Billionaire drops lakeside lodge plan

A $3 million lodge will not be built on the shores of Lake Pūkaki, after a High Court scrap. David Williams reports

A Hong Kong billionaire has dropped a controversial plan to build a sprawling lodge overlooking a scenic South Island lake.

The consent application, which was to be referred straight to the Environment Court, was quietly withdrawn last week, after the High Court rejected a bid to force the Crown to hand over a sliver of lakeside land.

Green groups had decried the lodge plan as inappropriate.

It would have been the first occupied building on the eastern shore of Lake Pūkaki, the country’s principal hydro storage lake. (The only other building is the Pūkaki power station, 9km south.)

Meridian, the 51-percent-taxpayer-owned electricity company, will be relieved, as the decision reinforces the primacy of hydro-electricity generation. The partially listed power company, one of New Zealand’s biggest, had warned the court forcing a sale “has within it the seeds of future conflict”.

Hong Kong businessman Ka Kit “Peter” Lee’s company, Blue Lake Investment (NZ) Ltd, still owns nearby Guide Hill Station. But gone is the vision of a 786-square-metre lakeside lodge for Lee’s guests and staff, including a 225sqm indoor swimming pool room, and a separate eight-person spa recessed into the ground.

“That’s the end of that matter,” says Blue Lake lawyer Graeme Todd, who confirms the company contributed to the legal costs of the station’s former owners, David and Marion Gould, who took the case. “We do not have the ability to purchase that property.”

Todd, of Queenstown, says the possibility of building a lodge elsewhere at Guide Hill was being discussed with the owners.

The consent withdrawal ends a years-long battle involving seemingly insurmountable planning problems.

The lodge proposal would have breached Mackenzie council rules for building within 100m of a lake, on land designated an outstanding natural landscape and a lakeside protection area. Indeed, a consultant planner for the Mackenzie council recommended consent be declined on landscape character concerns.

Rosalie Snoyink, of the Mackenzie Guardians, says the group is pleased the application’s been withdrawn. “After years of working to protect the outstanding natural landscapes of the Mackenzie Basin it would have been a travesty if the construction of a private luxury lodge on the shores of Lake Pūkaki was able to proceed.”

One has to wonder what would have happened if the outcome of the 2017 election had been different.

Extra spending agreed

Blue Lake bought the 3522-hectare Guide Hill Station, on the eastern flanks of Lake Pūkaki, in 2016. The $16.5 million purchase needed approval from the Overseas Investment Office (OIO).

The approval noted the company agreed to spend an extra $5.6 million on Guide Hill by the end of this year. Most of that, $3 million, was to be spent on a lodge. Other conditions included donations totalling $410,000 to Lincoln University, Mackenzie Country Trust, and Tourism Waitaki, as well as consulting with the Department of Conservation over environmental protection at Guide Hill.

An important aspect of the sale, as it turns out, was the associated purchase of 28ha of lakeside land, described as “former Crown land”. The Gould family, which sold the station to Blue Lake, said it had agreement from the Crown to buy back the land – taken in 1976 under the Public Works Act for electricity generation purposes.

The High Court case referred to a 48ha area.

In spite of Meridian’s long-standing opposition, and a warning that transferring the land to private ownership could set a dangerous precedent, the Commissioner of Crown Lands signalled his intention in 2016 to offer the land back to the Goulds.

(The Waitaki hydro scheme provides about 18 percent of the country’s generation.)

In a subdivision consent designed to “repatriate” the land to Guide Hill, the commissioner said the land was no longer required for public works. While there were no “applicable offer-back provisions” to the Goulds because the land was now owned under the Land Act, the commissioner suggested the Crown had a “moral duty” to do so.

There was an abrupt about-turn two years later. Land Information New Zealand, the Crown’s land manager in which the commissioner works, refused to follow through on the promised offer back. The stated reasons were a “recent change in Government”, a review of land use in the Mackenzie Basin, and DoC’s intention to seek its protection.

The Goulds challenged LINZ’s decision in the High Court, seeking a declaration the land should be offered back to them – the freehold title should be returned, subject to Meridian’s easement.

“The reality is that the Goulds have sold the farm.” Justice Simon France

Justice Simon France’s judgment, from December, offers a stern defence for the status quo, dismantling the points raised by Guide Hill.

Fundamentally, he questioned the Goulds’ connection to the land.

The Goulds have farmed Guide Hill since 1962. David Gould told the judge he and his wife still live there and their daughter, Alana, manages the farm for the new owners. The ashes of “their parents”, the original station buyers, are scattered there.

An agreement to take land off Guide Hill for the hydro scheme was first entered into in 1972 – “a period of ownership of only 10 years”.

“The reality is that the Goulds have sold the farm,” France wrote, adding there are strong public interests in retaining it in Crown ownership. “Further it is known the new owners have a development interest in the land, so there is an undoubted commercial overlay to it all.”

The offer-back provisions in the Public Works Act rely on the land not being required for its original purpose, or for any other public work. It might also not be offered back if its character has significantly changed.

France said the land is “plainly a component of the hydroelectric scheme”. “The evidence establishes beyond doubt that the target land is properly included in the easement. It provides, as does all the margin land, a degree of protection against existing risks, being flooding and erosion. The risks are likely to increase throughout the century.”

