Energy (Fuels, Levies, and References) Amendment Bill

on behalf of the Minister of Energy and Resources: I move, That the Energy (Fuels, Levies, and References) Amendment Bill be now read a first time. I nominate the Commerce Committee to consider the bill.

This bill amends the Energy (Fuels, Levies, and References) Act 1989 in order to provide a sustainable funding source for New Zealand’s International Energy Agency oil stockholding obligations. The bill also realigns existing funding mechanisms so that oil consumers, rather than general taxpayers, are apportioned the cost of stockholding. As a member of the International Energy Agency this country has a treaty obligation to contribute to global oil security by holding oil stock equivalent to 90 days of net imports. New Zealand is too small to mitigate international oil supply disruptions on its own. The collective arrangement under the International Energy Agency is this country’s best choice for coping with such disruptions. Release of the global stockholding during disruptions also helps protect New Zealand from significant damage to its economy from extreme oil price spikes

Commercial inventories held by oil companies in New Zealand contribute to part of this International Energy Agency obligation. Domestic oil production helps to bring down the level of the obligation. In this regard the work of the Government in progressing its Petroleum Action Plan has not only benefited the upstream producers for the benefit of all New Zealanders but also will have a positive impact on New Zealanders through lower International Energy Agency obligations. The Crown presently meets the remainder of its oil stockholding obligation by entering into ticket contracts with oil companies and traders in other International Energy Agency countries. Tickets are an option in return for an annual fee to purchase specified quantities of stock at market prices in the event of an International Energy Agency - declared oil supply emergency.

New Zealand has remained in compliance with its International Energy Agency obligations, using tickets since about 2006. As announced in May, New Zealand successfully tendered for tickets for approximately 150,000 tonnes of crude oil and refined petroleum products. In 2012 the Government initiated a review to determine whether tickets were still the most appropriate mechanism to meet our oil security obligations. This review confirmed that tickets are still the most cost-effective way of meeting these obligations and the review also determined that a fuel levy that can be adjusted in regulations provides better flexibility to meet uncertain ticket costs going forward.

The bill therefore introduces a new purpose for the petroleum and engine fuels motoring levy, and that is to fund New Zealand’s International Energy Agency stockholding obligations. By including the International Energy Agency stockholding obligations in the purpose of the levy, we are ensuring that we continue to meet our stockholding obligations in a fiscally sustainable way.

To this end, the bill also introduces greater flexibility in the setting of levy rates. Rather than having a set rate, the rate will be calculated based on forecasts of ticket costs, with some adjustment based on previous overspend or underspend. To enable this increased flexibility, levy rates will be set in regulations. The regulations will also prescribe which fuels the levy will apply to, and I expect that these new regulations will come into force later this year. Finally, the bill introduces a number of technical amendments to the Act. Although we are introducing a new purpose for the levy that will enable a more sustainable collection mechanism for the purchase of International Energy Agency oil tickets, we are continuing to investigate ways to put downward pressure on these costs. So, for example, over the last year we have secured two new Government to Government agreements with Denmark and Spain, and these increase the pool of potential suppliers New Zealand can look to tender for tickets with. We are also investigating which other countries may be appropriate to approach for this purpose, and, as I understand it, the officials have reviewed the existing tender process and have streamlined it so as to give New Zealand the best chance of achieving competitive and compliant tender bids.

I am grateful to the officials and the submitters whose contribution to this work has helped to shape and improve this legislation. The bill is yet another element in a raft of measures this Government is pursuing to improve New Zealand’s oil security, and I commend the bill to the House.

We in the Labour Party agree with the Energy (Fuels, Levies, and References) Amendment Bill in the sense that we obviously believe that New Zealand should live up to its treaty obligations. We see that the need for stocking oil in sufficient amounts is important, although we would prefer this to be held in New Zealand rather than offshore in Japan. Nevertheless, that is beyond the remit of this bill. We do realise that that is an important part of our obligations under the Agreement on an International Energy Program—to contribute and hold within New Zealand a 90-day stock of oil. The forecast costs of the current method of meeting New Zealand’s International Energy Agency stockholding obligation, the ticketing regime, will not be fully funded by the existing vote appropriation. In the absence of further intervention New Zealand would therefore become non-compliant with its International Energy Agency obligations, and we do not want to do that.

This bill provides for the purpose of the existing petroleum or engine fuel monitoring levy to be extended so that that levy revenue can be used to meet the costs associated with the Crown’s compliance with that agreement, and it removes the present maximum levy rate and provides for the levy rate on fuels to which the levy applies to be set, in the case of regulations, by Order in Council. Although we agree with the need for New Zealand to be compliant with our treaty obligations, and we recognise why that treaty is in place and why that treaty exists in order to ensure we have stability in oil, an essential commodity on which our economy and our lifestyle depends—on which pretty much every function of our life depends—we do not agree with the way that this will be collected, and I want to go through the points one by one.

At the moment the way that this levy, this additional cost, will be collected is effectively by charging motorists more at the petrol pump. There will be an increase in the amount that motorists will have to pay as a result of this levy. We just explained that having a stockpile is important to enable our ability to protect ourselves against these spikes and changes that can occur around the world. That is because we are talking about not just cars. We are talking about cars, and we are talking about buses, trains, aeroplanes, boats, and everything else that oil products contribute towards. But what this Government is doing is focusing the levy solely on the motorist.

Many people are finding it very difficult to fill their petrol tanks up right now. I can guarantee that there are people watching this debate tonight who will be saying: “Well, it costs me $120, $130, to fill my tank up when I go to the petrol station, and that is what we need to be able to do.” Well, add a few more cents on to that again. This Government has continued to hike the price of petrol up. This Government has hiked the price of petrol up in order to meet its Budget surplus. It did that just before Christmas last year—in case Government members sitting over there have forgotten what actually happened. So here they are again wanting to change and shift the goalposts, so that it will cost New Zealanders even more to fill their tanks up, rather than funding this obligation through general taxation, which has actually been the case for the last—well, who knows how long. Traditionally, that is how it has happened.

The second reservation that we have is that it allows the energy Minister to change that rate pretty much at will. Whereas at the moment there is a maximum rate, the bill gives enormous flexibility to the Minister to change the rates. Therefore, we do not have the scrutiny that we once had.

Thirdly—and I find this sort of unbelievable—actually, this levy also applies to biofuels. Why are we putting the same levy on biofuels, which are part of our energy future in terms of what we want to try to be, which is to be independent of the current fossil fuels?

The Labour Party recognises that this bill is likely to go through and it is likely to go to the Commerce Committee. We look forward to the debate and to hearing from the industry shareholders about exactly what is going to happen. But I come back to that same point: oil is an essential commodity, and we would like it to be less essential. We would like to be less dependent on it, and over time we will want to transition away from fossil fuels and on to renewables. That is certainly, from the point of view of the Labour Party, where we want to be headed. We want to see New Zealand being 100 percent reliant on renewable energy. Certainly, internally within New Zealand, we believe that by 2020 we could be 90 percent there, and by 2030 or 2035 we could be 100 percent focused on renewable energy in terms of what we achieve.

That will go hand in hand with the developments that we will see in the future around an increasing number of electric cars and what we hope would be a roll-out of more efficient public transport that would take the reliance off cars. This Government certainly has not been supporting that. In fact, the Government has embarked on an enormous road-building project, rather than try to support the idea of more efficient public transport. It is for that very reason that in Auckland, for example, the rail loop has been put out to 2020. The year 2020 means that we will pay up to $500 million more for that rail loop, and that when electrification comes on stream this year—something that the Labour Government initiated, and I am pleased to see that this Government has continued with it—our trains in Auckland will be so chock-a-block that they will not be able to function because of the absence of a circular rail loop that would enable more efficient use of public transport in Auckland. So to say that this Government is behind the efficient use of public transport is obviously wrong.

Coming back to the point that I started with here, the way this will be funded is through an increase in people’s petrol prices. They will be paying more for the petrol that they put in their tanks. When they go to the petrol station and, as many people do now, they hold their breath and they get their petrol in $20 or $25 lots because they cannot afford to fill their tank right up, they should remember that this Government is responsible for increasing the price of petrol in their tank again—again, one more increase. Well, it might not affect the people whom those members choose to represent, but it does affect the people whom the Labour Party stands for. We believe that where we are going with this is wrong. Giving the Minister of Energy and Resources increased flexibility around putting the price up whenever he might choose to do that is wrong. The fact that the levy applies to biofuels, an industry that we want to see more of in New Zealand, is also wrong as well.

Although we agree with the overall intent of the bill, and we agree with the fact that the treaty obligations are important, and we stand by those treaty obligations, we cannot support the bill as it currently stands, which is to rack up people’s petrol prices and give an energy Minister far more ability to rack prices up even further at will. We are willing to listen and to debate this in the select committee. We are interested in hearing from the various shareholder and stakeholder groups that are involved in the industry to see what they have to say. But right now, as it stands, we cannot support this piece of legislation.

Well, that was not a bad attempt from my colleague across the House here, David Shearer. I would have thought that he would make a fine leader of the Labour Party, and perhaps it should reconsider that. The Energy (Fuels, Levies, and References) Amendment Bill is a small but also very important bill. The modern world relies on a vast energy supply to fuel everything from transportation to communications, to security, and to health delivery systems. Energy plays an important role in the national security of nations all over the world. In any given country, energy is used to power the economy.

There are a number of members of the International Energy Agency—28 members in all—who have an obligation and a commitment to one another to ensure that they have a minimum of 90 days of their oil imports that they can access in order to bring stability in energy security around the world, which in the end brings economic and political stability as well. New Zealand, being a small country, does not have 90 days of fuel supply here within our own jurisdiction, so we enter into contracts with overseas jurisdictions to supply oil to us if there was ever going to be an emergency around the world regarding oil supply. That is very important because that brings the sort of stability that is needed. The normal commercial inventories held by oil companies in New Zealand contribute to our nation’s obligations, but, as I said, the remainder of the obligation is met through the Crown entering into, as the Minister said, these ticket contracts.

There is going to be an impending rise in the ticket requirement, principally due to a forecast decline in domestic oil production, which we anticipate in the medium term. However, due to the large extent of oil exploration that has taken place and is taking place at the moment, we anticipate that the domestic production of oil will increase in this country. That is one of the reasons why the levy system that is proposed in this bill can be changed by Order in Council, so that it can be increased or decreased as is necessary to work in conjunction with the domestic supply of oil that we retain here in the country.

It is important, as the previous speaker said, that we do have a vote provision to pay for these ticket contracts, but that provision is not going to be adequate. A levy-based system where, essentially, it is user-pays, is going to be the way in which we fund that. Over a 3-year period it is going to be approximately $20 million. That is going to be around about 6c per 60-litre tank of fuel. What that offers New Zealand is stability around our oil reserves and supply, which brings stability to our economy and national security, because right around the world disruptions to energy supply are major impediments to the stability of nations.

One of the options, of course, was to just renege on our obligation and not comply with this obligation. The Government would not do that because that would be an irresponsible level of commitment to those treaties and agreements we have. It is a little bit like if a household comes under a bit of pressure and you decide that you are going to quit your insurance policy. Although that might ease your cash flow, it does not do anything to bring confidence to your bank manager who might hold your mortgage. So it is important for us in terms of our international reputation and credibility to maintain our funding to pay for these provisions. All of these are very, very important in order to be a nation that carries its responsibilities internationally in the best light.

I am very happy to stand here and commend this bill to the House. It is not a large bill, but I think it is an important one. It brings about the change that we are shifting to a levy-based system as opposed to funding these ticket contracts out of general taxation. So for all of those who ride their bikes, well, you know, they can be happy. For those who drive our cars, we are paying our part for stability in our supply of energy and our economy. Thank you.

Kia ora, Mr Deputy Speaker. I am pleased to make a contribution at the first reading of the Energy (Fuels, Levies, and References) Amendment Bill. As previous speakers have noted, this bill is only a few pages long. It does not have a big subject matter, but it does have quite an impact on New Zealand families. As Mr David Shearer mentioned in his contribution, on this side of the House we have no issue with New Zealand meeting its international treaty obligations. Our reputation internationally is very important, so maintaining 90 days of oil supplies to our country, primarily through ticket contracts, is something we must uphold as a country. We have no issue with that. We do have an issue with the targeted approach in this piece of legislation. It will be targeting families. Ultimately, it will lead to increased costs for families at the pump. I know from travelling around my vast electorate that if you go to places like Kaikōura or, Mr Deputy Speaker, down to Invercargill in Southland, the cost of filling up is a significant cost for already stretched household budgets. This legislation, unfortunately, will add to that cost because the oil companies, which are the importers of petroleum, of our fuel, will be paying an increased levy through to the Customs Service.

I want to focus on the actual appropriation for maintaining our treaty obligations. That is currently around $3 million a year, and I think that the projections through to outer years, over the next 3, 4, or 5 years, are that it will go up to about $10 million a year. So there is a big shortfall there. There is a big shortfall, and that is largely due to the forecast decline in our domestic oil production. To meet that shortfall the Government has decided to go for this targeted approach, but based on those predictions the levy rate, which can be modified by Order in Council, can be modified at whim, and who knows how big this liability will be to actually maintain our obligations through the purchase of these ticket contracts. I was fascinated to learn that, of course, maintaining 90 days of oil supply for the country in case there was a disruption worldwide to oil supplies is a means of securing that for our economy. We know that our whole economy is dependent upon the power that drives everything. Although we want to see a transition to more renewable sources of energy, we know that at the moment fossil fuels are the primary source of fuel that powers our primary production, our export sector, our tradable sector. So it is very important that should these shocks eventuate—and we certainly hope they do not—our country, through its agreement with its partners, is able to open up those supply lines and cash in our ticket options so we can get those supply lines secure. We can keep the fuel pumping, hopefully not for as long as 90 days, so that we can keep our economy moving.

The point I want to make is that the Government had a choice. The Government had a choice to have a targeted levy to target the motor vehicle users, people who actually fill up at the pump, or to stick to the status quo and raise the relevant appropriation from general taxation. The Government chose the former, but here on this side of the House we think it is fair that it should continue to come out of general taxation because it is a public good. It is a public good that everyone benefits from that we comply with our international obligations. We certainly hope a worldwide disruption to oil supplies does not eventuate, but we certainly hope that if it does arise that we need to call in our emergency supplies and make sure that we can get those 90 days of fuel, then those supply lines are available to us. So, yes, we regret that the Government chose to take the targeted route. I know that the Government consulted various stakeholders in the industry, principally the oil companies. I guess they already pay their levies to the Customs Service in terms of importation duties and the like, and so this probably will not upset their business in a way. It will just add an additional cost that we know they will immediately pass on to the end consumer.

I return to the point that from Invercargill up to the folks in South Auckland and right throughout the country, this is going to mean an increase at the pump. Families have seen that significantly over the past year and in years prior, and it is definitely not going to be a shot in the arm, but a strain on the household budgets, particularly for those families out there. We know that a significant number of our population are doing it tough. Whether they are a working family or one of the non-working, beneficiary-type families who are out there, everyone is doing it tough. It is a luxury for many people to have a vehicle, but, again, they will be thinking twice about whether they will be able to afford to fill it up. So in one sense, yes, sure we want to encourage more use of public transport and other greener ways of getting around, but, ultimately, we do not want this to impact on our economy. Who knows—this is going to mean increased costs right the way through the supply chain of all our industries, and, ultimately, it is going to be an increased cost. We know that fuel cost is a significant cost on every business, so it will be interesting to see what the ultimate impact will be and whether maintaining our obligations in this way will impact on our business performance, particularly across those sectors that are highly dependent on fuel costs.

Another final issue I want to raise is that the Government has spoken a lot about New Zealand adhering to its international energy agreement obligations and that it is our reputation that is at stake. But I think it is quite ironic that the Government is so concerned about our international obligation to maintain emergency supplies of oil. I guess that is an international obligation, but I would not think that it really rated in terms of other international obligation that we have, particularly around climate change. I just find it ironic that the Government is so preoccupied and is going to all this great expense and effort to bring about this piece of legislation to introduce this targeted levy when it has done nothing about our international reputation for our clean, green image and also about action on climate change.

I know I have got other colleagues who will be adding more contributions in that area, but I wanted to just make that final point that it seems that the Government is focusing on what are perceived to be little things. In the scheme of things, it is a $3 million cost at the moment. We are going through all of this to basically load on to the end consumer an increased cost of fuel for what is only a few million dollars. I think that when you look at the grand scheme of things, our international energy agreement obligations do not really rank up there. I know that Australia has not met its obligations. It is about to get a rap over the knuckles, but it is not the end of the world. So we oppose this bill.

Kia ora, Mr Deputy Speaker. Ngā mihi nui ki a koutou. Kia ora. I rise to support the Energy (Fuels, Levies, and References) Amendment Bill. Late last year I had the privilege of touring the Marsden Point oil refinery, near Whangarei. It is a significant piece of New Zealand infrastructure. It is where the bulk of our diesel comes from, and a significant amount of our other liquid fuels, like jet fuels and petroleum. It is a point of entry for our fuel. I am a big fan of going to gigantic steel structures and seeing some of that industrial New Zealand, such as the Tīwai smelter down south. Seeing that refinery and the huge flows of oil that come through it makes you think about the vulnerability, if that oil stopped flowing, of our wider economy. But there is also the impact of that fuel coming to New Zealand, being combusted, and contributing to climate change, as the member Rino Tirikatene just mentioned.

The price of fuel at the moment is about $2.20 a litre. The energy contained in a litre of oil is the equivalent of an average person working for about 4 to 6 weeks. Can you imagine employing someone—I know that some National members would probably like to employ someone for 4 to 6 weeks’ work for only $2.20 in payment. What you can see is the fantastic stored energy contained in oil. The stored sunlight that fell on the Earth literally tens of millions of years ago is harnessed, but it has also come with a corresponding impact, which is climate change.

There is also the huge dependence on this substance by society, by our communities, and by our economy. I am too young to remember the carless days of the late 1970s and the 1980s, but I know about the huge shocks that put us and other developed economies, and developing economies, through that.

💬 Denis O’Rourke: It wasn’t so bad.

It was not so bad? Really? It was not so bad? Tell that to the New Zealanders who had to struggle with that, Mr O’Rourke. I think it was a significant shock to the New Zealand economy and it stimulated some of the research we have today.

