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6 Conclusions

This report has examined the broad features of the aquaculture industry, its regulatory framework, risk management approaches and specific risk treatment options. A wide range of stakeholders have been interviewed, marine farms have been visited, and the recommended qualitative approach to risk analysis has been trialled with a stakeholder group.

Although councils require a recommendation for managing the risk of marine farm abandonment, the scope of this exercise has allowed for the development of a framework that can be used to inform a range of stakeholders about aquaculture risks, both now and in the future. As a result, the conclusions reached cover the specific issue of marine farm abandonment as well as broader aspects of risk management in New Zealand aquaculture.

6.1 The industry

The New Zealand aquaculture industry includes several mature sectors characterised by well-established, well-resourced and sophisticated firms that have developed effective risk management for typical operating risks and shown an ability to collaborate at a regional level to manage more significant external risks. There is a robust and growing global market for aquaculture products which has led government to give the industry a strong mandate and support to grow in a sustainable manner.

The industry has significant sustainability drivers that acknowledge the importance of good environmental practice: in maintaining a clean and viable production space in the Coastal Marine Area (CMA); in public perception of its activities, and in its marketplace. An increasing sense of collaboration has resulted in the establishment of an industry organisation, Aquaculture New Zealand, which should enable the industry to establish more and better cross-species and nationwide initiatives, and strengthen and broaden its self-regulation activities to achieve agreed environmental objectives and fulfil obligations to regulators.

6.2 The regulatory framework

Since the introduction of the aquaculture reform legislation in 2005, councils are now the primary regulatory decision-makers affecting marine farming. Councils must balance environmental and economic development objectives and competing uses and values of other users of the CMA, and central government’s support for sustainable growth of aquaculture.

The new regime remains largely untested: a new Aquaculture Management Area (AMA) is yet to be created under the new provisions in the RMA, and there is uncertainty over how the process might proceed in practice. Despite current difficult economic conditions in which the high value of the New Zealand dollar is eroding export revenue, there is likely to be a market premium for already-consented space, even if clean-up and structure removal is required. Councils remain concerned that there are circumstances under which they could find themselves responsible for restoring abandoned farm sites. However, there has previously been no consensus between industry and councils as to the level of risk to which councils are exposed or the possible costs of any restoration.

6.3 Risk assessment in New Zealand aquaculture

The aquaculture sector at present does not use formalised or standardised risk assessment tools. Some of the supportive work on elements such as biosecurity and new technologies is based on discrete risk analysis, but risk assessment is not carried out as a matter of course by councils.

A predominantly qualitative risk assessment approach has been used because of the lack of consistent and qualified quantitative data. This assessment has been informed where possible by the available quantitative data. A residual risk analysis approach should be used because it is evident that the industry is working to reduce risk day-by-day.

A multi-stakeholder risk assessment workshop determined that this sort of analysis is useful for informing opinions on the true level of residual risk. Aquaculture should also be examined within three risk contexts - Research & Development (R&D), early commercialisation and full commercialisation - because each has distinct risks and differing time periods over which these may occur. At present, authorities make little differentiation between these contexts.

6.4 Risk evaluation

The risk scoring workshop demonstrated that current controls and voluntary approaches have reduced the risks to a manageable level, with industry participants treating many of the identified risks as business-as-usual. The current residual risk to councils of marine farm abandonment is very low, due to industry conditions that support the purchase and remediation of abandoned marine farming sites.

The residual risks to the industry are predominantly external. The risk from natural hazard events is no different to that for many other structures in the coastal marine area today. Major natural hazard or biosecurity events with similarly major impacts on marine farming activities are likely to attract national responses in which marine farm abandonment would be only one of many considerations. In the history of New Zealand aquaculture, biosecurity hazards have not resulted in major, ongoing impacts to farm productivity.

Marine farming space is a valuable commodity, which is presently limited. There is a general consensus among those in the industry that if industry profitability continues, it will remain economic for other marine farmers to acquire and clean up sites where marine farm business failure has occurred, provided these sites are still viable for farming. The industry has weathered a number of exchange rate fluctuations that have reduced export revenue while retaining the capacity to purchase and operate sites that come up for sale.

