Agricultural water use in New Zealand: should more be done to balance private property rights with greater public interest in an increasingly scarce resource? Fisher, R, Halsey, G, & Cooper, K Open Polytechnic of New Zealand Lower Hutt, North Island

About the Open Polytechnic 25,000 students 25,000 students Key distance education provider Key distance education provider Wide variety of programmes Wide variety of programmes Diverse teaching and research expertise (particularly practice- based research) Diverse teaching and research expertise (particularly practice- based research)

About the authors & approach Rick Fisher – Natural Resources Centre (environmental law) Gordon Halsey – School of Business (economics) Kelvin Cooper – Real Estate Centre Manager (property valuation) Our interdisciplinary approach: Can a water allocation scheme be developed which is environmentally sustainable, economically efficient, and accountable (in terms of its impacts on property values and the environment?)

New Zealand: key water allocation facts 1 1 Source:Ministry for the Environment (2007) New Zealand State of the Environment report. Wellington: MfE 600,000 ha irrigable land at present: could be another 1.5 million 600,000 ha irrigable land at present: could be another 1.5 million Consumptive demand 2-3 X higher than in other OECD countries Consumptive demand 2-3 X higher than in other OECD countries Consumptive demand competes with demand for other uses, notably hydroelectric demand Consumptive demand competes with demand for other uses, notably hydroelectric demand Irrigation accounts for 77% of allocated water use (majority from groundwater sources) Irrigation accounts for 77% of allocated water use (majority from groundwater sources) Many catchments (including Hawke’s Bay, Wairarapa, Marlborough, Tasman, Canterbury, Otago) are heavily allocated/fully allocated Many catchments (including Hawke’s Bay, Wairarapa, Marlborough, Tasman, Canterbury, Otago) are heavily allocated/fully allocated

Waitaki River

New Zealand’s response Sustainable Water Programme of Action ( ) Goals: Seek to improve water quality Seek to improve water quality Identify and reduce the undesirable effects of land use on water quality Identify and reduce the undesirable effects of land use on water quality Improve water allocation management Improve water allocation management Key tool: Resource Management Act (1991) Key tool: Resource Management Act (1991)

Resource Management Act (1991) -New Zealand’s town and country planning law -RMA and predecessor legislation replaced common law riparian rights with a statutory regime. -RMA purpose: to promote the sustainable management of natural and physical resources Key provision re water: s 14 no one can take, use, dam or divert water unless allowed to do so by: A National Environmental Standard A National Environmental Standard A rule in a plan A rule in a plan A resource consent (water permit) A resource consent (water permit)

Regional council boundaries

Water management by regional councils Councils must give effect to national directives, notably Water Conservation Orders, National Environmental Standards, and National Policy Statements Councils have delegated authority to: Control freshwater use Control freshwater use Set maximum/minimum flows Set maximum/minimum flows Create regional plans and regional rules Create regional plans and regional rules Grant resource consents for water extraction and use (water permits) Grant resource consents for water extraction and use (water permits)

Water as property Recent environmental law suggests more than a mere right of access, more a license with some power to exclude others from access (Aoraki Water Trust v Meridian Energy Ltd [2005] 2 NZLR 268 (High Court) Recent environmental law suggests more than a mere right of access, more a license with some power to exclude others from access (Aoraki Water Trust v Meridian Energy Ltd [2005] 2 NZLR 268 (High Court) Property characteristics of a water permit: Has monetary value Has monetary value Is a ‘good’ for the purposes of properties security legislation Is a ‘good’ for the purposes of properties security legislation Can be transferred to another owner on-site, and to another site within a catchment Can be transferred to another owner on-site, and to another site within a catchment Protects the priority of existing consent holders, as well as first in, first served allocation Protects the priority of existing consent holders, as well as first in, first served allocation

Advantages of tradable water permits Allocative efficiency (use can ‘migrate’ to higher value users) Allocative efficiency (use can ‘migrate’ to higher value users) Dynamic efficiency (price is a signal to potential investors) Dynamic efficiency (price is a signal to potential investors) Technical efficiency (allocation requires best practice monitoring and distribution) Technical efficiency (allocation requires best practice monitoring and distribution) Social efficiency (reduce tension between users and regional councils) Social efficiency (reduce tension between users and regional councils) Administrative efficiency (level the playing field among regional councils) Administrative efficiency (level the playing field among regional councils)

Key conclusions Environmental law : There are property rights in water There are property rights in water Current prioritisation rules are unwieldy, and may not promote environmental sustainability Current prioritisation rules are unwieldy, and may not promote environmental sustainabilityEconomic: Allocation systems may be efficient, via such methods as auctions Allocation systems may be efficient, via such methods as auctions Problems remain re rent seeking over issues of metering, pricing and ownership Problems remain re rent seeking over issues of metering, pricing and ownershipProperty: Additional measures may be required to properly value the benefit to landowners of having a water permit, and improve accountability for any environmental harm Additional measures may be required to properly value the benefit to landowners of having a water permit, and improve accountability for any environmental harm