Land Management and Asset Security

Ian Donges

President, National Farmers' Federation

Farmers make the day-to-day management decisions affecting more than 70 per cent of Australia's land mass and 70 per cent of the water diverted from our rivers and streams. They are the most important stakeholders in good environmental management. They are passionate about protecting our natural resource base in a bid to ensure sustainable agricultural industries for their children and their children's children.

Environmental protection and biodiversity conservation is the shared responsibility of all Australians. However, Commonwealth and state legislation generally imposes much of the cost of pubic good conservation directly on farmers.

Farmers' property rights are often reduced or removed to achieve a community benefit, at no cost to the wider community. Farmers ought not to be expected to foot the bill for public good outcomes that benefit the broader community. Such policies result in poor outcomes for the environment, for the economy and for farming communities.

Just as city businesses are compensated if the government resumes land to put a freeway through their property, farmers should be compensated if their ability to farm their land is compromised by legislation in the public interest.

Farmers are constantly interacting with the natural environment. By contrast, most Australians live in urban environments. And while they may have a strong interest in environmental issues, they do not experience the immediate consequences of variable climate, pests, feral animals, weeds, disease and environmental degradation to the same extent.

Threatened species are rarely located in urban environments. They are generally found outside metropolitan areas, often on farming land. The aim of the Commonwealth's Environment Protection and Biodiversity Conservation (EPBC) Act, recently passed by Federal Government, is to preserve threatened species for the benefit of the entire community - but it does so by imposing onerous regulations and costs on farmers thereby reducing landholders' ability to manage their farm without compensation. This 'heavy-handed' approach results in poor outcomes for the environment, for the economy and for farming communities.

A better approach would be to share equitably the costs of conservation and environmental outcomes between landholders and the general public. Incentives could be given to farmers with significant environmental features on their land to manage them for the benefit of the community, so that the community contributes to the costs imposed on farmers.

If regulations that reduce or remove farmers' ability to manage their land autonomously are imposed on farmers by the general community to achieve environmental objectives, then the general community should be willing to compensate farmers for any erosion in their ability to generate income from their land.

The National Farmers' Federation was a key contributor to t he House of Representatives Standing Committee on Environment and Heritage's Report, Public Good Conservation: Our Challenge for the 21st Century , which was released in September 2001 (E&H Committee, 2001). This report acknowledges that "the inquiry was provided with evidence that public good conservation activities raised major issues for landholders. These issues are not trivial matters and it was clear that they must be addressed at the highest levels of government".

"The Committee recommended that the government examine the feasibility of a national environmental levy to provide the public component of the financial resources that addressing environmental degradation required."

Developing and introducing new methods of managing land to preserve biodiversity can be costly, and the Commonwealth Government's commitment to research and development, plus compensation for adjustment costs, has a valuable role to play.

Farmers are also suffering because the EPBC Act is not consistent with state land management and conservation regimes. The on-ground impact of the Commonwealth legislation, on top of state interventions, has not been thought through thoroughly and is causing farm management problems.

The EPBC Act has a number of major deficiencies. A landowner can be managing the land fully in accordance with state legislation but be in breach of the Commonwealth Act. The onus is on the landowner to be aware of the implications of the EPBC Act. Neither local nor state government authorities have any obligation to advise landowners of the implications of the EPBC Act and Commonwealth bureaucrats do not have an understanding of local issues to give appropriate advice.

There is no provision for effective consultation with landowners. The implication is that the Commonwealth has a complete understanding of the preferred approach to land and water management to achieve environmental and social objectives in every part of the country, whereas in reality this knowledge is more likely to reside within the local community.

Suspension of further listings of threatened species under the Act until clear consultation and administration arrangements are in place would be a positive step.

The National Farmers' Federation (NFF) has been seeking support from the major political parties in a number of areas and, following election campaign commitments from the major political parties, will be progressing the property rights issue early in the new year.

We now have an explicit undertaking from the Commonwealth that adequate compensation will be paid if landholders' ability to farm their land is removed or reduced by Commonwealth legislation such as the EPBC Act.

The Government has also agreed to a significant strengthening of Council of Australian Governments (COAG) processes in regard to environmental management-to ensure better coordination of State/Commonwealth land management and environment protection legislation, improve consultation processes and address the issue of compensation.

We are also seeking an agreement by all governments to institute an incentive-driven, not legislation driven, approach to environmental management.

NFF has also called for an explicit acknowledgment of the economic and social implications that can result from listings under the EPBC Act and improved community consultation processes. In particular, NFF requires a specific implementation plan from the Commonwealth Government that explains how they will act once species or areas are listed as threatened.

Research and development support and a commitment to meet the adjustment costs of introducing new and more sustainable farm management practices are also vital ingredients of the most effective land management strategy.

