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Chapter 5

Basin Plan compliance

5.1
The Basin Plan represents a significant public investment and a reform that has implications for a broad range of environmental, social, cultural and economic interests. As such, an effective and fair compliance system is critical to the success of the Basin Plan, and providing Australians with confidence that water is being used in accordance with the rules. Following a series of recent reviews into compliance and enforcement in the Basin, the Basin Plan Compliance Compact (compliance compact) was agreed by the Council of Australian Governments (COAG) in June 2018. The compliance compact aims to improve consistency across compliance and enforcement. It commits governments to priorities and implementation work plans, improving transparency and accountability, metering and measurement, protecting and managing environmental water, and finalising water resource plans.
5.2
This chapter considers:
Basin State compliance obligations and progress in improving metering arrangements, transparency, and compliance frameworks;
the MDBA's compliance role and compliance compact obligations;
Commonwealth legislation to be introduced in relation to compliance; and
the potential role for a water audit.
5.3
Further discussion on compliance with SDLs, the SDL adjustment mechanism, WRPs, environmental water and water trade are discussed in their respective chapters.

Key reviews and inquiries

5.4
In July 2017, the ABC Four Corners program aired an episode detailing allegations of serious breaches of NSW water laws.1 The program became the catalyst for a number of reviews and reports into various aspects of water compliance in the Basin, as summarised below:
August 2017: The NSW government referred allegations about misconduct and maladministration within the NSW Department of Industry to the NSW Independent Commission Against Corruption (ICAC).2
November 2017: Final report of the Independent investigation into NSW water management and compliance published (Matthews report), commissioned by the NSW Government.3
November 2017: The Murray-Darling Basin Water Compliance Review was published after being commissioned by then Prime Minister Malcom Turnbull several months prior. 4 The Compliance Review report consists of two parts: Part A is the report of the MDBA; and Part B is the report of the Independent Panel appointed to support the MDBA with the review of state compliance and enforcement regimes.5 The recommendations and actions from the review were brought together to form the Compliance Compact.6
November 2017: The NSW Ombudsman made a special report to the NSW Parliament outlining 10 years' of investigations into complaints and public disclosures about NSW government handling of water compliance and enforcement. A further report was made in March 2018 to correct errors in data provided to the Ombudsman.7
November 2017: The Auditor-General reported on a limited assurance review undertaken by the Australian National Audit Office (ANAO), of the federal Department of Agriculture and Water Resources' (now the Department of Agriculture) assessment of NSW protection and use of environmental water under the National Partnership Agreement on implementing water reform in the Basin.8
March 2018: The Independent audit of Queensland non-urban water measurement and compliance was published.9 This was commissioned by the Queensland Government.
November 2018: The Senate Rural and Regional Affairs and Transport References Committee tabled their final report on the integrity of the water market in the Murray-Darling Basin. The terms of reference included inquiring into allegations of theft and corruption in the management of water resources in the Basin, as well as the use of Commonwealth environmental water holdings for irrigation purposes, and the impact of that on communities and the environment. The committee made six recommendations. As at 30 September 2019, no government response has been provided.10

