The Maori Geothermal Claim: a Pakeha Economist’s Perspective

Paper to be presented to the Waitangi Tribunal to assist an inquiry into various Maori claims concerning geothermal resources (Wai 153). September 1993?

Keywords: Environment & Resources; Maori; Political Economy & History;

1. Introduction and Disclaimer

1.1 As the title emphasises, this paper is no more than an attempt by a Pakeha economist to canvas some issues associated with the Maori claim to geothermal resources.

1.2 The paper follows in the spirit of an earlier paper to the Waitangi Tribunal concerned with the Maori claim to Broadcasting (Wai 150). That paper stated that I had some reluctance in preparing this work, because it might seem that I was somehow preempting the Maori claim. But, as I said there, while the Maori is perfectly capable of making their own claim, in their own terms, it might be helpful to ‘translate’ their claim into an account which a Pakeha can understand, and in terms more familiar to the Pakeha dialogue.

1.3 In the case of the broadcasting claim I had the privilege of working closely with the New Zealand Maori Council and Nga Kaiwhakapumau, which enabled me to obtain a good working knowledge of their claim. Unfortunately I have not had as extensive an opportunity in the case of their geothermal claim, and the much greater documentation I have had access to (including from the files of the Waitangi Tribunal) is only a partial compensation. So even more than in the broadcasting claim I have to warn the reader I may unintentionally misrepresent the Maori.

1.4 I also warned that the approach adopted in the broadcasting claim involved more disciplines than I could claim competence, and that also I was dissatisfied with the amount of time available to me to master all the scholarly details of the issue. These caveats apply in this paper also.

1.5 Nevertheless I hope that the challenge I have taken up, to explain the relevance of economic approach to the Maori geothermal claim, justifies the paper.

1.6 Throughout this paper I have used my experiences with the Maori claim to the broadcasting spectrum to inform the claim to the claim to the geothermal resource. In some respects the spectrum claim is a more difficult one, because the phenomenon is less tangible I have been told some scientists would dispute whether the electromagnetic spectrum even exists. Yet the broadcasting spectrum claim well illustrated the general principles of economics and law which assist those in the Western tradition to understand the Maori claim to resources.

1.7 The Waitangi Tribunal found that the spectrum was a taonga, although in some respects it was unlike “other taonga, especially ‘taonga tuku iho i nga tupuna’ (taonga handed down from the ancestors”. (1990:41) In another place J: would want to comment their deliberations. But for the purposes of this inquiry, the characteristics peculiar to the spectrum do not pertain to the geothermal resource, and it has the characteristics of general taonga.

1.8 The paper was commissioned by Te Arawa (FOMA) for presentation to the Waitangi Tribunal. Neither they, nor any Maori group, are responsible for the views expressed here.

2. The Tiriti o Waitangi and the Maori Claim[#]
[# The term “Tiriti o Waitangi” is used to observe the priority of the Maori text signed at the Waitangi Marae on 6 February 1840. The Waitangi Tribunal Act 1975 gives equal status to the English draft (or translation). For the distinction see my Contract, Covenant, Compact.Where the effects of two versions differ over the matters covered in this paper, the difference will be explored.]

2.1 The Maori claim to the geothermal resource may be briefly summarised that article two of the Tiriti o Waitangi guaranteed them all their resources and other taonga. Those resources included the geothermal resources. Where the Maori has not voluntarily alienated the resource – and I understand that it is only on very rare occasions that they have done so they still possess that geothermal resource and are entitled to develop it. Where the geothermal resource has been involuntarily alienated from the Maori, the resource should be returned or, if that is not possible, a sizable compensation should be made for its alienation.

2.2 This paper treats the geothermal resource as widely as is possible. It thus covers the thermal energy which is potential in the underground steam, but it also includes the resulting water, the tourist and scenic properties, any minerals involved in the geothermal system, any health or curative potential, and indeed possibilities yet unknown to us. I explain below how the last item is covered by the Tiriti.

2.3 I do not propose here to carry out a general analysis of the Tiriti o Waitangi, although it central to the discussion. However it may be helpful to state here that in my view the Tiriti is the founding document of the constitution of modern New Zealand, and that we should be most hesitant to over ride it in favour of some other constitutional principle.

2.4 There are a number of interesting reports on the legal background to geothermal rights, and to the claim. (Bennion 1991; Boast 1990; Boast & Edmunds 1992; Edmunds & Boast 1993; Gunn 1991; Love 1992) I have not taken a legal perspective. Rather, the economic perspective sees law as a superstructure built upon the underlying material and social relations. It is an important part of the structure, indeed vital for a market economy. but the economic perspective is that the existing legal system cannot define the basic reality, nor can it by itself establish the just and efficient solution to resource issues.

3. Property (and Resources) and Taonga

3.1 At a superficial level the notion of property appears to be well established as a Western concept. This is because it appears to be founded on such a tangible matter as land. However in recent years economists, among others, have become increasingly aware that there exist phenomena which has appear to have the characteristics of property but are far from tangible.[#]
[# The expression “Western” is intended to contrast with Maori. However the Western intellectual tradition is wide, as are the legal foundations. Where there is ambiguity the mainstream English part of that Western tradition is being used.]

