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Water Amendment Bill 2008

CHAIR —Welcome. I remind senators that the Senate has resolved that an officer of a department of the Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be given a reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted. Officers of the department are also reminded that any claim that it would be contrary to the public interest to answer a question must be made by a minister and should be accompanied by a statement setting out the basis for the claim.

Would either of you wish to make a brief opening statement before we go to questions?

Mr Freeman —I would like to make a short statement so that people understand the difference between the commission and the authority. Thank you for inviting me. I am here as the acting chair and chief executive under the current Water Act of 2007. The legislation that is proposed under the Water Amendment Bill would mean that I would then be the chief executive and a member of the authority, but today I am here as the acting chair and chief executive, so those roles get split under the bill. The commission still exists in its own right today. However, that will be affected by the bill.

CHAIR —Thank you. Dr McLeod, do you wish to make a brief opening statement.

Dr McLeod —No, thank you.

CHAIR —We will go straight to questions. Senator Heffernan.

Senator HEFFERNAN —As you are aware, in the event of a reconfiguration of the state’s proportion of water, the longer term science says that there may be increasing run-off in places such as southwest Queensland—the Warrego and those sorts of rivers may get some increasing run-off—and a serious decline in the 38 per cent of water that comes from the two per cent of the landscape in the southeast down here. Under this act how do you overcome the capacity of the states to be able to veto a change in apportionment of the states’ eligibility for the water? They have a veto at the back end.

Mr Freeman —I will refer the question specifically to Dr McLeod. In broad terms, states are still responsible for state shares and that can only be changed by the unanimous agreement of jurisdictions. However, what the authority will do is set the sustainable diversion limit. It does not change the share that a state has, but essentially the authority, through the basin plan, will determine how much of that share is available for use within that state.

Senator HEFFERNAN —You could disproportionately reallocate on a drought basis the share from the state?

Mr Freeman —No. What I am saying is that we do not shift state shares. They are set and will be changed only by agreement of ministers. However, the authority determines that proportion of a state share that a state can essentially access for use.

Senator HEFFERNAN —If the climate thing all comes to some sort of a percentile of reality and some parts lose their run-off and others gain, where it becomes an interstate thing, how do you stop the states from saying, ‘Bugger off’?

Mr Freeman —Through setting the sustainable diversion limit, which will be set from a basin-wide perspective. The sustainable diversion limits of various catchments would be determined from a basin-wide perspective. That will determine how much water that state can extract in that catchment.

Senator HEFFERNAN —We have resource operating plans on some of our rivers that end at the border. How are you going to overcome that?

Mr Freeman —Those water resource plans are more general, but there are also resource operations plans in the northern part of the basin.

Senator HEFFERNAN —Yes, the ROPs.

Mr Freeman —That is right. Those water resource plans across the basin are currently protected under schedule 4 of the existing Water Act and they will then have to comply with the basin plan as of those expiry dates in schedule 4.

Senator HEFFERNAN —Is that in 2015?

Mr Freeman —Most of the water resources of the basin will come under the jurisdiction of the basin plan in 2014, with New South Wales, the majority of the South Australian resources and the Queensland resources in 2014. There are some relatively minor resources prior to that date.

Senator HEFFERNAN —Are you saying under that the act in 2014 the resource operating plans, for instance, for the Warrego will be cancelled?

Mr Freeman —The resource operation plan for the Warrego will need to be consistent with the basin plan by those dates in 2014. That is correct.

Senator HEFFERNAN —If, in its wisdom, the Queensland government in the near future—for instance, with the Condamine and Lower Balonne resource operating plan—decides to commit itself to those extraordinary licences that are built in and that are unsustainable, what happens to the licences in 2014? In the meantime they have not been bought back at the valuation put on the Warrego. The Cubbie value had a strange twist to it in that the chairman has a conflict of interest and is legally on the document of Cubbie Station, which is valued at $175 million. How do you retrieve that?

Mr Freeman —A proposed basin plan is to be released in 2010. The basin plan is then planned to come into effect in 2011. However, as you are indicating, that has no effect on those existing resource operation plans until 2014. That basin plan will set the sustainable diversion limit for those catchments that you are talking about, and the 2014 resource operation plans will need to comply with that new sustainable limit.

Senator HEFFERNAN —What wisdom would bring a government, including the COAG capacity of the Commonwealth, to agree to a system where, knowing what you have just said, you would issue those licences now when you could just leave things as they are and not have to issue them and reconfigure them in 2014?

