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Shirley: Speech - Rights to Water

Rights To Water

Friday 17 Sep 2004

Ken Shirley Speeches - Environment & Conservation

Speech to Fish & Game "Living Rivers Seminar", Timaru; Saturday 18th September 2004

Good morning.

A long, long time ago, in a different world, I was employed as a water resource manager working for both the Wellington and Nelson Regional Water Boards. I led a team that was responsible for both the quantitative and qualitative aspects of the regional waterways and aquifers.

These jobs involved the measurement, allocation and protection of the water resources. We gauged the river flows, measured the ground water resources, conducted biological surveys and allocated water rights under the provisions of the Water and Soil Conservation Act 1967.

It was a good job that I greatly enjoyed, and it was with considerable reluctance that I gave it up to become the local member of Parliament in 1984.

Rivers and trees remain my passion, but my views on how to best allocate natural resources for a wide range of - often competing - uses while, at the same time, protecting environmental values have broadened and matured considerably.

One of the key competitive advantages that New Zealand enjoys is a temperate climate and reliable rainfall. These two factors underpin our biologically-based exports derived from farming, horticulture and forestry.

Another key comparative advantage we enjoy is relatively secure, and internationally competitive, electricity. As an aside, I must add that this comparative advantage is now under serious threat.

When we export meat, milk power, wood pulp and paper, the electricity component matches the value of the raw biological input. Our electricity security and competitiveness is, in turn, heavily dependant on hydro - which takes us back to the reliability of our rainfall, with our steep topography intercepting the moisture laden air of the roaring forties.

In this context, our watersheds are the lifeblood of our economy and social wellbeing, and I applaud Fish and Game for holding this "Living Rivers" seminar today.

Because of its relative abundance, water has traditionally not received the same level of focus in New Zealand as in other countries. But that is changing with more intensive and water-dependent patterns of land use.

I was deeply involved with the water disputes associated with horticultural development in the Waimea, Moutere and Motueka districts through the 1970's and early 1980's. I can attest that nothing invokes greater anger and frustration than disputes over water in times of scarcity. I certainly learnt a few political skills the hard way.

The dairying boom has made a major contribution to New Zealand's economy over recent years, and is probably the most significant contributor to Dr Cullen's surplus. In many parts of the country, however, top levels of dairy production can only be achieved with heavy applications of irrigation water. This can impact on our rivers, both in a quantitative and qualitative sense.

Large volumes of irrigation water diminish river flows at critical times, and elevated levels of phosphorous and nitrogen from intensive animal husbandry percolate and infiltrate to our rivers and ground water, often impacting adversely on the aquatic ecology.

These impacts can seriously degrade the resource's value for other users - such as fly fishers, boaties and passive recreationalists enjoying the intrinsic values of the river.

Water is a very dynamic resource with very interesting interactions between supply and demand. When you desperately need it, it is least available; when you really don't want it, you are awash.

For the past 60 years, our water allocation policies have been highly centralised, highly bureaucratic and highly politicised. We have assumed - I believe wrongly - that the Government and its agencies are the only bodies capable of resolving the matrix of multiple use and conflicting demands.

We have relied upon a `first in time, first in right' philosophy, which provides no incentive for efficient water use and innovation. The politicised allocation model has served the bureaucrats well with self-perpetuating administrations, endless rounds of hearings and public consultations and a complete failure to provide any certainty.

The recent Project Aqua fiasco highlights the many failings and inadequacies of the central politicised allocative model.

In Waitaki, we have a controlled catchment with substantially enhanced storage lakes developed by the State to generate electricity. These lakes are in the rain shadow of the main divide leading to intermittent and unpredictable seasonal shortages.

Groups of farmers want to access some of the stored and flowing water to irrigate their grasslands and crops. Simultaneously, recreational users demand minimal flows to maintain an acceptable aquatic ecology.

Irrigators need the water over the peak of the summer months to combat evapotransporation, whereas the energy company is reluctant to give up the water because it just might need it if there is a prolonged dry season and winter rains don't come to maintain the storage volumes to match the peak electricity demands.

Farmers assert that their use of the water would give a much greater benefit to the country than its retention for hydro, given the probability that it won't be needed and will all be spilled if in fact the late autumn and winter rains do come.

For those farmers who do acquire a water right on an administrative model, there is little incentive for them to use the water in an optimal manner. The bureaucrats give them the water on a "use it or lose it" basis - so there is little incentive for applying the most innovative and efficient irrigation methods.

For their part, the in-stream users of the river are dependant upon the politicians and bureaucratics to protect their interests by maintaining minimal flows. This highlights the need for a political lobby by all interested parties with no guarantees, no assurances and no certainty.

Over the past 15 years, New Zealand has slowly come to understand the benefits of applying market mechanisms to a large range of environmental problems. ACT argues that many of the radical reforms made in this country, on both economic and environmental grounds, have done more to advance environmental goals than the environmental movement in general.

The list ranges from the removal of taxpayer subsidies for fertiliser and land development, to market-related pricing and more efficient production of electricity and other energy products, through to the individual transferable quota system for fishing.

Currently there are proposals to manage roading on more commercial lines, including the use of congestion pricing and pricing mechanisms for urban water supply and use.

The trend around the world has been the abandonment of administrative allocation models for water and the introduction of tradable rights and pricing mechanisms.

Some people seem to find the pricing of water abhorrent, on the grounds that it is essential for the maintenance of life - yet those same people are happy to go to the supermarket to buy their food. Pricing mechanisms can best ensure that the optimal use is made of a resource and that supply best meets demand, particularly in times of scarcity.

With tradable water rights, the electricity generator would have to put a value on the water it retains in the storage dams and match that with the likelihood that it will be needed or not needed. Conversely, the potential irrigator who may assert that the water is worth more to him than the energy company can prove it through the pricing mechanism.

The holder of a tradable permit may, for a variety of reasons, decide not to exercise it and instead trade it to an alternative user who may well be in a position to make more efficient use of it either in the short term or the medium term.

The dynamic nature of water does make the initial allocation problematic, as water will have different values to different people at different times of the year. A market mechanism, however, is far better equipped to handle these complexities than an amalgam of politicians and bureaucrats subjected to endless lobby.

Equally, in-river users can enjoy clear and tangible property rights that can be protected and ensured. The difficulty with in-river users is that they tend to be held collectively by interest groups, rather than by a single entity with a clear purpose and application.

It is here that organisations like Fish and Game could hold a tradable permit on behalf of its membership. The water in a specific tributary may have a greater value during, say, the salmon and trout-spawning season and at other times water flows may be less critical.

Under a tradable rights scheme there is still a role for the regulator, but the rules are much clearer and the outcomes more assured for all interested parties. Given the intermittent nature of our water resources augmentation and storage can greatly increase supply. Under a tradable permit scheme there is an added incentive to provide storage and indeed where local storage schemes have been implemented they operate on a tradable permit scheme out of necessity.

It is time we dropped the political mantras in New Zealand associated with the allocation of water and adopted modern best practice which has proven successful around the world.

For a brief period in the late 1980's and early 1990's New Zealand was a world leader in this type of innovative thinking but, regrettably, the recent trend has been regression to the highly centralised, highly politicised failings of the past.


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