Murray-Darling River Basin Case Study Australia - World …siteresources.worldbank.org/INTSAREGTOPWATRES/Resources/Austra… · Murray-Darling River Basin Case Study Australia Background

Murray-Darling River Basin Case Study Australia

Background Paper

Brian Haisman

December 2004

This paper is a product of the study, “Integrated River Basin Management and the Principle of Managing Water Resources at the Lowest Appropriate Level – When and Why Does It (Not) Work in Practice?” The Research Support Budget of the World Bank provided major funding. The project was carried out by the Agriculture and Rural Development Department at the World Bank. The Water Resources Management Group and the South Asia Social and Environment Unit at the World Bank have provided additional support. The study core team includes Karin Kemper and Ariel Dinar (Co-Task Team Leaders, World Bank), William Blomquist and Anjali Bhat (consultants, Indiana University), and Michele Diez (World Bank), William Fru (consultant), and Gisèle Sine (International Network of Basin Organizations). Basin case study consultants include Maureen Ballestero (Tárcoles - Costa Rica), Ken Calbick and David Marshall (Fraser - Canada), Rosa Formiga (Alto Tietê and Jaguaribe - Brazil), Consuelo Giansante (Guadalquivir - Spain), Brian Haisman (Murray Darling - Australia), Kikkeri Ramu and Trie Mulat Sunaryo (Brantas - Indonesia), and Andrzej Tonderski (Warta - Poland). The views expressed in this paper are those of the author and should not be attributed to the World Bank.

TABLE OF CONTENTS EXECUTIVE SUMMARY ........................................................................................................i 1. AUSTRALIA IN BRIEF ...................................................................................................... 1

1.1 OVERVIEW ................................ ................................ ................................ ......................1 1.2 ECONOMIC DEVELOPMENT.........................................................................................2 1.3 GOVERNMENTAL SYSTEM ............................................................................................5 1.4 NATIONAL GOVERNMENT ...........................................................................................6 1.5 REGIONAL AND LOCAL GOVERNMENT .....................................................................7 1.6 WATER RESOURCE CONDITIONS AND PROBLEMS ............................................... 10 1.7 RIVER BASIN MANAGEMENT..................................................................................... 14

1.7.1 Pre-1975: The pre-basin management days ................................................................................................. 15 1.7.2 1975 – 1995: The establishment of basin management............................................................................. 15 1.7.3 Post – 1995: The era of micro-economic reform ......................................................................................... 17

1.8 CONTEXT OF NATURAL RESOURCE MANAGEMENT................................ ............ 19 2. THE MURRAY-DARLING BASIN ................................................................................ 21

2.1 PHYSICAL DIMENSIONS.............................................................................................. 21 2.2 INTERNAL PHYSICAL STRUCTURE OF THE RIVER BASIN................................... 23 2.3 HISTORICAL AND CURRENT DEVELOPMENT OF WATER RESOURCES ............ 28

2.3.1 Water resource development............................................................................................................................. 28 2.3.2 Competition for water......................................................................................................................................... 36

2.4 SOCIAL CONTEXT OF RIVER BASIN......................................................................... 43 2.4.1 Demographics ..................................................................................................................................................... 43 2.4.2 Aboriginal peoples............................................................................................................................................. 45 2.4.3 Manufacturing.................................................................................................................................................... 46

3. MANAGEMENT OF THE RIVER BASIN.................................................................... 48 3.1 PRE-DECENTRALIZATION PERIOD TO 1980................................ ............................ 48

3.1.1 National water resource management............................................................................................................ 48 3.1.2 State water resource management.................................................................................................................. 49 3.1.3 River basin organizations.................................................................................................................................. 50

3.2 DECENTRALIZATION REFORM PROCESS ............................................................... 54 3.3 THE MURRAY-DARLING BASIN COMMISSION....................................................... 55

3.3.1 The Murray-Darling Basin Cap ..................................................................................................................... 60 3.4 DECENTRALIZATION IN THE MURRAY-DARLING BASIN................................ .... 64

3.4.1 New South Wales................................................................................................................................................ 64 3.4.2 Victoria................................................................................................................................................................. 68 3.4.3 Snowy Corporatization...................................................................................................................................... 70

4. PERFORMANCE MEASURES....................................................................................... 72 BIBLIOGRAPHY................................................................................................................... 78

List of Tables Table 1: Australia’s Exports by Sector ($ million)............................................................................................ 4 Table 2: Total Public Sector Revenue 2000-01................................................................................................... 8 Table 3: Total Public Sector Revenue 2000-01................................................................................................... 9 Table 4: Public and private sector employment (‘000s) ................................................................................. 10 Table 5: Exceedance of water quality guidelines for Australia...................................................................... 13 Table 6: Estimated extent of land affected by dryland salinity (ha) ............................................................. 14 Table 7: State areas within the Murray -Darling Basin.................................................................................... 21 Table 8: Names and Lengths of the Principal Tributaries of the Murray-Darling Rivers ......................... 23 Table 9: Surface water resources data for the Basin's 26 major catchments............................................... 25 Table 10: Major dams and reservoirs in the Murray -Darling Basin: defined as reservoirs with a gross

capacity of 10,000 megaliters or more..................................................................................................... 26 Table 11: MDBC-Controlled Major Structures ................................................................................................. 30 Table 12: Growth in diversions of water in the MD Basin, 1988 to 1994*.................................................. 34 Table 13: Surface Water Use in the Murray-Darling Basin ............................................................................ 38 Table 14: Biotic and environmental condition of reaches in the Murray-Darling Basin ........................... 39 Table 15: Estimated Quantity of Salt Mobilized to Land Surface, 1998–2100 ........................................... 40 Table 16: Point & diffuse source nutrient inputs to Murray-Darling Basin rivers ...................................... 42 Table 17: Population change, Australia - 1991 to 2001 ................................................................................... 43 Table 18: Murray-Darling Basin: 1996 & 2001 Populations of Urban Centers that had populations over

4,000 people in 1991 ................................................................................................................................... 44 Table 19: Murray-Darling Basin – Rate of change in the number of farm establishments, farm families

and farming individuals, 1986-96 ............................................................................................................. 45 Table 20: Manufacturing Activities in the Murray-Darling Basin 1991-92................................................ 47 Table 21: Devolvement of Authority .................................................................................................................. 74 Table 22: Stakeholder Particip ation..................................................................................................................... 75 Table 23: Financial Self-sufficiency .................................................................................................................... 77

List of Figures Figure 1: Australia’s State boundaries and capitals ........................................................................................... 1 Figure 2: Exports and Imports as Percentage of GDP....................................................................................... 3 Figure 3: Australia’s Population........................................................................................................................... 5 Figure 4: Average Annual Rainfall (mm).......................................................................................................... 11 Figure 5: Murray-Darling Basin showing Major Rivers................................................................................. 22 Figure 6: Location of Major Dams in the Murray -Darling Basin ................................................................. 32 Figure 7: Distribution of Snowy Flows – before Environmental Flows Agreement .................................. 33 Figure 8: Growth in Diversions within each State of the Murray-Darling Basin ....................................... 35 Figure 9: Water Sharing Rules on the Murray River....................................................................................... 51 Figure 10: Murray-Darling Basin Initiative – Institutional Structure.......................................................... 57 Figure 11: Internal Structure of the Murray-Darling Basin Commission.................................................... 58 Figure 12: Operation of the Cap on Water Extractions ................................................................................... 61 Figure 13: Range of Prices for Water Entitlement Transfers in Victoria...................................................... 62 Figure 14: Major catchments of the Murray-Darling Basin........................................................................... 66

Acronyms

ANZECC Australia New Zealand Environment and Conservation Council ARMCANZ Agricult ural and Resource Management Council of Australia and New Zealand CAMBA China-Australia Migratory Bird Agreement COAG Council of Australian Governments FWRAP Federal Water Resources Assistance Program GDP Gross Domestic Product

GL gigaliters GWh gigawatt hours IAG Independent Audit Group IPART Independent Pricing and Regulatory Tribunal JAMBA Japan-Australia Migratory Bird Agreement MDBC Murray-Darling Basin Commission MW megawatts NAP National Action Plan for Salinity and Water Quality NRMMC Natural Resource Management Ministerial Council NSDP National Dryland Salinity Research, Development & Extension Program PIMC Primary Industries Ministerial Council RMC River Murray Commission TCM Total Catchment Management WRC Water Resources Commission

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EXECUTIVE SUMMARY Australia in Brief

Australia is a large island continent of nearly 8 million square kilometers situated in the Asia Pacific region. Its human history is one of political stability relative to the rest of the world. For 40,000 or more years Australia was home only to the world’s longest lived civilization of hunter gather peoples. Then in 1788, after occasional exploratory forays from Europe, the British flag was raised, the land claimed for the United Kingdom, and the period of European settlement began. The colonies that followed eventually joined together in 1901 into the federation of six States and two Territories that is modern-day Australia.

Today the country is a prosperous western-style democracy of 20 million people with a competitive, open economy that is highly resilient and growing strongly. Economic development was initially agricultural but is now greatly diversified with agriculture representing only 3% of gross domestic product (GDP). Australia is a leading commodity exporter and exports in recent years have been around 22% of GDP.

There is a three-tier system of popularly elected government. The national or federal government deals essentially with external and nationally significant matters. The State governments under the 1901 Constitution have sovereign powers over land and water and deal with law and order, health, education, transport and so forth. Local government (towns and rural areas known as shires) is responsible for local roads, water and drainage services, local amenities and the like.

Water resources are a major public issue in Australia because of their scarcity and extreme variability. While the coastal fringes are moderately well endowed with water and are therefore where most of the population resides, the interior is arid and water is very scarce, making Australia the driest inhabited continent on Earth. Management of Water Resources

Water scarcity and the drive for economic development have led to high proportions of river flows being extracted for agriculture and other purposes. This, coupled with a European-style land use that is now known to not always be appropriate to Australia’s ancient and fragile soils has produced noticeable declines in all river health indicator s. In addition, there is very significant, and growing, dryland salinity caused by the widespread clearing of trees for agriculture. Consequently, Australia has adopted an integrated catchment (watershed) management approach to its management of natural resources. The institutional arrangements for this approach are still evolving, but represent one of the most highly developed models anywhere.

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This localized, catchment-based approach, together with public sector reforms that began in the 1970s with a strong emphasis on decentralization of management and participatory decision-making, have been primary drivers for decentralization of water resource management across the country.

As provided by the Constitution, the national government does not directly manage water resources but in recent years has worked in partnership with the States to develop national policies coupled to national micro-economic reforms.

The States each had in the early 1900s a stand-alone rural water agency that managed water rights, built and operated dams, and built and operated irrigation schemes. These agencies have now all disappeared into integrated natural resource agencies, the dams and irrigation schemes have been transferred into a variety of corporative or privatized management models, and the agency staff largely dispersed to decentralized offices with a catchment management focus. What were once large head offices in the State capitals are now relatively small policy and administrative units.

Urban water supply around Australia has always been essentially a local government function, although it took different forms in different States. Decentralization and other water management reforms of the past twenty years have not changed this principle but a good deal of institutional reform has occurred, particularly in regard to the financial sustainability of the water supply entities. The Murray-Darling Basin

The Murray-Darling Basin lies immediately to the west of the Great Dividing Range which runs the length of the east coast of Australia. The basin takes its name from two dominant rivers, the Murray and the Darling, with a combined length of 3,780 kilometers. It extends over one million square kilometers (about the size of France and Spain combined) , which is about one-seventh of the land area of Australia, and covers part of four States plus the Australian Capital Territory. Much of the basin is semi-arid and some 86% of the area contributes no runoff. Total runoff is the lowest of any of the world’s major basins and average annual flow to the sea is a mere 400 cubic meters per second.

The rivers are characterized by very flat gradients (much of the Basin is less than 200 meters above sea level), highly variable flows, and limited runoff. As a result of flat gradients and high evaporation, several of the westward-flowing rivers in the centre of the basin virtually terminate in deltaic wetlands systems. All of these wetlands are of significant environmental value and are major considerations in environmental management of the rivers.

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The water resources of the Basin are now highly developed. Annual runoff is some 24,000 gigaliters (GL) of which around half is lost to natural processes. Total diversions are around 10,600 GL of which over 90% goes to irrigation. Storage dams in the Basin total 34,700 GL and support some 1,470,000 hectares of irrigation, representing nearly 75 percent of the Australian total.

The Basin is now home to nearly 2 million people and boasts a gross product of over A$23 billion. Around 40 percent of Australian farm production originates from the Murray-Darling Basin. Management of the River Basin

Initial management of the basin was associated solely with the issue of water sharing along the transboundary Murray River. The Murray, flowing westwards from its headwaters, forms the boundary of New South Wales and Victoria before flowing through South Australia into the sea. State sovereignty means that the water-sharing situation is not unlike an international basin. Protracted negotiations finally produced in 1914 the Murray Waters Agreement which comprised a package of water-sharing rules, provision for jointly-funded water development infrastructure (dams, locks and weirs), and cost-sharing rules.

Parties to this Agreement were the governments of the three riparian States plus the Commonwealth (i.e. federal) Government. The Agreement required consensus decision-making and provided for the creation of a River Murray Commission (RMC) comprising a representative from each jurisdiction. These representatives were usually the head of the relevant water agency. The Commonwealth’s role was largely that of provision of capital funds because of the national significance of water development on the Murray.

The Agreement provided for the States to nominate one of its agencies as “Constructing Authority” and the various works were assigned to one or another State in a Schedule to the Agreement. By this means the RMC was able to stay very small with only a handful of staff and did not need to acquire all the statutory powers that would have been needed for acquisition of land and construction of works. The Constructing Authorities were invariably the State water agencies and they were also responsible for the operation and maintenance of the structures under programs and budgets approved by RMC. The current asset portfolio constructed and maintained under the Agreement is now valued at A$1.5 billion.

These arrangements endured until 1988 when the Murray-Darling Basin Commission (MDBC) was formed under a new Murray-Darling Basin Agreement and took over this transboundary water management role plus took on a new responsibility for coordinating integrated catchment management across the whole Basin.

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The Murray-Darling Basin Agreement was driven by the same imperatives that were causing the States to move from independent agencies managing for example soils, or water, and to create institutional arrangements that were focused on integrated natural resource management. These imperatives were principally the growing evidence of land and water degradation across much of the productive Australian landscape and the growing understanding of ecological principles.

The Basin Agreement introduced also more elaborate institutional arrangements compared with those of the superseded River Murray Waters Agreement. A Ministerial Council was created as the primary policy-making body, comprising up to three Ministers representing land, water and environmental management from each jurisdiction, and the Commission as the executing body was expanded to comprise two representatives from each jurisdiction. A Community Advisory Committee was added and, importantly, it reports not to the Commission, but directly to the Ministerial Council. Members of this 28 person body are drawn mostly from State catchment management bodies plus 5 representatives of special interests such as indigenous peoples, conservation groups and farming groups.

The Commission office has grown with the new responsibilities and is split into two divisions. River Murray Water has taken over the role of the former River Murray Commission and is set up as a ring-fenced internal business unit of MDBC. It has a staff of 15. The other division is Natural Resource Management and has some 50 staff. The Natural Resource Management Division operates under the same philosophy as River Murray Water in that it does not carry out actual works on the ground but ‘outsources’ this to State and catchment entities.

MDBC operates from a single central office in the national capital Canberra, and thus the story of decentralization of water management in the Murray-Darling Basin is essentially the story of decentralization of State entities. Performance Measures

The extent of decentralization in the Basin can be summarized under headings that reflect the key characteristics of good decentralized water resource management. These are Devolvement of Authority; Stakeholder Participation; and Financial Self-Sufficiency. The following descriptions are necessarily broad as different States have taken somewhat different approaches, but will nonetheless demonstrate the current levels of decentralization.

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Devolvement of Authority

Water resource management is still driven by small central policy and audit groups in each State but all actua l management is carried out at regional levels in local offices with almost complete delegation for policy implementation including water sharing. Management and operation of dams and irrigation schemes has been transferred to entities designed for completely localized day to day management, and for financial sustainability. This has included in all States but one, privatization of irrigation schemes and their assets into the hands of the irrigators.

Urban water and floodplain management have always been localized responsibilities, albeit with some central technical and financial assistance, and this has continued and intensified in both technical and financial aspects. Stakeholder Participation

All levels of water management are now supported by stakeholder advisory groups of one kind or another. This is complete of course in the case of privatized irrigation schemes where there is now no government involvement, but is also particularly well-developed for integrated catchment management. The Basin popula tion has nearly 20 years experience in such community and government partnerships and brings a highly informed and sophisticated capability to the task.

Public consultation is now the norm even for urban water and wastewater projects in a manner that simply did not exist 20 years ago. Financial Self-Sufficiency

The national water reform agenda articulated in 1994, and couched in terms of a national competition policy, placed considerable emphasis on water management moving onto a sound financial footing. Economic elements of water reform policy required removal of cross-subsidies, consumption-based water pricing, new investments only if they were economically viable and ecologically sustainable, better specification of water entitlements, and the encouragement of water trading. These reforms were accompanied by institutional reforms that separated regulatory roles from service provision, required greater local-level responsibilities for management, and encouraged public education and consultation.

These reforms are advanced across the Basin. Generally, both urban and rural (irrigation) water supply infrastructure now gets no government funding for operations and maintenance and a very small and steadily decreasing amount of capital funding. The concept of a renewals annuity has been accepted as part of the pricing structure to ensure the long-run sustainability of the asset base.

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1. AUSTRALIA IN BRIEF

1.1 OVERVIEW

Australia is a sparsely populated island continent in the Asia-Pacific region. Total land area is 7,686,900 square kilometers, much of which is arid or semi-arid, making it the world’s driest inhabited continent. The population of nearly 20 million people is largely concentrated on the more temperate or tropical coastal fringes, particularly the eastern coast and the south-western coast. First settled by Europeans some 200 years ago, Australia was once a series of British Colonies with an economy dominated by agriculture and later gold mining. Today it is a highly diversified and prosperous, western-style democracy and stands as an independent nation.

Australia was created as a federation of six States under the Constitution of 1901. In addition there are two territories with self-government: the vast Northern Territory and the Australian Capital Territory containing the purpose-built capital city of Canberra.

Figure 1: Australia’s State boundaries and capitals

Prior to European settlement Australia had been inhabited for at least 40,000 years (and perhaps up to 60,000 years) by a civilization of unparalleled continuity and longevity. These peoples, known as Aborigines to the Europeans, were hunter-gatherers. While their technological achievements were simple, they have a remarkably complex social organization and spiritual beliefs and practice. This social organization is essentially tribal and territorial,

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with each of the peoples having a strong association with their piece of country and their own language group. Although hierarchical, Aboriginal society is very open and has no established system of chiefs or institutionalized political or social governance arrangements. There was no sense of a national identity. They appeared to live in remarkable balance with their natural resources and, although debate continues as to actual population, they may have numbered as many as three quarters of a million by the time European settlement began. Today they number some 410,000 or about 2.2 percent of the total population

A variety of explorers, including Portuguese, Dutch, French and British, began making contact with the island continent of Australia from as early as 1519. During the mid-1700s the British government began taking an increasingly closer interest and sponsored a number of exploratory expeditions. Subsequently, in 1770 the naval lieutenant James Cook visited the east coast and claimed possession in the name of the British Crown and named this land New South Wales.

By 1786 the British government had decided to settle the eastern half of Australia (westwards to the 135th longitude) for reasons that included establishing a British presence in the region, but primarily driven perhaps by the need for a penal settlement. It was decided that economic development of New South Wales should be initiated by the use of convict labor on government farms. By 1830 some 58,000 convicts had been shipped from Britain to Australia, and the final number was over 160,000.

