8.1
The Basin Plan allows for sustainable diversion limits in the southern basin to be adjusted, up or down by a maximum of five per cent, through a mechanism called the Sustainable Diversion Limit Adjustment Mechanism (SDLAM), as discussed below.
8.2
This chapter outlines key concerns raised by inquiry participants regarding the ability and resolve of basin governments to deliver on agreed SDLAM obligations. The chapter provides background information on the SDLAM then summarises concerns relating to project delays, transparency and accountability, and the extent to which projects can achieve environmental equivalence or improved outcomes. The chapter concludes with the committee's view and recommendations.
Background information on the SDLAM
8.3
The amount of water that can be sustainably taken from the Murray-Darling basin (basin) each year was agreed in 2012. Water recovery to meet sustainable take levels occurred through a combination of water licence buybacks and infrastructure upgrades. While some water was recovered through these methods, there was a remaining balance. Using the Basin Plan's SDLAM—which allows for the basin's diversion limits to be increased or decreased by no more than five per cent—basin governments agreed on a suite of 36 supply projects for the southern basin to offset the remaining balance. These supply projects are intended to decrease the water recovery target by 605 Gigalitres (GL) each year by improving water delivery and efficiency. The additional water provided via supply measures is made available for consumptive use. Constraints measures are a critical subset of the 36 projects; there will be a shortfall in the agreed offset amount without successful implementation of these measures.
8.4
Under the SDLAM, the Basin Plan also allows for an additional 450GL of environmental water to be gained through water efficiency projects so long as these projects produce neutral or positive socioeconomic outcomes. This water is in addition to the overall water recovery target. The water saved by efficiency measures is allocated to the Commonwealth Environmental Water Holder account (where the water saved from supply measures are available for consumptive use). To date, very few efficiency measures have been locked in (less than 2GL of the overall 450GL). Based on current progress, the Murray‑Darling Basin Authority (MDBA) determined that it is unlikely that the full 450GL of efficiency measures will be achieved by 2024.
8.5
In March 2021, the Australian Government announced the closure of its Water Efficiency Program (which placed approximately $1.5 billion aside to meet the 450GL target). This program is being replaced by a water saving program that does not impact farmers' water entitlements. The funding will be used to improve off-farm irrigation infrastructure, though states can still access
$60 million if they wish to pursue on-farm efficiency that meets that social and economic neutrality test.
Delays to projects
8.6
As explained, basin governments agreed in 2017 that the 36 supply projects must be operational by 2024 or more buybacks of water entitlements could occur to achieve the offset balance. In its 2020 evaluation of the Basin Plan, the MDBA assessed the implementation of SDLAM projects against legislative requirements and agreed timelines and milestones. The MDBA reported that:
16 projects have made good progress or are on track;
14 projects have made some progress with project design and implementation but could experience delays due to stakeholder concerns or regulatory requirements;
six highly complex projects—which are expected to significantly contribute to the overall offset volume—have a high risk of not being completed by the 2024 target date.
8.7
Broadly, the six projects relate to easing constraints, improving the efficiency of Menindee Lakes, NSW, and updating governance arrangements to allow environmental water to be released with natural flows.
8.8
The MDBA's evaluation rated the effectiveness of SDLAM implementation as requiring extensive improvement or change. It found implementation is not suitable in its current format, a large portion of the expected outcomes have not been met, and there are major deficiencies and shortcomings in implementation.
Community consultation
8.9
During this inquiry, the committee received evidence claiming that some of the delays might be attributable to poor community consultation and poor project design. For example, the joint submission from Indigenous peak bodies, the Northern Basin Aboriginal Nations (NBAN) and the Murray Lower Darling Rivers Indigenous Nations (MLDRIN), advised that consultation approaches for supply projects have been 'inconsistent and inadequate and undermine the principles of free, prior and informed consent and self-determination'.
