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Memon, Ali; Skelton, Peter --- "Institutional arrangements and planning practices to allocate freshwater resources in New Zealand: a way forward" [2007] NZJlEnvLaw 9; (2007) 11 NZJEL 241

Last Updated: 14 February 2023


Institutional Arrangements and Planning Practices to Allocate Freshwater Resources in New Zealand: A Way Forward

Ali Memon and Peter Skelton*

The mandate for making decisions on allocation of freshwater resources in New Zealand has been devolved to regional councils by the Resource Management Act (“RMA”) enacted in 1991. Growing demand for water resources in many parts of New Zealand during the last two decades has increased competition and conflicts between different stakeholders for access to scarce surface water and groundwater resources. However, while the RMA planning framework is innovative in a number of important respects, regional councils have evidently found it difficult to satisfactorily address water conflicts within the framework of the RMA. The objectives of this paper are twofold:

*Ali Memon is Professor of Planning and Environmental Management, Environment, Society and Design Division, Lincoln University, New Zealand. Peter Skelton is a former Environment Court Judge and recently retired as Associate Professor of Resource Management Law, Environment, Society and Design Division, Lincoln University, New Zealand. The research on which this paper is based was funded by the Foundation for Research, Science & Technology (“FRST”) under research contract LVLX0303: Sustainable Groundwater awarded to Lincoln Ventures Limited. The support of Dr John Bright and Dr Brett Painter in shaping this research is acknowledged, as is the research assistance with data collection provided by a number of postgraduate students in the Environment, Society & Design Division, Lincoln University.

From social equity and environmental justice perspectives, it could be argued that access to water should be treated as a basic human right and as a social good for purposes of satisfaction of domestic and livestock needs and for protection of ecological integrity. At the same time, growing competition by New Zealand’s wealth-producing activities, such as farming and manufacturing, for access to water makes it imperative that water is also managed as an economic good. We have argued in this paper that institutional inertia, in terms of formal and informal institutional constraints on water governance, is a major barrier to realising the innovative potential of the RMA’s water planning provisions. The institutional constraints on RMA water planning practices highlighted in this paper need to be partly addressed through central government policy interventions that extend strictly beyond the RMA. The Sustainable Water Programme of Action has put forward potentially the most ambitious water reform agenda for New Zealand since the enactment of the RMA in 1991, but it remains to be seen to what extent political intentions for effective and efficient allocation mechanisms are translated into policy. The proposed reforms are limited in scope because they eschew a number of the wider-ranging institutional reforms needed to address sustainability objectives.


The mandate for making decisions on allocation of freshwater resources in New Zealand has been devolved to regional councils by the Resource Management Act (“RMA”) enacted in 1991. Growing demand for water resources in many parts of New Zealand during the last two decades has increased competition and conflicts between different stakeholders for access to scarce surface water and groundwater resources. However, while the RMA planning framework is innovative in a number of important respects,1 regional councils have evidently

1 P A Memon (1993), Keeping New Zealand Green: Recent Environmental Reforms (University of Otago Press, Dunedin); N Ericksen, P Berke, J Crawford and J Dixon (2004), Plan-Making for Sustainability: The New Zealand Experience (Ashgate, Aldershot); T Jackson and J Dixon (2007), “The New Zealand RMA: An exercise in delivering sustainable development through an ecological modernisation agenda” 34 Environment & Planning B: Planning & Design 107–120.

found it difficult to satisfactorily address water conflicts within the framework of the RMA.2

The objectives of this paper are twofold:

The paper is structured as follows:

In section two we briefly discuss the recent international literature on design- ing appropriate institutional arrangements to achieve desired policy outcomes for adaptive water governance. We argue here that conceptually an institutional perspective provides useful critically informed insights into how water alloca- tion can be improved within the RMA planning framework.

In section three we comment on the antecedents to the RMA planning regime for allocation of freshwater resources in New Zealand. It is useful to understand the antecedents of the RMA from this perspective because some of the key attributes of the RMA water planning regime have been inherited from the Water and Soil Conservation Act enacted in 1967.

In section four we examine the current New Zealand freshwater alloca- tion planning regime based on the RMA and comment on how well it has performed. As a framework for integrated management of water resources focused on the sustainable management purpose of the Act, the RMA is ground-breaking in important respects. A key feature of the RMA is that it is a devolved planning mandate. Regional councils and unitary authorities, whose boundaries are broadly defined on a major catchment basis, exercise a pivotal role in the allocation and management of water resources in consultation with other stakeholders. We examine the juridical framework for water allocation embedded in the RMA planning regime and related planning practices that have evolved since 1967. We highlight reasons why institutional inertia has made it difficult for regional councils to effectively exercise their RMA water allocation mandate but also argue that new approaches to water allocation should, as far as possible, be designed to fit within the broad RMA framework.

In section five the discussion moves forward to comment on ways in which water allocation practices can be improved in New Zealand within the context

2 P A Memon and J Selsky (2004), “Stakeholders and the Management of Freshwater Resources in New Zealand: A critical commons perspective” in N Sharma and M Starik (eds), Stakeholders, the Environment and Society (Edward Elgar, Cheltenham, UK) 21–61.

of the RMA framework. Recently, the central government-initiated Sustainable Water Programme of Action has identified potentially innovative approaches that may improve current water allocation practices in New Zealand.3 Based on this and other sources, including international literature, in this section we comment on the following water allocation methods and approaches to assess their applicability within the RMA planning framework:

A significant omission from the above list is an examination of the extent to which water allocation functions can be further devolved by regional councils to regionally based communities of stakeholders. The Sustainable Water Programme of Action anticipates an increased role for communities and resource users in water allocation and management decision-making. An important question is the scope of such co-management partnerships that may be possible within the RMA framework. However, a critical assessment of the current extent and potential for further devolution of water allocation decision- making by regional councils within the context of adaptive water governance is beyond the scope of this paper.4


Over-harvesting of water resources is a widespread problem in many countries including New Zealand. However, managing water is particularly challenging on account of its common pool resource (“CPR”) attributes compared with in situ natural resources such as land. The sustainable development para- digm highlights the imperative to adopt water resource allocation strategies to achieve sustainability well-beings as policy outcomes. Such an integrated approach entails making difficult trade-offs between many competing and often highly contested in-stream and abstractive uses of scarce surface water and

  1. Ministry of Agriculture and Fisheries and Ministry for the Environment (“MAF & MfE”), Wellington (2004), Freshwater for a sustainable future: Issues and options; Water programme of action — water allocation and use. Technical working paper; Sustainable water programme of action; MAF & MfE (2006), Sustainable water programme of action: Implementation for change. Cabinet paper.
  2. Analysis of the potential for community engagement within the RMA water planning framework is being undertaken as the next phase of the FRST-funded research project on Sustainable Allocation of Groundwater.

groundwater resources. It is also imperative that allocation decisions are made democratically in an informed manner and reflect the multiplicity of values in pluralistic societies. The concept of adaptive water governance highlights the imperative for deliberative community engagement in managing water re- sources based on trust and social learning.

There is a range of approaches and methods available that can be used to allocate water resources in order to achieve desired policy outcomes. Such methods range from regulatory approaches to market-based economic instru- ments and community-based approaches. Notwithstanding the relative merits of these different methods (hierarchies, markets, and networks), one of the key themes in the recent water resource governance literature is that effectiveness of such methods is hugely contingent on having in place appropriate institutional arrangements.5

We use the term institutional arrangements here more broadly compared with its common usage. The common usage of the term institutions pertains to an organisational entity such as a family, a firm, or a government department. We use the term “institution” in its sociological sense, as a rule, norm, or custom simultaneously enabling and constraining human agency.6 The term institution encompasses formal rules (such as statutory prescriptions) and also informal norms, roles, and operating practices that are so stable, structured and accepted that they can be said to be “institutionalised”. Thus, one writer has defined the term institutions as “the [formal and informal] rules of the game in a society or

... the humanly devised constraints that shape human interaction”.7 Such rules and roles operate within and across organisations.8

Institutions play a critical role in determining the course and outcomes of human–environment relations.9 Achieving sustainability is a long-term process and the role of institutional reform and institutional learning is critical in

  1. N Verma (2007), Institutions and Planning (Elsevier, Amsterdam); P Healey (2007),“The New Institutionalism and the Transformative Goals of Planning” in Verma op cit, 61–90; J Silver, K Firman, P Pinkerton, R Heaslip, J Nephin and I Williamson (April 2007), “Co-management as Adaptive Resistance to the Neo-liberal Governance Paradigm: Theoretical Considerations”, Paper presented at the meeting of the American Association of Geographers, San Francisco; E Weber (2003), Bringing Society Back In. Grassroots Ecosystem Management, Accountability, and Sustainable Communities (MIT Press, Cambridge, Mass); A Agrawal (2001), “Common Property Institutions and Sustainable Governance of Resources” 29(10) World Development 1649–1671.
  2. K Bakker (2002), “From State to Market?: Water Mercantilización in Spain” 34 Environment and Planning 767–790; Healey (2007), supra note 5; Verma (2007), supra note 5.
    1. D C North (1990), Institutions, Institutional Change and Economic Performance

(Cambridge University Press, Cambridge).

