Referral of inquiry
1.1
On Wednesday 23 June 2021, the Senate agreed to the following second reading amendment:
(a)
The Water Legislation Amendment (Inspector-General of Water Compliance and Other Measures) Act 2021 be referred to the Rural and Regional Affairs and Transport References Committee for inquiry upon Royal Assent to examine any potential further amendments to improve the operation of the Act, and any related matters; and
(b)
The Rural and Regional Affairs and Transport References Committee:
(i)
Present an interim report three months after the date of Royal Assent, and
(ii)
Report six months after the date of Royal Assent.
1.2
Royal Assent was given on 30 June 2021. The Rural and Regional Affairs and Transport References Committee (the committee) provided a short interim report on 30 September 2021 and this final report three months after.
Conduct of inquiry
1.3
The committee advertised the inquiry on its website and invited submissions from a range of relevant stakeholders, including government agencies, industry, community groups and individuals. Details regarding the inquiry and associated documents are available on the committee's webpage.
1.4
The committee received 12 public submissions and two supplementary submissions which are listed at Appendix 1 and are published on the committee's webpage.
1.5
The committee held one public hearing on 18 November 2021. A list of witnesses who provided evidence at the public hearing is available at Appendix 2.
Acknowledgments
1.6
The committee thanks those individuals and organisations who contributed to this inquiry by preparing written submissions and giving evidence at the public hearing.
References to Hansard
1.7
In this report, references to committee Hansard are to proof transcripts. Page numbers may vary between proof and official transcripts.
Structure of the report
1.8
This report consists of two chapters:
Chapter 1 provides administrative details relating to the inquiry and outlines the purpose of, and background to, the Water Legislation Amendment (Inspector-General of Water Compliance and Other Measures) Act 2021 (the Act); and
Chapter 2 examines the key issues raised in the evidence and provides the committee's view.
Purpose of the Act
1.9
On 24 June 2021, the Act was passed by the Commonwealth Parliament. The Act amended the Water Act 2007 (the Water Act) 'to improve trust, strengthen compliance and increase transparency' across the Murray–Darling Basin. Broadly, the purpose of the Act can be divided into three areas:
First, the Act established the role of a new Inspector-General of Water Compliance (the Inspector-General) to monitor, and provide independent oversight of, water compliance.
Second, the Act created new offence and civil penalty provisions for unlawful conduct relating to the taking of water and trading of water rights.
Third, the Act conferred the existing compliance functions and powers of the Murray–Darling Basin Authority (MDBA), and those of the interim role, to the new Inspector-General. The MDBA retains its responsibility for overseeing implementation of the Murray–Darling Basin Plan (the Basin Plan).
1.10
The amendments contained within the Act respond in part to:
recommendations made by the MDBA and an independent panel in the 2017 Murray-Darling Basin Water Compliance Review to provide a more comprehensive suite of powers and sanctions;
the Australian Government’s commitment to strengthen compliance and enforcement powers made as part of the Murray-Darling Basin Compliance Compact (jointly agreed by the Council of Australian Governments in December 2018); and
recommendations made by the Productivity Commission’s 2018
Murray–Darling Basin Plan: Five-year assessment, Inquiry Report to separate the MDBA's implementation of the Basin Plan from its compliance role.
The Inspector-General of Water Compliance
1.11
According to the Hon Keith Pitt MP, Minister for Resources and Water, '[e]stablishing the statutory position of Inspector-General of Water Compliance is the keystone of this [Act]'.
1.12
The Inspector-General is a regulatory role, the purpose of which is to monitor and provide independent oversight of:
the performance of functions and exercise of powers by Commonwealth agencies and basin states in relation to their obligations in the management of Murray–Darling Basin water resources under the Water Act and regulations, the Basin Plan and water resource plans; and
the implementation of a range of Murray–Darling Basin intergovernmental agreements.
1.13
These functions are supported by new inquiry powers, as well as the power to issue guidelines and standards and undertake audits.
1.14
In undertaking inquiries, the Inspector-General has strong investigative powers. These include the power to compel persons to give specified information and to enter a person's premises.
