Special investigation

ts there in the Bible, in the book

of Revelation, almost the last word
written: And let him that is athirst
come. And whosoever will, let him take
the water of life freely.
Ever since we arrived in New Zealand, weve done exactly that: come and
taken water freely. Like air, its always
been seen as limitless, rivers and lakes
and streams providing life and livelihoods, and its been our god-given right
to take as much as we wanted.
But things have changed. Droughts
have descended more often and more
fiercely. Dairy farms have displaced
drylands, stubbled paddocks greened
with giant irrigators. Our population
has continued to grow. Climate change
and higher temperatures have become
our undeniable future. More immediately, a severe El Nio weather pattern
is set to clutch the country this summer,
further strangling rainfall along the
east coast.
And suddenly its clear that in many
parts of New Zealand, water has become
scarce. That theres barely enough to go
round. That some people are taking huge
amounts and not paying a cent for it.
That cant be right, can it? That cant
be fair? Surely its time people started
paying for the water of life.

eter Robinson reckons so. He grew

up in North Canterbury, caught his
first salmon at 11 at the mouth of the
Waimakariri and has caught one every
season in the 50 years since. His daughter
hooked her first fish here when she was
four. Just recently, his seven-year-old
grandson landed his first one, in the
same spot.
But its getting harder. The rivers are
drying up for longer and over a much
greater area. The landscape hes known
all his life is changing.
Particularly in that crucial time over
50 | NORTH & SOUTH | OCTOBER 2015

Droughts, climate change

and the rush to dairy
farming are all putting
enormous pressure on
our water supplies. But
as rivers run dry, how is
it that so many people are
still allowed to take this
public resource for free?
Mike White investigates
whether its time to
start paying for water.
MIKE WHITE IS A NORTH & SOUTH SENIOR WRITER.
PHOTOGRAPHY ON FOLLOWING PAGES BY MIKE WHITE.

WHAT
PRICE
WATER?
NORTH & SOUTH | OCTOBER 2015 | 51

I WENT UP THAT
ROAD AT BURNSIDE
YESTERDAY AND I
THOUGHT, THAT CANT
BE THE RIVER ITS
BONE DRY. IVE NEVER
SEEN IT LIKE THAT
BEFORE I THOUGHT
I WAS LOST.

Peter Robinson with a

photograph of grandson Harper
with his first salmon.

summer and everybodys after that water.

The fishermen want the water, the
farmers want that water, but the waters
just disappeared.
I went up that road at Burnside yesterday and I thought, That cant be the
river its bone dry. Ive never seen it
like that before I thought I was lost.
Even where water remains, smaller
flows lead to higher temperatures, increased algae and fish dying.
I used to go out fishing when I got
depressed, says Robinson, but thats
52 | NORTH & SOUTH | OCTOBER 2015

bloody depressing now too, seeing

whats happening to the rivers. I dont
want my grandson telling stories in the
not-too-distant future about how he
caught a salmon, and people saying,
There used to be salmon in the rivers?
Because I can honestly see that coming.
The situation in Canterbury is particularly serious for a number of reasons. About 70 per cent of New Zealands irrigated land is here. Water in
many areas has been over-allocated for
years more has been allowed to be
taken than is available. The past decade
has seen dramatic changes from dryland farming, where little irrigation was
used, to dairying, where it takes around
1000 litres of water to produce a single
litre of milk.

