CIF Project - Wairarapa Regional Irrigation Scheme

Grant No: 08/07

Last updated: October 2012

Contact details

Name of Applicant Group: Wairarapa Regional Irrigation Trust (WRIT)
Contact person
: Geoff Copps
Address
: PO Box 920, Masterton 5810
Telephone 1
: 06 370 3290
Email
: geoff.copps@growwellington.co.nz

Project details

Status: Finished
CIF funding
: $135,000
Total project funding
: $365,000
Proposed start date
: 2008-07
Proposed finish date
: 2012-06
Region
: Wairarapa

Final Report - Community Irrigation Fund
Newsletter: April 2010

Project description

The Wairarapa Regional Irrigation Project is facilitating the development of a storage-based, region-wide irrigation scheme that will allow the utilisation of the high volume of water available from the Tararua Ranges in the times when the Wairarapa Valley is facing water shortages.

Like many Eastern areas of NZ, Wairarapa faces summer water shortages that place limits on the production and therefore profitability of the various land use types present in the region. Lack of reliable water is also limiting the ability for the future productive potential to be achieved. However, the Tararua ranges receive some of the highest annual rainfall in the North Island and it is this water that will be captured, stored and released via a water distribution system.

The potential command area within the Wairarapa Valley is over 50,000 ha with likely irrigation coverage of over 30,000 ha.

The issue/opportunity

The four issues that the project is addressing are:

  1. Environmental Stakeholder Engagement
    The project must demonstrate that it can satisfy the key environmental stakeholders that it can mitigate any adverse environmental effects the scheme may cause.
    By engaging with the key environmental stakeholders early in the planning process, it is believed that issues can be identified and solutions sought before the regulatory process begins.
  2. Potential water user support
    The scheme will not be viable unless there is sufficient demand for water at a price that is affordable to them and also high enough to meet the scheme costs.
    To achieve the necessary uptake, potential water users will need to have the land uses and management techniques explained and demonstrated to them. There is not a widespread awareness of irrigated land use options within the Wairarapa community.
  3. Wider Community support
    It will be important that the scheme is not seen as a benefit solely to land users but that it will generate wider economic and social benefit.
  4. Scheme Financing and Equity
    It is believed that there would be benefit from having a capital structure that allows for some equity from within the region. This may be from both the private and public sectors.

The final structure will need to recognise and cater for the different investment criteria and motivations of a range of investors.

The context/background

Wairarapa, like many rural areas in close proximity to major cities, is facing pressure on productive land from residential development. To ensure the maintenance of the rural productive capacity in the face of rising land values driven by this residential demand, higher value productivity off the land is required which can only be achieved through access to reliable water.

The ability to better control production also allows the increasing quality and consistent supply demands of the marketplace to be met.

Methods

  1. Environmental Stakeholder Engagement
    To achieve this engagement, an Environmental Stakeholder Group will be formed. This Group will be privy to draft scheme plans as they are developed and will be used as a sounding board for concepts and designs.
  2. Potential water user support
    Potential water users will be communicated with both individually and in groups via the existing channels such as farm discussion groups as well as scheme specific events such as field days and seminars.
    Use will be made of examples both from within Wairarapa and elsewhere of irrigated land use success stories.
  3. Wider Community support
    All forms of media will be used to communicate with the wider community about the benefits of increased irrigated land use in the region.
    We will also seek to ensure that recognised community leaders are supportive of the scheme goals.
  4. Scheme Financing and Equity
    Professional advice will be sought options for structuring similar infrastructure projects with NZ and offshore to endeavour to establish the best structure for this specific project.

Project Update:  June 2012

Investigations into the potential for the Wairarapa valley to store water in the winter and distribute it for a variety of community and agricultural uses during the dry season have intensified.  While project investigations are still very much in the preliminary stages, good progress is being made to assess the demand for water, its availability, options for storage sites and possible financial models.

Over the past six months a range of parallel studies have been working towards identifying a shortlist of potential storage and distribution schemes by the end of 2012.

The project's governance group which represents district and regional councils, iwi, environmental, agricultural and economic interests, met last week and endorsed the work plan. 

A separate advisory group representing iwi, environmental, farming, health, recreational, local government and business interests of 19 national, regional and local organisations aims to work collaboratively to provide feedback on project studies and jointly address issues.   

