The Nation: Energy and Resources Minister Megan Woods
Lisa Owen interviews Energy and Resources Minister Megan Woods
Lisa Owen: The Prime
Minister’s fronted to the oil and gas sector in New
Plymouth as the government tries to dampen down fears about
Taranaki’s economy following a ban on future oil and gas
exploration. The industry contributes about $2.5 billion to
the economy each year and is responsible for around 11,000
jobs, but the Government says it has plans for a just
transition to a low-carbon economy. Energy and Resources
Minister Megan Woods joins me now. Good morning,
Minister.
Megan Woods: Morning, Lisa.
You
have set up a just transitions unit to help with the shift
to a low-carbon economy. Why didn’t you set that up before
you announced the ban?
Oh, it was. Prior to
me attending the Petroleum Conference, the Prime Minister
had asked me to talk to MBIE about getting a team together,
so that was a conversation that we’d had two weeks before
we made the announcement, when I gave my speech at the
Petroleum Conference. And that’s something I talked about
in that speech — about how we’d asked MBIE to start with
that work and with that planning. We’ve now got the
General Manager in place. He’s been in place for a week.
If you think about the speed of that, in bureaucratic years,
that’s like lightning speed to get a new unit set up.
We’re going to have someone on the ground in New Plymouth,
and the team’s raring to go.
So why did you
wait to make the announcement, if you were setting up this
unit? You obviously knew you were going to make this
decision.
When I went to the Petroleum
Conference, one of the things that I talked about in my
speech was the fact that we were going to be doing this
transition planning. So that was two weeks before the
announcement, where I gave reassurances that, any changes
that were coming, we would honour any existing permits, that
there’d be a very long time period over this, and that we
would be doing this transition planning that would be put in
place.
But your speech did not tell them that
you were going to ban new exploration.
No.
Look, the announcement — what I started the speech — I
think the first sentence of my speech was, “I’m sorry,
I’m not going to announce a block offer today, but what I
can do is give you the context in which we’re making this
decision, and that’s putting in place the transition
planning that we need to make sure that this is a planned
and measured transition and that we’re making sure that
we’re not going to encounter shocks into the
future.
OK. So how many businesses in Taranaki
have indicated that they’re shutting up shop as a result
of the ban?
I haven’t had anyone come and
say, “We’re shutting up shop.”
Were you
not told at the meeting that you had that there are two
businesses already, engineering and geoscience businesses,
who are pulling out because of this?
We
weren’t told that there were people who were shutting up
shop, but what we did talk about quite a bit — that,
actually, since 2014, there have been a number of businesses
shut down in Taranaki with the downturn, so particularly
engineering businesses, that it’s been a really rough few
years for that industry because there hasn’t been summer
programmes for the last two years.
What did
you hear from those businesses during that meeting? Because
we’ve been told that it was indicated that two businesses
are wrapping up because of this ban.
Well,
look, that may have been something that was said to someone
else in the meeting. It wasn’t something that was said to
me. But what we were told is that there were some people in
exploration that were maybe having to look at fewer staff in
that area but no one actually shutting up
shop.
Right, so it is affecting jobs right
now?
There could be some jobs, but the point
is — and the thing that people talked about a lot
yesterday and something we discussed — the fact that there
have been jobs shedding in Taranaki since 2014, and that’s
exactly the reason why we have to get in on the ground and
support the local efforts around the diversification of the
economy. I mean, this is work that the local mayors and
local leaders have been putting in place around identifying
four alternative areas for economic development before we
made the decision, so it’s a matter of what we can do now,
as a government, to support them in that and to go beyond
business as usual.
Right. I want to talk about
that plan in a minute, but first of all I want to establish
a clear timeline. When did you know that you were stopping
all new oil and gas exploration permits? What’s the exact
date you made that decision?
Oh, look, I
started getting advice before Christmas around what our
options were from officials, so I had verbal briefings
before Christmas, and the Prime Minister and I both
indicated this when we announced the 2017 block offer at the
end of last year, just before the wrap-up of the
parliamentary year.
So March 19th, she came on
to the forecourt at parliament and said it was still under
active consideration.
That’s
right.
So when did you actually make the
decision?
I don’t have the actual date;
I’ll have to go back and look at my diary, but it was
certainly after March 19. We were still getting advice at
that period of time, so it was prior to—
So
somewhere between the 19th of March and April the 12th, when
you made the announcement.
That’s right.
That’s right.
And you said that you were
starting to talk to people about it in December. So what
cost-benefit analysis did you do before making this
decision?
Oh, look, we got a range of
advice. We couldn’t use the formal cost-benefit analysis
tool simply because what we were talking about was an
unknown and you need known numbers.
Right. So
no cost-benefit analysis.
