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STANDING COMMITTEE ON RURAL AND REGIONAL AFFAIRS AND TRANSPORT
26/09/2008
Management of the Murray-Darling Basin system

CHAIR —Welcome, Mr Thompson.

Senator HEFFERNAN —Wild Dick Thompson.

CHAIR —I will just settle for Mr Thompson. You do not have to watch your back, Mr Thompson—we are keeping an eye on Senator Heffernan for you!

Mr Thompson —I just thought I should comment on his comment immediately. I grew a crop of rice last year. I grew it on 8½ megalitres. I have a crop of wheat in that very ground that will go at least four tonnes without any watering.

CHAIR —Very good. Thank you. Don’t worry about Senator Heffernan. As I said, we will keep an eye on him.

Mr Thompson —I am not worried about Senator Heffernan.

CHAIR —Okay. Do you wish to make a very brief opening statement before we go to questions?

Mr Thompson —Yes, I do, actually. I do not come here as a professor or somebody with letters after their name.

CHAIR —There is nothing wrong with that.

Mr Thompson —I am really concerned about some of the so-called experts and the input that they are having at the moment. They are fly-by-night, normally, most of them. Some of us do understand the system. We have the Wentworth Group making statements like they have known for decades. In 1992, the New South Wales department did a study which showed that the Murrumbidgee had 300,000 megalitres of water to spare. The then minister, Souros, was about to auction 60,000 megalitres of entitlement. It was only irrigators who prevented that happening.

Murrumbidgee Irrigation was the company that did not oppose water going into the Snowy River. While all irrigators originally were opposing it, I was taking my board up there to have a look. We came to an agreement with the authorities up there that we should all pursue savings instead of taking water from irrigators. We then pursued the Barren Box Project, which was the restoration of 3,200 hectare of wetlands, which saved 20,000 megalitres that went back to the Snowy River. Ten per cent of their needs we did in one job. That very area has sea eagles breeding in it at the moment. There are a lot of endangered species. There are a lot of win-wins out there if you look for them.

I am someone who has had a lot to do with the Snowy scheme. I was involved in negotiating bringing water forward for irrigators. In hindsight, maybe that was not a good idea, but we are all smart in hindsight. I have been involved in the cloud seeding program. I am amazed that a lot more effort is not being put into cloud seeding in the Snowy Mountains. I am not a cloud seeding fanatic but, having been there from day one when the Americans first came out to look at it, I am convinced it is an area that works and it does not take water off others, whereas a lot of cloud seeding does. I have been on the Tumut River Advisory Committee and the Murrumbidgee River expert panel. I was made a member of the Murrumbidgee CMA that came up with the—

CHAIR —What is the CMA, Mr Thompson?

Mr Thompson —The Catchment Management Authority and its predecessors. I have represented them on the Murrumbidgee River committee which came up with the river action plan for the ‘Bidgee. I am also on the Murray-Darling Basin CRG which has allowed me to see most of the sites on the Murray. I have been to the Lower Lakes probably on at least half a dozen occasions over the last 15 years, some of those as a private tourist organised for me by the department. I have had a private tour of the Menindee Lakes. We have come up with a program—our company—which is about finding water for the environment in the Murray at least cost to communities. I think that is one that needs to be driven further. That study does highlight that part of it is about how you manage the water when you get it, and in the Murrumbidgee with the hydrology of the area wetlands and what is required. I think it highlights how little people know about what is required.

I asked the modellers the other day: if a certain amount was put down the river and went into these wetlands how much of it would come back out and end up in the Murray River? They said that they have no idea. Until their study is completed they do not have any idea on the ‘Bidgee. I do not believe people know how we are going to combine the Goulburn, the Murray, the Darling and the ‘Bidgee to get the best outcomes with least water in the Murray. I mentioned that I am a rice grower as well. It does not use a lot of water. I am totally against compulsory acquisition, I might add. I think that would be a disaster.

CHAIR —We will go straight to questions, Mr Thompson.

