Crown Minerals Amendment Bill

I move, That the Crown Minerals Amendment Bill be now read a second time.

This bill amends the Crown Minerals Act 1991. The purpose of the Crown Minerals Act is to provide for the efficient allocation of rights to prospect for, explore for, and mine Crown-owned minerals, and the effective management and regulation of those rights. It also provides for the carrying out of activities in respect of those rights in accordance with good industry practice and a fair financial return to the Crown for the development of its minerals. This Government is committed to ensuring that the regulatory system that manages New Zealand’s Crown-owned minerals and the permitting regime that underpins these sectors is robust and fit for purpose.

This bill seeks to clarify and update statutory provisions and addresses gaps, inconsistencies, and errors with the Act. The changes in the bill will ensure that the identified regulatory gaps are closed, it will ensure there is a clarity for regulators and for industry around permitting, and it will address inconsistencies in the Act.

The nature of the petroleum industry is changing. There has been an increasing amount of acquisition and divestment activity across the sector. These transactions reflect a global trend of consolidation and rationalisation by large companies and smaller companies buying mature oil fields with the extension of extending end-of-life fields using specialist expertise. These are existing permits, and these will stretch for decades into the future. It is important that we make the most of these as we ensure a managed just transition to a net zero emissions economy.

It is therefore important that the Crown manages the risks that changes within the petroleum sector can bring by retaining appropriate oversight of acquisition and divestment activity in the sector. Under the Act, any change of permit operator requires the prior consent of the Minister of Energy and Resources or a delegated authority. A change of permit operator occurs when the day-to-day management of a permit changes from one permit participant to another. However, under the current legislation, a change of control of permit operator does not require prior ministerial consent. A change of control of a permit operator occurs when the majority voting rights for a corporate body are transferred. This is not in line with the intent of the Act as it allows companies to transfer operator responsibilities with reduced Crown oversight.

This bill closes this gap in the legislation. The amendment ensures that the Minister of Energy and Resources has oversight over appropriate transactions in the sector. It also ensures that the Minister must be satisfied that a change of control of an operator will not affect the permit holder’s ability to comply with the agreed work programme.

The bill also provides clarity around clauses in the Act which could be interpreted in multiple ways or where the meaning of the clause is unclear. Legislation that is unclear may lead to confusion and unnecessary administrative burden for those regulating the sector and the sectors themselves. The clear regulatory system provides a stable base for the Government and industry to work together in a cohesive manner and will ensure New Zealand’s regulatory system works effectively.

Finally, the bill addresses provisions in the Act where the wording is inconsistent with either another Act or where it is inconsistent with the purpose of the provision. Inconsistencies can create an unnecessary administrative burden for those reliant on this framework, and they can decrease the efficiency of the system.

The Economic Development, Science and Innovation Committee have examined the bill and have unanimously recommended that it be passed with amendments, and I’d like to acknowledge and thank the members of that committee and the chair, Jonathan Young, for their hard work and consideration of the bill. I’d also like to thank all those who made a submission on the bill. I support all the changes recommended by the committee, and I would like to briefly comment on some of the more significant changes.

The bill as introduced did not expressly provide for a situation where a change of control of a permit operator was commenced but not completed prior to the new provisions in the bill coming into effect. This could result in an unintentional breach of the new provisions of the Act. The committee has recommended inserting a new clause into the bill which would confirm that the current law will continue to apply to transactions entered into before the new provisions commence. This will give certainty and clarity to commercial transactions currently being undertaken.

The bill sets out how consents should be obtained for a change of control of a permit holder holding a tier one permit and what would constitute a contravention of a consent process. The bill currently states that if a person “knows, or ought reasonably to know, that they have obtained the power to exercise, or control the exercise of, 50% or more of voting rights of a permit operator without the prior consent of the Minister, they can be convicted of an offence under [the Act].” The committee has recommended that it be made clear that “a person can only be convicted of an offence if they knew, or should have reasonably known prior to the change in control, that they will obtain [that] power.”

There was concern raised in submissions that a person might be unduly penalised if a late application was properly made but the Minister has not made the decision before the change of control takes place. The committee recommended clarifying that a person cannot be charged with an offence while their application is still under consideration and will only be in contravention if their application is denied.

This is a Government that is committed to a just transition to a net zero emissions economy. The recent changes that we have made to the Act to halt future offshore oil and gas exploration permits are a signal from this Government so the industry and New Zealand can begin that transaction. We acknowledge there is a need to look at the wider Crown Minerals Act and ensure that it is futureproofed to meet the needs of all New Zealanders. That is why we will shortly be undertaking a wider review of the Act, which will involve engaging with iwi and other key stakeholders on how New Zealand can sustainably derive value from its resources. As I have said publicly, a just transaction means that the existing work programme of permit holders won’t be affected, regardless of the decisions that’ve been made on the future of the oil and gas industry in New Zealand. This means that our current regulatory system must continue to effectively manage permits that are currently in place. To do this, the legislation must be robust and up to date.

This bill will ensure that the regulatory regime that governs our Crown-owned minerals is fit for purpose. The bill will close gaps, clarify unclear provisions, and address inconsistencies currently in the Crown Minerals Act. This will ensure that we do have a regulatory system that remains effective and efficient while at the same time providing clear and transparent expectations to the industry. Our goal is to have minerals and petroleum industries that responsibly deliver value to New Zealand, and the amendments to this bill will help us to achieve that. I commend this bill to the House.

Thank you, Mr Speaker. The Economic Development, Science and Innovation Committee did spend considerable time going through the Crown Minerals Amendment Bill, and we received 11 submissions to it. It may not sound to be a large number, but, in fact, there are a very small number of participants in this industry in New Zealand, and that number is reducing because of this Government. However, can I say that this piece of legislation is an important piece of legislation. It actually addresses, as the Minister Megan Woods said, some gaps. That gap is when there is a change of operator control around an activity.

In this case, the situation which brought this to bear was the change of ownership regarding an offshore exploration and production operation. In fact, a couple of years ago, I was notified by concerned members of the industry that a change of operator had taken place, and they were concerned that this happened without information and notification to the Minister of Energy and Resources. They felt that that should happen simply because, yes, there are high risks in this industry, but I’d have to say this industry set the standard, set the mark, and set the benchmark when it comes to health and safety and environmental concerns, because they know that their social licence is tenuous, and so they work very, very hard.

So when one company was going to exit New Zealand and sold their interests through a share sale for the amount of around about US$1 million—and that could exclude them from decommissioning costs of US$90 million—there was concern in the industry that this could be perceived as exiting without responsibility, and that this was not a good thing for the reputation of the industry, and also the concerns about any expenses that would have to be picked up by the taxpayer. So I’d have to say that the person who approached me, who was an industry leader in the country at that particular point in time, was concerned genuinely about this matter and wanted to see that there would be a more robust process by which change of control took place.

Bernie Napp wrote about this. He has given information. He has named companies. I know the company who have bought this interest. I won’t name them, but I want to assure the people of New Zealand that this company has been purviewed by New Zealand Petroleum and Minerals and has been deemed to be effective, responsible, and capable in actually taking over control of a field in offshore Taranaki, and they do, as the Minister said, have expertise in the end-of-life production of an oil and gas field. There are companies around the world who have this specialist skill and activity. They understand what technologies are available and how to deploy those technologies in order to be able to achieve those sorts of results.

But can I say that it was the concern of the industry that raised this matter, and so there are responsible people who feel that there just needed to be a next step. There needed to be information that was proffered to New Zealand Petroleum and Minerals and to the Minister of Energy and Resources so that when there is a change of control, they don’t learn about it after the fact but they actually go through a process as if they were the original company asking for and applying for a permit. So they have to go through the rigours of being able to prove that they have financial capability and that, if they need to come to a decommissioning at the end of life of a field, they have the capability and the financial resources to do that, and they can also ensure they have full health and safety compliance issues regarding the safety of their employees.

This is the intent of this industry, and I think we could, in New Zealand, be proud of this industry in terms of its health and safety record. In fact, it was Rob Jager, who was the head of Shell, who had nothing to do with this particular situation, but who headed up the task force looking at what sort of response the Government should have regarding the Pike River tragedy. He was the head of Shell New Zealand, and has a reputation around the world—as Shell does—of having the highest standards possible regarding health and safety.

So there was this level of commitment that was strong enough to raise it with the local member of Parliament for New Plymouth, who then took it to the then Minister of Energy and Resources, the Hon Judith Collins, who then spoke to her ministry and sent a team offshore to meet and discuss with this company who wanted to acquire this resource and this operator control to ensure that they had the capability in order to satisfy the concerns of New Zealanders. It is from this actual event—this actual transaction that took place—that we see this bill come to the House in its substantive matters regarding it. I’m pleased that the Minister of Energy and Resources, the Hon Megan Woods, has continued to process and enhance and continue on with this piece of legislation, because it’s very important for New Zealand.

