Conservationists’ claim fraudulent — Minister

Press, 7 August 1982, Page 22

Conservationists’ claim fraudulent — Minister

Parliamentary reporter

A “white, paper" prepared by conservationists on the proposed Motonui synthetic petrol plant in Taranaki has been critised by the Minister of Energy (Mr Birch). He described the report as a fraudulent, inaccurate sham, passing itself off as a pseudoGovernment document.

The document, prepared by the Environment and Conservation Organisations of New Zealand (E.C.0.). and published at the same time as the Government's genuine White Paper on the synthetic petrol plant, attempted to make a mockery of Parliamentary documentation "even to the extent of featuring something w’hich passes for the New Zealand coat of arms." says Mr Birch. This E.C.O. document had since attracted ■ widespread publicity in the news media. The fact that some of its "inaccurate contents” had been published ’ meant that “gross inaccuracies”' were now being perpetuated as truth.

Mr Birch said the E.C.O. report was wrong on a number of counts. The assertion that the plant's cost estimate had risen from $216 million in June, 1976. to $1,850 million in March. 1982, was exaggerated and misleading, he said.

It ignored inflation, exchange rate movements, differences in plant size, and the bases for making the estimate, he said.

The Inter-Departmental Committee on Petro-chemi-cals made its estimate of $216 million in mid-1976 in United States dollars, and this was part of a comparative study of petro-chemical options. It was not intended to produce an absolute estimate of definitive design, engineering and site specific costs. The Government White

Paper summarises the plant cost estimates which have led to the decision to proceed. This decision was made in late 1981. based on the most recent estimate of $767 million (in mid-1980 United States dollars). This constitutes the capital cost of the processing plant. The figure of $lB5O million is the total expenditure on plant construction and interest payments in dollars of the day — that is. it includes the effects of inflation during the construction period. It is based on the $767 million capital cost estimate and is not a re-estimation .of plant cost, but it does contain an extra $6O million for plant start-up costs. Mr Birch said the E.C.O. report, in recommending compressed natural gas and methanol .as alternatives to synthetic petrol, overlooked the considerable effort the Government and its agencies were putting into these fuels.

Promotion of the use of C.N.G. had received high priority in the Government's transport fuels policy, and it was incorrect to say that this was or would be impeded by the impact of petrol substitution on refinery operation. The expansion of the Marsden Ploint refinery had been designed with both C.N.G. and synthetic petrol in mind, and there was still scope for greater penetration of C.N.G. into the petrol market. Synthetic petrol and C.N.G. were complementary, said Mr Birch, synthetic’ petrol having the advantage of substituting for petrol nationally. and not in the North Island only. Although methanol had some advantages over synthetic petrol, these were not as great as the E.C.O. report suggested. The efficiency of conversion of natural gas to methanol, the precursor of synthetic petrol, accounted for

most of the energy lost in the over-all gas-to-gasoline process. The production of methanol also accounted for most of the plant cost. It had ' been recognised that methanol was a longerterm option, and considerable research was being undertaken by the Liquid Fuels Trust Board and other agencies in developing a conversion kit for running petrol vehicles on methanol. Mr Birch says results to date were promising, but there was still work to be done to bring these developments to commercial reality.

The promotion of methanol on the grounds that it was somehow more "renewable" than synthetic petrol ignored the fact that methanol was an intermediate in synthetic petrol production. The synthetic petrol plant would, in fact, be producing almostl.s million tonnes of methanol each- year.

E.C.O.'s assertion that synthetic petrol would be a poor performer if oil prices did not rise steadily was not borne out by the economic analysis. It was not a "nowin” situation, Mr Birch said, because synthetic petrol could provide a high degree

of import replacement which would substantially reduce the cost of meeting oil demands. But Mr Birch's comments were scoffed at by the Labour spokesman on energy, Mr D. F. Caygill. He said that Mr- Birch’s exaggerated response showed that E.C.O. had "struck a nerve.” Mr Birch should "lay off” E.C.O. and get back to explaining why his Government w’as gambling on the future price of oil. It was inaccurate to suggest that the Government had put “considerable effort” into C.N.G., said Mr Caygill. The number of vehicles converting to C.N.G. continued

to lag well behind the Government's target.

It was also misleading of the Minster to assert that the synthetic petrol plant would produce almost 1.5 million tonnes of methanol each year. That would not be available as methanol unless the synthetic petrol process itself had been abandoned.

In spite of the Minister's denial. E.C.O. had correctly reported that the project's costs had moved from $216 million in June. 1976. to SlB5O million in March. 1982. Mr Caygill said.

It was true that these figures measured different things; the latter figure included inflation and interest payments during the project’s construction. Both figures however, showed the costs that had been given for the project at the respective dates. As the Government White Paper itself showed, if oil prices stayed constant, as they were at present, the alternative package outlined in the document would have given almost three times greater return to the nation. The Government was gambling on the future price of oil.