Budget 2009: environmental spending
On 28 May 2009 Finance Minister Hon. Bill English announced the new National's Government's first Budget. The content was highlighted ahead of time and, as a result, there were no particular surprises.
In terms of environmental spending, the key policies involved increased funding to grow the aquaculture industry, significant investment in the state highway network, a $1.5 billion infrastructure package, and an additional $35 million on other environmental projects, including Phase II of the RMA reforms. These are discussed in more detail below.
Sustainable aquaculture development
The Budget provides a $1.9 million funding package over the next four years to grow aquaculture into a sustainable market. It has been predicted that by 2025 aquaculture can increase to a billion dollar a year industry in New Zealand.
This initial package will fund a review of the existing legislation governing aquaculture management in New Zealand, and kick start the amendment process arising out of the review. A key driver of any amendments will be to reduce costs and time delays in consenting new aquaculture developments.
State Highway Network
The Budget allocates $3 billion for investment in the state highway network over the next three years, this investment being a key part of the Governments economic stimulus package.
The bulk of this budget is likely to be spent on the Government's seven identified "priority projects":
- Puhoi to Wellsford - State Highway 1
- Completion of the Auckland western ring route - State Highways 20, 16, 18
- Auckland Victoria Park bottleneck - State Highway 1
- Waikato Expressway - State Highway 1
- Tauranga Eastern Corridor - State Highway 2
- Wellington Northern Corridor (Levin to Wellington) - State Highway 1
- Christchurch motorway projects
The Government expects these projects to be substantially progressed over the next 10 years.
Infrastructure development
As with transport funding, the Government's emphasis on infrastructure development and funding is predicated on its programme of investment as a tool to cushion the impacts of the recession.
The 2009 Budget increases the capital spending allowance from $900 million to $1.45 billion, which is the first part of a planned $7.5 billion boost for infrastructure over the next five years. This plan will see capital spending allowance remaining at $1.45 billion for four years before rising to $1.65 billion in 2013/14.
As well as the funding indicated above for development of the state highways network, the Budget sets up an investment package for rail, including:
- A $90m operating subsidy for KiwiRail.
- $258m for funding of metro rail and rolling stock in Wellington.
- A new loan facility for KiwiRail of $140m, of which $75m has been provided to buy new locomotives.
Additional infrastructure spending outlined in the Budget makes provision for investment in health, broadband, education and housing.
Environmental sector
More generally, the following funding has been allocated for the environmental sector over the next four years:
- $9 million in funding for the reform of the Resource Management Act.
- Increasing funding for developing the Emissions Trading Scheme, including international linkages, to a maximum of $6.9 million.
- A $2.1 million increase in funding for the freshwater policy work programme.
- Additional funding of $17.3 million for activities that would have been discontinued as a result of funding reductions in 2009/10 (these activities relate to waste minimisation, Waikato River Settlement, and other policy advice).
With the Phase I reforms nearing the release of a select committee report, all eyes are on the Resource Management Act ("RMA") Phase II reforms.
Developing and finessing the Phase II reforms will be a more complex and considered process than the relative scramble of the Phase I reforms, and the aim will be to address more fundamental issues such as improving the relationship between the desired economic and environmental outcomes of the RMA. As well as focussing on specific priority areas, the Government will also be looking in Phase II to increase efficiencies by closer alignment of the RMA with other legislation.
Phase II comprises 10 related work streams. The first four work streams relate to developing greater direction for central Government in respect of improved management for specific topic areas - namely aquaculture, infrastructure, urban design and water. A further four work streams involve better alignment of the RMA processes with those of the Building, Conservation, Forests, and Historic Places Acts. The remaining two work streams are: developing the scope, functions and structure of the proposed Environmental Protection Authority - a substantial job in itself; and finally a 'catch-all' reform of a number of generic RMA process issues that were considered too complex to include in Phase I.
Nick Smith released some details of the specific reforms in Phase II on 8 May 2009.
Work streams 1 - 4: industry specific reforms
Aquaculture: Reform of the aquaculture regime is a high priority for the Government, as it is considered that it has the potential to be a billion dollar industry. The reforms will review existing aquaculture legislation to identify how to improve the regulatory regime, including the allocation of coastal space. The Government is aiming to have an Aquaculture Reform Bill ready for introduction in late 2009.
