Crown and Contact Energy reach resolution on Crown lands at Wairakei

Mark Burton, Minister of Tourism and State Owned Enterprises and Taupo MP, and Contact Energy Ltd today announced an agreement that protects the current and future use of Crown lands at Wairakei, Taupo, for recreation, tourism, forestry, and geothermal electricity generation.

Mark Burton and Contact Energy chief executive Steve Barrett both welcomed the agreement, saying it was a good outcome for the Crown, Contact, and Taupo.

“Under the 1988 Deed of Sale, Contact acquired the exclusive right to access the land at Wairakei for geothermal purposes and the right to install and operate equipment,” said Mark Burton.

“However, that agreement left some important matters undecided, including defining the area over which the rights applied, the nature of those rights, and the status of and protections for tourism operators and forests in the area, among others.

“This agreement settles these matters. Both Contact and the Crown have made compromises in order to reach this agreement, and the end result has been very positive. Use of Crown lands at Wairakei is now assured for recreation, tourism, forestry, and electricity generation. In addition, the agreement sets out clearly the rights and responsibilities of the Crown and Contact in respect to any future development.

“I am delighted to have reached such a successful conclusion with Contact.”

Steve Barrett agreed, saying that the agreement “provides certainty around the ongoing use of Wairakei for geothermal electricity generation while protecting the special character of the area and its use for tourism, recreation, and forestry purposes.”

The Crown continues to own the land and underlying geothermal resource under the Crown lands at Wairakei. The 1,579 hectare area is located north of the Taupo township and is used for tourism, recreation, forestry, and geothermal electricity generation.

The agreement resolves all outstanding land transfer matters related to the Crown’s 1988 sale of rights to the Crown lands at Wairakei (formerly known as the Wairakei Tourist Park) to the former ECNZ. Contact Energy Ltd became the owner of those rights and other assets including ownership of the Wairakei Geothermal Power Station in 1996 when it was split from ECNZ.

Key outcomes of the agreement include:

The Crown preserves prime tourism and scenic areas for current and future use. These areas have been identified by the Crown and include the Craters of the Moon, the prime tourism area, and existing tourism operations along the Waikato River Contact preserves the sole right to access the underground geothermal resource at Wairakei for current and future electricity generation The Crown further preserves areas identified as important for forestry use Contact has the ability to occupy specific sites to install geothermal wells, pipes, and other equipment. Any such development would be subject to usual Resource Management Act processes.

Mark Burton will brief local Taupo community interest groups on the agreement in more detail in the coming weeks.

Questions and Answers about the Wairakei Settlement between the Crown and Contact Energy

Introduction

The Crown and Contact Energy Limited have now reached a settlement on all the outstanding matters relating to various rights sold by the Crown to Contact at Wairakei. This represents the completion of complex negotiations that have been in progress on and off over the last 15 years.

Question 1: What is the 1988 Sale agreement?

In March 1988 the Crown sold core land assets and other rights necessary for the current and future generation and supply of electricity to the Electricity Corporation of New Zealand (ECNZ). When ECNZ was split in 1995 Contact Energy Limited (Contact) became the owner of those rights at Wairakei.

Question 2: What has been the work undertaken between the Crown and Contact?

The 1988 agreement specified in general terms many of the electricity assets around New Zealand but of necessity left much of the detail to be worked out later. At Wairakei ECNZ received the freehold title for the power station, the Wairakei Village and the ECNZ Information Centre and rights to occupy and use the Wairakei borefield for ECNZ/Contact’s electricity generation equipment and operations. Further identification work was required for the specific area of the borefield, the conditions of ECMZ/Contact’s rights of occupation and the rights over the rest of the land at Wairakei overlying the geothermal resource.

The points at issue included:

What area did ECNZ/Contact’s rights apply over? What was the term of ECNZ/Contact’s rights? What was the nature of ECNZ/Contact’s rights, for example absolute ownership, a licence, a lease, or an easement? What payment was due from ECNZ/Contact for different rights? What was the relative status of electricity rights and those for tourism? What was the status of the forest?

