A LITTLE-known and unrelated court case has ensured the administrators of insolvent Cubbie Station, Australia's largest irrigation operation, cannot sell water entitlements separate from the land.
Cubbie's chairman and former Queensland Treasurer, Keith De Lacy, called in the administrators last Friday when the banking facilities on $320 million of debt expired.
Legal action taken by two brothers against the Queensland Government means land and water entitlements cannot yet be split in the Condamine-Balonne area.
The Graham brothers from St George, Qld, disputed the water allocations in the Queensland Government's Resource Ope-ration Plan.
The plan cannot be signed off until the legal action is resolved and until then water and land has to be sold as one package, according to the State Liberal National Party member for Warrego, Howard Hobbs, who has provided the details of the court case.
Mr Hobbs said the Queensland Government should have settled the case with the Grahams months ago, which would have freed up water trading.
"Now if the Grahams win, the Government has to go back and recalculate the entire Resource Operation Plan, which could take years and further delay separation of water from land," Mr Hobbs said.
"This would happen even though everybody else is happy with the plan."
Cubbie, a major irrigated cropping enterprise rumoured to be worth $450 million, but unable to be sold for enough to cover its debt, will operate for the next three months.
Meanwhile the administrators, John Cronin, Jamie Harris and Colin Nicol, from McGrathNichol, will decide the Cubbie Group's fate.
A creditors' meeting will be held somewhere in the Balonne region on November 11 and a review will be written within a month.
Queensland Cotton's gins at St George and Dirranbandi relied on Cubbie for 40 percent of their production.
The Dirranbandi gin processed 52,000 bales of Cubbie Group cotton last season, while its Beardmore Gin at St George put through 19,000 bales in the same period.
The chief executive of Queensland Cotton, Richard Haire, remains confident Cubbie's cotton production will continue and the operations will not be "broken up".
He also said water, not the new owner, would dictate Cubbie's future.
"It's hard to imagine the administrators realising any (significant financial recovery) from a break-up scenario," Mr Haire said.
"It's highly unlikely the people who buy it now will endure the same length of drought."
Bruce Scott, the veteran Nationals member for the federal seat of Maranoa, said a "fire sale" would lower surrounding property prices. He said the best outcome was for Cubbie to continue operating after a restructure.
"If they were able to sell some water assets, I'm sure that would help," Mr Scott said.
Cubbie has been blamed by critics for taking too much water, but the Federal Government does not want to buy the property. Cubbie is headquartered at Dirranbandi, south-west Queensland and has 93,000 hectares and a water storage capacity of about 538,000ML.
Ironically, the operation failed because Cubbie's owners, managers and bankers put too much value on what is ultimately an unpredictable resource.
Under management's "Blue Sky Model", one massive rain dump every 10 years would have been enough and Cubbie Group's bankers, National Australia Bank and Suncorp, showed faith in the scheme, pouring cash into the operation on a regular basis.
However, the group hasn't filled its dams for years.
Cubbie Group is an unlisted public company with more than 50 shareholders, including the Brimblecombe and Stevenson families.
Nationals Senator, Barnaby Joyce, has defended Cubbie's position.
"Nobody has talked about how often those dams have been full," He said. "Just because you have a storage capacity for a freak storm didn't mean it was full all the time."
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