This is our fifth update on the recently introduced Natural and Built Environment Bill (NBE Bill) and Spatial Planning Bill (SP Bill). The Bills have been referred to the Environment Select Committee for further consideration, and submissions on the Bills are due by 5 February 2023 (extended from the original date of 30 January 2023).

This update addresses the proposed new regime for freshwater management under the NBE Bill, including freshwater allocation.

For our other recent updates on the proposed new legislation, click the 'Beyond the RMA series' tag above. 

Our first impressions

The NBE Bill proposes several significant changes for freshwater management and consenting practice, which appear to collectively amount to a stricter regime for this particular resource. The NBE Bill also includes new allocation principles, which we expect to result in an end to the first-in, first-served approach under the RMA. While it will be for the National Planning Framework (NPF) and NBE plans to flesh out this new regime in more detail, until that happens there will be some uncertainty for existing consent holders, and more for those who intend to seek consent to take or use water in the future.

A new allocation regime

The NBE Bill proposes a new allocation regime for freshwater, which is a clear departure from the first-in, first-served approach, to a more merits-based evaluation to resource allocation (we note that the new allocation regime is not only limited to freshwater).

Resource allocation is to be guided by three new equal-weighted principles: sustainability, equity, and efficiency. Working with these new principles will be “allocation methods”, which are used to determine allocation and include (but are not limited to): consensus, standard consenting, and a new “affected application pathway”.

The NBE Bill allows, but does not direct, that higher order direction can be provided by the NPF on the meaning of the resource allocation principles, and to define a particular allocation method. This suggests to us that any NPF directions are likely to be resource-specific, and pitched at a national level.

Irrespective of whether the NPF provides any relevant direction or definitions, NBE plans must include rules that require allocation methods to be used for the taking, diverting, or use of freshwater, and for the capacity of freshwater to assimilate a discharge of a contaminant. If the NPF provides direction, then a regional planning committee (RPC) is required to have regard to that direction when developing rules for NBE plans.

A market-based allocation method, to determine the allocation of rights to apply for a resource consent, has been proposed, but this is expressly excluded where the activity involves the taking, diverting, or use of freshwater. Market-based allocation is defined as “auction, tender, or any other method by which the allocation of a right to apply for a resource consent is determined through a process involving competing offers”. The specific exclusion of this method for the allocation of freshwater indicates a clear intention to prevent the ability to charge for water.

A new “affected application” pathway

The NBE Bill provides an alternative consenting pathway, which is engaged where a rule (in the NPF or an NBE plan) requires that this pathway is used. The new process provides opportunities for competing applications to be lodged for resource use within a specified time period, so that the consent authority is able to consider the merits of applications against all others in accordance with any allocation method, while also having regard to any NPF or NBE plan criteria and directions. This process appears to be a formalisation of the approach taken by many regional councils already of having common expiry dates for resource consents in particular catchments.

Establishment of a Freshwater Working Group

The NBE Bill establishes the new Freshwater Working Group (FWG), which is required to make recommendations on freshwater allocation matters and a process for engagement between the Crown and iwi and hapū, at a regional or local level, on freshwater allocation. The FWG is required to provide recommendations to the Minister by 31 October 2024. From that point, the Minister is required to respond to those recommendations, and then engage with iwi and hapū on freshwater allocation matters that are relevant to the plan for the region. The outcome of this engagement may result in the preparation of an allocation statement, which (if prepared) must be provided to the RPC and used to update the relevant NBE plan. The framing and timing of these provisions makes it clear that the FWG’s recommendations and any allocation statements will inform the approach to incorporating freshwater allocation in NBE plans, rather than in the NPF.

While it is for the Minister and iwi and hapū to decide to prepare an allocation statement, given the role of this process and that it requires the RPC to update an NBE plan, we would expect that iwi and hapū would push for this outcome.

Reduction in consent duration

The NBE Bill proposes a new 10 year maximum duration for certain resource consents, including activities involving the taking, using, damming or diverting of water, or discharge of contaminants into water or onto land where it could end up entering water. This is a new limitation that reflects the more stringent approach to freshwater resource issues.

The 10 year duration will not apply in all cases. For certain listed activities, including infrastructure activities and local authority water supply networks, there is an ability to seek a determination that the 10 year limitation not apply. There is also scope for a reduced, or longer, duration if an allocation statement is prepared, and a NBE plan is updated to reflect that statement. In that instance, the duration will be determined by an RPC - which will have regard to the matters agreed between the Minister and iwi and hapū.

Reviewing consent conditions

The NBE Bill provides that the NPF may direct consent authorities to review an existingconsent, including conditions related to the duration of that consent. It is a new broad reaching power, and it is currently unclear when or how the NPF would direct such a review - or what the steps after any review would be. While this review power is not limited to water take consents, together with the other changes discussed in this update as to how freshwater will be managed, this introduces a significant degree of uncertainty for existing consent holders.

Limitation on new water and discharge permits during interim period

The NBE Bill proposes a limitation for new water and discharge permits sought during the “applicable interim period” (described as “affected resource consents"), which will cause those permits to expire 3 years after the first NBE Plan for the relevant region is notified. There is scope to seek a determination that this 3 year duration not apply, and specific provision for such determinations for specific listed activities (such as the construction of water supply networks and specific infrastructure activities).

In effect, these provisions seek to align the term of any new water / discharge permits with the first NBE plans, which will then require renewal of those permits in light of any allocation rules and methods included in the first NBE plans. This may mitigate any rush to seek permits with a longer term in the interim period, but it will also ensure that the NBE Plans will be able to fulfil their role in relation to resource allocation. If any landowners or developers are intending on seeking such permits in the immediate term, they will need to strategically consider this limitation, and how it may impact on their longer-term development aspirations.

Our comments

Whether the Minister chooses to provide direction on resource allocation through the NPF, and if so how that direction is expressed (eg in emphatic terms or in a manner that allows greater discretion for later implementation), remains unknown. However, it is clear that the new approach to allocation could provide more guidance on how competition for resource use is to be resolved - at least at a regional level.

It may be that the role of the FWG becomes quite significant, particularly if the Minister intends to work collaboratively with iwi and hapū in relation to potential allocation statements. These allocation statements must result in updates to NBE plans (or will feed into the first NBE plans), with the eventual allocation rules and methods likely to reflect those statements. In terms of the methods, “consensus” is not explained but will require further detail as to who should be involved in the discussions, and it is clear that the affected applications pathway will be set up to compare between applicants. Both methods could well lead to litigation, or at least disagreements between interested parties.

Across the proposed changes affecting freshwater resource matters there appears to be a consistent theme: a stricter regime, and potential risks for existing consent holders and those seeking consents in the immediate term through transition. While we anticipate that further detail will be included in the NPF, the relative lack of clarity in the NBE Bill about the new allocation regime, and how the broad review powers will work (or be used) in practice will be a concern to existing consent holders, particularly those who need longer-term certainty to support their strategic investment decisions.

If you would like any assistance in understanding the matters raised in this update in more detail, or in making a submission, please contact one of our experts.

Special thanks to Libby Neilson and Shanae Richardson for their assistance in preparing this update.