Conduct of the inquiry
On 20 September 2012, the Water Amendment (Long-term Average Sustainable
Diversion Limit Adjustment) Bill 2012 (the Adjustment Mechanism bill) was
introduced to the House of Representatives by the Minister for Sustainability,
Environment, Water, Population and Communities, the Hon Tony Burke MP.
On 11 October 2012, the Senate referred the provisions of the Adjustment
Mechanism bill to the Environment and Communications Legislation Committee (the
committee) for inquiry and report by 19 November 2012. The provisions were
referred on the recommendation of the Selection of Bills Committee. Reasons for
referral included that:
The Bill will remove the power of the Minister and Parliament
to oversee potentially significant changes to the Murray Darling Basin Plan...
Doubts have been expressed by various States, upstream and
downstream, and stakeholder groups of all persuasions (irrigators and environmentalists)
about the content of this Bill.
On 30 October 2012, during the course of the committee's inquiry, the Adjustment
Mechanism bill was amended in the House of Representatives.
The amendments are discussed in further detail later in this report.
The Water Amendment (Water for the Environment Special Account)
Bill 2012 (the Special Account bill) was introduced to the House of
Representatives on 31 October 2012.
The provisions of the Special Account bill were referred to the
committee on 1 November 2012 for inquiry and report by 19 November
2012. The Selection of Bills Committee's reason for referral was that 'this
bill commits future Parliaments to appropriate $1.77 billion. This approach
deserves scrutiny given its impact on the budget'.
Given the close relationship between the two bills, the committee
decided to consider these bills together.
In accordance with usual practice, the committee advertised the
inquiries on its website and in The Australian newspaper. The committee
also wrote to relevant organisations inviting submissions.
The committee received 20 submissions to its inquiry into the Adjustment
Mechanism bill 2012 and 16 submissions to its inquiry into the Special Account bill
2012. These are listed at Appendix 1.
The committee held public hearings relating to the bills in Adelaide on
8 November 2012 and in Canberra on 12 November 2012 (see Appendix 2).
The committee would like to thank the organisations who made submissions
to the inquiries and the representatives who gave evidence at the public
hearings. In particular, the committee notes the short period of time to
provide a submission on the Special Account bill and thanks those who made an
effort to do so.
Note on references to submissions
Unless otherwise specified, references to submissions in Chapter 2 of this
report are references to submissions to the inquiry into the provisions of the
Water Amendment (Long-term Average Sustainable Diversion Limit Adjustment) Bill
2012. Similarly, references to submissions in Chapter 3 are references to submissions
to the inquiry into the provisions of the Water Amendment (Water for the
Environment Special Account) Bill 2012.
The Water Act 2007 (the Water Act) requires the Murray-Darling
Basin Authority (MDBA) to prepare a Murray-Darling Basin Plan (the Basin Plan).
Section 22 of the Water Act establishes the mandatory content of the Basin
Plan. In particular, the Basin Plan must include a specific limit on the
quantity of water that may be taken, on a sustainable basis, from the Basin as
a whole, and a limit on the quantities of water that can be taken from the
'water resources, or parts of the water resources, of each catchment area'.
These are known as 'sustainable diversion limits' (SDLs).
Under section 23 of the Water Act, these SDLs must reflect an
'environmentally sustainable level of take'. This is defined in the Water Act
to mean the level of water extraction from a water resource which, if exceeded,
would compromise the resource's key environmental assets, key ecosystem
functions, productive base or key environmental outcomes.
The MDBA released a Guide to the Altered Proposed Basin Plan in
October 2010. The first proposed basin plan was released in November 2011,
a revised draft was released in May 2012, and the most recent draft plan was
provided to the minister in August 2012.
In the August 2012 plan, the MDBA estimated that the:
...long-term average sustainable diversion limit for all
surface water SDL resource units to be 10,873 [gigalitres (GL)] per year. This
reflects a reduction of 2,750 GL per year from the Authority’s estimate of the
BDL [baseline diversion limit] for all surface water SDL resource units.
On 26 October 2012, the Prime Minister announced a government commitment
to recover a further 450GL of environmental water, primarily through farm
efficiency projects, on top of the 2750GL environmental water recovery in the
proposed Basin Plan. This included an announcement to provide $1.77 billion
over ten years from 2014 to 'relax key operating constraints and allow an
additional 450GL of environmental water to be obtained through projects to
ensure there is no social and economic downside for communities'.
On 1 November 2012, the minister wrote to the MDBA providing suggestions
on its proposed Basin Plan.
Some of these suggestions as they relate to the bills are discussed in Chapters
2 and 3.
The minister has stated the Basin Plan is 'on track to be finalised
before the end of the year'.
Calls for an adjustment mechanism
The explanatory memorandum (EM) to the Adjustment Mechanism bill states
that an SDL adjustment mechanism 'has been sought by all Basin governments' as
well as stakeholders.
