By Paul Kildea and George Williams*
This comment was published in the Public Law Review at (2011) 22 PLR 9.
The Water Act 2007 (Cth) is the most extensive Commonwealth intervention into water resource management in Australia since Federation. The Act brought the Murray-Darling Basin1 under Commonwealth management in order to remedy a longstanding over-allocation of water that was having a detrimental environmental impact over the area. The Act provides for the development of a Basin Plan that will impose legal limits on the amount of water that can be taken from the Basin.
The Howard government had hoped that this reform would be supported by a referral of power by affected States to the Commonwealth. However, Victoria refused to sign on and the Water Act was instead based only upon the federal Parliament’s own extensive law-making powers.2 The risks of this approach became apparent in October 2010, when the Murray-Darling Basin Authority (MDBA), a body created by the Water Act, released its Guide to the Proposed Basin Plan.3
The Guide provoked a furious response from local water users concerned that their interests would be ignored or downgraded. It also led to public disagreement between the federal Minister for Sustainability, Environment, Water, Population and Communities, Tony Burke, and the chair of the MDBA, Mike Taylor. This led Taylor to resign.
A key issue in the public debate is whether the MDBA in developing the Guide (and later a Draft Plan and then final Plan) must give environmental considerations precedence over social and economic factors. This involves both the interpretation of the Water Act and ascertaining the permissible scope of that Act in light of its constitutional foundation.
THE WATER ACT
On 25 January 2007, Prime Minister John Howard announced the National Plan for Water Security. The 10-year plan, backed by $10 billion of federal money, encompassed a range of commitments including investing in irrigation infrastructure, addressing over-allocation of water through entitlement purchases, centralising water information and reforming decision-making processes in the Murray-Darling Basin.4 In particular, Howard proposed to reconstitute the Murray-Darling Basin Commission (MDBC) as a Commonwealth government agency reporting to a single minister, and develop a new strategic plan for the Basin that would impose a revised cap on water diversions. Rather than seek to rely on the Commonwealth’s own legislative powers to implement the reforms, he said that the Commonwealth would ask the Basin States5 for a referral of powers under s 51(xxxvii) of the Constitution “to enable it to manage the MDB in the national interest”.6
At a water summit on 23 February 2007, New South Wales, South Australia and Queensland agreed to refer legislative power to the Commonwealth, and the Australian Capital Territory agreed to cooperate fully.7 Victoria, however, held out, with Premier Steve Bracks seeking a bigger share of federal money and arguing that Howard’s proposal rewarded States with poor infrastructure and poor water efficiency.8 Negotiations continued over the next several months, with agreement reached on some matters, such as water pricing and a role for the Australian Competition and Consumer Commission (ACCC) in regulating the water market, but Victoria remaining concerned about the breadth of the referral being sought. When agreement could not be reached, Howard announced on 24 July 2007 that the federal government would introduce legislation based on its existing legislative powers.9 He conceded that, although Commonwealth power was extensive, it was “not as extensive as to give us a close to ideal scheme”.10 It was thus clear from the outset that the failure to achieve a cooperative arrangement would affect the design of the new federal law.
On 8 August 2007, the Water Bill 2007 (Cth) was introduced into Parliament. Its key elements were the establishment of the MDBA, the establishment of Basin-wide planning through a Basin Plan, the creation of a role for the ACCC in regulating water trading and pricing, and the expansion of the Bureau of Meteorology’s functions in relation to water information and standards. Section 9 revealed that the Bill was based on a “hotch-potch”11 of federal constitutional powers, including interstate trade and commerce, corporations, external affairs, and territories powers, as well as powers relating to meteorological observations, statistics and weights and measures.12 The Bill was subject to a whirlwind inquiry and report by the Senate Standing Committee on Environment, Communications, Information Technology and the Arts, and passed without amendment on 16 August 2007. The Act came into effect on 3 March 2008.
