Should water be sold to the highest bidder?
Tony Orman looks at tradable water rights which has created a nightmare for farmers and growers in Australia and finds an uncertain situation in New Zealand.
On November 18 last year, The Australian, arguably Australia’s most astute and credible newspaper, ran an article reporting that top Australian farm groups “have privately begged state and federal governments to take immediate action to curb alleged speculation by ‘water barons’”.
In 2014 the Australian government removed all restrictions on who could trade water, allowing non-farming individuals and companies that did not use water, to enter the market and speculate.
The corporates moved in and prices climbed steeply from a long-term average of $135 a mega-litre to virtually $1,000 – a 750% increase.the additional price pressure would be the difference between surviving the drought or going bankrupt, said the Australian Grape and Wine Association.
The term “water barons” was not used lightly by The Australian. The paper revealed that Duxton Water, a publicly listed company, was established by former highflying international Deutsche Bank traders.
“Duxton Water has no land and uses no water, have bought and hoarded water rights in vast quantities and cornered the market, creating a price squeeze.”
Money and profits seemed Duxton’s sole motivation. Over the three or so years since it listed on the stock exchange, Duxton Water amassed water rights worth $256 million, controlling 74 billion litres of water. Shareholders reportedly enjoyed a return of almost 30% to June 2019.
What is the situation in New Zealand?
The concept of selling water rights is nothing new. Up until 1910, water rights were sold as mining privileges in Central Otago and those extensive rights apparently still exist. Basically, tradable water rights are about putting an economic value on natural resources, the theory being that people value resources most when they have to pay for them. The more they pay, the more they value them, so the theory goes.
In 1990, the Tasman Institute and Electricorp hosted a seminar with admission costs of more than $1,100 for a two-day session.
The promotional material promised to tell attendees how they could “benefit from the possible sale of one of New Zealand’s greatest assets” i.e. water.
In other words, water had become gold.
And the idea of charging for water was not just about industrialists, farmers and growers. Fast forward to the 21st century and in 2012 Prime Minister John Key said “nobody owns water”, which tended to further confuse the situation. Key was speaking on the proposed part-sale of state-owned energy companies and a claim lodged by the New Zealand Ma- ori Council with the Waitangi Tribunal to stop the part-sale of state-owned enterprises until the water and geothermal ownership was resolved.
Since then, controversy has erupted around bottled water as overseas investors moved in on the resource. New Zealand's bottled water exports skyrocketed in 2019, up more than 270%.
The bottled water industry sparked vigorous public protest and forced strong political debate.
It was then announced that new rules around water bottling would instil better control.
Environment Minister David Parker said the government will now "require consideration of the impact on water quality and sustainability of a water bottling enterprise, when assessing an investment in sensitive land”.
Outdoor recreation groups, in particular trout angling groups, were apprehensive. The New Zealand Federation of Freshwater Anglers – a trout and rivers advocacy – said immediate steps should be taken to pass a Water Act to put water firmly and clearly into public ownership with strong safeguards written in to ensure its future.
Federation President Dr Peter Trolove argued it was well-nigh time for reassessment of “the messy situation” and immediate action over the lack of security of the public’s rivers and aquifers.
He proposed a Public Ownership Water Act that would: (a) put water into public ownership (b) ban tradable water rights (c) ban private profiteering of water for export (d) ban foreign involvement.
“There’s nothing xenophobic about this, as water firmly and foremost should belong to all New Zealanders,” he added.
The chairman of the Council of Outdoor Recreation Association, Andi Cockroft, said the Australian experience was a strong warning to New Zealand to get its act together over water.
“Witness overseas and the dangers Aussie farmers and growers have faced over recent months with extortionate prices being charged for water at a time of severe shortage – with water barons cashing in on their predicament.”
Federated Farmers New Zealand water spokesman Chris Allen recently visited Australia, and in particular the Murray Darling basin.
The Australian Federal government had invested over $13 billion into water use efficiency, metering and conservation.
“Water is more than ever vital and precious for both human needs, production and the environment,” in the Murray Darling basin, an area the size of France and Spain combined, he said.the government wanted a 30% reduction in allocated volume to provide for the environment.to achieve this a few things had to happen.“land and water are now disconnected from each other to allow trading of entitlements to take place. The state governments own the water and significant storage infrastructure. This means water can now be traded either short or long-term or permanently.”
The Murray Darling catchment was 70% allocated for consumptive uses, mainly irrigation.
“No one pays for water except for an annual contribution toward the infrastructure upgrades and operational running costs,” he explained. Given that the state governments own the water, “the only way the federal government could leverage significant change was through biodiversity, for which the federal government is responsible.” Thus the development of the Murray Darling Plan.
(A 30% reduction in allocated volume was bought back on the water on the market to provide for the environment.)
There was a “huge investment” by the federal government in the total upgrading costs for every take point to install new water meters.
Canterbury ecological scientist Rex Gibson said the New Zealand government's current position appears to still be that “the people” own the water.
He sounded a note of warning in saying that while these debates occur, loopholes in the current ownership and usage of water are being exploited.
“There’s nothing xenophobic about this, as water firmly and foremost should belong to all New Zealanders.”