IN CONFIDENCE Energy and Resources Weekly Report To Hon Dr Megan Woods Minister of Energy and Resources Monday 13 November 2017 MINISTRY OF BUSINESS, INNOVATION & EMPL!OYMENT HIKINA WHAKATUTUKI Energy and Resources Weekly Officials' Meeting Agenda 11 :30am - 12:30pm Monday 13 November 2017 Item Subject Person Oral Item/ Paper Action Required (Decision/ Inform I Noting / Discussion) 1. Retail power price review Minister Oral item Discussion 2. Fuel market performance study Minister AM# 0677 17-18 Discussion Discussion 3. Refinery to Auckland pipeline update Andrew Hume BO# 741 17-18 AM# 0859 17-18 4. Land access Ilana Miller Oral Item Discussion 5. Weekly report Minister Oral Item Discussion Stakeholder management Andrew Hume Oral item Discussion 7. Any other business 6. Ministry of Business, Innovation & Employment officials attending: Ilana Miller, Acting General Manager, Energy and Resource Markets Tim Townsend, Acting Manager, Sector Development Policy David Darby, Manager, Commercial Analysis & Investment Andrew Hume, Manager, Energy Markets Policy Gareth Wilson, Principal Policy Advisor, Energy Markets Policy Josh Adams, National Manager, Petroleum Marcos Pelenur, Manager, Resource Markets Policy MBIE-MAK0-17157744 2 MINISTRY OF BUSINESS, INNOVATION & EMPL!OYMENT HIKINA WHAKATUTUKI Action points from last Officials' Meeting Actions Item Name Transition to low MBIE to provide Climate Change briefing for David Darby carbon economy Thursday reference to renewables in transport Andrew Hume MBIE to provide advice on barriers to electrification of process heat MBIE to provide advice on the role of minerals in the context of a transition to a low carbon economy Bottled water issues MBIE to provide advice (aide memoire) on Marcos Pelenur bottled water issues from an ERM perspective. Emerging technologies Minister noted her support for the EMP paper. Andrew Hume Would like to see it include equity considerations; what can be done to reduce energy poverty. MBIE to provide advice on Emerging technologies and proposed work programme RAP Review MBIE to provide advice on the differences, Andrew Hume including cost and time implications, between a statutory Vs non-statutory review. MBIE-MAK0-17157744 3 MINISTRY OF BUSINESS, INNOVATION & EMPL!OYMENT HIKINA WHAKATUTUKI 1.Managing the Estate Update on Schlumberger offshore seismic survey, offshore Taranaki Comment: Next Steps: In anticipation of a successful Petroleum Prospecting Permit For information. application, Schlumberger has mobilised its survey vessel from South Korea. The vessel is expected to arrive in New Zealand waters on around 25 November. The anticipated survey start date is early December. Responsible Manager: Josh Adams Update on Block Offer 2017 evaluation Comment: Next Steps: The final date to receive bids for Block Offer 2017 was early Officials are available to September. Since then MBIE's Petroleum Team has been discuss the way forward evaluating the bids received. Successful bids are expected to be for Block Offer 2017, known in late November with awards in December. including the decision making processes and opportunities for you as Responsible Manager: Josh Adams Minister to be involved. Todd Energy sells 16 per cent of the offshore Maari Field to Horizon Oil Next Steps: For information. A briefing is being prepared to explain proposed changes to Section 41 of the Crown Officials The Maari Field is the second largest crude oil field in New Zealand Minerals Act. are available to explain with total reserves of 49 million barrels. Production began in 2009. the history and rationale The permit will expire in 2027. r _ _ for the proposed changes. Comment: Horizon Oil International Limited (Horizon) has entered into an agreement, with Todd Maari Limited to acquire their 16 per cent interest in offshore Petroleum Mining Licence 38160 (Maari Field) for US$17.6 million. I I I Transactions like this generally require ministerial approval under the Crown Minerals Act, although this is not always the case. The decision to accept or consent to transfers is delegated to MBIE officials who assess capability to give effect to the permit conditions. Work is underway to tighten up aspects of Section 41 of the Crown Minerals Act. Section 41 governs the way transactions are assessed and consented to ensure the Crown has sufficient control over who operates and owns New Zealand's oil and gas assets. Horizon is already a partner in the Maari Joint Venture and in this case is increasing its share of ownership in the Maari field. Responsible Manager: Josh Adams MBIE-MAK0-17157744 4 MINISTRY OF BUSINESS, INNOVATION & EMPL!OYMENT HIKINA WHAKATUTUKI Update on Shell's New Zealand divestment programme Next Steps: For information. Officials are available