Evolution, Adaptation, And Invention - Property Rights In Natural Resources In A Changing World

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•providing that a consent authority, when considering an application for a resource consent from an existing consent holder for a new consent, must have regard to the value of the investment of the existing consent holder.90

For a property lawyer, the dismissal of rights that clearly have the characteristics of both personal and real property as being neither real nor personal property presents some difficulty.91 Traditionally, property is – by definition – either real or personal. There is no other category.92 The RMA’s section 122(1), therefore, creates something of a paradox, and a potentially fertile source of litigation, where competing resource consents, the use of consents as security, transferability, co-ownership and succession – all traditional property rights issues – arise.

7.2The courts’ interpretation of section 122(1), RMA

The High Court grappled with this issue in Aoraki Water Trust v Meridian Energy Ltd.93 The case concerned whether the Canterbury Regional Council could issue water permits to Aoraki Water Trust to use water from Lake Tekapo for irrigation even though the resource appeared to be fully allocated. Meridian Energy Ltd., had statutory consents dating back to 1929 authorizing it to take water from the lake for electricity generation. As Meridian’s maximum allowable offtake exceeded the natural mean flow from the lake, it argued that its water permit gave it absolute rights to the water, and it had a “legitimate expectation” that the right would not be eroded by the grant of later consents.

Relying on section 122(1), Aoraki contended that a water permit was not an absolute property right, but simply a license to use water (up to the allowable limit) as may arrive at the offtake point. Therefore, the council could grant other water permits, even if this reduced the water available to Meridian. Furthermore,

90Ibid., s 104 (2A). See discussion in Shona Foster, “Redirecting the Flow: The Growing Role of Intra-Generational Equity in the Allocation of Water Rights,” LexisNexis Resource Management Bulletin 7 (2007):27.

91Other writing on this subject include: David Grinlinton, “The Nature of Property Rights in Resource Consents,” LexisNexis Resource Management Bulletin 7 (2007):37; Barry Barton, “Private Property Rights and the Public Interest,” in Beyond the RMA, Raewyn Peart et al. (Auckland: Environmental Defence Society, 2007), 223; Laura Fraser, “Property Rights in Environmental Management: The Nature of Resource Consents in the Resource Management Act 1991,” New Zealand Journal of Environmental Law 12 (2008):145; Barry Barton, “The Nature of Resource Consents: Statutory Permits or Property Rights?” (New Zealand Law Society Seminar, New Zealand Law School, Wellington, 2009).

92Although see the comment by Justice David Baragwanath in Cavell v Thornton [2008] NZCA 191, at para 43, that resource consents are “property which is neither real nor personal property”; and by Environment Judge Jon R. Jackson in Hampton v Hampton, Unreported, Environment Court, Christchurch [2010] NZEnvC 9, January 22, 2010 at para 14, that a resource consent “is property in the economic sense. . . .” But cf. Hume v Auckland Regional Council [2002] NZRMA 49, at para 39 per Justice Judith Potter: “[resource consents] do not confer property rights.”

93[2005] NZRMA 251.

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preventing the council from granting new water permits would fetter the council’s statutory functions and duties.

Justices Lester Chisholm and Rhys Harrison, sitting as a Full Court, rejected these arguments, primarily on the following grounds:

•The water allocation regime under the RMA was a comprehensive statutory management regime, which necessarily resulted in an enforceable order of priority between potential users;

•Where there were competing claims to the same water, a water permit conferred an exclusive right on the first user where that permit fully allocated the resource; and

•A water permit conveyed a legitimate expectation that the rights granted therein could not be subsequently eroded by the grant of other permits. The principle of “non-derogation of grant” therefore applied in a public law context.

