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Water Legislation Amendment (Sustainable Diversion Limit Adjustment) Bill 2016



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BILLS DIGEST NO. 32, 2016-17 7 NOVEMBER 2016

Water Legislation Amendment (Sustainable Diversion Limit Adjustment) Bill 2016 Bill McCormick and Sophie Power Science, Technology, Environment and Resources Section

Contents

Purpose of the Bill ............................................................... 2

Background ......................................................................... 2

The Water Act and the Basin Plan ........................................... 3

Sustainable diversion limits ................................................... 3

SDL adjustment mechanism .................................................. 4

Committee consideration .................................................... 5

Senate Selection of Bills Committee........................................ 5

Senate Standing Committee for the Scrutiny of Bills .............. 6

Policy position of non-government parties/independents ..... 6

Position of major interest groups ......................................... 6

Financial implications .......................................................... 6

Statement of Compatibility with Human Rights .................... 6

Parliamentary Joint Committee on Human Rights .................. 6

Key issues and provisions..................................................... 6

Key provisions relating to the SDL adjustment mechanism .............................................................................. 7

Proposed amendments ........................................................... 7

Second notification of measures ........................................... 8

Additional efficiency measures ............................................. 8

Timing of the MDBA’s determination ................................... 9

Other provisions .................................................................. 9

Date introduced: 15 September 2016

House: Senate

Portfolio: Agriculture and Water Resources

Commencement: The day after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at

November 2016.

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Purpose of the Bill The purpose of the Water Legislation Amendment (Sustainable Diversion Limit Adjustment) Bill 2016 (the Bill) is to amend procedures in the Basin Plan 2012 (the Basin Plan) for adjusting sustainable diversion limits (SDL) for water in the Murray-Darling Basin (MDB). In particular, the Bill will:

• provide an additional opportunity for Basin states to develop and notify the Murray-Darling Basin Authority (MDBA) of new supply and efficiency measure projects up to 30 June 2017 (rather than 30 June 2016) and

• provide for the MDBA to make a single determination relating to proposed SDL adjustments after 30 June 2017 but no later than 15 December 2017 (rather than ‘as soon as practicable’ after 30 June 2016).

Background The Murray and Darling Rivers are the world’s 15th longest river system and the Murray-Darling Basin (MDB) covers 14 per cent of Australia.1 However, because they are long and slow flowing rivers and have a high evaporation rate, they carry one of the world’s smallest volumes of water for their size. Agricultural production of the MDB is estimated to be $13 billion annually, of which a third is produced using irrigation.2 The basin is home to over two million people. In 2011, ‘dryland and irrigated agriculture represent[ed] 84 per cent of Basin land use, 32 per cent of businesses and 11 per cent of jobs’.3

The MDB contains around 60,000 square kilometres of floodplain and 30,000 wetlands, including 16 listed under the Ramsar Convention on Wetlands of International Importance4 and there are at least 95 threatened species dependent on basin ecosystems.5

Water quality throughout the MDB declined through the 20th century as a result of increased salinisation (caused by salt stored in soils and/or groundwater being mobilised by extra water provided by human activities such as irrigation or land clearing) and more nutrients in the water from increased use of fertilisers and soil erosion. The Salinity and Drainage Strategy was agreed to by the Basin states and the Commonwealth in 1988 for the co-ordinated management of salinity in the River Murray and land salinisation and waterlogging in the MDB.6

The decline in river health was further exacerbated when water diversions across the MDB increased substantially during the 1980s and early 1990s, raising concerns that these diversions were exceeding sustainable levels. To combat this, the MDB Ministerial Council introduced a ‘cap’ on diversions of water from the MDB at the 1993/94 level of development, effective from 1 July 1997.7

From the late 1990s, efforts were being made by the Basin states to recover water entitlements in order to return water to the rivers for environmental flows.

In 2002, the Commonwealth, New South Wales (NSW) and Victorian governments agreed to provide $375 million over ten years to fund works to recover 212 Gigalitres (GL) and 70 GL in environmental flows respectively to the Snowy River and the Murray River.8

In 2003 the MDB Ministerial Council decided that, as the first stage of the Living Murray initiative, 500 GL of environmental water would be acquired to put towards achieving significant environmental benefits for six key ecological assets: Barmah-Millewa Forest; Gunbower and Perricoota-Koondrook Forests; the Hattah Lakes;

1. K Molloy, ‘The Murray-Darling Basin Plan: cooperation in transboundary water management’, in Free flow: reaching water security through cooperation, UNESCO publishing, Paris, 2013, pp. 77-80. 2. Ibid.

