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Communities should share in extraction royalties

Local government says communities should share in extraction royalties

Local Government New Zealand (LGNZ) has come out strongly seeking a policy change for the distribution of a share of royalties from mineral, oil and gas extraction to the communities where the activity takes place.

The Government receives hundreds of millions of dollars in royalty payments for oil, gas, coal and mineral extraction. In the five years to 2012, $1.69 billion was paid to the Crown in royalties from petroleum production and $49.85 million was paid in royalties from mineral production including coal.

LGNZ argues that the regions where the extraction occurs do not receive a direct share of these funds. Instead local authorities are required to pay for the local roads, services and amenities that enable extraction and support these industries, and to build a future for the region beyond the end of mining.

LGNZ President Lawrence Yule says local authorities also face environmental management costs for consenting, compliance, state of the environment monitoring and plan making.

“This is an important policy matter for our regions and their economies. The development of a ‘local share’ programme would support communities and regions, similar to the way the successful Royalties for Regions local share initiative in Western Australia has recognised the growth and pressure extractive industries place on a region.”

Hauraki District Mayor John Tregidga, chair of the LGNZ working party on royalties sharing, says that while mining and exploration creates jobs for communities, these industries have impacted Waikato by creating pressure on infrastructure.

“Royalty sharing would provide us with much-needed funding towards the additional infrastructure costs we face to support the presence of extraction industries, as well as the extra council staff time involved in compliance and consenting,” Mayor Tregidga says.

“This could increase further with new mining and exploration projects pending in Waikato. A local share programme would strengthen regional development for the benefit of our and other regional economies.”

“Investment in regions from royalties will also help the resilience of communities post mining. This is critical in boom and bust industries.”

Gisborne is another example of a community facing massive bills to upgrade its roads if oil and gas exploration proves successful in the region. TAG Oil is currently seeking to extract 14 billion barrels of oil from the East Coast Basin that would result in around $1400 billion in gross revenue and hundreds of millions in royalties.

“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?” Gisborne Mayor Meng Foon says.

LGNZ is holding a forum ‘Royalty payments – the case for a local share’ today in Wellington to discuss the sharing of royalty payments with the local communities where extraction occurs.


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