Trade in Australian Irrigation Water Rights Proposed

SYDNEY, Australia, January 3, 2003 (ENS) - Australian government scientists are proposing an unprecedented national water trading framework to define water rights for irrigation.

"Water trading and allocation systems contain serious flaws. It's time for Australia to bring together all existing licenses into a form that is consistently robust," says Professor Mike Young of the Commonwealth Scientific Industrial and Research Organization (CSIRO).


Irrigation in the Murray-Darling Basin (Photo courtesy Murray River Urban Users Committee (MRUUC) )
Young and CSIRO Research Fellow Jim McColl have identified a way to allocate and manage water resources, that is robust enough to expect the water resources to last for centuries. None of the current systems do this, they say.

"Current systems were not designed for water management in an environment where periodic drought is the norm, water resources are scarce, climatic conditions change and pressures on the environment are large," says Young.

Young and McColl propose a water rights system based on banking, share trading and Torrens Title registration procedures. This would allow water to be traded via electronic transfers, with licensed brokers and clear trading rules.

But the Australian Conservation Foundation (ACF), the country's largest environmental group, says strengthening property rights and entrenching rights to compensation for irrigation water would be going too far - it would diminish community rights to healthy rivers and water resources.

The ACF does not support the expansion of existing private rights to water and vegetation. "While private rights to land and water resources are already well defined in our legal system, the rights of the environment remain poorly defined," the ACF said in a position paper on the property rights dilemma. "In our view any increase of farmersí rights to land and water resources can only come at the expense of the natural environment," the ACF said.

The system proposed by CSIRO has three components, an entitlement, an allocation and a use license. Entitlements - the periodic receipt of water allocations received by farmers - are managed in a system that mimics the share registry systems used by companies.

These shares could be mortgageable and interests recorded.


River Murray winds its way across Australia (Photo courtesy MRUUC)
Entitlements must also specify risks such that their holders understand precisely what can and what can not be compensated through the courts. Share systems make it clear that risk is involved and that circumstances may change.

"Allocations need to be managed separately as a common pool resource. Much like the management of money in banking system, allocations should be credited to a formal account, similar to a bank account," says Dr. McColl.

"Trades and extractions from the pool for irrigation, for example, would be debited from these accounts and people should be able to write water checks and/or trade over the Internet at very low cost," McColl said.

The final component is a use licence - the right to apply water to land. This is where impacts on the environment, impacts on neighbors and impacts on downstream water users are managed.

When defining entitlements, land use changes that affect the amount of water in the river need to be managed, the CSIRO scientists say.

An advantage of the proposed system that separates entitlement, allocation and use issues is that it can be controlled as climatic, economic and technical circumstances vary.

"It's also important to limit trading opportunities to the amount of water consumed," says Young.

"In many irrigation systems as much as 50 percent of the water pumped on to the land returns to rivers via groundwater and drainage. Trading pumping rights without regard to the amount of water that is returning to the system for use by others and the environment is eroding current systems," Young said.


The Ord River diversion dam in Northwest Australia was completed and commercial scale irrigation commenced in 1963. (Photo courtesy Australian Department of the Environment and Heritage)
"Where major changes are required," the ACF said, "we believe a compact must be struck around the imperative of healthy rivers on the one hand, and the genuine socio-economic difficulties faced by irrigators on the other.

While ACF supports structural adjustment funding in some cases, the group said in its position paper, "we oppose any general requirement to compensate farmers for changes to environmental policies and regulations."

Irrigation is by far the largest user of water from the River Murray system. Of the 1.6 million hectares of irrigated land in Australia, 1.2 million hectares are found in the Murray-Darling Basin.

The ACF called for "a new deal to strike a new balance between water use and river health in Australia," and urged all governments to find "new political will to make this happen."

Copies of the Report Robust Separation: A search for a generic framework to simplify registration and trading of interests in natural resources can be downloaded by clicking here.