Types of Water Entitlements
A significant issue that arose during this inquiry was the different
types of water entitlements and the potential impact each could have on the
development and implementation of the Basin Plan.
Water entitlement types are regulated by relevant state laws and the
types of licences vary across states. This means that water entitlement types
across the Murray‑Darling Basin are not always directly comparable.
However, a number of similarities exist and the states generally provide for
the prioritisation of water allocations depending on the availability of water.
The water entitlement types can be identified as high, general, and low
reliability types. When referring to the trade in the southern Basin, the
National Water Commission (NWC) in its 2011 biennial assessment of water
trading divided the state water entitlements into these categories as:
Higher reliability entitlements include Victorian
high-reliability water shares, New South Wales high-security water access
licences (WALs) and South Australian high-security water entitlements. Lower
reliability entitlements include Victorian low-reliability water shares and New
South Wales supplementary WALs. General reliability entitlements are New South
Wales general security WALs.
In Queensland, the reliability types are called high security, medium security
and low security.
In terms of a broad comparison across states, the Productivity
Commission has noted that:
...high reliability entitlements had, in the past, been
expected to yield
100 per cent of their nominal volume in seasonal allocations 90 per cent of the
time or more. Further, they receive seasonal allocations before any water is
delivered against lower reliability entitlements... At the Basin level, the
majority of water entitlements (and the greatest quantity of entitlements by
megalitre (ML)) are general or low reliability entitlements.
In addition, the trade in water entitlements is affected by the
connectivity of water in the Basin system. That is, the 'ability to trade is
limited by the hydrological connectivity between the buyer and the seller.'
For the purposes of this report, water that is not connected to the Basin
system is referred to as terminal water.
The use and value of different water types can have a significant effect
on how water resources can be managed in the Murray-Darling Basin. The
committee heard significant evidence about this issue and this chapter examines
it in-depth. The evidence received about the possible effects of different
water types on the development of the Basin Plan (through the hydrological and
socio-economic modelling) and the implementation of the buyback program,
including significant cases such as Twynam and Nimmie-Caira will be discussed
Long-term Cap equivalent
A process for managing the differences in water types in the
Murray-Darling Basin was developed prior to the Basin Plan and agreed to by
Basin States and the Commonwealth as part of the Living Murray Program in 2004.
The differences between the water types is calculated as a volume called the
'long-term Cap equivalent' (LTCE) – also referred to as the 'Cap factor'. An
LTCE is an average that is calculated from a hydrological model based on
climate data from 1891 to 2003. The LTCE is developed to:
[take] into account the different characteristics of water
entitlements in New South Wales, Victoria and South Australia, and their
reliability... [creating] a common unit of measure, thus allowing equitable
comparison of a broad range of water recovery measures.
The Murray Darling Basin Authority's (MDBA) website notes, for example,
'to recover a [LTCE] volume of 1,000 ML in the NSW Murray region, you could
purchase either a 1,053 ML High Security Water Access Licence or a 1,237 ML
General Security Water Access Licence.'
Mr Tim Stubbs, environmental engineer, from the Wentworth Group of
Concerned Scientists (Wentworth Group) also explained how this works in terms
of the modelling for different types of water:
It comes back to that issue of entitlement, its level of
security or cap factor, as they call it. If you have a supplementary
entitlement it might have a cap factor of 0.4. So if you buy a gigalitre of
supplementary water then when you put that in the model it will only count as
0.4 of a gig.
Types of water entitlements and the modelling
The MDBA modelling
The committee heard evidence that differences in water entitlement types
could have an impact on the output of the hydrological modelling of the Basin. Therefore,
the committee questioned MDBA officials about how different water types were
taken into account in the MDBA's modelling. The MDBA told the committee how the
model deals with different types of water entitlements:
There are some places in the basin where we can define an
entitlement class, but because all of the buyback is modelled under the basin
planning process we have to use the models that are available. What that
actually means is that in a lot of catchments we have to look at the long-term
average yield of entitlements. You cannot actually in a lot of the models
determine up-front as an input to the model how much off allocation will be
declared, for instance. So what we have to do is suppress the long-term average
yield in the catchment and that flows through into the model to determine what
the components are of general security, off allocation or supplementary...
