The same commercial property consultant who wrote the valuation used by the Federal Government to pay Eastern Australia Agriculture (EAA) nearly $80 million for its water licences valued at zero the same type of water owned by two nearby southern Queensland cotton farms.
As Michael West Media reported on Tuesday, most of the record $80 million from the sale ended up with a Cayman Islands company established by Energy Minister Angus Taylor, Eastern Australia Irrigation (EAI). Taylor was the founder of the Caymans company and a director and consultant to its Australian associate EAA, both before the controversial $80m water sale in 2017.
Barnaby’s Boondoggle: documents reveal $80m price for ‘Watergate’ licences was nearly twice valuation
Eastern Australia Agriculture booked a $52 million profit immediately after selling the water licences belonging to its Clyde and Kia Ora cotton properties, in a the deal, which was overseen by then water minister Barnaby Joyce.
Shaun Hendy, the Colliers International valuer who in 2016 conducted the valuation of the EAA properties on behalf of the Federal Department of Agriculture and Water, had previously valued at zero the overland flow licences belonging to two properties near the Kia Ora and Clyde stations.
In a research report this week, Maryanne Slattery of Slattery & Johnson and Rod Campbell of The Australia Institute said the unredacted documents proved the Commonwealth paid too much for the water.
Local farmer under financial pressure
Under financial pressure in 2008, Queensland farmer Lawrence Pola had several valuers assess his water licences that were attached to the Kilcummin and Cawildi stations, located above Cubbie Station in the Lower Balonne valley.
One of the valuers was Mr Hendy, who then worked for CBRE. He agreed with another valuer that Pola’s overland flow licences had no value separate from the land.
“The licence does not comprise a tradeable component and has been correctly identified … as being attached to the land and as not having a value separate to the land,” his 2010 CBRE valuation stated.
Mr Pola says he was “stunned” by the subsequent $80 million purchase of licences from Eastern Australia Agriculture.
“It’s a cover-up,” says Mr Pola, who was forced off his properties in late 2009. “They’ve justified the EAA deal by saying the system has been changed to allow the sale of overland flows.’’
Overland flow licences ‘worthless’
Queensland’s overland flow licences in the Murray Darling Basin cannot be traded on the open market because they are attached to land. Many valuers regard them as “worthless” when separated from land because the floodwaters can be taken by other water users once flows leave the property.
But in 2016 Queensland amended the law to allow the Federal Government to purchase overland flows under the Basin Plan, making the Commonwealth the only buyer in town. By way of comparison, in 2014 the Commonwealth purchased overland flow licences from the nearby Balandool cotton property south of Kia Ora and Clyde for $800/ML, less than a third of the price it paid to Eastern Australia Agriculture.
A spokesperson for the Queensland’s Department of Environment, Mines and Energy said:
“The Commonwealth Environmental Water Holder was recognised under the Water Regulation 2016 as a ‘prescribed entity’ which can acquire and hold a water licence without owning the land. This has allowed the prescribed entity to acquire water licences from sellers, which has the effect of returning water to the environment.”
Queensland’s Department of Environment, Mines and Energy did not consider the buying of the licences a water trade.
The Coalition presented the taxpayer-funded deal with EAA to the public as a way of returning water to the ailing Murray Darling River system. But there are serious doubts the overland flows bought from the Kia Ora property have benefited the river system due to the high level of irrigation development downstream from the property.
Hendy warned the Federal Government about these risks when it was considering buying EAA’s water licences. He stated in the Colliers valuation:
“Depending on the location of a licence within the catchment, the acquisition of these rights to restrict the taking of water with the intent of providing more water for environmental purposes may only increase the opportunity for a water harvester downstream to increase their take.”
The Kia Ora operation near St George in southern Queensland is located above the Cubbie and Balandool cotton operations.
An unredacted copy of Hendy’s valuation when he conducted the EAA valuation for the Department of Agriculture and Water while working for Colliers International shows a valuation range of $1,100 to $2,300/ML, with a central estimate of $1,500/ML for licences attached to the Kia Ora and Clyde properties. Yet the Commonwealth paid $2,745/ML, nearly double the valuer’s central estimate.
Guardian Australia reported last year that a year before Colliers provided that valuation for the department Colliers was acting as agent for EAA to sell the properties.
“Colliers International has the pleasure of offering to the market one of Australia’s largest premium agricultural land and water portfolios; the Eastern Australia Agriculture portfolio consisting of the Kia Ora and Clyde properties in Australia,” it said on its LinkedIn page in September 2015.
‘No true market’
A spokesperson for the Department of Agriculture, Water and the Environment said “the department should be prepared to pay 10 to 30% above the standard market rate (i.e. up to $3,000/ML) for ‘properties of a high standard that have achieved above average levels of water use efficiency’ in this region”.
But as water specialist Maryanne Slattery’s analysis shows, the term “standard market value range” does not appear in the Colliers valuation document. In fact, that evaluation emphasises “there is no true market” for Queensland’s overland flow licences.
The Commonwealth paid an extraordinary premium to Eastern Australia Agriculture for water licences described by Colliers’ valuer Shaun Hendy as “lower valued” water that could be taken by other “harvesters”.
This Watergate scandal has a long way to run yet.
Gutless Wonders: when will politicians demonstrate the accountability they foist on the rest of us?