Water banking in aquifers as a tool for drought resilience in the Murray-Darling Basin

ABSTRACT

Water banking in aquifers is an internationally proven, low-cost solution that could improve drought resilience across the Murray Darling Basin. While significant potential for water banking through managed aquifer recharge (MAR) or conjunctive use of surface and groundwater resources has been identified in the Murray Darling Basin Plan, there is a need to establish clear policy and institutional foundations to incentivise adoption. To provide appropriate incentives for schemes, the legal status of rights to recharge, store and recover water, and the rules and costs which apply to groundwater extraction need to be clear and transparent. This paper aims to clarify principles and frameworks to secure water rights for recharge, storage, and recovery within the sustainable limits of water resources currently set under law. The current Basin Plan supports water banking, and banking would be complementary with objective and outcomes sought by future Basin Plans. Existing water accounting systems would need to accommodate this new capacity. Institutional arrangements and financial structures of water banking in the USA provide guidance for Australia. Demonstration sites would enable concurrent policy development and institutional set-up and provide critical experience to serve as models for wider adoption as part of future Murray Darling Basin plans.

KEYWORDS:

• Managed aquifer recharge (MAR)
• water banking
• drought resilience
• Murray Darling Basin

1. Introduction

Southern Australia continues to experience a widespread drying trend and recent droughts have greatly affected agriculture, communities, and the environment of the Murray Darling Basin (MDB) (Cai et al. 2014). While droughts are a natural part of Australia’s seasonal cycles, they are likely to become more severe and more frequent (Freund et al. 2017). Since the MDB supports a population of 2.6 million people, 9,200 irrigated agriculture businesses and generates $8 billion in tourism and $24 billion in food and fibre production (equivalent to 0.4% and 2% of Australia’s Gross Domestic Product (GDP), respectively), this has material consequences for the social, economic and environmental outcomes that are currently derived from MDB water resources (Murray Darling Basin Authority 2018). Long-term water banking through Managed Aquifer Recharge (MAR) for inter-year drought resilience is proven internationally (Megdal, Dillon, and Seasholes 2014; Scanlon et al. 2016) and has significant potential for application in Australia (Gonzalez et al. 2020).

Projected changes in groundwater recharge in Australia from 2010 to 2050 due to climate change have a large spread but median projections indicate substantial declines in recharge in southern Australia are likely with a rate of around double the expected decline in mean annual rainfall (Barron et al. 2011). Long-term groundwater level declines of 0.1 m per year on average over the last 50-years across the main alluvial groundwater systems in the MDB have been reported and some areas have seen declines of around one metre per year (Fu, Rojas, and Gonzalez 2022). These groundwater systems will therefore require either a reduction in allowable extraction and/or an increase in recharge during wet periods to simply maintain current levels. These projections raise uncomfortable questions about how water supply will be managed in Australia in the face of increasing drought severity and frequency in addition to long-term underlying drying trends.

Drought impacts tend to be magnified in Australia’s regional and rural communities largely because of the deep impact on agricultural industries. The social, financial and environmental impacts of drought in the MDB are well described and are expected to increase in the future (Downey and Clune 2019). Agriculture contributes approximately 2% of Australia’s GDP and employs approximately 350,000 people (ABARES 2022) so the effective management of drought is critical in ensuring the resilience of Australia’s food and fibre production. Drought has been shown to significantly reduce agricultural profitability and productivity. Recent drought in southern Australia reduced Australia’s real GDP by 0.7% and NSW was particularly hard hit with GDP falling by 1.1% ($6.9 billion in 2018–2019) and 1.6% ($10.2 billion in 2019–2020) (Wittwer and Waschik 2021). Since agriculture consumes approximately one-quarter of water extracted nationally (ABARES 2022), building drought resilience to maintain agricultural productivity requires advances in low-cost and innovative water management approaches.

Under the Water Act (2007), the Basin Plan (MDBA 2012) aims to strike a balance of consumptive use and providing water for the environment. This balance is critical to deliver a productive and healthy Murray – Darling Basin. To do this the Basin Plan sets sustainable diversion limits for both surface water and groundwater management areas to limit consumptive water use while maintaining enough for river operations and the environment. To meet their obligations under the Act and the Basin Plan, Basin State governments develop specific water plans for resources, record use in State water registers and report this to the Murray-Darling Basin Authority (MDBA).

Water banking through MAR has proven critical to improving drought resilience in the United States where capacities in the hundreds of millions of cubic metres have been banked for decades for later recovery during drought, for example, in California and Arizona (Scanlon et al. 2016). There is an informative body of literature to draw on for examples of how water banking can be applied from a policy and regulatory perspective with science-based principles governing the physics of the practice. Significant potential for water banking through MAR has been identified in the MDB (Arshad, Guillaume, and Ross 2014; Gonzalez et al. 2020; Lawrie et al. 2012). The current Basin Plan (MDBA 2012) has a single mention of MAR and does not include the term water banking. MAR is mentioned in the context of water accounting to say that ‘water resources which are used for the purpose of managed aquifer recharge’ must be accounted for (MDBA 2012). However, there are examples of MAR systems including some currently operating within the MDB that can form precedents.

This study highlights the opportunity for water banking through MAR in the MDB and discusses some of the key considerations for effective implementation. General characteristics supporting the successful integration of water banking in water resource management are discussed together with four possible conceptual implementation frameworks and potential institutional arrangements.