Infrastructure: Infrastructure investment is a critical tool in the Government’s programme for economic recovery. To increase efficiently in progressing infrastructure projects, better alignment between the RMA and the Public Works Act is required. Amendments including increased compensation for property owners are also likely.
The Hon. Nick Smith has announced that he has requested a general review of the workability of the designation provisions in the RMA, and whether any changes are needed to more efficiently facilitate infrastructure development without compromising environmental outcomes. This may be an answer to the submissions of many infrastructure and utility operators who, in Phase I, requested that a more coherent review of designations be considered during Phase II.
Urban Design: The Government has not yet committed as to the content of a National Policy Statement on urban design, with the Hon. Nick Smith indicating that he will review the Auckland One City approach before taking matters further.
Water: The Government has identified allocation and water quality as two pressing issues which need urgent attention in Phase II. A Water Strategy that will engage key stakeholders – water users, recreational users, iwi and environmentalists - is on the cards, although it is acknowledged that this is one of the more complex Phase II issues and will take considerable time to develop in detail.
Further details on the Water Strategy are to be announced in the next few months.
Further work streams
Legislative alignment: The relationship between consents required under the RMA and the Building Act has been identified as a key example of unnecessary duplication. The Ministry for the Environment and the department of building and housing have been instructed to consider alternatives, including, for example, a single approval process.
Environmental Protection Authority: The Phase II reforms will develop the role of the EPA, which is currently focussed on managing proposals of national significance. Phase II is likely to see provision for the EPA to perform a number of national level environmental functions, for example it has been suggested that the EPA could manage New Zealand's Exclusive Economic Zone.
The Hon. Nick Smith has indicated that the extent to which powers and functions of the EPA need to be under direct Ministerial control warrants further consideration, however, the intention is to have legislation in the House later this year and an expanded EPA fully operational by 1 July 2010.
National Infrastructure Advisory Board announced
Infrastructure Minister Bill English has announced appointments to the new National Infrastructure Advisory Board ("Board"), which has been established to provide advice to the National Infrastructure Unit ("NIU") and the Minister for Infrastructure. The Board will also assist to formulate the first 20-year National Infrastructure Plan ("Plan"), to be developed by the end of 2009 and updated every three years.
The Plan will present a high-level overview of the state of New Zealand's infrastructure, including a stock-take of existing infrastructure and anticipated future requirements. The Plan is intended to help Ministers, agencies, local government and the private sector identify needs and prioritise investments to lift growth. A further aim of the Plan is to provide stakeholders with greater certainty about the nature and timing of future Government investment. The intended result is that stakeholders in the private sector and local government will be better able to identify potential opportunities for their own future infrastructure investment decisions, alone or in partnership with central government.
The Government has appointed the following members, from the private sector and outside central government, to the Board: Dr Rod Carr (Chair), Sir Ron Carter, Lindsay Crossen, Dr Arthur Grimes, Dr Terence Heiler, Rob McLeod, John Rae and Alex Sundakov. All have expertise within the infrastructure industry ranging from former Deputy Governor of the Reserve Bank, to a former CEO of Fulton Hogan New Zealand Group to a former director of Landcare research.
The Board will report to the NIU, a body within Treasury established to assist the Government meet its objective to permanently lift the sustainable growth rate of the economy. The role of the NIU is to take a national overview of infrastructure priorities, providing cross-government co-ordination, planning and expertise. NIU's responsibilities include to:
- Formulate, and monitor progress on, the 20-year National Infrastructure Plan.
- Establish robust and reliable cross-government frameworks for infrastructure project appraisal and capital asset management.
- Monitor the implementation and use of the above frameworks.
- Provide support to, and act as a secretariat for, the Board.
The primary focus of the NIU, and for the infrastructure portfolio, is the performance of the stock of physical assets that underpin the functioning of the economy. The Government has placed a specific focus on network and utility systems such as transport, water, communications and energy as well as the quality of investment in, and long run management of, key infrastructure (including areas of large capital expenditure) such as public housing, schools, hospitals, prisons and defence assets. The overall aim is to ensure such networks enhance both the delivery of Government services and future economic performance. An Executive Director will lead the NIU and report directly to the Secretary to the Treasury. Until a permanent appointment of an Executive Director is made, Treasury Deputy Secretary Mike James is Acting Executive Director.
