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Standing Committee on Environment - 20/06/2014 - Streamlining environmental regulation, ‘green tape’ and one-stop shops

PEARSON, Mr Brendan Michael, Chief Executive Officer, Minerals Council of Australia

STUTSEL, Ms Melanie Louise, Director, Health, Safety, Environment and Community Policy, Minerals Council of Australia

Committee met at 09:01

CHAIR ( Mr Hawke ): Yesterday the committee heard from bodies representing legal and environmental practitioners who work within Australia's system of environmental regulation. Today the committee will hear from a range of industry representatives from sectors such as primary industries, manufacturing, development and infrastructure. We look forward to hearing about specific instances where the current system has not worked optimally and receiving suggestions for specific change that could be made in regulations or the way they are administered by government.

Before asking our first witnesses to introduce themselves I remind members of the media who may be present or listening on the web of the need to fairly and accurately report the proceedings of the committee. Although the committee does not require you to give evidence under oath, I should advise you this hearing is a legal proceeding of parliament and therefore has the same standing as proceedings of the House. We have your written submission. Thank you for that. Would you like to make a short opening statement or additional submission?

Mr Pearson : We will make a short statement.

CHAIR: Thank you. Please proceed.

Mr Pearson : Chairman, as you aware, the Minerals Council represents small, large and medium sized companies involved in minerals extraction and processing in this country. We represent companies that account for about 90 per cent of production of mining products. We welcome the opportunity to participate today. We emphasise, at the outset, that in our view streamlined approvals processes and effective environmental regulation are not mutually exclusive concepts and we do not seek in any way to remove or to diminish environmental safeguards. We believe, however, that a single approvals process can meet both objectives, that is, more timely consideration of projects and effective and efficient regulation. That is why we support the one-stop shop reform agenda and consider it a critical element of a forward looking microeconomic reform agenda.

I just want to touch very briefly on why we support reform of project approvals processes. I guess it is a truism to say that project approvals are an important element of mining industry growth. In recent years investment in mining projects, both greenfield and expansions, has been extraordinarily strong. As recently as 2012, mining investment was equivalent to about eight per cent of GDP, which is higher than in any previous mining boom for at least over a century. Although new investment in the minerals sector has slowed, Australia's commodity forecaster, BREE, recently reported that there is $32 billion in committed mining and related infrastructure projects, with a further $125 billion in projects under feasibility study.

The problem is that Australia's performance in processing project approvals has deteriorated over the last decade. Our research for the MCA by a Port Jackson Partners showed that the average Australian thermal coal project experienced an extra 1.3 years delay relative to those elsewhere in the world. In other words, 3.1 years in Australia's case, and 1.8 years on average for other comparable nations.

One MCA member company, Glencore, noted in its submission to the recent Productivity Commission that approval timeframes for major projects in Australia increased from seven months on average in 2002 to 18 to 36 months in 2012. These delays impose both a significant cost on individual mining companies but also on the broader economy. Our companies have indicated that a one-year delay in a project approval can affect the net present value of a project by between 10 per cent and 15 per cent and we know instinctively that the macroeconomic cost of these delays is significant and, conversely, that the economic gains from reducing these details is equally substantial. I just want to foreshadow that we aim to publish some research on the economic dividend to be gained from streamlined project approvals in coming weeks.

Mr Chairman, as I noted earlier, the streamlined project approvals processes and effective environmental regulation are not mutually exclusive. We support this one-stop shop reform agenda and we are more than happy to run through our suggestions on the improvements to the legislation and the current processes and to provide examples that may help you in your deliberations. Thank you.

CHAIR: Thank you. I might start with a few questions. I know there are a few today and time is limited with so many witnesses. You have referred to the time cost of projects. We have heard a lot about time in the approvals processes, that it cost projects a lot of money, and you have the impact on net value there. Are you recommending things like statutory timeframes and things like that in terms of the process or do you have any other recommendations? What can we do to limit this blow-out in time that it is taking—seven months in 2002—and 18 to 36 months in 2012?

Ms Stutsel : In our view it is a suite of initiatives that really needs to occur together. One of those is clearly statutory timeframes that provide certainty for both proponents, government and other stakeholders. Another is in relation to the determination of the terms of reference for an environmental impact statement. The matters that are to be considered in the environmental impact statement process we think should be determined early and actually locked in. We recognise that over the course of the environmental assessment there may be some additional matters which arise which subsequently need to be further assessed.

