Murray Valley Horticultural Industries response to the MDBA Sustainable Diversion Limits issues paper

Transcription

1 Murray Valley Horticultural Industries response to the MDBA Sustainable Diversion Limits issues paper Murray Valley Citrus Board Australian Dried Fruits Association Murray Valley Winegrowers Inc. Almond Board of Australia Murray Valley Table Grape Growers Council Dec 2009 Water and Environment Business

2 Table 1 1: Document review, authorisation and distribution Version no. Date Author Reviewer Release Approved Issued to No. of copies 1 (Draft 1) MD/JW GC GC MVHI 10 2 (Draft 2) MD/JW GC GC MVHI 11 3 (Final) MD/JW GC/MD GC MVHI 11 Disclaimer This document is for the exclusive use of the client for which it was prepared and is not to be relied upon by any other person. Psi Delta has made every effort to ensure that the information provided is accurate but errors and omissions can occur and circumstances can change from the time that the report or document was prepared. Therefore, except for any liability that cannot be excluded by law, Psi Delta excludes any liability for loss or damage, direct or indirect, from any person relying (directly or indirectly) on opinions, forecasts, conclusions, recommendations or other information in this report or document. Authors: Matthew Dent James Williams Geoff Croke Psi Delta Pty Ltd Psi Delta Pty Ltd Level 4, 50 Queen Street Melbourne VIC 3000 P F E mail@psidelta.com MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 2

3 Table of Contents 1 Executive summary Introduction Responding group and region represented Understanding of the issues Basis of response Region and background Economic value of region Risks for region and permanent plantings Current issues facing MVHI without any reduction in SDLs Major issues Fundamental objections Requirement for information Responses to questions raised Which Water Resource Plan areas should be used? Which forms of take should be limited by the SDLs? How should SDL provisions be determined in a way that optimises economic, social and environmental outcomes? How should surface water groundwater connectivity be dealt with? How should SDLs be set and expressed? Conclusion and recommended action MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 3

4 1 EXECUTIVE SUMMARY This response by the Murray Valley Horticulture Industries (MVHI) to the Sustainable Diversion Limits issues paper represents the views of permanent horticultural plantings throughout the Murray Valley region ( the Region ), including growers in Victoria, New South Wales and South Australia, with some of the industries representing growers beyond this into the Riverina region and other areas. It has been prepared on behalf of: Almond Board of Australia Australian Dried Fruits Association Inc. Murray Valley Table Grape Growers Council Inc. Murray Valley Citrus Board Murray Valley Winegrowers Inc. The industries represented in this response paper are of considerable economic importance to both the nation and the Region, which extends approximately 700km from Cobram/Barooga to Blanchetown along both sides of the Murray River. Given the need to maintain water supply to permanent plantings, these industries face challenges unlike those seen in annual crop based irrigation industries. These industries are investment intensive, only yielding benefits after a significant development period of up to 10 years, and as such are unable to respond quickly to reduced water availability or changing market conditions. Any loss of permanent plantings can entail costs exceeding $20,000/ha for replacement, and the economy will be impacted by up to 10 years of lost production. The economic cost of reducing water availability or reliability to these industries will therefore be much greater than for comparable reductions in most other industries. Most of the towns along the Murray River in the subject region owe their existence to the industries represented in this response. The MVHI support, in principle, the efforts to improve the sustainability of the Murray Darling River system, but strongly object to the overall method currently proposed to achieve this. The importance of the health of the river for the sustainability of irrigation industries is well understood, but the MVHI insist on the adoption of a more rigorous and balanced approach to the issue of consumptive versus environmental water requirements, including the provision of evidence of how environmental water can be used. In particular, it is essential that the proposed methodology for social and economic analysis be clarified and strengthened, so that economic and social issues, such as the needs of irrigators, are not overwhelmed by environmental considerations. The economic and social impacts of reduced horticultural output would substantially outweigh any benefits gained from diverting these water resources to environmental uses. As such it is strongly recommended that sustainable diversion limits be developed and managed with the aim of avoiding any reduction in water availability for sizable horticultural areas wherever possible. To facilitate this, alternative methods such as making greater investment in capital works, new technologies or new practices which result in increased efficiencies, and voluntary sale of water should be pursued in these regions. The MVHI are keen to assist the Murray Darling Basin Authority (MDBA) in ensuring that sustainable diversion limits are developed efficiently and in ways which minimise economic and social impacts for Basin communities and the wider economy. As such, the MVHI insist on the provision of more detailed explanations of proposed processes as soon as possible. This should include as much data as possible on the impacts of SDLs on water availability and MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 4

