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Sausages, legislation and the Draft Basin Plan

December 1st, 2011

Bismarck is supposed to have said that for the sake of digestion and peace of mind, one should never watch the process by which either sausages or legislation is made. Certainly that’s true of the Draft Basin Plan released by the Murray Darling Basin Authority a few days ago.

What was supposed to be an evidence-based analysis aimed at determining sustainable outcomes was derailed by poor communications and legalistic processes. The botched release of the Guide to the plan last year produced an outpouring of fear and outrage among irrigators who were repeatedly told that their water allocations would be “cut”. The Government rapidly abandoned the process and engaged in the political bargaining that has produced a new plan, of which the most prominent feature is a proposed environmental water allocation of 2750 gigalitres (or perhaps less) well below the 3000 to 4000 GL suggested in the Guide as the minimum necessary for a sustainable outcome.

The process by which this outcome was reached wasn’t pretty and, unsurprisingly, no one is happy about it (I had my dummy-spit a fair while ago). But, considered as a political compromise, the outcome isn’t all that bad. If the 2750 GL total holds, the environmental allocation will be around 25 per cent of the median flow – that’s comparable to what the Snowy got in the deal brokered by Craig Ingram in 2009. It’s a lot better than seemed possible even seven years ago, when politicians could barely agree on measures to return 500 GL, and a suggestion of 1500 was ruled out of court before it was even studied.

Thanks to the Water for the Future program, something like 1700 GL of average flow has already been (re)purchased from irrigators who have been happy to sell. If the government pursues this path, they could declare victory in a few years time and abandon the costly boondoggles involved in subsidising supposedly water-saving engineering projects.

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  1. Sam
    December 4th, 2011 at 23:02 | #1

    @Hermit

    “Not true the politicians insist, the Wonthaggi desal will be offset by the Crystal Hills wind farm and Sydney’s Kurnell will be offset by the Bungendore wind farm. I beg to differ since water demand is highest in hot weather when wind power is weakest and vice versa. Hot wire them together off the main grid and see how it works out.”

    This seems a very silly comment to me. Unlike electricity, water does not need to be generated at the time of use. In fact, water is tremendously storable, with years of supply often kept in dams and reservoirs. So long as a desal plant can actually handle a variable electricity supply (Unfortunately not the case with SE Queensland’s Tugan), it can make a perfect complement to renewable energy.

  2. John Quiggin
    December 5th, 2011 at 06:04 | #2

    Having actually done the research, rather than mouthing off prejudices, I can assure readers that the vast majority of towns and cities in the MDB are not going to die if irrigators are allowed to sell 3000 or 4000 GL back to the environment. Many of these towns are already growing strongly, for reasons that have nothing to do with irrigation.

    It’s true that there are some small communities where irrigation is a major source of income. Nevertheless, even here the services sector is usually larger. And this brings us to the absurdity of Charles’ latest “Mate if there are no people, education, health, transport and the like are a complete waste of time.”

    Umm, who do think is going to deliver these services? Robots?

    For readers in general, Charles certainly provides a good example of the reasons why policymaking in this area has been a disaster. Ideas that were wrong when they were first put forward a century ago, and have long since ceased to be relevant to the vast majority of the MDB population are presented with a certitude that is immune to evidence of any kind

  3. John Quiggin
    December 5th, 2011 at 06:05 | #3

    Hermit, do you have a source for your Port Stanvac costs. The WA plant already in operation quotes much larger numbers. That said, it would almost certainly be cheaper to buy the water from irrigators. But the comments thread indicates the kinds of problems any such measure would face.

  4. Hermit
    December 5th, 2011 at 07:25 | #4

    Pr Q I cannot find the original link. However I offer as evidence the fact that excess water charges in Adelaide are $2.98 per kL for quarterly consumption over 130 kL.
    http://www.sawater.com.au/SAWater/YourAccount/UnderstandingYourAccount/Pricing+Information.htm
    I presume that roughly equates with the highest marginal cost which would be desal.