6.4.1 Mussels

The residual risk to councils of mussel farm abandonment in the current New Zealand aquaculture context is negligible; i.e. any risk mitigation benefits would be far exceeded by the cost of setting and collecting a levy through a risk mitigation instrument. This largely qualitative assessment is supported by the following points, including some quantitative data.

  • There have been no mussel farm forfeitures from a total of 521 leases during the Ministry of Fisheries’ tenure of administering aquaculture (1964-2004). (There is an informal report, not captured in official data, of a mussel farm using experimental structures being abandoned in the Kaipara Harbour in the 1980s).
  • A trial qualitative assessment, completed as part of this report, indicated that the likelihood of marine farm business failure in the current New Zealand aquaculture context is negligible.
  • The capital value of mussel farming structures makes it unlikely that structures would be left in the water.
  • The value of consented marine farming space makes it unlikely that the space would not be restored to operation.

6.4.2 Finfish (salmon)

The residual risk to councils of salmon farm abandonment in the current New Zealand aquaculture context is negligible; i.e. any risk mitigation benefits would be far exceeded by the cost of setting and collecting a levy through a risk mitigation instrument. This largely qualitative assessment is supported by the following points, including some quantitative data.

  • There have been no salmon farm forfeitures from a total of 30 leases during the Ministry of Fisheries’ administrative tenure.
  • A trial qualitative assessment, completed as part of this report, indicated that the likelihood of marine farm business failure in the current New Zealand aquaculture context is negligible.
  • The capital value of salmon farming structures makes it highly unlikely that structures would be left in the water.
  • The value of consented marine farming space makes it unlikely that the space would not be restored to operation.

6.4.3 Oysters

Of a total of 337 oyster farm leases under Ministry of Fisheries regulation (1964-2004), 89 forfeiture notices were served to farmers. Most of these notices stemmed from historical management practices and regulatory regimes, meaning that a number of oyster farms were situated on unproductive sites or were unable to effectively make the transition from rock oyster culture to Pacific oyster culture.

However, management practices and risk management through zoning and monitoring by consent authorities have shown ongoing improvement. Although there are still 10 farms under outstanding forfeiture action (including those in Waikare Inlet, the site of a contamination incident in 2001), and a number of oyster farms recently transferred to the jurisdiction of Northland Regional Council that pose a higher relative risk of abandonment, only one oyster farmer has failed to comply and forfeited their lease. (There is an unofficial report that two small oyster farm sites were restored by the Ministry in the late 1960s.)

Despite some history of issues with maintaining operational viability on oyster farming sites, the residual risk to councils of oyster farm abandonment in the current New Zealand aquaculture context is low; i.e. it may be economically rational for councils to require some form of financial risk mitigation. This largely qualitative assessment is supported by:

  • a trial qualitative assessment of the likelihood of oyster farm business failure in the current New Zealand aquaculture context
  • continually improving risk management of oyster farms through industry good practice, and zoning and monitoring by councils
  • the willingness of the oyster industry to undertake structure removal and site restoration on derelict or abandoned farms
  • the value of consented marine farming space, which makes it unlikely that the space would not be restored to operation.

History and industry consultation show that occurrences of adrift marine farm structures are relatively rare. In most cases where structures break their moorings, the marine farmer will aim to recover them as soon as possible because structures and stock have significant residual value.

6.5 Risk mitigation instruments

There is a range of risk mitigation instruments that may contribute to improved risk management in the New Zealand aquaculture context, but only two of these have universally applicable prospects to effectively address the residual risk of abandonment of marine farms: a remediation pool fund and/or use of bonds. Either, or a mix, of these tools could provide residual risk coverage for councils and be written into resource consent conditions. There are also opportunities for collaborative efforts that would reduce risks such that the residual risk of abandonment is acceptable to councils.

