Energy Resources Levy Amendment Bill

Members, the House is in committee on the Energy Resources Levy Amendment Bill.

Point of order, Madam Chair. I move that the two parts be taken as one.

Leave is sought for that purpose. Is there any objection? There is. So we turn to Part 1 first. This is the debate on clauses 4 and 5, “Amendments relating to sectors”. The question is that Part 1 stand part.

Would we be able to seek the leave of the House to ask that question again?

Sorry, was that a point of order?

Sorry, Madam Chair. Point of order. We seek leave from the House to have that question put again regarding leave to take the bill as one question.

OK. Leave is sought for that purpose. Is there any objection? There is none.

Point of order, Madam Chair. I seek leave to move that the two parts be taken as one.

Leave is sought for that purpose. Is there any objection? There is none. The question is that Part 1 stand part.

Thank you very much, Madam Chair.

CHAIRPERSON (Hon Jacqui Dean): Sorry, sorry, as you were. Sorry. The question is that Parts 1 and 2, and clauses 1 to 3, and the Schedule stand part.

CHRIS BISHOP: Madam Chair, thank you. This is my first contribution in this unusual bill, and I know members on this side of the House, and I think from the ACT benches as well, have a number of questions, and we want to get through those.

The first one, I suppose, for the Minister is what is the retrospective effect, if any, of this bill? Because I’m someone who’s a bit of a constitutional purist in the sense that it’s not good to retrospectively alter arrangements, particularly commercial arrangements, that the Crown has set for players in an industry. And it’s a very technical bill, and I accept that it deals with legislation going all the way back to the Muldoon era—that was when the New Zealand Government was interested in energy, and did a few things. And I accept the energy resources levy is an old—it’d be fair to say it’s an old piece of legislation, and it dates back to the Muldoon era.

But I am genuinely interested in just how much retrospective effect it has. My read of the bill is that it does alter arrangements for some licence holders, and I suppose the follow-up question from that is: how many people, or how many companies, or licence holders are we talking about? Because, and if I could just make a general complaint, there’s a real paucity of information about this bill, a really scant identification of the problem that we’re talking about, how much money is affected by this for the Crown, if any. At various points, members on the other side said, “Well, it’s about getting fair return and getting more money for the Crown.”, and at other points they said, “Oh, it’s very, very minor.” So we want to know on this side of the House: how much are we talking about?

Unfortunately, I’ve read the—again—very scant departmental disclosure statement and it says, “The size of potential costs or the benefits to the Crown are largely dependent on the amount of the levy payable on any fossil gas produced that is claimed to be a discovery”, etc. “No quantified estimates are available.” Well, why not? Why are there no quantifiable estimates available? It does say at one point the amounts involved could be significant, but we really have no idea. And, frankly, I think that’s pretty suboptimal when Parliament’s being asked to change the law.

So those are a few starters for 10, but I’m sure other members will have many other questions to get into.

Minister, I have a number of questions. This bill’s been brought to the House under urgency with no opportunity to consult with stakeholders, we assume, no opportunity for a select committee inquiry, no matter how truncated, and I just want to observe that a number of bills have been passed through this House this year alone, such as the severe weather emergency legislation bills, which have offered even one day or 20 hours—sorry, let me just correct it: 20 hours—for submissions and then a day for hearings for submitters. And yet this bill, Minister—not even a day for submitters to offer their view on the bill and to help provide clarity to legislators, many of whom, particularly on the Government side, seem to have absolutely no idea what the effects of this bill are. So, Minister, I have a series of questions. They’re very specific. I will ask them as if I was a stakeholder, as if I was an affected party who is not able to have their say and who is not able make a submission, and I trust you will give us the decency of replying directly. Firstly, what advice has the Minister had on the costs and benefits of this proposal?

I will in the course of this committee stage be bundling up questions and answering them as they arise. Two of the speakers that have spoken have asked what advice I’ve had on the potential benefits to the Crown. What we are talking about here—and I think it’s really important that we do understand that this is actually about New Zealanders getting a fair return on the resources of the Crown mineral estate. The best estimate that officials have been able to give me, at this stage, is that unless we clarify this, unless we tidy this up, the New Zealand taxpayers could miss out on around $50 million.

Hon Member: Per year, or—

Hon Dr MEGAN WOODS: Overall.

