BEFORE THE ENVIRONMENT COURT ENV-2016-AKL- 42 and 45 … · BEFORE THE ENVIRONMENT COURT...

BEFORE THE ENVIRONMENT COURT ENV-2016-AKL- 42 and 45

IN THE MATTER of the Resource Management Act 1991 (RMA)

AND

IN THE MATTER of two appeals under s 120 of the RMA

BETWEEN Ngā Pōtiki a Tamapahore Trust and Others

Iwi Appellants and s 274 Parties

AND Bay of Plenty Regional Council

Respondent

AND The Astrolabe Community Trust

Applicant

PRIMARY STATEMENT OF EVIDENCE OF JAMES DOUGLAS MARSHALL FAIRGRAY FOR IWI APPELLANTS

Economic and social effects referring to Appendix B, paragraphs 5.1, 5.2, 5.5, 7 and 9 of the Environment Court’s directions dated 29 June 2016

Dated: 3rd January 2017

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TABLE OF CONTENTS

SUMMARY 3

INTRODUCTION 8

Experience and Expertise 8

Code of Conduct 9

Scope of My Evidence 9

SECTION 1: APPROACH TO EVIDENCE PREPARATION 13

Economic Approach to Assessment 13

The Owner/Applicant 16

The Iwi Appellants 17

Responsibilities for the Wreck 18

SECTION 2: LEGISLATIVE AND ECONOMIC CONTEXTS 20

Legislative Context 20

Economic Concepts Relevant to the Rena 21

SECTION 3: EVIDENCE ON MĀORI CULTURAL MATTERS 27

Evidence of Witnesses for the Owner/Applicant 27

Evidence of Witnesses for the Iwi Appellants 33

Key Cultural Matters from an Economic Perspective 37

SECTION 4: COSTS OF THE RENA GROUNDING AND WRECK 39

Value of Cultural Impacts 43

SECTION 5: PROPORTIONALITY 49

CONCLUSIONS 52

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SUMMARY OF EVIDENCE

1. My name is James Douglas Marshall Fairgray and I am geographer and

economist.

2. In this evidence, I provide an economic perspective to help address matters

relating to the proposal to dump the wreck of the MV Rena on the Astrolabe

reef or Ōtāiti (the proposal) as approved by the Bay of Plenty Regional

Council. I focus also on the Environment Court’s directions of 29 June 2016,

at Appendix B, paragraphs 5.1, 5.2, 5.5, 7 and 9.

3. I summarise my evidence, according to the key headings in this statement, as

follows:

Introduction

(a) In the Introduction, I set out the scope of this Statement of Evidence.

Section 1: Approach to Evidence Preparation

(b) In Section 1, I set out my approach to the evidence, including the

economic approach to analysis and evaluation,1 and reference to key

issues. This is in the context of the options for the Rena wreck:

i. Removing the wreck (or bow section) from Ōtāiti. This is, in

broad terms, the “remediation path”, on the basis that removal

will largely offer some remedy to the effects of the wreck;

ii. Allowing the wreck to remain in situ, with the consent and its

conditions allowing the Rena Owner to hold some risk for a

decade, and then pass on the risks and responsibilities

associated with the wreck to the community of New Zealand.

This is in broad terms, the “mitigation path”, in that allowing the

wreck to remain will not provide remedy, but conditions and side

1 I note that some experts have questioned the need for further economic evidence in this

case, notably Mr Fraser’s EIC for Respondent, dated 25 November 2016, at para [6.3] to [6.4].

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agreements would enable some mitigation of the adverse

effects; and

iii. Allowing the wreck to remain in situ, with the consent and its

conditions not allowing the Rena Owner to pass the risk and

responsibilities associated with the wreck to the community of

New Zealand. This is also a “mitigation path”, but one which

would reduce the level of risk and responsibility passed to the

New Zealand community.

Section 2: Legislative and Economic Contexts

(c) In Section 2, I set out the legislative and economic contexts, including

the relationships between the Resource Management Act (RMA or

Act), Māori cultural values and economics. The Act is predominantly

concerned with the sustainable management of resources to meet the

needs of the community, and one important dimension of resources is

the relationship of Māori to resources. In my view, a core concern from

an economic perspective is understanding the relative merits of policy

options and outcomes, including the basis on which those relative

merits are valued by communities.

(d) I set out the economic context, including concepts from economic

theory that can be applied to assist in evaluation of the Rena wreck.

This section focusses on the concepts of externalities, market failures,

Coase theorem, non-market valuation methods and applied economic

studies of cultural values. In summary, economic theory holds that in

the absence of completed negotiations and decisions (including

mitigation, remediation and restoration), there would be sub-optimal

outcomes, which would result in a loss of welfare. Although it was not

possible to apply non-market valuation methods to establish a robust

measure of this lost welfare in quantitative terms – especially because

the nature of the impacts is such that they do not lend themselves

easily to quantification - there is nevertheless considerable qualitative

evidence as to the significance of the impacts.

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Section 3: Evidence on Māori Cultural Matters

(e) In Section 3, I have examined and compared various statements of

evidence concerning (a) the impacts of the grounding and wreck on

Māori cultural values, (b) iwi and hapū relationships to the affected

areas and (c) the implications of the wreck remaining in situ. The

evidence on Māori cultural matters is key to this case, because it

identifies which groups are (likely to be) affected by the grounding and

wreck of the Rena, and the significance of the direct and consequent

effects on tangata whenua.

(f) In this context, I consider the options for Māori groups, including

reaching or not reaching a settlement, and possible outcomes as to

where responsibilities for the wreck and its effects will fall when final

decisions are made, whether or not individual settlements are

reached. This relates especially to the effects of leaving the Rena in

situ, since agreements mean that the Rena Owner will pass - to iwi

and hapū - both any settlement amounts, and on-going cultural and

other responsibilities for the wreck. One important matter is the

implications of on-going responsibility for the wreck on the exercise of

kaitiakitanga.

Section 4: Costs of the Rena Grounding and Wreck

(g) In Section 4, I address other costs, including agreed facts of the case,

covering the cost of removing the Rena wreck, environmental effects,

commercial fishing, risks to community health, historic value,

recreational use of the wreck for diving and future risk assessments. I

also outline the information that is available on the mitigation and

restoration packages that have been accepted or rejected.

(h) I also draw on the information available from settlements reached to

date as an applied economic assessment of the cultural impacts of the

“mitigation path” discussed above in paragraph [3(b)ii)]. This

considers the ‘revealed preferences’ of the groups that have accepted

mitigation and restoration packages. In theory, the value of the

mitigation and restoration packages should exceed the cultural

impacts. However, this assumes (among other things) equal

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bargaining power between the Applicant and Māori. As would be

expected the values per capita of mitigation and restoration packages

to date for the least affected groups (national and regional) are smaller

than more affected groups (such as Motiti Island residents and Motiti

hapū). The mitigation package offered to the Tauranga Moana is

significantly lower than the package accepted by other less affected

groups. Therefore, it is unsurprising that some hapū within the group

have not accepted this package.

(i) I also consider implications for the alternative “remediation path”,

which would be the removal of the Rena from Ōtāiti. While a number

of parties have reached or may be considering reaching settlements,

these are based on the Rena remaining in situ. For other groups, the

mitigation path does not represent an acceptable outcome, and they

seek remediation, through removal of the wreck. For those groups,

their costs from the wreck not being removed are clearly greater than

the possible benefits to be gained by accepting mitigation through

settlement(s).

Section 5: Proportionality of the Options for the MV Rena

(j) In Section 5, I examine the options for the MV Rena, with regard to the

proportionality of the different options:

i. Removing the Wreck (or bow section): The removal options are

very costly for the Rena Owner, especially removal of the whole

wreck. However, from a regional and national point of view the

money spent on removing the wreck would be net positive, since

the removal operation would generate jobs and economic activity,

while the major share of those costs would not accrue to New

Zealand as the funding would come the Rena Owner (based in

Greece).

ii. Current Resource Consent: the Rena Owner limits its liability by

agreeing to mitigation and restoration packages, without having to

bear the costs of removal. The resource consent and the

associated conditions allow the Rena Owner to pass the risk and

responsibilities associated with the wreck to the community of New

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Zealand. This is the logical option for the Rena Owner to choose,

as a profit maximising company, because it minimises costs and

limits liability for any future risks. This option places the highest

demand for the current evaluations of impacts and risks to be very

accurate, as any unforeseen or under-estimated costs would be

borne by the New Zealand community.

iii. Wreck Remains in situ but the Rena Owner is held liable for future

impacts from the wreck. This option would mean that the Rena

Owner retains the risks and responsibilities associated with the

wreck, and it would allow case by case assessments to be

undertaken. This option places less demand on the accuracy of

the current evaluations of potential risks.

Conclusion

(k) In the Conclusion, I provide overall views onmatters addressed in

evidence, including the extent and nature of adverse effects, and the

efficiency of proposed conditions and responsibilities, and the key

issue of proportionality.

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INTRODUCTION

4. My full name is James Douglas Marshall Fairgray. I have a PhD in Geography

(University of Auckland), and I have specific expertise in economics and

geography. I am a director of Market Economics Ltd, an independent

consultancy which specialises in economic and geographic assessment,

including policy analysis, spatial and interaction analysis, and social and

economic impact assessment.

Experience and Expertise

5. I have practised as a professional in research and analysis for 37 years, and

my project experience covers approximately 900+ studies. I have extensive

experience in assessment of modelling the spatial and economic implications

of government policies for communities.

6. I have appeared as an expert witness on numerous occasions, at all levels in

the planning structure. I appear most frequently in the Environment Court and

Boards of Inquiry, and at council level hearings, though I have also provided

expert evidence to the High Court and the Supreme Court.

7. Of direct relevance to this application, I have expertise in the following

matters:

(a) economic valuation methods including non-market techniques;

(b) policy analysis and impact assessment, especially as to how effects

are distributed within communities, and across geographic areas; and

(c) the application of economics to the RMA and s32 assessments. I

provided substantial input to the Ministry for the Environment (MfE)

guide to section 322, and I was the economics presenter for the MfE

and RMLA seminar series in 2014 on the RMA amendments.

2 Ministry for the Environment. 2014. A guide to section 32 of the Resource Management Act.

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8. More generally, I have undertaken a wide range of research into the effects

of policies and developments on people, households and communities. These

studies have been in the general context of peoples’ enablement and

wellbeing, in relation to the RMA.

Code of Conduct

9. I have read the Environment Court Code of Conduct for expert witnesses and

agree to comply with it.

10. I confirm that the topics and opinions addressed in this statement are within

my area of expertise except where I state that I have relied on the evidence

of other persons. I have not omitted to consider materials or facts known to

me that might alter or detract from the opinions I have expressed.

Scope of My Evidence

11. I have been engaged by the Ngā Potiki a Tamapahore Trust, Ngai Te Hapū

Incorporated, Te Rūnanga o Ngāti Whakaue ki Maketū Incorporated and Te

Arawa Takitai Moana Kaumatua Forum (Iwi Appellants), to provide evidence

in relation to the economic and social implications of the MV Rena grounding

and resource consent for the wreck to remain in situ, specifically with regard

to cultural effects.

