A South Island council faces a stark choice – build an expensive dam with considerable financial risks or immediately impose water restrictions that will cripple some businesses. David Williams reports.

It was during the summer of 2000-2001 that the effects of over-allocation of water from the Waimea River, at the top of the South Island, became abundantly clear.

With only a sprinkling of rain over five months, the river dried up. Unprecedented water restrictions came in for the Tasman district and neighbouring Nelson. Commercial growers on the Waimea Plains couldn’t irrigate to grow and ripen their produce. Economic losses were thought to be in the millions of dollars.

It had been known for years that water from the Waimea River and its associated aquifers were over-allocated – that there were more water-take consents than there was water to take. That false economy was exposed in an ecological disaster that quickly flowed through to humans.

Councillor Tim King, now the Tasman district’s deputy mayor, was involved in water rationing decisions in 2001. “I still remember those meetings and having to decide who was going to be rationed and by how much,” he tells Newsroom. “It got very serious. It was quite a sobering experience and one I wouldn’t like to have to go through again.”

During the big dry, Tasman council shut down three urban water supply bores because of saltwater contamination risk. Two were decommissioned. King says the council had organised contractors to push a big gravel bund across the bottom of the Waimea River to prevent saltwater coming up. But, on May 10, the rain started falling and the issue evaporated.

In spring 2001, as nerves frayed at the possibility of another dry summer, the Nelson Mail editorialised: “The region’s political leaders need to get their collective heads around the need for a well-planned strategy – both short and long term – to deal with the twin pressures of burgeoning demand for water and a possible trend towards repeated summer droughts.”

(Dry weather and droughts remain a constant – the council has imposed water restrictions nearly every summer since 2001.)

The dam plan

A water augmentation committee was established in 2003, leading to years of discussions, reports and feasibility studies, that have distilled to one plan. That’s for a 53-metre-high dam to be built in the Lee Valley, above the plains in the Richmond Ranges, creating a storage lake covering 87.5 hectares, an area larger than the 75-hectare Auckland Domain.

Dam water would boost river flow and shore up the public drinking water supply, including the urban areas of Richmond, Mapua and Brightwater. But concerns remain – over escalating costs, environmental damage from increased irrigation, and whether commercial water users are paying enough. It also appears to be caught in a national backlash against large dams, especially those helped by the public purse.

Time’s running out for the Lee Valley Dam. A $26 million shortfall has to be filled – and fast. (Cost savings of some $3 million in the design have already been identified.) If the project doesn’t reach its so-called “financial close” by November, a promised $35 million central Government loan will expire.

Tomorrow’s Tasman District Council meeting looms as one of the most important in its history. Given the dam debate’s track-record of protests, finger-pointing, and selective and disingenuous statements, there’ll be some feeling in the room.

“It’s the biggest point of division that we’ve had,” says Tasman Mayor Richard Kempthorne, who backs the dam proposal. The current capital cost is $102 million, with Tasman ratepayers expected to pick up $38.6 million. The responsibility weighs heavily with Kempthorne, who notes “our ratepayers haven’t got a bottomless pit of money.”

Where the water crisis forks

The fact of a water crisis is uncontroversial – all sides agree there is one. Where opinion forks is the best way to handle it.

“There’s no doubt that Tasman is in serious water trouble,” Forest & Bird solicitor Sally Gepp, of Nelson, says. Another incontrovertible truth is an extreme over-allocation of water – “to irrigators”, in her words.

Dam-backers say water storage will provide an environmental flow for the river and aquifers. Ecological flow has been earmarked 30 percent of the dam water. (Without it, because of the national policy statement on freshwater, the council will have to cut water use, immediately restricting new developments until an alternative solution is found.)

Opponents of a dam reckon there’s enough water in the aquifers, and the council, that gave away too many water-take consents in the first place, should just cut them back. That’s an attractively cheap option, to some. Businesses who rely on the over-allocation should just suck it up, the argument goes, and the irrigators, if they want more water, should damn-well stick their hands in their pockets and pay for it.