  1. E Ostrom (1990), Governing the Commons: The Evolution of Institutions for Collective Action (Cambridge University Press, Cambridge, Mass).
  2. R Connor and S Dovers (2004), Institutional Change for Sustainable Development (Edward Elgar, Cheltenham, UK).

this respect because institutions exercise a major role in structuring human behaviour10 in terms of how humans interact with each other and how humans engage with their environments.

The constraints and incentives derived from institutions influence the decisions and choices people make and thus affect policy adoption, im- plementation, and policy outcomes.11 From a critical social scientific stance, a key question to pose with respect to management on a sustainable basis of freshwater water resources in New Zealand is how do current institutional con- figurations based on the RMA framework impact on water allocation policy choices, their implementation, and their performance? Or, alternatively, from a normative perspective of institution design, how should we reform existing formal and informal institutional arrangements for allocation and management of freshwater water resources to achieve desired policy outcomes?

It has been argued that the process of water allocation by a water allocation authority is inherently political. Collective choices about the scope of manage- ment, who participates and how, and how collective decisions are made to resolve conflicts cannot be avoided by creating a single watershed authority with broad powers to comprehensively manage water on an integrated basis. A more devolved, polycentric institutional arrangement composed of networks of sub-watershed communities of interest may be criticised as fragmented and unscientific, but can also be viewed as a means by which affected communi- ties assert contested claims for inclusion, articulate and protect their values and interests during decisions about the watershed, and invest those decision- making arrangements with mechanisms for accountability and change.12 This highlights the significance of designing institutional arrangements that can accommodate diversity through deliberative community engagement processes, and promote social and cognitive learning through adaptive water governance as noted earlier.13

As discussed later (section four), the water allocation provisions in the Resource Management Act 1991 can be conceptualised as providing a partic- ular set of institutional arrangements and related formal and informal planning

  1. Agrawal (2001), supra note 5.
  2. J Clingermayer and R Feiock (2002), Institutional Constraints and Policy Choice (University of New York Press, NY).
  3. W Blomquist and E Schlager (2005), “Political Pitfalls of Integrated Watershed Management” 18 Society & Natural Resources 101–117.
  4. Weber (2003), supra note 5; L Susskind (2004), “Resource Planning, Dispute Resolution and Adaptive Governance” in J Scholz and B Stiftel (eds), Adaptive Governance and Water Conflict (RFF Press, Washington DC); B Painter and P A Memon (2007), “Enhancing the Potential for Integrated Water Management in New Zealand Through Adaptive Governance”, International Conference on Adaptive & Integrated Water Management: Coping with complexity and uncertainty, Basel, Switzerland, 12–15 November 2007.

practices based on the “prior appropriation” legal framework.14 Fundamentally, the Act manages the use and development of natural and physical resources by different stakeholders and establishes the functions and duties of stakeholders in order to achieve the sustainable management purpose of the Act as stated in s 5. The key stakeholders are central and local government and members of the civil society including the private business sector, community organisations, and Maori communities. The Environment Court, as part of the RMA institutional framework, has a significant role as a normative judicial decision-maker to resolve disputes between stakeholders.


It is useful to preface our analysis of the RMA with a brief historical snap- shot. As argued below, some of the fundamental attributes of the RMA water allocation regime have been carried forward from the Water and Soil Conservation Act 1967.

3.1 The pre-European Phase

During the pre-European phase, access to water and other resources was governed by Maori customary law and mauri. Embedded within a communally based society, these practices were characterised by a holistic perspective of water as a taonga (a treasure). Under tikanga Maori, no separation was made between water in a river, the riverbed, and surrounding land. Maori customary ownership and management rights to water were recognised in the Treaty of Waitangi. The current Treaty claims to water are based on the presumption that the Crown has breached Treaty rights. However, deliberation over Maori water ownership rights has been sidestepped by the government in a number of recently settled claims. The settlements of claims to Lake Taupo, the Rotorua Lakes, and Lake Ellesmere grant Maori control over the beds of these water bodies, but not the water in those bodies. The claims in respect of the Wanganui and Waikato Rivers are still pending.

  1. The attributes of a “prior appropriation” legal framework for water allocation are as follows:

Lack of clarity pertaining to Maori customary water rights is an issue that should be addressed prior to adoption of market-based instruments to allocate water resources. However, defining the scope of Maori property rights could prove to be very divisive, with parallels to the contest over negotiating Maori fishery rights during the 1990s and more recently the claim by Maori to fore- shore and seabed property rights.

3.2 Early European Settlement

The early European migrants to New Zealand brought with them the English common law riparian water rights system based on land ownership.15 The groundwater allocation system based on common law was akin in some respects to the so-called “doctrine of absolute ownership” that prevails in parts of the US where groundwater is privately owned. Landowners own water beneath their land and abstractions are only limited when they become harmful to others.

The riparian rights in New Zealand were not absolute. Thus, landowners had the right to take surface or underground percolating water in any quantities with no liability to neighbours; the right to take stream water or underground water flowing in channels in any quantities for “ordinary” purposes; the right to take or divert stream water for reasonable “extraordinary” or “secondary” purposes (e.g. irrigation) subject to returning it to the stream; and to receive the unimpeded flow of stream water from higher riparian owners.16

The riparian property rights regime of groundwater ownership prevailed in New Zealand until it was abolished in 1967. Having evolved in the English humid maritime climate, the suitability of the common law framework to define groundwater rights, as a basis to govern allocation of groundwater resources, in the setting of New Zealand’s relatively drier climate was questionable. Arguably, the attitudes and behaviours it engendered within the early farming community in New Zealand were characteristic of the tragedy of the open access scenario as there were no incentives for farmers to use groundwater frugally. Admittedly, such attitudes continue to prevail to some extent in the present-day New Zealand rural society as witnessed by the current water crisis in water-scarce regions such as Canterbury.

  1. An exception to this was the tradable water rights granted to gold miners in Central Otago during the 1870s (see Appendix 1).
  2. Other riparian rights related to discharging and natural drainage. There were also rights acquired by grant or easement. In addition there were several statutes relating mainly to pollution and flood protection. None covered water allocation.

3.3 Water and Soil Conservation Act 1967

The Water and Soil Conservation Act 1967 (“WSCA”) extinguished riparian rights, apparently without much public debate or political opposition. Presum- ably, this was a reflection of a commonly held belief that New Zealand was well watered and water scarcity was not an issue then. The new Act vested the sole right to “use” water in the Crown (s 21). The purpose of the Act implicit in its long title was framed in terms of the multiple-use approach to water allocation in contrast to the sustainable management purpose of the RMA. The WSCA created a two-tier hierarchical system for water planning and management in- cluding voluntary catchment-based water management plans (including water allocation) and a water rights system. However, in respect of plans there was no right of appeal to the courts, in contrast to the provisions of the RMA.

The devolution of water allocation functions to regionally based elected catchment boards was mediated under the WSCA by a strong centralised system for water allocation by the National Water and Soil Conservation Authority (“NWASCA”) for major publicly funded projects such as hydro-electric devel- opment, irrigation through government subsidies, and to prescribe water quality standards. NWASCA, a central government quango, was part of the extensive central government resource development bureaucracy under the umbrella of the Ministry of Works and Development that characterised the public sector in New Zealand prior to 1984.17 The Ministry was responsible for designing, con- structing, and operating irrigation schemes, and developing and maintaining large-scale projects of national significance such as energy projects.