12. I have particular focus on the Environment Court’s direction of 29 June 2016,

and matters set out in Appendix B paragraphs 5.1, 5.2, 5.5, 7 and 9. I have

examined those matters in the context of the broad options for the Rena

wreck, the proposal itself, the likely effects of the options on affected groups

particularly impacts on cultural matters, and the question of proportionality. I

cover those matters as follows:

(a) Para 5.1, “recognition and provision for affected Māori groups”, I

consider the range of Māori groups as appellants, and the matters of

importance to Māori groups as detailed by the witnesses for the

appellants and the applicant. As to “provision for”, I consider the

outcomes sought by affected groups, some of which have accepted

various levels of compensation, and others for which compensation is

not acceptable and they seek removal of the wreck;

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(b) Para 5.2, as to whether “the effects of the proposal on Māori values

are significant”, I consider whether effects on cultural and spiritual

values are effects on society’s welfare (the economic perspective),

and then the magnitude of those effects, for which I rely on the

statements of witnesses with expertise and understanding of Māori

values;

(c) Para 5.5, I consider those effects in the scope of 6(e) of the Act;

(d) Para 7, as to whether “alternatives…have been adequately

considered”, I have considered the proposal to allow the wreck to

remain on the reef, rather than removing it, and in particular the

proposed conditions, with regard to which parties will carry the

responsibilities for further and on-going effects of the wreck over which

time periods, and the limits of those responsibilities for the Owners in

terms of the dollar amount of the proposed bond;

(e) Para 9.1, as to “conditions that are efficient and workable, and

proportionate to the effects of the proposal”, I have considered the

efficiency of the proposed conditions, in terms of where the

responsibility for the effects will fall relative to the source of those

effects. I have also considered proportionality, as to whether the

conditions are proportional to the effects of the proposal, that is, to

allowing the wreck to remain on the reef.

13. The Astrolabe reef (Ōtāiti) and surrounding places affected by the Rena

grounding and wreck (referred to as affected areas) have values that derive

from the relationship of iwi and hapū to those places, including use values as

a source of seafood, and cultural and spiritual values from groups’ association

with the affected area over the long term.

14. I understand from the Primary Evidence of Mr. Tamati Waaka3 and Buddy

Mikaere4 that biophysical impacts within the affected area may adversely

affect iwi and hapū values to a different extent as compared to effects

measured through the lens of western science or sociology. I understand that

3 Primary DRAFT Evidence of Tamati Waaka for Iwi Appellants, dated 2 January 2017. 4 Primary Evidence of Buddy Mikaere for Ngai Te Hapū Incorporated to the Hearing Panel,

dated 14 July 2015.

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such impacts can have a negative effect on iwi and hapū values. From an

economic stand-point any loss of value represents a cost to those affected.

15. The cultural effects are related to but go beyond other effects, which include

effects on the biophysical environment, peoples’ health and wellbeing, and

financial aspects. Those other effects have been discussed in detail by other

relevant experts including marine biologists, oceanographers, marine

engineers, marine archaeologists, health physicians and fisheries

consultants.

16. In preparing this evidence I have reviewed the following evidence which

focusses on the cultural issues associated with the Rena wreck remaining in

situ:

(a) Primary DRAFT Evidence of Mr Tamati Waaka for Iwi Appellants,

dated 2 January 2017.

(b) Evidence of Mr Buddy Mikaere for Ngai Te Hapū Incorporated, dated

14 July 2015. I was unable to review Mr Mikaere’s Primary Evidence

prior to the completion of my own statement.

(c) Primary Evidence of Dr Shaw Mead for the Iwi Appellants, dated 23

December 2016.

(d) Primary Evidence of Dr Mason Durie for the Iwi Appellants, dated 23

December 2016.

(e) Primary Evidence of the Iwi Appellants’ cultural witnesses (that was

available at the time I completed this statement) including that of Ms

Rangi Butler, Ms Alice Kiwa, Ms Nadia Haua, Mr Peri Kohu, Mr Paku

Akuhata, Ms Mabel Wharekawa-Burt, Mr Rehua Smallman, Des Heke

Kaiawha, Frances Ngawiki Clarke, Margaret Meteria Clarke, Thomas

Abraham McCausland, Vervies Punohu McCausland, Tane Junior

Ngawhika, Manu Hughes Pene, Liam Te Wherowhero Tapsell, Peretini

Hawea-A-Rangi Te Whata, Tohu Ripeka Te Whata, Te Wano Ngahana

Ngatipeehi Walters, Rereamanu Patana Wihapi, Aroha Gwenvillan

Wilkinson, Barrie William Wilkinson, Nessie Hinetai Ani Kuka, Tiki

Bluegum, John Webster Te Kapene Thatcher and Bentham Ohia.

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(f) Primary Evidence of Sir Wira Gardiner for the Applicant, dated 28

October 2016.

(g) Primary Evidence of Mr Tahu Potiki for the Applicant, dated 28 October

2016.

(h) Primary Evidence of Dr Des Kahotea, dated 28 October 2016.

(i) Primary Evidence of Shad Rolleston, dated 28 October 2016.

(j) Primary Evidence of Antoine Coffin, dated 28 October 2016.

17. I have also read primary evidence from the Applicant and Respondent on the

issues of, cost of removing the Rena5, environmental effects6, commercial

fishing7, risks to community health8, historic value, recreational use of the

wreck for diving9 and future risk assessments10.

18. In the following statement, I also refer to academic literature, media reports

and Census data. I have referenced this information in footnotes throughout

the text of my evidence.

5 Mr Barker EIC for Applicant dated, 27 October 2016 and Mr de Jongh EIC for Respondent,

dated 30 November 2016. 6 Dr Ross EIC for Applicant, dated 28 October 2016; Dr Luca EIC for Applicant, dated 28

October 2016; and Dr Brodie EIC for Respondent, dated 30 November 2016. 7 Mr Boyd EIC for Applicant, dated 28 October 2016. 8 Dr Kelly EIC for Applicant, dated 28 October 2016, Dr Mitchell EIC for Applicant, dated 28

October 2016, and Mr Cressey EIC for Respondent, dated 25 November 2016. All consider that there is little health or public safety effects if the wreck is to remain.

9 Mr Dodd EIC for Applicant, dated 28 October 2016 and Mr Hudson EIC for Respondent, dated 28 November 2016.

10 Mr Conland EIC for Respondent, dated 25 November 2016.

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SECTION 1: APPROACH TO EVIDENCE PREPARATION

Economic approach to assessment

19. I have applied an economic approach as a useful way to assess key parameters

of the cultural and related effects of the grounding and the Rena wreck.

Economics is concerned with societal welfare, as measured through different

forms of value. The adverse impacts on the cultural and spiritual values of the iwi

and hapū associated with Ōtāiti are a loss of value. Relevant matters include the

size and nature of that loss in value, and the distribution by location among

various iwi and hapū. The RMA recognises such values, and an ‘economic’

perspective for assessing such matters is widely seen as being consistent with

the underlying nature of the Act, in that it requires assessment of advantages and

disadvantages (benefits and costs) of policies and actions, and of the processes

through which outcomes and effects arise (see paragraph [49]).

20. Accordingly, it is important to understand the scale and nature of the effects

of the proposal, the processes through which the effects did and will impact

on people and communities, and how those effects are distributed in place

and time and among people - in order to similarly understand how adverse

effects may be remedied or mitigated. Such approaches to assessment are

widely applied in the disciplines of economics, and especially economic

geography when effects have an intrinsic spatial component.

21. In this case, it is especially useful to have an assessment framework which

takes into account where adverse cultural effects have arisen, because of iwi

and hapū associations with places and relationships with those places. Those

relationships have an important spatial dimension, and a number of iwi and

hapū have such relationships with those places which are affected by the

Rena grounding and wreck. This makes it important to understand the relative

geographies of the iwi and hapū, and of the impacts of the wreck, as a basis

for understanding the scale and nature of adverse cultural (and related)

effects, and how those effects have been distributed among affected iwi and

hapū (that is, which iwi, hapū and persons have been affected, and the

manner in which they have been affected).

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22. The manner in which effects are distributed is highly relevant because there

are many different parties affected by the grounding and wreck, and they each

have shared views and their own specific perspectives on the matter.

23. Understanding the spatial dimension is one basis for assessing how these

effects may be remedied and/or mitigated – this includes the sufficiency and

appropriateness of any initiatives to remedy or mitigate cultural and other

effects.

24. Overall, the ‘economic’ and spatial perspectives are very important for

assessing whether proposed initiatives appropriately remedy or mitigate the

effects of the grounding and wreck on different iwi and hapū. An economic

and geographic approach enables us to:

(a) identify core concepts, including that the environment is the basis of

important cultural and spiritual values;

(b) identify different forms of relationship between iwi and hapū and the

affected area;

(c) understand that the strength of these relationships is reflected through

the importance of the affected areas to various iwi and hapū;

(d) understand and compare the options for the wreck, as to whether it is

allowed to remain in situ or is removed, and the range of

responsibilities associated with either outcome;

(e) understand the processes involved, in terms of how impacts have

occurred and may arise in the future, and how responsibilities are

distributed. These processes are essentially economic in nature,

relating to the impacts, remediation and mitigation, and to approaches

taken by iwi and hapū to solving the Rena problem; and

(f) compare the options and outcomes for mitigation and/or remediation,

including the use of environmental compensation as a mechanism

through which to assess the adequacy of any conditions or settlements

designed to offset the adverse effects of the Rena wreck.

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25. Because of the complexities and range of outcomes and affected parties, a

systematic approach is important. One core question to address is which iwi

and hapū have been affected by the Rena grounding and wreck. Another core

question is - of those iwi and hapū so affected - which ones feel that the

adverse effects on them have been satisfactorily remedied or mitigated by the

measures undertaken, and which ones do not feel the effects have been

satisfactorily remedied or mitigated.

26. I have not sought to apply a full economic assessment of the effects of the

grounding and wreck, or a cost and benefit analysis (CBA). While many of the

issues noted by experts are relevant to an economic analysis of the effects of

the Rena, the assessment of cultural impacts does not easily fit with methods

normally used to quantify or monetise effects. Cultural matters are

predominantly qualitative and are difficult to quantify let alone monetise with

any degree of accuracy. Quantification beyond such basic indicators as the

extent of the area affected, and numbers of persons affected, can be

problematic.

27. I understand that in a number of instances, settlements have been reached

on compensation for environmental and cultural effects, and a key outcome

from those is a dollar amount of compensation. In each case, this will have

required a judgement by the iwi and hapū involved that the dollar amount

adequately compensates for the impacts. The thought and reasoning behind

those decisions will have taken into consideration a wide range of factors

including the strength and nature of cultural and spiritual matters for that iwi/

hapū, and the circumstances of the iwi/hapū, together with assessments of

the likelihood of different outcomes (including the possibility of no

compensation), the likely time periods and so on. It is like any decision

process, that requires one to weigh up the benefits and the costs of different

options.

28. The complexities of cultural and spiritual matters mean they do not lend

themselves easily to quantifying or monetising, to allow quantitative or similar

comparisons of the type common, for example, in CBA.11 The options for

11 This means that rather simpler approaches in economics such as CBA - which at its core

seeks to quantify and monetise outcomes, and consider whether the sum of costs is greater or less than the sum of benefits - are of limited use. That said, CBA is an important tool for decision support in many instances.

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affected iwi and hapū appear to be limited to either - deciding to accept

mitigation including money as compensation for the wreck’s impact and

continued presence on Ōtāiti, or seeking the wreck’s removal as remediation

(in broad terms).

29. As a starting point, there appears to be a considerable area of common

ground, in that several basic facts seem to be accepted:

(a) the Rena grounding and subsequent decision to leave the wreck in situ

have generated adverse cultural effects on a number of iwi and hapū;

(b) the nature and geographic distribution of these effects are directly

related to where the grounding and wreck occurred;

(c) cultural and other effects have accrued to iwi and hapū primarily on

the basis of their relationship (including spiritual and cultural) with the

places affected by the grounding and the wreck; and

(d) the Rena’s Owner/Insurers (Owner) and The Astrolabe Community

Trust (Applicant) have taken initiatives to mitigate adverse cultural

effects, including the direct compensation of a number of the iwi and

hapū.

30. For those iwi and hapū who have not accepted such mitigation initiatives the

adverse effects on their cultural values remain unaddressed – that is, the

adverse effects are neither remedied nor mitigated.

31. The economic perspective is quite straightforward, for both the

Owner/Applicant and the Iwi Appellants.

