Sunday 15 April, 2012

Shane Taurima interviews Phil Heatley

Minister gives backing to fracking: “I’ve got no concerns.”

Says fracking hasn’t caused any earthquakes or contaminated any water in New Zealand, “and that gives me confidence”

Heatley is relaxed about Christchurch City Council’s moratorium on fracking: “There has never been any fracking in Canterbury. There currently isn’t any fracking in Canterbury. And there’s no intention to have any fracking in Canterbury.”

Concern that the fracking debate has become too emotive.

Mining royalties of 8% are “a bit low”. “We think those royalties are the ones that need to be shifted upward” ‘We do need to make sure that we are getting our pound of flesh.”

No movement on oil and gas royalties: “We think oil and gas is pitched about right.”

Government wants to accelerate oil exploration by 50%.

Can’t say how many of New Zealand’s 17 basins would need to be explored to increase oil industry income to the Government’s $12 billion target.

Oil and gas creates 3700 direct jobs in Taranaki alone. “Most of them” are taken by New Zealanders.

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Q + A
SHANE TAURIMA INTERVIEWS PHIL HEATLEY

PAUL Oil and minerals are worth over $4 billion to New Zealand at the moment, but National says this is small beer. We're blessed with such mineral wealth, it says, the sector could triple its profits to $12 billion a year or more as a contribution to GDP; it's just a matter of getting all that gold and coal and oil out of the ground. And there's the rub — it means drilling, mining and even fracking, and fracking is where chemicals and water are injected into rocks to fracture them, releasing the oil and the gas. And all of that’s controversial stuff, and it raises environmental concerns. John Key's government backed away from plans to expand the industry before when voters – remember that big demonstration down Queen Street – protested mining on Schedule Four lands. But now the Government's having another crack. Phil Heatley is the Minister of Energy and Resources, and he this morning is with Shane Taurima.

SHANE Thank you, Paul, and thank you, Minister, for joining us.

PHIL HEATLEY – Energy & Resources Minister
A pleasure.

SHANE You said earlier this year that the government will be promoting more exploration and more benefits from our resources, but at the same time balancing our environmental responsibilities. How much more exploration are you talking about?

PHIL Well, at the moment, our oil and gas exports are worth— well, they’re our fourth-largest export industry, and they pretty much operate under the radar. Most of it’s out of Taranaki. The safety and the environmental track record over the decade has been pretty good. They’ve been operating for about 50 years, discovered oil about, you know, a hundred years ago, and New Zealanders don’t know a lot about it. But the amazing thing is, as I say, it’s all out of Taranaki, it works, you know, beautifully or neatly beside one of our best dairy industry areas in the country and also tourism in Taranaki. So oil and gas in Taranaki – worth about, well, a couple of thousand jobs – about 3500 jobs. Dairying’s worth about 2500 jobs, and tourism – about 2000 jobs. And it’s significant there. Now, what we’re saying is, look, there’s other regions in the country where oil and gas reserves are. We’re very sure of that. If Taranaki over all these years can environmentally and in a safety-conscious way have a big oil industry sitting neatly beside dairying and sitting neatly beside tourism, there’s no reason why other regions can’t do that.

SHANE So the government says that there’s an extra $12 billion to be made from mining and drilling, so how much do we have to mine and drill to earn that?

PHIL Well, what we’re saying there, and these are just estimates, there’s been a fair bit of seismic surveying done in the ocean and, of course, on land exploration as well. What we’re saying is that if we increase our exploration, which isn’t actually drilling but exploration, by about 50% and make some significant discoveries, and, you know, they don’t come along easily – everyone knows about it when you make one, but many years go by in the time that you don’t.

SHANE So you want to accelerate exploration?

PHIL Accelerate explorations – that’s—

SHANE By 50%?

PHIL That’s right. If we do that, then we can jump from just over $3 billion to something like $12 billion a year, and that’s an awful lot of hospitals, awful lot of schools. You talk about everyone wants this idea of paid parental leave and all the rest of it. We’ve got to be able to pay for this stuff, and here’s an opportunity to use an industry which, as I say, in Taranaki has arguably run for many decades in a very responsible way, expanding that industry to other regions.

