A Taupo Maori land trust and Contact Energy have signed an agreement that will allow exploratory geothermal drilling to go ahead within a year.

The drilling will be carried out on trust land north of Taupo and 600m from Contact's proposed Tauhara 2 geothermal power station development.

Tauhara Moana Trust chairman Toby Rameka and Contact Energy chief executive Dennis Barnes said strong relationships were essential for responsible development and the agreement marked the beginning of a new phase in the relationship between the trust and Contact.

"Over the time we have spent together advancing Tauhara 2, we have developed a respect for each other. It takes time to get to this place in a relationship and I look forward to strengthening our ties in the years ahead."


Rameka said the trust was looking forward to its next phase of development.

"Particularly as it relates to the geothermal resource which our whanau and our leadership have a deep and emotional connection with.

"It is far better to be part of a project, be informed and be active partners than be on the outside and in the shadows."

Rameka said the trust and Contact had an interest in sustainable and responsible development that brought benefits to the region and New Zealand.

"For Tauhara Moana, any development undertaken on our whenua or that we are involved in has to take into account cultural, environmental, social and commercial issues. If this can be achieved, then making use of your resource for the benefit of your people and your community is an easy decision.

"We know from our longstanding relationship with Contact Energy that these things are important to them too," he said.

The trust believed Contact was committed to developing Tauhara in a way that made the best use of the trust's geothermal resources in the long term.

Trustee Topia Rameka said the agreement was unique and was based on a value-sharing arrangement reflecting the risks and certainties of the project.

He said the trust had not decided to look at a royalties-only scheme but instead wanted to share the risk and receive more of the benefits of geothermal energy production.

The full commercial details of the agreement were not revealed, both parties asking for confidentiality in the short term.

Barnes said Tauhara 2 was a key project for Contact and for New Zealand.

"Geothermal energy provides reliable, renewable baseload energy, whereas other renewable resources are intermittent."

Hydro, wind and thermal generation faced the cost of offsetting its carbon footprint and gas supplies were uncertain.

"Tauhara 2 was consented last year and will be built when market conditions allow."