The Owner/Applicant

32. For the Owner/Applicant, the grounding of the Rena and the wreck have given

rise to a number of major costs. Many of those costs have already been

incurred, through salvage activity and associated costs, and through the

payment of environmental compensation to some iwi and hapū.

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33. The options are limited to remediation and mitigation, since the grounding and

wreck are a fact and there is no option to avoid the effects:

i. Removing the Wreck (or bow section) from Ōtāiti is the “remediation

path”, on the basis that removal will remedy the effects of the bow

remaining on Ōtāiti;

ii. Allowing the wreck to remain in situ is in broad terms, the “mitigation

path”, as this option forecloses remediation. This option enables the

Owner to transfer the risk and responsibilities associated with the

wreck to iwi/hapū and the community of New Zealand; and

iii. Allowing the wreck to remain in situ, subject to conditions of consent

that would prevent the Owner from passing the risk and responsibilities

associated with the wreck to the community of New Zealand. This is

also a “mitigation path”, but one that entails with lesser risk for iwi/hapū

and the general public.

34. From a basic cost and benefit perspective, the costs incurred to date are much

less than the cost of removing the wreck. Therefore, avoiding the cost of

removing the wreck represents a benefit to the Applicant. Similarly, the extent

to which the costs of further mitigation can be minimised – such as

environmental compensation to affected iwi and hapū – also represents a

benefit to the Applicant.

The Iwi Appellants

35. For the Iwi Appellants, the grounding and wreck generated adverse effects.

Some of those adverse effects have been remedied (through the clean-up

activities completed to date) and/or mitigated. Some of those effects have

been neither remedied nor mitigated. This means that the scale of the adverse

effects is greater than the scale of remediation or mitigation provided to date.

This is because from a basic cost and benefit perspective, the costs (adverse

effects) outweigh the benefits of the remediation and mitigation to date

(assuming that remediation and mitigation may be considered as ‘benefits’).

Overall, this means that the effects are net adverse.

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Responsibilities for the Wreck

36. An important consideration for assessing the effects of the Rena wreck is the

responsibility for those effects. Currently, responsibility for the effects still rests

with the Owner. The conditions of consent may mean that those

responsibilities are transferred to central and or local government, acting for

the national and regional communities at large12. These government-level

responsibilities include, generally, environmental and coastal marine matters.

Within our national structure, responsibility for Māori cultural and spiritual

matters rests predominantly with iwi and hapū, as distinct from the community

at large, particularly because that is where the specialised knowledge and

understanding necessary to carry out those responsibilities also rests. That is

the practical circumstance, although this is augmnented with appropriate

statutory support – for example, the significance of Māori values is provided

for under the RMA, including 6(e), and 7(a) (kaitiakitanga).

37. This means that any transferred responsibilities for the effects of the Rena

wreck will be carried by the community at large, and the Maori community.

This includes future effects which will be carried predominantly, or entirely,

by affected iwi and hapū. In this respect, iwi and hapū represent the main -

or only - community structure through which those adverse effects may be

remedied or mitigated. A number of cultural witnesses – for example Rangi

Butler – have identified that the presence of the wreck on Ōtāiti causes major

trauma to them and the iwi and hapū they represent, and that the continued

presence will cause continued trauma. For them, failure to secure removal of

the wreck represents a failure to carry out their responsibilities of kaitiakitanga.

38. It is important to understand the effect of its on-going presence, in relation to

other effects from the wreck. Some effects of the wreck may have been

cleaned up or mitigated (to some degree), including oil spills, container float-

12 Within an economy, there are many formal and semi-formal organisational structures which

confer powers and responsibilities for key persons and groups. These range from elected representatives such as MPs, to community and sporting or interest groups. The structures typically confer powers and responsibilities of particular scope, which are wide ranging for MPs and councillors, and progressively lesser in scope and more specific to areas of interest, at local community and/or interest group level. Within these various structures, there is typically a level of specialisation and limited overlap. Within New Zealand, the Māori community has strong iwi and hapū organisational structures, which are for the most part geographically based. These structures also confer powers and responsibilities, on specific positions and internal structures such as committees, including for key matters like Māori cultural and spiritual knowledge and values.

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off, removal and containment of some contaminants, marine safety and so on.

Many of those effects were initially large, and on-going effort has reduced a

number of them (Dr Shaw Mead covers these in his statement).

39. However, while some environmental effects have diminished, the impacts on

cultural and spiritual values arising from the presence of the wreck have not

diminished, simply because the wreck is still there.

40. One obvious implication is that, because the adverse effects arising from the

Rena’s presence per se have not diminished while other effects have reduced

through environmental clean-up and other measures, so the effects from the

presence of the wreck have become relatively more important.

41. Another is that impacts arising from the presence of the Rena are not likely to

diminish into the future. Another is that estimates of future outcomes carry

substantial uncertainty, which increases as the future becomes more distant.

42. These matters also assist in understanding the significance of taking on the

responsibility for adverse effects. Responsibility generally adds another layer

to effects, which can be seen as exacerbating or intensifying effects, whether

they are adverse or beneficial effects. In simple terms, it is the difference

between “there has been a bad outcome” and “there has been a bad outcome,

in a matter for which I/we hold responsibility.”

43. The direct implication is that any settlement where iwi or hapū accept a

compensation package as mitigation for the wreck, also represents

acceptance of the future responsibility for adverse effects from the wreck. This

is particularly apparent in terms of kaitiakitanga, and the transgenerational

nature of effects and responsibilities (ie on future generations).

44. These considerations are important in relation to the effectiveness and

efficiency of different outcomes for the Rena wreck. Effectiveness is assessed

in terms of the extent to which adverse effects are mitigated or remedied for

all affected iwi and hapū, not just those who have reached settlement with the

Owner. Efficiency relates to the costs in both dollar terms and impacts on iwi

and hapū values, where the obvious trade-off is between the lower dollar cost

of leaving the wreck on Ōtāiti, versus the higher impact on cultural and

spiritual values of that outcome.

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SECTION 3: LEGISLATIVE AND ECONOMIC CONTEXTS

Legislative Context

45. The Resource Management Act (RMA) recognises Māori cultural values

under many sections of the Act. Importantly Māori cultural values are

recognised under the purpose and principles of the RMA:

(a) as a matter of national importance, s.6(e) refers to “the relationship of

Māori and their culture and traditions with their ancestral lands, water,

sites, waahi tapu, and other taonga.”

(b) also other matters that persons exercising functions under the RMA

must have regard to includes principles of “kaitiakitanga” (s.7(a)), and

(c) persons exercising functions under the RMA must take into account

principles of the Treaty of Waitangi (s.8).

46. These requirements have a prominent place in the RMA. They show specific

recognition by Parliament of the importance of Māori culture to New Zealand.

There are also a number of other references to cultural values throughout the

RMA.

47. Schedule 4 of the RMA sets out the matters that must be addressed when

preparing an assessment of environmental effects (AEE) in support of a

resource consent application. Importantly, clause 7(1)(a) of Schedule 4 states

that an assessment of effects must address (amongst other things) “cultural

effects” in the “neighbourhood, and where relevant, the wider community”.

48. I understand from legal counsel clause 7(1) means that while it is necessary

“where relevant” for the effects on the wider Bay of Plenty community be

assessed, it is necessary (without qualification) for an AEE to assess for the

effects of a proposal on local groups, including iwi and hapū.

49. From an economic perspective, the RMA can be viewed as a legislative

mechanism which enables communities to assess alternative policy options

concerning the allocation of scarce resources. Generally, the Act requires

decision makers to ensure outcomes will contribute to enabling social,

economic and cultural well-beings. The concept of assessing relative merits

Page | 21

of policy options and resource uses is in my view a core concern of the

economic perspective and research. Additionally, cultural values are an

important component of overall well-being and as such are a factor in

economic assessment.

50. The points discussed above are important for an economic assessment of the

MV Rena resource consent application because they show that:

(a) the importance of Māori cultural values under the RMA signals that the

wider community also places value on these cultural matters;

(b) AEEs prepared under the RMA may need to be multi-layered in their

assessment of affected groups. It is not sufficient that the wider

community benefits in aggregate, or on average, from a resource

consent being issued. The assessment should also have regard to

outcomes for sub-groups within the community, such as iwi and hapū;

and

(c) The economic perspective is a useful method for assessing and

applying the concepts of the RMA.

Economic Concepts Relevant to the Rena

51. Such assessment of outcomes and their distribution is at the core of

economics regarding welfare (or utility) of individuals and groups. A

considerable part of the study of economics is devoted to identifying and

understanding, and quantifying where possible, the nature and incidence of

welfare gains and losses as a result of different policies or actions and their

outcomes. The disciplines of economics and economic geography are not

unique in this area, but such matters are at their core as applied disciplines.

52. The Rena grounding has implications for cultural values, insofar as the

impacts represent a diminution of pre-Rena values – that is, a loss, or

reduction in welfare (or utility).

53. Often, price and volume information from market transactions can be used to

infer the costs and benefits of certain events, policies or outcomes.

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54. However, in many cases there is no direct transaction that can be used to

establish the economic value of an event, policy or outcome. The lack of

market prices per se does not mean that the there is no economic value. On

the contrary, these intangible benefits and costs can be significant and should

be valued. In economic literature, the presence of non-market values are

commonly related to externalities. Externalities are the costs and benefits

associated with commercial or industrial activity that do not accrue to any of

the actors involved with the market in question. An example of an externality

is production that results in pollution which harms wider groups in the

community.

55. In the Rena situation, these non-market externality values represent a major

component of the effects - as indicated by the settlements reached to date -

relative to the more tangible costs of the salvage and clean-up operations.

56. There is considerable international literature on the estimation of economic

value using non-market valuation methods. In terms of impacts on cultural

values, I consider that the Snyder et al 200313 discussion of the impact of the

Exxon-Valdez oil spill on indigenous people provides a useful summary of the

conceptual issues: 14

In particular we draw on this concept to characterize the idea that individuals

and communities possess some “endowment” of natural, cultural, and

economic goods. In modern market economies a large portion of this

endowment can be accounted in monetary terms and calculated as net worth,

thus making economic approaches to environmental valuation a reasonable,

though still incomplete, method for assessing damage. Still, as individuals,

we recognize that much of what we own -- our property, possessions, natural

gifts and talents, and our relationships to family and community -- is not

entirely represented in such accounts. Possessions have sentimental value

unique to their owner. And more to the point, nature, natural resources, and

local place as repositories of memories, relationships and the daily routines

have meaning and significance in our personal and collective lives that cannot

be reduced adequately to monetary value.

13 Snyder, R., Williams, D., & Peterson, G. (2003). Culture loss and sense of place in resource

valuation: Economics, anthropology, and indigenous cultures. In Jentoft, S., Minde, H., & Nilsen, R. (Eds.) Indigenous peoples: Resource management and global rights (Delft) (107-123).

14 Ibid p109.

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57. In New Zealand, there are very few examples of non-market valuation

methods being applied to Māori culture. However, there are more examples

of the methods being applied to other (contemporary) types of culture in New

Zealand, such as arts, building heritage, preforming arts and value of a place.

58. I consider that Manatū Taonga (the Ministry for Culture and Heritage,

commissioned research on an economic framework for valuing culture)

provides a useful summary of the economic methods that can be used to

value non-market goods. 15 I agree with the authors of the study that

“economics should, and can, incorporate measures of value other than

monetary and encompass the wider contribution of culture to society.”

59. However, as far as I am aware the only attempt to apply non-market valuation

methods to Māori culture was an application of a Multi-criteria model called

the Mauri model. This modelling method has been applied to the waste

dumping from the Tasman Pulp and Paper mill16 and recently to the wreck of

the MV Rena17. In this modelling method the authors attempt to articulate the

relative impacts on mauri of a location that is of importance to iwi or hapū. I

understand form Mr Mikaere that this modelling method has flaws and is not

supported by the local iwi and hapū that have cultural links to the areas that

have been studied. Mr Mikaere has advised that will address this issue in his

statement of evidence for these proceedings.18

60. Magee et al 2016 studied the value of cultural impacts in (natural) disasters

and applied them to the Christchurch 2010/11 earthquakes.19 The finding of

this study was that cultural impacts are likely to be significant and should be

included in the assessment of disasters.

