New Zealand: Mining in Schedule 4 Conflict

Introduction

In 2008, New Zealanders voted out of office its three-term centre-left Labour Party-led government in favour of a centre-right coalition government overwhelmingly dominated by the conservative National Party. The result was partly due to voter fatigue with nine years of government increasingly portrayed in the media and perceived by the electorate in general as instigating a so-called “nanny state” fixated with regulating the minutiae of New Zealand households, such as the energy efficiency of shower heads and the types of light bulbs that New Zealanders should install in their homes. The electoral misfortunes of the Labour Party were also partly the result of the global financial and economic shock of 2008 that the incoming National-led government had promised to shield New Zealand from. In contrast to the Labour Government’s sometime environment-friendly achievements of ratifying the Kyoto Protocol, legislating for a carbon emissions trading scheme (ETS) and declaring its intention to make New Zealand carbon neutral over the long term, some of the National Government’s first acts in power were to abolish the Govt3 programme to encourage government departments to adopt sustainable practices and achieve carbon neutrality, and to initiate a review of the ETS with a view to significantly amending it.

In an effort to refocus attention on New Zealand economic performance, the National Government floated a proposal in August 2009 to open up protected land to mining interests to revive economic growth. Minister of Energy and Resources, Gerry Brownlee, attempted to rationalise a number of mooted changes to the Crown Minerals Act protecting national parks and conservation reserves from mining operations. “The National-led Government is absolutely determined to raise our living standards. That is going to require a big improvement to our economic growth and productivity rates. We see our natural resources as playing a big role in contributing to those goals…I am committed to unlocking New Zealand’s mineral potential for the benefit of all New Zealanders, both present and future”

What exactly the government had in mind was unveiled in March 2010, when it began actively canvassing the idea of removing land from Schedule Four of the Crown Minerals Act, which prohibits mining on high conservation status land, in order to carry out prospecting for mineral deposits. When releasing a discussion paper proposing a number of measures to develop New Zealand's mineral potential, Brownlee and the Minister of Conservation, Kate Wilkinson, indicated that a preliminary stocktake of Schedule Four land demonstrated:

• New Zealand is mineral rich and extraction could be undertaken in an environmentally friendly way
• the mineral wealth was often highly concentrated in high conservation areas
• Schedule Four lands could be mined with little direct impact
• there was inadequate information on the potential mineral deposits and the Government wanted to improve knowledge of the "mineral estate".

Gerry Brownlee, Minister of Energy and Resources

The reaction to the Government's proposal was swift and vociferous. Environmental and local community groups, celebrities and opposition political parties immediately lined up against the Government, the mining industry and big business interest groups to condemn any suggestion of encroaching upon land with the highest protected conservation status in the country.

Schedule Four - origins

Schedule Four stems from a series to reforms made to New Zealand planning and environmental laws in the late 1980s in the wake of a number of highly questionable resource-based projects implemented by the 1975-84 National Government. These resulted in a new Conservation Act in 1987 and the Resource Management Act in 1991. The former Act brought large areas of Crown land under the supervision of the newly-created Department of Conservation for primarily conservation purposes. More than 80,000 square kilometres or around 32% of the country is now public conservation land administered by the Department. Recreation and (appropriate) tourism were to be promoted by the Department, while all commercial activities had to obtain a “concession” from the Minister of Conservation if they were to be performed on conservation land. The Minister was to make a decision whether to grant permission for such activities by “weigh[ing] up a number of potentially competing values, amongst which conservation values were to predominate”.

Mining, however, was treated differently because egress to Crown lands for mining purposes had for some time already been granted by a different minister under the former Mining Act. Mining was exempted from the Conservation Act and, instead, special “access” was arranged as part of the new Crown Minerals Act, which superseded the Mining Act in 1991. The Crown Minerals Act "sets the broad legislative policy for prospecting, exploration and mining of Crown-owned minerals in New Zealand" (Crown Minerals, 2010). Lands under the protection of the Department of Conservation were hence less protected from mining than from other commercial activities.

In 1997, the Act was amended to create an absolute mining prohibition on protected land. The amendment included a Section 61 preventing the Minister of Conservation from approving access arrangements for any Crown-owned land in Schedule Four (also newly created by the amendment). The amendment was successfully guided through parliament by a National-led government with wide cross-party support. Approximately 750,000 hectares was added to Schedule Four in 2008 and was criticised by the mining industry for lacking consultation and bypassing any comprehensive analysis of the conservation values of the land or its mineral potential.

Arguments in favour of opening up Schedule Four land for prospecting

Gold production in New Zealand

The main parties in favour of prospecting for minerals on Schedule 4 land included the Government, the mining industry represented by Solid Energy and the Mining Industry Association, and Business New Zealand representing business interests in general. Their arguments were essentially economic and sought to play down any potentially adverse environmental impacts by referring to the limited scale of mining and the technology that could be used.

