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Water - Victoria - Water Resources Overview

Surface and Groundwater Management, Availability, Allocation and Efficiency of Use
State of Victoria Water Resources Overview

Introduction

Water is fundamental to Victoria's future. It is critical to Victoria's economic performance, and it is vital to the health of every community, not only because of the economic activity it generates, but also because of its environmental, aesthetic and recreational values. It is a necessary input to Victoria's primary industries, and underpins economic growth in rural and regional Victoria. After manufacturing, agribusiness is Victoria's largest export earner. Dairying is the most prominent agricultural activity in the State, with mixed farming, orchards, vegetables and grapes being the other main irrigated farming activities. Currently around 30% ($1.8 billion) of Victoria's gross value of production ($6.1 billion) is produced in the northern irrigation regions, and there are plans to increase farm income from irrigated agriculture by $650 million per annum by the year 2010.

At the same time, the limits to the water that can be sustainably harvested have been reached already in many river systems, and will be very soon in many others. Current average annual water use in Victoria is around 5788 GL/a, with 89% of needs being met by surface water resources (5166 GL/a) and 11% by groundwater (622 GL/a). A further 814 GL of surface water is used to meet commitments to New South Wales on the Murray system, bringing total surface water diversions to 5980 GL/a. This level of usage represents around 87% of the estimated sustainable yield for surface water, 85% for groundwater within designated Groundwater Management Units and only 25% of the total groundwater resource in Victoria (< 5000 mg/L TDS). By 2050 it is expected that use of surface water will have risen by 7% relative to current levels to around 6422 GL/a, and groundwater use is expected to rise by 29% to 804 GL/a. This level of use (at 2050) represents around 94% of the sustainable yield for surface water. Additional demands for surface water will be met through water trading and through efficiency gains in water supply delivery and use.

Detailed information about the history of development and the management of water resources over the past 150 years in Victoria can be found in DWR (1989, 1992), DCE (1991), and Powell (1989, 1998). The most significant period of development of resources for both rural and urban water use was during the three decades from 1960, with around 6,900 GL of storage capacity being added during this period. This represents almost half of the current storage capacity (of around 15,500 GL) throughout the State, and about 80% of this storage capacity was built for irrigation purposes.

By the 1980s, the development of surface water resources throughout the State could be described as being in a 'mature' phase. Infrastructure development over the past 150 years had harnessed around half of the State's ultimately available water resources, and relatively sophisticated supply systems had been developed in many instances, with interconnected storages existing within many basins and connections also existing between some basins. In the same decade, there was a growing acceptance that the rate of development of the resource that had occurred over the past two to three decades was not sustainable. It was estimated that if development were to continue at the same rate, all available resources would be developed within 35 years. In addition, it was recognised that the focus on development of the resource had resulted in many of rivers and streams being degraded by altered flow regimes. Conflict over water, particularly during sustained droughts, was also seen to be a significant emerging issue. It was therefore clear that there was a need for more efficient use and management of existing resources.

Accordingly, a wide-ranging program of institutional and legislative reform was implemented in the late 1980s to ensure that water is managed effectively and used efficiently and that appropriate protection is given to environmental values. As a result of this change in focus from the continued development of new resources to the efficient management and use of existing resources, there has been no major storage development since the completion of Thomson and Blue Rock dams in the 1980s. The program of reform initiated in the late 1980s has continued in the context of the national water reform agenda adopted by the Council of Australian Governments in 1994, which was subsequently included in the National Competition Principles Agreement in 1995. Victoria is now well placed to meet national requirements.

Groundwater is the minor partner in the supply of the State's water, being mainly used by rural towns to supplement their surface water supply sources (especially in times of drought) and for irrigation. It also provides the sole source of water supplies for many remote farms. With increased pressure on surface water resources, groundwater has seen increasing use, requiring more intensive management, which again is consistent with the national water reform agenda.

The programs and policies that have been implemented as part of the water reform agenda are providing a sound foundation for the sustainable and efficient management and use of resources. Over the last decade Victoria's water management framework has led to a significant movement of water into higher-valued uses, and to major advances in the way droughts are handled. Moreover, it has introduced strong incentives for efficiencies in water distribution and use, which are driving major upgrading of on-farm and water authority practices. The environment is now recognised as having a valid right to water. In some overallocated systems like the Wimmera, water that has been saved through more efficient delivery systems has already been returned to the environment, and further action along these lines is being actively pursued.

There is nevertheless still a considerable task ahead, and a range of difficult issues to be worked through. This will necessarily involve extensive consultation with all stakeholders, as informed public debate (in particular in relation to setting the boundaries between water for agriculture and for the environment) is critical for gaining acceptance of a way forward. The challenge now is to manage a finite and scarce resource in an environmentally responsible and equitable way. This will involve pursuing further opportunities for water savings and reuse, facilitating the transparent re-allocation of water to more productive use through water markets, ensuring the efficient delivery of services, and restoring the health of rivers and catchments.

Legislative and Policy Framework

The Victorian Government is committed to ensuring the sustainable use of all water resources. This commitment was detailed in the Government's 1999 policy statement Our Natural Assets. Other key commitments made in this policy statement are to "maintain our commitment to the Murray Darling Basin Cap", "fund improvements to our irrigation infrastructure to produce water savings", and to "establish a Rivers and Catchment Restoration Program". Specific legislation and a range of policies and programs are in place to support these commitments. The legislative and policy framework is consistent with the national water reform agenda adopted by the Council of Australian Governments (COAG) in 1994 and incorporated into the National Competition Principles Agreement in 1995.

The water industry in Victoria is governed by four principal Acts of Parliament. The Water Act 1989 covers the management of surface water and groundwater and the governance and operation of non-metropolitan water authorities and rural water authorities. The three metropolitan retail water companies operate under the Water Industry Act 1994 and, as State Owned Companies, the directors also have obligations under Corporations Law and the State Owned Enterprises Act 1992. Melbourne Water operates under the Melbourne Water Corporation Act 1992 and derives its functions from the Melbourne and Metropolitan Board of Works Act 1958. The Water Act 1989 brought together the many existing pieces of water-related legislation and established the framework for future water management. It incorporates many of the key objectives that were subsequently set for the national water reform agenda. These include the definition and formalisation of rights to water (including rights for the environment) in the form of bulk entitlements, provision for temporary and permanent trading in water entitlements (with a view to moving water to higher value uses), pricing water for full cost recovery (which provides incentives for efficient usage) and improved public consultation and education.

Institutional reform in Victoria has also been in line with the national water reform agenda. This has included the establishment of a commercial focus for the activities of water authorities, the separation of service provision from water resource management, standard setting and regulatory enforcement, and the establishment of Catchment Management Authorities to manage the land and water resources of catchments in an integrated manner.

The Water Industry Act 1994 was introduced as part of a comprehensive program of reform of Government business enterprises, and involved the restructuring of Melbourne's water industry into a wholesale supplier and three retail water companies. The aim was to introduce a more commercial focus that would result in increased efficiency and improved customer services.

In 1995 the Murray Darling Basin Ministerial Council decided that an upper limit or cap had to be placed on the use of the River Murray water as water use was clearly reaching unsustainable limits. This interim Cap (set at 1993/94 levels of development) was embraced by Victoria and, almost immediately after the Council decision, Victoria set out some interim Cap rules. These rules included the following provisions:

• no new diversion licences on unregulated streams, except through transfer of existing licences;
• trade downstream only on unregulated streams, and with a 20% reduction in volume, unless the resulting licence is for winter-fill;
• banning of trade in sales on regulated streams; and
• reduction in sales allocations in gravity districts.

Further rules were also introduced in July 1997 which limited off quota to 30% of water right and restricted trading of sales above 30% of water right in gravity districts. The Victorian Government is committed to continuing to meet its requirements under the MDBC Cap, and has recently initiated a consultative process aimed at bringing farm dams into the water allocation process. This is in recognition of the fact that continued development of upper catchment dams for irrigation and commercial use is not consistent with meeting Cap requirements.

With increased pressure on surface water resources, groundwater has seen increasing use, requiring more intensive management. Groundwater is managed under the Water Act 1989. This Act repeals the Groundwater Act 1969. The Water Act 1989 continues to recognise that groundwater is a finite resource and asserts Crown rights over groundwater. It again allows for investigations of the resource, licensing of groundwater extractions, and protection of the resource from degradation. It also aims to 'eliminate inconsistencies in the treatment of surface and groundwater resources and waterways' (Part 1 (1), Water Act 1989).

Victoria's groundwater management regime is based on sustainable development through the establishment of community driven Groundwater Management Plans. The process begins with the definition of 'Groundwater Management Areas' (GMAs) throughout the State, which are areas where groundwater development has already occurred or where there is a potential for groundwater development, or areas of high environmental significance. These areas are administered by NRE, and a basic assessment of the status of the groundwater resource is carried out. The need to develop Groundwater Management Plans is determined by the demand on the resource in each GMA. When resource commitments in a GMA reach 70% of the sustainable yield, the area is declared a Groundwater Supply Protection Area (GSPA), groundwater community management groups are established and more intensive management is triggered. This includes the development of Groundwater Management Plans, which include such things as a review of the severity of the threat to sustainability, allocation policy and data requirements for better determining the sustainable yield. These Plans have legislative status under the Water Act 1989. Currently 17 out of the 63 GMAs in Victoria have either been declared as GSPAs or are planned to be a GSPA in the near future.

Groundwater resources along the South Australian/Victorian border are jointly managed and provided for under the Groundwater (Border Agreement) Act 1985. This covers a 40 km wide strip straddling the border which is referred to as the Designated Area. Administration of the Act is undertaken by the Border Review Committee which comprises members of relevant water authorities in Victoria and South Australia.

The Victorian Government has committed to a number of broad principles to guide the development of water policy and the delivery of water services. These are:

• Environmental sustainability;
• Financial responsibility and economic sustainability;
• Transparent and fair resource allocation;
• Sustainable land and water management;
• Customer-focused and efficient service delivery;
• Community involvement in decision making; and
• Clear accountabilities and responsibilities.

These principles have guided the policies and programs implemented by the Government to ensure efficient, effective and sustainable management of Victoria's water resources.

Water Industry Structure

The Victorian water industry is serviced by three groups of authorities known as the metropolitan, non-metropolitan urban, and rural water authorities.

Change in institutional arrangements has been a continuous feature during the two decades since a review of the non-metropolitan water industry by the Parliamentary Public Bodies Review Committee (PBRC) in the early 1980s. At that time there were two large water authorities in the State - the Melbourne and Metropolitan Board of Works (MMBW) and the State Rivers and Water Supply Commission, and over 380 smaller water bodies.

Implementation of the PBRC's recommendations resulted in a significant reduction in the number of bodies delivering water supply and sewerage services to non-metropolitan areas. The number of non-metropolitan urban water authorities (NMUs) in regional Victoria was progressively reduced from over 380 in the early 1980s to 130 within about eight years. This process of restructuring continued in the context of the program of water reform initiated in the late 1980s, and the number of NMUs was subsequently reduced to fifteen through further cycles of amalgamations. These changes also involved the transfer of water service functions from local government and the introduction of skills-based Boards.

In 1991 a review was undertaken into rural water services. This led to the adoption of a rural pricing policy based on financial sustainability and, ultimately, to the disaggregation of the Rural Water Corporation in 1994 into four regionally based Rural Water Authorities (RWAs).

In 1992, the MMBW was transformed into a statutory corporation with an explicit commercial charter and, in 1995, the corporation was disaggregated into five bodies - a wholesaler (Melbourne Water Corporation), three metropolitan retail water companies and Melbourne Parks and Waterways. The regulatory regime under which the retail water businesses operate is very different to that applying to other water authorities. The three retailers are State owned Corporations Law companies with performance standards and business obligations specified in licenses issued by the Minister.

In the restructuring process, the respective roles of Government and the water authorities have been clearly defined with respect to service delivery. Water authorities have been assigned the responsibility for provision of services and they have been provided with clear organisational objectives and accountability mechanisms that enable the true costs of the services provided to be identified.

The Melbourne retail businesses 'compete by comparison', and each year the Office of the Regulator-General (ORG) publishes a report comparing the performance of each retailer against a range of indicators - primarily related to service delivery. ORG's annual reports on performance show consistent improvement by the three businesses against almost all of the indicators. The NMUs and RWAs are not licensed and report on key performance measures in their annual reports.

A complementary institutional change was the establishment (in 1997) of Catchment Management Authorities across the State to ensure that the land and water resources of catchments are managed in an integrated manner. Nine Catchment Management Authorities (CMAs) were established, plus the Port Phillip Catchment and Land Protection Board which, together, cover the entire State.

The key drivers for the future evolution of institutions will be the requirements to provide customer focussed, high class water supply and wastewater services, resource protection and associated services in a sustainable, accountable and cost-effective manner.

COAG Compliance

In 1994, the Council of Australian Governments (COAG) developed a strategic framework for the efficient and sustainable reform of Australia's water industry. The Council was concerned about inefficiencies and lack of clear roles in managing and utilising of water resources, and underpricing and over-exploitation leading to environmental damage. The agreed framework proposed:

• clearly defined, tradeable 'property rights' (separated from land title) for water users;
• allocations of water to the environment based on best scientific knowledge, with monitoring and review, and steps to a better balance where rivers were stressed;
• pricing for water (urban and rural) that recovers costs, including externalities;
• separation between policy-making, regulatory, and service-provision roles (with best-practice in service provision);
• community consultation and public education; and
• an integrated approach to natural resource management.

In several respects, this COAG framework took up and reinforced the agenda for reform that had been pursued in Victoria since the 1980s. In 1995 the strategic framework was included by COAG in the National Competition Principles Agreement and the achievement of the framework's policy outcomes became a prerequisite for a State receiving 'competition payments' (in three tranches) from the Commonwealth.

While groundwater was implicitly included in many of the provisions of the COAG framework, more specific details regarding issues associated with groundwater allocation, pricing and use were set out (at COAG's request) in an ARMCANZ report in 1996 (ARMCANZ 1996). This policy discussion paper sets out specific advice to jurisdictions on appropriate arrangements to ensure that groundwater management practices are consistent with the intent of the COAG Water Reform Framework Agreement and identifies a range of key reforms directly related to the COAG reform agenda:

Policy and Management

• achievement of efficient sustainable use of groundwater in accordance with a nationally agreed approach to sustainability;
• public identification of the sustainable yield, allocation and use of aquifers, with allocations limited to sustainable yields where appropriate;
• removing restriction on groundwater use imposed by inefficiently designed or constructed wells;
• establishment of systems to support transferability of groundwater entitlements;
• improved integration of groundwater and surface water management; and
• expansion of the National Driller's licensing system.

Data and Information

• provision of adequate funding for groundwater investigation in high priority areas;
• requirements for drillers to provide well construction data for all wells drilled; and
• management and licensing of high yielding wells.

Pricing

• introduction of arrangements to provide for full recovery of direct costs of groundwater management with consideration being given to consequences of differential pricing between surface and groundwater where relevant.

Other Matters

• identification by Federal Government of its full costs of groundwater related activities;
• elimination of conflict of interest situations within Government institutional arrangements; and
• assessment of opportunities for development of groundwater education programs(s).

Five core activities have been identified to assist in monitoring the progress made by each State and Territory in implementing the program of national water reform. The five core activities under the reform agenda and Victoria's response are summarised below. Further details are available in HLSG (1999).

Institutional Reform (See also section above on Water Industry Structure)

Victoria's institutional arrangements for the provision of water and sewerage services have evolved in the context of the national reform agenda to ensure that the responsibility for service provision is as far as possible separated from water resource management, standard setting and regulatory enforcement.

Victoria's metropolitan water businesses, non-metropolitan urban water authorities and rural water authorities are responsible for service delivery. The Office of the Regulator General, the Department of Natural Resources and Environment, the Department of Treasury and Finance, the Department of Human Services and the Environment Protection Authority are responsible for other roles in a manner which minimises conflicts of interest.

In relation to urban water services:

• service provision in the metropolitan area is the responsibility of three retail water businesses who are State owned Corporations Law companies with an explicit commercial focus;
• the bulk water and bulk sewerage functions in the metropolitan area are provided by Melbourne Water Corporation (a State owned business created under the Melbourne Water Corporation Act 1992) which also has a statutory charter to act in a commercial manner;
• service provision in regional urban areas is provided by 15 urban water authorities who have skills-based boards and a commercial focus;
• bulk water in regional urban areas is either provided by rural water authorities and/or separate business units within the non-metropolitan urban water authorities;
• the service providers are not responsible for setting standards in the key areas of customer service, drinking water quality and the environment;
• responsibility for water resource management rests with the Minister for Environment and Conservation. In terms of departmental arrangements, resource allocation and catchment management functions are separated from service delivery monitoring arrangements;
• in the area of environmental regulation, the Environment Protection Authority acts as independent regulator; the Department of Human Services also has a role in quality regulation;
• Victoria has an independent economic regulator, the Office of the Regulator General, but the role of the Office in relation to the water industry is confined to specific areas - customer service and monitoring and reporting on non-financial performance; and
• the Treasurer is responsible for regulating metropolitan water prices and the oversight of the financial performance of the metropolitan retail water businesses (through separate departmental arrangements).

