Government funds Tiwai Point study after being 'left blind' on its condition

Environment Southland has been given $300,000 by the Government to assess the site of the Tiwai Point aluminium smelter, possibly duplicating work by owners Rio Tinto. Photo / Supplied

Cabinet has agreed to give Environment Southland $300,000 for a study of the condition of the Tiwai Point aluminium smelter, amid signs that the Government has doubts about what its owners, Rio Tinto, will do when it closes.

In January Rio Tinto, which owns about 80 per cent of the smelter, announced a deal with its electricity provider Meridian Energy which would extend the life of the smelter until at least the end of 2024.

The deal has generally been seen as a delay of Tiwai Point's likely closure, rather than securing its operation long term, with Transpower investing in network upgrades to help distribute the electricity used by the smelter to the rest of the country.

Meridian had said in October it had offered the smelter "well in excess" of $60 million a year in savings, while Forsyth Barr estimated the saving may have been in excess of $80m.

While Labour had committed to trying to strike a deal to extend the life of the smelter - using the carrot of cutting its transmission pricing - it promised any deal would require commitments about remediating the site.

Environment Minister David Parker said the electricity deal reached with Meridian was so good that the talks on clean-up did not progress and the Government had no clarity about the state of the site.

"At the end of the negotiations in respect of a transition for the smelter, we're left blind as to what the state of the site is," Parker told the Herald.

"Given that the risk here to the Crown is potentially hundreds of millions of dollars, we want to know what's necessary."

In late 2020 Cabinet approved a payment to Environment Southland to conduct a study on the state of Tiwai Point as it, unlike central government, had power to enter the site under the Resource Management Act.

Environment Minister David Parker said Rio Tinto has not said what the clean-up of Tiwai Point will entail other than that it will comply with its legal obligations. Photo / Mark Mitchell

While New Zealand Aluminium Smelters had indicated it was conducting a closure study, Parker said the Government had not seen the material.

"We don't know how thorough they will be," Parker said. "Nor do we know the state of the soils and substrate are under these potlines that have been used for all these decades. There hasn't been very thorough monitoring of groundwater."

Rio Tinto had not specified what the clean up would entail, Parker said.

"We've had no undertakings from them as to what they'll do, other than the generalised statement that they will meet their obligations at law.

"They won't say what their obligations at law are ... nor have they said what the state of the site is."

Earlier this week Rio Tinto and the Government struck a deal to remove ouvea premix, an aluminum dross byproduct which can emit toxic gases when it becomes wet, from a site in Mataura in Southland which is prone to flooding.

Parker said negotiations with Rio Tinto over the cleanup had been "pleasant" but the experience of Mataura negotiations were in his mind.

"The right things are said, but the experience we've had at the Mataura site is that they [Rio Tinto] stand pretty much at their legal rights as they see them, and we've got a duty to protect the public interests, not just private rights.

"They've contested their legal obligations with respect to Mataura dross, pretty vigorously."

New Zealand's Aluminium Smelter chief executive Stew Hamilton acknowledged in January that the company did not know the exact state of the Tiwai Point smelter. Photo / Gregor Richardson

Parker said Rio Tinto had expertise in closing smelters "but so did the operators of the Tui oil well, and that didn't end well for the Government".

Owned for years by a consortium including New Zealand Oil and Gas, the Tui field was sold to Malaysian company, Tamarind Taranaki, in 2017.

While the former owners sold the field with cash meant to be for Tui's decommissioning, when a well to extend the life was dry, Tamarind collapsed into liquidation, leaving the cost of the clean up to the Crown.

Rio Tinto declined to make anyone available for an interview on Parker's comments.

On the day the deal with Meridian was announced to extend the life of the smelter, NZAS chief executive Stew Hamilton said a major project was under way both to examine the state of the site, but also to consult with stakeholders about what would happen when the smelter was closed.

It included more than 300 bore holes being drilled on the peninsula to test the condition of the site. Hamilton conceded that in advance of the work, the company was not in a position to say exactly what state the site was in.

In a statement, a spokeswoman for Rio Tinto maintained the work to examine the site would be thorough and involved extensive consultation.

"Rio Tinto takes its operating and closure responsibilities very seriously and is currently conducting an extensive Closure Study to understand any environmental impacts on the Tiwai Point site.

"This process is a lengthy one, involving the expertise of several independent environmental scientists ... and includes extensive consultation with officials, our local community and Ngāi Tahu as mana whenua."

Environment Southland chief executive Rob Phillips said Parker had asked the organisation to help assess the extent of remediation needed once the smelter closed.

"We will be increasing our monitoring events and groundwater sampling, which will help form the basis for determining the scope of the remediation needed, Phillips said.

"The funding ... will go towards engaging external expertise to support and review this plan. This will be ongoing, and we are keeping the Minister updated."