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STANDING COMMITTEE ON REGIONAL AUSTRALIA
09/02/2011
Impact of the Murray-Darling Basin Plan on regional Australia

CHAIR —Minister, do you want to make any further remarks?

Mr Costa —I thought I would just open up with those comments to put it in context. I believe that is where your path might be heading but I will be led by you. I am more than happy to answer your questions. I will begin by going through some of our key recommendations, if that is of value to you. I will not go through them all. We have put up 11 recommendations, and the first one, which is there because we believe it is top priority, is that the Murray-Darling Basin Authority itself actually provide urgently an updated timeline that will give us and the stakeholders time to comment on the guide itself, especially giving us time to deal with the work you are doing on the socioeconomic analysis. We are a bit concerned about the time frame that is there and the capacity for that time frame to give due diligence to what might come out of any work that has been done on the socioeconomic analysis.

We saw the need for socioeconomic analysis as very important. In fact, a recommendation I put forward earlier was that that could have been something that was helped along by the new regional development boards across the state. I established those when I was the Minister for Regional Development. I saw that as an opportunity for the engagement of those types of bodies, in cooperation with the federal government, the Murray-Darling Basin Authority and us, to do that deep analysis of individual valleys, on the socioeconomic impact of the removal of water from each of those valleys.

We knew that that was going to be a time-consuming process. So we are asking, and we have asked, that consideration be given to an appropriate time line to allow those analyses to be appropriately interrogated. That is on top of our recommendations. That would give appropriate consideration to the outcomes of the inquiry. It is also about the implementation. We believe it is important that in the stakeholder consultation processes, as discussed by the Murray-Darling Basin Ministerial Council last year, we make sure that we bring the communities along with us and have an open and transparent discussion about the assumptions and the analyses that we have.

We have had difficulty getting access to the basis of the assumptions made in the draft plan. That tended towards giving people a lack of confidence about what is being presented. Through the commissioner’s team, we actually did supply quite a lot of quality data from very experienced and professional people, but it was the interpretation of that data and how one uses that data that we were not being engaged with in a very deep and meaningful way. It is about doing that so that the recommendations that are made do have some basis, particularly their impact on communities.

As a consequence of that, we are recommending to your committee that the Commonwealth give consideration to extending the time frame for the implementation of the RAP with a view to harmonising Murray-Darling Basin Plan commencement dates amongst the basin states. This is a complex task ahead of us. We see that it is important that there is harmonisation between the states in terms of timing and expectations over a period. There is some differential, for example, between New South Wales and Victoria which has cause some angst in our community. We need to ensure that there is an engagement process and an implementation process that harmonises what we do in each of the states at the same time. That distorts our market. It upsets our market systems.

That leads to revised stakeholder engagement. We feel that that requires more work. I have also travelled the state and have spoken to stakeholders face-to-face. I went after the Murray-Darling Basin Authority spoke to communities on the guide. I gave a little distance in time and then I came in behind them and crossed the state about two, three or four weeks afterwards, after people had had an opportunity to digest it. The purpose of our visit was to engage those communities, to inform our response as a state government—which people appreciated—in the process. All of the issues they raised were reflected in our response to the guide. It was that type of engagement that tended to give a lot more credibility to what we put together because the communities that were closely linked to this were involved in the process. I feel as though that may have been lacking in the development of the guide in the first instance.

I might get David, in a moment, to go through the transitional arrangements. We are recommending that we look very carefully, particularly in the transitional arrangements, at how one moves from where we are to where we are heading. We are of the view that, to give communities time to adjust and to give communities support to adjust, we need to be very mindful of that process and the time taken to do it. An example is that New South Wales has had in place water-sharing plans for just on a decade now.

Mr Harriss —They were introduced in 2004.

Mr Costa —In 2004—more than a decade ago. So we have had our water-sharing plans in place, and in the process of setting up those water-sharing plans we have gone through in a microsetting what the Murray-Darling Basin guide is trying to do across the whole basin. We have engaged communities and gone through all that was necessary to bring communities with us, but it has taken a decade—it has taken a long time for those communities to adjust. As they have cut back their water use, we have acquired a lot of water for the environment, for example, and we believe the outcomes that were reflected in those water-sharing plans are good ones as far as the way in which we engaged the community, set up those plans, implemented those plans, monitored those plans and reviewed those plans is concerned. It has taken time to get the results that we have got, and we have had a very, very successful result from that.

We have had the communities working with us. Many of the water users initially had to go through some pain to pull back, but they were able to do it over a slow and managed process so that their operations continued in another format. We can do that. I might get David to share with you our view about the transitional arrangements, which I believe will be vitally important in your considerations because they are about how we do what we have to do so that they do have as minimal an impact as possible on those economies and those communities.

CHAIR —Thank you, minister. The minister just mentioned the water-sharing plans and the processes that were involved there, and I have been involved in a few where quite a lot of scientific evaluation has been done, particularly in terms of ground water and the Namoi and those systems, but there seems to be some conflict in terms of the conclusions that are being reached by different scientific assessments. You might spend a little bit of time on that and what the water-sharing plans have come up with where there are variances with the model that the authority has come up with.