to provide background and context on Shell's divestment process. We will keep you Bids for the Shell assets are reported to be closing at the end of updated as the Shell November. Recent media coverage has reported that the two divestment process leading bidders are Questus Energy and Jadestone Energy. Both evolves. companies consider themselves "late field life" specialists, they are relatively new companies and are significantly smaller than Shell. Comment: Shell is in the process of divesting its share of the offshore Maui and Pohokura gas fields. Shell has operated oil and gas assets in New Zealand since the 1950's and has made a significant contribution to the communities it operates in as well as setting very high health, safety and environmental standards. This transaction is an important one to monitor because of the future decommissioning work that will need to be completed when gas production ceases at Maui. The Pohokura Field is also critical to New Zealand's security of gas supply and needs to continue to be managed in accordance with good industry practice. Officials are concerned to ensure that the new owners have appropriate financial and technical capability to give effect to the permits and apply good industry practice. Due to the scale of decommissioning costs at the Maui Field, Officials will require assurance/guarantee from the buyer and/or seller that the eventual decommissioning liability will not be transferred to the Crown. Discussions about this have commenced with Shell. Like the Maari Field transaction mentioned earlier, the Maui/Pohokura field transfers require Section 41 approval under the Crown Minerals Act. Responsible Manager: Josh Adams Solid Energy Pike River Deeds Comment: MBIE has received a letter from Solid Energy requesting to be released from three Deeds signed by or on behalf of the Minister of Energy and Resources in 2012, 2013 and 2015 related to Pike River. Officials believe this letter more relates to the portfolio of the Minister Responsible for Pike River Re-Entry. Officials are preparing a briefing for you on these deeds and will be recommending that this be transferred to the Minister Responsible for Pike River Re-Entry to make the decision. Next Steps: Officials will keep you updated on when you can expect this briefing to be provided. Responsible Manager: Ilana Miller MBIE-MAK0-17157744 5 MINISTRY OF BUSINESS, INNOVATION & EMPL!OYMENT HIKINA WHAKATUTUKI Possible transfer of Pike River mining permit Next Steps: Comment: The Pike River Establishment Unit within MBIE, working to the Will keep you informed of Minister Responsible for Pike River Re-Entry, is looking at options to any developments ensure that access to the Pike River Mine is retained as Solid Energy is wound down. These options currently include transferring the Pike River Mining Permit and associated access arrangements from Solid Energy to the new agency set up for the re-entry of Pike River. This work is ongoing, however should the mining permit and access arrangement be transferred, it will be a decision for the Minister of Energy and Resources. Responsible Manager: Ilana Miller MBIE-MAK0-17157744 6 MINISTRY OF BUSINESS, INNOVATION & EMPL!OYMENT HIKINA WHAKATUTUKI 2. Priority Developments Heading Comment: Next Steps: Responsible Manager: Heading Comment: Next Steps: Responsible Manager: Heading Comment: Next Steps: Responsible Manager: MBIE-MAK0-17157744 7 MINISTRY OF BUSINESS, INNOVATION & EMPL!OYMENT HIKINA WHAKATUTUKI 3.Policy Developments Regulatory Systems Amendment Bill 2 - Additional amendments and release of exposure draft Comment: Officials proposed amendments to the Crown Minerals Act 1991 (CMA) and the Continental Shelf Act 1964 (CSA) under the second Regulatory Systems (Energy and Resources) Amendment Bill 2017 (RS82). The majority of proposals were approved by the former Cabinet in December 2016 and April 2017. As a result of further consultation during the drafting process, additional policy changes to the CMA have been identified. You will receive a briefing seeking your approval to include these amendments in RSB2. MBIE's Regulatory Systems Team will be seeking approval from the Minister for Economic Development in mid-November, to release the exposure draft for RSB2 for public consultation. You will receive a copy of this briefing The objective of Regulatory Systems Amendment Bills is to make minor technical amendments to primary legislation in order to reduce the risk of regulatory failure. Next Steps: Officials will provide you with a briefing this week seeking your approval to include the additional policy changes in RSB2. You will receive a copy of the briefing that will be sent to the Minister for Economic Development, seeking agreement to release the