New Zealand Journal of Environmental Law
Last Updated: 13 February 2023
Freshwater Management and Allocation Under the Resource Management Act 1991:
Does First-in First-served Achieve Sustainable Management Principles?
This paper examines the current freshwater resource management regime and allocation of fresh water under the Resource Management Act 1991. It examines the concept of first-in first-served in the allocation of the resource and questions whether this approach achieves the sus- tainable management principles of the RMA. Balancing competing interests is an underlying issue in the management of water resources and current policy on the part of central government and the courts. Powers over allocation methods have been delegated by central govern- ment to regional and district councils, which are required to formulate and implement rules on allocation of water resources. The first-in first- served approach has for some time been adopted by the councils and the courts. The future of this approach is, however, open to scrutiny due to sustainability and increased demands on the resources. Sustainable concepts may be at risk if there is a strict adherence to the concept of first-in first-served in allocation of water resources and this paper concludes that central government should provide councils with direction on alternative allocation management, such as a quota regime and/or market-based approaches.
*BL (Hons) LLB (UZ), LLM (Auckland). Formerly Lecturer, Faculty of Business, Auckland University of Technology. The paper was originally written for the subject Natural Resources Law in the Law School of the University of Auckland, June 2006.
1.1 Fresh Water Defined?
Today under the Resource Management Act 1991 (the “RMA”) there is a general allencompassing definition of “water” that includes:1
(a) ... water in all its forms whether flowing or not and whether over or under the ground:
(b) ... fresh water, coastal water, and geothermal water: [and]
(c) does not include water in any form while in any pipe, tank or cistern
“Fresh water” is further defined as “all water except coastal water and geo thermal water”.2 The allocation of water resources discussed in this paper will focus on fresh water.
The statutory basis for the control of water resources is ss 14 and 15 of the RMA. Under s 14 no person may take, use, dam, or divert any water, or heat or take energy from material surrounding geothermal water unless allowed for by a rule in a regional plan or resource consent.3
1.2 Current Issues
In a public discussion paper on the management of New Zealand’s freshwater resource the Minister for the Environment stated that:4
Until recently we have taken our abundance of freshwater in New Zealand for granted. We have assumed that there will always be enough available to meet the needs of all communities and interests. We have also assumed that the different management regimes put in place over the years have sufficiently protected the quality of the water in our lakes, rivers, streams, wetlands and aquifers. We know now that our current ways of managing this precious resource are not always sustainable and have not kept pace with economic, cultural and environmental changes.
3 Ibid, s 14(1).
4 Hon Marian L Hobbs Minister for the Environment, Freshwater for a sustainable future: issues and options (A public discussion paper on the management of New Zealand’s freshwater resources, Ministry for the Environment, Wellington, 2004).
It has been noted by the Ministry that New Zealand’s freshwater resources are under pressure and there is no longer sufficient water to meet all needs, in all places, at all times. Declining water quality — largely the result of changing land uses — is also of increasing concern.5
This essay examines the current RMA regime on freshwater resource management. The question is posed whether it is wise policy for central government to delegate freshwater resource management policy to regional and district councils. It is submitted that a cautious approach should be taken to a full delegation of power by central government to regional councils especially in respect of the firstin firstserved approach.
Sustainable resources management principles and provisions of the RMA are examined and compared to the policies and the practical application of these principles in New Zealand, with reference to several issues arising in water resource management proceedings before the courts. The balancing of interests principles developed in the common law under the regime of the Water and Soil Conservation Act 1967 are examined, and the question is posed whether these principles are still applied under the current RMA. The question posed is whether the balancing test known as the Keam test is still relevant today and has it been adapted to meet the current principles of sustainability?6
The firstin firstserved principle in the resource consents process is also examined. The debate that has arisen as a result of the firstin firstserved principle is discussed and the recent High Court decision reported in Aoraki Water Trust v Meridian Energy is analysed (referred to as the “Aoraki” case).7 A question is posed whether the Aoraki decision and the recent amendments to s 124 and the insertion of ss 124A to 124C of the RMA further exacerbate the difficulties of the firstin firstserved principle?8 Some alternatives to the firstin firstserved approach are identified.
2. CURRENT FRESH WATER SITUATION AND POLICY
2.1 The Need to Examine Freshwater Resource Management
Statistics New Zealand 9 uses a system for water accounting based on a United Nations handbook that is based on the hydrological cycle which tracks the
movement of water through the hydrosphere (the region containing all the water in the oceans, atmosphere and land). In the cycle, water evaporates from oceans and the vapour is carried in air currents. As the vapour cools, it condenses and forms clouds or fog which, with further cooling, may fall on land as precipitation (either rain or snow). This precipitation can then follow a number of pathways. It may be evaporated immediately, be absorbed by plants which then release the water back to the atmosphere through transpiration, or drain into surface water and groundwater systems which eventually drain into the sea.10
An analysis of the annual Water Stock Account for the years 1995 to 2001 reveals a variance in the total change in storage as follows:11
Total change in storage
measured in millions of cubic metres
These figures suggest that there is a variance in the total storage of fresh water from year to year. The figures available from Statistics New Zealand are for the period ended 2001. However, the report suggests that:12
Changes in storage are a relatively minor part of the water stock accounts. The total volume of water stored in aquifers, lakes and reservoirs and as soil moisture, snow and ices is large but the annual changes are much smaller. Annual absolute changes in storage, for the June years 1995 to 2001, averaged only 2.4 percent of precipitation.
However, the report further cautions that:13
There is limited data for water abstraction ... [and] ... abstractions and discharges for irrigation are not available. Volumes for livestock usage are
not measured but are calculated from livestock numbers and standard consumptions per head. Abstractions for private domestic supply have been estimated according to regional water usage in municipal reticulation networks but there is insufficient information to enable reliable estimation of private industrial abstraction volumes.
Although it is clear that the government has made policy decisions to take water issues seriously it is submitted that to make clear policy decisions statistics on water must be current.
The Parliamentary Commissioner for the Environment has stated that the “strategic direction for the longer term” and “primary focus continues to be on environmental sustainability”.14 The Commissioner further reported that:15
There has been a notable shift in emphasis in environmental legislation and policy initiatives over the last 10 years. Most of the initial focus was placed on legislation ... The emphasis from the late 90s onwards shifted to a series of strategies with an environmental focus or component. This is indicative of a more broadly based and strategic approach to environmental management and sustainability matters. However, it remains to be seen how well all the strategies
... will be integrated together.
Environmental systems identified by the Commissioner as being at risk include fresh water, and significant drivers placing pressure on this system include “water demand, allocation and pricing”.16 The Commissioner has identified water management as a priority for investigation for the period 2004 to 2009.17 In an earlier report with findings of the Commissioner’s investigation into
urban water systems the Commissioner identified challenges as follows:18
Of concern in New Zealand is the perception up to now that the water resource should be “free”; however, the report further noted that:19
One submission dominated the submission responses: pricing and charging for water services. Nearly 75% of submitters responded on this topic ...
The responses indicated:
At regional level in a Working Discussion document20 the Environment Waikato Regional Council has for example identified increasing demand as a major issue and the need to establish allocable flows.21
It must be noted that a major water source for Auckland in the future could be the Waikato region.22 Will the firstin firstserved principle potentially lead to a similar allocation issue that arose in the Aoraki case? Furthermore, difficult ies may arise in respect of the Waikato River due to the as yet unsettled Tainui claim to the Waikato River.23
An examination of reports of the Ministry for the Environment and the Parlia mentary Commissioner for the Environment as well as the fact the government has established the Water Programme of Action in 2003 “to ensure that the country’s freshwater resources are managed to best support New Zealand’s sustainable development”24 suggest that there is a need to examine freshwater resource management.
21 Ibid, 5, 7.
2.2 The General Role of Regional and District Councils
Water resources are effectively managed through district and regional councils. The RMA provides for regional and district plans25 and the purpose of the plans is to assist local authorities carry out their functions under the RMA26 and plans may contain rules which have the force and effect of regulations under the Act.27
William Young J identified “fundamental issues of policy” in plan inter pretation in Nanden v Wellington City Council 28 as:
The Court of Appeal said in Gardenway Nurseries Ltd v Waimairi County Council:29
It is the essence of district schemes that they provide notice to the world of the use to which land in a district may be put ... [I]t is critically important that a district scheme should convey in unambiguous terms the uses to which the land in question may be put.
Citing these authorities it has been argued that:30
The function of rules in a plan is to convey to readers what is required of them or of others, or what possibilities are open or not. That will most satisfactorily be achieved if the reader can discern the relevant text of the rule without more. So the authors of plans should seek to minimise occasions on which more is required by avoiding in their plans ambiguities, injustices, absurdities, anomalies and contradictions. Let the plan speak for itself without the need for costly and uncertain third party interpretation.
Generally this argument supports the view that the rules must be interpreted with a purposive approach and places a burden of clarity on the part of the local authorities and arguable investor certainty.
25 RMA, ss 64, 65 & 73.
26 Ibid, ss 63 & 72.
27 Ibid, ss 68 & 76.
28  NZRMA 562, para .
29  1 NZLR 260, 590.