SHANE So, we currently have one producing petroleum basin in Taranaki, as you referred to.

PHIL That’s right.

SHANE There are a further 17 recognised basins in New Zealand.

PHIL Correct.

SHANE Does it mean all 17, for example?

PHIL No. The reality is that explorers that talk to us, both domestic ones and also the international big majors, they talk about Taranaki being a basin where it’s sort of— they put money in, investment – significant investment – and it’s sort of low risk. They know there’s sort of always been oil—i

SHANE So you’re not looking at all 17?

PHIL No. There’s always been oil and gas there, so they would expect there to be more in Taranaki.

SHANE How many of the 17?

PHIL But other regions such as, you know, the East Coast, the Canterbury Basin, the west coast of the North Island, West Coast of the South Island – those are other areas, some unexplored. But those companies say there’s opportunities there, and I think we should do the exploration work.

SHANE Can you tell us how many of the 17?

PHIL No, because what we’re saying at the moment, and this is what we’re going through a process of is we’re actually opening up those areas for exploration now, some seismic surveying, prospecting, all that type of activity, and that will give us a much clearer picture of whether it’s worth going to drill. And I must emphasise to you and to the New Zealand public is that the process is to first of all do prospecting or exploration, then you do drilling and then, of course, once those wells or mines are closed down, they need to be set straight, so it’s quite a long, involved process which requires an awful lot of consenting.

SHANE Granted. Let’s go back to the $12-billlion figure. How many local jobs is that going to create?

PHIL Well, we know that in the Taranaki, you’ve got about 30— 3500 jobs directly—

SHANE New jobs?

PHIL And 5500 jobs in that region are alone indirectly. It’s very significant. Now, you transfer that to a region like the West Coast— sorry, the East Coast of the North Island or the West Coast or other parts of the country—

SHANE But we’re talking about local jobs. How many local jobs, because, can I just quote you this from a 2007 BERL report?

PHIL Yeah.

SHANE And it says, ‘A large proportion of the oil and gas workforce are overseas experts,’ so again the question is how many local jobs?

PHIL Well, locally in Taranaki it’s 3700 local jobs and about 5500 which are more indirect with other service businesses. Now, those are all local jobs, and the average wage for those local jobs is $70,000 a year, which is a pretty good wage.

SHANE So none of those people came from overseas?

PHIL Oh, well, clearly there will be some who have come over and now live in New Zealand, but most of them are New Zealanders now. When you actually discover an oil well and put in all the infrastructure, I mean, jobs over a period of one or two years will go in the tens of thousands. But, of course, once that building dissipates, as it has in Taranaki, you’re left with jobs, you know, as I say, 5500, which is very significant and would be very significant in places like the East Coast.

SHANE The controversial process of fracking is currently under investigation by the Parliamentary Commissioner for the Environment. You’ve refused to declare a moratorium until the investigation is completed. Does that mean you have absolutely no concerns whatsoever?

PHIL Well, the information that we have to date—

SHANE No concerns?

PHIL No. I’ve got no concerns. I am delighted that the Parliamentary Commissioner for the Environment is looking at it. She takes her job very seriously. She’s looked at other issues, like the use of 1080, and come back with recommendations which we’ve taken a, you know, huge interest in. I’m glad she’s looking at it, but the reality is in New Zealand, hydraulic fracturing’s been occurring for two decades in Taranaki. Taranaki Regional Council, who permit it and police it, tell us that they have had no incidences of water-quality issues, they’ve had no incidences of earthquakes— you know, causing earthquakes, anything like that. And all I can say is that in New Zealand where it’s practised very deeply into the earth well away from aquifers, it appears to be safe. But, look, the Parliamentary Commissioner will have the last word.

SHANE So, because you look at fracking – it’s been banned in France, Quebec, Pittsburgh, Buffalo and in parts of South Africa. The EU has proposed a moratorium while an investigation is carried out. Moratoria are in place in New South Wales and New York. What do we know? What do you know, the minister who has absolutely no concerns, that they don’t?