In terms of the retrospective nature of this bill, that Mr Bishop brought up, I think one of the really important things to understand about this is that this is only talking about any natural gas which is produced from land to which a licence relates if the licence was granted in relation to a discovery of natural gas made before 1 January 1986, even if the licence was extended under that date. So there could be some fields, and Mr Brownlee was talking about them, that have been in production for a period of time. It won’t apply to that. It’s about new wells, it’s about new areas within that field that is pre-1986.

We are in this position because in 1976, the Muldoon Government decided that it wanted a greater return on the Crown mineral estate. What they found is that, according to the licences that had been granted, you could not alter the royalty payment. So instead they imposed a levy. When the legislation was changed—and post-1986, we’ve ended up with some disparate royalty and levy arrangements. So we have a range that goes from around 5 percent under some of those early—that require the levy to top them up. Post-1986, those are more like 12.5 percent, 20 percent royalties that are imposed. So this is actually about trying to—it’s been used since 1986, the levy, and it has been in all that period of time, to try and equalise the return that the New Zealand public get from the Crown mineral estate. This is about New Zealanders getting a fair return from those companies that come in for a profit to extract oil and gas from New Zealand. Every country around the world that allows those companies to do that charges a royalty. New Zealand has some of the lowest royalties in the world and it was brought to my attention that we needed to clarify this and I want to ensure that New Zealanders get a fair rate of return.

Well, that’s very interesting, Minister. It would have been good to hear some of that earlier. It might have helped us understand a little bit better about what the Government was attempting to do. It’s certainly not as clearly articulated in the explanatory note of the bill.

But it is interesting to consider a couple of points, and I’d like your view on it. So let’s say one of those early gasfields is theoretically not going to be covered by this because there’s nothing new about it, but we all know that on the Māui field there’s only two platforms, but there are multiple well heads. So does this apply to new well heads? Because you’ve got, as I said before, 500 petajoules of gas there. A huge amount: 15 billion cubic metres that could be extracted over the next 10 years. You’d think that that $50 million that the Minister spoke of is going to have to be charged somewhere. So the question also arises: where there are currently gas contracts in place, based on a price for supply, that recognise the current levy or royalty arrangement, would the Minister consider putting savings provisions into the bill that would enable those persons not to suffer losses?

The thing that has been stated by the disclosure statement is that this is a tax and, as such, ultimately all taxes from revenues derived by those who are selling something, whether it’s a product or service, and in this case, it’s a product, it’s ultimately the consumer who pays. It’s kind of interesting to say, “Well, New Zealanders are going to benefit from this.” when so many are clearly not.

Thank you, and I do genuinely want to thank the Minister for that explanation. It was genuinely really useful. To be honest, if that had been made clearer in the bill and the departmental disclosure statement, I think we all would have had an easier time understanding it. Frankly, I mean I suppose the first issue is: why are we doing this under urgency through all stages tonight? This is precisely the sort of small but technical and complicated bill that deals with rights and obligations of commercial companies and the Crown fiscal position that should go to a committee—just send it there for a month. I don’t understand why we’re having to do it at the tail end of Budget urgency when no one’s paying attention.

But, be that as it may—we are where we are—the follow-on question is why now, because, well, I don’t disagree with anything the Minister has said about the Crown getting a fair rate of return. These are non-renewable resources, we have nationalised minerals in this country, and it’s right and proper that the Crown gets a fair return for that. No one has any objection to that and no one has any objection to the energy resources regime to make up for deficiencies from the post-1937 nationalisation and the various royalties issued under then—I mean, the entire House was not alive back then.

So we are where we are, but why now—I mean, we’re at 2023. The Energy Resources Levy Act has been in place now for 47 years. Presumably, this problem has been around for a while, but there must be a kind of impulse for the Government to do this. I mean, it can’t be the case—and maybe I’m wrong; I’ll wait for the Minister’s response—that the Minister just woke up one morning and said, “That little problem that I’ve had kicking around for years and years and that successive energy Ministers have probably been advised about.” I’ve got a former energy Minister here in the House in the Hon Gerry Brownlee, and—

Hon Judith Collins: And me.

CHRIS BISHOP: I’m sorry—sorry. The Hon Judith Collins is sitting behind me and I did not realise. The Hon Judith Collins was one as well.

Hon Judith Collins: I’m looking after your back.

