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STANDING COMMITTEE ON REGIONAL AUSTRALIA
25/03/2011
Impact of the Murray-Darling Basin Plan on regional Australia

CHAIR —I welcome the representative from The Fifth Estate.

Mr Wiskin —Thank you, Mr Chairman.

CHAIR —Do you have any comments to make on the capacity in which you appear?

Mr Wiskin —I’m a private sector water policy and implementation adviser to the irrigation industry in the Murray-Darling system and more recently I was involved as a project director for the Pratt water study on the Murrumbidgee.

CHAIR —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 submission from you and we thank you for that. Is there any additional material that you would like to present or would you like to make some opening comments and then be subjected to questions?

Mr Wiskin —Thank you, Mr Chairman. I will just make a couple of interesting observations. I come from the private sector side of this equation. My background is as a lawyer, but I am also involved in project management for major developments, and I see some rather disconcerting structural problems with the way that the water debate and the institutional structures around the water debate are actually occurring in the Murray-Darling Basin.

I think it is interesting to have a quick snapshot of what we did with the Murrumbidgee, because we actually looked at the Murrumbidgee for the first time and tried to lift the veil of institutional obstruction and institutional arrangements that had been in place for almost 100 years. What was interesting out of that was that we identified that one-third of the flows of the Murrumbidgee—one of the most studied systems—were unaccounted water flows.

What I mean by that is that we questioned where we could not identify where the water flows were going. In the past it has been common practice by the people who run the system, who have a fairly good handle on what is extracted for production, to then make the assumption that everything else goes to the environment. We questioned that assumption and started to look at where those water losses were. At the Lowbidgee, west of Hay, we identified some 500 gigalitres of unaccounted water. Some 200 gigalitres of that water was simply evaporated in the flood plain. A significant amount of that water was also entering saltwater aquifers, so was therefore truly lost, and the water that was supposed to go to the environment—the environment being then the red gums of the Lowbidgee—was not going to the environment.

That was not just my assumption. That was work that was done by CSIRO to identify whether the environmental water was actually achieving the purpose which it was supposed to. CSIRO determined that the greatest beneficiary of those water losses or that water flow that was supposed to go to the environment was in fact the extensive growth in lignum scrub that intercepted that water before it actually got to the assets.

I see a similar situation occurring at Toorale Station where the area has been turned into a national park. The water to be released from the Toorale Station, besides costing 100 jobs at Bourke, will actually grow one of the greatest stands of lignum we have seen and the main beneficiaries will be the feral pig population, so I can see those sorts of disconnects happening again in the system here.

We identified 945 gigalitres of water for savings through private sector investments, reforms and matching crops to soils—particularly the last of those, matching crops to soils, particularly say in the Murrumbidgee irrigation area, where there could be significant savings by moving crop production, even within the irrigation area, from farms that had leaky soils to farms that had more suitable soils. That could achieve some major outcomes.

We identified $845 million worth of new investments to save water in the Murrumbidgee Valley. Then we also looked at what we could do with some of those savings in terms of improving the regional economic outlook and we identified $293 million per year of extra farmgate production that could be achieved by making some reforms, allowing the private sector to share in the savings—not to have all the savings but to share in the savings—if they were going to put the money in. We also identified $421 million of new capital investment opportunities which would have an impact of an additional 4½ thousand jobs throughout.

That was a snapshot that we did and one of the issues that really concerned us was this setting of numbers. We started to have a very close look at the modelling and it was fraught with errors. I am really pleased to see that since the Pratt water study the New South Wales government, the National Water Commission and others have gone a long way to try and improve the measurement and the validity and veracity of the models that do occur in the basin.

The problem is that there are more models than people that strut down the catwalk at a David Jones fashion show and, like the models at a David Jones fashion show, they are not necessarily representative of the environment they are supposed to be representing. You have a series of anorexic models. They are simply mathematical constructions that cannot simply replicate a real-life situation, particularly with the Murray-Darling Basin; it is so variable over time.

The problem with the modelling is that you then get significant errors and, with the authority’s guide, we have seen a couple of things happen. One is that they have applied a universal climate change factor across the entire basin, so it assumes climate change is going to be the same for everybody. It also has expanded what are the environmental assets. Once we used to talk about icon sites, clearly identifiable and clearly corralled, but both SEWPaC and the authority have moved away to talk about entire flood plains.

