ORD IRRIGATION CO-OPERATIVE LIMITED and DEPARTMENT OF WATER AND ENVIRONMENTAL REGULATION

[2020] WASAT 68

JURISDICTION     :   STATE ADMINISTRATIVE TRIBUNAL

ACT: RIGHTS IN WATER AND IRRIGATION ACT 1914 (WA)

CITATION:   ORD IRRIGATION CO-OPERATIVE LIMITED and DEPARTMENT OF WATER AND ENVIRONMENTAL REGULATION [2020] WASAT 68

MEMBER:   JUDGE D PARRY, DEPUTY PRESIDENT

MS C BARTON, MEMBER

MR P CURRY, SENIOR SESSIONAL MEMBER

HEARD:   25, 26, 27 AND 28 NOVEMBER 2019 AND 9, 10, 11, 12 AND 13 MARCH 2020 - PARTIES' PROPOSED FORM OF FINAL ORDERS FILED ON 27 MARCH 2020

DELIVERED          :   26 JUNE 2020

FILE NO/S:   DR 340 of 2015

BETWEEN:   ORD IRRIGATION CO-OPERATIVE LIMITED

Applicant

AND

DEPARTMENT OF WATER AND ENVIRONMENTAL REGULATION

Respondent

Catchwords:

Water licensing - Licence to take water - Annual water entitlement - Ord River Irrigation Area - Historical underutilisation of annual water entitlement - Policy to grant annual water entitlements to 'match justified crop needs and efficient water use for the area under irrigation' and 'recoup unused water from existing licensees at times of licence renewal' - Justified crop needs - Crop types and areas for purpose of determining justified crop needs and hence annual water entitlement - Crop irrigation water requirements for purpose of determining justified crop needs and hence annual water entitlement - Efficient water use - Distribution efficiency - Allocation for draining M1 Supply Channel to avoid flooding - Correct and preferable decision as to annual water entitlement - Whether there is any cogent reason to depart from application of unused water recoupment policy in circumstances of case - Practice and procedure - Challenge to credibility of applicant's expert witnesses in closing submissions without cross-examination - Whether rule in Browne v Dunn applies in SAT proceedings - Whether denial of procedural fairness

Legislation:

Administrative Appeals Tribunal Act 1975 (Cth), s 33(1)(c)
Rights in Water and Irrigation Act 1914 (WA), s 2(1), s 3(1), s 3(2)(c), s 4, s 4(1), s 4(1)(a)(i), s 4(1)(a)(ii), s 4(1)(b), s 4(2), s 4(3), s 5A, s 5C, s 5C(1)(d), s 5C(2)(a), s 5C(3), s 22GG(1)(c), s 28, s 28(1), Sch 1, cl 1, cl 3, cl 6, cl 6(2), cl 6(3), cl 6(4), cl 7(1), cl 7(2), cl 7(2)(a), cl 7(2)(b), cl 7(2)(c), cl 7(2)(d), cl 7(2)(e), cl 7(2)(f), cl 7(2)(g), cl 7(2)(h), cl 7(5), cl 8, cl 15(1), cl 15(2), cl15(3), cl 22, cl 22(2), cl 22(3)(b), cl 22(5), cl 23, cl 24, cl 24(1), cl 24(1)(a), cl 24(2), cl 25, cl 26, cl 26(4), cl 26(6), cl 27, cl 39, cl 39(1)(c)
State Administrative Tribunal Act 2004 (WA), s 17(1), s 18(1), s 27, s 27(2), s 29, s 29(5)(b), s 32(1), s 32(2)(a), s 90, s 105
Water Agencies (Powers) Act 1984 (WA), s 5(1)(c), s 104(1), s 104(1)(b)
Water Services Act 2012 (WA), s 11

Result:

Application for review allowed
Decision of respondent varied by:

• extending duration of Surface Water Licence SWL156287(3) to 10 years from date of Tribunal's decision;
• specifying the annual water entitlement in Surface Water Licence SWL156287(3) as 335 GL; and
• specifying that the 'Annexure to Licence to Take Water SWL156287(3)' referred to in term, condition or restriction 3 of Surface Water Licence SWL156287(3) is the document which appears in the respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) at pages 1746­1756

Summary of Tribunal's decision:

Ord Irrigation Co-operative Limited (OIC) applied to the Minister for Water (Minister) for a further renewal of its licence to take water from the Ord River and Ord River Basin at Lake Kununurra for distribution and supply to irrigators and for non-potable uses.  Whereas OIC's earlier two licences specified an annual water entitlement of 335 gigalitres (GL), when the Minister's delegate renewed OIC's licence to take water for a period of 10 years (from 14 August 2015 to 13 August 2025), the Department of Water and Environmental Regulation (Department) 'recouped' 110 GL (or about 33%) of the annual water entitlement specified in the previous licence that had not been used by OIC's members and non-member customers during the term of that licence (and indeed since 2007) and specified an annual water entitlement of 225 GL in the new licence.  OIC sought review by the Tribunal of the annual water entitlement of 225 GL specified in the licence and contended that an annual water entitlement of 335 GL should be substituted.

In an earlier decision of the Tribunal made by its former President, the Tribunal dismissed the application for review and fixed the annual water entitlement at 246.3 GL (which was the outcome contended for by the Department at the earlier hearing).  OIC appealed from the earlier SAT decision to the Court of Appeal of Western Australia.  The Court of Appeal unanimously allowed the appeal, holding that the Tribunal erred in law in the earlier SAT decision by '... fail[ing] to understand its statutory function of deciding for itself the correct and preferable decision as to the annual water entitlement under [the licence] ... by incorrectly proceeding on the basis that, since OIC was the applicant, the onus was on OIC to prove its case that the annual water entitlement should be 335GL on the balance of probabilities'.  The Court of Appeal set aside the earlier SAT decision and remitted the matter 'to a differently constituted Tribunal for reconsideration'.

The Tribunal heard the matter over nine days in Kununurra.  On the second day of the hearing, accompanied by the parties' legal representatives and expert witnesses, the Tribunal carried out an extensive view of the Ord River Irrigation Area (ORIA), including Lake Kununurra and Lake Argyle, by vehicle and seaplane.  The Tribunal heard evidence in relation to, among other matters, changes in dominant crops in the ORIA over its history, forecast of crop types and areas likely to be planted by OIC's members and non-member customers over the term of the licence, crop irrigation water requirements from eight expert witnesses, water and irrigation policy issues from four expert witnesses, and hydrology issues from two expert witnesses.  The expert witnesses gave concurrent expert evidence in panel sessions on crop irrigation water requirements, water and irrigation policy, and hydrology.  OIC contended that the annual water entitlement that should be specified by the Tribunal in the licence is 335 GL, whereas the Department contended that the annual water entitlement that should be specified by the Tribunal in the licence is 258.7 GL.

The Tribunal allowed the application for review and determined that the correct and preferable decision at the time of the decision upon the review is that the annual water entitlement that should be specified in the licence is 335 GL, because:

• the annual water entitlement 'to match justified crop needs and efficient water use for the area under irrigation', applying the guiding policy in the Ord Surface Water Allocation Plan (OSWAP), and including an appropriate allocation of 5 GL per year for draining the M1 Supply Channel to avoid flooding in the town of Kununurra when there is a significant rainfall event, is (more than) 335 GL and OIC seeks an annual water entitlement of 335 GL in its renewal application;
• although there has been historical underutilisation of the annual water entitlement by OIC, there are cogent reasons to depart from the application of the recoupment of unused water policy in OSWAP in the circumstances of this case; and
• there is not likely to be any alternative or competing user for any part of this annual water entitlement over the 10 year term of the licence and there is sufficient water within the 750 GL per year allocation limit for the Main Ord subarea to enable such development in the Ord East Kimberley Expansion Project as is likely to occur over the next 10 years.

The Tribunal determined that there are three cogent reasons to depart from the application of the recoupment of unused water policy in OSWAP in the circumstances of this case, namely:

• the annual water entitlement 'to match justified crop needs and efficient water use for the area under irrigation' under OSWAP, and including an appropriate allocation of 5 GL per year for draining the M1 Supply Channel to avoid flooding in the town of Kununurra when there is a significant rainfall event, is (more than) 335 GL, which was the annual water entitlement under the previous licence (part of which the Department seeks to recoup on its renewal) and is the annual water entitlement sought by OIC in its application to renew the licence;
• the ORIA has never settled and stabilised in terms of a dominant crop or crop mix for more than 10 to 15 years at any time in its history and has been in a state of transition throughout much of this time, including during the period 2008 to 2018, which is the period focused on by the Department as justifying recoupment of unused water from OIC, with the consequence that historical water use over this period is an extremely poor measure of future water needs; and
• OIC made the bulk of a significant investment in water use efficiency of $4.05 million and achieved a very significant improvement in the distribution efficiency of water as a result from 56% in 2007 to an average of 76% over the 10 year period 2009 to 2018 at a time when OSWAP did not exist in its current form and the Department's Statewide policy stated (and continues to state) that '[t]he Department will not recoup unused water entitlements that are a result of investment in water use efficiency'.

The Tribunal extended the duration of the licence to 10 years from the date of its decision and specified the annual water entitlement in the licence as 335 GL.

Category:    B

Representation:

Counsel:

Applicant	:	Ms F Ashworth and Mr B Douglas-Baker
Respondent	:	Ms CA Ide and Mr JA Misso

Solicitors:

Applicant	:	Kingfisher Law
Respondent	:	State Solicitor's Office

Case(s) referred to in decision(s):

Allied Pastoral Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR 1; (1983) 44 ALR 607; (1983) 70 FLR 447

Bestry Property Group Pty Ltd and Western Australian Planning Commission [2019] WASAT 15; (2019) 96 SR (WA) 311

Browne v Dunn (1893) 6 R 67 (HL)

Clive Elliott Jennings & Co Pty Ltd v Western Australian Planning Commission [2002] WASCA 276; (2002) 122 LGERA 433

Comcare v Maganga [2008] FCA 285; (2008) 101 ALD 68; (2008) 47 AAR 487

Falc Pty Ltd v State Planning Commission (1991) 5 WAR 522; (1991) 74 LGRA 68

ICM Agriculture Pty Ltd v Commonwealth [2009] HCA 51; (2009) 240 CLR 140; (2009) 170 LGERA 373

Marelic v Comcare (1993) 47 FCR 437; (1993) 32 ALD 155; (1993) 121 ALR 114

More and Water and Rivers Commission [2006] WASAT 112

Ord Irrigation Cooperative Ltd and Department of Water [2017] WASAT 85; (2017) 92 SR (WA) 67

Ord Irrigation Cooperative Ltd v Department of Water [2018] WASCA 83; (2018) 232 LGERA 331; (2018) 12 ARLR 135

O'Sullivan v Farrer [1989] HCA 61; (1989) 168 CLR 210

Water Conservation and Irrigation Commission (NSW) v Browning [1947] HCA 21; (1947) 74 CLR 492

TABLE OF CONTENTS

Introduction

Licence to take water

Application for review

Earlier SAT decision and appeal

Rehearing

The ORIA

Water resource and distribution

Water allocation limits

Ord Stage 1

Ord East Kimberley Expansion Project (Ord Stages 2 and 3)

Water allocations from the Main Ord subarea

Isolation and its consequences for farming in the ORIA

A farming district in transition

OIC

Water supply by OIC

Cost of water

Investment by OIC and improvement in distribution efficiency

Historical underutilisation of annual water entitlement by OIC

Legal framework and principles

Statutory requirement for a licence to take water

Power of the Minister to grant, renew and amend a licence to take water

Scope of the Minister's power to impose terms, conditions and restrictions

Role of OIC as a water service provider

SAT's review jurisdiction and powers

Legal principles relating to the application of policy

Policy framework

SP 11

OSWAP

Section 5C licence tenure

Issues for determination

What crop types and areas should be utilised for the purpose of determining 'justified crop needs' under OSWAP and hence the starting point for the determination of the annual water entitlement in Licence 3?

