Goulburn-Murray Water

Transcription

1 Goulburn-Murray Water Proposed Murray Darling Basin Plan Submission 16 April 2012

2 Contents 1. Introduction Background Customer price impacts... 2 Scenario A - Low Buyback... 2 Scenario B - Median Buyback... 3 Scenario C - High Buyback... 3 Modelled Price Impacts... 4 Potential Groundwater Price Impacts The Proposed Plan and its logic... 8 Sustainable Diversion Limits... 8 Surface Water Issues... 9 Local Reduction Shared Reduction Concept... 9 Environmental Watering Plans... 9 Water Quality and Salinity Sustainable Diversion Limits for Groundwater Groundwater trading Social and Economic Impacts Commonwealth Environmental Water Holder Implementation issues Legal Issues Review Water Buyback Implementation Costs Alternative Way Forward Appendix Appendix # v5 i

3 1. Introduction The Proposed Plan has the potential to substantially change the way water is managed across Northern Victoria. Goulburn-Murray Water (G-MW) supports the need for a healthy working river system particularly if it leads to balanced and sustainable outcomes. The lack of detail in some areas makes it difficult to assess the full impacts of the plan on our customers and on our operations therefore we have produced scenarios to assess a range of possible impacts on our customer base and operations. G-MW has a network of customer committees called Water Service Committees (WSCs) that have assisted in the preparation of this submission. We have appended comments collected through our customer meetings. Our submission provides comments on four broad areas: Customer price impacts The plan and its logic and Implementation issues An alternative way forward 2. Background G-MW is Australia's largest rural water corporation managing around 70% of Victoria's stored water resources, around 50% of Victoria's underground water supplies and Australia's largest irrigation delivery network. Goulburn-Murray Rural Water Corporation, trading as Goulburn-Murray Water, is a statutory Corporation established under the provisions of the Victorian Water Act. Goulburn-Murray Water (G-MW) manages water related services in a region of 68,000 square kilometers, bordered by the Great Dividing Range in the south and the River Murray in the north and stretching from Corryong in the east downriver to Nyah. We have some 30,000 customers in northern Victoria. G-MW manages both regulated and unregulated river systems that flow into the Murray in Victoria and administers groundwater within this area. G-MW also operates a number of storages and weirs on behalf of the MDBA, operates salinity mitigation works on the Murray downstream of Nyah, and is the Victorian constructing authority for the Murray-Darling Basin Authority (MBDA). # v7 Page 1

4 G-MW is the Victorian Resource Manager appointed by the Victorian Department of Sustainability and Environment and has been given responsibility for making the seasonal determination for all northern Victorian entitlement holders. G-MW is a partner in the Victorian Water Register, using it to manage more than $4 billion of water entitlements and trade. Appendix one provides detailed information about our customer base and volumes per system. 3. Customer price impacts Modelling the impacts of the Proposed Plan is problematical because of the lack of specification of key parameters affecting G-MW and its customers and the range of potential outcomes. This is particularly the case for surface water where detail of how the 971 GL of shared downstream reduction is to be apportioned across the southern basin is not identified in the Proposed Plan. Further, it is not known how the Commonwealth Water Buyback Program will operate and what proportion of high reliability entitlements the Commonwealth intends purchasing. Victoria has the greatest proportion of high reliability entitlements in the southern Basin (67%) and if the Commonwealth targets high reliability entitlements there could be further significant water buybacks from Victoria. To address this uncertainty, G-MW has developed three surface water scenarios to assess the impacts of the Proposed Plan on water availability, deliveries, and prices in order to appropriately inform this submission. Victoria has reached its local In Valley reduction targets proposed in the Proposed Plan and the scenarios are based on three possible levels of Commonwealth buyback of the Downstream Shared component of 971 GL, depending upon the volume of future water savings arising from works and measures. Scenario A - Low Buyback This 350 GL buyback scenario of which 275 GL comes from G-MW is based on the assumption that a proportion of the 971 GL of shared reduction would come from future potential works and measures in Victoria and across the southern Basin States that are not yet approved and that the remaining water to be purchased from Victoria under the Plan would be 350 GL split proportionally between G-MW and Lower Murray Water. # v7 Page 2

