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STANDING COMMITTEE ON ENVIRONMENT, COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS
10/08/2007
Water (Consequential Amendments) Bill 2007 Water Bill 2007

CHAIR —I welcome the representatives of the Victorian, South Australian, Queensland, New South Wales and ACT governments to this hearing of the Environment, Communications, Information Technology and the Arts Committee. I thank the New South Wales, Queensland and South Australian governments for their submissions, numbered 6, 7 and 9 respectively, and for the ACT government’s attendance at the hearing. This inquiry was called at short notice and a lot of people expressed a desire to attend the hearings. Therefore, we have divided the program into three round table sessions of about two hours each. We will ask each government to make a three- or four-minute opening statement and then we will have open discussion about issues as they arise.

Before we proceed I will just remind members of the committee that the Senate has resolved that departmental officers should not be asked to give opinions on matters of policy and shall be given a reasonable opportunity to refer questions to superior officers or to a minister. This resolution prohibits only asking questions for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about how and why policies were adopted. We will proceed now to short opening statements, starting with the ACT.

Mr Butt —The ACT has endorsed the approach being taken by the Commonwealth in this area, subject to some ACT specific concerns that do not arise specifically in the bill and some general areas where we see the need for uniformity across the whole basin in the approach. The ACT is very supportive of initiatives to improve trading arrangements and to improve the freer movement of water through the basin’s infrastructure, to see it move to better outcomes, both environmental and economic.

As you would appreciate, the ACT is in a somewhat unique position in that we are subject to whatever the Commonwealth will do anyway, so our position is not as strong as the other states in this area. We are also different in that our primary concern is in relation to urban water. We welcome the Commonwealth’s intent to separate agricultural use from urban use. Our one specific concern in terms of the legislation would be that we think there should be specific legislative reference to urban water and the definition of urban water to avoid potential confusion or conflict further down the track if this legislation comes into effect after the Senate’s consideration.

Mr Elton —I believe you have received our submission so, to save time, what I would like to do is summarise our key concern. New South Wales continues to recognise the significant benefits that could be realised from the Commonwealth government’s National Plan for Water Security and from an integrated approach to the management of water resources in the Murray-Darling Basin. We are keen to be able to continue to work with the Commonwealth government in a cooperative approach. However, New South Wales is concerned about one key element of the new direction that has been announced by the Commonwealth government in the past fortnight. Throughout this process and until recently there had been an agreement between the Commonwealth, New South Wales and the other states and territories that the Commonwealth would protect the value of existing water entitlements and that the Commonwealth would assume responsibility for any compensation liabilities and structural adjustment assistance that might be required as a result of Commonwealth government water planning decisions under this legislation. There has also been an agreement that implementation of the plan would result in no net increase in state budget allocations for water management in the Murray-Darling Basin.

These agreements were reflected in the draft legislation and in the draft intergovernmental agreement provided by the Prime Minister to Premiers on 9 July. However, the Prime Minister has recently announced that the Commonwealth will only fulfil these commitments if all states and the ACT sign a new intergovernmental agreement, and that is an agreement that the states have not yet seen. Our view is that this is a major departure from the essential policy features of the scheme that were agreed to by the Prime Minister through the water summits and in his letter to the Premier of New South Wales on 10 March.

The water bill that has now been introduced into the Commonwealth parliament includes provisions in relation to allocation of risk that reflect the Commonwealth government’s new approach. The effect of this would be that through the proposed basin plan the Commonwealth would have the ability to require reductions in water access entitlements, potentially attribute those cuts to changes in knowledge and thereby trigger compensation in accordance with the National Water Initiative risk-sharing arrangements. It is the New South Wales government’s position that the Water Bill should provide for the Commonwealth government to bear any such liability that might arise as a result of Commonwealth government water planning decisions. We think this is essential if irrigators and other water users are to have ongoing investment certainty. I might just add that it is very difficult for the states to be able to assess any other potential implications of the new approach, only having had the new legislation since Tuesday and without having yet received the proposed new IGA. We would like sufficient time for there to be further negotiations on the detail of the legislation and the proposed intergovernmental agreement before this legislation is settled. We think it is imperative if this scheme is still to be founded on a cooperative model, one that involves a significant ongoing role for the states in implementation.

Mrs Best —Queensland is supportive of the Commonwealth bill. As late as yesterday evening the Premier of the state wrote to the Prime Minister to indicate that support. However, he did highlight concerns around the compensation, and New South Wales has articulated that quite clearly. The objectives of the bill align with what the Queensland water resource planning statutory mechanisms support in terms of security for the environment, for users, backed by good science and open and transparent processes.

We have worked very hard with the Commonwealth government, as have other states to work through the detail of the bill. We have given a considerable amount of time and effort and have negotiated in good faith to assist the Commonwealth to come up with a bill that we think will really achieve those objectives in terms of water reform for the Murray-Darling Basin. But the fact that, at this point in time, we have negotiated on the bill and a draft IGA without having seen the IGA is somewhat problematic for us. We were advised yesterday that we will get to see the IGA next week. It is with the Prime Minister for his consideration. It is a bit difficult when you cannot see the whole package, because there are some things in the IGA that might relieve our concerns that are in the bill at this point in time. We do need to see both to really indicate full support.

We are concerned in terms of the time, as Senator Joyce articulated in the session this morning, in that the NWI agreement asked for water resource plans to conclude in 2014 without specifying the end of the year. The bill commences from 1 January and there is a three- to four-month time gap, which we think needs to be addressed. The indications from Commonwealth officials are that they do not see that as a major issue to work through and we would like some certainty around that.

We are concerned about clause 77—compensation—and the definition of water access entitlements. Queensland has a very different system from that in the southern part of the basin in that we have ephemeral streams that do not flow all the time. We are not based on surface water storages. We have a rules based no growth water resource planning regime in place, and for us it is very important that we have the issue of overland flow defined in the water access entitlements. It is reflected in the QFF submission, and we have worked with them on words that we would see suitable for the legislation. They have those six dot points at the end of their submission. We have worked with them on those and we would support those.

For us, it is probably the compensation, the clarification of water access entitlement and the time gap that are the critical issues. There are other minor things in terms of the drafting where we are happy to table documents that we have provided to the Commonwealth for their consideration and which have been discussed. We are supportive of the bill, with those provisos, proceeding.

Mr Freeman —I believe senators have a copy of the South Australian submission. I will just speak briefly to the points. South Australia supports a national approach to the management of the Murray-Darling Basin through an independent expert based authority. We have worked with the Commonwealth and other jurisdictions in good faith to achieve that. The bill that is currently before the committee has several key issues that need to be addressed and we have outlined five.

Just speaking briefly to those, the bill does not address the issue of critical human needs. As people are aware, the Murray-Darling Basin Agreement and the associated acts have had to be set aside this year. They do not cope with critical human consumption across the basin. This bill does not address that, either. This would seem to be an opportunity lost, and the bill needs to deal with such a major issue, that is, the incorporation in the basin plan of the requirement for critical human needs during these extremely dry periods.

Secondly, as the Victorian Farmers Federation mentioned in the previous session, the bill on its own does not guarantee environmental outcomes. Notwithstanding a lot of money can potentially flow, we believe that the basin plan requires the inclusion of an end-of-basin flow target. We are not saying that we need to specify that today. However, the absence of an end-of-basin flow target, which is how we measure the environmental health of river systems, needs to be incorporated into the plan requirements, and we suggest an amendment to achieve that. We have also suggested that in the interim, until such a target is struck, we believe that a rather arbitrary target should be incorporated perhaps in an IGA.

Thirdly, there is the deadline for the basin plan. The basin plan is the key mechanisms for addressing issues in the basin. It will be the cornerstone of this new legislation. Minister Turnbull, in his second reading speech, outlined a period of two years. We believe that the necessity to get this basin plan in place is so important that the two-year period should be legislated and could be incorporated into the bill.

Fourthly, there are the implementation costs. The Prime Minister outlined in his speech on 25 January that jurisdictions would incur no extra costs. In addition, it was agreed first by ministers in February 2007 that the states would face no net increase in costs from the implementation of new arrangements. This has not been included in the bill. One particular concern is the cost of information provision. A lot of information needs to be gathered from jurisdictions for the creation of this basin plan. We believe that the no-net increase in cost provision should be incorporated.

Finally, there is the issue that other speakers have spoken about. The new bill, by necessity, creates a more complex arrangement of institutional bodies. We will have the Murray-Darling Basin Authority. We have still got our existing commission infrastructure, and states have a large operational role. That is probably unavoidable given where we are with the bill. However, we think that it is a good argument for legislating compulsory consultation between the various players, because, potentially, the Commonwealth bill could be amended, which will have implications on the state, the commission or any of the other mechanisms, and we need to make sure that these things work in harmony and alignment, so we are proposing some amendments that you may consider about compulsory consultation.

Mr P Harris —My statement is a little longer than others because we did not have the ability to put a submission in within the time frame, so it will take about three or four minutes to read, if that is acceptable.

CHAIR —That is fine.

Mr P Harris —The Victorian government supports national leadership in Murray-Darling Basin management and has endeavoured to provide the Commonwealth with a clear ability under Victorian law to do the following things: to set and reset a basin-wide cap and caps under that on a catchment-by-catchment basis, to give the ACCC power to advise on water pricing policy structures and to control market behaviour across the basin, power to prevent any changes to water shares amongst states, the ability to hold environmental water in Victoria and not be hindered in its use for environmental purposes, the ability to access any necessary information to determine whether the caps are being complied with and the ability for the Commonwealth to enforce compliance via the Federal Court. A terms sheet establishing these principles and complete drafting instructions were provided to the Commonwealth so its legal advisers could see how we plan to alter Victorian law to allow the Commonwealth to achieve its stated objective of sustainable water management across the basin. The rejection by the Commonwealth of this approach was curiously framed. It did not respond to our proposals. Rather, it issued a demand for compliance with its own draft legislation, to which Victoria had never been a party. We were given no choice but to reject such a demand. I can table this terms sheet if the Senate would like that.

Victoria has rejected complete transfer of powers to the Commonwealth over our water sources because we have a very reliable water allocation system. Victoria’s irrigators and environmental groups agreed with the government that the certainty with which we had endowed their entitlements in negotiations over water reform between 2002 and 2004 was to be preferred to an unknown system of Commonwealth control. The Victorian water allocation system is a reflection of Victoria’s agriculture and relatively dense urban concentration within the basin, just as the more flexible allocation models of other jurisdictions reflect their agriculture and pattern of urban settlement. This is the heart of why state allocation systems vary.