Mr Freeman —That is not really an issue for the authority.

Senator HEFFERNAN —It is an issue for Australia’s taxpayers. I realise you have a bureaucratic background so I will ask you to explain this to me. Thank you, Senator Xenophon, for your capacity to invite me to ask this question.

Senator XENOPHON —I am not sure about that.

Senator HEFFERNAN —Explain this to me. What does this mean? The agreement says, ‘Decisions of the Basin Officials Committee’. Who are they?

Mr Freeman —The existing Water Act—

Senator HEFFERNAN —I will run through the question and then you can come back. It states:

Decisions of the Basin Officials Committee will be exercised consistent with the delegations received from the Ministerial Council. The delegations will relate to objectives and outcomes consistent with those set out by the Ministerial Council, and consistent with the Authority having the autonomy to decide on the matters set out in the corporate plan covering program design, delivery, monitoring and reporting arrangements required to implement the decisions of the Ministerial Council and the Basin Officials Committee.

What does that mean?

Mr Freeman —It is complex. The authority, under the amendment bill, will essentially have two different governance arrangements. If it is dealing with the basin plan, then it is under the governance of the authority—that is the seven-person authority—and is only subject to the federal minister, but essentially it is quite an independent authority. However, under the amendment bill, the authority will also take on the role of existing commission, and when it is exercising those responsibilities it is actually under the governance arrangements of ministerial council and a Basin Officials Committee. In old terminology that is the Murray-Darling Basin Ministerial Council, similar to the existing commission. The Basin Officials Committee, in lots of ways, will have the powers that the commission has currently. That is those commissioners from various states. What that is saying is that when it is exercising those responsibilities it will be subject to the Basin Officials Committee and the ministerial council. However, when it is exercising its responsibilities under the existing Water Act of 2007 it is subject to the authority and only in certain regards can be directed by the federal minister.

Senator HEFFERNAN —Thank you for that explanation. Someone out there must understand what that meant; I do not. There is a practical sense to all of this. I have not struck one person who thinks this way, given the science of the future and given the fact that if the science is 50 per cent right we will not have a lot of systems where there will still be zero allocation for general purpose licences in the future, because there are enough high- security licences out there to take up what is there, or will be available. I do not understand how you and all the resources that you represent—the resources that the Commonwealth and the states represent—would knowingly go ahead with the development of those resource operating plans that are not finalised yet in the full knowledge that there has not been a study done that makes them sustainable, and put the taxpayers of Australia at risk of some hundreds of millions of dollars of compensation in a buyback through a system of a committee advisory body chaired by a person who stands to gain personally—under the decisions of the advice given by the chair and that committee to the government—many millions of dollars and not have someone somewhere say, ‘Hang on. This is a serious conflict of interest. We have got to go back and redo this.’ There has been no effective environmental planning done on these resource operating plans, which derive themselves from the water resource plans on these rivers—none at all. It was exactly the same as in New South Wales when they gave the river management catchment plans for the likes of the Murrumbidgee River and where—oops!—we forgot about the forest interception. It was just a complete oversight.

How the hell can we sit here as responsible parliamentarians and cop a system that is seriously flawed? As cool as a cucumber, the government says, despite the fact that the person who is in charge of giving the advice on the future of these rivers to the government is going to get a financial gain, when in fact that person does not qualify under the criteria of the resource operating plan for a licence, and as Mr Scott Spencer says in Queensland, ‘But that’s a private arrangement between neighbours’? That committee had the capacity to advise the Queensland government not only on the allocation of the resource of the overland flow licences based on the capacity of earthworks to divert and store the water but also on what compensation ought to be payable if they buy the licences back. How can we all sit here and cop that? Why isn’t there a judicial inquiry? You are going to be the brains of the outfit.

CHAIR —Are you going to ask a question?

Senator HEFFERNAN —I am asking a question.

CHAIR —It is a statement.

Senator HEFFERNAN —What are you going to do about it?

Mr Freeman —What I cannot do is comment on the adequacy of those resource operations plans. What I can talk about is the amount of time that is required to develop a basin plan, and clearly there is a gap. We are in an existing situation and we will not have a basin plan for some time. The reason we will not have a basin plan for some time is not because of low priority. As far as I am aware, this is the largest planning exercise of this scale that is trying to optimise economic, social and environmental in the world. No-one has tried to optimise those three things. Historically, it has been a trade-off between replacing the economic and reinstating the environment, or alternatively forgoing the environment for economic gain. We are trying to optimise those. Therefore, this is a first, as far as I am aware. That will take considerable time.