Question 3: What are the key provisions of this settlement?

This settlement completes the 1988 sale by clarifying exactly what were the other rights sold to ECNZ.

The seven key provisions are:

Contact will have a Special Purpose Lease (SPL) over approximately 630ha of land, which will enable it to take possession of discrete parts of that land as required for its electricity generation business from time to time;

Contact will have an exclusive geothermal easement to enable it to extract geothermal fluid from under the ground of the land formerly known as the Wairakei Tourist Park, and to maintain and replace those existing wells and pipelines that fall outside the area covered by the SPL;

Contact will also have options to obtain certain other pipeline and well pad easements at various times after 2010, and a lease to part of Aratiatia (Polo) Flat;

The prime tourism area, including the existing tourism enterprises and three scenic areas, are not subject to any surface lease or easement except for 2ha around an existing re-injection site and a grazing paddock;

Contact will mitigate, and if necessary compensate, the Crown and concessionaires for any economic loss that they suffer as a result of Contact’s geothermal electricity works;

Contact will pay market grazing/forestry rent for any land it occupies beyond the 1989 schedule of the borefield and its western extension;

The Crown retains the right to object to adverse affects under the RMA process. The Crown cannot, however, use provisions of the RMA to seek the removal or cessation of Contact’s operations under the 1988 Deed of Sale.

Question 4: How much Crown land will Contact occupy?

Although the SPL applies to an area of land comprising 630ha, Contact currently only occupies around 100ha out of 1579ha of Crown land at Wairakei. This occupation will only increase when Contact needs to install new wells, pipelines and other equipment.

Question 5: What happens to the land in the SPL that Contact doesn’t occupy?

Around 530ha of the Wairakei land will continue to be used for forestry and farming. Question 6: What is the difference between this Special Purpose Lease and an ordinary lease?

Under the Special Purpose Lease, Contact will occupy land only when required for geothermal electricity purposes. This enables Contact to choose on a case by case basis what areas it needs and not to occupy more than is necessary in order to cover future uncertainties. This enables more of the Crown land to be left for other uses.

Question 7: What if Contact wants to occupy more land in the Special Purpose Lease?

In general, Contact must give six months notice to occupy new land and there will be a protocol to coordinate any development. Contact will pay market rent for any land it occupies outside the core borefield and western extension.

Question 8: I currently operate a tourism concession at Wairakei. What claim does Contact have over my lease or permit?

Contact has no rights over your lease or permit nor has it any right to enter your lease or permit area or interfere with your property. The only exception to this is the grazing paddock used by Taupo Horse Treks which may be affected at some time in the future.

Question 9: I want to apply for a lease or permit or expand an existing area I lease. How will this settlement affect my application?

The Commissioner of Crown Lands remains the lessor. He will decide the terms and conditions of any lease, licence or permit to be granted for a concession. The settlement does not alter this authority but enables the Commissioner to be certain as to which areas are subject to the SPL or other rights in favour of Contact and ensure there is no conflict between any occupancy agreement he makes and those rights.

Question 10: I want to set up a new tourism business on Crown land at Wairakei. What restrictions will I face from Contact?

East of State Highway 1 and Wairakei Forest north of borefield

If you want to set up a tourism business in this area you need to be aware over the existing wellheads and pipes and need to apply for a site that avoids these. In the case of Aratiatia Flat For planning would need to take account of Contact’s options for a lease to part of this land, while east of Karetoto Road allowance needs to be made for a possible pipeline after 2010, with the exact route to be approved by the Crown.

Wairakei Forest south of borefield

If you want to set up in this area then the site applied for will need to recognise that Contact has the option after 2011 to put in one pipeline corridor and a wellpad. The exact route will only be determined closer to 2011 with the Crown’s agreement. It will be in the interest of all parties that any route and wellpad avoids any tourism business. If that cannot be done and it is necessary to relocate your business you will receive compensation from Contact for economic loss on a ‘no better no worse-off’ basis.

Question 11: I currently use the Wairakei Forest for mountain biking. How will this settlement affect me?