Crop types and areas planted by OIC's members and non-member customers in 2018 (grouped into low, medium and high water use crops, and with sandalwood dealt with separately)

Mr Dear's forecast of crop types and areas likely to be planted by OIC's members and non-member customers

Mr Dear's 10 assumptions

Cotton

Maize

Hay

Double cropping

Fallow land

Determination of issue

What crop irrigation water requirements should be utilised for the purpose of determining 'justified crop needs' under OSWAP and hence the starting point for the determination of the annual water entitlement in Licence 3?

Expert witnesses' 'consensus' in relation to crop irrigation water requirements

Challenge to the credibility of the applicant's expert witnesses

Cotton, maize and sorghum hay

Sandalwood

Determination of issue

What distribution efficiency should be utilised as 'efficient water use' under OSWAP and hence the starting point for the determination of the annual water entitlement in     Licence 3?

Should the annual water entitlement in Licence 3 include an allocation for draining the M1 Supply Channel to avoid flooding in the town of Kununurra and, if so, what amount?

What is the correct and preferable decision as to the annual water entitlement that should be specified in Licence 3?

Annual water entitlement 'to match justified crop needs and efficient water use'

Is there any cogent reason to depart from the unused water recoupment policy?

Mandatory relevant considerations under cl 7(2) of Sch 1 to the RIWI Act and achievement of relevant objects in s 4(1) of the RIWI Act

Correct and preferable decision

Conclusion

Attachment A ­ Ms Pawley's calculations

REASONS FOR DECISION OF THE TRIBUNAL:

Introduction

Licence to take water

1. On 30 September 2004, a delegate of the Minister for Water (Minister) granted Ord Irrigation Co-operative Limited (OIC or applicant) Surface Water Licence SWL156287(1) under s 5C of the Rights in Water and Irrigation Act 1914 (WA) (RIWI Act), authorising OIC to take water from the Ord River and Ord River Basin at Lake Kununurra for distribution and supply to irrigators for irrigation use and distribution and supply for non-potable uses, for the period 30 September 2004 to 31 August 2009 (Licence 1). Licence 1 was renewed for the period 7 April 2010 to 31 March 2014 (Surface Water Licence SWL156287(2)) (Licence 2). Licences 1 and 2 both specified an 'annual water entitlement' of 335 gigalitres (GL) and were expressed to be subject to a number of 'terms, conditions and restrictions', one of which was to the effect that OIC must not take more than the specified annual water entitlement in any year.

2. On 25 or 26 February 2014, OIC applied to the Minister for a further renewal of its licence to take water.  On 14 August 2015, the Minister's delegate, who is an officer of the Department of Water and Environmental Regulation (Department or respondent), decided to renew OIC's licence to take water for a period of 10 years from 14 August 2015 to 13 August 2025 (Surface Water Licence SWL156287(3)) (Licence 3).  The Department 'recouped' 110 GL (or about 33%) of the annual water entitlement specified in Licence 2 that had not been used by OIC's members and non-member customers during the term of that licence (and indeed since 2007) and specified an annual water entitlement of 225 GL in Licence 3.  Licence 3 is expressed to be subject to 10 'terms, conditions and restrictions', including terms, conditions or restrictions 2 and 3, which state as follows:[1]

   2The licensee must not, in any water year, take more water than the annual water entitlement specified in this licence.

   3The licensee is to comply with 'Annexure to Licence to Take Water SWL156287(3)' and any amendments made by or with the approval of the Department.

Application for review

[1] Respondent's section 24 bundle dated 10 May 2019 (volume 1) (Exhibit 3.1) page 917.

1. On 10 September 2015, OIC sought review by the Tribunal, under s 26GG(1)(c) of the RIWI Act, of the decision of the Minister's delegate 'as to any term, condition or restriction included in a licence'.  In particular, OIC seeks review of:

   •the annual water entitlement of 225 GL specified in Licence 3;[2] and

   •the 'Annexure to Licence to Take Water SWL156287(3)' referred to in term, condition or restriction 3 of Licence 3, which sets out requirements relating to, among other matters, groundwater monitoring, metering requirements, trigger level reporting and water efficiency requirements (Annexure).

   [2] On 3 December 2015, the Tribunal granted an interim mandatory injunction, under s 90 of the State Administrative Tribunal Act 2004 (WA), stating that, until further order, 'the annual water entitlement referred to in condition 2 [of Licence 3] is [335 GL]'.

2. During the proceedings before the Tribunal, the parties agreed to a number of amendments to the Annexure, which resolved the matters in dispute between them in relation to the Annexure.[3]  In relation to the annual water entitlement specified in Licence 3, the applicant's position in the proceedings when it sought review was (and remains) that the annual water entitlement should be specified as 335 GL, whereas the respondent contended that, in light of evidence to be given by witnesses at the hearing, the annual water entitlement should be specified as 246.3 GL, rather than 225 GL as it had originally determined.

Earlier SAT decision and appeal

[3] Annexure to Licence to Take Water SWL156287(3) (respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) pages 1746-1756).

1. The matter was heard by the Tribunal constituted by its former President, Justice Curthoys, over four days on 21-24 November 2016 (earlier SAT hearing).  On 19 June 2017, the Tribunal published its decision in which it dismissed the application for review and fixed the annual water entitlement for Licence 3 at 246.3 GL, which was the outcome contended for by the respondent at the earlier SAT hearing (earlier SAT decision).[4]

   [4] Ord Irrigation Cooperative Ltd and Department of Water [2017] WASAT 85; (2017) 92 SR (WA) 67.

2. OIC sought leave to appeal from the earlier SAT decision to the Court of Appeal of Western Australia, under s 105 of the State Administrative Tribunal Act 2004 (WA) (SAT Act), contending that the Tribunal made errors of law in the earlier SAT decision. The appeal was heard on 7 March 2018. On 28 May 2018, the Court of Appeal[5] unanimously allowed the appeal, holding that the Tribunal erred in law in the earlier SAT decision by:[6]

   … fail[ing] to understand its statutory function of deciding for itself the correct and preferable decision as to the annual water entitlement under Licence 3 … by incorrectly proceeding on the basis that, since OIC was the applicant, the onus was on OIC to prove its case that the annual water entitlement should be 335GL on the balance of probabilities.

   [5] Buss P and Murphy and Mitchell JJA.

   [6] Ord Irrigation Cooperative Ltd v Department of Water [2018] WASCA 83; (2018) 232 LGERA 331; (2018) 12 ARLR 135 [6(2)]. See also [125]-[128] and [136]-[137].

3. In its reasons, the Court of Appeal observed and held as follows:[7]

   OIC was entitled to a review of the Minister's decision in which the Tribunal conducted a de novo hearing without OIC bearing any onus to show that a departure of the decision under review was justified. The Tribunal's misunderstanding of the nature of the function it was performing, reflected in its statement about onus identified at [82] above, deprived OIC of its right to such a review.

   [7] Ord Irrigation Cooperative Ltd v Department of Water [128].

4. The Tribunal's 'statement about onus' referred to in the quotation immediately above was as follows:[8]

   Since the OIC is the applicant, the onus is on the OIC to prove its case that the AWE should be 335GL.  The standard of proof is on the balance of probabilities.

   [8] Ord Irrigation Cooperative Ltd and Department of Water [24].

1. The Court of Appeal held that:[9]

   [T]here is a reasonable possibility that the Tribunal's decision was influenced by its misapprehension as to the nature of its statutory function.  It follows that the appeal should be allowed, the decision of the Tribunal should be set aside and the matter sent back to a differently constituted Tribunal for reconsideration.

Rehearing

[9] Ord Irrigation Cooperative Ltd v Department of Water [7].

1. After the matter was remitted by the Court of Appeal to the Tribunal for rehearing, the respondent contended, in its statement of issues, facts and contentions, as follows:[10]

   … In the absence of more up to date information, an appropriate [annual water entitlement] is 246.3GL, which will meet the anticipated water usage of the applicant's members for the 10 year duration of the licence.

   [10] Respondent's statement of issues, facts and contentions dated 10 May 2019 (Exhibit 1) [71].

2. Thus, the annual water entitlement originally contended for by the respondent for the purposes of the rehearing by the Tribunal was the same as it contended for at the earlier SAT hearing and had been fixed in the earlier SAT decision set aside by the Court of Appeal.  However, in her witness statement dated 9 September 2019, Ms Shaan Pawley, who holds the substantive position of Senior Engineer in the Department's Water Allocation Planning Branch and is acting in the position of Supervising Engineer (Section Manager) for the Surface Water Hydrology Section in the Department's Water Resource Science Branch, and who was called to give evidence by the respondent, calculated 'the annual licence volume required by OIC to be 243.8 [GL] per year'.[11]  Ms Pawley holds a Bachelor of Engineering (Environmental Engineering) (Honours) degree from the University of Western Australia and a Master of Science in Water Science, Policy and Management degree from the University of Oxford, is a Chartered Professional Engineer and registered on Engineers Australia's National Engineering Register for the practice areas of civil and environmental engineering, and has 16 years' experience in water resource management.  In a revised calculation, based on crop types and areas planted by OIC's members and non-member customers in 2018 (with most crops grouped into low, medium and high water use crops, and with sandalwood dealt with separately), and following a chaired        pre-hearing conferral between the eight crop irrigation water requirements expert witnesses called by the parties[12] on 13 November 2019,[13] Ms Pawley calculated 'the OIC's annual licence volume to be 262.9 [GL] per year'.[14]  In a further revised calculation, carried out by Ms Pawley at the Tribunal's direction in December 2019 after the first four days of the rehearing (during which the eight crop irrigation water requirements expert witnesses gave concurrent evidence), based on crop types and areas planted by OIC's members and non-member customers in 2018 (with most crops grouped into low, medium and high water use crops, and with sandalwood dealt with separately), and inputting the 'consensus' irrigation water requirements figures agreed by the crop irrigation water requirements expert witnesses in their evidence and otherwise the figures according to the evidence of the crop irrigation expert witnesses called by the respondent,[15] Ms Pawley calculated 'OIC's annual licence volume to be 258.7 [GL] per year'.[16]  Ultimately, this (258.7 GL) is the annual water entitlement the respondent contends the Tribunal should specify in Licence 3 in this review. 

   [11] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [94]. The calculation is shown in Table 2 on page 42 of Ms Pawley's witness statement.

   [12] Mr John Doble, Mr Jim Engelke, Mr Hans-Christian Bloecker, Mr David Menzel, Mr Robert Boshammer, Dr John Ruprecht, Mr Neil Lantzke and Mr Greg Hocking.

   [13] Chaired by Mr P de Villiers M.

   [14] Revised calculations of Ms Shaan Michelle Pawley tendered at the hearing on 25 November 2019 (Exhibit 5).

   [15] Mr Lantzke and Mr Hocking.

   [16] Exhibit 34 (Revised calculation - Version 1) which is reproduced in Attachment A to these reasons.

