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Murray-Darling Basin Plan
05/11/2015
Social, economic and environmental impacts of the Murray-Darling Basin Plan on regional communities

BARLOW, Mr Luke, Chairman, Moira Private Irrigation District

DUNCAN, Mr Guy, Private capacity

EAGLE, Mr Neil, Private capacity

SCHULTZ, Mr Lindsay, Private capacity

CHAIR: Welcome. Is there anything you wish to add about the capacity in which you appear?

Mr Eagle : I am a horticulturalist, citrus grower and beef producer. I have previously been the chairman of Murray Valley Private Diverters, which Johnny Lolicato is now chairman of, and for four years was chairman of the citrus industry peak industry body.

Mr Duncan : I am chair of Torrumbarry Water Services Committee, which is one of the largest sections of the Goulburn Murray Irrigation District, the northern bank of which is serviced by both Hume and the Goulburn River. I have held various positions on dairy groups and was on the panel of the Murray-Darling Basin Advisory Group that met with Craig Knowles on several occasions—to not much avail.

CHAIR: Thank you all for appearing before the committee today. Do you have a brief opening statement?

Mr Schultz : Well, I did have, but the last lot stole all my thunder!

CHAIR: Think of it in terms of the quality answers you will be able to give to our questions.

Mr Schultz : I am looking forward to that.

Mr Duncan : I would like to tell you about my personal experience of irrigation over the past 13 to 14 years—anecdotal evidence of district destruction, for want of a better term. I will not say it has corrupted the water market, but I do think that the water market has provided yet another avenue for parasites to live off hosts, effectively, by way of commission, speculation et cetera.

Mr Schultz : I was going to touch on a lot of what John Lolicato touched on, but the triple bottom line has been covered enough. The main problem I see is the social side of things, which in my area is a real problem—and talking more about the Murray River, because I have lived on it for 60 years and I know it backwards.

Mr Barlow : Firstly, I would like to thank the traditional owners of the land on which we are holding this meeting. It is quite relevant to our position at Moira, where our pump station is situation, on top of the Cadell Fault, which is just below the Barmah Choke. The Moira Private Irrigation District supplies 94 irrigation farms and 60 stock and domestic properties within the region. It was constructed 50 years ago via landholder funds and continues to be fully funded by members without any government funding and consists of diverse agricultural and horticultural enterprises. All these businesses are supplying both domestic and export markets with raw products that require processing. All these businesses require a reliable water supply to sustain this production and provide employment both on farm and further down the production line.

The area has undertaken major environmental projects as part of land and water management plans in the early days and Landcare groups and various on-farm efficiency irrigation projects that were both privately and publicly funded. We have seen a diverse flora area increase as a result of tree planting, which has resulted in an enormous benefit to the local fauna as well as lowering groundwater salinity. Draining and re-use of irrigation water has led to the maximum water efficiency, and with new irrigation techniques we have become an extremely diverse, sustainable area. Our concerns are purely centred around water removal from a delicately balanced irrigation area. Whilst we acknowledge that the environment does require moisture, we reject the way the government has gone about this. The Murray-Darling Basin Plan has the potential to remove water from our area of production and employment and cause destabilisation of a delicate irrigation entity.

Mr Eagle : I would like to first of all thank Senator John Madigan and his fellow senators for being the first politicians to take seriously this threat to the future of irrigated agriculture in the Murray-Darling Basin and to Australia's food security. That has not happened in the past. We are in the process of witnessing the progressive dismantling of our nation's 100-year-old major irrigation system. I think there has been mention before of MIL and the Wakool shire's reduction in the water availability of its entitlements, so I will not go any further there, but that is an indication that this is not going to be sustainable into the future. When we hear of MIL making a loss for the past nine years, we are looking at a train wreck about to happen.

What has driven this insanity? First, there has been a misreading of the 2000 to 2010 drought as river decline, accepted by bureaucrats and politicians from both major parties of the scaremongering of pseudoscientists, such as the Wentworth Group, who in reality are anti-irrigation environmental activists. They claim permanent climate shift and future permanent decline in rainfall and river flows to the extent that dams would not ever fill again, only for the Basin to get flooding rains and spilling dams at the end of the drought. Regarding the myth of overallocation, I explained in the papers attached to my submission—refuting this nonsense about overallocation. It is in the papers there, so I will not go further into it at the moment. If you want to ask a question on it, I will explain it.

Third, there is the false claim that the naturally estuarine Lower Lakes of Alexandrina and Albert were always fresh and should be maintained as freshwater lakes.

Fourth, the sustainable diversion limits, the SDLs, are another planned measure to restrict productive use of water. John Lolicato made mention of it earlier. Europe's river flow variation flow is two to one. Australia's is 50 to one or worse. In fact, in many cases, it is worse. How on earth is it possible to select which model to use? It is an absolute nonsense. When Libby Price, in an ABC radio interview with the then CSIRO chair dealing with that issue, challenged him as to which model to select, there was deathly silence. He did not want to answer that question.

There is the separation of land and water under the guise of moving water to high-value crops. Under MIS schemes, these high-value crops soon became low-value crops. There is suitable soil and climate in all areas of the basin to grow any crop. The water does not need to be shifted. I would like to make a comment here and maybe explain a bit more about it later. The water is in the hands of irrigators, but it is the resource of a region. If you let it flow freely without any bridling and restrictions, you could devastate regions. If water moves to what is, at this moment, a high-value crop but later becomes a low-value crop, what happens to the area you took the water from and had previously devastated? There needs to be a lot of thought given to this issue.

How do we rectify this monumental stuff-up? There is only one way, as our forefathers realised in the construction of our reservoirs: a secure supply of reliable water. This can only be achieved by, firstly, amending or redrafting the Water Act 2007 to give a triple bottom line of equal weighting to economic, social and environmental needs. The current act contravenes this basic principle which was laid down by COAG under the National Water Initiative.

Secondly, the structure of the MDBA must be changed to have the top water and agricultural appointees from each state as commissioners or board members and independent from political direction or other states' vetoes.

