2007 Harry Harris Oration Urological Society of Australia and New Zealand Prof. Mike Young Research Chair, Water Economics & Management The University of Adelaide. Adelaide Convention Centre, 21 st February 2007 Easing the Flow: Thinking about the River Murray like an Urologist

SOME COMMON MYTHS

3 Tonight you will eat a lot of water! 1 cup of lettuce 11 litres 1 slice of white bread 28 litres 1 bottle of wine 360 litres 1 potato 500 litres 8 oz steak 4,660 litres Standard meal: mignon veal, red onion, basil, potatoes with 2 glasses of wine: Approx litres! Plus Rasberry Tart & Walnut Brittle Icecream

4 Water withdrawals per capita Australia United Kingdom New Zealand Iraq (Australia = 135/161 countries)

5 PRICING RECYCLED WATER Great variability – there is no transparency RECYCLED WATER PRICES Northern Adelaide Plains - Virginia 7-15c/kL* Sydney – Rouse Hill 28c/KL (  incr. use) Ipswich Water – Springfield 43c/kL Christies Beach – Southern Vales 53c/kL* SOPA / Newington 83c/kL DRINKING WATER - Sydney Water (bulk) 98c/kL Ride citrus sports water (500mL) $6600/kL * Supplied to reticulator by STP operator without charge

6 The Real Cost of Recycling Ipswich Water Springfield (consultant) $1.45/KL SOPA Olympic Park (operating cost only) (SOPA) $1.60/KL Cost, integrated hydrological system (consultant) $2.50/KL Melbourne Eastern STP (consultant) >$3.00/KL Rouse Hill (Sydney Water) $4 to $7/KL

7 Options - If it stacks up do it Full cost pricing for infrastructure, including externalities. We can’t afford the costs of a grant-based system.

WATER SUPPLY AND THE DROUGHT

9 Australia has a problem Drought and … Evidence suggests a step change in weather patterns and … Science is warning of further adverse change and … The last 50 years have been wet and… This is when we built our cities and built our thirst for water Impose pre 1950s rainfalls on Australia and we have a very serious problem! We may have to get by with a lot less water Sydney, Brisbane, Melbourne, Adelaide, Perth, Toowoomba, Gosford, Goulburn, Bendigo, Ballarat

10 Less rain means much less water!

11

12 Sydney

13 Climate shifts occur 8yrs. 11yrs. A drought, Australia should have expected (not a 1 in 1,000 years event)

14 River Murray Inflows GL

15 River Murray Inflows 2007/8 Worst Scenario By May 2007, all Murray System dams empty 2007/8 inflows => 1,000 GL & South Australia get its 1/3 => 333 GL But SA system evap. + losses => 1,300 GL Balance – 967 GL Add back Wellington Weir + Lake Bonney & triage L. Alexandrina and L. Albert + 1,100 GL Available allocation to cities, vines, etc +133 GL

THE RIVER

17 System Plumbing

18 Storage Land use Water Yield RiverRiver Wetlands Rainfall Ground water Base flow Surface Drainage GW Recharge Water Extraction Irrigation, urban & industrial use $ x x x Water accounting 101 x x

19 Possible reduction in mean annual River Murray flow as a result of incomplete accounting (baseline 1993/94) Unmanaged flow reducing effectNett effect Water use efficiency savings- 723 GL Reduced water yield (Trees and dams)- 600 GL Salinity Interception Schemes-20 GL Increased groundwater use-349 GL Estimated nett reduction in mean river flow and allocations to irrigators -1,692 GL Add back 500 GL ?????

ML Unconfined Aquifer 50 ML Water that returns to the aquifer Extraction 45 ML Actual amount used 5 ML Evapo- transpiration Drainage Gross entitlement = 100 ML Return = 50 ML Recharge Credits for return flows

WATER LICENCES AND TRADING

Robustness Robust (adj.) Said of a system that has demonstrated an ability to recover gracefully from the whole range of exceptional inputs and situations in a given environment.  One step below bulletproof.  Carries the additional connotation of elegance in addition to just careful attention to detail.  Compare smart, oppose brittle. Robust systems  Endure without the need to change their foundations.  They last for centuries.  Inspire confidence.  Produce efficient and politically acceptable outcomes in an ever changing world.

23 Casting the Net Critical Concepts 1862 – Companies Act Limited Liability 1857 – The Torrens Title System ?000 - The Banking System Jan Tinbergen – 1 st Nobel Lauriat in Economics

24 Whereas the inhabitants of South Australia are subjected to loses, heavy costs, and much perplexity, by reason that the laws relating to the transfer and encumbrance of freehold and other interests in land are complex, cumbrous and unsuited to the requirements of the said inhabitants, it is therefore expedient to amend the said Act

25 Periodic Allocations & Trading

26 Allocation Trading Pay ____________________________________________ The sum of ________________________________ ML of 2000/01 Water Water Trading Australia Signature______________________ : Date ____________ ________ML WPay BPay

27 A Robust System Water Tradeable RightsPrice Single Title to Land & Water Land Entitlement Shares in perpetuity Bank-like Allocations Use licences with limits & obligations Channel Capacity Shares Channel Capacity Allocations Salinity Shares Salinity Allocations Solution for C21?

28 Water as an investment

OVER ALLOCATION

30 Source: Goode 2006

31 Annual diversions No plan to cope with climate shifts

32 Over allocation Exists because  Entitlements are defined in volumes and not as shares of available water in a pool  Plans assume that constant technology and land use change  Introduction of trading that activated previously unused water Solutions  Buy back  Pro-rata reduction

33 Illustrative buy back offer form Type of Licence South Australian River Murray Licence Offer conditional upon lease back of water until ….. Offer 1 …………….. not less than $2, per ML Offer 2 …………….. not less than $2, per ML Offer 3 …………….. not less than $2, per ML Offer 4 …………….. not less than $1, per ML Offer 5 …………….. not less than $1, per ML Signatures Licence holder ………………………………………… Registered interest (if any) …………………………..

GOVERNANCE

35 Six Governments in action Victoria NSW Snowy Hydro ACT

36 A way forward Concepts on the table  Commonwealth takeover via referral of powers  Run the system as one ground and surface water  Independent management with strong accountability to community and parliaments  Skill-based members  Minister can direct but only in writing and the gazette A solution? 1.Independent Authority under Commonwealth 2.Environment Trust to hold water 3.Infrastructure manager to keep the system running

37 MDB Authority functions and powers s. 9 The Authority, in the performance of its functions, must  Ensure over-allocation does not recur  Efficient and cost effective management  Maximise economic efficiency in use of MDB water  Ensure accountability  Achieve cost-recovery targets s.10 The Commission must do all things that are necessary or convenient to be done for, or in connection with, the performance of its functions.

38 Thinking like a Urologist A simple way forward  A system that adjusts allocations in harmony with the available supply  A 200GL minimum flow through Mouth  A little for the Coorong every year  SA’s high security entitlements combined with NSW and Victoria’s and Adelaide’s urban water tradeable  Carry over for all water in all States  Binding power referral only when over-allocation solved  A governance arrangement that guarantees that over-allocation does not recur!

The future depends upon us Contact: Prof Mike Young Water Economics and Management Phone: Mobile: