Copeland Gordon: Electricity and Gas Industries Bill — In Committee 
Copeland Gordon: Electricity and Gas Industries Bill — In Committee 
[Volume:620;Page:15855] 
GORDON COPELAND (United Future) 
: 
 I would like to continue the discussion on new section 43C(2)(b) inserted by clause 45 concerning gas processing facilities. I am also aware that members of the Petroleum Exploration Association of New Zealand have been to see me as I am sure they have been to see Rodney Hide and Roger Sowry on this matter to say that they are opposed to this particular provision in the bill. I must say that my first reaction to them when they came was I thought that yes they had a fair point. I say that because United Future is a free-market party and we believe in the creation of free markets. 
Hon Member 
: You’re voting for it. 
GORDON COPELAND 
: I will tell that member if he will just hang on a minute why that does not apply in this situation. The first thing that I have to ask myself is what the big picture really is here. The big picture was well explained by both Roger Sowry and Rodney Hide and it is that we do want to encourage exploration. But one could look at it from this point of view: if one does not happen to be the owner of an existing gas processing facility—and most of the explorers that have rigs here at the moment do not own gas processing facilities—then indeed new section 43C(2) works in one’s favour. One has the assurance that if gas is found and there is spare capacity—look at the wording of subsection (b) because none of those members have mentioned it—then there are conditions on it where that is (i) “reasonably necessary to allow new fields to be developed”—so the emphasis is on the development of new fields—“and (ii) spare capacity is available”. 
I worked in the oil industry for 14 years of my life and I can tell members that I fully understand free-market economics. Of course if one has sunk capital into a gas processing facility and one has spare capacity then in the normal course of events one will make some money by selling that spare capacity to someone who will use it and that gives a return on the investment. 
 That is the way markets work except that we have to analyse what kind of market we have here. Is it a free market? Is it a monopoly market? Those are two possibilities but actually there is a third possibility—an oligopoly. Let me tell those members who may not have studied market economics what an oligopoly is. It is a market situation in which control over the supply of a commodity—in this case gas—is held by a small number of companies. That is exactly the situation that applies to gas processing facilities in this country at the moment. We have an oligopoly and the danger in that situation is as the Minister explained that simply to keep a competitor out one can say: “No I am sorry I have spare capacity but I own this plant and you are coming nowhere near it.” Believe me that happens in this kind of situation. 
Is that in the interests of New Zealanders? Let us look at the big picture. We want gas to be discovered. We want to encourage not discourage exploration. If gas is discovered we want it processed in the most efficient manner so that we can deliver the best price to the ultimate consumers who are the people of this country. That is my reasoning and analysis of the situation we have and that is why I support new section 43C. 
Rodney Hide 
: Pretty poor. 
GORDON COPELAND 
: That is Mr Hide’s view but he can take another call to try to argue otherwise. That is what good vigorous debate is all about. I am just giving my point of view at this point in time. 
The other thing which I do not think Roger Sowry or Mr Hide mentioned is that as the Minister explained we are talking about a co-regulatory model. 
Rodney Hide 
: What model? 
GORDON COPELAND 
: A co-regulatory model. That means that the Minister as he said will not intervene unless a person having discovered gas comes to him or to the industry and says: “Hey so and so has a gas processing facility that is only 25 percent used and he will not let me use it.” In that situation— 
Rodney Hide 
: It’s called communism. 
GORDON COPELAND 
: No it is not called communism. It is called sensible economics aimed at delivering to the consumer gas at the cheapest price in the most efficient manner. It is all part of the deal. If the member is so purist that he has never heard of oligopoly situations then he can just be enlightened tonight that they do exist. [ 
Interruption 
] If the member wants to pronounce it the other way as some people do he can say oligopoly. Either pronunciation is quite fine. 
Rodney Hide 
: How do you spell it? 
GORDON COPELAND 
: Oligopoly. I will take Mr Hide to “Economics of Markets 101” some time and explain it all to him if he likes. This is the way it works and that is my view.