Pursuant to section 6(3) of the Inquiries Act 2013, I, The Honourable Dr Megan Woods, Minister of Energy and Resources, hereby establish the Government Inquiry into Fuel Supply Security in New Zealand (“Inquiry”).
The following persons are appointed to be members of the Inquiry:
- Elena Trout (Chair); and
- Dr Roger Blakeley.
Terms of Reference
Background and Matter of Public Importance
The Refinery to Auckland Pipeline (RAP) was shut down for 10 days following the discovery of a leak on 14 September 2017. The RAP is a 170 kilometre buried pipeline running from the Marsden Point Refinery to a bulk oil storage terminal at Wiri in South Auckland. The RAP supplies most of the Auckland region’s fuel, including all of its jet fuel. Jet fuel is supplied from the Wiri terminal to Auckland Airport via a second pipeline, which remained operational.
The main impact of the RAP outage was the rationing of jet fuel supplied to Auckland Airport over a 12-day period in September 2017. The affected airlines activated their contingency plans to operate under fuel rationing, which included rationalising flights, up-gauging aircraft for some flights (i.e. swapping smaller aircraft for larger ones), and arranging technical stopovers on long haul flights to allow for refuelling. It was estimated that at least three per cent of the scheduled domestic and international flights were cancelled at Auckland Airport during the period1.
The RAP outage also affected the supply of ground fuels, causing intermittent outages of some products (mainly premium petrol) at a small number of service stations around Auckland.
During the RAP outage, the Government activated elements of its emergency response plans to facilitate the flow of information to interested parties and to help the fuel industry and airlines manage the effects of the outage. For example, there was temporary permission for heavier loading of road tankers on routes from Tauranga and Marsden Point.
Following the RAP outage, Refining NZ, which owns and operates the RAP, reported that it spent $6 million repairing the pipeline, and lost $6.3 million in processing fees and a further $2 million in distribution fees attributable to the disruption to supply. Refining NZ received a pay-out of $2.9 million from insurers to cover environmental damage resulting from the pipeline leak2. Z Energy (one of the three affected fuel suppliers) reportedly lost $5 million as a result of the RAP outage3.
The RAP outage and its impact on fuel users is a matter of public importance.
Northland Regional Council’s Investigation into the Fuel Leak
The Northland Regional Council is responsible for monitoring and enforcing the Resource Management Act 1991 (“RMA”) provisions relating to the operation of the RAP in Northland, including at the rupture site in Ruakaka. In February 2018, the Council concluded its investigation into the unauthorised discharge of fuel from the RAP into the environment in September 2017. This investigation focused on:
- whether Refining NZ’s maintenance and operating practices were contributing factors to the leak;
- the involvement of any third parties in the leak; and
- Refining NZ’s response to the spill, including efforts to contain the discharge and to remediate the affected land.
The Northland Regional Council found that it does not have a case to prosecute anyone for the fuel leak because “while gouges apparently caused by a digger were believed to have triggered the RAP outage, the actual date of the damage and its specific cause were not known”. The discharge was attributable to “a particular and unique set of circumstances which could not reasonably have been foreseen or provided against” and “the effects from the discharge had been adequately mitigated and remedied”4.
The Northland Regional Council did not consider the impact of the fuel supply disruption, government oversight of fuel security, and how well other parties besides Refining NZ responded to the fuel leak.
Regulation and Oversight
Refining NZ is responsible for the safety and integrity of the fuel pipeline and associated equipment that it owns and operates. Under the Health and Safety in Employment (Pipelines) Regulations 1999, all pipelines, including the RAP, must be operated with a current certificate of fitness issued by an inspection body recognised by WorkSafe New Zealand, the agency enforcing the regulations. The certificate of fitness verifies that the pipeline and all equipment necessary for the safe operation of the pipeline comply with the standard or code to which the pipeline was designed, constructed, operated and maintained.
The Government has an oversight role to ensure that fuel supply is reliable and secure in New Zealand, including in relation to emergency response management. The Government’s Oil Emergency Response Strategy sets out the broad policy and operational aspects that underpin the Government’s response to a significant disruption of oil supplies. The strategy focuses principally on international disruptions to oil supplies or disruptions that require a national response. National and regional Civil Defence Emergency Management fuel plans also play an important role.
