OECD WORKSHOP ON AGRICULTURE AND WATER: SUSTAINABILITY, MARKETS AND POLICIES
14-18 November, 2005: 14-16 November – Adelaide Convention Centre, North Terrace, Adelaide, South Australia 17-18 November – Barmera, South Australia
SESSION N°5
Victoria's Our Water Our Future Program – Benefiting Our Agriculture Sector, Communities and the Environment
Kate Houghton, Office of Deputy Secretary Conrad McDonald, Project Officer, Policy Integration, Water Sector Group, Department of Sustainability and Environment, Victoria, Australia
Information on the Workshop is accessible though the OECD Password Protected website at: http://www.oecd.org/agr/env See under “What‟s new” then click on OECD Workshop on Agriculture and Water and Login under: water and Password: australia
VICTORIA’S OUR WATER OUR FUTURE PROGRAM – BENEFITING OUR AGRICULTURAL SECTOR, COMMUNITIES AND THE ENVIRONMENT Abstract This paper outlines the Victorian Government‟s comprehensive water reform program, Our Water Our Future (OWOF) and explores the objectives for the implementation of the program in Victoria‟s irrigation sector. Released in June 2004, OWOF sets out 110 actions to secure Victoria‟s water future for the next 50 years. It sets reform in all aspects of water management – water allocation, markets, urban demand and supply, meeting environmental needs, pricing and institutional reform. This paper will explore how the irrigation water reforms seek to: Create simultaneous economic and environmental benefits Develop Victoria‟s existing active water market; and Enable the reconfiguration (upgrading and closure) of water supply infrastructure to address the problem of stranded assets, but also ensure community participation in these decisions. The OWOF reform program is an excellent case study of how a Government is seeking to create positive, long term environmental, economic and social outcomes for Victoria. Introduction – the Need for Change Why water reform is required Water supports the environment, the economy and communities. The importance of water has been accentuated during the current dry conditions in Victoria. Many parts of Victoria have experienced below average rainfall over the past 9 years, with some irrigation districts unlikely to receive their full water allocations in the current irrigation season. Many regional towns have been on strict water restrictions during the past 4 years. A number of towns are still enduring prolonged water restrictions. Figure 1: Victorian rainfall, percentage of mean, 1 July 2003 – 30 June 2004
Source: Australian Bureau of Meteorology, July 2004
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Table 1: Streamflow in 2003/04 compared with long-term mean
Source: Department of Sustainability and Environment (June 2005i)
Table 1 illustrates the average streamflow in Victoria‟s river basins, compared with 2003/04 levels. Population growth is also a challenge which water management needs to address. According to the Victorian Government‟s, Melbourne 2030 (2002d) document, Melbourne‟s population is expected to grow by more than one million people by 2030. Regional Victoria is set to grow by another 350,000 people. The potential impact of climate change adds further uncertainty. In June 2005, a Commonwealth Scientific and Industrial Research Organisation report (CSIRO, June 2005) predicts a potential reduction in average stream flow into Melbourne‟s main reservoirs, resulting in a reduction in the yield of Melbourne‟s water
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supply system of 8 per cent by 2020 and around 20 per cent by 2050. This is based on a „mid-range‟ climate change scenario. The environmental requirements of the State‟s rivers and aquifers also need to be addressed in order to protect and enhance their environmental values but also to ensure the environment can continue to provide services to communities and industries. A report on river health, the Index of Stream Condition 1999, found that only a quarter of Victoria‟s rivers were considered in good health. Close to 35% of major streams were considered in poor or very poor health. The Victorian Government has a strong focus on improving the health of priority rivers through implementing its Victorian River Health Strategy and making significant financial investments for the enhancement of rivers. A recent update on the Index of Stream Condition (2004j) shows that the degradation of Victorian rivers has been halted, with no major change in river condition over the intervening 5 years. Victoria’s agricultural profile In 2003/04, Victorian farmers produced approximately $8.7 billion worth of agricultural products, from 13 million hectares of farmland. In 2004/05, direct Victorian exports of agriculture, forestry and fishing production were valued at $1.82 billion – almost 10 per cent of total Victorian merchandise exports and over 18% of total Australian merchandise exports for these