The price of water

By Geoff Cumming

As drought grips the country, the Government is promoting giant dams to irrigate dry farmland. Geoff Cumming investigates whether the biggest of these plans will work for farmers, investors and environmentalists

Hugh Ritchie checks the progress of an irrigator on his farm at Otane.  Photo / Mark Mitchell
Hugh Ritchie checks the progress of an irrigator on his farm at Otane. Photo / Mark Mitchell

Pete McIntosh slips a hand into the gently-flowing Tukituki River and scoops out a strand of mossy green algae, matted like wet hair. This is periphyton. Deeper in, a bigger weed, macrophyton, extends fronds from the gravel bed. Both are signs of the river's poor health due to too many nutrients - phosphorus and nitrogen - from farms and sewage ponds and the river's reduced flow, linked to over-allocation of groundwater for farming.

"The weed changes the ecology of the river - reducing the insects and bugs which trout and native fish prefer," says McIntosh, Hawkes Bay Fish and Game's regional manager. The result is smaller and fewer fish. "This used to be one of the top four fishing rivers in the country. Now it wouldn't make the top 10."

The Tukituki is also a playground for the nearby residents of Hastings and Havelock North. "Growing up in Hawkes Bay, you always used to go to the river for a swim. Now, I wouldn't bring my daughter here, and I definitely wouldn't let her put her head under the water." The nutrients in sufficient concentration are highly toxic to wildlife, dogs and humans.

Drought has only made things worse - reducing the flushing effect which keeps algal growth at bay. McIntosh has never seen the river this low.

140 km upstream, in the foothills of the Ruahine Ranges, sheep farmer Craig Preston surveys pasture burnt golden brown by six months of drought and shakes his head: "This will be the end for lamb and wool in this country. It will knock us back two years and the suffering trickles down to the community for three years. We have to find a better use of the land."

Alongside Preston's property, the Hawkes Bay Regional Council is promoting a solution both to the Tukituki's environmental plight and to the farmers' thirst for water. What began as a scheme to reduce pressure on the groundwater which feeds the river has grown into a proposal to build the country's biggest dam in 20 years: a wall of concrete 83m high and 510m wide to flood a valley on the Makaroro River. The 4.5 sq km lake will store up to 90 million cubic metres of water, diverted further downstream into an irrigation canal and piped to the farm gate. The water could irrigate around 30,000 ha of the Ruataniwha Plains and transform the use of the land. Oh, and there's a hydro-electric power generator as well, able to serve up to half of central Hawkes Bay.

"We didn't set out to build a monument," says regional council CEO Andrew Newman, who is fronting the proposal. "This is the win-win solution - environmentally, economically, socially."

Eighteen smaller schemes came and went before it became clear that a very big dam would maximise the opportunities for healthier rivers and farm incomes, Newman says.

Water - the Government has identified it as the key to rural prosperity and the summer drought has only underscored its importance to our economy, with predictions it will shave $2 billion off GDP. Primary Industries Minister Nathan Guy on Monday talked-up water storage as the answer to current and future droughts. "We don't have a shortage of water in this country - we don't have an ability to store that water."

But the climate has never been better to change that. The Government has earmarked $400 million from the partial asset sales process to invest in water storage infrastructure (it will expect a return on these investments), on top of funding already available for groups to progress schemes to "investment-ready"status. Hawkes Bay may be first to dip into the new fund - its water storage proposal is the furthest advanced of a number of irrigation schemes in the pipeline: smaller dams in Wairarapa, Nelson and central Otago and several river diversion schemes in Canterbury.

The Government at the same time has introduced a mechanism to fast-track "projects of national significance" through resource consent hurdles via the new Environmental Protection Authority. The council - which, as natural resource regulator, has an obvious conflict of interest in building a dam - will ask Environment Minister Amy Adams in May to "call-in"the project for an EPA board of inquiry. That process has a 9-month deadline and includes a submission period limited to just 20 days. The board's decision can be appealed only on points of law.

And while opening the floodgates for intensified land use, the Government has been slow to toughen safeguards for freshwater freshwater quality - only now drafting reforms.

All of these issues are colliding in Hawkes Bay. Water allows more intensive farming - more stock per hectare or additional crops a year - as well as increases in cultivated area. But environmentalists worry that irrigation hastens the conversion of farms and forest to "dirty dairying" and degrades waterways. At the Green Party's annual conference in Napier last month, co-leader Russel Norman branded the scheme "subsidised pollution".

"This dam will bring more large-scale industrial dairy farms to Hawke's Bay driven by debt and shareholders to exploit the land, the rivers, the cows and the workers,"

Never look a gift horse in the mouth

If Hawkes Bay gets the go ahead, the Government will expect a return on its investment and local farmers will also be invited to invest. But the water will be among the country's priciest - estimated to cost farmers 22-25 cents a cubic metre against a historic average of around 16 cents. And farmers will have to "take or pay", even in a wet year. On-farm infrastructure (piping and irrigators) will cost farmers $3500-$4500 a hectare.