Mr Harriss —Thanks very much, Chair, for the opportunity to address the hearing today. When we developed our water-sharing plans, they were quite a comprehensive process. They took a number of years of consultation, and one thing we made a conscious effort to do was to mix the social, economic and environmental considerations. I think that all of our committees established to prepare the water-sharing plans had socioeconomic advice all the way through. In determining the needs of the environment, we looked at what particular outcomes we were trying to see—for example, end-of-system flows or base flows during dry periods—but we also recognised that the environment gets its best value for water in wet years. So we did make provisions in each of our water-sharing plan areas to take back water—it went up to 12 per cent in some areas, and it was between four and 12 per cent across the state—and the idea was that that would be realised, probably, in wet years.

Of course, we then went into the longest drought on record, but what we have found this year, as we have come out of drought, is that some of those water-sharing plans have taken effect. For example, in the Lachlan, one of the trade-offs that the Lachlan folk made was that they would no longer have access to high flows—downstream tributary flows—which they had had previously. Instead, they would rely totally on regulated flows. This year—particularly in about July-August, when we had in the first flashes coming down the Lachlan—that was where we believed we would get the greatest environmental outcome, and those flows were protected from consumptive use. At the same time, we were lucky enough to have flows going into Wyangala Dam so people would have access to water.

In every one of our valleys there were specific objectives about what we were trying to achieve at the major environment assets. For example, in the Murray Valley, one of the major environmental assets was getting water and to the Barmah-Millewa Forest. We had quite rigorously sorted out rules for when to the water into the Barmah-Millewa Forest, and they were linked to flows that came in from tributaries in Victoria or New South Wales so that we could actually release water from the dam to top up the flow to provide the environmental aims. So we had clearly defined environmental outcomes.

The minister talked about transitional arrangements. In the development of our water-sharing plan process, we said, ‘The water-sharing plan is not the be all and end all for all time; at the end of 10 years we’re going to have another iteration of water-sharing plans, and we want to then work out if we need to recover any more water for the environment should there be limits on that sort of recovery.’

We developed what was called a risk assignment model in New South Wales which we actually legislated for. I will give the context as being in 2004 as well. We said, ‘If after any 10-year period we need water then the first three per cent should be recovered, without compensation, from the irrigators’. As you would imagine, the consumptive users were not overjoyed about that but, to paraphrase it, we said, ‘If you cannot get a three per cent efficiency dividend in 10 years, you are not really trying.’

Anything beyond that three per cent—the need for it had to be demonstrated—would then have been shared fifty-fifty by the Commonwealth and the state governments up to six per cent. Anything thereafter would have been borne by the state government. In 2004 it was never envisaged that we would go anything beyond six per cent in any 10-year period.

We had developed transitional arrangements for a longer period of time, decade by decade, which would allow water to be recovered in a timeframe that would allow communities to adjust to less water, to allow water efficiencies to be realised, and to enable the water-sharing plans to determine the effect of those and how effective they had been in providing water to environmental assets. It would, at the same time, allow us to identify any water management or water infrastructure works that would not just deliver water savings but also improve water management. So we had quite a well thought-out process which considered socio economics and a transitional arrangement through that risk assignment model which allowed for adjustment in economies and industries.

CHAIR —Would the six percent you talked about be compensated?

Mr Harriss —The first three per cent would come from irrigators without compensation. Anything thereafter would effectively be acquired either with compensation, through purchase or whatever, or through investment in water savings. That was the principle. We never believed, at that stage, that you would be going for anything more than six per cent but there was provision to do it.

Mr Costa —We have focused quite a bit on the purchase of water but there are other measures that one can implement, and acquire water for environmental purposes without accessing water that people are using as a consumptive use. For example, we have put to the federal government our priority projects. We have about $708 million worth.

Mr Harriss —A total of $1.358 billion to New South Wales of which $708 million would have been for state priority projects undertaken by the government. The remaining would have been for works within irrigation companies.

Mr Costa —They were about improving the efficiency of the water that we have got. For example, one of the projects was to put very reliable meters on all of the systems across the state. That way you know in real time what is being extracted at any point in time. We saw that as a great benefit. In fact, we believe that, as a result of a project like that, we would actually have savings within the system because of the way in which it is being monitored. There was some infrastructure work for some of the wetlands and some of the farming programs.

Mr SIDEBOTTOM —Did you put a volume on those savings in those projects? Was there a guesstimate?

Mr Harriss —The volumes have been included in our business cases but they will be verified as we go through the programs themselves. I cannot remember, off the top of my head, what those volumes were.

Mr Costa —To answer your question, yes, we did put some numbers there because we needed to say that there would be savings. We are still waiting for certain processes at the federal level. We have not heard this week.

Mr Harriss —The process for due diligence requires us to submit the business case, and for the Commonwealth to come back to us with their comments on the case through their due diligence. They did that just prior to Christmas. We had 20 days to respond to that and we are putting in our response today.

Mr Costa —I raised that because there are options other than just buying water. Those other options can actually assist us, particularly with the socioeconomic considerations, because you are not actually taking water out of a productive environment in terms of economics but they still give you the same benefits. It is about using the water we have got in a smarter way. That is how we approach that.

