A paper I presented at the Oil & Gas Symposium, Hastings District Council, 11 October 2013.
A paper I presented at the Oil & Gas Symposium, Hastings District Council, 11 October 2013.
When it comes to mining, Australia has many lessons for us. A 2009 report from the Queensland Government and Centre for Social Responsibility in Mining (CSRM) at University of Queensland showed that housing affordability often declines for people in mining towns who aren’t working in the industry.
Stats from the Real Estate Institute of Queensland (REIQ) show a close correlation between Queensland resources and property booms — median house prices in one suburb soared 65 percent in a year. Great if you’re a property investor, but if you just want an affordable home for your family you might be out of luck.
CSRM studies have documented the “two-speed economy” that follows mining “boom towns”, where people who aren’t working in the industry get a sharp shock when they realise that normal life is suddenly a lot more expensive.
A US Department of Agriculture study published last year found that in three states experiencing petroleum booms, a large increase in production caused only modest increases in local jobs and median household income and employment rose 1.5 percent on pre-boom levels.
There is a range of other peer-reviewed empirical studies on the subject (a few listed below), and I’m happy to look at evidence to the contrary.
So while some incomes will rise during an oil boom, the cost of living for everyone is likely to increase as well — meaning those on a fixed income are in fact worse off. We know that most of the high-paying jobs that go with the territory go to specialists who are brought in.
While this may not on its own be reason enough to say “no” to oil and gas exploration here, it’s important to understand the real opportunities and risks before rolling out the red carpet.
And communities aren’t the only ones thinking hard about the pros and cons. Two months ago Rabobank Group said it would no longer provide finance to anyone involved in extracting unconventional fossil fuels such as oil shales through fracking (see their Oil & Gas policy).
One of the world’s largest lenders, Rabobank is worried about the impact oil and gas production is having on people, productive agricultural land, wildlife and the climate — as well as the release of greenhouse gases and their warming of the planet.
As we are seeing in Taranaki now, there is increasing conflict in the communities affected by the expansion of oil and gas there and a perceived risk to the rural sector from residents near new developments.
A letter to Tiniroto resident John Brodie from the FMG Service Centre says:
“Our Underwriters have confirmed we exclude cover of Fracking and anything related to this activity. Fracking is outside of FMG’s preferred risk profile and is not something we would be willing to cover as we do not insure any risks relating to the mining industry.”
I agree that Gisborne refusing to welcome fossil fuels production here won’t make a serious dent in global greenhouse gas emissions. But global agreements don’t happen out of thin air — they tend to come from grassroots movements that influence local government, national legislation and eventually international diplomacy.
The people of Gisborne taking a stand would help the industry and government to think twice and take notice. But that’s a decision for our community to make, and soon. Last year 2000 locals asked for public notification of any mining resource consent yet Gisborne District Council has chosen not to do so. I think now more than ever we need a forum for the community, our government, iwi and industry to sit down and talk about what the pros and cons really mean for Tairawhiti.
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Weber, J. G. (2012). The effects of a natural gas boom on employment and income in Colorado, Texas, and Wyoming. Energy Economics, 34(5), 1580-1588. doi: http://dx.doi.org/10.1016/j.eneco.2011.11.013
Jacquet, J. 2009. Energy Boomtowns & Natural Gas: Implications for Marcellus Shale Local Governments & Rural Communities, NERCD Rural Development Paper No. 43, January 2009, 63 pp., University Park, Pennsylvania: The Northeast Regional Centre for Rural Development, The Pennsylvania State University. http://www.sciencedirect.com/science/article/pii/S0301421512006702
Always a voice for sensible decision-making, Brian Wilson’s Opinion Piece on local petroleum exploration was no exception. Brian succinctly outlined some of the fundamental challenges we have as a community if the oil industry gets established in Gisborne and questioned any benefits the industry might bring.
The greatest challenge of course is a moral one: why would we welcome an industry that is, probably more than any other, responsible for causing catastrophic changes in our climate? What are we going to tell our grandchildren when they ask why didn’t we make the transition to renewable energy faster?
And yes, anyone suggesting we need to change and still using fossil fuels is compromised, but that’s a bit like saying Gandhi and Mandela should not have spoken English during their struggle against colonisation.
