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The Government's Ruataniwha water storage scheme remains dogged by controversy and litigation

Some call it an engine for prosperity, others call it a licence to pollute. The Ruataniwha water storage scheme is the poster child of the Government’s push for large-scale irrigation, but it remains dogged by controversy and litigation.

The plan is to dam the Makaroro River, a small stream that flows from the Ruahines into the Waipawa River, which in turn flows into the Tukituki River. Photo/Tim Whittaker
The plan is to dam the Makaroro River, a small stream that flows from the Ruahines into the Waipawa River, which in turn flows into the Tukituki River. Photo/Tim Whittaker

Peter Butler, the full-throated Mayor of Central Hawke’s Bay, is nonplussed. His district and its rural townships are set to be transformed by almost $1 billion worth of economic development – underwritten by ratepayer and taxpayer money – yet “green idiots” are determined to stand in the way.

“Don’t you want jobs in Central Hawke’s Bay?” he bellows at protesters gathered outside the Napier headquarters of the Hawke’s Bay Regional Council, the promoter of the Ruataniwha Water Storage Scheme. Jabbing a forefinger at those he calls “antis”, he yells: “We’ve got the chance of jobs!”

Butler has travelled up to Napier from his sixth-generation farm just outside Waipawa, determined to counter the noise generated by those chanting slogans and waving placards against a plan to bring irrigation to the Ruataniwha Plains of Central Hawke’s Bay. “Don’t they want progress?” he asks later, during an interview with the Listener at his home on a high terrace overlooking the broad flats and rugged hill country of his district.

Inside the council’s modest meeting chambers farmers, ratepayers and environmentalists cram in to listen as the elected councillors inch closer to the moment that Butler believes will unleash riches for his region – the investment of $80 million of ratepayer money in an 83m-high dam in the Ruahine Range and an irrigation network to water 28,000ha of farmland.

Photo/Getty Images
Photo/Getty Images

The council – Hawke’s Bay’s environmental watchdog – voted two years ago to invest in the scheme, provided certain conditions were met. Ever since, the councillors have been locked in a complex and politically charged wrangle as those conditions have been progressively ticked off.

The pattern of debate has rarely wavered: on one side are five councillors who support the council providing the foundation capital needed for the Ruataniwha scheme to go ahead, on the other four who oppose it.

At this monthly council meeting in late June, the first item on the agenda is a statement from councillor Debbie Hewitt. A passionate advocate of the project, Hewitt had been the target of opponents who had demanded the Auditor-General bar her from voting because her family trust owns 19ha of land within the footprint of the proposed irrigation scheme, and the arrival of water is likely to significantly boost farm values. She had requested an exemption from the normal rule banning councillors from voting on matters in which they have a pecuniary interest. She tells her fellow councillors that the exemption was granted just the day before. Assistant auditor-general Melanie Webb ruled that despite Hewitt’s pecuniary interest, she was permitted to vote because to prevent her from doing so would not be in the interests of her Central Hawke’s Bay constituency.

Had Hewitt not won the exemption, voting on the Ruataniwha scheme would have been tied, with the project unable to move forward unless the chairman, Fenton Wilson, exercised his casting vote. Three months out from the local body elections, such a move would have provoked yet another roar of controversy around this divisive project.

Rod Parsons and Graham Anderson are among Hewitt’s constituents impatient for action on the Ruataniwha scheme. Both farm near the town of Waipukurau, and Parsons also owns a rural contracting and transport company. Like Butler, they see the scheme as a harbinger of prosperity. They are among the 200-odd farmers who have signed up to buy water from the scheme under 35-year take-or-pay contracts – deals that require them to pay for the water whether they need it or not.

They say they’ll use it to grow grass for dairy grazing as well as for crops. Irrigation brings choice and surety, says Anderson, who already has consent to take groundwater for part of his farm. Water makes double-cropping possible, he says: he can harvest peas in December, then plant a fodder crop in January that’s ready for harvest in May. In dry summers, lambs can be held for longer, rather than being sold under pressure to busy freezing works in a buyers’ market.