5 reliability, including where practical examples of impacts using scenarios or historic data to provide an accessible reference for irrigators. The MVHI are aware that the MDBA has immediate and challenging targets to show that environmental remediation is being achieved. However, the MVHI do not have confidence that sufficient technical research has been conducted to produce dependable results on how much SDLs should be reduced, particularly given the profound social and economic detriment to our industries and communities that potentially will be caused by reductions in SDLs. This technical work done properly is likely to indicate efficiencies and optimisation that can be achieved to maximise the benefit per megalitre of environmental water programs. Given the potential economic and social impacts it is important that the work on provision of adjustment such as through eco payments starts to be developed on a commensurate scale with the technical considerations. This work needs to be based on direct community engagement rather than an approach based on remote socio economic analysis. MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 5

6 2 INTRODUCTION 2.1 Responding group and region represented This response to the Murray Darling Basin Authority s (MDBA) Issues Paper on Development of Sustainable Diversion Limits for the Murray Darling Basin has been prepared jointly by industry groups representing a majority of the irrigated horticulture in the region extending approximately 700km from Cobram to Blanchetown, and within approximately 15km of the Murray River ( the Region ). These groups are: Almond Board of Australia Australian Dried Fruits Association Inc Murray Valley Table Grape Growers Council Inc Murray Valley Citrus Board Murray Valley Winegrowers Inc 2.2 Understanding of the issues The MVHI appreciate the requirement under the Commonwealth Water Act of 2007 ( the Act ) for the MDBA to produce a Basin Plan, and the extremely tight timeframe under which the MDBA is working to achieve implementation of this plan in The Basin Plan will ensure the integrated and sustainable management of water resources in the Murray Darling Basin, a goal which the MVHI support. The legislation provides for Sustainable Diversion Limits (SDLs) to be the main tool for achieving the objectives of the Basin Plan. SDLs are to be defined as the long term average limit on overall extraction from each Water Resource Plan (WRP) area, and for the Basin as a whole. These SDLs are also to be used as management tools for determining water availability for consumptive use, and will be defined in greater detail as required for the water resource in question. The opportunity provided by the MDBA Issues Paper ( the Paper ) for stakeholders to provide input into the development of those SDLs is taken up by this document, which responds specifically on socio economic issues and the relationship between SDLs and other elements of the MDBA s proposed Basin Plan. The response addresses the individual questions posed and provides further information on other issues considered by the MVHI to be of relevance. The MVHI are keen to use this opportunity to provide early input on the numerous issues related to the development of SDLs, and look forward to further opportunities to provide input before the release of the proposed Basin Plan in mid Basis of response Horticulture represents an important proportion of agricultural output in the Murray Valley, and with high returns per megalitre it provides a substantial contribution to State and regional economies. The growing of these permanent plantings is characterised by high investment per hectare, high cost off farm inputs such as packing sheds and irrigation technology/transport, in some cases high labour requirements, an inability to relocate, and difficulty with reconfiguration (including enterprise change). The potential for reductions in Sustainable Diversion Limits (SDLs) and consequent changed water management arrangements throughout the Basin is of serious concern to the MVHI. Of particular concern is the lack of specificity in the Paper on the methodology for implementation of SDLs, and the resulting uncertainty regarding potential impacts on MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 6

7 growers. Such certainty is an absolute necessity for the long investment horizons required by permanent plantings. MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 7

