WATER (COMMONWEALTH POWERS) BILL

Final Stages

The Legislative Council agreed to the bill with the amendments indicated by the following schedule, to which amendments the Legislative Council desires the concurrence of the House of Assembly:

No.1.Clause 3, page 2, line 20 [clause 3(1), definition of critical human needs, (b)]—After 'national security costs' insert:

or cause permanent plantings that exist on the commencement of this act to be lost

No. 2 Clause 3, page 3, after line 3 [clause 3(1)]—Insert:

permanent plantings means any trees, bushes, vines or palms, maintained for the purpose of the production of food for human consumption, that yield more than one crop after planting if properly maintained;

Consideration in committee.

The Hon. K.A. MAYWALD: I move:

That the Legislative Council's amendments be disagreed to.

I rise to speak to the amendments as put forward by members in another place in relation to an amendment to the definition of 'critical human water needs' to include permanent plantings that exist as at the commencement of this act.

I am certain that the intentions of the honourable member in another place are honourable in that we all, in this place, wish to be able to protect the viability of viable farming enterprises in this state, particularly at a time when we are suffering from one of the most extreme droughts. There is absolutely no doubt that members of the government, members of the opposition and members in another place seek to ensure that we do the best we can to minimise the impact on our communities as a consequence of this drought.

However, the amendments proposed and supported by the other place have a range of unintended consequences, which I will explain. Basically, they seek to specifically prescribe permanent plantings as part of the critical human water needs definition and therefore accord them the highest priority use of water in the basin without any bounds of consideration of equity, viability or socio-economic impact. Any permanent plantings would then have to be provided with greater water, regardless.

My concern is that there are a number of enterprises throughout each of the industry sectors, some more viable than others; we also have a very vibrant dairy industry that is having significant difficulties as a consequence of the drought, as well as vegetable growers and the like. The provisions of these amendments could see us end up with a second class of irrigators who are afforded a lesser security of supply in critical drought times. Instead of taking this path, the South Australian government has chosen to ensure that any improvements allocated to South Australia for consumptive purposes over and above our critical human needs are evenly distributed against all entitlement holders. So, all irrigators in South Australia, regardless of what they grow, get a fair share of the available resource.

However, from a state government perspective we have also recognised that there is significant investment in critical permanent plantings in the state to the value of about $1.5 billion. So this government has decided that, instead of taking water from one group and giving it to another to underpin that, it will guarantee those permanent plantings by saying to irrigators that they can have access to a critical water allocation that the government will guarantee. If there is a shortfall in the water made available to South Australia during the course of the water year to cover off on that critical allocation, then the South Australian government will back that up with water that it goes into the market and purchases from other users who have water on the market—in other words, from willing sellers. That is how we have determined to deal with the issue, and that is underpinning the security of supply.

One of the unintended consequences of the way in which these amendments have been drafted is that if another state such as Victoria were to follow suit it could have a significant impact on the water availability for all other users—in particular, South Australia. If South Australia proceeds with this amendment we can be sure that Victoria and other states would seek to replicate and extend the effect of this to apply to their significant permanent plantings, many of which would not necessarily be family farms.

There was an article in the Weekly Times this week in which Timbercorp was highlighted, allegedly with 120,000 megalitres of high security water for its permanent plantings. I am advised that permanent plantings in Victoria would very likely require, in survival or critical water allocation, about 600 to 700 gigalitres of water. Now, if we were to put that into the high security basket with critical human needs it reduces the amount of water available for all other needs—in particular, our dairy industry, vegetable growers and others.

Whilst the current definition of critical human needs does allow for permanent plantings to be considered on the basis of losses if there were a prohibitively high social, economic and national security cost, it does not necessarily say that they must be included. If we make it that they must be included South Australia, and the irrigators that the other house seeks support in this, would actually be worse off.

