Lessons from Australia's millennium drought ~ MAVEN'S NOTEBOOK

An Australian water official discusses the key policy initiatives that Australia enacted to respond to long-term exceptional drought conditions

In the late 1990s, Australia began experiencing severe drought conditions that stretched on for well over a decade. Australia is no stranger to drought, being known as the ‘land of droughts and flooding rains;’ however, the Millennium Drought as it would come to be known, was by far the worst on record. When the drought finally broke, it did so with drenching rains and flooding that claimed more than 20 lives and destroyed hundreds of homes.

The impact of the long intense drought was devastating to both the nation’s agriculture and environment; urban residents felt the squeeze as well, with some cities water use falling down to a mere 39 gallons per capita per day. As the state of California confronts potentially a drought that could last for years, what lessons can be learned from the Australian experience?

At the Public Policy Institute of California (PPIC) event, Managing Drought, held earlier this month, Jane Doolan, a professorial fellow of natural resource governance and a member of Australia’s National Water Commission, discussed how the Australian government responded to the extreme drought conditions with policy initiatives that changed their water entitlement system, supported water markets, and provided water for the environment to head off catastrophic impacts to sensitive species and ecosystems.

Here’s what she had to say.

Australia has had a history of water reform going back twenty years, with a lot of that reform focused on establishing clear, unambiguous property rights to water held by the environment, communities, and irrigators, she began. “As a precursor to the operation of our water market, which has been the way we have transferred waters from low value use to high value use without the intervention of government, a lot of what we’ve done over 20 years is focus on water efficiency,” she said. “From our rural sectors, we want high value, high performing sustainable irrigation. From our urban sectors, we want urban authorities providing their communities with the reliability of supply, and contributing the livability of those communities.”

There has been a lot of effort put into improving the environmental water that goes beyond just providing environmental water, although that’s critical, she said. “It’s setting it in the context of catchment management and improving river health, and it’s on the assumption that a healthy environment will underpin our regional economies and our regional well being,” she said.

Drought strikes …

Australia had been focusing on water for 20 years, and then the millennium drought struck, she said. The drought struck southeastern Australia, the states of Victoria and New South Wales, a bit of Queensland and south Australia, as well as Tasmania which share the Murray Darling Basin, the food bowl of Australia, she said. She noted that the reforms were primarily in Victoria and the Murray-Darling basin, but did apply to all of those states.

“The drought itself started in 1997, although some would say maybe earlier,” Ms. Doolan said. “It went through to 2009, and on any of the hydrologic indices that the hydrologists would care to use, it was the longest, the deepest and the most severe on record. It was really important for us to grapple with this because all of our climate change predictions for this area of Australia were that we will have reduced inflows. Our worst case climate change prediction was a reduction of 44% of inflows by 2050, and we were actually living through conditions much worse than that. So people were highly engaged around the drought, and they were willing to accept that this was their future; therefore what we put in place was almost climate adaptation.”

She then presented a slide showing monthly inflows for the Murray River in the Murray Darling basin, noting that the blue line is the long term average. “We have a lot of inflows in the spring; in the summer, not that much,” she said. “The black line is 2006-07; it was the lowest inflow year on record and it smashed the record; effectively it was the lowest by a third. 2007-08, the red line, would have been the lowest on record except we had 06-07,so we were starting to have years in sequences that actually were making us question how useful our historical record for planning was going to be.”

This is important as it relates to the entitlements and the allocations against them. “In this area we have low reliability entitlements; they didn’t’ get any water through the drought,” she said. “We have high reliability entitlements; in 2006-07, those high reliability entitlements started the season with a declaration of 76% of allocation; they finished at 95%. It was the first year this suite of entitlements had never had 100%, but the effect of that 2006-07 year was that the next year, those high reliability entitlements started with 0 and they finished the season with 43%. Now that’s an important thing because that starts to fly over a lot of what we did.”

The impacts of drought …

There were many impacts, both in the urban and rural sectors, she said. “All of the major centers of Brisbane, Sydney, Melbourne, and Adelaide were all restricted to indoor residential use only,” she said. “All of our urban cities around the country had stage 4 restrictions, indoor use only, and we were carting water to many small rural communities for years, which is very expensive. In terms of irrigation, the high reliability entitlements were starting the years at somewhere between 0 and 10% and there was no water against the low. The annual crops of rice and cotton, there was none, or very, very little during that period. The perennial crops of vines and orchards which use the high reliability product, after that 2006-07 year, people were sacrificing one-third of those. So it was pretty terrible. There were mental health impacts, there were huge job losses, we had foreclosures, and farm suicide rate increased significantly. And we can even detect the impact at the national economic level.”

