This article was first published in the April 2023 Resource Management Journal, the Official Journal of the Resource Management Law Association of New Zealand Inc, see here.
Allocation of freshwater in the current resource management regime is typically based on the first-in first-served approach. That approach allocates freshwater according to which party files a complete application for resource consent first. It is not expressly set out in the provisions of the Resource Management Act 1991 (RMA) itself but has been developed by the courts applying administrative law principles.
The Supreme Court has expressed some potential reservations with first-in first-served in Ngai Tahu Property v Central Plains Water Trust  NZSC 24. More recently, the Resource Management Review Panel recommended a shift away from allocating freshwater under the first-in first-served approach, noting that the approach has created inefficiencies and unfairness because it prioritises those with an existing allocation at the expense of potential new users. The Panel considered (amongst other things) that under the first-in first-served approach there is little incentive to encourage efficiency in water use and little ability to resolve “paper” over-allocation in some circumstances under this approach (where a water body is over-allocated if all consents were fully utilised, but where consents have not been fully utilised in practice). The Panel also found that the existing system disadvantages Māori, where land is returned through treaty settlements and Māori are not able to improve the land through irrigation.
Following the Panel’s recommendations, there has been a significant shift in the approach to freshwater allocation under the Natural and Built Environment Bill (NBE Bill) introduced in November 2022. Below we consider the key aspects of the proposed new approach, as well as the potential implications to end users that rely on freshwater takes. Overall, we consider that the combined effect of the various changes undermines the certainty of freshwater resources for end users. The proposed changes are also duplicative to some extent – the NBE Bill reduces the consent term available for water permits, to enable councils to review consent conditions and the efficiency of freshwater use more frequently, but at the same time introduces greater review powers, which has the same effect (if used correctly).
While the first-in first-served approach is not perfect, and change is required, recognition of priority and existing investment needs to remain central to any new allocation system. Having certainty of freshwater supply and duration is essential for users to continue operating and thriving in New Zealand. Certainty is central to enabling investment being placed in water-related infrastructure and industry.
Freshwater allocation under the Natural and Built Environment Bill
Under the NBE Bill, the first-in first-served approach to freshwater allocation is replaced by judgment or criteria yet to be determined, based on the high-level principles of equity, efficiency and sustainability.
The provisions of the NBE Bill provide that:
Regional plans must include rules that require one or more allocation methods to be used for taking, diverting and using freshwater (surface and groundwater), and the capacity for freshwater to assimilate a discharge of contaminant.
Allocation methods selected by the regional planning committee must have regard to the resource allocation principles of sustainability, efficiency and equity set out in the NBE Bill. These allocation principles are high level directions and it is expected that further detail will provided through the development of the national planning framework.
The allocation methods selected must also be consistent with any direction or definition in the national planning framework. Ultimately this means that the allocation of freshwater will need to be consistent with the principles of Te Mana o Te Wai as set out in the National Policy Statement for Freshwater Management which will be rolled over into the new national planning framework. In accordance with Te Mana o Te Wai, the health and wellbeing of water bodies will be the first priority, followed by the use of water for human health needs (including specifically drinking water).
Market-based allocation methods (ie trading water permits) cannot be used in relation to taking, diverting or use of freshwater.
A Freshwater Working Group must be established to make recommendations on freshwater allocation, and a process for engagement between the Crown, iwi and hapū on freshwater allocation at the regional or local scale. The Working Group is required to provide its report to Government by 31 October 2024 and the Minister must then respond to the report and engage with iwi and hapū at a regional level and prepare allocation statements. Allocation statements are then provided to regional planning committees. However, the NBE Bill leaves discretion to the regional planning committees as to how those allocation statements are taken into account.
The NBE Bill does provide that existing consent holders have priority over other applications when seeking a replacement consent for a freshwater take. In considering the replacement consent, the consent authority is also required to consider the value of the existing consent holder’s investment, the efficiency of the use of the freshwater resource, the use of industry good practice and the applicant’s compliance history.
Consent duration under the Natural and Built Environment Bill
The Resource Management Review Panel considered that freshwater permits could have shorter durations, which would require them to be reconsented more frequently. This has been reflected in the provisions of the NBE Bill whereby the maximum consent duration for taking freshwater is now 10 years (compared to 35 years under the RMA currently) except in limited circumstances including where required for a community reticulated water supply. The NBE Bill also makes targeted amendments to the RMA whereby water permits granted after the NBE Act comes into force expire three years after the combined plan for that region is notified unless an exception applies.
While a shortened duration will enable councils to review consent conditions and the efficiency of freshwater use, this can also be achieved through the increased review powers proposed under the NBE Bill as well – the changes are somewhat duplicative. A shorter consent duration may have implications for industry investment if there is not the same certainty of water supply at a particular location. A longer consent duration provides greater certainty to end users and, the increased review powers under the NBE Bill ensures councils can review consent conditions and the efficiency of freshwater use over time.
Implications that result from the new approach
As with all elements of RMA reform, the transition to the new system of freshwater allocation will be critical and lawmakers and councils will need to ensure there is a just transition.
While there needs to be more nuance than a blunt first-in first-served mechanism, the proposed approach under the NBE Bill leaves the allocation method largely to be determined by regional planning committees. This will mean end users need to be involved in regional planning processes to ensure allocation methods result in planning rules that are workable.