Water Rights and Water Markets in Australia: Unfinished Business and a Regulatory Tool to Improve Working

1. Water rights and the water markets in Australia- unfinished business and a regulatory tool to improve working.Professor Jennifer McKay, School of LawSouth Australia, DWG 2015 Fortalenza

2. Panel on environmental flows Dr Barbara Willaarts Water Observatory Madrid –Monitoring status of surface water bodies in Spain lesson learnt and challenges ahead. Dr Stanley Mbofho Liphadzi Water Research Commission South Africa- Sustainable Management of Water in South Africa Dr Maria Leichner General Director Fundacion ECOS Uruguay and RFP South America CSO-GEF Network Environmental flows in Uruguay

3. Framework for Australia

4. SA and Victoria early Political Challenges in Water Allocation between States

5. The caption reads: ’You see I intend to treat you with sisterly regard in the matter. You will observe that the droppings I allow to go to you absolutely without condition’. The caption was a bitter critique of the ‘family’ of Federation, in which the smaller states languished at the mercy of the larger.

6. old inaccurate Dethridge wheels

7. New technology recent science improvements Murrumbidgee Irrigation area NSW Issue- the solar panels were stolen so now on the high pole!

8. Water licences water is not attached to land any more after 1983 Consumptive pool users only have a share of a ground water and / or surface water pool. It is not a right, but a mere licence which can be defeated by a drought announcement or other changes. In the Millennium drought many farmers had zero allocations for many years and the Federal Government sponsored adjustment packages to keep them on the land( like unemployment benefits) but also gave relocation packages in some areas.

9. Environmental flows The overall objective of environmental flow recommendations is to ensure that sufficient water is made available to support the needs of the entire riverine ecosystem. Methodologies differ between the States Previously, these assessments have focused largely on minimum flow requirements for instream fauna (such invertebrates and fish) by employing the instream Flow Incremental Methodology (IFIM) or other desktop approaches. However, new holistic methodologies that incorporate natural variability in stream flow, and the high flow water requirements of entire riverine ecosystems

10. Environmental flow- ideal method The process involves four main steps in Tasmania: Identify freshwater ecosystem values in each catchment in order to define the objectives of the environmental flow assessment. Develop conceptual models that identify the ecosystem processes that support these values. Identify representative river reaches, conduct assessments using hydraulic and hydrological models to characterise physical habitat and biological diversity of the system, and identify specific flow events that relate to these attributes. Conduct hydrological analyses of flow data to define the pattern of occurrence of important flow events and the availability of important habitats for fauna. Recommend a flow regime that meets the objectives of the environmental flow assessment, including rules for water abstraction.

11. Environmental flows and water planning Environmental flow assessments essentially describe the importance of different flows to the aquatic values of riverine systems. It is critical when interpreting environmental flow assessments that they are considered in the context of the community's environmental, economic and social objectives for the river(s) being examined. Thus, assessments provide an essential input to DPIPWE's water management planning process; however, all water users within a catchment are considered by DPIPWE during the development of water management plans. During this process, environmental water requirements are negotiated and implemented as environmental water provisions, which aim to balance economic, social and environmental values within catchments

12. Water Laws and plans in Australia States

13. Are Statutory Water Plans the right way? YES - 61.5% But also pointed out some concerns: • unfairness in the processes for public consultation, • lack of knowledge of local, • cost of development and implementation of water plans, and • uncertainties in the science.

14. Environmental flows Throughout Australia, environmental flow assessments are used to estimate the quantity and timing of flows required to sustain identified aquatic values in riverine environments. Typically, water management planning and other natural resource planning processes use environmental flow assessments to make informed decisions about water management.There is no single standardised method for estimating environmental flows in Australia or in other countries; instead several  methods are available, and their application is often tailored to meet the specific requirements of each assessment

15. National issue Research Projects funded Daly Basin Projects Environmental flow requirements for Australian arid zone rivers Productivity and water flow regulation in the Ord River of northwestern Australia (WA) Snowy River benchmarking study (NSW) Assessment of the impact of private dams on seasonal flow (Vic) Importance of flood flows to the productivity of dryland rivers and their floodplains (Qld) Environmental Flow Requirements on the Paroo / Warrego Rivers (NSW

16. Environmental flows in MDB in 2011 Using the best available science, and drawing upon a wide body of peer-reviewed work, in October 2010 the Murray-Darling Basin Authority came up with a volume of water for the environment equal to 3,856 GL/year, on average. This would give a “high uncertainty” of conserving key environmental assets and ecosystem functions. It also had a larger number of 6,983 GL/year that would give a “low uncertainty” of conserving key environmental assets and ecosystem functions

17. water scarce towns in MDBC Source: EBC, RMCG et al (2011a) MDBA website

18. Water Act 2007 Commonwealth (under multiple powers in section 51, including the referral of powers from the States) enacts the Water Act to apply to M D Basin Commonwealth accreditation of all State Water Plans which must aim to achieve ESD ,gives a role to Australian competition and Consumer Commission to regulate process and enhances the Commonwealth environmental water holder. Buy backs of land and water start.