In Victoria we allocate water already in the dam. As a result, we have a very high proportion of our water in high security and we closely restrict water access by providing allocations under bulk entitlements to water authorities. We keep within caps under the Murray-Darling Basin Agreements because we simply cannot legally offer entitlements in excess of bulk entitlements, and bulk entitlements in turn match caps. The nature of our high regional population and our higher value permanent planting style of agriculture is vital to Victoria, and thus our system has always been more controlled and more reliable. As I mentioned, neither our farmers nor our environmentalists were prepared to give up this reliability, particularly after water allocations in Victoria held up so well during the worst ever irrigation system in 2006-07.

We believe Commonwealth negotiators never understood the nature of this issue, which is at the heart of Victoria’s objection. This was not ever about money. Victoria did not seek a special deal on funding. The Victorian government is actually spending today the first of more than $1 billion in real funds on irrigation modernising in Victoria over the period between now and 2012. No other jurisdiction, or even the Commonwealth, has made the dollar-level commitments in real or on-the-ground funding that we have recently made to regional water security and to improved environmental water management in the basin. Thus the Victorian government cannot support the Commonwealth’s bill, because it has failed to recognise the nature of our system and to accept that we do not want to see that system changed to avoid our carefully managed water policy and allow it to be redirected by a federal minister by either major political party according to the political priorities of the day.

Commonwealth ministers have suggested that Victoria refused to offer comment on the bill drafts as they were developed. This is not so. We have advised consistently what it would take to get our agreement and that we would refer certain powers but only those created in a comprehensive bill voted on in the Victorian parliament. However, in the spirit of willingness to comment, notwithstanding our opposition to the bill, we can advise of some unusual aspects in this latest draft.

Clause 35, as I think you have heard from the farmers federations, is a new provision and purports to enable the Commonwealth minister to prosecute individual farmers for acting inconsistently with the basin plan. This seems to us to be complete overkill. Clause 12 seems designed to create a circumstance where state water authorities and possibly even the Murray-Darling Basin Commission may also be prosecuted if they attempt to meet both federal and state water obligations.

Clause 172 duplicates the objectives of the Murray-Darling Basin Authority and the Murray-Darling Basin Commission. It uses identical language for two separate bodies. The Commonwealth has said most recently that it will keep the commission, which is a very important concession and not just an administrative one. It is a very important concession to farming interests, because it is the commission that holds the operational rules on which so much of the water trading allocation policy of every jurisdiction in the basin is based. We suspect this is simply a fault created via the recent policy shift to retain the MDBC.

Clauses 97 to 100 are entirely new to us and purport to allow the federal minister to unilaterally change trading rules within the basin. Trading rules are crucial to investment decisions. To my knowledge, in no other market in Australia can the federal minister alter the terms of trading in this way. In our view, the water exchange is analogous to the Stock Exchange, yet we do not allow the federal minister power to unilaterally change the rules of the Stock Exchange.

Finally, in the use of the treaties power of the constitution, there are some quite unique definitional approaches in this legislation. In order to rely on the power, the Commonwealth must be reasonably capable of identifying the relevant obligations under the treaty and also of establishing that the powers created are appropriate and adapted to the task. Victoria has assessed the Commonwealth bill and the use of the environmental treaties power quite thoroughly in recent times, including the celebrated orange-bellied parrot case. We find it curious that the Commonwealth has chosen to rely upon a treaty, the UN Convention on Climate Change, which it has indeed ratified but whose primary purpose it has comprehensively and consistently rejected, namely, the ultimate objective of this convention is to achieve stabilisation of greenhouse gas concentrations in the atmosphere sufficient to allow ecosystems to adapt naturally to climate change, or the Kyoto Convention in layman’s terms.

As a result of this, we believe that the proposals put in front of the Senate are incomplete, will create a confusion of governance, add additional complexity and red tape and will lead to uncertainty in investment within the basin.

CHAIR —Thank you. We will begin questions with Senator Wortley.

Senator WORTLEY —I would like to address my questions initially to South Australia. I understand that the differences between the comprehensive Water Bill and the accompanying intergovernmental agreement agreed by the first ministers and the Water Bill 2007 affect elements critical to South Australia. You have touched on some of those. One of them was that the provision for meeting critical human water needs was removed. What are the possible consequences of this being excluded?

Mr Freeman —We will have to set this legislation aside, just as we have had to set the Murray-Darling Basin Agreement aside to deal with that issue. It seems to me that just as this year the law has not coped with a critical drought, we could have ended up in a situation where, potentially, we had irrigator allocations and yet not have drinking water for the communities of New South Wales, Victoria and South Australia. This bill does not pick that up. It just leaves a policy gap and would, therefore, seem to be an opportunity lost.

Senator WORTLEY —You have also highlighted that there is no agreement to consult states and territories prior to amending the Water Act or making amending regulations, which was included in the previous IGA. Why is this of concern and, again, what are the possible consequences?

Mr Freeman —As I outlined in my introductory comments, this bill by necessity, because it cannot replace the Murray-Darling Basin Commission, the ministerial council and the many committees that underpin that commission and council, has had to introduce additional structures. I understand that fully. This bill has also left operations with the states, whereas the bill that was never introduced proposed that potentially the Commonwealth could take over operations. You are going to have a very strong role here for states. And yet there is no provision to ensure consultation between those various parties, particularly in regard to amending this legislation, in regard to the regulations that will underpin this legislation, and it would seem to me that that will create potential for real confusion, inefficiencies and waste of money.

Senator WORTLEY —Are there other significant issues that you sought assurances or agreement on that have not yet been answered or adequately answered?

Mr Freeman —There are many that the state has had to negotiate through. There are things that are very important to South Australia that conflict with other jurisdictions’ requirements, and we have taken a balanced approach to that. Therefore, we have distilled it down to critical issues. These are essentially the primary issues that we believe this bill in its current form can address. Like all the other parties, we are relying heavily on an IGA that we cannot see. We understand why those issues cannot be in this bill because of the constitutional powers that the Commonwealth is relying on for the foundation of the bill. However, taken in good faith, we believe a lot of those other issues should be addressed in the yet unforeseen IGA. Perhaps I can defer to my colleague, Mr Ashby.

Mr Ashby —I would add one other point. New South Wales put the case around risk and cost associated with the new schema. We completely agree with the position that they put earlier. It is something that does not come out strongly in our written submission. However, until we see the IGA we are not really sure exactly how this issue will be dealt with. In the prior schema with the comprehensive bill and associated IGA we were much more comfortable with the issues of risks and cost sharing. Now it is a wait and see.

Senator WORTLEY —You have taken up the invitation to attend here today and yet the reality is that you have not yet sighted the IGA. How significant is that? How do you feel you are able to present a case for your state when you have not seen the IGA?

Mr Freeman —It is fair to say that today was seen as an opportunity to both influence potentially what is in the bill, and that is why we have outlined the five areas that we believe are missing, and also the yet unforeseen IGA, because it is an opportunity to present in a public way the additional issues that need addressing.

Senator BIRMINGHAM —I would like to ask each of the jurisdictions, aside from Victoria: do you agree that this proposal would be a much stronger proposal if we had all jurisdictions onboard and could have gone down the path of the initial national plan?

Senator HEFFERNAN —That is what you call a drop-dead question.

Senator BIRMINGHAM —Four ‘yeses’ would be good.

Mr Freeman —I think it is fair to say that we respect Victoria’s position. It is their sovereign right to reject this bill. However, there is no doubt in South Australia’s mind that the comprehensive package that was previously on the table is far superior to this bill that we now have before us.

Senator BIRMINGHAM —Victoria claimed that they are investing more than any other jurisdiction. You would think that they were the messiahs of water usage and so on. How do the other states view that?

Senator IAN MACDONALD —These are difficult questions.

Senator BIRMINGHAM —The South Australian government has always claimed that over a long period of time major investments have been made in ensuring very efficient usage of irrigated water and so on out of South Australia. The suggestion might be that Victoria is just playing catch-up now.

Senator KEMP —Victoria has made some bold claims about how good it is. I have papers here from Queensland that show how good Queensland is. Queensland has indicated how it is leading Australia. If Victoria is making these claims, then we would like some responses. Is it true, as Mr Harris says, Victoria is leading Australia in this area?

Mrs Best —I refer to the introductory comments from the chair that we were not to respond on policy matters. I would think that it is not for any of us to comment on Victoria’s policy.

Senator KEMP —That is not a policy matter; that is actually a factual matter.

Mrs Best —It is not for us to comment on Victoria’s policy position.

Senator KEMP —As to my judgement, I listened very carefully to all of the submissions. I thought that all of you put your cases as you should. You stuck to the facts. Victoria decided to put in a very political submission and make some cheap political shots, and I will be making some comments about those as well. If you come to this committee, Mr P Harris, and you want to make political points you must expect that senators will respond. If you stick to the facts, as the other states have done—well, of course, they are entitled to hide behind the argument; they are not here to make political comments, they are here to put facts on the table, and I will leave it to my colleague to pursue—

Senator O’BRIEN —You jumped in on a number of questioners and the chair did not control you. I am entitled to jump in as well. The chair needs to regulate this so that when someone is asking the question they get to ask it and it gets answered, and other people do not jump in. We will then have an orderly process. Chair, are you going to do that?

CHAIR —We are going to follow an orderly process.

Senator O’BRIEN —Let’s get it sorted.

Senator HEFFERNAN —While he is—

Senator O’BRIEN —No, not while he is waiting.

CHAIR —Senator Heffernan and Senator O’Brien, calm down. Mrs Best is quite correct. These are government officials. They are not here to answer questions on policy and, if they choose not to do so, then sobeit. That is the view of the committee secretariat. The call goes to Senator O’Brien and we will do this in an orderly way.

Senator O’BRIEN —Senator Birmingham had the call. I do not want to take the call from him. I just do not want it to rotate around at the whim of the senators at the table. I would like the chair to control it.

CHAIR —I thought as a result of what had happened Senator Birmingham was not continuing that line of questioning, but please proceed.

Senator BIRMINGHAM —I understand the reluctance of the public servants from other states and the fact that their political leaders in those states appear to be too weak or gutless to stand up to Victoria is not a reflection necessarily on those public servants.

CHAIR —I do not know that you can make those sorts of comments. We will stick to reasonable questions about reasonable issues. These are government officials; they are not in a position to respond.

Senator HEFFERNAN —I have a question that is burning a hole in my heart.

CHAIR —Senator Birmingham has the floor, so we will let him proceed.