5 Scenario B - Median Buyback This 400 GL buyback scenario of which 315 GL comes from G-MW is based on an assessment of the gap which would remain after recovery of water savings from all current approved Victorian works and measures. Scenario C - High Buyback This 450 GL buyback scenario of which 355 GL comes from G-MW is based on the assumption that there is no recognition of further water savings from works and measures towards the shared reduction and Victorian entitlement holders are more willing sellers thus the buyback continues at historic rates (46% from Victoria) for the 971 GL of shared reduction. This rate is based on the volumes and proportions of buyback to date shown on the Commonwealth government website where Victorian entitlement holders have contributed 46% of the overall buyback up to February 2012 in long term average annual yield terms. The assumed apportionment of the 971 GL shared reduction is set out below: Victoria share of 971 GL G-MW gross share LMW share Scenario A 350 GL 275 GL 75 GL Scenario B 400 GL 315 GL 85 GL Scenario C 450 GL 355 GL 95 GL The possible levels of buyback of the Victorian Murray and Goulburn has been split between G-MW (79%) and Lower Murray Water (21%) based on the proportion of HRWS held in each region. G-MW s share above is in gross terms because it does not take into account the 75 GL from NVIRP Stage 1 water savings to be distributed to irrigators in The high reliability water shares (HRWS) below are in net terms as they have been adjusted to account for the increase of 75 GL from NVIRP Stage 1. Net Figures Total HRWS 2012 GL Scenario A Low Buyback Total HRWS 2019 GL Predicted Reduction GL Scenario B Median Buyback Total HRWS 2019 GL Predicted Reduction GL Scenario C High Buyback Total HRWS 2019 GL Predicted Reduction GL GMID 1, Pumped Irrigation Regulated Streams G-MW Net Total 1,295 1, , , # v7 Page 3

6 Each of the scenarios is considered to be a potential outcome and the volumes of water involved are all very substantial, representing a further loss of up to 20% of high reliability entitlement from G-MW s region. The range in volumes involved is equivalent to completely closing up to two irrigation areas in the GMID as indicated below. Goulburn Murray Irrigation District Volume of High Reliability Water Shares in 2012 GL Shepparton Irrigation Area 130 Central Goulburn Irrigation Area 266 Rochester Irrigation Area 126 Loddon Valley Irrigation Area 136 Murray Valley Irrigation Area 199 Torrumbarry Irrigation Area 239 Total 1,096 A loss of productive water in this order will materially impact on the viability communities and systems. Modelled Price Impacts Analysis of the three scenarios indicates the following price increase by 2018/19 on the typical bill of a medium sized irrigation customer in the GMID due solely to the Proposed Plan. Scenario A Low Buyback Scenario B Median Buyback Scenario C High Buyback Price increase on Typical Bill of a Medium Sized GMID Irrigation Customer by 2018/19 +15% +18% +21% These exclude any Plan implementation, monitoring and reporting costs. These price impacts are further illustrated in following three graphs. # v7 Page 4

7 Scenario A Low Buyback Impact on Typical Bill of Medium Sized GMID Irrigation Customer 12,000 11,000 10,000 15% increase 9,000 8,000 7,000 Total bill without MDBA Plan 6,000 5, / / / / / / / /19 Scenario B Medium Buyback Impact on Typical Bill of Medium Sized GMID Irrigation Customer 12,000 11,000 10,000 18% increase 9,000 8,000 7,000 Total bill without MDBA Plan 6,000 5, / / / / / / / /19 # v7 Page 5

8 Scenario C High Buyback Impact on Typical Bill of Medium Sized GMID Irrigation Customer 13,000 12,000 11,000 21% increase 10,000 9,000 8,000 7,000 Total bill without MDBA Plan 6,000 5, / / / / / / / /19 The following assumptions were used in the above pricing analysis: 2012 Water Share volumes are based on current information from the Victorian Water Register and the known further reduction in water shares due to Commonwealth purchases to be approved but not yet processed in 2012 following the NVIRP stage 2 agreement with SEWPaC. No further purchase of water shares by the Commonwealth until 2014/15. Future buyback is from regulated high reliability water shares only held by irrigators. Future buyback is distributed evenly between all water systems based on the volume of water shares linked to land and taken from irrigation areas or direct diversions from regulated rivers. Buyback for the Victorian Murray and Goulburn is split between G-MW and LMW based on the proportion of HRWS held in each region. Environment continues to pay storage fees. No material changes to operational costs currently being reviewed through Water Plan process. Does not include any Basin Plan implementation, compliance monitoring, measurement or reporting costs. None of the Non Water User allocation is used within G-MW s region. NVIRP stage 1 will provide 75GL back to irrigators in the G-MW region. This has been assumed to be shared equally between all G-MW regulated customers and reduced from the gross volume of buyback to give a net position of entitlement at 2019/20. No termination fees received for NVIRP delivery share reductions or non-nvirp terminations. Water share transfers result in maximum delivery share termination (1ML/day per 100ML water share). Second round water trade impacts are not considered. # v7 Page 6