In terms of using the water in a smarter way and whatever infrastructure we have to put into place, that ought to happen also to the environmental water. So the environmental water plan is also very important to ensure that what water is being acquired is being very efficiently applied, and that is where David was making reference to understanding what the environmental needs are with the science and applying the best science at the time, and applying that water using the best technology at the time. It is not just about acquiring quantum; it is about actually getting the best use out of what you do have, and we want to work with all parties to ensure that that happens. And that is reflected in our response as well.

I will just go back to some of the recommendations we have put to you. The Commonwealth government needs to work with states particularly in structural adjustment packages on a localised basin arrangement. We feel that there need to be localised economic development plans supported by workforce development plans within each basin. We see that as an important implementation process. We need to understand what the economic development plans are within our region and that is why I mentioned earlier the value of engaging, say, the Regional Development Australia boards. That is why they were set up—to see what is happening within each of the communities.

We also believe that social capital measures need to be recognised, particularly how they may impact on communities. We have had some communities, particularly during the drought where we have seen first-hand how a reduction in water availability, such as in the Deniliquin, caused a significant social problem for families and employment, and there was a flow-on to all of the services that governments and communities deliver to communities. For example, one of the scenarios that was presented to me when I was in Deniliquin was the fact that because there was a reduction in the water available—there was no water; it was not because the buyback—the income-earning people in the household were whipping off to Western Australia to work because there was nothing locally and they were leaving families back in town. That had a whole range of social implications and that town was starting to suffer as a result of the change in the social fabric as a result of having less water.

CHAIR —We have got the recommendations in front of us. We would like to go to some questions and perhaps link them back into the recommendations and I think some of them will come out of the written recommendations as well.

Ms LEY —David, when we had MDBA during the consultations to the Basin Plan and many people asked them about the science behind the plan and their evidence base, they simply referred to the states. They said that all the information they had they got from the states including the details that you were speaking about that came from the water sharing plans and the detail of how the river runs et cetera. I am not confident that they have got the information that they say they have from the states. What is the exchange of information given New South Wales—and we will use you as an example—and your intimate knowledge of river operations compared to their less intimate knowledge?

Mr Harriss —In the broader sense, we maintain the models—either the groundwater models or the surface water models—for just about every valley in New South Wales other than the Murray, and the model used there is actually run by the Murray-Darling Basin Authority themselves. We provided them access to our models. We provided an access to how to use the models and the technical support. But as the minister said in his opening address, we provided no assistance in interpretation of the results of those models or their application to how they would be used to determine a sustainable diversion or anything like that. That was solely the responsibility of the authority.

Certainly from the Office of Water’s position, we did not offer any technical support in telling them what the environmental needs of any particular wetland were other than to identify what we had done previously in our water sharing plans, which is in the public domain in any case. I cannot speak on behalf of any other organisation that might have provided advice, or any of the universities or research institutions, but certainly from the Office of Water’s perspective we provided them all of our technical information. We do currently manage the biggest hydrometric network in Australia so they have access to all our real-time data and all our historical records. They had all that information and they had all the technical support to be able to use it. But I emphasise that we were not party to the interpretation of that information.

Ms LEY —So who in the MDBA, not names but perhaps sections and occupations, did that interpretation?

Mr Harriss —That would have been done by the basin plan group, who were there putting together the basin plan, the scientists in that determining the needs of all of what is called the environmental assets. That flowed down into presumably the total volumes that are required to be delivered to deliver those outcomes. Again our response to the guide to the plan is in the public domain. We were quite critical in as much as we have not been party to the assumptions that were used in that modelling to determine the sustainable diversions limits or the methodology used to determine the needs for the environmental assets. We are still having an interchange with the authority trying to seek that information, because at the moment it makes it difficult for us to stand up and either support or discredit or do whatever if we do not really understand the mechanics behind it.

Ms LEY —Minister, can you therefore have confidence in MDBA in its current form given that at every consultation they simply said, ‘The models came from the states, we cannot answer questions about the models or the science behind them.’ It is confusing.

Mr Costa —Absolutely. I have all the confidence in the world in the material and the data and the models that we have passed on. We do not have a lot of confidence in how one has interpreted that. Some of the assumptions made, particularly what might be the environmental demands for certain water, for example, about looking at the iconic sites, there are hundreds of other sites upstream. We are looking at a particular end-of-stream type of scenario. We have not got the confidence that was done. What about all the other sites that are upstream of a particular site? Are they getting the environmental benefits that they are supposed to be getting anyway? You may have to send buckets of water down to a particular location to get the end-of-stream benefit. What about the more micro systems upstream? What are they getting? Is it just that we are pushing water through to make sure that that works? The assumption is that if you do that some of these other upstream iconic or other sites are going to get the benefit. Well, we are not sure about that. That is once again back to the interpretation of the data we sent off to them.

Mr McCORMACK —Minister, you said you have spoken to key stakeholders and various communities since the guide to a draft to a plan has been announced. Have you spoken to the mayors of Murrumbidgee, Griffith or Leeton shires?

Mr Costa —We had council representation; I cannot say if it was the mayors. I have spoken to so many people. We targeted the consultation and we actually invited the councils and the irrigating groups and the community groups and the leaders. That was deliberate, because what we needed to engage were the thinking heads within the community about what was really happening. They were very productive meetings and the councils were there.

