Basin Plan risks borne by people trapped in reform firing line

Failure to deliver the required volume of water to the environment will result in punishment for the people who didn't want it in the first place.

That's the fatal conundrum of the complicated and convoluted water reform.

River towns are struggling to adjust to their new economic reality with less agricultural activity

If the Basin Plan lives up to political promises, the remaining water recovery can come from two off-farm sources - and avoid unpopular irrigation buybacks.

But the big worry for communities is that if the state governments, federal bureaucracies and the Murray Darling Basin Authority don't finalise the water recovery process by 2024 then a doomsday clause lurking in the legislation kicks in - with direct irrigation buybacks to make up the shortfall.

To date, there's been around 2000 gigalitres of buybacks. There's more than 1000GL of recovery still to go before the full whack of the 3200GL target is achieved.

With just five years left to complete a mountain of work the task increasingly looks like pushing water up a hill.

Here are the big issues that could derail the plan.

Irrigation towns hung out to dry

State governments are responsible for 'supply measure' infrastructure works and to date, they have released minimal details of 37 individual projects which, if completed, could reduce the volume of water to be recovered from irrigation by up to 605GL.

Known in Basin Plan jargon as sustainable diversion limit adjustment mechanisms, supply measure projects are designed to move the increased volumes of environment river flow more efficiently and reduce water losses as more water flows downstream.

The states are also working with the Commonwealth on filling the 450GL 'upwater' bucket for increased flows across the South Australian border.

The unpopular on-farm buybacks have been ruled out for upwater recovery in a deal cut between state and federal governments in December last year.

But significant questions remain over where the remaining water will come from, and how the extra water can be safely and effectively transported downstream without major flooding and other unintended consequences.

State of confusion

In January, the Productivity Commission issued a stark warning in its five year progress assessment of the Basin Plan.

The Commission's found that the MDBA was tasked with conflicted roles and said it should be split into two independent bodies - a corporation offering policy advice and a regulator to check governments were playing by the rules of water recovery.

"These conflicts cannot be successfully managed through internal controls. In its current form, the MDBA cannot be a trusted adviser to Basin Governments and a credible regulator," the report said.

The Productivity Commission said the states were worryingly behind on design of the 37 supply measure projects and with so much at stake for the environment and communities, there should be an amnesty on the 2024 deadline to allow the states to make sure they didn't incur more buybacks.

The MDBA rejected the Productivity Commission's recommendation at the time of the report.

Last week the Basin states issued a belated response to the through the Council of Australian Governments, which did not adopt key recommendations.

The Ricegrowers' Association reacted angrily to the states' response and said in a statement that governments had decided to "abandon Murray-Darling communities when an opportunity for leadership presented itself".

Now the most challenging part of the reform was to hand, that is the last 1000GL of recovery, the government's had "kicked the can down the road", Ricegrowers said.

Downside in the upwater

Similar question marks hang over the recovery of 450GL of upwater.

The Basin Plan's initial strategy for upwater recovery was for 450GL of voluntary water buybacks and infrastructure investments, where irrigators swap their water entitlements for on-farm upgrades.

The deal between Basin states last year banned upwater buybacks and now created strict conditions all but rule out on-farm water recovery, as a proponent must prove their project proposal would not diminish social or economic outcomes in the the local region.

A report from consultants Ernst and Young to the federal government in January 2018 forecast that all the upwater could be recovered through a mix of targeted on-farm projects, savings through upgrading metering and monitoring equipment, and urban stormwater harvesting.

The forecast was theoretical, savings measures haven't been tested and it's unclear if design and implementation of the significant new recovery mechanism can be achieved by 2024.

Again, if the states and Commonwealth don't get it right, more on-farm buybacks are required under Basin Plan laws.

Another point to note, some irrigators are disappointed by the interstate deal to ban on-farm recovery - given they have missed out on the opportunity to sell their entitlement and recoup infrastructure investment.

Constraints in the relationship

Adding to concerns about supply measures and upwater delivery is the worryingly slow progress on works to ease river constraints and prevent flooding of towns and private land.

The Basin is home to 2.6 million people, a $24 billion agriculture industry, dozens of unique and iconic fauna, an $8b tourism industry and internationally significant wetlands.

The risk of damaging floods from increased flows, when 3200GL of environment water is added to the system, is perhaps the greatest hurdle to completion of the Basin Plan.

Relaxing constraints will require big building works like raising bridges and levees, modifying weirs to remove chokepoints, as well as negotiating easements where private land is inundated.

The Productivity Commission warned this task could lead to a significant deadline blow out.

In the early 2000s, negotiations to secure easements so river operators could release increased flows of up to 25,000 megalitres day from Hume Dam took almost eight years and involved negotiations with 103 landholders from Hume to Yarrawonga.

Easing constraints for the whole Basin will be radically more challenging, requiring negotiations with over 3000 landholders across five reaches of river.

Earlier this month, following resistance from South Australia, NSW Water Minister Melinda Pavey and Victorian Water Minister Lisa Neville failed to gain consensus for their request to review the MDBA's modelling of river constraints.

NSW and Victoria concerned about potential flooding when, under full implementation of the Basin Plan, there is a peak flow rate of 80,000ML a day at the SA border.

The MDBA's proposed constraints management - that is the regime of where to draw water and at what rate - would cause unacceptable flooding through some sections of the river system, they said.

NSW and Victoria will conduct their own independent peer review of MDBA constraints management.

It remains to be seen what comes of the results.

The political reaction to unforeseen impacts from liberalised inter-valley water trade is as big an unknown as the outstanding water recovery issues.

A boom in permanent plantation nut crops is driving water demand so high in the southern Murray Darling Basin that the price of water may become unaffordable for rice, dairy or even cotton irrigators, according to a report water market adviser Aither.

The federal government has commissioned the Australian Competition and Consumer Commission to investigate water trade in the Southern Basin, and it's established a community consultative committee to report back on the socio-economic impacts of water reform.

A large motivation for the reviews was highlighted by Aither when it found nut plantations have risen to dominate the crop mix of permanent planted horticulture.

The shift to permanent plantings had disrupted the traditional irrigation industry mix, which was better able to respond to variable water availability through dry years.

Around 95 per cent of the crop is located below the Barmah Choke - a narrow point in the river that restricts flow - in the lower Murray including Victorian Sunraysia, NSW Murray and South Australian Riverland regions.

Permanent plantings annual water demand is expected to hit a whopping 1555GL when all the existing and planned crops are mature.

That's 125pc more water than would be available to irrigation during a very dry year.

Reacting to the report Victorian Water Minister Lisa Neville imposed, in July, a freeze on increased water use in the lower Murray region of her state.

It remains to be seen if Victoria's ban is dropped or becomes permanent, and if the federal government weighs in after considering the reports it commissioned.

But how can government recover entitlement from industry that invested in water products in good faith? Is it willing to restrict trade to permanent plantings to preserve the viability of traditional industries like dairy? What will happen if nothing is done?

It's yet another unknown in the water reform process which may not be answered until after the 2024 recovery deadline.

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