what price water?

8/19/2019 What Price Water?

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N O R T H & S O U T H | O C T O B E R 2 0 1 5 | 515 0 | N O R T H & S O U T H | O C T O B E R 2 0 1 5

It’s there in the Bible, in the book

of Revelation, almost the last word

written: “And let him that is athirst

come. And whosoever will, let him t ake

the water of life freely.”

Ever since we arrived in New Zea-

land, we’ve done exactly that: come and

taken water freely. Like air, it’s always

been seen as limit less, rivers and lakes

and streams providing life and liveli-

hoods, and it’s been our god-given right

to take as much as we wanted.

But things have changed. Droughts

have descended more often and more

fiercely. Dairy farms have displaced

drylands, stubbled paddocks greened

with giant irrigators. Our populationhas continued to grow. Climate change

and higher temperatures have become

our undeniable future. More immedi-

ately, a severe El Niño weather pattern

is set to clutch the country this summer,

further strangling rainfall along the

east coast.

And suddenly it’s clear that in many

parts of New Zealand, water has become

scarce. That there’s barely enough to go

round. That some people are taking huge

amounts and not paying a cent for it.

That can’t be right, can it? That can’t

be fair? Surely it’s time pe ople started

paying for the “water of life”.

Peter Robinson reckons so. He grew

up in North Canterbury, caught his

first salmon at 11 at the mouth of the

Waimakariri and has caught one every

season in the 50 years since. His daughter

hooked her first fish here when she was

four. Just recently, his seven-year-old

grandson landed his first one, in the

same spot.

But it’s getting harder. The rivers are

drying up for longer and over a much

greater area. The landscape he’s known

all his life is changing.

“Particularly in that crucial time over

WHATPRICEWATER?

Droughts, climate change

and the rush to dairy

farming are all putting

enormous pressure on

our water supplies. But

as rivers run dry, how is

it that so many people are

still allowed to take this

public resource for free?

Mike White investigateswhether it’s time to

start paying for water.

MIKE WHITE IS A NORTH & SOUTH SENIOR WRITER.

PHOTOGRAPHY ON FOLLOWING PAGES BY MIKE WHITE.

Special investigation



“I WENT UP THATROAD AT BURNSIDEYESTERDAY AND ITHOUGHT, ‘THAT CAN’TBE THE RIVER – IT’SBONE DRY.’ I’VE NEVERSEEN IT LIKE THATBEFORE – I THOUGHTI WAS LOST.”


summer and everybody’s after that water.

The fishermen want the water, the

farmers want that water, but the water’s

just disappeared.

“I went up that road at Burnside yes-

terday and I thought, ‘That can’t be the

river – it’s bone dr y.’ I’ve never seen it

like that before – I thought I was lost.”

Even where water remains, smaller

flows lead to higher temperatures, in-

creased algae and fish dying.

“I used to go out fishing when I got

depressed,” says Robinson, “but that’s

a price on it, allow it to be traded, and

allow it to be auctioned to wh oever willpay the most for it.

“In the Soviet Union, only the people

at the end of the queue didn’t get bread

and everyone else got it cheap or free.

So the existing users of water are auto-

matically at the front of the queue and

they currently pay nothing and they’re

happy and they certainly don’t want

that situation to change.”

But more people have now joined the

queue and are missing out, he says.

“And I don’t see any other resources

or commodities in our economy or so-

ciety where anyone argues queuing is

the best way. The Communist Party of

New Zealand doesn’t advocate queuing

any longer.”

But despite the broad range of people

calling for commercial users to pay for

their water, no government has been

bold enough to confront it.

Partly this is because they sense

there’ll be an instinctive public reaction

that it’s bad to pay for water. Partly it’s

because if you put a price on it, you im-

mediately raise issues of ownership –

and if you do that you have to address

the possibility of iwi wanting a share

of the country’s freshwater.

And partly it’s becaus e the cur rent

of putting a price on water seems very

obvious, and though she’s talked aboutit for nearly a decade, politicians and

the public have skirted round it.

“This is the classic thing that happens

with many, many issues – they get away

on us and then we’re trying to fix them

up once they’ve got away. And this is

clearly one of these,” she says.

