The reports also suggested greening the fleet could be good for fuel security.
The Government is considering the creation of a new special economic zone (SEZ) in Marsden Point, potentially with its own bespoke planning, foreign investment and maybe even tax rules. If the Government goes ahead with the schemes, it could mean that businesses that operate in the new regional zones enjoyspecial tax treatment.
Shane Jones, wearing his Resources, Regional Development and Associate Energy Minister hats, said the Government was exploring the idea of an SEZ at Marsden Point as he released a series of documents that showed the cost of restarting refining at the site would cost anywhere between $4.9-$16.1 billion, based on two estimates in the report.
The old refinery closed in 2022 and the site has been substantially decommissioned, hence the high price tag.
One of the reports also suggested the Government might want to look at boosting the uptake of electric vehicles in order to safeguard New Zealand’s fuel security – as more electric vehicles (EVs) on the roads would mean less demand for imported fuel.
Jones and his party, New Zealand First, secured a review into reopening the refinery in coalition talks in 2023. Jones conceded the enormous price tag meant reopening of the refinery as before was a non-starter, however there were now other plans for the site.
Jones gave some backing to that idea and said there was a chance that any future liquefied natural gas (LNG) terminal, which has been floated as a solution to New Zealand’s winter energy woes, could be located at the site.
“Marsden Point is of inordinate strategic importance, not only as a part of our industrial complex, but as a site where we can accelerate the fuel transition journey. It’s a site where we can do biofuel development, it’s a site where, in the future, there’s nothing to stop us from thinking about energy generation there because the transmission lines at Marsden Point are the most robust and profound in the country,” he said.
A statement from Channel Infrastructure chair James Miller to the NZX said Jones’ announcement was a “resounding vote of confidence in the future of our company, and we look forward to seeing the full potential of the energy precinct delivered over time”.
“All of the potential options noted by the minister as forming part of a potential Special Economic Zone would help us to deliver our vision for Marsden Point as an Energy Precinct, grow our operations and create new jobs in Northland, and we look forward to the Government announcing more detail about how a new Special Economic Zone might work in due course,” Miller said.
Special Economic Zones
In a statement, Jones said Cabinet was expected to consider SEZs in the first half of this year.
An SEZ could include “business-friendly regulations, infrastructure and facilities, investment support, and customs and trade facilitation”.
They would not be restricted to energy sites like Marsden Point, but could apply to any strategically important areas of the country where infrastructure, ease of doing business and investment are critical to the economic interests of New Zealand, Jones’ statement said.
Jones gave the Herald some detail of what these zones might look like.
The zones would have special legislation governing them, making consenting easier, he said.
“If I had operations at the port and I wanted to expand them, then I would have an easier time consenting that expansion than I might [otherwise] because that zone would be governed by a distinct criteria that is driven to effect economic resilience outcomes.”
He said the “impetus behind the kaupapa [plan] of a dedicated [economic] zone is to transform that area into a precinct where we can accelerate energy resilience, energy innovation, energy investment”.
He said he was frustrated by the difficulty Northport experienced getting a resource consent for expansion. He was dismissive of environmental concerns regarding keeping heavy industry at the site because it was already the site of heavy industrial development.
“It’s a trade-off [between the environment and the economy] but let’s face it Marsden Point has been an industrial estate for them, for most of my life – we’re not talking about compromising Fiordland or something like that,” Jones said.
Tax changes?
SEZs have existed in various forms for decades.
They are enjoying something of a renaissance as countries look for ways to stimulate economic growth, particularly in areas that have struggled economically. Relaxed investment rules and generous tax settings are looked on as a way of attracting foreign investment. Earlier this decade, the UK began establishing SEZs in the guise of free ports. The ports have exemptions from certain customs rules.
Tax changes were not mooted in Jones’ press release on SEZs, but he confirmed to the Herald that he was considering putting tax incentives forward as suggestions to his colleagues.
Jones highlighted changing depreciation rules as an example of what was done overseas, although he stressed that tax rules were the domain of his colleagues in the finance and revenue portfolios.
“The best I can do is put Theo options forward in relation to economic incentives to my colleagues,” Jones said.
A chart from the Government's fuel security study. Photo / Castalia and Envisory report
New Zealand officials have taken a dim view of the idea in the past. The Labour-Green-NZ First Government looked at the idea for Tairāwhiti/Gisborne.
At the time, officials floated accelerated depreciation rates in the region or investment tax credits as ways of implementing an SEZ.
Officials warned that incentives might reward behaviour that would have taken place anyway, meaning the Government loses out on revenue without any net economic gain.
Firms would also “be incentivised to portray transactions as complying [with SEZ rules]”.
“Potentially this could create a significant loophole that puts the tax base at risk or, to prevent this, a more heavy-handed compliance and administrative regime than is the norm,” the officials said.
“The costs of tax concessions are high because they would introduce a reduction in coherence and consistency of the tax system and the potential for accounting activity to be devoted to re-characterising expenditure so as to gain the concession. Therefore, strong justification of tax concessions is required,” they warned.
It appears that while creating new zones with simplified planning rules is popular within the coalition, the tax incentive idea is less so.
Is the solution just more EVs?
One of the studies noted that improving New Zealand’s fuel security could be accomplished by reducing demand, rather than just increasing supply.
Though the report found the cost-benefit equation of reopening Marsden Point to be relatively low, mainly because of the high cost which would need to be carried by the Government or consumers through elevated prices, other solutions had better economics.
These included expanding the trucking fleet to make it easier to get fuel from New Zealand’s many terminals, increasing diesel storage, and accelerating the transition to zero-emission vehicles.
The report reckoned this could cost $129 million a year and save hundreds of millions of litres of fuel a year.
“[As] EV adoption continues, the transportation sector could reduce its petrol consumption by up to 40% ... As a result, over time, the risks to fuel security will decrease because New Zealand light vehicle users will become less reliant on imported fossil fuels.
“Broader market trends and technological advancements drive this transition and it is already occurring without requiring additional intervention or costs. However, if the Government is considering spending resources on fuel security measures, it could consider accelerating this energy transition.
“Achieving this would likely require subsidies and the Government would need to determine a funding mechanism. Potential options include taxes or a fuel surcharge ... These would require careful policy design to avoid subsidising consumers who were already going to transition and avoid distributional impacts.”
Jones said he was less keen on this because accelerating EV uptake would put pressure on New Zealand’s already fragile electricity supply.
But Labour’s climate change and energy spokeswoman Megan Woods said the Government needed to look again at EVs.
“Electrification gives us fuel security ... we can produce some of the cheapest electricity in the world,” Woods said.
The last Labour Government had success with an EV subsidy scheme, which was scrapped by the coalition. EV imports have since plummeted.
Woods said that the Government needed to look again at energy storage to get around the problem of increasing demand on the grid. This could be the Lake Onslow scheme or a “portfolio approach”, which would use a series of smaller battery schemes.
“We store energy in the cheapest form possible, which is renewable,” she said.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