I know that that side of the House likes to rubbish it whenever there is mention of peak oil. But what we are seeing right now, in New Zealand and around the world, is the peaking of conventional oils. Global oil production at conventional sources has plateaued since 2008, and what we see with the rush to extreme forms of extraction like deep-sea drilling, fracking, the tar sands in Canada, and the methane hydrate exploration in Japan and in New Zealand is peak oil in action. We are going to evermore extreme lengths to get our fixes of oil. That is why this bill is important.

Our economy at the moment is incredibly dependent on oil—and I hope it is not, into the future—and what we are seeing is pervasive high oil prices. When you look at the graphs that I put before the House last term, they show the spiking of oil prices since 1970. Each significant global recession in the last four decades has been preceded by an oil shock. What you can see is the close correlation between a spike in oil prices and the impacts on global economies. In fact, in New Zealand we did some analysis last term that showed that every US$1 price increase for a barrel of oil shaved $40 million to $60 million off New Zealand’s GDP. So it is right to be prepared for, and concerned about, oil shocks.

It is right to have oil stocks in reserve, because New Zealand is incredibly vulnerable. We are one of the most oil-dependent economies on the planet. Our vehicle fleet is over 11 years in age. We drive some of the longest distances with some of the fewest passengers. We are incredibly dependent on oil and we have some of the oldest cars in the world. I would like to echo the concerns of Z Energy in the regulatory impact statement, which said: “There are some concerns storing our 90-day stocks offshore, particularly where the vast bulk is stored in Japan.” Z Energy, I believe, is correct to question whether in the event of a significant and severe oil shock that oil would actually be released to New Zealand. Obviously, we have good relations with Japan, but I believe that for peace of mind—and the officials advised that the extra costs would be only around $3 million—storing the oil in New Zealand is something that should be given more consideration. I hope we can explore that in further depth in the Commerce Committee.

We are supporting this legislation, unlike some parties in this Parliament, because we think it is high time there should be the ability to adapt the fuel levies being paid. We know that oil prices fluctuate a considerable amount, so we think the Minister having the ability by regulation to increase that is a smart idea. We believe in fairness and equity, and we think the costs should lie where they are born. I do not think it is an equity issue to say that a marginal increase in the price of fuel is going to impact everyday New Zealanders, because what I want to see is the costs lying where they fall. If you are a New Zealander who is privileged, or has the infrastructure, to walk or cycle to school, or if you have got a SuperGold card and you take the bus to work, then you are not burning oil. I believe it is unfair for you, through the general Crown accounts, to be paying for that. I believe we are sending the wrong signal to New Zealanders who are lucky enough or have the inclination to go oil-free by saying that they should pay for the oil stocks. I believe that those people who use their cars and use the roads should pay for the oil supply—the security of having those 90-day oil stocks.

I believe it should be transparent and I believe we are seeing an increase in that now. For the first time we are not going to see the costs simply go out of the Crown’s general account. What we are going to see is a targeted levy, transparent to New Zealanders. I believe it is going to encourage the alternatives, because although I admit that the $20 million cost over 3 years is pretty marginal in the $8 billion fuel import bill of this country, I believe sending a price signal at the margins will have some effect. What I want to see is this Parliament and this Government encouraging alternatives, such as better public transport, safer walking and cycling, and innovative solutions like electric cars and sustainable biofuels.

An issue I want to follow up in the select committee is, again, another of Z Energy’s concerns, which is that biofuels might be covered under this levy. I find it patently ridiculous and counter-productive that this levy should be applied to sustainable biofuels. People who invest in a sustainable biofuel plant or put biofuels in their cars are doing a good thing for the climate, a good thing for the country, and a good thing for our economy. They should not be punished. I hope the Minister, in regulation, can make sure that biofuels are exempted as well, much like bitumen and liquefied petroleum gas currently are, under advice from the officials. I think that is smart.

The big picture in New Zealand is that oil is one of our most significant economic challenges. We are importing $8 billion worth of oil annually. That is roughly the size of our nation’s deficit. What we are seeing is a huge risk to our economy and a huge impost upon New Zealanders. Unlike many councils, businesses, militaries, and Governments, our Government has no oil reduction plan. In fact, it does not even have a plan to start planning. All it has is an oil production plan and an oil dependency plan. You can see that in the more than $14 billion it is putting on the credit card, with the so-called roads of national significance. They should be called the “roads of National Party significance”. That is $14 billion that is making our country more dependent on oil and is giving Kiwis fewer choices to get around. You can see it in the deep-sea drilling cheerleading the Government is doing. It is literally rolling out the red carpet, with $46 million in tax breaks and $25 million in direct subsidies to the oil industry. As the Ministry of Business, Innovation and Employment rightly points out, our oil production is declining. So all the Government has, on the face of it, is an oil production plan. What we need is an oil reduction plan, and that is what the Green Party is about.

We want to give Kiwis choices because in the last oil shock in 2008-09 many Kiwis found that the alternatives just were not there. There were not enough rail carriages in Wellington. They literally went to the museum to pull out rail carriages to put on the tracks. We saw that people wanted to cycle to school or work but could not because there was no infrastructure and they did not feel safe. Manufacturers and exporters who wanted to put their things on the rail line found that the National Government was closing rail lines, like the Gisborne to Wairoa line.

What Kiwis want is choices, and what they are not getting, under National, is choices. All they are getting is more roads and more oil wells, and no solutions. What we need to do, and what is of benefit to the country and the economy, is to provide Kiwis with choices—choices to get around faster, through things like a central business district rail link, and infrastructure like light rail and better buses for Wellington. Ironically, this is what we are going to see will be the big benefit to motorists. Less-congested roads when people use public transport in our big cities means there is more road space for carpenters, plumbers, and the people who need to use the roads to get around. It is a huge economic opportunity for New Zealand to look at the alternatives, like electric vehicles and biofuels. The Bioenergy Association estimates we could see 30,000 jobs created and become entirely self-sufficient in liquid fuels simply by using wood waste.

At this election the choices, when it comes to oil, are clear. Under National you are going to see more cars, more dependency, more oil imports, and more risky deep-sea drilling. Under the Greens you are going to see more choices, such as the central business district rail link, light rail, clean energy, jobs for New Zealanders, and better macroeconomic opportunities for our country. Kia ora.

