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Water Magazine

BayBuzz21 May 2014

Tukituki Protected … but what about the Dam?

By Tom Belford
Environmentally prudent water management took a leap forward in April when a Board of Inquiry ordered a stringent regulatory plan for protecting the Tukituki.

Show us the Money

By Mark Sweet
By the time the meeting started there was standing room only. Andrew Newman, then CEO of Hawke’s Bay Regional Council (HBRC) chaired proceedings.

Two Views on the Dam

By Mark Sweet
Kevin Davidson is one of the farmers most affected by Plan Change 6, and the Dam. Barrie Ridler has taken a keen interest in the Dam from the outset.

Does the Irrigation Scheme work for CHB Farmers?

By Barrie Ridler
Barrie Ridler is a consultant specialising in modelling economic and environmental impacts of farm systems with clients throughout NZ and Australia.

Alternatives to the Dam

By Garth Eyles & Chris Perley
BayBuzz asked two Regional Council ‘ex-pats’ for their views on the Dam. Both are deeply knowledgeable about land use practices and opportunities in CHB.

Mauri Ora Ki Te Rangi

By Ngahiwi Tomoana
Ngāti Kahungunu Iwi Incorporated is pleased that the mauri of the Tukituki and Papatuanuku has been acknowledged by the Board of Inquiry …

Caution! The Dam is a Risky Proposition

By Pauline Elliott, Transparent Hawke’s Bay
The Regional Council’s plan for a major dam in CHB has always faced two hurdles – environmental standards and financial viability.

Only 25 Questions Left!

By Tom Belford
I have read everything regarding this project that HBRC/HBRIC have made available. Yet I am still seeking definitive answers to some core questions.

Tukituki Protected … But What About the Dam?

By Tom Belford

Environmentally prudent water management took a leap forward in April when a specially constituted Board of Inquiry (BOI) ordered a stringent regulatory plan for protecting the Tukituki catchment.

The BOI, rejecting a softer scheme proposed by the Regional Council, bowed to the scientific evidence and fashioned a plan that limits both the main nutrients – nitrogen/nitrates and phosphorus – that pollute the Tukituki system. This approach was strongly advocated by Fish & Game, Forest and Bird, the Environmental Defence Society, Ngāti Kahungunu and others.

At the same time, the Board approved consents sought by HBRIC, the Regional Council’s investment company, which would enable construction of the proposed dam and irrigation scheme. The Board was satisfied that adverse environmental effects arising from construction of the dam itself and its resultant reservoir were adequately offset by compensatory measures proposed by HBRC/HBRIC.

Tukituki River

Whether intensified farming can meet the new environmental ground rules and generate the increased farm incomes to make the dam affordable are the remaining $600 million questions on the table.

New environmental rules

The new limits on nitrogen and phosphorus are set at a level required to protect the ecological health of the waterways, as are ‘low flow’ levels regarding minimum water volume needed in the rivers. Too low flows can trigger temporary limits on water extraction for irrigation.

The BOI expects that nutrient pollution will be mitigated by limits newly set on nitrogen leaching (these limits are set according to various land use classifications) and by requirements to exclude stock from waterways. What this means is that certain land uses, like dairy farming or intensified cropping on highly porous soils, are not likely to be feasible. Nitrate levels already exceed the new BOI limits in 9 of 19 sites presently monitored by HBRC.

That reality will require a ‘re-think’ of any expected land use changes that were associated with the dam. Specifically, dairying was projected to more than double within the dam footprint, increasing from 13% of land use currently to 30% (with many observers assuming an even higher percentage). But the issue isn’t limited to dairying; intensified cropping could produce even higher leaching rates.

Offsetting these constraining factors, the BOI plan permits an additional 15 million cubic metres of water to be taken from the Ruataniwha aquifer in Central Hawke’s Bay, with the proviso that such takes do not undermine the required waterway flows.

Farm Environmental Management Plans will be required and monitored to ensure that environmental requirements are being met.

In setting its plan, the BOI was mindful of the interplay between tougher environmental rules and current farming practices and farm economics, saying:

“The Board appreciates that such a regime will involve a cost to farmers. Nonetheless, the Board has concluded that the time has been reached where that cost will have to be met if serious efforts are to be made to avoid further degradation and restore the Tukituki waterways to health.”

The Board cited experts proffered by both HBRC and Fish & Game who identified numerous examples of how good farm management practices could be adopted so that both environmental and land use intensification goals could be achieved. On that basis, the BOI concluded:

“It [the BOI] also recognises that as a discharger of nutrients and contaminants, the primary sector is no different from any other industry. It has the same obligations to operate within limits and internalise effects, or mitigate those effects where absolute internalisation is not possible.”

So, is the dam viable?

While the Board of Inquiry decision sets the stage for a re-think of whether its new environmental ground rules and land use intensification can co-exist, that is only one of the suite of issues that must be addressed as the broader financial case for the dam’s viability and its claimed economic benefits finally come under scrutiny.

The articles that follow present the views of skeptics on the matter.

BayBuzz is taking this editorial approach for one simple reason. The Regional Council and HBRIC will soon have spent over $14 million making the case for their plans for the Tukituki catchment. HBRIC will continue to promote the dam throughout the public consultation period and, based upon past performance (e.g Tukituki Choices), the objectivity of the Regional Council cannot be presumed.

Since Board of Inquiry is the final authority on environmental aspects of the Tukituki and the proposed dam, our focus now turns to financial viability and economic claims. The articles that follow reflect the concerns of observers who have followed closely the development of the dam scheme. The issues discussed include on-farm economics, alternatives to the dam, the Māori perspective, ratepayer risks, transparency, and questions that still need answers.

Show Us The Money

By Mark Sweet

By the time the meeting started there was standing room only.
Andrew Newman, then CEO of Hawke’s Bay Regional Council (HBRC) chaired proceedings, and the MP for Tukituki sat at the
back of the room eating his lunch.

The venue was the Community Centre in Havelock North, and the date – 31 May 2010 – is when the public first heard details “on the proposals to set up a holding company for regional investments”. Although the proposal contained the statement, “The Regional Council’s investments include the Port of Napier Ltd, forestry and potentially the water storage projects,” at no time were ratepayers told that the main purpose of establishing the holding company was to provide a corporate structure for planning the construction of the dam.

Andrew Newman HBRIC

But as Treasury documents released in November 2013 under the Official Information Act show, government ministers Bill English and Stephen Joyce were briefed on the Ruataniwha dam proposal in October 2009.

