Underground gas storage

Clauses 17, 18 and 36

Issue: Scope of the proposed provision

Submissions

(New Zealand Institute of Chartered Accountants, Petroleum Exploration and Production Association of New Zealand)

The legislation should make it clear that the proposed rules do not apply to the storage of unprocessed gas. (New Zealand Institute of Chartered Accountants); or instances where gas is reinjected as part of field management or depletion. (Petroleum Exploration and Production Association of New Zealand)

The appropriate reference is to “royalty paid gas under a mining permit that has been issued or amended under the Crown Minerals Act 1991 for the purposes of underground gas storage.” (Petroleum Exploration and Production Association of New Zealand)

Comment

Inland Revenue officials have discussed this matter with officials from Resource Markets at the Ministry of Business, Innovation and Employment, who consider the definition of “underground gas storage facility” as defined in section 2 of the Crown Minerals Act (as currently used in the draft bill) is appropriate and there should not be any confusion in practice by what is covered by the proposed provision.

Recommendation

That the submissions be declined.

Issue: Grandparenting existing arrangements

Submission

(Deloitte, New Zealand Institute of Chartered Accountants, Petroleum Exploration and Production Association of New Zealand)

Allowing owners of existing facilities to continue present treatment would reduce compliance costs. (New Zealand Institute of Chartered Accountants)

Grandparenting arrangements in the proposed legislation are appropriate. (Petroleum Exploration and Production Association of New Zealand, Deloitte)

Recommendation

That the submission be noted.