I certainly agree with the Green member Gareth Hughes on one point, and that is that New Zealanders do have choices going into this election and are faced with a very positive choice going forward, with some of the best news that we have seen in the economy, not only in years but in decades. This is an economy where consumer confidence is at its highest in 20 years, if not 30. This is an economy where business confidence is at its highest in 30 years. This is an economy where unemployment is now coming down to 6 percent. We will be into the 5 percent range, I believe, in this year alone. This is an economy where we are seeing tax growth and we are seeing expenditure control. This is just great news, and this bill, the Energy (Fuels, Levies, and References) Amendment Bill, is another small step in the progress of this country towards achieving the economic growth that now puts us as one of the leading countries in the world.

It is interesting to reflect upon the choices that Kiwis have, as Mr Hughes put up just before, particularly given that for a number of years the Opposition cried that this National Government did not have a plan. It cried that this Government did not have a plan to achieve the growth that we are currently seeing before us. The Business Growth Agenda, which the Prime Minister and the Minister for Economic Development, Steven Joyce, rolled out, came out 3 years ago. We are now seeing the latest update of that, the Business Growth Agenda Progress Report 2013, which has literally hundreds of initiatives that we are continuing to tick off in order to achieve the type of future that this side of the House believes is going to be fantastic for our entire nation.

Within this Business Growth Agenda we deal with the six factors of production. I know that is going to be difficult for some members on the other side of the House to understand, but they are actually the things that drive an economy. These factors are around our export markets, our capital markets, our innovation, and our skilled workplaces. They are around investing in our people, investing in our infrastructure, and, very importantly, investing in our natural resources. In that respect, oil is a key factor of production in driving our economy. There are two parts to that: one, growing our domestic production of that supply and, two, ensuring our security of supply. In terms of domestic production, we have seen a season like very few others in the last decade in terms of the exploration that has taken place to improve domestic production and to improve the difference between what we are importing and what we are exporting. That is a positive thing. The second thing that we are doing goes to the heart of this bill, and that is improving the security of supply.

This bill, the Energy (Fuels, Levies, and References) Amendment Bill, takes some small steps to do that to ensure that if there are future fuel crises, we have a 90-day supply. It may not be stored here in New Zealand, but this provides the methodology to achieve that. Without going any further, I think this country is heading in a very positive direction. We continue to take small steps to drive wonderful economic growth and a very positive future. This bill delivers in that respect. Thank you.

I take a call on behalf of New Zealand First on the Energy (Fuels, Levies, and References) Amendment Bill. Before I actually speak on the bill I would like to bring it into context by referring to the tax cuts of 2010 that this National Government brought in, giving something like $2 billion back to the 10 percent who are the wealthiest people in this country. The likes of John Key got $1,000 a week back in tax cuts. The likes of Paul Reynolds from Telecom got $5,000 a week back in tax cuts. If we put that into context, this Government then puts this report out that says that it cannot take this out of general taxation and it cannot cover this out of the general funds because it cannot afford it, but it can afford to give $2 billion back to the very people who can afford not to have those tax cuts because they are the National Party’s mates.

So in this respect what we are seeing with this bill is a situation where once again the low to middle income earners in New Zealand—the people who can least afford it—will be paying more for their petrol on a daily basis through the pumps, to once again prop up this Government and to prop up this Government’s books. At the present time, for instance, we pay on average $2.20 per litre for petrol. The Government takes in the order of 64c a litre in tax—64c a litre out of $2.20. That is nearly 30 percent. So when New Zealanders are filling up, just think that nearly one-third of what they are paying is tax. Of that 64c, which excludes GST, 53c goes to the National Land Transport Fund, 9.9c goes to the ACC motor vehicle account, 0.66c goes to the local authority’s fuel tax, and 0.45c goes to the petroleum or engine fuels monitoring levy. So the Government is already taking significant funds.

In addition, GST is collected on the overall price of fuel, including excise. The GST excise amounts to approximately 8c per litre. Every time, of course, the cost of fuel goes up, the amount of GST taken goes up. In effect, the Government is quite pleased when it sees the price of petrol going up because it sees its GST booty coming in at even greater levels.

In addition to that, and most New Zealanders would not realise this, 1c per litre is taken to pay for the emissions trading scheme that this Government signed up to. So money is going offshore to be paid into this emissions trading scheme. It started out at something like $23 or $24 per unit and has now absolutely slumped down to $2 or $3 a unit. Again, New Zealand was one of the first countries in the world to sign up to it. This Government wanted to be one of the leaders, and all that sort of thing. Again, it took all of that money to commit this country, and basically the scheme is an absolute falsehood.

In that particular situation of the emissions trading scheme, basically New Zealanders’ hard-earned taxes and money that good, hard-working New Zealanders have earned is going overseas to traders and brokers and people who are making money out of our money. I can understand why this Government wants to get involved with this as well, because John Key was a money trader and a money broker. So there are many of his mates around the world who are involved in these schemes. I can see why in this legislation it says: “Meeting the stockholding obligation by building government-owned stock, or by placing a mandate on industry to hold stock, were considered as alternative options for meeting the stockholding obligation. These options were rejected because holding stock contracts is a more economical way of meeting the obligation.” That is a very important phrase: “These options were rejected …”. In other words, it was rejected that we should keep our own stocks or put pressure on the oil companies to ensure that they had sufficient arrangements to have stocks—whether it be onshore, offshore, or wherever they have their stocks—because it was determined in the legislation that holding stock contracts is a more economical way of meeting the obligation.

Who will be holding those stock contracts? Well, it will be international brokers, and it will be international agencies that are holding these contracts, and they will be making money out of them. They are not doing it for the fun of it. They are not doing it for the love of New Zealand. They are doing it to make money. So once again, while good, hard-working New Zealanders are paying more through the pump to fill up their cars, their trucks, their buses, and everything else, people around the world will be making money out of this. This Government prefers to do that.

This Government prefers people around the world to make money out of these contracts, to make money out of the emissions trading scheme internationally, because the leader of the National Party comes from that background. He comes from a background of dealing in money, trading in money, and being a broker. So I would not be surprised if there are many, many brokers and friends around the world who will do very nicely out of this arrangement.

