Val Shopping: Barnaby Joyce department paid 57 times over for #watergate rights

by | Nov 8, 2020 | Energy & Environment

New documents reveal a valuation of just $1.4 million for the water rights sold by Angus Taylor’s old company to Barnaby Joyce’s department. Unfortunately, the government was guided by a later, far higher valuation for the controversial water rights. Jommy Tee’s latest investigation is further compelling evidence of the drastic need for a federal corruption commission with teeth.

The department responsible for the Barnaby-Joyce inspired water buybacks rejected a valuation that valued the water holdings at one-fiftieth of what the government eventually paid for the buyback.

It makes the 10 times valuation paid in the recently exposed Leppington Triangle land scandal, now the subject of a federal police probe, look like a bargain.

The department responsible for overseeing the $80 million water buybacks from Eastern Australia Agriculture (EAA) also failed to obtain a specific valuation of the water licences, according to documents obtained under Freedom of Information.

Eastern Australia Agriculture (EAA) was established by Energy Minister Angus Taylor. Taylor has consistently stated his involvement with the company ceased before he entered parliament.

Furthermore, EAA had self-valued its entire water holdings (some 67,000 ML) at $79.5 million, yet the government paid $80 million for less than half of that holding (29,000 ML of overland flow entitlement). This self-valuation was contained in EAA’s financial report filed with ASIC on Christmas Eve 2016. The water entitlements the government bought were also considered more unreliable overland flow water.

And if the Australian Government solicitor had read this financial report, the government would have discovered that EAA’s parent company was Eastern Australian Irrigation. EAI was registered in the tax haven of the Cayman Islands.

The department has advised Michael West Media that the Australian Government Solicitor conducted a variety of searches on behalf of the department as part of due diligence, including from ASIC, but this “did not include obtaining or reviewing the self-declared value of water holdings relative to the proposed contract value”.

Barnaby’s Boondoggle: documents reveal $80m price for ‘Watergate’ licences was nearly twice valuation

The department had ample time to access the financial report before finalising negotiations for the July 2017 purchase.

It has been more than three years since the water buybacks were concluded but it is only through Freedom of Information documents that a clearer picture is emerging of what a debacle the process was. Just more evidence of how desperately the Australian public needs a federal integrity commission with teeth, yet the government is insisting on its “feather duster” bill.

According to FoI documents, the Department of Agriculture Water and Environment (DAWE) relied on generic valuations of the water holdings done for another program, the Queensland Healthy Headwaters program. The department also rejected earlier valuations from the Healthy Headwaters that would have valued the water at an astonishing 57 times less than what the government actually paid for it.

The department has confirmed that the primary valuations, undertaken by Colliers International, to justify the water buyback were “originally obtained to inform the price for any overland water flow projects under the Healthy Headwaters program”.

However, FoI documents show that just weeks before commissioning Colliers to undertake that valuation, the department had rejected valuations by Opteon that would have valued EAA’s overland flow water entitlements at a mere $1.4 million.

Colliers revalued the water entitlements at approximately $45 million. Despite this, the government still managed to pay $80 million – 57 times more than Opteon’s valuation for the same type of water in the same region.

In its briefing to Minister Joyce, the department claimed the premium price paid was “within the range of independent advice and represents value for money at the seller’s nominated price”.

Valuation shopping

How did this come to pass? In June 2016, the department commissioned Opteon to provide six water entitlement valuations for various Queensland regions as part of its Healthy Headwaters program. The valuations were usually presented as a dollar per megalitre figure ($/ML).

In early August Opteon valued the Condamine Balonne overland flow water, the region that corresponds to the water entitlements held by EAA, at $50/ML. That figure would have valued EAA’s 28,740 ML overland flow water entitlements at a minuscule $1.4 million.

Almost immediately the department queried two of the six valuations – the Condamine Balonne overland flow water entitlements and Warrego unsupplemented water entitlements – the very same areas where the government eventually pursued its Queensland water buyback process.

Opteon’s valuations were rejected because of a large discrepancy between those valuations and earlier valuations submitted by Colliers International in April 2016. Colliers’ earlier estimate valued the overland flow water in the Condamine Balonne region at a significantly higher $1,650/ML.

Colliers delivered the new valuations in late September 2016.

Because the department didn’t finalise the buybacks in time, Colliers was asked in March 2017 to update its valuation. As the FoI documents reveal, Colliers settled on a rate $1,500/ML for the overland flow water, valuing EAA’s overland flow entitlements at $45 million.