Not the formal
cost-benefit analysis tool. We certainly looked at a range
of implications, and we’ll be releasing all that advice in
the next couple of weeks.
So where was that
advice from? The advice you got was from
where?
From MBIE. From my officials at
MBIE.
Okay. Anything from
Treasury?
I’m sure that MBIE would have
talked to Treasury at this, but the advice that I get from
my officials comes through MBIE. But the point about using
that formal cost-benefit analysis tool is you’ve got to
have known numbers to plug into it.
So you
don’t know what the cost-benefit analysis is. That’s
what you’re saying.
Not using that tool.
Not using that formal tool, but certainly you can look at
what the costs and the benefits are through other means,
just not using the tool that is called
cost-benefit.
But without the actual
numbers.
Yeah, exactly.
Okay,
but numbers will be very important to the people in
Taranaki.
Absolutely.
If this
was under active consideration and you say you started
talking about it in December — it was an active
consideration as of March 19th, as the Prime Minister stated
— why didn’t you consult directly with the industry, the
New Plymouth Mayor, before making the
decision?
Look, this is also about
leadership. A decision needed to be made. We needed to make
a call on what it was. We needed to come out and make a
decision about Block Offer 2018.
But you can
make decisions and still consult people.
We
needed to make a decision about Block Offer 2018, and that
was becoming really critical that we got that information
out there for the industry.
But you were
discussing it since December.
Oh, what the
options were.
December, January, February,
March — four months you didn’t consult anyone. You
didn’t consult the mayor. You didn’t consult industry.
You didn’t consult business in
Taranaki.
What we were doing was getting
what our breadth of options were, that we needed to look at
what we could do in terms of onshore, offshore, what the
different permutations were around that. So what also needs
to be in mind — we actually do have an active block offer
going on at the moment. There is an onshore block offer that
is out for consultation at the moment.
I
understand that. We’re talking about the offshore ban. So
it didn’t occur to you, or you didn’t think that they
deserved to be consulted in that four months that you were
discussing the decision amongst
yourselves?
Look, over that four months, I
certainly knew what industry’s views were. I was taking
meetings with industry where their views were clear. Our
views were clear as well. But this was actually a matter of
a government making a decision about the
future.
They don’t feel consulted. I mean,
the Mayor came out and said it felt it was a kick in the
guts, and I’m told that you informed them at 7.30pm the
night before the announcement was made. You gave a speech in
which you said this will be clear, transparent, and
well-managed. They question whether there has been any
transparency, because they haven’t been
consulted.
So, the speech — the bit that
you’re pulling from — that’s my Petroleum Conference
speech, and that was about the transition planning, and it
is clear, it is transparent, and it is consulted. That is
exactly what we were doing in Taranaki yesterday. We met
with the mayor.
After the
fact.
No, this is about the transition
planning; this aspect of it — of what comes next. This
absolutely has to be locally led. This has to be drawn from
those people, and that’s exactly what we were doing on the
ground in Taranaki yesterday.
So they can be
consulted now but not about the decision; they didn’t
deserve a say in the decision or to discuss it with you
before you made it.
We made a decision about
what the future of offshore drilling was. We’ve decided we
won’t be doing any more about that. But what we know in
terms of what comes next — this has to be locally led from
local communities, and that is why we’re putting in
place— we’ve got someone from MBIE who will be on the
ground, working with the local economic development agency,
with the local mayors, and with locals about what the future
opportunities are.
Okay, what legal advice did
you get about whether you were exposed to court action by
this decision?
Oh, look, that’s something
that we had to consider, but, of course—
Did
you get legal advice?
We certainly did get
legal advice through—
And what was
it?
Look, I’ll be releasing all that in
the next couple of weeks.
Okay, well, just
tell us now, then.
What I did do was
undertake a block offer in 2018 that we are doing an
onshore—
Yeah, what did your legal advice
tell you about the risk?
Look, that will all
be released. We were complying with the
Act.
Why can’t you tell us
now?
I am.
No, no, the
contents of it.
We were complying with the
Act. So one of the important things to remember is that
block offer actually isn’t an instrument that’s defined
in the act. It’s something that start— I think it was
Gerry Brownlee, when he was Minister of Energy, started
doing in around 2012. So it’s not actually a
process—
So your legal advice is that there is no risk
to you by taking this decision?
Look, the purpose of the
Act — what the Crown Minerals Act asks us to do is to
actively promote the exploration in New Zealand. We are
doing that this year. We, at the moment, have out for
consultation an onshore block offer where people will be
able to go for exploration permits.
Legal
experts have told us that you will have to change the Act.
Is that the case, in your understanding?
Oh,
I’m getting advice at the moment around the best way in
which we can make effect to that.
But you will
have to rework it?
There will need to be
some changes to the Act.
