Oil Pollution Levy Consultation
Submission: Review of Oil Pollution Levy Rate – Industry Consultation Document
- The Association represents the interests of upstream oil and gas explorers in New Zealand. The Association welcomes the opportunity to comment on the proposed review of the oil pollution levy rates as set out in Review of Oil Pollution Levy rate – Industry Consultation Document (2).
- The Association records that agreement has essentially been reached on both the new levy allocation model and the need to rebuild the oil pollution fund. The subject of the current consultation is to seek views on the quantum of the money to be collected and how much each sector should pay.
- The consultation paper details in Appendix 1 the proposed charges to be levied. Two charges are identified. The first is to cover forecast operating revenue, and the second, forecast capital expenditure. The Association will leave it to the two affected companies which operate FPSO’s to comment on whether they are satisfied with the level of charges proposed - $214,185 each for each of the next 3 years to cover operating revenue. We simply note that, as we have submitted previously, there is little evidence for the way in which the threat model deals with the threats posed by FPSO’s, and consequently little basis for the charges to be levied.
- However we strongly disagree with the proposal to levy a charge of $80,000 per annum for each of the next 3 years to cover the costs associated with capital equipment purchases. (These figures are the upstream oil industry charges only).
- The February 2011 review of preparedness and response capability by Thompson Clarke Shipping identified that an injection of capital was required to fund the purchase of a variety of new equipment to replace gear that was wearing out or obsolete. The OPAC Committee agreed last year that $1.95m should be spent from the Oil Pollution Fund (OPF) in the forthcoming financial year to purchase the equipment identified.
- The occurrence of the Rena accident late in 2011 meant that the financial reserves of the OPF were used to fund the initial response to that incident.
- As noted by industry members at the 10 February 2012 meeting of OPAC, there has always been a clear understanding (based on section 331(2) of the Maritime Transport Act 1994 and the NZ Marine Oil Response Strategy 2006) that those responsible for creating an oil spill will reimburse the OPF if money is spent on responding to an incident. Whilst this has not yet occurred, the Act clearly states that funds recovered from the entity that caused the spill should be repaid into the OPF.
- The money in the OPF in February 2011 when Thompson Clarke Shipping made their recommendations on capital equipment purchases had already been contributed by industry. We consider it improper, and seemingly inconsistent with the relevant provisions of the Act, for Maritime New Zealand to ask industry to pay a second time to fund these capital items.
- The implication of such an approach is that the next time there is a Rena styled incident which involves funds being withdrawn from the OPF to cover operational expenses, the money already contributed by industry for acquiring equipment might simply disappear with no guarantee it will be returned. We note the potential for this to happen again might discourage contributors from supporting funds being accumulated in the OPF.
- The Association submits that the Government should reimburse the OPF to allow the capital purchases identified by Thompson Clarke Shipping to proceed rather than increase the levy rate further to recover this a second time from industry.