3.2 As a result economists tend to focus on ‘property rights’ rather than property. Thus there exists intellectual property rights, as for example embodied in copyright. By analogy there exists ‘intellectual property’ despite it being much less tangible than land.

3.3 But property rights associated with land may also be far from tangible. For instance under town planning ordinances the owner of a piece of land may be able to sell the airspace above it, forgoing the full use of the planning entitlements to the land by selling the unused entitlements to the developer of another piece of land. The Land Transfer Act 1972 defines land to include “messuages, tenements, and hereditaments, corporeal and incorporeal, of every kind and description. …”.My dictionary gives a legal meaning for ‘incorporeal’ as ‘having no material existence’ and ‘intangible’.

3.4 As is evident from the above examples in the Western environment property rights are based on common and statute law. There may well be phenomena which appear to be like other property, but because there is no law there is no way of enforcing property rights. For example while there is a copyright on this paper, were it to contain any original ideas its author would have no claim to them as property, and could not charge others for their use.

3.5 The economics literature sometimes uses the expression ‘resource’ to mean something for which there is a potential property right. While there may be no law which determines the property rights of the resource, or of all aspects of the resource, never-the-less one might conceive of the enactment of such a law which would formalise the property rights. We follow that terminology.[#]
[# Posner (1986) mentions the distinction between de facto or informal property rights and de jure or formal property rights. The sum of the two are economists property rights, but he confines (as we do) the term ‘property rights’ to the latter use only. (p 41)]

3.6 This distinction between property and resource nicely solves the question as to whether there was any property on 5 February 1840. Because there was no legal framework, in the Western concept, it could be said that there was no property in the legal sense. But there were resources, and indeed there were well ~efined procedures by the Maori to settle issues of usage and ownership. Clearly a relevant concept for interpreting the Treaty’s use of the term “taonga” in a Western framework is resource. It is also clear that a crucial process in the post 1840 history has been the conversion of resources into property.

3.7 But the Maori notion of taonga is broader than resource, or property as exhibited by the existence of property rights. It is not that taonga may be intangible, for we have seen that this is true for property in the Western system. However taonga, which is usually translated as “treasured possessions”, may include matters for which there can exist no legal property rights.

3.8 This insight was stunningly illustrated by the Waitangi Tribunal when it ruled that the taonga mentioned in the Treaty included the Maori language, a position which is now also adopted by the Crown. It is not just that there can be few things more intangible than a spoken language (and more concrete in human terms). But there is no obvious way it can be converted into a bundle of property rights, in the usual sense of the terms. No body, be it a collective or an individual, can claim exclusive use to the spoken language, control its form or substance, or transfer the rights through sale.[# ] To do so would be to limit the very things which make it a tonga.
[# These are the three characteristics of property rights. see paragraph 4.1.]

3.9 Thus the Maori notion of taonga encompasses the Western notion of property, because it includes all property, and some items which cannot properly be designated as property.

4. The Rangatiratanga of Property Rights

4.1 Economists characterise any resource by a series of property rights. As a general rule property rights cover the following:
(i) the right to use the resource;
(ii) the right to transform the resource, to change its form and substance;
(iii) the right to alienate the resource to some other party.

4.2 Where these exist in a relatively unfettered form the individual or collective which possessed these rights would be described as ‘ownership’.There will almost always be some restrictions on the rights, and even where they are onerous the term ownership may apply. For instance the owner of a building with a premier historic buildings classification may not possess the right to change the building’s form or substance, but the term ‘owner’ would still be used. However the owner retains the right to sell the building, and that third right – of transferability -is usually the crucial characteristic of ownership.

4.3 Note that the owner may be an individual or a collective. This is important in the Maori context, because as the English language version of the second article of the Treaty of Waitangi states, collective ownership was common, certainly dominant, and possibly universal (excluding personal items) in traditional Maori culture.

4.4 It should be recorded that much of the land legislation of the last 150 years has been to convert Maori collective ownership into individual title. But the second article of the Treaty recognises that collective ownership was legitimate, and guaranteed its continuance over existing Maori possessions -wenua, kainga, and taonga -following the signing. That the notion of ownership was clear is indicated by the second sentence of the article which discusses the circumstances in which the owners may choose to alienate their land.

4.5 A third point is that the property rights of the same tangible (or intangible) asset may be possessed by different persons or collectives. This is a very important issue in the geothermal resource and explored in a later section.

4.6 However the notion of ‘rangatiratanga’ is wider than merely of ‘ownership’. The word itself despite appearing in the second article of the Treaty -is not in the pre-contact Maori lexicon but was constructed for the biblical purposes. It is derived from the indigenous Maori word “rangatira”, who was “a person of high rank, a chief” (Biggs 1989).

