Who killed Project Aqua?

The demise of Project Aqua prompted alarm calls that New Zealand's bureaucratic hurdles were the death knell of any major project. GEOFF CUMMING investigates


Here's a story you won't hear from business leaders and Opposition MPs about the Resource Management Act. It's about a massive, $450 million project facing a gauntlet of objections from Maori, greenies and locals raising hell about cultural concerns, health effects and environmental damage.

It's about how lengthy consultation with these groups actually improved the design and ensured a smooth ride over the resource consent hurdles.

How, as a result of community input, the five-year construction programme came in on time and within budget, without the protests and ongoing fallout that can afflict major works.

The project, Watercare's replacement sewage treatment plant for Auckland, is one of the biggest tackled under the RMA. The new plant opened a year ago and is credited not only with ending odours from the notorious old sewage ponds but also with considerably improving water quality in the Manukau Harbour.

"We decided to put our money into quality discussions and reporting rather than funding lawyers through the various stages of consent and long and expensive litigation," says Watercare's wastewater general manager Craig McIlroy.

Consultation took three years but it ensured issues such as Maori sensitivity about discharging effluent into the harbour were addressed without going to court.

But listen to the chorus after Meridian Energy canned Project Aqua, the $1.2 billion hydro scheme for the lower Waitaki River. "This project was scuttled because of the Government's refusal to address the constraints in the Resource Management Act," said National's energy spokesman Roger Sowry. Act said the legislation had to be urgently revisited.

"The Resource Management Act continues to deliver huge and expensive uncertainty to large developments," said Business New Zealand chief executive Simon Carlaw.

Other electricity generators, Contact Energy and Genesis, chimed in. Contact's Steve Barrett said Project Aqua's fate highlighted the difficulty of gaining consents for major developments and limited the



options for using renewable energy to create new power stations. Genesis cited RMA issues as one reason it had not yet committed to a new gas-fired plant at Huntly.

For business leaders, Project Aqua's demise is the Big Bang - proof that they have not been crying wolf all these years about the creeping paralysis of the RMA.

If they're right, the implications are scary: that this is a country where you cannot move for red tape and that big projects in the national interest haven't a bolter's chance. But is it as simple as the RMA? Actually, no.

Getting to the bottom of Project Aqua's shelving is like a modern variation on Who Killed Cock Robin?

"Not I," say farmers after the Waitaki's water.

"Not I," say residents and recreation groups.

"Not I," say Meridian bean counters and engineers.

"Not I," says the Government.

Even Meridian isn't pointing the finger solely at business' favourite whipping boy - the RMA. Of the nine reasons the State Owned Enterprise's chief executive Keith Turner gave for pulling the plug, most were broadly related to the resource consent process: things such as additional costs arising from extended consultation, increasing mitigation costs and "whether Meridian would secure a consent".

But Turner pointed to other potentially crippling issues: geotechnical investigations that revealed the need for design changes "with an adverse impact on project economics" and a pending High Court case challenging Meridian's claim to the rights to all water flowing into the upper Waitaki - water from as far upstream as Lake Tekapo.

In essence, said Turner, a combination of circumstances - "a series of commercial uncertainties" - made the risk of continued spending on the project unacceptable.

This, of course, was not the message put around by business leaders and Opposition MPs.

"It's become a mindless mantra for the business community," says Environmental Defence Society chairman Gary Taylor. "The Business New Zealand anti-RMA campaign has been completely overstated."

What's often forgotten is that the RMA is "enabling" legislation that allows development if the effects can be remedied. Most projects are approved - even if they are put through the hoops.

One of the few big projects blocked under the RMA, says Taylor, was the proposed Meremere power project using rubbish as fuel. "It would have caused considerable air pollution."

Opponents of Project Aqua say this week's collective shudder - that the country is running out of power and that this is all down to the RMA - forgets one thing: maybe Project Aqua wasn't shaping up as the quick-fix answer to our power woes.

Maybe, they say, the project's shelving vindicates the RMA - legislation supposed to promote sustainable development. The requirement to consult and do detailed analysis before seeking approval unearthed problems that blew the project out of the water. The RMA saved us from another Think Big disaster.