In relation to rural water services:

• service provision is the responsibility of four rural water authorities, which deliver rural services in accordance with the Water Act 1989;
• the Minister for Environment and Conservation is responsible for setting standards in the key areas of resource management, corporate planning and the environment;
• Water Services Committees (consultative committees set up by the rural water authorities) have effectively assumed responsibility for determining rural water prices (by negotiation with the rural water authorities); and
• Catchment Management Authorities are responsible for performing some resource management duties. These CMAs work closely with rural water authorities to develop an agreement on the management of the catchments.

Cost Recovery and Pricing

Cost recovery has been high on the Victorian agenda over the past thirteen years, and both urban and rural authorities have progressively implemented changes in pricing policy with the aim of ensuring that prices reflect the true cost of service provision (excluding environmental externalities).

Surface Water

Changes in urban water pricing policy began with the introduction of water usage charges in Melbourne in 1987. Across the whole urban sector, usage charges have been progressively increased (and property valuation charges progressively removed) as a means of managing demand for water and giving customers greater control over their bills. In 1997, metropolitan Melbourne was the last area to move completely off property-based rates. The new tariff structures have also resulted in the removal of cross-subsidies associated with the previous property based rates system of charging.

Rural water authorities have also progressively implemented changes in pricing policy since 1992 with the aim of achieving full cost recovery (covering operating costs plus a renewals annuity for future asset replacements) by 2001.

Government is committed to ensuring fair pricing by water authorities. Responsibility for regulating prices currently lies with Government, although it is anticipated this will be transferred to an Essential Services Commission. Rural customer groups currently have a larger input into the pricing of rural services than is the case for urban customers. Effective rural customer groups (Water Services Committees), such as in the Goulburn-Murray Water districts, are now being involved in service-price tradeoffs to ensure fair pricing decisions.

In relation to new investments in water infrastructure, any work on new or existing schemes must meet the legislative requirements of the Water Act 1989. This Act requires that ecological sustainability must be considered before any revisions can be made to a bulk entitlement order and before any new bulk entitlement can be granted. The COAG "Asset Valuation Guidelines" also provide guidance regarding infrastructure, and the Department of Treasury and Finance have issued two publications - the "Investment Evaluation Policy and Guidelines (1996)" and "Infrastructure Investment Policy for Victoria (1994)", to ensure that all new investments are economically viable.

Groundwater

The cost of groundwater licensing is recovered through annual fees on groundwater licenses and application fees for groundwater licences and for bore construction licences. Government is, however, providing some initiative funding for new groundwater management arrangements (described in the section on Groundwater Allocation below) including:

• the purchase and installation of meters for a representative sample of bores;
• the construction of additional monitoring bores;
• limited technical advice for Consultative Committees;
• support of the Committees; and
• management of the planning process and writing of draft Groundwater Management Plans.

Licensed groundwater users in Groundwater Supply Protection Areas are also required to fund:

• metering and monitoring beyond that funded by Government;
• meter reading, maintenance and replacement costs; and
• costs involved in implementing the Groundwater Management Plan.

Water Allocation and Trading

The Victorian water allocation framework has been designed:

• in recognition that water is a finite resource;
• to protect river health by ensuring water to sustain rivers, floodplains and associated wetlands and estuaries;
• to provide all users with entitlements to water that are explicit, exclusive, enforceable and tradeable to enable them to make informed choices about their use and management of water and to allow certainty for long term planning;
• to protect broader environmental and recreational community values;
• to provide clarity on the entitlements of all users in times of drought;
• to facilitate the movement of water to its highest value use; and
• to enable community input into decisions on water allocation.

To meet these objectives, the allocation framework is based on a system of well-defined property rights provided as bulk entitlements (BEs) or licenses which can be traded on a water market. The allocation framework covers surface water in regulated systems and unregulated rivers and groundwater.

Surface Water Allocation

Under the legislative framework of the Water Act 1989, Victoria's bulk entitlement (BE) program directly deals with the allocation of water to authorities and the environment and provides a comprehensive framework for the trading of surface water entitlements. The BE program ensures secure, well-defined property rights, separate from land title, and it also enables the provision of water for the environment, either by establishing BEs specifically for the environment or by imposing conditions which specify an environmental flow regime on entitlements held by water authorities.

A key initial component of the Victorian water reform agenda was to convert water authorities' existing ill-defined rights to water into explicit, tradeable BEs and to develop a framework for trading these entitlements. Principles and guidelines were developed for BE conversions and they were applied across the State to ensure that all water users were treated equitably.

The BE conversion process was initiated in 1993. Around 190 water supply systems were identified where existing rights need to be converted to explicitly defined rights in the form of BEs. The process by which BEs are established can be lengthy as it involves thorough technical analysis and open and transparent decision making with stakeholder participation. For some systems, up to three years of public consultation with stakeholders is required before the entitlement is finalised.

Flow sharing arrangements have now been negotiated and agreed with stakeholders for 65% of the 190 identified systems. To date 120 formal BEs have been granted, which account for around 74% of the total volume of water extracted throughout the State. Gains for the environment have been made in the process of defining almost all of these BEs. The aim is to have BEs completed for all water supply systems by the year 2003. These BEs will cover around 98% of the State's allocated resources, involving approximately 160 separate BE Orders.

Regulatory systems to monitor and manage the entitlement system, including water trading, are also being implemented.

Licensed diversions from unregulated waterways are not included within the BE regime. Instead, the Minister for Environment and Conservation has the power to issue licenses, which provide a tradeable entitlement to water. This licensing power has been delegated to the rural water authorities. Licensed diversions on unregulated waterways account for approximately 5% of all water diverted.

Surface Water Trading

The introduction of well-defined rights to surface water has opened the door to water trading. Under the Water Act 1989 both temporary and permanent transfers of water entitlements can be made. Temporary inter-state trade has been possible since 1995, and permanent trade across State borders has also more recently been opened up - so far limited to high-reliability rights on the Murray below Nyah. The first permanent transfer was of 249 ML from New South Wales to Victoria in 1998, but there have been no more transfers into Victoria, and 2600 ML has moved out of Victoria, nearly all to South Australia.

Water trades may occur through direct farmer to farmer transactions, through a water broker or via a water exchange. In September 1998, in response to requests from its customers, Goulburn Murray Water established a water exchange which handles temporary transfers across all northern Victoria. It accounts for about 10% of the water traded but plays an important role in providing price information to the market.

At present, each year about 25 GL, or 1% of farmers' entitlements, is being permanently transferred in northern Victoria. Initially, much of the water sold consisted of 'sleepers' (i.e. water that was not being used); and some of the water bought was not for new development but rather for improving the reliability of supplies to dairy farmers who had increased their herd size. Increasingly, however, the water being sold is water that has previously been used, but for marginal benefit. Some of it watered grass on mixed enterprises, often in salinised country around Kerang and Pyramid Hill. The water being bought is leading to major new horticultural enterprises such as wine-grapes, almonds, olives and vegetables. Each year the value of annual production is increasing by around $50 million.

Temporary (i.e. one year) trade has blossomed as well. The level depends very much on seasonal conditions, but it has run at over 200 GL in recent dry years in northern Victoria. This suggests that people who would normally have used water have been taking commercial decisions to increase their return by selling. On-farm efficiencies may have also played a part.

Most trades to date have been between individual farmers, but BEs are also tradeable, and several water authorities have entered the market. Some urban authorities are acquiring water from irrigators (e.g. Lower Murray Water on a permanent basis, and Western Water on a temporary basis). Several urban authorities are selling excess water temporarily to irrigators. One authority has auctioned off water saved through pipelining.

Despite this progress, trading in Victoria is still in its relative infancy and increased trade volumes are expected in the future as water markets become more sophisticated and efficient through full implementation of BEs, the refinement of trading rules, the development of more sophisticated water 'products', further development of inter-state trade, and further development of the regulatory framework as markets grow.

Groundwater Allocation

Groundwater allocations in Victoria are made under a rigorous statutory licensing process. The groundwater management regime is based on sustainable development through the establishment of community driven Groundwater Management Plans. As outlined above, the process begins with the identification of Groundwater Management Areas (GMAs), which are areas where groundwater development has already occurred or where there is potential for groundwater development.

Over 60 GMAs have now been identified throughout the State. The sustainable yield of the aquifers in these Areas has been quantified, as has the volume of groundwater allocated to users. Within these GMAs a Permissible Annual Volume (PAV) has been set to reflect the sustainable yield of the aquifer. When resource commitments reach 70% of the PAV, the area is declared a Groundwater Supply Protection Area (GSPA), groundwater community management groups (Consultative Committees) are established and more intensive management is triggered. This includes the development of Groundwater Management Plans (GMPs), which include such things as a review of the severity of the threat to sustainability, allocation policy and data requirements for better determining the sustainable yield. The key issues to be addressed in a GMP are:

• metering and monitoring programs required;
• conditions relating to payment for the amount of groundwater taken and used from any specified bore or groups of bores;
• restriction or prohibition on the issue of groundwater licenses;
• rules governing the trading of groundwater licenses; and
• restrictions to be imposed on the taking of groundwater

Groundwater Trading

Trading of groundwater is provided for under the Water Act 1989. Currently, little trading occurs due to a combination of issues, including:

• Licensing and trading embargoes have been applied in many GMAs whilst Groundwater Management Plans are developed and implemented. This allows time for the collation of more information on the resource to determine sustainability and environmental requirements more accurately.
• In the case of groundwater extracted for stock and domestic supplies, private rights to groundwater are tied to property rights, and water can be used on an as needs basis, free of charge. These rights are not tradeable.
• In many GMAs, available groundwater resources have been fully allocated (predominantly for irrigation purposes) and users believe that existing rights will therefore be economically important when and if the property is sold -i.e. attached to the property right.

Groundwater trading will most likely occur in the future due to the increasing costs of groundwater, especially in GSPAs where groundwater users will incur volumetric use charges and recovery of management costs. This will reduce the number of 'sleeper' licenses and allow for the opening up of groundwater resources currently allocated but not used. This has already occurred in some parts of Victoria where the cost of licenses, whether used or not, have increased significantly and users have reduced their licensed volumes to what they actually use.

However, there are many difficult issues still to be resolved in setting up an effective groundwater market. National groundwater trading workshops held in July 2000 have flagged the difficulty of determining adequate policies for trading in groundwater that can be applied nationally.

Environment and Water Quality

Water for the Environment (see also Section below on Environmental Water Requirements)

The Water Act 1989 requires the Minister to consider the environment when making water allocation decisions. As discussed above, the BE program enables the provision of water for the environment in regulated systems either by establishing BEs for the environment or by imposing conditions which specify an environmental flow regime on entitlements held by water authorities. In the majority of BE conversion negotiations conducted to date, there have been some improvements to environmental flows achieved.

On unregulated rivers not covered under the BE program, the management of diversions is to be undertaken through the development and implementation of Streamflow Management Plans (SMPs). SMPs will establish environmental objectives, environmental flow provisions (immediate and, where necessary, long term), mechanisms to achieve long term environmental flow provisions, rostering rules, trading rules, and rules covering the granting of any new licences.

River Restoration Plans (RRPs) will be developed for rivers where the environmental provisions made through the BE process are considered to be insufficient to meet environmental objectives. These RRPs will build on current environmental provisions. They will set clear environmental objectives, set priorities for any additional water, identify mechanisms to provide additional water, identify complementary instream and riparian habitat works that will maximise environmental gains and establish agreed cost sharing arrangements for implementation.

In addition to the BE process, SMPs and RRPs, there is the opportunity for any further rights that are required for environmental purposes to be acquired through market mechanisms with cost sharing to be determined by Government.

Heritage Rivers and Essentially Natural Catchments

The Heritage Rivers Act 1992 (Vic.) provides for the protection and management of nominated heritage rivers and natural catchment areas. The Act, inter alia, identifies 18 heritage river and 26 natural catchment areas, specifies management principles and requires management plans to be prepared for these areas, and identifies activities not permitted in these areas.

Heritage river areas are defined as being a substantial part of a river system with outstanding nature conservation, recreational, scenic and/or cultural heritage values. The total length of the 18 heritage rivers defined under the Act is 2000 km, which is just over 3% of the length of the named streams in Victoria. These defined segments of rivers vary from those with particularly high natural values, to regulated systems with high cultural, scenic and recreational values.

The 26 natural catchment areas defined under the Act all lie wither within State forest or national park. They have remained effectively free from disturbance and the aim of management for these catchments is to retain them in their essentially natural condition.

Management plans for heritage rivers and natural catchment areas consist of two parts. General management strategies are common to each heritage river and natural catchment area. Specific management strategies provide more specific direction, tailored to the particular circumstances, for the individual heritage river or natural catchment area.

Integrated Catchment Management

Progress on integrated resource management has been made through the establishment of nine Catchment Management Authorities (CMAs) in non-metropolitan Victoria. The CMAs are responsible for strategic planning of land and water resources management in their region and the provision of integrated waterway and floodplain management. In addition, they provide Government with advice on priorities for action and investment.

The CMAs enable increased community input into, ownership of, and commitment to decisions on catchment management. They also improve the integration and coordination of all relevant service delivery programs in a region by either significantly influencing, or being directly responsible for, all relevant service delivery.

Water Quality

Detailed reporting of the status of water quality in Victorian streams and groundwater systems, stream condition, and management initiatives will occur under Theme 7 of the National Land and Water Resources Audit.

The strategic directions of the National Water Quality Management Strategy are implemented through the institutional framework for catchment management.

The process of identifying environmental values and setting water quality objectives at the regional scale is undertaken by regional communities under the auspices of a CMA through the development of a Regional Catchment Strategy and through the development of water quality and nutrient management action plans. In some areas where it is considered to be a priority, regional schedules to the State Environmental Protection Policy - Waters of Victoria - may also be developed.

All of these regional water quality objective setting processes use the ANZECC Australian Water Quality Guidelines for Fresh and Marine Waters as the minimum standards to be adopted and, in many cases, set regional water quality objectives that are more stringent than those recommended.

The Victorian State Environment Protection Policy - Groundwaters of Victoria also gives guidelines for the protection of groundwater in Victoria. The mechanism by which groundwater is protected is through preservation of its 'beneficial use', which is determined according to the salinity of the groundwater. This policy links in with national guidelines dealing with effluent re-use and other impacts on groundwater, and the ANZECC Australian Water Quality Guidelines.

Public Consultation and Education

The enhancement of responsiveness to community needs is an important step in the reform agenda, and Victoria has widespread public consultation and education processes in place throughout the water industry. Formal mechanisms for public consultation used by water authorities are as follows:

• each of the metropolitan retail water businesses has a customer consultative committee as required by its operating licence;
• all non-metropolitan urban authorities are required to have Customer Consultative Committees as part of an overall Customer Participation Strategy; and
• all rural water authorities have Water Services Committees for consultative purposes, which play an important role in the implementation of full cost recovery for rural and irrigation services.

Substantial stakeholder involvement is also a key part of the process for developing Bulk Entitlements and Streamflow Management Plans.

In terms of public education, there are a number of programs underway which serve to raise public awareness about water resources. These include:

• National Water Week - all Victorian water authorities participate in National Water Week;
• Waterwatch - a program coordinated by the Department of Natural Resources and Environment which distributes material and facilitates community monitoring of water quality and river health;
• Waterwise Program - covers 75% of water customers in Victoria;
• the metropolitan retail water businesses have education and schools programs as part of their water conservation plans, which they must submit as a condition of their licenses;
• non-metropolitan urban water authorities also have education programs in place and distribute educational materials to the community;
• rural water authorities have regular radio spots and media releases to announce water allocations and trading news; they also distribute educational videos; and
• metropolitan and regional urban water authorities produce television commercials to educate the public about the importance of Victoria's water resources and the need for conservation of these resources.

Groundwater is historically the minor player in water resources in Victoria, and an education program is currently being undertaken to promote groundwater across the State. Seminars and websites are being used to introduce rural communities to groundwater resources and their potential, and to provide information about environmental impacts on groundwater. This is an on-going project with updates and new groundwater initiatives being posted on the DSE website (www.dse.vic.gov.au).

General Comment

Victoria has been at the forefront in implementing the national water reform agenda, having initiated water reforms consistent with the national agenda from the late 1980s. Independent reviews by the World Bank, Productivity Commission and the National Competition Council place Victoria as a leader in the management of its water resources and catchments, and it is now well placed to ensure that water resources are used and managed wisely with foresight and care.