During its tenure of 24 years, the 1967 Act laid the basis for the “prior appropriation” framework for water allocation as it has come to be known and practised in New Zealand.18 An important attribute of this approach was that the Act tied the granting of water rights for consumptive purposes to specific activities on or at particular sites. The presumed rationale for this was to ensure that water was put to a “useful” purpose and not wasted. These provisions of the Act were carried forward into the RMA.

In 1981, the WSCA was amended to provide for Water Conservation Orders (“WCOs”) to recognise and provide for the amenities afforded by waters in their natural state. This amendment gave precedence to the protection of natural values in certain circumstances and was thus a gloss on the more general multiple-use purpose of the Act. Several orders have been made protecting a number of outstanding natural values mainly in rivers and these limit the

  1. Memon (1993), supra note 1.
  2. A leading case is Glenmark Homestead Ltd v North Canterbury Catchment Board [1978] 1 NZLR 407. This decision reaffirmed the abolition of the common law riparian rights system.

availability of the waters of those rivers for consumptive purposes. These WCO provisions of the 1967 Act have also been carried forward into the RMA.

The catchment boards exercised their devolved multiple-use mandate to allocate water resources with a pro-development emphasis. Such a bias reflected dominance of farming interests amongst the locally elected members and central government representatives on the boards. Notwithstanding the abolition of the riparian property rights regime by the 1967 Act and the decision to vest the sole right to use water in the Crown, the rhetoric of “water rights” in the 1967 Act nevertheless served to enhance a perception of water as private property “owned” by holders of water rights. Perhaps the only reason why the private property rights discourse remained latent and did not assume a stronger public profile in New Zealand during the 1960s and the 1970s was a commonly held belief that water was not a scarce resource.

Notwithstanding the significant role of catchment boards as a nationwide network of regionally elected authorities mandated by Parliament to allocate water as a publicly owned natural resource, their existence was more or less taken for granted (again, reflecting a commonly held perception of water abun- dance). The major conflicts over allocation of water resources during the 1980s took place in a national arena with the advent of the Muldoon government’s “Think Big” strategy. Some environmental groups and landowners challenged central government’s hegemony over allocation of water resources in the now infamous Clyde Dam case that came close to a constitutional crisis.19 As part of its “Think Big” strategy, the Muldoon government set out to establish a series of five hydro-electricity dams on the Clutha and Kawarau Rivers in Central Otago. The first of these dams was the Clyde Dam, better known then as the Clyde High Dam to distinguish it from another proposal for a low dam. The government needed a suite of water rights under the WSCA 1967 and obtained these in the first instance from NWASCA in accordance with the appropriate procedures. Several landowners and environmental groups appealed the NWASCA decision to the then Planning Tribunal under the WSCA, which gave the Tribunal a final decision-making role on the merits subject only to an appeal on the law. The Tribunal (later the Environment Court) originally ruled in favour of the government by a majority, but following a successful appeal to the High Court by the opposing groups on a point of law the Tribunal unanimously ruled against the government, thus denying it the necessary water rights for a project that had already started. The government then promoted an empowering Act which was passed through Parliament by a slim majority.20

  1. See for the Planning Tribunal’s final decision Annan & Ors v National Water and Soil Con- servation Authority and Minister of Energy (No 2) 8 NZPTA 369.
  2. It is noteworthy that none of the other four dams were built and the Kawarau River is now the subject of a National Water Conservation Order that would prevent any such development.

As we argue below, the enactment of the RMA in 1991 swung the political pendulum strongly away from central government participation in water resource decision-making in the direction of devolution. What is needed is a more balanced approach which recognises that both levels of government have appropriate roles to play. This is a challenge for the Sustainable Water Programme of Action.


From an institutional design perspective, the RMA has a number of desired attributes as a strategic and operational planning framework to allocate and manage water resources in an integrated fashion on a regional basis. In this section, our objective is to highlight the key attributes of the RMA from this perspective and also to reflect on some of the underlying difficulties that have been encountered in implementing the Act.

The RMA retained from its predecessor the prior appropriation framework based on the sole right to use water being vested in the Crown (s 354(1)). The Act includes water in all its forms, including groundwater (s 2).

To a much greater extent compared with its predecessor, the RMA is a devolved planning mandate based on the principle of subsidiarity.21 Functions relating to water are vested in regional councils including allocation (s 30), on the assumption that such decisions should be made as close as possible to the appropriate level of community of interest where the effects and benefits arise and that people should be a part of the solution to the problem. The Act, however, does not permit regional councils to devolve the water allocation function to stakeholder groups. Section 33 does give some powers of transfer of functions but these are limited to public authorities.

The boundaries of regional councils are broadly coterminous with major water body catchment boundaries in order to internalise environmental exter- nalities as a means to facilitate integrated catchment-based management of land and water resources. The councils are directly elected and thus councillors are politically accountable to their communities.

The RMA provides for regional councils to formulate policy statements and plans to allocate water resources and to allocate water to different uses under the resource consent process. The Act ties the granting of water permits for consumptive purposes to specific activities on or at particular sites.

  1. According to the principle of subsidiarity, a central authority has a subsidiary function, performing only those tasks which cannot be performed effectively at a more immediate local or regional level. Decisions should be made as close as possible to the appropriate level of community of interest where the effects and benefits arise.

As an additional water allocation method, the Act contains expanded Water Conservation Order provisions in Part 9.

While the primary responsibility for water allocation is devolved to regional councils, the Act assigns to central government potentially significant responsi- bilities relating to water allocation. Thus, the Act also contains provision for national standards for quality, level, and flow (s 43) and for national policy statements (s 45).

Provision can be made for water allocation by way of objectives and policies in regional policy statements and regional plans (ss 59–61), and for rules and other methods for controlling water use in regional plans (s 68). Sections 14 and 15 provide the primary restrictions on the use of water. The controls are exercised through rules in plans (the primary method) and water and discharge permits (the secondary method).

An important provision in the RMA is that, in contrast with land use, there is no right to use water without a permit unless a plan permits the use.22 Argu- ably, this provision puts a much stronger onus on regional councils to accord recognition to the wider public interest in their water management functions by comparison with the role of district councils with respect to land-use planning.

4.1 Implementation Difficulties

There has been a growing concern in a number of regions about how effectively regional councils have undertaken their water allocation functions under the Act. It is important to understand the fundamental causes of the constraints on the RMA in this respect in order to prescribe appropriate solutions instead of just focusing on addressing the symptoms of the problems. The concerns about the RMA water allocation regime focus on four particular aspects of the Act which in our view have had a significant bearing on how regional councils have interpreted and exercised their water allocation mandate under the Act, as discussed below.

In our view, regional councils have hitherto interpreted their mandate for water allocation narrowly. The reason for this relates to their limited understanding of the purpose of the Act in Part 2 and more specifically how they apply the s 5 test of sustainable management when preparing water allocation plans and when making decisions on resource consent applications for water permits. As argued below, the way s 5 is interpreted has a significant bearing on the scope of regional water allocation plans and decisions on water permit applications.

  1. Except to the limited extent contained in s 14 in respect of individual needs.

Section 5 promotes sustainable management of natural and physical resources as the overarching goal of the Act and this must inform all decisions relating to allocation of water resources under the Act (e.g. when adopting RMA planning instruments or variations or changes to these and when making decisions relating to resource consent applications). The sustainable manage- ment purpose of the Act occupies a pivotal place in the way the Act is designed. The wording of s 5 clearly signals that the purpose of the Act is wider than the management of adverse environmental effects.

As we have argued elsewhere, the definition of sustainable management in s 5 encapsulates the fundamental underpinnings of the concept of sustainable development in the sense that it requires decision-makers to adopt an integrated perspective for managing natural and physical resources, including water.23 Rather than elevating bio-physical ecological objectives above everything (the so-called environmental bottom-line or effects-management view), a broader perspective requires decision-makers to take into account ecological, social, economic, and cultural considerations (the holistic or integrated perspective). This is also the view that the courts have reached through evolving case law.

