Fuel Industry (Improving Fuel Resilience) Amendment Bill

I present a legislative statement on the Fuel Industry (Improving Fuel Resilience) Amendment Bill.

DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.

Hon Dr MEGAN WOODS: I move, That the Fuel Industry (Improving Fuel Resilience) Amendment Bill be now read a third time.

In November last year, I announced a policy package to improve the resilience of our fuel supply. A key part of that package was an obligation for fuel companies to store 21, 24, and 28 days’ cover of diesel, jet fuel, and petrol respectively on average. The Fuel Industry (Improving Fuel Resilience) Amendment Bill will help ensure we have sufficient petrol, diesel, and jet fuel in New Zealand to weather major disruptions to our fuel supply. Although the risk of such a disruption is very low, it would cost the economy hundreds and millions to billions of dollars, and this is something that we can ill afford at this time.

The obligation falls on fuel importers with access to bulk storage facilities. In New Zealand this includes the five major fuel importers, Z, BP, Mobil, Gull, and Tasman Fuels. The minimum stockholding level at the national level is initially set at 28 days of consumption for petrol, 24 days of consumption of jet fuel, and 21 days of consumption for diesel on average. The minimum stockholding levels have been designed to achieve a good balance between mitigating the impact of a potential fuel supply disruption and of avoiding disproportionate price increases at the pump.

The way that the obligation method is calculated apportions the days of cover based on importers’ average daily throughput. The obligation is therefore spread across the obligator parties in a way that reflects their share of the market and what they are capable of supplying.

The bill has been designed to avoid unintended consequences such as decreased competition or increases in fuel prices. None the less, we will carefully monitor the fuel market after the obligation provisions come into force for any signs that the bill’s provisions are adversely impacting the market. The bill provides for many aspects of the minimum stockholding obligation to be changed through regulation in the future if changes are warranted in response to evolving fuel supply risks and market conditions.

This is an important bill. It seeks to increase New Zealand’s supply resilience to disruption scenarios. Fuel companies strive to operate efficiently in a competitive commercial environment which can incentivise them to minimise their inventory costs and plan for just-in-time deliveries of fuel. While fuel companies have generally had a good record of security of supply in New Zealand to date, the fuel supply industry is evolving and demand for fuels will fall dramatically in the years ahead.

Without the measures in this bill’s intervention, there may be few incentives for a company to hold enough buffer stocks in the country or otherwise limit the extent to which the country is exposed in the event of a major fuel supply disruption. There is no costless option for increasing New Zealand’s fuel supply resilience. However, the potential impacts to the New Zealand economy of a supply interruption would be significant, and that is why our Government has taken action to secure New Zealand’s fuel supply.

I want to thank the Economic Development, Science and Innovation Committee for their work and consideration of this bill. I believe the changes that were made to the bill as a result of the select committee process have resulted in a better and more robust bill, and I want to thank all those who have contributed to the preparation and passage of the bill. I commend this bill to the House.

Thank you, Madam Speaker. I, too, would like to thank my fellow members on the Economic Development, Science and Innovation Committee, which is a very hard-working and collaborative committee, and we did give this bill due consideration and we did make some positive changes. While we support this bill, we—as I pointed out in previous readings—believe it was rushed needlessly and it should have had more time to consider things more adequately.

However, that’s as good as we’re going to get, clearly, and we support it with those remarks that I alluded to earlier, and I don’t believe I need to say anymore at this stage. So it’s with that, Madam Speaker, that I commend the bill to the House.

This is a very good bill, done by a very great select committee, so I too echo that. But, yeah, we are a very collegial select committee and we have made lots and lots of changes to this bill, including the way that we look at the average, the way that we want to be making sure that we delay the implementation to give the industry time to adjust as well.

This is a bill for our times when we face disruptions around the world. We want to make sure that New Zealand sees itself through all of these disruptions well. We need to make sure we keep our onshore supply at a level that we’re all comfortable to be able to support New Zealand through difficult periods of time. It’s great to see the National Party have made a huge “in” on this bill. I do hope for more today. So I commend this bill to the House.

I’m a little bit conflicted as to whether I should actually take my mask off, but I’ll keep it on because I’ve got a terrible case of a cold and I don’t want to spread it in the room.

Ricardo Menéndez March: Stay at home.

