Water Policy

Water governance arrangements in Australia are complex and can be difficult to navigate through, particularly as the policies seem to be under constant modification. This summary will set out the national and relevant state water governance arrangements by first addressing the national context and then placing the state policies within that context. It includes the relevant legislation and institutions that frame the management of water in Australia. A list of useful resources for further information is also included.

National Governance Arrangements

1. Constitutional Arrangements
   Under the Constitution, management of river systems is a State Government responsibility. The relevant sections are:
• section 98 that outlines the power of the Commonwealth to legislate with respect to trade and commerce because navigable rivers can be used as highways for those purposes and
• section 100 which limits this trade and commerce power of the Commonwealth by stating that it shall not 'abridge the right of a state or its citizens to the reasonable use of the water of the rivers for water conservation or irrigation'
2. National Government Initiatives
   There are three policy spheres that make up the context of national water governance arrangements. These are the
• National Water Initiative
• The Murray Darling Basin Initiative
• The National Plan for Water Security

i. National Water Initiative
All current water policy reform is taking place within the context of the National Water Initiative (2004). This is an Intergovernmental Agreement developed via the Council of Australian Governments (COAG) in response to a number of reports that identified the need to increase the productivity and efficiency of Australia's water use while ensuring the health of its river and ground water systems.

The aim of the National Water Initiative (NWI) is 'a nationally-compatible, market, regulatory, and planning based system of managing surface and groundwater resources for rural and urban use that optimises economic, social and environmental outcomes' (NWI website: www.nwc.gov.au/NWI/index.cfm) . Its key elements include:

• clear and nationally-compatible characteristics for secure water access entitlements;
• transparent, statutory-based water planning;
• statutory provision for environmental and other public benefit outcomes, and improved environmental management practices;
• complete the return of all currently over-allocated or overused systems to environmentally-sustainable levels of extraction;
• progressive removal of barriers to trade in water and meeting other requirements to facilitate the broadening and deepening of the water market, with an open trading market to be in place;
• clarity around the assignment of risk arising from future changes in the availability of water for the consumptive pool;
• water accounting which is able to meet the information needs of different water systems in respect to planning, monitoring, trading, environmental management and on-farm management;
• policy settings which facilitate water use efficiency and innovation in urban and rural areas;
• addressing future adjustment issues that may impact on water users and communities; and
• recognition of the connectivity between surface and groundwater resources and connected systems managed as a single resource. (www.nwc.gov.au/NWI/index.cfm)

The NWI commits all State governments to developing plans that include steps and timelines for implementation of key actions under the NWI. At first, accreditation of plans and assessment of NWI outcomes was carried out by the National Competition Commission. Large productivity grants for the States were tied to the achievement of the prescribed outcomes.

The National Water Commission now undertakes these assessments and grants are no longer tied to the outcomes. The National Water Commission was established under the National Water Commission Act 2004 and (upon change of Federal Government) is a portfolio agency reporting to the Ministers for Environment and Climate Change and Water Resources. Its role is to drive the national water reform agenda which it does by providing advice to COAG, the Commonwealth Government and the States on national water issues (for more information on the Commission see their website: http://www.nwc.gov.au/about/index.cfm)

ii. The Murray Darling Basin Initiative
The Murray-Darling Basin Initiative (1992) is the partnership between the governments and the community of the Basin that has been established to give effect to the 1992 Murray-Darling Basin (MDB) Agreement. The purpose of the Agreement is 'to promote and co-ordinate effective planning and management for the equitable, efficient and sustainable use of the water, land and other environmental resources of the Murray-Darling Basin' (from MDBC website: http://www.mdbc.gov.au/about/murraydarling_basin_initiative__overview).

The Murray-Darling Basin Agreement 1992 replaced the 1915 River Murray Waters Agreement. It grew out of increasing awareness of the problem of salinity (both dryland and aquatic) in the Basin. The management of water quality as well as water quantity became a priority. The integrated nature of this problem, one that required solutions that involved improved land management and water management strategies, as well as coordination across jurisdictions meant that a new agreement was needed. Various State government Murray Darling Basin Acts (e.g. Murray Darling Basin Act NSW 1992; Vic 1993; SA 1993 and QLD 1996) give the Agreement full legal status in each of the Basin states.

