What you need to know
New Zealand uses a prevention-control-response-recovery framework to regulate offshore exploration and production. The primary focus is on minimising hazards and preventing spills from occurring by ensuring permit holders have the capability, plans and resources necessary to minimise the likelihood, and reduce the effect, of any adverse event.
Although the likelihood of a major marine oil spill from an offshore installation in New Zealand waters is very low, the environmental, financial and cultural impacts of such an incident would be significant. New Zealand’s financial security regime for offshore installations aims to ensure operators can meet the costs of their activities, fulfil their legal obligations and cover any liabilities — we call this financial security.
Previously, owners were required to prove they had financial security of approximately NZ$27 million. Modelling and comparisons with other jurisdictions suggested this level was too low to meet the potential costs of an offshore incident. We amended the regime in 2020 so that in the event of an oil spill, offshore installation owners have financial security in line with the amount that would be required if there was a spill from their installation.
Rules come into force
Amendments to Marine Protection Rules Part 102 and 131 were required to support changes to New Zealand’s offshore financial security regime. These Rules came into force on 27 May 2020.
Amendment Act came into force
The Maritime Transport (Offshore Installations) Amendment Act 2019 came into force on 1 January 2020 and clarified the liabilities of insurers to the Crown and to other third parties entitled to claim compensation from an owner in the event of an oil spill. In the case of financial security, the Act clarifies the extent of the liabilities of those providing the financial security.
We undertook public consultation on the proposed amendments to Maritime Protection Rules Part 102 and Part 131. The consultation ran in parallel to the Maritime Transport (Offshore Installations) Amendment Bill 2019 passing through Parliament.
Proposals agreed on
In May 2019, Cabinet agreed to proposals to strengthen the financial security regime for offshore installations, which would need more legislative change than previously agreed on, including a Maritime Transport (Offshore Installations) Amendment Bill 2019 and amendments to Part 102 and Part 131 of the Marine Protection Rules.
Part 102 amendments consultation
Following the earlier public consultation on options to improve the financial security regime for offshore installations, Cabinet agreed we should consult on draft amendments to Part 102. These amendments would ensure the financial assurance provided by permit holders was more aligned with the risk associated with their activity.
Financial assurance regime consultation
In December 2016, Cabinet agreed to the release of a discussion document on options to improve the financial assurance regime and address the issues found during the review. A document describing the results of modelling of oil spill scenarios in New Zealand was also released.
Regime review undertaken
In 2016, officials from the Ministry of Transport and the Ministry of Business, Innovation and Employment reviewed each aspect of the financial security regime for offshore installations to determine their relevance, effectiveness and suitability.