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Irrigation Funding Proposal

22 July 2002

Irrigation Funding Proposal

Private public partnership arrangements are likely to be the key to advancing many of the substantial water management schemes which will be the key to economic development and social and environmental sustainability for many New Zealand regions in the future, Agriculture Minister Jim Sutton said today.

He predicted that a variety of corporate investors were expected to be interested in public infrastructure development. Government already had research under way into the possible application of systems such as BOOT (Build, Own, Operate and Transfer) or more conventional project finance models to irrigation development.

"The Labour-led Government is currently assisting feasibility and pre-resource consent studies through the Sustainable Farming Fund, and this would continue," Mr Sutton said.

He also made clear that Labour's previous undertaking to consider government involvement in scheme finance, where commercial viability had been established but insufficient private sector funding was forthcoming to allow construction to proceed, remained in place, and could be adaptable to either project finance or BOOT models.

Mr Sutton noted that there are several regulatory constraints to investment in water projects, which will need consideration by Government. For example, the Resource Management Act does not allow long-term assured access to water, and the Electricity Industry Reform Act limits the power of lines companies to invest in water schemes, which include potential for hydro generation.

The Contestable Water Fund and now the water projects in the Sustainable Farming Fund grew directly out of those public concerns. The Government abd AGMARDT funds have been highly effective in stimulating water resource assessments and plannning by local community gropus. To date, the combined investment of these funds in local water projects is $6.8 million in 55 projects.

Projects funded are: 15 studies aimed at improving knowledge and providing information on water resources; 12 studies for the development of regional strategies for water supply projects that improve the allocation and reallocation of water resources; and 28 feasibility studies for irrgation and rural water supply schemes.

Perhaps more importantly, the funds have stimulated the development of manuals into best management practices for irrigation development that will be available to all irrigators. This will improve efficiency of use and provide information on how much water to apply and when, storage and distribution techniques, and underground water assessment.

Industry New Zealand's major regional initiative funding under the Regional Partnership Programme is also a potential source of grant funding.

Terms for possible government equity participation would be further studied.

Mr Sutton said local government involvement could also be justified when development would bring significant social and economic benefits to the community, there would be an adequate economic return to Council, but a scheme would be unlikely to proceed without Council intervention.

"Central and local government are interested in overall economic environmental and social impact," Mr Sutton said.

"These can be considerable, for example it has been estimated that each 1,000 hectares irrigated can generate an extra 7.5 jobs at farm level, and up to 30 at national level. There are studies encompassing an area of nearly 1 million hectares, which have implications for the 500,000 hectares of existing irrigation, and over the next 10 years, may result in a further 300,000 hectares of new community-funded irrigation developments, so the significance is obvious."

But Mr Sutton cautioned that if the potential was to be realised, new and higher standards of attention to environmental and social impacts would have to be achieved, and regulatory arrangements upgraded.

"And gung-ho developers should remember that irrigation is not exempt from the need to be commercially sound. If at the end of the day a given scheme will not be able to generate sufficient revenue to service the investment it requires, then building it would make the nation poorer rather than richer."

Mr Sutton said water management and allocation issues would be discussed at a conference, to be held in Wellington on Tuesday and Wednesday.


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