9 No climate change impacts. Modeling for GMID gravity irrigation only. Potential Groundwater Price Impacts The Proposed Plan suggests that the baseline diversion limit (BDL) for the Victorian Riverine Sedimentary Plain be reduced from 175GL to 127GL. Modeling the price impact of this 48GL reduction in deep lead groundwater entitlement is problematic because the Proposed Plan does not provide any guidance on where specifically this reduction is to come from or how it is going to be managed in future. The Riverine Plain includes the Katunga, Mid-Goulburn, Lower Campaspe, Mid-Loddon and part of the Loddon Highlands groundwater management units and it is not known whether the reduction will occur across all areas or whether areas such as Katunga or Lower Campaspe would be targeted. It is understood that the Commonwealth intends buying back groundwater entitlements as part of the bridging the gap program but it is not known whether the Commonwealth will continue to hold the licences it buys or whether it intends to surrender them. There is no termination fee associated with the surrender of a groundwater licence. If the Commonwealth holds the groundwater licences and continues to pay the rates and charges then there will be no price impacts. But if the Commonwealth surrenders the groundwater licences then there will be adverse price impacts for the remaining customers as the costs of groundwater management required by the Northern Region Sustainable Water Strategy (NRSWS) are relatively fixed in nature and there is limited opportunity to make offsetting cost reductions. Particularly if part of a licence is purchased and the site based costs continue. The 48 GL represents approximately 15% of total G-MW groundwater licence revenue and if the reduction is spread across all areas and the Commonwealth surrenders the licences it buys then revenue from the remaining customers would have to increase by 18%. If the Commonwealth targets the buyback to specific areas then price increases in those areas could be much higher again but how the Commonwealth groundwater water buyback program will operate is not known. # v7 Page 7

10 4. The Proposed Plan and its logic Sustainable Diversion Limits G-MW supports the need for a healthy working river system particularly if it leads to balanced and sustainably outcomes. The figure of 2750GL should be considered in the context of equivalent environmental benefits. The environmental outcomes required could be delivered with much less water if the same about investment in efficiency is made in the environmental management as has been made in irrigations and water delivery. In consultation WSCs it is clear that the broader customer base very concerned about a number of issues including: the impacts of the loss of water on their businesses and their communities, the uncertainty it created through continual reform, the exit of irrigation farmers, and the resulting loss of employment, families and young people. Of fundamental importance is that less water and fewer customers will be required to cover the costs of the irrigation delivery system. If high levels of water reductions are pursued (particularly through the purchase of high reliability water shares) then acceleration of exits from horticulture, dairy and mixed farming are expected, resulting in reduction of irrigation farm numbers and lower economic benefit to northern Victoria. The Proposed Plan does not demonstrate that it has adequately investigated all available options for the achieving a healthy working river system or social issues associated with economies of scale for community viability. We recommend that adhoc purchases cease and that further consideration of environmental works and measures to achieve equivalent environmental outcomes be accelerated. The proposed sustainable diversion limits include domestic and stock and commercial plantation usage or take in the upper catchments. If these catchment interception uses increase then other usage will need to be reduced and this would adversely impact G-MW customers. Having to design and implement a monitor regime will be complex, costly and unlikely to provide a high level of accuracy. # v7 Page 8

11 Surface Water Issues The Proposed Plan suggests a surface water recovery target of 2,750GL across the Basin. For Victoria, the proposed recovery volume is 650GL to meet In-Valley requirements plus an as yet undetermined portion of a 971GL Downstream reduction for the southern Basin to be shared with New South Wales and South Australia. Local Reduction Shared Reduction Concept The concept of Local Reduction and Shared Reduction is considered to be sound and Victoria has already achieved over 650GL of the local reduction requirements. However, the Proposed Plan leaves the bulk of the proposed 971GL of shared surface water reduction in Southern Basin unassigned. Where this 971 GL, which represents over 40% of the reduction, will come from is not defined and this introduces a high degree of uncertainty and loss of customer confidence. No structure, process or detail is provided in the Proposed Plan on how this downstream shared reduction is to be allocated between Victoria, New South Wales and South Australia. G-MW believes that the final Plan must assign reductions to States. Environmental Watering Plans G-MW believes the Basin Plan should be about outcomes and not about a single number or just adding water. The ecological health of environmental assets is determined by a range of factors of which flows are just one element. Many of the environmental objectives the Proposed Plan is seeking to achieve will require more actions beyond the provision of water alone. The terminology and targets for the environmental watering plans are drafted in very board terms and it is unclear what environmental benefits the plan seeks to achieve. What level of restoration is being aimed for, considering the modified nature of the Basin? It is also unclear how the target of keeping the Murray mouth open 9 years in 10 years was arrived at and whether this a good indicator of Basin health or required water reduction. Similarly, the environmental benefit and justification supporting the need to discharge over 2 million tons per year of salt from the Murray system is not clear to G-MW. Knowledge around managing large volumes of environmental water is still developing in Victoria and it is considered that Environmental Watering Plans (EMPs) need to be adaptive to allow for learning s over time. However the approach to EMPs in the Proposed Plan is very prescriptive. # v7 Page 9