  5. Charles
    December 5th, 2011 at 07:52 | #5

    [It’s true that there are some small communities where irrigation is a major source of income. Nevertheless, even here the services sector is usually larger. And this brings us to the absurdity of Charles’ latest “Mate if there are no people, education, health, transport and the like are a complete waste of time.”

    Umm, who do think is going to deliver these services? Robots?]

    Yes Ummm.

    Lets consider a mining town. Does it continue to exist when the mine ceases to produce. Does the addition of soft support like education, health and additional roads save the day. There are many Ghost towns to prove that such a thesis needs to be critically examined.

    A mining town exists to supply the human resources needed to support the mine (no; education, health, retail, industry support infrastructure, legal services are not provided by robots). When the mine move on, the support services move on and the town dies. I happen to live in a town with a population that is equal to the number of pubs it once boasted, an old gold mining town. The pubs have gone the schools are no more, the health services are non existent. No they didn’t read academics research and say, oh we should stay because of soft support, they moved on when the reason for the towns ceased to exist.

    I can’t see why it isn’t exactly the same with irrigation, no reason no town seems pretty logical to me.

    If you trawl back through history, there are many failed irrigation schemes to examine. Not only are the channels closed, the people have gone. Tourism takes you only so far.

    I am however interested in learning, what are the towns that your research has shown are growing strongly, and what are the reasons (Ballarat and Bendigo started the same as my little town but survived as regional centres)?

  6. Charles
    December 5th, 2011 at 08:06 | #6

    Hermit, do you have a source for your Port Stanvac costs. The WA plant already in operation quotes much larger numbers. That said, it would almost certainly be cheaper to buy the water from irrigators. But the comments thread indicates the kinds of problems any such measure would face.

    i am seriously confused as to what your position is, you have said the north/south pipeline is the biggest boondoggle of them all. The north/south pipeline it is the infrastructure that allows the purchase of irrigation water to supply cities. Above you indicate support for buying irrigation water to supply towns.

    Without the boondoggle how was the water supposed to get to Melbourne?

  7. Charles
    December 5th, 2011 at 08:23 | #7

    Having actually done the research, rather than mouthing off prejudices

    As my request above would take time, could you please provide me a link to the relevant paper.

    Regards

  8. Sam
    December 5th, 2011 at 09:11 | #8

    Also, this might be boring of me to mention, but this problem would be much less severe with a lower population. It seems to me economists like John Quiggin provide great advice on how best to steer a speeding car around dangerous obstacles, but things would be so much easier if we learnt to simply apply the brake sometimes.

  9. Alistair Watson
    December 5th, 2011 at 10:44 | #9

    Charles. You said that I ‘want to denigrate the decisions made by the Victorian officials responsible for these issues, I assume you have alternate (sic) proposals.’ I do not denigrate Victorian officials. Especially since the publication of the report of the Ombudsman, it is now clear that mainstream officials were marginalised in major decisions about water policy taken by the Victorian Government in 2007. I denigrate politicians like John Brumby for their rank amateurism, wilful ignorance of mainstream knowledge about irrigation and urban water, rejection of advice and their infatuation with inappropriate technology like total channel control.

    Your remarks about the office of the Victorian Ombudsman are inaccurate, intemperate and offensive.

    Two good places for you to start in your re-education would be Bruce Davidson’s classic critique of irrigation ‘Australia: Wet or Dry’ and the collection of essays edited by Lin Crase for Resources for the Future, ‘Water Policy in Australia’ – especially the chapters by Warren Musgrave and Terry Hillman.

  10. John Quiggin
    December 5th, 2011 at 10:56 | #10

    “i am seriously confused as to what your position is, you have said the north/south pipeline is the biggest boondoggle of them all. ”

    Actually, I said “I don’t have a problem with the pipeline”.

  11. John Quiggin
    December 5th, 2011 at 11:01 | #11

    “I can’t see why it isn’t exactly the same with irrigation, no reason no town seems pretty logical to me.”