Thirdly, any action on further implementation of the plan must be suspended until a full evaluation is made of this Senate inquiry's recommendations. The tragedy would be if this Senate inquiry ends up being mothballed and not acted upon like the Living Murray inquiry, which was totally ignored in the end. There is the water currently being used for unproven environmental outcomes in low-flow drought periods when the rivers may run dry, and this year the river probably would have run dry. As Johnny indicated, there were eight years that the river ran dry prior to this latest drought. We have photos of them picnicking at the bottom of the river in 2014.

People do not realise that, in this last drought, the river probably would have run dry for four years out of that drought. Period. We would not have had any water flowing down to the bottom end. The fact that that did not happen is a reflection of our forefathers having enough brains to realise that this was a real problem. We have such a variable climate and inflow situation that they needed to build storage. They did, and that is the reason we did not have a dry river.

Before and after the construction of lock zero near Wellington, South Australia, the future management of the naturally estuarine Lower Lakes must be fully evaluated. This is the largest loss of resource in the total Murray-Darling Basin system, and it is all for a futile objective that is politically driven. Some of the saved resource could be redirected in low-flow years to productive use. The productivity and health of the Lower Lakes could be restored with re-establishment of the Mulloway fishing industry, which was a big industry before the barrages were constructed. The productivity of the Basin in South Australia and the upper states could be secured in the national interest.

The need to act on building of new storages at last is being discussed. There are numerous already identified evaluated sites: Murray Gates, Clarence Diversionand the Mitchell River in Victoria. Those are sites that should have been acted on. Imagine the resources that would have been available for such national building projects if our political leaders had not been duped into building the mothball desalination plants for Brisbane, Sydney, Melbourne, Adelaide and Perth—maybe Perth might have some value—squandering billions of dollars of resources that could have been put to useful purpose.

The mandatory reading for anybody dealing with the Australian water policy issues should be the late Professor John Briscoe's report. I submit the submission by Peter Millington, who was the director-general of the New South Wales Department of Water Resources between mid-1980 and mid-1990 and is now a consultant. I consider him to be the most knowledgeable and balanced water policy expert currently in Australia.

Finally, the interim report on the House of Representatives evaluation of the living Murray in 2004 was subsequently buried, but if acted upon maybe we would not be dealing with this mess now. The devastation of production, employment and communities is already massive. Realise the real endangered species are our next generation of irrigation farmers and their communities not the river red gums, the southern bell frog, native birds and fish—all of which we should and do actively strive to protect but for what, if all the people and the produce are gone?

CHAIR: This is not meant to be negative but many of the points that each of you have raised, in terms of the overall plan or even its broad approach in this area, have been heard by the committee previously. I am not going to say that we do not want to hear that, but I am first of all going to ask each of you as irrigators to talk about your own personal experience on your own properties with the implementation of the plan. What consequences has it had for you as irrigators? Once we have dealt with that, we can then talk about your perceptions more broadly of the plan including the assessment by Mr Eagle. If I can kick-off by each of you talking about your own personal experience on your farms as irrigators.

Mr Duncan : I grew up south of here in Shepparton. I own a dryland farm about 45 minutes from here. I was on a farm. I went away to university. I went to Swan Hill and got into vegetable production. I then saw an opportunity to get into the dairy industry, which involved me working with animals again, which I liked, as opposed to vegetables. There was a door there and I thought I would jump through it, so I did. It was about 13 years ago that I started. I started on wages and then went to a share farm position. Then for the last six years I have been leasing. The leasing part was not forced on me, but the landowner wanted to get rid of his cows so the option was to get in or get out. I saw a future. The milk price was high. Then the milk price dropped and crashed. At that stage it was time to cut the losses and get out. At that point in time the wisdom—for want of a far better word—of a few people in Shepparton was the food bowl modernisation plan, which you would be well aware is the modernisation of the Goulburn Murray Irrigation District.

I was visited by a farm irrigation assessor about seven years ago and was promised the world. I did not expect the world, however, I did see a viable future by way of modernisation of infrastructure. Since then, because part of that project was in the too-hard basket they jumped to the next project. As a result, I have been in limbo now for six years, and I still do not know at what point of my property the water will be coming from. I have been constrained in every way, shape or form of implementing infrastructure and water efficiency savings or accessing Commonwealth on-farm efficiency grants.

As a result of that, about four months ago, I went for finance for the farm, but because I had been bleeding money for the last six years I was unable to get that and somebody else has come in. I am forced now to go back to milking for somebody else and being away from my children for 11 hours a day. It has also resulted in constant relationship stress—pretty much along the lines of, 'Why the bloody hell did you buy that place next door?'. I bought it because at the time it looked very viable.

The plan has exacerbated that stress by the way that water has been purchased out of the system and created a Swiss cheese effect, particularly in the Goulburn Murray irrigation district, which is a very high cost system, because when the water was initially traded out it was argued by a learned gentleman and someone in this room quite a bit older than me that those costs must be associated with that megalitre of water. That was rejected because the federal government would not pay a state tax, which is how they termed the delivery share, or the running of the system. As a result, GMW went from a 60 per cent fixed cost scenario of 40 per cent variable, which was the water that was used in it, to a 90 per cent fixed cost—10 per cent variable. This effectively means that last year when I was leasing the water with the property, I was paying an account of about $17,000 to $18,000, and the actual water component of that consisted of about $3,500 to $4,000. Basically, whether I irrigated or not, I was, effectively, up for that cost—whether the water was allocated or not. This is a very big concern for our system because—we will get into the trading later—unless the system is used, it cannot be funded. The system is gravity based—its off takes are Torrumbarry Weir right though the Goulburn system and higher through Barham Murray valley. It is based on a low cost gravity delivery system of water. We are now being changed to a high cost, high-tech system. With the aim of a carbon friendly world, considerable amounts of pumping are being instituted into that system, which will have obvious effects, both by way of the production pipeline and energy use.