exposure draft for RSB2. Responsible Manager: Marcos Pelenur Regulatory Systems Amendment Bill 3 - Final proposals Comment: Final proposals for the third Regulatory Systems Amendment Bill (RS83) were due to MBIE's Regulatory Systems Team on 2 November. The Regulatory Systems Team needs to be satisfied proposals are appropriate for RSB3, and will assess the proposed amendments. Once the proposals have been agreed to by MBIE's Regulatory Systems Team and stakeholders have been consulted, officials will seek your formal approval for the changes to be made through RSB3 . --------------------, i:- Next Steps: Officials will provide you with further information shortly. Officials will undertake with consultation stakeholders in November and December 2017. Officials will seek your formal approval for the changes to the CMA in I The proposed CMA amendments are predominantly about clarifying early 2018. existing provisions, closing gaps and addressing inconsistencies. I IPl ,..,. - -- - ,____________...I Responsible Manager: Marcos Pelenur Historic onshore petroleum wells study progress Comment: Next Steps: In October officials commissioned Petrofac Facilities Management A draft report is due to Limited to produce a desktop study on New Zealand's historic MBIE on 17 November 2017. onshore petroleum wells. MBIE-MAK0-17157744 8 MINISTRY OF BUSINESS, INNOVATION & EMPL!OYMENT HIKINA WHAKATUTUKI 3.Policy Developments The study will assess the technical integrity of 103 historic wells in New Zealand to determine the actions required to address any outstanding plugging and abandoning commitments for these wells, and estimate the likely duration and cost of these actions. The final report will also provide a risk ranking of these wells in order to determine the relative priority of these actions. Officials are receiving weekly reports from Petrofac on the study and are satisfied that it is progressing as anticipated. The report will be used to support a cost-benefit analysis that will inform advice on managing risk exposure from historic wells. We will brief you shortly on these matters. Responsible Manager: Marcos Pelenur Development of heating and insulation grant scheme to support the Healthy Homes Guarantee Bill Comment: The Healthy Homes Guarantee Bill is progressing through its final stages in the House this week. MBIE Construction and Housing Policy is leading advice on the Bill. The Bill amends the Residential Tenancies Act 1986 to require every rental property to meet minimum standards of heating and insulation. We understand that Minister Twyford considers that a heating and insulation grant scheme could su ort landlords to com I with their new obligations under the Bill. Next Steps: MBIE will be working with EECA over the coming weeks to provide you initial advice on key policy choices for the design of a heating and insulation scheme. We will brief you shortly on these matters. Responsible Manager: Andrew Hume Fonterra road map to transition to a low emission future - announcements at COP23 Comment: Over the past 6 months, the Ministry for the Environment (MfE) and Fonterra, with input from MBIE, EECA and Transpower, have been working on a "roadmap" to transition to a low emission energy future, and Fonterra has proposed a series of targets. Fonterra will announce its targets at COP in Bonn next week, and Minister Shaw will announce the roadmap. Fonterra's targets to be announced are: • net zero greenhouse gas (GHG) emissions for operations (dairy processing and transport) by 2050, • 30 percent reduction in absolute operations emissions by 2030 (baseline - end of financial year 2015), and • no new coal-powered dairy sites from 2030 and until then coal used as a last resort. MBIE-MAK0-17157744 Next Steps: Officials will provide you with a briefing on the Process Heat in New Zealand (PHiNZ) project shortly. 9 MINISTRY OF BUSINESS, INNOVATION & EMPL!OYMENT HIKINA WHAKATUTUKI 3.Policy Developments The roadmap contains a mix of government and Fonterra-led actions. Key Fonterra actions, in addition to the targets, include case studies and demonstrations to test the viability to low emission alternatives to coal (for example using biomass in boilers). Of the government actions under the roadmap, MBIE is responsible for "reviewing the barriers for the uptake of renewable energy or increased efficient of their plant for process heat users", which will occur as part of the process heat action plan (called Process Heat in New Zealand (PHINZ)). Note this is intended to be all process heat users, and not limited to Fonterra. Other actions include a case study on the social good benefits of electrifying process heat, and exploring opportunities for new sources of capital and alternative finance models. Responsible