What will happen is that we will describe the basin from an economic, environmental and social perspective. We will then define the assets. What are the economic assets, social assets and environmental assets of the Murray-Darling Basin, and what is the water required to sustain those? Clearly, then there will be some trade-offs. Most people can do those in an asset class. They can talk about what is the most important environmental asset and what is the most important economic asset. When you start trading across classes—and we will have to do this—do you trade off some environmental assets in order to sustain communities and the economy? That is complex and that is why this basin plan is taking the time that it is. In the meantime the resource operation plans are there.

Senator HEFFERNAN —Under the bureaucratic thing that I read out a while ago and the delegation of authority through that, you are left out of that, according to what you have just said. I have had a discussion with Scott Spencer in this committee about how you can turn a blind eye to some of this stuff and just say, ‘Oh well, what are we going to do about it?’ I want to know what you are going to do about it, because the mean flow of the Culgoa system, the Condamine-Balonne, is 1,200 gigalitres. They have allowed 1,500 gigalitres in the lower reaches of on-farm off-river storage. It is not sustainable and yet we are going ahead with a ROP that is seriously flawed and has no environmental planning attached to it. We are supposed to be responsible parliamentarians and you are supposed to be responsible bureaucrats. We are going to a system that we know is not sustainable, and the answer is, ‘We won’t go back and see what is a sustainable extraction. We’ll just issue the licences on the earthworks. We will measure the earthworks, give them a licence, and then if it is too much we will buy them back.’ What sort of a flawed proposition is that? You are in charge.

CHAIR —I will ask you to shorten the questions down, because other senators have questions to ask. In fact, you might want to take your breath, unless there is a question there.

Senator HEFFERNAN —There is a question there. What are we going to do about it?

Mr Freeman —Dr McLeod is keen to say something.

Senator HEFFERNAN —If you know the answer then you are the first one.

CHAIR —Senator Heffernan, you have asked about 15 questions, but they are all the same one. Dr McLeod, would you like to answer Senator Heffernan’s question, and then we can change the dulcet tones from the front here.

Dr McLeod —Thank you. The paragraph you read out earlier relates to the relationship between the ministerial council and the Basin Officials Committee in relation to things that sit in that part of the governance arrangement for the new authority. In relation to this issue about the water resource plan in the Condamine-Balonne, for example, that issue is one that sits on the authority of the federal minister’s side of the governance arrangement. The way the Water Act that is currently in operation works is that the water resource plan for the Condamine-Balonne and instruments made beneath that are actually protected from the influence of the basin plan until the date set out schedule 4, as Mr Freeman said earlier.

Senator HEFFERNAN —Is there not a capacity to go through COAG to say, ‘Hang on. It would be sensible to just grandfather this arrangement till we come to 2014 and put a proper plan in action, and save everyone a lot of trouble and money’? Have you the capacity to do that?

Dr McLeod —The provisions of the act grandfather the existing water resource plan and instruments made beneath it.

Senator HEFFERNAN —What I am saying is that the water that is drawn now in the Lower Balonne is unlicensed, unmetered and unregulated—and do not tell me it is not because Scott Spencer and I had this out—and it is actually free, the bulk of it, because it is authorised water but not licensed water. We are proposing to issue a series of licences to put a financial instrument in place, but we do not have to do that. There is absolutely no reason. They can continue to operate with the authorisation until you get the authority to fix the plans in 2014.

Dr McLeod —The policy position that the government has set out in the act is to respect the water resource plan through to its expiry in 2014.

CHAIR —Senator Heffernan, if there is time we will come back to you. Senator Hurley.

Senator HURLEY —We have had this discussion about bits of water here and bits of water there, and Senator Heffernan did mention the aspect of sustainability. There has been a Sustainable Rivers Audit, hasn’t there? Can you just talk more about that and the effect on reform in the Murray-Darling Basin?

Mr Freeman —Yes, we can talk about it. It really is the work of the existing commission. Dr McLeod can talk in depth about the Sustainable Rivers Audit, but I will say that the Sustainable Rivers Audit is not comprehensive in terms of sustainability. It has not brought in the social, cultural or economic. It is really about environmental sustainability so it is certainly a different sustainable to the sustainable diversion limit, which is balancing economic, social, including cultural, and environmental. Having said that, it is a great piece of work in its limited scope of sustainability, but it is work of the existing commission.