And that law requires
consultation when you make those
changes.
There will be a requirement.
Whether or not all of it’s through the Act or whether some
of it’s to do with the regulations—
But at
that point people will get a say, will
they?
Whether it’s to do with the
regulations that sit below it. So I’m still getting active
advice about the best way in order to do that. What we’ve
also said—
So you’re not quite sure of the
process?
No, no. We’re still getting
advice around that, about how to implement that. But one of
the things that we’ve also been talking to industry about
is the way in which we may need to make some more
medium-term changes to the Act to really put in place the
commitments that we’ve given to industry around the fact
that we will honour all existing permits. And I think this
is one of the things that had really changed yesterday.
There was far more— I mean, understandably, people were,
you know, initially—
But they’re still not
unhappy. They tell us they’re not happy with the level of
consultation. I just want to move on. This is all about zero
carbon emissions by 2050 and the Paris Accords. So,
specifically, how much will this policy lower our greenhouse
gas emissions?
Well, specifically you
can’t say because it’s an unknown of what’s still in
the ground, because what we are proceeding with is the
ability to explore land—
So you don’t know
whether it’s going to have any impact at all on our
greenhouse gas emissions?
Oh, of course it
will have an impact when we stop burning more fossil fuels.
In terms of the specifics that you ask for — a number —
you simply can’t put that on it, because it’s an unknown
amount that’s in the ground.
You got some
advice, so, generally, what were you told? They didn’t
give you a specific number. Were you given a
ball-park?
This is a part of our move to
100% renewable electricity. We know exactly the impacts of
what that will have on our greenhouse
gasses.
No, but I’m asking about this policy
specifically and the impact it will have on greenhouse gas
emissions.
Well, in terms of this policy,
the point is we are proceeding with the production permits
that are currently there, so that won’t have an
impact.
So you don’t know. Oh, it won’t
have an impact? Okay.
No. It won’t have an
impact, because we’re still proceeding with those permits;
we are still proceeding with the exploration permits. The
bit when and why we can’t say, and this is really
important to understand, is because we don’t know what’s
underground in areas that don’t currently have exploration
permits. You’ve actually got to have numbers to calculate
when you’re dealing with unknowns. But what you can do is
work through and see when you’re working to 100% renewable
energy, you know the impact that that does
have.
There seems to be a lot of unknowns
here. Unknown the economic impact; unknown whether you’ll
have to consult; unknown about the law change; unknown what
the level of greenhouse gas emissions it will cut. Is that
fair? Unknowns, a lot of unknowns.
No, I
think that there are lots of knowns. And the knowns are
that we have to plan for the future of regions like
Taranaki. We could do the easy thing and make three-year
decisions, or we could actually have the courage to look
beyond the political cycle and put in place the planning
that’s required for these communities so there are jobs
and industry and security for them in 10, 20, 30 years when
these changes will take effect.
In terms of
that courage, the courage that you’re referring to, some
of our biggest emitters are agriculture and transport.
Transport is growing. Energy emissions are, quote, ‘fairly
static’, according to the environment ministry. So why is
oil and gas first on your hit-list? Why not do something
around importation of petrol cars, subsidising electric
vehicles? Why not go for something that will make a very
specific and fast impact?
Oh, look, we’re
going to have to do all of them.
So you’re
going to subsidise electric cars?
No, no,
no, we’re going to have to look at this sector by sector.
And that’s exactly what we’re doing with our Interim
Climate commission.
So why this one
first?
Because what we need to be doing is
making sure that we’re not causing shocks to communities
like Taranaki 20, 30, 40 years down the track. If we can
start adequately planning for the industries that need to
replace these fossil-intensive industries, we have to start
that now. This doesn’t have to be the kind of disruption
that we’ve seen in English coal towns in the ‘80s, when
they were shut down under Thatcher, or even here in New
Zealand in the 1980s when we had abrupt
change.
So, we’ve got about 80% of our
energy from renewables at the moment. Your manifesto commits
to reaching 90% by 2025 and close to 100% by 2040. How are
you going to do that and guarantee supply?
Yeah, and, look, that is something that is
a really important question, and one of the things that
we’ve given the Interim Independent Climate Commission,
one of the two initial jobs it’s been given, is charting
out that pathway.
So you don’t have a plan
for that?
No, of course we have a plan for
that. And what we know is that we need to up—What we need
to do is start looking at the consents that we already have
in place for consented energy that have yet to be built. And
one of the reasons why those consents haven’t been taken
up is that there’s been a great deal of uncertainty for
those consent holders, particularly around whether the 15%
electricity from Manapouri was going to come back into the
grid depending on decisions down at Tiwai. Some of that
certainty has been delivered with the decision to turn on
the fourth pot. So we already have a third of what is
already consented already built, there in consent, so
that’s the first cap off the rink. We also know technology
is changing. We know we’re getting summer peaks, so solar
becomes a far more important thing.
