Protecting water users and the environment from uncontrolled growth in domestic and stock water use

Transcription

1 CABINET IN CONFIDENCE ATTACHMENT A Background Report 13 Protecting water users and the environment from uncontrolled growth in domestic and stock water use Northern Region Sustainable Water Strategy

2 Published by the Victorian Government Department of Sustainability and Environment Melbourne, November 2009 The State of Victoria Department of Sustainability and Environment 2009 This publication is copyright. No part may be reproduced by any process except in accordance with the provisions of the Copyright Act Authorised by the Victorian Government, 8 Nicholson Street, East Melbourne. For more information contact the DSE Customer Service Centre Disclaimer This publication may be of assistance to you but the State of Victoria and its wholly appropriate for your particular purposes and therefore disclaims all liability for any error, loss or other consequence which may arise from you relying on any information in this publication. Accessibility If you would like to receive this publication in an accessible format, such as large print or audio, please telephone , (TTY), or customer.service@dse.vic.gov.au This document is also available in PDF format on the Internet at

3 Table of Contents Summary 1 Why are we concerned about domestic and stock use? 1 Recent growth in domestic and stock use and the potential for more 2 National requirements to manage significant interception 4 How much water is reasonable for domestic and stock use? 5 Community views on the need for better management 7 Broad options for better management 8 Evaluating options 9 Recording use 9 Requiring referrals under the Victorian Planning Provisions 11 Introducing a registration system 13 Introducing a comprehensive licensing system 15 The Preferred approach 17 Registering all new or altered domestic and stock dams in high risk areas; 18 Monitoring growth in domestic and stock use; 18 Issuing technical guidelines on calculating the maximum volume of reasonable domestic and stock use to promote the efficient use of water; 18 Reviewing domestic and stock water use policy in light of the draft Basin Plan 19

4 SUMMARY This paper recommends an approach for protecting water users and the environment from uncontrolled growth in domestic and stock water use. That approach rests on: registering all new or altered domestic and stock dams in high risk areas; monitoring growth in domestic and stock use; issuing technical guidelines on calculating the maximum volume of reasonable domestic and stock use to promote the efficient use of water; and reviewing, through an appointed steering committee, Victoria s domestic and stock water use policy in light of relevant recommendations in the draft Murray Darling Basin Plan, which is due for release in mid WHY ARE WE CONCERNED ABOUT DOMESTIC AND STOCK USE? Victoria's urban water corporations supply potable water to customers within their service areas. In northern Victoria, most people outside those service areas receive river quality water from rural water corporations for domestic and stock use. In both these cases domestic and stock water use is embraced within the same entitlement framework as irrigation and water for the environment. Some people however have a statutory right to take water directly from a bore or a waterway. Others make use of a statutory right to harvest rainwater flowing across their property. These statutory rights to water, enshrined in section 8 of the Water Act 1989, lie outside the entitlement framework. They are essentially unregulated, that is: The location where water is taken is not recorded. The volumes taken are not metered. There are no restrictions in times of shortage specifically for domestic and stock dams. The security and reliability of water supplies is not protected from the effects of new entrants into the system. Historically, the volumes involved were considered insignificant relative to the large volumes in waterways and in groundwater systems. However, recent work has highlighted that the volumes are significant in certain areas, and, more importantly, have the potential to grow dramatically and become a greater percentage of total resource use if dry conditions, and low inflows, continue. P1

5 RECENT GROWTH IN DOMESTIC AND STOCK USE AND THE POTENTIAL FOR MORE One of the main reasons for being concerned about growth in domestic and stock water use is the lack of accurate information. How can we manage the resource sustainably if we do not know where or how much of the resource is being used? For groundwater and waterway extractions, rough estimates can be made based on past registrations and the approval of bore construction licences or works licences. Information about the growth in domestic and stock dams is not readily available and is derived from specific case studies, often in areas most concerned about the impact of dams on existing supplies. For example, a study on the impact of manmade water bodies, including farm dams, on the Murray Darling Basin found that the number of farm dams grew by around 0.1 per cent per annum between 1994 to 2005 in the Goulburn, Broken, Ovens and Kiewa catchments 1. The study did not quantify the 1 Murray Darling Basin Commission, Risks to Shared Water Resources, Mapping the growth, location, surface area and age of man made water bodies, including farm dams, in the Murray Darling Basin P2