Senator BIRMINGHAM —Perhaps Victoria could explain to us in clear terms why they are so special that not only did they not support the original draft legislation, the national plan but also they have come here today telling us that they do not support this legislative package as well?

Mr P Harris —I did make that point in my opening statement but in a succinct form I can reply that Victoria and the nature of Victoria’s irrigation system is one of a strong track record of both delivery and dependence on high-reliability irrigation. In consulting with our irrigators and our environmentalists, the advice was clearly given to us that they would prefer to preserve the existing system rather than move to an uncertain system of Commonwealth control.

Senator BIRMINGHAM —We heard this morning from the Victorian Farmers Federation, I assume representing Victorian irrigators, that they in principle support the new legislation. You are relying on the apparent support of environmental groups, which we will hear from this afternoon, and from irrigator groups. But it sounds to me like the irrigator groups now support the national package.

Mr P Harris —It will depend on which irrigator you speak to. We are in constant communication with them. I understand entirely that the VFF has made relatively, although not completely, supportive comments on the legislation in very recent times. From our continuing discussions with them, it is quite clear to me that our position is consistent with the support that we have received from 5,000 irrigators across Victoria and environmental groups.

Senator HEFFERNAN —Thirty-eight per cent of the run-off from the Murray-Darling Basin comes from two per cent of the landscape. A lot of that landscape is yours. Have you modelled what would happen if we lose 5,000, most of which is going to come out of the 38 per cent of the landscape, less run-off due to all the various things the CSIRO has designated? Have you modelled what might happen?

Mr P Harris —We have indeed. I do not know if that is quite in the terms that you have described, but we have modelled the impact of potential climate change in Victoria, yes.

Senator HEFFERNAN —Can you paint a picture for us. The Victorian farmers do not know the answer to this. Will the 100 gigalitres that you are going to take out of the Goulburn for urban supply be higher security water than your farming high security water?

Mr P Harris —It is 75 gigalitres, rather than 100, and it will be created by that billion-dollar investment that I described a little earlier.

Senator HEFFERNAN —What will be the security title?

Mr P Harris —The billion-dollar investment will create roughly from irrigation savings within Victoria 225 gigalitres, so it will be shared in thirds between the environment, farming community groups and urban users. Urban users will pay for that water directly. They will pay $300 million of that $1 billion for that water. They will also pay for the infrastructure to deliver that water to Melbourne. This investment in the Goulburn-Murray irrigation district is probably 50 per cent of what is needed to make the Goulburn-Murray irrigation district as efficient as some other infrastructure in Australia. The nature of Victoria’s irrigation is that we are very dependent on high security, but we have quite an old and leaky irrigation system. Our allocation system is good and our infrastructure is relatively poor, so we have the ability to create a very large amount of water savings by investing in that basin. The Victorian government has put a billion dollars on the table to do so, and the security for that water that is going to Melbourne will be the same as the rest of those individual portions of 75 gigalitres. Because they will come from the flows that are at the start-up point in setting the system up. I know that you are familiar with this, but I will elaborate to be clear for everybody. It takes about 400 gigalitres to start up the system in Victoria, which means just sufficient water in the channels to start delivering it to individual farmers. Those savings will come from that start-up part of the system—lining of channels, delivery by pipes or more efficient gates—which will ensure that it takes less effectively to start up the system. Therefore, that water—75 gigalitres for farmers, 75 gigalitres for the environment and 75 gigalitres for Melbourne—will be very high reliability. Our proposition is that it will form a bulk entitlement in the same way that bulk entitlements do, for example, for other urban users within the basin. It is that level of reliability.

Senator HEFFERNAN —If we this mother earth is changed in the way the run-off is available, that 75 gigalitres may become irrelevant in terms of the flow of the system. We divert about 5,000 gigalitres out of the system now. I entirely agree with you that the cost of water over the years has not reflected the infrastructure refurbishment costs. We actually waste about a quarter, we deliver a quarter to extraction, and we put half of it through the system. If we lose a quarter of the system, will the urban water have a higher priority than the farm water?

Mr P Harris —No, not in that sense. It is because of where it comes from—this is why I was emphasising the start-up nature.

Senator HEFFERNAN —Yes, I am aware of that.

Mr P Harris —There will be higher reliability because if the system never starts then it is in jeopardy, but obviously if ever the system starts it will be available.

Senator HEFFERNAN —Theirs will be the first water?

Mr P Harris —For all three of them. It will be for the 75 gigalitres that we will provide to farmers, the 75 gigalitres to the environment, and I am just saying it is high reliability.

Senator HEFFERNAN —In the Nevada Desert they pay $500,000 a megalitre for their water for urban supply. If you want to live in South-East Queensland, with another 1.5 million people, we have to face up to the fact that we have to convert water from sugar to toilet flushes. I am not arguing that. I would like someone to paint a picture of what it means for the Murray-Darling Basin.

Mr P Harris —The Murray-Darling Basin Commission can in fact do that. If I look along the table, I think we would all agree that the commission does that very projection for everybody. We all do our own as well.

Senator HEFFERNAN —What I am saying is that, if we do all of this hard work and take savings to put 500 gigalitres back into the Murray or 1,500 gigalitres if you are a bit further up the scale, and then mother nature says, ‘Sorry, I’m taking 3,500 out of the system, anyway,’ where does that leave us?

Mr P Harris —If you get a very extreme event, as some of my colleagues have commented—

Senator HEFFERNAN —The CSIRO has said that it is not going to be extreme; it will be gradual.

Mr P Harris —I am interested in the CSIRO’s position, but I think people individually would just look at 2006-07 and say that if we have a replication of that what would happen. Quite clearly, the impact across the basin is likely to be a shared impact. It is not likely to simply fall in one location. But there are drought response and extreme event response arrangements already in place under the existing commission and with which my colleagues and I have cooperated throughout this season. In fact, I will give greater credit to my colleagues because most of them are much closer to the actual decisions. That involves shared pain for all of us.

I know the Murray-Darling Basin Commission gets very bad press because it is the physical representation of a cooperative form of federalism, but the system currently works in that extreme position that we were in in 2006-07. They get a little too harsh press. We are strong advocates in Victoria of preserving the competence in the commission under whatever new arrangements obtain. My point about clause 172 is that I am desperately hoping that everybody wants to retain that competence. The rules are in the heads, as well as being written down, of the Murray-Darling Basin Commission people as well as in the heads at this table and the people who work with us. It is very important to preserve that. You have seen yourself how many advertisements are now in the newspapers; anyone with any water competence at all can get a great job anywhere in Australia because there is a desperate need for that. We actually have it in the commission. Unless we are really careful, we are in danger of some of those people deciding there is a quieter life available for them working for Sydney Water, Melbourne Water or somebody like that than in the Murray-Darling Basin Commission, given the state of jeopardy it is in.

Senator HEFFERNAN —There is about a 50 per cent variability in the CSIRO work, which equates to somewhere between a 3,500 and an 11,000 gigalitre reduction. Do you think that the farming organisations, the government and the bureaucracy have it in their heads exactly what that means to capacity—such that the river actually runs and you do not have to move Adelaide—and what that means in terms of the proportion of the cutback, given that you are going to take 75 gigalitres off to urban supply? How much in disproportionate terms will have to come off the lower security water for farming? Have you modelled that?

Mr P Harris —We do not model that, because we do not need to. This saving that we are going to create will come from the start of operation of the system. Therefore, it is available.

Senator HEFFERNAN —I am not worrying about the availability. I am worrying about people rushing around saying they have to keep their entitlement and they need so much to water the dairy farm or the rice crop, when in effect the long-term projection says that the water is simply not going to be available.

Mr P Harris —That is right. There are projections from the CSIRO to say that there will be a step-change drop in water availability across the basin. But our reliability is likely to be affected only in the same way that everyone else’s reliability is affected. It is not a Victorian problem. It is a basin-wide problem. I am agreeing with the reform.

Senator HEFFERNAN —I accept that.

Mr P Harris —I am agreeing with national leadership for this purpose.

Senator HEFFERNAN —You are out on your own on this.

Senator KEMP —No, you are not.

Senator HEFFERNAN —Surely in that scenario, would your first priority be urban?

Mr P Harris —No, that is not an accurate representation.

Senator HEFFERNAN —What will you do about the urban supply?

Mr P Harris —You are thinking from a different perspective. In the Victorian system bulk entitlements are available for urban and for irrigation allocation. There are fixed amounts of water. The option in terms of the extreme circumstance you are describing is clearly to qualify rights so that there are water restrictions in urban areas, water restrictions in irrigation areas and water restrictions for environmental entitlements as well. Qualifying rights is a plausible scenario in an extreme circumstance. Your proposition that in some way we are attempting to create a priority for urban water here is not accurate. I am saying that legally we have very fixed arithmetic arrangements for this that guarantee we will stay within our allocations.

Senator HEFFERNAN —I would like to ask New South Wales why they are not prosecuting the people pinching water in Macquarie Marshes?

Mr D Harriss —We are undertaking an investigation process for compliance at present.

Senator HEFFERNAN —You are slow; I was up there four years ago and saw that going on.

Mr D Harriss —We are undertaking a compliance action at present.

Senator HEFFERNAN —This is red hot. Do you want me to take you on a tour of the banks in other districts, too, where they are pinching water?

Mr D Harriss —Can I go back to Senator Heffernan’s original question about the modelling?

CHAIR —Senator Heffernan, we are going to Senator O’Brien.

Senator O’BRIEN —While we are on New South Wales, there has been a very public exchange between the Premier of New South Wales, the Prime Minister and Mr Turnbull about the unseen aspect of this legislation, which is the intergovernmental agreement. Firstly in relation to the legislation, are there particular amendments that would assist New South Wales in terms of its acceptance of the overall process?

Mr Elton —Yes, there are. New South Wales was fundamentally comfortable with the legislation that was referred from the Prime Minister to the Premier on 9 July. We have not had time to look at the new legislation closely but on its face there are some changes. Some of those changes represent some advantages and disadvantages from our perspective, but most of them are not matters that we would consider to be showstoppers. However, there is one significant change that has been made, as I outlined in my opening remarks. That goes to the way in which the bill now deals with allocation of risk. As I said in my opening remarks, we would prefer the legislation to more closely reflect the original legislation, which provided for the terms of the original agreement struck between the Prime Minister and the Premiers, which was that through the basin plan the Commonwealth is able to set reduced water entitlements; where they are attributable to changes in Commonwealth government policy or where attributable to bona fide changes in knowledge, the Commonwealth would take up and assume the liability for compensation. This is post 2014, when we roll over our water resource plans. And the Commonwealth would also assume responsibility for any necessary structural adjustment assistance that would flow from those sorts of changes. We would prefer to see in this legislation the risk allocation arrangements to be framed around the terms of the original agreement between the Prime Minister and the Premiers.

