SUBMISSION TO THE NATIONAL COMPETITION COUNCIL FOR THE 2004 WATER REFORM ASSESSMENT BY GEOFFREY CUNNIGHAM AND FERGUS DUNCAN INTRODUCTION OF WATER TRADING Since the introduction of water trading under the Burnett Resource Operations Plan on the 2nd June 2003 both Fergus Duncan and myself have been heavily involved in the trading of water entitlements. Fergus Duncan’s main role has been as a water broker and he has negotiated and brokered the majority of water trades in the Burnett region. Geoffrey Cunningham is a solicitor with Payne Butler Lang Solicitors in Bundaberg and has been involved with the legal aspects of water trading. This submission deals with the following issues in Queensland including: 1. 2. Water trading – trading rules established in existing resource operation plans such as the Burnett and the commerce of trading approvals; and Developments in water trading mechanisms and the availability of market information. Fergus John Duncan I am principally a Real Estate Agent selling residential and commercial properties and businesses and have over the past 16 years specialised in the sale of rural property in Central Queensland, Moree and the Central Burnett. I have also owned an irrigation farm. Since the beginning of water trading I have completed the following sales: Upper Burnett Water Scheme 120 Ml @ $1250.00 per Ml 45 Ml @ $1500.00 per Ml 26 Ml @ $1500.00 per Ml 3 Ml @ $1300.00 per Ml 20Ml @ $1500.00 per Ml 40Ml @ $1500.00 per Ml 10Ml @ $1500.00 per Ml 30Ml @ $1600.00 per Ml 294Ml Total Lower Burnett Water Scheme 60Ml @ $900.00 per Ml Zone OB to Zone AA Zone OB to Zone NC Zone NC to Zone NB Zone NC to Zone NE Zone NC to Zone NA Zone OB to Zone OA Zone OB to Zone NA Zone NA to Zone NB Zone OB to Zone CB 2 Upper Burnett – Cancelled 50Ml @ $1600.00 per Ml Zone OB to Zone NB Currently for Sale 80Ml @ $1250.00 per Ml 290Ml @ $1600.00 per Ml 51Ml @ $1500.00 per Ml 421Ml Total Zone OB Zone OB Zone OB Geoffrey Paul Cunningham B.App.Sc, M. AgSc, LLB I am a solicitor with Payne Butler Lang Solicitors in Bundaberg and I practice principally in Property Law and Natural Resource Law. I have previous experience with rural industries as a consultant and as a research officer with the Department of Primary Industries. I have been involved since early 2003 with providing legal services to primary producers in relation to the transfer of water entitlements under the Water Act 2000. This role has included: 1. Drafting of legal documents including Water Entitlement Contracts and Leases and these documents are currently waiting for Queensland Law Society approval; Reviewing clients wills and succession plans to incorporate water entitlements; Writing media releases on the changes in the law relating to water entitlements; Providing training talks to legal practitioners and primary producers on the changes in the law relating to water entitlements; and Providing conveyancing services for buying and selling water entitlements in the Burnett region. 2. 3. 4. 5. Burnett Resource Operations Plan The majority of water trading has been conducted in the Upper Burnett area and the river zone limitations imposed on the Upper Burnett in the original ROP were as outlined in Table 1. 3 TABLE 1 MINIMUM AND MAXIMUM VOLUMES IN UPPER BURNETT RIVER ZONES IN MEGALITRES Zone Minimum Export Medium Priiority Import Maximum Nominal Volume Water Allocation Volume Nominal Volume Volume GA 3817 0 3817 150 3967 GB NA NB NC OA MA OB OC OD PA SA SB TOTAL 913 1951 3488 2411 5863 883 6405 0 290 1070 0 0 27091 0 50 50 750 740 110 550 133 100 100 0 50 2638 913 2001 3538 3161 6603 993 6955 133 390 1170 0 50 29724 50 200 200 100 50 0 60 150 100 100 0 0 1150 963 2201 3738 3261 6653 993 7005 283 490 1270 0 50 30874 There appears to be a major discrepancy between the water volume available for export (2638 ML) and the water volume available for import (1150 ML) in the original ROP that has never been explained by DNRM. A significant number of water trades were made in the Upper Burnett during the second half of 2003. However water trading has now effectively ceased in the Upper Burnett due to the river zones that require water having all reached their maximum nominal volumes for each zone. A case study of river zone OB highlights the restrictions on water trading that is currently being made by the maximum nominal volumes within each river zone. Zone OB Originally a large citrus growing area but has declined in citrus production as there has been a movement to elevated areas with less frost. The reliance on irrigation water from the Burnett River has declined due to the unreliability of the Warumba Dam and the discovery of good supplies of bore water from a fault in the sandstone substrate. There is 1385 megalitres in zone OB have either been sold or awaiting revision of the upper and lower limits in other river zones. 4 Water Trading in the Burnett Region The current problems with water trading under the Burnett Resource Operations Plans are as follows: 1. Number of River Zones The number of river zones are excessive with 13 river zones alone in the Upper Burnett area and the river zones need to be reduced to a more practical number such as 3 to 4 zones. The river zones should be set with reference to water infrastructures and the practical limitations on water movement and not by arbitrary river zones. 2. Minimum and Maximum Volumes in River Zones The minimum nominal volumes and maximum nominal volumes were set far too conservatively under the original Resource Operations Plan and are severely hampering water trading. The average import volume available in river zones started at 3.8%. A more practical level would be to allow 10 to 20 percent of the water allocation in each zone to be available for import or export from that zone; 3. Review of Minimum and Maximum Volumes in River Zones The Department of Natural Resources and Mines (“DNRM”) are making no effort to resolve the problem with the minimum nominal volumes and maximum nominal volumes. A review of river zone volumes was promised by DNRM by November, 2003. This review was never completed. A review of river zone volumes was promised by DNRM by February, 2004. This review was never completed. DNRM is currently promising to have a review of river zones completed by June, 2005. A six monthly review process needs to be put in place to review water trades during that period and to alter the minimum and maximum nominal volumes in river zones affected by those trades. 4. Land and Water Management Plans (“L&WMP”) The approval of L&WMP’s by DNRM has caused problems with the utilisation of water entitlements purchased under water trading. DNRM has been inflexibly applying average water use data for crops and ignoring yearly variations in rainfall. This situation has resulted in primary producers having to limit water estimates and increasing crop loss risks in dry years. 5. Availability of Market Information No online service is currently in existence for obtaining information on water trading sales. A comparable system to land sales is required for efficient water trading to develop. 5