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Water, water everywhere, but only a few drops stored

21 July 2011

Water, water everywhere, but only a few drops stored

Speech by Bruce Wills, Federated Farmers President, to the 2nd Annual Agricultural and Horticultural Outlook Summit, Amora Hotel Wellington, 21 July 2011

I would like to thank the organisers for allowing me to speak on water allocation, irrigation and storage to you today.

This is my first formal speech as Federated Farmers President, having been elected only 20 days ago.

I would like to thank and acknowledge the contribution Lachlan McKenzie has made in water policy and on the Land and Water Forum. Lachlan mastered a complex area and took his passion for farming into meetings. Especially those held at our offices in Wellington.

Somehow, I don’t think we’ve heard the last from him. But when it comes to water and Federated Farmers, you can say we’ve traded a McKenzie for a MacKenzie.

I am pleased to announce that Ian MacKenzie, Federated Farmers Gain and Seed chairperson, is our new spokesperson on water, the environment and the RMA.

Ian is well qualified for this key role given he runs a fully irrigated 400 hectare vegetable/grass seeds and finishing operation. Not only that, but he is a former Nuffield Scholar on comparative farm management and is also a past Ballance Farm Environment Award recipient.

Having him on water policy underscores how important this is to farming.

Where we need to go

Somewhat unusually, I’m actually going to start going straight to where we feel we need to go as a primary sector. Federated Farmers wishes to galvanize action and that’s by being central to actions that will take farming forward.

As a sheep and beef farmer, I grow grass. That grass is converted by my stock into protein and fibre that is exported. This, like my colleagues in horticulture, forestry, aquaculture and related manufacturing, generates foreign exchange enabling us to be a first world nation.

We all share the basic ingredient. That ingredient and the secret of our success is water.

Several years ago, Federated Farmers plastered ‘More Fish, Less Drought’ around Koru Lounges up and down New Zealand. Together with Irrigation New Zealand, Federated Farmers has advocated and restated the case for water storage.

Irrigation and water storage was seen by Wellington as an insurance policy. While ‘More Fish, Less Drought’ played on that notion it gave us an opening to explain the more complex notion that water storage is about extending the growing season.

This was part of making a much wider and compelling economic case for water storage. With Budget 2011, the Government responded with the Irrigation Acceleration Fund and a very welcome $35 million boost for irrigation projects.

Budget 2011 has revealed prospects for a $400 million fund in the future. This would be used as seed equity and not as a grant. It is all part of a commercial solution recognising that water storage must stack up commercially and we have the proof it does.

Yet it’s down to the perseverance of people likes of the Opuha Dam’s Tom Henderson, who we can truly thank. They’ve proved that water storage enables not just economic development but social, community and environmental development too.

We can make the economic and environmental cake bigger and water is the key.

Water is to New Zealand what black coal is to Australian exports. It’s the true backbone.

The challenge for us as the agricultural sector, from farm to processing plant, is to state the environmental case. If we do not put the environmental case alongside the business case, the regulatory brakes will come on at the behest of the wider community.

This is our call to step up.

It’s no good for us to have access to investment cash, willing investors and a world wanting our exports, if schemes get knocked back in the Environment Court or by the Environmental Protection Agency.

Half the game is to meet limits around water quantity. In this arena, rural water infrastructure can deliver positive wins for the environment, one example being minimum ecological flows while delivering reliable water to primary producers.

Native fish and water fowl cannot inhabit rivers that dry up over summer.

But the other half of the game will be to meet limits around water quality. This is where the real challenge comes.

Will increased production from irrigated land inexorably drive increased leaching? Can we secure environmental integrity alongside economic growth? These are tough questions being asked right now let alone what will come.

In the next four decades, we could easily increase the amount of people we can feed some 2.5 times. From 20 million to 50 million people plus. We have immense opportunities to export agricultural services but none of these things matter, unless we can take our communities with us.

Building the environmental case

I believe we now need to apply as much diligence and analysis to the environmental case as we have in the economic case.

If there are gaps in our knowledge and I know there are, then we need to plug them and plug them fast.

We need to start with what we know, the ‘known knowns’ on land use and irrigation, application as well as leaching rates. We need to learn how to make this package work. If we have ‘leaky’ systems, leaking water and leaking nutrients, then we need to know how to tighten them up.

We need proactive solutions instead of reacting.

