Appendix 1: Current ‘royalty’ regimes in New Zealand

Resource Management Act

The RMA provides a generic regime for royalties on some resources but is not applied effectively.

The RMA provides a general regulation making power [360(1)(c)] on prescribing “the amount, methods for calculating the amount, and circumstances and manner in which holders of resource consents shall be liable to pay for the occupation of the coastal marine area, the bed of any river or lake which is land of the Crown, and the extraction of sand, shingle, shell, and other natural materials from lands of the Crown, and the use of geothermal energy”. Council practice is inconsistent.

Coastal occupation charges and oceans policy

Section 64A of the he RMA specifies that regional councils, in preparing or changing a regional coastal plan or proposed regional coastal plan, must consider whether a coastal occupation charging regime should be applied. They must have regard to the extent to which public benefits are lost or gained; and the extent to which private benefit is obtained. A charge cannot be imposed in respect of a recognised customary activity. Revenue must be used to promote the sustainable management of the coastal marine area so this is a tied tax structure.

Coastal occupation charges have never been generally applied.

From 1987 to 1991 coastal occupation charges and royalties were set by the Department of Conservation under the Harbours Act. In 1991, under the new RMA, the occupation charges and royalties were to be set by the Minister for the Environment by regulation, collected by regional councils (with no cost recovery mechanism) and paid into the Crown Bank Account. Most councils did not collect the payments. A 1993 review of coastal occupation charges led to the 1997 regime where councils retain revenue for coastal management purposes, but the default is a zero charge so councils have to justify charges through the regional coastal plan process. Application of coastal occupation charges has, however, been hindered by lack of national guidance, cost and complexity of the plan change procedure to introduce them, and resistance of affected interest groups.

Oceans policy can operate outside the RMA structure  but should be consistent if possible.

Work on a New Zealand Oceans Strategy has been underway since 2000 including issues such as ensuring optimal resource use and, where appropriate, recovering government costs of managing those resources.

Fisheries resource rentals were imposed on introduction of the quota management system in 1986, although quota was allocated to incumbents free of charge. The rentals were set administratively based on profit which was complex and created perverse incentives to avoid or disguise profits and limit non-commercial fishing. Quota moved from fixed quantities to proportions of allowable catch in 1990 with compensation from 1989 to 1995 equal to the level of resource rental. In 1994 the Government agreed to revoke resource rentals at the end of the compensation period.

Minerals and coal

In New Zealand, the Crown owns, by statute, petroleum, gold, silver, and uranium in its natural condition in land, and other minerals under its land and in some cases under other land. For permits with production valued at more than $100,000 per year there is a requirement to pay a royalty. The underlying principle was sharing income and profit between permit holder and owner, with a balance between a fair financial return from Crown assets and prejudicing new projects. The Energy Resources Levy (ERL) on domestically produced coal (not all of which is Crown owned) and gas was introduced in 1977 to prevent wasteful use. The ERL now applies only to pre-1986 discoveries (at a lower royalty rate) and opencast coal.

Freshwater and Geothermal resources

The Crown owns some resources but only claims management rights over others.

The Crown vested in itself in 1903 the sole right to use water to generate electricity and in 1967 the sole right to use all natural water, but does not claim ownership of water and no royalties apply. The RMA provides the management regime for freshwater without any royalties. The Crown also vested in itself in 1952 the right to use geothermal steam to generate electricity, and in 1953 extended that to tapping, taking, use or application of geothermal energy. Uses could be subject to rental. The RMA superseded this regime (again without any royalties) but transitional regulations continued for Rotorua to manage depletion and extract a resource rental for the Crown.

Concessions regime for the conservation estate

The Department of Conservation (DoC) manages a significant proportion of New Zealand’s land area for a variety of purposes – species preservation, recreation etc. Where third parties provide services or undertake activities within that area, this is managed through a “concession” such as a lease, licence, permit or easement. Examples include accommodation facilities, ski fields, shops, and grazing. Different authorisations are required for mineral exploration, mining, tourism activities involving marine mammals, and hunting for commercial gain. Negotiated fees are charged to reflect benefits from using public land but most concessions are initiated by a private individual or firm approaching DoC, rather than being tendered.

Bioprospecting

Policy work is underway on bio-prospecting issues including access on Crown owned/managed areas and capturing and sharing benefits.[16]