Mr McCORMACK —I say that because they are the communities that stand to lose, I would argue, the most out of this whole process if the proposed cuts go ahead.

Mr Costa —Absolutely. I have had a good working relationship since I have been the minister with those. In fact, that is where I went out into those parts of the world. They have been very frank and open, and very helpful.

Mr McCORMACK —Very frank and open.

Mr Costa —And very helpful, actually.

Mr McCORMACK —That is good. Have you been consulted about proposals to establish an advisory board to either work within or replace the Murray-Darling Basin Authority? There is a bit of media out this morning that the new chair of the MDBA is headhunting key people to set up an advisory board. Have you had any consultations in that respect?

Mr Costa —I have not had any communications on that one, no. That was announced today, was it? I have been on the road.

Mr McCORMACK —There were some media reports this morning that that is taking place. Page three of the Herald.

Mr Costa —I did not read the Herald on the way down in the car.

Mr McCORMACK —That is fine. Just one more. There was a recent report that a manmade drought has been forced upon the source of the Murrumbidgee River. The scientists who have been placed in charge of this group called the Snowy Scientific Committee have said that the Murrumbidgee is being ‘starved of water’ by the Tantangara Dam near Adaminaby and there appears to be an administrative and managerial void caused by the fact that the New South Wales Office of Water lacks resources. Could you comment on that, please?

Mr Costa —I will get David to go into the detail on that. I am aware of what you are saying. How we actually manage the water systems we have got is very complex. It is fundamental to what you are looking at, and that is how humans manage the systems that we have. We have systems put in place whereby, if we manage it as best we can for all users—including communities, industry and environmental users—the way that we have all those regulations structured is very complex. I am aware of the concern and the comments made, but I believe that is really looking at that situation from one perspective.

Mr Harriss —The Snowy Scientific Committee was established to provide advice to the minister on the efficiency of environmental flows in the Snowy River under the act that was established when the Snowy was corporatised. The minister cannot direct them, but they provide reports. They provided a report in December about the use of what are called the montane streams, which are the upper Murrumbidgee and other upper rivers like the Geehi and the Goodradigbee.

The history of the Snowy is that Tantangara dam was built and virtually diverted all but base passing flows back into the Snowy system for ultimate power generation and diversion to the west of the range. With corporatisation, a provision was made for some additional flows to those montane streams and up to 27 gigalitres out of Tantangara into the upper montane streams. Just as Water for Rivers has been purchasing entitlements during the drought, there was not much allocation to each of those entitlements. There is this year. You only get a proportion of the entitlement, depending on how dry it is, and so until this year there has not been the ability to put a whole lot of water down either the Snowy or down those montane streams. Previously the New South Wales Office of Water had been making the best use of that resource by putting the little flow that was available down the Goodradigbee, because that is quite a healthy river and maintains fantastic habitat, but we have not been able to contribute much of the 27 to the upper Murrumbidgee.

The Snowy Scientific Committee has determined that the 27 that was provided for in the corporatisation agreement is insufficient anyway—they provided that advice in a report to the minister—so we will have to consider that and, if it does require any further water, we will have to consider the options of where that water comes from and how you acquire it. But there is a pretty competitive market at the moment in acquiring water for environmental purposes.

The bottom line is that 27 gigs is the minimum. In our five-year review we have provided additional base passing flows for the upper Murrumbidgee through Tantangara, so there is far more water coming out of Tantangara dam now than prior to corporatisation of the Snowy’s hydro scheme.

Mr McCORMACK —Minister, are you concerned that the Basin Plan, if and when implemented, will have a different starting date for New South Wales than for Victoria?

Mr Costa —Absolutely.

Mr McCORMACK —What can we do to work through that?

Mr Costa —I think I would pre-empt it by going slowly. These transitional arrangements would probably address that, if we were able to put in processes where that transition will be twinned, because ours is 2014 and I think there is 2019. That is where our people, New South Wales people—I do not apologise for being parochial here—have some concerns about how, for example, on one side of the river you are operating under a particular market and on the other side of the river you are not. Therefore, they will be targeted. Therefore, they have impacts.

What we would like to see is some clear way where particularly New South Wales and Victoria move harmoniously forward so that there is no skewing of our market or targeting of our supply and that we, as a total set of basin states, share the implementation together, equitably and at the same time. What that transitional arrangement may look like is exactly what we would like to look at and have the discussion with the authority over, because that has been raised with me at every session I have gone to.

Ms LEY —We had some legal advice that that is not possible. As a New South Wales member, like Mr McCormack I am very concerned. I cannot remember where we took that advice, but we did, and the answer was that, under the Water Act as it stands, New South Wales does not have the ability to push that time frame out.

Mr Costa —But we are in control of our own water sharing plans.

Ms LEY —I would like to think so, but we also had some advice that perhaps you are not in as complete control of them as you think.

Mr Harriss —Our concern is that your transitional arrangements are twofold, as the minister has pointed out, in the equity between the jurisdictions. If the Commonwealth were just to acquire all of the water required for the sustainable diversion limits through the markets, it would not be a real issue. But the first three per cent being recovered, as for climate change, is an issue. So we will be contributing that three per cent starting in 2014 as opposed to Victoria starting in 2019. If the other equity arrangement is to be through water purchase, our recommendation is that the purchase between the jurisdictions, where that water source is shared, be equitable and not focused just on one area. The other transitional arrangement that the minister alluded to is allowing industries to adjust, which might be beyond the five years provided for in the Water Act.