European settlement of Australia began formally on January 26, 1788 when the ‘First Fleet’ of eleven ships carrying 1,066 people arrived at what is now Sydney, and the commander, Captain Arthur Phillip, raised the British flag and took formal possession. (Macintyre, 1999)

1.2 ECONOMIC DEVELOPMENT

The economy of Australia has been one of the world’s most resilient over the past decade. It is an open economy with strong growth, low inflation and low interest rates.

Australia has a comprehensive economic policy framework in place. Policy reforms have been pursued vigorously to ensure that the economy is globally competitive and remains an attractive destination for investment. Australia has a sound, stable and modern institutional structure that provides certainty to business decisions that will support sustained growth. (DFAT, 2003) It has: § a healthy budgetary position – Australian government net debt is among the lowest in the

OECD, and is considerably lower than in Europe, Japan and the United States.

§ a world-class system of prudential regulation § strong business-oriented corporate regulation and insolvency regimes

§ substantial competition in key areas such as transport, telecommunications, electricity and gas

§ a highly open economy, with very low barriers to trade and investment § a flexible labor market and business-friendly tax system.

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Gross domestic product (GDP) of A$179.4 billion1 in the March Quarter of 2003 represents a change of 2.7% over the corresponding period last year. (ABS, 2003) The Australian economy grew by about 4 percent annually (compound average annual growth) from 1997 to 2002. (DFAT 2003) The outlook remains strong. GDP per capita (purchasing power parity) of US$27,500 rates alongside Canada US$28,900, Japan, US$26,700, U.S.A. US$35,200, France, US$26,500, Germany US$26,300 and U.K. US$26,400. (OECD, 2003)

Australia’s economic growth has been accompanied by low inflation. Australia’s compound average inflation over the 1990s was 2.3 percent, compared with average inflation in the European Union of 3.2 percent and 2.9 percent in the United States. The rate of inflation has been maintained at historically low levels.

Australia has strong export growth and is a leading commodities exporter – notably coal, crude petroleum, iron ore, gold, wheat, aluminum, beef, aluminum ores and wool. Export growth has averaged 8 percent annual growth since 1991-92. The largest single market is Japan, buying 19 percent of total merchandise exports in 2001 – 02. The United States follows with 10 percent , Korea 8 percent and New Zealand 6 percent. (ABS, 2003)

Figure 2: Exports and Imports as Percentage of GDP

At the same time, the degree of processing which Australian exports undergo has been steadily increasing, in turn reflecting the increasing sophistication of Australia’s export mix and higher levels of value-adding of raw materials in Australia. Exports of primary products declined from 63 percent to 59 percent of merchandise exports between 1991-92 and 2001-02.

Less than 10 percent of the country is used for intensive agricultural production, around half for rangelands grazing and the remainder unoccupied land (mainly desert in western and central Australia), Aboriginal land reserves (mainly located in the Northern Territory), forests, mining leases, national parks and urban areas. (ABS Year Book 2003)

1 All dollar figures in this paper are Australian Dollars (A$) unless specifically noted otherwise. As at October 24, 2003, A$1.00 = US$0.69

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During the first century of European settlement the wool industry reigned supreme. Australia was said to be, “…riding on the sheep’s back”. Today, Australia has around 14 percent of the world’s sheep but remains the biggest wool producer at 30 percent of the total.

Discovery of gold in 1851 set in train an unprecedented influx of migrants; many of them miners from the Californian gold fields. Country towns boomed and gold established Melbourne as then the nation’s financial capital. During the early 1900s, the Australian economy became more diverse, but remained dominated by agriculture. After World War II, major expansion occurred into manufacturing and service industries.

This post-war period also saw a minerals boom, much of it based in Western Australia. The relative abundance of minerals and scarcity of water is illustrated by the fact that Australia derives 75% of its electrical energy from coal. In common with many western economies, the place of agriculture in the national accounts has been declining for many years. During the last decade, agriculture has remained at around 3 percent of GDP, but remains significant in export terms.

Table 1: Australia’s Exports by Sector ($ million)

1996 – 97 1997 – 98 1998 – 99 1999 – 00 2000 – 01 2001 – 02

Agriculture 21 045 22 130 21 862 23 617 29 061 29 571

Mining 22 566 25 730 24 786 29 178 39 513 39 162

Manufacturing 25 812 27 980 27 169 32 079 37 514 37 190

Other merchandise

11 511 12 698 11 966 12 791 14 219 15 276

Services 24 226 25 206 26 242 28 369 33 204 30 958

Total exports 105 160 113 744 112 025 126 034 153 511 152 157

Source: DFAT 2003

Australia has averaged a current account deficit of around 4.1 percent of gross domestic product (GDP) over the past decade. In 2000-01 the current account deficit reached a 20-year low of 2.7 percent of GDP, and continued at a low level in 2001-02 when it was 3.1 percent of GDP.

Australia’s population has grown from 18.3 million in 1996 to 19.5 million in 2001. Over the last decade population growth has averaged 1.2 to 1.4% growth annually, or about the same as the world average. (Year Book 2003 ABS)

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Figure 3: Australia’s Population

Since the last recession in the early 1990s the unemployment rate has gradually declined, and the rate in 2001 was 6.7 percent. During the month of August 2003, the unemployment rate fell further from 6.2 to 5.8 percent. (The Age, September 2003)

1.3 GOVERNMENTAL SYSTEM

Throughout the 19th century, Australia was a series of quite separate colonies of Great Britain, each independent of the other. Initially governed by an appointed Governor operating under instructions from Great Britain, the Colonies gradually achieved self -government, each with a bicameral parliament operating along lines of the Westminster tradition.

Moves for unification were surprisingly slow. A federal counc il existed from 1885 but operated only in the nature of a standing conference. It had no executive power. Finally, federation came in 1901 with the adoption of the first Australian Constitution. Interestingly, one issue that held back federation, and even threatened to derail it at one time, was lack of agreement on the sharing of the waters of the transboundary Murray River, which formed the boundary between New South Wales and Victoria, before flowing through South Australia to the sea.

Presently, Australian is a constitutional monarchy, retaining the monarch of Great Britain. The Head of State is Queen Elizabeth II and is represented in Australia by an appointed Governor-General. Essentially, the Queen has only nominal duties and Australia is effectively independent. A national referendum to change to a republic was defeated in 1999.

The Constitution of 1901 created States from the former Colonies and set up the federal Commonwealth Government along bicameral lines. The lower house or House of Representatives is elected by popular preferential vote, and the upper house or Senate was set up with State’s rights in mind and has an equal number of Senators elected by popular preferential vote from each State regardless of size or population. The Prime Minister is the nation’s chief executive.

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The Constitution defines the separation of powers between the Commonwealth and States, with the Commonwealth Government taking responsibility for external and agreed national matters, such as foreign affairs, defense, customs and excise, trade, immigration, and posts and telegraph. All other powers not explicitly given to the Commonwealth reside with the States. States therefore are responsible for health, education, and so forth. Importantly, this results in the States retaining sovereign powers over land and water resources.

The States also have their own sovereign justice systems, initially fully linked back to the Queen as the “fountainhead of justice”. Thus the House of Lords and ultimately the Queen-in-Council of Great Britain once could hear appeals from State Courts. This is no longer possible and the State justice systems are now fully independent. The Constitution however set up the High Court of Australia to, among other things, interpret the Constitution and to provide the ultimate court of appeal from the various State Supreme Courts. The High Court is well regarded internationally.

The Australian system of governance has remained basically unaltered since 1901.

1.4 NATIONAL GOVERNMENT

The Commonwealth Government operated originally from the Victorian State capital Melbourne, but shifted eventually to a purpose-built capital city of Canberra, where it sat for the first time in 1927. Canberra lies within the Australian Capital Territory, which was excised from New South Wales for the purpose of the national capital.

After World War II, the influence of the Commonwealth Government has expanded. This has arisen partially from the States ceding their income tax powers to the Commonwealth during the War effectively in exchange for tax reimbursement grants. The Australian taxation system is one of the most highly centralized in the world. (ABS Year Book 2002) The Commonwealth continues to retain these powers and thus has significant influence in how money is spent when it is returned to the States. In natural resources fields, the Commonwealth has also exerted influence through being responsible for administration of external treaties and agreements, such as the Ramsar Agreement on Wetlands of International Significance. Since federation the Commonwealth has developed many significant bureaucracies covering fields which ostensibly are the province of the States.

Apart from the tax and international aspects of Commonwealth influence noted before, there is also a gradual movement towards the harmonizing of State laws, or at least policies, where interstate implications exist. This is being achieved through the Council of Australian Governments (COAG), which is comprised of the Prime Minister and the Premiers of each State. COAG meets regularly on matters of national significance, the most contentious of which is Commonwealth-State grants. Nationally-harmonized laws now exist for matters such as company laws and road laws, but natural resource matters, and in particular water, are still at various stages of national policy agreement.

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In relation to water resources, the Commonwealth Government has no powers other than that provided by Section 100 of the Constitution.

100. The Commonwealth shall not, by any law or regulation of trade or commerce, abridge the right of a State or of the residents therein to the reasonable use of the waters of rivers for conservation or irrigation.

This section of the Constitution lies within Chapter IV – Finance and Trade and, although not yet tested by the High Court, it is generally interpreted as referring solely to the Commonwealth’s powers that might impact on inland navigation. With the inland rivers of the Murray-Darling Basin now widely acknowledged to be over-allocated to irrigation, debate about the interpretation of “reasonable use” sometimes occurs within environmental circles.

1.5 REGIONAL AND LOCAL GOVERNMENT

Regional government, as represented in Australia by State governments, is largely unchanged since federation in 1901. Each Colony upon becoming a State retained its own Constitution. The States, with the exception of Queensland have retained a bicameral legislature, and all retain the British Crown as head of State. Hence there is a high degree of independent State sovereignty, at least on paper. Each State has a Governor appointed by the Crown (on recommendation of the government) who, like the Governor General for Australia, gives assent on behalf of the Crown to legislation. As noted, State powers are those not specifically reserved to the Commonwealth. In general, this pertains to the internal affairs of Australia, including public order, health, education, administration, transport and maintenance of infrastructure.

In the context of this background paper, the States completely manage water resources, including matters of allocation and water rights, and are responsible for the provision of water supply and related services to their citizens.

Funding of these services is partially sourced from State revenues and partially from Commonwealth tax grants. Direct State revenues are primarily derived from indirect taxes in addition to pricing for services. Generally, States combine all of this revenue into a Consolidated Revenue account and thus the different sources for any particular service can be difficult to identify. The Commonwealth, at times, provides tied grant monies, such as for flood mitigation projects. In such cases, the funding sources generally remain separate and visible.

Local government is essentially a child of the States as it is set up and administered through State Acts. The Australian Capital Territory has a unicameral, popularly elected government but has no separate local government. Local government authorities generally govern prescribed geographic areas that may be urban, rural or both. They are typically managed by an elected Council. Those local government areas that include rural areas are generally known

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as “shires”. Additionally, some States have, at times, set up functional-based local government bodies, say for water supply, that may cover several local government areas. The governing board or council may be either elected or appointed. Although the range of functions undertaken by local governments varies between the different States, most States have passed on to local government powers and responsibilities for such matters as:

§ the construction and maintenance of local roads, streets and bridges

§ water, sewerage and drainage systems

§ environmental health and sanitary services

§ the regulation of building standards

§ recreation and sports grounds, parks, swimming pools, libraries, museums and other civic amenities.

Law enforcement is shared according to the origin of the laws. Thus police services are a State-level function for criminal laws and traffic laws, but enforcement of parking laws, littering laws and the like are typically carried out at local government level. There is also the Australian Federal Police, which enforces Commonwealth criminal law, and protects Commonwealth and national interests from crime in Australia and overseas. They also provide local policing for the Australian Capital Territory.

Funding of local governments is a mix of direct revenues, plus grants from the Commonwealth and their parent State governments. Direct revenues are primarily derived from property taxes, in addition to pricing for services, but tax rates, or more precisely rate increases, may be controlled by the parent State.

An appreciation of the relative sizes of the economies and governmental activities of the three levels of government within Australia can be seen from Tables 2 and 3, which compare total public sector revenues for the financial year 2000-01.

Table 2: Total Public Sector Revenue 2000-01

(Gross over all levels of government)

Level of Government Revenue A$’000

Commonwealth 209,998

Multi-jurisdictional (universities) 9,683

State 130,879

Local 13,930

TOTAL 310,671

Source: Australia Year Book 2003, ABS, Commonwealth of Australia

9

Table 3: Total Public Sector Revenue 2000-01

(Within State jurisdictions)

Jurisdiction State Government

Revenue A$’000

Local Government

Revenue A$’000

New South Wales 44,491 5,779

Victoria 29,473 3,419

Queensland 23,149 4,644

South Australia 10,142 949

Western Australia 15,293 1,513

Tasmania 3,780 465

Northern Territory 2,086 161

Australian Capital Territory 2,465 n.a. (a)

130,879 16,930 Source: Australia Year Book 2003, ABS, Commonwealth of Australia (a) ACT has no separate local government

Management of the public sector has undergone considerable reform in the past two decades. Various inquiries into the machinery and management of government services at both federal and State levels led to reforms that invariably encompassed:

§ responsiveness to the elected government § improved efficiency and effectiveness, including through more results-based management and

less prescription § community participation.

From a water resources and basin management perspective, the critical elements of implementation of these reforms have included:

§ rationalization of institutional arrangements

§ outcomes-based management; including program budgeting, accrual accounting, merit-based staff appointments etc

§ creation of government business enterprises (State-owned corporations) for most service delivery functions

§ privatization of functions not considered core public sector activities

§ outsourcing of non-core business and administrative functions

§ significant delegation and decentralization

§ community participation, including community-government partnerships.

The States initially showed perhaps less inertia than the Commonwealth in the pace of change. For example, the New South Wales Government was the second government in the world and the first government in Australia to adopt accrual based financial reporting. For a time, the

10

two most populous States, New South Wales and Victoria had Premiers from the business world who were vigorous, even ruthless, in pursuing State management along business-oriented lines.

Not surprisingly, this has led to a substantial change in the way government services are delivered in Australia. Table 4 illustrates changes in public and private sector employment over this period of reform.

Table 4: Public and private sector employment (‘000s) Sector 1970 1975 1980 1985 1990 1995 1997

Commonwealth public service

230.9 277.5 153.4 173.7 161.9 146.2 133.6

% 4.3 4.7 2.4 2.6 2.0 1.8 1.6

Commonwealth businesses etc

98.3 118.7 244.0 260.7 244.8 225.5 154.1

% 1.8 2.0 3.9 3.9 3.1 2.7 1.8

Commonwealth Govt total

329.2 396.2 397.4 434.4 406.7 371.7 287.7

% 6.1 6.8 6.3 6.5 5.1 4.5 3.4

States/territories total

620.8 893.4 1 004.1 1 102.9 1 179.1 1 077.8 1 047.6

% 11.6 15.3 16.0 16.6 14.9 13.1 12.5

Local government 104.7 139.5 129.8 153.8 160.3 153.5 148.8

% 1.9 2.4 2.1 2.3 2.0 1.9 1.8

Total public sector

1 054.7 1 429.1 1 531.3 1 691.1 1 746.1 1 603.0 1 484.1

% 19.6 24.4 24.4 25.4 22.1 19.5 17.7

Total private sector

4 317.0 4 422.5 4 742.1 4 966.9 6 162.5 6 627.8 6 905.2

% 80.4 75.6 75.6 74.6 77.9 80.5 82.3

Total employment

5 371.7 5 851.6 6 273.4 6 658.0 7 908.6 8 230.8 8 389.3

% 100.0 100.0 100.0 100.0 100.0 100.0 100

Source: Geoff Winter, Research Note 17 1997-98, Dept of the Parliamentary Library. Commonwealth of Australia

1.6 WATER RESOURCE CONDITIONS AND PROBLEMS

Taken as a whole, Australia is a dry continent with a wide arid centre and some wetter fertile coastal strips. Rainfall is highly variable throughout and has different seasonal patterns from north to south. In the north a tropical monsoon-type climate prevails with a dry winter and a wet summer, while the south is dominated by frontal patterns from the Indian Ocean producing a wet winter and a dry summer.

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Average annual rainfall is 420 millimeters, but only some 12 percent of this rainfall appears as runoff, although this figure varies from less than one percent in the arid interior to around 25 percent in the tropical north. (NLWRA, 2000)

With a land area of 7,686,900 square kilometers (sq km) the total annual surface water runoff has been estimated at 387,180 gigaliters2 (GL) making Australia the driest inhabited continent (NLWRA 2000). However, with a population of just under 20 million, only some 24,058 GL are estimated to be used, suggesting that Australia is water rich by international standards. In fact, because of population distribution, there are a number of supply-demand imbalances. These are most marked in the mainland capital cities and in the Murray-Darling Basin which contains some 75 percent of Australia’s irrigation.

Figure 4: Average Annual Rainfall (mm)

These imbalances, coupled with runoff variability only equaled in South Africa, has resulted in Australia constructing a very large number of storage dams compared to its relatively sparse population. Total storage capacity of large dams as at 1990 was estimated at 67,920 GL (IEA 1999). At the time this represented nearly 4 megaliters or 4,000 cubic meters of (major) water storage per capita.

2 Australia uses the unit megaliter (ML = 106 liters or 1,000 cubic meters) and the unit gigaliter (GL = 1,000 ML or one million cubic meters) as its basic units of water resource volume.

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Sustainable yields of usable groundwater are estimated at around 26,000 GL and total groundwater usage for all purposes is some 4,962 GL. Some aquifers within the New South Wales section of the Murray-Darling Basin are presently over-allocated and government is currently correcting this. The Great Artesian Basin in the eastern inland covers some 1.7 million sq km and is estimated to have a total storage of 8,700,000 GL. Of this only about 570 GL are used annually, mainly for stock watering, but this has resulted in significant pressure drops. Of some 1,100 initially flowing bores, only around half still flow. Government is subsidizing the capping of these bores and a change in water distribution to piped systems to avoid the 85-90 percent losses that occur from the typical open channel distribution systems.

Approximately 75 percent of Australia’s water is used for irrigated agriculture, 90 percent of which occurs on the eastern States of Queensland, New South Wales and Victoria. A further 20 percent is consumed for urban and industrial purposes, and the remainder for other rural uses such as stock watering and domestic water supply. In a typical Australian household in 1996/97 each person used around 274 liters/day. (LWRA 2000)

On east coast rivers, apart from a supply-demand imbalance around a number of cities, the most significant problem is flash flooding. Reponses to this are a mix of flood plain management and building controls, plus the construction of levees in some places. Inland rivers flooding is of a different nature because of the long flat grades, but flooding problems still occur for a number of inland towns. The response is the similar to that for coastal towns, but less sophisticated flood warning systems are used because of slower inland flood travel.

Water quality issues are present across much of Australia. They are not uniformly distributed but tend to be most prominent where human activity is more intense. Turbidity and nutrient enrichment are the most widespread problems although arguably salinity, particularly dry land salinity is the largest single natural resource issue facing Australia.

For inland rivers the most significant issues are a rapidly degrading aquatic environment coupled with salinity and other water quality problems, particularly turbidity and nutrient enrichment. The National Eutrophication Management Program reports that freshwater algal blooms alone are costing the Australian community between A$180 m and A$240 m each year (LWRRDC 2000).

There is presently a major focus of debate in Australia concerning the need to recover a proportion of water now allocated to agriculture and to re-assign it to the maintenance of river health. Assuming the resumption of property rights from agriculture will be accompanied by compensation payments, the total cost could be in excess of A$2 billion. See also the section on the Murray-Darling Basin.

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Table 5: Exceedance of water quality guidelines for Australia (number of river basins)

Major

exceedances Significant

exceedances

Number of basins

assessed

Nutrient: total nitrogen 19 19 50

Nutrient: total phosphorus

40 20 75

Salinity: electrical conductivity

24 18 74

Turbidity 41 10 67

pH 7 6 43 Source: NLWRA 2000

Salinity is the dominant issue in the south west, south east, and in the Murray-Darling Basin. The Australian landscape, as a consequence of its climate and ancient geology, has vast quantities of salt contained within it. Some intense water-logging and salinity has occurred associated with irrigation, but the irrigation areas are small in relation to the total land area or even in relation to the total agricultural areas.