Senator O’BRIEN —How do you understand that this legislation would work in terms of affecting New South Wales obligations as to whether New South Wales signs the intergovernmental agreement? Can you define that for us?

Mr Elton —If the legislation were changed in the terms that we are seeking, then that removes that as an issue, in terms of going into the further IGA negotiations. Obviously we would need to see what other terms might be set out in the IGA. If the legislation goes forward in its current form, then a critical issue for us will be how this issue might be dealt with in the IGA. We have not seen the IGA, but my understanding is that it contemplates a future referral, perhaps within 12 months, to a fuller, more comprehensive water law. We do not know precisely what that might look like yet, but for us signing of the IGA would be conditional upon the original terms of the agreement being honoured, which would be that, if New South Wales comes into the agreement, the Commonwealth should take up liability, where that liability is attributable to Commonwealth government decisions, and the Commonwealth would take up the responsibility for any necessary structural adjustment assistance and that the Commonwealth would also assume responsibility, as it said it would, for honouring the principle of no net cost increase for states.

Senator BIRMINGHAM —If the Prime Minister—

Senator O’BRIEN —Senator Birmingham, I was asking questions.

CHAIR —Senator O’Brien has the floor.

Senator O’BRIEN —I would like to continue my questions without interruption.

CHAIR —Senator O’Brien, we will let you have the floor and continue your line of questioning. We have a lot of time.

Senator O’BRIEN —Thank you. What you seem to be saying is that, in its current form, New South Wales is not likely to sign an IGA that preserves the arrangement in the legislation? What are the cost implications for New South Wales? Have you determined those?

Mr Elton —They are difficult to quantify. As to the sorts of decisions that the Commonwealth minister could make in the setting of the basin plan, we think it is quite appropriate that the minister should deal with trade-offs between the science, the knowledge, the socioeconomic considerations and so on. But we cannot predict where the answer might fall. To be clear about the National Water Initiative, we support the risk-sharing arrangements in the National Water Initiative. We will continue to honour those outside of the basin. We have in fact legislated the National Water Initiative risk-sharing arrangements in our water management act. We will honour them inside the basin insofar as we might adjust policy that might go, for example, beyond Commonwealth decisions. However, what we are concerned about is potential for the Commonwealth to make decisions that could trigger a state liability. This was part of the original agreement. The Premier of New South Wales wrote, following the water summits, to the Prime Minister and outlined what we understood were the agreed principles. The Prime Minister wrote back indicating his support for these two key policy requirements, and that is what we are looking for.

Senator O’BRIEN —Is it constitutionally competent, in the absence of New South Wales signing up, for the Commonwealth actions occasioning cost to be imposed upon the state?

Mr Elton —We are still seeking advice as to any legal implications of the legislation. As it stands at the moment, our view would be that there is scope in these arrangements for Commonwealth decisions to be attributed to knowledge and to therefore trigger the risk-sharing arrangements, which mean that above three per cent the Commonwealth and the state share liability. We believe that it is reasonable—and we believe the Commonwealth has accepted this from the outset—that if the Commonwealth makes those decisions it should bear that liability. That is our position.

Senator O’BRIEN —I take it that arrangement changed some time in the last three weeks?

Mr Elton —That is right. The legislation has been rewritten. The original legislation essentially said above the three per cent threshold, which is the first three per cent, is borne by access entitlement holders, and that the Commonwealth government would bear any changes above that attributable to knowledge. Whereas now the legislation simply mirrors the National Water Initiative. The original agreement was a variation on the National Water Initiative in the Murray-Darling Basin.

Senator O’BRIEN —Has there been discussion between the Commonwealth and New South Wales based on the original agreement on cost sharing in the knowledge that Victoria remained a non-signatory?

Mr Elton —Right up until the Prime Minister’s announcements of a fortnight or so ago, yes. There was never any suggestion that these policy settings were conditional on all states signing. That is what has changed. Our understanding was that, if we came into the intergovernmental agreement, these key features of the scheme would be there. Now that the Commonwealth is legislating and relying on its own constitutional powers, this situation can arise irrespective of what any of the states do.

Senator O’BRIEN —In essence, apart from the last two weeks, there was agreement with the iterations of the legislation that New South Wales had seen and the understandings as to what was to be contained in the intergovernmental agreement to allow New South Wales to completely sign up to the package?

Mr Elton —That is right. There was one technical legal drafting issue, which happens to have been addressed in the latest draft, so that issue has gone away. This is our only issue. We are very keen for this scheme to go ahead, but it has to be from our point of view on the terms of the original agreement between first ministers.

Senator O’BRIEN —Is it fair to categorise the current position that the New South Wales government is unlikely to sign up to the package as it understands it at the moment?

Mr Elton —We do not know. It really depends on how this issue is treated in the IGA. Our preference, as our Premier has said in his letter to the Prime Minister, is that this issue be dealt with now in the legislation. But if it is not going to be dealt with in the legislation, our ongoing participation would hinge critically on how this issue is treated in the IGA. If the legislation is passed in its current form, then from our point of view the IGA would have to provide that, if New South Wales signs up, that would provide for the Commonwealth to take up the compensation liability as I have described, and the no net cost principle as well.

Senator O’BRIEN —Does the New South Wales government agree with Mr Turnbull’s opinion as expressed in the Daily Telegraph today that the New South Wales government will pay whether it likes it or not in relation to the Commonwealth’s basin plan?

Mr D Harriss —I would have thought that was a policy question.

Senator O’BRIEN —It is not a policy question. It is a matter of whether they judge that to be an accurate reflection of the facts on the understanding of the legislation and constitution—

CHAIR —It is really a policy issue.

Senator O’BRIEN —I think that is a long bow. I do not want you to guess. I am asking you whether you know the answer to that question.

Mr Elton —I would only restate what I have already said, which is that we think it is only reasonable that, if the Commonwealth government can make decisions through this legislation that can trigger a liability under the National Water Initiative risk-sharing arrangements, we think the Commonwealth should bear that liability.

Senator O’BRIEN —I have questions for other states, but I am happy if any other Senator wants to follow up.

CHAIR —We will go to Senator Macdonald.

Senator IAN MACDONALD —Senator Birmingham had a question, which I thought was a very good one, and then I have a question.

CHAIR —We have to balance out the questions.

Senator BIRMINGHAM —I will be relatively brief. Under the National Water Initiative, which you support, there is a cost-sharing arrangement that shifted risk from the states to the Commonwealth?

Mr Elton —That is right.

Senator BIRMINGHAM —In that step the Commonwealth took on some cost burdens that it did not previously have. Do you support the National Water Initiative?

Mr Elton —Prior to the National Water Initiative, when a water-sharing plan expired in 2014 there were no arrangements for allocation of compensation liability at all. No governments bore any risk at that point.

Senator BIRMINGHAM —Nonetheless, we had a negotiated settlement with each party agreeing to share some risk?

Mr Elton —That is right.

Senator BIRMINGHAM —And the legislation before us mirrors that package?

Mr Elton —That is right.

Senator BIRMINGHAM —I believe the Prime Minister has made it clear that the offer still stands, if we can get all jurisdictions onboard, for an expansion of the Commonwealth taking on those liabilities?

Mr Elton —That is correct.

Senator BIRMINGHAM —There has in fact been no change in the situation?

Mr Elton —There has been, because in the water summits a new agreement was entered into.

Senator BIRMINGHAM —The new agreement was conditional on all states and jurisdictions referring powers.

Mr Elton —I do not believe that is the case. The agreement was that the Commonwealth would take up responsibility for compensation liability. It would take up responsibility for any necessary structural adjustment assistance. The Commonwealth has sought to be able to make its own decisions about whether it would do that, and we think that is reasonable. The Commonwealth also agreed to the principle that there would be no net increase in overall state costs. There are some immediate savings for us, but there would also be some immediate cost increases for us. In combination, that represented a new agreement in principle that was a variation on the National Water Initiative.

We then had an exchange of letters between our Premier and the Prime Minister that confirmed these precise points. Out of all of the negotiations, the draft IGA that was circulated to Premiers on 9 July was quite explicit on these points. I do not have it in front of me but there is a paragraph that says it is the intention of the parties that the Commonwealth, whether it is changes in government policy or changes in knowledge, will take up responsibility for compensation liability. There are quite a number of explicit clauses setting out the Commonwealth’s commitment to the no net cost principle. This was a variation of the NWI.

Senator BIRMINGHAM —We have a point of difference here, but I would argue that we could have had that and we could still have that; all it takes is for our friends on the right of the table to come onboard.

Senator IAN MACDONALD —Under the current arrangement who pays for any compensation that might become payable as a result of New South Wales’ gross overallocation of water allocations in the last decade or so?

Mr D Harriss —If entitlements are reduced during the course of the water sharing as a consequence of a policy decision then the government will be responsible under our legislation.

Senator IAN MACDONALD —Which government?

Mr D Harriss —The New South Wales government. That is during the course of the water-sharing plans, which finish on July 2014.

Senator IAN MACDONALD —If there is a take-back because of overallocations in the past, are you saying that even under the new arrangements the New South Wales government will—

Mr D Harriss —During the course of the water-sharing plans that is what the legislation provides for. There is a review of the water-sharing plans to be undertaken by the Natural Resources Commission. The New South Wales process for allocation provides a two-tiered approach. One is, similar to Victoria’s and others, a high-security product and the other is a more opportunistic product, which means that if there is plenty of water available they can use that. If there is not, there is very little water made available by way of your allocation. Mr Arthur would have pointed out that there has been no rice grown in the last two years based on allocation, because there has been a lack of water due to the drought. Our allocation policy recognises that. Whilst there is a perception that there is an overallocation in terms of the total body that could be activated, we have policies that prevent that from being allocated, and that is enshrined in our agreement to the cap under the Murray-Darling Basin Agreement.

Senator IAN MACDONALD —You are saying that no matter who pays there is no prospect of compensation because of overallocations in the past?

Mr D Harriss —No. During the course of the plan, if the Natural Resources Commission within New South Wales decides there is an immediate need to take back and there was a demonstrable need to take back additional water, then that is potentially compensable.

Senator IAN MACDONALD —That does not alter under the current arrangements; it is compensable by the New South Wales government?

