FRACKING IN THE SOUTH ISLAND: THE CONSENT PROCESS

New Zealands 2011 Energy Strategy aims to expand state income from petroleum exports by opening up new gas and oil fields for production.i Hydraulic fracturing (fracking) could become an increasingly widespread practice in New Zealand. Fracking to extract coal seam gas is already ongoing in Taranaki.ii Currently, a number of energy companies are planning similar operations in the South Island. (See appendix) In April 2010, Wellington based company L&M Energy applied for two exploration permits to extract coal seam gas in the Canterbury Basin.iii - Permit 52605 was granted in September 2011 - Permit 52614 is still pending. - Currently, L&M energy is undertaking a 6-month (non invasive) study to assess the area for its mineral potential. Future operations are likely to involve fracking. Before companies can undertake any exploration for petroleum gas, they need: A. An Exploration Permit from Government under the Crown Minerals Act B. Resource Consent(s) from the Regional Council under the Resource Management Act (RMA) 1991 C. Land Access consent from the landowner

A. Central Government Permits: The Crown Minerals Act

In New Zealand, the Government owns all petroleum (including coal seam gas) within 12 nautical miles of the shore. Permits for exploration and development are granted by the Minister for Energy according to the provisions of the Crown Minerals Act 1991: iv 1. Company must apply to New Zealand Petroleum and Minerals in the Department of Economic Development for an exploration Permit. 2. New Zealand Petroleum and Minerals assesses the application. This process can up to 6 months to a year. Assessment of the permit application focuses exclusively on the companys efficiency, such as its ability to prevent fossil fuel wastage. Possible environmental effects are not assessed or considered.v 3. An exploration permit allows the company to use a number of processes to identify petroleum deposits and determine whether mining is desirable, including appraisal drilling.vi Before an exploration permit is granted however, companies may undertake minimum impact activities, such as aerial surveying.vii 4. An exploration permit does allow the company to drill, but not to extract large quantities of petroleum/coal seam gas. To begin commercial production, the company must apply to New Zealand Petroleum and Minerals for a mining permit. This can only take place after Resource consent and land access is secured, as below.

B. Resource Consent under the Resource Management Act

The RMA Consent Process

Before the holder of an exploration permit can begin exploration, they also need resource consent(s) from the Regional council, and possibly also the appropriate District council, according to the relevant provisions of the Resource Management Act 1991 (RMA).viii 1. The resource consent process begins when the company approaches the Regional Council (ECAN, in the case of Canterbury), and also the District Council with its proposal. 2. ECAN and the relevant District Council must determine whether resource consents are required, and if so, which sections of the RMA are relevant. Some sections of the RMA are dealt with by ECAN, others by District Councils. Regional Council Consent - A legal opinion recently obtained by Taranaki District Council determined that Section 15, 1(a, b, and d) of the RMA is relevant to assessing consent applications for fracking. Section 15 forbids discharge of contaminants into water, or into the land from an industrial premise.ix This section is dealt with by ECAN, not District Councils. - It is very likely that section 15, 1(a, b, d) is also the relevant section for fracking consent applications in Canterbury.x However, specific RMA resource consent requirements can differ across regions according to how the activity is classified in the regions plan (ECANs Natural Resources Regional Plan). xi Accordingly, the relevant RMA sections will not be identified and confirmed until ECAN receives a consent application from the company. Given that ECANs regional plan includes rules on the taking of water, it is likely that fracking projects in Canterbury will require consents relating to water use.xii District Council Consent - Depending on the companys precise proposal, the relevant District Council may also need to assess the application. The District Council if a relevant section of the RMA falls under its jurisdiction.xiii - However, if the consent application is publicly notified (see below), then the District Council may also make a submission regarding the discharge of contaminants (section 15, 1(a,b,d). 3. The company must then make a full application for RMA resource consent: - Company must submit an Assessment of Environment Effects. xiv - Company is advised, but not legally required to consult with interested and affected parties, and include this information in its application.xv If the company succeeds in receiving approval from affected persons, the council may be more inclined not to notify the application to the public. xvi - If the company anticipates that a consent application will be publicly notified and likely to be highly controversial, at this stage they can request that the Environmental Court deals with the application, rather than ECAN. 4. The council then determines whether the resource consent application will be publicly notified, non-notified, or given limited notification. a. Publicly notified:

According to the RMA, the council should publicly notify resource consent application if the activity proposed is likely to have adverse effects on the wider environment.xvii If resource consent is publicly notified, any member of the public can make a submission about the application for the Council to consider. A notice is published in the newspaper. People have 20 days after the announcement of the notification to make a submission. Publicly notified applications usually involve a hearing. Any one who makes a submission can demand a hearing.