2. What is water banking?

MAR is the purposeful recharge of water to aquifers for subsequent recovery or environmental benefit (Dillon 2005). This is distinct from unaccounted, unmanaged or incidental recharge, for example, through seepage or deliberate disposal. In Australia, MAR either through infiltration-based techniques under gravity or through pressurised well injection methods, tends to be operated for intra-year storage to supplement seasonal demands (Dillon 2015). The term ‘water banking’ has been used to describe a form of MAR that focusses on inter-year storage for enhancing long-term water security for increasing drought resilience (Megdal, Dillon, and Seasholes 2014). More specifically, water banking refers to a system or institution where water rights are deposited in a ‘bank’ for later use or transfer to other users as is the case in Arizona through the Arizona Water Banking Authority where this concept has been successful (Megdal, Dillon, and Seasholes 2014; Montilla-López, Gutiérrez-Martín, and Gómez-Limón 2016).

Water banking should be one of the measures considered in future basin plans to improve long-term water security across the MDB. With appropriate policies in place, the potential benefits could be widely distributed through conveyance not only within aquifer systems, but through rivers and pipelines, and through water trade. The general principle of water banking is simple: a known volume of surface water is stored in a groundwater system, with the future right (or credit) to recover a proportion of this volume accrued (Figure 1).

Figure 1. Water banking in unconfined aquifers though recharge basins.

Combining these two water resources as climatic conditions allow, storing surface water in aquifers when conditions are favourable (e.g. in wet years when more water is available and demand and prices are low) and recovering stored water when conditions change would be an efficient and effective use of resources. Viewed in this context, it is fundamental that property rights in both the surface and groundwater extend to individuals users such that the transactions can be accounted for and reconciled in real time (Clune and Crase 2017). The conjunctive use of surface water and groundwater (that is switching between surface and groundwater resources over time depending on availability and cost, where a user has access to both) is a first step towards water banking. Where additional water security is needed, inter-year water banking storage should take precedence over intra-year MAR storage and recovery, due to the very high value of water during drought.

In the MDB water access entitlements provide a perpetual or ongoing entitlement to exclusive access to a share of water from a specified consumptive pool as defined in the relevant water plan. Water allocations provide a specific volume of water allocated to water access entitlements in each year or season, defined according to rules established in the relevant water plan. Water entitlements and allocations may have high or low security reflecting the frequency with which water allocated under a water access entitlement is supplied in full.

The fluctuations in water trade prices between wet and dry years provide an incentive for water banking where the value of stored water recharged during wet years would be significantly higher on recovery during dry years. For example, the average water price across the southern Murray-Darling during drought in 2019–20 was $587/ML, compared to $154/ML after significant rainfall in 2020–2021 (Westwood, Walsh, and Gupta 2021). With the onset of drought conditions comes a reduction of low (or general) security water to zero in some cases which has major implications, for example, to agriculture, particularly where reliable supply is required to sustain perennial crops. Recharge of low security surface water during wet years when it is cheap and available could effectively convert this water to high-security groundwater for availability in dry years (Figure 2). This relies on appropriate policies to be developed that protects the security of stored water and rights to recover, and must also protect the rights of other users and the environment (Howe 2016).

Figure 2. Storage of low security surface water to high security groundwater through water banking.

Developing clearly defined rights for water bankers to recover a high-security groundwater allocation during drought with guarantees to access and use of the recharged volume (Figure 2) is essential to making this work. This would incentivise water banking and demonstrate that there were no third-party impacts to existing water entitlement holders.

In comparing storage in aquifers with surface water storage options such as reservoirs, MAR has several distinct advantages including providing natural treatment during recharge and storage (e.g. removal of micropollutants and pathogens (Page et al. 2010, 2014), scalable cost-effective supply (Knapton et al. 2019), replenishing over-exploited aquifers, minimal evaporation loss, algae, and mosquitoes (Dillon et al. 2010). Costs of MAR and banking are also favourable, when compared to infrastructure, such as desalination and dams (Arshad, Guillaume, and Ross 2014; Vanderzalm et al. 2022; Walker et al. 2021).

3. Water management in Australia and the Murray-Darling Basin

Water policy history and context ensuring water security in Australia has been, since colonisation and continues to be, a vexed issue particularly as both state and Federal jurisdictions sought to develop the economic potential of Australia’s river systems. As the challenges of excessive extraction and profligate application to agriculture have impacted the sustainability of water resources, regulators have sought reform to protect the river system and sustain the social, environmental and economic values which rely on it (Kildea and Williams 2010).

The role of government is of particular note in the delivery of water security in Australia since across all jurisdictions, the right to control of the flow of water, including groundwater, is either vested in the respective constitutions or reserved by statute (Gardner 2018). As such, State governments are the ‘owners’ of all water resources in the Australian context and the parties from whom authorisation is required to access the resource. Necessarily, government intervention will shape the operating environment in which the economic value of water is realised.

Key policy reforms in the context of a national approach to the management of water resources in Australia, particularly in the context of the MDB, have been enacted in the last four decades (Gardner 2018). In 1994, the Council of Australian Governments (COAG) endorsed a framework of initiatives for the water industry. This included clarifying water property rights, allocating sufficient water for the environment, and facilitating and promoting water trading. The COAG water reforms required the development of a comprehensive system of water allocations and entitlements. By world standards, the COAG framework represented ground-breaking recognition of economic and market principles in water policy.

Water reform continued through the National Water Initiative (NWI), agreed in 2004 by the COAG. The NWI is a shared commitment by governments to increase the efficiency of Australia’s water use, leading to greater certainty for investment and productivity, for agricultural industries and the environment. The NWI built upon the 1994 COAG Water Reform Framework and governments committed to: prepare comprehensive water plans; achieve sustainable water use in over-allocated systems; introduce registers of water rights and standards for water accounting; expand trade in water rights; improve pricing for water storage and delivery; and better manage urban water demands.