Seven months later at the meeting in Havelock North, financial adviser to HBRC, Robert Philpott, explained the structure and extolled the benefits of the holding company. He told the audience of ratepayers, “Why settle for 4% return on assets when you could be getting 9%.” He didn’t mention the dam.

The holding company morphed into the Hawke’s Bay Regional Investment Company (HBRIC). Building the Ruataniwha dam is their prime focus, the scope of work undertaken has been prodigious, and whether one supports or opposes the dam, there is no doubting HBRIC’s tenacity and determination over the past four years.

Unfortunately, the atmosphere of concealment and mis-representation in which the process began, characterises the way in which HBRIC has developed the dam proposal. Much of the criticism leveled at HBRIC would not have happened if they were more forthcoming with information, and open to scrutiny every step of the way.

And now, not surprisingly, at the crucial stage of raising the finance, HBRIC finds itself isolated.

Construction is scheduled to begin in September 2014, but where’s the money, against a currently estimated budget of $275 million?

Trustpower, who were up for $40-60 million, walked away in March, because the investment didn’t fit their ‘risk and return framework’.

Ngāi Tahu has also been listed for an equivalent investment. However, chief executive of Ngāi Tahu, Mike Sang, was quick to respond to Trustpower’s decision. He told The Dominion Post, “We will withdraw without a suitable partner. Our major issue is that Trustpower brought a large amount of expertise in terms of large-scale civil-type construction projects.”

Moreover, Ngāi Tahu had already indicated they would not invest in the dam without Ngāti Kahungunu’s blessing, and that appears unlikely, given the conflict over the consultation process.

Trustpower and Ngāi Tahu were anchor investors contributing 30-40% to the cost of construction. Chances are, they’re both gone. So, who to fill the void?

New investors?

Meridan Energy has invested in water storage projects in the past, but it’s unlikely to do so now that it is a Private Public Partnership (PPP) with shareholders other than the Government to please. If Trustpower won’t expose their shareholders to the risk, why would Meridian, or any other corporate investor?

There is Treaty of Waitangi money in the pipeline. The final Crown offer for the settlement of Ngāti Kahungunu ki Heretaunga-Tamatea’s claims was sent to the mandated body, He Toa Takatini, on 9 April 2014. The Crown’s final offer is $100 million, which includes “all cultural, financial and commercial redress”.

In his letter, Attorney-General Chris Finlayson acknowleged, “Heretaunga-Tamatea requested an on-account payment to initiate a series of water, education and marae restoration initiatives and to allow your participation in the Ruataniwha Water Storage Scheme if you so choose.”

The on-account payment is $25 million, but how much might be allocated to the dam is uncertain.

Heretaunga and Tamatea have issues to resolve. Tamatea were favoured by HBRC as exclusive partners for purposes of Plan Change 6. They alone have signed up with HBRIC to manage cultural and environmental aspects of the dam’s construction in a deal worth around $7 million. Many in Heretaunga are unhappy, and there are underlying tensions in the relationship with NKII, the region’s corporate iwi entity.

HBRIC can’t expect a commitment from He Toa Takitini before its target date of 30 September for financial closure.

Irrigator

So who’s left?

The Government are keen supporters of water storage and have earmarked $400 million from asset sales to assist start-ups nationwide.

However, obtaining a secured loan from Crown Irrigation depends on criteria HBRIC haven’t met, even before Trustpower walked away.

The October 2009 Treasury briefing to Ministers, English and Joyce, advised that, “Farmer participation seems desirable. Farmers should be given a first right to shares in the company.

The larger the pre-determined profit level for early investors, the more farmers will be induced to participate at this early stage.”

The Treasury advice makes sense. Farmers are the most important party in the scheme, as their land and livelihoods are most affected. Public opinion over HBRIC spending $80 million of ratepayers assets might have been more favorable, if, right from the start, farmers were encouraged to make a matching investment of $80 million.

Theoretically that is possible. $80 million represents 16% of the $500 million land value of the 25,000 hectares being irrigated (QV advice). Any shareholding in the project promises a dividend once the dam is completed which cushions the cost of water for the farmer. The banks might bridge the gap, but that is doubtful. Why would they take the risk during the construction stage when others will not?

HBRIC invited farmers to invest in the Ruataniwha dam in March 2014, and when they did, HBRIC also invited “Hawke’s Bay resident individuals or businesses who are ‘eligible persons’ for purposes of the Securities Act 1978.” ‘Eligible persons’ are those who have earned over $200,000 a year for the past two years, or have net assets of at least $2 million.

HBRC chairman Fenton Wilson

The offer is to buy shares in a Fund structured as a limited partnership with a minimum investment of $50,000. A cash return of 5% starts after completion of construction, and once water uptake reaches a certain point – Conversion Date – profit from water sales will be distributed. The Preliminary Information Memorandum (PIM), inviting expressions of interest, does not indicate how much this is expected to be.

The risks for investors in the partnership are those associated with construction, farmer uptake, and the unpredictable; the same risks Transpower decided not to take.

Considering a current bank term deposit of $50,000 for 3 years returns 5% at minimal risk, it would be surprising if Hawke’s Bay’s ‘eligible persons’ beat a path to HBRIC’s door, cheque books in hand.

If the Ruataniwha dam is stopped, some might blame the Board of Inquiry introducing nitrogen controls.

But lest we forget. Before the BOI report, and five months before construction is due to begin, the only money ‘on the table’ for the $275m project, is $80 million of regional assets, offered by HBRIC on our behalf.

Two Views on the Dam

By Mark Sweet

Kevin Davidson: FOR

Kevin Davidson is one of the farmers most affected by Plan Change 6, and the Ruataniwha dam.

His 462 hectare dairy farm, which at peak milks 1,800-1,900 cows, draws its water from the Waipawa River, supplemented with bores, and he is, “Definitely interested in investing in the dam.”

“It’d be really good if we could get $50-60 million from the land owners, because that would send a message back that we believe in it; long term for the generations to come.”

Kevin Davidson

Davidson, and other farmers on the plains, have invested heavily in the dam project. “Last year the additional charges on our water was around $25,000 for research and development.”

Also he contributed to the $300,000 cost of employing hydrology experts, Aqua-link, to challenge HBRIC’s modelling. “What’s been agreed is the Ruataniwha (water) might be over allocated, although that’s not proved, but it’s not over-utilized.”

So why build the dam? “To grow it,” says Davidson. “To irrigate more land because Hawke’s Bay’s not growing and we have to do something.”

Like many he doesn’t “agree with a lot of
the methodology Council has used to promote the dam, but putting that aside, if we want New Zealand to grow we have to invest in agriculture.”