So, what
is the split going to be? If you know the plan, what’s the
split of our renewables? How much investment is it going to
take?
Well, it’s going to require a split
between winds, which is one of our strategic advantages into
the 21st century. We can build some of the cheapest wind
energy in the world. I mean, being at the bottom of the
Southern Ocean has some huge advantages in terms of access
to that resource. So, in terms of the split that you asked
about, we are also hugely blessed, in terms of our
geothermal resource, that we have the ability to have
thermal base load going in through the thermal
resource.
But are you still going to have the
backstop? Are you still going to keep Huntly’s
coal-fuelled power station online as a backup? You had to
resort to that during Cyclone Gita.
Yeah,
look, we need to get beyond the fossil-thermal peaking. And
that is something that we’ve always had to do in terms of
the 2035 and 2050 targets. And that is what a transition is
about. The transition isn’t about the maintenance of a
status quo; the transition has a different
endpoint.
But a transition also has
implications as well, and one of them is cost. And the
productivity commission has said that it will be very
expensive to eliminate greenhouse gas emissions from
electricity generation. So how do you make a move to 100%
renewable when you’ve got people who are already rationing
heat because they can’t afford it? So how are you going to
deal with that?
And affordability is one of
the critical questions. And in terms of the electricity
pricing review, one of the things that we are looking at is
the future technologies and the impact on that. We have to
be thinking, and this is why having the managed transition
over a period of time is so important. What is the
contingency contracting in renewables that we need to put
in?
So are you guaranteeing people they
won’t be hit in the pocket by this change to 100%
renewables? Are they going to pay less for their
energy?
Yeah, oh, look, we have to make the
plans so that this doesn’t become unaffordable for people.
That is a bottom line for us, and that is what we are
looking at actively not only in this policy, but also in the
electricity price review.
So are you telling
people they’re not going to pay more for their energy when
you switch to 100% renewable?
Well, it
won’t be because of the switch, and that is one of the
things that we are looking at. Look, one of the things that
we know — that we have the opportunity with renewables is
to actually build that capacity where it’s required. We
produce so much of our electricity at the moment in the
South Island and have to transmit it to the centres of
demand, which are north of Taupo. We have the ability with
renewables to actually put that capacity in place where
it’s required so that, actually, transmission pricing
becomes less of an impact on there. And in terms of
distributed generation, solar energy, all those kinds of
things, these actually offer real opportunities for people
in terms of more affordable forms of electricity, and
that’s why we’re not seeing any of our work streams in
isolation. That electricity pricing review is absolutely
critical as we consider the switch to 100%
renewable.
Let’s circle back round to
Taranaki. Those people want $42 million over three years to
get them started on other opportunities. Are you going to
stump up the cash?
Look, one of the things
we spoke with the mayors and the economic development
leaders yesterday about is the fact that we need to work
through exactly how that’s delivered. We’ve put a person
on the ground there.
So are you going to give
them the $42 million or not?
Oh, look,
we’re not just stumping up with 42 initially, and I think
the Prime Minister made that really clear. And
people—
How much are you? Because you’ve
been planning this for a while, even though you didn’t
consult them, so you must know how much you are going to
give them or should give them.
One of the
things we’ve done in Taranaki — is the only region to
have this — is we’ve put an MBIE official on the ground
whose job—
That’s not money, though.
That’s not money.
I’ll just finish this,
Lisa.
I’m asking you about the money. Can I
get an answer on the money?
The job of that
person will be to help prepare the cases for the Provincial
Growth Fund. There’s $1 billion a year in that fund. The
$42 million that we talked about yesterday — it could be
more that’s required. And we see huge opportunity around
projects within that Provincial Growth Fund. $20 million has
already been allocated.
That wasn’t in
response to this and included things like doing up a church
and some other bits and pieces, so it wasn’t in response
to this.
No, but there are some elements
that are.
So, in response to this, what do you
think is the ballpark? What have you counted on? Because
you’ve had a discussion; you say you’ve planned.
What’s the plan in terms of money?
The
plan is to have the person there working around the
opportunities—
So no commitment to a dollar
amount.
Taranaki has a history as an energy
producer for New Zealand. We want to build on that with the
local leaders. Look, it could well be more than $42 million.
We don’t want to short-change the region. The most
important way to do it—
So are you saying
you’ll give them more, then?
No, what
we’re saying is that we’re putting the capacity on the
ground to work up things for the Provincial Growth Fund.
There are huge opportunities. We know that there is an
expertise in engineering in that region and a proud history
of providing energy.
We’re going to have to
leave it there, Minister.
Thank you,
Lisa.
Thank you for joining me this
morning.
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