MELISSA LEE: So—no, I’ve been tested for COVID; it’s not. But without wanting to labour the time, I just want to actually acknowledge all of the Economic Development, Science and Innovation Committee members and the chair, Naisi Chen, who is actually an excellent time keeper. Although, on this side of the House, we were rather concerned about the rushed nature, having actually had only two months to consider the bill when the bill was introduced in June and it’s only August, and we’re actually doing the final reading. We felt that because it was rushed, stakeholders literally only had two weeks to actually make submissions and for select committee to actually consider, and we felt that there wasn’t the robust discussions and understanding of the situation. That was the very nature of our opposition initially, but we actually support where we have come to, and providing fuel security for the industry is actually what we need to do.

I was particularly taken by the submissions from the aviation industry, where they’ve actually had several bad shipments, and their explanation as to why we could not actually include shipments that are on the way to New Zealand in that stock counting in terms of the number of days that it might actually take to get here, the reason being that even though it might have been tested on board those vessels, once it actually lands, it could test negative or positive. So they had to actually have a goodquality fuel stock onshore to make sure that there is no interruption to our aviation industry. I found that quite compelling.

I’d just like to take the final few seconds to acknowledge all of the officials: the clerk of the committee, who has actually been absolutely excellent; the advisers to the committee, who have actually provided all the information; and also the Parliamentary Counsel Office for having actually gone through several iterations of the bill, and actually providing it on time so that we can get it back to the House. On that note, I commend the bill to the House.

This is a bill which is fundamentally about the national interest. Our country—as nearly all other countries have experienced—has been through extreme supply change shocks over recent years, caused primarily by COVID-19, but also other events such as the war in Ukraine and the blocking of the Suez Canal. Those events have brought home to us the fact that we can no longer rely on a just-in-time mentality when it comes to critical parts of our supply chain.

The Fuel Industry (Improving Fuel Resilience) Amendment Bill ensures that, for a critical product in our supply chain, we will have greater security of supply. It is a standard and prudent measure that is employed by many other countries, and it will give a range of actors across our economy greater confidence about our fuel supply in the event of future shocks. It’s a good bill; I’m pleased to see broad support across the House. The ACT Party, predictably, is against it, and that points to some of the risks that will occur if the ACT Party is a part of the next Government. I commend the bill to the House.

What the ACT Party has to put up with! What the former speaker, the Hon Michael Wood, clearly admits is that the ACT Party is an acronym that stands for the Association of Consumers and Taxpayers. We only have New Zealand’s best interests at heart—the interests of consumers and taxpayers now and in the future.

Hon Julie Anne Genter: That’s not what Roger Douglas says.

SIMON COURT: The member who’s just entering the House, the Hon Julie Anne Genter, former associate finance Minister, points out that the Hon Roger Douglas is also concerned with the wellbeing of New Zealanders. The ACT Party agrees with him. That is why we can’t support this bill.

The problem to solve is: is there enough fuel stored in New Zealand to deal with some kind of crisis? That’s why the bill is called the Fuel Industry (Improving Fuel Resilience) Amendment Bill. This question came up after the closure of the Marsden Point oil refinery. That was a decision by the private sector to discontinue refining crude oil into petrol, diesel, and jet fuel in New Zealand. Why did they do that? Well, every signal that a Labour-Green—whatever they were—New Zealand First coalition of chaos sent was that there would be an end to oil and gas in New Zealand, and that sent a chilling effect through the willingness of our overseas investment partners and our international suppliers to invest in liquid fuels and resilience in New Zealand.

The Government caused this problem; this bill does not solve that problem. Only the private sector can solve the problem. The New Zealand Government doesn’t refine fuel. The New Zealand Government doesn’t own an oil refinery. The New Zealand Government doesn’t own any oil wells in the Middle East, or even here in New Zealand. The Government can’t solve the problem.

What this bill does is it sets up a compliance regime for fuel companies that the Minister herself, in the chair in the committee stage—just a few minutes ago—admitted had already been solved by the private sector. The Minister herself admitted that all of the infrastructure that sits at Marsden Point has been converted to onshore storage, and that the storage obligation created by this bill will be met by the private sector without this bill even being passed. Imagine that: the private sector delivers what a Government can’t—and ACT says shouldn’t.

