On-line water permit trading available

HYDROTRADER MEDIA RELEASE
Wednesday 18 July 2007

On-line water permit trading available

On-line water permit trading is now available in the Otago Region, and soon irrigation scheme shares will be able to be traded too!

Since the public launch of HydroTrader in March 2007, it has been possible to auction water permits within the Canterbury Region only. However the intention has always been to offer this auction facility in other regions, and Otago has been chosen as the next one to go on-line.

Otago has the second largest consented allocation of water from rivers and aquifers after Canterbury (roughly 18% compared with 41% in terms of annual allocation ), as well as having several fully allocated rivers and aquifers.

“Otago has a number of river catchments where the ‘consented primary allocation’ of water is fixed, such as the Manuherikia, Taieri and Kakanui,” says Dr Tony Davoren, HydroTrader’s Managing Director. “The only way to obtain access to the most reliable water in these catchments, and in aquifers deemed to be fully allocated, is to reach agreement with an existing water permit holder to transfer some, or all, of their allocation, and then have the transfer approved by the Otago Regional Council”, says Dr Davoren.

Dr Davoren points out that HydroTrader can assist with the first part of that process through its user-friendly website www.hydrotrader.co.nz. “Existing permit holders can now realise the true market value of their permits, and those needing high reliability water can buy their way into an otherwise closed market”, says Dr Davoren.

HydroTrader is also currently working with irrigation schemes to develop ways to make their shares available for auction, while making it clear that scheme directors still have the final say as to which transfers are approved, and under what conditions.

“While each irrigation scheme has its own requirements that must be met before share transfers are approved, HydroTrader is simply helping scheme members find out what the market value of those shares is before they seek approval from the company”, says Dr Davoren. “The process is similar to the way water permit transfers are dealt with by regional councils and unitary authorities, as they too make the final decision on applications to transfer water permits from site to site, including what conditions such transfers will be subject to.”

Those interested in buying, leasing or selling scheme shares should check in at HydroTrader’s website on a regular basis to see which schemes have come on board. Alternatively, they can contact HydroTrader and asked to be notified when their scheme signs up.

While to date no successful auctions have been completed, nonetheless, there are currently 6 auctions listed in Canterbury, including 5 in ‘Red Zones’, areas where Environment Canterbury consider groundwater to be fully allocated. The water available amounts to 15,000 m3/day, sufficient to irrigate approximately 300 hectares of farmland.

“From informal discussions I’ve had with a number of farmers, I suspect that the reasons for the lack of bidding are their computer-shyness and uncomfortableness in dealing with strangers on-line, as well as uncertainties over whether the process is anonymous, and the market value of the water”, says Dr Davoren.

“HydroTrader can assure both traders and buyers that the web site is completely anonymous and no-one knows who is trading and who is buying. The HydroTrader 0508 number can be used for assistance, as well as for placing “buy-now” bids”, says Dr Davoren.

In terms of what water permits are worth, Dr Davoren notes that there is a significant disparity between the value of irrigated and unirrigated land of up to $5000 per hectare, and sometimes more. Therefore, it is the water permit or irrigation scheme shares that comprise most, if not all, of that difference, which gives a good idea of their market value.

Another way to look at this is to consider how every cubic metre of water applied via irrigation will result in an increase in dry matter production, which can be converted into a dollar figure. For example, the grass to milk solids conversion is approximately 15c/kg of dry matter (DM). So each cubic metre of water per day would gross $24 (assuming an 8 tonne/ha increase in DM). Hence, a lease of 1000 m3/day has a gross return of $24,000 per season. “That is a great return from $4 - $4.50 per cubic metre of water per day for leasing a water permit that might otherwise be sitting in a drawer doing nothing”, says Dr Davoren.

Finally, HydroTrader wants to reiterate that the auctioning and transfer of water permits is completely legal and is subject to the requirements of the Resource Management Act 1991. Therefore this process is not to be confused with the ‘trading’ of water, a public resource, which is not “up for sale”. This follows concerns expressed by the Minister for the Environment, the Hon Mr David Benson-Pope, and the co-leader of the Maori Party, Mrs Tariana Turia, at the time of HydroTrader’s launch.

People interested in auctioning water permits and irrigation scheme shares can find more information on the trading process at www.hydrotrader.co.nz, or by phoning 0508 HYDROTRADER (0508 493 768).

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