12 April 2002

Water trading offers scope on both fronts

By Amanda Dunn

TRADING licensed irrigation water under current legislation is now theoretically possible.

Two separate water licence sales in East Anglia, totalling 90,000cu m (17.5m gallons), are already under negotiation.

"Although licence trading is presently under assessment by the Environment Agency, it is still possible to trade water under existing legislation, giving farmers the opportunity to benefit from additional water, add value to land or create an extra income," says Bidwells Robert Cumine.

"Granting of new licences will be conditional on a corresponding reduction in existing licences, with abstraction rights effectively being transferred from one farm to another.

"Water will need to be traded within Aquifer Units, which are the same as ground water catchment boundaries, and will nearly always be subject to an environmental impact assessment." The cost of the EIA will need to be met by the farmer.

All new licences will be time limited and license value will depend on the catchment area. "Depending on the cost and complexity of the transfer, it will be possible to either create a fixed term annual rental or complete a one off transfer of water."

"Trading water is likely to be more complex than trading contracts or quotas and if transfers are to be successful, close work with the Environment Agency will be required, particularly while the market and process are still in their infancy."

A three-month leeway for EA approval of a new licence should be allowed, he advises.

"In the first instance, growers wishing to sell a licence need to find a buyer.

"Following an initial check to ensure both parties are extracting from within the same Aquifer Unit the EA would then need to be approached and the cost of the EIA established."

Application to extend the buyers licence should then be made. This will be subject to a corresponding reduction in the sellers licence.

"While a rental agreement is relatively straightforward and likely to be cheaper than a one-off transfer, if the volume of water involved is too small, or cost of the EIA too great, it may prove to be non-viable," warns Mr Cumine.

"The concept of trading water should achieve an effective means of allocating a scarce resource, and in catchment areas currently fully licensed this could now make the consideration of a new license possible," he concludes. &#42

Trading of water licences is possible, but requires careful preparation and close co-operation with the Environment Agency, says Bidwells Robert Cumine.