What it does is it gives confidence to New Zealanders that this industry which operates offshore and onshore in New Zealand operates to the highest of standards—the highest of international best practice—and I think New Zealanders can be assured and ought to be proud that this Government does hold this industry to account and that this industry does, willingly and with great commitment, commit themselves to continue with best practice when it comes to care for the environment and also care for their employees. It’s great to see that whenever I visit different installations—particularly around Taranaki—offshore and onshore in terms of the high level of compliance to health and safety and environmental concerns, I can attest that this industry applies those. What this bill does is close that gap—that a company cannot come in through a share acquisition process, become a controlling interest, and become an operator in a field without the prior approval of the Minister of Energy and Resources, and that is an appropriate level of regulatory oversight that any Government ought to exact in this industry.

So the Economic Development, Science and Innovation Committee looked at this case and looked at this bill with a very, I would say, responsible attitude, and worked together to continue to support this bill and it brought some—as the Minister spoke of—improvements to it. One of the improvements—well, one of the, I guess, conditions that we looked at, or one of the situations that we reviewed, was what if a company had applied for or had entered into a transaction to change the control of an operating field prior to this bill going through?

And we have had that happen here in New Zealand in this very year. We know that Shell New Zealand Ltd have sold their fields, their assets, to OMV, an Austrian company who have been operating here since the year 2000, who invested $2 billion in their work in New Zealand and are now the largest holders of permits in this country. And they have had a transition process that takes many, many months, and if they were to have to wait until this bill passes and then go through the process of seeking permission from the Minister of Energy and Resources, then that would create incredible costs and delays to that process. This bill gives them an exemption.

But what I can say in these final few seconds is that New Zealand Petroleum and Minerals have said OMV are an exemplary company—

💬 SPEAKER: Order! Order!

—and they have agreed to that exemption. Thank you, sir.

I rise to make a small contribution to the second reading of the Crown Minerals Amendment Bill and acknowledge the opening statements to this debate by the Minister of Energy and Resources, the Hon Megan Woods, clarifying the intent of the bill but also pointing to the need to ensure that the policy intent was also a key consideration within the context of further work that would be done to look at the Crown Minerals Act.

I also want to acknowledge the chair of the Economic Development, Science and Innovation Committee. It is evident that in undertaking their role to listen, albeit to the 11 submissions, the key submissions of the stakeholders who have interests in this industry, to ensure that the range of further amendments that were agreed to—and by my understanding, by majority—were ones that would add greater clarity to the way in which the bill is intended to operate.

Just by summary—because I know that there are members of the select committee who do want to make a contribution to the detail of the bill—if we take the way in which the select committee has outlined the themes of the further improvements to the bill, they include matters relating to offences regarding the change of control, much of which has been commented on by the chair of the select committee; the issue of late applications for consent to change of control; consent to change of control of the permit operator; clarification of authorisation of geophysical surveys on adjacent lands; access to schedule 4 land: limit to common marine and coastal areas; and some transitional provisions.

It’s important to note that in considering the submitters’ views—as I read the detail of the way in which the amendments were proposed—this could only have been done with industry experience, and I believe it adds greatly to the way in which the bill is intended to help improve the operational aspects of its policy intent.

I want to pick up on a comment that was raised by Jonathan Young, the speaker before me, around the way in which industry themselves are seeking to assure best practice in their operations during a very difficult period of transition and with a significant emphasis on the health and safety components but also assuring that best practice ultimately is at the forefront of their minds in the way that they undertake their role.

I also want to draw on the reflection of the Minister, who indicated that it was important to have a broader piece of work in relation to the Crown Minerals Act and as it relates to iwi interests in these areas. I come from the Waikato, and there is a view in the West Coast—certainly in Taharoa, and it’s not petroleum but is the mining of black sand—that there is a further need to improve the way in which the Act can operate to enable development opportunities in this area. I welcome the next phase of work in relation to the Crown Minerals Act.

It’s an honour to stand tonight to talk to the Crown Minerals Act 1991, which aims to maintain—

I regret I must interrupt the member in full flow. This debate is interrupted and set down for resumption next sitting day. The House stands adjourned until 2 p.m. tomorrow.

Debate interrupted.

The House adjourned at 10 p.m.