Speaking at the same conference in 2009 where Brownlee made his first public statement on the possibility of opening up conservation land for mining, Murray Stevens, the chair of the New Zealand branch of the Australasian Institute of Mining and Metallurgy, lauded Brownlee’s intention to open up conservation for prospecting: “This will be a renaissance for the industry. New Zealand has finally got a government which wants to see development of the mineral sector in a sustainable fashion.” Stevens also started a refrain that was to be repeated by mining proponents over the following months and meant to allay the fears of environmentalists: “The New Zealand mining sector has got an environmental record second to none in the world, which speaks for itself” Had audience members known about conditions at the Pike River coal mine on the West Coast of New Zealand’s South Island where 29 miners were killed the following year, they might have been forgiven for conflating with the country’s environmental record with its safety record and concluding that such a self-congratulatory tone was perhaps somewhat misplaced.

In supporting the idea of mining on Schedule 4 land, Energy Minister Gerry Brownlee talked about “the potential for utilising more of the country’s valuable natural resources for the greater good.” Brownlee proposed removing a total of 7,058 hectares of land from Schedule 4 of the Crown Minerals Act, including some areas in the Coromandel Peninsula and the Inangahua sector of Paparoa National Park, and which represented 0.2% of all Schedule 4 land (4.6m hectares in total). Of this, he suggested only 500 hectares might eventually be mined. “In fact, 500 hectares is smaller than what the Ministry of Agriculture and Forestry describes as an average New Zealand sheep and beef farm (550 ha),” Brownlee stated.

As a trade-off for removing 7,058 hectares from Schedule Four, the Government said it planned to add 12,400 hectares to the protected category, providing a net gain in protected land of 5,342 hectares.

While noting that mining in New Zealand was already a NZ$2 billion industry which contributed to export receipts and government revenue, Brownlee emphasised the high productivity of the industry which created “an average of $360,000 of GDP per worker, nearly six times the national average”.

Citing earlier stocktakes undertaken for the Ministry of Economic Development, the Government estimated total mineral wealth throughout New Zealand to be worth NZ$194 billion. Of this, NZ$80 billion or 40% was estimated to be in Schedule 4 land.

Phil O’Reilly, Chief Executive of Business New Zealand, went even further than government estimates and referred to “thousands of billions of dollars” in in-ground natural resources whose development “could create a step change in New Zealanders’ prosperity. "In taking stock of resources below the conservation estate the Government is acting judiciously on behalf of all New Zealanders,” O’Reilly added.

Reiterating the estimate of thousands of billions of dollars in natural resources, Don Elder, the Chief Executive of Solid Energy, which is a major New Zealand resource company, stated that New Zealanders wanted “...good jobs and a high standard of living. Smart well-managed use of our natural resources, combined with a conservation fund to create long-term environmental gain will allow us to have both.”

Tony Kokshoorn, the Grey District mayor on the West Coast of the South Island where coal mining has been a traditional mainstay of the local economy, viewed mining as a “win-win” situation for the country because of the environmentally friendly technology that was available and the income that would accrue to the government coffers. Referring to current mining operations, Kokshoorn said “you don’t see any mining if you drive the length of the West Coast…there’s such a vast area of rain forest that you wouldn’t notice if mining was happening…New Zealand is in the cart financially; if we want to have good health systems, if we want to have good education, we’ve got to tap into our mineral wealth as well”.

Professor Dave Craw, a geologist and environmental scientist from the University of Otago who has researched the environmental effects of mining, stated in a Radio New Zealand interview that there will always be environmental affects related to mining, although he did not think they posed any great environmental threat in the long-term. Professor Craw referred to the gold mine in Reefton on the West Coast where technology provided for the arsenic-bearing ore to be transported elsewhere in New Zealand for processing to mitigate any serious impact on the Reefton environment. “I think you can minimise environmental impact using modern technology and using the science.”

Commenting after the final decision was made about mining on Schedule Four land, Chris Baker, the chief executive of Straterra, the industry lobby group representing the mining and resource sector in New Zealand, took up the refrain first used by Murray Stevens that the mining today is green and could actually enhance the country’s clean and green image: “Done properly, the net environmental or conservation effect of mining can be and should be positive.” Warming to this theme, Baker argued that the real threats facing Schedule Four land are pests and weeds, the eradication of which mining can contribute to. “Done properly, a by-product of mining could be much more conservation than can be afforded by government. It’s already happening. Seen this way, mining is more likely to enhance the New Zealand brand than detract from it.” The real problems on Schedule Four land inferred that New Zealanders were somehow confused over its true value; Baker stated that New Zealand did not know the “intrinsic” value of such land, although it appears from his comments that he was using the term in its financial rather than ethical or philosophical definition. A rigorous test of the economics involved in mining would demonstrate the benefit of opening up more protected areas for mineral extraction.

