12. Constraints Under Legislative & Regulatory Environment
There are some constraints under the current legislative and regulatory environment in New Zealand as it relates to investment in large-scale water enhancement.
An analysis of the key legislation is outlined below and related to investment in water enhancement.
Resource Management Act 1991 (RMA)
Resource consent can be issued to a water enhancement scheme for the take and use of water for a period of up to 35 years. However the Act includes provisions that give Regional Councils wide ranging powers to review a consent at any time, alter existing conditions of the consent and add new conditions if it sees fit. New or altered conditions can have a significant impact on a schemes access to water.
Legislation that has the ability to limit the supply of water clearly has an impact on the financial viability of a scheme and therefore creates risk for an investor (particularly project finance and BOOT structured investments where minimal security is offered by the scheme). Investors must be reassured by Central and regional Governments that the risks related to consent review are minimal provided appropriate environmental planning has been considered and on-going consent requirements met. Central Government might consider additional legislative protection for investors in a scheme where existing consent conditions have consistently been met.
Electricity Industry Reform Act 1998 (EIRA)
Where a scheme includes a storage facility with the potential to generate electricity, the EIRA prevents significant investment (more than 20 percent of equity) from an electricity lines business.
This legislation prevents investment from electricity lines companies who would rather see irrigation investment as a strategic investment. Government could consider providing dispensations for investment from these entities into water enhancement schemes that do not have power generation as their primary source of income.
Tax Depreciation Rates
Tax depreciation rates for water enhancement investments are conservative in New Zealand compared with similar nations (primarily Australia and USA). This makes New Zealand a less attractive investment environment for multi-national corporations.
Government would stimulate investment into water enhancement scheme (both on-shore and off-shore investment) if it were to review tax depreciation rates with a view to accelerating depreciation write-offs.
Public Investment Constraints
Key legislation impacting on central and local government investment have been discussed within the studies on their roles.
Contact for Enquiries
MAF Information Services
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