Bills Digest no. 54 2014–15
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WARNING: This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
Bill McCormick, Science, Technology, Environment and Resources Section
Moira Coombs, Law and Bills Digest Section
25 November 2014
Purpose of the Bill
Policy position of non-government parties/independents
Position of major interest groups
Statement of Compatibility with Human Rights
Key issues and provisions
Date introduced: 25 September 2014
Commencement: The Act will commence on 1 January 2015.
Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.
When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.
The purpose of the National Water Commission (Abolition) Bill 2014 (the Bill) is to repeal the National Water Commission Act 2004 (NWC Act), thereby abolishing the National Water Commission (NWC) from 1 January 2015; and to amend the Water Act 2007 to establish a mechanism for audits of the Murray-Darling Basin Plan and water resource plans and triennial assessments of the National Water Initiative (NWI) by the Productivity Commission.
After a decade of negotiations on water industry reforms, a comprehensive water agreement– the Intergovernmental Agreement on a NWI– was proposed by the Council of Australian Governments (COAG) in August 2003 and agreed to by the Commonwealth, states and territories in 2004. The NWI aimed to ‘achieve a nationally compatible market, regulatory and planning based system—one that manages surface and groundwater resources for rural and urban use, and optimises economic, social and environmental outcomes’. Under the NWI the parties agreed to the establishment of the NWC to assist with the implementation of the NWI and set out its structure and role; and provided for a review of the NWC’s role and function in 2010–11.
The NWC was established by the NWC Act with a number of general functions to be performed at the instigation of the Environment Minister, as well as advising and making recommendations to COAG on any water matter of ‘national significance’. In addition, when established, the NWI had a number of special functions, which included: an assessment of Australia’s water resources and their governance, management and regulation; biennial assessments of the performance of the water industry in managing and using Australia’s water resources; accreditation of Commonwealth, state and territory plans for implementing the NWI; and biennial assessments of the progress of parties in achieving objectives, timelines and outcome of the NWI. A sunset clause was originally included, which would have meant that the Act ceased being in force on 30 June 2012. The sunset clause was repealed in 2012.
Under Part 3 of the Water Act, the NWC has the additional function of auditing the effectiveness of the Murray‑Darling Basin Plan and associated water resource plans. In 2008 the COAG Reform Council delegated the assessment of the performance of the Murray-Darling Basin (MDB) states in relation to the water management partnership agreements (which relate to water reforms in the MDB) to the NWC.
A review into the NWC was commissioned by the Commonwealth Government on behalf of COAG in 2011 and the report tabled in Parliament on 14 March 2012. The report identified three core functions that would be required to achieve future water reform: monitoring and audit of reform activity, assessments of reform activity and knowledge leadership. It concluded that the NWC should continue in its role for the duration of the NWI agenda and the NWC should carry out triennial assessments of NWI implementation:
The assessments should cover all applications of the NWI reform agenda, including the Murray-Darling Basin reforms, on a comparable basis to the national assessments. The NWC may carry out selective assessments of components of the water reform agenda, such as urban water reform, and incorporate those select assessments in the comprehensive triennial assessments.
The report outlined the following advantages of having a single body, such as the NWC, addressing the core functions mentioned above:
Combining all of these activities into a single entity ensures the free flow of information and a comprehensive understanding of the state of reform implementation…... Having a single entity responsible for monitoring, audit and assessment, and knowledge leadership therefore enhances the efficiency and effectiveness of each of the individual activities. …..
The NWC is in a strong position to ensure the reporting tasks it initiates through audits and assessments are rationalised and harmonised with other accountability obligations on jurisdictions and water managers. This would improve the cost-effectiveness of audits and assessments, reduce the reporting load on jurisdictions, reduce the effort required by the NWC to collect information and ensure its reports were more sharply focussed on issues pertinent to driving future water reform.
The Commonwealth Government, after reviewing the report, ‘determined that the NWC should continue for the life of the NWI with core ongoing functions of audit, monitoring and assessment’ and that the sunset clause should be removed as part of the proposed amendments to the Act.
Under the amended Act, the NWC has responsibility to:
- provide independent assurance of governments’ progress on water reform and promote the objectives and outcomes of the National Water Initiative (NWI)
- audit the effectiveness of the implementation of the Murray-Darling Basin Plan and associated water resource plans
- assess the performance of MDB states in implementing agreed milestones under the National Partnership on Implementing Water Reform in the Murray-Darling Basin
- assess Carbon Farming Initiative proposals under the Carbon Credits (Carbon Farming Initiative) Regulations 2011.