The Minister could not say how much the additional regulatory compliance costs will add to a litre of petrol and diesel. That’s what New Zealanders want to know. That’s what the ACT Party—which stands for the Association of Consumers and Taxpayers—wants to know. How much will all this red tape and compliance add to a litre of petrol and diesel, or a ton of jet fuel, particularly for businesses who rely on exporting products out of New Zealand by air freight, or importing them by air freight? The Minister couldn’t answer how much it would cost. The Minister said Kiwis won’t notice at the pump. They won’t notice. They won’t notice in the daily fluctuation of prices. That’s because red tape, regulation, and compliance costs gets bedded into the baseline cost of supplying a good or a service. The Minister wouldn’t notice. I bet the Minister doesn’t even know how much a litre of petrol or diesel even costs.

That’s how out of touch this Labour Government has become. That’s why New Zealanders are overwhelmingly going to vote for a change of Government, and a change of Government that includes ACT sitting around the Cabinet tables so we can deliver real change.

Glen Bennett: Back to the bill.

SIMON COURT: “Back to the bill”, says the Hon Peeni Henare. Another former Minister, Michael Wood. I’ll tell you what New Zealanders will like: to send a bill to this Labour Government for all the wasted work of the last six years and failure to deliver. Look, what have we heard? Aviation fuel supply to New Zealand potentially is at risk. How do you overcome that? Well, a few years ago, a digger put a hole in the supply pipeline from the Marsden Point facility down to the Wiri Oils Terminal in Auckland. Now, building more storage is not going to stop a digger putting a hole in a pipe, if some person driving a digger isn’t careful.

Hon Scott Simpson: Jacinda was going to build a new pipeline.

SIMON COURT: Ah! Apparently, according to the Hon Scott Simpson, the former Prime Minister, Jacinda Ardern, was going to build a new pipeline. Now, I’ll tell you what, the amount of stuff that this Labour Government has announced and failed to deliver, the Hon Scott Simpson, never ceases to amaze me. While the Labour MPs who still hold their seats are sitting there making fun of New Zealanders, and their genuine concern about cost of living, the cost of petrol and diesel, ACT is listening to them.

The aviation fuel industry, through good testing, through good quality assurance, can identify whether fuel is suitable, whether it should be landed onshore or sent back to refineries in Australia for re-processing. It’s very simple. New Zealand is nine to 10 days away from refineries in Brisbane. Adding a few extra days of onshore stockholding is not going to improve fuel resilience for New Zealanders in any meaningful way. That’s what this bill proposes to do.

Then we have to consider all of the other incoherent policies of this Labour Government. While telling industry and telling New Zealanders they should drive less, use less petrol and diesel—trying to shame them out of their private motor vehicles into walking, cycling, and catching buses—at the same time, they say “Oh no, no, we have to store more petrol and diesel onshore because of national security or resilience reasons.” Well, the main risk to national security and resilience has been the Labour Government over the past six years—and don’t worry, Kiwis will soon have a choice about who they feel more comfortable with.

So what are the options for New Zealand? Well, there’s a real issue with resilience, but that actually is more related to natural hazards and to national security and to threats over the horizon than it is to how much diesel can be held at Marsden Point. The real risk to fuel resilience, fuel security, and the ongoing maintenance of core services—can New Zealand keeps the lights on in our regions after a major disaster? We have to think about the Alpine Fault. An Alpine Fault failure could be a magnitude 8 earthquake. It’s predicted to be more likely than not in the next 50 years. If we’re going to improve fuel resilience, then the New Zealand Government of the future needs to consider how they encourage more liquid fuels to be held in more places around the country so that, actually, after a natural disaster, the people of that region have access to diesel—in particular, to stand up generators, hospitals, telecommunications, waste-water and drinking-water treatment plants—and keep those basic core infrastructure services running. That is the issue with resilience, and that is an issue that a future Government would need to address.

Then we actually need to consider what the costs of that are. Well, if it’s about building more tankage, what Minister Megan Woods told us shortly before is that the New Zealand Government is going to pay to build tanks to store up to seven days’ additional diesel around the country. That may well be the right thing to do to keep the generators running after a natural disaster, but that’s not the case that’s been made in this bill, and that’s not the case that the Government has made.

It is disappointing today that only the ACT Party is voting against this bill, unless the Green Party also decides that it’s more important to stick to principle and vote against this bill because they don’t believe in oil and gas in our future, and liquid fuels like diesel and petrol in our future. Maybe the Green Party and the ACT Party can hold hands and actually stand up for what they believe in, even while other parties sacrifice New Zealanders’ standard of living affordability in the middle of a cost of living crisis.

