Improving the Water
Allocation Framework in New
Zealand: Enhanced Transfer
Richard Hawke
Ministry of Economic Development
Occasional Paper 06/09
May 2006
Ministry of Economic Development Occasional Paper 06/07
Improving the Water Allocation Framework in New Zealand: Enhanced Transfer
Date: May 2006
Author: Richard Hawke
Contact: [email protected]
Disclaimer
The views, opinions, findings, and conclusions or recommendations expressed in this
Occasional Paper are strictly those of the author(s). They do not necessarily reflect
the views of the Ministry of Economic Development. The Ministry takes no
responsibility for any errors or omissions in, or for the correctness of, the information
contained in these occasional papers. The paper is presented not as policy, but with
a view to inform and stimulate wider debate.
Key Points
The water resource underpins New Zealand’s economy and environment. The
allocation of this finite, scarce and valuable resource must consider economic and
environmental objectives to ensure that the allocation arrangements enable water to
be used efficiently and be allocated to its highest value use.1 The present allocation
arrangements need to be improved to achieve better economic and environmental
outcomes.
The transfer of water permits is enabled by the Resource Management Act 1991.
However, there are relatively few examples of it actually occurring. There are
numerous legislative and non-legislative barriers that may explain the lack of such
transfer.
The current water management legislation limits the potential for the transfer of water
permits because resource consents lack adequate specification to promote optimal
resource use. In particular, the bundling of the right to take water with the right to
use water limits the potential for transfer.
Enhanced transferability could reduce pressure on existing water permit holders and
on the environment. Transferability is not a solution everywhere or at all times. But it
has the potential to yield significant environmental and economic benefits in some
areas. Effective transferability would introduce flexibility and resilience into the
overall environmental management system.
1 Use in its broadest sense, i.e. use extends from abstraction for consumptive uses to instream
ecological uses.
Executive Summary
In April 2006 the Government agreed to key outcomes for the sustainable
management of New Zealand’s freshwater. At the same time Cabinet directed
officials to report back on a number of implementation measures including possible
enhancements to the transferability of water permits.
In 2004 the Council of Australian Governments (COAG) agreed to implement the
National Water Initiative (NWI). One element of the initiative was an agreement on
the principles affecting water transfer. This element built upon the 1994 COAG
agreement. Key elements of the 1994 agreement were: to reform pricing; to clarify
water property rights, particularly the separation of water property rights from land
title and a clearer specification of a water entitlement; to allocate water to the
environment; adopt transfer mechanisms; to reform institutional arrangements and
improve public consultation. Given the much longer history of water reform in
Australia, and the general similarity of the two countries’ legislative arrangements
prior to these reforms, the objective of this paper is to assess the provisions of the
New Zealand arrangement in light of the principles affecting water transfer in the
NWI.
The transfer of water permits is enabled by the Resource Management Act 1991 and,
indeed was enabled by the Water and Soil Conservation Act 1967. However, there
are relatively few examples of it actually occurring. There are numerous legislative
and non-legislative barriers that may explain the lack of transfer.
There is no intrinsic merit in developing markets in natural resources. However,
when faced with escalating demands and increasing scarcity there is considerable
literature on the role for market-based mechanisms. This is not about privatising the
resource. It is about allocating access to a valuable and scarce resource and
establishing a role for the market within a clear and defined administrative planning
framework. In Australia one of the key transformations that took place at the end of
last century was the acceptance that environmental and economic outcomes would
benefit from enhanced transferability.
The current water management legislation limits the potential for the transfer of water
permits. At present, resource consents lack adequate specification to result in
optimal resource use. In particular, the bundling of the right to take water with the
right to use water limits the potential for transfer.
Enhancements to the transfer provisions could facilitate more efficient sharing and
use of the available water, particularly in catchments where the water is fully
allocated or nearly so. Greater use of transfer provisions could reduce pressure on
existing water permit holders and on the environment. Transfer of water rights is not
a solution everywhere or at all times but it has the potential to yield significant
environmental and economic benefits in some areas. An effective transfer
mechanism would introduce flexibility and resilience into the overall environmental
management system.
Table of Contents
Key Points ................................................................................................................................. i
Executive Summary ................................................................................................................. ii
Introduction...............................................................................................................................5
The Context..............................................................................................................................7
Transferability .......................................................................................................................7
Applying any of the principles of the National Water Initiative to New Zealand....................7
The National Water Initiative.................................................................................................8
Water Transfer Under the RMA................................................................................................9
Introduction ...........................................................................................................................9
Non-legislative Barriers to Water Transfer..........................................................................11
Legislative Barriers to Water Transfer ................................................................................11
The New South Wales Experience with Implementing a Property Rights System for Water
Management.......................................................................................................................13
Water Management Legislation in New Zealand: Why Does This Limit Transfer? ................16
Desirable Reforms..................................................................................................................20
Clarity of rights....................................................................................................................20
Effective Water Transfer .....................................................................................................21
Conclusions............................................................................................................................26
Court Cases Cited ..................................................................................................................27
References .............................................................................................................................28
Appendix One: Paragraphs 58 – 63 and Schedule F from the NWI.......................................33
Water Markets and Trading ................................................................................................33
Appendix Two: Relevant sections of the RMA .......................................................................36
Section 2: Interpretation......................................................................................................36
Section 5: Purpose .............................................................................................................36
Section 7: Other matters.....................................................................................................36
Section 14: Restrictions relating to water ...........................................................................36
Section 30: Functions of Regional Councils .......................................................................37
Section 31: Functions of Territorial Authorities ...................................................................39
Section 136: Transferability of water permits......................................................................39
Section 354: Crown’s existing rights to resource to continue .............................................40
Appendix Three: Relevant Sections for the Water and Soil Conservation Act 1967 (repealed
by the RMA) ...........................................................................................................................41
21 Rights in Respect of Natural Water ...............................................................................41
24A Transfer of Rights........................................................................................................42
Improving the Water Allocation
Framework in New Zealand
Introduction
Water is critical for economic growth and environmental outcomes. The water
resource underpins New Zealand’s economy and environment. The allocation of this
finite, scarce and valuable resource does not have to imply a tradeoff between
economic and environmental objectives. Rather, the allocation arrangements have to
enable water to be used efficiently and allocated to its highest value use.2
The Resource Management (Amendment) Act 2005 implemented a number of
enhancements to the environmental management regime in New Zealand. It
concentrated on getting better and faster decisions on resource consents, providing a
means of working with councils when decisions are too big for local decision making,
and demonstrating more national leadership, especially through national policy
statements and standards. 3 However, it was noted during the review process that
there was a separate policy process, the Sustainable Water Programme of Action
(SWPoA), which could lead to recommendations for legislative changes focussed on
enhancements to the water management regime.
In December 2004 the “Freshwater for the Future: Issues and Options” discussion
document, prepared as part of the SWPoA, noted that transferable water permits
were one area of potential enhancement i.e.: “Action 7: Enhance the transfer of
allocated water between users … more central government facilitation and
2
Use in its broadest sense, i.e. use extends from abstraction for consumptive uses to instream
ecological uses.
3
http://www.mfe.govt.nz/publications/rma/rmaa2005-factsheets-aug05/overview/overview.html
5
encouragement for local councils to consider water transfers”.4 This work built upon
the work in the earlier water allocation technical report (MfE, 2004) that included a
component looking at options to encourage regional councils to consider water
transfers and to remove the barriers to, or reduce the transaction costs involved in,
such transfers.
In April 2006 the technical information paper “Freshwater for the Future: A supporting
document” that outlines key outcomes for the sustainable management of New
Zealand’s freshwater, presents possible enhancements to the current water
management regime, including changes to enhance the transfer of water permits. It
recognised that New Zealand should learn from the water reform experiences - both
positive and negative - of Australia. Given the reforms undertaken by Australia, and
the general similarity of the two countries legislative arrangements prior to these
reforms, the objective of this paper is to assess the provisions of the RMA in light of
the principles affecting water trading5 outlined in the Australian National Water
Initiative (NWI).6 The barriers to water transfer in New Zealand in terms of the nature
of New Zealand’s water resources and societal attitudes are well known; however,
there is less written on the barriers associated with the underlying legislation; this
paper addresses that gap.7
4
Water Programme of Action inter-departmental working group 2004: Freshwater for the Future:
Issues and Options, a public discussion document on the management of New Zealand’s freshwater
resources, page 21
5
The term “water trading” is the preferred terminology in Australia whereas the preferred terminology
in New Zealand is “water transfer”. Both terms mean the ability to transfer/trade the right to take
water; ownership of the underlying resource is not implied.
6
Particularly paragraphs 59 – 63 and Schedule F.
7
References include: MAF Policy, 1997 and Robb et al. 2001b.
6
The Context
Transferability
New Zealand has adopted transfer mechanisms to assist in the management of
scarce natural resources, for example in commercial fisheries. Transferability has a
number of theoretical benefits, such as: improved allocative efficiency because use
can migrate to higher value users; dynamic efficiency because a transfer allows
reallocation to occur and provides signals to potential investors; and, technical
efficiency because it encourages users to consider the most appropriate amount of
use. In terms of water permits transferability reduces the need for administrators to
make increasing complex and contentious allocation decisions and transferability
reduces the potential conflict between permit holders and between permit holders
and councils over the availability of water for allocation. This also potentially benefits
the environment because the pressure to allocate access to the detriment of the
environment is reduced.