The biggest concern for me with the Basin Plan is that, obviously, you lose your critical mass—we talked about the volume before—and also, there is the fact that the environment does not trade water. This is a big issue, and the circumstances under which water may or may not be traded into the future.

CHAIR: I will summarise the situation—tell me if I have anything wrong. You had a leased farm. You could not get a water allocation for it, or you could not buy water for it, or you could not get it delivered?

Mr Duncan : I could buy water for it, but the delivery system was dilapidated.

CHAIR: You could not get it delivered.

Mr Duncan : And as the water price goes up, your efficiency of water is greatly diminished, and the problem we have at the moment is that too much money was spent early on in this project and it has effectively created two classes of irrigator: some who have—I have said it before—Rolls Royces and Ferraris, and some who are still manually pushing their FJ around the road.

Senator McKENZIE: Don't denigrate the FJ!

Mr Duncan : Okay—Chrysler then!

CHAIR: So it is basically poor infrastructure and a poor water delivery system that is stopping you from farming?

Mr Duncan : In my personal circumstances, yes. That is because of the fact that I have not had any indication—they would have been better off coming to me seven years ago to tell me that they were not giving me a cent, because I could have gone and borrowed the money and put infrastructure in. At this point in time, I am not sure whether the water is coming from that corner of the farm, the other corner, or over the back. So to make significant capital without any idea of an outcome—there is a bit of deja vu when we talk about these water projects as far as the government goes—is just idiotic for me.

CHAIR: Does the water come to your farm boundary?

Mr Duncan : Yes, it goes right through the farm.

CHAIR: So your problem is getting it spread out on the farm.

Mr Duncan : That is correct.

CHAIR: You want to water your pasture.

Mr Duncan : That is correct.

Mr Schultz : You have opened a barrel of worms here. I was not going to bring this case forward, but I am here. I live in Benjeroop in Northern Victoria, and we experienced some very heavy flooding back in 2011 and we were under water for four and half months. The government at the time—Peter Walsh—saw the opportunity to force the farmers and take the water for the Murray-Darling Basin plan. Rural Finance stepped in. They went to each farm and they put pressure on each farmer and gave them, they thought, some pretty good offers. Basically, they said, 'You've got 30 days to make up your mind, then you're out of here.' That is what happened. The only bloke left there is me.

CHAIR: So they sold their farms—

Mr Schultz : They sold their farms to the government.

CHAIR: and their water rights?

Mr Schultz : The government took the water; then they put the farms back on the market. I tendered for a couple of the farms, but they were not happy with the tender forms, so they just tore those up and sold the farms individually to one owner. There are only two of us now in Benjeroop. I have water and he does not have water.

I have seen a community wiped out because of the Murray-Darling Basin Plan. I have seen how the water has been taken away from the community. We have the best—and I mean the best—land. You can grow anything in Benjeroop, and anybody who knows Benjeroop will back me up on that, but it is totally and utterly useless unless it has irrigation water.

CHAIR: So you are irrigating still?

Mr Schultz : I am still irrigating; I have irrigation. They want to shut the irrigation system down. I have said, 'That's not a problem; you go and shut the irrigation system down if you like,' but they want me to use a system that is 11 megs a day and I have been using between 30 and 40 megs per day. I said, 'You go and clean up the mess that you made when you came here, and put this irrigation system through in the 30s. You fix it up, pay for all that and give me a system that is equivalent or close to what I used to have, and then I'll be happy.' But we are going nowhere. Nothing is happening.

CHAIR: Is your neighbour not entitled to buy temporary water?

Mr Schultz : Yes, he can buy temporary water.

CHAIR: Is he doing so?

Mr Schultz : In one small area, because he can pump water into one small area, but 95 per cent of it is dryland farming.

CHAIR: Before those properties were bought by the government, didn't they all have water?

Mr Schultz : Yes, they all had water. It was a thriving district. There were four or five dairy cow farms.

CHAIR: Why can't the new owner, your neighbour, still pump water with temporary allocations?

Mr Schultz : Because they shut the irrigation system down. They went through and pulled all the wheels out and all the stops out. They have a channel all the way down to my place. I am the only person with a stop and three wheels. Everything else is just closed up.

CHAIR: They physically ripped it up?

Mr Schultz : They physically ripped all the stops out. I am the only one who can get any water out.

CHAIR: Who did that?

Mr Schultz : Goulburn-Murray Water. It is NVIRP, but ours is called something else now; it is called Connections. I am more than happy for them to shut it all down, but I am not going to have the FJ when the Ferrari is out there.

CHAIR: This is interesting.

Mr Schultz : It is disgraceful.

CHAIR: It would require a massive reinvestment in infrastructure to bring that land back into irrigation, wouldn't it?

Mr Schultz : What happened was that, before the floods, there was already $4 million allocated for the district to put in pumping systems and shut the system down—this was for the new system—but, when the floods came, the government at the time used that $4½ million and put it with another package for the buybacks.

CHAIR: Mr Barlow.

Mr Barlow : In line with the regulations for this inquiry, my submission was part of the Moira Private Irrigation District, not on an individual basis. I am happy to answer any questions in relation to or talk about the Moira Private Irrigation District.

CHAIR: We will get onto that. You don't want to talk about yourself?

Mr Barlow : I can talk about myself, if you like.

CHAIR: Most people can! I mean no disrespect, but we have heard a lot about what is wrong with the system, but I do not think we have heard sufficient individual case studies, and that is why you are here in two capacities—wearing two hats, if you like—representing the organisation but also as an irrigator. Before we get onto your organisation, I would like to hear your story, fairly briefly, as an irrigator. What effect has the implementation of the plan had on you personally?

Mr Barlow : I will go from the start. I came back to the family farm in 1992. The family farm was predominantly dryland with a bit of irrigation. In 2002, my wife and I purchased an irrigation property within another irrigation district, Moira. Of course, as you know, it was quite a baptism of fire with the droughts. There were low allocations; we had an irrigation farm that was terribly run down and inefficient in applying water. There was no problem getting water to the boundary, but, from then on, it was a struggle. We recognised that there were better means to use water; there were more efficient systems to put in place. So we have removed all of our border check system and replaced that with overhead irrigation, a lateral move irrigator.