Of more widespread significance is dryland salinity. This has been triggered over the past century as very large areas of land have been cleared of trees and other native vegetation in order to develop cropping and grazing enterprises. It has been estimated that 15 billion trees were removed from the Murray-Darling Basin alone. This import of an essentially European farming model has proved disastrous in the ancient and fragile landscapes of Australia. The removal of trees has interrupted the established hydrological cycle and has diminished the amount of transpired water. Consequently groundwater levels have risen bringing soluble salts to the surface, which both sterilize productive land and increase river salinities through surface runoff pathways. There is perhaps 7 million hectares presently affected by dryland salinity and the National Land & Water Resources Audit has estimated this will rise to around 17 million hectares by the year 2050. (See Table 6.)

While costs to agr iculture are high there is emerging evidence that costs to households and to urban infrastructure may be even higher. (NDSP 2000) The cause is the same rising saline groundwater, but as well as damaging vegetation, it also damages roads and buildings, corrodes gas, water and sewer pipes and causes waterlogging. In Wagga Wagga, a regional city of 56,000 people on the Murrumbidgee River in New South Wales, some 600 houses are presently affected, with 50-100 of these requiring remedial works. House damage is typically caused by brick, mortar and concrete deterioration (due to the growth of salt crystals within pores) and differential settling of soils. Damage to roads and highways is typified by

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weakening pavement, rapid potholing, accelerated aging of bitumen (10 rather than 20 - 30 years), fretting of asphalt, and corrosion of concrete structures. According to Salt Action3 if there is no change in current behavior, the present value of the cost of salinity to the Wagga Wagga region could amount to around A$3.2 million per year (DLWC 1999).

Table 6: Estimated extent of land affected by dryland salinity (ha)

State/Territory 2000 2050

New South Wales 181 000 1 300 000

Victoria 670 000 3 110 000

South Australia 390 000 600 000

Western Australia 4 363 000 8 800 000

Tasmania 54 000 90 000

Queensland not assessed 3 100 000

Total 17 000 000

Source: NLWRA 2000

Responses to irrigation-induced salinity include modification of on-farm practices and the construction of interception wells to limit flows of saline groundwater from irrigated lands towards incised rivers. This is discussed further in the section on the Murray-Darling Basin. Response to the dryland salinity problem is only just beginning. There is a major research effort seeking to create farming systems that are both financially viable and compatible with the physical landscape realities. Additionally, major revegetation programs are being pursued.

The major national vehicle for this response is the National Action Plan on Salinity and Water Quality. The Plan, which builds on a number of existing programs, is an attempt to focus and coordinate national, regional and local efforts at managing dryland salinity and its consequences, including the salinization of rivers. It takes a targets and standards approach to natural resources management, implemented through community-based catchment planning. The approach is augmented by research, incentives, governance and capacity building components of the Plan. The Commonwealth Government has allocated A$0.7 billion over 10 years to be matched by State dollars in a series of bi-lateral agreements.

1.7 RIVER BASIN MANAGEMENT

For purposes of discussion, the evolution of river basin management in Australia can be divided into three approximate periods – pre-1975 before any widespread basin management, 1975 – 1995 when basin management first began to be discussed seriously and became

3 Salt Action is a New South Wales Government salinity management program involving the community and State natural resource agencies.

15

established, and post-1995 when micro-economic reforms in the water industry began to be implemented in earnest. The dates vary from State to State of course, as do the detailed events, but will serve to illustrate the national picture. The following discussion also is largely centered on the eastern States of Queensland, New South Wales, Victoria, and to a lesser extent South Australia as an aid to setting the scene for the later detailed discussions of the case study Murray-Darling Basin.

1.7.1 Pre -1975: The pre -basin management days

As a result of the 1901 Constitution not specifically reserving any water resource management powers to the Commonwealth Government, the national role was, to all intents and purposes, limited to provision of capital for State projects either by way of direct grants or in the form of repayable loans. These projects tended to be major dams or other significant infrastructure. In addition, special-purpose grant programs such as FWRAP (Federal Water Resources Assistance Program) provided funds for such things such as flood mitigation programs executed by local government.

Water resource management itself was carried out by specially created agencies of the State governments. These agencies tended to be of long-standing and had their origins in the early 1900s when State governments had all decided that irrigation should be developed as a means of settling the inland. Just as elsewhere in the world, major irrigation development was dominated in its early days by government-designed, owned and operated projects. In addition, as described later, the States had all adopted systems of administratively granted usufructuary water rights.

Each State therefore set up State government bodies that were remarkably similar to one another across the States (especially Queensland, New South Wales and Victoria) to build major dams, develop and mange irrigation schemes, and to administer the new water rights. These bodies were often “commissions” that enjoyed some separation and independence from mainstream public service departments. Hence the NSW Water Conservation & Irrigation Commission and the Victorian State Rivers & Water Supply Commission for example. These remained essentially unchanged for some 60-70 years, until the 1970s.

1.7.2 1975 – 1995: The establishment of basin management

The primary drivers for the establishment of basin management were twofold. Firstly, as previously described, a spirit of public service management reform was born and began to take effect. Accountability, transparency and other doctrines of the managerialism era began to change how public administration was conducted. For water resource management a major change arose from the doctrine of decentralization, or regionalization as it was called in some places, which preached accountability being placed close to customers (this latter term itself being a new concept for public servants) and accompanied by public participation. The

16

landmark document was probably the 1977 Andrews Report in NSW Towards Decentralization and Community Participation. Led initially by the health bureaucracy, regions within the State were delineated and regional administrations created with previously unknown levels of delegation.

At the same time, public administrators were becoming ever more cognizant of the fact that natural resources tended to interact one with another and that a catchment or river basin made a sensible administrative unit within which to attempt to mange these processes. Not just for the obvious resource of water, but for soils and vegetation. This was accompanied by a slowly growing awareness that natural resources were not infinite and that use of resources had tangible consequences that frequently offset project benefits.

The impetus for this awareness was a combination of scientific research and evaluation of the status of natural resources valued by the community, lobbying by conservation interests, and the occasional crisis that excited the attention of popular news media. Two such crises relevant to this paper were the closure of the mouth of the Murray River because of drought conditions in 1981 and the ‘world’s longest algal bloom’ extending over 1000 kilometers of the Darling River in 1990-91. Although the highly variable Murray River could naturally cease to flow in its upper reaches and indeed the explorer who found the Murray mouth recorded having to drag his boats over sand bars to reach the ocean, the idea that the nation’s mightiest river could fail to reach the sea and that water extractions might have something to do with this, struck a responsive chord in distant urban populations.

The former rural dams, irrigation and water rights agencies began to alter their names in the 1970s to encompass notions of resource management, and a few years later set up their version of decentralization/regionalization around river basin boundaries. This irked the rest of the public sector in some States, which had generally created regions based on a group of local government areas, but by then the public was starting to become attuned to catchment management notions and catchment based boundaries have endured.

The public face of basin management in New South Wales for example, started in 1983 when the (by then) NSW Water Resources Commission and the NSW Soil Conservation Service staged the first ever ‘TCM’ educational display at the National Farm Field Days. TCM stood for Total Catchment Management and rapidly took root both in government and community thinking. Called integrated catchment management in other jurisdictions, this same powerful concept gave rise to the interstate Murray-Darling Basin Initiative in 1988. See Section II.

Water resource allocation had always been conducted on a river basin basis as simply a matter of hydrological commonsense. But it was managed centrally by the States. With the advent of water resource management regions, the regional mangers were delegated to various extents to allocate water, maintain and operate dams and other infrastructure, and to be the prime spokesperson for the government on water matters within the region. In New South Wales this

17

later extended to regionally- based bulk water pricing, with water user groups having significant input to works planning and budgeting.

All of the above refers only to rural or bulk water management. Urban water and wastewater management in all States was not part of the responsibility of the rural water agency, but was a local government responsibility, partially funded and supervised through a State public works agency. River basin entities in New South Wales have never taken up this municipal and industrial water supply role other than to be responsible for bulk water allocation management.

1.7.3 Post – 1995: The era of micro -economic reform

In 1994, the previously mentioned Council of Australia Governments (COAG) enunciated the so-called COAG Water Reforms. These reforms were largely driven by the National Competition Policy, which set out to reverse deteriorating macroeconomic circumstances experienced by Australia during the 1980s, including a rising external debt, high current account deficits, and the effects of falling commodity prices. (CRC Hydrology 2002). The federal government commissioned an inquiry that considered the principles of competition policy agreed to by governments in terms of six specific elements: § limiting anti-competitive conduct;

§ reforming regulation which unjustifiably restricts competition;

§ reforming the structure of public monopolies to facilitate competition; § providing third party access to facilities that are essential to competition;

§ restraining monopoly pricing behavior; and

§ fostering ‘competitive neutrality’ between government and private businesses when they compete (Hilmer 1993).

Against the background of these national competition reform principles, COAG set out a package of associated water reforms aimed at creating an economically viable and environmentally sustainable urban and rural water industry. This package was assembled from initiatives already underway in most States but was given cohesion and national impetus by the COAG agreement. The States were encouraged to implement these reforms by the Commonwealth providing three tranches of competition payments to the States representing their share of the increased national wealth to be created by the National Competition Policy. Payment of any tranche was however dependent on the States making independently verified progress with the reforms.

Key economic elements of the 1994 COAG Water Reforms were:

§ All water pricing is to be based on the principles of consumption-based pricing, full cost recovery and transparency of cross-subsidies with removal of cross-subsidies not consistent with efficient and effective service, use and provision. For urban water services, charges

include an access and usage component. For metropolitan bulk-water suppliers, charges are

on a volumetric basis to recover all costs.

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§ Any future new investment in irrigation schemes, or extensions to existing schemes, is to be undertaken only after appraisal indicates it is economically viable and ecologically

sustainable.

§ State and territory governments are to implement comprehensive systems of water allocations or entitlements, which are to be backed by the separation of water property rights from land

and include clear specification of entitlements in terms of ownership, volume, reliability,

transferability and, if appropriate, quality.

§ The formal determination of water allocations or entitlements includes allocations for the environment as a legitimate user of water.

§ Trading (including across State and territory borders) of water allocations and entitlements is within the social or physical and ecological constraints of catchments.

In addition, institutional reforms were endorsed that promoted:

§ As far as possible, separating resource management and regulatory roles of government from water service provision.

§ Greater local-level responsib ility for water resource management.

§ Greater public education about water use and consultation in implementing water reforms.

§ Research into water use efficiency technologies and related areas. (AFFA 2003)

Apart from the water rights reforms, the most visible response to the COAG package was acceleration in the creation or strengthening of government business enterprises managing water supply infrastructure.

The initial institutional changes involved separation out from water resource agencies of their units managing river regulation infrastructure (dams, weirs and the like) and also the units managing irrigation infrastructure. These units changed into State-owned enterprises, with a corporate form and often subject to company law. New South Wales is the last State to do this with its headworks dams, and is presently in the early stages of corporatization studies for its management of large rural dams and weirs.

Later, in all States except Victoria, a further transition occurred of State-owned irrigation businesses into fully privatized businesses with assets transferred from government to the new private irrigation companies.

Urban water in most States has moved into some form of government business enterprise, or state-owned corporation to achieve both the separation from policy and regulatory functions and the vehicle to drive financial self-sufficiency. In fact, most States derive a financial dividend from their urban water businesses.

Attempts in the late 1990s to coporatize management of the A$1.4 billion interstate water management asset portfolio of the Murray-Darling Basin Commission foundered for lack of uniform support from the contracting State governments.

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1.8 CONTEXT OF NATURAL RESOURCE MANAGEMENT

Accompanying the rise of an integrated catchment management philosophy applied to natural resource management has been a set of complementary institutional reforms. The residual State water resource management agencies surviving after the excision of their water asset management and operation activities have one by one been merged into a variety of integrated natural resource agencies. There is now not any water resource management agencies left as stand-alone entities within the eastern States.

The twin doctrines of natural resource integration and the separation of regulator/manager from service providers are still undergoing change. The service providers are now fairly stable, but States are now experimenting with integrating natural resource management with spatial and other State planning functions. All of these functions are provided in a more or less decentralized context, still driven by the public service reform agenda that took off in the late 1970s.

There is no clear consensus about the best model. Some States still link agriculture with natural resource management, others regard this as a conflict of interest and in violation of the functional separation doctrine. Fisheries management tends to stand alone because of a dominance of maritime aspects, but this is by no means uniform.

Nonetheless, all States have instituted some form of decentralized catchment management in the last 15 – 20 years, creating bodies with a mandate to advise on all aspects of natural resource management. They have however baulked at giving these catchment management bodies too much power and in particular the power to raise their own funds through land taxes. New South Wales has two coastal catchment management authorities with rating powers, but is hesitant about going further despite having legislation since 1989 that would allow this step to be taken. A few years ago a Victorian government gave its catchment management authorities rating powers, but this lasted only until the following State election when the incoming government promptly removed this power.

The arguments against more autonomous catchment management authorities that are empowered to make management decisions and raise land taxes come down to: § Protests from landowners, especially farmers, about the cost impost; § Concerns about creating a fourth tier of government; and § Opposition from local government, which fears inroads to its planning functions and powers

generally.

The federal government, which disburses large sums of public monies for natural resource management (much of which has recently come from partial sale of the federal communications utility) is presently adopting a policy of passing the local disbursement of these funds to properly constituted catchment management authorities via a series of bi-lateral agreements. In this way the authorities can exercise significant influence within their catchment, without necessarily being directly responsible for any specific natural resource.

20

The direction that States took on natural resource management was also influenced to varying degrees by the signing by the States, Territories and the Commonwealth in 1992 of the Intergovernmental Agreement on the Environment. The aim of the agreement was to facilitate: § a cooperative national approach to the environment;

§ a better definition of the roles of the respective governments; § a reduction in the number of disputes between the Commonwealth and the States and

Territories on environment issues;

§ greater certainty of Government and business decision making; and § better environment protection.

The agreement had arisen from a number of prior significant disputes between the jurisdictions, including cases where the Commonwealth had come over the top of State jurisdictions, citing its role as signatory to international agreements as the source of its authority. Additionally, the agreement built in a number of contemporary environmental principles such as recognition of: § the precautionary principle; § intergenerational equity; § conservation of biological diversity and ecological integrity; and § improved valuation, pricing and incentive mechanisms.

Some States have subsequently added these principles to natural resource legislation – for example, the Water Management Act 2000 in New South Wales.

In August 2003 COAG agreed to “refresh” the 1994 water reform agenda by development of a National Water Initiative with four key elements: § improvement of the security of water access entitlements; § protection of eco-system health at a whole -of-basin, aquifer of catchment scale; § improvement of water markets; and § urban water conservation and recycling.

Recently, the institutional arrangements under the COAG umbrella have been reformed in line with broad natural resource policy directions. This latest move has, among other things, embraced the doctrine of separation of resource managers from resource users. Accordingly, in 2001 COAG established the Natural Resource Management Ministerial Council (NRMMC) and the Primary Industries Ministerial Council (PIMC). These Councils have subsumed all or part of the work of three previous bodies, namely the Agricultural and Resource Management Council of Australia and New Zealand (ARMCANZ), the Australia New Zealand Environment and Conservation Council (ANZECC) and the Ministerial Council on Forestry, Fisheries and Aquaculture.

The new bodies, NRMMC and PIMC, are set up administratively by agreement of the Commonwealth, States and Territories, and together with the statutorily established Murray-Darling Basin Ministerial Council (see section III) form the country’s peak natural resource policy-makers under the auspices of COAG.

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2. THE MURRAY-DARLING BASIN

2.1 PHYSICAL DIMENSIONS

The Murray-Darling Basin, situated in the south eastern corner of Australia, extends for 1,060,000 square kilometers, or about one-seventh of the land mass of Australia.

It extends over 1300 kilometers from north to south and some 900 kilometers from east to west. Its eastern boundary is formed by part of the Great Dividing Range, a low mountain chain, rising to about 1500 meters in parts, and extending through three States for over 3500 kilometers parallel to the eastern coast.

The northern and western boundaries of the basin are largely in semi-arid zones and are not easy to define precisely because of the prevailing very flat nature of the landscape. The majority of the basin lies below 200 meters elevation.

Table 7: State areas within the Murray-Darling Basin

State Total areas of

States (sq km) Areas in MDB

(sq km) Percentage of State in MDB

Percentage of the area of

MDB

New South Wales

Victoria

Queensland

South Australia

ACT

TOTALS

802 081

229 049

1 776 620

984 395

2 367

3 794 512

559 873

130 474

260 011

68 744

2 367

1 061 469

74.79

59.96

14.63

6.98

100.00

-

56.65

12.32

24.55

6.49

0.22

100.00

Source: Crabb 1997

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Figure 5: Murray-Darling Basin showing Major Rivers

Canberra

Sydney

Brisbane

NEW SOUTH WALES

QUEENSLAND

VICTORIA

SOUTH AUSTRALIA

Melbourne

Swan Hill

Mildura Morgan

Menindee Meninde Lakes

Lake Victoria

Albury

Forbes

Dubbo

Moree

Charleville

Bourke

Murray Murrumbidgee

Lachlan

Darling Macquarie

Border

Balonne

Barwon

Warrego

Adelaide

200 km

Murray Bridge

Although one of the world’s larger river basins (fifteenth in terms of length and twenty first in terms of area) its runoff is miniscule in comparison with other major basins. For example, the mean annual discharge of the Mekong River is 15,000 cubic meters per second, but that of the Murray is a mere 400 cubic meters per second – by far the lowest run-off from any large river system in the world.

The basin covers part of four States, Queensland, New South Wale s, Victoria and South Australia, and also encompasses the Australia Capital Territory. The relative areas are shown in the table below.

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2.2 INTERNAL PHYSICAL STRUCTURE OF THE RIVER BASIN

The basin has two dominating elements – the western slopes of the Great Dividing Range, which generate virtually all the runoff of the basin; and the vast western plains comprising westward flowing rivers forming the primary drainage pattern from the slopes. The main rivers are shown in Table 8.

Some 86 percent of the basin generates virtually no runoff into the river systems. Eventually all the rivers merge effectively into one – the Murray River at Wentworth, about 825 kilometers from the sea.

Because of very flat slopes and high evaporation, many of the northern rivers lose flow and grow smaller in cross-section as they flow westwards. Some virtually terminate in deltaic wetlands, notably the Ramsar-listed Macquarie Marshes extending for some 1500 square kilometers near the end of the Macquarie River in the centre of the basin. Apart from Ramsar Convention obligations, the Marshes are also highly relevant to the Japan-Australia Migratory Bird Agreement (JAMBA) and the China -Australia Migratory Bird Agreement (CAMBA).

Table 8: Names and Lengths of the Principal Tributaries of the Murray-Darling Rivers

State River Length, km

Queensland-New South Wales Moonie 390 Condamine 690 Culgoa 320 Warrego 800 Paroo 530 New South Wales Lachlan 1,484 Macquarie 960 Bogan 590 Castlereagh 549 Namoi 858 Gwydir 668 Macintyre 321 Victoria Mitta Mitta 219 Kiewa 184 Ovens 227 Broken 192 Goulburn 563 Campaspe 245 Loddon 392 Avoca 269 Wimmera 290

Source: MDBC

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The flatness of the river gradients is illustrated by the fact that the water level just below the Hume Dam storage where the Murray River emerges from the hills into the riverine plains is 156 meters above sea level, but is 2250 kilometers from the sea. Water released from Hume Dam takes around 5 weeks to reach the sea. Actual gradients vary from 1 in 7000 near Albury where the river emerges from the hills onto the riverine plains, to about 1 in 60 000 near the river mouth.