30 Ian Williams, “Interpreting Resource Management Plans” (2004) NZLJ 324.
2.3 Regional Councils
The functions of regional councils are detailed in general in the Act31and include the quality of water in water bodies, the control of taking, damming and diversion of water, the setting of maximum and minimum levels and flows of water, and the establishment of rules for allocation of rights to take or use water.32 Regional councils may prepare regional plans to assist them carry out any of these functions in order to achieve the purpose of the Act.33
In formulating a plan regional councils must state the objectives for the region, policies to implement the objectives, and the rules to implement policies. It should state issues to be addressed, methods for implementation, reasons for the policies, the environmental results expected, monitoring procedures, and information required for resource consents.34 Regional councils must deal with conflicts in water uses particularly in the area of abstractions; the quality, level and flow of water in any water body including the setting of maximum or minimum levels of flow of water; and the use of the land for the purpose of maintenance of the quantity of water in water bodies.35
It has been submitted that although the RMA “offers a very flexible frame work within the overall purpose of the Act to achieve sustainable management” this approach “depends entirely on the steps taken by the regional councils in the preparation of regional plans” and these regional plans are not mandatory and there is no “followup by national government in order to provide more precise binding direction or criteria”.36 In comparing the RMA to European jurisdictions it has been argued that there is a need for central government to set bottom lines on resource management issues37 similar to the European Community Water Framework directive that promotes a “uniform or harmonised approach to setting water quality objectives and standards”.38
2.4 District Councils
Concern has been noted at local levels that “... local or seasonal competition
33 Ibid, 171.
34 Ibid, 172.
for water exists and a total demand exceeds supply in many catchments”.39 Conflicts in water allocation are common in rural regions between competing demands for consumptive uses of water (hydroelectric generation, irrigation, stock water supply and forestry) and nonconsumptive uses (recreation and conservation).40 Elias CJ in Discount Brands Ltd v Westfield (New Zealand) Ltd referring to s 5 of the Act stated that:41
The district plan is the key to the Act’s purpose of enabling people and communities to provide for their social, economic, and cultural well being. It is arrived at through a participatory process, including through appeal to the Environment Court.
Rapidly growing metropolitan areas42
such as Auckland face problems of access to potable supplies of water for domestic and industrial uses ... [and] ... a number of urban communities are considering options to encourage water conservation by adopting user pays charging methods and possibly turning local government water supply companies into corporate and private enterprises. Proposals to reform the water industry based on British models are alleged to be on the present government’s agenda.
Thus it appears water resource management at local government level is a challenge and it is submitted that district council plans arise as a result of del egation of sustainable development principles of the RMA. This delegation of complex policy issues requires some examination.
3. DELEGATION OF POWERS
3.1 Is Delegation of Powers to Councils Appropriate in Respect of Water Resources?
In New Zealand it is argued that the RMA gives “regional councils power to make rules ... but otherwise gives little guidance about what kinds of rules are appropriate and in what circumstances” and the Act would be “greatly enhanced by the addition of measurable goals and standards”.43
41  NZSC 17;  2 NZLR 597.
In other jurisdictions it has been argued that delegation means central government is not accepting full responsibility and the credibility and capacity of communitybased resource management has been questioned. It has been argued, for example, by Ben Bradshaw in Canada that the topdown approach of devolution of management responsibility for natural resource from distant centred professionals to those people directly impacted by the resource management decisions is of concern and it has been stated that44
among environmental stakeholders, support for devolution has largely been based upon the belief — or perhaps assumption — that transferring resource management authority to local communities better ensures the sustainable use of these resources.
It is submitted that45
these acts of devolution likely reflect the desire of upper tiered governments to download responsibilities and costs to lower tiered governments given increasing fiscal pressures, without explicit interest in improving resource management.
The argument against devolution of responsibility in Canada is based on case studies in Western Canada where communities have, for example, agreed to the establishment of hazardous waste treatment facilities near settlements based on shortterm economic interests.46 The author also highlights situations where projects go ahead in local communities based on the “fickle will” of the local community and cites a New Zealand example of 47
... a successful siting of a cellphone transmitter in a coastal New Zealand town under a system of local governance. The normally slow and fractious approval process was completed in record time by the local district council following the drowning of two local fishermen who might have been saved had they been able to phone for help. Whether this was the right decision is not at issue here. Rather, the concern is that, under extreme forms of devolution, resource allocation decisions may simply reflect the fickle will of the community, without
46 Ibid, 141.
systematic consideration of the strengths and weaknesses of a proposal and its alternatives. Economic hardship, given downturns in commodity markets or local resource cycles, may elicit similar community reprioritising.
It has, on the other hand, been observed in the New Zealand context that:48
Decentralisation can also be more efficient than centralisation by allowing for geographic and demographic variability. Decentralised responsibility for policy development and implementation is also desirable in that community values may be incorporated into the process from the bottom up.
However, it has also been argued by Janet McLean that “[t]he Resource Manage ment Act can be seen as part of a legislative trend to state broad principles rather than to prescribe rules of conduct”.49 The basis of this argument is that the purpose and principles sections of the Act as stated in Part 2 of the Act50 “fail to provide clear legislative goals against which to measure the success or otherwise of the Act’s processes” and:51
Both goal setting (ie what environmental outcomes or standards are sought to be achieved by the Act) and rule making (how those standards are to be achieved) take place largely through decentralised processes. The first involves the delegation of broad powers to locally elected representatives. The second, which we would not usually recognise as rule making or policy making process, is the case by case allocation of resource consents.
This decentralised process it is argued has the effect of “obscuring political accountability”.52 McLean argues that the s 5 statement of purpose is followed by sections with a statement of principles and these are not goals and the “hard decision has been delegated from central to local government”.53
Legislationconferring responsibilities have generally been given to local government by the Local Government Act 2002.54 Politically the view of central government appears to be that55
53 Ibid, 555.
... the concept of local government as grass roots democracy ... locally elected people should be able to make and implement decisions that directly affect their community ...
As delegation has been identified as a potential problem for sustainable resource management and the lack of consistency between regions such delegation may not be appropriate. However, government itself has recognised the need for central government to be involved in water issues.56
Together with the concerns on delegation or abrogation of responsibility the overallocation of water has been identified as an issue within local government.57 In respect of an important resource such as water concern has been noted that local government may have to choose or decide upon the best values in respect of water and particular concern has been noted that “a system that would require them to ‘pick winners’ amongst values and uses”58 is not desirable. This leads to a conclusion that central government should provide some guidance on this issue. It is submitted that the guidance needed involves integration. Resource management barriers that have been identified to integration include:59
The RMA does not clearly define the roles and responsibilities of regional and territorial local authorities. It poorly develops the role of central government. The law makes many of the integrating mechanisms overly bureaucratic. Provisions for Crown ownerships of certain resources impede the development of innovative policies ...
The process of integration requires consultation and the process of consultation assumes some significance.
3.2 The Need For and Usefulness Of the Consultation Requirements
The Local Government Act 2002 lists the circumstances when a local authority is required to consult and includes the formulation of longterm council community plans,60 annual plans,61 review of bylaws or the adoption of local
authority policy.62 The RMA63 also places a requirement on local authorities to consult on proposed policy statements or plans. These consultative requirements of the Local Government Act 2002 and the RMA place a burden on local authorities to actually make decisions.64
Under the RMA there is a power of general consultation:65
A local authority may consult anyone else during the preparation of a proposed policy statement or plan.
In Wellington International Airport Ltd v Air New Zealand 66 the requirement of local authorities to consult and the meaning of consultation was considered by Justice McKay who noted in his judgment:
The word ‘consultation’ does not require that there be agreement ... [but], it clearly requires more than mere prior notification.
Justice McKay further applied a leading authority on the requirement for consultation being Port Louis Corporation v Attorney-General of Mauritius where it was noted that in the context of central government and local authorities:67
The local authority cannot be forced or compelled to advance any views but it would be unreasonable if the Governor in Council could be prevented from making a decision because a local authority had no views or did not wish to express or declined to express any views. The requirement of consultation is never to be treated perfunctorily or as a mere formality. The local authority must know what is proposed: they must be given a reasonably ample and sufficient opportunity to express their views or to point to problems or difficulties: they must be free to say what they think.
This approach can be applied to the context of local authorities and the public. Does consultation place a burden on local authorities and in fact expose them to judicial review?68 Although there is a requirement for consultation and procedural formality on the part of local government the courts may take a more
67  AC 1111.
68 Padraig McNamara, supra note 54, at 368.
lenient approach on the public. In Countdown Properties (Northlands) Ltd v Dunedin City Council 69 it was noted that:
Persons making submissions in any instances are unlikely to fill in the forms exactly as required by the First Schedule [of the RMA] and the Regulations, even when the forms are provided to them by the local authority. The Act encourages public participation in the resource management process; the way whereby citizens participate in the process should not be bound by formality.