3. In contrast, the applicant contends, as it has since the commencement of these proceedings almost five years ago, that the Tribunal should specify an annual water entitlement of 335 GL in Licence 3 in this review.

4. Whereas the earlier SAT hearing was conducted in Perth (without a view) over four days, we conducted the rehearing in Kununurra over nine days.  The Tribunal heard this matter in Kununurra, because of the significant community interest in water licensing in the Ord East Kimberley, six of the witnesses called to give evidence reside there, and the applicant requested the Tribunal to conduct a view of the Ord River Irrigation Area (ORIA).  Accompanied by the parties' legal representatives and expert witnesses, the Tribunal conducted an extensive view of the ORIA, including Lake Kununurra and Lake Argyle, by vehicle and seaplane, on the second day of the hearing.  The Tribunal found the view to be of great assistance in understanding the evidence presented at the hearing.

5. In these reasons, we will now make background findings of fact in relation to the ORIA and OIC, before reviewing the legal framework and principles, and the policy framework, relevant to this review.  We will then identify the principal issues for determination in these proceedings and address each of the issues in turn.

6. For the reasons set out below, in our view, in the exercise of discretion under cl 15(2) of Sch 1 to the RIWI Act, the 'correct and preferable decision at the time of the decision upon the review', under s 27(2) of the SAT Act, is to specify the annual water entitlement in Licence 3 as 335 GL.

The ORIA

1. We make the following background findings of fact in relation to the ORIA.

Water resource and distribution

1. On 13 July 1962, the ORIA was constituted as an 'irrigation district' under s 28 of the RIWI Act.[17]  On 20 July 1963, the Kununurra Diversion Dam was opened, creating Lake Kununurra, which has a storage capacity of 100.8 GL.  Less than a decade later, in 1971,         the Ord River Diversion Dam was completed upstream of                Lake Kununurra, creating Lake Argyle, which had an initial storage capacity of 5,800 GL and, since the main spillway was raised by 6 metres in 1996, has had a storage capacity of 10,760 GL.  The vast scale of the storage capacity of Lake Argyle is apparent from the fact that it can hold nearly twenty times the volume of Sydney Harbour.

   [17] Respondent's statement of issues, facts and contentions dated 10 May 2019 (Exhibit 1) [14] and applicant's statement of issues, facts and contentions dated 5 June 2019 (Exhibit 2) Response to respondent's    statement  [14].

2. We reproduce below Figures 1 and 2 in the Ord Surface Water Allocation Plan (OSWAP), which was published by the Department in September 2013, and contains the policy which guides the Tribunal in arriving at the correct and preferable decision in this review.  Figure 1 'Plan area, proclaimed areas and irrigation areas (stage areas)' in OSWAP shows the location of the ORIA, in the north-east of       Western Australia, the towns of Kununurra and Wyndham,              Lake Kununurra (which is not named, but adjoins the Kununurra Diversion Dam, which is identified) and Lake Argyle, the rivers flowing into these lakes, and the 'Stage 1 areas' and 'Stage 2 areas' of the ORIA.  Figure 2 'Subarea boundaries' in OSWAP shows the same features and also the locations and boundaries of the 'Ord surface water subareas' referred to in OSWAP.  As discussed later in these reasons, Licence 3 (and previously Licences 1 and 2) authorises OIC to take water from the Main Ord subarea, which is subject to an allocation limit of 750 GL per year under OSWAP.  Figures 1 and 2 in OSWAP also show the Western Australia/Northern Territory border and indicate that, although the ORIA irrigation district under the RIWI Act ends at the geographical limit of State legislative jurisdiction at the border, the     'Ord plan area' extends across the border into the Northern Territory (Figure 1) and part of the 'Stage 2 areas' are located in the          Northern Territory (Figures 1 and 2).  In some of the evidence and in the parties' submissions in these proceedings, the part of the 'Stage 2 areas' located in the Northern Territory is referred to as 'Stage 3' or 'Ord Stage 3'.  For clarity, in these reasons, we refer to the part of the 'Stage 2 areas' shown in Figures 1 and 2 in OSWAP which is located in the Northern Territory as 'Stage 3' or 'Ord Stage 3'.  Figures 1 and 2 in OSWAP are reproduced immediately below.[18]

[18] Respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) pages 1052 and 1053.

1. The significant civil works that were carried out to construct the Kununurra Diversion Dam and the Ord River Diversion Dam, and thereby create the large storage capacity of Lake Kununurra and the vast storage capacity of Lake Argyle, respectively, are particularly impressive, because they were constructed in the 1950s and 1960s, in what was then, and remains, a remote part of the State and nation.  As Ms F Ashworth, who appeared with Mr D Douglas-Baker on behalf of OIC, said in opening, these works were carried out at that time and in this location:[19]

   … to harness the benefit - rather unique and certainly counterintuitive in an Australian context - of the huge volumes of water flowing down the Ord River in the summer wet season which made it one of Australia's fastest flowing rivers. …

   [19] ts 92, 25 November 2019.

2. The respondent called Ms Simone McCallum to give evidence.  Ms McCallum is employed by the Department as an engineer in the Surface Water Hydrology Section of the Water Resource Science Branch, holds a Bachelor of Science (Physics) (Honours) degree and a Bachelor of Engineering (Environmental Engineering) (Honours) degree from the University of Western Australia, and has more than 10 years' experience working on surface water assessment in Western Australia. As Ms McCallum said in evidence:[20]

   The Kimberley region experiences a climate characterised by a distinct dry season and wet season.  The dry season is warm, with very little rainfall.  The wet season is hot and rainfall occurs in the form of isolated thunderstorms and low pressure systems or cyclones.  The location and timing of rainfall on the Ord River catchment is highly variable, and means river flow is more difficult to predict than in other less variable catchments.

   [20] Witness statement of Simone Seensee McCallum dated 30 August 2019 (Exhibit 47) [38].

3. Because rainfall in the Kimberley region is so variable, total inflow from the Ord River catchment into Lake Argyle for a year 'could range from as low as hundreds to as high as tens of thousands of gigalitres'.[21]  Ms McCallum also gave evidence that the median annual streamflow into Lake Argyle, which is 'more relevan[t] … for … thinking about the amount of water available, … [than average annual streamflow] … is about 3,400 GL'.[22]  As Ms McCallum also explained, the Ord River catchment and Lake Argyle experience 'a high evaporation rate', with '[a]verage annual evaporation [at] around 3,000 millimetres'.[23] 

   [21] Witness statement of Simone Seensee McCallum dated 30 August 2019 (Exhibit 47) [39].

   [22] ts 792, 11 March 2020.

   [23] Witness statement of Simone Seensee McCallum dated 30 August 2019 (Exhibit 47) [40].

4. We reproduce immediately below Figure 3 'How water                  is distributed from the Ord River and Kununurra Diversion dams'          in OSWAP.[24]  The relative sizes of Lake Argyle and Lake Kununurra shown in Figure 3 are not to scale.  As indicated earlier, whereas Lake Kununurra has a storage capacity of 100.8 GL, Lake Argyle has a storage capacity of 10,760 GL.  Thus, the storage capacity of Lake Argyle is over one hundred times greater than the storage capacity of Lake Kununurra.

   [24] Respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) page 1060.

1. As is apparent in Figure 3 in OSWAP, and as Ms Pawley explained in her evidence, water from the Upper Ord River catchment flows into and is stored in Lake Argyle by the Ord River Dam.         The Upper Ord River catchment straddles the Western Australia/ Northern Territory border, with approximately four-fifths located in Western Australia and approximately one-fifth located in the Northern Territory.[25]  As Ms Pawley explained in evidence:[26]

   The Ord River system, including the water stored in Lake Argyle (by the Ord River Dam) and Lake Kununurra (by the Kununurra Diversion Dam) and its tributaries … supports many important stakeholders. It provides water to a growing irrigation area, sustains a unique Kimberley environment, provides water for hydroelectricity generation and supports local indigenous, community, recreational and tourism values … .

   [25] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [22].

   [26] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [21].

2. Water Corporation owns, operates and maintains the Ord River Dam and is licenced by the Department to store and release (but not divert) the water in Lake Argyle and Lake Kununurra under Surface Water Licence SWL55655(9).[27]  Pacific Hydro Limited (Pacific Hydro) owns and operates a 30 megawatt hydroelectric power station at the Ord River Dam.  Pacific Hydro releases water through the power station to generate hydroelectric power.  Pacific Hydro is not licensed by the Department, but rather operates under a 1994 water supply agreement with the former Water Authority of Western Australia (now Water Corporation) (water supply agreement).[28]  Water Corporation can also release water from Lake Argyle through the irrigation valves that bypass the power station.  However, as Ms Pawley said, '[w]ater is released through the power station whenever possible' and '[c]urrently releases via the irrigation valves usually only occur when the power station is shut down for maintenance'.[29]  As Ms Pawley also said, '[r]eleases via the irrigation valves will likely increase in the future when there are greater water demands from irrigators'.[30]

   [27] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [25].

   [28] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [26].

   [29] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [27].

   [30] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [27].

3. As can be seen in Figure 3 in OSWAP reproduced at [22] above, the water that is released through the power station and irrigation valves at the Ord River Dam flows down the Ord River and into Lake Kununurra. Lake Kununurra also collects any overflow above the spillway (spills) from Lake Argyle via Spillway Creek and surface water runoff from the local catchment between the two dams.[31]  As Ms McCallum explained in her evidence:[32]

   The model is set up to keep a constant water level in Lake Kununurra by ordering water from Lake Argyle that will replenish the water released for irrigation and environmental flow.

Water allocation limits

[31] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [28].

[32] Witness statement of Simone Seensee McCallum dated 30 August 2019 (Exhibit 47) [36].

1. Chapter 4 of OSWAP sets annual allocation limits for each of the five Ord surface water subareas totalling 905 GL per year.                 The 'allocation limits represent the annual volume of water that can be taken for consumptive use from each subarea'.[33]  Under OSWAP, '[a]llocation limits do not include water released for hydroelectricity generation or the downstream environment'.[34]  Table 3 in OSWAP sets out the allocation limits as follows:[35]

   [33] Clause 4.1 of OSWAP (respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) page 1073).

   [34] Clause 4.1 of OSWAP (respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) page 1073).

   [35] Clause 4.1 of OSWAP (respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) page 1074).

2. OSWAP states that the 750 GL per year allocation limit for the Main Ord subarea and the 115 GL per year allocation limit for the Carlton­Mantinea subarea are '[f]or irrigation'.[36]  As also stated in OSWAP, and as can be seen in Table 3 reproduced above ('[a]nnual reliability of supply'), the allocation limits of 750 GL per year for the Main Ord subarea and 115 GL per year for the Carlton-Mantinea subarea 'can be granted at 95 per cent reliability from the Ord River downstream of Lake Argyle'.[37]  As Ms Pawley therefore said in evidence, '[t]he Main Ord subarea, using water from Lake Argyle and Lake Kununurra, has a secure and reliable allocation limit of 750 [GL] per year'.[38]  As Ms Pawley explained, '[r]eliability refers to the frequency with which a water licence holder can access their full annual licensed water entitlement', and consequently licence holders from the Main Ord subarea 'can … expect irrigation supply to be restricted on average in [only] five out of every one hundred years, when water levels in Lake Argyle are low'.[39]  As Ms Pawley also said:[40]

   This highly reliable (95 per cent) allocation limit is maintained through water release rules (which include restrictions on releases) for irrigation, hydroelectricity, navigation and environmental releases at the Ord River and Kununurra Diversion dams. 

