The Government is considering a radical shift in the way Crown minerals are managed in New Zealand, leading to a mixed reception in climate change circles and industry groups. The Minister for Energy and Resources, Megan Woods, introduced the Crown Minerals Amendment Bill (‘Bill’) on November 23rd to amend the Crown Minerals Act 1991 (‘Act’).

The Bill proposes to alter the standing purpose of the Act from the promotion of exploration and development of Crown minerals to the broader management of such activities. The functions of the Minister will change from attracting permit applications, to a more discretionary position where permit applications will be offered to prospectors according to this discretion. Minerals programmes which are administered by the Act would subsequently be amended to reflect the change in purpose and scope of the Minister’s powers.

Minister Megan Woods focused on the need for Government to possess a statutory purpose that is more up to date and consistent with New Zealand’s climate change commitments. She stated the Bill has the intention of neutralising the promotional intents of the Act whilst providing certainty to investors.

Mining in New Zealand and the Crown Minerals Act 1991

New Zealand mining can trace its roots to the gold rushes that hit New Zealand during the 19th century. Steadily, legislation was passed to give the Government better control of the environmental impacts of mining activity in New Zealand. The Act was passed in 1991 to control the management of Crown owned minerals.

In New Zealand, in order to prospect, explore or mine Crown-owned minerals a party must be granted a permit by the Minister of Energy and Resources. The Minister is not obliged to grant a permit to any person unless certain statutory conditions are met under section 29A of the Act. In accordance with section 25 of the Act the Minister may also impose conditions on the permit at their discretion depending on the nature of prospecting, exploration or mining of the mineral. The stringency of permit approvals depends on the impact of the activity in question.

In 2013, the Act was amended to included a new purpose statement that promoted prospecting, exploration and mining of Crown-owned minerals. However, since then there have been both social and political shifts in the discussion on climate change and the impact of mining on the environment.

In 2019, the Government set a domestic target to reduce New Zealand’s greenhouse gas emissions to net-zero by 2050. The Government has also committed to several strategies that envisage a shift away from fossil fuels and towards greater levels of renewable electricity and other low-emissions alternatives.

What is on the Horizon?

Minister Megan Woods stated that the Act’s focus on the promotion of allocating petroleum and minerals rights for economic benefits limits the Government’s ability to reach decisions that allow a transition away from fossil fuels. A more neutral regime that achieves flexibility for the Crown in its role as resource owner and economic steward in the transition to more renewable resources is desired.

The Bill 

To address the concerns under the current Act, the Bill includes changes such as:

• The purpose will no longer be to “promote” prospecting for, exploration for, and mining of Crown owned minerals but instead the purpose will be to “manage” such activities.
• The “efficient allocation of rights to prospect for, explore for, and mine Crown owned minerals” will be altered to provide for the “efficient processing and consideration of applications for rights to prospect for, explore for, and mine Crown owned minerals”.
• The functions of the Minister will change from attracting permit applications to offering permits from time to time through applications.
• Minerals programmes regulated by Ministry of Business, Innovation and Employment (MBIE) can be amended to reflect and give effect to the amendments made by this Bill.

What does this mean for future mining prospects?

This may not look like an entire overhaul of the Act, however, the potential consequences of this Bill are significant. The New Zealand High Court recently released a judgment in the case of Students for Climate Solutions Inc v Minister of Energy and Resources in which Justice Cooke found that the Minister is not required, and in fact not permitted, under the Act to take into account climate change considerations under the Act, as this would be a direct contradiction of its purpose. Justice Cooke also ruled that climate change, climate change targets, and related compliance, did not fall within section 29A of the Act.

With the proposed amendment to the Act’s purpose, the discretion available to the Minister to consider applications has widened to the point that that they only need to make climate change considerations from “time to time”. However, the Bill has not introduced any reference to aforementioned climate change considerations at all.

So, whilst the purpose of the Act may be changed, there is no proposal to introduce any express requirement on the Minister to specifically consider climate change or carbon emissions when assessing mining permits. The Bill has effectively introduced measures to slow the predetermination of permit rights and opens the floor to broader considerations to “manage” these rights.

Conclusion

Industry groups have uttered disappointment and believe the Bill may be sending mixed messages to potential investors. Concern has been raised that the change is counter-productive and does not reflect what is happening globally because mineral deposits are an integral component in the transition to the very renewable batteries, wind and solar farms and electric infrastructure that the Minister is trying to achieve.

There is sentiment that the Government is missing the point and that to satisfy the increase in sustainable energy reserves, mining will, perhaps counter-intuitively, need to increase. The Bill appears to be inconsistent with the arguments the Government raised in Solutions v Minister of Energy Resources where it was argued by the Crown that in fact the Act was not inconsistent with New Zealand’s climate change goals.

The Bill could signal the start of a new wave of climate change considerations and legislation passed under New Zealand law. What this means for investors remains uncertain. The Bill is currently at the first reading stage and the select committee will then review the Bill, and offer the public the opportunity to have a say.