Water, water everywhere (except when we need it)
Released 04 Jun 2010
Speech by Don Nicolson, President of Federated Farmers, to the New Zealand Agricultural Summit held at the Duxton Hotel, Wellington
I thank the conference organizers, Conferenz, for this very valuable summit. It goes to the heart of New Zealand's largest and most important business, agriculture. We operate in a growing $25 billion industry that represents 64 percent of everything New Zealand sells to the world. That pays for our schools, our hospitals and social services.
I'd first like to acknowledge our excellent chair, Bill Falconer, who proves that men with knives can appreciate classical music. I'd also like to say, after speaking at a conference on New Zealand's ‘East Island', a warm ‘gidday' to my co-presenter, Guy Salmon.
Water has been described in a Forbes publication as being the ultimate commodity. Given this, New Zealand has the ultimate competitive advantage unless public policy, regretfully again, snatches defeat from the jaws of victory.
70 percent of the earth's surface is covered in water, with only three percent being freshwater. Then again, only about one percent is readily available for an expanding human race, let alone livestock. Between 1990 and 2007, 1.4 billion mouths entered the human race, a 27 percent increase over 17 years. Over the next 40 years, it is estimated the global population will expand by another 3.3 billion mouths hitting 10 billion by 2050. I say this because that highlights our competitive water advantage.
Rapid industrialisation and increasing agricultural use have contributed to worldwide water shortages. Areas that have experienced water shortages include China, Egypt, India, Israel, Pakistan, Mexico, Australia, parts of Africa and the United States. I could go on.
But how does New Zealand compare?
I mean, only last year, the country's media labeled the Manawatu River ‘one of the most polluted on earth.' Cartoonists like Tom Scott, frequently include pastoral images telling readers that farmers are ‘polluters' and I've literally been the butt of his pen. Of course we have Fish & Game's epithet of dirty dairying. Two words that invoke a seething sense of economic treason in me.
Surely, given the propaganda, our nation's livestock and people must be wading in a fetid e-coli rich cocktail of muck?
Or is it that New Zealand curse, that we continually set the bar high, only to keep raising that bar ever higher?
I think you will be genuinely surprised to learn that a joint study between the US universities, Yale and Columbia, ranked New Zealand second out of 163 nations for water quality. I'll repeat that, New Zealand was second out of 163 nations for water quality.
Iceland was number one but I suspect a certain volcano may have taken it down a peg or two. We are no Malta when it comes to water quality and Malta of course, is a member of the European Union.
If you doubt the reports veracity then I ask you to take it up with Yale and Columbia Universities. This is a world view looking into New Zealand rather that our self-critical presumption about what the world thinks of us.
But what about the Cawthron's charge then? It might have taken five months but the Institute finally conceded, in April, that ‘it NEVER said the Manawatu was the most polluted..." The damage was well done by then in blogs, newspapers, on radio and on television. Having seen the list of rivers used, you will find the Manawatu wasn't compared to the Thames, the Seine, the Ohio or even Australia's toxic King River.
New Zealand absolutely loves to play down what we do right in order to maximise what we do wrong. If we wish to grow to a better tomorrow we need to change that facet of our culture. It's self-defeating.
Freshwater and farming
Water is a critical component of every farmer's daily management regime and its use extends well beyond sustaining crops and drinking water for stock. Each year, our members make significant on-farm investments in order to reduce their overall impact on the quality and quantity of water. These investments include improvements in irrigation efficiency, nitrification inhibitors, effluent storage systems, riparian management and staff education and training.
Yet ladies and gentlemen, to be green, you have to be in the black these days. Well into the black in fact, evidenced by the shrinking number of mum and dad farmers. It's why I want you to realise that farmers are not an ATM. If dairy is flush with cash, as speculation about next season's payout indicated only last week, then why have only 12 dairy farms sold throughout New Zealand in the three-months to April 2010? Why was the average price in April down on March? If clean-green is the new black, then why have I got bales of unsold wool that effectively sees it as an animal health by-product?
Water is integral to farming and is an area where Federated Farmers has three elected spokespeople supported by five professional policy staff. Two of whom hold doctorates. I would argue our policy capability in this area is unique in the private sector as water is that important.
