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STANDING COMMITTEE ON REGIONAL AUSTRALIA
15/03/2011
Impact of the Murray-Darling Basin Plan on regional Australia

CHAIR —Welcome. Although the committee does not require you to give evidence under oath, I should advise you that this hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the respective houses. We have received a written submission from you. Do you have any additional material? Do you want to make a few introductory comments and then take questions in relation to your submission?

Mr Jonson —We do have some material to table in terms of introductory comments. Thank you very much for the opportunity. I am going to make it quite quick. We have made a submission and this exercise was to allow you to talk to a few more of the irrigator representatives. I tender apology for the Condamine irrigators who could not make it down here today. They sent you a submission over the weekend and I have that with me so we can cover that.

The main thing I just want to impress upon you is that in terms of the pathway you are looking for, the criticality for us is a Basin Plan that explains and justifies environmental needs and the magnitude of those needs and where generally they are required. That is critical if we are to deliver the sorts of things you are looking at: the on-farm improvements and the buyback. If we do not have the plan that give us that specification and that gives it credibility, then a willing seller is not someone you are going to find. It is a critical issue to get across and it is important, particularly in this neck of the woods where we are very flow-based. It is not stored water; it is flow-based water. Also, obviously, we want removal of uncertainties in the legislation and a plan in terms of going forward. The other two speakers will bear out the detail. Firstly I will introduce Frank Deshon to give you comments from the Dirranbandi side of the area.

Mr Deshon —Thank you, Chair, and thanks all for taking the time. I represent Smart Rivers from the Dirranbandi area that has a cross-section of members. We have members who are graziers, feedlotters as well as irrigators and dry land farmers. We support a plan and have always supported a Basin Plan. We were the very first people to come to the table years ago with the Queensland government to formulate a plan which works for the benefit of all of us. It is a certainty that we need in our area to promote investment in our towns and our farms. To date, it has been a shame that the current process has not instilled the confidence and has kind of put the cart in front of the horse. In formulation, every plan has got to be based on some healthy science. Smart Rivers recognised that years ago and started an ambitious project where we started monitoring and engulfed the services of an independent scientist. To date we have spent $1.93 million checking the health of the three rivers, the Culgoa, the Narran and the Bokhara, that run through our area that flow into New South Wales. It is a process we support and we are keen to be involved in a balanced plan that provides for security and sustainability for all businesses in our region. I will hand over to Mr Todd to get into the other parts.

Mr Todd —Firstly welcome to St George. We have a plan that has a good scientific base. We do want the environment to be right for the future; we want it to be right for our kids and their kids, so we have got some science down. We have got a plan that says what we need to do and how much remedial action needs to be taken. We then have to look at the tools that are currently available to us with buyback, the Healthy HeadWaters Water Use Efficiency Project, and there are some timing issues, the 2015 versus the 2019 issue. If the cuts are required to be dramatic, then obviously there might be some help for the local shires over and above the other measures that are needed.

If just go back to buyback; the Queensland version of water infrastructure improvement is called Healthy HeadWaters. The balance between those, to me, is critical. If you go all down the buyback track, obviously as Mr Deshon and Councillor Stewart alluded to, I do not think what some people are saying is right, somebody will be off to the coast; all they will be doing is retiring debt because there is a lot of debt here after 10 years of drought. We are a reasonably new irrigation community. A lot of money was spent and then we had drought so the debts have mounted up. If we did have some buyback money it would go towards debt, which is a good thing. But, if we use the Healthy Headwaters money and we get the water back for the environment via water use efficiency measures, then some of Councillor Stewart’s concerns are allayed because there will be money getting spent in the district on deeper storages and different types of irrigation. So, everybody is a winner out of the Healthy HeadWaters type system. The balance between those two is absolutely critical.

Regarding security for everybody going forward, we hear the statement that there will be no compulsory acquisition and we will get water only from willing sellers. That statement has obviously been made in political campaigns leading up to elections to give some confidence to irrigators and bankers alike. If that statement is in fact true, then that needs to be enshrined somewhere so that those people who are living out there with their water entitlement as their base and major asset can have some confidence that they are not going to have it ripped off them at some point in time. That creates great undermining of confidence both through our financiers and any potential investors in the area.

Mr Johnson just touched on it briefly that the legislation is still of serious concern to us. Many of us have been down to Canberra to the sessions about the Murray-Darling Basin Plan, et cetera. At the start when we were going down there we were getting told in no uncertain terms that this was a single bottom line plan. It is the same legislation controlling it now and all of a sudden it is a triple bottom line plan. So, one of those statements has to be incorrect and we need to know which one is correct. If the legislation does not allow it to be a proper triple bottom line plan then the legislation needs to be changed prior to us doing all this work and ending up in the High Court and getting it thrown out and having to start again, because that would be the absolute worst outcome. We would like to state that brief so that we could promote as much discussion as we could, thank you.