Basin States compliance obligations and regulatory frameworks

5.5
Basin States are responsible for ensuring compliance with their state water laws, and also for complying with their own obligations under the Water Act, the Basin Plan and WRPs.
5.6
Since the introduction of the Basin Plan, NSW is the only state that has introduced a Natural Resources Access Regulator (NRAR) responsible for compliance with, and enforcement of, the regulatory framework for water including water management rules and licence and approval conditions.11 The NRAR has powers for compliance and enforcement under the NSW Water Management Act 2000 and NSW Water Act 1912. The NRAR and the MDBA have a Memorandum of Understanding that sets out how they will work together in sharing information and intelligence, building capacity, and managing allegations of non-compliance including conducting joint operations.12
5.7
According to the Victorian Government, Victorian water corporations deter water theft with the assistance of real-time water meter data.13 Victoria also collects data on volume, location, quality, and water use through its Regional Water Monitoring Partnerships and State Observation Bore Network. This information is publically available on a Water Management Information System.14
5.8
Queensland has been working to strengthen its water compliance framework following the Independent audit of Queensland non-urban water measurement and compliance completed in March 2018. The Rural Water Management Program (RWMP) has been established within the Queensland Department of Natural Resources, Mines and energy to drive more transparent and sustainable rural water management across Queensland. The RWMPs works to implement the actions from the compliance compact and the recommendations from the independent audit.15 Queensland is currently working to develop and implement a water plan assurance framework that enables its natural resources department to assess and report on its performance as a regulator under the state's primary water legislation.16 According to their website this project is due to be completed in 2020.17
5.9
South Australia's Department of Environment and Water is responsible for monitoring water take and use from prescribed and non-prescribed water sources to ensure water users meet their obligations. The department reports its site visits, targeted water compliance operations, and compliance actions on a yearly basis.18
5.10
In the ACT, the Environmental Protection Authority (EPA) is the regulatory body that has responsibilities for administering the Water Resources Act 2007. The Water Resources Act 2007 is the governing legislation for managing water resources in the ACT, defining access rights to surface and ground water resources, environmental flow provisions, water licensing requirements, resource management and monitoring responsibilities and setting penalties for water-related offences.19
5.11
The Murray-Darling Basin Water Compliance Review found that there were substantial differences in the compliance processes between Basin states including in the culture of compliance, the level of resourcing, the extent of transparency and the comprehensiveness and clarity of the policy framework.20 For example, the Review concluded:
The regulation of water take is challenging in NSW as they have the greatest number of water licenses, the greatest volume of take and the largest geographical area of all the Basin States. NSW also has a significant volume of unregulated water and floodplain harvesting, which is difficult to measure and assess whether there has been a compliance breach.21 Water take compliance has historically been a low priority in NSW and NSW does not have a well-developed culture of compliance.
South Australia has had a long history of water compliance and licenced take has been metered since 1994. The MDBA Compliance Review found that of all the Basin states, South Australia's compliance framework is the most extensively codified through guidelines for staff and transparent, with detailed annual reports on compliance activities and outcomes. Accountabilities and decision-making responsibilities are clear.
The ACT has the smallest and most manageable of compliance tasks in the Basin and all licensed extraction in the ACT must be metered. Staff are able to audit meters regularly and monitor compliance effectively. The risk of non-compliance in the ACT is low.
In Victoria, the compliance function has been undertaken since 1994 by regional water authorities. Goulburn Murray Water (GMW), a statutory corporation constituted by Ministerial Order under the provisions of the Water Act 1989, is the biggest of the water authorities serving the Basin in Victoria. The MDBA Compliance review showed that the Goulburn Murray is a networked, largely regulated system, with modern remote sensor meters. As a networked system, the interdependence of irrigators is seen to yield a culture of compliance and, as a result GMW has a strong compliance system with sound governance arrangements.
Out of all the Basin states, Queensland has the least experience in developing a compliance culture. Overland flow harvesting (also referred to as floodplain harvesting) is common in Queensland which makes it challenging to collect accurate data on water take. In addition, Queensland's limited compliance resources face the challenges of distance and an industry with some very large entitlement holders. 22

Metering arrangements

5.12
Effective compliance within the Basin depends on accurate metering equipment and processes.
5.13
The compliance compact requires Basin States to improve metering and measurement processes via a number of steps, including:
publishing a metering policy and implementation plan by December 2018;
ensuring all new and replacement meters comply with national standards by June 2025;
ensuring all forms of water take are metered by June 2025;
reviewing metering thresholds by July 2019;
developing and implementing a program to progressively automate reporting of water take no later than 2025;
ensuring highest risk take is accurately metered by December 2019;
publishing a water information improvement program to address any gaps;
commencing annual reporting on improving metering and measuring progress by October 2019;
conducting and publishing a review of water information systems every five years; and
NSW and Queensland to publish improved measurement of floodplain programs and overland flow harvesting by July 2019. 23

