This morning, NSW and the Commonwealth announced a deal that will see the lifting of NSW’s embargo on water trading. Acting Prime Minister Gillard and acting NSW Premier Nathan Rees concluded a Memorandum of Understanding earlier in the week.

The announcement of the deal has been in a strange limbo since it was concluded some days ago. The NSW Irrigators’ Council’s Andrew Gregson issued a press release early yesterday morning welcoming the deal. There had been no leak: instead, Gregson had been told the announcement was imminent and that the lifting of the embargo would be gazetted by NSW Water Minister Phil Costa yesterday or today.

When Crikey spoke to Gregson yesterday afternoon, he was mystified as to why there had been no announcement, especially given the parlous financial circumstances of a number of farmers and irrigators across western NSW.

“A lot of them have the banks knocking at their doors,” he said.

By then Phil Thomson of The Land had picked up on the announcement and posted an online article. So had Peter Hunt of the Weekly Times.

Overnight, the only “announcement” was the judicious sharing of the details with metropolitan News Ltd and Fairfax journalists by the Federal Government, based on the MoU either being “announced” today or “signed” today, depending on which outlet you read. Julia Gillard and Nathan Rees finally got together this morning to make the announcement.

Just concluding the deal, letting key stakeholders know and issuing a press release apparently isn’t enough for this mob. Everything needs to be media-managed.

The embargo was a typically hamfisted NSW Labor policy and yet further evidence — as if we needed any — that management of the Murray-Darling Basin is still stuck in the political Stone Age. But for once the blame lies not in Macquarie St but somewhat further to the south, in the Victorian Government’s bloody-minded refusal to lift its own anti-competitive block on water trading, and in Canberra, which instead of punishing John Brumby’s recalcitrance, has rewarded it with hundreds of millions of dollars in funding.

This meant that the vast bulk of the Commonwealth’s water acquisitions in the MDB were being made in NSW. The embargo was NSW’s way of declining to do the bulk of the heavy lifting in restoring environmental flows in the MDB.

Victoria’s only concession was a commitment earlier this month to remove its trading caps by — wait for it — 2014.

The MoU involves a replacement of the embargo with a cap of 890GL of general security water entitlements over five years in NSW. The catch is that includes water already purchased, which is 520GL, meaning about 370GL will be available for purchase between now and 2012-13, with purchases back-end loaded.

There’s another, far more complex aspect to the MoU. Governments will attempt to develop “water shepherding” arrangements for the movement of environmental flows through the MDB so that what is purchased at the top — for example, in the upper Darling — isn’t siphoned off along the way and makes it all the way to South Australia, subject to ground water and evaporation loss.

As Gregson notes, this will be a very difficult algorithm to develop, because most users in the Basin have water rights subject to either volumetric or river height indicators — ie. their entitlements are triggered when the river flow reaches a certain level. Some parts of the system are also unregulated, or include floodplains which are subject to different allocation processes.

The complexity lies in developing a protocol that avoids triggering entitlements when environmental flows are involved, while keeping them operational for other events.

“It’s not impossible but it will be very complex,” Gregson says.

He also wants irrigators to get access to water shepherding provisions for their own trading, so it isn’t confined to environmental flows.

There will also be a need for extra resources for monitoring on the ground to ensure “shepherding” actually occurs in the system rather than merely in hydrological models. Apparently the Commonwealth has committed to provide the extra resources for monitoring.

From the point of view of environmentalists and South Australians, by imposing a cap on further trading in NSW, the MoU simply perpetuates the dysfunctional management framework that has wreaked such havoc on the system in the first place. Penny Wong and her Parliamentary Secretary on water, Mike Kelly, might beg to differ, saying that at least environmental purchases can now proceed in NSW.

But Victoria and Queensland continue in their pig-headed refusal to cooperate in restoring the MDB to a semblance of health. They’re the real problems the Federal Government needs to deal with.