No change. The Wairakei Forest will continue to be available for mountain biking, horse riding and walking as determined by the Commissioner of Crown Lands. If in the future Contact needs to build a pipeline the development will be coordinated to either avoid areas of high use or to relocate them as occurs now with forestry harvesting.

Question 12: Why has Contact got an exclusive geothermal right?

Under the 1988 Deed of Sale, Contact acquired the exclusive right to access the land at Wairakei for geothermal purposes and the right to install and operate equipment.

The settlement reflects the view that ECNZ and its successor Contact were sold an exclusive right of land access in 1988. Without such a right, no settlement would have been reached.

The Crown wanted to ensure there was a settlement which protected current and future tourism opportunities, the forest and scenic areas and ensured payment for any new land occupied.

The overall settlement has required both parties to make compromises to achieve agreement and will remove a significant road-block to tourism development.

Contact’s current and future operations will still be subject to the requirements of the Resource Management Act (RMA). This settlement resolves Contact’s rights to use the land at Wairakei. It does not remove Contact’s continuing obligations to obtain resource consents for its activities.

Question 13: What impact will the settlement have on claims by iwi or hapu?

The settlement completes the implementation of the 1988 Deed of Sale by clarifying what other specific rights were sold at Wairakei. It is made under the State Owned Enterprises Act 1986 and is subject to its provisions. The settlement does not alter the Crown’s ownership of the land or the Crown’s interests in tourism and forestry.

The Crown, through the Office of Treaty Settlements, is addressing Ngati Tuwharetoa’s claims in respect of the Central North Island (CNI). This includes Ngati Tuwharetoa claims to lands at Wairakei. Any decision about future iwi or hapu ownership of any lands at Wairakei will be determined by that process.

Question 14: What is the impact on the Huka Falls area?

No change. The Huka Falls area is unaffected by the settlement. It remains owned by the Crown and is not subject to any rights in favour of Contact.

Question 15: What happens to the Craters of the Moon or the Alum lakes?

No change. These areas are outside the SPL and are not subject to any surface rights in favour of Contact. They remain owned by the Crown but will continue to be modified and reshaped by Contact’s geothermal operations as happens now.

Question 16: Will any areas become scenic reserves?

The Huka Falls area is available to become a scenic reserve. This issue will need to be discussed between the Commissioner of Crown Lands and the Department of Conservation. Local hapu have previously objected to this proposal and could be expected to seek involvement in that discussion.

Question 17: Can I still go to the borefield lookout?

Yes. Free public entry to the borefield lookout continues.

Question 18: What if Contact damages the environment?

The settlement relates to land rights only, and does not in any way remove Contact’s environmental obligations under the Resource Management Act and other relevant legislation. The provisions of these Acts will address any environmental change.

The Crown cannot, however, use provisions of the RMA to seek the removal or cessation of Contact’s operations under the 1988 Deed of Sale.

Question 19: What are the “Options” being granted to Contact?

If in the future Contact wants to operate outside the SPL it has the right to seek and be granted certain easements. The right to ask for these is only available for a limited time. These are:

an easement for a pipeline corridor and re-injections wells and pipes up to 1 ha in total area in the Karetoto Road area that can be taken up between 2010-2014; an easement for one pipeline corridor and well pad in the south Wairakei Forest can be taken up between in 2011-2031; and two more pipeline easements can be taken up in 2050 and two more again in 2060 provided each pair must be taken up within 20 years of those option dates.

Contact can also obtain a lease for 40ha on Aratiatia (Polo) Flat if it takes this option up between 2006-2008. It must pay a holding payment to the Crown during this period.

Question 20: What conditions apply to the Options?

There are three main conditions: the exact routes of any pipelines must be agreed to by the Crown; Contact must pay a market rent for land it might occupy; and Contact must compensate for any forest or tourism loss on a “no better no worse” basis.

General Disclaimer: This Questions and Answers sheet seeks to provide information of a general character in plain English that will be helpful in understanding the Settlement between the Crown and Contact. It does not purport to provide all the technical, commercial or legal details of the settlement or represent any form of legal undertaking.

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