“It’s a basic principle that if some-

thing’s an input into production – in the

same way as fertiliser or iron or what-

ever you’re using in agriculture or man-

ufacturing – and it’s scarce and other

people want some too, why wouldn’t you

pay for it, because you’re profiting di-

rectly from it.”

Intriguingly, on this issue there’s

strong agreement across the political

spectrum, from environmental groups

to arch-conservatives, that big water

users should pay for this basic raw ma-

terial, just as they do for electricity or

fuel. Some of this revenue could then

be used to clean up our rivers and lakes.

Right-wing political commentator

Matthew Hooton says as competition

for water increases, there are two ways

to allocate it. The first is to persist with

the first-come-first-served system,

which he likens to queuing for food in

the Soviet Union. The second is to put

In basic economic theory, when a

resource gets scarce, the price goes

up. Only, with water, there’s never been

a price. Everyone from farmers to

hydroelectricity companies to townies

washing their cars has essentially got

water for free.

But it’s one thing to use it in your

house for taking a shower, and another

if it’s a fundamental part of your busi-

ness from which you profit.

Under the current system, devised

when everyone imagined water was

inexhaustible, big users such as farm-

ers have applied for consents to take

water from aquifers or rivers, and usu-

ally been granted this right for up to

35 years. They may pay for the consent,

they may pay for getting the water to

their property – but the water itself has

been free.

This water makes them money in two

ways: it means their land can be more

productive by growing more or different

crops, and having a water right also in-

creases the value of their land consid-

erably. So when farmers come to sell

their land, given we don’t have a capital

gains tax, they’ve essentially turned a

public resource, which they’ve taken forfree, into pure profit. These consents

for water have been granted on a “first-

come-first-served” basis, with new

businesses now unable to get water in

many areas like Canterbury because it’s

already been divided up.

Because nobody is paying for water,

there’s less incentive to use it efficient-

ly. And there’s no way of gauging if wa-

ter is being used for the greatest benefit

– would 1000 litres provide more value

by producing one litre of milk, or irri-

gating crops or fruit trees, or even in-

creasing the flow so tourism companies,

such as rafters or fishing guides, can use

the river? Fish & Game chief executive

Bryce Johnson says New Zealanders are

finally realising water is limited and being

exploited by a few.

“These guys get it for nothing. They

say they pay for it but all they pay for is

the delivery cost. It’s like paying for the

truck that brings the fertiliser but getting

the fertiliser for nothing. It’s an absolute

premium resource for them that they

take from the public for free, pocket the

profit from it, and all the public get back

is a shitload of pollution.”

Parliamentary Commissioner for the

Environment Jan Wright says the logic

blood y d epres sing now too, seeing

what’s happening to the rivers. I don’t

want my grandson telling stories in the

not-too-distant future about how he

caught a salmon, and people saying,

‘There used to be salmon in the rivers?’

Because I can honestly see that coming.”

The situation in Canterbury is par-

ticularly serious for a number of rea-

sons. About 70 per cent of New Zea-

land’s irrigated land is here. Water in

many areas has been over-allocated for

years – mo re has been allowed to be

taken than is available. The past decade

has seen dramatic changes from dry-

land farming, where little irrigation was

used, to dairying, where it takes around

1000 litres of water to produce a single

litre of milk.

The east coast suffers regular droughts

– in North Canterbury they’re still in

the grip of last year’s, while facing even

worse this summer. Many rivers you

used to swim in are now toxic trickles.

As this has become apparent, limits

have been set on how much water can

be taken from rivers and aquifers. Yet

despite this, numerous big irrigation

schemes that will further suck from

Canterbury’s stretched waterways are

being proposed, potentially even dou-

bling the 500,00 0ha that ’s a lread y

irrigated across the province.

Environmental consultant and former

Fish & Game adviser Scott Pearson sayswhen Canterbury’s farmers turn on

their irrigators in spring, the rivers start

running dry in a matter of days. “It’s so

blatantly obvious it’s just not funny.”

Come April, when the taps are

turned off, the rivers bounce back –

theoretically.

In May this year, Pearson stood in the

Cust riverbed and it was still dead dry.