industries. Agriculture, Forestry and Fishery Industries – At a Glance (2003) shows productivity in the agricultural sector has been growing at around 2.6 per cent per annum, increasing incomes and employment across regional Victoria. Approximately 78,100 Victorians are currently employed in the agriculture, forestry and fishing sector or 3.2% of total Victorian employment. Water – the way forward The Victorian Government has put water as one if its top priorities and has embarked upon wide-ranging reform to improve all areas of water management. These reforms would not be possible without involving and communicating with the Victorian community. A key feature of the process of reform has and will continue to be consultation and engagement with the Victorian public. The development of the final water reform package was characterised by this community consultation and open dialogue. On 10 April 2003, the Minister for Water and Deputy Premier, the Honourable John Thwaites, issued a Ministerial Statement on Water, “Valuing Victoria’s Water – Securing Victoria’s Future”. The statement outlined the challenges facing the water industry and announced that a Green Paper on water would be prepared that would work towards the long-term sustainability and security of Victoria‟s water resources. The Green Paper, “Securing our Water Future” was released for 3 months of public review and comment in August 2003. The public consultation process, involving formal written submissions, was complemented by 21 public information forums in both regional and metropolitan areas, 40 targeted stakeholder briefings, and regular newsletter updates. In addition, an Expert Advisory Task Force was formed to provide advice to the Secretary of the Department of Sustainability and Environment during the development of the Green Paper and to review public comments. At the end of the consultation process, more than 670 public submissions had been received, from individuals, environmental groups, industry bodies and other government agencies. The issues raised in the submissions were taken into account in the development of the final set of water reform initiatives.
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The resulting White Paper, Our Water Our Future, is an action plan for water reform for the State, outlining key policies, actions and areas of investment to increase efficient water use, promote the value of water as a precious resource, maximise water conservation, investigate opportunities for water reuse and recycling, develop plans to accommodate for future supply and demand and ensure that the water sector is effective and accountable. Released 23 June 2004, the White Paper comprises 110 actions, covering: Water Resources and their Allocation Restoring our Rivers and Aquifers for Future Generations Smarter Use of Irrigation Water Smarter Water Use in our Cities and Towns Pricing for Sustainability An Innovative and Accountable Water Sector
Irrigation and Agriculture – White Paper reforms The Our Water Our Future White Paper contains a range of initiatives to further develop Victoria‟s irrigation and agricultural sectors, recognising the importance of farming to the State‟s economy and communities. The irrigation water reforms focus on: refining water entitlements to widen choice; providing more certainty about water shares; dealing with channel congestion and stranded assets; upgrading and rationalising authorities water distribution services; and improving water use efficiency on farms. Victoria’s development of its active water market Victoria and its two neighbouring States (South Australia and New South Wales) pioneered the development of a trading market for irrigation water. Trading of water within Victoria and interstate is generating immense benefits revealing water's value and encouraging its best use while becoming a major part of business strategies. Victoria's water market enables both permanent trade (transfer of the on-going right to allocated water) and temporary trade (where some or all of the water available under a right in the current season is transferred, but not the on-going right). Water trade continues to underpin a growing and more prosperous irrigation sector and regional economy. Each year permanent trade from relatively low to high value irrigated produce has an estimated economic benefit (at the farm gate) of $100 million AUD ($77.5m USD) This figure is growing and is supporting regional development and boosting regional economies. Temporary water trade market has been pivotal in the current dry conditions to assist crop and livestock enterprises survive. It enables farmers to maintain production as well as providing a source of income for irrigators who choose to sell water. Modelling by the Commonwealth Government‟s Productivity Commission found that water trade in the Southern Murray-Darling basin (2004) decreased the negative impact of drought by as much as 50 per cent.
