The cost of the Ruataniwha irrigation project has risen by $10million as debate continues over whether the scheme will remain attractive to Central Hawke's Bay farmers and growers under new environmental rules.

The Hawke's Bay Regional Council has previously put the cost of the project, involving the construction of a huge dam and reservoir northwest of Waipawa and Waipukurau, at $265million.

But a "statement of proposal" presented at a council committee meeting last week said the project cost was "expected to be in the vicinity of $275million".

The council is due to vote on June 25 on whether to invest up to $80million of ratepayer money in the project.


Its commercial arm, Hawke's Bay Regional Investment Company (HBRIC), is working to secure investors to finance the remainder of the project.

HBRIC is also in the process of finalising a fixed-price contract with a contracting consortium to build the scheme, which will include an 83-metre-high concrete dam on the Makaroro River in the Tukituki catchment.

HBRIC chief executive Andrew Newman said the increase in cost of the project since an earlier feasibility study was due to improved specifications for the scheme.

"The price offer we've had through the construction process is distributing more water, further, so there's additional pipe and additional pumping through the distribution network," he said.

"So there's some additional capex [capital expenditure] over and above what we had forecast through feasibility, but, in turn, that offer is substantially better than what we had at feasibility."

HBRIC announced in February that the scheme would deliver pressurised water - potentially reducing the on-farm investment in pumping equipment water users would have to make.

At the time, the company said pressurisation was possible as a result of design modifications worked out with the construction consortium, OHL-Hawkins.

A final construction contract will not be signed until "financial close" on about June 30, the date HBRIC has set for meeting all conditions needed to give the scheme the green light.

Those include finalising funding arrangements, getting council approval, and securing contracts with farmers and growers to take a set amount of water through the scheme.

Doubts about the scheme were raised last week when a board of inquiry released a draft decision on an environmental management plan change for the Tukituki catchment.

The complex plan change, setting tougher nutrient leaching limits in the catchment and requiring farmers to implement individual environmental management plans, raised fears at the council that farming in the area would become uneconomic.

That, in turn, would make the water scheme unviable because potential water users would not have the confidence to invest in primary production in the area.

The board's decision has been generally welcomed by environmentalists but critics of the change have included regional council chairman Fenton Wilson, who said he feared the move would economically ruin Waipawa and Waipukurau.

But regional councillor Rex Graham said yesterday the farmers he had spoken to about the plan change "could all live with it and are all quite relaxed about it".

In its decision the board said it was putting forward a regime that would allow "high performance farmers" to carry out more intensive farming with "advanced management strategies".

"It won't be easy for many at first and there will be some pain but in 100 years they will look back and admire our innovative foresight and environmental leadership," Mr Graham said.

"We now need to get on with it and help build strong horticultural and farming businesses around a sustainable environment that everyone can benefit from over the next 100 years. This will include water storage and it may still include the Ruataniwha dam project that is currently on the table and these are decisions that the community along with individual farmers will need to make."