Faced with the clear words in section 122(1), the court fell short of declaring that water permits conveyed a property right, and rested its reasoning largely on the principles of “legitimate expectation” and “non-derogation from the grant.”94 It quoted with approval, dicta in Harper v Minister for Sea Fisheries – a case from the High Court of Australia concerning abalone harvesting rights:95

The right of commercial exploitation of a public resource for personal profit has become a privilege confined to those who hold commercial licences. This privilege can be compared to a profit à prendre. In truth, however, it is an entitlement of a new kind created as part of a system for preserving a limited public natural resource. . . .96 [emphasis added]

94The application of the principle of non-derogation from the grant was explored further in Southern Alps Air Ltd v Queenstown Lakes District Council [2008] NZRMA 47 in relation to the application for consent for a commercial jetboat operation in a scenic river where a similar operation already existed. The High Court considered that, while some interference with the existing operation might result if the permit was granted, that in itself would not mean the council was derogating from its grant of the earlier permit by granting a further permit to another operator.

95(1989) 168 CLR 314 (Tasmania) at 325, per Chief Justice Sir Anthony Mason, and Justices William Deane and Mary Gaudron,, quoted in Aoraki at para [29].

96The decision in Aoraki, and the issues it raised, prompted a “flood” of writing on the nature of water rights under the RMA. See, e.g., Foster, supra note 90; Ian Williams, “The Waitaki River,” New Zealand Law Journal (2005):177; Philip Milne, “Allocation of Public Resources under the RMA: Implications of Aoraki Water Trust v Meridian,” Resource Management Theory and Practice (2005):146; Andrew Hayward, “Freshwater Management: Water Markets,” New Zealand Journal of Environmental Law 10 (2006):215; Barry Brunette, “Freshwater Management and Allocation under the Resource Management Act 1991,” New Zealand Journal of Environmental Law 10 (2006):169, esp. 194–200; Olivia Nyce, “Water Markets under the Resource Management Act 1991: Do they Hold Water?” Canterbury Law Review 14 (2008):123; Karen Scott, “From the Lakes to the Oceans: Reforming Water Resource Management Regimes,” New Zealand Water Law 17 (2006):232; and Laura Fraser,

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A recent case, Armstrong v Public Trust,97 examined the nature of resource consents in the context of the RMA’s section 122(1). The case concerned inheritance rights to two coastal permits for whitebait stands on the Moeraki River. The permits were granted to a father and son: J & A Armstrong. Following his father’s death, Alan Armstrong applied for title to the permits under the “rule of survivorship,” a technical rule usually applied in relation to real or personal property rights held under a “joint tenancy.”98

The Public Trust argued, on behalf of the deceased’s daughter, that a resource consent is neither real nor personal property (as stated in section 122[1]), thus the doctrine of survivorship did not apply to resource consents held by two or more people.

Rejecting that argument, Justice John Fogarty considered that, for the purposes of determining devolution of a jointly held consent, it would not undermine the purpose of the RMA to treat a consent as if it were personal property.99 He held that:

To the extent that it does in fact allow property rights under the RMA, the common law as to real and personal property will apply, subject to constraints in the specific provisions of the statute.100

These cases have been analyzed more fully, and critically, by the writer elsewhere.101

More recently, in Hampton v Hampton,102 the New Zealand Environment Court had to consider whether an irrigation water permit issued under the RMA could be held by someone other than the owner of the land that would benefit from the irrigation. In finding that a consent holder “does not generally have to be an owner of any land to which it applies” (para [15]), Judge Jon R. Jackson stated, referring to section 122, “[c]learly a consent is property in an economic sense but there is no necessary link to ownership of any other property.”103

“Property Rights in Environmental Management: The Nature of Resource Consents in the Resource Management Act 1991,” New Zealand Journal of Environmental Law (2008):145, esp, 169–75. See also Melinda Dickey and John Young,“ Case Note Aoraki Trust v Meridian Energy Ltd.,” LexisNexis Resource Management Bulletin 6 (2005):8.

97Unreported, High Court, Timaru, CIV 2006-476-000227, April 20, 2007.

98“[A] type of ownership . . . by two or more persons in which each owns an undivided interest in the whole and attached to which is the right of survivorship.” Joseph R Nolan and Jacqueline M Nolan-Haley, Black’s Law Dictionary, 6th ed. (St. Paul MN: West Publishing Co., 1990), 1465.

99Armstrong v Public Trust, Unreported, High Court, Timaru, CIV 2006-476-000227, April 20, 2007, para [21].

100Ibid., para [23].

101Grinlinton, “Nature of Property Rights in Resource Consents,” supra note 91, at 37.