The Agreement provides for the constitution of the:
• Murray Darling Basin Ministerial Council: this is the primary body responsible for initiating policy direction within the Basin. It comprises of the ministers responsible for land, water and natural resources from each of the contracting governments.
• Murray Darling Basin Commission (MDBC): this is the executive arm of the Murray Darling Basin Ministerial Council. The Commission advises the Council on matters related to the use of land, water and natural resources within the Basin as well as implementing decisions taken by the Council, for example the Living Murray Initiative which aims to deliver environmental flows to six 'icon sites' along the Murray River. The Commission is an autonomous organisation responsible to each of the contracting governments as well as to the Council, but it is neither a government department nor a statutory body of any individual government
• Community Advisory Committee which provides the council and Commission with advice from the Basin communities as well as acting to inform the community about the Council and Commission's work and decisions

Importantly the MDB Agreement also sets out the arrangements for sharing the water of the River Murray between NSW, Victoria and South Australia. Under the agreement, all of the water flowing into Lake Hume on the Murray River, Dartmouth reservoir on the Mitta Mitta River, the Menindee Lakes on the Darling River and into the Murray River from the Kiewa River upstream from Albury is shared equally between NSW and Victoria. From these sources, NSW and Victoria generally provide in equal portions South Australia's entitlement flow and additional dilution flow. The volume of South Australia's annual entitlement flow is 1850GL. If certain trigger volumes are exceeded in the Menindee and Hume and Dartmouth Reservoirs, South Australia is entitled to additional flow of 3000 ML to mitigate the effects of surface water salinity (for more information see Background to Water Management in the NSW and Lower Murray-Darling River Systems available at http://naturalresources.nsw.gov.au/water/state_mm_murr_water_quality.shtml)

These general water sharing arrangements can be amended when periods of 'special accounting' apply. These are triggered when either NSW or Victoria are predicted to hold a reserve volume of less than 1,250GL at the end of May in the water year. Due to the extremely dry conditions of the past two years special accounting currently applies to the state water sharing arrangements.


iii. The National Plan for Water Security
Announced by then Prime Minister John Howard in January 2007, this is currently the most contentious of the three national policies due to its original proposition that the States of the Murray Darling Basin refer their constitutional powers for management of water to the Commonwealth. South Australia, New South Wales and Queensland agreed to this but Victoria did not. The Commonwealth went ahead with legislation (the Water Act 2007) to implement the plan, although with some modifications to the original statement.

As it stands, currently the National Plan for Water Security provides for a $10 billion package designed to ensure rural water use is placed on a sustainable footing over the next decade. It aims to significantly improve water management across the nation with a special focus on the Murray-Darling Basin.

The Commonwealth Water Act 2007 was passed by Parliament on 17 August 2007 and is the key mechanism through which elements of the national water plan will be implemented. It is intended to work in concert with the National Water Initiative to achieve national water management outcomes (see also http://www.environment.gov.au/water/index.html)

The key elements of the Act are

• Establishment of the Murray-Darling Basin Authority
• The Basin Plan
• Commonwealth Environmental Water Holder
• A new role for the Australian Competition and Consumer Commission (ACCC)
• An expanded role for the Bureau of Meteorology

The Murray-Darling Basin Authority has functions and powers, including enforcement powers, needed to ensure that Basin water resources are managed in an integrated and sustainable way. The main functions of the Authority include:

• preparing a Basin Plan for adoption by the Minister, including setting sustainable limits on water that can be taken from surface and groundwater systems across the Basin;
• advising the Minister on the accreditation of state water resource plans;
• developing a water rights information service which facilitates water trading across the Murray-Darling Basin;
• measuring and monitoring water resources in the Basin;
• gathering information and undertaking research; and
• engaging the community in the management of the Basin's resources.

The Authority will report to the Commonwealth Minister for Climate Change and Water and will comprise a full-time Chair and four part-time members.
The Basin Plan is to

• set limits on the amount of water (both surface and ground water) that can be taken from Basin water resources on a sustainable basis - known as long-term average sustainable diversion limits. These limits will be set for Basin water resources as a whole and for individual water resources;
• identify risks to Basin water resources, such as climate change, and strategies to manage those risks;
• ensure that any State water resource plans comply with the Act;
• develop an environmental watering plan to optimise environmental outcomes for the Basin by specifying environmental objectives, watering priorities and targets for Basin water resources
• develop a water quality and salinity management plan which may include targets; and
• develop rules about trading of water rights in relation to Basin water resources.

The Commonwealth Environmental Water Holder will manage the Commonwealth's environmental water to protect and restore the environmental assets of the Murray-Darling Basin, and outside the Basin where the Commonwealth owns water. The Australian Government's water holdings will include its share of water savings made through the programs of the National Water Plan. In the Murray-Darling Basin, these holdings will be managed consistent with the Environmental Watering Plan that will be developed by the Murray-Darling Basin Authority.

Australian Competition and Consumer Commission (ACCC)
The Water Act 2007 provides the ACCC with a key role in developing and enforcing water charge and water market rules along the lines agreed in the National Water Initiative. The aim of these new functions is to ensure that water markets are able to operate freely across state boundaries and that perverse outcomes from inconsistent water charging arrangements are avoided.

Specifically, the ACCC will provide advice to the Commonwealth on water charge and market rules to apply within the Murray-Darling Basin and will be responsible for enforcing these rules. The rules will ensure that charges are set efficiently and that participants in the water market act competitively. The ACCC will determine bulk water charges.

