A CASE STUDY OF HOW IRRIGATION SCHEMES IN NEW ZEALAND ARE EVOLVING TO MEET CHANGES IN FARMING PRACTISE AND REGULATION

Transcription

1 A CASE STUDY OF HOW IRRIGATION SCHEMES IN NEW ZEALAND ARE EVOLVING TO MEET CHANGES IN FARMING PRACTISE AND REGULATION 1 David Carshalton, 1. Beca PTY Ltd, Melbourne, Victoria ABSTRACT Beca Ltd (Beca) has been working with several existing irrigation schemes in Canterbury, New Zealand over the past five years to determine how schemes can meet the changing needs of irrigators. In the last fifteen years a large portion of irrigators on these schemes have installed new spray irrigation systems to replace existing border dyke (flood) systems that have been in operation since the 1940s. These on-farm system upgrades have been driven by a desire to improve the efficiency of their irrigation systems on light Canterbury soils. Regulation has evolved over this period to require a higher standard of monitoring and control to meet water quantity and quality standards. The irrigation schemes currently consist of open channel infrastructure that requires at least minor upgrades to adjust to the changing environment. This paper offers a case study of the response of three irrigation schemes to the changes in irrigation practise and regulatory requirements. Figure 1 shows the location of the schemes within the South Island of New Zealand. The infrastructure in each scheme is owned by a co-operative company whose shareholders are the farmers supplied by the scheme. All of the schemes are run-of-river schemes, with no storage originally constructed for them. The schemes are each manually controlled by racemen adjusting weirs on open channels. Typically the flow in each channel is set once per day. The schemes require about one raceman per 10,000ha to operate efficiently. Water is delivered in accordance with a fixed roster, and is recorded manually by the racemen. Investigation into the efficiency of the schemes demonstrates that the water taken into the scheme is around 20% more than what each scheme allocates to the farmer irrigators. This water is either leaked from the open channels, bywashed back into the river, or given to farmers above their allocated flow to avoid bywashing the water. (Bywash is water taken into the irrigation scheme that is not used and released back to the river). INTRODUCTION Description of Schemes Referred to in this Case Study This case study refers to the work Beca has undertaken for three irrigation schemes: Mayfield Hinds Irrigation Scheme (MHIS) This scheme was built in the mid-1940 s and supplies 33,000ha of farm land between the Rangitata and Hinds Rivers in Mid Canterbury. Valetta Irrigation Scheme (VIS) This scheme was built in the mid-1940 s and supplies 13,000ha of farm land to the west of Ashburton in mid Canterbury. Amuri Irrigation Company (AIC) AIC operates three irrigation schemes built in the 1980 s supplying about 25,000 ha of farm land between the Hurunui and Waiau Rivers in North Canterbury. Figure 1: Locations in the South Island, NZ, of the Irrigation Schems Considered in this Case Study