4.7 There have been a number of attempts to untangle what the signatories had in mind by using this word. Kawharu translates “tino rangatiratanga” as “unqualified exercise of their chieftainship”.[#] The official English text uses the phrase “full exclusive and undisturbed possession”.Significantl y it does not use the term” ownership” , suggesting the drafters had a more comprehensive notion in mind.
[# Among the nineteenth century translations I have access to are
-“entire supremacy” : Richard Davis translation in Coleman (1865);
-” full chieftainship” with an explanatory note” exercise of the power of chiefs” : Clendon papers [I: 1] (although attributed to Clendon this does not appear to be in his handwriting) ;
-“the head chiefs to all their rights”: Clendon papers [1:8] (attributed to Gordon Browne).]

4.8 The Waitangi Tribunal has pondered on the issue (e.g. 1987 part III), although as far as I know is yet to make a full finding.

4.9 For a final source I turned to Raymond Firth’s seminal Economics of the New Zealand Maori. Although it is packed with information about the economic behaviour and custom of the Maori, it does not link together rangatira and ownership. Never-the-less it is from that source I hesitantly offer the following conjecture.

4.10 I suspect the rangatira claimed authority over that which they did not actually own. The ‘legal’ owners would require some agreement from the relevant rangatira if they were to markedly change its usage, form, or owners. The rules for the exercise of this agreement I can only guess, but we know from accounts of the events which precipitated the Taranaki Wars that a major change of the ownership of land involved the agreement of the highest Ariki. It also seems likely that such changes would involve not only the recognition of the mana of the rangatira, but perhaps a koha (gift), for reciprocity (utu) was central to Maori society. If so it would be virtually impossible to alienate the rangatiratanga from a possession, for each change would require approval from the rangatira.

4.11 This approach may not be as alien to Western experience as might at first appear.In particular, English law maintains that in some sense the land is the Crown’s possession, and those who are said to own it actually hold it only in fee simple. While they have considerable freedom to use and dispose of the land as they wish, the Crown reserves considerable powers over its use. Examples include town planning, and historic places legislation, while the owner may be restricted from selling the land to foreigners. What is important is that in each case the Crown may vary the requirements and restrictions, but the owner in fee simple has no redress or right to compensation. It does not seem to me to be a travesty of the concept to state the English Crown has rangatiratanga over English land.

4.12 But rangatiratanga was more than this. Another aspect was custodianship for people in the past and the future, and on behalf of all that is created. The parallel today would be the sentiments expressed by many environmentalists

4.13 In summary, and to capture a complex issue briefly the Tiriti term “rangatiratanga” better captures the Maori notion, for the rights of the chief were largely the responsibilities of trustees or stewards for their people or the iwi or greater iwi, present, past, and future.

4.14 I have also found that the notion of rangatiratanga avoids the problem as to whether one can actually “own” a resource. This was an acute problem in the case of the radio frequency spectrum, since it is unclear in what sense anybody can own the spectrum. Nevertheless the Maori could claim rangatiratanga deriving, they explained, from the spectrum was a part of creation, and they had been given rangatiratanga over the entirety of creation.

4.15 The Maori creation story might be thought of as the Maori way of stating a set of principles which have been summarised in Western terms as
“(i) A reverence for the whole of creation;
(ii) A sense of kinship with fellow beings;
(iii) A sacred regard for the whole of nature and its resources as being gifts from the gods;
(iv) A sense of responsibility for these gifts as the appointed stewards, guardians, and rangatira;
(v) A distinctive economic ethic of reciprocity;
(vi) A sense of commitment to safeguard all of nature’s resources (taonga) for the future generations. “[#]
[# Quoted in Waitangi Tribunal (1988: 179).]

4.16 In regard to the broadcasting debate the Maori was saying -I think -that the traditional Maori view was that all things created are taonga, and that while the 1840 Maori may not have had a concept of an electromagnetic spectrum, there was a certainly a place in their universe for it. The geothermal is more tangible, and the claim applies equally forcefully to that.

4.17 The Western account is more prosaic. Irrespective of whether the spectrum exists in some sense, there were property rights which were associated with the spectrum, and which in New Zealand are legislated in the 1990 Radio Communications Act. These property rights cover enough of the characteristics in paragraph 4.1, for it to be said that they are owned. Thus the Western approach is to focus on the rights rather than the property -corporeal or incorporeal -itself.

5 The Kawanatanga of Property Rights

5.1 There are also at least two explanations for the status of the property right, one deriving from the Tiriti o Waitangi, and the other from the English draft or “translation” , which is given equal status in the Act which establishes the Waitangi Tribunal.

5.2 Article 1 of the Tiriti refers to the transfer of “kawanatanga” to the Crown. Today that term is today translated as “governance”.1 I take this to mean, in regard of resources, that the Crown was responsible for a framework to manage the resources and their implicit property rights. It has done so via the legal processes and statutes which regulate them today.

5.3 There is no implication that the establishment of its kawanatanga gave any entitlement of the Crown to resources. It is instructive there is no reference in the Tiriti to the transfer of resources such as land to enable Governor Hobson to govern. He had to purchase such resources from the Maori. But even more compelling is that article 2 of the Tiriti states that the rangatiratanga of resources is reserved for the Maori. As we have already explained that encompasses the notion of ownership of property rights.

