EXPLANATORY STATEMENT
Issued by the Authority of the Murray-Darling Basin Authority
Water Act 2007
Murray-Darling Basin Agreement (Schedule D - Processing Interstate Transfers of Water Allocations) Protocol 2010
The Murray-Darling Basin Agreement (Agreement) is Schedule 1 to the Water Act 2007 (Act). The Agreement 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 - Processing Interstate Transfers of Water Allocations) 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 Protocol requires that the Authority, each State Contracting Government, and each licensing authority follow a specified process for determining applications for interstate transfers of allocations. This process is set out in Schedule 1 to the Protocol and is made up of 5 sequential steps. The steps deal with lodgement of applications, consideration of applications by the transferee’s authority, consideration and finalisation of applications by the transferor’s authority, finalisation of applications by the transferee’s authority, and the reconciling of records in relation to interstate transfers of allocations by the Authority.
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 - Processing Interstate Transfers of Water Allocations) Protocol 2010
Section 1 – Name of Protocol
Section 1 provides that the name of the Protocol is the Murray-Darling Basin Agreement (Schedule D - Processing Interstate Transfers of Water Allocations) Protocol 2010.
Section 2 – Commencement
Section 2 provides that the Protocol commences on the day after it is registered.
Section 3 – Revocation
Section 3 describes the circumstances in which previous protocols that apply to interstate transfers of allocations by exchange rate trade and tagged trade are revoked or otherwise cease to apply.
Subsection 3(1) provides that all protocols made under paragraph 6(1)(f) of Schedule D to the Agreement before the commencement of the Protocol that apply only to interstate transfers of allocations by exchange rate trade and tagged trade are revoked.
Subsection 3(2) provides that all protocols made under paragraph 6(1)(f) of Schedule D to the Agreement before the commencement of the Protocol that deal with both:
- interstate transfers of allocations by exchange rate trade and tagged trade; and
- other transfers;
have no application to the extent that those protocols deal with transfers of allocations by exchange rate trade and tagged trade.
Section 4 – Application
Section 4 provides that the Protocol applies to interstate transfers of water allocations.
Section 5 – Definitions
Section 5 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 – Notices
Section 6 describes the method by which all notices under the Protocol must be given and provides for the Authority to determine the form and content that must be adhered to for notices that are required to be given to or by the Authority under the Protocol.
Subsection 6(1) provides that a notice under the Protocol must be given in writing.
Subsection 6(2) provides that the Authority must, in consultation with each State Contracting Government and, where appropriate, any relevant licensing authority, determine the form and content of a notice required to be given to or by the Authority under the Protocol.
Section 7 – Processes and principles
Section 7 requires the Authority and each State Contracting Government and licensing authority to follow the processes and principles in the steps that are set out in Schedule 1 to the Protocol.
Section 8 – Review of Protocol
Section 8 deals with who may recommend that the Protocol be reviewed and the circumstances in which a review must be conducted.
Subsection 8(1) provides that an independent auditor who has been appointed under subclause 16(5) of the Agreement may consider the operation of the Protocol and, if the auditor considers it appropriate, recommend that the Authority review the Protocol. Under subclause 16(5) of the Agreement, the Authority is required to arrange for an independent auditor to examine various issues after the end of each year and to make recommendations to the Ministerial Council about any amendments to the Transfer Register as the auditor thinks desirable in view of the examination the auditor has conducted.
Subsection 8(2) provides that the Authority must review, and, if appropriate, consider amending, the Protocol in specified circumstances. These circumstances are:
- a change to the Agreement or to Commonwealth or State legislation (or an instrument under such legislation) that may be relevant to or affect interstate transfers (paragraphs (a) and (b) of subsection 8(2)); or
- a report under clause 18 of Schedule D to the Agreement, or an independent auditor appointed under subclause 16(5) of the Agreement, indicates or recommends that such a review is appropriate (paragraphs (c) and (d) of subsection 8(2)).
Schedule 1 – Processes and principles
Schedule 1 sets out the steps that must be followed by the Authority and each State Contracting Government and each licensing authority in processing applications to transfer an allocation. A diagram summarising these steps is set out in Appendix 1 to this Explanatory Statement.
Step 1 – Lodging applications
Step 1 provides that an application to transfer an allocation is not to be processed unless the transferee and transferor have each given their respective Authorities a duly completed and executed original of their own application form and a duly completed and executed copy of the application form of the other party to the transfer.
Step 2 – Consideration of application by transferee’s authority
Step 2 sets out the obligations on the transferee’s authority in relation to initially considering the transferee's application. Specifically, clause (1) of step 2 provides that the transferee’s authority must note the application in its records, assign a transaction identification number to the transfer, and determine whether or not the transferor's application is prohibited.
Clause (2) of step 2 provides that either the transferee’s authority or the transferor’s authority may, at any time, request a copy of the corresponding application form lodged with the other authority.