2 OPERATING ENVIRONMENT Irrigation Practises Originally the farms were irrigated using border dyke irrigation on a fortnightly roster. In the past 15 years around 80% of irrigators, varying for each scheme, have converted from border dyke to spray irrigation, mostly using centre pivots. This has allowed water use efficiency to be greatly increased from the original border dyke irrigation which has an uneven distribution on the light soils typical of the Canterbury Region in New Zealand. The on farm spray irrigators are supplied by pumping either directly from the existing open channels (used on the AIC schemes) or from onfarm storage ponds (as on the MHIS and the VIS schemes). Pumping directly from the open channels is the lower cost option as it doesn t require the construction of on-farm storage ponds. However due to the manual control of the open channels it requires excess water to be run through the channels in order to maintain a continuous supply to farms, which leads to bywash back to the river at the downstream end of the scheme. The use of onfarm ponds requires additional capital expenditure, but allows flow buffering in the open channel system to prevent bywash from the scheme. Changes in Land Use There has been a substantial shift in land use of the last 10 years from cropping and meat/wool production (sheep and cattle) to dairy farming. Dairy farms are a more intensive land use that requires greater certainty over production levels. This results in a need for more efficient and reliable irrigation systems. Further, the returns on sheep and beef farming have been unable to support the cost of the increased efficiency required by regulation and hence farmers have shifted to dairy production. Summary of the Regulatory Setting The use of water for in New Zealand is the responsibility of the respective regional council. For all of the schemes covered by this study this is the Canterbury Regional Council, which is branded Environment Canterbury (ECan). The regional council has authority to grant resource consents (under the Resource Management Act 1991) that control the take and use of surface and groundwater. The water supplied to each irrigation scheme is governed by a resource consent which contains conditions of use. The bywash from the scheme (water taken into the scheme that is not used) is also subject to a resource consent. Water leached from the irrigated land into ground water, or runoff that is washed into waterways has not previously required resource consent. In the last ten years the quality of natural water ways has become a focus of national politics in New Zealand, which has led to the regional councils being required to improve the quality of natural waterways. This principally will be done by adding conditions onto existing water use consents that will limit the amount of nutrients that can be discharged into water ways and ground water. In August 2012, ECan released the Proposed Land and Water Regional Plan (plwrp) which sets out how the council will achieve the improvements required in water quality in natural waterways. In this plan, ECan proposes some significant changes for farmers, including: Shifting the focus of water use quantity regulation to include both quantity and quality. Taking into account the effect of nutrients in the runoff (to waterways) and leaching (into ground water) from irrigated land. ECan has begun to impose limits on nutrients allowed to move from farms into waterways. Requiring a farm environmental plan for each farm to demonstrate how the environmental measures will be met. Requiring land use consent when the land use is changed (for example if a farm changes for cropping to dairy). As it stands, the plan requires farmers to record their nitrogen runoff until 2017, when further decisions will be made. In the interim, the nitrogen runoff allowable in each catchment is being defined by variations to the plwrp plan. The plwrp requires irrigation schemes to install more extensive flow monitoring and finer control of water distribution to demonstrate efficient use of the resource and to inform on farm environmental plans. SCHEME CAPITAL WORKS TO MEET THE CHANGED OPERATING ENVIRONMENT Requirements of Capital Works Project Motivated by the changing land use, irrigation practices and regulatory requirements, the Boards of the respective companies have been investigating what capital upgrades are required to better match shareholder requirements. Beca has been engaged by each of the mentioned irrigation

3 companies to support them in the investigation of, design and delivery of scheme upgrades. Initially Beca met with the Boards of each company to understand their drivers for the scheme upgrades. The drivers were similar across the three schemes and are summarised as: Improve water use efficiency currently up to 20% of each scheme s water is lost to leakage, over-allocation, or by-washed back to the river. The water realised from scheme improvements can be used to expand the scheme, which can part-fund other upgrade projects. Allow accurate flow measurement and improved flow control to support farmers in meeting the new regulatory requirements. On schemes that operate a flow roster - provide water at a continuous flow, removing the requirement to buffer rostered flows in on-farm ponds. This can allow existing on-farm ponds to be used for reliability storage rather than operational storage. Consider the business case of using pipe networks to supply water at 40m pressure (sufficient for centre pivot irrigators) and so remove the need for on-farm pumping. Improve the flexibility of supply to allow for water trading in the future. Pty Ltd (Rubicon). The design and construction cost of this option was sourced directly from Rubicon. Open channel construction and control is typically significantly less costly that pipe infrastructure. However, the level of control is significantly less and channels will continue to leak, which doesn t fully meet the objective of improving water use efficiency. Manual control would still be required on smaller races, and flow measurement to farmers would rely on a flowmeter at each farm s pump station. About a dozen gates were proposed to be installed on each irrigation scheme, which were expected to reduce scheme bywash by 50% (around 10% of the total allocation saved). Table 1: Annual costs for upgrading the the existing open channel network using Concept 1 AIC and MHIS only Cost per ha per Item year $0/ha/yr (both) Capital Cost minus capital raised from shares Operating cost of existing open channel network Neutral cost because capital from new shares is approximately equal to capital cost $30/ha/yr (MHIS) $25/ha/yr (AIC) Although not formally identified as a driver for the project, there is a strong sense of wanting to preserve the resource for future generations. In many cases, the shareholders grandfathers helped build the original scheme infrastructure and they have a personal desire to upgrade scheme infrastructure so the water resource can be sustainably utilised by their grandchildren. Concept Design Pumping cost and maintenance (where pipe pressure is below 40m) Scheme overhead cost Total $160/ha/yr (MHIS) $200/ha/yr (AIC) $60/ha/yr (MHIS) $55/ha/yr (AIC) $250/ha/yr (MHIS) $280/ha/yr (AIC) In the concept design phase, the options to meet the project drivers were considered. For all three schemes, there are two basic concepts to meet the drivers, these are: 1. Concept 1 Retain the existing open channels, and add flow control gates at major junctions. 2. Concept 2 Replace the open channels with a pipe network to deliver water at 40m pressure. 1. Additional Control on the Existing Open Channels This concept consists of installing control gates, typically falling weir gates at critical locations, such as the FlumeGate produced by Rubicon Water 2. Replace the open channels with a pipe network to deliver water at 40m pressure. Each of the schemes has a natural gradient fall of approximately 1:125 across the length of the scheme. The total fall ranges from 120m (on the AIC schemes) to 360m (on MHIS). Therefore there is sufficient fall to generate 40m pressure to most farm offtakes though gravity pressure pipelines. Offtakes at the top of the scheme will still require booster pumping to supply spray irrigation. Table 2 presents a breakdown of annual costs for this concept.