8 3 REGION AND BACKGROUND 3.1 Economic value of region The produce from industries represented by the MVHI are of significant economic value, as shown in (Table 3 1). Table 3 1 Economic contribution of the MVHI, Industry Value (millions) % of Australian production Winegrapes farmgate value % exported $203.7 (2008) 19.9% N/A Table grapes $240 (2009) 74% 64% Dried grapes $31.5 (2009) 98% 20% Citrus $440 (2009) 24.3% 55% Almonds $250 (2009) 98% 63% (Source: Mildura Development Corporation, adapted from DPI, ADFA, AEC group, Murray Valley Citrus Board, 2008 Australian Regional Wine Grape Crush Survey Murray Darling & Swan Hill and the Almond Board of Australia) Horticultural production from the Region represents a vital contribution to Australian exports, with over half of table grape and citrus, and a similar percentage of wine production, being sold abroad. The Region also meets most of the domestic market for table grapes, dried vine fruit, and almonds. Any decrease in diversion limits would hit national export revenues and severely curtail the domestic supply of these foodstuffs. As one of Australia s most valuable horticultural regions, there is a corresponding high level of employment, with for instance over 18,000 wage and salary earners in the Mildura LGA in 2005 (ABS, 2005). Any long term drop in production due to a reduction in water availability would have a marked effect on this employment. There are also considerable multiplier effects through the wider community, with a large number of off farm jobs created from the horticultural industry s impact on the local and wider economy. MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 8

9 Table 3 2 demonstrates the results of modelling the impact of three reduction scenarios in MVHI output on the wider employment of the Mildura LGA, taking into account direct contraction in the economy and flow on industrial effects in terms of local purchases of goods and services. MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 9

10 Table 3 2 Total jobs lost in Mildura LGA from reductions in output Decrease in output Direct employment loss (number of jobs) 10% (~$43.5m) % (~$87m) % (~$130m) Source: Mildura Development Corporation REMPLAN modelling (2009) Total Mildura LGA employment loss (number of jobs) The value of the region as a source of agricultural produce at a time of increasing concerns about global food security should also be noted. 3.2 Risks for region and permanent plantings A significant issue for permanent plantings is the high capital investment costs and requirement for longer term investment horizons: Investment per hectare is typically $20 40,000/ha, with highly developed cultivation, watering and crop care systems. Continuing production from permanent plantings is reliant on long term investment, which requires confidence based on security of water supply. Permanent plantings have limited flexibility in dealing with low water availability, and the impacts of extended dry periods can be much greater than merely the replacement cost of the trees and vines. Most industries represented by the MVHI can expect zero or greatly reduced production for 3 to 10 years following re planting (Horticulture Australia Council (HAC) Submission Crisis in the Murray Darling Basin, 2007). The industries represented in this submission support a range of beverage, food processing and packing industries that also provide additional investment and employment in the region. Any reduction in throughput caused by reduced SDLs would represent a grave threat to these industries with a consequent loss of investment and regional employment. 3.3 Current issues facing MVHI without any reduction in SDLs The industry has already gone through structural adjustment in the past few years as a result of low allocations and low returns on horticulture from depressed market prices, with 30% of the area s horticultural crops having been removed from already fragile industries. This period has been the toughest ever experienced by the Region, and many horticultural irrigators are at a critical threshold, having only just survived a number of consecutive years during which costs exceeded incomes. This has had the effect of significantly reducing the financial and emotional reserves of many irrigators, to the point that many more are considered to be at high risk of leaving the industry. Any actual or perceived likelihood of a reduction in water availability is likely to exert further pressures on this group to cease production. MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 10

11 4 MAJOR ISSUES 4.1 Fundamental objections The MVHI object strongly to the fundamental principle expressed in this Issues Paper, that the sole goal of SDLs should be to provide water for the environment, to create water management arrangements that achieve the environmental water requirements albeit in a way that optimises social, economic and environmental outcomes. A more balanced approach is needed. The MVHI very strongly support measures to ensure the sustainability of the Murray Darling River system, but believe that an approach which aims to optimise environmental, economic and social outcomes on an equal footing will provide a better outcome in the long term. The Water Act 2007 states as one of its objects in Section 3 to maximise the net economic returns to the Australian community from the use and management of the Basin water resources (subject to the environmental considerations in Object 3, subparagraphs (i) and (ii)), and in Section 21 that the Basin Plan must be developed with regard to the consumptive and other economic uses of Basin water resources. Environmental outcomes from use of environmental water must therefore be evaluated with the same rigour as is applied to economic outcomes from the use of consumptive water. The river system is an environmental asset, but it is also a vital economic asset, and should be managed as both. The need for environmental action must not blind decision makers to the real need for irrigation, both as a stimulant for regional economic activity, and as a vital supplier of food. Large reductions in the SDLs for the region would bring about large permanent reductions in economic activity in the communities in the region. The current consultation about new SDLs is occurring when there is great uncertainty about the scale of impact of climate change and what its effects will be even after the present studies being undertaken by the MDBA are completed. It is clear that the research on both the biophysical impacts of increased environmental water, the economics of this re distribution of water and the optimisation of use of environmental water must reach a higher level of certainty before final decisions are made and communities in the region suffer permanent loss. 4.2 Requirement for information There is a regrettable absence of information provided on many of the key topics addressed in this Issues Paper. Section 3.9 of the Issues Paper, for example, states that the proposed Basin Plan will identify key environmental assets, but at this stage no listing of these assets has been provided, nor have key ecosystem functions or environmental outcomes been identified. This reduces the ability of stakeholders to make informed comment. The MVHI recognise that in many cases this information is not yet available, but nonetheless require sufficient detail on these issues to be able to contribute effectively to the development of optimal SDLs. If necessary, decision making timeframes should be adjusted to ensure that provision of sufficient detail is possible, and that procedures and processes can be determined and clarified such that the MVHI and other stakeholders have the ability to participate in these vital decisions. MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 11

