Opinion & Analysis
OPINION: Attack is rarely the best form of defence for a company seeking both social and environmental licence to operate.
But it seems the managing director of Chatham Rock Phosphate, Chris Castle, has decided enough is enough.
Last week, the Environmental Protection Authority released a 175-page staff report on his company's plan to mine phosphate nodules on the Chatham Rise, more than 400 kilometres off the coast from Christchurch.
The report is far from the final word on CRP's marine consent application. It is only an input into the public hearings to be held shortly by an expert decision-making committee (DMC) appointed by the EPA.
But the report's conclusion that "EPA staff are not currently able to recommend granting this marine consent on the face of CRP's application as it stands" is a serious blow. A similarly negative EPA staff report is seen to have influenced the rejection in June of an application by Trans Tasman Resources to mine ironsands from the seafloor off the southern Taranaki coast.
TTR's was the first-ever seabed mining application under the new regime governing activity in New Zealand's vast Exclusive Economic Zone, and the staff report criticising TTR's proposals was issued just as public hearings were finishing. In CRP's case, the critical view has been issued even before hearings begin, leaving the impression that processes are being developed on the hoof.
The CRP report does "recognise that there is more information to be provided, which may change our view". But the damage was instant and serious. CRP's share price dived from 20 cents to 15c, then 12c by Wednesday this week.
CRP had already halved the size of its marine consent area and delayed its intended listing on the London AIM exchange until after marine consents were granted.
Castle was incensed by the EPA report. He'd already faced delays for a mining permit, which had sapped investor confidence last year, while the TTR rejection had shocked the whole minerals sector. Industry had expected a permissive regime, albeit with environmental tradeoffs, while environmental activists had expected it to enable the Government's pro-mining agenda. So far, the opposite has been the case. Castle's initial response was to attack the EPA staff report as "premature" and the EPA's process as insensitive to a public listed company's obligation to continuously inform shareholders of material events.
The EPA responded that its timetable was known to CRP, and that the company had half an hour's notice of its impending publication. But Castle then sought the report's withdrawal, alleging an EPA staffer heavily involved in its preparation "appears to have been a signatory to a Greenpeace petition in 2010 seeking the Government permanently stop all plans to open up New Zealand's coastal waters to offshore oil drilling".
"If this is the case, it raises very serious questions over the objectivity of the report and its conclusions," said Castle.
A complaint followed to the State Services Commission, which batted it back to the EPA to handle as an employment matter if it saw fit. Ministers are also understood to be taking a close interest, in particular the micro-managing Economic Development Minister, Steven Joyce.
"The (EPA staff) report is likely to have the effect of closing access to international capital markets for future mining developments in New Zealand's EEZ if the decision-making committee acts in agreement with the EPA's staff," wrote Scott Vincent of Baltimore-based Green River Asset Management, a major shareholder in CRP, in an email to Energy Minister Simon Bridges.
These are heavy-handed tactics by a minnow player pushing a novel proposal. While its technical partner for the project, Dutch-based Royal Boskalis, is highly credible as a dredging firm, global expertise in ocean-floor mining is, at best, in its infancy.
However, the TTR and CRP processes are now attracting the worried attention of the oil and gas sector, where two major new entrants - Norway's Statoil and Australia's Woodside Petroleum - are looking to undertake exploration in the EEZ, as will Shell next year.
Accordingly, the first application for a marine consent for oil exploration in the EEZ, from Austrian player OMV, is being watched intently for any sign that the new regime is going off the rails. There is a world of difference between seabed mining and oil exploration. The former is new, the latter well understood.
But would-be investors are concerned over the way the EEZ legislation is working. They accept that projects may be rejected, but will baulk at spending the tens of millions of dollars required to work a project up if there's no realistic prospect ever of approval.
One answer may be to establish ahead of time where activities may or may not take place, through a fully developed oceans policy. That idea has been on the table for a long time.
Without some guidance of that kind, it's unlikely that pioneering projects in the EEZ with potential to create substantial new wealth for the country will ever make it off the drawing board.
That would be as much of a shame as approving any project anywhere without proper concern for the environmental consequences.