Chapter 3
Issues
3.1
As noted in the previous chapter, the Water Act 2007 was recently
the subject of a review undertaken by an expert panel chaired by Mr Eamonn
Moran, PSM QC. In addition to calling for submissions, the panel's review
involved consultation with a large number of key stakeholder groups.[1]
3.2
The panel's report, which was tabled on 19 December 2014, made 23
recommendations. The recommendations proposed amendments to the Water Act and
amendments (or review) of the Act's subordinate instruments. 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.[2]
3.3
Not all of the amendments contained in the bill propose substantial
changes to the Water Act. The committee received submissions from a number of
key stakeholder groups which raised concerns about specific amendments. Primarily,
the key issues raised by submitters relate to review and reporting
requirements, accreditation of water resource plans, indigenous issues and the
changes proposed under Item 27 (Section 106) in relation to water trading by
the CEWH.
Key issues raised
Review and reporting requirements
3.4
The issue of review and reporting requirements did raise some level of
concern – particularly in relation to the proposed timing of major reviews.
3.5
The Water Act currently contains various review and reporting
requirements, including:
-
that annual reports prepared by the MDBA include an analysis of
the effectiveness of the Basin Plan;
-
that the MDBA be required to give advice to the MDB Ministerial
Council on the impacts of the Basin Plan (five years after it takes effect);
-
that five-yearly reviews be conducted of the water quality and
salinity management plan targets and the environmental watering plan; and
-
that ten-yearly reviews of the Basin Plan are undertaken.[3]
3.6
The amendments proposed in Part 1 of Schedule 1 relate primarily to a
number of recommendations made in the Water Act Review. It was argued that rephrasing
and re-aligning the review requirements in relation to the Water Act would prove
a simpler and more effective approach. Specifically, the review found that the
required ten-yearly reviews of the Basin Plan should be informed by the
five-yearly evaluations (and that these evaluations should be undertaken in the
year immediately prior to the ten yearly reviews). The Water Act Review also
suggested that by delaying the commencement of these activities for several years,
the results would be more meaningful; particularly given that full implementation
of the Basin Plan will not be achieved until 2019, or – in the case of
sustainable diversion limit adjustment measures – 2024.[4]
3.7
The Minister for Agriculture and Water Resources, in his second reading
speech argued in relation to these amendments that:
In line with the review panel's recommendations, a further
review of the Water Act will be conducted in 2024. Furthermore, the first
legislated review of the Basin Plan previously set for 2022, will now take
place in 2026, with 10-yearly reviews thereafter. This strikes the appropriate
balance between regulatory certainty and allowing the Basin Plan to be reviewed
when its outcomes can be better assessed.[5]
3.8
The Australian Network of Environmental Defenders Offices (EDOA) noted
that the Water Act currently requires the MDBA to conduct a review ten years
after the Basin Plan takes effect – essentially in the year following November
2022. The organisation further noted that the amendments proposed by the bill
would require the MDBA to review the Basin Plan in 2026 – and then provide the
Minister with a report of that review – effectively postponing the review date
by four years.[6]
3.9
EDOA told the committee that whilst it understood the logic of the
amendment it did remain concerned that it would result in:
... approximately 14 years passing before the Basin Plan is
reviewed. This is particularly problematic in light of the fact that the
sustainable diversion limits (SDLs) in the Plan do not take into account future
climate change. This may prove to be catastrophic when the next significant
drought hits South Eastern Australia.[7]
3.10
EDOA also recommended that the SDLs in the Basin Plan "should be
reviewed before 2022 for the express purpose of determining if they are
consistent with current knowledge on projected impacts of climate change".[8]
Accreditation of water resource
plans
3.11
The EDOA also raised concerns in relation to accreditation of water
resource plans, which would be amended by Part 2 of Schedule 1 of the bill.