Dr McLeod —Further to Mr Freeman’s comments, the Sustainable Rivers Audit is an exceptional piece of work across the basin, and an important primary input into the basin plan as it will be developed. The Sustainable Rivers Audit is designed to be repeated over the coming years and that will provide not just a state but a measure of the trend in the state of the systems being monitored. My understanding of the forward program for the Sustainable Rivers Audit, which will come under into authority on the passage of the Water Amendment Bill, is that it will look at other themes and technical aspects, and also consider moving from the river itself into the floodplain areas as well. That elaboration will provide even better information for the setting of the sustainable diversion limit—again, as Mr Freeman said, looking from the environmental side of the sustainability equation.

Senator HURLEY —It is important to talk about some of these overall plans. This afternoon we have been discussing ad-hoc proposals, but the authority is getting scientific input and is looking at the whole basin. You were talking about environmental sustainability. There is a plan across the whole basin to deal with these sorts of things and these will be developed as we go along. It is not possible to have a fully formed plan that answers every single question on the table right now. These sorts of things are informing what is occurring.

Mr Freeman —Yes, that is correct. One of the challenges of the existing authority has been to corral all the bits that are existing out there. In that regard I have had many meetings with CSIRO, the Bureau of Meteorology, ABARE, BRS and various government agencies, together with states and with some of the NGOs and industry bodies. In fact, there is knowledge in those organisations that needs to be incorporated into the basin plan as well. There is a lot of it out there, but it is fair to say that the aggregation of all of that does not equal a comprehensive basin plan and there are significant gaps within existing knowledge that need to be filled if we are to do a proper job in this first round in the timeframes.

Senator HURLEY —Can you tell me about the current status of the public and private water storages across the basin?

Mr Freeman —No.

Senator HURLEY —How do we stand there?

Mr Freeman —That is a question that should be directed towards Dr Craik, but unfortunately she is not here.

Senator HURLEY —I would like you to answer a question relating to the previous witnesses. There was discussion about our critical human needs and water availability in the pipeline to Melbourne. Can you tell me whether the critical human needs provisions of the bill apply to the Murray-Darling system? Would they apply to the water for Melbourne?

CHAIR —I am sorry, gentlemen. There is a division happening. I think you have been around long enough to know that we will come back.

Senator HURLEY —Could you do a quick answer for me before I go because I may not be back. Is that a yes or no?

Mr Freeman —The provisions for critical human needs that exist in the Water Amendment Bill now relate to the River Murray system alone. That includes the main stem of the Murray, the small part of the Mitta River near Albury and the lower Darling. In the case of the previous testimony, that was in relation to the Goulburn River and it does not relate to that system.

Senator HURLEY —That is what I thought. Thank you.

Proceedings suspended from 6.14 pm to 6.19 pm

Senator NASH —I have a number of specific questions that relate to the bill so, if you bear with me, we will quickly work through them. Firstly, page 96, under clause 51(5) states:

If at any time the authority considers there is need for special action to protect the catchment of the Hume Reservoir … to take such special action as may be required by the authority.

What might that special action be?

Dr McLeod —I will give you a brief background of this provision in the agreement. This is an existing provision in the Murray-Darling Basin Agreement changed in a minimalist model to move it into this arrangement. Clause 51 of the agreement currently deals with the catchment above Hume Reservoir looking at particular issues to do with water quality resulting from erosion. That is my understanding of the history of that provision. I understand the sorts of things that have been considered in the past are various catchment management activities that may be necessary to reduce erosion, or for bank stabilisation or things of that nature.

Senator NASH —What might that be?

Dr McLeod —It might be treating a highly erodable part of the bank of a river or a creek in that catchment in order to reduce the erosion from that, for instance, rock stabilisation. I am not familiar with that particular—

Senator NASH —No, that is fine. I understand the complexity of the bill. Can I ask you to take that on notice and come to me with specific definitions of what that special action might be? I am happy to place a number of these on notice, if it is a bit onerous at this point in time. Can you give me an explanation on page 122 of clause 99, that the authority must not direct that water be released from Menindee below and before those two figures. Clause 99(2) states that, subject to subclause (1) the committee may, by majority vote, require the authority to direct that water be released from Menindee Lakes storage. Can you explain what that means and under what circumstances by a majority vote the committee would want the authority to do that?

Dr McLeod —Again, this is a provision of the existing Murray-Darling Basin Agreement with minimalist change into the new arrangement.

Senator NASH —The other one was before my time, so do not assume that I have knowledge of the original stuff.

