Editorial: Dam project struggling to hold water

Hawkes Bay Regional Council chief executive Andrew Newman at the site of the proposed Ruataniwha Dam near Tikokino, Hawkes Bay. Photo / Mark Mitchell

Ratepayers in Hawkes Bay have every reason to expect accountability and transparency from a big irrigation project in the region.

Years in the planning, the Ruataniwha water storage scheme is designed to create a 320 hectare lake, held in place by an 80m-high dam. Over summer, farmers contracted to take water from the reservoir would have reliable flows during times of pinched supply for their stock and crops.

Dam construction costs, which includes getting water to the farm gate, were first estimated around $275 million.

A review released last week by the Hawkes Bay Regional Council included a higher figure of $333 million, of which $80 million was to be borne by local ratepayers and the rest by Government-owned Crown Irrigation Investments and possibly ACC, which has been identified as a potential investor. The cost to farmers also jumped, from $200 million to $556 million, for pipes and irrigators and other capital items.

So the regional project, which has already consumed some $16 million, will potentially have taxpayers shouldering risk, while promoters of the scheme have yet to confirm whether the enterprise has convinced enough farmers to sign up to buy water to justify the investment.

The promoters announced Monday of this week was D-day for farmers to get on board. Previously it has said it had countersigned contracts for 31 million cubic metres of water with a minimum of 45 million cubic metres needed to be sold to make construction financially viable. This was also the trigger point for the regional council to commit a further $66 million into the dam. But it appears the public will have a wait two weeks to learn whether this threshold has been crossed.

The scheme as designed could, according to the promoters, generate 3500 jobs and contribute $380 million to Hawkes Bay's GDP. Clearly it has the makings of a significant regional asset.

Yet warning lights have flashed throughout the gestation of the scheme. The regional council's investment company HBRIC has been looking for alternative institutional investors since Trustpower and Ngai Tahu pulled out in early 2014, saying the risks surrounding the dam were too high and the returns too low. One economist suggested the projected price of water was too high for farmers and too low for investors, leaving the dam "stuck in the valley of death".

A battle was waged over environmental impacts, and former Conservation Minister Nick Smith was accused of meddling in the scheme to overcome concerns about water pollution. And a judge who ruled on a challenge to the report of a board of inquiry declared the tribunal had created a "factual fiction" to allow the project to go ahead.

Irrigation projects, properly designed and funded by those who benefit from them, play a vital role in the New Zealand economy. Schemes which need rules bent to get them over the line and financial risks shifted to those who derive little if any benefit should have to clear a very high bar. The longer the Ruataniwha project takes to tick all the boxes, then the case for it proceeding becomes harder to sustain.

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