BY BRUCE LINDSAY

Water management and decision-making is vulnerable to lobbying by powerful commercial interests, as was illustrated recently by the ABC Four Corners investigation into NSW water management. Even where such conduct cannot be categorised as corrupt in the criminal sense, it can compromise the integrity of public governance of natural resources. Excessive private interest in the exercise of public power needs to be resisted, and may be overcome by reform that ensures stricter standards, accountability and public participation. In water governance, reform based on ‘anti-corruption’ principles, could include increased legal and policy mechanisms such as third party participation rights, administrative hearings and a more prominent role for the public trust doctrine.

Four Corners exposes problems in NSW water management

In July 2017, an ABC Four Corners investigation exposed a high degree of industry capture over water management and rule-making in regional NSW. The Four Corners report identified how rules governing the extraction of water from the Barwon-Darling River system were made and/or modified after ‘extensive lobbying by irrigators’.

These rules are set under ‘Water Sharing Plans.’ Generally, water-planning arrangements are intended to restrict extraction, especially by upstream irrigators, in order to bring water management for this system into conformity with the Commonwealth Water Act 2007 and Basin Plan 2012. Those Commonwealth laws establish extraction limits intended to achieve environmental sustainability, as well as social and economic outcomes, over time. A second mechanism under Commonwealth law used to achieve those outcomes is large-scale water buy-backs, using billions of taxpayers’ dollars, and ensuring environmental water flows down the Barwon-Darling system. Environmental flows are water managed for the purposes of ecological health, integrity or benefit of water-dependent ecosystems. Environmental flows may be achieved by way of water management rules operating to ensure environmental outcomes, or legal entitlements delivered in a water system to achieve those outcomes, or a combination of both.

Rules for water extraction in the Barwon-Darling system established under a 2012 Water Sharing Plan lawfully permitted large, oligopolistic irrigators (now controlling around 70 per cent of water in this river system, according to the Four Corners report) to appropriate to private, commercial use, vast quantities of water, to the detriment of downstream water users, the environment and taxpayers. In particular, those rules permitted effective extraction of water funded by the Commonwealth Government to be sent down the river for environmental flows, as well as permitting extraction at times of low flow.

Water Sharing Plans are a key instrument under NSW’s Water Management Act intended to achieve laudable public interest governance goals. The rules operative for the Barown-Darling system are potentially inconsistent with Commonwealth law.  Through the exercise of economic and political power,  irrigator interests were described in the Four Corners report as securing regulatory outcomes that accrued immense benefits for themselves and control over a crucial natural resource (Four Corners referred to this as ‘profiteering’). Other media reports on political dealings relating to the same Barwon-Darling Water Sharing Plan tend to reinforce the problem reported by Four Corners.

Regardless of whether or not the dealings around water rules are strictly lawful, or technically fall foul of anti-corruption statutes, the accumulated conduct of the State and private irrigator interests in this example represents a departure from appropriate norms of public conduct as to fall within a broader ambit of corruption. This example is demonstrative of what we might term a ‘soft’ corruption: standards of institutional behaviour amounting not only to poor governance but substantial compromise to the integrity of public governance of natural resources.

An expansive concept of corruption

In her discussion of an ‘anti-corruption principle’, Zephyr Teachout identifies the deep concern with corruption in original American constitutional thinking. Corruption constitutes a basic threat to well-functioning political systems; it is corrosive of public trust in political institutions and without that trust, the honest and cooperative functioning of society is at best problematic and more likely impossible. Corruption is counterposed to concepts of political and civic virtue. Politics and public administration should be about maximising the public good and establishing the structures to achieve those ends. Corruption is antithetical to this position. In this approach, corruption adverts to moral practices beyond the criminal. It is an orientation of private gain to public power:

a range of self-serving behaviours … An act or system is corrupting when it leads to excessive private interest in the exercise of public power. People are corrupt when their private interests systematically overrides public good in public roles, when they put self-love ahead of group love. This is true if they are lobbyists or politicians, citizens or senators.

The response or antidote to this expansive sense of corruption needs to be structural or institutional, in order that corruption is, if not impossible, difficult, exposed, contested and deterred. Teachout cites Alexander Hamilton’s approach that ‘nothing was to be more desired than that every practicable obstacle should be opposed to cabal, intrigue and corruption.’ Hamilton’s sentiment in favour of ‘every practicable obstacle’ can find expression in key principles of good governance, such as in clear standards of public good and integrity in decision-making, dispersal of power, accountability and transparency, and maximising public participation by a well-informed engaged citizenry.

Procedural ‘obstacles’ to ‘excessive private interest in the exercise of public power’

How do such principles translate to the operation of public law in water management? More specifically, how can they translate in such a manner as to deter, if not prevent, corrupting processes, as evidenced in the NSW situation?

Principal legislative responsibility for water management in Australia rests with the States and Territories. Primary rights and powers over water vest in the Crown in each jurisdiction and water legislation then sets up schemes for rights to take, use, or control water to be distributed, usually via decision-making by or under delegation of the relevant Minister. A focus of water access and use rights, as a discrete body of law, is a legacy of the common law treatment of water as juridically separate, if connected to, land.

Water systems may be highly modified and regulated, by dams or channels for instance, with hydrologic and environmental regimes profoundly altered from pre-settlement patterns. Those modified systems typically have developed to serve urban, agricultural, mining, hydro-electric or flood management purposes.