Dr McLeod —That is the short history of it. My understanding of the history of the clause that was in the existing agreement and repeated here is that this is one of the few places in the agreement where a majority vote applies, and in the case of this majority vote it is to stop an individual state vetoing the sensible use of resources from a particular storage. Does that make it clear?

Senator NASH —Not really, no. Under what circumstances would a state veto the uses of a storage, in their own state obviously?

Dr McLeod —In order to maintain its status beneath, above, below or whatever the given level of that storage. It is designed to make sure that it is done in the interest of governments as a whole.

Senator NASH —That is about as clear as mud for me. Is this like a provision to override?

Dr McLeod —It is not so much to override. It is a different test about the nature of the decision that is possible in relation to releases from the Menindee Lakes than from other storages. Other storages require unanimous. Subject to 99(1) Menindee Lakes does not require a unanimous decision.

Senator NASH —I only have about half a dozen of these so just bear with me. On page 127, clause 113(2) states that the authority may at any time with the consent of either New South Wales or Victoria determine that certain quantities of water in transit in the upper River Murray are surplus to the requirements of that state and reallocate the whole or part of such quantities from that state to the other state. Could you clarify the consent of either state rather than perhaps both states? What does that paragraph mean?

Dr McLeod —Again, this is an existing provision moved into the new one. Perhaps we could take that on notice.

Senator NASH —Yes, that would be fine. With the questions on notice, we are reporting next week so could we have these by the close of business Friday at the latest?

Mr Freeman —Yes.

Senator NASH —On page 132—page 123 is where I brought it up, but it is a broader question about the issue of special accounting. Can you explain to the committee how special accounting works and what triggers that period of special accounting?

Dr McLeod —Special accounting are the provisions for counting water in the River Murray system in what was previously considered the dry end of the spectrum. What I mean by ‘previously considered’ is that as a result of the existing conditions that we have experienced in the last several years we are now in situations that were not even anticipated by these provisions. Special accounting is a way of sharing water differently. In the vast majority of years the normal accounting arrangements apply. Special accounting kicks in when the reserves, the amount of water available for the following year, drops below the 1,250 GLs that are specified in clause 123(1). That then brings into play a new set of ratios and a new set of sharing that exist as you move into the drier end of the spectrum.

Senator NASH —Will the authority have the responsibility to implement that?

Dr McLeod —Maintaining the accounts, yes.

Mr Freeman —Perhaps an example helps a little. Basically Victoria and New South Wales provide equal shares water to guarantee South Australia its 696 gigalitre. There is a 696 gigalitre provision that you would have seen in here. That assumes that water fell equally in New South Wales and Victoria, and of course rain does not occur like that, so there will be an imbalance in there. Because the majority of rain, for instance, in one year might be in Victoria that will create an imbalance. South Australia gets its 696, but Victoria may owe New South Wales water. Special accounting can be used for many different arrangements, but it is really about the rules in lots of ways for the Murray system based on equal provision between New South Wales and Victoria, and yet that is not the way weather normally occurs.

Senator NASH —On page 196, under part 2, general principles, in clause 4, power to alter entitlements in allocation to which schedule applies, it states that on the recommendation of the authority the ministerial council may, from time to time, alter the entitlements and allocations to which this schedule applies by amending appendix 1. On what basis from time to time would they do that and how would they amend it?

Dr McLeod —Again, it is an existing provision of the agreement. Could we take the specific reference to your question on notice?

Senator NASH —Thank you. It particularly interested me given obviously the power on the recommendation of the authority that that alteration could happen and then that is really all there is in terms of explanation within the bill. I would appreciate it if you could come back with a detailed answer to that. Can you provide me with an explanation of page 201, clause 11, part 4, under operational principles and administration? It states that the authority may, in accordance with any protocol made under paragraph 6(1)(c), direct that water standing to the credit of a valley account for any valley be used for any purpose to which the authority may have regard under subclause 98(3) or 98(4) of the agreement.

Dr McLeod —We can take that on notice.

Senator NASH —Yes. Mr Freeman, I am assuming that your role takes into account consultation with communities in terms of working up to the basin plan; is that right?

Mr Freeman —Yes. The current act has quite a detailed legislative process for consultation. The proposed basin plan goes out for 16 weeks for public consultation. After that we will not only publish submissions but our responses to those submissions. The Basin Community Committee, which is a statutory committee of the existing water act is a prime vehicle for consulting the broader community. One of the challenges I have been talking to industry, NGOs and states about is that given the compressed timeframes, the authority could get caught in the process here. If we do not watch out we will be having many public meetings, but there is a real challenge here to write the basin plan. We need to balance that, because community input is really important, but at the end of the day we need to develop this incredibly difficult scientific plan.