However, many regional council staff and elected members have favoured the more limited effects-based environmental bottom-line interpretation of s 5 in contrast to the broad overall judgement approach when applying the s 5 test to water allocation plans and resource consent applications. Some regional councils and the Ministry for the Environment were generally of the view that including objectives and policies to allocate water, based on a broad judgement approach, was ultra vires. In our view, this is an erroneous interpretation of the Act and it is largely for this reason that the scope of many regional water plans is limited primarily to setting minimum-flow requirements to manage adverse environmental effects and why regional council water plans lack longer- term objectives and policies to allocate water to competing uses, as discussed below.

Most regional councils either have an operative plan for water allocation or are in the process of developing one. These plans contain objectives, policies, and methods of implementation (including rules) for water allocation. The scope, format, and content of such plans vary considerably between regions. However, the scope of most water plans is limited to specifying:

  1. P Skelton and A Memon (2002), “Adopting sustainability as an overarching environmental policy: A Review of section 5 of the RMA” 10(1) Resource Management Journal 1–10.

Thus, most councils manage groundwater aquifers, where present, on a sus- tainable yield/recharge basis, with the quantity of water generally allocated up to the estimated annual recharge volume.24 In some instances, minimum water levels are also identified for some aquifers, particularly those at risk of salt- water intrusion. A number of councils specifically manage shallow unconfined aquifers as part of the surface water system. The perception of groundwater resources comes across in council plans as of less importance compared with surface water resources. Availability of adequate information for groundwater resources is a commonly mentioned constraint in council plans.

Regional plans, generally speaking, do not contain long-term council policies and priorities for allocating water efficiently between different broad classes of activities based on an assessment of anticipated demands from different land-use activities in relation to supply within the framework of s 5 of the Act. Current plans are generally devoid of strategic thinking in terms of how to deal with contentious issues such as reallocation of water due to changing demands in the near future, and policies lack timeframes for achievement of objectives. The underlying political intent was to deregulate the water sector in the same manner that other sectors of the New Zealand economy were deregulated post 1984.

Such so called “effects-based” plans may be generally satisfactory for catch- ments or aquifers where water conflicts are not an issue because adequate water is available to meet competing demands from existing and anticipated new users. However, this is manifestly not the case in water-scarce catchments or in catchments where water has been over-allocated. The problem of water scarcity is not limited to Canterbury and is present in many other catchments around New Zealand.

The recently prepared Waitaki Catchment Water Allocation Plan is a signifi- cant departure from this conventional approach to water planning practised by regional councils.25 The Waitaki Plan allocates water to activities by recognising beneficial and adverse effects on the environment and both the national and local costs and benefits (environmental, social, cultural, and economic).

From an institutional design perspective, a number of factors have con-

  1. Hill Young Cooper Limited (2006), Improving the management of freshwater resources: Issues and opportunities, A report prepared for the Ministry for the Environment, Auckland.
  2. Waitaki Catchment Water Allocation Plan 2006.

strained the willingness and/or ability of regional councils to prepare plans able to address water allocation conflicts, based on a longer-term strategic planning perspective and informed by robust science regarding the quantum of available groundwater and surface water resources and anticipated demands. As argued above, fundamentally this is a reflection of a flawed understanding of the sustainability purpose of the RMA, stated in s 5, by elected members and their professional advisers. The reason for such a limited understanding can be partly attributed to a view during the 1990s that the RMA does not permit councils to allocate water between different groups of uses, as explained earlier. Such a strategic planning approach was deemed akin to picking winners and was rejected by the government and some regional councils then. Also pertinent is continuing uncertainty in the minds of some decision-makers about the status of Maori customary water ownership and management rights.

Instead, regional councils were prevailed upon by the government to limit council intervention to managing adverse effects and instead to use market instruments to allocate scarce water resources. However, as discussed below, regional councils have been risk-averse to adopting economic instruments such as auctions and tenders as a method to allocate water resources. Instead, they have taken what can be described as a minimalist interpretation of their water allocation mandate by primarily relying on the water permit application process by individual applicants as a means to allocate scarce water resources. Council decisions on water permits are largely limited to assessment of adverse environmental effects, and even in water-scarce regions such as Canterbury councils have proved reluctant to decline applications from irrigators. Such an approach has been criticised in some quarters as a valuable common prop- erty resource being progressively commodified and monopolised for private gain.

In hindsight, a limited interpretation by regional councils of their water allocation mandate can be also construed as a consequence of devolution of responsibility for water resource allocation to relatively weak political authorities that are too susceptible to the vested interests of existing water users, coupled with inadequate resourcing of regional councils and lack of policy direction by central government. Effective implementation of a devolved planning man- date, such as the RMA, anticipates that regional authorities have the capability and political commitment to undertake their functions in collaboration with central government guidance and input from other stakeholder groups. How- ever, until recently, central government did little either to provide national policy guidance or assist regional councils to develop capability in their role as integrated regional water management authorities. Lack of organisational capacity, resources, and information to address water issues with the required level of expertise and commitment also affects the ability of other stakeholder groups besides regional councils (government agencies, community groups,

and iwi/hapu) to deal with water issues.26 Politically, regional councils have been dominated by rural farming interests. Conflicts over access to scarce water resources have multiplied over the years. For example, in water-scarce regions such as Canterbury, policies and rules for water allocation in the proposed regional water plan are being contested by competing in-stream and consumptive user groups.27

It is only very recently (in 2005), fourteen years after the RMA was enacted, that the Act has been amended to clarify the water resource allocation functions of regional councils in order to address the uncertainty in the minds of many councils regarding the scope of their functions. These amendments reconfirm that regional council functions include the establishment of rules in a regional plan to allocate water. In addition, subject to Part 2 of the RMA, a plan can allocate water resources amongst competing activities.28 However, little has been done by central government to address resourcing capacity and commitment issues. It remains to be seen to what extent the Sustainable Water Programme of Action addresses these concerns.

The RMA empowers regional councils to allocate water resources between uses (beyond environmental baselines) by granting water permits under the water permit application process. In New Zealand, this process operates on a first-in first-served basis, based on the framework of “prior appropriation”. The attributes of this framework are as follows:

All regional councils use this method.29 A number of councils have a tiered allocation system, with up to three layers of water take in terms of priority. The

  1. T S Lowry, J C Bright, M E Close, C A Robb, P A White and S G Cameron (2003), “Management gaps analysis: A case study of groundwater resource management in New Zealand” 19(4) Water Resources Development 579–592.
  2. Environment Canterbury (2004), Variation 1. Proposed Natural Resources Regional Plan, Chapter 5 “Water Quantity”.
  3. While a plan can reallocate a resource that is subject to existing resource consents, these consents continue to operate until they are either surrendered or expire. This is designed to give greater security of rights to consent holders and to protect investment in infrastructure.
  4. Hill Young Cooper (2006), supra note 24.

highest allocation tier has the highest security of supply and is the last to be reduced during a short-term or long-term water scarcity. Water use and water take are tied into water permits issued by councils. Crop and/or soil moisture requirements are used by councils to assist in determining appropriate volumes and rates for water allocation. Some plans contain provisions to claw back (reduce) water allocations where water use exceeds water availability or when better information availability leads to reduced water availability estimates. This can be achieved through consent reviews and when processing consent renewal applications.

During the drafting of the Resource Management Bill in the late 1980s, there was considerable debate about the drawbacks of the “prior appropriation” framework as a means to promote economically efficient utilisation of water resources in favour of using markets as a means to allocate water. As noted earlier, this debate was driven by the non-interventionist political agendas shared by the Fourth Labour government and the National government that succeeded it, both of whom saw the proposed statute as a means to deregulate land and water markets.