But Davison is concerned how the dam will impact on his operation compared to others. He pumps water from a four metre deep trench, which fills from river seepage through the shingle, under the stop bank. The plan is to stop him pumping when the river reaches a minimum flow.

“If they (HBRIC) were really worried about the impact on the environment surely they’d discount surface takers first. You’d think they’d have come to us, and said, ‘You’ve got an existing water right, how about you come onto the dam and we’ll give you an incentive.’ Instead they’re incentivising the guys who are drawing from 60 to 200 meters down, which could, and probably has, a three or four year lag before it affects the river.”

To make the dam viable, Kevin Davidson says HBRIC has to, “Make it more affordable to farmers, and let farmers have more control, so we keep hold of the land. If we farmers can invest in the dam, then we can have a say, and protect our interests.”

Otherwise, he says, “It could be going to China or Germany, but I want to see it stay in the hands of Kiwis.”

 

Barrie Ridler: AGAINST

Farm economist Barrie Ridler has taken a keen interest in the Ruataniwha dam from the outset.

The former dairy farmer, and lecturer at Massey University says, “One of the biggest problems is we can’t get access to the financial figures,” and he’s dismayed. “HBRIC aren’t even allowing councillors to see the full financial details. It’s hard to believe that a company set up as an arm of the Regional Council, and answerable to the Council, who are in turn answerable to the ratepayers, is not willing to divulge the information on which they’re basing their business case.”

But Ridler works with the figures available (see his article in this BayBuzz) and says, “What we do know is that $80 million is going to be invested, and choosing an interest rate of 7% as an opportunity cost, we have $5-6 million a year of interest foregone by Hawke’s Bay ratepayers, but the true figure is nearer $10 million.”

As he points out, the water that has a public and environmental benefit. For example, flushing flows to clear away algae are provided at ten million cubic metres per year. This must be costed into the equation adopting HBRIC’s current value of water – 10 million x 23 cents = $2.3 million. Add the $1 million or more of HBRIC operating costs, directors fees and salaries, which wouldn’t exist if it wasn’t for the dam, and the cost of investing $80 million is likely to be $10 million per year until the dam starts earning.

“Ever since BNZ Advisor’s report (2012) it’s been known that there has to be public sector subsidy in order to make a business case for the dam.”

What concerns Ridler most is the likelihood of construction over-runs having to be met by the ratepayers
and the potential erosion of our regional asset base.

“It’s a complex system. When you put complex systems together in the manner this one has been, it’s never going to work in the way you think it will. Any report you read about large projects of this nature, all over the world, you’ll find it’s common for over-runs to be between 80% and 100%.”

While Ridler is critical of the Ruataniwha dam, he has an alternative proposal, which aligns with the late Sir Paul Callaghan’s assertion, that New Zealand has reached the point of diminishing returns in agriculture.

“I don’t think the people who have done a lot of the work about adding a whole lot more agriculture in New Zealand understand the concept of diminishing returns,” says Ridler. “The fact is, we’ve gone past where more resources should be applied, and once you’ve gone past the optimal point of resources, two things happen: the economics get worse and worse, and the environment suffers.”

The alternative Ridler and others propose for the Ruataniwha Plains is “about encouraging farmers to better use current resources so productivity is increased by using those resources more efficiently.” By using water more effectively, and working with farmers on best practice, Ridler is confident production can be increased, and river flows improved without the dam.

“Our problem is we’ve never been given the opportunity to present our case, and unlike HBRIC, we haven’t been given $10 million to research.”

Does the irrigation scheme work for CHB farmers?

By Barrie Ridler

[BayBuzz asked farm economist Barrie Ridler to examine the economic merits of purchasing irrigated water from HBRIC. Barrie was senior lecturer on agricultural systems at Massey for 11 years. He also managed one of Massey’s model farms and owned and managed a 460 hectare sheep and beef farm in the King Country for 17 years. He’s now a consultant specialising in modelling economic and environmental impacts of farm systems. His clients have included MAF, DairyNZ, consultancy firms, regional councils and farms throughout NZ and Australia.]

Barrie Ridler

The Ruataniwha Water Supply Scheme (RWSS) seems designed to increase farm production at any cost rather than actually provide any economic gain for the farm.

Farms are relatively complex systems. The more complex a system becomes, the more difficult it becomes to manage to full efficiency and the greater the chance for catastrophic failure. Contemplating any change to a complex system requires thorough analysis and persistent attention to identify likely constraint points and thus avoid such failure.

Farmers contemplating using an irrigation scheme should require full comparative farm systems analysis. The use of accurate and unbiased data is paramount given the new complexity being added to what may have been a simple farm system, but such data are difficult to source.

Will the water be there?

Previous irrigation systems relied mainly on river run systems where flow rates were greater than requirements for irrigation and secondary to the hydroelectricity generated. However, the RWSS requires a high dam built on a river (Makaroro) that may not be able to supply sufficient irrigation water plus normal flows for environmental river conditions in summer.

The Makaroro River flow has not actually been measured at the dam site in the five years since the dam was originally considered. The ‘synthetic’ flow rates used to prepare the HBRIC proposal are open to considerable debate, yet are pivotal to determining the area that can be irrigated and the reliability of supply. Depending on who submitted to the BOI on this matter, the synthetic Makaroro water flows may be as much as 35% overstated, calling into question the surety of water supplies contracted by farmers.

If the water is available, is it needed?

An HBRC pre-feasibility study indicated:

  • In a ‘normal’ non-drought year all of the Ruataniwha Plains appear to enjoy a moisture surplus throughout the growing season – i.e. no irrigation required.
  • In a ten year drought, the seasonal deficit ranges between zero and about 240mm.
  • In a twenty year drought, the seasonal deficit ranges between zero and about 450mm averaging around 330mm.
  • There is also a significant difference in the average water requirement across zones in the scheme footprint. For example, Zone D in a twenty year drought requires about 240mm, while Zone A requires about 400mm.
  • The western extents of Zones C and D will not require irrigation in most years, and then only a modest amount, even in significant drought events. This suggests that it would be both uneconomic and unwarranted to irrigate these areas.

The data above show that in most years, irrigation will provide little additional pasture when soil water levels are already adequate and the opposite occurs if too much water is applied.

Dry summers provide a better response to water than damper summers and this relates to the percent of water deficit in the soil at irrigation time. So consistently dry conditions, as in Canterbury, can be managed and provide better responses than would the Ruataniwha area, which averages between 1,000 and 1,200mm of rain and whose monthly spread is quite uniform throughout the year. Projecting greater farm productivity in CHB based upon irrigation experience in Canterbury is fallacious.

