Independent review recommends fundamental reform of 'archaic, ineffective' EPBC Act

Eight key recommendations you should be across 10 min read

The Interim Report of the once-in-a-decade review of the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) has recommended major reforms, finding the EPBC Act to be archaic, ineffective and inefficient.

Amongst the recommended reforms are measures that would significantly reduce duplication between state and federal environmental assessment processes and consequent delays to projects. Significantly, the Interim Report rejects calls for the introduction of a climate change trigger under the EPBC Act, but recommends greater compliance and enforcement action and the introduction of a limited avenue for merits review of decisions.

Key takeaways

• If adopted, the Interim Report's recommendations have the potential to significantly reduce delays to approvals and duplication between federal and state approval processes, by encouraging devolution of the Commonwealth's assessment and approval functions to the states by way of bilateral agreements, underpinned by new National Environmental Standards.
• The Interim Report rejects calls to expand the 'matters of national environmental significance' which trigger the requirement for referral and approval of projects under the EPBC Act, including calls to introduce a climate change trigger.
• A proposal to provide for limited merits review of decisions 'on the papers' would, if adopted, create a new pathway for opponents of a project to seek to challenge and delay a project.
• While the Minister for the Environment (Minister) does not support the establishment of an independent compliance and enforcement regulator outside of government, proponents should still expect a significant increase in compliance and enforcement activity under the EPBC Act, following the Interim Report's finding that the existing approach to enforcement is too weak.
• In welcome news for the resources industry, the Interim Report recommends limiting the 'water trigger' so that it only requires consideration of projects that risk irreversible depletion or contamination of cross-border water resources.

Background

An independent review of the EPBC Act is required every ten years to examine the operation of the Act and the extent to which its objects have been achieved. On 29 October 2019, the Minister announced that the second independent review of the EPBC Act would be led by Professor Graeme Samuel AC.

Following extensive stakeholder consultation and consideration of almost 30,000 submissions, Professor Samuel's Interim Report was released on 20 July 2020.

The Interim Report follows the release of the Productivity Commission's Draft Report on Resources Sector Regulation on 24 March 2020 and echoes a number of findings of that report, as set out in our previous Insight. It also follows a recent independent performance audit of the Department of Agriculture, Water and the Environment (Department) in relation to its administration of the EPBC Act, which found significant overruns of statutory timeframes for approval decisions, and underscored the inefficiencies in the EPBC Act process also identified in the Interim Report.

'Ineffective' EPBC Act requires fundamental reform

The Interim Report is unreservedly critical of the EPBC Act, describing it as archaic, ineffective, cumbersome, having 'fundamental inadequacies' and not fit to manage current or future environmental challenges, particularly in light of climate change. The processes under the EPBC Act are acknowledged to be convoluted and inflexible, with the result that engaging with the EPBC Act is time-consuming and costly.

These findings are consistent with long-held concerns of project proponents, for whom a requirement for approval under the EPBC Act may result in months or even years of delay to their projects.

The Interim Report goes so far as to call for a comprehensive redraft of the EPBC Act in the longer term, or a new set of related Acts. In the short term, legislative amendments are said to be required to address known inconsistencies, gaps and conflicts in the Act.

Eight key recommendations to be aware of

The Interim Report runs to over 120 pages and includes a large number of recommendations. In our view, there are eight key recommendations that proponents should be across:

1. Devolve Commonwealth functions and streamline processes – the Interim Report acknowledges that duplication exists between the Commonwealth and state and territory environmental assessment processes. The Interim Report calls for devolution of the Commonwealth's assessment and approval functions, by way of bilateral agreements between the Commonwealth and states, to provide more streamlined regulation and reduce duplication.
   
   The ability of bilateral agreements to enable states and territories to grant approvals on the Commonwealth's behalf has always existed. However, to date, bilateral agreements have only accredited state assessment rather than approval processes. The implementation of bilateral agreements has often been a long, drawn-out process. While extending accredited arrangements to approvals is a step in the right direction, proponents should not expect this to be a simple or quick process.
   
   Professor Samuel believes the Commonwealth should retain the ability to step in to make decisions where it is in the national interest to do so or where accredited arrangements are not in place, and calls for a transparent assurance framework and regular review of decisions, suggesting that the Commonwealth will not be entirely 'hands off' should the recommendations be implemented.
   
   Encouragingly, in cases where the Commonwealth does continue to assess and approve projects, the Interim Report calls for the streamlining of Commonwealth assessment processes. The Interim Report recognises that the 'referral' step is unnecessary and time-consuming where the need for detailed assessment of a project is obvious. To avoid projects being referred only for the sake of legal certainty, it encourages providing greater clarity on impacts that are acceptable and for which approval is not ultimately required.
   
   
2. Develop National Environmental Standards – essential in enabling this proposed devolution of the Commonwealth's functions, according to the Interim Report, is the development of legally enforceable National Environmental Standards (Standards) to 'set clear rules for decision-making' by the states. The Interim Report recommends Standards that are outcomes focused and measurable, but also recognises the need for flexibility. It is suggested that precise, quantitative Standards will also support the capacity to automate consideration and approval of low-risk proposals.
   
   While any proposed measures to streamline the approvals process are to be commended, it will be important that the new Standards are implemented in parallel with the Commonwealth stepping back and accrediting state approval processes. Otherwise, the Standards may end up creating merely another layer of regulation.
   
