How coal is regulated

How coal is regulated in NZ

The coal sector in New Zealand is heavily regulated, with an eye to the environment, workplace health & safety, access to land, and property rights to coal. This is as it should be - society has a right to know that resources such as coal are mined responsibly. The principal legislation governing the coal sector are briefly discussed below, and a snapshot of other legislation provided.

Resource Management Act 1991

The mining of coal (and any other mineral) typically requires resource consents covering a wide range of matters. They include:

  • Occupation of land

  • Disturbance of ground

  • Removal of indigenous vegetation

  • Effects on indigenous biodiversity

  • Any other effects on the environment, such as landscape

  • The taking of freshwater

  • Discharges to freshwater

  • Noise, dust, blasting (the use of explosives), and vibration

  • Traffic management

New to the RMA system is a requirement on councils to consider the impacts on the climate of resource consenting decisions. This amendment is as yet untested, however, could have a major impact on resource consenting of coal mines. This is despite coal mines and many other emitting activities being already subject to climate change legislation (see below).

From the industry’s point of view, at issue for any mining project are its merits, the other values in the land, the likely environmental impacts on them, and proposals for their management, including site rehabilitation. Mining is a temporary use of land, and resource consents will cover the development of the mine, production during the life of the mine, the process of closure, and management of the site post-closure.

Environmental bonds, payable in the event of a breach of resource consents, are a routine condition of resource consents.

There is evidence, including trials carried out by the NSW Department of Primary Industries, that suggests cattle may thrive better on rehabilitated farmland than on unmined land.

The industrial use of coal, via coal-fired boilers, may require resource consents for discharges to air, subject to requirements in RMA plans, and the National Environmental Standards for Air Quality. That is in addition to resource consents required for other aspects of the operation, as would be the case for any business.

Climate Change Response Act 2002

The responsibility for carbon dioxide emissions arising from the burning of coal lie with the industrial and commercial coal users, whether they are using New Zealand coal or imported coal. In paying a price on CO2 emissions - through the NZ Emissions Trading Scheme - emitters are offsetting their emissions with carbon credits accruing to foresters from the growth of trees, which capture and store carbon.

Coal producers must account for the emissions arising from the mining process, for example the use of diesel in machinery and vehicles, and for the emissions arising from methane, a greenhouse gas, which naturally escapes from coal seams as these are being mined (fugitive methane). When paying a carbon price for these emissions, coal producers will pass on most of these costs to coal users.

In 2019 the Government made significant changes to the Climate Change Response Act (CCRA). In particular, New Zealand has committed to become net zero carbon by 2050; an independent Climate Change Commission has recommended emissions budgets from 2021, placing for the first time a cap on New Zealand’s emissions; and from 2021 government fixed-price option carbon credits was replaced by an auctioning scheme. The workability of these measures is yet to be tested.

The CCC has also recommended pathways for New Zealand to take in direct emissions reductions that stray beyond the CCRA.    

Industrial emitters pay the full carbon price, unless qualifying for industrial allocation of 60% or 90% of New Zealand Unit surrendering obligations as emissions-intensive, trade-exposed emitters. From 2021, the percentages of “industrial allocation” will be gradually phased out over time. In 2016 the NZU price was around $18 a tonne of CO2e, and towards the end of 2020 started exceeding $35. The Government  confirmed a price for FPO units for 2020 of $35 a tonne, which has driven the price increases on the market. For 2021, the Government has signalled a “trigger” or ceiling price of $50, and a floor of $20 for its NZU auctions, which are to be held quarterly. It has passed legislation to allow the Government to set a “confidential reserve price” that would sit about the $20 price floor, its purpose to achieve parity with the secondary carbon market. At the time of writing the NZU price is around $37.

The Government has been proposing over time a number of non-ETS related measures to help speed and direct the transition. Of significance for the coal sector are a ban on new coal-fired low and medium temperature industrial boilers from 31 December 2021, and to phase out all existing such boilers by the end of 2037. There will be an opportunity to review this policy for workability in 2025. At present, the economics of industrial conversion to electricity or wood waste (biomass) do not look promising. In evidence, 11 industry projects currently underway to reduce or eliminate coal use have depended on government co-investment of around $23 million to be economically viable. In many cases, these projects will depend for success on research and development, so their effectiveness is unproven at this time.

