2 NOVEMBER 2012

LOCAL GOVERNMENT NEW ZEALAND SUBMISSION

In the matter of Crown Minerals (Permitting and Crown Land) Bill

To the Commerce Select Committee

Table of Contents

Introduction ...... 4 Comments...... 4 Part 1 - Amendments to the Crown Minerals Act 1991 ...... 5 Regulatory framework ...... 5 Pre Qualification and Review Process ...... 5 Royalties Regime ...... 5 Part 4 - Amendments to the Reserves Act 1977 ...... 7 Clause 16A – Technical Drafting Matters ...... 7 Conclusion ...... 8 Recommendations ...... 8 Part 1 Amendments to the Crown Minerals Act 1991 ...... 8 Part 4 Amendments to the Reserves Act 1977 ...... 8

LGNZ Submission to Commerce SC re Crown Minerals (Permitting and Crown Land) Bill 3 OF 8 LE 01-18 2 November 2012

Introduction 1. Local Government New Zealand (LGNZ) welcomes the opportunity to submit on the Crown Minerals (Permitting and Crown Land) Bill. 2. Local Government New Zealand wishes to be heard on this submission. 3. Local Government New Zealand is a member based organisation representing all 78 local authorities in New Zealand. LGNZ’s governance body is the National Council. The members of the National Council are: • Lawrence Yule, President, Mayor, Hastings District Council • John Forbes, Vice-President, Mayor, Opotiki District Council • John Bain, Zone 1, Deputy Chair, Northland Regional Council • Richard Northey, Zone 1, Councillor, Council • Meng Foon, Zone 2, Mayor, Gisborne District Council • Jono Naylor, Zone 3, Mayor, City Council • Adrienne Staples, Zone 4, Mayor, South Wairarapa District Council • , Zone 5, Mayor, Westland District Council • Tracy Hicks, Zone 6, Mayor, Gore District Council • Len Brown, Metro Sector, Mayor, Auckland Council • Dave Cull, Metro Sector, Mayor, Dunedin City Council • Stuart Crosby, Metro Sector, Mayor, Tauranga City Council • Brendan Duffy, Provincial Sector, Mayor, Horowhenua District Council • Stephen Woodhead, Regional Sector, Chair, Otago Regional Council • Fran Wilde, Regional Sector, Chair, Greater Regional Council. 4. This submission has been prepared under the direction of the National Council. Councils may choose to make individual submissions. The LGNZ submission does not derogate from these individual submissions. 5. The final submission was endorsed under delegated authority by Lawrence Yule, President, LGNZ.

Comments 6. We do not have many specific comments to make on the Bill but at the outset we wish to make the general point that we are supportive of the Government’s objective of enabling sustainable development. Councils play a key role in ensuring that environmental considerations are appropriately managed. There is an on-going need to ensure there is appropriate capacity within councils, as an important regulatory agency, to undertake this role. 7. Local Government New Zealand submitted earlier this year on the discussion document in the matter of the review of the Crown Minerals Act 1991 Regime. The matters we specifically commented on were: • the regulatory framework • pre qualification • royalties regime.

LGNZ Submission to Commerce SC re Crown Minerals (Permitting and Crown Land) Bill 4 OF 8 LE 01-18 2 November 2012

8. We have also identified a number of technical amendments in Part 4 of the Bill that need attention.

Part 1 - Amendments to the Crown Minerals Act 1991

Regulatory framework 9. A key matter for local government, and for regional councils in particular as they perform their functions under the Resource Management Act (RMA), is the potential for overlapping regulatory frameworks within the health, safety and environmental maters (HSE regime). Councils have raised the potential for overlaps within the HSE regime and also the potential for gaps. We support the Government’s policy of avoiding regulatory duplication. 10. We note that when processing an application for resource consent for an oil and gas activity, environmental issues can sometimes result in more stringent requirements than the Health and Safety in Employment (Petroleum and Extraction) Regulations 1999. While the Crown Minerals Act principally leaves consideration of environmental matters to local authorities under the RMA, some of the requirements do have flow-on environmental impacts in practice. It would be more efficient if consideration could be given as to how these issues could be dealt with holistically. 11. This is not necessarily achieved through the legislation but a regulators forum which covers the HSE areas for a given area can go some way to ensure the agencies are talking to each other and that matters do not fall through the gaps. Section 29B - Granting of permit not indicative of any matter relating to health, safety, and environmental legislation 12. It is assumed that this section should also apply to the granting of a Tier 2 permit for exploration. The clause should be amended accordingly. Section 99D - Auditing 13. Councils seek that they are advised of incidents or ‘near misses’ and of any actions that are taken by the consent holder. Reporting to an agency such as the Ministry of Business Innovation and Employment is suggested, with the ability of a council (regulatory agency) to request more information if required. 14. The reason for this is to ensure that councils have the best information available as to what occurs on site so there are assurances that the operation is environmentally safe. If a council has queries, these could be discussed.