6.5.1 RMA bonds

There are conditions in which use of bonds may be appropriate for managing the residual risk of abandonment in the current New Zealand aquaculture context. However, the generalised application of permanent bonds over the life of a farm in the absence of ongoing residual risk analysis appears to be a coarse instrument for managing this risk.

RMA bonds do not provide for pooling of risk, thus the bond must remain tied to the consent on which it is imposed. Therefore, a ‘best estimate of worst case’ of restoration costs would be the only way that councils have to ensure that the bonds’ quantum would provide acceptable coverage in the event of abandonment requiring restoration. This is likely to require setting of large quantum bonds that could affect business viability and/or growth prospects across the industry.

When an unacceptable risk of potential business failure has been identified with any particular application, there is a basis for a bond with periodic review conditions, similar to what councils impose during wharf and marina construction periods. When stable conditions (e.g. ongoing profitable operation) prevail, the risk is likely to become acceptable and such a condition should be removed. Bonds should also be removed in the event that an alternative mitigation of residual risk, such as a remediation pool fund, is established.

Bonds should wherever possible be based on a guarantee from an acceptable financial institution, e.g. one with Standard and Poors’ or better rating.

6.5.2 Pooled funds

There is a strong basis for councils to have access to a generalised risk-based pool fund for any structures in the CMA, not solely focused on marine farms, but also covering marinas, wharves, jetties, moorings and future structures such as tidal barriers, wave generators, and offshore wind generators. While there are challenges and lead times involved in establishing a remediation pool fund, this option represents the most efficient and effective way to mitigate the residual risk of abandonment of marine farms and, potentially, other structures in the CMA. It also provides strong incentives to marine farmers to install and maintain effective risk management and mitigation, thus reducing the total risk from activities in the CMA.

The key features of such a fund include:

  • establishing the residual risk every three years with a detailed-as-possible quantitative analysis
  • fund governance by the industry (the pooled fund would preferably be industry driven and operated)
  • a detailed set of fund rules
  • an efficient means of contribution recovery and establishment of a threshold below which those not adding to the risk do not contribute to the fund.

The features above could be captured under current legislation by a voluntary pool fund established by the industry. Bonds could still be required from high risk marine farmers, or those that decide not to contribute to the fund. This type of fund could be established initially on a regional basis, starting in one region where unacceptable residual risk is an issue (e.g. Northland or Waikato regions). A regional fund could serve as an intermediate step to a national fund.

The New Zealand Oil Pollution Levy Fund has been identified as good practice for such a fund. This model has the additional advantage of being able to enforce contributions from all risk contributors from the time of fund establishment. Specific legislation would be necessary to require contributions from marine farmers. A voluntary fund could form the basis for a legislated approach, if such an approach was found to be desirable in the future.

If an industry based voluntary pool fund approach is pursued, the industry group running the pool fund might test industry willingness to make contributions to the fund before contributions being required to meet conditions of their specific resource consents. In this way, a voluntary pool fund could quickly achieve broader coverage and greater efficiency (but probably not complete coverage) than the imposition of bonds. Councils will need to develop policies and processes that recognise the fund and set out related consent conditions and responses.

6.5.3 Industry voluntary approaches

Aquaculture industry conditions, such as increasing collaboration and the implications of shared resource use, are favourable for industry self-regulation. It is important for councils to be fully aware of voluntary approaches to risk management in their jurisdiction and to foster partnerships with industry on further developing such voluntary approaches. Well-canvassed voluntary approaches should help to address council concerns and may allow councils to shift some regulatory activity to industry. Industry voluntary approaches may extend to mechanisms for site remediation at a local or species level that will further reduce the residual risk of abandonment.

The recommended option for managing the risk from those oyster farms in Northland that have been transferred from Ministry of Fisheries administration in poor condition is for current and former regulatory parties and industry to intervene to re-establish ongoing viability. Only once this has been achieved should farms be included under any pooled risk scheme. If business re‑establishment cannot reasonably be achieved, or the farm continues to pose an abandonment risk, then bond setting may be used as an incentive for the business owner to comply or exit.