15 Allan, Corey and Grimes, Arthur and Kerr, Suzi, Value and Culture (September 2013). Motu

Working Paper No. 13-09. 16 Hikuroa, D., Slade, A., & Gravley, D. (2011). Implementing Mäori indigenous knowledge

(mätauranga) in a scientifi c paradigm: Restoring the mauri to Te Kete Poutama. MAI Review, 3. Retrieved from http://ojs.review.mai.ac.nz/index.php/MR/article/view/433/693

17 Fa’aui, T.N. and Morgan, T.K.K.B., 2014. Restoring the Mauri to the pre-MV Rena state. MAI Journal, 3(1), pp.3-17. http://www.journal.mai.ac.nz/sites/default/files/MAI_Jrnl_V3_Iss1_Faaui_0.pdf

18 As set out under paragraph [16(b)] of this statement, I have otherwise relied on Mr Mikaere’s evidence prepared for the Regional Council hearing (see Primary Evidence of Buddy Mikaere for Ngai Te Hapū Incorporated to the Hearing Panel, dated 14 July 2015).

19 Magee, L., Handmer, J., Neale, T. and Ladds, M., 2016. Locating the intangible: Integrating a sense of place into cost estimations of natural disasters. Geoforum, 77, pp.61-72.

Page | 24

61. I have been unable to find any other New Zealand studies that apply economic

methods to value Māori cultural impacts. This gap in academic knowledge is

surprising, given the extensive nature of the Treaty of Waitangi Settlements

and the strong provision for Māori culture under the RMA.

62. Unfortunately, the economic valuation methods for assessing non-market

values are notoriously difficult and time consuming. As such, I have not

attempted to apply these methods in this evidence.

63. Furthermore, in terms of the Rena, the Coase theorem from economics is

particularly relevant.20 Broadly, the theorem suggests that economic systems

(markets) will fail to produce optimal outcomes in the presence of non-market

values (externalities such as cultural impacts).21

64. Figure 1 shows a stylised example of how, in theory, market failure may occur

in the presence of negative externalities (like cultural impacts). In this stylised

example, the individuals in the (free or commercial) market would choose to

supply quantity Q at price P, which is point A in the figure, where the marginal

social benefits (MSB) equal the marginal private costs (MPC).

65. However, the presence of negative externalities means that the market

allocation at point A is sub-optimal - in this case, an over provision of the item

in question. That is because the community would be better off (i.e. derive

greater welfare) if the market could produce less of the item (point B), where

MSB equals MSC (marginal social cost). The red shaded triangle in the figure

represents the value of the welfare that would be lost if the market acted freely.

20 Coase Theorem is named after the Nobel Prize laureate Ronald Coase. 21 In the case where a market has associated externalities, the resulting market outcome will be

at a point where the marginal social benefit will not equal the marginal social cost (sub-optimal). The market outcome could be changed to produce additional gains to society.

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Figure 1: Negative Externalities and Market Failure

66. I note that the stylised example above, cannot be applied directly to the

impacts from the Rena wreck remaining in situ. This is because there is no

traded good in this case, the wreck and its impacts are a binary outcome.

Either the wreck stays in situ and continues to leak contaminants over

decades, or the wreck is removed. However, I consider that the broad idea

behind the stylised example is useful. This is that society has been impacted

by the wreck and in the absence of removal, restoration or mitigation then it

is clear that a sub-optimal point has been reached.

67. I note that the Coase theorem also suggests that when property rights are well

defined and transaction costs are low, the parties will be able to negotiate

agreements (restoration or mitigation packages) that shifts society from the

inefficient point A to the optimal point B. In most situations, externalities

accrue to a large group (e.g. pollution from a factory harming a large

community) and the individual impacts may be marginally small (e.g. each

individual in the community has a small risk of respiratory impacts).

68. These two common attributes of externalities and market failures mean that

in many cases negotiations do not occur. Unless representative groups can

be formed, the relative cost of undertaking negotiation (i.e. time) may be

greater than the costs (i.e. small probability of sickness). Therefore, from an

Page | 26

individual point of view it is less costly to bear the externality than to expend

resources negotiating.

69. However, in the case of the Rena wreck, there are long-standing

representative groups (iwi and hapū), moreover there are relatively few

groups (fewer than 30), they are well organised in that they are part of an

established cultural structure, and the nature of the effects of the wreck are

readily identified in the cultural evidence of the affected iwi/hapū. This

unusually small grouping of impacted parties, in combination with the high

significance of the effects, means that negotiations have been viable for some

groups.

70. As reported in the Applicant’s evidence, a number of the affected groups have

managed to negotiate a restoration or mitigation package. I consider that as

each group completes negotiation the community outcome has moved

towards the optimal outcome (point B above).

71. However, there are some parties that have been unable to reach agreement

with the Rena Owner and insurers on a restoration or mitigation package. This

means that the optimal outcome has not yet been reached.

72. Moreover, for a number of groups, the optimal outcome could be reached only

if the wreck is removed, and not if it is allowed to remain on Ōtāiti.

73. I consider that the practical discussion in the next section provides a

reasonable guide of the value of cultural impacts, as an alternative to non-

market valuation tools.

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SECTION 3: EVIDENCE ON MĀORI CULTURAL MATTERS

74. I have examined statements of evidence on Māori cultural matters of both

tangata whenua and the experts, in relation to the wreck. I have drawn on this

evidence to aid my understanding of the nature of effects, the spatial extent

in terms of geography (of the earth’s surface) and the iwi and hapū affected,

and the differing responses to the options for the Rena. A particular issue is

the degree to which the settlements reached to date cover off or account for

areas and communities affected by the wreck, and the locations and

associations of those iwi and hapū which have not been addressed through

settlement.

75. I have examined the statements of evidence on Māori cultural matters which

have been prepared for the Applicant, by Sir Wira Gardiner, Mr Potiki, Dr

Kahotea, Mr Rolleston and Mr Coffin. I have also examined the evidence

presented on behalf of the Iwi Appellant, by Dr Mason Durie, Mr Tamati

Waaka, Mr Buddy Mikaere, and the Iwi Appellants’ cultural witnesses referred

to at paragraph [16(e)] of this statement.

76. I do not have expertise in Māori cultural matters, and I rely on the expertise of

these witnesses for my assessment as to the nature and extent of effects. I

have also examined the statement of Dr Shaw Mead, whose evidence covers

the effects of the Rena which do and will underpin cultural impacts.

Evidence of witnesses for the Owner/Applicant

Sir Wira Gardiner

77. Sir Wira Gardiner provides a summary of background matters for the

Applicant, including the consultation undertaken by the Owner of the Rena,

and the Applicant’s evidence on cultural values.

Mr Potiki

78. Mr Potiki considers concepts of Māori culture and knowledge of locations of

significance to local iwi and hapū. Mr Potiki states “There is no doubt that

Tauranga Harbour and its surrounding environs were an extremely fertile and

important fishery. There are numerous references that support that fact and

Page | 28

that local people were excellent sailors, travelling with ease between Motiti

Island and the mainland.”22

79. He also states in relation to fishing practice “evidence is limited to the actual

fishing experiences of people from Motiti, Patuwai and Ngāi Te Hapū and

experienced fishers from Tauranga Moana, specifically Ngāti Pūkenga.” 23

However, I note the Iwi Appellants evidence indicates that customary fishing

practices continue to be exercised.24

80. The evidence presented by Mr Potiki indicates that while the mainland iwi and

hapū may be geographically further from the Ōtāiti area, 25 the Tauranga

Moana were able to travel and use the fishing resource in this area. It also

indicates the resource was well known to the local iwi and hapū, as a “famous

fishing ground” according to Auckland newspaper reports from the late 19th

century.26

81. I consider that Mr Potiki’s evidence (and tangata whenua evidence for the Iwi

Appellants) shows that the local iwi and hapū knew of Ōtāiti area as a

“famous” fishery and that they could navigate to the area with “ease”. While

Mr Potiki suggests that there are limited records of actual fishing by iwi and

hapū of Tauranga Moana on the Ōtāiti area, he had not had the advantage

when preparing his statement of reviewing the Iwi Appellant’s evidence of

traditional fishing being undertaken to this day by customary fishers, such as

Mr Wilkinson. The Iwi Appellants’ expert evidence shows that there is

customary fishing of the area affected by the Rena.27

82. Finally, Mr Potiki discusses the Don Wong wreck off the Stewart Island at the

Breaksea group, and the associated cultural issues.28 The Don Wong is a

recent example of a wreck that affected cultural values of an iwi. While only a

22 Mr Potiki EIC for Applicant, dated 28 October 2016, at para [13.2]. 23 Mr Potiki EIC for Applicant, dated 28 October 2016, at para [13.7]. 24 See for example, Mr Wilkinson, dated 22 December 2016, at [11], [19] to [33]; Ms Nadia

Haua, dated 23 December 2016, at paragraphs [5] and [6]; Mr Pahunui Akuhata, dated 23 December 2016, at paragraph [7] to [9]; Mr Peri Kohu, dated 23 December 2016, at paragraphs [3] and [15]; and Ms Rangi Butler, dated 23 December 2016, at paragraphs [23] to [26].

25 The Ōtāiti area is approximately 5km from the tip of Motiti Island and 17km from Papamoa beach and 20km from Mount Maunganui beach.

26 Mr Potiki EIC for Applicant, dated 28 October 2016, at para [13.3]. 27 Mr Waaka DRAFT EIC for the Iwi Appellants, dated 2 January 2017, at para [155] to [162]. 28 Mr Potiki EIC for Applicant, dated 28 October 2016, at para [14.1].

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small number of iwi or hapū are associated with the Breaksea group, and the

wreck is in a remote location, nevertheless there was consultation with those

iwi or hapū who were affected. That was on the basis of their relationship with

the location in which the wreck occurred.

83. In terms of a conclusion, Mr Potiki makes no definitive findings about which

iwi or hapū have cultural links to the affected area.29 Mr Potiki makes no direct

reference to any iwi or hapū in his conclusions. His conclusions are limited to

generic findings about the “traditional relationship between tangata whenua

and Ōtāiti”,30 without making any judgement about the cultural links of specific

iwi or hapū.

Dr Kahotea

84. Dr Kahotea presents evidence on Māori interests, along with occupation

history of iwi and hapū in the local area, with a focus on the Ōtāiti area.

85. He considers that all Māori interests should be recognised, however not all

interests are equal. He considers that “continuous occupation of nearby land”

is of greater importance than “more recent interest” such as those recognised

in settlements with the Crown.31 The focus of Dr Kahotea’s assessment is on

the iwi and hapū that have occupied the Motiti Island, both historically (Te

Arawa iwi and Te Whānau-a-Tauwhao hapū) and currently (Te Patuwai hapū).

He considers that mainland iwi and hapū have lesser interest in the Ōtāiti

area. For example, at paragraph [4.15] Dr Kahotea considers that Ngā Pōtiki

hapū has a:

... statutory interest in the wider moana as recorded in their deed of

settlement. This is a contemporary interest from the way the Crown provides

for recognition or interest areas in settlement legislation. This does not

amount to Ngā Pōtiki having an ancestral relationship with Ōtāiti. Ngā Pōtiki

did not have customary ownership of Ōtāiti or the other reefs surrounding

Motiti.

86. However, at paragraph [6.12] Dr Kahotea acknowledges that Ngā Pōtiki hapū

have claims to customary rights over the seabed and waters around Motiti

29 Mr Potiki EIC for Applicant, dated 28 October 2016, at paras [15.1] to [15.10]. 30 Mr Potiki EIC for Applicant, dated 28 October 2016, at para [15.10]. 31 Dr Kohatea EIC for Applicant, dated 28 October 2016, at para [2.3(f)].

