Two drop-in sessions for water allocation queries are being held in May 2019.
Can I purchase water allocation for next year in the current water use year?
Yes. Some water brokers (not the department) facilitate ‘forward’ water allocation markets whereby a buyer may enter a contract with a seller to buy water allocation for a set price, with delivery at an agreed date in the future. Buying allocation from a seller on a forward basis can be beneficial in that it can mitigate against future pricing uncertainties. The delivery of the bought volume on the agreed delivery date is guaranteed by a contract provided by the broker and entered into between the seller and buyer.
Note that the forward water allocation market is a relatively new market offering by water brokers. As such, the availability of purchasing options may be much lower than the availability of allocation on the ‘spot’ market for the current water use year. The forward market will typically gain momentum:
- Near the end of the irrigation season, when the total end-of-season usage can be better estimated; and
- After state government agencies have provided their first water resource outlooks for the following water year, including in relation to forecast inflows and allocations and carryover, against which the likely water availability and water usage needs for the following year can be better assessed.
Forward water transfers are arrangements between a water broker and their customer. The department has no involvement in these arrangements and will only determine transfer applications when they are lodged with the appropriate fee.
Can I purchase River Murray water without owning any land along the river?
Yes. River Murray water rights (water access entitlements and water allocation) are able to be purchased independently of any land considerations, and independently of each other. This means that they are able to be purchased prior to, or after purchasing land and gaining other necessary approvals for the take and use of water.
Investors seeking to own water rights may also purchase River Murray water rights without owning any land.
What is the difference between a ‘Wet’ and a ‘Dry’ Entitlement Transfer?
Some water brokers offer sellers the opportunity to transfer entitlements ‘wet’ or ‘dry’
When an entitlement is transferred ‘wet’, it means that all of the current year’s water allocation that has been made to the entitlement, from 1 July to the date of signing the water transfer contract, is included in the transfer price and made available to the buyer.
When an entitlement is transferred ‘dry’, the current year’s water allocation remains with the seller.
Whether an entitlement includes the current allocation or not can affect the entitlement’s asking price. In either case, new water allocation that is made to the entitlement after the date of signing the transfer contract is made available to the buyer.
The department has no involvement in these entitlement transfers and will only determine entitlement transfer applications when they are lodged with the appropriate fee.
What is ‘Tagged’ Entitlement trade?
If you own or want to buy a New South Wales or Victorian water entitlement and use the water allocation made to that interstate entitlement in South Australia, you can do this under a system known as ‘tagging’.
An entitlement that is ’tagged’ retains all of its original interstate characteristics, but the tagging arrangement makes clear that the intended use of the water allocation under that entitlement is in another state or another trading zone.
The form to establish a tag on an entitlement is available here (River Murray, Form T1). To order water allocation under a tagged entitlement to SA, you will need to contact the the department's Water Licensing team in Berri on (08) 8595 2053.
Importantly, if you do own an interstate water entitlement, you do not need to establish a tag to receive water allocated under that entitlement in SA. You can just transfer the water allocation as required using a standard water allocation transfer form (Form A.1).
While you will pay an application fee to establish a tag on an interstate entitlement, the benefit of establishing a tag is that once the tag is in place, no further fees are required to maintain the tag or to order water allocation related to the tagged entitlement.
If you own entitlements in more than one trading zone, tagged trading is designed to help you manage and use your portfolio of allocations at a reduced cost.
If there is a restriction[SA_11] on water allocation transfers between two trading zones, the Basin Plan Water Trading Rules may require that the same restriction applies to orders for water allocation under a tagging arrangement. Whether the same restriction applies depends on the date that the tag was established.
- For tags established before 22 October 2010, restrictions on orders for water under a tag will not apply ever.
- For tags established between 22 October 2010 and 24 November 2012, restrictions on orders for water under a tag will apply after 1 July 2019.
- For tags established after 24 November 2014, restrictions on orders for water under a tag will apply.
Do I need a water licence or a water account before I can purchase River Murray water rights?
No. In South Australia a water licence will be established for you by the Department of Environment Water and Natural Resources (the department) upon your first approved water entitlement transfer. Similarly, a water account will be established upon your first approved water allocation transfer.
Are there any limits on the number of trades that I can make, or volume of water that I may trade each year?
No. There are no limits on either the number or volume of transfers that may be made each year. There are fees, however, associated with the transfer of water entitlements and water allocation so multiple transfers will attract multiple fees.
Why should I report the correct price for my water trades?
Proper price reporting is a fundamental element of any well-functioning market.
Sellers are now required to report the price achieved for their water sales in the Murray‑Darling Basin under the Basin Plan Water Trading Rules (section 12.48); and the reported price must not include any land or other considerations.
Reporting erroneous trade prices distorts the market and may force you to pay a higher price than necessary when you next need to purchase water, or you may achieve a lower price than you ought to when you next need to sell water.
Notwithstanding the requirement of the seller to report the price of all water entitlement and water allocation trade in the Murray‑Darling Basin, there are legitimate reasons why you may enter zero dollars ($0) for the price of water on your water transfer form such as:
- You are transferring water to a family member at no cost
- You are transferring water among water accounts, perhaps linked to separate farms, which you use to maximise your business flexibility
- You are an environmental water manager using water trade to deliver environmental water
Note that if you purchase a parcel of land with associated water rights, the land price and the water price should be provided as separate considerations.
New entry fields have been entered on all SA River Murray water transfer forms to facilitate accurate price reporting.
Will there always be water available for purchase on the River Murray?
The River Murray water market, together with the state water planning, management and entitlement frameworks underpinning it, is now effectively a ‘cap and trade’ system, which facilitates water trade. The system operates much like that of a financial market whereby natural forces of supply and demand are key determinants of price, volume and the directional movement of water within and among specified trading zones. Ultimately, market mechanisms should see water move to its highest value use in years of both low and high water availability.
In light of the above, there should always be water available for purchase. However, there has been a documented shift towards a reducing supply of water for consumptive purposes such as irrigation (due to recovery of consumptive water for environmental purposes) and increasing demand on the remaining consumptive water that has led to increased water prices (due to increased frequency of years of relatively low water availability, and an increase in water intensive permanent commodities like nuts). So, in the future, it is possible that there may be an inability to meet the total immediate demand for water allocation e.g. in consecutive dry years and/or periods of unprecedented drought.
Finally, note that even in years of relatively good water availability, it may be more difficult to purchase:
- Specific types of water, such as high security water shares ¾ as these entitlements are in shorter supply and are more tightly held i.e. SA Murray Class 1 or 5, and NSW Murray and NSW Murrumbidgee High Security; or
- Relatively small volumes of water (i.e. 10 ML) compared to larger volumes of water (i.e. 100 ML). This is because sellers may be unwilling to transfer small volumes, as transferring multiple small parcels of water incurs multiple fees.
[SA_11]Link to section on restrictions