In 1995 the Murray Darling Basin Ministerial Council (MDBMC) published a report that examined changes to the flow regimes in rivers within the Basin and the consequences of those changes.
The report identified increasing levels of diversions and the consequent decline in river health. From 1988 to 1994 water consumption in the Basin increased by 7.9 per cent overall.
The report examined the scope for diversions to grow further under the water allocation systems that existed at that time. The systems had evolved at a time when water managers were trying to encourage development of the Basin's water resources. Water was rationed during periods of shortage but the systems were not effective for controlling diversion during normal non-drought conditions. In the five years prior to 1994 only 63 per cent of the water that was permitted to be used was used, leaving considerable scope for further increases in consumption, without any changes in entitlements.
It was estimated that average diversions could increase by a further 14.5 per cent if expansion under 1993/94 management rules was unrestricted. This increase in diversions would reduce security of supply for existing irrigators. Increased diversions would mean that the level of reserves held in the storage's would be lower than is currently the case. This would reduce the capacity of the storages to be a reliable source of supply during long periods of drought. Under this scenario, water supplies for existing irrigators would therefore become less secure and river health problems would be exacerbated.
As a response to this report, effective from 1 July 1997, the MDBMC introduced the Cap, which in effect is the long term average volume of water that would be diverted by a valley were development not to grow beyond the maximum which existed up to and including the 1993/94 season.
The Cap in New South Wales is not the volume of water used in 1993/94. Rather the Cap is the long-term average volume of water that would be diverted by a valley were development not to grow beyond the maximum, which existed up to, and including the 1993/94 season. This means that the following elements are taken into account:
The Cap itself does not attempt to reduce Basin diversions, but to prevent them from increasing. The Ministerial Council decided that preventing any increase in
diversions was essential to arrest further decline in both river health and the security of supply to existing water users.
The Cap should restrain diversions, not development. With the Cap in place, new developments should be allowed, provided that the water for them is obtained by improving water use efficiency or by purchasing water from existing developments.
Implementation is the responsibility of individual states and in NSW implementation is coupled with other water reform endeavors such as environmental river flow objectives. Thus the primary response to the Cap as it affects the Murrumbidgee and Murray Valleys includes the following: -
Given that announced allocations in the years up to 1993/94 were often 120%, the implementation of the Cap heralded an immediate real reduction in water availability for many irrigators.
Whilst there is general agreement amongst water users and stakeholders on the concept of the Cap, significant issues have been raised regarding implementation arrangements. These issues relate to: -
Environmental flow rules are a set of operating procedures for managing river flow, aimed at restoring some of the "natural" flow regime of regulated rivers. Their objective is to improve river health while minimising the impacts on water users along the river.
To date environmental rules have applied for the Murrumbidgee River for the last two seasons. Environmental rules have yet to be developed for the Murray River.
In the Murrumbidgee river environmental rules have been developed by the Murrumbidgee River Management Committee which is made up of community members (drawn from landholder, irrigator, environmentalist, local government and Aboriginal organisations) and State and ACT Government representatives.
The Committee has developed four rules aimed at restoring some of the variability of winter flows and maximising the environmental benefit of tributary inflow for the Murrumbidgee River. The four rules: -
The current operation of the rules results in a long-term average reduction of annual farm gate delivery of water of 4.3%. In individual years the impact ranges from 0% to 17% in critically dry years.
Under the present allocation schemes individual entitlement holders forfeit any allocation they have remaining at the end of each year. The remaining allocation is returned to the general "pool" and redistributed amongst all entitlement holders when the allocation is made for the following water year.
Under a continuous accounting system there is no end of year in the sense described above. Part of any volume of water that an individual does not use one season may be carried over to the next season. There may be certain limits on carryover as defined by a set of continuous accounting rules for a particular valley.
It may also be possible to draw against water expected to be available in the next year. Once again certain limits on borrowing will be defined by the continuous accounting rules for the valley.
There are a number of beneficial outcomes of a continuous accounting system. Individual water users are able to manage their share of available water to match their business needs and are not as constrained by the seasonal vagaries of the valley supply reliability. Having such an opportunity discourages the individual to adopt a "use it or lose it" approach which could result in water being used for inappropriate purposes. The system encourages water use efficiency efforts because water saved is available for the individual's subsequent use, rather than being lost to other entitlement holders via the "pool".
A negative impact, probably slight, is that, as some unused water will be assigned to individuals, which will reduce the pool available to determine the allocation level in the following year. It is assessed that continuous accounting will reduce allocations by about 2 to 3%.
The Snowy River inquiry has reviewed the water sharing arrangements between irrigation, the environment and electricity generation. A range of options that balance these interests were prepared for governments' consideration prior to the corporatisation of the Snowy Mountains Hydroelectric Scheme.
The outcomes from that inquiry were released in October 1998.
The inquiry's preferred option increases flows in the Snowy and associated rivers to improve environmental conditions in those systems.
There will be some reduction in supply to the Murrumbidgee and Murray River systems although the water supply authorities are generally of the view that the reduction will be minimal and will be able to be absorbed through improvements in operational efficiencies.
Governments have yet to make a final decision on this issue.
Water transfers, particularly, on a seasonal basis have become a significant tool for many irrigators. Transfers are negotiated between private individuals but require the consent of DLWC.
The "market" has developed over the last decade or so, but has generally been described as immature and somewhat inefficient.
Data, on the extent of trading in recent years appears in Tables 6(a), 6(b) and 6(c).
Such water trading has delivered substantial benefits to individual water users. Buying water may allow crops to be finished satisfactorily, whilst the seller is receiving a financial benefit for water that was not going to be used, and just returned to the pool at the end of the season for the benefit of all in the following season.