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Island and Ōtāiti area. It appears that the key issue for Dr Kahotea is the

extent of the relationship between iwi and hapū of the Tauranga Moana group

and the Motiti Island and Ōtāiti area.

87. Dr Kahotea considers that the main parties that have suffered cultural impacts

have received restoration and mitigation packages from the Rena owner and

insurer. He outlines at paragraph [13.24] the mitigation funds that have been

allocated to each of the iwi and hapū.

88. I note that Dr Kahotea considers that Tauranga Moana Iwi is the key group,

which indicates that the hapū and iwi within this group do have a cultural

interest in Ōtāiti area. Dr Kahotea’s conclusion about the mitigation packages

appears to directly conflict with his earlier statements that mainland iwi and

hapū do not have a cultural relationship with Ōtāiti area.32

89. Dr Kahotea makes four references to Ngāti Whakaue in his evidence, one of

which relates to a traditional text by John White that identified that Ngāti

Whakaue were fishing in the area in the 19th Century. Dr Kahotea arrived at

his conclusions without the benefit of tangata whenua witness statements for

the Iwi Appellants, including detail about the fishing practices of some Motiti

Islanders.33

Mr Rolleston

90. Mr Rolleston’s evidence focuses on the nature of the consultation process

and engagement undertaken by the owners and insurers of the Rena. I

consider that his statement at paragraph [3.2(f)] is important:

There were a number of challenges to engagement. One was the large

number of iwi, hapū, and tangata whenua interests. Many interests overlapped

and different groups took different approaches to engagement. For example,

some did not wish to engage, on the basis that they opposed the application

in its entirety. Despite this, in my opinion, the owner and applicant did the best

they could in the circumstances.

32 Ibid, at para [2.3(f)]. 33 Ms Butler EIC for Iwi Appellants, dated 23 December 2016 at paras [23]-[29].

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91. It is Mr Rolleston’s view that engagement has been adequately undertaken

and that the remaining opposition “cannot fairly be attributed to a lack of

engagement”.34

92. Mr Rolleston also states that the chairperson of Ngā Pōtiki has been

instrumental in the restorative justice process. 35 In the Annexure to Mr

Rolleston’s evidence a list of the over 200 consultation meetings and the

participants are displayed. According to Mr Rolleston’s list of meetings, the

representatives of the Rena met and consulted mostly with36:

(a) the Māori groups from Motiti Island. The annexure shows

approximately 90 separate occasions that Te Patuwai hapū and other

Motiti Māori groups met with the Rena owners;

(b) Followed by Te Arawa (Maketū) iwi, with approximately 50 meetings

recorded. However, according to Mr Te Wano Walter’s affidavit, the

Te Arawa Takitai Moana Kaumatua Forum states the group consulted

with had no mandate to represent Te Arawa Ki Tai coastal hapū;37

(c) Then Te Whānau-a-Tauwhao hapū, with 23 meetings recorded;

(d) The non-Māori residents of Motiti Island were consulted approximately

10 times;

(e) The various iwi and hapū that have been called the “Tauranga Moana”

by the Applicant had approximately 65 meetings.

93. I consider that Mr Rolleston’s evidence shows that the Applicant and

Appellants both understood that there were issues to be resolved in terms of

cultural impacts, and that consultation was a critical part of that process.

94. Consultation did not resolve the concerns of all affected iwi/hapū. Ngā Pōtiki

a Tamapahore Trust (one of the Iwi Appellants) was involved in extensive

34 Mr Rolleston EIC for Applicant, dated 28 October 2016, at para [3.2 (h)]. 35 Mr Rolleston EIC for Applicant, dated 28 October 2016, at para [3.2(i) and (ii)] 36 I have applied Mr Rolleston’s groupings of tangata whenua that is outlined at Mr Rolleston

EIC, at para [5.12(a) to (c)] of his EIC for Applicant, dated 28 October 2016, and under the Annexure to his EIC.

37 Mr Te Wano Walter’s Affidavit for Iwi Appellants sworn on 23 December 2016, at paras [30]-[36].

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consultation with the Applicant, but agreement was not reached on the

Applicant’s wish to leave the wreck in place.38 It understand from the Iwi

Appellants that the Applicant has not reached an agreement with Ngāi Te

Hapū from Motiti, Ngā Pōtiki and other hapū of Tauranga Mona, or Ngāti

Whakaue ki Maketūand other hapū of Te Arawa Takitai Moana (coastal Te

Arawa).

95. There is no conclusion in Mr Rolleston’s evidence that precludes Ngā Pōtiki a

Tamapahore Trust or the other Iwi Appellants from having a cultural

connection to the Ōtāiti area, or from having been impacted negatively by the

Rena wreck. Mr Rolleston’s evidence shows primarily that the Applicant has

recognised the need to consult and that the Iwi Appellants were important to

that consultation.

Mr Coffin

96. Mr Coffin discusses the conditions of the recourse consent, concerning the

on-going management of the wreck. From a Māori cultural perspective, he

considers the key conditions are the mitigation packages, the foundation of

Kaitiaki Reference Group (KRG) and the cultural monitoring.

97. Of importance to my area of expertise, Mr Coffin provides a useful description

of the restoration and mitigation package’s conditions provided by the Rena

Owner and insurers for cultural impacts associated with the wreck (at

paragraph [12.1]).

98. He also provides local examples of other restoration and mitigation packages

for cultural issues in the Bay of Plenty, including Tauranga Waste which paid

reparation of $250,000 (paragraph [12.3]) and Port of Tauranga which paid

$600,000 for impacts associated with dredging (paragraph [12.4]). I consider

that a key difference in these cases of reparation is that they are projects

which generate positive benefit to the community, including the affected iwi

and hapū. However, even in those cases there were adverse effects which

needed to be compensated, over and above the direct benefits. The cultural

38 The Annexure shows eight meetings with Ngā Pōtiki a Tamapahore Trust and chairman Colin

Reeder as part of the Te Moana ā Toi group on at least 5 other meetings.

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evidence suggests that the Rena wreck will generate only negative impacts

on affected iwi and hapū.

99. In terms of the foundation of the KRG, Mr Coffin acknowledges that “there

could be difficulties in implementing the KRG condition as it may enable a very

large KRG that would not then sufficiently recognise the iwi and hapū with the

closest relationships to Ōtāiti.”39

100. The key conclusion of Mr Coffin is that he considers that the package of

mitigation, restoration and consent conditions are “appropriate in scope, size

and scale to the effects of the proposal”.40

101. I consider that even if his conclusion were approximately correct when

assessing the impacts of the Rena resource consent at the overall and total

wider community level, that does not satisfy the need for assessment of

outcomes within the community. As noted, the RMA requires that the

assessment also evaluate the impacts on sub-groups in the community, such

as iwi and hapū. Mr Coffin has made no assessment of the implications of the

resource consent on the local iwi and hapū that have not agreed to the

mitigation or restoration packages.

102. Nor has he attempted any sort of overall tabulation as to which iwi and hapū

have been impacted and to what degree, and compared this with the

compensation packages agreed to date. Such an assessment would be a

basic requirement for him to reach his conclusion that the package is

appropriate to the scale of the effects.

Evidence of Witnesses for the Iwi Appellants

Mr Waaka

103. Mr Waaka’s evidence on behalf of the Iwi Appellants provides a detailed

background on the Relationship Tikanga, which covers many key concepts of

39 Mr Coffin EIC for Applicant, dated 28 October 2016, at para [13.2]. 40 Mr Coffin EIC for Applicant, dated 28 October 2016, at [13.5].

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Māori cultural values. 41 The first sections of Mr Waaka’s evidence cover

similar issues to those discussed by Mr Potiki for the Applicant.

104. Mr Waaka’s evidence extends further than Mr Potiki, describing the

repercussions and responsibilities of Kaitiaki.42 This evidence is important

from an economic perspective as it reveals the significance of the cultural

values that are involved. Mr Waaka identifies at several points the importance

of responsibilities, for example to “responsibility to protect the tapu and mauri

of the natural world”43, and “..For kaitiaki, there is a responsibility to protect

the mauri and tapu of taonga. In my view, the dumping of the wreck on Otaiti

pollutes this environment and is a violation of the tapu and mauri of Otaiti and

Te Moana Nui a Toi, and therefore a failure to uphold these responsibilities.

It would be a source of whakama and associated loss of mana.”44.

105. Another key part of Mr Waaka’s evidence is his outline of the relationships

between the different iwi and hapū with the Ōtāiti and affected areas, along

with the nature of those relationships.45 His table at paragraph [162] usefully

shows a matrix of the different iwi and hapū along with the various

relationships. I have copied his table below.

Motiti hapū Affected coastal iwi and hapū

Historic 46 assoc

Kaitiaki

Te Patuwai / Te Hapū √ √ √ √ Te Whanau a Tauwhao √ √ √ √ Ngai Te Rangi √ √ √ Ngā Potiki √ √ √ Ngati He √ √ √ Ngai Tukairangi √ √ √ Ngati Tapu √ √ √ Ngāti Awa √ √ √ Ngāti Pukenga √ √ √ Ngāti Ranginui √ √ √ Waitaha √ √ √ Tapuika √ √ √ Ngati Whakaue ki Maketu √ √ √ Ngati Whakahemo √ √ √ Ngati Makino / Pikiao √ √ Te Arawa / Tuwharetoa √

41 Primary DRAFT Evidence of Mr Tamati Waaka for Iwi Appellants, dated 2 January 2017 at

para [15] to [83]. 42 Ibid, at para [54] to [57]. 43 Ibid at para [24] 44 Ibid para [173] 45 Ibid, at para [149] to [162]. 46 Historical association means iwi/hapū that whakapapa to important tupuna or events that

occurred at the affected place, or have spiritual association to the place.

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106. Finally, Mr Waaka combines the evidence on the repercussions and

responsibilities of Kaitiaki with the cultural relationships to assess the impacts

of the Rena wreck in the ‘Effects’ section of his evidence.47 In Mr Waaka’s

view at paragraph [137] the:

… most significant effect will be the whakama arising from the abandoning of the

wreck on Ōtāiti and in Te Moana Nui a Toi and the failure on the part of tangata

whenua to uphold their kaitiaki responsibilities.

107. He also notes that some of the affected parties have not agreed to a mitigation

or restoration package because of the on-going implications of doing so (see

paragraph [128]). I consider that this indicates that the costs of accepting a

package far exceeded the gains, so these groups have made the rational

decision to not negotiate further.

108. Mr Waaka’s views contrast with those expressed in the evidence for the

Applicant on the ‘ranking’ of affected groups, where he takes issue with Mr

Zacharatos)48. He also does not agree with evidence as to exclusive domain

over the Ōtāiti fishing grounds (Dr Kahotea and Mr Potiki). He offers evidence

of a different pattern of effects from the wreck, both in terms of relatively

impacts and relationship (use) of the affected area.

Mr Mikaere

109. I was unable to read Mr Mikaere’s Primary evidence for this case in the

preparation of my own evidence, as it was not available at the time I completed

this statement. However, I have reviewed his evidence from the Resource

Consent hearing.49 I consider that it is useful for understanding the conflicting

interests in the area. His evidence clearly shows that some hapū members on

Motiti Island do not agree with allowing the Rena wreck to remain in situ. In

particular, the Ngai Te Hapū group has actively rejected the resource consent

application.

47 Ibid, at para [163] to [177]. 48 Ibid, at para [184] to [186]. 49 Evidence of Mr Buddy Mikaere for Ngai Te Hapū Incorporated, dated 14 July 2015.

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Dr Mason Durie

110. Dr Durie in his evidence encapsulates a number of key points which are also

made by other witnesses. He notes (para 7) “Those detrimental effects have

been shown to span environmental, social, cultural and wellbeing

dimensions.” He further states at paragraph [16]:

… the impacts of the Rena and its contaminants have both direct and indirect

consequences for the health and wellbeing of tangata whenua in the region.

