An evaluation of the 2008 purchase of environmental water for the Narran Lakes

1. An evaluation of the 2008 purchase of environmental water for the Narran Lakes Future directions and priorities for managing the Ecological Assets of the Northern MDBKate Duggan and Tim Cummins

2. Features of the north • Highly variable flows • Total on-farm storage many times bigger than off-farm • Allocations are a limit on how much can be taken; not an obligation to supply from public storages • Water markets are thin • Moving towards three marketable forms of water: • entitlements • allocations • and physical water

3. Water storages on the Condamine-BalonneSource: Webb McKeown & Associates 2007, cited in Ballie 2007 and Frontier Economics (in press)

4. Terms of reference • Assess the process used to acquire and deliver environmental water to the Narran Lakes • Consider the potential to use this process as a guide to future acquisition and delivery of environmental water • Record the outcomes of the bird breeding event that inspired the purchase • Develop principles, guidelines and strategic options for the future purchase of temporary water for environmental outcomes

5. An assessment of the process (1) • It was based on sound data and knowledge – this gave confidence • This was an emergency response more than a process • It was more like jazz than classical music – experts were improvising (and communicating) around a shared understanding rather than following a set score • A lot rested on the social capital built up over many years through interagency and interstate cooperation • A lot also depended on good-faith negotiations between the buyer and seller

6. An assessment of the process (2) • There was a clear objective • To maintain water levels at Black Lake (where the breeding colony was concentrated) above 300 mm for 30 days • There were tried and tested risk management procedures for water quality • There were good procedures for water accounting • The value of water was determined from gross margins

7. An assessment of the process (3) • A lot of things went right • Missed the opportunity to recalibrate models • It was personality dependent • this reduces some risks • but increases others • It can provide the base for more certainty in the future

8. Terms of reference • Assess the process used to acquire and deliver environmental water to the Narran Lakes • Consider the potential to use this process as a guide to future acquisition and delivery of environmental water • Record the outcomes of the bird breeding event that inspired the purchase • Develop principles, guidelines and strategic options for the future purchase of temporary water for environmental outcomes

9. Future acquisition and delivery (1) • There is tension between purchasing water and addressing underlying causes: • cap compliance • total entitlements • total consumptive use • Given consumptive use will continue, some breeding events will fail that would naturally succeed • Therefore there will likely be a role for purchases in the portfolio of management tools used to meet ecological objectives

10. Future acquisition and delivery (2) • There will be a portfolio of future measures including • the purchase and ‘decommissioning’ of some entitlements • the purchase of entitlements to be used specifically for the environment • future purchases of allocations, and • the purchase of physical water.

11. Future acquisition and delivery (3) • Markets for allocations and for physical water are very thin – it will be risky to wait and see if they are available when needed • Call-options are an alternative – these would give the environmental water manager the right, but not the obligation, to call on irrigators to provide water at a pre-arranged price

12. Future acquisition and delivery (4) • Another alternative is to purchase properties with entitlements and use the on-farm storages for environmental water • This approach has paradoxes: • evaporation from storages is a consumptive use • maintaining properties and storages in operational readiness costs money • costs could be reduced by put-options giving the right, but not the obligation to put, or sell, water at pre-arranged prices

13. Future acquisition and delivery (5) • Is it economically more efficient to have call-options on private storages or put-options on public storages? • Does it matter which way around it is done? • Would doing both provide a hedge?

14. Terms of reference • Assess the process used to acquire and deliver environmental water to the Narran Lakes • Consider the potential to use this process as a guide to future acquisition and delivery of environmental water • Record the outcomes of the bird breeding event that inspired the purchase • Develop principles, guidelines and strategic options for the future purchase of temporary water for environmental outcomes

15. Outcomes (1) • Maintained water levels at Black Lake above 300 mm for 30 days • Water levels then fell at close to natural rates • Close to 50,000 ibis chicks fledged from two colonies • Mortality in the second colony was very high – of 120,000 eggs, 24,600 chicks fledged • Losses were due to nest abandonment (falling water levels) rather than food shortages

16. Outcomes (2) • It is probable that other bird species, vegetation, fish and other biota also benefited • The watering was supported by the local community • The cultural significance for the local Aboriginal people was marked by a community day in April

17. Terms of reference • Assess the process used to acquire and deliver environmental water to the Narran Lakes • Consider the potential to use this process as a guide to future acquisition and delivery of environmental water • Record the outcomes of the bird breeding event that inspired the purchase • Develop principles, guidelines and strategic options for the future purchase of temporary water for environmental outcomes

18. Principles and guidelines for future purchases (1) • Interim ecological objectives should be set for environmental watering of the Narran Lakes • Need to know how much water you need, and when, to meet the objectives • The scheduled reviews of water sharing plans, water allocation management plans and resource operations plans should take account of the interim ecological objectives

19. Principles and guidelines for future purchases (2) • Need a pre-approved plan with an agreed set of triggers, and the authority to purchase and apply water – including: • Decision trees to determine the spatial and temporal significance of breeding events • Thresholds for those with delegated authority to commit resources with confidence • Risk management procedures • Evaluation procedures • Need to support adaptive management and enable people on the ground to use their skills

20. Principles and guidelines for future purchases (3) • Need formalised ‘Incident Management’ arrangements • One person should have ultimate decision-making responsibility • But throughout the event they should have the constant support of people with river operating skills, ecological skills, modelling skills and communication skills

21. Principles and guidelines for future purchases (4) • Best available data and knowledge should be used to inform decisions and all opportunities should be taken to test and calibrate models under real-time conditions • All private storages built (or rebuilt) from now on should be fitted with the capacity to allow the inlet to act also as an outlet

22. Principles and guidelines for future purchases (5) • Evaluate the optimum portfolio of measures in light of the interim ecological objectives. The portfolio could include: • the purchase and ‘decommissioning’ of some entitlements • the purchase of entitlements to be used specifically for environmental purposes • the purchase of strategically located on-farm storages • the strategic purchase of allocations and physical water • the strategic purchase of physical water • the buying of call-options • the selling of put-options

23. Principles and guidelines for future purchases (6) • The environmental objectives for the Narran Lakes need a broad ecological base • They should not just be about birds • And the models should be modified to take account of the known broader ecological requirements