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Earlier this year, the government passed a law allowing Auckland to introduce an 11.5 cent per litre tax and left the door open for other councils to follow suit from 2021.
But in a surprise move, Jacinda Ardern slammed that door shut on Wednesday, ruling out any other regional fuel taxes while she is prime minister.
Local Government New Zealand president Dave Cull said some councils would be disappointed by the backdown.
"If regional fuel taxes are taken off the table, then we want some alternatives."
Rates revenue alone was not enough for councils to invest in and renew infrastructure, he said.
The group had supported regional fuel levies, but Mr Cull acknowledged they did have downsides.
He said there was now an "opportunity" to devise even better funding mechanisms.
"We'd actually rather have funding sources that were controlled by council and that actually incentivised growth."
Mr Cull said, for example, councils could receive a share of the GST generated in their area.
The Automobile Association (AA) said it was pleased Ms Ardern was listening to New Zealand motorists who were being hit by near-record high petrol prices.
AA spokesperson Mark Stockdale said the pledge was "pragmatic" as the levies were "not an effective tool" in the regions.
He said other areas did not have the same transport challenges as Auckland or a large enough population to generate enough money to make a fuel tax worthwhile.
National MP Paul Goldsmith said the announcement was the right move, but had been driven by panic and "total policy-making on the hoof".
"The government has woken up to the fact that Kiwis are sick of being fleeced at the fuel stations by a government that keeps putting fuel taxes up and they're backpedaling as fast as they can."
But Ms Ardern told Parliament she made the promise "for the sake of clarity" because National had been spreading false information.
'The PM has listened to New Zealanders'
Transport Minister Phil Twyford said the decision to rule out any new regional fuel taxes was made to give New Zealanders certainty.
Ardern's announcement that no new regional fuel taxes will be implemented was a decision which took Regional Economic Development Minister Shane Jones by surprise.
Mr Twyford told Morning Report Ms Ardern called him late morning yesterday to discuss ruling out more regional fuel taxes.
He said it was a mistake not to include Mr Jones in the discussions, but stood by the decision.
He said the government had never planned on expanding the taxes beyond Auckland and wanted to give New Zealanders certainty.
"Auckland, New Zealand's largest city, is a transport basket case and needed bold change," he said.
Ms Ardern and National leader Simon Bridges were having a spirited exchange about the high cost of petrol, when the prime minister rose to her feet to make the pledge.
"I can give this guarantee to this house and to consumers there will be no other regional fuel taxes while I am prime minister," she said.
Mr Twyford said it was right to give people in other regions an assurance.
"The prime minister has listened to New Zealanders. We know people are getting a hard time at the petrol pump."
The government has faced ongoing criticism for piling on extra fuel taxes, when the price at the pump is already sky high.
Mr Twyford said Wellington councils did ask for a regional fuel tax a few weeks ago - but were turned down.
"We're in discussions with Wellington councils and have been for most of this year about an ambitious transport plan for the region.
He denied it had been a u-turn decision, telling Morning Report that Auckland is an exceptional case.
Flexibility in the legislation will allow future governments to look at implementing fuel taxes in other regions, Mr Twyford said.
Parliament last night passed legislation giving the Commerce Commission new powers to allow it to investigate the fuel market.