The Great Canal

It looks as if the WA election may turn on a PPP scheme: Liberal leader Colin Barnett’s proposal for a canal bringing water from the Kimberleys to Perth. This seems to me like complete lunacy. The estimated construction cost is $2 billion, but given a 10-year staged construction process, accumulated capital costs will be closer to $3 billion by the time the first water flows. The private owner will want a nominal return of at least 10 per cent, and depreciation of 4 per cent[1]. That’s more than $400 million a year in capital costs alone, or something like $800 a household. I think a saw an estimated water flow of 200 GL, which suggests $2/kl in capital costs.

But that’s just the start of it. Water is heavy. Every kilolitre of water is a tonne of matter that has to be transported nearly 3000km with no assistance from gravity. I have no idea how much this would cost, but I’d be amazed if it could be done for $1/kl. And all of this is before treatment and reticulation, and without even thinking about evaporation and seepage, environmental issues, native title, compensation for non-indigenous freeholders and so on. Desalination is considered expensive at $1-2/kl but it looks like a marvellous bargaing compared to this.

The proposed contract is take or pay, so if demand falls short (this scheme will supply around 400kl/household, more than total consumption for many) the loss will be borne by existing public water suppliers.

Barnett has apparently committed himself to the scheme without any sort of feasibility studies, and, according to the Fin, scored a big win with the TV audience in his debate with Geoff Gallop by doing so. But, on the evidence of this scheme, he’s unfit to be trusted with a footy club raffle, let alone running a state government.

One interesting feature of this kind of scheme is that I’m in agreement with the Institute of Public Affairs. We have very different views on infrastructure policy in general, but we can both recognise a boondoggle when we see one.

Update 5/04 The Fin quotes a Treasury report that estimates the cost at $6.50/kl which includes higher construction costs. That sounds about right to me, and confirms my conclusions about Barnett. The story says the $2 billion promise was based on a proposal from Tenix (the planned private partner) that was exceptionally sketchy – apparently they didn’t even know the route of a major gas pipeline in the area.

Further update Rob Corr is all over this story. For what it’s worth, I’d judge that Barnett has a few days left to back off the idea and claim he’s been misunderstood. Any longer than that and he’s better off brazening it out all the way to the election. But three weeks is a long time in politics.

fn1. It’s supposed to be a BOOT apparently, so the capital will have to be amortised over 25 years or so, making 4 per cent a lower bound.

24 thoughts on “The Great Canal

  1. As a RWDB I am very suspicious of Government expenditure. However, as one claiming a tenuous link to C.Y. OConnor through my Great Grand Father I understand that visionary infrastructure projects can often over-come presumed obstacles. Therefore, in assessing the project I am interested in the possibilities of an inland route that could not only supply the SW of the State but supply agriculture and industry in the interior – a blossoming in the desert. There is vast potential and the assumptions used in assessing the project need to be able to take this potential impact into account.

    On a political bent – the Libs have dropped the ball in the making of the announcement.

  2. “he’s unfit to be trusted with a footy club raffle, let alone running a state government.”

    Colin Barnett was once an academic economist, was he not?

  3. Was it Malcolm Fraser who flirted with the idea of damming rivers on the eastern coast to form massive reservoirs? Or Joh Bjelke Petersen? Bruce Davidson, come back, we need you!

  4. According to the BOM, the Kimberley weather gets pretty much all of its rainfall in the summer. So you’ve not only got to catch it, you’ve got to store it. If you’re having an open-air canal, that’s impossible. It looks like evaporation alone would remove all of the water before it reached Port Hedland.

    Now would a pipeline work instead?

  5. Ho Ho Ho! Laugh we did, the polls were not giving it to labour by much at all and they only needed to loose 4 seats. Then we heard the news, old lead-foot Barnett had done it again. I heard a reporter ask him tonigh “When are you gonna resing” interrupting his flow, as it were.

  6. Sweet irony… Before he went into politics, Barnett was the head of the WA Chamber of Commerce! (This was before it amalgamated with the much larger Confederation of WA Industry to form today’s CCIWA.) For non-WA readers, it’s also worth pointing out that the current CCI CEO, John Langoulant, was the State Under-Treasurer from 1995 to 2004, ie he worked for both Liberal and Labor governments. Barnett seems to be doing a good job of alienating the Liberal’s natural support base in the business community.

  7. JQ,

    My understanding is that the canal is covered thus little evaporation.

    colin did in fact get a Masters degree in Economics. An expurgated version of his thesis can be seen on some backdated copy ofthe Economic Record.

  8. The article says that the canals lenght is “3700km” which suggests that it is not going to be exactly straight – the distance from Perth to Sydney is only 3279 km!

    Anyway might that be the reason why the figures dont add up? I think its probably only about 370kms to the kimberlys from Perth.

  9. But that’s just the start of it. Water is heavy. Every kilolitre of water is a tonne of matter that has to be transported nearly 3000km with no assistance from gravity.

    You ignorant Queenslander. Haven’t you ever looked at a map of WA? Perth is almost directly below the Kimberly region. The water will flow downwards like in a water slide! Wheeeeeeeeeee!