- publication of water markets reports to inform the market on trading and pricing and national performance reports for metropolitan, regional and rural water delivery agencies.
The National Water Commission Amendment Bill 2012 was passed with bipartisan support, however, the then Shadow Minister for Regional Development, Local Government and Water, flagged his concerns about funding the NWC in times of financial stringency:
The National Water Commission was brought in with a sunset clause and it is supposed to come to a conclusion. Were times more provident, so there was more money about, the extension of it would be something of not much consequence. But unfortunately these times mean we have to always start erring on the side of more diligence and away from the purely aspirational. I have to be honest and say there was quite some deliberation about this issue. I am sure that Senator Farrell has acted in a very honourable way. I have conferred with Senator Farrell and confirmed that this was an item of quite some discussion within the coalition. However, after deliberations we have fallen on the side of agreeing to the extension of the National Water Commission, but I think it is important that we put a shot across the bow because I know of people in the coalition—especially Senator Sinodinos, who maybe in the future will have a greater role to play in the financial affairs of our nation; he is on the ERC [Expenditure Review Committee] for the coalition so he has a role to play there—who are always looking for and trying to find savings where they can.
The first report of the National Commission of Audit proposed that the NWC could be consolidated into the Department of the Environment to provide administration cost savings, or its monitoring, audit and assessment functions could be transferred to the Productivity Commission. The Commonwealth Government announced the closure of the NWC from the end of December 2014 as part of the 2014—15 Budget, saving $20.4 million, with its key statutory functions being undertaken by existing government bodies.
In response to this announcement, the Executive Director of the Water Services Association of Australia (WSAA), Adam Lovell, and the Australian Water Association (AWA) Chief Executive, Jonathan McKeown, said ‘Abolishing the NWC will weaken our ability to engage Australians on water management challenges through future droughts, floods and with population growth.’ They called for the key functions of the NWC to continue to be funded, in particular the National Performance Report which provided transparent public reporting on the performance of urban utilities and rural water providers.
The details of the transfer of NWC functions to other agencies have been finalised with the introduction of the current Bill:
The National Water Commission (Abolition) Bill 2014 transfers two statutory functions to the Productivity Commission (PC) - assessments of progress in the implementation of the NWI and inquiry into the effectiveness of the implementation of the Murray-Darling Basin Plan and associated Basin State water resource plans. It has also been announced that monitoring and reporting on water markets will be addressed by the Australian Bureau of Agricultural and Resource Economics & Sciences, the Department of the Environment will take on the assessment roles in regards to the National Partnership Agreement on Implementing Water Reform in the Murray-Darling Basin and the Carbon Credits (Carbon Farming Initiative) Regulations 2011 and the PC will produce a biennial National Water Planning Report Card. The Bureau of Meteorology has taken an interest in the coordination of national performance reporting for urban water utilities.
The Bill has been referred to the Senate Environment and Communications Legislation Committee for inquiry and report by 24 November 2014. In making the referral, the Senate Standing Committee for the Selection of Bills noted the concern expressed by ‘many organisations’ (including the National Farmers Federation, the Wentworth Group of Concerned Scientists and the Australian Conservation Foundation) at the proposed abolition of the NWC. The Selection Committee stated that the inquiry should consider the impact of the Bill ‘on the continuation of robust, independent and transparent monitoring and assessment of matters of national water reform and the management of Australia’s water resources’.
Senate Standing Committee for the Scrutiny of Bills
The Committee made no comment on this Bill.
On 17 July 2014, the Senate passed a motion with the support of the Greens, ALP and Senators Nick Xenophon, Ricky Muir and John Madigan calling on the Government to reverse its position on the closure of the NWC.
After the May Estimates Committee hearings, Greens water spokesperson, Senator Lee Rhiannon stated that there was a crucial need for an independent commission to oversee the impacts of mining on the water supply. She argued that independent oversight of water at a state and federal level is being shut down by Liberal governments:
It's no coincidence that the government is shutting down the National Water Commission just as they are moving to change the management of the Murray Darling Basin and to gut the water trigger in the EPBC Act [Environment Protection and Biodiversity Conservation Act 1999].
At a time when conflicts around land-use, particularly mining, are on the increase the Coalition deregulation of water management is troubling.
