We appreciate this brief window of opportunity to submit on the Crown Minerals Amendment Bill.

350 Aotearoa opposes the Crown Minerals Amendment Bill (2024). 

350 Aotearoa is the New Zealand arm of the international climate movement 350.org which aims to unite the world around climate change solutions. We coordinate local campaigns by providing education, practical tools, and support for community leadership. Our campaigns challenge the cultural acceptance of fossil fuels and encourage tangible change in Aotearoa New Zealand towards an equitable zero-carbon economy. 

350 Aotearoa is guided by the four articles of Te Tiriti o Waitangi in conjunction with He Whakaputanga o te Rangatiratanga o Nū Tīrene. We tautoko whānau, hapū and iwi assertions of mana motuhake and tino rangatiratanga and that hapū in Aotearoa never ceded sovereignty. We recognise Mātauranga Māori is at the forefront of achieving climate justice in Aotearoa and our response to climate justice is guided, sustained and strengthened by the tangata whenua assertion of Tino rangatiratanga. 

The climate crisis is an intersectional issue that continues to uphold capitalist, colonial, white supremacist systems of oppression – and therefore disproportionately impacts marginalised communities. 350 Aotearoa asserts that climate justice is only possible when whānau, hapū and iwi can realise kaitiakitanga and their aspirations for their rohe. As the climate crisis escalates, we know that Indigenous peoples are providing determined leadership not just for cuts to emissions, but for a Papatūānuku-driven approach to our environment. In Aotearoa, this can be witnessed from land restoration projects to Indigenous-led resistance to oil drilling.

In 2018, we strongly supported legislating an end to new petroleum prospecting, exploration and mining permits in offshore and onshore New Zealand. Ending fossil fuel extraction is a necessary and urgent step in the effort to meet the pressing need to curb global temperatures to 1.5°C. 

The New Zealand Government’s commitment to our international (Paris Agreement – 2015) and domestic (Climate Change Response [Zero Carbon] Amendment Act – 2019) climate obligations must be central to the decision making in this field of legislation. Our actions as a nation need to be consistent with climate science, and accountable to those already facing the impacts of climate change. 

The urgency for keeping the oil and gas ban in legislation has never been greater. In order to limit global warming to 1.5°C, the total future global emissions between now and the year 2100 must not exceed 120 GtCO2e. Yet, the known fossil fuel reserves, if burnt, would equate to between 23 and 45 times this limit. This calls for an absolute end to new fossil fuel projects, immediately. 

The oil and gas exploration ban announcement in 2018 followed a decade of New Zealanders calling for the ban through petitions, submissions, rallies, and community engagement. This was evident in the Select Committee process at the time, with an overwhelming 85% of over 7000 submissions on the Bill in support of the ban on oil and gas exploration, with many pushing for the then government to be even more ambitious in their efforts to address climate change.

Aotearoa’s energy problem

Everybody should have the right to clean, affordable electricity. For many in Aotearoa today, we know that’s not the case. Around 300,000 New Zealanders are living in energy hardship – struggling to heat their homes and keep the lights on. Household power bills have increased by 42% over the last 14 years, while renewable electricity generation has stayed around 85% for half a century now. We have so much untapped potential for increasing our renewable energy generation, but the current barriers are corporate greed and a lack of political will.

The reason we are in this mess is that industry giants have starved our energy system of renewables investment, and instead filled the pockets of their shareholders by the eye-watering amount of over 10 billion dollars this last decade. By paying out excess dividends to shareholders, the four big “Gentailers” – Genesis, Mercury, Meridian, and Contact Energy, ensure that there is never sufficient investment capital to expand new renewable generation. 

Our updated report ‘Generating Scarcity – How the gentailers hike electricity prices and halt decarbonisation’ (by NZCTU, First Union and us, 350 Aotearoa) details that in 2023, the Generator-Retailers distributed $1,108 million in dividends to shareholders – from net profit after tax of only $521 million – an excess dividend of $638 million in just one year. Before this, from 2014 until 2021, the four big generator-retailer firms (the gentailers) distributed $8.7 billion in dividends off only $5.35 billion earned in profits. The report shows that systemic underinvestment in generating capacity has enabled excess dividend distribution, leaving New Zealand’s generating capacity practically flat over the last decade. Those companies have a perverse incentive to keep fossil fuels (coal, oil, gas) in the grid as it hikes power prices, enabling them to make record profits and distribute excess dividends, all of which slows the development of new renewable energy generation.

Whatever the source of the generation (such as hydro, geothermal, solar or gas) the Gentailers are paid for the cost of the most expensive source of generation in any 30 minute period. Gas and coal are the most expensive to produce, which incentivises electricity companies to keep supply tight so gas and coal are needed, rather than cheap renewables. Expensive fossil-fuel inputs thus set the price for cheap renewable electricity, keeping profits high and shareholders – including the Government – happy. But this kills the climate, and keeps our power bills sky high.