5.4 In such a framework the Crown cannot obtain possession or ownership of resources except following compensation.2 The requirements of the Tiriti are even more limited in that it demands voluntary consent by the rangatira. A purist might well hold to this view. Mine is moderated by the consideration that in exceptional circumstances where governance requires Crown possession, the Crown may have the right to compulsory acquisition, where all other practical means of acquisition are exhausted, and where fair compensation is paid to the owners. This is a very minimalist provision. In most cases of expropriation of Maori resources the terms were exceeded. A common situation has been the failure to pay fair compensation, although frequently the criteria of necessity, exhaustion of practical alternatives, and minimum expropriation have not been kept to either.

5.5 The statutory basis for ownership for a major component of the geothermal resource appears to be the Geothermal Energy Act 1953. To what extent there was a necessity, exhaustion of alternatives, and minimum of expropriation, is something historians must consider. I note here that there was no compensation to the Maori for the nationalisation of their property rights in the geothermal resource.

5.6 The Crown seems to have treated the geothermal resource it required for energy as a ‘wasteland’ and claimed it under some territorium nullius approach. The Crown has been hesitant to make such a claim in regard to the South Island during the Ngai Tahu hearings before the Waitangi Tribunal, even though Governor Hobson did.

5.7 In any case, where in the Treaty is such a right agreed to? It is not obvious that it is encompassed by the kawanatanga provision of the Treaty of Waitangi. Significantly perhaps, the notion of a wasteland appears in the second draft of the Treaty, which was under the direction of Hobson. In the third draft, in which Busby who was more familiar with Maori custom was closely involved, references to wastelands were dropped, presumably because it was thought there was none. Insofar as the second draft sheds any light on the status of wasteland it implies that they were nevertheless the responsibility of the chief. The exact words are
“The United Chiefs of New Zealand yield1 to Her Majesty the Queen of England the exclusive right of Presumption over such waste lands as the Tribes may feel disposed to alienate.”
It is hard to see that there is merit in the wasteland thesis.

5.8 It has to be acknowledged that traditional Maori practice involved regular usage in order to maintain possession. “I ka tonu taku ahi i runga i toku whenua – my fire has ever been kept alight on my land” (Firth 1959:385). There was a procedure by which after three generations of abandonment a hapu or whanau lost its rights to some land (5.13). Three generations – say 75 years – is a long period of non-usage before ownership is extinguished. However in the case of the geothermal resource it is relatively simple to demonstrate continuous Maori use since 1840. (Boast 1992a,b)

5.9 It could be argued that the uses in the 1953 Act were quite different from those past and current Maori practices. This may well be contentious, since the geothermal energy was being used by the Maori for cooking. But even if the difference could be established, it would be irrelevant. The Waitangi Tribunal (1988) had enunciated the principle of indigenous people to develop, and that presumably includes new uses of their resources. However without wanting to belittle the case for the right to develop by indigenous people, there is a simpler and more basic right involved here.

5.10 Earlier I mentioned that property rights included the right to transform, to change the form and substance. That clearly covers the situation where a new use is found for the resource. The Tiriti is explicit when it states “tino rangatiratanga” and that all encompassing “tino” must include the right to transform. Thus there is no case for the Crown to say that because geothermal energy to electricity was not a use in 1840, or between 1840 and 1953, the Crown had some entitlement to the resource for that purpose independent of any claim by the Maori

5.11 Similarly this approach would argue the Crown was wrong when as a part of the settlement with Ohinemutu village over their use of the geothermal resource it restricted the usage to non-commercial purposes, unless this was a temporary restriction, or if it makes compensation to the Maori for the restriction.

5.12 The Maori account of their possession of the geothermal resource may be simply summarised. It was a resource on the 5 February 1840, over which they exercised rangatiratanga by the fact that it was a part of creation and usage. Resources were guaranteed to the Maori under the Treaty signed on the 6 February 1840. No resources or property rights were transferred by the Treaty. Ergo on the 7 February 1840 the Maori still exercised rangatiratanga and ownership. At no stage have they voluntarily transferred – with some possible minor exceptions – these rights. Therefore today
eitherthe Maori retain their rangatiratanga and ownership of the geothermal resource;
or it has been expropriated without compensation.

5.13 Thus far the argument has been in terms of the Tiriti. What modifications are necessary in terms of the English text which the Tribunal is to take into consideration?

5.14 The English text uses the term Crown “sovereignty” in article one, but this sovereignty is limited by article two and article three. Instructively, in the Busby draft, the third article which introduces “all the Rights and Privileges of British Subjects” to New Zealand appears in the preamble, suggesting that it was intended to be higher in the hierarchy of constitutional changes or more fundamental than its place as today’s third article might suggest. That would certainly be true, were the Treaty intended to be some sort of social contract, as I argued in Contract, Covenant, Compact.[#]
[# That also argues that article two and article three in some respects cover the same ground, but that in addition article two also establishes the possession of the property rights at the time of the signing.]