Mr SIDEBOTTOM —I am just referring to your submission and thanks very much for that. I am really interested in this Healthy HeadWaters Water Use Efficiency Project that you have been talking about and you have been referring to some work being done by the Queensland government relevant agencies. Can you elaborate a little bit more on that? Are there specific examples of projects that you would highlight that could be looked at?

Mr Todd —Thank you for the question. Healthy HeadWaters is currently in pilot project stage so there is a significant amount of money about to be spent in pilot projects in the Lower Balonne and border rivers. What happens in the Healthy HeadWaters system is that you tender a certain water saving and the government pay a percentage of the project. In quite a few of them the government pays 80 per cent of the project, the proponent pays 20 per cent of the project and the water savings are split equally back to the environment and to the landholder.

At the end of the day, as would have been highlighted by the Productivity Commission, the water costs a little bit more than buyback, but it actually solves a few other problems like the local community retaining productive capacity via a mini stimulus as the money is getting spent in the community. To me, if there was enough money available, you would say no buyback and all to productivity but obviously it would then reduce the amount of water you would get for your bucks. It has got to be a balance, I think.

CHAIR —If I could just follow up on that, other than the 7,000 megalitres that the mayor mentioned, what are the other water use efficiency proposals that you could see in this from St George to the border, for instance?

Mr Todd —My opinion is that the greatest single water saving thing that can happen here is all the storages get deepened, which is hugely expensive. To be really simplistic, if you do not go amalgamating waters which is something that we do, if you had a storage eight metres deep and you lose two metres, you lose 25 per cent of it. Most of the storages in the district would probably average three metres so if you lose two metres you lose 66 per cent of it. That is the magnitude of difference; evaporation is our greatest killer. That is one of the areas in which a lot of work can be done. Half those savings could go back to the system and the community will retain its productive capacity.

CHAIR —The other issue I will just raise briefly is that a number of people have talked about the environmental water holder who is going to hold buyback water on behalf of the government. A lot of the modelling has been done on long-term average circumstances but in the non-average years the potential has been raised for the environmental water holder to actually temporary trade water back into the productive market; has QFF got a view on that?

Mr Jonson —We definitely would not oppose that sort of temporary arrangement provided it was truly surplus water. Obviously in our systems environmental water controlled through the plans are a totally separate issue and not available to trade back. But, given that the environmental water holder holds an entitlement and if there was truly spare water, then I cannot see us opposing the availability of that water for trade. That is part of a trading market.

Dr STONE —The Healthy HeadWaters project that the Queensland government is running is in a pilot stage. The equivalent is now available through the Murray-Darling Basin; we called it the National Water Initiative under the coalition. It is still called that is it not, the $10 billion 10-point plan? A tranche of that has been put out for farmers to identify a water savings project. It was supposed to be in partnership with a government authority perhaps or a water provider or the supplier of water. Is this ringing bells for you? Were you able to access that funding? There were several billion dollars put aside, I think. The first round went out last year; each state in the basin got some of that money. Did you participate? Did any of your communities or farmers participate in that round? Were they successful in getting dams deepened as part of water savings measures? It does not seem to be ringing any bells?

Mr Jonson —No, the only program that we are working on is the Healthy HeadWaters program which deals with on-farm water recovery and, to a degree, the issue of in-scheme water recovery. On-farm means farms that are in non supplemented areas, and in-schemes are the same thing. There have been no other programs that we have been participating in.

Dr STONE —Perhaps Queensland did not participate, I am not sure?

Mr Todd —I think we probably are participating. SEWPaC and DERM do this Healthy HeadWaters program. In New South Wales both programs, buyback and the other one, are done by SEWPaC. The Healthy Headwaters people would be answering to Richard McLoughlin and his crew, of which I think Mary Harwood is in that group.

Dr STONE —So, there is federal funding in your Healthy HeadWaters?

Mr Todd —It is all federal funding, but administered by DERM.

Dr STONE —It is the same project as we have had in Victoria and so on but under another name; and the first tranche went out last year?

Mr Todd —I would say so, yes.

Dr STONE —It is a Commonwealth funded water initiative.

Mr Jonson —It is the Water for the Future program, $5.7 billion, and the Healthy HeadWaters is the state component of that. There is also the buyback component. What we are talking about is a program for about 15 gigalitres, for which about $36 million is on application. That is due to be announced.

Dr STONE —Victoria’s share of the first tranche was about $23 million, I think, so that sounds about the same. In terms of the Private Irrigation Infrastructure Operators program, Sun Water—I think that is what you call your local system here—would not be eligible because it is Queensland government auspiced? Are you eligible for the Private Irrigation Infrastructure Operators program?