3. Murray-Darling-Basin Authority (MDBA), Socio-economic analysis and the draft Basin Plan, ‘Part A - overview and analysis’, MDBA, Canberra, November 2011. 4. Convention on Wetlands of International Importance Especially as Waterfowl Habitat done in Ramsar, Iran, on 2 February 1971, [1975] ATS 48 (entered into force for Australia and generally on 21 December 1975). 5. Molloy, ‘The Murray-Darling Basin Plan’, op. cit., pp. 77-80. 6. Murray-Darling Basin Commission, Salinity and drainage strategy: ten years on, 1999, Murray-Darling Basin Commission, Canberra, 1999. 7. Murray-Darling Basin Commission, Murray-Darling Basin cap on diversions: water year 1997-98: striking the balance, Murray-Darling Basin

Commission, Canberra, December 1998. 8. Commonwealth of Australia, State of New South Wales and State of Victoria, Snowy Water Inquiry Outcomes Implementation Deed, document no. NWEWG 21, 3 June 2002: see clause 11.1 which requires NSW and Victoria to pay $150 million each and the Commonwealth to

pay $75 million.

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Chowilla Floodplain (including Lindsay-Wallpolla-Mulcra Islands); the Murray Mouth, Coorong and Lower Lakes; and the River Murray channel.9

The combination of the Millennium Drought10 and the lack of progress with previous initiatives led then Prime Minister John Howard to propose a $10 billion National Plan for Water Security in 2007. He said that the current trajectory of water use and management was not sustainable. To deal with this, he proposed to ask the relevant state and territory leaders to refer their powers over the MDB to the Commonwealth.11 Under the Plan, the Commonwealth would provide $5.9 billion to modernise irrigation infrastructure both on and off-farm to save water and increase efficiency of water use. In addition, the Commonwealth would invest up to $3 billion to address over-allocation in the MDB through buying back water entitlements and assisting irrigators to exit unviable or inefficient parts of irrigation schemes.12

The Water Act and the Basin Plan Victoria and the Commonwealth could not reach agreement to transfer relevant powers. As a result, then Prime Minister Howard decided to introduce the Water Bill 2007 into Parliament to establish a new governance regime over the MDB using only Commonwealth constitutional powers.13

The Water Act 2007 (Cth) established the Murray-Darling Basin Authority (MDBA) with responsibility for developing a Basin Plan. One of the key elements of the Basin Plan was to include sustainable diversion limits (SDLs) on the quantities of surface water and ground water that can be taken from the Basin's water resources.

The Water Act was amended in 2008 to reflect the eventual agreement by the Basin states (that is, NSW, Victoria, South Australia and Queensland) to refer relevant constitutional powers to the Commonwealth.14

These amendments followed the Memorandum of Understanding on Murray Darling Basin Reform,15 signed by the Commonwealth, the ACT, NSW, Queensland, South Australia and Victoria in March 2008 and the Intergovernmental Agreement on Murray Darling Basin Reform16 in July 2008.

The Basin Plan was adopted in November 2012 after significant consultation with communities, stakeholders, interest groups and governments from November 2011 until May 2012.17 The Basin Plan is a legislative instrument made under the Water Act.18

Sustainable diversion limits As noted above, one of the key elements of the Water Act and Basin Plan is the requirement to establish long-term average sustainable diversion limits (SDLs) to the quantities of surface water and ground water that can be taken from the Basin's water resources for consumptive use.19 The SDLs are intended to reflect an environmentally sustainable level of water use (or ‘take’) of both surface water and groundwater for each catchment and aquifer in the MBD, as well as for the Basin as a whole.20 Essentially SDLs are a cap21 on consumptive water use in the MDB and ‘will commence in 2019, by which point they will be incorporated in state water resource plans’.22