It was noted in Fawcett v Hamilton City Council that:70
There are many occasions when notices of appeal ... are drafted and filed by persons who have no legal training. When such pleadings are deficient, it is not uncommon in the interests of fairness, for the Court to issue directions remedying the default, eg by making an order for further particulars, or requiring the filing and serving of a memorandum as to the issues intended to be addressed ... What is important is that all parties are given a fair opportunity of addressing relevant issues when matters are eventually heard.
Citing these authorities it has been argued that although there may be some leeway on the part of the public in respect of procedural matters there is the risk of a cost award and the public may have to pay for their opinions.71
It has been noted that72
the better resourced and more articulate stakeholders have been able to take advantage of opportunities to make input in decision making. As a general observation, many environmental groups are under resourced and struggling to contribute to the innumerable occasions available to them for consultation and comment.
Despite the concerns regarding the effectiveness of consultation it is an integral part of the process of resource management.
69  NZHC 67;  NZRMA 145, 167.
4. HOW ARE FRESHWATER RESOURCES MANAGED?
4.1 The Relevance of the Common Law Today?
Prior to the tempering of common law rights by legislation in New Zealand it was accepted under common law that a riparian owner does not have property in the water of a stream.73 At common law it is argued that riparian rights are “highly variable, expanding and contracting with the number of users and with the varying flow of the stream”,74 and every riparian owner is entitled to water in his stream, in its natural flow, without diminution or increase and without alteration in its character or quality.75 Lord McNaughten in McCartney v Londonderry and Lough Swilly Railway Co Ltd 76 summarised the common law position on the use of water for a person as use
... for ordinary or primary purposes, for domestic purposes, and the wants of his cattle. He may use it also for some other purposes — sometimes called extraordinary or secondary purposes — provided those purposes are connected with or incidental to his land, and provided that certain conditions are complied with. Then he may possibly take advantage of his position to use the water for the purposes foreign or unconnected with his riparian tenement. His rights in the first two cases are not quite the same. In the third case he has no right at all ... In the ordinary or primary use of flowing water a person dwelling on the banks of a stream is under no restriction. In the exercise of his ordinary rights he may exhaust the water altogether. No lower proprietor can complain of that. In the exercise of rights extraordinary but permissible, the limit of which has never been accurately defined and probably is incapable of accurate definition, a riparian owner is under considerable restrictions. The use must be reasonable. The purposes for which the water is taken must be connected with his tenement, and he is bound to restore the water which he takes and uses for those purposes substantially undiminished in volume and unaltered in character.
Important features of this summary are that no lower user of water may com plain if someone upstream has used the water. There is no specific definition of “reasonable”; however, it is suggested that normal domestic use should not exhaust a supply and there is an expectation that personal use must be
“connected with or coincidental” to the land. Should anyone pollute water a riparian owner may maintain an action for nuisance.77
Derek Nolan has summarised common law water rights as follows:78
... The natural rights or obligations of the landowner:
(a) Right to take surface or underground percolating water in any quantities (with no liability for diminishing a neighbour’s water supply).
(b) Right of a riparian owner:(i) To take stream water in any quantities for “ordinary” purposes in use of riparian land (domestic purposes and for stock);
(ii) To take or divert stream water (subject to only returning it) in reason able use of riparian land for “extraordinary” purposes (for example, irrigation or industrial use); and
(iii) To receive the unimpeded flow of stream water from higher riparian owners.
(a) Right to discharge surface water on one’s own land.
(b) Natural drainage servitude (at least outside towns), under which lower land of one owner must receive surface water naturally flowing or discharged from higher land of another, even if concentrated (within reason) in natural use of higher land.
... Rights acquired by grant or easement:
It has been noted by David Grinlinton that:79
... once considered ‘free’ resources or ‘sinks’ for waste products, there has been an increasing realisation that the use of air and natural water must be controlled by the state in the public interest. Naturally this imposes serious restrictions on the use of private property which impacts on water or the atmosphere.
Today the RMA tempers the common law rights as stated by Nolan. David Grinlinton illustrates the change in approach to property in resource manage
ment in an examination of Falkner v Gisborne District Council where it was reported that:80
The [RMA] prescribes a comprehensive interrelated system of rules, plans, policy statements and procedures all guided by the touchstone of sustainable management of resources. The whole thrust of the regime is the regulation and control of the use of land, sea and air. There is nothing ambiguous or equivocal about this. It is a necessary implication of such a regime that common law property rights pertaining to the use of land or sea are subject to it ...
4.2 The Effect of the Water and Soil Conservation Act 1967
Common law rights were vested in the Crown with the former Water and Soil Conservation Act 1967. The long title of the Act included the words “allocation” and described it as an Act to81
... promote a national policy in respect of natural water, and to make better provision for the conservation, allocation, use, and quality of natural water, and for promoting soil conservation and preventing damage by flood and erosion, and for promoting and controlling multiple uses of natural water and the drainage of land, and for ensuring that adequate account is taken of the needs of primary and secondary industry, community water supplies, all forms of waterbased recreation, fisheries, and wildlife habitats, and of the preservation and protection of the wild, scenic, and other natural characteristics of rivers, streams, and lakes.
The Act introduced a structure for the administration and control of water resources and a system to meet in full all demands and provided that:82
Every Regional Water Board shall have the following additional functions, rights, powers, and duties ... to meet in full all demands for or in respect of natural water within the region or, if the Board of the adjacent region agrees, of any adjacent region, the Board shall promote the protection of water supplies of local authorities and the conservation and most beneficial uses of natural water within the region, including the planning for and promotion of works and projects for the conservation of natural water, and projects for the multiple use of natural water.
80  3 NZLR 622.
Section 21 effectively vested rights in respect of natural water with the Crown who in turn gave a right to water and not ownership of water:83
... the sole right to dam any river or stream, or to divert or take natural water, or discharge natural water or waste into any natural water, [or to discharge natural water containing waste onto land or into the ground in circumstances which result in that waste, or any other waste emanating as a result of natural processes from that waste, entering natural water,] or to use natural water, is hereby vested in the Crown subject to the provisions of this Act.
Authority to take, dam or divert water was required of a Board. The duties of the Board were detailed in the Act.84
A case dealing with the balancing of interests in allocation of water resources under this legislative regime was that of Royal Forest and Bird Protection Society of New Zealand Inc v Bay of Plenty Regional Water Board 85 involving a dispute over an application to dam, divert, and discharge water from and into the Rangitaiki and Wheao rivers. It was held that the project should go ahead. This was despite it being noted that there would be significant effect on the wildlife and water resources and that the proposed development would completely destroy the “... relatively inaccessible ...” Rangitaiki River fishery86 and a finding that the Wheao River’s “excellent dryfly stream would be lost forever and replaced by a poor quality fishing stream”.87 It has been argued that this case illustrates the uncertainty of the environmental consequences as compared to the certainty of economic factors such as electricity generation that influences the outcome of such cases, and “On a balancing test, they [environmental costs] can often be outweighed and their true impact overlooked”.88
Thus, under the former legislative regime there was tempering of common law rights and there was a requirement to balance and meet the needs of the users of the resource. This involved the difficult task of balancing the needs and interests of more than one party. Today the balancing of economic interests against the interests of the environment includes a balancing of interests of use against the balancing of interests of future generations; this being a requirement of the Act.89
84 Ibid, s 20(1), (5) & (6).
85 (1978) 6 NZTPA 361.
86 Ibid, 365.
4.3 Continued Restrictions on Use of Water Resources Under the Resource Management Act 1991 — no expansive approach?
A feature of the RMA is that it provides a statutory framework for an integrated approach to environmental planning and has replaced a number of separate and inconsistent and overlapping statutes concerned with the use of natural resources.90
In a criminal matter before the High Court in the case of Bruce v Canterbury RC Justice Panckhurst discussed s 14 and concluded that both the taking and using of water must be approved:91
... it is helpful to first set out the relevant portions of s 14 of the Act:
Restrictions relating to water
(a) Water (other than open coastal water);–
Unless the taking, use, damming, or diversion is allowed by subsection (3).
(a) The taking, use, damming, or diversion is expressly allowed by a rule in a regional plan and in any relevant proposed regional plan or a resource consent;
It is readily apparent that both the taking of water and the use to which it is put are controlled. Both aspects must be ‘expressly allowed’ by a rule or a resource consent, in this instance the water right (which is deemed to be a resource consent by ss 386(l)(e)(i) and 87(d) of the Act).
In discussing the issue before the Court on whether a farmer was criminally liable for breach of s 14 by irrigating his potato crops and in particular breaching permits for extractions from the Waihao River, Justice Panckhurst observed that he was not persuaded to adopt an expansive approach to interpretation of the water rights:
I am not persuaded that it is appropriate to adopt an expansive approach to the interpretation of a water right in a prosecution context. I would prefer to leave that question open, since I am satisfied that these water rights did at least identify that the water was to be used on the land to which they were attached by virtue of the relevant legal descriptions. Otherwise the wording
91 HC Timaru, CRI 2004476000015, 6 April 2005.
in the water rights referring to the purpose of spray irrigation of a defined number of hectares, made no sense. While the drafting of the documents was not felicitous, even so I am satisfied that a reading of the ... permits ... must have conveyed to the holder that only irrigation of the respective blocks [of land] was authorised.
