Kingfisher Law recently wrote an article for the Irrigation Australia Journal which has been included below and can be found on pages 26-27 of Volume 33, Issue 4 (Summer 2017) of the journal.
Recent allegations of unlawful water diversion in the northern Murray Darling Basin (MDB) have captured public attention and prompted urgent regulatory investigations and reviews. Whatever the longer-run outcome of those inquiries, the immediate impact falls on compliant irrigators, whose confidence in the regulatory system and public water policy development and implementation is put at risk.
The importance of confidence in law and regulation of rights to scarce economic resources cannot be over-estimated. There is no doubt that water will become scarcer in a hotter, drier climate. Where, water is also a key factor of production, as it is in the MDB, pressure on the water rights system and the incidence of non-compliance can only increase when the regulatory system remains impaired.
Confidence in regulatory process crucial
If the regulatory system is unclear, unenforced or susceptible to gaming, erosion of public confidence in policies and laws and the constitutional process by which they are made and applied can act as a perverse incentive. In a weakly administered system, ignoring the rules can become an attractive and potentially lucrative strategy, and taking advantage at the expense of others who do remain strictly compliant becomes a tacitly accepted standard of conduct.
Unfortunately, the more the system is ignored or abused, the more likely it is to be ignored and abused. From a market perspective, loss of confidence in policy and regulation will discourage investment. It will also increase the potential for large operators to emerge and grow, while small operators become less profitable and are forced to leave the industry.
When a critical mass of non-compliance is reached, it becomes almost impossible to enforce rules uniformly, especially where rules have not been policed actively in the past.
One response to this situation is to adopt an approach by which regulators, either expressly or by an adaptive approach to applying rules, retrospectively approve acts which, if policed contemporaneously, would have would have been treated as infringements.
However, there is a clear risk of moral hazard in this strategy, which at root operates to reward rule-breaking and avoidance.
Monitoring the key
Going forward, enforcement needs further development, especially in validating recording of diversions and water take and clarifying the intersections between water resource management and planning law.
The recent allegations refer to taking water by two methods:
Metering is the key technology and regulatory tool for enforcing sustainable diversion limits and is the backbone of providing a fair approach to water management under a predictable, self-adjusting system. The current system was formed when MDB State water resource laws were first amended to implement the MDB Plan. Whether or not the practice has been widespread, meter tampering and inaccurate log book recording have not been reflected in prosecutions, which have remained low.
Nevertheless, it has become apparent that regulators do not have strong control of water meter data or possess capacity to cross-check data with factual observations. The recent ‘4 Corners’ television report’s revelations suggest that not all regulators have pursued actively water metering and reporting by water users.
NSW’s inquiry into its management of shared water under the MDB Plan, which was spurred by those revelations in July, has since produced an interim report recommending systemic fixes with new independent regulators. However, by itself a novel bureaucratic scheme to restore confidence in the government’s water management seems unlikely to achieve much in the short term, particularly given the seniority of individuals involved in the administrative short comings reported by the media.
Instead, what is needed to restore confidence is more reliable empirical evidence of compliance by users. The integrity of water resource management cannot be ensured without accurate metering and reporting.
However, a system which provides self-recording water use in a log book is inherently susceptible to human error, as well as fraud. The accuracy of this kind of system alone will always be in doubt because it relies on human accuracy. Recorded use needs to be backed by factual observation of water use across landscapes and districts. This provides background evidence of water diversion to check landholdings exhibiting signs of disproportionate water use. It also creates a motivational deterrent to rule-breaking.
When water and planning law collide
Of serious concern to all water stakeholders should be the diversion of environmental water, via the construction of vast earthworks under ambiguous planning laws (described as “roads”) that has altered the flow of water across land in the Northern Basin. As well as giving rise to arguable claims of common law nuisance by impacted neighbours, such works are potential recipients of retrospective, but dubious approval. If “roads” that perform a water management function as levees are approved under planning laws and across different jurisdictions, in this case Qld and NSW, this presents a serious loophole for some irrigators to subvert the spirit of water management laws.
The shepherding of large amounts of water (which may include taxpayer-funded environmental water) from a water source, across land and across State jurisdictions, for storage and private use is clearly a grossly unsustainable take of water. If such an irregular take of water is subsequently found to be legal or retrospectively approved through the application of planning laws, it will have a deleterious effect on confidence in the water regulatory system.
Compliant irrigators will in all likelihood bear the immediate costs. Loss of the extensive water volumes characteristic of this practice, which has the potential to continue until planning laws and water regulation are coordinated through reformed legislation, will mean less available water in the MDB. The water that is available for regular irrigators will cost more.
Questionable enforceability of the MDBP
At the same time, calls for the MDB States to recommit to the MDB Plan point up the fundamental weak link in Commonwealth enforcement: the Commonwealth cannot directly enforce compliance with the MDB Plan. As water resources are made under State Constitutions the MDP Plan is merely an agreement under the Council of Australian Governments.
Nevertheless, in light of the practices and issues revealed by the recent media investigations, there is an obvious role for the Commonwealth to prioritise MDB Plan effectiveness through its dealings with the States. Clearly, this must include strengthening national water metering standards and the collection and interpretation of remote sensing data in support of State water licensing and enforcement.
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