The drought was pretty bad for the environment, too. “For the whole period of the 12 years of the drought, we had reduced streamflows,” she said. “In western Victoria, those streamflows were reduced for that period by 80 to 90%. In regulated rivers or rivers with dams on them, all of the passing flows, which are for the environment and are protected by law, were qualified and reduced to provide water for critical human needs.” She noted that was the Australian counterpart to the California term, curtailment.

As a result, there were significant environmental impacts. “Seventy percent of river red gums along the Murray system were dead or dying, water birds in southeast Australia down to one-third their numbers, we had some species at risk of extinction and we had the lower lakes of the whole end of the Murray-Darling system starting to turn acid,” she said.

Reforms …

In response, they built on the policy reforms they had previously made. “Everything we did, we looked at the environmental, social, and economic implications of every decision,” Ms. Doolan said. “Everything we do must work under a drier climate. That’s what we’re looking towards. We were not just trying to get through this drought; we were preparing now for a different management regime.”

“We needed to clearly improve efficiency,” she said. “The water that we have should be efficiently used as possible across all those sectors. Entitlement holders, regardless of who they are, need to be able to manage their own climate risk. We needed to give them tools to do that, and allow them to do it and get out of their way; part of that is facilitating the operation of the water market. Finally, when there was government investment in this, we looked for multi-benefit solutions, solutions that would modernize irrigation, save water for the environment.”

“It was at this time that the federal government announced a $13 billion initiative to rebalance the Murray Darling, given it was over-allocated,” she said. “That set up a new sustainable diversion limit, and to acquire the water from the consumptive pool to the environmental pool. But it’s a twelve to fifteen year project, and so it goes alongside the reforms I am talking about.”

The water market was critical, said Ms. Doolan. “The year, 2007-08, which had the lowest allocations, also had the highest level of trading of those allocations,” she said. “Forty-five percent of that water was actually traded, so it was critical getting through the drought. For a water market to operate, it needs to have water – zero allocation years are not a good thing. It needs to have water at the time people are making decisions, which is around September, and we need to be able to guarantee that when people have bought water on the market, they can get it to their properties.”

Some of the reforms they worked on were was to actually assist the market to operate under extreme conditions, as well as help individuals. “We introduced carry-over, so an individual entitlement holder could decide to use their allocation, they could sell it, or they could carry over it some in storage for next season. It was really important for irrigators and really important for the environment,” she said. “We changed the system reserve rules, whereby we kept a little bit more back before we started declaring allocations, that reduced the potential probability of zero allocation years for high reliability for water, and it provided some certainty that our systems could deliver it so that if you carried over, if you bought water on the market, you would be able to get it.”

They also established clearer entitlements for the environment with credit for return flows, she said. “If you’re an irrigator, you draw the water off and you water your property, our expectation is you are as efficient as you can, and in an ideal situation, there are no drainage returns,” she said. “But for the environment, if you want to water a wetland, you put water on the wetland and 70 to 80% of that water will flow back to the river. So we put in place the conditions whereby the environment can actually claim some of that back, utilize it further downstream and become a very efficient use.”

“We improved the water grid physically to extend the coverage of the market,” Ms. Doolan added.

Water for urban and rural needs …

For the urban systems, the goal was for that they should be able to supply a minimum level of service with demand management and – where needed – new supply. “They should all be able to supply their communities with a minimum supply of water where they didn’t put them on restrictions too often and they didn’t ask for qualifications of rights and plunder the environment too often,” she said. “They went for demand management really aggressively, and over the period of the drought in Melbourne, water utilization per capita dropped by 43%. Even though the drought has broken, in 11-12, it still remains at about that level. Per capita residential use in Melbourne in 2011-12 was 149 liters per person per day, which is about 39 gallons per person per day.”

The urban suppliers looked at alternative sources, such as groundwater, recycled water, and stormwater where they could; some bought permanent entitlements on the market and diversified their sources, she said. They also augmented supplies in nearly all the major cities with desalination plants. “They were highly, highly controversial, but they all have a desal plant right this minute,” she said.

“We extended the water grid in Victoria to join the Murray Darling system to the Melbourne system,” Ms. Doolan said. “What this means is water can travel physically down a pipe, but it also means that water by substitution can move back, so theoretically we could have water from the desal plant in Melbourne move and be used in the Murray system. We haven’t, because it’s highly controversial, but it is enabled to occur.”