In May 2019, in response to the Productivity Commission’s 2017 inquiry into national water reform, the Australian Government agreed to renew the NWI. Previous adoption of water planning and entitlement frameworks COAG water reforms had created the foundations for efficient and sustainable water resource management. Water planning had established transparent processes for determining how much water is available in a system and for sharing between consumptive users (people and industry) and the environment. Water plans provide a consumptive pool which is the amount of the water resource that can be made available for consumptive use in each water system under the rules of the relevant state water plan. For the needs of the environment to be balanced against those of consumptive water users, a water plan will set an environmentally sustainable level of extraction. This is the level of water extraction from a particular system which, if exceeded would compromise key environmental assets, or ecosystem functions and the productive base of the resource.

The creation of water entitlements, separate from land, provided the secure long-term property rights that are essential prerequisites for today’s water trading and water markets (Productivity Commission 2020). Water entitlements and allocations are separate from regulatory approvals enabling use at a particular site and the operation of infrastructure to take water.

A key outcome of these reforms has been the realisation of the economic potential of water resources. Transferable rights have enabled the establishment of water markets and ultimately the trade of water within, and between, catchments, largely to support irrigated agriculture. Water trading and markets increase the flexibility of how and where water is used and have become increasingly important to water entitlement holders to adapt to seasonal variability and manage the risks of climate change. The addition of principles that support the development of water banking including water accounting, governance, regulation, operations and would build on the decades of water markets and trading experience providing new opportunities to develop drought resilience in areas such as the MDB.

4. Current regulation of MAR in Australia

Despite the above reforms, at present there are limited specific entitlement arrangements relating to MAR and water banking. There are currently no known mechanisms to be able to securely store recharged volumes for later extraction at the same or other location via a secure, exclusive property right.

Recognising this, the Productivity Commission’s 2020 Inquiry report (Productivity Commission 2020) observed that there is a lack of clarity about how alternative water sources are managed within entitlements and planning frameworks. In the case of MAR, the report noted that without exclusive property rights, secure rights to recover are not guaranteed and could not form a tradeable water right thereby reducing the incentives for investment in MAR. The report recommended that jurisdictions should improve entitlements and access rights frameworks by establishing a process to determine whether source water (including stormwater and recycled water) can be incorporated into water access entitlements frameworks. It also recommended that jurisdictions should investigate the extent to which current management arrangements create barriers to investment.

There are several characteristics associated with MAR where different types of ‘rights’ may be required including those to recharge water, access and occupy aquifer storage capacity, and to subsequently extract and trade stored water. In Australia, these ‘rights’ have generally been managed outside entitlement frameworks and instead authorised through various approvals and authorisations to recharge, store, and subsequently extract water (Table 1). For example, in South Australia this includes a permit to drain or discharge water into an aquifer, and a Notice of Authorisation and a permit to operate works to extract under the Landscape SA Act 2019 (sections 104 and 105). Additional approvals from public health and environmental regulators are also generally required.

Table 1. Summary of the current MDB state-based policy elements related to MAR (Business_Queensland 2017; DEWS 2022; DSE 2010; NSW Department of Trade and Investment RIaS 2012).

Policy	Victoria	New South Wales	South Australia	Queensland	Australian Capital Territory
Rights to recharge water	Recharge approval under s786 of the Water Act 1989 A works licence for bore operation and bore Construction Licence may also be required. Water entitlement for a MAR scheme under a take and use licence.	An aquifer interference approval is required under s91 of the Water Management Act 2000 A drainage work approval may also be required to construct and use a specified drainage work. Access licence/s required to account for all water taken from a groundwater or surface water source because of an aquifer interference activity.	Permit to construct or operate works, and to drain or discharge water into an aquifer under Landscape SA Act 2019 Environment Protection Authority (EPA) licence under Environment Protection Act 1993	Authority to take or interfere with water under Water Act 2000 Authority to construct works such as water bores or wells under Planning Act 2016.	Recharge licence under s47 of the Water Resources Act 2007 A bore work licence may be required for bore work on land
Carryover of unused water	May be permitted subject to a declaration under section 62A of the Act to authorise carryover for a MAR scheme	Undetermined	Undetermined	Undetermined	Undetermined
Transfers of recharged water	Temporary transfers are allowed for a MAR scheme at the discretion of a delegate	Groundwater access licences are transferable	No	Undetermined	No
Rights to access recharged water	Licence to take and use water from an aquifer which may require amendment under section 59A of the Act to provide for recovery water as part of the MAR scheme.	A water licence is required under the Water Management Act 2000.	Take of prescribed groundwater authorised under water licence or a Notice of Authorisation under 105 of the Landscape SA Act 2019	Water licence required to take underground water in groundwater areas subject to certain exceptions	Water access entitlement for ground water to be taken from the bore (s39 Water Resources Act 2007)
Rights to occupy aquifer storage capacity	Not separately approved from the authorisations above	Not separately approved from the authorisations above	Not separately approved from the authorisations above	Not separately approved from the authorisations above	Not separately approved from the authorisations above

In addition to the above approvals the following approvals may be required under relevant State legislation: environment protection approvals (for example to protect water quality), approvals in relation to the supply and protection of drinking water, other planning and building related approvals. Further approvals or assessments may also be required in accordance with water plans for specific water resources.

Table 1 highlights the inconsistencies in approaches to authorising MAR schemes in Australia. Some of the authorising frameworks provide secure property rights, with carryover and the ability to trade recharged groundwater and others do not. Furthermore, the complexity of navigating approval requirements defined in many State acts, regulations, guidelines, and codes of conduct across multiple government agencies adds administrative burden and uncertainty to MAR projects. There may also be additional licencing requirements and regulation for recovered water to be sold via reticulated water systems under water industry legislation. Better defined and secure property rights and more integrated and streamlined approval frameworks would increase certainty and confidence for future investment.