The establishment of the NIU and the Board are new initiatives for New Zealand. The NIU will be responsible, in close coordination with the Board, for a rigorous assessment of the performance of these new arrangements and will report to the Minister for Infrastructure by the end of 2011 as to whether any modifications or changes are necessary.
Auckland Governance Update
The Reorganisation Act - Auckland Transition Agency - Appointments announced
As outlined in the May 2009 edition of The Carbon Copy, the first Bill to implement the "Super City" changes - the Local Government (Tamaki Makarau Reorganisation) Act 2009 ("Reorganisation Act") - was passed into law under urgency on Saturday 16 May 2009. The Reorganisation Act establishes the Auckland Transition Agency ("ATA") which will be responsible for planning and managing Auckland's local government reorganisation. The ATA is a statutory entity and will only exist until the Auckland Council comes into existence in 2010.
The Minister of Local Government announced on 22 May 2009 that the ATA will be chaired by Mark Ford, the current CEO of Watercare Services Limited and chair of the Auckland Regional Transport Authority. Mr Ford will step down from his current roles at Watercare and ARTA.
The other members of the ATA are Miriam Dean QC, John Law, Wayne Walden and John Waller. The appointments are effective immediately.
Confirmation of local government decisions by the ATA
The ATA will be required to confirm certain decisions by existing local government organisations ("LGOs") - which are the six current local councils in Auckland and all council controlled organisations.
The Act requires the chief executives of LGOs to ensure that certain "significant" decisions have been confirmed by the ATA before those decisions can be implemented. The list of decisions which are caught by this process includes:
- the decision to adopt a long-term council community plan;
- the decision to set a rate;
- the decision to borrow money for a period which extends beyond 30 June 2011; and
- the decision to enter into any contract (other than an employment agreement) which is worth $20,000 or more and imposes any obligation on the LGO after 30 June 2011.
There is also a catch-all provision requiring LGOs to refer any other decision which they consider meets a three-limbed "significance" test, even if not specified by the list.
Once an LGO seeks confirmation of a decision from the ATA, the ATA must, as soon as practicable and in writing:
- confirm the decision;
- decline the decision; or
- request further information.
In declining to confirm a decision, the ATA must consider that the decision meets the "significance" test set out in the Act (and mentioned above), that:
- the decision will significantly prejudice the reorganisation of Auckland as provided for in the Act;
- the decision will significantly constrain the powers or capacity of the Auckland Council or its subsidiaries after the reorganisation; or
- the decision will have a significant negative impact on the assets and liabilities that are transferred to the Auckland Council as a result of the reorganisation.
It is clear that there was no intention by the Government, through this legislation, to require the ATA to second guess "business as usual" decisions by LGOs. The legislation contemplates that LGOs will carry on their normal business through the transition period; the aim is constrain extreme behaviour. The Explanatory Note to this legislation stated:
The key advantages of this approach are that it preserves local democracy by allowing the existing councils to continue business as usual but manages the risks of perverse behaviour, key projects are protected, and there is a shorter period of uncertainty for staff and public.
No doubt the ATA will need to urgently formulate criteria and systems to undertake this function as quickly and efficiently as possible, both because a qualifying decision is void and of no effect until it is confirmed, and because the ATA will need to juggle a number of other functions in order to ensure that the reorganisation of Auckland runs as smoothly as possible.
Auckland Council Bill - Closing date for submissions
The closing date for submissions on the second Bill, titled Local Government (Auckland Council) Bill ("Auckland Council Bill"), has also now been announced by the Government. Submissions on the Bill close on 26 June 2009.
The members of the Select Committee who will consider the Auckland Council Bill have now been selected. The Committee will be chaired by John Carter, National Party member for Northland. The other members are Dr Jackie Blue, Hon Tau Henare, Nikki Kaye, Simon Bridges (all National Party members), George Hawkins, Shane Jones, Su'a William Sio, Phil Twyford (all Labour Party members), Sue Bradford (Green Party), and Hone Harawira (Maori Party).
The Committee is expected to sit for some time in Auckland to hear submissions on the Bill and the Committee's report back to the House is due on 4 September 2009.