Further north, near the township of Otane, Hugh Ritchie farms 2000ha. Like Anderson, he uses groundwater on part of his farm, and he has contracted to buy a million tonnes of water from the Ruataniwha scheme, which will enable him to double his land area under irrigation. When he started irrigating 15 years ago, it was primarily to insure against drought, but he says the water has instead “transformed” his business. He produces two crops of peas a year and grows carrots for processing, as well as fresh produce and seeds for export. He’s able to meet contracts that would not be available to him if he didn’t have irrigation to guarantee his ability to supply.

Ritchie, Anderson and Parsons argue that large-scale irrigation will see more farmers develop expertise in crops and produce that they couldn’t otherwise contemplate. Throughout the district, there is much talk of the potential for high-value exports such as broccoli, carrots and radish seeds. Large agribusiness interests such as family-owned Carrfields, from New Zealand’s irrigation capital of Ashburton, have already been scouting for opportunities. The Ruataniwha scheme will “enable us to offer contracts to farmers”, says managing director Craig Carr. “Water is essential in high-value arable production.”

Dick Frizzell’s The Peak with the Tukituki River. Artwork/Dick Frizzell
Dick Frizzell’s The Peak with the Tukituki River. Artwork/Dick Frizzell

Big backers

Despite the frustration of the likes of Parsons and Anderson that the project has taken years of costly planning and court battles and is still not under way, and Butler’s perception that it is dogged by anti-progress antagonists, the scheme has powerful tailwinds in its favour.

The Government has tagged up to $400 million in cheap finance for big water storage and irrigation projects that would otherwise not be viable. Crown Irrigation Investments Ltd (CIIL) is charged with deciding which schemes to invest in, and so far the Government has tipped $120 million into its kitty. CIIL hasn’t managed to spend much yet – only $6.5 million, invested two years ago in Canterbury’s Central Plains Water scheme – but the Ruataniwha project looks likely to open the financial floodgates.

Numbers have not been confirmed, but CIIL is preparing to back the scheme with bridging finance of about $90 million at “concessional” interest rates. If the scheme had to pay normal commercial rates for this debt, it would not break even on the basis of current demand for water, says CIIL chief executive Murray Gribben.

So far, about 42% of the water that will be available from the scheme has been pre-sold under farmer contracts. As more farmers sign up to buy water and the scheme reaches the point where it can pay its way, CIIL will take its money out.

Queued up behind the Ruataniwha is a list of other big schemes that CIIL is considering backing. Projects in mid-Canterbury, Marlborough, Tasman and North Otago are under review, while a raft of early-stage proposals are coming down the pipeline for the Wairarapa, Central Otago and North Canterbury.

Primary Industries Minister Nathan Guy says the value of irrigation has been proven in recent severe droughts. He aims to have a million hectares of land under Government-backed irrigation schemes by 2025.

Also expected to swing in behind the Ruataniwha scheme is another Crown agency, the Accident Compensation Corporation. It is an open secret among those involved with the project that ACC is considering investing about $80 million in equity, making it an equal shareholder alongside the council. The corporation refuses to confirm or deny this.

Commercial bank debt will make up the balance of the financing package for the $345 million dam and water distribution network.

All going to plan, the project will reach “financial close” in the next few weeks. Work can then begin on what will be the biggest on-river dam since the late Sir Robert Muldoon’s controversial 1980s Think Big project, the Clyde hydro dam.

According to the key proponents of the Ruataniwha scheme – the chairman and chief executive of the Hawke’s Bay Regional Investment Company (HBRIC), the council’s commercial arm – it will provide wins for the regional economy, the environment, and investors. The degraded Tukituki River – which flows through Central Hawke’s Bay and suffers from low summer flows, slime and algae – will be regularly flushed clean by water released from the dam. Farmers will be able to use their land more intensively. And the ratepayers of Hawke’s Bay will get a 6% rate of return on their $80 million investment, as well as thousands of jobs and downstream economic activity.