In 1999, the National Competition Council (NCC) assessed Victoria as having met all its commitments under the second tranche, although the NCC was critical of aspects of the regulatory arrangements, particularly the lack of an independent price regulator. Initiatives currently underway are aimed at addressing these criticisms. Other priorities include the completion of the BE program, the continuation of other programs addressing the provision of water for the environment, the facilitation of increased water trading (while taking ecological sustainability into account), and initiatives to improve the efficiency of water use. The NCC will further evaluate Victoria's progress in implementing the reform agenda in the third tranche assessment in 2001.

Surface Water Resource

Reporting Units

For this Audit, the basins as designated by the Australian Water Resources Council (AWRC) have been adopted in Victoria as the basic reporting unit. There are 30 AWRC basins in Victoria, of which 11 are located north of the divide and form part of the Murray Darling Basin. Two of the AWRC basins (the Thomson and Upper Murray) have been further subdivided for reporting purposes, to distinguish between the relatively developed and undeveloped river systems within the basins. All reporting units are referred to as Surface Water Management Areas (SWMAs). A total of 32 have been defined for Victoria. The SWMAs are shown in Map 1.

Hydrology

The Great Dividing Range is the dominant physiographic feature of Victoria and is the dominant influence on the distribution of precipitation and, in turn, streamflow across the State. The higher average altitude of the Divide in the east causes the major proportion of the State's precipitation to occur in the eastern half of the State, generating approximately 80% of the total streamflow. North of the Dividing Range precipitation decreases rapidly with increasing distance from the Divide. To the south of the Divide precipitation is higher and more reliable due to the proximity of the highland areas to the coast.

Annual rainfall varies from over 1400 mm in the Victorian Alps and the Otway Ranges to around 250 mm in parts of the Mallee. The Victorian Alps are located in the Great Dividing Range in the south-east of the State and span the Kiewa, Ovens and Upper Murray River basins. The combined streamflow from these basins represents approximately 25% of the total streamflow generated across the State.

The mean annual streamflow of the State under undeveloped conditions is estimated as 20,188,300 ML, which is equivalent to approximately 5% of all flows in Australian streams.

River flows in Victoria show distinct variations in time, with streamflows showing both a seasonal pattern and substantial year-on-year variability in discharge. Across the State as a whole about 60% of average annual discharge occurs in the four month period from July to October. In the western streams this proportion approaches 75%. In all areas of the State, river flows decrease during the summer and autumn months. In general, those basins that have their headwaters in the upland areas of eastern Victoria have more reliable flows, while those in the west experience a greater degree of variability.

Victorian streams, like all Australian streams, generally exhibit a higher degree of variation in annual flows than streams in Northern America and Europe although the variations in Victorian streams are somewhat less than in most other Australian States.

Water Supply Systems

Map 1. Victorian Surface Water Management Areas

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There are ten major water supply systems supplying the majority of users across the State. These are the Melbourne (and Mornington Peninsula and District), Otway, Ballarat, Coliban/Campaspe, Werribee, Geelong and Bellarine Peninsula, Latrobe Valley, Thomson/Macalister, Wimmera-Mallee, and Goulburn-Murray Irrigation District (GMID) supply systems. The GMID and the Melbourne metropolitan system are the largest of these. They are both integrated systems comprising transfer works that divert water across basin boundaries.

Some of the 345 towns scattered throughout regional Victoria (with a total population of around 1 million) are serviced via these larger systems, but there are also many smaller urban supply systems servicing local centres. There is a total of some 304 urban water supply systems throughout the State, 87% of which draw their supplies from surface waters.

There are about 80 storages (with a capacity exceeding 1000 ML) located across the State. These represent a total storage capacity of around 15,500 GL for Victoria.

Available Resource

The total annual 'divertible' surface water resource is the average annual volume of surface water that can be diverted utilising both existing infrastructure and potential infrastructure under the ultimate level of development. The divertible yield is estimated without consideration being given to in-stream environmental water requirements.

For Victoria, the total annual 'divertible' surface water resource of 10,220 GL represents approximately 51% of the total streamflow of 20,188 GL. The remaining 49%, or 'non-divertible' portion of the total surface water resource, refers to water that is unsuitable for development for a variety of reasons including poor quality, high cost, the need to protect environmental values (other than in-stream values), and other social factors (such as the need to protect sites of special cultural significance).

The 'sustainable' yield is the estimated maximum volume of water that can be diverted after taking account of in-stream environmental water requirements. It is calculated as a long term average annual volume. While this concept is apparently relatively straightforward as defined, in practice the sustainable yield is very difficult to determine. Once environmental flow requirements at particular points within a SWMA have been determined, using simulation models it is possible to derive an estimate of the average volumetric 'environmental allocation' and the 'sustainable yield' for the SWMA. While Victoria has a variety of programs underway aimed at identifying, improving and protecting environmental flow requirements, the necessary investigations take considerable time and resources and have not been completed for most catchments.

Given the short time frame of the Audit, it was necessary to make some broad assumptions, and use a variety of approaches, to derive estimates of the sustainable yield for SWMAs in Victoria. Consideration was given to environmental water requirements (known and likely), existing users' rights, and related social and economic impacts.

In summary:

• within the Murray Darling Basin, sustainable yields were equated to the average annual diversions from each SWMA with the Murray Darling Basin Cap in place. (The Cap limits annual diversions within the Basin to the 1993/94 level of development);
• for SWMAs in the southern part of Victoria where environmental values could potentially be threatened by further allocations, the sustainable yield was limited to the current allocation volume, pending the outcomes of further detailed investigations of environmental water requirements;
• for the remaining southern SWMAs, the sustainable yield was determined by calculating the total volume of water that can be extracted from the river system (during May to November) such that the degree of change to the natural flow regime is not 'unacceptable' as defined by the achievement of a rating of 5 for the Hydrology sub-index of the Index of Stream Condition. (Further information regarding the Index of Stream Condition can be found in the State Technical Report). Where the yield estimated using this method exceeded the assessed divertible yield of the SWMA, the sustainable yield was limited to the divertible yield.

Where sustainable yields have been limited in accordance with the Cap, or the current allocations within a SWMA, it is assumed that the current environmental water provisions represent the volume of water that can currently be made available to the environment after consideration is given to current users' rights and related social and economic impacts. In some situations these provisions may not fully meet the environment's requirements.

In the longer term, there may be further scope for improving environmental regimes where necessary - for example, by freeing up additional water by improving distribution and water use efficiency (other options for improving environmental regimes will be considered as part of the River Health Strategy). In SWMAs where a significant portion of the available resource is committed to a downstream SWMA, there is also potential for trading of entitlements between the two SWMAs. This will result in a change to both the sustainable yield and the environmental allocation in both SWMAs. Trade out of a SWMA would decrease the sustainable yield of the SWMA and a trade of water rights into a SWMA would increase the sustainable yield. However, the sum of the sustainable yields for the two SWMAs would remain unchanged.

The estimates of sustainable yield made using the ISC hydrology sub-index are considered to be relatively conservative, as the methodology assumes that diversions occur only during the period May to November (i.e. the flow regime for the period December through to April must remain unchanged). However, the approach was found to give inconsistent results across the State and could not be universally applied. The estimates of sustainable yields determined using this approach can therefore only be considered to be interim measures, pending the outcome of detailed environmental flow assessments.

The major limitation associated with the concept of the sustainable yield for a SWMA is that the assessment is undertaken at the furthest downstream location on rivers/streams within a SWMA. Therefore the sustainable yield represents an average across a SWMA, and it does not take into account the impact of diversions on specific river reaches within the catchment. Consequently, where the sustainable yield of a SWMAs is specified as being equal to or greater than the allocated volume, there still could be river reaches within the SWMA that are overallocated, potentially over-used and, therefore, stressed. These situations will be identified and addressed in the context of established programs (in particular, the Streamflow Management Plan and Stressed Rivers programs) aimed at addressing the provision of water for the environment. These programs are described below in the section on Management Initiatives. Conversely, where the sustainable yield is specified as being equal to the allocated volume, there may still be 'spare' capacity on some river reaches, in the sense that further diversions could occur without stressing the particular river reaches. A further complication is that where SWMAs are nested (as in the Murray Darling Basin), a portion of the flows from upstream SWMAs are often required to meet commitments to downstream SWMAs. This means that current allocations for use within the upstream SWMA (and therefore the defined sustainable yields) are relatively low compared to what they would be if resources generated within the upstream SWMA were to be utilised only within this (upstream) SWMA.

For the reasons outlined above, the concept of sustainable yield for a SWMA is not a particularly useful management tool, as proper management requires consideration of the environmental flow requirements for specific river reaches.

Further details of the methods adopted to determine sustainable yields, and the limitations of these methods, can be found in the State Technical Report.

For Victoria, the total sustainable yield is estimated to be 6,862 GL, or 34% of the total streamflow. Of this sustainable yield, 92% (equivalent to 31% of streamflow) has already been developed for use.

The management area with the most highly developed surface water resource is the Goulburn Basin, with a developed yield of 1,943 GL. This represents 31% of the total developed yield in the State.

Figure 1 shows the developed yield, divertible yield and sustainable yield as a percentage of the total mean annual runoff for the State.

Figure 1. Total Annual Yield Represented as a Percentage of the Mean Annual Runoff for Victoria

Developed Use and Allocation

The total volume of surface water allocated for use in Victoria is 5469 GL, which represents 80% of the sustainable yield of 6862 GL< for the State. An additional 814 GL is allocated for commitments to NSW. The total allocation of the State's resources represents 92% of the sustainable yield.

At present, approximately 5166< GL of surface water is used in Victoria annually. This represents 75% of the sustainable yield of the resource and 82% of the currently developed yield.

Water use in Victoria is dominated by irrigation, which uses 78%, or about, 4019 GL, of total extracted water on average each year. Urban and industrial use accounts for a further 17%, or 861 GL, of total use (approx. 60% of which occurs in Melbourne) and rural supplies for 5%, or about 286 GL. The statewide breakup of consumptive water use by major use types (Level One categories) is shown in Figure 2. The urban use component comprises around 47% domestic use, 34% industrial/commercial, 6% for other uses such as parks and gardens, and 13% losses.

Figure 2. Average Annual Water Use for Level One Use Types

Most of the land under irrigation is located north of the Great Dividing Range and is supplied from the Goulburn and Murray Rivers. Approximately 40% of irrigation water is devoted to the production of pasture, which is used primarily to feed animals that provide meat and dairy products.

Categorisation

The categorisation of SWMAs with respect to the proportion of current diversion (i.e. current use) relative to sustainable yield (SY) and the proportion of current allocation relative to SY is shown in Table 1, and the number of SWMAs falling into the various categories is summarised in Table 2. Five categories have been defined for this purpose:

Category 1: Low level of development: 0-30%

Category 2: Medium level of development: 31-70%

Category 3: High level of development: 71-99%

Category 3*: Fully developed: 100%

Category 4: Over allocated/used resource: > 100%

The fully developed (3*) category refers to those SWMAs where sustainable yield has been nominally set at the current allocation due to one of the following reasons:

• The Murray-Darling Basin Ministerial Council (MDBMC) Cap placed on the development of the surface water resources of the Murray Darling Basin.
• The determination of the sustainable yield is awaiting outcomes of detailed environmental flow studies.
• The high salinity of the resource prevents further development.

Table 1. Surface Water Management Area (SWMA) 'Development' Categories

Surface Water Management Area	Development Category		Comment
	Diversion	Allocation
East Gippsland (VIC)	1	1
Snowy River (VIC)	2	3*	Categorisation pending outcome of Snowy Water Inquiry
Tambo River	2	3*	Categorisation pending outcome of Gippsland Lakes environmental study
Mitchell River	2	3*	Categorisation pending outcome of Gippsland Lakes environmental study
Avon River	3	3*	Categorisation pending outcome of Gippsland Lakes environmental study
Thomson - Macalister Rivers	3	3*	Categorisation pending outcome of Gippsland Lakes environmental study
Latrobe River	2	3*	Categorisation pending outcome of Gippsland Lakes environmental study
South Gippsland	1	1
Bunyip River	1	2
Yarra River	3	3*	Categorisation pending outcome of streamflow management plan
Maribyrnong River	1	2
Werribee River	3	3
Moorabool River	2	3*	Categorisation pending outcome of streamflow management plan
Barwon River	2	2
Lake Corangamite	3	3*	Categorisation due to water quality constraint
Otway Coast	1	1
Hopkins River	2	3*	Categorisation due to water quality constraint
Portland Coast	1	1
Glenelg River (VIC)	3	3
Millicent Coast (VIC)	3	3	Categorisation because of lack of information about sustainable yield for this area - flows are intermittent and not in defined water courses.
Upper Murray River (VIC)	3	3*	Categorisation due to MDB Cap
Mitta Mitta River	3	3*	Categorisation due to MDB Cap
Kiewa River	3	3*	Categorisation due to MDB Cap
Ovens River	3	3*	Categorisation due to MDB Cap
Broken River	3	3*	Categorisation due to MDB Cap
Goulburn River	3	3*	Categorisation due to MDB Cap
Campaspe River	3	3*	Categorisation due to MDB Cap
Loddon River	3	3*	Categorisation due to MDB Cap
Avoca River	3	3*	Categorisation due to MDB Cap
Mallee (VIC)	3	3*	Categorisation due to MDB Cap
Wimmera-Avon Rivers	4	4	Categorisation recognises the substantially altered condition of the Wimmera River and terminal lakes and inadequate security of supply to irrigators.
Mid-Murray (Hume to SA Border) (VIC)	3	3*	Categorisation due to MDB Cap

Table 2. Summary of Surface Water Management Area (SWMA) 'Development' Categories

Category Number	Category Description	Number of SWMAs
		Diversion/SY	Allocation/SY
1	Low Level Resource Development	6	4
2	Medium Level Resource Development	7	3
3 & 3*	High Level Resource Development	18	24
4	Over Developed Resource	1	1

Map 2.Current Level of Surface Water Resource Development (Volume Diverted)

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Map 3.Current Level of Surface Water Resource Development (Volume Allocated)

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Map 2 and Map 3 on the following pages show the assigned categories for current diversion and current allocation for each SWMA respectively.

With reference to Tables 1 and 2, one SWMA (the Wimmera-Avon Rivers) is categorised as over-developed in terms of both diversion and allocation. While it has not been possible to accurately estimate the SY of this SWMA in the time frame available for this Audit, the categorisation recognises the substantially altered condition of the Wimmera River and terminal lakes and the inadequate security of supply for water users. (For the purposes of determining a total sustainable yield for the State, an interim estimate of the SY for the Wimmera-Avon Rivers SWMA, derived using the ISC Hydrology sub-index method, has been assumed, which is consistent with the current level of diversions minus expected efficiency savings over the next twenty years).

Twenty-four SWMAs (75%) are categorised as highly developed in terms of allocation and 18 SWMAs (56%) are categorised as highly developed in terms of current diversion. Of the 24 SWMAs that are highly developed in terms of allocation, 21 are considered to be fully developed (i.e. category 3*). These fully developed SWMAs include:

• the five SWMAs that feed into the Gippsland Lakes (Tambo, Mitchell, Avon, Thomson-Macalister and Latrobe Rivers), for which the SYs have been set at the current allocations pending completion of the Gippsland Lakes environmental study;
• the Snowy River (Vic) SWMA for which the SY has been set at the current allocation pending the outcome of the Snowy Water Inquiry;
• two SWMAs (Yarra and Moorabool Rivers), for which the SYs have been set at the current allocations pending the outcome of the Streamflow Management Plans currently being developed;
• two SWMAs (Lake Corangamite and Hopkins River) where any further development is constrained by the high salinity of the resource;
• eleven SWMAs in the Murray Darling Basin where SYs have been set to average annual usage under the MDBC Cap.

For these fully developed SWMAs, further development can only take place if rights are acquired via water trading or via efficiency gains or, in the case of those SWMAs where studies are currently underway, where those studies identify the fact that further resources can be made available for allocation without detriment to environmental values.

The remaining three basins that are categorised as highly developed in terms of allocation (Werribee and Glenelg Rivers, and Millicent Coast) are considered to have some limited scope for further development. There is further scope available in the seven SWMAs that fall into the medium (Bunyip, Maribyrnong and Barwon Rivers) and low (East Gippsland, South Gippsland, Otway Coast and Portland Coast) levels of resource development in terms of allocations.

Groundwater Resource

Reporting Units

Groundwater abstraction, allocation and use information has been reported at three levels - Groundwater Management Units (GMUs), Unincorporated Areas (UAs) and Province. For the purposes of the Audit GMUs have been assumed to be identical to the Groundwater Management Areas (GMAs) identified throughout the State, which are areas where groundwater development has already occurred or where there is potential for groundwater development. To date 63 GMUs have been identified which cover 90% of the total groundwater allocations in the State. Groundwater Provinces are based on a combination of the principle hydrogeological basins and geological zones within Victoria. The UAs comprise the areas between the GMUs and the Province boundaries. Sixty-three GMUs have been reported on, along with 18 UAs. The GMU and UA boundaries are shown in Map 4 on the following page.

