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Policy Capture in the Murray-Darling Basin, by Daniel Connell

The retreat from sustainable river management and prospects for change

The Murray–Darling Basin Plan is headed for failure in the near future. Behind the current disputes there is the chronic under-resourcing of regional water planning by New South Wales and the rapid erosion of support for catchment-wide management in Victoria and Queensland. For South Australians, with an end-of-catchment focus, there has been very little achieved by the years of controversy and the billions of dollars of public funds expended since John Howard announced his grand intervention in 2007.

And it’s not just the state governments backing away. The national government has been reducing support for sustainable river management ever since the basin plan was approved by an overwhelming majority in the national parliament in 2012. Among the few who voted against it was the new National Party leader, Michael McCormack, from Wagga Wagga. On his appointment he immediately nominated water security—meaning water security for the irrigation industry—as his number-one issue.

The collapse of the basin plan will not be the first retreat from sustainable river management in the Murray–Darling Basin. By one count it is only the most recent of eight attempts since the optimistic reforms of the 1980s and early 1990s.

First was the Salinity and Drainage Strategy, approved by the new Murray–Darling Basin Ministerial Council in 1989. The idea was that irrigators would be forced to reduce the salinity impacts of irrigation. In turn, this would reduce their demand for water, which was the vehicle for transporting salt into streams from their properties. With the demand for water contained, substantial flows would then be left in the rivers. Over succeeding decades, as the Salinity and Drainage Strategy failed to achieve that higher goal, a number of other strategies were developed with the same aim.

Second was the Natural Resources Management Strategy in 1990. That was followed by the Council of Australian Governments’ rural water reform package in 1994, the cap on further extractions in the mid-1990s, the Integrated Catchment Management Policy Statement in 2000, the Living Murray First Step project in 2004, the National Water Initiative in 2004 and most recently the eighth attempt: 2012’s basin plan.

The strategies of the irrigation industry have not merely been defensive. Through these decades of turmoil they have made great gains in their efforts to achieve greater water security for irrigation enterprises. A classic in these campaigns was the Foodbowl Modernisation Program in northern Victoria, designed to upgrade infrastructure to give greater protection against climate change. A principle of the Council of Australian Governments’ 1994 water reforms, reaffirmed in the National Water Initiative, was that after water entitlements were given stronger legal protection, and regional water-delivery systems were handed over to irrigation associations as sunk costs, irrigators would be financially responsible for future infrastructure maintenance and development, including, in particular, measures to deal with drought and predicted climate-change impacts.

But that ‘deal’ proved difficult to implement. The Foodbowl Modernisation Program required irrigators in the mid-north region of Victoria to invest $100 million, supplemented by $1 billion from the Victorian state government and $1 billion from the federal government. All of this was contrary to the principles of the 1994 Council of Australian Governments plan and the National Water Initiative unless there was a clear public benefit.

Originally there was a public benefit. It was estimated that the volume of water to be gained through the infrastructure improvements funded in the first of the two stages of the project would be about 225 gigalitres, to be split equally between regional irrigators, the environment and the city of Melbourne, which is just outside the Murray–Darling Basin catchment. The project was developed at the height of one of southern Australia’s worst droughts, when Melbourne’s storages were at record low levels, so this was seen as a justifiable investment in the city’s future water security. Community opposition in central Victoria, however, led by the irrigation industry, resulted in the cancellation of the planned allocation to Melbourne, thereby voiding most of the proposed public benefit. Despite the loss of this rationale, public funding continued to flow.

Subsequently, in order to deal with Melbourne’s ongoing water-security problems, the state government built a 150-gigalitre desalination plant, costing $5.7 billion for construction alone. Future operating costs over the life of the plant are projected to be many more billions. Under similar circumstances the South Australian government constructed a 100-gigalitre desalination plant for Adelaide.