Mr Jonson —That is a different program. Sun Water is eligible under Healthy HeadWaters. It just has not been feasible to deliver what you might call efficiency gains in a number of the schemes at this point in time. That is still under discussion.

Dr STONE —Why is that? Have you not identified savings?

Mr Jonson —I think it is a range of issues. It is one of the issues I highlighted in our submission that you should ask Sun Water. Clearly in the early phases it was cost, it was critically a value for money issue in terms of delivering entitlements. In other cases it may have been because the savings delivered, which would have been through a works and measures type arrangement, were not an entitlement that could be accessed by the Commonwealth; it was actually a flow in the river that belonged to the government. That is one of the constraints in this neck of the woods with a very predominantly flow based system instead of a stored system. You have got to get over those sorts of problems. In other words, you could, for example, install better outlet works in a damn such as Coolmunda, which would allow you to pulse your environmental flows to produce savings, but you have then got to take them out of a flow, which is a flow in the river that is not owned by Sun Water. Hence the project did not get up at that stage. Whether that comes back to the ledger with a new thrust is another matter but it is totally different to down south, which is a stored water arrangement.

Dr STONE —Would you argue that more funds should be put into something like your Healthy HeadWaters, which is on-farm water use efficiency measures, rather than on the buyback?

Mr Jonson —No. I think what we are saying is at this stage there is a fairly significant skew towards the on-farm because we have got $36 million on the table and out of 15 gigalitres only six gigalitres has been bought in buyback at this stage. We are way behind the ledger. We are saying that critically, you have got to get those two things into balance. As Mr Todd said, an irrigator needs money through buyback to participate in water efficiency if he is going to meet the recurrent costs of running travelling irrigators or whatever he is going to do. You have got to have that good nexus between the two plans, so we have got to get the buyback exercise moving. At the present time we are highly worried about that aspect of it. This is why we are emphasising the plan: does that give greater certainty to SEWPaC so they can actually spend some money up here, because we are a bit worried that they are dragging their feet for some reason. In terms of the value of that money for the environment, as the previous speaker has talked about, is the question of the ability to deliver water for specific environment needs. It is a very significant concern up here as to whether we are going to get something that will encourage willing sellers. That is why we are hammering the plan, because we see that as probably the critical issue under a no regrets planning process. We want to move out of no regrets to something that is much more focused.

Dr STONE —Previous speakers—and you have probably heard them here today—have said that in this current environment, after 10 years of drought, so-called willing sellers are likely to be debt stressed sellers with the returns going to the bank rather than people just wanting to spend more on their property. Is that a fair scenario?

Mr Todd —I would say that may not necessarily be a bad thing, because those irrigators might not hang around if we get another three years of drought and they have not done some reduction to their gearing. I think the whole irrigation industry probably wants to have a good look at where it is financially. If we get a kick up in interest rates or something like that we are not sustainable. A portion of buyback is sort of good for irrigators but the Healthy HeadWaters satisfies the community side of it.

If you think about the Healthy HeadWaters side of it, if you are getting 80 per cent funding from the government, that mean 20 per cent funding has got to come from the proponent. If you go to a bank manager around here to see if he is going to flick 20 per cent of a major project to any irrigator after 10 years of drought then he is going to laugh at you; it is not going to happen. You have got to have a bit of both going on and make it balanced throughout the community.

It has got to be remembered back at the start of all this that the science has got to justify the need to do it. Then I think we can move down this track without too much grief, providing the money keeps flowing and people have got security to their entitlement, and we can get through this plan. We are at the end of it, hopefully we are nearly finished with water planning because we have done it up to here for 10, 11, 12 years; we are sick of it. We have had enough.

Mr Deshon —I will just read you out what Mr Todd said: the money to date has only been spent on purchasing sleeper and dozer licences. There has not been value for money from an irrigator’s perspective with infrastructure attached because we all have on-farm storages, unlike other basins, where we hold our water for consecutive years. That is why we have got the element of evaporation with which we have to combat.

CHAIR —I can understand the logic of that scenario of tying strategic buyback to water usage but there are a lot of people who would not. In fact, we have had the reverse of that argument put to us on a number of occasions.

Mr Todd —Whether it actually has to be tied on a personal basis or whether it can be on a district basis can be investigated, but if we do not tie it up somehow we are not going to protect our community. If we have not got a good chunk of Healthy HeadWaters infrastructure improvement stuff going on, Councillor Stewart is going to have some grief and the community is going to have some grief. We have got to get the balance in there where we get a bit of both. I actually tried, way back, to get them tied together, and we had no chance, especially for Queensland where one is done by DERM and the other by SEWPaC. They have just got to look at that money as a chunk and spread it around, even if it is only within the valley according to whatever the ratio. There needs to be some discussion about that and a plan for that, rather than just one going off there and one going off there.