Senator HEFFERNAN —Do you reckon there are any speculators in the water market?

Mr Thompson —I think the speculators in the water market will get their fingers burnt, to be quite honest.

Senator HEFFERNAN —No, they will not get their fingers burnt with the capital worth in light of the daily trade.

Mr Thompson —The water is not something you hang onto for a year and not use.

Senator HEFFERNAN —The rice is a wonderful industry; there is no question about that. It is just a question of: if Mother Nature is changing the game we have to do something about it. I realise that it is vertically integrated to a 1,400 per cent increase in capital worth from the raw to those little things you tip the water with. It is a fantastic industry. What do you think of the role of non-paddy rice? Most people do not understand that the paddy really is only to control the variation in the temperature for the plant. If we could successfully go to that—as you have done with your wheat crop, which a lot of people do after a rice crop—is there a role for non-paddy rice?

Mr Thompson —There is a role for having the water on it for a lot less of the year. That is why I raised it. I only used 8½ megalitres last year because I put no water onto it. I used a bit of rainfall and did not put water onto it until 15 December. Today my workman is sowing rice on the rainfall that has been there. If you can get it up and grow it for two months without putting water on it, you will have made your savings.

Senator HEFFERNAN —So there is technology around.

Mr Thompson —There are some wheat problems at the moment and controlling wheat without water is a problem.

Senator HEFFERNAN —I understand all that. When I made that statement five years ago, scientists rang up and said, ‘Mate, we’re on the way with it,’ and that is what is up the north coast now. Do you think that generally in your industry people recognise that there might be a chance that what the present holds is what the future is going to present us with? I am confident; are you confident that farmers will be inventive and ingenious enough to deal with a lot less water producing the same amount of food?

Mr Thompson —I was speaking to a group of irrigators only a couple of days ago on trade and how they use that to carry forward how they make their decisions. I said to them, ‘The driver for efficiency’—and there have been major ones in the last 10 years—’has been trade and the shortage of water.’

Senator HEFFERNAN —The price of the market.

Mr Thompson —Yes—that is, trade has driven the price at the market.

Senator HEFFERNAN —Generally, do you think people are trying to make decisions about the future based on the science of the future or on the history of the past? are people saying, ‘1956 will come along again; we’ll just wait,’ or are they saying: ‘Hang on a minute—we might be going to lose 3,500 gigs out of the system. We’d better think about how we’re going to do this with a lot less water’?

Mr Thompson —We certainly are. For over two years our company has been budgeting on the first 50 years of the last century, not the last 50 years, in running the company and what water will be available.

Senator HEFFERNAN —I am fully sympathetic, as Dr Arlene Buchan just said, to the fact that the whole system is in stress and Mother Nature is the referee. In the future, if we have 3,500, or 11,000 gigs at the worst, less water, it will mean, as you would probably understand, that more water will have to go to the freight and the work of the river rather than the farming work. Do you understand that?

Mr Thompson —I totally understand. If some of those outcomes—

Senator HEFFERNAN —So there is going to be a whole lot less water.

CHAIR —Senator Heffernan, you asked Mr Thompson a question and you cut him off halfway through the answer.

Senator HEFFERNAN —Righto. I tend to do that.

Mr Thompson —I understand what the issues will be. If the worst case scenarios do become reality, there is going to be major structural adjustment. But I would hate to think that we were being quite that negative. We are allowing for quite a bit less water—let’s not all slit our wrists yet.

Senator HEFFERNAN —No, and the bulk of production in the Murray-Darling Basin is, after all, dryland and we dryland blokes have to deal with that as well. You would agree that the river management plans, for the Murrumbidgee, for instance, that were put out a few years ago—the document that was that thick—were flawed, wouldn’t you?

Mr Thompson —The Murrumbidgee river plan?

Senator HEFFERNAN —Yes.

Mr Thompson —I was part of that.

Senator HEFFERNAN —Why didn’t you include forest interception in it? Was that just a mistake or did everyone forget?