Bureau of Meteorology
The Act gives the Bureau of Meteorology water information functions that are in addition to its existing functions under the Meteorology Act 1955. This will include publication of a National Water Account and periodic reports on water resource use and availability. The Bureau will also be empowered to set and implement national standards for water information. A major outcome of the Bureau's work will be increased transparency, confidence and understanding of water information.

As of 26 March 2008 the Basin states (including Victoria) and the Commonwealth have signed a Memorandom of Understanding (MOU) (which will lead to an Intergovernmental Agreement to be signed in July 2008) which agrees to the merger of the Murray Darling Basin Commission and the Murray Darling Basin Authority. The Authority wiil take over the current functions of the MDBC and will be responsible for developing, implementing and monitoring the Basin Plan which is to be provided by 2011. The States retain the right to review the Plan. The States also retain their power to allocate water within their borders but under a new cap on Basin wide allocation which will be specified in the Plan. Current state water shares as defined by the Murray Darling Basin Agreement will be preserved until their expiry date.

The MOU contains a commitment to provide for critical human needs and arrangements to allow South Australia to store water in upstream dams to ensure there is enough water for Adelaide and towns reliant on the Murray for drinking water. As well, it give in principle agreement for the Commonwealth to fund the second stage of Victoria's Food Bowl Modernisation project, with water savings to be shared bewteen irrigators and the environement.

State Water Governance Arrangements

1. Victoria

The two principal water policy and planning instruments in Victoria are the Government White Paper Securing Our Water Future Together and the Water Act 1989.

Securing Our Water Future Together is a statement of government action on a wide range of water management matters. It includes an integrated action plan for the next 50 years to secure reliable water supplies in Victoria, while meeting the needs of the environment (Securing Our Water Future Together p. 11)

The Water Act 1989 provides the legislative framework for the planning and management of Victoria's water resources including water trading. The State Government retains the overall right to the use, flow and control of all surface water and groundwater on behalf of all Victorians. The Minister for Water (currently Tim Holding) is responsible for allocating water at the bulk level through the granting of bulk entitlements. The Minister is supported in this role by the Department of Sustainability and Environment.

Bulk entitlements define the amount of water in the consumptive pool and contain rules for sharing available water in the system. In regulated systems bulk entitlements are issued to water corporations for consumptive use including water allocated to individuals under licence, water right and supply by agreement. There are seventeen water corporations in Victoria constituted under the Water Act 1989; as well as three state owned companies established under the Corporations Act 2001

In Victoria a bulk water entitlement is also held for the environment. This is managed by Catchment Management Authorities (CMA) under the direction of the Minister for Environment. Victoria has ten CMAs.

Victoria is currently developing Regional Sustainable Water Strategies. More information on the important discussion paper for the Northern Region Sustainable Water Strategy that includes Sunraysia is given at the end of this report.

Water licences
There are two types of private water entitlements. Most water used for agriculture comes in the form of water rights held by farmers in irrigation districts. Licences for individuals to pump or divert water out of streams are another form of entitlement.

Since July 2007 in Victoria (and after an amendment to the Water Act in December 2006) these entitlements have been 'unbundled'. Unbundling separates a water entitlement into a

• water share with high reliability and low reliability if irrigators previously had access to 'sales' water
• a delivery share and
• a water use licence

A water share is a legally recognised secure share of water available for use in a water system. Unlike the previous entitlement, water shares can be owned separately from land and can they can be sold or leased separately from land.

A delivery share gives an irrigator an entitlement to have water delivered to land in an irrigation district and a share of the available water flow in a delivery system. It is linked to land and stays with the property if the water is traded away.

A water use licence allows an irrigator to use water for irrigation. It includes an annual use limit and recognises approved drainage. It is attached to a specific parcel of land.

Unbundling allows for greater flexibility in water trading and the conversion of the previously insecure 'sales' water into a low reliability but legally protected 'low reliability water share' that can be traded either permanently or temporarily. In return for this increased security, 20% of the available 'sales' water pool has been set aside as an environmental water reserve. This helps Victoria meet its environmental obligations under the National Water Initiative and the Living Murray Initiative.

Allocation Policy
Victoria's seasonal allocation policy is relatively conservative. The following hierarchy applies when allocating water within a season:

1. Water is first set aside to fill the irrigation channels and cover river and distribution losses (from seepage and evaporation)
2. Allocations are made for high reliability water shares
3. Water is set aside in a communal reserve to ensure the following season's high-reliability water shares can be fully allocated.
4. Allocations are made for low reliability water shares for the current season

There is usually no individual carry over of allocations from year to year in Victoria but due to the current dry conditions, carry-over was allowed into the 2007-08 water year and is continuing for the 2008-09 season.

2. New South Wales
3. South Australia