Pipeline crisis undermines National's claim to being the government of infrastructure

Thursday, 21 September 2017

People hit pipes all the time in New Zealand, but usually the consequences are more limited.

OPINION: It is possibly the most New Zealand story imaginable. Someone with a digger strikes a pipe. These things happen, right?

All the time, although normally the consequences are a little less dramatic.

Air New Zealand has gone to great lengths to minimise the disruption to passengers, flying two of its long haul jets to Wellington purely to refuel.

For National, a party which wants to be known as the government of infrastructure, the Auckland jet fuel crisis could not be more embarrassing.

National has done everything it can to promote itself in this way. Billions of dollars has been spent on roading, and the major projects are so important, apparently, that they are 'roads of national significance'.

Judith Collins' handling of the Auckland jet fuel crisis has been impressive, but even she has been unable to come up with a sensible answer as to why her Government has ignored the risks posed by the pipeline.

* Auckland Airport jet fuel rationing regime in place until next Thursday

* Petrol industry spokesman urges Auckland motorists to keep calm and carry on

* Z Energy warned Government in 2012 about high risk of jet fuel outage at Auckland Airport**

But if this week shows anything, it is that certain pieces of infrastructure in our long, narrow, nation are of far greater national significance than the road from Puhoi to Wellsford or the Kapiti Expressway.

The refinery to Auckland pipeline is hardly sexy. It appears few outside the fuel industry were even aware it existed a week ago.

How could it possibly be that one pipe carries three different grades of fuel, let alone carry virtually all of the fuel used in New Zealand's largest city and largest airport?

But it is true, and the industry was acutely aware of the risks. Despite warnings, and even a proposed solution from one of the major players, the Government seems to have been prepared to look away, on the basis that it was deemed a 'one in 100 year event' and a solution seemed expensive.

It could have been much worse.

The crisis has been handled by Air New Zealand with aplomb. Despite major rationing at its hub, only a small proportion of its flights have been cancelled, thanks to the lengths it has gone to.

This included the embarrassing symbolism of flying empty wide-bodied planes for refuelling into Wellington, an airport where it has led a concerted campaign to oppose the proposed runway extension.

That New Zealand's often maligned petrol industry has managed to keep enough fuel in Auckland demonstrates it is a capable and nimble sector.

Aucklanders too, deserve credit. The thing that would have made this a real crisis would have been panic buying early in the week. But the city appears to have kept calm, when for any individual, it made sense to immediately buy fuel.

There is one National minister to come out of this looking pretty good. Judith Collins was a surprise choice for the energy and resources portfolio, but in less than a year she has already put the industry on notice that steadily increasing margins will not simply be tolerated.

Her handling of the response to the crisis has calm and coordinated.

Even in taking questions on the warnings about the risk the pipeline posed, she advanced the best argument available to National: blame everyone else.

Collins pointed out that Labour has also been warned about the risk of the pipeline, and that the industry is earning good margins. Both points are true, but irrelevant.

The fact is National sought a review of oil security, and that review highlighted abject market failure to invest in security of supply.

Air New Zealand warned of the threat to its business, while Z Energy not only warned of the threat to the airport, it called for intervention in its industry.

The opening bid the petrol company came up with was to invest on a return equivalent to its cost of capital - it is possible the Government could have extracted a better deal, especially amid rising returns.

But instead the government opted to take a range of inconsequential measures, and leave infrastructure up to the market, without even seeming to explore a solution.