    For a start, less irrigation water doesn’t mean no irrigation, and certainly not no agriculture. Then, as you say, there’s tourism. And lots of irrigation is in places where people want to live, and are happy to set up businesses. Check the population growth numbers

    http://www.abc.net.au/news/stories/2010/04/01/2862339.htm?site=milduraswanhill

  12. December 5th, 2011 at 11:45 | #12

    @John Quiggin John you should be saying this publicly, loudly, often. The idiot media so readily accept the zero sum nonsense from irrigators, NFF, town mayors, angry man in main street.

  13. rojo
    December 5th, 2011 at 13:07 | #13

    Alistair, I don’t discount the value of water to the environment, that’s intrinsically hard to put a value on. Buybacks offer no direct return on the water outside environmental assets, savings provide for both.

    What I mean is you can spend a bit extra to save water which
    - maintains production
    - maintains and initially enhances cash-flow through the towns
    - maintains the asset base, buybacks devalue existing infrastructure. No compensation.

    That’s just cash return on water saved, without considering the flowon effects of export income etc

    All meaning community wealth is not sapped making it cheaper in the short term.

  14. Charles
    December 5th, 2011 at 13:29 | #14

    Thank-you for the link

    http://www.abc.net.au/news/stories/2010/04/01/2862339.htm?site=milduraswanhill

    I was hoping for some papers from your research, but I link to a ABC report is a good place to start.

    As I understand it your claim was the I was mouthing off and you research had shown otherwise. To quote:


    Having actually done the research, rather than mouthing off prejudices,
    ……
    Many of these towns are already growing strongly, for reasons that have nothing to do with irrigation.

    Lets take Swan Hill, the ABC, report has Swan Hill population expanding by 1.4% over year 2010. Your asserting this is due to reasons other than irrigation. I think it is reasonable for me to assert that the ABC article would support your position if irrigation in the Swan Hill was steady or declining.

    Recent reports are hard to obtain, but this one covers the period 1997-2007

    http://www.swanhill.vic.gov.au/services/forms/Downloads.asp?whichcategory=27&AreaID=11&sortorder=Date

    You will note that in that period there has been considerable investment (and unfortunately expansion) in irrigation agriculture and that the investment has been in crops that take several years to yield. Once the crops are yielding they take additional labour to harvest and manage. Based on the plantings to 2007, 2010 would be when one would expect increased labour usage.

    I would suggest that Swan Hill is expanding due to the investment in irrigation agriculture by MISs, made possible I may add by the trading of water, trading that unlocked untold volumes of water rights that were never used by the initial owners.

    Why is my conclusion wrong? I actually want to see research that shows I am wrong, I want research that shows me that regional centres have a future, that my glum outlook for the future is nothing more than mouthing off prejudices.

    Step up to the plate John.

    On another note I actually agree with:

    I can assure readers that the vast majority of towns and cities in the MDB are not going to die if irrigators are allowed to sell 3000 or 4000 GL back to the environment.

    Unfortunately the key word is majority, with the current solution no one knows who the minority will be, and the selection will be forced on some and decided by others considering issues that have nothing to do with minimising societies sunk cost loss.

    An irrigation system is not viable if a large percentage of users trade out. Once that happens the rest are forced to follow.

  15. Charles
    December 5th, 2011 at 13:32 | #15

    John I have a post in moderation, if you post it please close the bold after majority.

    Regards
    Charles

  16. Doug
    December 7th, 2011 at 15:02 | #16

    Just a comment on population issues specifically population along the Murray in northern Victoria – certainly around Echuca and Yarrawonga – I was told that population growth there was being driven by retirees from Melbourne, there was substantial evidence of suburban style estates spreading around the edges of those towns.

  17. Wakefield
    December 7th, 2011 at 21:17 | #17

    Hermit – you need to understand maths. The desal water is multiples more expensive $3 – $5 per kl every year. Buying water entitlement at $1500 per ML gives a supply of water every year – big difference.

