Information Sheet- Water Trading
Background
Water trading is essentially about buying and selling water entitlements. Water trades require a willing seller and purchaser and generally require regulatory approval.
A significant share of surface water resources in the south-west of the State is currently allocated to the irrigation industry. Some of these irrigation entitlements could be purchased for public water supply to the IWSS water grid.
Harvey Water is a privately owned cooperative that manages the interests of the Harvey irrigation district. It currently holds the water allocation for this district. The irrigation industry has the potential to realise significant efficiency savings by replacing unlined irrigation channels with piped distribution networks. These savings can be sold for public water supply, which finances the investment in these efficiencies.
Current Situation
In the largest deal of its kind in Australia, the Water Corporation secured a trading agreement with Harvey Water in August 2006 to permanently transfer water entitlements for 17.1 gigalitres per year from the irrigation cooperative to the Water Corporation for public water supply through the IWSS.
In return, the Water Corporation provided funding for the upgrade of the Harvey and Waroona piped irrigation scheme distribution systems. This project replaced open irrigation channels in the Harvey and Waroona Irrigation Districts with a pipe network. The staged conversion reduced evaporation and seepage losses from the old open channel system, resulting in irrigation water savings of up to 20 per cent. The water saved is available for use in the IWSS water grid.
Stages 1 and 2 of the planned 3-stage conversion project have been completed. To date, 11.8 gigalitres of water has been transferred from Harvey Water’s irrigation allocation to the Water Corporation and made progressively available to the IWSS.
In November 2007, the Minister for Water Resources approved the use of the Logue Brook Dam for public water supply. This source will now be connected via a gravity pipeline to the Samson Brook pipehead to yield the full potential of this trade of 17.1 gigalitres a year. Due to the need to manage water quality to protect public health, Logue Brook Dam will no longer available for recreational purposes.
As a result, the Water Corporation is setting aside $10 million in a trust fund to create new recreational opportunities in the South West. The State Government has committed another $3.29 million to enable Lake Kepwari in Collie to be opened for recreational purposes in 2008/09. The Department of Sport and Recreation and the Department of Environment and Conservation are working with the Water Corporation to support these opportunities for recreation in the south-west.
The project also creates further potential on-farm improvements in water efficiency through improved watering practices as water is now delivered to irrigators under pressure.
The Future
The Water Corporation is working with Harvey Water to investigate the feasibility of trading a further 7 gigalitres of water a year through the investment in on-farm efficiencies in the Harvey – Waroona areas. Water trading opportunities also exist in the Collie Irrigation area, also managed by Harvey Water. An estimated 16 gigalitres of water could be made available through efficiency savings in this area. The issues associated with such a trade are complex, including the requirement for improved water quality in Wellington Dam. This trading opportunity is therefore less certain than that
for the Harvey - Waroona areas, and would require substantial time to resolve.
As part of Western Australia’s commitment to the National Water Initiative, the
Department of Water are reviewing mechanisms to facilitate water trading. As part
of their commitment to water reform, they are introducing statutory water management planning in priority areas in the State and enhancing the security of allocations for use.
Sustainability considerations – addressed in planning
Economic | Social and Cultural | Environmental |
| Water trading is a relatively cheap water source | Water trading promotes the efficient use of water | Minimal environmental impacts with piping open channels |
| Water trading is a relatively cheap water sourceA piped irrigation network provides opportunities for improved on farm operations in irrigation districts | Trading may adversely impact recreational activities in public water supply dams – requires consideration of offsets and net social and environmental impacts | Some impacts with the new pipeline from Logue Brook dam to Samson dam |
| Currently the water allocation is held by the irrigation cooperative, rather than individual growers | Where trading is through increased efficiencies, there is no adverse impact on local communities | Defers the need for new water sources, which may have environmental impacts |
Potential source yield
The total amount of water available from water trading is estimated to be 40 gigalitres a year – 17 gigalitres a year from the existing trade and a further 23 gigalitres a year in new trades from Harvey Water. This is enough to supply more than 90,000 new homes.
Potentially, there may be other trades available from existing water allocations in the metropolitan area held by industry and agriculture. These existing allocations are generally smaller in nature as they are held by individual licensees. Greater security of water allocations and reduced transaction costs may create trading opportunities for these allocations in the future. Many factors require consideration, including the need to support a diverse economic and employment base in Western Australia.
Potential cost
Unit costs are in the order of $1 to $2 a kilolitre.
Key
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Potential source yield (in 50 year planning horizon)
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Potential cost (2007 $)