Crown Minerals Amendment Bill

Members, we now come to the Minister’s amendments to Part 3. This is the debate on amendments to clause 36, new clauses 36A to 36C, 37, 38, 39, 40, 43, 44, 45, 45A and 45B, new clauses 46AAA, 47A and 47B, clause 49, and amendments to the Schedule, set out on Amendment Paper 343. The question is that the Minister’s amendments to Part 3 set out on Amendment Paper 343 be agreed to.

Thank you, Madam Chair. Short question to start with—on new clause 36A, inserted by clause 36, so on page 13. This is about the decommissioning and totally removing it, and then there’s some exemptions, but then at subsection (2A), it says: “Despite subsection (2), an item of infrastructure left in place in accordance with an exemption … must be treated as having been decommissioned.” So I take that to mean that oil and gas infrastructure can be left to contaminate the seabed. I wonder, with the Minister, has he consulted the Minister for Oceans and Fisheries about the impacts that leaving such infrastructure on the seabed could have?

Also, going back to the questions that we were having in Part 2 that are relevant to Part 3, as well, on the people who were consulted on this amendment: I know the Minister has said that there’s been no consultation with environmental groups or iwi groups, but has there been consultation with the type of people who know how to decommission this large infrastructure in a difficult environment?

Also, the guarantees—I know the guarantees might be more in Part 2 of the bill that we just closed off, but it is relevant, the guarantee, to the decommissioning and the cost of decommissioning, because, of course, if an incorrect cost is assumed for the cost of decommissioning earlier on in a process, and it turns out that it’s actually going to be a much larger cost to decommission because of—who knows; it might be health and safety laws. Who knows what might change, but the decommissioning might be more expensive than first anticipated. So how is the financial mechanism going to provide for that increase in cost of decommissioning, and did the Minister consult with any of the financial institutions that might provide that sort of guarantee to work out how much the liability is?

Thank you, Madam Chair. Extending on those questions from my colleague Rachel Brooking—the decommissioning cost is a crucial question. One thing that, also, we didn’t get to ask in Part 2 was how the evaluations are made for the appropriate level of liability or guarantee that is to be set aside for different forms of petroleum exploration. We know that shallow wells have costs associated, but a deep-water well would have significantly more costs in terms of decommissioning. What are the evaluations that are made? What are the means by which the nature and extent of an outgoing guarantee may vary between these different types of wells? That’s the essence of my question. Thank you.

Thank you, Madam Chair. My questions pertain to new clauses 36B and 36C. That’s page 13 of the Amendment Paper.

What we know is that this Amendment Paper, in essence, what it’s doing is it’s removing automatic liability for the cost of decommissioning—which has been covered off in questions from the Hon Rachel Brooking and from Steve Abel—from those previous permit holders. But more importantly, and also one of the things that the legislation that we put in place in 2021 did, was it brought in associated criminal offences and pecuniary penalties for failing to meet the cost of decommissioning. But this Amendment Paper is removing all of that. It is a complete watering down of those protections that were there for the New Zealand taxpayer.

What we see from new clause 36B is that removal of their automatic liability and the associated criminal offences from a person with a participating interest in a permit, whenever that was granted, who transfers all or any part of their participating interest in the permit. Then 36C does that “from a licence holder or any person with a participating interest in a licence who transfers the licence or all or any part of their participating interest in the licence (see the repeal of section 89K(2) by new clause 36C, inserted by this Amendment Paper).”

So what I would like to know from the Minister—and he never addressed the question in Part 2, but it pertains as much to Part 3 as it does to the question of the five policy options that are spelt out in the annex to the regulatory impact statement that were considered. What was it that made him settle on the preferred option, option four, that the Government ultimately went with? Why was it that it was ministerial discretion to decide these things that were decided on? We haven’t had a policy explanation from the Minister about—sure, he may have seen that there were some problems with the bill he’d brought to the House and that it needed to be tidied up, but there’s a leapfrog away from having those decisions laid out in statute to then giving discretionary power to a Minister to decide. That has not been adequately explained to the House.

