DEPARTMENT FOR WATER, $79,488,000

ADMINISTERED ITEMS FOR THE DEPARTMENT FOR WATER, $6,844,000

Witness:

Hon. P. Caica, Minister for Environment and Conservation, Minister for the River Murray, Minister for Water.

Departmental Advisers:

Mr S. Ashby, Chief Executive, Department for Water.

Mr T. Goodes, Deputy Chief Executive, Department for Water.

Mr M. Cawthorne, Director, Corporate Services, Department for Water.

Ms K. Prideaux, Manager, Budget Strategy, Department for Water.

The CHAIR: I declare the proposed payments open for examination. Minister, would you care to make an opening statement?

The Hon. P. CAICA: I do have a very detailed opening statement, as you would expect, Madam Chair, but for the benefit of the opposition I will speak quickly. I am pleased to provide some information about programs managed by South Australia's Department for Water. As we know, the Department for Water came into being last July to lead the management of the state's water resources. The department has achieved a lot over the past year; however, there is still much work ahead to ensure a sustainable and secure water future for our state.

The prolonged drought meant that in recent years substantial resources have been focused on immediately responding to many issues that arose as a result of the drought, plan for difficult scenarios, and develop long-term solutions. Australia's wettest spring on record in 2010 and widespread rainfall over catchments in summer created flood conditions upstream in the Murray-Darling system. High flows over the South Australian border helps regenerate the river system and bring a much-needed lift to communities who depend on the river.

Dredging at the Murray Mouth ceased for the first time in eight years. In the Riverland, the Lake Bonney regulator was removed and the Cobdogla and Berri Basins and Bookmark Creek were opened for the first time in a decade. A major repair program was undertaken to fill 3,500 metres of cracks in government-owned levees between Mannum and Wellington. Work is underway to remove the Narrung bund to fully reconnect Lake Albert with Lake Alexandrina for the first time in three years. While the Clayton regulator at Goolwa was partially removed last year, negotiations are continuing to secure funding for the full removal of that regulator and the regulator in Currency Creek.

Riverbank collapse remains a risk, and the department has continued efforts to maintain public safety, working with local councils in the Lower Murray region to proactively address the recommendations of technical experts. I make this point: one good year cannot undo the effects of years of low flows. We expect the Murray-Darling Basin Authority's proposed basin plan will soon be released for community consultation, and it will be this plan that will set enforceable, sustainable limits on river and groundwater extractions to return the basin to health, underpin sustainable industries, and ensure critical human water need. The plan must ensure that the basin is managed as a whole through a 'no borders' approach, and we are working together with the Murray-Darling Basin Authority to get the balance right.

I could touch on matters that relate to the 67 per cent over the past year that we announced, and we have announced that in this coming year, irrigators will receive 100 per cent of their allocation this year, and that is news that has been welcomed by irrigators in South Australia, particularly those above Lock 1. We also want to develop a long-term carryover policy, given the fact that we now have permanent storage rights. We intend there to be a significant boost, which will be made to help restore the health of wetlands and flood plains through the backwaters of the River Murray through the $96 million Riverine Recovery Project. Also, work continues on the Water for Good plan that was developed and launched in June 2009.

As everyone would be aware, in February the state government accepted the recommendation from water security commissioner Robyn McLeod that the position of commissioner was no longer required. I have lots to say and can say about the achievements of the Department for Water over the last 12 months, but maybe I will get an opportunity to talk about those if the opposition asks some reasonable questions this time around.

The CHAIR: Thank you, minister. Member for MacKillop.

Mr WILLIAMS: Thank you, Madam Chair. Given the opportunity, the opposition will ask plenty of reasonable questions. Before I go on, I want to put on the record that I have been contacting my office, and there is no knowledge in my office of any contact from the minister or the minister's office in regard to the dispensing of opening statements and/or Dorothy Dixers. I just want that on the record.

I refer to Budget Paper 4, Volume 4, page 183, Urban water. Minister, I note this morning you held a press conference and issued a statement about the stormwater management strategy for providing a road map for the future. The last of, I think, nine action dot points states:

Complete the review of the current government's arrangements with a view to establishing an appropriate governance body that has the power to ensure the timely delivery of storm water management projects.

Is this an admission that the current Stormwater Management Authority has not been able to fulfil the functions it was assigned when it was set up some years ago under your government?

The Hon. P. CAICA: I thank the honourable member for his question. On 1 July 2007, the Stormwater Management Authority was established as a body corporate under schedule 1A of the Local Government Act 1999. The following board members are appointed to 29 February 2012: Mr Barry Grear, who is the Presiding Member; Mr Kym Good, from the Adelaide and Mount Lofty Ranges Natural Resources Management Board; Mr Andrew Grear, from the Department of Planning and Local Government; Ms Julia Grant, from the Department for Water; Mr Brian Clancey, from the District Council of Mount Barker; Ms Wendy Campana, from the Local Government Association; and Mr Colin Pitman, from the City of Salisbury.