The speed of change the Government is envisaging poses a risk of industrial contraction in certain sectors, and the export of jobs and emissions, with no benefit for global climate.

Despite the challenges for industry in switching away from coal to biomass or electricity, which many submitters have expressed in repeated consultation on the topic, the CCC has generally upheld the Government’s direction in phasing out coal use in low and medium-temperature industrial process heat. Astonishingly, the Government did not wait for the CCC’s final advice before deciding policy in this area, as outlined above. It had established the CCC in legislation for it to provide advice to the Government, and now the Government is ignoring the CCC.

The CCC claims evidence that “proven technologies” exist for boiler conversion, and the Government’s policy announcements agrees with this contention. This is not correct, except in the case of a few boutique, demonstration projects where special or unique circumstances apply. For example, Fonterra’s Te Awamutu dairy processing plant depends on available wood waste in the region, and on waste heat from geothermal energy to dry it.    

If the Government succeeds in closing down coal mines in New Zealand as a result of its policies, including in the sphere of nature conservation and environmental management, the country will simply import more coal than the around 1 million tonnes per year that it already does.

Health and Safety at Work Act 2015

Since the Pike River coal mine tragedy of November 2010 the Government has carried out sweeping reforms of legislation and regulation covering workplace health & safety. This has occurred with active participation and engagement from the New Zealand mining and quarry industries. The focus is on identifying the principal hazards in mining, developing plans for their management, with a much more active role being played by the WorkSafe mining inspectorate. This includes new training requirements, new health & safety roles at workplaces, and new approaches to site management and leadership being rolled out. In recent years, the focus is increasingly on worker health and wellbeing. 

The use of hazardous chemicals is now regulated by WorkSafe under this Act. This would typically apply to explosives used in breaking up rock during the mining process.

Access to land

Mining can only be carried out with the permission of the land owner. If this is privately owned land, the mining company will need to come to an arrangement with the owner. The fact that mining is the highest-value use of land means that a commercial arrangement is almost always reached.

Coal mining companies may purchase the land in which the resource is located, and, so, may skip this step.

If the land is Crown-owned, for example, public conservation land, conditions apply under the Crown Minerals Act 1991. In this case, the coal mining company would negotiate with the Department of Conservation safeguards for the conservation of biodiversity and heritage, consistent with conservation legislation.

Property rights to coal

For coal that occurs on land currently or previously owned by the Crown, alienated under certain statutes, the Crown is the owner. A coal mining company will apply for a mining permit under the Crown Minerals Act 1991. Criteria for decision-making include the company's technical and financial capability, that it will apply good industry practice in mining the coal, and that it has systems to meet responsibilities under other legislation, in particular, towards the environment, and for workplace health & safety.

A royalty is payable to the Crown for the right to mine Crown-owned minerals.

Where the Crown is not the owner, the coal will be privately owned. That ownership would normally rest with the private land owner, and, on occasion, with some other person. The coal mining company would always consult Land Information New Zealand on the minerals ownership status in respect of a piece of land. Where land ownership and minerals ownership is split between two persons, the company will have to reach a separate arrangement with the owner of the coal.

Other legislation

Here is a snapshot of other natural resource management legislation that a coal mining company will have to, or may have to, comply with:

  • Wildlife Act 1953 - if the company has to move individuals of some native species, such as kiwi, geckos, a wildlife permit will be needed
  • Animal Welfare Act 1999 - in some cases, the exercise of a wildlife permit will need approval from an animal ethics committee 
  • Heritage NZ Pouhere Taonga Act 2014 - most mining today is done where miners worked in the past; their leavings are now heritage. An authority is needed to modify heritage
  • Conservation Act 1987 – a concession may be needed for ancillary mining infrastructure, e.g. an access road located outside of the area of the mining permit