Please contact a member of the team if you have any questions about the Auckland governance reorganisation or if you require assistance lodging a submission on the Auckland Council Bill.
Regulatory Improvement Bill
The Regulatory Improvement Bill ("Bill") was introduced to Parliament by Hon Rodney Hide MP on 9 September 2008. The Bill proposes amendments to a group of statues with the broad policy objectives of improving the regulatory framework and reducing the compliance burden on industry. These amendments were identified as part of the Quality Regulation Review to address regulatory duplication, gaps, administrative errors, and inconsistencies between different pieces of legislation that collectively create unnecessary compliance costs and uncertainty for business.
The Bill has been introduced as an omnibus Bill to amend more than one Act, however it is intended that the Bill will be divided into separate Bills at the Committee of the Whole House stage. (At this stage it is considered that a single Bill is administratively more efficient to progress uncontroversial, but important, amendments.)
By way of summary, the Bill proposes the following changes:
Companies Act 1993 - amends section 196 of the Companies Act 1993 to provide that certain companies with overseas ownership may, via a unanimous resolution of shareholders, elect to not appoint an auditor.
Conservation Act 1987 - amends the concessions provisions as they relate to the maximum term of a permit, and changes the discretion regarding public notification to issue a license. It also clarifies the contestable processes regarding applications outside a tender or other process initiated by the Minister.
Designs Act 1953 - allows for the restoration of lapsed copyright in a registered design in identified circumstances.
Fisheries Act 1996 - creates a statutory process whereby commercial fishers who have inadvertently incurred deemed value debts can have the debt reviewed.
Gas Act 1992 - amends section 3 of the Gas Act 1992 to create certainty that any regulations and rules that the Gas Industry Company Limited can recommend will cover gas used as a feedstock.
Hazardous Substances and New Organisms ("HSNO") Act 1996 - changes aspects of the HSNO Act to ensure the policy intent of the Act can be more efficiently and effectively achieved with minimum necessary compliance costs.
Ministry of Agriculture and Fisheries (Restructuring) Act 1995 - removes the penalty regimes for non-payment of cost-recovery levies.
Reserves Act 1977 - allows for 10-year licences over vested reserves for the purposes in that section.
Weights and Measures Act 1987 - proposes to remove the control of LPG in gaseous form.
The Bill received its first reading on 15 May this year. It has now been referred to the Commerce Committee and submissions are due by 16 July 2009. The final report on the Bill is due by 11 November 2009. If you are intending to make a submission on the Bill, or would like some advice as to how the Bill may affect your business, please do not hesitate to call us on the details provided at the bottom of this newsletter.
Co-management and the Waikato-Tainui Raupatu Claims (Waikato River) Settlement
The Waikato-Tainui Raupatu Claims (Waikato River) Settlement Bill (“Bill”) was introduced to Parliament on 23 September 2008 and was subsequently referred to the Maori Affairs Select Committee.
The Bill in its current form contains instruments and agreements that acknowledge the grievances of Waikato-Tainui, provide redress for historical Treaty breaches in relation to the Waikato River and introduce a new regime of co-management to restore and protect the health and wellbeing of the Waikato River. The settlement is a final resolution of the historical raupatu claims of Waikato-Tainui in relation to the Waikato River and creates binding co-management arrangements for the future. As outlined in the Bill, co-management requires more than consultation alone. The successful implementation of co-management through the arrangements provided for in the settlement requires a new approach, including the highest level of good faith engagement and consensus decision-making.
Despite the progress to date, there have been some concerns about the consultation process during the negotiations, and the overall substance of the Bill. There are also concerns over some of the implications of the Bill, especially the lack of representation for affected stakeholders on the statutory boards, the potential costs involved, and the lack of clarity about what the objectives will mean for farmers.
The local farming industry, represented to a large degree by Waikato Federated Farmers, has made a submission to the Maori Affairs Select Committee on the Bill.
The vested interest of Federated Farmers is that non-point discharges (such as farm effluent run off) constitute 80% of discharges to the River - the waste of the 3,000 dairy herds in the Waikato River catchment equals that of about 5 million people. Federated Farmers has some serious concerns about the legislation, the process of implementation and what "co-management" will mean to those who fall within the Waikato River catchment, but are not part of any agreement in respect of its management.
