Executive Summary

• setting the minimum requirements for all new water-measuring devices that are installed

• defining situations where water measuring devices are compulsory.

The NES would apply to those who have obtained, or are seeking to obtain, a resource consent for abstracting water. Four scenarios for the uptake of water measuring devices have been considered:

• the status quo

• the proposed NES

• national direction through voluntary approaches and working with regional councils without regulation

• legislative change (via amendment of the RMA).

Our analysis has shown that, of these options, only the NES is able to achieve the policy objectives. Specifically, it is the only option that provides for the consistent, accurate and comprehensive measurement of consented abstraction in a timely and cost-effective manner.

The status quo would result in around 10,300 water-measuring devices being installed over a 36-year period. The proposed NES would result in approximately 14,200 water-measuring devices being installed over a five-year period, subsequent to the gazetting of the regulation. The differences in cost and benefits between the NES and the status quo are largely associated with the differences in the extent to which measuring devices are required and the timeframe for consents to include a water measuring device (see Figure 1).

The present value (PV10%¹) of the capital, ongoing, replacement and consent review costs of the proposed NES relative to the status quo is estimated at $42.3 million. The additional cost of the implementation package proposed by the Ministry for the Environment adds approximately $1.2 million to the total cost, taking the total up to $43.5 million. Ninety-six percent ($41.8 million) of the cost would be incurred by existing consent holders, while regional councils and central government would incur 3 percent ($1.1 million) and 1 percent ($0.6 million) of the cost, respectively.

Following are a number of important benefits from having an NES.

• There is almost universal agreement among stakeholders that the measurement of consented water take will help improve the management of New Zealand’s freshwater resource. The potential for this kind of improved management is delayed under the status quo. Existing studies indicate that New Zealand residents place high value on the protection of the natural environment, and on this basis it is reasonable to assume that improvements in the management of freshwater resources and environmental flows will be accorded a high value by New Zealand residents.

• Compliance monitoring and enforcement will be improved. In the absence of water-measuring devices this is so imprecise and inaccurate as to only be useful for blatant non-compliance, such as that occurring during times of restriction.

• Confidence in water resource management will be improved by the measurement of consented water take, and improved public confidence may result in reduced transaction costs in resource consent decision-making.

• The proposed NES will improve the ease and effectiveness with which actual water take can be reported. Measuring actual water take is important for achieving and demonstrating improved efficiency at all levels (individual, industry, regional and national). At the national level the proposed NES will allow complete physical water accounts to be compiled within five years of the regulation being gazetted. This will assist the understanding of the effects of environmental policy on the economy, and of economic policy on the environment. It will also help New Zealand to meet its international obligations to report the status of and changes to its natural environment.

• Technical efficiency gains for existing consent holders from the enhanced monitoring and management of systems performance have not been quantified. However, stakeholder interviews and the literature suggest that there can be benefits from consented water users monitoring the actual water taken, which in some situations may offset the cost of installing and maintaining a water-measuring device.

• There is the potential for water allocation to be made more efficient from knowing just how much water has been taken − although this benefit only occurs where water is scarce. In the absence of data on the actual take, determining the reasonable needs of consented water users is based on relatively simple models, and allocation is often based on these same models. Hence, the availability of data describing actual take will allow for fairer and more efficient allocation through:

  • identification of un-utilised allocation
  • refinement of estimates of the degree of effective catchment allocation
  • improved resource understanding, allowing for less conservatism in the setting of allocated volumes at the catchment level.
  Aqualinc estimate that knowledge of actual water take has the potential to free up to 5 to 10 percent of the allocated volume in what are considered to be highly allocated regions.²

The quantitative benefits arising from allocative efficiency gains can be estimated for a scenario in which irrigators are able to have an increased level of consumption. The potential benefit to future and/or current irrigators illustrates the magnitude of the potential benefit (Table 1). Note that the level of benefit identified is illustrative only, and cannot be attributed solely to the installation of water measuring devices: the implementation approach taken will also be critical. The allocative efficiency benefit enabled by the proposed NES results from the benefit arising earlier than it otherwise might.

Table 1: PV10% of potential benefit resulting from improvement in allocative efficiency ($million)

The results suggest that if the installation of water-measuring devices enables a 3.4 percent increase in consumption for irrigation in what are currently considered highly allocated regions, the benefits will outweigh the costs of the proposed NES. The benefit illustrated would accrue to existing irrigators able to exploit the knowledge that they are not fully utilising their consented allocation (e.g. through increasing their irrigable area), or to potential irrigators seeking consents in catchments that are considered to be highly allocated. The increased use of water may, however, have some offsetting costs in terms of in-stream values, water quality and green-house-gas emissions due to the intensification of land use.

Although this shows the potential for allocative efficiency gains to allow an increase in water consumption by irrigators, the efficiency gains may also be enjoyed by others, including municipal water supplies and industrial users. Allocative efficiency gains could equally occur as environmental flows, that is, the amount of water taken from the water body is reduced. Under this scenario, councils will have determined that the value of water as environmental flows is equal to or greater than its value as consumptive use.

Table 2 provides a summary of the costs and benefits identified, along with an indication of their magnitude.

Table 2: A summary of the magnitude of costs and benefits of the NES

Several regional councils and other parties have submitted that regional councils should maintain discretion as to when and where measuring devices are required. They argue that there is little benefit in requiring measurement in regions/catchments where consented abstraction is a small proportion of the total available resource. Some councils have suggested that small takes should only require measurement where a resource is highly allocated, or where the cumulative effect of smaller takes is significant.

On a national basis it is estimated that 44 percent of the cost (PV10% cost $19 million) of the NES is associated with take rates of less than 10 L/s, and that these takes account for 4 percent of the total unmeasured annual allocation by volume. The large proportion of cost (34 percent) associated with takes of less than 5 L/s arises because of the large number of consents and the assumption that under the status quo currently unmeasured takes of this size are exempt by many councils from the requirement to instal measuring devices. Approximately 57 percent of cost is associated with the measurement of takes of less than 20 L/s. These takes account for just 8 percent of the estimated unmeasured annual allocation.

Submissions and key informant interviews have repeatedly raised doubts that the industry can install approximately 14,200 water measuring devices over a five-year period. If the proposed timeframe for achieving comprehensive measurement of consented water takes were extended to 10 years following gazetting of the regulation, the PV10% cost would be reduced by 34 percent − from ≈$43.5 million to ≈$28.6 million.