Chapter 2


Chapter 2

Background

2.1        The Explanatory Memorandum (EM) to the bill notes that the bill's primary purpose is to make the legislative amendments necessary to implement the Government's response to the Report of the Independent Review of the Water Act 2007 (the Water Act Review).[1]

The Water Act Review

2.2        The Water Act 2007 (the Water Act) provides the legislative framework for managing Australia's largest water resource – the Murray-Darling Basin – 'in the national interest, as well as for providing information on Australia's water resources'.[2] Under Section 253 of the Water Act, an independent review of the operation of the Act (and the extent to which it has achieved its objectives) was required to be conducted prior to the end of 2014.

2.3         The Water Act Review was conducted by a panel of experts – including Mr Peter Anderson, Dr Steve Morton and Mr Gavin McMahon – and was chaired by Mr Eamonn Moran, PSM QC. The panel undertook consultation with representatives of all state and territory governments, as well as stakeholders across the irrigation, indigenous, environment and community sectors.[3]

2.4        The panel's report, which was tabled on 19 December 2014, made 23 recommendations to amend the Water Act 'and to amend or review its subordinate instruments, in ways that improve its effective operation'.[4] The Government's response accepted the majority of recommendations made in the panel's report – with Recommendations 9 and 21 being agreed to in part.[5]

Amendments to the Water Act proposed by the bill

2.5        The bill contains a large number of amendments – not all of which propose major changes to the Water Act. The following chapter provides an outline of the proposed amendments. Additional information is provided in relation to some of the more significant amendments proposed by the bill and those about which submitters have raised concerns. These issues are discussed in more detail in the following chapter.

Schedule 1 – Amendments arising from review of the Water Act 2007

Part 1 – Reviews and reporting requirements

2.6        Under Part 1 of Schedule 1 of the bill, it is proposed to amend a number of the review and reporting requirements under the Water Act.[6] The amendments proposed would:

  • postpone the first five yearly reviews from 2017 to 2020 (Items 1 and 2);
  • postpone the first ten year review of the Basin Plan by the MDBA to 2026 instead of 2022 (Items 3 and 4);
  • provide for a further review of the Water Act, to be conducted in 2024 (Item 7) and give the Minister – in consultation with the states – discretion to determine the terms of reference for the review (Item 8);
  • remove the requirement for the MDBA to include an analysis of the Basin Plan's effectiveness in its annual report and allow the analysis to be contained in a separate report (Items 5 and 6); and
  • add the requirement for the five yearly reviews of the impacts of the Basin Plan to consider the social and economic impacts of the Basin Plan (in addition to water and salinity targets and the Environmental Water Plan) (Item 1).

Part 2 – Accrediting water resource plans

2.7        Part 2 of Schedule 1 of the bill proposes amendments to the provisions of the Water Act relating to the accreditation of water resource plans.[7]

2.8        The EM indicates that the proposed amendments contained in Items 10 to 20 are designed to align the accreditation cycle of water resource plans with the 10-yearly cycle of Section 50 reviews.

2.9        It is noted that Section 50 reviews are undertaken in accordance with the Water Act 2007, which requires that the MDBA must:

  1. review the Basin Plan during the tenth year of the period that starts when the Basin Plan first takes effect if the Authority has not reviewed the Basin Plan under subsection (2), and given the Minister a report of that review, before the start of that year; and
  2. review the Basin Plan during the tenth year of the period (the post-report period) that starts when the Authority gives the Minister a report of a review of the Basin Plan under paragraph 5(b) if the Authority has not reviewed the Basin Plan under subsection (2), and given the Minister a report of that review, after the start of the post-report period and before the start of that year.[8]

2.10       The proposed changes are consequential to Recommendation 4(a) of the Water Act Review, which recommended that the first Section 50 review of the Basin Plan be postponed until 2026. It is argued that this would provide sufficient opportunity to ensure that the outcomes of the implementation of the Basin Plan can be adequately analysed and evaluated.

2.11      The EM notes that the proposed changes are necessary because under the current accreditation arrangements, the 2026 review (and any subsequent amendments) are unlikely to be complete before many water resource plans require remaking. The EM lists the likely benefits of the proposed new arrangements as follows:

  • Water resource plans will only need to be remade when there have been changes to the Basin Plan as a result of a Section 50 review. This will reduce the regulatory burden associated with having to reaccredit water resource plans simply because they are older than 10 years, even though they remain consistent with the Basin Plan and relevant for state water management purposes.
  • All water resource plans will be accredited against the same version of the Basin Plan. This will improve the consistency of water management approaches across the Murray-Darling Basin.
  • Changes to the Basin Plan as a result of Section 50 reviews will be adopted by all water resource plans within three years. This means that changes to Basin Plan water management approaches will be reflected in Basin State water management plans in a timely manner, consistent with adaptive management principles.[9]

2.12      It is further noted that the proposed new arrangements incorporate Recommendation 5 of the Water Act Review which recommends that the Water Act allow flexibility for Basin States to nominate a more recent version of the Basin Plan to be used when accrediting a water resource plan other than that specified in Section 56.