Hydrogeology

The principal groundwater resources in Victoria are contained in Tertiary or younger aged unconsolidated sediments. By volume, the most significant resources are generally located to the south of the Great Dividing Range, with additional significant resources in the arid west and north west. Bore yields vary from as little as 0.5 L/s through to high capacity bores producing in excess of 100 L/s.

Sustainable Yield

Map 4.Map of GMUs and UAs in Victoria

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Sustainable yields have been estimated for all GMUs in Victoria. While a nationally agreed definition of sustainable yield is now available, there is as yet no agreed methodology for determining sustainable yields. In Victoria, the sustainable yield methodology varies across the State according to the aquifer characteristics being investigated.

In most cases, because of the lack of usage data and, in many cases bore hydrograph data, the sustainable yield has been determined as a percentage of rainfall, with adjustments made to take account of environmental requirements to the extent possible given currently available information. Checks on aquifer storage, river recharge/ discharge, aquifer throughflow, well interference, seawater intrusion and pressure/head loss are incorporated into the methodology. The most commonly considered issues are baseflow to river systems and the intrusion of seawater. The requirements of groundwater dependent ecosystems (GDEs) have not generally been considered explicitly in this process, as their requirements are as yet poorly understood. However, in estimating sustainable yields for groundwater management units, efforts have been made to avoid significant interference with GDEs. As the requirements of groundwater dependent ecosystems are evaluated, current government policy will allow for variation of the sustainable yield if the prospect of a detrimental impact emerges (e.g. seawater intrusion, which may result in aquifer salinisation).

It should be noted that the derived estimates of sustainable yield are relatively subjective. Until there is more substantial data on usage it will not be possible to derive water balances for the GMUs, and determine the recharge that provides the basis for sustainable yield. Similarly, the lack of information about the requirements of groundwater dependent ecosystems has meant that some fairly broad assumptions about these requirements have had to be made. Because of these, and other uncertainties such as the impact of climate variability and the likely impacts of plantation forestry on sustainable yields, a conservative approach has been adopted in the estimation of sustainable yields for GMUs.

When resource commitments in a GMU reach 70% of the estimated sustainable yield, the area is declared a Groundwater Supply Protection Area (GSPA), groundwater community management groups are established and more intensive management is triggered. This includes the development of a Groundwater Management Plan for the GSPA, which involves (inter alia) the establishment of programs to meter usage and more detailed monitoring of groundwater levels to allow better determination of the sustainable yield. It has become evident that some GMUs have been over-allocated prior to their delineation as a GMU in 1996. Review of the sustainable yield in these systems and other highly developed resources is being given a high priority in the GSPA process to ensure that the systems do not become over used, or have adverse impacts on any GDEs.

In areas outside of the GMUs the sustainable yield estimates are of low reliability, especially in the fractured rock systems. In areas such as the volcanic rises, sustainable yield estimates can be misleading due to the high recharge rates and low aquifer yields and, hence, low extraction capabilities. Care must be taken when interpreting resource availability in fractured rock systems, as it will not necessarily be the same as the sustainable yield. The salinity of the resource should also be considered at all times when determining groundwater resource availability, particularly in areas outside of the GMUs where the resource can be highly saline (>14,000 mg/L) and of little beneficial use.

Further details on the methodology used to estimate sustainable yields, and the limitations of these methods, are provided in the State Technical Report.

Available Resource

It is currently estimated that the groundwater resource in Victoria is capable of providing 3660 GL/a on a sustainable basis. This resource is variable in quality, and is hence applicable to differing use types according to the salinity of the waters. As shown in Table 3 below, the resource is capable of providing 308 GL for potable use (<1000 mg/L) (all located in GMUs), 1900 GL for agricultural use (1000 - 1500 mg/L) (450 GL of which is in GMUs) and an additional 1450 GL (>5000 mg/L) (36 GL of which is in GMUs) for industrial use. The greatest potential for use occurs in the West Gippsland and Otway regions of the State. The most intensive use of groundwater occurs in the Shepparton and East Gippsland areas.

The depth to the resource varies from as little as 5 metres through to greater than 1000m. Resources less than 100m in depth are generally well developed. Deeper resources are developed primarily where high yields can be obtained and/or where artesian pressure enables free flow.

Table 3. Groundwater resource according to salinity categories

Salinity Category (TDS in mg/L)	Sustainable Yield in GMUs (GL)	Sustainable Yield in UAs (GL)	Victorian Total Sustainable Yield (GL)
0 - 500	225	0	225
501 - 1000	83	0	83
1001 - 1500	240	0	240
1501 - 3000	136	1380	1516
3001 - 5000	77	69	146
5001 - 14,000	37	616	653
> 14,001	0	797	797
Total	798	2862	3660

Use and Allocation

Groundwater licensing (allocation) information is held by the Rural Water Authorities who jointly manage the GMUs and all other groundwater resources with the Department of Natural Resources and Environment. Groundwater abstraction data has only recently been collected by the Rural Water Authorities, and only in limited areas. The accuracy of usage information in most cases is therefore very low, and it should be regarded as unreliable for many of the GMUs. Programs are underway to remedy this problem, with priority being given to the metering of usage in GMUs where allocations and abstractions are greater than, or approaching, the sustainable yield.

Current allocation and usage of the groundwater resource within GMUs is summarised in Table 4 and Figures 3(a) and 3(b) below. It can be seen from Table 4 that the low salinity groundwaters are fully developed, with the higher salinity groundwaters (>3000 mg/L) close to 60% developed. Usage is lower than the allocated volumes, at approximately 80% of total allocations.

Groundwater use is split across four main categories: irrigation, urban/industrial, rural (including stock and domestic bores) and in-situ use. The predominant use of groundwater in Victoria is irrigation, which comprises around 69% of total use and 72% of total allocations.

Table 4. Groundwater Allocation and Use (ML) by Salinity Category for GMUs, UAs and State of Victoria

Salinity Category	A (0-500)	B (501-1000)	C (1001-1500)	D (1501-3000)	E (3001-5000)	F&G (5001-14,000)	TOTAL
Allocations - GMUs	223,812	58,486	200,825	115,157	48,662	20,608	667,549
Allocations - UAs	0	0	0	49,530	2,880	59,216	111,626
Allocations - Victoria	223,812	58,486	200,825	164,687	51,542	79,824	779,175
Use - GMUs	157,652	42,761	179,281	81,795	38,987	11,415	511,891
Use - UAs	0	0	0	49,530	2,880	57,626	110,036
Use - Victoria	157,652	42,761	179,281	131,325	41,867	69,041	621,927

The total groundwater use is estimated to be 622 GL/a, which includes 510 GL/a in the GMUs and a further 112 GL/a in the UAs. The predominant use in the UAs is for irrigation (60%), stock and domestic (20%), mine dewatering and urban use (16%) and in-situ uses (4%).

Based on the data for 1996/97, approximately 80% of the total allocated volume for groundwater is being used, with 160 GL of allocated groundwater not being used. Howvever, more recent estimates indicate that this gap between allocation and use is closing, reflecting both an increase in demand for water and the decreasing availability of surface water supplies in many locations.

Figure 3. Groundwater Allocation and Use in Victoria for Level 1 Use Types

Categorisation

The categorisation of GMUs and UAs for 1996/97 is given in Table 5. Based on allocation, there are 9 GMUs in category 3 and 16 GMUs in category 4. However, by usage there are only 8 GMUs in category 3 and 8 GMUs in category 4. It should be noted that the usage figures are not very accurate, so some of the category 4 GMUs will be fully used, but not necessarily over-used.

Table 5. Categorisation of Groundwater Resources by GMU & UA

Area type (GMU/UA)	Category	Allocation 1996/97	Usage 1996/97
GMU/UA	1	25/16	32/16
GMU	2	13	15
GMU	3	9	8
GMU	4	16	8

Figure 4. Groundwater Resources in Victoria (including all GMU and UA resources)

Maps 5(a) to 5(d) and Maps 6(a) to 6(d) on the following pages show the categorisation of groundwater with respect to current groundwater use and allocation respectively.

Figures 4 and 5 below indicate the status of groundwater resources at 1996/97. It appears that there are considerable 'spare' groundwater resources available for allocation and use. However, as shown in Figure 5, much of the high quality resource, which is located in the GMUs, is already allocated and used. The groundwater resources situated outside of the GMUs are commonly inaccessible, located in State or National parks, or are low yielding and uneconomical to develop (e.g. fractured rock aquifers). There will be considerable pressure on the GMUs over the next 5 to 10 years whilst the sustainable yields are reviewed, and Groundwater Management Plans are developed and implemented.

Figures 4 and 5 show the difference between the situation in 1996/97 (the reporting year for the Audit) and the average allocation and use taken over a four year period, from 1996/97 to 1999/2000. The average allocation and use is considerably higher in the GMUs over this period (see Figure 5), indicating significant growth and increased demand for groundwater over this period.

Data for 1999/2000 indicates that allocations are now up to 762 GL/a, with another 113 GL/a pending in license applications. This is an increase of nearly 100 GL over a 3 year period, which predominantly has occurred in the GMUs. This increase in demand for groundwater has placed increased pressure on the resource. A moratorium on the issuing of further licences has been applied in many GMUs until Groundwater Management Plans are in place. Licensing for each GMU will then be considered on a GMU basis.

Figure 5. Groundwater Resources in GMUs in Victoria

Map 5(a).Current Level of Groundwater Resource Development (Volume Extracted) - Watertable Aquifers

Map 5(b).Current Level of Groundwater Resource Development (Volume Extracted) - Confined Aquifers

Map 5(c).Current Level of Groundwater Resource Development (Volume Extracted) - Deep Confined Aquifers

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Map 5(d).Current Level of Groundwater Resource Development (Volume Extracted) - Deepest Confined Aquifer

Map 6(a).Current Level of Groundwater Resource Development (Volume Allocated) - Watertable Aquifers

Map 6(b).Current Level of Groundwater Resource Development (Volume Allocated) - Confined Aquifers

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Map 6(c).Current Level of Groundwater Resource Development (Volume Allocated) - Deep Confined Aquifers

Map 6(d).Current Level of Groundwater Resource Development (Volume Allocated) - Deepest Confined Aquifer

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Joint Groundwater and Surface Water Use

Current Status of Conjunctive Management in Victoria

Groundwater is the minor player in the supply of the State's water, with some 11% of total water use being drawn from groundwater resources. However, it is now being increasingly recognised that, in many areas, groundwater substantially contributes to the baseflow of surface streams, and that groundwater use can impact upon the availability of surface water resources (and vice versa).

The Water Act 1989 prescribes in considerable detail the setting up of Groundwater Supply Protection Areas (GSPAs), and the development of Groundwater Management Plans for these areas. On the other hand, it is silent on the question of Streamflow Management Plans (SMPs), which are developed in an informal arrangement between NRE and the rural water authorities. It is recognised that part of the function of SMPs is to apportion the baseflow between consumptive use and the environment.

Ideally, where there is a significant interaction between surface and groundwater systems, there should be some integration of groundwater and surface water planning and management processes.

The only conjunctive management of surface and groundwater resources currently in place in Victoria is in relation to 'on-farm' water allocations in some locations, where total water use cannot exceed a set allocated volume, regardless of the source of the water. Goulburn Murray Water currently has such a policy in place in some irrigation districts, particularly in those areas covered by salinity management plans, where infiltration of water to the groundwater can cause rising water tables and, subsequently, increased land salinisation. The implementation of the policy is still in its infancy and the data required to enforce this policy is currently not readily available (pers. comm. D Morrison (GMW) October 2000).

While current SYs for some GMUs take into consideration baseflows to rivers and lakes, and have reduced SYs to allow for the maintenance of these surface water flows, these allowances have been made on the basis of very limited information. The impact of groundwater use on river baseflow needs to be monitored to determine whether the assumptions that have been made are correct, and what management actions are required in order to ensure that surface water resources are not impacted upon by the extraction of groundwater resources.

Impediments to Conjunctive Management of Surface and Groundwater Resources

Impediments to the conjunctive management of surface and groundwater resources are:

• insufficient data on groundwater levels and use;
• in most cases there is not satisfactory scientific quantification of surface environmental flow requirements;
• inadequate understanding of the significance of climate variability (in particular floods) in influencing recharge;
• the need to establish appropriate conceptual models of how groundwater and surface water systems interact, on which to base the development of principles for the joint management of the resources; for example:
• the extent to which decreases in watertable level affect stream baseflow is virtually universally unquantified, along with the levels at which rivers begin recharging aquifers, such as during high flow periods;
• little is known about the distance from a stream in which groundwater extractions should be limited to avoid adverse impacts on baseflow, or under what climatic conditions use in the stream and/or groundwater should be limited; and
• the lack of a formal statutory mechanism to allow for the joint management of surface water and groundwater

Priorities for Conjunctive Management

Rural water authorities have identified streams that they consider require investigation as a matter of priority because of their potential interaction with groundwater systems. These are listed in Table 6, along with the GMU that impacts on those streams. Monitoring is required in these situations to determine the connection between surface water and groundwater.

Table 6. Surface Water Bodies Requiring Further Investigation Into Possible Conjunctive Management

RWA	Surface water body	GMU	Comments/Concerns raised by RWAs
SRW	Freestone Creek	Wa De Lock
	Moorabool River	Bungaree
GMW	Upper Ovens River (above junction with Buffalo River)	Murmungee
	Kiewa River and tributaries	Mullindologong
	Yea River	Possible recharge to aquifer upstream of Nagambie GMU	Macquarie Perch endangered; large number of dams; small reduction in base flow may affect water quality; possible demand for groundwater by subdivision.
	King Parrot Creek	Possible recharge to aquifer upstream of King Lake GMU	Possible demand from irrigation and subdivision; Murray cod endangered; high diversion from stock and domestic bores.
	Seven Creeks	Possible recharge source to aquifer upstream of Nagambie GMU	Endangered Trout Cod; possibility of irrigators increasing demand on groundwater as surface water capped.
	Loddon River above Cairn Curran Reservoir	Recharge to aquifer upstream of Moolort GMU	Fish threatened; high value vegetation; low base flows which should be protected.
	Nariel Creek	Recharge to upper Murray River and possibly to Mullindolingong GMU
	Delatite River	Possible recharge to aquifer upstream of Alexandra GMU

For the purposes of the Audit, a further assessment was made of the priorities for considering conjunctive management of surface and groundwater resources. The results of this assessment are shown in Table 7. The listed priorities are based on the categorisations of the various GMUs and SWMAs relative to current use, and on the degree of physical connection between surface water and groundwater systems. Of the 63 GMUs in Victoria, 44 are physically connected to surface water resources.

Having prioritised GMUs and SWMAs in relation to the need for conjunctive management, the next steps would involve specifying and prioritising particular river reaches and the aquifers connected to those particular reaches. Information currently available indicates that most aquifers are connected either in part to a river reach, or have variable connection along a stream's length. More detailed information would be required prior to any conjunctive use policy or management process being put in place. This would include information on the physical processes and connections between surface water and groundwater systems, on the impacts that high use of groundwater or surface water has on the other resource, and an estimate of the joint 'sustainable yield' for the combined systems. As each case differs from the next, management strategies would need to be tailored to particular situations.

Planning for Conjunctive Management

One possible way of integrating surface and groundwater planning processes would be to amend the legislation to include provision for 'Water Management Plans'. Such Plans would specify (inter alia) how the groundwater baseflow would be shared between groundwater users, surface water users and the environment.

An available option would be to declare a zone of a fixed width adjacent to a stream, in which groundwater extraction is treated as if it were a stream diversion. At present there are zones defined for some streams in Victoria where this is the case. However, these zones are generally applied to a relatively narrow strip adjacent to the stream and are determined somewhat arbitrarily. Water Management Plans could also allow for the allocation in any particular season to be 'biased' towards either groundwater or surface water, depending on the state of each resource at the time.

Any conjunctive use policy or management process put in place would require much more detailed information on the physical processes and connections between surface and groundwater than is currently available. Considerable work would be required to provide this understanding and such investigations are outside the scope of the Audit.

