EXPLAINED: Economist talks up Rookwood Weir's business case
WITH the Queensland Government on the verge of releasing the business case for Rookwood Weir, the CQ region is on tenterhooks waiting to see if will proceed.
The Rookwood Weir project (also known as the Lower Fitzroy River Infrastructure Project) not only has the potential to provide the CQ region with water for urban, industrial and agricultural uses but would also provide invaluable water security, employment for thousands and a $1 billion boost to the local economy annually.
Since the Rookwood Weir project (also known as the Lower Fitzroy River Infrastructure Project) was first promised by then-Premier Peter Beattie in 2006, it has crawled slowly through the necessary bureaucratic processes towards a final government decision on its economic viability.
CQUniversity's economics professor John Rolfe said an agreement between federal and state governments in the mid 1990s, that meant that the federal government would no longer fund water infrastructure projects if they weren't financially viable.
Consequently, a business case considering the economic benefits and financial costs in addition to social, environmental and sustainability impacts was required to be conducted for the Rookwood Weir project.
Commencing in October 2016, after a federal contribution of $2m, Building Queensland and the joint proponents, SunWater and the Gladstone Area Water Board, developed the business case which was submitted to the Queensland Government in October 2017 - just prior to the state election being called.
Key considerations in the business case included water demand, water pricing, funding and financing models, delivery and operating models, and costs, risks and benefits associated with the proposed infrastructure.
Queensland's Energy Minister Dr Anthony Lynham said he wanted to ensure Queensland taxpayers were getting value for money when he makes a decision and publicly releases the business case for the Rookwood Weir project.
"I will release the business case this month, and the taxpayers of Central Queensland will be able to do the sums themselves," Dr Lynham said.
Professor Rolfe said once the business case was released, didn't mean that the project would automatically go ahead.
"I think there's a couple of steps yet before it's really done and dusted,” Mr Rolfe said.
"The business case is probably the last big hurdle, that's why it's such a big story.
"If it comes out and its positive, the rest of it's dealing with the bureaucracy almost.”
He said the more interesting outcome will be if it comes out and it's weakly negative or if it's close to the line and just working out what happens with both governments whether they'll still support it.
"I think if it comes out and it's badly negative, probably the federal government wouldn't support it I think because it wouldn't meet their funding rules, that would be my guess but I don't know,” Mr Rolfe said.
"I would think that the politicians are very keen to push ahead with it, to make it happen but for them to do that easily, the business case has to be positive for very close to positive.
"If it's not positive then the politicians will have to work that much harder to be able to justify it, to get it over the line.
"But we'll know later this week, with luck.”
He expected local CQ councils would have differing priorities within the business case considerations.
Livingstone Shire Council would only require a small volume of water to supply their agricultural development on the northern side of the river but as their urban footprint grew, they would be looking to draw more water from the Fitzroy system.
Mr Rolfe anticipated that Rockhampton Regional Council, who already unallocated water at the moment in the river system, weren't going to be a huge component of the business case compared to industrial and agricultural water.
But if the business case for the Rookwood Weir project was a 50/50 prospect or even close to that, Mr Rolfe said there would be a lot of pressure on CQ's local governments to intervene and provide the necessary money to get the project over the line.
"Local government and local interests will push very hard for Rookwood to be built,” he said.
"Essentially, it's a large potential development and the construction would have a huge impact on the local economy and it would be necessary to underpin agricultural growth in the area.”
Mr Rolfe expected parts of the publicly released business case to be redacted (to maintain commercial in-confidence) but admitted there were a couple of sections he was looking forward to examining.
"The two key bits of data are what the business case is for water supply to Gladstone for infrastructure there and what the business case is for the remaining water to be used by agriculture in the lower Fitzroy,” he said.
"What you would expect is some estimates of the allocation in both directions, the costs involved and the potential uses and returns involved.”
He said Gladstone required the water to be kept as a buffer in case they have a run of dry years and the Awoonga Dam can't supply all their needs.
"It's critical for Gladstone that they have the water available for industry,” Mr Rolfe said,
"The value they generate from water is many, many times more than can be generated out of agriculture which is why supplying water to Gladstone is essentially the thing that makes Rookwood more likely to be viable that just about any other water infrastructure project in the state.
"Just about all of the others are only able to put up a case for agricultural development.”
Mr Rolfe said the tricky bit for government preparing the business case was having to come up with scenarios about future industrial development in Gladstone and CQ's future agricultural development - which would all be dependent upon overseas markets.
"A lot of these types of business cases they put up are pretty broad brush, based on scenarios like if there is major growth and demand from China for industrial and agricultural goods, versus a medium or low export growth scenario,” he said.
Mr Rolfe said the challenge was working out overall if the business case stacked up balancing the profits from the industrial allocation of water to Gladstone which could compensate the potential costs on the agricultural side.
"I expect that the price of water to supply and underpin water reliability for Gladstone is pretty high, industrial water is generally fairly expensive,” he said.
"The challenge is in the economic case for the remaining supplied to agriculture.”
Mr Rolfe said if the case was based on existing agriculture in the Fitzroy basin for crops like cotton or other broad acre crops, then the business case was probably going to be hard to justify.
But if Rookwood Weir was built, Mr Rolfe said CQ agriculture had a bright future which could be potentially be boosted by new companies coming in, buying up land and tapping into new Asian markets for horticultural products such as macadamias, avocados, mangos, mung beans and chick peas.
"The Atherton Tablelands is a great example of that, agriculture has developed well there in the last few years,” he said.
"It's been banana farmers coming in from Innisfail and developing bananas there and blueberry farmers coming in from outside and establishing the blueberry industry.
"That's the sort of scenario I imagine would apply to the lower Fitzroy as well.”
Mr Rolfe also expected some local land holders would diversify, develop their own enterprises and to value add in agriculture using strategies such as feed-lotting.
Growing Central Queensland's Anne Stunzner has explained the answers to two vital Rookwood Weir project questions - how will our economy benefit and where are the jobs coming from?
How will Rookwood Weir boost CQ's economy by $1 billion annually?
- High value crops (including macadamias, citrus and tropical fruits, table grapes, chick peas, mung beans) can take advantage of water security).
- While the market will influence prices, further value is added to crops and commodities through processing.
- Intensive animal industries can also play a significant role in agricultural prosperity.
- Every dollar of direct production can be multiplied in ancillary industries such as transport and logistics, sales, retail, marketing, repairs and maintenance etc.
How will Rookwood Weir generate 2100 jobs?
- In the construction phase, it's estimated there will be around 200 jobs in total.
- This includes 80 people to build tow bridges, 60 to 80 people at the weir site and support and administrative roles.
- There will be additional contract work on roads and quarry of construction material, but it's understood up to 50 people could be sourced from existing Central Queensland firms.
- Further jobs will be created in research and development, technology development, farming, transport and logistics, financial services, ancillary support (mechanics, tractor sales etc), education, health care, transport, logistics, wholesale and retail trade.
- It's understood these jobs would build over time, with full potential being achieved in roughly a decade.