2.13      It is proposed that, under Item 10, definitions of 'notifiable instrument' and what 'affects water resource plan accreditations' would be inserted to assist with the operation of new subsection 48(8). It is noted that these new terms have been included to clarify the process the Minister needs to observe following a Section 50 review, and subsequent amendment of the Basin Plan.[10]

2.14      In addition, it is proposed that, under Item 11 the new subsection would compel the Minister to provide notification that an amendment to the Basin Plan affects water resource plans if the amendment has been prepared by the MDBA as a result of a Section 50 review of the Basin Plan. Under the proposed amendment, the Minister would be required to provide this notification by 'notifiable instrument' – as defined in new subsection 4(1).

2.15      It is noted that the making of a notifiable instrument makes it clear that an amendment has been made as a result of a Section 50 review and will cause all water resource plan accreditations to expire after a period of three years. This item also includes a note which provides clarification that existing water resource plans will generally cease to have effect three years after the Minister has issued a notifiable instrument determining that an amendment 'affects water resource plan accreditations'.[11]

2.16      Under Item 15, it is proposed to repeal subsection 56(2) and replace it with new subsections 56(2) and (2A):

  • Subsection 56(2) clarifies that, subject to subsection 56(2A) the version of the Basin Plan to be applied by the Authority and the Minister when accrediting and making water resource plans is the Basin Plan in effect when the plan is accredited or made.
  • New subsection 56(2A) sets out four specific scenarios and specifies which version of the Basin Plan is to apply in each case.[12]

2.17      The table included in the EM sets out the four specific scenarios (which specify the particular version of the Basin Plan that would apply in each case) as follows:

  • Scenario One – the proposed water resource plan is provided to the Minister before the first ten year review of the Basin Plan. In this case, the Basin Plan to be applied is the version that was in effect two years before the proposed water resource plan is given to the Minister, unless the Basin State makes a nomination which is covered under scenario four (described below). This represents a continuation of the current approach.
  • Scenario Two – the proposed water resource plan is provided to the Minister after the first ten year review of the Basin Plan and an amendment of the Basin Plan that affects water resource plan accreditations came into effect within three years before the proposed water resource plan was given to the Minister. In this case, the Basin Plan to be applied would be the version that was in effect immediately after that amendment, unless the Basin State makes a nomination under scenario four (described below). This scenario reflects amendments in Items 17-20 which would mean that water resource plan accreditations expire three years after an amendment to the Basin Plan that affects water resource plan accreditations.
  • Scenario Three – the proposed water resource plan is provided to the Minister after the first ten year review of the Basin Plan and within three years of a ten year review report and no amendment to the Basin Plan has been made as a result of that review. In this case, the Basin Plan to be applied is the version that was in effect immediately before the report was given to the Minister unless the Basin State makes a nomination which is covered by scenario four.
    Scenario Four – the Basin State nominates a version of the Basin Plan to be applied. In this case, the nominated version of the Basin Plan applies provided that the version is not older than the version that would apply under scenarios one, two or three. This gives effect to Recommendation 5 of the Water Act Review, by providing flexibility for Basin States to nominate a more recent version of the Basin Plan to be applied.[13]

2.18      According to the EM, Scenario Three recognises that (even in the absence of an amendment that affects water resource plans) "Basin States may nevertheless wish to review and revise some or all of their water resource plans".[14]

2.19      The EM also notes that the arrangements applying in each of the four scenarios set out in the bill recognise that water resource plans take a period of time to prepare and the Basin Plan may change during that time. It is also suggested that specifying a version of the Basin Plan that will apply in these scenarios "provides certainty for Basin States, subject to the water resource plan being submitted within a specified period".[15]

2.20      It is proposed, under Item 17, to replace subsection 64(1) with a new subsection that provides that water resource plans are accredited until three years after an amendment to the Basin Plan (that affects water resource plan accreditation)[16] or until the plan ceases to have effect under the state water management law, whichever is the earlier.[17]

Part 3 – Indigenous matters relevant to Basin water resources

2.21      Part 3 of Schedule 1 of the bill proposes to amend the Water Act to provide for "greater incorporation of indigenous expertise in the governance of the Basin's water resources".[18]

2.22      The Bills Digest notes that there are existing provisions in the Water Act and in the Basin Plan which incorporate indigenous involvement or require indigenous matters to be considered. The amendments proposed would, however, facilitate greater recognition of indigenous interests in the Water Act and the management of Basin water resources.[19]