Pre Qualification and Review Process 15. We support the idea of a ‘pre qualification’ process and see merit in ‘frontloading’ the process. We also support the concept of annual review meetings and see these as important mechanisms to improve coordination between regulatory bodies and their statutory functions. 16. We seek that appropriate cost recovery for local authorities is provided for in the provision of the Bill. This will ensure that councils are able to recover any additional expense arising from additional resourcing requirements associated with the ‘pre qualification’ process.

Royalties Regime 17. We signalled in our submission to the discussion document our interest in the proposed review of the royalties regime.

LGNZ Submission to Commerce SC re Crown Minerals (Permitting and Crown Land) Bill 5 OF 8 LE 01-18 2 November 2012

18. Wherever mining, oil and gas exploration or extraction occurs, there is a significant local infrastructure demand and also a demand for environmental management by the regional council. While rates can be levied on mining activity on private land, where the mining occurs on public land such as the conservation estate, it is not possible for the affected local authority to recoup any costs from the mining activity. 19. It is clearly an inequitable situation when rates cannot be struck by a council on a mining activity which creates the same demands on local infrastructure as a mining activity on private land. 20. It is interesting to consider the rating of mining land. While the mineral itself has value, the land from which it is extracted, and on which the rating valuation is based, tends not to be of significant capital value because of its condition. 21. At present the royalties are all consumed within the consolidated fund. The local government sector seeks consideration of an increase in the amount of royalties received and the opportunity to apply a set percentage of the royalties to local authorities. The portion to be paid to local authorities should cover two matters: • Infrastructure costs

A royalty payment should cover the provision of local infrastructure by the relevant local authority directly associated with the mining, oil and gas exploration or extraction. A royalty payment would allow monies to be returned to the communities directly impacted by a mining or petroleum activity. These councils fund the infrastructure which supports that activity. We seek that the territorial or unitary authority receives a portion of royalty payments - this local infrastructure in turn enables economic development.

Our preferred option regarding the payment of royalties to cover the costs of infrastructure is that royalties are paid directly to the affected council.

An alternative model we draw to your attention is the Australian ‘Royalties for the Region’ model. One hundred (100) per cent of the royalty goes to the State Government and 25 per cent of this is put into ‘Royalties for the Regions,’ from which portions are then put into special purpose funds. One of those funds is the ‘Country Local Government Fund’ which is essentially for regional development throughout Western Australia. The ‘Country Local Government Fund’ in turn funds the ‘Super Cities Fund’ which allows towns to apply for ‘transformational’ infrastructure grants, provided the town can demonstrate that it meets certain criteria.

A number of issues have already been put to Ministers by New Zealand West Coast South Island councils: a. That the very low New Zealand royalty rate for coal and gold should be increased. b. That this increase is applied to all existing coal and gold mining permits, thereby revoking existing permit arrangements. c. That 33.3 per cent of the new royalties be reserved for local government infrastructure funds, with the money collected from each regional council being held in separate funds for each region. d. That each regional fund be administered by the Ministry for Business, Innovation and Employment, with individual Territorial Authorities in each region applying to the Ministry for infrastructure grants, and the Regional Council applying for a management grant. e. That grant criteria be developed using the Western Australian ‘Super Cities’ template modified to suit NZ circumstances.

LGNZ Submission to Commerce SC re Crown Minerals (Permitting and Crown Land) Bill 6 OF 8 LE 01-18 2 November 2012

We seek that different models are explored for revenue sharing with local authorities and that this is done in conjunction with councils.