Arguments against mining on Schedule Four land

Lining up against the proposal were an array of politicians (both government and opposition), environmental NGOs, political commentators and bloggers, and independent scientists. Their arguments concentrated on the potential damage to the environment and New Zealand’s reputation and image in the rest of the world, the alleged distorted and poorly conceived economic argument used by the government, and its clumsy political management of the issue.

Mining Protest-4

Damage to the environment

“New Zealand is blessed with magnificent landscapes, rich forests, and a unique biodiversity. We have a proud history of protecting these precious places and the species that rely on them for survival. Over many generations, New Zealanders have fought hard to protect our National Parks and other conservation areas… It is these wild and natural places, protected from development, that underpin our valuable 'clean green' image and our tourism industry's '100 % Pure' brand. To put this at risk is folly in the extreme.” This is what the Green Party of Aotearoa New Zealand web site said about New Zealand’s unique nature in opposition to the proposal to mine on Schedule 4 land.

Old gold workings, St. Bathans, Otago, New Zealand

Referring to historical efforts to protect the environment, Green Party co-leader and MP, Metiria Turei, told a crowd demonstrating against the Government’s proposal outside parliament buildings that “it was the people who created Schedule 4 and protected those places, and it will be the people who save Schedule 4 and those treasured places, and that’s you.” Another speaker at the same event stated that the mining proposal “touches our identity as a country. This is not a country that mines its most treasured places, it is not a country that mines its national parks. It’s who we are, it’s what we believe in, it’s why we’re proud to be clean and green….The economy is not based on mining, it is based on looking after the land”

The specific long-lasting environmental hazards of mining were focused on by Dennis Teag of the Coromandel Watchdog Group NGO. He said the mining industry liked to talk about the benefits of mining but rarely alluded to the drawbacks, including the very real environmental issue of tailings dams where millions of tons of toxic waste have to be stored in a containment facility forever. The cost of cleaning up if they go wrong was incredibly large, such as the $17.5m required to remedy the damage incurred at the Tui copper, lead and zinc mine on the western slopes of Mount Te Aroha in the Kaimai Range of New Zealand and considered to be the most contaminated site in the country. It was abandoned in the 1970s but Teag claimed the remedial work would probably not be effective anyway.

Coromandel Peninsula Panorama

Auckland Central MP Nikki Kaye, representing the ruling National Party in an electorate that traditionally votes Labour, spoke out against her own party's plan to remove Schedule 4 protected status from part of Great Barrier Island, which is part of her electorate, and open it to mining. "My personal view is that when environmental and economic factors are taken into account and given the island's status in the Hauraki Gulf Marine Park, mining on Great Barrier Island doesn't stack up," she said.

Mount Hobson Great Barrier Island

Auckland mayor and former National Party MP and cabinet minister, John Banks, agreed with Kaye. He said Great Barrier Island was “the untouched jewel in the crown of the Hauraki Maritime Park" and that mining the island would be a “serious blow to the established economy that depends on the area’s untarnished image.” Banks stated that there were more jobs in ecotourism than in open cast mining and that the infrastructure required to mine Great Barrier Island would be devastating to the local environment.

Macraes Gold Mine - Frasers Pit: an example of open cast gold mining in New Zealand

The potential damage to New Zeland’s ‘clean, green’ reputation was highlighted by The Economist. “In many ways, the dilemma New Zealand faces is no different to that of other rich countries—how to balance economic growth with the need to address environmental degradation. But it is particularly acute in a country so dependent on the export of commodities and landscape-driven tourism. The difference between New Zealand and other places is that New Zealand has actively sold itself as “100% Pure”. Now that New Zealanders themselves are acknowledging the gap between the claim and reality, and the risk to their reputation this poses, it is time for the country to find itself a more sustainable brand, and soon.”

Kevin Hackwell, Forest and Bird Advocacy Manager, told Radio New Zealand’s Kathryn Ryan that economic analysis showed that mining Schedule Four land could have had an impact on the 100% pure image to the extent that it would lower GDP by 1%, as the rest of the economy, such as the wine, horticulture, agriculture industries, etc., leverage off the 100% pure brand [16].

Forest and Bird had previously said that leaked information demonstrated that the Government had originally intended to remove up to half-a-million hectares from Schedule Four, but had pared this figure back to just over 7,000 hectares for fear of a massive backlash from the New Zealand public. Even the sweetener offered by the Government to add an extra 12,400 hectares to Schedule Four in compensation was denounced by Hackwell. He said the additional land had been proposed for protection back in 2008 (i.e. before the National Government came to power) and had simply been awaiting official designation. “They should not be seen as trade-offs for high-value conservation land being removed from Schedule 4 because none of the expected 12,000 hectares has significant mining potential”.

Hackwell also attacked the Government’s proposal to set up a contestable environment fund to include 50% of the royalty revenues from minerals, to be capped at NZ$10m a year, when NZ$53m had been cut from the Department of Conservation’s budget over the previous four years. “The proposal is proof that the Government fails to see the value of conservation land – for tourism, for recreation and for the unique plants and animals it protects”.

