Crown Minerals Act review - a step forward

Monday 19 March 2012

Author: David Coull

The discussion paper for the review of the Crown Minerals Act 1991 was released last week. Overall the changes propose​​d in the discussion paper are a step forward towards improving and simplifying the regulatory environment for petroleum and mineral operations in New Zealand.

It is clear the MED has had regard to the industry and other submissions made on the August 2010 discussion document and this is reflected in a number of the proposed amendments. We would expect the bulk of the proposals set out in the discussion document to be welcomed by industry.

There are a number of key themes running through the discussion document and, more generally, the current environment for petroleum and minerals companies operating in New Zealand:

  • The lowest common denominator: We believe industry should welcome appropriately rigorous regulation of certain aspects of petroleum and mining operations. Obvious examples are health and safety and environmental protection (both onshore and offshore). It only takes one operator to drop the ball in relation to these aspects to create a significant issue for all other operators in New Zealand. The flipside of this is that the regulatory authorities must be able to respond quickly, and industry needs reasonable certainty of outcome.

  • Need to work with Government: It is clear from the various Government initiatives since the November 2009 Action Plan that the Government is committed to the development of New Zealand's natural resources – however, this requires industry to work co-operatively with Government in relation to the development of the Crown's mineral estate and in a sense to partner with the Government to facilitate that development.

  • Better resourcing within MED: One of the key deliverables under the Action Plan was ensuring better resourcing within the MED. NZP&M has bulked up its capability and resources over recent months and the discussion paper includes initiatives to enable NZP&M to be more efficient and to focus on what really matters to industry – examples are structural changes to work programmes which should reduce the need for continual changes to work programme conditions, and more meaningful compliance monitoring/reporting.

  • Better engagement and coordination across the whole of Government: One issue often raised by industry is the need for better coordination between the various relevant Government agencies in relation to petroleum and minerals operations so that the left hand knows what the right hand is doing. Given the likely increasing role of other regulators such as the DoL, the EPA and Maritime NZ, the tangible initiatives described in the discussion paper intended to facilitate this result are to be welcomed (for example, the proposed annual work programme meetings with permit holders and other regulators).

  • Iwi engagement: One of the key features of mining and petroleum developments over the next few years is likely to be iwi involvement and investment in resources projects. A number of iwi and industry participants are already taking tangible steps in this direction. This likely trend is reflected in a number of the issues raised in the discussion paper.

  • Stakeholder engagement: A key issue going forward for resources development will be engagement with other stakeholders. These potentially include (to name a few) landowners, territorial authorities, infrastructure owners/providers and the community more generally. Industry needs to meaningfully engage with these groups and ensure they are provided with clear and factual information in relation to proposed operations/activities. If industry does not do this, it can be sure other groups will look to fill the information void (and not necessarily with correct or helpful information).

Although it is not practical in a summary article such as this to mention all the various proposals in the discussion paper, some of the more significant of them include:

  • Differential regimes: it is proposed to have different regulatory requirements for different types of permits. Tier 1 operations will have more onerous regulatory requirements and be proactively managed. Tier 1 will include petroleum, coal and ironsands. Tier 2 will include alluvial gold operations and aggregates. Such an approach makes good sense and should help to free up NZP&M's resources.

  • HSE assessment: Early assessment of HSE issues has been proposed (either by way of a prequalification mechanism or during exploration permit assessment). Given the increasing public visibility of HSE considerations (including, in particular, for offshore operations), this should be welcomed and should ensure that all companies operating in New Zealand meet a minimum benchmark in terms of HSE competence and compliance. It should also be noted that the Crown's expectation is that this initial HSE assessment should not be a time intensive task.

  • Mining on conservation land: The discussion papers records that the policies announced in March 2010 in relation to public notification of mining on public conservation land are to be included in the amending legislation. There is no other detail provided. This is likely to be one of the more significant aspects of the proposed amendments and it will be necessary for industry to carefully consider the detail once it becomes available. An important consideration for industry will be to ensure that any changes do not duplicate existing approval processes (e.g. under the RMA) or impose an additional layer of regulation for no better regulatory outcome.

  • PPPs over existing permitted land: In order to encourage speculative geophysical surveys, the proposal has been made to allow petroleum prospecting permits to be granted over lands which are already the subject of a permit. One can easily see some industry participants not liking the idea of having a seismic data provider coming into its permit, gathering data and then selling it to others.

  • PEP duration: The proposal has been made to have differing exploration durations depending on the nature of the petroleum permit – onshore (9 years), shallow water offshore (12 years) and deepwater offshore (15 years). It seems to us there is considerable merit in such an approach although some onshore operators may not favour the slight reduction in exploration permit duration from the status quo. No doubt much will also depend on the precise nature of the minimum work programmes the Crown will find acceptable for each category and how robust NZP&M will be in relation to allowing changes in each of the permit phases and policing non-compliance. A related point is the expectation (on behalf of the Crown at least) that exploration blocks will become smaller over time.

  • Ministerial consent: The key change to section 41 of the Act is that permit holders will be able to assume that permit transfers and dealings will not require consent unless they are advised by NZP&M to the contrary within 40 days. This should help to deal with one of key issue that has been raised in relation to the Ministerial consent requirement (i.e., how long it takes to get consent). One would have thought, however, that NZP&M will want to approve all permit transfers and it may be the legislation should expressly provide for that. One also expects that most parties to long term gas sale agreements will not be in favour of providing them to NZP&M as has been proposed.

  • Royalties. While no changes are proposed to petroleum royalty rates, it is proposed to review the royalty rates for coal, gold, silver, ironsands and phosphates. The paper also touches on whether the royalty regime should be administered by NZP&M or Inland Revenue.

Perhaps the biggest challenge for both the Crown and industry coming out of this review is to ensure that the Crown Minerals Act reforms are integrated with the other reforms affecting petroleum and mining operations that are taking place with much speed and that these requirements collectively do not unnecessarily hinder or delay resource developments. An important aspect of this is ensuring that the relevant regulatory requirements and processes are sufficiently robust that they cannot be used by fringe or outlying groups as a lever to achieve collateral purposes which do not advance the economic and other interests of New Zealanders as a whole.

David Coull is a partner in the Wellington office of Bell Gully. He specialises in corporate and resources law.


This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • David Coull

    Partner Wellington
Related areas of expertise
  • Energy