6 volumes retained in these dams, the impact of these dams on stream flow or the purpose for which the dams were built. However, if we assume that most of the growth was in domestic and stock dams of around 1.5ML in size this could equate to around 100ML a year being captured by new domestic and stock dams. While the volumes are not significant compared to total use in those catchments and the study appears to suggest growth has been moderate, over time the cumulative effect would build and each year water currently valued at around $250,000 is being lost from the resources available for allocation to existing entitlement holders and the environment. Other studies, such as the Campaspe Case Study 2, have looked at the volumes involved rather than tracking growth trends. These have shown that at a local level, domestic and stock dams can capture a significant proportion of run off, particularly under continued dry conditions and low inflows. The Campaspe study found that the impact of farm dams (both licensed and unlicensed) on total water resources is considerable at a local level and the impacts would increase under climate change. The report estimated that existing dams capture 11 per cent of the Campaspe s water resources (assuming long term average water availability). This would increase to 29 per cent under a continuation of recent low inflows, with as much as 77 per cent of run off captured in one sub catchment. Unlicensed dams accounted for up to 90 per cent of the total volume captured (1,435 ML/year compared to 142ML/year in licensed farm dams). The photographs below show growth in domestic and stock dams at a local level. The photos compare part of the Mt Ida sub catchment (within the Campaspe Basin) upstream of Eppalock in 1982 with the same location in This graphic illustration shows how growth in the number of dams significantly increases the amount of water harvested at the expense of downstream water users and flows in creeks and streams. The proliferation of domestic and stock dams is occurring in rural residential areas across the state. Many, many allotments have already been subdivided and are ready to be built upon. Unless we improve the way domestic and stock use is managed, this could further increase the number of domestic and stock dams and bores. These allotments are generally found in the Rural Living Zone, but significant 2 See Background Report 1, Draft Northern Region Sustainable Water Strategy P3

7 numbers are also located in the Farming Zone. For example, around Melbourne s fringe there are currently 53,000 parcels of land without houses where domestic and stock rights could be activated. 3 For Instance, Figure 1 4 below shows a large number of lots that could be developed in the Campaspe Basin. Those parcels bounded in red are eligible for subdivision, while the other parcels have already been subdivided but do not yet appear to have a domestic and stock dam. Figure 1. Land Parcels in Upper Campaspe Subdivisions can occur Land already subdivided (land parcels) Domestic and stock use of groundwater is also increasing. Approximately 60,000 groundwater bores have been constructed in Victoria since the 1970s with more than 16,000 constructed since There is potential for continued as of right growth in groundwater use as parcels of land get developed and in existing urban areas where property owners seek to avoid the impacts of restrictions on their reticulated supplies. NATIONAL REQUIREMENTS TO MANAGE SIGNIFICANT INTERCEPTION 3 From Planning Sustainable Future for Melbourne s Peri urban Region (RMIT, Nov 2008) 4 City of Bendigo Strategic Planning P4

8 An improved understanding and management of domestic and stock use will be required to meet national commitments under the National Water Initiative (NWI) and to adequately recognise and protect domestic and stock water users in the Murray Darling Basin Plan, which is due for completion in mid Clause 57 of the NWI imposes obligations on jurisdictions in relation to interception activities 5 that are assessed as being significant. The NWI requires that by no later than 2011 in water systems that are fully allocated or approaching full allocation: significant interceptions must be recorded (for example, through a licensing system); proposals for interception activities above an agreed threshold size must purchase an entitlement; and a robust compliance monitoring regime must be implemented. In water systems that are not yet fully allocated or approaching full allocation: significant interception activities should be identified and estimates made of likely water use by those activities; a threshold should be set where activities are permitted without an entitlement; and progress towards full allocation regularly monitored and reported publicly. The National Water Commission is working to codify interception activities that should be considered significant for the purposes of assessing jurisdictions compliance with the NWI. At this stage, it is unclear whether domestic and stock use will be classified as significant. Nonetheless, Victoria could potentially be non compliant with the NWI should a decision be made to classify the cumulative effects of domestic and stock use as significant. In any case, Victoria needs to develop its own sense of how to determine what is significant at the local level. For example, the Campaspe study identified the density of dams per square kilometre as one potentially useful measure. The Commonwealth Water Act 2007 requires the Murray Darling Basin Authority to prepare a Basin Plan setting out environmentally sustainable diversion limits, that is, the volume of water that can be taken from Basin water resources (including by interception activities). At this stage, it is unclear how the Basin Plan s sustainable diversion limits will incorporate or account for domestic and stock use. Under the current Murray Darling Basin cap, domestic and stock use is permitted outside the capped arrangements. While the Basin Plan could adopt a similar approach, it may seek to incorporate domestic and stock usage into its sustainable diversion limits. If the Basin Plan were to do this, Victoria water users could be exposed if they did not have a management framework that adequately accounted for domestic and stock use. HOW MUCH WATER IS REASONABLE FOR DOMESTIC AND STOCK USE? The Water Act 1989 defines domestic and stock water use. Importantly that definition specifically excludes use for dairies, piggeries, feed lots, poultry or any other intensive or commercial use. Rather it is defined as meaning use for household purposes; or watering of animals kept as pets; or watering of cattle or other stock; or 5 NWI interception activities include (i) farm dams and bores; (ii) interception and storing of overland flows and (ii) large scale plantation forestry. P5