  18. Charles
    December 10th, 2011 at 07:09 | #18

    Just a comment on population issues specifically population along the Murray in northern Victoria – certainly around Echuca and Yarrawonga – I was told that population growth there was being driven by retirees from Melbourne, there was substantial evidence of suburban style estates spreading around the edges of those towns.

    The thing is, if John had really done some research there would be a paper written and in it we would find a methodology, data, a discussion as well as the conclusion. It would be better than a feeling for what is going on, or what one had been told.

  19. John Quiggin
    December 10th, 2011 at 07:57 | #19

    Unfortunately, the research I’ve done on this specific point is in a report to government that is still awaiting a release. But I really don’t have to prove anything to you. Even the casual evidence above makes the point, and if you choose not to believe that more detailed research confirms it, you’re welcome to a free money-back refund on the way out.

  20. Charles
    December 10th, 2011 at 07:58 | #20

    A good summary of the Victorian desal plant, with both sides of the argument.

    http://www.theage.com.au/victoria/blind-panic-and-a-city-running-dry-the-desal-nightmare-20111209-1onu9.html

  21. Charles
    December 10th, 2011 at 09:03 | #21

    Unfortunately, the research I’ve done on this specific point is in a report to government that is still awaiting a release. But I really don’t have to prove anything to you.

    No you don’t.

    Unfortunately I have ran research groups so I have a fair idea how it should be done (methodology, data, discussion, conclusion, publication, it isn’t that hard).

    My distaste for “I have done research” meme came about when I got involved on the side of the farmers in a political debate (they are the right words I think) with Vets on one side and farmers on the other, a debate that saw agriculture departments destroy the lively hood of several farmers before sanity prevailed and they backed-off.

    The veterinary industry pulls a new animal disease off the self when needed, unfortunately they picked ovine johne’s for their last round, a disease that has detection tests that gives false positives and negatives and with the only sure cure being the destruction of the flock.

    The farmers had to deal with “I have research which shows”, with no research behind it (if I am to believe the complete lack of publication), and “computer models” that where nothing but second order differential equations with pretty computer plots, with no paper justifying the model.

    It was fighting this that led me to the simple idea of requesting the papers when faced with such an argument. If the paper is forth coming it leads to something you can read to learn (I try and have views to suit the facts), and gives you the data to form an opinion on the value of their research and conclusion. If there is no paper you get a lot of hand waving. The hand waving is interesting to watch, can’t show you because it is secret is common, as is the conclusion is self evident (then why do the research).

    The one I find really interesting is “anecdotal evidence has shown”, it the neatest way of saying “old wives tale”.

    What really upset me was the miss-use of science. I felt such blatant disregard for how science should be done would only lead to a disrespect for science. Research without publication is worthless.

    We have seen this disrespect in the climate change debate. My belief in global warming is not based on a bunch of academics waving their arms, it’s based on reading published information (I found the Vostok ice core data, discussion and conclusion particularly compelling). In my view the climate change debate has been a disaster because the popular press is reporting it as 99% of academics are waving there hands over here, only 1% over there (rounding to the nearest whole number of cause).

    In my view those that have used “I have done research” without publications have a lot to answer for; but no; you don’t have to prove anything to me.

  22. John Quiggin
    December 10th, 2011 at 12:11 | #22

    As has been pointed out to you several times, it’s easy enough to check the basic facts. Agriculture accounts for about 10 per cent of total employment in the Basin, and only about half of that is irrigated agriculture. Agricultural employment has been static or slowly declining for decades but, as noted above, the population of irrigation-intensive areas along the Murray is mostly increasing.

    http://www.abs.gov.au/ausstats/abs@.nsf/mf/4610.0.55.007

    So, the claim that allowing some irrigators to sell water is going to have substantial adverse effects on employment and

    And, while you can believe me or not about the employment results, my group has done plenty of work to show that the economic impacts of a well-managed buyback will be very modest

    http://www.uq.edu.au/rsmg/WP/WPM09_01.pdf

  23. Charles
    December 10th, 2011 at 16:06 | #23

    Thankyou.