CHAIR: What are you growing?

Mr Barlow : Let me get onto that one, please.

CHAIR: Okay.

Mr Barlow : Since then we have had some glorious years of 100 per cent allocations—some 60s and 80s and back to 13 now. Predominantly, we are focusing on winter crops, being canola, wheat and barley. We are also growing faba beans as a high-value crop, and, what a previous speaker, John Brady of Kagome, spoke about before. The benefits of those leguminous crops to our soils certainly set us up for better rotation down the track.

In those 100 per cent allocation years, when we had what I deemed enough allocation, we ventured into double-cropping. On the same area over 12 months we were putting two crops in. The summer crops consisted of corn, grain sorghum and soya beans, for human consumption. While the water was there and our infrastructure was there and our organisation had the ability to deliver water, we could participate in quite a profitable business.

Since then, the Basin Plan has come into play. On a personal level to us it has not had the impact it has had in other areas, because we are associated with a private irrigation district. Prior to the 2007 Water Act coming in, it was a very closed system with a lot of different rules, but the new Water Act came in and opened up a lot more rules and we had to abolish a lot of our operating systems. We are under constant scrutiny for compliance with new rules and regulations.

Our biggest concern now, as a personal irrigator, is the destabilisation point. Currently we are sitting in balance, but the more water that leaves the district the less balance we have. We are not a gravity system. We have to pump out of the river with our five pumps. Any exit of entitlement from that system leaves a higher pumping cost for the individuals who want to remain irrigators, and also a higher conveyance loss through our open channel system.

CHAIR: Mr Eagle?

Mr Eagle : We were involved in three private irrigation schemes, supplying our property. My concern is, much like Luke, a change of rules in the future. Any loss of water out of the system progressively makes it less and less viable, and, possibly, in the end it will not be viable. We also have rules that have been imposed in relation to water trade that are an absolute nonsense—there is a need to get 50 per cent agreement from all of the entitlement holders of a WAL, in volume, to actually have water exit the WAL, out of the scheme. But the requirement is, ludicrously so, that it needs 100 per cent of the entitlement holders of a WAL to bring water back in. That is just unbelievably stupid. It makes it almost impossible in a large scheme. One of the schemes we are in has about 85 members in it. To get 100 per cent agreement, to actually round them up and get an agreement to bring any water back in permanently, is almost impossible.

CHAIR: Why would you let it out in the first place?

Mr Eagle : There are various things. These are individuals. As you have said, they have a right—

CHAIR: But 50 per cent is required. Would you get 50 per cent?

Mr Eagle : Fifty per cent of the entitlement holders of a WAL have to agree to an exit. This is of the volume of water entitlement, not the individuals. So you might only need half-a-dozen people out of 30 to 80 people to get that agreement. So that is not so difficult. But to get 100 per cent to bring any water back in is almost impossible in a large scheme. This is the sort of nonsense that we are dealing with now. I have had a good life—and, hopefully, it will last another year or two—but I am concerned about the future generation of farmers. Two of our children are in that position and are involved in these schemes, and if you look at the prospects for the future under the nonsense that has been imposed it starts to become worrying, for sure, as to what future there is, and I have absolutely no doubt that the members that are in the schemes are thinking the same way. Certainly our children are.

CHAIR: Your concerns are primarily the same as Mr Barlow's in relation to stability.

Mr Eagle : He has got concerns. He is seeing that as a problem. If we look at water availability, prior to the cap and water starting to be taken back out of production—this goes way back before the plan—the reliability factor on the Murray for 100 per cent allocation on any entitlement was around seven to eight years out of 10. I have absolutely no doubt now that that level of reliability has dropped back dramatically, and that is a real concern because, as I have said in my paper here, the only thing that governs the future viability of the irrigation system is the reliability of water. If that drops back, the very basis of the whole system is in question.

Senator MADIGAN: Gentlemen, we have heard that you are concerned about the future, and I suppose this question is directed firstly to Mr Duncan and Mr Barlow. An issue that has been touched on today is the carryover of water, and I feel that it has not been really flushed out enough, so to speak, or thrashed out.

Senator McKENZIE: Very punning, Senator.

Senator MADIGAN: It has not been thrashed out enough. As some of the younger farmers in this room—and for your offspring in years to come and for your grandchildren—what is your view of this carryover of water? How it is affecting your ability to farm now and how will it affect future generations' ability to farm?

Mr Duncan : I make no hiding of the fact that the only reason that carryover was introduced in Victoria was to secure water for the North-South Pipeline. It was sold under the guise of a flexibility tool to irrigators, but really it was just about Melbourne Water having water when they wanted it and for what they wanted for urban use in Melbourne. It was, as I said, sold under the guise of a magic flexibility tool for irrigators, and this is part of the problem. When we go back to reliability that Mr Eagle was talking about, Victoria was built on sustainable industries of dairy, horticulture, prime beef and sheep. They are commodities that must have water every year—year in, year out. When I went to the first advisory group that was chaired by Mr Knowles, he said to me, 'What do you want?' and I said, 'Well, under your operation, what I want is a magic shed.' He looked at me like I was an idiot and said, 'What do you want a magic shed for?'. And this is an analogy I use quite often when trying to explain it. In that magic shed I want 2,000 ewes in lamb, 300 springing dairy cows, 400 springing beef cows, 20,000 vines about to hit production and 20,000 fruit trees about to hit production, so when I know which commodity is going to pay the most that year I will just wheel them out and start them up.

It does not happen. New South Wales is a very different system. We have heard it is opportunity watering. They basically use or lose all water. That is why the rice and one-off annual crops are common on the other side of the river. But, when we go back to the buyback of water and the reliability, the same price was paid for Goulburn and Murray high-reliability water—which is by far the best reliability in the country, or has been—as was paid for the water in the middle of New South Wales. If you want to base the price on reliability, instead of getting between $2,200 and $2,700 a meg at the peak—it is nearly $3,000 at the peak at the moment because South Australia is back in the market—Victorian water really should have been worth in the vicinity of $6½ thousand to $10,000. That just was never truly reflected in the price.