Progress of improved metering

5.14
While metering and measurement arrangements have been varied in the past resulting in inconsistency and lack of transparency, Basin states are in the process of improving their arrangements. This is expected to resolve gaps in information, consistency and accountability, as well as improve states' compliance with the Basin Plan and enforcement processes. A key question for this committee is how long it will take to implement these improvements, and whether improvements will actually result in better compliance and at what cost.
5.15
Noting that annual reporting on improved metering and measuring process with the compliance compact obligations is set to begin in October 2019, a summary of progress as at September 2019 is provided below.
5.16
NSW recently improved the standard and coverage of its non-urban water meters through the introduction of mandatory metering and record-keeping rules. The new non‑urban water metering framework began in December 2018 and will be implemented through a staged roll-out over five years.24
5.17
In Victoria, meters are owned, read, and maintained by water corporations and read remotely on a regular basis or at least yearly. Victoria’s Non-Urban Metering Policy requires all new extractions for commercial and irrigation purposes to be metered, while existing licensed extraction sites must be metered if the licensed volume is 10 ML or greater for surface water and 20 ML or greater for groundwater. Victoria is reviewing its policy and state-wide implementation plan to ensure they are economically practical and of a suitable standard to meet the requirements of the compliance compact.25
5.18
Queensland has been working to develop a new non-urban water measurement policy following a review completed in 2018. Queensland aims to implement the new policy from 2020.26
5.19
In South Australia, all meters must comply with the SA Licensed Water Use Meter Policy and from 1 July 2019, all new and replacement meters for licensed water use must comply with the national metering standards for meter selection, installation, and maintenance.27
5.20
In the ACT, a meter must be installed to measure all licensed water use and the licensee must demonstrate to the EPA how the metering measures water use. Meters must comply with the ACT's metering guideline which is based on the national metering standards and framework.28
5.21
The Independent Review of the Compliance Compact,29 advocated for the development of a Basin-wide approach and threshold to metering.30 However, some Basin states are opposed to a Basin-wide approach to metering. For example, in their submission to this inquiry, the Queensland Government argued that a 'one size fits' all approach to Basin management would be overly prescriptive and inconsistent with good natural resource management. They note that hydrogeological differences between the northern and southern basin necessitates different management approaches and ways of measuring success.31
5.22
Similarly, the submission from the Victorian Government noted that differences between states, including practical and geographic limitations (for instance, the lack of mobile coverage makes telemetry-read metering impossible in many areas) means a uniform approach to Basin management, including metering, is impractical. In addition, the submission noted that it is important to ensure any changes in Basin plan management, including compliance and enforcement, do not create inconsistency with non-Basin parts of a state. 32

Transparency and accountability

5.23
The need for greater transparency and accountability was a common theme in the various compliance reviews completed across the Basin. For instance, the Murray-Darling Basin Water Compliance review found that reporting on compliance activity was limited, varied between states and can be difficult to locate online.33
5.24
The compliance compact requires jurisdictions to improve transparency and accountability via a number of steps, including:
Basin states and the MDBA will review their internal governance arrangements to ensure a strong culture of compliance by 30 September 2019;
Basins states will publish, and begin working to, a reporting framework for significant water management decisions involving discretion by 30 September 2018;
Basin states will publish a work program to improve the transparency of information about water take under entitlements by 30 June 2019;
Basin states will publicly report on compliance and enforcement actions by locations including the timeliness with which allegations are addressed on an annual basis starting 30 September 2018;
the Australian Government will scope out with Basin States a proposal for a Basin-wide system to provide publicly accessible, real time advice on environmental watering by 30 September 2018; and34
the Australian Government and Basin States will review joint governance arrangements in the Basin by 31 December 2018.

Progress in implementing reforms

5.25
The December 2018 interim assurance report for the compliance compact showed that overall Basin states had made good progress in progressing priority actions related to transparency and accountability. The report did note, however, that it was often difficult for the MDBA to conduct its assurance due to inadequate information provided by Basin States and public information available online.35
5.26
As mentioned earlier, the 2018 Claydon Review examined the Basin Plan's joint governance arrangements but the findings are not yet publically available.

Compliance and enforcement frameworks

5.27
The compliance compact seeks to develop a more consistent approach to compliance across jurisdictions, noting that local adaptation will still be required, and to ensure that compliance and enforcement frameworks clearly delineate responsibilities. Priority actions related to improving compliance and enforcement frameworks include that:
each Basin State and MDBA publish a revised compliance framework addressing the requirements of recommendation 6 of the MDB Compliance Review;36
Basin States and the MDBA will establish a network of water compliance practitioners, co-ordinated by the MDBA, to promote best practice and innovation in water compliance; and
the MDBA and Basin States will develop protocols to cover how allegations of non-compliance by individual entitlement holders will be coordinated in each jurisdiction (both before and after accreditation of WRPs).