4 Table 2: Annual costs for construction of a pipe network (Concept 2) Cost per ha per Item year Debt servicing of capital cost minus income from new shares sold amortised over 30 years at 7.5% interest Operating cost of pipe network Booster pumping cost and maintenance (where pipe pressure is below 40m) Scheme overhead cost Total Annual Costs (in 2014) $200/ha/yr (VIL) $250/ha/yr (MHIS) $180/ha/yr (AIC) $20/ha/yr (All schemes) $0/ha/yr (VIL) $30/ha/yr (MHIS) $40/ha/yr (AIC) $30/ha (VIL) $60/ha (MHIS) $50/ha (AIC) Preferred Option and Business Case $240/ha/yr (VIL) $360/ha/yr (MHIS) $290/ha/yr (AIC) Analysis of the business case demonstrated that the key variable to the project is real increases in electricity costs. Historically New Zealand has had a 3% annual increase in electricity costs above inflation for the last 40 years. Figure 2 shows the annual cost, in present value, of running a pipe network compared to an open channel scheme if a 3% annual increase of electricity cost is included, and other items are held with no increase above inflation. Based on this, the pipe network option is better value for all three schemes. If there is no real electricity cost rise, then the MHIS pipe network upgrade is not attractive and the AIC pipe network upgrade is marginally worse than Concept 1. When reviewing the options, the MHIS company board preferred the pipe network, even though it was not the lowest cost option for the medium term, because: 1) Over time, the pipe network lowered the cost of pressurised water if there is an increase in the electricity costs. In the case of AIC this is a short term payoff, in the case of MHIS this is a long term payoff. 2) The pipe network met the project drivers better than the upgraded open channels, particularly giving a better level of control, and removed most of the existing open In summary, for all three schemes the respective Boards preferred the pipe network concept, although the AIC project is still being developed and the Board s initial preference for a piped network will depend upon the project contract price and remains subject to shareholder approval. Risks to the Projects The risks to the projects were considered at the concept and preliminary design phases. The common risks across all three projects were: Interest Rates fluctuating. The business cases assumed a 30 year average interest rate of 7.5%. Exchange Rate Fluctuation this will affect pipe supply and installation costs. Oil price the price of pipe is linked to the oil price. This can also be an opportunity (a negative risk), currently the oil price is less than when the estimates were completed. Not all new shares are sold this would reduce the income to the scheme to offset the capital cost for shareholders, and effectively increase the cost per hectare of the capital cost. Point where open channel network is cheaper than a pipe network for AIC Point where open channel network is cheaper than a pipe network for MHIS Figure 2: Graph showing the annual cost, in present value, of a pipe network scheme compared to an open channel scheme, allowing for a real increase of 3% in electricity costs