Fish & Game “salvaged” the river in Oc-

tober, saving fish as the river level fell.

Seven months later, it was still just bare

stones and dry banks. Twenty kilometres

downstream, it was the same story – a

section that’s normally dry only from

December to February still didn’t have

a drop in it, nearly three months on.

Farmers argue these Canterbury rivers

always go dry in summer. The problem

is, says Pearson, they’re going dry ear-

lier, for many more months, and over

longer stretches of the river – even after

relatively wet winters.

He understands the importance of

irrigation for the economy, but says the

system of allocating water just isn’t

working. “The effects on the river are

clear. We have a serious issue with this

resource that’s getting more and more

scarce.”

Peter Robinson with aphotograph of grandson Harperwith his first salmon.

Parliamentary Commissioner for the Environment Jan Wrightsays the logic of putting a price on water is very obvious.




terbury, but can be twice as much.)

Moreover, about half of New Zealand-

ers arguably do pay for the amount of

water they use, through water meters

at their houses. Authorities claim

they’re not paying for the water itself,

but merely for the cost of the infrastruc-

ture and supplying the water to them,

or dealing with wastewater.

However, this seems convenient se-

mantics, perpetuating the assertion

nobody pays for, or therefore owns,

water. But if you’re paying a charge per

cubic metre of water for showering and

doing the dishes and watering the gar-

den, and the more you use the more you

pay, it seems difficult to deny that peo-

ple are indeed paying for the water it-

self – in the same way that everyone

pays for electricity based on how many

kilowatt-hours they use.

Matthew Hooton says claiming domes-

tic users aren’t actually paying for the

water is like saying when you buy a can

of Coke, you’re only paying for the can

and the brand and the truck to get it to

the shop – not what’s inside the can.

“‘No one owns the water’ and ‘the wa-

ter belongs to all of us’ are sing-songy

lines that have no particular meaning.”

Tony McCormick stands on the lip

of the Opuha Dam, inland from

Fairlie, admiring the lick of snow on the

surrounding hills. It’ll eventually melt and

help fill the storage lake that irrigates 250

properties and 16,000ha downstream.

God knows, they can use all the help they

can get after last summer. In late Febru-

ary, the lake essentially went dry, dirt

bikes and 4WDs replacing the boats that

usually roar across its surface. For almost

two months, the irrigation scheme had

to be shut down – the first time it had

happened since the dam was completed

in 1998. With an El Niño forecast this

summer, McCormick, Opuha’s CEO,

doesn’t rule out it may happen again.

The Opuha scheme is the poster child

of New Zealand’s irrigation industry.

The benefits it’s brought are used as

evidence that more irrigation will trans-

form our economy, create jobs and save

regional towns. Blips such as what hap-

pened this year at Opuha don’t under-

mine the value of irrigation schemes,

McCormick stresses – they just rein-

force that we need more water stored

behind more dams like Opuha to coun-

ter the dry years.

So if that’s the case, shouldn’t there

be a p rice o n water from the star t –

when someone is granted a consent in

the first place?

“Look, I don’t have an issue with peo-

ple paying for water,” says Davoren.

“But it has to be global. If a farmer or

irrigator has to pay for water, then so

does the person in the city. I don’t think

you can be discriminating about this.”

The issue here, however, is the person

in the city isn’t profiting from the water

they use. Farmers use their water to

produce more goods that they can sell,

and increase the value of their land.

(Davoren says land agents estimate ir-

rigated land is worth about 1.6 times

more than non-irrigated land in Can-

shall have to pay for that water but

you’re not going to give it away to some-

body else and not get some recompense

for it,” says Davoren.

So in 2007, people started asking how

much water was worth. To figure this

out, they looked at the amount they

could increase the yield from their land

if they had water (the rule of thumb is

you can at least double production if you

irrigate), how much water they needed,

and came up with a value per cubic me-

tre (1000 litres). Davoren says that fig-

ure has ranged from 50 cents to $1.60

but is now about 80 cents.

Farmers generally need about 3500–

4000 cubic metres per hectare. So for

a 10ha block, you need to buy at least

35,000 cubic metres. At the current

market rate, that’s around $30,000.

