Everything you need to know about the water buyback scandal

Over the Easter long weekend, with the election campaign on brief hiatus, news emerged of a controversial water deal between the government and a Cayman Islands-based company with prior links to energy minister Angus Taylor. Crikey breaks down everything you need to know about the scandal which has been quickly dubbed “watergate”. 

The basics

In 2017, the government made a $79 million water purchase from a company called Eastern Australia Agriculture (EAA). Deals like this are a key part of the administration of the Murray-Darling Basin Plan (MDBP), which involves the government buying back water in the region from irrigators which it then redistributes in order to improve efficiency and sustainability. But this particular transaction has come under scrutiny for a few reasons.

Firstly: it was a negotiated buyback, meaning it happened without an open tender process. EAA is a subsidiary of Eastern Australia Irrigation (EAI) which is based in the Cayman Islands (a territory known as a tax haven with little corporate transparency). Secondly: Energy Minister Angus Taylor was a co-founder and director of EAI before he entered parliament. EAA donated $55,000 to the Liberals before the 2013 election.

Barnaby Joyce — who was water and agriculture minister at the time — signed off on the deal. It was the most ever paid for water under the MDBP, which has been in place since 2012. But despite the high price, the water itself couldn’t actually be used. The water EAA sold was overflow water, or water left behind after a flood — something there hasn’t been much of recently. Legally, the water cannot be actually be used by the Commonwealth outside the property.

Joyce took a keen interest in the progress of the buyback; it concerned land in the Queensland town of St George where he once lived.

The background

The MDBP began in 2012, but water buybacks had been in place for some years before that. They’re part of the government’s strategy to ensure water is used sustainably in the region. Joyce has been a long-term opponent of buybacks. But, in addition to the EAA deal, he was involved in other major deals during his time as minister. In 2017 almost $200 million worth of buybacks were approved without open tender.

Both Joyce and Scott Morrison have accused Labor of doing similar things while in government. In 2012, before the MDBP had been formalised, Labor signed off on a $303 million buyback deal with the Twynam Pastoral Company — a lucrative agribusiness run by Argentina-based billionaire John Kahlbetzer. The deal was criticised by environmentalists. Speaking on the ABC shadow environment minister Tony Burke said this buyback occurred in a different context, before the MDBP was in place.

But “watergate” highlights other forgotten issues of mismanagement in the Murray-Darling basin that date back several years. This controversy had its genesis, for instance, in the then-unregulated construction of levees in Balonne Shire in Queensland.

Traditionally “overland flows” were a key contributor to river flows via the Balonne River, which connects to the Murray-Darling system and provides around 9% of the basin’s water. Levees trap overland flows during flood events and prevent them from entering the river system, enabling irrigators and cotton farmers to use or sell the water; the vast Cubbie Station, which built an entire business model on trapping water, is located nearby. As well as preventing water from entering the MDB, levees also dramatically distort water movement across the floodplain causing severe flood damage to neighbouring properties. EAA’s properties, Kia Ora and Clyde, took advantage of poor levee regulation to store floodwater. In Kia Ora this resulted in serious damage on at least one neighbouring property.  

The $80 million deal behind “watergate” involves the acquisition for “environmental flows” of flood water from Kia Ora and Clyde — in effect, EAA has been paid $80 million to surrender water which it obtained by unauthorised, though nonetheless legal, levee building on the floodplains of the Balonne. EAA has agreed to decommission its levee works, although there is no process for independently verifying that the works have been removed.

The response

In a statement Angus Taylor said he did not have any interest in the relevant companies at the time of the buyback and received no benefit. He stated he had “no knowledge of the federal government’s water buyback from EAA until after it occurred”. 

Joyce, meanwhile, had to be told to “calm down” by ABC’s Patricia Karvelas during a fiery and rambling interview last night. He described the controversy as “a load of horse crap” and repeatedly pointed the finger at Labor, who he accused of engaging in similar behaviour.

Meanwhile the Greens and Centre Alliance are calling for a royal commission, which Labor has not ruled out.