Oil & Gas Regulation 2013

Bell Gully
New Zealand
New Zealand
significantly narrowing the scope of the Ministerial consent
provision for dealings (section 41 of the Crown Minerals
Act). It will only apply to certain kinds of agreements that
impose on permit holders an obligation relating to the
proceeds of production;
the introduction of strata permits;
a requirement for joint venture permit holders to appoint an
operator who is responsible for day-to-day management of
activities under the permit. Operator changes are only
permitted with the prior consent of the Minister; and
an ability for petroleum prospecting permit holders to apply
for designation as speculative prospectors (with the result
that it is possible for any data filed with the Crown to remain
confidential for 15 years).
There are several stages for the Bill to progress through before
becoming an Act of Parliament and it is unlikely this will occur
until mid to late 2013.
The Marine and Coastal Area (Takutai Moana) Act 2011 (“MCA”)
was enacted in 2011. The MCA repealed the Foreshore and Seabed
Act 2004 and amends other legislation, including the Crown
Minerals Act and Resource Management Act. Under the MCA, an
applicant may seek a Court determination of Maori customary title
to the foreshore and seabed (now called the marine and coastal
area). The MCA provides for three levels of statutory rights in
relation to the marine and coastal area: a right to participate in
consultation processes; a protected customary right (a form of use
right); and a customary marine title (a form of customary interest).
These rights may affect an oil and gas development in the marine
and coastal area.
A key theme of the Government’s promotion of the New Zealand
petroleum industry has been to ensure that the development of New
Zealand’s oil and gas resources occurs in a safe and
environmentally responsible way. In light of this, the Government
enacted the Exclusive Economic Zone and Continental Shelf
(Environmental Effects) Act 2012 (the EEZ Act) in September this
year. This follows the Government’s report in 2010 on its review of
New Zealand’s health, safety and environmental arrangements in
relation to offshore petroleum operations to ensure such
arrangements are fit for purpose and compare favourably to
international best practice.
The EEZ Act establishes an environmental management regime for
New Zealand’s exclusive economic zone and the continental shelf.
Prior to the enactment of the EEZ Act, there was no specific
environmental management regime in respect of the EEZ and
continental shelf as the Resource Management Act 1991 only
regulates environmental affects of activities in New Zealand up to
12 nautical miles offshore.
In broad terms, the EEZ Act provides for the classification of
activities to be undertaken within the EEZ or continental shelf as
permitted, discretionary or prohibited activities. A person seeking
to undertake discretionary activities must apply to the
Environmental Protection Authority (EPA) for a marine consent.
This will require the applicant to prepare and submit to the EPA an
application for a marine consent (which will include the provision
of a detailed environmental impact assessment) in respect of the
discretionary activity. That application will then be assessed by the
EPA and a public hearing will be held in respect of it. Exploration
drilling is expected to be categorised as a discretionary activity.
The EEZ Act includes transitional provisions which apply in respect
of lawfully established existing activities and some planned
petroleum activities.
The Resource Management Act 1991, the Hazardous Substances
and New Organisms Act 2004, the Maritime Transport Act 1994
and the Marine Mammals Protection Act 1978 are also likely to be
relevant to any oil and gas development. Due to the timeconsuming
nature of the resource consent process under the
Resource Management Act, the Minister for the Environment may
use a call-in process (on a case-by-case basis) to streamline the
appeals process and decrease consent timeframes.
The Gas Act outlines the responsibilities of gas operators and
owners of gas fittings, and provides for a co-regulatory model of
gas governance. Under this system, an industry body may
recommend regulations and rules to the Minister of Energy and
Resources in the areas of wholesaling, processing, transmission,
and distribution of gas. The Gas Industry Company (GIC) is the
industry body approved pursuant to the Gas Act and has, since its
approval in late 2004, made several recommendations. The GIC is
required to have regard to the objectives and outcomes set out in the
Government Policy Statement on Gas Governance 2008 when
making such recommendations.
Despite promoting industry-led solutions and light-handed
regulation, the Government has maintained oversight of the process
and has reserved the right to regulate unilaterally where industry
solutions are not considered appropriate. The Government has also
indicated its intention to establish a regulatory authority of its own
if the GIC does not deliver the required outcomes.
3.2 How are the State’s mineral rights to develop oil and
natural gas reserves transferred to investors or
companies (“participants”) (e.g. licence, concession,
service contract, contractual rights under Production
Sharing Agreement?) and what is the legal status of
those rights or interests under domestic law?
All oil and gas in its natural state is the property of the Crown.
Ownership of the oil and gas will pass to a permit holder who has
obtained the oil and gas lawfully and in the course of activities
authorised by a permit issued by the Minister of Energy and
Resources.
As described below (at question 3.3), three types of permits are
available under the Crown Minerals Act: prospecting; exploration;
and mining permits. While prospecting rights are usually exclusive
(but can be non-exclusive if the permit conditions reflect this),
exploration and mining rights are always exclusive. Further, an
exploration permit generally gives a subsequent right to apply for,
and be granted (subject to satisfying certain specified criteria), a
mining permit. In addition, some petroleum mining licences
continue to exist under the Petroleum Act.
New Zealand historically operated a petroleum exploration permit
allocation system based on cash bonus bidding, staged work
programme bidding, and priority in time applications. The priority
in time application allocation method allowed companies to apply
to explore for petroleum over any land in New Zealand which was
available for permitting, and the applications were then processed
by New Zealand Petroleum & Minerals. However, as part of
another significant piece of recent regulatory reform in New
Zealand, this allocation method was removed in 2012 and was
replaced with annual competitive block offers. This was driven by
the objective of providing for a more proactive and strategic
approach to the management of the Crown’s petroleum estate by
New Zealand Petroleum & Minerals, especially in relation to New
Zealand’s offshore basins.
The first annual exploration blocks under the new system were
recently put up for tender by the Government on 11 June 2012. The
23 petroleum exploration blocks cover over 40,000 square kilometres
of offshore seabed and 3,000 square kilometres of land in the
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