1. Introduction
Context
1.1 The Ministry of Economic Development, in consultation with other agencies and stakeholders, is currently developing an oil emergency response strategy which will detail the policy and operational aspects of managing an emergency disruption of oil supplies should that occur. This document outlines and seeks feedback on the key aspects of such a strategy.
1.2 Approximately 75% of consumer demand for oil products in New Zealand is for domestic transport use and another 7% for aviation.1 The overall objectives of the strategy are to ensure that the effects of an oil supply disruption on New Zealand would be minimised and to ensure that New Zealand is able to effectively meet its obligations as a member of the International Energy Agency (IEA). The strategy will be relevant for both international emergency situations, where the IEA asks member countries to implement emergency measures, and domestic situations where New Zealand responds independently.
1.3 However, in the event of a long term disruption, major disaster or pandemic-type event, there may also be a need to activate a civil defence contingency plan, which the Ministry of Civil Defence and Emergency Management are leading the development of over the course of 2006/2007. Along with the responsible government departments, the Ministry of Civil Defence and Emergency Management will engage with the petroleum industry and regulatory bodies to develop contingency plans, or modify existing plans, that support the petroleum industry to take coordinated action during an emergency that affects distribution nationally or regionally.
1.4 The Guide to the National CDEM Plan which came into effect on 1 July 2006 [Cab Min (06) 11/5 refers], notes the Ministry of Civil Defence and Emergency Management will develop contingency plans to support the CDEM sector to:
- respond in support of the welfare requirements of critical and vulnerable customers arising from the petroleum distribution interruption;
- provide logistical and other support to the petroleum and oil industry, if appropriate; and
- support the contingency arrangements of the commercial sector to lessen social and economic impacts during long-term recovery outages or reduction in services.
1.5 The civil defence contingency plan will complement and support the oil emergency response strategy. In the event of a local, regional or pandemic type of event the Ministry of Civil Defence and Emergency Management contingency plan would take effect, although measures (including regulatory powers) in the strategy may assist if the situation warranted it.
What Will the Oil Emergency Response Strategy Say and When Will It Be Activated?
1.6 The oil emergency response strategy will allocate roles and responsibilities for action in an emergency, outline the measures that are available to respond to an emergency supply disruption, and provide guidance on how to implement them. This will help to ensure that decisions are made quickly in an emergency situation, that the appropriate processes are followed, and that decisions are based on sound information.
1.7 The government will only activate the emergency response strategy if the taking of emergency measures is required to either fulfil New Zealand's obligations under the IEA or to deal with an emergency disruption to petroleum supplies in New Zealand. For the latter situation, the government may introduce regulations under the Petroleum Demand Restraint Act (1981) if petroleum products are, or are likely to be, in short supply in New Zealand or within any specified part of New Zealand. The emergency response measures will not be activated where the primary purpose is price management or to assist any particular supplier.
How Will the Emergency Response Strategy Improve Our Response to an Emergency Oil Supply Disruption?
1.8 New Zealand regularly participates in IEA oil emergency response simulation exercises. Through participation in these exercises, the Ministry of Economic Development has developed a process for responding to an emergency oil disruption and guidance on how to implement specific emergency response measures.
1.9 The process for responding is now being updated and expanded to take account of new domestic and international research into responding to oil supply disruptions2 and recent international experience of responding to oil emergencies.3 Furthermore, the updated oil emergency response strategy will take account of the changing range of options available to New Zealand to respond to an oil emergency disruption. In particular, the New Zealand government is currently undertaking a process of tendering for reserve petroleum stocks which will broaden the response options available to New Zealand.
What Are New Zealand's IEA Emergency Response Obligations?
1.10 The IEA was founded in the 1973/1974 oil crisis to coordinate measures in times of oil supply emergencies. The scope of IEA work has since widened to include broader energy issues, but oil security remains the IEA's core activity.
1.11 As a member of the IEA, New Zealand may be called upon to participate in the IEA's emergency response procedures. The IEA's emergency response mechanisms were set up under the 1974 Agreement on an International Energy Program (IEP). The IEP Agreement requires IEA countries to hold oil stocks equivalent of at least 90 days of net imports of the previous calendar year and to release oil stocks, restrain demand, switch to other fuels, increase domestic production and, if necessary, share available oil, in the event of an oil supply disruption of 7 per cent or more to the IEA or individual countries.
1.12 The IEA also has a complementary set of measures known as Co-ordinated Emergency Response Measures (CERM). These provide a rapid and flexible system of response to actual or imminent oil supply disruptions of any size.
What Legislative Powers Are Available to Respond to an Oil Emergency?
1.13 If required, emergency powers to respond to a disruption in oil supplies are provided in the Petroleum Demand Restraint Act (1981) and the International Energy Agreement Act (1976).
1.14 The Petroleum Demand Restraint Act authorises regulation making for the purpose of restraining demand, reducing consumption, or ensuring the equitable distribution of petroleum products in New Zealand. As noted above, the government may introduce these regulations if petroleum products are or are likely to be in short supply in New Zealand or within any specified part of New Zealand.
1.15 The International Energy Agreement Act provides for maintaining reserve supplies. It also provides for ministerial directions and emergency regulations to control the production, acquisition, distribution, supply, or use of petroleum, if it appears that New Zealand's IEA obligations require the taking of emergency measures.
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