Proposed reforms to streamline environmental approvals for large projects are polarising industry and environmental groups. However, the case for reducing duplication and delay is overwhelming and there are ways to safeguard environmental outcomes.

The Commonwealth Government has released a new draft Framework of Standards for accrediting State and Territory environmental assessments and approvals.  The Framework aims to “strengthen intergovernmental cooperation and minimise unnecessary costs to business”, while maintaining “high environmental outcomes”.

In Australia, major projects must pass environmental assessments at both the Commonwealth and State and Territory levels before going ahead. The advantage of this dual system  is that protection of Australia’s environment and biodiversity is not placed solely in the hands of any individual State or Territory government.

However, the drawback is often significant levels of duplication and delay.  To minimise these issues, the Environment Protection and Biodiversity Conservation Act 1999  allows the Commonwealth to strike “bilateral agreements” with State and Territory governments to accredit their assessment and approval processes. This eliminates the need for separate Commonwealth assessments or approvals.

The Framework

Until now, the Commonwealth has restricted bilateral agreements to assessments only.  When the Commonwealth accredits a State or Territory environmental assessment process the effect is that a proposed project is assessed solely by the State or Territory. However, the Commonwealth and State or Territory Governments still make separate approval decisions.

The new draft Framework contemplates shifting to a position where the Commonwealth will negotiate agreements relating to both assessment and approval of projects.

While Assessment Bilaterals are now generally accepted by the community, there is significant controversy around the introduction of Approval Bilaterals.

The economic case for Approval Bilaterals is strong. By removing the need for separate Commonwealth approval of projects they promise to streamline the environmental assessment process further. 

The Productivity Commission estimates that reducing a major project’s approval time by one year could increase its net present value by 10 to 20 per cent.  Thus, even minor efficiency improvements can lead to significant economic gains.

Industry groups have enthusiastically welcomed Approval Bilaterals. Australia’s resources sector investment pipeline is close to $500 billion, of which almost half relates to projects requiring government approvals.  The value of improving the implementation of Assessment Bilaterals alone is estimated to be $400 million over 10 years.

While the economic case for Approval Bilaterals is clear, environmental groups are concerned that these agreements place too much power in the hands of State and Territory Governments, whose direct economic interest in a project might be greater than the Commonwealth’s.  Their view is the Commonwealth should retain a closer supervisory role over matters of national environmental significance.

However, if the Commonwealth decides that a State or Territory is failing to comply with a bilateral agreement, it can suspend or revoke the agreement.  It has done this before, such as when the Commonwealth objected to the Queensland Government’s assessment of the $6.4 billion Alpha coal project. The Commonwealth froze the assessment process and threatened to suspend its Assessment Bilateral with Queensland, which could have resulted in the Commonwealth restarting Alpha coal’s assessment process.

While disputes between Commonwealth and State or Territory Governments can have dire consequences for industry, it is a safeguard against any potential for abuse of bilateral agreements.

In developing the Framework, the Commonwealth appears to have taken care to minimise the risks inherent in Approval Bilaterals. The environmental standards that will be required before a State or Territory approval process is accredited are comprehensively described, as are the standards for regular reviews and audits. 

Overall, the Framework strikes the right balance – streamlining the approvals process without jeopardising environmental outcomes.  The reduced duplication should see a faster approvals process for major projects, something that is sorely needed, particularly in the resources sector.

The final version of the Framework is due to be released in December 2012.  In the meantime, the Commonwealth is inviting feedback on the draft Framework.