Priority – High
Security Level – In Confidence
Distribution
Minister
Minister’s
Advisor
Minister’s
Office
Document Number:
B17-0675
20 November 2017
1982
Draft - Direction on the wind-down of Crown funding of water
infrastructure development in New Zealand
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Purpose:
This briefing discusses the initial steps in exploring the Government’s policy to wind down
uncommitted irrigation development funding.
Minister
Action Required:
Minister’s Deadline
Note MPI and Treasury will provide you with advice
on the implications of winding down Government
When convenient
support for irrigation.
Information
Agree to MPI and Treasury engaging with CIIL to
ascertain details of their commitments to inform this
By 24 November 2017
Minister of
advice.
Agriculture
Agree to sign the attached letter to the CIIL Board
Chair directing no new or extensions to
Official
commitments without Shareholding Ministers’
By 24 November 2017
approval
Agree to meet with the Chair and Chief Executive of
When convenient
the
CIIL at a time convenient to you.
Agree to forward this briefing to the Minister for the
By 21 November 2017
Environment and the Minister of Finance
CC Minister for Regional Economic Development
Under
Contact for telephone discussion (if required
)
Name
Position
Work
After Hours
Released
Responsible
Justine
Director Investment
s 9(2)(a)
Director
Gilliland
Programmes
Responsible
s
Manager Sustainable
s 9(2)(a)
Manager
9(2)
Resources and Programme
(a)
Coordination
Brief: B17-0675
Key Messages 1.
As part of the Confidence and Supply Agreement between the New Zealand Labour
Party and the Green Party of Aotearoa New Zealand, the Government has agreed
to wind down Government support for irrigation. The coalition agreement between
Labour and New Zealand First agreed to honour existing Crown irrigation
investment commitments.
2.
There are currently two vehicles delivering grant funding for water management and
infrastructure development (currently excludes on-farm infrastructure): the Irrigation
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Acceleration Fund (IAF), which was established in 2011, and Crown Irrigation
Investments Limited (CIIL), which was set up in 2013. CIIL also provides capital
funding for scheme construction, on a loan basis.
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3.
Both vehicles are currently set-up to prioritise irrigation expansion with less
emphasis on improving environmental outcomes or facilitating diversification of land
use (see
Appendix 1: A timeline and summary of funds/entities established; and
relevant budget information).
4.
Both the IAF and CIIL have existing projects in the pipeline detailed later in this
briefing, and the wind-down of both, CIIL in particular, will result in uncommitted
funds becoming available.
Information
Official
the
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Brief: B17-0675
Recommendations subject to your agreement 5.
The Ministry for Primary Industries (MPI) recommends that you:
a)
Note MPI and Treasury will provide you with advice on the implications of
winding down Government support for irrigation
.
Noted
b)
Agree to MPI and Treasury engaging with CIIL to ascertain details of its
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commitments to inform this advice.
Agreed / Not Agreed
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c)
Agree to sign the attached letter to the CIIL Board Chair directing no new
or extensions to commitments without Shareholding Ministers’ approval
Agreed / Not Agreed
d)
Agree to meet with the Chair and Chief Executive of CIIL at a time
convenient to you to discuss the process further.
Agreed / Not Agreed
Information
e)
Agree to send this briefing to the Minister for the Environment and Minister
of Finance by 21 November 2017
Agreed / Not Agreed
Official
the
Ben Dalton
Hon Damien O’Connor
Deputy Director-General
Minister of Agriculture
Sector Partnerships and Programmes
Under
for the Director-General
/ / 2017
Released
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Brief: B17-0675
Background
6.
New Zealand Governments have historically provided infrastructure for water
storage and distribution, but withdrew support in the 1980s. Less investment in
infrastructure led to individual irrigators applying for, and being granted, water takes
from groundwater and smaller rivers. Increasing demand and more variable rainfall
has resulted in over-allocation of these waterbodies, which, along with land use
changes, has resulted in deteriorating water quality.
7.
In recent times, the need for better off-farm water supply infrastructure emerged 1982
from the collaborative Canterbury Water Management Strategy process that began
in 1999. Conceptually, reliable water supply enables communities to be more
resilient to climate change, address over-allocation of groundwater and rivers, and
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encourage and enable more diverse and higher value land-use over time.
8.
The use of mostly already allocated water for productive use via on-farm irrigation
was a way to finance a majority of the water infrastructure needed (rather than from
taxation or rates). The downside of this approach has been that, in some parts of
New Zealand, particularly Canterbury, the most viable land-use to finance the
infrastructure has been intensive livestock, mainly dairy farming, which adds to
nutrient load and creates risk.
Crown Irrigation Investments Limited
Information
9.
As part of exploring winding down Government’s support for irrigation, it is proposed
MPI work with Treasury (as the joint monitoring agencies of CIIL) to understand
CIIL’s commitments. In line with the Government’s policy to see out these out,
discussions need to be had with CIIL to determine what projects are committed and
the level of resourcing that would be needed to see the current committed projects
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through to completion. A letter from shareholding Ministers to CIIL directing that, in
the interim, no new or extended commitments are made without shareholding
Ministers’ approval is attached for your use, as requested. It is also recommended
the
that you meet with the Chair and Chief Executive of CIIL, at a convenient time to
discuss the process further.
