Water allocations
Let’s start with a “back to basics”: a water allocation is a legal right to harvest/hold water. It’s usually expressed as a right to harvest/hold a number of megalitres of water per year. The bottom line is that if you’re going to build a dam, you need to have the right to keep water in that dam. Without that, the water cannot be dammed and must be allowed to flow to downstream licence holders. The system of water licensing is carefully balanced so that there should be enough water in the system for all license holders.
One of the Queensland government’s pre-conditions that must be satisfied before construction can commence on Emu Swamp Dam is that GBIP must be able to demonstrate that it has legally binding commitments for 3,900 ML of water in the relevant catchment. This is an aggregate number and can be from a number of sources, for example:
1,740 ML is being allocated to the project by the Queensland government from the strategic infrastructure reserve (this allocation already exists in the Water Plan as intended for Emu Swamp Dam)
450 ML is, subject to a list of conditions, being sold by the Council to GBIP
Some allocations could be transferred by irrigators from their current allocations into the dam, though we haven’t heard that any of the irrigators have agreed to transfer any of their allocations
Some allocations could be bought from other existing water allocation holders in the district although based on recent comments from GBIP this doesn’t appear to have happened
In a 15 April 2021 article in Stanthorpe Today (“Dam progresses”) GBIP confirmed that the only current allocation it has secured is the 1,740ML from the Queensland government. CEO Lloyd Taylor was quoted as saying “Ultimately, by the time we finish construction, we need to have all the water allocations available ... so there is a significant period of time available to us to find those water allocations.”
This view on the timing for the acquisition of allocations by GBIP is inconsistent with the Queensland government position. In late April 2021 the State Government confirmed that (our underlining):
“Granite Belt Water Limited (GBWL) as the proponents of GBIP must be able to demonstrate that arrangements are in place that will allow the project to acquire sufficient water entitlements to underpin the viability of the project, prior to proceeding to construction.
In accordance with the funding conditions, such arrangements must be legally binding and may be presented in several forms including enforceable agreements with vendors that are enacted post a decision to proceed with construction.”
It seems clear that GBIP must find the potential water allocations (and enter into conditional agreements to purchase these) before construction commences. So why the lack of progress?
One of the problems might be found in GBIP’s budget. In its Detailed Business Case the upper bound budget for purchase of water allocations is $1.8m. For the 2,160 ML that GBIP still needs to acquire (including the 450 ML from Council) this is roughly $833 per ML, far below the weighted average trading price for FYE 30 June 2020 which was $3,304 per ML. After the purchase of 450 ML from Council, which on current Council estimates might sell for between $1,125,000 ($2,500 per ML) and $1,530,675 ($3,401.50 per ML), there is very little budget left for the remaining 1,710 ML.
Neither the State nor Federal government are providing funding for the purchase of water allocations. As such the additional cost, likely more than $5m over that budgeted, would lead to a cost overrun of more than 20% on the $24m currently being provided by Council and irrigators. Will this be paid by both Council and irrigators? Or just irrigators?