EEZ Bill Introduced

On 24 August 2011, the Government introduced into Parliament the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Bill (the Bill). The Bill is a welcome development given the national interest in ensuring appropriate protection of the offshore marine environment.

The stated purpose of the legislation is to achieve a balance between the protection of the environment and economic development in relation to activities in the Exclusive Economic Zone (EEZ) and on the continental shelf by:

  • requiring decision makers to take into account a number of specified matters when making certain decisions under the Bill (as described below);
  • requiring them to take a cautious approach in decision making if information is uncertain or inadequate; and
  • requiring the adverse effects of activities on the environment to be avoided, remedied or mitigated.

The Government has also proposed certain interim measures to manage the environmental effects of activities before the Bill is enacted.

In broad terms, the Bill provides for the classification of activities to be undertaken within the EEZ or continental shelf as permitted, discretionary or prohibited activities. A person seeking to undertake discretionary activities must apply to the Environmental Protection Authority (EPA) for a marine consent. This will require the applicant to prepare and submit to the EPA an application for a marine consent (which will include the provision of a detailed environmental impact assessment) in respect of the discretionary activity. That application will then be assessed by the EPA and (very likely) a public hearing held in respect of it.

The Bill is very detailed and addresses many different aspects of the activities to be undertaken in the EEZ and continental shelf and the management of the environmental effects of those activities. Although this summary cannot address all the issues that will no doubt arise in relation to the Bill, we set out below initial observations in respect of some of the provisions contained in the Bill.

Existing mining activities to continue

Clause 16 of the Bill provides that certain existing mining activities are able to continue unaffected by the requirements of the new legislation. In particular, where the relevant activity involves a structure or submarine pipeline and is associated with mining for petroleum under an existing petroleum mining permit (or petroleum mining licence), or is associated with prospecting or mining for minerals under a continental shelf licence, then the activity may continue even if it contravenes the new legislation.

Although this "grandfathering" provision will no doubt be welcomed by the owners and operators of existing offshore installations and FPSOs, there are a number of limits to the extent of this provision. In particular, the provision does not apply:

  • to petroleum prospecting or exploration activities; or
  • to any change in the activity if the change was authorised by a change to a petroleum or minerals permit or licence made on or after 1 July 2011; or
  • to the alteration, extension, removal or demolition of a structure or pipeline associated with the activity; or
  • in respect of any period during which the existing petroleum or minerals permit or licence is extended.

These are clearly significant limitations on the effectiveness of the grandfathering provision which, if enacted as proposed, will require existing operators to carefully consider the nature of any proposed changes to their existing operations.

Transitional provisions – don't forget committed operations

The Bill includes transitional provisions which apply in respect of lawfully established existing activities. In broad terms, the effect of these provisions is that where a discretionary or prohibited activity is being carried on at the time the legislation becomes effective, such an activity is able to continue for a period of time (which, in the case of a discretionary activity, is six months after the regulations come into force (and longer if an application for a marine consent is made within six months)).

As an interim measure prior to the legislation becoming effective, the Government has requested that operators planning to undertake petroleum exploration drilling operations submit to the EPA an environmental impact assessment consistent with the requirements under the Bill. The EPA will consider the information provided in light of the purpose and principles outlined in the Bill and make recommendations relating to the activity. The processing costs of any review under the interim measures are to be paid for by the Government (unlike under the Bill). The EPA has also indicated that, while the interim measures are in place, environmental impact assessments provided by operators will not be publically notified, there will be no public hearings and any EPA recommendation will not be monitored or enforced.

A key area of concern is that if a proposal has been reviewed by the EPA but the relevant activity has not started before the legislation commences, then it does not appear as if the transitional provisions will apply to the proposed activities as they will not be existing activities. Rather, it appears intended that an operator who has already had its proposal reviewed by the EPA under the voluntary interim regime will still need to have its application considered under the new public hearing process if it proposes to commence drilling activity after the commencement date of the legislation. This has potentially significant commercial implications for operators who have made (or are required to make) commitments to drill but have not started drilling by the time the legislation commences. It is important that this situation is carefully considered during the Select Committee process as an appropriate result would seem to be that a proposal that has already been reviewed by the EPA should be treated as an 'existing activity' and should not require a marine consent under the new process.

Overarching duty

The Bill provides that every person carrying out (or proposing to carry out) activities in the EEZ or continental shelf has a "general duty to avoid, remedy, or mitigate the adverse effects of the activity on the environment". They also have a duty to provide training and supervision to all their employees who are engaged in such activities to ensure compliance with the requirements of the legislation and regulations and also sufficient resources (including establishing appropriate management systems) to enable them to do so. The nature and extent of these duties are likely to require careful consideration by operators undertaking exploration and mining activities in the EEZ and continental shelf.