Following the election of the Rudd government in November 2007, the new Prime Minister moved to implement his election promise to further address the unfolding environmental crisis in the Murray-Darling Basin. On 3 July 2008, the Basin States signed a new Intergovernmental Agreement on Murray-Darling Basin Reform, which gave effect to a Memorandum of Understanding to which the parties had agreed at a Council of Australian Governments (COAG) meeting in March. Under the Reform Agreement, the Basin States agreed to use their “best endeavours” to pass legislation to provide for a referral of constitutional powers. The purpose of the referral was limited in enabling the Commonwealth to pass particular amendments to the Water Act to:13 transfer the existing powers and functions of the MDBC to the MDBA, thus establishing the MDBA as the sole body responsible for the overarching management of the Basin’s water resources; expand the role of the ACCC so that its regulatory remit extended to irrigation infrastructure operators and related bodies that fall outside the scope of Commonwealth powers; and enable the Basin Plan to provide for critical human water needs. The States introduced referral legislation into their respective Parliaments through the remainder of 2008,14 and on 25 September 2008 the Water (Amendment) Bill 2008 (Cth) was introduced into the House of Representatives. After inquiry before the Senate Standing Committee on Rural and Regional Affairs and Transport, the Bill was passed by Parliament and came into effect on 15 December 2008.
THE BASIN PLAN
On 8 October 2010, the Murray-Darling Basin Authority acted under the Water Act to release for public consultation and discussion its Guide to the Proposed Basin Plan. The most controversial part of the Guide was the Authority’s treatment of sustainable diversion limits – under the Water Act, the Authority is required to set limits on the long-term average volumes of water that can be used for consumptive purposes after the environmental water requirements have been met. The Guide proposed that, in order to meet the requirements of the Water Act, current diversion limits would need to be reduced across the Basin by a range of 3,000 to 4,000 gigalitres a year, or between 22 and 29%.15 Environmentalists welcomed the Guide, while farmers and irrigators argued that such deep cuts would lead to job losses and the decline of rural communities.16 Community anger at the proposed cuts was expressed at a series of public meetings following the release of the Guide.
This anger intensified when the Chair of the MDBA, Mike Taylor, told public meetings that the Water Act was “focused on returning water to the environment”.17 The Chief Executive of the MDBA, Rob Freeman, reiterated this view before a Senate Estimates Committee hearing, saying that “the environmental envelope is the first consideration and then where you land in that envelope is determined by economic and social issues”.18 Under pressure to provide some clarity on the issue, Tony Burke announced that he would seek legal advice from the Australian Government Solicitor (AGS) on “whether the interpretations referred to publicly by the MDBA matched the requirements of the Act”.19 As discussed below, this advice confirmed the general approach taken by the MDBA.
Determining the factors, and their relative weight, to be considered in developing the Basin Plan requires a careful examination of the Act and the underlying constitutional basis of its provisions. The question is a crucial one, and it is especially important that a common approach be adopted by the MDBA and the Minister. While the plan is prepared by the MDBA, it is subject to approval by the Minister;20 the Minister’s approval of the plan is then subject to disallowance by Parliament.21
SOCIAL AND ECONOMIC FACTORS AND THE BASIN PLAN
Section 21 of the Water Act sets out the basis on which the Basin Plan is to be developed. The MDBA and the Minister must take into account social and economic factors. However, s 21(1) of the Water Act states that environmental concerns as reflected in key international conventions have primacy in the making of the Plan:
“The Basin Plan … must be prepared so as to provide for giving effect to relevant international agreements (to the extent to which those agreements are relevant to the use and management of the Basin water resources).”
The term “relevant international agreement” is defined in s 4(1) and includes several environmental treaties, including the Ramsar Convention on Wetlands and the Convention of Biological Diversity. Some of the specific obligations arising under these treaties, such as the conservation of declared Ramsar wetlands in the Basin, are detailed in s 21(2) and (3). The primacy of the international agreements is further reflected in the objects of the Act, as set out in s 3:
“The objects of this Act are:
(a) to enable the Commonwealth, in conjunction with the Basin States, to manage the Basin water resources in the national interest; and
(b) to give effect to relevant international agreements … and
(c) in giving effect to those agreements, to promote the use and management of the Basin water resources in a way that optimises economic, social and environmental outcomes.”
The broad purposes of the Basin Plan as set out in the Act are expressed in similar terms.22 Section 21(4) confirms the relevance of social and economic factors to the Plan, but its opening words (“subject to subsections (1), (2) and (3)”) clarify that these factors must be read against the overarching obligation to give effect to international agreements. The provision states:
“Subject to subsections (1), (2) and (3), the Authority and the Minister must, in exercising their powers and performing their functions under this Division:
(a) take into account the principles of ecologically sustainable development; and
(b) act on the basis of the best available scientific knowledge and socio-economic analysis; and
(c) have regard to the following:
(i) the National Water Initiative;
(ii) the consumptive and other economic uses of Basin water resources;
(v) social, cultural, Indigenous and other public benefit issues.”