Progress in implementing reforms

5.28
The network of water compliance practitioners (now referred to as a Community of Practice) was established as a committee of the Australasian Environmental Law Enforcement and Regulators Network (AELERT) in July 2018, meeting for the first time in November 2018. The AELERT website describes the purpose of the Water Compliance Community of Practice as being to 'share information on cross-cutting issues, solve problems, and promote best practice in water compliance policy and operations across different jurisdictions in a collaborative way, while building capability within the AELERT network.'37
5.29
On its website, the MDBA have published the collaboration protocols for sharing information and coordinating activities in relation to compliance across the Murray-Darling Basin for Queensland and New South Wales. As at 1 October 2019, collaboration protocols for South Australia, the ACT and Victoria have not been published online.

Penalties and sanctions for water breaches

5.30
The Murray Darling Compliance review found there were difficulties across Basin states in proving that a water breach had occurred and identified three main challenges in this regard:
(1)
the burden of evidence required to prove a water breach is considerable;
(2)
the penalties and sanctions for water breaches vary significantly between states; and
(3)
there are not an appropriate range of administrative, civil and criminal sanctions and penalties for breaches.38
5.31
In addition, the final report from the parliamentary inquiry on the integrity of the water market recommended the development of a uniform schedule of evidentiary requirements, penalties and sanctions. The committee recommended that the schedule should consider the appropriate burden of evidence for water breaches, the use of technology in determining breaches, the suitability of strict liability offences and the simplification of offences.39
5.32
As part of the compliance compact, Basin States and the MDBA were required to publish a revised compliance framework, which would include a statement of the penalties and sanctions regime and any improvements required by 31 December 2018.
5.33
However, no decision has been made about establishing a uniform sanctions and penalties system across the Basin. In its submission to this inquiry, the Victorian Government argued that a uniform compliance system would be contrary to the COAG principles of Best Practice regulation. The submission further highlighted the practical challenges in making compliance systems more consistent. For example, as state penalties for water breaches are part of the broader state penalty frameworks, any changes to bring further Basin-wide uniformity would result in the penalties being inconsistent with State based penalty regimes, or would require 'a complete overhaul of those regimes (i.e. changes broader than water related offences).' 40

MDBA compliance functions

5.34
The MDBA has a number of compliance functions, including:
ensuring compliance with the SDLs, including maintaining and publishing a register of water take annually;
monitoring and enforcing compliance of all regulated entities with WRPs;
enforcing compliance with water market and trade rules, including ensuring that:
restrictions on trade are consistent, including that water announcements are disclosed appropriately;
irrigation infrastructure operators and Basin states meet information and reporting requirements;
reporting of water trade prices is accurate; and
use of exchange rates is compliant.
reporting on compliance with environmental requirements under the Plan, including assessing WRPs for environmental water compliance and examining Statements of Assurance from Commonwealth and State Environmental Water Holders;
providing assurance of the compliance and enforcement frameworks of each Basin state such as through conducting audits of Basin state compliance processes;
monitoring water quality and salinity targets across the Basin; and
directly regulating the compliance of individual water users within the Basin Plan in the absence of adequate action by a Basin state.
5.35
As noted in chapters 2 and 4, the MDBA uses a range of compliance mechanisms, including informal negotiations, infringement notices, enforcement notices, injunctions and enforceable undertakings. 41
5.36
The MDBA have created an online register to report on the handling and progress of compliance matters reported to the MDBA. Every three months the MDBA updates and publishes its register of allegations received. This register includes matters that have been referred to state water agencies.

