Response from Urban Water Sector on:

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1 Industry Feedback qldwater Collated Industry Comments Response from Urban Water Sector on: Discussion Paper on Enhancing regulations to ensure clean water for a healthy Great Barrier Reef and a Prosperous Queensland. March April 21 st 2017 Contents Background... 3 Feedback on Questions Raised in the Discussion Paper Do you have suggestions for minimum practice standards? How long should each industry be given to meet the new minimum standards once they have been determined? What data should be collected by producers, industry and government? How best can records be collected and made available to support producers and industry? What incentives or assistance might best encourage compliance with minimum practice standards? How could good performance by producers be best rewarded? How often should catchment pollution load limits be reviewed to determine whether load limits are being exceeded? What other decisions could catchment load limits help inform? What types of new agricultural activities should be subject to the additional requirements?... 7 qldwater ph Page 1

2 10. Should new water quality requirements apply only to new agricultural, urban and other intensive activities in those reef catchments that are exceeding or close to exceeding their catchment pollution limit or should they apply across all reef catchments? Can you foresee any circumstances where an offset would be inappropriate? How could financial contributions be determined? Is the proposed order of preference for where an offset should be located appropriate?... 9 General Comments... 9 Contacts and Further Information qldwater ph Page 2

3 Background The Queensland Water Directorate (qldwater) is the central advisory and advocacy body within Queensland s urban water industry representing the majority of the State s Water Service Providers, from small local governments up to major utilities including Queensland Urban Utilities and Unitywater. qldwater works with its members to provide safe, secure and sustainable urban water services to Queensland communities. This collated response was compiled for the Department of Environment and Heritage Protection in response for requests for feedback on the Discussion Paper on Enhancing regulations to ensure clean water for a health Great Barrier Reef and a Prosperous Queensland. This response collates responses from numerous councils that provide public sewerage services within catchments draining to the Great Barrier Reef. Feedback on Questions Raised in the Discussion Paper 1. Do you have suggestions for minimum practice standards? Standards for all sewage treatment plants (STPs) in Great Barrier Reef (GBR) catchments already exist in Environmental Authorities (EA) and are generally conveyed in terms of limits for the contaminants released to land or water. There is no consistent minimum practice standard because of significant variation in values, objectives, impacts and development history of the communities served by public STPs. Requiring consistent minimum standards across all STPs would not merely be expensive, but would also be a poor use of limited public funding to improve environmental health for the reasons outlined below. Moreover, an arbitrary minimum standard would be inconsistent with the principle of Ecologically Sustainable Development (ESD) which underpins the Environmental Protection Act 2004 (EP Act). ESD is a variable concept that requires a fit for purpose response in the context of the specific activity and the receiving environment being considered. The standards that a STP must meet are determined by the Environmental Regulator and the Local Government owned service provider and are recorded in an EA (under the auspices of the EP Act) in the context of local ESD. Limits for nutrients and other contaminants are typically established when a STP is built or when there is a significant upgrade (material change of use) to an existing facility. This means that older STPs in areas where there is little population growth may have older (and possibly less stringent) licences than other areas that have been more recently expanded. In recent years, there has been a drive towards tertiary treatment particularly for STPs within GBR catchments. There is no strict definition of tertiary treatment and the urban water sector no longer uses the terms primary, secondary and tertiary treatment because they convey different meanings to different people. Licence conditions in EAs for GBR STPs over the past decade suggest that this standard is currently being interpreted as long term median concentration of total nitrogen of 5 mg/l and total phosphorus of 1 2 mg/l. This accords with the understanding presented by Brodie (1995) 1, Waterhouse and 1 Brodie, J.E., Management of sewage discharges in the Great Barrier Reef Marine Park. In: Bellwood, O., et al., (Eds.), Recent advances in Marine Science and Technology, vol. 94. James Cook University, Townsville, pp qldwater ph Page 3