Questionable figures

The numbers touted by the Government in relation to expected income from mining were subjected to intense scrutiny by independent scientists, journalists and commentators. Wanaka-based consultant geologist Stephen Leary, who has worked in New Zealand, Australia, Europe, Canada and South America, said some of the figures proffered for individual conservation areas in the Government's geological reports were "misleading" because they were "wildly optimistic" and had not been backed by exploration. "The numbers they're throwing around, the value of the mineral wealth in Stewart Island and Great Barrier Island – it's basically just made up," Leary said. "People might go, `Well, maybe it's worth mining Stewart Island because $7b is a lot of money', whereas in fact there's basically no way there's $7b worth [of minerals] there. What it's doing is misleading the public."

Gold mine and mill, Macraes Flat, 2007

Prominent political commentator and blogger, Russell Brown, criticised the Government for not undertaking a robust cost-benefit analysis and Minister of Energy Brownlee in particular for propagating estimates of mineral reserves with little scientific foundation. He referred to fellow blogger Keith Ng’s critique of gold prices – on the basis that gold was the most commonly cited mineral in the Government’s discussion paper – whose value fluctuates greatly depending on prevailing economic conditions, and Brownlee’s allusion to the overall productivity of the mining sector.

Ng had written: “Here’s what Gerry did. He took the total worth of the mining sector, then divided it by the number of people it employed. It does not mean that more mining = higher productivity. It just means that mining is very capital-intensive and employs relatively few people, which are fairly obvious facts.”

Brown remained realistic about the need to pay off public debt and reduce the Government’s fiscal deficits, as well as the hypocrisy of using mineral resources mined in other countries, “[b]ut if I’m to be asked to swallow a proposal whose implications stretch out for tens or hundreds of years, I expect far better than to be told by a minister that he is totting up that future on the back of a bloody envelope.”

Another prominent political commentator, Gordon Campbell, was also highly critical of the indicative figures used by Brownlee, arguing that it encourages mining companies to exaggerate estimates in order to get government backing for drilling in sensitive ecological areas to find out whether said estimates were correct or not. “Does that sound responsible – or does it sound more like the government is playing Russian roulette with the conservation estate?” asked Campbell.

He also criticised the estimated value of the tiny area of Schedule 4 land (NZ$60 billion on 7,058 hectares) compared to the estimate of NZ$194 billion for New Zealand a whole. “It doesn’t make sense. Either these estimates are completely cockeyed – or else some very heavily intensive mining of these areas is being contemplated.”

The problem as Campbell saw it was that the Government relied exclusively on the work of a single mining industry consultant who had admitted that his figures represented a ‘back of the envelope exercise’. “Even then, this figure [$NZ194 billion] is for gross worth. It bears no relation to the figure that would actually accrue to New Zealand, once foreign-owned mining companies have extracted the mineral wealth, and taken the lion’s share of the profits offshore.”

This issue of the direct financial benefit to New Zealand was one pursued by Radio New Zealand host Kathryn Ryan. Asked what the expected government royalties would be from minerals extracted by a foreign-owned mining company, NZ Minerals Industry Association Chief Executive Doug Gordon said the direct return to the country would be a 5% accounting profit on gold and silver or a 1.5% gate profit – one or the other.

During a subsequent interview, Radio New Zealand business commentator, Rod Oram, said the thousands of billions of dollars talked about by Solid Energy and Business NZ was “completely over the top” Mining would be mostly undertaken by foreign companies and while export figures would be very impressive as a result, the question remained how much of that money “sticks to the ribs” of the NZ economy. It was hard to calculate, Oram said, how much of mining exports would accrue to NZ.

Oram was critical of the Government for not outlining a plan for dealing with a potentially substantial flow of money into the NZ economy. He noted that the United Kingdom had not been sensible enough to ring-fence income from its North Sea oil and gas deposits and use it as a fund to invest elsewhere in the economy. Norway, on the other hand, had invested its oil profits wisely.

Government mishandling of the debate

Whatever the relevant merits of the arguments put by the opposing camps, observers from both camps were sometimes united in their criticism of the Government’s mishandling of the issue. While there was general agreement that the state of New Zealand’s finances were dire and required innovative solutions, there was a general consensus that the Government had picked the wrong fight by advocating increased mining of mineral reserves and had communicated its intent poorly.

Left-wing commentator Andrew Campbell said the Government had failed in its communications, its groundwork on the issue and its overall policy, which was opposed by the majority of New Zealanders, while right-wing commentator Matthew Hooton expressed frustration that by pushing for an increase in traditional mining production the National Party had not lived up to its election campaign promise to deliver innovative change to the economy.

Echoing Hooton’s comments, Keith Ng said the Government’s proposal was “a giant leap backwards.”