5.15 If the Crown was given sovereignty in New Zealand while that sovereignty involves wider powers than governance, it is still limited by the terms of the Treaty, including those of article three. Indeed there is a strong theme in British constitutional thought that if a government fails to respect the rights of the population, then the population is entitled to overthrow it.[#] Among those rights are those to hold property secure from arbitrary government seizure.
[# John Locke’s 1690 treatise on Civil Government is perhaps the best known exposition from this perspective, responding to the 1688 ‘Glorious Revolution’ and the Bill of Rights.]

5.16 Since article two of the English text of the Treaty states the Crown confirms and guarantees…the full exclusive and undisturbed possession of their Lands and Estates Forests Fisheries and other properties” , and then sets down a procedure by which the chiefs may alienate them “at such prices as may be agreed upon”, there can be no doubt that both article two and article three secure the property rights of the Maori from arbitrary Crown seizure.

5.17 Does the Treaty cover property rights of the geothermal resource? I propose not to answer this in detail because it seems to me very obvious that it did, and would have explicitly if the issue had been raised.[#]
[# See Waitangi Tribunal (1990:41) for an example of the use of this test.]

5.18 More contentious is the question of whether the Treaty would have intended to cover all property rights, including those at the time unknown to the signatories, Crown and Maori, such as the use of the resource to produce electricity or minerals (of which little was known at the time) or even tourist services.

5.19 I note that article two of the Treaty states “full exclusive” which might suggest the intention was all property rights were confirmed and guaranteed, including the rights to transforms in ways not then imaginable.

5.20 Moreover, I am unable to think of a situation where the Crown having yielded total ownership of a resource could claim to some development opportunity for the resource, other than after paying fair compensation for that opportunity.[#]
[# Where the legal discussion on water rights and minerals differ is that it is not clear that in these cases the total ownership of the entire resource was ever confirmed and guaranteed by the Crown.]

5.21 Thus while it may have been a matter of the interests of state in 1953 to pass the Geothermal Energy Act, that did not relieve the Crown of paying a fair compensation for the resource. Whether it did is a matter of investigation. But whatever were the circumstances in 1953 the situation has since changed and their can no longer be these matters of state justifying the Act. In particular the corporatisation and privatisation process of the last few years means that the Crown no longer is directly in the field of the production of energy. The Treasury paper of 19 May 1987 is a clear statement of this position, and the proposal to sell the Crown’s geothermal interest confirms this account. (Treasury 1987)

5.22 In summary, under the sovereignty interpretation of the Treaty, whatever the rights the government had to pass the Geothermal Energy Act 1953, it should not have alienated the property rights in the geothermal resource from the Maori without fair compensation, and it should return those involuntarily alienated rights now that any justification for their seizure is redundant.

6. The Tiriti and the Resource Management Act 1991

6.1 I need to say a little about the effect of the Resource Management Act 1991. In a recent paper Richard Boast (1990) applies the ‘hierarchy of interests’ principle developed in North America to the geothermal issue and suggests that sustainability may be treated as superior to the common law rights of indigenous people. In this section I want to suggest that while this may be true in a situation of sovereignty, it need not be true where it is a matter of governance, and that there is an alternative interpretation of the Resource Management Act which may well be consistent with the Tiriti.

6.2 A major problem in any economy which is regulated by market forces is how the interests of future generations may be incorporated. Since the unborn cannot express a demand in the market, the market by itself cannot reflect their interests.[#] We assume here that the interests of future generations should be taken into account, a premise which I return to in the case of the Maori, but which also seems to apply in non-Maori culture too.
[# Economic theory sometimes overcomes this dilemma by assuming that the economic actors are immortal, or that they take into full account their assessments of the interests of all their descendants. Neither assumption is entirely realistic.]

6.3 I want to suggest that the Resource Management Act 1991 is a means by which future generation’s interests are taken into account, via the notion of sustainability. I do not need to ague here that this is the most efficient way of taking the interests into account. Rather that it is an honest attempt to do so.

6.4 If so the Act is not in conflict in principle with the notion of rangatiratanga of the second article of the Tiriti. As explained in section 4 rangatiratanga was not simply ownership or stewardship on behalf of an iwi today. It also involved a responsibility for those of the past and the future.[#]
[# The issue of the rights of the future are discussed in the section on the Resource Management Act. I do not discuss the rights of the past, which while not totally alien in the Western approach is by no means simple.]

6.5 The responsibility to generations in the future is nicely illustrated by the rules of forfeiture of rights. Smith (1936) wrote “If a Native left his tribe and went to live in another district either through marriage or otherwise, and he and his descendants remained away for three generations, they would forfeit all rights to the land so abandoned”. (p.57) The implication that such was the custodial responsibilities of the rangatira that he could not unilaterally abandon land for which he was accountable. The abandonment had to be confirmed by, not one but, two further generations, including people who were almost certainly not alive when the initial decision was made.

6.6 I suggest then, that if the governance of the Tiriti is the appropriate interpretation of the role of the Crown in the New Zealand constitution, that the Resource Management Act is a part of that governance: a mechanism by which the interests of future generations may be incorporated into economic decision making. As such in principle it involves no superiority of the law to rangatiratanga but offers a mechanism by which the stewardship of the rangatira on behalf of future generations may be expressed.

