Executive summary
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Hydrogen has a wide range of applications in sectors ranging from electricity generation to industrial processes and fuel for heavy transport.
Hydrogen can be categorised by how it is sourced. This discussion document focuses specifically on natural and orange hydrogen. Natural hydrogen (sometimes called white, gold, geological or native hydrogen) is produced naturally below the surface of the earth. Orange hydrogen is produced by stimulating a chemical reaction that allows hydrogen to develop (e.g. by injecting water and carbon dioxide onto target source minerals and then collecting the hydrogen produced).
Natural and orange hydrogen could unlock opportunities for energy resilience and economic growth. However, the hydrogen industry is still developing the processes and technology needed for commercial scale production. The Crown Minerals Act 1991 (CMA) sets out the broad legislative framework for the issuing of permits to prospect, explore and mine Crown-owned minerals within New Zealand. However, the CMA was not designed with natural and orange hydrogen in mind and there are questions around whether it is fit for this purpose. We have heard from industry that having a clear and certain regulatory pathway and clarity around if and how the CMA applies to hydrogen is key to encourage investment.
As both the exploration and development of natural and orange hydrogen is an emerging industry, we are seeking views on the regulatory approach to support this emerging industry while also ensuring it operates responsibly. However, we want to be clear that the Crown is not considering the nationalisation or asserting ownership of all hydrogen in its natural state.
This document seeks feedback on 2 high-level options:
- Option 1: Include hydrogen in the definition of a mineral to regulate it as a mineral under the CMA. This would mean that where mineral rights are privately owned (or owned by iwi under a customary marine title), the owner would have control over its development. Where mineral rights are held by the Crown, the right to access the minerals would be allocated under the CMA. Other regulatory requirements (e.g. environmental resource consents) would apply in both circumstances.
- Option 2: Exclude hydrogen in the definition of a mineral under the CMA and regulate it as a non-mineral natural resource. This could mean that (by default) hydrogen is allocated and its effects managed primarily through the Resource Management Act 1991 (RMA).[1] An alternative is that a new allocation regime could be developed outside the RMA. Excluding hydrogen in the definition of a mineral under the CMA would allow hydrogen to be developed with a wider focus than the purpose of the CMA (e.g. reducing New Zealand’s emissions and improving energy security and resilience).
Option 1 would allocate rights to the hydrogen that the Crown owns in a way that maximises the benefit to New Zealand. This aligns with how most minerals are treated across New Zealand and ensures the Crown receives a fair financial return for its minerals for the benefit of New Zealand. It would mean that the Crown’s existing relationship agreements with iwi and hapū regarding Crown-owned minerals would automatically apply, and that the Marine and Coastal Area (Takutai Moana) Act 2011 would provide ownership rights for iwi, hapū and whānau within customary marine title areas.
Option 2 would, by default, regulate hydrogen primarily through the RMA and potentially allow for a regime with a wider focus than an economic return to the Crown, including greater focus on other government priorities. This option could range from a light touch approach (e.g. a first-in, first-served approach based on when consents are lodged with the relevant council) to a more considered allocation approach similar to how geothermal resources are regulated, through to the alternative of a new hydrogen-focused legislative regime (e.g. similar to the approach taken in the Offshore Renewable Energy Bill). Under the RMA, existing engagement requirements with iwi and hapū would apply. If new legislation is developed outside the RMA, a role for iwi and hapū (given their strong interests in natural resources) could apply, but it would need to be developed outside of the Crown minerals framework.
We want to hear a range of perspectives to ensure any regulatory approach we progress is appropriate for New Zealand.
Footnotes
[1] Note that the Government’s resource management reform will replace the RMA with 2 pieces of legislation.