About the Author

Anthony Willy

Anthony Willy

What Value Fresh Water?

Print Friendly and PDF
Posted on

This question of charging for the use of fresh water has recently appeared in the news media and on the political radar apparently generated by opposition to proposals to export fresh water so before turning to the question of the charging for fresh water it is convenient to dispose of the controversy surrounding the export of water. It is a red herring.

Export of water

There are genuine concerns surrounding the export of fresh water from New Zealand. Two recent attempts to do so have highlighted the issue: The Ashburton case and the renewal of a resource consent first granted in 1992 allowing for the annual export from south of Haast of some ten million tonnes of pristine water in tankers for consumption overseas. There have been other similar schemes in the past such as the export of water from the Manapouri tail race proposed in the nineteen seventies but to date none have matured into viable businesses.

These initiatives do raise concerns but they have nothing to do with the argument that all water users in New Zealand should pay for the share of the resource they consume. The objections to the export of water relate to the security of our fresh water resources. It is one thing for Dr. Smith to airily dismiss these concerns by pointing to the tiny amount of our water that is currently exported in bottled form. (He did much the same with the demise of local body democracy in the odious racist provisions of the Resource Management Act). The fact is we live in a thirsty world and New Zealand has abundant resources of fresh water. If the large scale export of water becomes an established business model it is only a matter of time before international corporates will eye up the opportunities and seek to benefit on a massive scale comparable with the extraction and sale of oi, but with important differences that water will have a higher value and minimal extraction and infrastructure costs. Give the various trading agreements into which New Zealand has entered it will be difficult if not impossible to deny to foreign trading partners business opportunities which are open to New Zealanders and one of our most valuable natural resources will be put at risk from massive exploitation.

The Prime Minister appears to think that this is a difficult question, “not impossible” he says but difficult. I fail to see why. A simple amendment to the Resource Management Act requiring that all water abstracted pursuant to a water permit must be used and consumed within New Zealand would suffice. Economic purists will not be pleased because they believe that like any resource it should bear its international economic value, but C’est la vie.

Charging for water

The argument made by some commentators is that most people pay for the water they use so why shouldn’t farmers and other commercial users. The fact is that the notion of charging for water is a misunderstanding and adds nothing to the argument. Nobody in New Zealand pays for the water they consume but most pay a proportional part of the cost of any publically funded infra structure which brings the water from its source to their taps or headworks. This applies to both urban and rural people.

Economists have a simple answer to the question of charging for the water we use. They say that like any other commodity which produces a financial return it should have the value put upon it which the market will bear. The argument is that a number of inputs go to make up any economic activity: labour, capital, energy etc. and in the case of most economic activities (but not all), the availability and use of fresh water is crucial . The latter is particularly relevant to an agrarian economy such as New Zealand’s because so much of it depends directly on the use of fresh water. No water; no crops, no livestock, no milk products, no wine, and these make up the overwhelming components of the New Zealand economy. In addition of course there is the water for drinking and bathing without which no tourist industry would be possible. Clearly the economists contend as each of these activities has a financial reflex a charge should be placed on the water they consume.

This argument is easy to apply to such economic activity as farming because the linkage between water and profit is unambiguous. For any land based business: cropping, livestock, dairying, grape growing etc. to make money it requires fresh water. Why then the argument goes should these people have access to this crucial ingredient free of charge? If a charge were imposed then (presumably) the activity would remain viable and a money stream would flow-somewhere. Where is one of the practical problems inherent in the economist’s approach.

The legal position.

Before discussing those problems, a word about the legal position. As is so often the case the seemingly inexorable logic of the economists clashes with the law.

For one hundred and fifty years or more the English Common Law (which came to us in 1840 with the cessation of sovereignty to the Crown) has provided that no person or entity can own fresh water. This fundamental principle has never been questioned in any decision of the Courts and there is no legislation, and never has been, vesting ownership of water in any person or entity. For what it is worth in 2016 the previous Prime Minister reiterated this principle in answer to claims by some Iwi groups seeking to establish ownership of water within their geographic areas. Legally the proposition is beyond question, but of course Parliament is sovereign and notionally could alter the law to provide that fresh water is capable of private ownership.

Options for a charging regime

Notwithstanding the current legal position if it is decided that a charging regime be implemented for the use of fresh water there would appear to be only three options.