  10. Just loved the little cartoon in the oz of barnett looking through the telescope at the moon and saying-I have an idea of how to fix the cheese shortage!

  11. It strikes me that what ever the economics of the situation, the environmental repercussions obviously make this idea simply untenable. Razor might have a great faith in “visionary infrastructure projects” but the fact remains that most of these “visionary infrastructure projects” have been ecological disasters.

    The Kimberley’s ecosystem is dependent on that water. End of story. The mentality that says “There’s heaps of water up there and none down here so let’s just build a canal” reeks of highly dated thinking that continues to lead to the abuse of Australia’s environment. Moreover it it a patch on a problem that won’t go away. Perth needs to find more ways to use water sparingly including gray water, water tanks and native flora instead of massively unsustainable English gardens. I’m shocked that it can even be considered in this day and age.

  12. I look forward to aboriginals being trained to pole the gondolas down the grand canal in those stripy shirts.
    I can already see colin reclining in the back sipping champagne.

  13. Don’t be ridiculous, Marklatham. Everybody knows that they are like Scotsmen – they have to be caught young. There just aren’t currently enough around to train (of either).

  14. Not so much stupid as like the definition of a weed as a flower in the wrong place. I can see some quite energy efficient ways of using most of the waters currently flowing into the Gulf of Carpentaria. That would take even more up front cost and a longer payback time, but would not need much maintenance.

  15. From the WA Water Corporation’s Website, in the context of Perth’s forthcoming Desalination plan

    “…the capital cost of the desalination plant is $346 M with an annual operating cost of $24 M. A Kimberley pipeline would cost $10 Billion to build and would have an annual operating cost of $100 M. Secondly, in energy terms the desalination plant will use far less – 5 kWh per kL; whereas a pipeline would use 15 kWh per kL.”

    Engineer’s report: [pdf]

    The Water Corporation’s most recent
    (it reads to me like the apologia of annoyed and sceptical bureaucrats)

    For anyone who may not know, Lake Argyle in the Kimberley was completed for irrigation development in the early 1970s and it wasn’t long before people realised that elephants don’t get much whiter. Irrigation still does not consume much of the water. Ever since, the idea of piping the water to Perth has been around.

    I would have hoped that the WA Libs would have learned their lesson with pipelines to Perth and take-or-pay contracts after the North-West shelf gas pipeline in the late 70s, where energy consumers bore the cost of the (Sir Charles) Court government’s ambitious cock-up for years.

    Hammy, I agree about the desirability of serious and urgent efforts to pursue water reuse. But with the significant reductions in water supply trends for Perth, I think it would be foolish for a Government to ignore new ($ efficient) water supply options (such as Yarragadee Aquifer).

  16. While we should all be skeptical of politicians and their ‘railways’ at election times, it might be interesting to take an historical look at the economics and the debates surrounding the Snowys at the time. There is always a fair bit of the ‘build it and they will follow’ about these types of projects. In this regard the ABCs past series on the modern man-made wonders of the world, particularly the trials and tribulations of constructing the Panama Canal was enlightening.

    With regards a canal from the Kimberleys, I can recall the experience of my retired father, a surveyor at the time of the standard gauge Trans line upgrade. Surveying out of Kalgoorlie at the time,(circa 1985) they were called out to asses floodwaters building up behind the line around Karoonda/Kitchener way, east of Kalgoorlie. What you have to appreciate was that this water had flowed for some months, all the way from a massive rain depression dumping water behind the Kimberleys. It was following a series of natural watercourses to the Bight but in its way was a natural man-made dam in the form of a railway line albeit with a large bridge/culvert to funnel through. Engineers had not foreseen this volume of water and it tore away the bridge and line for half a kilometre, closing the line for some weeks. The volume of water flowing through the breach astounded all at the time, considering its source. Mother Nature had perhaps shown men how to dream of a Snowy in the West.

  17. John, it would be great if you could analyse the viability of Gallop’s desalination plant in the same way you have done here, along with the environmental and energy considerations.

  18. Why not move Perth to the Kimberleys? Then Perth people could add Queensland-style Southern-State conspiracy theories to their impressive repertoire of Eastern-State conspiracy theories.

    Think of the synergies.

  19. Barnett has lost his marbles. To commit $2bn ++ of taxpayers money to a project without a feasibility study, with no environmental impact assessment (but then given his environmental credentials he would ignore it any way!) and with no idea of whether the technology will work smacks of foolhardy recklessness.

    Still he has never had any sensible economic ideas given that he believes (like most opposition politicians of ANY persuasion) that it is possible to simultaneously reduce taxes, increase spending and increase the size of the budget surplus.

  20. lets start thinking of where we live here in Perth and change now all our methods of living in this dry environment. desalination is a great idea (albeit the power issue but it is better than the canal). We get so sucked up in grand old images here in the west. Why not use grey water and plan our environments more carefully instead. Let industry be accountable for its water usage/wastage.
    The canal is corporate/liberal players dreaming up big schemes for the grandiose egos and profits including vested interests in the genetically modified cotton industry.

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