Energy Sector – Decommissioning rules require careful consideration

New decommissioning rules for natural gas and oil fields have good intentions but require careful work to avoid unintended consequences, according to Energy Resources Aotearoa.

“We totally support operators taking responsibility and paying the costs for decommissioning. This is what all good operators do,” says chief executive John Carnegie.

“There seems to be some welcome flexibility for the Minister to consider specific factors in each case which is better than a ‘one size fits all rule’.

“We just need to be careful not to over-reach and impose unfair rules because of one bad example.

“Holding operators liable for a field they sell for many years afterwards has worrying implications. This could be a fundamental change to the nature of business law, creating unlimited perpetual liability.

“It’s like holding a factory owner responsible for an unforeseeable issue in a factory they sold many years ago. No other industry is subject to this, even those with much greater risks and direct impacts on safety and the environment.

“It’s also a surprise for operators who invested under certain conditions and were promised existing rights would be protected. This retrospective liability is like changing and backdating the rules of a rugby game halfway through the match.

“This combined with the requirement for a financial security could change the economics of existing fields. This might encourage them to be decommissioned earlier than otherwise, which wouldn’t be a good outcome for our energy security.

“It adds even further to an unhelpful investment climate at a time we really need more local natural gas developed. Just today we’ve seen a survey from BusinessNZ showing rapidly rising energy costs, and imported coal is keeping the lights on this winter.

“We look forward to engaging constructively with the Government as the details are worked out on these changes.”