Groundwater Licensing Management and Trade

Before the identification of groundwater management units and adoption of sustainable yield philosophies, it was not uncommon for water licences to provide access to a volume of water that could be taken as either surface water or groundwater ('conjunctive licences'). As a result of the COAG (1994) agreements to establish accounting mechanisms able to facilitate trade, conjunctive licences are progressively being separated into surface water and groundwater licences and this separation is considered complete in most states.

The identification of groundwater management units and adoption of sustainable yield practices within these management boundaries has allowed issue and management of groundwater licences to reflect that of surface water licensing. Thus groundwater licences comprise a share (still considered a volume in many areas) and an allocation. The introduction of groundwater management plans in overallocated areas alters the previously assumed 1:1 relationship between share and volume.

Where groundwater licences have been translated from volume to share through introduction of groundwater management plans, forecast of allocation is provided across the lifespan of the plan (typically 5-10 years). Thus, groundwater users have forewarning and can adapt if the plan requires a decrease in allocation. This is fundamentally different to the security offered by surface water and is of great importance to regional economies during drought where the storage/share ratio is low (e.g. NSW).

In locations where groundwater mining is not advocated, groundwater sharing plans typically address overallocation through an adjustment period by successively reducing the value of groundwater shares each year over the duration of the plan. In some areas where significant reduction was required (e.g. the Namoi, see case study 2), governments have provided financial support to assist regional communities to adjust to lower water availability. The other common practice to assist economic viability of communities in such instances is to develop carry-over capacities. As with surface water, this capacity allows unused (volumetric) allocation from 1 year to be transferred into the following year. Two primary constraints affect the capacity for such carry-over: (i) the physical limitation of bore yield; and (ii) the institutional limitations identified in the relevant groundwater management plan. While carry-over does not increase the net volume of available water over duration of a plan, it does allow for individuals to 'save' groundwater entitlements for drought years when surface water is not available.

The implementation of sustainable yield as an extraction regime rather than just a volume has generally been facilitated by the subdivision of groundwater management units into zones. They may be subject to different management constraints and practices (including trade) depending on zone-specific characteristics such as aquifer dynamics, level of development, water quality objectives, water level objectives and/or water pressure objectives. Case study 2 provides some insight into the manner in which zones can be used.

In accordance with COAG (1994) water reforms, groundwater management trade is progressively being enabled. Groundwater trade typically develops in fully allocated systems once enabled through institutional arrangements dictated via groundwater management plans.

Groundwater markets are geographically defined by groundwater management plans, and often restricted by institutional, technical and practical constraints applicable to zones subject to those plans. Generally speaking, groundwater trade in overallocated systems is considered a problem, and limited until overallocation has been addressed. Thus (nationally), groundwater trade is somewhat influenced by the priority development of groundwater management plans for overallocated resources and therefore tends to be localized (and can be restricted to zones within management areas).

The isolated nature of groundwater infrastructure and high costs of bore construction provide for narrow water market. Groundwater trade involves accessing more water from a bore rather than supplying more water via a channel. In practice, the high private overhead and risk of stranded assets associated with groundwater development for irrigation have limited the practical separation of groundwater property rights and land property rights

A national overview of groundwater markets was compiled in 2003 (Fullagar and Evans, 2003). This overview found that established rural groundwater trade markets existed only in SA and southern Victoria, for both temporary and permanent transfers. Prices for temporary trade ranged from AUS$0/m3 to AUS$2.80/m3. Prices for permanent trade ranged from AUS$0.325/m3 to AUS$21.50/m3. The broad range in prices is a direct reflection of the nature of markets within different groundwater management units: the niche wine markets in SA (notably McLaren Vale) allow far greater prices than do dominant crops in other states. Although only about 150 groundwater trades were estimated to occur annually in Australia (more than 50% of these in SA), expansion of groundwater trade is anticipated (Boyd and Brumley, 2003; Fullagar and Evans, 2003) as it is progressively enabled through implementation of the water reform process.

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