Table 7. Prioritisation of GMUs and SWMAs for Conjunctive Management

SWMA Priority	SWMA	GMU Level of connection with SWMA
		High	Medium	Low	Nil
High	Werribee	Deutgam Merrimu	-	-	Cut Paw Paw
	Barwon	Gerangamete Gellibrand	Bungaree	-	-
	Corangamite	Gerangamete Warrion Colongulac	-	-	Paaratte
	Broken	-	Katunga GSPA Goorambat	Shepparton GSPA Kialla GSPA	-
	Goulburn	-	Katunga GSPA Alexandra	Campaspe GSPA Shepparton GSPA King Lake Kialla Nagambie	-
	Campaspe	Campaspe GSPA	Ellesmere	Shepparton GSPA
	Loddon	Campaspe GSPA Ascot	Bridgewater Bungaree Moolort Ellesmere Salisbury West Spring Hill GSPA	Shepparton GSPA	Glengower Bullarook Tourello
	Avon	Wa-de-lock	-	Sale GSPA	Seacombe Rosedale
	Thomson-Macalister	Denison GSPA Wa-de-lock	-	Sale GSPA	Seacombe Rosedale
Medium	Mitchell	Wy Yung	-	Sale GSPA	-
	Yarra	Wandin Yallock	Moorabbin	King Lake	-
	Moorabool	-	Bungaree	-	-
	Hopkins	Ascot Nullawarre GSPA Yangery GSPA	-	-	Glenormiston Tourello
	Ovens	Murmungee	Barnawatha	-	-
	Lower Latrobe	Denison GSPA	Moe	Sale GSPA	Seacombe Rosedale
Low	Bunyip	Lang Lang	Moorabbin Frankston	Nepean	Koo-wee-rup / Dalmore GCA
	Millicent Coast	Lake Mundi	-	-	Neuarpur GSPA Telopea Downs Lillimur (Kaniva) Boikerbert
	Kiewa	Mullindolongong	-	-	-
	Glenelg	Lake Mundi			Portland Condah
	Otway	Gellibrand Nullawarre GSPA Colangulac Newlingrook	-	Jan Juc	Paaratte
	South Gippsland	Leongatha	Giffard	Corinella	Seacombe Rosedale Tarwin
	Maribyrnong	Lancefield			Cut Paw Paw
	Portland	Yangery	Heywood	-	Portland Condah
No physical connection (all categories of SWMA and GMUs)	East Gippsland	-	-	-	-
	Snowy	-	-	-	-
	Tambo	-	-	-	-
	Avoca	-	-	-	-
	Mallee	-	-	-	Murrayville Berrook Telopea Downs
	Wimmera	-	-	-	Balrootan
	Mitta Mitta	-	-	-	-

* Text Colours for GMU & SWMA current use categorisations:

Category 4 = Red; Category 3 = Pink; Category 2 = Green; Category 1 = Blue

Potential for Development

Demand Trends

For the purposes of predicting likely future demands, total demand for water has been considered at an SWMA scale and as comprising three sub-components, namely urban domestic, industrial/commercial and irrigation. Rural domestic and stock demand was included in the urban domestic component<. In making predictions, a distinction has been made between future demand and future use, with demand being considered to be the unrestricted demand for water, and use being the amount of water that could realistically be supplied to meet forecast demand, after various constraints on supply have been taken into account.

The first step involved predicting future demands for water in each SWMA. Average rates of economic growth for each SWMA, representative of the next 20 years, were derived from the MONASH model (Adams et al 1994). This model is a general equilibrium simulation of the Australian economy that was first developed in the late 1970s. It accounts for 155 different commodity inputs, and< has been used widely in Australia as a tool for practical policy analysis by academics, government and the private sector. Further details about the MONASH model can be found in the State Technical Report. In the absence of any other information, it was necessary to assume that the derived growth rates would continue through to the year 2050.

The economic growth rates obtained from the MONASH model were subsequently converted to baseline water demand forecasts for each SWMA< using the method employed by the Australian Academy of Technological Sciences and Engineering in a recent study of Water and the Australian Economy (AATSE 1999). This requires the estimation of a set of generic 'water use coefficients' that relate the level of economic activity (value added) to the amount of water consumed. Again, details regarding this conversion can be found in the State Technical Report.

The MONASH model enabled demand forecasts to be made for the industrial/commercial and irrigation components of demand. Forecasts of growth rate for the urban domestic component were made using household and population forecasts published by the Victorian Department of Infrastructure.

Using this information, and assuming the derived growth rates to 2020 would continue through to the year 2050, forecasts of total demand within each SWMA were made for 2020 and 2050. Based upon the figures obtained, total demand for water in Victoria (which could potentially be met from either surface or groundwater sources) is expected to increase at a rate of approximately 2.3% p.a. However, a number of factors will act to constrain this growth, as discussed below.

The greatest demand for water exists in the irrigation sector, which accounts for 78% of all surface water currently diverted in Victoria. This demand is expected to increase at 2.4% p.a., compared with 2.8% p.a. for industrial/commercial use, and only 0.7% p.a. for urban domestic consumption (which is highly variable across the State).

The greatest rates of increase in total demand (derived by summing forecast demands for each of the three use sectors) are projected for the Latrobe, Kiewa and Avon SWMAs. However, on a volumetric basis, the greatest forecast demand for water (including imports) exists in the northern basins, which are dominated by a large agricultural sector. The largest surface water diversions (including exports) occur in the Goulburn, Mitta Mitta and Yarra basins, and this is likely to remain the case in the future.

Development Constraint

There are a number of constraints on further growth in water use in each of the SWMAs and GMUs which mean that forecast use in 2020 and 2050 may be less than forecast demand. These are:

• Sustainable Yield. This represents the volume of water that can be sustainably extracted from a given resource, thereby providing an upper limit on water extraction. Where forecast demand for either surface or groundwater in 2020 and 2050 exceeds the sustainable yield, forecast use must be restricted to the respective current estimates of sustainable yield.

As outlined above, sustainable yield determination for surface water in SWMAs is a complex task, requiring detailed environmental assessments and, given the time frame of the Audit, many simplifying assumptions have had to be made. As a consequence, for the various SWMAs a number of different methods have been adopted for determining sustainable yield. For SWMAs located north of the Divide within the Murray Darling Basin, further increases in water use are not permitted under the Murray Darling Basin Cap and sustainable yields have been set at 1993/94 modelled levels of usage (as per requirements under the Cap). Therefore, there is no potential for further increases in water use within these SWMAs. However, in these SWMAs there is nevertheless still significant potential for further water-based economic development via the trading of water entitlements and the freeing up of water via efficiency gains, both in distribution systems and in on-farm water use.

Similarly, south of the Divide, there are a number of SWMAs where sustainable yield for surface water has been set at current allocation levels as an interim measure pending the completion of detailed environmental studies (the Snowy, Tambo, Mitchell, Avon, Thomson-Macalister and Latrobe Rivers) and/or Streamflow Management Plans for the Yarra and Moorabool Rivers). The current potential for further increases in water use in these SWMAs is therefore dependent on the 'gap', if any, between current usage and the estimated sustainable yield (i.e. the current allocation). Once the various studies and investigations have been completed, there may be identified opportunities for further increases in use within these SWMAs. As is the case for SWMAs in the Murray Darling Basin, there are also current opportunities in these southern SWMAs for further increases in water-based economic activity via water trading and efficiency gains.

In the case of groundwater, there are many limitations in the determination of sustainable yields for GMUs, including:

• current lack of knowledge regarding the water requirements of, and appropriate provisions for, GDEs;
• the lack of information on groundwater use;
• lack of information on groundwater recharge mechanisms;
• uncertainties regarding the impact of climate variability; and
• uncertainties about the impact of plantation forestry on sustainable yields.

Because of these limitations a conservative approach has been taken in the estimation of sustainable yields for GMUs, which in this case, have been based on the Permissible Annual Volume work undertaken for NRE (SKM 1998, Woodward-Clyde 1999).

While further increases in use are limited in GMUs where current allocations are close to or at the sustainable yield, as is the case for surface water, further water-based economic development is possible via increases in on-farm water use efficiency (nearly 70% of groundwater is used for irrigation) and water trading. A moratorium on the issuing of further licenses is currently in place for the highly developed GMUs, until further information on the resource is available to quantify the sustainable yields and the actual current use more accurately. As estimates of sustainable yield are reviewed based on the additional information being gathered, there may be additional opportunities identified for further increases in use in some GMUs.

• Water quality (salinity). The quality of a water resource influences its range of end uses. Urban consumers and many commercial entities rely upon a high grade of water supply, while the quality required by the irrigation sector is not as strict due to the variability of water quality requirements for differing stock and crop types.

The majority of Victoria's surface water sources are considered to be of a high quality, with the exception of the Avoca, Lake Corangamite and Hopkins SWMAs where further increases in surface water use are constrained by the salinity of the resource. However, conjunctive use of high and low quality water sources, and promising research into 'halophytes' (crops that prefer brackish water) provide potential opportunities for utilising poorer quality water. There is also scope for the development of industry not dependent upon high quality water.

Groundwater resources across Victoria have varying standards in water quality. Of the approximately 800 GL available in the GMUs in Victoria, 68% have less than 1500 mg/L TDS. A further 27% have less than 5000 mg/L TDS which is of a quality generally suitable for stock and irrigation purposes. Resources outside of the GMUs are more saline, and are hence less likely to be used in the future. Fifty percent of the groundwater outside of GMUs is greater than 5000 mg/L TDS, with 28% of this greater than 14,000 mg/L TDS. Consequently there is currently a lack of demand for these resources, as higher quality resources are still available. The Otway Province is the most likely area for future development outside of current GMUs, as demand for water for irrigation and industrial use is high in this region, and groundwater quality is of a suitable standard for these types of uses.

• Availability of New Sources of Water and the Economic Cost of Water Harvesting. In the case of surface water, in some SWMAs increases in use can be accommodated without further development of infrastructure, but in others no further development is possible without new storage development. The construction of large dams comes at considerable economic cost, particularly given that the most suitable sites have already been developed. No significant storage development has occurred since the late 1980s. Rather the focus has shifted to more efficient and productive use of water.

For the purposes of forecasting likely surface water use in 2020 and 2050, it was necessary to first evaluate the feasibility of developing new sources of supply, and to estimate the likely costs associated with potential new sources of supply.

A state-wide investigation into potential dam sites for further surface water development was completed by the Rural Water Commission in 1986 (Alexander and Haydon 1986). The sites identified in this study are still relevant today. Of the 143 potential dam sites identified, 73 were selected for detailed analysis. Site locations were restricted to high yielding streams with a salinity less than 1600 EC (1000 mg/L). Annual yields from the potential new storages were computed together with estimates of the annualised costs of supply from these sites, based on the capital costs estimated by Alexander and Haydon (1986), indexed to 1996, plus the estimated costs of water treatment (if required) and the necessary trunk mains and reticulation.

The identification of areas of potential groundwater development in GMUs were determined based on the Permissible Annual Volume work undertaken by Sinclair Knight Merz for NRE in 1996. The initial work was based on existing developed groundwater resources, where demands were high. Further areas have been listed since 1996. Around 90% of the licensed volume of groundwater is used within these GMUs, and further development in these areas is expected over the next 50 years.

Resources in shallow aquifers of good quality water are already being harvested across the State. Other good quality resources that lie in the Highlands of Victoria will not be developed for various reasons, particularly because of the costs involved. Aquifers in fractured rock systems such as those in the Highlands (which generally have high quality water) typically have uneconomical yield rates. Deeper aquifers in some locations (e.g. the Gippsland and Otway Basins) are currently being utilised for industrial and urban supplies where the users find it economically feasible to invest in the infrastructure required to ensure security of supply. For many small users of groundwater though, there is a sensitivity to the price rises which are required to cover the costs of more intensive groundwater management in GSPAs.

Groundwater extraction costs were computed for the various GMUs across the State. These costs consist of bore construction, development and maintenance costs, plus the licensing costs associated with the use of groundwater. These costs were added together and expressed on a $/ML basis, by estimating the average yield of the aquifer in each GMU.

All costs (surface and groundwater) were expressed as a fixed annualised recovery cost per megalitre of water supplies ($/ML/yr). Further details are provided in the State Technical Report.

Development Potential

Surface Water

The surface water resources of Victoria are already highly developed. As noted above, approximately< 92% of the estimated sustainable yield is already developed, of which 87% is currently used (including commitments to NSW).

There are therefore no, or very limited, opportunities for further increases in actual water use within many SWMAs. However, as noted above, there is an important distinction to be made between development potential in terms of the potential for further increases in water use ('volumetric development potential'), and development potential in terms of the potential for further increases in water-based economic activity ('economic development potential').

While the Audit requires a focus on the volumetric development potential, the economic development potential is the more important consideration from the point of view of potential regional development. Consequently, two ratings of development potential are presented here.

The first rating reflects the volumetric potential for further increases in water use within SWMAs. This rating of development potential relative to increased water use is based on the volumetric difference between the estimated sustainable yield and current (i.e. 1996) usage, with development potential ratings for the various SWMAs being given as follows:

High: >100,000 ML available for further use;

Medium: 35,000 - 100,000 ML available for further use;

Low: < 35,000 ML available for further use;

None: no water available for further use.

The second rating reflects the potential for increased water-based economic activity, based on a qualitative assessment taking into account available water resources (i.e. the volumetric development potential), the ability to acquire significant volumes of water via trade, and the likelihood of achieving significant water savings via efficiency gains (in distribution systems and in on-farm use). While some of the savings achieved through efficiency gains may need to be allocated to the environment in some SWMAs, there is also the possibility of utilising some of this water to support further development. There is also potential for future increases in inter-basin transfers, which would also affect the economic development potential of a SWMA.

Map 7.Volumetric Development Potential

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Map 8.Economic Development Potential

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Considerable opportunities exist to save water via improved water use efficiencies. This is particularly so in the agricultural sector where irrigation practices are often only 50% to 70% efficient. This could be improved through adoption of technologies such as sub-surface irrigation which has demonstrated efficiencies of up to 95%. Water trading will also expose the true economic value of water, leading to more productive and efficient use. Future development in many parts of the State will rely on water trading to release resources currently allocated but not used.

Table 7 below shows the two ratings of development potential for all the SWMAs and these ratings are also shown in Map 7 and Map 8 on the following pages. It is evident that significant volumetric development potential remains only in some of the coastal and eastern basins, in particular the Otway, South Gippsland, and East Gippsland SWMAs. However, significant economic development potential exists in most SWMAs north of the Divide and in over half of the SWMAs south of the Divide.

Table 8. Development Potential for Surface Water Management Areas

SWMA	Development Potential (Volumetric)	Potential for Trade	Potential for Water Savings	Overall Development Potential (Economic)
Upper Murray	N	H	L	M
Mitta Mitta River	N	H	L	H
Kiewa River	N	M	L	M
Ovens River	N	M	L	M
Broken River	N	M	M	M
Goulburn River	N	H	H	H
Campaspe River	N	H	M	H
Loddon River	N	H	H	H
Avoca River	N	L	L	L
Mid-Murray River (Hume to SA Border) (VIC)	N	H	L	H
Mallee (VIC)	N	L	L	L
Wimmera-Avon Rivers	N	L	H	M
East Gippsland (VIC)	H	L	L	H
Snowy River (VIC)	L	L	L	L
Tambo River	L	L	L	L
Mitchell River	L	L	L	L
Avon River	L	L	L	L
Thomson-Macalister Rivers	M	H	M	H
Latrobe River	H	H	M	H
South Gippsland	H	L	L	H
Bunyip River	M	M	L	M
Yarra River	M	M	M	M
Maribrynong River	L	M	L	M
Werribee River	L	M	M	M
Moorabool River	L	L	L	L
Barwon River	L	L	M	L
Lake Corangamite	N	L	L	L
Otway Coast	H	L	L	H
Hopkins River	L	L	L	L
Portland Coast	L	L	L	L
Glenelg River (VIC)	L	L	L	L
Millicent Coast (VIC)	N	L	L	L

KEY: N=None; L=Low; M=Medium; H=High

Groundwater

Assessment of the potential for groundwater development involves consideration of the current development status, aquifer salinity, aquifer depth and aquifer yields. Fractured rock aquifers and deeper aquifers have lower potential for development than surficial sedimentary aquifers, where most of the current development has already occurred. High yielding deeper aquifers have a high potential where the resource is of good quality (TDS < 5000 mg/L).

For groundwater, the potential for further increases in use are limited in central northern Victoria and in the Gippsland Basin where usage is already high, but there is scope for economic development based on savings achieved through increases in efficiency of use and, potentially, water trading. Future development of additional groundwater resources will most likely occur in south-western Victoria in locations where surface water resources are limited, and where there is good quality groundwater available. The Otway Province includes many GMUs that have groundwater of suitable quality for irrigation and industrial use and which are currently under-utilised. There is significant potential to develop these resources over the next 50 years.

Changing pricing structures for groundwater are expected to contribute to the increased development of the resource, such that groundwater use will eventually reach its sustainable yield across the State.