Rainfall across the basin varies from around 1200 millimeters per year at the top of the Great Dividing Range to less than 200 millimeters per year in the western edges. Evaporation varies from around 1000 millimeters per year at the top of the eastern ranges to over 2000 millimeters per year in the west. In other words there is only a very small area of the basin where rainfall exceeds evaporation.

Average rainfall across the basin is 480 millimeters per year, but is highly variable. Only 5 percent of the Basin has an average annual rainfall in excess of 760 millimeters. Total runoff is some 24,000 GL per year, but around half of this is lost to natural processes.

The basin’s two principal rivers are, of course, the Murray, which is 2,530 km long from its source in the Great Dividing Range to its mouth in South Australia; and the Darling, measuring 2,740 km from its source to its confluence with the Murray at Wentworth. About 1,880 km of the length of the Murray River forms the border between New South Wales and Victoria. The border is in fact on the southern or Victorian bank and is generally regarded as being at the top of the riverbank.

Table 9 gives some appreciation of the sub-catchments of the basin and their principal rivers.

The runoff data in Table 9 illustrates clearly the limited water resources available. Runoff, as well as being low, exhibits extreme variability – particularly in the Darling River. Although it is the longest river in Australia (2740 kilometers), the total annual flow has ranged from 0% (no flow for 12 months) to 911% of the mean annual flow.

With fertile riverine plains that possessed fortuitous land slopes suitable for irrigation, all governments embarked on dam construction to improve flow reliability for irrigation and town development. The total constructed storage in the basin is now some 34,500 GL compared to the natural outflow to the sea of 12,200 GL per year and a current annual usage averaging 10,684 GL. This is among the world’s highest ratios of storage volume to usage volume.

Table 10 lists the major storages – in excess of 10,000 megaliters.

25

Table 9: Surface water resources data for the Basin's 26 major catchments

Catchment Area, in

square km

Mean annual runoff,

GL

Basin outflow,

GL

Major divertible resource,

GL

Developed Resource,

GL

1 Upper Murray 15,300 4,200 4,200 3,200 3,200 2 Kiewa 2,050 705 705 350 10 3 Ovens 7,850 1,620 1,620 500 100 4 Broken 7,330 325 325 180 100 5 Goulburn 16,800 3,040 3,040 1,930 1,780 6 Campaspe 4,020 280 280 115 110 7 Loddon 15,400 251 251 100 100 8 Avoca 12,000 85 85 30 5 9 Murray-Riverina 16,300 100 100 50 50

10 Murrumbidgee 84,000 3,800 2,730 2,500 2,140 11 Lake George 985 60 0 5 0 12 Lachlan 84,700 1,270 0 680 570 13 Benanee 21,400 50 50 5 0 14 Mallee 52,000 0 0 0 0 15 Wimmera-Avon 23,400 373 0 120 110 16 Border 49,500 1,100 840 315 149 17 Moonie 15,800 122 100 27 1 18 Gwydir 25,900 860 350 435 327 19 Namoi 43,100 1,000 600 342 300 20 Castlereagh 17,700 210 100 75 0 21 Macquarie-Bogan 73,700 1,350 250 638 417 22 Condamine-

Culgoa 150,00 1,490 340 286 172

23 Warrego 72,800 750 10 37 7 24 Paroo 76,200 717 0 51 0 25 Darling 116,000 106 0 404 354 26 Lower Darling 58,800 446 130 20 2 (Source: AWRC 1987, Volume 1, 50-51)

26

Table 10: Major dams and reservoirs in the Murray-Darling Basin: defined as reservoirs with a gross capacity of 10,000 megaliters or more

Name of storage Date

completed Location Capacity

ML Purpose *

New South Wales

Eucumbene** 1958 Eucumbene River 4,798,000 i,h,u,r

Hume*** 1936-61 River Murray, nr Albury 3,038,000 i,h,u,r

Menindee Lakes*** 1960 Darling River, nr Menindee 2,285,000 i,u,r Burrendong 1967 Macquarie R, nr Wellington 1,678,000 f,i.h.u,r

Blowering 1968 Tumut River 1,628,000 i,h,r

Copeton 1976 Gwydir River 1,364,000 i,h,u,r Wyangala 1936-71 Lachlan River, nr Cowra 1,220,000 i,h,r

Burrinjuck 1927-95 Murrumbidgee River 1,026,000 i,h,u,r

Talbingo 1971 Tumut River 921,000 i,h,u,r Jindabyne** 1967 Snowy River 688,000 i,h,u,r

Lake Victoria*** 1928 River Murray, nr SA border 680,000 i,u,r

Keepit 1960 Namoi River, nr Tamworth 423,000 f,i,h,u,r

Split Rock 1987 Manilla River, Namoi Valley 397,000 i,h,r Windamere 1984 Cudgegong R, nr Mudgee 368,000 i,r

Pindari 1962-96 Severn River, nr Inverell 312,000 i,r

Tantangara 1960 Murrumbidgee River 254,000 i,h,u,r Lake Brewster 1952 Lachlan River, nr Hillston 150,000 i,r

Googong 1978 Queanbeyan River 125,000 f,u

Chaffey 1979 Peel River, nr Tamworth 62,000 i,u Barren Box 1988 nr Griffith 60,000 i

Tumut Pond 1958 Tumut River, nr Tumut 52,800 i,h

Lock 10*** 1929 River Murray, nr Wentworth 47,000 i,n

Oberon 1949 Fish River, nr Oberon 45,400 u Jounama Pondage 1968 Tumut River, nr Tumut 43,500 i,h

Euston Lock 15*** 1937 River Murray, Euston 38,600 i,u,n

Lock 11*** 1927 River Murray, nr Mildura 37,000 i,n Lake Cargelligo 1902 Lachlan River 36,000 i

Carcoar 1970 Belubula River, nr Bathurst 35,800 i

Lock 9*** 1926 Murray R, nr Wentworth 32,000 i,n Tooma 1961 Tooma River, nr Cooma 28,100 i,u

Khancoban 1965 Swampy Plains, nr Albury 26,600 i,h

Stephens Creek 1892 Stephens Cr, nr Broken Hill 24,300 u

Lock 8*** 1935 River Murray, nr Wentworth 24,000 i,n Geehi 1966 Geehi Cr, nr Cooma 21,100 i,h

Suma Park 1962 Summerhill Cr, nr Orange 18,100 u

Ben Chifley 1957 Campbell River, nr Bathurst 16,000 u Umberumberka 1915 Umberumberka Cr, nr Broken Hill 13,200 u

Hay Weir 1983 Murrumbidgee River, nr Hay 13,000 i,u,r

Rufus River Lock 7*** 1934 River Murray, nr Wentworth 13,000 i,n Tombullen 1980 nr Leeton 11,300 i

New South Wales total 22,053,800

Victoria

Dartmouth*** 1980 Mitta Mitta River 3,906,000 f,i,h,u,r Eildon 1927-55 Upper Goulburn River 3,390,000 f,i,h,u,r

Waranga 1910 nr Rushworth 411,000 i,u

Mokoan 1971 Winton Swamp, nr Benalla 365,000 i Eppalock 1964 Campaspe River 312,000 i,r

Cairn Curran 1958 Loddon R, nr Maryborough 148,000 i

27

Yarrawonga Weir*** 1939 River Murray, nr Yarrawonga 120,000 i,h

Tooloondo 1952-60 Natural depression, nr Horsham 107,000 i,r

Bellfield 1966 Fyans Cr, nr Stawell 78,500 i,u

Tullaroop 1959 Tull Cr, nr Carisbrook 74,000 i,u Lake Lonsdale Fyans Cr, nr Stawell 65,500 u

Pine Lake 1928 nr Horsham 64,000 i

Nillahcootie 1967 Broken R, nr Benalla 40,000 i,u Torrumbarry Weir*** 1924-96 River Murray, nr Torrumbarry 38,000 i

Lake Boga nr Swan Hill 37,000 u,r

Taylor's Lake 1923 nr Horsham 36,000 i Greens Lake Goulburn R, nr Stanhope 32,500 i

Upper Coliban 1903 Coliban R, nr Kyneton 31,500 i,u

Wartook 1887 McKenzie R, nr Halls Gap 29,500 u

Rocky Valley 1959 East Kiewa R, nr Wodonga 28,400 h Goulburn Weir 1890 Loddon R, nr Nagambie 25,000 i

Buffalo 1965 Buffalo R, nr Wangaratta 24,000 i,u

Fyans Lake nr Halls Gap 21,000 u Lauriston 1941 Coliban R, nr Kyneton 20,000 u

Malmsbury 1870 Coliban R, nr Kyneton 18,000 u

Green Lake nr Horsham 14,100 u William Hovell 1971 King R, nr Wangaratta 13,500 i

Victoria total 9,449,500

Queensland

Glenlyon 1976 Pike Cr, nr Stanthorpe 261,000 i Leslie 1985 Sandy Cr, nr Warwick 108,000 i,u

Beardmore 1972 Balonne R, nr St George 101,000 i,u,r

Cress Brook 1983 Cressbrook Cr, nr Toowoomba 81,800 u Coolmunda 1968 Macintyre Br 75,200 i,u

Cooby Creek 1942 Cooby Cr, nr Toowoomba 20,900 u

Jack Taylor Weir Balonne R, nr St George 10,100 i Queensland total 658,000

South Australia

Goolwa Barrages*** 1940 River Murray mouth, nr Goolwa 1,974,000 i,u,r,n Lock 1*** 1922 River Murray, nr Blanchetown 64,000 i,u,r,n

Lock 3*** 1925 River Murray, nr Overland Corner 52,000 i,u,r,n

Lock 2*** 1928 River Murray, nr Waikerie 43,000 i,u,r,n

Lock 5*** 1927 River Murray, nr Renmark 39,000 i,u,r,n Lock 6*** 1930 River Murray, nr Murtho 35,000 i,u,r,n

Lock 4*** 1929 River Murray, nr Berri 31,000 i,u,r,n

South Australia total 2,238,000 Australian Capital Territory

Corin 1968 Cotter River, nr Canberra 75,500 u

Burley Griffin 1963 Molonglo River, Canberra 27,700 r Bendora 1961 Cotter River, nr Canberra 10,700 u

ACT total 113,900

Murray-Darling Basin total 34,513,200 (Source: ANCOLD 1990; various MDBC and other sources)

* f - flood control; h - hydro-electricity; i - irrigation; m - industrial and/or mining; r - recreation; u - urban supplies; f - flood mitigation; n - navigation. ** Though strictly speaking outside the MDB, the Eucumbene and Jindabyne storages have been included as they are the major reservoirs for the Snowy Mountains Scheme. *** These are “joint works” as defined in the Murray -Darling Basin Agreement, owned and operated by the various States on behalf of the Murray -Darling Basin Commission.

28

2.3 HISTORICAL AND CURRENT DEVELOPMENT OF WATER RESOURCES

2.3.1 Water resource development

The earliest use of Murray-Darling Basin resources, other than for domestic and stock watering purposes was a vigorous river transport industry started initially on the Murray River and quickly spreading to the Darling and Murrumbidgee Rivers in New South Wales. Based on paddle steamers, the industry grew in response to the expanding pastoral industries, centered largely on wool growing that had spread across the western plains of the basin and with very limited access to adequate roads. By 1855 the first paddle steamer navigated the Murray upstream to Albury (2195 kilometers from the sea) and in 1861 the first steamer reached Walgett on the Darling River, a remarkable 1200 kilometers upstream from the Murray, and an irregular trade followed, dependent on flood years for navigation. The variability of the river flows caused significant problems and, particularly on the Darling, steamers could be stranded for many months because of low flows. (The Darling once stopped flowing for 362 days during the drought of 1902-03).

Significant extractive development of water resources began in the late 19th century following the decline of gold mining. Irrigation began initially as large -scale private irrigation development on the mid Murray River with massive steam-driven pumping plants lifting water onto the highly fertile plains. Shortly after the turn of the century government-sponsored irrigation schemes started in New South Wales on the Murrumbidgee River and in Victoria on the Goulburn River. Schemes along the Murray River soon followed. The driving force for these schemes was government’s desire to open up and populate the inland. Slogans such as “greening the desert” and “turning water into gold” enjoyed wide popularity.

A number of irrigation schemes in all three Murray River States were constructed on both the Murray and its major tributaries after World War I as “soldier settler” projects. The objective was to reward returning soldiers with a block of irrigated land, and incidentally to minimize potential unemployment in the cities as the soldiers ceased active duty. Some of these schemes were ill conceived, farm sizes were inadequate, markets were limited and many schemes failed economically.

Meanwhile in the 1880s the South Australian government had became highly concerned at major extractions of water from the Murray and condemned the actions of the upstream States as exacerbating already difficult navigation conditions and putting the river trade at risk.

These navigation problems caused the South Australian government to begin planning for construction weirs and locks in the lower reaches as a means of securing the valuable river trade and making the port of Goolwa the hub of the inland wool trade. The government had been impressed by similar development on the Mississippi River in the United States and

29

engaged the U.S. Corps of Engineers to make preliminary appraisals of potential sites. At the same time the upstream States began considering major storage works to secure reliable irrigation water supplies.

Debate raged for decades and, as federation approached, threatened the progress of federation. Eventually the States agreed to refer the vexed issue of sharing the transboundary Murray River to a Conference of Engineers to be convened for the purpose, and federation was allowed to proceed, with the new nation proclaimed on 1st January 1901. The Conference followed in 1902 and proposed a series of water regulation infrastructure and a water sharing formula.

It took until 1914 for the original River Murray Waters Agreement to be signed by the governments of New South Wales, Victoria, South Australia and the Commonwealth government. The nature of this Agreement is described more fully in Section III.

The South Australian government had become impatient and had started work on Lock and Weir No 1, Blanchetown and this was incorporated into the schedule of joint works. The long touted Upper Murray Storage, now known as Hume Dam started construction in 1919. The full portfolio of major structure assets and the dates of completion are shown at Table 11.

There is a complex history behind some of these structures. The two weirs on the Murrumbidgee River (major NSW tributary entering the Murray 1236 km from the mouth) are the result of a deal with New South Wales concerning navigation.

During negotiations among the States as to the joint structures that would be built for water conservation and for navigation, New South Wales was offered locks and weirs up the Murrumbidgee as far as the township of Hay – nine structures in all – or the equivalent amount of money to be spent on locks and weirs on the Darling River. New South Wales chose the Murrumbidgee option, but in the event only No. 5 Redbank and No. 7 Maude were built and without a lock chamber. The reason being that railways were rapidly penetrating the inland and by the time agreement was reached, the river trade was already in decline. Of 26 locks and weirs planned for the Murray River, only 13 eventuated due to the decline caused by rail freight growth.

This decrease in the originally planned joint construction program was ratified by amendments to the Murray Waters Agreement in 1934. These amendments also provided for the construction of barrages at the Murray mouth to protect the interests of landholders alongside Lake Alexandrina (and the adjoining Lake Albert) into which the Murray River empties immediately prior to its discharge to the sea. There are five barrages in all linking the island of Lake Alexandrina with the mainland. The longest is Tauwitchere Barrage at 3.66 kilometers and together the five barrages extend for a total of 7.60 kilometers.

30

Table 11: MDBC-Controlled Major Structures

Structure Name Built and Operated by State

Year Completed

Storage Capacity

(GL)

Storage / Pool Level

(m AHD)

Distance from

mouth (km)

Lock & Weir 1 Blanchetown

Lock & Weir 26 Torrumbarry

Lock & Weir 3 Overland C’rn’r

Lock & Weir 9 Kulnine Lock & Weir 11 Mildura

Lock & Weir 5 Renmark Lock & Weir 2 Waikerie Lake Victoria

Lock & Weir 4 Bookpurnong

Lock & Weir 10 Wentworth

Lock & Weir 6 Murtho Lock & Weir 7 Rufus River Lock & Weir 8 Wangumma

Hume Dam Lock & Weir 15 Euston Yarrawonga Weir

Barrages Murray Mouth (5) Maude Weir (M’bidgee R) Redbank Weir (M’bidgee R)

Menindee Lakes (Darling R)

Dartmouth Dam (Mitta Mitta R)

SA

Vic SA SA

Vic SA SA

SA SA

NSW

SA SA SA

NSW/Vic enlarged

NSW

Vic SA

NSW

NSW NSW Vic

1922

1924 1925 1926

1927 1927 1928

1928 1929 1929

1930 1934 1935

1936 1961 1937

1939 1940 1940

1940 1968 1979

64

38 52 32

37 39 43

680 31 47

35 13 24

1520 3080

38

120 2020

5

6 1680* 4000

3.3

86.2 9.8

27.4

34.4 16.3 6.1

27.0 13.2 30.8

19.2 22.1 24.6

182.9 192.0 47.6

124.9 0.8

74.4

68.1 59.8- 61.7

486.0

8

1638 431 765

878 562 362

773 516 825

620 697 726

2225 2225 1110

1992 8

1526

1429 1025 2375

Source: MDBC m AHD = meters above Australian Height Datum (approx sea level) * Menindee can be surcharged above 2000 GL

All of the MDBC-controlled major structures of Table 11 were constructed by and are in effect owned and operated by a State “constructing authority” on behalf of the riparian States. The capital cost of all structures was shared equally by the three riparian States and the Commonwealth (that is, one-quarter shares) and the operations and maintenance costs were shared equally by the three riparian States. Recently, under the impetus of the COAG water reforms there has been a change to an approximate pricing-for-service model and in 1997 the Basin Ministerial Council4 agreed that total annual costs should be split as follows (Dole & Haisman 1998):

4 See Section III for details of Murray-Darling Basin institutional arrangements.

31

New South Wales 40% Victoria 36% South Australia 24%

More recently, the Council has agreed that the capital costs component of annual costs should be changed to a renewals annuity computed as a constant annualized amount, allowing for borrowings and investment as needed, which should be set aside to assure the long-run sustainability of the asset base.

Menindee Lakes is a set of basically four natural lakes lying to the west of the Darling River and augmented by New South Wales into controllable water storages. In the 1960s South Australia had become concerned over limited water availability during drought sequences and was proposing a mid-river storage, the Chowilla Dam. New South Wales offered to lease most of the capacity of the Menindee Lakes Storage to the then River Murray Commission while the Chowilla option was evaluated. In the event, Chowilla was abandoned because of economics and salinity problems and instead the Commission elected to build the 4000 GL Dartmouth Dam on the Mitta Mitta River in Victoria and within the Hume Dam catchment to augment regulated water supplies.

In 1970 the seven-year lease of Menindee Lakes to the Commission was converted into a permanent arrangement and subsequently the commissioning of Dartmouth Dam in 1979 enabled the South Australian minimum annual entitlement under the Murray Waters Agreement to rise from 1546 to 1850 GL.

The Great Depression of 1929 slowed the construction program, and this together with the effects of World War II limited the rate of irrigation development. However, after the war, governments were re-invigorated and several decades of rapid expansion in both dam building and expansion of irrigation. The figure below illustrates the number and spread of major dams across the basin, all of which service irrigation development.

A number of these dams have third party hydro-electric plants installed. Some of these have been afterthoughts, mostly in the 1990s when dam owners were looking to increase their revenue streams and offered potential energy to the highest bidder. These schemes have required significant engineering in some cases, as no hydropower penstocks or other outlet works were incorporated in the initial design. On dams where hydropower provisions were included in the design, some schemes were built from the outset, while others were added when market and/or political conditions were favorable. The MDBC asset portfolio has three hydropower plants attached. Hume Dam has a 50 megawatt (MW) station owned and operated by Eraring Energy, a NSW state-owned corporation; Dartmouth Dam has a 150 MW station owned and operated by Southern Hydro Ltd (now subsidiary of Meridian Energy Australia); and Yarrawonga Weir has a 9.2 MW station owned and operated by Meridian Energy Australia, a subsidiary of the New Zealand state-owned corporation, Meridian Energy.