The transition to renewables will take time – it took petroleum a few decades in the early 20th Century to supersede coal as the primary fuel – but the longer we allow cheap access to fossil fuels, the longer the transition takes.
Humans have already discovered five times more oil and gas than we can consume without pushing planetary warming above the critical two degrees increase. We don’t need to find any more.
I was at a meeting with a representative from Z Energy recently where they talked about the concept of ‘permitted oil’ as opposed to ‘peak oil’. Last month Z Energy partnered with Norske Skog and others to invest over $13 million in a biomass development project in the Bay of Plenty using woodchips and sawdust to create biofuels. That kind of money is not just green-washing, they are serious about using our existing resources to reduce New Zealand’s $6 billlion/year addiction to fossil fuels and our community should be talking to them.
Scion, the forestry research institute has estimated that eight biomass plants around the country could replace ten percent of our crude oil requirements using just the current waste from the wood industry.
A recent Auckland University and Vivid Economics report commissioned a group New Zealand’s most influential business leaders, suggested that green growth may not out perform the dirty alternatives if the goal is short-term profit but a different way of measuring growth and wealth may be required.
“The benefits of green growth policies do not always show up rapidly as higher growth, and higher short-run growth should not be a necessary criterion for a good green growth policy. This is because conventional measures of growth do not measure the state of the economy’s stocks of wealth, and many valuable environmental outcomes are not traded in markets, so improvements do not appear as growth. A green account addresses these deficiencies.”
Renewable energy industries do however have a much higher job creation result for the same investment in fossil fuels, and Tairawhiti is well placed to take advantage of any shifts in the allocation of resources around the national economy during the transition period.
Gisborne District Council has committed to reviewing our policies and plans as they apply to petroleum exploration and production. As a result of public concern, our Council reportedly has the most robust process for assessing resource consent applications from this industry.
As a community we are still waiting to have a well-informed, rationale discussion on the issues and while central government has indicated a willingness to resource this, they are still rolling out more exploration permits and changing laws to reduce opportunities for public input in the decision-making process.
The local body elections will not provide the best opportunity to have this discussion but candidates should all be able to clarify their understanding of the issues.
A decision by Gisborne District Council to give the green light to Canadian company TAG Oil for an exploratory well to be drilled west of Gisborne city has been condemned by an RMA Commissioner.
Manu Caddie, who is also a Gisborne District Councillor, says he is supporting an application for a judicial review of the decision based on the public interest test, cumulative effects and the way potential cultural impacts have been handled in the assessment phase.
“Two thousand local residents signed a petition last year requesting any application to drill in the district be publicly notified. All they want is a chance to look into the application and make submissions if they have concerns.”
The Council’s Regional Policy Statement and Combined Regional and District Plan are largely silent on drilling activities and the Council has agreed to review the plan once the Parliamentary Commissioner for the Environment issues her report on fracking later this year.
“The PCE in her interim report on fracking raised a number of real concerns about drilling on the East Coast and the lack of regulation in the petroleum industry as a whole” said Mr Caddie. “Until those concerns are addressed the public should have the right to examine applications and comment on them.”
“An industry representative said just last week that they have nothing to hide, so why are they afraid to give our community the opportunity to be part of the decision-making process.”
Mr Caddie said he understood the company had threatened to leave the district if the application was publicly notified and comments from vested interests meant staff felt pressure to let the application go through non-notified. “I’m sure everyone will deny that is the case, but this is what staff have told me.”
Mr Caddie said it was a sad day for the district and democracy. “The petition of 2,000 citizens must be the largest set of submissions Council has received on a single issue and it is bitterly disappointing that a simple request to have the opportunity to make comments at a public hearing – for or against the proposal – has been seen as less important than the desire of the company to rush into drilling.
Mr Caddie said he believed Council had good grounds to notify the application – while the risk of significant immediate pollution may be limited to a well explosion like the one that happened in the United States last month or limited contamination of land and streams, the cumulative effects of the activity should be taken into account at each stage and the RMA allows for public notification when the risk may be small but the potential effects significant if something goes wrong.