9 in the case of the curtilage of a house and any outbuilding, watering an area not exceeding 1.2 hectares for fire prevention purposes with water obtained from a spring or soak or water from a dam; or irrigation of a kitchen garden. 6 In 2002, DSE set down some guidelines for calculating domestic and stock water requirements. 7 With regard to household use, it drew on information from the Water Services Association of Australia to set an allowance of 0.2 megalitres per year for household purposes (excluding garden watering). The guidelines also suggested an allowance of 3.0 megalitres per hectare to water kitchen gardens and curtilages. For stock, it suggested an annual allowance per head of 0.03 megalitres for dairy cattle, for beef cattle 0.02 for horses and for sheep. Where domestic and stock water was to be stored in a dam, DSE suggested it was reasonable for landholders to build dams to a size suitable to ensure water availability during a drought. Therefore it set down rule of thumb allowances for reasonable security factors. Where average annual rainfall, are shown in the following table. Average annual rainfall Below 500 mm mm 800 mm 1.5 Greater than 800 mm 1 Dam size security factor To see how these guidelines apply in practice, consider a 40 hectare property zoned for farming. If we assume it has a dwelling, annual rainfall of 450 mm and a carrying capacity of, say, 10 sheep per hectare, then, in practice, under these guidelines, the amount of water that would be deemed reasonable for domestic and stock use would vary according to the source of supply. The figure could be calculated as outlined in the following table. Source of wate surface water from a waterway household allowance (megalitres) groundwater dam stock allowance (megalitres) 1.44 (40 X 10 X ) 1.44 (40 X 10 X ) 1.44 (40 X 10 X ) Kitchen garden allowance (megalitres) 0.3 (3.0 X 0.1) (3.0 X 0.4) (3.0 X 0.1) + curtilage allowance (megalitres) Total allowance (megalitres) 0 (3.0 X 0) = (3.0 X 0) = (3.0 X 1.2) = 5.54 (given a security factor of 2.0, this would allow a dam size of ML) 6 The Act defines "kitchen garden" to mean a garden that is used solely in connection with a dwelling, from which no produce is sold, and is not bigger than: 0.1 hectares if it is irrigated only with surface water; or 0.4 hectares if it is irrigated with groundwater; or 1.2 hectares if it is part of an allotment that was alienated from the Crown before 15 December Notes on Aesthetic Dams, October P6

10 The Campaspe Case Study revisited these guidelines. It recommended they should be modified so that: The kitchen garden allowance would vary with different climatic (rainfall) zones.; The stock allowance would be based on the underlying carrying capacity of the land as measured in dry sheep equivalents; and The security factor for dam size would be based on the mean rainfall since 1997 rather than long term averages. The Campaspe Case Study identified that many dams were bigger than would be deemed reasonable even under these modified guidelines. The ratio of actual dam volumes to reasonable volumes was up 20 times. The fact that actual dam volumes are considerably higher than reasonable volumes would suggest that better consideration and application of reasonable domestic and stock guidelines before dams are constructed could promote more sustainable domestic and stock use in the future. COMMUNITY VIEWS ON THE NEED FOR BETTER MANAGEMENT In 2002, after a wide ranging review of water harvesting and use from catchment dams, the Victorian Government legislated to require all farm dams used for irrigation or commercial purposes to be licensed. The review committee had also considered the need to license domestic and stock dams. While noting increased competition for domestic and stock supplies after four years of drought, the committee concluded that there was a relatively low risk of growth in the number of domestic and stock dams. It also felt that a return to more normal rainfall would see sufficient water available for domestic and stock needs in most catchments. In 2009, after a further seven years of drought, the Draft Northern Region Sustainable Water Strategy was released for public consultation. It posed a number of questions about the future management of domestic and stock water use. Feedback from the community is being used to help formulate the Final Northern Region Sustainable Water Strategy. The questions posed in the Draft Strategy, and feedback received from the community, are summarised in the following tables. Draft Northern Sustainable Water Strategy Questions Domestic and Stock Dams Are management arrangements for dams in rural residential areas adequate? Are the original assumptions used for the farm dams legislation still valid, with regard to domestic and stock water use? Should rural zone planning arrangements be able to limit the number of dams? Should a property size limit be put in place to ensure that small properties (that is, those unlikely to have legitimate domestic and stock needs) cannot build a dam without a licence? Should CMAs have improved powers to limit number of dams in subdivisions? Community Feedback No. No. Most say yes tighter regulation is needed. Yes particularly with regard to life style dams. Potentially. P7

