CORRECTED VERSION

OUTER SUBURBAN/INTERFACE SERVICES AND DEVELOPMENT COMMITTEE

Inquiry into sustainable development of agribusiness in outer suburban Melbourne

Melbourne— 16 June 2009

Members

MrN. Elasmar / MrD. Hodgett
MsD. Green
MsR. Buchanan / MrD. Nardella
MrM. Guy / MrG. Seitz
MsC. Hartland / MrK. Smith
Chair: MrG. Seitz
Deputy Chair: MrK. Smith

Staff

Executive Officer: MrS. Coley
Research Officer: MrK. Delaney
Witness
Mr Martin Kent, Chief Executive
Southern Rural Water (sworn).


The CHAIR— I declare open our meeting and welcome everybody to this public hearing. Our procedure is that parliamentary privilege is extended to everybody that makes statements here under oath or affirmation, which falls under the Evidence Act and is protected by the Constitution Act 1975, the Defamation Act 2005 and the Parliamentary Committees Act 2003. In other words, whatever you say here is protected; you can say whatever you like, but if you repeat them outside, you do not have that protection afforded you. In due course you will get a copy of the Hansard transcript of what you have said here.

I ask you to state your full name and your mailing address.

DrKENT— My full name is Martin John Kent and my mailing address is P.O. Box 153, Maffra, 3860. Thank you very much for this opportunity. I am manager director of Southern Rural Water. I would like to explain a little bit about Southern Rural Water and then speak briefly about our experience with the Werribee and Bacchus Marsh irrigation districts.

Southern Rural Water operates the Werribee and Bacchus Marsh irrigation districts in the Werribee basin, the Macalister Irrigation District in Gippsland and seven large dams associated with Gippsland and the Werribee basin, and it runs *groundwater and surface water licensing across the bulk of southern Victoria. In both Werribee and Bacchus Marsh, we maintain and operate the channel and pipeline systems that deliver water from our storages. We set and update allocations of river water for the entitlementholders, principally irrigators. We take and schedule water orders, consistent with water efficiency and customer service objectives. We also manage groundwater use, particularly in Werribee South, but it is functionally separate within the organisation from our irrigation district staff.

With our experience with Werribee and Bacchus Marsh irrigation districts I think we have some insights into operations of agriculture, particularly irrigated agriculture, in the periurban region. As you would be aware, the last decade has seen an unprecedented reduction in inflows in the Werribee Basin. If we look at the period from 1997, we have seen about a 65per cent reduction in average flows. If we look at the period from 2004, inflows in the Upper Lerderderg River, which is part of the Werribee Basin, are at something like 4per cent of their historic values.

From a seasonal allocation perspective the change hit in 2003 when instead of our customary 100per centplus allocation for both Werribee and Bacchus Marsh, we had only 40per cent. In Werribee South particularly the impact of that reduction was exacerbated by rapidly declining groundwater levels, which led us to ban groundwater use. The ban was necessary because it is a shallow aquifer and dropping aquifer levels risk sea water intrusion into the aquifer, which would potentially cause permanent damage to its use.

It was that event that gave rise to the Werribee Irrigation District Recycled Water Scheme, which I am sure you have heard about from other people. We are at present reaching the end of the original fiveyear interim phase of the recycled scheme, but that interim phase is about to be extended for another two years.

I talk of the interim phase because when the scheme was created, it was recognised that the salinity of the recycled water coming out of the western treatment plant was around 1600EC units. That, particularly at that time, was seen to be well above the desirable level, which was pitched at around 1000EC units. Our subsequent experience would suggest that levels higher than 1000EC units are sustainable, particularly in the short term. Interestingly though, the salinity of the recycled water has also grown over that period as inflows to the treatment plant have reduced and the influence has become more concentrated.

Whilst the recycled scheme commenced in 2003–04, we then had two years of greater river water availability, so deliveries of recycled water were relatively small. However, in 2006–07 water availability from the river plummeted and in that year dropped to a 10per cent allocation. The following year we had 8per cent, and this year it is just coming to a close at 5per cent— totally unprecedented allocation figures. With those allocations in Werribee South the recycled scheme has been working effectively to the maximum.

We now start the 2009–10 irrigation year with virtually no river water in store. Faced with these circumstances we have been working with our customers and stakeholders to try to maintain a basic level of production in both irrigation districts, because we remain concerned that any significant interruption to water supply will not only threaten the viability of individual businesses but potentially also the irrigation district.

These irrigation districts are unlike most of the other Victorian water systems which are far larger and have far greater diversity of agriculture within them. Diversity means, particularly for the sort of highvalue irrigators we see in Werribee and Bacchus Marsh, the opportunity to trade water from lower value uses. In Werribee and Bacchus Marsh, that is not the case; there is too little water and the bulk of the irrigation is high value. Trading has not been of assistance there.

What we have done is try to develop a range of contingency arrangements aimed at providing the equivalent of a modest seasonal allocation in Bacchus Marsh and a small supplement for Werribee South and particularly an opportunity to moderate the salinity of the recycled water, particularly in summer. The sorts of things we have been doing are pumping out what is called the ‘dead storage’ in Pykes Creek Reservoir— that is, the storage that would not be accessible under gravity; a range of measures to try to maximise the efficiency of our channels and pipelines; maximising the availability of recycled water in Werribee South— and our partners at Melbourne Water have stepped up and increased the volume slightly.

