14 August, 2010

Irrigation-Politics and Sovereign Risk

I was recently asked to write an overview of the politics of Australian irrigation with emphasis on the Barwon-Darling River. This is what I wrote:-

Big Picture-Background
Australia is claimed to be the most urbanised country on earth with the great majority of the population clustered in coastal cities. The very strong democracy, highly visible in a pre-election environment, appropriately has the voting power where the people are. Thus, the people with the electoral power are geographically separated from rural activities and generally have little knowledge of agriculture.
Furthermore, Australian urban voters have been strongly influenced by environmental advocates who are given significant exposure by the media. The “virtuous greens” are a significant market segment in our cities and like to feel they are playing their part in “saving the planet”.
There is a widely held perception that our inland rivers, from which irrigation water is extracted, have been “over allocated and mismanaged” by previous authorities, who did not have the benefit of today’s environmentally enlightened incumbents. This is mostly nonsense, but I believe it is a widely held belief.
Australia’s rainfall and thus river flows, is highly variable and thus it makes good sense to conserve water in efficient dams when flows are big. This can be for later use and/or flood mitigation. Usage by irrigators is controlled by variable allocations within each water year. An irrigation license/entitlement allows water to be extracted from the river only when defined conditions are met and allocations are made. When flows are low or non-existent, allocations are likewise low or absent. Irrigators understand this and knowingly accept the risks involved.
The drought of recent years has seen the run-off into our major state owned dams at the lowest level since white settlement and this has still not been corrected. This fact if by far the most significant cause of low river flows. Yet the belief that our rivers have been “over allocated and mismanaged” has seen Governments (mainly Federal) attempting to correct the situation by the purchase and effective cancellation of irrigation licenses. This will do nothing for our rivers when flows (and thus allocations) are low and will only constrain production when water supplies are plentiful. But, that does not appear to be understood.
Most of the focus has been on the Murray Darling Basin which covers Victoria north and west of the Great Dividing Range (GDR), all of NSW west of the GDR, and the southern half of Queensland west of the GDR until the Lake Eyre catchment in the far west of that state. This area includes some of Australia’s very best country (soils and rainfall) and some 80% of its irrigation. After the Murray and Darling Rivers join in south western NSW the river flows west in to South Australia before turning south and flowing in to Lakes Alexandrina and Albert (the Lower Lakes) from where it originally flowed in to the Southern Ocean. However in the 1930’s, the South Australians built a series of weirs (“The Barrages”) just above the ocean entrance to convert the Lower Lakes from their natural state of being sometimes salty and sometimes fresh, depending on river flows, into a state whereby they always contain fresh water and the sea is obstructed from entering. The Lakes are wide and shallow and evaporation losses of fresh water are huge.
South Australia is the driest state in the second driest continent on earth, (Antarctica is the driest), and the Murray River is the only decent river in the state. South Australians adopt a “victims attitude” and children are taught in primary school what a poor deal the state gets with upstream irrigators, in particular, extracting water that is “rightfully theirs”. The inefficiencies of water use, particularly the evaporation losses from the Lower Lakes are taboo subjects, rarely mentioned.
It would seem, perhaps by accident, that South Australians hold most of the key posts in the Commonwealth Government involved in the management of water. Senator Penny Wong the Minister for Water and Climate Change is a Senator for South Australia. Senator Nick Xenaphon is also a South Australian Senator and came to Canberra with one of his key objectives being to “save the Murray”. The new CEO of the Murray Darling Basin Authority (MDBA) is a former South Australian water bureaucrat. Professor Mike Young, probably Australia’s best known water scientist and a prominent member of the philosophically “dark green” Wentworth Group of “concerned scientists”, is Adelaide based and will not publically acknowledge the problem of “The Barrages”.
Against this backdrop, the Federal government has passed legislation to give it greater control over management of the Murray Darling Basin and the Murray Darling Basin Authority has been charged with writing a management plan for the Basin which in terms of the Water Act 2007 gives very much more weight to environmental issues than it does to socio-economic issues. The Productivity Commission has recommended that the Act be amended to correct this, but there would appear to be little public support for such a move. Irrigators are very concerned that the MDBA plan will recommend significant reductions in entitlements for irrigation.
Today it was announced that release of the MDBA Plan will be delayed until after the election. A change in Government would probably see greater sympathy for the irrigator’s position and certainly the junior member of the Coalition, The Nationals have a better understanding of the situation than do the Labor Party representatives.

