Late Autumn newsletter

ECan’s draft Land & Water Plan heralds de facto ban on water permit trading
Environment Canterbury (ECan) have released a draft of their Land & Water Plan (click here to read) currently scheduled for formal notification in August 2012.

While the draft does not represent official Council policy, the provisions developed by ECan’s planners dealing with transfers as they currently stand amount to a de facto ban on water permit trading.

Policy 4.73 and Rule 5.241 spell this out, as both refer to the requirement to surrender between 33 and 66% of any “unused water,” defined as: “the surplus (if any) between water that is allocated in a resource consent and that shown by the metering of a water take to have been actually taken, measured over the period 1 July to 30 June in the following year”.

The implications of this are two-fold. Firstly, permits that have not been used, or water use not recorded, automatically comprise 100% “unused water.” Applications to transfer this type of allocation are classified as a “non-complying activity” under Rule 5.242, which essentially means that they’re likely to be publicly notified and face a tougher test before they can be granted.

Secondly, where water use has been recorded, the difference between the maximum amount previously used and the annual volume limit is also classified as “unused water,” even when water use has been low due to climatic factors such as high rainfall and low temperatures. There is no consideration of the volume used in relation to the way an annual volume is calculated; i.e. is the maximum used (according to the water meter record) equivalent to the volume that might be used in the 9/10 season?

Applicants seeking to transfer this type of allocation will be required to surrender between 33 and 66%, depending on where the water is being moved to, and how it is to be used.

Therefore the effect of these planning provisions is to create a de facto ban on water permit trading, as losing between one-third and two-thirds of what ECan classify as unused water, or facing the prospect of a transfer application being publicly notified, will be sufficient to kill just about any deal.

Some examples of the implications of these draft provisions are provided at the end of this newsletter.

The opportunity to give feedback on the draft plan ends on Monday 7 May 2012. This is open to anybody, however given the short timeframe it is expected that this will mostly comprise technical and specific comments from advocacy groups, resource management consultants, corporate entities etc.

Once the plan is formally notified in August 2012 there’ll be a longer period (40 working days) to lodge submissions on any provisions of concern. HydroTrader will circulate a newsletter with an update at that time, and offer advice as to what to include in a submission.

Other issues with the draft Land & Water Plan
While there’s much to like about the draft Plan (it’s short and easy to read, the rules have been significantly simplified, and non-essential background material and endless cross-references have been dispensed with), HydroTrader has the following concerns:

(1) Policy 4.64 states that takes of >10L/s must be telemetered. This would add significantly to the costs of what are quite small takes, and provide ECan with vast quantities of electronic that they are unlikely to ever analyse, even if they had the staff and the time;

(2) Policy 4.74 states that consents must be given effect to in just two years (rather than the current default of five years as specified in the RMA), unless a longer period can be justified due to the scale or complexity of the activity. This will place significant financial pressure on small to medium-size water users to give effect to consents straight away, even at times of fluctuating commodity prices and exchange rates;

(3) Schedule 11 has no provision for annual volumes to be calculated using a ‘plan compliant method’ such as Irricalc. While indications are that this may have been an oversight that will be rectified in the notified version, there is no guarantee that applicants and water permit holders will have continued access to an alternative to ECan’s somewhat controversial Schedule WQN9 methodology;

(4) Rules 5.222 and 5.228 classify applications to take water in excess of allocation limits as prohibited activities. Therefore when new information is available which suggests that more water could be allocated, prospective applicants would have to seek a plan change, rather than simply lodging a consent application which would be considered on it’s merits (and may even be processed without first being notified).

(5) Rules 5.052 and 5.053 will require land use consents to be sought for some activities that may result in an average annual loss of more than 20 kilograms of nitrogen per hectare per year. While the need to carefully manage nutrient losses is unquestioned, we’re not sure how robust the figure of 20kg is; our concern being that this may be far too low. One bit of good news is that the amount of groundwater that can be taken as a permitted activity will increase from 10 m3/day to 100m3/day on properties over 20ha. This will be sufficient for dairy shed washwater and other small-scale activities in most instances.

Permits available to trade now listed on HydroTrader website
A list of the main permit allocations confirmed as being available for sale or lease, and allocations wanted to buy or lease, is now available on HydroTrader’s website [click here to view]. Allocations are grouped into groundwater zones and river catchments, which will make it much quicker for you to see just what's available and where.
 
Given the provisions of the draft Land & Water Plan we strongly recommend that those wanting to trade water allocations make use of this new facility before the Plan is notified (likely to be in August 2012), or at least before it’s made operative (second half of 2013?).

Some examples of the implications of the draft provisions of ECan’s Land & Water Plan
 
(1) A dairy farmer has an annual volume of 700,000 m3. As the water meters have only just been installed at the end of the 2011/12 irrigation season, any application to transfer some or all of this allocation to another site will be processed as a non-complying activity under Rule 5.242.
Therefore it’s likely to be publicly notified given the Plan’s directive that such water should be surrendered (Policy 4.73).

(2) An arable farmer has an annual volume of 1.2 million m3 and water meters were installed just prior to the start of the 2011/12 irrigation season. However, this season was quite wet and only 550,000m3 was used according to the water meter records. Therefore 650,000m3 will be defined as “unused water”. Due to a change in personal circumstances, the farmer wishes to reduce his mortgage by selling off 300,000m3/year of his water allocation, which he had hoped to use one day to fully irrigate his property. If he wants to avoid having his transfer application notified, he will have to surrender between 99,000 and 198,000m3 of the 300,000m3 of “surplus water,” depending on where the buyer is located and how they intend to use the water (as per Condition 6 of Rule 5.241).

(3) A cropping farmer has finished irrigating for the season and has only used 75% of his annual volume because the season was quite wet at the beginning. However late summer / early autumn is proving to be very dry. The dairy farmer across the road would like to use some of the  remaining annual volume to avoid having to dry off his cows early. Such a transfer application would be treated as any other temporary transfer  under either Rule 5.241 (requiring between 33 & 66% to be (permanently) surrendered), or Rule 5.242 (at risk of being notified and unlikely to be processed in time to be of any use that season).

(4) An industrial water user secures a new water permit in a groundwater zone that is not fully allocated. Due to the concerns of neighbouring water permit holders the application was notified, but it was granted at a hearing after additional expert evidence was supplied showing that well interference would be acceptable. Having spent over $50,000 to secure the permit (including the costs of drilling the well, aquifer testing, ECan’s processing costs and consultant’s costs), the applicant now has to proceed with major capital works within two years in order to avoid the permit lapsing, even though commodity prices and exchange rates are now much less favourable since the application was lodged 12 months previously.

Summary
The provisions of draft Land & Water Plan have confirmed HydroTrader’s conclusion (expressed in our last newsletter, and media release) that ECan has no interest in allowing water permit trading to continue as a legitimate means of expanding sustainable irrigation and industrial water use in Canterbury.

Therefore our message to the farming community in general, and water permit holders in particular, continues to be:

“Remain vigilant, keep an eye on ECan’s planning documents, and make your views known before those documents are finalised.”

If you have any questions about the contents of this newsletter or our earlier one, or ECan’s proposed Land & Water Plan, make contact with us as follows:

Dr Anthony Davoren – Managing Director (0274) 336-552
Gus Walkden – Finance & Marketing Manager (021) 555-985
Warwick Pascoe – Technical Director (027) 358-6378
David Hendrikz – Senior Technical Advisor (027) 715-7064