Prime Minister Christopher Luxon’s government is facing a political firestorm over its plan to establish a liquefied natural gas (LNG) import facility, with opposition parties labelling the funding mechanism a “gas tax.” The announcement, made on February 9, 2026, has sparked debate over energy security, affordability and the government’s commitment to reducing emissions.
The core of the controversy lies in the proposed levy on electricity companies, intended to finance the LNG terminal. While the government insists it is not a tax, Labour Party leader Chris Hipkins has repeatedly characterized it as such, stating, “If it looks like a tax and it quacks like a tax, it’s a tax.” Energy Minister Simon Watts initially described the funding as a “levy,” but later asserted it was neither a tax nor a levy, claiming it would result in “net savings” for Recent Zealand households. Prime Minister Luxon dismissed Labour’s claims as “a load of rubbish,” arguing the plan is designed to lower power bills.
The proposed LNG facility is intended to address concerns about New Zealand’s declining domestic gas supply and the risk of electricity shortages during “dry years” – periods of low rainfall that reduce hydroelectric power generation. According to Marc Daalder, a senior political reporter, the facility is envisioned as a stopgap measure to ensure a reliable backup fuel source when renewable energy sources like hydro, wind, and solar are insufficient to meet demand. “Every once in a while, it rains less than you’d like it to…That means our hydro lakes run low,” Daalder explained. He noted that domestic gas reserves have “fallen off a cliff” in recent years despite $1.5 billion invested in exploration.
The government estimates the LNG facility could save households $50 per year, but the exact size of the levy on electricity companies remains undisclosed while the procurement process is underway. The Ministry of Business, Innovation and Employment (MBIE) estimates that access to LNG could deliver savings of upwards of $265 million per year by reducing electricity price spikes. A contract for the facility is expected to be signed by mid-2026, with potential operation as early as 2027, and the Taranaki area is the likely location.
However, the plan has drawn criticism from multiple quarters. The Taxpayers’ Union has similarly labelled the levy a “power tax,” accusing Luxon of breaking a promise of “No new taxes.” Concerns have also been raised about the environmental impact of LNG. Daalder pointed to recent research suggesting that, when accounting for the entire supply chain – from gas production and liquefaction to shipping and regasification – LNG could be as polluting, or even more polluting, than coal.
Martin Gummer, managing director of Optima, a firm specializing in energy management solutions, largely supports the move, emphasizing the continued importance of gas for manufacturing, food processing, and overall electricity reliability. Gummer, in a December 2025 open letter to the Prime Minister, had urged a “bold, decisive” energy strategy. He acknowledged that LNG is not a perfect solution but represents a sensible interim step. He also highlighted the need for a funding stream to assist industries in transitioning to renewable energy sources, a component currently missing from the government’s plan.
As of February 12, 2026, the government has shortlisted proposals for the LNG facility and is progressing to commercial contracting. Further announcements are expected in mid-2026.