Surveying parched fields from a hill on his Ruataniwha Plains farm, central Hawkes Bay Mayor Peter Butler can see the difference water makes - farmers with irrigation are green with crops or pasture; those without are bare. But drought in central Hawkes Bay is routine in January and February, and aquifers until now have supported a land use pattern of mixed cropping, lamb and beef grazing and some dairying.

What's different about this drought is that it started last September and has turned the whole North Island brown. Scientists predict a cycle of more dry years and the aquifer supply has been over-allocated.

"If we could get 40,000 ha of irrigated land, we would be an oasis in the North Island," Butler says. "There'd be no other place like this. If it was dry the cows would still be milking twice a day; people finishing lambs would still be finishing thousands of lambs from dry breeding country; crops would still be growing. Everything would just carry on."

The benefits would flow into the main towns, Waipukurau and Waipawa, he says. "Imagine the extra tractors and trucks requiring engineering companies and mechanics. If farmers are making more money they will be spending it on the good things in life. "This could be absolute boom times."

But how much is too much? What are the costs and who will pay - economically, environmentally and socially? While most farmers and local politicians share the council's enthusiasm, it's an understatement to say the scheme has polarised opinion in Hawkes Bay - and it's not just greenies taking deeply-entrenched positions.

You can lead a horse to water but you cannot make it drink

With the council driving the process and bypassing the Environment Court for the EPA there is concern democracy will be drowned in the rush. Although the proposal was included in last year's long-term plan consultation, critics say not enough was known about it - only now are some technical details surfacing.

Opponents have wide-ranging concerns from price and farm economics to democracy. McIntosh says the EPA is a more political process - the Minister appoints the board and may consult the council on its make-up. He also worries it will be less scientific than the Environment Court.

While the scheme was costed into last year's long-term plan consultation, details have changed and technical reports are continuing to emerge.

An umbrella environmental forum, Te Taio, claims the regional council refused a meeting to hear its concerns. Chairman John Cheyne says the council has spent $8 million to date on consultant reports and feasibility studies; opponents are largely volunteers who face an uphill struggle if it goes to a board of inquiry.

"I don't think the council has really been interested in anybody who doesn't agree with them." says Cr Liz Remmerswaal, a lone dissenting voice on the regional council. "There's a certain amount of 'getting the project over the line'. "

An environmentalist who rose to prominence fighting plans to build into the cliffs at Julian Robertson's Cape Kidnapper's development, Remmerswaal says she won't be seeking re-election. She says the council has conducted mock consultation with hand-picked stakeholder groups.

"It's like the fairy tale on one side and the reality check on the other and there's group-think going on around the council table which isn't healthy.

"This is going to look good on Andrew Newman's CV but it's not going to stop drought."

Farm economist Barrie Ridler is challenging the model used to estimate profitability gains for dairy farmers, claiming most gains come from improved farm practices and the irrigation costs will halve the profit. Ridler, a former senior lecturer at Massey University, farmer and consultant, says the council model also ignores farmers' debt servicing costs. He is promoting an alterative dairying model where profitability rises with lower stocking but, along with other critics, he gets short shrift from the scheme's proponents.

Why not take a breath and give everyone a say?

Newman says objectors had their chance during the long-term plan consultation.

"The gestation of these projects often takes a decade. My objective is to get it to a decision point within five.

"There's some real negative consequences - environmentally, economically and socially, if this thing doesn't run."

Though it's unusual for such projects to be led by bureaucrats rather than a politician or farmers, Newman is clear that the council can be both natural resource regulator and a facilitator of economic growth.

"It's not my ego that's got us here.

"Experience says you don't get these things across the line, or even to a decision point, unless you drive it."

The council needs to show investors there's enough demand for the scheme to be profitable and is wooing farmers with discount prices if they sign-up early and incentives for deep bore water users. None has obliged - while many are keen, most want more details before taking the plunge.

"It's going to be expensive, no two ways about it," says Hugh Ritchie, a third generation farmer and staunch supporter of the scheme. "Whoever goes in will need to be a good operator."

But Ritchie - who chaired the Tukituki stakeholders group which launched the process - has reaped the productivity gains of irrigation on his 300ha farm at Otane and, like others, has bought land in the irrigation zone.

"The Canterbury [irrigation] experience has been that there's a multiplier effect: huge benefits flow to the community from the additional dollars spent. You drive through Waipukurau or Waipawa at the moment and you see empty shops."

He hears the green argument that we can manage better with the resources we've got but argues that means standing still.

"You've got to build your economy on something you are good at. We've got an advantage in agriculture - we are blessed with water."

The scheme is modelled on best-practice farmers like Ritchie - "the top 20 per cent"- buying in. "My gut feeling is we can make it pay at 20 cents a cubic metre and that in 20 years' time that will seem bloody cheap," says Ritchie. "But there's a pretty big tie-up to efficiency and to changes in land management. It recognises that to get access to water we will need to meet certain environmental outcomes."