The federal government is also trying to hand control of the water trigger for coal seam gas and large mining projects over to the states - to the very governments which have allowed the irresponsible development of mining in the first place.
The ALP reportedly opposes the abolition of the NWC and raised concerns about the independence of assessments and audits if they were conducted by the Department of the Environment.
The National Irrigators Council (NIC) has strongly supported the abolition of the NWC and the transfer of its functions to other agencies, arguing that this would ‘rationalise arrangements which are currently sub‑optimal’. The NIC was critical of the reports produced by the NWC, stating its analysis ‘amounts to coffee‑table material rather than serious analysis’. It supported the transfer of the assessment of the implementation of the NWI and the Basin Plan to the Productivity Commission (PC) on the grounds that this would strengthen monitoring because the ‘PC has a proven track record in providing sound, independent advice to Government on all aspects in the economy, including environmental issues’.
The National Farmers Federation (NFF) expressed disappointment with the proposed abolition of the NWC but welcomed the transfer of its key roles to other agencies. The NFF argued that the PC needs to have specific areas of high level expertise in water issues and put equal focus on social, economic and environmental outcomes. It suggested some critical changes to empower the PC to:
a) adopt a “triple bottom line” approach to its assessments and audits
b) appoint Commissioners or Assistant Commissioners with the appropriate expertise
c) adopt a more collaborative approach to involving stakeholders in their audit processes than their standard business practice
d) consider the broader process of review of the Murray-Darling Basin Plan
e) have access to the historical records of the NWC.
Both the Australian Water Association and the Water Services Association of Australia did not support the abolition of the NWC on the basis that it ‘removes any national leadership of Australia’s most valuable economic and environmental resource’. The associations were of the opinion that there is ‘backsliding’ from the states in implementing the NWI and the abolition of the NWC will allow this backsliding to continue. They argued there is a need for a national independent body to focus on water to meet future challenges of climate change, population growth, liveable and productive cities, future private sector involvement, infrastructure needs and state indebtedness.
The Australian Conservation Foundation, which opposes the abolition of the NWC, felt that giving responsibility of water management to the PC was a short-sighted and backward step in the absence of substantial changes to the mandate and operation of the PC. It noted that the NWI ‘was pivotal in shining a light on [certain] aspects where governments had fallen behind on their commitments under the NWI’. It argued that environmental sustainability, social and cultural considerations needed to be included in the Productivity Commission Act 1998 and the PC should be given sufficient resources to employ staff qualified in water management to complete NWI assessments and Basin Plan audits.
The Explanatory Memorandum states that the abolition of the NWC will provide savings of $20.9 million over four years.
As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible with human rights as it does not engage any of the applicable rights or freedoms.
Parliamentary Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights considers that the Bill is compatible with human rights and has completed its examination of the Bill.
The NWC is an independent statutory authority established in 2004 by the Howard Government in response to the Intergovernmental Agreement on a NWI. In introducing the Bill to establish the NWC, the Minister for Transport and Regional Services noted the two key functions for the Commission were ‘assessing the implementation and promoting the objectives and outcomes of the historic NWI Intergovernmental agreement … and advising on financial assistance to be provided by the Commonwealth under the Australian Water Fund’. The Minister further noted how the Government expected the Commission to operate:
… the Bill allows for commissioners to be nominated by the Commonwealth and by the states and territories. The Bill also requires the commissioners to act in the best interests of the commission—it certainly does not envisage a disparate set of commissioners each representing and advocating different sectoral or government interests. The cause of water reform needs to rise above that, and so does the commission. In the same way that our rivers do not respect state boundaries or even regional boundaries, the commission must ensure that it does not pay undue heed to sectoral, state based or regional differences. It must act in the interest of coherent national approaches to water management on this continent.
As mentioned above, when the NWC Act was passed, it contained a sunset provision (section 39) which provided that the NWC Act would cease to be in force on 30 June 2012. However, section 39 was repealed by the National Water Commission Amendment Act 2012, which also amended section 38 to make provision for regular reviews of the NWC. The Explanatory Memorandum for the 2012 Amendment Bill noted:
The Independent Review of the NWC was commissioned by the Commonwealth Government on behalf of the Council of Australian Governments in accordance with the NWI and section 38 of the NWC Act. The Review concluded that the NWC should continue, without sunset for the duration of the NWI.
