WHILE the Federal Government is spending $3 billion to buy back water licences in the drought-stricken Murray-Darling, farmers in the Queensland portion of the basin are expanding irrigation works.

NSW farmers and water experts say savings from the commonwealth buybacks will be undone by new irrigation works on the Warrego River, a major Murray-Darling tributary in western Queensland, The Australian reports.

However, federal Water Minister Penny Wong said she would not intervene to block the works.

The Queensland developers are backed by foreign money in food production plans that defy predictions of a dire outlook for Murray-Darling irrigation.

The irrigation expansion plans loom as a test case for Canberra's plans to manage the Murray-Darling Basin, with the Bligh Government bluntly telling Senator Wong that they will proceed with state support.

While the commonwealth has taken control of the Murray-Darling, state river plans continue to operate until their expiry.

The Warrego River resource operations plan expires in 2014.

Senator Wong said she had accepted advice from Queensland that the new plans were proceeding under legally issued entitlements within caps on water extractions set by state river plans.

The main Warrego irrigation venture, on the Mirage Plains property south of Cunnamulla, would cancel out the water savings from Canberra's $24 million purchase in September of the Toorale cotton property in northern NSW.

Toorale is downstream on the Warrego from Mirage Plains, and was acquired to return to the Murray-Darling its annual allocation of 14 megalitres, The Australian said.

Mirage Plains has an allocation of 23 megalitres.

While irrigation is expanding in Queensland, the Rudd Government is about to spend $350million on acquiring water allocations in the state.

The Government's emissions trading white paper last month predicted average streamflow in the Murray-Darling would drop by 10-25 per cent by 2030, with irrigated agriculture in the basin suffering a 92 per cent decline.

Read more on The Australian online.