5. International experiences of water banking in aquifers

Water banking in aquifers has been implemented at volumetric scales of >1,000 GL at numerous locations in the USA to store excess surface water in aquifers to restore depleted water tables and for recovery during drought (Megdal, Dillon, and Seasholes 2014; Scanlon et al. 2012). Examples in California and Arizona highlight some key features of how this is set up and provide some guidance for implementation in the MDB.

Water banking has been practiced in California since the 1960s (Scanlon et al. 2012). The Arvin Edison Water Storage District in California’s Central Valley was set up to purchase water for MAR to restore groundwater depletion due to pumping for irrigation (Scanlon et al. 2016). Over several decades up to 1,200 GL was stored and drawn on during droughts in the 1970s, 80s and 90s (Scanlon et al. 2012). Surface storage is limited in the Central Valley and is needed to provide flood protection. MAR has been used to store excess flows for drought recovery and is considered an important tool to mitigate climate change driven alterations to flood and drought frequency and intensity (Scanlon et al. 2012). The Kern Water Bank, within this district in the Central Valley, operates based on the simple principle of buying and storing surface water in wet years when cheap and available for extraction during dry years when surface water is scarce, and prices are high. Irrigators buy water in unit volumes, the value of water banking in the district is evident in the order of magnitude lower prices observed during drought compared to external markets and increased reliability enabling farmers to transition to high value perennial plantings throughout the region (Scanlon et al. 2016).

The Arizona Water Banking Authority was established in 1996 in anticipation of water shortages in the Colorado River and to enable interstate water management (Megdal, Dillon, and Seasholes 2014). Arizona’s water bank consists of a range of recharge schemes varying in scale from <1 GL/y to close to 200 GL/y at the Tonopah Desert infiltration basins. The main objectives were to utilise more of the Colorado River flows when available and to build storage to satisfy State water security goals.

The Arizona Water Banking Authority management framework as discussed by Megdal, Dillon, and Seasholes (2014), includes a regulatory system which covers recharge, storage and accounting, recovery, and institutional arrangements. The establishment of the Authority as an entity allowed it to enter an interstate arrangement with the neighbouring state of Nevada to store water for future benefit (AWBA 2022). Recovery permits consider whether water will be recovered within the hydrologic zone of influence within the same calendar year it was stored or whether it is recovered after this time from any location in the aquifer (Megdal 2022). Recharge requires a permit and evaluation of hydrological feasibility of the project. This usually involves groundwater flow models to determine the extent of expected groundwater plume. It must also avoid flooding caused by rising water levels and deleterious impacts to water quality. Recharge credits can also be in lieu of recharge by foregoing groundwater use through substitution with alternative water sources (e.g. urban stormwater or recycled wastewater). These in lieu recharge credits are legally identical to direct recharge. Storage of recharged water also requires a permit. This establishes the legal right to the source water used for recharge and regulatory reporting requirements for monitoring the water banking operations, for example, water levels and water quality. This system of water accounting assures users that the recharged water can be recovered later. It also accounts for storage losses. Extended storage beyond the first year is subject to a one off 5% ‘cut-to-the aquifer’ (AWBA 2022). This water is recharged but cannot be recovered.

The regional character of the aquifer in Arizona allows for withdrawal of water in a different place to where the water was recharged. The water accounting system determines the volume of water contributing to the regional aquifer system and then authorises an equivalent amount of recovery.

Experience from Arizona indicates six general characteristics supporting the successful integration of water banking in water resource management to enhance water security (Megdal, Dillon, and Seasholes 2014):

• An acceptance that changes will be required to address future water imbalances of supply and demand and groundwater depletion, particularly related to climate change and drought.

• An availability of water for recharge either continuously or intermittently when available.

• Suitable hydrogeology, for example, extensive, regional alluvial aquifers with significant storage capacity.

• A well-established regulatory and water accounting framework with permitting, approval and compliance functions.

• Funding mechanisms that facilitate investment including support for changes to planning and management, and monitoring requirements.

• Institutional arrangements and incentives to operate.

These characteristics are discussed in the following sections in the context of the MDB and four possible conceptual implementation frameworks are subsequently proposed.

6. Characteristics that support the integration of water banking in the Murray-Darling Basin

6.1. Commitment to change and adaptive management

The need for action on water security in the MDB is well established. The Basin Plan is designed to be an adaptive management framework to be reviewed every 10 years to allow for emerging climate change patterns, new information, tools, and new techniques such as water banking to be considered. The first review will be conducted in 2026. Public acceptance of the concept of MAR or in the MDB has been gauged positively in the Namoi River region where two-thirds of respondents supported the idea (Rawluk et al. 2013). The general acceptance of MAR as a water management tool in Australia has also been documented in studies of water recycling via aquifers (Dillon 2009) and stormwater harvesting with MAR (Mankad, Walton, and Leonard 2013). The adoption of national guidelines for MAR has increased confidence in project development leading to greater implementation (Dillon et al. 2020).

6.2. Availability of water for recharge

Each of the Basin states have a system of water rights, entitlements and allocations relating surface water and groundwater. Any type of water could form a source for recharge. To date in Australia, MAR has mainly used stormwater, recycled water or water produced from mining activities (Dillon 2015). The use of regulated surface water sources, and particularly from highly allocated systems such as those in the MDB, is rare. Any current or future MAR activities using surface water in the MDB would have to operate within the limits of the environmentally sustainable level of take defined in the Water Act 2007 and the consumptive pool/s set through the sustainable diversion limits in the Basin Plan to which the States manage through specific water plans. It is assumed that all surface water in the MDB is fully allocated to either the environment or consumptive use. The mechanisms to enable transfer of water allocations exists through established water markets and corresponding State water registers. MAR would need to use existing surface water allocations either currently held or obtained through trade. Water quality would need to be considered to ensure protection of groundwater quality consistent with the Australian MAR guidelines (Natural Resource Management Ministerial Council EPaHC, National Health and Medical Research Council 2009).

