Hon Shane Jones
Minister for Resources

Removing the ban on petroleum exploration beyond onshore Taranaki is part of a suite of proposed amendments to the Crown Minerals Act to deal with the energy security challenges posed by rapidly declining natural gas reserves, Resources Minister Shane Jones says.

“Natural gas is critical to keeping our lights on and our economy running, especially during peak electricity demand and when generation dips because of more intermittent sources like wind, solar and hydro,” Mr Jones says.

“When the exploration ban was introduced by the previous government in 2018, it not only halted the exploration needed to identify new sources, but it also shrank investment in further development of our known gas fields which sustain our current levels of use.

“Without this investment, we are now in a situation where our annual natural gas production is expected to peak this year and undergo a sustained decline, meaning we have a security of supply issue barrelling towards us.”

Rebuilding investor confidence in New Zealand’s petroleum sector will require more than removing the ban. The Coalition Government is proposing further changes, agreed by Cabinet, to re-establish New Zealand as an attractive and secure destination for international investment. These changes were agreed in the New Zealand First and Act coalition agreements with the National Party.

“Our job as the Government is to provide the right policy settings to enable the sector to get to work, and that’s exactly what we are aiming to achieve through these amendments,” Mr Jones says.

“Some of our current settings are a barrier to attracting investment in exploration and production because they are overly costly and onerous on industry. Some obligations lack necessary flexibility, and compliance obligations are uncertain and unclear.

“As well as removing the ban, we are proposing changes to the way petroleum exploration applications are tendered and allocated, aligning the petroleum decommissioning regime with international best practice, and improving regulatory efficiency.”

New Zealand cannot ignore the significant economic contributions the petroleum and resources sector delivers, and the opportunities further strategic development represents.

“Our petroleum and minerals sectors contributed $1.9 billion to GDP in 2020-21 and $236 million in Crown revenue in 2022-23. In 2023 mining employed around 6000 people, the majority of which are based in regional communities,” Mr Jones says.

“I want a considered discussion about how we use our natural resources to improve the security and affordability of energy and resources supplies, stimulate regional economic development opportunities, and increase New Zealand’s self-sufficiency to protect against volatile international markets.”

The Crown Minerals Amendment Bill will be the latest piece of legislative reform introduced by the Government aimed at cutting red tape to enable crucial resources and infrastructure projects across New Zealand, and benefits to flow to communities. The Bill will be introduced to Parliament in the second half of 2024.

For more information, visit 2024 Proposed amendments to the Crown Minerals Act 1991 | Ministry of Business, Innovation & Employment (mbie.govt.nz)

Notes:

The Crown Minerals Act Amendment Bill proposes:

• Reversing the 2018 ban on new petroleum exploration outside onshore Taranaki.
• Removing the 2018 restriction preventing new petroleum permit-holders from accessing some Taranaki conservation land for petroleum activities other than minimum impact activities. Conservation land protected by Schedule 4 of the CMA, including Mount Taranaki, would still have the same protections in place. This change ensures conservation land across New Zealand is treated consistently.
• Changes to how petroleum exploration permits are allocated. Currently permits are allocated through a competitive tender process. The bill proposes allowing for a choice between a tender and a non-tender (called priority in time) method.
• Changes to the petroleum decommissioning requirements to align with international best practice, and better balance regulatory burden and risk. Specifically:
  • Technical changes to financial securities requirements, the primary tool to manage the risk of a permit-holder failing to carry out or fund decommissioning. These changes will make financial securities more flexible to allow industry to set aside this money in a way that is cost-efficient and best suit the circumstances.
  • Changes to trailing liability which allows the Crown to go back to previous permit-holders and make them decommission or recover the money for decommissioning. It is not proposed to remove trailing liability but limiting it to the most recent transferor, providing greater certainty to previous permit-holders.
  • Post-decommissioning liability remains on a permit-holder who decommissioned if something goes wrong after they have plugged and abandoned a well or left infrastructure in situ. This is a change from the current requirement to provide a payment or financial security for post-decommissioning liabilities, which sought to quantify the likely risk and cost in the future.
• Other changes to provide important signals to the industry that New Zealand is open for business, including reintroducing the term ‘promote’ into the purpose statement of the Act, giving the Government the mandate to actively promote prospecting, exploration and mining of minerals.
• Introducing a new tier of mineral permitting that will make it easier for people to undertake small-scale non-commercial gold mining activity, and
• Other technical legislative changes to ensure processes are working as intended, including fixing inconsistencies of terms and drafting errors.

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