The clamour for local authorities to receive oil and gas royalties ahead of the central government comes with a warning, the chief executive of the Tararua District Council says.

"Money from these royalties can really benefit a community, but when the tap turns off it leaves a community far less resilient," Blair King told councillors last week.

He said evidence he'd received indicated royalties can result in economic swings for a region.

"The upturn and downturn of a district's growth can hinge on royalty payments.

Advertisement

"House prices can fall through the floor (when royalties dry up) and so that's the risk."

Councillor Tracey Collis said there had been a move at the Local Government conference seeking a policy change for sharing oil and gas royalties and councillor Jim Crispin said the royalty contract should be in a territorial authority's hands, not central government.

"They would be used to develop long-term, sustainable industries when royalties aren't being earned."

However, Mr King said any royalties for the region would go to Horizons Regional Council, not Tararua District Council.

"In Australia, especially in Perth, the original royalties programme saw money going to local authorities.

"But in New Zealand it was realised there was a lot of money in royalties and that's why they go to the Crown. Targeted central government funding into health, roads and railways is why the Government is loath to give away royalties to regional councils or territorial authorities."

Tararua District Mayor Roly Ellis said the issue had been discussed with economic development minister Stephen Joyce.

"His reply was 'if we do it for oil, it will set a precedent'. You could see the dollar signs in his eyes."