-water diversion limit in the Basin.[21]
2.16
Despite this, the MDBA chose not to specify the impact of climate change
in the Basin Plan. The committee heard extensive evidence that climate change is
likely to have significant impacts on the outcomes to be expected from
returning water to the basin through the SDLs.[22]
2.17
It is forecast that the impact for water run-off is far more significant
than the change in rainfall due to a multiplier effect. As was pointed out in
the Garnaut Review on climate change 'a decrease in rainfall can result in a two- to three-fold decrease in streamflow.'[23]
2.18
The CSIRO conducted extensive analysis on this issue in 2008, including
modelling rainfall run off to the year 2030. According to the report, the
likely impact would be significant:
The best estimate or median indicates that the future mean
annual runoff in the MDB [Murray Darling Basin] in ~2030 relative to ~1990 will
be lower, by 5 to 10 percent in the north-east and southern half [of the Basin],
and by about 15 percent in the southernmost parts. Averaged across the entire
MDB, the best estimate or median is a 9 percent decrease in mean annual runoff.[24]
2.19
The committee is of the view that the impact of climate change has not
been adequately explained by the MDBA.
2.20
The Wentworth Group, for example, strongly criticised the lack of
consideration of climate change projections in the Basin Plan and noted that
the MDBA's position 'conflicts with Government Policy on climate change.'[25]
2.21
The committee also notes that the MDBA has ignored the recommendation of
the Windsor Report which urged the MDBA to 'apply greater rigour to the
assumptions made to develop the proposed sustainable diversion limits,
including the forecast impact of climate change'.[26]
Interceptions
2.22
A final consequence of the reliance on historical data is that it may overlook
changes in water interception that may have occurred due to changes in land
management over the past century.
2.23
The current modelling process also appears to fail to account for interception
in regarding certain forestry projects. Professor Mike Young provided
information to the committee that stated:
Under the Proposed Plan, States will be required to adjust
for the adverse effects on water availability of increased forestry, increases
in farm-dam interception and increases in the capture of overland flows...
Missing from the Proposed Plan is a requirement for the
adverse interception effects of biodiversity plantings to be fully accounted
for.[27]
2.24
CSIRO climate modelling for 2030 predicts a five per cent lower median
and a 15–20 per cent extreme range lowering of rainfall in the Southern Basin.
The relative high proportion of high security water purchase from South
Australian and Victoria under the Commonwealth Restoring the Balance in the
Murray-Darling Basin program will have a disproportional effect on agriculture
as a result of climate change. Consequently these states will suffer
disproportional socio-economic effects relative to other Basin states.[28]
Water entitlement types in the 2750
figure
2.25
Finally, the committee was concerned with how various types of water entitlement
had been taken into account by the MDBA when developing the 2750 GL/y
figure. The committee heard evidence that the outcomes for the Basin system
could vary significantly based on the type of water used.
2.26
The committee's concern with water types used in the modelling for the
2750 GL/y figure focussed on four main types: high security water; general
security water; supplementary water; and terminal water. The MDBA acknowledged
that depending on the type of water used this could have a significant impact on
the outcomes for the Basin:
CHAIR: ...do you agree that if you modelled [2750] gigs
of buyback water that happened to be all supplementary water you would get a completely
different outcome than if you modelled [2750] gigs of high‑security
water?
Dr McLeod: Yes, that is correct.[29]
2.27
The Wentworth Group explained these potential impacts further and
highlighted how different types of water were needed to achieve different
environmental outcomes and events in the Basin system. As Mr Tim Stubbs
explained:
...Once you have your breakdown of how you want to get those
outcomes and what is the best way, you will then have some clear picture of
what sort of water you would need. You might be able to say: well, to achieve
all these events, we only need to achieve them when it is flooding already
because we want to put a top on a peak or a tail on a flood. We may be able to
use general security water for that or, potentially, even supplementary if it
was in the right place at the right time. However, for other events you might
have to say: well, we probably need high-security water to make sure we can be
confident of achieving that event, because there will not be any supplementary
water around at that time, potentially, and we will need a certain amount of
high security in the bank to make sure we can hit those events, because they
are drier time events. I am not sure how the authority has done it, but I
imagine you would have to have a spread of entitlements to be able to hit all
your targets.[30]
2.28
However, the committee remained unsatisfied with the explanations
provided by the MDBA regarding water types in the development of the 2750 GL/y figure.