My early thinking around this topic is that we will consult heavily with all expressions of peak bodies, whether they be irrigator associations, conservation movements and so on, we will consult the broader community through the Basin Community Committee and we will support that strongly, but basically if people want to get involved then probably the best way is to come through the Basin Community Committee, which is a committee of people out of the community, but also engage through a broad expression of peak bodies.

Senator NASH —I understand the necessity to get arrangements in place, but do you think it is a reasonable timeframe? You said it was 16 weeks for community consultation. We are talking 2011 for the basin plan. Do you think it really is a reasonable timeframe and have you had any feedback from communities suggesting that they would like it to be longer?

Mr Freeman —I have heard shorter. I have not been advised longer by any members of the community. I do not think it will be that the first time people can engage is when they see the proposed plan. My proposal at the moment is to develop a thing called a concept statement and for that to be published early in 2009. In the first quarter of 2009 we will go out with a concept statement that explains what a basin plan is, what are the timeframes for the steps of its development, and how people can engage in that process. Following the concept statement there will be a series of issues papers dealing with some of the components of the basin plan. People will not have to wait until 2010 before they see the proposed basin plan. They will see instalments of that through issues papers. In 2010 we step through the statutory process of the proposed basin plan. There will be a lot of consultation. I have not heard people saying later, I have heard people saying earlier.

Senator NASH —You mentioned before that community consultation would come through the basin community. Having just been from one end of the basin to the other, these communities are very keen to have an input. They are feeling like they are being completely left out, from a lot of the conversations that I have had, and they are not being consulted enough on the future of water decision making for the basin. What is the process for, say, an individual community to interact with that basin committee?

Mr Freeman —The basin committee has not been struck yet.

Senator NASH —What will it be? You must have an idea of what the process will be, given that you just said that you are taking input from communities and it will come through the basin committee.

Mr Freeman —The process for the Basin Community Committee engaging the broader community is something that we will need to work through with the Basin Community Committee. Yesterday I had meetings with representatives from the Gwydir Valley. In the meantime, we will be engaging at that so-called peak body level. It is not just people in the basin but people outside the basin who have views that they want to express about the Murray-Darling Basin. How we get that through the Basin Community Committee is an issue to be worked out when that committee is struck.

Senator NASH —When will that happen?

Mr Freeman —We have advertised for members. That process closes on Monday the 17th. It is then a matter of selecting the 16 members. We will not be in a position to decide until the legislation commences, because although I am the acting chair and chief executive I cannot make decisions because there is not a quorum there.

Senator NASH —Obviously this is not part of the process of looking into this bill, but when you do have that process in place for that community consultation to go through that committee, could you advise this committee of what that process would be, for our information?

Mr Freeman —Yes.

CHAIR —Senator Xenophon.

Senator XENOPHON —Ultimately the minister has the final say on the basin plan. There is a process of toing and froing, but ultimately if there is disagreement the minister can finally sign off on the basin plan. In broad terms is that correct?

Mr Freeman —In broad terms. There are certain provisions of the basin plan that the minister cannot vary. Section 44 of the act defines the ones where the minister cannot direct a change. You are correct in regard to setting sustainable diversion limits.

Senator XENOPHON —In relation to those sustainable diversion limits it is up to the states to monitor and implement the basin plan. Is there is a fair degree of autonomy for the states for the implementation of the basin plan?

Mr Freeman —The principle of subsidiarity still exists. One of the underpinnings of our constitution is subsidiarity. Basically, decisions are left to the most appropriate level of government. We will set sustainable diversion limits. States then introduce water resource plans that determine how that is going to be met. Having said that, it is not a hands-off approach. The authority has responsibility for evaluation and monitoring to ensure that the basin plan is being complied with and similarly the National Water Commission, under the existing legislation, has a role in auditing the implementation of the basin plan.

Senator XENOPHON —If a state is not implementing the basin plan and the authority is responsible for monitoring that, what powers does the authority have to ensure compliance with the implementation of the basin plan?

Mr Freeman —I will answer the first part and then I will defer to Dr McLeod for the second. If the water resource plan is inadequate and therefore is not progressing the basin plan, the authority can in fact strike a water resource plan that achieves the objective of the basin plan, and that water resource plan stays in place until the state brings in a compliant water resource plan. If the plan is deficient the authority has the ability to introduce its own plan and that plan will in fact stay in place until a state brings in place a compliant plan. If the plan was adequate but the operations of that plan were found to be deficient, then that will be a second issue, and that is the one I was deferring to Dr McLeod.