12 The legal status of the environmental targets in the Proposed Plan is unclear to G-MW, whether they are aspirational or mandatory and whether there are penalties for noncompliance. System constraints and the physical release capacity of G-MW dams will need to be recognised in this regard. The hydrologic modelling used by the MDBA to inform the Proposed Plan shows that the environmental benefits would appear good for the rivers and lower fringes but marginal for out-of-bank flows onto the floodplains in Victoria. This highlights the need to align the objects and targets of the EWPs with what can be realistically achieved and the importance of environmental engineering works on the floodplains to make the environmental water go further. Environmental releases will see changes in the flow regimes and river operations that our customers and communities will not be used to and not expect increased flow variability, higher flows in winter and less in summer. Many of these changes are not consistent with the efficient management and operation of supply systems that underpin the reliability of entitlements. There will be higher costs of modelling, managing and communicating these impacts to customers and communities and the respective roles, responsibilities and liabilities for environmental releases need to be clearly defined. There is potential for times when irrigation and environmental demands could be in competition for the same river delivery capacity; spring, summer or autumn peaks. Goulburn River downstream of Eildon would be a case in point. The extent of potential conflict for river delivery capacity is not clear as environmental watering plans have not yet been developed but how these potential competing demands are going to be managed will need to be defined. Water Quality and Salinity The Proposed Plan intends a new suite of targets for salinity and water quality and G-MW has significant concerns with this approach in the Proposed Plan and questions how this is going to add further value to current Victorian and MDBA water quality and salinity management arrangements. It will be difficult if not impossible to meet the proposed water quality and salinity targets all of the time for the range of conditions experienced right across G-MW s region and in practice there are limited actions G-MW can take to deal with water quality issues such as natural variability of dissolved oxygen, salinity, nutrients, and blue-green algae. The Proposed Plan refers to water that can be called out to address extreme water quality events. Where is this water coming from? What volumes are envisaged and what would be the impacts on irrigator entitlements? The legal status of the water quality and salinity targets in the Proposed Plan is unclear, whether they are aspirational or mandatory and whether there are penalties for noncompliance. Who would then be liable is also not clear. The plain English version of the Proposed Plan says the targets are aspirational but the legal instrument does not. # v7 Page 10

13 The Proposed Plan takes a very compliance driven approach which introduces risks and uncertainties and there is potential for confusion and duplication with existing State arrangements. Northern Victoria has been very successful with community driven salinity and water quality programs for many decades and G-MW and its Water Services Committees support a continuation of such a community partnership approach. Whilst the Proposed Plan suggests a strict regulatory compliance regime on water system operators, it is entirely silent on the obligations of the Commonwealth in managing its very large water holdings to achieve environmental outcomes. G-MW cannot see the benefits of the water quality and salinity management approach in the Proposed Plan to justify the potential high costs. Sustainable Diversion Limits for Groundwater The Proposed Plan suggests a 48GL reduction in deep lead groundwater entitlement from the Victorian Riverine Sedimentary Plain. G-MW does not see this reduction is justified or warranted. G-MW considers that the basis of the sustainable diversion limits (SDLs) for groundwater in the Proposed Plan does not adequately take into account Victoria s existing groundwater management and entitlement framework and in particular, its methods for setting seasonal allocations to manage access in response to changes in conditions. G-MW believes that the MDBA approach has resulted in particularly conservative SDLs and the proposed reduction is unnecessarily high. The proposed Victorian Riverine Sedimentary Plain (deep lead groundwater resources) SDL was set by the MDBA on the basis that there was a high level of risk to key environmental assets (e.g. Barmah and Gunbower Forests) and key ecosystem functions (e.g. contribution to base flow) from deep groundwater extraction. Technical evidence would indicate that most of the Riverine Plain deep groundwater resource is poorly hydraulically connected to shallow groundwater processes and by extension represents very low risk of adverse impacts occurring on either base flow contribution or the maintenance of key environmental assets. On the other hand, SDL increases are proposed in the Proposed Plan for groundwater in the Victoria s highlands areas. It would seem to be a better approach to consider surface water and groundwater SDLs more closely in uplands regions. Given the issues of close connectivity between groundwater and surface water in highlands regions (high value key ecosystem functions via base flow) it is difficult to understand why, for example, the Commonwealth would seek to buy back Goulburn surface water entitlements while at the same time the Proposed Plan suggests that groundwater SDLs increase from baseline diversion limit (BDL) in the Goulburn-Broken Highlands by some 20 GL. # v7 Page 11

