Q+A: Megan Woods interviewed by Corin Dann

Energy Minister assures consumers they can still cook with gas

Energy and Resources Minister Megan Woods says New Zealand consumers will still be able to cook and heat their water with gas for many years to come, despite the government’s stance on new offshore oil and gas permits. Speaking on TVNZ 1’s Q+A this morning, Dr Woods told Corin Dann: “We’re talking about a 30, 40-year transition. We’re talking about still drilling for oil and gas in New Zealand in the 2030s and the 2040s.” She also hinted there would be provision in next month’s budget to top-up the country’s Natural Disaster Fund because it was forecast to dip below a threshold which would trigger a need for the government to help. “There’s $370 million left in the Natural Disaster Fund. When that figure dips below $200 million EQC will write a letter to myself and the Minister of Finance and say that we’re running pretty low,” she said.

END

Q + A
Episode 6
MEGAN WOODS
Interviewed by CORIN DANN

CORIN The minister for energy, Dr Megan Woods, joins us now. Thank you very much for joining us on Q+A. Nice to see you.

MEGAN Thanks, Corin.

CORIN Can you explain to New Zealanders – there’s a lot of debate still going about this issue – how ending exploration will stop or decrease our greenhouse gas emissions?

MEGAN Well, I think one of the important things to realise, that this is about addressing climate change. It’s about us facing up to what we need to do as a globe and as a country. But it’s also about positioning and future-proofing our economy for the world where the world is moving beyond that.

CORIN How does it bring emissions down?

MEGAN Sure. So, 15% of New Zealand’s electricity emissions at the moment come from non-renewable sources. We’re 85% renewable. But we’ve got a pathway through to 2035, where we’re going to get to 100% renewable. So we will be stopping the peaking eventually. We’ve always said that gas remains part of the peaking.

CORIN What will you replace it with?

MEGAN So, what it is about building capacity around the renewables – through to 2035, we absolutely acknowledge there is still a place for peaking.

CORIN So, just to be clear, in 2035, do you think it’s possible for all New Zealand to have all of our electricity supplied by renewables and we won’t need to have any emergency dry years of coal, oil or gas in case there’s an emergency? Are you saying that?

MEGAN No, what we’re saying is the plan we’re putting in place to get there will still use peaking, which is the emergency supplies you talk about, and beyond 2035, it could still well do it onwards to 2050. Technology is changing, but at the moment, we’d have to have too much over capacity in order to have 100% renewable.

CORIN All right. Let’s put electricity to the side here. 60% of our energy use is fossil fuels.

MEGAN That’s right.

CORIN How is this policy going to reduce the demand, the consumption of energy which creates the greenhouse gas emissions?

MEGAN Sure. Well, it’s about doing both. We’ve certainly got to address the demand issue. And that’s what the carbon budgets that the independent climate commission we’ll be putting together will be very much focussed on those demand issues. We’ll be looking at the two first cabs off the rank, as it were, that the independent climate commission will be looking at is agriculture and the 100% renewable target that we’re going to bring in. But then we need to look across the whole economy. We need to be thinking how is it that we’re building our cities? What are we doing about transport – all those kind of issues that come in. Demand is critical.

CORIN So if demand’s critical, why are you smashing one particular industry and hurting an industry, when really, the goal here is to stop people consuming carbon, not the supply of it.

MEGAN Well, I think you can’t do one without the other. And let’s be really clear – what we’re talking about here is letting the current mining permits run and the current exploration permits. People will still be drilling for oil and gas in New Zealand in 2030 and possibly 2050, 2060 and possibly 2070.

CORIN Are you sure about that? What makes you so sure?

MEGAN So, we’ve got current exploration permits that run through to 2030. And if someone in 2030 decides that they’ve got a find and that they’re going to convert that into a mining permit, go through the process, that goes through to 2070.

CORIN Have you got evidence to back that up? Have you got research? Have you got reports? Have you got cost-benefit analysis?

MEGAN What we know is that there’s 100,000 square kilometres of New Zealand that is currently under exploration permits. Now, that’s roughly the size of the North Island, which is 113,000 square kilometres. You’d probably look at a 10% to 15% chance is what the industry would say of actually finding something. That gives you 10,000 to 15,000 square kilometres that would be available for exploration.

CORIN We haven’t found anything for 12 years, have we?

MEGAN No, we haven’t, but what I’m saying is that we currently have about 2600 square kilometres offshore in production. We’ve got the potential even if you went with the 10% to 15% chance for a further 10,000 to 15,000 square kilometres.

CORIN It’s a big risk, though, isn’t it?

MEGAN Well, it was a month ago. Because these exploration permits were out there. We’re told off the east coast of the South Island in the Barque Prospect there’s 11 trillion cubic metres of gas sitting out there off the coast. And that’s certainly what was gone out with.

CORIN Okay. My understanding from talking to the industry is that you should’ve been given an update on reserves by Shell Todd and OMV at the start of this year. Have you had that?

MEGAN Yeah, and that’s the figure that’s going around, there’s a sort of a seven to 10 year that’s currently being drilled.