A study of demand for irrigation water begun last year has indicated a strong desire by farmers to irrigate in future.  To date the project's technical coordinator, Greg Ordish, has interviewed 111 landowners representing 161 properties covering more than 26,000 hectares in the Carterton, Te Ore Ore and Woodside areas. 

Owners of 68 per cent of properties expressed interest in new or expanded irrigation.  Of the landowners not currently irrigating, 71 per cent expressed interest to do so in future. The extra volume of water required to meet the new demand would be more than 33 million cubic metres per year.

The study continues until October with farmer interviews now beginning in the Martinborough area.  Results will be compared with a theoretical study of demand over the whole of the Wairarapa valley by Landcare Research.

Financial viability and a sound ownership model are required to make any major project or scheme a reality.  While the shape and extent of a Wairarapa scheme is yet to be established, a tool has now been developed to help determine financial viability when we get to that point.
The project (via WRIT and Grow Wellington) has engaged PWC to develop a model that will allow financial considerations to be part of the project's decision-making process.   It is able to run scenarios of changing capital and operating costs, uptake rates, volumes of water available, interest rate changes and investor mixes.

A recommended capital structure and timeline have also been provided by PwC as a starting point for discussion.

The next step is to assess the most favourable storage options more closely by matching them against areas of demand for water, environmental considerations and possible distribution systems.  The site options would remain confidential until potentially affected landowners had been personally contacted by the project team.  Environmental and engineering assessments of each site would then be made, followed by development of a shortlist of sites for pre-feasibility studies, due to begin early in 2013.

A newly-appointed steering group of experts from seven of New Zealand's leading environmental science agencies is advising the project on the potential effects of more intensive land use as a result of increased irrigation. It will also identify management options to address any such effects. 

Further information can be found at www.wairarapawater.org.nz.


Project Update: February 2012

Engineering consultant Tonkin and Taylor has been commissioned to undertake a range of work, including water availability and demand, and to identify a range of potential water storage sites and distribution options and the environmental effects of these

This work will be undertaken over the next 7 months alongside exploration of investment options. In September next year a short list of potential schemes will be developed for consideration by the project’s Leadership Group, in what is likely to be a staged approach.

The Leadership Group which represents district and regional councils, iwi, environmental, agricultural and economic interests, met late in 2011 and endorsed the work plan.

In work to determine the likely demand for irrigation water, a pilot study east of Carterton last month found that 90 per cent of farmers on non-irrigated land said they would like to irrigate. Indicative results showed that when existing irrigators were added, the farmers wanted to irrigate about half of the total land area. The results of the pilot will be compared with the results of a theoretical demand assessment currently being made by Landcare Research over the whole of the Wairarapa valley.

High-level environment assessments will be made of the potential issues and threats to the environment of any water scheme. Part of this work will be to identify areas where the soil is not suitable for irrigation. Once they are short-listed, potential storage schemes and distribution methods will be further assessed for environmental effects, benefits and efficiency.

In early December 2011, representatives of 13 interested organisations met with the project team to consider how they would like to be involved in the project. The group’s terms of reference will be confirmed in the New Year and will include information sharing, jointly addressing issues and providing feedback and ideas.

The potential for high-value land uses such as horticulture or specialist crops, which might also attract processing facilities, will be investigated as well as liaising with local councils on opportunities for urban and recreational water use.

Investigations into how a scheme may be financed will be undertaken in the first half of 2012. This will identify a range of options for a mixed ownership-type arrangement to finance the development, construction and operation of any regional water scheme.


Project Update: October 2011

The Wairarapa Water Use Project has made progress on a number of fronts in the past months.

Following an Expression of Interest process, a lead technical consultant is about to be appointed to the project and WRIT remains involved in the planning of that technical work. The outcome will be a prioritised set of scheme options that will be advanced through the full feasibility and resource consent process.

A Technical Coordinator has been appointed by the Greater Wellington Regional Council to work full-time on the ground in Wairarapa with a focus on farmer liaison to determine demand for irrigation water both in terms of location and quantities. WRIT and its Trustees are a key resource for this person as they interact with the farming community.

