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Economic Costs of Inaction on Paradise Dam

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Economic Costs of Inaction on Paradise Dam February 2020 Economic Costs of Inaction on Paradise Dam Report prepared for Bundaberg Regional Council, Wide Bay Burnett Regional Organisation of Councils, Regional Development Australia Wide Bay Burnett, Bundaberg CANEGROWERS, CANEGROWERS Isis, and Bundaberg Fruit and Vegetable Growers Adept Economics Adept Economics is a Brisbane-based consultancy providing expert economic analysis and advice for private and public sector clients who want to know, for example, whether an investment project is worthwhile, or a policy or program is beneficial and cost-effective. Adept can help you by preparing business cases, reports for boards or senior executives, or funding submissions to governments, councils and other funding agencies. Contact Gene Tunny – Director, Adept Economics Suite T27, The Johnson 477 Boundary St, Spring Hill QLD 4000 AUSTRALIA [email protected] Authors Gene Tunny and Nick Behrens, with research assistance from Ben Scott Disclaimer This report has been prepared in accordance with the scope of services described in the contract or agreement between Adept Economics and the Client. Any findings, conclusions or recommendations only apply to the aforementioned circumstances and no greater reliance should be assumed or drawn by the Client. Furthermore, the report has been prepared solely for use by the Client and Adept Economics accepts no responsibility for its use by other parties. The report is not financial advice. Contents Abbreviations ........................................................................................................... 6 Executive Summary ................................................................................................. 7 Background ....................................................................................................................... 7 Importance of Paradise Dam for water security which underpins investment and production ......................................................................................................................... 7 Economic opportunities in the Bundaberg region ............................................................... 8 Views from stakeholders in the Bundaberg region ........................................................... 10 Survey results .................................................................................................................. 12 Estimated costs of inaction on Paradise Dam .................................................................. 13 Conclusions ..................................................................................................................... 15 1. Introduction ...................................................................................................... 17 1.1 Terms of reference .................................................................................................... 17 1.2 Scope of the study ..................................................................................................... 18 1.3 Structure of the report ................................................................................................ 20 2. Background ...................................................................................................... 21 2.1 Paradise Dam ....................................................................................................... 21 2.2 Agricultural employment and production in the region ........................................... 31 2.3 Broader economic performance of Bundaberg region ........................................... 32 2.4 Economic opportunities ......................................................................................... 34 2.5 Global trends in demand and supply for agricultural commodities ......................... 37 3 3. Literature review .............................................................................................. 40 3.1 Economics of water infrastructure ......................................................................... 40 3.2 Water availability and agricultural production ........................................................ 44 3.3 Implications of literature review for the study......................................................... 45 4. Stakeholder consultations .............................................................................. 46 4.1 Consultation strategy ............................................................................................ 46 4.2 Position of Commissioning Organisations ............................................................. 46 4.3 State of play .......................................................................................................... 47 4.5 Water allocations .................................................................................................. 52 4.6 Paradise Dam as a driver of investment ................................................................ 55 4.7 Potential economic impacts of Paradise Dam inaction .......................................... 56 4.8 Community reaction .............................................................................................. 60 4.9 Ability to mitigate impact of Paradise Dam inaction ............................................... 61 4.10 Importance of restoring Paradise Dam to its original and intended capacity .......... 62 4.11 Options for Government ........................................................................................ 63 5. Importance of Paradise Dam to Your Business Survey results .................. 65 5.1 How and when water is used from the Bundaberg Irrigation Scheme ................... 65 5.2 Importance of the Paradise Dam’s water resource to your business ..................... 67 5.3 Previous business investment contingent upon Paradise Dam ............................. 70 5.4 Impact on business of loss in Paradise Dam capacity ........................................... 72 5.5 Importance of the Paradise Dam’s water resource to the Bundaberg community .. 75 5.6 Planned projects contingent upon Paradise Dam .................................................. 78 5.7 Importance of restoring the Paradise Dam’s capacity ........................................... 80 5.8 Businesses’ ability to mitigate to loss of Paradise Dam’s storage capacity ............ 82 5.9 Alternatives available to Government .................................................................... 84 6. Estimates of the costs of inaction on Paradise Dam .................................... 85 6.1 Economic model approach .................................................................................... 85 4 6.2 Assumptions ......................................................................................................... 86 6.2 Economic modelling scenarios .............................................................................. 92 6.3 Estimates of the costs of inaction on Paradise Dam .............................................. 95 7. Conclusions ..................................................................................................... 98 References .............................................................................................................. 99 Appendix A: Organisations and individuals consulted .................................... 103 Appendix B: Issues discussed in stakeholder consultations .......................... 104 Appendix C: Crops grown in Bundaberg-North Burnett ................................... 105 Appendix D. Survey demographics .................................................................... 106 About the authors ................................................................................................ 109 5 Abbreviations ABARES Australian Bureau of Agricultural and Resource Economics and Sciences ABS Australian Bureau of Statistics BIS Bundaberg Irrigation Scheme CAPEX Capital expenditure CBA Cost-benefit analysis DNRME Department of Natural Resources, Mines and Energy (Queensland) DPI Department of Primary Industries (Queensland) CG Coordinator General (of the Queensland Government) FTE Full-time equivalent (employment) GRP Gross regional product GVAP Gross value of agricultural production Ha Hectare HP High Priority (water) LGA Local Government Area ML Megalitre (i.e. 1,000 kilolitres or 1 million litres) MP Medium Priority (water) PV Present value ROL Resource Operating Licence 6 Executive Summary Background Bundaberg Regional Council, Wide Bay Burnett Regional Organisation of Councils, Regional Development Australia Wide Bay Burnett, Bundaberg CANEGROWERS, CANEGROWERS Isis, and Bundaberg Fruit and Vegetable Growers have commissioned Adept Economics, assisted by QEAS, to investigate the economic costs of inaction on Paradise Dam by the Queensland Government. The Paradise Dam is in the Bundaberg region and was opened in 2005 with a capacity of 300,000 megalitres (ML) of water. In September 2019, Sunwater, a Queensland Government-owned corporation, started releasing water from Paradise Dam to address what it considered were dam safety concerns. The height of the dam wall will be reduced and the dam’s capacity will be substantially cut. There is a large amount of concern in the Bundaberg community regarding the potential economic and social impacts on the region and the rest of Queensland. Importance of Paradise Dam for water security which underpins investment and production Paradise Dam is one of six storages in the Bundaberg region, and at its originally intended
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