9. MDBA, ‘The living Murray program’, MDBA website. 10. For further information about the Millennium Drought, see, for example, Bureau of Meteorology (BoM), ‘Recent rainfall, drought and southern Australia’s long-term rainfall decline’, BoM website, April 2015. 11. J Howard (Prime Minister), Address to the National Press Club, Great Hall, Parliament House, transcript, 25 January 2007. 12. Australian Government, A National Plan for Water Security, 25 January 2007, pp. 7 and 11. 13. A Martin, P Pyburne and B McCormick, Water Bill 2007, Bills digest, 30, 2007-08, Parliamentary Library, Canberra, 14 August 2007. 14. Water Amendment Act 2008 (Cth). The ACT, as a territory, did not need to refer Constitutional power. 15. Council of Australian Governments (COAG), Communique, ‘Attachment A: Murray-Darling Basin reform: memorandum of understanding’,

COAG meeting, Adelaide, 26 March 2008. 16. COAG, Agreement on Murray-Darling Basin Reform, COAG, 3 July 2008. 17. MDBA, ‘History behind the plan’, MDBA website. 18. Water Act, section 33. Note section 20 of the Water Act sets out the purpose of the Basin Plan. 19. MDBA, ‘Sustainable diversion limits’, MDBA website; see also Water Act, subsection 22(1), item 6. 20. Ibid.

21. Prior to the development of SDLs, there was a limit on the amount of surface water taken for consumptive use called a ‘cap’ which was set based on historic use rather than what was sustainable. 22. MDBA, ‘Sustainable diversion limits’, op. cit.

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The Basin Plan set a long-term average surface water SDL of 10,873 GL per year (GL/y) for urban, industrial and agricultural use in the MDB to be achieved by 2019. This is a reduction of 2,750 GL/y from the June 2009 Baseline Diversion Limit (BDL) for the MDB.23 The amount of water that can be diverted in each catchment, as set by the state water resource plans, must not exceed the SDL set in the Basin Plan. The recovery of surface water entitlements to achieve much of this reduction has already occurred through investment in infrastructure efficiency and by securing water entitlements (‘buybacks’) for environmental use.24

In response to concerns about the ‘potential adverse social and economic impacts on irrigation dependent communities that may arise from water purchases’, then Leader of the Opposition, Tony Abbott stated in 2012 that ‘if elected, the Coalition will amend the Water Recovery Strategy to apply a cap on buybacks of 1,500 GL’.25 The Water Recovery Strategy for the Murray-Darling Basin was then published in June 2014 and confirmed that there would be a 1,500 GL limit or ‘cap’ on surface water buybacks.26 In September 2015, the Basin Plan was amended to place a 1,500 GL limit on water purchases by the Commonwealth.27 The Department of the Environment expressed confidence that ‘the Commonwealth will be able to fully bridge the gap without engaging the 1,500 gigalitre limit’.28

As of 30 September 2016, a total of 1,996.1 GL had been recovered, leaving 753.9 GL needed to reach the 2,750 GL Basin Plan recovery total. Of this total, 1,165.6 GL has been purchased.29

SDL adjustment mechanism In response to comments from the Basin states, the Water Act was amended in 2012 to insert a SDL adjustment mechanism.30 The process for this mechanism is set out in sections 23A and 23B of the Water Act and Chapter 7 of the Basin Plan. In short, the SDL adjustment mechanism permits the Water Minister, on the advice of the MDBA, to adjust the SDL up or down by up to five per cent (544 GL) as long as environmental and socio-economic outcomes are not compromised.31 The adjustments are made in response to environmental works and measures (efficiency, supply and constraints measures) proposed by the Basin states. The SDL adjustment mechanism also requires the MDBA to develop a ‘constraints management strategy’ to ease or remove constraints.32 Depending on what proposals are taken forward, the SDL adjustment mechanism could potentially change the benefits and costs associated with implementing the Basin Plan.33

The SDL adjustment measures that are being considered are:

• efficiency measures—that is, measures to improve the efficiency of water delivery and irrigation systems and return additional water for the environment.34 These include, for example, reducing evaporation losses at suitable water storages

• supply measures— that is, measures which enable less environmental water to be used to achieve 'equivalent environmental outcomes'. These include building or improving river or water management

23. MDBA, ‘What’s in the Basin Plan’, MDBA website. Note that the BDL includes 823 GL/y of water that had already been recovered for the environment, through the Living Murray initiative, Water for Rivers Program and state water sharing plans and which is not part of the 2,750 GL reduction: MDBA, Regulation Impact Statement: Basin Plan.