CHRIS BISHOP: She’s looking after my back—yeah, that’s right. There are many jokes I could make, but I won’t, I say to the Hon Judith Collins. So, no doubt, the two other energy Ministers in the House received similar advice that it would be a pretty good thing to clear this up at some point and to clarify this. There’s clearly evidence of a bit of a discrepancy or, in the Minister’s words, a disparate regime—fair enough. But why now—I mean why in May 2023, a few months out from the election, on the back of Budget urgency; why now?

This is the suspicion that I think a few of us have had, which is that there’s been a discovery, or there’s potentially a discovery, where the Crown may be missing out on revenue, and the Minister’s given us the best available estimate, I think her words were—I wrote it down. The best estimate from officials is $50 million overall. So, look, is that $50 million the Crown would prefer to have? Absolutely—times are tight for the Crown as well, and I’m sure everyone in the House would love the Crown to have that. But why now?

Has there been a development in the industry that requires us to do this, firstly, now, and, secondly, essentially immediately? I mean, this will be law by probably midnight, or at least tomorrow morning when the Governor-General signs the bill into law.

Thank you, Madam Chair. Just further to that: why now? Minister, you did describe benefits to the Crown of approximately $50 million. That means an organisation which participates in gas production or multiple organisations collectively are going to have to pay the Crown, let’s assume, $50 million. In order to generate profit from a business, typically for every $7 you earn, you get $1 in gross profit—based on my experience working in different industries. So what are we saying here? That these organisations now have to generate $350 million worth of additional revenue in order to cover this $50 million cost? It’s not clear whether the impact of this cost, on top of a host of other costs that the Government has imposed on this industry, including what appear to be excessive decommissioning costs—will these costs, which the Minister hasn’t been able to articulate—I’m picking that the industry might have to generate $350 million extra revenue in order to cover this $50 million impost.

Will all of these costs hasten the end of field life? Will these costs reduce incentives to invest in plant and equipment and production, in hydraulic fracturing—that wonderful technique developed to extract residues from gasfields that were once thought to be uneconomic? Will all of this negativity towards the gas industry, this imposition of cost, imperil New Zealand’s security of supply at a time when the international strategic situation is becoming so uncertain that our neighbours in Australia are now starting to invest in long-range missiles to defend themselves from threats to the north? Security of supply, Minister.

Will the effect of adding cost to gas production flow on to customers, to the tune of $50 million, $100 million, $300 million? And what about industrial and major users? There is a lot of major users that use natural gas—like Oji Fibre—to recycle paper that’s in cardboard collected from kerbside; like O-I Glass, who recycle glass collected from all around New Zealand. They’re the only ones who do that in New Zealand. And, of course, Methanex, which generates methanol—a product that, if you’ve got a raincoat or you’ve got a backpack and it’s water-repellent, it has probably got some methanol in it that is quite likely to have come from Methanex in Taranaki. If you use a high-end cosmetic, if you use paint, if you use any kind of petroleum hydrocarbon - based chemical in your home or in your business, it’s quite likely you have Methanex methanol in it.

So all of these costs are going to flow through into the economy and to the consumer. You described the benefit to the Crown, but you haven’t articulated the cost to the consumer and to business. And, Minister, on top of cost, I would like to know whether the Minister has been contacted by any sector representatives, anyone from the energy sector, or any stakeholders since the bill was tabled this afternoon.

Thank you, Madam Chair. It’s good to take a call in this committee of the whole House. Yeah, I find it really strange. I would like to know if there is a single company that has triggered this. Have the officials identified a company that has a resource on a pre-1986 licence that is potentially about to drill, and do some exploration? Are they doing that? Is that what’s triggered this?

The other part of my question—because, if that is the case, I mean, we should know, and we will find out, in the fullness of time, and there’s no doubt about that—but it’s such a strange thing. It doesn’t make sense to us, on this side of the House, and nothing we’ve heard from the Government members has thrown any light on to this at all; in fact, it’s made it more confusing, you know, so that makes us even more suspicious.

My second question is around if we have a platform and there’s another well drilled, another hole drilled, into the same field, horizontally drilling into that same structure—is that a new well? Or is that the same well in the same field?

Hon Gerry Brownlee: It’s a question I asked. It hasn’t been answered.

STUART SMITH: Yes, I know, and I haven’t heard an answer, and I think that’s a very fair question. Also, you can redo those particular holes, and that happens quite frequently. Is it geographically defined within a particular licence? Is it where the well penetrates the surface, whether that be the seafloor or the surface of the earth, on dry land? Or is it dependent on where the hole goes once it’s into the structure? Is it if it’s in the same layer of the structure—how far away from it before it becomes a new well?