Section 22 sets out in more detail some of the matters that must be included in the Basin Plan, including the long-term average sustainable diversion limits for the Basin water resources. The 2008 amendments to the Act also introduced a new requirement in s 86A that, “without limiting section 21”, the Basin Plan must be prepared having regard to “critical human water needs”.
The Water Act affirms the relevance of social and economic considerations while also making clear that they are secondary to the MDBA’s and Minister’s obligation to give effect to the relevant international agreements. This reflects the primary constitutional basis of the Act: that is, the federal Parliament’s power to enact laws with respect to “external affairs” in s 51(xxix) of the Constitution, and in particular the aspect of the power that enables the federal Parliament to pass laws to implement obligations assumed by the federal executive under international treaties and conventions.23
Had the Howard government been able to secure a referral of State power to support the reform, it would have been possible to empower the MDBA and the Minister to give equal priority to environmental, social and economic factors in the development of the Plan. Without such State backing, the federal Parliament had no choice but to draft the Act so as to ensure that the Basin plan implemented the international conventions upon which the validity of the Act depended. As the High Court has made clear on a number of occasions, a law based upon the external affairs power must be “reasonably capable of being considered appropriate and adapted to implementing the treaty”.24 If a law does not pass this test, it will be struck down by the court as being unconstitutional.25
Advice to Minister Burke prepared by AGS was consistent with this construction of the Water Act. It provided that “[t]he overarching objective of the Act and the Plan is to give effect to relevant international agreements”.26 In addition, it found that the terms of the key treaties provide an indirect avenue for the Commonwealth to take into account social and economic factors. This arises from the fact that both the Convention on Biological Diversity and the Ramsar Convention on Wetlands appear to frame their environmental obligations in ways which permit consideration of social and economic factors.
For example, the Convention on Biological Diversity commits members to, as far as possible and as appropriate, “regulate or manage biological resources important for the conservation of biological diversity … with a view to ensuring their conservation and sustainable use”.27 The term “sustainable use” is defined in the Convention to mean “the use of components of biological diversity in a way and at a rate that does not lead to the long-term decline of biological diversity, thereby maintaining its potential to meet the needs and aspirations of present and future generations”.28 As the AGS advice stated, both Conventions “establish a framework in which environmental objectives have primacy but the implementation of environmental objectives allow consideration of social and economic factors”.29
The Water Act, both as to its own terms and when read in light of its constitutional underpinnings, recognises that a Basin Plan must be prepared to give effect to the relevant international conventions. In doing so, social and economic factors must also be taken into account. However, these latter factors cannot be given such weight as would prejudice the faithful implementation of the international environmental conventions upon which the validity of the Act depends.
This suggests a clear legal path for the construction of a Basin Plan. First, the Plan must be prepared to implement the relevant international conventions. Secondly, in doing this, some social and economic factors can be taken into account in the meeting of the core environmental objectives. Thirdly, once the threshold of compliance with the international conventions has been met, social and economic factors may generally be taken into account to the maximum remaining extent possible.
Various attempts have been made to describe the making of the Plan while not recognising the primacy of the international environmental conventions. Some such statements have been unhelpful and misleading. The suggestion that the MDBA can give “equal weighting [to] environment, economy [and] social impacts” is simply incorrect.30 This is not permitted by the Water Act, and indeed to do so could risk the Plan being struck down by the High Court as being developed inconsistently with the terms of the Act. Suggestions that the Plan might “optimise”31 environmental, social and economic factors are closer to the mark, but only so long as they are read against the requirement that the plan comply with the relevant international environmental conventions.
* Paul Kildea: Research Fellow and Director, Federalism Project, Gilbert + Tobin Centre of Public Law, University of New South Wales. George Williams: Anthony Mason Professor and Foundation Director, Gilbert + Tobin Centre of Public Law, Scientia Professor, University of New South Wales; Australian Research Council Laureate Fellow.
1 The Murray-Darling Basin is located in South-Eastern Australia, covering more than one million square kilometres across New South Wales, Victoria, Queensland, South Australia and the Australian Capital Territory. It produces $15 billion of agricultural produce annually, or 39% of Australia’s total agricultural production: Murray-Darling Basin Authority, Guide to the Proposed Basin Plan: Overview (Murray-Darling Basin Authority, 2010) p 13.