2.23      Subsection 22(1) of the Water Act includes a table which lists specific matters that must be included in the content of the Basin Plan. Subsection 22(3) then lists a number of requirements for water resource plans. Item 22 proposes to amend subsection 22(3) to add a new paragraph – 22(3)(ca) – which would require water resource plans to have regard to 'social, spiritual and cultural matters relevant to indigenous people in relation to the water resources of the water resource plan area in the preparation of the water resource plan'.[20]

2.24      Section 172 of the Water Act sets out the functions of the MDBA. There is a proposed amendment under Item 23 to insert a new paragraph – 172(1)(ia) – which would add a new function for the MDBA to engage the indigenous community on the use and management of Basin water resources.[21]

2.25      Subsection 178(3) lists fields relevant to the MDBA's functions. Item 24 proposes to amend this list to add 'Indigenous matters relevant to Basin water resources' as a field relevant to the MDBA's functions.[22]

2.26      Section 202 of the Water Act relates to the Basin Community Committee (BCC). The BCC, which was set up to advise the MDBA about the performance of its functions, consists of a Chair and up to 16 other members. Currently, under subsection 202(5), the BCC's membership must include:

  • at least one MDBA member;
  • at least eight individuals who are water users or representatives of one or more water users; and
  • an individual with expertise in indigenous matters relevant to the Basin's water resources.

2.27      Under Item 25 of the bill, the last requirement (dot-point three above) would be amended to require at least two indigenous people with 'expertise in Indigenous matters relevant to the Basin's water resources' be included on the BCC. Item 21 proposes a definition of the term 'Indigenous person' be included in the definitions contained in subsection 4(1) of the Water Act.[23]

2.28      The EM suggests that the amendments under Items 21 and 25 would increase the requirement for 'members with expertise in Indigenous matters' from one to two and it would also mean that these members must now be indigenous.[24]

Part 4 – Trading by Commonwealth Environmental Water Holder

2.29      The functions of the Commonwealth Environmental Water Holder (CEWH) – which primarily involve managing the Commonwealth environmental water holdings[25] – are set out in Section 105 of the Water Act.

2.30      Under the Water Act, the CEWH is charged with performing its functions for the purpose of protecting or restoring the environmental assets of the Murray-Darling Basin and giving effect to relevant international agreements. The CEWH is also required to manage the Commonwealth environmental water holdings in accordance with particular planning documents – including the MDB environmental watering plan, which is set out in Chapter 8 of the Basin Plan.

2.31      Commonwealth environmental water holdings are actively managed, which means that water may be:

  • delivered to meet current environmental needs;
  • carried over to future years to meet future environmental needs; or
  • traded (disposed of or acquired).[26]

2.32      Currently, however, Section 106 of the Water Act limits the disposal of Commonwealth environmental water holdings. The CEWH may only dispose of water which is not currently required to meet objectives of the environmental watering plan or any applicable environmental water schedules and would otherwise be forfeited. The Bills Digest notes that the reason for imposing the limitation was to ensure that the CEWH operates to meet environmental objectives rather than as a profit making enterprise. It is further noted that the limitation does not apply in circumstances where proceeds from the sale can be used by the CEWH to acquire other water or water holdings which will better protect or restore environmental assets.[27]

2.33      The EM notes that Section 86AE(2) provides that the relevant purposes and objectives for managing and disposing of Commonwealth environmental water holdings that were acquired with amounts debited from the Special Account (established by Part 2AA of the Water Act) are those of the environmental watering plan; not objectives that relate to areas outside the Murray-Darling Basin.[28]

2.34      In order to amend the limits on disposal of water by the CEWH, it is proposed, under Item 27, to repeal and replace Section 106. These amendments reflect Recommendations 15 and 16 of the Water Act Review.[29]

2.35      Proposed new subsection 106(3) in Item 27 would enable the CEWH to dispose of water (or Commonwealth environmental water holdings) if the organisation uses the proceeds of the disposal for acquiring water or Commonwealth environmental water holdings. In the case of a water allocation,[30] the CEWH would be permitted to use the proceeds for environmental activities – provided the long-term annual diversion limit has been complied with in relation to the disposal.

2.36      It is noted that, in terms of the new subsection 106(3) that the CEWH must reasonably believe, at the time of the disposal, that using the proceeds would improve the capacity of the Commonwealth environmental water holdings to be applied to meet the objectives of relevant plans, including the Murray-Darling Basin environmental watering plan.

2.37      It is proposed under subsection 106(3)(b) that the proceeds from a sale of water allocations may only be used for environmental activities if the CEWH is satisfied that the long-term annual diversion limit has been complied with in the resource unit where the disposal is to take place.

