Carbon farmer appeals decision over MRP's $34.7m carbon credit bill

New Zealand Carbon Farming, the country's largest supplier of post-1989 bulk carbon credits, is appealing a High Court decision which found in favour of Mighty River Power over a $34.7 million liability NZCF claims it's owed.

The original case, heard by Justice Kit Toogood in the High Court at Auckland last November, centred on a change to the methodology for working out the amount of carbon credits produced by forests under the Emissions Trading Scheme (ETS). NZCF's legal claim related to a dispute with MRP over carbon credits under a 15-year contract for NZCF's Harwarden Forest in North Canterbury.

At the time, MRP opposed the claim which meant it would have to buy significantly more carbon units from the supplier than was originally forecast because the contract included a pro-rata scaling clause if the quantity of carbon sequestration produced by the forest was altered by a new methodology.

Justice Toogood found in favour of MRP in a judgment released in June of this year.

Appearing in the Court of Appeal before Justices John Wild, Christine French and Mark Cooper, David Goddard QC said NZCF's appeal revolved on three issues, being the scale-up and MRP's contingent claim, the wash-up of units after five-yearly returns, and whether NZCF needed to provide records to MRP necessary to verify units received were the same as the power company had agreed to buy.

The issues were also traversed in the High Court hearing.

The contract between the two was signed in January 2012. It was already known then in the industry that the government planned to change the methodology from so-called Look Up Tables, which measured carbon sinks from forests on a regional basis, to a Field Measurement Approach (FMA), which measured each particular forest. What wasn't known at that time was how much difference that would make to the quantity of carbon credits Harwarden Forest and others would generate. The FMA approach came into effect in early 2013.

In his opening statement to the Appeal Court, Goddard went through Justice Toogood's decision, explaining the differences between the earlier measure and the FMA, saying all models would carry some degree of imprecision.

MRP's 2015 annual report includes a contingency related to the ongoing case. If NZCF's appeal is successful, MRP will have to buy additional carbon credits, which carry a notional cost of $34.7 million over the life of its 15 year contract with NZCF.

The hearing is set down for one day and is continuing. Jack Hodder QC is acting for MRP.

(BusinessDesk)