The ACT Party opposes this bill because it imposes unnecessary regulation and red tape. The cost to consumers is unjustified. As the Minister has stated, the private sector has already solved it by building more storage and channel infrastructure at Marsden Point in Northland. There’s no need for this bill; no need for it under urgency. ACT won’t support it.

Tēnā koe, Madam Speaker. The Green Party is supporting this bill. It does make sense. It’s unfortunate that subsequent Governments over decades haven’t done enough to create a transport system that is more energy efficient, that’s already electrified, that gives people the option to get around and not have to rely on so many private vehicles, because that would mean we’d have a better current account deficit. It would be smaller if we imported less vehicles and fuel.

Some people mistakenly believe that if we had more oil exploration in New Zealand, that would solve our problem of petrol in our cars, but New Zealand has never used the oil that we extract off the coast of Taranaki in cars and trucks; it’s not that type of oil. So the whole idea that we would somehow produce oil here and use in our cars and trucks is misguided.

What we can do is electrify our transport fleet, invest in rail and coastal shipping, make our cities more hospitable for walking and cycling, and provide proper public transport, just like they do in the five countries that the National Party keeps talking about because they’re rated as having the best roads. The reason top executives—

ASSISTANT SPEAKER (Hon Jacqui Dean): Order, order! I hope the member can anticipate what I’m going to say. In the third reading, while this is a summing up of the debate, the discussion must be confined to what is contained in the bill and not what is out of the bill.

Hon JULIE ANNE GENTER: I don’t believe that has applied to previous speakers. I feel there’s some—no, I won’t say it.

ASSISTANT SPEAKER (Hon Jacqui Dean): Good.

Hon JULIE ANNE GENTER: True resilience when it comes to fuel, true resilience for New Zealand will be electrifying our transport system and investing in a more balanced transport system, as the Green Party has long called for. But that will take time and, of course, we need to start now. In the interim, it makes sense to have this provision and I believe it was well supported at the select committee.

Thank you, Madam Speaker, for the opportunity just to take a short call this morning on the Fuel Industry (Improving Fuel Resilience) Amendment Bill. That is it, in a nutshell. The title of this bill does what this bill says it does, right? So it’s about improving fuel resilience.

This bill ensures Aotearoa New Zealand has fuel resilience by ensuring that we have adequate fuel stock. Any major disruptions—although we know there is a low risk of that, however, we’re being prepared—would make a massive, huge, costly debt to Aotearoa New Zealand, in the millions and billions of dollars.

This bill is about looking after New Zealand, it’s about looking after New Zealanders—that’s what we do on this side of the House, that’s what the Labour Government does: it plans and it supports all New Zealanders, and it’s doing that by this bill making sure that we have enough fuel to make sure that we will be resilient. It’s a good piece of legislation, and I commend this bill to the House.

Kia ora, Madam Speaker. I’m glad that I’m able to make a short call on this, because the ACT Party was just speaking so passionately about this—so passionately that they didn’t even participate in the select committee process. That’s how passionate they are about this legislation, obviously.

Last week, I was with executives from Air New Zealand who were asking me, “Have we passed this legislation yet? Because it is necessary.” They have been asking for it, so I’m glad—and I love it when you look at the bill and what it says on the packet is in the tin: Fuel Industry (Improving Fuel Resilience) Amendment Bill.

Thank you very much, Madam Speaker. I rise for a short call on the Fuel Industry (Improving Fuel Resilience) Amendment Bill. This is one that National does support. The National Party does support this as a means to increase resilience in fuel supply. Although we did have some concerns about the speed at which it progressed through Parliament and the time for adequate consultation with stakeholders—noting particularly that suppliers will only have until April 2024, after Royal assent, to comply with stockholding obligations and the industry does have concerns about a requirement to quickly invest in new tankage to meet obligations that could impact consumers through subsequent potential increases to the cost of fuel. Obviously, following the closure of the Marsden Point refinery, along with global events such as the invasion of Ukraine, fuel security and the sovereign risk for the lack of fuel security has been identified as a potential risk, and this bill seeks to introduce minimum fuel stockholding obligations on fuel importers to ensure that New Zealand’s fuel security is not in question.

