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Management of the Murray-Darling Basin system

CHAIR —Welcome. Before we go to questions, do either of you wish to make a very brief opening statement since we only have you for 30 minutes?

Mr Ellis —I would appreciate the opportunity, thank you very much. Very briefly, I am chairman of Murray Irrigation, which represents 2,400 farming businesses in the Murray Valley of New South Wales.

CHAIR —2,400?

Mr Ellis —Yes, 2,400-odd individual farms. Our area covers some three-quarters of a million hectares, or 780,000 hectares. We are adjacent to some Ramsar listed sites—the Barmah-Millewa and Koondrook-Perricoota forests. Our region supports a regional population of some 30,000 people.

Within Murray Irrigation, we are basically a general security water user group. We have a large general security licence. Irrigation water is actually not allocated to our licence until urban and high security irrigation commitments are met. I note that the terms of reference for this inquiry refer to a national emergency. I would certainly say that this national emergency is not confined to the Lower Lakes.

Senator HEFFERNAN —You are right about that, brother.

Mr Ellis —It is a crisis facing people, communities, industries and what-not in the area that I represent. In my paper, there are some examples of environmental disaster and acidification in river systems which are shut off to try to help with providing flows down the main stem of the Murray River system to actually help achieve some results there.

Within Murray Irrigation, we are just into our third year now of zero allocation. I guess in line with the national emergency, it is a disaster unfolding in our area as well socially and people-wise. There are some very sad, tragic cases starting to unfold as a result of a lack of water.

Within the river system, I would certainly say that, of the stored water, I am well aware that stored water basically underpins the critical water needs for the next 12 months. The water that is there is basically committed to make sure that we can supply critical urban and human needs. Where we sit currently with the winter flows having failed this year—and it appears the spring inflows into the storages are not providing much in the way of run-off—it could well be quite some way down the track before there are any further substantial flows into any of the storages. Certainly with the Upper Murray storages, I guess there is the opportunity for summer rainfall and flows down the Darling system, which might put water in Menindee.

So I just think we are all in a very, very tough situation. Within Murray Irrigation, we are certainly talking with DEWH and Senator Wong about water reform. We have been involved in several discussions with both the minister and her department about a package of measures that helps us as a community, as an irrigation company and as farmers adapt to climate change and work through a water reform process. We are well aware that we are going to be living with substantially different water supplies in the future. We are all part of the mix. Anyway, that is just by way of very brief introduction, I guess.

CHAIR —Thank you very much, Mr Ellis. I commend you, in your community, for still being able to smile. Now we really are short of time. We have an extended program today. I ask senators to make their questions as short and direct as possible. Mr Ellis, if we can come straight to the answer, it would be appreciated. I will kick off with Senator Hutchins and then I will go with whoever asks me for the call.

Senator HUTCHINS —Down that area are a lot of rice farmers. You get anecdotal advice that they use too much water and that rice is not really suited to be grown in Australia, particularly down that way, because there is not enough water. What is MIL’s response to that sort of observation by a number of people?

Mr Ellis —Rice is grown when water is available. As you would be aware, within Deniliquin, the rice mill was a major employer within the town. It has shut down, as have several of the rice mills. There has been almost no rice grown in our area in the last four years.

Senator HEFFERNAN —Catastrophic.

Mr Ellis —Catastrophic impacts on the local community there. With regard to whether rice should be grown—

CHAIR —The claim by a number of people is that they are taking too much water and they have taken too much water before. This is why there is a number of these pending disasters along the system. I wonder if you could respond to that sort of claim by a number of people.

