Woods MeganFUEL INDUSTRY (IMPROVING FUEL RESILIENCE) AMENDMENT BILLFirst ReadingHon Dr MEGAN WOODS (Minister of Energy and Resources): I present a legislative statement on the Fuel Industry (Improving Fuel Resilience) Amendment Bill. ASSISTANT SPEAKER (Hon Jenny Salesa): 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 Fuel Industry (Improving Fuel Resilience) Amendment Bill be now read a first time. I nominate the Economic Development Science and Innovation Committee to consider the bill. At the appropriate time I intend to move that the bill be reported back to the House by 10 August 2023 and that the committee have authority to meet at any time while the House is sitting except during oral questions during any evening on a day on which there has been a sitting of the House on a Friday in a week in which there has been a sitting of the House and outside the Wellington area despite Standing Orders 193 195 and 196. In November last year I announced that the Government would be strengthening New Zealand's fuel sector with a suite of initiatives aimed at increasing New Zealand's fuel resilience to fuel supply disruptions. The headline initiative in this suite of measures is a minimum stockholding obligation (MSO)—which I'll refer to as the obligation"—the details of which are outlined in this bill. Fuel importers have limited incentives to hold reserve stocks above commercial fuel stockholding levels and invest in backup fuel storage facilities. In the absence of this bill the sector may not keep sufficient domestic fuel stocks to mitigate the impacts in fuel disruption scenarios adequately. The bill will ensure a sufficient supply of fuel is held in New Zealand. This will help mitigate the impact of any major disruptions to international oil and fuel markets natural disasters and infrastructure failures that could occur. It also creates regulation-making powers to adapt the design of the MSO over time in light of energy and transport trends. These powers can be used to introduce new stockholding requirements applicable to different types of fuels and specific strategic locations. Given the recent jet fuel rationing incidents I have directed my officials to look into the case for introducing stockholding requirements specific to Auckland Airport and other strategic locations in the future. Once this bill is passed we will have the flexibility to introduce these additional location-specific requirements through regulation. As I announced last year the obligation falls on fuel importers with access to bulk storage facilities. In New Zealand this includes the five major fuel importers: Z Energy BP Mobil Gull and TasmanFuels. The minimum stockholding level at the national level will be set at 28 days of consumption for petrol 24 days of consumption for jet fuel and 21 days of consumption for diesel on average. The minimum stockholding level is intended to achieve a good balance between minimising the impact of any potential fuel supply disruption and avoiding disproportionate price increases at the pump. To meet the MSO fuel importers do not necessarily have to make significant investments in fuel storage facilities. Some of them may need to change their stock management practices however to reduce fluctuations in their stock level. I would now like to discuss some of the key provisions in the bill and how they ensure the resilience required in our fuel system. The required minimum volumes of stock are specified in the obligation in terms of average stock during a single month. The calculation method is intended to reduce fluctuations in fuel stockholding levels particularly in the depths of the troughs in the inventory cycle. The calculation method underpins the stockholding obligation. Calculating it on a 12-month rolling average basis lessens fluctuations throughout the year and provides more certainty about the minimum stockholding level that fuel importers are required to meet. The stock that may be counted towards the MSO is limited to stock held in a bulk storage facility and fuel cargo bound for a New Zealand port on a vessel within New Zealand's exclusive economic zone (EEZ). Counting cargoes within the EEZ is a pragmatic approach to avoiding complexities around counting stocks on ships that are in port and discharging or are awaiting a berth to commence discharging or after discharging cargo at one port and steaming to another. This typically accounts to one or two days of cover for each fuel type and represents stock that can quickly contribute to any local fuel supply disruption while seeking to minimise the regulatory burden. In light of the Auckland jet fuel incident the bill provides for regulation-making powers to introduce location-specific stockholding requirements to be developed in the future. In particular officials will continue to look into the merit of developing requirements specific to Auckland Airport given that the major fuel importers have yet to agree on a new investment plan for the airport's fuel infrastructure. The bill is pragmatic in the way it deals with events that could impact on an obligated party's storage capacity such as a force majeure event like an earthquake or a major fuel supply disruption. In events such as these it may not be reasonable or beneficial to expect an obligated party to comply with the MSO. As such the bill includes an exemption regime where obligated parties can apply to the Minister of Energy and Resources for an exemption. Exemptions will be provided on a case by case basis using set criteria. In extreme cases such as following a large international fuel supply disruption it may be necessary to issue a suspension of the regime so reserve stocks can be drawn down. The bill also gives the chief executive of the Ministry of Business Innovation and Employment the discretion to accept enforceable undertakings from obligated parties on my behalf. This would allow an obligated party and the regulator to intervene early in the event of a possible failure to meet the obligation. The information disclosure requirements will give much clearer oversight on the fuel importers' stock levels and their contingency plans in case of outages. The bill also gives the regulator the ability to share information collected under the MSO with other Public Service agencies or statutory entities such as the Commerce Commission. Information collected such as fuel stock storage capacity and contingency plans is likely to be useful to other agencies involved in emergency management including the National Emergency Management Agency. This bill seeks to increase our fuel resilience in a way that will limit potential price impacts on consumers. The probability of a significant fuel disruption is low but it remains impossible to predict. Any disruption however could have significant impacts on the New Zealand economy businesses and consumers. Recent jet fuel disruptions have highlighted the flow-on effects to our economy of such an event which the country can ill afford in this time of recovery. I expect that this bill will mitigate the extent to which New Zealand is exposed to fuel disruption scenarios and I am pleased to commend this bill to the House. ASSISTANT SPEAKER (Hon Jenny Salesa): The question is that the motion be agreed to."