Oil and gas bonds idea won’t work – officials kill Shane Jones’ idea for long-term

Resources Minister Shane Jones wanted to introduce oil and gas bonds so the sector would be compensated if a future Government upended its work – but he’s been told it’s not workable.

Jones revealed officials’ advice during an appearance before the Economic Development, Science and Innovation select committee at Parliament this morning.

The Government is working its way through reversing the oil and gas ban from the previous Government, with Jones championing a return of industry players and wanting to provide long-term certainty in case a future Government brought back the ban.

He had floated the idea of a bond scheme to entice investors to return to New Zealand and be compensated if a future Government pulled the regulatory rug from under them.

“That idea has fallen on barren ground and is unlikely to make its way to Cabinet,” Jones told the committee in response to questions from Labour MP Megan Woods.

“The bond idea came as a way of assuring investors – you can say they were exaggerating or catastrophising – [who were] not confident New Zealand has the level of regulatory consistency.

“Sadly officials have taken the view that the idea won’t work.”

Resources Minister Shane Jones wants to reinvigorate the oil and gas sector.
Resources Minister Shane Jones wants to reinvigorate the oil and gas sector.

He said he was the kind of politician to float ideas in the open rather than do months of “clandestine” work, which might be considered “cavalier and reckless – but that idea about myself didn’t start yesterday”.

Another of those ideas – which officials were still working on – was to share revenue from mineral extraction with the regions. Whether that extended to iwi “will have to be considered”, he told the committee.

He also confirmed his intention to shift the liability landscape so oil and gas investors would be more likely to return and start drilling.

Woods grilled him and officials on the $335m in taxpayer money that was spent cleaning up and decommissioning the Tui oil field. “Why are you exposing the taxpayer to more Tui-like situations, decreasing protections for the taxpayer in legislation with the watering down of trailing liability?”

Jones: “I think you’re catastrophising things. There are still obligations and financial security required. What we’ve changed is the capacity of the Crown to go back to ‘Adam and Eve’ in seeking liabilities – and the model will be up for debate in select committee – and [will instead] go to party who most recently owned the asset.

“To suggest liability will inevitably be with the Crown is shallow politics.”

Green MP Steve Abel then pointed to the Deepwater Horizon disaster and asked Jones if he was reducing the burden of responsibility on oil drillers for the harms they might cause to the economy, environment and fisheries in order to “attract some money”.

Jones: “We have taken a different approach to balance a better set of outcomes between regulatory burden and management of fiscal risk. The last Government had the effect of chilling investment and leading to the untimely demise of industry. I want to reinvigorate the sector with a set of different weightings as to how we manage risk – that’s how politics works, folks.”

Labour MP Megan Woods. Photo / Mark Mitchell
Labour MP Megan Woods. Photo / Mark Mitchell

‘Who is going to pay for that?’

Earlier, as Regional Economic Development Minister, he told the committee about the $1.2 billion regional infrastructure fund. A small amount ($22m) would be used to run it, while another small portion (to be confirmed) would be available for grants, but the bulk of it would be for capital investments, with final criteria to have Cabinet sign-off by July 1.

The capital projects would fall into two categories – flood resilience and enabling productivity – but Jones warned that it would be a partnership rather than the Crown carrying the can.

Take the onshore infrastructure needs for offshore wind in Taranaki, which could replace oil and gas as the “next Garden of Eden economically-speaking, though I myself have doubts about that”, or for gas exploration off the shore of Oamaru.

“Who is going to pay for that? My answer is don’t look to me for a subsidy.”

What would ultimately get funded would be up to the regions because “I’m not into this business of Wellington knows best”.

This led to some verbal sparring with Labour’s Taranaki-based MP Glen Bennett, who said there were already region-endorsed priorities in the Taranaki 2050 roadmap with a focus on transitioning away from oil and gas.

“But it doesn’t seem like you’re listening to the region,” Bennett said.

Jones said they’d have to “agree to disagree” and talked up how “black and white gold” had enriched the region.

Derek Cheng is a senior journalist who started at the Herald in 2004. He has worked several stints in the press gallery team and is a former deputy political editor.


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