6.3. Suitable hydrogeology for recharge, storage, and recovery

Across Australia, water banking has immediate potential to improve drought resilience. It is estimated that in the MDB around 4,000 GL of aquifer storage potential near major rivers could be utilised for water banking, which equates to 16% of the total accessible surface water storage (Gonzalez et al. 2020) (Figure 3). Within the river regions associated with the main productive alluvial aquifer systems in the Basin (Condamine, Gwydir, Namoi, Macquarie, Lachlan, Goulburn-Murray, Murray, Murrumbidgee) which account for around 80% of groundwater extraction in the Basin (MDBA 2020), aquifer storage potential is estimated to be in the order of about 2,500 GL (Figure 3). In a practical sense, water banking to underpin water security outcomes in the MDB would be most likely to succeed in aquifers that are already exploited and are important resources that are heavily relied on. These areas are likely to have room for additional recharge to offset intensive pumping and are generally productive and have low salinity meaning recharge, storage and recovery is more likely to be efficient. Management planning, monitoring, and reporting systems are typically well-established in these areas and could accommodate MAR within current frameworks.

Figure 3. Aquifer storage potential in unconsolidated sediments within 5 km of major rivers in the MDB, adapted from (Gonzalez et al. 2020).

6.4. Well-established regulatory and water accounting framework with good compliance; supported by water markets

For water banking to be successful, policies need to allow surface water allocations or alternative water sources to be used for recharge and include rules to govern the transmission of surface to groundwater, including recharge, storage, and recovery. This may provide for arrangements such as the following: 1) a publicly operated scheme run to improve groundwater security for all users; 2) a public or private entity securely storing water for its own use; 3) a public or private entity securely storing water that can be traded and recovered by other users within the same aquifer (Frontier Economics 2008).

The following elements are essential policy preconditions for water banking schemes underpinned by secure rights. This analysis is drafted based on an assumption of separated water rights, that is the right to an entitlement share and volume of a resource is separated from the rights to take and use that volume at a particular location. It is noted that some resources in the MDB have not been separated (unbundled) in this manner, however, it is considered that the conceptual framework below could be adapted to operate in a bundled framework.

6.5. Accounting mechanisms for recharged water within the consumptive pool/s

An effective accounting mechanism will provide a recognised capacity for alternative water sources to be contributed to a groundwater consumptive pool or pools through recharge (e.g. from existing surface water allocations, stormwater or other sources), and subsequently allocated to an entitlement. Effective and transparent water accounting should provide assurance to users of the aquifer that water banks are operating in line with their rights. This will require fit-for-purpose metering and measuring of water recharged, stored, and extracted underpinned by effective compliance and enforcement systems.

Where recharged water is sourced from existing surface water allocations, it is envisaged that a system of debits and credits will be required as water is moved from the surface water resource to a groundwater resource (and potentially returned to a surface water resource). The exchange could utilise existing systems and mechanisms to account for and register transfers via State water registers. A method of notification to the resource manager will also be required which could be formalised through transfer applications or be made through a system for verifying capacity (if needed) and crediting the volume to the relevant resource.

As water banking would operate via a system of exchanges between water resources, or adding additional supply from other sources, it is proposed that water banking would operate entirely within determined sustainable extraction limits.

6.6. Recharge attributed as defined shares within the consumptive pool

Attributing recharge to entitlements would enable users to access a share of water from a specified consumptive pool as defined in the relevant water plan. There are different methods in which recharged volumes may be attributed to users. For example, recharge may supplement reliability of all users or be quarantined to specific entitlements or authorised users. This entitlement provides a tradeable and mortgageable property right which is critical in providing exclusive rights to the user and security and certainty for investment. It is also important that recharged volumes may accumulate and remain in the resource until it is called on. For example, this may be achieved by allocating a percentage share of recharged volumes to users supported by carryover arrangements, or by providing for the basis of an entitlement to be determined by the volume of water recharged to the aquifer since the recharge activity commenced.

6.7. Guarantees of future access and use of stored water

Guarantees of future access and use would in part be provided by the groundwater entitlement and associated allocations relating to recharged volumes noted above. Guarantees would also be underpinned by rights to recharge and recover and any conditions placed on access and use.

Depending on the nature of the scheme the following rights may also be required:

• A surface water entitlement and associated allocations relating to recharged and recovered volumes;

• An ongoing share of the recharge and storage capacity of the aquifer (where there is competition for limited capacity);

• Approvals to operate infrastructure (such as well or infiltration schemes) to recharge water and to subsequently extract recharged volumes within determined operational limits.

User certainty would also stem from transparent rules that provide for allocations to recharge entitlements, carryover (if applicable) and any adjustment to recharge volumes (for example, depreciation factors to account for losses during storage).

6.8. Feasibility and risk management framework

A key consideration in defining rights under banking schemes noted above is to ensure that these rights do not result in adverse third-party impacts on the resource, new or existing groundwater users or the environment.

Feasibility and risk management considerations would need to be embedded into the relevant water plan and the associated approvals framework for the scheme. Prior to commencement of any scheme this would include:

• Feasibility assessment, risk assessment and risk management plan tailored to the scale and risk of the MAR scheme (Natural Resource Management Ministerial Council, 2009)

• Assessment to ensure the quality of recharged water does not adversely affect the environment or public health outcomes (Frontier Economics (2008))

• Assessment to ensure risks to the resource, new or existing groundwater users or the environment are appropriately managed. These risks would be assessed and managed via regulatory approvals or rights to conduct the scheme and may include:

• appropriate buffers so that recharged or extracted volumes do not intersect other groundwater users;

• Limits on recharge or extraction to ensure the scheme does not adversely affect aquifer pressures or levels;

• Ensuring groundwater dependent ecosystems are not adversely affected.