The east coast suffers regular droughts

in North Canterbury theyre still in
the grip of last years, while facing even
worse this summer. Many rivers you
used to swim in are now toxic trickles.
As this has become apparent, limits
have been set on how much water can
be taken from rivers and aquifers. Yet
despite this, numerous big irrigation
schemes that will further suck from
Canterburys stretched waterways are
being proposed, potentially even doubling the 500,000ha thats already
irrigated across the province.
Environmental consultant and former
Fish & Game adviser Scott Pearson says
when Canterburys farmers turn on
their irrigators in spring, the rivers start
running dry in a matter of days. Its so
blatantly obvious its just not funny.
Come April, when the taps are
turned off, the rivers bounce back
theoretically.
In May this year, Pearson stood in the
Cust riverbed and it was still dead dry.
Fish & Game salvaged the river in October, saving fish as the river level fell.
Seven months later, it was still just bare
stones and dry banks. Twenty kilometres
downstream, it was the same story a
section thats normally dry only from
December to February still didnt have
a drop in it, nearly three months on.
Farmers argue these Canterbury rivers
always go dry in summer. The problem
is, says Pearson, theyre going dry earlier, for many more months, and over
longer stretches of the river even after
relatively wet winters.
He understands the importance of
irrigation for the economy, but says the
system of allocating water just isnt
working. The effects on the river are
clear. We have a serious issue with this
resource thats getting more and more
scarce.

n basic economic theory, when a

resource gets scarce, the price goes
up. Only, with water, theres never been
a price. Everyone from farmers to
hydroelectricity companies to townies
washing their cars has essentially got
water for free.
But its one thing to use it in your
house for taking a shower, and another
if its a fundamental part of your business from which you profit.
Under the current system, devised
when everyone imagined water was
inexhaustible, big users such as farmers have applied for consents to take
water from aquifers or rivers, and usually been granted this right for up to
35 years. They may pay for the consent,
they may pay for getting the water to
their property but the water itself has
been free.
This water makes them money in two
ways: it means their land can be more
productive by growing more or different
crops, and having a water right also increases the value of their land considerably. So when farmers come to sell
their land, given we dont have a capital
gains tax, theyve essentially turned a
public resource, which theyve taken for
free, into pure profit. These consents
for water have been granted on a firstcome-first-served basis, with new
businesses now unable to get water in
many areas like Canterbury because its
already been divided up.
Because nobody is paying for water,
theres less incentive to use it efficiently. And theres no way of gauging if water is being used for the greatest benefit
would 1000 litres provide more value
by producing one litre of milk, or irrigating crops or fruit trees, or even increasing the flow so tourism companies,
such as rafters or fishing guides, can use
the river? Fish & Game chief executive
Bryce Johnson says New Zealanders are
finally realising water is limited and being
exploited by a few.
These guys get it for nothing. They
say they pay for it but all they pay for is
the delivery cost. Its like paying for the
truck that brings the fertiliser but getting
the fertiliser for nothing. Its an absolute
premium resource for them that they
take from the public for free, pocket the
profit from it, and all the public get back
is a shitload of pollution.
Parliamentary Commissioner for the
Environment Jan Wright says the logic

Parliamentary Commissioner for the Environment Jan Wright

says the logic of putting a price on water is very obvious.

of putting a price on water seems very

obvious, and though shes talked about
it for nearly a decade, politicians and
the public have skirted round it.
This is the classic thing that happens
with many, many issues they get away
on us and then were trying to fix them
up once theyve got away. And this is
clearly one of these, she says.
Its a basic principle that if somethings an input into production in the
same way as fertiliser or iron or whatever youre using in agriculture or manufacturing and its scarce and other
people want some too, why wouldnt you
pay for it, because youre profiting directly from it.
Intriguingly, on this issue theres
strong agreement across the political
spectrum, from environmental groups
to arch-conservatives, that big water
users should pay for this basic raw material, just as they do for electricity or
fuel. Some of this revenue could then
be used to clean up our rivers and lakes.
Right-wing political commentator
Matthew Hooton says as competition
for water increases, there are two ways
to allocate it. The first is to persist with
the first-come-first-served system,
which he likens to queuing for food in
the Soviet Union. The second is to put

