6 Costs and Benefits
The Ministry for the Environment has commissioned a Section 32 analysis of the standard. [Section 32 of the Resource Management Act 1991 relates to the evaluation of alternatives, benefits and costs associated with proposed changes to plans, regulations, policy statements and so on.] The analysis will be reported in two parts - a scoping report and a full appraisal. This section is based on the scoping report, with fuller quantification during the next phase. It:
- defines the types of costs and benefits that will be incurred as a result of the standard
- stratifies the costs and benefits by affected group and by the situations in which they will be encountered
- identifies key information that could be researched during the consultation phase.
6.1 Costs and benefits of the standard
The costs and benefits of the standard will depend on the changes that it makes to the status quo. The outcome will depend on the way that councils act in respect of consent requirement, their knowledge and regulation of drinking-water sources, and their current protocols for managing unconsented discharges. Costs will typically be incurred as a result of increased activity under the standard, although in some cases increases will not occur because councils and consent applicants are already meeting the standard requirements.
There are six stakeholder groups likely to be impacted by the proposed standard:
- central government
- regional and local government
- drinking-water suppliers
- resource consent applicants
- public health
- emergency management.
6.1.1 Central government
Central government will incur costs through the preparation of the standard, its implementation and monitoring costs. Of these, the implementation costs will probably be the most significant, and will arise largely through the technical assistance programme. An extensive monitoring programme is not likely to be required, because compliance can be measured through existing council auditing processes.
6.1.2 Regional and local government
Regional and local government will be the primary mode through which the standard is implemented. Expenditure will comprise implementation and administration costs.
Implementation costs incurred by regional government will largely arise through the identification and description of drinking-water catchments. While this will be relatively simple for surface catchments, groundwater catchments and their recharge zones can be more difficult to establish. Costs will be incurred by authorities with the need to review permitted and unregulated activities to determine whether they are likely to have an impact on drinking-water sources. If the reviews result in the need to adjust plans, costs could be involved. Local authorities will also need to ensure that communication protocols are in place in the event of an unauthorised discharge by a consent holder.
In administering the standard, some costs will increase for regional and local government. As any resource consent is processed, there will be an additional step required to check whether the activity is within a drinking-water source catchment, and where this is true, ensuring that the necessary impacts have been included in the assessment of environmental effects (AEE). Most of these costs are likely to be recovered from consent applicants.
6.1.3 Drinking-water suppliers
Drinking-water suppliers will experience increases in cost in both the implementation and administration phases of the standard. During implementation, the cost increases are likely to be minor and associated with increased consultation with regional and local government.
During administration of the standard, drinking-water suppliers, as affected parties, may receive more referrals for consents. This will largely depend on the location and type of drinking-water source, the activities in the catchment, and current practice with consents. Where an upgrade to treatment processes is negotiated, there may be increased capital costs and an increase in the cost of running the plant.
In some cases, the increased protection offered by direct consideration of impacts on drinking-water supplies will result in savings in treatment costs, particularly for drinking-water suppliers with low or minimal treatment in place.
6.1.4 Resource consent applicants
Some resource consent applicants are likely to face increases in costs as a result of the standard. They will be required to identify whether they are within a drinking-water source catchment, and to show that the proposed activity will not have a significant effect on that water supply. Decision-making bodies will require notification procedures for unconsented discharges.
The additional costs for consent applicants may, in some cases, be limited, simply because most activities that have an impact on water quality would normally be required to demonstrate that the impact is only minor, and drinking-water supplies may be recognised as a value to be protected, regardless of the standard. However, even where this is not the case, the additional thresholds for demonstrating impact on drinking-water supplies may not be large.
Where impacts from a consentable activity are probable, mitigation or prevention costs are likely to be incurred by applicants. The size and scope of these costs is difficult to determine, and may vary from significant, where activities are no longer able to proceed in an area, to low where only minor mitigation measures are required.
6.1.5 Public health
The ultimate aim of the standard is to reduce the risks to drinking-water. The reduction in risk from the proposed measure is difficult to quantify, and the social costs of an outbreak are equally difficult to estimate. Indicatively, the social cost from the Walkerton outbreak [As noted, in 1993, the city of Milwaukee was affected by a Cryptosporidium outbreak resulting from a drinking-water filter failure. The outbreak infected an estimated 403,000 people, and led to the death of 120 people. The total financial cost of the outbreak is estimated at US$96.2 million (NZ$187.34 million); Corso (2003).] was estimated at $287,000 per affected individual, with 2000 people becoming ill.
The reduction in risk will depend on the nature of the activities that will be captured by the standard, and whether it results in a reduction in risk. The nature of the reduction in risk to public health will be investigated further in the full section 32 appraisal.
Table 3: Initial assessment of costs and benefits from the proposed standard (large table)
