The Government’s plan to build a billion-dollar liquefied natural gas import terminal in Taranaki is being sold as a masterstroke of energy security. But look past the government spin and what you actually find is a rushed, billion‑dollar infrastructure bet that sidesteps the Government’s own expert advice, locks New Zealand into fossil fuels for decades, and is being rammed through Parliament.
The situation is this. This proposal has serious problems: problems of cost, of process, of transparency, and of basic strategic logic. And the way the Government has handled it this week exposes a worrying pattern in how decisions are being made at the top.
The Muldoonist comparison
The sharpest critique has come not from the left, but from within the political right. Writing in the Herald today, Matthew Hooton has labelled the LNG plan a reversion to “Think Big Muldoonism”. And the comparison hits home because it’s apt. Just as Robert Muldoon’s Think Big energy projects of the early 1980s involved grandiose state intervention, special empowering legislation, and wildly optimistic cost estimates, so too does this LNG terminal.
Hooton points out that the Government plans to rush through its own bespoke legislation (the Enabling Liquefied Natural Gas Bill) which he dryly calls “this generation’s very own Clutha Development (Clyde Dam) Empowering Act 1982.” The echoes are unmistakable. Special laws to override normal consenting processes. Costs that will inevitably blow out. Timelines that nobody seriously believes.
Hooton is withering on this point: “Whatever Watts and Prime Minister Christopher Luxon say, the plant will not be open in 2028, and it will not cost only $1b.” He compares the promised numbers to the Key Government’s claims about the International Convention Centre and the City Rail Link, and to Labour’s promises on light rail. His advice is: “Whatever costs and timeframes are given for government projects, it’s always prudent to double them, at the very least.”
The Muldoonist label matters because this is supposed to be a centre-right government that believes in markets and fiscal discipline. Hooton asks: “Are there any genuine low-tax, free-market right-wingers left in Parliament, or have they all been captured by Wellington bureaucrats and lobbyists for vested interests?”
It’s a fair question. What ministers are proposing is to socialise costs across the entire electricity system, pass special legislation to bypass even its own Fast Track consenting process, and lock in contracts before the election to make it harder for a future government to reverse course. That’s not a free-market approach. It’s industrial policy by fiat.
Hooton’s general point is that the Government is proposing a massive state intervention in the energy market, funded by a compulsory levy on electricity users, to build infrastructure that the private sector itself won’t fund because the commercial case doesn’t stack up. If that isn’t Muldoonism, what is?
Hooton also raises the possibility that New Zealand is “being scammed by offshore gas producers, who seem to have successfully convinced Watts, Luxon and MBIE bureaucrats to build an over-specced plant that is really about them securing a 365-days-a-year market in New Zealand.” That’s a serious allegation, and one that deserves far more scrutiny than it’s currently getting. It gives credence to critics who say the Coalition has become embedded in the pocket of the fossil fuel industry.
The Slick sales job
Janet Wilson, writing in The Post, put it perfectly when she described the Government’s announcement as a “slick sales job the country doesn’t need.” She compared Luxon and Energy Minister Simon Watts to sideshow hawkers, “all hair-oil and no socks,” trying to convince us we need to spend money to save money.
Wilson’s case against the terminal is comprehensive. She points out that the Government has ignored an avalanche of expert advice. Its own Frontier Economics review warned LNG should only be a last resort and that building a terminal made no economic sense if it was only used as backup – which is exactly what the Taranaki proposal is supposed to be.
The Parliamentary Commissioner for the Environment, Simon Upton (a former National MP, no less) wrote to Watts last November questioning the need to “use public money to underwrite the development of an LNG import facility that will potentially be with us for decades to come.” Upton warned: “New Zealand has a long and less than distinguished history of sponsoring expensive ‘solutions’ without fully understanding the consequences.”
Wilson also identifies a structural conflict of interest at the heart of this decision. The four gentailers (Meridian, Genesis, Mercury, and Contact) are “hard-wired to underinvest so that shareholder dividends remain high.” Last year the Big Four’s dividends were worth $1.4 billion, with the Government owning 51 percent in three of them, making it the biggest beneficiary of that arrangement. So the Government is simultaneously the regulator, a major shareholder in the electricity companies, and now the underwriter of a billion-dollar gas terminal that will prop up the existing system. The conflicts of interest are staggering.
As Wilson concluded, historians will eventually “see a government which relied on the private sector – until that sector didn’t see any commercial sense in building an import facility, and the government was forced to do it instead.” She says the Government “largely pays lip service to alternative energy” while keeping the current dysfunctional system intact.
The Tax that isn’t a tax
The levy fiasco deserves its own discussion, because it reveals something deeper about the Government’s approach to transparency.