The limited information received suggested that the assumption made was for a
pro rata reduction across water types, excluding terminal water (that is, water
from terminal or non-connected river systems). As the MDBA told the committee:
Dr McLeod: We assumed a pro rata reduction across all
the entitlement classes in each of the—
CHAIR: ...So you had an equal 25 per cent terminal, 25
per cent [supplementary], 25 per cent general purpose?
Dr McLeod: That is right. Terminal is not actually a
class. In the terminal system—
CHAIR: I can assure you, though, the impact of buying
water out of a terminal river is a lot different to the impact of buying out
of—
Dr McLeod: I totally accept that. In the typical New
South Wales system, there is high security, general security and supplementary.
We assumed a pro rata share across each of them.[31]
2.29
The committee also received information about how this division of water
types had operated in practice so far through the government's buyback program.
As at 31 March 2012, of the 1238.2 GL of purchased entitlements, 455.4 GL was
high security water, 695.4 GL was general, medium or low security water, 41.8
GL was supplementary water, and the remainder unregulated or unsupplemented
water.[32]
2.30
The committee considers that the government needs to further explain the
rationale for the particular make-up of the water types in developing the 2750
GL/y figure, how it will treat terminal water, and how this correlates to the
division of water types for the government's buyback program so far and into
the future.
2.31
In this regard the committee notes the recent agreement by the
Department of Sustainability, Environment, Water, Population and Communities (SEWPaC)
and Murray Irrigation Ltd to purchase a significant volume of water from 35
irrigation farms for return to the Basin. Murray Irrigation Ltd stated that the
volume of water purchased remains confidential.[33]
The confidentiality of this purchase further highlights how significant details
regarding the implementation of Basin plan are not being made publicly available.
2.32
Victoria has contributed 424,150 megalitres (ML) of high security water
and 22,493 ML of low security water to the Commonwealth Restoring the Balance
in the Murray‑Darling Basin program, a ratio of 1 to 19.[34]
Uncertainty regarding the impact of
water buybacks (the Nimmie-Caira case)
2.33
The committee heard evidence about the Nimmie-Caira buyback scheme in
hearings on 23 August and 10 September 2012. In order to meet part of its
contribution towards the 2750 GL/y reduction, the NSW Government is proposing to
purchase water from 11 properties in the Nimmie-Caira irrigation district near
Hay, NSW.
2.34
The committee is aware that the NSW Legislative Council passed an order
to produce documents relating to the proposed Nimmie-Caira water buy-back. On
20 September, the response was tabled in the NSW Parliament. The index of
documents that was made publicly available in the Parliament shows that many of
the relevant documents remain confidential because of claims of privilege.[35]
2.35
The committee is unsure about whether the purchase of water will be at
market value. It was indicated that the total Nimmie-Caira proposal for
participating land holders could be priced at around two and a quarter times
the value of the water, which would include the sale of 'the land and water and
the infrastructure.'[36]
2.36
The committee notes that large scale purchases of water can, in certain
circumstances, legitimately attract a premium because they deliver
administrative savings. This is consistent with the government’s guidelines for
large purchases of water under its buyback program, which allows for an up to
10 per cent premium on water purchases above 40 GL.
2.37
A recent Auditor-General’s report on the water buyback program found
that while governments have the prerogative to offer a premium for large scale
purchases for these reasons, the potential savings should be documented:
...the ANAO suggests that the justification for price
premiums should include explicit consideration of the reliability of the
entitlements and the compatibility with priority environmental needs that are
not able to be serviced through other entitlements already held. The expected
administrative cost savings resulting from large purchases should also be
documented.[37]
2.38
Because the details of the proposal remain confidential it is not
possible to judge the value-for-money of the Nimmie-Caira proposal.
