13 Nov 2014

Water infrastructure options paper highlights water security opportunities around Australia

by Nick Thomas

The Water Infrastructure Options Paper identifies 31 projects as having current or potential Commonwealth involvement, and some financing options.

The recently released Commonwealth Government’s Water Infrastructure Options Paper identifies key water infrastructure opportunities throughout regional Australia, with a focus on long-term water security.

Australia's Minister for Agriculture, the Hon Barnaby Joyce MP, released the Paper on 29 October, and then chaired a National Roundtable on Water Infrastructure in Canberra which brought together over 80 Australian water experts.

Purpose of the Paper

The Paper is intended to address an election commitment "to start the detailed planning necessary to build new dams – to secure the nation's water supplies and deliver strong economic benefits for Australia, while protecting the environment". It was prepared in conjunction with the Government's Agricultural Competitiveness Green Paper, and it will inform the development of the Government’s White Papers on Agricultural Competitiveness and on Developing Northern Australia, which are expected to be released in 2015.

The Paper emphasises the potential economic and social benefits which water resources development can provide, at regional and national levels. It refers to raised productivity and economic activity, improvements in drinking water and sanitation, better flood mitigation, and support for "expanding industries such as mining and irrigated infrastructure".

Water management also features in the Government's Agricultural Competitiveness Green Paper. Key issues which the Government has raised in that context include:

  • the role which the Government should have in accelerating the development of water infrastructure projects;
  • opportunities to enhance water use efficiency and water availability via infrastructure projects (noting that this has been a priority of the Government's regional water policy in recent years); and
  • ways of promoting more flexibility in water use and more efficiency in water trading.

Commonwealth-State collaboration

The Paper recognises that water management, and (more specifically) water infrastructure, is primarily a matter for the States and Territories. However, it recognises that the Commonwealth may have a role in particular projects in one or more of the following key areas – supporting future planning, promoting national water management reform, providing or assisting with scientific and economic advice and analysis, efficiently administering national legislation (presumably a reference to the Water Act 2007 and Commonwealth environmental approval laws), and construction funding "in some cases where there is a clear national case for assistance".

While the Paper has been prepared to address opportunities for Commonwealth involvement in water infrastructure, it emphasises the importance of strong State or Territory support for infrastructure projects, and the Paper was prepared in consultation with State and Territory ministers and agencies.

Potential projects

The Paper refers to 63 water infrastructure projects across Australia, and ranks them according to current status and availability of information. Of those, the Paper identifies 31 projects as having current (4) or potential (27) Commonwealth involvement. It appears likely that that these 27 identified "potential" projects are also the most advanced or most significant of the potential projects, although many may not progress to construction for at least several years.

The 27 potential projects, and their rankings, are outlined below.

Financing options

Before the Commonwealth would commit funding, an analysis of feasibility and cost-effectiveness would be needed, and Infrastructure Australia would evaluate that analysis if $100 million or more of Commonwealth funding is proposed.

The Paper comments on several financing models which might be appropriate for a particular water infrastructure project. These include:

  • public-private partnerships (the Paper noes the potential for these for some kinds of projects);
  • concessional loans (the Paper notes that the Government has provided these for other forms of infrastructure, such as roads);
  • debt guarantees (the Paper suggests these are unlikely);
  • demand guarantees (this could be particularly complex for water projects, given the dependence on climatic factors, but the Paper raises the possibility of a "cap and collar" approach);
  • contingent loans (these could be based on income or other measures, though the Paper notes that the applicability of this model to water projects is questionable, again given the dependence on climatic factors);
  • betterment levies (the Paper notes the difficulty of this model, especially in rural areas where water users will likely pay a contribution to the infrastructure cost in their water fees); and
  • debt financing (this is currently the most common form of Commonwealth funding).

Opportunity to comment

Although the Government has not invited comment specifically on the Paper, it has sought comment on the Agricultural Competitiveness Green Paper, which includes the list of 27 projects, by 5.00pm on 12 December.

Water infrastructure projects with potential for Commonwealth involvement

Likely to be sufficiently developed to allow consideration of possible capital investment within the next 12 months

  • Gippsland: Macalister Irrigation District / Southern Pipeline, Victoria
  • Tasmanian Irrigation Tranche II: 5 projects (Southern Highlands, Scottsdale, Circular Head, Swan Valley, North Esk)

Could warrant future consideration of possible capital investment, but less advanced in stage of development

  • Gippsland: Lindenow Valley Water Security Project, Victoria
  • Emu Swamp Dam – Severn River, Stanthorpe, Queensland
  • Nathan Dam, Dawson River, Queensland
  • Wellington Dam Revival Project, Western Australia

Likely to be suitable for further consideration for possible assistance to accelerate feasibility studies, cost benefit analysis or design

  • Apsley Dam – Walcha, New South Wales
  • Lostock Dam enlargement – Hunter Valley, New South Wales
  • Mole River Dam, New South Wales
  • Needles Gap, New South Wales
  • Burdekin Falls Dam (including Water for Bowen), Queensland
  • Connors River Dam – Sarina, Queensland
  • Fitzroy Agricultural Corridor – construction of Rookwood Weir and raising Eden Bann Weir
  • Mitchell River System, Far North Queensland
  • North Queensland Irrigated Agriculture Strategy: Flinders-Gilbert, large scale infrastructure proposals (eg. IFED) and on-farm developments
  • Nullinga Dam – Cairns, Queensland
  • Urannah Dam – Collinsville, Queensland
  • Ord Irrigation Stage III (water infrastructure components), Northern Territory and Western Australia
  • Pilbara and/or Kimberley irrigated water pipeline system, Western Australia
  • Expanded Horticulture Production on the Northern Adelaide Plains – Waste Water Re-use, South Australia
  • Intensive Livestock and Horticulture Expansion – Northern Dams Upgrade – Clare Valley, South Australia
  • Exploring off-stream storage opportunities to increase water availability for agricultural development, Northern Territory
  • Upper Adelaide River Dam / off stream storage, Northern Territory

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.