CORIN Hang on. Seven to 10 year – where did the seven year come from? I haven’t heard that before.

MEGAN That’s a figure that we’ve been talking about. Seven to 11 is often the figure that’s put there. I think that’s probably a pessimistic figure.

CORIN That’s the latest data?

MEGAN That’s right.

CORIN So if you’re a consumer of gas in New Zealand, and let’s say for your barbecue, for your hot water, for your cooking, should you be transitioning off gas? Cos isn’t that the issue, you want people to transition off gas in New Zealand? That’s the only way this policy will bring down greenhouse gas emissions, right?

MEGAN That’s right, but that’s very long-term. We’re talking about a 30, 40-year transition. We’re talking about still drilling for oil and gas in New Zealand in the 2030s and the 2040s. So no one has to rush out and do it tomorrow.

CORIN What makes you so confident that these companies will continue to come here? I mean, capital, money travels around the world, it goes where it goes – why will they continue to come here when the signal you’ve sent is they’re not wanted?

MEGAN Well, look people have spent a lot of money on these exploration permits. You’ve already done quite a lot of work before you put a tender in and a block offer and get an exploration permit. The advice I’ve had is that people will continue to do those. We’ve had a number of changes of hands of permits and exploration permits in New Zealand, even before this decision was made. That’s just the nature of the industry and the market, but actually, we had New Zealand Oil and Gas came out on the day that we made the announcement and said that it’s not really going to make a huge difference in that respect.
CORIN Have you talked to Methanex? Methanex is our largest consumer of gas – 46% of it. The industry is telling me that they could up sticks and potentially leave in five years, you know, because of the uncertainty created by this.

MEGAN Well, look, Methanex, one of the things that they’re heavily dependent on is the extension of a permit in Taranaki, a gas permit, next year. So that will go through the normal process it would have a month ago. Nothing’s changed.

CORIN In five years’ time, they have to look at refurbishing their plant. They spend up to $100 million doing it. Why would they do that if the long-term horizon’s been shortened?

MEGAN And so for them, making sure that that permit that they currently work with is extended is absolutely critical. And nothing’s changed in that respect from a month ago. That’s still the same. That’s still the same issue, but in terms of the long-term investment signal, what we also now is that methanol used to be made in New Zealand before we used gas. It was made using bio mass. We also know that Iceland is making methanol using geothermal. So there are other options. And what a number of industry players are telling us is they want those long-term investment signals that they can decide.

CORIN This is a $1 billion business. It affects the overall economy. That’s a lot of money for this economy, and we’re importing oil.

MEGAN It is, and we don’t use any of the oil that we drill here in our cars that we export at all. That’s not the way we use it.

CORIN You put that business at risk with that decision. Did you consult with them? Did you talk to them? I mean, the argument is that you didn’t.

MEGAN Oh, well, that’s simply not the case. And actually, I’m visiting Methanex in Taranaki tomorrow.

CORIN Did you talk to them beforehand, though?

MEGAN Yes, and we talked to the industry.

CORIN So they knew this was coming?

MEGAN Absolutely.

CORIN Methanex knew this was coming?

MEGAN They were at the Petroleum Conference, when I went and gave a speech.

CORIN You didn’t tell them at the Petroleum Conference that this was your plan, explicitly?

MEGAN I think I said 32 times - I think someone counted it up - that we had begun the transition planning for when we moved away from fossil fuels. I gave an assurance that no one’s current permits would be touched. And let’s be really clear – the Prime Minister, in the first interview that she gave when she was Prime Minister-elect, when asked about block offer, said that 2017 was going ahead, but there was no guarantee of future block offers. This was so strongly signalled.

CORIN So you’ll tell them tomorrow that you want them to stay?

MEGAN Absolutely. Look, one of the things, the dependencies that is still there for them is whether or not they have a permit.

CORIN Be quite useful if they didn’t, thought, wouldn’t it, because that would free up 46% of your gas supplies.

MEGAN But that’s exactly the kind of shock that we’re trying to avoid. We’ve got the opportunity to do this right, to take the time to plan a 30, 40-year transition. Look, I grew up in the 1980s in South Christchurch. I saw the Addington rail workshops close down around me and people lose their jobs overnight. We can avoid that by putting in place the long-term transition planning. We’ve not prepared to pull the rug out from under communities and individual workers and families by having the courage to do the long-term planning that’s required.

CORIN Where does coal sit in this? Will you ban future exploration of coal?

MEGAN Look, this isn’t a decision about coal; this is about block offers. And this is about offshore oil and gas.

CORIN Have you given any thought to that decision?

MEGAN Oh, well, obviously, the speech from the throne talked about mining on conservation land, but no, we have not done any work on whether or not we’re going to ban coal.

CORIN This is important, though, because you need that coal, as we mentioned earlier, in terms of electricity supply in the event of a dry year. And the papers that were given in terms of the Greens’ questioning during the coalition was that if we didn’t have any more, if you stopped coal exploration, you’re talking 2028, there’d be no more coal.