In the last year the Government has also advised that New Zealand motorists are going to have increases in the fuel tax—going up 3c a litre per year over the next 3 years. New Zealand First opposed this last year when it was brought in. We asked right then why people in Invercargill, Gore, on the West Coast, and down in Pātea—everywhere—should be paying for the roads of national significance when the vast majority of those roads are north of Taupō. There was the odd road in Wellington, there was the odd road in Christchurch, but the vast bulk of them were north of Taupō and, particularly, north of Hamilton and into the Auckland area. Why should people in the South Island be paying for all the Auckland and Hamilton roads? Why should the fuel tax be increasing every year by 3c a litre to pay for that?

Again, this National Government does not care about the provinces. It does not care about the rural areas. Obviously, it does not care about its own farming supporters, Federated Farmers and all the farmer supporters, around New Zealand because it is quite happy, over the next 3 years, to end up charging another 9c a litre for fuel so that the roads of national significance—or, as we have heard, the “roads of National Party significance”—can be built. So, once again, good, hard-working Kiwis are going to pay through the nose and it is going to cost them more.

New Zealand First has had enough of this. We have had enough of this. This Government is a Robin Hood Government. In this case, it takes from the poor and the middle-income earners and it gives to the rich. It gives the tax breaks to the wealthy. It gives the deals to the wealthy. It gives the concessions to the wealthy. It thinks nothing about giving a couple of billion dollars back to the wealthy. But when it comes to making sure we have security of supply of fuel in this country, it says: “No, let’s go after Joe Average in New Zealand and let’s charge him. Even though he is already paying dearly, at $2.20 a litre, and paying 64c a litre in tax at the present time to the Government, let’s go after him as well because he is the easy target.” They have got no choice in it. They have got no choice in it. Another 3c, another 4c, another 5c—they have got no choice in it, and that has got to come to an end.

New Zealand First does not support this bill. We will be following this bill closely through to the select committee, and we hope there are a huge number of submissions on this because, once again, the Government is gouging. It is tax gouging and it is taking advantage of good, average, hard-working Kiwis.

It is my pleasure to take a brief call on the Energy (Fuels, Levies, and References) Amendment Bill and to support this bill. It is very difficult to continue after listening to that load of rubbish from the previous speaker, Andrew Williams, so I commend this bill to the House.

Even for that member, Kanwaljit Singh Bakshi, that was a ridiculously short speech. If he really thinks that what Andrew Williams was saying was so wrong, maybe he could have taken a bit of time to earn his $140,000 a year salary and to actually put the counterfactual to it, rather than saying: “That was rubbish. I commend this bill.” Unfortunately, that is the quality of debate we have come to expect from the National members. Labour will be opposing this piece of legislation. What we have seen—

💬 Hon Todd McClay: A racist comment.

What was that, Mr McClay? I am sorry. I raise a point of order, Mr Speaker. I take deep offence at being told by Mr McClay that I am being racist.

💬 Mr DEPUTY SPEAKER: Did the member say that?

💬 Hon Todd McClay: Speaking to the point of order—

💬 Mr DEPUTY SPEAKER: Well, I am asking the member a question. I did not hear it. Did he use those words?

💬 Hon Todd McClay: Not directed at that member, no.

💬 Mr DEPUTY SPEAKER: Did you use those words?

💬 Hon Todd McClay: But—

💬 Mr DEPUTY SPEAKER: Well, the member will withdraw and apologise.

💬 Hon Todd McClay: I withdraw and apologise. I raise a point of order, Mr Speaker. I was talking about something someone else said. It was not directed at that member. She should not be so—

💬 Mr DEPUTY SPEAKER: I do not care. Would the member please sit down. If the member was using those words in the House, it was inappropriate.

As I said, Labour will be opposing this piece of legislation, the Energy (Fuels, Levies, and References) Amendment Bill. We do agree that it is important that we uphold our international obligations, of which this is one, but there were a number of options on the table for the Government in terms of how it meets those obligations.

The user-pays approach that has been chosen is enormously regressive. Currently, it is funded out of general taxation. The benefits of being signed up to this International Energy Agency agreement mean that all of New Zealand benefits. I have heard Ministers speaking and say that this protects our economy from price shocks, there are reasons why we do this, and we are hugely reliant on oil in this country. Well, that to me says that this is a public good. This is not just about people who drive cars; this is actually about our entire economy. As such, I do not think it is unreasonable, therefore, that the funding for this—and the funding is increasing and does need to increase—comes out of general taxation.

Whenever we in the Labour Party see something like this, we like to pass what is called an equity ruler over what we are doing. This will hit people who have no alternative to driving their car to work. I am thinking of the shift worker who lives in a part of provincial New Zealand where public transport is not very widespread and it certainly does not run at night. Even in the cities there are limitations on when public transport runs. They have a car because walking or cycling that late at night when you are doing shift work is not an option. Well, this bill will put the price of their petrol up. It is regressive. It is incredibly regressive for the poorest families. It is the same thing that we saw with GST—again, a very regressive approach.

But, in fact, the benefits of having these stockpiles are there for all New Zealanders. It is ridiculous to say that it is only people who drive cars who get the benefit of this. I tell you what, if we ended up in some really big oil price shock, people with cars would be the first people being told: “You can’t drive them. Actually, these reserves are going to be used for running other things in our economy.” You know, if we think about the carless days, back when we had the last price shock, we know that it is actually the people who drive the cars who will be the first to be asked to stop using oil. So why are they the ones who are then going to be paying for it? From our perspective in the Labour Party we cannot understand the arguments for burdening a small group of New Zealanders when the benefits are actually applicable to all, especially when at the same time the Government is also doing nothing about the apparent price-gouging that is already happening in terms of the price of carbon.

We heard evidence at the last Emissions Trading Scheme Review Committee from Gull, which has to purchase its fuel from the other four big oil companies, that it is being charged carbon prices hugely in excess of what the market is currently pricing carbon at and that there is no transparency around that. As long as they do not say that they are charging something different, they are perfectly entitled to make a profit off carbon. This Government has sat on its hands and done nothing about the increases in electricity prices and fuel prices that are a result of that price gouging, and that has hurt some of the poorest families as well. So from our perspective this is a national good. Having this energy security is a national good, so it should be general taxation that covers it, not a levy targeted at people who drive cars.