2 As detailed further below, the Act was amended in 2008 with the support of a referral. On the constitutional basis of the Act, see generally Carney G and Gardner A, “The Constitutional Framework for Water Resources Management” in Gardner A, Bartlett R and Gray J (eds), Water Resources Law (Lexis Nexis, Chatswood, 2009) p 81; Kildea P and Williams G, “The Constitution and the Management of Water in Australia’s Rivers” (2010) 32 Sydney Law Review 595.
3 Murray-Darling Basin Authority, n 1.
4 Howard J, A National Plan for Water Security (25 January 2007), http://www.nalwt.gov.au/files/national_plan_for_water_security.pdf viewed 4 January 2011.
5 This term is used to include Queensland, New South Wales, Victoria, South Australia and the Australian Capital Territory.
6 Howard, n 4, p 13.
7 Lewis S, “Bracks Under Pressure to Sign”, The Australian (24 February 2007) p 6.
8 Ker P and Grattan M, “Bracks Isolated as Premiers Sign Up for Water Deal”, The Age (24 February 2007) p 4.
9 Howard J, Press Conference (Perth, 24 July 2007).
10 Howard, n 9.
11 Twomey A, “Aspirational Nationalism or Opportunistic Federalism?”, Quadrant (October 2007) p 40.
12 Respectively, ss 51(i), 51(xx), 51(xxix), 122, 51(viii), 51(xi) and 51(xv) of the Constitution.
13 Intergovernmental Agreement on Murray-Darling Basin Reform 2008, s 2.4; Intergovernmental Agreement on Murray-Darling Basin Reform – Referral 2008.
14 See, eg Water (Commonwealth Powers) Act 2008 (NSW).
15 Murray-Darling Basin Authority, n 1, p 110. The average reduction would be 27 to 37% if it were sourced only from watercourse diversions: p xxiii.
16 Franklin M and Karvelas P, “Reality Bites in Murray Plan”, The Australian (9 October 2010) p 1; Akerman P, “Farmers Say Jobs Will Flow Out with Water”, The Australian (9 October 2010) p 7.
17 Quoted in ABC, “Murray-Darling Water Meeting in Deniliquin Overflows with Farmers”, PM (13 October 2010), http://www.abc.net.au/pm/content/2010/s3037494.htm, viewed 4 January 2011.
18 Senate Environment and Communications Legislation Committee, Supplementary Budget Estimates (19 October 2010) p 15.
19 Wilson L and Lloyd G, “Farmer Has Some Water Advice for Ministers”, The Australian (21 October 2010); Burke T, “Murray Darling Basin Reform – Interpretation of the Water Act 2007” (Ministerial Statement, 25 October 2010) p 3, http://www.environment.gov.au/minister/burke/2010/pubs/sp20101025.pdf viewed 4 January 2011.
20 Water Act 2007 (Cth), s 44.
21 Water Act 2007 (Cth), s 33; Legislative Instruments Act 2003 (Cth), s 42.
22 Water Act 2007 (Cth), s 20.
23 See Commonwealth v Tasmania (Tasmanian Dam Case) (1983) 158 CLR 1.
24 Victoria v Commonwealth (Industrial Relations Act Case) (1996) 187 CLR 416 at 486.
25 See, eg Victoria v Commonwealth (Industrial Relations Act Case) (1996) 187 CLR 416 in regard to s 170DE(1) and s 170DE(2) of the Industrial Relations Reform Act 1993 (Cth).
26 Australian Government Solicitor, The Role of Social and Economic Factors in the Basin Plan (25 October 2010) at  (summary) and  (discussion), http://www.environment.gov.au/minister/burke/2010/pubs/social-economic-advice-ags.doc viewed 4 January 2011.
27 Convention on Biological Diversity, Art 8(c).
28 Convention on Biological Diversity, Art 2 (emphasis added).
29 Australian Government Solicitor, n 26 at  (discussion).
30 Burke T, Interview with Matt and Dave, ABC 891 (26 October 2010), http://www.environment.gov.au/minister/burke/2010/pubs/tr20101026.pdf viewed 4 January 2011.
31 Burke T, Interview with David Speers, PM Agenda (25 October 2010), http://www.environment.gov.au/minister/burke/2010/pubs/tr20101025.pdf viewed 4 January 2011; Burke T, n 19, p 4; Burke T, “Murray-Darling Basin Plan” (Address to Meeting of Councils within the Murray-Darling Basin, 22 November 2010), http://www.environment.gov.au/minister/burke/2010/tr20101122.html viewed 4 January 2011.