The Stormwater Management Authority is responsible for the operation of the Stormwater Management Agreement between the State of South Australia and the Local Government Association. The agreement sets out the roles and responsibilities of state and local government and provides governance arrangements for stormwater management on a catchment basis throughout South Australia.

In addition, the state government agreed to contribute $4 million per annum, adjusted in accordance with the CPI, for a period of 30 years from formation in July 2007. The 2011-12 contribution is $4.525 million. As you would be aware, the funds are used for various initiatives, including the preparation of stormwater management plans, carrying out works or acquiring land in accordance with an approved stormwater management plan, or for other stormwater management purposes.

The funds are also used towards projects relating to water quality or pollution abatement, and investigation and research pilot programs, or other projects relating to stormwater management. Community education and awareness programs and the payment of the operational costs of the Stormwater Management Authority are also funded by this contribution. Since September 2006, a total of $20.187 million has been approved towards 62 projects which have a total value of $47.87 million. This includes projects across the metropolitan and regional areas of the state.

We have undertaken a review of the governance arrangements of the Stormwater Management Authority; and both state and local governments have consulted on this review, and this consultation is nearing completion. The outcomes of the review and consultation will be the first steps towards considering a new state and local government stormwater agreement, and this will be completed over the next six to 12 months.

Of course, one of the very fine objectives in the stormwater strategy that was announced this morning is to look at and deliver on the review of those governance arrangements. In a nutshell, no, it is not in any way an admission of failure by the Stormwater Management Authority, as could be evidenced by the information I provided to you prior that sentence.

Mr WILLIAMS: I think that was the very long answer. Minister, I still have my doubts, when you say you want to ensure the timely delivery of stormwater management projects. I think that some of the members on your side of the parliament and some on our side of the parliament are very anxious about the lack of action in some stormwater management projects. All we need is a wet winter and there will be serious flooding in this city. I think we are all aware of that, and the Stormwater Management Authority, as you have pointed out, has had since 2007 and has achieved very little in regard to some major potential flooding issues.

Minister, your fourth dot point is, 'Develop access rights to stormwater for re-use scheme owners to provide certainty for stormwater resources.' You are picking up that if somebody is going to invest in a stormwater harvest and re-use scheme that they should have some rights so as to ensure that the stormwater will continue to flow to where they have invested their money.

The next dot point states, 'Complete further studies to improve the knowledge and management of public health risks relating to the recycling of stormwater, including assessing the risk of augmenting drinking water supplies.' To me, minister, that is code for the fact that you are at last getting out of the denial phase with regard to stormwater and starting to move to the phase where you are accepting the policies that the Liberal Party took to the last election.

Minister, quite simply, when will you fully adopt the Liberal party's stormwater policy as proposed at the last election and have a policy where stormwater is brought up to drinking standard so it can actually be used?

The Hon. P. CAICA: For one that is such a stickler for the rules, I would be interested to know what budget line this might particularly relate to.

Mr WILLIAMS: It is Budget Paper 4, Volume 4, page 183, Urban water.

The Hon. P. CAICA: It's fine. Don't have a crack at me for longwinded answers if you are going to ask longwinded questions. What I will say is that the policy of the Liberal opposition in the lead-up to the 2010 election was irresponsible and reckless. The reason it was is that the fine member for MacKillop was suggesting at that stage, 'Oh, run it through some reeds for a week, whack it underground—'

Mr WILLIAMS: Don't mislead parliament.

The Hon. P. CAICA: I'm paraphrasing here—'and Bob's your uncle; it'll be fine to drink.'

Mr Williams interjecting:

The CHAIR: Order! Actually, minister, may I interrupt here? I do not notice anywhere in this fascinating booklet in front of me a reference to Liberal Party policy. It is very good of you to answer, obviously, but you do not have to answer that particular part of the question. That is my thought.

The Hon. P. CAICA: Thank you very much, Madam Chair, but I want to take the opportunity of making a few points in answering this question. The policy was reckless and dangerous. All the advice that we have received, including the most recent advice from the CSIRO—of which we are contributing some not insignificant funds to promote the research of polishing stormwater to an appropriate standard that might render it capable of being able to be used as drinking water. So, we are investing in that.

One of things I would remind the member for MacKillop and others is that stormwater by its very nature contains a significant amount of contaminants; that is, there is no sense of consistency with the stormwater that is collected. Unlike wastewater that comes through the sewerage, it is fairly constant in its consistency. The advice I have received from Health and the experts is that more research is required before we will be in a position to even contemplate that. In addition, the implications that the injection of stormwater—if we get to that standard—would have on our potable water distribution system is such that it changes the very complexion of that particular water. So, there is a lot of research to be done.

