Offshore Renewable Energy Bill passes first reading

Introduced under urgency and having passed its first reading, the Bill is a key component of the Governments Electrify NZ Plan

The Offshore Renewable Energy Bill (the Bill) introduces a legislative framework to govern the construction, operation, and decommissioning of offshore renewable developments.

The Bill addresses a legislative gap, providing developers with the certainty needed to invest in large-scale clean energy projects.

The purpose of the Bill is to:

• Offer greater certainty for investment in offshore renewable energy developments.
• Facilitate the selection of developments that align with New Zealand’s interests.
• Manage risks to the Crown and the public associated with offshore renewable energy projects.

The key functions of the Bill include:

• Establishing a two-stage permitting regime to provide certainty and enable selection of developments that best meet New Zealand’s interests.
• Requiring consultation, including specific engagement with Māori groups, to consider relevant interests.
• Imposing decommissioning and financial security obligations to ensure developers bear the costs of decommissioning.
• Providing for safety zones around infrastructure to protect assets and individuals.
• Including provisions for the administration, monitoring, and enforcement of the regime, along with penalties for non-compliance.

Feasibility and commercial permitting regime

The Bill establishes a two-tier permitting framework. These permits are awarded by the Minister of Energy and comprise two distinct categories: feasibility permits and commercial permits.

Feasibility Permits:

Feasibility permits provide holders with the exclusive right to:

• Apply for a commercial permit within the specified area.
• Seek resource or marine consents for offshore renewable energy generation activities in the same area.

This exclusivity ensures no competing offshore renewable energy developers can operate within the same permit area during the permit’s validity, although it does not prevent other activities from occurring in the area.

Key features of feasibility permits include:

• Allocated through a publicly notified application round.
• Applicants must meet eligibility criteria, demonstrating financial and technical capability and alignment with national interests and benefits.
• The Minister considers risks such as effects on Treaty settlements, national security, public order, and the applicant’s management of existing rights in the area.
• Permit holders have the exclusive right to explore offshore renewable energy commercial opportunities in the area for 7 years.
• The use it or lose it principle: permits are subject to milestones, with possible revocation if insufficient progress is made.
• When multiple applications are submitted for the same area, the Minister evaluates them on their merits.
• Where there are applications for overlapping permit areas, the Minister may also invite 1 or more offshore renewable energy applicants to revise their application.

Commercial Permits:

Commercial permits allow permit holders to undertake offshore renewable energy generation infrastructure activities as authorised by their resource or marine consents. The procedural and administrative processes for commercial permit applications align closely with those outlined for feasibility permits.

A commercial permit is exclusively available to feasibility permit holders for the relevant area. This permit introduces enforceable conditions by the Minister to impose, monitor and enforce obligations on the permit holder for the project’s lifecycle.

Key considerations for commercial permits include:

• Applicants must demonstrate readiness to execute the development plan and possess technical and financial capacity to install, operate, maintain, and decommission the proposed infrastructure.
• Applicants must show a high likelihood of compliance with the regime and provide financial security arrangements for decommissioning.
• The Minister considers any significant changes to the project that could impact the benefits identified during the feasibility stage.

Provisions for Feasibility and Commercial Permits

Provisions common to both feasibility and commercial permits, include:

• General requirements for all permit holders.
• Compliance with permit conditions at all times.
• Processes for permit variations, including changes to area, duration, or conditions.
• Rules for transfers of permits and changes in significant influence over permit holders.
• Revocation and surrender of permits.

The ability to vary, transfer, surrender or revoke permits is subject to Ministerial approval.

Importantly, the permitting regime does not replace existing regulatory requirements, such as those under the Resource Management Act 1991 (RMA) and the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Act 2012 (EEZA).

