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Focus: Murray-Darling Basin Plan Guide released

13 October 2010

In brief: A landmark guide to the proposed Murray-Darling Basin Plan marks a major shift in the management of water resources towards providing more water for the environment and less for consumers. Partner Chris Schulz (view CV), Senior Associate Kate Axup and Lawyer Fergus Green examine the Guide's key implications for the use and management of water in the Basin.

How does it affect you?

  • The Murray-Darling Basin Plan Guide is a plain language explanation of the proposed Murray-Darling Basin Plan, which is due to be released in late 2010 or early 2011.
  • The Guide provides for sustainable diversion limits that imply average cuts to water for consumptive use in affected areas of between 22-29 per cent (and 27-37 per cent if cuts are sourced only from existing water entitlements for irrigation, industry and drinking).
  • While the issue of the final Basin Plan is subject to a lengthy consultation process involving affected state governments and other stakeholders, the state governments have no power to directly control the content of the Basin Plan. The Commonwealth has a limited power of direction, but importantly is not able to direct the Murray-Darling Basin Authority in relation to the key issue of the sustainable diversion limits incorporated into the Basin Plan.

Background

At the awkward time of 4pm last Friday afternoon, a large document, innocuously entitled 'Guide to the proposed Basin Plan' (the Guide), was publicly released by the Murray-Darling Basin Authority (the Authority). The minimalist fanfare belied the importance of this document, which signals a major shift in the way Australia's iconic river system is to be managed.

The Guide's release marks a critical point in the long history of reform of the way the Murray-Darling Basin is managed. The Basin states – Victoria, New South Wales, Queensland, South Australia and the ACT – and the Commonwealth have long grappled with the challenge of restoring the ecological health of a river system whose environmental functions and assets have been compromised by prolonged drought and the over-allocation of water entitlements.

The Basin states and the Commonwealth agreed to return over-allocated water systems to sustainable levels under the National Water Initiative (2004). The enactment by the Commonwealth Government of the Water Act 2007 (Cth) invested this reform process with considerable new resources and attention. The Water Act's key objectives include to:

  • restore and protect the ecological values and ecosystem services of the Basin, return overallocated water systems to sustainable levels of extraction and give effect to international environmental agreements; and
  • promote the use of Basin water resources in a way that optimises economic, social and environmental outcomes.

The Water Act signalled two important shifts: first, towards the pursuit of environmental outcomes in the management of the Basin; and second, towards the centralised management of the Basin at the Commonwealth level.

To achieve this, the Water Act established the Authority and charged it with the task of producing a Basin Plan for adoption by the Commonwealth. The Authority, in producing the Basin Plan, has three critical responsibilities:

  • to determine the Environmental Water Requirement (EWR) – the amount of water (based on best available science) needed exclusively for the environment, to restore and protect the ecological values and ecosystem services of the Basin;
  • to establish long-term average sustainable diversion limits (SDLs) for the Basin as a whole and for each surface water and groundwater resource area – SDLs are binding limits on the use of ground and surface water in the Basin for consumptive purposes, informed by the EWR as well as by socio-economic considerations; and
  • to oversee and advise on transitional arrangements for the transition to SDLs.

The Authority's proposed Basin Plan is to be released in late 2010 or early 2011. The Guide is a plain language explanation of the proposed Basin Plan.

The Guide and the eventual Basin Plan will be the subject of a lengthy consultation process involving affected state governments and other stakeholders. However, the Authority is an independent statutory authority whose members are appointed by the Commonwealth; it is not a representative body of affected states. Basin state governments have no power to directly control the content of the Basin Plan, yet the Water Act requires them to implement it and generally prohibits them from acting inconsistently with it.

Environmental Water Requirement

Recognising that a range of water diversions (particularly water taken for agriculture, industry and drinking) have compromised the Basin's environmental integrity, the first task undertaken by the Authority was to determine the EWR – that is, the amount of water needed for the environment in order not to compromise:

  • key ecosystem functions (natural processes such as the transport of nutrients and sediment and wetting/drying cycles);
  • key environmental assets, including ecosystem services, water-dependent ecosystems and sites with ecological significance (eg rivers, lakes, wetlands, flood-dependant forests);
  • the productive base of the water resource; and
  • the key environmental outcomes of the water resource (including ecosystem functions, biodiversity, water quality and water resource health).

The Authority, relying on 'best available science' and its own comprehensive analysis, concluded that to meet these requirements, surface water of between 22,100 and 26,700 gigalitres per year (GL/y) would need to be reserved for the environment. Relating this figure to its assessment of the current distribution of surface water in the Basin, the Authority concluded that the amount of additional surface water needed for the environment is between 3000 and 7600 GL/y (long-term average).1

This range informed the Authority's determination of SDLs for the Basin.