Now all the water that is allocated first is Victorian high-reliability water. That is why the gravity system was installed and why it was put out over such an area, because it was sold on reliability and permanence of industry, which is why the set-up there is the biggest exporter out of the Port of Melbourne. We have seen SPC go down the tube. We have seen wine grapes go up and down because of gluts, because it is all good for MIS to come in. If we go to MIS, that is another bugbear. MIS was a flawed proposition, from any political persuasion. They came and they bought the water as a tax offset the first year. So every cent that they paid for permanent water was just a write-off on tax. No farmer could do that. I said to Lindsay before it started, 'If you had made $20,000 on your profit on your farm that year, why couldn't you go and buy 10 megs at $2,000 and write it off on your tax?' But you were not allowed to, because you were not an MIS participant. That is what artificially inflated the price of water initially.

Getting back to carryover, no, I do not think it is working. I think carryover is a very good tool, for argument's sake, if you have got a 500-meg water allocation or a 500-meg licence and you only get 470 or 460 out and you get a rain event and so you have got a bit of spare water there. That 10 to 15 per cent threshold, yes, is a very good flexibility tool, because you know you have not lost that tariff that you paid or the commodity or the resource that year. But, as far as banking against what the value is going to be in the use of the carryover for speculation and the holding up of valuable airspace in the dam—if you are going to do that, well, the first water that spills over the dam when the spill happens should be environmental water, because it is only going one place, and that is down the river. It should not be taken off irrigator or urban entitlements. It is a ridiculous proposition. If the water spills into the river, it is in the river. The river is the environment. That is its first allocation—whatever spills over that dam wall.

Mr Eagle : I would like to make a point about that, talking from a New South Wales perspective. I was involved initially with the department at that time in developing a carryover scheme, which was resisted quite strongly by quite a lot of the irrigators at that time. They were worried about it taking up dam space. Finally it was agreed to trial it on a 10 per cent carryover basis, on the basis that it was the first water lost when Hume prereleased or spilt. This is on the New South Wales Murray system. It is an insurance policy. After a year or two, the irrigators realised that it did not take up dam space, provided it was the first water lost. Then it really does not matter a stuff whether it is 100 per cent carryover that is enabled or 10 per cent or 15 per cent or 30 per cent— provided, if the dam prereleases or spills, it is the first water lost.

There is discussion going on at the moment as to whether it should be capped, because we have had resistance of people wanting it to be the first water lost. Unfortunately, the introduction of that scheme has been bastardised and changed, without the industry knowing. That is a tragedy, because it really was a very effective, good tool for people to manage their risk to some extent. Now that the rules have been changed to get it back again, there is a resistance to change it back, because, if people have bought water, they do not want to think that they are going to lose it if the dam spills or prereleases. But the elephant in the room now is that we have got the Environmental Water Holder, and they are the biggest water holder. If they are sitting on a large amount of water and the dam pre-releases and spills, that water has not been lost. So it is taking up dam space now. It has become a very real issue as far as restricting the possibility of increases in allocation in any given year is concerned. So it is an elephant in the room, I tell you.

Senator MADIGAN: Mr Eagle and Mr Duncan, the point I am trying to make here is that, as you explained Mr Eagle, there was what they intended to be the consequence of carryover but now I am trying to define what has been the unintended consequence.

Mr Eagle : The unintended consequences when you make it not the first water lost means water is taking up space in the dam and allocations will not increase.

Senator MADIGAN: Yes, but then of course we are going on to what is the effect—

Mr Eagle : That has massive implications.

Senator MADIGAN: Yes, and what are the implications, what are the outcomes for the future of our young farmers who are trying to come into the market because I am hearing from people that it is hamstringing, it is cruelling, it is destroying the future for the next generation of farmers. One of the unintended consequences which has been put to me is that this is being bastardised, for want of a better word.

Mr Eagle : 'Bastardised' is the word.

Senator MADIGAN: Yes, by some unscrupulous traders, speculators in the market and that water is not a commodity. Everybody needs water and, most importantly, we all need food, no matter who we are or where we live. If we are not careful, we are not going to have any young farmers to pick up the cudgels in years to come because they are just being decimated in this unintended consequence.

Mr Duncan : In the last two weeks, I have had two phone calls from the young farmers you are talking about. They were victims of the Benjeroop buyback. They are both absolutely desperate. They are asking me, 'What do we do?' They have no water. They have gone to the temporary market. They both have young families. Young Jamie Semmler has picked up a job in Melbourne. He is away from his family. It is an absolute mess.

Senator DAY: Mr Eagle, you say in your submission that approximately 200 gigalitres per annum has been diverted from the Snowy River system out to sea.

Mr Eagle : It is in the submissions I have sent in before. The situation is that the Snowy was talked about as having only one per cent of its flow going to sea. That is accurate if you go from—in the first 30 kilometres to Jindabyne, 62 per cent of the original flow of the Snowy still goes to the sea—prior to that amount of water that we are talking about. I have no problem. With the misinformation that was peddled, if they had called it the 'Eagle stream' they would not have given it any water but because it is the iconic Snowy, the talk that there was no water left in the Snowy was all—

Senator DAY: What was the rationale behind doing that?

Mr Eagle : What I am saying is that it is the misinformation that has been peddled to the public that I really take exception to. I raised that at an MDBC meeting one time with Blackmore and Green at one time. Here we had that body saying that there was only one per cent still in the Snowy, when in actual fact 62 per cent of the Snowy flow at that time was still going to the sea because other tributary flows, other than first small 30-kilometre distance after Jindabyne, they are not intercepted. It is the misinformation. People were being fed this and they were aghast to think that there is only one per cent of the Snowy still in the stream.