14 In summary, there is considerable inconsistency in the SDL methodology MDBA has applied in Victoria and it is considered that the MDBA has not given full effect in its modeling to Victoria s current groundwater management arrangements. G-MW asks that the MDBA revise the approach it has used to set Victorian SDLs in the Proposed Plan. Groundwater trading Clarity is also sought on the status of groundwater trade and the requirement to commence operating to Basin Plan trading rules by 1 July How does this relate to Victoria s Statutory Plans which contain its own trading rules and will be recognised as transitional plans? Where do Local Management Plans (non-statutory) and its trading rules sit? This requirement is generally confusing as the Basin Plan in all other respects will not take effect until Social and Economic Impacts Irrigated agriculture and associated processing, manufacturing, freight and service industries are major economic drivers of northern Victoria. Comment on the socio-economic impacts of the Proposed Plan in G-MW s region are best conveyed to the MDBA by others more expert in this field but G-MW believes that the Proposed Plan as current, with implementation in 2019 and review in 2015 gives insufficient time to adjust and this will mean substantial structural change for northern Victorian communities. The impacts from the buyback and the second round trades are likely to be unevenly distributed and the western parts of the GMID could be particularly impacted. G-MW refers the MDBA to the analysis commissioned by the Hume, Loddon Mallee and Grampians Regional Development Australia (RDA) Committees that identify the potential socio-economic impacts of the Proposed Basin Plan on northern Victoria. Structural adjustment is normal and necessary but these communities are carrying all the risks from this Government reform and experience has shown that rapid adjustment can be very difficult on communities that have limited capacity to adapt further. The surface water reductions proposed under the Proposed Plan are not the first to occur in the Goulburn Murray Irrigation District (GMID) but rather will be on top of already very major adjustments. In 1998, at the start of the millennium drought there was 1,601GL of water right in the GMID. In 2012, there is now 1,096GL in the GMID which represents nearly a 35% reduction in the last 14 years. # v7 Page 12

15 Goulburn Murray Irrigation District (GMID) High Reliability Water Shares 1991 Pre-Water Trading 1998 Start of Millennium Drought ,620 GL 1,601 GL 1,096 GL Continued restructuring of farms to improve viability is needed but the tipping point for dairy and fruit processing industries in northern Victoria is not clear to G-MW and the ability to retain critical mass for the processing sector could be at risk. G-MW believes this needs to be much better understood when the MDBA is framing the final Basin Plan. If there are high levels of water buyback from G-MW s region then broad Commonwealth support will be needed to assist irrigation dependent communities to adjust to the rapid and sharp change required to move to an economy with significantly less water use by 2019 and to build more robust, resilient and profitable farming businesses for the future. In G-MW view a broad well thought through structural adjustment plan will be required. Commonwealth Environmental Water Holder In future the temporary water market may not provide the same level of access to water at affordable prices during drought periods. The Commonwealth has purchased substantial volumes of spare water from lower value entitlement holders that in the past have put that water on the temporary market in periods of low allocation. The water trading behaviour of the Commonwealth will be important and a discussion paper on trading Commonwealth environmental water indicates that the Commonwealth may trade temporary water only in a relatively narrow band of seasonal conditions. If this is the case then upward pressure on temporary water prices during dry years is expected and this will most affect dairy and horticulture with potentially further exits and contraction. To minimise the economic and social impacts the Commonwealth Environmental Water Holder needs to have the flexibility to trade temporary water to irrigators in dry years. Otherwise this will add greatly to the pressures on irrigation in northern Victoria. Importantly to enable this in a transparent manner we recommend that the MDBA consider the possibility of creating a market regulator to provide a high level of confidence in the market. # v7 Page 13