The short and long term picture for water
We face a public perception that land-based primary production activities, particularly dairy farming, has the greatest single impact on the quality and quantity of New Zealand's freshwater resource. We tend to overlook the urban and industrial needs from our 4.3 million humans, incidentally, the third most numerous large mammal in New Zealand. This is leading to a polarisation of interests in respect to the changing manner by which water is allocated in New Zealand.
Our sector needs to consider and address the effects of non-point, or diffuse sources of pollution. This is where rainwater washes organic matter, sediment and nutrients into waterways or groundwater. That puts pressure on us to address nutrient loss from pasture into water. It makes sound economic sense to do so as nitrogen is a costly fertiliser to buy.
Yet there's also a need to ensure that the science used to support claims about the agricultural effects on water quality and quantity is robust and not one-sided. Policy needs to be science informed not science led.
I also think there's a growing realisation that the current water allocation regime established under the Resource Management Act, is not always equitable or efficient. That extends to a current water management framework, which doesn't reconcile competing interests well.
There is a real need to ensure that good outcomes spanning the entire community that must be achieved in a timely and cost-effective manner. More and more regional councils will be seeking changes to RMA planning and policy documents, probably through the addition of methods seeking to cap nutrient loss mentioned earlier.
We also have a strong drive from Government for substantial reform to the management of freshwater in its first term. Yet, right now, there's growing uncertainty around the future role, structure and function of regional authorities, especially following the Environmental Protection Authority. If constructed well, an EPA may improve the lot of farmers by bringing consistency.
I say this because the status quo is untenable. It creates significant and unnecessary costs and time delays. Resource management policy, plan-making and decision-making processes has become unnecessarily adversarial.
In some parts of New Zealand the current management framework for freshwater, the Resource Management Act, isn't working as it ought to. Since its passing nearly twenty-years ago, we have seen demands for water in some regions significantly grow and in many cases, exceed what's available. Water quality has declined in some of the country's lowland streams and there are significant deficits in water-related infrastructure. In addition to this, territorial and regional councils have largely failed to undertake their statutory planning and policy decision-making duties in a robust, timely or cost-effective manner.
In addressing these issues, regulatory bodies have developed a plethora of policies and plans covering quality, allocation, use and governance of freshwater. For farmers, the time and monetary cost of compliance are high and in many cases, prohibitive.
On the positive side of the ledger, there's an increasing realisation that while we have an abundance of water, this water is not always in the right place at the right time. In a nation with our annual rainfall, the word drought should not be in our vocabulary. Federated Farmers believes water storage is critical to our future management of freshwater and to our nation's economic development.
In addressing the above issues, the primary sector is investing heavily. I admit we do have a long way to go but at least we recognise that, which is a lot more than can be said about direct sources of water pollution in the urban environment.
It's wrong to categorise the primary sector as a spectator as I said before, we know we have an impact. We are not in a state of denial.
Farmers are investing in research and technology such as nitrification inhibitors through the cooperatively owned fertiliser companies, like Ravensdown. Information dissemination and education is alive and well through the industry good bodies and the universities with the Ballance Environmental Awards to highlight best practice. The Dairying and Clean Streams Accord and the Primary Sector Water Partnership show a sector that is not asleep at the wheel.
The longer term infrastructural picture
Water infrastructure will have a crucial role in increasing the productivity of farmed land - it's essential to maintain the competitiveness of New Zealand agriculture and our status as a developed nation. We live in a world of food shortage and New Zealand is that rarest of things - a food exporter.
The reliability of supply provided by water storage will enable more effective and efficient irrigation. That enables us farmers to take advantage of high-value markets that require a reliable supply of high quality products. Don't be alarmed by predictions of doom within five years either. Our reputation, no a pedigree of excellence, has been built by generations of farmers over 170 years. While clichés may have local currency it's our farming pedigree that works offshore.
The American, Warren Buffett, said "it takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently."
But what are we doing differently about water? Water storage provides the potential to manage water for multiple purposes, to achieve environmental and community objectives as well as pressing economic growth. The world wants our food if we have the public policy will to expand our capacity to meet it.
There is real potential to increase the area of land under irrigation in New Zealand. For example, in Canterbury alone, it's estimated half a million hectares of land could be irrigated. That's about the size of Trinidad & Tobago. Without the development of significant water storage and associated infrastructure, irrigation development in Canterbury is expected to fall well short of its potential.
