Finlayson Christopher: Energy (Fuels Levies and References) Amendment Bill — First ReadingText is incorporated into the Bound VolumeFinlayson Christopher: Energy (Fuels Levies and References) Amendment Bill — First Reading[Sitting date: 05 March 2014. Volume:696;Page:16375. Text is incorporated into the Bound Volume.]Hon CHRISTOPHER FINLAYSON (Attorney-General) on behalf of theMinister of Energy and Resources: I moveThat the Energy (Fuels Levies andReferences) Amendment Bill be now read a first time. I nominate the Commerce Committee to consider the bill.This bill amends the Energy (Fuels Levies and References) Act 1989 in order to provide a sustainable funding source for New Zealand’s International Energy Agency oil stockholding obligations. The bill also realigns existing funding mechanisms so that oil consumers rather than general taxpayers are apportioned the cost of stockholding. As a member of the International Energy Agency this country has a treaty obligation to contribute to global oil security by holding oil stock equivalent to 90 days of net imports. New Zealand is too small to mitigate international oil supply disruptions on its own. The collective arrangement under the International Energy Agency is this country’s best choice for coping with such disruptions. Release of the global stockholding during disruptions also helps protect New Zealand from significant damage to its economy from extreme oil price spikesCommercial inventories held by oil companies in New Zealand contribute to part of this International Energy Agency obligation. Domestic oil production helps to bring down the level of the obligation. In this regard the work of the Government in progressing its Petroleum Action Plan has not only benefited the upstream producers for the benefit of all New Zealanders but also will have a positive impact on New Zealanders through lower International Energy Agency obligations. The Crown presently meets the remainder of its oil stockholding obligation by entering into ticket contracts with oil companies and traders in other International Energy Agency countries. Tickets are an option in return for an annual fee to purchase specified quantities of stock at market prices in the event of an International Energy Agency - declared oil supply emergency.New Zealand has remained in compliance with its International Energy Agency obligations using tickets since about 2006. As announced in May New Zealand successfully tendered for tickets for approximately 150000 tonnes of crude oil and refined petroleum products. In 2012 the Government initiated a review to determine whether tickets were still the most appropriate mechanism to meet our oil security obligations. This review confirmed that tickets are still the most cost-effective way of meeting these obligations and the review also determined that a fuel levy that can be adjusted in regulations provides better flexibility to meet uncertain ticket costs going forward.The bill therefore introduces a new purpose for the petroleum and engine fuels motoring levy and that is to fund New Zealand’s International Energy Agency stockholding obligations. By including the International Energy Agency stockholding obligations in the purpose of the levy we are ensuring that we continue to meet our stockholding obligations in a fiscally sustainable way.To this end the bill also introduces greater flexibility in the setting of levy rates. Rather than having a set rate the rate will be calculated based on forecasts of ticket costs with some adjustment based on previous overspend or underspend. To enable this increased flexibility levy rates will be set in regulations. The regulations will also prescribe which fuels the levy will apply to and I expect that these new regulations will come into force later this year. Finally the bill introduces a number of technical amendments to the Act. Although we are introducing a new purpose for the levy that will enable a more sustainable collection mechanism for the purchase of International Energy Agency oil tickets we are continuing to investigate ways to put downward pressure on these costs. So for example over the last year we have secured two new Government to Government agreements with Denmark and Spain and these increase the pool of potential suppliers New Zealand can look to tender for tickets with. We are also investigating which other countries may be appropriate to approach for thispurpose and as I understand it the officials have reviewed the existing tender process and have streamlined it so as to give New Zealand the best chance of achieving competitive and compliant tender bids.I am grateful to the officials and the submitters whose contribution to this work has helped to shape and improve this legislation. The bill is yet another element in a raft of measures this Government is pursuing to improve New Zealand’s oil security and I commend the bill to the House.