Why hasn't government repealed the offshore ban yet?

The government blamed last year's electricity crisis on the ban and moved to repeal it with urgency. However, with a dry winter around the corner, progress has stalled.

Last year I wrote about how Government’s rush to hurriedly pass the Crown Minerals Amendment Bill - which would repeal Labour’s 2018 offshore oil and gas ban - had backfired, with major drafting errors delaying its passage.

According to Patrick Smellie, who broke the story, the Bill was expected to return to Parliament in February 2025 for its final reading after those errors had been remedied.

Today is the last sitting day in February, but the Bill is so far down the order paper that it won’t get a look-in.

The coalition parties had laboured the point that Labour’s 2018 oil and gas ban was the primary cause of the 2024 electricity price crisis, rather than the collapse in investment in generating capacity that followed the Key Government’s partial privatisations of the gentailers.

Then-Energy Minister Simeon Brown, for example, said that “For the last six years the last Government demonised gas production in New Zealand… so when the wind isn’t blowing, the sun’s not shining and we have a dry hydrological year, we don’t have the backup.” Associate Energy Minister Shane Jones described the ban as “the most dismal destructive decision visited upon the energy landscape of New Zealand”.

Another dry winter is now emerging.

In its 5 February Security of Supply Outlook, Transpower notes a “larger likelihood of average to below average rainfall expected over the next 3 months in regions of the South Island with major hydro catchments” as well as almost non-existent snow storage.

The delivery of a market review by consultants Frontier Economics in late June certainly won’t prevent prices from spiking, and daily average wholesale prices have been already above $200 MWh since the beginning of February.

These are mid-winter prices in the height of summer.

The level of urgency required echoes the rapidity with which the Crown Minerals Amendment Bill moved through the initial legislative process: it was introduced in late September, written submissions closed on 1 October, and oral submissions took place in the following week.

That haste was of course at odds with the time it would take for new gas to reach the market, with MBIE noting that the discovery and development of new gas field supply was “unlikely to happen before 2035”, while other submitters suggested sixteen years is a more realistic time period.

On those timelines it’s hard not to conclude that this is much more than political theatre. If so, it would make sense to pass the legislation as quickly as possible, to be seen to be doing something.

However perhaps the ongoing delay indicates some kind of disagreement between the coalition parties, either in the diagnosis of the problem of the method of addressing it.

Jones has, for example, indicated he is open to taxpayers underwriting fossil fuel exploration in the event that new gas isn’t found. On the risks around so-called “trailing liabilities”, official advice released to RNZ indicates that “the Crown could end up paying for another clean-up if oil companies don't provide enough financial security, and both the current and previous permit holders go bust.”

It’s hard to see how Act (and to a lesser extent National) could stomach these taxpayer-funded subsidies. For the sake of appearances, it might be better not to have those debates too openly.

What is clear, however, is that we still don’t have a real energy security plan as we head towards a potentially catastrophic dry winter. I was thrilled to see Labour today indicating they are considering requiring gentailers reinvest profits into new generating capacity (a recommendation from the Generating Scarcity reports), but that will likely take years to have an impact.

Who will bear the pain when the lights go out? Certainly not the architects of these failed privatisations.