2024 Proposed amendments to the Crown Minerals Act 1991

Gas plays an important role in our energy system – now and in the future

Petroleum is a valuable national asset and has an important role to play in improving New Zealand’s security of energy supply, improving outcomes for consumers and our critical industries, and increasing Crown revenue.

The latest petroleum reserves data show gas reserves are declining. There is less natural gas available to produce than previously thought. This drop in natural gas reserves (called Proven plus Probable reserves) is the result of producers lacking certainty that they can economically extract the natural gas in their fields, as well as believing there is less natural gas available in those fields.

Petroleum reserves data shows decline in gas reserves

All natural gas produced in New Zealand is used in New Zealand and production is expected to peak in 2024.

To sustain current levels of natural gas use, New Zealand needs to invest in getting the most out of our existing fields and in exploring new fields. 

Beyond energy security, the petroleum sector is already an important part of New Zealand’s economy. Oil and gas together contribute billions of dollars to New Zealand’s GDP and earns the government hundreds of millions of dollars in royalties. The value of oil exports in 2022 were valued at around $900 million, and Crown revenue from petroleum was $214 million in 2022-23.

Mining also creates high-paying jobs and opportunities to develop skills which benefits local economies. In 2023 the mining sector in New Zealand employed around 6,000 people.

Reinstating offshore petroleum exploration and other measures to improve investor confidence

The Government is proposing a package of changes to the Crown Minerals Act 1991 to meet our gas security challenges and seize economic opportunities for the benefit of all New Zealanders. Proposed changes include:

• Reversing the 2018 ban on new petroleum exploration outside onshore Taranaki.
• Removing the 2018 restriction preventing new petroleum permit holders from accessing some Taranaki conservation for petroleum activities other than minimum impact activities. Conservation land protected by Schedule 4 of the CMA, including Taranaki Maunga, would continue to have the same protections in place.  
• Changes to how petroleum exploration permits are allocated. Currently permits are allocated through a competitive tender process. The Bill proposes allowing the option of using a competitive tender or non-tender method, called priority in time.
• Changes to the petroleum decommissioning requirements to align with international best practice, and better balance regulatory burden and risk.
• Changes to provide important signals to the industry and international investors that New Zealand is ‘open for business’.
• Introducing a new tier of mineral permitting that will make it easier for people to undertake small-scale non-commercial gold mining activity, and
• Technical legislative changes to improve regulatory efficiency and ensure processes are working as intended including fixing inconsistencies of terms and drafting errors. 

Decommissioning petroleum wells and infrastructure 

Decommissioning involves plugging and abandoning wells, removing all or parts of infrastructure, and undertaking any necessary site restoration.

Decommissioning petroleum infrastructure carries significant costs, and our regulatory regime must protect private landowners, the Crown and ultimately taxpayers from having to pick up the tab in the unlikely event that a permit or licence holder fails to do so.

Following changes to legislation in 2021, our regime now ensures permit holders carry out and fund decommissioning. 

The Government wants to make sure that New Zealand’s requirements align with international best practice, and balance the regulatory burden on permit holders with the risks that they pose.

Government is proposing changes in three key areas, aligning our regime with international best practice:

• Financial securities: All permit holders will still be required to provide a financial security for the cost of decommissioning and the Minister will continue to make decisions on the amount and kind of security. The Government is proposing changes to allow more flexibility in how these financial securities are held in a way that is cost efficient and best suits a permit holder’s circumstances.
• Trailing liability: A previous permit holder will still be liable if the person they sell their permit to fails to carry out or pay for decommissioning. The Government is proposing limiting trailing liability to the most recent transferor, providing greater certainty to previous permit holders.
• Post-decommissioning liability: A permit holder who decommissioned will still be liable if something goes wrong after they have plugged and abandoned a well or left infrastructure in situ. The Government is proposing removing the requirement to make payments or provide a financial security in anticipation of difficult to quantify, future risks. Instead, and aligned with the approach in other jurisdictions like the United Kingdom and Australia, permit holders who decommission will be liable in perpetuity for any issues after decommissioning.