Oil & gas is not the solution

We need to rapidly build new renewable energy generation and create a level playing field for communities wanting to produce their own power. Increased renewable energy and distributed generation and storage are important for the decarbonisation of electricity generation, meet the increased clean electricity demand of other sectors such as transport, stationary heat and industrial processes and achieve greater resiliency.

Those with vested interests in the fossil fuel industry are clearly flexing their muscle in support of increased gas use as a ‘transition fuel’. But there’s a few problems here. First up – it would take well over a decade between overturning the ban and new gas actually coming online for use, and that’s if any company decides it is worth their while exploring for gas here at all. Secondly – overseas studies have shown that gas is at least as bad for the climate as coal, when you consider the whole-of-life emissions. We don’t just have to worry about the gas we are burning – we also have to worry about the gas that is leaked in the process of getting it from the ground to where it is used. Because of how much is leaked during drilling, transportation and so on, we know that gas is at least as bad for the climate as burning coal, and is definitely not a transition fuel.

Finally, and most excitingly, increasing our gas supply is simply not needed. The price of solar panels, batteries, wind power, and other associated technologies is plunging. With the right tools and incentives, electricity demand and supply can be managed without the need for new gas exploration. Community energy projects can provide resilience to the grid – and large energy users can be incentivised to dial down their power use when needed. More household solar could mean using less hydro during the day when the sun is shining, freeing up hydro capacity at peak times and reducing need for gas.

The government could buy out Methanex and replace gas-fired ‘peaker’ plants as soon as possible, to meet peak electricity demand with renewable energy, energy storage, and active demand management. Better still, through establishing a Ministry of Green Works, the government could take an active role in building and operating renewable power storage, complementing the role of Transpower as the publicly owned operator of the electricity grid.

The government, as a majority shareholder of Genesis, Mercury, and Meridian, remains the largest player in the electricity sector. This coalition government could rewrite the rules that govern our energy system – as well as use its power as a majority shareholder to force gentailers to invest in building renewable infrastructure. The review of the performance of the electricity market is a perfect time to consider all options, especially the changes that will make the biggest difference.

Community energy generation as a solution 

In the last 30 years, household power prices have risen by 79% – while commercial rates have dropped by 24%. More than 110,000 households are spending >10% of their income on power and live in energy hardship. Community energy is critical for a just and equitable transition to renewables and tackling energy hardship. Government has an opportunity to support affordable, clean, and reliable power by introducing policies that will strengthen energy sovereignty, giving people greater access to their local energy systems. Through distributed energy, the petitioners believe that we can stop powering our lives with polluting fuels from the last century that keep damaging our climate, our neighbourhoods, and our health. It is essential that New Zealand’s energy strategy does not solely focus on large-scale energy projects – greater support (financial and otherwise) is needed to enable these community energy projects to thrive.

We highly recommend committee members watch our 20-minute video on community energy projects in Aotearoa – ‘We can produce our own power’. 

There are a variety of tools and policy levers that we strongly recommend are implemented to assist the development of community energy generation. These are:

• Direct funding in the form of interest-free loans for community energy projects and household solar 
• That financing at least equivalent to the Government’s share of excess dividends distributed over the 2014 to 2023 period – $1.54 billion – be invested into household and community-owned and operated electricity generation schemes, including through the MBIE Community Renewable Energy Fund, between now and 2030 to reduce reliance on the gentailers and support low-income households as per Generating Scarcity Report.
• Levy a windfall tax against these gentailers, set against the value that has been generated through the excessive use of thermal generation. The value of that windfall tax would be used to insulate homes across Aotearoa, and to reduce emissions from industrial heat processes as per Generating Scarcity Report. 
• Introduce regulated buy back rates as per this OECD report.
• We have also attached MBIE’s report ‘Te Kore, Te Pō, Te Ao Mārama | Energy Hardship: The challenges and the way forward. This report was partly drawn from the Electricity Price Review’s findings and the government’s response to its recommendations. We attach this report with the intent of reminding the committee of the large numbers of New Zealanders experiencing energy poverty, the disproportionate impacts across different communities, and the opportunities that Community Energy has to reduce power prices for particular households. 

We believe that a thriving, low-emissions Aotearoa is 100% possible. An Aotearoa where everybody has clean, reliable and affordable electricity, with power being generated inside communities and co-benefits staying local. As the climate crisis escalates, community energy projects build resilience to climate-fuelled storms, ensuring communities retain power when they need it most. To achieve this just and equitable transition to renewable, community power, we need intervention from this Parliament to release a strategy that will help Aotearoa achieve 750MW of community energy generation and 400MW of community storage by 2035.

Further comments

The Bill understates the rights of Māori as tangata whenua and the threats from petroleum and other mineral mining – climate chaos, desecration of whenua and awa, and impacts on kaitiakitanga. It fails to honour Te Tiriti o Waitangi as it undermines the principles of partnership and protection that are key to respecting Māori sovereignty and safeguarding future generations. We also note that allowing surface access to Taranaki Conservation Land for petroleum exploration and mining exacerbates the threats on indigenous biodiversity and natural ecosystems.