24. Department of the Environment, Water recovery strategy for the Murray-Darling Basin, Commonwealth of Australia, [Canberra], June 2014, p. 5.

25. T Abbott (Leader of the Opposition), ‘Letter to A Gregson (Chief Executive Officer of the NSW Irrigators’ Council)’, NSW Irrigator’s Council website, 29 November 2012; see also Department of the Environment, Water recovery strategy for the Murray-Darling Basin, op. cit., p. 18. 26. Department of the Environment, Water Recovery Strategy for the Murray-Darling Basin, op. cit., p. 18. 27. G Hunt (Minister for the Environment) and B Baldwin (Parliamentary Secretary to the Minister for the Environment), Coalition delivers

election commitment with 1500GL water buyback cap, joint media release, 14 September 2015. 28. Department of the Environment, Supplementary submission, no. 24, to the Senate Standing Committee on Environment and Communications Legislation, Inquiry into the Water Amendment Bill 2015, 2015, p. 2. 29. Department of Agriculture and Water Resources (DAWR), ‘Progress towards meeting environmental needs under the Basin Plan’, DAWR

website, last reviewed 21 September 2016. 30. The Water Act was amended by the Water Amendment (Long-term Average Sustainable Diversion Limit Adjustment) Act 2012. 31. Department of Sustainability, Environment, Water, Population and Communities (DSEWPC), Sustainable diversion limit (SDL) adjustment

mechanism, fact sheet, Department of the Environment and Energy (DEE), 2012. 32. Basin Plan, section 7.08. 33. MDBA, Regulation Impact Statement: Basin Plan, op. cit., p. 71. 34. MDBA, ‘Surface water: sustainable diversion limit (SDL) adjustment mechanism’, MDBA website.

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structures so that environmental water can be delivered directly to places that need it more or those which can achieve the best outcomes; or through streamlining some river operations or management rules35

• constraints measures—that is, measures that ease or remove structures or rules that constrain the delivery of environmental water to allow water managers more flexibility in releasing and moving water through the river system. Constraints include features such as crossings, bridges or low lying private land, or river practices and rules, which can restrict when and how much water can be delivered from water storages.36

Under the SDL adjustment mechanism, the current 2,750 GL Basin Plan water recovery target can be reduced by supply measures or increased by efficiency measures. A 2012 fact sheet37 released by the then Department of Sustainability, Environment, Water, Population and Communities indicates that the water recovery could vary between 2,100 GL and 3,200 GL. Some Basin state governments consider that there are enough ‘supply measures’ to reduce water recovery by as much as 650 GL (thus reducing the target to 2,100 GL). At the same time, it can be increased by up to 450 GL to 3,200 GL through ‘efficiency measures’.38

According to the Department of Agriculture and Water Resources:

All Basin governments are participating in the SDL adjustment work program and have prepared individual and joint proposals for supply and constraints measure projects. The Australian Government is continuing to consult with Basin states and industry to finalise efficiency measure programmes. 39

In April 2016 the MDB Ministerial Council agreed to a package of SDL adjustment proposals (efficiency, supply and constraints measures).40 These projects are expected to be completed over the next eight years. The MDBA noted that its modelling of 15 of the 37 nominated supply measures have an estimated ‘SDL offset’ of 370 GL.41 In 2015 the independent SDL adjustment stocktake report, commissioned by the MDB Ministerial Council, estimated the supply contribution (including constraints measures) for projects proposed under the SDL adjustment provisions of the Basin Plan to be approximately 500 GL.42 However, the report also found that there is considerable risk that the aim of achieving 450GL through the efficiency measures program will not be met.43

Under the SDL adjustment mechanism, states will have until 2019 to incorporate any adjustments to SDLs in their water resource plans. All SDL adjustment projects will need to be completed by 2024. At this time, MDBA will review the projects to reconcile the anticipated outcomes with the achieved outcomes and make any final SDL adjustments.44

In April this year, the MDB Ministerial Council ‘requested that the Commonwealth amend the Basin Plan to provide for a second SDL adjustment step by 30 June 2017. This would allow for a second tranche of projects to be developed to further improve the outcomes of the Basin Plan’.45

Committee consideration Senate Selection of Bills Committee On 13 October 2016, the Senate Selection of Bills Committee decided not to refer the Bill to a committee for inquiry.46

35. Ibid.

36. MDBA, ‘Managing constraints’, MDBA website. 37. DSEWPC, Sustainable diversion limit (SDL) adjustment mechanism, op. cit. 38. Ibid.

