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Z Energy in stoush over cost of ETS

South Island mining OceanaGold Corp is refusing to pay for diesel it bought from Z Energy, which charged for the fuel based on a higher cost of the emissions trading scheme than the New Zealand-owned company actually pays.

Z's lawyers agreed in court the company had charged more than it paid for carbon costs under the ETS, but that there was "nothing wrong with this", according to a High Court judgment from Associate Judge David Gendall on the dispute.

Z had sought but was refused a summary judgment requiring OceanaGold to cough up close to $1.2 million more than the gold miner believes it should have to pay under its contract for supply.

The government's ETS, intended to price carbon and help control carbon emissions, sets a top price per tonne of carbon of $25 and makes Z liable to pay carbon costs on one in every two tonnes of carbon emitted.

However, carbon prices over the period of the contract in dispute were more in the region of $14 a tonne and OceanaGold claims Z is attempting to impose an additional element of "windfall" profit margin.

OceanaGold argues its contract specified a fixed margin, so the additional charge is unlawful under the contract.

The agreement terminated in May 2012, before global carbon prices collapsed further.

Justice Gendall said while Z regarded the issue as "a simple debt recovery exercise", OceanaGold argued "the supply agreement required pricing of the fuel to be 'detailed and transparent' and that although the plaintiff could recoup the actual underlying costs of supply of fuel ... as those costs fluctuated over the life of the contract, (Z's) margin on the supply was visible and fixed".

The judge said OceanaGold contended Z "could not ... by charging more for the ETS than it paid, obtain additional profit margin on its supply of fuel to (OceanaGold)".

Justice Gendall ruled the issue raised sufficient issues to mean a summary judgment was not warranted. The issue will go to a full hearing at a date to be determined.

Z Energy, formerly the domestic wholesale, retail and distribution arm of Shell New Zealand, is owned 50/50 by infrastructure group Infratil and the New Zealand Superannuation Fund.

(BusinessDesk)

Comments and questions
2

Thank you, Mr Smellie, for alerting us via NBR to what may have slipped by as just another commercial stoush. The ETS issue involved has greater ramifications, I consider, for a very wide range of industries and the outcome will be fascinating reading.

The company I work for recently bought ETS units for 25c!!!! (not sure if they were NZ units or dodgy East European ones).

At that cost, the compliance on ETS probably costs more than the ETS itself, except for the very biggest users.

Something needs to be done, or it should be scrapped.