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Water trade has continued to strengthen across the State: from 1991/92 - 2003/04 approximately 70,500 megalitres of water has traded into the Mallee‟s Nyah-to-Border region, largely supporting irrigation developments in almonds, olives, and wine grapes an equivalent level of permanent trade has occurred within the Goulburn-Murray Water gravity irrigation districts. This trade has moved water use from mixed farming to dairy and horticulture (including significant olive developments) during the past decade there has been about 233,000 megalitres of temporary water trade. This is in line with movements during the recent drought, which saw temporary trade make up around 15 per cent of total water use.
The reforms outlined in Our Water Our Future will further strengthen the water market and increase the opportunities the market provides. Unbundling of Water Entitlements – Simplification and Choice The benefits of the water market will continue to be enhanced by unbundling existing entitlements into three components. Currently, all elements of an entitlement (delivery, use and share) are bundled together, not allowing an irrigator flexibility in dealing with these individual elements. „Unbundling‟ is a concept introduced by the Victorian Government as part of the Our Water Our Future water reform, supported by the Commonwealth Government through the National Water Initiative. Unbundling recognises that the bundle of different types of entitlements can be better managed when separated into three individual components: A water share: a legally recognised, secure share of water available for consumption A delivery share: an entitlement to have water delivered to a property A water-use licence: an entitlement to use water for irrigation on a property
Figure 2: Components of a Water Entitlement
Source: Department of Sustainability and Environment (June 2004g)
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Unbundled water entitlements will: make water trade easier by separating transferable components (water share and delivery share) from other elements of a water right reduce borrowing costs by allowing mortgages to be granted directly over water shares allow water to be leased enable a brokering body to offer financial products tailored to irrigator demands make it easier for irrigators to adjust either the reliability of their water supplies or the timeliness of having water delivered to suit their needs. protect irrigators from price rises when water is traded out of a district by tying delivery shares to the land, even when water shares are sold.
After consultation with the irrigation communities, it is proposed that water rights and diversion licences on regulated waterways in Northern Victoria will be unbundled for the 2007/8 irrigation season. State Water Register Up-to-date and publicly accessible records of how much water is allocated, and how and where water is used, is fundamental to public accountability for the management of water resources. It is also essential to the operation of an efficient water market. Information on who owns water, how much is allocated to farmers, the environment, and other users, and the water-use associated with the water shares will be recorded in a single and publicly accessible webbased Water Register. The Water Register will:
Record who has been issued with water shares and the reliability, tenure, location and holding in megalitres for each water share Record how much water has been allocated against water shares, how much has been used, who used it and where it was used Record registered interests in water shares, such as mortgages and leases Provide summary reports on volume of water shares in each water system, annual allocation, use and the trading history, including average prices for each water system
The Northern Victorian ‘Sales’ package – for irrigators and the environment The „Sales‟ package in northern Victoria is an example of how water reform, targeted investment and government leadership can simultaneously deliver greater certainty for irrigators, improve productivity that aids the economy and return water to the rivers which support communities, industries and natural habitat. Irrigators in northern Victoria receive an amount of water each year, ( up to their maximum entitlement, based on the water available in a given year). In years when water is plentiful, irrigators can receive extra water, known as „sales water‟, defined in the Our Water Our Future White Paper (2004g) as: Lowerreliability water offered to irrigators on a season basis, in proportion to their base rights, after provision has been made to meet the base rights in the following year.
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This sales water cannot be separately traded and does not have the same legal protection as the irrigator‟s base entitlement. This can lead to uncertainty when planning around the use or income from the sale of sales water. In 2004, the Government reached an agreement with northern Victorian farmers to convert sales water into an independent, lower-reliability product. In exchange, 20 per cent of sales water will be allocated to the environment, providing on average 120 gigaltires of water for the River Murray, as part of Victoria‟s commitment to the Living Murray Initiative. In 2002, the Murray-Darling Basin Ministerial Council established the Living Murray Initiative, to address the declining health of the River Murray system. On 25 June 2004, the Council of Australian Governments committed to invest $500 million AUD ($387.35m USD) over 5 years to improve river flows on the Murray and habitat in one of Australia‟s most culturally significant rivers. Legislation introduced on 5 October 2005 in the Victorian Parliament will enable for the first time sales water to be given the same legal protection currently provided to water rights and enable sales entitlements to be fully tradeable. The Our Water Our Future Goulburn-Murray Water Recovery Package (Sales Package) has been approved by the Murray-Darling Basin Ministerial Council as one the Victoria‟s proposals to recover water for the Living Murray Initiative. The Package will recover 145 gigalitres in water savings at a cost of $93 million AUD ($72.04m USD). The $93 million of jurisdictions investment will go towards: $6 million AUD ($4.64m USD) in seed funding to investigate and develop pilot infrastructure reconfiguration plans for irrigation distribution systems; $50 million AUD ($38.73m USD) towards upgrading and rationalising irrigation distribution infrastructure. $30 million AUD ($22.43m USD) to improve dam safety $7 million AUD (5.23m USD) for the State Water Register
The 145 gigalitres is made up of 120 gigalitres from sales package plus an additional 25 gigalitres of high reliability water from $50 million investment in irrigation distribution infrastructure.
