The government spent billions buying water from farmers to save the Murray-Darling, but there’s now a push to sell water back. By Sophie Morris.

The Murray-Darling up the creek

The Murray River, which flows 2530 kilometres to the Southern Ocean.
Credit: Ribeiroantonio / iStock

When the burghers of Griffith in NSW vented their fury at plans to take water from farmers, the new federal MP for the electorate of Riverina, Michael McCormack, was there in solidarity.

It was October 2010 and McCormack’s constituents, incandescent with rage, burnt copies of the proposed Murray-Darling Basin plan. One threw a fake horse’s head at the hapless bureaucrat who had been sent to front the crowd.

The protests had the desired effect. The Labor government heeded the backlash and, by the time the Basin Plan became law, two years ago, the volume of water to be recovered for the environment was significantly less than proposed in 2010.

For a program that is costing taxpayers a cool $13 billion, there has been little scrutiny of progress on the ambitious river rescue, which was conceived under a Coalition government, during severe drought, and then enacted by Labor.

Think about it: $13 billion. That’s $100 for every Australian who files a tax return, or more than 10 times the yearly budget of the ABC.

Much of the cash has gone to irrigators and their communities, either to buy water from them, or to upgrade their pipes, channels and dams to reduce water wastage.

Now, as drought again threatens part of the river system, which supports 40 per cent of Australia’s agricultural production, there is a growing push for the government to sell back water it has purchased from irrigators.

McCormack, now parliamentary secretary to the minister for finance, thinks expanded water sales could be a useful budget-savings measure.

“We do have a debt to pay off and huge costs involved in the delivery of water. To save money, indeed to make money, that [selling water] is the sort of thing we could do,” McCormack tells The Saturday Paper.

“It’s a way to pay down debt and it’s something we need to do.”

Hang on a minute. Wouldn’t selling water that has just been bought from farmers back to them defeat the purpose of the whole exercise?

Simon Birmingham, the parliamentary secretary to the minister for the environment, thinks it might. McCormack has raised the water trading issue with Birmingham but, as a South Australian Liberal, Birmingham has a different perspective on managing the river system to his upstream Nationals colleague.

Birmingham says the Commonwealth has so far acquired some 1900 gigalitres for the environment in a bid to put water use in the iconic river system on a sustainable footing. (That’s almost four times the volume of Sydney Harbour – and 70 per cent of the targeted volume of 2750 gigalitres – but well short of the 7600 gigalitres that would be needed to restore the rivers to full health, according to the initial proposals from the Murray-Darling Basin Authority in 2010 that caused such angst in Griffith.)

“Clearly, if we were to simply then use that as a bank of water to sell to irrigators, we’d be returning to a potential scenario of overallocation,” says Birmingham.

“There’s potential to achieve win-win outcomes from trading, but they need to be win-win outcomes that remain true to the original intent in establishing the environmental water holder and not ones that compromise that for a budget outcome.”

Birmingham is due to receive a review of the Water Act from an expert panel, who heard similar views to McCormack’s from some irrigator groups, arguing for a relaxation in restrictions on water trading by the Commonwealth.

1 . The water rights system

To understand this issue, it’s important to distinguish between a water entitlement, which is the long-term licence to a yearly share of water, and the temporary water allocation, referring to the volume that is allocated each season to that entitlement.

At the moment, there are legal limits on the circumstances in which the Commonwealth Environmental Water Holder David Papps, who is responsible for the government’s multibillion-dollar water assets, can sell water. These restrictions are designed to prioritise the environment. Water can only be sold if it can’t be used for the environment or carried over for the next year, or if the proceeds are used to buy other water that would improve environmental outcomes. So far, Papps has sold only one major parcel of temporary water, while retaining the long-term licence. That sale, of 10 gigalitres in the Gwydir region of NSW, netted $3.2 million in January. He also sold 340 megalitres in the NSW Peel Valley, for $32,580.

Some, such as McCormack, argue that Papps should be trading water more extensively to raise revenue and to pay for the costs of the Basin Plan.

Rice grower Laurie Arthur, of Moulamein in NSW, reckons this would enforce discipline in the use of environmental water by putting a real price on it. This, he says, would force Papps to make the same calculations about its use as farmers do when deciding whether to purchase water to plant a crop or to sell water allocations to generate cash flow.

