The Nation: Energy and Resources Minister Megan Woods

Press Release – The Nation

Lisa Owen: The Prime Ministers fronted to the oil and gas sector in New Plymouth as the government tries to dampen down fears about Taranakis economy following a ban on future oil and gas exploration. The industry contributes about $2.5 billion …Lisa Owen interviews Energy and Resources Minister Megan Woods

Lisa Owen: The Prime Minister’s fronted to the oil and gas sector in New Plymouth as the government tries to dampen down fears about Taranaki’s economy following a ban on future oil and gas exploration. The industry contributes about $2.5 billion to the economy each year and is responsible for around 11,000 jobs, but the Government says it has plans for a just transition to a low-carbon economy. Energy and Resources Minister Megan Woods joins me now. Good morning, Minister.
Megan Woods: Morning, Lisa.
You have set up a just transitions unit to help with the shift to a low-carbon economy. Why didn’t you set that up before you announced the ban?
Oh, it was. Prior to me attending the Petroleum Conference, the Prime Minister had asked me to talk to MBIE about getting a team together, so that was a conversation that we’d had two weeks before we made the announcement, when I gave my speech at the Petroleum Conference. And that’s something I talked about in that speech — about how we’d asked MBIE to start with that work and with that planning. We’ve now got the General Manager in place. He’s been in place for a week. If you think about the speed of that, in bureaucratic years, that’s like lightning speed to get a new unit set up. We’re going to have someone on the ground in New Plymouth, and the team’s raring to go.
So why did you wait to make the announcement, if you were setting up this unit? You obviously knew you were going to make this decision.
When I went to the Petroleum Conference, one of the things that I talked about in my speech was the fact that we were going to be doing this transition planning. So that was two weeks before the announcement, where I gave reassurances that, any changes that were coming, we would honour any existing permits, that there’d be a very long time period over this, and that we would be doing this transition planning that would be put in place.
But your speech did not tell them that you were going to ban new exploration.
No. Look, the announcement — what I started the speech — I think the first sentence of my speech was, “I’m sorry, I’m not going to announce a block offer today, but what I can do is give you the context in which we’re making this decision, and that’s putting in place the transition planning that we need to make sure that this is a planned and measured transition and that we’re making sure that we’re not going to encounter shocks into the future.
OK. So how many businesses in Taranaki have indicated that they’re shutting up shop as a result of the ban?
I haven’t had anyone come and say, “We’re shutting up shop.”
Were you not told at the meeting that you had that there are two businesses already, engineering and geoscience businesses, who are pulling out because of this?
We weren’t told that there were people who were shutting up shop, but what we did talk about quite a bit — that, actually, since 2014, there have been a number of businesses shut down in Taranaki with the downturn, so particularly engineering businesses, that it’s been a really rough few years for that industry because there hasn’t been summer programmes for the last two years.
What did you hear from those businesses during that meeting? Because we’ve been told that it was indicated that two businesses are wrapping up because of this ban.
Well, look, that may have been something that was said to someone else in the meeting. It wasn’t something that was said to me. But what we were told is that there were some people in exploration that were maybe having to look at fewer staff in that area but no one actually shutting up shop.
Right, so it is affecting jobs right now?
There could be some jobs, but the point is — and the thing that people talked about a lot yesterday and something we discussed — the fact that there have been jobs shedding in Taranaki since 2014, and that’s exactly the reason why we have to get in on the ground and support the local efforts around the diversification of the economy. I mean, this is work that the local mayors and local leaders have been putting in place around identifying four alternative areas for economic development before we made the decision, so it’s a matter of what we can do now, as a government, to support them in that and to go beyond business as usual.
Right. I want to talk about that plan in a minute, but first of all I want to establish a clear timeline. When did you know that you were stopping all new oil and gas exploration permits? What’s the exact date you made that decision?
Oh, look, I started getting advice before Christmas around what our options were from officials, so I had verbal briefings before Christmas, and the Prime Minister and I both indicated this when we announced the 2017 block offer at the end of last year, just before the wrap-up of the parliamentary year.
So March 19th, she came on to the forecourt at parliament and said it was still under active consideration.
That’s right.
So when did you actually make the decision?
I don’t have the actual date; I’ll have to go back and look at my diary, but it was certainly after March 19. We were still getting advice at that period of time, so it was prior to—
So somewhere between the 19th of March and April the 12th, when you made the announcement.
That’s right. That’s right.
And you said that you were starting to talk to people about it in December. So what cost-benefit analysis did you do before making this decision?