The RWSS scheme is based upon a contracted ‘take or pay’ system of 35 years. Farmers in the scheme must pay for their contracted water, each year, whether they actually need and use the water or not, yet apparently are not compensated if water supply is insufficient.

The farmer needs to know

Any comparative analysis requires all the costs and benefits before any change to be compared to those after the change. There should also be a comparison of what other alternative systems are possible, rather than costing only an irrigation alternative. This step seems to be overlooked in the rush to use irrigation as the only way to improve profits.

Why not compare the farm before and after implementing improved management practices – such as better per cow performance through more precise feeding and lower replacement rates; better use of resources by improving pasture, stock and staff management? Such an analysis may well reveal substantial improvements to sustainability and profit with little or no additional cost, yet provide a more balanced system less likely to suffer breakdown.

For the RWSS area, applying known principles of farm management and more efficient resource allocation has been shown to lift profits by 25-40% and provide a reliable system that will withstand dry seasons with relative ease and little decrease in profits. Depending on the input data used for an irrigation option, the improved non-irrigated system may prove far more profitable, if not quite as ‘production rich’, as the irrigated option.

So, the key data points for the farmer include:

  1. Accurate daily rainfall data from the water catchment over at least 20-35 years.
  2. Amount of irrigation water required on a contracted 35 year supply to ensure increased stock numbers and performance can be maintained.
  3. Frequency of non-supply.
  4. Cost of water (yearly charge increasing with CPI).
  5. Full intensification costs. Note: Any additional cost compared to the improved current system must be charged against the irrigation. Using dairy as an example, due to pasture production increases that may result from more water, stock numbers may increase by 50-80%. The improvements therefore include the on-farm irrigation equipment, larger capacity milking shed(s) and yards, races, water supply, feed pad(s), effluent ponds and system, additional fertiliser and pasture costs, tractors and machinery, sheds, staff housing and more stock (and share) purchases.
  6. Additional running costs: interest (what rate charged?); insurances, especially for irrigation equipment; power; repairs and maintenance; and depreciation (what rates?).
  7. Need to pump water to farm (or pay 26 cents per cum compared to 23 cents/cum contracted).
  8. Cost of pipeline from distribution end to farm.
  9. Allowable nutrient loads, as these will limit future production.
  10. What pasture response rate to water should be used for the area and soil type?
  11. What is the effect on longer term profit if more water than is normally required in an ‘average’ year must be purchased but not used; or is purchased but not available in dry years due to insufficient river flows?

Irrigation in CHB

Obviously, this is a very difficult analysis to complete without very good data on rainfall, water availability and pasture/crop growth response rates, which fluctuate between and within years depending on moisture deficits. These factors all create a formidable challenge when attempting to assess the worth of irrigation in general. They are complicated further when applied to a particular farm, where shape, contour and variable soil type require costly customisation of the actual irrigation system.

The intensification costs are large and it could be argued that it would be less risky to buy a dairy farm in an area with adequate rainfall. Certainly it would be cheaper to buy an existing dairy farm in another region than to buy dryland and convert to irrigated dairy in the RWSS area. Yet HBRIC projects dairying to be the only land use type that actually grows in CHB post-irrigation.

The intuitive urge to assume large increases in pasture and milk production will inevitably result from adding water and that this will equate to higher profit and increasing capital gain is unfounded.

For the RWSS, assuming a water price of 26 cents per cum, or about $1,100-$1,600/ha/year every year for 35 years, whether used or not, a price of $7/kgMS* and current costs for farm inputs and charges:

  1. If a more realistic 10:1 response to water (ratio at which added water yields additional dry matter) is used rather than the 20:1 response some submitters claimed, irrigation is not as profitable as an improved existing system.
  2. If per cow production of 380-425kgMS /cow are achieved rather than 450-476kgMS/cow, irrigation is not as profitable as an improved existing system.
  3. If the average rainfall year occurs 50% of the time, above average 25% of the time, dry years 20% of the time and droughts 5% of the time, irrigation is far less profitable than the existing system.
  4. If water is not sufficient for full irrigation from the RWSS dam more often than one in 20 years, as projected, then profitability is threatened.
  5. If input prices increase faster than output prices (and the trend has always been this way) irrigation will become increasingly difficult to afford unless water is virtually free.

*kgMS stands for kilogram of milk solids.

If any one of the above factors cannot meet or exceed the stated expectations of the RWSS promoters, it will render irrigation less profitable than an improved non-irrigated existing system.

The complex farm system anticipated from intensification using water is vulnerable to only small variations in any of a number of critical assumptions. If all these are added together, the resulting economic loss will be sufficient to reduce equity at an unsustainable rate and the total economics of the farm may be at risk. As shown above, dairy conversions would be extremely risky.

Promoters of the irrigation scheme could be accused of ‘irrational exuberance’.

In Central Hawke’s Bay, farmers would be better served by looking at the known improvements that can be made in current practices to lift both productivity and profitability.

For example, 21% of existing land use in the proposed irrigation footprint is in sheep and beef (and substantially more in the rest of CHB). According to evidence provided to the Board of Inquiry by Beef & Lamb NZ:

“The [HBRIC] plan assumes that irrigation is essential to increased production from dryland sheep and beef farming. This is not altogether correct as the recent development of lucerne grazing and other novel forages and feed sources has demonstrated. Recent work in this area has shown that equivalent levels of production can be achieved on dryland lucerne as are achieved from irrigated pasture.”

In short, prudence dictates seeking improved performances with current conditions before jumping into irrigation as the only cure-all for better farm financial performance. Otherwise the irrational exuberance will evaporate even before the water does.

[Editor’s Note: Barrie’s expanded treatment of these issues will be published in the June edition of Primary Industry Management.]

Alternatives to the Dam

By Garth Eyles & Chris Perley

Proposed new dam site in CHB

[BayBuzz asked two Regional Council ‘ex-pats’ for their views on the proposed dam. Both are deeply knowledgeable about land use practices and opportunities in Central Hawke’s Bay.

Garth Eyles is a land management consultant and former HBRC land management manager (15 years). He is a nationally respected land use expert and conservationist, familiar first hand with the farming environment in Central Hawke’s Bay. In 2009 Garth was awarded one of the Ministry for the Environment’s prestigious Green Ribbon Awards.

Chris Perley is a private land use policy consultant. He was Manager Land Management at the HBRC until 2011. Previously, he was a senior policy analyst at the Ministry of Forestry and a researcher on sustainable land use strategy at Otago University.

From Garth Eyles:

Garth Eyles

Of course, with climate change, the region will need to use water more efficiently, to store water, and to conserve water as the region becomes drier.  Why then is there this great concern about the proposed dam? What are the issues?