Clause (3) of step 2 provides that if a request is made under clause (2) of step 2, the other authority must promptly provide the requesting authority with a copy (clearly marked as such) of the application form that has been requested.
Clauses (4) to (6) of step 2 set out the process that must be followed if the transferee's authority decides that the transferee's application is prohibited. This process involves the transferee's authority notifying specified persons that the application is prohibited (clause (4)) including providing reasons why the application is prohibited (clause (5)). There is also a requirement on the transferor’s authority to promptly inform the transferor if the transferor’s authority receives a notice from the transferee’s authority that the application is prohibited (clause (6)).
Clause (7) of step 2 sets out the process that must be followed if the transferee's authority decides that the transferee's application is not prohibited. Specifically, the transferee’s authority is required to notify the transferor’s authority of the transaction identification number in relation to the application and that the application is not prohibited.
Clause (8) of step 2 provides that the transferee’s authority must promptly notify the transferor’s authority of any event that results in the transferee’s authority subsequently prohibiting the transferee's application.
Step 3 – Consideration and finalisation of application by transferor’s authority
Step 3 sets out the obligations on the transferor’s authority in relation to considering whether to approve an application to transfer an allocation, once the transferor’s authority has been notified by the transferee’s authority that the application is not prohibited.
Clause (1) of step 3 provides that when the transferor has received both:
- the transferor's duly completed and executed original of their own application form and a duly completed and executed copy of the transferee's application form; and
- notice from the transferee’s authority that the application is not prohibited;
the transferor’s authority must note the application in its records, assign a transaction identification number to the transfer, and determine whether or not the transferor's application will be approved.
Clauses (2) and (3) of step 3 set out the process that the transferor’s authority must follow if it decides that the transferor's application will not be approved. This process involves notifying specified persons that the application will not be approved (clause (2)) including providing reasons why the application will not be approved (clause (3)).
Clause (4) of step 3 sets out the process that the transferor’s authority must follow if it decides that the transferor's application will be approved. This process involves notifying the transferee’s authority of this fact and the transaction identification number, debiting the transferor's allocation account, setting a date upon which the transfer will take effect for the purposes of water accounting, and advising the transferor that the application has been granted.
Step 4 – Finalisation of application by transferee’s authority
Step 4 sets out the process that the transferee’s authority must follow once it receives notification from the transferor’s authority that the application has been approved.
Clause (1) of step 4 provides that, unless an event has occurred subsequent to the transferee’s authority giving notice to the transferor’s authority that the application was not prohibited that results in the application being prohibited, the transferee’s authority must approve the transfer, amend its records to reflect the effect of the transfer, calculate the volume of the allocation to be received by the transferee (by applying the exchange rate notified by the Authority), credit the transferee's allocation account accordingly, and advise the transferee and any broker or other agent engaged to assist in making the transfer that the transfer has been finalised.
Clause (2) of step 4 provides that if an event has occurred subsequent to the transferee’s authority giving notice to the transferor’s authority that the application was not prohibited that results in the application being prohibited, the transferee’s authority must promptly inform the transferor’s authority of this fact and make arrangements with the transferor’s authority to ensure that specified persons are promptly informed that the application is not approved.
Step 5 – Reconciling records
Step 5 sets out the Authority's obligations to:
- reconcile the volume of transfers of allocations and other forms of temporary transfers into and out of each State (based on the data provided by each licensing authority); and
- report on any discrepancies.
Clause (1) of step 5 imposes an obligation on each licensing authority within a State to send to the Authority within 7 days after the end of each month a copy of the aggregate volume of all transfers of allocations and other forms of temporary transfers into and out of the State in that month and a table setting out data relating to each transfer from which the aggregate volume was derived.
Clause (2) of step 5 provides that the Authority must examine whether there are any discrepancies between the information provided regarding the aggregate volume of all transfers of allocations and other forms of temporary transfers and the data from which the aggregate volume was derived.
Clause (3) of step 5 provides that the Authority must record any discrepancy between the information and the data (other than an allowable discrepancy) and provide the relevant licensing authority with a report on the discrepancy within 14 days of the end of the month for which the information and data has been provided.
Clause (4) of step 5 defines the term "allowable discrepancy". Allowable discrepancies are those that are sufficiently small (no more than 1 megalitre) or explicable due to the differences in the timing of recording or processing transfers between the relevant transferor's and transferee's Authorities.
Clause (5) of step 5 obliges a licensing authority that receives notice of a discrepancy to provide the Authority with an explanation of the discrepancy within 14 days and, in consultation with the Authority, promptly seek to resolve the discrepancy.
Clause (6) of step 5 requires the Authority to inform the next meeting of the Trade Working Group (or its successor) of any discrepancy that is not resolved in the same month that the licensing authority receives notification of the discrepancy and to report the discrepancy to the independent auditor for that year referred to in subclause 16(5) of Schedule D to the Agreement.
Appendix to this Attachment
Appendix 1 contains a flow chart setting out the Allocation Transfer Approval Process in Schedule 1 of the Protocol.
Appendix 1