Government seeks advice on selling fresh water

Bill English

Bill English asked a technical advisory group to look into the charging and exporting of fresh bottled water

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The government has asked a technical advisory group that is part of the Land and Water Forum to look into the charging and exporting of fresh bottled water after mounting public concern.

 Prime Minister Bill English said the government had sent a letter to the group yesterday.

“We’re writing to the technical advisory group that’s working on water allocation and asking it to include in their considerations the issues around export water,” he says.

This follows his flip-flop on the issue in recent days.

Over the weekend, he said there would be an opportunity over the next few years to change the rules over water and foreign companies.

But yesterday he told the AM Show it's looking as if it will be “too hard” to put a price on New Zealand water.

Mr English says a century of convention would be upended if New Zealand suddenly started charging companies to use or take water.

“Right now, it is too hard. You want to be careful about rushing in and starting to charge people for water that historically no-one's owned and no-one's paid for.”

But Mr English backed-tracked on his comments to the programme later in the day.

“I’m not saying it’s too hard, I’m just saying it’s hard. It would be a big shift [for] New Zealand to put a price on water.”

But he says some opinions on the issues are split.

“On the one hand, there is real concern about foreign companies and their access to water. On the other hand, there is also a long-held, deep-seated view among New Zealanders that no-one owns [water] and it’s free.

“We would want to step through any processes carefully so that’s why we wrote a letter.”

Asked why it would be hard to charge people for water, Mr English says there is a range of issues.

“Who gets to charge, who gets the revenue, what the charge might be, whether you could do that legally without establishing ownership of water.”


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32 Comments & Questions

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How is this different from ... shall we say .... radio spectrum? An arbitrary parcelling up of a natural resource which is able to be monetised by private enterprise or used for public goods by Government? Ah yes - international treaty arrangements and international practice. Well actually, one could note that the WTO Agreement on Subsidies and Countervailing Measures, in tandem with New Zealand's retention of sovereign ownership of resources, such as in many cases access to water, strongly suggests that downstream products using New Zealand water where the water has been obtained “for less than adequate remuneration" might well be capable of being treated as subsidised by the Crown and on export could become the target of anti-subsidy claims by foreign governments. I note that it doesn't appear to be a large step from the definition of "goods" in the relevant WTO Agreement, as clarified by the Apellate Body, ("tangible items of property like trees that are severable from land" such as oil, gas, minerals, metals, plants, and agricultural crops. A government provides them to a commercial entity where there is a reasonably proximate relationship between the action of the government providing the good on the one hand and the use or enjoyment of the good by the holder of the natural resource right. It appears that a lot of simple Kiwi's might think that there has already been less than adequate remuneration.

Natural resources, like so many other assets are generally accepted to have an economic value by reference to their resource rents, (ie the net revenue generated from the resource less the cost of extraction). Adequate remuneration would almost certainly be a proportion of this value, a conservative take on this might start from a minimum of 40% of the net resource rent. Valuation of the asset to New Zealand would also take into account some assessment of the opportunity cost - namely a recovery of the cost to government of providing and maintaining the life of the resource (in the case of renewable resources of course - the rate of recharge for aquifiers is variable and is dependent on a range of factors outside this simple Kiwi's understanding ).

Pricing methodologies are complex but not difficult - rather just a political minefield, especially in election year. What you do for export of water really needs to be done for water use locally, and there are lots of vested interests, and lots of people who have based business decisions on the status quo.

For instance, regulatory approaches to fishing rights are a contentious but plausible model for both regulation and price discovery in this area perhaps. Within reason, and subject always to relevant facts and circumstances, it would be good policy for natural resource exploitation to be coherently harmonised across different resource types, (relevant facts does not equal alternative facts I should note!)

The most important thing for simple Kiwis, is just that the Government should not price access to water in way which provides incentives for non-sustainable or non-commercial (ie non-subsidised) exploitation whether in the short or the long run. The public benefits of the resource should be maintained in the long term.

Ultimately, although this note is focused on exported water products, local water resources should be subject to an analogous regime in the interests of ensuring a level playing field. As suggested already, this is the actual minefield through which the Government appears to be tiptoeing in election year. A canny move to push the issue down to a technical advisory group no doubt!

Overall, such an approach would almost certainly be important in determining whether we meet the obligation under the subsidiary agreements to GATT, and more importantly to simple Kiwis in future generations. Wait - I hear the howls of dissent and anger already arising from water rights holders!!!!!

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It is different because you cannot drink the radio spectrum or put it on your land besides the radio spectrum was a farce and was a way for the government to wash their hands and give back to the local iwis.

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Just a stalling measure in election year
But it will backfire if they just park the issue until after the election

How Nick Smith can be so naive to think Kiwi's aren't 1000% passionate about water and water quality is insane and shows that this Government has lost touch with the real world
The majority of Kiwi's do care about giving away some of the worlds best water for free to overseas companies who profit - including Coca Cola with their Pump water in the local market.
We also do care whether there is still cow crap residue in our rivers and waterways when we go for a swim - a small amount is still too much and is not acceptable

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Nick Smith hasn't made any impact on Housing in Auckland so what makes you think he gives a toss about a few buckets of water?

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Even the OECD is now in on the act and saying that the damage farming is doing to our environment and waterways is potentially damaging our overall economy as we trade off our clean green image
http://www.stuff.co.nz/environment/90613205/new-zealand-showing-environm...