Clockwise from top left, Peter Butler, Debbie Hewitt, Andrew Newman, Kate McArthur, Nathan Guy, Andy Pearce.
Clockwise from top left, Peter Butler, Debbie Hewitt, Andrew Newman, Kate McArthur, Nathan Guy, Andy Pearce.

Too compelling a case?

Andy Pearce, chairman of HBRIC, calls it a “compelling case”. But much to Pearce’s chagrin, many critics think it’s all too good to be true.

Having kept the project alive despite continual delays and serious setbacks – the withdrawal of early investors Trustpower and Ngai Tahu after they concluded it didn’t stack up, the imposition of tighter environmental rules than HBRIC had hoped for, sluggish farmer uptake of water contracts – Pearce’s board and chief executive Andrew Newman are still battling on multiple fronts against litigants determined to curb it.

HBRIC claims that in combination with new water-quality rules set as a result of a protracted board of inquiry process that wrapped up in 2015, the Ruataniwha scheme will enable Hawke’s Bay to have its cake and eat it. It will have the prosperity that intensive agriculture brings and a healthier river.

They argue it won’t be like Canterbury, where a poorly policed grab for water transformed the dry plains from a patchwork of crops and tawny sheep paddocks to a treeless expanse of lush grass dominated by dairy cows – with a consequent decline in water quality as a result of nitrate leaching through the pasture from the urine of intensively farmed animals.

Instead, the farmers of the Ruataniwha Plains will be constrained by environmental limits. Thrashed out by the board of inquiry, the new rules (known as Plan Change 6) demand higher minimum flows in the Tukituki, and no more than 0.8 milligrams of nitrates per litre in the river, which ecologists consider the upper limit before aquatic health starts to suffer.

In addition, the dam on the Makaroro will release regular slugs of water to flush the catchment of algae and slime. Without the reservoir, with its 93 million tonnes of stored water, HBRIC says the only way to get the Tukituki up to the minimum flows required in Plan Change 6 would be to severely curtail existing groundwater takes and prevent future irrigation, at great economic cost.

Further, the amount of nitrates that farmers are permitted to leach from their land is set out in a detailed table, and they will be required to draw up farm environmental management plans and nutrient budgets. And although the economic returns promised to the region have been predicated on the assumption that 37% of the irrigated land will support dairy cows, Pearce insists the rules are “so stringent” they will “severely constrain” dairy farming.

Dam opponent Colin Riden beside the Makaroro River. Photo/Tim Whittaker
Dam opponent Colin Riden beside the Makaroro River. Photo/Tim Whittaker

So what’s wrong with the thing?

So if the scheme and the environmental rules have been designed with such hand-in-glove precision, why are environmentalists protesting?

Pearce claims there has been “a great deal of ill-informed nonsense talked about all of this by people who understand neither the plan nor the rules”.

If so, Gary Taylor, head of the Environmental Defence Society (EDS) and instigator of the Government’s Land and Water Forum, must be one of those slow to comprehend, because he simply doesn’t believe that what’s being promised is possible.

Put simply, the level of nitrates in the Tukituki is already well above 0.8mg/l in many places, and the roll-out of a massive irrigation scheme is likely to lead to a shift away from lower-leaching land uses such as sheep farming to intensive higher-leaching farm types. “So we can’t see how it can work,” says Taylor.

In particular, he is alarmed that HBRIC has interpreted the rules to mean that the irrigation scheme is under no obligation to meet the new 0.8mg/l standard. Instead, Pearce argues that’s a problem for the council – the scheme’s foundation shareholder – to solve.

It’s a view that the council concurs with. Group manager Iain Maxwell says the council’s legal advice is that the 0.8mg/l “is not a compliance limit for the scheme”. Instead it is a “trigger for action” that will require the scheme operators to work out if it is “materially contributing” to nitrate concentrations above 0.8mg/l. If so, he says the scheme will then have to review how its farmers are operating in the localities where high levels of nitrates are occurring and work out improvements to ensure they are following “industry best practice”.

If Maxwell is right, the Ruataniwha scheme has a “licence to pollute”, says environmental barrister Rob Enright. He says the council and HBRIC’s interpretation of the rules treats the 0.8mg/l standard as a mere aspiration, with no hard enforcement mechanism to prevent the cumulative effect of increasing agricultural intensification on the river.