When you look at the area of the entire flood plains in the Murray-Darling Basin you get into very significant errors within the modelling. I only have to cite the New South Wales government draft set of accounts under the new national Water Accounting Standards for the Murrumbidgee that came out in November. They cited problems with modelling and the degrees of accuracy in those accounts. In the notes to the accounts it says that where you have groundwater and flood plains the level of accuracy is plus or minus 100 per cent. If you apply that level of error across the basin models then you are actually inventing policy based on numbers that are extraordinarily subject to challenge. We have to look at a different way to go about it.

Mr SECKER —Do you have any understanding of what the Environmental Water Holder will actually do with its water and what do you think it should do with its water?

Mr Wiskin —That is a particularly good point. One of the concerns, again, is that most of this water has been acquired on the basis of average modelling. I do not want to really talk about average modelling; I want to talk about what happens in a dry time. That is where you get all these significant errors in the models. You get major errors in the model at high-flow events and at low-flow events.

To take an average and to use that average then to acquire environmental water, I would have to predict that much of the water that has been acquired cannot be delivered at times when it is needed. If they use an average model to then justify environmental flows, what they are effectively doing is taking water away from other users, because in the first instance that water, because it is an average, cannot be delivered in a dry time. They are taking water from somewhere else in the system to deliver those environmental outcomes.

The problem I have is that I cannot sit here today and make any judgement about the environmental value of that water because I do not have access to the black box that the Murray-Darling Basin Authority has. It would seem that nobody else has access to that black box. The New South Wales government’s submission to the Murray-Darling Basin Authority in December last year was highly critical. It said the same thing: it cannot make any judgements about the environmental veracity or otherwise of the findings of the authority because it does not have access to the data. In fact, at the back of that submission in appendix A it lists a massive amount of information to be requested by the New South Wales government so that it could make a determination as to whether that water can be delivered.

CHAIR —We have found in our deliberations that all of the state agencies have had similar issues, so there is a breakdown in the connection between the water managers and the authority’s report. In your document as well you talk about water for rivers and a sort of regional approach to some of these systems. Could you elaborate on some of that and also some of the issues from when you were working on the Visy water plan, the Pratt water plan—some of the river gauging issues that were out there. We are picking that up in other catchments as well.

Mr Wiskin —Just on the question of accuracy of gauging, that was a tremendous eye-opener for us. We just assumed that this information was correct. This is again a problem with the modelling. I was quite harsh at the time, quite frankly, about the inaccuracies in the gauging. What we saw was that there had been a lack of investment over a long period of time in validating and improving the gauging of the water flows, so over time you got gauges that were actually put in for something else being used for determining river flows. The gauges were put in for flood mitigation works; a totally different purpose from what was required for managing the river system. You then got changes in the cross-sections of the channels in the rivers that completely negated the accuracy of any results.

When we looked behind what they were doing with that empirical data, if the data did not fit the output of the model the data was then tweaked to make sure it fitted the model. That is incredibly damaging if you are then basing water sharing plans and legal entitlements to water on that sort of approach. We argued very strongly for an $11 million investment in improving the water gauging.

Mr SECKER —It would be very useful for this committee to hear from the Environmental Water Holder and what its plans are, because there is a fair bit of mystery around the place about what it is actually going to do and how it is going to do it.

Ms LEY —We have heard from the Environmental Water Holder and I agree we need to hear from him and his office again.

Mr Wiskin —Just on that point, I think that is where you have some management problems. You have SEWPaC on the one side and they actually sit on the same floor in John Gorton House. You have the Commonwealth water holder on one side of the floor and there is supposed to be this Chinese Wall between the water purchasing people on the other side of the floor. To me, once the water is acquired for an environmental purpose, why is SEWPaC the agency responsible for determining where that water goes? I would have thought that is the role of an authority or a delivery agency.

I did not answer the second part of your previous question, Mr Chairman, and that is that management structures going forward need to be simplified. You cannot take a whole-of-basin approach and expect somebody to get their head around the project outcomes and the management outcomes you expect from that. It has to be done on a catchment-by-catchment basis and the delivery vehicle must be one that is going to implement, on the ground, water savings and management so that you can get outcomes that can be measured catchment by catchment.

You then end up with a series of continuous improvements. Those continuous improvements can be earmarked against a percentage of diversions rather than having this waffly number of 3,000 or 4,000 gigalitres, or whatever it is, across the whole system. We would have it documented as a percentage of diversions in each catchment. Some catchments will have easier gains than others but that is the job of doing a forensic analysis, catchment by catchment, in the same way Pratt Water did a forensic analysis on the Murrumbidgee. You go catchment by catchment. That allows you to build up a profile of water needed for the environment and that can be delivered. The critical issue is can the water be delivered. I suspect most of the water that the Commonwealth water holder has at the moment cannot be delivered. I cannot say that for certain because I do not have access to the data.