Lack of review of other options

More water seems to be the only option being pursued. What would be the result if $80 million was spent on developing dryland farming systems in the region?  It could save the total reliance on water that seems to be the imperative. The introduction of dryland pastures such as lucerne and plaintain could greatly enhance production and require a much lower water need.

There appears to have been no serious effort made to investigate these options.  A pity, as such an approach would have required smaller storage needs.

Other than the risk to dam storage capacity being drastically reduced by a Cyclone Alison event of the 1960s filling the lake with gravel, it’s the effects of downstream land use that are going to have the greatest impacts on the region. Climate change predictions include more frequent cyclones for the region.

Gravel and our beaches

The Dominion Post (April 5) reporting Professor Paul Komar’s recent report,  The Hawke’s Bay, New Zealand: Global Climatic Change and Barrier Beach Responses, states, “attention be paid to rivers, especially the Tukituki, with measures taken to improve delivery of sediment to the beaches”.

The dam built in one of the main sub-catchments (the Makaroro) supplying gravel from the ranges will stop any gravel movement entering the river system from this sub-catchment for the life of the dam. Most gravel that enters the river system does so from the ranges during major storm events. This gravel ends up deposited as a fan off the mouth of the Tukituki River. Over time, this gravel is distributed along the coast.

The BOI decision requires that 3,400 cubic metres of ‘sediment’ be trucked each year to the coast to support beach profiles at the Tukituki mouth. Who knows whether this be a sufficient offset?

Cropping

Makaroro River

Climate change is going to bring bigger droughts, bigger rains and stronger winds.  These factors, combined with the Takapau soil suite containing some of the most wind erodible soils in the country, and the need to remove shelter belts (provided with grant monies since the 1950s because of the soil erosion risk) to introduce centre pivot irrigators means cropping becomes marginal.

Irrigation will not stop soil erosion as the cultivated soils will take less than an hour to dry out in a howling westerly, whereas the centre pivot will take up to 72 hours before it circulates back.  Orcharding and viticulture have been limited in the past more by out of season frosts and wind than lack of water.  Irrigation will not change these natural limitations.

These factors mean the western areas on the Ruataniwha will need to stay in pasture to be sustainable and so, most likely, will go into dairying. Any pollution will pass through the shallow soils into the aquifers or into the streams affecting the full length of the Tukituki catchment. Cropping will be sustainable further east, on the heavier soils, which will require less water and experience lower velocity winds.

Hill country fencing

The approved plan embraces fencing as the major control for phosphorus pollution in the catchment.

Fencing hill country waterways is fraught with problems as most are in narrow, steep-sided valleys. Fencing along the margins of the waterways means flood damage with every fresh. Fencing along the top edge of the valley sides means a significant loss of grazing land.

The fencing costings provided by HBRC seem very inadequate and appear to be about $3 per metre. A retirement fence costs in excess of $15 per metre. The difference in cost between the HBRC fencing of $10,125,000 and my costings for retirement fencing of $50,625,000 is huge!

The plan envisages a fence to control only cattle, hence the low cost, which would comprise a two wire fence. This may keep a dairy cow out but a hungry beef animal – no way. Electric? Okay until the power goes off (in a storm) and the fence will be the last item on the property to be repaired.

These retirement costs and subsequent loss of grazing income will be borne by hill country farmers who will gain no benefit at all from the changes, but will bear most of the fencing cost and all the cost of lost production within the retirement areas.

From Chris Perley:

Chris Perley

The propaganda surrounding the Ruataniwha dam argues that we have two clear options: a life of desperation if we don’t intensify farming more; or an economic nirvana if we do. Both positions are false, and leave no room for thought on what issues and opportunities we have – and we have many.

Forget commodity production

We should be discussing how farm aggregation, corporate farming, and the loss of local ownership and processing impact on our communities. It is assumed we can do nothing about it.

Yet the key to local economies is creating diversity and value within the land, adding value locally through long, local value chains, keeping control of as much of the value chains to the consumer as possible, and retaining the distribution and spending of that money locally. Create, keep and distribute value. Attract enterprises that want to live and be a part of our space. Make our place a great place to live for all. An upward spiral, rather than the downward one we are currently in.

Proponents of commodity development also don’t question the assumption that a healthy environment is somehow in competition with the economy. It is not.  A healthy environment is the key to both cost reductions and price increases within discerning markets. It also gives us the quality of life that keeps our own and attracts others.

This is particularly ironic given that the reaction to the BOI decision on nitrogen limits by some proponents of the dam shows they still persist in believing that more pollution and more land aggregation, with less local processing and more migrant labour, is apparently the only hope for Central Hawke’s Bay.

More intensification of commodity-focused, price-taking large-scale sameness, with more pollution, is not the answer.
It is the problem.

Emphasise quality and diversity

Our mistake is in thinking that the solution lies in production of more and more, ever more cheaply. By so doing we de-emphasise quality and diversity, almost treating them as disdainful hippy alternatives. Just pour more fuel on a system that is spiraling downward.

It does not matter what new technology or infrastructural investment is promoted to our producers. If the basic strategy of commoditising product, land, people and environment is not challenged, then margins will continue to fall, there will be less enterprise and ideas, less potential realised within our landscapes, less people employed, and more profits and processing jobs lost from our local economy.

Those who benefit from the ideal of producing more are the processors of the primary produce, the researchers (who incidentally don’t get funded for researching ‘agro-ecological’ approaches in New Zealand), the corporate suppliers of the ‘next big thing’, and the middlemen who clip the ticket on the way through.

Getting off the emphasis on industrialised cheap commodity and re-focusing on market position and price retention is paramount.

What we could have

We want an economy where there is high-value local processing and jobs, owned by locally owned small and medium enterprises that spend their profits and buy locally, supplied by family farms whose production holds price or is sold at a premium.

We need high social capital, morale and initiative within our people with the opportunity to be creative. We want resilience to market changes, so diversity and differentiation is the key. We also want clean rivers and a landscape that can hold water from our rains to mitigate both flood and drought, provide good things for free, and provide us with a compelling marketing message:

Healthy land, healthy food, healthy community … therefore pay more for the privilege.

Getting there

We must realise the potential within our climatic and landscape systems, both in terms of the land use patterns that create a resilient landscape – economically, environmentally, and socially – and in terms of creating capacities in our soils that lower input requirements and hold water against gravity and drying winds.

Given our climate, and the threats of more extreme weather events in the future, increasing these capacities over the wider Central Hawke’s Bay area is far more important than the 25,000 hectares proposed for irrigation. Water holding increases our resilience to droughts and floods, while at the same time creating economic benefits, increasing biodiversity, economic options, lowering energy needs, and increasing carbon stores.