Some regional projections around irrigation and land use change are based on limited and outdated assumptions about farming practices and irrigation technologies. These are the high profile ‘unknown, unknowns’ that trip us up. Let’s get these assumptions on the table. Let’s actively update the models because what goes in does not necessarily come out in a different form.

Establishing the knowns and those unknowns, means we can have a real conversation about what we are and are not delivering for the environment. We’ve got copious amounts of economic data, but it’s not the same when it comes to environmental data.

This is about reducing assumptions and what can appear to be, conflicting water quality data. We need credible science to improve confidence in the data. If we encounter negative data then we’re half way there because we get out of denial and into solutions.

Agriculture has at time appeared to be like a wagon train under attack from the old wild west. This creates a defensive mindset and being defensive, closes ears to what maybe a reasonable argument.

Let’s be open, plug the knowledge gaps and go positively forward with our communities.

There is much we can build on too.

Most of us here are members of the Primary Sector Water Partnership. The partnership is applying significant effort and innovation individually and collectively, with regard to nutrient efficiency and water efficient farming systems

Today, we have a whole new generation of irrigation hardware, ground sensors and software coming on-stream. As technology marches forward, precision agriculture becomes a bigger part of modern farming.

So how will these schemes fit in the new “limits setting” regime?

Be it money or trout, setting limits makes sense. It’s about delivering certainty for farmers and the community. Farmers get the concept of benchmarks and they understand bottom-lines.

The Land and Water Forum

Federated Farmers has been an active participant in the Land and Water Forum and I want to focus on several of its recommendations.

Recommendation 35 stated that public funding of rural infrastructure projects should be targeted to early stages

The NZIER looked at “The economic impact of increased irrigation” last November, estimating the economic benefits for ‘NZ Inc’ of 14 schemes under development.

These 14 schemes will deliver an irrigated area of 350,000 hectares, 270,000 hectares being in Canterbury.

By 2026, these 14 schemes will deliver extra production worth $2 billion a year at the farm gate and almost $4 billion in exports. This, by the way, is 2010 dollars too.

This is a significant increase on the $23 billion in primary exports from 2008/9. Off-farm infrastructure costs with water storage are relatively modest compared to the real gains in agricultural output.

Water storage offers bangs for modest bucks. The 2011 National Infrastructure Plan goes further echoing what Federated Farmers has said for years. Water is our unique competitive advantage and is fundamental to economic growth. Growing the economic cake for all.

This raises a number of issues because water allocation and regulatory certainty is key for investors.

This includes access to what is called ‘new water’ through improved management of existing allocation and through new infrastructure development. The National Infrastructure Plan heralded the $35 million Irrigation Acceleration Fund over five years to support for irrigation proposals to an ‘investment ready’ stage.

Commenting on the package, KPMG observed the debate around intensification should be conducted in an open facts-based manner. That needs to become a blueprint for how it should be done and I suppose, where extra production will be generated.

Some of it will come from using innovative but intensive farming systems. Intensive farming is a term we know and use but it has different connotations outside of farming.

This is a good place to look at the Land & Water Forum’s Recommendation 31. It is for regional planning to be on a collaborative basis and must occur so that rural infrastructure can be developed in a way that provides a range of social, economic, cultural and environmental benefits.

Part 2 of our much loved RMA says that when water is allocated, the social, economic and cultural values associated with water must be in balance with one another and with environmental values too.

The Land and Water Forum report, issued last September, signals greater use of collaborative processes in water policy-making and implementation at national, local and catchment levels.

For farmers, this is actually good news because involving landowners in any process is essential. When policy outcomes could directly affect their property and what they can do with their land, it's only right landowners take charge of implementing any changes that may result.

Real progress also starts with decision making and how communities are informed. This is where we need to plug those gaps about what we don’t know on the environmental footprint of storage and irrigation.

So how can the resourcefulness and innovative capacity of New Zealanders to develop local solutions be harnessed? As organisations involved in water, this is within our gift to both influence and shape.

We need to take the community with us and that means getting positively on the front foot rather than always reacting. It means finding solutions and not picking holes in others.

On-farm, farmers have to look at stock and effluent management systems tailored to location, including fencing waterways where feasible. This I need to stress is not a dairy exclusive story. It will involve other parts of the pastoral sector and horticulture too.

It’s all about better nutrient utilisation and increased pasture or crop growth.