Applying any of the principles of the National Water Initiative to
New Zealand
Attempting to apply any of the principles of the NWI to New Zealand requires an
understanding of the context of the NWI. In 1994 the Council of Australian
Governments (COAG) agreed on a National Water Reform Agreement to provide the
strategic framework for substantial Australian water reform to “achieve an efficient
and sustainable water industry”8, i.e. the reform encompassed economic,
environmental and social objectives. This agreement was against the backdrop of
Federal Inquiries9, which identified declines in environmental quality and the need for
microeconomic reform. It was recognised that it would be unsustainable for Australia
to continue its water use trend and that an important part of the solution to
environmental problems lay in policy and institutional change and that that this would
require substantial reform. Therefore the COAG water reform agreement was tightly
linked to general competition reforms and it linked environmental and economic
objectives.
The 2004 Intergovernmental NWI Agreement built on the 1994 agreement. The
objective of the NWI is “to provide greater certainty for investment and the
8
Communiqué of the Council of Australian Governments (COAG), February 1994; Attachment A: the
National Water Reform Framework Agreement
9
Including the Hilmer Committee on National Competition Policy (NCC, 2006)
7
environment, and underpin the capacity of Australia’s water management regimes to
deal with change responsively and fairly”10. This desire to place greater emphasis on
environmental objectives and outcomes, and comprehensive water planning is well
aligned to the “sustainable management” purpose of the RMA.11
The National Water Initiative
The Australian Commonwealth and State Governments agreed to implement the NWI
“in recognition of the continuing national imperative to increase the productivity and
efficiency of Australia’s water use, the need to service rural and urban communities,
and to ensure the health of river and groundwater systems by establishing clear
pathways to return all systems to environmentally sustainable levels of extraction”.
The objective was to provide “a nationally-compatible, market, regulatory and
planning based system of managing surface and groundwater resources for rural and
urban use that optimises economic, social and environmental outcomes”12; a much
more comprehensive objective than that of the 1994 Agreement.
The environmental objectives of the NWI are clearer and stronger than those in the
1994 Agreement. The agreement included: the enhancement and certainty of water
access entitlements; best practice water pricing; the progressive removal of barriers
to trade in water; the statutory provision for environmental and other public benefit
outcomes, particularly through the use of comprehensive water plans; and improved
environmental management practices, such as the collection of robust data. One
element of the NWI that built upon the 1994 Agreement was the principles affecting
water trading.13 Thus both New Zealand and Australia have invested considerable
resources into enhancing their water management frameworks. New Zealand has
the opportunity to learn from the good and bad experiences of Australia, particularly
in terms of enhancing the framework for the allocation of water.
10
Intergovernmental Agreement on a National Water Initiative (COAG 2004); paragraph 5.
s5, Resource Management Act, 1991
12
Intergovernmental Agreement on a National Water Initiative (COAG 2004); paragraph 23.
13
The outcome desired is outlined in paragraph 58 of the NWI, Appendix One.
11
8
Water Transfer Under the RMA
Introduction
The historical basis for New Zealand water law is similar to that of many Australian
States.14 For example, in a manner similar to the New South Wales Water Act
(1912) the New Zealand Water and Soil Conservation Act (1967) vested in the Crown
the rights to dam, divert, discharge or use all natural water15; i.e. the Crown holds the
rights for the people, or because the underlying resource is not capable of
‘ownership’ the Crown asserts the rights to manage the resource on behalf of
everyone. That is, the old system of common law rights was replaced by a system of
statutory rights. The Crown vesting was reinforced by the creation of offences such
as the unauthorised taking of water. In this way the old common law rights that were
previously used to manage the water resource were replaced, i.e. the effect of s 21 of
the Water and Soil Conservation Act was that “Common law rights are extinguished
and statutory rights where appropriate are to take their place”.16
With the entry into force of the RMA on 1 October 1991, the Water and Soil
Conservation Act 1967 was repealed; however, the legislative system of discretionary
administrative disposition of statutory privileges, that was contained in the 1967 Act
was carried forward in the RMA via s14 and s354 (Appendix Two).17
The result of s14 is to make it an offence to take, use, dam or divert any water (other
than coastal water) in a manner that contravenes a rule in a regional plan or a
proposed regional plan unless expressly allowed by a resource consent (water
permit) or allowed by s20A, which makes certain activities lawful. Following the
common law principles a person is not prohibited by s14(1) from taking, using,
damming, or diverting freshwater if it is required for: an individual’s reasonable
domestic needs; or the reasonable needs of an individual’s animals for drinking
water, and the taking or use does not, or is not likely to, have an adverse effect on
the environment (s14(3)(b)). Interestingly the Environment Court recently ruled that
14
But without the complication of the Constitution and the interaction of the Federal and State
Governments.
15
Section 21(1) of the Water and Soil Conservation Act 1967 (Appendix Three)
16
Woodhouse J in Glenmark Homestead Ltd v North Canterbury Catchment Board 1978 1 NZLR 407
at 412 (CA). McMullin J stated that it was “difficult to conceive of any interference with water which
would be outside the scope of [section 21]” Stewart v Kanieri Gold Dredging Limited [1982] 1 NZLR
329 (CA).
17
In Falkner v Gisborne District Council [1995] NZRMA 462 it was noted that where common law
rights are inconsistent with the provisions of the RMA then those rights are no longer applicable.
9
the definition of water under the RMA is broader than the definition under common
law and therefore does encompass water taken from a water race of an irrigation
scheme.18
The RMA describes a resource consent as being neither real nor personal property
(s122); however, the High Court has ruled that the RMA’s comprehensive statutory
management regime for water allocation and use effectively prescribes a licensing
system and elevates the status of a water permit from a simple licence to a licence
plus a right to use the resource.19 Therefore while permits are neither real nor
personal property the fact a permit has considerable value means it has some of the
characteristics of property. In addition, s122 allows the holder of a resource consent
to grant to others the use of their consent as if it were personal property, unless the
consent expressly provides otherwise.
Section 136 of the RMA enables water permits to be transferred (the old s24A of the
Water and Soil Conservation Act 1967 was carried forward). Section 136(1) provides
for water permits to take and/or use water to be transferred to any owner or occupier
of the site in respect of which the permit was granted. To transfer the permit to
another site within a catchment is subject to the approval of the consent authority,
unless expressly allowed by a regional plan (s136(2)). When transfers are permitted
under s136(2), the High Court has ruled that the council role is effectively one of a
post box; the Council receives the transfer and notes its register accordingly.20 That
the Council has no active role in such a case is supported by s136(3) which indicates
that the transfer is ineffective until “received” by the relevant consent authority.21 The
Resource Management Amendment Act 2005 clarified that transfers could be
temporary (s14(2A)) as well as permanent.
Despite the provisions for water transfer there are relatively few examples of it
actually occurring. Transfer has occurred in isolated cases (e.g. private contractual
agreements in Otago), temporary transfer was enabled by the Opoua Catchment
Water Allocation and River Flows Regional Plan in the Manawatu and Fenemor and
Sinner (2005) provide examples of formal and informal transfers occurring in the
18
Alexander v Wellington RC (2005) ELRNZ 39 (Env C)
Aoraki Water Trust v Meridian Energy Ltd (2005) 11 ELRNZ 207; 2005 NZRMA 251 (HC)
20
The Favourite Ltd v Vasasour 22/3/05, HC Blenheim CIV-2004-406-32
21
This position was supported by Williams, D 1997: Environmental & Resource Management Law (2nd
ed.) and Re Mangawhai Habour Restoration Society Inc (Env C Auckland, A 119-04, 7 September
2004) Judge Newhook held that the Council’s role in receiving notes of transfer was a “function” rather
than a power or duty.
10
19
Waikato (but relatively few transfers have occurred to date). There are also specific
instances where transfer is well understood, for example, within some of the
community level irrigation schemes in Canterbury water transfer has been
occurring.22
Non-legislative Barriers to Water Transfer
There is an extensive literature on the benefits of and barriers to water transfer in
New Zealand.23 The barriers to water transfer include both issues surrounding the
fundamental underlying concept and issues surrounding the operational detail. For
example, a common concern for users is that of losing their permit irreversibly to
alternative users/uses or that transferability would speed up landuse change, and so
it is not surprising that water users are more comfortable with temporary (or withinseason) transfer than permanent transfer (MAF Policy, 1997; Robb et al., 2001b). It
has been argued that enhanced transferability is a move towards privatisation of a
community resource. In addition to the philosophical concerns are issues with
operational detail; for example, how are permits to be allocated, the mechanisms of
transfer and monitoring and a shift in control away from Councils.
It has also been argued that the small size of many New Zealand catchments limits
the potential net benefits in terms of gains from better use of water as compared to
the transaction costs involved in facilitating increased transferability. Also, because
very few catchments have been closed off to new applicants there has not been the
same impetus for transferability as in much of Australia. In addition, there is a
fundamental restriction on enhanced water transfer - the legislative basis of water
permits and how they are specified; it is these barriers that are the focus of this
paper.