Localising and building on the value off the land is also vital.  We should emphasise local processing, decentralised co-operative systems, and control of the value-chain to the end market. Family farms are far more important to a local economy than large-scale mechanical enterprises owned out of the region and staffed by cheap migrant labour.

The research effort on land should be focused on agro-ecological, not lead by production and techno-fixes. We need to work with climate and land, rather than try to force land areas that are uneconomic in pasture away from the woodlands and wetlands to which they are far better suited.

That potential is also critical to the market position of our production. The mega-trends for discerning consumers are tasting the local difference (Terroir), environmental and food quality, and food safety.

The idea of healthy land, food and community, with a strong shift away from commodity production, has not been seriously considered by the proponents of the dam. A focus on the one (dam) game in town, public relations, and the bamboozlement of sense by finance, has completely trumped strategic thinking.  They are still thinking within the commodity trap, and cannot think themselves out of it.

Mauri Ora Ki Te Rangi

By Ngahiwi Tomoana

Ngahiwi Tomoana

[When the Board of Inquiry issued its Tukituki decision, the region’s largest iwi, Ngāti Kahungunu issued this statement, reading in part:

Ngāti Kahungunu Iwi Incorporated is pleased that the mauri of the Tukituki and Papatuanuku has been acknowledged by the Board of Inquiry … through their direction to apply greater protection measures to the water quality standards than those proposed by Hawke’s Bay Regional Council.

Ngāti Kahungunu Iwi Incorporated would like to acknowledge all marae, hapü, industry and environmental groups who we have worked with shoulder to shoulder
during this process …

The Board has rejected [the HBRC] nutrient scheme and emphasised significantly stronger environmental protections. The HBRC will be required to look very hard at the viability of the over-all scheme in light of the Board’s findings today.

We remain committed to working with Hawke’s Bay Regional Council to promote the mauri of our waterways, the sustainability of our natural resources and the kaitiakitanga of our hapü within the Ngāti Kahungunu rohe for future generations …

Iwi Chairman Ngahiwi Tomoana said, “Ngāti Kahungunu are pleased that all those submitters who have fought to protect and enhance the Tukituki and Papatuanuku can breathe a little easier, for now.”

Mauri Ora ki Te Rangi
Mauri Ora ki Te Whenua
Mauri Ora ki Te Tangata

The bounties of our ancestors will nourish the lands so all peoples will flourish.

Last month I was in China and spent three days in Beijing with Minister Pita Sharples and Pania Tyson-Nathan, CEO of Maori Tourism, following up on business opportunities.

Beijing was blanketed in smog for the three days. Visibility was about one block ahead and about three stories high during the day. The smog was predicted to hang in there for another week. Sixty percent of the year Beijing is shrouded in fog, it was reported, and in Shanghai it’s about 40% of the year.

We met with high-level government officials who informed us that although China’s focus on economic development over the last 40 years was on track, they wish they could have had the foresight to also focus on ecological development as well.
The price of economic success was at a huge cost to the environment and the quality of life for all Chinese residents.

A misty Tukituki

I was pleasantly surprised that our hosts talked so openly about it to us and the media was also full of it. It is a portent that we at a local level here do not sacrifice our taonga tuku iho, the treasures handed down from our ancestors, including the environment in all its aspects, for straight economic growth, because a strong ecology makes a strong economy … not the other way around.

For sure, there must be modifications and structures and infrastructures put in place to enhance people and places, but not to estrange people from places.

The draft report from the Board of Inquiry at first blush certainly and delightfully puts the environment in a strong spotlight to ensure minimal degradation of waterways as a prerequisite to any design, technical, scientific or economic matter regarding the proposal to advance.

From a Māori point of view, which the BOI found very difficult to consider, as they have no expertise in this area, the mauri o te awa o Tukituki, the life force of the river, based on science, has been given precedence over every other aspect, and we consider that a win for Papatuanuku, a win for tikanga, a win for the next generation.

What the farming sector has to come to grips with is that farming practices need to invariably change in the face of climate change and global warming, and the tired old practice of just damming things up and destroying the environment is over. Of course we want the farming sector to prosper, as Māori provide at least 10% of all dairy, and 30% of beef and lamb products nationally. This is alongside 40% of wood and 40% of seafoods.

In the past, farming practices have drained swamps, lakes and water bodies, straightening rivers and streams, flushing water quickly to the sea. And just as suddenly, here was a move to stop the water running altogether, only to be controlled by the same bodies – the Hawke’s Bay Regional Council and its predecessors – that drained the water in the first place. It defies our longer thinking logic.

Wairoa has water all year round, yet it has never been considered seriously for investment in greater productive capacity. Māori have serious assets in Wairoa, but these are being ignored in regional economic strategies.

Ngāti Kahungunu is keen to work alongside those who consider economic and ecological development as dual priorities for the good of all peoples.

Caution! The Dam is a Risky Proposition

By Pauline Elliott, Transparent Hawke’s Bay

The Regional Council’s plan for a major dam in Central Hawke’s Bay has always faced two hurdles – environmental standards and financial viability.

Tukituki Board of Inquiry protects river

The environmental standards have now been set. The headlines said it all: another step; another hurdle; moving along; a green light. Except it’s really an amber light.

The draft decision handed down by the Board of Inquiry (BOI) last month said ‘Yes’ to the dam and ‘Yes’ to a plan for managing the Tukituki catchment. However, it set much more stringent control, particularly around nutrient management, than was ever anticipated by the Regional Council.

The environmental hurdle

HBRIC, the Regional Council’s investment company, states in its high-level business case that should the decision of the Board of Inquiry require greater stringency around nutrient management, the scheme might not be economically viable.

Now, in effect, the BOI has said, “You can build a dam, but we will not allow any further degradation of the Tukituki River.”

Aspects of the draft decision will be bothering the heads of many. Farmers and growers, for example, will be giving careful thought to the financial implications of the conditions established by the BOI decision – these are not insignificant, and must be met whether or not a dam is built. The Regional Council itself will be giving a lot of headspace to the costs and other resource implications of managing and monitoring a regime much more rigorous than anticipated.

HBRIC will be burning the midnight oil to figure how it can get firm agreements for the purchase of 40 million cubic metres of water (uptake) – a minimum requirement for the project to proceed.

And prospective investors will be wondering just how viable this proposition is, given the new BOI ground rules.