  1. The state claims ownership of all fresh water and sells it to users. The proceeds of sale going to the consolidated fund.
  2. Ownership of fresh water become vested in territorial local authorities and the proceeds of sale become part of local body revenue.
  3. Fresh water be privatised and sold off to the highest bidder. No doubt in a global economy this would need to include overseas buyers.

Each of these possibilities suffers from the basic flaw that one cannot charge for something one does not own: To be lawfully entitled to charge for a commodity, as distinct from management of it one must own the resource.

Given the history of the management of fresh water in New Zealand the economists no doubt assume that the right to charge for water will become vested in the central government who will then make the political decision whether or not to retain ownership, pass it on to local authorities or sell it on the private market. To date central government has played no part in the allocation of fresh water. Theoretically a government could seize ownership of fresh water much in the same way as socialist parties over time have sought to own the means of labour production and exchange, but this model for running a twenty first century economy has been eschewed by most first world societies. If Central government is not willing to take the Marxist step of arrogating to itself ownership of all fresh water then there is no mechanism by which ownership can be passed on to a local authority or to private enterprise..

Practical problems

Even if these legal and conceptual difficulties could be overcome and in some way ownership of fresh water could became vested in local authorities there are insuperable practical problems in the implementation of a charging regime. By definition such entities are territorial but water is not. It falls from the sky indiscriminately on this place beneath and accumulates according to the laws of gravity. Thus for example rain falling on the West Coast of the South Island is just as likely to find its way into aquifers in the Canterbury region as it is to argument a river discharging to the sea or an aquifer on the West Coast. In that event which region will be held to own the water and derive the returns? If for arguments sake it is decided that ownership will be conditional upon where the water finally comes to rest then how to decide ownership of the water in a river, particularly one which forms a territorial boundary. For example the Waitaki River forms the boundary between Canterbury and Otago. Who gets to charge for the water, and in what proportions? Similarly with the Waikato River which of the territorial local authorities through whose territories it passes have the right to abstract and charge for the use of the water it carries, and in what proportions? And of course the same can be said of many other rivers in the country which pass through more than one local boundary or feed more than one aquifer.

And then questions of equity arise. If most of the water underlying Canterbury rises on the West Coast why should the people of Canterbury derive all of the rent from the commodity and none of it go to the people of the West Coast. If that is thought to be unfair then is some sort of revenue sharing arrangement to be implemented? If so would not the Canterbury farmers feel aggrieved that rent from their hard work and enterprise is going to people in another district.

These are only a few of the more obvious difficulties confronting those who argue for a charging regime. They are not merely quibbles but are multiplied throughout New Zealand as local geomorphological variations dictate.

Iwi Leaders Group

Lurking behind these physical problems are the demands of the Iwi Leaders Group which seeks ownership of the water which either rises in or flows through their various territorial areas as being a right preserved to them by the Treaty of Waitangi. Is this to run in parallel with government and or territorial local body ownership or is it to trump that ownership. If a right to charge for the use of such water is created it is unlikely that the various Maori hapu and iwi would be able to use all of the water arising within their areas clearly what they are really seeking is the right to charge those activities that do use the water thus conferring on these small groups a stranglehold on the New Zealand economy. For example the hydroelectric river schemes on the Waikato, the Tongariro,  and Waitaki rivers are a bottomless ponds of money to the owners of the water.  One can no longer dismiss such claims as derisory. Following the passage of the Resource Management Amendment bill 2016 by a single vote this shadowy group of Iwi leaders has with a complicit government already achieved the unthinkable in a Rule of Law country. It has persuaded the National Party, with one outside vote to subvert local body democracy by passing the odious Resource Management Amendment Act thereby creating local body electoral separatism based on race. The ultimate prize;  control of fresh water resources is now within their grasp. A charging regime will bring not merely control of the allocation of water to this group but also ownership.

The intangibles

Rain and Carbon Dioxide are a gift of nature (God, Gia or whatever scientific principle floats your boat). Like the fish in the sea or eels in the stream for which there is no charge, they owe nothing to the hand of man. These elements are crucial to the production of the food and drink needed to sustain us, and to generate the oxygen we breathe without which there can be no life on earth. Even if were possible to do so it is no more economically rational to charge for the one and not the other (or perhaps the economists have yet to turn their attention to C02 and Oxygen). At rock bottom the argument that those who use water to derive revenue should pay for the substance amounts to no more than the envy of some of those who do not derive their livelihood from the land and who see a privileged few farmers making large sums of money out of a natural resource. This is an unworthy motive on which to plan such a disastrous social and economic policy.