Taylor cites an opinion from Royden Somerville QC that is diametrically opposed to the legal advice received by the council and HBRIC. Somerville says the scheme is required to operate in a way that puts the Tukituki on track to reach the 0.8mg/l level by the target date of 2030 and beyond.

Taylor says his group is considering seeking an Environment Court declaration to determine who is right. Such a move would bring the number of active legal challenges against the Ruataniwha scheme to three, just as HBRIC is on the brink of clinching the financial wherewithal to get it under way. Already before the courts is an appeal by Forest & Bird against a Department of Conservation decision to downgrade the status of 22ha of conservation land in the Ruahine Forest Park needed by HBRIC for the dam footprint, and swap it for 170ha of farmland elsewhere. A Court of Appeal ruling is pending.

And Greenpeace is seeking a High Court judicial review of a Hawke’s Bay Regional Council decision to grant HBRIC resource consents to expand the scheme footprint without public notification.

Experts also challenge HBRIC’s claims that the planned “flushing flows” will achieve the promised environmental improvements. Freshwater specialist Kate McArthur says the pulses of water that the scheme will release from the dam won’t be large enough to shift the gravels and scour the rocks of algae. She predicts periphyton (green slimy growth) will quickly re-establish after each flush.

McArthur says any environmental gains from the additional flows will be offset by the extra nutrients leaching from the more intensively farmed land within the scheme area. She dismisses the claimed merits of flushing flows as an “ecological myth”.

Despite claims that the scheme is an integral part of the sustainable management of the Tukituki, Taylor fears that the council’s shareholding in such a costly and high-stakes venture will inevitably lead to slack enforcement.

“I’m concerned that the council has a fundamental conflict of interest as a major investor in the scheme and as its environmental regulator. It has to make the Ruataniwha scheme work financially, but to do that, we think it has to compromise environmentally.”

The river downstream of the proposed dam site. Photo/Tim Whittaker
The river downstream of the proposed dam site. Photo/Tim Whittaker

What about the money?

Which raises the question: if the scheme is such a good idea, why don’t the farmers pay for it themselves? Why is the regional council, which already has a difficult job on its hands as environmental regulator, investing $80 million of start-up capital to get it going?

Pearce says the farmer-ownership model that prevails among South Island irrigation schemes was not possible for the Ruataniwha scheme, which involves the construction of both a large dam and a water distribution network. At about $900 million (including $345 million for the dam and distribution network and up to $550 million in on-farm investment), “it is our view that the farmers couldn’t raise the capital to do this”.

Newman argues the case for the council investing in the scheme as an engine of regional growth has no less merit than its ownership of Napier Port, where the council is also the environmental regulator.

The economic trickle-down from the scheme has been calculated by Christ­church economist Geoff Butcher. In a report for HBRIC in March, Butcher advised that although the cost of the project had increased substantially since a previous analysis in 2012 and Trustpower’s withdrawal meant there would be no income from electricity generation, the economic benefits were even greater than he calculated four years ago.

He says the impact of the scheme will multiply through the economy, creating 3580 new jobs and boosting regional GDP by $380 million a year – a 60% increase on the benefits he predicted in 2012. Butcher says the positive outlook is driven in large part by an assumption that there will be 4000ha of apple orchards and vineyards – both highly profitable at present – in the scheme area.

But some say this is a highly dubious assumption. So far, only 2% of the land area signed up to receive water from the scheme – just 300ha – is intended for trees and vineyards. And scheme opponents such as regional councillors Peter Beaven and Rex Graham – both veteran orchardists – say the Ruataniwha Plains are too cold, windy and prone to late frosts to compete with the more benign conditions of the region’s economic powerhouse, the Heretaunga Plains.

“It’s just ludicrous to suggest that the pipfruit industry is about to rehouse itself in Central Hawke’s Bay. It’s just not going to happen,” says Beaven, a former chief executive of Pipfruit New Zealand – although he acknowledges conditions in the area may become more favourable in future as a result of climate change.

