Photo Source: Dexter Fernandes
Energy Resources Aotearoa (ERA) is calling on the New Zealand government to underwrite the risks of fossil fuel exploration, a proposal that is stirring up controversy. As the oil and gas sector seeks taxpayer-backed incentives, the push is fueling concerns over the country’s climate commitments.
Industry Seeks Risk-Sharing Measures
In a letter to Energy Minister Simeon Brown on 8 July, ERA requested government support for managing exploration risks, including mechanisms such as underwriting, hedging, or guarantees. “The taxpayer should take on part (or all) of the risk if natural gas should not be produced,” ERA stated in its appeal, obtained through the Official Information Act.
The industry claims its challenges stem from Labour’s now-reversed 2018 offshore exploration ban. The letter argued that government intervention would “fairly and most efficiently” address risks created by the policy and revive investment in gas supplies.
Mixed Signals from Government
The government’s response has been varied. Resources Minister Shane Jones acknowledged that options were under consideration but clarified, “No decisions have been made either way.” However, Minister Brown emphasised the government’s stance against energy subsidies, stating that the coalition remains “fuel agnostic” in its approach.
This stance aligns with commitments made at the recent COP29 climate summit, where New Zealand pledged to phase out fossil fuel subsidies. Climate Change Minister Simon Watts called the move an important step, saying it “fits well with New Zealand’s leadership” in advocating for fossil fuel subsidy reform globally.
Strong Opposition from Critics
Critics have sharply condemned the proposal. Green Party co-leader Chlöe Swarbrick dismissed the idea as “deranged,” arguing that government underwriting would prolong dependence on fossil fuels. “Why would our democracy be underwriting an industry that has no future?” she asked, highlighting the contradiction with climate goals.
Swarbrick pointed to the industry’s track record, noting that gas production peaked in 2014, four years before the exploration ban, and that significant discoveries have been elusive.
The Parliamentary Commissioner for the Environment also issued a warning, with Commissioner Simon Upton cautioning against “implicit or explicit subsidies” for fossil fuel exploration.
“It is not appropriate for any government, present or future, to offer subsidies to underwrite the cost of exploration,” the Commissioner’s office stated, referencing the risks of burdening taxpayers with cleanup costs from environmental damage.
Historical Precedents and Broader Implications
ERA argued that underwriting exploration risks is “not without precedent,” citing the Helen Clark-led government’s 2004 decision to compensate Genesis Energy for failed offshore gas developments. Critics at the time, including then-National Party leader John Key, called the move an inappropriate market intervention with limited long-term benefit.
Environmental watchdogs cautioned against repeating history, noting that gas production peaked shortly after the 2004 deal, while energy challenges persisted. “Kicking the can down the road is not a solution,” Swarbrick emphasised, urging a focus on renewable energy.
Future Energy Policy at a Crossroads
New Zealand’s energy future now hinges on whether the government prioritises immediate economic concerns or long-term sustainability.
Tensions between advocating fossil fuel exploration and meeting climate targets remain unresolved, with the final emissions reduction plan for 2026-2030 set to be revealed,