Local Govt | National News Video | Parliament Headlines | Politics Headlines | Search

 


Why Gisborne would need a ‘local share’ of royalties

27 August 2014

Royalties – Why Gisborne would need a ‘local share’ of royalty payments

Every year the Government receives hundreds of millions of dollars in royalty payments for oil, gas, coal and mineral extraction in New Zealand.

If exploration company TAG Oil realises the billions of barrels of oil it hopes to locate in the East Coast basin, then those figures could include a massive contribution from Gisborne. However, currently, none of those royalties would be flowing directly back into the region.

Local Government New Zealand (LGNZ) and Gisborne Mayor Meng Foon argue that shouldn’t be the case. These payments are, in part, made possible by the regions which provide much of the infrastructure and housing needed to support these industries. Local government in these regions develops roads and provides services and amenities that enable extraction, yet these regions don’t currently receive any direct benefit from these royalties.

LGNZ has argued strongly for the development of a ‘local share’ programme. It’s an argument supported by the success of overseas ‘local share’ initiatives, such as the Royalties for Regions programme which has operated in Western Australia since 2008.

Oil is New Zealand’s fourth largest export and our oil, gas and minerals industries contribute about $4 billion to New Zealand’s GDP annually. In the five years to 2012 $89.5 million was paid to the Crown in royalties and energy resource levies (ERL) from mineral production. Over the same period, petroleum production contributed a further $1.8 billion in royalties and ERL.

Oil and gas from Taranaki made up the largest amount of royalty payments in 2013 with more than $381 million in oil and gas royalties and a further $26,000 in mineral royalties, followed by coal and minerals from the West Coast and Waikato. However, royalties are also paid out for Auckland, Bay of Plenty, Canterbury, Northland and Tasman regions.

These payments are made to the Crown directly. Any return to the regions from where returns are generated happens as a corollary to the distribution of Crown funds generally, across New Zealand. Importantly, that type of distribution does not take into account the significant infrastructure burden shouldered by specific regions.

Community infrastructure, such as roads, wastewater and water treatment can be put under great strain during an extraction boom. Local authorities also face environmental management costs.

Gisborne could face massive bills to upgrade its roads if oil and gas exploration proves successful in the region.

Mayor Foon has pointed out that, for the mining industry to be successful, Gisborne’s roads and bridges need to be updated and water tables improved. Who will pay for that? The amount Gisborne District Council currently draws from fuel and road taxes is not enough to maintain the roads for existing forestry industry traffic, let alone expanded mining operations.

A number of overseas jurisdictions, including Western Australia, recognise the importance of reinvesting royalties directly into the local communities where extraction is taking place. It is time for New Zealand to follow suit.

Royalty sharing would provide local authorities such as Gisborne with funding towards the additional infrastructure costs they face to support the presence of extraction industries.

Council leaders affected by this issue will be among those taking part in the ‘Royalty Payments – the case for a local share’ forum in Wellington on 4 September.

Lead speaker for the LGNZ-hosted event will be Kelvyn Eglinton Western Australian Regional Manager for Newmont Asia Pacific, one of Australia’s significant mining companies and the owner of Newmont Waihi Gold.

Mr Eglinton will outline how billions of dollars have been distributed to communities through Western Australia’s Royalties for Regions programme.

Western Australian extraction royalties make up a quarter of the state’s annual revenue – and 25 per cent of the forecast royalty payments are allocated to the programme each year. This equates to approximately five per cent of the overall state expenditure.

The Government of Western Australia’s goal is to build strong and vibrant regional communities that are desirable places to live. By 2015 it is estimated that there will be 2,500 Royalties for Regions funded projects across Western Australia.

It’s a pioneering programme which recognises the amount of growth and pressure on infrastructure created by extractive industries in a region. It recognises that investment back into a region by government improves the prospect of future external investment into new projects.

Royalties for Regions is administered by the Government’s Department of Regional Development. It includes three sub funds - the Regional Infrastructure and Headworks Fund, the Country Local Government Fund and the Regional Community Services Fund.

The Regional fund is for the large-scale, strategically-important, regional infrastructure projects.

The Country Local Government fund is about supporting local community and infrastructure requirements.