Senator DAY: I accept your facts. I understand from your submission what they did; I would like to know why they did it.

Mr Eagle : I do not have a clue.

Mr Duncan : Green votes?

Mr Eagle : Green votes—I presume it was, but you people are politicians; you would know a lot better than me why they would do it. But I am aghast to think—this is the problem we have with the whole system. We have had misinformation being peddled to the public, and decisions are being made. It is like this business of the river dead and dying. Marohasy had Peter Cullen on a Sunday morning program. He had been stating that the rivers were in massive decline. This was early in the drought. She got him cornered on the Sunday program: 'You tell me what is wrong. Salinity levels at Morgan are now at pre-World War II levels. Turbidity levels are stable. Nutrient loads are stable. Tell me what is wrong.' Cullen had to finally admit, 'Actually, the rivers are in quite good health.'

This is the problem that we have as a community. People that we should supposedly take notice of, that are knowledgeable, are peddling mischief. I do not mind quite so much if they make a mistake, but when they are peddling mischief that they know is wrong, I take exception to that. That is what has been happening and that is what has driven this nonsense. How can we have people talk about overallocation when there is no such animal as overallocation? The first water goes to conveyance losses; then to critical human needs, which is towns; stock and domestic; identified environmental needs; and then, after that, if there is any left over, the irrigators get some.

In the last drought, four years out of the 10, the general security irrigators in New South Wales got two years of zero, one year of nine per cent and one year of 10 per cent. How can we talk about overallocation when they have no allocation, if they are the last ones to get allocation attached to their entitlement? It is peddling misinformation that I really take exception to.

Senator DAY: You say in your submission that new storages need to be added.

Mr Eagle : Yes.

Senator DAY: Where do you think these new storages should be located?

Mr Eagle : I know one—the Victorian one—that was turned into a national park on the Mitchell. During the drought that river had three floods that did a massive amount of damage, and they built a bloody desalination plant instead of building the dam on the Mitchell that could have been reconnected to the Thompson for Melbourne's supply. As I understand it, Murray Gates—the Cargelligo and the Murray—is classified in New South Wales as the cheapest dam to build for water yield for money spent. Then there is talk about the Clarence diversion. There are a whole heap of different possibilities. How in the hell can we build all these desalination plants and squander all this money and refuse to look at building some bloody dams, like our forefathers had enough brains to do? We have people talking now about building dams. Like the Ord, I am totally in favour. They were talking about raising it—what a nonsense. They only use 10 per cent out of the thing at the moment. They are building another dam in Queensland—that is fine; I am totally in favour—but how can we talk about doing that? From when the cap started, we will end up taking the equivalent of half the historical water use from the Murray-Darling Basin out of productive use. We are talking about 5,000 gigalitres of productive water use being taken out. We are talking about building a dam in Queensland that is going to produce I think 500 gigs, so it is about a tenth. We are talking about taking out of production 10 times what we are talking about building.

Senator DAY: If you could take this on notice and perhaps come up with some suggestions of where else you think new storage facilities should be. With politicians, what you call something is really important. If you do a survey and ask people about dams, they do not like them, because they are big concrete monstrosities that affect the environment. But if you call them reservoirs, they all think they are wonderful—

Mr Eagle : Reservoirs are great, yes.

Senator McKENZIE: You might correct the Hansard.

Senator DAY: If you start calling them reservoirs everybody loves them. You suggested there should be a new weir built at Wellington in South Australia at the true Murray mouth, which is before it gets into the lake. It has been suggested there are quite a number of engineering issues and problems associated with that.

Mr Eagle : I do not know the South Australian areas well, but as I have had it explained to me there is a solid base in an area that is upstream of Wellington, but regardless of that, apparently, and I am not an engineer, with friction piling it can be built in unstable soils anyway, so it is nonsense that we cannot build a dam—or a reservoir!—somewhere near Wellington. It can be done, engineering-wise. With the new technologies now that is not a problem.

I have a lot of friends in South Australia, and people should not be looking at us as states—we are Australians and we should look at the interests of all Australians. The inaction during the last drought was a tragedy. I was asked to talk to South Australian irrigators at Renmark during the drought, and I did. I said to them we should build a reservoir near Wellington and stop the losses in low-flow drought periods. If you did that then Adelaide would be the most secure city in Australia for water. It would have saved all the irrigators in South Australia's area. I am in favour that they should have had water—50 dairy farms around the lakes went out of business during drought—I think three have started again—and 30 per cent of the horticulture went out of business in South Australia and about the same in Sunraysia. The tragedy is that it did not need to happen. When I spoke to these fellows they all agreed it would be sensible for us to build that but I said if it is going to happen it really needs to be driven by people from South Australia requesting that the change take place. They obviously went out of the meeting room at Renmark that day and looked over the bank and saw the weir pool chock-a-block full and thought they would never run out of water. But they did run out of water. There is not enough water in store in our system to maintain the loss that we are talking about down there. That is what happened, and that will happen again if you get an extended drought.

As far as the aim of keeping Coorong to the sea open is concerned, build the reservoir near Wellington and then you can take the boards out of the tidal gates and allow the Southern Ocean to do the clearance that would take place then. As far as the Coorong is concerned, obviously it is in South Australia's hands to do some redirection of the water that was diverted to reclaim that swampy country—it is beautiful country—and some it should be redirected back into the southern end of the Coorong. These things can be done and should be done in my opinion in the interests of not only the upstream people but also South Australia. In my opinion there are great benefits from the changes that could take place in South Australia. I believe that it should be looked at.

Mr Duncan : The other dam proposal for Victoria—

Senator DAY: Reservoir!

Mr Duncan : Sorry, reservoir—would be the Buffalo reservoir, which could be and funded entirely by the environment and they could use all the water for the environment and leave the irrigator storages, which have been paid for for a century, well and truly alone.

Mr Eagle : I would be delighted to talk to some people I know who would know a lot more about it than me about what are the prospects for storages. They have been evaluated—they are all evaluated. It is not in my field to know all of them—I know a couple, that is all. I know a couple of them that should have been done already.