19. Environmental flows Based on these volumes, the Authority recommended that the increase in environmental flows should be between 3,000 and 4,000GL/year. That means between 27% and 37% reduction in water extractions by irrigators if this extra water were obtained entirely from reductions in water course extractions. The upper limit was set at 4,000GL/year rather than 7,600 GL/year by the Authority because it believed that reducing irrigation diversions by more than 4,000 GL/year would result in unacceptably high socio-economic costs

20. environmental flows uncertain science According to Freeman “…the assets and functions are now yielding numbers below 3,000GL/year”. Whether this is old or new, all science used to make public policy decisions should be scrutinised and, wherever possible, be subject to peer review. If not, the evidence is compromised. Yet, so far, the Authority has refused to establish an independent scientific assessment panel to review its “new science”, despite an explicit request to do so by the Wentworth Group of Concerned Scientists, the Australian Conservation Foundation and others

21. conflict resolution measures

22. New model for water utilties Model of water business enterprise. Source: McKay J (2003) & McKay J, Water Policy (2005) 1-20

23. References cited Keremane, G., Mckay, J., Ettehad, E. & Wu, Z. 2013. The Evolution of Business Models for Non-Major Desalination Plants in Australia- Issues for Governance. The International Desalination Association World Congress on Desalination and Water Reuse. Tianjin, China. Keremane, G. B., McKay, J & Wu, Z (2012), ‘Sustainable Water Planning in Australia-A survey of our sustainability water policy entrepreneurs’, Water, 39 (5):62-65. Wu, Z, McKay, J & Keremane, G.B. (2012), ‘GOVERNANCE OF URBAN FRESHWATER: Some views of three urban communities in Australia’, Water, 39 (1):88-92. McKay, J. M. (2008). Insubstantial Tenuous and Vague Laws - The Achievement of Ecologically Sustainable Development by Water Supply Business CEO’s , Australian Business Law Review, 36(6):432-445

24. Thank you for invitation Questions?

26. An old conflict They hang the man and flog the woman That steal the goose from the common, But let the greater villain loose That steal the common from the goose. English folk poem, 1764

27. Water Markets legal issues in Australia Constitutional Institutional Structures Monopolistic behaviour of water barons but this can be regulated by ACL Separation of water from land aspect liked by farmers but not the broader community. Community adoption of sustainable development ideals, loss of roles and collectivity in rights and obligations –a move away from the yeoman farmer of the last 200 years The Water Act 2007 Basin Plan and regional water plans how these could assist communal management and have an impact on State Water markets

28. Long term issues The longer term social impacts of the effects of water markets are unclear and the distribution of them may not make a significant contribution to sustainable communities or to equitable regional development (McKay and Bjornlund 2001). 2014 Paper Compensation for loss of water allocation is limited . This was a major issue. Water Plans at a regional level can contribute to conversations in the local region to induce a collective approach. McKay 2013

29. Water markets-rural community concerns While the available data are relatively scarce, they do suggest that rural community members fear the effects of water markets on their communities. There is evidence that they disagree with water markets being the primary method of allocating water Bjornlund 2004a; Tisdell and Ward 2003). Disquiet about water markets among residents of rural communities is centred on an apprehension that the sustainability of rural communities will be diminished and that ‘ emerge and manipulate the market for individual or corporate benefit (Bjornlund 2004b; Tisdell and Ward 2003).

30. Water Markets community response Fenton found that while 50% of respondents believed that individuals had the right to sell their water allocation, approximately 65% were nonetheless opposed to water trading. Hence people living in rural communities appear to distinguish between the right of individual farmers to sell their water and an evaluation of whether this is desirable; there is a disjuncture between people’s perceptions about what is good for individuals as opposed to what is good for their community.

31. Tisdell and Ward separating water entitlements from land- initial pillar of the new water markets while almost two-thirds (61.8%) of farmers they surveyed accepted that water entitlements should be separated from land, only about half (50.8%) of community members shared this view (2003: 66). More community members than farmers supported intervention by water authorities if the economic viability of communities is threatened (Tisdell and Ward 2003: 68).

32. Water markets – the hopes market-oriented approach was developed. The market-based approach was first set out in the communique of the 1994 COAG meeting and was developed more fully in the National Water Initiative announced in 2004 (Council of Australian Governments 1994, 2004a, b). The central idea was to replace bureaucratic systems of water allocation based on licenses with tradeable water rights. It was hoped that markets would ensure that water was allocated to its most socially valuable use. The market-based approach to policy has thus far had only limited success. A number of problems have become evident.

33. National intervention in water since 1994 INTERGOVERNMENTAL AGREEMENT ON A NATIONAL WATER INITIATIVE 2008 Between the Commonwealth of Australia and the Governments of New South Wales, Victoria, Queensland, South Australia, the Australian Capital Territory and the Northern Territory PREAMBLE 1. Water may be viewed as part of Australia’s natural capital, serving a number of important productive, environmental and social objectives. Australia’s water resources are highly variable, reflecting the range of climatic conditions and terrain nationally. In addition, the level of development in Australia’s water resources ranges from heavily regulated working rivers and groundwater resources, through to rivers and aquifers in almost pristine condition.