   
3. Leave climate change regulation out of the EPBC Act – the Interim Report rejects calls to broaden the environmental matters dealt with under the EPBC Act, including calls to introduce a climate change trigger. Noting the Greens currently have a bill before Parliament which seeks to introduce a climate trigger into the Act, the Interim Report's position on this issue makes its passing even less likely. 
   
   However, Professor Samuel considers the EPBC Act should require development proposals to explicitly consider the effectiveness of their actions to avoid or mitigate impacts on nationally protected matters under specific climate change scenarios and transparently disclose the full emissions profile of the development. It is unclear whether this recommendation extends to requiring disclosure of indirect and downstream (scope 2 and 3) emissions. In launching the Interim Report, the Minister indicated that the Commonwealth does not support any extension of the EPBC Act to require reporting of greenhouse gas emissions.
   
   
4. Introduce limited merits review – while the Interim Report does not advise the introduction of full merits review of decisions under the EPBC Act, it advocates a limited merits review 'on the papers'. If adopted, this recommendation would create a new pathway for opponents of a project to seek to challenge and delay a project.
   
   Professor Samuel emphasised that legal challenges should be limited to matters of outcome and not process, but did not find evidence that 'lawfare' is a major issue under the EPBC Act. The Interim Report supports maintaining extended standing to bring legal challenges against decisions under the Act, but also suggests it may be beneficial for applicants to be required to demonstrate they have an arguable case or that the case raises matters of exceptional public importance, where they are relying on extended standing provisions.
   
   
5. Ramp up compliance and enforcement action – the Interim Report concludes that the existing approach to enforcement of the EPBC Act is too weak and that penalties are neither commensurate with the harm caused nor an adequate deterrent. Professor Samuel recommends establishing an independent compliance and enforcement regulator that is not subject to actual or implied political direction from the Minister, to act as a 'strong, independent cop on the beat'.
   
   While generally supportive of strengthening enforcement functions, the Minister has dismissed the need for an independent regulator outside the Department. However, proponents should still expect a significant increase in compliance and enforcement activity under the EPBC Act as a result of the review.
   
   
6. Consider biodiversity offsets as a last resort – the Interim Report recommends that offsetting be considered only when proponents have exhausted all reasonable options to avoid or mitigate impacts, and that offsets should deliver genuine restoration. Professor Samuel sees an opportunity for the right policy settings and greater regulatory certainty to provide a catalyst for an effective biodiversity restoration market, as well as an opportunity to leverage carbon markets to deliver environmental restoration.
   
   
7. Modify water trigger – Professor Samuel proposes modifying the 'water trigger', which requires the referral and approval of coal seam gas and large coal mining projects that are likely to have significant impacts on water resources, so that it is limited to consideration of projects that risk irreversible depletion or contamination of cross-border water resources. He also considers the argument for expanding the water trigger beyond large coal and coal seam gas projects to be compelling, but notes this would require careful consideration to avoid duplication with other Commonwealth and state regulatory requirements.
   
   The Interim Report advocates retaining the Independent Expert Scientific Committee to provide technical advice to the Minister on projects referred under the water trigger, but recommends that its name and remit be adjusted to reflect any changes to the water trigger.
   
   
8. Promote use of Indigenous knowledge – the Interim Report concludes that the EPBC Act is not fulfilling its objectives as they relate to the role of Indigenous Australians in protecting and conserving biodiversity and heritage, and promoting the respectful use of their knowledge. It recommends that the Standards include a specific standard on best practice Indigenous engagement and that a new Indigenous Knowledge and Engagement Committee should replace the existing Indigenous Advisory Committee and advise on development of the new standard. The Interim Report also calls for a comprehensive review of current cultural heritage laws and consideration of the role of the EPBC Act in providing national-level protections.

Minister's response to Interim Report

The Minister formally responded to the Interim Report on 20 July 2020 and has committed to:

• develop the Standards recommended in the Interim Report;
• commence discussions with willing states to enter new bilateral agreements accrediting states to carry out environmental assessments and approvals on the Commonwealth’s behalf, to facilitate 'single touch approvals';
• commence a national engagement process for modernising the protection of Indigenous cultural heritage, commencing with a roundtable meeting of state and federal Indigenous and environment ministers; and
• explore market-based solutions for better habitat restoration with a view to improving environmental outcomes and providing greater certainty for businesses, and establish an environmental markets expert advisory group.

The Minister has foreshadowed introducing legislation and 'prototype' Standards as early as August, ahead of the release of Professor Samuel's final report due in October 2020. This has given rise to concerns from a number of quarters that the Government may do a 'rush job' of these important reforms.

The Government has also indicated it will take steps to strengthen compliance functions, in line with Professor Samuel's recommendations, although it does not support the establishment of an independent regulator outside the Department. Despite not being a recommendation of the Interim Report, the Minister will also reportedly be discussing with the Attorney-General potential actions to prevent unwarranted challenges to decisions under the EPBC Act, citing concerns regarding activists engaging in 'lawfare' to stymie projects.

What next?

Professor Samuel has called for feedback on the Interim Report, to inform the preparation of his final report due in October 2020. Feedback can be provided by completing a survey available on the Department's website. The survey is open until 9am on Monday, 17 August 2020.

Professor Samuel has also indicated he will continue to engage with key stakeholders in a targeted way to test and refine the key reforms proposed.

Please contact us if you would like to further understand the implications of the Interim Report for your specific business or project, or if you require any assistance in providing feedback on the Interim Report.