16 5. Implementation issues Legal Issues G-MW is the appointed storage manager, resource manager, system operator and source bulk entitlement holder for each of the northern Victoria catchments and is integral to the delivery of environmental water. The legal obligations and risks that arise from the Proposed Plan, particularly the consequences of non-compliance and with whom the compliance obligation ultimately rests and is ambiguous. Both environmental and private assets co-exist on the floodplains in northern Victoria it will be very difficult to get water onto the floodplains and achieve top of bank or out of bank flooding without having third party impacts. G-MW believes that there is a critical need to resolve legal liabilities for third party impacts associated with delivery of environmental flows prior to the plan being endorsed. Flooding impacts on activities of others and water quality impacts (black water/salinity spikes) from return flows are all potential impacts that bring significant legal liabilities. Ownership of these risks are not well articulated. We recommend that the MDBA ensure that appropriate mechanisms are in place such as flood easements to ensure third party impacts are minimized. If risk management is not clearly articulated prior to the implementation of the plan G-MW will implement operating rules aiming to ensure no unauthorized third party impacts. We would welcome the opportunity to discuss this with the MDBA. G-MW s operational activities and entitlement management are empowered by the Victorian Water Act. The Proposed Plan requires Water Resource Plans to be developed that would be the new legal instruments under the Commonwealth Water Act. This is not consistent with the current Victorian legal framework. Specifically, the Victorian Water Act sets out water entitlements rights and these can only be changed through a formal statutory process under the Act. In contrast, under the Commonwealth Water Act water entitlements can be changed by government direction. This fundamental shift in entitlement security is a major concern to G-MW and its customers. G-MW s clear position is that it wants to maintain the integrity and security of the Victorian water entitlement framework. # v7 Page 14

17 G-MW is concerned that on one hand the cap is mandatory with legal penalties for noncompliance by system operators from 2019 but on the other hand the primary adjustment mechanism is via a voluntary customer buyback processes being managed by the Commonwealth and nothing in the Proposed Plan commits the Commonwealth to making this adjustment nor does the Proposed Plan require the Commonwealth to do this by any specific date. These legal uncertainties need to be resolved before the Basin Plan becomes an enforceable legal instrument Review While the proposed 2015 review would in theory introduce flexibility and provide further time to consider works and measures, it also prolongs the uncertainty of what the sustainable diversion limits might be in G-MW and its Water Services Committees are concerned that this ongoing uncertainty will impact on investment confidence and leave irrigation communities in limbo until As the review and any recommended change will go through parliamentary processes there is a higher risk that the review will amount to nothing. If the review is to remain we recommend that volume of water for the end of system targets be subject to the outcomes of the review. This would allow appropriate time for identification and implementation of works and measures to offset the need for purchases. Water Buyback Water purchases compensate the water share owner but leave the irrigation system and regional economy potentially worse off. To ensure the future cost effectiveness of water delivery a buyback strategy through NVIRP or aligned with NVIRP needs to be devised. A strategic approach is needed with targeted buyback of water for the environment that also achieves the reconfiguration of infrastructure and withdrawal from areas not conducive to continuation of irrigation. The Proposed Plan states that reductions in surface water diversions are to be achieved through water buybacks but G-MW believes that no further random so called no regrets water purchases should be made from G-MW s region. If such an approach is continued then there is the very real risk of the Swiss cheese effect reducing the viability of delivering water to remaining customers with a resulting downward spiral. The Commonwealth water buyback program needs to be aligned with the $2 billion investment being made by the Commonwealth and Victorian Governments in NVIRP modernisation in order to minimise risks of redundant or under-utilised assets or the retirement of highly productive irrigation land from random uncoordinated water buybacks across the entire supply system. # v7 Page 15

18 Areas of the GMID not suitable for irrigation in the future due to environmental and economic sustainability issues should be targeted for water purchases. MDBA, SEWPAC & NVIRP/GMW need to be working together to direct buybacks to suboptimal areas at the extremities of the irrigation network and not from the heart of the newly modernised backbone system. High reliability entitlement provides greater certainty of water allocations and this is important for dairy, horticulture and urban utilities which require a reliable supply to maintain operations and supply. The Victorian government is currently reviewing the carryover rules and is completing detailed modeling to better understand the impacts that these rules may have on the reliability of water entitlements. We would strongly recommend that the MDBA complete similar modeling to demonstrate if the EWH carrying over water will impact on the security of other entitlements. Implementation It is not clear how the plan will be operationalised as the Proposed Plan does not clearly define or assign respective implementation roles and responsibilities. The roles of the system operators and environmental water managers are unclear, despite these parties being critical to effective co-ordination of environmental waterings. There are relatively robust systems in place now in Victoria that provide a base for further discussion. This must to be resolved before the Plan becomes an enforceable legal instrument. Costs Prima facie it appears that administrative costs to implement and comply with the plan will increase from the current requirements. The apparent wide ranging reporting requirements to the Commonwealth in the Proposed Plan would appear to be quite onerous and this additional regulatory burden is of concern. The Commonwealth is yet to carry out a regulatory impact assessment of the Proposed Plan that quantifies these costs but the cost impacts are likely to be substantial. Water Resource Plan accreditation requirements are not well defined in the Proposed Plan but development time, resources and costs are expected to be significant and the increased ongoing compliance monitoring, measurement and reporting costs of the Proposed Plan have the potential to be extremely high based on our recent experience with the development of sustainable water strategies G-MW believes that the any additional costs imposed by the Basin Plan should be met by the Commonwealth. G-MW customers should not have to pay higher prices as a consequence of implementing this Commonwealth Government initiated reform. # v7 Page 16

