purchase of water for narran lakes - overview · web viewthe purchase would improve the chances of...

Purchase of water for Narran LakesOverview

Last updated 13 April 2015

Prepared for Lower Balonne Water Network

IntroductionThe Commonwealth Environmental Water Office (CEWO) is investigating options to establish arrangements to purchase water on a temporary basis in the Lower Balonne Water Management Area. The purchase would improve the chances of achieving a flow event identified by the Murray-Darling Basin Authority (MDBA, 2012) as being environmentally significant.

The preferred watering option is primarily concerned with achieving a 25 GL cumulative inflow at the Wilby Wilby stream gauge (422016) upstream of the Narran Lakes within a period of 2 months or less. This event was identified by the MDBA to:

Provide a flow regime which ensures the current extent of native vegetation of the riparian, floodplain and wetland communities is sustained in a healthy, dynamic and resilient environment.

The current spell between events of this magnitude (~680 days by the end of March 2015) significantly exceeds the long term average (~420 days) and the target frequency of once every 1.1 years identified by the MDBA (2012)

The CEWO has considered a range of options to access water on a temporary basis in the Lower Balonne. These include purchasing supplemented water allocation, purchasing water harvesting extraction rights, and purchasing water stored in private storages.

The CEWO is seeking to achieve enhanced flows through:

1. the release of water from private on-farm storages into the river; and/or 2. a reduction in the extraction of water from the river during a suitable water harvesting

event.

It is considered that the most efficient source of water to enhance the flows at Narran Lakes is from the Narran and Balonne Minor upstream of the B2 bifurcation.

To acquire water within the timeframes required, the CEWO proposes to establish contracts in advance that set out the majority of the conditions for the purchase (‘Standing Arrangement’). A Standing Arrangement would not oblige either party to go ahead with a purchase, but would allow both parties to agree quickly on a specific purchase during a suitable event.

The two- stage process for reaching agreement on the purchase of water is outlined below.

Purchase Of Water for Narran Lakes | Overview | of 15

Stage 1: Agreeing to termsThe purpose of the Standing Watering Arrangement is to provide a framework for both parties to move quickly during an event. Further detail of the arrangement is provided in Attachment A .


Interested Allocation Holders submit a proposal addressing the requirements set out in the Request for Tender.

(Further detail of the draft Requirements are provided in Attachment B)

Tenders may be required to provide documents to support their tender

such as evidence of authority.

We request tenders from relevant Water Allocation holders (in the Narran and Balonne Minor).

The Request for Tender will include the Standing Water Arrangement and outline factors the Commonwealth will consider when assessing the value for money of each tender such as the technical capacity to achieve a demonstrable increase in river flows.


We evaluate tenders and notify Tenderers of the outcome. We negotiate a Standing Water Arrangements with successful

Tenderers.

Stage 2: Water Harvesting EventStage 2 involves the creation of a binding contract for the purchase of water.


In accordance with the Standing Water Arrangement, once the agreed water has been provided, each Allocation Holder provides us with an invoice and

meter readings and we pay the agreed price.

(Note: Payment by us may be contingent on verification from Queensland that the agreed Storage Volume was released, and/or the Acquired volume was not accessed, during the event.)

Hydrological trigger of 250-300 GL of excess flow at Beardmore Dam(Note Provided at Attachment C is the Queensland Department of Science, Information, Technology,

Innovation and the Arts (DSITIA) procedure for estimating a likely 25 GL event at Wilby Wilby).

Allocation Holders complete and submit the Water Order confirming their agreement (or otherwise) to release water, or to refrain from extracting, and proposed volume and

price per megalitre

We issue a Request for Water (Note Requests for Water will only be made to Water Allocation Holders who are signatories to a Standing

Watering Arrangement.)

We consider final estimates of the volume required to achieve the target flow at Narran Lakes.We arrange for water quality testing as required.

We sign the Water Orders that we wish to proceed with, establishing a contract with each Allocation Holder. Allocation Holders must comply, either by releasing the Storage Volume, and/or refraining from

extracting the Acquired Volume, during the Relevant Time.

Note: At our discretion we may elect not to purchase any water, or to purchase a reduced volume of water (for example, if water quality is unsuitable or where the combined volume of Water Orders is

insufficient to achieve the required environmental watering outcome).

We evaluate water orders and notify Allocation Holders of the outcome.

See Attachment D for further information on price considerations.

Attachment A

Key contract principles in Standing Water Arrangement

Structure

Deed of standing offer under which Allocation Holders provide a standing offer to accept ‘requests for water’ from the CEWH.