I would like to refer to another unintended consequence. We have received legal advice that a critical point is that altering the definition of critical human needs in the bill may give rise to an argument that South Australia is not a referring state for the purposes of the proposed section 18B of the commonwealth Water Act 2007. If this were so, the Water Act would not operate in South Australia in many important respects. The proposed amendments to the Water Act rely on the adoption of a uniform approach across the various basin states; deviation from the agreed uniform approach necessarily creates a level of legal uncertainty and risk. I have a copy of that advice, which I will table shortly.

The South Australian government will be opposing these amendments and will not be supporting the amendments to the legislation, given the significance of the unintended consequences, whilst recognising the merit in wanting to support communities, and particularly wanting to support communities in my electorate of Chaffey and the Riverland area. I believe that whilst the intention is good, the execution would cause all sorts of difficulties and actually result in those communities being undermined and less water being made available to South Australia.

Mr WILLIAMS: I made some comments about the process when this matter was previously before the house, and the process continues to be complicated. The opposition was approached in recent days with the prospect of an amendment being moved in the other place, and has spoken to Family First, who propose to move an amendment to change the definition of 'critical human needs'. I will come back to the exact definition presently.

Having discussed the proposed amendment with the mover in the other place, and having had a number of contacts from people in the communities along the river, the opposition has come to the conclusion that, unless we get significant satisfaction on a number of questions, we will support that amendment in the upper house.

I will not go through the whole gamut of the opposition's previous argument, but the opposition is very concerned about this measure and is very concerned that South Australia—as has been the case for over 100 years—has not done particularly well out of this deal. We believe that Victoria, in particular, has done exceedingly well out of the deal. When the opportunity came along, via this amendment, to maybe do considerably better, we decided that we would support the amendment in the other place.

There are a number of issues here. We did, indeed, ask some questions in the other place, seeking clarification. The existing definition of 'critical human needs' is somewhat ambiguous, and I will read out the bit that I regard as ambiguous in a moment, but it is because of the way that 'critical human needs' is used in further clauses, or certainly in the tabled text, which tends to increase that confusion, and I will come to that and seek some clarification from the minister on a number of points.

It may be just as easy if I make all of the points now and the minister responds to them, and then we will see if we have to go further. I will start at the definition and address the amendment specifically. It defines 'critical human needs' as meaning:

...the needs for a minimum amount of water, that can only reasonably be provided from basin water resources, required to meet—

(a) core human consumption requirements in urban and rural areas; and

(b) those non-human consumption requirements that a failure to meet would cause prohibitively high social, economic or national security costs.

The amendment seeks to add to paragraph (b) the words:

or cause permanent plantings that exist on the commencement of this act to be lost.

I can understand some of the reasons for paragraph (b) but I cannot understand all of them, and I do question why it is worded in the way that it is, particularly when, in answer to questions in the other place, the minister suggested that it was written broadly enough that it might, indeed, encompass permanent plantings. If that is the case, what is the problem with the amendment?

I understand that, in South Australia's case, something like 90 per cent of our population relies on River Murray water for their domestic uses, but a significant part of rural South Australia also relies on River Murray water for stock as well as domestic purposes. I assume that the wording of paragraph (b) deliberately includes the words 'those non-human consumption requirements', and so on, to encompass stock water.

I understand that SA Water, the distributor of water here in South Australia, also supplies a lot of other non-core human consumption requirements, mainly industrial use, and I assume that it encompasses that as well. Will the minister give us an assurance about the comments made in the other place by the minister with regard to permanent plantings and why adding those words would be a problem, and will she do that in the context of the tabled text? This is where the confusion really comes in.

I refer to three sections in the tabled text under schedule 1. Section 86B deals with the basin plan to provide for critical human water needs. My reading of that section is that it basically says that the basin plan must provide a statement of the critical human water requirements for each of the states. That must be set out in the basin plan upfront, so as we go into tier 2 and tier 3 circumstances that is the amount of water that it has been assessed is necessary for each of the states to provide for those critical human needs referred to in the definition about which I have already spoken.

