Hunter River Salinity Trading Scheme Working together to protect river quality and sustain economic development A world-class scheme for protecting waterways

The NSW Government’s Hunter Before the scheme there was River Salinity Trading Scheme significant conflict between leads the world in using economic primary producers and mining instruments for the effective operators. Discharges from protection of waterways. The industry increased salt levels in scheme has been responsible for the river at times making the restoring the waters of the Hunter water unsuitable for irrigation. to an unprecedented level of Primary producers responded by freshness. Water salinity1 is more seeking tighter regulation of Photo: DIPNR stable and lower—the river is now emissions. To address strong as fresh as many bottled mineral community concerns about new waters. discharges, new mine proposals were facing extremely high costs. A community working The scheme allows agriculture, together to protect mining and generation The scheme is a huge win for the to operate side by side, sharing entire Hunter River community. river quality and sustain the use of the river. Agriculture benefits from fresh economic irrigation waters while miners It wasn’t always like this. development. and electricity generators can make controlled discharges of excess waters. It protects the region’s most precious natural resource, provides for diverse interests to work together, and allows continued economic development, providing a secure future for the region.

1 Water salinity is estimated Electrical conductivity at Singleton 1980 to 2002 (monthly means) by measuring electrical conductivity. The more salty salinity target salinity water is, the more it mean Electrical Conductivity (mS/cm)(µS/cm) trial 2000 conducts electricity. 1800 Electrical conductivity is 1600 measured in microsiemens 1400 Regulation per centimetre (µS/cm). scheme 1200 start commenced Drinking quality water usually 1000 S/cm) measures between 600EC µ 800 and 1200EC. EC (mS/cm)

EC ( 600 Since the scheme started, 400 river salinity has more 200 consistently been below the 0 salinity target. Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03

2 Photo: State Water Photo: DIPNR Photo: DIPNR

MURRURUNDI

Pages R Isis R

Dart Hunter R Brook

Munmurra R Merriwa R SCONE Lake Glenbawn

UPPER MERRIWA SECTOR ABERDEEN

ULAN MUSWELLBROOK Paterson R Lake Foy Liddell Brook Goulburn R Lake DENMAN St. Clair KERRABEE Glennies DUNGOG Ck

Gungalwa MIDDLE Ck SECTOR SINGLETON Williams R Widden PATERSON Ck Martindale Ck LOWER SECTOR Black Hunter R Wollombi Ck Brook MAITLAND

CESSNOCK UPPER SECTOR

MIDDLE SECTOR NEWCASTLE LOWER SECTOR

The Hunter River catchment

The Hunter River drains the Also located in the valley are Human activities also impact largest coastal catchment in over 20 of the world’s largest on river saltiness. During , covering mines and three power coal mining, salty water some 22,000 square stations, including ’s collects in mine pits and kilometres. largest electricity generator. shafts and has to be pumped out to allow mining The supports a Salt occurs naturally in operations to continue. range of agricultural many of the rocks and soils activities including wineries, of the Hunter Valley. Some uses dairying, vegetables, fodder, of this salt is leached into large volumes of river water beef and horse breeding. groundwater and nearby for cooling. As this water rivers. evaporates, natural salt is concentrated in the water that remains.

3 How the scheme works

The central idea of the Going with the flow The river is divided into scheme is to only ‘blocks’ discharge salty water Monitoring points along the river The water in the river is nominally when there is lots of are used to measure whether the divided into numbered blocks. A river is in low flow, high flow or block is a section of water that low salt, fresh water flood flow. flows past Singleton in a day. So, block 2003-198 is the block of in the river. When the river is in low flow, water that will flow past Singleton no discharges are allowed. This is when the river can best on the 198th day of 2003 (17 July). handle salt discharges because: When the river is in high flow, This block of water will flow past • large amounts of fresh water limited discharge is allowed— other points on the river on dilute the saltier discharge so controlled by a system of salt different days. the impact on the river is not as credits. The amount of discharge For each block, the scheme great, and allowed depends on the ambient operators continually monitor salinity in the river, so it can • through careful control, the the flow level and the ambient change daily. The total allowable mixture of river and discharge salinity and then calculate how discharge is calculated so that the water can be kept fresh to meet much salt (if any) can be added to salt concentration does not go water quality standards. the block (Total Allowable above 900EC in the middle and Discharge) so that salinity stays lower sectors of the river, or above under the target. 600EC in the upper sector. When the river is in flood, unlimited discharges are allowed as long as the salt concentration does not go above 900EC. Members of the scheme coordinate their discharges so that this goal is achieved. Example of discharge controlled by credits Hunter River flow categories (megalitres per day) 198 Discharge unrestricted Site A flood 10000 197 high flow low flow 196 Singleton

6000 Discharge with credits 195 194

4000 Site B

1800 2000 1000 No discharge The river is divided into numbered blocks. For example, block ‘2003-198’ will th Upper Middle Lower pass Singleton on the 198 day of 2003 sector sector sector (17 July). In this example, suppose block 198 could hold 112 tonnes of salt.

