Corporate greed drives Murray-Darling crisis

May 25, 2007

The deepening of Australia's drought- and global-warming-driven water crisis has thrown into sharp relief the historical and current inadequacy of the Liberal-Labor political establishment to put the needs of working people before those of big business.

The sharp end of Australia's water crisis is graphically illustrated in the fate of the Murray-Darling river basin. In December, the Murray Darling Basin Commission reported that, "Inflows for the season to date (six months, June to November) have been only 610 GL [1 GL = 1 billion litres] which is 68% of the previous recorded minimum of 1090 GL observed in 1902 and only 7% of the long-term average of 8400 for the same period".

On November 1, the Murray-Darling Water Crisis Management Council, formed by Murray River shire councils, warned PM John Howard's government that the Murray had only about 24 weeks of water left in it. The council urged immediate action be undertaken to construct a temporary weir at the mouth of the Murray to stop millions of litres of water flowing into and evaporating from the shallow Alexandrina and Alberta lakes.

The Howard government ignored the recommended emergency action, leading to a far greater crisis. On April 19, Howard announced that unless major rains over the following six weeks increased inflows into the Murray-Darling river system, irrigators would be cut off from water supplies after June 30. Howard's only recommended course of action to avoid this was for "all Australians to pray" for the needed rain before then.

However, because of desiccation of the land, it will take significant rains over a longer period to restore flows into the Murray-Darling river system and thus avert the threatened cut-off of water supplies to irrigators.

Such an action would be economically devastating to the 50,000 farmers in the basin, who accounts for about 41% of Australia's agricultural output, 90% of the country's irrigated crops and $22 billion worth of agricultural exports.

The resulting cutback in crops for domestic supply would cause massive direct and indirect job losses in the basin's towns and in the country's food-processing industries, and a possible four-fold increase in retail food prices across Australia.

Electricity shortages

The water crisis however is impacting far beyond the basin's farm sector. On May 14, for example, the Orange town council voted to supply Newcrest Mining's Cadia goldmine with 450 million litres of water for the next three months to stave off the mine's closure, which would cost 450 jobs. The decision will leave Orange's 37,000 residents with minimal drinking water, necessitating level four water restrictions.

The financial burden inflicted on working people by the water crisis will be exacerbated by electricity price increases. Because the majority of Australia's 27 coal-fired power stations rely on a highly water-intensive model of power generation they are vulnerable to water shortages. For example, the 1400 megawatt capacity Stanwell power station in Queensland used almost 20 GL of water in 2004-05 — the same amount that Sydney Water provides for 1.6 million homes and businesses in a two-week period.

Two coal-fired power stations in south-east Queensland owned by the Tarong Energy Corporation have announced that they will cut electricity generation by 70% from full load this year in order to conserve water. Using the pretext of the expected reduced demand for coal supplies for these power stations, Rio Tinto, the world's second biggest mining company (after BHP Billiton), announced on May 16 that it would sack 160 workers at its Tarong coalmine over the next few months, despite the company having made a net profit of $10.6 billion last year.

According to a report commissioned by the Queensland government, only two power stations in Australia use the dry-cooling method of power generation — the Millmerran power station and the Callide C station west of Gladstone. They use 90% less water than conventional coal-fired power stations.

The May 19 Sydney Morning Herald reported that the "water shortage across eastern Australia is now so acute it has begun to affect power supplies, and the country is at risk of electricity shortages next year".

In Queensland, wholesale spot prices for electricity have jumped by up to 270%, according to the May 15 Brisbane Courier-Mail. "The Energy Users Association of Australia, which represents big electricity customers such as Telstra and the major banks, has warned that high wholesale power prices may add up to 1.5 percentage points to the consumer price index if they are passed on to business and households", it added.

In an interview on ABC TV's May 24 Lateline program, climate change author Professor Tim Flannery estimated that retail electricity prices could rise by 30% across eastern Australia. Asked how this would impact on industry, Flannery pointed out that this was uncertain because 'it's obscured by hidden subsidies given to various industries. For example, the aluminium smelting industry in Australia. No-one really knows what they pay for their electricity, but it's rumoured to be in the order of one or two cents a kilowatt hour", compared to the 12-20 cents per KWh that household consumers pay.