All this is l ogical and s eemingl y a

straightforward transaction. But essen-

tially what’s happened is that a farmer

has been granted a consent to use a

public resource – a consent that means

no other member of the public can use

that water – and has then sold the wa-

ter they’ve got for free to someone else,

for a considerable profit.

Davoren stresses that while demandfor water and HydroTrader’s services are

increasing, the amounts being sold and

bought are small in the overall picture

of water being used for irrigation in Can-

terbury, with only around 4-5 million

cubic metres a year being traded.

But even that amount of water at 80

cents a cubic metre means more than

$2 million has changed hands so far this

year in deals brokered by HydroTrader.

So while the government and others

may insist nobody owns the water, some

people are certainly profiting hand-

somely by selling water they don’t own

and have been allowed to use for free.

It’s a situation Jan Wright admits New

Zealanders should be concerned about

and she questions why the government

doesn’t receive any revenue from such

sales.

Davoren says to increase production

anywhere on New Zealand’s east coast,

you have to irrigate. If you haven’t got

a consent or can’t store water on your

farm, or you buy a neighbouring block

without water rights, then your only

option is to buy water.

“People are saying, ‘This water is so

valuable to me that I’m prepared to pay

for it to grow something.’”

gions, a few times a year, when it’s in

short supply. “And any attempt to pricethe water will also bring a very divisive

and ugly argument with iwi over who

actually owns it in the first place.”

Hence, the government has main-

tained the mantra that nobody owns

water in New Zealand – that at best you

can have a consent allowing you to use

water.

But in a small office in the west of

Christchurch, this fiction is laid bare.

Tony Davoren runs HydroTrader – a

company that helps people buy and sell

water. What essentially happens is that

someone who has a consent to take a

certain amount of water – either

groundwater from an aquifer or from

a river – and isn’t using it can sell that

surplus portion of water to someone

else who needs it. Most of this goes to

farmers wanting to irrigate, but Davor-

en has helped sell water to yam-wash-

ing and truck-washing businesses.

These deals have been going on for at

least 20 years, but were usually done

over a handshake in the pub. However,

with limits now being placed on how

much water can be taken, and greater

demand for it, it’s natural a market has

sprung up.

“It’s not explicit in the plans that you

In the same way it was a Labour govern-

ment that removed farming subsidies,

Labour has for many years called for

commercial water users to pay for the

water they take. So have the Greens.

But the current government has con-

sistently shied from it, though it has

asked the Land and Water Forum to

look at how to get the best value from

water. This group, which includes a

range of interested parties, from iwi to

environmental groups to farming or-

ganisations and business giants like

Fonterra, is likely to address the issue

in a report before the end of the year.

Environment Minister Nick Smith

accepts we need a more sophisticated

way of allocating water than the present

first-in-first-served system, and have to

find where it will provide maximum

economic benefit.

“But we’re not looking to price the

core natural resource.”

Smith argues New Zealand actually

has plenty of water and questions of

charging for it relate only to a few re-

government has a strong rural and

business base – and asking farmers and

companies to pay for water would be

utter anathema.

“It’s power politics – that the farmers

have too much political power – that’s

all it comes down to,” says Hooton.

“They want free water, they don’t want

to pay. And if I was a farmer, it’s exact-

ly what I would argue. But you wouldn’t

make that case for fertiliser, would you?

There’s no other input they don’t pay

for except the sun.”

The government’s cowardice in not

charging for water was reminiscent of

National’s reluctance to remove farm-

ing subsidies in the 70s, despite the

clear logic of doing so, Hooton says.

“The fact that something is obviously

economically sub-optimal and non-

sustainable doesn’t mean that a

business-as-usual National government,

whether led by Muldoon or Key, is going

to change it. It’s sad we’re even having

debates like this, 31 years after we em-

barked on rational economics.”

Environmental consultant Scott Pearson in the dry bed of theAshley River near Rangiora. He says when Canterbury’s farmers

turn on their irrigators in spring, the rivers start running dry ina matter of days. “It’s so blatantly obvious it’s just not funny.”