Governance

5.37
The MDBA is made up of five divisions—River Management, Science and Knowledge, Partnerships, Corporate Strategy and Service and the Office of Compliance, all led by the Chief Executive. The Office of Compliance was established late 2017 following a recommendation from the Murray-Darling Basin Water Compliance Review.42
5.38
The role of the Office of Compliance is to:
ensure stronger compliance and enforcement across the Basin as part of the Water Act 2007, and
undertake accounting, auditing and reporting activities on key commitments, such as water trade rules and the protection of water for the environment.
5.39
The responsibilities of the Office of Compliance include:
setting compliance and enforcement policies and processes;
maintaining an audit program;
conducting investigations into allegations of non-compliance;
implementing compliance with the water trading rules;
developing best practice guidelines for different aspects of compliance;
benchmarking Basin State performance against best practice; and
reporting publicly on compliance performance.43
5.40
Following a recommendation from the Productivity Commission five-year review, the oversight of SDLs and WRPs now sits within the Office of Compliance.
5.41
The Independent Assurance Committee (IAC) was established by the MDBA in February 2018, following a recommendation from the Murray-Darling Basin Water Compliance Review. The IAC is a statutory committee under section 203 of the Water Act. The committee consists of four independent experts with knowledge across a range of fields, including water and natural resources policy and management, and regulation and compliance.44
5.42
The purpose of the IAC is to provide advice on the design, implementation and adequacy of the MDBA's Basin Plan compliance program. The IAC's advice is to be made public. 45
5.43
The IAC develops an annual work program, which for 2019-2020 is expected to include the following areas of focus:
water resource plan accreditation progress and compliance;
the protection of environmental water;
improvements in metering and measurement of water take;
the commencement of sustainable diversion limit reporting and compliance;
improving public confidence and trust in water regulation through transparent reporting, engagement and communication; and
progress and performance implementing commitments under the Murray–Darling Basin Compliance Compact.46
5.44
The Productivity Commission suggested that the IAC is not truly independent as the member appointments can be terminated by the MDBA at any time (under section 204 of the Water Act) and the MDBA also has the ability to provide procedural direction to the IAC as to the way it carries out its functions and holds meetings.47

Concerns regarding possible conflicts in the MDBA's compliance role

5.45
In its five-year review of the Basin Plan, the Productivity Commission raised concerns that the MDBA has conflicting roles in that it supports the states to implement the Plan and evaluates and ensures compliance with the Plan. It observed that the MDBA developed the Plan, is involved in implementing it, and is also responsible for evaluating its effectiveness and impacts, or essentially 'marking its own homework'.48
5.46
The Productivity Commission argued that the conflict between these roles will intensify as WRPs are accredited, as the MDBA conducts its first required evaluation of the Plan in 2020, and when Basin states require the MDBA's capability to implement supply measures and integrate them with shared resources. In 2024, the Authority will be responsible for assessing the effectiveness of supply measures in achieving equivalent environmental outcomes, despite having had a key hand in advising on these projects. In the longer term, it will also pass judgment on whether river operators managed water resources consistent with WRPs, despite the MDBA itself being the operator of the River Murray.
5.47
The Productivity Commission argued that the MDBA in its current form cannot be seen as a trusted advisor to governments and a credible regulator and recommended that the MDBA be split into two separate institutions: the MDBA, to support implementation and manage joint programs and shared resources; and the Basin Plan Regulator, which would be an independent regulator with compliance and evaluation functions, including responsibility for undertaking the 2026 review of the Plan.49 Figure 5.1 provides the Productivity Commission's proposed institutional arrangements.
5.48
The Joint Basin Governments responded that further consideration was needed before a decision on this recommendation could be made, and that the Ministerial Council would further consider the need to separate the MDBA's regulatory and service delivery function in 12 months' time.50 At this committee's public hearing on 18 October 2019, Mr Malcolm Thompson, Deputy Secretary, Department of Agriculture, added that the position of the Joint Basin Governments and the Commonwealth was that the MDBA's work was at a 'critical juncture' in implementing the Basin Plan and it would be 'too disruptive to separate the organisation into two parts.' The Joint Basin Governments and the Commonwealth, Mr Thompson explained, also wanted to further consider the impact of the compliance reforms across the Basin (both through the compliance compact and with the new role of Inspector-General) before considering the Productivity Commission's recommendation further.51

Figure 5.1:  Productivity Commission's proposed institutional arrangements

Source: Productivity Commission, Murray-Darling Basin Plan: Five-year assessment, Inquiry report, No, 90, December 2018, p. 361