b. Limited Notification - If the consent is not publicly notified, the Council must decide if there are any affected persons that should be notified. An affected person is defined as a person or group of people who could be adversely effected in a much greater way than the general public (such as neighboring landowners or farmers in the immediate area). - If a consent process is given limited notification, people identified by the Council as affected persons will be asked to give their written approval. If they refuse approval, they can choose to make a written submission against the application. c. Non-notified - A non-notified consent application means that the general public and interest groups have no opportunity to make submissions, and no hearing takes place. - The council will decide that a consent application should be non-notified if the activity proposed will not have adverse effects that are more than minor, and no affected people are identified. 5. The Council makes a decision, and grants or denies resource consent - Note: resource consent can be granted with conditions, including the payment or a bond, and/or specific environmental requirements.xviii 6. Appeal Process - When the consent decision is reached, the applicant (company), or anyone that made a submission may make an appeal to the Environment Court (a national body) against the decision. - The consent decision specifies how long people have to lodge an appeal. - Note: if the consent application is non-notified, there is no opportunity for the general public to request an appeal.

Reasons for Concern

The history of fracking in New Zealand shows that companies have been allowed to start drilling without public consultation, and even bypass consent processes entirely. This raises the concern that future consent processes may allow fracking to go ahead without consultation or proper assessment of the risks: The Taranaki Consent Experience: Until mid 2011, fracking in Taranaki was carried out by companies including TAG oil without RMA consent from the Taranaki Regional council (TRC)

At the time, the TRC justified this by stating in response to a Official Information Act in June 2011:
The Council does not currently require resource consents for the activity of fracking. This is because the activity occurs in oil and gas reservoirs that are between about 2500 and 4500 metres below the land surface. Potable deep ground water resources in the region are about 600 metres and above. Hence the activity is separated by consolidated sediments of thousands of metres in thickness which means the risk of fracking fluids moving upwards and contaminating potable groundwater is very minimal. xix

In July 2011, the TRC requested and received a legal opinion from law firm Simpson Grierson in response to lobbying from concerned local groups. The legal opinion stated that RMA consent from the council was necessary under section 15 (as above).xx The TRC accepted this advice and now requires resource consent to be given for fracking In July the TRC also stated that it was very likely that resource consent for fracking would be non-notified, given minor adverse effects and lack of affected parties given the depth that they occurxxi Since July, the TRC has granted numerous non-notified resource consents for petroleum companies to discharge fracking contaminants into the land in various locations. Note that discharge of contaminants is the only part of the fracking process that currently requires resource consent under the RMA in Taranaki. xxii The TRC has prepared a detailed report on fracking that will be given as a guide to other councils considering the management of the practice under the RMA, which will be released on the 22nd November. The conclusion of the report however, is that fracking is a very low risk activity. xxiii This is a troubling development given that this report could influence ECANs decision to publicly notify or non notify fracking consent applications.

Diffusion of Responsibility for Environmental Regulation Neither national level nor local level consent processes require a comprehensive, independent assessment of the potential environmental risks of the fracking process: - NZ petroleum and minerals does not assess environmental factors when considering and granting exploration or mining permit applications - Regional/district councils only have to grant consent for aspects of fracking that relate to the existing regional plan and relevant RMA sections. The environmental risk assessment that the council considers when making its decision is provided by the company applying for resource consent. Again, interest groups and the public may only submit other information if the consent is publicly notified.

C. Land Access Consent

Finally, before a permit holder can explore for petroleum, they need a land access agreement with the landowner. 1. First, the company permit holder must approach the landowner/s. If the owner consents, an access agreement is drawn up, and exploration and appraisal drilling may begin. 2. If the landowner refuses, the permit holder seeking land access can request to enter into an arbitration process. The arbitrator is appointed by the Chief executive of the Ministry

of Economic Development. If both parties agree to arbitration, the process can begin immediately. If either party refuses, an arbitrator may be appointed after a 30-day period. 3. If the landowner continues to refuse access throughout the arbitration, the company permit holder can apply to the Chief executive of the Ministry of Economic Development (MED) to determine an access arrangement on the grounds of public interest - The chief executive of the MED must then make a report to the Minister of Energy - The Minister of Energy then assesses the application, determines whether the grounds of public interest are sufficient to grant land access, and makes a preliminary decision - The company and landowner are notified of the preliminary decision, and have an opportunity to either reach an agreement for land access, or appeal the decision. - If the land owner continues to refuse to allow land access, the Governor general on the joint advice of the Minister of Energy and Minister for the Environment may grant the company land access. Note that while the landowner can stall the process by continuously refusing land access, the Ministry of Economic Development (the same government body that grants the permits) can eventually overrule the landowner and allow the company to proceed. ---------------------------------------------------------------------------------------------------------------------------Note- some sources state that the Department of Labour is also responsible for regulating and monitoring fracking operations. However, it is important to note that the Department of Labour is concerned only with issues of workers health and safety, rather than broader environmental concerns, water contamination and associated health risks to the general population.1