11 Draft Northern Sustainable Water Strategy Questions Groundwater Should all groundwater use including for domestic and stock use be licensed? Should groundwater use for domestic and stock purposes be licensed in priority areas (such as Water Supply Protection Areas)? Should groundwater use for domestic and stock purposes be licensed and metered in areas services by urban reticulated water supplies? Community Feedback Yes, but in some views only small volumes are involved. Most say yes. Most respondents said yes, but beyond this the general feeling was that the focus should be on sustainable use of the resource in all circumstances. Draft Northern Sustainable Water Strategy Proposal Reasonable Domestic and Stock Water Use Community Feedback The Minister for Water will specify criteria for determining the maximum volume of reasonable domestic and stock water use to ensure consistency and fairness in its application. The criteria will be developed in consultation with farmer organisations, CMAs, councils and other stakeholders. Any water use above this maximum will require a licence. There is support for a tighter definition. There were some queries about the nature of the guidelines (e.g. volumes, capacity, extraction etc.) if there is no licensing framework. Because the Draft Northern Sustainable Water Strategy posed general questions rather than putting forward firm proposals, there has been limited public consultation on the options discussed in this paper. Nonetheless, the options have been discussed and developed in consultation with representatives from rural water corporations, CMAs and the Victorian Farmers Federation, DSE and other government agencies. There has been general support for staged reform including measures to improve the management of domestic and stock water. There was also a general desire for further consultation, either through the other sustainable water strategies or some other process before significant reforms were introduced. BROAD OPTIONS FOR BETTER MANAGEMENT There are four broad options (with some variations on themes) for improving the management of domestic and stock water use. They range from light handed recording of use through to integration into a comprehensive licensing regime covering all water use. The options are: 1. Recording use 2. Requiring referrals under the Victorian Planning Provisions a. Referral for advice on resource availability b. Referral for approval P8

12 3. Introducing a registration system a. Registration of new use (with potential voluntary registration of existing use) b. Registration of new and existing use 4. Introducing a comprehensive licensing system a. License new use (either all use statewide, or only in intensive management areas) b. License all new and existing use (either all use statewide, or only in intensive management areas) EVALUATING OPTIONS Any change to the existing system must pass a few simple tests: 1. Does it recognise and protect existing water users? 2. Is it easily understood and straightforward to administer? 3. Does it account for and encourage the efficient and sustainable use of available resources, including helping to reallocate water between different users and different uses? 4. Do the benefits of the new system outweigh its costs? This section of the paper discusses each of the options in light of those tests. RECORDING USE The recording and tracking of domestic and stock use over time could be done using a combination of existing or new methods including: 1. The Minister for Water could require use to be recorded in accordance with section 8(2) of the Water Act 1989, which states if required to do so by the regulations, a person taking water under subsection (1) must give the Minister, in accordance with the regulations, written notice of the amount taken. 2. Satellite or photographic imagery could be used to record and track growth in domestic and stock dams over time. 3. Low cost self assessment procedures could be developed backed up by random audits or targeted audits based on satellite imagery showing, say, green lawns in February. Conceptually the recording of use is easily understood but it would not necessarily be easy to administer. The first administrative issue is who would administer it? Water corporations do not generate revenue from the users of section 8 private rights. Therefore, unless it was a community service obligation, paid for by government, water corporations would have no incentive to administer a recording system. Of the methods noted above: P9

13 The first method would be cost prohibitive because it would most likely require meters to be installed to determine the amount taken. There is an estimated 310,000 domestic and stock dams and 80,000 domestic and stock groundwater bores across the State. Less is known about domestic and stock waterway diversions but there could also be in the order of 80,000. With lifecycle metering costs of up to $3,000 per meter, a requirement to meter all existing users would be extremely expensive. Even metering new use only would be hard to justify if water was available because: o o There are ongoing administrative costs associated with meter reading or collating data collected from meters and as noted above, without some form of licence fee there would be no ongoing revenue stream to cover those administrative costs The dam size or bore size provides a degree of self regulation in the absence of meters Even if metering was not required and data came from estimates of water used, the administrative cost to ask and track around users would be high. The second method, which is discussed below, has promise and could be a useful tool for improving our understanding and management of domestic and stock dams, but has limited application for groundwater and waterway extractions and may be expensive to do on a statewide basis The effectiveness of the third method would depend on what incentives or sanctions might be applied to encourage self assessment and enforcement could be costly and an administrative challenge. The Campaspe study discussed earlier assessed the feasibility of using aerial photographs to identify domestic and stock dams. It found that a manual method of interpreting aerial photographs to find domestic and stock dams was efficient and accurate. This information could be readily linked with property data from local government bodies, and other water authority data bases for licensed farm dams, surface water diversions, groundwater licences and urban water. The report and the proposed methodology show that there is a reasonable method for recording and tracking domestic and stock dams over time. The cost of this method is relatively low on a subcatchment level but may be prohibitive on a State wide basis. A key issue to consider would be who should fund the cost of recording and tracking use existing and/or new water users, governments or some combination of users and governments? While a reasonable method exists for tracking existing and new domestic and stock dams, recording and estimating the volumes of existing groundwater extractions and waterway diversions is likely to be more problematic. There is some experience of undertaking assessments at a local level but some form of selfassessment or survey may need to be developed. However, without appropriate incentives to comply or strong sanctions for non compliance, it is unlikely to be effective and further consideration would need to be given to the purpose for which the information was being collected. In general, the main benefit of recording and tracking use over time is that it would start to improve the accounting information about total water use and the relative impact of domestic and stock use. However, it would only provide retrospective analysis; it would provide limited opportunity to promote the efficient use of available resources. P10