However, while the MDBA acknowledged that the different types of water
would have a significant impact on the modelling, it stated that the modelling
does not detail different water types. As the following exchange shows:
CHAIR: ...[Do] you agree that if you modelled [2750
GL/y] of buyback water that happened to be all supplementary water you would
get a completely different outcome than if you modelled [2750 GL/y] of high‑security
Dr McLeod: Yes, that is correct.
CHAIR: The same thing applies to general allocation
and terminal water. Where is the model that says, 'We can only take that much
terminal water, that much supplementary water and we need that much general'?
How did you model that[?]...
Mr James: The Basin Plan is really based on volumes
of water, it does not necessarily go to what mix of entitlements needs to be
recovered to achieve that volume. The volume is a long-term average amount, and
the entitlement mix to achieve that recovery could be a range of product mixes.
The oral testimony by MDBA officials goes on to indicate that terminal
water was not used in the modelling but that like other water types it could
impact on the management of water resources through water trading:
CHAIR: But in the [2750 GL/y]...what was the modelling
[in terms of the different entitlement classes]?...
Dr McLeod: We assumed a pro rata reduction across all
the entitlement classes in each of the—
CHAIR: ...So you had an equal 25 per cent terminal, 25
per cent [supplementary], 25 per cent general purpose [water entitlements]?
Dr McLeod: That is right. Terminal is not actually a
class. In the terminal system—
CHAIR: I can assure you, though, the impact of buying
water out of a terminal river is a lot different to the impact of buying out
Dr McLeod: I totally accept that. In the typical New
South Wales system, there is high security, general security and supplementary
[water entitlements]. We assumed a pro rata share across each of them.
CHAIR: But is it not a bureaucratic, or a technical,
flaw to say that general-purpose water in a terminal river can deliver the same
outcome as general-purpose water in a continuous system?
Dr McLeod: No. It can deliver it at different
locations, so buying general—
CHAIR: Yes, but there has to be a restriction on the
amount of terminal water you buy—correct?
Dr McLeod: Yes.
The MDBA official, Dr Tony McLeod, also explained how wet and dry years
were taken into account in this respect:
...the modelling we did assumed a pro rata purchase across a
range of entitlements. Not every model actually captures that in detail and the
models are calibrated against the way water is used, both in wet and dry years.
In dry years water use is generally limited by the amount of water that is
available under those entitlements. In wet years, even if the entitlements have
a high level of annual allocation they have tended not to be used. That is
factored into the way the model operates. We look at the yield that would come
from a portfolio that would deliver [2750 GL/y] on average across the basin.
The MDBA indicated that there was potentially a very large fluctuation
in the environmental water available each year. The MDBA stated that in its
...the variation in environmental water availability between
years is influenced by modelling assumptions which include the nature and
location of water recovery and the variability in water availability over the
historic climate sequence. In the context of such assumptions, modelling
results indicate that, in providing the long term average amount of water
recovery to meet the requirements of the Basin Plan, the annual amount of water
available could vary from around 300 to around 3,800 GL/yr.
Mr Tim Stubbs from the Wentworth Group explained how the modelling
available to the MDBA could help it decide how to use the different water types
and achieve environmental outcomes:
...When they do the modelling, the model does not want to flow
an average volume down the river all the time. That is not what it is about. It
is very sophisticated. It looks at adding peaks to get overland flow and looks
at adding tails to inundate areas for longer periods. Once you have your
breakdown of how you want to get those outcomes and what is the best way, you
will then have some clear picture of what sort of water you would need. You
might be able to say: well, to achieve all these events, we only need to
achieve them when it is flooding already because we want to put a top on a peak
or a tail on a flood. We may be able to use general security water for that or,
potentially, even supplementary if it was in the right place at the right time.