4 Credits determine who Credits can be traded can discharge salt There are a total of 1000 salt Licence holders’ need to discharge credits in the scheme— discharge depends on highly different licence holders have variable operational conditions at different numbers of credits (see each site. Credit trading gives page 10 for a list of credit holders each licence holder the flexibility and the initial credit allocation). to increase or decrease their Licence holders can only discharge allowable discharge from time to salt into a river block in proportion time while limiting the combined to the credits they hold—1 credit amount of salt discharged across allows a discharge of 0.1% of the the valley. total allowed. The trading system is online, So, suppose block 2003-198 could allowing licence holders to trade handle 112 tonnes of salt (the Total quickly and simply. The trades Allowable Discharge for this can be for one or many blocks block). Then, a licence holder with (i.e. a single day or longer 20 credits could discharge 2.24 periods), and the terms of the tonnes (112 x 20 x 0.1%), and a trade are negotiated by the parties licence holder with 45 credits involved. could discharge 5.04 tonnes A register ensures the information (112 x 45 x 0.1%), into that block. on credit holdings is publicly The licence holder performs a available at all times. Other second calculation to determine information on the trading scheme what volume of their discharge is also available. water contains the permitted tonnage of salt. Note: the River Register indicates when discharges can occur (see page 8).

199 201 202 Site A Site A Site A discharge 198 200 201

Singleton less than Singleton Singleton 197 199 200 900EC

196 198 199 195 e 197 198 arg ch is Site B Site B d Site B

On 15 July, block 198 passes Site A. With On 16 July, block 198 passes Site B. With On 17 July, block 198 passes Singleton 20 credits, Site A could discharge 45 credits, Site B could discharge with salt concentration less than 900EC. 2.24 tonnes (112 x 20 x 0.1%). 5.04 tonnes (112 x 45 x 0.1%). If Site A did not discharge, it could trade 20 credits to Site B which could then discharge 65 credits of salt— 7.28 tonnes (112 x 65 x 0.1%). 5 What makes this scheme successful?

The scheme has been Rigorous data and A community prepared to designed to suit the modelling work together and try unique characteristics new ideas of the Hunter River Having a good understanding of The scheme only came into being catchment. the river was the basis to because the parties involved were designing an effective scheme. prepared to work together to find A number of key factors Data has been collected over a solution. Mines, power stations many years and a model of the and farmers put years of conflict working together have river’s behaviour developed by the and mistrust behind them to find made this innovative former Department of Land and a way forward. The EPA played solution such a success. Water Conservation (DLWC). an important role in looking for alternative market-based The researchers found that when strategies rather than reapplying the flow in the river increased, traditional pollution control salinity increased for a few hours thinking. DLWC was instrumental and then dropped to very low in trialling and implementing the levels. Their explanation was that water management aspects of the it rose initially as the river picked scheme. The NSW Minerals up salt from riverbanks and pools, Council also played a central role. but then fell as freshwater run-off diluted the salt concentration. The scheme is a result of These very low salinity levels extensive consultation with the were identified as the best time for community and was thoroughly discharges—the river could trialled before being formally handle extra salt and still remain established by the Minister for the fresh. Environment, the Hon. Bob Debus under the Protection of the Environment Operations (Hunter River Salinity Trading Scheme) Regulation 2002. A pilot scheme operated from 1995 to 2002, allowing the approach to be refined based on experience. Salinity peaks as rising Relationship of flow picks up salt from The Hunter Catchment the river bank and pools salinity to river flow Management Trust, as Chair of the scheme’s Operations Committee, brings stakeholders salinity together regularly to review flow scheme performance. It includes water users, mining, electricity window of generation, government and opportunity community representatives 2000 (see list on page 11). Ml/day 900 EC

Salinity drops as increasing flow dilutes salt concentration.