There have been two points that Government members have made. One is that this is about our international reputation, and we absolutely agree. We cannot be reneging on these kinds of agreements. Why is it, though, that National members care about our international reputation only when it comes to how much oil we are keeping in the country? When it comes to our polluted waterways, when it comes to our complete inaction on climate change, and when it comes to the consistent undermining of our clean, green image, they are nowhere to be seen. International reputation does not matter then, but God forbid it gets pointed out that we do not have enough oil in the country. Then, suddenly, those members are all about our international reputation. A little bit of consistency from National members would be nice when they are considering our standing on the world stage and how we are viewed in that respect.

So the second point that Government members have made has been that this is why we need more oil and gas exploration. This is based on our net imports, so the more that we export, the cheaper these levies are going to be. But if you read the regulatory impact statement, there is another alternative: we could stop using as much oil. We could reduce the need to import as much oil. We could support the biofuels industry. We could develop alternatives that would give us energy security in our own right in New Zealand—far more energy security than we have currently, being hugely reliant on a product that we overwhelmingly have to import. But the Government’s plan is that we will just keep trying to find more oil, and as we have seen so far, this is a high-risk area.

There are no guarantees that we are actually going to find commercial yields of oil, but we do know that there is a lot of low-hanging fruit there in biofuels and alternative energy sectors that we could be capitalising on right now. I say to National members that you could do both. This does not have to be an either/or. You could do both. If the Government was to do both, then that would reduce the cost of these levies, so it comes down to the question of why, oh why, we are taxing biofuels as part of this bill. Why are biofuels one of the energy sources that are going to be levied? It is extraordinary. How are we going to incentivise the production of biofuels if we make them more expensive by levying them to pay for more oil? Why would we not exclude biofuels when they actually help us reduce the cost of these levies and reduce the amount that we need to import into the country?

That beggars belief, especially when you see just how many exemptions there already are under this particular levy. So at the moment jet fuel for domestic use is not targeted and other petroleum products are not targeted. Let us be quite clear: we use oil in this country for a lot more than just energy. Most of our world is made of oil. So this is not just about energy, but none of those other applications or uses of petroleum are going to be targeted by this levy. Liquefied petroleum gas (LPG) is not going to be targeted by this levy, and neither are bitumen, solvents, or, as I said, jet fuel for domestic use. There are all these exemptions, so why can we not exempt biofuels? I want the next National Party speaker to answer that, if we can exempt all those other things.

And let me remind you that in the regulatory impact statement the Government said that the lack of exemption is because at the moment there is not a lot of biofuel production in New Zealand, so it is very small. Well, there is not going to be any production if we keep taxing it out of existence to pay for more oil. Interestingly enough, the reason given for why LPG production is not included in this particular levy is that the size is so small as to not be worth it. That argument can be rolled out for other fossil fuels, but for biofuels, no, they are included and they are taxed, despite the fact that they actually help us reduce the amount of oil that we need to import, which would ultimately reduce the levy that needs to be paid.

Finally, I want to come to another worrying part of the bill, which is that it introduces a regulation-making power that would give the responsible Minister the ability, by Order in Council—so without having to come through Parliament—to actually increase this levy. At the moment the fuels that can be levied are specified in the Energy (Fuels, Levies, and References) Act, as is the maximum levy rate. The proposal is that the Act be amended to provide for the Minister of Energy and Resources to make regulations that specify the fuels that can be levied and the levy rate. At the moment there is a maximum levy rate there in the legislation. This bill is going to be doing away with that. So I predict that we will see more levy rate increases in years to come, more targeting of one group of people whilst exempting a whole lot of others for no good reason, more levies put on biofuels—one of the very industries we want to support—and, once again, no move towards energy independence or energy security for New Zealand as a whole.

So, yes, we do need to do something about this. No one is suggesting—that I am aware of—that we renege on our international obligations, but there were options open to the Government that could have reduced the impact on the poorest households and recognised the public good for everyone of energy security and therefore have it come out of general taxation rather than a targeted levy. Those options could have supported our biofuels industry, rather than adding another tax to it, which will make it harder for the industry to develop and for us to achieve the kind of energy security we need in this country. That would support our international reputation, not just in terms of how much oil we have stockpiled but in terms of how much we are doing to live up to our “clean, green” and “100% Pure New Zealand” brands. This bill does nothing to achieve that.

I rise to support the Energy (Fuels, Levies, and References) Amendment Bill. This bill is related to a few key words. Firstly, security—this bill is about oil security, and oil security is closely linked to security generally. Secondly, sustainability—this bill attempts to fund our oil security in a sustainable way. And, finally, reputation—New Zealand is a good international citizen, and this bill will enable us to meet our international obligations. So I commend the bill to the House.

Five minutes, Dr David Clark.

I understand that it is going to be a 10-minute call, not a split call.

💬 Mr DEPUTY SPEAKER: Well, the member should inform the Speaker before the moment.

We found out literally this minute, and I nearly was distracted enough not to—

💬 Mr DEPUTY SPEAKER: All right. I will accept the member’s late announcement.

Thank you, Mr Deputy Speaker. I am very pleased to speak to this bill, the Energy (Fuels, Levies, and References) Amendment Bill, because it raises more questions than it answers. It is an opportunity to ask what is really going on here, in terms of the oil stocks, and why this is such a priority for the Government. We can speculate a little bit on what the answers are. Why are biofuels included in the levy, for example? We do not see this Government jumping up and down when it comes to our other international obligations. I think immediately of our climate change obligations.

In a past life I worked briefly in the parliamentary environment to learn a little bit more about politics. I worked in Treasury as well for a longer period of time, working on the emissions trading scheme. New Zealand was the first country in the world to adopt an “all gases, all sectors” emissions trading scheme. That is a proud record indeed. But how sad it is now to observe that same emissions trading scheme having been watered down to the point where it is now the subject of international ridicule. New Zealand can no longer hold its head high and say that it is doing its bit in the world movement to try to address the worst effects of climate change.

Those Government members over there are very quiet, and well they might be. They might well hang their heads in shame at their record of winding back this piece of legislation. We should as a country be able to shift to renewables, thus reducing the kinds of obligations we are trying to address in this bill, far more easily than almost any other country on the planet. We have an abundance of natural resources. We have an embarrassment of riches of wind, geothermal, and solar resources. Our wind resources are close to our main cities, we are only just beginning to tap into our geothermal resources in any kind of meaningful way, and solar energy, of course, is an applicable resource, certainly in Dunedin, where we have an abundance of sun.