Despite considerable complexity, water management remains characterised by centralised discretion in Ministerial hands, obscure bureaucratic and technocratic control, few structural checks and balances, and limited scope for public participation in governance. Unlike planning or environmental laws, these characteristics are a legacy of water management dominated by the highly reductionist paradigm of water as a usufructuary resource separated not only from other land and resource questions but abstracted from social questions as well. Water – or more accurately, rights to water – is viewed as a public resource for management and disposal, especially to private interests, albeit qualified now by other (for example, environmental or Indigenous) considerations. Water in this context is amenable to inappropriate or corrupt dealings as any other public resources, such as public revenues.

One series of reforms that might be proposed is the interposing of procedural rights, tools and obligations between a public authority, such as a Minister, charged with making plans, rules or administrative instruments materially affecting interests in water, and other relevant interest-holders. Interest-holders, in this context, may be those with rights or water allocations , but equally should be persons or organisations with any form of materially affected interest – such as protection of the environment, recreational or urban consumption interests, other consumptive interests, or cultural and customary interests. The purposes and effect of these participatory mechanisms must be to expand ‘third party’, public interest involvement in water governance, with accompanying benefits of accountability, dispersal of power and influence, and greater practical inclination to ‘shared governance’ approaches.

Procedural devices should expand public participation in policy-, plan- or rule-making beyond current requirements under NSW water law for ‘notice and comment’ type arrangements on draft water sharing plans and their preparation by management committees. Amendments to rules under water sharing plans currently may be made by the relevant Minister without any public participation. This type of change has proved especially significant in terms of water management outcomes and impropriety.

Statutory requirements for administrative hearings would also be an appropriate mechanism to contribute further to transparency, accountability and independent scrutiny of water decision-making. An administrative hearing might be enlivened by a trigger in water legislation, such as the risk or likelihood of adverse, public interest impact resulting from the rule or plan change. Alternatively, the trigger could be objection by a person with affected interests, including a person acting in the public interest. The model of administrative hearings on rules and plans is well-established in US water law, as well as administrative law generally. Objector-based models of public participation are evident in US water law, such as under the California Water Code, where water transactions occur. The California Water Code provides for ‘protest’ where an application is made for a permit to take water. Field investigations, negotiations or hearings may be used to determine the matters in dispute. Adjudicative procedure may also be used in other circumstances, such as in determining the rights and interests (including public interests) within a water system generally. Sources of water rights may be more diverse and complex than in Australia, not only derived from Crown grants, and adjudication is more common in the US context. Liberal objector appeals rights under planning laws in Australian jurisdictions, such as to the Land and Environment Court in NSW or VCAT in Victoria, are evidence of similar methods here, capable of opening up decision-making to greater scrutiny and accountability. Consideration should be given to application of this type of approach to water trading rules in Australian jurisdictions. Other procedural innovations include legally mandated negotiated forms of rule-making, which are participatory, structured, deliberative processes of rule or plan-making. There are interesting informal examples of this approach in Australia, such as preparation of Sustainable Water Strategies in Victoria, although little in the way of statutory organisation of this approach.

Looking further down the ‘obstacles’ course

Laying ‘all practicable obstacles’ to corruption risk in water management might also progress by way of two further areas of reform. First, greater direct incorporation of ‘integrity’ mechanisms into water governance. The role of independent, specialist statutory bodies scrutinising water management and operations would provide an important check on poor governance as well as turpitude in decision-making. Adaption of environmental ombudsman functions, such as New Zealand’s Parliamentary Commissioner for the Environment, to water could be considered. In prospective legislation for protection of the Yarra River currently before the Victorian Parliament, two relevant tools are drafted: a performance auditing role for the existing Commissioner for Environmental Sustainability, and a new Birrarung Council to both advise on and advocate for the River.

Second, greater exploration of and attention to the public trust qualities of water governance would establish a stronger, if not clearer, basis in substantive law of the public interest character of water resources. The public trust doctrine has not attained great traction in Australian law, notwithstanding its English common law origins. It has received more judicial attention and influence in the US context. In particular, it has supplied a bulwark in State jurisdictions against public authorities surrendering, diminishing or disregarding common benefits in natural resources and their protection, including their alienation to private interests. This includes waters. Superadding fiduciary qualities to the State’s exercise of powers over public resources provides a powerful, foundational, and (notably) justiciable principle to water resources management. Currently, the most eloquent and comprehensive principles governing disposal of rights in water in the Australian context tend merely to condition the exercise of powerful Executive (ministerial) discretion. Fiduciary qualities and controls establish protections and duties for positive actions insulating, to paraphrase US legal scholar Joseph Sax, water resources management from ‘avoidable destabilization and disruption’. Any propensities to corrupted uses and gains could be captured in that concept. These fiduciary qualities might be introduced by clear legislative intendment that a State’s water resources are held on trust by the Crown, not solely vested in the Crown.

Conclusion

Water resources represent a source of great wealth, both as a common good and, in rights to take and use them, for private accumulation. As with any source of wealth mediated by public authority and the exercise of public power, disposal of water resources may be prone to ‘cabal, intrigue and corruption.’ Circumstances reported on in NSW suggest that this may play out not only as a matter of criminality but in the lawful operation of water management. Ensuring propriety, or norms of civic virtue, in natural resources management is an institutional and governance challenge, depending on the broad structures and architectures of public power, as well as a matter for criminal justice and anti-corruption bodies. There is a wide field of water governance tools and models available internationally that may lend themselves to meeting these institutional and governance challenges.

 

Dr Bruce Lindsay is a lawyer at Environmental Justice Australia.

Suggested citation:  Bruce Lindsay,  ‘Anti-Corruption, Water and the Basin Plan’ on AUSPUBLAW  (12 September 2017) <https://auspublaw.org/2017/09/anti-corruption-water-and-the-basin-plan/>