You will have seen that there was a project, for example, in the minerals industry in Queensland where the very late entrant of a spurious matter into the terms of reference led to around a nine-month delay on that project and actually meant that it was subsequently not within its investment window to proceed. We think that the one-stop shop process delivers a real opportunity, though, in terms of giving people one set of environmental impact assessment processes, one set of approvals, one set of conditions and one requirement for an offset. If we achieve that effectively what we will do is reduce a number of points at which we have seen quite significant additional time imposts in the negotiation phase with the department, particularly the federal environment department.

CHAIR: There are some good points that you made there that I would like to follow up on. Some people argue, and we have heard some evidence, that one-stop shops are good, and one process is obviously a lot better than many, but that if other elements that you have been suggesting are not followed then you may have similar delays but just through one process. When you are talking about your assessment processes, other people have suggested to us that the most important component of this is something they refer to as risk management in relation to the matters to be considered. Is this the same thing that you are talking about in terms of what matters will be considered for each particular project and what the risk of a project is?

Ms Stutsel : Certainly the matters that are included in the EIS should be based on a comprehensive risk assessment, and they should be material.

CHAIR: That does not happen now, does it?

Ms Stutsel : It does happen, but even issues that have an immaterial risk—so either a very low consequence or a very low likelihood of occurring—require the same level of assessment.

CHAIR: Given equal weighting.

Ms Stutsel : So, you spend an awful lot of time doing science on issues that might never occur and you spend an awful lot of time doing science on work where, even if it did have an impact, that impact would not be significant on the matter that you are trying to protect.

CHAIR: Does this, in your view, lead to lots of delay in the process? Is this one of the critical elements?

Ms Stutsel : That is one of the critical elements, but equally at the back end of the approval what we see with conditioning is that we will get one set of conditions from the state and we will get a separate set of conditions from the Commonwealth and often those conditions are entirely unrelated to each other even though they relate to the same environmental matter. The responsibility then is on the proponent to manage multiple and often competing conditions, and there is a reporting and compliance burden associated with that. Similarly we often see projects required to have two environmental offsets, one for the state process and one for the federal process.

CHAIR: So you are saying a referrals manager in each jurisdiction would assist. How would that happen? How would that assist? I just want to understand that a bit better.

Ms Stutsel : The way that the EPBC Act is structured means that there is a driver on companies to actually undertake what we call insurance referrals. Because of the risks associated with potentially triggering a matter of national environment significance and the risks associated with subsequent matters of national environmental significance being included in the act and having a retrospective implication for your project what all of our companies will do is refer their project to the Commonwealth and have it determined whether or not it is a controlled action. A referrals manager, someone who actually had the delegated authority to say, 'Your project, based on the information that you can provide, is clearly not within the requirements of the EPBC Act and we will give you certainty that you will not be subject to that retrospective application later on' would actually reduce the number of projects that we have going through that process.

CHAIR: Is there any of these in any of the bilateral agreements that you are aware of?

Ms Stutsel : There are case managers that the Commonwealth is committed to.

CHAIR: This is separate. We are talking about referrals.

Ms Stutsel : The case managers could have a referral role.

CHAIR: In the current bilaterals is there any delegated authority or not?

Ms Stutsel : There is delegated authority in the bilaterals for the referral process.

CHAIR: This would be a manager of those processes in each jurisdiction or is this already happening?

Ms Stutsel : The way the bilaterals are constructed effectively means that, if you are in a state process that is accredited under the bilateral and you are deemed to have referred to the Commonwealth, and if subsequently it is called in by the Commonwealth you will have met those referral requirements. In a lot of ways the way in which the bilaterals with Queensland and New South Wales are structured—and we are obviously yet to see the approvals bilaterals for other states—means that the requirement for a referrals case manager is very much reduced.

CHAIR: So, it is not necessarily in the current bilaterals but could be in other jurisdictions. Mr Zappia.

Mr ZAPPIA: Thank you for your presentation thus far. Mr Pearson, you said that investment in the mining sector has been strong over the last decade and I think you said words to the effect that it has probably tailed off a little bit in the last couple of years.

Mr Pearson : Yes, I did.

Mr ZAPPIA: Can you very briefly explain why?