But this simplistic and selective approach ignores a council’s responsibility to the whole community, including businesses, some of which will stop operating without water. In terms of there being ample water in the aquifers, the council says the issue is one of water level. “Abstraction will draw the water level down to a point where it detrimentally affects the flow in both the Wairoa and Waimea Rivers.”

“It seems like we’re venturing into the unknown by providing for additional water to be used for unknown land uses, which may exacerbate the existing issues of pollution.” – Sally Gepp

Twenty percent of the dam’s water would be set aside for urban water, including commercial and industrial users. That leaves 50 percent for irrigation – not just existing irrigators but for pumping water over new areas. Which leads to a potential water quality issue.

Forest & Bird’s Gepp says the mix of future land uses are not clear and parts of the Waimea Plain are already polluted by nitrogen-nitrates. “It seems like we’re venturing into the unknown by providing for additional water to be used for unknown land uses, which may exacerbate the existing issues of pollution.”

The flooded area of the dam includes public conservation land, part of the Mount Richmond Forest Park, with high-value ecology. There’s a population of endangered snails, Wainuia nasuta snails, and a nationally critical plant species of shovel mint, Scutellaria novaezelandiae.

Nelson MP Nick Smith is supporting a local bill, in the Tasman council’s name, to get around environmental protections of conservation land. But Forest & Bird warns that might set a “moral precedent”.

Smith is resolute. He says the Lee Valley is remote and has negligible recreation use. “The benefits from the dam, in increasing water quality and minimum flows in the river, far outweigh the relatively small effects of inundating this small area.”

Smith and irrigators point to the fact the Department of Conservation and Fish & Game were involved in the water augmentation committee. The MP and former Cabinet minister says the dam is “strongly supported” by Nelson/Marlborough Fish & Game.

That’s not what regional manager Rhys Barrier says, however.

Barrier says Fish & Game wants the council to fix the historic over-allocation to restore the Waimea River’s health – how councillors do it is up to them. But should the dam be built, he adds, the Waimea River will be a lot healthier during an average or dry summer.

(A key benefit, Barrier says, is to protect the lower Waimea drinking water bores from saltwater – potentially catastrophic for Richmond’s lower Queen St aquifer. “Saltwater intrusion can occur if aquifer levels get too low and given the way sea levels are tracking, the risk here is only going to increase.”)

Council enters joint venture

Tasman District Council – one of the country’s six unitary authorities, which means it’s also a regional council – formed a joint venture with Waimea Irrigators Ltd, Waimea Water, to pursue the dam project.

Waimea Irrigators chairman Murray King says if the dam idea’s quashed, businesses will move from the area. Irrigators will be unlikely to invest more money to expand. “Effectively what it does is it stifles economic development in the region – also affect the growth of region, even by constraining water supply for extra housing.”

The council’s report says without a dam, when the Waimea River is low, water-take permits could be cut back “by as much as 100 percent”.

King bristles at suggestions the extra irrigation might pollute the very waterways it’s trying to save. “This area is already heavily irrigated. And when people say that it’s going to lead to more nitrates and things it’s just not true.” (However, he adds the disingenuous line that “farmers are not in the business of wasting resources”, which, if true, would mean councils wouldn’t have to impose rules to fence off waterways or limit farm runoff.)

Nelson MP Smith says a Tasman dam is the only practical way to address the significant environmental problems of the minimum flows being too low in the Waimea, resulting in regular algal blooms and a lack of recreational opportunities and ecological health. There’s also risks to the regional economy.

“We now face a choice in the Waimea Basin of effectively slashing the amount of water for horticulture, with massive implications for jobs in the Nelson economy, or proceeding with the Waimea Community Dam that will provide us with the opportunity to address these environmental issues and maintain our key horticultural industries.”

That said, the community’s biggest challenge, according to Smith, is how to fund it.