3.12
Under Section 54 of the Water Act, water resource plans are required to
be prepared for each water resource plan area in the Basin. There are 36 water
resource plans areas defined in the Basin Plan, which largely correspond with
existing Basin state water management areas. Water resource plans are required
to be consistent with the Basin Plan and the relevant long-term annual
diversion limit[9]
for the particular area.[10]
3.13
The Water Act (Sections 45 to 49) sets out the process for amending the
Basin Plan. In summary, the MDBA may – following consultation – prepare an
amendment to the Basin Plan and provide it to the Minister for adoption. One proposed
amendment (Item 11) would add new subsection 48(8) which would provide that if
an amendment to the Basin Plan is prepared by the MDBA (as a result of a ten
year review of the plan under Section 50) then the Minister must, by notifiable
instrument, determine that the amendment 'affects water resource plan
accreditations'.[11]
3.14
EDOA submitted that while the Water Act Review recommended streamlining
the accreditation process, the amendments proposed in the bill actually
introduce a high degree of flexibility regarding accreditation of water
resource plans. Further, the group argued that this flexibility would
"allow Basin States to choose which version of the Basin Plan is relevant
for accreditation purposes (assuming certain conditions are met)".[12]
EDOA suggested that this "is no doubt intended to account for the
adjustments to the SDLs that will likely occur in 2016 and 2024 (which will in
turn result in amendments to the Basin Plan)."[13]
3.15
The group further argued that this amendment would result in Basin
States being able to choose the version of the Basin Plan with the highest
SDLs, "that is, the version that allows the highest consumptive use in the
relevant water resource or resources".[14]
3.16
The EDOA told the committee that while it is not opposed to the adaptive
management approach that underpins the Basin Plan, the amendments would not
"facilitate an adaptive approach for the purposes of mitigating the
impacts of climate change",[15]
and:
... furthermore, the proposed amendments are highly complex and
to that extent inaccessible to the vast majority of people and groups with an
interest in the management of Basin water resources. This is in itself
problematic as it all but eliminates the possibility of meaningful engagement
across the Basin.[16]
Indigenous matters
3.17
The committee received several submissions in relation to the amendments
designed to increase indigenous involvement and engagement in the Basin's water
management.
3.18
During the Water Act Review, a number of indigenous and environmental
groups argued that there was a need for greater recognition of 'Indigenous
interests' in the Water Act. The review panel expressed general support for the
idea of greater indigenous involvement and indicated general support for amendments
to the Water Act which would enable there to be a more active incorporation of
indigenous interests and expertise in the planning and management framework of
the Water Act.[17]
3.19
The EDOA noted that whilst the Water Act currently does not adequately
acknowledge indigenous knowledge or provide for cultural water, the group
recognised that proposed amendments "partly address this significant
oversight."[18]
3.20
While strongly supportive of the amendments, the group also submitted
that further amendments to the Act are required to properly provide for
indigenous participation in water management in the Basin, including:
-
an appropriately worded object to the Act;
-
a requirement that water resource plans set aside a certain percentage
of water for cultural use; and
-
a requirement that the Water Act and Basin Plan give effect to
the United Nations Declaration on the Rights of Indigenous Peoples.[19]
3.21
The New South Wales Aboriginal Land Council (NSWALC) noted that the
management of water in the Murray-Darling Basin is of critical importance to
Aboriginal people who live in those regions, and argued that "water is
central to the cultural, social and economic prosperity of Aboriginal
people".[20]
3.22
The NSWALC told the committee that it was prepared to give conditional
support to the bill, and noted that the bill contained some positive amendments
in terms of increased indigenous representation on the MDBA and the BCC. The
group indicated that it was strongly supportive of these provisions and viewed them
as a "small but positive step toward better recognition of Indigenous
interests in the Murray-Darling Basin management framework".[21]
3.23
However, the organisation also indicated that it had some concerns
regarding the risk that environmental outcomes would be compromised, and the
potential impacts on Aboriginal culture and heritage.[22]
The organisation told the committee that it was strongly against any changes
which would compromise environmental flows:
... environmental flows are strongly tied to Aboriginal social,
cultural and economic interests in water in the Murray-Darling Basin area.[23]
3.24
Similar views were expressed by Murray Lower Darling Rivers Indigenous
Nations (MLDRIN). MLDRIN noted that it had participated in, and provided
information to, the Water Act Review and was generally supportive of the
changes included in Part 3 of the bill – in that they constitute minor, but
valuable improvements.[24]
3.25
However, MLDRIN also told the committee that the Water Act Review and
the bill have:
... both fallen short of acting on a number of key
recommendations put forward consistently by Aboriginal organisations throughout
the review process and in subsequent discussions with Government. ... We
reiterate our position that further reform is needed to address the fundamental
inequity of water entitlement frameworks in the Basin, which have been
established and operated in the absence of genuine Aboriginal engagement and
participation.[25]
Amendments proposed under Item 27 (Section
106)
3.26
Overwhelmingly, the primary issue of concern to submitters was water
trading by the CEWH, and the related amendments proposed under Item 27 (Section
106) of the bill.