What was the policy rationale between not only the first and second reading and the select committee stage and the committee of the whole House, that we get to the point where the bill is looking for its third reading and that scrutiny has already happened, and there is such a fundamental shift, going from a decision that is defined by statute, to giving discretionary power to a Minister to make that decision? That needs to be spelt out.

It wasn’t all of the options that were put to the Minister. He’s told us that the explanation was that he wanted to see the industry blossom. Well, there is no causal connection. He needs to explain to us how it is that giving a Minister the discretionary power to do it is going to lead to that particular outcome, because the logic simply doesn’t follow and it doesn’t stack up. What was the advice that he received that actually saying to multinational companies, “You can come to New Zealand, and if you just leave your mess for New Zealand taxpayers to leave up, don’t worry, there’s no penalties. I’m removing those in the legislation as well and letting you off scot-free.”—what was the rationale that led him to that?

Now, the rationale is best conceived in the following way: this piece of legislation is a response to the worst energy natural resource decision ever recorded since the Treaty of Waitangi. Sadly, the main instigator is a political fugitive from electoral justice living at Harvard, so it has fallen to our Government. With the stroke of genius in new clauses 36A and 36B, it posits the responsibility with a Minister to make the judgment as to what flexibility—because no statute, no bureaucrat can know all the scenarios, and as a consequence of these two clauses, the policy intent is absolutely clear. We are not going to trust our economy, corrode the productivity of our economy, by denying ourselves access to fossil fuels. The high-tide mark of that heresy has come and gone. That is why, in every speech I give about this bill, I am hailed and feted by all four corners of our motu.

Thank you, Madam Chair. I think the Minister needs to realise this is a committee of the whole House stage, where there are very particular questions put about individual sections of the bill. The Minister has theoretically opened this debate up to any energy decision made since the Treaty of Waitangi was signed with the contribution that he just gave. So I do encourage the Minister to actually start addressing the questions that are put to him. They are serious questions. This is a very atypical process that this bill is going through in that it has been recommitted to the House and is bypassing that scrutiny that it had previously gone through at select committee stage and the committee of the whole House. It’s made some fundamental changes, not least of all the Minister giving himself discretionary power.

Now, that is something that a Minister should come to this House prepared to answer questions about, not engage in hyperbole. They should actually be on top of the bills that they bring to this House and be able to answer basic questions like “What does this section do?”. That is not too much to ask of a Minister, and we haven’t been able to get any of that detail out of this Minister in the time that he has sat in the chair. Don’t worry, Madam Chair, I’m not going to engage with every energy decision since 1840, which the Minister has brought into scope of this debate. So he may want to curb his enthusiasm while he sits in that chair, because he’s broadening the debate with every utterance he makes.

But I go back to the policy rationale. We are asking for this. It has not been adequately explained why it is that it requires ministerial discretionary decision-making to make it. Now, I might not agree, and I don’t agree, with the changes the Minister is making, but why could he not pursue those through the original amendment bill that he brought, which wasn’t through ministerial discretion making? There was a different route to do that and there were five options that were considered by his officials that are laid out in the regulatory impact statement.

I’m not debating on this occasion the merits of the decision. I’m just asking about why he has chosen this particular route. The committee does need to understand that. It’s not enough just to say that he wants to be heralded from all four corners of the land—that just makes no sense. Why is it—what is the causal connection between ministerial discretion and what he thinks are the desired outcomes? The committee is still waiting and the committee deserves to know.

Thank you very much, Madam Chair. I take the first call on this piece of legislation, as someone who did represent an area that arguably had the largest reserves of hydrocarbons and mining. I’m not going to go off onto a wider tangent—I’m tempted to—but I will focus on the issue and the points being discussed now, and that is ministerial discretion.