In answer to the question, what we will not do is adopt a reckless and dangerous policy that was promulgated by the Liberal Party prior to the last election. We will continue to manage stormwater and its re-use in such a way that we believe that the best effect that we can have on that is through providing a diversified supply of water that can be used for 'fit for purpose' and purposes other than drinking.

We know within Water for Good that we have a target of 20 gigalitres of recycled stormwater by the year 2013. We expect that to not only be achieved but also come in at about 23 gigalitres by the end of 2013, and that by 2050 metropolitan Adelaide will have available to it 60 gigalitres of recycled stormwater, supplemented by significant amounts of recycled wastewater. Quite simply, no, we will not be adopting a dangerous and reckless policy.

I will say that, amongst the approved priority research projects up to a value of $14 million over the four years under the Goyder Institute research programs, one of them is Managed Aquifer Recharge and Urban Stormwater Use Options. Of course, we have the chief scientist, Don Bursill, who has expressed views that accord with mine about the dangerous and irresponsible policy of the Liberal Party on this matter. You can say absolute rubbish but—

Mr PEDERICK: And they don't do it anywhere else in the world?

The Hon. P. CAICA: Look, if you want to—

Members interjecting:

The Hon. P. CAICA: Don't bully me, please. If you want to use South Australians as guinea pigs and, quite simply—

Members interjecting:

The CHAIR: Order!

The Hon. P. CAICA: —potentially compromise the health and wellbeing of the population of South Australia through contamination of their drinking water supplies, well, you do that when you may be in government, but I am certainly not going to do it, because what you propose is reckless and irresponsible.

Mr WILLIAMS: Minister, I was most interested in your comment that you are now expecting to have the harvesting and storage of 23 gigalitres of stormwater by 2013. Your government has been claiming these sort of numbers for a long time now. Surely, by now, you have identified where you are going to use this water? The reality is that your predecessor made the statement, back in September 2009, that to re-plumb Adelaide to provide a second pipe system to deliver non-potable water would come at a cost of $6 billion.

The Water for Good document, which your government put out a couple of years ago, identified that all the public gardens, parks and playing fields across the whole of metropolitan Adelaide only use 15 gigalitres of water a year, some of which has already been replaced by water from the Adelaide to Parklands pipeline. Where are 20 gigalitres of non-potable water going to be used? Have you yet identified the users?

Whilst you are answering that question, you might tell the committee how much of the water, which potentially could be pumped up the Adelaide to Parklands pipeline, is actually being used? How many customers are there for that water, and how much commitment has been given to take water from that particular pipeline?

The CHAIR: That is a long question—a fantastically long question.

The Hon. P. CAICA: So much for me being longwinded. South Australia has been successful in attracting over $67.4 million in commonwealth funding for eight stormwater projects across Greater Adelaide. The combined cost of the projects is in excess of $153 million and, in addition to the commonwealth funds, approximately $47.4 million will be contributed by the South Australian government, with the balance being provided by local councils and other partners.

These projects include the $5.8 million Adelaide Botanic Gardens Aquifer Storage and Re-use project—where I was this morning and it is going to be a fantastic project. In fact, as a result of that project, the entire Botanic Garden will be self-contained with respect to the water supply that it requires. Also, the $58.6 million Water Proofing the West project; the $9.8 million Adelaide Airport Stormwater project; the $14 million Unity Park Biofiltration project; the $30 million Water Proofing the South Stage 2 project—I was down there the other week as well; the $8.1 million Barker Inlet Stormwater Re-use Scheme; and the $8.4 million Oaklands Park Stormwater Harvesting and Re-use Scheme.

I am pleased that all these projects have commenced and are in various stages of planning, design and construction. All the projects are currently scheduled to be completed by the end of June 2013. Collectively, those projects will harvest over eight gigalitres of stormwater per annum, and one of the conditions of funding is that there would be a distribution system and that users and customers have been identified for the water that will be generated by these schemes—some of which, as mentioned, will ensure that the Botanic Garden—

An honourable member interjecting:

The Hon. P. CAICA: Well, that in its own right makes the Botanic Garden a customer. It will use that water in its entirety, and that is a good thing. On 19 June, the Australian government announced that $100 million has been made available for round 3 of the National Urban Water and Desalination Plan: Special Call for Stormwater Harvesting and Re-use Projects. This grant round will again support stormwater harvesting and re-use projects that use urban stormwater to reduce demand on potable water supplies and deliver improved water quality to our urban waterways. There are two aspects to it: one is that we produce water that is fit for purpose so that it reduces our draw on the potable water supplies that have historically been used; and, secondly, it delivers improved quality of water to our urban waterway, and that, again, is an added benefit.

The Department for Water will be working with the current project proponents to assist in the development of bids for round 3, as I alluded to, and the department will also offer advice to any other new proponents that will bid for funding under this round. Part and parcel of the funding provided to the proponents of these very innovative stormwater projects was contingent upon having identified users and customers for the water that will be generated via these schemes.

Mr WILLIAMS: Will you publish the identified users so that we can all see that the water is going to be used?

