Decommissioning overkill needs rethink

Proposed new rules for decommissioning oil and gas infrastructure need a rethink to achieve their objectives and avoid unintended consequences, Energy Resources Aotearoa has told a select committee this morning. 

“The industry supports the intent of the Bill and our members are already set to take responsibility for decommissioning fields at the end of their lives,” says chief executive John Carnegie.

“However the Bill is regulatory overkill with different requirements piling on costs, far more than needed to protect taxpayers.

“Much of the Bill is retrospective, which is like moving the goal posts after the ball has been kicked. 

“These changes could add even more uncertainty and disincentive to invest in our natural gas supplies, driving up the cost of energy even higher.

“This would destroy jobs, punish our exporters, and increase the cost of living for vulnerable New Zealanders.”

Energy Resources Aotearoa’s submission is supported by independent advice commissioned from experts:

  • Law Professor Philip Joseph finds the bill to be retrospective and “constitutionally objectionable” and “raises a fundamental rule of law concern”, which would be damaging to business confidence.
  • Justin Smith QC expresses serious concern about ‘trailing liability’, which means former permit holders can be liable for fields they have transferred and no longer control. He says it is “a truly novel and draconian provision in New Zealand”.
  • Consultants Wood Mackenzie find the New Zealand proposals are far stricter than comparable jurisdictions and unnecessarily duplicative. They find that “such a strict regulatory system is not necessary to obtain a satisfactory level of taxpayers’ protection.”
  • Economics consultants Castalia finds the proposal’s costs to greatly outweigh the benefits with net costs to New Zealand of almost $1 billion, generating only 11 cents of economic benefit for every dollar of cost.

“Given there is no urgency with no fields due for decommissioning soon, we’d like to work with the Government on a new regime to achieve the goals we all share.”

The full submission including expert opinions is available here.