Taxpayers will no longer pick up the tab for the decommissioning of oil fields under a new law expected to be passed by the Government later this year.
Energy Minister Megan Woods is introducing legislation to Parliament that will impose an explicit obligation on petroleum permit and licence holders to carry out and pay for the decommissioning of oil fields.
"After the Crown had to take responsibility for decommissioning the Tui oil field, it became clear to me that the current requirements around decommissioning are inadequate and we need to prevent taxpayers carrying the can again," Woods said on Wednesday.
"It will apply to current and future permit and licence holders and the obligation to fund decommissioning will be extended to former permit and licence holders if a permit is transferred after the Bill is enacted.
"This is to ensure those who have enjoyed the benefits of a permit can't avoid the responsibility of cleaning up after themselves."
The Ministry of Business, Innovation and Employment (MBIE) has been managing the $155 million Tui oil field decommissioning project off the coast of Taranaki after the permit operator, Tamarind Taranaki Ltd, went into liquidation and receivership in 2019.
Its parent company, Tamarind Resources Private Limited in Singapore, went into liquidation and receivership last year, leaving the Government to clean up the mess as the liquidators gave up the rights of the Tui assets to the Crown.
The law change will give the Government power to monitor a permit or licence holder's financial position to ensure they can afford to clean it up. It will require permit and licence holders to maintain a financial security that can be used for decommissioning purposes.
"The Bill will enable me to consider a number of factors, including for example the circumstances of a particular permit or licence holder, when determining the amount and type of financial security required," Woods said.
"It also raises the bar for permit acquisitions, to ensure that only companies with sufficient financial and technical capability will be able to acquire a permit in New Zealand."
Woods said decommissioning fields is an issue that governments are grappling with the world over as they transition away from fossil fuels.
The Māori Party's Debbie Ngarewa-Packer called on the Government in 2019 to stop using taxpayer money to clean up decommissioned oil fields. She said concerns about the ability of Tamarind to foot the bill were raised but "fell on deaf ears".
"New Zealand taxpayers are footing the bill for the recklessness of what is a multibillion-dollar industry, while here in Taranaki we are suffering the environmental consequences of their negligence," she said at the time.
"We have known for years that oil and gas is a sunset industry, and yet the Government's policy settings still do not properly recognise this reality."
The nine anchors and chains placed on the seafloor following the disconnection of the BW Offshore-owned FPSO Umuroa ship from the Tui operation have been retrieved and brought ashore. The ship departed New Zealand in May.
There is currently a request for proposals out for the removal of the subsea infrastructure, which is closing in mid-June.
The Government banned new offshore oil and gas exploration in 2018, which MBIE estimated at the time could cost nearly $8 billion in lost tax over 23 years. Newshub revealed the decision was made without a cost benefit analysis to back it up.
The Parliamentary Commissioner for the Environment investigated the impact of the ban and found it was likely to have an impact on gas and electricity prices once the current exploration and mining permits expire.
The Government has pushed back on claims by the Opposition that the ban has led to an increase in coal use and importation. Woods says it was because of tight supply of gas production at the Pohokura gas field and dry weather conditions, which impacted on hydro lake inflows.
Ngarewa-Packer has called for the Government to go further with the ban, by banning new oil and gas exploration on land.