I deeply suspect you don’t know, Minister. I deeply suspect that the officials don’t know; I deeply suspect that they haven’t done any work on it, because this whole bill has been rushed. It’s quite clear it’s been rushed. It’s quite clear that there has been very little work go on behind the scenes. If the best estimate that they can come up with is $50 million, what does that mean? Is that a wet finger in the air exercise in terms of the value of that? How did they assess that particular number? All these things would have been probably teased out, I would think—even in a quick select committee process, we would have got to the bottom of those details—but, under urgency, we are putting this bill through for some unknown reason. We could have got this through before the election. Well, maybe there’s an early election coming. Perhaps that’s the explanation.

Hon Gerry Brownlee: I think that’s happening.

STUART SMITH: I think it is. I mean, quite clearly, they’ll see that they won’t get much of a bump out of this Budget, and it’s probably a good idea to staunch the bleeding while you can, take what little—I mean, there’ll be a big disappointment that they got nothing out of the Coronation, given to the—

CHAIRPERSON (Hon Jacqui Dean): Order! Back to the matter in hand.

STUART SMITH: Well, I’m getting there, Madam Chair.

CHAIRPERSON (Hon Jacqui Dean): Back to the matter in hand.

STUART SMITH: Well, the reason that we’ve got these strange bills here is, I think, because of the worries that they have about the stability of the Government and the party dysphoria being exhibited by some people who want to hop from one party to another, not quite sure which one they belong to, and so they’re going to get these things through at the last minute and it just seems quite strange.

CHAIRPERSON (Hon Jacqui Dean): OK. Order! Order! No. Order! I did ask the member to come back to the matter in hand, and by that I meant the bill for which we are in the committee stage, and I think that beginning to disregard the warnings of the Chair is just not a respectful way to treat this committee process.

Thank you, Madam Chair. There’s a couple of questions floating around which I will address. The Hon Gerry Brownlee asked if this would apply to new deposits in the Māui field. Yes, it would, because, as you know, Māui is a pre-1986 licence; so by definition. Also, there was a question about whether this pertained to one company. I think if anyone does a scan of the licences that exist out there, there are two fields that exist in the pre-1986 regime, and that is McKee and it is Māui. So I think it’s more useful for members to think about it in terms of the fields that are there.

The previous speaker, Stuart Smith, did ask a question about what constitutes a new well. That is not the question that should be being asked. This is about deposits, so not necessarily wells. It’s about new deposits within those licensed areas. So I think that probably it’s unhelpful to think about it in terms of those.

There was a question about why now? Why now is because we have had industry seeking clarity around just these questions, around new deposits within these pre-1986 licensed areas. I think all members just need to take this back: what we are saying is: should someone who is extracting from the New Zealand owned - Crown mineral estate be paying the top-up levy to take them to what they would be doing if it was a post-1986 licence? I think everyone just needs to get this in perspective. This is about making sure that New Zealanders are getting the fair value from the Crown mineral estate, which belongs to all of us, and our Government makes absolutely no apology for standing up for New Zealanders getting the value of that estate, rather than saying that we should be charging 5 or 10 percent royalties to a company that is out of kilter with royalties that they’re paying anywhere else in the world when they’re extracting the Crown mineral estate and, indeed, that that same company would be paying in terms of the royalty plus levy if it was a post-1986 area. It is an absurdity. This is clarifying it and this is making sure that New Zealanders can extract that value.

A question for the Minister: given that there has, post the dinner break, been quite a few answers to questions that were raised in the first and second readings, how long ago was the first advice paper provided to the Minister on this? And would the most recent advice paper that led to the drafting of this bill contain this information?

And then it’s inexplicable, in my head, as to why—when it’s also plausible, as the Minister puts in her answers—was there no advice from the department that this could be a consulted matter that was dealt with by way of statute amendment? See, what’s still perplexing us is why something that is being blasély passed off as simple and, you know, of only just an updating sort of thing—bringing us up to the mark, etc.—has got its own legislation under urgency on Budget day.

So the question is: when was the first advice provided to either the Minister or a Minister; and would the latest advice have all of the information in it that the Minister’s been able to give the House this evening? We’ll get it eventually.