“There is scant information in the application on the process for rehabilitating the site while industry publications suggest at least half of all wells corrode within 30 years allowing fugitive emissions of gas and oil, long after they have ceased production. The area is around known fault lines and aquifers, who knows what impact drilling into those could have.”
The documentation provided with the Council decision suggests one or two individuals within local iwi had signed off on behalf of the tribe with no evidence of hui-a-iwi to provide a mandate or majority of iwi members’ endorsement.
“Iwi and hapū have a right under Te Tiriti o Waitangi, New Zealand law and international agreements to make free, prior and informed decisions on activities that impact on their traditional lands, waterways and air space. From the information supplied I can’t see evidence of that happening in this situation and a number of iwi members have expressed extreme frustration with the process used by the company to consult with iwi.“
Mr Caddie said central government should provide much more support and resources to iwi and hapū that are faced with extractive industries moving into their area.
“Around the world we have seen indigenous peoples welcome industries that make grand promises then leave after ruining the environment local peoples have depended on for generations. It is a familiar story we are seeing played out in our own backyard.”
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Gisborne District Council: Decision Documents
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CONTACT: Manu Caddie – Tel. 0274202957 / Email: email@example.com
A Gisborne District Councillor says the government is picking winners and industries other than oil and gas would grow the regional economy if similar public funds were committed to other parts of the economy.
Manu Caddie would prefer to see government support for developing industries on the East Coast such as renewable biofuels and biochemicals, internet-based small businesses, high tech food production with the associated intellectual property and what he terms ‘lifestyle relocators’.
“We could wait for a new mill to be built and employ a few hundred on minimum wage or we could get on with attracting a hundred innovative, high earning business owners that want to live in places that are vibrant and well connected but out of the rat race of the sprawling metropolitan areas. Compared to the larger centres we have very cheap commercial and residential property prices, a compact city, relaxed lifestyles and relatively unspoiled environment.”
Mr Caddie says the Government has a fundamentally flawed policy of prioritising petroleum development without any plan to reduce greenhouse gas emissions let alone transition the country away from fossil fuels.
“There may well be some short-term economic gain for some members of the community if a significant amount of hydrocarbons can be extracted, but the evidence from overseas is that in mining boomtowns the economic benefits accrue to a certain part of the population while others are worse off and inequalities increase.”
“The region has not had a properly informed debate on the costs and benefits of mining here. There has been no independent analysis and advice on our situation and what the alternatives could be that would deliver more sustainable employment and environmental benefits. If the Government wants to pick winners then at least make it evidence-based instead of ideological. Environmentally sustainable mining is an oxymoron and given the scientific evidence on the impacts of fossil fuel consumption, the issue really is a moral question more than anything else.”
Mr Caddie says he agrees with Steven Joyce and Meng Foon that education needs even more attention.
“This is as much about families and students getting the support they need and taking responsibility as it is about the quality of teaching and approaches to formal learning. More sophiscated understanding of and flexibility around the relationships between schooling, family dynamics, employment and lifestyle choices is critical.”
“Only one in four Gisborne school leavers have NCEA Level 3 or above, nearly ten percent lower than the national average. Between half and three quarters of young people say they do not plan to continue with any form tertiary training after leaving school. A higher proportion of Gisborne young people work in agriculture, fishing, forestry and manufacturing than the national average.”
Gisborne has about 150 young offenders under 17 years. Based on 2001 estimates from PriceWaterhouseCoopers, each year offences committed by young people in Gisborne cost around $2.5 million in Police, court and sentencing costs.
“There is a significant underclass emerging that are extremely disconnected from mainstream society, community leaders, public institutions, employers and community organisations need to get a whole lot smarter about how we think about this part of the population and just focusing on economic development will not be sufficient.”
An overdue government report on the “benefits, impacts and risks” of petroleum development across the East Coast is a sloppy marketing campaign for the industry paid for by taxes and council rates, according to some councillors from Gisborne and the Hawkes Bay.
Gisborne District Councillor Manu Caddie said the $130,000 report released today was originally due in November and the lack of a good news story must be embarrassing for the Government. “The study is riddled with errors, clearly biased and provides less than half of the information promised in the Terms of Reference” said Mr Caddie.
The East Coast Oil and Gas Development Study was funded by the Ministry of Business, Innovation & Employment with support from local authorities on the East Coast from Tararua to Gisborne.