123456789101112 Days

6 A focus on environmental Underpinned by Real time data and outcomes, and a break legislation trading with tradition Traditional approaches focus on Participants in the scheme A Services Coordinator manages individual sites and require are licensed by the EPA. The the information that underpins the discharge minimisation at each. Environment Protection Licence scheme. Twenty-one monitoring Under this approach, ‘trickle’ defines the discharge points and gauges collect information along discharges were allowed all the the monitoring and reporting the length of the river. Every 10 time without an effective link back requirements. Any licence holder minutes measures of river flow to the state of the river. discharging outside the limits and salinity are collated then sent of the scheme is violating their by radio or phone to the central In dry times the river became very licence conditions, and data warehouse. salty, and unusable for irrigation penalties apply. when it was needed most. In wet River modelling experts use this weather the opportunity to The Regulation contains the information to calculate the Total discharge without a negative Scheme rules and additional safety Allowable Discharge in response impact was often missed. The end measures, such as discounting the to changing river flow and rainfall result was high and variable value of credits if too many are within the catchment area. salinity, with no guarantees that traded into the one river sector. A daily River Register is particular levels of freshness could For more information, refer to the: maintained on a dedicated be maintained. • Protection of the Environment website. It notifies each credit Under the new scheme, focusing on Operations (Hunter River holder about the amount of salt the environmental goal—keeping Salinity Trading Scheme) that can be discharged, and the salinity under 900EC—gives Regulation 2002 start and end times for each licence holders flexibility when release. and developing their saline water Participants need to hold management strategies. They can • Protection of the Environment sufficient credits to meet their choose to combine pollution Operations Act 1997. discharge needs. Credit trading abatement technologies with salt These can be viewed on the EPA’s is done via the online credit credits in the most cost effective website at www.epa.nsw.gov.au or exchange facility. manner for their organisation. obtained from the NSW Each licence holder may choose a Government Information Service. Sample pages of the River different strategy, but the combined Register and the Credit Trading discharge will not compromise websites are shown on the next the freshness of the river. page.

7 Sample pages from the Scheme’s websites

The River Register is available to the public at www.hits.nsw.gov.au.

River Register Block Number 2003-56(4) Fixed Total Allowable Discharge: DATE WHEN BLOCK PASSES 847 Tonnes (not applicable SINGLETON 25/02/2003 if in flood)

Site Discharge Period Credit Holder Discharge Start Discharge Stop Sector Dartbrook 24-02-2003 05:00 25-02-2003 05:00 UPPER Muswellbrook No. 2 23-02-2003 11:00 24-02-2003 11:00 Block Classification: High Bengalla 24-02-2003 07:00 25-02-2003 07:00 Sector Credit Discount Factor : 1

Hunter Valley Operations West 24-02-2003 03:00 25-02-2003 03:00 MIDDLE Hunter Valley Operations North 24-02-2003 18:00 25-02-2003 18:00 Block Classification: High Liddell Coal 24-02-2003 08:00 25-02-2003 08:00 Sector Credit Discount Factor : 1 24-02-2003 03:00 25-02-2003 03:00 Mount Owen 24-02-2003 13:00 25-02-2003 13:00 Ravensworth/Narama 24-02-2003 18:00 25-02-2003 18:00

Lemmington 25-02-2003 00:00 26-02-2003 00:00 LOWER Wambo 24-02-2003 16:00 25-02-2003 16:00 Block Classification: High Redbank 24-02-2003 18:00 25-02-2003 18:00 Sector Credit Discount Factor : 1 Bulga/Saxonvale 24-02-2003 09:00 25-02-2003 09:00 Warkworth 24-02-2003 18:00 25-02-2003 18:00 Mt. Thorley Operations 24-02-2003 18:00 25-02-2003 18:00 DATE AND TIME OF ISSUE: 25/02/2003 08:51:58 EASTERN STANDARD TIME Start and stop times are from discharge points.

Credit trading is done online, (www.epa.nsw.gov.au/hrsts/) and can be completed within a few minutes.

8 Allocating credits

Initial credit allocation 200 new credits Environmental protection auctioned every 2 years at least economic cost Credits were first allocated free of Every two years 200 new credits Licence holders can choose the charge to licence holders, based will be created to replace those most cost-effective strategy for on a formula that took into that have expired. These new their operation. This can be a mix account the environmental credits have a lifespan of 10 of: performance, salty water by- years. For example, the first 200 • buying more credits, and product, employment and credits auctioned will span block • implementing cleaner economic output of each licence 2004/183 (1 July 2004) to block technologies or practices holder. 2014/181 (30 June 2014). (such as re-use or minimising Credits were reissued when the This arrangement means that the generation of saline water) Regulation was introduced. 200 new credits will be available so that fewer credits are every two years into the future, needed. The initial credits have different but the total number of active life spans: The long life span of credits credits is limited to 1000. • 200 expire on 30 June 2004 allows industry to plan ahead and The new credits will be sold by adjust their processes over time. • 200 expire on 30 June 2006 public auction, a process that can The result is that environmental • 200 expire on 30 June 2008 reveal the market value of credits. outcomes are achieved at least • 200 expire on 30 June 2010 New industry can enter the cost to the community. • 200 expire on 30 June 2012. scheme by buying credits at auction, or by acquiring credits directly from other scheme participants.