111. Dr Durie distinguishes between flourishing mauri and languishing mauri, and

at paragraphs [33] and [34], he concludes:

A perceived sense of failure is heightened when there is a lack of ability for Iwi

to exercise, or to be seen to exercise kaitiakitanga, especially when there is a

clear expectation of a responsibility to care for the ocean. In that respect, self

esteem, self management and self belief have been considerably lowered.

Instead of tangata whenua responding in a positive manner to the situation and

addressing the problem, decisions to alleviate the intrusion remains in the

hands of other authorities.

Examples of tangata whenua evidence

112. Mr Kohu is a kaumatua representing Ngai Tamarawaho hapū of Huria

Tauranga. He states at paragraph [3] “Like almost every other hapū and iwi in

Tauranga we can claim a customary fishing association with the rocks and

reefs around Motiti Island – including Otaiti. The fact that Otaiti was a famous

hapūka fishing place was well known and appreciated by those fishing there.”

He further states at paragraph [10]:

For the current applications the responsibility for protecting Article 2 rights has

passed to the applicant and I can’t see any evidence in their whole case which

says that those rights have been properly considered and addressed in terms

of Treaty principles as required under part 2 section 8 of the RMA.

113. Mr Kohu expresses concerns about principle and process at paragraph [11]:

Where for example is the application of the principle of mutual benefit as far as

Ngai Te Hapū are concerned? Dumping the wreck on the reef against Ngai Te

Hapū’s wishes is not an act of mutual benefit surely.

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114. Mr Smallman states he is Chairman of Ngati Pukenga Iwi ki Tauranga trust,

supporting Ngai Te Hapū, and comments on relationships and responsibilities

at paragraph [6]:

The first is our traditional relationship with places like Otaiti. All the iwi of

Tauranga Moana are coastal people and we have a shared concern for the

ocean environment which has sustained and continues to sustain us. Our

traditions tie us closely to the sea and the relationship is a close and enduring

one. This relationship also means that we have a shared kaitiaki responsibility;

not just for the rivers and streams that feed the harbour around which we live

but also for the ocean from which we derive our Tauranga Moana identity.

115. He disagrees with the actions of some other iwi and hapū, stating at paragraph

[7]:

Not opposing the applications and in some cases actively supporting them as

is the case with other hapū and iwi groups is in my opinion a denial of our

cultural integrity. It means turning away from our responsibilities as kaitiaki to

do what we can to ensure that the world we pass on to our children is in better

shape than the world that came to us.

Key Cultural Matters from an Economic Perspective

116. I have identified from my review of the cultural evidence the following key

economic matters:

(a) Cultural and spiritual matters have major value for all iwi and hapū

affected by the Rena wreck;

(b) These cultural and spiritual links are generally founded on

transgenerational (past, present, future) relationships with the sea and

the land;

(c) There have been substantial adverse impacts from the wreck,

resulting in significant loss of value;

(d) These impacts include the direct impacts on the physical environment,

the intrusive effect of the wreck on Otaiti, and the prevention of iwi and

hapū from carrying out their responsibilities - including protecting and

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caring for the environment and its taonga – as long as the wreck

remains on the reef;

(e) While not all witnesses agree on all matters, it appears to be common

ground that the continued presence of the wreck on Otaiti generates

on-going adverse impact on cultural and spiritual values;

(f) The Owners recognises that substantial impacts have occurred, and

has consulted in efforts to reach settlements including payment of

money as remediation and/or compensation;

(g) The Owner has not been able to reach settlement with all affected

groups;

(h) There is clear evidence that not all of the affected iwi and hapū have

had their concerns met;

(i) For a number of Māori groups, allowing the wreck to remain on Otaiti

is not acceptable. For these groups, generally, not agreeing to accept

the wreck remaining on the reef is a matter of cultural value, rather

than price;

(j) While some physical impacts on the environment have reduced as a

result of clean-up efforts and ongoing dispersal, the impacts from the

wreck remaining on Otaiti are significant and have not diminished. The

evidence indicates that now and into the future the greatest adverse

effects are cultural and spiritual impacts;

(k) These impacts are not shared across the local and regional

communities on a per capita basis across the population as a whole,

but are heavily concentrated on the Māori community. This is not an

indication of lack of concern by non-Māori, rather it reflects where

understanding and responsibilities lie for those impacts.

117. From an economic perspective, there is a strong nexus as to the wreck

causing substantial loss of value, clear evidence as to how the impacts are

distributed, and evidence that substantial impacts will continue into the future

for some iwi and hapū affected by the wreck. However, these impacts do not

Page | 39

apply pro rata among Māori groups, as shown by the settlements which have

been reached.

118. One outcome is that there are three broad groupings (though not formal

groups) – those prepared to negotiate a settlement based on the wreck

remaining on Otaiti (including those who have already done so); those seeking

through the RMA procedures to have consent declined so the wreck is not

allowed to remain on the reef, and those pulling back from the RMA process

itself.

SECTION 4: COSTS OF THE RENA GROUNDING AND WRECK

119. I now address the key issue of the monetary costs, which are relevant to the

matter of proportionality (see Section 5).

120. Considerable work has been undertaken to identify and understand the

effects and the costs of the grounding and the wreck. I understand that the

cost of removing the Rena wreck is estimated to be in the order of $0.5 billion

NZD50 It is estimated that it would cost $86 million NZD to remove just the

bow51. That cost is considered, by the Applicant and Respondent, likely to be

greater than the combined costs of the environmental effects52, commercial

fishing53 or risks to community health54 if the Rena wreck remains in situ.

There is also evidence that there may be some positive benefits from the

wreck, in terms of historic value and recreational use of the wreck for diving.55

121. According to the evidence from the Applicant and Respondent, from a

financial perspective the cost of removing the wreck is likely to be orders of

50 Mr Barker EIC for Applicant dated, 27 October 2016, at para [2.5]; and Mr Jongh EIC for

Respondent, dated 30 November 2016, at para [47]. 51 Mr Fraser EIC for Applicant dated, 30 November 2016, at para [9.5] 52 Dr Ross EIC for Applicant, dated 28 October 2016, at para [2.3]; Dr Luca EIC for Applicant,

dated 28 October 2016, at para [2.7]; and Dr Brodie EIC for Respondent, dated 30 November 2016, at para [83]. All consider that there is likely to be limited impact on environment if the wreck is to remain.

53 Mr Boyd EIC for Applicant, dated 28 October 2016, at para [3.1] suggests that there is likely to be limited impact on commercial or recreational fishing if the wreck is to remain.

54 Dr Kelly EIC for Applicant, dated 28 October 2016, at para [2.9]; Dr Mitchell EIC for Applicant, dated 28 October 2016, at para [3]; and Mr Cressey EIC for Respondent, dated 25 November 2016, at para [32]. All consider that there is little health or public safety effects if the wreck is to remain.

55 Mr Dodd EIC for Applicant, dated 28 October 2016, at para [2.5]; and Mr Hudson EIC for Respondent, dated 28 November 2016, at para [40].

Page | 40

magnitude greater than the potential compensations that would be required

to mitigate the costs from the wreck remaining in situ. Therefore, it is logical

that the Rena Owner (Diana Shipping Co) and Insurer (The Swedish Club)

would seek to minimise their costs by negotiating mitigation and restoration

packages with the affected communities, which would enable the wreck to

remain in situ, and avoid incurring the cost of removal.

122. I am generally aware of total restoration and mitigation packages that the

Rena owner and insurer have negotiated which are in the order of 10% of the

estimated cost of removing the whole wreck. I do not know whether these

packages represent the total restoration negotiated to date. However, the

contention by the witnesses for the Applicant that all meaningful claims have

been satisfied56 suggests that these packages represent most or all of what

the Applicant expects to have to pay in mitigation for the wreck. This in turn

suggests that overall the Rena Owner and Insurer would save some hundreds

of millions of dollars in costs if they leave the aft section of the wreck on the

seabed – a matter which I understand is outside the ambit of this hearing –

and many millions of dollars if granted resource consent to leave the bow

section of the wreck in situ.

123. The reported restoration and mitigation packages associated with the Rena

amount to around $50 million NZD. I note that there may be other confidential

restoration and mitigation packages that have not been reported by the

Applicant. I have found reports on the following restoration and mitigation

packages:

(a) Government agencies have been paid $27.6 million, with a further

$10.4 million to be paid if the wreck remains in situ.57

(b) The hearing panel imposed a bond of $6.35 million.58 The purpose of

the bond was to provide financial assurance to Bay of Plenty Council

in circumstances where the consent holder fails to comply with the

conditions. The money would be used to mitigate or avoid damage to

56 Mr Coffin EIC for Applicant, dated 28 October 2016, at para [12.7]. 57 Rena Recovery (2012) http://www.renarecovery.org.nz/latest-news/rena-settlement-

reached.aspx 58 Mr Conland EIC for Respondent, dated 25 November 2016, at para [44].

http://www.renarecovery.org.nz/latest-news/rena-settlement-reached.aspx

http://www.renarecovery.org.nz/latest-news/rena-settlement-reached.aspx

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the environment in the event of a hazardous materials being released

from the wreck.

(c) A fund of $440,000 for surf lifesaving clubs within the Bay of Plenty

area for responding to, and recovery from, a contingency event. Also,

a fund of $160,000 to provide for annual research and education

scholarships for the duration of the consent involving the marine

environment, seamanship or navigation for residents of the wider Bay

of Plenty.59

(d) The Astrolabe Community Trust was established and granted $2.2

million for projects for the benefit of the Region.60

(e) Te Arawa iwi have received $1.25 million in a fund to mitigate and for

restoration of cultural impacts.61 It is important, however, that the Iwi

Appellants’ evidence indicates that Te Arawa Takitai Moana (the Te

Arawa coastal hapū) were not consulted and did not agree to this

mitigation fund. Rather, I understand that the Iwi Appellants consider

the mitigation fund was agreed to by the Ngati Makino Heritage trust,

which did not have any mandate to negotiate on behalf of the Te Arawa

coastal hapū.

(f) Te Whānau-a-Tauwhao was offered a mitigation package that was

unanimously rejected by the hapū.62

(g) Tauranga Moana iwi have been offered a mitigation fund of

$250,000.63

(h) There are also media reports of Te Patuwai hapū (mana whenua over

Motiti Island) rejecting an offer of $750,000.64 This hapū has since

withdrawn their strong opposition to the Rena wreck remaining in situ.

59 Mr Coffin EIC for Applicant, dated 28 October 2016, at para [12.1]. 60 Registration Decision: The Astrolabe Community Trust (THE49218) at para [11]. 61 Sir Gardiner EIC for Applicant, dated 28 October 2016, at para [7.18]. 62 Mr Taingahue evidence at the resource consent hearing for Te Whanau a Tauwhoa ki nga

Moutere Trust and Rangiwaea Marae, dated 14 July 2015, para [42]. 63 Dr Kohatea EIC for Applicant, dated 28 October 2016, at para [13.24]. 64 New Zealand Herald (2015) Rena: Cash offered to Māori. The report suggests that Patuwai

Tribal Committee refused the settlement offer of $750,000. http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11468442

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11468442

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(i) Motiti Environmental Management Inc and Korowai groups have

received a commitment of $1.5 million to assist in projects to the

benefit of Motiti Island community.65

124. Irrespective of the actual amounts, the key point is that a range of settlements

have been reached. The basis for those settlements is that iwi have been

adversely affected by the Rena grounding and wreck, including adverse

effects on cultural aspects. The Rena’s interests have acknowledged those

adverse effects, and have offered compensation, including monetary

payments, as a means of remedying or mitigating those effects. I have

assumed that the proposal to leave the Rena in situ means there is no

opportunity to avoid those adverse effects.

