National Water Commission
Australian Water Markets Report
7
200 –2008
National Water Commission
Australian Water Markets Report
7
200 –2008
© Commonwealth of Australia 2008 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and enquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney General’s Department, Robert Garran Offices, National Circuit, Barton ACT 2600 or posted at www.ag.gov.au/cca.
ISBN 978-1-921107-70-2
Australian Water Markets Report 2007–2008, December 2008
Published by the National Water Commission 95 Northbourne Avenue Canberra ACT 2600 Tel: 02 6102 6000
Email: [email protected]
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Australian Water Markets Report 2007–2008, NWC, Canberra
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As well as providing an overall summary of the various water markets in operation around Australia, the report includes specific sections on each jurisdiction. Aside from the trading data, the report includes information about terminology, trade processes, governance arrangements and other aspects of Australia’s water markets.
Foreword by the Chair and Chief Executive Officer
Water trading is a centrepiece of national water reform under the National Water Initiative (NWI). The National Water Commission (Commission) has strongly promoted the development of water markets in Australia. In doing so, it has identified the need to improve market performance through the provision of better information.
Therefore, in addition to its role as a statement of activity, the report also stands as an important information resource, describing administrative/trading arrangements in each jurisdiction.
The production of the inaugural National Water Commission
Australian Water Markets Report 2007–2008 (Australian
Water Markets Report) has been a twelve month project, funded through the Raising National Water Standards program. It is anticipated that following the publication of this inaugural report for the 2007–08 water year, further reports will be produced at the end of each successive water year and therefore progressively build an on-going source of market information.
Looking to the future of the Australian Water Markets Report, the Commission has collaborated with the Bureau of Meteorology throughout this project, as the Bureau is expected to commence the collection of water trading data under the Water Act 2007 (Cwth) in 2009. This data will be a foundation for the production of the Australian Water Markets Report 2008–2009. In the 2008–09 water year and future years, the Commission intends to begin trend analysis.
The Commission would welcome feedback on the report.
Production of the Australian Water Markets Report
Ken Matthews AO
Chair and Chief Executive Officer 17 December 2008
Before the production of the Australian Water Markets Report, there was no consolidated, annual, nation-wide report on water trading around Australia. Mindful of the disparate sources of market information required to compile the report, the Commission engaged the Allen Consulting Group to assist with data collection and analysis in this inaugural year of publication. The Bureau of Rural Sciences was also engaged to produce maps for the report.
The Commission acknowledges the assistance of the states and territories for providing water trading information for the Australian Water Markets Report. A number of private organisations also assisted in the provision of market information.
Even so, the collection of trading data and other related water information remains very challenging. The Commission is pleased that new ground has been broken to establish a valuable new data resource for Australia.
Content of the Australian Water Markets Report
The Australian Water Markets Report is a statement of past activity for the 2007–08 water year. It is therefore not intended to be a guide to inform market participants for the future, but rather highlights trends and market activity over the course of an entire water year (and subsequent water years as it is reproduced annually).
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National Water Commission Australian Water Markets Report 2007–2008
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Table of contents
iii xi
1
Foreword Explanatory notes Section 1—Executive summary—market highlights
Introduction Water supply Trading activity Legislative and administrative developments Environmental purchases Market performance issues
- 9
- Section 2—Overview of water markets
Summary Market resources Irrigation infrastructure operators and trading zones Principal mechanisms of trade
- 21
- Section 3—National summary of trading activity
Summary Water access entitlement markets Water allocation markets Estimated market turnover Government environmental water purchasing programs Urban water markets
31 51
Section 4.1—Trading summary—Queensland
Summary Market operation Water supply conditions Queensland water allocation markets Queensland seasonal assignment markets Value of market turnover
Section 4.2—Trading summary—Victoria
Summary Market operation Water supply conditions Victorian water share markets Victorian water allocation markets Value of market turnover
iv
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Table of contents continued
73 85
Section 4.3—Trading summary—South Australia
Summary Market operation Water supply conditions South Australian water licence markets South Australian water allocation markets Value of market turnover