Oh, look, we got a range of advice. We couldn’t use the formal cost-benefit analysis tool simply because what we were talking about was an unknown and you need known numbers.
Right. So no cost-benefit analysis.
Not the formal cost-benefit analysis tool. We certainly looked at a range of implications, and we’ll be releasing all that advice in the next couple of weeks.
So where was that advice from? The advice you got was from where?
From MBIE. From my officials at MBIE.
Okay. Anything from Treasury?
I’m sure that MBIE would have talked to Treasury at this, but the advice that I get from my officials comes through MBIE. But the point about using that formal cost-benefit analysis tool is you’ve got to have known numbers to plug into it.
So you don’t know what the cost-benefit analysis is. That’s what you’re saying.
Not using that tool. Not using that formal tool, but certainly you can look at what the costs and the benefits are through other means, just not using the tool that is called cost-benefit.
But without the actual numbers.
Yeah, exactly.
Okay, but numbers will be very important to the people in Taranaki.
If this was under active consideration and you say you started talking about it in December — it was an active consideration as of March 19th, as the Prime Minister stated — why didn’t you consult directly with the industry, the New Plymouth Mayor, before making the decision?
Look, this is also about leadership. A decision needed to be made. We needed to make a call on what it was. We needed to come out and make a decision about Block Offer 2018.
But you can make decisions and still consult people.
We needed to make a decision about Block Offer 2018, and that was becoming really critical that we got that information out there for the industry.
But you were discussing it since December.
Oh, what the options were.
December, January, February, March — four months you didn’t consult anyone. You didn’t consult the mayor. You didn’t consult industry. You didn’t consult business in Taranaki.
What we were doing was getting what our breadth of options were, that we needed to look at what we could do in terms of onshore, offshore, what the different permutations were around that. So what also needs to be in mind — we actually do have an active block offer going on at the moment. There is an onshore block offer that is out for consultation at the moment.
I understand that. We’re talking about the offshore ban. So it didn’t occur to you, or you didn’t think that they deserved to be consulted in that four months that you were discussing the decision amongst yourselves?
Look, over that four months, I certainly knew what industry’s views were. I was taking meetings with industry where their views were clear. Our views were clear as well. But this was actually a matter of a government making a decision about the future.
They don’t feel consulted. I mean, the Mayor came out and said it felt it was a kick in the guts, and I’m told that you informed them at 7.30pm the night before the announcement was made. You gave a speech in which you said this will be clear, transparent, and well-managed. They question whether there has been any transparency, because they haven’t been consulted.
So, the speech — the bit that you’re pulling from — that’s my Petroleum Conference speech, and that was about the transition planning, and it is clear, it is transparent, and it is consulted. That is exactly what we were doing in Taranaki yesterday. We met with the mayor.
After the fact.
No, this is about the transition planning; this aspect of it — of what comes next. This absolutely has to be locally led. This has to be drawn from those people, and that’s exactly what we were doing on the ground in Taranaki yesterday.
So they can be consulted now but not about the decision; they didn’t deserve a say in the decision or to discuss it with you before you made it.
We made a decision about what the future of offshore drilling was. We’ve decided we won’t be doing any more about that. But what we know in terms of what comes next — this has to be locally led from local communities, and that is why we’re putting in place— we’ve got someone from MBIE who will be on the ground, working with the local economic development agency, with the local mayors, and with locals about what the future opportunities are.
Okay, what legal advice did you get about whether you were exposed to court action by this decision?
Oh, look, that’s something that we had to consider, but, of course—
Did you get legal advice?
We certainly did get legal advice through—
And what was it?
Look, I’ll be releasing all that in the next couple of weeks.
Okay, well, just tell us now, then.
What I did do was undertake a block offer in 2018 that we are doing an onshore—
Yeah, what did your legal advice tell you about the risk?
Look, that will all be released. We were complying with the Act.
Why can’t you tell us now?
I am.
No, no, the contents of it.
We were complying with the Act. So one of the important things to remember is that block offer actually isn’t an instrument that’s defined in the act. It’s something that start— I think it was Gerry Brownlee, when he was Minister of Energy, started doing in around 2012. So it’s not actually a process—
So your legal advice is that there is no risk to you by taking this decision?
Look, the purpose of the Act — what the Crown Minerals Act asks us to do is to actively promote the exploration in New Zealand. We are doing that this year. We, at the moment, have out for consultation an onshore block offer where people will be able to go for exploration permits.
Legal experts have told us that you will have to change the Act. Is that the case, in your understanding?
Oh, I’m getting advice at the moment around the best way in which we can make effect to that.
