West Coast Minerals Forum

Thanks for the invitation to talk to you today. It’s my first time at this Forum as you know, so it’s nice to be here, getting a little of that special Coast flavour into my day! 

Before I talk about the minerals sector I’d like to just quickly cover the background to the economic work we’re doing.

The Government has set ambitious economic goals for New Zealand that require a significant improvement in our economic performance.

We have put together a business growth plan that will grow more and bigger businesses and provide the standard of living New Zealanders aspire to.  It focuses on six key areas:

• capital markets
• innovation and ideas
• skilled and safe workplaces
• infrastructure (including electricity, broadband, and transport)
• export markets
• natural resources.

This Government has also been active in promoting a better, more streamlined and less fragmented environment for business.  The newly-established Ministry of Business, Innovation and Employment – MBIE – is a significant step towards improving the interface between government and business. 

MBIE brings together a significant part of the public sector to shape and deliver a stronger economy. This means:

• clear, co-ordinated and focused policy leadership - for example, aligning economic policy, innovation policy and skills and labour market policy to support higher business performance and growth
• more integrated advice, services and regulation for business
• that it’s easier to do business and seek advice from government
• Government services are organised to meet business needs – including improved co-ordination and reduced duplication.

David Binnie as Group Manager of New Zealand Petroleum and Minerals will speak to this in more detail later this morning.

Developing our energy resources

New Zealand is a fortunate country in its abundance and diversity of energy resources – we’ve got minerals, oil and gas, wind, hydro and geothermal in various stages of development. It’s a long and exciting list.

We’re taking some big steps in developing these resources in this term.

Done right, such development can make a real difference by creating jobs and raising household incomes.

As part of our agenda for economic growth, we produced a revised energy strategy in August 2011. The strategy looks out to 2021, and sets the strategic direction for the energy and resources sector and the role energy will play in the economy.

The minerals contribution

The mining sector is the backbone of the West Coast economy. BERL reported recently that mining and quarrying activities on the West Coast employ 1,940 people and generate $377 million in regional GDP.

The Government believes that there is significant potential for New Zealand to grow the economic contribution made by minerals.  We are determined that this growth happens in a way that is well managed and consistent with the wider values we hold as a nation. 

Crown Minerals Act

Right now we are conducting a review in order to improve the legislation governing oil, gas and mineral permitting. This review of the regulatory regime for Crown minerals is a key part of our work to ensure that we have legislation that allows these important industries to grow while responsibly managing health, safety and environmental matters.

This review aims to encourage development of Crown-owned minerals so they contribute to economic development; streamline the current regime and make it better able to deal with future developments; and ensure better coordination between regulatory agencies on health, safety and environmental matters. 

A discussion document was released on 7 March, and submissions closed 20 April.

The main proposals in the discussion document included:

• developing a front-end process to ensure companies’ health, safety and environmental capabilities are well known as they enter the permitting process
• ensuring regulatory effects are proactive, co-ordinated and focus on operations that have the highest technical and geological complexity, and that generate the bulk of royalty income – called Tier 1
• developing a pragmatic, streamlined management regime for low-risk activities associated with minerals like industrial rocks and alluvial gold – Tier 2
• improving dialogue between regulatory agencies, iwi and other important stakeholders. 

By developing a management regime which better recognises and accommodates the varying risk and value profiles of different exploration and production activities, we will be able to better manage risk and create greater value from the Crown petroleum and mineral estate. 

So we’re proposing to distinguish between the relatively small number of complex, higher-risk Tier 1 activities and the larger number of lower-risk industrial, small business and hobby mineral or Tier 2 operations.

Tier 1 activities will be subject to a more hands-on, co-ordinated management and regulatory regime.  They include petroleum (oil and gas), hard rock gold and silver, coal and ironsands, and emerging phosphate and sulphide minerals operations.

Tier 2 activities, which will include small to medium-sized alluvial gold operations, do not generally present the same degree of risk or regulatory complexity and may therefore be subject to a simpler and more streamlined management regime. The net effect for many of you smaller producers here today will be a reduced compliance burden.

However, Tier 2 operations will still be subject to the provisions of the Health and Safety in Employment Act 1992, the Resource Management Act 1991, and other relevant legislation. 

Tier 2 also includes aggregate, industrial rocks and building stones, peat, perlite, pumice, silica and zeolite. 

The discussion document also proposed an annual progress review with Tier 1 permit holders as the basis of ongoing permit management and oversight.

The preliminary assessment of health, safety and environment considerations, and the annual progress review, would enable more meaningful engagement between officials, other regulators, and permit holders, and allow for co-ordinated ongoing regulation throughout exploration and production activities.

Royalty rates

A review of royalty rates for some minerals is under way.  This review is focused on ironsands, coal, gold and silver, and phosphates, in the first instance. 

We need to review royalty rates because there is a lack of transparency in the rate that applies to ironsands and phosphates. At the moment these royalty rates may be decided at the discretion of the Minister.  Also, the commodity prices for gold, silver and coal have increased by an order of magnitude since 2008 (the last time the royalty rates for minerals were reviewed).

The review of royalty rates is considering:

• whether the Crown is receiving a fair financial return from the development of its mineral estate
• whether the royalty rate is internationally competitive, particularly when compared with Australia.

We received valuable feedback in the submissions on these proposals, and that feedback has been taken into account by my officials. I expect to be taking final recommendations for changes to legislation arising from this consultation process to my Cabinet colleagues very shortly.

The next step will then be preparation and development of a bill, which we expect to introduce into Parliament this year. 

In addition to this, we are working on preparing new Crown Minerals petroleum and minerals programmes and regulations. Your input into draft programmes will be sought later in the year.

The aim is clear – we want to ensure that New Zealand has robust and best practice legislation in place that ensures safe and responsible development every step of the way.

It is my hope that by setting a high regulatory standard, that New Zealanders can draw increasing confidence in the high standards of operation that can and are being delivered by the mining industry in New Zealand.