125. In the instances where affected iwi and hapū have opted to accept the

measures of remedy and mitigation offered by the Owner/Insurers those

iwi/hapū may have considered the settlement packages offered to have been

sufficient to compensate them for adverse cultural effects.

126. However, important aspects of negotiations commonly include uncertainty,

limited information, and the perceived relative strengths and weaknesses of

the parties involved. These factors mean it also quite conceivable that some

iwi and hapū have settled on the basis not of what they considered an

acceptable level of compensation, but in the belief that the price settled on

was the best they could get – that is, reaching a settlement was the better of

two unwanted outcomes; than reaching no settlement and no compensation

and still ending up with the wreck left on the reef and seabed. For example,

Mr Heke states at paragraph [15] his evidence for the Iwi Appellants that he

considers Ngati Ranginui iwi and Ngai Te Ahi hapū initially agreed to a

settlement offer because they felt they could not resist the Owner’s wishes to

leave the wreck on the Otaiti. I understand that agreement was later recinded

because it did not reflect the wishes of the people.

127. Nonetheless, drawing these aspects together, it seems clear that: (a) there is

acceptance that iwi and hapū who have a relationship to the affected area are

adversely affected by the wreck; and (b) financial mechanisms have been

65 Sir Gardiner EIC for Applicant, dated 28 October 2016, at para [7.37].

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employed by the Owner/Applicant with the agreement of some iwi and hapū

to remedy or mitigate those adverse effects.

128. It follows that since there are affected iwi and hapū who have not reached a

settlement, then there are adverse effects which have not been remedied or

mitigated - that is, the effects are “net adverse effects”. Those iwi and hapū

who have not negotiated or accepted a restoration and mitigation package

with the Owner remain in a net negative position – that is, they are still being

impacted negatively.

129. Because some iwi and hapū have accepted compensation, then there is an

informal “compensation market” in existence. This has emerged as

information on adverse effects and acknowledgement of those effects has

gone into the settlement process, and dollar amounts have come out as a

means of settling differences. What has taken place has been a matter of

judgement for iwi and hapū who have reached agreement on a financial

settlement. Hence, there has been a process, but no formula for calculating

the dollar amounts.66 The settlements reached to date will have set some

benchmark from the Owner’s perspective for any future settlements. I would

expect the settlements to date to reflect the lower end of the market, given

that a number of groups have not settled. One possibility is that the price

(compensation) offered is not high enough for settlement to be reached.

Another is that it is not a matter of price, but of opposition to having the wreck

remain in situ.

Value of Cultural Impacts

130. For that part of the “market” which includes those iwi and hapū prepared to

reach a settlement, it is relevant to understand what the possible loss of

cultural value may be in dollar terms. In this section, I apply the conceptual

66 Given the scale of the known restoration and mitigation packages, relative to the costs of

removal, from a global economic perspective the cost and benefit outcome of the wreck remaining in situ is likely to be net positive. This is because the restoration and mitigation packages stated above are likely to offset the costs to most groups and communities. However, for the wider Bay of Plenty Region and New Zealand, it is not likely such a conclusion would hold true. That is because the costs of removing the wreck would be borne by the Insurers, and that cost would be distributed more of less globally, whereas the costs of not removing the wreck would be borne almost entirely by the New Zealand community, and predominantly by the Bay of Plenty regional community.

Page | 44

and practical methods available from an economic standpoint to quantify the

potential loss of the impacts on cultural and spiritual values.

131. The situation is that there is loss of cultural and spiritual values by iwi and

hapū, while the main option for the Owners is compensation including financial

to mitigate the loss of value. There is no commercial market in cultural value,

by which the loss of value may be expressed in financial terms and calibrated

or standardised against other gains or losses in cultural value. The interface

between cultural values and dollar amounts is not an easy one. There are no

established and fully accepted methods to precisely calculate values in terms

which are equivalent on both sides of that interface between commercial or

dollar values on one side, and cultural and spiritual values on the other. In this

case, a number of the values and any impacts are specific to groups affected.

132. In the absence of a widely accepted or mandated methodology, a key process

is negotiation, where mitigation packages may be offered as a mechanism to

enable the exchange of value across that interface. The parties recognise this.

The impacts have occurred and continue to occur, and are very difficult to

remedy and avoid into the future, given that the Applicant seeks to leave the

wreck in place.

133. For some groups, the mechanism for mitigating the losses in cultural value is

financial payment, as a means of (environmental) compensation. While there

is no expectation that the impacts may be directly mitigated, a common basis

is that a close approximation of mitigation may be reached by using financial

resources to enhance other cultural values. This would be expected to link

closely with the extent of the impacts experienced.

134. On this basis, the mitigation and restoration packages that have been agreed

to date provide some indication of the potential value of the cultural impacts

for each of the affected iwi and hapū who have reached agreement with the

Owner.

135. In economics, the mitigation and restoration packages could be described as

revealing the preferences or values of cultural impacts for the iwi and hapū.

However, I note that there are some well-known issues with assuming that

revealed preferences are an estimate of actual values. For example, key

assumptions behind using revealed preferences as a measure of value is that

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all parties to the agreement have full information and equal negotiating power.

If either of these two assumptions is violated then the negotiated deal may not

accurately represent the value to one or other party. In this instance, where a

number of negotiations have occurred between the Owner and individual iwi

and hapū without full disclosure of outcomes, and the negotiating power is

unlikely to have been equal, then at best the revealed preferences would be

an approximation.

136. I note that the Owner and Insurer are large multinational organisations. In

particular, the Insurer (the Swedish Club) is likely to have extensive

experience and knowledge of negotiating mitigation and restoration

packages. By comparison, affected iwi and hapū have limited resources and

very limited experience or knowledge of accidents of this nature.

137. It therefore seems likely that the iwi and hapū who have settled have not

achieved settlements which are materially in excess of their losses. However,

I have assumed that some of the iwi and hapū have managed to negotiate to

a point at which the mitigation and restoration package agreed to was at least

as much as the cultural and other impacts from the Rena grounding and the

wreck remaining in situ.

138. Mr Waaka’s statement at paragraph [182] is relevant:

The Rena applicant has made efforts to engage with the various iwi and hapū

groups to see if arrangements can be achieved that may help those groups

live with the Rena wreck. The applicant has referred to agreements with the

Motiti hapū, and I am aware that those hapū have withdrawn their appeals.

However, there is also evidence that some of those groups have simply

withdrawn from the process on principle and not sought to agree measures

that may help to release them from any on-going or future effects of whakama.

139. This evidence shows that for some hapū groups the potential implications of

accepting a mitigation or restoration package in lieu of the wreck being

removed was so great that they have withdrawn from the process. In

economic terms the costs of accepting a package far exceeded the gains, so

these groups have not negotiated further.

140. Nevertheless, I consider that it would be constructive for the Applicant to make

available information concerning the relative scale of the different levels of

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mitigation and restoration packages that have been offered to each group.

This would assist in considering mitigation only for those groups for whom

leaving the bow section of the wreck on the reef is acceptable – it does not

reflect the value of those groups who seek full removal.

141. Before I consider the different mitigation and restoration packages it is

instructive to understand the implications of these agreements. While I have

not seen or read any of the documentation behind the mitigation and

restoration packages, it is clear that the agreements are a mechanism for

shifting future risks associated with the Rena wreck remaining in situ. In

summary the Rena Owner and Insurers are passing the future risks of costs

and impacts associated with the Rena to the community of New Zealand,

including iwi and hapū.

142. I understand there is a risk in the future that sea conditions (storms and wave

action) could result in additional damage.67 The probability and the scale of

the damage occurring in the future cannot be measured precisely, and

therefore represents a contingent liability to the Rena Owner. The mitigation

and restoration packages along with the resource consent allows the Rena

Owner to limit its liability as to future risks – the current consent conditions

have a 10 plus 10 year life, and beyond that the New Zealand community

including the iwi and hapū, will bear the risk. This is important, as the

packages offered by the Rena Owner are not a windfall gain, they are

mitigation for taking on the potential future risks.

143. Notwithstanding my concerns stated above about the negotiations, I have

compared the mitigation and restoration data provided by the Applicant,

Respondent and media reports of rejected offers for each community group

to produce a per capita estimate of the market value of the packages. Broadly,

cultural impacts are felt by individuals within each group, therefore it is a useful

indicator to convert the mitigation and restoration packages into a per capita

unit.

144. First, I consider the per capita mitigation for the communities and groups that

have been least affected by the Rena. As one would expect, the wider New

Zealand community received the smallest mitigation package, with a value of

67 Mr Conland EIC for Respondent, dated 25 November 2016, at para [51].

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less than $9 per person. This small mitigation package reflects the relatively

minor average (per capita) impact of the Rena wreck at the national level.68

145. The next least-affected community is the wider Bay of Plenty community,

which has received a package of around $33 per person.69 The Bay of Plenty

community is likely to endure more of the costs associated with the Rena

wreck, as such it is unsurprising that the mitigation packages allocate more

funds to this community than to the wider New Zealand community.

146. Next, Ngati Makino Heritage Trust, has also received a mitigation package in

the order of $1.25 million. The per capita amount would be in the order of $29

per person if it applied to all 43,000 persons counted in Census 2013 as being

of Te Arawa iwi. On that basis, this package reflects the important cultural

connection that this iwi has with the Ōtāiti area, and the cultural impact which

goes beyond impacts that non-Māori would experience. Therefore, it is

unsurprising that the mitigation package per capita for this iwi would be

greater than for either the Bay of Plenty or New Zealand communities.

147. However, it is not possible to calculate the real per capita value since the

number of people on whose behalf the Trust reached a settlement is unknown

- as indicated above at paragraph [123(e)] the Te Arawa coastal hapū were

not part of the negotiation. The amount may be considerably larger per capita

if the Trust represents a smaller number of people.

148. The residents and hapū of Motiti Island are likely to have been significantly

affected by the Rena grounding and the associated oil and contaminant spills,

and leaving the wreck in place. Clearly, many of the impacts associated with

the Rena wreck are location-specific, and the close proximity of the Island to

the wreck is likely to result in impacts accruing most heavily on this small local

community. The restoration and mitigation packages would be in the order of

68 The total restoration and mitigation packages paid to the government is reported as $38

million (if wreck remains in situ) and the total New Zealand population in 2013 Census was 4.2 million. The total restoration and mitigation packages by total population suggests a per capita value of $8.96.

69 The Bay of Plenty community has received funds totalling $2.8 million. These funds are to be used for the benefit of the wider Bay of Plenty Community, which has a population of approximately 268,000. The total restoration and mitigation packages divided by total population suggests a per capita value of $24.39. Therefore, including the national restoration and mitigation packages of $8.96, the average Bay of Plenty resident received $33 per capita. I have not included the bond, as this will only be paid in the event of additional impacts occurring. The bond merely offsets the unknown potential risks as such it is not benefit to the wider Bay of Plenty Community.

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$55,000 per resident on Motiti Island, on a purely per capita basis.70 However,

it is important to also recognise that many of those who consider themselves

as having close association with Motiti do not currently live on the island, so

that the per capita assessment may need to based on a considerably larger

population of interest.

149. The key to this comparative assessment is having reliable information on the

settlement amounts to date and the numbers of people on whose behalf a

settlement was reached, as well as understanding of the scale of the impacts

to those groups. While the number of people is straightforward to identify at

the national and regional levels, and a broad approximation is possible for

Motiti Island, it is much more complicated at points which lie in between the

apparent ends of the spectrum. Any calculations of a per capita figure are

heavily dependent on the estimates of the numbers of people associated with

each claim. While there is considerable evidence on the iwi/hapū involved and

their association with the affected area, there is also quite substantial

disagreement on these matters among the experts. Therefore, while there is

potential to use this approach for some benchmarking – in regard to any

groups which have not reached a settlement and which may be prepared to

accept the wreck remaining on Otaiti – that would depend on some resolution

as to the numbers in each affected group, as well as the extent of the impacts

suffered.