Mr Thompson —Are you talking about the catchment plan or the river plan?

Senator HEFFERNAN —The river plan. The catchment-river plan.

Mr Thompson —That was about sharing the water that was being modelled at the time—

Senator HEFFERNAN —It totally—

CHAIR —Senator Heffernan, you keep asking questions and then cutting Mr Thompson off halfway through. Mr Thompson, continue with your answer.

Mr Thompson —Some of us argued at the time that the rules they put in place for the Murrumbidgee would make it worse for the environment, and I believe that is the case. It was pouring a little bit of water down fairly regularly and it was going to reduce the number of spills from the dams. Spills from the dams are probably the best environmental outcome you can get.

Senator HEFFERNAN —But it excluded the calculations on forest interception from the 2020 thing.

Mr Thompson —I would think there is more native revegetation happening at the moment. There is a lot of—

Senator HEFFERNAN —Well, the regrowth is starting, but why would—

Mr Thompson —perennial pastures.

CHAIR —Sorry, Mr Thompson. Senator Heffernan, can you ask the question and then give Mr Thompson the opportunity to answer. If you do not want to hear the answer that is fine, but I do.

Senator HEFFERNAN —But I just want to know why it happened—

CHAIR —You have already asked the question.

Mr ABBOTT —why they made the mistake of not including the—

CHAIR —Mr Thompson, if you can remember the question, will you answer it, please?

Mr Thompson —The Murrumbidgee Water Sharing Plan was to be based on modelling of the last 100 years and the water available under that. It was never intended to take in those other areas. I agree it should have—

Senator HEFFERNAN —That is all I wanted you to say.

Mr Thompson —just as I agree with a lot of other things. I believe that cloud seeding should be taken into account too if we are fair dinkum.

Senator HEFFERNAN —It was just a flawed basic plan.

Senator ADAMS —Mr Thompson, I would like your opinion on the six properties which the government may purchase to help the system. Does your organisation have any opinion as to the water going right down to the lakes and just how much it will help?

Mr Thompson —That is on the Darling system. I do not claim to have as good an understanding of the top end. I do know that there are some issues with getting the water back out of those systems. There are issues up there with defining what the actual right is in the first place. Sometimes you can buy some unregulated water, which just increases the right for somebody else further down. I understand that a lot more work needs to be done. I do not have a problem with land and water being purchased. In fact, recently Mike Young used the Waterfind study, were they said that the market was limited and so you had to have compulsory acquisition. I said to him when he presented that that the study was totally flawed. Most trade happens with land at the moment, but as the price of water goes up people will maximise their sale when they are selling their property. They will sell water and land separately, and a lot more water will be coming on the market.

Senator ADAMS —If the deal is that the water and the land are together, and those properties are all shut up for environmental use, how do you feel about that?

Mr Thompson —Closing them up for environmental use is a totally different argument to taking the water. There can be productive properties left with only stock and domestic on them. I do not understand that situation well enough to say whether it should be turned into a national park or remain a productive farm, but I have no problem with water being purchased and taken off properties. We irrigators fought for property rights, and we have them. We said, ‘If you want water for the environment, come and buy it.’

Senator HEFFERNAN —What about the compensation based on the history of use for the groundwater blokes? Wasn’t that a rip? The most extravagant wasters of water got the greatest rewards and the most efficient people got penalised.

Mr Thompson —I am on the catchment management board, and I am not about to comment on that in public.

Senator FARRELL —Mr Thompson, can you tell us a bit more about this River Reach program of yours?

Mr Thompson —Yes. River Reach is being funded by the government to do the modelling.

Senator FARRELL —Federal or state government?

Mr Thompson —The federal government is funding it. Murrumbidgee Irrigation are doing it in partnership with the catchment board. Our part of it is finding the water. All the savings we are making in our area, we are providing to irrigators below about 50 per cent allocations. We are then going to do a deal so that they go to the environment in the higher allocation years. What that will be doing is finding the water for the environment but keeping the water for irrigators to maintain their base production in dry years. That is all of the savings we are making, and they are fairly large. We moved the 20,000 out from Barren Box. There are a lot of other areas. We have a loss allowance to deliver our water as a private company, but we are more than prepared to see this water go to the environment and to do a long-term deal so that the environment gets it.