4 Johnson (2002), 2 and the GBRMPA policy for island STPs 3. EAs also show increasing controls on other contaminants and there are examples of stringent limits being imposed ostensibly because an STP is within GBR catchments even if they are hundreds of kilometres from the coast. The impetus to improve STPs has been driven in part by the success of large upgrades in coastal communities over the past two decades. Between 2000 and 2014, over $ million was invested in large public STPs 4 resulting in an 80% reduction in loads of nutrients being released. This resulted in significant improvements to local releases and as a result, all GBR STPs now represent less than 4% of the total load of nutrients coming from GBR catchments. 5 The past improvements may have led to the perception that tightening standards at more STPs within GBR catchments would be a sensible approach for improving total nutrient loads reaching the GBR. There are 129 STPs within the GBR catchments and only 33 have an EA requiring tertiary treatment, but this group together treats the majority of the sewage collected thus addressing a major component of the total load from STPs. The remaining STPs are mostly small and many are a large distance from the coast. A number also recycle water or discharge to land. It has been estimated that upgrading just the 61 STPs that are within 50 km of the coast (to tertiary treatment ) would cost around $719 million and create ongoing operational costs of $33 million per year 6. This large expense is driven by the relatively high cost of upgrading and maintaining small STPs and means that it would be extremely expensive to adopt set a consistent minimum standard such as tertiary treatment for STPs. This high relative cost might be justified if it were not for the relative impacts of these STPs. A conservative estimate suggests, however, that the remaining STPS contribute less than 2% of nutrients from GBR catchments 7. The most efficient upgrades typically reduce loads by 80% meaning that these expensive upgrades could address only around 1% of total nutrient loads. In contrast, recent modelling commissioned by the Queensland Government showed targeted reductions of between 50% and 80% of nitrogen from each catchment could be achieved for a total of $390.6 million (included CAPEX and OPEX) solely by addressing priority diffuse sources. 8 This means that critical nutrient issues can be addressed at less than half the total cost to upgrade remaining STPs which would at best address a negligible fraction of nutrient loads. The above information is presented as an argument against imposition of a blanket approach to developing minimum practice standards and against pressure to achieve 2 Waterhouse, J., Johnson, J., Sewage Discharges in the Great Barrier Reef Region. Water 29 (5), The Great Barrier Reef Marine Park Authority Sewage Discharge Policy, March 2005 requires tertiary equivalent nutrient concentrations of 5 mg/l Total Nitrogen and 1 mg/l Total Phosphorus. 4 Great Barrier Reef Marine Park Authority 2014, Great Barrier Reef Outlook Report 2014, GBRMPA, Townsville, p Great Barrier Reef Marine Park Authority 2009, Great Barrier Reef Outlook Report 2009, GBRMPA. 6 Queensland Water Directorate, Industry Discussion Paper on Sewage Treatment Plants in Great Barrier Reef Catchments. December See note 6. 8 Alluvium (2016). Costs of achieving the water quality targets for the Great Barrier Reef by Alluvium Consulting Australia for Department of Environment and Heritage Protection, Brisbane. July 2016, p. 44. qldwater ph Page 4

5 arbitrary standards premised on benefits for the GBR. However, this does not mean that standards should not be reviewed. Standards within EAs are typically based on loads or concentrations of contaminants released using maxima, minima and long term medians and percentiles. Consistency in the approach to setting these standards may be able to create opportunities to better protect the environment and the GBR. For example, use of total loads rather than concentrations may be preferable for many contaminants (except those that are acutely toxic at high concentrations). Removing maximum concentrations for some (non toxic) contaminants would promote consistent discharge standards but allow occasional high concentrations, creating the opportunity to more appropriately target lower long term loads. Appropriately managed, this could promote innovation to reduce total loads of nutrients reaching the GBR from STPs at a reduced cost. This is because all STPs use biological processes and living systems are prone to occasional peaks and troughs and are difficult and expensive to maintain within strictly defined boundaries over periods of months and years. Tolerance of occasional peaks can actually reduce total loads over longer periods. Another useful approach could be to modify licence requirements to encourage best practice at a reduced standard, for example by excluding the fraction of nitrogen that is resistant to decay and which STPs cannot remove from licence limits. Licence requirements that have a reduced focus on nitrogen are less costly to maintain and can still protect the receiving environment so long as biological oxygen demand and the unionised fraction of ammonia, which have acute impacts, have sensible discharge limits. The additional cost to remove nitrogen from STP discharges might be better spent on other catchment activities (see offsets below). 2. How long should each industry be given to meet the new minimum standards once they have been determined? As discussed above new minimum standards are not recommended for STPs because they would not reflect optimal investments for ESD and would be unlikely to impact reef health. However, as a general rule, the time allowed for adoption of new standards should reflect the cost on the entity regulated. In terms of sewage treatment this means the communities of regional Queensland, many of which are very small. Given there is no longer a structured, strategic capital subsidy program for treatment plants it will take regional communities many years to be able to afford the capital costs for new sewerage infrastructure, and many will never be in a position to afford the increased operational costs. Another trade off that should be considered is the carbon cost of more efficient sewage treatment. The increased operational costs for high nutrient removal is driven to a large degree by the price of energy as this drives the price of chemicals, pumping and membranes required for high level treatment. These not only represent additional costs for small communities but also increases in carbon emissions. Given that climate change is a greater driver of reef decline than water quality, this is a trade off that should be factored into future decision making. 3. What data should be collected by producers, industry and government? For STPs, significant data is already collected under EA conditions and reported to the environmental regulator. This reporting should be streamlined with the KPI reporting qldwater ph Page 5