If we go back to the risk-assignment model we talked about, the six the per cent, I think you will find that in a number of the valleys, like the Lachlan and Gwydir, it is irrelevant because the water is being purchased there anyway. It would only apply to some of the bigger valleys, such as the Murrumbidgee, the Murray, the Goulburn in Victoria and the Condamine-Balonne in Queensland, where there would be a longer period of water recovery. That is the implementation transition as opposed to a fixed five years, which is in the act at the moment.

CHAIR —I have a question on the socioeconomic issues. One of the things we have been looking at is usage as against entitlement, and it is varied within various systems. Do either of you have any comments on the differences between some of the valleys as to the fairly obvious socioeconomic impacts. For example, at Mildura, other than in the last few years they have been used to 100 per cent of entitlement and they have developed a whole regime based on that, so a 20 per cent cut is enormous; whereas, some of the other systems have not had more than 60 to 70 per cent of entitlement. In New South Wales what is the diversity of difference between usage and entitlement across the system?

Mr Harriss —It varies depending on the season and the particular valley. New South Wales is quite proud of its two-tier system of allocation in which we have high security, which is virtually guaranteed in every year. It represents only 10 to 15 per cent of our total water use. The rest is what we call general security, where you get a proportion of your entitlement depending on how much water is available in that particular year. So, for example, this year all bar the Gwydir and the Belubula valleys have 100 per cent of general security available this year because it has been particularly wet and there is 100 per cent of high security available in every valley. But, during the peak of the drought in 2006-07 and in 2007-08, in the Murray Valley they had zero per cent allocation for those two years and nine per cent in the year after. In the Lachlan I think they had five years of zero per cent allocation for general security.

That whole system shows that the general security is far more opportunistic and where systems are based on that opportunism—and actually we are probably best placed than any of the other jurisdictions to adapt to climate change because it caters to a variable seasonal climate and long-term climate arrangements. All things being equal, in a year like now, in the Murrumbidgee they would probably use only 60 per cent of that high security. In the Murrumbidgee I doubt very much whether they will use 50 to 60 per cent of their general security, because there has been so much rain there has not been the requirement for that much irrigation. So in New South Wales we also have a provision where, if they do not use that water, they can carry it over to the following year because it is still in the dam. That provides them with a bit of an insurance policy so that they have water should it go dry again tomorrow. So we have some pretty good institutional arrangements where they do not use all of their water in the wet years but they have got insurance policies where they can reserve that water in the dry years, and in New South Wales we have probably the most active trading market of all the jurisdictions.

Whilst in those valleys they may not use all of their entitlement in that particular year, my understanding is that the recovery of water is not just entitlements; the recovery of water is actual water to be used for environmental assets as opposed to consumptive use. So it is not just taking out the sleeper or the dozer components; it is actually taking out water that is currently used for production.

Mr Costa —The construction of the market and the mechanisms we have in place have served us extremely well over the drought period. The two-tiered system has given investors an opportunity to know what the risk is, particularly when they are focusing forward. David was saying that we have not had anyone run out of water in terms of high security. Communities still got water over a very dry period but that was at the cost of general security because we could not afford to run the risk of the high-security people not getting access to water. So it has served us very well. The market has looked after it very well. Allocation based on entitlement and supply has been a very effective tool, which has proven to be very capable of managing very difficult times. We are very pleased with the outcomes of that. We turned off some of the water-sharing plans during that period to actually manage that a lot better.

CHAIR —How would New South Wales approach the distribution of the reductions proposed between general security and high security?

Mr Harriss —My understanding is at the moment we have to only consider that three per cent because both parties have said they are going to recover the rest of the water by purchase, so it is really a matter of willing buyers and willing sellers. We really have not addressed how we would apply that three per cent, and I think there would probably be a bit of blood on the floor when we do.

We would typically go out to our committees which have developed the water-sharing plans and suggest what we have to do with the new iteration of the water-sharing plans—how best do we share that between the various users, given, as I said before, I believe it is water that is coming off production, not just coming off entitlement? There are going to be some hard yards in that.

Mr Costa —That is where the transitional arrangements are important about how long it takes to do that. That discussion will happen as we go back and look at our water-sharing plan.

CHAIR —Do you see some clouds on the horizon in terms of the authority’s guide and how it will impact on that process?

Mr Harriss —It is quite clear that they are expecting the jurisdictions to produce the resource management plans and so we will have to work out how we share the water that is currently available to the various consumptive users. If it is just being purchased, as I say, it will probably have less of an impact than if we had to reduce by a significant percentage but we still have to address how we recover that three per cent from existing users now, and no-one likes giving up what they believe is a property right.

Mr TEHAN —You mentioned ‘blood on the floor’.

Mr Harriss —In developing our first iteration of water-sharing plans we reduced water by between four per cent and 12 per cent across different valleys in New South Wales and there was heated discussion about how that should be shared. In the first iteration of our water-sharing plans we made our high-security users the priority. High-security users are typically secondary industry, horticulture, permanent plantings, things that need water every year, feedlots and those sorts of things that just cannot do without water as opposed to general security, which is more like cereal crops—if it is a dry year you do not necessarily have to plant cereal crops—pasture production and stuff like that.