Senator FARRELL —Where are you finding this water?

Mr Thompson —We are finding it in various ways, such as our channel systems. We have a creek that is 75 kilometres long that runs into the Barren Box wetlands. It has been used over the years as a delivery system. Every time you put water down it, water was lost. We are going to save about 6½ thousand megalitres just out of that and restore the creek to something like its original condition.

Senator HEFFERNAN —Is that going to recharge, some of that water? You say it was wasted—do you consider recharge as waste?

Mr Thompson —There was a high watertable. Some of what was lost would have been going to recharge.

Senator HEFFERNAN —Yes, it would.

Mr Thompson —A lot of it was just growing capungi, which was destroying the original—

Senator HEFFERNAN —I understand all that, but there is a recharge effect too. It is not all waste.

CHAIR —Let the witness finish the answer, please. He has lots of interesting things to say.

Mr Thompson —We are piping and pressurising all of our horticulture—about 20,000 hectares in the MIA. The savings from that will be going to our irrigators in the dry years and will be sold to the environment in the wetter years.

Senator SIEWERT —I will ask about the water that was borrowed from the environmental allocation. Were you involved in that process in the Murrumbidgee Valley?

Mr Thompson —The department was, to ensure that high security had enough water for the permanent plantings. There was water that had been set aside under the Murrumbidgee River plan. There is a certain amount set aside each year and released under certain conditions. They decided not to release it under some of those conditions and to carry forward the other water. That was lent to high-security irrigators. Part of it, though—and I would have to check the exact details—was also lent to supply towns in the Murray when it was short 18 months ago. I am not too sure of who should pay that back. I do not believe that the Murrumbidgee resource should pay for it twice.

Senator SIEWERT —This is the 113 gigalitres that Dr Buchan was talking about earlier?

Mr Thompson —Yes, I do understand that there is an amount there. I think about 60,000 went to the Murray out of it.

Senator SIEWERT —Okay. I am just trying to clarify that we are talking about the same allocation of water. So that was borrowed from the Murrumbidgee, went to the Murray—

Mr Thompson —Some went to the Murray. Some was used for the high-security irrigators in the Murrumbidgee to guarantee their high-security work.

Senator SIEWERT —So what I am hearing—and I want to get it right—is that at the moment—and dispute is too strong a word for it—you do not know who should be paying it back.

Mr Thompson —I have raised the issue over the last couple of years of whether the Murray should be responsible for some of it or not. I have not got a clear answer.

Senator SIEWERT —How long ago was it borrowed?

Mr Thompson —It would have been in the first year of low allocation, and we have had about three of those now. Off the top of my head, I cannot be exact. It would be either two or three years ago.

Senator SIEWERT —Two or three years ago. Okay. I think you were here earlier when we heard that the CMA are saying that if they could get that water back, they would be very happy to have it allocated to other environmental outcomes, such as the Coorong.

Mr Thompson —If it became available for the environment, I would not see any reason why the CMA would not see that as a high priority. We would have a lot of people, though, who would see the low Bidgee, which has been short of water for many years too, as just as high a priority.

Senator SIEWERT —It sounds to me as if there is a dispute as to who should be paying that water back. Does that mean that the rules are not clear when water is borrowed about what the process is for returning it?

Mr Thompson —The rules would have been very clear if the water plan had not had to be suspended. When the rules for the water sharing plan were made up, it would have covered the worst droughts we had ever had. Unfortunately, this drought and its impacts—and we should remember this—are worse than any other in living memory. The rules were not made up to cover this outcome, just as Snowy-Hydro have not been able to guarantee their one million megs a year to the Murrumbidgee and to the Murray. It is because it is outside of any predictions they ever made.