8.10
NBAN and MLDRIN also argued that it is unclear who is responsible for ensuring that standards for consultation have been met or that the informed consent of Indigenous peoples has been obtained:
It is unclear where accountability lies for ensuring that projects meet standards of engagement and consultation, including the informed consent of First Nations. A key challenge is understanding responsibilities across three layers of project management and delivery: regional proponents (such as CMAs in Victoria), basin state governments and the Commonwealth [Department of Agriculture ]…Regional proponents are chiefly responsible to consult First Nations and seek their endorsement for project proposals and state governments coordinate program delivery. However, where local consultation is suboptimal or compromised, it is unclear whether First Nations have any recourse to state or Commonwealth review or assessment processes. It is unclear how the Commonwealth's gateway assessment will consider the outcomes of First Nations consultation if First Nations have unresolved concerns. These First Nations face a worrying absence of defined accountability and transparency when seeking to navigate decision-making hierarchies and have their concerns or opposition addressed. Regional-based project proponents refer Nations to checks and balances incorporated in Commonwealth funding and approvals processes, while Commonwealth agencies defer all accountability for decision-making regarding potential impacts on cultural heritage to proponents and state-based legislation.
8.11
NBAN and MLDRIN contended that SDLAM decisions have marginalised and disadvantaged Indigenous communities, who have repeatedly raised significant concerns through multiple avenues, but these concerns have not been meaningfully considered or addressed. NBAN and MLDRIN argued 'it is unclear what obligation project proponents have to understand and address [Indigenous] concerns.
8.12
NBAN and MLDRIN also argued that deficiencies and inconsistencies between states and projects are allowing Indigenous peoples' concerns and preferences to be insufficiently considered. While these concerns were noted during the MDBA's SDLAM technical workshop, NBAN and MLDRIN identified that it is unclear whether action was taken to address the issues.
8.13
Poor consultation for SDLAM projects was also identified as an issue by the National Farmers' Federation and the NSW Irrigators' Council. The National Farmers' Federation stressed that projects should have community support, and where they do not, they should be adjusted to earn support.
8.14
The NSW Irrigators' Council was concerned that poor design and consultation would result in further buybacks:
[I]n NSW, many of the projects which were put forward are not supported by local communities, as they were poorly designed, lacked due process and were not designed with effective consultation/involvement with local communities. This has effectively caused the projects to stall, raising significant concerns about the high risks of a scenario in which the SDLAM projects were not completed, and further water recovery from already fragile communities would be required.
8.15
The National Irrigators' Council, in their submission received in February 2020, was similarly concerned that communities will be impacted by government delays:
There is a fundamental disjoint in responsibility for implementation of these projects vs consequences of failure. Irrigation communities will bear the cost of failure to achieve 605GL of equivalent benefits and we remain extremely concerned that the lack of progress on many projects means we will see more water purchased by the Federal Government in 2024.
8.16
The nature of SDLAM places responsibility for implementation on the states while the Commonwealth provides funding. The National Irrigators' Council drew attention to the Productivity Commission's five-year review report which identified that the core reasons for lack of progress rested with basin governments and highlighted that these issues have still not been resolved. Ms Juliet Le Feuvre, Member, Lifeblood Alliance, argued out that some projects 'require cooperation between states, which has been singularly lacking, and the Commonwealth is unwilling to provide leadership and push them along'. One of the issues considered by the committee was whether basin states are adequately incentivised to implement projects by the 2024 deadline. The Victorian Government suggested that while the 'penalty' was buybacks, the SDLAM projects are still necessary to producing environmental outcomes:
The penalty [for non-delivery of projects] is that the legislation indicates that in 2024 the Commonwealth government can come in and buy back water…the concern with 2024 is that the offset projects are important. We need to deliver them. We know from our own economic studies that buying back water has socioeconomic impacts for communities, particularly when there are more ad hoc purchases around the place…We need the environmental outcomes associated with those...
Inflexibility of projects
8.17
Inquiry participants also raised concerns about the apparent inflexibility of projects. The National Irrigators' Council and the National Farmers' Federation argued that the 2024 deadline should, with appropriate milestones, be extended to allow state governments time to complete supply measures. The National Irrigators' Council also argued for flexibility to change projects where they can be shown to produce better outcomes:
[W]e continue to urge maximum flexibility in how and what is delivered. That includes ensuring the flexibility to change projects (including introducing new projects) if they can produce better results for the environment and communities.