💬 Ian McKelvie: Ha, ha! When did you have any?

Perhaps not so in Mr McKelvie’s electorate, but that may have more to do with the clouds that hang over this National Government, I suspect. There are plenty of things that could be done to address the fuel needs that our country has, and this Government seems to be sitting on its hands, as it is in general around the issue of power.

Of course, the example that springs to mind—we have seen it just today, actually—in terms of power prices, is that David Shearer has put out a statement asking why we do not have a transparent arrangement. He has got a member’s bill that would address this issue. Suddenly the Electricity Authority is on board, and good on it. Good on it for following the lead of this very sensible policy. But where is the Government? Nowhere to be seen. Of course, we know that Simon Bridges thinks that the current market works perfectly fine. It has got a few hitches, he said, and it needs a little more “time to bed in”, if I can quote him—it needs just a little more time to bed in. We have had the current market for 15 years, Mr Bridges. A little more time to bed in is hardly a plausible answer.

This is an electricity market that has failed New Zealanders. Increasing power prices and price gouging have been the norm. The Wolak report, of course, found that over 5 years there was $4.3 billion worth of price gouging in the New Zealand market. That was Professor Wolak’s best estimate as the world’s leading modeller on energy markets. He found that there was a lack of competition. Since that time the Government has done nothing—nothing—to address it, and power prices have gone up and up and up. Occasionally, it has done the odd thing to prop it up. It has given a bit of a subsidy to Rio Tinto, a bit of corporate welfare here and there to help out its mates, without any real request that jobs be preserved. But this Government has done nothing to address the concerns of ordinary New Zealanders.

By contrast—by stark contrast—we have the Labour Party’s NZ Power initiative, which will see ordinary folks see their power prices drop by about $300 to $500 a year, which will make a very real difference in the household incomes of those people who are struggling the most. It will also mean lower power prices for small businesses, often around the 5 percent mark. I know that if most small businesses could get a 5 percent saving, they would be pretty pleased with that. But this Government says that, no, the market is fine and that those profits going offshore with all the asset sales is just fine. There is no objection from this Government. You will not hear it making a peep. Even the Electricity Authority is ahead of it. It is no lightning bolt.

Labour has also got other policies that would help save energy in this country. The KiwiBuild initiative, which Labour has launched, will see 10,000 houses built, in partnership with industry, every year to address the housing crisis in New Zealand. In that policy we have also promised that we will make sure that warm homes become the norm for rental properties. Phil Twyford’s bill has been drawn from the ballot. We know that warm homes require less energy and that they also contribute to keeping the health of New Zealanders going. They contribute towards productivity and they contribute, therefore, towards the economy of New Zealand and to preserving the quality of life for our citizens.

Of course, the economy is something else that is drawn into question here because when we are talking about oil, when we are talking about energy, the main uncoupling has not yet happened between economic growth and energy supply. This Government is again showing its lack of vision in not looking to build the biofuels industry. It immediately rolled back the biofuels sales obligation when it came into office, although it would have cost nothing at all but would have helped provide the security for those people out there taking the business risk, trying to develop new technologies and new forms of energy.

We saw the Government roll back the ban on baseload thermal generation, although we know that it is not necessary in New Zealand and although we have seen none since. We know that this Government has done everything it can to oppose development in the energy sector. That is, of course, because it has a cosy relationship with the status quo. But it is not New Zealand’s future and it is not the right future for the world, either.

We need a Government that does have a vision for taking New Zealand forward and growing wages for New Zealanders. We need a Government that does have a vision to allow more money in New Zealanders’ pockets at the end of the week when their power bill gets paid. We need a vision for a country that does have warm, dry homes for every New Zealander, and when we compare National and Labour in this Parliament, we can see that that vision is being supplied by the Labour Party and by the Labour Party only.

We have seen plenty of other areas where the Government lacks vision. The Government will not bring in a capital gains tax. It says it is not interested in pro-growth tax reform; it is just interested in inching along. It will not address a universal KiwiSaver, although a capital debt problem has been a problem in New Zealand for decades—for absolute decades. It is ostrich economics from National. I guess that is why since World War II there have been much lower growth rates for National-led Governments than there have been for Labour-led Governments. Labour has the prouder record on managing the economy, although National will try to spin it otherwise.

I wish that this Government would look more seriously at the issues raised by this bill. I wish that this Government would restore our country to a country where a full day’s work will cover the basics in terms of expenses—a country where there are more jobs and where wages catch up with prices; a country where New Zealanders pay for what is fair, whether it is their power bill, their tax bill, or their grocery bill; and a country where every single child gets the opportunities they should have and gets the opportunities to start learning early and to fulfil every bit of their potential.

That is the New Zealand we should have—a New Zealand we can all be proud of, an economy that works for all New Zealanders, a fair and just society where all New Zealanders can live in dignity, and an environment we can protect. Instead we have this nonsense where we have concern for one part of our international reputation when it comes to oil and no concern for our climate. We have no concern for our environment, for our children, or for economic growth that shares its gains fairly with every single New Zealander and makes sure that every New Zealand child has the opportunities to get ahead—the opportunities we would all want for our children.

That is the New Zealand that the Labour Party wants to build. We on this side of the House oppose the Government’s attempts to keep its head in the sand, to take New Zealanders down, and to manage decline in New Zealand and a shift of our residents to Australia.

The member for Dunedin North, who has just resumed his seat, is sadly deluded. He is a nice enough fellow, but he seems to think that if he keeps blustering for long enough, he will talk himself into believing that what he is saying actually has a grain of truth. Sadly, however, he is also determined to try to delude people who might vote Labour later in the year. So let me just put on the record that Labour’s policies will do enormous damage to energy supplies in this country, and Labour’s and the Greens’ policies will drive up prices for consumers without doubt. There is no question of that, and those who vote for Labour or the Greens this year need to realise that they will pay considerably more through their power bills for their mistake, should either of those parties be in a position to drive their policies through Government.

Fortunately, this Energy (Fuels, Levies, and References) Amendment Bill is not about the dopey initiatives of the Labour and Green parties; it is a very good bill about good initiatives that will work for our country, and I have great pleasure in supporting the bill.