Protecting taxpayers from potential oil spill costs

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Thursday, 20 June 2019, 7:05 pm
Press Release: New Zealand Government

Hon Julie Anne Genter
Associate Minister of
Transport20 June 2019 PĀNUI PĀPĀHO MEDIA
STATEMENTProposal to better protect taxpayers from
cost of potential oil spillsOffshore oil and gas
operators would be required to hold higher levels of
insurance to ensure they can cover the cost of an oil spill
under proposed new rules announced today by Associate
Minister for Transport Julie Anne Genter.Cabinet has
agreed to consult on increasing the amount of insurance that
oil and gas operators are required to hold. Currently,
operators are required to hold insurance worth around $27
million. The new proposal would require them to hold levels
of insurance proportionate to the risk posed by the
installation, up to a maximum level of $1.2 billion.
“While the likelihood of an oil spill is low, if one
occurs it could have significant environmental, financial
and cultural impacts and cost tens or even hundreds of
millions to clean-up,” Julie Anne Genter
said,“Communities and taxpayers shouldn’t be left to
foot the bill for clean-up of an oil spill, like we saw with
the Rena. It’s only fair that operators are able to cover
the clean-up cost of a worst-case scenario oil
spill.“Under the proposed regime, operators would be
required to hold insurance proportionate to the risk posed
by their installation poses.“The proposed upper limit
has been set at $1.2 billion to future-proof the regime in
the event that a future installation proceeds in a
higher-risk, deep water location.

“For existing
operators, the amount of financial insurance required would
be well below the upper limit of $1.2 billion.“I
understand that the amount of insurance or financial
insurance estimate for current production installations in
Taranaki ranges from about $170m to $360m.As part of the
proposed new regime, the Minister has also introduced a Bill
to amend the Maritime Transport Act 1994 (the Act) to
provide certainty in relation to the liability of insurers
(or, in the case of financial security, the persons
providing the financial security) to the Crown and to other
third parties who are affected by the pollution.The Bill
clarifies that rules may specify the types of liability that
will need to be insured against, and may provide for the
insurance or other financial security to cover the cost of
well control measures and other costs of implementing marine
oil spill contingency plans. The rules will also propose the
amount of insurance or financial security required to be
held.“Under the existing Act owners of offshore oil and
gas installations face unlimited liability for the cost of
pollution damage and clean-up resulting from a spill from
their facilities in New Zealand waters. The Amendment Bill
does not change their unlimited liability.“Members of
the public and interested parties will have the opportunity
to have their voice heard on the Bill during the Select
Committee process.“The remainder of the regime,
including the increased limits for financial assurance, will
be implemented through marine protection rules. Consultation
on these draft rules will occur alongside the Bill.The
Government last year announced an end to new offshore oil
and gas permits, while allowing existing permits to run
their course. Part of that deliberate, planned and managed
transition over the coming decades is ensuring the existing
operations are well managed and risks are mitigated where
possible,” said Julie Anne
Genter.

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