Lisa Owen interviews Labour’s Energy & Resources Spokesman David Shearer

Headlines:

David Shearer says Labour’s policy backs oil drilling and indicates not keen to be swayed by the Green Party.

Promises tougher safety regulations covering oil spills, saying NZ needs more equipment onsite to help it deal with emergencies.

However unclear when asked what specific regulations and requirements are needed: “I can’t tell you as nobody can in the industry exactly what you’ll need for a particular circumstance.”

Says Anadarko oil spill plan for drilling last summer would not have met Labour's new standards, saying “obviously a month is – we would never want to see that sort of situation to happen. “

Royalties and taxes to be kept at around 42 cents in the dollar but “with further discoveries we would certainly lift the royalty rate which would then be able to go back into the regions”

Would look at perhaps 5% retained by the region

Will consider setting up a sovereign wealth fund for oil profits modelled on Norway's Global Fund and to ensure inter-generational equity

Says New Zealand can exploit oil resources and back clean-tech sector as Shearer acknowledges "fossil fuels are out"

Lisa Owen: … This morning the [Labour] party’s energy spokesman David Shearer joins me this morning to reveal its policy this election. You are here this morning to say you support it practice now aren’t you?

David Shearer: Well we support oil drilling and we have done in the past, there’s no major change there. What we want to see is a regime very much like in Norway, a Norwegian model where there is good processes of approval, there’s tight regulations, we have a regime for making sure that that money is used well and at the same time we try and make sure our transition to renewables goes on in pace because at the end of the day fossil fuels are out. They can not continue to be our future. But we can use them to transition to renewables.

Ok there’s a lot in there let’s unpack some of it. National has said this is a potentially a 12-billion dollar industry but we had the summer of exploration, nobody found anything and as you say oil production is on its way out, it’s falling. Is this potential oil boom a mirage?

Well people say that there’s the potential out there. We had 14 or so wells drilled recently with nothing found. So it’s anybody’s guess and for a government and I would say certainly a Labour government putting all our cards on the table and saying our economic development is going to depend or rely on the discovery of oil is nonsense. It’s like walking into a casino and hoping that the ball lands on number 36. But it is one strand of our development processes. We should be focusing on adding value to our agricultural goods or some of the IT stuff that we’re going. That will be generating more of the income into the future. But there’s a potential there and while there’s a potential we should be looking at it.

So why do it at all? I mean the Green’s cite, I think its 45-million a year in subsidies of fossil fuel industries. Why chase it at all? Why not just branch out into clean tech or other areas?

Well certainly that… it’s not an and/or thing, it’s an and. You do both effectively. So what I’m saying is that is we are able to have industry coming down here and drilling for oil and finding oil, obviously that will benefit us. The government is not putting in an enormous amount of money; the people who are taking the risk here are the actual companies that are coming down. And the amount of money that we are spending, to help them invest in New Zealand it’s actually pretty small. And even some of those subsidies I think, what you’ll find is a lot of those subsidies are around the IP and some of the information that is dug up by various oil companies that we transfer to new oil companies if they come in. So in many ways it’s building up our stock of knowledge around the oil industry.

Well your leader has actually criticised elements of how National’s handling this industry. A lack of liability cover he says and he’s not sure whether best environmental practices are being followed. So how would things be different under a Labour government?

Well the first thing we would want to do is to make sure that the approval process has a lot more public participation. And that would mean getting out front the block offer that they normally put up would actually have a, we would argue should have wider public participation there, that the government should actually bring that to be discussed. So when the block offer is actually put out there companies that are coming in to tender for it know that the participation is actually taking place already. That’s the first thing; getting out front so that people have a greater degree of participation.

So getting communities to agree to it before they find something?

Exactly. And then but also give surety to the companies that are coming in that in fact what they’ll be getting is something that they know they’ll be able to move along with. Secondly regulation, certainly insurance, right now we’re looking at insurance of 26-million dollars that should be bumped up to closer to 400-million dollars. We should ensure that liability

It’s in the review and National is reviewing that and the suggested level is 300-million.

It should be at least 300-million dollars. We should have our own people on the rigs. Right now it’s just simply a paper audit. We do not have New Zealanders overseeing the exploratory rigs that are out there doing the drilling. We should have our own people there on the ground and certainly on the rigs. We should be able to have certainly the insurance but also the ability to, if there is an accident, be able respond much quicker than we have done in the past.

So what are you saying there? That equipment to respond to an oil spill should be onsite in New Zealand?

To a much greater degree that we have at the moment, I mean we’ve got what three skiffs and I don’t know, a couple of booms.

So what specifically would you want here?

Well we’ve spoken to the industry and they believe that what they can do is have greater – more capping equipment on site and they can have other equipment, because they’re not actually sure what will be necessary in a given situation that can be flown in much more quickly. And I think that’s where we want to be going with that.

Well let’s look at a specific example there, Anadarko was drilling this summer and we know that its oil clean-up plan said that it could take a month for a capping stack to plug a leak to get here, 115 days for a rig to arrive. Would you let them drill under those circumstances?

Well what I believe we can do is to have – we have to speak to the industry, this not something you can necessarily lay down and say because we’re not quite sure what accident might happen. And hopefully and accident doesn’t happen.

But that’s the whole point isn’t it? You aren’t quite sure what kind of accident might happen, so would you allow them to drill under those circumstances?

But what I’m saying is what we can do is to have much more equipment on site and much more equipment within flying distance of New Zealand to bring that down to New Zealand deal with any emergency.

So is a month and 115 days, is that an ok timeline for you?

Well of course it’s not. Obvious a month is – we would never want to see that sort of situation to happen.

So you wouldn’t let them drill under those circumstances?

