Economy

Davos down under: Taranaki searches for answers

Taranaki is looking for answers following the oil and gas exploration ban. Is a new energy centre enough? Thomas Coughlan reports from the Just Transitions summit in Taranaki. 

Analysis: On Wednesday night, Prime Minister Jacinda Ardern went into the snake pit.

Having announced the Zero Carbon Bill at the Beehive and endured a withering attack on KiwiBuild at Parliament, she boarded a flight to New Plymouth for Thursday’s Just Transitions summit, a conference that was meant to hash out Taranaki’s future when the oil and gas sector eventually disappears. 

Two hours into the summit, many in the auditorium (possibly including members of the Government) were scratching their heads. 

The opening speech from James Cameron, director of Titanic and Avatar, Suzy Amis Cameron (who played Rose’s granddaughter in Titanic) struck some unusual notes. 

Amis Cameron made a strong pitch for a vegan diet that would improve, among other things, the sex lives of New Zealanders. As Taranaki grappled with the loss of one of its core industries, the Camerons seemed to be making a case for shutting down the other one as well. 

It all felt a bit Davos down under, a rehash of the much parodied Swiss meeting place where the ultra rich jet in for a few hours, mouth off to each other about wealth inequality, and jet out again. 

Cameron even finished his speech with a thank you to New Zealand for its film “incentive programmes” (read: tax breaks) that attracted high value to productions like his forthcoming Avatar sequels. 

“We make thousands of jobs in Wellington by attracting that capital to New Zealand,” he said.

And he inadvertently hit the nail on the head.

"We do create thousands of jobs in New Zealand, our unemployment rate is at near record lows, they’re just in the wrong places."

A little over a year ago, Prime Minister Jacinda Ardern announced the block offer of new offshore oil and gas exploration permits would not go ahead.

What became known as the Oil and Gas Ban quickly became one of the Government’s thorniest political crises. To the Government’s right, the decision represented economic suicide, kissing goodbye billions of dollars of tax receipts. To the left, the ban was hollow virtue signalling: existing permit holders would continue to explore and drill to their collective hearts’ content.

It all felt a bit Davos down under, a rehash of the much parodied Swiss meeting place where the ultra rich jet in for a few hours, mouth off to each other about wealth inequality, and jet out again. 

But the thorniest issue of all isn’t to the left or right of the Government: it’s right in the middle, smack between New Zealand First, Labour, and the Greens, and that is how to keep regional economies alive, pay workers fairly, and do all of that without trashing the environment in the process. 

The problem with Taranaki’s oil and gas sector is that it’s almost exactly what we want: well-paying, challenging jobs that aren’t in Auckland or Wellington. Oil and gas accounts for 41 percent of Taranaki’s GDP and has lifted the region’s GDP per capita to $80,000, far higher than the national average of $51,000.

But then there’s the looming, obvious problem that all of that is built on extracting fossil fuels, which go on to cause climate change.

The industry isn’t pleased. It quickly formed an opposition group, Energy Voices, to lobby against the change. The word in Wellington was that people were worried and worse, they were angry. 

And so we get the Just Transitions summit. Where senior government ministers got together with businesses, unions, Oscar-winning film directors, and economists (interestingly, not members from industry group Petroleum Exploration & Production Association New Zealand (PEPANZ), who were not invited to speak) to talk about Taranaki’s future when the drilling eventually stops. 

Unlike their industry leaders, people at the summit said they weren’t surprised when the offshore block offer came to an end last year. Sean Hindson and Leilanie Bennett, who both work in the sector and attended the summit with their union, said they both knew the sector had to change.

Speaking outside the conference, Hindson and Bennett said they took a global view of the challenges. 

“The change globally is coming, you’ve just got to make sure you do it in a way that it doesn’t have a massive effect on the community and workers,” Hindson said. 

For Bennett, the ban was about more than just oil and gas. 

“My partner is a crane operator who works in the sector, but for us personally, things around the foreshore and the seabed are very important, so we agree with no more offshore exploration especially for our kaimoana and our marine life,” she said. 

But she has her fears too. She’s afraid of income loss, and her extended family splitting up and leaving the region to find work. With the economy here so dependent on one sector, there’s no guarantee another would be able to fill the gap. 

The Government hopes clean energy can help. It announced a National New Energy Development Centre, which Ardern promised would “help create new business and jobs in Taranaki, while helping New Zealand move towards clean, renewable energy and away from fossil fuels". 

The centre will be set up with $27 million and be given $20 million over the next four years for operational costs. Energy Minister Megan Woods said it would create up to 45 jobs. Even if, as promised, it sparks employment in the private sector, there are doubts it would replace the 11,000 jobs that industry group PEPANZ estimates - and the businesses supporting them. 

At the moment, the centre has some industry support; Todd Energy and Methanex, two of Taranaki’s biggest players, have indicated their support. 

A more controversial issue still is whether the promised clean energy jobs will be in Taranaki or elsewhere. Woods said the energy centre would be a “conduit” between research and industry and would help players get their technology commercialised. While the centre would be based in Taranaki, Woods conceded that the $20 million in research funding could “end up in other places”. 

That’s the key problem with Just Transitions: it’s not just an industry issue. Cold, hard, economics tends to mean well-paying white collar work gravitates towards towards cities, where universities and the private sector create their own knowledge ecosystems.

Finance Minister Grant Robertson was pressed later in the day to guarantee that each job lost in the oil and gas sector would be replaced by another of equal value. 

“Targets and setting targets is a topic of great interest to the Government right at the moment,” he said, apparently referencing Housing Minister Phil Twyford’s struggle to meet his KiwiBuild goals.  

“I’m not going to sit on the stage and commit to that,” he said. 

But the Government has political capital to burn here. The oil and gas ban hasn’t been enough to burn off the region’s Jacindamania. 

In the lobbies, corridors, and beside the coffee cart, attendees said they trusted the Government would keep its word, transitioning their economy without shedding jobs. Despite the capital gains tax backdown and KiwiBuild dramas, people at the summit — even unions, believed in this Government's commitment to working people. 

But that's today. There's always the chance the attention lavished upon Taranaki vanishes as the ban faded into distant memory, but the unions aren't buying that. 

“I don’t think that will be the case with this Prime Minister,” said Mike Howarth, of the E tū union. 

“I think Megan Woods and Grant Robertson are absolutely committed to this process,” he said. 

Sean Hindson agreed: “It’s refreshing to believe in a politician”. 

But if that all sounds a bit one-sided, that’s because it was. PEPANZ wasn’t invited to speak to the summit. Its chief Cameron Madgwick came as a delegate.

With gas alone supplying energy for 400,000 New Zealanders, according to an estimate from Gas Industry Co., an industry co-regulator, Madgwick wanted to make the case for gas as an energy-dense fuel to help New Zealand transition to a low-emissions future. 

Ardern is lucky. She has a long runway. While new exploration permits will no longer be granted, onshore exploration and the use of existing permits is still very much part of the energy picture. This means that most people currently working in the sector will have their jobs for a while yet.

What happens to Taranaki afterwards is still very much up in the air. 

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