Woods MeganCROWN MINERALS (DECOMMISSIONING AND OTHER MATTERS) AMENDMENT BILLSecond ReadingHon Dr MEGAN WOODS (Minister of Energy and Resources): I seek leave to present a legislative statement on the Crown Minerals (Decommissioning and Other Matters) Amendment Bill. ASSISTANT SPEAKER (Hon Jacqui Dean): Leave has been sought for that course of action. Is there any objection? There is none.Hon Dr MEGAN WOODS: I move that the Crown Minerals (Decommissioning—ASSISTANT SPEAKER (Hon Jacqui Dean): I beg your pardon. Sorry that was me. So leave is sought. That legislative statement is published under the order of the House and it can be found on the Parliament website.Hon Dr MEGAN WOODS: Thank you Madam Speaker. I move That the Crown Minerals (Decommissioning and Other Matters) Amendment Bill be now read a second time.Today we're discussing a bill designed to strengthen New Zealand's regulation of decommissioning. The cost of decommissioning varies but can be substantial and run into the hundreds and millions of dollars. If a permit or licence holder cannot afford to carry out this work then the cost lands on the taxpayer. This is not theoretical; this happened here in New Zealand in April 2020 when the Crown needed to take on responsibility for the decommissioning of the Tui oilfield after the operator Tamarind Taranaki Ltd went into legislation. When we first came into Government in 2018 we fixed the legislative loophole that existed that allowed for this to occur and this bill is a further protection for the taxpayers of New Zealand from having to pick up the costs for this. The Crown had to set aside $155 million for this decommissioning based on a 2015 study decommissioned by the previous permit holder. We've made good progress on that decommissioning but the costs have greatly exceeded those original estimates and further funding was needed to be appropriated in Budget 2021. This scenario highlights the importance of clarifying that petroleum permit and licence holders are responsible for decommissioning. We must get our regulatory settings right to ensure funds are set aside for decommissioning while petroleum is being produced and profits are being made. Globally Governments are turning their attention towards planning for decommissioning and New Zealand should be no exception.So the bill amends the Crown Minerals Act of 1991. The aim of these changes is to mitigate the risk to the taxpayer of having to stump up with the funding for the decommissioning and this bill does this in three separate ways. Firstly it clarifies who is responsible for the decommissioning what they are responsible for and that there will be consequences for failing to fulfil these responsibilities. It seeks to encourage all permit holders to carefully consider who they transfer to by introducing perpetual liability. Second it also enables a proactive approach to monitoring permit and licence holders' financial positions and provides the regulator with enhanced oversight of planning under way for decommissioning. Third while most operators want to do the right thing and plan for decommissioning financial situations can and do change. That is why the bill that we have in front of us introduces the additional requirement that permit and licence holders must establish a financial security which can be used to fund and carry out decommissioning in the event that things do go wrong. The bill also requires a permit and licence holder to make a payment or provide a financial security that could be put towards the cost of any post-decommissioning work that is required. The committee received 23 written submissions which were supplemented by 11 oral submissions. I want to thank the committee for the work that they did on this bill. There was general agreement that the rules governing the petroleum sector's responsibility for decommissioning needed to be strengthened. Concerns were raised particularly by industry participants in the oil and gas sector in relation to the impact this bill could have on future investment in the petroleum sector and the security of gas but this bill is simply clarifying the existing expectation that exists that decommissioning forms an important part of the petroleum life cycle. There were also concerns about how certain provisions will affect the existing petroleum permit and licence holders. The fundamental of the bill—that decommissioning must be carried out and funded by those who held the permit or licence—is not a new requirement in the New Zealand regulatory regime. I appreciate that some of the requirements will be new—for example the requirement to hold a financial security.The three aspects of the bill which drew the majority of attention were the perpetual liability criminal liability for directors and the requirement to make post-decommissioning payments. Several submitters raised concerns with the provisions that implement perpetual liability—that is holding a former permit holder liable for the costs of decommissioning if the current permit holder fails to pay. The committee recommended retaining perpetual liability on the basis that this would only be used as a last resort. The committee did take on board the recommendations of some submitters to clarify the implementation of these provisions. The bill also introduces a criminal penalty for knowingly failing to decommission. This is reserved for the most serious breaches and could apply to individuals including directors in companies. Some submitters argued that this is not justified and expressed particular concern about the potential for a director to be criminally liable years after the company had transferred out of a permit. The select committee has recommended limiting this provision so that only directors of current permit or licence holders can be held criminally liable. The provisions that enable funds to be collected for the post-decommissioning also attracted some attention for being a new levy or tax. I do not consider it to be either of these. It will not be a blanket fee calculated using a generic formula; instead I propose it is determined based on the assessment of risk. The committee did not recommend removing the requirement entirely as some submitters suggested. In response to the submissions the committee made amendments so that the companies that still exist in New Zealand may propose a financial security. Most petroleum permits and licences in New Zealand are held by limited liability subsidiaries. I do not expect these companies will exist years from now when problems around decommissioned wells and infrastructure may arise and potentially fall on the taxpayers of New Zealand and so this is why we require either a cash payment or a financial security that can be used for any future post-decommissioning work. The committee also considered further advice from the Ministry of Business Innovation and Employment in response to additional analysis carried out after the bill was introduced. This included proposals which were considered to contribute to the overall aim of mitigating the risk to the Crown or to improve the implementation of the provision. Among others changes were made to the penalties and enforcement tools and to introduce a penalty for the failure to make payments towards post-decommissioning. This was to make clear that where there was an obligation to do something we would expect it to be complied with. So in closing I do want to thank all those who have been involved in every aspect of this bill. It's encouraging to hear that there was support for what we are trying to achieve here. While there may not be consensus on how we achieve it I hope that parties are reassured that this bill has been thoroughly considered and views have been listened to. The aim is to provide a flexible approach to regulation which will allow requirements to be implemented in a proportionate way. This bill tackles a very difficult question we have about the legacy of oil and gasfields as we look to our future but in other ways it is very simple. It is putting in place measures to reduce the risks that the costs of decommissioning or further remediation work will entirely fall on the Crown or the taxpayers of New Zealand. I commend this bill to the House. It will modernise and improve the regulation of decommissioning and bring New Zealand into line with international best practice established by like-minded countries.