We probably preferred in our first iteration of the water-sharing plans to look after high security and most of the reductions in water availability were borne by general security users. The second iteration of the water-sharing plans will probably open up that whole argument. Again we will consult with the communities and the stakeholders on how best to share that reduction so that we maximise the environmental, social and economic outcomes.

Mr TEHAN —By using that expression ‘blood on the floor’ are you saying that there is going to be real pain? Will we see people go out of business as a result?

Mr Harriss —I personally do not think that three per cent will create a huge challenge, but there is always spirited debate. No-one likes giving away anything. I think that was what I was alluding to. There will be very spirited debate.

Mr Costa —Not only between governments and governments but between water users and water users because if a general security water holder is told they cannot grow their crop of wheat or whatever because they do not have access but the guy down the road can keep growing his oranges and his grapes—we take his water but not their water—there will be vigorous discussion. There will be vigorous discussion not only between agencies and governments but also within the community. There will be very robust discussion going on. Because it happened before, it will happen again.

Mr TEHAN —So it has the potential to pit community against community and farmer against farmer.

Mr Costa —And user against user, yes. That is why the leaders—yourselves, us—are putting out a very clear picture of where we want to go, how we are going to get there and what it is going to do to us in terms of cost and impact. People deserve from us a clear picture of where we are going and why. That way they can invest, that way they can settle, that way they can get on with their business and be people producing and caring for and being part of our community. What we are looking at at the moment is a guide that does not give that clarity to our community because there are so many questions that need to be resolved. The sooner we show that leadership, show that clarity, the quicker things will settle down. Already, particularly in places like Griffith where I have had people contact me, confidence has waned rapidly, and that impacts on the value of assets and the capacity even to sell and move out or to change what you are doing.

The community needs rapid, clear direction. That is why what you are doing is vitally important. I was hoping that we looked at the socioeconomic impacts much earlier than we did, and I was the one who put up the recommendation that we might consider using structures like Regional Development Australia to assist the authority in interrogating those socioeconomic impacts. Without it you are going to have, as we have been experiencing, an enormous reaction from the community about their lack of confidence in what we are trying to achieve.

No-one has denied the need to put a basin plan in place. It is what it looks like, the confidence that we get from what it will deliver and how we deal with the impact that are missing. That has got to be resolved sooner than later. At the moment there is plenty of water out there, but that does not take away the long-term anxiety that people have about their investments and about where they live, where they settle and where they raise their families. It is very important that we get this one right, and sooner than later.

Mr ZAPPIA —Thank you for your presentation; it has been very useful. I would like to clarify two things. As a result of the MOU with the federal government, does that mean that water buybacks would in fact be strategic in New South Wales? That is my first question. My second question relates to the investments already made by the New South Wales government to return water to the environment. Can you tell us how many gigalitres approximately has been returned and, from your understanding, has that been included in the calculations under the MDBA plan?

Mr Costa —I will get David to give you the exact numbers, but in terms of gigalitres we are in excess of 500 that we have already acquired. I do not have the confidence that that has been included. That is of concern to me. I will get David to go into that detail because he knows not only the numbers but the names of every creek in New South Wales—and it is a worry!

Mr ZAPPIA —I just need the global picture.

Mr Costa —I was pretty close—538 gigs have been acquired.

Mr Harriss —Models change a bit, of course, but we estimate around 212 gigalitres on average was recovered for the environment through the implementation of our water sharing plans. As I said before, most of that will be realised in wet years. And then through programs like RiverBank we have already recovered any additional water. So we have delivered over 538 gigalitres back to the environment in the last decade. We have been told that that has been considered but it will not be a part of what has got to be recovered in the future. All of that, including the Living Murray brought up to a line in the sand and the sustainable diversion limits and the environmental needs require this water from this period on. They have already got that but they need this much as well, so it has not been included in it.

Mr ZAPPIA —What about the MOU?

Mr Harriss —The MOU identified specific volumes in each of the respective valleys. The Commonwealth then focused on what they believed their requirements were in those particular valleys.

Mr ZAPPIA —The time frame as well.

Mr Harriss —And the time frame. So they believe that they have recovered as much water as they need in the Lachlan. They need to recover how much water they have in the Gwydir. In fact, we have some preliminary figures that my organisation has done. The volume still to be recovered from the Gwydir about a month ago was only 26 gigalitres, which is only five per cent of current diversions. In the Lachlan they have recovered all the water they need, but in the Murrumbidgee they still have to recover something like 601 gigalitres, which is about 24 per cent of current diversions when you factor in what has already been purchased.

Mr ZAPPIA —But that does not prevent the Commonwealth from purchasing water from anybody within the state? In other words, it does not overcome the fears and concerns brought to this committee that water is being bought from communities when perhaps it should not be.

Mr Harriss —No. It was specifically for each respective valley.

Mr Costa —I need to put into context. Before the MOU, we had no idea where they were purchasing water from, and that was the problem. What we wanted from the valleys was a quantum and some time frame. Because of commercial-in-confidence nature of purchase we are not interested in individuals. What we wanted to know was that it was not all going to be taken out of the Murrumbidgee. We did not know that at that point.