Mr Ellis —Rice water use now is averaging about 10 megs to a hectare. They are basically growing about a tonne of rice with a megalitre of water. That is where it has sort of headed. If you compare water use across a number of things—almond use is some 18 megs a hectare—there is a whole range of water use figures that you can look at. As we come out of this drought, we may find that the major impact, the absolute devastation and wipe-out, occurs across where people have the permanent plantings. Something like the rice industry or these more opportune type industries can spring up again because they do not have that perhaps huge overhead of the permanent plantings, which may be wiped out by a lack of water. I guess, in saying that, what I am saying is that I think there is a real place for rice in the Australian scene. The rice industry is certainly working furiously to develop new breeds of rice which may not have to be flooded and things like that.

Senator HEFFERNAN —Non-paddy rice is a commercial proposition now. That is what is up the coast. That is what is in the Northern Territory. Non-paddy rice, which I said five years ago was where we were going to go, is where we are headed.

Mr Ellis —Yes.

Senator SIEWERT —I asked this of another witness a little while ago. The issue that is raised is: can you sustain the overheads in the off years when you cannot grow rice opportunistically?

Mr Ellis —I think you are wrong. The ricegrower is in one type of industry that probably can. Many of our ricegrowers have had absolutely nothing for four or five years. If water were available, many of them could kick off and produce a crop almost immediately.

Senator SIEWERT —What about the mills closing down and things like that?

Senator HEFFERNAN —It affects the infrastructure.

Senator SIEWERT —Yes. That is what I mean. Can the mill start up again once you are growing again?

Mr Ellis —Well, at the moment, they certainly still have a mill operational in the Murrumbidgee Valley, which is to the north of us. They are maintaining the Deniliquin mill so it could fire up again.

CHAIR —Senator Hutchins. Then we will share what little time there is left between other senators.

Senator HUTCHINS —I have only a few quick questions, Mr Ellis. Again, it is sort of simplistic to say that we should not grow rice down there because it takes too much water when, in fact, as you are saying, there appear to have been changes over the last few years to accommodate what you have identified as pending difficulties with water supply?

Mr Ellis —I speak regularly with irrigators from everywhere. I have spoken again recently with South Australian irrigators. They were critical of the rice industry. They came up and had a look at the scale of our operation up there and what we can do when water is available and when we can gear up. After having a look around, they said, ‘The best thing you can do to help us is keep growing rice’, because they realise that if we were to shift 10 per cent of our water in a normal year when there is a water supply into growing whatever they are growing in the Riverland or wherever else, it wipes out their market. What I am saying is that I think there is a need for a broad mix of things now. The challenge for us all is to reach a balance between food production and water use for food production versus the environment and that sort of thing.

Senator HUTCHINS —We have had highlighted to us before the mill closing at Deniliquin. What other impacts are occurring as a result of the shortage of water now in your area, which you say is about three-quarters of a million hectares and 30,000 people? I cannot quickly do the sums, but that is a lot of hectares per person.

Mr Ellis —There are huge problems. As I understand it, Deniliquin is a town of some 8,000 people. As I understand it, there are 400 houses for sale at present in the town.

Senator HUTCHINS —If I remember, it employed a few hundred people, did it not?

Mr Ellis —The rice mill?

Senator HUTCHINS —Yes.

Mr Ellis —Yes. About 200 went recently. Of course, that was down substantially on what it would be when there is any harvest. It was at the end of two or three years of no rice that 200 went.

Senator HUTCHINS —So it is not just the mill. The ricegrowers cooperative would have had employment lost, I imagine?

Mr Ellis —Murray Irrigation is reasonably large. We employ 130-odd staff. We are certainly going down. We are under pressure to shut our doors and stop sending out a bill because irrigators, three years down the track with no water, are still receiving a fixed charges bill.

Senator HEFFERNAN —There is serious depression in the community.

Mr Ellis —There are huge problems.

Senator HUTCHINS —I know. I want to hear that from Mr Ellis and Mrs Gibson.

Mr Ellis —There really are some huge emerging social problems.

Senator HUTCHINS —This is my final question. What is MIL’s views on the compulsory acquisition of water to meet environmental needs?