But you will have to rework it?
There will need to be some changes to the Act.
And that law requires consultation when you make those changes.
There will be a requirement. Whether or not all of it’s through the Act or whether some of it’s to do with the regulations—
But at that point people will get a say, will they?
Whether it’s to do with the regulations that sit below it. So I’m still getting active advice about the best way in order to do that. What we’ve also said—
So you’re not quite sure of the process?
No, no. We’re still getting advice around that, about how to implement that. But one of the things that we’ve also been talking to industry about is the way in which we may need to make some more medium-term changes to the Act to really put in place the commitments that we’ve given to industry around the fact that we will honour all existing permits. And I think this is one of the things that had really changed yesterday. There was far more— I mean, understandably, people were, you know, initially—
But they’re still not unhappy. They tell us they’re not happy with the level of consultation. I just want to move on. This is all about zero carbon emissions by 2050 and the Paris Accords. So, specifically, how much will this policy lower our greenhouse gas emissions?
Well, specifically you can’t say because it’s an unknown of what’s still in the ground, because what we are proceeding with is the ability to explore land—
So you don’t know whether it’s going to have any impact at all on our greenhouse gas emissions?
Oh, of course it will have an impact when we stop burning more fossil fuels. In terms of the specifics that you ask for — a number — you simply can’t put that on it, because it’s an unknown amount that’s in the ground.
You got some advice, so, generally, what were you told? They didn’t give you a specific number. Were you given a ball-park?
This is a part of our move to 100% renewable electricity. We know exactly the impacts of what that will have on our greenhouse gasses.
No, but I’m asking about this policy specifically and the impact it will have on greenhouse gas emissions.
Well, in terms of this policy, the point is we are proceeding with the production permits that are currently there, so that won’t have an impact.
So you don’t know. Oh, it won’t have an impact? Okay.
No. It won’t have an impact, because we’re still proceeding with those permits; we are still proceeding with the exploration permits. The bit when and why we can’t say, and this is really important to understand, is because we don’t know what’s underground in areas that don’t currently have exploration permits. You’ve actually got to have numbers to calculate when you’re dealing with unknowns. But what you can do is work through and see when you’re working to 100% renewable energy, you know the impact that that does have.
There seems to be a lot of unknowns here. Unknown the economic impact; unknown whether you’ll have to consult; unknown about the law change; unknown what the level of greenhouse gas emissions it will cut. Is that fair? Unknowns, a lot of unknowns.
No, I think that there are lots of knowns. And the knowns are that we have to plan for the future of regions like Taranaki. We could do the easy thing and make three-year decisions, or we could actually have the courage to look beyond the political cycle and put in place the planning that’s required for these communities so there are jobs and industry and security for them in 10, 20, 30 years when these changes will take effect.
In terms of that courage, the courage that you’re referring to, some of our biggest emitters are agriculture and transport. Transport is growing. Energy emissions are, quote, ‘fairly static’, according to the environment ministry. So why is oil and gas first on your hit-list? Why not do something around importation of petrol cars, subsidising electric vehicles? Why not go for something that will make a very specific and fast impact?
Oh, look, we’re going to have to do all of them.
So you’re going to subsidise electric cars?
No, no, no, we’re going to have to look at this sector by sector. And that’s exactly what we’re doing with our Interim Climate commission.
So why this one first?
Because what we need to be doing is making sure that we’re not causing shocks to communities like Taranaki 20, 30, 40 years down the track. If we can start adequately planning for the industries that need to replace these fossil-intensive industries, we have to start that now. This doesn’t have to be the kind of disruption that we’ve seen in English coal towns in the ‘80s, when they were shut down under Thatcher, or even here in New Zealand in the 1980s when we had abrupt change.
So, we’ve got about 80% of our energy from renewables at the moment. Your manifesto commits to reaching 90% by 2025 and close to 100% by 2040. How are you going to do that and guarantee supply?
Yeah, and, look, that is something that is a really important question, and one of the things that we’ve given the Interim Independent Climate Commission, one of the two initial jobs it’s been given, is charting out that pathway.
So you don’t have a plan for that?
No, of course we have a plan for that. And what we know is that we need to up—What we need to do is start looking at the consents that we already have in place for consented energy that have yet to be built. And one of the reasons why those consents haven’t been taken up is that there’s been a great deal of uncertainty for those consent holders, particularly around whether the 15% electricity from Manapouri was going to come back into the grid depending on decisions down at Tiwai. Some of that certainty has been delivered with the decision to turn on the fourth pot. So we already have a third of what is already consented already built, there in consent, so that’s the first cap off the rink. We also know technology is changing. We know we’re getting summer peaks, so solar becomes a far more important thing.