Mr Pearson : A 50 per cent reduction in commodity prices is probably the most important single factor. Investment in the mining sector reached seven or eight per cent of GDP. We are going to see that come back down maybe to four or five per cent. That means fewer new coal projects and a slowing in the expansion of the iron ore sector, but there is still, in our view, a pipeline of projects that will have to come forward, because otherwise our volumes will eventually tail off. There is still reasonable pipeline there.

Mr ZAPPIA: You said you were going to provide us, further down the track, with some information about economic gains and dividends, which I would certainly appreciate. Ms Stutsel, you made a comment about unrelated matters in the assessment process between state and federal government. Would you please elaborate on what you meant by the unrelated matters that you are being asked to respond to?

Ms Stutsel : For example, one of our member companies was going through an environmental approval process in Western Australia. They went through the standard Western Australian approval process, got their approval in place and a set of conditions and an offset requirement associated with that. At the same time they were going through the EPBC Act process. Now, because of the lack of familiarity of the Commonwealth officers undertaking that assessment with both the project and the environment in which that project was being undertaken, what we saw were conditions that would relate more to temperate or semi-temperate ecosystems being applied to an arid environment. So, for example, that company was asked to provide scientific justification for why the materials in its tailing storage facility would not have an impact on platypus in the region. Now, platypus have not been seen in arid Australia for some thousands of years.

Mr ZAPPIA: I think I get the gist. I am trying to ascertain whether the requests put upon this particular applicant were a duplication of the same requests or were they two separate directions in terms of the requests and related possible conditions? The example you were giving—and I can understand your frustration—could have still been applied even if it was a one-stop shop case.

Ms Stutsel : Our experience is that state governments have a much closer association with both mining projects and the geography in which the projects are located, so we tend to get a much more informed assessment of the project. That duplication occurs, as I was talking earlier, at both phases. The example I gave was in the environmental impact assessment process, but similarly what we see with the conditioning end, and in this project's example two sets of conditions that related to the same matter. For example, with the tailing storage facility the state government might have conditioned that it had to be safe and stable with a bund height of a certain height and an angle of repose of a certain degree—very specific detailed requirements. However, the Commonwealth's requirements were slightly different to that and the reporting requirements that sat with it, again, were different between the two jurisdictions.

Sometimes there is actually a requirement for the proponent to make a best endeavour's decision about which of the two will actually be met by the way in which the tailing storage facility is constructed, for example, and they will have to go back and argue the case with the relevant regulator why the regulation is inappropriate, but in other times they just have to manage those dual sets of reporting and compliance requirements.

CHAIR: Mr Broad and then Ms Marino. We will try to keep it to two to three questions per member and then we will come back, because we are in half-hour blocks.

Mr BROAD: My apologies for being a little bit late. I missed some of your preamble. My question is around the water trigger. We assume everyone that the Mineral Council of Australia represents is completely ethical and there is never any problems, but of course the challenge with mining—and everyone at this table understands the importance of mining to the Australian economy—is that if something does go wrong it comes back on us more than it comes back on you. This is the challenge to get it right. We can think of the Gulf of Mexico and those sorts of different events around the world. The water trigger is quite an interesting one. I represent rural seats. Can you explain how, if we went to a one-stop shop, given the motivation of state governments to get more royalties out of the mining industry, that we can not only address the concerns around looking after our water but address the concerns that there would not be a conflict of interest by allowing it to sit in a one-stop shop with the states? I am interested in how you think that could be done.

Ms Stutsel : I should start off by saying our view is that we think the water trigger should actually be repealed from the EPBC Act, because we consider that it is duplicative of processes that exist both with the National Partnership Agreement and also in terms of the existing state approval processes.

Mr BROAD: It was put in, though, because of a perception.

Ms Stutsel : Absolutely.

Mr BROAD: Perceptions are just important. Sorry to cut you off.

Ms Stutsel : That is all right. We consider that states have the appropriate capacity to undertake that assessment, and obviously with the IESC and the changes that have been proposed and have gone through the House in relation to all state governments being able to access independent advice from the scientific committee but also the Commonwealth retaining that ability means that you will have the very best peer reviewed science being done independently as well as the very good peer reviewed science that companies already do informing state based decision making.

