Federal government pushed plan to buy a portion of water entitlements rather than adopt Queensland proposal to purchase two farms and all water rights

This article is more than 1 year old

This article is more than 1 year old

The former agriculture minister Barnaby Joyce approved a controversial change of strategy in his department which led to the purchase of low reliability water entitlements for “a record” $80m from a company with links to a fellow minister, new documents obtained by Guardian Australia show.

The 2017 purchase of water from the Cayman Islands-based Eastern Australia Agriculture has been in the news since the Guardian revealed the energy minister, Angus Taylor, had been a director of the company before entering parliament in 2013.

Taylor has denied he played any part in the 2017 water purchase by the federal government or that he or his family received any benefit from it.

However his longtime business associate Tony Reid was a key adviser to EAA and played a central role in convincing the department to pay $80m for the company’s overland flows.

The new documents, obtained under freedom of information laws, show that in November 2015 the federal Department of Agriculture and Water Resources recommended that Joyce support the Queensland government’s proposal to buy EAA’s two properties, Kia Ora and Clyde, and all its water rights.

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Joyce agreed to “commence formal discussions with Queensland Department of Natural Resources and relevant commonwealth agencies to assess the feasibility costs and risks of the proposal”, signing off on the idea a day later.

“The department sees merit in Queensland’s proposal,” the document says.

The preliminary assessment of the joint purchase is heavily redacted but the ministerial submission notes that the purchase would yield 55.7GL – enough to provide 66% of the water recovery target in the Condamine Balonne.

But a month later Joyce and his department changed tack, the documents show.

Instead of buying the farms and water, the department was to “approach EAA (directly or through their agent, Colliers International) to test their interest in selling … a portion of the water entitlement” associated with the two properties.

The alternative approach appears to have originated in the federal department some time in late November. Handwritten comments by Joyce have been redacted.

The submission says that federal bureaucrats had been advised by their Queensland counterparts that “a range of targeted recovery scenarios demonstrate that it may be possible for us to purchase certain classes of water entitlements while leaving sufficient entitlements on the two properties for viable irrigated agriculture to continue”.

Meanwhile the Queensland minister, Anthony Lynham, was getting increasingly anxious about the delays by the commonwealth and its lack of commitment to his plan to buy the properties. He wrote again on 25 November to stress the urgency.

Joyce has claimed publicly that the idea of the $80m water purchase of unreliable overland flows came from the Queensland government.

But Lynham said the deal he proposed was “very, very different” to the one signed off by Joyce two years later. The documents bear him out.

“It was a wasted opportunity … It was Barnaby Joyce’s decision to subsequently buy the unreliable overland flow of 28,000 megalitres in 2017 and it was his decision to pay $80m,” Lynham said.

What is now clear from the documents is that the deal originated in the federal government – and that environmental outcomes were not the main consideration.

Joyce, the documents disclose, was much more interested in a water deal that would make up the numbers required under the Murray-Darling plan, than the impact the water purchase would have on the environment.

In a letter to Lynham dated 21 December 2015, Joyce said he had asked his department to approach the company directly to enquire whether it would sell just a portion of their water rights.

“If the company is open to this, my department may negotiate a purchase consistent with our objective to achieve the best possible gap-bridging potential while retaining maximum agricultural productivity on the properties and also minimise the impact on other local businesses in the region,” Joyce wrote. He makes no mention of the environmental benefits.

The documents also disclose that the department was well aware that Colliers International was the agent acting for EAA on attempts to sell the two properties, yet the department commissioned Colliers to provide it with a valuation of the EAA water entitlements it intended to buy.

The valuations, released to the Senate under a notice to produce last year, were heavily redacted and it is impossible to know whether the eventual price paid of $2,700 per megalitre for overland flows was within Colliers’ recommendation.

Sources have told the Guardian the price bands recommended were considerably lower than the price paid.

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The investors were certainly happy. The company immediately booked a $52m profit on the sale, and one investor told the London stock exchange it was a record price paid for water in Australia.

The documents also reveal that EAA had already received considerable federal largesse under the Healthy HeadWaters program. It had been granted $2.173m to line its dam storages with rock to save water.

Yet despite having paid for the upgrades, the department walked away from buying the storages which could have held the overland flows. There is nothing to suggest any wrongdoing on the part of all these individuals.

The decision to redact nearly half the content in the documents was made by the bureaucrat who led negotiations on the EAA purchase, Mary Colreavy. The Guardian is appealing the decision on the basis that she was not an impartial decision-maker and that the public interest in the $80m sale outweighed the department’s interest in keeping internal deliberations confidential.

Meanwhile, more information has come to light about the network of personal connections between the directors and investors in the Cayman Islands-based Eastern Australia Irrigation.

The Guardian has already revealed that Taylor was at the same Oxford college with Chris Gradel who heads Pacific Alliance, the Hong Kong-based fund that was a significant investor in the Cayman Islands parent.

Gradel, Taylor and another director of Pacific Alliance, Robert Knapp, were in the same college rowing club at Oxford.

There are also strong links through the consulting firm McKinsey. Taylor, his brother Charlie and Gradel were partners at the firm. Gradel was a partner in Hong Kong while Taylor was a partner in Australia prior to entering parliament in 2013.

There is nothing to suggest any wrongdoing on the part of these individuals.