PHIL Well, what I know is that in those few areas in the world, and there’s hundreds of areas in the world where fracking is permitted, in those areas of the world, generally there’s no regulation to support the practice or regulate the practice or control it, anything. Often it’s in shallow rock, getting coal-seam gas and that type of thing. In New Zealand, we don’t do this. We’re in very deep rock – very deep – well away from aquifers, and in the place where they do hydraulic fracturing in New Zealand, the only place – well, actually, it’s Taranaki and a little bit in Waikato – in Taranaki, they’ve been doing it for 20 years, and they’ve had no problems. So if we want a local example, we’ve been doing it in Taranaki for 20 years with no issues. Does that mean that I don’t think it’s worth looking at? Of course it is, and the Parliamentary Commissioner thinks it is, and I welcome her report.

SHANE So does that mean that you can guarantee that it doesn’t cause earthquakes and it doesn’t cause water contamination?

PHIL Well, it appears from Taranaki’s experience of two decades, water-quality testing, seismic survey—

SHANE Can you guarantee that? Can you absolutely guarantee that it does not cause earthquakes and it doesn’t cause water contamination?

PHIL They’ve advised me that where we do it in New Zealand, in the Taranaki, it hasn’t caused it there, and that gives me confidence However, the Parliamentary Commissioner might discover things that we don’t know about, might make recommendations where we need to change things, and I’ll be very interested in that. But can I just point out one thing which I think is very important, because the Green Party give a list of a few places where it’s been banned for the reasons I gave. We just don’t do it like that—

SHANE And we have—

PHIL Wait a minute. No, no, no. I would like to list. You know, in Germany, they do it; in Denmark, they allow fracking; in Norway, they allow fracking—

SHANE But we’re talking about New Zealand—

PHIL No—

SHANE I want to talk about New Zealand because—

PHIL Wait a minute. In the Netherlands—

SHANE Because— Because the Christchurch City Council are the latest to declare their city—

PHIL That’s right.

SHANE free of fracking. They cite these concerns over water contamination and over the links to earthquakes. Are they simply overreacting?

PHIL Well, the Christchurch City Council have decided unanimously to ban fracking. There has never been any fracking in Canterbury. There currently isn’t any fracking in Canterbury. And wait a minute. There’s no intention to have any fracking in Canterbury, so this council has suddenly come together, made a unanimous decision to—

SHANE Are they overreacting?

PHIL Well, they’ve made a decision on something which, in the end, it’s not occurring there and isn’t intended to occur there anyway. Look, they’ve made a decision. Good on them. That’s fine, but I actually—

SHANE Are they overreacting, Minister?

PHIL Well, I’m not going to say they’re overreacting. What I’m saying is there’s never been fracking in Canterbury, there isn’t fracking in Canterbury and there’s no intention of fracking in Canterbury, mainly because of the rock types. We’ve informed the council of this. However, they’ve decided to have a moratorium. The Green Party’s been down there talking to them about it and worrying them about it, and I guess they’ve responded. It’s up to them.

SHANE Can I just say— put another suggestion to you? Professor Rosalind Archer from the Auckland University – she says that fracking has become an ‘emotive issue’. And she says the bans in France and in Bulgaria have arised because of public pressure exerted on their governments, not in response to environmental damage caused by fracking operations in either country. Could or has the same happened here?

PHIL Well, that’s something that the Parliamentary Commissioner will have to unravel, and that is what is fiction and what is fact. Again, you name some countries where fracking’s banned. I’ve named some where it goes ahead.

SHANE But it would suggest, though, that you were suggesting this before – that it has become an emotive issue and it’s not being based on fact.

PHIL Well, that’s been a concern to me because all I’ve been able to do at my— power I’ve got at my disposal is to get the facts for what happens in New Zealand. It happens in Taranaki. It’s been done for two decades well. No contamination of water aquifers.

SHANE And you’ve made that point.

PHIL Well. And the reality is—

SHANE You’ve well and truly made that point. Let’s move—

PHIL I can only base it on that, you know, New Zealand information. But let’s see what she comes up with.

SHANE Let’s move on from oil to coal, because permission has been granted for an open-cast mine at the Denniston Plateau on the West Coast of the South Island.

PHIL Correct, yes.