Mr ZAPPIA —You said earlier on that it is important that we match the best crop type with the soil. I notice in the strategies to date, certainly at federal government level, there has been no budget allocation for doing that kind of thing. Is it your view that there should be so that we can, for example, provide some sort of subsidy to farmers to readjust their production from perhaps one crop type to another?

Mr Wiskin —Yes, and this is where you need to maintain a critical mass of irrigation around an area that is serviced by towns and services in the irrigation industry. You avoid the Swiss cheese effect. I am not sure you need a subsidy. I think what you need is tradeable rights amongst rice growers. There has been a restriction on the amount of land on a particular property that you can plant to rice production in some areas. If you had tradeable rights you could share-farm the next guy’s farm and both get a better outcome. It allows the irrigation district then to manage water within its district. I have no problem with governments subsidising irrigation corporations to acquire water within their regions and to reallocate it within their regions. You get best-use practice over time.

This idea of simply trading water out has another unintended consequence. I am in favour of trading—I have probably traded more water than most—but it has unintended consequences in some areas where you get this Swiss cheese effect. You also get producers who elect not to grow produce and by not growing produce, because the supermarkets are not paying the prices that are required, the processors go out of business—that has also happened across the basin—and the chance of re-establishing that processing industry is remote. So I think there is a combination of subsidies for irrigation corporations to manage their own affairs and to work within the system. I do not believe that government is in the best position to decide which farms should be moved or which crops should be moved to other land. That is something that corporations have to work towards themselves.

CHAIR —We have talked about the Environmental Water Holder and there has been some debate about whether the water holder should temporary trade back into the market because of this long-term average issue that is out there. How would you construct the relationship between the Environmental Water Holder, the industry and the authority in an institutional sense?

Mr Wiskin —I do not completely reject the idea of having a Commonwealth water holder. I completely reject the tender process that has been used to acquire this water because it has acquired water from the weak and the vulnerable. I have acted for some of those people and I know the government’s view is that two-thirds of the water that has been acquired has been from people selling part of their allocation. But let me tell you very clearly that those people had clear motivation to sell. Their bank managers were barking at their heels, so they had no choice. So, whilst the Commonwealth has picked up a substantial amount of entitlement, it comes back to this issue of how you deliver it.

I do not believe that temporarily trading the water back into the system helps. In the Pratt water study, we rejected the idea of retiring entitlement because entitlement is just a share of the available water. So if the water is not there, your share is not there. It is meaningless to acquire this entitlement. What we recommended was an environmental water option whereby entitlement holders could enter into an option arrangement with the government to sell their water at a predetermined price—and there are ways of working that out—and, once certain trigger points are met, the entitlement holder then delivers water to the environment. That way the entitlement holder maintains ownership of the title and becomes part of the solution.

What it also does is provide a revenue stream for farmers so that they can make a judgement during a dry year about whether they plant a crop or whether they sell their water to the government. In other words, the environment then becomes part of the tradeable water right, but it is an option. ABARE did the work on this and determined very clearly that it was the cheapest option of acquiring water when the water is required for environmental needs. That is the important part. When the system is completely dry, throwing a thimbleful of water into a channel has no effect on the environment; it just does not get there. So you need to piggyback water for the environment on the back of maintenance flows.

It goes to the very heart of how you run a system in a declining water period. You have a care and maintenance strategy that allows you to have collapsing defences through the system and those collapsing defences should also involve how you maximise water in storage when water is available. Water in storage became absolutely critical during the millennium drought. Maintenance flows were retained; sufficient water was provided down the system for permanent plantings. People did not steal water, like rice growers and cotton growers, and they were not the problem, because they simply did not grow any of that stuff; there was not any water. They were not the problem.

So you continue to follow the water flows. If you continue to follow the water flows, it allows you to put in place a series of strategies that allow retirement of production when the water is not available. At that time, the government can exercise their option and acquire environmental water. In that way, you are not taking water out of the system but you are providing a constant revenue stream to the entitlement holders.

Mr SECKER —We have had other evidence about how much water is taken out of the basin through forestry plantations. Have you done any modelling in your involvement with forestry plantations on how much water they take out?

Mr Wiskin —We did a study on that, but this is where it becomes very muddy. You have to make certain assumptions. You have to then feed those assumptions into these terribly inaccurate models. So what I am trying to say to people is, if you want to make some serious investments, you need to make some serious investments in the empirical data that is necessary to validate the modelling. I am all in favour of modelling, I use financial models all the time, but I can tell you now that I can make a financial model do anything it likes just by changing the assumptions. This is the problem with the modelling: we need to have far more investment in monitoring the water.

