Wednesday, October 13, 2010

Murray-Darling Basin Plan: Despite extreme lobbying, you can’t take water that does not exist

The release of a guide to the Murray-Darling Basin Plan is receiving very poor media coverage. This headline – “Basin Authority holds its first public meeting” - is entirely misleading. The Authority had numerous meeting with stakeholders including water users, irrigation groups, farmers groups, local councils, and anyone else who could claim and interest for the past two years. There should be no surprises.

Another here – “As many as 130,000 jobs could be lost because of reduced water allocations in Victoria's fruit bowl region under the Murray-Darling Basin plan, a farmer says” That’s right. A farmer says so, therefore it must be true. 

This is a week the farming lobby has spent years preparing for, and they are basking the attention. 

The further problem which is completely overlooked by the media, is that while the reductions in rights to take water are ‘up to 37%’ that means that most reduction in most rivers are ‘between zero and 37%’. 

Let’s not also forget the fact that these are reductions of paper rights, not volume taken. There would be very few water users whose volume taken matches the volume of their rights due to variability and recent dry conditions.  The graph below shows that recent rainfall conditions are below historical averages, although this is not uncommon in the long term.

What is missing from this mainstream media nonsense is any actual thought about the reason the plan was developed in the first place. Simply put, there are more rights to take water ‘on paper’ than there is water in the system. This leads to both downstream water users suffering at the expense of upstream users, and environmental areas suffering due to upstream water users. When downstream environmental assets, such as wetlands, receive water, the water also flows through to downstream users. 

There is even the possibility that the next five years more water will be used by irrigators than the past five years, even with the Basin Plan, simply because of rainfall variability. The percentage figures are based on long run averages, which are a distant memory for many people in the Basin. 

Imagine I give you a piece of paper that allows you to take 100ML/annum of water from a particular reach of a river. The river flow is highly variable and because of this you get 60ML one year, zero the next three, 100ML the next, then 25ML. You average 31ML. Then, you get told the stream is overallocated and you are getting cut 37%, so that your allocation is now 63ML. If we had the previous six years again the impact would have only occurred in one year - the cut would take your five year average from 31ML to 25ML – a 20% decline in average use, and a once in five year impact. 

If over the next 5 years you can take 63ML, zero, 25ML, 50ML, 5ML and 60ML, you might end up with even more water on average – 34ML/a instead of 31ML/a – despite the theoretical cut to you water right.

In South Australia for example, irrigators have only been able to access 10% or less of their water rights over the past 5 years or so. If the Basin as a whole shares the water more equitably, these irrigators may be able to use 63% of their previous water allocation – a 37% cut on paper, but a 600% increase in real water use compared to the past 5 years. 

Even the MDBA itself showed just how low actual water use is compared to these theoretical baseline figures from which reductions are calculated. The graph below is from page 130 of the Guide and shows that the average water use since 2002-03 is equal to their most ambitious reduction scenario.

My point is, people are taking the cuts as real water then multiplying impacts to flow on industries then getting bigger and bigger impacts that border on ridiculous. These complementary agricultural industries are clearly already adjusted to any proposed cutbacks.

The only person to present any figures on the media circus is economist Quentin Grafton. He makes his case that farmers are exaggerating losses as follows: 

"In 2000-2001, the gross value of irrigated agricultural production was just over $5 billion, and they used surface water of about 10,500 gigalitres in that particular year," he says. 

"Fast forward to 2007-08, 70 per cent reduction in surface water use, guess what happened to the gross value of irrigated agricultural production? It changed by less than 1 per cent." 

Not only are impacts greatly overstated but water users will generally be compensated for their theoretical water loss at market prices for water – whether the water exists or not. 

Historically most water rights are a gift from the State to landholders. They have generally earned a good living from these gifts, and now that the government has realised that too many were granted, they are going to pay to buy them back. 

While I’m on the water bandwagon, some people are taking the chance to have a dig at cotton and rice growers for their water consumption. What they need to understand is that while Australia is a dry continent, we are characterised by variability of rainfall. Some years it floods and to make use of the water you need a thirsty annual crop. That’s why the virtual desert regions south of St George are cotton areas, even though this intuitively seems bizarre. 


  1. Cameron you are wrong. The 3000 - 4000 GL cuts are based on average equivalents, so they do represent real water.

    And they also include a 3% reduction for climate change effects.

    Good comment on cotton though. Something that the media always overlooks though so does the MDBA in their report.

  2. So cotton and rice only when it rains.....?? (Without water entitlements that would be a hard business to run...)

  3. Well it was the first *public* meeting on the Guide to the Proposed Basin Plan. Most of the earlier meetings were either invite only or were information sessions where no (or very few) questions could be asked.

    Some of the states have done some public meetings about the basin plan independently though.

    @Anonymous: That's actually how cotton and rice are farmed in Australia now. Most cotton and rice farmers only grow opportunistically and grow something less water intensive in the dry years. It requires doing a bit of maths in your business model, but it is certainly able to be done.

  4. Matt C,

    Average equivalent of what? You will note the careful use of terminology in the Guide - they use the phrase "current longterm average surface water diversion limit" - what ever that means. It definitely does not mean average use - it is a limit. And use in the past decade has been extremely low.

    You'll have to provide me with some examples.