The first-in first-served rule to grant water permits is satisfactory when sufficient water is available to satisfy all demands. However, where there is insufficient water for all demands, the first-in first-served system does not guarantee that water is allocated to the highest environmental, social, cultural, or economic values. Further, when the amount of water already allocated from a water body or aquifer comes close to the allocation limit, then there is the potential for “gold rush” situations which exacerbate the problems with first-in first-served. The first-in first-served system can also make it difficult to manage the cumulative effects of numerous small water takes on water bodies.30

The objective to make water permits tradable under the proposed RMA framework did not proceed further when the Bill was enacted, partly on account of possible Maori claims on ownership of water resources under the Treaty of Waitangi, and uncertainty in the minds of many New Zealanders, including rural landowners, about possible longer-term implications of privatising a resource presumed to be community-owned. However, the debate about making water permits tradable has once again gained prominence more recently with growing scarcity of water in regions such as Tasman and Canterbury, in response to rapid expansion of dairying and horticulture industries. Regional councils and unitary authorities are struggling to cope with the problem of how to reallocate water resources in situations where the resource has been fully or over-allocated. Politically, once a water body has been fully allocated, then it is very difficult for new and highly valued uses to access water or to claw back consents for

  1. MAF & MfE (2004), Water programme of action — water allocation and use. Technical working paper.

environmental reasons. Making water permits tradable is seen as a solution to this dilemma by some, while the merits of going down that road are questioned by others (including Maori).

The recent discourse about making water permits tradable under the RMA is focused on two related concerns: the status of water permits as a property right and the transferability of water permits.

4.2 Are Water Permits a Property Right?

As discussed below, the answer to this question is ambiguous. This is a funda- mental issue that the Sustainable Water Programme of Action will need to resolve.

Under the RMA, a water permit authorises, inter alia, the taking, and use, of water subject to the availability of the water. De jure a water permit does not constitute ownership of or a property right in the resource and does not provide a guarantee that water is available.31 In our view, this provision in the Act is based on the rationale that ownership of water should not be privatised in the manner, for instance, that land is privately owned. Water ownership should instead stay in the public domain.32

The extent to which the above provision in the Act (s 122) has discouraged development of markets in water permits is not known. Some may argue that in order to enhance development of water markets, by redefining water permits as an economic instrument to allocate scarce water resources to the financially most profitable uses, the legal status of water permits ought to be recognised in the Act for what they are in practice: a property right in water. This may help to develop greater confidence in water permits as a financial chattel that can be readily bought and sold, akin to the way fisheries quotas are traded, and to allocate scarce water resources to the financially most profitable uses. From a broader socio-political stance, the merits of taking such a radical step can be debated in view of widely shared public concerns about commodification and privatisation of water resources.

In practice (de facto), water permits are regarded as a property right within the farming community, amongst many elected regional council members

  1. Water permits are neither real nor personal property (s 122).
  2. The Act enables regional councils to grant permits for up to 35 years, or for five years if no period is specified. They may be cancelled by a council if not exercised for a continuous period of two or more years. Permits may lapse if not given effect to within five years of the grant, unless the consent specifies a different period or an extension is granted. Water permits can be reviewed when a plan becomes operative (ss 68(7) and 128(1)(b)). Replacement (new) consents will have some measure of priority from August 2008 (ss 124B and C).

representing rural constituencies, and within the real estate industry. While there is no explicit guarantee of the renewal of a water permit, to date the practice has been for this to occur as a matter of course, although conditions to address environmental effects or efficiency requirements may be modified or added. Existing users believe they have rights to their allocation, and indeed require this certainty to ensure reliable investment and to allow for future planning. It is difficult to adjust environmental baselines in fully allocated catchments when new information shows them to be inadequate. Such claw-back situations have proven extremely difficult politically in Australia, and have to date been largely avoided in New Zealand.33 For example, a recent proposal by Environment Canterbury to review resource consents for irrigation in an over-allocated aquifer have led to threats of seeking financial compensation by rural landowners.

It remains to be seen to what extent a recent court decision may change the legal status of water permits as a property right. The decision in Aoraki Water Trust v Meridian Energy Ltd 34 has held that, at least in a fully allocated situation, a new permit to take water from the same source cannot be granted as a matter of law. This has been seen by some commentators as endorsing the view that, notwithstanding s 122 of the RMA, water permits do create some form of property right in the resource. In our view, whether or not that is the correct interpretation to put on this judgment, it is inappropriate that a judicial decision should precipitate such a fundamental shift in the philosophy that underpins the RMA water allocation regime, namely that freshwater is a publicly owned resource. This is a major question that the Sustainable Water Programme of Action will need to address.

The success of New Zealand’s fisheries quota management regime provides a useful guide to how a comparable regime can be designed to allocate water resources. Independently Transferable Quotas (“ITQs”) have been defined as the permanent right to access, catch, and sell a specific proportion of the Total Allowable Commercial Catch (“TACC”) for a designated species in a specified Quota Management Area each fishing year.35

It has been suggested that the status of water permits as a property right that provides greater certainty for the consent holder can be achieved by amending the RMA to:

  1. MAF & MfE (2004), Water programme of action — water allocation and use. Technical working paper.

34 [2004] NZHC 820; [2005] NZRMA 251.

35 Clement & Associates (1997), New Zealand commercial fisheries: The guide to the quota management system (Clement & Associates, Tauranga); S Kerr, R Newell and J Sanchirco (2003), Evaluating the New Zealand ITQ market for fisheries management (MOTU, Wellington).

This amounts to a significant change in the nature of property rights attached to water permits in order to facilitate transferability.

This also is an issue that the Sustainable Water Programme of Action would need to address. Unless significantly more reallocation by trading occurs, there is a risk that measures increasing the duration of consents or the likelihood of renewal would lock water resources into lower value and/or inefficient uses.37 Such measures would also make it more difficult to manage adverse effects and environmental bottom lines, especially in response to changes in the environment (e.g. future shifts in rainfall patterns). Protection of in-stream values by means of Water Conservation Orders may be constrained by “locking in” consents for longer terms. Changes perceived as providing users with firmer rights may involve public sensitivity and raise concerns about Treaty of Waitangi issues.38

4.3 Transferability of Water Permits

The primary objective of enhancing transferability of water permits is to achieve more efficient use of scarce water resources in terms of their allocation between different competing users. Enabling transfer of water permits between water users by removing barriers to such transfers and reducing transaction costs allows the market to encourage water users to become more efficient in order to secure the best returns from investment in water. Water is given an economic value that does not otherwise exist.

Thus, it has been suggested that enhancing transferability of water permits could potentially lead to an improved overall system of water allocation and use.39 To the extent that trading facilitates the reallocation of water resources, the first-in first-served approach to making initial allocations would be of less concern. Similarly, where initial administrative allocations turn out not to be the highest valued use, trading potentially allows this to be corrected over time, reducing the need for councils to review allocations. In turn, this would potentially provide greater certainty for investors, with reviews of allocations primarily driven by environmental factors rather than the need to provide for

  1. MAF & MfE (2004), Water programme of action — water allocation and use. Technical working paper.
  2. Ibid.
  3. Ibid.
  4. Ibid.

other uses. The emergence of a price for water would also provide incentives for technical efficiency in use.40

The potential benefits from a transferable water permit allocation regime include:

To facilitate transferability, many believe that it is necessary in water allocation plan provisions to de-link entitlements to access water from the land on which the water was to be used; that is, water should be able to be traded independently from how it is used. By enabling water to be bought and sold separately from land (separate “take” from “use”), it is arguably more readily able to move to economically higher value uses.

However, it is not at all clear to what extent the provisions of the RMA relating to transferability of water permits are, indeed, a constraint on trans- ferability and developing water markets. As discussed below, the recent amendments to the Act have further enhanced the transferability of water permits but regional councils and resource users have been risk-averse to taking advantage of these provisions.

Under the Act, water permits do not run with the land but are personal to the consent holder at the site specified. They can also be acted upon by any other person with the permission of the consent holder (unless there are conditions to the contrary), and can be transferred to a new owner or occupier of the site on application by the consent holder (s 126).

Prior to the Resource Management Amendment Act 2005, a major stum- bling block for facilitating transferability was that transfers must be permanent and there was no capacity for the temporary or partial transfer of water permits. If the transfer was intended to be for a specific duration, there had to be a separate agreement (outside the RMA) to ensure that this occurs. The 2005 amendments to the Act provide that water permits can be transferred in whole or in part for limited periods.

  1. Ibid.
  2. Tasman District Council (2000), Water Allocation Policy Paper, Staff Report.

The RMA also provides for the transfer of water permits to another site within the same catchment/aquifer in either of the following circumstances:

Yet, surprisingly, provisions to allow off-site transfer of water permits have not been included in the vast majority of regional water plans to date, including in water-scarce regions, and there have been no calls from industry sector groups such as Federated Farmers to do so.42

As observed above, reasons why councils have refrained from doing this as a means to encourage development of water markets are not entirely clear. Transfers of water permits on application by the parties occur infrequently and the amount of trade has been limited except where the transfer occurs in the wider context of a change in ownership of land.43 This may have led to a situation whereby spare capacity in the water system (e.g. from unused allocations) has not been transferred or reallocated to a significant extent.

