Shell and Todd caught drilling without approval

Multi-national oil company Shell's New Zealand arm and local energy giant Todd Energy have breached the new law governing New Zealand's Exclusive Economic Zone, the Environmental Protection Authority says in an Oct. 10 document released on Wednesday evening by the Green Party.

The two companies' joint venture, Shell Todd Oil Services (STOS), has been issued with a warning letter only, and no further action is contemplated by the EPA at this stage, a spokeswoman said. A statement from the EPA described the issue as indicative of a "bedding-in period" for the new legislation, which specified a process of transition for existing producing oil and gas fields, all of which are in the Taranaki Basin.

The two breaches relate to so-called "side-track" wells - spurs drilled from existing wells - in the 35 year-old Maui oil and gas field, which was subject to constant upgrades and development before the EEZ and Continental Shelf (Environmental Effects) Act came into force in 2012, and has a history of health, safety and environmental compliance.

In a statement this evening, Shell country chairman and STOS general manager Rob Jager said: "Shell Todd Oil Services has been safely operating the Māui natural gas field off the South Taranaki coast for more than 35 years. 

"STOS is a strong supporter of the aim and intent of the EEZ legislation however it is not uncommon with new legislation that there are different interpretations initially. In our view the activities referred to ... have had no adverse impact on the environment and we will continue to work constructively with the EPA to come to a common understanding of the new legislation."

Both the EPA and Shell New Zealand appeared blind-sided by TV3 breaking news of the breach, assisted by information released by the EPA to the Green Party under the Official Information Act some 20 days after the Sept. 20 general election. The Greens issued an EPA memorandum dated June 20, in which the regulator notes company employees "repeatedly ... promoting a desire to comply and a belief that certain activities had commenced before the EEZ Act came into force."

A statement attributed to the EPA's general manager of enforcement and compliance, Andrea Eng, said: "The EEZ Act and the associated regulations are relatively new and we are still in the bedding-in stage.

"There will continue to be active discussion between the regulators and operators to ensure operators fully understand their new obligations."

More regular inspections would occur.

"A grandfathering provision under the EEZ Act allows an operator to continue with existing activities involving structures or pipelines which would otherwise require a marine consent as a result of the EEZ Act coming into force," Eng said. "These existing activities may continue without a marine consent for the term of the relevant petroleum mining permit."

"However, if an operator wishes to undertake activities ... such as any new structure or pipeline associated with an existing activity, making changes in the character,
intensity or scale of an activity, or any alteration, extension, removal of existing structures or pipelines, they will need to request a ruling or apply for a marine consent from the EPA."

Marine consents were not required before the EEZ Act because there was no legislated regime for New Zealand's vast oceanic EEZ, the fifth largest territorial waters on the globe.

Green Party co-leader Russel Norman said the breach was proof that "the government’s cavalier attitude towards environmental protection has encouraged this type of cowboy behaviour."

“In this context, it’s hardly surprising that a major oil company has broken our environmental protection law by drilling wells that the EPA says are illegal."

STOS is owned 50/50 by Royal Dutch Shell, headquartered in the Netherlands, and Todd Energy, a subsidiary of the empire owned by the Todds, the family known as New Zealand's wealthiest.

“We now need the EPA to pursue prosecutions so that the industry learns its lessons," said Norman.

(BusinessDesk)