Following a study of experiences in Australia focussing on commercial and pricing issues, work has begun on developing a structural model for the project development phases through to established operation as well as a water pricing model that could be applied.


Project Update: June 2011

Wairarapa water project enters new phase

Investigations into what could be one of the largest economic development projects in the greater Wellington region are set to increase with the establishment of a detailed project plan and additional staff and funding.

The potential for Wairarapa to store excess water off-river in the winter and release it for a variety of community and agricultural uses during the dry season has been explored since 2007. Following an independent review of project investigations to date, and a $750,000 allocation in Greater Wellington Regional Council's proposed annual plan, a series of more in-depth investigations are now planned.

"While irrigation of farmland had been the early focus of this project, a range of other potential uses for water, including urban and recreational use, could benefit wide sections of the Wairarapa community and will become a key part of future investigations," said project leadership group chair Fran Wilde, who also chairs the Greater Wellington Regional Council.

Extensive pre-feasibility work completed over the past four years has identified potential sites for storage and indicated a potential demand for water, with strong economic returns. The plan for the next 12 months includes an assessment of the demand for water, and further engineering, environmental and economic studies.

At the same time a series of more detailed technical studies will get underway, with a storage area south of Martinborough first on the list. An earlier report on the economics of irrigated farming will be reviewed and updated over the next few months.

The potential for high-value land uses such as horticulture, which might also attract processing facilities, will be investigated as well as liaising with local councils on opportunities for urban and recreational water use.

"We recognise the need for more resources and are now recruiting a technical co-ordinator to work with the overall project management team," Fran Wilde said. A website to help interested parties stay in touch with the project has been set up at www.wairarapawater.org.nz


Project Update: February 2011

The Wairarapa Water Use Project is moving into its next phase and is gathering momentum with several positive developments over the past few months.

Earlier this year, an independent expert review of all project investigations to date found that the project is potentially viable in hydrology, engineering and economic terms. The review has given the Leadership Group confidence to proceed further with what has the potential to be one of the largest economic development projects in the greater Wellington region.

The review also reaffirmed that the project needed to investigate multiple uses of water and encourage these where possible. While irrigation of farmland has been the focus to date, there are a range of other potential uses for water, including for urban and recreational use, which could benefit wide sections of the Wairarapa community. These will become a key part of future investigations.

In recognition of this project's potential to benefit the whole region, Greater Wellington Regional Council has allocated it $750,000 in its proposed 2011/12 Annual Plan. With a project this geographically large it is critical that sufficient resources are applied now so we can make a concerted effort to move it to the next stage.

The funding will be used to build on pre-feasibility work completed over the past four years which has indicated a potential demand for irrigation water, strong economic returns, and identified potential sites for storage.

Over the next 12 months a lot of more detailed work will be done in the next phase. We cannot afford to wait until each piece of work is completely finished so a range of investigations will take place concurrently. In addition, Greater Wellington Regional Council continues its own Regional Plan review which includes looking at water allocation and storage issues and managing the impact of land use in an environmentally and economically sustainable way.

The project website will be live shortly and we will be meeting with stakeholder groups over the next couple of months.


Project update: June 2010

While the overarching stakeholder group, the Leadership Group, did not meet it has been kept engaged via numerous electronic updates and their individual participation in project activity. There have been formal meetings/presentations with: the combined District Council’s of Wairarapa; DOC; Environmental/Recreation Groups; and Wairarapa Development Group – a new development lobby group.

The members of all stakeholder groups received an electronic update in April 2010.

It is clear that there are several irrigation scheme projects around NZ that are facing the issue of securing the upfront finance to advance the project to the point where it is “bankable”. This was evident at the Workshop held in Ranfurly in Mid-March that was attended by a project representative and was also a common theme of discussions at the IrrigationNZ conference.

Discussions are being held on how the project might secure funds to get to resource consent stage and how and when that might be matched by SFF.
A land use survey of all properties within the Wairarapa valley command area was undertaken during this period. This was not a demand survey for irrigation water but more a survey to gauge current and future land use although it did ask about possible future water demand.