The current situation may reflect a lack of pressure from users and limited public understanding of the Act’s provisions to transfer permits. Other possible barriers to improved transferability identified in the MAF and MfE study include:44

  1. Instead, regional councils have adopted varying other approaches for dealing with a fully or over-allocated resource but with limited success. Some councils operate a waiting- list approach, where the applicant will wait to gain an allocation to water if it becomes available. For example, Tasman District Council (a unitary authority) operates an informal unadvertised waiting list (Ministry for the Environment, Wellington (2000), Making Every Drop Count. The National Agenda for Sustainable Water Management Action Plan). If a water resource is over-allocated, a council could use a rationing scheme where existing consents are reviewed and adjusted to reduce allocations. Politically, this is a difficult policy option and thus avoided, but some councils use similar rationing schemes to reduce takes during water-short periods (MAF & MfE (2004), Water programme of action — water allocation and use. Technical working paper; Hill Young Cooper (2006), supra note 24).
  2. MAF & MfE (2004), Water programme of action — water allocation and use. Technical working paper; Hill Young Cooper (2006), supra note 24.
  3. MAF & MfE (2004), Water programme of action — water allocation and use. Technical working paper.

Fenemor and Sinner (2005) have examined factors influencing adoption by regional councils and unitary authorities of transferability of water permits policies and rules in their regional plans as a market-based instrument for water allocation.45 Their study is based on a review of decisions by Tasman District Council (“TDC”) and Environment Waikato on whether to introduce rules into their regional plans to facilitate transfers of water allocations among competing water users.

As reported in the above study, the TDC’s operative regional water plan permits transfer of water permits in the Wai-iti Valley irrigation scheme. TDC has also dropped the “use-it-or-lose-it” rule for water permits in this irriga- tion scheme to facilitate tradability of water permits. Environment Waikato’s Proposed Waikato Regional Plan is now the subject of proposed Variation 6 which is in the public submission phase. The Variation contains new provisions for the transfer of water permits that have yet to be tested. The authors of this study conclude that councils are unlikely to adopt policies to encourage tradability of water permits without the support of major water users, or at least non-opposition.

Suggested criteria for establishing a successful transferable water permit (“TWP”) regime include:

Some of the issues that would need to be addressed by the local authority proposing to adopt a TWP regime are as follows:

  1. A Fenemor and J Sinner (2005), Institutional inertia? Case studies of transferable water permits in New Zealand (Ecologic Foundation Inc, Nelson).
  2. Tasman District Council (2000), supra note 41.

A further issue would be the concern of iwi about limiting transfers to sites within the same rohe so as not to hinder their ability to exercise kaitiakitanga in that rohe.

In the context of increased transferability it would be important that institutional arrangements appropriately:

There is a risk that, while the TWP approach might facilitate the transfer of water to the most valued economic uses, it would not necessarily facilitate

  1. Ibid.
  2. MAF & MfE (2004), Water programme of action — water allocation and use. Technical working paper.

transfer of water to enhance social, cultural, and environmental values unless used in conjunction with other components such as improved strategic planning and/or the setting of allocation criteria. A TWP regime which offered increased provision for temporary or partial rather than permanent transfers, or did not strengthen the nature of the right contained in water permits, is more likely to be more socially acceptable to the wider community and to Maori.49


Informed by the above review and the recent government-sponsored Sustain- able Water Programme of Action which has identified a number of potentially innovative approaches and methods that may improve the current water allocation procedures, other recent proposals, and an international literature review, our objective in this section is to examine the potential of a range of approaches to improve water allocation in terms of their adaptability within the broad RMA framework, with particular reference to the sustainable manage- ment purpose of the Act.

5.1 A National Policy Statement (“NPS”) to Manage Increasing Demand for Water

The RMA empowers the Minister for the Environment to guide allocation of water resources by regional councils by promulgating national environmental standards, a national policy statement on water, and central government submissions on plans. Arguably, in spite of these provisions, the stance to implement the RMA adopted by the predecessors of the Labour coalition governments prior to 1999 had swung the pendulum strongly away from central government participation to guide local government. The proposal for a NPS on managing increasing demands for water in the current package of water sector reforms proposed by the government reflects a more balanced stance on devolution of responsibility to local government vis-à-vis central government participation in decision-making.

To date, central government has not determined the national interest in fresh- water, either within the RMA planning framework or outside it in the context of a national sustainable development strategy. As discussed below, New Zealand does not have a national sustainable development strategy. Regional councils make water allocation decisions when developing RMA regional water plans

  1. Ibid.

and when dealing with resource consents, with limited participation by central government.50

Thus, a key question for the Sustainable Water Programme of Action to address is how a NPS on water allocation should be framed in terms of its scope and content within the juridical framework of the RMA and/or outside it (e.g. in the context of a national sustainable development strategy for New Zealand). It is difficult to anticipate, based on currently available information on the water reform agenda initiatives, what shape or form the proposed NPS to manage increasing demand for water will take.

In our view, a NPS on water allocation should be more than aspirational and should establish an agreed direction and set out high-level goals, measures, and timelines for improving water allocation (including its utilisation) within the framework of a national sustainable development strategy. The absence of a national sustainable development strategy is of considerable concern, par- ticularly given that the government will make a number of significant decisions about the package of proposed water sector reforms, the outcomes of which will determine the management of the water sector in New Zealand for many years to come. For example, four significant issues that need to be addressed, amongst others, that we have identified above, are the questions of Maori ownership of freshwater, the status of water permits as a tradable property, adoption of market-based water allocation instruments (e.g. resource rentals, auctions, and tenders), and the extent to which resource users will be permitted to exercise a management role on a co-management basis with regional councils (akin to fisheries regional quota management groups). Underpinning many of these issues is a highly contentious political question about whether urban and rural communities are willing to accept water available for allocation becoming a privatised tradable commodity in the same way as the fishery resources have been significantly privatised during the last two decades.

If the government proposes to adopt a “cap and trade” policy for water allocation, this could pose major financial implications for regional councils who may want to buy back water permits in order to improve water quality. It is unlikely that central government would be agreeable to fund such initiatives in the manner that it has recently agreed to contribute to the funded “cap and trade” policy to reduce non-point source pollution of Lake Taupo. Even the recent post-1999 Labour coalition governments in New Zealand have so far proved reluctant to address “big picture” issues that a sustainable development agenda would expect us to. The predecessor to the current National Water Programme of Action was the National Agenda for Sustainable Water Management Action Plan

  1. The recently prepared Waitaki Catchment Water Allocation Regional Plan is an exception, as discussed later.

formulated in 2000, which did not get implemented.51 Likewise, the government has shied away from developing a national sustainable development strategy for New Zealand after having made a commitment to do so in 2001.52 Instead, without an explanation, the government changed its focus to a Programme of Action in January 2003, which is targeted specifically at water quality and allocation, energy, sustainable cities, and child and youth development. While the Programme of Action is a useful initiative based on the practical applica- tion of a sustainable development approach to particular issues, it remains narrow, and a more strategic approach, focused on the big picture, is needed.53 Given this situation, it remains to be seen to what degree the proposed NPS will address the contextual questions relating, for instance, to the sustainability of intensive farming in dry regions or the affordability of our current urban lifestyles and patterns of consumption that have been recently posed by the Parliamentary Commissioner for the Environment. In our view, such issues are better addressed in a national sustainable development strategy.

A further challenge for the Sustainable Water Programme of Action is to clarify how it can deliver sustainable water governance that is aligned with the long-term strategic planning objective of the new Local Government Act 2002 in congruence with the RMA water planning regime.

5.2 Catchment Water Allocation Plans

A regional council can prepare a strategic water allocation plan for an individual or a group of spatially contiguous river catchments that allocates water resources between broad uses in order to achieve the sustainable management purpose of the Act. In view of uncertainty in the minds of some, the amendments to the RMA in 2005 clearly empower councils to prepare such strategic plans, as discussed earlier. This gives a mandate to regional councils to ensure that the region’s water resources are allocated in order to promote all three social economic and cultural well-beings in the context of s 5.