NSW and the Cap
In the mid 1990’s the Australian States agreed that a cap should be placed on further irrigation development and extractions in the Murray Darling Basin. The agreement broadly was that extractions should be capped at the 1994 level, based on water that would be extracted, under the then management regimes to service the level of development which then existed. This “cap” was progressively implemented river by river with the exception of the Mungindi-Menindee reach of the unregulated (meaning no physical regulation by way of a major dam) Barwon Darling. The Barwon Darling cap implementation was complicated and delayed by the highly variable nature of river flows, a lack of reliable historical information and a very strong lobby by local irrigators.
In 2006 a deal was struck between the Government and Barwon Darling irrigators to apply the cap at an interim level of 173GL (173,000ML). This compared with the total entitlement of 517 GL-a cut of 67%. The 517 GL was the aggregate of all licenses including “sleepers” and the total amount had never been used. Usage was more in the area of 250GL. The interim figure was based on a computer model of the river in which the irrigators had little confidence. The model was to be reviewed by a representative “working group” and many thought the correct figure would be more like 240GL, once metering errors and the like were corrected. A particularly strong argument was that the area of cotton grown in 1994 could certainly not have been grown with only 173GL. The agreement had some attractive features including introduction of carry-over water in years when extractions were below individual irrigators share of the 173GL’s and the introduction of an initialisation amount credited to individual irrigators water accounts.
This working group had one or two meetings, but never completed its work. Then out of the blue, earlier this year, the Barwon Darling (Mungindi/Menindee) irrigators received from the NSW Office of Water a convoluted letter advising that the 173GL figure was to be reduced to 143GL’s (a further 17% cut) on the basis that the Murray Darling Basin Authority supported by the Independent Audit Group, claimed that the Darling River was continually exceeding cap. Cap was defined not as the simple 173GL number, but yet another modelled figure which apparently took account of river heights and calculated a different cap figure. This was news to the signatories to the agreement with the Government who without exception believed that the cap figure (interim) was simply the 173 GL’s against which actual metered extractions would be compared.
The NSW Government appeared to accept the irrigator’s argument and the point that if they had a problem with the MDBA/Ministerial Council they needed to deal with it in the context that they were bound by their agreement with the Barwon Darling irrigators. The government has now deferred the matter for twelve months mainly to monitor what happens in 2010 when river flows have been so much greater. In legal terms the Government has great power and any legal action by the irrigators would be unlikely to be successful.
There is little public sympathy for the irrigator’s position. Yet:
• Irrigated agriculture contributes approximately 25 per cent of the gross value of Australian agricultural production, 3% of GDP, 22% of exports, but only uses 0.4 per cent of Australia’s farming area (Source: CSIRO, 2006)
• Australia utilises about 8% of its available water for industry, agriculture and support of the population, with agriculture using about 65% of this, or less than 6% of Australia’s water (Source: National Land and Water Audit 1997 – 2002)
• In their ‘natural’ state, the rivers located in the southern half of Australia experience more variable flows than virtually any other rivers in the world (Murray-Darling Basin Commission 2005)
• Between 1885 and 1960, the Darling River stopped flowing at Menindee on 48 occasions – well before irrigation existed on the river or its tributaries (Australian Farm Institute).

On the local scene Mungindi/Menindee extractions average only about 6% of flows past Bourke. The final cap figure, be it 143GL or 250GL, compares with an annual average flow past Bourke of 2,500 GL’s, with extractions only allowed from the bigger flows. This would seem a small environmental price to pay for all of the socio-economic benefits derived, particularly to a series of disadvantaged towns along the river whose populations include a large proportion of indigenous Australians.
It should also be noted that water flowing past Bourke is usually stored downstream in the Menindee Lakes. A series of natural lakes engineered to form a highly inefficient water storage, where normally half the water diverted is lost to evaporation.
To my mind, the irrigator’s argument has “right” on its side, particularly if it is accepted that Australia has a moral responsibility to sustainably maximise its agricultural production. I remain sufficiently naive to believe that in the long run “right” will prevail.
David Boyd
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