On this basis I uphold the conviction ... the water rights did not expressly authorise irrigation of the potato crop ...
The Act further provides that no person may discharge any contaminant into water or water onto land that may result in the contaminant entering water unless allowed for under a rule in the regional plan or with resource consent.92
4.4 The Allocation of Freshwater Resources
The RMA makes no specific reference to water allocation as this is left up to regional councils to manage through regional plans within the broad principles of sustainability under the Act. It has been submitted that:93
The granting of water licences on a “first come first served” basis and the failure of water licence trading to be generally adopted in New Zealand have resulted in an inflexible system. This makes it difficult for the allocation of water to adapt to changing economic requirements.
In countries where water is a limited resource and overallocation an issue the central government has a more “centralised framework for water resource management and provides for the use of economic incentives to change behaviour” and monitoring of water use is done at a national level.94 Regional councils have addressed overallocation by adjusting permits to reflect actual use rather than adopting pro rata reductions in allocations or removing allocations from specific uses.95 In comparing New Zealand’s water allocation regime to water scarcity areas in dry regions such as Africa it has, for example, been concluded that:96
94 Ibid, 152.
Being a water scarce country, South Africa has faced this issue more directly. Catchment management strategies have specific provisions for water use charges which can be used to promote more efficient water use behaviour. The strategies are also required to contain water allocation plans. Both these mechanisms enable the freeing up of water for new uses. New Zealand may be able to learn from the South African approach in addressing water allocation issues.
It has been noted that in South Africa a National Water Authority deals with the issue of water allocation much more specifically, requiring catchment manage ment plans to contain water allocation plans, which are required to set out principles for allocating water, whereas in New Zealand the RMA makes no specific reference to water allocation this being generally left up to regional councils.97
4.5 Sustainability of Freshwater Resources?
In the Water and Soil Conservation Act 1967 there was no express criteria for water rights applications as it was considered that Parliament had “... pointedly refrained from tying the hands of the administrating tribunal by hard and fast requirements”.98 The RMA states that the purpose of the Act is “to promote the sustainable management of natural and physical resources”.99 In Machinery Movers Ltd v Auckland Regional Authority the High Court noted the difference between the 1967 Act’s long title and s 5 of the Resource Management Act and stated “the RMA ... places a far greater emphasis on environmental protection
... than did the 1967 Act”.100 The RMA defines sustainable development to mean101
... the use, development, and protection of natural and physical resources in a way, or at a rate, which enables people and communities to provide for their social, economic, and cultural wellbeing and for their health and safety while
(a) sustaining the potential of natural and physical resources (excluding minerals) to meet the reasonably foreseeable needs of future generations; and
(b) safeguarding the lifesupporting capacity of air, water, soil, and eco systems; and
97 Ibid, 133.
98 Keam v Minister of Works and Development  1 NZLR 319, at 322–323.
99 RMA, s 5(1).
100  1 NZLR 492, at 499.
101 RMA, s 5(2).
(c) avoiding, remedying, or mitigating any adverse effects of activities on the environment.
Commentators have argued that there is some doubt as to whether these pro visions are balanced against the use and development of natural and physical resources.102 It has been submitted that the criteria listed in s 5(2)(a) to (b) above are vague and are linked to the principles of development and environmental considerations by the word “while” which is arguably vague and does not place enough emphasis on the considerations in 5(2)(a) to (b).103
In respect of balancing interests this uncertainty in the drafting of s 5 and the interpretation of “while” has led to two main viewpoints. The first being that s 5 balances the socioeconomic aspirations with environmental concerns whereas the opposing view is that the purpose of s 5 is to simply promote sustainable management.104 It has also been argued that the word “while” does not merely suggest that the three requirements in s 5(2)(a) to (b) must simply be contemplated when considering sustainable management. The requirements must “all be pursued while communities are being enabled to provide for their wellbeing” and “their enablement must not render incapable of fulfilment objectives specified” in s 5(2)(a) to (b).105 With this challenge in mind it has been submitted that the practical difficulty of balancing social and economic factors against physical environmental factors in practice has been delegated from central to local government.106 However, it has been noted that notwithstanding the criticisms of s 5 the current Act “provides a much clearer direction to manage water resources sustainably in contrast to the multiple use approach implicit in the previous water resource legislation”.107
In Foxley Engineering Limited v Wellington City Council the Tribunal considered that the provisions of s 5(2)(a) to (b) could be considered to ensure that land resource is managed in such a way as to enable the people of the community to provide for the various aspects of their social wellbeing and their health and safety. “They are safeguards which must be met before the Act’s purpose is fulfilled” (sustainable management).108 This view was reiterated in Mangakahia Maori Komiti v Northland Regional Council where Judge Bollard in determining a dispute over irrigation rights observed that:109
109  NZRMA 193, 210, 214.
Paragraphs (a), (b) and (c) of s 5(2) are sometimes spoken of as ‘bottom line’ requirements. Yet, one’s immediate inclination is not to place too much reliance upon such a catch phrase. It seems preferable to approach the three paragraphs on the footing that each is to be afforded full significance and applied accordingly in the circumstances of the particular case, so that promotion of the Act’s purpose is effectively achieved.
Despite the differing views on s 5, applying the principles of s 5 water resources must be allocated and managed taking into consideration the following sustain able principles:
Under the previous legislative regime the general test was “any proposed use of natural water should be a beneficial use, and that the loss which might flow from the taking of the water should be weighed against the benefit which will result from its use”.114
5. BALANCING INTERESTS IN ALLOCATION
5.1 Balancing Competing Interests — a Legislative Requirement?
It is further submitted that the Keam test has been superseded by more than balancing of economic interests against the interests of the environment and now includes a balancing of interests of today’s use against the balancing of the interests of future generations or sustainable principles.115 The balancing of interests now must consider sustainable use of the resource and this balancing must be practically achieved in the allocation of the water resources.116
110 RMA, s 5(2).
111 Ibid, s 5(2)(a).
112 Ibid, s 5(2)(b).
113 Ibid, s 5(2)(c).
5.2 Water Conservation Orders
Although there is no specific reference to allocation of water resources in the RMA there are water allocation provisions in the form of Water Conservation Orders.117 The purpose of these provisions is to recognise and sustain outstanding amenity or intrinsic values afforded by water in its natural state or where a body of water although no longer in its natural state is considered to be outstanding.118 Water Conservation Orders can provide that a water body be preserved in its natural state if it is considered to be outstanding, or to protect the characteristics to which a water body contributes such as organisms, fish, wildlife, scenic or natural characteristics, scientific and ecological values, recreational, historical, spiritual, or cultural purposes and protection of characteristics that are con sidered to be of outstanding significance to Maori tikanga (customary values and practices).119
Some councils see these provisions as a duplication of the functions of regional councils120 and two major concerns with such orders are that they can be revoked at any stage121 and the task of meeting the test of outstanding features will become increasingly contestable.122 The Tribunal held that to qualify for inclusion in an order, a water body has to be outstanding in a national context, or contain outstanding characteristics or features, or contribute in some significant way to outstanding characteristics or features.123 It is submitted that although a high standard is set to qualify for inclusion as an outstanding resource these provisions achieve sustainable development as there is a recognition of the need to preserve a water body for the future.
5.3 The Keam Test — is it Still Relevant Today?
Under the regime of the Water and Soil Conservation Act 1967 a test to determine the balancing of interests between conflicting parties was formulated in the case of Keam v Minister of Works and Development:124
... any proposed use of natural water should be a beneficial use, and that the loss which might follow from the taking of the water should be weighed against
117 RMA, Part 9 ss 199–217.
118 Ibid, s 199(1)(a) & (b).
119 Ibid, s 199(2) & (3).
120 Pyar Ali Memon, supra note 35, at 319. 121 Ibid, and see RMA, s 216.
122 Ibid, 320.
123 Re Draft Water Conservation (Mohaka River) Order W20/92 (PT) and in Re Draft National Water Conservation (Buller River) Order 1989 C32/96 (PT).
124  1 NZLR 319, at 323.
the benefit which will result from its use ... where some adverse effect may follow ... the kind of balancing envisaged ... appears to be only a matter of common sense and thoroughly in accord with the purposes of the Act ... there may be cases where the ... broad test will be inappropriate .... For example there might be an application to abstract some water for a limited term from a source of supply so abundant.... In that kind of case it would be wrong ... to apply the benefit test in any exacting way. ... a weighing of advantages and disadvantages is not required if there are no significant disadvantages.