However, for other events you might have to say: well, we probably need
high-security water to make sure we can be confident of achieving that event,
because there will not be any supplementary water around at that time,
potentially, and we will need a certain amount of high security in the bank to
make sure we can hit those events, because they are drier time events. I am not
sure how the authority has done it, but I imagine you would have to have a
spread of entitlements to be able to hit all your targets.
The ABARES modelling
The committee also heard evidence that the water entitlement types had
limited consideration as part of the socio-economic modelling used to develop the
Basin Plan. In this regard, the committee took evidence from the Australian
Bureau of Agricultural and Resource Economics and Sciences (ABARES) about its
approach for different categories of water entitlements in the socio-economic
models of the 2750 GL/y reduction of take for the Basin.
When asked about whether the MDBA had specified the different water
types to ABARES for use in its modelling of buybacks, an ABARES official stated
that there was 'no differentiation between the types' and later added that for
'all intents and purposes the difference between low and high security water is
reflected in the average yield'.
When pressed further about differences in availability of water types, the
ABARES official conceded that 'we do not have that information'.
ABARES provided some further explanation of how water types are
considered as part of its modelling of the impacts of the 2750 GL/y figure. In
an answer to a question on notice, ABARES outlined that a pro rata approach was
The ABARES water trade model is a ‘water use’ model that
models how irrigators use available irrigation water during the year. The model
does not explicitly model entitlement classes, but rather aggregate allocations
across regions and industries.
For the Basin Plan modelling a long-term average year of
water availability was modelled, with water allocations based on observed
long-term average allocations. For this modelling, differences in entitlement
types are reflected through differences in their long-term Cap equivalents.
ABARES modelling is broadly consistent with the Commonwealth
purchasing an equal proportion of high and low security entitlements. That is,
if it was assumed 25 per cent of entitlements within a region were to be
purchased, then this would involve purchasing 25 per cent of the high security
entitlements in the region and 25 per cent of the low security entitlements.
In order to mimic the effect of purchasing a higher proportion
of high security water entitlements, ABARES modelled a scenario where it is
assumed the SDLs lead to a 20 per cent reduction in perennial land use (fruit,
nuts and grapes). As expected, the results for this scenario indicate that the
reduction in the gross value of irrigated agriculture increases as higher
proportions of high security water are purchased (16.8% reduction compared to a
During the inquiry, the ABARES modellers also had difficulty explaining
how terminal water was treated in the modelling and constantly referred to the
published technical reports:
CHAIR: In the 2,700 gigs of removal, is any of that
Dr Nguyen: I do not think we have information on that.
CHAIR: Do you know what I am talking about?
Mr Sanders: No; what do you mean by terminal? Do you
mean that it reaches the end of the system?...
CHAIR: You do not know what I am talking about; that
is the problem. Is it in the Lachlan? Is it in the Macquarie? These are
terminal waters. Do you know the difference?...
Mr Sanders: Some of our systems are terminal and
disconnected from the whole system.
CHAIR: But you are not trying to tell me that you
consider the Lachlan or the Macquarie to be a connected system?
Mr Sanders: No; the Lachlan is disconnected. I believe
the Macquarie might be connected, but all that information is contained within
CHAIR: It would have to be a bloody big flood to get
Mr Sanders: All that information is contained in our
CHAIR: But how much of the water, for your modelling
purposes, is terminal?
Mr Sanders: Once again, all that information is
contained in these reports.
CHAIR: But, mate, tell me. You wrote the thing; tell
me what the answer is.
Mr Morris: We will have to take that on notice, I
CHAIR: You do not know the damn answer. The whole
thing is flawed.
ABARES explained on notice that regions that were deemed to be connected
or disconnected for the purposes of water trade were based on the direction of
the MDBA. The answer noted that:
The ABARES Water Trade Model is a model of water use that
allows water to move between irrigation activities and regions depending on
relative economic returns and constraints on water trade.