The Minister will himself know that we have three-year terms in this Government, and if indeed he is looking to support the mining sector—and, coming from a region that has quite a history of mining, of decisions, good and bad, that have been made, some by politicians, others by heads of companies; decisions that have left the region of the West Coast in a mixed kind of situation. At the moment, it’s OK. If you had a look and tried to assess the value of mining to the economy or to the community, you would expect that every person on the West Coast would be a multimillionaire. We should be multimillionaires. There have, literally, been billions and billions of dollars of resources taken from the West Coast region and, indeed, still are being taken from our region. We have towns that can’t even put in a decent water-supply system. We have ratepayers who can’t afford to pay rates. So the mining doesn’t guarantee benefits and prosperity to the communities—neither, indeed, to the wider community.

The question of who makes the decisions as to whether these projects should go ahead or whether we have prospecting is a proposition put forward by the Minister, that the Minister should—he should be reminded that there are a lot of people working around this country to ensure that there might be a Green Minister in 18 months or 20 months. Is that, indeed, what the Minister is seeking? That is a realistic outcome. What we do in this House is to try to balance decision making by politicians and Ministers against the independence of quasi-Government organisations—or, indeed, it might be put out to an independent authority, where there’s total independent decision-making; semi-independent back, where a Minister has oversight of a Government organisation; or it could be the Minister, as is being proposed here.

What goes around comes around, and I’d suggest, and the Minister will know this, that to offer certainty, as he’s trying to do, for the mining sector, for the prospecting and hydrocarbon sector—they need a more robust and consistent process than the whims of a Minister. Because as I say, what goes around comes around. He may be aware of this, but not everyone is supportive of his proposals across the wider economy. I certainly understand and see the value of mining, but we are living in a world that is moving away from hydrocarbons. That reality must be taken on board.

Trying to give assurance to prospecting companies that the Minister of the day is very supportive—and we would certainly acknowledge that—and that that will continue beyond the next election is actually a falsehood. The Minister can no longer give an assurance beyond the next term because of the independence of this parliamentary system. Some people like it, some people don’t. But the question of ministerial decision-making does come with a lot of risks, and it is important that those risks are tabled in this House here today.

The Minister, I’m sure, will take a call, and I ask the question: has he considered a more independent process, to give more assurance to the mining sector that, in fact, the decisions made by him will, indeed, be enduring, or could they perhaps be overturned by a Minister with another set of objectives?

I thank the honourable member for that contribution. In my delivery this evening, I have not obfuscated the fact of a cardinal choice, a decision that was made to go for the Minister, who him- or herself will be accountable under this legislation. Potentially, his or her acts will be justiciable. That is how our system works. That politician, that Minister, is, yes, as the honourable member said, going to be able to exercise a certain level of discretion against criteria laid out—and I don’t want to belabour it, because I have referred incessantly to the criteria upon which she or he will make the decision. It is a choice that was taken by our Government. Yes, there were other choices, but we have decided, given where we are in the arc of our nation’s journey to secure affordable, secure, and sustainable energy sources, the decision we’ve made.

Thank you, Madam Chair. This is the first time I’ve risen to take a call on this question, and I appreciate the Minister for Resources’ explanation of the arc of our nation’s journey towards our energy future. I’m thinking here about new clause 36A, “Section 89E amended (Decommissioning)”, as well, and, in particular, the ministerial discretion around decommissioning. If we look at the other forms of legislation that are out there at the moment, why are we rushing through, or having this messy process that we’ve had with this bill—where we’ve got an amendment upon an amendment for a bill—to try and complicate things even further?

My question to the Minister, really, is: why are we not seeing some greater consistency across Government bills? We have the Offshore Renewable Energy Bill, which has a very different regime for decommissioning, and I’m concerned. But the Minister could explain whether there is a reason why this is distinct, and why the decommissioning here is simply to give it ministerial discretion, rather than a more consistent decommissioning regime that allows for environmental concerns and that allows for other users to be taken into account. The Minister might like to respond directly and, hopefully, with a bit more clarity.