6 undertaken by all service providers to DEWS and the BOM which is regularly publically published. A greater emphasis should be given to Healthy Waterways type initiatives (e.g. Fitzroy Partnership for River Health) for the promotion and publication of this information. 4. How best can records be collected and made available to support producers and industry? See question 3 above. 5. What incentives or assistance might best encourage compliance with minimum practice standards? Financial incentives including the return of a consistent program of state contributions to major treatment infrastructure would be required if significant change was required for treatment infrastructure in regional Queensland. Moreover, State CSOs would be required to support the additional operational costs required in many small communities where the rate base is insufficient to cover additional operational costs of high technology treatment processes currently required to meet the standards enforced for large STPs. 6. How could good performance by producers be best rewarded? N/A. 7. How often should catchment pollution load limits be reviewed to determine whether load limits are being exceeded? This should be determined by the optimal monitoring and modelling approaches indicated by the well established reef science panels and regional partnership programs across the reef catchments, rather than driven by stakeholder demand. There is a strong risk that expectations of scientific understanding of catchment loads, end of catchment concentrations and the actual impacts on the GBR will exceed both the ability of science to measure and the scope of practice change to address within expected timeframes. 8. What other decisions could catchment load limits help inform? In terms of STPs, catchment load limits would inform a population cap for regional cities. The essential nature of treatment infrastructure mean that large investments of public funding must be made ahead of time. This is exacerbated by the scale sensitive nature of treatment plant development and indivisibilities associated with major infrastructure projects. To avoid over or under investment requires certainty of adequate funding and this is not generally possible for councils considering expansion. Unless alternative options (such as the suggested offset approach discussed below) can be provided in a practical manner that encourages market certainty, it is likely that population caps will also be required. This will be difficult to manage under the highly variable and contradictory growth targets set by successive state governments in the past. Whole of government approaches are required to consistently partner with local government service providers, increase certainty and remove the conflicting and perverse incentives arising from fluid policy agendas across state agencies at different times. qldwater ph Page 6

7 9. What types of new agricultural activities should be subject to the additional requirements? N/A. 10. Should new water quality requirements apply only to new agricultural, urban and other intensive activities in those reef catchments that are exceeding or close to exceeding their catchment pollution limit or should they apply across all reef catchments? While the key focus of this policy should be on the GBR and on the priority impacts from land based pollution, the environmental values of local environments must also be considered. This means that continual improvement should be broad based and applied across all catchments in a fit for purpose manner. A broad based approach would also assist with equity issues as communities in priority catchments that could be significantly disadvantaged compared to those elsewhere if strident new water quality requirements were introduced in a patchy way. It is suggested that a broad based approach (across all reef catchments) is pursued but that greater incentives are provided in priority catchments so that change can progress more rapidly to enable improvements in reef health as soon as possible. 11. Can you foresee any circumstances where an offset would be inappropriate? Offsets for discharges at sewage treatment plants would be inappropriate where the values of an immediate receiving environment or broader catchment are significantly compromised because an offset occurs elsewhere. Conversely, offsets that focus solely on one issue (e.g. nutrients) may not be appropriate within a single catchment if other impacts (e.g. sediments, habitats, connectivity) are shown to be higher priority issues. Further discussion is required to allow offsetting beneficial environmental outcomes rather than simple nutrient accounting. Another difficult issue for STPs and other infrastructure that is publically owned by a specific community is where offsets are invested in catchments that are located beyond the geographical scope of the community of interest. While this is unlikely under the current policy which requires investment only upstream of the STP, it will need to be carefully managed when broader offsets are permitted, as is necessary to make the policy effective (see question 13 below). 12. How could financial contributions be determined? Financial contributions could ultimately be determined through a market, but in the short to medium terms a framework will be required to help establish market rules to accelerate of trading. Ideally, such a framework would extend beyond the proposed nutrient trading approach to allow comparison (and trading) of environmental outcomes of different investments. For STPs financial contributions should be determined by comparison of the: relative costs of the nutrient remediation strategies being compared, social and economic consequences for the communities being impacted, environmental values of the two areas under consideration and level of risk assumed by the parties involved in the offset activity. qldwater ph Page 7