See media release, Hekia Parata, Enegrgy Strategy sets direction for New Zealands Energy Future, 30th August 2011, available at http://www.beehive.govt.nz/release/energy-strategy-sets-direction-new-zealand%E2%80%99senergy-future For more depth, see links available on the NZ Petroleum and Minerals website http://www.nzpam.govt.nz/cms/news/2011/energy-strategies-released ii For good overview see news articles assembled in the fracking section of Climate Justice Taranaki website http://climatejusticetaranaki.wordpress.com/category/fracking iii See interactive Petroleum GIS viewer available on the NZ Petroleum and Minerals website, https://data.nzpam.govt.nz/permitwebmaps/default.aspx?commodity=petroleum iv See Crown Minerals Act 1991 available at http://www.legislation.govt.nz/act/public/1991/0070/16.0/DLM242536.html v See Minerals Program for Petroleum, 2005,Preamble, p.7 available at http://www.nzpam.govt.nz/cms/petroleum/legislation The Minerals Program establishes the policies, procedures and provisions to be applied under the Crown Minerals Act 1991. This includes details of the permitting and royalty regimes. vi Ibid, Section 5.4.1, p.44 Small-scale fracking could be undertaken at this stage vii As defined in the Crown Mineral Act 1991, Section 2, interpretation: Minimum impact activity means any of the following: (a) geological, geochemical, and geophysical surveying (b) taking samples by hand or hand held methods (c) aerial surveying (d) land surveying: (e) any activity prescribed as a minimum impact activity: (f) any lawful act incidental to any activity to which paragraphs (a) to (e) relate to the extent that it does not involve any activity that results in impacts of greater than minimum scale and in no circumstances shall include activities involving (g) the cutting, destroying, removing, or injury of any vegetation on greater than a minimum scale; or (h) the use of explosives; or
i 1

Confirmed to author by Department of Labour.

(i) damage to improvements, stock, or chattels on any land; or (j) any breach of the provisions of this or any other Act, including provisions in relation to protected native plants, water, noise, and historic sites; or (k) the use of more persons for any particular activity than is reasonably necessary; or (l) any impacts prescribed as prohibited impacts; or (m) entry on land prescribed as prohibited land viii See Resource Management Act 1991 available at http://www.legislation.govt.nz/act/public/1991/0069/66.0/DLM230265.html ix Ibid, Section 15 x According to an email correspondence with Bill Bayfield of ECAN Our Natural Resources Regional Plan has policies and rules that deal with the effects of activities such as discharging water and/or contaminants into/into land or to groundwater and surface water, discharging contaminants to air, and the taking of water. Where fracking involves these activities then they fall to be considered by Council. Unless the conditions for relevant permitted activity rules are met, a resource consent will be required xi The relevant chapters of which are chapters four water quality and five water quantity. ECANs Natural Resources Regional Plan is available at http://ecan.govt.nz/our-responsibilities/regional-plans/nrrp/Pages/readplan.aspx xii Ibid, see also notes on endnote 10 from Bill Bayfield xiii Again, this cannot be certain until the company has approached the relevant district council with its precise proposal. According to John Christendon, environmental services manager for the Selwyn District Council, whether fracking will require [district] council resource consent depends on what is proposed. Issues that the [district] council have some jurisdiction over include the scale of buildings, staffing, storage of hazardous substances and earthworks See media release, Tuesday 4th October 2011 Council looking into fracking application xiv See A Guide to Preparing a Basic Assessment of Environmental Effects available on the Ministry for the Environments website: www.mfe.govt.nz xv For more information see An Everyday Guide to the RMA booklet 2.2 Consultation for Resource Consent Applicants available at http://www.mfe.govt.nz/publications/rma/everyday/consent-consultation/ xvi P.6 ibid xvii xvii See Ministry of Environment, An Everday Guide to the RMA 3.1, Your Rights as an Affected Person, p.5, available at http://www.mfe.govt.nz/publications/rma/everyday/affected/ xviii The RMA 1991, Sections 108-112 xix Offical Information Act information on Taranaki fracking: Offical Information Act- Hydraulic Fracturing, response to Catherine Delahunty MP, Green Party, 16th June 2011, Document 908057. Signed by B G Chamberlain, Chief Executive Taranaki Regional Council xx The legal opinion also highlighted rule 44 of Taranakis Regional Fresh Water Plan (2001) relating to the discharge of contaminants to land from industrial premises, Fraccing under the Resource Management Act 1991, th letter from the council to petroleum companies in Taranaki, 29 July 2011, available on the Climate Justice Taranaki website xxi Ibid xxii See Resource consents issued list on the Taranaki Regional Council website, http://www.trc.govt.nz/resourceconsents-issued/ th See also Climate Justice Taranaki, media release, Toxic water and toxic milk from oil industry?, 7 October 2011 http://climatejusticetaranaki.wordpress.com/category/fracking/ xxiii See Regional council report rates fracking 'low risk,' Leighton Keith, 7th November 2011, available at http://www.stuff.co.nz/taranaki-daily-news/news/5918385/Regional-council-report-rates-fracking-low-risk. Note that in the same article, John Pfahlert, executive officer Petroleum Exploration and Production Association was quoted as saying the experience of the TRC is something that they [other regional councils] can draw on. We are encouraging them to learn from what the TRC has been doing."