Energy (Fuels, Levies, and References) Amendment Bill

Good morning, members. The House is in committee on the Energy (Fuels, Levies, and References) Amendment Bill.

Point of order. I seek leave for all provisions to be taken as one question.

Leave is sought for that purpose. Is there any objection? There is no objection. The question is that clauses 1 to 4 stand part.

Thank you, Madam Chair. We, obviously, support this, so we’re not going to take a lot of time on it, but I would like, seeing we don’t have a select committee process, for the Minister to answer the question of whether she has had officials look through to ensure the provenance of the diesel that we are importing into New Zealand, that it has not been a source—that the crude oil that it’s been refined from does not come from Russia, which would breach our sanctions. Now, I gave in my speech in the second reading two examples of the sanctions being breached in the US by a roundabout way where diesel has been imported into Saudi Arabia, and diesel that has been manufactured or processed in Saudi Arabia from their own crude oil was actually exported to the US, thereby getting around that sanction. I also gave the example of the refineries in India that are sourcing crude oil from Russia and refining that into diesel and exporting it to the US.

So are we in that similar situation, not just with diesel—jet fuel, Jet A-1, and petrol, and the like? Are we actually supporting the Russian regime? Has there been any work done on that? If there hasn’t, we should know that. If there has been a cursory look, that’s OK, but we actually really need to go right into this. It’s not a simple thing of asking where the diesel came from; we need to know what the provenance of the crude oil is that that diesel was refined from.

In answer to the question that the member put, the member might recall that there was quite a lot of discussion, and, in fact, the Government spoke about this at the time that the sanctions were put on. So this is not a new question and there’s a lot of information in the public domain about this. Yes, the supply chains of refined product all around the world have been the subject of a great deal of scrutiny. The New Zealand agency that is responsible for that is no different than its counterparts in countries that have put sanctions on. And those questions are being looked at. There has been a lot of work internationally that has been happening around supply chains to ensure that there aren’t inadvertent back doors for sanctions to be broken.

In terms of the refineries that the member talked about, in terms of where he might have a concern about where that diesel is coming from, by and large New Zealand diesel does not come from refineries in those countries. Our diesel—the New Zealand import—largely comes from the Asian refineries in Singapore and North Korea. Of course, the fuel companies who do import the diesel are also doing a huge amount of work around their supply chain, because they also want to ensure that they are upholding global sanctions that have been put on for a reason.

Point of clarification from the Minister. She just stated that we are importing refined fuel from North Korea—that would also be in breach of our sanctions, so I’d just like that to be clarified.

💬 Hon Dr Megan Woods: Madam Chair—

I’m still making a point here. While I gave the example of two refineries, that was not the only way around these things. I just gave two examples, and I still haven’t really had a direct answer. Has there been any work done to check the provenance of imported fuels into New Zealand to ensure that there is not a switch around—as is the case in Saudi Arabia that I gave—or that the fuel has been refined from Russian crude? Thank you.

Sorry for the excitement, Madam Chair, that I caused. Of course, New Zealand is not importing diesel from North Korea. I misspoke; that is South Korea. In answer to the second question that the member re-asked—which I’ve already addressed—“Has work been done?”, I gave quite a lengthy answer. The answer is, “Yes, a lot of work has been done examining supply chains.”

Madam Chair, thank you. I have a couple of questions for the Minister. Minister, what is the likely cost to consumers from the application of the levy, in terms of cents per litre on diesel?

I’m happy to answer that, and I did address this in my second reading speech on this bill. This is actually just changing the rules around the levy of how what is already collected can be used. So it is not an increase in the levy; it’s around the criteria of where it can be used. The levy, at the moment—the way in which it’s written—can largely only be used by international oil tickets. That does not address New Zealand’s domestic fuel security. So it’s changing the rules because it is not the least-cost option; it will be more expensive to have onshore stockholding, but that is critical to our domestic security. So there isn’t an increased cost to consumers.

Thank you for clarifying that, Minister. That will be seen as a small mercy for all of those subject to the inflationary pressures they’re suffering in this cost of living crisis. Imagine that. The Government knows how to reallocate, reprioritise spending—all it took was a little tweak to a levy! But thank you, Minister.

Look, back to business: have you had any advice, Minister, on where fuel needs to be stored? What are those locations? What does that mean in terms of resilience? How does the Minister define resilience, and how will we know we’ve achieved it?

As to the locations of where the fuel will be stored, that is obviously something that is a critical part of this work. If we’re talking about resilience, where it is that we have that fuel stored and the ability to transport it—if that is what is required—is critical. There will be a full request for proposal (RFP) process, and part of that RFP will be around geographical location as well.

Thank you, Madam Chair, and thank you, Minister; that’s very helpful.

💬 Andrew Bayly: No it’s not.

Mr Bayly says it’s not helpful, but it is helpful to me and my line of questioning, Mr Bayly. So thank you, Minister. So you’ve confirmed that the Government will procure fuel for storage somewhere yet to be determined. I’m assuming that through developing the scope of the request for proposal, there will be some measures that those responding will need to address.

I’m also interested in how the stock is managed. Has any consideration been given to the fact that diesel has a shelf life? So if diesel is stored somewhere and not used, it could be subject to biological contamination from what they call “diesel bug” in the trade. When I worked as a civil engineer, every now and again, we’d go to start up a machine or we would use fuel from onsite storage, and we’d discover that the fuel had actually grown algae which live on diesel. That’s because if the fuel is not regularly used, if the tanks are not essentially flushed with new fuel continuously, then there’s a risk of biological contamination and the fuel is ruined or rendered unsuitable. So, Minister, has any consideration been given to how the stock is managed and what storage actually means?

Thank you, Madam Chair. Yes, a great deal of consideration has been given to the integrity of the fuel that is being stored. There’s a number of measures that will be put in place. The request for proposal will be around winter-specified diesel so that it does have more resilience in that respect. There will also be a turnover regime for the fuel, and there will be a regular testing regime to ensure that the diesel is fit for purpose if it is called up for those purposes of fuel security.

Mr Speaker, the committee has considered the Energy (Fuels, Levies, and References) Amendment Bill and reports it without amendment. I move, That the report be adopted.

Motion agreed to.

Report adopted.

💬 DEPUTY SPEAKER: The bill is set down for third reading immediately.

Third Reading