• Assessment to ensure water banking infrastructure is appropriately designed, operated and maintained (managed through regulatory approvals for works, for example, to drill and operate well or operate surface water diversion structures).

Risk management would also need to be reflected in arrangements during the operation of the scheme including:

• Metering and reporting of volume of water recharged for accounting purposes supported by transparent register of credits and debits;

• Monitoring and reporting e.g. water flow and quality at regular intervals;

• Penalties for breaches of scheme rules (e.g. if water recharge or extraction limits exceeded);

• Infrastructure maintenance requirements.

Ideally these approval and risk management frameworks should be integrated as far as possible to minimise red tape and facilitate water banking activities through a streamlined process.

7. Funding mechanisms that facilitate investment

Government has a role in funding the development of policies that enable MAR in Australia’s MDB. Federal funding to support development of a nationally consistent framework would enable State-level efforts to be aligned. Combinations of federal, state, and local government-level funding, possibly in partnership with private investment where appropriate, could support development of demonstration sites to act as precursors for fully operational schemes, building knowledge, confidence, and robust operational and regulatory frameworks. For the long-term economic sustainability of schemes, some model of cost recovery is required depending on the framework considered. The Arizona example is demonstrative of the type of funding arrangements required to enable adoption. Several sources were made available including a tax assessed across the service area, a pumping fee and State-level appropriation funding. As of 2021, the Arizona Water Banking Authority had accumulated around 5,390 GL in long-term storage credits (AWBA 2022).

8. Institutional arrangements and incentives

Under the NWI (paragraph 74), foundational best practice institutional principles were set including that as far as possible, the roles of water resource management, standard setting and regulatory enforcement, and service provision should be separated.

This means that institutional responsibilities of regulators, service providers (public or private) and regulators of service providers should be separate. The regulator of service providers has an important role in managing monopoly providers, protecting customer rights, and ensuring rights are protected against competitors.

Under Paragraph 92(iv) of the NWI, the Parties to the NWI also agreed to undertake ‘a review of the institutional and regulatory models for achieving integrated urban water cycle planning and management’. A review by Frontier Economics (2008) conducted for the purposes of this clause identified that wider adoption and more efficient use of alternative water sources ‘has often been blocked by institutional and regulatory impediments rather than technical or financial ones – potentially including the entitlements arrangements’.

Appropriate institutional frameworks are critical to successful implementation. Best practice institutional design principles have been outlined that include (Frontier Economics 2008):

• organisations should have clear and consistent objectives and obligations;

• policy, regulatory and service delivery roles should be structurally separated; and

• organisations should be incentivised to achieve their objectives, for example, through appropriately defined regulatory responsibilities and funding sources.

The key institutional arrangements to implement water banking through MAR should therefore encompass three main functions. Firstly, policy functions responsible for determining strategic policy positions, introducing, and administering legislative and water resources planning and management functions, and licencing or permitting banking activities. Secondly, regulatory functions responsible for monitoring, enforcement and compliance functions that may include a level of technical regulation to ensure the safety, reliability, and quality of services. Thirdly service providers which may be private or public institutions to deliver water banking services to customers. Where cost recovery is via the provision of water industry services (e.g. through a reticulated system) it will be important to ensure cost recovery is fair and transparent, and services are delivered to appropriate standards.

9. Four possible conceptual frameworks for water banking implementation

Four conceptual frameworks have been identified for how water banking through MAR or conjunctive use of groundwater and surface water may be implemented in the Murray Darling Basin. Table 2 details the key elements of each framework including rights and approvals for users, and resource management (wholesale) accounting mechanisms needed for each framework to operate effectively and minimise impacts on third parties. Each framework has merit depending on the outcomes and objectives sought and the context in which the scheme is to operate. The frameworks are not mutually exclusive and may be combined to optimise outcomes for users and the environment. It is envisaged that these frameworks may be used as a tool to guide discussions on what water banking arrangements may be suitable and appropriate in the context of different systems by resource managers and other key stakeholders. A key next step will also be to test these frameworks in the context of different State policy and regulatory frameworks to determine the extent of any changes needed to accommodate them.

Table 2. Four frameworks for the implementation of water banking through MAR in the MDB.