Manager: Andrew Hume MBIE-MAK0-17157744 10 MINISTRY OF BUSINESS, INNOVATION & EMPL!OYMENT HIKINA WHAKATUTUKI 4.Regulatory Reform & Implementation and Operational Matters Otago Proposed Regional Policy Statement Comment: MBIE has been participating in mediation on the proposed Otago Proposed Regional Policy Statement (proposed RPS) focusing on ensuring that there is an appropriate policy framework for regulating mining activities. MBIE was a submitter on the proposed RPS and then became a section 274 party joining the appeal of Oceana Gold and other appellants. MBIE's interest in the proceedings is the impact of the proposed RPS on the prospecting, exploration and mining of minerals for the benefit of New Zealand. I I Next Steps: MBIE will be preparing evidence (due end of November) with the Court date scheduled for Feb 2018. Discussions between parties may continue during that time. Responsible Manager: Tim Townsend Hawke's Bay Oil and Gas Regulation Plan Change Comment: Next Steps: Hawke's Bay Regional Council has advised that they are preparing a draft plan change which would prohibit oil and gas exploration in fresh and coastal water bodies in the region. This would have implications for future exploration activities and block offers in the region. During the remainder of 2017, the Council is consulting with key stakeholders and statutory agencies to confirm whether to formally notify the draft plan change. Formal submissions are not being sought at this stage. Responsible Manager: Tim Townsend MBIE-MAK0-17157744 11 MINISTRY OF BUSINESS, INNOVATION & EMPL!OYMENT HIKINA WHAKATUTUKI 5. Stakeholder Issues Scion takes on Vice Chair Role in IEA's Bioenergy Group Comment: Next Steps: Paul Bennett, Scion's Science Leader for Clean Technologies, has been elected Vice-Chair of the Executive Committee of the International Energy Agency's (IEA) Bioenergy Group. The IEA Bioenergy Group provides technical co-operation over a range of bioenergy activities, including liquid biofuels, bioenergy and feedstock market, sustainable bioenergy, biogas etc. This is achieved through task groups, each of which undertakes a specific piece of international research. Scion is a Crown Research Institute (CRI) specialising in research, science and technology development for the forestry, wood and wood-derived materials and other biomaterial sectors. Due to the technical nature of the IEA Bioenergy Group's work, Scion is New Zealand's representative in the Group. MBIE will continue to engage with Scion, and will provide you with updates on significant research outputs from the IEA Bioenergy Group. Responsible Manager: Andrew Hume MBIE-MAK0-17157744 12 � ·�f,�� �: ·1 \, �' Iii ,.., MINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT HIKINA WHAKATUTUKI NZ Petroleum & Minerals permits approved: THURSDAY, 2 NOVEMBER TO WEDNESDAY, 8 NOVEMBER 2017 Partial surrender Permit Permit Type Number Minerals Exploration 55162 Extension of land 60078 Minerals Exploration NZ Garnet Limited Partial surrender 60123 Minerals Prospecting Hyde Limited 60230 Minerals Mining Karl Benjamin Otago Lawrence (100%) Transferred to Peter Barrett (100%) New Permit 60294 Minerals Exploration Gerard Michael Fahey, Tasman Paul Francis O'Brien, Michael James Reedy Granted for a period of 5 years to explore for gold over an area of 869.407 hectares Subsequent Permit 60389 Minerals Exploration Hyde Limited Subsequent minerals exploration permit to minerals prospecting permit 60123 granted for a period of 5 years to explore for all metallic minerals (excluding uranium) over an area of 3827.636 hectares Change of Conditions 51906 Petroleum Exploration Permit OMV New Zealand Limited Permit activity Operator Transfer and or MBIE-MAK0-17157744 Location Client Golden Limited Bush Mining Southland West Coast Resources Otago Resources Otago Offshore Taranaki Basin 13 Comment Partial surrender - area decreased by 190.444 hectares Land area increased by a further 658.964 hectares Partial surrender - area decreased by 38.276 square kilometres Permit holder committing to next stage of the work programme � ·�f,�� �: ·1 \, �' Iii ,.., MINISTRY OF BUSINESS, INNOVATION & EMPLOYMENT HIKINA WHAKATUTUKI Access Arrangements under consideration by ERM and other Crown agencies requiring Joint Ministerial Approval Agencies Permit number Applicant Land Status and Location LINZ & ERM 41808 Oceana Gold (New Zealand) Limited Crown Land - Waihi LINZ & ERM 51630 Oceana Gold (New Zealand) Limited The Crown land covers commercial forest operated by Crown Licensee, Forest Matariki Forests and administered by LINZ in the Waikato region. LINZ & ERM 40813 Oceana Gold (New Zealand) Limited The Crown land covers commercial forest operated by Crown Licensee, Forest Matariki Forests and administered by LINZ in the Waikato region. DOC & ERM 41808 Oceana Gold (New Zealand) Limited Crown Land - Waihi DOC & ERM 41289 Rangitira Developments DOC stewardship land Limited at the southern end of the Buller Plateau. DOC & ERM 37168 Roa Mining Company Crown land Limited district. MBIE-MAK0-17157744 Comment The applicant currently has a licence to occupy the Crown land. - Grey Joint wildlife application. 