Regulatory proposals for natural and orange hydrogen development

Introduction

Hydrogen represents a potentially significant opportunity to decarbonise industry and build a new export market for New Zealand (we wrote about this in an earlier Energy Blog post). The Government's Hydrogen Action Plan was released in November 2024, aiming to unlock private investment in hydrogen production. Renewable sources of energy meet only 30% of New Zealand's total energy use, despite the renewable-dominant electricity sector. Decarbonising heavy transport and industry remains challenging, and electrification is often unfeasible.  

However, hydrogen remains a nascent industry without a bespoke regulatory framework and there are concerns as to whether the current legislation for minerals development in New Zealand is fit to regulate hydrogen. Reviewing the regulations for new resources is a current government priority.  

Accordingly, in May 2025, the Ministry of Business, Innovation and Employment released a discussion document on regulatory proposals for natural and orange hydrogen development.¹ In particular, the question is whether hydrogen should be treated as a mineral under the Crown Minerals Act 1991 (CMA) or be regulated by the Resource Management Act 1991 (RMA) and its replacement legislation. There is also the possibility of creating a new bespoke allocation and management regime. Consultation is now open and submissions are due by 4 July 2025. 

Background to Government consultation

As hydrogen has not been widely used as a conventional fuel source in New Zealand in the past, the existing regulatory framework for extractive activities has not been developed with natural and orange hydrogen in mind.² Consequently, the existing rules on extracting natural and orange hydrogen are unclear, creating uncertainty for investors and developers. 

The CMA, which regulates the management and development of Crown-owned minerals, captures natural hydrogen in the definition of "mineral". However, the CMA does not determine the ownership of hydrogen that flows across Crown-owned and privately owned land, leading to uncertainty as to ownership and right to commercialise. Additionally, as orange hydrogen is not naturally occurring, it is not currently covered by the CMA.

Regulatory proposals

The discussion document clarifies that the Crown will not be asserting ownership or nationalisation of all naturally occurring hydrogen, and outlines the two 'high level' regulatory options that are on the table:

1. Option 1 would include all hydrogen (including orange hydrogen) in the definition of mineral for the purposes of the CMA. This would mean that if the mineral rights were privately owned (or owned by iwi under a customary marine title), the owner would control its development. Similarly, if the Crown owned the mineral rights, the Crown could allocate the right to access the minerals under the CMA for the benefit of New Zealand.
2. Option 2 would exclude hydrogen from the CMA on the basis that it would be regulated as a non-mineral natural resource. This would leave hydrogen to be primarily regulated by the Resource Management Act 1991 (or its replacement legislation). By excluding it from the CMA, this approach would also allow the production of hydrogen to fulfil wider purposes than the CMA allows, such as for industrial decarbonisation. The Government considers that this option could range from a light touch approach (such as a first-in, first-served approach based on when consents are lodged) to a more considered allocation approach similar to how geothermal resources are regulated. There is also the option to create a bespoke regulatory regime, specifically for hydrogen, outside of the RMA (similar to the approach taken in the Offshore Renewable Energy Bill).

Hon Shane Jones, Minister for Resources, noted that the Government is "open to considering alternative ideas and approaches" to enable natural and orange hydrogen development in New Zealand.

Our thoughts on the proposed options

The Government is currently seeking feedback on several issues:

1. Policy Objectives: The Government has outlined that the two key policy objectives are to provide investment certainty and achieve efficient market outcomes. Given the desire to encourage private investment as the main vehicle to accelerate industrial production of hydrogen, these are sensible priorities to speed up the transition to clean energy and build future energy security.  
2. Including hydrogen as a mineral under the CMA: New Zealand could seek to align its regulatory regime with other jurisdictions. There has been a growing global trend to regulate hydrogen in the same way as petroleum given its similar exploratory and production processes. In Australia, natural hydrogen is regulated under existing petroleum legislation in the Northern Territory, South Australia, Western Australia and Tasmania, with New South Wales being the outlier in prescribing natural hydrogen as a mineral separate from petroleum.  
   
   The main challenge with regulating hydrogen under the CMA will be in dealing with hydrogen reservoirs across multiple land parcels, given that the Government has indicated that they will not nationalise hydrogen (as is the case with petroleum). This means that ownership disputes could arise where tapping into a hydrogen reservoir that crosses property lines means potentially extracting hydrogen from another party's property. This issue is not currently addressed in the CMA, since petroleum is nationalised and thus always Crown-owned. To address this issue, the Government has suggested introducing the "rule of capture" used in some overseas jurisdictions, whereby ownership is shared by all owners of a common hydrogen reservoir. We agree with the Government that if the rule of capture was introduced for hydrogen in New Zealand, limitations would be required to prevent overproduction and ensure the fair and equitable allocation of hydrogen resources, such as production caps, well spacing and drilling requirements and unitisation. 
3. Regulating hydrogen under the RMA: If excluded from the CMA, it would seem entirely feasible for hydrogen allocation and production to be managed through the RMA. There are analogies with the management of geothermal resources, which are already managed under the RMA as water permits. 
   
   In regard to whether a bespoke regime (outside of the RMA) would be more appropriate, there does not appear to be the same drivers (or Government desire) as existed for offshore wind (and which resulted in the Offshore Renewable Energy Bill). In terms of management under the RMA, it is likely, however, that the planning framework does not appropriately provide for hydrogen production (and the approach is likely to vary across district and regional plans). Therefore, a piece of national direction could be drafted to ensure a consistent approach to the management of hydrogen use nationwide.   

If you would like assistance preparing your submission or would like to discuss the implications of the proposed hydrogen framework for your sector or business, please get in touch with one of our experts below.

This content is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter, please contact a Russell McVeagh partner/solicitor.