Gas (Information Disclosure and Penalties) Amendment Bill

Members, the House is in committee on the Gas (Information Disclosure and Penalties) Amendment Bill. Part 1: this is the debate on clauses 3 to 18 and the Schedule, “Amendments to the Gas Act 1992”. The question is that Part 1 stand part.

Thank you, Mr Chair. The Government’s actions since 2018 won’t deliver more gas. It’s not clear why the Government needs more information about the lack of gas, but this is the Gas (Information Disclosure and Penalties) Amendment Bill, which is designed to establish a regulatory framework around gas information: information about the market, production, consumption, storage, and whether there are risks to security of supply—risks that could come from planned outages, from maintenance, and from inspections.

The Government was shocked back in 2018 when the Pohokura field was taken out of production and, at the same time, a regulatory compliance assessment on the Kapuni field resulted in a significant reduction in the supply available to industry and to generate electricity. We are seeing now significant energy shortages, gas shortages that have flowed through to wholesale electricity prices, gas shortages that have resulted in the importation of a million tonnes of coal more than normal in the last couple of years so that New Zealand is now reliant this winter on nearly 30 percent of its electricity being generated from coal, at a time when the Prime Minister has declared a climate emergency and when every reasonable New Zealander could expect the Government to have made some progress towards a low-carbon future. But they’ve been paddling the boat backwards. They’ve got the paddle steamer—the coal-fired paddle steamer—in full reverse. It’s going backwards down the river, far, far from the low-carbon future that New Zealanders have been promised and that we were told was, in fact, an emergency.

So here we are to consider at committee stage this bill, the Gas (Information Disclosure and Penalties) Amendment Bill. I want to give those watching what’s going on in the House tonight and wondering what is it that this bill is designed to do and why we need this regulation an example of why it’s really not needed and why it’s simply an example of Government overreach and regulation. They are regulating a group of businesses that they don’t trust, which probably puts those businesses in the same category as all the other businesses in New Zealand.

But I want to give for those watching at home who may not know much about the Gas Industry Co.—it’s a private market manager. It’s an example about how the private sector can manage its own risks. Actually, if you compare it to the Transpower information disclosure about electricity generation, it’s far and away more detailed, it’s far and away more clear how much gas New Zealand has got in storage and when the outages are going to occur, and it gives businesses plenty of information with which to plan their own activities—those gas users, those energy users, who depend on gas for their business. [Holds up graph] So what it shows you is outages here, when they’re planned. Some last for days; some for weeks. It shows you how much gas is in storage by month.

As you can see on this far side of the graph, New Zealand has been drawing down gas at a phenomenal rate over the past few weeks as dry conditions persist, cold weather hits, and we have no choice but to use thermal generation. So it’s either gas or coal, and I would suggest—as does Europe, as does the United States, and as does every developed economy in the world—that gas is a far preferable fuel to coal, particularly imported coal.

Now, the ACT Party believes that businesses and industries and sectors should be able to demonstrate they can manage their own risks and that where there’s a public good in having information about what those businesses do, those businesses should be able to manage their own risks, and there’s no need for Government regulation unless there is a risk or a public good that can be adequately justified. That is why ACT proposes a number of amendments to this legislation.

We propose two specific amendments that were asked for by the gas industry and their customers—firstly, to establish a much higher test for whether regulation is needed. It shouldn’t be on the whim of a Minister as to whether a regulation is imposed on an industry. When an industry is already adequately reporting its own risks for the public and for their customers, that should be sufficient. That’s why ACT believes—and our Supplementary Order Paper 41 sets out quite clearly—that the regulatory test for whether Government should regulate should be comparing the current voluntary scheme, with hundreds of disclosures—hundreds of disclosures, in fact—in great detail that looks something like this. [Holds up another graph] I’m not sure whether the Minister or the Minister’s staff have gone on to the Gas Industry Co. website and looked at the quality of disclosures or looked at the way that the industry and the Gas Industry Co. investigate them and close them out. I’m not sure if they have looked—I’m not sure if they’re interested. But if they were, they might find that the job’s already being done by the sector and there’s no need for this regulation.