Thank you, Madam Chair. I will behave myself this time. The Minister has just confused matters even more. So now we know that it is a new deposit in a licence area. That’s fantastic, but I can’t see a definition of a deposit. What is a deposit? How do you define it? Is it in the same structure, is it in the same field, and is it another deposit in the same field if it is? What is that definition, and how is that determined? Is that determined by geological survey, is that determined by the company concerned identifying it through its well logs as being a different structure? How do they ascertain that that is that different structure? I mean, it’s quite a technical area, and I would suggest, as we can’t go down below the ground and have a look—

Hon Gerry Brownlee: It’s a question about stated reserves.

STUART SMITH: Stated reserves. Well, if that’s the case, we know that they change over time, as the Hon Gerry Brownlee pointed out earlier in one of his contributions, and the Māui field was estimated to go for how long?

Hon Gerry Brownlee: 30 years.

STUART SMITH: 30 years. It’s gone 45. So the stated reserves were clearly exceeded—clearly exceeded. Were they the same deposit in the Māui field? Were they not?

So this is not a simple thing, and the Minister passed it off as though it was. It’s not like a gas station. You drive along the road and you’re either at the Z garage or you’re down at the BP. It’s not quite like that; it’s much more complicated than that. But we need to know: does the Minister actually have advice on that? Because this is a pretty important point in a bill that has been rushed before this House that seems to have little in the way of justification and has certainly had little in the way of work. We understand she had some advice in December and started a work stream after that—probably after the holidays, I’d say, before any work was done. And how deep did that go? No pun intended there in terms of a well, but I would really like to have an answer to that question. Thank you.

Thank you, Madam Chair. I’d like to ask the Minister about what exactly has triggered this whole debacle of a piece of legislation being rushed through Parliament tonight, in urgency, on Budget day, when the Minister has just told us that she had advice on this in December last year.

What is the very urgent and obviously very secret nature, given that no other party in Parliament that we’re aware of—it may have been the Greens, but who would know?—was consulted, or even advised that this was coming?

Stuart Smith: The backbench didn’t know.

Hon JUDITH COLLINS: The backbench didn’t know, but that’s not that unusual given them.

So I have a question about that, which is: is there any particular instance, and does it have anything in particular to do with the fact that New Zealand Petroleum and Minerals—which is, obviously, the sector regulator and part of Ministry of Business, Innovation and Employment—initially declined the application of Greymouth Gas Turangi and that that decision was overturned by the courts as being, obviously, not within the law? It was judicially reviewed, so I just wonder if that has anything to do with it. If it’s not, then that timing is interesting. So if it’s not that case that’s driven the Government to spend all of this parliamentary time on this bill that would normally be going through a normal phase with a select committee, is there some other discovery or some other permit that the Government hasn’t alluded to yet that it’s most concerned about?

I just want to come back to some questions for the Minister that I pitched a couple of minutes ago about cost. And we do appreciate that the Crown is entitled to gain royalties from minerals, including hydrocarbons—not commonly known as “fossil gas”, as described in the legislative statement, not to any normal person who operates in the sector, anyway. Minister, what is the cost of this policy—cost to consumers, cost to the business owners? Have they provided any feedback to officials or to the Minister herself since they became aware of this legislation, or prior? Who knows—stakeholders may well have been consulted, they might have been contacted this afternoon.

Minister, what are the costs? Have any stakeholders been contacted, and have they given any feedback to officials or the Minister?

Madam Chair, just in answer to the question—I have addressed it multiple times, but I will answer it again, and, hopefully, that will be the end of the question in terms of what triggered this legislation. As I have said multiple times, what triggered this is the fact that there were members in the industry that were seeking clarity. It was unclear. It needed to be made clear. That is what has triggered the need for this legislation. I know that there is a desire on one side of the House to make it a whole lot more interesting than it is.

In terms of the question asking is there anything in particular that triggered it: no, other than officials brought to my attention the fact there was an area that needed clarity. Is it connected with the Greymouth decision? No, not to my knowledge.

In terms of feedback that I have received since this bill was tabled: no, I personally have not received feedback from the industry on it. I have not had a chance to catch up with my officials over the dinner break about whether or not they received feedback.

Thank you to the Minister for providing us with that answer. So if she hasn’t received feedback from the sector, then why would that be, when she tells us that she received feedback from the sector asking for this matter to be dealt with in this way?

I note in some of the speeches in the second reading of the bill there was somewhat of a misrepresentation of what I had said in my earlier speech. I said, “The industry had indicated that they wanted clarity.” This was when they were dealing with officials, when they were talking about the lifetime of the permit and developments that might be happening within particular licences. Of course, there is ongoing relationships and conversations between officials and permit and licence holders, and I, myself, meet with members of the industry.