34. RIGHTS TO WATER no property, common property, state property and private property no ``best'' regulation and that a mix of regimes can be found in most cases and environmental destruction can be found in all regimes. However, it is possible to identify conditions for the success of specific regulative systems conditions for the success of specific regulative systems. In the Australian context, I see this as the regional water plan, but there is a way to go in the administration of these and pressures such a coal seam gas.

35. water markets Calls for a Commonwealth takeover of water policy have also been justified on the basis of the supposed desirability of a uniform policy approach. However, given the differences in climate and catchment hydrology between the states and the fact that, with the exception of the Murray–Darling Basin (which is already governed by well-established federal institutions) there is no real possibility of trading water between states, there is no obvious reason to expect uniformity to yield beneficial outcomes. Rather than a one-size-fits-all solution, it would be better to adopt policies based on local circumstances, and the democratic choices of local electorates.

36. Water Act 2007 The Water Act requires state regional water plans to be done and accredited as in the national interest The accreditation process has not happened yet as the community are unhappy. 3 ATTEMPTS TO BALANCE ESD. Problem perception of unfairness and loss of State sovereignty Philosophical issue can regional plans be amalgamated? Several regional interest plans do not make a whole

38. FIDUCIARY DUTIES MDBC Under the Corporations Act, company directors owe their fiduciary duties to 'the company as a whole' and not to any particular shareholder whether that shareholder is in a position to control the company or not. Even the board of a wholly owned subsidiary company is not bound to comply with the directions of the controllers of the company. Where a controlling member of a corporation attempts to dictate informally a course of action to the board, such a communication is legally ineffective. The directors are under no duty to obey such a communication, and indeed would be in breach of their duty if they were to do so. See Mantziaris C, 1998 Ministerial Directions to Statutory Corporations, Parliamentary Library Research Paper 7 1998-99, Australian Parliamentary Library

39. INTERGOVERNMENTAL COOPERATION Developing innovative structures for intergovernmental co-operation An earlier CAF paper observed that innovative, purpose-built intergovernmental bodies will be required to drive national reforms. The Commonwealth Department of Finance and Deregulation has acknowledged that: when governments work co-operatively to develop policy objectives and consider forming bodies that are accountable to more than one government, these joint arrangements may require innovative governance structures. The Ahead of the Game: Blueprint for the Reform of Australian Government Administration also acknowledged the need for “fit for purpose” governance structures for intergovernmental bodies

40. Oecd on water Governance( urban) The OECD has noted that the formation and maintenance of a successful and effective government partnership depends on trust, mutually agreed upon objectives, and a governance framework that establishes the rules and guidelines for each partner. A motherhood statement but one of great importance I will explore the trust aspect now relying on our Australian research

41. Perceptions of water planners on water governance (Keremane et al 2012)

42. Perceptions of urban community on water (Wu et al 2012) governance

43. I am able to achieve sustainable water management Source: McKay, 2008

44. Corporate governance legal types of WSBs by State –Urban and Rural (McKay 2008)

45. Who do you prefer to be governing Australia’s water resources? (Wu et al 2012) Urban community’s view Note: Ranking Order: 1=most preferable to 7=least preferable

46. Thank you Questions?

47. water rights complex in Australia consideration of the water rights systems alone is not sufficient for the analysis of the institutional framework In fact, the influence of all relevant public policies on a specific commodity or on the entire resource, and their interaction with the given property and use right arrangement, should be given explicit consideration

48. Reform in the national interest does not have to involve the Commonwealth Government. The establishment of the National Electricity Market Management Company (NEMMCO) to jointly manage the national electricity market in eastern Australia In a limited number of cases, intergovernmental entities have been set up by States to further co-operation across borders (e.g.. Dumaresq-Barwon Rivers Commission which enables management of jointly “owned” water infrastructure on the NSW/Queensland border).

49. There is minimal guidance available to identify situations when adoption of harmonized or common national approaches to reform makes sense.25 The most succinct rationale for cooperating to achieve national reform is the Commonwealth criteria for National Partnership Payments Guidance for Ministerial Councils suggests that they should focus on items of “strategic national significance” defined as issues of interest for all jurisdictions and those requiring resolution of disagreement on key issues of Australia-wide concern. COAG, 2009, Commonwealth-State Ministerial Councils Compendium, October, p.6

50. The Intergovernmental Agreement on Federal Financial Relations outlines the basis of Commonwealth support for national reform or service delivery improvement in areas of State or Territory responsibility, where it: • is closely linked to a current or emerging national objective or expenditure priority of the Commonwealth — for example, addressing Indigenous disadvantage and social inclusion; • has ‘national public good’ characteristics — where the benefits of the involvement extend nationwide; • has ‘spill over’ benefits that extend beyond the boundaries of a single State or Territory; • has a particularly strong impact on aggregate demand or sensitivity to the economic cycle, consistent with the Commonwealth’s macroeconomic management responsibilities; or • addresses a need for harmonisation of policy between the States and Territories to reduce barriers to the movement of capital and labour. In general, the presumption in favour