Legislative Barriers to Water Transfer
At present, despite a water right being more than a simple licence, there is almost
universal agreement that the property rights associated with water lack adequate
specification.24 Property rights are a bundle of rights with a number of dimensions;
22
Participants within these schemes also understand the value of water because the alternative to
purchasing water from the scheme is drilling a groundwater bore.
23
Even prior to the RMA there were recommendations to make water permits transferable, e.g. Jarden
Morgan (1989).
24
The key issue with a property rights framework is that it is not the property that is owned, it is the
rights to use the property that is owned. For water rights the key rights are: flexibility, divisibility,
quality of title, exclusivity, duration and transferability (see Guerin, 2003 and Harris Consulting and
11
they do not have to imply ownership of the underlying resource, but can be
considered to have the following dimensions (ACIL Tasman, 2003; Guerin, 2003):
•
Flexibility and divisibility. That is, can the right holder transform the right; e.g
can the right holder lease all or part of the right for less than its full term?
•
Exclusivity. That is, do the direct benefits and the costs associated with the
use of the right accrue solely to the holder; i.e. is it possible to exclude others
from use of the right?
•
Quality of title. The right should be clearly specified so that owners and
potential holders understand exactly what benefits and obligations the right
brings. For example, the right may be to an absolute amount of resources or to
a proportional share of a pool. In the case of water rights a secure title does
not mean that the access to the water should be secure, but that the access
rights should be. Nor does a secure title require that the rights cannot be
attenuated, but attenuation should be on the basis of well-understood and
recognized principles.
•
Enforceable and enforced. It must be possible to determine, including
information requirements, when the rights have been infringed and to have
legally binding ways of preventing this or providing redress.
•
Duration. What is the duration of the right? Is it permanent? What is the basis
for reallocation and whether the right holder would have any preference for
future allocations?
•
Transferability. What is the basis for initial vesting of the right and are there
any limits on transferability; e.g., to who, at what price, how often.
The level of resources invested in defining and enforcing property rights depends
upon the marginal benefits and costs to investors and so will change as the level of
technology, scarcity and access to state power change (Anderson and Hill, 1975). In
general, the rationale for creating new rights regimes is to improve the efficiency of
use of an underlying resource. Numerous authors have noted that the lack of
effective water rights can create major problems for managing an increasingly scarce
The Agribusiness Group, 2003). The Productivity Commission (2003) undertook a substantial review
of water rights in Australia and elsewhere.
12
resource (e.g. Bruhns, 2003; Counsell, 2003; Counsell and Evans, 2005) and that
carefully defined property rights are a prerequisite for this (e.g. Crase et al., 2000;
National Competition Council, 2001; Natural Resource Management Standing
Committee, 2002). The Resource Management (Amendment) Act partially
recognised this issue by requiring consenting authorities to consider an application by
the existing consent holder prior to a new application (s124B) and when considering
an application the consenting authority must consider the value of the investment of
the existing consent holder (s104(2A)).
The New South Wales Experience with Implementing a Property
Rights System for Water Management
In Australia one of the key transformations that took place at the end of last century
was the acceptance that society in general would benefit from improved clarity of
entitlements in order to make decisions about natural resources. In NSW it was
recognized even prior to the 1994 COAG reforms that a system of tradable property
rights brought real gains. In rural NSW changes to the water management regime
were in response to escalating demands and increasing water scarcity (Haisman,
2003). Until that point, when water was abundant and could be used freely without
detracting from the needs of other users, there was little demand for government
regulation and certainly no requirement for a market in tradable water entitlements.
However, when faced with escalating demands and increasing water scarcity the
government was faced with two approaches. The first was to continue to permit
users to access and use the water resource on a first-come-first-served basis. Once
the resource was fully allocated, this would have resulted in some users enjoying
supply based on historical precedent and at the expense of higher-value (potential)
users. Continuing to grant permits would also result in over-use and impacts on
water quality. To prevent over use and declines in water quality would require
increased regulation. However, increased regulation would force the government to
make difficult allocation decisions between competing uses (Sturgess and Wright,
1993).
At this point the NSW government recognized that a better approach would be for the
government to establish and enforce a property rights regime; this system would be
much more efficient than assuming that administrative decision-makers25 would be
able to assemble, interpret and act upon all the necessary information to make
25
This would include bureaucrats or politicians.
13
allocation decisions. When a resource is freely available and each consumer can
take from the common pool without coming into conflict with the needs of others, a
tradable rights system would seem to have few benefits. However, at full allocation
(or near to it) there are substantial benefits.
In the case of water management in New Zealand, the concern has tended to be on
too much water (i.e. managing floods) rather than resource scarcity; hence, the firstin-first-served approach is appropriate. Over time as resources become scarce, or
technology provides new opportunities, or new markets develop, society finds it
necessary to regulate the consumption of certain resources through legislative and
bureaucratic intervention. But as the scarcity continues to increase, conflict between
potential uses and users increases, and centralised planning and bureaucratic
decision-making becomes less able to cope with the complex allocation decisions
required.
There is now a substantial literature on the conditions necessary for the development
of effective markets in natural resources. In simple terms these are (Sturgess and
Wright, 1993; MAF Policy, 1997):
•
The relative scarcity of the resource. If the resource is not fully allocated with
demand exceeding supply, new permits could be obtained from the relevant
authority and there would be no incentive to transfer existing permits. 26
•
There is sufficient knowledge of the nature of the resource, its availability and
the impacts of use by each user on the others.
•
There is an appropriate legal framework, i.e. governments have a role to play
in enforcement and ensuring the rights are clearly defined. If the government
does not do this the value of the rights will be reduced and the growth of the
market hampered by transaction costs.
It is useful to remember that in some regimes water transfer has been integral part of
the allocation system for over one hundred years (e.g. in the western United States
where allocation was largely via the prior appropriation doctrine, Kenney, 2003). It is
26
However, this does not mean that that there is no point in enabling transferability unless and until a
resource is fully allocated. As noted by Sinner and Salmon, 2003 and Fenemor and Sinner 2005 it is
much better to introduce transferability as soon as possible and there are considerable benefits from
even a small number of transfers (e.g. the signals to all potential users and investors about the true
value of water).
14
also important to note that water management reform is not a one-off exercise. The
Australian experience has been one of twenty years of legislative and non-legislative
improvements. A recent Treasury document notes that while the NWI sets
benchmarks that have the potential to deliver significant economic and environmental
benefits, implementation challenges remain (Roberts et al. 2006).
15
Water Management Legislation in New Zealand: Why Does
This Limit Transfer?
At present the only option for assessing resource consent applications under the
RMA is the “first-in-first-served” allocation regime 27; however, even in 2001 this
approach was receiving increasing criticism (Robb et al., 2001a). Robb et al. (2001a)
also recognised that very little transfer of water was occurring; however, they
suggested that this may be due to the fact that water was not yet scarce enough
(unlike in rural NSW) but that in some fully-allocated catchments it was occurring and
could be expected to increase as demand for water increased. Many water rights
holders do not have a clear idea about the benefits and obligations that holding the
right brings to them (Harris Consulting and The AgriBusiness Consulting Group
2003).
Despite the ‘Aoraki’ decision of the High Court which noted that a water permit was
more than a simple licence and water right holders were entitled to expect that their
rights would not be eroded by subsequent decisions of the consenting authority, a
water right does not have all the characteristics of a secure entitlement in terms of
the attributes of property rights.28 For example, while the water right holder can now
lease all or part of the right for less than its full term in practice this is not always
possible because of the way consents are structured.
Consents in New Zealand are structured in many different ways. There is no
consistency either between or within councils. While not a requirement of the RMA,
consents often state that water may be taken for a particular use (even down to
specifying the exact area and landuse practice). In other cases the consent may be
to simply ‘take’ water with no particular use specified. While s14 of the RMA states
that a consent is required for ‘taking and using’ it does not specify how consents
should be structured to ensure both the ‘taking’ and ‘using’ aspects are addressed.
At present there are no guidelines or model consents issued by the Ministry for the
27
In Fleetwing Farms Ltd v Marlborough District Council [1997] 3 NZLR 257 the Court of Appeal
considered the legal test for determining priorities for hearing competing appeals (and a fortiori
competing applications for resource consent) under the Resource Management Act where two
companies had applied separately to the Marlborough District Council for a coastal permit to establish
a mussel farm on the same area of seabed at Port Underwood. In delivering the judgment of the
Court, Richardson P at p 267 stated that: ". . . [W]here there are competing applications in respect of
the same resource before the council, the council must recognise the priority in time." Even if another
applicant applies for a similar resource consent while the first application remains undecided, the
consent authority is not justified in comparing one against the other and failing to give a timely decision
on the first on its merits and without regard to the other (p264).
28
Aoraki Water Trust v Meridian Energy Ltd (2005) 11 ELRNZ 207; 2005 NZRMA 251 (HC)
16
Environment (the Ministry responsible for the administration for the RMA) and so
each Council has developed its own practice. The primary reason for consents
including both take and use is probably historical precedent. Under the Water and
Soil Conservation Act 1967 applicants usually sought a right to “take and use” and
because regional water boards had a duty to promote “the conservation and most
beneficial uses of natural water”,29 every applicant was required to demonstrate the
extent to which the use of the water applied for would be beneficial to him or her
(Williams, 1997).
