Water Rules Update

The ACCC, which is responsible, among other things, for developing and enforcing rules to remove barriers to water trading within the Murray Darling Basin, recently released a position paper on Water Trading Rules. This paper, which is part of the public consultation process, sets out ACCC’s general position on matters related to water trading.

One matter canvassed by the ACCC concerns co-held water access licences. One example of such a licence are Joint Water Supply Schemes ("Schemes") where the one water access licence is held by a number of irrigators.

Dealings by one holder in such licences are usually subject to requirements that such holder obtain the approval of all or a majority of holders, as is the case when one holder wishes to exit a co-held licence by making application under section 74 of the Water Management Act 2000.

The ACCC considers that obtaining the approval of a majority of co-holders may be difficult in large Schemes, particularly where they can have 50 to 100 members and that this hindrance on the ability of a co-holder to trade his share of a co-held licence may constitute a barrier to trade. This is similar to the barrier caused by Irrigation Infrastructure Operators ("Operators") not allowing the transformation of irrigation rights, now overcome by the Water Market Rules, which will allow irrigators to transform such rights held against the Operator without the agreement of other irrigation right holders, subject to certain conditions.

In short, the ACCC’s position as regards jointly held licences is that:

•        the disparity between the rights of co-holders in Schemes (to subdivide and/or exit the co-held licence) as compared to the rights of irrigation right holders against Operators (to exit the Operator’s licence) is not justified, and

•        a co-holder’s inability to obtain the necessary approval of other co-holders in a Scheme interferes with the functioning of the water market for trade, and

•        such co-holder should have similar exit options to those of irrigators who hold irrigation rights against Operators and who are protected under the Water Market Rules against the prevention of, or unreasonable delay in, transformation of such irrigation rights, and

•        the New South Wales Government (as well as the other basin state governments to the extent to which they have jurisdiction over similar co-held licences) should review the existing arrangements for trade or subdivision by holders in a co-held licence.

The ACCC is expected to release its draft advice on the Water Trading Rules at the end of this year with its final advice being provided to the Murray Darling Basin Authority by March 2010.