Shane Jones seeks advice on compo for oil and gas firms if rights extinguished

Wednesday, 28 February 2024

Resources Minister Shane Jones has sought advice on whether oil and gas companies could be offered “bonds” that they would able to redeem in the event that drilling rights issued by the Government were cancelled down the track.

His comments suggest they could be compensated by the public if a future government cracked down again on drilling.

Jones also revealed he was considering changes to a law passed by the former Government that was designed to reduce the risk of the cost of well clean-ups falling back on the taxpayer.

The Government has committed to reversing a ban on new offshore oil and gas exploration permits that the Labour government put in place in 2018 to help address concerns about climate change.

However, doubts have been voiced that explorers will be attracted back into the market.

That is in part because of previous disappointing drilling campaigns and global environmental concerns, but also because of the risk a future government might change tack again and stop them developing any discoveries.

“The bureaucracy is revisiting some of the burdens” on the sector, Jones said.

“We need to explore whether or not there has to be some bonds or something like that, [so] that investors in New Zealand have some way of future-proofing their investments in the event that there's some unilateral change.”

Labour energy spokesperson Megan Woods said Jones’ comments called into question whose interests he was acting in, the oil and gas industry’s or New Zealanders’.

Any financial guarantees offered to oil and gas companies would amount to subsidies for fossil fuels that the National government under John Key in 2015 sought to stamp out internationally, she said.

“Does this mean the Government is walking back from that position on subsidies for oil and gas? If that is the case they need to come clean.”

Subsidies appear to be outlawed in New Zealand’s free-trade agreement with the EU which is due to be ratified by Parliament in the next few months.

Jones indicated officials would be looking at such issues.

The former government passed a law in 2021 that placed a backstop obligation on original oil and gas permit and licence holders to pay for the decommissioning and clean-up of oil and gas wells they developed.

The law was passed in response to a debacle that saw taxpayers pick up an estimated $443 million bill for decommissioning the Tui oil field after end-of-life rights to the field were on-sold to a Malaysian company, Tamarind Taranaki, that later went bust.

Woods, then energy minister, said at the time the law was designed to ensure that incident was never repeated.

But Jones said “oil and gas people” wanted that law changed as it was a disincentive to coming back into the industry.

“We're looking at whether or not there are some ways of striking a sweeter spot between the need to protect the public's interest … and the industry's desire to help boost oil and gas back in New Zealand,” he said.

He did not deny that could see more risk go back on the taxpayer, but said the need was to find “a balance”.

“I know there are people who hate fossil fuels but I want to keep the lights on. I'm not interested in all these pink fairy tales.”

Woods said that when minister she “also came under sustained lobbying” from the oil and gas industry, which didn't want a structure in place that ensured that it was them that picked up the tab for decommissioning rather than the taxpayer.

“But I considered it my duty to look out for the interests of New Zealanders,” she said.

Greenpeace Aotearoa spokesperson Amanda Larsson described offering incentives to the oil industry and “threatening to overturn legislation designed to protect New Zealand’s oceans and coastlines from oil spills” as absolutely bonkers.

“If an overseas company takes the profits from extracting oil in New Zealand, they should be responsible for cleaning up their mess afterwards,” she said.