Mr Harriss —At the time that the minister put the embargo on and we developed the MOU, according the Commonwealth’s own environmental water holders website, 97 per cent of the water purchased had come from New South Wales, and we were very concerned about the equity. As the minister said, a lot of these purchases were commercial-in-confidence so we did not know where they were occurring, or whether any were occurring in Victoria or in South Australia, so we wanted some sort of security that was some equity, hence the embargo.

Mr Costa —The market cooled down very quickly as a result.

Mr McCORMACK —Minister, what is your view on building more dams?

Mr Costa —I think there is a place for dams. I was working towards the Tillegra, for example. I understand and appreciate the environmental impact of those structures but in certain locations they are of great benefit to both the community and the environment. That particular dam, I felt, had addressed all of the environmental impacts, including impacts on the lower wetlands. When you have a dam of that size you can actually control the environmental flow; you can send water down as you need to for an environmental asset. There is some potential for some augmentation of some of the dams out west. Two years ago when people were pressing me for more dams out west my comment was, ‘We can’t fill the ones we’ve got.’ So you have to be realistic about it. It has to be strategically located and have long-term purpose.

Without the dam network across the state, we would be in an enormous amount of trouble. It is part of the colonisation of Australia. If you are going to supply water you have to bank it, and the way you bank water is to dam it. If you are not going to do that, you have to come up with some other technology and other solutions that will deliver you the same outcome. They are there, as we are showing in the Sydney Basin, where we have four million people. We have not had to build a new dam but we need the dams; they still supply the vast majority of Sydney’s water. If new technology is to have an impact on communities it will take a great deal of resourcing and a great deal of time. But in rural communities there are not too many other options other than, maybe, groundwater, but groundwater is still impacted by what is in rivers and rivers are impacted by what is in groundwater. But there is probably a long-term benefit in improving how we move water from our dams to our communities. I can see that there is potential for water to be moved more efficiently in terms of their use. I make this comment: if Wagga Wagga were going to be settled, we did not have the dams upstream and we have just had the rain we have had now, there would be no Wagga Wagga. Our dams are also designed for flood mitigation and you would not have communities where you have them now. It would not happen. Dams are an integral part of our colonisation of New South Wales or Australia. I do not apologise for any of the work that we have been doing in reference to that. It is about being realistic and practical and sensible about ensuring water supply. I have no issue with dams so long as we manage them the way they should be managed, and we do.

Evidence was then taken in private but later resumed in public—

Proceedings suspended from 11.05 am to 11.28 am

Dr STONE —When we were with the committee in New South Wales we went to Barham and we had an excellent description there of an environmental flow that was planned for a big part of the Perricoota-Koondrook Forest. I understand it had been consulted on with locals for about five years and a lot of hydrological work had gone into it. The plan is ready to roll. In fact, it was the officers we met with who were going to implement that strategic environmental asset being watered appropriately, they felt, with environmental flow. Their concern was that they had not had any consultation with the Murray-Darling Basin Authority in relation to that particular project. Has there been work done since from your from department, Minister, perhaps to make sure that the Murray-Darling Basin Authority is fully across that particular environmental asset and its project? If not, what can we recommend to rectify that? And have you got numbers of other projects like that where you have done a lot of environmental investigation, perhaps works and measures, got an outcome that you think is going to work?

Mr Costa —Barham Blocks is another one.

Dr STONE —Yes. Can you give us a description of where you are at with consultation on that and how many other assets do you think you have which could in fact represent better value for money for the basin and better use of environmental flows perhaps than has currently been identified in the plan?

Mr Costa —That is a great question because when we began it is about that conversation or that engagement. We have been passing data on to the authority, and David will go into more detail on those specific projects, and how they actually used that in relation to their landing we were not privy to. That has been a problem. But at the officer level there has been some work.

Mr Harriss —I think you are talking about the environmental works and projects at Perricoota-Koondrook. It is a $61 million project of a couple of channels and levies to enable us to inundate a fair amount of that forest. It is part of a $61 million environmental works and measures project which is funded by the Murray-Darling Basin Authority. There has been a lot of consultation. In fact, the head of the steering committee is the head of River Murray Water, and I sit on that steering committee as well. So there is a lot of consultation—we have consulted widely with the local community there. It is ready to go; unfortunately, although we proposed that the whole project would be completed by June 2011, the country is inundated and we cannot get any machinery in there. So because of the flood it is going to be delayed. But we do have a number of works programs around the other assets sites throughout New South Wales such as the Macquarie Marshes and, potentially, the Lowbidgee area where you can better manipulate the flows to get better outcomes. It includes the Gwydir wetlands and so on.

What we are doing—and we are in the early stages of doing this—is that, whilst we are aware of a lot of programs, we are trying to put it together in some kind of prospectus where we identify water-savings projects such as the Menindee Lakes and identify where you can build pipelines to deliver to stock and domestic suppliers which go through either open channels or ephemeral streams. Where would they be better off being pipelined? There are hundreds of those, if you like. We are looking at some of those schemes where you can better manage water to get environmental outcomes. So we are trying to categorise them and have a prospectus, but there is a lot of potential for those works. We think Koondrook-Perricoota is going to be a flagship of that, because we will be able to inundate a vast area of that forest with regulated flows. We think that is a legitimate investment which will take some of the pressure off the recovery of water, but it does take a lot longer to identify and work through those programmes.

