Defining moment for Ardern
By Richard Harman (author)
Jacinda Ardern was thinking about what to do with offshore oil exploration from well before she became Prime Minister.
In the early 2000s as a Labour staffer, she worked with New Plymouth MP, Harry Dynhoven who was Associate Minister of Energy on trying to attract foreign oil explorers to come to New Zealand.
Dynhoven presided over an aggressive Government policy which saw it chase big international players, dangling tax incentives and reduced royalties in an attempt to kick-start interest in areas like the Great South Basin.
But since then the Paris Climate Change conference has happened and New Zealand has committed to net zero carbon emissions by 2050.
Perhaps just as importantly with its new young leader, Labour has found a new audience among younger urban voters who take climate change seriously and want to see their Government lead the way in combatting it.
So yesterday Ardern announced that the Government would not issue any new permits for offshore oil exploration.
Existing permits like the Barque prospect off the east coast of the South Island will still go ahead; it is only new exploration permits that will stop.
It may turn out to be a defining moment for Ardern’s Government; a bold rebranding that turns Labour a greener shade of red.
"We are bold, but I would caution the idea that the only thing we are going to be bold on is the environment,” she told POLITIK.
“Setting up a billion dollar regional growth fund, that was bold.
“That is a significant initiative, saying we’ll build 100,000 houses; that’s bold.
“That will be a defining feature for us.
“We will be willing to take bold action, to take action, to take risks on the big stuff.”
Nevertheless, the exploration ban – and last week's Government Policy Statement on transport and ending of large-scale irrigation subsidies have impressed their partners in Government, the Greens.
Speaking over the weekend, Greens Co-Leader, James Shaw, described last week’s announcements as “great Green wins” and foreshadowed a big announcement this week (which turned out to be the exploration ban) and said there was plenty more to come in the Budget.
After the announcement of the ban, Ardern took Shaw and NZ First Minister, Shane Jones, and Energy Minister Megan Woods with her when she went to speak to students at Victoria University.
The “optics” were obvious; this was a policy aimed at the youth vote which Labour at present dominates.
But there was another aspect to the trip to the University; a desire to show that the three parties of the Government were on the same page.
Jones picked up on that later in a speech to Parliament during an urgent debate on the ban.
"Today is a historic day, because there's been a clear line of sight as to what happens when three parties come together for a common purpose,” he said.
”As a consequence of the advocacy of the leader of the Green Party and also the leadership shown by our Minister of Energy and Resources and the passion shown by our Prime Minister, we have given a clear sense of the direction of travel that this Government seeks to take.”
New Zealand First is privately not wildly enthusiastic about the ban but nor is it ardently opposed.
It has sections of its membership who are opposed to offshore drilling and its manifesto called for a tightening up of offshore drilling permits.
Even so, Jones was quick to claim an NZ First victory in the negotiations over the policy.
“On my side of the Government, we ensured that those parties who already hold enforceable rights, statutory entitlements—they do not lose them,” he said.
“We have ensured that the investors, the planners, and the strategists behind the current statutory right holders can enjoy clear air.”
Just how much arm twisting NZ First had to do is not clear. Any move to close down existing permits and concessions would have seen the Government dragged through the courts with potential damages of billions of dollars.
“It was not something we entertained because NZ First made it so clear,” Ardern said.
“There was no point in even considering that because that was something they were very clear on."
Nevertheless, the reaction from the petroleum industry was negative.
The Petroleum Exploration and Production Association of New Zealand (PEPANZ) said the decision was a lose-lose for New Zealand's economy and environment, likely to threaten jobs and mean higher prices for consumersMadgwick.
"We are disappointed there has been no direct consultation with the industry and it is also a surprise given the Labour Party's 2017 energy manifesto talked of continuing offshore exploration," said PEPANZ CEO Cameron Madgwick.”
But what might lower the political price of Ardern's move is the fact that the offshore petroleum exploration industry in New Zealand has been in the doldrums now for the past two years and that it may well have turned out that even if the Government had offered up blocks of ocean for exploration, there may have been no takers..
In January, a Singaporean consultancy, BMI, in a report on the industry here, said ongoing offshore exploration, faced significant headwinds, “including volatile oil prices, high project cost structure (harsh weather, remote location of blocks) and the presence of more prospective upstream markets in the vicinity, namely Australia and Indonesia.”
“Interest in New Zealand's annual oil and gas block offers remains at an all-time low, declining from a peak of 15 new exploration permits awarded in 2014, to just one in each of the past two rounds.
“Exploration interest remains almost exclusively confined to the mature Taranaki basin, and government efforts to stimulate interest in its 18 other petroleum basins have achieved little to date, as firms continue to shun high-risk, high-cost, frontier upstream projects.
“Failure to improve the situation could even see New Zealand scrap future annual oil and gas block offers altogether, as Prime Minister Jacinda Ardern looks to chart a path away from fossil fuels.”
Thus for the Government, despite the criticism yesterday and an impassioned attack from the Opposition, this was a relatively cheap policy to implement as it cemented in its youth vote base and paid its dues to the Greens.
Ardern argues that the short-term political hits the Government will take from business, and the industry have to be balanced against the fact that the decision gives them certainty.
“So long as we kept talking about fossil fuels not being our future and the need to transition without setting out a plan about how and when, we weren’t providing that certainty.
“By doing what we have done, we are saying nothing is going to change tomorrow, but we are now planning for 30 years time.
“It was a really important decision to make,” she said.
“Someone had to do it.”
And she believes there are economic gains to be made by the emphasis that this will put on renewable energy.
“There are economic gains to be made for countries which show leadership in a timely way and an economic cost to leaving it.
“I would rather know that we have made the right decision than do what is easy.
“Most people would agree that this is inevitable and when something is inevitable you should plan for it.”
But Ardern is careful to ensure that her Government is not being portrayed as predominantly a Green Government.
She says there is much more to it than that.
“We are united on the need for regional economy,ic growth and the need to transition and grow new parts of our economy; investing in ensuring that we are encouraging r and d, trade and growing prosperity and sharing it and the wellbeing of New Zealanders.
“What you have seen is one element of that in the last couple of weeks.”