We are very concerned about the changes made to the securities / decommissioning requirements. Removing – or reducing – the requirement to pay financial security for decommissioning liabilities would put the government at a higher risk of having to pay hundreds of millions of dollars to decommission – or plug – a failed oil well.

This is intended to reduce possible barriers to investment, with the Regulatory Impact Statement noting that repealing the ban alone “may not achieve the desired impact of increasing petroleum investment, and, therefore, gas supply”. 

The decommissioning regime was established in the wake of the collapse of the Malaysian-owned Tamarind Taranaki, which ran up significant debts amidst an unsuccessful drilling campaign, leaving the government with a $443 million clean-up bill. Tamarind Energy had been established in 2014 to acquire end-of-life oilfields and use advanced technology to squeeze out more reserves, drive harder bargains with processors and underspend on decommissioning. Permits to the Tui oilfield were acquired by Tamarind Taranaki, which planned to drill a number of wells to extend the life of the Tui field to 2025, however when the first failed to produce the company’s financiers exited. The company struggled on, but in November 2019 a gash in a pipeline prompted the Environmental Protection Agency to halt production, the company was put into liquidation, leaving the Crown to deal with the costs of decommissioning. 

The Regulatory Impact Statement notes that as of July 2023 “the estimated decommissioning costs of our four offshore fields is $2.044 billion and 21 onshore fields is $491.027 million”, and that the purpose of the current regime is to “mitigate financial risk to the Crown, other third parties and ultimately taxpayers of having to fund decommissioning in the event of a petroleum company’s failure to decommission”. It is noted that “the sector considers these financial security provisions to be inflexible.”

If actors in the oil and gas industry cannot balance generating a return from their economic activities alongside the liability cost involved with the future cost of decommissioning their operations after use, then their investment simply makes no economic sense whatsoever.

Financial securities are crucial to maintain, as they make permit and licence holders set funds aside or enter into other types of security while they are financially strong – not only at the point the regulator has concerns about the permit or licence holder’s financial capability to fund decommissioning – as by then it is usually too late. The removal of the key financial security safeguard dramatically increases the risk of the taxpayer having to yet again pay to decommission a failed oil field. 

Providing greater flexibility to the decommissioning regime risks leaving New Zealand taxpayers to foot the bill for the environmental clean-up of fossil fuel infrastructure. Companies that profit from exploiting our natural resources should be held fully accountable for their decommissioning obligations. Weakening these provisions only serves to protect corporate interests at the expense of the environment and future generations.

We note that decommissioning the Tui oil field has already cost the government $443 million, according to the cabinet paper. We must not hand an open cheque to fossil fuel companies, at a time when New Zealand should be making big polluters pay for the environmental damage they are causing. While 350 Aotearoa opposes the bill in its entirety, we emphasise the particular importance of not limiting trailing liabilities, or making financial securities more flexible. There is no advice showing that the new financial security arrangement would be effective – and the government continues to refuse to provide such information. .

Finally, 350 proposes that the term ‘manage’ – not ‘promote’ remains in the purpose statement of the Act. It is crucial that the government aims to manage the reserves as appropriate for our climate, for our economy, and for our people. It is not the Act’s role to solely focus on attracting permit applications (in the midst of a climate crisis).

In summary

As a country, we are still stumbling into this climate crisis world like it’s business as usual. If we know that gas cannot be our future, then why is this government pushing ahead with repealing the oil and gas ban? Why are we still creating new subdivisions and houses which have gas installed? Why aren’t we prioritising getting our gas out of the homes, schools, and hospitals that cater to some of those most vulnerable in our community? If gas prices are to continue going through the roof in the coming years, why are we locking ourselves, our communities, and our local industries into paying those exorbitant costs? We’ve already seen recently how vulnerable our workers are to changing energy prices with the closure of two timber mills in the central North Island.

350 Aotearoa call on the New Zealand Government to halt the oil and gas ban repeal, and instead further strengthen the amendment to the Crowns Mineral Act:

• 350 Aotearoa supports an Act which ensures no new petroleum prospecting, exploration or mining permits granted anywhere offshore or onshore in New Zealand. 
• 350 Aotearoa objects the current exemption for issuing new permits in onshore Taranaki, and request that the Act include no new petroleum prospecting, exploration or mining permits in onshore Taranaki. 
• 350 Aotearoa request that all existing petroleum prospecting and exploration permits be revoked. 
• 350 Aotearoa objects to the granting of extensions to existing permits, and requests that the Act include a secure cut-off point for existing permits.
• 350 Aoearoa recommends the government does not limit trailing liabilities, or make financial securities more flexible.

If the government continues to pursue expensive, climate-killing gas, rather than develop a forward thinking, renewables-based energy transition plan, then every New Zealander will know that they don’t have their best interests at heart.

Thank you for considering this submission. We look forward to engaging with you further.