Bill to reverse oil and gas exploration ban finally passes

1/08/2025·3 min read

Bill to reverse oil and gas exploration ban finally passes

The Bill introduced by the government last September to reverse the 2018 ban on new petroleum exploration (other than onshore Taranaki) has finally passed. The Crown Minerals Amendment Bill (Bill) was delayed to enable a controversial new decommissioning liability regime for petroleum infrastructure to be redesigned.

In this article we outline key elements of the Bill and the final shape of the petroleum decommissioning liability regime which has emerged.

Key elements of the Bill

Of course the Bill is about more than just the exploration ban reversal and decommissioning liability. Other key features of the Bill include:

changing the purpose statement of the Crown Minerals Act 1991 (CMA) from “manage” to “promote” prospecting for, exploration for, and mining of Crown-owned minerals for the benefit of New Zealand;
allowing petroleum exploration permits to be allocated on application or by other methods, rather than requiring a “Block Offer” tender process for such permits;
increasing flexibility in relation to the financial securities that petroleum permit participants are required to provide to cover decommissioning costs;
introducing perpetual petroleum permit holder liability for issues arising after decommissioning, in place of a payment/security regime; and
introducing a new Tier 3 permit for small-scale, non-commercial gold mining.

See our earlier FYIs here and here.

Petroleum Decommissioning Liability - Proposals

The issue which delayed the Bill was the approach to be taken to petroleum decommissioning liability reform.

Before the Bill was introduced, the petroleum decommissioning liability regime (put in place by the previous government) imposed significant trailing liability for unmet decommissioning costs, stretching back to all previous holders of a permit.

The Bill, as introduced, would have limited this trailing liability to the most recent previous holder of a permit only. When the Bill emerged from Select Committee review, this approach remained intact.

What then followed was a fairly last-minute Amendment Paper, introduced just before the Bill was due to pass in November last year, which massively increased the scope of parties having trailing liability for decommissioning costs. The Amendment Paper would have extended decommissioning trailing liability to:

the permit holder or most recent previous permit holder;
a person with a controlling interest in the current permit holder or most recent previous permit holder; and
a person who transferred a controlling interest in the current permit holder to a person with a current controlling interest (ie most recent previous controllers of a permit holder).

Supplementary Departmental Disclosure issued alongside the Amendment Paper stated that submitters on the Bill to the Select Committee raised concerns about a potential loophole with the trailing liability provisions, which only applied to transfers and not to changes of control.

This proposed change would have significantly expanded the scope of parties having trailing liability, in a blunt and inflexible way (ie not taking account of financial securities which may already be in place).

Petroleum Decommissioning Liability - Final Form

What finally emerged from the legislative process was a reversal of the proposed extensions set out above. Under the final form of the regime:

current permit holders will have the primary liability for decommissioning (and be required to put in place appropriate financial security to support those obligations, as has always been a feature of the revised regime);
any change of control of a permit holder will require Ministerial consent (not just a permit operator, as the CMA currently provides); and
on any permit transfer or change of control, the Minister will have the power to require the person transferring or ceasing to have control (or any of their related bodies corporate) to provide a guarantee covering any costs of decommissioning which are unmet.

There is an exception to the consent/guarantee requirements for changes of control of non-operators of petroleum prospecting permits. They will only need to notify the Minister after the change of control.

The final settings have positive elements. The removal of “automatic statutory liability” for a large number of parties on any change of control allows a more refined approach, considering the circumstances of each case.

On the other hand, the wide Ministerial power to impose liability on any transfer, extending throughout corporate groups, risks discouraging transfers (including investment farm-ins) and limiting the development activity New Zealand needs.

An alternative approach could focus more on the incoming party - ie requiring the new permit participant or controller to “deliver up” appropriate security before a transfer or change of control was consented (with flexibility along the lines of the new financial security regime).

The Last Word?

The Labour Party has already indicated that they will reimpose the petroleum exploration ban, and no doubt they will review the decommissioning liability regime at the same time. This is unlikely to be the last time that the industry has to grapple with moving liability goalposts.