Senator McKENZIE: Thank you, gentlemen, for your evidence before us today. It does raise a lot of the issues that, obviously, we have heard throughout the inquiry. Mr Eagle, you commented on an issue I really wanted to broach with the lot of you. What framework, regulation or legislation do we need to bring in to actually ensure that South Australian governments, other state governments or irrigators from other spaces cannot be buying water from our system here to meet critical human need whilst refusing to turn on the desalination plant, for instance—either in Victoria, South Australia or, indeed, elsewhere in the country—taking water out of our communities and from productive use simply because it is cheaper than turning on those incredibly huge white elephants?

Mr Eagle : I agree. That is a vexed question and I guess it is a political decision.

Senator McKENZIE: It is a question for this committee in terms of the recommendation that we put forward.

Mr Eagle : I agree.

Senator McKENZIE: How do we address that? That can happen.

Mr Eagle : I think you would address it on the issue of future food security for our country. You need to maintain a farming base. We are in danger of destroying the irrigation farming base of this country, which is the Murray-Darling Basin, and, unless there is a reliable supply of water, the people will not be there into the future.

Senator McKENZIE: I appreciate that, but what changes do we need to implement into the water trading environment? John Brady, I think, in his submission went to increased transparency et cetera. What changes can we make to the water trading environment to ensure that that does not occur or that governments or water holders have to—Mr Duncan, are you leaning forward because you want to say something?

Mr Duncan : Under the current scenario, probably nothing. I do not see that you can restrict that trade.

Senator McKENZIE: We are going to make recommendations from this committee, so would that be something that you would support?

Mr Duncan : The recommendation from me, for system viability, would be—a recent example is that the CEWH has just put 20,000 megs of Goulburn environmental water onto the market. In my opinion, that 20,000 megs should only be available to irrigators in the Goulburn system. That should not be available for outside speculators or out-of-river pumpers on greenfield sites up north of Robinvale for almonds et cetera. It is just ridiculous when you have a situation where the capacity or the tariffs on a Goulburn-Murray Water irrigator are about $30 or $40 per year without pumping a megalitre of water onto your land, and they can come in with a $7 diverter's licence and a $6 pumping fee and buy that water hand over foot whenever they want, from year to year, without that ongoing infrastructure cost.

The argument to the ACCC would be that we are a unique system with a high cost base and it is because of decisions that were made not to tag the cost of that water earlier that we are reaching a critical point. I think we probably reached it six months ago—I have been on about this for years, but the last six months in particular. It should be addressed soon—the transparency of the trading. Every megalitre of water that the environmental holder holds, whether it is the VEWH, the CEWH or on-farm efficiency gains, is tagged. They know where every megalitre is and every system that it has come out of. It is not rocket science; it should be available for tender based on your delivery share in that system or the charges to that system. I would argue that there needs to be a bit of give and take and that the environment would be able to trade it purely back in that system. It is now easy through the Victorian water region, and I assume it is the same in New South Wales—on computerised meters, that water can be audited at the end of that season.

So if I tendered, for argument's sake, on the basis of four delivery shares at the rate of 50 megs a delivery share, and at the end of the season they went back and looked at my meter and said, 'You have used 180 megalitres of water,' they would not even look at you. But if you bought 200 megs in that tender and you can only account for 20, which means that you have on-traded that 180 megalitres at a profit as a speculator and not for agricultural productive use, I think the hammer should come down hard. If the environment is prepared to trade to the irrigator, then that irrigator has left himself liable for a ballpark figure of a fine of $500 per megalitre for outside trade. The trade was made in good faith for that system, and if he has abused that then he should be fined.

Senator McKENZIE: Mr Schultz, I know you went directly in your submission to water barons and superannuation funds involved in the trade of water. What changes do we need to be looking at?

Mr Schultz : I have a pretty simple solution. Really I feel it should just go back to irrigators. You would have to have irrigation land to be able to trade in water. You would only register as a buyer or a seller. If you were a buyer—in a situation like mine, I am a buyer; I buy water when I can afford to buy it. I cannot afford to buy it at the moment. If you want to sell, you only get to sell once. I know that sounds pretty simple. Do I make any sense there? You either register as a buyer or you register as a seller, and you can only sell once. When I want to sell my farm when I want to retire, I can sell my farm and the water. But that would take all these traders right away from it. These dams and these weirs and these irrigation systems were built for irrigators, not water barons.

Senator McKENZIE: I will keep asking everybody that question because I think we will end up with quite a variety of solutions. For the committee, I think we need to make clear that there are differences in how carryover is treated between New South Wales and Victoria. I am not sure that is clear to the committee, so would somebody like to explain the differences so we have it on the record?

Mr Schultz : Neil, you would be the man.

Mr Eagle : I think I have explained the New South Wales one. I would be interested to hear the Victorians explain the Victorian system—

Senator McKENZIE: Because it is not the same.

Mr Eagle : a little bit more clearly.

Mr Duncan : You can carry over up to 100 per cent of your allocation, and once you are allocated it, next year it falls out the other side unless you have low-reliability water, which is something that has been paid for in tariff for the last 15 years and has never been allocated. That low reliability is effectively airspace in the dam for that megalitre, so you are paying a storage tariff on that, and that is where it goes into. Look, even though I am a chair of a water service community, carryover still gets me baffled to a point. I just think in Victoria it was never required because of the high reliability of the allocations. Since that has been diminished, that is the other guise under which carryover has been brought in: as a flexibility tool. As I said before, the only reason carryover was ever brought in in Victoria was for the North-South Pipeline. That was its embryonic stage—

Senator McKENZIE: You made that point.

Mr Duncan : and it has grown from there. You will get wide varieties of opinions. I suppose at the end of the day a lot of it comes back to the individual farmer's financial position, their level of equity, the level of risk they are exposed to and how much they are prepared to gamble on what they are going to hold in and hold out, or whether they buy to carry over at the end of the season. But the general theme I get from irrigators in Victoria now is that they do not like carryover on our system. I would be fairly confident in saying that, for 80 per cent plus of irrigators, if they took carryover away, there would not be a riot in the streets.