   [36] Clause 4.1 of OSWAP (respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) page 1074).

   [37] Clause 4.1 of OSWAP (respondent's section 24 bundle dated 10 May 2019) (volume 2) (Exhibit 3.2) page 1074).

   [38] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [53].

   [39] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [55].

   [40] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [55].

3. As is apparent in Table 3 in OSWAP reproduced at [26] above, the 750 GL per year allocation limit for the Main Ord subarea has been divided into the components of 'general licensing' (590 GL per year) and 'Northern Territory' (160 GL per year). However, the text referenced by the asterisk next to the allocation limit for the Northern Territory states that '[t]he Northern Territory component may be used in Western Australia if demands in this [S]tate grow rapidly before extra supply options are approved'. Similarly, OSWAP states in cl 4.2 that:[41]

   Much of the remaining 400 GL/yr [that had not been allocated as at February 2013] is expected to be granted for irrigation expansion in WA and a portion will be needed should irrigation expansion proceed in the Northern Territory.  Allocation of the remaining water will be based on how developments proceed, any intergovernmental agreements and whether new water is available through water supply planning.  

Ord Stage 1

[41] Respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) page 1075.

1. The climatic conditions of the Kimberley region referred to above and the large storage capacity of Lake Kununurra and subsequently the vast storage capacity of Lake Argyle, and the consequent high reliability of water supply for irrigation at the Kununurra Diversion Dam and the Ord River Dam, enabled the creation in the 1960s and 1970s of an open drain, gravity­fed, flood or furrow irrigation system, generally to the north of Lake Kununurra at Ivanhoe Plain and in part to the south of Lake Kununurra at Packsaddle Plain, which is known as 'Ord Stage 1'. Ord Stage 1 originally comprised an area of approximately 5,000 hectares of irrigated farmland and now comprises an area of over 16,000 hectares. Water is conveyed to Ord Stage 1 farmland to the north of Lake Kununurra via an open channel known as the 'M1 Supply Channel'. The route of the M1 Supply Channel is shown in Figure 4 in OSWAP, which is reproduced at [31] below.

1. As Ms Pawley said in evidence, '[s]uccessive Western Australian and Commonwealth governments have supported irrigation expansion in the Ord'.[42]  Clause 3.2 of OSWAP refers to 'irrigation expansion' in the Ord as follows:[43]

   Since the 1950s the vision for the Ord irrigation project has been to develop all the irrigable soils on the greater Ord and Keep River floodplains.  Expansion beyond the Stage 1 areas was promoted in the mid 1990s, culminating in a proposal to develop more than 30 000 [hectares] of irrigated agriculture to the north of the Stage 1 area,        in what became known as the M2 channel supply area.

   The M2 channel supply area was thoroughly investigated and granted conditional environmental approval by the [S]tate and Northern Territory governments in early 2002.  Although the project lapsed, the approvals remained and the Western Australian Government committed financial resources to develop the first phase of the M2 supply area.

Ord East Kimberley Expansion Project (Ord Stages 2 and 3)

[42] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [118].

[43] Respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) page 1064.

1. In 2008, the State Government committed to developing          7,400 hectares of serviced irrigation farmland, now known as the 'Goomig farmland', to the north-east of Ord Stage 1, as 'the first phase of the greater (30 000 [hectares]) M2 channel supply area development',[44] which is known as 'Ord Stage 2'.  We reproduce immediately below Figure 4 'Current (Stage 1) and proposed irrigation development areas in the plan area' in OSWAP, which shows the route of the M1 Supply Channel through Ord Stage 1 to the north of          Lake Kununurra, and the route of the M2 Supply Channel, currently an extension of the M1 Supply Channel, constructed in 2010 to 2012 to convey water to the Goomig farmland and ultimately to the Knox Creek Plain portion of Stage 2.

   [44] Clause 3.2 of OSWAP (respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) page 1064).

1. In addition to Ord Stage 2, OSWAP proposes 'expansion of the Ord River Agricultural Area over the remaining 14 000 [hectares] of the M2 [S]upply [C]hannel area in the Northern Territory',[45] which is known as 'Ord Stage 3'.  OSWAP refers to the Western Australian, Northern Territory and Commonwealth governments having 'recently [as at September 2013] signed a Memorandum of Understanding on the proposed expansion of the Ord River Agricultural Area' in                Ord Stage 3.[46]  However, as discussed later in these reasons, an intergovernmental agreement between Western Australia and the Northern Territory has yet to be negotiated and agreed to enable the supply of water from the ORIA, in particular the Main Ord subarea, to Ord Stage 3.

   [45] Section 3.2 of OSWAP (respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) page 1064).

   [46] Section 3.2 of OSWAP (respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) page 1064).

2. The proposed development of approximately 30,000 hectares of new agricultural land in Western Australia (Ord Stage 2) and the potential development of approximately 14,000 hectares of new agricultural land in the Northern Territory (Ord Stage 3) is now collectively known as the 'Ord East Kimberley Expansion Project'.       As Ms Pawley said in evidence, the Ord East Kimberley Expansion Project is being managed by the Department of Primary Industries and Regional Development, with support from other State government departments and agencies, including the respondent, and the State and Commonwealth governments have invested over $500 million 'to deliver key irrigation infrastructure (such as the M2 [Supply] [C]hannel and roads) to expand the ORIA and community infrastructure'.[47] 

   [47] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [118].

3. The respondent called Ms Susan Worley, who is the Department's Director of Water Assessment and Allocation, to give evidence.  Ms Worley holds a Bachelor of Science Education degree from the University of Western Australia and a Diploma in Science and Maths Education from Curtin University of Technology and has also studied towards a Diploma in Landcare at Curtin University of Technology (incomplete), and has been involved in water resource management through her employment with the respondent and its predecessors for 24 years, including as Regional Manager North West with the Water and Rivers Commission (1999­2006), in which role she was involved in water planning for the Ord East Kimberley, and as Manager of Water Allocation Planning (2006­2010), in which role she was involved in water allocation planning for current and future irrigation in the         Ord East Kimberley.  As Ms Worley said in her evidence, the Ord East Kimberley Expansion Project has been supported by the State and Commonwealth governments, by releasing land to enable development and in other ways.  As Ms Worley also said in her evidence, the Department supports the expansion of irrigated agriculture in the        Ord East Kimberley through its role as 'water regulator and water resource planner' and 'aims to have an appropriate level of water planning underway sufficiently ahead of the development planning so that water resource management arrangements are clear and water is not a constraint to a State agenda'.[48]  To date, the Western Australian Government has released new land at Goomig (approximately           7,400 hectares), Knox Creek Plain, Ord East Bank, Ord West Bank, Mantinea, and Packsaddle.  The State Government also plans to release land in the areas of Cockatoo Sands Victoria Highway and Carlton Hill Road.  These locations can be seen in Figure 1 'Ord East Kimberley irrigation development and expansion areas' in the witness statement of Ms Worley, which is reproduced immediately below.[49] 

Water allocations from the Main Ord subarea

[48] Witness statement of Susan Joan Worley dated 5 September 2019 (Exhibit 39) [11].

[49] Witness statement of Susan Joan Worley dated 5 September 2019 (Exhibit 39) page 4.

1. In total, the Ord East Kimberley Expansion Project aims to increase the size of the ORIA to a total of approximately 60,000 hectares of agricultural land, comprising approximately 16,000 hectares in Ord Stage 1, approximately 30,000 hectares in Ord Stage 2 and approximately 14,000 hectares in Ord Stage 3.  Approximately     51,000 hectares of the 60,000 hectares of agricultural land in the ultimate envisaged ORIA (Ord Stages 1, 2 and 3) would be supplied with irrigation water from the 750 GL per year allocation limit of the Main Ord subarea and approximately 9,000 hectares would be supplied with irrigation water by the 115 GL per year allocation limit of the Carlton­Mantinea subarea, located downstream on the Ord river, to the west of the remainder of the ORIA.  Ms Pawley also said that water from the Main Ord subarea could be used to supply land in the Carlton­Mantinea part of Ord Stage 2.[50]

   [50] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [119].

2. Under Licence 3 (and previously under Licences 1 and 2), OIC diverts water from the Main Ord subarea (at Lake Kununurra) above the Kununurra Diversion Dam for irrigation of approximately       15,031 hectares of agricultural land in Ord Stage 1.[51]  Most of the water diverted by OIC under Licence 3 is diverted at the M1 offtake for conveyance via the M1 Supply Channel to Ivanhoe Plain to the north and about 10% - 12% is diverted at the Packsaddle Pump Station for conveyance to Packsaddle Plain to the south.[52]  Between 2015 and 2018, OIC also diverted water under Licence 3 for irrigation by Kimberley Agricultural Investment Pty Ltd (KAI) at the Goomig farmland in Ord Stage 2 and conveyed this water to KAI via the M1 Supply Channel and the M2 Supply Channel.  From 2019, KAI has accessed water for the Goomig farmland under its own Surface Water Licence SWL179228(3), rather than from OIC under Licence 3.[53]

   [51] The area of 15,031 hectares is taken from Attachment MD-35 in the witness statement of Mathew Dear dated 12 September 2019 (volume 2) (Exhibit 6.2), which is reproduced at [148] below. As Ms Pawley points out in her witness statement dated 9 September 2019 (Exhibit 41) [60], OIC's 2018 annual report indicates that, in that year, 15,059 hectares of land was available for cropping under Licence 3. However, nothing turns on this relatively small discrepancy. Given that the annual water entitlement that the Tribunal is required to determine for the purposes of Licence 3 in these proceedings will operate prospectively for 10 years, and given that Mr Dear's Attachment MD-35 contains a forecast of crop types and areas which are likely to be irrigated under Licence 3 over the period to 2029, we find that the area of agricultural land to be irrigated in Ord Stage 1 under Licence 3 is 15,031 hectares.

   [52] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [29] and [53] and OSWAP cl 3.2 and cl 5.2 (respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) pages 1062 and 1083).

   [53] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [29].

3. Water Corporation also diverts water from Lake Kununurra, under its Surface Water Licence SWL158784(7), and conveys it via the M1 Supply Channel to supply water to its 'M1 channel customers' and to flush and dilute discharges to the M1 Supply Channel from the Kununurra Wastewater Treatment Plant, which it owns and operates. 

4. In addition, there are about 80 self-supply water licensees in Ord Stage 1, known as 'riverside pumpers', who are collectively licensed to take 10.5 GL per year directly from the Ord River above and below the Kununurra Diversion Dam.[54]

   [54] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [29] and Table 1 page 24.

5. As Ms Pawley said in evidence, the Department 'will issue licensed water entitlements up to the annual allocation limits at the defined reliability for each of the subareas to support irrigation'.[55]  As Ms Pawley also said, '[o]nce the allocation limit is reached, no more licensed water entitlements will be issued by the Department'.[56]  As at August 2019, 382.3 GL per year (or approximately 51%) of the 750 GL per year allocation limit for the Main Ord subarea 'has already been licensed for irrigation' and a total of 120 GL per year 'has been committed (that is a licence application was approved pending conditions being met)' to KAI for development of the Goomig farmland in Ord Stage 2.[57]  Of this volume, KAI holds a 32 GL per year licence with the remainder (88 GL) reserved to be provided in stages, based on KAI's development timeline.  Taking into account the volumes of water currently licensed and committed, the Main Ord subarea is 63% allocated.  The water which is currently licensed or committed from the Main Ord subarea is summarised by Ms Pawley in Table 1 of her witness statement, which is reproduced immediately below.  As this table shows, 279.7 GL per year from the Main Ord subarea:[58]

   … is available for new or increased entitlements to support irrigation expansion in Western Australia and potentially in the Northern Territory, subject to irrigation water requirements and intergovernmental water sharing agreements.