It becomes more complicated because, as we go through the text, we get to section 86D, which refers to additional matters relating to tier 2 water sharing agreements, specifically subsection (3)(b), which states 'recognise that each of New South Wales, Victoria and South Australia is responsible for meeting the critical human water needs of that state and will decide how water from its share is used'. That says to me that, irrespective of the definition in subsection (3) to the referring amendment, it is still the individual jurisdiction that has to find from its allocation the amount of water that would be drawn out of the river for critical human needs.

If we turn to division 4, section 135, we are now talking about tier 3 circumstances and, again, we have a very similar set of subsections pointing out that critical human needs water is the highest priority water and also pointing out that each state-contracting government will be responsible for meeting that critical human needs water and each state will decide how water from its entitlement is used.

The dilemma and the complication is that we are defining 'critical human needs', and my reading of the tabled text is that the basin plan will, indeed, provide that water, which is essential as conveyance water, which is used to keep the river operational and to keep the water quality at a standard suitable for critical human needs. That water is provided under the plan from the water available within the system, but the water that is drawn out of the river in each of the jurisdictions comes out of each individual jurisdiction's share. So, I fail to understand how this particular clause will have an unintended consequence, because my reading of it is that, if we put this in, this will apply only to South Australia and it will apply only to South Australia's share of the water, which has already been defined elsewhere within the tabled text. I would like the minister to clarify those points.

The Hon. K.A. MAYWALD: I thank the member for his questions. First, on the issue of the definition of critical human needs and the two tiers, A and B, the purpose is to make it broad enough in establishing the basin-wide plan that the science and work the authority is going to do will underpin what that means. At the moment, under the contingency planning each of the states has put forward an amount of water that it believes is the critical human needs component. In New South Wales it is 75 gigalitres, in Victoria it is 53 gigalitres, and in South Australia it is 201 gigalitres. We have based our South Australian critical urban needs on our stock and domestic requirements (restricted), SA Water household and industry water, but using efficiency plans to ensure that industry minimises the amount of water it uses. That is what the 201 gigalitres is for notionally now.

What we are endeavouring to do in this particular referral is provide an opportunity for the basin-wide plan to underpin the numbers, based on what we present but also on the work that the authority does, to ensure that those numbers reflect a fair distribution of the water in relation to the social and economic impacts of the water. In other words, the 201 gigalitres that we currently have is a figure that was developed through the Howard-Turnbull contingency planning process that was established. That was not a formalised process in relation to the Murray-Darling Basin Agreement, as such. It will now be a formalised process and there will be a determined amount for critical human needs in each of the states.

In the other house the minister referred to permanent plantings potentially being part of that critical water need. In all possibility, it could be, if it is determined by the basin-wide plan to be so. But, it would not be, as the amendment that the upper house has put forward, that every permanent planting would be of that nature. If we included all permanent plantings, which would potentially include permanent plantings for vineyards that do not have a market to sell their produce to, or 40 year old citrus trees that do not have a market to sell their juice to, it could mean that you would be providing water to non-viable enterprises and reducing the amount that could be available for very viable enterprises such as dairying, vegetable-growing and the like.

So, to have just a blanket arrangement whereby permanent plantings could have first dibs on the water without any requirements around that, you would have a very distorted share of the water across the needs of the basin. You would also have a situation where you would bring into play permanent plantings in Victoria and New South Wales and, as I said in my opening remarks on these amendments, in Victoria alone that could require between 600 and 700 gigalitres.

Whilst I appreciate that the mechanism of underpinning and supporting our critical plantings is of critical importance to this place, the nature of these amendments does not deliver what I think the honourable member was intending in the other place. Secondly, when we talk about critical human needs, section 86B of the referring bill provides:

(1) The Basin Plan must:

(a) include a statement of the amount of water required in each basin state that is a referring state (other than Queensland) to meet the critical human water needs of the communities in the state that are dependent on the waters of the River Murray system;

So, in other words, the plan is going to do the social and economic studies that will underpin what is declared as the critical human needs water. That is the idea of having it—so it can be encompassing and we are not limiting the scope by which the basin-wide plan can deal with issues such as permanent plantings.