32

Figure 6: Location of Major Dams in the Murray-Darling Basin

Source: MDBC

A major change to the water resources of the basin occurred with the progressive construction of the Snowy Mountains Hydroelectric Scheme started after World War II as a post-war development project. Construction extended over the period 1949-1974. Essentially the project, consisting of 16 dams, 145 kilometers of tunnels, 80 kilometers of aqueducts and 7 hydropower plants (including 2 underground) diverts large quantities of water from rivers originating in the Snowy Mountains (including the significant coastal Snowy River) to the Murray River and to the Murrumbidgee River. This project was of international engineering significance in its time, and was a source of immense national pride. (SHL 2003)

As presently operated, the scheme diverts an annual average water volume of 1121 GL from coastal rivers to the inland and which is shared approximately equally between the Murray River and the Murrumbidgee River (itself a major tributary of the Murray). Although the installed generating capacity of 3736 megawatts (MW) represents 16.5 percent of total current generating capacity in New South Wales and Victoria, the annual generation of around 4500 gigawatt hours (GWh) represents about 74 percent of all renewable energy in the National Electricity Market.

33

More recently voices have been raised about environmental impacts both in adding water to the Murray and in taking water from the Snowy River which had been reduced to only sufficient flow for domestic and stock watering purposes. As part of the interstate agreement to corporatize the Snowy Mountains Scheme (refer Chapter III) it was agreed to hold a comprehensive public inquiry into water flows.

Figure 7: Distribution of Snowy Flows – before Environmental Flows Agreement

Source MDBC

The inquiry started in 1998 and, as a result, the governments of New South Wales and Victoria agreed to return some of the Snowy River flow in order to at least partially restore the substantially altered aquatic ecosystem. Over a period of 10 years the flow of the Snowy will be restored to 28 percent of its original annual average flow. In order to minimize impacts on irrigators, the Commonwealth, New South Wales and Victoria will contribute some A$340 million over the same 10 year period to creation of water efficiency savings through a variety of technologies. Effects on energy production are estimated to be a reduction of around 11 percent annually. Governments, as shareholders in the energy production, decided to accept this loss as part of the cost of restoration of the health of the Snowy River.

34

Table 12: Growth in diversions of water in the MD Basin, 1988 to 1994*

River System 1998

Development Diversion (GL)

1994 Development Diversion (GL)

Change in Diversion (GL)

Percentage Change in Diversion

NSW

Border Rivers 165 228 63 38.2

Gwydir 378 393 15 4.0

Namoi 274 288 14 5.1

Macquarie/Castlereagh/Bogan 375 400 25 6.7

Upper Darling 103 136 33 32.0

Lower Darling 128 139 11 8.6

Murrumbidgee 2,220 2,300 80 3.6

Murray 1,907 1,977 70 3.7

Total NSW 5,550 5,861 311 5.6

Victoria

Murray 1,640 1,725 85 5.2

Goulburn/Broken/Campaspe/Loddon 1,939 2,094 155 8.0

Total Victoria 3,579 3,819 240 6.7

South Australia

Pumped Diversion 468 506 38 8.1

Reclaimed Swamps 104 104 0 0.0

Total South Australia 572 610 38 6.6

Queensland

Border Rivers 47 135 88 187.2

Condamine/Balonne 178 291 113 63.5

Total Queensland 225 426 201 89.3

ACT 63 65 2 4.1

Total for Basin 9,989 10,781 792 7.9 Source: MDBMC 1995

*The figures are the average diversion figures from the modeled 1988 and 1994 development scenarios

In the light of continuously increasing diversions from the rivers of the Basin, the Murray-Darling Basin Ministerial Council commissioned an audit of water use, which was published in June 1995. This led to the imposition of a cap on water use (see Section III) but gave the first comprehensive tabulation of basin-wide water use on a consistent basis. This revealed that median flow to the sea had been reduced 79 percent from natural conditions by the high levels of diversions.

35

The Audit of Water Use also revealed the rates of growth in water diversions from 1988, which was the year used as the benchmark for the basin salinity strategy. This strategy arose from concerns about salinity and waterlogging problems along the Murray River with studies showing that the irrigation areas affected by high water tables could increase from 559,000 hectares in 1985 to 869,000 hectares in 2015 (MDBMC, 1987). The historic MDBC Salinity and Drainage Strategy resulted, in which the States agreed to be responsible for actions taken after 1 January 1988 that would significantly affect river salinity. In effect a market in salt credits was set up. A target salinity (80 EC5) was set for Morgan in South Australia (near the pipelines taking water to Adelaide) and a series of jointly developed salinity interception schemes agreed upon to deal with existing saline inflows.

Figure 8: Growth in Diversions within each State of the Murray-Darling Basin

5 EC = electro-conductivity units (micro Siemens per cm) used as an indicator of total dissolved solids (TDS). 1 EC is approximately equally to 0.6 mg/liter of total dissolved solids.

0

2000

4000

6000

8000

10000

12000

14000

1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Year

An

nu

al D

iver

sio

n (G

L/Y

ear)

Total

NSW

VictoriaS.A.

Queensland

ACTAverage Natural Flow to Sea

Full development of existing entitlements

'88'94

Average Natural Flow to Sea

Source: MDBC 1995

36

2.3.2 Competition for water

During the most of the 19th century, rights to take or divert water were governed by Common Law inherited from Great Britain. This approach allowed for private riparian water rights, with riparian landholders able to extract water effectively subject only to claims from the downstream neighbors. As irrigation demand began to accelerate all of the Colonies quickly perceived this approach as unworkable in the highly variable hydrology of the basin. After holding formal inquiries (Royal Commissions) all had replaced the common law around the turn of the century with statute law that explicitly vested the control and use of water in the State and provided for a system of administratively granted usufructuary rights.

On the face of it, this should have resulted in a sustainable water allocation system. The actual results varied significantly from State to State.

South Australia generates no runoff within its section of the basin, so was more constrained by the water sharing provisions of the Murray-Darling Basin Agreement. Virtually all irrigation in South Australia is of permanent plantings – vines and fruit trees – and these of course need high security water supplies for long-term survival. Water allocation was accordingly conservative. The other major use of Murray water in South Australia is for urban supplies to the capital Adelaide, which is actually outside the basin and relies on pumping and overland pipelines. Adelaide (population 1.1 million) takes an average of around 130 GL annually although the figure is highly variable. In dry times when local catchments in the Adelaide Hills are providing little water, Adelaide can take up to 80 percent of its requirements from the Murray River.

Victoria, with irrigation based on vines, fruit trees and a significant dairy industry with improved pastures, also took a conservative approach to allocations. Victorian Murray irrigators can expect to get their full allocations 96 years out of 100 and the worst shortfall is modeled at 40 percent. In fact in the very severe drought just ending (hopefully) Victorian Murray irrigators had water rights restricted. (This does not tell the whole story, as Victoria has a system of “sales” water over and above water rights that because of conservative allocation is available in most years, so that irrigation enterprises have come to rely on this additional, but not guaranteed, water.)

New South Wales, in computing the allocation limits for each catchment, had assumed that the underuse of entitlements typical throughout the 50s, 60s and early 70s would persist. This underuse came about because irrigation, apart from the horticultural blocks in the Murrumbidgee Irrigation Areas, was largely based, both by government design and by irrigator practice, on notions of “drought-proofing” or providing supplementary fodder and other crops, to more conventional dryland farming. Within the Murray Irrigation Districts for example, water was allocated to irrigation farms on a “one -in-three” basis – meaning enough

37

water to irrigate one-third of the farm area. Accordingly, total allocation limits for each catchment were set on a basis that only around 70 percent of entitlements would be used at any one time.

In fact, during the 1970s irrigation was transforming itself into an industry in its own right. Water became steadily more valuable, water use increased, and it is generally accepted today that New South Wales is over-allocated. Again the story is a little more complex, because water entitlement volumes are not absolute numbers but represent a share of the available water. Thus allocations can be 50 percent higher than the average catchment yield but the catchment can be operated sustainably, because the allocation percentage permitted at any one time is continuously under government control. In some New South Wales catchments, full entitlements can be expected in only around 35 years in 100.

In Queensland, there had been relatively little irrigation development until recently. The rivers in the Queensland portion of the basin do not have great amounts of water (some are non-perennial in fact) and Queensland was concentrating its inland development elsewhere.

Total water use in the Murray-Darling Basin as revealed by the MDBC Water Use Audit demonstrated that irrigation dominated water use on all Basin rivers.

The high levels of water extraction and the economic development of the Basin generally has led to declines in water quality and in river health generally. The new competition for water is river health versus extraction of water for economic gain and the nation is currently engaged in substantial debate on this issue within the Murray-Darling Basin.

38

Table 13: Surface Water Use in the Murray-Darling Basin

River System Diversion for

Irrigation (GL) Domestic, Industrial, Stock & Town Use (GL)

Total Water Diversion (GL)

Diversion as a % of Total Basin Diversion

NSW

Border Rivers 221 1 222 2.1

Gwydir 299 1 300 2.8

Namoi 244 4 248 2.3

Macquarie/Castlereagh/Bogan 465 6 471 4.4

Upper Darling 188 1 189 1.8

Lower Darling 128 85 213 2.0

Murrumbidgee 2,424 19 2,443 22.9

Murray 2,024 29 2,053 19.2

Total NSW 5,993 146 6,139 57.4

Victoria

Upper Murray/Ovens/Kiewa 1,531 36 1,567 14.7

Lower Murray 264 20 284 2.7

Goulburn/Broken/Loddon 1,656 54 1,710 16.0

Campaspe 79 22 101 0.9

Total Victoria 3,530 132 3,662 34.3

South Australia

Private Pumped Diversion 235 4 239 2.2

Government Pumped Diversion 129 100 229 2.1

Reclaimed Swamps 106 0 106 1.0

Total South Australia 470 104 574 5.4

Queensland

Border Rivers 72 2 74 0.7

Macintyre Brook 10 0 10 0.1

Condamine/Balonne* 157 5 162 1.5

Total Queensland* 239 7 246 2.3

ACT 0 63 63 0.6

Total for Basin 10,232 452 10,684 100.0

Source: MDBMC Water Audit June 1995 * Excludes water harvesting diversions

• Annual diversion averaged 10,676 GL/year • Over 95% of diversions were for irrigation

In response to growing evidence of a decline in river health the MDBC commissioned an audit of river condition to bring together current studies and knowledge and to inform the debate on restoration of river health. The results (Norris et al 2001) showed, among other things, that:

39

§ 38 percent of the river length assessed had biota that was significantly impaired;

§ 10 percent of the river length was found to be severely impaired, having lost at least 50 percent of the types of aquatic invertebrates expected to occur there;

§ Over 95 percent of the river length assessed in the Murray-Darling Basin has an environmental condition that is degraded and 30 percent is substantially modified from the original condition.

Table 14: Biotic and environmental condition of reaches in the Murray-Darling Basin

Percentage of river length in each category

Indices Biota condition

Reference (%) 62

Significantly Impaired (%)

28

Severely Impaired (%)

8

Extremely Impaired (%)

2

Environment condition – overall

Largely Unmodified

(%)

3

Moderately Modified (%)

69

Substantially Modified (%)

29

Severely Modified (%)

0

Environmental components

Hydrological disturbance index

Catchment disturbance index

Habitat index

Nutrient and suspended load index

43

4

28

4

44

93

36

41

11

3

34

49

1

0

3

6

Total Basin river length is 77,366 km. Note: Figures may not add up exactly because of rounding Source: Norris et al 2001; Snapshot of the Murray-Darling Basin River Condition

The above Table from the same report illustrates the position clearly. This has set the scene for what the Commission has termed the Living Murray initiative, which is a concerted attack on the issue of failing river health of the transboundary Murray River. The States were already addressing environmental flows across the rest of the Basin, but the Murray itself, because of the complexities of transboundary management and of its highly regulated nature limiting the flow modification options has been somewhat slower to address. As expected, subsequent studies are showing that nothing less than a substantial clawback of water extractions will produce meaningful restoration. How to do this is the subject of much debate, but governments are coming to the realization that, despite political, economic and technical difficulties, large capital acquisitions of water for the environment are the only realistic option if river health is to be at least partially restored.

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Of the physio-chemical parameters of river health, the most important in the Murray-Darling Basin are salinity, nutrients and turbidity.

Of these, salinity is dominating current integrated catchment management efforts. During the 1970s the effects of water-logging and irrigation-induced salinity along the Murray River itself was the centre of attention and led to the MDBC Salinity and Drainage Strategy of 1998. By 1987 it was estimated that 96,000 hectares of the Basin’s irrigated land were salt -affected and 560,000 hectares had water tables within 2 meters of the land surface. However, scientists were already plotting the spread of dryland salinity across most of the western slopes of the Great Dividing Range as a consequence of the policy and practice of stripping native vegetation and tree cover to establish cropping, cultivation and improved pastures.

A recent Salinity Audit of the Basin (MDBMC 1999) demonstrated that future salt exports to the rivers from the landscape will shift from irrigation-induced sources to dryland catchment sources. An important finding of the Audit however is the estimation that much of the salt mobilized does not get exported through the rivers and on to the sea. It stays in the landscape or gets diverted into irrigation areas and floodplain wetlands. The Audit further predicted that at the downstream end of many river valleys, salinity would rise to levels that would threaten the use of the water for human consumption and eventually agriculture. For example, the Audit predicts that in the central basin rivers, the Macquarie and the Bogan Rivers, salinity will rise above the World Health Organization standard for drinking water within 20 years. The salt volumes being mobilized form the landscape are significant.

Table 15: Estimated Quantity of Salt Mobilized to Land Surface, 1998–2100

Murray-Darling Basin

Salt mobilized to land surface (tonnes per year)

State 1998 2020 2050 2100

South Australia

Victoria

New South Wales

Queensland

434,000

740,000

3,707,000

>186,000

640,000

825,000

5,000,000

>255,000

870,000

1,150,000

6,140,000

>256,000

1,020,000

1,370,000

7,690,000

>256,000

BASIN TOTAL >5,070,000 >6,720,000 >8,420,000 >10,340,000 Source: MDBMC, 1999

Response to the irrigation-induced salinity increases in the Murray River first reported on in detail in the early 1970s (GHD 1970) was the construction of lines of salinity interception wells at key locations, plus a scheme of “salinity credits” established between the basin States that ensured that that any activity that would increase salinity levels had to be accompanied by an equal mitigating action, either by physical actions or trading in credits. Together these initiatives formed key elements of the Salinity and Drainage Strategy of 1988 administered by the MDBC. The salinity interception schemes are joint works of the MDBC managed in the

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same way as the joint dams, locks and weirs. The saline groundwater is pumped to evaporation basins well away from the river. This Strategy has largely been successful (MDBC 1999c) but in the larger picture of dryland salinity threats to river salinity, the positive effects of the 1988 Strategy on river salinity represents only a buying of time.

Initial response to the growing awareness of the magnitude of the dryland salinity problem was the National Dryland Salinity Research, Development & Extension Program (NSDP) established jointly by the Commonwealth and State Governments in 1993. This Program is essentially a cooperative research effort to understand the nature of dryland salinity and to identify farm and other management practices that could either assist in remediation or, as a default option where nothing else will work, to identify productive uses of the saline landscape.

The management program that complements the NSDP is the National Action Plan for Salinity and Water Quality (NAP). This is described further in section III but is a partnership plan between communities (mostly as represented by their catchment management authorities) and government to fund and manage specific actions such as tree planting etc. The Commonwealth Government has pledged A$700 million to be matched by the States and Territories in a A$1,400 million program.

The nature of the Basin geology is such that natural turbidity can be high in some of the Basin’s rivers. The amount of salt in the landscape has also ensured that natural river salinities can also be high. In fact, the first recorded comments on river salinity come from the first explorers of the inland. The actions of human settlement have come on top of these background salinities.

Similarly, toxic algal blooms are a natural occurrence and have been noted since the beginning of European settlement. There is evidence however that human activity has increased nutrient levels. In the summer of 1990-91, following extensive flooding of the far west of New South Wales, the Darling River managed to produce what has been called the world’s longest algal bloom, with more than 1000 kilometers of river affected.

A report commissioned by MDBC shortly after the Darling bloom illustrated the interesting fact that point source nutrient inputs to the rivers was highest during a dry year, suggesting that sewage treatment plant and other discharges formed the primary source, but that diffuse sources of nutrients dominated in wet years, suggesting an overland, or agricultural source for the nutrients.

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Table 16: Point & diffuse source nutrient inputs to Murray-Darling Basin rivers

Category Nutrient Loads, tonnes per year

Dry Year Average Year Wet Year

Total P Total N Total P Total N Total P Total N

Point sources 650 3,900 750 4,400 900 5,300

Diffuse sources 250 1,600 950 6,700 4,300 28,000

Ratio point / diffuse sources

2.6 2.4 0.8 0.7 0.2 0.2

Source: GHD 1992, S-8.

Significant research followed the Darling bloom and led to increased investment in discharge management and erosion control. Managing algal blooms has become a routine part of river operations with, for example, flows that are designed to provide adequate turn-over of weir pools being built into valley environmental flow strategies.

Flooding represents another form of competition for water, or rather competition for floodway areas within the Basin. Flat river gradients in the Murray-Darling Basin result in substantial lateral spread of even modest overbank flooding. With the exception of flood warning predictions, flood management however is treated generally as a local management issue, not a basin one. Urban towns alongside rivers typically have levee protection added, and there are some rural levees protecting high value crops such as cotton in the north of New South Wales.

The scale of the rivers is such that operation of headwater dams has very little impact on flooding, except in the immediate one or two hundred kilometers downstream from the dams. MDBC, under the mandate agreed to by the States and codified in the Murray-Darling Basin Agreement operates its dams essentially for water supply purposes, but practices flood mitigation generally to the extent that water supplies are not unduly jeopardized.

Following major floods in the Upper Murray River in 1996, the Commission conducted a community-based review of the operations of the two headworks storages (Hume Dam, 3080 GL; Dartmouth Dam, 4000 GL) and a new balance between the needs of water supply (irrigation) floodplain dwellers, and environmental needs was sought (Haisman et al 1999). The review also took cognizance of recreation, cultural and hydropower needs. The results of this study have passed on into the ‘Living Murray’ environmental flows initiative for further refinement. (MDBC 1999a)

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2.4 SOCIAL CONTEXT OF RIVER BASIN

2.4.1 Demographics

Essentially, the Basin is sparsely populated, with 1.9 million people over 1,060,000 square kilometers – a population density of less than 2 people per square kilometer. The pattern of population change in the last decade in the Basin has been one of consolidation of the larger population centers and static or declining smaller towns. This reflects changes in agriculture to fewer farm units as a result of technological and economic forces, improved roads and communications, and a decline in services as banks and other institutions have rationalized their country services.