While it is certainly the same government that receives royalties as well as issues approvals, I think it is important to note a couple of things. One is that there are standards that have been put in place under the bilateral agreements that those states are required to meet, and the Commonwealth obviously retains an oversight role to ensure that the states are undertaking the assessment in a way that is compliant with the requirements of the EPBC Act, and they have that oversight and enforcement mechanism and assurance processes available to them, including the ability to call the project in at any time.

Secondly, within the state itself it is actually a very different arm of government that is undertaking the environmental approval and assessment than is collecting the royalties. So, for example, what we often see is that there are multiple agencies, including the Environmental Protection Agency or its relevant equivalent, which have a key role in providing high quality information to then either a coordinating authority or whoever the deliberative authority is to then make a decision about whether that project will proceed, and that is done very separately to any consideration from Treasury in relation to royalty collection.

Mr BROAD: I am still fleshing out the perceived conflict of interest. Do you think it is there?

Ms Stutsel : I disagree. I do not think it is there, because effectively we would say that the same conflict of interest would therefore also exist with the federal government in terms of the large tax receipts, for example, through corporations tax, and in many cases our corporations tax payments are actually substantially higher than the royalties that are received by state governments. I think the issue here is that you have a separate arm of government undertaking revenue collection and undertakes environmental approvals. Provided that the environmental approval is done to an agreed set of standards in a manner that is consistent and transparent, and which enables public engagement in the process, I think stakeholders should have confidence in both the process and the outcomes.

CHAIR: Ms Marino.

Ms MARINO: Thank you for being here today. I have a few questions, some of which you may like to take on notice. One of the things you touched on in your submission was heritage forum shopping. If you have practical examples that you can provide to the committee I think that would be useful.

Mr Pearson : We can do that.

Ms MARINO: Given some of the evidence we have received so far and the comments we have had, in the experience of your members is the threatened species list completely relevant in the species that still exist on that list? I would appreciate your comments on that. I would also appreciate comments on practical suggestions for how the one-stop shop should not add further to your processes whilst delivering on its environmental intent.

One of the other things you touched on was the increased regulatory burden. I notice that in your submission you touched on the fact that six new pieces of legislation relating to environmental regulation, six replacement acts, more than 60 sets of major amendments to primary legislation and over 50 sets of amendments to a large range of subordinate legislation. One of the other things you noted in there was that this process has not necessarily improved the environment outcome, these additional layers of regulation. If you also have practical examples of this I also think that the committee would appreciate that evidence.

Ms Stutsel : We would be happy to provide the practical examples in writing, if that would assist the committee.

Ms MARINO: Yes, please.

Ms Stutsel : In terms of the general issues that you have raised, I think the regulatory churn that you have just talked about is evidence of the fact that what we see is an ever-escalating range of requirements on environmental performance and conditioning, which actually does not translate into environmental outcomes on the ground.

Ms MARINO: That sort of evidence is what this type of committee, being an environment committee, would be interested in.

Ms Stutsel : We certainly see that in terms of the threatened species list, that it is an additive process rather than a reductive process. Additional species get added, but even where there is science to demonstrate that certain species are no longer in locations or are no longer threatened we do not actually see a process for removing species from that list. A great example of that is that we have a pigeon called a squatter pigeon which happens to love disturbed areas. It was originally a threatened species and it still is on the threatened species list, but it is now extremely prevalent on mined areas in Queensland. If the science was done we are fairly confident that the listing of that species would actually be reduced from being threatened and, therefore, the environmental requirements would go back to something that is more appropriate to the level of risk on that species.

CHAIR: Mr Giles.

Mr GILES: Just following up an answer you gave to Mr Zappia's question when he asked you about examples of duplication. Just to clarify, you spoke about two sets of conditions applying to the same matter. For me 'duplication' means not merely regulation touching the same matter but the same matter for the same reason. I think that is a pretty critical distinction. I am just wondering if you could point to examples of such duplication. This could be a question on notice if that is more convenient.

Ms Stutsel : Certainly it can be the same matters for the same reason, although it might have been that, for example, an issue is triggered by multiple matters of national environmental significance as well as recognised by the state as an environmental value that might impacted on. They become quite confounded, the environmental matters that are included in the environmental impact assessment process. I am happy to provide some specific examples of that to you in writing. I guess it is not only unique to the environmental approval process. We also see it, for example, in relation to requirements on water regulation as well as emissions monitoring.