Irrigation system reconfiguration Reconfiguration is a process of reviewing and re-investing in infrastructure to meet the changing water supply needs of irrigators. In order to deliver efficient and responsive services, the delivery infrastructure provided by water authorities must be continually adapted. Reconfiguration applies equally to meeting the increasing demand from areas that are expanding as well as downgrading or decommissioning. It is essential that rural water authorities‟ distribution systems provide efficient, responsive supplies of water that are flexible enough to meet the varied needs of irrigators. Legislation currently before the Victorian Parliament will ensure that reconfiguration is a fair and open process, embodying community participation. The Victorian Government will require rural water authorities to share information and work in partnership with irrigators when reconfiguring water supply systems. Where a system‟s supply capacity is proposed to be changed, the authority will discuss the options with customers in order to achieve the most cost efficient method of continuing the service.
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A water authority may only stop providing a service if there is complete agreement with all customers affected, or through a Reconfiguration Plan that is prepared in consultation with stakeholders and may be endorsed by the Minister. Under current amendments to Victoria‟s Water Act 1989, a Reconfiguration Plan will be required where a water authority proposes to change the level of service for part of a system and finds difficulty in reaching agreement with all affected customers. Reconfiguration Plans will look for ways to modify the system and maintain service levels or, by agreement, change service levels to reflect new requirements. An example of the Government supporting a community investigating the future viability of its delivery systems, is the Pyramid-Boort Future Management Strategy. As part of the Living Murray Initiative, $6 million dollars AUD ($4.64m USD) will be provided to progressively develop pilot program plans in Northern Victoria. Water savings from reconfiguration programs can be delivered back to the environment, further exemplifying how duel benefits for both the environment and economy can be obtained. Consulting and communicating on irrigation reforms - Unbundling The unbundling of water rights is a complex process. The Government has worked closely with irrigation communities while developing and implementing the proposed water reforms. High-level consultation with irrigator leaders and environmental representatives has continued – particularly in the lead up to preparation of proposed legislation, introduced 5 October 2005. In addition a range of communication activities have been put in place to help communicate Our Water Our Future water reform to irrigators across Victoria. The Department of Sustainability and Environment has held a number of half-day public information sessions with irrigators to explain the fundamentals of the sales water deal and unbundling. These were publicly advertised in regional press and were very well attended. The Department of Primary Industries (DPI) is carrying out targeted communication with irrigators, based on face-to-face and small group meetings, industry specific newsletters and rural media reporting. DPI has briefed a network of „extension officers‟ to communicate water reform issues. (Four hundred and eighty five officers and staff attended education sessions at 12 locations around the state). These officers have daily face-to-face contact with thousands of Victorian farmers. Also critical has been a program of briefing industry service providers on water reform issues. These providers also have daily face-to-face contact with farmers.
Healthy Environment underpins a Healthy Economy Creation of Environmental Water Reserves The Our Water Our Future White Paper commits to significantly improve the health of Victoria‟s rivers by 2010. Victoria‟s natural waterways have recreational and cultural significance in addition to being vital in providing water to farms, towns and industry. The value of Victoria‟s rivers to the economy is considerable, including: A minimum of $400 million AUD ($309.8m USD) spent annually on freshwater recreational fishing Tourism from the Murray River and Gippsland Lakes regions worth more than $650 million AUD ($503.5m USD) An aquaculture industry worth $12 million AUD ($9.3m USD), producing 80% of Australia‟s trout production and employing approximately 200 people.