On Monday, Luxon announced the terminal would be funded by “a levy” on electricity companies. By Tuesday morning, Energy Minister Watts was insisting it was “neither a tax nor a levy.” It was, he claimed, “a net savings to Kiwi households.” Even Winston Peters admitted “it’s a tax.” By Tuesday afternoon, Peters was running a different line. Labour’s Megan Woods, with some justification, described it as “a tax slash levy slash fee slash charge.”
As Marc Daalder reported in Newsroom, the Taxpayers’ Union – normally a reliable ally of the right – called it “a power tax” and said Luxon would “destroy his credibility” if he U-turned on his no-new-taxes pledge. The Union called the whole episode “an unforced error.”
The semantic gymnastics are almost beside the point. Whatever you call it, the levy will be imposed on electricity generators, who will, as the Government’s own official advice acknowledges, pass it on to consumers. That’s somewhere between $15 and $30 per year per household on top of power bills that already rose 12 percent last year and are expected to climb another 5 percent this year.
The Government’s defence is that the net benefit will outweigh the cost, because the terminal’s existence will lower the “dry-year risk premium” currently baked into forward electricity prices. That sounds reasonable in theory. But several things should give us pause. The modelling on which that claim is based hasn’t been released. Finance Minister Nicola Willis has promised to release it “pretty shortly”, a promise that raises the obvious question of why it wasn’t released alongside the announcement.
Even the Cabinet papers were more cautious than the ministers. They noted that “the extent to which this downward pressure actually results in a reduction in electricity bills will depend on a range of market dynamics.” In other words, there’s no guarantee the savings will actually materialise in your bill. The promise of $50 per household per year in savings rests on a chain of assumptions: that the terminal gets built on time, that costs don’t blow out, that the risk premium falls as predicted, and that gentailers actually pass the savings on to consumers rather than pocketing them as profits. In an electricity market that has consistently failed to deliver benefits to consumers, where prices have risen 60 percent in real terms over 25 years, that’s a very large qualification.
Ignoring the alternatives
Perhaps the most troubling aspect of this decision is what it crowds out. The Cabinet papers gave no substantive consideration to grid-scale battery storage or rooftop solar. The BCG report commissioned by the gentailers recommended a $200 million fund to help businesses transition from gas to cleaner energy. The Government didn’t just ignore that recommendation – it had already scrapped the GIDI Fund, which served a similar purpose.
Rewiring Aotearoa’s Mike Casey argued the country would be better off burning its existing coal stockpile at Huntly as a short-term bridge while investing the billion dollars in renewables, solar panels, and battery storage: “For the billion dollars that they’re suggesting they put on the LNG gas terminal, that could be put towards the electrification of a lot of our industry”. The energy transition is happening already, and the question is whether the Government will help it along or throw a billion dollars at slowing it down.
Jen Purdie, a senior research fellow at the University of Otago, pointed out in The Conversation that globally, solar and wind capacity has been doubling every three years: “Importing LNG to firm electricity instead undermines these options and puts the brakes on clean investment.” Every dollar sunk into a 15-year LNG lease is a dollar that doesn’t go toward building the renewable and battery infrastructure that will actually solve the problem long-term.
Even one of the bidders, Turkish company Karpowership, warned the Government that building an LNG terminal would drive up domestic gas prices by linking New Zealand to volatile international energy markets. When a company that stands to profit from the procurement is telling you the policy is flawed, that should be a red flag.
Environmental Defense Society chair Gary Taylor compared the rushed timeline to the Interislander ferry fiasco, saying: “Good policy, particularly when it involves significant capital investment, should not be rushed like this.” He’s right. There is no reason why the winter of 2027 is some magical deadline.
A failure of democratic process
What worries me most is the process. The Government plans to bypass even the fast-track consenting process by rushing through bespoke legislation to get the terminal building started before the November election. Cabinet papers explicitly state: “Our objective is to provide as many of these approvals as possible before the election.” Officials advised that contracts should be signed quickly to “make it more difficult for a future government to unwind” the deal.
This is highly alarming. The Government is deliberately trying to lock in a multi-billion-dollar, 15-year commitment before voters get their say at the ballot box. It is trying to make the decision irreversible, precisely because it knows a future government might take a different view. That is not how democratic decision-making is supposed to work.
When you add it all up: the overriding of expert advice, the conflicts of interest, the semantic games around taxation, the bypassing of normal consent processes, the attempt to lock in commitments before an election, this looks less like sound energy policy and more like a panicked government reaching for the most visible, expensive option it can find in an election year.
The energy security problem is real. Nobody disputes that. But the solution should be forward-looking, not backward-looking. It should strengthen New Zealand’s energy independence, not create new dependence on volatile international fossil fuel markets. And it should be arrived at through genuine democratic deliberation, not rammed through under urgency before voters get a chance to weigh in.
The ghosts of Think Big should be a warning, not a template.
Dr Bryce Edwards
Director of the Democracy Project
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