Gordon Campbell on the Meridian share float, and AnadarkoOctober 24th, 2013
So only 62,000 investors have lined up to buy Meridian, even at the rock bottom price of $1.50 a share. That’s even after the process had been sweetened with a government subsidy – in a style more commonly associated with the likes of Noel Leeming or Harvey Norman – whereby investors would get the full gains long before they would need to pay the full cost of their investment. Who pays the price for that generous little gift? Taxpayers, of course. In effect, they get to subsidise Meridian investors to buy into a valuable state investment, so that said private investors can then siphon off the returns, and make added profits by charging the same taxpayers more for their electricity in future. What a great deal! Surely no other political party should be allowed to upset the apple cart by daring to criticise such an arrangement, should they?
Well, Finance Minister Bill English is certainly sounding aggrieved. Yesterday, he blamed Labour and the Greens for “ sabotage” of the Meridian float.
…[English]blamed in no small part Labour and Greens’ energy policy, accusing them of scaring off mum and dad investors from Mighty River Power and Meridian because of their policy to control wholesale power prices. “They set out to sabotage lower income New Zealanders doing it. Unfortunately they’ve had some effect.”
Right. Nothing to do with the failure of the widely unpopular asset sales programme as a whole. Or with the prior example of the Mighty River Power float only a few months ago, where investors bought in at a share price that promptly went south. Or with the fact that Meridian – for all the talk about it being a stable, long term, investment – faces a cloudy future given the unknown fate of the Tiwai Point aluminium smelter, a factor that the government shored up in the short term with a $30 million gift from the taxpayer aimed at keeping the smelter open ( and its electricity off the market) only so long as it took to unload Meridian onto all the suckers it could drum up with a slick advertising campaign, also paid for by taxpayers. Its as if this government has an ideological fixation on selling down state assets, and is running an unlimited bar tab on whatever it takes to do so, and charging it all back to taxpayers. While blaming someone else if anyone baulks at the deal.
As things stand, National is going to be lucky to reach even the bottom end of the $5-7 million it promised to voters that this process would yield, back at the 2011 election when it sought a mandate to proceed. The NZ Herald story linked above spells it out:
Total proceeds to the government from the Meridian share offer, at $1.50 in two instalments, will be $1.88 billion. Combined with the $1.7 billion in proceeds from the part sale of Mighty River Power, the two floats will raise $3.58 billion. With just Genesis and part of Air New Zealand left to go before next year’s election, it may not meet its target.
It gets worse. To get the net picture, you also have to deduct the full costs of conducting the sale process – ie, the actual costs, plus the opportunity costs as senior staff at the energy companies have been diverted into working on the sales process since 2011. Then deduct the revenue foregone in future from siphoning away into the private sector the flow of returns from Mighty River and Meridian. All up, the net figure gained from these sales then has to be compared with the debt servicing cost of borrowing a similar amount at a time when internationally, interest rates have been rock bottom, and money has rarely, if ever, been cheaper. On any rational basis, borrowing would have been a far more sensible option, given that prudent economic management in the past had left the Key government with plenty of head room when it came to Crown debt.
Looking out toward the 2014 election, the black humour of the situation is that National continues to be regarded as a more competent manager of the economy. That would be funny, if it wasn’t so tragic.
Through an Anadarko, Darkly
Don’t know what planet David Robinson of PEPANZ ( Petroleum and Exploration Production Association of New Zealand) was on yesterday on RNZ’s Morning Report, but it seemed to be an hitherto unseen one where the global oil industry does everything to the very, very highest standard, faithfully observes all the regulations that are supposed to apply to its sector, readily responds to rare instances of environmental damage when they occur, and diligently applies all the lessons of historical accidents whatever the cost of compliance may be. Now, that is science fiction. Try telling it to the victims of oil spills in Ecuador or Alaska, or to the residents of the Nigerian delta, or to the inhabitants of Columbus, Mississippi. Or try telling the US government, which has been battling Anadarko in court to recover the massive cleanup costs for the environmental excesses of the Kerr-McGee company that Anadarko now owns. All that aside, the really disingenuous part of Robinson’s account on RNZ was when he characterised the Gulf of Mexico spill as being one where a series of unforeseeable events all came together ( what bad luck!) in excess of the known technology of the day, to produce an event that the industry has learned from, and taken steps to correct. Yeah right.