Allocation options

The Land and Water Forum report states that the growing problem of water scarcity must be managed better. It states, “more efficient and effective means of allocating water permits and allowing them to be transferred can help to manage demand, reduce contamination and maximise the value of water for the economy”.

The first element in any allocation process, is to determine how much water in each water body is available to be allocated for productive use.

The forum believes the principle of ‘first-in-first-served’ for water allocation should be replaced by an allocation scheme when pre-set thresholds for scarcity are reached.

For us in the agricultural sector, it acknowledges that water storage may be part of the answer to water shortage problems.

In catchments which are at or getting near to full allocation, it suggested three broad options for future water allocation:

1. Continue existing consents, but as they expire, change conditions to get greater technical efficiency or to allocate consents for a shorter period
2. Establish a different system of allocation through regional plan rules. These could be based on criteria around efficiency and community considerations. It could also provide a degree of preference for existing consent holders
3. Establish a payment system, for example tender and/or auctions to establish a value for the use of water.

It is also worth looking at the Canterbury Water Management Strategy.

The strategy opts for reconfiguring consents in order to recharge aquifers on the lower plains, improve reliability of water supply from those aquifers and to increase flows in the spring-fed streams.

The ‘but’ is that a charging mechanism for water is advocated. The strategy sees charging as a way to ‘remunerate’ investment in new infrastructure in order to ‘enable supply and demand to be managed in an effective manner’.

The strategy envisages working with consent holders to reallocate water being used inefficiently. The strategy refers to a brokering system to “allow inefficient or unproductive use of water to be “bought out” and the water reallocated for environmental purposes, or for more efficient irrigation uses”.

The earthquakes, I should add at this point, will not have any impact upon water allocation as the process is separate and distinct. After the Darfield earthquake last September, Federated Farmers, Irrigation NZ, the Rural Support Trust and the industry good bodies worked closely with Lincoln and Canterbury University.

Geophysical and geotechnical surveys as well as other technical work showed little long term damage to groundwater infrastructure, though one member’s farm was compromised by a river changing its course.

Federated Farmers principles on water allocation

Federated Farmers is guided by eight principles and I’d like to outline these to you:

1. Water allocation decisions must be based on sound information

2. The system for water allocation must be relatively simple and cost-effective, for both the regulator and the user

3. Secure tenure and clear specifications for water use are fundamental

4. No one particular water allocation policy may be appropriate in all circumstances

5. Water allocation regimes must not undermine local or community water allocation strategies

6. Water allocation regimes should provide for water harvesting and storage

7. Efficient use of water is best determined by water permit holders

8. The voluntary transfer or exchange of water permits must be accommodated in any water allocation regime.

I think these are sensible but as an organisation we are extremely wary of water trading.

Water is part of the commons like the air we breathe.

Any move to introduce a commercial trading regime opens a policy ‘Pandora’s Box’. It not only brings the rights of Maori into the frame but places a premium on scarcity; diametrically opposed to what we wish to achieve with developing ‘new water’.

Improving on what we do

Allocation regimes determine how much is available for commercial use such as irrigation.

In water-short areas, environmental flow regimes figure out how much water must remain in the natural environment, like aquifers, lakes and rivers and how much is available for use.

In the drier regions of New Zealand, like Canterbury, abstracted water drives agriculture and horticulture. Irrigation may be needed in regions who had not previously faced water shortages. Especially during key growing times or relatively dry periods of the year.

The recent Red Meat Strategy advocated year round production to smooth supply. That hinges on the availability of water during late spring and summer especially, to maintain grass growth and support weight gain.

We mustn’t forget that New Zealand has some of the world’s highest quality freshwater, ranking in the top ten for both its abundance and cleanliness. The 2010 Yale and Columbia Universities Environmental Performance Index ranked us number two behind Iceland.

Our abundant rainfall feeds over 70 major rivers and more than 700 lakes but here is the crucial point. Only around five percent of annual inflows are harvested. To put that into context, we currently harvest only around 20 percent of what’s in Lake Taupo.

The worldwide average by contrast is more like 50 percent.

Even if harvesting doubled or even quadrupled, 80 to 90 percent of the water would still flow naturally.

So when do we use water? Seventy percent of annual water allocation is somewhat predictably driven by summer but over 60 percent is harvested as run-of-river.

Groundwater takes are responsible for some 30 percent but and here is the kicker, less than five percent currently comes from water storage.

Less than five percent from the solution to reliable security of water supply. We are not scratching the surface when it comes to water storage and the simplest and most cost effective way of creating ‘new water’.