The Victorian state government has instigated a scheme that switches the Latrobe Valley's brown coal-fired power stations from fresh to recycled water, returning 135 GL of fresh water to Melbourne's water supply. But the incredibly high water costs of coal-powered electricity generation and its impact on global warming adds further urgency to the need to transition Australia to non-water-dependent renewable energy sources.

State governments have responded to the drought by enforcing ever-tighter water-use restrictions on residents, with Brisbane recently graduating to level five restrictions. But there has not been a similar campaign to force big business to cut back on its water usage.

The Victorian government, for example, has refused to name the top 200 corporate water users in the state, thus protecting them from public accountability and scrutiny. Meanwhile, as households pay $960 per megalitre for water, bottled water manufacturer Sunkoshi is only charged $2.40 per ML.

Government negligence

If Howard had acted in November, it's possible that some of the worst aspects of the crisis in the Murray basin could have been mitigated.

The impending disaster has been repeatedly drawn to the attention of the state and federal governments for more than a decade now, leading to many promises that have been considerably underfunded. The May 12 Australian, for example, reported that the Howard government has so far underspent by $500 million on its 2004 election promise to spend $2 billion on its central water policy, the WaterSmart program.

"This week's budget papers", the Murdoch-owned national daily reported, "also reveal that the much-trumpeted $10 billion, 10-year federal takeover of the Murray-Darling river system will receive only $500 million worth of funds in total for the first two years — raising doubts about whether the full amount will ever be delivered".

At the heart of the federal scheme is the promotion of water trading as the key mechanism to distribute the scare supply of water in the basin. Maude Barlow, an international water conservation campaigner, noted at a 2006 Melbourne Landcare conference: "The idea is to use each drop of water in the most profitable way … The rivers and aquifers need more water, not less. And just which farmers will be encouraged by the banks to sell water instead of growing food? The small farmers producing for the domestic market, that's who. Big agribusiness exporters will still get all the water they need as long as it lasts."

Agribusiness water greed

Clearly, at the economic root of the problem of the water crisis is the unsustainable over-allocation of water allowances in the Murray-Darling basin to farming, particularly the export-oriented agribusinesses.

By 1994, 77% of the Murray River's annual flow was being diverted for human use, with 95% of this use being for agriculture. Environmental flows were conveniently forgotten in the race for agribusiness profits, exacting terrible costs on the environment, including the drying up of wetlands and the growing salinity of the river (threatening the quality of Adelaide's main water supply) and the silting up of the Murray's mouth, requiring 24-hour dredging.

The lack of cooperation between the state governments has exacerbated the problem. Queensland and NSW governments in particular have allowed the expansion of irrigated agriculture, and the ballooning of water allocations in their states, without regard for the environmental, social and economic consequences downstream.

The approval of rice and cotton growing in particular, two of the most water-intensive crops in the world, has been a huge drain on the basin's limited water resources.

Cotton farming expanded three-fold in the 13 years to 1998 due to governments providing growers with extremely cheap irrigation water. Water charges only comprise about 1-2% of the operating costs of a large cotton farm, resulting in huge profits.

By 1996-97, cotton growing was consuming almost 10% of all water used in Australia, more than all of Australia's 8 million households combined. Unsurprisingly, Queensland's Cubbie Station cotton farm, which has a water storage capacity of 500 GL, is the focus of much resentment by smaller farmers downstream.

While meteorologists now believe the seven-year drought-causing El Nino has ended, reduced water availability is a reality here to stay. The UN's Intergovernmental Panel on Climate Change impacts assessment report released in March found that, "Annual stream flow in the [Murray-Darling] basin is likely to fall 10-25 per cent by 2050 and 16-48 per cent by 2100".

Dealing with this requires a radical shift away from allowing the big-business-dominated market to determine the allocation of Australia's scare water resources. The millions of working people, who are bearing and will bear the brunt of the impact corporate greed and government inaction on water, need to have the power to decide how society uses this precious resource. That however will require a radical change in the whole way our society is politically and economically organised.

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