We have had access to some unallocated water in Lake Merrimu and have transferred some water from the drought reserve for our Macalister customers in the Thomson Dam across to both Werribee and Bacchus Marsh. That came through the Melbourne supply system with the assistance of Melbourne Water, Western Water and City West Water.

The government drought rebate scheme has also assisted financially. That has provided a rebate for, I think, 50per cent of that fixed water charges in systems most recently receiving less than a 30per cent allocation. That is relevant in these areas because those emergency supplies of water come at additional cost, ranging between $525 a megalitre and $688 per megalitre. That is paid in addition to normal water rights.

If you put that together with all the water right charges, I would expect that some of the irrigators are effectively paying over $1000 a megalitre for the water they are actually receiving. Unfortunately with the continuing drought some of those emergency supplies are nearing exhaustion. The outlook for 2009–10 is difficult.

These shortterm contingency plans have really been designed to try to give space for what we call our Western Irrigation Futures Project, which is designed to look at longer term options for both Werribee and Bacchus Marsh. We are looking specifically at waterbased options, not other options, and in doing this within the existing land use planning for both districts.

The key things we are looking at are how we can best source and apply the water that is available, how we can reduce the salinity of the recycled water for Werribee South and where it may be possible to source additional water for Bacchus Marsh. To date we have recently completed eight consultation sessions with customers from both Werribee and Bacchus Marsh. We have run a series of technical workshops and hope to have a first draft of our options paper by the end of this month.

I would like to offer some reflections that we would have against a couple of your terms of reference in the context of Werribee and Bacchus Marsh. I am looking particularly at terms of reference3 and 5. The first reflection is, as you would be aware, agriculture is shaped by many factors. In many respects agriculture has been viewed historically as footloose and relocatable, that it will move to regions where it has available to it the land, the water, the climate, the access that meet the needs of individual businesses, particularly their risk and cost requirements. The expectation is that agriculture will relocate if that mix of variables in one area is no longer suitable. We see many examples across the state where either production is changing on farms or there has been relocation to other areas.

You would be aware that the thrust of water policy in recent times has been linked to that. Perhaps the key measure has been to encourage water markets with the objective of allowing those in agriculture to make their business decisions rather than relying on bureaucrats or others to make decisions for them so that their decision making about water is just one of those business decisions that they would make.

That perhaps has been possible in large systems, as I mentioned before; arguably, it becomes very difficult in small systems. I think the thing that this emphasises too is that agriculture is shaped by multiple factors, not just landuse planning. In some respects landuse planning can protect from intrusion from other land uses, but if the mix of soils, water, climate and the like are not there, land use will not be able to ensure that existing agriculture continues.

If you look at the Werribee and Bacchus Marsh irrigations districts— clearly the lack of suitable water in recent years has dramatically changed the equation for agriculture. Despite the overwhelming other advantages of both districts, particularly in terms of climate, soils and access, without water the mix does not exist to allow viable businesses to continue. Water is clearly critical for both Werribee and Bacchus Marsh and, arguably, for any agriculture, not just the agriculture in its current form but any highvalue agriculture.

That is why we are looking through our Western Irrigation Futures project at options for water of appropriate quality, appropriate volume and appropriate price. If water does not come in, clearly agriculture will cease, and that leaves two questions in my mind— one is economic, which is: would that current agriculture relocate somewhere else? The second question is, I guess, aesthetic, and that asks what land use would replace it in any event, not just looking at what would be permitted under current landuse planning, but what should be there in the longer term?

It is interesting, reflecting on my now 13years with Southern Rural Water, that that uncertainty has played in certainly Werribee South, it may well have played in Bacchus Marsh over that period. Interestingly the uncertainty in the early part of my time with Southern was over land use and urbanisation, particularly urban development, but clearly now we have the uncertainty over water.

Reflecting on term of reference3, I conclude that certainly the planning protects current agricultural land for agriculture. As I suggested before, it cannot guarantee the other requirements of agriculture, particularly water; nor does it necessarily protect it from the interface issues. Both Werribee and Bacchus Marsh have a range of interface issues. In Bacchus Marsh both agriculture and urban; in Werribee South you have some urban development by the coast and also the tourist precinct.

Looking at term of reference5, we know that it is possible to do a range of things to encourage and support agriculture in places like Bacchus Marsh and Werribee, and there is always a lot done with extension marketing and farm rates and those sorts of things. However, water supply is now far more challenging. I would conclude that the current conditions show that the longstanding water resource for both Werribee and Bacchus Marsh— and that is the Werribee Basin— is now unsuited to current agriculture and probably even more unviable if climate change predictions come to pass.

As I mentioned, through Western Irrigation Futures we will be looking at water options for existing Werribee and Bacchus Marsh. I would like to close though by saying that with respect to sustainability, it is a much broader question, and, arguably, for agricultural production one question is: where is it most sustainable or more sustainable for areas like Bacchus Marsh and Werribee? What land use is sustainable? Is agriculture sustainable there, and what do we need to do to assist that?

The CHAIR— Thank you, DrKent. We have a couple of minutes left for any questions from committee members. Don, you are very familiar with this area.

MrNARDELLA— Certainly.

The CHAIR— The committee has visited on a bus trip right through the area, where it was described to us in those terms.

MrHODGETT— Just for my own benefit, DrKent— you talked about the dead storage at Pykes Creek. What sorts of volumes are you talking about?

DrKENT— Mere hundreds of megalitres.

MrHODGETT— It does not require any further works; it is just pumped out and useable——

DrKENT— Yes.

MrNARDELLA— That has all gone now anyway.