Also, we are ensuring that the independent authority has a role in that and the parochialisms of the states do not prevail. If we are to prescribe it in the manner in which the other house has suggested, we would be embedding in that process the parochialisms that we are trying to get away from at the moment. Thirdly, section 86D refers to the tier 2 water sharing arrangements. Section 86D(3)(b) provides:

recognise that each of New South Wales, Victoria and South Wales is responsible for meeting the critical human needs of that state and will decide how water from its share is used.

The first part of that section identifies the process we are undertaking at present. What happened back in 2006-07 was that, as a consequence of the basin being managed on an ongoing basis and South Australia not having access to storage in the upper catchment, the water in those dams technically belonged to New South Wales and Victoria. While we were running down the dams to critically low levels, Victoria was able to keep its allocations to its irrigators at 95 per cent and we saw the dams drain. In November 2006 we met in Canberra with the then prime minister and all the water ministers and premiers and there was a significant issue we had to deal with in that it looked like we would not have enough water for critical human needs in the following year because we had drained the dams.

This provision enables each state to take ownership in order to ensure there is enough reserve and enough buffer within their own entitlement to water to ensure that does not happen, so South Australia in a normal year, when we normally get 1,850 gigalitres as a minimum plus any environmental flow of which we will be a beneficiary as a consequence of the new basin-wide plan, will be able to set aside water in Hume and Dartmouth dams that we do not bring down into South Australia as a reserve for future critical human needs and irrigation carryover. It means we can plan beyond a one-year time frame.

At present, under the Murray-Darling Basin Agreement, the dams fill up and the dams drain down and it could happen in a year and there is no thought beyond that year—and that is what has got us into this trouble. This is proposing that each state is responsible to ensure that at the beginning of the year we have enough in reserve in the dams and we have not drained it all so there is enough to supply at least our critical human needs. It also provides for irrigators to do the same in carrying over their water.

When it says that 'each state will decide how water from its share is used', it means that if in South Australia we have major downpours in the Mount Lofty Ranges and we have another source of water, other than the Murray-Darling Basin to supply Adelaide, we can choose to apply some of those critical human needs in another way; and it could be to the survival of permanent plantings or it could be to carry it over into the next year for the purpose of the next year's reserve for critical human needs in the upstream states. It gives us flexibility of operation that we have never had in relation to water.

It also means that South Australia can be responsible for the level of restrictions that we may apply in our state. In relation to the water that is allocated in bulk to South Australia, we can have much more flexibility in how we manage it and much more control over the security of supply of water for all purposes. Irrigators will be able to look at the opportunity of purchasing water when the price is low to carry over into the following year, along with water they may not have needed during the course of the year. It is a much better arrangement than we currently have. It enables us to plan and manage beyond a 12-month period. It enables us to have access to those dams and it enables us to have the flexibility to deal with the allocations within South Australia for the benefit of our communities, as we see fit.

Mr WILLIAMS: I want to confirm a point the minister has just made. At the end of this water year, if South Australia has put aside 201 gigalitres for critical human needs in Dartmouth or Hume dams (or wherever), assuming the bill is in place and we are under tier 2 water sharing arrangements, as we go into the next year, if the drought continues in the southern part of the basin and Victoria and New South Wales are still under severe stress, even for their critical human needs, and we get a very wet winter in Adelaide and the reservoirs fill, am I correct in saying that South Australia could then have that 201 gigalitres, or any part thereof, released from the storages into the system and we could allocate that water, even under tier 2 or tier 3, to irrigators for permanent plantings, notwithstanding the continuance of the severe situation in the upstream communities which rely on the river, say, Mildura for example?

The Hon. K.A. MAYWALD: The answer to that question is yes, and that is the advantage of this clause and the way in which we have negotiated it. We can actually be masters of the destiny of our own water which we are putting away in dams and which is quarantined for us. It is not water that be can resocialised under tier 2. The only time that there could be a change to that is if we move to tier 3 and there is not enough water to run the river, then a new process will come into play.