Dr McLeod —The existing act has a range of enforcement provisions in part 8 and also in relation to part 10 there are provisions for the authority to exercise its compliance and enforcement arrangements.

Senator XENOPHON —I will not take it any further. I am anxious to get a couple more questions in. I will go through those and, if I have any further queries, I can put them on notice. In relation to the north-south pipeline, you may have heard the Plug the Pipe people giving evidence on that before. What is the status of that project? Is that something that is outside the basin plan or specifically excluded from the basin plan in terms of the water being diverted to Melbourne?

Dr McLeod —It may be helpful to recap the role of the basin plan, which is in part to set sustainable diversion limits on the take from the basin water resource. In the case of a decision by an individual government to reassign water use within the context of their existing planning framework, that is not something the basin plan can affect.

Senator XENOPHON —In the bill’s present form does the authority have jurisdiction, for instance, to assess the environmental and social impact of taking that water out of the Goulburn Valley and diverting it to Melbourne?

Dr McLeod —The authority has a role in preparing the basin plan to consider the social, economic and environmental issues, and develop a balanced outcome against those criteria, subject to the terms of the act. When the authority makes the basin plan they will have to take into account the current distribution of uses in order to come up with a judgement. Once that is settled that will then kick through to the state water resource planning instruments. During the course of the basin plan, a whole range of things can take place that can transfer water between different types of uses, water trade being an example.

CHAIR —We are running short of time.

Senator XENOPHON —There have been assertions made both from the Victorian government and those opposed to the project as to what the water savings would be on that plan as it applies to other parts of the basin in terms of water saving measures. In relation to the north-south pipeline water saving assertions by the Victorian government and the contrary assertions made, what power does the authority have to test those assertions to independently audit whether those assertions or claims of water savings are verifiable?

Mr Freeman —The authority will have to familiarise itself sufficiently with that project to understand the economic, social and environment impacts of the project. It will have to essentially look at the project and ascertain what are the economic, social and environmental. It will have to understand the hydrology of the project. It is not there in an audit role, because what it will then do is take that into consideration in setting the sustainable diversion limit for that valley. Whether that water is applied to Melbourne or whether it is applied to irrigation is an issue for the Victorian government, but the authority will have to understand the project.

Senator XENOPHON —Whilst you do not have an audit role in the bill in its current form it would not have been inconsistent with the basin plan, nor with the IGA generally, if you had that authority to have an audit role to verify particular water savings. I am not asking you to comment from a policy perspective, but you would have the facilities to undertake that audit role or to undertake such an audit if you had the authority to do so, would you not?

Mr Freeman —Yes. I never thought subsidiarity would be so popular. In a way, though, it would start to cut across that principle, because our role here is to set the sustainable diversion limit for that valley and then where that water is applied is Victoria’s business. What you are suggesting is that we would go further than simply setting the sustainable diversion limit for the valley, and that is not where this legislation currently lies. Water resource planning is a state responsibility that sits within the framework of the basin plan.

CHAIR —We really have gone way over.

Senator NASH —It is 6.45 pm. We are not over yet.

CHAIR —I will stand corrected. In two minutes time we will be over. I am sorry; I put the horse before the cart. The ex-deputy chair has been waiting patiently and has a number of questions to ask and we will go over time. I am going to give Senator Siewert every opportunity she needs to ask the questions, bearing in mind that it will impinge on the time of our next witness.

Senator BIRMINGHAM —I am happy for Senator Siewert to ask questions if I could sneak one or two in at the very end.

CHAIR —It will impinge on your party’s time with the last witness. With Senator Siewert’s indulgence, you can ask one very brief question. I know from the officers that the answer will be short, sharp and to the point. Senator Birmingham.

Senator BIRMINGHAM —It follows on from Senator Xenophon’s. In setting the sustainable diversion extraction limit for the Goulburn Valley the Food Bowl Modernisation Project will still be undertaken at the time that the basin plan is being developed. Is it your expectation that the authority will base its decisions on that extraction limit on simply the advice of how much that modernisation plan will be saving in water or will it be, as in Senator Xenophon’s point, be undertaking some independent assessment of that?