Furthermore, consents may be in terms of an actual volume of water, per second,
over a week, a season and/or over a year and they may also specify a maximum rate
of take. These differences and inconsistencies result in considerable attenuation of
the flexibility that users have and the quality of their title.
Interestingly, it has been argued that the change from the Water and Soil
Conservation Act 1967 to the RMA resulted in a reduced degree of permanency with
consents. The 1967 Act authorised the grant of a licence to use water for the
purposes specified in the right rather than a licence revocable at will. In addition, a
regional water board could not impose conditions that would give it the ability to
modify the terms of the water rights. The only option, other than to grant short term
water rights, was to grant a right for a fixed term subject to earlier termination. The
RMA introduced a fundamental change to this basic concept because the consent
authority has the ability to review the conditions of the consent at any time.30
The uncertainty in the quality of title means that it is actually quite difficult for
individual consent holders to ensure their rights are enforceable and enforced. In
most cases consent holders rely on the Council if their rights are infringed, or
potentially impacted upon. The Resource Management Amendment Act (2005)
attempted to improve the certainty for current holders of consents. Up until that
Amendment the rights of an existing consent holder were no greater than those of a
new applicant, indeed there was no notion in the RMA of consent renewal. In
29
section 20(5)(c)
sections 128 – 132. This ability is limited to three circumstances. First, where the resource consent
has specified a time or times for the purpose of a review (s128(1)(c)). Second, when a regional plan
becomes operative that sets rules relating to maximum or minimum levels or flows or rates of use of
water, minimum standards of water quality… and the Regional Council considers that it is appropriate
to review the conditions of the permit to enable the levels, flows, rules or standards to be met
(s128(1)9b)). Third, the consent may be reviewed if the application which resulted in the consent
being granted contained inaccuracies which materially influenced the decision made (s128(1(c)). See
Williams (1997) for a more complete discussion.
17
30
addition, the duration of a consent could be up to 35 years but there were no
guidelines in the RMA for what time period was appropriate. Hence, while some
consents were granted for 35 years there were others granted for less than 5 years
and it was very unclear what the process would be for addressing competing
applications in times of scarcity. This reflected the balancing act undertaken by
councils who did not want to grant access to a valuable resource in the absence of
high quality information on availability or alternative uses versus those making
investment decisions desiring long-term consents.
In most cases transferability was not provided for in regional plans and the need to
obtain the approval of the consent authority has meant that few transfers (other than
those associated with land sales) have occurred. In those regions without an
operative regional plan, transferability is even more restricted because the
management of the resource is done largely by consent and the rights of each
consent holder becomes very unclear; most fear that if they transferred their consent
they could well lose the possibility of accessing the resource in the future.
It would be unfair to suggest that the complexity in the structuring of consents is due
solely to a lack of guidance and sixteen different regional councils developing their
own protocols. The RMA was designed to enable ‘sustainable management’, ensure
that the management of air, water and land was undertaken in an integrated way
(s5), and enable decisions to be taken at their most appropriate level. Hence,
decisions on the coastal environment are taken by a mixture of national and regional
authorities in recognition of the national importance of the coast, decisions on air and
water are largely a regional council responsibility and decisions on land use (such as
noise, subdivision and the like) are the responsibilities of territorial local authorities.
To ensure a degree of consistency and integration there is the opportunity for
national policy statements (however, none have been issued to date except the
mandatory coastal policy statement) and national environmental standards (such as
those on air quality) and territorial local authority plans have to give effect to regional
policy statements.31
Additional complexity arises in the area of land management, and this impacts upon
the structure of water permits. Regional councils, under s30 – Functions of Regional
Councils – have the following functions for the purposes of giving effect to the RMA in
31
Until the 2005 territorial local authority plans had to only be consistent with regional policy
statements rather than give effect to them.
18
its region: control the use of land for the purpose of soil conservation, the
maintenance of the quantity of water in water bodies and the maintenance and
enhancement of ecosystems in water bodies. Territorial authorities, under s31 –
Functions of Territorial Authorities – have the following functions for the purpose of
giving effect to the RMA in its district: the control of any actual or potential effects of
the use, development, or protection of land ……(Appendix Two). Therefore, the main
mechanism Regional Councils have to manage water quality and quantity impacts
due to land use is through the water permit, and more particularly through the ‘water
use’ conditions attached to that permit.32 These conditions can be specified in the
name of the permit (e.g. ‘a permit to take and use water for the purposes of irrigation
….’ or as actual conditions specified in the permit itself). It is this combination of take
and use, and the way it has been implemented in such a diverse manner, that
provides a key legislative barrier to water transfer in New Zealand.
The appropriateness of land use controls to manage water quality and quantity has
been considered by the Environment Court33. In that case the Court ruled that
economic efficiency is part of sustainable management34 and s7(b) requires regard
be had to efficient use and development of natural and physical resources, with s7(b)
qualifying the more general direction of s5(2). In the case of water management, s2
of the RMA defines water in all its forms so rainfall is within the definition of water,
s14 sets out the various restrictions on the use of water and s30(1)(c)(iii) provides
that one of councils’ functions is to control the use of land for the purpose of
maintaining the quantity of water in water bodies. When combined with the
requirement that councils should not act to undermine the rights of permit holders35
this means that a role of Regional Councils is to control uses or interceptors of water
to achieve a sustainable water resource.
In terms of the principles of the NWI the arrangements in New Zealand require
enhancements. At present the institutional and legislative arrangements address the
objectives of allocation, protection of third party interests and the need to protect the
environment in a way that impedes the flexibility and benefits that transferability
would bring to the framework for water management.
32
Alternative approaches would be to have Regional Councils issue landuse consents (but to date this
approach has not been taken up) or manage uses via the Regional Plan.
33
Carter Holt Harvey Forests v Tasman District Council W007/98, 4 ELRNZ 93
34
As held by the Court in Marlborough Ridge Led v Marlborough District Council C111/97, 3 ELRNZ
483 all aspects of efficiency are economic by definition.
35
Which the Environment Court commented on and was confirmed in Aoraki Water Trust v Meridian
Energy Ltd (2005) 11 ELRNZ 207; 2005 NZRMA 251 (HC)
19
Desirable Reforms
Clarity of rights
It has been argued that most critical environmental and resource problems arise from
common-pool externalities where property rights are either absent or incomplete
(Libecap, 2002; Libecap and Smith, 2002). Hardin (1968) in his “Tragedy of the
Commons” noted that in certain situations it was possible for each person to get
locked into a system that compels them to increase their resource use despite
knowing the resource is limited. However, Libecap notes that the problem of
cooperation is more complex and daunting than implied by Hardin. Because of the
numerous and diverse parties often involved, the parties disagree on the magnitude
of the problem, the need to take corrective action, timing, the appropriate form of
intervention and the allocation of the costs and benefits involved. Hence, it is
common for the status quo to remain until the costs have become clear and large and
swamp distributional concerns. Unfortunately, by the time action is taken many of the
rents associated with the common pool resource have been dissipated and the
property rights or regulatory arrangements adopted may bear little resemblance to
more idealised solutions. Nonetheless, property rights tend to arise from a common
concern at finding ways of encouraging individuals to coexist peacefully (Demsetz,
1967).
Clarifying rights in the face of resource scarcity was the approach taken for water
management in NSW in the 1980s and COAG in its 1994 Agreement. It was also the
New Zealand response to concerns about fishery management in the 1980s.
Reforms to the RMA, which is recognised to provide an integrated framework for
considering the environmental impacts of anthropogenic activities, to include a move
towards a property rights based system have been recommended for a number of
years by a number of authors (for example, Sharp, 2004; Ford et al., 2001). A shift to
clarifying rights would provide the required platform for a water transfer system (i.e.
specifying consents and clarifying the rights associated with them in terms of the six
dimensions of a property right).
Such a water transfer system was not required as long as resource availability was
always able to meet demand; however, this is no longer the case. Whereas NSW
first enabled temporary transfer (following an Amendment to the Water Act 1912) in
the 1980s in response to drought situations and resource scarcity, it would have been
20
much better to provide a comprehensive legislative regime prior to enabling transfer,
as envisaged by the NWI (Sturgess and Wrights, 1993).
Clarifying rights prior to enabling transfer would ensure that transfer would not be at
the expense of environmental outcomes and instead would be the mechanism for
sharing the available resource among competing users and uses. As described by
the NWI comprehensive water planning is important for integrated water resource
management. Hence, water transfer is a mechanism within a clear regulatory
framework. In the case of the RMA, transfer does not require a philosophical change
because the RMA follows Bromley’s (1988) preferred solution of a process that yields
standards of performance that have been collectively (politically) determined, and
mechanisms for implementation that reward individual initiative, experimentation and
efficiency (including via transfer). That is, the RMA provides planning for the social
goals while relying on market-like processes to achieve the most efficient
implementation of those goals. This was to avoid problems that occur when planners
get too involved in operational issues and when the market has too much
involvement over the broader policy issues. The appropriateness of this approach
has been echoed many times (e.g. Goesch and Hanna, 2002; Freebairn, 2005)
Effective Water Transfer
Effective water transfer provisions within the RMA would be consistent with the
underlying philosophy of the Act and with the position expressed by the Crown in its
submission to the Waitaki Allocation Board. Effective water transfer arrangements
would enable clear values of water to be expressed and tradeoffs made. Most
contemporary approaches to sustainable development call for resource pricing
(Sharp, 2002) and more generally economic instruments have been receiving a lot of
attention as the way forward for environmental management and advancing
sustainable development in New Zealand (Sinner and Salmon, 2003) and have been
long considered in their applicability for water management (e.g. Donnelly, 1993).