WATER EVERYWHERE

• To irrigate just one hectare of

farmland takes around 4000 cubic

metres a year – about four million

litres. Domestically, an average

person uses about 250-300 litres

a day, or 100,000 litres a year.

• Canterbury irrigators without a

water consent are paying 80 cents

per cubic metre for water they

have to buy. Charges for domestic

users around New Zealand with

meters vary, from $1.40 per cubic

metre in Auckland and $1.80 in

Tauranga to $2.05 in Nelson.

• Canterbury has about

70 per cent of the country’s

irrigated land.

• Around two-thirds of

Canterbury’s consented water

– 4.36 billion cubic metres – is

used for agriculture. Another

quarter is used for stock. Town

supply accounts for only 3.8

per cent of consented water

– 0.26 billion cubic metres.




built storage lakes to ho ld th e wat er,

which they then sold to miners. Visit

Central Otago and you can still see the

remains of this private enterprise.

Of course, many will argue now is

absolutely the wrong time to be raisingthis issue, to be suggesting farmers

should pay for water, given how our

crucial dairy industry is besieged by low

prices. But when would be a good time?

When the milk payout is nearer $8 rath-

er than around $4 as it is now? At that

time you’d still be accused of sabotaging

the economy’s engine room. And as

more farmland slips into foreign own-

ership, shouldn’t we be considering if

a crucial natural resource that’s under

increasing pressure should be given to

them for free as well, so they can make

profit that goes overseas?

So maybe this is exactly the right time

to confront the issue – when the value

of what we’re using an increasingly

scarce resource for is laid bare. When,

despite so much of that resource under-

pinning one industry, so many farmers

aren’t making a profit and may go broke.

“And at the same time, we’ve brought

ourselves a host of environmental im-

pacts,” notes economist Geoff Simmons.

“They’re getting a free input – their most

crucial input – and are profiting from

that water. And their land values go up

when they get a consent to use water –

but they’re not even taxed on that. It’s

an incredible situation really.” +

try’s primary exports isn’t really about

increasing value, but increasing volume

– pouring more water on to land for

more dairy cows. “And that’s all that

irrigation is about.”

Oram says rather than encouraging anindustry that takes 1000 litres of water

to produce a single litre of milk, it would

make far greater environmental and

economic sense to investigate how to

farm better in dry climates where water

is scarce – things like grasses that grow

deeper roots, how to improve soil qual-

ity, and catching water on farms rather

than massive dams and lakes and net-

works of pipes.

Charging for water needs to be looked

at now, he says, because crucial deci-

sions are already being made about

many catchments, pressure on water is

increasing, and climate change will only

exacerbate this. “Absolutely it’s com-

plicated. But heck, if we can’t work out

complicated systems, then there’s no

hope.”

The avowal that nobody owns water

and nobody pays for it has never

been true – despite what the Bible may

have promised and politicians perpetu-

ated. When gold miners flocked to New

Zealand in the 1860s and started scour-

ing our hinterland, water was precious

– it was the only way to sluice away earth

to reveal the gold. So canny businessmen

constructed races from high rivers and

says there’s “madness going on” in rela-

tion to some environmental concerns.

Irrigation provides so many economic

and societal benefits, Curtis argues, that

there’s no way farmers should pay for

the water they use. In fact, the public

should be funding more irrigation pro-

jects, he says.

But that’s like saying taxpayers should

subsidise any business that could create

jobs – oh, and by the way, how about

they chip in free electricity too.

Morgan Foundation economist Geoff

Simmons says our current system of di-

viding up water is the real madness, and

the obvious solution is to establish clear

ownership rights, price it, and make

farmers and hydroelectricity companies

pay for it. “I don’t view it as a tax. I view

it as a charge for something you don’t

own – the public owns it. To say this

would kill jobs or kill communities is

just abso lute bollo cks – it just alters

behaviour.”

Paying a fair price would mean users

valued it, u sed it much more efficient-

ly, and it was used for the highest-

value produc ts. Sure, t here would be

difficulties moving to a system where

you auctio ned wate r, rather t han h adit by historical right for free.

But policy economist Peter Fraser, who

specialises in agricultural issues, says

there are precedents with other resourc-

es that we can draw lessons from, such

as how we allocated fisheries quotas or

divided the radio spectrum.

