Tony Orman looks at tradable water rights which has created a nightmare for farmers and growers in Australia and finds an uncertain murky situation in New Zealand
On November 18, 2019, “The Australian” arguably Australia’s most astute and credible newspaper that has not succumbed to the tabloid trash style, ran an article titled “Plea to Rein in Water Barons to Help Suicidal Irrigators”.
The article reported that top Australian “farm groups have privately begged state and federal governments to take immediate action to curb alleged speculation by ‘water barons’, to defend suicidal irrigators” – i.e. growers and farmers.
In 2014 the Australian government removed all restrictions as to who could trade water, allowing non-farming individuals and companies that did not use water, to enter the market and speculate.
The corporates moved in and prices climbed steeply from a long term average of $135 a mega-litre to virtually $1000 – a 750% increase. The additional price pressure would be the difference between surviving the drought or going bankrupt, said the Australian Grape and Wine Association.
Then came the dark stark reality of the impact – “It’s not just the potential for economic damage, but the human cost with many accounts emerging of suicidal irrigators.”
The term “water barons” was not used lightly by “The Australian.” The paper revealed that Duxton Water, a publicly listed company, was established by former high-flying international Deutsche Bank traders.
“Duxton Water has no land and uses no water, have bought and hoarded water rights in vast quantities and cornered the market, creating a price squeeze.”
Money and profits seemed Duxton’s sole motivation. Over the three or so years since it listed on the stock exchange, Duxton Water amassed water rights worth $256 million, controlling 74 billion litres of water. Shareholders reportedly enjoyed a return of almost 30 percent to June 2019.
What is the situation in New Zealand?
The concept of selling water rights is nothing new. Up until 1910, water rights were sold as mining privileges in Central Otago and those extensive rights apparently still exist. Then came the turbulent 1980s, Rogernomics and the free market was ushered in. The Resource Management Act apparently allowed water rights to be sold within a catchment and used for a different purpose, e.g. irrigation instead of domestic supply., provided it was compatible with the regional plan.
Basically free marketeers put an economic value on natural resources, the theory being that people valued things most when they have to pay for them. The more they pay, the more they value them, so the doctrine goes.
In 1990, the Tasman Institute – a subsidiary of the old Business Roundtable – driven by free market adherents such as Ron Trotter, John Fernyhough, Roger Douglas, Rod Deane and others, was set up. Fernyhough was chairman of the newly set up SOE Electricorp and Deane chief executive. Later that year Electricorp hosted a seminar with admission costs of over $1100 for just a two day session.
Water Now Gold
The promotional material promised to tell the speculators how they could “benefit from the possible sale of one of New Zealand’s greatest assets.”
In other words water had become gold.
The waters become muddied somewhat as individuals, even conservationists, positioned themselves in the potential gold rush. Environmentalist Guy Salmon had already become controversial within conservation circles for his advocacy of using “market forces” to manage natural resources such as water.
And the idea of charging for water was not just hitting farmers and growers. The public’s outdoor recreation was in line for impact. Electricorp in 1987 tried to charge the New Zealand Canoe Association $10,000 one weekend for use of water in the Mangahao Rive from its dams in the Tararua Ranges.
Fast forward to the 21st century and the water was further muddied. In 2012 Prime Minister John Key said “nobody owns water” which only served to further confuse the situation. Key was speaking on the proposed part-sale of state-owned energy companies and a claim lodged by the New Zealand Maori Council with the Waitangi Tribunal to stop the part-sale of state-owned enterprises until the water and geothermal ownership was resolved.
Since then controversy erupted around bottled water as the then National-led government allowed overseas speculators, such as Chinese, to move in on the resource. New Zealand’s bottled water exports skyrocketed in 2019, up more than 270 per cent and most of it headed to China.
The current government fiddled as it struggled to deliver on its 2017 election promise to charge bottled water exporters. In September 2018, New Zealand was sending 31.5 million litres overseas (valued at $26 million) and in 2019 it jumped to almost 118 million litres (valued at $62 million).
And again the corporates and foreign ownership were prominent. Aotearoa Water Action’s Nikki Glading said “We’re no longer seeing little small plants operating locally, we’re seeing large plants that have massive investment from overseas.”
The bottled water industry sparked vigorous public protest and forced strong political debate.
It was then announced that new rules around water bottling would instil better control.
Environment Minister David Parker said the Government will now “require consideration of the impact on water quality and sustainability of a water bottling enterprise, when assessing an investment in sensitive land”.