Consultation requirements

The Bill provides consultation requirements, including:

• Applicants for feasibility and commercial permits must consult with relevant Māori groups before offshore renewable energy applications are submitted.
• The Minister must also consult those Māori groups before granting any offshore renewable energy permit.
• The Minister must give public notice of all feasibility permit applications being considered and provide reasonable opportunity for any person to submit on that permit application.
• The Minister must give public notice after accepting a commercial permit application but no need for further consultation.

Decommissioning and financial security obligations

The decommissioning requirements for offshore renewable energy infrastructure are outlined in the Bill. It imposes dual obligations on commercial permit holders and owners of offshore renewable energy transmission infrastructure to both decommission their infrastructure at the end of its life and maintain sufficient financial security to cover the Crown’s estimated costs if they fail to do so.

The decommissioning obligation generally includes removing infrastructure and restoring the site, with specific details and timelines set by regulations. This obligation must be met before the offshore renewable energy commercial permit expires, is surrendered, or at an earlier time specified by the Minister. In cases of permit transfers, a limited trailing liability applies to former permit holders until the new holder meets the financial security requirements.

Permit holders must also submit decommissioning proposals, cost estimates, and completion reports to the Minister to ensure compliance and oversight throughout the decommissioning process. The Bill specifies the obligation to establish and maintain acceptable financial security arrangements that protect the Crown by covering the estimated costs of decommissioning if the responsible party fails to fulfil their obligations. These financial security requirements may continue even after the permit holder is no longer responsible for the permit or infrastructure unless released earlier by the Minister.

Protection of infrastructure and safety zones

The Bill enables the Minister to establish a safety zone up to 500 metres around offshore renewable energy infrastructure, including generation sites and substations. These zones prohibit unauthorised access or activities, protecting both the infrastructure and the public. Applicants for safety zones must consult with Maritime New Zealand and other parties likely to be affected by the proposed restrictions.

Administration and enforcement of the regime

The Ministry of Business, Innovation, and Employment (MBIE) is tasked with administering, monitoring, and enforcing the regime. To fund these activities, the Bill provides for the recovery of costs through fees and levies.

The Bill empowers enforcement officers and safety zone officers to carry out compliance and enforcement. Penalties are prescribed for breaches of the regime including:

• Fines ranging from $3,000 to $10 million.
• Pecuniary penalties for civil violations.
• Imprisonment for up to two years for serious breaches.
• Revocation of permits for non-compliance.

The Bill sets out clear provisions for both strict liability and absolute liability offences. Strict liability offences address failures such as non-compliance with permit conditions or safety zone restrictions, while absolute liability applies to unauthorised offshore renewable energy renewable energy activities.

To safeguard individuals acting in good faith, civil and criminal immunity is provided for enforcement officers and other authorised persons under specific circumstances.

A process is also established for appeals to the High Court on questions of law regarding certain decisions, and the introduction of regulations is permitted to provide further detail on aspects of the regime.

Amendments to other acts

The Bill also amends the EEZA and RMA. Key changes include:

• Permit requirements: applicants for resource or marine consents related to offshore renewable energy generation infrastructure must hold a current feasibility or commercial permit for the relevant area.
• Automatic cancellation: resource or marine consents are automatically cancelled if the associated commercial permit expires, is revoked, or is fully surrendered.

Further EEZA amendments require applications for marine consents to decommission offshore renewable energy infrastructure and to include a decommissioning plan accepted by the Environmental Protection Authority. These amendments specify:

• Required content for decommissioning plans.
• Assessment and amendment processes.
• Public consultation requirements.

Next steps

The Bill has passed its first reading and has been referred to the Transport and Infrastructure Select Committee for consideration. Submissions are due on 6 February 2025 and the Select Committee is expected to report back by 17 June 2025.

The Government anticipates that the Offshore Renewable Energy regime will be in place by mid-2025 with the first round of feasibility permits open for applications in late 2025.

Alongside the Bill, MBIE is also developing regulations to support the regime’s implementation. Further consultation on feasibility permit regulations is planned for early 2025.

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