I think it is important that we have consistency in our legislation and that it makes sense that there are not too many bits that just jar, because we’ve already seen what happens when we have to amend an amendment to legislation, and it’s just poor process. So if the Minister could explain why we aren’t following a simple process, that would be helpful. Thank you.

Thank you, Madam Chair. I’d like to go to clause 44 of the Amendment Paper, on page 16, which is the exemption powers of the Minister, section 89ZZA, and that’s amended and replaced with “The Minister may, if they consider it appropriate and if satisfied that the criteria in section 89ZZB(1) are satisfied, exempt a permit holder or license holder from the obligation to carry out and meet the costs of any post-decommissioning work.”

Now, I think this strikes at the heart of the questions that we’re asking, these exemptions powers, these discretionary powers that the Minister is going to hold—the Minister of the day, whoever that is, is going to hold—under this legislation. I think what the committee would like—and certainly on this side of the committee we’d like to understand: “if they consider it appropriate and if satisfied”. This is quite unusual wording in a piece of legislation. Usually, it would be that a Minister would exercise discretion if a set of criteria set out in a different clause of the Act was satisfied. But this Act has quite a different and quite a unique turn of phrase in it: “if they consider it appropriate and if satisfied”.

I’d like the Minister to explain exactly how that will be exercised, what that means, how that is different than the criteria in section 89ZZB(1) being satisfied and fulfilled, what the appropriate test actually looks like—is it a subjective test? Are there some objective measures around it? How does the Minister consider that that will be exercised, and what are the policy discussions that have gone in to say that it needed to not just be that if the conditions in section 89ZZB(1) are satisfied, then the Minister can make this decision and come up with an exemption? Why is it that we’ve got that quite unusual wording in that clause?

Thank you, Madam Chair. Helpfully, my question is also on clause 44, but a different question, because what clause 44 does is replaces amended section 89ZZA(1) with what the Hon Dr Megan Woods has just read out. But the principal Act has another bit in it that is being deleted by this, which is it requires an “obligation to obtain and maintain a financial security under section 89ZV(1)(b)”. And if we look at 89ZV(1)(b)—that’s at clause 33—it amends 89ZV to, again, remove the phrase that talks about “obtain and maintain” a financial obligation.

So my question is: this deletion of having to obtain and maintain a financial security, is that something specific to this amendment of the amendment bill, or how is this explained in terms of the explanatory note and the other issues that the Minister has talked about? Is there somewhere else that has a requirement to obtain and maintain a financial security, or is it now just gone—no financial security is required?

I think the contributors are confusing two regimes. The regime that imposes the vast majority of the liability, in terms of environmental outcomes, is not this statute. What this statute does is it gives an elected politician, or the Crown warrant, within the guardrails of this Act, the ability to exercise some flexibility in terms of the final decommissioning obligations in this statute. It is wrong to suggest that it erodes liability imposed under other statutes. I have traversed why our Government has plonked for this particular approach. There, really, is nothing that I can usefully add, because it’s striking a wall of indifference.

Thank you, Madam Chair. I think it is important in these sorts of instances, because what we are seeing here is that the further we get into this amendment, based on the Minister’s response, it’s a worrying trend of the extent of the executive power on the way that we’re able to move regulations, and the way that we’re looking at legislation and legislation-making power, which I think is a concern, not just simply for this particular bill but in terms of the way that our system works in general.

I wanted to draw the attention of the Minister to a specific area—and I know that other people have lots more to talk about in terms of decommissioning. But I wanted to draw the Minister’s attention to the Schedule. Now, in the amendments to the Schedule—and I’m looking at the new clause 45 that replaces clause 45, as an example—actually, I’m going to go with new clause 44 and new clause 45, which is in the Crown Minerals Amendment Bill, regarding tier 3 permits—

CHAIRPERSON (Barbara Kuriger): Which page are you specifically referring to?

