Adept Economics Director Gene Tunny has been involved in the Queensland Government’s ongoing detailed business case process into repairing Paradise Dam in the Bundaberg region. The detailed business case will inform the state government’s decision on the future of the dam. The process is anticipated to wrap up by the end of 2021. Many growers and businesses in the region are eagerly awaiting the outcome.
Gene has been involved in the Paradise Dam Industry Forum’s working group on economic assumptions at Sunwater’s invitation, after having previously completed an analysis of the economic costs of inaction on Paradise Dam for Bundaberg Council and grower groups, as discussed below. Sunwater is the state government’s irrigation water business and is the operator of Paradise Dam.
Paradise Dam is located on the Burnett River south-west of Bundaberg and was built in 2005. It made headlines in 2019 when Sunwater announced it would be releasing 100,000 ML (i.e. 40,000 Olympic-size swimming pools) from the dam due to safety concerns resulting in the dam’s spillway being considered completely inadequate. This was almost two years’ worth of water supply. Subsequent to this, in 2020-21, Sunwater lowered the dam wall by over 5 metres as an emergency measure. The detailed business case is currently investigating whether to maintain the primary spillway height at the level of essential works, restore it to its full capacity, which is preferred by regional stakeholders, or to replicate its previous yield by boosting and exploring alternative water supply options.
Current situation
Paradise dam is currently operating at approximately one third of its capacity. Farmers in the region are receiving extremely low water allocations of only 22 percent for the 2021-22 financial year. Many in the region are calling on the state government to restore Paradise Dam to its full height, as they consider it is very important in safeguarding the reliability of irrigation water supply in the region. This has resulted in some growers reportedly being forced to remove trees to reduce water usage. Bundaberg avocado grower Matthew Kingston stated that he didn’t know anyone who would not be considering removing trees since most people will run out of their water allocation by September.
Bundaberg region farmers and business owners have raised more than $1 million to fund a class action against the Queensland Government and Sunwater, as farmers in the region could be facing historically low water allocations. The class action illustrates the importance of the dam to growers in the region and the concern many stakeholders have about dam levels being lowered. The class action identified more than 650 directly affected water allocation holders.
High cost of inaction on Paradise Dam
In 2019-20, Adept Economics, in conjunction with QEAS, was commissioned to study the economic costs of inaction on paradise dam by Bundaberg Regional Council, Wide Bay Burnett Regional Organisation of Councils, Regional Development Australia Wide Bay Burnett, Bundaberg Canegrowers, Canegrowers Isis, and Bundaberg Fruit and Vegetable Growers.
The study concluded that the cost of inaction on Paradise Dam would be approximately $2.4 billion over the next 30 years. The study concluded that not restoring the dam wall would compromise future investment and income-generation from high-valued crops such as macadamias and avocados. Additionally, the long-term social costs of inaction include social problems such as mental health arising from financial stress.
There are potentially huge repercussions of inaction on Paradise Dam across the entire area, affecting not only farmers but also suppliers, harvesters, and local businesses. A survey of businesses in the area by Adept Economics and QEAS found that 92 percent of those surveyed indicated that Paradise Dam was extremely important to their business.
Controversy
The lowering of the dam wall has been a controversial and contentious issue in the region. Queensland Government Regional Development Minister Glenn Butcher demonstrated why the decision was made to bring the wall down. Concrete blocks supporting the dam wall were not bonded together properly, which could result in the wall collapsing during a big rain event. Bundaberg MP Tom Smith suggested that the government could not risk the lives of 9,000 people downstream from the dam.
Minister Glenn Butcher stated that he has put pressure on the department to deliver the business case by the end of the year with the preference for the dam wall to be restored. The state government has stated that they will guarantee irrigation water supply for the region. However, the future of the dam depends on the findings of the detailed business case being coordinated by the state government, with economic analysis undertaken by its consultant NCEconomics.
The state Opposition spokesperson for Water and the Construction of Dams Deb Frecklington states that farmers in the region deserve certainty on where the future water for their crops will come from. She has warned that without the dam returning to its original capacity, it would cost $2.4 billion (i.e. Adept Economics’ estimate) and many regional jobs. Bundaberg Regional Council’s Executive Director Ben Artup revealed that preliminary estimates to be refined by Sunwater suggest that restoring the dam to its full capacity would cost $800 million which could be considered a worthwhile investment resulting in saving over $2.4 billion.
Where to from here?
Overall, the recent substantial reductions in water allocations for those in the region reinforce the urgent need for the Queensland Government to wrap up the detailed business case and come to a timely decision regarding the restoration of Paradise Dam to its previous capacity.
For further information, please contact Adept Economics by emailing us via contact@adepteconomics.com.au or call us on 1300 169 870..
Gene has also discussed business cases for public infrastructure projects with a particular focus on Paradise Dam in episode 85 of his Economics Explored podcast.