Allocation Holders can opt in or out of a request process. They can refuse to participate for legitimate business reasons.

Issue of a request for water will be at the CEWH’s discretion. Factors which will be considered are likely to include: anticipated flow events; Water Harvesting Announcements; and water already held in storages.

Each Water Order will commit an Allocation Holder to release a certain volume into the river (the Storage Volume), or refrain from extracting a certain volume (the Acquired Volume) during a particular period (the Relevant Time).

Practical obligations on Allocation Holders

Allocations Holders must:

act in good faith;

release the Storage Volume, and/or refrain from extracting the Acquired Volume, during the Relevant Time;

take Meter readings in relation to the Storage Volume and/or Acquired Volume; and

provide the Meter readings to the CEWH, with a statutory declaration which confirms that the meter readings are true and accurate.

Keep, and provide to the CEWH, records of the allowable and actual extraction of water and release of water to the river during the Agreement period.

Obligations on the CEWH

Subject to receiving evidence that Allocation Holders have fulfilled their obligations (ie refrain from extracting the Acquired Volume and/or release the Storage Volume), pay Fees to Allocation Holders in accordance with the Water Order.

Inform the Allocation Holder of the results of any water quality testing undertaken on the Allocation Holder’s property.

The CEWH must also act in good faith.

Environmental Outcomes

The Allocation Holder will acknowledge that the CEWH will acquire and use the Acquired Volume and/or Storage Volume for an Environmental Outcome.

The Environmental Outcomes will be specified in each Water Order.

Breach of Obligations

If the Allocation Holder breaches its Obligations then the CEWH may, having regard to the breach and its impact upon the Environmental Objectives, implement any of the practical solutions (Remedies) outlined below.


o The CEWH may request the Allocation Holder to repay an equivalent proportion of the Fees.

o The CEWH may deduct an amount of the Fees payable to the Allocation Holder under an agreement (or any other agreement with the CEWH).

o The CEWH may direct the Allocation Holder to release an equivalent volume of water from its storage.

o The CEWH may purchase water and direct the Allocation Holder to reimburse the CEWH.

o The CEWH may direct the Allocation Holder to purchase a volume of water and either:

1. transfer it to the CEWH; or

2. release it into the river.

Audit, access and communication

The CEWH may conduct audits relevant to the performance of the Allocation Holder’s Obligations under the Deed. For example, the CEWH may:

o undertake water quality sampling to verify the suitability of the Allocation Holder’s water for purchase;

o audit the Allocation Holder’s operational practices and procedures; or

o audit the accuracy of the Allocation Holder’s meter readings.

The CEWH will be permitted to access the premises of an Allocation Holder to conduct such audits or for other matters connected with the Deed.

The Allocation Holder must work and communicate proactively with the CEWH.

The Allocation Holder must participate, at its own cost, and as reasonably required by the CEWH in studies, evaluations and questionnaires and other activities to analyse the success of an Environmental Outcome.


Attachment B

Draft Statement of Requirement

1. Overview

1.1. The CEWH is intending to establish an open panel, such that additional panel members may be added from time to time to purchase water to achieve environmental requirements identified for the Lower Balonne Water Management Area.

1.2. The initial focus is to identify suitable panel members to assist the achievement of environmental outcomes in the Narran Lakes.

1.3. The Murray Darling Basin Authority (2012) identified the following flow indicator to maintain health and provide recruitment opportunities for fringing lignum shrublands and riparian forest in Narran Lakes:

an inflow of 25,000 ML (gauged at Wilby Wilby on the Narran River) over a 2 month period with a target frequency of every 1.1 years

1.4. The current spell between events of this magnitude (~680 days by the end of March 2015) significantly exceeds the long term average (~420 days) and the target frequency of once every 1.1 years identified by the MDBA (2012)

1.5. To improve the capacity for attaining this (and potentially other) environmental outcomes for the Narran Lakes the CEWH requires:a. a proven, demonstrable reduction in take, achieved by Allocation Holder(s)

not extracting an agreed volume, and a consequential increase in flows.

and/or

b. a proven, demonstrable increase in flows achieved by Allocation Holder(s) releasing an agreed volume held in private storage.

1.6. The most efficient source of water to enhance flows at Narran Lakes are water entitlements which are subject to an announced period in Lower Balonne Water Management Area Zone LBU-05 followed by those in LBU-04 (refer to table 1 below). Therefore a mandatory requirement is that Allocation Holders hold or be in control of water entitlements which are subject to an announced period in Lower Balonne Water Management Area Zone LBU-05 and or LBU-04 (‘Eligible Water Harvesting Right’).