1.15
Under the Act, the Inspector-General may issue guidelines relating to the management of Basin water resources, which Commonwealth and basin state agencies must have regard to in performing certain water management obligations. Additionally, the Inspector-General may issue standards relating to measuring water taken from Basin water resources and data related to water trading. In his second reading speech, the Minister for Water stated that:
… the Inspector‑General will seek to improve consistency across the basin. The guidelines and standards will clearly articulate to basin state regulators, communities and other stakeholders what constitutes best practice for basin water management. The standards and guidelines will provide the Inspector-General with a framework to evaluate the performance of basin jurisdictions, including the Commonwealth, in delivering the Basin Plan.
1.16
The Act also transfers the existing power to undertake audits from the MDBA to the Inspector-General 'to support strategic and proactive identification of compliance issues'.
1.17
The Inspector-General may choose to establish an advisory panel to assist and provide highly technical or specialised advice to the Inspector-General. According to the Explanatory Memorandum, advisory panels 'would enable the Inspector-General to access advice which is independent of the Department, Basin States, and the Authority'.
1.18
In addition to broad discretionary powers to carry out its functions, the Inspector‑General must:
publish its annual work plan, any guidelines issued and, if it conducts an audit, the audit report;
conduct an inquiry if requested by the Minister (though the Inspector‑General may also choose to do so on their own initiative);
take reasonable measures to protect confidential information from disclosure; and
notify the appropriate state agency before taking certain action.
1.19
The Inspector‑General is supported by the (non-statutory) Office of Water Compliance, both of which sit within the Department of Agriculture, Water and the Environment portfolio. According to the Minister for Water, 'ethical walls' will ensure the Inspector-General's independence. He explained:
The inspector-general will be operationally independent. That is, the bill ensures that the inspector-general is at arms-length from government and has the freedom to choose how to pursue basin compliance. Ethical walls will separate the new regulator from the department's water-purchasing and policy programs, and the inspector-general will be truly independent, with its own work plan and budget and the ability to enter into its own contracts and appoint its own authorised compliance officers.
Criminal offences and civil penalty provisions
1.20
In his second reading speech, the Minister for Water explained that the Act also 'strengthens compliance by enhancing the existing offences and the penalty regime under the Water Act', including new basic offences, aggravated offences and civil penalties for unlawful conduct relating to the taking of water and trading of water rights. For example, the Act inserts new civil penalty provisions for the following matters:
contraventions of laws relating to taking water when not permitted under a state law and for contraventions of the Basin Plan;
failing to comply with an enforcement notice;
obstructing an authorised officer of the MDBA or an authorised compliance officer of the Inspector-General in performing their functions, duties or exercise of powers; and
failing to comply with a requirement to provide specified compellable information.
1.21
Many of the civil penalty provisions introduced by the Act exist alongside fault-based offences. Examples of this include sections 73A and 73B, which establish civil and criminal Commonwealth take offences and aggravated take offences (where higher penalties would apply if certain aggravating circumstances exist). Under section 73A, the penalties for taking water when not permitted under state law include 1000 penalty units ($222 000) for an individual. This section also provides a criminal penalty in the alternative, with imprisonment for 3 years or 180 penalty units, or both.
1.22
The Explanatory Memorandum outlines the rationale for a combination of criminal and civil penalties as follows:
It is also appropriate to include both criminal and civil penalties to provide flexibility for the Commonwealth to enforce contraventions appropriately, without the need to pursue criminal penalties in all circumstances.
1.23
The Act also strengthens compliance with the addition of provisions on evidentiary requirements which apply strict liability to certain offences and reverse the onus of proof in certain circumstances.
1.24
As noted above, the Act enables the Commonwealth to step in and take enforcement action on water theft if a basin state is unwilling or unable to do so. The Explanatory Memorandum states that:
As conduct relating to the take of water would also be the subject of Basin State laws, the Bill would require the Inspector-General to notify the appropriate agency of the State before taking certain action. The intent is for the Commonwealth to have the ability to take certain action where the relevant Basin State is unable or unwilling to do so.