12 5 RESPONSES TO QUESTIONS RAISED 5.1 Which Water Resource Plan areas should be used? What are your views on the proposed approach to determining WRP areas as set out in this paper? The MVHI are generally supportive of the proposed approach to adopting water resource plan areas based on existing State water planning areas, and support the concept that WRP areas are to be wholly contained within a single Basin State. The proposed process extending WRP areas over state boundaries for the purposes of developing SDLs is a cause of some concern, as there are considerable differences in the management, nature and volume of water entitlements in different States. Entitlement densities vary significantly between regions, with the result that the economic impacts of any particular reduction in water availability would also vary. This concern is exacerbated by the difference in starting dates for SDLs in the different States, as this would cause differential impacts between regions, with the likelihood being that those irrigation areas first subject to a reduction would be the worst affected. The MVHI recognise the potential requirement for national coordination during the implementation process Do you have any suggestions you would like to provide to the MDBA in this regard? More information needs to be provided about the effects on irrigators of any changes to existing WRP areas. Greater clarity is required on how environmental water requirements will be sourced from different regions and how WRP selections will affect this process. The selection of WRPs could have a significant effect on the analysis of economic impacts, and every effort should be made to ensure WRP areas are, as much as is practical, homogeneous in their level of economic activity. In particular, the horticulture industries in the MDB are high intensity, mostly small area industries which provide a much larger economic benefit that the equivalent area of pasture or cereal crops. There is a risk that selection of WRP areas could result in the economic contribution of horticultural industries being undervalued. 5.2 Which forms of take should be limited by the SDLs? What are your views on the proposed approach to take limited by SDLs, as set out in this paper? The MVHI are generally supportive of the inclusion of all forms of take under the SDLs, but have a number of concerns regarding the exact processes to be used. In particular, we are concerned about: The methods for including or excluding environmental water entitlements There needs to be equality between environmental water entitlements and consumptive use entitlements, to ensure that economic activity is not sacrificed, for example, to provide water to environmental sites during drought, when they would naturally be dry. The MVHI support the idea that The water entitlements held by the Commonwealth Environmental Water Holder will retain their original characteristics and suggest that this arrangement be extended to include all environmental water entitlements The methods for defining the environmental impact of different forms of take The different environmental impact of different forms of take needs to be recognised as part of the SDL process, as the purpose of limiting take is not to recover a specific volume from available resources, but rather to ensure that take does not compromise the MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 12