I have to make it quite clear that the changing of the definition will not only have the consequences of making less water available for South Australians, potentially because there will be very little water available beyond critical human needs, but also, if the definition is amended in the act, section 18B means that we put at risk being a referral state (as outlined previously) and the definition in the referral would stand. It is really important to understand that it is not just about the definition of 'critical human needs' but it also means that we might not be a referral state for those purposes under section 18B, if it is amended.

Mr WILLIAMS: I meant to raise this earlier, but one of the reasons that the opposition was encouraged to support the amendment in the other place was that we have growers of permanent plantings in South Australia with what we regard as high security water looking upstream at a large number of places, particularly in New South Wales, where those with high security water have a much higher allocation than they do. I think, at the moment, our growers are on 15 per cent; the southern Darling, I think, are on 100 per cent; 95 per cent in the Murrumbidgee; and part of the Murray Valley upstream—

Mr Pederick: At least 80 per cent in the Murray Valley.

Mr WILLIAMS: That is one of the things that I think it is very difficult for our growers to understand, particularly those with permanent plantings. I think that is what is driving the amendment and certainly the opposition's position on the amendment; that is, there seems to be an imbalance. Under the new regime with the basin plan, does the minister expect that scenario to continue or will it change?

The Hon. K.A. MAYWALD: Under the new regime, the Murray-Darling Authority will go basin by basin and set new caps on the extraction out of those valleys. There will be a new cap set for the Darling, the Barwon-Darling, the Border Rivers, the Lachlan River and the Murrumbidgee River. How it works at the moment is that the Murrumbidgee waters are not part of the shared resource. We do not have any access to the Murrumbidgee waters at all, except what flows out of the end that New South Wales has not been able to capture or use.

They have dams in New South Wales that belong to New South Wales. They are not dams that were built by South Australia. They are not dams that were built in partnership with South Australia or in partnership with Victoria. They belong to New South Wales. That is the water that those irrigators are allocated. They are not allocated water from the shared resource. The same with the Menindee Lakes. Currently, New South Wales dams the Menindee Lakes. The Murray-Darling partners actually invested in increasing the storage capacity in the Menindee Lakes, which meant that, at a certain level, the water them becomes a shared resource, but prior to its becoming a shared resource it is in New South Wales' hands.

That is why they get to allocate their water in their jurisdiction under the existing agreement. That is why there are the perceived imbalances that we see at the moment. It is due to the long-term dry that we have seen in the southern Murray-Darling Basin. It has not been an issue for us in the past because South Australia has been a beneficiary of the environmental flows out of the Darling, out of the Murrumbidgee, out of the Murray, out of the Ovens, out of the Kiewa, out of the Loddon and out of the Campaspe. As each of those states have increased their capacity to take out of those systems, there has been less left in the river, which has created more environmental stress for South Australia at the end of the system.

What the basin plan will do is return the balance in those valleys and improve the lot for the environment. If you improve the lot for the environment, you improve the amount of water in the river system and you improve how much flows into South Australia, and that underpins the security of supply to our irrigation communities here in South Australia.

It is regarded nationally that South Australia has been incredibly conservative in its approach to the allocation of water. We capped extractions out of the Murray between 1968 and 1969. The overallocation is deemed to be in New South Wales and Victoria and not in South Australia. We are very small extractors, comparatively speaking, from the Murray-Darling Basin system.

So, in the redistribution of water for consumptive purposes back to the environment, the large proportion of that will have to occur in New South Wales and Victoria to bring the system back into balance. If you bring the system back into balance, you underpin the sustainability of the working river so that those who remain in the system have a greater security of supply. You then offer them flexibility of supply by enabling them to manage their water across a number of years, rather than just one year at a time, and that is when the carryover water becomes crucially important. They can become more masters of their own destiny in relation to their water supply. That is the underpinning of this new basin-wide plan that will benefit South Australia.