While much attention has focused on the massive benefits to the region (strongly questioned by some) and promoted as offering wealth comparable to the Canterbury and Ashburton schemes, there is a fundamental flaw in that comparison. Business commentator Rod Oram points out that the Canterbury/Ashburton dam schemes are wholly owned by user consortiums with a vested interest in keeping the cost of water down. The Ruataniwha scheme must operate to extract optimum returns for investors. This will include inflation-adjusted increases in water prices. Investors want a return. There can be no comparison between the riches of Canterbury and the fraught Ruataniwha investment.

Jumping the financial hurdles

The hurdles yet to be overcome are high. One of the ‘biggies’ is finance. At the time of writing, the only certainty around funds for financing the dam scheme is the $80 million earmarked as an equity investment by our Regional Council – that’s assuming you and I, the residents and ratepayers of Hawke’s Bay, tick that box. ‘Equity investor’ means we are the primary holder of the risks associated with the investment. Quite a different scenario from Council’s original intention of ‘advancing a loan’.

The Government’s newly formed Crown Irrigation Investments Ltd (CIIL) was expected to invest a “large amount” upfront. However, late last year CIIL did an about face and declared any investment would be made as a secured loan – no risk exposure – and would in fact only be a ‘backstop’ to mitigate poor water uptake in the early stages of the scheme.

Public consultation is underway as you read this. Long before Council had considered or approved it, consultation has been publicised to start on 1 May and close on 3 June.

During the process of public consultation, you will be asked the question: “Do you think the Regional Council should invest $80,000,000 in the Ruataniwha Water Storage Scheme?”

Definitely not a question we can answer at this point. Public information on short, medium or long term risks or returns on ratepayer investment has been very tightly held by HBRIC and the Regional Council. Some regional councillors have complained bitterly about the lack of detailed financial information … even for them.

We know, from the high-level business case presented to Council in early April, that commercial viability is based on “satisfying private investors’ risk-adjusted return requirements”. As revenue does appear, lenders (CIIL) and private investors will be the first to receive payments and dividends. We know that the minimum target for return to the Regional Council sits well below that of private investors and is unlikely to show a return at all for at least ten, maybe twenty years. The Regional Council investment will be exposed to the highest level of risk and the lowest rate of return for some time to come.

We do not know how many farmers will sign a firm purchase agreement for water in coming months to meet the minimum 40% uptake requirement. Without farmers to purchase water, the dam cannot generate revenue (apart from minimal electricity generation). Deloitte, commissioned to undertake a peer review of HBRICs high-level business case, identified the key project risk as uncertainty around farmer uptake.

The Port as scheme subsidiser

HBRIC serves as the wholly owned investment arm of the Regional Council. It was established specifically to progress the CHB dam and, at the same time, the assets of Port of Napier were transferred to it. How HBRIC manages debt, investment, and risk levels, has a major consequence for ratepayers, good or bad.

For example, each year the Port pays a dividend through HBRIC to the Regional Council, making a significant contribution to council operating costs and effectively subsidising our rates. Since the proposed dam would lose money for years in any scenario, the assumption has been that the Port might increase its dividend to cover HBRIC’s shortfall in payments back to the Regional Council on the water storage project. Yet over these same years, the Port must use its profits to undertake major capital investment needed to meet rising user demand and remain competitive. The odds that the Port can both meet its own needs and subsidise the dam are low to zero.

HBRC brass briefs press on Tukituki decision

So, will rates increase? Almost certainly!

Should the public be asked to submit on the proposed recommendation to invest in the dam without full information available on financial structures and inherent risks? Absolutely not!

It is worth noting a couple of examples where decisions made without full public disclosure of all relevant information have had massive implications for ratepayers.

Firstly, the Kaipara District Council and its now infamous decision to proceed with a sewage treatment plant at Mangawhai. From all accounts, this was a perfectly sound strategy for ‘future proofing’ against an anticipated residential explosion in the region. For a number of reasons, the global financial collapse being one of them, the anticipated population growth did not happen.

Then a number of things went wrong. The Council continued to pursue the scheme in spite of evidence it should not; the council kept the true costs off its books for five years, through a public private partnership. Costs ballooned and in 2012, general rates increased by 31% across the region, and by several hundred percent in Mangawhai. The final debt to ratepayers stood somewhere between $80m-$100m.

The Auditor General, Lyn Provost, was called in to investigate and released her report in December 2013. Among other things, she cited poor decision-making processes and lack of transparency, including the use of workshops instead of council meetings to make important decisions. She apologised to the people of Mangawhai, but could give no comfort as to who would be responsible for the debt. The council has been replaced by commissioners.

More recently, the Auditor General was asked to investigate Delta, a subsidiary company of Dunedin City Holdings Ltd, wholly owned by the Dunedin City Council. The review found breaches of the Local Government Act 2002 and Companies Act 1993, and instances of Delta using artificial business structures to avoid public accountability.

These recent experiences have inspired a separate report, to be released later this year, in which the Auditor General will explore wider governance and communication issues between council-controlled organisations and councils. It might just be a bit late to apply to our investment proposal and its inherent lack of critical information.

So, can we reasonably consider the question “Do you think the Regional Council should invest $80,000,000 in the Ruataniwha Water Storage Scheme?” Not with any confidence that we have the facts needed to understand the financial risks involved.

If consultation gets underway with or without this information, it is vitally important that you have a say.

Transparent Hawke’s Bay intends to monitor and assess the objectivity and transparency of materials prepared by the Regional Council for public consultation. If it is found to be misleading or incomplete we may ask for your endorsement in our request to the Auditor General, asking her to re-examine the process and sufficiency of information.

Only 25 Questions Left!

By Tom Belford

I have been closely monitoring the water storage project since its inception about five years ago, including participating in the stakeholders committee and now as a regional councillor. I have read everything regarding this project that HBRC/HBRIC have made available.

Yet I am still seeking definitive answers to the core questions that follow.

I would think that all ratepayers might insist on knowing the answers … before any decision to proceed with this project is made.

Adequacy of Water Supply

1. Have water flows on the Makaroro ever been actually measured above the proposed dam site? If not, why not, given the critical importance of establishing the adequacy of water supply to make the scheme viable as a ‘water insurance policy’ for irrigators?

2. Various HBRC/HBRIC documents project rainfall in the catchment feeding the dam at 1,200mm to 2,500mm annually, yet the latter is used to estimate water supply to the dam. If the former figure is more accurate, have sensitivity analyses been completed to project the diminished water supply? Please explain.