8.18
The National Farmers' Federation suggested that governments should also explore pathways to allow new SDLAM projects to be developed. The 'continued inflexibility of the projects and poor community consultation', it argued, 'means that beneficial and other adaptive measures that could improve projects have effectively been locked out'.
8.19
Likewise, Cotton Australia supported the Productivity Commission's suggestion that where unsuccessful projects are terminated, it should be possible to consider new projects. The NSW Irrigators' Council argued that flexibility is essential to ensuring that the projects are appropriate, effective, and achieve environmental benefits while protecting communities from buybacks.
8.20
Similarly, Ms Juliet Le Feuvre, Member, Lifeblood Alliance, argued that overly stringent considerations are impeding worthwhile projects being accepted:
With respect to the efficiency projects, the state governments, particularly New South Wales and Victoria, put such stringent conditions on those projects being accepted that it's become virtually impossible for anybody to actually get a project up and running. That's because of all the requirements the state governments put upon them. That's been through the ministerial council and agreed by all the jurisdictions; that's the way it is. It's not that there aren't projects out there.
8.21
In contrast, NBAN and MLDRIN argued that there should be a hard deadline for projects to strengthen accountability and avoid enabling an open-ended process:
[S]ome basin jurisdictions are seeking extensions beyond the 2024 implementation deadline…We contend that, if existing issues with Supply Measure projects cannot be resolved in the period up to 2024, in addition to the 8 years to 2020 that proponent governments have spent working on them since the Basin Plan was made, we do not have confidence that risks and issues can be effectively addressed…extending the 2024 deadline risks creating an open-ended process, without the clear timeframes and targets that are needed to provide certainty and accountability for affected communities.
Viability of projects
8.22
Other contributors were concerned about the viability of some projects. For example, the committee heard anecdotal evidence that 'it may take 10 to 20 years to resolve constraints'. Dr Jane Doolan, Commissioner, Productivity Commission, explained that a previous constraints strategy involving negotiations with fewer landholders took almost eight years to complete:
[T]he constraints, for example, are not an unknown quantity. Previously, the Murray-Darling Basin Commission, again on behalf of the governments, undertook a constraint-lifting programme from Hume to Yarrawonga, lifting those constraints to allow flows of 25,000 megalitres a day. That required negotiation with something like 108 landholders and it took almost eight years. It was relatively successful. It requires one-on-one negotiation with landholders. The constraints projects as they were envisaged, as we understood them, involved around 3,000 landholders. It's not to say don't do it, but you actually appreciate that that's going to require time. At the time in 2018, we felt it was unlikely to be achieved by 2024.
8.23
Mrs Jan Beer provided insight into some of the challenges involved in constraints projects:
[T]here are a large number of problems…inability to negotiate easements with landowners, refusal of GMW [Goulburn-Murray Water] to accept legal liability and the transfer of risk to their customer irrigators, impossibility of overcoming the myriad of physical constraints throughout the river systems, including many chokes in the river channel capacity.
8.24
Mr John Pettigrew, Chair, Goulburn Valley Environment Group, suggested that a single landowner can effectively veto the entire Victorian constraints strategy.
8.25
Cotton Australia argued that there is insufficient transparency around SDLAM projects and that business cases should be completed for remaining projects and an early assessment made as to viability.
8.26
Dr Doolan emphasised the importance of governments providing credible and realistic advice on the implementation of projects:
The mantra of governments at the time, in 2018, was the plan should be delivered on time and in full. Governments were saying that because they believed it provided some certainty…But our observation was communities could see it wasn't possible. They knew constraints would take longer than that. They knew that the plan for Menindee hadn't been developed and it would take a long time to negotiate what that would be. So, whilst they were trying to provide certainty, all they did was add to uncertainty because what they were saying people didn't believe.
8.27
Mrs Jan Beer observed that it is unclear who is responsible for reviewing projects and, where necessary, communicating that a project no longer qualifies as it will not be ready to enter into operation by June 2024 as required. Similarly, NBAN and MLDRIN argued there is a lack of transparency around decision-making and approvals projects. In September 2020, the Australian Government announced a new investment package which included a focus on accelerating planning and delivery of projects that are at risk of not being delivered by 2024. In announcing this package, the Minister for Resources and Water, the Hon Keith Pitt MP, reaffirmed the government's commitment to a community-centred approach to the basin.