39. DAWR, ‘Sustainable diversion limit adjustment mechanism’, DAWR website, last reviewed 27 October 2016. 40. Murray-Darling Basin Ministerial Council, Package of supply, constraints and efficiency measures agreed by the Murray-Darling Basin Ministerial Council on 22 April 2016, MDBA, [Canberra], 2016; see also MDBA, Water ministers agree Basin Plan package, media release, 22 April 2016.

41. Ibid.

42. W Martin and G Turner, SDL adjustment stocktake report, MDBA, [Canberra], August 2015, p. 1. 43. Ibid., p. 2. 44. MDBA, ‘Surface water: sustainable diversion limit (SDL) adjustment mechanism’, MDBA website. 45. MDBA, Water ministers agree Basin Plan package, op. cit. 46. Senate Standing Committee for Selection of Bills, Report, 7, 2016, The Senate, Canberra, 13 October 2016, p. 4.

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Senate Standing Committee for the Scrutiny of Bills The Senate Standing Committee for the Scrutiny of Bills had no comments on the Bill.47

Policy position of non-government parties/independents At the time of writing, non-government parties and independents do not appear to have commented on the Bill.

Position of major interest groups The Explanatory Memorandum indicates:

All Basin jurisdictions (Queensland, New South Wales, the Australian Capital Territory, Victoria and South Australia), key industry groups, environmental organisations and Basin Indigenous group have been consulted on the details of the Bill. 48

The National Irrigators Council Chair, Gavin McMahon, has reportedly welcomed the MDB Ministerial Council’s decision to request an amendment to the Basin Plan as a ‘sensible decision’ that would allow further time for a second round of projects to be developed, to maximise all supply contributions under the SDL adjustment mechanism.49

National Farmers’ Federation Water Taskforce Chair, Les Gordon, reportedly said ‘the projects allowed for a significant reduction in the amount of water recovery required to achieve Basin Plan outcomes which was good news for both the environment and communities’.50

Cotton Australia General Manager, Michael Murray, is reported as saying that ‘agreements reached at last week’s meeting meant all governments must now commit to the full delivery of the 650 GL in SDL offset projects’.51

However, Australian Conservation Foundation Healthy Ecosystems Program Manager, Jonathan La Nauze, reportedly said the relevant MBD Ministerial Council meeting delivered mixed results for the Basin Plan. While there was a 500 GL increase for irrigators, he felt it was a lopsided agreement because ministers had decided to delay incorporating an extra 450 GLs of environmental water into diversion limits until as late as 2024, meaning the health of rivers, fish and waterbirds was less certain.52

Financial implications The Explanatory Memorandum states that there is no financial impact associated with the Bill.53

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.54

Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights had no comment on the Bill.55

Key issues and provisions The Bill proposes to amend Chapter 7 of the Basin Plan which sets out procedures for the operation of the SDL adjustment mechanism.

47. Standing Committee for the Scrutiny of Bills, Index of Bills considered by the committee, 2016, The Senate, Canberra, 12 October 2016, p. 7. 48. Explanatory Memorandum, Water Legislation Amendment (Sustainable Diversion Limit Adjustment) Bill 2016, p. 3. 49. C Bettles, ‘Ministers strike “sensible decision” on Basin Plan’, The Land, (online edition), 24 April 2016. 50. Ibid.

51. Ibid.

52. Ibid.

53. Explanatory Memorandum, Water Legislation Amendment (Sustainable Diversion Limit Adjustment) Bill 2016, op. cit., p. 3. 54. The Statement of Compatibility with Human Rights can be found at pages 4-5 of the Explanatory Memorandum to the Bill. 55. Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, Report, 2, 2016, Canberra, 11 October 2016, p. 100.