The Regional Community Services Fund is about enhancing quality of life for residents.

The key premise is that dollars are put back into the community to deal with the issues generated because of the mining boom. It funds regional and local priorities, put forward at a local level, supporting and enhancing projects which are already planned and funded locally. If a community is going to upgrade roads it can support it to upgrade more roads. If is planning a wastewater programme, it will support a bigger programme to benefit a wider area.

Royalties for Regions provides an excellent model to adapt and build upon for a similar scheme for New Zealand. It is vital for local authorities and communities affected by extractive industries. Regions like Taranaki and the West Coast have provided infrastructure support for extraction industries for years without any direct royalty benefits. Gisborne could be facing this scenario in the coming years. A scheme which returns a local share of royalties needs to be implemented as soon as possible to strengthen regional development for the benefit of these communities and the industries they support.

Malcolm Alexander is the Chief Executive of Local Government New Zealand

ENDS


© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Patience: Drive Safe

Be patient before passing is the AA's message for drivers this Labour weekend.

"People taking crazy risks to get past other vehicles is one of the most dangerous things on the road,” says AA spokesperson Dylan Thomsen.

“The weather is looking good for the long weekend so the roads will be busy. Unfortunately, that also increases the chances of people getting frustrated and trying a risky passing manoeuvre. When they get past, there will probably be more traffic up ahead anyway so it won’t get people there faster.” More>>

 
 

Parliament Today:

Employment Relations Bill: Govt Strains To Get Tea Break Law Through

The Government has been left with egg on its face - failing to get its much-vaunted, but hugely unpopular, meal break law passed in the first week of its new term, Labour spokesperson on Labour Issues Andrew Little says. More>>

ALSO:

Guns: Police Association Call To Arm Police Full Time

"The new minister gave his view, that Police do not need to be armed, while standing on the forecourt of parliament. The dark irony was that the interview followed immediately after breaking news of a gunman running amok in the Canadian parliament in Ottawa..." More>>

ALSO:

Gordon Campbell: On The Tokenism Of New Zealand's Role Against Islamic State

Our contribution against IS will be to send SAS forces to train the Iraqis? That’s like offering trainers to General Custer just as the 7th cavalry reached the Little Big Horn. More>>

ALSO:

Scoop Business: Shell And Todd Caught Drilling Without Approval

Multi-national oil company Shell’s New Zealand arm and local energy giant Todd Energy have breached the new law governing New Zealand’s Exclusive Economic Zone, the Environmental Protection Authority says in an Oct. 10 document released by the Green Party. More>>

ALSO:

Gordon Campbell: On Pharmac, Gough Whitlam And Sleater-Kinney

We’re not at the outset of these negotiations. The outset was six years ago, and negotiators were hoping to have some sort of ‘framework’ deal finished in time for the APEC meeting in a few weeks’ time. These ‘extreme’ positions are what we’ve reached near the intended end of the negotiations… More>>

ALSO:

PM Of Many Hats: Questions, No Answers On Whale Oil

Dr RUSSEL NORMAN (Co-Leader – Green) to the Prime Minister: How many times since November 2008 has he spoken with blogger Cameron Slater on the phone and how many times, if any, has he texted him?
Rt Hon JOHN KEY (Prime Minister): None in my capacity as Prime Minister. More>>

ALSO:

Aussie Investigation Dropped: Call On Minister McCully To Pursue The Case Of Balibo Five

West Papua Action is deeply concerned at the lack of any clear outcome from the Australian Federal Police inquiry into the 1975 deaths of the ‘Balibo Five’ including NZ journalist Gary Cunningham. More>>

ALSO:

'Feed The Kids' Bill: Metiria Turei To Lead Fight On Feeding Hungry Children

Green Party Co-leader Metiria Turei is urging all political parties to support the Feed the Kids Bill which she inherited today from Mana leader Hone Harawira. More>>

ALSO:

Parliament Today: State Opening Of Parliament

The House sat at 10.30am on Tuesday before MPs were summoned to hear the Speech from the Throne in the Legislative Council Chamber. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
Regional
Search Scoop  
 
 
Powered by Vodafone
NZ independent news