10. s 9(2)(b)(ii), s 9(2)(f)(iv)
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Brief: B17-0675
s 9(2)(b)(ii), s 9(2)(f)(iv)
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Information
11. s 9(2)(b)(ii), s 9(2)(f)(iv)
Official
Irrigation Acceleration Fund
12. In-line with the Government’s policy to wind-down support for irrigation, along with
the
the possible wind-down of CIIL, it is also proposed that MPI provide advice on the
Irrigation Acceleration Fund. Since the “IAF Transition” in 2016, CIIL has been
managing all large-scale IAF regional schemes and contracts (see Appendix 1 for
more details on this timeline).The IAF supports strategic water management
projects (such as the Managed Aquifer Recharge concept) as well as smaller scale
irrigation schemes through early stages of development.
Under
13. s 9(2)(b)(ii), s 9(2)(f)(iv)
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s 9(2)(b)(ii), s 9(2)(f)(iv)
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s 9(2)(b)(ii), s 9(2)(f)(iv)
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Appendix 2: Background
Crown support for water management and Infrastructure projects
1.
The Crown provides two types of support for Water Management and Infrastructure
development/construction:
•
Grant funding (government provides co-funding up to 50%, either through
IAF (MPI) or by CIIL depending on the scale of the project)
•
Capital Investment for construction of irrigation/water management
Infrastructure by CIIL.
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2.
Currently, The IAF and CIIL only provide grant funding for infrastructure to deliver
water to the ‘farm gate’
for predominantly irrigation use (not covered is on-farm
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infrastructure such as irrigation equipment, water storage ponds, or infrastructure
for other uses such as stock water schemes)
3.
s 9(2)(b)(ii), s 9(2)(f)(iv)
The Irrigation Acceleration Fund – managed by MPI
4.
The IAF currently supports two types of projects:
•
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Strategic water management studies: To identify challenges and
opportunities relating to freshwater management. These studies occur at an
early stage, to assess the feasibility and necessity for freshwater management
infrastructure at both a regional and community scale. These are always as
partnerships with regional/district councils.
•
Community irrigation schemes: Projects that help new, smaller community
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scheme developments and capital upgrades of existing community scheme
infrastructure. These proposals must be consistent with agreed regional
strategies.
the
5.
All eligible applications are assessed by an Investment Advisory Panel (includes
subject matter experts from areas of MPI) who make a recommendation to approve
the funding or not.
6.
Depending on the quantum of funds sought, funding is approved by the delegated
Under
MPI authority (usually the Director, Investment Programmes, Sector Partnerships
and Programmes).
7.
The funding of each stage of development is individually contracted and the
approval of one stage does not assume the following stages will be funded. Each
application is assessed on its own merits.
IAF current live contracts under MPI management:
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o
Gisborne Managed Aquifer Recharge Feasibility - to improve the reliability of supply
of the Makauri aquifer for irrigation of horticulture crops by supplementing the
aquifer with water sourced from the Waipaoa River.
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Brief: B17-0675
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Ashburton/Hinds Managed Aquifer Recharge Scoping Study – developing a
business case for catchment-wide system to use irrigation scheme water to improve
groundwater levels, lower nitrate concentrations and improve lowland stream flows
in the Hinds water management zone, supported by Canterbury Regional Council
under the CWMS.
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Rangitikei/Tutaenui Community Irrigation and Stockwater pre-feasibility –
investigating the potential for combining an upgrade of the Marton town water
supply with providing water for irrigated horticulture and stockwater.
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o
Bay of Plenty Freshwater Opportunities/Barriers - strategic water management
study to identify water infrastructure projects that could potentially contribute to
improved outcomes for the regional economy and environment.
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o
Strath Taieri Irrigation Scheme feasibility – community scheme concept to reliably
irrigate 2000ha of mainly sheep, beef and cropping land while also improving flows
in a significant stretch of Taieri River in Otago.
Crown Irrigation Investments Limited (CIIL)
8.
Note: CIIL has provided an independent briefing to your office which contains
details of their operations/processes and current projects under their management.
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9.
CIIL was primarily set up to invest in the construction of viable water storage and
distribution infrastructure projects based solely on the economic return from
irrigation. Support is provided by way of loans, with capital returned over a 10-15
year period.
a.
July 2016 - A change to CIIL’s constitution led to regional scale schemes
in progress being transferred from MPI management to CIIL to ensure
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commercial disciplines were applied earlier in the investigation stages.
b.
September 2017 - CIIL’s mandate was broadened to enable capital
investments into infrastructure projects with environmental benefits such
the
as the Waimea Dam.
Under
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Brief: B17-0675
s 9(2)(b)(ii), s 9(2)(f)(iv)
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the
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