Table 17: Population change, Australia - 1991 to 2001

2001 population Change since 1991 (a)

Remoteness Area '000 %

Major Cities 12,373.3 12.9

Inner Regional 3,872.7 14.3

Outer Regional 1,978.5 4.9

Remote 334.7 -0.2

Very Remote 201.1 4.5

Australia (b) 18,769.2 11.9 (a) Based on 2001 Remoteness Areas. (b) Includes persons in Migratory category. Source: ABS 2001 Census of Population and Housing

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Table 18: Murray-Darling Basin: 1996 & 2001 Populations of Urban Centers that had populations over 4,000 people in 1991

State Urban area 1991 Population 1996 Population 2001 Population New South Wales Wagga Wagga 40,875 42,848 44,451 Albury 39,975 41,491 42,148 Tamworth 31,716 31,865 32,543 Orange 29,635 30,705 31,970 Dubbo 28,064 30,102 30,937 Bathurst 24,682 26,029 27,036 Queanbeyan 23,714 25,689 29,928 Broken Hill 23,263 20,963 19,834 Griffith 13,296 14,209 16,003 Moree 10,062 9,270 9,273 Inverell 9,736 9,378 9,537 Gunnedah 8,874 8,315 7,871 Parkes 8,784 10,094 9,805 Cowra 8,422 8,544 8,722 Deniliquin 7,895 7,816 7,786 Forbes 7,552 7,467 7,102 Mudgee 7,447 8,195 8,619 Cooma 7,385 7,150 6,949 Narrabri 6,694 6,419 6,245 Young 6,666 6,798 6,836 Cootamundra 6,384 5,879 5,486 Leeton 6,245 6,615 6,927 Glen Innes 6,140 6,101 5,722 Tumut 5,955 5,915 6,243 Corowa 5,064 5,161 5,220 Yass 4,828 4,840 4,909 Narrandera 4,649 4,678 4,119 Temora 4,270 4,125 4,146 Cobar 4,138 4,524 4,117 Victoria Bendigo 57,427 59,936 68,715 Shepparton-

Mooroopna 30,511 31,945 35,828

Wodonga 23,639 25,825 27,732 Mildura 23,176 24,142 28,062 Wangaratta 15,984 15,527 16,342 Horsham 12,552 12,591 13,241 Echuca 9,439 10,014 10,955 Swan Hill 9,357 9,385 9,771 Benalla 8,334 8,582 8,614 Maryborough 7,623 7,381 7,481 Castlemaine 6,812 6,990 6,835 Seymour 6,558 6,294 6,441 Stawell 6,339 6,272 6,142 Kyabram 5,540 5,738 5,534 Kerang 4,024 3,883 3,719 Queensland Toowoomba 75,900 83,350 89,338 Warwick 10,393 10,947 12,011 Dalby 9,385 9,517 9,731 Roma 5,669 5,744 5,907 Goondiwindi 4,331 4,374 5,491 Stanthorpe 4,187 4,154 4,193 South Australia Murray Bridge 12,725 12,831 13,017 Renmark 4,256 4,366 4,470 ACT Canberra 276,162 297,034 309,799 Source: ABS 1993; 1998; 2003

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The changes in farm establishments and in the numbers of individuals on farms follow a familiar international pattern for developed countries. Australian agriculture now operates in a very low tariff environment and the pressures for structural change in the industry have been strong. The figures for the decade 1986-1996 in the Murray-Darling Basin are shown below, although the trend is a national one.

Table 19: Murray-Darling Basin – Rate of change in the number of farm establishments, farm families and farming individuals, 1986-96

Change 1986-96 Change 1986-91 Change 1991-96

Farm families - 24.4% - 12.9% - 13.1%

Farm individuals - 22.9% - 16.0% - 8.2%

Farm establishments

- 16.2% no data no data

Source: Adjusting for Catchment Management, MDBC, June 2000

2.4.2 Aboriginal peoples

The Basin is, naturally, very important to the Aboriginal people, and thousands of Aboriginal sites have been located along the rivers and floodplains. At the Lake Mungo World Heritage site there is evidence of occupation at least 40,000 years ago. In 1994, the lowering of water levels in Lake Victoria for maintenance purposes, revealed more than 10,000 Aboriginal burials dating back between 3,000 and 4,000 years, one of the largest burial sites ever discovered (MDBC 1998).

Of more recent origin are the many carved and scarred trees from which such things as bark canoes, shields, boomerangs and carrying dishes were cut. These are to be found along most of the Basin's waterways. In the central Murray area, there may have been sites of semi-permanent settlements with high population densities (MDBMC 1987a).

Recognition of Aboriginal rights in water management is relatively new and is still a matter of debate and resolution through the courts, but it is now common that indigenous representation is sought on all major issues. At Lake Victoria, MDBC has spent some A$7 million in investigations and protection works for Aboriginal heritage. States operating rivers and issuing water use rights, also attempt to take due recognition of this heritage.

The Aboriginal peoples of Australia were hunter gathers and had not developed water resources in any modern sense of the term. Water as a resource simply formed a natural habitat for food sources. In fact, water has a deep spiritual significance for Aboriginal peoples that is still poorly understood (much is secret) and was certainly not understood at all by the early European settlers. When the British flag was first raised on 26 January 1788, Australia was basically regarded as terra nullius – that is, unoccupied in any sense of land property rights.

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Recent court cases have overturned the terra nullius doctrine and subsequent laws now recognize a form of native title that pertains to traditional activities - spiritual, ceremonial, hunting and the like. While the equivalent position in water is still evolving, modern water legislation such as the New South Wales Water Management Act 2000 provides for the holders of native title (to land), without need for a license, to take and use water in exercise of their native title rights.

In reality, the quantities of water currently involved in the exercise of native title rights are generally trivial in terms of extractions, but there have however been some impacts in a number of special cases where umbrella environmental laws have required government water agencies to take account of matters of aboriginal significance.

One such case in northern NSW involved the Boobera Lagoon regarded by local aboriginal peoples as the home of the Rainbow Serpent and therefore of critical importance to the Dreamtime6. The water agency put special restrictive conditions on water extraction licenses from the lagoon to preserve the Aboriginal heritage values.

2.4.3 Manufacturing

While agriculture is the dominant economic activity in the Basin, manufacturing is not insignificant. In 1991-92, for the whole of the Murray-Darling Basin, there were over 3,200 manufacturing 'locations' (essentially establishments), employing over 62,400 people, and with a turnover of over A$10,750 million (6.4 percent of the Australian total) The two largest sectors are 'food, beverages and tobacco' and ‘textiles’, each account ing for about 17 percent of the category nationally. Together they account for 63.5 percent of the Basin's manufacturing turnover. (MDBC 2003) Table 18 illustrates the manufacturing mix in 1991-92.

The dominant manufacturing sectors are clearly derived from the Basin’s agricultural base, and the total figure for agriculturally dependent manufacturing is almost certainly in the range of at least 70 to 75 percent , i.e. a turnover close to A$8,000 million. Other agriculturally-independent activities include computer manufacture, car transmissions, whitegoods and so forth.

Finally, a number of locations can now correctly be termed important manufacturing centers, especially Albury-Wodonga (turnover A$1,275 billion), Canberra-Queanbeyan ($660 million), Bathurst-Orange ($635 million), Toowoomba ($623 million), Shepparton-Mooroopna ($467 million), and Wagga Wagga ($357 million). (MDBC 2003)

6 Aboriginal myths and ritual concerning ancestry, natural resources, sacred and other sites make up the Dreaming, or Dreamtime that brings the past into the present signifying continuity and eternity. The Rainbow Serpent in Aboriginal mythology lives in permanent water holes and is seen as a guardian of water resources, and among other things ensures replenishment of stores of water.

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Table 20: Manufacturing Activities in the Murray-Darling Basin 1991-92

Description

Number of establishments

at June 30 1992

Numbers employed at June 30 1992

Wages & salaries 1991-92, A$mill

Turnover, 1991-92, A$mill

Food, beverages and tobacco

673 28,095 787.6 6,136.6

Textiles 75 3,624 91.0 692.8

Clothing and footwear

70 1,890 39.9 143.2

Wood, wood products, furniture

552 5,131 115.1 601.1

Paper, paper products, printing and publishing

304 5,101 131.5 617.0

Chemical, petroleum and coal products

51 786 22.5 120.2

Non-metallic mineral products

251 1,871 49.5 297.8

Basic metal products

58 989 28.2 212.7

Fabricat ed metal products

512 5,031 123.0 648.5

Transport equipment

160 2,523 64.7 255.6

Other machinery and equipment

379 5,552 134.3 760.0

Miscellaneous manufacturing

196 1,886 43.0 268.0

Total MD Basin manufacturing

3,281 62,479 1,630.3 10,754.4

Source MDBC 2003: (data provided by the Australian Bureau of Statistics, Sydney)

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3. MANAGEMENT OF THE RIVER BASIN There is no single, or overall, institution directly responsible for management of water resources of the Basin. In brief, the key players are: § State governments and their local government entities and authorities, which have primary

responsibility within their territory for all water resource management and water supply matters.

§ The Murray-Darling Basin Commission (MDBC), which comprises representatives of all Basin States, and manages structures and transboundary waters on the border between New South Wales and Victoria, and is responsible for developing, monitoring and coordinating joint natural resource management and integrated catchment management policies of the member States. It is the only body specifically set up to cover the Basin and is becoming more critical as the States move steadily towards more harmonization of their catchment management.

§ The small Dumaresq-Barwon Border Rivers Commission, which comprises representatives of the States of New South Wales and Queensland, and manages structures and transboundary waters on the border of New South Wales and Queensland.

3.1 PRE-DECENTRALIZATION PERIOD TO 1980

The pre-decentralization period was characterized by a fairly uniform approach to water management within all four basin States. Today there still remain many similarities, especially in principle, but a variety of institutional arrangements have emerged from the 1980s onwards, driven by a combination of the doctrine of decentralization of public administration and by the move to a river basin approach.

3.1.1 National water resource management

As noted previously, the national or federal government has no direct water resource management role. That is, it is not responsible for any specific body of water, although since the COAG water reforms of 1994, it does collate national water policy. In the pre-decentralization period it did however exert significant influence on water development because of its role in funding State programs. Thus, a good deal of the dam construction that took place in the Murray-Darling Basin in the period 1950 – 1980 was made possible by federal capital grants and loan funds used to supplement State funds. The federal government at times was the sole source of funds as in the case of the Snowy Mountains Scheme.

While some of this funding was ad hoc on the merits of individual propositions mounted by a State, the national government at times created specific long-term capital funding programs such as the Federal Water Resources Assistance Program (FRWAP). Apart from construction of dams and weirs, plus some contribution to hydrological networks and to groundwater investigations, FWRAP funds also formed a key source of funds for flood management works – primarily levees.

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3.1.2 State water resource management

The three eastern States had essentially identical management arrangements during this time. These comprised a special government agency in the form of a corporate body outside of the regular Public Service which, among other things:

§ Inventoried and monitored water resources through comprehensive hydrological networks, supplemented by a hydrogeology and groundwater drilling function involved in groundwater

investigations, mapping and monitoring,

§ Managed water use rights (surface and groundwater),

§ Built, owned and operated major dams and weirs,

§ Built, owned and operated irrigation schemes,

§ Managed rural flood management (including country towns).

Each managed their affairs centrally from a capital city office. With few exceptions, officers stationed outside of the city were relatively junior and had limited authority or delegated powers.

During the 1970s, State water planning functions were added to the agencies, or at least made more explicit and broadened from a simple development focus. By 1980, the word ‘irrigation’ had disappeared from agency names and they were known variously as:

Queensland – Queensland Water Resources Commission

New South Wales – NSW Water Resources Commission

Victoria – the State Rivers & Water Supply Commission (shortly thereafter to become the Rural Water Commission).

Urban water supply was a function of local government. In Queensland and New South Wales, this function was part of a wide suite of responsibilities for town and shire councils, but in Victoria this function often resided with special purpose local government authorities set up under a board. Many of these authorities were very small and in fact would be staffed part-time by personnel from the regular local council office.

South Australia had a somewhat different approach in its Engineering and Water Supply Department, which in addition to the powers listed above for the eastern States water agencies, took complete responsibility for urban water supply and wastewater treatment, both for the capital Adelaide (which lies outside the Murray-Darling Basin but draws water supplies from it) and for country towns.

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3.1.3 River basin organizations

The current over-arching river basin organization, the Murray-Darling Basin Commission, was not created until 1988 when it took over and expanded the functions of the former River Murray Commission established in 1915.

The history of the Basin Commission effectively goes back to the need for inter-state water sharing provisions on the transboundary Murray River. The first Inter-Colonial Conference on River Management to specifically address this issue was held in 1863. However, it was not until September 1914 that an agreement was finally signed by the three riparian States - New South Wales, Victoria and South Australia. By then the nation state of Australia had also come into existence, and the Commonwealth Government also became a signatory.

After nearly derailing the progress towards federation, the turning point in this water sharing debate came with an interstate meeting in 1902 which finally came to grips with a potentially workable package of water sharing rules and joint water regulating works. The 1902 Interstate Joint Royal Commission was set up immediately, but it still took another 12 years to negotiate the details. Another milestone in the slow march towards consensus then occurred in 1911 when the State Premiers made significant advances in agreement and set up an Interstate Conference of Engineers, which, after due deliberation, recommended an acceptable basis for the final River Murray Waters Agreement of 1914. In simple terms, this is effectively a three-part arrangement – water sharing, joint works, and cos t sharing. The latter two changed a little during the early years as construction of works proceeded, but the underlying principles of the water sharing arrangement has not although complex details have been added over the years.

The key features of the original water sharing agreement (see Figure 9) were:

The two upstream States (Victoria and New South Wales) could use half each of the flows of the headwaters (as measured at Albury);

South Australia (the downstream State) was entitled to a minimum monthly flow as specified in the Agreement for each month of the year, and now totaling 1850 GL for twelve months;

The two upstream States were obliged to provide half each of this minimum monthly flow at the South Australian border; and

Each State was entitled to the use of the rivers and tributaries within their own territories.

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Figure 9: Water Sharing Rules on the Murray River

SA hasMinimummonthly

entitlementat border

SOUTHAUSTRALIA

NEWSOUTHWALES

VICTORIA

NSW mustsupply half

Vic mustsupply half

NSW cantake half

Vic cantake half

Albury

Murray River

DarlingRiver

Uppercatchment

Basinboundary

The set of joint water regulating works that complements the water-sharing arrangements is currently valued at around A$1.5 billion. They comprise two headworks dams (combined capacity 7038 GL), a major diversion weir (120 GL), 13 locks and weirs, an off-river storage formed by a natural lake (Lake Victoria – 680 GL), and a set of barrages at the Murray mouth. In addition, the Commission effectively leases the Menindee Lakes Storage on the Lower Darling River (1680 GL also formed from natural lakes) from New South Wales. These are individually listed in Table 11. The Commission is also responsible for a series of joint salt interception works in the mid-river area, valued at A$77 million.

The waters held by these works and in the rivers connecting them are all subject to the water sharing rules of the Agreement and are defined as “waters under the cont rol of the Commission”. This operating principle has not varied since 1915 and continued when, in 1988, the River Murray Commission was subsumed into the Murray-Darling Basin Commission.

The Agreement was ultimately ratified by the Commonwealth and three State parliaments in 1915. This ratification took the form of a River Murray Waters (or similarly named) Act passed by each jurisdiction, which included any necessary local provisions such as nomination

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of a State Constructing Authority, clauses giving effect to the River Murray Waters Agreement (typically included as an Appendix to the Act) and other relevant supporting administrative measures. This provision for securing the execution and enforcement of the Agreement is itself a part of the Agreement.

This Agreement as a political accord between the parties is of significant interest in the matter of river basin management in federal systems, because of the avoidance of the alternative solution of the imposition of Commonwealth Government control through the exercise of supervening federal legislation. (Clark and Renard, 1974). Over the years, the issue of possible federal management of natural resources, and water in particular, has waxed and waned. In 2003, the debate on the merits of federal control has once again re-surfaced, this time in the context of two relatively recent issues - a current debate about restoring a measure of environmental flows to the Murray River and the related issue of the facilitation of interstate water trading.

Under the Murray Waters Agreement, the River Murray Commission was given power to control the transboundary waters of the Murray, but all other water in the basin remained under the sovereign control of the respective State Governments. To avoid the complexities involved in giving the Commission powers to do such things as acquire land, design and build water projects, and own assets sited in the various States, most of its water management functions were carried out on its behalf by the partner States. This included the actual operation of dams and weirs. The Commission issued flow rate instructions, but the physical opening of discharge valves for example was done by the resident State agency staff of the particular structure.

The River Murray Commission comprised one person appointed by each of the three States, plus a Commonwealth representative who chaired the Commission. The State representatives were always the heads of their principal State water agency. A secretariat was also formed, but was never large because of the arrangement within the Agreement that the Contracting States would nominate a “constructing authority” to design and carry out those works assigned to it by a schedule to the Agreement.

It should be noted that the River Murray Commission and its Basin Commission successor were not established as a government department or agency of any individual Contracting Governments, including the national government. Instead the Commission reports collectively to all governments.

Because the River Murray Commission did not have to acquire any powers relevant to construction it was able to stay very small. During the construction era (roughly 1919 to 1939) the secretariat was only part-time and comprised only of 2-3 people. Later it gained permanent staff, an Executive Engineer and a Secretary, but even in the 1970s when more complex activities were occurring it did not rise above about 9 permanent staff.

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Hence the story of decentralization of water management of the Murray-Darling Basin is really the story of the decentralization of water management by each State. By 1980 the States were in the early stages of decentralizing much of their management as part of the previously described public sector reform processes commenced in the 1970s and this included their River Murray management functions (not applicable to the non-riparian State, Queensland).

The formation of the now Murray-Darling Basin Commission in 1988 (described in detail in the next section) was a natural extension of the trends within the States towards catchment-based management of natural resources. As already described, the new Basin Commission absorbed the former, more narrowly focused, River Murray Commission. A similar small organization also existed in 1988 on the transboundary rivers of the New South Wales – Queensland border, but at the time it was decided for reasons of geography and size that should remain as a separate entity and not be absorbed into the fledgling Basin Commission.

This other entity, the Dumaresq-Barwon Border Rivers Commission, administers a water-sharing agreement between the States of Queensland and New South Wales known as the New South Wales-Queensland Border Rivers Agreement 1946. The Agreement covers both rivers that form the state boundary and the so-called ‘intersecting streams’ that flow from Queensland south into New South Wales to join the Darling River system.

The Border Rivers Agreement is relatively simple but is similar in some respects to the original Murray Waters Agreement in that it provides for joint works, a water-sharing formula and a cost-sharing formula. The Border Rivers Commission owns two structures, the Glenlyon Dam of 252 GL capacity and the Boggabilla Weir of 6 GL capacity. There are no full-time staff of the Commission, with all work being carried out by officers of the water agencies of the two States. With the advent in 1997 of River Murray Water as a business unit of the Murray-Darling Basin Commission, the Border Rivers Commission could be seen as something of an anachronism, but because of the distances involved between the Murray River and the northern Border Rivers, it continues to exist and function separately as a matter of pragmatic convenience.

The water and cost sharing arrangements on the New South Wales – Queensland Border Rivers principally concern the transboundary rivers. The Agreement provides for construction of a water storage with both the capital cost and the water being shared equally by the two governments. The Agreement however also provides for changes in these shares and at present water from the constructed storage, the 252 GL Glenlyon Dam, is effectively shared 57 percent to New South Wales and 43 percent to Queensland. In addition complex detailed water operations rules have been agreed by the Border Rivers Commission, including provisions for continuous accounting of water shares authorized by an amendment to the Agreement in 2001.

Other water agreements within the Murray-Darling Basin not directly under the auspices of the Basin Commission include:

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§ Legislated agreements between Victoria and South Australia concerning management and sharing of groundwater resources at the state boundary;

§ Certain reservations of water use from designated rivers associated with the Australian Capital Territory to assure water for the national capital, Canberra;

§ Informal agreements between New South Wales, Queensland and South Australia on the management of the Great Artesian Basin: and

§ Operations of the Snowy Mountains Scheme, including the inter-basin transfers of water from coastal catchments.

3.2 DECENTRALIZATION REFORM PROCESS

Decentralization reforms in water resource management were driven principally by State governments, though generally supported by local communities who were keen to gain a measure of control over their local resources. The national government played no role other than its influence in micro-economic reform policy, nor did any other external entities such as NGOs play any role.

Driving forces came from: § The general climate of public sector reform, which included decentralization as a desirable

management goal, as previously discussed;

§ The desire by State governments to embrace concepts of integrated catchment management in recognition of the fact that uncoordinated management of natural resources produced sometimes unwelcome and unexpected results; and

§ The desire of State governments to remove, or at least distance themselves, from the expensive business of managing irrigation schemes, which in any case were increasingly being seen as not a core function of modern government. This was accompanied by a parallel and increasingly vocal desire on the part of irrigators to manage their own schemes in the belief that self-management would be both more effective and more cost-efficient.

