NZ Initiative's Jason Krupp says the 'what’s yours is mine' rules stymie economic development in the places that need it most

By Jason Krupp*

If you wanted to sum up the madness of mining regulation in New Zealand the tongue-in-cheek phrase “what’s yours is mine and mine’s my own” is a great fit, as judged by a situation playing out in Northland right now.

Minewatch Northland, an anti-mining group, is urging local residents to resist any attempt by Evolution Mining to conduct exploration work near Whangarei over concerns it could introduce heavy metals and other chemicals into the waterways.

The concerns themselves are fair enough. Residents must have a say in the development that happens in their regions. New Zealand is a democracy after all, and one with a high regard for the quality of the natural environment. Long-term environmental and health considerations also need to be factored. 

But before these issues get thrashed, let me make a prediction. I foresee that it is only a matter of time until Minewatch Northland challenge the permits, process, or land use consents in court in a bid to prevent the project from going ahead.

Once it hits the justice system the firm, and most likely the Whangarei District Council too, will be tied up in red tape for months, adding to the operating and regulatory costs for both parties. Should these costs prove high enough, Evolution Mining will walk away to seek easier projects elsewhere.

If the court sides with the mining firm, Minewatch is still likely to consider it a win to some degree, because it will have served as a warning to other prospective miners that Northland is not an easy place to do business.

Either way, there is very little cost to the anti-mining group, since courts rarely award costs on these kinds of appeals. If the court does award costs, as an asset-less incorporated society the group will simply dissolve when the bill falls due.

In short, the anti-mining group want to tell the property owner what to do with their property without actually owning the property.

More critical readers will of course take any prediction with a good pinch of scepticism. But this prediction is based on the experience of New Talisman Gold Mines, which recently staved off a similar environmental challenge from Project Karangahake Society Inc.

The firm was granted consents by the Hauraki District Council to begin bulk sampling in the Karangahake Gorge, an area that has already been mined out extensively in the 1900s, on condition the firm meet strict environmental standards.

Those consents were challenged by the anti-mining group, who skipped the Environment Court, instead filing a judicial review at the High Court. The group alleged the activity would damage a recreational area. These matters were considered in the original consent application, but Hauraki District Council hired two independent consultants to assess the process again. Further lobbying by Project Karangahake also prompted Environment Waikato to hire another consultant to assess whether sufficient consideration had been given to the potential for surface and underground water pollution.

After months of delay and significant costs, all the consultants agreed that the consents had been correctly granted, and that the firm’s activities were unlikely to have a significant or lasting effect on the area of the environment.

In the face of this evidence, Project Karangahake withdrew their application for judicial review. But in his addresses to shareholders at the firm’s annual meeting, New Talisman Chairman Murray McKee noted the group continues to protest the firm’s operations.

What happened in the New Talisman case is not so much a one-off, but standard tactic used by anti-mining groups to stymie developments they object to.

Mining legislation, particularly the Resource Management Act, allows anti-development groups to do so because it does not confront objectors with the costs of their actions. There is the obvious cost of the additional assessments, which some might be seen as appropriate to ensure the quality of the outcome. But in the presence of a robust consenting regime, these can prove to be an additional burden that objectors place on the applicant.

There are also the wider opportunity costs that are often ignored, such as the foregone jobs if the project does not proceed. It should be noted Northland’s unemployment rate stood at 8.9% as of June 2015, 3.2 percentage points higher than the national unemployment rate. Of course it is problematic to link the region’s wider employment malaise with a single project. Yet it is clear that too many objections to development, be it housing or mining, can collectively drag on the wider economy.

The remedy is a robust property rights regime that prevents situations like this from occurring. Or at the very least a user pays regime so that objectors face some of the costs they impose on firms and ratepayers.

If politicians are unwilling do so, as they have been up until now, they can expect New Zealand’s international standing as a destination for mining investment to deteriorate. Currently the country’s Policy Perception Index, a ranking of how mining companies rate regulatory regimes, fell 21 places to 35^th according the Fraser Institute’s 2014 Survey of Mining Companies.

In the 2013 report New Zealand is described as “just about close to the hardest jurisdiction [in which to work] anywhere”. That’s a damning indictment for a country that by World Bank measures has a higher natural resource endowment than Australia on a per capita basis, and where the wealth produced from mining could improve the lives of people living in some of the country’s poorest regions.

---------------

*Jason Krupp is a Research Fellow at The New Zealand Initiative, which provides a weekly column for interest.co.nz.