Regions were deemed connected or disconnected for the
purposes of water trade based on direction from the MDBA. The main requirement
for trade was sufficient hydrological connectivity between regions.
Specifically, the analysis assumed:
- the northern and southern parts of the Basin are not connected for the
purposes of water trade;
there is interconnectivity within the southern connected system of the
Basin and there is also interconnectivity between some of the northern regions;
- some regions are entirely disconnected from the rest of the system for
the purposes of water trade (Paroo, Warrego, Gwydir, Lachlan, Ovens, Wimmera,
and the Eastern Mount Lofty Ranges);
- water trade is also constrained by the Barmah Choke and by within
catchment environmental requirements as directed by the MDBA.
The committee was concerned with the limited consideration of different
water entitlement types as part of the MDBA and ABARES modelling for the
Basin's water resources and the associated socio-economic impacts. The
committee acknowledges that the LTCE and assumptions of pro-rata purchases
across different entitlement types helps address the issue in the modelling.
However, the committee is of the view that these considerations do not
fully account for the possible impacts that different water entitlement types
can have on the desired environmental outcomes for the Basin. The committee
considers that the MDBA and ABARES should have examined the impact of different
water types for modelling and environmental outcomes more explicitly and in
The committee remains concerned about the accuracy of models regarding the
socio-economic impacts of the 2750 GL/y figure on the Basin when such models do
not consider full details about how different water types are used in practice.
Furthermore, the committee remains concerned that terminal or
unconnected water was not appropriately represented in the modelling. This is
part of a broader concern the committee has with the socio-economic modelling
of the impacts of the Basin Plan (see chapter seven) and has the potential to undermine
public confidence the social, economic and environmental outcomes that may be
achieved under the Basin Plan.
The committee recommends that the MDBA commission an independent review
of the possible effects of using a range of assumptions of water entitlements types
(e.g. high and low reliability) in the hydrological and socio-economic
modelling of the Basin Plan. In the case where the results for certain water
entitlement assumptions show that the objectives of the plan will be
compromised, the MDBA should develop a policy which will ensure that this
arrangement of water entitlements will not be realised.
Types of water entitlements and the buyback process
In addition to the modelling of water entitlement types, water
entitlement types are an important feature of the water buyback process under
the government's Restoring the Balance Program. The committee received
evidence about water entitlement types across many Basin catchments and also
examined the Nimmie-Caira buyback case in detail (and to a lesser extent the
case of Twynam Agricultural Group). The general issues, Twynam and the
Nimmie-Caira case are discussed in turn.
The committee heard evidence about the problems that could arise in the
buyback process due to the differences in water entitlements types. For
example, the practical limitations of how water entitlement types (and their
legalistic classifications) have for managing water resources in the Basin were
noted by the Wentworth Group. As the following explanation by Dr Williams, Member,
Wentworth Group shows:
CHAIR: ...Why did we allow supplementary water to be
Dr Williams: ...I think the issue of rules based water
that is built in and supplementary water—and the way that is managed for the
environment and converted across to tradeable entities—is one that we just did
not get right. This plan was an opportunity to do that.
CHAIR: I agree with that. When you get four inches of
rain at Gundagai and you get a [supplementary] flow and if you get four inches
the next night it become a flood flow, and when it gets down to the Redbank
Weir somehow they can define one from the other!
Dr Williams: It illustrates, to my mind, the nonsense
we have. When we have the legal people take what this current plan has in place
and put it into legal language, which it will be, we will have a muddle-time
tangle, because of the issues you raise. I think we need a plan that recognises
the flood plain and recognises how you use supplementary water, rules based
water and water for entitlements, and build that sensibly into the plan. It
currently [as of September 2012] does not.
The committee also asked questions about how terminal water was treated
in terms of water purchasing. As the following exchange shows, SEWPaC officials
considered that the supplementary water, even in a terminal system, was able to
be used for its identified purposes and removed from the consumptive take if
CHAIR: ...How do you value [in terms of purchasing] that
water in a terminal system versus in a non-terminal system—supplementary?...