We have also sought a commitment that there be no further listings until consistent State and Commonwealth administrative arrangements are in place.

A Productivity Commission report released in May, 2001, Cost Sharing for Biodiversity Conservation: A Conceptual Framework , outlines a number of issues associated with the property rights debate (Aretino et al ; 2001). The report acknowledges that "clarification of property rights is likely to be an ongoing issue. This is because community expectations of what is considered an acceptable environmental standard may change over time to reflect a standard either higher or lower than that implied under existing property rights. For instance, community preferences for biodiversity conservation may increase in light of improved understanding of the significance of biodiversity loss".

Australia also needs to review water reform under the COAG agreements. Only secure water property rights, which are tradeable, will ensure that water resources are used sustainably, for the benefit of all Australians, in the long term. Inefficient and inappropriate land and water use has created problems of national significance such as rising salinity and falling water quality.

In recognition of the seriousness of this issue, the NFF established a special Water Task Force in May, 2001. That task force has just finalised its report, which states that: "It is the National Farmers' Federation's view that the Council of Australian Governments' water reform agreements have not been implemented to deliver on promised water property rights".

It also found that there are six fundamental characteristics of a water property right:

• Duration - a continuous period measured in years that the property right is held;

• Flexibility - modification or alteration to account for recognised constraints on the availability of water resources;

• Exclusivity - an entity holds the water property right exclusively so that it can be traded in a market place;

• Quality Of Title - secured to the extent that removal or impairment is compensated and the rights are adequately registered to facilitate financing and transfer;

• Transferability - easy transfer of water property rights on a permanent or temporary basis; and

• Divisibility - capable of being shared or subdivided.

Importantly, these characteristics are not mutually exclusive. They must all be present for a true property right to be acknowledged and no alteration to one characteristic ought to be able to erode any of the other five.

A 1998 Industry Commission Report, A Full Repairing Lease: Inquiry into Ecologically Sustainable Land Management outlined components of a property right (Industry Commission, 1998). The list reflected the characteristics of property rights put forward by NFF, but also included enforceability, saying "property rights are secure from involuntary seizure or encroachment".

It is now becoming obvious that one of the key steps in the COAG Agreement was the establishment of property rights, with respect to water once water was separated from land title. This has not been carried out in all states, with the resulting situation that in financial negotiations, the level of security previously enjoyed has been seriously eroded.

All Australian governments have recognised the need for water reform and the Council of Australian Governments' has committed to:

• Changing the way water charges are set and the level of costs recovered;

• Refining existing allocation and water management systems; and

• Introducing trading in water rights so that those that can use the water most productively can get access to the resource.

Well-defined long-term water property rights - involving clear specification of entitlements in terms of ownership, volume, reliability, transferability, and if appropriate, quality - are a prerequisite for all of these initiatives.

The current practice of state governments clawing back over-allocated water licences, with no financial compensation, is at odds with regional communities' need for certainty in their infrastructure investments. Clawback without compensation actually threatens environmental outcomes due to the contention over equity, grid locking decision-making processes.

In Australia, state and territory Governments historically owned the rights to all ground and surface water. Governments then used licenses, permits and agreements to share the resource between water users. However, these entitlements have often not been issued as part of a comprehensive resource management system.

Until recently, water entitlements were tied to a particular piece of land, water storage or irrigation scheme, limiting their ability to be traded and giving them no legal status independent of the land or infrastructure to which they were tied. All states and territories now have legislative frameworks in place that separates "water property rights" from land and title.

However, the frameworks are not consistent and often do not allow farmers and their financiers to form a reasonable expectation about the tenure and the security that the entitlement will deliver over time. This has seen a significant reduction in asset security, and needs to be addressed as the water reform is finalised.

The National Farmers' Federation is seeking Australia-wide recognition of and respect for secure water property rights. In establishing these rights, water users must get the maximum degree of security about the nature of the property right, so that they are able to form a reasonable expectation of the benefits provided by the right. And compensation must be paid where the value or security of water rights is eroded by government actions in order to attain 'public good' outcomes.

The policy aim of the NFF is to ensure that farmers are compensated if and where their property rights are eroded or removed.

References

Aretino, B., Holland, P., Matysek, A. and Deborah, P. 2001, Cost Sharing for Biodiversity Conservation: a Conceptual Framework , Productivity Commission, AusInfo, Canberra, Australia.

The House of Representatives Standing Committee on Environment and Heritage Report Public Good Conservation: Our Challenge for the 21st Century , (2001) Canberra, Australia.

Industry Commission. 1998, A Full Repairing Lease: Inquiry into Ecologically Sustainable Land Management, Canberra, Australia.