Mr D Harriss —That is for the first years. But after that 10 years, in 2014, that is when we have signed up for the National Water Initiative. On Senator Birmingham’s point, prior to the agreement to the National Water Initiative there was no liability for any state or any jurisdiction to pay compensation for any reduction in entitlements, but we have agreed that as part of the National Water Initiative and we had those cost-sharing arrangements effectively agreed. The difference between what we had two weeks ago and what we have now is that, under the National Water Initiative, New South Wales would be responsible for working with its communities to determine how much water needs to come back in consideration of socioeconomic issues. Effectively, under the new bill New South Wales does not have any input into that, and so we bear the liability of other people making that determination.

Senator IAN MACDONALD —That would not be the case if the original bill had gone through?

Mr D Harriss —That is right.

Senator IAN MACDONALD —Again, I would repeat Senator Birmingham’s conclusion. That is all I have on New South Wales.

CHAIR —Are there other questions for other states?

Senator O’BRIEN —Yes. Given that New South Wales has referred to exchanges of letters and draft intergovernmental agreements, will you at least take on notice whether the state of New South Wales is prepared to supply those to the committee?

Mr Elton —We are happy to table those documents.

Senator O’BRIEN —I would appreciate it if the committee could receive those documents.

Senator HEFFERNAN —I will declare an interest here. I come from New South Wales. I am a worn-out farmer and have a water licence on the Lachlan. Have you considered, under this National Water Initiative, the double accounting in respect of groundwater? Have you come to a conclusion generally across New South Wales on the impact on the allocation?

Mr D Harriss —As to surface water in New South Wales, we have 104 aquifers. In the areas where about 80 per cent of the total water is used we have water-sharing plans and actual embargoes on the issue of any more entitlements. We are going through a process, which is jointly funded with the Commonwealth, of adjusting the major aquifers back down to sustainable yield. There is $135 million—

Senator HEFFERNAN —A picture paints a thousand words. As to the bore at Wagga that takes the water to Junee, West Wyalong and Temora, about 88 per cent of the water coming out of the bore is actually water that was going to be in the river. Have you done all of those figures?

Mr D Harriss —Absolutely. In the water-sharing plans, where there is a direct connection, such as in the Hunter Valley, allocations of surface water and groundwater are directly linked. In the area that you were just talking about, where we have had to reduce the allocations to town water in the Riverina, we have also restricted the allocations that are taken by Goldenfields Water and Riverina Water to match the same restrictions that are being placed on surface water. We recognise the connection.

Senator HEFFERNAN —That groundwater between Wagga and Narrandera is—

Mr D Harriss —In that area we know there is a very close connection between the surface aquifer and the river. Further out, around Carrathool and Narrandera, they pump from 100 metres or more, and we know that the connection is not as direct.

Senator HEFFERNAN —In relation to compulsory acquisition and compensation, how do we define the non-compensable climate change effect on the allocation that is available?

Mr D Harriss —Our allocation policy apportions a proportion of the bucket of water that is available. If the amount of water in the bucket is less as a consequence of climate change or bushfires or other risks, then there is less water available for distribution. That is how we normally apportion the impacts of reduced water, whether it is a short-term impact of drought or a longer-term impact of climate change.

Senator HEFFERNAN —There is still some quaint thinking that if I have a 5,000 megalitre water licence down the system somewhere—and it is now based on units of the available water—if the water is not there I will be compensated for it.

Mr D Harriss —I cannot speak for anyone’s thinking. We have been clear in a lot of the stuff that we have been producing over the last couple of years. We have been clear in trying to meet with all of our users and explain the system more so than ever, particularly with the high-security users. The New South Wales high-security product, which constitutes only about 10 per cent to 20 per cent of our whole profile, is effectively based upon the modelling that shows, if we had a repeat of the last 110 or 115 years, those people would get 100 per cent of their entitlement just about every year. However, over the last 12 months we have smashed that record by about 40 per cent in the Murray Valley and by substantial proportions in other valleys, rather than just beating it by a smidgen.

Getting back to your point about what modelling is being done, the Murray-Darling Basin Commission is doing a lot of modelling currently—this is a work in progress—about the potential impacts of climate change, reafforestation, groundwater, farm dams, bushfires and non-return flows. They will do the modelling that will demonstrate that, given a different range of scenarios, how much water would then be available to each of the jurisdictions under the current water-sharing arrangements. And then to quote my colleague, Peter Harris, the states will then go and work out under the current water-sharing arrangements how that would impact on their users. We are doing that at present. For example, we will be honouring that high-security right of maintaining 100 per cent of their right in every year, and that would impact on water availability for other users. We are doing that work now.

Senator HEFFERNAN —I am pleased to hear that. It will take more than political courage to sort all of that out, if the science is true. As Mr Harris has said, it will take some pretty strong leadership to do what has to be done.

Mr D Harriss —Absolutely. That work is being done by the commission and within the jurisdictions—

Senator HEFFERNAN —It sort of makes out the case for federal refereeing.

Mr D Harriss —There are two components to that. One is getting the work done—the science and the socioeconomic work that feeds the decisions. The next stage is the next part, which is the more political and policy part.

Senator HEFFERNAN —Could I move to the impact of overland flow. With your permission, Chair, I would like to progress to Queensland briefly and then go back to New South Wales. I know your position on the inequity of the overland harvesting in the lower Balonne and those river systems. In terms of the long-term impact for New South Wales, given that the likes of the Culgoa used to deliver 28 per cent of its flow and it now delivers two per cent, I cannot ask you the detailed questions that I would like to ask you until I have got you on the mark. Can I do that?

Senator O’BRIEN —We will do it in an orderly fashion.

CHAIR —Yes, we will do this in an orderly fashion.

Senator O’BRIEN —I do not have all that many questions to ask of Queensland. I am happy to move on to Queensland now.

CHAIR —So we are moving on to Queensland?

Senator IAN MACDONALD —Provided we have the time for questions.

Senator O’BRIEN —We have 35 to 45 minutes.

Senator IAN MACDONALD —Provided there is a fair allocation, because I have quite a few questions for Victoria that I want to ask.

CHAIR —We had a run with Victoria at the beginning, but we will come back to them. We will do Queensland now.

Senator O’BRIEN —Does Queensland have the same view of the state of negotiations that New South Wales has, that is, the position of the Commonwealth in terms of its acceptance of responsibility of post-2014 risk has changed substantially with this legislation from that which existed at a time early in July?

Mrs Best —We would strongly support what New South Wales was saying.

Senator O’BRIEN —Has there been an exchange of correspondence between the Queensland government and the federal government that would set out the earlier position and, if so, can you share it with the committee?

Mrs Best —We can share correspondence from the Premier to the Prime Minister and back. The letter from the Prime Minister might be similar to the New South Wales letter. The Premier has written on at least two occasions that I am aware of to articulate his support of the national initiative but also expressing concerns about the compensation and making sure that there are adequate provisions.

Senator O’BRIEN —Going back to 25 January, the Prime Minister announced that the Commonwealth was prepared to carry the entire costs, but what you are telling us is that that remained the position despite Victoria’s continued resistance to signing up to the intergovernmental agreement; so far as Queensland was concerned, in the first week at least of July the Commonwealth remained committed to accepting that risk?

Mrs Best —Yes, that is correct.

Senator O’BRIEN —You said you would support the views expressed by the Queensland Farmers Federation in its submission as to particular amendments to the legislation?

Mrs Best —Yes.

Senator O’BRIEN —Have you seen their submission?

Mrs Best —Yes. We have worked with them consistently throughout the whole process of developing the Commonwealth legislation. We felt that it was very important to make sure our key stakeholders were involved. I think you will see in their submission that they acknowledge that the first three dot points of the six points that they want considered were crafted by our department.

Senator O’BRIEN —Ergo you support them; they are yours?

Mrs Best —No, we have worked collaboratively on them.

Senator O’BRIEN —And whoever owns them, they are supported by both the QFF and the Queensland government?

Mrs Best —Yes.

Senator O’BRIEN —Are there any consequences for the Commonwealth in those amendments which would, in your view, lead the Commonwealth to the view that they should not be supported? How do you understand someone might categorise opposition to those amendments?

Mrs Best —One of the issues that we have consistently encountered is a lack of understanding of the difference in Queensland. As I said in the opening comments, we do have a very different water system because of the nature of it being the upper part of the catchment; they are ephemeral streams that are not consistently flowing as in the southern states. We are not based on large water storage infrastructure. The concern that we have is that there is not that understanding of the different types of authorisations that form part of our water access entitlements and that overland flow is certainly a key component of those entitlements. We have not been successful in negotiating with the Commonwealth to have it specified in the legislation. That is one of the ongoing discussions that we were having with them and we have not reached a landing on that.

Senator O’BRIEN —In relation to the legislation as it stands, would Queensland remain in support of the legislation without those amendments?

Mrs Best —We would be looking to the IGA to see what comfort we would have to address those concerns in the intergovernmental agreement. I am happy to give you a copy—it is not a signed copy—of the letter the Premier was sending to the Prime Minister. He said he was happy to continue having discussions and was hopeful of resolving the issues around compensation.

Senator O’BRIEN —So far as the Queensland government is concerned, that issue of change in compensation obligations is a concern?

Mrs Best —It is a concern.

Senator O’BRIEN —Is it potentially a stopper?

Mrs Best —That would not be my call. That would be the Premier’s call.

Senator O’BRIEN —You do not know the answer to that?

Mrs Best —The Premier is well informed/advised that there are concerns around that. He has highlighted that in his letter and it is not for me to make that call.

Senator O’BRIEN —All I want to know is whether the witness knows the answer and, if the witness does not know the answer, I am happy to be told that.

Senator IAN MACDONALD —That is not for the witness to indicate.

Senator O’BRIEN —That she does not know the answer?

CHAIR —It is not for her to answer if it is a policy issue.

Senator O’BRIEN —There are too many bush lawyers around this table.

CHAIR —We will stick to the standing orders.

Senator O’BRIEN —I am glad you agree with me, Chair. I am all but finished the line that I currently wish to pursue. I think I have asked you this before but just for completeness: has Queensland done any assessment or does it intend to assess the potential cost of the impact of the legislation on the state of Queensland’s finances from 2014 on if it proceeds in its current form?

Mr Claydon —Our answer to that is the same as that of New South Wales. We have not done, and the extent of that would depend on the extent by which the Commonwealth minister may make a decision to reduce the amount of take that Queensland water users could have. We have no control over that and no knowledge of that, and the extent of the costs that would apply to Queensland would depend on the extent of the decision of the Commonwealth minister to reduce the water available to be taken in Queensland.

Senator O’BRIEN —How much is Queensland expecting from the $3.5 billion off-farm investment?