The Hon. P. CAICA: We connected 500 houses the other day through a component of Water Proofing the South, and that is through a dedicated lilac system, similar to Mawson Lakes. The idea is that we will progressively build up to 8,000 houses and then 16,000 houses that will be connected to the system. I am happy to give you the names of each of those householders as they progressively come on—

Mr WILLIAMS: No, the water re-use. The stormwater re-use ones.

The Hon. P. CAICA: But that is a combination of waste water—

Mr WILLIAMS: Well, your Water for Good says that, if you have connected all the new houses in Adelaide between now—

The CHAIR: Order!

The Hon. P. CAICA: The program—

Mr WILLIAMS: —and 2050, it is only four gigalitres of water, Paul.

The CHAIR: Order! If people are going to ask questions, they will get answers, and they should probably listen to those answers before the shouting starts again. In fact, I have forgotten if we are on a question or an answer.

The Hon. P. CAICA: Madam Chair, I thank you for calming the member for MacKillop. I reinforce that, contingent upon the provision of that funding for these very innovative projects, users and customers would be identified and that a distribution system and network would be part and parcel and would be contained within those particular projects.

The Adelaide Airport stormwater project is being undertaken in partnership with SA Water at a total cost of $8.9 million and an estimated harvest of 400 megalitres per annum, with a capacity to be upgraded to 1,000 megalitres, I am told. Again, this will reduce the amount of water that is being used by Adelaide Airport in its operations and also, I expect, a lot of the businesses within the area that are now flourishing on airport land.

With the independent pricing that will occur with respect to water through ESCOSA in the future, it is important that it is done in such a way that a viable market is established with regard to the value of a diversified water supply that comes from the re-use of stormwater that makes it far more attractive to consumers and customers than might be the case when accessing potable water supplies. I will ensure that, as information becomes available, subject to the agreement of the proponents of the projects, that information will be made available. We will have to get their agreement for that; it is their project.

Mr WILLIAMS: And how much water is being used in the Glenelg to Adelaide Parklands pipeline? What is committed to that?

The Hon. P. CAICA: I will take that on notice. That might be a question you might want to ask SA Water, not the Department for Water.

Mr WHETSTONE: I have two questions for the minister regarding his opening statement. Budget Paper 4, Volume 4, page 179, under Targets 2011-12, the sixth dot point states that the government aims to develop a long-term carryover policy for implementation in 2012. Is this a commitment by the government to reintroduce carryover provisions in 2012? How much permanent storage has been negotiated to house that water, and can you indicate to the committee how much carryover water went unused last water year as a result of the minister knowing carryover provisions for irrigators in the 2011-12 year?

The Hon. P. CAICA: I thank the member for his multi-pronged question. As he is aware, temporary River Murray carryover arrangements were introduced as a drought measure in 2007-08 to allow River Murray water users to manage their annual inter-seasonal risks. These arrangements were continued and expanded during 2008-09 and 2009-10 based on projected low inflows continuing. I remind everyone that we were still tracking in August 2010 what were near-record low inflows, and that changed, as I mentioned, in a very short period of time.

The current drought-specific policy of providing carryover for River Murray users, which I mentioned was going to cease, ceased on 30 June 2011. The government recognises that enduring carryover arrangements can be an important risk-management tool for irrigators under variable flow conditions. As the member for Chaffey would be aware, consultation is occurring now with industry and stakeholder groups on a new long-term carryover policy that can be implemented. Of course, that was contingent upon our being able to ensure that we had permanent storage rights and, as part of the recent settlement with Victoria, they signed the relevant schedule to allow us to permanently store approximately 300 gigalitres (or 150 per cent of South Australia's critical human needs) in Dartmouth and Hume.

The new long-term carryover arrangements will be established within an appropriate legislative, administrative and operational framework and be underpinned by robust and transparent long-term storage rights, as I have mentioned. We are very pleased that Victoria signed the relevant schedule to allow that permanent storage to occur. I thank New South Wales for their signing somewhat earlier.

Yes, we do want to have permanent carryover arrangements. Quite simply, the Murray-Darling Basin plan, when it is enshrined, needs to be underpinned by appropriate storage arrangements that are shared between the jurisdictions, but it also needs to be underpinned by a robust and transparent water market to allow for the travel of water throughout the system to where it can be best used.

It is our intention to continue to work with and on the Murray-Darling Basin plan to make sure that not only we deliver to the Murray-Darling Basin system a sustainable and productive future through that plan but we also have within it the ability to maximise the economic potential that will be unleashed as a result of permanent storage and robust, transparent trading rules. Does that answer the question?

Mr WHETSTONE: Yes.

The Hon. P. CAICA: You were not listening, were you?

Mr WHETSTONE: Well, it was all going to be not exactly what we wanted.

