Phyllis Tichinin: Numbers don't add up on RWSS

Phyllis Tichinin

THERE is still no meaningful financial information on the Ruataniwha Water Storage Scheme (RWSS). Maybe that's why the second most savvy infrastructure investment company in NZ, Trust Power, has followed the most experienced - Morrison and Co - and walked away from the project citing too much risk. Deloitte was recently commissioned by Regional Council's staff to review the HBRIC dam investment company's business plan but have left Regional Councillors without a credible, written business case evaluation.
So, to help shed more light on the topic, I've done some consulting around with academics who specialise in ag project financing and come up with the following:
The projected amount of inflow to the dam is suspect at best. The flow of the Makaroro River has not actually been measured above, or at, the site. This is a dry catchment and historic records indicate the annual inflows could vary fourfold. Back-to-back dry years could easily mean there wouldn't be enough water for irrigation just when it is needed most.
The contract farmers have to sign to get RWSS irrigation water will say they have to pay for a set amount of water each year. When it's a wet year and they don't need to irrigate they have to pay anyway. In a prolonged drought and the water in the dam runs out they have to pay anyway whether they get the water or not. Jeez!!
A sleeper provision is Board of Inquiry's requirement that sediment build-up be removed from the dam. This is virtually impossible and is likely, by itself, to make the dam uneconomic.
The Opua Dam in Canterbury is held up as the example of why the RWSS is such a good idea. Here are the comparisons:
The Opua cost $35 million to build in 1998 which would be about $42 million now. The RWSS, at $300 million plus, will cost 7.5 times more but hold less than half the amount of water. But be aware, dam projects historically have cost overruns of 80 to 150%.
The RWSS is being sold as irrigating 25,000 ha of land even though the BOI figures indicated 17,000 ha. The Opua only supplies 16,000 ha. That could be because the rainfall in Canterbury is about half of what it is in CHB. Hmm, perhaps rainfall/water isn't really the limiting factor for production here.
The Opua is entirely farmer owned. The RWSS would be mostly investor owned and backed by the full faith and credit of the HB Regional Council, read, the ratepayers.
The surge in crop production and processing experienced with the Opua irrigation water was without the nitrogen limits that will be imposed on the Ruataniwha Basin.
The annual water cost to Opua Dam farmers is about 11 cents per cubic meter/ha. The projected cost for the RWSS is 23 cents/m3/ha AFTER a public sector (taxpayer) subsidy of 20 to 25 cents/m3/ha. So actually the RWSS water costs more like 40-50 cents/m3/ha.
Even with this massive subsidy, the RWSS apparently needs to sell 104 million cubic meters of water each year in order to be financially viable. The scheme relies on 100% farmer uptake of that water.
Each of the four HBRIC commissioned reports use different projected water flows varying from 91 to 104 million cubic meters per year. As the dam is likely to supply less than 93 million cubic meters, and the Makaroro summer river flows cannot be increased, where is the difference going to come from?
So we're all being told that our dam is a good idea because the Opua Dam has delivered well, even though Opua has 100% higher water inflow, irrigates 40% less land and supplies water at one quarter of the price. This has gone beyond farce to involving what cannot be delivered. That may constitute fraud.
The HBRC reports predict half of the irrigated land in the Basin would become dairy farms. Each 300 ha dairy farm will use about 30,000 households worth of water per day while irrigating. During summers with all those dairy farms irrigating that's about 1 million households worth of water a day. Might it be more profitable to simply continue sheep and beef farming and sell the excess water to the Chinese?
Let's face it. This is not a good idea. The whole process lacks transparency. Some form of water storage in the Ruataniwha is needed but it could be smaller scale, inexpensive and farmer-owned. There are lots of more productive things to do with that $80+million in ratepayer money which could benefit CHB farmers, rather than encouraging them to sell their land or sell their souls to the Australian banks.
Things like developing a CHB centre of dry land farming excellence where R&D innovation, driven by local input and experience, could create new dynamics in soil fertility and water holding that could then be taken to the rest of the world. But funds for that sort of innovation are being melted away by the irrational exuberance of Regional Council staff and farmers who haven't crunched the numbers or who are expecting us to pay up to vastly increase their land values and retirement package. And everybody's okay with this?
#Phyllis Tichinin is a farmer, a biological soils consultant and a specialist in the use of plant-based animal remedies. Based in Havelock North, she trained as an environmental manager and held higher level policy analysis positions in that arena in the USA.