Senator SIEWERT —That is a very good point. If, as I believe, we are now entering into drought and climate change is coming in on top of that, is what you are saying now that, if we continue with this process, it will never go back to business as usual? We are facing much lower rainfall in future. If I understand what you have just said correctly, there are not really rules to cover that scenario.

Mr Thompson —The water will be returned, but I would like to comment on climate change. I certainly believe there has been climate change since the year dot, and mankind is at the moment impacting on that climate change. There is no risk about that. There were predications done about dryland salinity in the basin not many years ago. A lot of them have proved to be totally wrong, and climate change is certainly making them more wrong.

Senator SIEWERT —Yes. I appreciate your comments on climate change. The point I was trying to get to is that, if I understand what you said earlier, the reason that we do not know about the rules about returning the water is that it is outside what was planned for under the management plan, and if we continue in this scenario where we have lower rainfall, we are now entering into a phase that is outside the current rules and outside the current management plans.

Mr Thompson —I do not believe we are entering into a phase where the water sharing plan will not be reinstated because, even at 20 per cent general security, it will get reinstated. I do not believe that the last three or four years will be the average. I think it is taking a very negative view to accept that. I do accept that, at best, we will get what we got in the first 50 years of the last century.

CHAIR —You mentioned the impacts of the drought. Would you like to expand on that? What has been the impact of drought on your shareholders?

Mr Thompson —Our shareholders have had to continue to pay their fixed river costs to the government. We did give some rebate to them last year out of reserves. Some of them are getting to the stage where they are not growing anything and cannot pay their bills. I appreciate the difficulties in the Lower Lakes. It would be nice to be able to do something overnight. Fortunately, the rain that they have had recently has helped. But there are a lot of people right through the catchment who are having a really hard time. People will have to sell their farms. To some extent, because there has been no allocation attached to the entitlement, the buyback has probably held up the value of the resource at the moment and is helping some of these people to survive.

CHAIR —Have irrigators had to sell and move off the land yet?

Mr Thompson —Some people have sold.

CHAIR —Would you roughly have an idea of numbers? If you do not, we will skip after it. That is fine.

Mr Thompson —No, I do not.

CHAIR —But it is not getting any better.

Mr Thompson —If it goes another 12 months, you will start to see high numbers.

Senator FISHER —Have you seen Minister Wong’s water amendment bill, which was tabled in the House of Representatives yesterday?

Mr Thompson —I have not had a chance to read it yet.

Senator FISHER —Did the government consult with you in the lead-up to the bill?

Mr Thompson —We have been consulted. I must be a little bit careful about what I say here, because I am on the stakeholder buyback committee. That is an in-confidence committee, so I would prefer not to comment.

Senator FISHER —Could you perhaps take that question on notice? Were you or your organisation consulted by the government in the preparation of—

Mr Thompson —Our organisation has been consulted right through the process. Some of the things that are happening at the moment are happening too quickly, I believe, and there is not enough time. The socioeconomic studies have not happened. We are answering or trying to answer papers every second day at the moment.

Senator FISHER —Sure. Given that you have not seen the bill, could you take on notice some questions. What do you and your organisation think of it? Do you think that it will achieve its stated aims, including the timing?

Senator NASH —Do you believe that the basin has enough water to pump 110 gigalitres to Melbourne?

Mr Thompson —No. I think that is totally ridiculous.

Senator NASH —Why then do you think that the decision has been taken to allow that to happen if it is absolutely dot dot dot?

Mr Thompson —Victorian irrigators have not been nearly as well informed over the years as irrigators in other states. They really have not an organisation that has been getting the message back to the grassroots. They are only just starting to see what is happening to them under these water reforms.

Senator NASH —Excluding Adelaide, do you think that any city or community that is not in the basin should fall under a critical human needs aspect?

Mr Thompson —Not if they are not in the basin. We always try to move water into the basin; it should not be going out of it.

Senator NASH —Exactly.