2.39
In response to questioning about the price to be paid for supplementary
water as part of the Nimmie-Caira proposal, the NSW Office of Water insisted
that it would not provide the information to the committee:
CHAIR: Surely you can tell us what the base price of
supplementary water is.
Mr Raft: Around $300-plus a megalitre.
CHAIR: Yes, it was 350 on the Warrego. What you are
doing there is paying $800-something for the water [based on the 2¼
multiplier]. Could we do this in camera?
Mr Harriss: I still will not reveal the
cabinet-in-confidence, rather the commercial-in-confidence.
CHAIR: Did you say that is the first time that that
has been mentioned today; that it was cabinet-in-confidence?
Mr Harriss: No, not cabinet-in-confidence, I meant
commercial-in-confidence.[38]
2.40
The committee was also concerned whether the full supplementary water
entitlements or the long-term average annual yield of the Nimmie-Caira proposal
would contribute towards the 2750 GL/y reduction. In the Nimmie-Caira case this
would be 381 GL/y or 173 GL/y respectively. This issue was not fully explained
to the committee and would have a significant impact on the implementation of
the 2750 GL/y return of water to the Basin as proposed under the Basin Plan.[39]
2.41
In this respect, the committee is not able evaluate whether this
important issue represents value for money for Australian taxpayers. The
committee will consider this issue in further detail in the final report of the
inquiry.
Adjustment mechanism
2.42
The Basin Plan (August 2012) included an adjustment mechanism to
facilitate changes to the 2750 GL/y reduction in take from the river. The
adjustment mechanism would provide for a 5 per cent change in the 2750 GL/y.
2.43
According to the MDBA, the proposed changes to introduce an adjustment
mechanism:
...are designed to allow changes to be made to the SDLs when
new initiatives or projects are identified that achieve better outcomes either
for the environment or for Basin communities.[40]
2.44
The MDBA added that the mechanism would consider:
...projects based on environmental works and measures, river
operations, rule changes and infrastructure developments that could use less
environmental water to achieve similar environmental outcomes, or more
environmental water to improve the environmental outcomes without increasing
the socio economic impacts.[41]
2.45
Under the adjustment mechanism the MDBA would not require Ministerial or
Parliamentary approval for a change to 2750 GL/y within the 2040–3460 GL/y
range.[42]
2.46
The committee notes that the relevant amendment to the Water Act 2007
to provide for an adjustment mechanism was only introduced into Parliament on
20 September 2012.[43]
Because of the timeframe the committee has not been able to form a specific
view on the provisions of the bill.
2.47
Overall, the committee is very concerned with the lack of information
about how the adjustment mechanism would work and the details in determining
changes. The 2750 GL/y is a highly controversial figure but the committee is of
the view that the public and Parliament need to be reassured that any changes
are based on appropriate information and processes. These are yet to be
detailed by the MDBA. As a result, the Parliament is again being asked to
legislate on a matter with insufficient information.
Modelling of scenarios
2.48
Given the problems that have been discussed above with the 2750 GL/y
scenario, the committee finds it difficult to understand the MDBA's refusal to
model other key scenarios for the return of water to the Basin. Indeed, now
that the Parliament will be asked to approve an adjustment mechanism that can
change the 2750 GL/y figure, the committee considers that conducting and
publishing the modelling of other scenarios is even more important.
2.49
The MDBA has continually claimed that significant scenarios were not
modelled because of the 'sensitivity analysis' already undertaken and the issue
of constraints in the system.[44]
2.50
However, organisations such as the Wentworth Group have disputed this as
a sound justification for the 2750 GL/y figure. The Wentworth Group acknowledged
that the MDBA has the best available modelling capabilities for water resources
in the Basin system but lamented that it has not been used to model other
scenarios.[45]
2.51
To this end, the committee welcomes the recent commitment of the MDBA to
model the 3200 GL/y with constraints scenario. The committee urges the MDBA to
publicly release the detail and results in a way that is suitable for public
scrutiny and debate.
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