I just note that this does underpin the continuing importance of oil and gas to New Zealand. We are a country that is trying to transition to alternative fuels and there are some exciting things happening in my region. For example. H. W. Richardson Group is turning some of their trucks, about 40 percent, into hydrogen powered and 60 percent diesel. They have the first commercial hydrogen production refuelling station being built in Gore, which should probably go live this year, I think. We have Fabrum in Christchurch, which is a small hydrogen company that’s doing some pretty exciting stuff and is probably one of the world’s leading companies in this space. There is Mike Casey, with his 100 percent electric orchard in Central Otago, who is doing some quite incredible stuff with integrated energy systems, electrifying the entire production.

But the simple reality is that for the short to medium term at least, we do continue to need oil and gas. We need this to transport products to New Zealand. We need it to transport food and other products around New Zealand to keep our tractors etc. going, and it’s quite critical. I note that Norway is often held up as an exemplar of the shift to new energy systems, with about 85 percent of new cars sold in Norway being battery powered. But Norway has also, this year, approved more than $18 billion in new oil and gas investments to develop 19 oil and gas fields. So I am just noting that this is going to take some time and the reality is that energy is complex and challenging and we need it to keep our economy moving.

We do support this bill as a means to ensure continuing security of supply of fuel in New Zealand to ensure that we keep our economy going, keep the lights on, keep people fed, and keep our economy moving.

Thank you, Madam Speaker. I’m delighted to stand to take a short call on the Fuel Industry (Improving Fuel Resilience) Amendment Bill. As a Cantabrian who was in rural North Canterbury after the earthquakes, I am fully aware—as are many Cantabrians—of the essential nature of keeping your fuel tanks full. So traumatised, I think, were many of us, that all these years later, we still refuse to actually run with anything less than half a tank of petrol, because we know the importance of keeping our fuel stocks available to us.

So this bill is a complete no-brainer and I’m glad to hear the support from the National Party and it’s extremely interesting to me that ACT opposes it. I commend this bill to the House.

Thank you, Madam Speaker. We do support this legislation on this side of the House. We do so because fuel security is very important to New Zealand and New Zealanders.

The simple reality is that, in geographic terms, we are at the very long tail-end of the international supply chain network that involves and evolves around the globe. What’s worse and more risky for us is that not only are we at the very longest end of that international global supply chain, but we are a very tiny market at the end of the supply chain. International fuel operators are just international commodity traders and will, at times of stress, reprioritise their supply chain priorities depending on need, as they see it, in commercial terms.

Notwithstanding that commercial operators here in New Zealand will, of course, make prudent decisions to protect their own business and commercial interests, this legislation provides a legislation backstop and a requirement on those operators to do what we would hope would be done, but this provides the guarantee.

Just as an example of how fragile that global supply chain network is, members need only to have a look at what’s currently happening in the Panama Canal: a global hub, where right, at this very minute, there are more than 200 vessels stuck in a queue simply because transit through the Panama Canal at the moment is being impacted by climate conditions, actually. The protracted droughts in that part of the world are meaning that shipping is not able to transit through the canal as it normally does, and that will have a knock-on effect, not only for fuel deliveries but for a range of other trade and supply features around the globe.

Those are some of the basic reasons that we support this legislation on this side of the House. We think that it’s pragmatic and sensible for the New Zealand Government to put in place a range of security issues that are prudent and that are practical, but we know also that the commercial sector will do their bit. So, on that note, I’m happy to commend the bill to the House.

Thank you, Madam Speaker. We do live in a complex world at the moment, and my colleague, the Hon Scott Simpson, has spoken very well to that. We’ve seen the war in Ukraine. We’ve seen COVID. We’ve seen the fact that supply chains have been clogged. We’ve been subject to serious weather events. I think it’s fascinating, for—and I hope people are observing at home—the fundamental issue in terms of governance is resilience, right now.

We have the National Party and ACT members with very clashing views on this very fundamental area of Government. I am the most disappointed with my ACT Party colleague—the ACT Party, yes, but too my colleague Simon Court, in particular. He is a West Auckland MP. Mr Court, I hope you have walked down Don Buck Road and visited those families on lower Don Buck who had their electricity go out, who were reliant on emergency services. I hope you’ve been out further north-west, into Muriwai. I hope you’ve spoken to the community on the ground, who want to make sure that we do have resilience as we face these challenges into the future. This is a much-needed bill, and I commend it to the House.