“We’ve spent so many years talking about the knowledge economy, moving up the value chain, selling ideas and knowhow rather than soil nutrients… and now the vision for a more productive New Zealand is digging shit up and cashing it in?

“We know exactly why we can’t rely on the primary sector in the long-term. The more you squeeze out of the land, the harder you need to squeeze to get the next dollar out. It means that growth becomes harder, and we’ve said for years that moving up the value chain – agriscience, biotech, etc. – was the way forward,” wrote Ng.

For Russell Brown, the Government’s approach to process was “feckless”, reflecting its proclivity not to think issues through thoroughly before promoting a policy publicly.

While Radio New Zealand business commentator, Rod Oram, was generally in favour of mining because New Zealand could not morally accept the benefits of other countries mining when it did not mine its own land, he expressed incredulity that the Government wished to pick a fight over land that might produce NZ$18 billion of income (as a proportion of conservation land potentially earmarked by the Government, i.e. 500 hectares out of 7,058 hectares) when it could mine other land that did not have any of the pitfalls of Schedule Four.

This point about why the Government would pick a fight over such a highly contentious issue was picked up subsequently by Wellington barrister and environmental law lecturer at Victoria University in Wellington, Tom Bennion, when reviewing legal access to minerals in 2011. He asked why mining industry groups did not seek to debate access to Schedule Four lands during the many months that Government was reviewing Schedule Four before Brownlee made his proposal public. “The industry’s silence may indicate that it does not appreciate the minister’s bold initiative, which brought thousands out onto the streets to protest against mining”.

The Commissioner for the Environment delivers her opinion

Not long before New Zealanders took to the streets in force in Auckland on 1 May 2010 to protest the Government’s proposal – an estimated 40,000 people took part in the protest, which “in a country with an estimated population of 4.4 million…was an overwhelming display of public sentiment” – the country’s politically independent Commissioner for the Environment, Jan Wright, publicly opined that the Government had failed to make a case for opening Schedule Four land to mining. Her official submission on the Government’s discussion document criticised the lack of information available about the conservation value of the land and the benefit to New Zealanders of mining it: “These areas have been set aside as some of our most precious conservation land and before we can even begin to discuss mining it in any rational manner we need a lot of good information which simply hasn’t been made available” said Wright “The onus … is on the Government to prove beyond reasonable doubt that the mineral values below the land justify the risk to the conservation values above the land. The information contained in the [Ministry of Economic Development] discussion document does not meet this test.”

Wright was also highly critical the problems raised by the issue accompanying the proposal to water down the powers of the Minister of Conservation by legislating for access to conversation land to be jointly decided with the Minister of Energy. “Such a move would unfairly privilege mining and compromises the role of the Conservation Minister who holds the conservation estate in trust for the public.”

In September 2010, Wright issued a more detailed analysis of the issues stemming from the Government proposal and which made recommendations for clarity through legislative change. She labelled the public debate over Schedule Four “somewhat muddled”, but since the Government had backed down from the issue in July 2010, Wright focused her analysis solely on the Government’s stated intention to pursue other opportunities for expanded mining on public land, including the sixty percent of the conservation land managed by the Department of Conservation not listed in Schedule Four.

Wright noted that there were legitimate arguments justifying mining (“[t]he conservation estate is a major Crown asset and the Crown is justified in seeking a return on this asset”), including the potential for a net conservation benefit derived from mineral extraction in the form of extra revenue for the Department of Conservation to improve pest control (an argument subsequently latched on to by Straterra chief executive Chris Baker – see above). However, Wright also pointed out that the campaign to remove conservation land from Schedule Four had eroded public confidence in mining on the other sixty percent of the conservation estate.

Transparency of information and discussion process

The Schedule Four - Discussion Paper stated that the Ministry of Economic Development and the Department of Conservation were “now seeking input from the community before making decisions about … policy initiatives set out in this paper. These actions aim to make the most of New Zealand’s mineral resources in an efficient and environmentally responsible way”.

All of the discussion documents were published on the Ministry of Economic Development website.

Public feedback was received over an eight week period beginning from the date of publication (March 2010) up until 26 May 2010. The consultation process initiated by the Government sought feedback from the public on a number of areas proposed for removal from and addition to Schedule Four. The Government stated:

"No decisions have yet been made. The results of the stocktake are presented in a discussion paper, on which public feedback is being sought. After receiving and considering submissions on the discussion paper, Cabinet will decide on any changes to Schedule 4 in the third quarter of 2010 ... The Government is also seeking feedback on proposals for a new contestable conservation fund, a proposal to further investigate New Zealand’s mineral potential, and changes to Crown land access arrangements."

The submission questions for the general public were clear, simple, and structured so that the answers could be analysed quantitatively.

Final decision

Results of the public feedback process

The final decision was based upon the outcomes of the consultation process; these reflected the views of a huge number of organizations, as well as individuals (although a large number of these were presented via pro forma submissions).