The Review found that implementation of the NWI is occurring within a highly complex and evolving environment. This complex environment requires an independent and specialist institution to credibly engage with, and report on the progress of water reform.
Item 1 of Schedule 1 of the Bill repeals the NWC Act and thus the NWC.
Transitional matters are dealt with in items 7 to 11. These provisions reflect those in other legislation that abolishes statutory agencies.
Item 8 provides for the transfer of records and documents in possession of the NWC to the Department of the Environment (the Department).
Item 9 proposes that any unresolved complaints raised against the NWC with the Commonwealth Ombudsman will continue to be dealt with under the Ombudsman Act 1976 following the transition period, as if the Department had taken the relevant action.
Item 10 requires the Secretary of the Department to prepare a final annual report for the NWC and provide it to the Minister, who will be required to table it in Parliament in accordance with standard reporting requirements.
Item 11 proposes that the Minister may make rules by legislative instrument to address transitional matters.
Basin Plans and water resource plans
Item 6 repeals existing Part 3 of the Water Act, which currently provides for audits of the implementation of the Basin Plan and water resource plans by the NWC. With the proposed abolition of the NWC, proposed Part 3 will require the Minister to refer matters for inquiry to the PC according to prescribed timeframes for audits on the effectiveness of implementation of the Murray-Darling Basin Plan and associated water resource plans, and for triennial assessments of progress by parties to the NWI. However, concerns have been raised about whether the PC has staff with the necessary expertise to conduct such inquiries. The NWC is concerned that splitting its various roles will result in losing the ‘synergistic advantages of integration’. The NWC also argues that the ‘triple bottom line’ approach will also be lost. This refers to consideration of economic, social and environmental objectives when looking at issues of water reform. The National Farmers Federation considers the ‘triple line approach’ as one of the critical elements of the success of assessments and audits by the NWC.
Under proposed subsection 87(1), the Minister must refer the matter of the effectiveness of the implementation of the Basin plan and water resource plans to the PC for inquiry within a five year period ending on 31 December 2018. Currently, the NWC has discretion as to when to audit the effectiveness of implementing these plans, providing such audits are conducted within five years of the most recent audit.
In relation to the conduct of audits, the NWC has commented:
Under the Water Act 2007 the NWC was to audit the effectiveness of the implementation of the Murray-Darling Basin Plan and the associated water resource plans at least every five years. The first report was due on 3 March 2013. However because the Basin Plan commenced in late November 2012 there had been insufficient activity to allow an audit of implementation by March 2013. Report at that time instead addressed the preparedness of governments to implement the Plan, and there has been no full audit of implementation of the Murray-Darling Basin arrangements since the Water Act was enacted.
Professor Richard Kingsford also notes:
The implementation of the Murray-Darling Basin Plan remains the most challenging issue for water management in Australia, requiring independent assessment. The NWC is capable of doing this, with expertise and in a role removed from the key water agencies of government. The option for the Productivity Commission to take on this role does not adequately recognise the complexity of the task and the expertise required both in terms of staff capacity but also leadership, provided by the NWC commissioners.
The Wentworth Group of Concerned Scientists commented in its submission to the Senate Committee ‘that there are a number of signs that indicate we are departing from the strong leadership of the last decade’. One of those signs refers to the NWC:
The National Water Commission, established to lead the 2004 reforms, is to be abolished. It was central to guiding the reforms. It had the core tasks of auditing progress on the national reform agenda, auditing the outcomes of the Murray-Darling Basin Plan, and advising the Council of Australian Governments on further opportunities for improvement. The National Water Commission also funded new knowledge on water management and assisted state governments implement reforms.
Proposed subsection 87(2) will ensure that an ongoing assessment process will continue during the following five year period after the completion of the PC’s most recent inquiry. Under proposed subsection 87(3), the Minister’s referral must specify the five year period within which the PC must submit its inquiry report. Proposed subsection 87(4) requires that after the report is submitted to the Minister and prior to it being tabled in Parliament, the PC must also provide a copy to the Murray-Darling Basin Authority and the Basin states to keep them appraised of progress toward the implementation of the Basin Plan. Proposed subsection 87(5) provides that inquiring into the implementation of the Basin Plan and the water resource plans will be taken to be a matter relating to industry, industry development and productivity under the Productivity Commission Act 1998 (PC Act). This provision is necessary to ensure that the PC has power to undertake the inquiries, given that the PC’s functions are limited to those provided in the PC Act, which are focused on matters relating to industry, industry development and productivity, which might not (absent proposed subsection 87(5)) be regarded as including inquiries of the kind required under the Water Act.
