Government dawdles on upping oil industry's pollution charges

Wednesday 19th October 2011

The oil industry has been pressing the government for the last five years to change the way it charges for oil pollution clean-ups, says John Pfahlert, the executive director for the peak body for the local industry, the Petroleum Exploration and Production Association of New Zealand.

“The proposed methodology would have seen our share go from $10,000 or so per offshore facility to over $200,000,” he told BusinessDesk. “Industry supported that approach”, largely because it accepted that floating production, storage and offloading units (FPSO’s) “posed a greater risk to the environment.”

A review of oil spill preparedness by Australian consultants Thompson Clarke in February this year identified west coast oil industry activity as the greatest threat to the New Zealand environment in the event of an oil spill, with the only major oil spill risk on the east coast at the Marsden Point oil refinery, at the head of the Whangarei Harbour.

Pfahlert, who is also a member of Maritime New Zealand’s Oil Pollution Advisory Committee, says the formula would also have seen 30 percent increases in total oil and shipping industry funding for oil spill pollution readiness, with another 30 percent rise in three years’ time.

That would have taken the current emergency response funding of around $4 million annually to around $6 million.

Instead, the issue had become bogged down as officials debated what to include in a public discussion document that would precede any change to the way levies are set for the fund, which is intended only to fund “first responses” to an oil spill crisis.

“Indeed, I wrote to Minister Joyce in the middle of last year trying to get some action on the levy review because it was taking so slow.”

A consultation process had been undertaken last year.

He had now been told the review was on hold, following the grounding of the container ship Rena off Tauranga, and subsequent oil pollution from the ship.

Like Transport Minister Steven Joyce and Labour Transport Ministers before him, Pfahlert was unaware New Zealand could have but had not signed a vital protocol to an international convention on oil clean-up cost-sharing that would have doubled the amount New Zealand could demand from ships that caused oil pollution.

New Zealand signed the convention in 2006, but it is not specifically mentioned in briefings to incoming Ministers of Transport in the last two years.

Last year’s oil pollution review coincided with the Gulf of Mexico oil spill, which led to urgent inquiries by the Ministry for Economic Development and Department of Labour to assess New Zealand’s health and safety practice on offshore oil rigs.

However, the same urgency does not seem to have applied to the five yearly review of the oil pollution readiness strategy, which happened to coincide with the Deepwater Horizon oil rig explosion that killed 11 oil workers and spewed 627,000 tonnes of light crude oil into the Gulf of Mexico.

Approximately 1,700 tonnes of heavy bunker fuel was on board the Rena when it struck the unmarked but well-known Astrolabe Reef on Wednesday, Oct. 5 at around 2.20am.

Pfahlert said the total revenue collected by the oil pollution levy fund had been cut back about a decade ago, when it had built up to a multi-million dollar cash pot, because there were so few oil spills to deal with in New Zealand.

It was not well understood that no country in the world planned to be fully equipped for worst case scenarios, he said.

“There’s nowhere in the world where you would have had a substantially different response (to the Rena) in my view,” he said. “That’s just the way it is.

”It’s always been understood the government would write the cheque for the clean-up and seek payment from the owners,” he said.

BusinessDesk.co.nz

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