Andy Pearce: Water prices not too costly

Dr Andy Pearce

I'd like to thank Simon Cowan for his questions posed in his Talking Point on Friday, August 28. They are important and we welcome the opportunity to answer them again.

The first point I am keen to address is the question around whether the water is too expensive at 26 cents per cubic metre. Our farm economics consultants confirm that a wide range of land uses are viable at this price. There is detailed information about this in the Feasibility Report provided to HBRC by its own staff in October 2012. The on-farm economics were robustly tested in the Board of Inquiry hearings.

The recent Barrhill-Chertsey irrigation scheme in Canterbury is charging 27c per cu/m to farmers producing a wide range of small seeds, arable crops, red meat and some dairy - a similar mix of land uses that we expect in Ruataniwha. That's a "real-world" test which confirms that 26c is not too expensive.

Farmers now need to each assess this proposition for themselves. While the use of water is viable across many farming types it can be optimised by the particular mix of land uses that best suits a farmer's situation. Farmers are now in possession of accurate information provided by consultants and they will be working through the impact on their farm and will decide what is best for them.

What's the investment mix?

The scheme is to be funded by a mix of public and private investors including HBRC, Crown Irrigation Investment (CIIL); and private sector investors. In October we expect to recommend one of five private sector investors as preferred. HBRC expects a 6 per cent return on its investment. CIIL will expect a return on its investment, which is still to be finalised, but is unlikely to be as high as the public sector discount rate.

We don't believe this scheme could have been fully financed by farmers and based on history very few have been. By way of example Opuha in South Canterbury was initially 70 per cent funded by Local Government entities. Farmers have since been invited to invest in the project, through a special limited partnership.

Enough water has to be contracted for the scheme to work. Initially we believed 40 million cu/m (c 40 per cent of the water) would be sufficient. However, with the popularity of the discounted rate for existing deep groundwater users we now think we need to contract around 45 million cu/m to make the scheme economic.

Is there enough rainfall to fill the dam?

Rainfall availability is sufficient. This was robustly tested in the Board of Inquiry hearings. In an average year just over 200 million cu/m of water will flow into the scheme's reservoir. Of that, 44 million cu/m will be released in the environmental flows, including the flushing flows, and to maintain minimum flows further downstream; 104 million cu/m supplied for irrigation, and the remaining 52 million cu/m will flow down the river. So, in an average year just half the inflow will be used for irrigation. In dry years, the inflow has to be at least 25 per cent less than normal to have any impact on the water available for irrigation.

As we bring all the elements of this multi-million dollar project together it is important to remember why we are doing this - to improve the quality and quantity of the water flowing down the Tukituki River, provide farmers with a secure irrigation source in a drying climate and to give our region the lift it needs to hold its own in regional New Zealand.

For those wanting more detail this information is also available on the Hawke's Bay Regional Council website in the Ruataniwha Water Storage Scheme Business Case to Council (March 2014)

-Dr Andy Pearce is the chairman of Hawke's Bay Regional Investment Company. (HBRIC)

-Views expressed here are the writer's opinion and not the newspaper's. Email: editor@hbtoday.co.nz