A sizeable area on the Makaroro River will be flooded to create the 7km long lake. It is mostly modified land: logged then converted to pasture or pine forest, though remnants of native bush remain - home to rare native birds and long-tailed bats. But environmentalists are less worried about the lake's impacts than the downstream effects.

Their over-riding concern is the power of water to change the way land is used - ushering in a conversion to dairy farms that will lead to more nitrate and nitrogen contamination of the river.

Everyone agrees irrigation will bring change - increasing property values by bringing water to the farm gate, whether farmers can afford to take it or not. "We've got farmers who are 60 years old," says district mayor Butler. "Some have no sons. They are not going to change their system and invest in irrigation when they'll be gone in 5 to 10 years. That's when the big-time investor farms come in because they can afford to do it."

Pete McIntosh and other critics fear those investors will be corporate dairy farms - the irrigation costs dictating the kind of returns that have fuelled the dairying boom in Southland, Canterbury and other regions. And with increased dairying comes increased nitrate leaching and nitrogen runoff into streams and rivers. Dairy farms lose an average 39kg/ha of nitrogen each year from soil, compared with 8 kg for sheep and beef, a 2009 MAF study found.

Proponents unashamedly nod to Canterbury, where irrigation has changed the landscape - and economy. Mayor Butler says his constituents are well aware of the difference dairying has made to Ashburton where "every second person's a millionaire". Yet environmental concerns about the pressure on the braided rivers led to the suspension of ECan, the elected Canterbury Regional Council.

There is, however, yet another string to the Hawkes Bay council's bow. To deal with the Tukituki's ill health, it has drafted a plan change for the catchment (which it also wants handled by the EPA board of inquiry because of its links to the irrigation proposal). The plan change raises minimum flow levels, introduces limits on pollutants and requires farmers taking groundwater to follow good farming practices, such as nutrient budgeting and fencing off streams.

An early bonus is that it has forced the Central Hawkes Bay District Council to spend $6.2 million to treat sewage at Waipukurau and Waipawa to a higher standard before it is released into the river, significantly reducing phosphorus contamination.

But the plan change at the same time allows for significant increases in nitrate and nitrogen levels in the river and its tributaries. The new limits allow for nitrate and nitrogen levels to rise three to five times in some parts of the river, says McIntosh. "They are creating headroom for more nitrates to allow for more dairying. Once nitrates get into the groundwater it's almost impossible to keep it out of the river and there's a lag effect."

The council cites advice from freshwater scientists that phosphorus is the main cause of algal growth in the Tukituki and that fixing the sewage ponds should fix the river, even if nitrogen levels rise.

McIntosh disagrees, and independent water scientists say the science is uncertain. "They've sold the nutrient problem as a phosphorus problem when it's actually both."

Horses for courses

The council and most farmers doubt that the dam will trigger the wholesale conversion to milking cows which critics fear. Dairying's thirst for water makes it an expensive proposition. The council's consultants predict a third of the newly irrigated land, about 10,000 ha, will go into dairying, with the economics stacking up well for sheep and beef and crop farms, which need less water than dairy farms.

"[Dairying] isn't everyone's cup of tea," says crop farmer Richard Dakins, who farms near Takapau in the south of the irrigation zone. Like Hugh Ritchie, he expects productivity gains from double-cropping, perhaps attracting another processing company.

"It's like an insurance policy - it gives you confidence to grow things because you know you're going to get the extra value.

"I think the bigger benefits will be downstream - for the health of the rivers and for the community: more labour on farms and more demand for services."

"I don't think I would look back if it goes ahead - I don't think the region will look back."

McIntosh hopes they are right - stressing that Fish and Game would welcome improved summer flows for the river and economic gains for the region.

"We have never been opposed to the dam, but not at the expense of the river.

"If they can improve the flows and the water quality, we are in. But we still don't know what the flows are going to be and the water quality is definitely going to drop."

At the Ongaonga general store - a classic grocery, cafe, post office and petrol bowser in the middle of nowhere - a woman reflects the community's uncertainty about the scheme. "I'm a farmer and a fisher - it needs to be good for both.

"I'm worried that only the rich farmers will be able to afford it, not the ordinary Joe Bloggs. We need simple answers and information - not graphs."

Thinking big: Ruataniwha water storage

Off-farm costs

An estimated $230 million for 90 million cubic metre dam on the Makaroro River, 6.3 megawatt power station, irrigation canal and piping to farm gate.

Funding

BOOT (Build, Own, Operate and Transfer) model is proposed, with investment company operating for 35-70 years before handing back.

Council to invest $80m. Government also a likely investor.

Other potential investors: iwi (Ngati Kahungunu), food processors, power generators, farmers, Fonterra.

Potential water trading regime.

On-farm costs

Farmers pay estimated $3500-$4500 per ha for piping, irrigators and pumps (where needed).

Water take charge estimated at 22c-25c a cubic metre. Contracts will be "take or pay".

- NZ Herald

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