14 The table below assesses the option of recording use against the simple tests discussed above. Key Test Domestic and Stock Dams Groundwater or Waterway Extractions Does it recognise and protect existing water users? Is it easily understood and straightforward to administer? Does it account for and encourage the efficient use of available resources? Do the benefits of the new system outweigh its costs? Yes recording may provide some protection Yes need to consider who funds administration Yes for accounting. No for promoting efficiency. Potentially if can inform decisions to allow new use No Can record new use but existing use problematic Yes for new. Unclear for existing. Partly for accounting. No for promoting efficiency. Potentially if can inform decisions to allow new use REQUIRING REFERRALS UNDER THE VICTORIAN PLANNING PROVISIONS At face value, one aspect of domestic and stock water use the statutory right to harvest rainwater flowing across a property lends itself to control under the Victoria Planning Provisions (VPPs). The construction of a dam is defined as works under the Planning and Environment Act 1987, and clauses within the Rural Zones (i.e Rural Living Zone and Farming Zone) and the Environment and Land Management overlays require a planning permit for works. However, there are no specific policy guidelines (along the lines of those developed for native vegetation), that assists decision makers in applying criteria when considering such applications. (See the attachment, Options for the development of Farm Dams under the Victoria Planning Provisions, Project Planning & Development Pty Ltd, 2009.) Some councils already require a permit to construct a dam. However, the approach is not consistently applied across the State; only some councils refer permit applications to water corporations or catchment management authorities and even where permits are required, this has not provided useful data. Very clear directions would need to be given to ensure the approach is applied consistently across all municipalities. In principle, local governments and referral authorities (the local water corporation or the local catchment management authority) could refuse an application for a permit on environmental grounds, based on the existing information available in the Decision Guidelines and the planning scheme. However the council would need to demonstrate that their decision to refuse a permit was based on sound reasons, supported by the best available science. Any referral authority that refused an application that were to become subject to review by VCAT 8, the referral authority will be joined as a party to that review. The need for strong evidence to support a decision to refuse a permit is consistent with advice sought by the Department of Sustainability and Environment on the options available for managing farm dams 8 The Victorian Civil and Administrative Tribunal P11

15 under the Planning and Environment Act The main finding of the report 9 was that permit approval arrangements for works could be used to control domestic and stock dams but research would be required to provide the relevant referral authority with the information that would definitively support either approval or refusal on the grounds that it would have an adverse impact on water yields. This approach could be supported by more specific criteria for councils to use when exercising their discretion, which could be incorporated into the planning scheme. It is possible that the information contained in the Northern Region Sustainable Water Strategy, along with any specific research that identifies stressed and at risk catchments would be sufficient grounds to refuse an application. While this approach might work for councils with strong evidence to demonstrate that the construction of any new dams would cause major risks to the environment and existing water supplies, it would not ensure consistent water resource management across the State. Furthermore, collecting sufficient evidence and defending permit decisions could be a costly exercise. In the short term, this option might be good for those councils with major concerns about the impact of domestic and stock use, strong evidence of the impact of continued uncontrolled growth and strong support from water corporations and CMAs for action. This option would not entirely solve the problem without also providing water corporations with clear directions on how they should consider and process any referral. Another issue is that this option is not consistent with the approach adopted for commercial farm dams, which sought to reduce the regulatory burden and avoid duplication by regulating commercial farms dams through one agency (i.e. the relevant water corporation). Duplication at the permit approval stage should be avoided, but a complementary approach between planning provisions and the Water Act 1989 may be appropriate at earlier stages in the planning cycle (e.g. new developments and subdivisions). In addition, any possible controls on subdivisions might have limited effect given that as noted above, there are thousands of land parcels where new dwellings would readily be approved without the need for subdivision. The table below assesses the option of using the planning arrangements. Key Test Domestic and Stock Dams Groundwater or Waterway Extractions Does it recognise and protect existing water users? Is it easily understood and straightforward to administer? Does it account for and encourage the efficient use of available resources? Do the benefits of the new system outweigh its costs? Yes stops new use in hot spot areas Yes No Potentially if stopping use in stressed catchments No not applicable for these sources. No not applicable for these sources. No not applicable for these sources. No not applicable for these sources. 9 Options for the development of Farm Dams under the Victoria Planning Provisions, Project Planning & Development Pty Ltd, March 2009 P12

