Deep sea petroleum exploration will be put onto a firmer regulatory footing through the decisions in the new energy strategy and with the passage of the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Bill.

This Brief Counsel looks at the regime which could emerge as a result of these initiatives.

The big policy picture

The National Government is determined to maximise New Zealand's mineral potential and, despite a political setback over its plans to open more land within the Conservation Estate to mining, has been working steadily to put the regulatory and information infrastructure in place to encourage extraction – particularly of the deep sea petroleum resource.

All the evidence suggests that there is a lot to play for. The Fraser Institute Global Petroleum Survey of 2010 ranked New Zealand the 18th most attractive jurisdiction for petroleum development of the 133 jurisdictions surveyed, and the second for ease of access to the geological database.

And our Exclusive Economic Zone (EEZ) is one of the largest in the world and, at over 4 million square kilometres, is equivalent to more than 20 times our land mass.

All this, to a Government running an economy with a seemingly entrenched balance of payments deficit, is – if you will forgive the pun – deeply attractive.

The EEZ Bill

The Bill extends a variant of the Resource Management Act regime to the EEZ. It is based on a draft prepared under the previous Labour Government in 2008, reworked to reflect the current Government's priorities so that the purpose of the Bill is now to achieve a balance between the protection of the environment and economic development.

Activities will be classified as permitted (requiring no consent), discretionary or prohibited.

Discretionary activities will require application to the Environmental Protection Authority (EPA), supported by an environmental impact assessment. The level of detail required in the impact statement will be set by regulation but must meet US standards and, the Government has indicated, will be commensurate with the size and significance of the likely environmental effects of the proposed activity.

The Bill requires the EPA to take a cautious approach if the available information is uncertain or inadequate – a presumption which, in the EEZ context, may result in a high information threshold to obtain consent.

Public notification will be required for all regulations and consents.

An important departure from the normal RMA process is the proposal to limit appeal rights against EPA decisions to the High Court and to points of law. This may be an issue for submission to the select committee as it is much more restrictive than the provisions applying in the inshore coastal marine area, where appeals can also be made to the Environment Court and on the facts.

The legislation will be enabling in that it will set up a general framework only, with all of the operational and technical detail to be established through regulations. This will allow for flexibility to adapt to new technologies as they emerge.

The Government hopes to bring the new law into effect by 1 July next year but is planning to introduce transitional measures to manage the interim.

The Bill is the legislative equivalent of Selley's No More Gaps in that it is a multi-purpose filler. It will establish an umbrella jurisdiction over environmental effects in the EEZ and extended Continental Shelf, from which effects managed under existing laws (such as fishing and shipping) are then excluded. Existing uses and interests will be also protected.

The Bill will cover the construction and installation of oil rigs and seabed mining and also anticipates possible but as yet unrealised future uses, including:

  • deep sea aquaculture
  • carbon storage and capture, and
  • marine energy generation.

The energy strategy

The Government is proposing to replace from the beginning of next year the current first come, first served – or 'priority in time' – system for allocating exploration rights with a competitive tender along the lines used in other countries, including Australia, India, Indonesia and Vietnam.

Submissions are due with MED by Wednesday 26 October.

If the proposal proceeds as indicated, New Zealand Petroleum and Minerals will publish annual Block Offers for around 30 blocks. These will be published in the first quarter of the year and the permits awarded in the last quarter. Applications will be assessed on technical and financial capability and on the proposed work programme.

In the last four years, offers have been released for the East Coast, Great South, Reinga, Northland and Raukumara Basins and for parts of the Taranaki Basin.

Other initiatives

The Government has improved data acquisition and access by:

  • funding seismic studies in prospective areas
  • accelerating the Petroleum Exploration and Geosciences Initiative in the Taranaki Basin, and
  • enhancing the search capacity and bringing fully up to date the information on the database.

It has also announced a review of the fiscal and royalty framework applying to petroleum – "to ensure the Government receives a fair return...while providing sufficient incentives for investors".

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.