Escalating costs

Tasman ratepayers have watched in horror as the project’s initial budget of $42 million in 2009 climbed to $70 million in 2014 and, last month, to $102 million, with a funding gap of $26 million. (Kempthorne said in 2014 if costs went up to $90 million the project wouldn’t proceed. But he says that was at a time when ratepayers were to pay the dam’s total cost.)

The latest cost blowout has lifted the council’s input by almost $12 million, to $38.6 million. A district-wide rate will climb from $29 to $46 per property, while a rates hit in so-called “zones of benefit” could cost an extra $199 a year.

It’s on the issue of costs that both sides score their biggest hits.

Supporters of the dam ask ratepayers to look beyond their capital contribution (plus 51 percent of the operational costs, or $864,000 a year) to what they’re not having to pay. Irrigators will stump up $50 million, with help from a $35 million Crown Irrigation Investments loan, there’s $7 million from another Government fund for freshwater improvement, and the Nelson City Council’s agreed to provide $5 million. That’s more than $60 million of outside money.

Kempthorne says: “If we don’t have a dam, then we will have to look at other augmentation options. But just about for everyone involved, they will be considerably more expensive.”

Costly to go it alone

The 17 other areas considered for large-scale water storage are likely to be more costly than Lee Valley, the council says.

Some of the other sites don’t provide the same protection against droughts, can’t provide enough of an increase to cope with future water use demand or won’t be able boost river flow enough to meet the Waimea River’s minimum flow. One option, known as Riverside Pond, would cost $60 million to provide about 62 percent of the “urban water” flowing from the Lee Valley Dam. And its operational costs are far higher, at almost $2 million a year.

Rainwater tanks, something advocated by environmentalists, might cost householders more than $5000 each, the council says. Compare that to $1350 for the dam. There are also the council’s sunk costs to consider if the dam plan is scrapped – roughly $8 million.

Another points-scoring argument comes from Waimea Irrigators’ King: “The more you delay the project, the more it costs.” But then he adds that delaying have often been “instigated by the naysayers”, when it appears the project’s biggest hurdle has been funding.

(Consents for the dam were granted in 2015. Forest & Bird dropped its appeal after extra conditions relating to snails and shovel mint were added. Considering the recent revival of its opposition, Nelson MP Smith accuses Forest & Bird of changing its tune. “That is why I do not give great weight to Forest & Bird.”)

A matter of fairness

The dam-busters, if you like, also have a solid string of money-related arguments. Chief amongst them is fairness.

Tasman councillor Mark Greening says the community’s paying for vast amounts of water security it doesn’t need. “If we’re only securing 18 or 20 percent [for urban water], surely you’d only be paying 18-to-20 percent of the dam costs – but also the running costs.” The council report for tomorrow’s meeting says in “hectare equivalents”, about 70 percent of the dam’s  “extractive capacity” is for irrigation.

Greening accuses irrigators affiliated to the dam project of talking up the financial benefits and not fronting with the money. “Instead they’ve supported a funding model that reduces their exposure and increases ratepayers disproportionately, to the benefits. An alternative funding model was available – user pays – but they couldn’t afford it.”

Forest & Bird’s Gepp notes there’s an application for the dam to get $18 million from the Government’s provincial growth fund. “It just seems that there’s no limits to the extent to which this scheme is trying to tap into the public purse.” She calls it a “massive transfer of wealth from the public to private beneficiaries, because this scheme is only going to get off the ground if the public subsidises it”.

It’s true the project would probably die without Government support, but this argument is selective. Waimea Water announced in April that landowners on the Waimea Plains committed to spend $16.5 million to buy more than 3000 water shares. (That commitment allowed Waimea Water to access low-cost debt through Crown Irrigation.) So farmers are paying millions. And the subsidy is a low-cost loan.

But that initial public offering was the bare minimum for the scheme to be viable. Waimea Irrigators’ King – who’s adamant irrigators are paying a fair share of the dam’s cost – is confident more farmers will sign up. “It will only take one drought for many people to come on board. And in many cases, the cost of this will pale into significance compared to the cost or the impact of drought on their business.”

