Simon Court, the ACT Party’s climate change spokesperson, said on Monday that the Government’s 2018 ban on issuing new permits for offshore oil and gas exploration had led to increased imports of coal for electricity generation.
However, that same claim was found to be “mostly false” by AAP fact-checkers when it was made by National MPs during last year’s election. Then-National MP and energy spokesperson Jonathan Young even admitted after the AAP report that he was incorrect.
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“The statement that was in the passage was wrong, completely wrong,” Young told Stuff at the time.
Gas fields and lake levels
In an interview with Newsroom about his own statement with the misleading claim, Court at first backtracked from it before reiterating it.
“The result of the ban on exploration for natural gas will be that New Zealanders import more coal. Coal imports were up 41 percent in the December 2020 quarter as compared with the same time 12 months earlier. New Zealand imported more coal in 2020 than in 2017 and 2018 combined,” Court said in the statement issued Monday.
Energy and Resources Minister Megan Woods said any suggestion the exploration ban was responsible for the uptick in coal imports was wrong.
“It’s utterly false to try and suggest that the current stockpiling of coal by electricity companies to manage the country’s dry year storage problem and production decline of an existing gas field has anything to do with the ban on future exploration of oil and gas,” she said.
“This idea was debunked at the election campaign when the National Party suggested it, and it’s still false. It is a market response to current conditions.”
“Energy industry experts and government reports indicate the oil and gas exploration ban was unlikely to have had a short-term impact on prices or coal consumption in the past two years. Other factors such as drought, gas field outages and global markets are likely to have been the main influences on price.”
While no one denies that coal imports are up and that more coal is being burned for electricity, the disagreement is over the cause of the greater reliance on fossil fuels. Court implied in his statement that the exploration ban meant there wasn’t enough gas to run the fossil fuel turbines at the Huntly Power Station, so generators had to rely on coal instead.
Woods, however, said the gas shortage was a result of outages at the Pohokura gas field. These outages have been ongoing since 2018 and have meant the field has been producing as little as half as much gas as usual.
Professor Alan Brent, the Chair in Sustainable Energy Systems at Victoria University of Wellington’s school of engineering and computer science, agreed that Pohokura was partially to blame. He also said that hydroelectric generators – responsible for 60 percent of New Zealand’s electricity – are struggling with low lake levels.
“If you look at what’s happening right now, the prices are quite high. That’s because there is a gas shortage at this point in time and the lake levels are low. That’s primarily what’s been driving, over the past few years, why we’ve bought more and more coal,” he said.
It’s far too early for the exploration ban to have led to a shortage in gas supply today, he said. “It’s going to be a decade or two from now when that might be an issue.”
The process from applying for a permit to actually producing gas is one that takes years. The current coal imports and gas shortages would have happened with or without the ban.
AAP came to similar conclusions when it reviewed Young’s comments in September.
“Energy industry experts and government reports indicate the oil and gas exploration ban was unlikely to have had a short-term impact on prices or coal consumption in the past two years. Other factors such as drought, gas field outages and global markets are likely to have been the main influences on price,” the fact-checker reported.
Flip-flopping on blaming the ban
When Court spoke to Newsroom, about his statement, he at first backtracked on whether the increase in coal imports was a result of the exploration ban.
“The reason they’re stockpiling coal is because they can’t get access to natural gas at the price and volumes they need it. It’s true that the Pohokura gas field has declined in output. And that was forecast, but at some time in the future, not at this time,” he said.
When asked whether he was now saying the exploration ban wasn’t responsible for more coal burning in recent months, he replied, “That is correct”.
“There’s enough projects that have consents, that are ready to be built, to meet that demand. We’re not overly concerned about that, to be quite honest.”
– Professor Alan Brent
Court then went on to reiterate his original position, saying the ban had “set the tone” and created uncertainty in the market. That uncertainty, Court insisted, meant companies were more likely to burn coal than they otherwise would have.
“It’s definitely a contributing factor to why we don’t have natural gas coming on-stream now, when we know that gas is the next step to reducing our emissions, compared to coal. So rather than the companies continue to carry out offshore exploration, they’ve actually pulled back. This is potentially a risk that is going to materialise into much greater coal use over the next decade,” he said.
“There is a lack of availability of natural gas, and if more companies were exploring and bringing natural gas online and they could see it coming in the next 18 months, two years, three years, that would actually have a downwards pressure on gas prices. Those are market signals that are coming through to businesses that rely on thermal energy, like the electricity generators, who say: ‘Well if we can’t get the gas, if there’s not going to be any more gas at readily available and reasonable prices, then we still have to supply power and heat to our customers so we’re taking coal as the only option’.”
Brent said it was unlikely the ban on new offshore exploration would lead to increased emissions in the coming decades.
“It’s an interesting discussion on what is going to happen in 10 or 20 years. A Transpower report came out last month that said we are going to electrify. We think they are underestimating how much electricity we are talking about. If we don’t start building pretty soon, then that gas exploration ban might start biting us in the backside,” he said.
However, “there’s enough projects that have consents, that are ready to be built, to meet that demand. We’re not overly concerned about that, to be quite honest.”