    If you look at Graph 8.10 on page 130 of the Guide (added to the post) you will see that the average diversion since 2002-03 is actually 12% below the MDBA scenario 1 sustainable diversion limit.

    Farmers have survived on less water than this being proposed in the Plan for almost a decade.

    For example, in the Upper Condamine Alluvial Groundwater the MDBA states a diversion limits of 117GL, and reduction of 34% to 77GL, yet I know for a fact (it was my job to know) that the average use sine the 1970s is less than 60GL.

    Further, you would have to question the farming lobby's claims of disastrous impacts when water use has been below this figure for a decade and they are all still in business producing the same quantity of food as before (see Quentin Grafton link in the article).

    Anon, cotton growers typically do only grow when it has rained and they have their on-farm storages full (which requires a water entitlement), or they have access to groundwater. They do also speculate on summer rains. Cubbie Station is the extreme example of this. Just because you have an entitlement doesn't mean you get a steady supply of water each year (depending on your particular river).

  5. I thought the 60 GL just for the Central Condamine Alluvium? Not the whole Condamine Alluvium? I could be wrong, it's obviously been a few months since I looked at the figures.

  6. True Penny. My mistake. The central part of the alluvium has a total limit of 95GL (out of the 117GL total) of which the average use is 60GL. Although I think the point about real v imaginary water remains valid.

  7. I believe Professor Grafton cites and misrepresents ABS data. Between 2001 and 2006, output increased by 9%, probably as a result of removal of constraints on trade and efficiency gains. Between 2006 and 2007, southern irrigation areas first suffered cuts in water from the drought. Over this period output dropped by 12%. I also note that in his work for the Wentworth Group of Scientists, Grafton estimated around 12,000 jobs lost from 4,000 gigalitres of water and 6,000 jobs from 2,000 gigalitres.

  8. Good article but the area around St George in Southern QLD is not desert,virtual or otherwise.Upgrade your geography.

  9. Several comments, unfortunately delayed till now due to other work.

    1) I second Penny7b - It seems to have been the first open invite meeting with actual proposals to debate. The timing of the release being delayed past the election prevented it from becoming an issue that people could vote on, and the timing of the release was farcical - 4pm on a Friday - to bury it as much as possible.

    2) I second yourself and Pennyb7 regarding cotton and rice. In and of themselves, they are not "bad", and are actually a good way of dealing with interannual variation.

    3) The MDBA cannot be blamed for only basic consideration of economic and social issues, as in the Water Act giving effect to the creation of the MDBA, these are not the principal concerns. Tony Burke has moved to get MDBA to take more account of those factors, presumably to take off some of the political heat from his potential balancing of those factors. However, the politicians may have already handballed the problem to the next government, with as far as a recall, a comment (by Julia?) to the effect of “I'm not sure if this plan will be finalised before we pack up for the next caretaker period”.

    4) Consultation is quite often a sham. An example I remember was a land management plan being rushed through an unnamed local council, and the consultation box had been ticked because meetings had occurred, even though there was little information presented, and even less account taken of the feedback. The final plan to be voted on came very close to preventing soil disturbance (eg ploughing) on some areas below 15mm, before someone in council twigged and asked the engineer who did the report on which it was based. "Actually, that is meant to be 15cm". In the case of the MDBA it remains to be seen whether consultation is genuine or a sham.

    5) Water rights are proportionally allocated each year. A 37% reduction in water use would then apply in all states, wet or dry, assuming the Government buys back existing water rights. Does the environmental water holder intend to have the same variability in water flows that farmers receive, and how well does this meet their aims? That is an excellent question, and should be the topic for hot debate.

    6) Quentin may have some facts ‘straight’, but does he have the picture right? Does the likely simplification of his story that recent water allocation cuts have had basically no effect on irrigation industries have a good basis? I’ve addressed that, at least for the dairy industry over at JQ’s (last weekend reflection).

    7) Farmers originally bought, or were gifted, land with a water right attached. Some bright economist(s) said it would be more efficient if the water could be bought separately. People borrowed and bought water. But because water was originally gifted, and they have had the use of water, are you suggesting they should give them back freely? Indeed, you likely own a home with a mortgage, but the original land was not legally bought from original owners at settlement. Should you give it back if they ask?

  10. thefarmer42,
    Good points. I agree about the variability question. It is something the is typically avoided be cause it is difficult to get a grasp on, and especially difficult to communicate.

    On your last point I would note that the MDBA board has appeared in the media to be promising buybacks to recover all water from willing sellers, rather than simply adjust the number on the water right. This is a far better outcome than anyone in the city who deals with government planning decisions, who can have their building heritage listed (without compensation), compulsorily acquired at market rates (non-willing seller), their planning code downgraded to limit the development potential (without compensation).

    I will finish by asking what exactly the irrigation community would propose if they were in charge of managing water in the basin?

  11. Maybe I misread your comment about the repurchase of a 'gift' as implied disapproval? I'll assume you consider the repurchase as a reasonable option.

    You'll find out what irrigation communities consider through the consultation process. A number of industry bodies have already made statements on their website about preferred options. The likely scenario is that preferences are for works to improve efficiency rather than solely repurchase.

    From the middle ground, it seems that "extreme lobbying" by some interests, is met at the other end by economists (and others) who are using a bad set of binoculars (eg old gross data, QG) from outside the basin coming to a view that massive reductions in available water have had no effect, and will have no effect. Neither is the basis for good policy.