The Productivity Commission's proposal for a "one project, one assessment, one decision" framework to reduce duplication in approvals processes will be welcomed by industry. But it's a tough assignment that will attract plenty of controversy.
The Commission's review of Australia's development assessment and approval processes for major projects benchmarked Australia against practices in the US, UK and Canada. (Read more on the Commission's study here.)
While none of the other countries emerged as having a better process overall, the Commission did find "substantial scope" for improving Australia's DAA processes.
The cost of a one-year delay to a major oil or gas project is estimated at between $300 million and $1.3 billion, with a median estimate of $700 million representing 9 per cent of a mid-range project's net present value.
To reduce the costs of duplication in DAA processes the Commission is advocating a "one project, one assessment, one decision" framework.
This would be achieved through greater use of "bilateral agreements" between the Commonwealth and States/Territories, including approval bilaterals, and more strategic assessments, instead of project-specific assessments.
The Commission also recommends reviewing the government's "water trigger" for CSG and large coal mining developments which was legislated in June. In this, it sympathises with industry concerns that the water trigger adds a new layer of regulatory duplication between States/Territories and the Commonwealth.
BILATERAL AGREEMENTS KEY TO "ONE PROJECT, ONE ASSESSMENT, ONE DECISION" FRAMEWORK
Expanding the use of "bilateral agreements" under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) is undoubtedly the most controversial of the Commission's recommendations.
Most projects only undergo environmental assessment and approval at the State/Territory level. However, where a large project is likely to impact on a "matter of national environmental significance" (MNES) (such as world heritage properties or listed threatened species and ecological communities), the Commonwealth's role in the environmental assessment and approval of projects is triggered.
This means the project requires assessment and approval at both the State/Territory and Commonwealth levels.
The EPBC Act does allow the Commonwealth to enter "bilateral agreements" with States/Territories under which the Commonwealth accredits State/Territory assessment or approval processes. This reduces duplication by removing the need for separate Commonwealth assessment or approval.
So far, the Commonwealth has only entered "assessment bilaterals" which means a project will only be assessed by the relevant State/Territory, but must still receive separate Commonwealth approval.
Assessment bilaterals are already well-established and the Commission has recommended their scope be expanded.
More controversial is the proposal to introduce "approval bilaterals".
Here, the Commonwealth accredits both a State/Territory's assessment processes and their approval decisions, thereby removing the need for Commonwealth approval and achieving the Commission's goal of "one project, one assessment, one decision".
So far, the Commonwealth has yet to enter a single "approval bilateral".
Apart from being favoured by the Commission, the introduction of approval bilaterals is a major component of the Coalition's 2013 Federal Election pledge to reduce "greentape".
However, approval bilaterals are highly contentious.
Environmentalists hold serious concerns that approval bilaterals will erode environmental standards. Their argument is that State and Territory Governments have a strong economic (and political) interest in facilitating major projects, making it inappropriate for them to be delegated extensive powers over matters with national, and in some cases global, environmental significance.
This viewpoint will likely be bolstered by a recent WA Supreme Court decision 1 invalidating the WA Environmental Protection Agency's approval of a gas hub for Woodside Petroleum's $40 billion Browse Basin project, on the basis of conflicts of interest on the EPA's board.
The Productivity Commission acknowledges these concerns, concluding that a comprehensive approval bilateral regime would be "neither feasible nor desirable".
Instead, the Commission has recommended a "targeted" approach, under which approval bilaterals would be implemented for less sensitive areas and for projects with well-understood impacts.
The Commission further dilutes its "streamlining" objectives by advocating that approval bilaterals be "carefully negotiated", with their operation monitored by the Council of Australian Governments.
These cautionary measures are sensible. However, they give cause for doubting whether approval bilaterals will actually deliver real benefits for industry.
Currently, assessment bilateral agreements require extensive collaboration between relevant State/Territory and Commonwealth agencies throughout the assessment process. Under an approval bilateral, the Commonwealth would need to be satisfied that the State's decision-making processes were adequately dealing with project impacts on MNESs. As such, Commonwealth involvement would likely intensify under an approval bilateral.
The success of approval bilaterals would also depend on resourcing in State/Territory approval authorities. There is already criticism that State and Territory bodies don't have adequate resources to properly assess major projects. Thus, what likelihood is there that they will have capacity to also take on the Commonwealth's approval responsibilities?
Ultimately, approval bilaterals may sound appealing in theory, but the reality is that they carry serious risks and may fail to significantly reduce duplication.
In June 2013, the Commonwealth Parliament amended the EPBC Act to make significant impacts on a "water resource" (defined very broadly) a MNES for CSG and large coal mining developments. This significantly expands the Commonwealth's involvement in DAA processes for CSG and large coal mining projects.
During consultation on the amendment, industry expressed concerns that the water trigger would duplicate existing State and Territory water impact assessment processes, for no tangible environmental benefit.
The Commission has expressed sympathy for those concerns, and has recommended the water trigger be independently and publicly reviewed.
The Commission also criticised the fact that the water trigger was introduced without a "regulatory impact statement" (RIS) being prepared. Generally, outside of urgent circumstances, the impacts of any new regulation must be assessed and published in an RIS. Far from there being any emergency, it appears the water trigger was expedited simply to ensure its introduction before the 2013 Federal Election.
The Commission also draws attention to the fact that the water trigger is exempt from any future approval bilaterals. The apparent policy rationale for this exemption is a community perception that State/Territory Governments are failing to properly manage the water impacts of CSG and large coal mining developments.
However, the exemption is a significant anomaly, given that no other MNES are subject to this restriction, and only complicates the approvals process for affected mining projects.
Less controversially, the Commission is recommending the increased use of strategic assessments to streamline DAA processes.
Currently, most projects are assessed and approved on a case-by-case basis. In contrast, strategic assessment approaches rely on broader region-level plans and policies, reducing or eliminating the need for assessment and approval of individual projects.
Strategic assessment is a rarity in that it has the support of both environmental and industry groups. Industry benefits from not needing to go through DAA processes for each individual project, while environmental outcomes are improved because strategic assessment takes account of the combined impacts of projects.
The downside is that strategic assessment is a costly and time-consuming (in some cases, upwards of 5 years) process. Thus, while it can't be a complete replacement for individual project assessments, it does present a non-contentious means of improving approvals processes.
1The Wilderness Society of WA (Inc) v Minister for Environment  WASC 307 (19 August 2013).
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