In this case, the Court of Appeal held that on the legal issue of whether to grant or refuse applications to take natural water it was a proper approach to exercise such discretion on the basis that any proposed use of natural water should be based on beneficial use. The loss which might follow from taking the water should be weighed against the benefit that will result from its use.125 The Court held that in exercising such discretion regard should be had to the conservation and most beneficial uses of natural water within the region including prospects for the multiple use of natural water and to recreational needs and safeguarding scenic and natural features, fisheries and wildlife habitats.126
This principle of balancing interests was considered in Auckland Acclimat- isation Society Inc v Sutton Holdings Ltd, a case involving a conflict of interest between farming and conservation where it was held that “... [w]here there is a conflict, each [interest] has to be weighed on the particular facts, without any general presumption”.127 It has been argued that the balancing test is basically one of comparison and no matter how great the loss which might flow from the proposed exercise of the right it will always be outweighed by the benefit that will result. However, in applying this test in respect of water there is no “bottom line” for protection of water.128
It has been submitted that the balancing function of the RMA is clear in s 5129 and was, for example, considered in a water allocation case, Te Runanga o Taumarere v Northland Regional Council.130 This case involved a dispute over the discharge of treated effluent into a natural wetland where the local Maori tribe argued the effluent would affect the historical and spiritual significance of the traditional shellfish gathering in the area. The Tribunal noted that the attitudes of the local people and the feasibility of another option for effluent disposal had not been adequately considered.
It can be argued that the Keam balancing test exists under the current
125  1 NZLR 319, at 323 & 324.
126 Ibid, 324.
127  2 NZLR 94, at 100.
128 Nicola R Wheen, supra note 88, at 170.
129 Ibid, 191.
130  NZRMA 77.
legislative regime of the RMA. However, the Act further obliges the parties to consider sustainable development and although the Act effectively requires a balancing of interests and the taking into account of the principles of sustainable development the actual allocation of water rights is in practice “undertaken by the regional water boards on a ‘first come, first served’ basis”.131
6. FIRST-IN FIRST-SERVED ALLOCATION
6.1 First-in First-served Approach — a Difficulty?
A difficulty with the firstin firstserved principle has been that “politically, catch ment boards were dominated by farming interests and tended to be development orientated”.132 The only provisions to upset the firstin firstserved principle is under the resource consent provisions of the RMA where the Minister has the power to call in applications of national significance. Should the Minister consider that a proposal is of national significance the Minister may direct that he or she will decide any particular application.133
The RMA provides that in considering whether an issue is of national significance the Minister shall have regard to factors such as public concern, the actual or likely effect on the environment, the use of the natural and physical resources, and any irreversible changes to the environment.134 This is a power the Minister has not used often and it is interesting to note that it is a power that has been used in matters involving water.135 As a result of the callin powers special legislation was enacted to deal with the water issue arising in respect of water allocation on the Waitaki River.136
6.2 Entrenchment of the First-in First-served Approach
The issue of water allocation was examined in depth in the case of Aoraki Water Trust v Meridian Energy Ltd 137 where the Aoraki Trust and the Mackenzie and Timaru District Councils sought declaratory orders from the High Court in respect of water use.138
133 RMA, s 140.
134 Ibid, s 140(2)(a)–(h).
138 “In the case of water, high profile projects such as Projects Aqua on the Waitaki River and the rapid expansion of irrigation in Canterbury have put the spotlight on the weaknesses in our allocation mechanisms”; Dr J Morgan Williams, Parliamentary Commissioner for the
The facts of this case arise as a result of Meridian Energy Limited using water from lakes to generate electricity at power stations in South Canterbury. Meridian and its predecessors had dammed, diverted and used water from these lakes under a series of consents since 1929139 and 1968140 and the Canterbury Regional Council had issued the current series in 1991141 for a period of twenty five years.142 Parties including the Aoraki Water Trust applied for consent to take water for irrigation purposes and Meridian argued that the resource was fully allocated and there was no surplus available for use by others. This led the Trust to seek orders from the Court that143
... water permits do not limit [the Council’s] powers and discretions under ss 104 to 104D Resource Management Act 1991 to grant water permits to any other person to take, divert and/or use the waters of Lake Tekapo notwith standing that the grant of such consents reduces the amount of water available to [Meridian] to store in the lake and use at its generation stations [and]
... water permits do not limit the powers and discretions of the Waitaki Water Allocation Board under ss 6, 7, 13, 17, 18 and 19 Resource Management (Waitaki Catchment) Amendment Act 2004 to make provisions for the taking, diversion and use of waters of Lake Tekapo by persons other than [Meridian] notwithstanding that such allocation may reduce the amount of water available to [Meridian] at its generation stations.
The applicants submitted that a water permit is a bare licence and does not pass an interest or transfer property in anything. It only authorises the holder to act in a way that would otherwise be unlawful by allowing the holder of the permit to take, use or divert water in terms of s 14 of the RMA and an issuing authority is under an obligation to take into account the reasonable needs of competing users of the resource.144
The applicant relied on the authority of Stanley v South Canterbury Board 145 where the Board raised the issue of whether a permit holder will have a priority over those who apply later and held that the permit holder “has no guarantee of or priority for the quantity of water specified in the permit ... [and] ... must
Environment, Report of the Parliamentary Commissioner for the Environment for the year ended 30 June 2005, at 12.
142  NZHC 820;  2 NZLR 268, at 269.
143 Ibid, 273.
144 Aoraki Water Trust v Meridian Energy Ltd  NZHC 820;  2 NZLR 268, at 276.
145 (1971) 4 NZTPA 63.
accept the possibility that the source of water ... may be diminished ... by the demands of others lawfully entitled to use the water”.146 This case was clearly contrary to the principle of firstin firstserved.
The High Court in Aoraki Water Trust v Meridian Energy Ltd would not apply this authority and distinguished it on the basis that it was determined under the Water Conservation Act 1967. The Court noted that the decision did not address the threshold question under consideration here of “whether a consent authority under the Resource Management Act [can] grant a permit to use a resource which is already fully allocated by an existing grant”.147 The Court instead applied Fleetwing Farms Limited v Marlborough District Council 148 where the Court of Appeal considered the legal test for determining priorities on resources. This case involved two separate applications for a permit to establish mussel farms in the same area of seabed. It was held that where there were competing interests the intention of the legislature was on a “firstcome firstserved basis”149 and where there are competing applications in respect of the same resource before the council “the council must recognise the priority of time”.150
The Court in the Aoraki case considered whether any provisions of the RMA empowered the Council to grant water permits to others where the resource was already fully allocated to an existing holder. In considering this s 104 the Court was of the view that it only identifies factors to which a consent authority must have regard to when considering an application and “on a plain reading does not empower the consent authority to grant a consent to Aoraki in circumstances where the resource is already fully allocated to an existing holder”.151
The Court went further to consider whether there were any other provisions in the Act that allowed a consent authority to interfere with an existing grant and concluded that “where Parliament has conferred power on a consent authority to interfere with an existing grant it has acted expressly and for very limited purposes”.152 The Court listed these express provisions as:153
148  3 NZLR 257.
149 Ibid, 265.
150 Ibid, 267.
151 Aoraki Water Trust v Meridian Energy Ltd  NZHC 820;  2 NZLR 268, at 283.
152 Ibid, 284.
154 RMA, s 68(7).
On this basis the Court refused to grant an order and held that a consent authority “would be acting unlawfully if it granted Aoraki’s application in circumstances where the resource was already fully allocated ... and a new permit would have the effect of diminishing or derogating from the existing consents”.158 It is interesting to note that the Court was of the view that:159
Part 6 of the Resource Management Act codifies the constituent elements of a resource consent, covering its nature, duration, expiry, review and transfer. A number of specific provisions ... elevate the status of water permits from something of the nature of a bare licence to a licence plus a right to use the subject resource. In that sense it has similarities with a profit à prendre ...
The Court confirmed the position by stating that water permits are not real or personal property and what is important is that, when granting the consents a right “to take, use or divert property, being surface water in Lake Tekapo, for a defined term at maximum rates and quantities and for maximum periods” was created and “the principle of nonderogation from a grant is applicable in all legal relationships which confer a right in property”.160 This principle of non derogation was accepted by the Court:161
In our judgment, granting a water permit for a particular volume of water over a specified period of time commits the consent authority to that grant in the
155 Ibid, s 128(1)(b).
156 Ibid, s 314(1)(f ).
157 Ibid, s 329(1).
158 Aoraki Water Trust v Meridian Energy Ltd  NZHC 820;  2 NZLR 268, at 284.
159 Ibid, 279.
161 Ibid, 281.
sense that it is not entitled to deliberately erode the grant unless it is acting pursuant to specific statutory powers.
In discussing the Aoraki case Ian Williams noted that a resource consent is neither real nor personal property162 as the RMA specifically provides that resource consents are neither real nor personal property.163 Williams in his discussion of the Aoraki decision and in comparing New Zealand legislation to that of Australia noted that under the Queensland Water Act 2000 the expression “property” is avoided and the focus is on a specific range of entitlements and rules governing the exercise of these rights. Williams submits that it is Parliament’s intention in the RMA to “exclude any common law baggage and to provide itself with a clean slate that it would fill by other features of the Act”.164
In an analysis of the Aoraki decision it has been submitted that the Court avoided the full effect of s 122 by finding that a water permit provided a right in water owned by the Crown.165 The basis of this observation being that water is not property owned by the Crown but rather a public resource which the Crown has control and stewardship of and166
... that control has then been delegated to Regional and Unitary Councils under the RMA, to manage the resource sustainably and efficiently.