Primary Sector Allocation of water

There is 550,000 hectares of irrigated land in New Zealand. If we expressed that as a country to create a point of comparison, then it is larger than Trinidad & Tobago but slightly smaller than Brunei.

Around 350,000 hectares of this irrigated land is in Canterbury making it irrigation central.

Changing land use is reflected in available statistics but these statistics must be taken with a pinch of salt as they are less than robust.

That said, in 2006 it was thought 42 percent of irrigated land was in arable production with 31 percent being in pasture. By 2010 that had flipped. An estimated 76 percent of irrigated land is now thought to be in pasture with only four percent left in arable production.

Like I said, you need to be cautious with these statistics, but it shows a strong trend towards pasture based systems.

At a national level, nearly 80 percent of summer supply is allocated to the primary sector. This is followed by industry then by municipal supply but again, caution needs to be attached to what may seem to be primary dominance.

These figures are strongly weighted by Canterbury and to a lesser extent, Otago.

The reverse is true with regions on the West Coast. From Auckland down to the West Coast itself, 80 percent of summer supply is allocated to municipal first, industrial second then primary as ‘tail end Charlie’.

With over half of New Zealand’s population residing north of Taupo, our population is well catered for. In other regions, the balance is closer to 50/50.

It is also important to remember that the actual water take is estimated to be around half of the consented take too.

This also highlights why water storage is the way ahead in terms of the environment, economically and for vital infrastructure.

Trends, Pressures, Risks

Given the dominance of run-of-river and groundwater and with catchments at or nearing full allocation, this has led to restrictions on consented takes, competition and indeed, litigation.

There is a logical flaw on relying upon rivers and groundwater, given they are subject to reduced summer flows. If the water isn’t there, it isn’t there.

What’s more, extracting water during low summer flows directly impacts in-stream values increasing environmental risk.

Irrespective of whether you believe human induced climate change is real or not, climate variation happens. The level of winter snow fall as storage and rainfall variation from season to season is well known to farmers from their on-farm records.

Yet I can’t bring myself to use the word ‘drought’ because of the rainfall we do get over a full year. The issue for our economy is that is doesn’t always fall in the right place at the right time.

Access to reliable water is a marked constraint on production. The past season illustrates this as a ‘game of two halves’.

The first half was drought-like in key farming regions then we had the ‘most perfect autumn’ as one rural paper put it. With the exception of the top of the South Island and about 100 farms in the Hawke’s Bay, everywhere seems to have made up for the poor beginning.

If milk production is a marker, we’ve finished up on a season that started so unpromising.

The answer was good rainfall, warmer weather and sunshine over an elongated autumn.

This also happens to be the promise of water storage.

We have the raw ingredient, its called rain. We just don’t have the means to store it in order to maximise pasture growth during optimal conditions.

The opportunity

The 2007/2008 El Nino influenced drought impacted the economy by $2.8 billion and was seen as the tipping point for recession before the global economic meltdown. A similar drought, a decade earlier, cost the economy over $1 billion.

The economic case for storage is indisputable.
Yet the role of irrigation has changed from simple drought proofing or insurance to being the means by which farmers and therefore the economy can diversify and grow, as I mentioned earlier.

Increased control of irrigation is a facet of precision agriculture. The right amount of water removes a summer production variable, when sunshine hours and soil temperature are optimum.

In the future, New Zealand will also face increased competition from countries that share our ‘pastoral sweet spot’. While the brand counts, we also know that price is a major driver. That means greater volume without greatly added costs.

For the New Zealand farmer, irrigation from stored water will be important to enable the agricultural sector to quickly respond to market signals. We’re not just talking pastoral farming but our colleagues in horticulture and on-land aquaculture too.

A study commissioned by the Waitaki Development Board showed irrigated farms yielded phenomenal increases in production.

Revenue from these irrigated properties increased threefold, from $21 million as dryland to $65 million with water. An amazing performance.

We are talking about billions of the dollars in extra exports and thousands of news jobs on and off-farm.

It’s a compelling argument but only if we can take the community with us.

Given the Government is viewing water storage as an equity investment there is massive opportunity here as we know 95 percent of current water available for use does not come from water storage.

The economic and business case is abundantly clear but the third leg in this triad remains the environment.

Let’s be open, plug the knowledge gaps that exist and go forward with the community.

Thank you.

ENDS

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