National Water Initiative
Proposed section 88 provides for inquiries to be conducted by the PC in relation to the NWI.
The NWI is COAG’s principal water policy agreement. Governments across Australia agreed on actions to achieve a more cohesive national approach to the way Australia manages, measures, plans for, prices and trades water.
The Wentworth Group of Concerned Scientists note:
Most importantly, the 2004 National Water Initiative provided a nationally consistent framework within which industry and governments had certainty for investment…
It appears that our Australian governments are walking away from strategic water reform at the very time when we should be preparing for the next inevitable drought. The Wentworth Group believes that we urgently need to reinvigorate the reform effort in order to tackle issues that remain unresolved as well as emerging water challenges. Water reform must be seen as a long-term endeavour, rather than a one-off effort.
Proposed subsection 88(1) requires the Minister to refer to the Commission for inquiry the progress made by parties to the NWI on the achievement of objectives and outcomes of, and within timelines required by, the NWI. The matter must be referred during the three-year period ending on 31 December 2017. Proposed subsection 88(2) allows for ongoing assessment of NWI progress in the subsequent three year periods after the completion of the PC’s most recent inquiry report.
Under proposed subsection 88(3), the Minister must specify the three year period within which the PC must submit its inquiry report. As part of the referral the Commission is required to make recommendations on actions the parties might undertake to better achieve NWI objectives and outcomes. Once the PC has completed the inquiry report, in accordance with proposed subsection 88(4), it must submit a copy to the Minister. Prior to the report being tabled in Parliament, the PC must also give a copy of the report to COAG and any COAG subcommittees dealing with matters concerning water.
A number of concerns have been raised in submissions to the Senate Environment and Communications Legislation Committee concerning the level of specialist expertise available to the Productivity Commission in undertaking the audits and inquiries needed in the water reform area. The NFF suggested that the Productivity Commission needed to adopt a ‘triple-bottom line’ approach in its assessments and audits. The recommendation of the Independent Review of the NWC in 2012 considered that the NWC should continue until the NWI was fully implemented. In Associate Professor Stuart Khan’s view:
The Commonwealth Government and the National Water Commission played a key role in navigating the water sector through new extremes and supporting the economic viability of many towns and cities during the previous Millennium drought. Without the National Water Commission, there is now no clear avenue through which to drive and harness the benefits from national coordination in water reform… The ability to ensure water is managed efficiently, safely, sustainable [sic] and continues to drive economic growth is impeded by the lack of national oversight over Australia’s water management. The National Water Commission played a vitally effective role in delivering national water reform throughout the last decade, but it is now unclear how such focussed attention to nationally significant water issues can be maintained.
Members, Senators and Parliamentary staff can obtain further information from the Parliamentary Library on (02) 6277 2500.
. Intergovernmental Agreement on a National Water Initiative, op. cit., paragraph 10 and Schedule C.
. For more extensive background on the National Water Commission see B McCormick and J Grace, National Water Commission Bill 2004, Bills digest, 72, 2004– 05, Parliamentary Library, Canberra, 2004; M Harrison-Smith, National Water Commission Amendment Bill 2012, Bills digest, 148, 2011– 12, Parliamentary Library, Canberra, 2012, accessed 11 November 2014.
. Section 39 of the NWC Act, as made, accessed 20 November 2014.
. M Harrison-Smith, op. cit.
. D Farrell, (Parliamentary Secretary for Sustainability and Urban Water), Gillard Government extends National Water Commission, op. cit.
. Senate Standing Committee for the Selection of Bills, Report No. 12 of 2014, 25 September 2014, accessed 6 November 2014.
. The Statement of Compatibility with Human Rights can be found at page 3 of the Explanatory Memorandum to the Bill.
. National Farmers’ Federation, Submission to Senate Environment and Communications Legislation Committee, op. cit.
. Water Act 2007, sections 87 and 88.
. National Water Commission, Submission to Senate Environment and Communications Legislation Committee, Inquiry into the National Water Commission (Abolition) Bill 2014, op. cit., p. 4.
. R Kingsford, op. cit., p. 2.
. The Basin States are defined by section 4(1) of the Water Act 2007.
. National Water Commission, National Water Initiative, op. cit.
. Wentworth Group of Concerned Scientists, op. cit.
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