The real cost of the oil and gas ban

Sean Rush at Stuff writes:

I became a criminal defence lawyer in Napier, my home town, in the early 1990s. I was the son of hard-working parents who often relied on the former family benefit to get by so I thought I knew a thing or two about the tough side of life. But criminal law exposed me to an even tougher New Zealand.

It was disheartening to see young men, disproportionately Māori, go through the system. They could be the sort of guys I went to school with and played rugby with. These kids were smart, fun, and a bit cheeky, in many ways, just like me.

They fell into a cycle that soon became apparent: small misdemeanours which ended in youth court. Then car conversion, drugs, burglary and jail time, and after that the offences become more serious: armed

robbery, assault, grievous bodily harm, and sometimes drugs and gang involvement. Suddenly that cheeky kid is doing a lengthy lag in jail.

What’s this got to do with the Government’s oil and gas announcement? In one fell poorly thought through swoop, the Government dashed the hopes of many New Zealanders, and primary among them are those cheeky kids I grew up with, and their kids and mokopuna. What the sector offered New Zealand was a growing industry; energy of course, but mostly hope. Hope for a more positive economic future, for everyone.

Yep 11,000 jobs with no future, and all for a decision that will actually increase greenhouse gas emissions.

My family and I took a punt and came home in 2013. Two kids later, it’s worked out for us. I also saw a future where the industry I had grown to love could do something for the kids I saw being left behind.

​The Government’s announcement that it is halting exploration has well and truly ended that dream. It will have a chilling effect on new investment as well as eliminating the possibility of growth.

The rhetoric that current exploration permits can last for 40 years is a glib half-truth. Most permits require an upfront expensive commitment to seismic acquisition, worth millions of dollars, within the first three years and, if something looks “interesting,” a well that might cost over $100 million within the following two.

Only if that well can be successfully developed will some of the permit area stay “live” for 40 years, but that requires another government consent and there is now considerable uncertainty about whether it will be given.

This is the key. The current exploration permits are basically worthless unless you will be given a mining permit in the event of an area being worth mining or drilling. But absolutely no one thinks this Government would ever allow an exploration permit to become a mining permit, so effectively the current permits are worthless.

Investors can choose other destinations to put their money. This move will not change global exploration – it will be carbon leakage in action. There won’t be any emissions reductions, and in all likelihood emissions will go up in New Zealand as we start to rely on coal again. I expect the existing permits will be handed back within 5 years.

They may wait to see is a more rational Government is in place after 2020, but if not they’ll all head off.

Investment in infrastructure bankrolled by oil companies brings jobs, from holding the stop/go sign, digging pipeline trenches, hot trades, catering, taxis, trucking, wharfs to higher-skilled jobs like civil engineering, financing and everything in between. Royalties from one medium-sized field, like the UK’s “Buzzard” field would, at current oil prices, earn nearly $4 million a day in royalties.

Maybe the cycle of offending could be broken with a good job and the economic independence, choices and freedom a job brings – people like freedom when they get it and make better life choices to hang on to it. Jobs bring economic independence. A gas discovery brings jobs.

Big oil companies – the sort we need in New Zealand – do not invest in countries with unstable policy regimes. They don’t invest in a country where politicians make industry altering decisions without any consultation nor a dearth of analysis on what the decision means for the country and the New Zealanders who face ripping out their gas cookers and heating in a decade’s time.

This part needs to be stressed again.

  • This decision was not Labour party policy
  • It was not a coalition commitment
  • There was no consultation
  • There was no analysis of its impact

This is Mickey Mouse territory.

This new policy will hurt New Zealanders. And it will really hurt the kids of the kids I grew up with and saw in court as a criminal lawyer; who without hope of economic opportunities in the communities they live in are vulnerable to the same fate as their dads. And that, from a country that is committed to ending poverty, is the real cost of this decision.

A great op ed.

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