Dr STONE —So you are concerned about the time frames? You do note, in fact, in your written submission that the time frames of the report—to complete it in February next year—is potentially a problem with the amount of extra work that needs to be done. On the other hand, minister, you were saying that you are very concerned, as all of us are, about the communities out in the basin having some outcome—an outcome that they would be happy with, obviously; that is, a win-win scenario—as soon as possible. So how are we going to work the balance there? You are producing this audit of all the potential environmental asset programs—and that is an excellent thing that we need as a committee—but, on the other hand, we also want the community to be able to move forward, invest and have some confidence as soon as possible.

Mr Costa —I think the solution there is about regaining the community’s confidence that we are actually addressing those impacts that they are concerned about and showing that there is a framework in place that will deal with the detail over a period of time. Just the fact that you are here is part of the solution—the fact that the committee has been formed and you are looking at that side of the ledger in terms of water. That has sent out a very good message—the fact that you are here. What needs to happen is that, as a result of what you do and what the basin authority have done, we marry the two to show the community that there is a framework and a path forward that will consider in detail all of the concerns that were raised and that there will be an implementation process over time that will give everyone an opportunity to adjust—including how we use our environmental water.

So I see the primary objective at the moment as regaining that community confidence and getting the community to appreciate that there are people across all jurisdictions, such as David and the people in the team, who know this story intimately and can advise and give some good direction. But as leaders we need to look at that in a very strategic way and show to the community that socioeconomic impact is as important as the environmental impact and what we are doing with the environment. I believe what has come forward is that it has not had that equity at that level. Once people get that confidence, I believe that the time—given time to implement—will not be a problem for the people; they will start to reinvest and do things that we want them to do and stay in their communities.

So, to answer your question, we need to win the confidence of the community that there is a plan forward, that there is a framework that we can work with. ‘Guide’ is a good word—I like the word ‘guide’; it is nice to talk about it for a while, because that is what it is. It is a guide; let us get it right before it becomes a plan and a draft, and let us just engage the community in this conversation. You do not have to go out there and meet with everybody every second day. But what you have to do clearly is to articulate a very strategic view and how you are going to achieve that over time. Examples like Perricoota and Barren Box and the others are good ways of showing that to the community. Whether or not we have an inventory of all of them tomorrow does not matter. It is best to have it as soon as possible but it does not matter if it is not tomorrow, but that people believe and understand and recognise that we are doing these things, that we are achieving good results and that is what we will continue to do. That is the message we have to get out.

Ms LEY —This question is really to David: do you think that the Commonwealth, having bought the environmental water that they have, should strategically release it back onto the market at certain times? At the moment they have said that they have bought it, it is out of the system, it is permanently gone. Do you think there should be water products developed by the Commonwealth to put it back into productive use?

Mr Harriss —Potentially so. We established a group called the Murray Wetlands Working Group about 1992 where we actually invested in infrastructure works which made water savings and we gave that group carriage of the volumes, which included 30,000 megalitres recovered from Murray irrigation and 2,200 megalitres recovered from works in the Barmah-Millewa Forest. We said that you could trade that water in dry years when it was needed for consumptive use and was not going to maximise an environmental outcome. And then you could use that water—only temporarily trade it; you could not permanently trade it—in wet years and divert it when you are going to maximise the environmental outcomes. We believe that was enormously successful in its first few years—I think they might be winding up slowly now. That enabled them, as a community group, to effectively become self-sustainable and actually to undertake more works to improve wetland values along the length of the Murray River.

Ms LEY —So that would be a good model?

Mr Harriss —That is a model that could be used.

Mr Costa —That is what I meant earlier about flexibility and having a robust environmental water plan—that could be part of it.

CHAIR —Thank you, Minister and David, for taking the time to come today. I think your concluding remarks really encapsulate what we are trying to achieve. I think we have got a pretty reasonable chance of making progress along the road that you are talking about, where environmental improvements can occur with the people not taken out of the equation. If there is any further information you would like to give to the committee, particularly in terms of some of the solutions you were talking about a moment ago, David—about pipelines here and there. A lot of them are small and incremental in terms of volume savings but they are still very positive in terms of the win-win outcome. We are looking for those sorts of solutions within individual valleys.

Mr Harriss —We are looking at a range of projects. Some of them are conceptual only, but some are not, like the Menindee Lakes—we have even done an EIS for some of the works already at the Menindee Lakes. But I think I will give a copy to my minister first before we make it available!

Mr Costa —That would be appreciated—we work well together.

CHAIR —But if we could have some information on the projects that you have already put to the Commonwealth—things that you would like them to think about.

Mr Harriss —Yes, certainly.

CHAIR —Thank you again for taking the time.

Mr Costa —Thank you, Mr Chair, and the committee—it is much appreciated.

Resolved (on motion by Mr McCormack):

That this committee authorises publication, including publication on the parliamentary database, of the transcript of the evidence given before it at public hearing this day.

Committee adjourned at 11.39 am