SOUTH Australia is preparing a constitutional challenge seeking to remove water trading barriers in upstream states of the Murray-Darling Basin.  

Premier Mike Rann says limits on trading water licences are ``a cap on the rescue of the River Murray''.


He says his government has exhausted all diplomatic channels and he has instructed the state's solicitor general to lead the challenge, adding: ``I am prepared to take (this) all the way to the High Court''.


``The states' rights in this matter are referred to in the Australian constitution,'' he told parliament on Thursday.


``We do not undertake such action lightly.


``Our objective shall be to return sufficient permanent fresh water to the river to restore its health.


``I have asked the legal team to examine all avenues to secure South Australia's rights to water.


``The upstream states continue to place barriers in the path of that long-term solution.''


Victoria's four per cent cap on trading water licences out of Victorian districts was one such barrier, he said.


The Victorian cap would rise to six per cent by the end of the year and be abolished in 2014.


``But we believe that by 2014 it could be too late,'' Mr Rann said.


``We need that cap lifted well before 2014.


``We see it as a cap on reform and a cap on the rescue of the River Murray.''


SA would enter the temporary water market to purchase water needed to provide healthier flows to the Murray while fighting for a lasting solution, he said.


``Our state will not shirk its duty to keep the Lower Lakes (of the Murray) and their environment in a sustainable condition until the commonwealth can purchase enough permanent water licences to send additional water down the river,'' Mr Rann said.


``But there will be little benefit in the commonwealth using its allocated $3 billion to buy permanent water to restore healthy environmental flows to the river if the environment has already been destroyed in the meantime.


``That is why we need to remove the barriers to water trading in the upstream states as a matter of some urgency.
``We are not prepared to stand by and passively watch the decline of our natural environment at the end of the Murray Darling system.''