I’m sure that the answer’s just been given, or will be the subject of a little more questioning from my colleague, but the thing that’s struck me is that tonight in the committee, the Minister of Energy and Resources—as Minister, you’ve said that there are only two fields that would be affected here: Māui and McKee. The permits for those fields are for the whole of the Māui field and the whole of the McKee field. So does that mean that if they continue extracting gas and can find a way to extract gas from their existing wellheads, then there is no increase in charge? Or does it mean, in fact, that if they try to increase the size of the reserve by putting another wellhead off one of the two platforms—there aren’t that many platforms out there—they would then be subject to this higher cost? I’m simply trying to make the point between trying to attract investment to get as much out of those fields as possible before they run out, while there is this supposed just transition occurring, because we don’t have an immediate fuel source available to replace the gas that’s being used inside the New Zealand economy at the present time.

As I have previously answered, this is about deposits, not wells. So that’s the more useful way to think about it.

No, no, you’re missing the point, I’m sorry. Let’s clarify that, because I saw your official run up to you. There is a thing called a licence, and the licence is issued over a geographic area, where it is assumed it is gas-controlling. So if you go outside of that area, I would say that, yes, that is a new deposit. But if it’s inside that area, it’s expected and it’s part of the capital commitment that’s been made by those companies.

As I’ve just said before, I think the P1 estimate for Māui is quite considerable—it’s another 10 years. It’s, as I’ve said over and over, 15 billion square cubic metres, I should say, of gas—a lot of gas. It’s very valuable to the New Zealand economy, providing lots of jobs on a daily basis, and needs to be there as a stopgap as other fuels are brought on to line, if, in fact, they are able to be brought on to line in that period of time. The question is: are we, in fact—well, how is that definition changing from what it’s always been, which is a licence over a geographic area, compared to a new deposit?

Thank you, Madam Chair. I’ve just done a quick word search on the primary legislation. I can’t find any reference to “deposit” in there.

We now have the Minister claiming that it is a deposit that’s important, and she’s said that several times. What is a deposit? We have to have a definition for a deposit, otherwise this is a hopeless piece of legislation if it doesn’t even mention it in there. But the definition, quite clearly—and the courts will go to the Minister’s utterances on this bill, and they’ll say, “Oh, it has to be a deposit.” What is a deposit? There is no legal definition in the levy Act, so, therefore, what does it mean? It doesn’t mean anything.

Hon Gerry Brownlee: This’ll be good.

STUART SMITH: Yeah. Well, we’ll give the Minister a minute to read the note and, hopefully, come up with something a lot better than she’s managed to give us, other than more confusion.

I repeat what we have been discussing through this committee stage: what this bill does is it will ensure that new deposits in old licensed areas are payable at the same as the deposit that the licence was granted on.

Thank you, Madam Chair. Well, that was a Sir Humphrey answer—there was nothing in that answer. We don’t know what a deposit is, Minister—that’s the point, which seems to be lost on you. The courts will not be lost on that. They are looking for this. This is a licensed area, pre-1986, and what we’ve found is that you’ve said that it’s not a new well, but it’s a deposit. It’s a new deposit—what is a new deposit? We don’t know. We’re just going round in circles. It’s a shambles—it really is.

Madam Chair, I’ve given this some quite serious thought. The only time I can see “deposits” being used is in the explanatory note, which, of course, is not actually the bill. The Minister said “the new deposits”. Well, what, is someone going out there creating new natural gas? Is that what it is? What is this? Are these new discoveries? It’s certainly not new deposits. Someone is not out there pumping some natural gas in, are they?

Simon Court: If only!

Hon JUDITH COLLINS: If only they were, says Mr Court. But we really do need to have this sorted, because it just doesn’t make sense—what the Minister has told us—and, again, the term “deposit” doesn’t seem to have any definition in the primary legislation or in this bill. So I’m just wondering: is there some other piece of legislation that the Minister can refer us to, to help give some form of explanation as to what it is we are talking about?

Thank you, Madam Chair. I wonder if one of the problems this bill is designed to solve might be revealed at the foot of the legislative statement where it describes transitional provisions. In the final sentence, Minister, the bill “validates all past levy payments as proper, and the money received has always been lawfully collected and applied.” Is there a situation, Minister, where, unless this is passed, money may have been collected and applied unlawfully or not in accordance with any particular statute?