Ms Harwood: We assess the water on offer to us
against market benchmarks. We ask: 'What does that type of water trade for in
that catchment?' We are also looking at the key factors of whether the
entitlement can be used for the environment, whether it can be delivered to the
environment and whether it represents value for money against other water
CHAIR: My difficulty is that in a terminal system...this
water is the water that you are buying when the water is in flood in most
terminal systems. So why would you buy it?
Mr Robinson: I think it is not always when it is in
flood; it is certainly when there is a significant flow-on. Part of the
purchase program assessment is whether the water be directed to the key
environmental sites. In the case of the Macquarie, supplementary water can be
called to the weir at the top of the Macquarie marshes and can supplement
CHAIR: The event of supplementary water is when it is
the system, not when it is in the storage.
Mr Robinson: Yes...If there is a supplementary event
and we decide to call our supplementary water, it is not then available for
consumptive use in the supplementary event, and it arrives at the environmental
The committee was given an example in how the water entitlement types
were determined for the buyback program. The case of the purchase of
supplementary water from Tandou was instructive. In this case, the purchase of
approximately 250 GL of supplementary water only resulted in a long-term
average yield of 11 GL of water being returned to the Basin system. As an MDBA official
explained to the committee:
Ms Swirepik: I used to work in New South Wales. I am
drawing a bit on my historic knowledge there. Our supplementary water used to
be water gifted, if you like, to irrigators—
CHAIR: Off allocation. Turn your pump on tomorrow
Ms Swirepik: That is right—during the high flow
events. So it is not part of the normal allocation announcements of water that
is generally held in the dam if you like. What happens with the supplementary
water is that, in terms of someone like the Commonwealth Environmental Water Holder
purchasing that water, they will look at the long-term average yield against
that license. You were talking yesterday I think about the Tandou licence which
has been issued, and it is 250 gigalitres but the long-term average yield is
only 11 or something.
CHAIR: At the conjunction of the river.
Ms Swirepik: That is right. So what that basically
means is that you do not get that 250 gigalitres very often. You might get it
once every ten or
15 years. You will get a bit of a bonanza, basically, by accessing a flood.
CHAIR: But my difficulty is this. In an environment
sense, that it was great for Tandou. 'We've won the lottery!' the CEO said. 'We
will buy the water on the spot market because it is only available when there
is a spot market.' I mean, it was a gift.
Ms Swirepik: Yes.
The MDBA representative went on to acknowledge a concern raised in
committee questions that the reliability of supplementary water had significant
restrictions in how it could be used in the system – while at the same time
noting a benefit was that it mimicked natural flooding events:
CHAIR: But my difficulty is: for the Commonwealth
Water Holder, it is only available when it is in the system.
Ms Swirepik: I understand exactly what you are
saying. I think, from an environmental point of view, that is actually a bonus,
because what we are often trying to do is to recreate some of those flood
events. So instead of us having to purchase an average yield and think about
how we might bank that up to deliver a pulse down the river, it is coming
CHAIR: That could happen in an ideal event, but there
is often two inches of rain in the district and they do not take up the water
and it becomes supplementary. You cannot necessarily put that water to the best
use with 24 hours notice. That is my problem.
Ms Swirepik: That is right. My experience is mostly
in the Murray system. Those smaller access events tend to be a very small
portion of the access by those users. A lot of it is actually in the bigger
Twynam water purchase
The Twynam purchase was made in the 2008-09 tender process, and was the
largest single purchase of water entitlements that year. The total paid by the
government for the Twynam water entitlements was $303.3 million and was made up
of 240 GL of water entitlements which converted to a long-term annual average
yield of 107 GL.