The Government is proposing to use different ways to allocate new petroleum exploration permits 

Currently applications for petroleum exploration permits can only be made through a competitive tender process, called Block Offer. 

The Government wants the flexibility to use alternative processes to match investor interest in the most efficient and effective way. 

The Government is proposing amendments that would give it the option to use a tender or non-tender method to allocate new petroleum exploration permits. A form of non-tender method, called ‘priority in time’ was used to allocate petroleum exploration permits before 2013. The non-tender method and how it interacts with Block Offers will be designed through a review of the Minerals Programme. 

Iwi and hapū would still be consulted as they are as part of the current block offer process. Consultation on non-tender applications would be on an individual basis similarly to minerals applications. 

Additional changes to release economic opportunities in the sector 

Purpose statement and Minister’s functions

The purpose of an Act provides an important direction as to how it should be interpreted. The purpose of the Crown Minerals Act 1991 is currently to “manage” prospecting, exploration and mining of minerals. And the Minister’s functions under the Act are to “from time to time offer permits for application by public tender”.

The Government is proposing a change to replace “manage” with “promote”, and replace the Minister’s functions with “attract permit applications”, reversing a change made to the Act in 2023. 

Reverting to the previous purpose statement and associated Minister’s functions is intended to signal that the Government wants to increase petroleum exploration and production in recognition of the important role gas will play as a transition fuel.

Government Policy Statement

The Government is proposing introducing a mechanism for a government to issue, should it want to, a Policy Statement about 1 or more Crown-owned minerals. A Statement, if issued, would be an important signalling tool that sets out the priorities and focus areas for a particular Government.

Extending the data confidentiality period for existing prospecting datasets

Just before the ban was introduced, some speculative prospectors collected offshore seismic data. Under the CMA they are entitled to a 15-year confidentiality period during which they can sell that data to interested explorers and in turn promote investment into New Zealand. The 2018 ban extinguished demand for that data because New Zealand was no longer issuing offshore exploration permits.

The Government is proposing to extend the 15-year confidentiality period for affected datasets to support their activities that help promote New Zealand.

Regulatory efficiency changes

Introducing a Tier 3 minerals mining permit

Government is proposing a new tier of minerals permit that could make it easier for people to undertake small-scale non-commercial gold mining activity across the country. Sometimes referred to as ‘hobby or recreational mining’, this differs from gold fossicking, which can be done by anyone in designated areas using only hand tools.

There are currently around 200 permits for this small-scale non-commercial gold mining, all in the South Island and mostly in regions with historical gold fields such as Otago and the West Coast. 

Currently under the Crown Minerals Act, the same regulatory burden that can be applied to a medium sized coal mine is applied to a person who wants to use a small suction dredge to look for gold in a river. 

This is an example of where the time, effort and resources regulators and applicants are putting into permit applications vastly exceeds the risks and value of the activity.

This Government wants to get that balance right so that regulators can focus their attention on the applications that actually need it.

Technical changes

A number of other mostly minor and technical changes are also being proposed to address known issues currently impacting the regulatory system. The changes intend to reduce administrative costs for the regulator by speeding up processing, allowing more of a focus on higher-value applications, which will benefit the whole sector.

No changes to the way the Crown and the sector engage with Māori

The Government is not proposing any changes to the way that the regulator and permit holders engage with iwi and hapū during the decision-making process for rights under the Crown Minerals Act, or to repeal the changes that were made in 2023 to how iwi and hapū can engage with permit holders. 

Have your say

All New Zealanders will be able to have their say on these proposed changes during the Select Committee process following the introduction of the Amendment Bill in the second half of 2024.

MBIE will be undertaking an engagement process to provide interested stakeholders with the information needed to meaningfully participate in the process.