A further impediment is regulation by public opinion.
Spurred on by myopic special interest groups, New Zealanders have become increasingly concerned about the potential environmental effects stemming from agricultural use and the intensification of land use. Consenting processes for water infrastructure, particularly large-scale infrastructure including storage, is protracted, adversarial and expensive. That has to change unless New Zealand wishes to forego developed nation status.
Determining water infrastructure priorities
A major impediment to the development of medium-large water infrastructure projects is their initial capital cost and the need to preserve inter-generational equity. These projects provide very good financial returns in the medium and long term, but the initial capital cost is generally too great to be borne by one generation of farmers.
Consents for Hunter Downs, the latest to be approved, were lodged back in 2006. The Opuha Dam was first discussed back in 1981 and opened in 1998. There are many stories like this. To get schemes off the ground demands perseverance and courage that would defeat lesser people.
So what resource do these brave people have access to? The Community Irrigation Fund and a little over $700,000 per annum. Thankfully that does exclude GST!
Irrigation from the Opuha Dam has been estimated to have increased farm output by $124 million per year and to have created 480 full-time jobs in the local community. It has also bought permanent water flow to the Opihi River that enables recreation and tourism.
The 35-year Hunter Downs consent will be enough to irrigate up to 40,000 hectares benefitting horticulture as well as agriculture. While the infrastructure consent applications are yet to be lodged, the reality is that we are looking at an annual economic boost of some $117 million and 1200 new jobs off and on-farm.
So the augmentation and storage of water provides long-term opportunities to expand the agricultural sector. Policies must enable and encourage this to happen in areas which are nearly fully allocated. New Zealand isn't like arid Australia. We do have the annual rainfall - just not the means to store it.
The solutions are not really complex either. Using rainfall, something New Zealand is awash with right now, enables users to utilise times of high water flows and high groundwater. It's about harvesting water with no or minimal impacts on the environment.
Yet inappropriate regulations and controls about how and where water resources are used risks producing perverse outcomes. For example, efficiency tests should not be based on land use or whether the use is economic or not.
Commercial drivers for efficiency should be left up to the user as it's about choice. We don't use that logic with roads. Flexibility is required within water allocation regimes to allow water permit holders to voluntarily transfer or exchange permits. Such transfers support the optimal use of water resources to meet the needs of both parties.
Managing agricultural impacts: a new vision
Like other activities, pastoral agriculture can impact the quality of New Zealand's freshwater resources. We know that and we acknowledge it. The impacts of farming can be classified into two sources being either point and non-point source discharges.
Point source discharges include those from specific sources, for example partially treated human sewage or industrial discharges to water. Agriculture, especially dairy, has been to the forefront in positively addressing point source discharges from the farm.
Non-point or diffuse source discharges are caused by rainwater washing organic matter, sediment and nutrients into waterways. Diffuse pollution also occurs where nutrients or other contaminants leach into groundwater.
Over the past decade, farm based point source discharges to waterways and waterbodies have become less and less of an issue. This is in large part due to improvements in on-farm waste treatment processes - such as land based methods of effluent disposal. As a farmer I can tell you the waste from grazing animals is a very effective fertiliser.
Non-point source discharges and in particular sediment erosion and nutrient loss from land, presents a much harder issue for us to address. It's complex and includes the time lag from discharge, the actual impact and the linkage between land use activities and nutrient loss.
However, farmers and the primary sector are taking the lead through significant investments in science and technology and on-farm mitigation such as riparian plantings through to better systems, training and new technologies.
Despite these efforts, over the next few years I predict, agriculture will continue to be under increasing pressure to address these non-point source discharges. But and here's the but, management of New Zealand's freshwater resources must provide for economic growth and development.
I repeat what I said earlier, we farmers must be profitable businesses. We do not live in a subsidised nirvana so it's about finding the right economic/environmental balance. Need I remind you that when you drive home to a house that is heated and full of appliances, we are all harvesters of the environment. Federated Farmers does support efforts to reduce the negative impacts of land-based primary production on water but it must be practical and practicable.
So what are Federated Farmers emerging principles?
Water policies must take into consideration the values and aspirations of individual communities and the sectors it directly affects
Recognising and providing for these values and aspirations in water policies is challenging but not implausible. Farmers are stakeholders too and we need clean water, which is a point lost on some.