The committee questioned Department of Sustainability, Environment,
Water, Population and Communities (SEWPaC) officials about how the purchases
for the Twynam process were considered by the Department, as the purchase
initially began as a tender process but subsequently moved to direct
In an answer to question on notice the Department stated that the water sales
were considered as a package:
Twynam submitted 34
applications through the Northern and Southern Basin water entitlement tenders
in 2008-09. Each application was for a single entitlement, but they were
offered as a combined package with a single asking price. The Evaluation
Committee assessed the 34 applications as a combined bid in accordance with the
tender evaluation plan. This involved assessing the combined bid against the
- Ability to provide
more water in a catchment where scientific evidence indicates that water needs
to be recovered for the environment;
- Capacity to deliver
the water for an environmental benefit; and
- Price including
offer prices, transaction costs, and management costs.
The committee questioned SEWPaC officials about several issues contained
in the Australian National Audit Office's (ANAO) report into the Twynam
purchase. The committee considers that the ANAO report provides a comprehensive
examination of the government's buyback process in this case and notes the
following issues raised in the report.
First, the purchase process should have been more completely documented
by the department especially regarding the move from the tender to the
negotiation process of the purchase. As the ANAO report notes:
...some aspects of the
department’s processes and practices for securing Twynam’s entitlements should
be given greater attention in any future negotiations, to better demonstrate
compliance with procurement principles and established tender procedures. In
particular, there was no letter on file to show that Twynam’s original
application had been rejected. Rejection of unsuccessful offers was effectively
a pre‐condition of the then Minister’s approval to enter
into direct negotiations with applicants; and a letter is the department’s
normal practice for notifying unsuccessful applicants. In seeking the then
Minister’s approval to enter into direct negotiation with vendors, the
department also undertook to develop ‘operational guidelines’ in consultation
with its probity advisor, the Australian Government Solicitor (AGS). No such
guidelines were in place prior to the meeting with Twynam’s representative.
Also, the department did not seek probity advice from AGS on its dealings with
Twynam until after the meeting took place on 16 February [which included direct
negotiations between senior departmental officers and Twynam’s
representatives]. The probity advisor concluded that the department had a
defensible response to any complaint about ‘unfair treatment’, but recommended
that the department update its program documentation, including tender guidelines
and evaluation plans, to provide greater clarity around the management and
documentation of meetings with applicants. The ANAO endorses this approach.
Second, and more importantly for this committee, there were concerns
that the purchase of water entitlements that were of low reliability did not
reflect value for money – particular as the department chose to pay a premium
for the water entitlements from Twynam. The ANAO report notes:
... that the project
board’s rationale for paying a premium for large parcels of water did not
explicitly take into account the reliability of the entitlements being
purchased—and therefore the capacity of these entitlements to meet more urgent
environmental needs in the catchments. All of the entitlements purchased from
Twynam were general security or supplementary licences, rather than high
reliability entitlements. While supplementary licences have provided water for
use on the environment, the allocations against the general security
entitlements have been modest (or zero) [see footnote], in line with prevailing
climatic conditions in the relevant parts of the Basin. Contrary to the project
board’s original rationale for paying a premium, the general security
allocations have not enabled ‘immediate’ benefits for the environment.
Moreover, their capacity to provide ‘substantial’ benefits will, as elsewhere,
depend on rainfall and inflows to storages.
Furthermore the report states:
The ANAO acknowledges
that it is the prerogative of the project board to determine the appropriate
pricing strategy for each tender, including the basis on which price premiums
can be paid. Nevertheless, the ANAO suggests that the justification for price
premiums should include explicit consideration of the reliability of the
entitlements and the compatibility with priority environmental needs that are
not able to be serviced through other entitlements already held. The expected
administrative costs savings resulting from large purchases should also be
Nimmie-Caira buyback proposal
The committee examined some of the general issues regarding water
entitlement types through the case of the Nimmie-Caira buyback proposal in New
South Wales. The case also raised questions about how the different types of
water were defined and the distinction between supplementary water and
At the time of writing, the Nimmie-Caira buyback proposal was for the government
purchase of 381 000 megalitres of supplementary water from the Nimmie-Caira
irrigation project in south-west New South Wales. The
381 000 megalitres of supplementary water converts to a long‑term average
annual yield of 173 000 megalitres.
