The environment watchdog is warning there are shortcomings in the tool that farmers use to manage the nutrients they put into their land which can end up damaging rivers and lakes.
The Parliamentary Commissioner for the Environment, Simon Upton, has released a report on whether the software programme, Overseer, should be used to regulate farmers with respect to water quality.
Mr Upton said New Zealand has a major water quality problem associated with nutrient losses from farms.
Nutrient pollution from a wide variety of agricultural and horticultural activities is a major contributor to degraded water quality, and that "is socially and environmentally unacceptable", he said
Local and central government are grappling with how to limit that degradation and drive improvements, and Overseer is being used by some councils to do that, according to the report.
But it found there are important gaps and shortcomings in Overseer that undermine confidence in its use as a regulatory tool.
It was time to open up the software to greater scrutiny, "to ensure cleaner water, farmers and regional councils need to be confident that Overseer's outputs are reliable", Mr Upton said.
What is Overseer?
Overseer takes nutrients that are present or introduced to the farm, including nitrogen and phosphorus, models how they are used by plants and animals on the farm, and then estimates how they leave the farm and in what form.
The programme estimates the nutrient losses from the farm, which includes emissions into the atmosphere, leaching through the soil, and run-off across the land surface.
Sediment and pathogens, such as E. coli, fall outside the model's scope.
Nitrogen and phosphorus are the nutrients of most concern in New Zealand's freshwater because high concentrations can cause excessive plant growth and algal blooms.
That reduced oxygen levels and prevented light from penetrating the water - affecting freshwater plants and animal species.
Overseer was initially developed to help farmers make more efficient use of nutrients, with the aim of boosting both productivity and profitability.
But it has steadily been adopted by regional councils to regulate farmers' activity, with the end goal of improving water quality by limiting what ends up in waterways.
Overseer is jointly owned by the Ministry for Primary Industries, the Crown Research Institute AgResearch and The Fertiliser Association of New Zealand.
The Fertiliser Association represents and is owned in equal shares by the two major New Zealand manufacturers of superphosphate and nitrogen fertilisers - Ballance Agri-Nutrients Ltd and Ravensdown Ltd. Both companies are farmer-owned cooperatives.
How do regional councils use it?
The report said regulators are forced to rely on Overseer because the environmental effect of one farm's diffuse nutrient pollution cannot be measured separately from the effects of all farms in a catchment.
It therefore has to fall back on using nutrients leaving the property as a proxy for the environmental damage it will cause.
Overseer comes into play because nutrients cannot be physically measured, paddock by paddock, farm by farm, so the tool is used to estimate the loss.
Some regional councils set nitrogen limits in terms of the amount individual farms are allowed to apply to their land, and the amount of nitrogen loss is also limited by regulation. Overseer is used to determine how a farm complys with both of these.
Seven councils do not explicitly reference Overseer in their regional policy statements or resource management plans, but some may still use it.
Three councils require farms to have an Overseer nutrient budget, but impose no restriction on the amount of nitrogen leached.
While six councils attach some regulatory consequence to the amount of nitrogen leached by a farm, so Overseer becomes part of a framework that imposes nitrogen loss limits.
The report has found that important elements of the model are not open for review, and some gaps and shortcomings need to be addressed.
For example, it is possible to deliberately manipulate Overseer outputs, making it look like nitrogen loss had reduced on paper, when in practice it had not.
There are also problems with the software's updated versions which can change the requirements on resource consents and render some farms non-compliant, when in fact the practices on the farm had not changed at all.
Mr Upton has made ten recommendations, including providing greater transparency around how the model works and aligning its ownership, governance and funding arrangements with the transparency required for it to be used as a regulatory tool.
He said there also needs to be official guidance on how Overseer should be used by regional councils.