Water agencies typically began engaging management consultants and forming internal task forces to recommend and drive implementation of decentralization initiatives.

This paper concentrates on the two upstream States of the Murray River (New South Wales and Victoria) as the two major water users of the basin; however the decentralization policies and strategies of the other two States (South Australia and Queensland) followed essentially similar courses.

For water agencies there was another significant factor in play, often described as the start of the “mature” phase of water resource management in Australia. Put another way, the 1980s represented the close of the development era in water resources that had started around 1900. This required water agencies to divest themselves of design and construction functions and to build up their water planning expertise to allow continued growth in economic returns from water, using essentially the existing infrastructure.

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The 1980s also marked the start of active environmental management of the resource and the start of institutional change that recognized the imperatives of integrated catchment management in which water management was merely a part, and possibly only a subsidiary part.

3.3 THE MURRAY-DARLING BASIN COMMISSION

The creation of the Murray-Darling Basin Commission (MDBC) in 1988, with its focus on integrated catchment management, took its impetus from the growing realization that natural resources all interacted, that management institutions therefore needed to reflect these interactions, and that a catchment, or river basin, was a significantly useful management unit for this integrated approach. Interestingly, although the formation of the MDBC was not related to any drive for decentralization, and it presently remains a centralized body located in the national capital Canberra, the MDBC has in fact exercised some influence in the push for decentralized natural resource management by the States.

The dismantling and assimilation of the River Murray Commission, which was essentially confined to managing bulk water supplies to its three “customers” on one transboundary river, into the Murray-Darling Basin Commission, with now a basin-wide focus and exerting coordinating influences over the management of all natural resources, was accompanied by two significant institutional changes.

Firstly, a Ministerial Council was formed, consisting of up to three Ministers from each Contracting Government who have prime responsibilities for matters relating to water, land and environment. Its key function is;

“Generally to consider and determine major policy issues of common interest to the Contracting Governments concerning effective planning and management for the equitable efficient and sustainable use of the water, land and other environmental resources of the Murray-Darling Basin.” (MDB Agreement 1992)

To do this the Council is empowered to develop, consider and, where appropriate, to authorize measures; to authorize certain works; and to agree on amendments to the Agreement. The Council directs an expanded Commission as the executive body under the Agreement. The expanded Commission comprises two representatives of each State and the Commonwealth who, between them, represent water, land and environmental resource management. The Council appoints, on the advice of the Commission, a chair for the Commission in the form of an independent President. The Commission meets at least four times each year.

Secondly, the Council is obliged to appoint a Community Advisory Committee. This Committee is in an unusually influential position in that it reports directly to the Ministerial

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Council. This means that on relevant issues the Council will at times receive reports and recommendations both from the Commission and from the Community Advisory Committee.

The terms of reference of the Community Advisory Committee are to advise the Council and Commission:

§ on natural resource management issues referred to the Committee by the Ministerial Council or Commission; and

§ on the views of the Basin's communities on matters identified by the Committee as being of concern.

Currently, the Committee comprises an independent Chairman and 28 members, namely:

§ twenty three State representatives chosen on a catchment/regional basis, nine from New South Wales, five from Victoria, four from South Australia, four from Queensland, and one from the

Australian Capital Territory; (these members are generally the chairs of the relevant catchment management body) and

§ a representative nominated by each of five specia l-interest "peak" organizations : the National Farmers Federation, the Australian Conservation Foundation, the Australian Local

Government Organization, the Australian Landcare Council, and an indigenous representative nominated through the Indigenous Land Corporation.

The Committee is supported by a small Secretariat based at the Office of the Murray-Darling Basin Commission in Canberra.

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Figure 10: Murray-Darling Basin Initiative – Institutional Structure

FIVE GOVERNMENTS

C’wealth NSW Vic SA Qld

MURRAY-DARLING BASIN MINISTERIAL COUNCIL

Up to 3 Ministers from each Government representing land, water and environment

Community Advisory Committee

28 Regional & Special Interest representatives

MURRAY-DARLING BASIN COMMISSION 2 Commissioners from each Government representing land, water and

environment – plus independent President

Commission Office Chief Executive and 60+ staff

As noted in the diagram above, the Agreement, without constraining the choice of person by the governments, requires the Commissioners to “…represent water, land and environmental management…” Thus the present (November 2003) Commission comprises representatives (generally the head) of: Commonwealth Department of Agriculture, Fisheries & Forestry Department of Environment & Heritage New South Wales Department of Infrastructure, Planning & Natural Resources NSW Department of Agriculture Victoria Department of Primary Industries Department of Sustainability & Environment South Australia Department of Water, Land & Biodiversity Conservation Primary Industry & Resources South Australia Queensland Environmental Protection Agency Department of Natural Resources & Mines Australian Capital Territory Environment ACT

Internally, the MDBC Office is split into its two primary functions – the operational control of the Murray River (formerly vested in the River Commission) and the larger task of coordination of natural resource management. It is this natural resources task that has influenced decentralization by the States because of the emphasis on a catchment as the most useful geographical unit of management, coupled with a strong public participation ethic.

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Together these forces are naturally drawing management towards a catchment -based organizational design.

The internal structure of the Commission office is shown in Figure 11. The River Murray Water unit in effect exercises the functions of the previous River Murray Commission. It has a staff of 15. This is a small increase from the previous organization because of the effects of micro-economic reforms in which COAG required MDBC to put its direct water management on a business basis. Recent moves towards corporatization of River Murray Water have stalled, but in the meantime it has acted to take a more assertive control of asset management issues previously left to the States; it has changed the equal cost sharing arrangements of the Agreement to a pricing-for-service basis; and it has adopted a corporate structure, including oversight by a board of management. River Murray Water has only three water customers – the three riparian States of the Murray River – and is in effect the water wholesaler. It has no say over how the States allocate their share of the resource, nor any say over State operations or water pricing. These are sovereign matters for the States concerned.

Figure 11: Internal Structure of the Murray-Darling Basin Commission

Murray-Darling Basin Commission

Board

River Murray Water

Natural Resource Management

• Develops Policies & Strategies • Coordinates:- § Knowledge generation § Research § Knowledge access

• Conducts Investigations & Education • Coordinates funding and programs for

On-ground works and measures

• Stores and delivers bulk water supply

• Prices for services • Collects and invests revenue • Controls and manages assets• Contracts service inputs

In regard to the Natural Resource Management arm, the budget available to MDBC has varied over the years and with individual natural resource programs. The States and Commonwealth share equally in a modest budget for the Commission’s own expenditure (salaries and operations), then contribute funds in a variety of shares to particular programs for which the Commission prioritizes and allocates these funds to States and catchment bodies to expend according to agreed strategies and plans. Thus the Commission exerts influence and leverage over investment in natural resources to a degree dependent on the extent to which governments direct funds through the Commission or alternatively allocate the funds themselves directly to projects through the executing agency or body.

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This process is more or less controlled by the Commonwealth in making funds available subject to matching State funds in various proportions and in having a major influence on the extent to which such joint funds are directed through MDBC. Currently (2003), the Commonwealth is directing much of its natural resource funding to catchment management bodies in a series of bi-lateral arrangements with the States that do not involve MDBC. The executing agencies or bodies are however expected to propose programs and projects that are harmonious with MDBC strategies.

While the nature of the Agreement, which has States as equal partners and each effectively with a power of veto because of requirements for consensus decisions within the Agreement, suggests that harmony and cooperation will be the result, State self-interest can never be discounted. It is no surprise that the two States with perhaps the greatest concern occasionally with Commission strategic directions are the States at the bottom and the top of the catchment. South Australia at the downstream end of the Murray River has always seen itself as enduring the self -interested actions of all States upstream. Queensland at the top of the catchment, and a later member of the Commission, sees itself as sometimes constrained in development because of basin strategies driven by what it might regard as over-development downstream, particularly by New South Wales.

In dealing with such issues, the Commission cannot issue directions to the States in respect of natural resource management, but has a good record nonetheless of resolving disputes through its processes and deliberations. From the outset the Commission has adopted a policy of being “information rich” and this emphasis on research, investigations and education has been helpful in bringing the States to a common purpose.

On the whole the Commission respects State’s sovereign rights and avoids taking any position on matters, such as privatization of water services for example, that have no effects on other States. It is guided by the prior notification provisions in Clause 46 of the Agreement, which require a Contracting Government or a public authority that is “considering any proposal which may significantly affect the flow, use, control or quality of any water in the upper River Murray and in the River Murray in South Australia” to inform the Commission.

Data and information are required to be provided in a timely fashion to enable the Commission to “…assess the possible effect of the proposal on the flow, use, control or quality of that water; and to make representations thereon to that Contracting Government or public authority before the Contracting Government or public authority decides if the proposal will proceed.”

Again, the Commission has no power to approve or to not approve a proposal, but exerts significant influence through its processes. The Agreement allows the governments to also agree on the types of proposals that might be subject to Clause 46 and on the criteria to be applied in assessment. Notably, MDBC has not made any such detailed agreement and prefers to operate on the merits of any particular situation rather than constrain itself.

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As with its predecessor the River Murray Commission, MDBC’s direct water management functions are confined to the transboundary Murray River. MDBC has however been responsible for initiating basin-wide agreements on some specific water and water-related management activities by the States.

The latest and most critically important such decision to act together in the common good has been an agreement to set end-of-river salinity targets for all of the basin’s major rivers. This move comes in response to the growing threat to water quality of the rivers from dryland salinity. The most direct joint water management agreement however has been the imposition of the so-called “cap” on annual surface water diversions.

3.3.1 The Murray-Darling Basin Cap

By the early 1990s most Basin States had become aware of the need for environmental flows as their rivers came under increasing environmental stress from escalating extractions of surface water. The intense period of water development that followed World War II had come to an end for essentially economic reasons, as the marginal cost of further water reservoirs had become prohibitive. At the same time political awareness was growing that water was indeed a finite resource and that there were real environmental limits also constraining sustainable water development.

The Murray-Darling Basin Ministerial Council therefore decided in 1994 to prepare a benchmark report on water extractions from the Basin’s rivers to form a basis for determining a balance between water extractions and water needed for river health. The Ministerial Council published this report, “An Audit of Water Use in the Murray-Darling Basin” in June 1995. As shown previously in Figure 8 the report confirmed a rapid increase in water extractions since 1950.

More critically from an environmental viewpoint, the Audit also showed that under 1994 levels of development, median annual flows from the Basin to the sea had diminished to only 21 % of those that would have occurred under natural conditions. The reduction in flow has affected most critically the small to medium size flood events. The frequency of these events has been substantially reduced and many of them are completely harvested. One consequence is that the lower reaches of the Murray River now experience severe drought -like flows in over 60 % of years compared with 5 % of years under natural conditions.

The Audit also confirmed that growth in water extractions would continue even without further construction of reservoirs because the States (particularly New South Wales) had issued many water use licenses that were at that time still unused or only partially used. This had come about because irrigation was initially thought of only as a supplement to dryland farming, not as an industry in its own right. Consequently water managers believed that the patterns of use they had observed in the 1960s and 1970s (where only about two-thirds of the issued water use entitlements were ever in use at the one time) would continue. The advent of

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high value crops such as cotton and wine grapes have rapidly made those observations obsolete. The 1995 Water Use Audit found that average diversions could increase by a further 15 % if all existing water entitlements were fully developed. Clearly this would contribute to further environmental stress and reduce reliability of supply to existing water users.

Prompted by the Audit and the issues that it raised, the Ministerial Council made an historic decision to end the revealed continuing growth in extractions in order to protect river health. In July 1995 the Council agreed to limit the annual levels of water extraction from the Basin rivers to those applicable to the levels of development that existed in 1993/94.

This decision does not refer to the volume of water that was used in 1993/94. Rather, the limit in any year is the volume of water that would have been used with the infrastructure (pumps, dams, channels, areas developed for irrigation, management rules, etc.) that existed in 1993/94, assuming similar climatic and hydrologic conditions to those experienced in the year in question. That is, the limit in each sub-catchment varies year by year in response to climatic conditions. The limit in dry years is higher for example than in wet years. In other words, the decision is not an attempt to reduce basin water extractions, but is intended simply to prevent them from increasing. It is not applied to individual water users but to major sub-catchments or valleys.

This is illustrated in Figure 12 which shows that while annual water extractions across the Basin will continue to vary with climatic conditions, the average of these extractions is required to cease rising, as it was doing up until 1993-94, and to remain constant thereafter.

Figure 12: Operation of the Cap on Water Extractions

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1984 1989 1994 1999 2004

An

nu

al B

as

in E

xtr

ac

tio

ns

MC

M

Cap on ExtractionsGrowth in Extractions up

to 1993/94

Source: MDBC

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It is also important to state that the Cap, as it became known, does not affect the State’s shares of water from the transboundary Murray River under the Agreement. These remain a share of actual flows for the two upstream States (New South Wales and Victoria) and a monthly minimum volumetric entitlement for the downstream State (South Australia). How a State allocates their shares to individual water users or to towns and irrigation schemes, and between consumption and in-stream uses, is entirely a matter for the State concerned. However, the Cap now requires the States to exercise controls over actual extractions of water in accord with the Cap rules.

A significant implication of the Cap is that all future growth in water-based economic productivity must come from gains in water use efficiency, or from water trade. As a result, the market value of irrigation water entitlements virtually doubled overnight.

Figure 13: Range of Prices for Water Entitlement Transfers in Victoria

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99

(source: Planright Australasia P/L, VIC)

$ / M

L

Source: Close et al, 1999

The above graph refers only to permanent transfers of water entitlements, not to the temporary trade of water attached to any entitlement. That is, the graph represents the capital value of an entitlement. The variation between 1997/98 and 1998/99 is essentially a reflection of a relatively small market in permanent transfers and the consequent sensitivity of prices to individual circumstances.

It should be noted that water has been tradable in the Basin for some years. It is controlled by State water agencies which will typically approval water transfers provided there are no adverse environmental effects and the transfer is operationally possible. Interstate temporary trades are regularly made and a small pilot of permanent interstate trade is managed by

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MDBC. An idea of the extent of trading can be got from New South Wales which began temporary water trading in 1983-84. Nowadays the volumes now traded on the temporary market in NSW can exceed 600,000 ML per year or some 8 percent of the total water rights of 7,323,000 ML. Permanent trading of rights has typically been much less, lying in the range 10,000 to 50,000 ML per year (DLWC 1997).

The Cap has also driven water use efficiencies. Not only has the increased asset value of a water entitlement enabled an increased financial investment in water efficiency technologies by individual water users; it has been a powerful signal that water is finite. The nature of Australian water use rights is such that a water efficiency gain made by the holder of the right does not diminish the quantum of the right but enables the holder to increase production through use of the water saved.

This seemingly simple decision to limit or ‘cap’ water use has required considerable work in implementation. The task has been large, politically challenging, and complex. It has been necessary to develop new simulation models that predict climate-adjusted volumes of water extractions in order to define extraction limits that can in turn be audited. It has also required the development of a comprehensive monitoring and reporting system by each State in cooperation with MDBC to support the modeling and to produce compliance data.

Additionally, a high level of sophistication is required by State water managers to manage each catchment (or ‘valley’ in common Australian parlance) because their decisions must be made in advance of the occurrence of the actual weather conditions for each season. This requires an adaptive management approach to controlling water made available for extraction. Fortunately, compliance is assessed over a number of years with the objective of keeping average extractions to a constant value as shown previously in Figure 12. Because of the high value of water and the sensitivities and competition for its use, the Ministerial Council has created an Independent Audit Group (IAG) to audit each State’s progress towards Cap implementation and to report annually on Cap compliance.

While the Cap decision was largely driven by considerations of end of system flows (e.g., the median volume of water reaching the Murray mouth had diminished by 79 %) the Cap has provided a baseline of extractions upon which the States could build their environmental flow programs. As illustrated by Figure 12, while actual water extractions may vary from year to year, the Cap will provide a constant mean value of extractions in the long term. In turn, this defines the environmental share as the remainder of the flows.

In many ways the Cap may be seen as a crude instrument. For example, it works only on annual flows, it ignores the major extraction or intervention caused by the operation of State-owned storage dams, and it allows maximum extractions in dry years, which may be contrary to the actual ecological needs of the rivers at that time.

Nonetheless the Cap is a bold and unprecedented political move. It demonstrates determination by Governments that managing the health of rivers is important and that

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Governments are prepared to make moves that could be unpopular with their agricultural constituents - irrigators in particular. As it happens, irrigators are slowly coming to realize that the Cap actually protects their interests, not just from a river health point of view, but because it prevents increases in water use that would diminish the existing reliability of their water supplies.

The Ministerial Council has further emphasized its determination to manage river health by approving in August 2000 detailed rules for Cap operation and then adding them into the Murray-Darling Basin Agreement as an Appendix. The effect of this is to make the Cap legally binding. It is interesting to note also that the Cap is computed not just for the Basin as a whole, or even for each State, but by agreement it is computed catchment by catchment. The agreement by States to do this has in effect been a concession of sovereignty and an over-riding of the provision in the Murray-Darling Basin Agreement that States have unrestricted use of rivers within their territories. Such is the importance placed on river health and the common good.

3.4 DECENTRALIZATION IN THE MURRAY-DARLING BASIN

While decentralization reforms of the past 20 years have produced no change in the umbrella organization it has changed substantially how the States manage water within the Murray-Darling Basin and has spawned a number of sub-basin entities. Creation of these latter entities was driven as much by integrated catchment management demands as by the doctrine of decentralization. They are actually basin organizations in their own right - more familiarly known in Australia as catchment authorities. Their management areas are not small. The Murray-Darling Basin has 17 major catchments averaging 62,000 square kilometers in size.

Because of the different approaches to decentralization, the two States being studied are discussed separately.

3.4.1 New South Wales

At the start of the period of decentralization in public sector management, water resource management was under the control of the Water Resources Commission (WRC), which had grown from the former Water Conservation and Irrigation Commission set up in 1912. WRC was responsible for water resource policy, State water planning, government irrigation areas and districts, water use licensing, and the operation and maintenance of major infrastructure comprising 16 large dams and 34 regulating weirs on the State’s rivers. At that time, although 64 percent of WRC’s staff was located in country areas, virtually all of these were under the direct control of a Sydney-based Head Office manager and had extremely limited delegations of authority. They could not, for example, approves the granting of a water use license, or make any decisions about water releases from dams.

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WRC had made some moves to separate policy and regulatory functions from operational functions and had split the Commission into a Resource Management Division and a Rural Water Supply Division. The Resource Management Division was known colloquially as the ‘owner-manager’ group in recognition that it should not focus on water user or customer concerns, but should focus on the needs of the resource itself and the State’s role in having vested in it by the Water Act 1912, “..the use, flow and control” of the waters of the State. The Rural Water Supply Division began to focus on improved customer service and on commercialization. This latter being built around attempting to increase prices for services, including delivery of water, to cost recovery levels from the quite low, and more or less arbitrary fees and charges applying in the early 1980s.

In 1985, WRC presented its Minister with a report on regionalization7 which sought to place the management of ‘customer-driven’ functions squarely in the regions with maximum possible delegations of authority for these functions, and to retain only ‘State-driven’ functions, including overall policy formulation within the Sydney Head Office. This was accepted and implemented over the succeeding years. The basic objective of regionalization was, “to respond more efficiently and effectively to the needs of Commission clients.” (WRC 1985)

The result of this was the establishment of regions based on catchment boundaries, with Regional Directors empowered to issue water use licenses and to operate and maintain all major infrastructure with little or no reference to Head Office.

At the same time the move to integrated catchment management (or Total Catchment Management (TCM) as it was then known in NSW) was underway. The Water Resources Commission together with the Soil Conservation Service of New South Wales firstly set up two pilot catchment management committees, then sponsored legislation for the widespread establishment of community-based catchment management. These committees, and their slightly altered successors, are essentially advisory in nature, but the legislation provided for their transformation into ‘catchment management trusts’ which could be given land taxing powers.