Table 1 Description of zones for the Lower Balonne Water Management Area Zone Location AMTD LBU-05 Narran River – from the bifurcation of Balonne Minor

River downstream to the Queensland and New South Wales border including Donnegri Creek and Little Narran

80.6 – 0.0 km

LBU-04 Balonne Minor River – from the Balonne Minor River regulator downstream to the bifurcation of the Narran River including Belah Creek

163.5 – 128.9 km

1.7. The CEWH seeks to achieve the above by entering into a standing contractual arrangement with successful Tenderers under which they would:a. make certain commitments on an ongoing basis about matters relevant to

the arrangement including maintaining capacity to meter, providing the

CEWH with notice of dealings affecting land or water title and notice of matters affecting its capacity to perform;

b. provide a standing offer to engage in a request process underpinning undertakings to:

i. refrain from extracting an agreed volume of water during a particular period (this is referred to as an ‘Acquired Volume’ in the Contract);

and or

ii. transfer an agreed volume from water held in private storage (this is referred to as a ‘Storage Volume’ in the Contract);

c. take meter readings and provide required evidence to verify compliance with the water order.

1.8. Notably:a. Under the Standing Arrangement, the Allocation holder is not obliged to

provide an Allocation Volume or a Storage Volume, but may receive a request from the CEWH where it is seeking to acquire temporary water or rights therein;

b. on receiving a request, allocation holders can opt in or out of the round, either advising that they do not wish to participate (for legitimate business reasons) or that they do, in which case pricing and volume on offer will need to be confirmed;

c. depending upon the responses received the CEWH would then determine which arrangements to progress and issue corresponding ‘water orders’ to that effect.

1.9. The CEWH may comparatively evaluate responses to determine which will comprise the best value for money. Value for money factors that the CEWH may take into account when considering responses may include price, location (losses) and available volume. For example, to assist the CEWH in achieving value for money the CEWH may take into consideration:a. a price limit which, in the absence of an active market may be informed by

gross margin estimates (or other information such as water allocation prices in other water management areas, seasonal conditions etc). Depending on the situation this price limit may not be disclosed. Reponses which propose prices above the Price Limit are unlikely to be pursued.

b. Relative price of water orders

c. Volume of water required by the CEWH

d. Efficiency of water acquired or released water reaching Narran Lakes.

e. Where the CEWH is seeking to acquire water held in storages considerations will additionally include ability to meet specified water quality and release requirements.


2. Mandatory requirements

2.1. Tenderers must hold or control an Eligible Water Harvesting Right with the following characteristics:a. a water allocation for the take of unsupplemented water; and or

b. a water licence for the take of overland flow water

which are subject to an announced period in Lower Balonne Water Management Area Zone LBU-05 and or LBU-04

2.2. Tenderers are referred to sections of this RFT dealing with:a. Minimum Content and Format Requirements; and

# Minimum Content and Format Requirements

1. The Tender must be written in English

2. Measurements must be expressed in Australian legal units of measurement

3. The Tender must not be a joint Tender

4. The Tender must include a completed and signed Tenderer’s Deed in the form provided (see Attachment 2: Tenderer's Deed in Schedule 2).

5. Tenderers must provide copies of licences / titles in respect of:

the Eligible Water Allocation; and

any other Water Allocations or licences held in the catchment.

b. Conditions for Participation.

# Conditions for Participation

1. The Tenderer exists as a legal entity at the Closing Time

2. The Tenderer is the registered owner of or is otherwise authorised to control the Eligible Water Allocation


3. Requirements

3.1. Tenderers should carefully review the Contract in order to fully understand the nature of what is proposed. Tenderers should satisfy the Commonwealth that they are able to undertake these activities and to participate in the process in good faith.

3.2. Tenderers should provide a description and supporting documentation (for example, property area map, certified reports for overland flow works) of water infrastructure, including diversion, storage, pumping and metering relating to water entitlements held or under the Tenderers control in the Lower Balonne Water Management Area Zone 04 and or Zone 05 which are subject to an announced period.

3.3. Tenderers must provide a Tender which meets the requirements of the Acquired Volume or Storage Volume or both.

Acquired Volume (not extracted)

3.4. Tenders in relation to the Acquired Volume should demonstrate their ability to effect retention of in-stream flows to support environmental outcomes by providing a proposed methodology to achieve the Acquired Volume.

