Vendor calls shots on ‘Watergate’ deal
Monday, 13th May, 2019
By Craig Brealey
The company that sold water licences to the Federal Government for $80 million did all of the calculations itself and the government was happy to go along with it, according to a new investigation of the deal.
Indeed, the vendors, Eastern Australia Agriculture (EAA), estimated the volumes of the licences at the suggestion of the Department of Agriculture and Water Resources, The Australia Institute said this week.
Further, the licences bought from two properties in the Condamine-Balonne valley in Queensland would provide little or no water to the rivers downstream, the Institute reported.
Last month it was revealed that the deal, made when Barnaby Joyce was Water Minister and now dubbed “Watergate”, resulted in the profits from the sale being sent overseas to a tax haven in the Cayman Islands.
The Australia Institute’s new analysis was drawn from documents presented to the Senate and obtained under Freedom of Information legislation by Senator Rex Patrick and The Guardian newspaper.
They showed how closely the Department of Agriculture and Water Resources (DAWR) collaborated with EAA, said Maryanne Slattery, Senior Water Researcher at TAI.
“The deeper into this water deal you go, the murkier it gets,” Ms Slattery said.
“Not all of the licenses the Commonwealth bought existed before this sale.
“EAA did all the key calculations on water volumes for the newly-created licenses itself, apparently with no independent verification.”
Ms Slattery said that EAA offered to have their work verified and invited an on-site visit but the department seemed not to have taken up the offers.
She said the water brought no benefit to the environment, as required by the Murray-Darling Basin Plan, but was purchased to make it appear so.
“The Department was attempting to buy water to meet targets on paper, without actually removing any water from irrigation.
“EAA knew the department under Mr Joyce had ‘a very strong objective to minimize the water being taken away from productive agriculture’, she said, citing correspondence between the department and EAA.
“EAA was happy to oblige with a deal that ‘would not affect the viability’ of the property because the company can use its other ‘water entitlements to continue irrigation.’
The department was also assured by EAA that the purchase would have ‘virtually no impact’ in drier years and ‘marginal’ impact in high-flow years.
Ms Slattery said the details of the deal showed that it did not count towards environmental water recovery because the water was never counted in the calculations of water use in the Basin.
“Essentially something was created from nothing, or at least from outside baseline modelling, and sold to the taxpayer for millions.”
This was despite the MDBA telling the Senate that water that wasn’t in the ‘baseline calculations’ could not contribute to the water recovery target.
“Released correspondence shows that EAA and the Department know that much, if not all, of this deal does not count.”
When DAWR approached EAA in 2016 to buy water, at least half the “overland flow” (that is, flood water) licenses had not been created.
After 18 months of negotiations, DAWR bought nearly 29 gigalitres of overland flow licenses for nearly $80m in July 2017.
EAA had offered to sell thew water for $2,200 per megalitre. The Commonwealth paid $2,745/ML.
But these licenses are attached to the land that water flows over, meaning that the Commonwealth has no legal control over it once it leaves the EAA property. This means it can be extracted by other irrigators.
The high price was to compensate EAA for the transfer of a dam to the Commonwealth. DAWR declined the dam and suggested its use could be subject to a future agreement, said Ms Slattery.
“Watergate has shown that the Commonwealth paid a high price for water that is almost impossible for it to use effectively for environmental purposes,” Ms Slattery said.
“Taxpayers may be forced to pay up all over again. Hopefully next time they will be buying water that can be used and at a fair price.”