Dr LAWRENCE XU-NAN: I am looking at pages 18 and 19 of the new Amendment Paper 343, which is referring to pages 31 and 32 of the old Amendment Paper 214. On pages 18 and 19, we’re looking at clauses 44 and 45 in the Schedule, which was previously tier 3 permits. I’ll talk about financial securities if I get another opportunity, but I want to focus on these two first, because one of the first striking differences here is that rather than giving a specific date, as it has done in the previous amendment bill, what we have seen is a date that is now done by Order in Council. Granted, the original date has already passed, which was 30 June 2025, but I wanted to ask as my first question to the Minister why a concrete date hasn’t been given in this case and why, instead, we will be requiring an Order in Council for a new date. That’s my first question.

My second question is this: in the Schedule, in new clause 45, “Existing Tier 2 permits may become Tier 3 permits”, under the existing amendment bill, at new clause 45, it does mention that a Minister must consider different criteria. In this case, subclause (3) says that “The Minister must—(a) consider whether the permit satisfies the requirements of a Tier 3 permit as set out in section 2B(2A);”. However, there was no part in the previous Amendment Paper that had subclause (3)(b) mentioned at all, which determines “whether the permit area is an appropriate area.” This is a new clause that’s been added in this new Amendment Paper, which is different from the previous one. So my second question to the Minister is: what is the rationale for adding in this specific clause? Considering it doesn’t need to meet the criteria set out in section 2B(2A) because it’s a different subclause, what is, then, the Minister’s definition for “appropriate”?

Thank you. Going back to the Minister for Resources’ answer about my question around the deletion of “to obtain and maintain a financial security”, the Minister said that’s to do with different Acts. I’m quoting from the principal Act, the Crown Minerals Act. Then, we turn over the pages and we hear what our colleague has just spoken about in terms of financial securities at page 19 and that being a transitional provision. So, surely, the answer to my question, Minister, is that you are removing the need for a financial security under your amendment and that is what your change is. If it’s not—if it’s somewhere else in the legislation—could you point us to it? If the Minister is saying that it’s somewhere in some other legislation, I’m interested in that, as well, but to say that it’s not governed by the legislation is wrong. It is governed by the Crown Minerals Act. The Minister may want to say that his changes will mean that it’s not included in the Act, when this bill becomes an Act, but those are two different points, and so I’d like the Minister to clarify that point, please.

Thank you, Madam Chair. I’d now like to turn my attention to clause 40 on page 15 of the Amendment Paper. What clause 40, and I think 39 before it, if I’m not mistaken, do is they amend sections 89M and 89U of the Crown Minerals Act. They are the sections—89M and 89U—being repealed, and that, effectively, removes the liability for former permit and licence holders. This is a category that we haven’t talked about. We’ve talked about current operations, and what happens if there’s a transfer of those assets and the shareholdings change. But what we haven’t talked about is those former permit and licence holders and what risks this poses to the Crown.

What I’d like to know from the Minister is whether or not there was any economic modelling of the risk to the Crown in terms of potential costs? We know that there’s about a $2.5 billion decommissioning cost out there, in New Zealand, in terms of what these changes mean, in terms of that risk profile to the Crown and, therefore, the New Zealand taxpayer. And if that modelling doesn’t exist, why didn’t he ask for that?

Obviously, this legislation in no way negates the existence of an obligation enforceable against a permit holder to ensure that they’re held responsible for decommissioning outcomes, subject to the discretion exercised by the Minister. Now, I accept that it is a philosophical or institutional policy decision that our Government has taken which is at odds with the prosecutors in the Opposition, but it is what it is.

I move, That debate on this question now close.

I’d just like to follow up on that answer that the Minister gave. Obviously, we hold very different views on this, but what I would like to know from the Minister is whether or not economic modelling was done around the risk profile to the Crown, and if it wasn’t, why he didn’t ask for that.

Thank you, Madam Chair. I’m interested in page 19, which is to do with the Schedule at clause 45, “Existing Tier 2 permits may become Tier 3 permits”, and I’m wondering if the Minister can explain why we have this provision. Wouldn’t it be better that tier 2 permits remained tier 2 permits and didn’t become tier 3 permits?

