Onshore exploration date shifts as Govt buffers position

Energy and Resources Minister Megan Woods.

The timetable for offering new onshore exploration acreage appears to be slipping as the Government looks at ways to protect itself from potential legal challenges.

Consultation on the 1703sq km of land potentially available for exploration in Taranaki closed on June 8 and formal tenders for acreage had been expected to be sought this month.

But the formal request for bids now looks set to slip into September at the earliest as the Government ponders options to protect itself from potential legal action. In April the Government shocked the industry by declaring no further offshore exploration acreage would be offered. Onshore exploration would be restricted to Taranaki only and new acreage there was also only guaranteed to be offered for three years.

Energy and Resources Minister Megan Woods last week said the Taranaki offer would proceed. She had received advice on potential changes to the Crown Minerals Act, but she told Parliament she had taken additional advice on whether a "belt and braces" approach was needed to avoid a potential judicial review of the ban on new offshore exploration acreage. "I am seeking some additional advice, but whatever outcome we go with there will be a Block Offer 2018 that will be initiated," she said in response to questions from National MP Jonathan Young.

John Kidd, director of sector research at Woodward Partners, said the block offer has already been initiated. Woods may be trying to defer the formal invitation for bids - another potential trigger for legal action - until the Crown Minerals Act can be amended to conform with the sharply reduced scope of the exploration regime outlined in April.

"The minister therefore appears to be stuck - not able to move without breaking (or changing) the law and not able to move back without also possibly breaking the law," Kidd said in a note to investors.

Critics of the policy change say the Government has misunderstood the importance of gas as an industrial fuel and for dry-year generation in New Zealand's increasingly renewable generation system. The International Energy Agency also forecasts global demand for gas will rise by 45 per cent by 2040 as nations use more of it to replace coal and reduce emissions from power generation, steel-making and petrochemicals production.

Kidd believes the Government's next step will include getting formal Cabinet endorsement of the decision announced by the three party leaders of the Labour-led coalition on April 12. The Government will then need to amend the Crown Minerals Act - possibly by including consideration of climate change in the purpose section of the legislation.

Kidd said the policy is "fundamentally flawed" and many sectors of the economy will be looking to see how the Government treats independent assessments of its harms and benefits expected from Treasury, the Ministry for the Environment and the Ministry of Business, Innovation and Employment through the regulatory impact statement process.