The Hon. P. CAICA: What do you mean? Tell me what you want? You have representatives I am consulting with through this particular process. I am meeting with them again in Swan Reach on, I think, 11 August. Are you telling me that you no longer talk to the body of which you were the former president because I am sure they are going to be proffering what you want?

Mr WHETSTONE: Yes, minister, I do talk to them, and I appreciate your answer; thank you.

The CHAIR: Do you have another question, member for Chaffey?

Mr WHETSTONE: Thank you, Chair. Minister, I refer to Budget Paper 4, Volume 4, page 176, highlights for 2010-11. The last dot point refers to water plans for icon sites, including the Chowilla flood plain. When is the work on the Chowilla regulator expected to recommence and, due to the delays on that work resulting in downtime for workers, how much downtime has there been and how much is the downtime costing the government?

The Hon. P. CAICA: As the member would be aware, work ceased as a result of the fact that the welcome water that was returned back to the system meant that that work was very difficult to proceed with.

I do not have those figures with me. Again, without being too cute, that is a project that is being managed by SA Water, not the Department for Water, but I will take that on notice and get back to you with an answer. I do not have those figures here in front of me.

We are very pleased that water returned back to the system, but one of the unintended consequences of that, of course, is that various projects that were in various stages of advancement were impacted because of the inflows that came in. Whilst we welcome that, it is unfortunate that this has been delayed but, as soon as the water subsides, that work will continue.

Mr WHETSTONE: The second part to the question was how much is the downtime costing the government per day?

The Hon. P. CAICA: I said that I do not have that in front of me, and I think I said that I would get back to you with those details.

Departmental Advisers:

Mr J. Ringham, Chief Executive, SA Water.

Mr P. Mendo, Chief Financial Officer, SA Water.

Mr P. Prodanovski, Financial Controller, SA Water.

Mr G. Henstock, Corporation Secretary, SA Water.

The CHAIR: We are now on SA Water. Minister, I assume—I could be wrong—that you do not have an opening statement?

The Hon. P. CAICA: I have one.

The CHAIR: I am sure you have one; would you like to give it or—

The Hon. P. CAICA: I actually think the opening statement is of more value than the questions that have been asked.

An honourable member: He's referring to you guys, isn't he?

The Hon. P. CAICA: No, they are quality questions. What I would say, Madam Chair, is this government's number one priority for SA Water is to ensure that South Australia has secure and safe water supplies for our future economic and population growth. I believe that South Australia has always led the nation in innovative water management. Adelaide continues, as I mentioned earlier, to recycle more waste water than any other Australian city, but we are not resting on our laurels.

Having said that, it is probably against my better judgement but, given the fact that we have approximately 23 minutes left for this line of questioning, let's forgo the rest of my very detailed opening statement and get straight into questions.

The CHAIR: You are generous, minister. The member for MacKillop.

Mr WILLIAMS: The reality is that there is very little reference to SA Water in the budget but I will draw the minister's attention to Budget Paper 5 at page 51, the Capital Investment Statement. The first question is: why is the government still, three years after the announcement, failing to satisfy the commonwealth that it has met conditions for the provision of $228 million towards the doubling of the capacity of the desalination plant from 50 to 100 gigalitres a year?

The Hon. P. CAICA: As the honourable member is well aware, the total federal funding budgeted in 2010-11 was $97.8 million, with the revised budget now at $66.4 million. The reduction in budget of $31.4 million is primarily attributable to the revised first water milestone of the Adelaide desalination plant, and this has led to a revised timing of the receipt of federal funding attached to the 50 gigalitre component of the plant.

The federal funding forecast for 2011 is $9.38 million, which is $57 million lower than the revised budget. This is timing related, and the $57 million variance is attributable to the delay of the 100 gigalitre federal funding implementation plan, which is currently being finalised and awaiting approval from the state and the commonwealth for the $228 million commitment which, I have said previously, is secure and safe.

Mr WILLIAMS: Minister, do you not accept what the federal government is saying about the supposed deal, that the state government conned the federal government into committing $228 million in funding for the desal plant by making an ambiguous promise to 'reduce our reliance on the Murray', and can you confirm that the federal government is seeking a reduction in SA Water's Murray River licence before it will part with the $228 million?

The CHAIR: I think the word 'conned' is clearly debate.

Mr WILLIAMS: It was a quote from a local newspaper.

The CHAIR: In that case, the minister does not have to comment on media reporting.

Mr WILLIAMS: No, he does not have to comment. If he wishes to confirm it, his silence will do that.

The CHAIR: Well, no. Nice try, member for MacKillop, but no banana, because in this particular instance I am directing the minister, I am informing him, that he does not have to comment on comments made in a local paper, in that distinguished organ The Australian, or on any media report.

The Hon. S.W. Key interjecting:

Mr WILLIAMS: Point of clarity, Madam Chair.

The CHAIR: Oh no, do not take me there.

Mr WILLIAMS: Are you telling the minister that he must not respond?

The CHAIR: No. I am giving him—

Mr WILLIAMS: I just wanted to clarify that.