Interestingly the Court has accepted evidence that market forces encourage
efficiency and sustainable management by encouraging resources to gravitate to
their most productive use.36
A shift to enhanced water transfer will not occur simply because the legislation
enables it. In the United States it has been argued that increasing scarcity and the
36
Marlborough Ridge Led v Marlborough District Council C111/97, 3 ELRNZ 483
21
environmental costs of new projects would shift attention to a greater use of
economic instruments; however, changes appear to be slow (Young, 1986). Young
suggested that this may be due to the fact that transactions take place between a
highly diverse set of individuals that have a number of influences on their behaviour,
including a number of non-economic factors. However, Young also suggested that,
at least initially, while there may not be much evidence of transfers they tend to start
off as a result of private individually driven contractual relationships (which is
consistent with the informal transfers that have occurred to date). However, without
removing the legislative barrier transfer is effectively limited.
The New Zealand legislative arrangements are currently further along enabling water
transfers than NSW was prior to the 1994 COAG reforms. In particular, one of the
first reforms agreed to by COAG in 1994 was to split the entitlement to water away
from land. New Zealand has already done this, i.e. you do not have to be the owner
of land in order to obtain access to the water resource. However, the second stage
in separation undertaken in Australia was to separate the ‘use right’ from the ‘access
right’ or the right to access the water resource. Young and McColl (2002 and 2003)
describe these reforms as a move away from a bundle of unclear rights (the old
licensing system) towards a bundle of clear individual rights as key to the water
reforms. Goesch and Beare (2004) and Counsell and Evans (2005) echo this in their
call for effective water transfer and the splitting of the take and use components of a
water right.
While it may be possible to structure existing consents to split the ‘use right’ from the
‘access right’ without legislating new arrangements, this could result in a range of
different approaches and not the desirable bundle of clear rights and responsibilities.
The RMA already has many of the characteristics of the new water management
regime envisaged by the NWI – the placing of the environment first, the need for a
clear planning framework (which addresses the societal allocation values and
expectations) while devolving decision making down to the individual. Indeed, even
in 1991 transfer of water consents was envisaged and included in the Act. However,
because of history, the drafting of the Act and the relative abundance of the resource
there has not been great enough pressure to make the transfer provisions part of the
Act ‘work’ (other parts of the Act which have proved poorly worded or unworkable
have been changed in one of the 14 amendment acts that have been passed since
1991).
22
One of the challenges with introducing transferable water rights is the need to have a
system for initially allocating rights. From a long-term perspective this is not
problematic because the transfer of rights over time will far exceed any poor initial
distributional decisions (Libecap, 2005); however, the initial allocation of rights is
often difficult because of the equity considerations (Tietenberg, 2001).
Cesetti and Kemper (1995), following a review of the initial allocation of water rights
in the United States, Australia and Chile, noted that if the introduction of water
markets is contemplated then the definition and initial allocation of water rights is an
important issue that has to be addressed. The experience from these three countries
shows that a certain degree of creativity is possible. The three counties chose
different approaches based on existing information about historical use, the degree of
confidence in the allocation mechanism (e.g. physical inspection versus auction), and
tradeoffs between equity and economic efficiency. The important lesson is that what
was allocated were user rights to ensure that it was the security of tenure and
enforcement of the contract and that it is possible to design pragmatic approaches to
initial allocation that take into account local needs and constraints.37 There is not just
one possible solution to initial allocation.
Marino and Kemper (1999) from their assessment of a number of water markets that
have been in existence for a number of years (e.g. the system used in Ceara, Brazil
was developed in 1854) suggest that while there might be ideological opposition to
the introduction of water rights the most challenging institutional feature is the
implementation of adequate information and transaction mechanisms to provide
users with equal possibilities of participating in the market. Their research
demonstrates that water markets can improve efficient allocation and use of water
and provide flexibility in the management of water in times of shortage. Similarly Lee
and Jouravlev (1998) note that water markets and a decentralised approach provide
a degree of flexibility and resilience that allows opportunities to be taken and may
help reduce potential conflict between users.
37
There are many possible ways for the initial allocation to occur. For example, Auctioning – while
this means that the rights are allocated to the highest bidder(s) the outcome may be highly uncertain
and is likely to result in significant economic and social disruption; Grandparenting – this means that
the initial allocation would be carried out on the basis of current existing water rights and that existing
rights holders receive a considerable transfer of wealth (the actual allocation can be either on the
existing consented amount or a function of historic use or some combination; Averaging – this means
that the rights are spread across all that land or people within the catchment to ensure some form of
‘equitable’ allocation. Critically, there is not one perfect form or initial allocation, they all involve costs,
benefits and tradeoffs.
23
Once the broad allocation decisions have been made, there is a need to be able to
provide a set of arrangements to ensure that change and the reality of different uses
is accommodated (Abernethy, 2003). There are many benefits from water transfer
and there are lots of examples New Zealand should learn from (Bjornlund and
McKay, 2002; Goesch and Hanna, 2002).38 Even in Australia it took a while to work
through the range of solutions and develop a solution that was acceptable to all as
early proposals were not always welcomed (Cristofani, 2003). Furthermore, there are
significant costs in not having effective transfer mechanisms. For example,
applicants have an incentive to apply for as much water as they think the council will
allocate them, which restricts access to the resource; permit holders have reduced
certainty over access to the resource, which may reduce their incentives to invest in
new technology or practices; landuse practices may be ‘locked into’ historical
patterns because of water resource availability; the value of the water is tied to the
land and innovative new potential users are restricted from accessing the resource;
Councils may need to develop complex allocation procedures and there is a
reduction in the potential for water use to migrate to higher value uses.
The Australian reforms suggest that there have been substantial economic gains
from increased transfer. For example, it has been estimated that water transfer has
increased the return from irrigation in Victoria by $12m/annum and the benefits of
transfer to NSW have been estimated as $60-100 m/annum. One way to determine
the effects of reforms is to compare the performance of water markets in Victoria and
NSW. Victoria had a 10 year start on NSW and has made a significant investment in
specifying high-level entitlements. The evidence is that: water trades are running at a
net value of over $100 million per year in Victoria with substantial movement from low
valued to high valued uses; the largest irrigation area in Victoria has three times the
level of trade compared to that of its counterpart over the border; and Victoria’s farm
output for each litre of water used is twice that of NSW. These statistics cannot
prove the benefits of water markets but they do indicate emerging trends. There are
encouraging signs that water markets can move water to higher valued uses and that
38
The potential benefits of transfer are numerous, such as: encouraging greater water use efficiency
among land owners as there is a continual positive incentive to reduce water demand; encouraging
the most cost-effective solution to be implemented first; providing flexibility for changing environmental
outcomes; encouraging flexibility in resource use and cooperation between resource users;
encouraging devolved decision-making; providing security to users that their rights will not be eroded
by the granting of new permits; reducing conflict between permit holders and between permit holders
and Councils over the availability of water for allocation; reducing the need for councils to develop
complex restrictions and criteria to improve water use efficiency through regulatory means and be
encouraging environmental benefits.
24
the better we specify water entitlements, the more this will happen (ACIL Tasman,
2003). Significantly the benefits have not just been economic. There have been
considerable environmental gains in terms of increased certainty about the nature of
the water resource maintained in the river for environmental reasons, the ability of
people to increase this via water transfers and the shift in landuse practices that are
resulting in some practices that were detrimental to the environment being altered
(Cullen, 2000). Hence, it is important to not lose sight of the long-term benefits and
goals (Keary, 2004).
In addition to the legislative arrangements transferability would be enhanced by
improved access to information, such as how much water is available for allocation,
how much water is allocated and how much water is used. 39 A number of these
actions are currently being actively implemented or investigated by Regional
Councils.
39
While Robb (2000) provides information on water allocation in New Zealand, to date there have
been fewer studies on actual water use. However, most of those have shown that actual use is
commonly substantially less than the amount of water allocated (e.g. Jones and Baker, 2005; Hawke,
2003)
25
Conclusions
The ability to transfer water permits has been provided for in New Zealand legislation
since the passing of the Water and Soil Conservation Act in 1967. The philosophy of
the RMA is aligned with the NWI; however, the provisions in the RMA related to
transfer fall short of what the NWI seeks to achieve.
Transfer under the RMA is hindered by the current legislation, particularly in terms of
the lack of specification of rights and the bundling together of take and use.
Enhancements to the transfer provisions could facilitate more efficient sharing and
use of the available water, particularly in catchments where the water is fully
allocated or nearly so. Greater use of transfer provisions could reduce pressure on
existing water permit holders and on the environment.
Transfer of water rights is not a solution everywhere or at all times but it has the
potential to yield significant environmental and economic benefits in some areas
where there is less water available. A prerequisite for transfer is the specification of
rights (other requirements like a clear planning framework and the allocation of water
to the environment are already in place). The provision of transferability introduces
flexibility and resilience into the overall environmental management system that is
currently lacking.
