Petroleum industry a bad taxpayer investment

Media Release:
Dr Terrence Loomis, Economic Anthropologist

Petroleum industry a bad taxpayer investment
20 March 2017

The New Zealand Petroleum Conference this week in New Plymouth will no doubt talk up the industry’s value to the country. But economic anthropologist Terrence Loomis, who has recently published a book [1] on government energy policy and the petroleum industry, says the industry is a bad taxpayer investment given global energy trends and climate change

“The government has handed out more than $85 million a year in subsidies and tax breaks to oil companies, but the industry has performed poorly. The benefits have not matched the industry’s hype or the targets set by the government under its Business Growth Agenda,” Dr Loomis said.

“It’s a classic example of boom and bust,” Dr Loomis said. He pointed to:

• A decline in uptake of new permits since National took office, in spite of the government’s much-publicised Block Offer process. In the last round only one exploration permit was picked up, and that by a local company.

• Exploration permits are being surrendered at a faster rate than five years ago, according to NZP&M data. Out of 273 permits issued since 1995, only 17 % are still current and many of those are under renegotiation.

• Permit fees to the Crown are down 32% over the past six years.

• Royalties and tax revenues have shrunk from around $700 million when National took office in 2008 to less than $300 million last year.

• Crude oil’s contribution to GDP was $1.7 billion in 2016, down 23% over the past five years.

The oil and gas industry blames weak global markets, and is asking for more taxpayer handouts. Earlier this month, PEPANZ Cameron Madgwick called on government to review its ‘policy settings’ to make New Zealand more attractive to petroleum companies.[2]

“They’re no doubt looking for lower royalties and taxes, more free geological survey data and speedier resource consents,” Dr Loomis said. “This would be a complete waste of taxpayer money. Disruptive technologies are rapidly becoming cheaper than fossil fuels, the insurance industry is calling for a phase out of government subsidies, and investment companies are getting out of fossil fuels because of poor returns and the risk of ‘stranded assets’.”

“Government and PEPANZ are holding out for a ‘game-changing’ discovery. But by the time it happened, it may not to be commercially viable given rapid changes in the global energy scene,” Dr Loomis said. “Government could spend billions supporting infrastructure development just to have the whole thing fall over.”

“Taxpayer money shouldn’t be wasted on propping up a sunset industry. Instead, the government should redirect fossil fuel subsidies into promoting green tech jobs and helping key sectors like transport and agriculture transition to clean energy.”

Dr Loomis has been a Visiting Scholar at VUW’s Institute of Governance and Policy Studies. He will address the People’s Climate Rally in New Plymouth this week about his recently-published research.

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[1] Petroleum Development and Environmental Conflict in Aotearoa/New Zealand, Lexington Books, Lanham, Mass. http://www.terrenceloomis.ac.nz/latest-publication.html

[2] Fuseworks Media, 8 March 2017, “Action needed to grow New Zealand’s petroleum sector – PEPANZ.”

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