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Key provisions relating to the SDL adjustment mechanism As noted earlier in this Digest, the SDL adjustment mechanism was inserted into the Water Act in 2012 and permits the Minister, on the advice of the MDBA, to adjust the SDL up or down by up to five per cent (544 GL) as long as environmental and socio-economic outcomes are not compromised.56

Section 23A of the Water Act provides that the Basin Plan may provide for the MDBA to propose an adjustment to the SDL against the criteria in the Plan. Section 23B sets out the process the MDBA is required to follow when proposing an adjustment, which includes the preparation of an amendment to the Basin Plan. Under subsection 23B(6) of the Water Act, the Minister must decide whether to adopt the MDBA’s proposed amendment. If the Minister does adopt it, the Basin Plan amendment must be tabled in both Houses of Parliament and is a legislative instrument subject to disallowance.57

Chapter 7 of the Basin Plan sets out detailed criteria and procedures for the operation of the SDL adjustment mechanism as envisaged by section 23A of the Water Act. In particular, Part 2 of Chapter 7 sets out certain timeframes for the processes associated with the mechanism. Currently, the key timeframes are:

• the Basin Officials Committee58 may notify the MDBA of supply or efficiency measures to be taken into account in proposing SDL adjustments by 30 June 201659

• after receiving a notification from the Basin Officials Committee, the MDBA must determine the amount of SDL adjustments resulting from the proposed measures and then propose SDL adjustments under section 23A of the Water Act ‘as soon as practicable’ after 30 June 201660

• after 30 June 2016, but on or before 31 December 2023, a Basin state or the Commonwealth may notify the MDBA of one or more additional efficiency measures.61 These additional efficiency measures are considered by the MDBA in making reconciliation adjustments in 2024 (see below)

• the agreed measures are required to be implemented by 2024.62 There is also an opportunity for the MDBA to make ‘reconciliation adjustments’ in 2024 in certain circumstances.63

Proposed amendments The Bill proposes to amend Chapter 7 of the Basin Plan to alter the process and extend certain timeframes relating to the SDL adjustment mechanism. In particular, the proposed amendments would:

• allow the Basin Officials Committee to notify the MDBA of a second set of proposed supply and efficiency measures by 30 June 2017

• postpone the date after which additional efficiency measures can be notified from 30 June 2016 to 30 June 2017 and

• extend the timeframe for the MDBA to start the process for considering proposing adjustments to long-term SDLs to after 30 June 2017 (rather than 30 June 2016), while at the same imposing a deadline of 15 December 2017 for the MDBA to present its determination of proposed SDL adjustments to the Minister.

56. DSEWPC, Sustainable diversion limit (SDL) adjustment mechanism, op. cit. 57. Water Act, subsection 23B(6) and section 33. 58. The Basin Officials Committee comprises an official from each of the Basin states (Commonwealth, New South Wales, Victoria, South Australia, Queensland and the Australian Capital Territory): see further section 18A of the Water Act and Part IV of the Murray-Darling Basin

Agreement as set out in Schedule 1 of the Water Act. The Committee’s functions are set out in section 201 of the Water Act and include to facilitate cooperation and coordination between the Commonwealth, the Basin states and the MDBA in managing the Basin water resources. 59. Basin Plan, subsection 7.12(1). As noted earlier in this Digest, on 22 April 2016 the Murray-Darling Basin Ministerial Council agreed to a package of supply, efficiency and constraint measures under the SDL adjustment mechanism and officials formally notified the Murray-Darling

Basin Authority of the agreed adjustment measures on 5 May 2016: DAWR, ‘Sustainable diversion limit adjustment mechanism’, op. cit. 60. Basin Plan, section 7.10. 61. Basin Plan, subsection 7.12(2). 62. Basin Plan, paragraph 7.12(3)(a) and subsection 7.12(6). 63. Basin Plan, section 7.11.

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Second notification of measures Section 7.12 of the Basin Plan provides that the Basin Officials Committee may, by 30 June 2016, notify the MDBA of one or more supply measures or efficiency measures that, in the view of the Basin Officials Committee, should be taken into account in proposing SDL adjustments.

This notification occurred on 5 May 2016:

On 5 May 2016, Basin Governments reached a major Basin Plan milestone by formally notifying the Murray-Darling Basin Authority of 36 supply and efficiency measures for consideration under the sustainable diversion limit adjustment mechanism … The Authority is now modelling the effect of these supply measures to determine how they will affect the sustainable diversion limits.