In addition to the usual array of water uses, there is also specific potential for development of groundwater where low-temperature (30 - 80^oC) geothermal resources are available, such as in the coastal areas of south-western Victoria, the Latrobe Valley and parts of coastal Gippsland. These resources can provide ongoing low-grade heat at a fraction of the cost of traditional energy sources once an installation is in operation. There is considered to be immediate potential for application of this low-grade renewable energy source to space heating (as is currently occurring in Portland), horticulture (including greenhouses), industrial process heating, swimming pools and spas.

Forecast Use

Water use has been forecast for each SWMA across Victoria for the next 50 years up to 2050. The forecasts are based upon the projections of unrestricted demand, adjusted for the developmental constraints discussed above. It is assumed that new demands will be met through the use of additional resources - i.e. no account is taken of the potential for future demands to be met via efficiency savings or via water trading.

Water sources (surface and groundwater) were assumed to be sequentially developed to meet demand according to the lowest economic cost, while taking into account water quality requirements for the intended use. Priority for supply was allocated in the order - urban domestic, industrial/commercial and irrigation. Demand was adjusted, using an economic model, according to the estimated consumer response to the expected price changes associated with the costs of providing water from new system augmentations (in the case of surface water) or new groundwater sources. Where forecast demands for either surface or groundwater exceeded the sustainable yield, forecast use was restricted to the respective current estimates of sustainable yield.

This modelling approach is not spatially explicit - i.e it does not take into account the spatial location of demands relative to supply sources (surface water and groundwater) within a SWMA, or the fact that SWMA boundaries often split GMUs. This allows demands to be supplied from anywhere within the SWMA, irrespective of the location of the source relative to the demand centre. This limitation is partially addressed for surface water, where the cost estimates account for the provision of a trunk main to deliver water to the nearest demand centre. However, this is not the case for groundwater, which typically supplies relatively 'local' demands. In addition, the model develops water resources sequentially, rather than simultaneously. While this is generally true for the development of large surface water storages which can be used to supply extensive regions, it is not the case for most groundwater resources.

These factors operate to spatially distort the 'picture' of future groundwater use, although it is considered that the forecast overall development rate across the State is likely to be a reasonable indication of the likely future development of the total groundwater resource.

Because of the difficulties associated with forecast future groundwater use, a second approach was used to obtain more realistic forecasts of groundwater use within the various SWMAs. This was based on work undertaken by Read Sturgess for the Department of Natural Resources and Environment (Read Sturgess and Associates 1997). This work split demand across urban (domestic and industrial), irrigation and rural (domestic and stock) uses and derived expected rates of growth for each type of use. Demands were predicted for each GMU over the 50 year period, for each of the three consumer groups. Average growth rates over 50 years for irrigation and rural use were estimated to be 1.3% and 1.25% per annum respectively. For urban use, it was decided to adopt a stepped linear growth rate, with the growth rate over the first 20 years (to 2020) being 1.25% per annum, after which it slows to 0.70% per annum (to 2050).

As expected, the overall growth rate in total groundwater use across the State predicted by Read Sturgess was comparable to that predicted using the spatially inexplicit modelling approach. The Read Sturgess model results were used to determine forecast groundwater use within the various SWMAs, by splitting forecast use for the GMUs areally across the relevant SWMAs.

Results show that total surface water use (including water used to meet commitments to NSW on the Murray system) is likely to increase from 5,980 GL/a (in 1996) to 6,295 GL in 2020 and 6,422 GL/a in 2050. This is a 5% and 7% increase on current use for 2020 and 2050 respectively. It is expected that the largest increases in water use will occur in the Thomson-Macalister, Latrobe and Bunyip SWMAs. The relative volumes of water use for the different use types are expected to alter over the next 50 years. Use of surface water is currently dominated by Victoria's large irrigation industry which represents 78% of all surface water consumed in Victoria. In comparison, urban domestic consumers account for 17% and the industrial/commercial sector accounts for only 5%. Forecast estimates of use for 2050 suggest that the industrial/commercial sector will increase to 11%, at the expense of irrigators which will decline to a 73% share. The proportion of water consumed by the urban domestic sector is likely to remain relatively constant at about 17%. This shift in water use from irrigation to the industrial/commercial sector results from the assumption in the modelling process that the industrial/commercial sector is given priority supply over irrigators which, in turn, reflects the greater willingness of the industrial/commercial sector to pay a higher price for water.

It is important to note that these estimates only reflect potential increases in water use achieved through increased water diversion. Hence, they do not account for the significant increases in water-based economic development that is possible through water trading, improved water use efficiency and potentially, additional inter-basin transfers.

Groundwater use is expected to increase from 621 GL/a currently, to 725 GL/a in 2020 and 804 GL/a in 2050. This is a 15% and 29% increase on current use for 2020 and 2050, respectively. As with the surface water estimates, this does not include potential increases in water-based economic development due to savings from improved on-farm water use efficiency or water trading.

The current breakup of current groundwater use is similar to that for surface water, with 67% currently used for irrigation, 14% for urban domestic use, and 19% for industrial/commercial use. Forecast demands indicate that this breakup is likely to alter over the next 50 years with the breakup of forecast demand in 2050 being 58% for irrigation, 23% for urban domestic use, and 19% for industrial/commercial use. This represents a transfer of 9% of the irrigation share to urban domestic use.

Current patterns of groundwater use indicate already high demands in central northern Victoria and in the Gippsland Basin. Future development of additional groundwater resources is most likely to occur in south-western Victoria in locations where surface water resources are limited and where there is good quality groundwater available for irrigation and industrial use (in the Otway Groundwater Province). Improved on-farm water use and trading in the northern and eastern areas will allow for further development in already highly developed GMUs. Nearly all of the resources currently located in GMUs are expected to be highly developed by 2050.

The programs currently in place to monitor groundwater usage within GSPAs, will enable more accurate estimates of future groundwater use within a few years.

Categorisation in 2020 and 2050

The SWMAs have been categorised according to the forecast use in 2020 and 2050 as a proportion of the sustainable yield. Maps showing the development categories for each SWMA are shown in Map 9 and Map 10 respectively. Approximately 60% of the basins are currently considered fully developed, according to this categorisation. This is expected to increase to 75% in 2020 and up to 85% in 2050, when only three basins (9%) would be considered to have a low level of resource development.

Development in the GMUs is clearly shown through the categorisation process (see Figure 6). Currently there are 26 GMUs in category 1, whereas in 2050 it is estimated that only 7 will be Category 1. Similarly, there are currently 29 GMUs highly developed (Category 3 or 4), with 46 predicted to be highly developed (all Category 3s, it is assumed that any Category 4s will be brought within sustainable yields by management practices in the future) in 2050.

Maps showing the development categories of GMUs in 2020 and 2050 are shown in Maps 11(a) to 11(d) and Maps 12(a) to 12(d) respectively.

Figure 6. Change in Development Status of GMUs from 1996 to 2020 and 2050.

Map 9.Projected Level of Surface Water Resource Development in 2020

Map 10.Projected Level of Surface Water Resource Development in 2050

Map 11(a).Projected Level of Groundwater Resource Development in 2020 - Watertable Aquifers

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Map 11(b).Projected Level of Groundwater Resource Development in 2020 - Confined Aquifers

Map 11(c).Projected Level of Groundwater Resource Development in 2020 - Deep Confined Aquifers

Map 11(d).Projected Level of Groundwater Resource Development in 2020 - Deepest Confined Aquifer

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Map 12(a).Projected Level of Groundwater Resource Development in 2050 - Watertable Aquifers

Map 12(b).Projected Level of Groundwater Resource Development in 2050 - Confined Aquifers

Map 12(c).Projected Level of Groundwater Resource Development in 2050 - Deep Confined Aquifers

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Map 12(d).Projected Level of Groundwater Resource Development in 2050 - Deepest Confined Aquifer

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Environmental Water Requirements

The Victorian Government is committed to striking a balance between satisfying existing demands to urban centres and irrigation industries and improving the environmental flow regime of rivers. The provision of water allocations for the environment is being addressed via a number of programs, which are detailed below. The aim is to maintain and, where possible, restore the environmental values of rivers and wetlands, whilst recognising existing entitlements.

Bulk Entitlements

Under the legislative framework of the Water Act 1989, Victoria's bulk entitlement (BE) program ensures secure, well-defined property rights, separate from land title, and it also enables the provision of water for the environment, either by establishing BEs specifically for the environment or by imposing conditions which specify an environmental flow regime on entitlements held by water authorities.

The first phase in implementing BEs throughout Victoria, involves the conversion of existing rights to water to BEs. While this conversion process is focussed on the conversion of existing ill-defined rights to water, it also provides the opportunity for negotiation of enhanced environmental flows (e.g. through adjustments to system operating rules).

To date, flow-sharing arrangements have been negotiated and agreed with stakeholders for 65% of some 190 identified water supply systems. One hundred and twenty formal BEs have been granted, which account for around 75% of the total volume of water extracted throughout the State. These include BEs for the Goulburn and Murray regulated systems in northern Victoria, which together account for about two-thirds of Victoria's usage. The current status of the BE conversion process is shown in Map 13.

The BE conversion process has already lead to improvements in environmental flows for various rivers around the State including the Werribee and Maribyrnong Rivers in the south-west of Victoria, the Thompson and Latrobe Rivers in Gippsland and the Goulburn River north of the Divide. BEs for the River Murray include specific provisions for looking after wetlands along the Murray, and consideration of provisions for in-stream flows is continuing. Work is also continuing on other major river systems including the Ovens, Broken, Loddon, Barwon, and Yarra Rivers.

While the BE conversion process has led to improvements in environmental flows (in around 90% of the systems converted to date), it does not typically result in environmental flow provisions that fully meet the needs of the environment. Environmental requirements will receive a high priority in the granting of new BEs, although no new BEs have as yet been granted. Ecological sustainability must be assessed and taken into account before any revisions can be made to a BE, and environmental requirements must also be met before any new BEs are granted.

Streamflow Management Plans

Map 13. Current Status of the Bulk Entitlement (BE) Conversion Process

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Provisions for environmental water requirements are also being made in Streamflow Management Plans (SMPs) for unregulated rivers that are not covered by the BE process. SMPs differ from BEs in that they are plans for the management of a number of diversion licenses on unregulated rivers rather than an explicit property right. These SMPs establish environmental objectives, environmental flow provisions (immediate and, where necessary long term), rostering rules for diversions in times of reduced flows, trading rules, and rules governing the granting of new licenses. The plans include mechanisms for reallocating water where negotiated environmental flows fall short of environmental flow requirements.

Priority is being given to the development of SMPs for stream systems that are recognised as being stressed. To cover the entire State, it has been estimated that around 100 SMPs will be required. Thirty nine streams have been identified as priority streams requiring SMPs. A total of 20 SMPs are currently at various stages of preparation. The status of SMPs for the identified priority streams is shown in Map 14 and< can be summarised as follows:

• Draft SMPs have been prepared for three streams - the Merri River, Gellibrand River and Upper Latrobe River.
• Background information has been collected for 14 streams.
• A project group has been established for 8 streams.
• SMPs for the remaining 14 streams are scheduled for commencement in the next two years.

Preparation of these SMPs is both time-consuming (taking about two years) and expensive (costing over $100,000 per plan). Consideration is being given to the possibility of undertaking rapid assessments and putting in place some interim diversion limits and rules, so that some development via the issuing of new licences can continue in less stressed valleys, with reasonable confidence that environmental damage will not result.

The aim is to have SMPs prepared for all priority streams by the year 2005. The SMPs will provide a framework of rules to meet agreed principles to ensure the long-term environmental sustainability of rivers and streams and, by clarifying rights to water, create certainty regarding water availability for existing and possible future agricultural or other development. Regular review of plans is proposed as a critical element of an adaptive strategy for streamflow management.

Stressed Rivers Program

Map 14.Current Status of StreamFlow Management Plans

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While improvements to environmental flows are achieved in about 90% of cases in the conversion of BEs, these improvements are often at the margin - the emphasis is on preventing further decline and on clarifying and protecting the rights of existing users. In a number of streams, further action to restore flows is called for.

The Stressed Rivers Program involves the identification of rivers that are stressed due to inadequate flow regimes, and the development and implementation of comprehensive work plans (River Restoration Plans) to improve their condition. These Plans will build on existing environmental provisions. They will set clear objectives for the improvement of river health, set priorities and identify mechanisms for enhancing the environmental flow regime, identify complementary in-stream and riparian habitat works that will maximise environmental gains, and establish agreed cost sharing arrangements for implementation of the Plans.

Progress to date with this program is as follows:

• Establishment of a Scientific Reference Panel (in 1997) that developed and applied criteria to identify and prioritise flow-stressed rivers for action. The Panel identified 35 river reaches as suffering a degree of stress on the basis of changes to their flow regimes. Based on criteria such as the environmental significance of the river, and the realistic potential for restoration, the Panel then proposed eight reaches as the priorities for action.
• Allocation of $400,000 by the Victorian Government for the development of eight River Restoration Plans by Catchment Management Authorities.
• Development of broad approach to determine action.
• Completion of the first case study on the Snowy River.
• Commencement of two further case studies for the Avoca/Wimmera/Glenelg/Avon and Thomson Rivers with scheduled completion of the draft plan by late 2001.
• Development of guidelines (based on the case studies) for developing integrated River Restoration Plans.

The aim is to have River Restoration Plans completed for the eight priority rivers (Glenelg, Avoca, Broken, Maribyrnong, Loddon and Lerderderg Rivers, the Thomson River downstream of Cowwarr Weir, and Badger Ck) by the year 2002. The Snowy River is also recognised as a priority river but, because of its national significance, it is regarded as a special case (see Management Initiatives Section below).

Groundwater

The Water Act 1989 requires that the environmental water requirements be considered in determining the sustainable yields of groundwater systems. The methodology adopted to date in estimating the sustainable yield of Groundwater Management Areas involves checks on aquifer storage, river recharge/discharge, aquifer throughflow, well interference, seawater intrusions and pressure/head loss. However, as noted above, while efforts are made to ensure that sustainable yields are set to avoid significant interference with groundwater dependent ecosystems (GDEs), the methodology does not yet give explicit consideration to the water requirements of, and provisions for GDEs.

As yet, there is no accepted definition of GDEs and their water requirements and appropriate provisions for their protection are not well understood. Consequently, no method yet exists for assessing these requirements.

The most commonly known GDE is river baseflow, and the interaction between groundwater and surface water is only partly understood. The variability within streams and across catchments means that no one methodology can be used to determine baseflow in streams, nor to determine the ecological impacts of reducing baseflow as a result of reductions in groundwater levels. Provisions to allow for the water requirements of GDEs will most likely require conjunctive management of surface water and groundwater resources to ensure that use of groundwater does not impact on surface water resources, and vice versa. It has been mooted that this could be undertaken via the development of 'Water Management Plans', which would encompass both the surface water and groundwater resources within a catchment or region.

Currently there is a push through the National Groundwater Committee for development of a definition of GDEs and a consistent methodology for taking these requirements into account in allocating groundwater. As this information becomes available it will be incorporated into the assessment of the sustainable yields of groundwater systems.

Water Resource Management

Surface Water Management Initiatives

The development of Victoria's scarce and highly variable water resources for urban, industrial, and agricultural use has provided massive benefits to the State. While the past focus on resource development resulted in many of our rivers and streams being degraded by altered flow regimes, there is now clear recognition that healthy rivers and streams are key to the sustainable use of our water resources.

The Victorian Government is committed to achieving a balance between extractive use and environmental requirements for all of the State's rivers and streams. The Government intends, by continuing to work within a consultative framework with all stakeholders, to maintain reliable supplies for water users, ensure the environmental values of rivers and wetlands are sustained and restored where necessary, and to improve the efficiency of use of the resource.

To achieve this will require operating 'smarter' - using water more efficiently, cutting out waste and putting water to its most productive use. Better water resource management will both support sustainable agricultural growth and protect the environmental values of waterways.

Implementation of the wide range of programs and policies that are already underway aimed at ensuring the sustainable and efficient use and management of all water resources will continue. These will be further strengthened by additional initiatives aimed at consolidating the gains made to date and giving particular emphasis to improving the efficiency of water use.

Current management initiatives are summarised below.

Water Allocation and Water for the Environment

BEs, SMPs and RRPs

The Bulk Entitlement, Sreamflow Management Plan and River Restoration Plan processes described above will continue to be implemented. Together, these provide the basis for a sustainable water allocation system based on tradeable property rights, and the means to protect and improve environmental water management.

Farm Dam Review

This initiative involves the establishment of a review process and consultative program aimed at bringing upper 'catchment dams' that are not on waterways (and therefore do not require a license) into the water allocation framework. Growth in farm dams for irrigation and commercial use threatens both environmental values and the security of existing rights to water.

