The wealth in the waterways

April 3, 2010
Making money from the water of the Waimea will mean spending money first, writes Geoff Collett.
--------------------
Nelson MP Nick Smith's analogy of New Zealand water to Saudi oil is apt in various ways - not least for the potential wealth it speaks of that lies in the billions and billions of litres flowing down rivers such as the Waimea each year. And it is money that will lie at the heart of the debate over whether the Lee dam becomes the solution to watering the Waimea Plains for the next 100 years.
The price tag for the dam is intended to be mostly, but not entirely, paid for by those who want to take water, whether to water crops or for urban supply. But attached to that price tag are two looming questions that could conceivably derail the plan.
The first has been well publicised - the cost to irrigators and others who will want to tap into the Waimea aquifer. It has been calculated out on a per-hectare basis and could be up to as much as $580 per hectare on the calculations prepared so far.
In part, it reflects the detailed financing arrangements planned to get the dam built, but it has surprised even those closest to the project. Worryingly for them, it has caused some would-be irrigators to balk, especially those whose properties could do with water but don't depend on it to survive.
The immediate risk is if too many landowners opt out of the scheme, the costs for those who want or need to be part of it will start to spiral.
The dam size could be reduced to get the bill down, but the committee would be reluctant to do that, chairman Murray King says. At that point, the area that could be serviced would have to be reduced, potential users would miss out and the group's determination to set up the Waimea district with a scheme that will last 100 years would be eroded.
"I know that in 20 years, we will look back and say, 'Why didn't we do it sooner - it looks cheap', " he says.
The consultants who came up with the numbers have put things in blacker and whiter terms. They say that if such a project does not go ahead, the cost to the region through lost farm productivity could amount to $440 million over 25 years.
Whatever you make of such projections, clearly, as Dr Smith points out, the value of water to productive land is vast and lasting.
He thinks today's landowners should bite the bullet. "The cost of their share of contributing to the scheme will pay them more than enough dividend in terms of increased land values from an improved water supply, " he says.
But that leads to the other critical factor hanging over the Waimea project. While it envisages irrigators meeting most of the cost, it is based on also receiving a hefty boost from the public purse.
The augmentation committee has settled on the view that 30 per cent of the total benefits of securing flows down the river will go to the public rather than irrigators, and so 30 per cent of the bill - say, $12m - should come from taxes or rates.
As Neil Deans, of Fish and Game, points out, the argument can quickly become complicated. Some could argue that there would be no need to pay to keep the river healthy in the first place if the irrigators hadn't been allowed to take so much water. He can see the other side, that if there is to be a benefit to the community from the work, the community should contribute. But should it be as much as 30 per cent? "That's a very hard question. I've thought long and hard about that. The answer is probably. I may never be able to give a better answer than that."
After all, as he points out, the Opuha Dam in South Canterbury - a similar scheme, and widely regarded as a boon for the local farming community - was entirely funded by irrigation interests.
Dr Smith is sympathetic to the argument for a contribution from rates and taxes, but not uncritically so.
The debate about how costs and benefits from irrigation should be carved up is happening in government circles, he says, and it is not straightforward. He thinks that ultimately the Government will accept it has some role to play in helping new schemes happen, for the greater good they can deliver. He hopes, but does not promise that the Government will stump up something to the Lee dam, presuming it gets built. But he is cagey about how much. "I don't want to lock myself into a position when there is still a further process of community consultation".
And he adds: "I do have a firm message for landowners, and that is, you cannot expect the taxpayer or the ratepayer to fund your improved land values."
A further complication for the committee is Nelson city's role. The Nelson City Council has officially been part of the project to date and Mr King says it makes sense for it to remain so, meaning, presumably, helping pay if and when the dam gets built.
The council, however, doesn't see it that way. Its staff representative on the Waimea water committee, utilities engineer Dave Plant, says the city considers it has "sufficient water for the very foreseeable future with the Maitai dam", which provides plenty of drought security. Indeed, not only is the council unlikely to stay involved in the Waimea project, but it hopes to eventually claw back the $200,000 seed money it contributed to help get the project started.
Mr King hopes the council can be convinced to look at the project differently. While he is reluctant to comment much on Nelson's situation, "thinking longer term, there are a couple of things that we see with Nelson's water that they don't".
Then again, if the Waimea scheme did not need to include provision for helping water the city, it could help scale back the dam size and push the price down a bit. That's one possibility, Mr King confirms, but equally, "we might find someone else might want it [the city's share]. Someone else might underwrite it and sell it back to Nelson city later. Who knows?"