Calls for a water audit

5.49
There have been recent calls for a comprehensive water audit of the Murray-Darling Basin to help overcome uncertainty about water accounting and water security, guide decision making and provide up-to-date data about how much water is in the Basin and how it is being used.
5.50
Professors Quentin Grafton, and John Williams, both of the Australian National University, argued that a water audit could help mitigate three key uncertainties with respect to water use in the Basin:
(1)
recoverable return flows are not currently properly accounted for in water entitlements in the Basin;
(2)
despite efforts to better estimate floodplain water harvesting, there is uncertainty about the amount of water diverted which poses problems if water entitlements for floodplain water harvesting become tradeable; and
(3)
audited water accounts are necessary to plan for the impacts of climate change including evaluating the hydrological effects to projected changes in rainfall and temperature.
5.51
Professors Grafton and Williams proposed that a water audit would build upon the BoM and state water accounts52 and utilise satellite technologies that can quantify surface water. 53
5.52
The MDBA has already begun using remote sensing technology, including satellite technology, to monitor water flows. Satellite data combined with hydrological (gauge flow data) analysis can help identify unexpected changes in the landscape and/or rivers, including any changes in flow that may be the result of unauthorised take.54
5.53
On 2 September 2019, Minister Littleproud announced $5 million for a new system to show real-time data about what water is in the Basin. The new tool, which will be held by the BoM aims to help communities understand exactly how much water is available for irrigators, communities and the environment. The system will be rolled out over the next three years in two phases. Phase 1 will involve fortnightly updates of data for water in storage on a valley scale and Phase 2 will provide updated water availability data at the river reach and individual storage scale and allow the user to aggregate data to valley and Basin scale.55

Legislation to address compliance matters

5.54
As part of the compliance compact, the Australian Government committed to drafting legislative amendments to the Water Act to strengthen the MDBA's compliance and enforcement powers including new civil penalties and criminal offences.
5.55
The interim assurance report on the compliance compact reported in December 2018 noted that the legislative amendments were on track to be drafted by the end of 2018.56 At the time of writing, this legislation had not been introduced in Federal Parliament. In their submission to this inquiry, the Department of Agriculture noted that the legislation may potentially be combined with the legislation to establish the Inspector-General position, expected to be introduced into Parliament in 2020.57

Establishing an Inspector-General of Murray-Darling Basin Water Resources

5.56
On 4 August 2019 Basin States unanimously agreed to establish an Inspector-General Murray–Darling Basin Water Resources to build community confidence in water management, Basin Plan implementation and compliance across the whole basin.58
5.57
The new statutory position will have powers across the basin under the Water Act. The Inspector-General will hold the MDBA, Commonwealth and all states to account, provide independent assurance to the community around the plan’s implementation, and ensure laws governing water use are followed. The Inspector-General will be able to refer issues to the proposed new Commonwealth Integrity Commission, once that Commission is established.
5.58
The Inspector-General will:
check on water recovery and delivery of water efficiency projects;
monitor compliance and suspected water theft across the basin; investigating and collecting evidence where appropriate;
appear at Senate estimates;
report to the Ministerial Council every six months;
provide annual reports to the Minister for Water Resources, to be tabled in the Parliament; and
conduct community engagement on Basin Plan implementation and compliance matters.
5.59
Mr Mick Keelty AO APM, was appointed as interim Inspector-General on 1 October 2019 pending legislation under the Water Act to create a permanent position. It is anticipated that the establishing legislation will be introduced in coming months, with a view to it coming into effect in 2020. The Northern Basin Commissioner role was subsumed by the Interim Inspector-General role from 1 October 2019.59
5.60
As the legislation to create a permanent position for the Inspector General is at the time of writing yet to be introduced into the Parliament, it remains unclear how the role of Inspector-General will be distinct from existing state based compliance regimes and how the risk of overlap will be mitigated. At the public hearing on 18 October 2019, Mr Keelty advised the committee that he was working with the Department of Agriculture and the Minister for Water to ensure the role of Inspector-General does not duplicate the work of the department or other bodies.60
5.61
On 2 December 2019, Minister Littleproud requested that the Interim Inspector General investigate the impact of changing distribution of in-flows to the southern basin on state shares under the Murray-Darling Basin Agreement and report by 31 March 2020. The proposal to extend the powers of the Interim Inspector General will be considered by the Ministerial Council on 17 December 2019.61
5.62
The next chapter outlines the reporting and evaluation frameworks in place to monitor the overall implementation of the Plan, including the division of reporting responsibilities between Basin states, the MDBA, the CEWH and the Department of Agriculture.


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