Well what I’m saying is we want to make sure first of all, first of all that we have the best regulations in place that we have also on standby an ability to respond to most emergencies and within flying time an ability to come and respond.

But Mr Shearer, I’m asking you what specific regulations and requirements you would need and you seem a bit woolly on it?

Well I’m telling – I can’t tell you as nobody can in the industry exactly what you’ll need for a particular circumstance. What I’m saying though is that if we have the best environment to drill in, in the world and we’re looking at the Norwegian model that I was talking to you about before, what we want to have it’s a bit like the airline industry. It’s very, very safe but when it goes wrong it goes badly wrong. And what we want to have is an Air New Zealand rather than an Air Togo. I mean that’s effectively what we want to try and do so that these situations don’t occur.

You raise the Norwegian example there so let’s look at royalties and taxes at the moment they’re about 42 cents in the dollar, Norway has 76 and the Green’s here would like it to be around 70 percent. So is it time for those to move up?

With further discoveries yes I agree with putting royalties up. But right now where New Zealand is based if you put it up to 70 cents tomorrow, 70 percent tomorrow you would effectively kill the industry. We are a country that is at the bottom of the South Pacific, it costs a hundred-million dollars to drill a hole here in New Zealand and if you were to put it up before you knew what was actually under the ground
you would effectively kill the industry.

So no rise at the moment. What about regional royalties? New Zealand first thinks about 25-percent for example should go back into the region that the mining is taking place in. Would you do the same for oil?

I think there’s a really strong argument for regions being able to know that they can directly benefit in a further discovery. With further discoveries we would certainly lift the royalty rate which would then be able to go back into the regions.

So how much to go back into the regions?

Well it depends on what actually – what we find in a particular place. I mean you can’t necessarily say as a percentage.

As a percentage though?

Well I mean overseas they’re looking at 5-percent of a royalty, I don’t know if that’s appropriate to a particular well that might be found. Certainly in Taranaki there’s about a billion dollars of economic activity going on inside Taranaki as a result of the oil industry at the moment despite the fact we don’t have a royalty regime. So many of these areas are actually benefiting a lot from that. And if you had a find for example off the coast of Canterbury you can imagine the gas, it’s mainly gas in New Zealand it’s less likely to be oil, the gas that would be coming onshore would provide enormous economic development and potential in the South Island.

So let’s say someone does strike oil or gas, what would you do in terms of the royalties? Would you set up, like Norway has, you know they have got two pension funds and saving for future generations, investing for future generations, what would you do?

Well in Norway’s case what actually happened was with the amount of oil that was coming in and the amount of revenue that was coming in, what they realised was that their economy was going to explode effectively, the inflation was going to go up as a result of having too much money washed through it. We’re not, unfortunately, in that circumstance. I’d love it if we were. But what they did do was they put it into a…as you say a pension scheme, a sovereign wealth fund and from there they were able to draw from it and Norway’s future is secure probably for another 100,200 years.

So do you anticipate a fund like that?

Look I can see that there is certainly merit in that and there will be other announcements in and around that. There’s definitely an argument to be formulated around ensuring that there is generational equity, so that what we pull out of the ground now goes on to benefit not just the people today but the people in the future.

Alright well the Greens, they’re likely to be your collation partners, how do you – Russel Norman has said that he would like to negotiate a deep sea drilling policy after the election depending on the numbers. So wedded are you to this?

Well I don’t think we’re as far apart as some people think we are. I mean obviously the Greens don’t want to close down our oil industry because they’re talking about putting the royalty figures up to 70-percent. That obviously is based on the fact.

They don’t want deep sea drilling though and you’re supporting it and you’ve got a policy for it.

Well we’ve got a policy because we believe that there’s a future for New Zealand and a future for us being able to transition into renewables. And if this allows us to transition into renewables I would have thought that that was something the Greens would want to support.

Could Russel Norman talk you round, talk you out of this deep sea drilling policy?

I think while we’ve got the potential for such wealth to flow into New Zealand and the ability as I say to transition to other forms of energy, why would you want to do it? In New Zealand at the moment, most -

He might be able to talk you out of it? You’re not negotiable on this?

Look I’m obviously saying we sit down and negotiate, that’s what happens after elections, which coalitions. But I would argue that this is our policy, this is what we think it best. Most New Zealanders support oil drilling. Most New Zealanders also want to make sure that the environment is well and truly protected. What we’re saying is we can do both. We can do both of those things together. And you only need to look at Norway or Taranaki to see that’s the case.

Well you’re saying why wouldn’t you do it while the Greens answer to that is they’re worried about climate change and it shows you’re not serious about the environment, protecting the environment.

Well actually that’s not true. That’s absolutely not true. We are serious about the environment but we’re also serious about creating jobs and making sure that New Zealand can get ahead. And if you can do both of those things why wouldn’t you want to do it.

In the time left just quickly I want to ask you that - turning to another issue; the government’s announced this ministerial inquiry into the handling of the case around the Malaysian diplomat. Does it go far enough?

No because basically what happens is it focuses on the department and doesn’t focus on the minister. So this is a ministerial inquiry that looks at everything except the actions of the minister. I mean at the end of the day what your seeing here is a way of shutting down the argument in order of Murray McCully to walk scot free through to the election.

The other thing is that David Cunliffe, the preferred prime minister ratings, they’re below yours. David Cunliffe’s are below yours. Why do you think he’s failing to connect?

Ah look, there’s a long wait before it between now and the election. You watch-

So why isn’t he connecting now?

He hasn’t been in that position for as long as I have been or was. But between now and the election there’s quite a lot of water to go under the bridge. And I know several elections that have turned around as a result.

So you can’t answer why he’s not connecting?

Ah I’m just saying that he definitely is connecting but will likely improve over time as we go towards the election for sure.

Alright, thanks for joining me this morning.

ENDS

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