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Decline in river health can be costly for the regional economy. The Victorian River Health Strategy (2002c) outlines that the total impacts of algal blooms and poor water quality in the Corangamite region are estimated to range between $6 million AUD ($4.65m USD) and $9 million AUD ($6.97m USD) per year. Another problem is river erosion, which can result in the loss of valuable land and public assets, such as bridges and roads, particularly during floods. The estimated cost of repairs of river-related damage from the 1998 East Gippsland floods was in the order of $30 million AUD. ($23.2m USD) To improve river health, the Government will create an Environmental Water Reserve, a legally recognised share of water to be set aside to maintain the environmental values of a water system. The Environmental Water Reserve would also be implemented for groundwater systems, to prevent over-extraction. The Government will ensure that the rights of existing consumptive entitlement holders are recognised in establishing the initial Environmental Water Reserve. The approach taken in setting up the initial Environmental Water Reserve will differ depending on whether a system is over-allocated. For rivers and aquifers that are currently not over-allocated, the Environmental Water Reserve will be established using a precautionary approach by setting a sustainable limit on diversions to ensure environmental values of a particular river or aquifer are protected. For rivers and aquifers that are fully or over-allocated, the initial reserve will recognise existing entitlements. This means that in some over-allocated systems, the initial reserve may be inadequate to maintain a healthy river or aquifer. Legislation to create the Environmental Water Reserve was introduced in the Spring session of State Parliament in October 2005. Major enhancements of Environmental Water Reserves The enhancement of Environmental Water Reserves for key Victorian rivers is a priority for the Victorian Government. Through targeted investment in irrigation and delivery infrastructure, new technologies and entitlement agreements with irrigators (e.g. „Sales‟ package), considerable water savings have and will be put back into rivers and streams, providing dual benefits for farming communities and the environment. One of the main priorities for the Victorian Government is fulfilling its commitment to the National Water Initiative to return flows to River Murray and returning flows to the Snowy under a separate intergovernmental agreement. In 2005, the Victorian and NSW Governments achieved the first three-year target of the Snowy Water project by returning a total of 57,000 megalitres - 38,000 megalitres to the Snowy and 19,000 megalitres to the River Murray. Victoria has provided water savings totalling 26,600 megalitres under this commitment. A range of projects now being implemented will contribute further savings to Snowy and Murray environmental flow targets. These include: Tungamah Pipeline Project – replacing the dilapidated channel system that supplies domestic and stock customers and three small towns with a continuous piped supply. The Government recently announced $17 million AUD ($13.17m USD) for this project. The project is estimated to recover 5,000 megalitres. Channel automation – a newly developed technology designed to automate open channel delivery systems by radio controlled channel gates and new computer water scheduling software. The technology provides a more efficient service, with benefits for irrigators and channel operation, as well as generating water savings. After a successful pilot on the Central Goulburn 2 Channel near
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Tatura in Northern Victoria, the technology is being introduced on Central Goulburn Channels 1, 3 and 4. $23 million AUD ($17.81m USD) is being invested in the project to save an estimated 18,000 megalitres per annum. Decommissioning Lake Mokoan project – Lake Mokoan is a made-made lake which looses large volumes of water to evaporation and provides poor quality water. A report released in August 2003 recommended decommissioning as the most cost effective and community suitable option. This project will generate 44,000 megalitres of water, with up to 20,000 megalitres being environmental flows for the Snowy River and 24,000 megalitres for River Murray flows. The project will also improve the ecological health of the Broken, Lower Goulburn and Murray Rivers through providing more natural flows.