Meridian always said Aqua was a knife-edge proposition. When it was launched in 2001, with a target generation cost of 3.5c a kilowatt hour, the SOE said it would be forced to abandon the project if it hit any major obstacles. By January this year, generating cost had climbed to 4.5c and Meridian warned it would need to produce electricity for less than 5c a kilowatt hour to be economically viable. Even it it gained all the approvals needed, Project Aqua still had to be "a value proposition for the company - financially, environmentally and socially sound".

For Aqua opponents in tiny Kurau, on the Waitaki River, Meridian's decision shows how far we have come since the Think Big era, when then Prime Minister Rob Muldoon used special legislation to push through the Clutha high dam, flooding much of the Clutha gorge and destroying communities.

"There's nothing wrong with the RMA," says Kate White of Save the Waitaki. "It's being used as an excuse. Aqua wasn't environmentally sustainable and it shouldn't have gone ahead.

"The way [Meridian] have dealt with the community has been terrible. They've caused a huge amount of social damage. If [the RMA] stops this sort of thing happening then it's a good act."

White says Meridian's approach was a demonstration in how not to consult. "They didn't have a relocation plan and they didn't have a workforce plan. They were losing on all fronts. I would love to see the geotechnical report - I'm sure there were major problems with it."

Factored into the cost of the project were several mitigation measures, including an offer of $6 million for a community trust (and $1 million a year thereafter), an irrigation scheme and recreation lakes.

But as Meridian struggled last year to win over locals, another fishhook surfaced. The Aoraki Water Trust, a group of 255 South Canterbury farmers, lodged plans to build an irrigation canal to take water from Lake Tekapo, upstream of Meridian's control structures. Legal wrangling followed, with Meridian claiming its consent to take water for electricity generation meant all the water, Aoraki saying there was nothing to stop anyone taking water from upstream, or from streams flowing into the lake. Aoraki cited a 1969 agreement allowing water to be taken from the Waitaki catchment for irrigation and sought clarification from the High Court.

A week before Meridian called a halt, it asked the High Court to strike out Aoraki's claim. The court refused, saying the case should at least be heard.

In his announcement, Turner said uncertainty over water rights was an issue of national significance that could take years to resolve. He told the Herald: "Until then we have a grave doubt over existing hydro production, let alone new hydro production."

Aoraki's lawyer Phil Milne says Meridian is using water rights uncertainty as an excuse.

"To suggest that Project Aqua fell over because Meridian lost a strike-out application is just laughable. To suggest it threatens Meridian's existing operations is even more laughable," he says.

"These issues have not come out of left field, we've been raising them with Meridian for over a year. Exactly the same issue was debated in the Whanganui minimum flows case [which also involved Meridian] in the early 1990s."

Meridian's real difficulty, says Milne, was trying to fast-track a major project "and you can't rush things through under the RMA".

"The sensible thing would have been to sort out the water rights issues first and, once you know how much water you are going to get, you then know how much to invest in land acquisitions and near-final designs."

But he says the RMA doesn't deal well with water allocation - "there's room for an amendment on that".

Other McKenzie Basin farmers are after smaller amounts of water for irrigation. Then there is the question of the allocation of water for users of the lower Waitaki, where the planned 60km canal would reduce water flows by 70 per cent.

The Ministry for the Environment says the absence of a water allocation plan for the catchment represents a failure of the RMA (although fingers have been pointed at Environment Canterbury over the lack of a plan). Without one, it's first in first served, says the ministry's general manager David Brash.

It also meant applications to use water were dealt with individually rather than as a package.

To sort out the competing claims between environmental, recreational and farming groups for the remaining water, the Government ushered in the Resource Management (Waitaki catchment) Amendment Bill, which sets up a body to make allocations.

When the special legislation was announced before Christmas, National and Act MPs branded it an attempt to fast-track Project Aqua. But Meridian was far from happy when the select committee, chaired by Green Party co-leader Jeanette Fitzsimons, reported back last week.

Meridian spokesman Alan Seay says the catchment bill raised doubts about how much water Meridian could take, while likely appeals over allocations threatened "three to four years" of delays.

