A combination of geology and soaring costs is threatening the viability of dairying on Nelson’s Waimea Plains. By Anne Hardie.

The cost of water is making it harder to justify dairying on the Waimea Plains near Nelson where the Waimea Community Dam build continues to blow its budgets.

Just three small dairy farms remain on the plains where horticulture returns have increasingly driven land use over the decades. Now the dam, which is integral for future production on the plains, will make it even harder for those farms to hold their ground.

The dam has been plagued by continual cost blowouts, but Waimea Irrigators Ltd (WIL) chairman Murray King says it is an intergenerational project that will enable horticulture to develop on the Waimea Plains.

King owns one of the three remaining dairy farms and has long been a proponent of the dam in the Lee Valley. Along with other proponents, he has worked on the project for 20 years and though the increasing cost of the dam is disappointing, he says the benefits will still be significant for the region.

When the project was first put to the public in 2017, it had a price tag of $75.9 million. By the time it was commissioned in 2019 it was $105m and since then the project has been assaulted with problems from geology to Covid. The latest increase takes the project to $185m and there is a risk it will go higher as the remaining 30% of the build is completed.

The biggest hurdle for the build and cause of increased costs was the discovery of highly fractured rock on the site, with multiple large shear zones (areas of ground rock and clay) bisecting the top of the spillway, plus weak rock under the plunge pool. Added to geology problems was the high inflation on the cost of materials and global supply chain disruptions, materials in short supply and the ongoing impact of Covid-19 on staff and productivity. The mechanical and electrical works alone is now expected to cost $19m more than the original 2018 budget.

The irrigators who bought shares in WIL own 49% of the dam, with some of the larger irrigators paying hundreds of thousands of dollars each to secure water for the future and buying surplus shares to get the dam over the starting line. Tasman District Council owns 51% and will fund that percentage of the operating costs with just over half of those costs attributed to insurance, rates and consent compliance. The remaining costs cover ongoing dam operations, maintenance, engineering, staff and company costs.

The council needs the dam to service its existing communities and future residential and commercial growth. Waimea Water, which is the council-controlled organisation responsible for managing the construction, operation and maintenance of the dam, expects it to be completed by early spring which means it could begin filling and be commissioned by early 2023.

Initially, irrigators were looking at paying annual operating costs of about $500/hectare or just over, but that could double and King admits it is an unknown at this stage until extra funding is sorted and costs shared. Council has stated it proposes to use income from its enterprise activities to cover interest related to the irrigators’ share for 2022-23 as other funding options are investigated. A targeted rate on irrigators will not come into effect until the 2023-24 year.

The Kings have added value to their dairying enterprise by teaming up with the Raine family to produce Appleby Farms’ ice cream. However, King says that may still not be enough to compare with the returns from horticulture and the increasing cost of irrigation.

Along the road, Andrew Ford says the increasing costs associated with the dam will make it expensive water for pastoral farming. His family has been milking cows on the plains for 56 years and even before the dam costs soared, he knew he would likely be the last generation dairying on the 63ha farm. The Fords paid just over $5000/ha to buy shares in the dam and though they don’t have a final figure, the annual operating costs are expected to be beyond $1000/ha.

He still supports the dam but says the annual operating costs will make dairying questionable once it is completed and they begin paying those costs. He expects the farm’s future is horticulture due to its land value as well as high irrigation costs.

As well as higher irrigation costs, irrigators on the plains face the uncertainty of the Government’s Three Waters Reform. If it goes ahead, the council’s interests and debt in the dam project are tipped to transfer to a proposed new entity.

While that may be beneficial for a council asking ratepayers to cover its share of the dam’s debt, King says there are concerns for irrigators under Three Waters’ management.

“We’ve got a partner and don’t know what it is and what the terms and conditions are going to be and how it will operate.”

Despite the costs of the project and concerns about Three Waters, he says the dam is still the best long-term solution for the region’s urban and irrigator needs. About 3000ha of the Waimea Plains are subscribed to be irrigated by the dam and up to 5000ha of land has the contour to be potentially irrigated once there is available water.