26
Court Cases Cited
Alexander v Wellington RC (2005) ELRNZ 39 (EnvC)
Aoraki Water Trust v Meridian Energy Ltd (2005) 11 ELRNZ 207; 2005 NZRMA 251
(HC)
Carter Holt Harvey Forests v Tasman District Council W007/98, 4 ELRNZ 93
Falkner v Gisborne District Council [1995] NZRMA 462
Fleetwing Farms Ltd v Marlborough District Council [1997] 3 NZLR 257
Glenmark Homestead Ltd v North Canterbury Catchment Board 1978 1 NZLR 407
Marlborough Ridge Led v Marlborough District Council C111/97, 3 ELRNZ 483
Re Mangawhai Habour Restoration Society Inc (EnvC Auckland, A 119-04, 7
September 2004)
Stewart v Kanieri Gold Dredging Limited [1982] 1 NZLR 329 (CA)
The Favourite Ltd v Vasasour, HC Blenheim CIV-2004-406-32
27
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32
Appendix One: Paragraphs 58 – 63 and Schedule F from
the NWI
Water Markets and Trading
Outcomes
58. The States and Territories agree that their water market and trading arrangements will:
i)
facilitate the operation of efficient water markets and the opportunities for trading,
within and between States and Territories, where water systems are physically shared
or hydrologic connections and water supply considerations will permit water trading;
ii)
minimise transaction costs on water trades, including through good information flows
in the market and compatible entitlement, registry, regulatory and other arrangements
across jurisdictions;
iii)
enable the appropriate mix of water products to develop based on access entitlements
which can be traded either in whole or in part, and either temporarily or permanently,
or through lease arrangements or other trading options that may evolve over time;
iv)
recognise and protect the needs of the environment; and
v)
provide appropriate protection of third-party interests.
Actions
59. The States and Territories agree to have in place pathways by 2004, leading to full
implementation by 2006, of compatible, publicly-accessible and reliable water registers of all
water access entitlements and trades (both permanent and temporary) on a whole of basin or
catchment basis, consistent with the principles in Schedule F. The Parties recognise that in
some instances water service providers will be responsible for recording details of temporary
trades.
60. The States and Territories agree to establish by 2007 compatible institutional and regulatory
arrangements that facilitate intra and interstate trade, and manage differences in entitlement
reliability, supply losses, supply source constraints, trading between systems, and cap
requirements, including:
i)
principles for trading rules to address resource management and infrastructure
delivery considerations, as set out in Schedule G;
ii)
where appropriate, the use of water access entitlement exchange rates and/or water
access entitlement tagging and a system of trading zones to simplify administration;
iii)
the application of consistent pricing policies (refer paragraph 64 below);
iv)
in respect of any existing institutional barriers to intra and interstate trade:
a)
immediate removal of barriers to temporary trade;
b)
immediate removal of barriers to permanent trade out of water irrigation
areas up to an annual threshold limit of four percent of the total water
entitlement of that area, subject to a review by 2009 with a move to full and
open trade by 2014 at the latest, except in the southern Murray-Darling Basin
where action to remove barriers to trade is agreed as set out under paragraph
62; and
c)
jurisdictions may remove barriers earlier than those in (b) above;
v)
subject to (i) above, no imposition of new barriers to trade, including in the form of
arrangements for addressing stranded assets; and
vi)
where appropriate, implementing measures to facilitate the rationalisation of
inefficient infrastructure or unsustainable irrigation supply schemes, including
33
consideration of the need for any structural adjustment assistance (paragraph 97
refers).
61. To support the above actions on trading, the Parties also agree to complete the following
studies and to consider implementation of any recommendations by June 2005:
i)
a study taking into account work already underway, on effective market and
regulatory mechanisms for sharing delivery capacity and extraction rates among
water users, where necessary to enhance the operation of water markets and make
recommendations to implement efficient ways to manage changes in water usage
patterns, channel capacity constraints and water quality issues;
ii)
a study to facilitate cross system compatibility, that analyses the existing product mix,
proposes possible choices of product mix, makes recommendations on the desirable
model and proposes a transition path for implementation; and
iii)
a study to assess the feasibility of establishing market mechanisms such as tradeable
salinity and pollution credits to provide incentives for investment in water-use
efficiency and farm management strategies and for dealing with environmental
externalities.
62. Recognising the need to manage the impacts of assets potentially stranded by trade out of
serviced areas, the Parties agree to ensure that support mechanisms used for this purpose, such
as access and exit fees and retail tagging, do not become an institutional barrier to trade
(paragraph 60(v) refers).
63. In regard to the Southern Murray-Darling Basin, the relevant Parties (Commonwealth, New
South Wales, Victoria and South Australia) that are members of the Murray-Darling Basin
Ministerial Council agree to:
i)
take all steps necessary, including making any corresponding legislative and
administrative changes, to enable exchange rates and/or tagging of water access
entitlements traded from interstate sources to buyers in their jurisdictions by June
2005;
ii)
reduce barriers to trade in the Southern Murray-Darling Basin by taking the necessary
legislative and other actions to permit open trade and ensure competitive neutrality,
and to establish an interim threshold limit on the level of permanent trade out of all
water irrigation areas of four per cent per annum of the total water access entitlement
for the water irrigation area by June 2005, including:
a)
in the case of NSW, making necessary legislative changes to give effect to a
Heads of Agreement between Government and major irrigation corporations
to permit increased trade, including to remove barriers to trade up to the
above interim threshold limit; and
b)
in the case of Victoria and South Australia, bringing into effect change to
permit increased trade including to remove barriers to trade up to the above
interim threshold level, in the respective Authorities and Trusts, at the same
time that NSW amends its legislation;
iii)
review the above actions in June 2005 to assess whether all relevant parties have met their
obligations to enable achievement of the interim threshold;
iv)
a study into the legal, commercial and technical mechanisms necessary to enable
interstate trade to commence in the Southern Murray-Darling Basin by June 2005;
v)
review the outcome of 63(ii)(a) by 2007 and, if the actions are shown to be insufficient to
ensure the desired level of open trade, to take any further action, including legislation,
determined necessary to achieve the desired opening of water trading markets in the
Southern Murray-Darling Basin;
vi)
the National Water Commission monitoring the impacts of interstate trade and advising
the relevant Parties on any issues arising; and
34
vii)
review the impact of trade under the interim threshold in 2009, with a view to raising the
threshold to a higher level if considered appropriate.
SCHEDULE F:
GUIDELINES FOR WATER REGISTRIES
The Parties agree that water registers will be established in each State and Territory and will:
1. contain records of all water access entitlements in that jurisdiction, and trades of those
entitlements, including their location;
2. be of sufficient standard to achieve the characteristics of secure water access entitlements
contained in the Agreement;
3. contain protocols for the protection of third party interests that:
(i)
require the holder of a registered security interest to be notified prior to any proposed
dealings in relation to the water entitlement, and requiring the consent of such
interests to any proposed transfers;
(ii)
allow only authorised dealings;
(iii)
require the registration of permanent transfers of the water entitlement and
encumbrances that affect the entitlement, such as mortgages and other security
interests;
(iv)
enable lenders to procure the registration of their interest independently of the holder
of the entitlement (to ensure the rights of the entitlement-holder are sufficiently
protected);
(v)
prioritise competing dealings;
(vi)
manage time lags between date of lodgement for registration and actual registration of
dealings, as such time lags may affect priorities; and
(vii)
allow for the discharge of the security interest, in conjunction with the transfer of the
entitlement to a new registered holder;
(viii)
ensure that lenders are only affected by a subsequently registered interest where the
lender has consented to the subsequent dealing;
(ix)
assist in the process of identifying water specific or unregistered interests.
4. be administered pursuant to certain procedures and protocols, based on land title office manuals
and guidelines that exist in various States and Territories that seek to minimise transaction costs
for market participants;
5. be publicly accessible, preferably over the internet, and include information such as the prices of
trades and the identity of entitlement holders; and
6. enable resource managers to monitor and accumulate trade and water use volumes accrued under
water entitlements in a separate water accounting system.
35
Appendix Two: Relevant sections of the RMA
Section 2: Interpretation
“Water''—
(a)
Means water in all its physical forms whether flowing or not and whether over or under the
ground:
(b)
Includes fresh water, coastal water, and geothermal water:
(c)
Does not include water in any form while in any pipe, tank, or cistern:
Section 5: Purpose
5.
Purpose—
(1)
The purpose of this Act is to promote the sustainable management of natural and physical
resources.
(2)
In this Act, ``sustainable management'' means managing the use, development, and protection
of natural and physical resources in a way, or at a rate, which enables people and communities to
provide for their social, economic, and cultural wellbeing and for their health and safety while—
(a)
Sustaining the potential of natural and physical resources (excluding minerals) to meet
the reasonably foreseeable needs of future generations; and
(b)
Safeguarding the life-supporting capacity of air, water, soil, and ecosystems; and
(c)
Avoiding, remedying, or mitigating any adverse effects of activities on the
environment
Section 7: Other matters
7.