We will also see the icon sites, such as the Lower Lakes and Coorong, Chowilla and Channel, and the upstream icon sites, benefit from the Living Murray as a first step, but they will also benefit from water that will be allocated specifically to those projects. That is water that will have ownership in the environment, and that environment will benefit from it as well. Therefore, it will not be competing with water for irrigators, as it currently is. That is the underpinning of the benefits to South Australia out of this new plan.

We all want to see a better deal for the River Murray. I have consistently said that this new agreement—the referral of powers, the bringing back into balance of the amount of water that can be extracted from the system and the amount of water that is available to the environment—will underpin the security of supply to our irrigation communities in the future.

There has been commentary in another place that the purchase of water entitlements out of the system is buying fresh air and that there is very little or no water applied to a lot of those entitlements. That might be so right now but, in buying those entitlements out of the system now, what you are buying is the future use of that water, too. So, when it does rain, and when there is a water coming back into the system, it will not be captured at the same level it was before and extracted for purposes. Therefore, there will be more in the environment and the security of supply for our irrigation committees will be enhanced, our Lower Lakes will be better off and our riverine environment will be better off.

This is substantial legislation that needs to go forward in an unamended way to demonstrate that South Australia is serious about our referral of powers. We do not want to open the door for renegotiation. We do not want to open the door for Victoria to put in similar amendments that would further reduce South Australia's security of supply by the unintended consequences of this amendment and what it would mean across the board in the basin if other states were to adopt a similar approach.

This is a hard-fought and hard-won reform. It is the first time in 100 years that we have been able to achieve a referral to the commonwealth and a truly national approach to developing a new basin-wide plan to include caps on surface and groundwater for the first time. It is a substantial step in the right direction. Certainly, there would be members in this place—and I am probably one of them—who would say that, if we had had a blank sheet to start with, we would probably have done it differently. However, if we had had a blank sheet, I can assure you that we would not have had the problems we have with New South Wales and Victoria.

We did not have a blank sheet; it is as simple as that. We never have had a blank sheet in this argument, even at Federation. The issue of water held up Federation for 10 or more years. South Australia did not get a good deal then. We have been working on improving that ever since. Over the decades there has been improvement on a very slow basis, but this is a huge step forward at this point and we look forward to the development of the basin-wide plan over the next couple of years, which will see us much better prepared for the next dry spell or even an extreme drought event that we may incur.

Mr PEDERICK: There is a lot of talk in this and the other place about the basin plan, but there is still a major flaw, even with the formalising of the new agreement, if it all goes ahead between the states and commonwealth, and we are still not managing the basin as a whole. I fear as a South Australian that with drought, which we all recognise in the southern part of the Murray-Darling Basin, we are not getting our share of any water that falls in the north. The minister mentioned the Menindee Lakes. We are a long way off ever sharing that water unless we have massive floods, because the two lakes they are using at the moment have a maximum surcharge capacity of 615 gigalitres, so they will never get to the 640 gigalitres to share through the Murray-Darling Basin Commission involving the three states.

We already have far too much development—it is going on as we speak—in southern Queensland and northern New South Wales on the Warrego. With the Macquarie Marshes, we have had New South Wales rubber stamp illegal banks. I have mentioned in this place before that, as those who are at the bottom of the system, we used to get 20 per cent of our water from the Darling. We are certainly getting there as far as referring our powers to the commonwealth, but we have a long way to go before we can say that this is anywhere like a whole-of-basin plan and managing those northern waters. I am interested in the minister's comments on that.

The Hon. K.A. MAYWALD: I refer the honourable member to the tabled text, which refers to what the basin plan will cover. It covers all the water in the basin and all the groundwater in the basin.

Mr WILLIAMS: I thank the minister for her response to our questions, and that is the end of our questions.

The Hon. K.A. MAYWALD: I thank members opposite for their cooperation in this matter and look forward to this legislation being implemented.

Motion carried.