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What's that got to do with charging for water?

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Tens of millions of dollars have already been lost by those who thought that exporting water is a sure fire way of making profits. Alas, not the case as exporting/selling water is a low value but high capital & logistics cost business.

Hundreds of jobs are going to be lost soon enough when the unprofitable water export industry becomes even more unprofitable with the imposition of a water charge.

Disclosure of interest : Acting for the seller of a water export company with overseas owners who are just looking to sell for book value. No secret as business has been on the market for over a year with zero interest from New Zealanders. Am wondering why.

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How can we esquire further? Who can we contact?

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If you are genuinely serious, can be arranged. A refundable good faith deposit of $50k to be deposited with solicitor before any discussions and due diligence. Wasted enough time with too many tyre kickers and brokers - especially those from China.

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Usually you would be served a teaser before a look in deposit was paid. Maybe you are the problem

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Full IM available. Good faith deposit is to get rid of tyre kickers and brokers.

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If its bleeding money why would anyone pay book value. The Present Value of loses is a negative number. Maybe worth scrap value.

Your clients need to get real otherwise they just keep writing out cheques each year to cover the losses.

Good luck with this.

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Scrap value? Maybe but not according to all those who believe that the water is being given away so there's plenty of money to be made? Let them show how the money can be made - maybe they want to set up their own plants and businesses selling water?

My clients are happy to keep boxing on. Plant is fully automated and requires minimal manpower - most staff are employed in the sales, marketing and distribution area.

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It's quite strange to run down the very thing you are trying to sell. Water bottling is just getting started. The opportunity is enormous. If a company owns it own land and resource, is close to an export port and has a strong local market presence it is a potential goldmine

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Being realistic - after 1 year of being on the market, my clients know that the only buyer will be a multi-national with huge distribution network and can charge premium prices for NZ 'pure' water. The multi-nationals are all set in the game however with multiple sources all over the world - water is water! Heck, even Fiji had a bottling plant transferred from NZ which is now sitting ideal among banana palms.

Only point of posting here is to counter the hide-in-the-long-drop brigade who thinks that water is such a precious commodity in itself that businesses are falling over themselves to tap into this 'free' wonderful opportunity.

Fact is that this is a high capital and logistics cost business, with very very low margins.

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They are only getting started. Nong Fu just buying Otakiri, Danone buying down south. Obviously Coke and Pepsi already here. Besides these traditional multi national drinks guys. Dairy giants are circling, big booze players are moving in non Alcohol. Its all about location and brand validation. Resellers of water cant make any money on the race to the bottom water either. Therefore their point of difference is becoming origin. O PURE, 1907, Antipodes seem to be doing quite well and will do better once a plant in Putaruru and one in Whakatane potential close (maybe one of these is your client)

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so............what does Jacinda think?

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Looking for a Little guidance??

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Nah............more dinner & a show
This elections wide open as National positioned to lose but no one else putting up a credible team of 5ish that can run the country
All the centre PC stuff has passed its use by date
Probably 3-5 issues will swing who wins

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Will be an interesting election with the National party failing so spectacularly on housing affordability, and using rampant immigration to fake economic growth while undermining the future chances of young Kiwis, then telling them "Oh, we'll adjust the pension once all the Boomers are through, so you young folk will need to settle for less than them in yet another way, so sorry - we can't inconvenience our core Boomer voting bloc".

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more's the point...what would Jesus do ?

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Turn the water into wine ... of if you're in the media that would be whine.

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Happy to support your advisors on estimating the resource rents - appreciate koha - bless you both for the new business :)

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Coincidentally, this government's theme song does seem to be "Jesus take the wheel...♩ ♪ ♫ ♬ "

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What's the problem? Confined cubic metres is 22,123,961,900.7 (that's 22 trillion litres - or 3,142 litre bottles for every person on the planet). The unconfined supply is 605,120,123,566.6 cu. m (which is 605 trillion litres; 1.8m litres for each of the planet's inhabitants).

The problem, then, isn't supply. Is it, perhaps, the continuing sense of unfairness that so many have in this country; especially those without the ability to think critically or without the will to actually do something for themselves; the need to penalize anyone but themselves?

https://data.mfe.govt.nz/table/2528-average-estimated-national-groundwat...

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How about storing it to use for irrigation of the Canterbury plains, sending it to Auckland or Northland?

This is a joke and will bite us in the arse once we have shortages.

Why do we keep selling off NZ bit by bit and my did the Maori elder ask when they would get their cut?

This is a disgrace.

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It's a safe bet that Tainui's answer to Donald Trump will be collecting royalties on fresh water within the next 5 years.

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Water is one of our best natural resources. We have to look after it for the next generation, not sell it now for a quick, albeit small buck.

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Water is a self replenishing resource! Currently a lot of that water flows into streams and rivers and into the sea.

Care and regulations must be in place however to make sure that not too much is taken as to drop the water table and deplete the aquifers. This is where action is definitely required.

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I see no relevance in the "self-replenishing resource" point. The natural answer is "So what?"

If it's a resource the world values, New Zealand may as well profit from it.

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They do, thats why we have a strong agricultural sector. An abundance of FREE water

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I think we can figure out how to treat water used here differently to water exported straight out of the country.

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