MEGAN Look, one of the things that we are seeing, Huntly is transitioning to a gas peaking plant, away from using coal. Gas is about half the emissions of coal. But it still is half the emissions, so we’ve always said it’s part of the transition, gas. But I think one of the things that we need to be really clear on, that a transition is not status quo. The status quo is doing nothing, burying our heads in the sand and not having the long-term future-proofing plans for the economy. So we are absolutely accepting that gas will be used as part of that peaking.

CORIN I don’t mean to be rude – I just need an answer on coal. Is there a future for more exploration of coal?

MEGAN Oh, look, we have made no announcements about ending coal, and we certainly haven’t done any work.

CORIN Are you ruling out that you won’t ban coal exploration?

MEGAN Oh, we have done no work on banning coal.

CORIN That’s a possibility?

MEGAN No, I’m not saying it’s a possibility at all. What I’m saying is there are no plans to do that. We haven’t done anything. But then you have a look at what Fonterra has said in the South Island, who are one of the major users of coal in New Zealand, that they’re saying that they want to by 2050 be at carbon neutrality and that they’re going to move away from using coal.

CORIN Okay. One final quick question on this. Have you sought legal advice as to whether this is in breach of the Crown Minerals Act? Because there is talk in the industry of a judicial review, that you’re supposed to encourage prospecting and that this might be in breach.

MEGAN Oh, look, we’ve absolutely sought legal advice. We’ve looked at it. And I think what everyone has to remember as there actually has been a block offer this year. We’ve put out a block onshore in Taranaki. It’s not offshore, that that is going ahead. And one of the reasons we did that is because actually, there’s some of the fields that are yielding the supplies that we need to ensure there is that security of supply.

CORIN What does the advice tell you about that? Do you think there will be a judicial review?

MEGAN Oh, look, there well could be, and that’s up to the industry, but I’m confident that I made the decisions within the realm of the Crown Minerals Act, within the criteria that I needed to decide. One of the things I had to consider was the security of supply. One of the other things that I also had to consider, that the last two years that block offer has gone up, only one in each of those years of the offshore permits has been taken up. But, look, this is also about leadership. This is about a government having the courage to do the right thing, to lift its eyes beyond the three-year political cycle and make those long-term plans for the future.

CORIN Fair enough. Just very quickly, you’re doing an inquiry into power pricing. Can you give consumers a guarantee this morning that the power prices will not go up beyond the rate of inflation while you are the Minister of Energy?

MEGAN Look, what I’m going to give consumers a guarantee on is that we are certainly looking very closely not only at the here and now, that we know that there’s some issues now, that the International Energy Agency has told us that we’ve had very rapid rises in the cost of electricity compared to some of our OECD counterparts.

CORIN Willing to put your neck out and give them an assurance?

MEGAN What I’m saying is, we’ll be looking at everything – right from generation through to how that power arrives at their door. But one of the things we’re also going to do with this power pricing review is not only look at the here and now – exactly what we’re talking about. The changes in technology that are coming could have huge implications in terms of affordability for electricity. So we’re also going to be looking at those.

CORIN Okay. We might have to tackle that one another day. Just very quickly, on the issue of EQC – there’s been a lot of noise about this this week with talk of $1 billion. You know, with the insurance – houses that can’t be reinsured and these sort of things. Has the government got enough money left in its fund, the Natural Disaster Fund? My understanding – it’s, what, at $370 million? You’re going to run out of money.

MEGAN That’s right. So, there’s $370 million left in the Natural Disaster Fund. When that figure dips below $200 million– When it gets to about $200 million, EQC will write a letter to myself and the Minister of Finance and say that we’re running pretty low.

CORIN When do you think that will happen?

MEGAN The advice I have is that will happen reasonably soon. That will happen this year that we’ll receive that letter, and that’s something we’ve been planning for.

CORIN So the government’s going to have to bail out the Natural Disaster Fund.

MEGAN Well, it’s called the Crown guarantee, and it’s, I think, one of the things that New Zealanders can be proud of and have some certainty around the fact of EQC is the fact that when the fund does run out, that there is a Crown guarantee that backs it up.

CORIN Sure, and I think that’s reasonable.

MEGAN That’s reasonable.

CORIN That’s absolutely reasonable. But the issue is, do you, as a government, have to take a big chunk of money – say, $0.5 billion – take it across, stick it in the fund, leave it there? Because then you’d have an opportunity cost on not being able to use that money for other things.

MEGAN Look, certainly, we’ve been planning when we’ve put this budget together for the fact that the Crown guarantee will be drawn on. It’s something that the Minister of Finance and I have been talking about quite frequently, the fact that there will be… And in terms of the quantum of that, that we need to—

CORIN But you’re going to have to put some money across?

MEGAN Oh, look, we are planning for the fact that the Crown guarantee will be activated in the coming financial year.

CORIN Dr Megan Woods, thank you very much for your time. Much appreciated.

MEGAN Thank you very much.

Please find attached the full transcript and the link to the interview

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