6.7 In tentatively offering this suggestion I am not arguing that the Resource Management Act is a perfect solution to this problem, or that it is in total harmony with the second article of the Tiriti. What I am suggesting is that it is possible to interpret the Act consistent with the Tiriti, and indeed section 8 of the Act, requires that be done.

6.8 A more complex issue might be the provisions in the Act giving the power to a Regional Authority to award a water right. In need not mean that the Maori forgo all or part of the rangatiratanga over water which is guaranteed to it by the Tiriti. Rather it might be interpreted that this water ‘right’ is a mechanism for moving the Maori rights into the effective economic/commercial domain. This approach has to be explored, and it almost certainly requires additional law to confirm the guarantees to the Maori in the legal system.

6.9 More generally, while I am anxious that we should let the provisions and procedures of the Resource Management Act bed in, the indications of the various legal opinion I have looked at (Bennion 1991; Boast 1990; Boast & Edmunds 1992; Edmunds & Boast 1993; Gunn 1991; Love 1992) suggest that there is sufficient ambiguity in the law over the geothermal resource to require some supplementary legislation. The principle is already recognised in that mining is not covered by the Act.

6.10 In particular, the Act appears to operate by treating the geothermal resource in terms of a water right. The geothermal resource is more than a water right, just as it is more than a source of energy. Even if we focus only on the energy element of the geothermal resource, the water is a vehicle by which the energy is carried, not the energy itself. No doubt the legal process could, by a series of judicial decisions, eventually find its way through the complex task of converting the statutory provisions into a realistic regulatory framework for the entire geothermal resource. But it will take time, involve delays, and there will be unnecessary mistakes, which together will be damaging to the environment and to economic development. It would be wiser to enact legislation which will make clear the intentions of parliament.

7. The Separation of Property Rights

7.1 One of the outcomes of the property rights approach is that a single resource may have a numerous separate property rights, which may be possessed by different economic agents. A crucial regulatory issue is how to enable the separation of the possession, which may result in greater economic efficiency.

7.2 For instance the Torrens type registration system of the radio frequency system was to enable both the simplification of the ease of transfer but also to allow the possibility of the separating of the use of a frequency. The frequency might be used for talkback during the day, jazz at night, and religious broadcasting on Sunday, each program being run by an economically separate entity.

7.3 The Maori is no stranger to this separation of property rights. A stretch of river might involve different whanau or hapu having different fishing rights -by type or season, while others might have transit rights of the river, and others have different rights for access for water. Some of these rights would be close to private -only a particular whanau might be permitted to set up an eel trap at a particular point -others would be collective within a regulatory framework -as when anybody in the iwi may travel along the river with, perhaps, some rules about right of ways for canoes. The framework would have had procedures for solving dispute over or conflicts between property rights. There would be parallels to today’s procedures: informal procedures (two hapu resolving between themselves, perhaps with a mediator), formal procedures involving a judicial element (perhaps a tohunga interpreting the meaning of a rahui), and formal procedures involving a legislative element (perhaps a (high) rangatira reallocating or redefining property rights). The Maori separation of powers would perhaps have been less distinct than they are today.

7.4 I am of the view that we should assume, unless there is evidence to the contrary, that in traditional Maori economic activities (implicit) property rights were efficiently allocated and resolution procedures worked reasonably effectively. Two exceptions would be if the property rights were being newly allocated (e.g. after a conquest), or if the property rights involve some new innovation (for it would be idle to argue that the Maori had fully allocated property rights over the use of river gravel for concrete). The assumption arises from a model in which experience would have led the Maori to have improved their rights allocation and procedures over time. I think it most unwise -even arrogant -to assume, as I am afraid some of the more pro-private enterprise property rights literature on occasions does, that allocations (especially collectivist ones) in pre-capitalist societies were inefficient.

7.5 Recognising that I have made an assumption that property rights framework of the traditional Maori was efficient, and acknowledging that this assumption may be tested by examination of Maori lore and practice, I want to use the assumption to explore the likely configuration of geothermal property rights in traditional Maori society. I am using the evidence of pre 1840 Maori land rights.

7.6 It is evident that individual kainga, whanau, and hapu had entitlements to individual sites for cooking, bathing, and medicinal purposes among others (Boast 1992a,b). However it is unlikely that these use rights gave their holders unlimited alienation rights. These were almost certainly held by the iwi, or some greater entity, and the rangatira, as stewards, would be responsible for decisions.

7.7 If land practices are any indication, alienation of the rights from an iwi would be rare, and arise only in very special circumstances. As a general rule the Maori did not alienate land which had a significant geothermal source, even in European times.

7.8 It the rangatira would have claimed stewardship over significant alienation of rightsl on behalf of the iwi, I think it likely, had the occasion arisen, the rangatira would have claimed the property rights for transformation of the resource on behalf of the iwi.
[# Even insignificant alienation, such as the voluntary transfer between whanau of the same hapu, may have required some rangatira acknowledgement (in some respects a registration of the change).]

