Report finds lack of oversight and a 'trust me' approach.
Fracking has escaped the threat of a ban in New Zealand for now, but the days of industry self-regulation could be numbered after a report found large holes in oversight of unconventional mining by energy companies.
The National-led Government's plan to vastly expand oil and gas mining received a boost as the Parliamentary Commissioner for the Environment, Jan Wright, found hydraulic fracturing ("fracking") for gas could be done safely if well-managed.
"I've not seen anything yet that is of high and urgent concern, but that is not to say that everything has been done perfectly so far," Dr Wright said.
But her investigation revealed an industry that had mostly been left to set its own rules.
"In New Zealand ... companies appear to be not only regulating themselves, but monitoring their own performance."
Her report came three weeks after a royal commission report on the Pike River coal mine tragedy criticisedthe lack of oversight of the mining industry.
She was questioned yesterday about parallels to the conditions that led to Pike River and responded: "All I can say is that there seems to be quite a degree of trust, which may not have caused problems so far but might in the future."
Companies were operating on a "just-trust-me" approach but had not yet earned the trust of the public, she said.
Many oil and gas producers passed on information about the integrity of their fracking wells to councils, but local bodies lacked the expertise to assess these reports.
In Taranaki, where most of the fracking had occurred, no specific consents had been sought by energy companies until last year despite operations beginning 23 years ago.
The commissioner found regulation of mining operations was highly fragmented and complex.
A single fracking operation required the involvement of the Ministry of Business, Innovation andEmployment, regional and district councils, the High Hazards Unit,and the Environment Protection Authority.
Despite this, it was unclear who took responsibility for assessing specific risks to the environment.
Dr Wright dismissed the more extreme fears related to fracking, such as reports of flames emerging from household taps, but warned of concerns raised by poorly managed fracking, in particular its potential for triggering earthquakes or polluting aquifers.
There had been no record of fracking-related quakes or pollution in New Zealand, but expansion of the industry increased the risk of mining-related harm.
New oil and gas exploration was proposed in vastly different geological areas - such as the East Coast - and at shallower depths, which increased the risk of polluting aquifers.
University of Canterbury environmental chemistry expert Sally Gaw said the consequences of a contamination incident had been understated in the report because there were "limited to no options" to clean up a spill or leak.
Energy Minister Phil Heatley said he was taking the report very seriously and noted law changes that followed the Pike River report would strengthen rules on drilling wells.
Prime Minister John Key said the report proved critics who felt New Zealand should not be engaging in fracking were fundamentally wrong.
Warning on quake danger
Oil and gas companies have been urged not to carrying out fracking near active faultlines by the Parliamentary Commissioner for the Environment.
Dr Jan Wright said there was no evidence of fracking triggering quakes, in New Zealand, but vast oil and gas expansion in areas with high seismic activity meant the industry needed to proceed with caution.
Squeezing liquid into rock at extremely high pressure to extract fossil fuels could trigger a slip if it was pushed through a stressed fault.
A British report published in June found there was little risk of fracking increasing seismic activity.
Coal mining was more likely to trigger quakes, it said.
But the commissioner was more cautious because of New Zealand's greater seismic activity.
"On the surface of it, it looks more high-risk for earthquakes," she said.
An unpublished GNS Science report for the Taranaki Regional Council found fracking in the region did not contribute to any of 3000 monitored earthquakes.
GNS Science head of petroleum geosciences Rosemary Quinn said hydraulic fracturing rarely caused larger seismic events.
Three instances of fracking-related quakes had been observed worldwide.
Government oversight and regulation
* Oversight is complex and fragmented.
* Regulation may be too light-handed.
* Companies have not earned public trust.
Environmental risks management
* Well sites must be chosen carefully, away from earthquake faultlines.
* Wells must be designed and constructed to prevent leaks.
* Spills and leaks must be prevented on the surface.
* Waste must be stored and disposed of with care.