"We had restored proper RMA processes and the importance of broad ecological and amenity values and within a week Meridian had pulled the plug," says Fitzsimons.

Brash says Project Aqua has highlighted the law's inadequacies for dealing with water - an increasingly scarce commodity with increasing demand from power generators, farmers and other users. "We think the RMA is not sophisticated enough to cope with that demand."

Others suggest the rising value of water, and the question of property rights, are key issues not just for Meridian but for other hydro generators.

Moves to fix the problems predate the Waitaki kerfuffle. The Government announced a "water programme of action" in January last year to introduce more flexibility and efficiency to water allocation.

"We are not shying away from the fact we can improve the system," says Brash. "It's not impossible to get approval - we can show that's not the case. But as we get increased demand for scarcer water resources we need to get better and there's a whole lot of things we can do."

Which is the Government's response to business railing against the RMA in general - there's nothing that can't be fixed, no point in throwing the baby out with the bathwater.

In a rushed damage control exercise this week, the ministry assembled a list of big projects granted resource consent under the 1991 Act. Among them, the $120 million Clifford Bay ferry terminal; Meridian's $200 million Manapouri tailrace project in a national park and more than 20 other power generation schemes.

The "Good News" list omitted other success stories - Watercare's sewage plant, its Waikato pipeline, Auckland Hospital, the Fergusson container terminal extension and major roading projects, including the $160 million Orewa-Puhoi extension of the northern motorway through ecologically prized bush.

Transit, once a vocal critic of the RMA, has toned down its criticism since the Government took steps to streamline the consent process. A "joint officials group" of state and local agencies helped to cut through barriers to the Grafton Gully to Port motorway project.

Complaints of long waits for Environment Court hearings have also eased with improved funding and the appointment of extra judges. Acting Environment Minister David Benson-Pope says the backlog of cases awaiting hearing has reduced from more than 3000 in 2001 to 1500-and-falling. A new tracking system aims to ensure standard cases are heard within six months and urgent cases within three months.

"There's a lot of urban myth surrounding the RMA," says Benson-Pope. "A lot of improvements have been made which people haven't noticed yet. People are still running around with last year's information."

Which is not to say that business does not have legitimate gripes about costs and delays arising from the resource consent system, and abuses of consultation and appeal processes by objectors - far more commonly by business rivals than by iwi.

The review of the RMA announced this week will look at further streamlining, says Benson-Pope. Some local authorities are better than others at processing consents "and they are the ones that have got the economic development. There are some really simple best-practice things which can help people to pick up their act."

Other suggestions include sending major projects likely to be appealed direct to the Environment Court and easing the requirement to obtain separate consents for different aspects of a project.

Whether regulatory changes can breathe fresh life into Project Aqua - or big hydro schemes in general - is another matter.

Fitzsimons says Meridian was right to doubt it would have obtained the consents it wanted for such an environmentally damaging project.

"It would have been hard to get 70 per cent of our largest braided river and take it away.

"I think the end of large-scale hydro was signalled some time ago because all the easy, cheap, do-able sites have been taken.

"People say there's a big resource of hydro that could be developed and that's true if you don't actually care what you wreck. Every new scheme is more expensive and environmentally damaging than the last one.

"The writing's been on the wall for large hydro schemes for a long time. Even the Clyde dam couldn't get through the planning hurdles and that was pre-RMA."

Energy consultant Bryan Leyland, who has warned for a decade of a looming electricity crisis, says Aqua's canning is as much down to lack of planning as the RMA.

Aqua would have paved the way for more hydro station development, but Meridian's move has "destroyed the bankability of hydro".

"Project Aqua has sent a signal to everybody 'don't even bother'. Bankers won't finance what they perceive to be a risky project. They will just say 'Project Aqua was hydro, it's gone belly-up - how can you promise me yours will work?'."


Even Energy Minister Pete Hodgson says the days of large-scale hydro-electric projects are over.

"We are at a turning point in New Zealand's energy history," he told the National Power Conference in Auckland. Future hydro development is likely to be small to micro in scale."