8.28
A new National Partnership Agreement is also being developed to 'strengthen relationships between basin governments' and provide states with funding for new and ongoing activities that are required to implement the Basin Plan.
8.29
The committee explored whether a timeline and a plan of what can be achieved prior to the deadline of 2024 had been sought from basin states.
Dr Doolan explained that the Productivity Commission's five-year review had recommended an independent panel process where states would develop business cases to be assessed for credible timeframes and reasonable milestones by the panel. If particular criteria were met, an extension could be granted, and progress monitored against milestones. Where progress was found to be lacking, the project would be terminated to protect against states continually extending deadlines. According to Dr Doolan, who appeared before the committee in April 2021, consideration of this suggestion is, at time of writing, currently live between basin governments.
8.30
The Department of Agriculture, Water and the Environment commissioned an independent from INDEC on the status of projects which was released by the Murray Darling Basin Ministerial Council [MINCO] on 30 April 2021. The report found 15 of the 36 projects had been completed and a further 15 would be delivered by June 2024 (this is estimated to secure 75 per cent of the required offset).
Net impact of SDLAM projects
8.31
Some inquiry participants expressed concerns regarding the net impact of SDLAM projects on the environment. For example, the joint submission from Professor Jeff Connor, Professor Sarah Wheeler, Professor Quentin Grafton, Professor John Quiggin, Dr Adam Loch and Dr John Williams argued that SDL assumptions of substitutability of infrastructure for flow have been justified on the basis of opportunity to augment environmental outcomes in one location without accounting for possible downstream or system wide impacts, such as reducing flow downstream, decreasing Murray mouth outflows, and increasing salinity.
8.32
Professor Connor et al argued that there is an absence of accounting for the net impact of irrigation efficiency projects in Commonwealth calculations. That is, while the Commonwealth generally only counts the change in diversion, irrigation efficiency projects actually change three components of water volume metrics: 'diversion', 'consumption' and 'return flow'. As there is a rebound effect of improved irrigation efficiency (where improved irrigation efficiency leads to more area irrigated and changing crops resulting in more water consumption) this means that actual water for the environment may be less than reduced diversion if water consumption increases.
8.33
These concerns were echoed by the Lifeblood Alliance, who argued that there is a 'need for proper accounting for the loss of return flows and efficiency projects'. Healthy River Ambassador, Mr Bob Newman, also argued that governments should include loss of return flows to the environment in calculations of water recovery from efficiency measures.
Ability to deliver environmentally equivalent outcomes
8.34
Some inquiry participants raised concerns about the ability of supply projects to deliver equivalent environmental outcomes, particularly where they had yet to be implemented and proven. For example, Dr Jensen questioned whether some major supply projects could, in fact, deliver equivalent benefits. According to Dr Jensen, similar concerns were raised by the Wentworth Group of Concerned Scientists who found that 25 projects did not meet Basin Plan requirements, raising questions around the validity of including 316–436GL in the total SDL adjustment of 605GL. Dr Jonathon Howard, an academic from Charles Sturt University, noted that the Wentworth Group of Concerned Scientists' analysis of the proposed supply projects found that only one project met all of the criteria.
8.35
Dr Howard advised that the reports provided with the original SDLAM proposal concluded that there was considerable uncertainty in the representation of real changes in ecological condition when using the Ecological Elements method's scoring. Furthermore, the methodology itself was described by the Independent Review Panel as risky and operating in unchartered waters.
8.36
Professor Crase argued that converting ecological outcomes to a quantum is problematic and that assessing projects at basin-scale would likely produce negative net benefits:
SDLAM projects are designed to produce an ecological outcome at a specific location. The science of then converting this to a quantum of water at a basin or sub-basin scale is problematic, or simply intellectually dishonest…If SDLAM projects were examined at a scale that considered the system-wide benefits and costs, many would likely produce negative net benefits…
8.37
NBAN and MLDRIN argued that the SDLAM will lead to degradation of cultural and environmental values across the southern basin. This is because, they contended, the ability of registered supply projects to offset 605GL is questionable, efficiency measures are not guaranteed to achieve recovery of the 450GL, and there is no guarantee that the reconciliation process will be able to 'make good' any unmet outcomes.