For agriculture, there were the entitlement reforms enabling irrigators to manage their own risks and make their own decisions, she said. “There was also significant investment, some of it from the Murray Darling Basin Plan, in irrigation modernization and irrigation efficiency,” Ms. Doolan said. “We’re modernizing all of northern Victoria’s irrigation network at a cost of $2 billion, and it will save 430 gigaliters of water for the environment. It will provide a higher level of service to irrigators, and it will be very, very efficient. That was actually combined with investment into whole farm planning and on-farm efficiencies as well.”

“It worked,” she said. “From a revenue perspective, in 2008-09, our irrigators used 53% of the water they used in 2005-06 which was still during the drought, but the on-farm production was only reduced 21%, so effectively through the drought, our irrigators ended up using virtually a third of their water and getting two-thirds of their production. What we found is that our irrigation industries have taken that as their aspiration. They want to get to the point where they get twice the production from half the water.”

Rethinking water for the environment …

We also had to really rethink from an environmental perspective how we wanted to manage the environment during a drought. “Basically some of our environmental flow studies would say to us, shove a flush down a river, but the river was a series of pools, the community would have slit your throat, and you didn’t actually have enough water for a flush, so what do you do?” she said. “We went back to first principles and we looked at what the environment does in a drought in Australia, and it contracts. It contracts to drought refuges and a range of places which sustain biodiversity, and if the resilience is there, it will recover during wetter years. That’s the paradigm that we brought to this. What we did in extreme drought is that we assured the high value environmental assets survived, and we would provide the wherewithal that they could recover during wetter periods.”

That then flowed through to how we used environmental water during the drought, to how much water the environment need. “THe environment needs high reliability water for drought and it needs lower reliability in the wetter years,” she said. “We can start to actually work out exactly what the portfolio should look like. So we needed to know where our drought refuges are, and where are they ‘best capable of resilience’ and that changed the range of our planning as well.”

In 2007-08, the environment had a 43% allocation like the irrigators did, she said. “We used that water to actually save species from extinction, prevent catastrophic black water events and algal bloom events, and we watered drought refuges. Sometimes we used consumptive water on route. We used environment entitlement and we pumped groundwater with irrigation pumps to save some red gum trees, we put water into wetlands using pumps, and sometimes we made an irrigation channel run backwards. We got results. We had breeding in some areas of endangered species. It was great.”

So in summary …

Ms. Doolan then summarized the steps that Australia took in responding to the millennium drought:

Economic, social, environmental outcomes were considered together: “Every reform was really looking at the environmental, social, and economic implications all at once, and it was critical that we did that. We were under a lot of scrutiny.”

They worked on the principle, ‘This is the future,’ as opposed to ‘we need to get through this.’

Improvements to the water grid at the highest level so that it can move water around

Efficiency in all sectors: Urban households and industry as well as rural on-farm and irrigation systems

Environment: infrastructure and smart river management: “It’s using works, smart river operations, consumptive water on route, and a whole range of ways that we can actually get water to places.”

Entitlement-holders were given tools to manage their own risk

They worked to make the water market able to operate under extreme circumstances

Augmented supplies when required

The environmental paradigm shifted to one that was practical, pragmatic, and easily understood. “It withstands quite significant scrutiny and is seen as fair; the pain is shared all around.”

And then the drought broke …

“Then the drought broke, not with a drizzle; the drought broke with the biggest floods on record as tends to happen,” Ms. Doolan said. “And we found ourselves in a different place. Now there is community backlash. ‘God, the desal plant, you don’t need it, it’s costing us a fortune, water prices are high.’ We found ourselves with new governments, pretty much conservative governments, all up the eastern seaboard and at the federal level as well – New governments not accountable for the decisions made and able to reprosecute a lot of those issues. Water for government is no longer a priority; It’s almost a bit of a nuisance because you’ve still got these programs going that are long-term that are yesterday’s issue, and flood management and flood recovery becomes the new drought.”

“Now, water managers know things will work in cycles; you’re in your cycle as we speak,” she continued. “There are two elements to this cycle: the drought enables reform. And you should take that with both hands and run with it. But just be aware that following the drought, there is always the period where a lot of that work is reprosecuted, there’s a period of consolidation, and a period of embedding, and that’s got to be undertaken. It’s less sexy, but it’s just as important to make sure that the gains that are won during the drought are sustained into the long term.”