Central Plains Water - The Corporate Dairying Connection

The Corporate Dairying Connection

In May 2007, confidential minutes from the March board meeting of Central Plains Water Limited were leaked to media. The minutes stated that the councils (Christchurch and Selwyn District) must agree to a 'bail out' loan or the scheme would be 'killed'. Central Plains Water later confirmed that the corporate dairy farming company, Dairy Holdings Limited, was prepared to offer a large loan to the scheme. Dairy Holdings Limited operates 57 dairy farms and is owned by Timaru millionaire Allan Hubbard and Fonterra board member Colin Armer.

On 5 June 2007, Christchurch City Council was informed that Central Plains Water Limited had 'a shortfall of $NZ1 million' and had run out of money needed to pay for the expenses of the impending hearings on the applications for the various resource consents.

On 7 June 2007, the Christchurch City Council authorised two Council general managers to approve loan agreements for CPWL to borrow up to a maximum of $4.8 million, subject to the Central Plains Water Trust continuing to 'own' the resource consents, as required by the April 2003 Memorandum of Understanding.

The Malvern Hills Protection Society questioned whether the Central Plains resource consent applications had been offered as security for the $NZ4.8million loan and whether such a loan would breach the 2004 CPW Memorandum of Agreement, which forbids transferring or assigning its interest in the resource consents. Similarly, Ben Dingle, a director of the competing dairying company, Synlait, also questioned the community benefit of the Central Plains project, as the main benefits of irrigation schemes (increased land values and higher-value land-uses) flow to the landowners who have access to the water.

A report to the Christchurch City Council meeting of 13 December 2007 gives the details of the final loan arrangements. On 19 October 2007, two Council general managers signed the loan agreement with Dairy Holdings Limited. The amount initially borrowed from Dairy Holdings Limited is $NZ1.7 million out of a maximum of $4.8 million. The law firm Anthony Harper had certified that the loan was not contrary to the Memorandum of Agreement as the resource consent applications were not used as security. However, the loan agreement grants a sub-licence from CPWL to Dairy Holdings Limited to use the CPW water consents by taking water for irrigation from the Rakaia River. The sub-licence will start from the date the consents are granted to the date that the whole scheme is operational. The Christchurch City councillors voted (eight votes against, five votes for) not to accept the report.

A resource consent is specifically declared by the Resource Management Act 1991 not to be real or personal property. Resource consents are not 'owned'; they are 'held' by 'consent holders'.

The Central Plains Water Trust applications for resource consents may not have been technically used as security for the loan from Dairy Holdings Limited. However, the Christchurch City Council report clarifies that Dairy Holdings Limited, will now get the benefit of the first use of water from the Rakaia River, under the loan arrangement. That benefit will flow from the date the consents are granted, which will be some years before any of the 'ordinary' farmer shareholders in CPWL receive water, once the full scheme is constructed.

The concept of guaranteed public 'ownership' of the resource consents by Central Plains Water Trust, is somewhat of a fiction, given that a private company, Central Plains Water Limited, has an exclusive licence to operate the consents to take and use water for irrigation, and particularly given that Central Plains Water Limited has already granted a sublicence for the Rakaia River water to Dairy Holdings Limited.