The doubled sword of Crown Minerals Act change

It has been presented in the media as a double edged sword. On one hand we have the well publicized statement by Prime Minister Jacinda Ardern with full support of the Green Party that by 2050 oil and gas will be banned in New Zealand. On the other the more pro-development New Zealand First Member of Parliament and Minister for Regional Development Shane Jones is touting a $1 billion hydrogen gas development in Taranaki.

Taranaki in the 1980’s had a very large energy projects underway. These were part of the Robert Muldoon Government’s “Think Big” scheme which called for large industrial projects that would create hundreds of thousands of jobs, boost the New Zealand economy and address significant energy shortages. They included a methanol plant at Waitara and a synthetic fuel plant at nearby Motunui.

Now in 2018, Mr Jones is talking about the possibility of an American consortium developing a multi-billion dollar emissions free plant based on existing technology. 8 Rivers have announced a project in which they build a plant using Allam Cycle technology that they developed in the United States and which is used at a plant in Texas.

Whilst I am interested to see how the technology will be used and what any Government feasibility study will show, I have some concerns on both sides of the fence. Notably:

  1. It might be emissions free technology, but how will the gas be extracted. If it is fracking one can expect significant resistance from the Greens/Greenpeace over potential damage to groundwater, and other parts of the environment – one can also expect resistance purely based on ideology as well
  2. Who would fund it? My parents generation will be wary of anything that looks like another “Think Big” project on the grounds of the parlous financial state that the original ones left New Zealand in
  3. How would the American consortium construct the project and would New Zealand communities nearby receive due benefits for hosting it

Not surprisingly, especially with the Government’s statement on ending oil and gas by 2050, there is excitement among local businesses and Mayors, keen on getting some confidence back into a region heavily reliant on energy projects.

Back in 1979 when the Muldoon Government was pushing for energy independence, New Zealand was probably not ready for such ambitious projects and their costs. Despite worsening Middle East tensions and the rises in the price of oil caused by the fall of the Shah in Iran and the Arab oil shock of 1973 following the Yom Kippur War, compared with the price of petroleum today, it was even then quite low. Our transport system, energy market and infrastructure was not ready for something that then was probably a couple decades ahead of its time.

But 40 years later with concerns about the impact of fossil fuels now widely advertized and concerns about energy dependence in the future justified, this debate rears its head once again. The sword being wield though, depending on which side of the blade strikes you, is another thing all together.

Government rushing oil legislation

The Crown Minerals (Petroleum)Amendment Bill is before Parliament at the moment. It has come back from the submissions phase, where 2312 submissions were collected from members of the public, N.G.O.’s and others. In the next few weeks it will go back to the House of Representatives for its third and final reading.

Despite its promises of transparency, I find myself in the unusual position of agreeing with those who oppose the legislation in claiming that it is being rushed. Yes we had a chance to make submissions (though mine was destroyed when my USB drive corrupted itself one day and never got to be submitted). Yes we were given a chance to speak to the submissions before the select committee.

But I nevertheless believe that too much haste is being made in progressing this legislation. This is especially since the announcement in April that oil and gas would be phased out did not involve any prior consultation with the oil and gas sector, or any apparent effort to figure out what alternative sources of fuel could be developed. The stance is capped off by the chair of the oil and gas industry body PEPANZ, Cameron Madgwick. Mr Madgwick has gone on the record as saying that the industry would rather have certainty about the process going forward in 2018 than being offered a new block for exploration.

As it is, I have always believed that totally ridding New Zealand of oil and gas is never going to happen and that the Government will find itself being forced to make concessions of some sort or another. It will also find that its failure to acknowledge the lack of a nation-wide blue print for meeting New Zealand’s energy needs in the forseeable future proves problematic with no clear priorities, objectives for meeting those priorities or policies to give effect to the objectives, in place.

Even if New Zealand does meet its objectives, will it make any difference? I think New Zealanders are more conservative than Labour and the Greens are willing to admit when it comes to energy. Certainly people realize that a few significant policy decisions in major countries like India, China or the United States could lead to changes that completely undermine any in roads New Zealand makes in carbon emissions.

So, Labour can rush this Bill of Parliament through as it looks like they will try, but it is not a well crafted law and will cause them and their Green allies some significant headaches in the months and years to come.

Time for a petrol price inquiry

I have read of petrol reaching another all time high price in New Zealand today. This is on a commodity that in December 2017 New Zealanders were paying one of the highest pre-tax (i.e before tax added) prices in the world for. Due to some countries like the Netherlands having substantially higher taxes on fuel than New Zealand, we come in about mid field in the O.E.C.D. for total price after tax paid.

Do we need a goods and services tax (G.S.T.)on petroleum and diesel? I am not sure of the answer to that. The Automobile Association New Zealand has long called for a removal of G.S.T. on fuel, and says that it would lower petrol prices by 10c/L, and reduce pressure on already pressurized budgets.

Sure there is a petrol tax coming and petroleum companies do not want to have dollars shaved off their profit, but since when was that new? Sure the Middle East looks dicey at the moment – but that is the way it has been for most of the last decade. Sure there are costs incurred in refining product and getting it to the market, but again, that is the way it has been for yonks.

Basically it is theft and New Zealanders are blindly thinking “she’ll come right” eventually.

Well, no. It will not come right unless we kick this mentality that has cost us much as a nation, and is set to cost quite a bit more before long, to the curb. This notion that somehow the market will correct things and petroleum prices will come down is stuffed.

So, who is going to petition the Minister for Energy, Dr Megan Woods about the disgusting theft that petroleum companies are getting away with? There is no justification for any of the companies whose global parents hundred hundreds of billions of dollars (U.S.)per annum and are comparable in some cases to G.D.P.’s twice as big as New Zealand to not pay tax in full and on time.