As a Government media release from 20 July 2010 stated: “Government was undertaking a genuine consultation process and had not made up its mind on any of the matters prior to the eight week discussion period which began on March 22. ... The government received 37,552 submissions … and the vast majority of submissions were focused on the proposal to remove 0.2 per cent of land from Schedule 4 to allow for wider mineral prospecting on those sites.

“Most of those submissions said we should not remove any land from Schedule 4. We heard that message loud and clear.”

Outline of the final decision

In July 2010, the Government confirmed it no longer planned to remove any land from Schedule 4 of the Crown Minerals Act for the purposes of further mineral exploration or extraction. Instead, it will focus its efforts on exploiting New Zealand's mineral wealth in areas that fall outside conservation areas. The reason for this decision was that the Government received nearly 40,0000 submissions after launching a discussion document, resulting in public protest actions, including street demonstrations. The Government was “forced to drop the plans because of the public outcry” as “New Zealanders did not want to see their pristine conservation estates and their national parks dug up for mines”. New areas were to be added to Schedule 4 by October 2010 as originally planned.

However, the Government still saw a silver lining to the outcome, as Energy Minister Brownlee said: “I suspect few New Zealanders knew the country had such considerable mineral potential before we undertook this process and I get a sense that New Zealanders are now much more aware of that potential and how it might contribute to economic growth.”

Ex post facto analysis of the economic case for mining Schedule Four land

Geoff Bertram, a Senior Associate with the Institute of Policy Studies at Victoria University in Wellington, looked at the economics of the Government proposal as part of a symposium on the Schedule Four debate in August 2010 following the final Government decision on the issue. He wrote up his findings for publication in 2011 in which he began with a reminder of the “resource curse” concept, which holds that countries overly reliant on resource-based exports tend to grow more slowly than the average. Associated with the damage minerals booms do to growth is the tendency to unwittingly encourage “rent-seeking” whereby large mining companies fund large-scale lobbying to extract special favours from government, which in turn distorts policy regimes to the detriment of the rest of the economy. Although mining in New Zealand has not been large enough to make the resource curse a destabilising factor in macroeconomic issues, there are nevertheless issues of “diffuse negative spillovers from mining…such as damage to the national branding of pastoral and tourism exports, loss of the existence and option values of natural landscapes and ecosystems, and the potential for regulatory capture by large mining interests”.

New Zealand had faced such distortions under the 1975-1984 National Government when it embarked on a series of large resource-based projects under its much derided “Think Big” programme, e.g. exploitation of the huge Maui gas field in the Tasman sea off the coast of Taranaki as a way of countering the oil shocks of the 1970s. Later governments sought to remedy the negative impact Think Big had on the regulatory system by recalibrating planning and environmental law via a new Conservation Act in 1987 and the Resource Management Act in 1991 (see above). The anomaly represented by mining activities, which the Minister of Conservation had no power over, was remedied by amendment of the Crown Minerals Act 1997 with the creation of Schedule Four “as a device to reduce regulatory uncertainty” by “removing the highest-value categories of [conservation] land from consideration for mining”. The credibility of such protection, however, is seriously undermined when industry lobby groups, or those who believe they would be doing these groups a service, pinpoint an opportunity to circumvent or nullify these types of rules. This was indeed the case with Schedule Four because it gives the ministers responsible the option of removing protected areas from the schedule by means of a simple Order in Council “following a consultation process that might easily be reduced to tokenism”. According to Bertram, the furore triggered over the status of conservation land protected by Schedule Four in 2010 showed that removal from such protection should be decided by a parliamentary vote and the Crown Minerals Act should accordingly be amended.

Turning to the actual value of Schedule Four minerals, Bertram used as a starting point the only dollar figure the Government provided in its discussion document: NZ$194 billion. However, this was merely an estimate of the gross revenue from the extraction of all “on-shore minerals, excluding hydro-carbons”. Using 2002 and 2003 Statistics New Zealand estimates of the rental value of the country’s mineral estate, i.e. after subtracting all relevant costs (exploration, development, transportation, etc) to establish the net income that total mineral resources could yield, Bertram found that the lump-sum valuation of the entire mineral estate was less than NZ$2 billion, or less than 1% of the Government’s gross sales revenue figure. As the Government’s 2010 stocktake included only 10% of New Zealand’s total mineral reserves, they would equate to less than $200 million or not even $70 for each of New Zealand’s 2.8 million voters. Even if all Schedule Four land were opened up for mining, which would be roughly equal to 40% of the mineral estate, the country could expect to make only $400 million, or $143 per voter.

Coming to the issue of specific spillovers or externalities stemming from mining protected land, Bertram referred to two earlier studies which showed that a major negative shock to New Zealand’s “brand” as a ‘clean and green’ and ‘100% pure’ nation in terms of real or perceived environmental damage could have a big economic impact by substantially reducing overseas tourism. The potential negative impact on GDP from a loss of image could be as much as 1-2%.

