New Zealand: Land and Water Forum writes the book on scarcity management

Brief Counsel

The Land and Water Forum's third and final report, released last week, sets out a detailed policy prescription for freshwater management in circumstances of short or tight supply.

Under the Forum's proposals, existing users could look forward to increased security of tenure and an easier ability to trade or transfer take rights. But they would be expected to share the burden should scarcity thresholds be triggered.

The report, available here, contains a useful diagrammatic representation of the Forum's proposed allocation model, a simplified version of which we have used to set the structure for this Brief Counsel.

The report, available here, contains a useful diagrammatic representation of the Forum's proposed allocation model, a simplified version of which we have used to set the structure for this Brief Counsel.

Direction

The over-arching direction is provided through the National Policy Statement on Freshwater Management, which took effect on 1 July last year. Councils have until the end of 2014 to reflect the NPS in their regional plans or can opt for a phased programme of implementation out to the end of 2030.

The NPS, and the Forum, accept that not all water bodies will be restored to pristine condition and that some will be allowed to remain degraded where the economic benefit from their continued use outweighs other considerations. Chapman Tripp's commentary on the NPS is here.

The National Objectives Framework is currently being developed by officials for presentation to the Government. The Framework is intended to guide council decision-making regarding the levels to which different catchments should be managed and to assist them to prioritise catchments for planning.

Setting up the allocation regime

Catchment planning will be delivered through the Regional Plan rather than – as now – through the Resource Management Act (RMA) consenting process. The Forum places a strong emphasis on community consultation and collaborative planning and clearly envisages a wider application of the processes used in the development of the Hurunui-Waiau Regional Plan led by Environment Canterbury.

Plans will need to:

  • set objectives, limits and targets, both for water quantity and water quality and methods to achieve those objectives (which may include trade and transfer arrangements as a mechanism to ensure that the water goes to the highest value use)
  • establish the remaining "allocable quantum" taking into account seasonal and other variations and providing a clear statement of the reliability of remaining supply, and
  • set the demand thresholds which will trigger a change in the allocation process to allow better scarcity management.

Accounting

Councils will be required to ensure that all water use is accounted for and to monitor and enforce limits. Where limits are set, users will no longer be able to rely on accessing further water to fuel growth – a change that the Forum hopes will encourage more efficient use of existing rights.

The accounting regime will need to include a robust accounting system for contaminants to ensure that quality targets are being met or maintained. The principal tool for managing water quality will be an expectation in regional plans that water users will maintain Good Management Practices (GMP) and that these will be subject to Audited Self-Management (ASM) schemes across the country.

Under allocated catchments

Essentially the status quo remains. Consents can continue to be granted on a first-in, first-served basis.

Demand pressure – the new approach

All existing uses, including unconsented takes, are converted to standardised water consents and subjected to a "technical efficiency test". The Forum is vague about what this will comprise, saying that it is a matter for "national guidance". The idea is to identify and address unused paper allocation and "clear cases of inefficient use".

The new consents should be:

  • granted for a term of not less than 20 years (except where the applicant is seeking a shorter timeframe)
  • clear so that holders know what they are entitled to now and into the reasonably foreseeable future
  • non-derogable (meaning that no new consents can be granted if they would compromise the rights of existing consent holders), and
  • easily divisible to enable redundant rights to be transferred to other users.

Nearing full allocation

In these circumstances, the Regional Plan should identify how the remaining allocable resource will be allocated. This may include a mix of first-in, first served, balloting, merit comparison and market based solutions such as auctions or tenders.

This would require legislation and, in the Forum's view, guidance regarding which methods would be most appropriate to which circumstances.

Fully allocated

The Forum has proposed that compulsory transfer powers akin to the Public Works Act should be provided to urban water suppliers in situations where population growth has created a tension between the water requirements of towns and cities and existing use rights in the rural hinterland.

Before this power could be exercised, the urban supplier would have to exhaust all other options, including efficiency improvements, demand management initiatives and alternative water sources.

Over-allocation

Three broad responses are identified:

  • enforced 'haircuts'
  • negotiated voluntary reductions in water use, and
  • volumetrically driven auctions and tenders.

The Forum says that any timeframes for compliance must be reasonable.

Large scale projects

The Forum has recommended that a review be held three years after the new regime has come into effect with a view to implementing:

  • an extension of term beyond 35 years for large-scale infrastructure projects, and
  • an expectation that consents will be re-issued on expiry provided that the incumbent can demonstrate that they have complied with any consent conditions.

Clearly some members of the Forum would have liked to have endorsed this as a recommendation at this stage but others were reluctant, including iwi.

Consensus not complete

Although the Forum managed to achieve a large amount of consensus, it was unable to:

  • agree on whether merit appeals to Environment Court decisions should continue to be allowed, or
  • make any recommendations regarding water use charges or taxes.

Interestingly, the Finance Minister has indicated that the Government may include some form of price on water for farmers, industries and other large users in the policy package it will develop in response to the Forum's work.

Where to from here

A special Water Reform Directorate, comprising officials across a range of affected government agencies, has been set up within the Ministry for the Environment to provide an all-of-government perspective on the report. The directorate is expected to remain in place until the end of March. The Government has not yet indicated when it will respond to the Forum. The timing may depend on the progress of other, related work streams, in particular the local government review, the RMA Phase 2 reforms and the Government's negotiations on water with the Iwi Leaders Group.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

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