102Unreported, Environment Court, Christchurch [2010] NZEnvC 9, January 22, 2010.

103Ibid., para [14].

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7.3Conclusion on the RMA’s section 122(1)

Both Aoraki and Armstrong suggest that resource consents give the holder something analogous to a property right, or a right in the property of another, without saying unequivocally that it is property. In the case of Aoraki, the coastal permits were compared to an easement or lease, while in Armstrong they were to be treated as being in the nature of personal property.

As noted, in Cavell v Thornton, Justice David Baragwanath stated that resource consents are “property which is neither real nor personal property,” and in Hampton v Hampton, Environment Judge Jon R. Jackson stated that a resource consent “is property in the economic sense. . . .” But in Hume v Auckland Regional Council, Justice Judith Potter held that “[resource consents] do not confer property rights,”104 Similarly, in Marlborough District Council v Valuer-General,105 Justice Ronald Young considered whether mussel farms established pursuant to coastal permits were rateable as “interests in land” for the purposes of the 2002 Local Government (Rating) Act. He held they were not, stating that “coastal permits confer no property rights” and therefore the holder did not “ha[ve] an interest in land sufficient to make it rateable”.106

As can be seen, there is little consensus in the courts as to the nature of resource consents. Where does that leave us? The resource consent regime certainly creates rights to undertake activities using land, air, or water that have the characteristics of real and personal property. They are transferable, have economic value, may be used as security, and may devolve upon death in certain circumstances. But the Act says they are neither real nor personal property.

Returning to Harper v Minister for Sea Fisheries, the High Court of Australia characterized abalone fishing consents as “an entitlement of a new kind created as part of a system for preserving a limited public natural resource. . . .”107

Therefore, one way to characterize resource consents under the RMA is as a new form of ‘statutory property’ analogous to a bare license coupled with the right to use and/or take whatever natural resources are allowed in the terms of the consent. Such statutory licenses would be solely governed by the rules contained in the statutes that create them. They would not be subject to the general rules and statutes dealing with real or personal property, but may be subject to other generic principles of law that do not require a traditional ‘real’

104[2002] NZRMA 49, at para [39].

105[2008] 1 NZLR 690.

106Ibid., paras [44] and [59]. See also David Grinlinton, “Do Coastal Permits Under the RMA Create Rateable Interests in Land?” LexisNexis Resource Management Bulletin 7 (2008):116.

107(1989) 168 CLR 314 at 325, per Chief Justice Sir Anthony Mason, and Justices William Deane and Mary Gaudron. The Court in Aoraki Water Trust v Meridian Energy Ltd [2005] NZRMA 251, quoted this extract with approval (at para [29]).

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or ‘personal property’ interest. These may include concepts such as derogation from the grant, legitimate expectation, and administrative law remedies.

The principal of sustainability is an integral part of the creation of such rights, as all persons exercising functions and powers under the RMA, including council decision makers and environment judges, are required to promote the sustainability purpose of the legislation.108 In this sense, sustainability is an inherent characteristic of both the grant and the exercise of “statutory property” rights under the RMA.

7.4Mining permits and access arrangements under the

1991 Crown Minerals Act

Similar provisions are found under the CMA in respect to minerals permits. Section 92(1) of that Act provides that such permits “are neither real nor personal property,” but as with the RMA, are treated as if they are personal property for some purposes,109 and as if they are interests in land for other purposes.110 The earlier discussion on the nature of resource consents is equally relevant to mining permits under the CMA. The CMA does not require sustainability to be considered in allocating permits or for a landowner to grant access to their land for mining activities. However, sustainability does apply to the externalities of mining activities where resource consents are required under the RMA regime for the land, air, and water effects of mining activities.

Under previous mining legislation, mining permits were treated as “leases” – which are clearly a form of real property.111 The current regime was, therefore, a major departure from the pre-existing legal framework, which may have been driven by the desire of the government of the day to avoid calls for compensation for “takings” of property rights where mining permits are withdrawn or otherwise modified to the detriment of the holder.112

The CMA also requires access arrangements to be negotiated between miners and surface landowners. The process is complex. The landowner has a limited veto on access rights for nonpetroleum mining, although compulsory arbitration

108RMA, ss 5–8.