Isolation and its consequences for farming in the ORIA

[55] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [56].

[56] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [56].

[57] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [56].

[58] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [56].

1. The evidence before the Tribunal indicates that not only is the ORIA a place of significant opportunities for farming, owing to the vast water resource created by the climatic conditions of the summer wet season and the dams referred to earlier, but it is also a place of significant difficulties and challenges for farming, owing to its isolation.

2. Mr Jim Engelke, who holds a Bachelor of Agriculture degree from the University of Western Australia and a Master of Business Administration degree from the University of New England (Armidale), and has been the General Manager of KAI since 2013 and a director of KAI since 2018, was called to give evidence by the applicant.  KAI is a 'large-scale development company' operating in the ORIA 'with a development capacity of approximately 25,000 hectares, including approximately 6,660 hectares in Goomig, 5,500 hectares in Knox Plain, 2,000 hectares in [Carlton] Hill, and 1,200 hectares in Ord Stage 1'.[59]  As KAI's General Manager, Mr Engelke is responsible 'for all aspects of its land development and farming operations - including the design, construction, monitoring and operation of water infrastructure and cropping methods'.[60]

   [59] Witness statement of Jim Engelke dated 5 September 2019 (Exhibit 24) [3].

   [60] Witness statement of Jim Engelke dated 5 September 2019 (Exhibit 24) [5].

3. Mr Engelke aptly described the ORIA as 'an [i]solated [p]lace' 'in far northern Western Australia'.[61]  Mr Engelke referred to the extreme isolation of the ORIA and its consequences for farming in the following passage of his evidence:[62]

   To put the geographical location in perspective, although Kununurra is governed by Perth, Perth is nearly four times further away than Darwin, which is 850 km away by road.  These distances affect land development and farming in the region, principally through increased logistics costs, being the cost of getting farming inputs in and outputs out.

   [61] Witness statement of Jim Engelke dated 5 September 2019 (Exhibit 24) [8].

   [62] Witness statement of Jim Engelke dated 5 September 2019 (Exhibit 24) [8].

4. As Mr Engelke explained, in consequence of the ORIA's isolation:[63]

   Scale is critical to meeting KAI's farming objectives.  Without scale the limitations of locations are more severe.  Scale enables increased use of shipping, rather than trucking, bulk purchasing and allowing investment in infrastructure to handle the increased volumes and input and output.  To illustrate the point, in 2019 KAI grew maize on a substantial scale.  Last year, KAI grew 1,500 hectares of maize that produced a yield of just less than 16,000 tonnes, and KAI is likely to grow approximately 30,000 tonnes this year.  The combined production in the region for 2019 will be approximately 50,000 tonnes.  At these volumes and coupled with supply contracts investment in grain handling and storage becomes viable.

   [63] Witness statement of Jim Engelke dated 5 September 2019 (Exhibit 24) [9].

5. Mr Hans-Christian Bloecker, a second-generation farmer in the ORIA, who grew up on the approximately 1,106 hectare property he farms under the trading name Bothkamp Australia Farm (Bothkamp) in Ord Stage 1, and who was called to give evidence by the applicant, gave similar evidence about the ORIA's isolation and the difficulties and challenges posed by that isolation for farming.  Mr Bloecker holds a Bachelor of Science in Agriculture degree and a Bachelor of Economics degree from the University of Western Australia and a Diploma in Horticultural Business from the University of Tasmania.  In the 10 years that he has been Managing Director of Bothkamp, Mr Bloecker has been 'responsible for short-term and long-term strategic business decisions, including but not limited to crop selection, agronomy, infrastructure investment, and tropical irrigation methods and practices'.[64]  Over this period, 'Bothkamp has operated a commercially successful, large-scale farming business' in Ord Stage 1.[65]  As Mr Bloecker explained, Bothkamp (and all other farmers in the ORIA) face two main difficulties and challenges in farming in this remote location:[66]

   First, the cost of farming inputs such as equipment, seeds, chemicals, machines and equipment parts are expensive owing to the costs of freighting these goods into the region.  For example, fertilizer can be purchased at CSPB (fertiliser suppliers) in Perth but it must be transported to the Ord, which costs approximately $220 per metric tonne.  This means that a farmer who purchases urea fertilizer at $500 per tonne must pay an additional $220 per tonne to transport the fertilizer to the Ord.

   Second, freight not only increases the costs of farming inputs, it also increases the costs of farming outputs.  Currently, 90% of Bothkamp's horticulture is sold to domestic markets in Perth, Adelaide, Melbourne, Sydney, Darwin and Brisbane, and 10% of its horticulture is exported predominantly from the ports of Perth, Melbourne and Sydney.  Bothkamp gets its horticulture to these markets by loading trucks at the Property and paying the associated freight cost.  Although highly variable, in August 2019, these prices were approximately $200 per tonne to Perth or $400 for a refrigerated pallet to Melbourne (which is required for crops such as melons).  To illustrate the point,              Kent pumpkins are currently $0.60 per kg and at the start of season were $1.20 per kg.  The freight percentage is therefore a significant percentage of a crop that itself is highly variable in price:  from 17% of market price as prices stood at the start of the season to over 30% of the market price as prices stood at the end of the season.  And it should not be forgotten that in addition to freight, on these prices the farmer has all of the other costs of production, which means that freight can make tight profit margins substantially tighter.

   [64] Witness statement of Hans-Christian Bloecker dated 6 September 2019 (Exhibit 22) [8].

   [65] Witness statement of Hans-Christian Bloecker dated 6 September 2019 (Exhibit 22) [5].

   [66] Witness statement of Hans-Christian Bloecker dated 6 September 2019 (Exhibit 22) [11] and [13].

6. Mr Robert Boshammer, who has been a farmer in Ord Stage 1 for 35 years, was also called to give evidence by the applicant.  Mr Boshammer holds a Bachelor of Applied Science (Honours) degree from Queensland Agricultural College.  Mr Boshammer farms with his son and daughter through a number of family trusts and businesses, which, for convenience, are collectively referred to as 'Oasis'.  Oasis owns 2,100 hectares of agricultural land in Ord Stage 1, of which it farms 1,300 hectares and leases 800 hectares to a sandalwood farm.  Oasis also farms 300 hectares of land in Goomig (in Ord Stage 2), which is leased from KAI.  As the General Manager of Oasis, Mr Boshammer is 'involved in all major decisions concerning the business, including crop choice, investment planning, and tropical irrigation methods and practices'.[67]  Since 2006, Mr Boshammer has also been a non-executive director of Cambridge Gulf Ltd (CGL), which imports and distributes fuel and operates and manages the Port of Wyndham under an operating agreement with the Department of Transport.[68]  Through his work with CGL, Mr Boshammer has 'extensive knowledge of the cost of transporting goods to and from Kununurra, as well as the market opportunities that exist as a result of the [Port of Wyndham's] operations'.[69]  From 2012 to 2018, Mr Boshammer was also a Board Member of the Kimberley Development Commission (KDC), advising the Minister for Regional Development and Lands on matters affecting the development of the region, including water and food security, projected development of the ORIA, and new market opportunities for local farmers.  As a result of his work on the KDC, Mr Boshammer has 'extensive knowledge of proposed developments in the Kimberley, which includes the ORIA, and the business opportunities this presents for local farmers in terms of accessing emerging markets'.[70] 

   [67] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [5].

   [68] Witness statement of Mathew Dear dated 12 September 2019 (volume 1) (Exhibit 6.1) [4].

   [69] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [7].

   [70] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [8].

1. Mr Boshammer gave evidence consistent with the evidence of Mr Engelke and Mr Bloecker about the consequences of the ORIA's isolation in terms of the significant freight costs of farming inputs and the significant freight costs and difficulties involved in transporting goods to markets from the ORIA.  As Mr Boshammer said in evidence, 'Oasis' properties in Broome and Mataranka provide a clear illustration of how transport alone can affect farming in the ORIA'.[71]  As Mr Boshammer explained in his evidence:[72]

   … Until the Mataranka property was sold in 2018, Oasis farmed watermelon on its Mataranka and Broome properties across a combined 400 hectares (approximately).  For a number of years before the Mataranka property was sold, Oasis was supplying from these two properties approximately 40% of the Australian watermelon market between May and November.  Notwithstanding that Oasis had the expertise to grow watermelons, and the ORIA has the right soils and weather to grow watermelons, Oasis is not interested in growing watermelons in the ORIA because of shipping and production costs.  By growing watermelons in Broome and Mataranka as opposed to the ORIA, and without providing commercially sensitive information, I can say that Oasis saves $60 per tonne in freight alone, which is a substantial enough percentage of our profit margins for Oasis not to grow watermelons in the ORIA.

   [71] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [17].

   [72] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [17].

2. Mr David Menzel 'wears' what he describes as multiple 'hats' in the Ord East Kimberely.[73]  As a consequence of his multiple roles in the Ord, Mr Menzel has enormous knowledge and experience of the particular circumstances, opportunities, challenges and potential developments within this remote agricultural region.  Mr Menzel holds an Advanced Diploma of Science (Farm Management) from the University of Melbourne and has been a local farmer in Ord Stage 1 for 24 years.  He farms approximately 460 hectares of land in partnership with his wife, Karen.  Mr Menzel has been the Chairman of the Board of OIC since 2010, was Vice Chairman of the Board from 2006 to 2010, and has been a director of OIC since 2004.  Mr Menzel also holds the following positions:

   •Shire Councillor and President of the Shire of Wyndham-East Kimberley, the local government in the district of the ORIA, since 2017;

   •Chairman of the Independent Review Group for Ord Stage 2 since November 2015, in which role he reports to the Federal Minister for the Environment and Energy in relation to Goomig and Knox Plain regarding environmental management;

   •a director of the Ord River District Co-operative (ORDCO) since 2014, which is an independent agricultural co-operative that provides services to members through the provision of product data and information, merchandise relevant to irrigated agriculture (including crop protection and nutrient products, and seed and grain merchants), crop monitoring, research and development, and harvesting, storage and marketing of farm produce; and

   •a non-executive director of CGL since 2010.

   [73] ts 472, 28 November 2019.  As Mr Menzel said, 'I might be wearing two or three hats in the one meeting' (ts 472, 28 November 2019).

3. Mr Menzel was also previously Chairman of the East Kimberley Community Reference Group Stage Two Development, which oversees community engagement with the ORIA expansion and infrastructure upgrade.  In addition, between May 2014 and June 2015, Mr Menzel was a member of the Prime Minister's Northern Australia Advisory Board, which was responsible for the development of the Developing Northern Australia White Paper.  This role 'entailed broad consultation across northern Australia focussed on the topics of land, water, infrastructure, business, trade and investment, education, research and innovation, and governance'.[74]

   [74] Witness statement of David Douglas Menzel dated 6 September 2019 (Exhibit 20) [9].

4. In light of his multiple and overlapping 'hats', we have no hesitation in accepting Mr Menzel's observation that he has 'extensive knowledge of current and future projects in the ORIA',[75] and his evidence that:[76] 

   As a local farmer, Chairman of OIC, and director of Gulf Cambridge Ltd and ORDCO, I have experience at every level of production, wholesaling, marketing and transporting produce and equipment, and have witnessed first-hand the difficulties involved in farming in Ord Stage 1.  I also have personal experience in commercial farming practices, related costs, water requirements, and tropical irrigation best practice.