As the Nimmie-Caira proposal relates specifically to supplementary water, Mr
David Harriss, Commissioner, NSW Office of Water, informed the committee of the
licensing structures in place for supplementary water in New South Wales. Mr
Harris described supplementary water as:
...water which is over and above regulated flow and which can
be diverted through licensed infrastructure. It is not flood flows. It is not
overland flows. It is water which exceeds regulated flows and cannot be
reregulated or diverted. It can be used to offset another regulated flow
downstream. That water can be diverted through licensed infrastructure. In the
future—and in many areas already—it will incur a cost which is determined by
the Independent Pricing and Regulatory Tribunal in New South Wales.
The committee asked questions about how the supplementary water in the
Nimmie-Caira proposal could be separated from flood water or overland flows.
Evidence received by the Wentworth Group suggested that the management of floodwater
was a problem across the Basin:
...I think this [the Nimmie-Caira proposal] is a very good
illustration of a very important matter that in the current plan has not been
properly resolved—that is, the diversions of floodplain water is an issue right
across the plain. In the original guide to the basin, that matter was right up
front. That matter has not been dealt with properly and now we have got a whole
lot of nonsense exercises, in my judgement, being done to accommodate a process
that the current plan does not address properly—that is, if you have floods and
you are trying to return the river to flood and retain its ecological function
again then you must have floods. It appears to me that what we are doing, if
these are the facts of the matter, is actually buying back our flood water to
flood. I think that is an issue that is more general than this particular one
right across the floodplain. A really good Murray-Darling Basin plan should
deal with that matter thoroughly and properly, and it does not.
Furthermore, the committee heard that local communities were not being
fully informed how the floodwater in the region and the supplementary water
targeted in the Nimmie-Caira proposal and, as a result, the land in the region
would be managed:
CHAIR: The mean average of 173 gigs and a peak of 390
gigs [under the Nimmie-Caira proposal] we are firmly told on three stacks of
Bibles does not include any floodwater. I will be interested to see how they
define supplementary water converting from a flood. The proposition is that you
will then take water off the floodplain? Your dad would remember when this
floodplain was covered in lignum et cetera. And I have seen what happened down
at places at the bottom there when Twynam converted it from what Tysons used it
for, and it became a poverty bush wilderness. Does the council have concerns
about the unavailability of information on the re-formation, the redefining, of
the irrigation, what is now overland flow, supplementary water, floodwater,
whatever? Farming it into some sort of shepherding proposition where allegedly
it is going to perhaps get back to the river?
Councillor Sheaffe: If there is a plan for what they
are going to do with this country, we certainly do not know what it is.
However, the NSW Office of Water stated that overland flows and
floodwater would not form part of the purchase of supplementary water:
Mr Harriss: On the Nimmie-Caira, they diverted during
the peak year 381,000 megalitres in any particular year.
CHAIR: In those peak years that included—I was just
Mr Harriss: No, that did not include any overland
flows. This is the water that is backed up—
CHAIR: But how did you differentiate the water
because there was overland flow.
Mr Harriss: No, it was not overland flows. This is
the water that has backed up beyond the regulators and is diverted through the
offtakes into the Nimmie-Caira area.
CHAIR: But some of this was over-bank water in the
Mr Harriss: No, Senator, we have not factored in the
over-bank flows. In fact, we cannot—
CHAIR: What became of the floodwater that got mixed
in with the supplementary water?
Mr Harriss: The floodwater did not go into it. This
was specifically diverted through the Nimmie-Caira regulators and pumped
through channels and then the appropriate floodway, but it does not include the
Other witnesses suggested the LTCE helps manage the issues regarding the
Nimmie-Caira buyback proposal. As the following exchange with representatives
from the National Irrigators' Council and the NSW Irrigators' Council shows:
CHAIR: The 'supplementary flow' is an artificial
diversion of in-river water—right? It is not a supplementary flow; it is
in-river water diverted with the weir. Agreed?