8 To create the precursors of the market envisaged by the current offsets policy, support is required particularly where there are market failures associated with under valuing environmental externalities. At present, the policy overtly requires that all costs and risks be borne by the holder of an Environmental Authority. Only a partnership approach between the State and local governments will provide sufficient resources and allow appropriate risksharing to overcome the uncertainties and risks the mechanism (necessarily) entails. This change to the current policy has been requested by the sewerage sector for some time. At present, uncertainty and potential risk are considered in the policy only through the introduction of (arbitrary) ratios for nutrient improvements. For example, the difficulty in estimating load reductions from diffuse sources (compared with point sources) means that a nutrient reduction action ratio or buffer of 1.5:1 will then be applied for diffuse nutrient reduction actions to account for uncertainties (p.5). This is an example of one of the many requirements in the policy that shift all risks onto the holder of the EA, even though they also carry the cost of ongoing monitoring (to assess success) and bear the risk of failure if the nutrient reduction actions are unsuccessful or are destroyed through force majeure. The arbitrary safety factor has no grounding in science and is unaffected by evidence or monitoring. A science based approach with greater flexibility would be more likely to be successful and this would necessarily require greater funding to establish. Timeframes also need to be carefully considered. Currently, in return for bearing all the risks, an investor (EA holder) may be able to defer or reduce capital expenses for a period with a maximum of 20 years (p. 6). Capital planning for sewerage assets has a much longer time horizon and represents one of the most significant expenses of public funding for regional communities. There is little incentive in the current policy to allow councils to justify to their communities taking on the required risks and there are significant disincentives and public costs. The policy needs to create mechanisms to shift this balance and increase certainty for potential investors and innovators. There are numerous ways in which risks could be more equitably shared and insurance mechanisms explored to increase certainty and potential benefits for all parties. The current policy also requires that Nutrient reduction actions must be provided in advance or concurrently with impacts that are occurring so that the nutrient reduction action provides the benefit at the time of additional nutrient release and the duration of the nutrient reduction action will be negotiated on a case by case basis to align with the performance specifications and lifespan of the point source infrastructure (p. 6). These requirements do not sufficiently encourage the development of nutrient reduction actions prior to a major change in point source infrastructure occurring. The result is that large scale offsets must be designed, negotiated and executed in the brief yet widely spaced intervals common to sewerage infrastructure investments. A better approach would be to encourage numerous small investments in nutrient reduction action to defray costs and risks, increase immediate environmental benefits and increase opportunities to accumulate downstream benefits. This would also provide greater certainty for both the regulator and the EA holder that appropriate nutrient reductions were being sustainably achieved and that relationships with landholders, contractors and catchment groups were tested. The power of demonstration sites and proof of concept qldwater ph Page 8

9 studies should not be underestimated particularly in promoting innovative or culturechanging processes and activities. What is needed is a policy that promotes and encourages gradual, modest investments in nutrient reduction activities that improve environmental outcomes immediately and also accumulate broader benefits and create a buffer for future potential point source changes. The newly established regional Healthy Waterways Partnerships may provide a good governance structure for the implementation of offset projects. 13. Is the proposed order of preference for where an offset should be located appropriate? The proposed order, namely: in the same catchment as the impact within a catchment where load limits are being exceeded in a targeted area. is not appropriate for several reasons. First, targeted area is not defined. If a targeted area means a location where remediation activities are most likely to have a beneficial impact on the GBR, then there is no reason why such areas shouldn t be prioritised immediately to get early benefits for the reef health. Second, for STPs, investments within the same catchment are preferred because they will more likely be beneficial to the public owners of the STP and the environment impacted by any discharge. However, there is a limit on the number of STPs where practical offsets can be implemented and most communities would likely accept investments in nearby catchments so long as the environmental values near a discharge are not unduly impacted. Although council boundaries are not recognised by the environment, they are important in the Department s current approach to bubble licences and may also be barriers to public perceptions of equitable investment. Ideally, the framework would allow trade offs among outcomes considering the cost, projected impact and location of any offset in the context of the likely impact on the discharge location. This would need to be a triple bottom line analysis in line with the ESD approaches of the EP Act. While this is a complex decision process, it would be facilitated by the strategic pollution reduction framework suggested in the Discussion Paper and by a standard process (e.g. a decision support tool) for communicating the alternative benefits, costs and risks of a handful of options. This would be difficult at first but absolutely necessary to develop trust in the offsets approach and build certainty for any future trading market that maximises investments in ESD for the reef. This decision support system should not be constrained by arbitrary preference orders set by policy but rather be determined by cost, utility and community willingness to pay (as a surrogate for market forces). General Comments p. 4 The Introduction states: Nutrient and sediment in run off from agricultural and urban activities, as well as end of pipe releases from urban and other intensive land uses, are the main sources of pollutants to the reef with agricultural production the main contributor. qldwater ph Page 9

10 This is misleading. Urban sources provide less than 4% of nutrients to the GBR catchments (as shown in the first diagram in the paper) and should not be grouped with other sources. p. 5 The Urban Water Industry agrees with the findings and recommendations of the GBR Water Science Taskforce. Contacts and Further Information Primary Contact Dr Rob Fearon qldwater The Queensland Water Directorate T: (07) M: W: Referees: qldwater ph Page 10