109Minerals permits are treated as if they are personal property on the death or bankruptcy of the holder, and for the purposes of the Protection of Personal Property Rights Act 1988

(NZ). CMA, s 92(2).

110Minerals permits may be charged/mortgaged/transferred (CMA, ss 92(3), 41); may themselves be leased (and the lease registered ) (CMA, s 41); may be noted on titles (CMA, ss 81–89); and may carry obligations to pay rent/royalties (CMA, ss 34, 15(1)(d)).

111See Tainui Maori Trust Board v Attorney-General [1989] 2 NZLR 513 at 519–25 per President Robin Cooke (as he then was) in relation to coal mining licenses under the Coal Mines Act 1979 (NZ).

112Sections 36 and 39 of the CMA allow changes to permits and their revocation by the Minister of Energy in certain circumstances.

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is available for petroleum113 and other resources considered to be in the public interest.114 The CMA expressly provides that an access arrangement creates no interest in land for the purposes of the 1952 Land Transfer Act,115 although it is very similar to the traditional easement. However, an access arrangement longer than six months may be noted on the land title so the holder is protected should the surface estate change hands.116

7.5Individual Transferrable Quotas under the 1996 Fisheries Act

Individual transferable quotas (ITQs) are a hybrid form of property right having elements of a land title and company shares. They are similar to a nonexclusive profit a prendre in relation to the fish stock to which they are granted, but expressed as a share (out of a total 1,000,000 shares)117 of the TACC for that stock. As such, it is not a right to an absolute tonnage of fish stock, but a proportion of the TACC of any particular year.118 ITQs can be sold, transferred, or mortgaged.

The management of the QMS is subject to and guided by the “sustainable utilization” principle in section 8 of the 1996 Fisheries Act. As such, it is fair to say sustainability has been accommodated in this new form of property rights, both in the grant of a quota and the exercise of quota rights from year to year.

7.6Coastal permits for aquaculture in AMA’s under the

Aquaculture Reform Act 2004

A coastal permit granted for aquaculture activities in an AMA within a regional council’s jurisdiction is a resource consent under the RMA, and the earlier discussion on the nature of resource consents is fully applicable. The aquaculture regime is currently under review with major reforms proposed by the current government.119

7.7Forestry rights

The 1989 Crown Forest Assets Act (CFAA) provides for the grant of Crown forestry licenses for terms ranging from 5 to 65 years, depending upon the loca-

113CMA, ss 53, 63 and 64.

114Ibid., ss 47, 54 and 66.

115Ibid., ss 84 and 85.

116Ibid., s 83.

117Fisheries Act 1996, s 42. On the nature of ITQ’s under the New Zealand fisheries regime see also Lim v McLean [1997] 1 NZLR 641 (PC).

118See NZ Fishing Industry Association (Inc) v Minister of Fisheries, Court of Appeal, CA 82–97, 83–97, and 96–97, July 22, 1997, at 15–16.

119See New Zealand Government, Ministry of Fisheries, supra note 72.

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tion of the forest and the status of Treaty of Waitangi claims to the land.120 Such licenses do not confer an estate of interest in the land,121 but paradoxically may be registered against the land titles122 and may contain protective covenants and public access easements, which may also be registered under the Land Transfer Act.123 They clearly are intended to convey valuable economic rights in a resource, and may be dealt with as a tradable commodity. Again, they are a hybrid form of property comprising a license to enter land to plant, maintain, and undertake harvesting activities, coupled with a grant of a property right in the harvested trees allowing their removal and sale. In this sense, they are similar to profits à prendre, which are normally regarded as “interests in land.” However, as with section 122(1) of the RMA, and section 92(1) of the CMA, section 16 of the Crown Forest Assets Act (CFAA) expressly states they are not interests in land.

A sustainability purpose is not found within the CFAA, although section 18 requires protective covenants for conservation and for archaeological purposes to be included in such licenses where appropriate. Forestry activities are normally subject to the RMA and, where resource consents are required, will be subject to the RMA’s sustainable management principles regarding environmental externalities of forestry on land, water, and air.

