6.3  Water allocation and use

The initial allocation of water to users in New Zealand is governed by the RMA, although most existing water allocations pre-date its enactment.[41] In 1999 77% of allocated water was for irrigation, 7% for industrial use, and 16% for industrial water supply.[42] This covers both surface water and groundwater. Controls are based on minimum flows and water quality more often than through allocation limits, though cumulative impact is a factor in considering consent applications (Lincoln Environmental, 2000).[43]

No one can now take, use, dam, or divert water unless (1) allowed by a rule in a regional plan or a resource consent; or (2) the water is for an individual's reasonable domestic needs or the reasonable needs of an individual's animals for drinking water and the taking or use does not, or is not likely to, have an adverse effect on the environment (comparable to the English reasonable use approach discussed in Section 5.4).[44]

Consents are normally issued on a first-come, first-served basis, although the planning or consents processes allow for evaluation of competing uses of water flows, and apply for between 5 and 35 years, often with review at 5 to 15 year intervals. Over-allocation is normally addressed by reviewing consents (Lincoln Environmental, 2000).[45] Metering is not universal, but often applies to large takes.

The RMA provides for councils to introduce rights regimes in certain circumstances; eg, transferable permits to take (but not discharge) water (s.136), and in some circumstances permits can be transferred to another firm or another site provided both sites are in the same catchment. Councils have expressed concerns about lack of economic instruments and legal uncertainty around consent review clauses and measures such as waiting lists for new consents for over-allocated resources and controls on land use (Lincoln Environmental, 2000).

The RMA also requires the Minister for the Environment to consider the use of economic instruments to achieve the purposes of the Act, and regional/local administrators to have regard to alternatives including the provision of information, services or incentives and the levying of charges (including rates), based on the likely benefits and costs of each alternative(Sharp, 2002).

The RMA does not appear to allow for rights over stored water. This may not be an issue for privately owned lakes, such as an irrigation storage lake formed over privately owned land, but may cause problems where water is stored in a natural or publicly owned lake. Hydro generators, for example, use their dams to control flows out of their storage lakes in order to maximise hydro-electric revenue, subject to resource consent requirements about minimum flows.

They presumably cannot use the RMA to stop anyone else taking water from a lake if that does not jeopardise the minimum flow requirements. This could mean that when inflows exceeded outflows, alternative users of the water would be able to apply for a resource consent for the surplus. This would be a problem for the generators if the return flows bypassed one or more of their hydro stations. It appears that, unless any environmental factors inhibited issue of a consent, any disputes would have to be resolved by private contractual means.

The two regions of New Zealand where water scarcity is most significant are Canterbury and Otago. Both regional councils allocate water on a first-come first served basis according to the requirements of land use. The allocation of water between productive uses and in-stream uses is evaluated through court action, partly because the relative value is not known and there is no mechanism (other than land acquisition) to guide water to its most productive use. Manawatu-Wanganui has a tradable permit system with ten year permits granted according to existing entitlements. Permits are transferable during periods of water restriction only, provided the end use is irrigation, both sites are within the catchment and the council is informed in advance (Sharp, 2002). Very few transfers, other than for land transfer or subdivision, have occurred (Lincoln Environmental, 2000).

Making a process for water allocation or re-allocation work is not straightforward. Water may only be available in specific places at specific times which may not correspond to when and where the water is required, leading to demands for water storage and transportation. Demand for water may also be simultaneous, as for crop irrigation, leaving little room for trade-offs, or conflict with environmental needs at certain times of the year. Allocations also must consider whether the water source is groundwater or surface-water, and the effects of how the water is used on the rate of groundwater recharge, which in turn affects aquifer levels and spring-fed streams. There can also be conflict between in-stream uses (eg, hydro-electric power) and extractive uses.

All of these factors act to limit the volume of trading in a water market quite apart from the transition problems involved in creating a new rights structure over existing water use arrangements. Restrictions (eg, for environmental reasons) on taking water from particular sources can also increase pressure on other sources, producing a less than optimal trade-off overall. Constructing a water allocation system that maximises economic and social outcomes while achieving environmental requirements is difficult.