The major impetus for the review was the impact of such dams on the MDBC Cap in northern Victoria. However the issues are the same across the State wherever the limits of the resource are being reached. Significant catchment dams are being constructed in upper catchments both north and south of the Great Dividing Range as farmers move from more traditional farming practices into vineyards, intensive horticulture, olive production and other enterprises that rely on irrigation. As a result, there are pressures on the water resource in many basins and smaller catchments. For example, increased levels of development has caused concerns in the Moorabool catchment in the south-west, in the upper Wimmera, and in the Avon River catchment in Gippsland.

Progress to date with this farm dam initiative is as follows:

• Establishment of a Review Committee to facilitate public debate.
• Release of a Discussion Paper in April 2000 outlining the issues, with regional workshops and forums being held during May, June and July to inform the community and discuss the issues.
• Public hearings held throughout the State during August.
• Submissions on the Discussion Paper submitted by 30 September.
• Review of submissions and recommendations made to Government by mid-December 2000.
• Further opportunity for public input until mid-February 2001.
• Final recommendations to Government in mid-March 2001.

Catchment Management

Catchment Management Authorities are required to develop Regional Catchment Strategies and Waterway Health Strategies. Regional Catchment Strategies establish the objectives and priorities for land and water management within a region. The more detailed Waterway Health Strategies include objectives, priorities and detailed works for river management in each region.

River Health Strategy

It is proposed that further enhancement of riverine ecosystems (which requires not only improvements in environmental allocations but also catchment management works to improve water quality and revegetation and rehabilitation of waterways) be progressed through the development of an integrated Victorian River Health Strategy. This Strategy is a key component of the Government's Rivers and Catchment Restoration Program.

This Strategy will provide a statewide policy umbrella under which regional waterway health, water quality and floodplain management strategies are undertaken. It will set management directions and targets for all major management functions that affect the health of rivers. It will provide direction on a range of issues including the provision of environmental flows, management of river water quality, river frontages and river erosion, aquatic biodiversity and habitat, preserving linkages with floodplains, wetlands, estuaries and terminal lake systems and linking broader catchment management programs.

Groundwater Management Plans

Victoria's program to manage groundwater resources as discrete entities (GMAs) is aimed at ensuring the sustainable management of groundwater resources. Groundwater Management Plans (GMPs) are being developed for the currently declared GSPAs, with more areas to have GMPs developed and implemented over the next 5 years. GMPs allow for the collation of information on GDEs and the determination of groundwater impacts on the local environment. As noted above, while efforts have been made to ensure that the sustainable yields estimated to date have been set to avoid significant interference with groundwater dependent ecosystems (GDEs), the methodology does not yet give explicit consideration to the water requirements of, and provisions for GDEs. Once this information is available, the sustainable yield for each GMU can be re-assessed to include all GDEs and ensure sustainable development of the GMUs in Victoria.

Groundwater Quality Protection Program

Victoria is currently finalising a risk mapping project for the entire State in which the risk to groundwater of various land uses and activities has been quantified according to the hazard, and the degree of risk of the hazard impacting on groundwater and its beneficial use. This is based on previous work in which the beneficial uses of groundwater were mapped according to the beneficial use categories in the SEPP - Groundwaters of Victoria. These categories are based on groundwater salinity (Total Dissolved Solids - mg/L) and have designated classes for urban, domestic, industrial, irrigation and environmental beneficial uses.

The risk mapping program has identified land uses such as cattle grazing, sheep farming, and septic tanks, and possible hazards to groundwater such as microbes, pesticides and nitrates, and has quantified the contaminant concentration at the watertable after 50 years. Unsaturated zone modelling was undertaken to determine these impacts, and this has been mapped across the State based on soil types, geology, depth to watertable, and climate. This is a first in Australia, and the resulting maps from this program will be used by statutory authorities for planning and determining where resources should be targeted to prevent groundwater contamination.

Water Trading

While the introduction of water trading has already seen significant volumes of water move to higher value uses, work is underway to further facilitate water trading. The Department of Natural Resources and Environment is presently working with rural water authorities on a number of improvements to the water market, including:

• building on the experience of Goulburn-Murray Water's Water Exchange, which presently handles over a quarter of all temporary transfers, to develop ways to have quicker and more frequent exchanges, and to extend coverage to Sunraysia, interstate, and south of the Divide;
• ensuring there is proper recording and auditing of trading activity throughout Victoria and interstate;
• making market information on permanent transfers more available, including via a web page, and investigating appropriate exchange mechanisms for permanent transfers;
• reviewing trading rules and developing a guide to water trading in Victoria; and
• looking at market and entitlement innovations, such as the leasing of rights, rights to channel capacity, and exit fees.

In relation to interstate trade, the Murray Darling Basin Commission is now considering the next major expansion of interstate trade, which is likely to take in all gravity irrigation districts, and lower-reliability water. In order for this to occur, more work is being carried out on exchange rates to translate rights into different reliabilities, and on ways to encourage interstate trade.

There is currently little groundwater trading in Victoria for reasons outlined in the Section on COAG compliance above. When Groundwater Management Plans are reviewed in 5 years time, trading may begin to occur with intra-aquifer trading occurring first with the uptake of 'sleeper' and 'dozer' licenses, along with possible inter-state trading (across border regions). Groundwater trading policy is still being debated and it will take some time before a consensus on the best course of action for each GMU is made. In many cases, different policies will be required for different GMUs according to the development status of the groundwater resource.

Water Conservation, Re-Use and Efficiency of Use

Water trading has encouraged investment in water efficiency measures by farmers and by water authorities because they are now being exposed to the true value of water.

On-farm efficiencies

Improvements in on-farm water use efficiency are being achieved through the adoption of more efficient irrigation technology (e.g. drip and micro-spray irrigation), and there has also been significant investment in drainage re-use systems, which have the additional benefit of reducing nutrient run-off into rivers. Also, farmers involved in flood irrigation are starting to install automatic irrigation systems, with gates at the top of bays controlled by timers or water sensors. This makes for more efficient irrigation.

These on-farm water savings are supporting new development either on the same farm or, through the market, elsewhere.

However, water use efficiency still varies significantly not only between different enterprises but also between farms running similar enterprises. For example, some farmers produce over four times the milk per ML of water than others produce. It is therefore clear that there is still major scope for on-farm water efficiencies.

The Victorian Government is continuing to support research aimed at improving the efficiency of on-farm water use. Projects include:

• Cooperative Project with the Cooperative Research Centre for Viticulture, CSIRO, NSW Department of Agriculture and the South Australian Research and Development Institute

This project is aimed at reducing water usage in the viticulture industry. Involving the expenditure of $3.6 million over 3 years, the project will accelerate the adoption of water-saving irrigation practices (which will also improve grape quality) in the Sunraysia, Riverland and Murrumbidgee irrigation districts.

• Megabucks from Megalitres

This project is a $670,000 project funded under the Victorian Government's Science and Technology initiative. It focuses on more efficient use of irrigation water in horticulture, dairy and broad-acre crops, and will include studies on wine grapes in Mildura, pear production in Tatura and pasture production in Kyabram. The aim is to increase water use efficiency, both in terms of income and amount of crop produced, against megalitres of water applied.

The project is composed of several major components, the first of which compares on-farm water use efficiency in different agricultural industries. This is seen as important in convincing growers and graziers that there are other agricultural enterprises which could both increase their profitability and improve their irrigation management skills. The project will also examine new and emerging irrigation technologies, including Partial Rootzone Drying, which could potentially reduce the amount of irrigation water applied to horticultural crops by 30-40% with no reduction in yield.

• Gippsland Lakes 'Rescue Package'

The Government has initiated a project aimed at improving reducing nutrient levels and resulting algal blooms in the Gippsland Lakes. This project provides incentives to farmers to improve irrigation practices and reduce irrigation runoff to rivers running into the Gippsland Lakes. It also involves detailed environmental assessments of the Lakes and contributing rivers and streams, and assessment of groundwater discharge.

Water Authorities

Water authorities are increasingly focussing their attention on reducing losses in their supply systems and pursuing water conservation and wastewater re-use opportunities. In recent years many non-metropolitan urban water authorities have developed schemes for re-using urban wastewater for irrigation purposes. Melbourne Water has recently implemented a program aimed a achieving 20% reuse of Melbourne sewerage by 2010.

These re-use schemes benefit irrigation developments and reduce wastewater discharges to the environment.

The metropolitan retail water businesses are required to prepare Water Conservation Plans under the conditions of their operating licenses and, more recently, both the rural water authorities and the non-metropolitan urban water authorities have also been required to develop Water Conservation Strategies as part of their Corporate Plan. While goals and targets are required as part of the water conservation strategies, this is as yet not the case for the Water Conservation Plans. However, licences for the metropolitan water businesses are due to be renewed in June 2001, and opportunities for strengthening requirements will be considered as part of the Water Conservation program described below.

Water Conservation Program

The Government is committed to raising the awareness of the need for water conservation and, in November 2000, announced three Statewide water conservation initiatives aimed at promoting the efficient use of Victoria's water resources in both urban and rural water sectors. These are:

• A Statewide education campaign which will address water conservation strategies for both rural and urban water use.
• The establishment of a Statewide Water Conservation Council - which will provide a forum for consultation and dialogue with industry, businesses and the community and promote the consideration of water conservation issues and best practice.
• A program to ensure that water agencies (i.e. rural and urban water authorities and the metropolitan water businesses) manage the resources under their control efficiently and set and achieve appropriate water conservation targets.

This program will include the consideration of appropriate incentives to address the problems stemming from the inherent conflict involved in service providers supplying on-going public education on water conservation when they have a financial interest in increased water consumption. The National Competition Council, in its second tranche assessment of Victoria's COAG water reform achievements, noted this conflict.

Together, these water conservation initiatives will:

• create a high level of awareness of the need to use water efficiently at all times and, particularly, in times of scarcity;
• change the culture of the Victorian community to one that values efficient water use; and
• establish clarity and transparency regarding the roles and responsibilities of water agencies in relation to water conservation and water conservation targets.

Water Savings in Distribution Systems

The Wimmera-Mallee system

This system consists of storages in the Grampians which harvest water from the Glenelg and Wimmera rivers. Water is released into 16,000 kilometres of open channels which make deliveries each spring and autumn to nearly 30,000 square kilometres of wheat and sheep land to the north. The system supplies farm dams with stock water, caters for over 50 small towns, and supplies some water for irrigation on properties near Horsham.

The long distances, hot climate, and sandy soil mean that in some parts of the system, as little as 20 percent of the water released from the storages reaches users; the system average is just over 50%. A $41m. program of pipelining the northern one-third of the system, which will then be supplied from the Murray, is scheduled to be completed in 2002. This is expected to reduce water losses by about 50 GL a year.

The project is being funded about 70% by the State and Commonwealth Governments, in return for savings which go back to the rivers and to customers of Wimmera-Mallee Water. The current pipelining program is expected to deliver 35 GL of savings for the environment (the Wimmera and upper Glenelg and Wannon Rivers), of which 18 GL had been achieved by 1997/98, with another 7 GL due in 2000/01.

Another 10 GL of savings is going to improve system supply reliability (unrestricted supply was only available in 75% of years), and about 5 GL will be available for new development (as well, private interests can buy water by contributing to efficiency savings projects, under a 'sale of savings' policy).

A feasibility study of further pipelining in this supply system has recently been initiated which is estimated as potentially achieving further water savings of around 70 GL.

Northern Irrigation Districts

In June 2000, a report on the potential for water savings in Victoria's northern irrigation districts was submitted to the Minister for Environment and Conservation. This report was commissioned by the Department of Natural Resources and Environment, managed by Goulburn Murray Water, and carried out by consultants Sinclair Knight Merz. It provides a comprehensive analysis of the types of losses in major rural water distribution systems in northern Victorian irrigation districts, and provides options and associated costs for achieving water savings within these systems.

The study found that in the 10 years to 1998/99, an average of 980 GL, or 29% of water diverted by rural water authorities out of the Murray and Goulburn/Loddon systems, was effectively lost. Seepage and evaporation from open channels were found to make up only 16% of the total losses, while the largest source of loss was found to be channel outfalls, which represent 30% of the total losses. Other sources of loss included leakage from faulty channels, weirs and pipes (9%), unmetered domestic and stock supplies (4%), and the under-reading of meters to farms (11%).

The report has provided the first step to enable Victoria to develop a package of works to produce sufficient water savings within the Northern Victorian irrigation systems to meet the Government's commitment to return environmental flows to the Snowy River. The potential water savings identified in the report will not be easily achieved, and not all of them will prove to be economic.

In its response to the study, the Government has established a set of principles that will be applied to develop a package of works which balances the cost of works, the need for improved environmental flows for both the Snowy and Murray Rivers, and the need to improve regional infrastructure. The principles include the following:

• supplies to existing users must not be affected;
• environmental impacts must be neutral or positive;
• water savings will be shared equitably in proportion to funding contributions;
• some savings will be available for local, northern Victorian benefits - i.e. to improve the reliability of supplies and the environmental values of rivers there.

Before any water savings works are approved for implementation, the environmental impacts on the River Murray and its environs will be subject to thorough assessment. Further work will be required to investigate possible offsetting measures to ensure River Murray flows are maintained where works are proposed to reduce spills and leakage from channel systems.

The Government is establishing a consultative process with the water authorities, through the Department of Natural Resources, to facilitate discussions with the irrigation community about the range of complex water savings options identified.

One of the first projects to deliver savings is the Woorinen pipeline project, which involves the replacement of the 1920s channel system 10 km north of Swan Hill. This will provide 2.1 GL of water to the Snowy River previously lost through inefficiencies.

Water Savings for the Snowy River

The Victorian Government's commitment to improving river health includes a specific commitment to restore 28% of the natural river flow to the Snowy River (the level recommended in 1996 by a scientific panel as being necessary at Jindabyne to stop silting up and biodiversity decline).

On 6 October 2000, the New South Wales and Victorian Governments announced they would each contribute $150 million towards water savings or purchases in the Murray and Murrumbidgee systems, which would over the next 10 years return flows to 21% of natural (of which 15% would be high-reliability water and 6% would be lower-reliability water). The volume of water required is 212 GL. The remaining 7%, to reach 28%, is expected to be achieved through the development of new infrastructure projects involving the private sector.

The Commonwealth Government subsequently endorsed the New South Wales and Victorian proposal for the Snowy River, and announced a complementary $75 million package to increase environmental flows down the Murray River.

New South Wales and Victoria propose to establish a joint government enterprise, whose charter will be to acquire water at the lowest cost to meet the target flow, principally by the development of water saving infrastructure such as pipelining, major engineering works, better water accounting and improved maintenance of irrigation distribution systems.

Sustainable Irrigation Development

Victoria's water allocation framework, together with the existence of a water market, has given the State a major competitive advantage in attracting investment in irrigation development. The allocation system provides high levels of security for irrigators, tradeable entitlements allow water to move to high value uses in an equitable manner, and caps on the amount of water that can be diverted from rivers have been important in protecting the security of supply and exposing irrigators to the real value of water through water markets.

Improvements in water use efficiency are leading to on-going new irrigated agriculture development. Water being saved by farmers is either being used to improve security or expand production on their own farms, or is being transferred elsewhere. As well, savings made by authorities are going to new development.

Sunraysia Rural Water, for example, in 1995 auctioned 2,700 ML of water saved from pipelining the Carwarp and Red Cliffs supply systems. Urban authorities have been developing schemes for re-using wastewater for irrigation purposes. Treated effluent from Ararat, for instance, is being piped about 15 kilometres to Great Western for vineyard development.

The Government is directly promoting this activity. In September 2000 it announced a $30 million 'Water for Growth' initiative, which provides new funds to facilitate key water infrastructure and on-farm projects to maximise the efficient use of our water resources, and accelerate the regional water resource planning framework for the State.

The funding will build on and enhance existing projects and will open up new opportunities for irrigated agriculture and food processing, while supporting the sustainable use of all water resources.

The initiative includes a program offering grants to farmers for innovative water use efficiency projects, and to authorities or private companies to facilitate regional water infrastructure projects for efficient water supply and wastewater reuse. The environmental benefits of proposals will be considered, including potential improvements to river water quality and flows. In general, to qualify for funding, proposals will need to have a public benefit.

The initiative is also funding a project to improve the operation of water markets, and the preparation of Streamflow Management Plans to identify the potential for new allocations and more flexible trading rules on individual streams, while protecting environmental values.

The Water for Growth initiative also ensures a strategic approach to regional water resource issues and enables the Government to receive -via Regional Water for Growth Committees - a collective view on key water management issues and infrastructure priorities.

The Deakin project around Mildura is a landmark project under the initiative. The concept is to open up a major new irrigation development, with integrated drainage, meshing with the existing infrastructure. The project would double irrigation in Sunraysia, irrigating up to 20,000 ha, using 200 GL of water, largely sourced from the market. The feasibility of the project is currently being investigated.

