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Water Rights Arrangements in Australia and Overseas

Commission research paper

This paper was released on 3 October 2003 and compares the legal, organisational and regulatory arrangements for managing water rights, against accepted best practice principles.

It reveals significant differences among the benchmarked jurisdictions in the way that water rights are defined, allocated, regulated and administered. In some jurisdictions, water rights are the personal property of water users; in others, they are vested in the State.

Such differences have implications for both the management of water rights and the efficiency of resource allocation.

Twelve case studies, which should be read in conjunction with the main report, were prepared to assist the understanding of the complex legal, organisational and management arrangements of the jurisdictions studied.

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  • Key points
  • Media release
  • Contents
  • Case studies

Governments manage water resources by issuing 'rights' (licences, allocations, entitlements) to control water use. Water rights vary enormously, within and between jurisdictions, in their duration, security, flexibility, divisibility and transferability.

There are two basic systems used to ration the (variable) supply of water in the jurisdictions studied:

  1. Governments devise plans to share the volume that is available for consumption among the holders of each class of right. Water rights are defined in volumetric terms, with a statement of the probability that the nominal volume will be delivered in full in any given year.
  2. Governments and courts recognise historic claims to access fixed volumes of water on a strict priority basis determined by the length of time each right has been held.

Governments generally also seek to ensure that sufficient water is available for a variety of environmental purposes.

In jurisdictions using the 'planning' approach, governments explicitly set out to achieve a balance between the economic, social and environmental objectives of the community, despite uncertain community preferences and environmental effects.

  • thus in the Australian jurisdictions studied, licences can be varied to obtain additional water for the environment. The timing and volume of water requested by right holders may also be varied administratively.

In those jurisdictions with secure and tradeable permanent water rights, such as California and Colorado, agencies obtain additional water for the environment by purchasing existing rights from the current right holders; harvesting additional water; or investing in water savings programs.

Both systems have strengths and weaknesses: in particular, the benefits of clear private rights versus the flexibility of governments to manage the resource.

The economic, social and environmental interests of those affected by water resource management decisions are more likely to be satisfied if sound governance arrangements and processes are in place.

Restrictions on water trading and 'exchange rate' problems can adversely affect the efficient transfer of water rights to higher valued uses.

Subsidies and differences in the level of cost recovery in the pricing of infrastructure potentially reduce the efficiency of water trading.

Water rights arrangements are complex, with many inter-relationships and dependencies in their provisions. It is important that care be taken in seeking to adjust any one component of a system, as there would usually be ramifications for the integrity of the system as a whole.

A Productivity Commission study has found significant differences in the way water rights are defined, allocated and administered in Australia and overseas.

The study — Water Rights Arrangements in Australia and Overseas — compares arrangements for managing water rights against accepted best practice principles.

Productivity Commission Chairman Gary Banks said: 'In all the jurisdictions studied, there is growing concern that water should go to its most valued uses — including for environmental purposes.'

The Commission found that there are two contrasting systems used to allocate water across competing users:

  • In most Australian jurisdictions, and in South Africa, governments devise plans to share the volume available for consumption among right holders. Governments can modify these allocations for various reasons, including to increase the water available to the environment.
  • In California, Colorado and Chile, water rights are secured as legal property. Users can trade their rights in markets, provided doing so does not adversely affect the rights of others. Government agencies can only allocate additional water to the environment by purchasing water rights, harvesting additional water, or investing in water savings programs.

The Commission noted that both systems have strengths and weaknesses, and quite different implications for the distribution of water between users and uses.

Mr Banks said: 'The study shows the importance of having sound governance arrangements for administering and enforcing water rights. It is also clear that adjusting any one component of such complex systems could have wider ramifications for their integrity'.

Background information

Leonora Nicol (Media, Publications and Web) 02 6240 3239 / 0417 665 443

Preliminaries
Cover, Copyright, Foreword, Contents, Abbreviations, Glossary, Overview

1 Introduction
1.1 The study
1.2 Processes
1.3 Report structure
1.4 Terminology

2 The water sector
2.1 The water cycle
2.2 Water supplies
2.3 Water use
2.4 Water and land impacts
2.5 Economics of water use
2.6 In summary

3 Legal framework
3.1 Evolution of water law
3.2 Current legislative framework
3.3 Water rights
3.4 Inter-jurisdictional arrangements
3.5 In summary
Attachment 3A

4 Organisations involved in the water rights system
4.1 Overview of organisations
4.2 Coordination of resource management
4.3 Separation of functions
4.4 Reporting requirements
4.5 Resourcing
4.6 In summary

5 Definition of water rights
5.1 Universality
5.2 Predictability of volume and enforceability
5.3 Certainty of title
5.4 Duration
5.5 Exclusivity
5.6 Detached from land title and use restrictions
5.7 Divisibility and transferability
5.8 In summary
Attachment 5A

6 Government involvement in water allocation
6.1 Acquisition programs
6.2 Resource plans
6.3 Inter-jurisdictional arrangements
6.4 Agencies
6.5 Processes
6.6 In summary
Attachment 6A
Attachment 6B

7 Administering water rights
7.1 Organisations
7.2 Functions
7.3 Comparisons
7.4 In summary
Attachment 7A

8 Distribution management
8.1 Distributors and their reporting requirements
8.2 Water accounting
8.3 Water distribution
8.4 In summary
Attachment 8A

9 Pricing
9.1 Pricing infrastructure services
9.2 Pricing conveyancy losses
9.3 Pricing water rights management
9.4 Pricing environmental third-party effects
9.5 In summary
Attachment 9A

10 Monitoring and enforcement
10.1 Enforcement agencies
10.2 Monitoring procedures
10.3 Enforcement procedures
10.4 In summary
Attachment 10A

A Participants

Glossary

References

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