The final report is being finalised, but the main points are:  

  • Responses were received from a broad range of farm types, covering hobby and lifestyle farms of 1 hectare through to farms of over 1,000 ha. The most common land use, by farm and by land area, was 'sheep and beef', when measured by both the number of farming operations and the number of hectares being farmed. Over a quarter of respondents had considered a change in land use over the last five years, with those running larger properties being more likely to consider a change to their land use.
  • The most common reasons for not changing land use were the lack of water and the perceived lack of financial viability.
  • Nineteen percent of properties currently had irrigation, with 9% of the land on these properties being irrigated.
  • The average cost of running electricity for these irrigation systems was $15,675 per annum, with most farmers identifying annual costs of less than $10,000 per annum.
  • Of those propeties which did have irrigation, half identified some level of restriction of access to water. Irrigation was most commonly initiated due to 'the feel of the soil'.
  • Those currently irrigating identified an average increase in net margin of 35%.
  • Sixty-two percent of respondents on properties over 500 ha would install or increase irrigation if water was accessible. When considering those who do not currently irrigate, 53% would consider irrigating if water was available on a cost-effective basis.
  • Thirty-four percent of all respondents (53% of those not currently irrigating) would be interested in irrigation if water was available at an affordable price. Farmers of properties in the 101-500 ha range were the most likely to consider irrigation.
  • If water for irrigation was available at an affordable price, the amount of land being irrigated would increase by 86%, from a current total of 3,899 ha (or 9% of the 36,900 ha farmed by respondents) to 7,266 ha. Fifty-five percent of those who are not currently irrigating would consider irrigation.
  • When questioned concerning the potential use of irrigated land, by number of hectare to be irrigated, respondents noted they would consider 3,498 ha for cropping, compared to 3,117 ha for sheep and beef and 1,698 ha for dairy use.
  • The most common reasons for not considering use of irrigation were the perceived lack of financial viability, and that the current land use does not require irrigation.

Plans are being advanced for a project website.  This will make use of the “Wairarapa Water Use Project” brand to take account of the potential multiple uses of water the largest of which will be rural irrigation.


Update: February 2010

The end of 2009 saw the completion of the initial stakeholder engagement forums with a session being held with the Wairarapa business community (via the Wairarapa Chamber of Commerce) and two meetings held with invited representatives of the rural community.

Both of these meetings expressed high level support for the concept of a storage-based regional scheme and also were keen to maintain contact with the project as it progresses.

Planning also began with the iwi liaison officer of the Regional Council on a hui to both inform and receive feedback on the project concepts from the wider leadership group of both Ngati Kahungunu and Rangitaane. This is now set for Saturday 24 April 2010.

The Leadership Group met in early December where they received verbal reports from both Nimmo-Bell and KPMG on the progress with the two respective reports: Economic Impact and Cost/Benefit Analysis and PPP Options Study.

The final versions of both reports were received in early 2010 and the high level conclusions are:

Economic Evaluation Investigation

Irrigation Benefits (excluding construction)

 
Benefits NPV
($M)
Net Benefits NPV
($M)
Cost Benefit
Ratio
Increase in GDP
($M)
Increase in Employment
(FTE’s)
Wairarapa Community
$451
$407
10.2
$407
14,700
Wellington Region
$452
$330
3.7
$331
14,800

In summary, from an economic/employment stance, a project of this type would be highly beneficial to the Wairarapa community, and in fact the entire Wellington region.

The benefits in the above tables could be even further enhanced through actions such as:

  • Adopting higher value agricultural production such as such as horticulture, seeds, and vegetables
  • Building associated processing facilities in the Wairarapa
  • Sourcing a higher proportion of externally-derived funding
  • A greater rate of project uptake
  • Reducing the capital construction costs
  • Implementing the project over a shorter time frame so the benefits are derived quicker

Funding and Ownership Options Investigation

The high level financial analysis undertaken confirmed at the assumed water price, the scheme(s) are not likely to viable as a purely private-sector commercial proposition.