I have noticed that the federal government certainly took up the recommendations of the Pratt water study to start to look at better knowledge on inflows. Knowledge of inflows into storage is absolutely critical because during a drought water sharing plans get suspended. The environmental needs get shunted to a very low drawer and the simple reason is that the people who run the storages and run the system can only look at critical human needs in a very dry period. During the dry period, the guys operating the dams, particularly in New South Wales and Victoria, had to make some very difficult judgements. They had to make judgements about whether they released water for care and maintenance flows or whether they held water for critical human needs and they had to do it on the basis of not knowing whether it was going to rain tomorrow.

Mr SECKER —Sorry to interrupt, but you are going right away from what I asked.

Mr Wiskin —Sorry.

Mr SECKER —Notwithstanding inaccuracies in the modelling, what did your modelling show?

Mr Wiskin —I do not have the detail, but it showed that the interception of plantations was marginal in terms of the impact on water flows. Having said that, that is a very subjective judgement because we did not have sufficient data to allow us to properly model what an end-of-system impact would be.

Mr SECKER —Could you provide us with what you came up with anyway?

Mr Wiskin —We can, yes. They are on the net. There are 40 studies on the net.

Mr ZAPPIA —Mr Chair, could I just clarify something?

CHAIR —Yes.

Mr ZAPPIA —I think I understood correctly what you were saying earlier on about the Commonwealth Environmental Water Holder. Am I right in saying that you believe the water should be purchased as required on a temporary basis as opposed to on a permanent basis?

Mr Wiskin —Yes. I am suggesting that there are a number of tools. The water tender is one of those tools, but it should not be the only tool. An environmental watering option is another tool. It may not be suitable in all catchments and for all purposes. The temporary market to buy water can be used, and has been used. I was involved in Eastern Australian Agriculture at Clyde in early 2008 where temporary water was acquired by the then commission to the Narran Lakes to support a 50,000-bird breeding event. That was a really good example of where water in farm storage was able to be directed to the environment. So there are a range of tools; one tool does not fit all.

In terms of actually meeting the government’s target, if they have a target, strategic water purchases are really critical. You can make strategic water purchases in areas that are not going to have such a major socioeconomic impact. Last year there was an opportunity of acquiring 92 gigalitres in the Lower Balonne. The government did not even bother talking to people about it. There is another opportunity in the Lower Darling to achieve a major benefit if you could acquire significant amounts up to 40 gigalitres in that Lower Darling area, and through changing the way Menindee Lakes is managed; such as a 30-gig storage for Broken Hill, guaranteeing Broken Hill three years supply of water; fixing Cawndilla, getting in excess of 200 gigs out of the dead pool at Cawndilla back into the system as part of this collapsing defence in a dry period. You can achieve a lot of gains.

CHAIR —In the Pratt water report—and this is in your document—you suggested 1,334 gigalitres of water per year in the Murrumbidgee Valley were unaccounted water flows.

Mr Wiskin —Yes.

CHAIR —You talked about that briefly. Can you just go back to that? Probably more importantly, when you raised that issue with the bureaucracy, what was the response to that?

Mr Wiskin —The response was, ‘That’s not correct, because we know that water goes to the environment.’ We said, ‘Well, we need to go and validate that,’ and that is what we tried to do. Since then—and I have to give credit where it is due—there has been a tremendous improvement in the way they are looking to manage the system. With the Water for Rivers approach of looking at major gains in managing the system flow or the river flow and working with organisations such as State Water, I think there will be real gains and savings out of that, far more gains and savings than there will be out of on-farm stuff in the short time frame that we are talking about. It is the Water for Rivers approach that I would like to see as an implementation authority.

The great thing about it is that you get away from this feudal lordship of a Murray-Darling authority and you involve the states, and the states still manage the system, they still own the storages. The Water for Rivers concept actually had a legal basis. It was called an implementation deed. So the shareholders in Water for Rivers, being the state governments and the Commonwealth, had clearly-defined legal obligations to meet. It worked extremely well. It was a low-cost, low-overhead operation, very little bureaucracy, and it achieved some great outcomes in a short period of time.

CHAIR —Thank you, Ian. The time has expired, but I do thank you for the effort you have put in and the way in which you have articulated your experience in terms of some of these systems. If there is any further information, particularly given the direction of the questions, you might like to follow up on those. There will be a transcript and that will be made available and, if there are any issues, please let us know.

Mr Wiskin —Thank you.

[10.34 am]