Where forestry is undertaken on private land, the allocation of rights to fell and mill indigenous trees has been subject to the sustainable management since 1993.124 Thus the management of indigenous forests on private land, and the exercise of felling and milling rights, are governed by sustainability principles. In all cases, if the activity requires resource consent(s) under the RMA, the process of granting the consent(s) will also import the RMA’s sustainability principles.

7.8 Customary rights orders under the 2004 Foreshore and Seabed Act

The customary rights order125 is not a real property right in the traditional sense because it is usually not exclusive but rather is normally exercised communally. It must give way to other vested property rights, and the scale, extent, and frequency of the use or activity will vary depending on the specific terms of the

120Crown Forest Assets Act 1989 (NZ) (hereinafter “CFAA”), part 2.

121Ibid., s 16.

122Ibid., s 30.

123Ibid., ss 18, 19, 24 and 25.

124Forests Act 1949, s 67B., and s 2(1) (definition of ‘sustainable forest management’), as inserted by the Forests Amendment Act 1993 (NZ).

125See section “6.4 Maori customary rights” in this chapter and supra note 76.

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order.126 A customary rights order, therefore, gives the holder something in the nature of a usufructory right, but granted as a form of statutory license under the legislation. As such it is a quasi-property right of a new kind. Sustainability principles are not expressly mandated in the application process, but it could be argued that they are implicit in the traditional resource management techniques and customs applied to the use of natural resources by Maori.

7.9Emissions trading units under the ETS127 legislation

New Zealand proposes a market-based system of rights to reduce greenhouse gas (GHGs) emissions. Emissions trading units (ETUs) will, for the most part, be issued free by the government to existing industrial, forestry, fisheries, and agricultural emitters. ETUs will be recorded in the Emissions Unit Registry, and will be fully tradable within New Zealand and internationally. Emitters must surrender units in proportion to specified levels of emissions. As it is likely that New Zealand will significantly exceed its Kyoto target, it will have to buy emissions units on the international market. Over time, the level of emissions can be managed through the government setting caps on levels of GHGs in much the same way as it sets the annual TACC for fisheries. Again, this represents a new form of property right in the nature of a reverse nonexclusive profit a prendre in the right to emit GHGs into the atmosphere.

Because the raison d’être for the Kyoto protocol and associated climate change measures is to stabilize the world’s climate, this new form of property right inherently accommodates sustainability objectives.

8. Integrating sustainability as a core obligation of property

The analysis in the previous sections suggests that there are two main approaches to integrating sustainability considerations into the exercise of property rights in land and natural resources.

The conventional approach has been to maintain strong private property rights within society. This is justified as necessary to encourage investment and economic growth. Limitations have historically been imposed on the exercise of those rights through planning, building, and health regulations, and more recently, environmental and resource management regulations. But even with sophisticated modern environmental legislation there is generally a conceptual and legal separation between the individualized ‘ownership’ or property right itself, and the community or public-interest focused environmental protective

126Foreshore and Seabed Act 2004, s 52.

127See the Climate Change Response Act 2002 (NZ), as amended by the Climate Change Response (Emissions Trading) Amendment Act 2008 (NZ).

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regulation. Property rights are still regarded as legally complete and enforceable in themselves, qualified only by whatever limitations may be applied externally through the operation of applicable environmental and resource management laws. If there are no such laws, or the laws are incomplete or technically inapplicable to particular situations, then the owner can exercise his or her property right to the fullest extent desired. The basic principle of ownership of land is that you can do whatever you wish with your land provided there is no law against it.128 Nevertheless, legislation, and local authority planning instruments and by-laws, generally place strong limits on the use of land through land use and technical construction restrictions, on the use of water, and on discharges of contaminants from land into the atmosphere, on to land and into water. Failure to comply with these restrictions usually incurs financial penalties (sometimes severe129), and, in serious cases, imprisonment of the perpetrator and even managers and directors of companies through vicarious liability.130 Progressive as many of these measures are, they are still essentially external penalties or incidents of liability that may or may not apply to any particular property right in any particular situation. They are not obligations or responsibilities that automatically apply as an inherent incident of ownership of land and natural resources.