	Framework 1	Framework 2	Framework 3	Framework 4
	Water banking to supplement existing entitlement holders’ supply	Water banking for productive, water quality or other environmental outcomes	Water banking for individual or collective use or trade	Water banking via conjunctive use of surface and groundwater
Recharge water	Existing surface water allocation or alternative water source (e.g. stormwater/recycled water)	Existing surface water allocation or alternative water source (e.g. stormwater/wastewater)	Existing surface water allocation or alternative water source (e.g. stormwater/wastewater)	Carryover of unused groundwater allocation or surrender of surface water allocation in lieu of groundwater allocation
Wholesale accounting associated with recharge	Debit recorded against surface water consumptive pool or alternative water source and credited to groundwater consumptive pool. Banked volume debited from recharge storage capacity of aquifer.	Debit recorded against surface water consumptive pool or alternative water source and credited to resource available to meet the needs of the environment. Banked volume debited from recharge storage capacity of aquifer.	Debit recorded against surface water consumptive pool or alternative water source and credited to designated groundwater recharge consumptive pool (quarantined from other existing consumptive pools). Banked volume debited from recharge storage capacity of aquifer.	Unused groundwater allocation credited to groundwater consumptive pool as carryover volume and/or debit recorded against surface water consumptive pool and credit to groundwater consumptive pool (in case of surrender)
Retail level actions associated with recharge	Application to recharge by resource manager	Application to recharge by resource manager	Application to recharge by resource manager	Default carryover or water user application to carryover unused groundwater Water user application to surrender surface water allocation in lieu or grant of groundwater allocation
Groundwater rights	Existing groundwater entitlements (expressed as a percentage share of the volume banked) Allocation (noting recharge supplements reliability of allocations to existing entitlements) Recharge entitlement (providing ongoing right to recharge to finite aquifer storage capacity) Recharge allocation (providing annual right to utilise recharge capacity considering resource condition)	Entitlements not applicable as water supplements water available to meet the needs of the environment. Recharge entitlement (providing ongoing right to recharge to finite aquifer storage capacity) Recharge allocation (providing annual right to utilise recharge capacity considering resource condition)	Designated recharge entitlements (separate to existing user entitlements). Entitlement may be expressed as the volume of water recharged to the aquifer since the recharge activity commenced. Allocation less any loss factor Recharge entitlement (providing ongoing right to recharge to finite aquifer storage capacity) Recharge allocation (providing annual right to utilise recharge capacity considering resource condition)	Existing groundwater entitlement with associated right to carryover, and/or grant of groundwater allocation in lieu of surrendered surface water allocation
Retail level actions associated with extraction	User metering or extraction limit (must not exceed maximum extraction volume) Authorisation to take water Potential conversion of groundwater to surface water allocation for trade Potential water industry licensing to retail extracted water	Not applicable as water for productive, water quality or other environmental outcomes	User metering or extraction limit (must not exceed maximum extraction volume) Authorisation to take water Potential conversion of groundwater to surface water allocation for trade Potential water industry licensing to retail extracted water	User metering or extraction limit (must not exceed maximum extraction volume) Potential surrender of groundwater allocation in lieu of surface water allocation Potential water industry licensing to retail extracted water
Wholesale accounting associated with extraction	Debit recorded against groundwater consumptive pool and credit to surface water consumptive pool (if required). Extracted volume credited to recharge storage capacity of aquifer.	Not applicable as water retained in aquifer for productive, water quality or other environmental outcomes.	Debit recorded against groundwater consumptive pool and credit to surface water consumptive pool (if required). Extracted volume credited to recharge storage capacity of aquifer.	Debit recorded against groundwater consumptive pool and credit to surface water consumptive pool (if required).

9.1. Framework 1: MAR to supplement existing entitlement holders’ supply

A scheme enabling surface water recharge to add to the volume of groundwater available for consumptive use, which could supplement (increase) the reliability of existing entitlement holders’ allocations. Recharge may occur when surface water is plentiful and/or at low cost, or when there is a public benefit driver justifying action to supplement water availability. This would change the characteristics of existing groundwater entitlements (their reliability is increased).

At a small scale, such an arrangement may involve recharge within a consumptive pool defined at a management zone level, with volumes shared between existing entitlement holders within the consumptive pool (Stewart and Green 2022). At a large-scale, this may be conducted at a resource scale with volumes shared between all existing consumptive users. For example, this may be by a bulk water utility or resource manager to benefit all users of a system. Such an arrangement may be considered analogous in principle to schemes whereby additional prescribed, treated, or desalinated water is pumped to supplement water available to irrigation dependent communities such as the Barossa or McLaren Vale in South Australia.

Such a scheme may provide a cost-efficient method to augment drinking or irrigation water supply and enhance the reliability of groundwater supplies to all users, particularly during drought. Furthermore, such augmentation may avoid the need for reductions or other restraints put on consumptive water users where a groundwater resource is overallocated or extraction is close to the extraction limit.

Careful consideration of this approach would be needed in terms of its impact on existing property rights, and where they exist, water markets, as it would alter the characteristics of these rights, by increasing the reliability of supply (or removing the risk of restrictions on extraction). It is further likely that there would be no or low incentives for private investment in such a scheme due to the lack of security of access to stored water. As such this model would need to be driven by government or a bulk water utility with public service obligations. Banked water would also be subject to water management rules such as principles for allocation applicable to the consumptive pool which may not be fit for purpose for recharge volumes, for example, allocation principles may not appropriately account for loss factors for banked water.

For Framework 1 where banked water augments the security of all users within a management area, a type of levy or tax applied to water licences or properties within the area could be applied similar to the model followed by the Arizona Water Banking Authority (Megdal, Dillon, and Seasholes 2014).

9.2. Framework 2: MAR for productive, water quality or other environmental outcomes

A scheme enabling surface or other alternative water sources to be used to recharge groundwater to improve the productive capacity of the resource or achieve other environmental outcomes. For example, recharged volumes may help to manage water salinity, water table levels, or deliver other environmental or ecological outcomes to water-dependent ecosystems. Recharged water may be attributed to non-consumptive water comprising a water resource and may be targeted to local or resource-scale outcomes.

Such a scheme may be implemented to complement water banking outcomes under other frameworks. For example, in the Angas Bremer managed under the Eastern Mount Lofty Water Allocation Plan, water users have recharged surface water to the underlying aquifer to manage groundwater levels and salinities, thereby managing the productive capacity of the resource. A different complementary approach may involve a percentage of banked water for consumptive use being set aside for environmental outcomes.