   [75] Witness statement of David Douglas Menzel dated 6 September 2019 (Exhibit 20) [11].

   [76] Witness statement of David Douglas Menzel dated 6 September 2019 (Exhibit 20) [13].

5. Indeed, in light of their academic qualifications and significant local knowledge and experience, we fully accept the evidence of         Mr Menzel, Mr Engelke, Mr Bloecker and Mr Boshammer in relation to the history, current circumstances and potential developments within and affecting the ORIA.

6. Mr Menzel gave evidence consistent with the evidence of Mr Engelke, Mr Bloecker and Mr Boshammer in relation to the particular challenges posed by the ORIA's isolation.  As Mr Menzel said, 'the area's isolation has affected every aspect of farming' and '[o]ne of the more significant effects of the isolation is that transporting goods in and out of the ORIA is inefficient and expensive'.[77]  Mr Menzel gave a 'simple example of how the area's isolation impacts significantly on farming' in that 'it is not uncommon to wait 7­10 days for machinery to be repaired due to the delay involved in the transportation of machine parts to Kununurra', which 'can have significant effects on the cropping or harvesting regime'.[78]  As Mr Menzel also said, 'water availability and reliability is what makes farming in the ORIA commercially viable' and 'partially offsets the other relative disadvantages Ord Stage 1 farmers face'.[79]

   [77] Witness statement of David Douglas Menzel dated 6 September 2019 (Exhibit 20) [14].

   [78] Witness statement of David Douglas Menzel dated 6 September 2019 (Exhibit 20) [15].

   [79] Witness statement of David Douglas Menzel dated 6 September 2019 (Exhibit 20) [16].

7. Similarly, Mr Mathew Dear, who has been the General Manager of OIC since 2012, and an employee of OIC since December 2006, gave the following evidence, which was not questioned or contradicted and which, given his significant knowledge and experience of the circumstances of the ORIA, we accept:[80]

   [I]n my opinion, predicting what will be farmed in the Ord is notoriously difficult.  This is because, in my opinion, the Ord is not like other irrigation areas.  The Ord is an irrigation area that requires high value crops to be grown or for farmers to grow a large volume of crops to benefit from economies of scale.  This is because everything in the Ord is expensive due to the region's isolation.  It costs substantially more for farmers to freight farming equipment and supplies in, and farming produce out.  This makes it difficult for local farmers to compete with other irrigation districts that have lower farming overheads.  For example, if local farmers wish [to] compete in the Perth cucurbit market, local farms will need to compete with growers in Carnarvon in Western Australia which is substantially closer to Perth.  For this reason, farmers in the Ord tend to move quickly to and from different crops in order to maximise profit margins by selecting those crops that have the highest return in a particular season.

   [80] Witness statement of Mathew Dear dated 12 September 2019 (volume 1) (Exhibit 6.1) [120].

8. As indicated earlier, KAI seeks to address the difficulties and challenges posed by the increased costs of inputs and outputs in the ORIA by farming at scale.  While the properties of other farmers in the ORIA are significantly smaller than the current development, and certainly the development capacity, of KAI, farmers in the ORIA have also sought, individually and collectively, to minimise the costs of transporting farming outputs to markets.  For example, in 2019, Oasis spent $750,000 on a new baler and tractor so that it could heavy bale hay.  As Mr Boshammer said, this allows Oasis 'to pack more hay onto trucks, which has the potential to reduce freight costs because fewer trucks are required for the same volume of hay'.[81]  Mr Boshammer also gave an 'example of farmers working together to defray freight costs' in that, from 2018, farmers in the region collectively produced enough maize to charter ships to transport this crop from the Port of Wyndham directly to purchasers in South Korea.[82]  This enterprise not only required local farmers to work collaboratively in the production, storage and transportation of maize, but also depended on the use of infrastructure, such as warehouses, that had been built and paid for by the farmers.  In 2018, farmers in the ORIA produced enough maize for two 10,000 tonne shipments to South Korea.  In 2019, farmers in the ORIA were growing enough maize for three 10,000 tonne shipments.

   [81] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [15].

   [82] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [15].

9. Another means by which farmers in the ORIA have worked cooperatively to mitigate the significant additional costs associated with farming in this remote location is the formation of ORDCO.  As Mr Bloecker, who is a director of ORDCO, and Mr Boshammer both explained, ORDCO assists to defray some of the costs of farming inputs, such as seeds, fertiliser and chemicals for weed and pest control, '[t]o some extent',[83] by purchasing commonly-used products in bulk and passing on the savings to its members, and storing farm inputs, so that they are available in the district when required and farmers do not have to individually incur the expense of storage and the cash flow problems of having to purchase bulk goods well in advance of requirements.  However, as Mr Boshammer said, 'even through ORDCO, the cost of most products is higher for farmers in the ORIA than [in] other regions of Australia' and, similarly, 'machines, machine parts and human capital, all cost more in the ORIA than in other parts of Australia'.[84]

A farming district in transition

[83] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [16].

[84] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [16].

1. Although the ORIA was established some 60 years ago, the evidence shows that there has never been a stable dominant crop or crop mix in this farming district for more than 10 to 15 years.  While six decades old, as Mr Engelke expressed it, 'the ORIA is not a        well-developed farming region', but rather is properly characterised as 'a pioneering region … [which] needs the room to move, adjust and react'.[85]  The evidence before the Tribunal in relation to the history of irrigated agriculture in the Ord is well expressed and summarised in the following evidence of Mr Engelke:[86]

   Stage 1 is a developing region.  In my observation, and to my knowledge, the region has not been stable for more than ten years at any time in its history.  There have been a few times that the region nearly stabilised, for example with cotton and then with sugar, but something has always destabilised it.  In my experience, there has not been a stable crop in the region and farmers have tended, because of necessity, to scramble from one crop to the next. …

   [85] Witness statement of Jim Engelke dated 5 September 2019 (Exhibit 24) [57].

   [86] Witness statement of Jim Engelke dated 5 September 2019 (Exhibit 24) [61].

2. As Mr Engelke mentioned in the passage of his evidence set out immediately above, the first major crop in the ORIA was cotton, which was planted extensively in the 1960s and 1970s.  However, cotton was found to be susceptible in the Ord to a wet season pest,            Spodoptera littoralis, 'which would feed on the leaves and flowers of the cotton plant'.[87]  Consequently, as Mr Boshammer said, 'the cotton industry … ceased in the early 1970s'.[88] 

   [87] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [49].

   [88] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [9].

3. Next, in the mid-1970s to mid-1980s, came horticulture, including rockmelons, watermelons and pumpkins.  However, as Mr Boshammer said in evidence set out earlier in these reasons, although the ORIA has 'the right soils and weather to grow watermelons', it proved to be cost­prohibitive to produce such horticultural crops in the ORIA.[89]

   [89] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [17].

4. Next, in the mid-1980s, came maize.  In around 1985,                 Mr Boshammer observed that farmers in the ORIA were 'beginning to have increasing success in growing maize, such that by around 1987, to the best of my recollection, the region was exporting approximately 5,000 tonnes of maize annually to [Papua] New Guinea for use in animal feed'.[90]  ORDCO built a warehouse in Wyndham for storage of maize before shipping.  However, within a few years, as  Mr Boshammer said, '[Papua] New Guinea began using wheat instead of maize in animal feed and the maize industry began to decline'.[91]

   [90] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [10].

   [91] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [10].

5. Next, in the early 1990s, came sugarcane.  Sugarcane 'quickly became the dominant crop in the region for the next 12 to 15 years'.[92]  In 1995, CSR Limited opened a local sugar mill.  However, the sugar industry in the ORIA began to decline from around 2005,  as Mr Boshammer explained, 'owing to comparatively low world sugar prices (which meant low profit margins for local growers) and shrinking production in the face of competition for land in the ORIA from sandalwood growers'.[93]  The sugar mill closed in 2007.  It appears that, by the end of the first decade of this century, sugarcane, which had been the dominant crop in the ORIA for 12 to 15 years, simply ceased to be commercially grown there, as a consequence of factors outside the control of the farmers.

   [92] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [10].

   [93] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [12].

6. Next, from 1999 and then increasingly in the early-mid 2000s, came sandalwood.  The applicant called Mr John Doble to give evidence.  Mr Doble, who holds a Bachelor of Business in Agricultural Management degree from Marcus Oldham College and Deakin University, has, since February 2015, been the Assistant Regional Manager for Western Australia for Quintis Forestry Limited (Quintis), in which role he manages all aspects of Quintis' Indian sandalwood operations on 16 properties, comprising approximately 5,000 hectares of land, including 3,150 hectares in the Oria, on which Quintis grows sandalwood, and has also, since January 2012 and January 2013, respectively, been Quintis' Western Australia Irrigation Manager and Harvest Manager.  As Mr Doble explained in his evidence, '[s]andalwood is a perennial crop and is currently harvested when the trees reach an age of approximately 15 years' and '[a]s it is a parasitic, it is grown with a range of host trees'.[94]  Quintis first planted sandalwood in the ORIA in 1999, 'following research which identified the suitability of the region for sandalwood growth', and its first commercial harvest of sandalwood was completed in 2014.[95]  Between the mid and late 2000s, sandalwood was planted on approximately one­third of Ord Stage 1, and it is, by far, the dominant crop by area planted.  Later in these reasons, when we consider what crop types and areas should be utilised for the purpose of determining 'justified crop needs', under cl 5.2 and local licensing policy 4.7 in Table 8 of OSWAP, and hence the starting point for the determination of the annual water entitlement in Licence 3, we accept the reasonableness of the assumption and forecast of Mr Dear that 'the sandalwood industry will shrink marginally when plantings from 2008 and 2009 come to the end of their 15-year growing cycle'.[96]  Although sandalwood is likely to remain a dominant crop by area planted until at least 2030                 (two growing cycles), it is not a primary or dominant crop for farmers generally in the ORIA, because there are only a small number of sandalwood growers, the two principal growers being Quintis and Santanol Pty Ltd.[97]  For most farmers in Ord Stage 1, who had planted the once­dominant crop of sugarcane, as Mr Boshammer said:[98]

   As has often been the case in my 34 years in the ORIA, following the closure of the sugar mill in 2007, the region had to re-invent itself. …

   [94] Witness statement of John Doble dated 10 September 2019 (Exhibit 26) [13].

   [95] Witness statement of John Doble dated 10 September 2019 (Exhibit 26) [8].

   [96] Witness statement of Mathew Dear dated 12 September 2019 (volume 1) (Exhibit 6.1) [123]. See [151]­[152] below.

   [97] Witness statement of John Doble dated 10 September 2019 (Exhibit 26) [10].

   [98] Witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [13].

7. Similarly, as Mr Menzel said, 'the Ord has always been, and remains, a dynamic and, on one view, an unstable region for farming'[99] and:[100]

   The history of sugarcane production and the need to diversify to other crops exemplifies the character of farming in Ord Stage 1, and the ORIA more broadly.  In my experience, and to my observation, Ord Stage 1 farmers must adapt according to market opportunities to survive in a region with such high-costs of production and distribution.  For this reason it is not possible to predict with certainty what or if any single crop type may emerge in future to dominate production across Ord Stages 1 and 2.  That said, to my observation, the region is changing again and is moving to embrace different farming practices, such as double cropping, as well as emerging opportunities in cotton and hay; and as set out below, these changes are already having an effect on water use in the region.