In large part these two plants were constructed because the state governments could not rely on transfers from the Murray–Darling Basin for water made available through infrastructure improvements. It’s not that the volumes that were to be diverted were particularly large. The 75 gigalitres originally envisaged for transfer to Melbourne would have been a small proportion of the annual volume diverted in the basin, which averages approximately 11,000 to 12,000 gigalitres, most of it going to irrigation.

What could replace the basin plan if it fails? Since 2007, when the Water Act was introduced, the future of water management in the Murray–Darling Basin has been transformed by two developments barely mentioned in the guidelines to the basin plan. These are the creation of the Commonwealth Environmental Water Holder and the resolution of an obscure debate about whether the environment should be supplied through so-called rules-based water or through entitlements.

The Commonwealth Environmental Water Holder was created to manage the water that the national government gained through either purchase or infrastructure improvements. The Rudd and Gillard Labor governments made a commitment that all water reclaimed through the basin plan would be purchased at market prices from willing sellers or come from investment in infrastructure.

Since then there has been no shortage of willing sellers and the only restraint has been governments responding to irrigation-industry pressure to maintain the size of the sector. Under the original plans, when the water holder’s acquisition program was complete it would hold more than one-quarter of all water entitlements in the Murray–Darling Basin. That has been dramatically reduced under the current coalition government, but there’s nothing to stop a future Labor government from reinstating the original targets and giving the water holder much greater independence so that it could operate as a replacement for the basin plan when it fails.

In the years after the Water Act was passed it was thought that water gained for the environment by government investment would be restored to the river outside the water-entitlement regime. However, a different strategy has recently emerged.

The long-established approach to managing rivers in the basin was the allocation of a proportion of the flow to entitlement holders, with the balance left in the river. Water left in the river is called rules-based water because it is the result of applying the management rules. But it has proved difficult to protect rules-based water from encroachment by entitlement holders. The rules have always favoured water held under entitlements—as opposed to the rules-based water—when supplies are reduced during droughts. The management rules have this bias because the original reason for building dams and regulating rivers was to supply water to towns and agriculture during summer and in droughts when the natural flow is low. In addition, there is the burden of water theft, which the late Peter Cullen estimated was responsible for at least 20 per cent of all extractions. Most of that stolen water comes from the rules-based component of the flow.

When they were first introduced in the early twentieth century, water allocations were very loosely defined. In recent years they have been tightened, sharpened and designated as ‘entitlements’ and ‘rights’. As entitlement holders increased their certainty and the reliability of their ‘rights’, the risks of non-supply in over-allocated systems in a highly variable climate became increasingly concentrated within the proportion of flows supposedly reserved for the environment: the rules-based component. In response, some environmental advocates began to argue for buying the entitlements that were previously seen as the source of the problem. That way they would have water for the environment with the same legal and security characteristics as other entitlements. But in the absence of substantial funds those dreams were just fantasies.

The situation was transformed by then Prime Minister John Howard’s $10-billion water-reform package announced in January 2007, which included $3 billion for the purchase of environmental water. To irrigators this would have looked like a win-win situation: irrigators would get $3 billion in compensation and then get most of the water back anyway in times of drought. But a further shift occurred when subsequent Labor governments changed this dynamic, with supplies to the environment ensured through the use of entitlements. Under this new arrangement, environmental water will be permanently outside the consumptive pool but protected by the same legal framework as the entitlements that are used for irrigation.

Under the prevailing political conditions, the activity of the Commonwealth Environmental Water Holder is tightly suppressed by hostile irrigation-industry groups and governments sympathetic to them. Turning the water holder from the cautious, risk-averse organisation it currently is into the transformative force it could be will depend on an enormous injection of political will. But under a national government that was serious about environmental sustainability the organisation could become the most important water-management institution in the Murray–Darling Basin. For that to happen the cap on further water purchases would need to be lifted, funding for additional purchases increased and regional community groups given a greater role in the development and implementation of rehabilitation plans.

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