Mr Thompson —At some stage, we may need to debate whether water is more important in the Snowy River or the Murray River, but that is a fairly hard one for some environmentalists.

Senator NASH —On the buybacks, do you think that the current buyback system is transparent?

Mr Thompson —Yes.

Senator NASH —You do not think that there is any need for improvement?

Mr Thompson —There has been a fair bit of carry on about it not being transparent. But at the end of the sale we know what has been paid for what type of water.

Senator NASH —You said that people know what has happened at the end of the sale. As it is an ongoing process, do you think that it would be useful if the buyback is going to progressing over a long period of time to—

Mr Thompson —It depends what sort of buyback you have. If you have a tendered price, like the last time, that closes on a certain date, there is no way that you can. But, if they are going to go out in the market and offer a certain price, then when deals are done and signed off, I believe it should become public knowledge.

Senator HEFFERNAN —How does the government jump this hurdle? If I have got 400 acres at Coleambally and I have shut out all the sandy—

Mr Thompson —Are you selling with the rest of them?

Senator HEFFERNAN —Well, at Leeton, if you like. Say I have managed to get rid of all the sandy soil that I used to put paddy rice on, and then the bank comes to me and says, ‘Mate, you’ve run out of money; you’d better sell your water.’ You say that the government buying land with the water is not such a bad idea. I am saying it is a very bad idea. What do I do with my 400 acres once I lose the water off it? How much depreciation in the value of 400 acres with an 18-inch rainfall is there from when it was an irrigated farm? What is the depreciation in the land content?

Mr Thompson —I think what I actually said was: as there is a separation of land and water and people are in the market for just water, people will put their farm up as water and they will put it up as land and they will maximise the return they can get.

Senator HEFFERNAN —But do you really think the government should be—

CHAIR —Sorry, Senator Heffernan. Senator Nash had the call and we have gone over time. I will go back to Senator Nash and then we will wind up.

Senator NASH —Mr Thompson, are you aware of any socioeconomic impact studies that have been done to date on the previous buybacks? The department, when giving evidence last week, I think it was, talked about the report that they have commissioned ABARE to do, which is not due until early next year. But there is absolutely no requirement to wait for any of that reporting on those impacts before any of the buybacks continue. Are you aware of that and do you agree with that as a way forward?

Mr Thompson —As far as the first buyback goes, there was so little water attached to it that it has not reduced production.

Senator NASH —Exactly how much water was attached to that?

Mr Thompson —Because of the low allocations, the actual entitlements they bought—you are buying empty buckets at the moment—

Senator NASH —A very good point well made.

Mr Thompson —For a long-term outcome, I believe buying the water at the moment is how they should be going. But it does not matter what they buy at the moment; the water is not there.

Senator NASH —True. And the second part of the question about the socioeconomic impact reporting? Has there been any done?

Mr Thompson —It has not been done as yet, and I believe it will end up just as a body count, with the way things are going.

Senator NASH —What do you mean by that?

Mr Thompson —You do not do them; you just count the people who have to leave after it has happened. That is what I am saying.

Senator NASH —Exactly. So do you believe the government should be holding off on any more of the buyback until they actually figure out what the impacts of this are going to be on rural communities?

Mr Thompson —No, because of the amount they are buying at the moment. As I said, the first one had virtually no impact because it had no water attached to it. So in the short term it has had no impact.

CHAIR —I think the Young Bugle will get the line today—well done, good questioning. That is the local paper, isn’t it?

Senator NASH —Sorry? It has nothing to do with the paper. It is about getting the right answers, thank you, Chair.

CHAIR —Very good. We have gone well over time—

Mr Thompson —Your committee would not have time to come and visit Barren Box to get an idea of what really happens, would it?

CHAIR —You can certainly write to the secretariat to invite us. If we can squeeze it into our busy, busy timetable, I am sure senators will take the opportunity. That is not a guarantee, but please write to us. On that, Mr Thompson, we thank you very much for your insight.

Proceedings suspended from 11.03 am to 11.15 am