3. The Board of Inquiry cited widely differing estimates of the area to be irrigated – 17,120 hectares, 25,390 hectares, and 31,289 hectares. The BOI itself settles upon 29,779 hectares (17,120 from the dam and almost as much,12,659, from additional groundwater allocations). Water supply reliability for farmers (as well as increased farm output) must be determined by the scheme’s actual irrigable footprint. So what is the actual footprint?

4. Water supply contracts with farmers will presumably commit the scheme to provide contracted water at a specific level of reliability (i.e. supplied X out of Y years). What will the contracted reliability be? Are farmers required to pay for contracted amounts if the water cannot be supplied?

Farmer Uptake & Retention

New rules should keep the cows out

5. We’re told that 109 Expressions of Interest (EOIs) account for 43.6 million m3 of water. What percentage of farmer prospects within the scheme footprint is this? How many remaining farmers have said ‘no thanks’?

6. The targeted uptake rate by farmers assumes that 90% of farmers who have signed Expressions of Interest (EOIs) will convert those to firm purchase contracts, as well as 20% of farmers in the irrigation footprint who haven’t signed EOIs and 100% of current irrigators.

7. How realistic are these assumptions, given such practical factors as: some current irrigators will be allowed deeper bores (furnishing up to 15 million cubic metres of water annually directly from groundwater, removing their need for irrigation water); the scheme’s distribution network not being built out for years to reach all potential users; farm ownership turnover being a key assumption supporting uptake rates? How wide a range of uptake scenarios has been modeled to reflect these sensitivities?

8. Lower initial water prices ($0.06 per cubic metre discount for first four years) will be offered to farmers to entice initial uptake of the scheme, presumably costing HBRIC $10 million or more. What is the projected cost of this subsidy, and where is that cost reflected in the scheme financials?

8. It is assumed that users of the scheme will be ‘Top 20%’ farmers in terms of ability to achieve higher, cost-effective productivity through the use of irrigation water, as well as other improvements in farming methods. However, trade literature suggests farmers could achieve most of the postulated productivity gains without irrigation, simply by farming smarter. Has HBRIC modeled the productivity gains achievable by adoption of ‘best practices’ with and without irrigation water as an input?

9. Will access to the scheme be restricted to such ‘superstar’ farmers? Have such farmers been identified in CHB? What programme is HBRC preparing to educate farmers regarding ‘best practices’ and to promote/incentivize their adoption?

10. If farmers do not achieve productivity gains (and hence income gains) sufficient to offset the costs associated with irrigation, they will become less or un-profitable. If such farmers default on contracted water payments, the scheme will lose revenue. Has any sensitivity analysis been conducted regarding potential attrition or non-payment for contracted water?

11. Has any analysis of existing farm indebtedness been undertaken with respect to the farmers targeted by this scheme?

12. If the scheme were built on strictly commercial terms, what would the price of scheme water need to be? Based on that, and given ratepayer/taxpayer financial support, how much of a subsidy to irrigators does HBRIC’s stipulated $0.23 per cubic metre price represent?

Ratepayer Financial Risk

‘Floating wetlands’ expected to keep CHB sewage from Tukituki

13. The HBRC business case postulates two initial uptake rates by farmers – 40% of stored water volume (low case) and 56% (both base and high cases). However, the projections used to justify financial viability are based on the 56% assumption. Why then does HBRIC maintain that only 40% initial uptake is sufficient for the scheme to be viable? Is 40% merely a floating ‘target’ or an absolute minimum ‘condition precedent’ for launching the project?

14. These uptake assumptions must be matched to scheme income and cash flow projections, and then used to drive calculation of returns (and return schedules) to various scheme financial partners. HBRIC indicates that it (and therefore HBRC) will sit at the ‘bottom of the waterfall’ in terms of receiving any return on its investment. What is the investment return (and its timing) projected for HBRC across different income scenarios?

15. What is the risk that HBRC will fail to achieve its stipulated investment return? What are the risk factors involved? What is the minimum investment return HBRC will accept, and how does this compare with other traditional investments available to HBRC/HBRIC?

16. Will the dam produce a greater or lesser return on investment than additional and/or accelerated investment in Napier Port? Has a direct comparison been made and where is it available?

17. In the near to medium term, higher dividend payments to HBRC from Napier Port are assumed to ensure that HBRC still gets its required cash injection in the start-up period before the scheme is yielding adequate cash flow. How realistic is this given that Port leadership is floating the idea of reducing HBRIC/HBRC ownership stake in the Port to raise capital and lessen the financial risk the Port increasingly faces?

18. What is the risk that further investment, beyond $80 million, would be required to sustain the scheme? Where would those funds come from? What are the risk factors involved? For example, has HBRIC confirmed the average cost over-run of dam construction projects? For example, can institutional investors pull out before their initially agreed exits?

19. How much time does the Crown Irrigation Authority (CIIL) give to satisfy its “minimum amount required” principle? HBRIC appears to expect about $100 million from CIIL. Has CIIL indicated a maximum amount or percentage of total investment it would make?

20. Is there a time limit imposed by HBRIC or any other party on the search for institutional investors?

21. Over and above the actual cost of the dam and distribution infrastructure, the scheme will lose money in initial years until/unless sufficient farmers commit to water purchases and begin to pay for their water. Thus, no revenue until the last quarter of 2017, at best. If initial uptake projections are met, that revenue might be in the range of $9.2 million (40 million m3 x $0.23 c/m3). If $300 million has been required for the dam by close of 2017, $15 million in annual interest at 5% must be paid (and/or a return paid to investors). How would the hypothetical shortfall of about $6 million or more be covered? And who gets the initial revenue? CIIL? Institutional investors?

Other Issues

22. Has the Macfarlane report, which serves as the basis of all environmental impact and economic benefit analyses, been independently peer reviewed? By whom?

23. The HBRIC business case mentions a “water augmentation dam” as an option to deliver the environmental improvements required by Plan Change 6 and to offset the economic cost of those. The estimated cost of this dam, with a capacity of 10 million cubic metres of water, is given as $30 million (no documentation is cited). Where is the RMA-required analysis of this option?

24. The Board of Inquiry, at a cost of $10 million, has ordered initiatives designed to ‘offset’ some of the proposed dam’s environmental impacts? Are these expenses in addition to the ‘irrigation scheme’ cost of $275 million? Where are these expenses accounted for? The BOI also places conditions such as annual beach replenishment at the mouth of the Tukituki, as well as keeping the river mouth open. Where is this expense accounted for? What other such expenses are there?

25. The only gain in anticipated land use projected by HBRIC is dairying, from 13% presently to 30%. The other major change is sheep and beef down from 21% to 7%. Yet HBRC/HBRIC constantly downplay the growth of dairying. Please explain.

BayBuzz21 May 2014

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