   [99] Witness statement of David Douglas Menzel dated 6 September 2019 (Exhibit 20) [67].

   [100] Witness statement of David Douglas Menzel dated 6 September 2019 (Exhibit 20) [22].

8. In terms of the region 're-inventing itself' since the end of the sugar industry in the late 2000s, other than sandalwood, no dominant crop or crop mix has emerged.  However, as we will discuss in relation to what crop types and areas should be utilised for the purpose of determining 'justified crop needs' and hence the starting point for the determination of the annual water entitlement in Licence 3 below, it is reasonable to forecast, among other things, that:

   •'cotton will become the dominant crop in the region over the next 10 years',[101] following large-scale, successful cotton trials conducted by KAI in the ORIA in 2018 and 2019, using a recently developed, genetically modified cotton variety, known as 'Bollgard 3';[102]

   •'demand for maize will not weaken';[103]

   •'hay production is likely to increase in coming years on the back of already substantial growth over the last three years';[104] and

   •'double cropping [including cotton as the first crop] will increase from approximately 20 hectares in 2019 to 1,000 hectares over the next 10 years'.[105] 

   [101] Witness statement of Mathew Dear dated 12 September 2019 (volume 1) (Exhibit 6.1) [122].

   [102] Witness statement of Jim Engelke dated 5 September 2019 (Exhibit 24) [12]-[14] and witness statement of Robert John Boshammer dated 10 September 2019 (Exhibit 18) [46]-[49]. See [154]-[169] below.

   [103] Witness statement of Mathew Dear dated 12 September 2019 (volume 1) (Exhibit 6.1) [130]. See [170]­[174] below.

   [104] Witness statement of Mathew Dear dated 12 September 2019 (volume 1) (Exhibit 6.1) [125]. See [175]­[182] below.

   [105] Witness statement of Mathew Dear dated 12 September 2019 (volume 1) (Exhibit 6.1) [131]. See [183]­[187] below.

'whether the proposed taking and use of water … are in the public interest' (cl 7(2)(a))

1. As we said at [84] above, the expression 'public interest' in cl 7(2)(a) of Sch 1 to the RIWI Act is defined in cl 1 of Sch 1 to the RIWI Act to mean 'public interest having regard to any economic, social or recreational benefits to the public, or to a section of the public' and the meaning of the expression 'public interest' is broad in scope and 'imports a discretionary value judgment to be made by reference to undefined factual matters confined only by the subject matter, scope and purpose of the statute in question'.[419] As we said at [85] above, the 'objects' (or purpose) of Pt III of the RIWI Act, which are relevant to delineating the scope of the expression 'public interest' under cl 7(2)(a) of Sch 1 to the RIWI Act, are set out in s 4(1) of the RIWI Act. The objects which relevantly inform the scope of the expression 'public interest' are to provide for the 'sustainable use and development [of water resources] to meet the needs of current and future users',[420] 'to promote the orderly, equitable and efficient use of water resources',[421] and to provide for 'the protection of [water-dependant] ecosystems and the environment in which water resources are situated, including by the regulation of activities detrimental to them'.[422] As we also indicated earlier, the expression 'use and development' is defined in s 4(2) of the RIWI Act to include, relevantly, 'use and development for … commercial … purposes'.

   [419] ICM Agriculture Pty Ltd v Commonwealth [20].

   [420] Section 4(1)(a)(i) of the RIWI Act.

   [421] Section 4(1)(b) of the RIWI Act.

   [422] Section 4(1)(a)(ii) of the RIWI Act.

2. As the respondent submits, a key consideration in terms of 'public interest' is whether the annual water entitlement specified in Licence 3 'will result in a portion of the [annual water entitlement] which will not be used, or not used efficiently'.[423]  The respondent also submits that it is not in the public interest to specify an annual water entitlement of 335 GL in Licence 3, because it is 'in the public interest that as much water as is reasonably available is made available for future development areas, and that water is not held by the [a]pplicant if it will not be used'.[424] However, as we found earlier, applying OSWAP, the annual water entitlement in Licence 3 'to match justified crop needs and efficient water use for the area under irrigation', and including an appropriate allocation of 5 GL for draining the M1 Supply Channel to avoid flooding in the town of Kununurra when there is a significant rainfall event, is (more than) the 335 GL sought by the applicant. We are, therefore, satisfied that an annual water entitlement of 335 GL will be used, and used efficiently, by OIC's members and non-member customers, and that the proposed taking and use of this amount of water by OIC is in the public interest in terms of economic and sustainable use and development of water resources to meet the needs of current and future users and the orderly, equitable and efficient use of water resources. It is in the public interest for an annual water entitlement of 335 GL to be specified in Licence 3, because it is likely to be used, and used efficiently, for the growing of crops, which advances the economy of the region and the State, particularly where, as in this case, as we discuss below in relation to whether the proposed taking and use of water 'may prejudice other current and future needs for water' (under cl 7(2)(d) of Sch 1 to the RIWI Act), there is not likely to be any alternative or competing user for any part of that water within the term of Licence 3 and there is likely to be sufficient water within the 750 GL per year allocation limit for the Main Ord subarea to enable such development in the Ord East Kimberley Expansion Project as is likely to occur within the next 10 years. Furthermore, enabling the economic development of the ORIA, by the economic and sustainable use and development of the vast water resource and the orderly, equitable and efficient use of that resource, is the very purpose for which the ORIA was established. Moreover, economic advancement of the region is also likely to facilitate social benefits to the public in the region, whether directly or indirectly involved in farming or not. It also follows that we are satisfied that specifying an annual water entitlement of 335 GL in Licence 3 achieves the objects stated in s 4(1)(a)(i) and s 4(1)(b) of the RIWI Act to provide for the 'sustainable use and development [of water resources] to meet the needs of current and future users' and 'to promote the orderly, equitable and efficient use of water resources'.

'whether the proposed taking and use of water … are ecologically sustainable … [and] are environmentally acceptable' (cl 7(2)(b) and (c))

[423] Respondent's closing submissions [191].

[424] Respondent's closing submissions [192].

1. The respondent properly concedes that '[t]here is nothing to suggest that the proposed taking and use [of 335 GL per year] is not ecologically sustainable and environmentally acceptable'.[425] As discussed below in relation to whether the proposed taking and use of water 'may prejudice other current and future needs for water' (under cl 7(2)(d) of Sch 1 to the RIWI Act), the (sustainable) allocation limit of 750 GL per year for the Main Ord subarea is not likely to be reached within the 10 year term of Licence 3. Furthermore, as indicated earlier, under OSWAP, '[a]llocation limits do not include water released for … the downstream environment'.[426] Consequently, the proposed taking and use of water would leave sufficient water for environmental flows in the ORIA. We are therefore satisfied that the proposed taking and use of 335 GL per year is ecologically sustainable and environmentally acceptable, and is consistent with the object stated in s 4(1)(a)(ii) of the RIWI Act to provide for 'the protection of [water-dependant] ecosystems and the environment in which water resources are situated, including by the regulation of activities detrimental to them'.

'whether the proposed taking and use of water … may prejudice other current and future needs for water' (cl 7(2)(d))

[425] Respondent's closing submissions dated 11 March 2020 [195].

[426] Clause 4.1 of OSWAP (respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) page 1073).

1. The respondent submits that specifying the annual water entitlement in Licence 3 as 335 GL 'would prejudice future needs for water by tying up water unnecessarily that could be allocated to others in the future'.[427]  However, on the evidence before the Tribunal, there is not likely to be any alternative or competing user for any part of the annual water entitlement of 335 GL under Licence 3 during the term of this licence.

   [427] Respondent's closing submissions dated 11 March 2020 [196].

2. As we said at [39] above, Ms Pawley gave evidence that, as at August 2019, 382.3 GL per year (or approximately 51%) of the 750 GL per year allocation limit for the Main Ord subarea 'has already been licensed for irrigation' and a total of 120 GL per year 'has been committed (that is a licence application was approved pending conditions being met)' to KAI for development of the Goomig farmland in Ord Stage 2.[428] Including both licensed and committed water, therefore, the Main Ord subarea is 63% allocated. As indicated by Ms Pawley in Table 1 of her witness statement set out at [39] above, 279.7 GL of the 750 GL per year allocation limit for the Main Ord subarea is still available for allocation (in addition to the 88 GL committed to KAI for the development of the Goomig farmland, beyond the 32 GL per year already licensed for that development in Stage 2). Ms Pawley gave evidence that the remaining 279.7 GL per year 'could be used to irrigate between 9,200 and 23,700 hectares (depending of the types of crops planted) of new agricultural land' and that '[w]ithout recoupment [from OIC], between about 32,500 and 47,000 hectares (depending on types of crops planted) of the target 51,000 hectares of agricultural land can be developed using water within the existing 750 [GL] per year allocation … limit of the Main Ord subarea'.[429]

   [428] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [56].

   [429] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [122].

3. However, Ms Pawley recognises in her evidence that 'it is likely that full development [of Ord Stage 2 and Ord Stage 3] will not occur within the 10 year term of OIC's licensed water entitlement'.[430]  Similarly, in its closing submissions, the respondent states that '[t]he current modelling of the Department shows that the Main Ord [subarea] allocation limit will not be met for the duration of the licence to 2029/2030'.[431]  The Department's current modelling referred to in this submission is shown in the following diagram prepared by Ms Worley.[432]

   [430] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [122].

   [431] Respondent's closing submissions dated 11 March 2020 [169].

   [432] Exhibit 35.

4. Ms Worley also indicates the 'considerable timeframe for development stages' of land proposed to be developed in Ord Stage 2 and Ord Stage 3, on 'a reasonable timeframe projection based on date of land release', in Figure 2 in her witness statement, which is reproduced immediately below.[433]

   [433] Witness statement of Susan Joan Worley dated 5 September 2019 (Exhibit 39) [35].

5. In Figure 2 in Ms Worley's witness statement reproduced immediately above, all of the 'Land Parcels' in 'Land Released - Expected development 0 - 5 yrs' are in Ord Stage 2 (in Western Australia), as is the first 'Land Parcel' in 'Planned development +5 yr', namely CS Victoria Highway.  The other 'Land Parcels' in 'Planned development +5 yr' are in Ord Stage 3 (in the Northern Territory).        On the basis of Ms Worley's evidence in the diagram and figure reproduced in the preceding two paragraphs, the respondent submits that, if the annual water entitlement specified in Licence 3 is 335 GL, then the Main Ord and Carlton-Mantinea allocation limits will be reached 'in approximately 2032' and '[t]his would most likely impact on water availability for Northern Territory Stage 3 and the Knox [Plain] cockatoo sands areas'.[434] 

   [434] Respondent's closing submissions dated 11 March 2020 [184].

