EXPLANATORY STATEMENT
Issued by the Authority of the Murray-Darling Basin Authority
Water Act 2007
Murray-Darling Basin Agreement (Schedule D – Calculating Cap Adjustments) Protocol 2010
The Murray-Darling Basin Agreement (Agreement) is Schedule 1 to the Water Act 2007 (Act). The Agreement and Schedule D allows for the Murray-Darling Basin Authority (Authority) to make protocols in respect of certain matters.
This instrument, the Murray-Darling Basin Agreement (Schedule D – Calculating Cap Adjustments) Protocol 2010 (Protocol), is made under clause 6 of Schedule D to the Agreement. The Protocol is a legislative instrument: see section 18D of the Act.
The purpose of the Protocol is to set out the method of calculation and other relevant details for determining the extent to which the annual diversion targets under the Agreement are to be adjusted each year.
Details of the Protocol are set out in the Attachment.
The Protocol commences on the day after it is registered on the Federal Register of Legislative Instruments.
The Protocol is not subject to disallowance by Parliament nor the sunsetting rules in Part 6 of the Legislative Instruments Act 2003: see section 18D of the Act.
Consultation
The Contracting Governments to the Agreement have been consulted in the development of this Protocol.
The Office of Best Practice Regulation has also been consulted on this Protocol and has determined that regulatory impact statements will not be required for this Protocol.
ATTACHMENT
Details of the Murray-Darling Basin Agreement (Schedule D – Calculating Cap Adjustments) Protocol 2010
Section 1 – Name of Protocol
Section 1 provides that the name of the Protocol is the Murray-Darling Basin Agreement (Schedule D – Calculating Cap Adjustments) Protocol 2010.
Section 2 – Commencement
Section 2 provides that the Protocol commences on the day after it is registered.
Section 3 – Revocation
Section 3 provides that all previous Protocols made under paragraph 6(1)(a) of the Agreement are revoked.
Section 4 – Application
Section 4 provides that the Protocol applies to both exchange rate trade and tagged trade.
Section 5 – Definitions
Section 4 defines certain terms used in the Protocol. Some terms used in the Protocol will take the meanings they have in the Act (including the Agreement): see section 13 of the Legislative Instruments Act 2003.
Section 6 – Cap transfer rates for transferred allocations – Table 1
Section 6 sets out the table (Table 1) referred to in clause 2 of Appendix 3 to Schedule D to the Agreement. The numbers in the table represent the cap transfer rates that apply to interstate or intervalley transfers of allocations into or out of each of the designated river valleys described in the table.
These cap transfer rates are used to calculate the change to the annual diversion target that must be applied to each designated river valley to account for transfers of allocations into or out of the designated river valleys under clause 2 of Appendix 3 to Schedule D to the Agreement.
Section 7 – Cap transfer rates for entitlements transferred before 1 July 2007 – Table 2
Section 7 sets out the table (Table 2) referred to in paragraph 5(a) of Appendix 3 to Schedule D to the Agreement. The numbers in the table represent the cap transfer rate that applies to entitlement transfers from one designated river valley to another for each of the designated river valleys described in the table.
These cap transfer rates are used to calculate the change to the annual diversion target that must be applied to each designated river valley to account for transfers of entitlements recorded on the interim register from one designated river valley to another under clause 5 of Appendix 3 to Schedule D to the Agreement.
Section 8 – Cap factors
Section 8 sets out the table referred to in paragraph 8(c) of Appendix 3 to Schedule D to the Agreement. The numbers in the table represent the cap factor that applies to the net increase in each type of entitlement for each designated river valley described in the table.
These cap factors are used to calculate the net increase in the cap required for each type of entitlement for each designated river valley under clause 8 of Appendix 3 to Schedule D to the Agreement.
The table was prepared by distributing the average annual diversion under cap conditions (calculated under paragraph 11 (4) (e) of Schedule E to the Agreement) between each type of entitlement in a designated river valley. In many designated river valleys, that average annual diversion is significantly less than the total volume of entitlements.
In a designated river valley where there is only one type of entitlement, the cap factor was determined by dividing the average annual diversion under cap conditions, by the total volume of entitlements in that designated river valley.
In a designated river valley where there is more than one type of entitlement, the average annual diversion under cap conditions was distributed among entitlement types in accordance with the relevant State Contracting Government's assumptions about the maximum use for the highest priority entitlement in that designated river valley.
Section 9 – Adjusting annual diversion targets – implementation of Stages
Section 9 sets out the 20 steps to be used by the Authority to implement the Stages set out in subclause 9(2) of Appendix 3 to Schedule D to the Agreement that are used to calculate the adjustment to make to the annual diversion target in respect of each designated river valley. Each of Stages 1 to 3 involves the calculation of one component of the total annual diversion target adjustment for each designated river valley. Stage 4 involves the aggregation of these individual components to determine the total annual diversion target adjustment for each designated river valley
Steps 1 to 8 (inclusive) relate to Stage 1 of the calculation process. These steps enable the calculation of the component of the annual diversion target adjustment for each designated river valley that arises as a result of allocating to the cap required in each designated river valley of destination, so much of the volume of the cap no longer required in the designated river valley of origin as is required in the designated river valley of destination.
Steps 9 to 17 (inclusive) relate to Stage 2 of the calculation process.
Pool any cap surpluses and deficits calculated under Stage 1 in relation to each designated river valley, in order to reduce any shortfalls in each designated river valley.
Where lower reliability entitlements have been converted to higher reliability entitlements within a designated river valley, the net effect of that conversion on the cap attributable to that valley must be included in the pool. However:
(a) a shortfall within a designated river valley caused by such conversions cannot be reduced by attributing a surplus existing in another designated river valley; and
(b) the volume pooled with respect to a designated river valley cannot exceed the sum of the deficits arising in other designated river valleys, as a result of transfers between that designated river valley and other designated river valleys.
Steps 18 and 19 relate to Stage 3 of the calculation process.
(a) Calculate any cap surplus resulting from Stage 2 for each designated river valley.
(b) Then allocate any of that cap surplus that is attributable to interstate transfers into or from that designated river valley to the environment, by
(c) reducing the annual diversion target for that designated river valley by the portion of the surplus referred to in paragraph (b).
The allocation referred to in paragraph (b) must only apply in the year in which it is made and will not create an entitlement to draw a comparable volume of water from any storage in the Basin. Progressively reducing annual diversion targets will, however, eventually allow more water to flow downstream.
Step 20 relates to Stage 4 of the calculation process. This steps enables the calculation of the total annual diversion target adjustment for each designated river valley.