The three options for PPP structures were:

PPP Structures Benefits Risks
Private Sector-Led
Private sector equity and ownership
May be shorter time-frames May only proceed with immediately viable pieces of overall project and may not get full benefits on a regional scale
Hybrid model
Government provides a proportion of free equity leaving bankable project
All parties have stake in making sure it works Complex deal which will take time to pull together
May have issue of competing political demands for funds>
Public Sector-Led
Public sector drive investment and delivery of project
Public perception of “public” ownership
Can keep the “big picture” in mind
Can cater for long-term (30+year) financing
May not encourage innovation in design and implementation
Still requires Central Government to meet shortfall

The final conclusions are:

  • PPP may be best way to combine diverse equity interests but will be complicated
  • No real comparative PPP projects exist in NZ
  • Due to high capital/low operating costs, there is low opportunity to reduce costs through innovation.

Project update: October 2009

Project governance is in place with the formation of a Leadership Group representing iwi groups, the Wairarapa Regional Irrigation Trust, environmental/recreational interests, the three Wairarapa district councils, Greater Wellington Regional Council and Grow Wellington. Community engagement to hear perspectives and ideas about water uses and values, and to develop a viable and environmentally sustainable project, was identified as the group’s first priority.

Meetings with three key interest groups - iwi groups, environmental/recreational and business sector have provided initial project information and heard questions, issues and views of each group. A fourth group, rural land users, will meet on 30 November.

The process of gaining community engagement early on was applauded by the interest groups. General acceptance of the proposed irrigation project was evident in the meetings. There were no objections about the project concept or process.

Issues being addressed by the Leadership Group, technical working group and community participants include environmental viability, scheme options, capital funding, land ownership and process costs.

Each interest group will participate further in project development and receive information and updates on progress. A joint meeting of the four groups and a separate hui for iwi are planned for the new year.

Discussions with land owners on potential storage sites, all on private farmland, have continued.

The draft report on a capital and ownership model investigation has been received. A draft report is due on an economic evaluation to quantify the benefits of irrigation in Wairarapa and a cost/benefit analysis of total community return on each dollar invested in irrigation. Final reports for both studies will be considered by the Leadership Group in December.


Project update: June 2009

Media release: Irrigation group to seek community input

"Community engagement is the first priority agreed by a high-level governance group to oversee the development of a regional water and irrigation project which has the ability to transform Wairarapa’s future.

"Conversations with all parts of the community early on are vital to hear perspectives and ideas about water uses and values in Wairarapa, and to develop a viable and environmentally sustainable project. The group is committed to this approach," said Greater Wellington Chair Fran Wilde, who was elected to chair the group.

A series of presentations and meetings will be held with key interest groups over the next few months to provide initial information to a range of interested groups and to hear their questions, issues and views.

Ms Wilde said the purpose of any proposed project would be to future proof the productive capacity of the Wairarapa valley land, and the subsequent economic and social return through water storage and irrigation opportunities.

"It is well-recognised that the community’s rights to access quality water resources must be retained," said Ms Wilde. "We also need to ensure that any proposal does not damage the physical environment."

"The Wairarapa Regional Irrigation Trust is delighted with the impetus that this group will give the project and its wide representation will help take the project to the next stage," said trust chairman and Greytown farmer, Bob Tosswill.

The 10-member leadership group represents the three Wairarapa district councils, iwi groups, Greater Wellington Regional Council, the Wairarapa Regional Irrigation Trust and Grow Wellington.

A technical working group has been formed and the work will be co-ordinated by project manager Bruce Geden of Greater Wellington Regional Council. The next phase will build on initial investigative work carried out since 2001 by local economic development agencies and more recently by the trust.

Along with other regions in New Zealand, Wairarapa faces decreasing water availability, climate change and the increased likelihood and frequency of drought.

Preliminary studies commissioned by the trust indicate great potential for irrigating land that currently does not have access to water for that purpose. Fran Wilde said this raised exciting possibilities for exploring future diverse land uses that could contribute to economic growth and consequential social enhancement in the Wairarapa community.

Issues to be addressed by the group, technical working group and community participants over the next 12 months include environmental viability, scheme options, capital funding for any proposed project, land ownership and process costs."

The first set of meetings with stakeholders is programmed for October/November 2009 with one of the main purposes of the initial meetings being to ascertain how the various stakeholders want to remain engaged with the project on an ongoing basis.

Concurrently with these engagements work is being undertaken on assessing the economic value of increased irrigation to the wider region and also an exploration of the capital funding options applicable to this type of infrastructure project.

 

Last Updated: 23 October 2012

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