In arguing that the Aoraki decision is flawed it has been submitted that167
... a right to take, use and interfere with the flow of water does not necessarily or logically include a right to exclude others from using water from the same source ... a permit to take, does not allocate contributing waters, but rather allocates what arrives at the point of control (a practical priority not a grant of a right to upstream property) ... a party seeking to take water elsewhere in a lake (or aquifer) is not seeking to take the same water as the consent holder. Rather, each is taking or seeking to take, different water out of the same source (or storage).
162 Ian Williams, supra note 135, at 178.
163 RMA, s 122(1).
146. See also: http://www.rmla.org.nz/library_speeches.asp (at 20 April 2006). 166 Ibid.
167 Ibid, 160.
An earlier interpretation of s 122 by Justice Potter in Hume v Auckland Regional Council suggests a different pragmatic approach:168
The appellants’ concerns with private property rights permeate their arguments in relation to statutory interpretation and lead to contentions which are not logical or supportable in the light of the purpose of the Act. For example s 122 which declares in subs (1) that a resource consent is neither real nor personal property, does not then in the subsections that follow, establish instances when consents will be treated as giving real or personal property rights to their holders. The exceptions merely refer to the manner in which resource consents may be dealt with in certain situations, which reflect some of the incidences of real or personal property rights, subject to the express limitations of the sub sections; but they do not confer property rights.
In a discussion on the issue of property rights under environmental legislative regimes it has been noted by David Grinlinton that “clearly there is a continuing tension between the imposition of environmental regulation and legal principle and the exercise of private property rights”.169
Williams submits that the Aoraki decision enhances our understanding of the effect of water permits “but it also reveals the deficiencies of a system that allows an authority to allocate all the water in a system without a plan that addresses all the interests in the water”.170 He further submits that there is growing dissatisfaction with “the first come, first served allocation prin ciple”171 first identified by the Court of Appeal in Fleetwing172 and submits that Parliament is also moving away from this principle as seen in recent amendments to resource management legislation. An example of this change in policy is the Resource Management Amendment Act (No 2) 2004 where the purpose of the Act is stated as:173
providing for the allocation of authorisations to apply for coastal permits to undertake aquaculture activities by tender unless the regional coastal plan provides otherwise; and
enabling regional councils to grant preferential authorisations to persons who privately initiate plan changes that establish aquaculture management areas; and
168  NZHC 763;  NZRMA 49, para 39.
providing for existing permit holders to have their applications for new consents considered before any other applications for the same area; and
to empower the Minister of Conservation to direct regional councils in relation to the allocation of space in the coastal marine area.
Thus, although the firstin firstserved principle is recognised there is power to grant preferential authorisations and allow the Minister to direct regional councils in relation to allocation in respect of coastal permits. Under the current resource management legislation the word “allocation” did not occur until recently and is still not specifically defined. The Resource Management Amendment Act 2005 provided that regional plans may “allocate” between types of activities and impliedly acknowledged that resource consents allocate rights.174 Regional councils continue to maintain the right175 to set minimum and maximum flows of water.176 The RMA has been amended to clarify that regional councils’ functions include the establishment of rules in a regional plan to allocate resources including water; however, they cannot include rules to allocate water that is subject to an existing consent.177
Regional councils have the functions of establishing methods to allocate natural resources, including water.178 Allocation can be implied in the provisions of the Act in respect of the functions, powers and duties of regional councils to include the control of the use of land179 and the taking, use, damming and diversion of water in respect of any coastal marine area in the region180 including activities in relation to the surface of water.181 There is specific provision under s 30 of the RMA for:182
the control of taking, use, damming, and diversion of water, and the control of the quantity, level, and flow of water in any body of water, including —
(i) the setting of any maximum or minimum levels or flows of water;
(ii) the control of the range, or rate of change, of levels or flows;
(iii) the control of the taking or use of geothermal energy;
A recently inserted subsection to s 30 provides that a rule to allocate a natural resource may be established by a regional council and the council may allocate
175 RMA, s 68(7).
178 Ibid, s 30(1)(fa).
179 Ibid, s 30(1)(c).
180 Ibid, s 30(1)(d)(iii).
181 Ibid, s 30(1)(d)(vii).
182 Ibid, s 30(1)(e).
the resource in any way. However, this power of allocation is still subject to a requirement that the rule may not allocate the amount of a resource that is already allocated.183 (See Appendix One for full text of amendment.) As there is no definition of allocation in the legislation it is submitted that there may be confusion with the meaning of the term “allocation”.184
It appears that regional councils deal with the overallocation of freshwater resources in different ways. Some councils have minimum flows and allocation limits for rivers that are fully allocated. Some councils operate a waiting list approach and operate informal unadvertised waiting lists. A council may use a rationing scheme where existing consents are reviewed and adjusted to reduce allocations.185 Specific problems identified by the Ministry for the Environment include:186
... little strategic planning designed to cope with increasing demands for water
... It is becoming increasingly common for water resources to be closed to further allocation (ie applications for new resource consents are turned down)
... in some cases, where no limit has been set as to how much water can be allo cated, there is increasing public unrest at the continued allocation of water which is often viewed as a common or public resource being used for private benefit
... most plans provide limited evaluation of where water would be most valued for environmental, social, cultural and economic reasons
The Ministry for the Environment has specifically referred to problems with the firstin firstserved approach to water allocation:187
... the firstin firstserved approach does not guarantee that water is allocated to the greatest environmental, social, cultural or economic values. Further when the amount of water already allocated from a catchment comes close to the allocation limit, there is potential for ‘goldrush’ situations which exacerbate the problems with firstin firstserved. The current firstin firstserved system can also make it difficult to manage the cumulative effects of numerous small water takes or discharges to water bodies.
This suggests that a change of policy will follow.
Amendment Act 2005 (2005 No 87).
(Technical Working Paper, Ministry for the Environment, June 2004) 8.
186 Ibid, 8–11.
187 Ibid, 10.
7. THE FUTURE OF FIRST-IN FIRST-SERVED
7.1 The Future of the First-in First-served Principle Under the Current Legislative Regime — is it Wise to Continue?
Under the current s 124 there is provision for a current resource consent holder to continue using the resource until an application is finally determined including any appeals. The section applies to an application where the resource consent is about to expire, or where there is a new consent application for the same activity.188 New sections 124B to 124C are included in the RMA to become effective from 2008.189 The new sections provide that a consent authority must hold an application without processing the application if resource consent is already held by another. There is also provision to notify an existing consent holder of another application and the existing consent holder is given an opportunity to apply under s 124 for a further consent.190
Thus the new sections 124A–124C establish priority over new applications when an existing consent holder applies for a new consent to replace an existing consent. This process is a default position that can be changed by a regional plan. These sections also allow existing holders to continue holding the consent until the matter is determined should others apply and should the applicant not be holding a consent. The consent authority must hold the consent and not process the consent. It has been submitted that these provisions will lead to confusion between “allocation” and “prioritisation” between users of a resource191 as these sections allow for an allocation of priority between those competing for a resource consent rather than dealing with the allocation of an overallocated or dwindling resource between those with competing interests.
These new sections further entrench the “firstin firstserved” approach in the legislation where there is a dispute in respect of overallocated resources such as water. It is submitted that a practical application of these sections will lead to an entrenchment of the principle of firstin firstserved and will lead to difficulties in the future as water resources become scarce or overallocated. However, as already noted, there are occasions where consent may be reviewed before its expiry,192 or in a matter of national significance the Minister may call in a consent.193
Amendment Act 2005 (2005 No 87).
190 Sections 124C(2)(a) & 124C(6). 191 Philip Milne, supra note 165.
192 RMA, s 128.
193 Ibid, s 140.
Under s 128 a consent authority may review the conditions of a resource consent if there is an adverse effect on the environment, or in the case of water a regional plan rule has become operative where maximum or minimum levels or flows or rates of water use have been reached.194 It can be argued that this section is a check on the firstin firstserved approach. However, it is submitted that the section only operates if there is an adverse effect on the environment or in the event a rule exists in a regional plan on maximum or minimum flows. This arguably does not consider sustainable management principles as an “adverse effect” on the environment or breach of a flow level assumes an adverse effect has already occurred rather than taking into account the needs of future generations.
Although it has been argued that the consent process “is not and never was intended to be a resource allocation process”195 it is submitted that:196
Allocation must logically be for a defined quantity of a resource (area, volume, and/or rate of use) at a particular time or situation and at a particular place or area (eg at particular flows in a particular part of a river). Permits authorise and define the extent of interference (physical allocation) by particular persons for a particular duration and may limit the interference to particular times or seasons, or particular situations of flows or receiving water ...
The firstin firstserved approach is entrenched in respect of applications made under s 124 for resource consent where there is an existing resource consent as there is a requirement that the consent authorities must have regard to existing investment when determining applications for new consents.197 This suggests an economic bias regarding the use of the firstin firstserved approach rather than recognition of sustainable principles.