• Environmental management

Second, a share of the royalties should be transferred to the regional council in whose jurisdiction a permit is granted for the environmental management function undertaken by the regional council in respect of the minerals permit granted and should reflect the actual cost to the regional council.

With respect to the regional council role in environmental management, not all costs associated with this are recoverable. For example, in the case of mining, there are four main areas where costs are incurred by a regional council: consenting, compliance, state of the environment (SOE) monitoring and plan making. In general, costs are recoverable for consenting and compliance but tend not to be 100 percent cost recoverable. None of the costs associated with SOE monitoring or plan making are recoverable. In regions where there is significant mining, the costs associated with SOE monitoring can be substantial. This tends to be of waterways draining mined catchments. 22. We seek that officials work with LGNZ on the matter of royalties to look at options for a share of royalty payments to be made to territorial authorities and regional councils in whose region or district a permit is issued for mining, oil and gas exploration or extraction. 23. We seek that royalties are set by regulation, and that local authorities are granted a share of royalties.

Part 4 - Amendments to the Reserves Act 1977

Clause 16A – Technical Drafting Matters 24. We have identified a number of technical drafting inconsistencies in the course of reviewing clause 76, which are outlined below. We request that the Select Committee take the opportunity to rectify these issues which, left as is, could be problematic and create inefficiencies for local authorities:

• Section 16A(2): this clause specifies the types of reserve that can still be classified by the Minister for the Environment. However, it does not refer to Government purpose reserve (clause 22) or local purpose reserve (clause 23). We assume this is an inadvertent omission and that the intention is for local purpose reserve to be treated in the same manner as recreation, historic and scenic reserve and to continue being classified by the Minister for the Environment.

• Section 16(2) of the Reserves Act clarifies that land declared to be reserve by a resolution of a local authority under section 14 is deemed to be classified for the purpose in the resolution. However, this provision does not form part of new clause 16A. Therefore, it appears that once a council has declared land to be a reserve under section 14, an additional step will be needed in order to classify that land. There does not seem to be a logical reason for this if the land is recreation, historic, scenic or local purpose. In our view, the Bill could have provided that any land that an administering body declares to be a reserve for recreation, historic, scenic or local purposes is deemed to be classified. Such a provision would limit the need for an additional process. We submit that the current deeming provision in section 16(2) should be carried over into section 16A for these types of reserves.

LGNZ Submission to Commerce SC re Crown Minerals (Permitting and Crown Land) Bill 7 OF 8 LE 01-18 2 November 2012

• The current subsections (2A), (2B), (2H), and (3) to (11) of section 16 are retained by section 16A. However, it does not make sense to retain section 16(2H), as it refers to subsections (2E), (2F) and (2G) which are not carried over.

• Similarly, section 16(5)(d) relating to public notices should not be retained, as it refers to subsections (2C) and (2D) which will not apply in section 16A.

Conclusion 25. Local Government New Zealand is generally supportive of the changes proposed but seeks a change to the royalties framework for Crown minerals to provide for revenue sharing with councils in whose jurisdiction a permit is issued for mineral and oil and gas extraction. 26. Local Government New Zealand thanks the Commerce Select Committee for the opportunity to submit on the Crown Minerals (Permitting and Crown Land) Bill. Recommendations

Part 1 Amendments to the Crown Minerals Act 1991 • Clarify Section 29B and amend as required. • Amend Section 99D to require ‘near misses’ to be reported and this information passed to the relevant local authorities. • Provide a mechanism in the Bill to allow cost-recovery for councils for time associated with the ‘pre-qualification’ process and review meetings. • Set royalties by regulation and grant local government a share of royalties. • Officials work with LGNZ to look at options for a share of royalty payments to be made to local authorities in whose region or district a permit is issued for mineral and oil and gas extraction.

Part 4 Amendments to the Reserves Act 1977 • Amend Sections 16A and 16(2) as described above.

LGNZ Submission to Commerce SC re Crown Minerals (Permitting and Crown Land) Bill 8 OF 8 LE 01-18 2 November 2012

Submission by Local Government New Zealand

Submission by Local Government New Zealand

IN THE MATTER OF: Crown Minerals (Permitting and Crown Land) Bill To the Commerce Select Committee 2 November 2012