Prospects for expanded mining in future

Despite the Government’s climb down over its mining plans, it had not lost its appetite for expanded mineral extraction. According to Brownlee, the advantage of the discussion process was that it identified where the mining industry could and could not go. “As many people have pointed out, around 85 percent of the country is not protected by Schedule Four and a great deal of that land has mineral potential”.

"New Zealanders have given the miners sector [sic] a clear mandate to go and explore that land and, where appropriate, within the constraints of the resource consent process, utilise its mineral resources for everyone's benefit," Brownlee said.

The Government would conduct a significant aeromagnetic survey of non-Schedule Four land in Northland and on the West Coast of the South Island to learn more about which areas have the highest concentrations of valuable minerals.

Issues from a global perspective This New Zealand case study provides an example of issues that are writ large on a global scale: how to sustainably benefit economically from the exploitation of non-renewable natural resources?, at what cost to the natural environment should mineral extraction take place?, how should civil society and all relevant stakeholders be engaged in a discussion over the efficacy of mining?, and what is the best and most effective regulatory framework that avoids the potential danger of the “resource curse”?

What were “success” factors that led to the rejection of the purely economically justified political strategy under specific New Zealand conditions? These factors included the following:

• Accountability: the importance of a rigorous assessment of the country’s economic potential (from a mineral resource point of view), called a ‘stocktake’ on the one hand – or in this particular case the recognition that such assessment was lacking in rigour - and a thorough examination of public views on the other. Ultimately, Government representatives proved accountable to the general public and conceded that its argument had been weak and therefore had not convinced the voters to back it
• Transparency: the importance of a democratic consultation process – “hard data” from the stocktake (mostly relating to the economic value of minerals) were supplemented by “soft data” on the intrinsic value of culture and the environment (conservation), and contribution to the New Zealand economy of its ‘100% pure’ brand image with the benefits that accrue from tourism and recreation, and which finally appeared from the point of view of local communities to be more beneficial.
• Openness: the importance of having a dialogue with a wide range of industry groups, individuals, civic associations and NGOs in the country, which resulted in a diversity of viewpoints on the issue. The communication process is of particular interest in this case study and could be analysed further from the perspective of applying it to less or newly democratic societies.
• Intrinsic value: Even though New Zealanders overwhelmingly voted into power a conservative government in 2008 which promised to focus on the country’s economic needs, the anti-mining debate was nevertheless driven by a strong sense of the intrinsic value of the country’s conservation estate and an inherent understanding that whatever financial benefit could be literally extracted from protected land could not possibly outweigh the benefit of leaving that land intact.

Was the final result based on radical ideology? What were the general benefits of the consultation process?

• Although the pro-mining lobby accused the anti-mining camp of being overly emotional over the issue, it was clear that a wide spectrum of the New Zealand public was against the Government’s proposal, including NGOs, both government and opposition politicians, professional commentators, and academics etc. These groups were simply following a long New Zealand tradition that placed higher value on an unspoiled natural environment than short-term financial gain. As Bertram noted, “the existence values of landscapes and ecosystems…are no less real than commercial values, and it is not helpful to dismiss them as ‘emotion’, since human welfare is ultimately experienced as happiness by individuals and it is this that economics seeks to maximise”.
• Although protests of the size and scale of the anti-mining demonstrations are relatively rare in New Zealand, the opposition provoked by the Government mining proposal fits in with a wider global reaction against the perceived interests of the wealthy “elite”. According to O’Brien, the protest, especially among the grassroots, “may represent a reaction to the prioritization of economic development over environmental protection undertaken by the right of centre National led government”.
• The protests should not be construed as “radical”, however, as past support for environmental issues among the general public in New Zealand has been tempered by the understanding that economic performance should be maintained. This is true of the mining issue in New Zealand where the public is generally comfortable with coal mining and quarrying for aggregates for the construction and roading industries.
• In this case, rather than generating an insoluble conflict, a better understanding of the country’s mineral estate and its potential worth to the New Zealand economy was created: including the value of environmental “services” (sometimes subjectively perceived).
• Gaps in knowledge and information were highlighted, sometimes to the embarrassment of the Government, which were quickly filled by a range of expert commentators.
• Light was cast upon the way government decision-making procedures work, with the result that proposals for greater legislative clarity were put forward that would provide more regulatory certainty and transparency in future.
• Considerations regarding the improvement of technical mining procedures were started.

Was the philosophical debate over the efficacy of mining for minerals in general resolved?

• Mining the conservation estate in New Zealand was emphatically rejected on both environmental and economic grounds, i.e. the damage to New Zealand’s image would have serious ramifications for one of its main income earners – tourism
• The economic argument for mining more non-scheduled areas became more readily accepted
• There was growing awareness of the moral gap between rejection of mining in New Zealand and acceptance of products derived from mining in other countries
• The stirrings of a debate over how to best use future potential income from mineral resource exploitation began, e.g. establishment of a special purpose Conservation Fund.