16 INTRODUCING A REGISTRATION SYSTEM Registering domestic and stock use would improve water accounting. By ensuring that new users comply with guidelines on reasonable volumes for domestic and stock water use, it would also promote sustainable use of the resource. Under this option, the statutory right would remain unchanged, but new users would need to register before construction of a new dam, pump or bore. Registration could be required for all new use, with the option of registering existing use in certain declared areas or on a voluntary basis. Only the registration of all uses, existing and new, is likely to improve significantly the accounting for water use. Experiences with the registration of farm dams for commercial purposes demonstrate that this option is administratively workable. In that sense, it is easily understood and relatively straightforward to administer. On the other hand, experience also suggests that voluntary registration of existing rights is unlikely to be widely adopted. People are generally reluctant to enter voluntarily into any regulatory regime. The major benefits of registration are: It would protect existing and new water users by ensuring use is recorded and is reasonable. It would enable information sharing between water corporations and prospective users before a dam or bore is constructed including advice on reasonable domestic and stock use based on published Guidelines for Reasonable Domestic and Stock Use. It flags that there could be a need for more intensive management in the future highlighting the finite nature of the resource and the fact that, if more intensive management is required in the future, registrations could be converted into licences, and ongoing licence fees could apply. The cost of registration could vary considerably depending on the extent to which existing domestic and stock use is registered. As noted above, the number of domestic and stock water use sites could be in the order of 470,000 (310,000 dams; 80,000 bores; and 80,000 waterway diversions). This is an order of magnitude greater than the existing 50 60,000 entitlements currently recorded in the water register. The cost of registering all existing users is likely to be prohibitive and realistically, it would take a minimum of 2 3 years to formally register everyone currently exercising rights under section 8. It may be easier to register groundwater extractions given that a significant number of bore construction licences are already registered. Assuming 470,000 statutory rights, even individual transaction costs as low as $2 each would result in a total cost in the order of $1 million. At $20 each the total cost rises towards $10 million, and at $200 each it is nearing $100 million. Individual transaction costs of $20 seem optimistic $50 to $100 might be closer to the mark, but is the likely cost proportionate to the benefits? Probably not. Storing information in the register also costs money. Existing entitlements in the register attract an annual fee of $11.45 each. If registrations were to be free of charge for those already exercising rights under section 8, the fixed costs of running the register would need to be met from other sources. The potential costs suggest that it would be preferable to register new use. It may also be appropriate to P13

17 target registration of new use to highest risk areas. Complementary measures to record and track use would need to be pursued. The challenge is to manage the risk unsustainable growth in domestic and stock water use where required, without imposing significant costs or preventing regional growth in areas where the resource is not stressed. One way of doing this would be to improve our understanding and management of domestic and stock use by registering new use in high risk areas and monitoring growth in domestic and stock use over time. In effect all new domestic and stock groundwater extractions and most waterway diversions are already registered through the process of requiring a section 67 licence works licence for bore construction and works on waterways. These licences ensure minimum construction standards and also provide information about the nature and location of the works and provide an opportunity for information to be shared between prospective users and the water corporation before a bore or pump is constructed. Based on public feedback on the Draft Strategy and evidence from the Campaspe Basin case studies, the community would likely be accepting of requirements for all new stock and domestic dams in rural residential lifestyle areas to be registered. Most stakeholders agreed that these areas pose the greatest risk unsustainable proliferation of domestic and stock dams within the landscape. Registrations could be administered consistent with the current approach to groundwater extractions, and works on waterways, for domestic and stock use. That is, property owners in rural residential areas could be required to register before building or altering a stock and domestic dam. This would: provide an accurate record of the location and nature of new domestic and stock use on rural residential properties; ensure dams do not exceed the capacity required to meet the definition of reasonable domestic and stock needs and meet all construction standards; improve information sharing between prospective users and the water corporation before a dam or bore is constructed, including advice on alternative supplies; and Requiring a section 67 construction licence would help to register the location of dams and improve our understanding of new domestic and stock use; it would also help to ensure that individuals maintained the right of access to reasonable stock and domestic use under the Water Act The table below assesses the option of using a registration scheme to manage domestic and stock use. Key Test Domestic and Stock Dams Groundwater or Waterway Extractions Does it recognise and protect existing water users? Is it easily understood and straightforward to administer? Does it account for and encourage the efficient use of available resources? Yes existing use is recognised Yes Yes if consistent with domestic and stock guidelines and future intensive management Yes existing use is recognised Yes Yes if consistent with domestic and stock guidelines and future intensive management P14