a price on it, allow it to be traded, and

allow it to be auctioned to whoever will
pay the most for it.
In the Soviet Union, only the people
at the end of the queue didnt get bread
and everyone else got it cheap or free.
So the existing users of water are automatically at the front of the queue and
they currently pay nothing and theyre
happy and they certainly dont want
that situation to change.
But more people have now joined the
queue and are missing out, he says.
And I dont see any other resources
or commodities in our economy or society where anyone argues queuing is
the best way. The Communist Party of
New Zealand doesnt advocate queuing
any longer.
But despite the broad range of people
calling for commercial users to pay for
their water, no government has been
bold enough to confront it.
Partly this is because they sense
therell be an instinctive public reaction
that its bad to pay for water. Partly its
because if you put a price on it, you immediately raise issues of ownership
and if you do that you have to address
the possibility of iwi wanting a share
of the countrys freshwater.
And partly its because the current
NORTH & SOUTH | OCTOBER 2015 | 53

Environmental consultant Scott Pearson in the dry bed of the

Ashley River near Rangiora. He says when Canterburys farmers
turn on their irrigators in spring, the rivers start running dry in
amatter of days. Its so blatantly obvious its just not funny.

government has a strong rural and

business base and asking farmers and
companies to pay for water would be
utter anathema.
Its power politics that the farmers
have too much political power thats
all it comes down to, says Hooton.
They want free water, they dont want
to pay. And if I was a farmer, its exactly what I would argue. But you wouldnt
make that case for fertiliser, would you?
Theres no other input they dont pay
for except the sun.
The governments cowardice in not
charging for water was reminiscent of
Nationals reluctance to remove farming subsidies in the 70s, despite the
clear logic of doing so, Hooton says.
The fact that something is obviously
economically sub-optimal and nonsustainable doesnt mean that a
business-as-usual National government,
whether led by Muldoon or Key, is going
to change it. Its sad were even having
debates like this, 31 years after we embarked on rational economics.
54 | NORTH & SOUTH | OCTOBER 2015

n the same way it was a Labour government that removed farming subsidies,
Labour has for many years called for
commercial water users to pay for the
water they take. So have the Greens.
But the current government has consistently shied from it, though it has
asked the Land and Water Forum to
look at how to get the best value from
water. This group, which includes a
range of interested parties, from iwi to
environmental groups to farming organisations and business giants like
Fonterra, is likely to address the issue
in a report before the end of the year.
Environment Minister Nick Smith
accepts we need a more sophisticated
way of allocating water than the present
first-in-first-served system, and have to
find where it will provide maximum
economic benefit.
But were not looking to price the
core natural resource.
Smith argues New Zealand actually
has plenty of water and questions of
charging for it relate only to a few re-

gions, a few times a year, when its in

short supply. And any attempt to price
the water will also bring a very divisive
and ugly argument with iwi over who
actually owns it in the first place.
Hence, the government has maintained the mantra that nobody owns
water in New Zealand that at best you
can have a consent allowing you to use
water.
But in a small office in the west of
Christchurch, this fiction is laid bare.
Tony Davoren runs HydroTrader a
company that helps people buy and sell
water. What essentially happens is that
someone who has a consent to take a
certain amount of water either
groundwater from an aquifer or from
a river and isnt using it can sell that
surplus portion of water to someone
else who needs it. Most of this goes to
farmers wanting to irrigate, but Davoren has helped sell water to yam-washing and truck-washing businesses.
These deals have been going on for at
least 20 years, but were usually done
over a handshake in the pub. However,
with limits now being placed on how
much water can be taken, and greater
demand for it, its natural a market has
sprung up.
Its not explicit in the plans that you