3.5. The proposed methodology to achieve the Acquired Volume should:

a. Account for all water entitlements in Lower Balonne Water Management Area Zone LBU-05 and or LBU-04 under the Tenderers control;

b. Provide a history of take against water entitlements to demonstrate that not extracting water under the entitlement achieves a reduction in take;

c. Provide estimates of the actual or potential capacity to make water available including (if applicable), specify times where water is unlikely to be offered (for legitimate business reasons) such as during peak watering season;

d. Provide a method to ensure a demonstrable reduction in take with a consequential increase in natural river flows;

e. Demonstrate ability to control extraction under water entitlements during the announced period; and

f. Include a Risk Assessment addressing capability shortfalls.

3.6. In addition, Tenders should demonstrate an ability to prove that water sold to the CEWH was not taken under water entitlements during an announced period and the consequential increase in natural flows during the Relevant Time. The proposed Acquired Volume water accounting methodology should:

a. Account for all water entitlements in Lower Balonne Water Management Area Zone LBU-05 and or LBU-04 under the Tenderers control;

b. Include a method for calculating the water available for take; and

c. Provide evidence the Tenderer is metering the taking of water including:

i. Location of water extraction points; Purchase Of Water for Narran Lakes | Overview | of 15

ii. Details of water metering and locations;

iii. Accuracy of meter readings.

Storage Volume

3.7. Tenderers must provide a Tender which meets the requirements of the Acquired Volume or Storage Volume or both.

3.8. Tenderers providing a Tender with regard to the Storage Volume should demonstrate ability to increase in-stream flows to support environmental outcomes by releasing water from storage into the Narran River. A proposed release methodology should be provided that includes:

a. Demonstrated ability to release water into river and to control (including to cease) flow rates;

b. Estimates of the actual or potential capacity to make water available including (if applicable for legitimate business reasons), specifying times where water is unlikely to be offered such as during the peak watering season;

c. Ability to monitor or provide information regarding storage water quality information;

d. Risk Assessment addressing capability shortfalls.

3.9. In addition Tenderers should also provide the proposed water accounting methodology to verify the Storage Volume was released in the river including:

a. Location of water release points;

b. Details of water metering and locations;

c. Accuracy of meter readings (supported by meter test results).

Tenderer’s compliance with the Contract

3.10. Tenderers should indicate their level of compliance with the Contract.

Innovative proposals

3.11. Tenderers are advised that innovative proposals may be submitted in addition to a complying tender.

3.12. Tenders with innovative proposal should demonstrate how the proposal may:

a. Improve the capacity for attaining environmental outcomes for the Narran Lakes;

b. Achieve value for money for the CEWH;

c. encourage market opportunity for the Commonwealth, for example by increasing trading opportunities;

d. minimise potential impacts from a reduction in water available for production.


Attachment C

Procedure for estimating a likely 25GL event at Wilby Wilby

The following procedure has been developed from the study of marginal 25GL events simulated using the CEWO model. It is hoped that the procedure could be further refined with more experience.

A 25 GL event at Wilby Wilby needs about 300 to 325 GL of excess flow into Beardmore Dam depending on the antecedent conditions in the Lower Balonne. In a situation where 250 to 300 GL of excess flow is estimated at Beardmore Dam then intervention by the CEWH (temporary purchase) may be required. The excess flow is the total flow into Beardmore Dam minus the volume required to fill the dam to the spill level. The volume of the event has to be estimated during the early stages of the event. There is uncertainty in this estimate.

The following procedure is suggested.

1. Estimate the peak flow for the event and the time of arrival. Flows at Weribone (422213A0 and Cashmere (422404A) can be summed to provide an estimate of the flow expected within the next day. Warnings from the Bureau of Meteorology and flows at stream gauges further upstream can be used to assist in making an estimate of the peak flow.

2. The volume in the rising limb of the hydrograph can be estimated by multiplying half of the estimated peak flow (in ML/day) by the number of days from the start of the event to the estimated peak flow. This assumes a triangular shape to the rising limb of the hydrograph.

3. The volume of the receding limb of the flood can be estimated by multiplying the peak flow (in Ml/day) by 6. If the event at the upstream gauges has a rapid recession, multiply the peak flow by 3. If there is a likelihood of follow-up rain that could extend the event, multiply by 9.

4. Estimate the volume need to fill the storages at St George (Beardmore Dam, Jack Taylor Weir, Buckinbah and Moolabah Weirs).

5. Calculate the excess volume by subtract the volume needed to fill the storages from the volume estimated in 3.

6. If the excess volume exceeds 325 GL, the event should be successful.

7. If the excess volume exceeds 300 GL and the Narran has had a recent flow through event (within 1 month), the event should be successful.