Sustainable Diversion Limits

The Authority modelled the socio-economic impacts of a range of scenarios in which water was reallocated to the environment (ie away from consumptive uses) within the ranges it determined would be required for additional environmental water. It concluded that reallocating surface water to the environment in line with the upper end (more than 4000 GL/y) of the 3000 to 7600 GL/y EWR range would entail unacceptably high socio-economic impacts on communities affected by the corresponding reductions in consumptive water, which would compromise the Water Act objective of optimising economic, social and environmental outcomes.

Accordingly, the Authority decided only to consider and propose SDLs based on reallocations to the environment of 3000 to 4000 GL/y.2 It has proposed reallocations to the environment under three scenarios – of 3000, 3500 and 4000 GL/y.

The Authority concluded that (on average) 13,700 GL/y of water from the Basin is currently diverted for consumptive uses, which fall into two categories:

  • watercourse diversions (approximately 80 per cent of consumptive diversions) – diversions from watercourses to provide water for towns, irrigators and industries (typically via systems of entitlements administered by Basin states in accordance with regional water resource planning instruments);3 and
  • interception activities (approximately 20 per cent of consumptive diversions) – activities that intercept water that would otherwise flow into the Basin's river system, including farm dams and forestry plantations.

The Authority therefore concluded that the SDL for surface water in the Basin must be between 9700 GL/y and 10,700 GL/y. Crucially, this implies average cuts to water for consumptive use of between 22-29 per cent from all diversions (ie including watercourse and interception diversions), or between 27-37 per cent if cuts are sourced only from watercourse diversions (of which water access entitlements for irrigation comprise a major part).

The above figures represent the average cuts throughout the Basin necessary to comply with the Basin-level SDL. SDLs applicable in individual water resource areas differ across the 29 water resource plan areas for surface water: in some areas, no reductions are required; in others, up to 45 per cent reductions in watercourse diversions could be required.

Transitional arrangements

Transitioning from current arrangements to SDLs would, according to the Authority, yield substantial environmental benefits as required by the Water Act. However, this transition will also have considerable social and economic consequences for individuals, businesses and communities in the Basin. Accordingly, a number of transitional arrangements will be put in place to minimise and offset these effects. Transitional arrangements will be effected by a mix of Federal Government policy, state government policy and mechanisms established under the Water Act. The Authority has an important function to advise the Commonwealth on various aspects of transitional arrangements.

Delayed application of SDLs

The Water Act contains a number of mechanisms that will ensure that Basin states are not bound to adhere to SDLs from the moment the Basin Plan comes into effect, but rather will be able to take advantage of higher SDLs in the initial years of the Plan's operation, allowing affected persons and communities more time to adjust to the reductions in consumptive water availability.

First, the Federal Government has agreed to honour all of the Basin states' existing water resource plans (which will typically allocate water to consumptive purposes above levels that would be allowed under SDLs mandated in the Basin Plan) until they expire.4 These plans will be accredited as 'transitional water resource plans' or 'interim water resource plans' for the purposes of the Water Act and will take precedence over the Basin Plan to the extent of any inconsistency until they expire. The existing plans applicable in most Basin states expire between 2012 and 2017, and as late as 2019 in Victoria.

Second, the Water Act allows for temporary diversion limits to be established, by which diversion limits would be set above the otherwise applicable SDL for up to five years. The Guide proposes that temporary diversion limits should be available in all regions where transitional or interim water resource plans expire less than five years after the date the Basin Plan takes effect and where residual reductions are required.

Water buybacks

Basin states and the Federal government will continue to buy back water for the environment from water entitlement holders who are willing to sell their entitlements. This will ease the burden of transition to SDLs on entitlement holders (though not necessarily on the communities in which they operate).

The Commonwealth has already bought back water entitlements, and will continue to do so, under its $12.6 billion (over 10 years) Water for the Future program. The Authority conservatively estimates that the combined effect of water buybacks and investments in water efficiency infrastructure will recover an average of 2000 GL/y by 2014. Although this will not be enough to meet the minimum environmental water requirement proposed by the Authority, the Commonwealth Government has indicated that it will 'bridge the gap' by buying additional water needed to make up the difference between prevailing diversions and the SDLs for surface water.

Basin state governments have also invested, and will continue to invest, in environmental water buybacks and water efficiency upgrades to supplement the Commonwealth effort.