[Robinson]: That was really an extraordinary event, where the number of things that conspired to cause that to happen all lined up on one particular day. ….the industry has look at that in great detail to find out what went wrong and what were the steps. We’re a learning industry, we’re always learning and improving and bringing in new technology. So the things that happened and conspired at the Gulf Of Mexico would be extraordinarily unlikely to happen again today because those gaps have been plugged. The problems we had there have been solved. Remember in the Gulf…they had no technology to cap that well. They had to design and build it at the time. We’ve learned from that. The devices to contain a well are now places all arounds the world in strategic locations, so everybody drilling wells has access to them.
This is snake oil. The Gulf of Mexico spill was not caused by a freak series of unforeseeable events in excess of the technology of the day. It was utterly preventable. As both the Congressional and presidential inquiries subsequently found, the Gulf spill was caused by a culpably lax dereliction of existing safety practices and construction standards. It was due to flagrant failings in safety standards devised by BP, and scrutinised and signed off by Anadarko. That’s why Anadarko was found jointly liable, to the tune of $4 billion. Point being, this wasn’t unknown, unforeseeable territory: the existing blow out prevention technology was not in place. On RNZ, Robinson slid past the causes of the spill – i.e., the cementing structures and blow out prevention best practice not followed by the joint partners, presumably in order to cut costs. He chose to talk instead about the capping technology, which has to do with staunching the after effects of a spill, once a breach has occurred. That’s a quite different matter. Despite (a) the regulations, and (b) the technology (to stop serious blowouts occurring) already in existence, this industry has not behaved responsibly in preventing environmental damage. Moreover, the track record of the global oil industry is that it has fought tooth and nail in US courts to escape liability for its actions whenever disasters have happened. It is now asking to be taken on trust that it will behave responsibly in New Zealand when it is operating in far riskier, more remote, and extremely deep locations offshore, where the industry safety records and practices of the past are of little relevance.
As an aside, and even on Robinson’s own terms…when he talks about the capping technology being placed around the world “in strategic locations” how close is the closest of such locations to New Zealand? Because quite recently, Bob Daniels, Anadarko’s senior vice president for international and deepwater exploration was saying that the closest capping stack technology to New Zealand was located in Singapore.
Meanwhile, Bob Daniels, senior vice-president international and deepwater exploration for Houston-based Anadarko, said the firm operated with the prospect of governments changing everywhere in the world. Any Labour-Green government would take a less industry friendly stance than the current Government which has just passed laws to crack down on protesters who impede explorers. Daniels said governments were subject to change. “That could change the regulatory environment that we work in but that’s not something that we can control so we try to best manage through it and make sure our investments have enough protection on the downside that if there is a change that costs us something we can sustain through that.”
He said if there was an accident in New Zealand at an Anadarko well, it would respond. Access to well containment gear – capping stacks – was compulsory in the United States and they were deployed around the world in industry centres, the closest of which is in Singapore.
Right. And how many days – or weeks – would it take for that to arrive in New Zealand? Quite a while, evidently:
Maritime New Zealand pollution response operations manager Neil Rowarth said that, although containment, dispersal and cleanup processes were in place for a spill, the only way to shut off the undersea geysers was to ship in a new platform and siphon off the oil.
In the Gulf of Mexico, where there are more than 3800 oil and gas platforms, towing in a relief operation was relatively easy, even though oil was still escaping two months after the April 20 sinking of the Deepwater Horizon. In New Zealand, where there are just seven platforms, help could take longer to arrive, with potential rescue platforms a long distance off, Mr Rowarth said.A similar leak at Montara oil field, in the Timor Sea, last year took 79 days to shut off.
Clearly, a major oil spill in New Zealand waters would pose different problems than elsewhere. The nature of the oil found here when combined with the coldness of our waters mean that – on the upside – the spill wouldn’t spread as readily as in the Gulf. On the downside though, it would form a waxy consistency that may make cleanup more difficult. Either way, the risks and opportunities, costs and benefits ( and there have been some ridiculous claims about high paying jobs for locals that in reality would be few and far between) need to be spelled out far more transparently than they have been to date. Unfortunately, in Energy and Resources Minister Simon Bridges, the public seems to have been saddled with a government minister able to spout only the rankest of oil industry propaganda.