Mr Ellis —We are certainly opposed to compulsory acquisition. Irrigators have a property right to water entitlements. There is a market and trade there. The devastation of having carryover water suspended in New South Wales—it was 52 per cent of our carryover water in 2006—was caused by government interference in the market. That water was carried over water or water that people had gone out in the market and bought to set up their own drought management strategy. To have the government then pull the rug out from under them really did interfere with that market and the confidence people had that they could manage their own risk and security by entering the market.

Senator HUTCHINS —I just wanted to see what MIL’s attitude was and put it on the record. Thank you, Mr Chairman.

CHAIR —Senator Hanson-Young has some questions.

Senator HANSON-YOUNG —Mr Stewart—sorry, Mr Ellis.

Mr Ellis —I answer to either.

Senator HANSON-YOUNG —You mentioned before that compulsory acquisition is a no-go in terms of the effect that you think it will have on irrigators. Keep in mind the fact that the crisis we are seeing not only in the Lower Lakes and Coorong but also in the other wetland areas throughout the system is because we actually have not had adequate environmental allocations. What do you think is the best and fastest way of ensuring that that happens?

Mr Ellis —The government is in the market buying water entitlements. I am not saying do not do that.

Senator HANSON-YOUNG —Do you think that that is efficient enough?

Mr Ellis —If you move to compulsorily acquire at the moment, you are still not going to actually receive any water. The sad reality is that there is no—

Senator HEFFERNAN —Purchase versus allocation.

Senator HANSON-YOUNG —So how do you see that we acquire in the most efficient way an allocation for the environment?

Mr Ellis —By what the government is embarking on now, you will achieve that in the long term. Sadly, the only way you are going to get water into the Lower Lakes and the Coorong is for it to rain. As I have said in discussions with Tim Fischer and Senator Wong—

Senator HEFFERNAN —D’oh, d’oh.

Mr Ellis —you can come to Murray Irrigation and buy 1½ million water entitlements and, sadly, carry it home in your briefcase because it is only a piece of paper.

CHAIR —The ‘d’oh’ was not a derogatory slur to your statement. Please do not think that.

Senator HANSON-YOUNG —Putting aside the emergency right now where we need freshwater flows for the Lower Lakes and the Coorong, we are also looking at the need for an environmental allocation throughout the system. Do you think that the government’s approach is going to secure the allocation we need for the environmental flows effectively enough?

Mr Ellis —I think this water reform package, Water for the Future, is a 10-year strategy.

Senator HANSON-YOUNG —Do you think that is fast enough?

Mr Ellis —Well, I think things will happen. There will be parts of the plan that hit the table prior to 10 years. This needs to be a strategy that we all work through because we are all in it and it is going to impact on all of us. We must keep food production and the environment and everything in mind here. Sadly, there is no quick fix. Until we get rain and water in the dams—

Senator HANSON-YOUNG —Do you think that the basin plan being proposed at the moment will deliver the results fast enough for your irrigator members?

Mr Ellis —For a lot of them, no. A lot of them are now seeing it purely as an exit strategy. They are just saying, ‘You get me the best price I can and I’m out of here.’ That is part of the need for us to work closely with government and a 10-year strategy. We need to all think through this carefully so that it does not just become a decimation of our region to buy up water entitlements that are not actually yielding any water. We need to be very mindful of what is going to be left behind once we have been through this transit.

Senator HEFFERNAN —A whole lot of transit assets.

Senator HANSON-YOUNG —How would you like to see that fast-tracked?

Mr Ellis —I do not know that a lot of it can necessarily be fast-tracked. I think we have to do the planning. We have to work through the process. What I am saying to DEWH and the government is, ‘Work with us. We’re all in it together. Work with us. Don’t just arrive on the table with a book.’

Senator HANSON-YOUNG —But 10 years does not help your irrigator members.

Senator HEFFERNAN —That is what you call the market at work, though.

CHAIR —Mr Ellis, did you want to answer that, or are you just waiting for another question?

