Govt advised repealing gas ban likely to breach trade deals

Legal advice from the Ministry of Foreign Affairs and Trade states the Government’s plans to repeal the 2018 ban on new offshore oil and gas exploration will “likely” breach New Zealand’s obligations in recent free trade agreements.
Deals with major trade partners such as the European Union and the United Kingdom prohibit New Zealand from reducing environmental protections to encourage trade or investment. Though officials said the risk of a country taking a case against New Zealand was low, the policy was “likely” inconsistent with these provisions.
The advice came to light after Newsroom was provided a copy of the Regulatory Impact Statement for the repeal from the House Office, which revealed passages that were redacted from the online version of the document.
In the impact statement, Mfat said the policy “risks being seen as running counter to the Pacific regional and global consensus on transitioning away from fossil fuels … The preferred option poses relationship and reputational risks. There are risks to New Zealand’s relationships with its global and Pacific Island partners around the perception of a policy departure on the transition and our climate change goals.”
The risks were more than just diplomatic, however – they were legal as well.
“MFAT assessed that reversing the 2018 ban would likely be inconsistent with the obligations in several of New Zealand’s free trade agreements (FTA) not to reduce environmental protections for the purposes of encouraging trade or investment. These obligations prevent parties from reducing environmental protections to advantage domestic businesses (giving them an unfair advantage in export markets) or attract investment away from countries with higher environmental protections,” officials wrote.
“MFAT considers it is hard to assess the likelihood of a trading partner bringing a legal challenge under an FTA but, on balance, expects the risk of legal challenge is likely to be low.”
It is unclear how the disclosure of this advice may change that risk. Greenpeace Aotearoa executive director Russel Norman told Newsroom that the European Union and other partners should “take actions against the New Zealand Government if they try to breach the FTAs, because we take a position of what’s in the best interests of New Zealanders and what’s in the best interest of New Zealanders is global action on climate change”.
He said New Zealand was undermining the global commitment and solidarity on climate change and was acting as a “climate criminal”.
MFAT also considered the reversal of the ban could raise legal risks around New Zealand’s commitments under the Paris Agreement.
“MFAT has assessed that reversing the 2018 ban, which is estimated to increased [sic] New Zealand’s carbon emissions, could be perceived as New Zealand not intending to meet its nationally determined contribution under the Paris Agreement unless appropriate measure are taken to demonstrate how the additional emissions will be offset,” officials wrote.
“This gives rise to international legal risk. There have been attempts globally to take novel cases against States under international law, for breach of their climate change obligations. While these legal risks are low at this time, as is the risk of challenge, this is an active area of international litigation.”
Read the document (highlights indicate text that was redacted in the published version):
Prime Minister Christopher Luxon declined to comment to Newsroom about the advice the Government received. Resources Minister Shane Jones defended the Government’s actions but couldn’t comment specifically on the legally privileged information.
“The only thing that obviously I won’t talk about is the legally privileged advice. There’s a very strong convention that ministers obviously can’t and don’t talk about it. The fact that you’ve got it, well, that’s another matter. That’ll be dealt with in another way,” he said.
“It is a publicly debatable point, to what extent is the sovereignty of New Zealand crimped by trade agreements in general? The thing to bear in mind is that whenever our nation hooks up with another nation and creates a free trade deal, we always secure enough space to ensure we can pass rules and regulations for our own resilience. No government that I’ve ever been a part of has surrendered what it means to maintain and continue Parliamentary sovereignty in New Zealand.”
Jones said he was not “overly concerned that somehow I’ve stepped on a legal landmine”. Though he was “alert to legal implications”, this was not something that had raised alarm bells for him.
On the reaction of the Pacific, Jones said New Zealand was balancing transitioning away from fossil fuels with New Zealand’s economic interests.
“I know it sounds somewhat awkward when you consider the challenges facing the atoll nations of the Pacific, but we cannot have a situation of deindustrialisation, we cannot have a situation of manufacturers decamping from New Zealand because we haven’t developed a sustainable transition package as we move from a historic, disproportionate reliance on fossil fuels to new sources of energy.”
Green Party co-leader and climate spokesperson Chlöe Swarbrick told Newsroom the advice was “utterly beyond belief”.
“We have a Government that is telling us that it doesn’t care about climate science, it doesn’t care about community voice, but now we also have it on the record that it doesn’t care about our international reputation, our potential trade implications or potential legal liability,” she said.
“Honestly, I just read this and it absolutely beggars belief. It shows that you can’t run a country on dogma and wishful thinking, yet it seems as though that’s what the Government is intent on doing here.”
Greenpeace’s Russel Norman said the Government was pursuing culture war issues without considering the impacts on New Zealanders.
“It will cause economic harm to New Zealand to go ahead with this. Think about kiwifruit and a whole bunch of agrifood producers who have gained tariff-free access to the European Union market, which is the single biggest market on the planet,” he said.
“The Government is going directly against New Zealand exporters’ interests by pursuing this path. They’re so committed to this culture war climate denialism that they’re willing to jeopardise the economic interests of New Zealand.”
Labour’s climate spokesperson Megan Woods, who as previous Energy and Resources Minister first implemented the exploration ban, was similarly critical.
“It shows what a ridiculous, backward-looking step ending the oil and gas exploration ban is. It’s not going to solve our energy crisis in the immediate term and it’s putting New Zealand’s prosperity at risk,” she said.
“New Zealand makes its way in the world as a trading country largely dependent on its reputation as a country with high environmental standards. The Government is showing the world that it’s absolutely throwing that on the bonfire.”
Woods also said the legislation was “the wishlist of the largely multinational oil and gas industry”, pointing to how the industry was consulted on the law before the public was allowed to see it and given significantly more time to submit than the five days (including a weekend) provided to everyone else. Public submissions on the bill close at 11:59pm on Tuesday.
In addition to consultation, she said the industry has got its way with the weakening of the decommissioning rules. Commercially sensitive information, which was meant to be redacted, shows the cost of decommissioning existing fields ranges from $2 million for small onshore fields to $1 billion for the largest offshore field.
In total, the four offshore fields have a decommissioning bill of $2b and the 21 onshore fields would cost nearly $500m to cap and clean up.
“This law is putting the interests of industry first and exposing New Zealand taxpayers to liabilities that our government had put protections in place to close off. We’ve already shelled out hundreds of millions of dollars to clean up after one international player pulled out. It is negligent behaviour,” Woods said.
Jones wouldn’t guarantee the changes wouldn’t lead to a repeat of the Tui oil field situation, but said New Zealand needed to strike a balance between protecting the Crown’s books from that risk and enticing new oil and gas developers to the country.