3.27
As noted previously, the Water Act provides that water may be delivered
to meet current environmental needs or carried over to future years to meet
future environmental needs, or traded, in order to actively manage Commonwealth
environmental water holdings.[26]
3.28
This issue was discussed in the Water Act Review which noted that:
Trade of Commonwealth environmental water, either allocations
or entitlements, is one of the management tools that enhance the capacity of
the portfolio to meet environmental watering requirements. For example, trade
can be used to manage variability in water availability and environmental water
demand across the Basin by selling allocations in one catchment where
environmental watering needs have largely been met and purchasing in another
catchment or at a later time when additional environmental water would provide
a net improvement in environmental outcomes. It can also be used to re-balance
the portfolio of entitlements based on improvements in knowledge of
environmental watering requirements.[27]
3.29
As outlined in the previous chapter, amendments proposed under Item 27
would enable the CEWH to dispose of water or Commonwealth environmental water
holdings if it uses the proceeds of the disposal for acquiring water or
Commonwealth environmental water holdings. In relation to water allocation, the
CEHW would be able to use the proceeds for environmental activities, provided
the long-term annual diversion limit has been complied with.
3.30
In its submission, the Wentworth Group of Concerned Scientists (WGCC)
told the committee that it did not support the amendments proposed under Item
27 (Section 106) to "allow trade revenue to be used for 'environmental
activities' instead of buying water for the Murray-Darling Basin".[28]
Further, the WGCC indicated that:
We are concerned ongoing investment in environmental
activities would lead to a long term reduction in environmental flows. We are
also concerned that important environmental activities may be cost-shifted to
the CEWH, and that the safeguards may be vulnerable to misuse.[29]
3.31
The WGCC set out its specific concerns about the proposed amendments as
follows:
-
The amendments would likely reduce reinvestment in environmental
water allocations and consequently leave less environmental flows in rivers in
the long term. As it currently stands, the 2,750GL Basin Plan recovery target
is the 'minimum amount of water that will enable the achievement of ...
Basin-wide environmental objectives' and to date there has not been enough
water acquired to meet this minimum target.
-
The Water Act 2007 states that CEWH's functions are
specifically related to water holdings, and the Environmental Water Holdings
Special Account was set up for this purpose. The proposed amendments would
broaden CEWH's responsibilities beyond those which were intended in the Water
Act 2007 and may encourage cost-shifting whereby CEWH's funds are used to
subsidise environmental programs that should be funded from other sources.
-
Safeguards in the proposed amendments were difficult to enforce
and may leave Commonwealth environmental water funds vulnerable to misuse. The
SDL safeguard does not limit the volume of water allocations that can be
disposed of, nor the amount of money that can be reinvested in environmental
activities.[30]
3.32
WWF-Australia noted that it was supportive of existing legislation,
which provided the CEWH with flexibility to trade water "provided that the
trade will improve the capacity of CEWH's water holdings to be applied to meet
environmental water objectives".[31]
3.33
WWF-Australia indicated that it recognised the importance of water
trading, and the fact that it provided flexibility in relation to water
management. However, the organisation told the committee that it fully supported
the concerns raised by the WGCC and that it "does not support the
amendments under Item 27 (Section 106) to allow trade revenue to be used for
'environmental activities' instead of buying water for the Murray-Darling
Basin".[32]
3.34
The committee notes that the stated objective of proposed new subsection
106(3) is to provide increased flexibility for the CEWH. Specifically, to
enable the CEWH to sell water allocations and use the proceeds for other
activities which meet environmental objectives – in addition to the purchase of
other water or water holdings.[33]
3.35
In his second reading speech, Minister Joyce indicated that in terms of
subsection 106(3):
The flexibility will enable the Commonwealth Environmental
Water Holder to get the best environmental outcomes possible, as efficiently as
possible, whilst also assisting in the socioeconomic requirements of Basin
communities.
This recognises that achieving environmental outcomes in the
Basin will often require both water and complementary environmental activities.