5 preferred contractor. The final design build tender offer was voted on by the MHIS shareholders in 2014 and fell short of the required 75% majority. Environmental Impacts of the Capital Projects The upgrading of the schemes infrastructure is considered to be a permitted activity by ECan since the water use is not changing. Nonetheless there will still be effects on the environment of the projects, including: Less groundwater recharge. The 15 20% distribution losses are partly due to leakage from the open channels into the ground water. Removing this will reduce groundwater levels, affecting borehole yields and flows in spring fed waterways. Irrigating a greater area, by selling water saved from leakage and bywash, will result in increased farm activity, resulting in economic benefit to the community, but potentially increasing nutrient loadings. The implementation of more efficient practises, as set out in the farm environmental plans, are intended to mitigate this change. Current Status of Capital Project in Valetta Irrigation Scheme The VIS scheme completed construction and commissioning on a pipe network to replace the existing open channels in mid The project included some notable innovations, including: Onsite manufacture of all pipe using PE100, with diameters ranged from 300mm to 1600mm. Transporting the pipe in lengths up to 200m, thereby reducing the number of welds required on site. This saved significant amounts of time and cost. Inclusion of a small hydropower generator on the main pipeline. Current Status of Capital Project in Mayfield Hinds Irrigation Scheme The preliminary design for a pipe network and associated business case, were completed in mid The MHIS Board of Directors approved the project to proceed to the procurement phase via a design and build tender. A request for tender was issued to prequalified consortiums in early 2013, which led to a 12 month value engineering and negotiation period with the The pipeline project is still considered an option by the Board, but several other smaller capital projects are being completed before the pipe network project is revisited. It is likely that a pipe network with a lower level of service, and accompanying lower capital cost, will be presented for the shareholders to vote on. Current Status of Capital Project in the Amuri Irrigation Company s Schemes The developed design of the AIC scheme pipe network has been completed. At time of writing the design and cost estimate were being considered by the company Board. Subject to Board approval, consultation with shareholders and a request for tender to design and build contractors are likely to be the next steps for this project. Comparisons between the Projects on Each Scheme The challenges from regulation and irrigation evolution facing the three schemes are very similar, and the upgrade plans being consider by each of the three solutions have the same key components. However, there are a number schemes that have not elected to install a pipe network to respond to these challenges. There are several factors the make pipe networks possible for these schemes: Sufficient fall across the scheme to generate pressure in a pipe network to remove the need for pumping. Storage can be supplied above the pipe networks if required. The Valetta Irrigation Scheme pipe network is the only capital project that has been completed to date of the three schemes covered in this case study. There are several reasons for this: 1. The farmers on this scheme had not invested in spray irrigation and associated on-farm pumping systems to the same extent as MHIS and AIC. The benefit of pressurised water without pumping was attractive since it avoided the capital expenditure of on-farm pump stations. 2. The Valetta Irrigation Scheme is the smallest of the three considered in this case study. Therefore it was less complex to design a solution that best suited the shareholders requirements and easier to inform the shareholders prior to voting on the capital expenditure.

6 3. The existing shareholders on VIS purchased the new shares resulting from the water savings through the pipe network upgrade. This gave the project greater financial certainty than when shares are sold to new shareholders. Comparisons to the Australian Experience Both Australia and New Zealand irrigators are experiencing pressure to improve water quality and water use efficiency, from regulation and the value of water. There are several key similarities: - The value of water is increasing - The higher costs imposed by regulation and requirements for more efficient irrigation require agricultural practises to become more intensive. There are several key differences between the New Zealand response to: - Heavier soils with less slope leading to greater use of open channels for flow conveyance and much on-farm flood irrigation - Different ownership structures - Power supply costs Conclusions The three schemes presented in this case study have supplied up to three generations of farmers without any significant changes to the scheme infrastructure. Over time, the on-farm land use and irrigation practises and the regulatory environment has changed significantly. This has driven the scheme s respective Boards of Directors to consider how they can improve their schemes to meet the needs of the next generation of farmers. The initial preferred solution for the schemes considered has been to use pipe networks to replace the open channels to meet efficiency and measurement targets required by new regulations and the pressure required by spray irrigation without on-farm pumping. For MHIS the shareholders voted not to proceed with a piped network at the price presented, for VIC the pipe network was accepted and installed and AIC has not yet voted on the solution offered. Pipe networks have the highest capital cost of the options considered, and require selling new shares in the scheme using the water saved to become financially viable. In conclusion, the preferred solution to the current market opportunities is to install a pipe network. However the capital cost of the pipe network still needs to be affordable compared to the current scheme pumping costs. ACKNOWLEDGEMENTS I would like to acknowledge the input David Heiler (Technical Director Water Infrastructure, Beca Ltd) for his extensive effort in delivering the studies for each of the three schemes and in the preparation and review of this paper, and to Andrew Barton (General Manager, Amuri Irrigation Scheme) for his review of this paper.