Mr GILES: The significance is obviously pretty high for this matter given the international obligations given effect to by the Commonwealth legislation, so that seems to me to be a critical issue for law making in this area. The other matter was a more open question. I am interested in the MCA's thoughts on the impact of state based one-stop shops on programs which may cross state or territory boundaries.

Ms Stutsel : It is extremely rare for a project to be cross-boundaries, particularly in the minerals industry context. The only situations in which we have had that have been in relation to mineral sands projects between New South Wales and Victoria, for example. What they have required is three levels of assessment—New South Wales and Victoria as well as the Commonwealth EPBC Act assessment—and then multiple layers of subsequent approvals, for example, given their location in the Murray-Darling region, and then secondary approvals and conditioning requirements.

What we would see with the one-stop shop process is you would have only two jurisdictions then responsible for managing that process. Indeed, where we have had cross-jurisdictional projects we have seen that state governments have been very good at collaborating in their environmental assessment process. We hope we would continue to see that behaviour. Certainly it would be a high degree of efficiency for the proponent to only have to deal with two rather than three jurisdictions. But as I said earlier, that is extremely rare. Most projects are located within a single jurisdiction and so indeed it is a one-stop shop single point of contact for government.

CHAIR: We were talking about the threatened species list with Ms Marino's question. We heard evidence yesterday from the Environment Institute of Australia and New Zealand that this list is well out of date, so the new threatened species commissioner the government is bringing in could have a task to immediately look at keeping this list up to date. Everybody wants to protect threatened species, but if the list is out of date then that seems to be a difficulty in doing that. Is that what you are saying; that if you can have this list regularly updated or have a process which keeps the science current, that would assist in everybody's evaluation of these projects?

Ms Stutsel : Yes, it would and particularly if we move to more of a risk based approach to environmental approvals and conditioning, because what you would actually do then is align the assessment and conditions to the level of risk to the species in terms of its ongoing viability. We very much supported the introduction of the threatened species commissioner, and we very much look forward to ensuring that some of the good science that is being done by our industry can be used to inform that process.

CHAIR: We only have one minute left. I just want to get two thoughts from you, because we had some pretty provocative evidence from the environment institute yesterday on a couple of matters. The last two things they raised was a bank of science; that the Commonwealth use all of the science that is done by industry and other bodies better, that is, maintain or start to reference a body of science. Given modern technology, would this concept be something you would support, rather than having to reinvent all the science? All of the work done by so many different groups could be tapped into and recognised more regularly.

Ms Stutsel : That is something we have been advocating for a number of years. We are very keen for there to be a single repository of scientific information from, for example, environmental impact assessment processes. The only issue for us is the timing at which that science is made available and ensuring that there is appropriate contextual information around it so that we do not compare peer reviewed science with a lower quality of scientific evidence.

CHAIR: That is a good point. The last point they made was a professional standards body for assessors similar to accountants and so on. This would help alleviate Mr Broad's concerns in a certain sense that where you see major projects that have been given long approval processes you do not see the scientists or the engineers in the debates. You see community concern, which can often be uninformed, and you have no relevant people who are trusted to say that this is the trusted authority, qualified and trusted.

Ms MARINO: Accredited.

CHAIR: Ms Marino is right; accredited qualified scientists and engineers saying, 'Here's the facts about this one way or the other.' They were recommending some sort of professional standards body which would accredit people in this regard.

Ms Stutsel : In theory we do not have a problem with that. In application, though, it is a very complex area and that is that you will often have generalists in a particular thematic area and specialists. So, when a company is undertaking an environment impact assessment process, for example, it will have hydrogeologists, limnologists and other water scientists involved in undertaking any ground water assessment and then it may find a particular stygofauna or species that needs additional work. There may only be one expert in that area in Australia that may be being used by the company already, so how you accredit people at every one of those levels for what science they can undertake and what boundaries of the science that they can actually provide expert opinion on becomes a very complex matter.

CHAIR: We are out of time today so I would like to thank you for your evidence. We have asked you to give a couple of additional bits and pieces so we would be grateful if you could forward those to the secretariat for our consideration. You will be sent a copy of the transcript of your evidence for any corrections or anything you would like to make. Thank you for appearing before us today. We value your submission as well.

Mr Pearson : We will get that economic research to you the minute it is finished.

CHAIR: Thank you so much.