Mr Claydon —We have not put all of that together. It is recognised that the basin plan will determine where the priorities will go.

Mrs Best —The focus of the discussions has really been on the legislation and the IGA. We would see the funding arrangements and process to do that as following subsequent to it.

Senator O’BRIEN —That has not been the subject of any discussion at this stage?

Mrs Best —No.

Senator O’BRIEN —It is a bucket of money as far as everyone is concerned and there are no particular allocations to any particular state at this stage?

Mrs Best —Not to my knowledge.

Mr Claydon —Yes, that is right; not to our knowledge—none that has been revealed to us.

Senator O’BRIEN —I would invite any state representatives that have a different view to say so now. Can we take it that that is the case for all states?

Mrs Best —The focus of the discussion has always been on the legislation and the IGA. When we have asked questions of the Commonwealth, Commonwealth officials have said that we need to get this in order first.

Senator KEMP —I have listened very carefully to the evidence. It is correct that the public servants at the table have dealt with issues they can deal with and have not dealt with issues outside their ambit to deal with. Of course people do have some concerns about a bill of this nature and undoubtedly that will always be the case, but there is very widespread support for the bill going forward. In fact, the major group that objects appears to be Mr Peter Harris’s government, the Victorian government. I make that point because in the evidence that has been given the only public servant who has transgressed the rule about getting into politics has been Mr Peter Harris. In the statement that he made there were some gratuitous comments about climate change and what he perceived to be—

Senator O’BRIEN —This is scurrilous. You are entitled to ask a question but if you want to make a speech and waste time—

Senator KEMP —You just keep quiet. We listened quietly to you.

Senator O’BRIEN —I think you are entitled to ask a question, but if you want to make a speech and waste time—

CHAIR —I am sure you will have a question, Senator Kemp, so if you could move to that question.

Senator KEMP —Senator O’Brien has objected constantly to people butting in, and it is astonishing that he is not practising what he preaches. The point I make to Mr Peter Harris is that my judgement is that, as a public servant, if you wish to make political comments you should tell your political masters to come along before this committee and make them rather than come here as a proxy for them.

Senator O’BRIEN —Another scurrilous comment under privilege from you.

Senator KEMP —The point I would make is that Victoria is really the only major government completely out of step. We have heard qualifications that other states have. Victoria is completely out of step on this. We have heard evidence from the VFF. The VFF has had some qualifications and raised some issues. But my understanding from the evidence they gave this morning is that it broadly supports the thrust of the bill with some qualifications. What I would like to hear from Mr Peter Harris is: how can he claim that he has the support of Victorian farmers when it is very clear from the evidence that has been given to this committee that he does not?

Mr P Harris —I am happy to answer that.

Senator O’BRIEN —This is supposed to be a question to Queensland.

CHAIR —We are supposed to be going to Queensland.

Senator KEMP —We have gone to Victoria.

Senator O’BRIEN —We are directing questions to Queensland at the moment.

CHAIR —We were doing it systematically by states, but proceed.

Mr P Harris —I am happy to answer that. It is because I speak to them.

Senator KEMP —Are you saying that the evidence given this morning before this committee was wrong?

Mr P Harris —I did not hear the evidence given before the committee this morning.

Senator KEMP —We had the VFF before the committee.

Senator O’BRIEN —That is your view of the evidence.

Senator KEMP —The VFF said that they have some qualifications with the bill but are broadly supportive of it.

Senator O’BRIEN —You are verballing them now.

Mr P Harris —The VFF is not the irrigator community of Victoria. The Department of Sustainability and Environment is in constant contact. I referred earlier to the negotiations that occurred leading up to the water reforms in Victoria in 2004. There has been an ongoing relationship between my department and the irrigators, and I think all my colleagues have very similar relationships. We hear from them quite directly, particularly with the benefit of email, but often phone calls. I think in Victoria we remain completely in touch with the views of our irrigators. But I am sure there could be a difference of opinion out there.

Senator HEFFERNAN —With great respect, the great flaw in that is that the authority of the farming organisations in New South Wales—otherwise you have a dog’s breakfast—is channelled through the authority of the VFF.

Mr P Harris —If that is the basis on which Senator Kemp is making his comments, then I accept that he should rely upon that if he chooses to. I am simply trying to answer his question. We are in constant communication with them, and I think you too would know that.

Senator KEMP —Can I get the Victorian position clear? Please correct me if I am wrong. I understand that you have sought to have Victoria-specific arrangements applying in Victoria and the full referral of powers applying in other jurisdictions. Is that correct?

Mr P Harris —That is not 100 per cent correct. Our position was from the start that we would provide powers to the Commonwealth to enable them to undertake the leadership of water reform in the Murray-Darling Basin but via legislation prepared for the Victorian parliament. In the end after discussing that in a number of meetings between my minister and Mr Turnbull, we were asked to put that down on paper and we did so. That is the basis of the terms sheet we put forward. The area where you are clearly correct is that other jurisdictions were prepared to examine, based on the nature of the legislation, the full referral of powers, and Victoria was prepared to provide support for the Commonwealth to exercise the acts that it needed to exercise to provide leadership in the basin. We had a different legislative basis for proceeding. We did participate in discussions by invitation amongst all jurisdictions on the nature of the Commonwealth bill, but our position was always separate from the start.

Senator KEMP —I know that you touched on this in your opening statement, but just for the sake of completeness, could you make it very clear why the situation in Victoria, in your view, is different to that of all the other states?

Mr P Harris —It is the nature of the agricultural water entitlements and the environmental water entitlements that we have generated, which are relatively high security and therefore have a high level of confidence. If I could set this in context, in 2006-07, given how much stress everybody was under over whether their water entitlements would be retained, those who were in Victoria expressed a high level of confidence because the entitlements were maintained. It is virtually circular. They said, ‘Look, things are pretty crook yet our entitlements have held up. Why would we concede to going to a different system?’ It is as simple as that, particularly when the suggestion was in the original drafting of the Commonwealth bill that the operational rules might change. As I said to Minister Turnbull a number of times, ‘This is such a big shift that you have to sell to people that in future they will have to get their advice from an unknown new authority.’ By ‘people’ I mean irrigators who otherwise used to ring up Goulburn-Murray Water and ask what the entitlement next week is going to be and monitor it that way. It created a level of uncertainty whereas we had certainty. This is not me proclaiming arrogantly some great success for the Victorian system. It is just to explain why in 2006-07 human beings who were dependent on water and saw high reliability of water broadly continuing to be supplied whilst in other circumstances it was being cut, necessarily said, ‘Good. I favour that system.’ Any human being would do that.

Senator KEMP —You want the Commonwealth to control virtually all the system but not the Victorian part of it?

Mr P Harris —No. In our terms sheet, which we have tabled and you can examine, we would concede to the Commonwealth the ability to set a cap across the basin and to set subcaps catchment by catchment. Therefore, to vary in future based around good science, as they suggested that they would, the nature of water allocation across the basin. We clearly said that we would give them the ability to do that and we would give them the ability to enforce compliance via the Federal Court, that is, ‘Don’t just take our word for it when we pass our law. If we fail to do so, you can go to the Federal Court and enforce compliance, you can access information, we will give you the power to enter property and so on in order to get information to support a case saying we were not observing your activities.’ But we wanted to do that through the Victorian parliament with a Victorian based bill. That is why you have heard the distinction that I think you are making that Victoria wanted to do it via Victorian law, because in practice that is correct. We wanted the Commonwealth to show national leadership but we were prepared to concede constitutional ability for them to do so via Victorian legislation.

Senator KEMP —It seems to me that everyone can claim that their states are different and I am sure that they are. I am sure that there are particular features in every state where there are concerns that the Commonwealth adjustments simply are made. It does seem that Victoria really is the one who is quite out of step. The infrastructure investment required in Victoria is simply huge in the area of irrigation. What level of commitments have you made?

Mr P Harris —We have made a commitment for $1 billion.

Senator KEMP —Over how many years?

Mr P Harris —Through to 2013 roughly, but we have also been quite clear that there is another $1 billion that could easily be expended effectively to create even further water in Victoria; that is, in practice there is clearly a substantial ability to generate water savings. If I could just divert slightly, we are talking legislation here, but as we know legislation does not create water; investment creates water, potentially, under this structure. There is a substantial opportunity to create water within the basin via investment in Victoria and we are putting our money where our mouth is in Victoria. We know that the federal government has a $10 billion plan, but as my colleagues have noted, no-one is absolutely clear—

Senator IAN MACDONALD —But you are not going to share in that.

Mr P Harris —We will share.

CHAIR —We will let the witness answer.

Mr P Harris —When I previously described the 225 gigalitres that will come out of the Victorian investment, 75 goes to urban users, 75 goes back to farmers and 75 goes to the environment. The 75 to the environment will flow down the rivers and end up in South Australia. As the river does, it will lose a lot of its impact along the way, but solely just through environmental allocations we will actually be sharing more water. That is just through environmental allocations.

Senator KEMP —You suggest that you will invest $1 billion over six years. That works out to $150 million on average per year, roughly.

Mr P Harris —It is still $1 billion.

Senator KEMP —Yes, it is $1 billion, but it is spread over a long period of time and it is $150 million a year. How much does your department estimate is required to carry out an appropriate upgrade of the infrastructure?

Mr P Harris —That is an interesting point and I am not trying to avoid it. I will give you both answers. There are opinions from the irrigator community in Victoria as to how much money is required, and they are quite high, and there are opinions from our department and the Goulburn-Murray Water, and they are somewhat lower.

Senator KEMP —Can you give us the range?

Mr P Harris —We would say that the truth of the matter is $2 billion, which is a fairly good central figure between the estimates. In other words, there are people who say that it is higher than $2 billion and there are people who say that it is lower than $2 billion. We reckon $2 billion would see serious water savings in the Goulburn-Murray irrigation district which would generate water for the environment which would be a direct flow of benefit to the river, but also obviously farmers can choose to sell those water savings and, under the effective trading system that I think has now commenced with the Murray-Darling Basin Commission and councils’ oversight, that water is available to be traded to other parts of the basin as well.

Senator KEMP —You said that there is $1 billion on the table over six years and there may be another $1 billion on the table from Victoria; is that right?

Mr P Harris —We are saying that there is $1 billion more that could be invested quite readily under exactly the same infrastructure principles that we are. I am not saying the Victorian government is promising the second $1 billion, no. I am not saying that.

Senator KEMP —You think that the investment required is $2 billion; Victoria has put in $1 billion, essentially.

Mr P Harris —That is right.

Senator KEMP —And you would obviously want the Commonwealth government to put in the remainder?