13 environmentally sustainable level of take characteristics of those resources. For example, water entitlements diverted from the river (directly or via channel systems) in the Region are likely to have significantly less environmental impact on the river system compared to water taken from the catchment headwaters. This is because water extracted in the Region has already provided environmental flows to the length of the river, whereas take from the headwaters regions prevents any environmental flows. The MVHI also are concerned over the Issue Paper s reference to the productive base of the environment. It was the understanding of the industry at the time of the Water Act 2007 that this term referred to the economic/agricultural use of water. Any reference to production must therefore give at least equal weight to current use What are your views on the proposed approach to treating interception activities as set out in this paper? The MVHI are cautiously supportive of most aspects of the proposed approach to treating interception activities, but emphasise the need for rigour in measurement and limiting processes, due to the potential for impacts to be unfairly distributed if processes for measuring and accounting for take are insufficiently thorough. The methods for measuring actual take and the actual environmental impact of this take must be rigorous and transparent, particularly if existing diversions have an influence on selecting SDLs for each catchment. If assumed take by previously unmeasured sources such as farm dams is substantially different from actual take, this could result in other forms of take being reduced more than is necessary, exacerbating economic impacts Which interception activities are significant enough to be explicitly identified in the SDL provisions? The MVHI suggest that the significance of different forms of take, particularly dispersed take in upper catchment areas, should be considered cumulatively. The significance of individual sites is not as important as the significance of the net volume of water removed from the system. 5.3 How should SDL provisions be determined in a way that optimises economic, social and environmental outcomes? What are your views on the proposed approach to optimising economic, social and environmental outcomes through SDLs as set out in this paper? The MVHI are strongly supportive of the concept of optimising SDLs and the management systems of SDLs to minimise economic and social impact. However, there are serious concerns about the suggested processes, in particular the lack of clarity as to how these processes will be managed. The process proposed will provide economic and social impact assessments followed by some community engagement. Our experience of such activity is that it is carried under timetables that are too tight, includes far too little direct community input in the scoping of the analysis, has an over reliance on secondary statistical data and fails to appreciate the impacts on the economic and social fabric of communities. The impact of the introduction of the SDLs will be fundamental to the MVHI region communities and they deserve a far more thorough process that attends more to the planning of how these communities can survive the changes Minimising reduction in water entitlements The MVHI strongly support the concept of minimising reductions in water entitlements for irrigators, however, we believe that the proposed process of minimising any average MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 13

14 reduction in water availability to entitlement holders is unnecessarily crude. As a minimum, the reliability, asset value and level of pre existing investment associated with entitlements should affect the degree of reduction necessary. Reducing entitlements for highly developed, reliable water supply systems provides no more water for the environment than does reducing entitlements in less developed systems, but the economic impacts are obviously greater in the first instance Inclusion of drought periods in modelling effects The MVHI are firmly supportive of the suggested process of analysing economic impacts during drought conditions in addition to long term average conditions. The impacts of drought conditions are particularly significant for horticultural industries with permanent plantings, where a continuous supply of water is vital. Any reduction in entitlements for these industries during drought risks the loss of productive plantings which can take up to 10 years to replace. The severity of this impact is such that reductions in entitlements for permanent plantings should be avoided at all costs Use of gross value of irrigated agriculture production in determining inter valley sharing While the MVHI are supportive of using economic output data as a guide to identifying contributions required from various regions, we are concerned about the concept that the gross value of irrigated agricultural production in various valleys could be a significant consideration in the distribution of contributions of water to downstream assets. The flow on economic value of different forms of irrigated agriculture varies considerably, particularly with regards to regional and local economies within the Basin, but also on a national scale. The local economic impact of irrigated horticultural production is significantly greater than many other forms of irrigation. Further, a significant proportion (55%) of the citrus and other crops produced in the Region is exported, contributing to the national economy What is the best way to maximise input from particular communities of interest in the time available? The MVHI are seriously concerned that the time available is insufficient for effective community involvement and thus is inadequate to optimise the social, economic and environmental outcomes of this process. While the importance of taking decisive action on these issues is undoubted, this should not compromise the integrity of consultation processes, particularly when economic impacts could amount to billions of dollars. The drought conditions which have precipitated the present environmental concerns are a recurrent feature of the Australian climate. The most significant requirement for effective participation by the MVHI in this process is the provision of specific, detailed information about the systems proposed to be used in selecting and managing SDLs, and real world relevant data on likely impacts of SDLs. Without a detailed understanding of the proposed changes to water management and water availability, it is impossible for industry representatives to actively participate, let alone support any such changes. As a guide, the information of greatest importance and urgency to the MVHI includes: Details of clear and concrete procedures for: Relating economic impact studies to the selection of SDLs Setting and reviewing SDLs The treatment of environmental requirements under different scenarios including drought and wet periods MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 14