Victoria is also taking action to improve flows in other key rivers in the State. The Victorian and Federal Governments in June 2005 officially agreed to funding the Wimmera Mallee Pipeline Project in partnerships with the community. This project involves replacing traditional irrigation channels with piped delivery systems. The pipeline will save 103,000 megalitres of water, much of which will be returned to the Wimmera and Glenelg rivers as environmental flows. Work is also underway improving the efficiency of infrastructure in the Macalister Irrigation District. Water savings from the project will increase environmental flows in the Macalister River by 5,000 megalitres by the end of 2006. During the next 10 years, a further 2,000 megalitres will be provided to the Macalister through water efficiency savings and improving the irrigation district‟s water supply system. Future Directions White Paper Implementation The implementation of the White Paper aims to secure water supplies for Victoria for the next 50 years. In order to achieve this, the White Paper outlined long-term planning processes, to look at water supply, demand and trends in five regional areas in Victoria. These Sustainable Water Strategies will set priorities and directions for managing changes in demand for water and investment in water supply systems and major infrastructure for water recycling and re-use. The strategies will be flexible to new challenges that arise, and will look at a range of supply options including water conservation, enhancing supply and alternative supplies. The Central Region Sustainable Water Strategy is currently under development, and is aimed for release in mid to late 2006. Following this, Sustainable Water Strategies for the Wimmera and Glenelg region, Northern Victoria, Gippsland region and South West region will be developed. Conclusions/Recommendations The Our Water Our Future reform program is an excellent case study of how the Victorian Government is seeking to create positive, long term environmental, economic and social outcomes for the State. Through careful planning, targeted investment and extensive community consultation, the Our Water Our Future program will assist to secure Victoria‟s water future for the next 50 years. The reform program will assist agriculture and irrigation industries in Victoria to remain viable and productive well into the future. Unbundling, reconfiguration processes and investment and the strengthening of the State‟s water market will increase the choices available to irrigators and enable them to better adapt to future challenges such as increased domestic and international competition.
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The development of Victoria‟s water market has seen numerous benefits for individual irrigators, the environment, and local communities. Through enabling both permanent and temporary water trading, water has been moving to higher value uses. More responsive irrigation supply systems, which are water efficient and economically viable, have not only provided greater certainty over water supplies, but also delivered water savings that can be delivered back to the environment. The environment will also benefit from the „win win‟ aspect to Victoria‟s water reforms. Investment in water supply infrastructure and entitlement arrangements are not only providing more water entitlement certainty but also enhancing the State‟s Environmental Water Reserve.
References CSIRO (June 2005). Implications of Potential Climate Change for Melbourne’s Water Resources. CSIRO Urban Water, CSIRO Atmospheric Research and Melbourne Water. Department of Primary Industries, Victorian Government (September 2005). Agriculture, Forestry and Fishery Industries, At a Glance. Department of Primary Industries. Department of Natural Resources and Environment, Victorian Government (2000a). Index of Stream Condition 1999. Department of Sustainability and Environment. Department of Natural Resources and Environment, Victorian Government (December 2001b). The Value of Water: A guide to water trading in Victoria. Department of Sustainability and Environment. Department of Natural Resources and Environment, Victorian Government (August 2002c). Victorian River Health Strategy. Department of Sustainability and Environment. Department of Sustainability and Environment, Victorian Government (October 2002d). Melbourne 2030. Department of Sustainability and Environment. Department of Sustainability and Environment, Victorian Government (April 2003e). Valuing Victoria’s Water – Securing Victoria’s Future, Victorian Government. Department of Sustainability and Environment. Department of Sustainability and Environment, Victorian Government (August 2003f). Securing our Water Future. Department of Sustainability and Environment. Department of Sustainability and Environment, Victorian Government (June 2004g) Our Water Our Future. Department of Sustainability and Environment. Department of Sustainability and Environment, Victorian Government (April 2005h). Our Environment Our Future: Victoria’s Environmental Sustainability Framework. Department of Sustainability and Environment. Department of Sustainability and Environment, Victorian Government (June 2005i). State Water Report 2003-2004. Department of Sustainability and Environment. Department of Sustainability and Environment, Victorian Government (October 2005j). Index of Stream Condition: The Second Benchmark of Victorian River Condition. Department of Sustainability and Environment. Productivity Commission (2004). Modelling Water Trade in the Southern Murray-Darling Basin.
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