shall have to pay for that water but

youre not going to give it away to somebody else and not get some recompense
for it, says Davoren.
So in 2007, people started asking how
much water was worth. To figure this
out, they looked at the amount they
could increase the yield from their land
if they had water (the rule of thumb is
you can at least double production if you
irrigate), how much water they needed,
and came up with a value per cubic metre (1000 litres). Davoren says that figure has ranged from 50 cents to $1.60
but is now about 80 cents.
Farmers generally need about 3500
4000 cubic metres per hectare. So for
a 10ha block, you need to buy at least
35,000 cubic metres. At the current
market rate, thats around $30,000.
All this is logical and seemingly a
straightforward transaction. But essentially whats happened is that a farmer
has been granted a consent to use a
public resource a consent that means
no other member of the public can use
that water and has then sold the water theyve got for free to someone else,
for a considerable profit.
Davoren stresses that while demand
for water and HydroTraders services are
increasing, the amounts being sold and
bought are small in the overall picture
of water being used for irrigation in Canterbury, with only around 4-5 million
cubic metres a year being traded.
But even that amount of water at 80
cents a cubic metre means more than
$2 million has changed hands so far this
year in deals brokered by HydroTrader.
So while the government and others
may insist nobody owns the water, some
people are certainly profiting handsomely by selling water they dont own
and have been allowed to use for free.
Its a situation Jan Wright admits New
Zealanders should be concerned about
and she questions why the government
doesnt receive any revenue from such
sales.
Davoren says to increase production
anywhere on New Zealands east coast,
you have to irrigate. If you havent got
a consent or cant store water on your
farm, or you buy a neighbouring block
without water rights, then your only
option is to buy water.
People are saying, This water is so
valuable to me that Im prepared to pay
for it to grow something.

WATER EVERYWHERE
To irrigate just one hectare of
farmland takes around 4000 cubic
metres a year about four million
litres. Domestically, an average
person uses about 250-300 litres
a day, or 100,000 litres a year.

Canterbury irrigators without a

water consent are paying 80 cents
per cubic metre for water they
have to buy. Charges for domestic
users around New Zealand with
meters vary, from $1.40 per cubic
metre in Auckland and $1.80 in
Tauranga to $2.05 in Nelson.
Canterbury has about
70per cent of the countrys
irrigated land.
Around two-thirds of
Canterburys consented water
4.36 billion cubic metres is
used for agriculture. Another
quarter is used for stock. Town
supply accounts for only 3.8
per cent of consented water
0.26 billion cubic metres.

So if thats the case, shouldnt there

be a price on water from the start
when someone is granted a consent in
the first place?
Look, I dont have an issue with people paying for water, says Davoren.
But it has to be global. If a farmer or
irrigator has to pay for water, then so
does the person in the city. I dont think
you can be discriminating about this.
The issue here, however, is the person
in the city isnt profiting from the water
they use. Farmers use their water to
produce more goods that they can sell,
and increase the value of their land.
(Davoren says land agents estimate irrigated land is worth about 1.6 times
more than non-irrigated land in Can-

terbury, but can be twice as much.)

Moreover, about half of New Zealanders arguably do pay for the amount of
water they use, through water meters
at their houses. Authorities claim
theyre not paying for the water itself,
but merely for the cost of the infrastructure and supplying the water to them,
or dealing with wastewater.
However, this seems convenient semantics, perpetuating the assertion
nobody pays for, or therefore owns,
water. But if youre paying a charge per
cubic metre of water for showering and
doing the dishes and watering the garden, and the more you use the more you
pay, it seems difficult to deny that people are indeed paying for the water itself in the same way that everyone
pays for electricity based on how many
kilowatt-hours they use.
Matthew Hooton says claiming domestic users arent actually paying for the
water is like saying when you buy a can
of Coke, youre only paying for the can
and the brand and the truck to get it to
the shop not whats inside the can.
No one owns the water and the water belongs to all of us are sing-songy
lines that have no particular meaning.

ony McCormick stands on the lip

of the Opuha Dam, inland from
Fairlie, admiring the lick of snow on the
surrounding hills. Itll eventually melt and
help fill the storage lake that irrigates 250
properties and 16,000ha downstream.
God knows, they can use all the help they
can get after last summer. In late February, the lake essentially went dry, dirt
bikes and 4WDs replacing the boats that
usually roar across its surface. For almost
two months, the irrigation scheme had
to be shut down the first time it had
happened since the dam was completed
in 1998. With an El Nio forecast this
summer, McCormick, Opuhas CEO,
doesnt rule out it may happen again.
The Opuha scheme is the poster child
of New Zealands irrigation industry.
The benefits its brought are used as
evidence that more irrigation will transform our economy, create jobs and save
regional towns. Blips such as what happened this year at Opuha dont undermine the value of irrigation schemes,
McCormick stresses they just reinforce that we need more water stored
behind more dams like Opuha to counter the dry years.
NORTH & SOUTH | OCTOBER 2015 | 55

Opuha CEO Tony McCormick at the Opuha Dam, inland from

Fairlie. In February, the lake, which irrigates 250 properties
and 16,000ha downstream, essentially went dry.

The last thing you need, says Tony

Howey, who farms downriver, is to
make farmers pay for water.
While more than half of Opuhas water
now feeds dairy farms, Howey has stuck
with growing grain, vegetables and berries. Irrigation has meant hes more than
doubled the number of people he employs, and the wages he pays them filter
through to South Canterburys economy.
Water is as fundamental to New Zealand as oil is to Saudi Arabia, Howey says,
because it has allowed farmers to make
the most from their land.
And while the general public might
think its a bad thing to be intensive, hell,
thats what weve built our economy on
intensive agriculture. If we were just
running a few sheep, one sheep to the
acre, it wouldnt be a very good-looking
economy round here.
Given the high cost of building new
irrigation schemes, and the cost of complying with environmental standards,
making farmers pay for water would
be a step too far. If you put a tax on it,
these schemes just wont happen; itll
just be a stifling of the economy.
56 | NORTH & SOUTH | OCTOBER 2015

Describing paying for water as a tax,

with its associated negative connotations, rather than simply a cost to business, is something Irrigation New Zealand frequently does. But to Andrew
Curtis, the industry bodys chief executive, thats exactly what it is. The way
he sees it, if farmers irrigate their land
they make more money and pay more
tax, which benefits all New Zealand.
If you charge me a tax for the water,
that just comes off my profitability and
I pay you less income tax. So do we create another tax and create more bureaucracy around the collection of that, or do
we just accept we have an income tax for
business in New Zealand that basically
says, if you make any money, well take
33 per cent of the dollar off you?
Any increase in land value from irrigation means an increase in rates that also
goes to the public purse, he says, and
farmers are already paying for water
through consents and through the cost
of getting the water to their properties.
Are we going to start saying were
going to put a charge on air? Curtis
despairs. This car uses air coming into

its combustion system, so theres now a

charge for that? Its the same principle.
But its not the same theres enough
air for everybody, but water is scarce in
places like Canterbury and has to be
rationed.
No, insists Curtis, weve got shitloads
of water were not water-limited in
any way, shape, or form.
He argues Canterburys alpine rivers
have phenomenal amounts of water,
and the answer is simply to get it to the
dry areas. Its about getting smarter
with water management. Its not about,
Oh, the end of the world is nigh and
its all buggered and youve got to stop.
If irrigation is hobbled or prevented,
Curtis says you might as well just stop
farming. Dont farm anywhere. Kill all
those local communities actually, a
lot of the Christchurch community as
well. So lets get real, because we all
like flat-screen TVs, we all like to come
out and have a coffee and do all those
things.
Curtis talks in torrents, a gush of repeated facts and arguments in favour of
free water, unstoppable, unstaunchable.
He attacks radical greenies and,
somewhat ironically, slaps at the antichange lobby; claims the officially
recognised definition of whether a river
is swimmable is just an emotive term;

says theres madness going on in relation to some environmental concerns.

Irrigation provides so many economic
and societal benefits, Curtis argues, that
theres no way farmers should pay for
the water they use. In fact, the public
should be funding more irrigation projects, he says.
But thats like saying taxpayers should
subsidise any business that could create
jobs oh, and by the way, how about
they chip in free electricity too.
Morgan Foundation economist Geoff
Simmons says our current system of dividing up water is the real madness, and
the obvious solution is to establish clear
ownership rights, price it, and make
farmers and hydroelectricity companies
pay for it. I dont view it as a tax. I view
it as a charge for something you dont
own the public owns it. To say this
would kill jobs or kill communities is
just absolute bollocks it just alters
behaviour.
Paying a fair price would mean users
valued it, used it much more efficiently, and it was used for the highestvalue products. Sure, there would be
difficulties moving to a system where
you auctioned water, rather than had
it by historical right for free.
But policy economist Peter Fraser, who
specialises in agricultural issues, says
there are precedents with other resources that we can draw lessons from, such
as how we allocated fisheries quotas or
divided the radio spectrum.
He also points to oil and gas companies, which pay licences to explore, and
also pay royalties for what they extract.
While acknowledging that requiring
farmers to pay for water is a very fair
thing, Fraser notes it will be extremely
hard for them to accept this while theyre
also being asked to help pay for dams
that are so horrifically bloody expensive. But the reason its usually left to
farmers to fund the schemes is other
investors can see that the numbers actually dont stack up.
Its the 21st century version of Think
Big in that its big, stupid engineering
solutions to solve a problem where there
are actually better ways of doing it. Were
effectively producing water-hungry,
low-value goods dairy being the prime
one.
Its something economic commentator Rod Oram also points out the governments push to increase the coun-

Irrigation in Canterbury. Some estimates say there are another 500,000ha in

Canterbury that could be irrigated.

trys primary exports isnt really about

increasing value, but increasing volume
pouring more water on to land for
more dairy cows. And thats all that
irrigation is about.
Oram says rather than encouraging an
industry that takes 1000 litres of water
to produce a single litre of milk, it would
make far greater environmental and
economic sense to investigate how to
farm better in dry climates where water
is scarce things like grasses that grow
deeper roots, how to improve soil quality, and catching water on farms rather
than massive dams and lakes and networks of pipes.
Charging for water needs to be looked
at now, he says, because crucial decisions are already being made about
many catchments, pressure on water is
increasing, and climate change will only
exacerbate this. Absolutely its complicated. But heck, if we cant work out
complicated systems, then theres no
hope.

he avowal that nobody owns water

and nobody pays for it has never
been true despite what the Bible may
have promised and politicians perpetuated. When gold miners flocked to New
Zealand in the 1860s and started scouring our hinterland, water was precious
it was the only way to sluice away earth
to reveal the gold. So canny businessmen
constructed races from high rivers and

built storage lakes to hold the water,

which they then sold to miners. Visit
Central Otago and you can still see the
remains of this private enterprise.
Of course, many will argue now is
absolutely the wrong time to be raising
this issue, to be suggesting farmers
should pay for water, given how our
crucial dairy industry is besieged by low
prices. But when would be a good time?
When the milk payout is nearer $8 rather than around $4 as it is now? At that
time youd still be accused of sabotaging
the economys engine room. And as
more farmland slips into foreign ownership, shouldnt we be considering if
a crucial natural resource thats under
increasing pressure should be given to
them for free as well, so they can make
profit that goes overseas?
So maybe this is exactly the right time
to confront the issue when the value
of what were using an increasingly
scarce resource for is laid bare. When,
despite so much of that resource underpinning one industry, so many farmers
arent making a profit and may go broke.
And at the same time, weve brought
ourselves a host of environmental impacts, notes economist Geoff Simmons.
Theyre getting a free input their most
crucial input and are profiting from
that water. And their land values go up
when they get a consent to use water
but theyre not even taxed on that. Its
an incredible situation really. 
+
NORTH & SOUTH | OCTOBER 2015 | 57