Update on Regulation of the Resources Sector

Articles Written by Samantha Daly (Partner), Lara Douvartzidis (Associate), Angus Hannam (Associate)

The Productivity Commission (Commission) has released its draft report on Resources Sector Regulation, inviting submissions from the public and affected stakeholders on its proposed findings and recommendations by 5 June 2020.

 

The Terms of Reference

In August 2019, the Commission was requested to carry out a study of regulation affecting the resources sector across Australia and to highlight instances of best practice. The Commission defines best practices as those seeking to minimise burdens on businesses and regulators, whilst achieving clear, evidence-based regulatory objectives.

The Terms of Reference for the study call for an examination of unnecessary burdens or impediments on resources companies operating, or seeking to operate and invest, in Australia – unnecessary, in the sense of delivering negligible benefit or improvement in regulated outcomes, for an increase in the cost, complexity, uncertainty and/or delay of regulatory processes.

The Commission also seeks to identify instances of best-practice regulation across all stages of the project life-cycle to provide opportunities for individual jurisdictions to assess their own regulatory environments. Areas of focus include project approval processes, environmental management and compliance arrangements, and effective community engagement and benefit-sharing practices.

The draft report contains a number of findings and recommendations including in relation to the following key areas:

Risk- and outcomes-based regulatory approaches

  • In several jurisdictions, regulators are adopting a risk-averse stance, too often resulting in a one-size-fits-all approach to regulation. For instance, environmental impact assessment documents are becoming increasingly complex and lengthy, but there appears to be no corresponding improvement in public understanding or decision-making.
  • A failure to appropriately tailor conditions of approval has led to the imposition of requirements that often make little sense in the operational context in which proponents operate.
  • Rather than imposing bans and moratoria on certain types of resources activity such as onshore gas, governments should weigh the evidence on the costs to the environment, other land users and communities against the benefits on a project-by-project (or regional) basis.

Efficiency in regulatory decision-making

  • The introduction of clear timelines for regulatory processes should be introduced, including public reporting of regulator performance against timelines which promotes accountability.
  • To address issues of timeliness and uncertainty, the use of stop the clock provisions should be limited to situations where issues emerge that could not have been reasonably anticipated.
  • Deemed decisions, whereby the assessment agency’s recommendation to the final decision maker becomes the approval instrument if a decision is not made within statutory timeframes, could reduce delays.

Interjurisdictional cooperation, coordination and concurrence

  • There are a number of flow-on effects, in terms of delay, duplication and inconsistency, of the need for projects to obtain approvals from multiple agencies. Arrangements enabling regulatory processes to occur in parallel rather than in sequence are preferable.
  • In particular, there is often duplication and delay for projects triggering the Environment Protection and Biodiversity Protection Act 1999 (EPBC Act) and requiring environmental approvals at the Commonwealth and State or Territory level. The trial of bilateral approval agreements is endorsed and the need for both the nuclear and water triggers in the EPBC Act should be reviewed.
  • There is endorsement for cooperative models among agencies within a jurisdiction including the use of lead agencies or major project coordination offices to provide guidance to proponents and coordinate processes across agencies, and the use of memorandums of understanding, inter-agency working groups or taskforces.

Regulator capacity and capability

  • Adequately resourced and skilled regulators are the key to enduring reform. Ministers, through the Council of Australian Governments, should establish a forum for regulators to share leading-practice initiatives.
  • The Commission endorsed as a best practice model the National Offshore Petroleum Safety and Environmental Management Authority, the independent statutory national regulator for offshore oil and gas, and encouraged wider adoption of a number of its characteristics, including in relation to resourcing and cost-recovery.
  • Regulators should consult industry on a program of site visits to develop technical expertise, perhaps as part of induction training provided to new staff.

Effective community engagement and benefit-sharing

  • Effective frameworks for strategic land use seek to balance the trade-offs between resources development and other land uses to maximise benefits for the community.
  • There is potential for companies to deliver benefits to the communities in which they work, beyond the provision of employment and wages, eg financial payments to local governments and community groups, as well as investment in key infrastructure.
  • As a leading practice for addressing community impacts from resources projects, communities should be supported to engage with resources companies, rather than mandate local procurement and employment requirements.

Sound environmental outcomes

  • The Commission identified a number of leading practices aimed at delivering sound environmental outcomes. With regards to offsetting, the establishment of comprehensive public registers of offsetting obligations and the projects developed to meet them is supported as a valuable transparency measure.
  • Schemes allowing companies to pay their offset obligations into a fund can reduce costs and deliver better environmental outcomes, whilst science-based implementation strategies for the use of offset funds are key to achieving their intended purpose.
  • The provision of financial assurance to incentivise companies to undertake rehabilitation is supported, and the Commission also promoted the implementation of progressive rehabilitation, and saw merit in governments seeking opportunities to facilitate reopening and rehabilitating legacy mines.

The importance of policy certainty

  • The Commission was critical of ill-defined policy and the impact it can have on investment, particularly in relation to greenhouse gas considerations in regulatory decision-making. There is an inconsistency in approach as to how the contribution of greenhouse gas emissions to global climate change should be assessed and how this should be factored into the public interest of a project proceeding.
  • A lack of clarity in policy objectives can lead to inconsistent and unpredictable application of regulations across resources projects, creating investor uncertainty.
  • Not approving resources projects or curtailing their exports on the basis of potential greenhouse gas emissions in destination markets – that is, Scope 3 emissions – is an ineffective way of reducing global emissions.

 

Responding to the call for submissions

The study runs parallel with a number of other reviews in relation to the regulation of the resources sector, including the federal review of the EPBC Act, the South Australian Productivity Commission inquiry into the effectiveness of regulation in the extractives supply chain, the review of the Aboriginal Heritage Act 1972 (WA) and the NSW review of the work health and safety regime for mining. The Commission is due to report to the Australian Government by 7 August 2020.

As the Commission itself noted, many of the issues raised in this study and regulatory challenges facing the sector have been raised in previous reviews. Accordingly, the question of what consequences might realistically flow from the present review should be approached with a degree of guarded optimism.

We nonetheless encourage all affected stakeholders and interested parties to closely consider the regulatory burdens affecting them, and to identify any areas worthy of regulatory reform or consideration by the Commission. In that regard, we note the Commission has requested specific information with regards to the following key areas:

  1. Whether there are aspects of mining and petroleum licensing systems that pose a material impediment to investment;
  2. The extent to which post-relinquishment obligations on resources companies are barriers to investment, and whether there are leading-practice ways of managing the residual risk to the Government following the relinquishment of a mining tenement; and
  3. The advantages and disadvantages of institutionally separating regulatory and policy functions in jurisdictions where separation does not already exist, and the effectiveness of other approaches to ensuring regulator accountability.

Any submissions on the draft report, including the provision of any further information, need to be provided to the Commission by 5 June 2020.

Please contact our Environment and Planning team if you would like further information about the review, or would like assistance in preparing a submission.

Important Disclaimer: The material contained in this article is comment of a general nature only and is not and nor is it intended to be advice on any specific professional matter. In that the effectiveness or accuracy of any professional advice depends upon the particular circumstances of each case, neither the firm nor any individual author accepts any responsibility whatsoever for any acts or omissions resulting from reliance upon the content of any articles. Before acting on the basis of any material contained in this publication, we recommend that you consult your professional adviser. Liability limited by a scheme approved under Professional Standards Legislation (Australia-wide except in Tasmania).

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