The purpose of that clause is to make abundantly clear that this is prospective and not retrospective legislation.

We haven’t had an answer yet to this question about what constitutes a “deposit”. So my understanding—and I’m sure it’s the understanding shared by the entire geology profession—is that a gasfield is a geological structure that may expand or may be many, many square metres, if not square kilometres, of geological structure likely to contain gas. And the point about putting down a well is that it creates an escape and the pressure that the gas is trapped in is released and the gas flows to the surface. That’s roughly what happens.

But the idea that somehow there are discrete little bundles—or whatever you want to call it, like little underground lakes of gas—is complete rubbish. And I don’t know how the officials from the Crown minerals department of the Ministry of Business, Innovation and Employment can be so confused. A deposit of perhaps iron ore is very clear, because it’s one location and it’s extracted from that location. But a gasfield is vast. It’s a geological structure where tapping into it releases the pressure and lets the gas flow up.

If someone decides then what the Minister is saying—if it’s what I think you’re saying, Minister—is that if from one of Māui platforms, they put the big LiDAR lines out and they put one of those seabed well heads on and go into the structure that is part of their licence, somehow if gas flows into it, it’s a new deposit. It can’t possibly be. It is either in the structure or it’s not.

The reality is that the licence is given on the basis that the structure, in its entirety, contains gas, and that’s the reason why the upper estimates of what the field can produce keep changing. That’s why it was thought that 20 years ago it was all over. I can remember a point where they were saying that in 18 months, it’s all done and dusted. Then, next minute—or, as another sort of Taranaki-type saying would go, “Nek minnit”—the estimate is enlarged. And now we’ve gone a full 20 years over those times, and we’re getting another, apparently, 10 years under current projections of what the field can produce—it’s a 1P field.

So it’s very hard to understand why this term “new deposit” is being used. Why not just be straight upfront in the legislation and say that, “Well, from now on, the levy arrangements that were in existence before 1986 are gone, and these are the new levy arrangements.”? That would be much more honest with the public of New Zealand and certainly with the industry itself. And I think we do need an answer as to why the officials have given you advice that there is such a thing as a deposit inside a gasfield.

I move, That the question be now put.

Thank you, Madam Chair. I’m getting more confused as the Minister attempts to answer more questions. So on this issue of what is an existing deposit and what is a new deposit, back in 2018, the Government passed a law that banned any new permits. Therefore, the only place that people can currently go to get more gas is within existing permits. So I think we need to have a very clear understanding of what this word “deposit” means, because if it’s not a new permit, then it’s something existing within an existing permit. And we’re all sitting here, not clear at all on what that means in terms of new deposits, because they must all be within existing gasfields.

I think the discussion we’re having tonight in this committee exemplifies exactly why there does need to be clarity over what the exemption is. And I want to take this back. This is about the exemption, and I’m going to direct members to new subsection 6(3) in clause 5 in Part 1 of the bill that we are debating here, and I’m going to read this out: “The exemption in subsection (1)(a) does not apply to any natural gas produced from any land to which a licence relates if the licence was granted in relation to [the] discovery of natural gas made [after] 1 January 1986”—

CHAIRPERSON (Hon Jacqui Dean): Before.

Hon Dr MEGAN WOODS: Sorry, “made before”—that’s material, thank you, Madam Chair—“1 January 1986 (even if the licence was extended on or after that date).”

The wording in the exemption clause is leading to confusion. It is exactly why industry has come to officials at the Ministry of Business, Innovation and Employment asking for clarity around that. It’s about whether fossil gas production from newly producing deposits within these pre-1986 licence areas can be considered “discoveries” for the purposes of the exemption—and that is the critical part. So a newly identified deposit of gas may be found within the bounds of an old licence area, and that licence area could well be in a pre-1986 licence area. It should be payable as a levy and a low royalty rate.

Thank you, Madam Chair. Is the Minister aware of any new deposits in those fields?

I move, That the question be now put.

Just before we continue, I’m not going to accept the motion, because while we are getting close to exhausting new areas in the bill, I think there is still enough interest across the House to warrant taking some more calls. But I do note that a considerable amount of time has been spent exploring a very, very similar question. It’s not for me to judge whether that has been answered, but I would be suggesting to the committee that if they wish to keep this committee stage going, then I would imagine that exploring other aspects of this bill would be a good thing to do.