CHAIR —I am not arguing against your logic. I agree with your logic. You can have a win-win without a loss.

Mr Todd —That is right.

Mr MITCHELL —In your submission you mention government significantly increasing investment in irrigation research. Has industry itself done that already? Has it looked through different programs? Have you got examples of where that sort of research could bring savings?

Mr Jonson —I suppose the research is done within the various bodies: Cotton Australia, Canegrowers and the Growcoms. A lot of those have their own research bodies so there is a weight of research being done, as well as the CRC for Irrigations Futures. There is just a need for support. I think one issue there was that we are looking at a very different situation with the drawdown and the need for research to match that winding back type of arrangement, rather than a growth type arrangement. You have got to get more efficient is where that argument is coming from.

Mr Todd —I would probably just add to that. There has been a lot of investment with Cotton Australia and their best management practices. In this district I think virtually zero tail water runs off all of our farms. It is all recycled except if you get a massive storm event. Generally, under best management practice, we recycle all of our water. People have invested in water saving infrastructure to the ability of their financial position. We want to get more out of the water because if we get more production we get more cotton and we get a better return. Everybody wants to go there, but we are pretty hamstrung with the gearing that is currently in the area.

Ms LIVERMORE —Your submission really emphasises an engagement process with irrigation communities. Can you just spell out briefly what that would look like for you? What would be your minimum key points for that to be successful?

Mr Jonson —I will get Mr Todd to talk more specifically about how that would apply here. The comment we were making was that the whole of the guide process was at arm’s length; we really were not involved in it. There was also the same problem with that link-up with buyback or water recovery; it was an arm’s length, we will buy it if we want it type approach. Really, they were not coming and talking to irrigators about what was the best idea. We just heard a previous example of what that would be. I think Mr Todd might want to talk a little bit more about that.

Mr Todd —Regarding the quality of the engagement we had, the basin has tried, and we have been down to Canberra three times I think. If anybody went to any of those sessions in Canberra they would be absolutely disgraced after what we had as a Queensland planning process and the way we were engaged, through to a ministerial advisory process; it was a process that really worked. We got around the table and we had scientists come in and give us opinion. By contrast, when we went to Canberra, we got talked at generally by people who did not know what they are talking about. We went down for a technical reference panel and the quality was just terrible; they just did not know what they were talking about. Firstly, they have got to get their information right; and secondly, they have got to come to the right people and spend time. It is not an easy process, but they have got to spend the time and do it properly and not talk at us because there is a lot of information out there. From what I could see, they had not taken any information from the Queensland government who have been through 10 years of doing this in the Lower Balonne so surely they would have some knowledge. They do have some knowledge. They run that system pretty well. They had not engaged with the Queensland government to any great extent and they were trying to run this little mystery program down in Canberra, and even sort of hiding it from the Queensland government, as far as I could see. It just did not work.

Mr Deshon —At no time has Smart Rivers ever been approached with any input into the Basin Plan at all.

CHAIR —We have heard that same complaint in other states; it is not just Queensland saying that. It seems there has not been an effective relationship between the authority, the river managers in the various states, the catchment management people and the various people who actually live there. I think that is coming through loud and clear. I think the new chairman of the Murray-Darling Basin Authority is getting that message very loudly too.

Mr Jonson —Getting back to Ms Livermore’s point, what we were seeing was that if we did have a better specification of where and how much the environment water would be needed in a place like the Lower Balonne, a lot could be done with the irrigators in the context of willing sellers, looking at how that water is met and the value of that water. That was the sort of thing we were talking about. It is only predicated on the basis that you have something that gives you some definition of what they want in terms of environment water. That is what we were referring to, without getting into the detail of it.

Mr Todd —When this first came out, we at Smart Rivers went to the SEWPaC or Mary Harwood’s crew and said, ‘Look, if there is a cut needed we would happily survey all our irrigators and see if we could get a relative percentage off everybody’, which would give everybody a bit of a crack at getting a little bit of debt reduction done, and give everybody a piece of the cake. We thought we could get something if the cuts were minimal. We were expecting something under 10 per cent and we thought we could have got that over the line. Similar to what Dr Reid said, were not able to have that conversation. I understand they are constrained, but anyway, it was frustrating.

Mr Jonson —That was supported by the department up here too, that they would do the run on it and the modelling of it but the arm’s length, no regrets part, no, and that is still what they are saying.

CHAIR —Thank you very much for taking the time to be here. There were some very constructive comments that we will be able to take on board. There will be a copy of what you have said in Hansard, so if there are errors or you would like to add something, feel free to do so.

Mr Todd —Thanks for taking the time.

CHAIR —Thank you for coming. I now welcome representatives of the Condamine Alliance to today’s hearing.

[4.00 pm]