Shareholders of a small North Otago irrigation company say a proposed 6000% hike in the annual fees they pay for an easement across public conservation land could set a much wider precedent.
The Department of Conservation (DOC) is seeking to increase from $550 to $32,684 the annual fee it charges the Otekaieke Community Water Company (OCWC) for an easement across 0.085ha of scrubby North Otago public conservation land.
The easement gives access to non-potable water from the Otekaieke River, which is use for stock water, gardens and small-scale irrigation.
At last year’s concession fee review DOC proposed increasing the fee to $10,894 in 2022 with a further increase to $32,684 in 2024 to reflect “market rates”.
OCWC shareholder Greg Metherell said using that logic, the fee for any easement could be substantially increased.
“If Transpower has lines over my land, why can’t I charge them market rates?
“The wider implication for NZ is that we could face huge cost increases.”
He describes his absolute shock when he read the letter outlining the proposed easement fee.
“It was so extreme I first thought it was a mistake.”
Getting answers and explanations from DOC has been difficult and reached a point where Federated Farmers is negotiating with DOC on the OCWC’s behalf.
Metherell said the water scheme existed for over 100 years before the users bought it from the Waitaki District Council for $1 in 2015. The purchase came with conditions.
The OCWC has 15 shareholders who use small amounts for garden and stock and three who run commercial farms and use the water for garden, stock and small-scale irrigation.
In a letter to OCWC last year, the DOC stated the new fees “represent the value of the opportunity granted, a fee setting framework based on the market value for each type of concession the department oversees is utilised”.
It states that the concession “is to be set at the market value for the activity being carried out on public conservation land”, and it reflects exclusivity.
It states fees are determined by the nature of the activity, the effects of the activity and the contractual conditions set by the concession.
The company has rejected the increase, saying DOC has not provided evidence of how it determined market rates in calculating the new fee and asks how it can charge for managing water when that is the responsibility of ECan, to which OCWC pays a fee.
Correspondence from experts working for the OCWC describe as flimsy DOC’s attempt to establish market rates for the easement and agree with Metherell that it will create a commercially significant precedent.
It is also noted that the Deed of Easement contract is between DOC and OCWC, not individual shareholders, so it has no formal means to charge individual shareholders based on their activity.
DOC’s director of regulatory services, Steve Taylor, limited his response because discussions are still underway with concessionaires.
He said in a statement that existing fees are below market rates.
“A recent review found these were previously charged at below market rates and we are now proposing to charge market rates.
“We are working with the concessionaires in good faith to try and resolve the situation.”
A breakdown of how DOC calculates annual concession fees reveals administration charges vary between $150 and $500, monitoring fees are based on a cost recovery basis, and easements servicing more than one lot are calculated by multiplying the relevant easement fee by the number of lots or beneficiaries.