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Fresh Water and RMA reform: a plan or a blunder?

Free Thoughts – Fresh Water and RMA reform: a plan or a blunder?

“Treaty settlements should be for cash and resources. They must not involve deals over governance arrangements that undermine our democratic institutions.”

Summary & Overview

Who owns the freshwater flowing down our rivers? Does that question even make any sense?

A better question is, who has the rights to use that water, and on what terms?

In 2009 the government established the Land and Water Forum to explore the many issues around fresh water use. The Forum has done a good job, and made the case for, amongst other things, introducing tradeable water rights - a routine application of the price system to ensure efficient resource allocation, so that water is allocated to highest-value uses. This is much the same as New Zealand’s world-leading use of tradeable fishing quotas to ensure sustainable management of our fisheries.

But moves to implement tradeable property rights highlight ownership issues, and fuel contesting claims to ownership. In New Zealand that inevitably triggers Maori claims to an ownership right. The Freshwater Iwi Leaders Group has been lobbying on this, outlining what some might describe as ambitious - and others as outrageous - aspirations for Maori in this area.

Sensing a massive political storm ahead, all parties are attempting to tack out of trouble.

The government says it recognises iwi rights and interests in water (without determining what they might be or how they might be decided); Local Government NZ has signed a memorandum of understanding with the Iwi Chairs Forum acknowledging the mana and kaitiakitanga status of iwi over the nation’s land and natural resources (without defining what that means in practice); and the Land and Water Forum has wisely sidestepped the issue, saying that whatever iwi rights and interests in fresh water might be is to be resolved between iwi and the Crown.

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The government says nobody owns our rivers’ freshwater flows, but that’s largely semantics. If you have the right to use the water, you effectively have an ownership right (in use) of the water.

In short, everybody is dodging these difficult issues, for now.

But everybody is also planning and manoeuvring in anticipation of a new structure for management of fresh water access rights. The proposed changes to the RMA suggest iwi ownership claims are being shuffled down to local and regional government, a headache for them courtesy of central government.

Is this part of a deliberate plan, or is the government simply blundering?

A series of small steps, each seemingly innocuous, are leading us to what could be a very divisive outcome. The RMA Reform Bill – a deal between the National and Maori Parties – requires councils to introduce Iwi Participation Agreements. These could serve as a pathway for iwi to become joint or full resource consulting authorities.

ACT has consistently opposed such co-governance arrangements. They are undemocratic, liable to corruption over time as they can block and hold up sensible developments, and they lock in place traditional structures that might have had some logic a hundred years ago, but are hopelessly inappropriate in a modern, largely integrated multicultural country.

Treaty settlements should be for cash and resources. They must not involve deals over governance arrangements that undermine our democratic institutions.

For those interested, these water allocation and RMA issues are dealt with at length below.

The Forum reports

The Land and Water Forum is comprised of a range of industry, environmental and recreational groups, iwi, scientists and other organisations with a stake in freshwater and land management. It was established in response to the growing scarcity of water and the disputes arising about rural and urban infrastructure development, discharges, payment, management and participation, farming run-off, and water quality.

The Forum’s objective was to develop a shared vision and a common way forward among all those with an interest in water, through (those deathly words) a stakeholder-led collaborative process. But how else could this be done? Endless political and legal contests are giving poor outcomes, as always happens when property rights are ambiguously defined and/or unenforceable.

The Forum has produced four reports on fresh water issues since 2010, the most recent in late November last year, focused on how to maximise the economic benefits of freshwater while managing within water quality and quantity limits.

There can be no doubt that we need to reform the institutions surrounding water use allocations, moving away from first-come first-served arrangements to a more economically efficient system of pricing and trading of water use rights.

Water is a scarce and thus valuable resource.

Current practice

Currently water is allocated by regional councils, operating under the RMA. Permits are issued to individuals or businesses on a first come first served basis, issued for a maximum term of 35 years, usually for a particular purpose, and come attached with various conditions. This may have been a reasonable approach when water was abundant, but not when water is a scarce and valuable resource.

In a sensible institutional framework water “use rights” would be traded, so that water would be used in its most valuable way – a routine matter of using the price system to ensure efficiency of resource use.

It is a similar situation to that before fishing quota were introduced. Overfishing was making fish scarce and the populations vulnerable. By setting quotas and allowing them to be tradeable, New Zealand led the world in establishing a rational method of fisheries management, fixing the problem of the “tragedy of the commons”, where overuse of a common resource has disastrous consequences.

