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Treasury kept out of water matters

Maryanne Slattery

The report the New South Wales Parliamentary Inquiry on floodplain harvesting is due to be published next week.

The Inquiry is an example of our democratic institutions and processes at work. It received 289 submissions and heard extensive evidence from both sides of the debate.

It’s unlikely that the committee members will all agree about the findings and recommendations in the final report. That’s to be expected with such a contentious topic.

It’s a shame that such processes aren’t applied to all major works or policies in NSW.

The NSW Treasury is responsible for management of NSW finances, financial analysis and advice and the management of NSW assets. It is the NSW Government’s key advisor on economic and fiscal management.

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Therefore, we expect Treasury to be included in all major water investment decisions, such as the Broken Hill pipeline. In recent Budget Estimates, the Chair of the floodplain harvesting inquiry, Cate Faehrmann, asked Treasury officials if they had approved the $500 million Broken Hill pipeline. They replied:

Treasury did not have a role in approving funding for the Broken Hill Pipeline.

The question probably hadn’t been asked before. Most people would have assumed that Treasury had been given an opportunity to assess the financial prudence of a $500 million project before the money was spent. Apparently not.

Whilst New South Wales taxpayers footed this bill initially, the ratepayers of Broken Hill are ultimately going to have to repay it. And it wasn’t signed off or even checked by Treasury to determine if it was good value for money.

Yes, the pipeline guarantees drinking water to Broken Hill – a function that was previously provided by the Barwon-Darling/Baaka. It also means that northern irrigators are no longer embargoed from extracting water when Menindee Lakes are low.

The draft business case for the pipeline said that the pipeline would:

deliver additional labour surplus through avoided costs of water embargoes on Northern River Irrigators (i.e. loss cotton production) [sic].

So, the pipeline was a financial benefit to northern irrigators and a financial cost to Broken Hill ratepayers, with no Treasury oversight.

But that was 2016. Let’s fast forward to 2021 and see if things have changed.

The NSW Government is in the process of issuing floodplain harvesting licences (hence the Parliamentary Inquiry).

The CEO of New South Wales Irrigators Council recently estimated that these licenses are worth about $1.5 billion. There is a maximum of 604 farms eligible for these licenses, which is roughly $2.5 million of floodplain harvesting licences for each farm – free.

Floodplain harvesting diverts water that would otherwise flow back into rivers and ultimately the Barwon-Darling/Baaka. That is, it denies water for Aboriginal cultural and spiritual needs, downstream communities, drinking water, and the environment. It also has an economic cost to other water uses.

Cate Faehrmann also asked Treasury officials if they had estimated the cost of the proposed floodplain harvesting licences. Their answer? “No.”

So again, upstream enjoys the benefit, downstream pays and Treasury has had no oversight or input into the decision.

But it doesn’t stop there. The Committee heard evidence from Bret Walker SC (who led the South Australian Royal Commission into the Murray-Darling Basin Plan), that the licence volumes being proposed will be unlawful and subject to a future legal challenge.

If the licences are issued now, and if a future legal challenge is successful, the licences will need to be cancelled. It’s claimed that these licences are compensable. If that’s so, the holders of the licences will be entitled to compensation if they are revoked by a future Government.

Cate Faehrmann also asked the Treasurer in budget estimates if he was aware that his Government was on the verge of handing out hundreds of millions, if not billions of dollars of licences that will be compensable. The Treasurer did not know.

So, if the NSW Government has its way, Northern NSW irrigators are again about to receive a windfall, at the expense of everyone and everything downstream.

If that is rectified by a future government, the lucky licence holders may be eligible for hundreds of millions, or billions in compensation. Without any analysis, advice or approval by Treasury.

Maryanne Slattery is the Director of Slattery & Johnson

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