18 Do the benefits of the new system outweigh its costs? Yes if targeted to keep costs at minimum Yes if targeted to keep costs at minimum INTRODUCING A COMPREHENSIVE LICENSING SYSTEM A comprehensive licensing system would involve removing the statutory rights to water under section 8 and converting it into a right under a section 51 licence. The amount of water would be quantified with domestic and stock use converted into a volumetric amount. The licensed right would be subject to conditions and ongoing fees and charges would apply. The two variations on this option are: 1. License new use (either all use statewide, or only in intensive management areas). 2. License all new and existing use (either all use statewide, or only in intensive management areas). The major benefits of licensing are that it would: Ensure a high level of protection for existing water users and the environment. The licensing arrangements would provide scope to cap usage in fully allocated or stressed water systems. Allow water to be reallocated between different users and different uses through a cap and trade approach. Enhance the value of the rights. A transferable licence, issued free of charge to existing users would allow the holders to benefit from trade. Balanced against this, however, the move to a licensing system would cap their entitlement to a specific volume and would subject them to rosters and restrictions in the event of shortages. Improve water accounting, significantly. Help to cover the cost of managing water resources through licence fees. Harmonise the administration of all water entitlements within Victoria s entitlement framework. Those arrangements are easily understood and they are administratively efficient. Like registration, the cost licensing would vary depending on whether all use, new and existing, was licensed or only new use was licensed. It would also depend on the extent to which it was applied; it would cost more to apply it statewide than to apply it only in declared areas. Overall, the costs of licensing are likely to be higher than the costs of registration since the conversion into volumetric rights would require additional verification. While application fees and ongoing licence fees could recover some of the costs, there is considerable potential for a funding shortfall if existing users were to be given their initial licence free of charge. For some water systems, one cost consideration is the extent to which further work would be be required to understand the sustainability of the resource. Where there is limited knowledge about the resource, but there is evidence of significant recent growth in domestic and stock use, licensing only new users may not provide sufficient revenue to fund the work necessary to manage the water system P15

19 adequately. For example, around suburban Melbourne, where there has been considerable growth in domestic and stock bores, licensing new and existing users would be justifiable to help improve our knowledge of the resource and to help ensure that current and future use is sustainable. It would be possible to phase the implementation of a licensing scheme, if the judgement was that this would reduce transaction costs. For example: Licensing could be confined to new domestic and stock water use. Existing users could then choose to move from a registration system (either voluntary or compulsory) in order to benefit from trade; or All new uses could be licensed, and, in those areas where more active management was thought necessary, all existing use would be licensed as well. A registration system would apply everywhere else. The main judgment here revolves around whether costs would be increased or decreased through phased implementation. On balance, community acceptance would likely be higher with phased introduction. And the transaction costs associated with administration would also be less lumpy. Even so, implementation would be a daunting administrative challenge. If new licences for domestic and stock water on stressed water systems were to be subjected to cap and trade rules, new users would face establishment costs; they would need to buy entitlements from existing users. And in some areas, trading rules would limit the areas from which they could buy. For example they might only be able to buy entitlements from upstream in the catchment or only from within a specific sub catchment. One possible alternative to licensing domestic and stock use would be to explicitly require licences for dams built for aesthetic purposes. In effect, this would provide people with an incentive to be able to demonstrate that their domestic and stock dam was no bigger than necessary to cover reasonable domestic and stock use. The table below assesses the option of using a licensing scheme to manage domestic and stock use. Box: 1: What s the difference between licensing and registering rights? Licensing Statutory right removed and converted into a right under a licence Amount of water quantified with domestic and stock use converted into a volumetric amount Right subject to licence conditions Ongoing fees and charges apply Provides data on amount able to be taken Registration Statutory right unchanged but conditional upon registration Otherwise unconditional May be one off registration fee but no ongoing fees and charges Allows data to be collected about location and nature of rights but not amount able to be taken Administratively less onerous than conversion of rights into licences Key Test Domestic and Stock Dams Groundwater or Waterway Extractions P16