Mr Ellis —With some of the initiatives, if it starts to rain and there is water available next year, there will be substantial amounts of water in the environmental bucket as a result of the buyback that is happening and is ongoing. I am not saying stop that. I am saying work with the communities that are going to be impacted as well.

Senator HANSON-YOUNG —On another topic, you were talking before that when flows are good and rainfall is good, we should be growing rice. In relation to permanent plantings, how much water do you think is needed in New South Wales for permanent plantings? Obviously I understand that, with the changing seasons, it is hard to determine into the future.

Mr Ellis —Look, there is very little in the way of permanent plantings within my area of operation. There are certainly others. I could furnish you information, but I believe Andrew Gregson from the New South Wales Irrigators’ Council provided information there.

Senator HANSON-YOUNG —In terms of your 2,400 members, what is that water used for if it is not for permanent plantings?

Mr Ellis —When we have water available, it is for a broad range. There is rice, there is cereal cropping, there is dairy farming, there is annual horticulture like tomatoes and potatoes grown and that sort of thing. There is certainly livestock.

Senator HUTCHINS —Do they grow other things down there?

Mr Ellis —Yes. There is an emerging—

Senator HEFFERNAN —They grow everything from marijuana to pumpkins, mate. Can you tell us what the head licence of Murray Irrigation is volumetric?

Mr Ellis —The total licence?

Senator HEFFERNAN —Yes.

Mr Ellis —It is 1.4 million.

Senator HEFFERNAN —It is the biggest licence?

Mr Ellis —Yes.

Senator HEFFERNAN —I note there is a catastrophe at the bottom of the river. There is a catastrophe all the way up the river. It has not rained. The system is fully allocated. All the water that is in the system is contracted. So if they are going to send water down, they have to take it off someone it is contracted to. It is plain language. No-one wants to use it. They are all dancing around it. South Australia in 2006-07 got 99 per cent of their 11-year average and you fellas got three per cent. In 2007-08, South Australia got 66 per cent of their 11-year average and you blokes got 30 per cent. So it is not as though you have not taken a fair share of the pain in this process. What is going to happen if it does not rain later this spring and next autumn? This time next year will be just a complete bloody wipe-out. Do you think that your growers, the industry and irrigators generally in the Murray-Darling Basin are figuring into their thinking about future allocations and that sort of thinking that just went on there that we are going to go back to what we were 50 years ago? That is given that science says we are going to lose between 3,500 and 11,000 gigs.

Mr Ellis —I think there is a growing recognition that times have changed. Probably 12 months ago, I could go out to an irrigator meeting and almost be shot down or thrown out of the room because I wanted to talk about issues like this that we needed to start to discuss as a community about the growing impact. Now I am almost overrun—‘Well, what are you doing? You’ve got to get together a package with the government that enables us to sell water entitlements and achieve some income’—because that is the only thing they have to look forward to in at least three years. When you look out, this season is probably going to be another zero. We have just come out of two zeros. We are probably heading into another zero. Given the dry sponge scenario in the catchments, irrespective of what happens, it could be biblical rainfalls and we would probably go into debt for the year.

Senator HEFFERNAN —The Riverina is actually destocking now because of not only the river wet problem but also the dry land is wiped out.

Mr Ellis —Yes.

Senator HEFFERNAN —So it is catastrophic. I will not use the language I would use normally. If we cannot go to some sort of fertigation and different crops, the answer on the rice question is the market takes care of that with the price of water, which is done with dairy farming. The price of water will fix up what you grow, so you end up growing marijuana.

CHAIR —That is why we were talking about rice in Kununurra. I understand that, Senator.

Senator HEFFERNAN —So non-paddy rice is a possibility now. But obviously with fertigation, if we lose that 3,500 as a minimum out of the system, we will have to go to non-furrow.

Mr Ellis —What I am saying is that is we need to work through this whole package strategically. We could all panic now and do some knee-jerk thing.