Key provisions of the Act
1.25
The Act's provisions are contained in three schedules. The first schedule contains three parts:
Part 1 inserts a number of new criminal offences and civil penalty provisions into the Water Act.
Part 2 establishes the Inspector-General and transfers enforcement and compliance functions from the MDBA to the Inspector-General.
Part 3 provides transitional arrangements to manage the transition of some functions from the MDBA to the Inspector-General.
1.26
Schedules 2 and 3 make consequential amendments to the Basin Plan and minor amendments to the Water Act, respectively.
Background to the Act
1.27
This inquiry is preceded by several other parliamentary committee inquiries into the management of the Murray–Darling Basin. In addition, a number of investigations and reports have been commissioned in response to allegations of non-compliance in the northern Murray–Darling Basin.
1.28
Occupying a seventh of Australia’s landmass, the Murray–Darling Basin is Australia’s largest water resource. Water in the Basin is used for drinking water, supplying water for irrigated agriculture and industry, recreational and cultural purposes and maintaining freshwater ecosystems. As a result, the Murray–Darling Basin has a complex history with competing demands from various interest groups—including irrigators, communities, environmental bodies and others—making it challenging to manage the sharing of water.
1.29
There are many different actors and legislation involved in the governing of the Murray–Darling Basin. Historically, water management was controlled by the individual basin states (Queensland, New South Wales, Victoria, South Australia and the Australian Capital Territory). At a federal level, the Water Act provides the legislative and regulatory framework for the management of the Basin. It enables the Commonwealth, in conjunction with the basin states, to manage Basin resources in the national interest. In addition, each basin state has its own state legislation. As a result, compliance and enforcement activities are distributed amongst various state and federal agencies.
1.30
The Basin Plan, which came into effect in 2012, is a piece of Commonwealth legislation which aims to address over-extraction of water resources. The Basin Plan guides governments, regional authorities and communities in sustainably managing and using the surface and underground waters of the Basin. Implementation of the Basin Plan, led by the MDBA, has now been underway for nine years, with full implementation due by 2024.
1.31
The Basin Plan has several key components: it places limits on how much water can be extracted from water sources (known as sustainable diversion limits); it sets water recovery targets to bring environmental systems back to a healthier level; it allocates water for environmental protection purposes; it regulates trade of water across the basin; and it sets out monitoring, evaluation and compliance activities.
1.32
In 2018, as part of its five-year review of the Basin Plan, the Productivity Commission found that the 'MDBA is inherently conflicted, required to be both a trusted adviser as the agent of Basin Governments and a credible, impartial regulator'. Accordingly, it recommended structural reform to split the MDBA's implementation and compliance roles between two separate agencies.
1.33
In response, the MDBA established a dedicated Office of Compliance and an Independent Assurance Committee to ensure it met its compliance objectives and received external assurance on its work. Basin states also agreed to legislate to establish an Inspector-General of Murray–Darling Basin Water Resources to provide independent assurance that the MDBA was fulfilling its compliance role.
1.34
In August 2019, the Australian Government announced creation of an Inspector-General of Murray–Darling Basin Water Resources to be 'a new tough cop on the beat across the Murray-Darling, with the powers needed to ensure integrity in delivery of the Basin Plan'. Mr Mick Keelty AO was appointed Interim Inspector-General of Murray–Darling Basin Water Resources on 1 October 2019, with the expectation that legislation to create the new position would be considered by the Commonwealth Parliament in 2020. This role subsumed the Northern Basin Commissioner role.
1.35
In December 2020, the Hon Troy Grant replaced Mr Keelty as the newly named Interim Inspector-General of Water Compliance. Following passage of the Act, Mr Grant was appointed as Inspector-General by the Governor‑General on 5 August 2021.
Consideration of the Act by other committees
1.36
The Water Legislation Amendment (Inspector-General of Water Compliance and Other Measures) Bill 2021 (the bill) was considered by the Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee), the Parliamentary Joint Committee on Human Rights (PJCHR) and, in brief, the Senate Select Committee on the Multi-Jurisdictional Management and Execution of the Murray Darling Basin Plan (Select Committee).