20 Does it recognise and protect existing water users? Is it easily understood and straightforward to administer? Does it account for and encourage the efficient use of available resources? Do the benefits of the new system outweigh its costs? Yes Yes Yes Partially yes if targeted. Too costly if statewide. Yes Yes Yes Partially yes if targeted. Too costly if statewide. The imperative for the Murray Darling Basin Authority to develop a Basin Plan by 2011 adds some uncertainty to the course of action with regard to domestic and stock rights. Ideally, all state s should be treated equally in this process. It would be a disappointing if Victoria licensed domestic and stock use to protect the environment and existing users only to discover that the Basin Plan allowed continued uncontrolled growth in domestic and stock use in other states. Box 2: How is D & S use managed in other states? Queensland: Riparian rights & farm dams comparable statutory rights which cannot be diminished by a moratorium or water resource plan. Groundwater extractions of artesian water require grant of an entitlement and sub artesian water can be subject to management plans. ACT: Riparian rights & farm dams comparable statutory rights. Groundwater all extractions require grant of an entitlement. New South Wales: Riparian rights comparable statutory rights. Farm dams stautory rights conferred on occupiers of land to construct and use a dam in accordance with a harvestable rights order. Such orders provide that any dam that captures less than 10 per cent of average regional runoff does not require a licence. Groundwater all extractions require grant of an entitlement. South Australia: Riparian rights & farm dams comparable rights to take water for stock and domestic purposes, however those rights may be subject to prescribing the particular waterway or groundwater area prescribed areas will require farm dams over a certain size to be licensed. Groundwater right to extract subject to prescribed area. THE PREFERRED APPROACH This paper demonstrates that people s statutory rights to take water for domestic and stock water use lie outside Victoria s water entitlement framework. It also illustrates that in many catchments the proliferation of these rights, coupled with the tendency for dams to store more water than is reasonable to service those rights, is leading to environmental stress. It is also eroding the rights of other downstream water users. P17

21 The current situation is not sustainable. But the transaction costs involved in going to a fully harmonised entitlement system are likely to be somewhere in the order of $10 million to $100 million. Moreover, community understanding of this issue, and community appreciation of its seriousness, are only just starting to build. Victoria has a proud history of building consensus around water reforms. While acceptance of the need for change has often been grudging, and while there has often been heated debate about which of the possible options was to be preferred, none of the implemented reforms has been reversed as a result of community groundswell. The options for reform explored in this paper would benefit from public scrutiny. And they would benefit greatly from more information about the costs and benefits. In that context, this paper recommends an approach for protecting water users and the environment from uncontrolled growth in domestic and stock water use. That approach rests on: registering all new or altered domestic and stock dams in high risk areas; monitoring growth in domestic and stock use; issuing technical guidelines on calculating the maximum volume of reasonable domestic and stock use to promote the efficient use of water; and reviewing, through an appointed steering committee, Victoria s domestic and stock water use policy in light of relevant recommendations in the draft Murray Darling Basin Plan, which is due for release in early REGISTERING ALL NEW OR ALTERED DOMESTIC AND STOCK DAMS IN HIGH RISK AREAS; As previously outlined, the immediate challenge is to manage the risk of domestic and stock use where required, without imposing significant costs or preventing regional growth in areas where the resource is not stressed. The minimum change necessary to achieve that is to require the registration of all new, or altered, domestic and stock dams in high risk areas. Such areas must be mapped and published. And the process for registration must be designed to minimise or avoid administrative costs. The declaration of high risk areas must be treated as an opportunity to build community understanding, and appreciation of the issues discussed in the paper. Careful communication and consultation will be required. MONITORING GROWTH IN DOMESTIC AND STOCK USE; Registration will help to improve water accounting in high risk areas, but of itself that will not be enough. The ideas explored in the Campaspe Case Study must be developed further in the interest of monitoring growth in domestic and stock water use. The overall aim must be to understand the threats to water resources, and to identify the thresholds that call for the introduction of registration. ISSUING TECHNICAL GUIDELINES ON CALCULATING THE MAXIMUM VOLUME OF REASONABLE DOMESTIC AND STOCK USE TO PROMOTE THE EFFICIENT USE OF WATER; The registration of domestic and stock water use should be based on climatic requirements in different parts of Victoria. While security factors should be based on average circumstances, they should be open to variation where justification is provided. The security factor should incorporate an appropriate P18

22 allowance for evaporation and seepage. Nonetheless, in assessing the requirements for a new dam, existing water supplies available to the landholder should be taken into account. Calculations should be made in respect of the volume of water supplied from other dams on the property, from rainwater tanks, from waterways, from bores and from reticulated supply systems. The volumes estimated to be available from other sources should be taken into account in determining whether the dam is of a reasonable size. These guidelines will also support any local governments choosing to regulate the construction of domestic and stock dams through the planning provisions. REVIEWING DOMESTIC AND STOCK WATER USE POLICY IN LIGHT OF THE DRAFT BASIN PLAN The Murray Darling Basin Authority is due to release the draft Basin Plan in By that time, the recommendations outlined in the recommendations above should be yielding useful information. It will therefore then be appropriate to review, under the auspices of a steering committee appointed by the Minister, Victoria s domestic and stock water use policies. These policies must make sense in light of the relevant recommendations in the draft Basin Plan. The steering committee would include suitably qualified stakeholder representatives, most likely drawn from pre existing Consultative Committees and Working Groups currently involved with the development of sustainable water strategies across the State. P19