Government outwitted

Whether you take the Opteon valuation, the Colliers valuation, or EAA’s own fair value price lodged with ASIC, the government was well and truly outwitted, paying anywhere from double to 57 times more than the estimated value of the overland water entitlements.

In all the material the department tendered to Senate estimates, Senate orders for publication, and other FoI requests, MWM has not found any reference to Opteon’s valuations in any briefing to then Minister Barnaby Joyce.

The briefings only ever contained a recommended maximum purchase price.

The department in responding to a question on notice by Senator Rex Patrick stated the purchase price was above “standard market value range, but below the maximum price the independent valuer advised” should be paid.

What did the ANAO say?

The Australian National Audit Office in July this year tabled a report into the purchase of strategic water entitlements.

The report noted that the arrangements to support the strategic purchases of water through limited tender “were not fully effective”; that the department did not consistently apply approved policy, planning and guidance to the assessment of all limited tender procurements; and that the department did not develop a framework to maximise value for money.

Guess who’s coming to dinner? Glencore, Peabody and BHP

ABOUT THE AUTHOR

Jommy Tee

Jommy Tee

Jommy Tee is a long-time career public servant, having worked in the policy development field for 25+ years as well as an independent researcher interested in politics, current affairs, and Nordic noir. You can follow Jommy on Twitter @Jommy_Tee.

6 Comments

  1. Avatar

    Repeated evidence of corruption and or ineptitude from our Federal Government, means nothing when it doesn’t reflect in Police action.
    We all know this current Federal Government on the surface appears to be the most blatantly corrupt Government we’ve ever endured since Federation, maybe Joh Bejlkie-Peterson’s excepted, but that’s rapidly becoming open to debate.
    Until Murdoch turns on this #LNP Government, expect the Status Quo to remain. We have a complicit media, afraid to stand up under threat of their job, status, & whatever. Positive stories against the government narrative have seen Journalists threatened, so they cave in to the threats.
    If all Journalists were to publish the threats they had received on the same day, detailing the source of the threat, would it make a difference? Only if they showed strength of caricature that’s currently missing.

  2. Avatar

    I have just read the 2017 federal government annual report department of agriculture water and environment pdf format.
    Commencing at page number 61 in the below link, one will find very little reference is held therein that promoted the legality of the Angus Taylor launched EAA business, then that he had registered this outfit in the Cayman Islands. (As has been stated) https://webarchive.nla.gov.au/awa/20171113005116/http://www.agriculture.gov.au/about/reporting/annualreport/2016-17

    The minister that held this portfolio was none other than Barnaby Joyce.

    During this minister’s tenure the Darling River had been denied its annual environmental river flows, in fact the Darling River had ceased to flow. Nor did he responsibly pursue the 2 objectives mentioned just below.

    Objective 1: Improve the environmental health of the Murray–Darling Basin
    consistent with national and international obligations by recovering water,
    including by prioritising water-saving infrastructure projects.
    Objective 2: Help communities, irrigators and businesses to use water resources
    sustainably and efficiently consistent with nationally agreed water reforms.
    Despite all the above and all the roles he had pledged to undertake, he had failed.
    Yet this same person is still on the Federal government payroll.

    Notwithstanding that the L/NP party government had breached the Commonwealth Constitution Act 1900, for they had abridged the right of the people to have clear access to the flowing waters in all Australia’s Rivers and Streams. [EG the Darling River.]
    Nor does this L/NP party government in itself…govern in the best interests of the Australian people.
    I myself have lost all faith in the L/NP mobsters as they are not at all a bonafide responsible government party.

  3. Avatar

    here’s some words from a leading proponent of liberalism, John Kenneth Galbraith –

    ‘The modern conservative is not even especially modern. He is engaged, on the contrary, in one of man’s oldest, best financed, most applauded, and, on the whole, least successful exercises in moral philosophy. That is the search for a superior moral justification for selfishness.’

    https://medium.com/being-liberal/searching-for-a-superior-moral-justification-for-selfishness-a39a6541e8a9

  4. Avatar

    It is just astounding that government money can go to friends of a Minister, without the Minister playing any part in the negotiations or approvals.

    Too many coincidences involving the scandal prone Taylor.

  5. Avatar

    Excellent article on a very serious topic.

  6. Avatar

    When a Federal Minister in Government is a party to a Tax Haven account, you just know he’s up to no good. And details outlined in this article DEMAND a Full Investigation by the Federal Police
    But, with Scomoccio as PM, I bet it wont happen……”Nothing to see here folks”…….!

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