Mr Freeman —This is a decision for a future authority. We are not there yet. It is fair to say the authority would do more than simply take the advice of the state. What we are doing is assessing the economic, social and environmental—I come back to that issue—to determine the sustainable diversion limit. We are not saying whether that is a good project or an appropriate project. It is simply assessing that the water that we believe is saved has been saved, and that the water that has been directed towards the economy is going to the economy and so on. It will be assessing those three elements, but it will not be a determination on whether that is a good project.

Senator BIRMINGHAM —Certainly, but you have to know how much water is there before you can then decide on the diversion.

Mr Freeman —We have to understand that project. Having understood the project, our interest is at the higher level about the sustainable diversion limit.

CHAIR —Senator Siewert.

Senator SIEWERT —Some of the questions I was going to follow up have been asked. I will be as brief as I can. I would like to go back to the issue of critical human need and look at it as it relates to the proposed pipeline. What assurance do we have that water that will be taken by that pipeline will then be used to meet critical human need?

Dr McLeod —The critical human need provisions in the water amendment bill relate only to the River Murray system and in particular they relate to conveyance water in the River Murray system. Further to that, the new Murray-Darling Basin Agreement is a schedule to the bill and actually sets out the framework under which decisions will be taken by the ministerial council as far as those decisions affect state shares, that is, sharing between the states on the River Murray. In the case of the pipeline project it is a form of extraction on one of the tributary systems to the River Murray system, and not the River Murray system itself, and thus is not directly affected by these provisions.

Senator SIEWERT —I understand that to mean that it does not have to comply with the definition of critical human need because it is being considered outside the system.

Dr McLeod —It is a form of water extraction against a licence and it is not one that comes under those provisions as the bill is currently.

Senator FISHER —Just to make this absolutely clear, the water coming out of that pipeline potentially to Melbourne can be used for absolutely anything and not just critical human needs.

Senator SIEWERT —It is because it is still defined as extraction.

Senator FISHER —Is that a correct statement for me to make?

Dr McLeod —It is just an extraction; under this bill that is not bound.

Senator SIEWERT —In other words, if a state wanted to change an extraction use into the future from irrigation to urban use they will be allowed to get away with it if they are taking water that is already extracted under licence?

Mr Freeman —Providing that occurred within the sustainable diversion limits, so it is simply a redirection of irrigation water to a community, that can occur.

Senator FISHER —That is terrible. What an indictment.

Senator SIEWERT —Do you have any powers to protect environmental flows from theft or diversion?

Dr McLeod —One of the components of the basin plan is the environmental watering plan. It has a set of purposes set out in section 28 of the existing act that include the purpose to safeguard existing environmental water, planning and coordinating and other things. One of the foundational purposes of the environmental watering plan component of the basin plan is to safeguard existing environmental water.

Senator SIEWERT —What capacity do you have to enforce that safeguard?

Dr McLeod —When the basin plan is made it will be binding on all parties so the terms of the basin plan will need to be necessarily complex and specific in order to ensure that occurs.

Senator SIEWERT —There is quite a bit of very compelling evidence, and it has been reported anecdotally, that environmental flows are being diverted and stolen. How do you safeguard environmental flows? You might want to think about that while we go and vote. I am looking for the enforcement of it.

CHAIR —I am sorry, gentlemen. The bells are ringing once again.

Proceedings suspended from 6.49 pm to 6.53 pm

CHAIR —Put questions on notice very quickly, because adjournment is 7.15 pm, which is beyond my control.

Senator FISHER —I will ask that you answer these questions on notice. It will come as no surprise that they are about critical human needs. Can you provide the authority’s interpretation of the meaning of proposed section 86A, in particular your view of the meaning of the terms ‘highest priority’ and ‘first priority’ in section 868A(1)(a) and (b)? What would be your view of the meaning of communities who are dependent on basin water resources in 86A(1)(a)? What would be your view of the meaning of the term in 86A(2) that can only ‘reasonably be provided from the basin water resources’? What would be your view of the meaning in section 86A(2)(a) of ‘core human consumption’, and what would be included in ‘urban and rural areas’? What would be your view of the meaning in section 86A(2)(b) of ‘non-human consumption requirements’ and of the term ‘prohibitively high social, economic or national security costs’? Finally, the bill contemplates amounts of water being specified for critical human needs, but in your view who will make the decisions on how water is allocated for that purpose, who will have input into the making of those decisions, and what is the process contemplated for that? There are a lot of questions there.

CHAIR —We are going to adjourn at 7.15 pm. Senator Siewert is not here, so I would encourage Senator Siewert to put her questions on notice. I thank the officials from the Murray-Darling Basin Authority and I call the National Irrigators Council.

[6.56 pm]