The Government yesterday resorted to blunt political power to force through its ban on offshore oil exploration.

The legislation allowing the ban will go Parliament’s Environment Committee.

Usually, petroleum industry legislation goes to the Economic Development Committee, but that is chaired by Jonathan Young, the New Plymouth MP  and National’s energy spokesperson.

The Environment Committee is chaired by first-term Labour MP, Deborah Russell who has already told Parliament that the Bill was the “ smallest of steps, but it is a start. “

But outside Parliament, one petroleum company, Greymouth Petroleum, announced yesterday that it was taking legal action not only against the proposed ban but also against the Coalition Government”s refusal earlier this year to issue it an exploration permit before the ban was even announced.

Meanwhile a Wellington shareholding firm has issued an analysis of last week’s controversial Regulatory Impact Statement on the legislation saying it has underestimated the full economic impact.

But the immediate issue yesterday was the Government’s decision to send the legislation to the Environment Committee and to allow only two weeks for submissions to be prepared and submitted and then another two weeks for those submission to be heard.

This time frame is highly unusual. 

As an example,  the other controversial Bill before the committee, the Conservation (Indigenous Freshwater Fish) Amendment Bill, has allowed six weeks for submissions to be submitted and is not required to be reported till March 12, next year.

Why the rush?


Energy Minister Megan Woods on Monday gave as a reason for the four weeks for submissions and hearings “the need to proceed with Block Offer 2018 under these new settings in a prompt manner”.

The block offer is the Government’s call for bids to explore specific geographic areas.

But the petroleum industry yesterday said it would be prepared to forgo this year’s block offer if it allowed the Committee more time.

“Given the strong public interest and enormous ramifications of this decision, it’s crucial this process isn’t rushed,” says Petroleum Exploration and Production Association CEO Cameron Madgwick. 

“Our industry doesn’t want a Block Offer this year if it means an undemocratic process. 

“This means there should be no reason now for urgency. 

“The legislative changes in the bill involves serious economic and environmental issues and go even further than expected. 

“There needs to be proper scrutiny of the impacts through a normal four to six-month select committee process. 

“The entire process has been a disgrace with no warning, no consultation and the Government trashing their own expert advice on the devastating impacts of this policy.” 

National’s Jonathan Young said the decision to cut his Committee out of hearing the submissions on the mill meant it would go to a  committee that hasn’t handled Crown Minerals legislation before.

“All previous Crown Minerals amendment bills have gone before the Economic Development Select Committee.,” he said.

“Indeed (Energy Minister Megan) Woods reports to the Economic Development committee in her capacity as Minister of Energy and Resources.

“But the greater concern is that the committee is chaired by Labour backbench MP Deborah Russell, a vocal opponent of the oil and gas industry.”

They want to burn the earth

During the course of the debate on the introduction of the Bill late on Wednesday, Russell claimed that National MPs demonstrated and demanded ongoing commitment to fossil fuels,

”I say that calling themselves blue-green is an utter charade, and they should just stick to their knitting and promote “business, business, business; drill, drill, drill—we don’t care about the future,” she said.

She described National as “the party in this House which has a systematic disregard of people”, and she said it was the party that wanted “to burn the earth.”

Despite this, she maintained she would be able to run “the best select committee process” she could.

“It will be open, we will consult widely, and we will take as many submissions as we can get

“We will hear from them all, we will take them seriously, and we will take them seriously from all parts of the community, from people who are committed to the environment to people who are part of the fossil fuel industry.

“We want to hear from them all, and I invite those people to please send their submissions in.

“We want to hear from them, and we will respond to them sincerely, honestly, and openly, because that’s kind of select committee I run.”

But there is an understandable lack of faith from within the petroleum industry because of the way the Government has gone about implementing the ban.

Last week’s Regulatory Impact Assessment prepared by the Ministry of Business, Innovation and Employment was dismissed in Parliament by acting Prime Minister Winston Peters.

“When a body of research begins with the cost possibly being $200 million or $8 billion or $22 billion, and possibly higher—as I have said, if NASA had that sort of accuracy, then Neil Armstrong would be still trying to find the moon,” he said.

Economic impact under-estimated

But John Kidd, a long experienced petroleum industry analyst from Woodward Partners sharebroking firm in Wellington in a report issued this week said that the Impact Statement seriously underestimated the total economic impact of the decision.

“The analysis is confined to microeconomic impacts and does not provide for macroeconomic impacts to GDP and its constituents (balance of payments, regional development, employment et al,” he wrote.

Because of the uncertainty attached to oil exploration, it is usual to express forecasts as a range rather than one specific number.

So the statement has a number of different scenarios but under one where the ban on offshore drilling lasted only until 2020 then the total loss to the Government out to 2050 would be between $44 million and $12 billion.

But Kidd points out that the Bill commits to running Block Offers in each of 2018, 2019 and 2020 but leaves later years as open, saying “onshore Taranaki block offers can, but are not required to, run beyond 2020.”

“The positioning feels to be one of formalising an option to cease block offers altogether from 2021,” he said.

In that case, the loss to the crown out to 2050 could be as high as $26.7 billion.

The losses to the petroleum companies could also be massive and yesterday New Zealand’s second largest company, Greymouth Petroleum, began what could become a procession of them through the courts as they seek redress for the ban.

Legal action

Greymouth Chair and CEO, Mark Dunphy, told POLITIK that the company hopes to discover why it was not awarded a permit to explore an offshore Taranaki block in last year’s block offer and why the permit went to a Chinese company instead.

The allocation was made after the coalition government was formed.

“What happened? Well, we had a change of Government,” he said.

“Whether there is bias or prejudice and whether it is at Ministerial level or the level of the officials, we don’t know.

“But we intend to find out through discovery in the normal process.”

Greymouth is also seeking to have the Prime Minister’s April statement announcing the offshore ban declared unlawful.

The Prime Minister’s Statement may represent the preferred policy position but this Statement did not comply with the process required by our law, and this will be clarified by the High Court.,” the company said in a statement.

“The policy change is abrupt, counterproductive, comes too soon and will add to current gas shortages and further increase gas and petroleum prices.”

Dunphy says there are signs that there is already a shortage of gas.

He said that since April, the spot price of gas on the wholesale market had climbed from $5 per gigajoule to $10.75 on Wednesday night.

“You can’t buy a molecule of gas if you want to in the normal traded parcels,” he said.

But the logic of the petroleum industry is up against the ideology and politics of the Government on this whole issue. And the message for the petroleum energy industry is that it is the Government who has the power.