A major inadequacy in the current situation is the lack of a "property right" attached to a water user's allocation. As stated earlier the allocation systems are a means of sharing and do not necessarily describe absolute quantities of water.
In the eyes of irrigator organisations property rights need to be developed for all users including the environment. If this does not occur then there is a continuing opportunity for government to allocate to a environmental regime, thereby changing the reliability (and quantum) of supply to other users, without the obligation/need to consider any form of compensation.
Irrigators see recent issues such as the CAP, environmental flows, continuous accounting and the Snowy River as being the type of issue on which government/s will make a decision that will adversely affect their access to water - and in all cases they will not receive any compensation for a certain loss in income earning potential.
The issues surrounding property rights were well spelt out in October 1995, in Occasional Paper Number 1 by the Task Force on COAG Water Reform.
Unfortunately the NSW government has been slow to act and four years on there is an even more urgent need to ensure that this issue is quickly resolved.
Again transfers while having obvious positive benefits, can also have a negative impact in that the amount of unused allocation to be carried forward at the end of the season will obviously be reduced.
The Federal Government has recently formed a Natural Resource Management Taskforce. The Taskforce is to report to Cabinet in May with proposed solutions to the Murray-Darling basin crisis as part of a broader review of natural resources management.
The Weekend Australian newspaper of 29-30 January, 2000, reported on the views of a number of experts on the basin. Those views included the following:-
These issues indicate a continuation of the pressure already in existence to wind back irrigation water use.
The Taskforce, being a Federal group, will come up against the States' rights that are deeply imbedded in the water argument (indeed such state rights are enshrined in the Australian Constitution), however if nothing else occurs it could be expected that there will be solid Federal Government support for the current views and initiatives of the Murray Darling Basin Ministerial Council.
Another issue arising in January 2000, was the issuing of a White Paper, which explains the elements of the NSW Government's proposed legislative framework for water management. The proposal includes the introduction of a Water Management Bill that is to provide legislation for sustainable water management in NSW.
The White Paper suggests that the current legislative framework (which dates back to 1912) needs to be updated to bring it into line with COAG reforms and other natural resources management frameworks operating in NSW. In particular the White Paper advocates the need to adequately provide for the recognition and preservation of environmental water.
Elements of the White Paper that are of particular interest to ricegrowing include the recognition of environmental water, establishment of "property rights" associated with the owning of water allocations and strengthening of water trading and transfer arrangements.
The prospect of legislation on "property rights", trading and transfers will be welcomed although whether the White Paper fairly responds to the lengthy debate that has occurred on these issues needs to be further examined. It may be that in any case time has run out for irrigators to establish a right that could attract compensation as it appears that the White Paper proposals give environmental water first ranking.
For instance it is advocated that the Minister will be able to adjust water entitlement conditions to achieve agreed environmental and public health outcomes. Whilst "agreed" will be the operative word in the political sense, it seems as if the Minister will be able to taketh in the one hand and not have to giveth with the other.
The White Paper requires the most vigilant attention from anyone who is associated with the water industry in NSW.
For the Murray Valley historical water use has been about 110% of entitlement.
Removing access to off-allocation plus the CAP are estimated to reduce the average entitlement to 92%. Other government initiatives could reduce that further e.g. Snowy 5%, other policy reforms 5%.
Despite such downward pressures on availability, at the end of the 1998/99 irrigation season many rice growers had substantial unused water allocations. Many of these same irrigators had either reduced irrigated areas or purchased water early in the season, expecting shortage. It seems there was a lack of understanding of what the new arrangements meant (i.e. some farmers assumed that the allocation announced was on a similar basis to previous years) or the expected drought was much less severe that the farmers expected (probably influenced by the new arrangements which led to initial very low announced allocations). The effect was that farmers over-estimated the actual risk and ended up with surplus allocated water.
As the arrangements change then the data that an individual uses to make his assessment on likely water availability also changes. There is an urgent need for systems to be developed that will assist the irrigator's risk assessment approaches to become more accurate.
The most critical element necessary to give such risk assessments integrity in the long term is to ensure that title to water is secured. At least then if water is to be "taken away" there will be the potential for compensation, and conversely an irrigator may seek to enter the market to purchase, and then will know exactly what is being purchased.
A number of studies have attempted to identify irrigator response predictions to substantial reductions in water supply. Not surprisingly rice, as a large unit water user, is nominated by many irrigators as an activity that might be substantially reduced. The record as shown in Tables 4(a), 4(b) and 4(c) appears to indicate that all activities will be reduced by similar amounts - that is the proportion of water allocated to a crop seems to stay roughly the same. Such a response belies again the consistent financial return that is generated by growing rice.
The overall scenario is further explored for the Murrumbidgee in Tables 7 and 8. Table 7 describes the current total allocation position while Table 8 shows deliveries of general security supplies over the last 11 years.
Verbal advice from the DLWC indicates that based on modeling of long term average diversions for the Murrumbidgee a "typical" supply year in the future can be described as follows:-
Typical Water Supply - Murrumbidgee
Future "typical" year |
Current allocations (from Table 7) | |
General Security |
1673 |
2092 |
High Security |
160 |
317 |
Supply losses |
353 |
373 |
TOTAL |
2186 |
2782 |
For general security, which includes water for ricegrowing, the data for a future "typical" year indicates an allocation of 80% (i.e. 1673 ÷ 2092).
However as Table 8 shows general security usage has rarely exceeded 100% of entitlements so the "real" reduction will on average be less than 20%.