Thank you, Madam Chair. To the Minister—because I am aware that the Minister has done quite a bit of work in Taranaki—the question is one of consultation. What consultation has she had with iwi, who value and have a view around Crown minerals, particularly in the Taranaki area—if she has felt and whether she can share with the committee her consultation process, knowing that the Ministry of Business, Innovation and Employment said there was no Treaty implications from this. I’m just interested in the Minister’s view on what iwi have said around this and, I guess, the ongoing challenges they have around particularly Wai 792 and whether that has been factored in her decision here. So it’s a process question, Mr Chair.

The consultation or the conversations that officials have had have been with licence or permit holders, and, as the member will be aware, we do not have any iwi that hold, under the Crown Minerals Act, any oil or gas exploration permits. As the member will also be well aware, when we’re looking at what the new energy future looks like, particularly in our offshore new energy, the work that we are doing and progressing well around offshore wind, that is something we’re seeking to rectify, because I want our new energy future to be one that is far more inclusive.

Just before I take Mr Bennett, I’ll just say that I have been watching this debate. I heard the previous Chair, the Hon Jacqui Dean, and I am as one with her.

Yes, I understand, Mr Chair. The Minister has talked about the definition of deposits and things like that. I asked her a specific question just before that last change over in Chair.

Is the Minister aware of any new deposits? The Minister didn’t have a chance to answer it at that time. Would the Minister please answer that question now?

CHAIRPERSON (Greg O’Connor): In so far as it is relevant to the bill.

Mr Chair, yes. I think if the member had been following the debate, he would have already heard me address a similar question by one of his colleagues.

CHAIRPERSON (Greg O’Connor): Simon Court—

Point of order. The Minister has not addressed that particular question. If she has, then great, but she hasn’t.

CHAIRPERSON (Greg O’Connor): The Minister has addressed the question. The member might not be happy with the answer, but she has addressed the question.

Thank you, Mr Chair. Minister, I just want to come back to transitional provisions. I asked you previously about this description in the legislative statement: “The bill validates all past levy payments as proper.” Your response was that the bill does not do anything retrospective, and it states quite clearly that amended section 6 does not apply retrospectively. However, this is very clear language, Minister. It says the bill validates all past levy payments, which appears to be retrospective and gives rise to a concern that levy payments may have been unlawfully collected and applied. Would you please clarify, Minister?

I’m happy to clarify that. What that is saying is that it is validating all the payments that have been paid in the past according to the law as it was there, and not attempting to apply this new legislation to payments that have been made before the passage of this legislation. It is making it crystal clear that this is prospective, not retrospective.

Thank you, Mr Chair. I’d like to ask the Minister for Energy and Resources—and it has been asked, but it hasn’t been answered—why this particular bill has not gone through a select committee process. Why is it her decision to rush this through in urgency, when there is clearly a lot of interest in the bill and what its implications are for the oil and gas industry?

I move, That the question be now put.

Thank you, Mr Chair. Just a follow-up—and I want to say thank you to the Minister. That clarified her answer to consultation with iwi, and, obviously, this is around permit-holders. I just want to follow up on that question to the Minister. In their current Treaty claims, one of the issues—particularly from the Taranaki iwi—is really around ensuring that no future breaches will occur. So the question I have to the Minister: is she comfortable that the bill that we’re passing through under urgency will not further disadvantage the iwi of Taranaki as they are processing their Treaty claims to Crown-owned minerals, or to any other iwi who have an issue in this space?

I’m happy to answer the two questions that have been put. The one from the Hon Judith Collins about why we’re using this Budget urgency: what we want to do is we want to clarify this. We want to get this fixed up. We do want to be in a position that, actually, we can get that fair return for New Zealanders from the Crown mineral estate. Once you know about one of these things, it is your job as a Minister to get this fixed as quickly as possible, especially if New Zealanders may be forgoing lost revenue, which at the moment is $50 million. I can think of lots of ways in which we could help New Zealanders with $50 million.

In terms of the questions from the Hon Meka Whaitiri, I haven’t had specific advice around that. But what I would say relates to my previous answer, which is that this is actually about getting a fair return that we can then spend on our health system and on our education system, where we can address a number of things. But, as I indicated in a previous answer, it is my determination that the next phase of the energy future in Taranaki will be a far more equitable one.

The committee has considered the Energy Resources Levy Amendment Bill and reports it without amendment. I move, That the report be adopted.

This bill is set down for third reading immediately.

Third Reading