Section 4.4—Trading summary—New South Wales
Summary Market operations Water supply conditions New South Wales water access licence markets New South Wales water allocation markets Value of market turnover
- 105
- Section 4.5—Trading summary—Western Australia
Summary Market operation Water supply conditions Western Australian water licence markets Western Australian water allocation markets
113 119
Section 4.6—Trading summaries—Northern Territory, Australian Capital Territory and Tasmania
Summary Northern Territory Australian Capital Territory Tasmania
Section 5—Market performance
Summary Transaction times for water access entitlement transfers Transaction times for water allocation trades Processing times in each jurisdiction Market depth indicators Other market indicators
127
Appendix A
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National Water Commission Australian Water Markets Report 2007–2008
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List of figures and tables
3456
Figure 1.1: Figure 1.2: Figure 1.3: Figure 1.4:
National rainfall in the 2007–08 water year relative to long-term average Murray-Darling Basin rainfall in the 2007–08 water year relative to long-term average Storage levels for major water systems—Australia (as at 1 July 2008) Water allocation announcements for selected supply schemes in the Murray-Darling Basin during the 2007–08 water year
Figure 1.5: Figure 2.1: Figure 2.2: Figure 3.1: Figure 3.2: Figure 3.3: Figure 3.4: Figure 3.5:
Environmental water purchases in the 2007–08 water year
8
10 16 22 23 24 25 26
Principal water systems where trading is operational Interstate trading zones in the connected Murray-Darling Basin system Water access entitlement trading in each state and territory as a volume share of national total Water access entitlement price differentials across water systems Water allocation trading in each state and territory as a volume share of national total Water allocation price differentials across water systems Net change in water allocation volumes in Murray-Darling Basin trading zones due to interstate water allocation trading
Figure 3.6:
Interstate trade of water allocations
28
29 37 42 43 44 47 48 57 62 63 64 64 67 68 69 70 70 77 79
Figure 3.7:
Commonwealth buy-back program—purchases by water system Water levels in key Queensland storages supplying the market Water allocation trading volumes and prices for Mareeba-Dimbulah supply scheme Water allocation trading volumes and prices for Bundaberg supply scheme Water allocation trading intensity
Figure 4.1.1: Figure 4.1.2: Figure 4.1.3: Figure 4.1.4: Figure 4.1.5: Figure 4.1.6: Figure 4.2.1: Figure 4.2.2: Figure 4.2.3: Figure 4.2.4: Figure 4.2.5: Figure 4.2.6: Figure 4.2.7: Figure 4.2.8: Figure 4.2.9:
Weekly trading volumes of seasonal assignments Seasonal assignments trading intensity Water levels in key Victorian storages supplying the market Water share trading intensity Water share volumes traded and average prices—Northern Victoria Water share volumes traded and averages prices—Greater Goulburn Water share volumes traded and averages prices—Victorian Murray (Barmah to South Australia) Water allocation trading intensity by trading zone Net change in water allocation by trading zone Water allocation trading volumes and prices—Greater Goulburn Water allocation trading volumes and prices—Victorian Murray (Dartmouth to Barmah)
Figure 4.2.10: Water allocation trading volumes and prices—Victorian Murray (Barmah to South Australia)
Figure 4.3.1: Figure 4.3.2:
Water levels in key storages supplying the South Australian market Water licence trading intensity
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List of figures and tables continued
Figure 4.3.3: Figure 4.3.4: Figure 4.3.5: Figure 4.3.6: Figure 4.4.1: Figure 4.4.2: Figure 4.4.3:
Water licence volumes traded and average prices—South Australian River Murray
80 82 83 84 91 97 98
Water allocation trade intensity Prices and volumes of water allocation trade in the South Australian River Murray Prices and volumes of interstate water allocation trades into the South Australian River Murray Water levels in key New South Wales storages supplying the market Water access licence trading intensity Water access licence entitlement prices and volumes traded —New South Wales general security (reliability)
Figure 4.4.4: Figure 4.4.5: Figure 4.4.6: Figure 4.4.7: Figure 4.5.1: Figure 5.1: Figure 5.2: Figure 5.3: Figure 5.4: Figure 5.5:
- Water allocation trading intensity
- 101
102 102 103 110 121 123 123 124 125
Water allocation prices and trade volumes—Murrumbidgee Water allocation prices and trade volumes—New South Wales Murray River Water allocation prices and trade volumes—total New South Wales Water levels in key Western Australian storages supplying the market Approval times for water allocation subdivision, amalgamation and location changes—Queensland Approval times for water licence transfers—South Australia Approval times for water allocation trades—South Australia Processing times for water access licence transfers—New South Wales Approval times for assignment of water allocations—New South Wales
Table i:
Water market information sources Water access entitlements on issue xiv 11 11
Table 2.1: Table 2.2:
Water levels of major surface water storages supplying the Australian water markets —as at 30 June 2008
Table 2.3: Table 2.4: Table 2.5: Table 3.1: Table 3.2: Table 3.3: Table 3.4: Table 3.5: Table 4.1.1: Table 4.1.2: Table 4.1.3:
Irrigation infrastructure operators
15
17 17 22 24 25 27 28 32 33 34
Principal exchanges and methods of operation Water market registers Water access entitlement trading activity Water allocation trading activity Prices for water allocations—by water system Interstate water allocation trades—origin and destination for the 2007–08 water year Estimated market turnover—gross value of water sales ($million) Queensland water trading terminology Water entitlements on issue as at 30 June 2008 Water allocations on issue by resource operation plan area
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List of figures and tables continued
Table 4.1.4: Table 4.1.5: Table 4.1.6: Table 4.1.7: Table 4.1.8: Table 4.1.9: Table 4.1.10: Table 4.1.11: Table 4.1.12: Table 4.2.1: Table 4.2.2: Table 4.2.3: Table 4.2.4: Table 4.2.5: Table 4.2.6: Table 4.2.7: Table 4.2.8: Table 4.2.9: Table 4.2.10: Table 4.2.11: Table 4.2.12: Table 4.2.13: Table 4.2.14: Table 4.2.15: Table 4.2.16: Table 4.2.17: Table 4.2.18: Table 4.3.1: Table 4.3.2: Table 4.3.3: Table 4.3.4: Table 4.3.5: Table 4.3.6:
Supplemented interim water allocations on issue Water entitlement shares by sector
36 37 38 40 41 42 43 45 49 52 54 54 55 57 58 58 59 60 61 61 63 65 66 66 66 69 71 74 75 77 77 78 80
Queensland—water allocation announcements Water allocation transfers by resource operation plan area Water allocation transfers executed with or without a land sale Water allocation prices Water allocation leases Seasonal assignment trades Estimated value of market turnover Victorian water trading terminology Status of unbundling of Victorian water rights and entry on the water register Water entitlements on issue as at 30 June 2008—all Victoria Water entitlements on issue as at 30 June 2008—by water system in northern Victoria Approximate water entitlement shares by sector Victoria—water allocation announcements Water share transfers—northern regulated rivers Bundled water entitlement transfers—southern regulated rivers Change in location of water shares—northern regulated rivers 10% non water use limit Limited term transfers Prices for water shares Water allocation trades—net change in allocation volume by zone Water allocation trades—southern regulated rivers Interstate allocation trades into and out of Victoria—DSE data Interstate allocation trades into and out of Victoria—MDBC data Prices for water allocation trades—regulated rivers Estimated value of market turnover—regulated rivers, northern Victoria South Australian water trading terminology Water licences on issue (taking and holding allocations) Water entitlement shares by sector—River Murray South Australia—River Murray water allocation announcements Water licence transfers Prices for water licences
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List of figures and tables continued
Table 4.3.7: Table 4.3.8: Table 4.3.9: Table 4.3.10: Table 4.4.1: Table 4.4.2: Table 4.4.3: Table 4.4.4: Table 4.4.5: Table 4.4.6: Table 4.4.7: Table 4.4.8: Table 4.4.9: Table 4.4.10: Table 4.4.11: Table 4.4.12: Table 4.4.13: Table 4.4.14: Table 4.5.1: Table 4.5.2: Table 4.5.3: Table 4.5.4: Table 4.5.5: Table 4.5.6: Table 4.5.7: Table 4.6.1: Table 4.6.2: Table 4.6.3: Table 5.1:
Water allocation trades and net change in allocation volumes by region
80
- 81
- Interstate water allocation trades into and out of South Australia—MDBC data
- Water allocation prices
- 83
- Estimated value of market turnover
- 84
New South Wales water trading terminology Water entitlements on issue as at 30 June 2008 Water access licences on issue by water source—as at 30 June 2008 Approximate water entitlement shares by sector New South Wales—water allocation announcements Breakdown of entitlement transfers by type of dealing Water entitlement transfers by valley and water resource Transfer of entitlement out of irrigation districts Term transfers
86 88 88 90 92 94 94 96 96
- Prices for water access licences
- 98
Water allocation assignments—regulated river water sources Interstate water allocation trades into and out of New South Wales—MDBC data Prices for water allocations
99
100 100 103 107 107 110 110 111 111 112 114 116 117 122 125 126
Estimated value of market turnover Water licences on issue as at 30 June 2008 Water licences on issue by region—as at 30 June 2008 Water entitlement shares by sector Groundwater licence transfers Prices for water licence transfers Water allocation trades in Harvey Water irrigation districts Prices for water allocation—surface water Groundwater licences on issue—by aquifer Water entitlement on issue—by water control districts Statutory water dealings—Tasmania Approval times for water allocation trades—Victoria Market depth indicators for each Australian state/territory Market indicators for each Australian state/territory
Table 5.2: Table 5.3:
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Explanatory notes
Reporting period and scope Water market terminology Reporting conventions Information sources Disclaimer xii xii xii xiii xv
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Water market terminology
Explanatory notes
Various terms have been adopted by Australian jurisdictions to describe statutory water rights and dealings. In some cases different terms are used to refer to essentially the same market product or dealing. To avoid confusion, the Australian Water Markets Report generally uses terms that are consistent with those developed by the National Water Initiative (NWI).