Exxon Mobil NZ in 2017 made N.Z.$143 million profit, up 57% on the previous year. In the same year B.P. New Zealand increased its profit 65% to N.Z.$243 million and Z Energy increased their profit in the same time to N.Z.$263 million

It would cost me $100.80 to filll a 1.4 litre Hyundai Getz from completely empty at $2.24/L. A 3.0L Toyota Surf would cost $89.05 to fill its 65L tank with diesel at $1.37/L.

Yes, we need to be cutting down on carbon emissions, but until there is a serious uptake in electric cars, which still have a number of barriers in the way and hybrids, New Zealand is not going to make inroads on its Paris Accord obligations. But to get there, those vehicles must first become more affordable. Right now a hybrid or electric vehicle is simply not in the budgetary of many New Zealanders.

Time to be bold on fuel

When the Government made the announcement that oil and gas would be phased out in New Zealand there were a lot of incredulous people across the political spectrum. They ranged from those who hoped for that day, but were concerned that politicians would shy away from making such an announcement, to those who worked in the industry and were scared that it would mean the ends of their livelihoods. And then there were others, such as myself sit in the middle, not quite believing such a day will actually happen, and think that those in the oil and gas sector will be able to find work.

Why? Contrary to the assumptions of many, there is considerable expertise in the oil and gas sector that could be employed in other energy projects, and not just in Taranaki or Northland.

How do I believe that this can happen?

One idea that I have long liked is exploring the feasibility of creating a nation-wide biofuel programme using material from the waste stream. This is an idea that has some investment in it already – Gull uses dairy waste to create a biodiesel. It has also experimented with the waste from beer. It uses 10% bioethanol. Ethanol is a key part of the fuel in recent car types, so having a bioethanol source will help to reduce the carbon emissions from our fuel. If other companies such as B.P., Z, Caltex and Mobil were to follow the lead of Gull, scope would exist for a significant reduction in vehicle emissions from burning fuel.

New Zealand needs to be bold. Right now it is suffering from severe aversion to radical overhaul of how and what our vehicle fleet consumes in the way of fuel. Yes, the Government sees a day when New Zealand will be carbon neutral, but does not have a working blueprint to get there. Nor does it see the potential alternatives sources that biofuel – a catch all term in my opinion for all fuels with a biological base, such as waste matter – can offer.

To do this we will need infrastructure. Should a feasible type/s of biofuel be found, there needs to be a means of collecting the waste matter that would be used. Having collected, there needs to be a drop off point with storage for it near a refinery that can turn it into the appropriate product/s. To have this infrastructure work we need skilled labour and that already exists in the form of the people working on energy projects in Taranaki. The skills and knowledge required would encompass the full range of skills currently available among the workforce in Taranaki.

To do this, the Government needs to be bold and open a dialogue with the oil and gas workers in Taranaki who will otherwise think that they are going to be shafted. That should not be the case, and certainly not if we really want true energy independence without having to rely unduly on the likes of B.P., Caltex and Mobil whose interests are purely corporatized and not necessarily in the interests of New Zealand or New Zealanders.

Contrary to National’s belief fossil fuels are not dead – YET

Contrary to the belief of the National Party, the Government has no plans for a ban on coal. Part of this is pure necessity, ensuring that during dry seasons in the hydro-electric catchments where rains have failed to keep the hydroelectric storage lakes of the lower South Island and the Waikato power scheme topped up, the Huntly power station can still be started. It runs on coal and gas.

Part of the absence of a ban also rests on an acknowledgement that there is still a demand for New Zealand coal overseas, especially in China and Japan, with coal mining making up a significant part of the West Coast economy. The railway line from Ngakawau, north of Westport down to where it meets the Trans Alpine line is largely paid for by coal coming out of mines in this area.

There are other things that can be done first before any ban include:

  • No longer mining lignite or sub-bituminous coal which has a higher sulphur conent and releases
  • Focus on bituminous and anthracite coal which burn better

Power stations at Whiranaki in Hawkes Bay and Stratford in Taranaki are diesel fuel and natural gas based operations, respectively, that have installed capacity of 360 megawatts. Like Huntly, these are normally held in reserve unless there is a dearth of hydroelectric power available.

Contrary further to the National Party’s claims of fossil fuels being banned in the near future, Minister of Energy Megan Woods has stated that she can see oil and gas still being used in 50 years time. The reason for this is simple. National has ignored the finer print of the message and claimed that oil and gas will stop quickly, whereas the ban only exists on new exploration.

The claims made by New Zealand Gas have been completely dismantled by economic commentator Rod Oram. Among some of the rebuttals were:

  • Having the right geology – whilst true of Taranaki, it cannot be so easily said for the Canterbury Bight
  • The economics would suit New Zealand – actually the U.S. is becoming a major exporter, and the cost of selling N.Z. product at a price beneficial to both customers and shareholders alike is not likely to suitable
  • The fisheries will be okay – New Zealand has superb fisheries that are the envy of many nations, which is one of our biggest comparative advantages
  • The environment can survive an oil spill – The moves to protect the Southern Ocean fisheries aside, National slacked off in a big way on affording our marine environment the protection it badly needs and did not seem to think our capacity for dealing with an oil spill needed overhauling
  • No need for alternative sources – biomass is slowly becoming more popular; substantial research is going into other alternative energy sources, meaning the decline of gas is in some respects natural

Whilst it is true there is still an immediate future for fossil fuels, the long term outlook strongly suggests something approaching a gradual yet nearing terminal decline. New Zealand and the world are moving on, and at some point, N.Z. Gas will have to accept this.