Managing and developing freshwater enables us to farm for generations
New Zealand has an abundance of good quality freshwater, the second best on earth in fact. If used, managed and developed well, it is an enabler of economic growth benefitting the entire community. Water is our competitive advantage.
Best available science informs, not leads water policy
Given there are many competing values about water, judgments are required and tradeoffs between cultural, economic, and environmental interests, needed. This role is best performed by individuals who serve in a representative capacity and are accountable to a constituency.
Transparent decision-making processes result in good water outcomes
Decision-making based on a consistent and robust methodology is critical to ensuring that competing and conflicting interests in water are balanced in a fair and equitable manner. Above all it must be transparent.
Water policy, planning and decision making in collaboration with landowners, the community and other key stakeholders
Water policy developed through meaningful collaboration with those who have a stake in it achieves a lasting outcome.
One size does not fit all
The most successful policies and methods allow for flexibility, innovation and cost effective responses to unforeseen challenges or new information.
Water allocation and use: getting it together
Adequate, reliable information about individual catchments must use science to determine the availability of water as a resource before water management policy is developed. Water is literally running out of New Zealand right now in vast quantities.
In many respects, water storage is about water trading because the water available will be retailed to those who need it at a given point in time on a just in time basis. The commercial return rewards the investors in the storage scheme, whether that's a group of brave farmers, councils, the Cullen Fund or whatever.
Water permits are another form of water trading. Permit holders must have confidence that their investment will be protected from confiscation and unreasonable restrictions. Without security of tenure for water permits, long-term investment in improvements to existing irrigation schemes together with new investment in additional irrigation projects will be seriously inhibited.
Yet water trading in the form of a market based platform to commoditise water is something that would worry me. It places a premium on scarcity - the speculators friend. The Emissions Trading Scheme, for example, places a value on gases that are neither scarce nor desirable but legislation forces everyone to treat those gases as if they are.
By contrast water is valuable but with our annual rainfall, it isn't scarce. A commodity based water trading platform would become another mechanism for those who delight in fractal calculations to make money off the productive sector and the environment.
That, ladies and gentlemen, denudes our unique competitive position. The dairy property boom stopped dead in 2008 despite the shrill pronouncements of a minor parliamentarian. In the 2009/10 season, farmers are projected to retain an average of just 6.2 cents out of each dollar our hard efforts generated. Farmers are no magical ATM.
Each catchment has different demands on water, different availability of water and different values applied to water. It is therefore appropriate that individual catchments or sub catchments have water allocation policies that match their specific characteristics.
Community involvement in negotiated settlements, particularly in areas where water is over allocated, allows local communities to seek their own solutions. This gives communities a genuine role in determining how allocation should be managed.
So is it time for a New Zealand Water Agency?
We don't trade roads but we do have a New Zealand Transport Agency that funds and builds them. Transmission Gully will be a $2.2 billion project and is sorely needed but imagine what that amount of money would do for water storage.
So I am going to voice a personal opinion to you that may be a spark for reform. This is not Federation policy I wish to stress so I wish to fly a kite with you. Perhaps the time has come to reassess the role of the Ministry for the Environment in respect of water delivery.
Water is, I believe, not too dissimilar infrastructure from our complex national road network. Both roads and water are vital to commerce and communities. But why do we treat roads so differently from water? Having an agency of Government, a New Zealand Water Agency if you like, dedicated to the delivery of this staple of life is essential to overcome an ad hoc, seat of the pants approach that has typified this nation's treatment of the water resource. The lack of coherent development massively underplays our real potential as a global food exporter.
My concluding comment further highlights the conundrum we pose as a country. New Zealand is a small producer of food in global terms but we are a major exporter of food.
We export the most lamb of any nation and are the second largest exporter of dairy products on the planet. If we take that last export, dairy products, our powerhouse status is built off producing a mere two percent of world's milk. With a growing world population it highlights our economic potential if the public policy will exists to support it.
Every lamb, every kernel of grain and every kilogram of milksolids we increase the export of, is not just good for lifting our farm profits, its great for every single New Zealander. Water is the hinge on the economic door.
Thank you.
For further information:
Don Nicolson, Federated Farmers President, 03 216 7405, 027 226 6331