“When you look at the volume of water they hold, and the value of it, they could fund their entire operations through a smart trading strategy,” says Arthur, who has previously served as water spokesman for the National Farmers’ Federation and as a National Water Commissioner. “If I was looking for budget savings, I’d be looking at the Murray-Darling Basin Authority.”

This approach would mean less water for the environment and more for farmers. It has environment groups worried. In a report on progress on the Basin Plan, the Australian Conservation Foundation says that water trading can be useful if it serves an environmental purpose, but the push to rewrite the Water Act must be resisted.

“Trading provisions for environmental water must not be changed to allow proceeds to be used for activities other than recovering water,” says the ACF. “Environmental water trade should not be driven by other considerations, such as the need to fund non-flow activities, recover operational costs or increase consumptive water availability.”

The ACF’s Jonathan La Nauze adds that it is a “slippery slope”. “If we open the door to selling off environmental water for these purposes, the temptation will always be there for future governments to cut the Commonwealth water holder’s budget, arguing they can just sell a little bit of water to pay the bills. The end result is that the environment gets less water, meaning wetlands, fish and birds are back in the firing line. It’s rewriting the Basin Plan by stealth.”

A source close to the Commonwealth Environmental Water Holder says implementation and monitoring of the Basin Plan costs about $50 million a year and that selling water to fund this would compromise environmental outcomes and skew water markets.

2 . Health of the Murray

It’s an issue that has been, so to speak, bubbling away beneath the surface. But it goes to the heart of whether the river rescue will work or just end up as a giant boondoggle that, despite all the cost and disruption to communities, falls short of its environmental targets.

One of the most tangible goals of the plan is that it should provide enough water flowing through the system for the mouth of the Murray River to remain open nine years in 10.

For almost four years, the dredges that forced the Murray mouth open through the dry horror of the millennium drought have been idle. When the rains arrived in 2010 and sent water flowing through the rivers and out to sea, some hoped it would be the last time mechanical intervention was required to shift tonnes of sand away from the river mouth.

Now the dredges are expected to crank up again within weeks as drought again grips parts of the river system and sand once more accumulates where it meets the sea.

It is too soon to declare the Basin Plan a failure. Its implementation is painstakingly gradual and it won’t come into full force for another decade. However, Adelaide University ecologist David Paton says the fact dredging is needed now, at a time of year when there should be strong natural flows, is worrying.

“If it’s supposed to be open nine years in 10, the one time of the year it really shouldn’t be closed is now, when there should be large environmental flows,” he says.“We need to have some honesty among the politicians. You can’t have them promoting the notion that we’ve saved the Coorong, that we’ll have a healthy river, because it’s quite clear that the quantum of water is not there to do that.”

So, if we haven’t yet saved the Coorong, the internationally recognised lagoon of Storm Boy fame, what benefits are taxpayers seeing for their investment?

Those monitoring the outcomes on behalf of Papps say there is evidence environmental watering is making a difference, including improved salinity in the Coorong. Native fish, apparently, are also benefiting. Golden perch are breeding in Victoria’s Goulburn River for the first time in 10 years. In the Lachlan catchment, there are recent reports of Murray cod spawning and reduced carp numbers. In the Gwydir catchment in northern NSW, rainfall has been scarce, water levels are low and environmental watering may have helped keep ecosystems alive as drought tightens its grip.

One thing that is certain is that drought will come again. Birmingham cautions that the Basin Plan can no more prevent drought than it can prevent flood. That is to say, when drought arrives, the environment – like irrigators – must survive on rationed water.

“Time will tell as to whether we have got it right and whether it has all been worth the expense,” says Birmingham. “But it is without doubt that what we were doing before was jeopardising the health of the nation’s largest food bowl and reform was essential.”

When Tony Burke, as Labor’s environment minister, finalised the Basin Plan two years ago, he described the environment as the “toughest negotiator of all”. Tough it may well be, but it is nowhere near as loud as the good folk of Griffith.


This article was first published in the print edition of The Saturday Paper on Dec 6, 2014 as "Up the creek".

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Sophie Morris is The Saturday Paper’s chief political correspondent.