Lies, dam lies and water plans

lin-crase-thumb-newProfessor Lin Crase



This was originally published in The Conversation Monday 4 June, 2012. 

When the water planning process for the Murray-Darling Basin first commenced, an experienced colleague of mine noted that this was shaping up to be a lying contest between farmers and environmentalists. He also observed that some of the protagonists had strong track records for stretching the truth, and wisely foreshadowed a difficult time for the general public trying to discern the likely impacts of the Plan from claims designed to secure the most advantage from taxpayers.

After all, it was always going to be the case that public funds would be used to lubricate the implementation of the Basin Plan. And there’s nothing like the smell of public money and an ambitious policy reform agenda to attract lobbyists.

What my colleague did not address at the time was the wrangling that would also emerge between the different state jurisdictions. This is not because it had escaped his attention. Rather it was because the initial debate was primarily portrayed as a zero-sum contest exclusively between farming communities and environmental interests.

Now that this first phase has passed, the public will be treated to the traditional jousting between states and the federal government. Sifting through fact and fiction in this jurisdictional debate will be no easier than judging the fairly simplistic cases presented by irrigators and environmentalists over the past five years. What both debates share in common are a predilection to communicate with little reference to history, scant regard to the role of uncertainty and even less attention to the cost-effectiveness of choices.

Since Federation, water has been a state-controlled resource and an area of contention between jurisdictions that cover the Murray-Darling Basin. Most of those disputes have centred on the southern part of the Basin, where almost 90% of the water in the Basin originates.

Initially, Victoria and New South Wales sought to harvest water in the upstream catchments of the southern part of the Basin in order to promote irrigation. South Australia objected to water being harvested and diverted. This might appear to be exceptional environmental foresight by the downstream state, in reality the main driver was the ambition to keep the Murray available for navigation. South Australia wanted to become the port through which the valuable produce from the Basin would be transported. Its citizens would reap the economic rewards.

The water sharing between jurisdictions was formalised early after Federation. The agreement guaranteed minimum flows to the downstream state but left the remaining water primarily split according to its origin. The upshot of these arrangements, accompanied by substantive subsidies from the public purse, was the development of significant irrigation communities in New South Wales and Victoria. Oddly enough, South Australia also used the advantage of guaranteed minimum flows and public funds to create its own irrigation communities along the Murray.

It is not possible to detail all of the events that led from these initial jurisdictional divides to the present. Suffice to say that the various states spent most of the last century handing out water rights like they were manna from heaven and picking up the tab on irrigation projects that failed along the way.

Important nuances also emerged. Victoria and South Australia created water rights in a way that encouraged perennial agriculture. New South Wales primarily used lower security water rights that resulted in irrigation focussed on annual crops.

It was only towards the end of the last century that the problems of irrigation became apparent. Some of these were environmental: increased salinity, algal blooms and loss of native species. Other problems were economic: many of the agricultural products could not attract market prices that covered the costs of production, including irrigation.

Tired of the financial drain on state budgets, most jurisdictions started to divest themselves of irrigation infrastructure in the 1990s. A notable exception was Victoria, which still owns the debt-ridden Goulbourn-Murray Water. Weary with being blamed for the environmental ills of the Basin, states were also enthusiastic about shifting responsibility to the Federal Government in the mid 2000s.

Federal bureaucracies started the process of trying to develop a basin-wide plan largely without input from the state agencies, even though the states knew most about water. Apparently the logic was that the states had done a poor job up to that point. The wisdom of Canberra could thus legitimately be harnessed to solve this problem once and for all.

The hard-working public servants in Canberra soon discovered the scientific knowledge about the Basin is incomplete and circumscribed by uncertainty. It is also the case that most of the public debate in this country has about volumes of water. The initial disputes over how much water could be claimed by each of the southern states are testament to the longevity of this approach. The difficulty is that environmental outcomes are not just related to volumes of water. Specifying a split of water between irrigation and the environment is a rubbery indicator of environmental health, at best.

The initial Guide to the Basin Plan did a pretty poor job of acknowledging these limits and nuances. Rather, it portrayed volumes of water that would purportedly guarantee some level of environmental amenity whilst limiting the impact on communities.

The second version, known as the Draft Plan, did a better job. It at least overtly stated that water managers would need time to trial different approaches for gaining improvements in the environment. This is known as adaptive management and amounts to learning by doing.

Regrettably, by now the debate had firmly settled on arguments over a volume of water. Predictably, irrigators continued to claim the new limits would be too severe while environmentalists argued that not enough water would be transferred to the environment.

One of the consequences of this tortuous, public argument over volumes has been the renewed enthusiasm for spending taxpayers’ money on irrigation infrastructure. Much to the joy of engineering companies and some irrigation lobbyists, the costs of implementing any Basin Plan are thus set to rise markedly.

This “back to the future” policy is based on the notion that irrigation infrastructure can generate water for the environment and miraculously transform the economic malaise of related industries. Both arguments are spurious in the extreme.

In contrast, buy-back of water rights is cheaper for the taxpayer and remains the most popular approach for the less-vocal and thus less-influential farmers. Recent reports from the National Water Commission also show that most of these farmers have stayed in agriculture after selling their water, thus dispelling the predictions of mass disruption to regional communities.

Enter the states. South Australia has foreshadowed using the judicial system to secure more water for the environmental assets at the end of the Basin. Again, it might be premature to view these actions as indicative of exceptional environmental consciousness. In order for that water to reach the Lower Lakes it must first pass the existing irrigation industries along the South Australian Murray and the South Australian government already has a history of using taxpayers’ money to secure water for this group.

The upstream states of New South Wales and Victoria will predictably argue that they have already made substantive contributions to the goals of the Basin Plan and resist any further re-allocation of water. There will undoubtedly be a rush on the part of the states to squeeze additional public money from the Commonwealth before any Plan is signed off.

Showing all the myopic symptoms of earlier legislators, it is also likely that most of this will then be spent on infrastructure projects. Such projects provide ribbon-cutting opportunities for politicians even if most would fail a rudimentary benefit-cost assessment.

What is less clear is how the spoils of Commonwealth largesse will fall between the states. I suspect this will come down to a type of jurisdictional lying contest similar to that already witnessed from the protagonists in this debate.

Lin Crase is Professor of Applied Economics and Director of the Centre for Water Policy and Management at La Trobe University