As alternatives to the status quo model of water allocation used by all regional councils (capping by setting minimum flows or levels followed by resource consents), alternative plan models for a more strategic approach to water allocation are as follows:

  1. Ministry for the Environment, Wellington (2000), Making Every Drop Count. The National Agenda for Sustainable Water Management Action Plan.
  2. W McGuinness (2005), A national sustainable development strategy: How New Zealand measures up against international commitment (Sustainable Future Limited, Wellington).
  3. Ibid.

The recently prepared Waitaki Catchment Water Allocation Regional Plan provides one model for a strategic regional water allocation plan.54 The Waitaki Plan allocates water for a range of uses to enable people and communities to provide for their social, economic, and cultural well-being and their health and safety, based on a broad overall judgement approach by the Board as required by s 5 of the Act. The activities include the following broad groupings: town and community water supplies, hydro-electricity generation, agricultural and horticultural activities, industrial and commercial activities, tourism and recreation facilities, and other minor activities.

The scope of the Waitaki Plan includes the following:

The Plan also contains a framework for allocation and resource consents.

The merits of a strategic planning approach to water allocation by a regional council (akin to the Waitaki Plan model) include the council’s ability to make allocation decisions to respond to needs of all stakeholders on the basis of current needs and anticipated changes in demands in the future, in relation to available water resources. Such a plan, if informed by wide-ranging public consultation and evidence-based objectives and policies, would to some degree avoid divisive community conflicts.55 The proposed allocations could be made in the context of national and sub-national sustainable development strategies. Hence, such a plan could be designed to promote sustainability outcomes across all sustainability well-beings. The objectives and policies in a regional water plan may be also informed by input from community outcomes processes undertaken for Long Term Council Community Plans prepared under the Local Government Act 2002. However, to adopt such an integrated approach to the water resource allocation objectives and policies with other sectors, the interface

  1. Waitaki Catchment Water Allocation Board, Christchurch (2005), Waitaki Catchment Water Allocation Regional Plan.
  2. The Plan is the first stage and sets the framework for allocation, but there is still potential for litigation during the resource consent stage.

between the RMA and the Local Government Act 2002 needs better clarifi- cation by the government.

A potential drawback of a strategic water allocation plan, based on the Waitaki model, is the ability of regional councils and the Environment Court to make judgements about the most valued uses of water from an economic perspective in the context of an overall broad judgement approach required under s 5 of the Act. Critics of the strategic approach to water allocation by a public sector agency argue that an administrative/political/judicial allocation process is not conducive to achieving economically efficient allocation of scarce water resources to their most profitable uses. It is argued that the staff and elected members of regional councils and Environment Court Judges and Commissioners do not have the incentives or the information to get such decisions right.

In the eyes of some critics, a regional water plan should be effects-based and its scope primarily restricted to defining minimum flows to protect in-stream and cultural values. Instead of the council making judgements about how the resource should be allocated between competing demands for extractive uses, water markets should be used to achieve efficient utilisation of water resources (“cap and trade”). For example, according to one critic of the Waitaki Catch- ment Water Allocation Board,

... in its draft water plan, the Board has failed to grasp the opportunity to intro- duce market-oriented water allocation mechanisms. Instead it has perpetuated a central-planning approach. The New Zealand Institute of Economic Research (NZIER) has noted that, by diminishing Meridian Energy’s access to water, the Allocation Board’s draft plan is likely to result in increased electricity prices and increased risks to the security of electricity supply, without any evidence of likely benefits to the environment. As the NZIER notes, “if there is a prece- dent for regional councils to arbitrarily claw back rights to the use of water then existing investment will be undermined and further or new investment will not proceed”.56

In response to this criticism, it is important to recognise that allocations made in a regional water allocation plan are not necessarily set in concrete. They can be reviewed by a regional council to reflect anticipated or changed market conditions or better information about available water resources through the plan change provisions in the Act. More importantly, a strategic water alloca- tion plan can also provide for water markets to allocate water within individual

  1. “A review of the draft Waitaki Catchment Plan” (2005), New Zealand Institute of Economic Research, Wellington, p. 18. The operative Plan does in fact make greater provision for hydro generation. (R Kerr, cited in ACIL, Tasman (2004), 8.)

classes of activities instead of on a “first-come first-served” basis. Likewise, a strategic plan can also provide for water markets to develop across different classes of activities, following the initial plan allocations. The use of market- based instruments is embedded within a strategic planning framework. The council can exercise an overall judgement approach (s 5) by regulating allocation of water to provide for all activities when making initial plan allocations and subsequently by keeping a watching brief on how well the water markets are functioning in the context of its strategic water resource objectives.

The important point that we are making above is that strategic planning and use of market-based instruments to allocate water resources are not necessarily mutually exclusive approaches, as two ends of a spectrum. To the contrary, deployment of market-based instruments has to be embedded within a broader strategy for water resource allocation in order for the markets to deliver desired societal outcomes. Such an approach is based on the concept of local community guardianship of water resources within plan and consent constraints. The standard prescription of “create water markets and price water” (the “cap and trade” approach) on its own is insufficient to promote all sustainability well-beings.

5.3 Charge Resource Rentals for Water Permits

An amendment to the RMA could require water permit holders to pay a resource rental for the right to abstract water as a resource consent condition. It could be argued that a council charging resource rentals for water extraction will promote the sustainable management purpose of the Act from two perspectives:

The RMA would need to specify the purpose for charging a resource rental, who would levy the rental (the Crown or councils), and methods to determine the level of contribution. This would enable a regional council in its regional water allocation plan to develop appropriate objectives, policies, and methods (including rules) for this purpose. These provisions in a proposed plan may be restricted to catchments approaching full allocation or over-allocated.

  1. This would depend on how users respond to the increase in cost of access (MAF & MfE (2004), Water programme of action — water allocation and use. Technical working paper).

Charging resource rentals for access to water may raise claims of com- modification and privatisation of resource, both among Maori (with regard to Treaty issues) and in the wider community. For this reason, charging resource rentals for resource rights can be a contentious issue, as demonstrated by recent experience in New Zealand with fisheries management and with coastal occupation charges, as discussed below.

Resource rentals were an important component of New Zealand’s fisheries quota management system when it was established in the mid 1980s. Early on, the government expected to extract resource rentals from the fishing industry on behalf of taxpayers in general. The justifications for levying charges were to recover the public cost of managing the resources, and to provide a financial return to the public owner. However, due to conflict with the industry, the government was subsequently forced to scale down in 1989 the level of resource rentals in order to reach an accord with the industry. Although rentals continue to be collected, they are not a major revenue source.58 Thus, it was reported in 1991 that: “In retrospect, the financial outcomes for the Crown have fallen far short of costs. Far from generating a return to the Crown, the fisheries produce a substantial net loss to the Treasury, expected to amount to some $200 million over the five years of the ‘Accord’.”59

A regime to charge private occupants for the use of coastal space was included in the RMA 1991 and then amended in 1997. As reported by Palmer et al,60 implementation of a workable collection regime has repeatedly stalled due to strong interest group and agency opposition, compounded by inad- equate policy planning, poorly designed consultation processes, and legislative loopholes. The following observations by the authors are pertinent to designing a resource rental regime for water allocation:

  1. P Pearse (1991), Building on progress: Fisheries policy development in New Zealand, A report prepared for the Minister of Fisheries, Wellington; Kerr et al (2003), supra note 35.
  2. Pearse (1991), ibid, at 15.
  3. J Palmer, H Cringle and J Sinner (2005), Implementation failure: Resource rentals for the occupation of coastal space, Ecologic Research Report No 5 (Ecologic Foundation Inc, Nelson).

Section 108 of the RMA authorises councils to impose financial contrib- utions as a condition on granting resource consent. A condition in a resource consent requiring a financial contribution has to be imposed in accordance with the purposes specified in the regional plan and in accordance with the method for determining the level of contribution specified in the plan. However, contributions charging could only be justified on a recovery of outgoings on infrastructure basis or possibly towards the costs of further research into the nature and extent of the resource. Section 108 could not be used simply to make a charge for the use of water itself.

