On-ground works are nearing completion for the Connections Project, the $2 billion investment in irrigation infrastructure modernisation in the Goulburn-Murray Irrigation District (GMID). Once complete, the final water recovery can be confirmed and distributed.
The Irrigators’ Share Consultative Committee (ISCC) - appointed by the Minister for Water in June 2019 - has been taking a close look at options to best distribute the up to 75 GL of water recovery from Stage 1 of the Connections Project that will be returned to irrigators.
The ISCC has explored a range of ways to share the benefits of the water recovery and is now seeking feedback from GMID delivery share holders on our proposed approach.
ISCC's proposed approach
What distribution approach is the ISCC proposing?
After a detailed investigation of a range of options, the committee found that a once-off distribution of benefits is the most practical solution. As water shares are a critical component of peoples’ businesses, it is proposed that water shares – or for those with small amounts of delivery share, the associated value – be issued directly to irrigators.
The committee is suggesting a once-off distribution of water shares to those who hold GMID delivery share greater than 0.25 ML/day.
Analysis showed that those with very small delivery share (less than 0.25 ML/day) would be better off receiving a financial benefit as the costs for them to administer such small parcels of water outweigh the value of the water. This financial payment is proposed to be made as credit on their Goulburn-Murray Water bills.
The committee explored the value of different distribution models for individual irrigators and for the GMID as a whole, looking for solutions that deliver security for irrigators while keeping the costs to recipients low, providing long-standing benefits to the GMID, ensuring that arrangements couldn’t be easily changed, and protecting the rights of current and future entitlement holders.
Keeping costs low
To protect the value of the irrigators share, the committee looked at the distribution costs that would be met by the beneficiaries. For all ongoing models a portion of the available allocation or water shares would need to be sold to fund the ongoing management and distribution of benefits to irrigators. This would result in a higher cost for water from the irrigators share relative to an irrigator holding the same water share. Several different governance models were investigated to look for cost-effective arrangements for an ongoing water distribution. To be consistent with the requirements of the trading rules under the Murray Darling Basin Plan,the cost and red tape involved in ongoing models would be significant.
For those with very small amounts of delivery share, the costs for both once-off and ongoing approaches outweigh the benefit to recipients. This is why the committee proposes delivering a financial benefit to those below the 0.25 ML/day delivery share threshold, providing a transparent, simple and balanced approach to fairly sharing the benefits.
Arrangements that cannot be easily changed
Given that it is impossible to predict or control the future, the committee came to the position that providing benefits fully and directly to individual irrigators provides them with the maximum choice, certainty and control over how the irrigators share should be managed into the future.
The committee concluded that the significant controls aren’t in place that would be required to maintain a central entitlement that is sold each year, with the benefit provided as payment to irrigators or used to keep down irrigation access fees.
By issuing water shares, recipients can manage the irrigators’ share to suit their business needs, including use for carry-over, farm financing and allocation trade. Providing the benefits directly to irrigators – as water shares or as financial benefits – guarantees that water stays with irrigators and arrangements cannot be changed down the line.
Rights of current and future entitlements protected
Under the Murray Darling Basin Plan, all Basin states are required to operate under the same rules for water trading. With farmers increasingly making market decisions on the best way to use their water in each year, non-discriminatory trading rules provide GMID irrigators with an even playing field in accessing the market.
Distributing the irrigators’ share once-off as water shares aligns with the trading rules, protecting the rights of all water entitlement holders now and into the future. It is important that the distribution of the irrigators’ share integrates with our existing rules and frameworks to protect all entitlements and maintain the benefits of water trade.
Long-standing benefits to the GMID
The committee considered different ways to lock in the irrigators share within the GMID. In looking at different options it also looked at its ability to have a material benefit to the GMID while not putting additional costs onto irrigations. Given that irrigators in the GMID are free to trade all other water shares, locking in this water would not prevent water leaving the district.
The committee recognises the importance of helping the GMID adapt to changing irrigator needs. Providing the irrigators share directly to delivery shareholders gives irrigators the most ability to make the decisions that are right for their businesses.
The committee noted that the Victorian Government is putting other measures in place to manage water trade in the Goulburn system in light of evidence around environmental tolerances.This, in combination with driving down the cost of delivery, will provide advantages to irrigating in the GMID.
The committee looked at once-off and ongoing options for distributing both water and financial benefits, as well as combinations of the different approaches.
Financial options included the once-off sale of water shares and the ongoing sale of allocation, with the benefit provided to delivery share-holders either as direct monetary returns or through investment in GMID infrastructure. The committee believes that delivery share-holders would prefer to get water rather than receiving financial benefits unless the costs of administering the water outweigh the value of the water provided.
Options to hold water shares centrally and distribute water seasonally through allocation processes were thoroughly explored. The committee found that simple and cost-effective ongoing allocation-based models that were limited to delivery share holders were not possible as they would be in breach of Commonwealth regulations. These rules set out that water trades must be non-discriminatory, meaning that it is not permitted to provide water allocations only to people with delivery share.
Distributing the irrigators’ share through increases in entitlement allocations, which would be consistent with Commonwealth regulations, was dismissed by the committee as it would provide water to all Murray and Goulburn entitlement holders, not just delivery share holders.
Watch a recording of the first ISCC Virtual Town Hall
Please note that this is a video recording of the virtual town hall event that took place on the 29th April 2020. The Questions & Answers-function explained in the video is no longer available.
For all questions answered to date, please see the Questions & Answers document.
Watch the Q&A session of the second virtual town hall event
What was the Irrigators' Share Consultative Committee (ISCC) charged to do?
The committee have been charged with recommending a distribution model for the irrigators' share to the Minister for Water by mid-2020.Convened in July 2019, the ISCC have been meeting periodically to work through different distribution options. The ISCC is now reaching out to the GMID delivery share holders for feedback on their proposed model.
The committee have been guided by its terms of reference and agreed principles. These principles include the Delivery Share Review recommendation that delivery share would form the basis for distributing the benefits of water recovery, with the approach supporting the long-term future of the GMID.
The irrigators' share refers to the share of water recovery that will be delivered back to GMID irrigators as part of Stage 1 of the Connections Project. The irrigators’ share will be up to 75 GL - long term average annual yield (LTAAY) - of the confirmed water recovered, reflecting the contribution irrigators make to the costs of operating and maintaining irrigation infrastructure.
The total amount of water recover target for Stage 1 is at 225 GL LTAAY, to be shared equitably between the environment, the Melbourne retail water corporations who contributed funding (City West Water, Yarra Valley Water, South East Water), and GMID irrigators.
Once water recovery works are completed, it is essential to confirm the water recovered so that water shares can be issued with no risk of impacts to existing entitlement holders. It is also important that Connections Project entitlements issued to all recipients – irrigators, Melbourne urban water retailers and the environment – are based on principles of equity and transparency.
The committee believe that this should be done as soon as possible after Connections Project works are completed. The committee is calling for a clear timeframe to be announced when the Minister makes the final decision regarding distribution, setting out when water shares will be distributed.The issuing of water shares and financial benefit to over 10,000 customers is a major undertaking that needs to happen as soon as possible to ensure that the issue of the benefit is not avoidably delayed.
In the interim, the committee calls for any water allocation available from the irrigators share to be released to delivery share holders, where it is not required to offset system stress from water shares issued to the Commonwealth in advance of water recovery works.
The Minister for Water has asked the Irrigators Share Consultative Committee to provide its recommendation by mid-2020. The Minister will then decide on the final distribution model.
The consultation is now closed.
Below you can find the feedback form that the Committee asked GMID delivery share holders to fill out. Please note that the feedback form is now closed for submissions.