The CHAIR: I have not finished speaking. I am giving him what I would call measured advice. Whether he chooses to take that advice or not is entirely up to him. I would, but that is just me.

The Hon. P. CAICA: I thank Madam Chair for her advice and such is her advice that has been provided on previous occasions, I know that you disregard that advice at your own peril and I apologise for doing this but I am going to answer the question. What the Deputy Leader of the Opposition refers to is an article that appeared in one of our august papers that was not The Australian, so I will correct that.

Part and parcel of the modus operandi of the opposition is not to do any research in its own right, but to utilise the papers as its form of research. As I have said, without being disrespectful to my friends in the media, I do not always believe what it is that I read in all papers that are produced in South Australia.

Quite simply, I have never heard anyone refer to the fact that they believe—and particularly here referring to the commonwealth officials—that they were conned by the South Australian government. Quite simply, the agreement that we reached was to reduce our reliance on the River Murray.

That means that we currently access water that is supplied on a 650 gigalitre five-year rolling average and it is what we will always have access to, save and except if there is any agreement reached in regard to sustainable diversion limits where we have said, in the past, that SA Water will play its part in restoring the River Murray to an appropriate level of health.

So, far from being—in the words of a local paper and, I guess, quoted by the great researcher that is the Deputy Leader of the Opposition in this regard—conned, it was an agreed position that we reduce our reliance.

What I would say, and I think I need to clarify this, is: what does reducing our reliance mean? That has been a subject of some discussion with the commonwealth and I am pleased to say that we are very close to what is a landing point. What it essentially means is that we are not going to increase our draw on it.

The work that we are doing—and I have mentioned this in previous questions—recycled water projects and wastewater projects, the desalination plant in its own right is going to ensure that we never have a future call, from SA Water's perspective, on water that is drawn by South Australia from the River Murray.

To finalise this answer: no, we have not had any direction or discussion from and with the commonwealth with respect to reducing our current level of draw on what is SA Water's entitlement.

Mr WILLIAMS: Are you saying that the commonwealth has not at any stage during the discussions on the $228 million expressed that it thought that reducing your reliance on the River Murray meant a reduction in the rolling water licence held by SA Water?

The Hon. P. CAICA: Certainly any discussions that I have had—

Mr WILLIAMS: You or your agencies.

The Hon. P. CAICA: —with my commonwealth colleagues did not focus on—

Mr WILLIAMS: You or your agencies.

The Hon. P. CAICA: My agencies have never put to me in any form of concrete proposal that there was any expectation that this state would reduce its current draw as it relates to the SA Water entitlement from the River Murray.

Mr WHETSTONE: As it relates to SA Water.

The Hon. P. CAICA: As it relates to SA Water.

Mr WHETSTONE: Who's going to take a hit?

The Hon. P. CAICA: Is that a supplementary question?

The CHAIR: I do not know; I cannot hear. Was it from the member for Chaffey?

The Hon. P. CAICA: It would be disorderly for me to answer an interjection by the member for Chaffey, so I am asking whether or not, Madam Chair, that is a supplementary question? If it is, I will answer.

The CHAIR: Having said that, it would be disorderly to make an interjection. In that case this house has been in a severe case of disorder for some five days now. I did not hear the member for Chaffey. Member for Chaffey, were you asking a question?

Mr WHETSTONE: A supplementary, Chair. Minister, if you have not had negotiations with the commonwealth government over a reduction in South Australia's diversion allocation in accordance with the return water for the $228 million, if some of your agencies have, there are negotiations going on at the moment, as I have been told by the commonwealth bureaucrat telling me that South Australia are playing hardball as to how much water they will give up and the question is: who will give up the water on behalf of the $228 million if it is not SA Water?

The Hon. P. CAICA: I do not know at what level the member for Chaffey is dealing with commonwealth bureaucrats or, indeed, it may well be commonwealth members of parliament on this particular matter and I would reinforce the point: there have been no discussions, nor is there any requirement for South Australia to reduce its water allocation entitlements as it relates to SA Water as part of the agreement for the $228 million.

We have resolved the issue, as far as it goes, with respect to what reducing reliance means. It does not mean shaving off SA Water's entitlement, nor does it mean shaving off any water from what it is that other consumptive users are entitled to. Quite simply, it is about reducing our reliance, as I have said, and that is our future draw on the River Murray. Maybe the member for Chaffey has more information that might assist me as to what he means by 'Who's going to take a hit?' and on what and what for, but I have answered that as best I can and I hope it is satisfactory to you.

Mr WHETSTONE: I have had discussions with departmental heads in the commonwealth water section and they tell me that they are in negotiation with the South Australian state government in giving up water for the $228 million. Again, they have said that our state government is not playing the game and they are still in negotiations with how much water will be given up out of South Australia's diversion allocation for the $228 million.