8.38
A joint submission from Professor Connor et al raised concerns that funding of projects is not linked strongly enough to the objectives of the Basin Plan—that is, to protect the environment and maintain a sustainable level of water diversion.
8.39
Dr Anne Jensen submitted that the SDLAM is flawed in that it required the Federal Parliament to approve the increase of SDLs for the southern basin by 605GL in 2018 before individual projects had been designed or implemented.
8.40
Dr Jensen underlined the need to ensure that genuinely equivalent environmental outcomes from projects are supporting the 605GL reduction. Dr Jensen flagged that reconciliation of whether the supply projects have, in fact, delivered equivalent environmental outcomes will not occur until 2024. If project outcomes do not reconcile with targets, this would then require the development of new projects or the purchase of equivalent water which would further delay achieving environmental outcomes. Dr Jensen suggested that annual financial and environmental audits of progress of supply projects should be undertaken with action taken for any projects that are deemed unlikely to deliver the agreed outcomes.
Buybacks
8.41
The consequence for basin states failing to achieve the agreed offset volumes by set deadlines was, until recently, assumed to be potential further water licence buybacks by the Commonwealth from across communities and industry.
8.42
In September 2020, the Minister for Resources and Water, the Hon Keith Pitt MP, announced that the Australian Government would shift its focus onto
off-farm projects, and that no more buybacks would be considered by the Australian Government.
8.43
Ms Juliet Le Feuvre, Member, Lifeblood Alliance, argued that the Minister's announcement that there would be no further buybacks or on-farm projects removed:
…the most practical way of recovering water. And he not only cut off buybacks; he cut off on-farm efficiency projects as well, at the behest of the states. So he removed all the cost-effective ways of recovering water and left only the very expensive ways of recovering water on the table. The Commonwealth had recently signed a contract with the Victorian government, for I think $170 million, to recover
15 gigalitres of water. That's about $11,000 a megalitre, which is very expensive water. The people who are actually benefiting from that modernisation of their irrigation areas are not being asked to pay a cent to recoup the benefit. The principles of 'beneficiary pays' are not being observed.
8.44
Other participants were also supportive of buybacks, arguing that pursuing irrigation efficiencies represents a less effective way to achieve water recovery, both in terms of cost and outcomes.
8.45
For example, NBAN and MLDRIN argued that the quickest, most efficient, and economically responsible way to meet the overdue water recovery target would be to purchase the outstanding balance from willing sellers via an open and transparent tender process.
8.46
Dr Jensen pointed out that recent work undertaken by Professor Lin Crase and Professor Sarah Wheeler found that buybacks were more economical than engineering projects. Additionally, better benefits could be produced by using the balance between the amount of funding initially put aside for infrastructure improvements and the cost of buybacks to improve social services within communities:
Recent work by Prof Lin Crase and Prof Sarah Wheeler has found that purchase of water through buybacks costs half as much as water recovered through engineering works. They also found that spending the balance on social services in communities (eg health services, social support services and schools) brought greater economic and social benefits for the total investment.
8.47
Professor Crase argued that cost-benefit analyses of SDLAM projects should be made publicly available.
8.48
A local farmer from Bourke, Mr Mervyn Gordon, told the committee that buybacks offer the opportunity for people to remain in their community by allowing them to move their business operations away from an over‑extracted water source:
Whether you agree with buybacks or not, they were there to work for our business; it would cover off on the environmental demand. We'd already given up 71 per cent, supposedly, for the environment and seen no benefit from it. So if there was a program available for us to move our operation away from an over-extracted river source to one of an industry that allowed me to stay and participate in my community, I'd be a fool not to use it.
8.49
The National Parks Association of NSW also supported voluntary buybacks, arguing that environmental health can only be achieved with reduced diversions. The committee heard that there are willing voluntary sellers who would like the opportunity to be able to sell their water entitlements to the government to be used as environmental water.