Matters to take into account – casting a wide net

As stated above, the proposed legislation seeks to achieve a balance between the protection of the environment and economic development in relation to activities in the EEZ and on the continental shelf. The matters that decision-makers must take into account to achieve this purpose include (among other things):

  • the adverse effects on the environment of all activities undertaken in the EEZ and continental shelf (including the effects of activities not regulated by the legislation);
  • the economic well-being of New Zealand;
  • the efficient use and development of natural resources;
  • the effects of activities on "existing interests"; and
  • the protection of the biological diversity and integrity of marine species, ecosystems and processes.

These are very wide ranging obligations, requiring consideration beyond the particular matter being advanced. It is clear that the intention underlying the legislation is to require the EPA to take into account, and to balance, a wide variety of factors affecting the environment and "existing interests" when making consenting decisions under the proposed legislation. This is a key theme running through the legislation, and clause 61(2) expressly provides that the EPA may grant an application for a marine consent if the activity's contribution to New Zealand's economic development outweighs the activity's adverse effects on the environment. The reverse also applies to refusing an application for a marine consent.

Uncertain information and the precautionary approach – a bit too cautious?

The Bill includes a requirement to base decisions on the best available information. This is defined to mean the best information that, in the particular circumstances, is available without unreasonable cost, effort or time. It is likely that it will be contentious as to what is reasonable in the context of any given application. This concern is compounded by the fact that the Bill requires the EPA to make "full use" of its powers to obtain information and expert advice and commission research.

The Bill also requires decision-makers to "favour" caution and environmental protection where the information available is uncertain or inadequate. If this means that an activity is likely to be prohibited or a marine consent refused, the decision-maker must consider whether taking an adaptive management approach would allow the activity to be undertaken. This could enable an activity to commence on a small scale to enable effects to be determined and monitored. It seems to us that the application of the precautionary approach should not necessarily be a mandatory requirement given that information about deep sea environments is limited and there is often likely to be a degree of uncertainty. Rather, the EPA should be able to exercise its judgment as to whether this principle should be applied in any given case. This is particularly the case given the EPA has the power to review the duration of a marine consent or the conditions of such a consent at any time during the life of the consent (including, among other things, to deal with any adverse effects on the environment or existing interests that arise that were not anticipated when the consent was granted).

Marine consents – comprehensive public process and possible costs and delay

The EPA is required to give public notice of an application for a marine consent and a hearing must be held if requested by the applicant or submitters (or if the EPA itself determines a hearing should be held). The EPA must not permit any person other than a representative of the EPA to question a party or witness. This raises the issue as to whether submissions and evidence will be effectively tested. We believe that applicants should have the right to rigorously test the evidence presented to the EPA. This right is even more important where a precautionary approach is required.

In addition, we believe there should be the ability for the EPA to process applications on a non-notified basis. Under the Resource Management Act, about 93% of consent applications are processed on a non-notified basis. In this regard, public notification processes do not always result in better decision-making or decisions, particularly when an application relates to highly technical or operational matters where it is necessary to have a high degree of technical knowledge or industry experience to contribute in a meaningful way to the decision making process.

The Bill imposes an obligation on the EPA to deal with applications as promptly as is reasonable in the circumstances. We believe it is important that there should be clearly stated statutorily imposed time-frames throughout the entire consenting process in order to ensure that decisions are issued in a timely manner. Such an approach is crucial in order to provide applicants with a degree of certainty in relation to the likely timelines involved so they are able to coordinate the EPA consenting process with their commercial arrangements with third parties and any other consents and approvals they may require from other regulatory authorities. Such an approach would be consistent with ensuring the efficient use and development of New Zealand's natural resources.

Regulations – devil in the detail

The Bill empowers the making of regulations classifying activities as permitted, discretionary (allowed with a marine consent) or prohibited (no marine consent can be applied for or granted). Where the regulations do not classify a particular activity, the default position under the Bill is that the relevant activity will be classified as a discretionary activity.

Regulations may also prescribe standards, methods, or requirements in relation to activities carried out in the EEZ or continental shelf, the effects of those activities, or for assessing the state of the environment. Those regulations (expected to be enacted in 2012) will obviously be crucial to the overall shape and effect of the proposed new regime. The Government has indicated the Bill will not come into effect until a complete set of regulations is developed.

The Bill provides that regulations may identify and provide for areas of the EEZ or continental shelf that have features that require a location-specific approach. This may include closing an area of the EEZ or continental shelf to all or any activities. We believe regulations targeted at specific locations should only be made if they can be justified by scientific and technical evidence.

The prohibited activity status should only be used sparingly, as is the case under the Resource Management Act. It may be more appropriate to replace the prohibited classification with non-complying activity status in order to allow for applications for marine consent to be made provided that these can meet a specified threshold. We believe this is justified as it is likely there will be advances in technology that enable potential adverse effects to be controlled with greater precision.

Time will tell whether an appropriate balance between the protection of the environment and economic development will be achieved as envisaged by the Bill. It will likely depend on what amendments are made to the Bill through the Select Committee process, the specific controls and standards set out in subsequent regulations and how the Bill is implemented and enforced. Assuming an appropriate balance can be struck, the Bill is likely to represent an important development to achieving the dual objectives so important to New Zealanders of ensuring environmental protection and economic prosperity.