“The risks only get larger as the project gets larger.” – Mark Greening

Fair share or not, part of the Crown Irrigation agreement is the council will underwrite the irrigators’ debt. When the loan matures in 15 years it’ll be refinanced at commercial rates. If it all goes wrong, the council will be expected to step in to protect its own investment and the benefits to the wider community.

King says, yes, in an unusual or extreme event, if irrigators were unable to refinance their outstanding debt, the council would use rates to recover the money. “Irrigators will not want to be beholden to the council so they will just do what they normally do and they will go to a commercial bank and they will refinance it.”

(A local accountant, Ian MacLennan, estimates it might cost up to $400 million to repay the dam loans, with ratepayers picking up the lion’s share.)

Tasman council’s other problem is debt. Greening says it’s already high, per head of population. Council numbers compiled by the Taxpayers’ Union last year shows Tasman’s financing costs per ratepayer were $393, against a national average of $264.

About 50,000 people live in the district, with 20,224 residential ratepayers. Its net debt on June 30 was $141 million – $18 million lower than forecast. Compare that to nearby Nelson City and Marlborough councils, which have roughly the same rating base and have $120 million and $96 million, respectively, of net debt.

Tasman’s latest 10-year plan sees that net debt hovering at its limit of $200 million for the next four years, giving it little headroom if things go wrong. One of those things is a cost overrun, which the council is liable for. Already, because of the increased estimated costs, the council is having to delay other projects to stay within its debt limits.

Paying for a dam, and underwriting the loans, puts the Tasman community at substantial financial risk, Greening says – “and the risks only get larger as the project gets larger”.

Make or break

Kempthorne has used his casting vote to get several council dam decisions across the line – and may have to again at tomorrow’s meeting.

The mayor’s framing it as a vote for the future. “It is quite stark as to whether people can see the value of providing for the community for the future or actually looking at our issues, ‘for me, now’.”

Greening, however, holds out hope “someone’s conscience will be pricked”. He notes several councillors were holding out for more information at the last vote.

People outside the Waimea Basin, such as those in Golden Bay, might object to paying for a dam, but the council can’t do nothing. If the vote fails, the council has to scramble to find an alternative.

Fish & Game’s local boss, Barrier, says: “If they don’t do this [dam], I’m not sure what they’re going to do.”

If the dam is scrapped, Tasman’s council will immediately enact tougher water controls. Based on council figures, that means in nine out of every 10 years, urban water takes could be cut by 25 percent, with a 50 percent reduction for other consented takes. Some businesses won’t be able to operate.

Council staff make their case

It’s clear what Tasman council staff think. The council report for tomorrow’s meeting, written by chief executive Janine Dowding and four senior managers, is almost artistic in the way it railroads councillors into voting for the dam.

If the dam doesn’t go ahead, “there will be a substantial financial and economic loss to the Nelson-Tasman region”. (A report last year, put “losses”, or financial benefits not gained, at between $859 million and $1.13 billion.) In a technical sense, staff say a no-dam decision “would be inconsistent with the council’s long-term plan”.

Any alternatives to a dam are “likely to take several years to develop”, the report says, “assuming there is an affordable alternative to the dam”. In any case, an alternative might only address “the short-term urban water needs”. Until such an alternative is found, the Waimea River “will continue to have compromised health”.

But the ultimate get-out clause for councillors worried about a public backlash is the section of the report dealing with public opinion. “Commentary from members of the public is generally in the nature of views and preferences (which the council is obliged to consider). As to technical and financial matters, the council may be expected to rely on expert professional advice.” Staff and specialists are “professionals who are recognised experts in their field”, the report says, noting “they have professional membership and indemnity cover”.

Trust the experts, the report seems to say. And Tasman councillors may well do that, voting for a rates-increasing project that piles on long-term debt and takes on serious financial risks. No matter the benefits, environmental and economic, councillors might also like to remember that it’s not experts who elect them.

David Williams is Newsroom's environment editor, South Island correspondent and investigative writer.

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