8.50
Conversely, the committee received evidence from a range of inquiry participants emphasising what they considered the negative effects of water buybacks. In Deniliquin, a number of witnesses outlined the detrimental social and economic impacts that buybacks have had on the region.
Ms Natalie Akers, Policy Adviser, Victorian Farmers Federation, argued that further buybacks would devastate some regions:
Future buybacks would be devastating to the region—absolutely devastating. If you want to kill off industries and if you want to lose jobs, buybacks are a sure way to go about doing that…We need water security, and the prospect of water buybacks does not give that.
8.51
Mr Philip Endley, Chief Executive Officer, Murray Irrigation Ltd, argued that buybacks had also achieved poorer environmental outcomes:
[T]here was a lot of buyback of general-security water from this region…very little of that water has then come back as environmental flows to this region…what we've seen is that there are something like 2000 ephemeral creeks and wetlands in this area and, in large degree, they're drying out. They don't completely die, but they're certainly not in the condition they were in, and one of the reasons is that that water is not returned as environmental flows to this region.
8.52
Steps to support local communities affected by water recovery have been taken by the Australian Government. For example, it has provided funding to communities that have been affected by water recovery to stimulate projects that create economic development and employment opportunities.
Committee view and recommendations
8.53
The committee received a range of evidence regarding the SDLAM and its associated projects from various stakeholders, including Indigenous peoples, irrigators, and environmentalists. The committee heard that in some states, community consultation on various projects has been insufficient, and processes to address concerns raised regarding projects have been equally lacking.
8.54
The committee notes evidence suggesting a degree of inconsistency in how each jurisdiction has approached community consultations in relation to SDLAM projects. The committee also heard that it can be difficult for stakeholders to determine which level of government is responsible for ensuring that standards for consultation have been met. In one example of note, Indigenous peak bodies NBAN and MLDRIN reported that state agencies referred stakeholders to checks and balances incorporated in Commonwealth processes, while Commonwealth agencies suggested states were responsible. This uncertainty is understandably a source of frustration for those peak bodies and the communities they represent. The committee considers that division of responsibility between governments should be made clear to facilitate transparency and accountability, and reduce unnecessary bureaucracy for stakeholders.
8.55
The committee recommends that the Commonwealth work with MurrayDarling basin states, through the Ministerial Council, to develop best-practice community consultation guidelines for Sustainable Diversion Limit Adjustment Mechanism (SDLAM) projects, and clarify processes and responsibilities for ensuring that standards of consultation are appropriately applied.
8.56
A number of inquiry participants questioned the net impact of SDLAM projects on the environment, the ability of some projects to deliver equivalent environmental outcomes, and the accounting methods being used to determine the overall impact of irrigation efficiency projects on the river system. The committee heard suggestions that SDLAM projects should be linked more clearly to the intent of the Basin Plan, with some arguing that the underpinning assumptions and the accounting methods used to assess (and ultimately support) projects did not fully account for the overall net impact of the projects.
8.57
The committee considers that the SDLAM projects remain an indispensable component of delivery of the Basin Plan. The committee is also satisfied that SDLAM accounting methods properly measure and represent the benefits of the projects. Nonetheless, the committee considers that there may be value in better communicating the net impact of projects on the environment and encourages basin governments to identify opportunities to achieve this.
8.58
The committee acknowledges stakeholders' concerns regarding delays in projects. At the same time, the committee notes the significant steps taken in recent years by the government to accelerate the planning and delivery of at-risk projects. The committee notes the findings of the independent INDEC report released 30 April 2021, which found that around 75 per cent of the required offset would be delivered by June 2024.
8.59
If, as seems likely based on the evidence the committee received, it transpires that some key SDLAM projects will not be completed and operational by the agreed 2024 deadline, it would be valuable to better understand the consequences of this in greater detail. The committee requests more information be made available on the implications of projects failing to meet the deadline, particularly how this will affect the objectives of the Basin Plan and Australian taxpayers.
8.60
The committee supports accelerating the establishment of the independent panel recommended by the Productivity Commission in its five-year review to assess progress and determine whether extensions of time or termination of particular projects is warranted.
Next chapter
8.61
The following chapter considers issues relating to strategic agricultural planning and variations in climate.