15 Identifying environmental water demand Cost benefit analysis and optimisation of environmental uses of water Data on the impacts of likely SDLs on: Water availability, including examples accessible to irrigators, such as an evaluation of what past water allocations would have been under various SDLs Water reliability Operational costs/ml of water supply systems In addition, a major area of concern for the MVHI is the dependability of arrangements resulting from this process. As a high investment industry, permanent horticultural plantings require a high degree of certainty in order to maintain or increase the existing level of production. While it is understood and accepted that no one is capable of guaranteeing announced allocations, horticultural industries do require a high degree of confidence that the volume and reliability of water assets are accurate and with frequency and volume of future changes minimised. This requires the process of allocating SDLs and the management systems for implementing them to be concrete and transparent. It is further recommended that once SDLs have been set, no further decrease in water availability is possible for at least a set period of time Do you have any suggestions you would like to provide to the MDBA in this regard? Provision of information The MVHI consider it critical that the information discussed above be provided to the community as soon as possible to facilitate effective and informed community involvement in the decision making process. In particular, greater clarity is required with regards to the processes connecting economic impact assessments to SDL selection, and the methods proposed to be used to minimise economic impacts Key economic impacts faced In the process of evaluating the economic impacts of SDLs it is important to take into account the pre existing investment in establishing the various forms of take, particularly given that many irrigators have debt structures which could cause significant hardship if assets suddenly reduce in value. Furthermore, economic impact analysis needs to include secondary and tertiary industries, as many of the irrigators represented by the MVHI are heavily dependent on value adding industries to maintain market share. Industry output may undergo stepped changes as industries shrink below viable size limits and processing and other support services shut down. Avoiding such thresholds should be a focus of the economic impact evaluation activities. 5.4 How should surface water groundwater connectivity be dealt with? With the exception of the Katunga system, the irrigation areas represented by the MVHI make relatively little use of groundwater resources due to the poor quality (salinity) and low availability of this resource in the Region. As such, the MVHI are unable to provide significant comment on this issue. The MVHI support the inclusion of groundwater diversions in the MDBA SDL calculations, however, as groundwater diversions impact on surface flows. If these are not accounted for, there is the potential for environmental to come solely at the expense of surface diverters. MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 15

16 5.5 How should SDLs be set and expressed? What are your views on the proposed approach to setting and expressing SDLs as set out in this paper? The MVHI are cautiously supportive, in principle, of the use of river system models as a basis for calculating SDLs, but have concerns regarding the legitimacy and transparency of existing modelling systems and in particular of the principles stated as the basis for this application of the models Annual variability One of the stated objectives of using models to set SDLs is that they are able to provide limits not only in terms of a long term average, but also in terms of the annual variability within that long term average. What this means with regards to the reliability and dependability of irrigation entitlements is an issue of major concern for the MVHI, and needs to be resolved through provision of both a more detailed explanation and data and examples relevant to irrigators Inclusion of economic impacts in developing SDLs The relationship between the hydrological models proposed to be used to establish SDLs and the economic and social impact assessments discussed elsewhere in the paper is not clear. While supportive of the concept of using economic and social impact analysis to minimise impacts, the MVHI require more information on the relationship between these aspects to be able to contribute in a real fashion Integration of basin wide environmental water requirements There is little detail provided on the methods proposed to be used to integrate catchment scale and Basin scale environmental water requirements. This is a major issue, particularly for the Region, located in the lower reaches of the river basin, and the lack of detail on how this process will be carried out is of concern Need for stability Irrigation of permanent horticultural plantings requires a stable economic and physical environment due to the long payback period and high level of investment required. The proposed transition period to full implementation of SDLs of five years is generally too short if there is to be any reduction in water availability to these industries. Too rapid a transition period jeopardizes the high financial returns per megalitre used, and may undermine the flow on effects to the Regional economy and that of Australia as general. Processes will also need to be sufficiently clear and transparent that irrigators are able to have confidence that SDLs, once set, will provide for a stable volume of water for consumptive use. The process for recovering environmental water from different catchments and States also needs to be clarified, particularly due to the disparity in starting dates for the Basin plan in different regions. If there is doubt about these processes or concern regarding future reductions, it is likely that investment in irrigated horticulture will be stifled Do you have any suggestions you would like to provide to the MDBA in this regard? The MVHI maintain that the issues discussed above be clarified, wherever possible with the use of actual or indicative data, relevant examples and where necessary the discussion of scenarios. An example which would be of particular use to the MVHI would be a detailed example of what a variety of likely SDLs would mean if applied to climate and water use data from the past 10 years. It is also suggested that the location of take be taken into account in addition to the method of take, particularly in the effect on environmental flows elsewhere in the river. Water taken MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 16