7.9 In effect this is what happened with the Ohinemutu settlement, where the hapu were allowed to retain their traditional use rights, albeit with some modification, but the Crown acting as if it held the rangatiratanga, taking the transformation rights to itself. It is, of course, unclear on what fundamental authority the Crown could make such a claim.

7.10 Since ultimately transformation rights become use rights, the subsequent discussion is on those use rights, but observing that the rangatira would have ultimate authority via the stewardship for which they were responsible.

7.11 A central problem arises where one use impinges on the other. For instance the drawoff of geothermal steam may reduce the effectiveness of a site for cooking, bathing, and tourism. At a simpler level that one group of people are bathing in a hot pool may prevent others from doing the same. The short response to the simpler example is that a system of property rights allocates the use between people (in Pakeha culture it is usually the informal rule of first come first served).However a more complex case is when an innovation does not result in proper allocation of property rights, perhaps because the full implications of the change are not foreseen. The outcome is that the incomplete allocation of property rights are likely to lead to inefficient use of the resource.

7.12 Here are some practical examples of potential conflict in the geothermal resource use:
-a site may be used as a tourist attraction or to mine some valuable mineral (sulphur has been such a mineral in the past, but it may be that there are also rare and very valuable minerals);
-a site may be used as a tourist attraction or to produce commercial energy such as electricity;
-a site may be wahi tapu, and yet be commercially promising;
-a geothermal resource may lie below two properties in which case the drawoff from either devalues the resource for the other. (It is recorded that this can happen to sites up to seven kilometres apart);
-a geothermal resource may lie below the territories of two or more iwi.
There are even more lethal combinations of the above. For instance I am aware of a potential conflict where one iwi wants its share of a geothermal resource for commercial energy, while the other wants it to use its share as a tourist attraction.

7.13 Perhaps the first thing to be said is there is no ready solution to these conflicts. However economists argue that a step towards resolution is to allocate all the property rights under one agent. This one agent then allocates the resource to gain the maximum return for the agent. Insofar as complete property rights includes the right to alienate, it will be often in the interests of the agent, to alienate (typically by sale) some part of the rights to another agent. The deed of sale, enforced in a civil court, thereby allocates the property rights between the two. Sometimes there will be recourse by the parties involved to courts.[#] Some economists argue that this is always more effective than a system of state legislated rights. That for me is an empirical question, but I am sure that where legislation leaves an ambiguity about scope and possession of property rights -as it seems to with the geothermal resource the outcome will be inefficient.
[# Or some other procedure agreed upon, such as mediation or arbitration.]

7.14 Other features of this argument appear in the Treasury (1987) paper on geothermal energy resources (although it is written before the Resource Management Act, and its argument should be adjusted for that). Although it ignores the non energy uses of the geothermal resource the argument is that
“..if rights to use the field are held more than one person, potentially profitable large scale developments are unlikely to go ahead.” (para 6)
The paper then introduces a non-sequitur
“Accordingly, geothermal resources should remain vested in the Crown, as they are under the existing Geothermal Energy Act, so it is possible for only one user to obtain rights to develop a field.” (para 6)
It would be equally logical to vest the rights in the relevant iwi or (coalition of iwi). A point the paper promptly acknowledges by favouring the selling of the rights to private enterprise.

7.15 A related issue is the need to distinguish the hole drilled in the ground (and the attendant equipment) from the geothermal resource from which the well is drawing. One can easily imagine a situation where the resource owner allowed a totally different agent to drill a well in order to draw off the steam (perhaps reinjecting the cooled water), in return for a royalty. The well owner would be able to sell their interest in the well, and probably sell their drawoff right, but nonetheless would not own the geothermal resource itself.

7.16 I am hesitant to be too detailed as to whom would be the appropriate Maori agent to vest a field in. What is crucial for economic efficiency is that the there should be only one agent to exercise rangatiratanga over the field. Sometimes this may be an iwi geothermal trust, sometimes it may have to be a joint iwi geothermal trust. I assume the decision of who have entitlements in each trust would be the responsibility of the Maori Land Court, and they would try to simulate the sort of process which would have gone on within the traditional Maori when they faced a similar problem. Perhaps it would involve finding a common ancestor to the iwi. If so the aim would be to identify the most recent ancestor whose lines encompasses all the legitimate claimants.

7.17 The difficulty with this approach is that typically there will already be some uses of the particular resource. For instance an iwi might be using one area within the field as a tourist attraction, various property owners above the field may have thermal bore, and there may be hapu may be using other sites for cooking and bathing.

7.18 The ‘grandfather’ rights issue could be solved by the vesting process including subsidiary contracts between current users and the agent in whom is the primary vesting, which precisely state the rights of the current user. Typically the Crown, who allowed these situations, would pay the primary agent for the loss of those rights (although this might be inappropriate where the current rights were held by a subsidiary of the primary agent -e,g, a iwi, hapu, whanau). Alternatively the Crown might buyout the current users rights, or it could even terminate them without compensation (although in my view such an option should be pursued in special circumstances only). As a rule related rights would not be included. For instance the ownership of the well might remain with their present owners (although the Crown might transfer its wells to the Maori as a part compensation for past wrongs or in part compensation for not being able to return grandfathered rights outside the iwi).