19 In a number of sections of the Proposed Plan, the States when implementing the Plan are required to have regard to or consider various matters. What this means in practice is not clear to G-MW. As the Basin Plan will be a legal instrument this wording introduces a high degree of uncertainty and clarification is sought on this. 6. Alternative Way Forward As an alternative to the numbers in the Proposed Plan, G-MW believes that there is a strong case for less of the unassigned shared contribution of 971GL for end of system flows to come from the productive use and more to come from efficiency savings. This will leave more water for agriculture in northern Victoria and lessen the adverse economic and social impacts. G-MW proposes that this would involve: 1. Increased funding of the on-farm irrigation efficiency program to upgrade existing farm systems 2. Investment in environmental engineering works & measures on the flood plain to make the environmental water go further 3. Smarter river operations new tools, better predictive models, real time technology and changes to operating policies and storage release rules 4. Changed operations of the Barrages at Murray mouth and changes to how the Lower Lakes, Coorong and Murray Mouth are configured and managed 5. Menindee Lakes savings changed operating rules or works on bypass infrastructure 6. Strategic water purchases aligned with NVIRP modernisation Since the Proposed Plan base year of 2009, Victoria has recovered or committed to recover over 650 GL of water for the environment and G-MW believes that priority now needs to be given to on-farm investment, and environmental works and measures. Increased funding of the on-farm irrigation efficiency program would have major synergies with NVIRP modernisation. The DEWHA initiated Farm Water Program in the GMID with coinvestment and sharing of savings has been a success and expansion of this program is strongly supported by irrigation communities. It would enable one single customer engagement about the farming future and the optimisation of both supply and on-farm systems in a single package. This would realise the benefits of modernisation investment sooner, achieve potentially 100 GL of water savings for the environment for $400 million and improve the ability of irrigation businesses to adapt to the future with less water. # v7 Page 17

20 Environmental engineering works in northern Victoria could achieve the same environmental outcomes using significantly less water than would be required to raise river levels and create overbank flows as proposed in the Proposed Plan. The proposed projects include Lindsay Island, Wallpolla Island, Gunbower Forest, Hattah Lakes and the Goulburn river floodplain. MDBA needs to explore the trade offs of operating differently, modifying, automating or relocating the 70 year old Barrages at the Murray Mouth to maintain optimum water quality. This could potentially reduce the amount of sea water intrusion into the Lower Lakes and reduce the amount of environmental water required for dilution flows, at a much lower socioeconomic cost than water buy back. # v7 Page 18

21 Appendix 1 G-MW Customers Water Customers No Goulburn Murray Irrigation District (gravity irrigation areas) 14,350 Pumped Irrigation 670 Regulated Surface Water Diversions 3,440 Unregulated Surface Water Diversions (irrigation, domestic & stock and farm dams) 7,510 Groundwater (irrigation, domestic & stock and commercial) 7,820 Water Districts (domestic and stock) 1,260 Flood Protection 120 Non-water users 1,050 Bulk water supply to urban and rural water corporations 6 High Reliability Water Share Entitlements Volume of High Reliability Water Shares in 2012 GL Goulburn Murray Irrigation District Shepparton Irrigation Area 130 Central Goulburn Irrigation Area 266 Rochester Irrigation Area 126 Loddon Valley Irrigation Area 136 Murray Valley Irrigation Area 199 Torrumbarry Irrigation Area 239 Total 1,096 Pumped Irrigation Nyah Irrigation District 7 Tresco Irrigation District 7 Woorinen Irrigation Area 11 Total 25 Regulated Streams Ovens 26 Broken 17 Goulburn 40 Campaspe 13 Loddon 18 Bullarook 1 Murray 59 Total 174 Non Water User Goulburn 276 Campaspe 24 Loddon 3 Murray 199 Total 502 Grand Total 1,797 The 2012 High Reliability Water Shares (HRWS) volumes are based on current information # v7 Page 19