The Murray-Darling Basin Ministerial Council has requested that
the MDBA work with Basin States to develop a proposal for a 'SDL Adjustment
Mechanism'. The Council noted that:
It would be essential that the Adjustment Mechanism operates
on a transparent and legally sound basis using the best available science, and
a methodology developed in consultation with jurisdictions.
The House of Representatives Standing Committee on Regional Australia
recommended in its July 2012 report on the proposed Murray-Darling Basin Plan
...the Commonwealth Government develop a mechanism to adjust
sustainable diversion limits automatically in response to efficiencies gained
by environmental works and measures.
In coming to this conclusion, the House of Representatives Standing
Committee observed that relying on the general mechanism for amendments to the
Basin Plan in sections 45–48 of the Water Act would mean that 'any amendment to
the SDLs could potentially be delayed for over six months'.
Other recent inquiries
The Murray-Darling Basin Plan has also recently been considered by the
Senate Rural and Regional Affairs and Transport References Committee during its
inquiry into the management of the Murray-Darling Basin. In its second interim
report, that committee did not form a specific view on the Adjustment Mechanism
bill due to lack of time. However, the Rural and Regional Affairs and Transport
References Committee stated:
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.
The House of Representatives Standing Committee on Regional Australia
considered the Adjustment Mechanism bill in October 2012. That committee
concluded by recommending that the bill be passed, stating that it was:
...confident that the proposed amendment strikes an appropriate
balance between allowing the MDBA the capacity to act in a timely manner when
making SDL adjustments and continued Parliamentary oversight.
The Special Accounts bill has also been referred to the House of
Representatives Standing Committee on Regional Australia for inquiry and
report. That committee has called for submissions by 15 November 2012 and will
be holding a public hearing on 20 November 2012.
Overview of the bills
Water Amendment (Long-term Average
Sustainable Diversion Limit Adjustment) Bill 2012
The Adjustment Mechanism bill seeks to amend the Water Act to provide a
mechanism to adjust the long-term average SDLs under the Basin Plan 'without
invoking the formal Basin Plan amendment process'.
To achieve this, the bill would insert proposed new sections 23A and 23B into
the Water Act to set out the process and conditions for adjustments to the SDL.
Proposed process for adjustments to
Proposed subsection 23A(1) would provide that, under the Basin Plan, the
MDBA may propose an adjustment to an SDL for the water resources of a
particular water resource plan area or a particular part of those water
resources within a set amount, and, as a result of these adjustments, an
adjustment to the SDL for Basin water resources as a whole.
Proposed section 23B sets out the following process by which SDLs would
- the MDBA must give a notice of the proposed adjustment(s) to the
minister, which must include certain information (as set out in subsections
23B(2) and (3));
at the same, the MDBA must also prepare an amendment to the Basin
Plan giving effect to the proposed adjustments (see subsection 23B(5));
- as soon as practicable after receiving the proposed amendment,
the minister must consider the amendment and may either:
- adopt the amendment in writing; or
- give the MDBA notice that the minister has decided not to adopt
the amendment (new subsection 23B(6), as amended).
Once the minister adopted an SDL adjustment amendment, the amendment would
be required to be registered on the Federal Register of Legislative Instruments
(FRLI) and tabled in both houses of Parliament.
Initially, the bill was put forward with a subsection 33(2A) which proposed
that the amendment would be a non-disallowable legislative instrument under the
Legislative Instruments Act 2003. However, this section was amended by
the House of Representatives on 30 October 2012 to make the amendment a
Proposed conditions on adjustments
to the SDL
The Adjustment Mechanism bill would impose the following conditions on
adjustments to the SDL:
the MDBA must seek and consider advice from the Basin Officials
Committee before proposing an adjustment to the SDL;
the MDBA must invite members of the public to make submissions on
the proposed adjustment and provide a reasonable amount of time for those
submissions to be made and considered;
- the adjustment to the total basin SDL must be no more than plus
or minus 5 per cent;
the SDL must still reflect an 'environmentally sustainable level
for the Basin water resources, or part of those water resources.
the Basin Plan must include criteria for determining whether the MDBA
should propose an adjustment and the amount of adjustment.
The EM states that:
It is envisaged that criteria to be specified in the Basin
Plan will include that the mechanism must operate on a no-detriment basis. The
adjustments would then not be able to weaken the social, economic and
environmental outcomes inherent in the Basin Plan.
The EM also states that:
It is expected that the criteria to be included in the Basin
Plan will include stakeholder consultation requirements.
As discussed earlier, the Adjustment Mechanism bill proposes to amend
the Water Act to provide a mechanism to adjust the long-term average SDLs under
the Basin Plan 'without invoking the formal Basin Plan amendment process'.
The EM states that an SDL adjustment mechanism 'has been sought by all Basin
governments' as well as stakeholders.
