HOPES for a unified national plan to revive the Murray-Darling river system are in tatters as NSW moves to enact its own set of water trading rules after a long-running dispute with Victoria.
The Rudd Government and NSW were last night finalising a four-year deal that will place limits on how much water is bought back from farmers to restore environmental flows.
The deal will see NSW lift a ban it placed on water buybacks in May out of frustration with Victoria's stance over a controversial water-trading limit.
While the NSW and the Commonwealth hailed the deal as a boost for the environment, green groups claimed it was a step backwards for the river.
Despite national agreements advocating the removal of barriers to water trade, both Victoria and NSW are now operating with state-based trading limits.
Under the deal between NSW and the Commonwealth:
This year's limit of 60 billion litres represents a dramatic reduction in water buybacks: the Commonwealth bought 560 billion litres worth of water entitlement from NSW irrigators within the past two years alone.
The deal has in effect been prompted by a controversial Victorian rule that limits the amount of water that can be traded out of irrigation districts to 4 per cent of that region's water.
The "4 per cent cap" rule has long been unpopular with other states, the Commonwealth and environmentalists because it restricts Victoria's contribution to the buyback process and, therefore, river health.
Earlier this month the Australian Competition and Consumer Commission said the cap was poorly targeted and disadvantaged the farmers it was designed to protect.
NSW placed a temporary embargo on its water trading in May, after repeated efforts to persuade Victoria to fully remove the cap proved fruitless. Victoria has only agreed to phase out the cap by 2014 and allow breaches in certain circumstances.
While yesterday's deal has ensured the embargo is removed, Australian Conservation Foundation spokeswoman Arlene Buchan said it was not the type of progress the foundation had hoped to see.
"The Commonwealth and NSW should have pressured Victoria to remove the 4 per cent cap, not installed another short-sighted barrier," she said. "It's an eye for an eye and everyone ends up blind."
NSW Premier Nathan Rees said the deal provided "certainty and balance for regional NSW communities and water users without compromising our strong commitment to the environment".
NSW Irrigators Council spokesman Andrew Gregson said: "We would have preferred free and open trade, but today's deal is the best that could have been expected.
"We were extremely disappointed that the Victorian Government entrenched their trade barriers and that the Commonwealth agreed to them. The NSW embargo was a response which our State Government had to take - but it had to be a short-term response."
Ricegrowers' Association of Australia President Les Gordon said the trading limits, though not ideal, were an "appropriate short-term outcome".
Victorian Water Minister Tim Holding declined to comment, while acting Prime Minister Julia Gillard said the agreement would enable "continued progress in the purchase of water from willing sellers''.
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