22 from the Victorian Water Register and the known further reduction in water shares due to Commonwealth purchases to be approved but not yet processed in 2012 following the NVIRP Stage 2 agreement with the Commonwealth. Goulburn Murray Irrigation District (GMID) Customers predominately draw water by gravity from a G-MW supply channel. The GMID incorporates the Shepparton, Central Goulburn, Rochester, Loddon Valley, Murray Valley and Torrumbarry Irrigation Areas. The GMID irrigation delivery network, much of which is years old, presently consists of some 6,300 km of channels, 900 km of pipes and 3,000 km of drains. The GMID is currently undergoing $2 billion of modernisation under NVIRP funded by the Commonwealth and Victorian Governments. Modernisation is reconfiguring the historic layout of irrigation channels and automating, lining and pipelining the backbone channel network. Pumped Irrigation Water is supplied to customers from a G-MW fully piped and pressured supply system at Nyah, Tresco and Woorinen. Regulated Streams Customers who source their water directly from rivers where the water is stored and flows are controlled or regulated by a G-MW water storage higher in the catchment are defined as regulated customers. These customers provide the entire irrigation infrastructure including the pump and supply to the property. Unregulated Streams Customers who source their water directly from rivers or streams where supply is not controlled by a G-MW water storage but instead rely on access to natural run-of-river flows are defined as unregulated customers. These customers provide the entire irrigation infrastructure including the pump and supply to the property. Groundwater Customers hold a licence to divert water from an underground aquifer by means of a bore. The customer owns and operates the entire irrigation supply including pump, bore and supply infrastructure. Non Water User Customers with water shares not associated with a water use licence or registration. # v7 Page 20

23 Environmental Water Holdings Victorian Environmental Water Holdings System High Reliability Entitlement (ML) Low Reliability Entitlement (ML) Unregulated Entitlement (ML) Murray 123, ,265 74,300 Goulburn 63, ,832 0 Ovens Broken Campaspe 126 5,048 0 Loddon 2,570 2,024 0 Total 190, ,169 74,300 Obtained from Victorian Water Holder Seasonal Watering Plan 2011/12 Commonwealth Environmental Water Holdings System High Reliability Entitlement (ML) Low Reliability Entitlement (ML) Murray 170,137 11,125 Goulburn 121,152 10,527 Ovens 70 0 Broken 47 4 Campaspe 6, Loddon 2, Total 299,592 22,578 Effective January 2012 Total Environmental Water Holdings Commonwealth and Victoria System High Reliability Entitlement (ML) % of Total High Reliability Entitlement Low Reliability Entitlement (ML) % of Total Low Reliability Entitlement Murray 293, % 144, % Goulburn 185, % 185, % Ovens % 0 0.0% Broken % 4 0.1% Campaspe 6, % 5, % Loddon 4, % 2, % Total 489, ,747 # v7 Page 21

24 Appendix 2 The views and concerns expressed by Water Services Committees (WSCs) are out below. The Proposed Plan in its current form is not supported. A major revision of the Proposed Plan is required to find a better balance. Plan consultation has not really been genuine. Strong enough evidence has not been provided to justify the proposed reductions. The basis of the SDLs is not clear, the environmental outcomes are not clear and the social economic impacts are not understood. The proposed reductions are too high and will come at too high a cost. The 2015 review proposal is not supported. The environment will end up with too much water and not be able to use it effectively. The governance arrangements around the Proposed Plan are not clear and experience has shown this is a critical area. There is no proper plan for the environment. In reality there has been little change between the Guide and the Proposed Plan. The Proposed Plan just adds to the uncertainty about the farming future in this country. The Plan is not just about the environment it also about social and economic change across the Basin. The volumes of water to be acquired and the levels of price increase this will mean for the customers that remain are major concerns. Chapter 8 on water quality and salinity management should be scrapped altogether as it adds no value. The quality of water in the River Murray is better now than it was 20 years ago. How much will G-MW customers be expected to contribute to the cost of implementing the Proposed Plan? # v7 Page 22

25 The extent of irrigation will be significantly reduced and this will impact Australia s food security. By the time the Proposed Plan is recognised as an over correction the damage to irrigated agriculture will have already been done and it will not be reversible. Unknown costs & legal liability for G-MW or CMA from environmental releases directed by MDBA resulting in overbank flows and possible class actions. Groundwater issue - extraction proposed presumes no link between ground and surface water. The water buyback plan leaving expensive infrastructure (current and in-progress) underutilised and former irrigated land becoming valueless and unproductive. Minister Bourke (featured on Radio National) emphasised his concern that even with the 2,750ML, the capacity of natural/made systems cannot deliver to key wetlands/environment priorities. Eg Chowilla Flood Plain, without both extra works and risk of overbank flooding. Under food security, there is likely greater importation of foodstuffs than now. Also, greater carbon impact of transporting garlic from Mexico and broccoli from Belgium etc. # v7 Page 23