The Hon. P. CAICA: I am not going to be disrespectful to the member for Chaffey but, gee whiz!—at one stage before the last federal election he was making claims that it was his policy that was being adopted by the commonwealth government at that stage and how he might have lost some very important components of his body parts for making that statement. He has also made statements about the fact that, through the carryover and the removal of the carryover policy, it would cost in the vicinity of $30 million to production up in the Riverland and that—

Mr WHETSTONE: I said that there was one grower who lost $15 million.

The CHAIR: Order!

The Hon. P. CAICA: Two growers, you said, and you used figures of a significant amount of money that have never been verified by anyone else. Quite frankly, Madam Chair, I am not going to continue to answer a question from the member for Chaffey based on what is his hearsay in discussions that he purports to have had with commonwealth officials. That would just be ridiculous.

Mr WHETSTONE: You can't answer the question.

The Hon. P. CAICA: What do you mean, 'You can't answer the question?' I am not answering an illogical question that is being proposed without any basis of evidence as to its proposition. Either put up or shut up.

The CHAIR: Member for Chaffey, are you going to do one of those things?

Mr WHETSTONE: Minister, if Adelaide are not taking any more reliance out of the River Murray with the $2 billion desal plant ($1.8 billion desal plant plus the interconnector), are South Australian taxpayers paying increased rates, an increased cost for a desal plant, for what reason? For insurance? So that they can have a plant sitting there doing nothing until it goes drought again?

The Hon. P. CAICA: I am sorry if I have ruffled the feathers of the member for Chaffey, but that was a slightly incoherent question, but I will answer it the best I can and attempt to be coherent. The decision to construct a desal plant was in the midst of the most unprecedented drought in anyone's living memory. In fact, as we know, sections of the river system—particularly on this side of the border, but most particularly below Lock 1—were on the verge of collapse. We went through that this morning.

Of course, the decision to construct a desal plant is to have an independent source of potable water that is independent of and not reliant upon climatically dependent water sources—that is, those that fall out of the sky, that flow through the rivers—and it ensures South Australia's water security into the future. In reducing our reliance on the River Murray, it also ensures South Australia's expanding population, its increase in mining and its continuation for productive industry being able to operate in this state, but also that we are able to ensure reliable, secure water supplies (and potable water supplies) for our citizens of this state.

Of course, it was an insurance policy against what scientists tell me was the most unprecedented drought in anyone's living memory, that was a glimpse into the future where we expect droughts. I am no scientist, but droughts of ever-increasing intensity (if that is the right word) will be more frequent than they have been in the past as a result of climatic change. So, it was a sound decision to construct a desal plant when that decision was made, and it will prove to be a sound decision in the future when again South Australia is faced by what might be ever-increasing exposure to droughts the type of which we experienced in the last few years.

Mr WILLIAMS: Has the government recovered any of the $79 million paid to AdelaideAqua in order to ensure first water by December 2010?

The Hon. P. CAICA: I am advised that we have not paid $79 million. What has been paid is $46 million that was paid on the basis of targets that were achieved by AdelaideAqua via the 10 by 10 by 10 program.

Mr WILLIAMS: So, you are telling the committee that you have signed a fixed-price contract to construct a desalination plant yet you went and gave the constructing company another $46 million—and another $46 million simply so that they would have a safe worksite? Minister, is that what you are asking the committee to believe?

The Hon. P. CAICA: Again, you have to deconstruct the question. Quite simply, the $79 million to which the honourable member refers, of which $46 million has been spent, not $79 million as he asserted, is within the $1.83 billion fixed price of the desalination plant. It was also a matter that was brought before the Public Works Committee in the submission that was made before that Public Works Committee. The 10 by 10 by 10 initiative was implemented in July 2009 as a risk mitigation measure and it was implemented jointly by SA Water and the AdelaideAqua Design and Construction Consortium for the purpose of providing certainty of delivery while maintaining a focus on key outcomes such as safety, the environment and plant performance, including durability of the asset. The aim was to achieve 10 out of 10 for each of the three key areas: safety, environment and performance.

Again, I do not understand the manner in which the question is asked because it seems to be asserting that something untoward has occurred here when, quite simply, it is within the $1.83 billion that has been budgeted. In addition to that, it had the transparency of this component of the Public Works Committee during its examination of the desalination plant. So, I do not know what you are talking about, Mitch. You are trying to get a little bit of mileage.

Mr WILLIAMS: Minister, you are saying that you signed a contract with AdelaideAqua to design and build the desalination plant, and then, when they got part way through the process of building it, you decided that there were some safety issues, that there were some environmental issues, that there were some performance issues with the plant they were building and that you would dip into your pocket and give them another $46 million. What sort of original contract did you sign up if it did not take into account matters such as safety, the environment and the performance of the final product?

The Hon. P. CAICA: I will reinforce the point I made earlier. The 10 by 10 by 10 initiative was implemented jointly and agreed by SA Water and the AdelaideAqua Design and Construction Consortium for the purpose of providing certainty of delivery, while focusing on the key outcomes that I mentioned: safety, the environment and the plant's performance.