7.2 Aoraki and Sustainability
The Court in Aoraki rejected the argument that it was Parliament’s intention that consent authorities should (guided by Part II of the Act) define sustainable limits to a resource. It also rejected the concept that through plans and consent hearings authorities should determine how much, in effect, a later applicant for water from the same source should be permitted to have. The Court noted that if this was the intention of Parliament then:198
194 Ibid, ss 128(1)(a)(i) & 128(1)(b).
195 P Skelton, “Project Aqua reveals flaws in Regional Planning”, NBR, 19 September 2003. 196 Philip Milne, supra note 165.
A consent authority could lawfully grant an unlimited number of permits for the same water even though that resource had already been exclusively or fully allocated in a physical sense. Existing and new permit holders would then have to compete among themselves to satisfy their demands. There would be no enforceable order of preference or priority, given ... rejection of a first come, firstserved system. Also, a consent authority would be powerless to harmonise the first grant with later grants; upon granting a permit an authority becomes functus officio and is unable to revisit its terms unless expressly allowed by statute. In our view this chaotic situation would be the antithesis of the management regime contemplated by the Act and the consent authority’s express obligation to control the taking, use, damming and diversion of water
... we also agree ... that overallocation of a water resource would be equally foreign to Part 2 of the statutory regime.
It has been argued that the firstin firstserved approach “whilst orderly, simple and maximising investment certainty” is the “antithesis of a sustainable and efficient use of public resources” and “excludes later potentially more efficient uses for the term of the consent and minimises the prospect of equitable and efficient sharing of the resource and sharing of the risks which come with the resource (eg the risk of drought years)”.199
It means that decisions made years ago (often without future needs in mind) will be ‘locked in’ and new uses locked out. How can such a system provide for the reasonably foreseeable needs of future generations for more efficient users?
In Aoraki the Court stated that200
... granting a water permit for a particular volume of water over a specified period of time commits the consent authority to that grant in the sense that it is not entitled to deliberately erode the grant ... In situations where the consent authority’s commitment represents a full allocation of the resource consent the grantee (subject, of course to the events of nature) ... must reasonably expect to proceed with planning and investment on the basis that the consent authority will honour its commitment ...
It is possible to argue that the Court has considered the practicalities of allo cation and sustainability in that it states the allocation is subject to the “event[s] of nature”.
The effect of the firstin firstserved approach is illustrated in the case of Dart River Safaris v Kemp201 where a principle was noted that conditions in a later consent cannot interfere with those of an earlier consent. Justice Panckhurst noted that:
Regardless of the merits of the situation, the fact remains that DRSL has legal rights by virtue of its resource consent ... they remain rights which may not be denied or eroded by imposition of a condition on another person’s resource consent.
Related to balancing of interests and allocation of rights on a firstin firstserved basis it has been noted that:202
Underlying all of this, is a higher level philosophical/political debate as to whether the RMA is about management of resources or allocation of property rights. Should it provide (or be interpreted to provide) the highest possible level of protection of existing investment in ‘property rights’, or should decisions about efficiency and effects of later applications or existing users be left to Councils and the Environmental Court applying the purpose and principles of the RMA? The High Court in Aoraki has sided firmly with the protection of investment based on implied rights in property, implemented by an implied restriction on the exercise of discretionary judgment. However, I for one remain unconvinced that this is what Parliament intended in 1991, or in 2004 when it passed the Waitaki amendments.
An example of a regional issue that may arise in the future is that involving the country’s largest populated area of Auckland where Watercare Services, a water supply company that supplies Metrowater Limited, that in turn supplies Auckland City, already takes 10 per cent of its supply from another region being the Waikato region203 and it is predicted that this will be an increased supply source.204 As the Waikato River is a major river it is likely that further allocations will lead to disputes similar to the Aoraki case. There are already proposals afoot to cease all new applications for surface water allocation in areas where surface water allocation exceeds water availability.205
201  NZHC 448;  NZRMA 440, 447.
In a recent High Court judgment of Ronald Young J the Aoraki case was followed and the “Aoraki principle” of firstin firstserved has been reinforced. In MacKenzie Irrigation Company Limited v Meridian Energy Ltd,206 an appeal from a decision of the Waitaki Catchment Water Allocation Board to approve the Waitaki Catchment Water Allocation Regional Plan, the appellant contended that the Board failed to reflect the High Court decision of Aoraki in their plan especially in respect of the wording of particular aspects of the plan.207 Ronald Young J expressed the view that:208
There seemed to be an error of law by the Board in failing to acknowledge in an appropriate way within R6/Table 5 that the allocation provided for was subject to the Aoraki principle and therefore Meridian’s existing water rights.
A direct redraft of the R6/Table 5 did not seem to be an appropriate approach. However, I was concerned that leaving no reference to the Aoraki principle and Meridian’s entitlement in R6/Table 5 may unfairly mislead the public that further allocation of water was possible without Meridian’s agreement before their existing rights expired. This is clearly wrong.
In consideration of the matter Ronald Young J accepted the submission that each rule within the plan must ensure the allocation of water resources was subject to existing water rights.209 He also accepted the submission considered in Fleetwing Farms Ltd v Marlborough District Council 210 being the firstin firstserved concept as a basis for competing applications for resource consent and noted that this court had concluded that any limitation on the principle was only available in limited circumstances such as under s 128.211
Following the MacKenzie Irrigation Company Limited case the plan was redrafted to give effect to the Aoraki principle and a footnote inserted under Rule 6 of the plan stating that:212
206 [27 June 2006] HC Wellington, CIV 20054852192.
207 The appellants contended that the Board failed to reflect the Aoraki decision in rules 6/Table 5, 8(3) and 21 of the Waitaki Catchment Water Allocation Regional Plan. These particular rules provide that no person shall take, use, dam or divert water if the sum of annual volumes exceeds the annual allocation or transfers the location of consents in certain cases. The Regional Plan was prepared by the Waitaki Catchment Water Allocation Board under the Resource Management (Waitaki Catchment) Amendment Act 2004. See Waitaki Catchment Water Allocation Board, Waitaki Catchment Water Allocation Regional Plan (Waitaki Catchment Water Allocation Board, Christchurch, September 2005).
208 [27 June 2006] HC Wellington, CIV 20054852192, para 13.
209 Ibid, para 11.
210  3 NZLR 257.
211 [27 June 2006] HC Wellington, CIV 20054852192, para 9.
212 Waitaki Catchment Water Allocation Board, Waitaki Catchment Water Allocation Regional Plan (Waitaki Catchment Water Allocation Board, Christchurch, September 2005) 52.
While the consents to operate the Waitaki power scheme remain in force, the Upper Catchment is already fully allocated to a holder of those consents and other existing consent holders.
8. POSSIBLE ALTERNATIVES
Amendments to s 124 that entrench the firstin firstserved approach213 do not come into effect until 2008 as “the intention is to allow regional councils to consider the issue of natural resource allocation and to change a regional plan to vary the default rule, where the councils considers it appropriate”.214 This effectively gives regional councils an opportunity to consider alternatives.
Regional councils have varying approaches to dealing with over or fully allocated resource:215
Some councils are identifying minimum flows and specifying the amount of water that can be taken from rivers and groundwater aquifers. For example, the Greater Wellington Regional Council has minimum flows and allocation limits
... A method used is not to grant any further consents until water becomes available with some councils operating on a waiting list approach, where the applicant will wait to gain an allocation to water if it becomes available. For example, Tasman District Council ... operates an informal unadvertised waiting list ... If a water resource is overallocated a council may use a rationing scheme where existing consents are reviewed and adjusted to reduce allocations.
It has been noted by David Grinlinton that the216
[u]se of mechanisms such as easements, restrictive covenants, leases and licences can assist in protection of environmental values without interfering with property ownership. Tradeable permits for water and emissions ‘budgets’ with tradeable permits to control atmospheric pollution provide further examples of ‘free market environmentalism’.
There is some flexibility under the Act in respect of water resources that are already allocated in that water permits can be transferred if allowed under
a regional plan;217 however, it is submitted that this transfer process does not necessarily take into account current sustainability requirements and there is no facility to transfer these permits temporarily.218 In identifying overallocation of water resources the government has noted concern with transferring permits:219
In a situation of increasing competition for water, the current system may not allow allocated water to be used in the most valued or efficient way. Technically water can be reallocated once a permit expires and water permits can be transferred. But while persontoperson transfers occur frequently (largely as a result of the sale of property), transfers of water from site to site seldom occur.
A possible alternative to the firstin firstserved concept is the quota manage ment regime under the fisheries legislation.220 In a study commissioned by the Organisation for Economic Cooperation and Development (OECD) it was noted that there is a worldwide trend towards the use of individual fishing quota systems “because they work well”.221 A system has been created where licence holders can fish commercially using transferable annual catch rights called independently transferable quotas (“ITQs”). Title is effectively created in the quota thus allowing for trade in quotas that are transferable and may be sold or even mortgaged.222
The Fisheries Act 1986223 makes it clear that the allocation of access to fisheries is determined under the provisions of the Fisheries Act and sets out a purpose of the Act which is to provide for the utilisation of fisheries resources while ensuring sustainability. The words “ensuring sustainability” are defined as “maintaining the potential of fisheries resources to meet reasonably foreseeable needs for future generations”; and “avoiding, remedying, or mitigating any adverse effects of fishing on the aquatic environment”.224 A system has been set up to determine the total annual catch allowed (“TACs”) where the responsible
217 RMA, s 137.
218 Ministry for the Environment, Water Programme of Action — Water Allocation and Use
(Technical Working Paper, Ministry for the Environment, June 2004) 10. 219 Freshwater for a sustainable future: issues and options, supra note 4, at 15. 220 Fisheries Act 1983, now largely replaced by the Fisheries Act 1986.