150. While there has been considerable effort to estimate the revealed

preferences, the differences in base numbers and relationships are too great

to allow reliable estimates.

151. Also, as pointed out, this approach has limited immediate relevance to those

groups for which the key concern is to have the wreck removed from Otaiti.

70 Census 2013 shows that there were 27 residents in 15 households on the Motiti Island. The

mitigation package for the Motiti Island residents was reportedly $1.5 million, which is equivalent to $55,570 per resident.

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SECTION 5: PROPORTIONALITY

152. In this section, I address the matter of proportionality. This includes the

relativity between the costs associated with each of the alternative outcomes.

It also includes the issue of who pays, and where the costs fall.

153. I consider that there are four alternative options for the Rena wreck:

(a) Remove the whole Wreck: Rena Owner is required to remove the

entire Rena wreck, which would cost in the order of $0.5 billion NZD.

This cost would be covered by the Rena Owner and Insurers and as

such the New Zealand community would not bear any additional costs

(assuming that the removal does no further damage to the Ōtāiti or the

affected area);

(b) Remove the Bow: Rena Owner is required to remove the bow section

of the wreck, which is indicated to cost in the order of $86 million NZD.

This cost would be covered by the Rena Owner and as such the New

Zealand community would not bear any additional costs (assuming

that the removal does no further damage to the Ōtāiti or the affected

area). There would be ongoing costs associated with the remaining

stern of the wreck. It is unclear how much mitigation or restoration

packages would still be required under this option;

(c) Current Resource Consent: In this option the wreck remains in situ

and beyond 10 years all the risks associated with the future damages

are shifted to the community of New Zealand, which includes the local

iwi and hapū. As described above, the Rena Owner has to provide

some mitigation and restoration packages that compensate for some

of these costs. However, there is a risk that the costs associated with

the wreck remaining in situ may be greater than the mitigation and

restoration packages. This risk is shifted to the community of New

Zealand and the iwi and hapū.

(d) Remain in situ – Rena Owner liable: another option is that the Rena

Owner remains liable for the future costs and will carry the risk of the

costs being higher (or lower) than expected. There would be on-going

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costs associated with the remaining wreck, however the Rena Owner

will be can be held responsible as they arise.

154. According to the Commissioners decision at the resource consent hearing,

the costs associated with the second option (and by inference the first option)

were disproportionally large compared to the potential impacts:

[679] As we have said, we do not have jurisdiction to order removal of the

wreck other than to impose a condition to remove the bow pieces. We find

that the removal of the bow section is not warranted. When considering bow

removal in a “balance of effects” scenario, we are of the view that removal

would be disproportionate and overly cautious in light of the potential for the

bow pieces to cause adverse effects. Any effects, which may occur, could be

adequately addressed by the proposed conditions of consent.71

155. The decision at paragraph [680]72 specifically addressed proportionality when

drawing together the potential adverse effects of leaving the wreck on the reef

(damage to the reef and release of contaminants), the potential effects of

removing the bow section (loss of natural character and risks of scour) and

the costs. It concluded that “a requirement to remove the bow pieces would

constitute a disproportionate response”.

156. It seems that the first two alternatives have been set-aside as being too costly

or disproportionate in dollar terms. However, I note that from the Bay of Plenty

Region and the national perspective the money spent to remove the wreck

should not be considered as a negative. This is because it would not be a

cost to the New Zealand economy, but a contribution. The money spent

removing the wreck would be net additional to New Zealand, flowing in from

the Rena Owner who operates out of Greece. This would mean that the

expenditure on removal would have the opposite effect to which the

commissioners expected, in that the removal of the wreck is positive for the

New Zealand economy as it would generate jobs and economic activity.

157. In this regard, I refer to the NZ Treasury Guide to social cost benefit analysis

(2015), which identifies that “[a]ll people in New Zealand affected by a policy

71 Decision of Panel on MV Rena Resource consent Applications, Volume 1, 26 February 2016,

at [679] 72 Ibid [680].

Page | 51

should be recognised in the analysis”73 and notes that the guide is about cost

and benefit assessment from a national perspective. In this instance, because

the funding for removal would be drawn from outside the national economy, it

would not be a consideration in terms of proportionality.

158. I also note that the information that I have collected on the mitigation and

restoration packages indicate that the Rena Owner has already agreed to

approximately $50 million NZD (see paragraph [123]), which is approximately

$36 million NZD less than the cost of the removal of the bow section of the

wreck.

159. The current alternative is outlined in the resource consent, mitigation and

restoration packages. This alternative transfers the risks associated with the

Rena wreck to communities within New Zealand. There is no way to reliably

estimate whether the future costs associated with the wreck will be smaller

than the value paid by the Rena Owners. Therefore, the community of New

Zealand is chancing that the costs will be lower. If the costs turn out to be

higher, then this alternative will result in a sub-optimal outcome.

160. One further alternative is that the wreck would remain in situ and that the Rena

Owner remains liable for future damages. Under this alternative the scale of

the mitigation and restoration packages can be modified over time to reflect

the actual impacts that accrue from the wreck. This option ensures that the

risks associated with the Rena wreck remain with the party that caused the

impacts. From an economic perspective this ability to modify mitigation and

restoration packages as impacts accrue will result in a more efficient outcome.

161. I note that this approach is also consistent with precautionary approach to

uncertainty, where even though the risk may be small the potential effects are

significant. I also note that this does not include the consideration that the

mere presence of the wreck is a continued significant adverse cultural effect.

That effect was not mentioned in the Commissioners’ discussion of

proportionality (at paragraphs [679] and [680]) where the only costs referred

to are physical environmental costs (“damage to the reef and more immediate

release of contaminants”). Elsewhere, the decision recorded that “the effects

73NZ Treasury guide to Social Cost benefit analysis 2015, p 10

http://www.treasury.govt.nz/publications/guidance/planning/costbenefitanalysis/guide/cba-guide-jul15.pdf

Page | 52

on Maori values would be significant” (at paragraph [653]), though it is not

apparent as to how or whether that conclusion was included in the

assessment of proportionality.

CONCLUSIONS

162. I consider that there is broad agreement by the parties that the Rena

grounding and wreck remaining in situ, will have negative impacts on cultural

values of iwi and hapū.

163. However, the costs of removing the wreck are likely to be much greater than

the costs of the wreck remaining in situ, apart from the effects on cultural and

spiritual values. On that basis, it is likely that the Rena owner and insurer

would be able to provide mitigation and restoration packages that more than

offset the impacts, which cost would still be orders of magnitude smaller than

the cost of removing the Rena wreck.

164. In my opinion, the RMA places importance on cultural values and Māori

traditions. Specifically, the requirements of the RMA with regards to resource

consents means that outcomes for both the wider community and sub-groups

within the community should be assessed, this includes iwi and hapū. I

consider that this means that mitigation and restoration packages should

cover all affected parties.

165. Conceptually, economics provides a sound framework from which values,

including cultural values, can be assessed. Economic theory suggests that in

the absence of the mitigation and restoration packages that the externalities

created by the Rena wreck would result in a sub optimal outcome for the

community.

166. In some instances, negotiations between the Owner and affected parties have

resulted in mitigation and restoration packages being contracted. However, a

number of affected groups have not negotiated mitigation and/or restoration

packages, and a number of those groups seek removal of the wreck.

167. There is no overall “inventory” to date which identifies all of the affected parties

and the nature and extent of the adverse effects. In my view, such an

inventory – in combination with a corresponding inventory of mitigation and

Page | 53

restoration packages - would be essential for understanding whether or not

the mitigation provided has been effective (in terms of comprehensive

coverage of affected parties) and efficient (in terms of mitigating the effects

on those parties).

168. Since the wreck is still on Otaiti, and there is as yet no requirement to remove

it, then the adverse effects on those seeking its removal remain. The cultural

impacts from the grounding and the wreck are acknowledged by both the

Applicant and the Iwi Appellants, although their magnitude is the subject of

disagreement. The reductions achieved to date in a number of the physical

environmental effects suggest that the adverse effects on cultural values are

now relatively more important, and have not been diminished – beyond

agreements reached in settlements made to date.

169. These matters highlight the question of proportionality. According to experts

and tangata whenua witnesses for the Iwi Appellants, and as acknowledged

in the Commissioners’ decision, the cultural effects from the grounding and

the wreck of the Rena are significant. As against this, the costs of removing

the wreck are low for the Region and New Zealand, even though they would

be substantial for the Owner and Insurer. In my view, this indicates a quite

different equation as to proportionality from that which was considered by the

Commissioners, to one where the costs to New Zealand are very substantially

smaller, and the adverse effects are larger once adverse effects on cultural

values are specifically included.

170. In this context, I draw on my above assessment to consider the perspectives

set out in the Environment Courts direction of 29 June 2016, in Appendix B

paragraphs 5.1, 5.2, 5.5, 7 and 9 (see above at paragraph [12]), as follows:

(a) Para 5.1, “recognition and provision for affected Māori groups”. The

element of recognition relates to both acknowledgment of all the

groups which are affected, and the nature of those effects. Key

elements include both comprehensiveness so that all are included,

and consistency of response including mitigation and remediation

measures. The number of groups involved as appellants to this

hearing demonstrates that recognition has not been comprehensive,

while both the variations apparent in the settlements and the

Page | 54

resistance to wreck removal shows that the approach has been to deal

with groups individually rather than on a consistent basis. That also

means “provision” to date may have been adequate for some groups,

which have accepted various levels of compensation, though not for

others, for which compensation is not acceptable and they seek

removal of the wreck;

(b) Para 5.2, as to whether “the effects of the proposal on Māori values

are significant”, the evidence of relevant witnesses for both the

Applicant and the Iwi Appellants consistently identify that the affected

Maori values are significant, and that adverse effects on them have

been significant. This was also acknowledged in the Commissioners’

decision. From the economic perspective, those adverse effects

amount to loss of value, and adverse effects on welfare.;

(c) Para 5.5, the grounding and wreck have affected matters relating to

Maori with ancestral lands, water and sites, according to the relevant

witnesses. This suggests the effects must be recognised and provided

for under 6(e) of the Act;

(d) Para 7, as to whether “alternatives…have been adequately

considered”, in my view the proposed conditions impose a short time

period and limited responsibility for the Owner and Insurer, with the

risks of future adverse effects transferred largely to New Zealand

within 10 years, and wholly to New Zealand within 20 years. The

transfer of responsibilities is potentially very significant if these include

costs of future removal of the wreck. This relates especially to

proportionality;

(e) Para 9.1, as to “conditions that are efficient and workable, and

proportionate to the effects of the proposal”, in my view the proposed

conditions are very efficient from the perspective of the Owner and

Insurer, because the costs are limited and have a finite time horizon.

However, from the New Zealand perspective they are not especially

efficient because there is considerable uncertainty and risk as to what

the longer-term effects on the environment may be. The potential for

Page | 55

adverse physical effects relates especially to the presence of the

wreck, and the length of time it remains on the reef.

(f) Further, I consider that the proposed conditions are not proportionate

to the effects of the proposal, because they will impose a transfer of

responsibility for future adverse effects, and remove the opportunity

for the costs of remediation – removal of the wreck – to be recovered

from those responsible for the grounding and wreck, the Owner and

Insurer. Currently, the trade-offs for this country are the substantial

costs in terms of loss of cultural values, together with other costs yet

unmet as to effects on the physical environment, as against the costs

of removing the wreck which would not be borne by New Zealand. The

proposed conditions would remove responsibility for the costs of

removal, and transfer those contingent costs to this country, in

conjunction with costs from adverse impacts on cultural values. In my

view, the responsibility for these costs under the proposed conditions

will not be proportional to how those adverse effects and actual and

potential monetary costs were caused.

Dated this 3rd day of January 2016

________________________

J D M Fairgray

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