The delicate balance of sharing water

Water trading is about to be introduced into one of the most arid regions in

the world. Combine this with a predicted doubling in demand for water in the

next 20 years and a new State Government policy to ensure that environmental

water needs are given first priority, and the result will be that Western Australia’s

water users are about to recognise how precious this resource really is.

Under new water laws that came into effect earlier this year, Western Australian

water users will be able to buy, sell or lease their licensed water entitlement

in areas where water is scarce. Commission Chief Executive Roger Payne is keen

for WA to avoid the pitfalls that have occurred elsewhere in the country and

worldwide, where speculative trading and resulting overuse of water has led

to environmental degradation. Regulating agencies have then been forced to claw

back water to replenish the depleted environment, and this in turn has sometimes

caused substantial economic and social pain as water users adjust to resource

cuts.

Saleable commodity

Mr Payne sees trading as a way to ensure more efficient use of water between

users, encouraging the migration of water to those activities of higher economic

value, but he is conscious that trading needs to be carefully managed within

a policy framework that protects environmental values.

‘WA is in a very strong position because environmental water provisions cannot

be traded, the environment is looked after first, and there are very few places

where water resources are even marginally over allocated,’ Mr Payne said.

Trading is expected to be welcomed by the business community, who will be able

to get access to the water they need to kick start new ventures currently stalled

in areas where water is already fully allocated up to the sustainable limit.

Existing water users will find their licence has become a saleable item.

So, for example, if a farmer has a water entitlement to irrigate pasture, and

he decides to invest in a more efficient irrigation system, or retire but stay

on the property, the water he saves becomes an asset that he can sell to a prospective

user in his area – a new grape grower for instance.

Another example of how the changes benefit water users could be the case of

a mining company that needs to set up infrastructure to get massive amounts

of water for its site and industrial processes in a remote part of the state.

The ability to sell their water licence when the mine reaches the end of its

life means that the company can recoup costs and is therefore more likely to

conserve and manage the resource carefully.

The Water and Rivers Commission has the ability to refuse a trade negotiation

which may lead to unacceptable impacts on the environment or other users, but

it will not set the price for that trade, relying instead on market forces to

reflect the true value of the water resource.

Where mining and agriculture continue to dominate the economy and together

account for two thirds of water use, there is little doubt that pressure on

water resources will increase dramatically. Thirty per cent of the state’s water

management areas are expected to reach their sustainable use limit in the next

10 years, but unlike other states in Australia only about 18% of the total water

available in WA has been allocated.

Groundwater uneconomic

It is true that Western Australia has many wild northern rivers that carry seasonal

flows of mammoth proportions but damming these may involve unacceptable social,

economic and environmental expense. The state also boasts vast reserves of groundwater

laid down over millions of years, and on the whole uses only a fraction of what

lies hidden beneath its ancient soils.

The problem is that developing most of this groundwater resource is currently

uneconomic – high salt content and remote locations make it unattractive compared

with other smaller water reserves close to centres of human development along

the coast. Without careful management these local sources would be overused

and the environment degraded.

This is where the Commission’s Environmental Water Provisions Policy comes

into play, formally recognising and setting aside water to meet ecological needs

before setting a sustainable limit for social or economic needs.

Extensive water allocation planning is now underway in the Kimberley, Pilbara

and South West regions of WA, where current and potential water users are jostling

for big shares in the resource. The new policy provides an opportunity for the

State Government to get ahead of the game and ensure that important natural

water dependent systems and features are protected in the very long term, regardless

of economic demands. Trading water rights on the open market will help the cause

by encouraging users to increase their water efficiency. And the economy benefits

because the water that is subsequently freed up can be made available for potential

new business ventures.

‘Sharing water in Western Australia is a difficult balancing act and it’s only

going to get more complicated,’ said Payne. ‘But if we get it right first time

it means we can offer some certainty for the State’s future sustainable development.’