Maori are far from satisfied with the current situation over water.
Matthew Tukaki, Executive Director of the New Zealand Maori Council told the National Freshwater Conference in Wellington in February. that Maori had a guardianship over water.
“Let me be clear, Maori have a guardianship, ownership and protection role when it comes to the nations freshwater ways and let me be even clearer – if what has been happening to our freshwater eco-systems and ecology over the last hundred years was working then we would not be a position where we have hundreds of at risk waterways up and down and all around the country.”
He said Maori had been forced to head to the Waitangi Tribunal to prove the case that they had been “left out of the loop” or ignored when it came to water in New Zealand.
“The truth is we now have deepening problems not just with the state and cleanliness of our waterways but also the allocations granted through local government, the extracting of water by foreign companies, the degradation of our aquifers and more,” said Matthew Tukaki.
He called for action instead of just talking about the problem.
“We need to cut this talk —- the work needs to start now, we need to set much more ambitious targets and it must be led on partnership with Maori,” he said.
He expected a joint working group between Maori and the Crown should be set up and said a high court test could be in the offing.
“ And everything will be on the table from the High Court test case right through to RMA reform, a much more detailed plan of Maori engagement, allocation rights, ownership and more,” he said.
Outdoor recreation groups – particularly the trout fishing public – want to be involved in the debate and decision-making. were under new illusions. The New Zealand Federation of Freshwater Anglers – a trout and rivers advocacy – said immediate steps should be taken to pass a Water Act to put ownership of water firmly and clearly into public ownership with strong safeguards written in to ensure its future.
Federation President Dr. Peter Trolove argued it was well nigh time for reassessment of “the messy situation” and immediate action over the lack of security of the public’s rivers and aquifers.
“The precarious state of water both in quality and quantity has been caused by politicians cultivating uncertainty and allowing exploitation for profit,” he said.
A Public Ownership Water Act should:-
(a) put water into public ownership
(b) Ban tradable water rights
(c) Ban private profiteering of water for export
(d) Ban foreign involvement
“There’s nothing xenophobic about this as water firmly and foremost should belong to all New Zealanders,” he added.
“In essence the Crown has failed to meet its obligations to the Treaty and to all New Zealanders. Government should urgently move to enshrine in law, public ownership of water.”
Council of Outdoor Recreation Association’s chairman Andi Cockroft said the Australian experience was a strong warning to New Zealand to get its act together over water.
“Witness overseas and the dangers Aussie farmers and growers have faced over recent months with extortionate prices being charged for water at a time of severe shortage – with water barons cashing in on their predicament while politicians take vacations overseas. This is not to mention the wildfires that raged over there.”
He drew a comparison with tradable fish quotas of the Quota Management System where in a few short decades, the fishery resource was now dominated by corporate fishing companies aggregating quota.
Federated Farmers NZ water spokesman Chris Allen recently visited Australia and in particular the Murray Darling basin.
The Australian Federal government had invested over $13 billion into water use efficiency, metering and conservation.
“Water is more than ever vital and precious for both human needs, production and the environment,” in an area the size of France and Spain combined he said. The government desired a 30% reduction in allocated volume to provide for the environment. To carry out this a few things had to happen. “Land and water are now disconnected from each other to allow trading of entitlements to take place. The state governments own the water and significant storage infrastructure. This means water can now be traded either short or long term or permanently.”
The Murray-Darling catchment was 70 percent allocated for consumptive uses mainly irrigation.
“No one pays for water but an annual contribution toward the infrastructure upgrades and operational running costs,” he explained. Given that the State Governments own the water“the only way the federal Government could leverage significant change was was through biodiversity for which the Federal Government is responsible.” thus the development of the Murray Darling Plan.
(a 30% reduction in allocated volume was bought back on the water on the market to provide for the environment.
There was a “huge investment “by the Federal government in the total upgrading costs for every take point to new age water meters.
Canterbury ecological scientist Rex Gibson said the current government’s position appeared to still be that “the people” owned the water.
“However this is complicated by the vocal irrigation lobby, especially in Canterbury where 70 percent of New Zealand’s irrigation occurs. It also sits in limbo whilst the role of Iwi, via the Treaty of Waitangi, in water management and ownership is debated. This debate is probably some years from settlement and will likely be settled around the management of waterways of traditional and cultural significance rather than a blanket rule,” he said.
Photo:-Tongariro River – Don’t let public’s water be tradable, “wheeled and dealed”