We know it is not just about adding water, because the lack of environmental
works and measures, such as fish ladders and carp screens, can be a real
barrier to maximising environmental outcomes.[34]
3.36
The EDOA submitted that it "is highly unusual not to define
terminology such as 'environmental activities' in legislation".[35]
The organisation indicated that while it understood the value of adopting a
flexible approach (which would provide the CEHW with the ability to undertake a
range of activities that may augment the environmental outcomes they can
achieve with their water) the organisation is concerned that bill does not
contain sufficient checks and balances in this area.[36]
3.37
The CEWH noted in its submission that while the bill did not explicitly
define environmental activities:
... an environmental activity is one which "... would
improve the capacity of the Commonwealth environmental water holdings to be
applied to meet the objectives of .... the environmental watering plan"
(section 106(3)(c) of the Bill). This makes it clear that the activities need
to be: (a) directly linked to and improve the use of Commonwealth environmental
water: and (b) of a kind that would help that water achieve the objectives of
the environmental watering plan."[37]
3.38
The CEWH further noted that investments in environmental activities must
also be consistent with the broader functions of the CEWH, including that the
holdings relating to water in the MDB must be managed in accordance with the
Basin Plan's environmental watering place, and be consistent with the
Basin-wide environmental watering strategy.[38]
3.39
WWF-Australia noted that while it was supportive of investment in
environmental water and environmental activities that promoted the long-term
health of river systems (including measures to treat cold-water pollution and
construct fish ladders and carp exclusion devices) the organisation was
concerned that ongoing investment in environmental activities could lead to a
long-term reduction in environmental flows.[39]
3.40
The Australian Conservation Foundation (ACF) and Environment Victoria
provided a joint submission which argued that the change proposed under Item 27
(Section 106) "will not bring any additional environmental benefit to the
Murray-Darling Basin and is an unnecessary amendment to the Water Act".[40]
3.41
However, the ACF and Environment Victoria also submitted that regardless
of their views in relation to environmental benefits – given the primacy ofÂ
Section 105 – they were satisfied that the changes proposed under Section 106
posed minimal risk to the environment, provided the following conditions are
met:
-
'Reasonable belief' should be an objective test based on best
available science and the circumstances at the time. The key test is that both
the decision to dispose of environmental water and how to use the proceeds must
comply with Section 106(3)(c) so that it would improve the capacity of the
Commonwealth environmental water holdings to be applied to meet the objectives
of the environmental watering plan.
-
Any disposal of water must not impact on the SDL in the catchment
– as outlined in Section 106(5).
-
The ability to engage in other environmental activities allows
the CEWH greater flexibility to perform its functions and achieve its
objectives. However any such activities must be in accordance with the
environmental watering plan and must be demonstrated to improve the
environmental outcomes of environment watering conducted by the CEWH.
-
Item 28 of the bill amends the CEWH's annual reporting
requirements. The CEWH will have to report on the 'purpose for which the
proceeds of disposals of water or Commonwealth environmental water holdings
have been used during the year'. The annual report should include details of
how spending on environmental activities improved the CEWH's capacity to meet
the objectives of the environmental watering plan.[41]
3.42
Murray Irrigation told the committee that, while it was of the view that
the amendments "do not go far enough to ensure the Water Act 2007
delivers triple bottom line outcomes", it does support the intent of the
bill.[42]
In particular, it commended the proposed amendment to Section 106 of the Water
Act to enable the CEWH to "consider more than volume and flows when
looking for solutions to environmental water delivery to maximise the benefits
achieved from the volumes held".[43]
3.43
The Ricegrowers' Association of Australia (RGA) indicated that it
supported the CEWH being able to use the proceeds of the disposal of water
allocation for the purpose of environmental activities. The RGA argued that the
CEWH should be "provided with flexibility in the use of any funds
generated by trade, provided these funds are used for the purpose of improving
environmental outcomes".[44]
3.44
However, the RGA also noted that under the current NSW cost sharing
framework for water infrastructure, all water entitlement holders are required
to contribute equally to the cost of operating the water infrastructure managed
by the NSW Government. The RGA therefore recommended that Item 27 of the Bill
should be amended:
... to include an additional provision within the replacement
section 106 which ensures that the Commonwealth Environmental Water Holder will
be responsible for all future costs associated with any such 'environmental
activity'.[45]
3.45
The Australian Dairy Industry Council (ADIC) expressed strong support
for the Section 106 amendments, and noted that it has long called for increased
flexibility for the CEWH in trading.[46]
3.46
Further, ADIC argued:
Proceeds from environmental water trades should be able to be
used on projects that bring improved environmental outcomes for the Murray
Darling Basin in addition to purchase of water for environmental use. It is
appropriate for the Act to provide more flexibility for environmental water to
be temporarily traded regardless of whether it can be carried over the next
season. These amendments provide for environmental outcomes through projects
such as riparian management, pest control or support for state projects such as
more efficient flood management. At the same time, water not needed for
environmental flows can be returned to the irrigation pool for use by farmers.[47]
3.47
Cotton Australia argued that the current limitation which prevents the
sale of Commonwealth water "unless it can be demonstrated that it cannot
be carried over into the next water year" is at odds with other water
users "where irrigators situated within the Gwydir Valley are continually
reviewing and changing water management to deliver the best commercial
outcomes".[48]
3.48
Cotton Australia also indicated that it is supportive of the proposed amendments
to Section 106, and argued that the changes would enhance the CEWH's ability to
manage the water resources at its disposal and maximise environmental outcomes.[49]
3.49
Cotton Australia further argued that "those who are concerned that
these changes to Section 106 may somehow take away from the integrity of the
Plan, should take comfort in the fact that the Bill provides significant
safeguards," which include:
protections that ensure the revenue from sale of Commonwealth
Environmental Entitlements can only be used to purchase other entitlements;
the revenue from sales of both entitlements and allocations
cannot be used to pay fees and charges; and
sales can only occur if the Long-Term Average Diversion Limit
conditions have been met.[50]
Payment of fees and charges
3.50
Several submitters commented on the issue of the proceeds of trade being
used to pay fees and charges.
3.51
Under the amendments proposed by subsection 106(4) the proceeds of trade
could not be used to pay fees and charges for holding and delivering
Commonwealth environmental water.
3.52
The amendment, which is consistent with Recommendation 15 of the Water
Act Review, is designed to ensure that the CEWH's operating costs continue to
be met from Commonwealth consolidated revenue, rather than from the sale of
Commonwealth environmental water holdings.[51]
3.53
The CEWH's submission noted that the bill clarifies that 'environmental
activities' do not include statutory fees and charges for holding and
delivering water. Further, CEWH told the committee that:
Fees and charges are recurring, non-discretionary and a large
ongoing expense. Selling water to cover these fees would require the sale of
large volumes of allocations without reciprocal environmental benefits. This
would reduce the capacity to meet the environmental objectives of the Water Act
and Basin Plan.
It would also require the Commonwealth Environmental Water
Holder to approach the water market with the objective of raising significant
amounts of revenue, which due to the scale of the requirement would be likely
to cause negative impacts for some market participants.
Importantly, the Commonwealth Environmental Water Holder will
continue to pay the same fees and charges as other water holders, consistent
with existing arrangements.[52]
3.54
The RGA submitted that the CEWH should be provided with the flexibility
to use trade proceeds to fund the water charges it incurs. It was noted that
these charges are currently funded by tax payers, and it was argued that
providing the CEWH with the flexibility to use the funds for its water charges:
... would mean that the Commonwealth government is able to
divert these tax payer funds to another purpose if need be. This prospect may
be important for the Commonwealth in a tight fiscal year.[53]
Committee comment
3.55
The committee notes that – under Section 253 of the Water Act 2007,
an independent review of the operation of the Water Act (and the extent to
which it has achieved its objectives) has been conducted.
3.56
The committee also notes that in conducting the Water Act Review, the
panel consulted with a large number of stakeholders. The committee is aware
that the panel received more than 70 submissions over the course of its review
and consulted with a large number of key stakeholders – including state and
territory governments, and organisations across the irrigation, environment,
community and indigenous sectors.
3.57
The committee sees as significant the fact that the Water Act Review
made 23 recommendations – the majority of which were accepted in the
Government's response – with Recommendations 9 and 21 being agreed to in part.
3.58
Finally, the committee notes that a number of the organisations which
submitted to its inquiry into the bill indicated that they had both been
consulted and were actively involved during the Water Act Review.
3.59
The committee specifically notes the concerns raised by a number of
organisations in relation to the amendments proposed under Item 27 (Section
106). However, the committee also notes the safeguards that have been included
in Section 105 of the bill and concludes that they will be sufficient to
protect the interests of all stakeholders.
3.60
The committee therefore recommends that the bill be passed.
Recommendation 1
3.61
The committee recommends that the Senate pass the Water Amendment
(Review Implementation and other Measures) Bill 2015.
Senator the Hon.
Bill Heffernan
Chair
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