There is currently no standard method for the assessment of impacts of major projects on biodiversity. The draft NSW Biodiversity Offsets Policy for Major Projects (Offsets Policy) is seeking to introduce a standardised approach that provides guidance in assessing and offsetting the biodiversity impacts of major projects.  At this point in time, biodiversity impact assessments are undertaken on a case-by-case basis which can result in significantly different offset requirements for different projects.  The Offset Policy aims to minimise these discrepancies and provide an assessment procedure that is practical and reasonable. The Offsets Policy will apply to major projects in NSW (projects that are declared State Significant Development or State Significant Infrastructure by the Minister for Planning and Infrastructure).  

The policy principles

The policy is underpinned by seven key principles:  

Principle 1 – Impacts must first be avoided and unavoidable impacts minimised through mitigation measures.

Proponents must avoid and minimise impacts before considering offsets.  A proponent will need to justify why impacts can’t be avoided or minimised. If an impact can’t be avoided, a reasonable effort must be made to minimise the impact, and offsets used to compensate for the remaining impacts. Any impacts that are more complicated and severe (e.g. extinction of a species) will require additional consideration by a consent authority before an offset can be used.  

Principle 2 – Offset requirements should be based on reliable and transparent assessment of losses and gains

The Framework for Biodiversity Assessment will need to be applied on behalf of proponents in a transparent and repeatable method for assessment by ecological consultants who are accredited specialists under the existing NSW BioBanking Scheme.  

Principle 3 – Offsets must be targeted to the biodiversity values being lost or to higher conservation priorities

Offsets will need to have a ‘relationship’ to the biodiversity values being lost:

  • Vegetation - the policy no longer requires like-for like’ offsets.  The offsets can now include similar vegetation in the same locality if those vegetation types are more highly cleared than the vegetation that will be impacted by the development in question
  • Threatened species - if a species is not critically endangered or listed under the Environment Protection and Biodiversity Conservation Act 1999, with approval, a species may be offset with a similar species in the locality that is under the same or greater level of threat, and
  • Aquatic biodiversity - offsets can include similar aquatic habitat in the catchment that is more threatened than the aquatic habitat being impacted upon.

The Offset Policy will broaden the scope of entities that can fulfil offset requirements, and recognises that protecting and improving biodiversity of a similar value, but under a greater level of threat can also provide benefits to the state.

Principle 4 – Offsets must be additional to other legal requirements

Offset land can already be managed under legal requirement. The Offset Policy requires offsets to be in addition to other existing native vegetation management. Public land can be used for offsets even if it has existing legal requirements for environmental management, however a 5% - 7.5% overall discount to the number of biodiversity credits will apply to that land. Land that is used to create carbon credits which are not 'legal requirements' (i.e. voluntary carbon offsets) can also generate biodiversity credits under the scheme. This means that one offset site can potentially generate both biodiversity credits and carbon offsets.  

Principle 5 – Offsets must be enduring, enforceable andauditable

As the impact on biodiversity is usually permanent, the mechanism used to manage an offset site must also be enduring.  As such management actions are required to be enforceable and auditable and comply with the following criteria:

  • objective of ongoing management
  • sufficient resources available
  • plan of management in place
  • mechanism can't be altered without an alternative arrangement, and
  • the conservation of the offset must be in perpetuity and disclosed to future owners.

Currently, Biobanking agreements are the only mechanism in NSW that satisfy all of the above criteria.

Principle 6 – Supplementary measures can be used in lieu of offsets

Supplementary measures may be used in lieu of offsets if an appropriate offset site cannot be found, however reasonable attempts must be made before supplementary measures will be considered by a consent authority.

Supplementary measures will need to be commensurate with the cost of establishing an offset site.

Principle 7 – Possibility to discount offset if the proposal will provide significant social and economic benefits to NSW

In very limited circumstances, a consent authority will consider modification of offset requirements if it would otherwise prevent a project from proceeding.   

How the policy will work

The policy principles will guide the Framework for Biodiversity Assessment.  The Framework for Biodiversity Assessment proposed by the Offsets Policy has two stages.

Stage 1 – Biodiversity assessment

Under the Offset Policy, a proponent is required to:

  • avoid and minimise impacts on biodiversity
  • assess the remaining impacts
  • determine if the impacts require further consideration, and
  • complete a biodiversity assessment report.