Senator HEFFERNAN —I agree with what you are saying entirely.

Mr Ellis —We have really got to work through this carefully.

Senator HEFFERNAN —I agree with you entirely. The solution is not these symbolic things like Tooralie. We are going to return probably 7,000 or 8,000 megs to the system. It will get halfway down to Wilcannia and that will be it. Mike Young says that we have to go back and redraw the plan for the system against the science of the future. So how silly is it that if we got savings out of the Goulburn River with better piping et cetera, you would actually take that water, against the scenario of losing 3,500 gigs, and send it to Melbourne instead of sending it down the system? Does that make any sense?

Mr Ellis —That is a concern for all of us reliant on the Murray system, I think. It is a system. The more water that is taken out of it, there are impacts right along it for all of us.

Senator HEFFERNAN —But that impact, because of the discounting and the disproportionate return of the run-off drops to the freight component of the river, that 75 gigs, would be very important, even if it was just a freight component for the future, would it not?

Mr Ellis —That is right, yes.

Senator ADAMS —Thanks for your presentation. On page 5, you have said here that Murray Irrigation’s view is that South Australia needs to take greater responsibility for providing solutions to the issue that they confront. Can you give me an example? Do you think they should be taken off the Murray completely and have storage dams and desalination plants? Would that help the system? What is your view on this?

Mr Ellis —I think all options need to be on the table. Change is here. Change has arrived. It is going to impact on all of us. We have to look at what all the options are and the bigger picture. There is a balance between water for food production and water required for environmental needs. I think we need to consider all the options. If there is an environmental disaster occurring from a lack of water in the Lower Lakes, what other options are there? Probably no-one wants to go there. But we have to look at what all the awful sorts of options are. The gentleman before me spoke about selecting environmental areas that you need to keep and others which maybe you cannot keep and you need to let go. We have to make all sorts of awful decisions.

Senator ADAMS —You also comment on soils and state that it is not just the Lower Lakes that are having problems with salinity. Could you just give me an idea of what the salinity issue is around where you are or what you cover? Is it getting worse?

Mr Ellis —Yes. There has certainly been a saline issue, mainly as a result of high water tables back in the 1970s. We certainly had an emerging salinity issue throughout parts of our region, largely, I guess, due to lower allocation years and lower water use. But certainly some improved farm practices and the huge benefits achieved as a result of the land and water management plan works have largely got a lot of that sort of stuff under control. We have certainly learnt to live and control that sort of problem a lot better. But some of this stuff that is really popping up now is a result of certain rivers and streams that have been shut off deliberately. They are anabranches of the Murray River—the Wakool, Niemur, Colligen Creek and Merran Creek. They are all streams that have actually been shut off and are drying out so that the water can run down the main stem of the Murray to reduce the transmission losses. You have a local community there. They say, ‘Well, why can’t I have some water running down my stream when it is running down that one?’ There are all sorts of issues there. I can understand why people get angry about that. I live personally just to the west of the Werai State Forest. It is not listed there, but it is quite a substantial forest to the west of Deniliquin. The Niemur River flows through that just some kilometres from my property. To see the hundreds and hundreds of Murray cod dying in the holes as they dry up there just breaks your heart, but that is what is happening. Some areas have acid sulphate soil that is popping up through the river beds now and that is creating huge problems.

Senator ADAMS —I have just one quick question. So you would believe that we need an overall look at this with all governments cooperating?

Mr Ellis —That is the only way it can happen. It has got to happen. We are all in it together. We must work at it together.

CHAIR —Mr Ellis and Mrs Gibson, thank you very much. Senator Hutchins and I were just saying you are definitely a man of the land, Mr Ellis. Neither of us would like one of those hands around our throat. Thank you very much. Perhaps we could borrow your hand. Senator Hutchins said he would like to put it around someone else’s throat.

[9.31 am]