That is why ACT proposes a very high, strong test for the Government to impose further regulation, and that it must be to compare any regulation against a successful voluntary scheme that’s currently running, whereas the current bill as proposed compares whether regulation is needed to a blank slate—an absence of reporting—as if there is no voluntary scheme. In that case, what the Government is proposing sets up a fake regulatory test. It is not a valid way to approach whether regulation is needed.

So what ACT proposes in Supplementary Order Paper 41 amends the bill so that any test of whether regulation is required is a much higher bar. We believe, based on the investigation that we’ve done in looking into this problem and actually going and talking to stakeholders—the ACT Party believes that the system that they’re currently providing information to the Government, to the public, to customers, and to competitors is working fine and that no further regulation is needed.

There is an additional amendment that ACT proposes, and that is to establish a very high bar for Government to require, if there is to be regulation, a very high bar on any disclosure of commercially sensitive information. These businesses that produce gas and that supply gas to downstream producers of petrochemical products, like Methanex and others that supply gas for electricity generation, are very, very concerned that disclosing information about their contracts, about their future intentions, and about negotiations with their customers or with each other as to how much gas could go where—they believe that that will put them in a very difficult and dangerous situation and it may, in fact, disadvantage them when compared to competitors in the electricity industry or each other. So ACT’s tabled amendment inserts a new clause, clause 11AA, which sets a very high bar to protect disclosure of commercially sensitive information other than to the industry body or to a Government department.

The industry, rightly, is very, very nervous about further interference by the Government in the gas sector and in the energy sector. They’re very, very nervous about proposals to build large hydroelectric dams, so large at a cost of billions of dollars—probably more than 10—abating carbon at a cost of maybe thousands of dollars a tonne, rather than the emissions trading scheme’s 50. They’re so afraid of this interference that they’re actually very reluctant to make any investments at the moment, and, in fact, the security of supply that the Minister and the Government are so concerned about is likely to be far more precarious than any estimates they have made.

The Gas Industry Co. is currently consulting with its stakeholder groups and with customers and more widely on ways to mitigate scarcity and security of supply issues. They have asked a number of questions like, essentially, what is the unintended cost of the Government’s poor attempts at regulations already, will they result, essentially, in a crashing out of gas supply to the market, and is there a risk that the lights go off in New Zealand much sooner than the Government anticipated?

I’ll just take a short call to address some of the questions that the member put there. The first, I guess, is around the problem definition, and the member asked why it was that this regime was being put into place. That’s spelt out very much in the preamble to the legislation; that in 2018, there was a convergence of events around gas infrastructure that led to gas outages of the Pohukura pipeline. What this brought very starkly into relief is there simply was not an adequate disclosure regime for industry, for the markets, for anybody to understand the flow-on implications of what was happening. There was a situation where those that were reliant on that gas for producing electricity had no oversight of what was happening. What is more, they could not get the information that was required from the oil and gas companies in order to be able to function properly as a market. The consequence of this was very high spot prices. Something that became very clear to me as a relatively new Minister of Energy and Resources was something needed to be done about it—that we could not have a regime where there were some industry participants that were having to put drones into the air to fly over the pipeline to try and figure out what was going on because we had a voluntary regime that simply was not delivering the disclosure that was required. So that is why this legislation is before the House and why it is necessary.

In answer to the member’s questions around the Supplementary Order Paper (SOP), the Government will not be supporting the SOP that the member’s put forward, and there’s a number of very sound reasons why we won’t be supporting the Supplementary Order Paper. But I do congratulate the member for thinking about it and for taking the time to put together alternatives to the legislation. I would make the point where you say that industry doesn’t want this regulated regime of disclosure. I am yet to meet an industry that comes and asks the Government for regulation. Usually, it’s in result to a need to ensure that you have a functioning market, which has very much been identified through the 2018 situation that came in here. The SOP will affect the Gas Industry Co (GIC) regulatory recommendation process, and therefore will have a much broader effect on the regulatory regime than what is included in the SOP’s explanatory note. The way in which it is drafted means it will spread much further throughout the regime than I think the member—certainly through the explanatory note to the SOP and certainly through his contribution to this House—intended. I’m very confident that the current procedures that we have in place to consider industry voluntary alternatives are robust enough and can reside within there.