But aside from the question of whether landowners will plant fruit trees and grapevines on their irrigated land, Wellington economist Peter Fraser challenges Butcher’s analysis on the grounds it fails to properly value the risks and opportunity cost of investing public money in the scheme.

Fraser’s concern is centred on what’s known as the public sector discount rate – a test that was developed in the 1970s to prevent public agencies spending money on projects that were better left to the private sector or that caused more economic harm than good.

“It represents the hurdle rate,” says Fraser, a former Treasury and Ministry of Agriculture economist. “If the project can’t get over the hurdle, it shouldn’t get public funding.”

For projects like water storage, Treasury recommends a discount rate of 7%. But Butcher preferred a 5% rate, a figure that Fraser says produces a much more glowing view of the economic gains than is merited. “A 5% discount rate is fine if they were using farmer money – but they are not, they are using public money.”

Fraser – who has advised ratepayer group Transparent Hawke’s Bay – is also troubled by other aspects of Butcher’s economic modelling, including “heroic” assumptions about the spread of high-value horticulture and viticulture into Central Hawke’s Bay and a long-run dairy payout of $6 – it’s currently $4.25.

He reaches for a line from the character Slider in the movie Top Gun to sum up his conclusion that the project looks like a bad investment for Hawke’s Bay ratepayers: “‘Your ego is writing cheques your body can’t cash.’”

Manuherikia River (Manuherikia Valley). Photo/Getty Images
Manuherikia River (Manuherikia Valley). Photo/Getty Images

Maori divided

Ngahiwi Tomoana is even more colourful: “It’s a dog.” Tomoana is chairman of Hawke’s Bay’s Ngati Kahungunu. He says the iwi has looked at the Ruataniwha scheme from environmental, economic and social perspectives and concluded that it falls short on every count.

Based on his analysis of publicly disclosed information, including contracted water sales, Ngati Kahungunu’s investment manager, Taine Randell, has concluded the scheme will be loss-making for the first five to 10 years.

In the meantime, Tomoana predicts, there will be widespread change of farm ownership as older farmers cash in on land price increases triggered by the availability of irrigation. Land valuer Greg Morice has predicted the Ruataniwha scheme will produce “significant capital gains” that farmers are “unlikely to see again in [their] lifetime”.

Tomoana describes the scheme as a “disaster” for the Tukituki. “Unless it has benefits for the community, for all households, then we are going to be suffering in another 100 years’ time. Water is going to be owned by people who aren’t from here, who don’t have a heart for here. It’s one transaction that will make a whole lot of people rich and a whole lot of people poorer.”

However, Roger Maaka, chairman of Te Taiwhenua o Tamatea – the hapu of Central Hawke’s Bay – says the benefits greatly outweigh the risks. He lives in Takapau, a once vibrant rural township in the district that has become a “ghost town” over the past 30 years. He says local Maori need the jobs and opportunities that the project will bring.

The Tamatea and Heretaunga hapu are considering investing some of their Treaty settlement money in the scheme, a prospect fiercely opposed by Tomoana, who condemns it as an “axe and blanket” deal.

Ngahiwi Tomoana. Photo/Maori TV
Ngahiwi Tomoana. Photo/Maori TV

Opponents unlikely to be silenced

HBRIC’s Newman and Pearce expect to advise the regional council over the next few weeks that they have the necessary investor and bank support for the scheme and that all conditions have been met for the council to hand over the $80 million in foundation capital to fund the first phase of development.

But that is unlikely to silence opponents anxious about myriad aspects of the project. Some object to a current proposal for the council to buy $36 million worth of water from the scheme for extra “environmental” flows on top of the promised flushing flows – which would make the council not only a shareholder and regulator but also a major customer. Some don’t like HBRIC being able to borrow against Napier Port to pay the promised 6% dividend to the council – a notion that Fraser describes as not so much “robbing Peter to pay Paul; it’s Paul stealing from himself”.