But we don’t lead the world in water management. As you would expect, more efficient water management occurs in places where water is scarce (although there is much scope everywhere for improving practises), with water trading systems established in California and Australia, for instance. See for example the Australian online trading site Waterfind, where there is an established spot and forward market in water, analogous to what we see in electricity and other markets.

Transitional difficulties

So what are the problems of moving to a more rational arrangement for the pricing and trading of the scarce resource that is water?

The first is that existing longstanding use rights for water need to be honoured. Land that has an existing water permit is more valuable than the same land without it. In the course of a normal property market transaction that water right gets capitalised into the price of the land. A recent purchaser of that land will have paid for both the land and the water right.

Even if the owner is of long standing, the business (eg a farm) will have been developed, capitalised and operated on the basis of the presumed market value including the water right. So to remove the water right, or suddenly to start charging for it, is to inflict a wealth loss on the owner - who may very well have paid for it, rather than got it for free decades ago before water became scarce.

The solution is that we need to “grandfather” any changes in, allowing a long transition to a new system of allocation which, if we want to use water efficiently, must involve the pricing of water use. In short, existing long-standing owners of permits own them and should be able to trade them.

Tradability means that when new land is brought into cultivation, or planned to be, the owners can buy access to water.

Iwi aspirations to water rights

The question of “ownership” of freshwater in our lakes and rivers and streams erupted when the Maori Council took a claim to the Waitangi Tribunal during the process of partial privatisation of the electricity generators through 2011-13. As some observed, this claim had little legal merit, being a ‘hold-up’, presumably an attempt to get access to free SOE shares from the government. It failed.

In principle, fresh water is not a pan-Maori matter. In so far as some customary rights may be valid, they apply to the specific neighbouring iwi or hapu. And in any case the main rivers relevant to the electricity generators are already covered by full and final settlements with the relevant iwi.

The reality is that in almost all cases potential iwi and hapu “customary rights” have long since been super-ceded by the Crown, local authorities and the landowners (Maori and pakeha) of neighbouring lakes, rivers and streams. This is because common law and customary right entitlements have a practical test: continuous interest in a property or resource and effective control of it, or the exercise of a right over it.

Nevertheless, the Freshwater Iwi Leaders Group (ILG) has been active in advocating for access rights. It has engaged with the Crown to pursue what they see as rights and interests of iwi in freshwater, and conducted regional iwi meetings outlining their objectives. One avenue they are exploring is a nationwide recognition of iwi interests in the form of a share of water allocated for commercial use. From this we can sense a backward glance at the 20% stakes acquired in the fishing and aquaculture settlements.

The objectives are not modest in scope. Among their proposals are for all Crown owned lake beds and river beds to be vested in the relevant iwi or hapu; the water column, the space through which the water flows to be vested in the relevant iwi or hapu; a $1 billion “capacity building” fund; and co-governance, management and decision-making responsibilities achieved by iwi representation on regional councils, akin to the co-governance arrangements already achieved for the Waikato River.

Arguably, the extravagant scale of these claims represent an attempt to double-dip, given existing settlements in most of the relevant areas are supposed to have been full and final.

Alternatively you might view them as a bargaining position: go in hard and see how far you can get, especially when up against a government that seems more than willing to entertain pretty much any claim, especially given the balance of power delivered via Maori Party representation in a finely balanced MMP Parliament.

What else might the ILG be angling for?

The Sapere report (The incentives to accept or reject a rights regime for fresh water) commissioned by the ILG explores how existing consents could be converted to a rights based regime, where existing (time limited) allocations could be converted into permanent and thus more valuable allocations, with a view to allocating a portion to Maori interests. The key word here is “permanent”.

How long should a water consent last? Security of tenure is important - they need to be long enough to warrant the investments which depend on water access, and there needs to be a well-established trading system so that water use can change with shifts in the relative value of different uses. There needs to be a way for use rights to move to their highest valued use, as a simple matter of economic efficiency.

But it is hard to see any justification for granting a right in perpetuity, as that would represent a substantial wealth transfer to those with current allocations. The existing 35 year lease period could be reviewed, but it probably needs to be at least 20 years.

As the leases of existing holders of use rights expire, we need to transition to a situation where use rights are purchased and can be traded. An alternative to simple transferable rights (ie trading), is one where the government could instead lease water quota out for a set time period, the price set by auction. They amount to much the same thing.