Minister sets a TAC that maintains stock at or above a level that can produce maximum sustainable yield.225
There appears in principle to be no legal barrier to adopting a similar system for water resources. Assuming there is sufficient data on the availability of water resources a similar system could be adopted where the total available for allocation is determined and then allocated and a “right” created in the water permit that can be traded as with ITQs. The Ministry for the Environment has suggested in working papers to improve allocation systems the following should occur:226
This report further suggests that in respect of the firstin firstserved approach:
The benefit of moving away from firstin firstserved is that it “will give regional councils a new tool allowing comparative assessment of applications” and will enable “more holistic decision making”.228 However, a move away from this system may lead to controversy in the process of consultation that is required to determine the criteria.229
It has been noted that the alternatives to the firstin firstserved approach of marketbased mechanisms are effective230
... to a certain extent in dealing with conflicting demands, longterm and broad based consequences and rationing issues, and are based on such assumptions as a perfectly functioning market, perfect information and the availability of substitutes ... [and] irrigation users [have] major concerns over irreversibly losing their licences to urban/industrial users.
(Technical Working Paper, Ministry for the Environment, June 2004) 15–20.
Concern has been noted by the Ministry for the Environment that to retain the current system will lead to the need to “claw back” water permits already granted in the event of a dry year or high demand. There is a risk that “sleeper permits” may be activated in a dry period leading to a further exacerbation of the situation. To alleviate the situation the Ministry has suggested that regional plans be compulsory and allocation limits be established. This would require accurate scientific information. However, there is a need to give regional councils tools to determine allocations other than firstin firstserved. Concern is noted by the Ministry that tenders, auctions and ballots may lead to equity issues and a difficulty with factoring in wider issues such as cultural considerations.231 It is submitted that such economic alternatives could lead to difficulties in implementing sustainable principles.
As central government has embarked on a Sustainable Water Programme of Action, coordinated by the Ministries for the Environment and Agriculture and Forestry and its aim is to “find the best ways of managing the freshwater resources”232 it can be concluded that there is a need to examine water resource management. Commentators have suggested that “modern environmental planning and resource management legislation shows the extent to which the exercise of individual property rights have been increasingly abridged in public interests”233 leading to the conclusion that the concept of property rights and investment rights in water will continue to be of some concern.
Allocation of water resources is of concern and it has been argued that the firstin firstserved approach “whilst orderly, simple and maximising investment certainty” is the “antithesis of a sustainable and efficient use of public resources” and “excludes later potentially more efficient uses” and “minimises the prospect of equitable and efficient sharing of the resource and sharing of the risks which come with the resource” (for example, the risk of drought years):234
It means that decisions made years ago (often without future needs in mind) will be ‘locked in’ and new uses locked out. How can such a system provide for the reasonably foreseeable needs of future generations for more efficient users?
(Technical Working Paper, Ministry for the Environment, June 2004) 13.
Regarding sustainable management principles, commentators on the issue of whether water allocation and the sustainable management principles of section 5 of the RMA has brought about a greener decisionmaking process (when compared to the legislative regime of 1967) conclude the practice of balancing interests has continued “in a confined sense” and “is environmentally flawed”.235 It has been concluded that236
... the general wording of section 5(2) has offered decision makers plenty of room to balance up interests, and make value judgments. Thus the old danger that nature’s interests will be devalued and so outweighed in decision making persists. While this problem could be addressed by the indirect approach of trying to influence the values which decision makers take to their tasks, the Act already offers avenues by which the extent of discretion available might be constrained ... this is a political (as opposed to a legal) issue and requires political redress. Statutory change is not necessarily required but more intervention may be.
Thus central government requires the political will to determine water resource policy. To support this submission it has been argued that s 5 introduces sustainable management as the goal to be promoted in water allocation decisions and s 5 is “framed in wide terms” and the “flexibility this imports is clearly deliberate”.237 However, referring to Becmead Investments Ltd v Christchurch City Council,238 caution has been noted that “the consequences of generality ... is that it is necessary to make a careful value judgment”. In circumstances of value judgments central government may be required to provide guidelines. In reflecting on sustainability in the international law context it has been concluded that “ultimately, they [sustainable principles] should be seen as merely reflecting common sense”.239
The Ministry for the Environment has suggested in their working papers that the firstin firstserved approach to allocation be changed by allowing for marketbased approaches to the allocation system. The Ministry has suggested “the use of marketorientated instruments, such as a tender, auction or a ballot to allocate water remaining available for abstraction”.240 However, it is also noted
236 Ibid, 198.
237 Ibid, 187.
238  NZEnvC 39; 2 ELRNZ 368, 386;  NZEnvC 39;  NZRMA 1, 17.
(Technical Working Paper, Ministry for the Environment, June 2004) 21.
by the same Ministry that such a system of marketorientated allocation “does not allow for issues of equity of access or for wider values, such as cultural considerations, to be taken into account other than in initial eligibility”.241 It is submitted that such “wider values” include principles of sustainability that is so inherent in the RMA.
An examination of the advantages and disadvantages of the alternatives suggests that the alternatives are problematic. In a problematic area guidance is required. Delegation by central government of the hard decisions to local government will lead to the conclusion that there will be further inconsistencies or diversity between regions and further localisation. This in turn leads to the conclusion that central government has a responsibility to determine policy. Should local government or regional councils be required to determine their own allocation system other than on a firstin firstserved basis concern has already been expressed at local government level that:242
Councils tended to prefer the existing system (firstin firstserved) because it meant they did not have to ‘pick winners’.
As local government appears to favour the firstin firstserved approach for practical reasons that may not consider sustainable management of the resource this leads to the conclusion that a cautious approach should be taken to a full delegation of power to regional councils without a clear policy.
It appears central government is required to guide local government with clearer water allocation policy. Central government may consider an amendment to s 30 of the RMA to allow regional council plans to consider alternatives to firstin firstserved. Limited attention has been given in the RMA to issues of water allocation to promote the sustainable use of an increasingly scarce resource. Central government will need to reassess its role if it wishes to maintain water supply and quality and there needs to be a greater coordination of water resource monitoring systems operated by regional councils to provide a national overview and improve data. Without a change to the firstin firstserved approach it can be concluded that central government is likely to use its callin powers similar to the Aoraki situation and consideration may need to be given to delegation of these powers of callin to regional councils.
It appears that the policy of central government favours the firstin first served approach as evidenced by the entrenchment of the approach in the recent insertion of the new sections 124A–124C. These sections set up a process to give existing consent holders priority over new applications when an existing
consent holder applies for a new consent to replace an existing consent. This process is a default position that can be changed by a regional plan. As this process will not come into effect until 2008 there is a period of opportunity for both central and local government to consider alternatives to avoid over allocation of a resource or the need for “claw back” provisions in the future.
It has been submitted that New Zealand does not have specific national policies to promote sustainable management of freshwater resources other than the provisions of the RMA. This task has been delegated to regional councils without much guidance or technical assistance from central government. The RMA provides a framework for regional resource planning and regional policy statements, and plans have been prepared but fail to address sustainable end use of limited water resources. The RMA does not change the planning practice from a supplyorientated approach to an approach of balancing demand with availability and promoting efficient use.243 To achieve sustainability central government could consider a fisheries quota style approach to allocation of water. The firstin firstserved approach is an issue and adherence to this approach leads to concern with implementation of the sustainable principles of the RMA. There is a need to consider alternatives.
Section 30(4) was inserted, as from 10 August 2005, by s 11(4) Resource Management Amendment Act 2005 (2005 No 87).
A rule to allocate a natural resource established by a regional council in a plan under subsection (1)(fa) or (fb)may allocate the resource in any way, subject to the following:
(a) the rule may not, during the term of an existing resource consent, allocate the amount of a resource that has already been allocated to the consent; and
(b) nothing in paragraph (a) affects section 68(7); and
(c) the rule may allocate the resource in anticipation of the expiry of existing consents; and
(d) in allocating the resource in anticipation of the expiry of existing consents, the rule may —(i) allocate all of the resource used for an activity to the same type of activity; or
(ii) allocate some of the resource used for an activity to the same type of activity and the rest of the resource to any other type of activity or no type of activity; and
(e) the rule may allocate the resource among competing types of activities; and
(f ) the rule may allocate water, or heat or energy from water, as long as the
allocation does not affect the activities authorised by section 14(3)(b) to (e).
(NB: Words in bold and italicised are author’s emphasis.)