The Government reviewed fuel security most recently in 2012. The 2012 review found that the fuel supply network in New Zealand is reasonably robust, the oil supply industry is adept at responding to most supply disruptions and the Government has processes in place to manage severe disruption events.
Purpose and Scope of Recommendations
The RAP outage highlighted that fuel supply can be vulnerable to disruptions, and that effective risk management practices and contingency plans need to be in place to minimise the risk and impact of disruptions. The purpose of this Inquiry is to draw lessons from the RAP outage to inform how the fuel industry and the Government could improve the resilience of fuel supply in the Auckland region.
To do this, the Inquiry will:
- inquire into the cause(s), contributory factor(s) and impacts of the RAP outage, the operational responses to the outage, and the relevant operational and risk management practices of Refining NZ, fuel suppliers, airlines, national and regional civil defence emergency management organisations, and any other relevant parties; and
- taking into account the factors contributing to the RAP outage and its impact, report and make any recommendations it sees fit regarding the resilience of fuel supply in the Auckland region, and any other relevant matters.
Exclusions From Inquiry
The Inquiry is not to inquire into, determine, or report on whether issues of criminal or civil liability arise.
The Inquiry may take account of the outcome of any other relevant studies or investigations but is not bound in any way by the conclusions or recommendations of such studies or investigations. Studies and investigations deemed relevant to the Inquiry include but are not limited to:
- the Northland Regional Council’s recent investigation into the fuel leak5;
- New Zealand Petroleum Supply Security 2017 Update6, which was published by the Ministry of Business, Innovation and Employment (MBIE) in September 2017; and
- any other fuel security studies commissioned by interested parties that may be completed before or during the course of the Inquiry.
“Fuel” means liquid petroleum fuels, including diesel, gasoline and jet fuel.
“Fuel supply system” means the infrastructure and practices associated with the supply of fuel in New Zealand.
“Practices” includes, without limitation, each of the following: decision-making, procedures, processes, services, and systems.
The Inquiry is to report its findings and opinions, together with recommendations, to the Minister of Energy and Resources in writing no later than six months from the establishment of the Inquiry. In order to ensure the Minister is kept appropriately informed as to progress, the Chair will provide regular updates to the Minister on the Inquiry’s progress throughout the course of the Inquiry.
If the Inquiry identifies issues which may affect its ability to deliver a final report by six months from the establishment of the Inquiry, it shall notify the responsible Minister as soon as possible with a view to identifying an appropriate solution, which may include (but is not limited to) an extension of time.
Consideration of Evidence
The Inquiry may begin considering evidence on and from 10 December 2018.
Dated at Wellington this 6th day of December 2018.
Hon Dr MEGAN WOODS, Minister of Energy and Resources.
1. Auckland Airport, September 2017 Monthly traffic update, 27 October 2017. Retrieved from: https://corporate.aucklandairport.co.nz/~/media/Files/Corporate/Monthly_Traffic_Reports/2017/Monthly-Traffic-Update-September-2017.ashx?la=en
2. New Zealand Herald, NZ Refining profit jumps 66 per cent despite $14.3 million repair costs for pipeline rupture, 28 February 2018. Retrieved from: https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12003417.
3. Z Energy, Z Energy operational data for quarter ended December 2017, 23 January 2018. Retrieved from: https://investor-centre.z.co.nz/investor-centre/assets/Uploads/QOD-Dec-17-and-guidance-revision.pdf.
4. Northland Regional Council, No prosecution over refinery pipeline leak, 2 February 2018. Retrieved from: https://www.nrc.govt.nz/news/2018/february/no-prosecution-over-refinery-pipeline-leak/.
5. Northland Regional Council, No prosecution over refinery pipeline leak, 2 February 2018. Retrieved from: https://www.nrc.govt.nz/news/2018/february/no-prosecution-over-refinery-pipeline-leak/.
6. Ministry of Business, Innovation and Employment, New Zealand Petroleum Supply Security 2017 Update: http://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-security/oil-security/documents-library/petroleum-supply-security-september-2017.pdf.