Mr Culleton: It is a diversion of a regulated flow.
CHAIR: Yes, so it is not supplementary water.
Mr Culleton: Correct.
CHAIR: It is regulated water which, for the purposes
of this licence, is defined as supplementary. What I am trying to find out is
this: in 1992, when did supplementary water become flood water?
Mr Gregson: The reason that there is an average
annual reliability associated with entitlements is to get past exactly this confusion
[between different water entitlement types] and to be able to talk to them on a
one‑on-one exchange rate basis. So whether this is supplementary, or
whether it is regulated, or whether it is Victorian sales water, is, as my
erstwhile colleague puts it, irrelevant. We are able to judge what the average
annual volume of water will be from those entitlements.
The committee notes that the NSW Legislative Council passed an order to
produce documents relating to the proposed Nimmie-Caira project. On 20
September 2012, the response was tabled in the NSW Parliament. The index of
documents that was made publicly available shows that, at the time, many of the
relevant documents remained confidential because of claims of privilege.
Following a review of the claims of privilege, the Nimmie-Caira business case
and certain related documents were tabled in the NSW Parliament on 20 November
2012. Therefore, further information is now publicly available that was not
available when the committee held hearings on the Nimmie-Caira issue.
The business case presented by the NSW Office of Water to SEWPaC lists a total
cost for the project of over $168 million. Of this, $120 million is for the
purchase of water entitlement, land and infrastructure covering the 19
properties from 11 farm businesses. About $25.5 million is proposed to be spent
on 'land transition arrangements' including the establishment of easements,
decommissioning fencelines and establishing boundary fences, pipelined water
supply, utilities, environmental water management services and a cultural
The committee also notes that in NSW in 2012 'water historically
diverted for flood irrigation to the Lowbidgee under a legislative power was
recognised as a new licence subcategory, supplementary water (Lowbidgee) access
The issuing of 381 000 unit shares for the Nimmie-Caira area landholders and
the subsequent purchase of these new water entitlements by the government from
the landlholders are key parts of the Nimmie-Caira proposal.
The committee remains concerned about how the government examines and
purchases different water types through the water buyback scheme. The examples
of Tanduo and Twynam highlighted that the purchase of large amounts of
supplementary water can have only a minimal impact on the return of water to
the Basin system. The committee is unconvinced that this provides the
government with the best options available to manage environmental follows
given the low level of reliability of the water.
The committee heard evidence that led to similar concerns about the
Nimmie-Caira buyback proposal. In this case too, the lack of reliability of
flows undermines the value for money that the proposal provides for tax payers
and leads to uncertain environmental outcomes. The committee is also concerned that
there has been limited public transparency about the Nimmie-Caira buyback
proposal. In this regard the committee welcomes the tabling of the Nimmie-Caira
business case in the NSW Parliament following the review of an independent
arbiter. However, the committee considers that there still has not been the opportunity
to fully scrutinise the potential problems arising from the use of different
water types in this case.
The committee also has concerns that the proposed purchase of water
entitlements as part of the Nimmie-Caira project stems from the creation of a
new licence entitlement recently granted to the landholders. This, combined
with the concerns about different types of water entitlements and the $168
million total cost of the proposal, raises further questions about the value
for money the Nimmie-Caira proposal represents for Australian taxpayers.
The committee recommends that the Australian National Audit
Office (ANAO) review the Nimmie-Caira proposal. To the extent possible and in
collaboration with the NSW Audit Office if necessary, the review should amongst
other things examine the process undertaken by relevant parties for determining
the value of all aspects of the Nimmie-Caira proposal. The review should also
examine any factors that may impact on the value for money for the government
and the tax-payer of the proposal should it proceed. The ANAO should report on
this review prior to the approval of the Nimmie-Caira proposal by the
Department of Sustainability, Environment, Water, Population and Communities.
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