17 from the Region provides environmental flows for a significant distance upstream, and this benefit should be taken into account. Pro rata sharing of the impacts of climate change between consumptive and environmental use is a concept which is generally supported by the MVHI. However, we would like to see this concept extended to cover pro rata sharing of the impact of drought events. Environmental sites and processes naturally have to cope with low flows during drought, and to attempt to supply long term average volumes of environmental water during drought times would disrupt this natural process and seriously impact on the regional economy. Further clarification is also required on the treatment of water entitlements held on behalf of the environment. It is understood that these entitlements are excluded from the SDLs, and proportionately reduce the negative impact on consumptive water entitlements arising from those SDLs. We insist that the processes used to manage this water be clarified, and that existing and future environmental water entitlement be maintained as entitlements in the same sense as consumptive use entitlements. This will allow parity between environmental and socio economic impacts throughout drought events and climate change. The MVHI object to the lack of critique in the Issues Paper of the methodology used to determine environmental outcomes, and the environmental water requirements needed to achieve them. The National Farmers Federation (NFF) has expressed concern that the river system modelling adapted from the CSIRO Sustainable Yields Audit project work and to be used by the MDBA may in many cases contain obsolete data that requires updating. There are also questions of how the MDBA s own Sustainable Rivers Audit, particularly Report 2 (due in 2010/11), will be used with this. MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 17

18 6 CONCLUSION AND RECOMMENDED ACTION The MVHI support, in principle, the efforts to improve the sustainability of the Murray Darling River system, but are deeply concerned about the overall method currently proposed to achieve this. Existing water resource management areas should continue to be used to the extent practical, and suggest that detailed information be provided to all stakeholders regarding the effects of any changes. The MVHI are supportive of the inclusion of all forms of take under diversion limitation, but are strongly concerned about the possibility of error in measurement. SDLs must be clearly defined to ensure major irrigation areas cannot be impacted negatively by mismeasurement (of presently unmeasured forms of take). As over estimation of other forms of take could result in economically important irrigation systems facing additional reductions, it is important that measurements of all forms are conservative during the setting of required reductions. The MVHI believe that a more robust process is required to ensure that the economic and social impacts of SDLs are properly evaluated and then minimised. It is recommended that the focus of SDLs be broadened to include economic and social sustainability equally with the environment. The MVHI are opposed to the concept presented in the issues paper that economic and social concerns are secondary to environmental needs. It is also recommended that much more detailed information is provided to stakeholders on the actual process of optimising environmental, economic and social impacts, and the likely impacts of SDLs on water supplies and water useability. While the MVHI recognise the need for maintenance of environmental production, the approach proposed by the MDBA means that this is at the expense of only agricultural producers. The Murray Valley is regarded as the most efficient irrigation area in Australia, and through this it can be argued that irrigators in this region already contribute to environmental needs. Further disadvantaging of these groups could be alleviated by the adoption of payments for ecological services, a practice widely adopted in other areas of the world including by the Commonwealth Government on projects overseas. The efficiency of Murray Valley irrigators means that the MVHI would also be prepared to offer support for metering of all water used, despite the difficulties presented in measuring all forms of take. The MVHI are primarily concerned with the long term reliability of water supplies, not just as a vital input to horticultural production, but also as a requirement for future investment in the industry. Given the economic value of horticulture to the MDB, it is suggested that water availability to these industries should not be reduced if at all possible, but over and above the need for water itself, these industries need to be able to have confidence in the future of water supplies. Whatever processes are ultimately used to limit and manage irrigation water supplies, they need to be consistent and transparent, and have demonstrable dependability for both irrigators and financiers. Typically a large part of security for farm borrowings is against water assets and large reductions in the value of these assets jeopardises the necessary capacity to borrow. The MVHI recommend that much more detail be provided on the proposed processes, and that adequate community engagement be undertaken to ensure that the specific needs of the Basin s various irrigation industries are taken into account. Overall, the greatest need of the MVHI and many other stakeholder groups is the provision of more information and the opportunity for real involvement in the decision making MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 18

19 process. Stakeholder groups such as the MVHI are in many ways the best qualified parties to assist in minimising economic and social impacts of the development of SDLs, and this capability should be maximised by the MDBA. MURRAY VALLEY HORTICULTURE INDUSTRIES RESPONSE TO MDBA SDL ISSUES PAPER 17 DECEMBER 2009 P: 19