2.38      The EM notes that determining that the long-term annual sustainable diversion limit has been complied with the (for purposes of subsection 106(3)(b)) is a decision that the CEWH must make based on information published by the MDBA prior to the disposal. It is also noted that under the Basin Plan, the MDBA is required to publish registers of take[31] that record any difference between annual take and annual permitted take as well as a cumulative balance for each sustainable diversion limit resource unit.

2.39      The amendments proposed under subsection 106(4), Item 27, clarify that proceeds of trade under subsection 106(3) cannot be used to pay fees and charges for holding and delivering Commonwealth environmental water. The EM notes that this subsection is intended to support the environmental objects of the Water Act and Basin Plan by ensuring that they are not compromised as a result of water that has been acquired (for the purpose of meeting environmental objectives) being sold to meet non-discretionary fees and charges associated with operating costs.

2.40      The EM also confirms, that under subsection 106(4) it is intended that the CEWH will continue to pay all fees and charges for the holding and delivery of environmental water from appropriations made to the Special Account, and not from trade proceeds.

2.41      Proposed new subsection 106(6) provides that the condition relating to long-term sustainable diversion limits in new subsection 106(5) does not restrict the use of the proceeds of trade under subsection 106(3) prior to the sustainable diversion limits coming into effect and the registers of take being published by the MDBA.

2.42      The amendment included under Item 28 proposes the promotion of transparency and accountability by requiring the CEWH to publish information on the trade of water and Commonwealth environmental water holdings – and the purposes for which proceeds from trades are used – in its annual report. This amendment gives effect to the Government's response to Recommendation 17 of the Water Act Review.

2.43      The amendment included under Item 29 is designed to ensure that the reporting requirement included by Item 28 does not compel the CEWH to amend previous annual reports. The amendment proposed under Item 28 will take effect on or after the day the amendments commence (the day after Royal Assent).

Part 5 – Murray-Darling Basin Water Rights Information Service[32]

2.44      The EM notes that Part 5 of the Water Act provides that the MDBA may establish an information service – the Water Rights Information Service – which would provide access to registrable water rights information for the Basin.

2.45      Item 30 proposes to repeal the definition of registrable rights in subsection 4(1) of the Act. This item is consequential to the repeal of Part 5 of the Act.

2.46      Item 31 of Schedule 1 proposes to repeal Part 5 of the Water Act (the Murray-Darling Basin Water Rights Information Service). Item 32 consequentially repeals a reference to Part 5 and the Water Rights Information Service in the list of the MDBA's functions.

2.47      The EM notes that the Water Rights Information Service has not been established, that there are no plans to establish it in the future, and indicates that prime responsibility for water access rights information, including responsibility for keeping information up to date, has and will continue to rest with Basin States. It is further noted that the Commonwealth has taken steps to initiate systems which provide for water rights information to be available, including:

  • the Basin Plan water trading rules – these require certain information to be made publicly available in a central location – via the MDBA – to facilitate the operation of efficient water markets and opportunities for trading; and
  • water market information collected by the Bureau of Meteorology which is made publicly available through regular web-based water market reports.

Part 6 – Miscellaneous amendments[33]

2.48      Item 33 proposes a minor amendment to the definition of 'bulk water charge'.

2.49      Item 34 proposes a minor amendment to an existing provision relating to the definition of infrastructure operators and water service infrastructure.

2.50      Item 35 proposes a minor amendment to an existing provision relating to the definition of irrigation infrastructure operator and irrigation networks.

2.51      Item 36 proposes to amend Section 74 of the Water Act, which sets out a simplified outline of the provisions relating to 'risks arising from reductions in diversion limits'.

2.52      Item 36 also proposes to replace subsection 74(4) to clarify that the Commonwealth may make a payment in certain circumstances if there is a reduction in, or change in reliability of, a water entitlement holder's allocations.

2.53      Item 37 proposes to repeal existing subsection 92(4) and substitute a new subsection. New subsection 92(4)(a) retains the existing provision for the water charge rules to specify the effect and period of effect (previously referred to as 'duration') of a determination or approval of regulated water charges. New subsection 92(4)(b) provides new flexibility for the ACCC (or an accredited State agency) to extend the period of effect that applies to a determination or approval of regulated water charges as necessary (beyond the period of effect referred to in rule 3 of the Water Charge Infrastructure Rules 2010).

Schedule 2 – Technical amendments

2.54      Schedule 2 of the bill contains a number of minor technical amendments[34]. Part 1 relates to technical amendments affecting the definition of referring State and Part 2 relates to Amendments consequential on the Acts and Instruments (Framework Reform) Act 2015.

2.55      The minor technical amendments proposed under Schedule 2 include amendments to the definition of 'referring state' to align with Basin State legislation and the repeal of spent provisions (relating to the application of the Water Act before the Basin Plan came into effect).

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