14 MINISTRVOFBUSINESS, • INNOVATION & E MP�OVMENT HIKINA WHAKATUTUKI Upcoming Meetings, Events and Announcements Upcoming meetings: Meeting with / Purpose Monday 13 November Tuesday 14 November Wednesday 15 November Thursday 16 November Friday 17 November MBIE-MAK0-17157744 I I I I I I Time 15 MINISTRVOFBUSINESS, • INNOVATION & E MP�OVMENT HIKINA WHAKATUTUKI Upcoming speeches & communications: Event or announcement N/A Activity Date Speech / media release due MBIE Contact Upcoming Cabinet Papers and Briefings Upcoming Cabinet Papers Title of paper Comment Provided by [date] To be considered by Cabinet Committee Contact N/A Upcoming Briefings, Aide Memoires and Reports Subject Comment Due date Contact Potential barriers to This briefing provides an overview of Wednesday 15th April in innovation in the emerging technologies Richardson the November including energy sector electricity industry, their impact, potential barriers, and how we are reacting to these. Regulatory Systems Amendment Bill 2 Additional amendments to the Crown Minerals Act 1991 This briefing seeks your agreement to Friday include the proposed additional 17th November amendments in second the Regulatory Systems (Energy and Resources) Amendment Bill. Hannah Sherwood Investment in resources data acquisition Introduce the current Data Acquisition Friday 17th Programme an November and provide operational update to the Regional Aeromagnetic Survey Project due to in commence Wanaka early December. Jono Weir MBIE-MAK0-17157744 16 • MINISTRY ,Of BUSINESS, 1. INNOVATION & EMP�OVMENT . HIKINA WHAKATUTUKI Upcoming Briefings, Aide Memoires and Reports Subject Comment Due date Report back on the findings and recommendations of the Fuel Market Financial Performance Study On 26 June 2017, Cabinet noted that the then Minister of Energy and November Resources intended to discuss the findings of the report with industry and directed officials to assess the Study's findings and recommendations. and to report back to the Minister by 30 November [CAB-17-MIN-0319 refers] Contact David Buckrell were two There principal recommendations. The first related to the creation of a registry for the borrow and loan system that limits each participant's visibility of other participants' market shares. The second related to the creation of a liquid wholesale market for retail fuels. The report back intends to focus on these two recommendations. MBIE-MAK0-17157744 17 MINISTRY OF BUSINESS, ININDVATION & EMPLOYMENT HIKINA WHAKATUTUKI OIA Requests Ministerial OIAs Number MOIA17-001 ,. - Name Date received I 31 Oct 17 - Date due to Minister's Office 21 Nov 17 Date due to requestor 28 Nov 17 Relates To/ Status Update BIM and associated correspondence, notes and aide memoires Status: Gathering information. Departmental OIAs Number 1718-0525 1718-0592 Name -I - -- -r - -- - 1718-0598 -r - -- - I 1718-0349 -I - -- - MBIE-MAK0-17157744 I I I 16 Oct 17 Date due to Minister's Date due to Office (if requestor applicable) 13 Nov 17 N/A 24 Oct 17 N/A 21 Nov 17 Copy of sent application clarification request. Status: Drafting. 24 Oct 17 14 Nov 17 21 Nov 17 Rationale for request for areas to be excluded from Mokihinui catchment of Kahurangi National Park. Status: Scoping. 6 Sep 17 22 Nov 17 29 Nov 17 All documents, reports and analysis, including emails, relating to Thompson & Clark's contract work for MBIE in the Advantage NZ 2013 Petroleum Conference. Status: Gathering information. Date received Relates To/ Status Update Copy of 2013 Epithermal Block Offer consultation document. Status: Drafting. 18 MINISTRY OF BUSINESS, ININDVATION & EMPLOYMENT HIKINA WHAKATUTUKI Number 1718-0524 1718-0443 1718-0400 1718-0401 Name -r - -- - I -I - -- - I -r - -- - I -r - -- - I MBIE-MAK0-17157744 Date received Date due to Minister's Office (if applicable) Date due to requestor Relates To/ Status Update 03 Oct 17 N/A 29 Nov 17 Copy of the old Crown Minerals Act section 41 practice statement. Status: Drafting. 03 Oct 17 N/A 29 Nov 17 Information regarding a previous OIA and mining tender. Status: Gathering information. Parts 1 to 6 responded. Part 7 extended. 22 Sep 17 24 Nov 17 1 Dec 17 A copy of the Wiri pipeline report referred to on Morning Report. Status: Drafting. 22 Sep 17 24 Nov 17 1 Dec 17 A copy of the Wiri pipeline report referred to on Morning Report. Status: Drafting. 19