SHANE The decision is currently before the Environment Court. Is this an instance what we’re— with what goes in the bank outweighs the environment? And my point is this: what’s more valuable, $1 billion over the next six years, which is what Bathurst has predicted could contribute to the economy over the next years, or our vulnerable and endangered native species?

PHIL Well, you appreciate, Shane, this is before the courts. I’m a bit limited about how much I can discuss this. But the reality is Denniston, like any other application, has to go through a process, and there is a balance between the economic benefits and the— what impact it’ll have on the environment.

SHANE And so let’s get specific.

PHIL Okay.

SHANE Let’s be specific here. So what outweighs? What’s more valuable? The $1 billion that we can put in the bank or the endangered native species that we talk about? Because according to Forest & Bird, there are a number of native species, included the great spotted kiwi, the giant weta, the kaka and a number of unique plant species, in the plateau. So what’s more valuable to you as minister to New Zealand? The billion dollars in the bank or these native species?

PHIL Well, it is a balancing issue here, and I can’t discuss Denniston because it is before the courts, but I’m happy to answer your question more broadly. And that is that New Zealand is not Texas. It is not the backblocks of Australia. We have beautiful mountains, beautiful rivers, beautiful seascapes, landscapes, we have endangered species, and we all recognise that. But the fact of the matter is in New Zealand as an oil and gas explorer and developer, as a miner, has generally been very responsible. We do have legislation and regulations that manage this well. There are public debates over issues such as Denniston, so it’s very transparent. And that’s very positive. And the fact that we’re having this conversation now and there’s more of these conversations coming up about mining and oil-and-gas exploration shows that this government is very conscious of our environmental responsibilities. But if we want the schools and if we want the hospitals and if we want paid parental leave and all the rest of it, we have to pay for it—

SHANE And you make a good point. You make a good point about schools.

PHIL If Taranaki can mine these resources, other regions can too.

SHANE You make a good point about, you know, providing a future for schools and education, so let’s talk about royalties, because we currently get 43c in the dollar from the petroleum sector and levies and GST in taxes.

PHIL Which is pretty high.

SHANE Yeah, it is, but Norway gets 75c; Denmark gets about 70c; Alaska gets more than 60c; little old Tunisia gets more than double than us. We’re getting ripped off, aren’t we?

PHIL No, essentially what’s happening here is in the oil and gas sector, they pay about 43% of their profits, as you say, in revenues, and that’s very significant. And we think that that’s probably pitched about right, although we are looking at—

SHANE So we’re not being ripped off?

PHIL Well, no, I don’t think so. We’re looking at the royalty regime at the moment. We think oil and gas is pitched about right, and the reason is because we’re so isolated and need to attract investment into New Zealand and a rig, for example, an oil rig offshore is about a million dollars a day it costs them. We’ve got to be a bit careful that we don’t pitch it so high that they won’t come. On the other hand, minerals, for example, coal, gold, silver, all those – we think those royalties are the ones that need to be shifted upward, and we’re looking at that.

SHANE By how much?

PHIL Oh, I can’t pick it at the moment. We’re actually going out for consultation on that in regards to the Crown Minerals Act at the moment about how it should be.

SHANE Double? Treble? How much more?

PHIL I’m not going to pick a figure, but I do know under minerals, those types of minerals, we’re pitching a bit low. The reality is if we are going to do more mining, more oil and gas exploration, and we are saying that we want to put that into schools and hospitals and all these other things New Zealand wants to, you know, keep up, catch up with Australia, then we do need to make sure that we are getting our pound of flesh.

SHANE Can I just ask you – do we have to— as we wrap up, do we have to sacrifice a bit of our clean, green image for a better standard of living, for the better standard of living that you talk about, for the schools, for the health?

PHIL Well, Shane, look, historically, Taranaki hasn’t. Taranaki’s done real well.

SHANE So that’s a no?

PHIL No, I don’t think we do. We’ve got a very strict environmental regime. Health and safety we’re working on pretty hard. Taranaki’s got a great track record. Dairy industry, oil and gas, tourism – why can’t it happen elsewhere in the country?

SHANE And that’s a good place to leave it. Minister, thank you for joining us.

PHIL My pleasure.

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