Senator McKENZIE: Mr Barlow?

Mr Barlow : It gets back to Senator Madigan's questioning previously about young farmers and carryovers. I did not quite get a chance to put an opinion in there. I appreciate you calling me a young farmer, John; I am 42.

Senator McKENZIE: It is all relative, Mr Barlow, to the average age.

Mr Schultz : I can assure him that that's still young!

Mr Barlow : Well, to put that into perspective, 50 years ago the Moira Private Irrigation District was founded and created by a dozen foundation members going and knocking on doors to get money to formulate the big channels, to buy pumps, to buy a licence and to get some sustainability and surety in their business. The average age of those guys was about 45, so young farmers are getting older.

On carryover: whilst I can appreciate Mr Duncan's explanation and I surely cannot match Mr Eagle's expertise, as a private irrigation district, carryover to our members was not available until possibly—do not quote me on this, because I have only been in the district since 2007, but it was before my time. The carryover was carried over by the board, and then it was distributed to members and used as conveyance water on top of that.

I think some of our previous speakers today talked about the reduction in the bucket size. That is because the water that the government holds now was actually entitlements on farms. Now that has been removed off farm and put in a Commonwealth Environmental Water Holder bucket. Therefore the amount of irrigation and intensity on that water, or demand for that water, remains the same, but the bucket is smaller.

In New South Wales our allocations, especially in general security water, are not that secure. It has even got to the point now, in the Lower Darling system, where the high-security water entitlement holders consider their high-security licences lower than general, and the only option they have is sale: remove permanent plantings and sell their water. In our situation in New South Wales a lot of our members are using the carryover as a benefit. I say it is a benefit because it enables them to secure their production for next year on the irrigated land because they have no confidence in what the allocation is going to be. That is probably smart business by individuals that realise that, with the government in play and less water available in trade, reliability of that general security water is not going to be what it was. They are just trying to shore up their business, and the carryover is the tool that they are using to do that.

Senator McKENZIE: You also said, Mr Barlow, in your submission that you had no faith in the Constraints Management Strategy. Would you like to flesh out for the committee why?

Mr Barlow : Yes, Senator McKenzie. I have attended several constraints committee meetings in Deniliquin, Mathoura being our local area, and I must state as I did previously that our farming land, our pump site and all our members are situated on high ground. We have to pump over a natural fault line which is called the Cadell Tilt, which is approximately 40 metres high in elevation, straight up, which actually caused the redirection of the Murray River to where it is today.

Senator McKENZIE: Fun fact for the day!

Mr Barlow : It was long before European settlement and possibly before even the Indigenous settlement.

Mr Schultz : I remember it well!

Mr Barlow : You might ask and wonder why I bother to attend a constraints committee meeting when none of our members will be affected. It gets back to a community side of things. Some of our members do have areas in other irrigation bodies that may be affected.

Senator McKENZIE: But why don't you have faith in it?

Mr Barlow : It is the fact that we keep hearing the same people put forward the same arguments, such as Louise Burge and Neil Eagle and John Lolicato, who have previously spoken here today, and the same information, the same maps, the same photos—all that information is presented quite clearly and concisely, and you leave that meeting thinking, 'Well, finally we're getting somewhere,' and then six months later we are asked to go and present it all again.

Senator McKENZIE: This is not the first Senate inquiry looking at the Murray-Darling Basin Plan. There are people in this room who have been before the committee I sat on previously, where, again, we looked at the same maps; we talked about the Barmah Choke; we talked about all of these issues. It does make you wonder why.

Mr Barlow : The Barmah Choke is an interesting one because our extraction point is below that, so we are quite familiar with the area and the constraints that it has. I do not know if you would like me to talk about that or whether someone else is going to question me on that one, but the higher velocities and the higher levels that Environment are pushing in this river—and it is stated that that is their intention: to prolong floods, to work on the back of natural events—have caused destabilisation of the bank, trees to fall in and sedimentation. Therefore the choke is getting more clogged, and it is getting shallower with the sedimentation.

Senator McKENZIE: Environmentally degraded, one could argue.

Mr Barlow : That is right. Yet the Office of Environment and Heritage have stated that their environmental flows have had no impact at all on the choke. Yet, at the same time, they turn around and say, 'We want higher velocities and higher levels.'

Senator McKENZIE: We look forward to asking them those direct questions.

Senator MADIGAN: Gentlemen, as you know, we have heard a lot of information here today and, as Senator McKenzie alluded to, there have been several other inquiries over a number of years. In recent times we have heard a lot about free trade agreements and the potential benefit to our dairy farmers and for Australian agriculture. Are we going to be able to take advantage of the potential benefits from these free trade agreements that have been mooted—if and when they arise—if government of today does not listen and if we do not take stock, admit where we have got it wrong and repair the damage?

Mr Duncan : There will be a game loss, and the other side of that, particularly with the GMIDs, is that the federal government is about to throw in another $900 million at the second part of the food bowl. So why would you silver-plate or gold-plate the system and then take all the productive capacity away from it? It is crazy. Can I just touch just briefly on the constraints? I want to go back to one thing. It is not hard. If anybody is going to disagree with the constraints thing, I have heard figures on what the EDNTs are going to cost through the Goulburn river. It is phenomenal, and you are going to have land taken out of use. But the simplest way to explain the constraints mechanism is to get in a light plane at the top of Dartmouth, fly over Hume and realise that those lakes in South Australia were probably caused by a flood 30,000 years ago that had water coming in from every tributary at its maximum rate. That is how they were formed. Unless you want to do that now and take all the inhabitants away from there and take development away, it is crazy. Why don't we wipe out the foreshore of Sydney and put marshes back in? It is the same argument. It is crazy.

CHAIR: Thank you gentlemen. Your attendance and your evidence here is very much appreciated.

Mr Duncan : Thank you, and your ears are too.