7.19 It would be wrong, on efficiency and Treaty grounds, to vest the geothermal resource in the landowner above it. It would inefficient because the boundaries of a field rarely correspond to the surface boundaries, and so the property rights would be ambiguously shared between various land owners, with the outcome of an excessive drawoff as has occurred around Rotorua city. And while the Maori may have (voluntarily or involuntarily) disposed of the property rights in land, it would have not been their intention to have voluntarily disposed of the geothermal resource under it, unless there was a source on the surface.

7.20 However I think it would be appropriate for the Maori Land Court (or whomever) to use traditional Maori notions of land entitlements to allocate the property rights, as discussed in paragraph 7.16.

7.21 It must be emphasised that vesting the property rights of the resource in a suitable Maori group does not solve the conflict of resources. What it offers is, providing the property rights are fully allocated, a process by which the conflicts will be settled reasonably efficiently.[#]
[# To give but one illustration of how imperfect or ambiguous allocation can be inefficient, consider the legal and other expenses that such an allocation would generate.]

7.22 Vesting fields in a geothermal trust would still leave the Crown with the following kawanatanga or general third article property rights:
– the right (and duty) to provide a regulatory framework;
– the right to levy to fund the regulatory framework;
– the right to charge for the benefits of the research on geothermal resource provided by Crown Research Institutes and their predecessors;
-the property rights to such capital that the Crown has invested in the development of the geothermal resource (e.g. wells and well head dynamics).

8. Geothennal Resource as a Development Opportunity

8.1 Most of the major known development opportunities for the geothermal resource have been canvassed. They include:
– a source of energy for electricity;
– a source of energy for hot water and steam;
– a tourist attraction;
– a source of some minerals.

8.2 Typically, the various opportunities are in conflict, and similarly in conflict with traditional uses.

8.3 I have explained how the property rights framework enables the making of reasonably efficient use of the resources. I draw attention to the very real danger that the development opportunities will be set back by the current regulatory regime. Most of my points have been already been explained, but it is useful to summarise them as follows:
– the legislation regulating the geothermal resource is incomplete and ambiguous in places;
– the property rights associated with the resource are not fully allocated, and especially are not vested in a single authority.

8.4 In addition, there is the complication of the Maori claim to the geothermal resource. As long as this is unresolved, it will inhibit the development of the resource, since potential developers will be unable to obtain a secure title over the resource.

8.5 There exists the real possibility that if the government relies on a resolution process overly dependent upon the courts the opportunities for development will be delayed and, insofar as a sustainable resource is involved, lost.

8.6 This delay and loss means that there will be less energy provided by the geothermal resource, some of which will be made up by more expensive sources, some of which will not be made up at all. And there will be less jobs in energy production and tourism. If there turns out to be other currently unexpected uses of the resource (e.g. mineral extraction) that economic potential will be lost also. Instead human energy will be diverted to the process of resolution, rather than of utiliation.

8.7 Fortunately government has the opportunity of cutting through this gordian knot, by enacting legislation which remedy the deficiencies and ambiguities of the current statutory system. In particular it would:
– administer the entire geothermal resource via a single act (i.e. kawanatanga role);
– vest the property rights of each geothermal field in a single entity (preserving the rangatiratanga of the Maori).

8.8 The entity in which the vestment should be made is a duly appointed Maori geothermal trust, the ownership of which would be determined by an agency such as the Maori Land Court, based on traditional Maori notions of the possession of property rights.

8.9 Use rights currently held (by Pakeha and Maori) would be acknowledged, and dealt with along the lines discussed in paragraph 7.18.

8.10 Regulation (especially environmental regulation) of the resource would remain in the context set by the Resource Management Act.

8.11 The Crown would keep for itself rights such as those mentioned in paragraph 7.22, although it may wish to transfer some items as a part of the reparations for past grievances associated with geothermal wrongs of the past, or in lieu of the grandfather rights for present users mentioned in paragraph 8.9. It might also wish to sell its interests to the relevant geothermal trust, or to some agent who has obtained property rights from the trust.

8.12 From one point of view this may seem expensive to the Crown. There has been mention of it obtaining between $10 million and $30 million from the selling of its rights and interests. However this is a small amount beside the revenue it would gain in taxation and reduced dependence on social security outlays), from the geothermal developments that this strategy could unlock.

8.13 In any case, the approach proposed here would remedy past grievances and wrongs arising from the neglecting of the Tiriti. The Crown would benefit then in two ways: from the early development of the potential of the resource, and from the righting of past wrongs.

8.14 In summary in my view the Waitangi Tribunal should find that -the Maori has rangatiratanga over the geothermal resource, arlsmg from its traditional practices, and as guaranteed by the Tiriti;
– the Crown has kawanatanga over the geothermal resource, arising from article one of the Tiriti;
– these principles should be enacted in statute;
– that those with manwhenua over a field should have their rangatiratanga recognised;
– the Tiriti partners should work together to enable, as soon as is feasible, the unlocking of the potential of the geothermal resource for the development of the nation.

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