Posted on 6-1-2003

Water Slips Through Property

SYDNEY, Australia, January 3, 2003 (ENS) - Australian government scientists
are proposing an unprecedented national water trading framework to define
water rights for irrigation. "Water trading and allocation systems contain
serious flaws. It's time for Australia to bring together all existing
licenses into a form that is consistently robust," says Professor Mike
Young of the Commonwealth Scientific Industrial and Research Organization
(CSIRO).

Young and CSIRO Research Fellow Jim McColl have identified a way to
allocate and manage water resources, that is robust enough to expect the
water resources to last for centuries. None of the current systems do this,
they say. "Current systems were not designed for water management in an
environment where periodic drought is the norm, water resources are scarce,
climatic conditions change and pressures on the environment are large,"
says Young. Young and McColl propose a water rights system based on
banking, share trading and Torrens Title registration procedures. This
would allow water to be traded via electronic transfers, with licensed
brokers and clear trading rules.

But the Australian Conservation Foundation (ACF), the country's largest
environmental group, says strengthening property rights and entrenching
rights to compensation for irrigation water would be going too far - it
would diminish community rights to healthy rivers and water resources. The
ACF does not support the expansion of existing private rights to water and
vegetation. "While private rights to land and water resources are already
well defined in our legal system, the rights of the environment remain
poorly defined," the ACF said in a position paper on the property rights
dilemma. "In our view any increase of farmers’ rights to land and water
resources can only come at the expense of the natural environment," the ACF
said.

The system proposed by CSIRO has three components, an entitlement, an
allocation and a use license. Entitlements - the periodic receipt of water
allocations received by farmers - are managed in a system that mimics the
share registry systems used by companies. These shares could be
mortgageable and interests recorded. Entitlements must also specify risks
such that their holders understand precisely what can and what can not be
compensated through the courts. Share systems make it clear that risk is
involved and that circumstances may change. "Allocations need to be managed
separately as a common pool resource. Much like the management of money in
banking system, allocations should be credited to a formal account, similar
to a bank account," says Dr. McColl. "Trades and extractions from the pool
for irrigation, for example, would be debited from these accounts and
people should be able to write water checks and/or trade over the Internet
at very low cost," McColl said. The final component is a use licence - the
right to apply water to land. This is where impacts on the environment,
impacts on neighbors and impacts on downstream water users are managed.

When defining entitlements, land use changes that affect the amount of
water in the river need to be managed, the CSIRO scientists say. An
advantage of the proposed system that separates entitlement, allocation and
use issues is that it can be controlled as climatic, economic and technical
circumstances vary. "It's also important to limit trading opportunities to
the amount of water consumed," says Young. "In many irrigation systems as
much as 50 percent of the water pumped on to the land returns to rivers via
groundwater and drainage. Trading pumping rights without regard to the
amount of water that is returning to the system for use by others and the
environment is eroding current systems," Young said. "Where major changes
are required," the ACF said, "we believe a compact must be struck around
the imperative of healthy rivers on the one hand, and the genuine
socio-economic difficulties faced by irrigators on the other.

While ACF supports structural adjustment funding in some cases, the group
said in its position paper, "we oppose any general requirement to
compensate farmers for changes to environmental policies and regulations."
Irrigation is by far the largest user of water from the River Murray
system. Of the 1.6 million hectares of irrigated land in Australia, 1.2
million hectares are found in the Murray-Darling Basin. The ACF called for
"a new deal to strike a new balance between water use and river health in
Australia," and urged all governments to find "new political will to make
this happen."