5.4 Auctions and Tenders to Allocate Water

A regional council can make provision in its regional water plan to use market- based methods (“cap and trade”) to allocate water in specified catchments or sub-catchments which are either approaching full allocation or are over- allocated. Such markets can be designed to operate across uses or within specific uses.

Two types of water trading systems that have been considered recently in

New Zealand are auctions and tenders. Under the current provisions of the Act, a regional water allocation plan can include objectives, policies, and methods (including rules) to establish a water trading system either at the broad catchment-wide level or more narrowly within allocations to particular uses (for example, irrigation) or within a particular part of the catchment, with the regional council as manager.

Auctions and tenders can be designed to operate according to specified rules. For example, criteria can be set for eligibility to enter the process in order to achieve other planning objectives or to demonstrate that the applicant is capable of developing the resource or meeting conditions on use. The trade- off is reduced potential benefits from allocation due to less competition for the resource and a narrower range of potential uses.61

Tendering and auction arrangements require participants to explicitly ident- ify the value they are prepared to pay for the right, and rights are allocated in order of value. This avoids the need for regional councils to make political and administrative judgements about the financially most valued uses of water and to collect detailed information to support this decision-making process.62 The valuations placed by bidders, and thus the pattern of allocation, will, however, depend on the quality of information and science available (publicly and privately) as well as the detailed specification of the access right, such as duration, certainty as to the availability of water, scope to make transfers, and the arrangements on expiry.

Tender and auction arrangements do not allow for issues of equity of access or for wider values, such as cultural considerations, to be taken into account in the allocation process other than in initial eligibility. There may also be concerns that water available for abstraction could be controlled by a few big players. It has been suggested that these risks can be managed through the specification of tender/auction/ballot rules and the general framework of competition policy under the Commerce Act.63

The RMA permits regional councils to allocate surplus water by setting up an auctioning system in its regional water allocation plan.

As an example of a water auction framework, the Raffensperger Milke model, developed for the Tasman District, is designed to facilitate transfer of water permits or parts thereof within a particular catchment. A regional council could make provision for this model in its regional water plan by specifying the

  1. MAF & MfE (2004), Water programme of action — water allocation and use. Technical working paper.
  2. Ibid.
  3. Ibid.

parameters of the auction management system including details of the way the auction market would work as objectives, policies, methods, and rules. Rules in the plan would provide that:

An amendment to the RMA could make provision for water tendering as a method in regional water allocation plans to allocate remaining water available for allocation. Such an amendment could be modelled on the existing provisions for coastal tendering under Parts 7 & 7A RMA. The research findings of Palmer et al 2005 on implementation failure of a resource rental regime for coastal space summarised earlier are equally relevant here.64


Water’s attributes as a scarce and valued resource bring it squarely into the domain of politics, where, in market-based economies, individuals and groups struggle to promote their vested interests in decision-making for allocating this resource.65 The challenge for any society to craft robust institutions that can promote sustainable water governance, either by administrative alloca- tion processes, using market-based approaches, or via community-based management approaches, or a mix of these approaches therefore should not be under-estimated. Sustainability in the water sector demands radical changes in mainstream political, economic, and social institutions in order to modify socio-economic and organisational behaviours to take account of sustainability well-beings. This is difficult to achieve because business, consumers, and governments generally accept only those institutional reforms that mobilise short-term or shallow conceptions of sustainability.66 It is unrealistic to limit the scope of water sector reforms to fine-tuning administrative and technical approaches to improve water allocation when the real issues are those of

  1. Palmer et al (2005), supra note 60.
  2. Blomquist and Schlager (2005), supra note 12.
  3. S Owen and R Cowell (2002), Land and limits. Interpreting sustainability in the planning process (Routledge, London).

power, competition, lack of social trust, and related ingrained social mores and behaviours not compatible with sustainability objectives. These are frequently the ultimate structural constraints to sustainability. For this reason, we believe that a national policy statement on how to address increasing demand for water should be framed in the context of a national sustainable development strategy that can address these “big picture” contextual constraints on sustainable water governance in New Zealand.

From social equity and environmental justice perspectives, it could be argued that access to water should be treated as a basic human right and as a social good for purposes of satisfaction of domestic and livestock needs and for protection of ecological integrity. At the same time, growing competition by New Zealand’s wealth-producing activities, such as farming and manufacturing, for access to water makes it imperative that water is also managed as an economic good. We have argued in this paper that institutional inertia, in terms of formal and informal institutional constraints on water governance, is a major barrier to realising the innovative potential of the RMA’s water planning provisions.

Thus, as discussed above, fundamental shortcomings of the way that regional councils have exercised their RMA water allocation mandate are that water resources are allocated by regional councils without a longer-term strategic planning perspective and with little scope to reallocate water resources according to their market value in alternative uses. Too much reliance has been accorded by regional councils to formal hierarchical approaches to managing water allocation based on statutory RMA plans and the related practice of allocating water on a “first-come first-served” rule, as in the past. There have been limited opportunities for stakeholders to collaborate on crafting water management solutions in a deliberative and communicative manner. Strong government and strong governance are not mutually exclusive or necessarily competing imperatives for promoting sustainable water governance.

Water is still commonly regarded as a “free gift of nature” by most New Zealanders and price signals are virtually non-existent in New Zealand’s water allocation regime. No water trading markets have been established as yet by regional councils to facilitate transfers. A related issue is lack of clarification of the status of water permits as a property right.

The above RMA water planning practices have precipitated major problems in catchments and aquifers where allocable water resources are approaching allocation limits or have been over-allocated. With increasing demand on a limited resource base, water conflicts are intensifying in many areas. Despite this situation, a wide political constituency for adoption of market-based approaches to water allocation is still lacking amongst resource users and local and central government decision-makers in New Zealand.67 Related concerns

  1. In comparison with New Zealand, the apparent success of recent Australian water sector

include uncertainty regarding the status of Maori customary water ownership and management rights under the Treaty of Waitangi. Maori communities have felt their values have been marginalised in water allocation decision-making because they lack adequate formal and informal political representation in local government.

The institutional constraints on RMA water planning practices highlighted in this paper need to be partly addressed through central government policy interventions that extend strictly beyond the RMA. While the RMA has devolved the water management mandate to an inadequately resourced local government sector, central government has essentially taken a hands-off role until recently in providing national policy guidance. The Sustainable Water Programme of Action has put forward potentially the most ambitious water reform agenda for New Zealand since the enactment of the RMA in 1991, but it remains to be seen to what extent political intentions for effective and efficient allocation mechanisms are translated into policy. There is lack of clarity in the basket of suggested reform options for anyone to anticipate the reform outcomes at this stage. More importantly, the proposed reforms are limited in scope because they eschew a number of the wider-ranging institutional reforms needed to address sustainability objectives.


The mining privilege rights granted to gold miners in Central Otago during the mid 19th century were a chattel and fully tradable independently of land. Following the enactment of the Water and Soil Conservation Act in 1967, they became very constrained as to purpose and exercise such that the chattel status was constrained (but not extinguished) in a free-market sense. Prior to 1967, they were quite unencumbered.

Notwithstanding this, both pre and post 1967, trade has been negligible despite the areas where these rights exist having been water-short areas for over 100 years. In almost all cases, the only trade has been a transfer of ownership with the relevant parcel (or part parcel) of land. This trade has been by way of a transfer attached to the land transfer, not a privilege trade per se. The privileges have over time been subdivided into shares to optimize price for land subdivision of the original associated land and

reforms to develop water markets is notable. According to a recent study commissioned by Meridian Energy (ACIL, Tasman (2004), Water markets in Australia, A report prepared for Meridian Energy Ltd, Melbourne), while there have been some transitional concerns, the benefits from water trading so far have significantly outweighed the costs. However, these markets are currently focused on regulated (highly managed) catchments. Application to unregulated New Zealand catchments will create additional challenges due to system complexity and uncertainties.

privilege. There are now situations where the shareholding is in 64ths. The fraction of ownership is taken as being a fraction of the face value of water flow specified in the privilege. As a tradable chattel, these rights have never had a real market movement in the way economists say will happen.

Source: Graeme Martin, Otago Regional Council, Personal communication, 28 November 2006.

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