The summary of the Adjustment Mechanism bill above incorporates the
amendments in the House of Representatives on 30 October 2012. However, it is
worth noting that the Adjustment Mechanism bill was amended in three key ways:
to require that the public be consulted and their submissions
considered before the MDBA proposes an adjustment;
- to provide the relevant minister with a discretion as to whether
or not to adopt an amendment proposed by the MDBA; and
- to ensure that an amendment to the Basin Plan to adjust the SDL is
a disallowable legislative instrument.
Water Amendment (Water for the
Environment Special Account) Bill 2012
The Special Account bill gives effect to the Prime Minister's
announcement of 26 October 2012 to provide $1.77 billion to fund projects to
acquire an additional 450GL of water above the 2750GL benchmark in the Basin
The Special Account bill would amend the Water Act to establish the
Water for the Environment Special Account pursuant to section 21 of the Financial
Management and Accountability Act 1997. The bill would appropriate $1.775
billion over a 10-year period from the 2014–15 financial year to the special account.
The bill specifies the nature of amounts that would be credited to the account,
the purposes for which amounts would be debited from the account and would
require annual performance based reporting on the achievements of the account.
The Special Account bill is designed to complement the Adjustment
Mechanism bill in that it would allow funds to be dedicated to projects and
programs to decrease the long-term average SDL. According to the EM, the
Special Account bill would 'enable water to be recovered and constraints to be
removed without negatively impacting on the wellbeing of communities in the
The Special Account bill would insert a new part 2AA into the Water Act.
Proposed subsection 86AA(1) provides that the object of part 2AA would be to
enhance the environmental outcomes that can be achieved by the Basin Plan by
protecting and restoring the environmental assets of the Murray-Darling Basin
and protecting biodiversity dependent on the Basin water resources so as to
give effect to relevant international agreements. Proposed subsection 86AA(2)
sets out examples of how environmental assets of the Murray-Darling Basin may
be protected and restored, and includes:
(a) increasing the flow of water through barrages to the Coorong;
(b) increasing the average depth of water in the Lower Lakes;
(c) reducing the average salinity levels in the Coorong and Lower Lakes;
(d) increasing the average depth of water at the mouth of the River Murray;
flushing salt from the water resources of the Murray-Darling Basin to
reduce the average salinity levels of the Basin;
(f) allowing for environmental watering of floodplains of the River Murray
(g) providing flows of water over the banks of rivers and streams to improve
connections between water-dependent ecosystems in the River Murray System.
Proposed section 86AD sets out the purposes of the Water for the
Environment Special Account. In summary, payments from the special account would
be made if the aim was to further the object of part 2AA by:
improving the water efficiency of the infrastructure that uses
Basin water resources for irrigation;
- improving the water efficiency of any other infrastructure that
stores, delivers or drains Basin water resources for the primary purpose of
providing water for irrigation;
- improving or modifying infrastructure (including bridges and
roads) that constrains the delivery of environmental water to the environmental
assets of the Murray-Darling Basin in order to ease or remove those
- increasing the capacity in dams and storages to increase the
capacity to deliver environmental water to the environmental assets of the
- entering agreements to acquire an interest in land (including
easements) to facilitate environmental watering of the environmental assets of
the Murray-Darling Basin; and
improving the rules, policies, practices and procedures in
relation to the use and management of the Basin water resources.
Proposed paragraph 86AD(2)(b) provides that amounts standing to credit
of the Account could be debited for the purpose of purchasing water access
rights which relate to Basin water resources for the purpose of furthering the
object of the new part 2AA.
Proposed paragraph 86AD(2)(c) provides that amounts standing to credit
of the account could be debited for the purposes of making any other payments
in relation to projects whose aim is to further the object of the new part 2AA;
or to address any detrimental social or economic impact on the wellbeing of any
community in the Murray-Darling Basin that is associated with a project or
purchase using funds from the special account.
Proposed section 86AE makes clear that water access rights acquired by
the Commonwealth with amounts debited from the Water for the Environment Special
Account would form part of the Commonwealth environmental water holding.
The Commonwealth Environmental Water Holder must manage the holdings in
accordance with sections 105 and 106 of the Water Act.
Proposed new section 86AG inserts a table which sets out the amount to
be credited to the special account each financial year.
Proposed section 86AI requires an annual report to be given to the minister
each financial year and that the minister must table the annual report in
Key issues regarding the bills
Submitters and witnesses raised a number of key issues regarding the
transparency and consultation, in particular relating to the
availability of certain key documents;
ministerial discretion and parliamentary oversight under the
Adjustment Mechanism bill;
- whether and how the object of part 2AA of the Special Account
bill might be achieved;
the purposes for which payments could be made from the Water for
the Special Account.
Some of the key issues regarding the Adjustment Mechanism bill are
discussed in greater detail in Chapter 2, while those pertaining to the Special
Account bill are discussed in Chapter 3.
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