Members of an independent committee, set up to recommend how to return water savings to northern Victorian irrigators, have raised concerns about the preferred distribution method.
The Irrigators' Share Consultative Committee has released its recommendation how the 75gigalitres, saved under the first stage of the $2billion Connections project, should be distributed.
The ISCC, headed by former Nationals MP Paul Weller, has recommended irrigators with more than 0.25 delivery shares should receive a mix of 4 megalitres of high reliability and 1.8ML of low-reliability shares.
Irrigators holding less than 0.25 of a delivery share will receive the financial value of the water shares, as a credit against their Goulburn-Murray Water bill.
The committee has proposed distributing 61,000ML of HRWS and 28,000ML of LRWS entitlements, valued at $300 million, when Connections is completed.
Committee members decided on a proposal to make a one-off delivery, as ongoing water allocation-based options were not seen as a viable way of distributing the irrigators' share.
The value of the irrigators share would not be eroded by the setup, or ongoing governance and administration costs, the committee was told.
"Ongoing distribution options significantly increase the administrative and operational complexity, as well as incurring ongoing costs," members were advised.
"Increased complexity and cost must be weighed carefully against any benefits provided to delivery share holders of the GMID."
Disappointing direction
But GMW Central Goulburn Water Services Committee chairman Peter Hacon said he was deeply disappointed the direction that had been "forced" on the committee.
"I have deep concerns it has the potential to have a net negative impact on the GMID," Mr Hacon said,
"If irrigators decide to sell their water and terminate their delivery share, we could see a mass exodus of irrigators, particularly in Zone Seven (Torumbarry)."
He said HRWS in Zone Seven were worth far more than in other areas of the GMID.
A delivery share is an entitlement to have water delivered to land in an irrigation area.
The share is linked to fixed charges, known as the Infrastructure Access Fee (IAF), which covers the cost to access the water delivery network.
The cost of selling an IAF is around $30,000, but Mr Hacon said Torumbarry irrigators would cover that by selling their additional high and low-reliability water shares.
LRWS were regarded as "a valuable product" by G-MW, with a capital value of $13m, across the three zones.
"In Torumbarry, a HRWS is worth about $6500, so four delivery shares would work out at $26,000," Mr Hacon said.
"All you have is a get out of gaol free card, for anyone in Zone Seven."
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He said one of the guiding principles, behind modernisation of the GMID, was ensuring its long term, collective future.
"What (a one-off delivery) does is give short term benefits to individuals, but challenges the long term viability of the GMID," he said.
Reducing the number of delivery shares would increase costs for irrigators, who stayed in the system.
Mr Hacon said a controlled release of the water savings would be preferable.
"If it's done in an uncontrolled fashion, it could be catastrophic,'" he said.
It would have been better to go with an allocation model, tying water to land, which would have attracted investment to the area.
Shepparton Water Services Committee chair Craig Reynolds, who has a cropping business at Congupna, spoke out against the proposal.
He said the one-off distribution owuld only benefit delivery share holders once.
"I do have concerns this one-off distribution will lead to water leaving the GMID," Mr Reynolds said.
"I felt there was support in the committee, for an annual distribution, but legal advice came back to say it wasn't possible.
"History shows irrigators have tended to sell their water then complain."
He said an annual disribution would see delivery share owners get the most benefits from the savings, as they were the ones paying to maintain them.
"But from what I was told the federal government water trading rules stop this," he said.
Paying out access fees would give G-MW a pool of funds to continue maintenance and upgrades.
"A payout does give GMW a pool of funds to do that sort of stuff, it's not all bad, but what we want to see in these communities is a viable irrigation industry," he said.
Viable farms and businesses that supported them meant people would stay in the district, supporting community organisations such as sporting clubs.
"What we what we want to see in these communities is a viable irrigation industry, without the temptation to trade your water," Mr Reynolds said.
"What's good for me now may not be good for the community, in ten years.
"All I could see was what has happened in the past, and what might happen in the future."
Distribution proposals
The committee looked at a once-off, and ongoing, distribution of both water and financial benefits, as well as combinations of the different approaches.
Financial options included the one-off sale of water shares and the ongoing sale of allocations.
The committee believed delivery shareholders would prefer to get water, rather than receiving financial benefits, unless the costs of administering delivery outweighed the value of that water.
Members explored the options of holding shares centrally and distributing water seasonally, through an allocation process.
The committee found that simple and cost-effective ongoing allocation-based models, limited to delivery shareholders, were not possible as they would breach Commonwealth regulations.
They were told the Murray Darling Basin Plan rules stated water trades must be non-discriminatory.
"Preliminary legal advice indicates that any arrangements for restricting the assignment of water allocation from a centrally held entitlement to irrigators within the GMID, by reference to their delivery shares, would be inconsistent with the Basin Plan trading rules," the committee was told.
"There is no mechanism to apply for an exemption to the Basin Plan to make a single allocation against delivery share: the lack of clear pathway and uncertainty of acceptance by the Commonwealth makes it a risky proposition."
Distributing the irrigators' share through increases in entitlement allocations, which would be consistent with Commonwealth regulations, was dismissed by the committee.
It would provide water to all Murray and Goulburn entitlement holders, not just delivery shareholders.
The other option of allocation through an increase to the consumptive pool would also provide water to all entitlement holders.
"Providing a financial benefit requires the sale of allocation with associated administrative processes to be set up to transfer the money to delivery shareholders," committee members were told.
Additional cost
Committee chair Paul Weller said irrigators could already relinquish delivery shares, using the water they already had.
"We looked at ringfencing the 61GL of HRWS, but that would come at a cost to farmers.
"Irrigators could still trade the water they already have, so it would still be leaving the GMID.
"All we would have done is increase the cost to farmers and water would still have left the district."
He agreed some irrigators would sell their additional allocation.
"I think we need to be very careful with delivery shares and we need to manage that," Mr Weller said.
"But I am not looking at putting in a structure that gives farmers a bigger bill."
An allocation model would require setting up a company, a board of governance, staff, and and auditing proceedure.
"You have to have good corporate governance, and that costs money," he said.
"There would be a lot of costs, and every time that company transferred water to irrigators, there would be a transfer fee."
A G-MW spokeswoman said access to the system remained, even if high-reliability water was sold; therefore, the IAF remained payable.
"To decrease delivery share, irrigators can transfer shares to another property in the same irrigation district or terminate all or part of it by paying the termination fee to Goulburn-Murray Water," she said.
"The Victorian Government completed a review of delivery share in northern Victoria in 2018.
"This review found that existing termination fees, capped at ten times the annual IAF were effective at preventing price shocks to other irrigators as people adjusted their delivery share," the spokeswoman said.
GMW was required to use all money collected through termination fees to manage the costs of the system and put downward pressure on prices for remaining irrigators.
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