Some say HBRIC has pushed mass irrigation as if there is no alternative path to prosperity, without considering the dryland systems based on crops such as lucerne, which Marlborough farmer Doug Avery and others have proven to be highly lucrative and resilient to drought (See “Going with the flow”, February 26).

And some think there isn’t even enough water in the Makaroro River to keep to keep the dam filled. Colin Riden is not a hydrologist but he has spent enough time tramping up the Makaroro to cause him to question the feasibility of the project from the moment he heard about it. He has analysed the rainfall data, knows every river gauge in the district and can recite river flows going back years.

Riden told the board of inquiry – and continues to assert – that HBRIC’s hydrologists based their analysis of rainfall and runoff in the Makaroro on data from an unreliable river flow gauge, which was then simulated to produce an over-estimation of the available water. In recent correspondence to ACC chairwoman Dame Paula Rebstock, he says rainfall maps for the area show average annual falls between 1600 and 1800mm, whereas the dam needs 2300-2500mm. “To deliver a high-cost irrigation scheme when it is widely known that the reservoir catchment’s rainfall does not support the expected inflows requires wilful defiance of mathematics, science and fiduciary duties,” he wrote.

Riden is not alone in his view that there’s a mismatch between the available water resource and the size of the dam. Former GNS hydrologist Gil Zemansky told the board of inquiry – and reaffirmed his view in a recent interview with the Listener – that accurate information on the Makaroro River’s flow was of “fundamental importance” to the scheme because it was a large dam for a “small catchment”. However, like Riden, he says data from a dubious river gauge was extrapolated to arrive at an “unreliable” analysis that overstates the water resource by about 20%.

Further, there is likely to be even less water available for the dam in future as a result of climate change, says Zemansky. Niwa modelling for the area predicts river flows will drop 6% by 2040 and continue to fall thereafter.

Zemansky’s evidence was rebutted by HBRIC’s consultant, David Leong, but he was prevented from responding to the rebuttal – a process he considers unfair and at odds with the approach he is accustomed to as an expert witness before the courts in his native US.

But Newman stands by HBRIC’s hydrology data, and says independent experts have reviewed it on behalf of investors and concluded it is reliable. “That’s all part of due diligence.”

Like Pearce, he betrays a hint of exasperation at the naysayers who continue to hurl doubt at the scheme he has worked so hard to bring to fruition.

“There are certain people who just don’t seem to listen … for whatever reason. Distrust of institutions, distrust of individuals, people who think we are just hell-bent on this grand agenda for the sake of it, including myself, without running a proper process. We have given this thing an absolutely huge process.”

Perhaps if those whom Peter Butler condemns as “antis” put down their placards and listened more carefully, they would see that the scheme will produce only wins for the river and the region. Time will tell. But by then, they fear, it will be too late.

In the pipeline: Nine planned irrigation schemes

North Otago Irrigation Company Scheme: Major expansion of existing scheme, which takes water from the Waitaki River. Will increase the area under irrigation from 15,000ha to 25,000ha.

Ruataniwha Water Storage Scheme: Large storage dam to irrigate 28,000ha of Central Hawke’s Bay.

Central Plains Water (mid-Canterbury): Stage 1, irrigating 20,000ha, has been operating for a year. Planning and capital raising for stage 2 are under way.

Hunter Downs (South Canterbury): Plan to take water from the Waitaki River to irrigate 20,000-30,000ha. Likely to be under construction by next winter.

Manuherikia Valley (Central Otago): Options include major enlargement of the historic Falls Dam to store water to irrigate 25,000ha. Farmer interest is being gauged.

Waimea Dam (Tasman): Proposed storage dam in the Lee Valley to replace the extraction of groundwater for irrigation on the Waimea Plains near Nelson.

Flaxbourne Community Irrigation Scheme (Marlborough): Proposal to take water from the Awatere River to irrigate 2200ha.

Hurunui Water Project (North Canterbury): Proposal for a storage dam on the Upper Waitohi River to irrigate up to 35,000ha.

Wairarapa Water Project: Investigating one or more storage dams to irrigate up to 30,000ha of the Wairarapa Valley.

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