He also points to oil and gas compa-

nies, which pay licences to explore, and

also pay royalties for what they extract.

While acknowledging that requiring

farmers to pay for water is a very fair

thing, Fraser notes it will be extremely

hard for them to accept this while they’re

also being asked to help pay for dams

that are “so horrifically bloody expen-

sive”. But the reason it’s usually left to

farmers to fund the schemes is other

investors can see that the numbers ac-

tually don’t stack up.

“It’s the 21st century version of Think

Big in that it’s big, stupid engineering

solutions to solve a problem where there

are actually better ways of doing it. We’re

effectively producing water-hungry,

low-value goods – dairy being the prime

one.”

It’s something economic commenta-

tor Rod Oram also points out – the gov-

ernment’s push to increase the coun-

its combustion system, so there’s now a

charge for that? It’s the same principle.”

But it’s not the same – there’s enoughair for everybody, but water is scarce in

places like Canterbury and has to be

rationed.

No, insists Curtis, “we’ve got shitloads

of water – we’re not water-limited in

any way, shape, or form”.

He argues Canterbury’s alpine rivers

have phenomenal amounts of water,

and the answer is simply to get it to the

dry areas. “It’s about getting smarter

with water management. It’s not about,

‘Oh, the end of the world is nigh and

it’s all buggered and you’ve got to stop.’”

If irrigation is hobbled or prevented,

Curtis says you might as well just stop

farming. “Don’t farm anywhere. Kill all

those local communities – actually, a

lot of the Christchurch community as

well. So let’s get real, because we all

like flat-screen TVs, we all like to come

out and have a coffee and do all those

things.”

Curtis talks in torrents, a gush of re-

peated facts and arguments in favour of

free water, unstoppable, unstaunchable.

He attacks “radical greenies” and,

somewhat ironically, slaps at “the anti-

change lobby”; claims the officially

recognised definition of whether a river

is swimmable is just an “emotive term”;

Describing paying for water as a “tax”,

with its associated negative connota-

tions, rather than simply a cost to busi-

ness, is something Irrigation New Zea-

land frequently does. But to Andrew

Curtis, the industry body’s chief exec-

utive, that’s exactly what it is. The way

he sees it, if farmers irrigate their land

they make more money and pay more

tax, which benefits all New Zealand.

“If you charge me a tax for the water,

that just comes off my profitability and

I pay you less income tax. So do we cre-

ate another tax and create more bureau-

cracy around the collection of that, or do

we just accept we have an income tax for

business in New Zealand that basically

says, if you make any money, we’ll take

33 per cent of the dollar off you?”

Any increase in land value from irriga-

tion means an increase in rates that also

goes to the public purse, he says, and

farmers are already paying for water

through consents and through the cost

of getting the water to their properties.

“Are we going to start saying we’re

going to put a charge on air?” Curtis

despairs. “This car uses air coming into

The last thing you need, says Tony

Howey, who farms downriver, is to

make farmers pay for water.

While more than half of Opuha’s water

now feeds dairy farms, Howey has stuck

with growing grain, vegetables and ber-

ries. Irrigation has meant he’s more than

doubled the number of people he em-

ploys, and the wages he pays them filter

through to South Canterbury’s economy.

Water is as fundamental to New Zea-

land as oil is to Saudi Arabia, Howey says,

because it has allowed farmers to make

the most from their land.

“And while the general public might

think it’s a bad thing to be intensive, hell,

that’s what we’ve built our economy on

– intensive agriculture. If we were just

running a few sheep, one sheep to the

acre, it wouldn’t be a very good-looking

economy round here.”

Given the high cost of building new

irrigation schemes, and the cost of com-

plying with environmental standards,

making farmers pay for water would

be a step too far. “If you put a tax on it,

these schemes just won’t happen; it’ll

just be a stifling of the economy.”

Opuha CEO Tony McCormick at the Opuha Dam, inland fromFairlie. In February, the lake, which irrigates 250 propertiesand 16,000ha downstream, essentially went dry.

Irrigation in Canterbury. Some estimates say there are another 500,000ha inCanterbury that could be irrigated.

what price water?

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