“The study makes some optimistic claims about benefits but glosses over the risks and has almost no worthwhile analysis of the economic impacts let alone social and cultural impacts of this industry should it come to dominate the region” said Mr Caddie.
“One of the few redeeming features of the report is that, based on geological analysis and economic modelling, it suggests commercial petroleum development in the region is highly unlikely” said Mr Caddie. “The study provides a good case for the government to support industries that will produce more sustainable, long-term employment with much lower risk to the environment and existing primary industries.”
One of the bitter ironies of the report is that it relies on production scenarios supplied by Apache Corporation, a company that has since pulled out of exploration in the region. While the report tries to reassure the public and decision makers that well integrity is not a risk, just last week Apache Corporation had a blowout at an exploratory well being drilled only 330m below the surface near New Orleans.
Similarly the study suggests a subsurface safety valve eliminates the risk of hydrocarbon or chemical leaks should a well be compromised, yet according to the US Minerals Management Service such valves have a ‘high failure rate’.
Hawkes Bay Regional Councillor Liz Remmerswaal said the study is inconsistent and selectively quotes from the Parliamentary Commissioner for the Environment’s interim report on fracking.
“The PCE report identified seven key concerns about any petroleum exploration or production on the East Coast and while the MoBIE study says it will not make recommendations it then suggests the questions raised by the PCE do not need to be addressed before exploration starts” said Ms Remmerswaal.
The PCE report also provides evidence on how reinjection processes used in fracking operations overseas have caused significant earthquakes. The MoBIE report is not only silent on these concerns, it recommends the reinjection of waste products from the drilling process.
Both councillors believe the government and councils should commit similar funds to a study on sustainable energy opportunities for the region.
Last month a government-funded trade delegation visited DLR, one of the world’s leading energy market analysts, the same organisation that was recently commissioned by Greenpeace to produce a plan for 100 percent renewable energy use by 2050 for New Zealand.
The Greenpeace report reveals that 250 companies in New Zealand are already researching and commercialising clean technology with Investment NZ suggesting at least 60 of these are world-class enterprises. These companies have potential revenues of $7.5-22billion, significantly higher than the total revenue for even the most optimistic East Coast petroleum development scenarios. The Greenpeace report also provides evidence that clean energy jobs are more secure, safer, often pay better and are created at 3-4 times the number of fossil fuel jobs for the same investment.
“The MoBIE study has some generous claims about how many local people will be employed but why they assume at least half will be local residents is unclear, especially as Apache Corporation representatives speaking at public presentations very clearly refused to promise any direct local employment in the industry” said Mr Caddie.
The report identifies known aquifers in the region and discusses their protection and exclusion from exploration zones though some confusion exists about how the Napier MP and Minister for Local Government Chris Tremain claimed credit for excluding aquifer areas in Hawkes Bay but no where else in country.
“The Minister acknowledges the significant risk to aquifers during drilling and production phases but has only focused on protecting his home patch” said Mr Caddie. The study suggests excluded areas should be identified through changes to regional and district plans.
“It’s a bit fresh that this study is launched the same week as Hawkes Bay Regional Council is asking for a drought to be declared and the study says fracking requires ‘large volumes of water’” said Ms Remmerswaal. “But other than implying a massive new dam will solve the problem, little assessment is made of the existing competition for scarce water resources let alone the impacts of a new industry requiring large volumes to be used and contaminated in the process.”
The councillors are also concerned that the report relies heavily on the few examples of fracking in Taranaki which has very different geology and the regulatory history of the Taranaki Regional Council which the PCE report revealed had been operating outside the law in relation to fracking according to their own lawyers assessment.
Apache Corporation announced the withdrawal from a joint venture on the East Coast in January leaving Canadian company TAG Oil with responsibility for an exploration operation in a complex area both in terms of the geological and cultural landscape. Marauder Resources which holds other permits for exploration in Hawkes Bay received a warning from auditor KPMG last year that the company may not be able to ‘continue as a going concern’.
Liz Remmerswaal 027 333 1066 (will be outside HBRC from 11am-12pm)
Manu Caddie 0274 202 957
Download the MoBIE study and government comments here:
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