Stage 2 – Fulfil offset requirements

Subject to the outcome of the biodiversity assessment report, the proponent is required to prepare a Biodiversity Offset Strategy setting out one of the following ways to fulfil the offset requirements:

  • offset a site secured by a biobanking agreement
  • mine site rehabilitation
  • contribution to supplementary measures, or
  • contribution to a biobanking fund.

The proponent must then submit the biodiversity assessment of Offset Strategy as part of the project application for consideration by consent authority.  

Biobanking agreements

The preferred offsetting method will be through a biobanking agreement, where an offset site is dedicated to protecting and improving biodiversity to counterbalance the losses of biodiversity on the development site. This is materially different to the current situation whereby proponents have a choice of what method they choose to secure land (eg conservation agreement, covenant etc).

The offset site can be owned by a proponent or, alternatively, the proponent can contribute monetary payments to a landowner to manage an area of biodiversity on their land. 

Improvements in biodiversity on an offset site will be calculated in ‘biodiversity credits’.  A biobanking agreement will identify the number and type of biodiversity credits that will be generated through the landowner’s management actions.  A proponent can then purchase biodiversity credits to compensate for the loss of biodiversity on their development site. 

Once the biodiversity credits have been purchased, they are ‘retired’, removing them from the market to prevent them from being traded in the future.

Voluntary conservation agreements (VCA) are currently the preferred offset mechanism for most major projects in NSW as they provide greater flexibility for the proponent. Also, one of the benefits of a VCA as opposed to a biobanking agreement is the exemption of this land the subject of a VCA from Council land rates.  The Local Government Act 1993 does not currently exempt land the subject of a biobanking agreement from land rates.  

New flexible ways to achieve your offset requirements

The Offsets Policy has introduced new, more flexible ways (in addition to the biobanking agreements) in which proponents can achieve their offset requirements to ensure that the best and most credible offsets are provided:

  • Mine site rehabilitation - Proponents will be able to count ecological rehabilitation of mine sites in calculating offsets, where there are 'good prospects of biodiversity being restored'.
  • Broadening of the 'like-for-like' biodiversity requirement - this recognises that the exact same biodiversity may not always be available for an offset.  If like-for-like is not available, offsets that are a 'higher conservation priority' may be targeted, provided they have a relationship to the biodiversity being lost.
  • Supplementary measures - If all reasonable measures have been made to locate an offset site, but one is not able to be found, a proponent is able to provide funds for supplementary measures such as:
    • threatened species recovery programs
    • threat abatement programs, or
    • contribution to biodiversity research and survey programs.

      The contribution will be calculated based on what the cost of an offset site would have been for that project.

Possibility of a discount on your offsets?

The Offsets Policy will allow a consent authority to reduce offset requirements in certain limited circumstances, where ‘significant social and economic benefits accrue to NSW as a consequence of the proposal’, and the project’s offset requirements may make the project unviable. 

The potential to reduce offset requirements has been introduced under the Offset Policy in recognition that under the Environmental Planning and Assessment Act 1979 a consent authority is required to consider the social and economic aspects of a proposal.   

Biodiversity offsets fund

The NSW Biodiversity Offsets Fund for Major Projects (Offsets Fund) complements the Offset Policy’s supplementary option by enabling proponents to contribute a monetary amount to satisfy their offset requirements. The fund will then purchase offsets on behalf of the proponent.  The establishment of the Offsets Fund will:

  • give proponents increased certainty - proponents will be able to understand upfront how much money they will need to contribute to fulfil their offset requirements
  • enable a more strategic and coordinated purchase of offsets located in strategically important biodiversity areas in NSW such as land adjacent to wetlands and rivers, and
  • facilitate landowners to establish offset sites on their land that could result in an additional income stream. 

Transitional provisions

The transitional period is likely to commence during the second half of 2014.  It is intended that after approximately 18 months, the policy will be implemented through legislation. It is not clear from the draft Policy how the Policy (once finalised) will apply to current development applications where Director-General’s requirements have been issued but the development assessment process is not yet complete.

The Offset Policy will not apply to existing offset sites secured under other long-term mechanisms.