On 24 September 2024, following growing concerns over energy security, the Government introduced the Crown Minerals Amendment Bill to reverse the 2018 ban on new petroleum exploration, which had limited exploration to onshore Taranaki. The Government believes these changes are necessary to ensure a stable energy supply, create economic opportunities, and provide certainty for investors. It plans to pass the Bill before the end of 2024.

We discuss some other important changes proposed in the Bill below.

Permit allocation methods

Currently, petroleum exploration permits are allocated through a competitive tender process, known as a Block Offer. The Government believes that greater flexibility in permit allocation will be a more effective way to match investor interest, so the Bill provides for the use of non-tender methods. Iwi and hapū will continue to be consulted as part of the Block Offer process. Consultation for non-tender processes will be on an individual basis, similar to minerals applications.

Decommissioning framework updates

Alongside the changes outlined above, in order to align with international best practice and provide greater certainty to potential investors in NZ’s oil and gas industry, the Bill also makes changes to three key areas of the current infrastructure decommissioning regime:

• Financial securities: There will be more flexibility in the type and structure of financial security that industry participants are required to provide to cover decommissioning costs.
• Trailing liability: To provide greater certainty for previous permit holders, the Bill will limit trailing liability for remediation costs to the most recent transferor of a permit, rather than all previous permit holders.
• Post-decommissioning liability: The current permit holder will remain liable in perpetuity for any issues that arise after decommissioning, but the requirement to provide financial security for unquantified post-decommissioning risks will be removed. This approach aligns with practices in other jurisdictions, such as the United Kingdom and Australia.

Next steps

The Bill had its first reading on 24 September and will now undergo a condensed Select Committee process so that it can be passed before the end of the year.

We expect wide interest in the Bill and diverse views given the difficult, but necessary, balance between - on the one hand, ensuring energy security and attracting international investment and - on the other hand, mitigating the environmental impacts of offshore drilling.

We will report on the Bill’s progress once submissions to the Select Committee open. If you have any questions about how these changes could affect you, or would like assistance with making a submission, please contact one of our experts.