The member mentioned the fact that the GIC is currently out there consulting with members around how we ensure security of supply as we go through a transition, as all nations across the globe will, as we transition away from fossil fuels. They are doing that piece of work because I commissioned them to do it at the end of last year. I asked them to go out and do this piece of consultation because we must have a regulatory regime that is fit for purpose for us to have a transition away from fossil fuels but also protects consumers when we go through that. Critical to that is having adequate transparency provisions in our regulations to make sure that we can start to think of an energy system, that we don’t have our electricity industry having to wonder what’s happening in another part of that energy system, that we can actually have windows right across that energy system.

The member also continues to repeat some points about our decisions around the ending of offshore oil and gas exploration in 2018 somehow leading to the market conditions we’re seeing now. We’ve discussed many times with that member the fact that, actually, that simply is not the case. In fact, it was found, during the election campaign, to be an untrue statement. A certain political party was told to stop saying it because it was so untrue. But what we do know is that we do have to prepare for a transition away. We’ve recently seen the international energy agency come out and actually say that the path that New Zealand’s going down is something that the world needs to look at, that simply continuing to issue exploration permits for oil and gas is an untenable position for countries to find them in. We need regulation to match that.

Thank you, Mr Chair. It’s a pleasure to stand here this evening and support ACT with its Supplementary Order Paper. While we need to know how much gas is in place in this country, there is a voluntary regime currently, and I’ve just got a number of questions for the Minister tonight that I’d like to ask.

The Minister talked about a convergence of events before that happened in 2018, and often waxes lyrical about Pohokura, and we do know that there were faults with Pohokura. These faults are still trying to be rectified, and our people are working hard on that. But when the Minister talks about a convergence of events, there were other events that happened in 2018, and they were decisions that the Minister and her Government made against advice of the Ministry of Business, Innovation and Employment around the future oil and gas permits, and the Minister continues to say that that had absolutely no bearing on the situation that we find ourselves in today. So I would like the Minister to answer the question as to whether she has any proof that that had no bearing—the removal of all of the investment that’s led to so many fields being turned away from—on what’s happening today.

The second question I would like to ask the Minister is—she mentioned when she was speaking before about the voluntary regime and how that lead to this situation. My understanding is that the voluntary regime came into place after the problems at Pohokura, and, when we went through the select committee process, the question asked was “Have there been any breaches of the voluntary regime?”, and no one was able to point to any breaches of the voluntary regime. As Mr Court mentioned before, it’s working perfectly fine.

So I’d like to ask the Minister those two questions: what proof does she have that the political decision has had no effect on the gas fields; and, secondly, when did the voluntary regime come into place, and does she know of any breaches of the voluntary regime?

I’d just like to answer the question, first of all, about whether our decision in—I think it was—April of 2018 had any impact on something that happened in the spring of 2018 in terms of gas production. I am sure that member, coming from Taranaki herself, knows that there’s a bit of a longer lead time between issuing a block offer and getting to production than a few weeks in terms of that. So I think I can say that without a shadow of a doubt, the decision of our Government to end the issuing of new oil and gas exploration permits offshore in April 2018 had absolutely no impact on what happened in the spring of 2018. In fact, any of those permits that would have eventuated after the 2018 decision actually wouldn’t be into production until 2027.

I’m sorry to interrupt the member, but it’s come time for me to report progress.

House resumed.

The committee has considered the Gas (Information Disclosure and Penalties) Amendment Bill and reports progress. I move, That the report be adopted.

Motion agreed to.

Report adopted.

Members, the House stands adjourned until 2 p.m. tomorrow.

The House adjourned at 9.57 p.m.