I’m just puzzling my way through the amendments, and in the original Act, it’s to section 89ZZA. Now, in the amendment bill, it was amended by clause 44. And now, in the amendment to the amendment bill, it is being amended yet again. In effect, it’s worth just ignoring what’s gone through in the Crown Minerals Amendment Bill and just going straight from the source legislation—the parent legislation, as it were—to the—

Hon Rachel Brooking: The principal legislation.

Hon Dr DEBORAH RUSSELL: —the principal legislation; I knew there must be a lawyer’s term for that, thank you—to what’s sitting in the amendment bill. So, in the exemption part, the amended section 89ZZA is another one which gives the Minister exemption powers. It’s been there quite some time—well, it was inserted on 1 December 2023, so that’s quite interesting. But they say: “(1) The Minister may, if they consider it appropriate and if satisfied that the criteria in section 89ZZB(1)(a) or (b) are satisfied, exempt a permit holder or a licence holder from the obligation to pay all or part of any amount the person would otherwise be required to pay under section 89ZV(1)(a) or from the obligation to obtain and maintain a financial security under section 89ZV(1)(b).”

So that’s the section in the principal legislation. But by the time it’s amended: “(1) The Minister may, if they consider it appropriate and if satisfied that the criteria in section 89ZZB(1) are satisfied, exempt a permit holder or a licence holder from the obligation to carry out and meet the costs of any post-decommissioning work.” So, previously, as far as I can tell, because this is not legislation I’m especially familiar with, a permit holder or a licence holder would have posted a bond, they’d have had to pay something, they had to maintain a financial security, and the Minister could grant an exemption from that.

Now, that bit around actually paying some money upfront that the Minister can exempt people from is that the Minister can now exempt someone from actually carrying out and meeting the costs of any post-decommissioning work. So there’s a little bit of an analysis that’s needed here, because under the old section that’s sitting in the principal Act, the person would have been required to pay some money—presumably quite a lot, because this is expensive stuff—but now they, under the ministerial discretion, can be exempted from the obligation to carry out and meet any of the costs of the post-commissioning work. So there’s a shift there.

What I want to know, given that it’s been changed around like this, is the extent to which any modelling was done on this about the amounts of money that might be involved and what the costs might have been to the petroleum exploration companies or whoever is doing the work or whatever, or, alternatively, what the residual cost to the Crown might be. That’s the bit that really worries me. You see, the difficulty is that we know from the Tamarind experience that the cost to the Crown was quite extraordinary in terms of cleaning up the mess that was left behind.

So what I’m looking for is whether the Minister requested any advice in changing from the original section 89ZZA to this new section 89ZZA, where the change is from paying a sum of money to actually paying the cost of any post-commissioning work, and the Minister can exempt the person from doing that. What I’m looking for is just whether the Minister sought any advice on that, any modelling on it, any quantification of the numbers involved. The reason this is important is, of course, if the Minister issues an exemption, then the people who clean up the mess are the New Zealand taxpayers who end up paying the sums there. So I’m hoping that the Minister has requested some advice on that.

The advice taken was of a highly professional nature. It was within the bounds of proper conduct from our professional civil service. There is a clear pathway forward in each of these clauses, which shows that liabilities can still be imposed, costs can still be recovered. But the genius of the bill is that it ensconces a Minister, entrusted with the interests of the entire nation, to effect rational, flexible outcomes. And upon that note, here endeth the lesson.

I move, That debate on this question now close.

The question is that the Minister’s amendments to Part 3 set out on Amendment Paper 343 be agreed to.

The amendments are agreed to; therefore, Part 3 as amended stands part.

The question is—on the Schedule, where there is no debate—that the Minister’s amendments to the Schedule set out on Amendment Paper 343 be agreed to.

The amendments are agreed to; therefore, the Schedule as amended stands part.

Amendments to Clause 2 set out on Amendment Paper 343