It was a risk mitigation feature and, of the three key outcomes, safety has been given the highest priority. Safety initiatives include decongestion, deployment of additional resources via relief crews, additional personnel, protective equipment—just like the protective equipment that you and I wore when we went on our most recent tour of the desalination plant, Mitch—additional training, additional safety infrastructure, and enhanced management initiatives.

I can and maybe I should go through the environmental outcomes that were posing the risk and this agreement was going to mitigate against those risks through the 10 by 10 by 10 initiative, but I do not really think you are interested. I think you are interested in making some absurd bloody claims—excuse me for saying 'bloody', Madam Chair—absurd claims that are not based in fact or have any substance.

Mr WILLIAMS: Minister, given that you signed a contract, and I can only assume that part of the contract was that first water would be delivered by December 2010, were there any penalty clauses in that contract which would come into play if that date was not achieved?

The Hon. P. CAICA: I think you are aware, or you should be, that there were penalty clauses contained within the contract that I did not sign but SA Water signed on the delivery of the desalination project. As I understand it—and I stand to be corrected—those penalties relate, amongst other things, to the milestones of achievement but, in particular, to the milestone that relates to first water. First water has not been delivered as yet, so at this stage there has been no invoking of the penalty clauses, on the basis that the penalty that might so be ascribed (if that is the right word) to the consortium cannot be determined until such time as the first water milestone is achieved.

Mr WILLIAMS: Why did SA Water make an offer to AdelaideAqua to write off, for want of a better expression, any potential to activate penalty clauses for a $10 million payment?

The Hon. P. CAICA: Quite simply, there was an offer that was the subject of negotiation between AdelaideAqua and SA Water for a level of payment that would reflect, if you like, some aspects of a penalty. That was not accepted by AdelaideAqua on the basis that they would not agree, as I am told, to the no further claims aspect that was included within that offer to settle.

Mr WILLIAMS: Why did SA Water make the offer? Is it the expectation that AdelaideAqua is not going to make claims against SA Water?

The Hon. P. CAICA: I am advised that, with respect to major projects like this, there is an expectation that there will be claims. Part of what was said on settlement was that acceptance of that which was being offered was against any further claims. I cannot speak on behalf of AdelaideAqua.

Unless the member for Chaffey has inside information on discussions that might have occurred at that particular level, I think that question is best left unanswered because I cannot speak on behalf of AdelaideAqua. I can only say that I am advised that, with major projects like this, with the size and the complexity of this, there is an expectation that there may, in such projects, be claims. We will have to wait and see.

Mr WILLIAMS: So, it is not a fixed-price contract?

The Hon. P. CAICA: It is a fixed-price contract.

Mr WILLIAMS: Well, how are they going to make claims if it is a fixed-price contract?

The Hon. P. CAICA: The claims come according to the risk. It is still built within. So, $1.83 billion is the fixed price, and contained within that $1.83 billion is a contingency amount that takes into account exactly what it is that you have asked for.

The CHAIR: Minister, thank you. I would just draw the committee's attention to the time.

Mr WILLIAMS: Madam Chair, I find it acceptable if you say that the committee has run out of time rather than 'as there are no more questions', because there are a lot more questions.

The CHAIR: Well, there being—

Mr WILLIAMS: No more time.

The CHAIR: The time having expired, I declare the examination of the proposed payments concluded. Before we conclude the proceedings, in reference to the past five days I would like to thank all the ministers and their staff, members of the government and the opposition, and the parliamentary officers and house attendants for making this a truly pleasurable process.

The Hon. P. CAICA: Madam Chair, may I just say one thing if I can before we conclude?

The CHAIR: Yes.

The Hon. P. CAICA: This morning a question was asked in relation to firefighter numbers, and I said that I would get back with that information. If I could take this opportunity it saves me coming back in a more formal way later. I have been advised that, in previous years, the percentage of firefighters has been calculated using the regional staff numbers. Now, the percentage of firefighters is calculated using all the department staff. Back when it was at 85 per cent, or thereabouts, that was 85 per cent of approximately 400 people who made up regional staff. Now the reduced percentage figure, whilst the number of firefighters is roughly the same, is taken as a percentage of the entire staff of 1,100. I thought that those figures were a bit crook.

Madam Chair, can I also reinforce your points, and thank you, because you are not going to thank yourself, for the manner in which you have conducted the examination today. I also thank both the government and the opposition benches for the way in which they have behaved and performed. I also reinforce what you said and express my gratitude and thanks not only to my office staff at the ministerial office but all the people within the agencies who have worked very hard to ensure that I was properly prepared for this examination.

The CHAIR: Thank you, minister.

Mr ODENWALDER: I move:

That the draft report be the report of the committee.

Motion carried.

At 14:33 the committee concluded.