The objective of this inaugural Australian Water Markets Report is to inform market participants and other interested parties about the structure of water markets in Australia, by documenting trading products, activity and prices. Therefore considering the varied audience for this report, and the inconsistencies in market structure and terminology around Australia, it is important to note the key terminology and reporting conventions used in the report.
The exception to this is in Section 4 of the report, which contains the trading summaries for each jurisdiction. In that section, trading statistics are reported using the terminology adopted by the particular jurisdiction, with an accompanying table of definitions for each term and how they relate to the NWI terms.
Reporting period and scope
The Australian Water Markets Report reflects the 2007–08 water year, which is the twelve month period from 1 July 2007 to 30 June 2008. In this inaugural year it does not attempt to articulate trends in comparison with previous water years. As the Australian Water Markets Report will be produced in subsequent years, this comparison between years will become available over time.
The principal NWI definitions that are used in this report are: + water access entitlements—‘a perpetual or ongoing entitlement to exclusive access to a share of water from a specified consumptive pool as defined in the relevant
water plan’ and
The report is a statement of past activity for the 2007–08 water year. As it is published after the end of the 2007–08 water year, it is not intended to be a contemporary guide to inform market participants on their day to day water trading decisions. Instead, it highlights trends and market activity over the course of the recent water year—information that is informative not only to direct market participants, but also to regulators, policy makers and other indirect market participants.
+ water allocations—‘the specific volume of water allocated to water access entitlements in a given season, defined according to rules established in the relevant water plan.’
The term ‘entitlement’ is often used as a generic description of different water products, including bundled water rights.
Reporting conventions
A number of conventions have been used in capturing and setting out the market information.
The Australian water market consists of a number of separate markets of varying size, activity and connectivity with each other. There are water resources with tradeable products in each state and territory in Australia. The Murray-Darling Basin (often referred to as the Basin) is also comprised of a number of markets and covers parts of Queensland, New South Wales, the Australian Capital Territory, Victoria and South Australia. Therefore, while a national summary is provided, and trading is possible across large distances in the Basin, this report is structured as a review of a number of distinct markets.
1. Definition of a water trade
For the purpose of this report, a water trade is defined as one of the following transactions:
+ A transfer of water access entitlement from one legal entity
to another, with or without a change in location. This was formally referred to as a ‘permanent’ water trade.
Transfers made as part of a land sale are included in the report as a water trade. Where possible, these transactions have been identified separately to those transfers made independently of a land sale.
The focus of the report is on the market institution. Therefore, it does not contain statistics on volumes of water used by various sectors, the efficiency of water use or the economic value of different water uses.
• Transfer of ownership between related parties, often involving zero consideration, are included in the trade data and are not reported separately due to the incapacity of existing water registers to single these trades out. (The incidence of a zero price could be for a number of reasons other than trade between related parties.)
This inaugural report focuses on surface water as the water source for trading activity. Groundwater trading also occurs in certain areas of Australia and this is reflected in the Australian Water Markets Report. There may potentially be other man-made water sources that become part of Australia’s water markets in future years.
• Transfers accompanied by a change in location from one water source, delivery system or trading zone to
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3. Price information
another are included in the report and, where possible, are identified separately to ‘internal transfers’ made within a trading zone or water source.
The availability and quality of price information for water access entitlements and water allocation assignments is of variable quality, depending on the depth of market. Prices for water access entitlements are generally of poor quality due to the comparatively small volume of trade of this product (relative to allocation trades) and the fact that most jurisdictions do not have a statutory requirement for buyers and sellers to disclose price.
• Dealings that vary the location of a water access entitlement, without an accompanying transfer of ownership, are not included in the report.