The land is a buffer zone, France said – “and that is a required use”. “It is both presently used and required, and is required in the future. It is far from a case of land banking to see if some need emerges.”

Land now on the margin of a hydro scheme has clearly changed in character. “The land may look the same but its border is now a hydro lake, which previously it was not. Risks of flooding and erosion now exist that previously did not.”

Putting that to one side, ownership was validly transferred to the Land Act, which has its own alienation options, the judgment said. The Public Works Act hasn’t applied to the 48ha on Pūkaki’s shores since 2007, when easements were registered.

Critical infrastructure which must endure

Meridian filed “considerable evidence” from various experts – on which the judge appears to have put considerable weight.

Hydraulic engineering specialist Dr Murray Webby told the court it’s important to maintain a lake management margin to accommodate future inundation and potential erosion. Coastal geomorphologist Dr Martin Single said Pūkaki’s shore was “young” and still changing, with erosional processes expected to cause further change.

Meridian’s general manager of generation and natural resources, Guy Waipara, told the court Lake Pūkaki is part of the backbone of the national electricity system. As “critical national infrastructure”, it needs to “endure in perpetuity”.

Guide Hill Station’s line in court was the lakeside land was no longer needed for the purposes for which it was taken. The Goulds have had a licence to graze the land, which has never been flooded, since 2003. (The proposed lodge would have been 12 metres above lake level.)

Just because land’s not submerged doesn’t mean it’s surplus, Waipara countered. Putting the land in private hands, with plans for “significant development”, can’t co-exist with Meridian’s easement. To do so “has within it the seeds of future conflict and is short-sighted”.

Crown ownership of lake margins serves the common good, Waipara said. Put simply, selling the land would breach Meridian’s operating easement.

“Flexible hydro generation is important to ensure New Zealand’s electricity security and that will become even more important to meet future demand. Lake Pūkaki is New Zealand’s biggest hydro storage lake and its management and the imperatives affecting the management regime will likely change over time.”

Political winds of change blow

The Goulds couldn’t be reached for comment. But France’s judgment makes it clear they’re unhappy with how things changed after the new Government was formed in 2017.

It turns out the family has been chasing the land since as far back as 1990, when an employee of Electrocorp Production, a division of state-owned Electricity Corporation (ECNZ), advised the Goulds the “land in question” had been declared surplus to requirements.

France said the statement is “too vague to be of value”.

Meridian was incorporated in 1998, and it received ECNZ’s rights to operate Lake Pūkaki. Easements were registered in 2007.

Guide Hill applied to the Commissioner of Crown Land to “alienate” the 48ha slice in 2011. In September 2017 – a month before the coalition Government of Labour, New Zealand First and the Green Party was formed – Blue Lake lodged consent to build a lodge on the lakeside land. That seems slightly presumptuous, considering the company didn’t own it.

Things soon started to unravel.

The acting commissioner advised the Mackenzie council, which was considering Blue Lake’s consent, there was no contract to sell to Guide Hill. Seven months later LINZ made its bombshell decision to renege on its earlier promise.

The Department of Conservation initially didn’t express an interest in the land, although it did raise concerns about grazing. In April 2018, however, it wrote to say it had gathered more information about the land’s conservation values. In the intervening period, it said, a plan change had become operative which designated the whole Mackenzie Basin an outstanding natural landscape, placing the “target land” within a lakeside protection area.

The Goulds maintain the about-face was political – that key to DoC’s U-turn was “a change of Government”, they told the High Court. Meridian said that’s unsupported by evidence. Blue Lakes’ lawyer Todd says he can’t comment. “It was the Goulds’ arrangement with the Crown, and not with us.”

Eugenie Sage, the Minister for Lands and Conservation, didn’t respond to requests for comment by publication deadline.

Development progressed

In 2018, Todd, the Queenstown lawyer, said the result of the legal melee over the lakeside land and lodge wouldn’t jeopardise the OIO-approved sale of Guide Hill.

What it did jeopardise, he said back then, was “significant public benefits” being negotiated. “All that the public are going to get is a bit of extra land, which is ridden with exotic trees, which they’re going to have to now pay to remove.”

Key to Blue Lake’s lodge proposal was an offer to place a legal covenant over 1400ha of Guide Hill. That’s about 40 percent of the property, and a 23 percent rise on the protection area agreed with the OIO.

Now the lodge can’t be built overlooking Lake Pūkaki, is that 1400ha figure under threat? “No,” Todd says.  

The area isn’t yet legally protected. “That matter is still being resolved as part of the overall development of the property.”

Another condition of Blue Lake’s purchase of Guide Hill was to spend $2 million on an accommodation and tourism development – something that sailed through planning permission.

The development area, in a cluster of existing farm buildings, is about four kilometres from the lake. The facility comprises visitor accommodation units for up to 48 guests, a cafe/restaurant and shop, helipad, jetty and a multi-use outdoor facility for weddings and stargazing.

Todd says: “They’re all under construction and are due to be completed within the timeframe within the OIO consent.”

That might not be the last word, however. The Overseas Investment Office, which sits within LINZ, says it’s aware of the court judgment and has been closely monitoring the matter.

“We are currently reviewing a report from the consent holder that was recently provided and are considering our response,” OIO group manager Vanessa Horne says in an emailed statement. OIO representatives might even visit Guide Hill later this year, she says, depending on Covid-19 alert levels.

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