1.37
The PJCHR had no comment in relation to the bill.
Senate Standing Committee for the Scrutiny of Bills
1.38
The Scrutiny Committee raised concern about, and sought advice from the Minister for Water in relation to, the following matters:
provisions which confer immunity from liability;
the reversal of the evidential burden of proof;
the appropriateness of not providing for reports to be tabled in Parliament;
the broad delegation of administrative powers;
the inclusion of significant matters in delegated legislation;
the incorporation of external material as in force from time to time; and
powers to make instruments which are not subject to parliamentary disallowance.
1.39
The Minister for Water provided a response to the Scrutiny Committee on 23 June 2021. In it, he advised that it is appropriate to leave the conferral of functions and powers on the Inspector-General to delegated legislation 'as this will allow the Basin Plan or regulations to be more easily amended so as to accommodate changing or uncertain situations'. Additionally, the Minister for Water warned that describing the scope of the functions and powers that could be conferred on the Inspector‑General could limit the function of the Inspector‑General.
1.40
Regarding the reversal of the evidential burden of proof, the Minister for Water advised that the drafting of the Act draws on underlying provisions in various state and Australian Capital Territory laws to create the offences and that, consequently, reliance on an exception, exemption, excuse, qualification or justification provided by a law of a state by the defendant is necessary to provide consistency between the Commonwealth offences and an offence brought under state law. He further advised that matters in relation to exceptions, exemptions, excuses, qualifications or justifications provided by state laws would be peculiarly in the mind of a defendant operating within that state. As a result, requiring the prosecution to establish these matters would impose a disproportionate burden on them.
1.41
The minister also advised that, in relation to the defences set out at subsections 73F(2), 73G(2), 222D(6), 238(6), 239AC(6) and 239AD(7), a defence of reasonable excuse, rather than the use of more specific defences, is appropriate because it ensures consistency with the existing provisions of the Water Act.
1.42
On 13 July 2021, the Scrutiny Committee expressed its continuing scrutiny concerns in relation to provisions which reverse the evidential burden of proof (including through the inclusion of a defence of reasonable excuse), the appropriateness of not providing for reports to be tabled in Parliament and the inclusion of significant matters in delegated legislation.
Select Committee on the Multi-Jurisdictional Management and Execution of the Murray Darling Basin Plan
1.43
On 23 July 2019, the Senate resolved to establish the Select Committee to inquire and report on matters relating to the responsibilities for Commonwealth, state and territory governments arising out of the Basin Plan, including the different approaches of basin states to water resource management in the Murray–Darling Basin and any complications of multi‑jurisdictional management.
1.44
Prior to the introduction of the bill, the Select Committee explored what powers the Inspector-General should have and to what extent the office should be empowered to access information in order to carry out the functions of the role. The Select Committee discussed the importance of having an independent body that could not only refer compliance matters back to the states for investigation, but also have power to investigate cases where state investigations are unsatisfactory. It received evidence that the Inspector‑General would need to be properly empowered to carry out the role. This included adequate independence, resourcing and full cooperation from basin states.
1.45
Recommendations 6 and 7 of the final report, reproduced below, are of particular relevance:
Recommendation 6: The committee recommends that the Murray–Darling Basin Authority and the Office of the Inspector-General for Water Compliance, work with Murray–Darling basin states to develop best‑practice principles to better align, where practical and appropriate, the compliance and enforcement approaches of governments, such as terminology, reporting requirements of regulators, and penalties.
Recommendation 7: The committee recommends that the Murray–Darling Basin Authority and the Inspector-General of Water Compliance, work with basin states to clarify the division of compliance roles and responsibilities between Commonwealth and state governments and their agencies, and the Inspector-General’s role in resolving multijurisdictional issues. Where there is duplication, uncertainty, or absence of compliance responsibility between governments, the Murray–Darling Basin Authority and the Inspector‑General should work with states to address this.