For Framework 2 where recharge is primarily for environmental benefit schemes are most likely to be run by government for societal benefits and values associated with the protection and improvement environmental assets. Innovative financing mechanisms could involve payment for ecosystem services (Jiménez et al. 2020). Exceptions may apply where certain land uses, e.g. mining, require protection of groundwater-dependent ecosystems from impacts (e.g. dewatering) and costs would be absorbed by the project as part of a licence to operate as in some of the large iron-ore mine in Western Australia (Cook et al. 2022).

9.3. Framework 3: MAR for individual or collective use or trade

A scheme enabling surface water to be used to recharge groundwater that is quarantined to a specified recharge consumptive pool. Recharge would occur when surface water is plentiful and/or at low cost.

At a small or local scale this approach may involve recharge by individual/s or a small-scale service provider on behalf of specified beneficiaries such as irrigators at a cost for later extraction or trade. The approach could also be scaled for delivery to allow banked water to be sold to users who can extract it at other locations using the aquifer as a delivery system.

Importantly because the recharge volumes are attributed to a specified recharge consumptive pool, the associated recharge entitlement provides a secure tradeable right to the banked volumes. As a result, it is likely that this model would be more attractive for private investment but may also be delivered under a public scheme. Specific rules relating to the determination of recharge entitlements, allocation or carryover of banked water could be set relating to the recharge consumptive pool. Other economic benefits may stem from the development of markets in recharge entitlements and private investment in infrastructure and service delivery of such schemes.

The system run by the Arizona Water Banking Authority outlined previously acknowledges direct recharge of water to the aquifer and in lieu recharge through foregoing groundwater use in substitution with alternative water sources (e.g. urban stormwater or recycled water) (Megdal, Dillon, and Seasholes 2014).

In Framework 3 where recharge is for individual or collective use or trade, cost recovery could take the form of tradeable water allocations that cover the cost of recharge, storage, and supply (where conveyance is needed). In cases where recovered water is reticulated and delivered to a customer through a metered connection, a retail model analogous to conventional supply by water utilities may be applicable as exemplified by the Salisbury Water stormwater harvesting scheme north of Adelaide, South Australia (Radcliffe et al. 2017).

9.4. Framework 4: conjunctive use of surface and groundwater

Conjunctive water management is defined as ‘an approach to water resources management in which surface water, groundwater and other components of the water cycle are considered as one single resource, and therefore are managed in closest possible coordination, to maximise overall benefits from water at the short and at the long term’ (van der Gun 2020). There are different approaches in which conjunctive water management arrangements may be implemented. For example, a water user or water banking authority/entity may hold separate groundwater and surface water entitlements but substitute use from these sources up to a maximum volume, e.g. in the Three Moon Creek water supply scheme and the Upper Ovens River (Queensland Competition Authority 2021; Walker et al. 2021). Alternatively, the same parties could hold combined groundwater and surface water entitlements and be permitted to alter the percentage of use from each source. The latter concept is problematic given the absence of fully integrated water plans and regulatory frameworks for groundwater and surface water resource (Productivity Commission 2021) and is not explored further in this paper.

Generally, under a conjunctive use framework, surface water would be taken during wet periods when it is readily available, and groundwater would be taken during dry periods. Water banking outcomes could be facilitated by permitting carryover of unused groundwater volumes. In this context, the opportunity to build future water security stems from foregoing use of groundwater and retaining that water in storage. Additional benefits may come from combining conjunctive use arrangements with banking arrangements, e.g., under Framework 3. This would provide flexibility for users to manage their supply risk through multiple strategies (carryover of unused groundwater and/or recharge of surplus surface water) and provide associated benefits of enabling users to take from the cheapest or most productive water source in response to their needs and prevailing conditions.

10. Conclusions

Significant potential for water banking through MAR in the Murray Darling Basin has been identified, however, there is a lack of clear policy and institutional frameworks to incentivise implementation. Some existing MAR schemes in operation in Australia have similarities with the concept of water banking although their regulations are fragmented and generally managed outside of water entitlement systems. There is a lack of clarity about how surface water and groundwater resources can be conjunctively managed and used incorporating managed recharge and aquifer storage.

Drawing on international experience, several general characteristics supporting the successful integration of water banking are discussed and four possible conceptual frameworks to implement water banking are identified. With the right conditions in place including but not limited to hydrological, regulatory, institutional, and financial arrangements, each potential framework has merit depending on the outcomes and objectives sought for the water resource, environment, and users of the resource. These different potential water banking frameworks require further consultation and testing in the context of different water resources and regulatory systems.

To further encourage adoption and investment in schemes for supporting consumptive use, there is a need to better define property rights and support schemes within more integrated water regulatory and planning frameworks. This includes providing for stored water to form part of consumptive pools with recharged volumes attributed to entitlements, and in high-risk settings such as where there is competition for limited aquifer storage capacity, defining secure rights to access and utilise this storage capacity. Approval requirements for water banking MAR schemes should also be consolidated where possible to reduce administrative load and facilitate start-up through more streamlined processes but be balanced with appropriate safeguards to protect third parties and the environment.

For enabling water banking through MAR or conjunctive use as part of future basin plans, a national policy framework would give States a consistent approach for defining appropriate State policies and integration with specific water resource plans. Frameworks will need to accommodate different scales and objectives of water banking schemes and appropriate institutional arrangements including whether schemes are delivered by private interests, public authorities, or combinations thereof.

Demonstration projects will enable policy and institutional arrangements to be defined concurrently with the development of real schemes and provide critical experience in scheme implementation that can serve as models for wider adoption as part of future Basin Plans.

Acknowledgements

Declan Page thanks the Winston Churchill Memorial Trust and the University of Queensland Policy impact Program for useful feedback, Dr Jennifer Yarold for assistance with the figures and Dr Peter Dillon and Dr Jane Doolan for discussions on water banking policy.

Disclosure statement

No potential conflict of interest was reported by the author(s).