Mr P Harris —Not necessarily. We actually think that there is a case here for private sector investment and we have had private sector firms approaching us for this purpose. The water is worth something.

Senator KEMP —I have just got a couple of other questions before I let my colleagues continue theirs. I have just received some advice that there are only two representative irrigator groups in Victoria, the VFF and the Northern Victorian Irrigators. My understanding is that both have publicly supported the bill.

Mr P Harris —That may well be the case. You have the advantage of me on that. I do not know that.

Senator KEMP —Doesn’t this quarrel with your view? You are saying that the representative bodies, with some qualifications, generally support the bill and you are relying on your discussions with irrigators and you feel that you are properly reflecting their views. Do you see that there is a potential problem there?

Mr P Harris —As I conceded earlier to Senator Heffernan, if you say that the leadership of the organisations represents the view of those groups that is fine. That is certainly one perspective. In our case, we are not standing out in the main street of Shepparton saying, ‘Please come and tell us you have a problem with this.’ People volunteer that they have a problem with this.

Senator KEMP —In general you would know that governments of course take advice from all areas, but you do give some weight to the properly constituted representative bodies. The point I am making is that the Victorian government seems to be out of step in relation to the properly constituted bodies. Is the risk assignment in Victoria agreed in NWI enshrined in legislation in Victoria?

Mr P Harris —No.

Senator KEMP —But I understand it is in New South Wales.

Senator HEFFERNAN —Do you think it will be, because otherwise it makes a phoney argument of what we are talking about here? Queensland has got the same problem and we are coming to you.

Senator KEMP —Are there any plans to do that.

Mr P Harris —Not that I am aware of.

Senator KEMP —How do the irrigators feel about that?

Mr P Harris —I frankly have not heard a view on the NWI from irrigators for a while.

Senator KEMP —But you are in constant consultation with them.

Mr P Harris —Which just means that it is not a front-of-mind issue.

Senator KEMP —I think you will find it is. I am finished for the time being.

CHAIR —Do other people have questions of Victoria at this stage?

Senator O’BRIEN —I have some questions.

Senator BIRMINGHAM —We agreed this would be a round table discussion as well. I do not think that we need to isolate state by state if there is more interest in Victoria.

CHAIR —That is the way we were doing it, state by state.

Senator O’BRIEN —We need to try to be a bit orderly.

Senator HEFFERNAN —I do not want the ACT to feel out of it. I am going to ask a question just so everyone knows you are here.

CHAIR —Thank you. We have heard from the ACT. Their problems are largely urban but if you do have questions of them then we will ask them. Senator Macdonald, you can proceed with your questions to Victoria.

Senator IAN MACDONALD —What do you envisage will be the impact of Victoria not coming on board with this proposal on the ability to upgrade the infrastructure that quite clearly so desperately needs doing?

Mr P Harris —In the short term, I do not think there will be a great impact because we will be spending our $1 billion. There is a steering committee of all the irrigator groups meeting today to determine to which districts effectively we give priority for the investment.

Senator IAN MACDONALD —But you are not going to be spending Commonwealth money, are you?

Mr P Harris —No, we are spending our money.

Senator IAN MACDONALD —If you were on board, you would be getting Commonwealth money, too.

Mr P Harris —That has actually never been stated as clearly as you have stated it. I think the implication has always been there. I am not trying to correct you.

Senator IAN MACDONALD —Where was the $10 billion going if it was not towards that and other issues? A lot of it was going to help fix up infrastructure that is ruining the Murray-Darling because it is so inefficient.

Mr P Harris —I think my colleagues may have a better answer for you on that. I know from a Victorian perspective that the $10 billion was held up as a prospective investment. Substantial parts of it were devoted to information development by the Bureau of Meteorology and for the development of the new authority and another substantial part of it was to be devoted to buy-backs of overallocation and some remaining portion, but always unspecified in the knowledge of Victoria, was to be provided to infrastructure by the Commonwealth. As I stated in my opening remarks, there was never any deal or swap. There were without doubt media comments from some of our irrigators saying that they would like a very large amount of money but that is traditional in these processes. I do not put any weight on that terribly one way or another. But to my knowledge there has never been an offer from the Commonwealth which says—

Senator IAN MACDONALD —So you never expected to get any Commonwealth money? That just belies—

Senator O’BRIEN —That is not what he said.

Senator IAN MACDONALD —What impact is your not coming on board going to have on your infrastructure, which desperately needs upgrading. You are losing so much water it is almost a crime. The Commonwealth was indicating that it was prepared to come in and help, and you are rejecting that.

Mr P Harris —No. The Commonwealth was not indicating and has never indicated that it was prepared to come in and help on this Goulburn-Murray infrastructure upgrade. We are the only jurisdiction that has invested. If you get the farmer representatives back they will tell you that.

Senator IAN MACDONALD —That is not their understanding.

Senator O’BRIEN —The Commonwealth has made it very clear—

Senator BIRMINGHAM —It is putting billions of dollars of funding on the table—

Senator O’BRIEN —Are we all just going to jump in?

Senator BIRMINGHAM —I will keep going, thanks Senator O’Brien.

Senator O’BRIEN —Is everyone just going to jump in?

Senator BIRMINGHAM —We are having questions of Victoria. You wanted a state-by-state structure.

Senator O’BRIEN —We were actually proceeding with the call and you just jumped in.

CHAIR —Senator Birmingham, in fact Senator O’Brien had the call after Senator MacDonald.

Senator IAN MACDONALD —Let me continue.

CHAIR —You said you had a short follow-up question. I think we have to be rational about what we are doing.

Senator IAN MACDONALD —Senator O’Brien has had a very good go.

CHAIR —We are dealing with Victoria. If you wish to add to what your questioning has already covered, then please do so, but then we must go to Senator O’Brien.

Senator IAN MACDONALD —Senator Birmingham was rightly pointing out that it belies anyone’s understanding of this. Victoria is not that stupid that they would not have recognised that there was Commonwealth money coming in for the infrastructure. By not being part of it you are rejecting that. What impact is that going to have on your infrastructure and the losses that occur? You are telling me none, as I understand it.

Mr P Harris —That is right, because we will be investing our $1 billion in the next period and the irrigator committees will be deciding where and how.

CHAIR —We must not forget South Australia, because only Senator Wortley has asked questions of South Australia.

Senator O’BRIEN —I thought Senator Birmingham did. In terms of the intergovernmental agreement negotiations between Victoria and the Commonwealth, has there been a sharing of draft agreements between the Commonwealth and the state of Victoria?

Mr Ben-David —The draft IGA?

Senator O’BRIEN —Yes.

Mr Ben-David —Yes, we did receive the earlier draft that was shared with all jurisdictions.

Senator O’BRIEN —But after 6 July 2007, did you receive that one?

Mr Ben-David —Is that the last version we received? Yes. We have not been treated differently. We have not had any information withheld from us that we know of.

Senator O’BRIEN —Can you tell the committee what the process has been in terms of discussions between the Commonwealth and the state of Victoria regarding trying to reach agreement on legislative and inter-governmental agreement issues? Have there been regular meetings between officials and, if so, how regular? Have there been regular meetings between minister and minister and, if so, how regular? And has that process changed recently?

Mr P Harris —Yes. Perhaps we will need to share this because I have not been involved in the officials’ meetings but Mr Ben-David has. There have been ministerial meetings between Minister Turnbull and Minister Thwaites and also between Minister Turnbull and the Premier and between both our ministers and the Prime Minister. They occurred through late May, certainly in June and into the July period. They were clearly discussions which were focused on the differences between the Victorian position and the Commonwealth position and how we could attempt to bridge the gap. From Victoria’s perspective, we advanced this concept of what I have called the camel—I am glad I have got that on the Senate record—which is an agreement where the federal government and other jurisdictions would proceed down a path and Victoria would support that path, but via Victorian legislation. And that incrementally developed over the period of those discussions culminating in the term sheet proposition that the Premier put to Mr Turnbull. Then, in support of the term sheet, we actually provided the Commonwealth with our drafting instructions so that they could give those to their own lawyers who could then look at our legislation and see whether we were conning them or not with our statements because we clearly were not. In our terms we were not, but we gave them our drafting instructions as well.

Senator O’BRIEN —When was that?

Mr Ben-David —I think 11 July. I might be out one or two days.

Mr P Harris —This does not have a date on it. We did provide them with that. It is more than a fortnight ago because I was doing a speech in Victoria about two weeks ago on our other water reforms and I got asked a question about this. It had been two weeks since we had provided the term sheet to the Commonwealth and I expressed confidence that the Commonwealth was seriously considering our proposition and that very day we got the letter from the Prime Minister saying, ‘Sign up to our legislation.’ So it has been about three or four weeks since we have given that to the Commonwealth.

Senator O’BRIEN —Have there been regular meetings between Commonwealth and Victorian officials to progress agreement between the state and the Commonwealth on the issue of the legislation and the intergovernmental agreement and when did they cease?

Mr Ben-David —There have been no specific bilateral discussions. They have always been multilateral, so most of the people at this table have been part of those discussions and we have put forth our concerns. I would have to check my diary, but the only bilateral discussion that I can recollect was the one last week when two Commonwealth officials did a tour of the states to discuss the draft bill and a one-page description of the IGA. The Commonwealth officials were not able to come to Victoria so Victorian officials, myself and another, came to Canberra for that discussion.

Senator O’BRIEN —What is the latest iteration of the proposed intergovernmental agreement that the state of Victoria has seen?

Mr Ben-David —We have not seen it.

Senator O’BRIEN —Not the current version, but I think you said that you had seen the 6 July version?

Mr Ben-David —Yes. I believe that was the one sent out with the Prime Minister’s letter.

Senator O’BRIEN —I only received it today, so I do not know the answer to that.

Mr P Harris —It was some time ago. We certainly have not seen the new IGA that is forecast as a result of the new bill.

Mr Ben-David —No-one has seen that.

Senator O’BRIEN —Did Victoria have the view that negotiations were proceeding positively? I think you said this, Mr Harris, but I just want to be absolutely clear, that they were proceeding positively until some time in the middle of July.

Mr P Harris —Yes. I certainly had that view and I know the Premier also believed that was the case, but I am a born optimist so perhaps you can discount that.

Senator O’BRIEN —Can I categorise the Victorian position as one of saying that Victoria was happy to reach agreement but required the legislation to be Victorian, rather than Commonwealth, to implement that agreement?

Mr P Harris —That was basically our position.

Senator O’BRIEN —And did Victoria take a substantially different position on compensation or any other significant matter in the package from other states?