Regulatory and Institutional Frameworks and Water Sector Service Provision

Appropriate structural arrangements and a clear delineation of roles and responsibilities is fundamental to a well-functioning water sector. A wide range of reforms implemented within the water industry over the last ten years has progressively improved the structure and performance of water and catchment authorities and has clarified various aspects of the regulatory framework within which they operate. However, while these changes have encouraged efficiency, lowered prices and resulted in improvements in service delivery, there are still a number of areas where current regulatory arrangements could be further improved.

For example, current regulatory arrangements for the water industry are complex - five separate arms of Government have regulatory roles which differ in different parts of the water sector. Of particular concern is the lack of a framework (the metropolitan retail water companies operate under the Water Industry Act 1994 while the non-metropolitan urban and rural water authorities operate under the Water Act 1989), the various criticisms made by the National Competition Council, and the lack of transparency in how trade-offs between costs and service standards are addressed.

The Victorian Government is committed to a broad range of policy initiatives directed at improving the regulatory framework and, therefore, the delivery of water services by the twenty five water businesses. The key challenge is to develop a simplified, streamlined and consistent Statewide regulatory framework which:

• Provides consistency and clarity regarding the roles, responsibilities and obligations of the various players in the industry.
• Recognises the need for effective identification and resolution of competing priorities and resource demands.
• Enables community and industry engagement in goal setting and decision making.
• Ensures that environmental and community service standards are met.

A number of major current initiatives are summarised below (other initiatives related primarily to the management of water quality are not included as they are more relevant to Theme 7 of the Audit).

Security of Supply

Government has a responsibility for ensuring that effective regulation is in place so that risks to supply (quantity or quality related) are managed properly. Work in this area is particularly focussed on ensuring that authorities have effective incident protocols and emergency management plans in place, and clarifying management responsibilities. All urban authorities are also required to prepared detailed Drought Response Plans (DRPs) to ensure timely and effective response to water shortages and the availability of adequate supplies during prolonged dry periods. Authorities have recently been required to review these DRPs in the light of their experience over the past 3 - 4 dry years, and they are now all well placed to respond to future droughts.

Improved Customer Consultation

The Victorian Government is committed to ensuring that the mechanisms are in place that will ensure a customer service culture of quality service delivery and close consultative relationships between water authorities and their customers.

The three metropolitan retail water companies have customer service obligations spelt out in customer contracts which are benchmarked against a contract developed by the Office of the Regulator General (ORG). In addition, the companies have Customer Consultative Committees, provide their customers with drinking water quality and environmental performance reports, and each year are the subject of a comparative performance report published by ORG. In contrast, customer service obligations on non-metropolitan urban water authorities are currently not explicit. They are gradually introducing customer charters and Customer Consultative Committees, but there is no oversight of customer matters. Rural water authorities have long had mechanisms in place to involve customers in decision making and, in recent years, have generally moved to enhance the role of customers in decision making through the formation of elected Water Services Committees. In some cases, these Committees are actively involved in key decisions affecting service levels.

A number of initiatives are underway to improve the consultative processes used by water businesses, and it is expected that best practice consultative arrangements will ultimately be regulated by the proposed Essential Services Commission (see below).

Energy and Water Ombudsman

The Government is committed to expanding the role of the current Energy Ombudsman (who handles customer complaints about the electricity and gas industries) to cover the water industry. A feasibility study is currently underway, and the aim is to have a new Energy and Water Ombudsman (Victoria) established and handling customer complaints before 1 July 2001.

Fair Pricing

Government is committed to ensuring fair pricing by water authorities and it is intended that responsibility for the oversight of prices be transferred to the proposed Essential Services Commission (see below). Price reviews of the Victorian water industry in 1997 and 1998/99 focused on the urban water sector and resulted in a three year price freeze which will end on 30 June 2001. In the rural water supply sector, after more than a decade of progressive price increases, the sector is in the process of achieving its target of recovering full costs, including a renewals annuity to fund future system refurbishment. The Government needs to determine new prices to apply from 1 July 2001 and, in September 2000, released a discussion paper initiating a Statewide review of water, drainage and sewerage prices.

The review provides an opportunity for stakeholders to participate in the price review process, with a view to developing a framework which sets out the Government's expectations in relation to water prices and service levels to be delivered by all water authorities in the future. It specifically seeks comments on the effectiveness of arrangements in the rural water sector where rural water authorities set prices in conjunction with Water Services Committees.

Following the review of submissions, and a further consultation phase, recommendations will be made to Government in February/March 2001, with a view to establishing new prices for urban water, and a framework of pricing principles for future pricing decisions, by July 2001.

Infrastructure Planning Council

In May 2000, the Premier announced the establishment of an Infrastructure Planning Council to help identify Victoria's infrastructure needs over the next five to twenty years. The Council is focusing on four key areas of network infrastructure - transport (ports, airports, roads, rail and the linkages between different transport modes and regions), water (drainage, sewerage, water treatment, reservoirs and irrigation), energy (electricity, gas and alternative energy sources) and telecommunications (including cable networks, wireless networks and infrastructure to support e-commerce). The Council's role is to:

• examine the State's existing infrastructure and to identify future needs and areas for improvement;
• gather information about the State's infrastructure priorities;
• consider specific major infrastructure initiatives; and
• examine impediments to the efficient use of infrastructure, including the need for physical improvements or enhanced maintenance.

The Council will provide advice to Government on ways to improve the use of existing infrastructure (including the removal of impediments) and identify strategic directions for infrastructure development in the medium term. In formulating its advice, the Council will give particular consideration to the interrelationships between different types of infrastructure, and to opportunities for partnerships between all levels of government, regional authorities, business and the community.

The Council will consult extensively with stakeholders throughout the Victoria. As a first step, it called for submissions from individuals and organisations on the matters within its Terms of Reference. It will provide the Premier with an interim report at the end of one year, and a final report, including any recommendations, within two years.

Essential Services Commission

The Government is committed to establishing an Essential Services Commission (ESC) to ensure the interests of consumers are protected in terms of price, quality and reliability of services supplied by utilities (e.g. gas, electricity and water) with market power. A Consultation Paper has been released for comment.

The establishment of the ESC provides an opportunity to review the current regulatory arrangements for the water sector, and develop a statewide framework under which the roles of the Government and the regulators are clearly delineated. The Government intends to consult separately on the detailed issues associated with revising the Statewide regulatory framework for water and establishing the ECS as the economic regulator of the water industry.

Groundwater Management Initiatives

The Victorian Government is committed to meeting the requirements of the COAG water reforms. Management initiatives introduced by the Government (and which have a statutory underpinning in the Water Act 1989), and which will continue, include:

• The identification of Groundwater Management Areas (GMAs). This process began in 1996 and to date 63 GMAs have been identified which cover 90% of groundwater use in Victoria.
• The development of comprehensive Groundwater Management Plans for all GMAs identified as being overallocated (some 16 of these systems have been identified to date). The aim is to introduce more intensive and focussed management to these GMAs in the next few years. The Act provides for a Groundwater Supply Protection Area (GSPA) to be declared by the Minister for Environment and Conservation. Following this a Consultative Committee is appointed by the Minister and given the responsibility of preparing a Groundwater Management Plan for the GSPA. Such a Plan will involve more intensive monitoring of groundwater and metering of usage and may result in local policy changes such as groundwater trading or buy back schemes. It is up to the Minister to approve the Plan and, once approved, the Plan becomes binding on all parties.
• The development of basic Groundwater Management Plans for all other GMAs where allocations exceed 70% of the PAV, incorporating the collection of information on groundwater levels and usage and other groundwater parameters as required for the GMA, followed by review after 5 years of operation.
• Government has made $4 million of additional funding available to Rural Water Authorities over the three years to 30 June 2001 to accelerate the assessment of groundwater in GMAs.

Key Management Issues

The key challenges facing the Victorian water sector in the future are associated with protecting and improving the health of our water resources (including healthy rivers), and ensuring their efficient management and sustainable use in the face of increasing competition for scarce resources. This will require:

• Continued implementation of the Management Initiatives outlined above.
• Improved knowledge and management tools - in particular, there is a need to address the Data and Information gaps outlined below.
• Continued facilitation of the integrated management of all catchments at the regional level via Catchment Management Authorities.

Associated key management issues include the need to:

• keep water supply system modelling tools and associated data inputs current;
• continue building our knowledge base, and increase the sophistication of our planning techniques and management tools to support the sustainable management of a finite resource.
• ensure the availability of adequate human and financial resources to allow the implementation of the wide range of management initiatives currently underway;
• improve the efficiency of water markets through full implementation of Bulk Entitlements, the refinement of trading rules, the development of more sophisticated water 'products', further development of inter-state trade, and further development of the regulatory framework as markets grow;
• provide a statutory basis for Streamflow Management Plans so that they are binding on all parties, and for including farm dams in the water allocation framework;
• establish systems for the benchmarking and continued monitoring of stream condition and environmental flow outcomes;
• ensure adequate maintenance of the groundwater observation bore network - over 50 of the State's 250 monitoring bores are over 500 metres deep and, as the condition of these bores deteriorates, funding major maintenance such as refurbishment and, ultimately replacement, represents a significant management issue;
• develop a process for integrating groundwater management with surface water management in situations where aquifers have a direct linkage with surface water systems, with priority being given to those areas where allocations for either the GMUs or the SWMAs are over or close to the sustainable yield;
• develop and implement of a policy for reducing allocations in over allocated groundwater systems to match sustainable yields;
• actively manage declining groundwater levels in the Gippsland Basin resulting from offshore oil and gas extraction, which potentially impact on the groundwater resource available for on-shore extractions as well as potentially inducing land subsidence;
• enhance community acceptance of drought as a reality in Victoria's inherently variable climate by ensuring that water users are educated about the risks associated with drought and, in particular, about the nature of the trade-offs between supply security and the price of water;
• consider the potential impacts of major land use change (e.g. plantations) and climate change on the security of surface and groundwater supplies and environmental flows and develop appropriate strategies for managing these impacts;
• ensure that water authorities plan responsibly to meet future water needs, in consultation with their customers, ensuring that all realistic water use and delivery conservation measures are utilised before considering augmentation of water supply infrastructure;
• update information on the incremental costs of potential new storages, and develop a rapid appraisal methodology for pre-feasibility studies that includes a consideration of associated social and environmental costs; and
• develop decision support tools which will allow the evaluation of water and catchment management initiatives in terms of their likely environmental, economic and social outcomes so that an appropriate balance can be achieved that maximises benefits to the community.

Data and Information Gaps

As resources become more fully utilised, the need for data and information to ensure their effective management and sustainable use increases. Priorities include the following:

• Maintenance and expansion, where necessary, of surface and groundwater monitoring networks to improve our understanding of the quantity and quality of our water resources to guide future allocation and management decisions.
• Continued development of the State Data Warehouse to ensure that data and associated information products are readily available to water and catchment managers and communities.
• Improved data on the components of urban and rural water use (surface and groundwater), crop types, irrigated areas, and related user management decisions.
• Improved understanding of environmental water requirements so that recommendations can be made (in a reasonable time frame) for environmental flow regimes which will sustain river health with some degree of certainty.
• Development of a consistent methodology for the assessment of environmental flow requirements for use in all water allocation processes.
• Establishment of sustainable diversion limits for summer and winter in unregulated rivers.
• Improved ability to estimate surface water flows in ungauged catchments.
• Development of methodologies that will allow the setting of appropriate exchange rates for water trades (which also requires improved understanding of losses in river and distribution systems).
• Improved ability to incorporate hydrological considerations into the design of river restoration programs to get maximum environmental benefits for the $ invested.
• Improved understanding of the requirements of Groundwater Dependent Ecosystems so that these requirements can be taken into account in setting sustainable yields for GMUs.
• Improved understanding of the linkages between surface and groundwater systems, with a view to developing management regimes that allow for the conjunctive use of these resources where a high degree of linkage is present.
• Improved understanding of the risks associated with climate change and the implications for sustainable yields and the security of surface and groundwater water supplies (particularly during droughts) and the viability of irrigated agriculture on a regional basis.
• Evaluation of the potential benefits of incorporating information from seasonal climate forecasts and shorter term weather forecasts in operational water management decisions.
• Improved ability to predict the impacts of land use change (e.g.plantations) and management practices on surface water and groundwater availability and quality at a catchment scale.
• Ability to integrate water resources system models with economic, financial, social and environmental response models.
• Development of user-friendly decision support tools that will enable the evaluation of the potential economic, environmental and social impacts resulting from changes in land and water management practices.

Many of these information gaps are being addressed by the current research programs of the Cooperative Research Centres (CRCs) for Catchment Hydrology and for Freshwater Ecology, and the Department of Natural Resources and Environment is a party to both of these CRCs.

Future Directions

Water will continue to be vital to Victoria's future, its value will continue to increase, and there will be increasing competition for our finite water resources. The water reforms that have been undertaken to date and the management initiatives currently underway provide a sound foundation for ensuring the sustainable management of our water resources into the future.

The challenge from here on is to manage a finite and precious resource in an environmentally responsible and equitable manner, while recognising its important role in providing for the community's needs. This will increasingly involve exploring fully opportunities for reuse, water savings and transparent re-allocation through water markets. Government's role is to provide the appropriate policy and regulatory framework and investments, where appropriate, to ensure the effective management of water resources and the efficient delivery of water services to meet community needs.

The broad principles set out by the current Victorian Government will continue to guide the development of water policy and the delivery of water services. These are:

• Environmental sustainability;
• Financial responsibility and economic sustainability;
• Transparent and fair resource allocation;
• Sustainable land and water management;
• Customer-focused and efficient service delivery;
• Community involvement in decision making; and
• Clear accountabilities and responsibilities.

In this context, the long term policy framework for water management in Victoria needs to embrace the following elements:

• Detailed knowledge and understanding of the demands for water for consumptive and environmental use;
• An allocation system which recognises the sustainable limits of our water resources, provides adequately for the environment, and provides certainty for consumptive users;
• A water trading system which enables water to move to higher value uses;
• Pricing mechanisms which recognise the real value of water;
• Infrastructure which enables water to be stored and released efficiently when and where it is needed; and
• Institutional arrangements to manage the collection, storage, release and sale of water and wastewater which are accountable to consumers and the Government of Victoria.

Because of the linkages between land and water processes, water management cannot be considered in isolation from catchment management. Water management initiatives will continue to be combined with a range of catchment management initiatives, with the aim of producing healthy rivers and catchments which, in turn, will underpin sustainable industries and communities. The strategic framework in which this will occur will involve:

• A 'whole of catchment' approach to planning and management which recognises the strong interactions between land and water management, and engages the whole community in decisions.
• An effective system of tradeable property rights for allocation and use of the natural resource bases.
• An effective Statewide policy, regulatory and institutional framework for water and catchment management.
• A performance evaluation framework which ensures transparency and accountability (to Government and the community) in delivery of services.
• A strong science capacity which will enable the development of innovative and effective land and water management systems.

This framework will provide the context in which the Government will continue to work, in consultation with all stakeholders, to maintain reliable supplies for water users, ensure the environmental values of rivers and wetlands are sustained and restored where necessary, and to improve the efficiency of use of the resource.

References

Adams, P. D., Dixon, P. B. and McDonald, D (1994) 'MONASH forecasts of output and employment for Australian industries: 1992-3 to 2000-01', Australian Bulletin of Labour, v 20, n.2.

AATSE (1999) Water and the Australian Economy, A joint study project of the Australian Academy of technological Sciences and Engineering and the Institution of Engineers, Australia, April, 1999.

Alexander, D. P. and Haydon, S. R. (1986) 'Long Run Incremental Costs of Annual Regulated Flow in Victorian River Basins', unpublished report prepared by the Rural Water Commission for the Department of Water Resources.

ARMCANZ (1996) Allocation and Use of Groundwater: A National Framework for Improved Groundwater Management in Australia, Policy Position Paper for Advice to States and Territories, Task Force on COAG Water Reform, Sustainable Land and Water Resource Management Committee, Occasional paper No. 2, December 1996.

DCE (1991) Water Victoria: The Next 100 Years, Department of Conservation and Environment Victoria, Melbourne.

DWR (1989) Water Victoria: A Resource Handbook, Department of Water Resources Victoria, Melbourne.

DWR (1992) Water Victoria: A Scarce Resource, Department of Water Resources Victoria, Melbourne.

HLSG (1999) 'Progress in Implementation of the COAG Water Reform Framework, 1999 Report to COAG', High Level Steering Group on Water, Occasional Paper No.1.

Powell, J. M. (1989) Watering the Garden State: Water Land and Community in Victoria 1834-1988, Allen and Unwin, Sydney

Powell, J. M. (1999) 'Victoria', in A Century of Water Resources Development in Australia 1900-1999, Ed. W Boughton, Institution of Engineers, Australia, Canberra.

Read Sturgess and Associates (1997) 'Investment Analysis of Groundwater Activities', Unpublished report for the Department of Natural Resources and Environment, April 1997.

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