Lifespan of credits

Each block represents initial credits (last block expires in 2010) 200 credits. new credits (available by auction from 2004) Every year the total number of active credits is limited next series of credits to 1000 credits. 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 Every 2 years, 200 credits expire and 200 new credits are created and sold by public auction. New credits have a lifespan of 10 years, so the first 200 credits will be active from 1 July 2004 to 30 June 2014.

2002/03 2004/05 2006/07 2008/09 2010/11 2012/13 2014/15 2016/17 2018/19 etc

9 Reference information

Scheme participants

Licence holders and credit allocations at commencement of the Regulation

Credit holder Licence number Premises name No. of (if applicable) (if applicable) credits Bengalla Mining Company Pty Ltd 6538 Bengalla Mine 35 Bulga Coal Management Pty Ltd 563 Saxonvale Colliery Holding 40 Camberwell Coal Pty Ltd 3390 Camberwell Coal Mine Colliery Holding 15 Coal and Allied Industries Ltd 640 Hunter Valley Operations 120 Coal and Allied Industries Ltd 1976 Mt Thorley Colliery Holding 0 Cumnock No 1 Colliery Pty Ltd 37 Cumnock No 1 Colliery 15 Dartbrook Coal Pty Ltd 4885 Dartbrook Coal Mine 15 Drayton Coal Pty Ltd 1323 Drayton Coal Mine Colliery Holding 25 Hunter Valley Coal Corporation Pty Ltd 4460 Mt Owen Coal Mine 15 Lemington Coal Mines Ltd 1497 Lemington Coal Mine Colliery Holding 40 Liddell Coal Operations Pty Ltd 2094 Liddell Colliery Holding 55 779 Bayswater Power Station 230 Mt Arthur Coal Company Ltd 113 Bayswater Colliery 25 Muswellbrook Coal Company Ltd 656 Muswellbrook No 2 Open Cut Coal Mine 10 Nardell Coal Corporation Pty Ltd 10337 Nardell Coal Corporation Pty Ltd 30 Ravensworth Operations Pty Ltd 10860 Ravensworth East Mine 0 Ravensworth Operations Pty Ltd 2652 Ravensworth Operations Narama Mine 100 Redbank Project Pty Ltd 11262 Redbank Power Station 35 Rix’s Creek Pty Ltd 3391 Rix’s Creek Colliery 25 United Collieries Pty Ltd 3141 United Colliery 10 Wambo Mining Corporation Pty Ltd 529 Wambo Mining Corporation 35 Warkworth Mining Ltd 1376 Warkworth Colliery Holding 40 New South Wales NA NA 85 Environment Protection Authority Total credits 1,000 • Initial credit holders are shown in the table, however, credit holders may vary from time to time. Details of current holders can be found on the EPA website (www.epa.nsw.gov.au/hrsts/). • Although some of the participants referred to above were not initially issued with credits, they will be able to participate in trading. • Some credits were initially kept by the EPA as a transitional mechanism. All residual credits were allocated during 2003, so all 1000 credits are held by participants.

10 Administrative roles Scheme management River monitoring, modelling The Hunter River Salinity Trading and the river register are Scheme Operations Committee provided by the Services consists of: Coordinator at the Department of • a member nominated by the Infrastructure, Planning and Hunter River Catchment Natural Resources (formerly Management Trust Department of Land and Water • four members to represent the Conservation). interests of licence holders Licensing and regulation, • a member to represent the online credit register and interests of irrigators exchange facility are provided • a member to represent by EPA. environmental interests The Operations Committee • a member from an organisation considers issues in relation concerned in the management to the day-to-day operation of a river in the catchment of the scheme. • a member from the Department of Infrastructure, Planning and Natural Resources.

The cost of administering the scheme is shared equally between credit holders and discharge licence holders. (In the future credits may be held by persons other than licensees).

11 Published by: Environment Protection Authority 59-61 Goulburn Street, Sydney PO Box A290, Sydney South 1232 Phone: (02) 9995 5000 (switch) Phone: 131 555 (information & publications) Fax: (02) 9995 5999 TTY: (02) 9211 4723 Email: [email protected] Website: www.epa.nsw.gov.au The EPA is pleased to allow this material to be reproduced in whole or in part, provided the meaning is unchanged and its source, publisher and authorship are acknowledged. ISBN 1 74137 011 6 EPA 2003/87 August 2003 Printed on recycled paper