Mr P Harris —Yes, we did. It was made clear to us that if we were not a participant in the Commonwealth legislation we would not get the benefits of compensation, and we accepted that would be the outcome.

Senator O’BRIEN —The long and the short of it is that Victoria had told the Commonwealth that they would sign up to a package provided the legislation was Victorian rather than Commonwealth legislation, and if that meant that you did not get the off-farm compensation, you would accept that?

Mr P Harris —That is right.

Senator O’BRIEN —And the Commonwealth rejected that?

Mr P Harris —Yes. Mr Ben-David is a little worried about your term ‘off-farm’. We are actually saying effectively that as to the compensation protections that my colleagues have been talking about on risk management, we accepted that if we were not part of the Commonwealth’s legislation, we could not be participants in that. Yes, we did accept that and that was part of our understanding throughout. Minister Turnbull made that quite clear some months earlier.

Senator O’BRIEN —That was the only hurdle to get over?

Senator IAN MACDONALD —You have asked the same question three times. I want to take note of the time and we have Queensland and South Australia to do in the next 10 minutes.

CHAIR —We have done Queensland. Senator Birmingham has some questions of Victoria and then, if you want to come back to Queensland, we can come back to Queensland.

Senator O’BRIEN —I would like an answer to my last question and I am happy to pass over to whoever wants to continue on Victoria.

Mr P Harris —You are correct.

Senator BIRMINGHAM —Mr Harris, in trying to draw together the strands, let me be totally clear cut here. You have $2 billion worth of infrastructure projects that you have identified. The Victorian government is funding $1 billion and you are happy to pass up the opportunity for Commonwealth funding.

Mr P Harris —No, I do not think I ever said that we were happy.

Senator BIRMINGHAM —But you are?

Mr P Harris —I answered a question from Senator MacDonald that said that there was loss associated with this. I am saying that for the next few years we will be doing all the investment that can be done. Clearly, if the Commonwealth was to come to us tomorrow and say that they wanted to put $1 billion into water in Victoria, they could have done that quite separate to this legislation and we would have done them a deal which enabled them to obtain water.

Senator BIRMINGHAM —Once again, as has been the history with the river’s management and the reason why we need a national system of course, a state’s recalcitrance is causing the rest of the system and the rest of the states to suffer. Does Victoria support the National Water Initiative?

Mr P Harris —From my understanding of the National Water Initiative, yes. I think the National Water Initiative is under a little question at the moment.

Senator BIRMINGHAM —You are signatories to it and of course the Commonwealth has accepted its share of the risk in the National Water Initiative, as we discussed with the New South Wales government previously. Has the Victorian government allocated funds for that?

Mr P Harris —As I mentioned earlier, the Victorian government had undertaken a substantial negotiation to obtain commitments from our irrigators and commitments to our environmental needs through to 2019 and that is reflected not only in state legislation but also in the NWI arrangements.

Senator HEFFERNAN —Why would you legislate? Are you going to legislate the risk assignment?

Mr P Harris —We have actually done better than that from our perspective.

Senator HEFFERNAN —Why is everyone down the back of the room shaking their heads?

CHAIR —Let the witness answer.

Mr Ben-David —The NWI includes a provision that says:

The parties agree that where affected parties, including water access entitlement holders, environmental stakeholders and the relevant government agree, on a voluntary basis, to a different risk sharing formula to that proposed in paragraphs 48-50 above, that this will be an acceptable approach.

We have negotiated a separate risk sharing arrangement.

Senator BIRMINGHAM —You have negotiated—

Mr Ben-David —We have, as reflected in our legislation.

Mr P Harris —As reflected again in Victorian legislation, which is why I say we have gone further. To be very clear, we have effectively negotiated an arrangement with our farmers, which they support.

Senator HEFFERNAN —Are you sure of that?

Mr P Harris —Yes.

Senator HEFFERNAN —They are all shaking their heads down the back.

Mr P Harris —Mr Paul Weller, the then-President of the VFF, negotiated this arrangement with the state.

Senator BIRMINGHAM —So after 2019, Victoria will meet its risk sharing liabilities under the National Water Initiative formulas?

Mr P Harris —Victoria will, yes.

CHAIR —At this point we have a very limited amount of time. Queensland wishes to table some documents.

Mrs Best —Yes. I would like to seek permission to table the documents that I referred to when Senator O’Brien was asking questions and also an additional table that is related to those documents. I would like the committee to note that the sections referred to are a little different to the new iteration because they refer to the previous bill.

CHAIR —We accept these documents.

Mrs Best —Thank you.

Senator HEFFERNAN —I would like to ask a couple of questions about ROP coming out of the WRPs for the Warrego and the Balonne. I understand that they are in draft form at the moment.

Mrs Best —The Condamine-Balonne is in draft form, yes.

Senator HEFFERNAN —I understand that the independent chair of that process was Leith Boully; is that correct?

Mrs Best —Yes.

Senator HEFFERNAN —I understand that the implementation of the WRP through the ROP, the resource operational plan, was to license entitlements. Is that correct?

Mrs Best —The resource operational plan implements the rules in the water resource plan, correct.

Senator HEFFERNAN —And part of the overland flow, which was what replaced the A and B licensing regime earlier, had the licensing arrangements in draft form. The ROP has some recommendations on water licences. Do you agree that there are some?

Mrs Best —Yes.

Senator HEFFERNAN —They are based on the measurement of earthworks capacity to intercept overland flow and store it, et cetera.

Mrs Best —With overland flow we have gone through an extensive process of certification where we have qualified engineers to certify the volume and the storage.

Senator HEFFERNAN —You do not have to talk about that. We are running out of time. But they are based on the earthworks that are there.

Mrs Best —Yes. If they are approved works prior to 2000.

Senator HEFFERNAN —And their capacity to intercept and store water?

Mrs Best —Their capacity, but there are also rules about how much water can be stored at a particular point in time.

Senator HEFFERNAN —I am aware of that. How can the independent chair of the process who does not actually have any earthworks, because she has a commercial-in-confidence arrangement—

Mrs Best —The chair of the ministerial advisory committee provides advice to the minister.

Senator HEFFERNAN —I am asking the question: how can she be eligible for a water licence if she does not have any capacity to harvest water, because she gets it from Cubbie?

Mrs Best —As I said, the chair provides advice to the minister and there is a completely independent progress, the ROP referral panel, who look at all—

Senator HEFFERNAN —I am not doubting that for a minute. Under the process, the licences are going to be allocated to people upon their capacity to intercept and store water.

Mrs Best —With respect, if you have specific questions about the ROP concerns, there is a due process to lodge those concerns. We are here today to talk about the legislation.

CHAIR —That is quite correct. We are here to talk about this bill.

Senator HEFFERNAN —With great respect, I will tell you why it is part of the bill. Under the bill, we are going to endorse those draft plans as compliant and I am saying it is fundamentally flawed because the 400 gig—

Mrs Best —The Prime Minister has written to the Premier to say that they can proceed.

Senator HEFFERNAN —I know about that letter. The 400 gig licence that has been issued for overland flow to Cubbie with the joint beneficiary being the independent chair of the process who does not have any capacity to store water. In my view, that is a matter that can be referred to ICAC.

Mrs Best —Minister Turnbull has been very clear in his second-reading speech that the existing entitlements including the ROPs, which are part of the water resource plans, will be respected.

Senator HEFFERNAN —How can you have an entitlement if you do not have any earthworks?

Mrs Best —I will repeat, Minister Turnbull has stated in his second-reading speech that the Prime Minister has also written to the Premier about those water resource plans—

Senator HEFFERNAN —I have seen all that correspondence. How can you have an entitlement if you do not have any earthworks?

Mrs Best —I will repeat, Minister Turnbull has said in his second-reading speech—

Senator IAN MACDONALD —That is not answering the question.

Senator HEFFERNAN —We are assuming that the ROP is compliant with the National Water Initiative which is built upon the capacity of earthworks entitlements to be licensed, and that is a fundamental flaw which I think should go off to a corruption commissioner.

CHAIR —Thank you. We have noted the answer that you have been given and your comments have been noted. Are there any other questions? We have about three or four minutes left of this session. Has someone got some overriding issue they wish to raise?

Senator WORTLEY —In the South Australian submission you said that South Australia has worked in good faith with the Commonwealth and other basin states to develop a comprehensive draft Commonwealth Water Bill and associated IGA. You then go on to say that South Australia has some significant concerns about the government’s Water Bill 2007. I wonder if you can provide details of the consultation and process between the Water Bill and the reviewed Water Bill?

Mr Freeman —I cannot provide that in detail. As was outlined by Victoria, the negotiations around the previous Water Bill, being the one that was not introduced into parliament, was on a multilateral basis. There were essentially fortnightly meetings between senior officials and in the alternate weeks there were meetings with the other officials. That was a comprehensive process. I think we received this bill one day before it was introduced into parliament.

Senator WORTLEY —And the consultation process that led to the reviewed bill?

Mr Freeman —What I am saying is that we saw the bill that is before parliament one day before it was introduced into parliament, with no consultation prior to that.

Senator WORTLEY —So there was no consultation?

Mr Freeman —No.

Senator WORTLEY —You have raised concerns that the bill fails to provide a guarantee on environmental returns to the River Murray. I am wondering how you think this can be addressed and how significant it is in relation to the Water Bill 2007?

Mr Freeman —As I outlined, it could be addressed through an amendment to the mandatory content of the basin plan. The basin plan at the moment does not require an end-of-river system target. In talking previously about how we might divide up the off-farm infrastructure, one of our concerns is that this will be about splitting up a pie amongst jurisdictions, when really it should be about basin-wide solutions. Whether money is spent in one jurisdiction or another is irrelevant. We need to restore health to the river system and the way that we will measure that is a target at the mouth.

Senator WORTLEY —If this is not addressed, what will be the outcome?

Mr Freeman —If this issue cannot be addressed in the bill we believe that it is critical that it gets addressed through the IGA. There are two critical elements that are missing. I have outlined five issues that we believe can be addressed in the bill. If they cannot be addressed in the bill then it will be essential for South Australia to have the emergency provisions for water for critical human consumption addressed through the IGA. Just as important will be the environmental outcomes as I have expressed. They could be included in an IGA, which would give less certainty than the bill. And probably just as important, it will be essential for the IGA to recognise that the Water Bill is a first step towards a more comprehensive bill which would reflect the full agreement that was agreed by first ministers back in February 2007.

Senator WORTLEY —Thank you.

CHAIR —Thank you all.

Proceedings suspended from 12.45 pm to 1.38 pm