An efficient system

Economically efficient use of water will result if we price water and allow it to be tradeable - in large and small chunks, in short and long blocks of time.

Given that water is part of a natural system of evaporation, condensation and flow, revenues from the pricing of water should be owned in common, as revenues to local and central government. Those revenues should in the first instance be used to fund the monitoring, consultation, enforcement, scientific research, and environmental work focused on fixing degraded water quality.

There is no reason why issues concerning Maori customary rights – inevitably limited in scope and location, and reflecting a limited range of traditional activities - in so far as they can be established, should not fit comfortably into these arrangements for a modern rational system of water allocation. Any allocation could be from currently unallocated water, or by the government purchasing existing water rights.

Land and water forum recommendations

The Land Water Forum released its latest report in late November last year, and the government intends to release a public discussion document early this year before final decisions are made on these issues.

The Forum’s recommendations are good, particularly recognising the need to allow flexibility (ie water users to be able to manage their allocations, transfer rights, change their land use), with proposals for developing infrastructure, reducing uncertainty, improving the science base for decision-making, and reducing waste and inefficiency.

Some of the useful recommendations include: limit setting and management activities should be a priority, both within and between catchments on the basis of environmental risks; a range of water quality measures, including models to estimate nutrient loss, and a range of data gathering measures; individual transferable discharge allocations; a timetable for stock exclusion from waterways, and riparian setback rules; the rollout of residential water metering; and a transition away from any over-allocation of water rights.

The report notes that the responsibility for reaching agreement on iwi involvement is a matter between the Crown and iwi, and that the responsibility to giving effect to any agreement is the responsibility of the Crown. But then notes that “our recommendations suggest the Crown should instruct and enable councils to implement the agreement”.

Which brings us to the RMA Amendment Bill introduced to Parliament in December.

A twist in the tail/tale – RMA reforms

It seems clear that the government is planning to hand down to regional councils most of the decisions responding to iwi claims for rights to fresh water. As noted earlier, Local Government NZ has already signed a memorandum of understanding with the Iwi Chairs Forum, where they “acknowledge the mana and kaitiakitanga of iwi over the nation’s land and natural resources”. The next step for that will be a further push for iwi representation, not democratically elected, on local and government council decision-making bodies. This is the contentious co-governance model, a structure which stores problems for the future by undermining democratic processes via appointed iwi representation.

Already we have seen numerous examples in Treaty settlements of co-governance arrangements being established (eg over the Waikato river). As these arrangements are rolled out across the country we are handing a major role to unelected people.

What is the next step in all this?

At the end of 2015 the government introduced their RMA Amendment Bill to Parliament. The Bill is a deal negotiated between National and the Maori Party. Under this Bill iwi get enhanced preferential treatment (see clauses 13, 16, 17 and especially 38).

Note that the RMA already contains provisions for consenting authorities to transfer their powers to iwi (sections 33 and 36B). These are provisions rarely used, although just last month a Joint Management Agreement (re 36B) was signed between Ngati Porou and the Gisborne District Council, arising from the 2012 Ngati Porou Treaty settlement, with plans to move over five years to full section 33 powers.

This RMA Amendment Bill goes much further, introducing new Iwi Participation Agreements. These will “require” councils to formalise their consultation with iwi through these agreements, and stipulates that within a month of a new council being formed they must contact all iwi in their area to begin establishing these new agreements. There must be annual reviews of progress.

This looks like a new and accelerated pathway for iwi to become joint or full resource management consulting authorities, particularly for the control of water and other natural resources in their area.

This would be a huge backward step. As I said in the House speaking on the first reading of this Bill, the requirement to consult with iwi adds another third party to be consulted when anybody wishes to develop their property.

The ACT Party has consistently opposed co-governance arrangements. They are undemocratic, liable to corruption over time as they create opportunity to block and hold up sensible developments, and they lock in place traditional structures that might have had some logic a hundred years ago, but are hopelessly inappropriate in a largely fully integrated multicultural country in the 21st century.

Treaty settlements should be for cash and resources. They should not involve deals over governance arrangements that undermine our democratic institutions.

Concluding

We fixed over-exploitation of our fisheries by leading the world with a system of tradeable quota and science based quota management.

We can do the same with freshwater and water quality, by pricing water and allowing the use rights to be traded, all supported by a strong science research base to ensure we do not over-allocate water, while repairing the environmental damage already done to our rivers and lakes.

But we need to do this without undermining the democratic arrangements governing local and regional government representation.


ends

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