Other matters—
In achieving the purpose of this Act, all persons exercising functions and powers under it, in relation to
managing the use, development, and protection of natural and physical resources, shall have particular
regard to—
(a)
Kaitiakitanga:
[(aa)
The ethic of stewardship:]
(b)
The efficient use and development of natural and physical resources:
[(ba)
the efficiency of the end use of energy:]
(c)
The maintenance and enhancement of amenity values:
(d)
Intrinsic values of ecosystems:
(e)
Repealed.
(f)
Maintenance and enhancement of the quality of the environment:
(g)
Any finite characteristics of natural and physical resources:
(h)
The protection of the habitat of trout and salmon:
[(i)
the effects of climate change:]
[(j)
the benefits to be derived from the use and development of renewable energy.]
Section 14: Restrictions relating to water
14.
(1)
(2)
Restrictions relating to water
No person may take, use, dam, or divert any—
(a)
Water (other than open coastal water); or
(b)
Heat or energy from water (other than open coastal water); or
(c)
Heat or energy from the material surrounding any geothermal water—
unless the taking, use, damming, or diversion is allowed by subsection (3).
No person may—
(a)
Take, use, dam, or divert any open coastal water; or
(b)
Take or use any heat or energy from any open coastal water,—
36
in a manner that contravenes a rule in a regional plan or a proposed regional plan unless
expressly allowed by a resource consent or allowed by section [20A] (certain existing lawful
activities allowed).
(3)
A person is not prohibited by subsection (1) from taking, using, damming, or diverting any
water, heat, or energy if—
(a)
The taking, use, damming, or diversion is expressly allowed by a rule in a regional
plan [and in any relevant proposed regional plan] or a resource consent; or
(b)
In the case of fresh water, the water, heat, or energy is required to be taken or used
for— (i)
An individual's reasonable domestic needs; or
(ii)
The reasonable needs of an individual's animals for drinking water,—
and the taking or use does not, or is not likely to, have an adverse effect on the environment;
or
(c)
In the case of geothermal water, the water, heat, or energy is taken or used in
accordance with tikanga Maori for the communal benefit of the tangata whenua of the area
and does not have an adverse effect on the environment; or
(d)
In the case of coastal water (other than open coastal water), the water, heat, or energy
is required for an individual's reasonable domestic or recreational needs and the taking, use, or
diversion does not, or is not likely to, have an adverse effect on the environment; or
(e) The water is required to be taken or used for fire-fighting purposes.
Section 30: Functions of Regional Councils
30.
Functions of regional councils under this Act—
(1)
Every regional council shall have the following functions for the purpose of giving effect to
this Act in its region:
(a)
The establishment, implementation, and review of objectives, policies, and methods to
achieve integrated management of the natural and physical resources of the region:
(b)
The preparation of objectives and policies in relation to any actual or potential effects
of the use, development, or protection of land which are of regional significance:
(c)
The control of the use of land for the purpose of—
(i)
Soil conservation:
(ii)
The maintenance and enhancement of the quality of water in water bodies and
coastal water:
(iii)
The maintenance of the quantity of water in water bodies and coastal water:
[(iiia)
the maintenance and enhancement of ecosystems in water bodies and
coastal water:]
(iv)
The avoidance or mitigation of natural hazards:
(v)
The prevention or mitigation of any adverse effects of the storage, use,
disposal, or transportation of hazardous substances:
[(ca)
the investigation of land for the purposes of identifying and monitoring
contaminated land:]
(d)
In respect of any coastal marine area in the region, the control (in conjunction with the
Minister of Conservation) of—
(i)
Land and associated natural and physical resources:
[(ii)
The occupation of space on land of the Crown or land vested in the regional
council, that is foreshore or seabed, and the extraction of sand, shingle, shell, or other
natural material from that land:]
(iii)
The taking, use, damming, and diversion of water:
(iv)
Discharges of contaminants into or onto land, air, or water and discharges of
water into water:
[(iva)
The dumping and incineration of waste or other matter and the dumping of
ships, aircraft, and offshore installations:]
(v)
Any actual or potential effects of the use, development, or protection of land,
including the avoidance or mitigation of natural hazards and the prevention or
mitigation of any adverse effects of the storage, use, disposal, or transportation of
hazardous substances:
(vi)
The emission of noise and the mitigation of the effects of noise:
37
(vii)
Activities in relation to the surface of water:
(e)
The control of the taking, use, damming, and diversion of water, and the
control of the quantity, level, and flow of water in any water body, including—
(i)
The setting of any maximum or minimum levels or flows of water:
(ii)
The control of the range, or rate of change, of levels or flows of water:
(iii)
The control of the taking or use of geothermal energy:
(f)
The control of discharges of contaminants into or onto land, air, or water and
discharges of water into water:
[(fa)
if appropriate, the establishment of rules in a regional plan to allocate any of the
following:
(i)
the taking or use of water (other than open coastal water):
(ii)
the taking or use of heat or energy from water (other than open coastal water):
(iii)
the taking or use of heat or energy from the material surrounding geothermal
water:
(iv)
the capacity of air or water to assimilate a discharge of a contaminant:]
[(fb)
if appropriate, and in conjunction with the Minister of Conservation,—
(i)
the establishment of rules in a regional coastal plan to allocate the taking or
use of heat or energy from open coastal water:
(ii)
the establishment of a rule in a regional coastal plan to allocate space in a
coastal marine area under Part 7A:]
(g)
In relation to any bed of a water body, the control of the introduction or planting of
any plant in, on, or under that land, for the purpose of—
(i)
Soil conservation:
(ii)
The maintenance and enhancement of the quality of water in that water body:
(iii)
The maintenance of the quantity of water in that water body:
(iv)
The avoidance or mitigation of natural hazards:
[(ga)
the establishment, implementation, and review of objectives, policies, and methods
for maintaining indigenous biological diversity:]
[(gb)
the strategic integration of infrastructure with land use through objectives, policies,
and methods:]
(h)
Any other functions specified in this Act.
[(2)
A regional council and the Minister of Conservation may perform the functions specified in
subsection (1)(d) to control the harvesting or enhancement of aquatic organisms to avoid, remedy, or
mitigate—
(a)
the effects on fishing and fisheries resources of occupying a coastal marine area for
the purpose of aquaculture activities:
(b)
the effects on fishing and fisheries resources of aquaculture activities.]
[(3)
However, a regional council and the Minister of Conservation must not perform the functions
specified in subsection (1)(d)(i), (ii), or (vii) to control the harvesting or enhancement of aquatic
organisms for the purpose of conserving, using, enhancing, or developing any fisheries resources
controlled under the Fisheries Act 1996.]
[(4)
A rule to allocate a natural resource established by a regional council in a plan under
subsection (1)(fa) or (fb) may allocate the resource in any way, subject to the following:
(a)
the rule may not, during the term of an existing resource consent, allocate the amount
of a resource that has already been allocated to the consent; and
(b)
nothing in paragraph (a) affects section 68(7); and
(c)
the rule may allocate the resource in anticipation of the expiry of existing consents;
and
(d)
in allocating the resource in anticipation of the expiry of existing consents, the rule
may—
(i)
allocate all of the resource used for an activity to the same type of activity; or
(ii)
allocate some of the resource used for an activity to the same type of activity
and the rest of the resource to any other type of activity or no type of activity; and
(e)
the rule may allocate the resource among competing types of activities; and
(f)
the rule may allocate water, or heat or energy from water, as long as the allocation
does not affect the activities authorised by section 14(3)(b) to (e).]
38
Section 31: Functions of Territorial Authorities
31.
Functions of territorial authorities under this Act—
(1)
Every territorial authority shall have the following functions for the purpose of giving effect to
this Act in its district:
(a)
The establishment, implementation, and review of objectives, policies, and methods to
achieve integrated management of the effects of the use, development, or protection of land
and associated natural and physical resources of the district:
[(b)
the control of any actual or potential effects of the use, development, or protection of
land, including for the purpose of—
(i)
the avoidance or mitigation of natural hazards; and
(ii)
the prevention or mitigation of any adverse effects of the storage, use,
disposal, or transportation of hazardous substances; and
[[(iia)
the prevention or mitigation of any adverse effects of the development,
subdivision, or use of contaminated land:]]
(iii)
the maintenance of indigenous biological diversity:]
(c)
Repealed.
(d)
The control of the emission of noise and the mitigation of the effects of noise:
(e)
The control of any actual or potential effects of activities in relation to the surface of
water in rivers and lakes:
(f)
Any other functions specified in this Act.
[(2) The methods used to carry out any functions under subsection (1) may include the control of
subdivision.]
Section 136: Transferability of water permits
136.
Transferability of water permits—
(1)
A holder of a water permit granted for damming or diverting water may transfer the whole of
the holder's interest in the permit to any owner or occupier of the site in respect of which the permit is
granted, but may not transfer the permit to any other person or from site to site.
(2)
A holder of a water permit granted other than for damming or diverting water may transfer the
whole or any part of the holder's interest in the permit—
(a)
To any owner or occupier of the site in respect of which the permit is granted; or
(b)
To another person on another site, or to another site, if both sites are in the same
catchment (either upstream or downstream), aquifer, or geothermal field, and the transfer—
(i)
Is expressly allowed by a regional plan; or
(ii)
Has been approved by the consent authority that granted the permit on an
application under subsection (4).