Risk allocation

The Water Act also makes provision for compensation payments to entitlement holders where the volume or reliability of their water access entitlements are compulsorily reduced in order to comply with SDLs. The risk of such reductions is allocated between individual entitlement holders, the Commonwealth and the applicable Basin state in each case, according to a risk allocation formula set out in the Water Act.5

On one interpretation, the risk-sharing mechanism established in the Water Act (including the payment of compensation by the Commonwealth) is triggered only when SDLs are reduced after the Basin Plan comes into effect.6 However, the Authority's position, revealed in the Guide, is that the Federal Government should bear the risk of reductions associated with the transition from Basin states' existing water plans to the new SDLs (though paying compensation for compulsory reductions may be unnecessary if the Federal Government is able to 'bridge the gap' entirely through voluntary buybacks, as it has indicated it will).

Structural adjustment

The Authority has flagged that support for affected persons and communities may be needed in addition to that outlined above, in the form of structural adjustment policies and payments.

Implementation of the Plan

The eventual Basin Plan will be put into effect primarily through the accreditation, oversight and enforcement by the Authority of state water resource plans (which will be effective after transitional and interim plans cease). In aggregate, these localised plans will cover the entirety of the Basin's resources through the application of a consistent set of water resource and planning boundaries.

While these plans will draw heavily from current, region-specific water planning instruments at the state level, they will contain important new features in order to give effect to the Basin Plan. Most importantly, each water resource plan will contain mechanisms for implementing the SDL applicable to it (ensuring that the aggregate effect of each plan is to meet the Basin-wide SDL).

The Basin Plan will set out requirements that each water resource plan must meet, and the Authority and the Federal Water Minister will assess proposed plans to ensure they are consistent with the Basin Plan. Plans will be accredited throughout the period 2012-2019.

While Basin states will be responsible for implementing their water resource plans, they must comply with the Basin Plan, applicable water resource plans and the Federal Water Act. Moreover, the Commonwealth (primarily via the Authority) will retain a key role in monitoring and enforcing compliance, for example, by establishing transparent compliance rules and water accounting methods and by conducting compliance audits.

Other mechanisms by which the Basin Plan will be given effect include:

  • the Environmental Watering Plan, which will set out how water will be applied to the environment to maximise environmental outcomes;
  • a water quality and salinity management plan, which will set new water quality and salinity objectives; and
  • new water trading rules, which will establish the way water will be traded across the Basin (including the removal of existing volumetric limits to water trading in the Basin).

Next steps

The Authority is now briefing and consulting with stakeholders, including Basin states, peak bodies and community members on the Guide's contents. It will conduct a series of community information sessions in Basin states and communities from 12 October to 11 November 2010 (see this schedule of meetings). Feedback from these sessions and other consultations, along with additional work undertaken by the Authority, will be incorporated into the proposed Basin Plan.

Once the Authority has finished developing its proposed Basin Plan, the following steps will occur:

  • The Authority will release its proposed Basin Plan in late 2010 or early 2011.
  • Upon release of the proposed Basin Plan, a 16-week public consultation period will commence and the Authority will receive and consider public comments on the proposed Basin Plan.
  • The Authority, in consultation with the Murray-Darling Basin Ministerial Council, will then finalise the proposed Basin Plan and will formally present it to the Federal Water Minister for review and adoption.
  • The Minister is then required by the Water Act to adopt the Plan, subject to the Minister's limited powers to make 'suggestions' to the Authority, which the Authority is not obliged to incorporate, and to issue 'directions' to the Authority, which the Authority is obliged to incorporate (but any such direction must not relate to any aspect of the Basin Plan that is of a factual or scientific nature or to other key matters within the Authority's responsibility, including the SDLs). The time allowed for the Minister to make suggestions and directions is limited under the Water Act.
  • The Basin Plan is a legislative instrument under the Water Act that comes into effect when the Minister adopts it, which is expected to occur sometime in 2011.
  • State water resource plans will be accredited from 2012-2019 as states' transitional and interim water resource plans expire.
Footnotes
  1. The Authority also concluded that the aggregate amount of additional groundwater needed for the Basin's discrete groundwater aquifers is between 99 and 227 GL/y (long-term average).
  2. The Authority also concluded, using a similar methodology, that groundwater reductions of 186 GL/y (in aggregate) would be required.
  3. Watercourse diversions also include floodplain harvesting, which is normally included in water resource plans.
  4. Murray-Darling Basin Reform Memorandum of Understanding of 26 March 2008 at paragraph [37], reflected in Part 11, Division 1 of the Water Act.
  5. See Part 2, Division 4 of the Water Act (s74A). The risk assignment framework is derived from clauses 48-50 of the Intergovernmental Agreement on a National Water Initiative of 2004, as amended by clause 10.1.3 of the Agreement on Murray-Darling Basin Reform of 3 July 2008.
  6. This interpretation is supported by the Explanatory Memorandum to the Water Bill 2007 (Cth) at pages 24-25 ('Clause 78').

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