Money intended for dams has been reallocated so the Albanese government can buy water entitlements from farmers.
Federal Water Minister Tanya Plibersek told the ABC that money allocated for water buy backs this financial year was previously committed by the Coalition to build dams.
She's set up a fund – with an undisclosed sum — to boost the amount of water going to the environment in Australia's largest river system.
It allows for the Commonwealth to buy water rights from irrigators for the first time in almost a decade.
"We have set money aside to achieve the goals of the Murray Darling Basin Plan and there is an amount of money that is listed as 'not for publication' in the budget that won't be just for buybacks, it will be for other water projects that will help us meet our goals as well," she said.
"Some of the money that has been set aside in the 'not for publication line' has come from the cancellation of a couple of dam projects and the re-profiling or the delay of some other dam projects as well."
This week's federal government budget axed the $5.4 billion Hells Gate dam project for north Queensland, a commitment by former Nationals leader Barnaby Joyce.
Almost $900 million of other dam projects have been delayed and, as indicated before the election, the government has clawed back $1.173 billion from the National Water Grid Fund.
The not for publication fund this week has sent a shiver down the spine of farm communities, long opposed to water buybacks.
Ms Plibersek said there was a "very good reason" the sum of the new fund remained confidential.
"Anybody who walks into a negotiation, if they're trying to buy something or get a state government to put some money into a plan, if you telegraph how much you're willing to spend up front you're not going to get value for money."
Since the Murray Darling Basin Plan was legislated in 2012, there's been 1,200 gigalitres of water reallocated from farming to the environment.
The plan states that 605 gigalitres must be found from state-run water infrastructure projects by June 2024, but these projects are running behind schedule.
In return for South Australia's support for the initial plan, a further 450 gigalitres of water was also committed to the environment from efficiency projects by June 2024, but so far just 2 gigalitres has been put toward this target.
A recent report suggested it could cost close to $11 billion to meet a target of returning 450 gigalitres of water to the environment, assuming the deadline is removed.
"We're certainly not contemplating that sort of money, nowhere near it … we think we can get much better value," Ms Plibersek said.
An agreement reached by basin water ministers in 2018 set a criteria about how the water can be recovered, in a way that causes no harm to basin communities.
Its unclear how legally binding the agreement is and Victoria and New South Wales remain opposed to Commonwealth water buybacks.
The federal opposition is also opposed to buybacks and has raised concerns that this week's not for publication fund could already disrupt the water market.
Ms Plibersek said she was "not concerned about that."
She also dismissed concerns that additional water couldn't be delivered to the environment due to constraints in the river system.
"We're working with the states and territories very cooperatively on constraints measures, supply measures, on improvements to the efficient use of water in partnership with irrigation companies in some cases … We're looking at all of the ways we can get to the full delivery of the Murray-Darling Basin Plan, nothing is off the table."
However, Ms Plibersek ruled out mandatory buy backs.
Acknowledging the challenges of the imposing deadlines, Ms Plibersek said she was still working toward reconciling the Murray Darling Basin plan in June 2024.
Water ministers will meet again in early February, following the Victorian state election and ahead of the NSW state election.