Positive outcomes to be learned from

Although the way the debate was conducted clearly exasperated parties on both sides, the whole process might be considered as positive:

• it triggered a deluge of analytical commentary on the pros and cons of mining the conservation estate and contribution of the mining industry to the New Zealand economy
• both sides probably felt they had been given ample opportunity to voice their arguments, even though the Government may have regretted the way it handled its communication campaign (which may have been the result of relative inexperience after having only recently won an election for the first time in nine years)
• although shortcomings in the regulatory process were highlighted, a comparatively large number of New Zealanders felt confident enough about influencing the outcome to participate in the public consultation process. Democratic dialogue was respected.
• the debate promoted a thorough and thoughtful discussion of conservation values, and went some way toward demarcating the distance to which New Zealanders are prepared to go to encourage economic growth at the expense of the environment

Conclusion

The heated debate in New Zealand over the benefits of mining for minerals on the conservation estate was a symptom of wider global economic forces that place an especial emphasis on economic growth at almost any cost. While there is a very legitimate debate to be had over the intrinsic and economic value New Zealanders place on their landscape and environmental heritage and what role mineral extraction should or could play in that, the arguments used by the government to justify the potential exploitation of conservation land were clearly not seen as credible by most New Zealanders. The government may not have abandoned ideas of revisiting the issue in the future, but regardless of the action it takes and the strategies it adopts, the whole debate has triggered a wider ranging philosophical and political discussion over the way the environment is perceived and whether decision-making processes relating to environmental protection reflect the high ideals and democratic traditions that New Zealanders aspire to.

Questions and proposed methods for further research

• The communication process could be investigated in more detail: what are the links between the most important factors involved in economic development (“economic development” should not be considered “mining” itself, but rather “technological progress” in the mining industry, the process of collation and utilisation of geological data, an appropriate breakdown of mining data at the aggregate level, and the interlinking of the mining industry with other sectors, e.g. recreation, tourism, agriculture, viniculture), and the number, diversity, and value orientation of the responses in the Summary of Submissions?
• What are the subjective values of the environment? How could they be used as a counter-weight to economic values?
• What are the economic counter-factuals to the primary economic argument for mining? What is the opportunity cost?
• Institutional procedures and official decision-making processes (going on in the ministries and other institutions concerned) versus the democratic process (on the part of civic society) - what were the differences? Were there any correlations?
• Does New Zealand have an advantage or disadvantage in comparison to other democratic societies in these types of public participatory consultation processes because of its small size? Is New Zealand unique in its desire to protect its landscape at the cost of potentially enhanced economic benefit from exploitation of such natural resources?
• Did the proposed removal of Schedule Four status from some lands represent “a significant challenge to the prevailing conservation paradigm” in the face of wider global challenges to protected areas from increasing “global commodity demands and local land pressures”? Is this the thin end of the wedge in terms of moving away from protected conservation status?

Resources

Video clips/Documentaries

• TV3 News: Mining in the Denniston Plateau Likely 22 November 2011 9m35s
• TVNZ News:Government misleading public on mining promise - Greens 9 July 2013 3m5s
• TVNZ News:Mining permit for protected land could 'set precedent' 10 July 2013 4m43s

Web sites

• Schedule 4 Review. New Zealand Mineral Exploration Association. Available from http://www.minerals.co.nz/html/main_topics/whats_new_sched4.html
• Natural Riches Lie Untapped. New Zealand Mineral Exploration Association. Available from http://www.minerals.co.nz/html/main_topics/whats_new_untapped.html
• Too Precious To Mine
• Coromandel Watchdog
• Parliamentary Commissioner for the Environment, Making Difficult Decisions: Mining the conservation estate

Academic articles

• Baker, C. (2011)"A Mining Industry View," Wellington Policy Quarterly, 7, no. 1: 26–30.
• Beninion, T. (2011)"Access to Minerals," Wellington Policy Quarterly, 7, no. 1: 7–12.
• Bertram, G. (2011) "Mining in the New Zealand Economy", Wellington Policy Quarterly, 7, no. 1: 13-19.
• van Kampen, M. (2012). The adequacy of legislation regulating the environmental effects of mining. New Zealand Journal of Environmental Law, 16, 203.
• Mascia, M. B., & Pailler, S. (2011). Protected area downgrading, downsizing, and degazettement (PADDD) and its conservation implications. Conservation Letters, 4(1), 9-20.
• O'Brien, T. (2012). Environmental protest in New Zealand (1997–2010). The British journal of sociology, 63(4), 641-661.
• Rudzitis, G., & Bird, K. (2011). The Myth and Reality of Sustainable New Zealand: Mining in a Pristine Land. Environment: Science and Policy for Sustainable Development, 53(6), 16-28.

This page was created with support of the OP VK CZ.1.07/2.4.00/17.0130 Project - Interdisciplinary Sustainable Development Network