    To the fist link, the question is, why do the populations have a modest increase? I am not arguing it is not happening, I suspect the modest increase are due to the Managed Investment Schemes made possible by water trading, but I have no data (other than the amounts invested) to back up my conclusions one way or another.

    The second paper was very interesting.

    First an unrelated point, salinity in the lower Murray is a serious problem in dry years, not wet. The conclusion reached on page 13 probable occurred because the model does not take into account the charging and discharging of the water table. The level of the river drives that.

    Modelling of the salt load in the lower Murray is further complicated by ground water flows being modified using pumps so the return flows end up in lakes disconnected from the system instead of the Murray. They were installed during the current drought to help deal with the salinity issues (another boondangle I suppose).

    Further, in your modelling you have a lot more opportunity irrigation, such irrigation will be onto land that has limited preparation, proper drainage systems are not likely to be installed and the flow back to the river will take time and will occur through the water table not via properly prepared drainage systems.

    It’s interesting that you have assumed no wetlands flows back to the Murray and no resultant salt load. If you charge the water table it goes somewhere. Wetland charging is flood irrigation by another name.

    I wonder if the 30% conveyance costs mentioned on page 9, are add to the environmental flows required, or part of the environmental flow required? No matter.

    In the introduction it was mentioned that water use reduction schemes have been put in place to achieve the initial 500ml (page 5) but that the goal was not achieved. I think it would be a safe assumption that the result was better than 0, but the modelling seems to have obtained all water through trading. I think discounting the effort put in to date is a little harsh no matter what your boondangle views are.

    Obviously you have to pick a $ value for environment flows, $100 for wetlands and $50 for flow to the sea are interesting values. I’m not arguing they are right or wrong, just interesting when compared to the shadow price and the conclusions.

    As environmental flows are secure water flows (they have occurred when secure flows have been under pressure) I would have thought you would have to put up an argument that they are worth about the trade price for secure water flows in drought years and the shadow price in a good year.

    I am surprised the paper assumes dryland farming returns are 42% of irrigation returns, it’s not even close (page 15). That would be a critical assumption to the costs.

    If I read it correctly, you have stopped cotton growing in all but wet years and pulled out all the grapes in SA (page 15), bit of pity there has been thousands of acres of grapes planted in the last 10 years (driven largely by managed investment schemes ) as the wine industry expanded.

    Are you advocating the destruction of the wine industry because of a model based on the current grape glut? I don’t know as the returns assumptions for each crop were not given.

    On page 3 the total value of irrigated agriculture at 4.7 billion, in table 9 it is 2.9 billion under current trade. If the 4.7 is the actual value as reported by the ABS, and 2.9 is the value out of a model I would be taking a serious look at your model.

    It seems to me the paper is arguing for full trade but selected purchase of environmental flows to minimise the opportunity costs. I am arguing that the current system (buying traded water) may damage irrigations system that have large sunk costs. Seems to me to be the same argument using different words.

    All the above are minor whinges. It’s table 2 that I find most worrying, what is a normal year? With climate change historic records aren’t worth the paper they are printed on.

    Thanks. Now I some idea of where your coming from.

    Regards

  24. rojo
    December 10th, 2011 at 19:33 | #24

    Just a quick question, why does chowilla need so much water? 3600GL should be enough to keep the entire floodplain under water for 10 years.

  25. John Quiggin
    December 11th, 2011 at 00:10 | #25

    A few quick responses, Charles.

    1. The differing numbers on output are gross value and value added
    2. Salinity is indeed higher in dry years. It looks as if there is an error in the table headings. I’ll get the authors to fix this
    3. I picked a paper without climate change, just to keep things simple. Here’s a list of working papers, including quite a few on different aspects of climate change and water
    http://www.uq.edu.au/rsmg/working-papers-rsmg

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