Woods MeganENERGY RESOURCES LEVY AMENDMENT BILLFirst ReadingHon Dr MEGAN WOODS (Minister of Energy and Resources): I present a legislative statement on the Energy Resources Levy Amendment Bill.SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.Hon Dr MEGAN WOODS: I move That the Energy Resources Levy Amendment Bill be now read a first time.This bill clarifies the rules around royalties and will ensure that the Crown receives a fair financial return from fossil gas. The bill progresses a discrete change to the energy resources levy—that is an Act of 1976—to clarify who is exempt from the levy.In a few moments I'll say more about the bill and how the amendment will support the collection of revenue from the Crown's mineral estate but first I'd like to explain to the House the background to the Government's intention to introduce this bill and for it to pass through all stages under urgency. This context is important to understand why the Government is taking decisive steps and I want to be transparent about this. All petroleum legislation including the Petroleum Act 1937 and the Crown Minerals Act 1991 which superseded it grant rights to mine Crown-owned minerals in exchange for a fair financial return to the Crown. The rights to extract fossil gas in certain areas are granted through licences and more recently permits. These are issued following the discovery of a deposit and the licence or permit grants rights to an area that is deemed large enough to contain the reservoir intended to be mined.There have been inconsistent approaches over time to achieving a fair financial return on the Crown's fossil gas resources with royalty rates dependent on when licences or permits were granted for gas discoveries. This is not uncommon and reflects the historical practice at the time those licences were granted. Licences granted under the old Petroleum Act 1937 resulting from a discovery before 1 January 1986 are subject to a royalty rate of either 5 or 10 percent. In comparison post-1986 licences and modern permits granted under the Crown Minerals Act 1991 pay either 12.5 or 20 percent royalty rates. These rates are some of the lowest in the world.To ensure the Crown receives a fair financial return from the pre-1986 licences with low royalty rates the Energy Resources Levy Act 1976 imposes a levy on gas production. Discoveries made before 1 January 1986 are exempt from paying this levy. However the use of the word discovery" in the exemption clause could potentially lead to some confusion about whether fossil gas production from newly producing deposits within pre-1986 licence areas could be considered new gas discoveries for the purposes of the exemption. This could undermine the broader intent of the petroleum legislation to achieve a fair financial return to the Crown.The Government recognises this is a problem and one that needs to be fixed. If this is ignored the Crown could lose millions in revenue. I see this as a significant amount of money that the Crown is entitled to collect for the benefit of the New Zealand public. The bill will clarify that the levy exemption does not apply to gas produced from any land to which a licence relates if the licence was granted in relation to a discovery of gas that was made before 1 January 1986. This would clarify that the pre-1986 licence holders who operate on a low royalty rate must pay the top-up levy. The amendment will only apply prospectively so it will not impact on previous payments or non-payments. This is fair and this is reasonable. The bill also validates past levy payments so that the public can have confidence that all past levy payments were proper and that the money received has always been lawfully collected and applied. So to move forward we are drawing a line under any possible confusion and are moving to ensure the regime is clear and the Crown receives a fair financial return on its fossil gas. I commend this bill to the House."