[(2A)
A transfer under subsection (1) or subsection (2) may be for a limited period.]
(3)
A transfer under any of subsections (1), (2)(a), and (2)(b)(i) shall have no effect until written
notice of the transfer is received by the consent authority that granted the permit.
(4)
An application under subsection (2)(b)(ii)—
(a)
Shall be in the prescribed form and be lodged jointly by the holder of the water permit
and the person to whom the interest in the water permit will transfer; and
(b)
Shall be considered in accordance with sections 88 to 115, 120, and 121 as if—
(i)
The application for a transfer were an application for a resource consent; and
(ii)
The consent holder were an applicant for a resource consent,—
except that, and in addition to the matters set out in section 104, the consent authority shall
have regard to the effects of the proposed transfer, including the effect of ceasing or changing
the exercise of the permit under its current conditions, and the effects of allowing the transfer.
(5)
Where the transfer of the whole or part of the holder's interest in a water permit is notified
under subsection (3), or approved under subsection (2)(b)(ii), [and is not for a limited period,] the
original permit, or that part of the permit transferred, shall be deemed to be cancelled and the interest
or part transferred shall be deemed to be a new permit—
(a)
On the same conditions as the original permit (where subsection (3) applies); or
(b)
On such conditions as the consent authority determines under subsection (4) (where
that subsection applies).
39
Section 354: Crown’s existing rights to resource to continue
354.
Crown's existing rights to resources to continue—
(1)
Without limiting the Acts Interpretation Act 1924 but subject to subsection (2), it is hereby
declared that the repeal by this Act or the Crown Minerals Act 1991 of any enactment, including in
particular—
(a)
Section 3 of the Geothermal Energy Act 1953; and
(b)
Section 21 of the Water and Soil Conservation Act 1967; and
(c)
Section 261 of the Coal Mines Act 1979,—
shall not affect any right, interest, or title, to any land or water acquired, accrued, established by, or
vested in, the Crown before the date on which this Act comes into force, and every such right, interest,
and title shall continue after that date as if those enactments had not been repealed.
[(2)
Any person may take, use, dam, divert, or discharge into, any water in which the Crown has
an interest, without obtaining the consent of the Crown, if the taking, use, damming, diversion, or
discharge by that person does not contravene this Act or regulations.]
[(3)
Any person may use or occupy any land and any related part of the coastal marine area in
which the Crown has a right, interest, or title, without obtaining the consent of the Crown under the
Land Act 1948 [[or the Foreshore and Seabed Endowment Revesting Act 1991]] [[or the Foreshore
and Seabed Act 2004]], if the use or occupation by that person does not contravene this Act or
regulations.]
40
Appendix Three: Relevant Sections for the Water and Soil
Conservation Act 1967 (repealed by the RMA)
21 Rights in Respect of Natural Water
(1)
[(1A)
[(1B)
[(2)
[(2A)
[(2B)
(3)
Except as expressly authorised by or under this Act[, or as expressly authorised under the
Mining Act 1926 by a mining privilege in respect of water granted after the 9th day of
September 1966, or as expressly authorised under any other Act by any right granted during
the period commencing after the 9th day of September 1966 and ending not later than the 31st
day of December 1968, or as expressly authorised by any other Act (whether before or after
the passing of this Act) in respect of any specified natural water], the sole right to dam any
river or stream, or to divert or take natural water, or discharge natural water or waste into any
natural water, [or to discharge natural water containing waste on to land or into the ground in
circumstances which result in that waste, or any other waste emanating as a result of natural
processes from that waste, entering natural water,] or to use natural water, is hereby vested in
the Crown subject to the provisions of this Act:
Provided that nothing in this section shall restrict the right to divert, take, or use sea water:
Provided also that it shall be lawful for any person to take or use any natural water that is
reasonably required for his domestic needs and the needs of animals for which he has any
responsibility and for or in connection with fire-fighting purposes:
[Provided further that any authorisation granted under the provisions of the Geothermal
Energy Act 1953 shall not constitute an express authorisation within the meaning of this
subsection.]
Notwithstanding anything in this or any other Act or in any rule of law, no person shall take or
export from New Zealand any natural water obtained, under any right granted under this Act,
to divert or take or use natural water without the prior written consent of the Minister.]
Any consent under subsection (1A) of this section may be given subject to such terms and
conditions (including payment to the Crown for the water) as the Minister thinks fit to impose
after consultation with the Minister of Finance.]
Every damming of a river or stream which lawfully existed at the 9th day of September 1966,
and every diversion or taking of natural water, and every discharge of natural water or waste
into any natural water, and every use of natural water, which had lawfully been happening at
any time during the period of 3 years that ended with the 9th day of September 1966 and of
which in each case notice in writing is given to the Regional Water Board before the 1st day
of April 1970 in accordance with any regulations made under this Act is hereby authorised to
the extent that it lawfully existed or had lawfully been so happening:
Every damming of a river or stream, and every diversion or taking of natural water, and every
discharge of natural water or waste into any natural water, and every use of natural water,
which is authorised by any Order in Council issued under the Public Works Act 1928, or
issued under any other Act, before the 1st day of April 1968 and of which in each case notice
in writing is given to the Regional Water Board before the 1st day of April 1970 in accordance
with any regulations made under this Act is hereby authorised under this Act in accordance
with the provisions of that Order in Council, but shall cease to be so authorised after the 31st
day of March 1975 unless the rights or powers conferred by the Order in Council are being
substantially exercised by that date.]
A right in respect of any natural water subject to a national water conservation order shall not
be granted if the grant of that right would be contrary to any provision of the order or of any
condition or restriction imposed under section 20D(4) of this Act.]
[Any Regional] Water Board may, on application to it in accordance with the provisions of
this Act and any regulations made thereunder, and on payment of the prescribed fee, grant to
the applicant on such terms as it may specify the right within the region of the Board to dam
any river or stream or to divert or take natural water or to discharge natural water or waste into
any natural water [or to discharge natural water containing waste on to land or into the
ground] or to use natural water:
41
[Provided that, where the damming, diversion, taking, or discharge is to be on any
conservation area within the meaning of the Conservation Act 1987 or within the boundaries
of a National Park or a public reserve, or will affect the quantity or quality of the water in any
river or stream where it is within or adjoining any conservation area or National Park or public
reserve, the Board shall, before making any such grant, consult the Minister of Conservation
or in the case of a public reserve, the administering body:]
Provided also that, where any right as to natural water is required for mining purposes, the
Board shall, before granting or refusing the right, consult the Inspector of Mines for the area in
which is situated the natural water in respect of which the right is sought.
[(3A) In granting any right under this section to discharge natural water waste into any natural water
that has been classified under section 26E of this Act the Board shall, subject to subsection
(3B) of this section, impose such terms and conditions as may be necessary to ensure that—
(a) After allowing for reasonable mixing of the discharge with the receiving water, the quality
of the receiving water does not as a result of the discharge fall below the standards specified in
the classification of that water:
(b) The combined effect of the discharge being authorised and of all existing discharges and
authorised discharges into the receiving water will not result in any failure to maintain the
standards of quality specified in the classification of the receiving water:
[[(c) Any discharge into water that is classified other than Class SE is substantially free from
suspended solids, grease, and oil:]]
[[(d) No discharge of any undisintegrated waste is made into water that is classified Class
SE.]] ]
[(3B) Where it is impracticable, because of emergency overflows, the carrying out of maintenance
work, or any other temporary situation, for the Board to impose any term or condition that is
required to impose under subsection (3A) of this section in granting any right, it may grant the
right without imposing that term or condition. In any such case the Board shall publicly notify
the reasons for so acting.]
(3C) Repealed.
(3D) Repealed.
(3E) Repealed.
[(3F) In considering any application for a right under this section in respect of any natural water
which is subject to a water conservation order made under this Act, the Board may grant the
right only if the combined effect of the grant and of existing rights is such that the provisions
of the water conservation order can remain without change or variation, and in granting any
such right shall impose such terms and conditions as are necessary to ensure that the
provisions of the water conservation order are maintained.]
[(3G) Notwithstanding the provisions of subsection (3F) of this section, a Board may grant a right
which is contrary to the provisions of a local water conservation notice, or not impose a
condition required by such a notice, if it considers that the right would be of a minor nature,
duration, or effect, or that the exception is warranted in the public interest in the particular
circumstances of the case.]
[(3H) he provisions of subsections (3F) and (3G) of this section shall also apply to applications for
rights in respect of natural water that flows into natural water that is subject to a water
conservation order.]
(4)
ach Board shall keep conveniently available for public inspection and information detailed and
properly indexed records of all rights granted on application or otherwise lawfully authorised
under this Act.
(5) Repealed.
24A Transfer of Rights
(1)
Any right granted or authorised under section 21 of this Act may be transferred, and shall be
deemed always to have been transferable, subject to any terms and conditions specified in the
right, by the holder of the right or his executor, administrator, or other lawful representative, to
any succeeding owner or occupier of the land in respect of which the right is granted or
authorised.
42
(2)
Notice in writing of any such transfer shall be given to the Board by the transferor, of if he
fails to do so by the transferee, and the transfer shall have no effect until the notice has been
given.
43