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Part 2: Deliver water efficiently and equitably for domestic consumption, sustainable economic use and environmental benefit

Strategy 2.2
Support development of open, barrier-free markets for interstate water

Developing and implementing open, barrier-free markets for water trading in the southern connected Murray-Darling Basin, consistent with the National Water Initiative, is a key task under this strategy.

Building upon the success of the MDBC pilot interstate water trading project, which commenced in 1998 (see below), state jurisdictions have been committed to expanding interstate entitlement trade and have spent considerable time and resources in developing the necessary principles to enable trade to be fully realised.

Since 1 July 2006, interstate water trade has been implemented in accordance with Schedule E as follows:

  • allocation trade between New South Wales, Victoria and South Australia, and
  • entitlement exchange rate trade between Victoria and South Australia.

Ministerial Council determined in May 2007 that tagged transfers will commence 1 July 2007 while allowing exchange rate trade to continue.

Tagged transfer protocols were approved by the Commission in April 2007 to enable implementation of tagged entitlement transfers. The protocols included:

  • tagging entitlements for extraction in another state, and
  • adjusting valley accounts and state transfer accounts.

The revised Schedule E to the Murray-Darling Basin Agreement and its supporting protocols provides for expanded interstate water trade with a strong legal basis in which transfers can be consistently implemented across the jurisdictions.

The Commission approved a Schedule E protocol in December 2006, ‘Processing interstate transfers of water allocations (temporary transfers)’, to ensure that interstate temporary transfers were processed in a consistent manner and that state accounts are reconcilable. During 2006–07 the Commission considered and approved amendments to the following Schedule E exchange rate entitlement protocols:

  • calculating Cap adjustments
  • processing interstate exchange rate transfers, and
  • restricting transfers between trading zones.

Interstate entitlement transfers

After operating for eight years, the MDBC pilot project between Nyah in Victoria and the barrages in South Australia ended on 19 May 2006. The pilot project facilitated 312 interstate entitlement transfers totalling 31,865 ML to be processed. Table 10 summarises the volumes of water transferred between the states.

Table 10 Volume of trades by source and destination (in ML)
Origin Destination
  New South Wales pilot South Australia pilot Victoria pilot Total
New South Wales   7,511 345 7,856
South Australia 100 2,074 2,174
Victoria 5,191 16,644 21,835
Total 5,291 24,155 2,419 31,865

During the end of May and June 2006, no interstate entitlement transfers were processed under Schedule E, as the MDBC pilot project ended on 19 May 2006 and the revised Schedule E had not yet commenced implementation. During this period, however, Victoria and South Australia had a bilateral agreement that enabled interstate exchange rate transfers to be processed. Only one transfer was approved under this agreement.

During implementation of the expanded exchange rate entitlement transfers from 1 July 2006, approximately 90 entitlement transfers totalling around 12,986 ML were processed from Victoria to South Australia for the 2006–07 water season.

As required by Schedule E, a new MDBC exchange rate entitlement transfer register commenced operation in March 2007. This interstate trade register operates through the MDBC website, allowing state processing officers to input data on exchange rate entitlement transfers directly.

Interstate allocation transfers

The 2006–07 water season saw the highest-ever volume of interstate allocation transfers from the smallest allocation pool in recent years.

The interstate allocation trade market resulted in water moving into South Australia and Victoria. There was net allocation trade of around 40 GL into South Australia. Victoria was also a net importer of allocations (around 10 GL), with around 50 GL leaving New South Wales. The net movement of 50 GL was the result of total interstate allocation trade in the order of 130 GL (the 2004–05 season saw total interstate trade of around 120 GL, with a net movement of less than 30 GL).

A notable change to the trading pattern was a much lower volume of late season transfers. Recent years have seen significant volumes move from South Australia to New South Wales in the last few months of the season, with lesser volumes moving from Victoria to South Australia (Victoria does not permit late season trade into New South Wales). However, limitations placed on late season interstate transfers, and the prospect of carry-over in South Australia and Victoria, greatly reduced the volume of late season trade.

In contrast to previous seasons, net trade was generally in one direction throughout the year. South Australia, in particular, has tended to be a buyer of allocations early in the water year, and a seller late in the season. Figure 8 compares annual interstate transfers with the end-of-season NSW General Security allocation. This allocation is the most volatile water entitlement of the southern connected Basin and is an indicator of water availability in the region.

Figure 8 Interstate allocation transfer volume versus NSW end-of-season General Security allocation

Figure 8

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