64

However, the Minister’s second reading speech also indicates:

While the notification of this package of measures was a significant step, Basin governments think more can be done, and this Bill will enable us to provide for that. 65

Item 7 of Schedule 1 of the Bill inserts a proposed subsection 7.12(1A) in the Basin Plan to allow for the Basin Officials Committee to provide a second notification to the MDBA. In particular, the new subsection would provide that the Basin Officials Committee may, after 30 June 2016, but on or before 30 June 2017, notify the MDBA of supply measures or efficiency measures that, in the Committee’s view, should be taken into account. As the Explanatory Memorandum states:

A second notification would provide an additional opportunity for Basin jurisdictions to develop and notify new projects up to 30 June 2017 to augment the first package of measures notified on 5 May 2016. 66

A recent review of the Water Act, conducted in 2014, concluded that ‘the settings governing the operation of the sustainable diversion limit adjustment mechanism are appropriate and consistent with the Act’s objectives’.67 However, as noted earlier in this Digest, since that review, the Murray-Darling Basin Ministerial Council has requested an amendment to the SDL adjustment mechanism and this amendment gives effect to that request.68

As noted earlier in this Digest, the Basin states have until 2019 to incorporate any adjustments in their water resource plans, and SDL adjustment projects do not need to be completed until 2024. As such, it seems that an opportunity for Basin jurisdictions to propose a second package of measures, to be finalised by June 2017, is unlikely to impinge greatly on the timeframes for these next stages in the implementation of the Basin Plan.

Additional efficiency measures Under subsection 7.12(2) of the Basin Plan, a Basin state or the Commonwealth may also notify the MDBA of one or more additional efficiency measures to be taken into account in proposing reconciliation adjustments in 2024. These notifications can occur after 30 June 2016, but on or before 31 December 2023.

Item 9 of Schedule 2 proposes to amend subsection 7.12(2) to change the date after which these additional efficiency measures may be notified from 30 June 2016 to 30 June 2017. As the Explanatory Memorandum notes, this amendment is essentially consequential to the amendment in item 7 outlined above, which allows the notification of extra efficiency measures by 30 June 2017 to be incorporated in the initial SDL adjustment.69

64. A Ruston, ‘Second reading speech: Water Legislation Amendment (Sustainable Diversion Limit Adjustment) Bill 2016’, Senate, Debates, 15 September 2016, p. 1027. 65. Ibid.

66. Explanatory Memorandum, Water Legislation Amendment (Sustainable Diversion Limit Adjustment) Bill 2016, op. cit., p. 2. 67. E Moran, P Anderson, G McMahon and S Morton, Report of the independent review of the Water Act 2007, Australian Government, Canberra, November 2014, p. 23. 68. This request was made on 22 April 2016: Explanatory Memorandum, Water Legislation Amendment (Sustainable Diversion Limit Adjustment)

Bill 2016, op. cit., pp. 2 and 8. 69. Ibid., p. 8.

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Timing of the MDBA’s determination Section 7.10 of the Basin Plan currently provides that, after receiving a notification from the Basin Officials Committee, the MDBA must propose SDL adjustments ‘as soon as practicable’ after 30 June 2016. Item 4 of Schedule 1 of the Bill would amend this section by providing that the MDBA must propose SDL adjustments ‘as soon as practicable after 30 June 2017’ but not later than 15 December 2017. This amendment would have a number of effects.

First, it would extend the time for the MDBA’s process to determine and propose SDL adjustments by one year (from 30 June 2016 to 30 June 2017). This is in a sense a retrospective amendment, given that the time for considering proposed SDL adjustments began on 1 July this year.

The proposed amendment also means that the MDBA need only make a single determination relating to the SDL adjustment, taking into account both the first and second notifications received from the Basin Officials Committee. According to the Explanatory Memorandum:

A single determination is administratively and legislatively simpler than two separate determinations which would require two separate public consultation processes and the tabling of two separate amendments in Parliament. 70

In addition, this proposed amendment provides, for the first time, a deadline (of 15 December 2017) by which the MDBA must present its determination of proposed adjustments to the Minister. According to the Explanatory Memorandum:

This deadline would ensure a timely adjustment and provide certainty for processes which depend on the outcome of the adjustment mechanism. Key dependent processes include the development of water resource plans incorporating the adjusted SDLs by Basin States and the achievement of the Commonwealth water recovery objectives.

71

Other provisions Other provisions of the Bill are either consequential (that is, a result of the above amendments) or minor drafting corrections that have no substantive effect.

70. Ibid., p. 7. 71. Ibid., p. 7.

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