The second approach requires the modification of the concept of property itself to incorporate sustainability as an “inherent” or fundamental responsibility of holding rights of possession or ownership in land and natural resources. While this approach may be harder to achieve and would require a major paradigm shift in perceptions of property rights in most developed legal systems, it is not so novel in the history of human development. As Christopher Weeramantry has so eloquently pointed out in his Foreword to this volume, we have a rich heritage of “global wisdom” – the traditional wisdom of ancient civilizations, indigenous peoples, and customary principle. This wisdom generally emphasizes duties to the community and future generations – rather than individual rights – in human interaction with the natural environment. This is not always the case, of course. The Judeo-Christian tradition holds that humanity exercises dominion over the Earth with individuals able to take from the public stock of

128As illustrated in the quotes from Blackstone, Commentaries on the Laws of England, supra notes 6–8. The RMA, s 9, applies this approach to land use in New Zealand by allowing the use of land by the owner unless it is restricted by a National Policy Statements, or a rule in a Regional or District Plan.

129Under the RMA, s 339(1) and (1A), individuals can face penalties on conviction for environmental offences such as discharging contaminants into water or air of up to $NZ300,000 ($US210,000) and companies up to $NZ600,000 ($US425,000), with ongoing additional daily penalties for continuing offences of up to $NZ10,000 ($US7,000). There is also the possibility of imprisonment for up to two years for serious environmental offences. RMA, s 339(1)(a).

130See, e.g., RMA, s 340 (liability of those concerned in the management of a body corporate for acts of agents and employees), and s 341 (strict liability for certain offences).

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resources those things of immediate necessity.131 Nevertheless, as noted earlier, even Blackstone recognized that the rights of private property must sometimes be “sacrificed to public convenience” and the need for humanity to ration resources as required to ensure the survival of all.132

Other writers have noted the need to internalize environmental values in human interaction with the natural environment. Aldo Leopold’s seminal writings were referenced in the Introduction to this volume. He called for a new land ethic; the recognition that humans are an integrated part of the biotic community, not apart from it. He called for “the extension of the social conscience from people to land.”133 More recently, Kevin Gray observed “It no longer seems strange to speak of the responsibilities of ‘ecological citizenship’ ”.134 Referring inter alia to the writings of Mark J. Smith,135 he noted:

There is today a wide acceptance of a ‘new politics of obligation’ – however imperfectly realized in practice – according to which ‘human beings have obligations to animals, trees, mountains, oceans, and other members of the biotic community’.136

Gray also notes, there are sound economic arguments to recognize the vital interrelationship between environmental values and “quality of life and human well-being.”137

Leaving metaphysics and quality of life arguments to one side, the physical reality is that humans exist as organisms within a mutually interdependent ecosystem that is ultimately indifferent to human survival. This necessitates land and resource use that is sustainable at a local, as well as a global, level. Traditional cultures and societies understood this because they were less insulated from the natural environment as most developed societies have become.

Principles of sustainable development and management of natural resources are now widely accepted at the global level and local levels in many jurisdictions. In New Zealand “sustainability” is at the core of policy, planning, and decision-making in respect to the use of land, air, and water. To the extent that the resource consents that are granted for use of land, for withdrawals of water,

131See, e.g., Blackstone, Commentaries on the Laws of England, supra note 6, Book II, Ch. 1 at 2–3. See also the discussion in John A. Passmore, Mans Responsibility for Nature, 2d ed. (London: Duckworth, 1980); Klaus Bosselmann, When Two Worlds Collide – Society and Ecology, (Auckland, N.Z.: RSVP, 1995).

132Blackstone, Commentaries on the Laws of England, supra note 8. See also supra notes 6–8, and accompanying text.

133Aldo Leopold, A Sand County Almanac and Sketches Here and There (Oxford: Oxford University Press, 1968), 209. See also Passmore, Man’s Responsibility for Nature, supra note 131.

134Gray, “Pedestrian Democracy and the Geography of Hope,” supra note 12, at 45, 63.

135Mark J. Smith, Ecologism: Towards Ecological Citizenship (Buckingham: Open University Press, 1989), 99.

136Gray, “Pedestrian Democracy and the Geography of Hope,” supra note 12, at 63.

137Ibid., 55.