6. In relation to Ord Stage 3, Ms Worley gave evidence that the Northern Territory 'did not accept any of the responses to an initial [e]xpression of [i]nterest in 2016 for the 14,000 [hectare] Stage 3'.[435]  She said that the Northern Territory Department of Environment and Natural Resources is in 'the final stages of soil capability studies to advance the understanding of the extent of land suitable for agriculture and is currently intending to put out another [e]xpression of [i]nterest within the next 12 months' (that is by September 2020).[436]  However,     as Ms Worley also said, in order for Ord Stage 3 to be developed, it is first necessary for there to be an intergovernmental agreement in place between Western Australia and the Northern Territory and 'a future developer will be required to negotiate an Indigenous Land Use Agreement'.[437]  In relation to an intergovernmental agreement, Ms Worley said that this 'has been a work in progress over several years' and that 'officers from the Northern Territory have just requested that we move towards completing that, that our Ministers set up a meeting, that they start to have a discussion'.[438]  Ms Worley said that, as a result, '[p]eople from within the Department, including myself' were scheduled to hold a 'meeting with Northern Territory representatives later this month [that is in March 2020], to discuss' an intergovernmental agreement.[439]  Ms Worley also gave evidence that, to her knowledge, there is '[n]ot yet' any 'support for … [an] intergovernmental agreement … at the [M]inisterial level'.[440]              She added that '[i]t was discussed with the previous Ministers, but not with current Ministers'.[441]

   [435] Witness statement of Susan Joan Worley dated 5 September 2019 (Exhibit 39) [37(i)].

   [436] Witness statement of Susan Joan Worley dated 5 September 2019 (Exhibit 39) [37(i)].

   [437] Witness statement of Susan Joan Worley dated 5 September 2019 (Exhibit 39) [37(i)].

   [438] ts 702, 10 March 2020.

   [439] ts 702, 10 March 2020.

   [440] ts 703, 10 March 2020.

   [441] ts 703, 10 March 2020.

7. Assuming that the Department's '[m]edium licenced [sic] water use as irrigation development progresses' timeframe for Ord Stage 2 and Ord Stage 3 depicted in Ms Worley's diagram reproduced at [300] above is correct, the evidence shows that there is not likely to be any alternative or competing user for any part of the annual water entitlement of 335 GL in Licence 3 within the 10 year term of the licence and that there is likely to be sufficient water within the 750 GL per year allocation limit for the Main Ord subarea to enable such development as is likely to occur during the 10 year term of Licence 3. Furthermore, we accept Mr Munck's evidence that the Department's currently anticipated timeframes for development of Ord Stage 2 and Ord Stage 3 are 'very optimistic', because 'around 20,000 [hectares] [which is controlled by KAI in Stage 2] could take up to 20 years to develop', 'assuming a reasonable land development rate of 900 hectares per year'.[442]  Mr Munck considers that 'a development rate of              900 hectares per year … throughout the Ord expansion area would be optimistic but reasonable', given that it is 50% above the development rate of 3,000 hectares in Goomig by KAI over 5 years to 2019 (at an average rate of 600 hectares per year).[443] We also accept Dr Ruprecht's opinion that the Department's timeframe for development of Ord Stage 3, which is most of the development shown as 'Planned development + 5 yrs' on the diagram reproduced at [301] above, is 'optimistic', given that an intergovernmental agreement still needs to be negotiated and finalised, expressions of interest have not yet been sought or approved, land has not yet been released, environmental and other approvals will need to be obtained from Northern Territory government departments, and an Indigenous Land Use Agreement will need to be negotiated and finalised with the native title holders. However, even assuming that the Department's current timeframe for development of Ord Stage 2 and Ord Stage 3 is reasonable, we find that the proposed taking and use of 335 GL of water per year in Licence 3 would not prejudice other current and future needs for water by existing or future potential irrigators within Ord Stages 1, 2 and 3.

   [442] Gregory Ross Munck's response to respondent's witness statement and expert reports dated 15 October 2019 (Exhibit 38) [11].

   [443] Gregory Ross Munck's response to respondent's witness statement and expert reports dated 15 October 2019 (Exhibit 38) [23].

8. As indicated earlier, one of the strategies in cl 2.3 of OSWAP is to 'optimise the water available for new development and power generation by recouping unused water entitlements'.  Furthermore, as also indicated earlier, cl 5.2 of OSWAP states that unused water entitlements 'will be recouped because maintaining reliability for unused entitlements would mean the storage level that triggers restrictions on electricity generation would be higher than it needs to be'.  As Ms Pawley explained in her evidence, under the water supply agreement entered into in 1994, Pacific Hydro has the right to release water at rates sufficient to generate at least 210 gigawatt hours of electricity per financial year when the water levels in Lake Argyle exceed 78 metres AHD.[444]  Ms McCallum gave the following evidence, which was not questioned or contradicted, and which we accept:[445]

   At the current hydropower demand (226 gigawatt hours per year), modelling shows that unused water entitlements impact hydropower restrictions when the total licenced [sic] irrigation entitlements is closer to the allocation limit.  If total licenced [sic] annual water entitlements from the Main Ord subarea increased to the allocation limit of 750 GL/year, a hydropower restriction above the 78 m AHD Class 2 restriction level would need to be introduced to meet the modelling targets.  In this scenario, a restriction to limit hydropower demand to 100 gigawatt hours per year needs to be put in place when the Lake Argyle falls below 92 m AHD to meet the modelling targets.

   [444] Witness statement of Shaan Michelle Pawley dated 9 September 2019 (Exhibit 41) [131].

   [445] Witness statement of Simone Seensee McCallum dated 30 August 2019 (Exhibit 47) [54].

9. The 'modelling targets' referred to by Ms McCallum include the full irrigation allocation should be met in 95% of years and the hydropower targets based on the water supply agreement commitment to generate at least 210 gigawatt hours of electricity per financial year when the water levels in Lake Argyle exceed 78 metres AHD.           The effect of the modelling referred to by Ms McCallum in her evidence set out in the preceding paragraph is that, if total licensed annual water entitlements from the Main Ord subarea increased to the allocation limit of 750 GL per year, in order to ensure the full irrigation allocation is met in 95% of years, a hydropower restriction would need to be introduced when water levels in Lake Argyle were greater than     78 metres AHD, with the consequence that potentially less than         210 gigawatt hours of electricity per financial year could be generated.

10. However, as Ms Ide said in opening the respondent's case, the 'hydro power generation issue … has changed from where we were a few years ago'.[446]  This is because the Argyle Diamond Mine, which appears to have been responsible for more than half of the hydroelectric power demand as at August 2019, is closing in 2020.  As Ms McCallum said in oral evidence, the closure of the Argyle Diamond Mine means that demand for hydroelectric power will be reduced by more than 50%.  Consequently, unless a major alternative electricity customer is established in the region, there is not likely to be any restriction on hydroelectricity production to ensure 95% reliability of water for irrigation, even if the 750 GL per year allocation limit for the      Main Ord subarea is reached.  Although the respondent submits that '[t]here is nothing to preclude hydropower generation increasing in the future',[447] there is no evidence before the Tribunal of any likely alternative customer.  Consequently, the proposed taking and use of 335 GL of water in Licence 3 would not prejudice future needs for water for hydroelectric power generation.

'whether the proposed taking and use of water … would, in the opinion of the Minister, have a detrimental effect on another person' (cl 7(2)(e))

[446] ts 56, 25 November 2019.

[447] Respondent's closing submissions dated 11 March 2020 [153].

1. There is no evidence that granting an annual water entitlement of 335 GL in Licence 3 'to match justified crop needs and efficient water use for the area under irrigation', in accordance with OSWAP, would have a detrimental effect on another person.

'whether the proposed taking and use of water … could be provided for by another source' (cl 7(2)(f))

1. It is common ground that there is no alternative source available to provide the water sought by OIC.

'whether the proposed taking and use of water … are in keeping with … local practices; or a relevant local by-law; or a plan approved under Part III Division 3D Subdivision 2' (cl 7(2)(g)(i)-(iii))

1. It is common ground that there are no local practices, relevant by-laws or a plan approved under Pt III Div 3D Subdiv 2 of the RIWI Act.

'whether the proposed taking and use of water … are in keeping with … relevant previous decisions of the Minister' (cl 7(2)(g)(iv))

1. The respondent submits that '[t]he two surface water licences previously granted to the [a]pplicant do not establish a basis for a further allocation of 335GL'.[448]  We accept this submission.  However, the evidence in this case demonstrates that the annual water entitlement 'to match justified crop needs and efficient water use for the area under irrigation' under OSWAP, and allocating 5 GL per year for draining the M1 Supply Channel to avoid flooding in the town of Kununurra when there is a significant rainfall event, is (more than) 335 GL.

'whether the taking and use of water … are consistent with … land use planning instruments; or the requirements and policies of other government agencies; or any intergovernmental agreement or arrangement' (cl 7(2)(h))

[448] Respondent's closing submissions dated 11 March 2020 [204].

1. It is common ground that there are no relevant land use planning instruments or requirements or policies of other government agencies that apply.  As indicated earlier, no intergovernmental agreement or arrangement has yet been reached with the Northern Territory with respect to the supply of water to Ord Stage 3 in the Northern Territory.

Correct and preferable decision

1. In the exercise of discretion under cl 15(2) of Sch 1 to the RIWI Act, the correct and preferable decision at the time of the decision upon the review as to the annual water entitlement that should be specified in Licence 3 is 335 GL, because:

   •the annual water entitlement 'to match justified crop needs and efficient water use for the area under irrigation', applying the guiding policy in cl 5.2 and local licensing policy 4.7 in Table 8 of OSWAP, and including an appropriate allocation of 5 GL per year for draining the M1 Supply Channel to avoid flooding in the town of Kununurra when there is a significant rainfall event, is (more than) 335 GL and the applicant seeks an annual water entitlement of 335 GL in its renewal application;

   •although there has been historical underutilisation of the annual water entitlement by OIC, there are cogent reasons to depart from the application of the recoupment of unused water policy in OSWAP in the circumstances of this case; and

   •there is not likely to be any alternative or competing user for any part of this annual water entitlement over the 10 year term of the licence and there is sufficient water within the 750 GL per year allocation limit for the Main Ord subarea to enable such development in the Ord East Kimberley Expansion Project as is likely to occur over the next 10 years.

Conclusion

1. The application for review should be allowed and the decision of the respondent made on 14 August 2015 should be varied, pursuant to s 29(3)(b) of the SAT Act, by:

   •extending the duration of Licence 3 to 10 years from the date of this decision;

   •specifying the annual water entitlement in Licence 3 as 335 GL; and

   •specifying, with effect from the date of this decision, pursuant to s 29(5)(b) of the SAT Act, that the 'Annexure to Licence to Take Water SW156287(3)' referred to in term, condition or restriction 3 of Licence 3 is the document which appears in the respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.2) at pages 1746-1756.

2. The Tribunal makes the following orders:

   1.The application for review is allowed.

   2.Pursuant to s 29(3)(b) of the State Administrative Tribunal Act 2004 (WA), the decision made by the respondent on 14 August 2015 is varied by:

   (a)extending the duration of Surface Water Licence SWL156287(3) to 10 years from the date of this order;

   (b)specifying the annual water entitlement in Surface Water Licence SWL156287(3) as 335 GL; and

   (c)specifying, with effect from the date of this order, pursuant to s 29(5)(b) of the State Administrative Tribunal Act 2004 (WA), that the 'Annexure to Licence to Take Water SWL156287(3)' referred to in term, condition or restriction 3 of Surface Water Licence SWL156287(3) is the document which appears in the respondent's section 24 bundle dated 10 May 2019 (volume 2) (Exhibit 3.1) at pages 1746-1756.

I certify that the preceding paragraph(s) comprise the reasons for decision of the State Administrative Tribunal.

JUDGE D PARRY, DEPUTY PRESIDENT

26 JUNE 2020

Attachment A ­ Ms Pawley's calculations

Exhibit 33

Exhibit 34

Exhibit 51