Despite the successful establishment of one such trust (outside the Murray-Darling Basin) well before the more general legislation, only one further trust has eventuated, in the western Sydney urban area. The State government’s reluctance in this matter stems from both a political desire to avoid being seen as the creators of new taxing bodies, and also from concerns with the creation of what could be construed as a fourth tier of government that would lessen or interfere with the traditional roles of established local government.

The catchment management committees (now termed Catchment Management Boards) are very widely based and attempt to have representation from all major stakeholders including

7 NSW used the term decentralization to refer simply to location of personnel. Regionalization was the term used for the establishment of regionally-based management of public services.

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indigenous interests. Senior government agency staff members sit as equal members with the community, although the legislation provided that the community members must be in the majority. The chairperson is always a community member.

Despite the lack of self-funding capabilities and of direct management responsibilities, the new catchment bodies immediately exerted significant influence. This arose because of the pent-up desires of local people to manage their own resources being at a level that no one had predicted. A mighty synergy arose and news media gave great prominence to the opinions of catchment management committees. Secondly, the committees had the task of coordinating catchment strategies and exerted strong influence on Regional Directors, particularly those from Water Resources, Agriculture, Fisheries, Soil Conservation, Forestry, and the National Parks & Wildlife Service.

Figure 14: Major catchments of the Murray-Darling Basin

Source: MDBC

Thirdly, the new committees were given the responsibility for prioritizing and recommending how specifically directed catchment funding would be spent. This required both community and government bodies to make a case for their projects and to bid for the necessary funds. This powerful position has continued to the present. The sums of money that these committees were required to priorities were non-trivial, and were eagerly sought by both community groups such as Landcare groups and by cash-strapped government agencies. This arrangement has made successful the TCM slogan, ‘Communities and Governments Working Together’.

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At the end of 1999 the government announced a consolidation of what had become a plethora of community-based natural resource management groups (including 45 catchment management committees) into 18 Catchment Management Boards. There were no significant new powers granted, but an intention to use the Boards more extensively than previously in the process of prioritizing and directing funding is expected to strengthen the position of these groups. As before, membership is mandated to be dominated by community interests.

At the same time as the water agency was regionalizing and integrated catchment management was being fostered, the drive for privatization of government irrigation areas and districts was slowly gaining momentum. This drive was by no means universal but arose from government’s moves towards commercialization of public services and from desires to divest itself of these drains on the public purse, and from the desire of irrigators to manage their own affairs. In 1994 this drive was given further impetus by the promulgation of the COAG Water Reforms that emphasized a fully commercial approach to the delivery of water services, together with a separation of the regulatory and resource management functions form the service delivery functions.

The result of this was that New South Wales privatized all of its former government irrigation schemes during the period 1995 – 2000. At the time of privatization, NSW had 18 Irrigation Areas and Districts physically operated as 7 irrigation schemes. By 1994, these schemes ranged in age from 30 to 80 years, serviced over 400,000 hectares of ir rigated land (about 50% of the State’s irrigation usage) through works that would cost over A$1 billion to rebuild. They supplied some 6,500 farms, covering about 2% of the State’s area and producing over A$700 million annually from agricultural products. (Taylor et al, 2001)

In New South Wales, the commercialization of urban and country towns water supply services has not resulted in the creation of any new bodies. These services were already decentralized to, and provided by, local government, albeit with technical assistance and subsidy from the State government, and have remained with local government. There has however been a substantial change to the financial management arrangements, driven by the COAG requirements for a positive real rate of return for urban water supply services. This has required a life cycle approach to asset management and demand management initiatives, including a change to volume-based pricing.

Similarly, floodplain management in New South Wales has always been a local government responsibility, in cooperation with the State Emergency Services. As with country towns water supply, local government flood management has always been supported with technical assistance and subsidy funding from the State government. The basin organization, MDBC has no direct responsibility for flood management, but has periodically exercised interstate coordination roles along the transboundary Murray River, where an Interstate Levees Committee was established from time to time.

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3.4.2 Victoria

Victoria took a somewhat different approach from that taken in New South Wales. Initially, Victorian water resource management was structured similarly to New South Wales. The Victorian State Rivers and Water Supply Commission, first formed in 1905, was remarkably similar to the New South Wales Water Conservation and Irrigation Commission in both form and functions. In fact, the New South Wales body was not created till 1912 and, given the dialogue between the States on Murray River and other water matters, it is probable that Victoria formed something of a model for New South Wales.

The first steps to decentralization in Victoria were also similar. That is, Victoria strengthened its country offices, divided them into regions based on catchment boundarie s and delegated many customer-related functions to these offices. It went one step further however and, in 1984, transformed the operational sections of the State Rivers and Water Supply Commission into the Rural Water Commission to manage all operational activities including headworks, but shifted its policy functions into a new and separate Department of Water Resources.

This set the scene for a strong focus in Victoria on putting rural water services on a commercial footing, and the government set about this with some vigor. For purposes of this paper, two milestones were critical. Firstly, in 1985 the government approved the Financial Management Strategy of the new Commission. This required the Commission to cut operating costs by some 30 percent in exchange for the government taking responsibility for most of the capital debt that had been incurred over the decades in constructing the irrigation infrastructure. The Strategy also set a 20 year timeframe for the achievement of financial self-sufficiency for the irrigation schemes. This resulted in the need for a real price rise of 2 percent per annum in water prices, assuming the cost reductions to be achieved. (Langford et al, 1999)

The second critical milestone was approval by the responsible Minister in 1987 of a plan to fully decentralize operations of the Rural Water Commission into regions that would have all necessary powers delegated from the Melbourne Head Office, and be required to operate on a commercial basis. This regionalization was accomplished at the end of 1990. Early in 1992, after further review by the government, this concept was taken further and the Commission transformed into the Rural Water Corporation.

This reform of the agency moved irrigation water management, headworks (major dams etc) and finance and administration into what amounted to a publicly-owned corporation. As well, the new arrangements decreased the number of regions from nine to five and provided that they be managed by skills-based Regional Boards of Management which would provide for substantial customer participation. These Boards were functioning by the end of the year and set the scene for the current rural water management institutional arrangements in Victoria.

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The final step in this substantial management reform came in 1994 when the government transformed the five Regional Management Boards into government business enterprises in the form of autonomous Regional Rural Water Authorities. These authorities now stand on their own, reporting separately to the responsible Minister and are responsible for the financial and technical management of the irrigation schemes and headworks infrastructure.

In the meantime, the water resource policy and regulatory functions also migrated from one government agency to another. These moves reflected those occurring in other States and were driven by the desire for integrated water resources management, which really means establishing integrated natural resources management. The Department of Water Resources was abolished and its functions moved successively to a new Department of Conservation and Natural Resources, thence to the Department of Natural Resources and Environment, and from the start of 2003 to a new Department of Sustainability and Environment. This latest move reflects the final separation of resource managers and resource users and has led to the establishment of a Department of Primary Industries covering agriculture, fisheries, minerals, petroleum and so forth.

The Regional Rural Water Authorities’ mandate is to provide irrigation, drainage, salinity control, some urban water supply and other water-related services. In addition to their primary task of managing rural water services, the Authorities also contribute to management of specific water supply catchments and administer on behalf of the Department of Sustainability and Environment what amounts to the customer service elements of such resource management matters as ground and surface water assessment, floodplain and waterway management, water use license administration and so forth. These services are provided by way of a Government Services Contract.

Victoria has also gone further than New South Wales in the matter of catchment management. Victoria had over the years established a range of locally-based management Boards and advisory Groups and Committees to manage sustainability of the rural landscape. These comprised: § Catchment and Land Protection Boards

§ River Management Boards

§ Salinity Implementation Groups § Water Quality Working Groups

§ Sustainable Regional Development Committees

Some of these, such as the salinity groups were community-based; others such as the River Management Boards were statutory local government bodies. There was a substantial proliferation of these, with consequent inefficiencies, and in 1997 the government combined these functions into nine Catchment Management Authorities to create a whole -of-catchment approach to natural resource management in the State.

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Unlike the New South Wales advisory counterparts, the Victorian Catchment Management Authorities have a series of executive functions and are set up with a management board and with permanent staff. The Boards are appointed by the responsible Minister and are generally composed of people recognized by local communities for their skills and leadership in various natural resource management areas

The primary function of Catchment Management Authorities is the protection and enhancement of land and water resources through the development and implementation of regional catchment strategies. In addition, they have floodplain management responsibilities, including planning, structural measures and warning systems. The Authorities also provide advice to the State government, as do their New South Wales counterparts on funding and resourcing priorities.

As initially set up in 1997, the Catchment Management Authorities were empowered to raise their own funds by way of levying land taxes – the so-called “catchment tax”. The first of these taxes was applied in the Murray-Darling Basin in 1998 and a furor followed. The following year, the State government was voted out of office and the new government, which had come to power promising to rescind the levies, promptly did so. The new Victorian government also took some of the heat out of the situation by providing State funds somewhat equivalent to those that might have been locally raised. This has returned the funding situation to that prevailing previously of a dependence on State budget allocations.

3.4.3 Snowy Corporatization

While not strictly a step in decentralization, the recent corporatization of the Snowy Mountains Hydro-Electric Authority has had effects on water management in the Murray and Murrumbidgee Rivers. The Snowy Mountains Scheme was financed by advances for the Commonwealth and was operated by A Commonwealth agency, the Snow Mountains Hydro-Electric Authority. In 1993 the governments of New South Wales, Victoria and the Commonwealth agreed in principle to proceed with corporatization.

Corporatization was seen as offering a number of potential benefits to the three Governments, (Vanderzee et al, 2002) including: § reform of the national electricity market; § refinancing of the existing Commonwealth debt for the construction of the Scheme; § establishment of a new competitively neutral, commercially focused electricity business; § securing greater certainty of water supply for irrigation from the Scheme; and § an opportunity to address outstanding ownership, tenure and environmental issues.

Substantial negotia tions followed and eventually, in 2002, Snowy Hydro Limited was created to take the place of the former Authority. Snowy Hydro Limited is a corporation owned by the three governments in proportion to their energy entitlements from the Scheme – Commonwealth (13%), New South Wales (58%) and Victorian (29%). Without going into all the details, what proved quite difficult was securing agreement on water use by the scheme in

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a way that both gave the Scheme and the States an acceptable level of certainty of water shares.

The difficulties were twofold. Firstly, previous water operations were not completely codified and were subject to operational decisions by the Snowy Mountains Council – a body representing the three jurisdictions. Secondly, water interests had some difficulty in making their case against energy interests, given that water was not to be an asset of the new corporation and its revenue would derive from energy. Simplistically then, from a corporatization viewpoint therefore energy was paramount, but from a basin, or even national, perspective, water was the scarce commodity, not energy.

A further degree of difficulty was added because New South Wales would be licensing the works of the corporation and Victoria (and South Australia) needed protection of their water rights.

In the event, all the difficulties have been surmounted, but irrigators now find themselves in a challenging new game.

For example, in New South Wales where decentralization of irrigation management has gone all the way to privatization of schemes, irrigators were once accustomed in dry times to lobbying the Water Minister to put pressure on the Snowy Mountains Council to release some water ahead of normal schedules to alleviate water shortages. The Snowy Mountains Council also included representatives of State water agencies also responsible for irrigation. Nowadays, there is no Minister to assist, the state water agencies have no representation on the Board of Snowy Hydro Limited, and the private irrigation scheme companies must negotiate a fully-commercial arrangement with Snowy Hydro if they are to obtain additional water at any time. To their credit, irrigators are dealing well with this example of water as an economic good, but have undergone some financial strains in the process.

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4. PERFORMANCE MEASURES Assessing the performance of decentralization initiatives within the water industry is not a simple task in a developed country such as Australia. Centralization has never been a hindrance to adoption of best management practices in water resource engineering, indeed it is possible to argue the converse, so the technical efficiency of water allocation and use has not changed other than through technical advances.

Performance measures such as land area cultivated or economic value of crops produced are not related at all in the Australian context to decentralization, but are factors primarily related to climate and commodity prices and less directly to policies such as flexibility of water trading and the like. In any event, these are not statistics particularly tracked in Australia. The natural resource managers in this water scarce country track water volumes with great precision, but agricultural statistics, which are generally kept by other agencies, rarely distinguish irrigated from other crops.

It is a very confusing and frustrating experience for a researcher to attempt to estimate the area irrigated in the Murray Valley in any one season, let alone the types of crops that farmers may have chosen to grow. The Land and Water Resources Audit is currently addressing this issue.

In addition, the significant climatic diversity of the Murray-Darling Basin with frontal systems in the south and monsoonal systems in the north, together with various approaches to water management by the States, particularly of allocation reliability, means that average statistics are of very limited value.

Finally, apart from anything else, the concepts of decision-making occurring at the lowest appropriate level and of community participation are not peculiar to river basin management, but are accepted tenets of modern management practice that were articulated and adopted generally well ahead of the realization that water management on a catchment basis had significant merit. To this is coupled that fact that establishment of basin management in Australia has been largely driven not by water management problems but by integrated catchment management problems. Thus separation out of the effects of decentralization in water management becomes even more difficult.

How then to assess whether decentralization has worked or not worked in the Murray-Darling Basin in one or more of the jurisdictions?

Firstly, it is necessary to establish what decentralization was attempting to accomplish. The New South Wales Water Resources Commission in 1985 described the basic objective as “…to respond more efficiently and effectively to the needs of Commission clients.” (WRC 1985). This was expanded to say that decentralization would permit:

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§ Provision of local services better reflecting the needs of local consumers;

§ More opportunities for customer participation in setting standards and monitoring performance;

§ Increased administrative efficiency through better communication, and quicker, more efficient decision making; and

§ Better cooperation on coordination, at the regional level, with other authorities providing public services.

In the World Bank river basin research project a proposed definition of decentralization is based on:

§ an increase in transparency in decision making; and

§ a substantial increase in stakeholder involvement in decision making, including measures to accord financial self-sufficiency.

This is not dissimilar to the New South Wales concepts, but would apply equally well to a fully-centralized administration with these defined attributes. It also adds the attribute of measures pertaining to financial self-sufficiency (of the decentralized entities).

The following then is a series of tabular report cards based loosely on these objectives and definitions. Three tables are presented:

§ Devolvement of Authority;

§ Stakeholder Participation; and

§ Financial Self-Sufficiency.

The tables are focused only on New South Wales and Victoria as the two primary water-using States of the Murray-Darling Basin, but similar courses of action have proceeded in both Queensland and South Australia.

The tables below are necessarily simplistic and should not be interpreted as covering the full complexity of the issues. Nonetheless they demonstrate that both States have moved significantly in response to the national Water Reform agenda.

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Table 21: Devolvement of Authority

New South Wales Victoria

Function Pre – 1980 Current Pre – 1980 Current

Water resource management

All done from Sydney. No staff located in country.

Only policy and some technical specialists in Sydney. Others in country under Regional Directors.

Water sharing plans prepared by regional water management committees.

All done from Melbourne. No staff located in country

Only policy and some technical specialists in Melbourne.

Other work is split between regional offices or ‘outsourced’ to Rural Water Authorities.

Headworks management

All site staff controlled from Sydney.

‘State Water’ formed as internal ring-fenced business to manage headworks.

Site staff and operations under Regional Directors but centralized policy and standards.

All site staff controlled from Melbourne

Fully transferred to autonomous Rural Water Authorities

Irrigation scheme management

All operations and maintenance staff working in accord with Sydney-sourced standards.

Fully privatized.

Only management by the State is through bulk water licenses and discharge licenses.

All operations and maintenance staff working in accord with Melbourne-sourced standards.

Fully transferred to autonomous Rural Water Authorities.

Urban water management

.A function of local government.

Financial and technical assistance from State

Water businesses of local government operating in ring-fenced fashion.

A function of specifically created local authorities.

Local authorities disbanded in favor of smaller number of urban water supply state-owned corporations.

Floodplain management

A function of local government.

Financial and technical assistance from State

No substantial change

Mostly a function of specially created local authorities.

Now transferred to Catchment Management Authorities.

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Stakeholder participation includes consultation, advisory and direct management functions. Consultation is now routine practice, and formalized advisory arrangements are common. Strictly speaking however, only those entities that have been turned over to the stakeholder such as is the case with New South Wales privatization of irrigation districts which has included asset transfer to a company in which the irrigators are shareholders could be said to represent more or less complete management by stakeholders.

Table 22: Stakeholder Participation

New South Wales Victoria Function

Pre – 1980 Current Pre – 1980 Current

Water resource management

All valleys had appointed water user advisory committees.

State-wide Water Advisory Council reports to Minister.

Water Management Committees operate under Regional Catchment Management Boards

All valleys had appointed water user advisory committees.

State Catchment Management Council

Rural Water Authorities have Board and Water Service Committees for stakeholder input and decision-making.

Headworks management

Nil.

State Water has Customer Service Committees in each valley.

Nil.

Rural Water Authorities have Board and Water Service Committees for stakeholder input and decision-making.

Irrigation scheme management

All schemes had appointed water user advisory committees

All are now user-owned and operated.

All schemes had appointed water user advisory committees

Each scheme has a water-user based Water Services Committee that oversights O&M, budgeting and pricing

Urban water management

Limited other than normal council processes.

Consultation now common.

Limited other than normal council processes.

Consultation now common.

Floodplain management

Limited other than normal council processes.

Extensive consultation now common.

Limited other than normal council processes

Consultation and partnerships part of normal Catchment Management Authorities’ processes.

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In relation to financial-self sufficiency, Victoria has generally taken the approach of creating accountable state-owned corporate bodies. New South Wales has done somewhat less of this within the Murray-Darling Basin apart from privatizing former government irrigation schemes, but is unique in Australia in submitting bulk water prices to an Independent Pricing and Regulatory Tribunal (IPART).

IPART is attached to an appropriate Minister for administrative purposes, but reports its determinations directly and independently to the New South Wales Parliament. IPART covers a wide range of government services, including urban water, electricity, public transport, and so forth. It determines maximum prices, but the government may elect to set less than this maximum. The process consists of the water agency submitting a case for its proposed prices, then the Tribunal examining this in depth, including by way of public hearings at which any citizen can seek to be heard. IPART also has total access to the books and records of the water agency and may carry out its own research as necessary.

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Table 23: Financial Self-sufficiency

New South Wales Victoria Function

Pre – 1980 Current Pre – 1980 Current

Water resource management

No costs recovered other than admin – e.g. license fees

Water pricing subject to IPART*. WRM costs recognized above O+M and renewals costs on impactor-pays basis.

.

No costs recovered other than admin – e.g. license fees

Regarded as public good and is funded by government.

.

Headworks management

No costs recovered.

IPART has set price path to full cost recovery by June 2004

No costs recovered.

Full recovery of O+M and renewals. Initial limited capital grants by govt for compliance costs – e.g. dam safety

Irrigation scheme management

Limited recovery of O+M costs.

All privatized schemes self-sufficient, but are receiving for up to 10 years capital grants from government in recognition of deferred rehabilitation works.

Limited recovery of O+M costs

Rural Water Authorities are self-sufficient.

Urban water management

Pricing based on property taxes. Cross-subsidies common.

Pricing based on metered supplies. Cross-subsidies removed.

Pricing based largely on property taxes. Cross-subsidies common.

Pricing based on metered supplies. Cross-subsidies removed. Urban water authorities expected to pay a dividend to government.

Floodplain management

Owners of levees pay a fee. Costs of local government programs covered in general property taxes plus State grants.

Levee fees still apply. Attempts by local government to ring-fence where feasible. State grants continue.

Owners of levees pay a fee. Costs of local government programs covered in general property taxes plus State grants.

Levee fees still apply. Catchment Management Authorities’ programs transparent. Property taxes started but rescinded.

* Independent Pricing & Regulatory Tribunal

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