The Federal Government has ordered a Productivity Commission (Commission) review into regulations affecting investment in the Australian resources sector.
The Commission has been tasked with identifying best practice project approvals processes in Australia and internationally and considering options for expediting project approvals processes without compromising community or environmental standards.
Federal Resources Minister, Matthew Canavan, has publicly stated that the impetus for the review came from the delays experienced by Adani in securing final environmental approvals for its Carmichael Coal Mine.
The Commission’s study will complement the statutory review of the Environment Protection and Biodiversity Act 1999 (Cth) (EPBC Act) scheduled to commence in October 2019, which was reported in our July update.
This alert considers the findings of the previous Commission review into project approvals processes, the terms of reference of the proposed review, and implications for resources industry participants.
2013 Study of Major Project Development Assessment Processes
In 2013, the Commission reviewed approvals processes for major projects, including resources projects. This study benchmarked Australia’s approval processes against those in the United States, United Kingdom, Canada and New Zealand.
The final report released on 10 December 2013 concluded that none of the other countries selected for benchmarking purposes “stood out as a better performer overall than Australian jurisdictions, although in each system there were leading practices”. The key recommendations of this report were:
- strengthening bilateral assessment and approval agreements between the Commonwealth and States to streamline the framework for environmental approvals;
- limiting the use of “stop-the-clock” provisions which allow regulators to extend the timeline for making an approval decision (i.e by issuing a request for further information);
- State and Territories improving coordination between regulatory agencies to minimise overlap and duplication of functions;
- institutionally separating environmental policy development for regulation and enforcement functions to improve transparency and efficiency; and
- extending the use of strategic assessments to consider the cumulative impacts that arise from multiple projects rather than evaluating a single project proposal at a time in isolation.
The terms of reference announced for the current review are almost identical to those established for the 2013 review, except the current review proposes to focus solely on resources activities rather than other categories of major projects. However, the findings of the 2013 review did not result in significant legislative reforms.
KWM’s submission to the 2013 review (available here) identified inefficiencies and duplication in approvals processes which had resulted in key projects not receiving funding, losing funding, or having to be refinanced on less favourable terms. One of our key submissions recommended expanding the use of bilateral agreements between the Commonwealth and State Governments for the assessment of major projects in order to streamline the approvals process and limit duplication. The importance of limiting duplication has been captured in the terms of reference issued to the Commission for the current review.
Terms of Reference and Time for Review
The Terms of Reference for the review was released on 6 August 2019 and an issues paper is due to be released in September 2019. The Terms of Reference refer to the resources sector broadly, but comments made by Ministers and Federal Government officials in the media indicate that the focus of the review will be mining and onshore gas projects. Some consideration should also be given to critical supporting infrastructure, such as pipelines, ports and railways.
The Commission has been instructed that it should identify:
- impediments to business investment in the resources sector;
- regulatory practices which reduce complexity, duplication and improve transparency for investors;
- environmental management and compliance arrangements which remove unnecessary costs while ensuring environmental protection;
- best practice for government involvement in the resources approval process to expedite project approvals without compromising community or environmental standards; and
- best practice examples of effective community engagement and development and mutually agreeable relationships between the resources sector and communities.
The Commission is to consult with existing COAG Energy Council working groups related to land access, community engagement and regulatory benchmarking.
The Commission is expected to produce a draft report by March 2020, with a final report to be issued by 6 August 2020.
Implications for Resource Industry Participants
The review comes at an opportune time for the resources sector. The Federal Government’s current energy policy demands a more “reliable base energy supply” and contemplates the development of additional onshore gas exploration and drilling projects.
State governments also appear to have become more receptive to resources projects and the resources sector more generally since the Federal election as evidenced by:
- The Northern Territory lifting its 3-year moratorium on exploration fracking for onshore shale gas in 2018 and recently approving the first onshore shale gas exploration Environmental Management Plan, since the fracking ban was lifted, for the McArthur Basin 2019 Drilling Program;
- Queensland granting final approvals to Adani’s Carmichael Coal Mine; and
- the NSW government calling for planned gas plant closures to be delayed in order to ensure reliable energy supply.
The Commission provides a valuable opportunity for resource sector participants to provide feedback on how current regulations and approval processes have impacted their operations. Industry participants may also make submissions proposing alternative regulatory models which could be more favourable to both short and long-term investment.
Given the Federal Government’s current policy stance, and the fact that the review will coincide with the statutory review of the EPBC Act, there is a good chance that the review’s recommendations will lead to proposals for legislative reform. The review is due to be finalised within 12 months, which means there is scope for the current Federal government to implement the key findings during its term.