Insight into the negotiations between Crown and iwi leaders over the fresh water resource

Water ownership is in the eye of the beholder.

Paddy Gower’s interview with Sir Mark Solomon of Ngai Tahu on the weekend was an illuminating insight into the negotiations between Crown and iwi leaders over the fresh water resource. There is much that we agree with Sir Mark on on the topic of water but he is also overlooking the importance of trading and price if we want to protect fresh water while getting the maximum bang for buck from the water we use.

Water ownership is in the eye of the beholder
Let’s be clear from the outset – Maori have rights over water, just as they do over other natural resources that weren’t bought from them. The Treaty of Waitangi tells us that.

The interview began with the usual word play over who ‘owns’ water. Iwi seem to be towing the government line that ‘nobody owns water’ – probably for political expediency to avoid another foreshore and seabed style confrontation. However, Maori are rightly talking about having ‘use rights’ like other commercial users, and ‘governance rights’ akin to our regional councils. Both of these are a form of property right just like the existing resource consents handed to farmers and electricity companies so, really, the quibble over who owns water is pure semantics.

For Maori there is a moral hazard: They may not want to act on water quality if it affects their commercial interests. This is the same sort of tension that has been pointed out with Hawke's Bay Regional Council’s promotion of the Ruataniwha Dam. Their desire for these rights is legitimate but how these tensions are managed is yet to be resolved.

The current water allocation system is an economic and environmental disaster 
Currently water is allocated by regional councils under the Resource Management Act (RMA) on a first come, first served basis. This system has led to an inequitable mess. Water rights – a valuable public resource – have been snapped up for free by commercial interests. In some areas there is no water left for new entrants to the market – despite the fact that some new entrants might be able to add more value than the incumbents. Sometimes too much water is being taken, full stop, and the environment suffers.

As Sir Mark points out, this system has hurt Maori in particular. In many areas all water rights have already been snapped up, leaving nothing for Maori who now want to develop the land they received via Treaty settlements. Ngai Tahu would know this better than anyone – the iwi has converted huge tracts of land to dairy and now found it can’t get rights to use water (and by extension the rights to leach nitrogen) for that land.

Maori want their ‘fair share’ of water to develop their land for commercial use. How would this be achieved given the status quo? In areas with plenty of water Maori would look to have first right of refusal to any new water consents until they get their ‘fair share’. In areas where the water is fully allocated it would mean the Crown taking water rights back from other users, which would no doubt raise the issue of compensation.

The environment should trump commercial uses
To their credit, Maori want the environment to take precedence so that our fresh water is safeguarded for safe customary and recreational use (swimming, drinking and food gathering). In fact as we do, iwi are arguing that the bottom lines set by government are too low – instead of setting the bottom line at wadeable, Maori feel the bottom line should be swimmable, if not drinkable! This is a position we strongly agree with as previously stated.

If these environmental bottom lines are crossed, Maori recognise that their businesses, along with anyone else’s need to be reined in – commercial ‘use rights’ would take a hit. This prospect will hurt business owners who want certainty but there is no certainty where the environment is concerned. Fishing quota owners know this only too well, with the Total Allowable Catch (TAC) being managed by the government to ensure sustainability of the resource. Your quota only gives you a share of what is allowed to be caught each year. Some years that is nothing.

Water must be traded and/or priced to ensure it is used in the best way
As we have, Sir Mark seems to be arguing that we should set environmental bottom lines (which are subject to change), then allocate to commercial users beyond that, including a ‘fair share’ for Maori. However, this change doesn’t go far enough to sort out the problems of the current ‘first come, first served’ RMA system. We have to allow water use rights to move to their highest value use – and this requires the use of either trading or price. If you oppose both, then we lock in current users and uses of water forever – which means we are shutting the door to new users and innovation. That is not a recipe for progress.

Sir Mark doesn’t want the rights to be tradable – he cites the problems with fishing quota, which all ended up in the hands of a few big corporates (including iwi) forever. There are ways to ensure that doesn’t happen with water but, if trading is out of the question, there is another alternative – using price to determine who gets what commercial access. The way to achieve that is for the government to lease water quota out for a certain time period only, not permanently. The price of those leases should be determined by auction. As existing consents expire, more water could be added to the auction regime.

In between auction rounds there is no reason the temporary use permits couldn’t be traded to make the market even more efficient. Because the permits expire and are then available by auction, this would prevent the sort of market concentration we have seen with fishing quota. By auctioning temporary usage rights (subject to a minimum flow) to the highest bidder for a limited period, you can ensure water is continually being used in the highest-value way. Remember though, this only applies for commercial users – drinking, recreation (swimmable as lowest standard) and Maori customary use all come first. Thereafter, once these uses are assured, then all users including iwi corporations are deemed commercial and enter the leasehold auctions for the allocation. The proceeds from the auction would finance maintaining and monitoring the environmental bottom lines.

Sir Mark rightly points out that Maori should be involved in governance of our fresh water because of their interest in kaitiakitanga – guardianship of the resource. But as regional councils know, kaitiakitanga costs money – for monitoring, consultation, enforcement, and fixing water quality problems when they arise. The government has already spent over $400 million fixing water quality problems; regional councils are racking up a bill too. The public can’t keep paying for a problem they didn’t create – commercial water users should. This is where the proceeds of the periodic auction bids come in.

Gareth Morgan is a New Zealand economist and commentator who in previous lives has been business as an investment manager. He is also a motor cycle adventurer and philanthropist. Gareth and his wife Joanne have a charitable foundation, the Morgan Foundation, which has three main stands of philanthropic endeavour – public interest research, conservation and social investment. This post first appeared on Gareth's World.