8. If the excess volume is less than 250GL, the event will probably not be successful and it is unlikely that CEWO can purchase sufficient water to produce a successful event.

9. If the event is between 250 GL and 300 GL, then it may be worthwhile purchasing water to enhance the event.

10. The estimate of the volume of the event can be refined each day as more information comes to hand.

Attachment D

Establishing a price for water

To assist in achieving value for money, prior to bids being requested and or received, the Commonwealth Environmental Water Holder will identify a price limit that the CEWH will not pay above. This Bid Price Limit may not be disclosed to the market; for example, where a competitive process is used. If a competitive process is used, Bids will be rejected if they propose prices above the Bid Price Limit. Bids proposing prices below the Bid Price Limit will then be comparatively evaluated to determine which will comprise the best value for money.

The CEWO commissioned Marsden Jacobs Associates (MJA) to estimate the market value of unsupplemented water in the Queensland Lower Balonne. In this context, the market value was defined as “the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.”

The following information was sought to derive a price estimate:

Historical market values for water entitlements in the NSW Barwon-Darling and QLD Lower Balonne as reported on state government water registers;

Historical market values in neighbouring catchments (NSW Border Rivers and Gwydir catchments) for allocation trade of unregulated and regulated water.

Residual (margin based) imputation, which values allocation water as the gross margin (income less variable costs) that a ML of water could provide a farmer if water was retained by the irrigator and used to produce irrigated crops.

Informed estimates by key stakeholders including state government officers and farm advisors who are knowledgeable about water usage and its value to irrigators in the regions.

The analysis is primarily informed by gross margin analysis and stakeholder input. The gross margin analysis is based on work by the NSW Department of Primary Industries (DPI). The NSW DPI analysis for the NSW northern zone was considered to be most suitable as it was published in 2012, whereas the most recent gross margin analysis by Queensland was released in 2006.

The following analyses were considered most relevant to the Lower Balonne:

“Surface Irrigated Cotton (Roundup Ready Flex® Bollgard II ®)”; and

“Surface (furrow) Irrigated Bread Wheat”.

Gross margin analysis was also used when the Qld and NSW governments purchased water from a private storage on the Balonne to provide flows into Narran Lakes in 2008. An overview of this purchase is provided in Attachment E .


Attachment E

Review of Narran Lakes 2008 environmental water purchase from on-farm storage

The 2008 waterbird breeding event was a high priority as it was one of the largest waterbird breeding events recorded in the Narran Lakes and the most significant in the Murray-Darling Basin since 1998. In April 2008, Officers from NSW Department of Environment, Climate Change and Water (DECCW), working with officers from the Queensland Department of Environment and Resource Management (DERM), purchased a total of 10.4 GL of water in Queensland at an approximate cost of $1.88 million. This was an emergency response more than a planned process. The steps undertaken were as follows:

Available data and hydrological modelling established a release schedule for 11 GL.

NSW and Queensland officers estimated a market value for physical water of around $180 per ML by using the marginal returns to water from irrigating a hectare of wheat (assuming a wheat price of $350 per tonne, a yield in tonnes per hectare and a water application rate).

o The price of $180 per ML is difficult to compare with any established market price at the time as no trade of this type of water occurs in the area. Upstream at St George, where a government-owned and run irrigation scheme exists, it has been known for supplemented water to trade in the range of $100 to $250 per ML on a seasonal basis.

DECCW officers telephoned irrigators in Queensland looking for willing sellers from private on-farm storages. An irrigator with 30 GL of stored water agreed to sell 11 GL earmarked for wheat production for the $180 per ML price. Importantly, the irrigator started releasing the water the next day in good faith while purchase contracts were drawn up.

Gauging stations on the Queensland side of the border and in New South Wales enabled DECCW to accurately monitor flows and account for losses on route. To ensure the correct amount of water passed through each weir, Queensland officers marked the river level at the weirs before the environmental water arrived and ensured the water was drawn down to that level as the water passed through (MDBA 2009h).

Lessons from the Narran Lakes purchase

Physical water can be purchased and shepherded downstream in flow-based river systems to meet urgent environmental needs. However, this requires:

monitoring of environmental assets and hydrological modelling appropriate method for valuing water willing sellers with on-farm storage fast and effective coordination between relevant parties available funding tried and tested risk management procedures for water quality appropriate regulation and metering of licence holders cooperation of state agencies to shepherd water gauges to measure river flows and calculate losses appropriate water accounting methodology.


purchase of water for narran lakes - overview · web viewthe purchase would improve the chances of...

Documents