So, what is the split going to be? If you know the plan, what’s the split of our renewables? How much investment is it going to take?
Well, it’s going to require a split between winds, which is one of our strategic advantages into the 21st century. We can build some of the cheapest wind energy in the world. I mean, being at the bottom of the Southern Ocean has some huge advantages in terms of access to that resource. So, in terms of the split that you asked about, we are also hugely blessed, in terms of our geothermal resource, that we have the ability to have thermal base load going in through the thermal resource.
But are you still going to have the backstop? Are you still going to keep Huntly’s coal-fuelled power station online as a backup? You had to resort to that during Cyclone Gita.
Yeah, look, we need to get beyond the fossil-thermal peaking. And that is something that we’ve always had to do in terms of the 2035 and 2050 targets. And that is what a transition is about. The transition isn’t about the maintenance of a status quo; the transition has a different endpoint.
But a transition also has implications as well, and one of them is cost. And the productivity commission has said that it will be very expensive to eliminate greenhouse gas emissions from electricity generation. So how do you make a move to 100% renewable when you’ve got people who are already rationing heat because they can’t afford it? So how are you going to deal with that?
And affordability is one of the critical questions. And in terms of the electricity pricing review, one of the things that we are looking at is the future technologies and the impact on that. We have to be thinking, and this is why having the managed transition over a period of time is so important. What is the contingency contracting in renewables that we need to put in?
So are you guaranteeing people they won’t be hit in the pocket by this change to 100% renewables? Are they going to pay less for their energy?
Yeah, oh, look, we have to make the plans so that this doesn’t become unaffordable for people. That is a bottom line for us, and that is what we are looking at actively not only in this policy, but also in the electricity price review.
So are you telling people they’re not going to pay more for their energy when you switch to 100% renewable?
Well, it won’t be because of the switch, and that is one of the things that we are looking at. Look, one of the things that we know — that we have the opportunity with renewables is to actually build that capacity where it’s required. We produce so much of our electricity at the moment in the South Island and have to transmit it to the centres of demand, which are north of Taupo. We have the ability with renewables to actually put that capacity in place where it’s required so that, actually, transmission pricing becomes less of an impact on there. And in terms of distributed generation, solar energy, all those kinds of things, these actually offer real opportunities for people in terms of more affordable forms of electricity, and that’s why we’re not seeing any of our work streams in isolation. That electricity pricing review is absolutely critical as we consider the switch to 100% renewable.
Let’s circle back round to Taranaki. Those people want $42 million over three years to get them started on other opportunities. Are you going to stump up the cash?
Look, one of the things we spoke with the mayors and the economic development leaders yesterday about is the fact that we need to work through exactly how that’s delivered. We’ve put a person on the ground there.
So are you going to give them the $42 million or not?
Oh, look, we’re not just stumping up with 42 initially, and I think the Prime Minister made that really clear. And people—
How much are you? Because you’ve been planning this for a while, even though you didn’t consult them, so you must know how much you are going to give them or should give them.
One of the things we’ve done in Taranaki — is the only region to have this — is we’ve put an MBIE official on the ground whose job—
That’s not money, though. That’s not money.
I’ll just finish this, Lisa.
I’m asking you about the money. Can I get an answer on the money?
The job of that person will be to help prepare the cases for the Provincial Growth Fund. There’s $1 billion a year in that fund. The $42 million that we talked about yesterday — it could be more that’s required. And we see huge opportunity around projects within that Provincial Growth Fund. $20 million has already been allocated.
That wasn’t in response to this and included things like doing up a church and some other bits and pieces, so it wasn’t in response to this.
No, but there are some elements that are.
So, in response to this, what do you think is the ballpark? What have you counted on? Because you’ve had a discussion; you say you’ve planned. What’s the plan in terms of money?
The plan is to have the person there working around the opportunities—
So no commitment to a dollar amount.
Taranaki has a history as an energy producer for New Zealand. We want to build on that with the local leaders. Look, it could well be more than $42 million. We don’t want to short-change the region. The most important way to do it—
So are you saying you’ll give them more, then?
No, what we’re saying is that we’re putting the capacity on the ground to work up things for the Provincial Growth Fund. There are huge opportunities. We know that there is an expertise in engineering in that region and a proud history of providing energy.
We’re going to have to leave it there, Minister.
Thank you, Lisa.
Thank you for joining me this morning.

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