Federated Farmers has expressed the view that the proposed legislation affects all those within the catchments of the Waikato River and gives powers to statutory boards which will produce plans that have to be implemented within all council plans under the Resource Management Act 1991.
Other key industry users may be affected:
- Mighty River Power has eight hydro dams along the river's length.
- 22 communities use the river for drinking supply.
- Watercare Services Ltd is entitled to take 150,000m3 per day from the river (which is equivalent to 150 million litres every day).
- At full capacity, the river will provide 15% of Auckland's water supply.
- Geothermal fluid from the Wairakei power station.
- The river is used for discharge of treated sewage, storm water and water supply for Franklin, Waikato, Waipaa and South Waikato District Councils and the Hamilton City Council.
Submissions on the Bill were sought in February 2009, and the Maori Affairs Select Committee report is due on 30 June 2009.
Councils push for National Wind Farm Guidelines
At least eight councils have indicated that they will support Palmerston North City Council's (Palmerston North) proposal for a national policy statement for wind farms.
The proposal has been quick to gain support amongst councils and has easily met the threshold required for Local Government New Zealand (LGNZ) to put the issue on its agenda and lobby the Government for a national policy statement. This debate is expected to occur at the LGNZ conference in Christchurch on 29 July 2009.
Councils in support hope that national guidelines will help to avoid what some see as ad hoc processing of wind farm applications and will reduce hearing costs. In particular, those in support want to develop a national policy statement detailing:
- the minimum distance turbines can be placed from private residences;
- the allowable maximum saturation of an area's skyline; and
- iconic areas on which turbines cannot be built.
The national policy statement, if approved, would subject wind farm developers to new rules under the Resource Management Act 1991 on the location of wind farms and the number of turbines.
Palmerston North is particularly keen for national guidelines on wind farms, as it alone has granted consent for five wind farms (totalling 366 turbines) in the last decade and anticipates further developments. In one case, Palmerston North spent $500,000 preparing for a hearing on a wind farm proposal which was being processed at a ministerial level.
Palmerston North's Mayor, Jono Naylor, commented that, given Palmerston North's experience, it is important that it take a lead role even though any national guidelines developed may not be applicable to Palmerston North in the future. He noted that it is a national issue that affects communities through the country. The Councils across the country that have indicated their support for a national policy statement include:
- Rangitikei District Council
- Franklin District Council
- Whakatane District Council
- Central Hawke's Bay District Council
- Grey District Council
- Kaipara District Council
- Gore District Council
- Chatham Islands Council
- Porirua City Council
A Fresh Start on Fresh Water
Environment Minister Nick Smith announced the government's proposed changes to freshwater management at the Environmental Defence Society conference this week. The Ministry for the Environment and the Ministry for Agriculture are proposing a new direction for freshwater management in New Zealand. Government is proposing a holistic approach following the establishment of the Sustainable Water Programme of Action in 2003. The major issue underlying water management is the finite nature of water and the realistic limits to water in New Zealand. The Proposed National Policy Statement for Freshwater Management, which is currently out for public consultation, and proposed National Environmental Standards relating to the measurement of water takes, ecological flows and water levels, will continue to be developed as part of this new approach.
As part of Phase II of the Government's resource management reforms, it aims to establish a fairer and more efficient freshwater management system which has stronger central government leadership and better national-level direction. A three pronged approach is planned to implement the new scheme:
- The Land and Water Forum will lead the process and will establish a common understanding of outcomes, goals and long term strategies.
- In parallel, consultation will continue with iwi leaders.
- All the while, Central Government will do the background and technical research required to scope out policy options and to develop tools to support the Government's new direction for water management.
The Land and Water Forum will be made up of the previously developed Sustainable Land Use Forum, iwi representatives, members of the Turnbull Group (a forum convened by Water New Zealand focusing on urban water issues), and other industry representatives. It appears that consultation at this stage will be limited to various government departments, major interest groups and key stakeholders, however further consultation on more detailed options is anticipated once these have been developed.
These initiatives will likely affect industries and businesses, both urban and rural, which rely on water in some form or another. Watch this space to see how Government approaches this topic as there will be opportunities to become involved as detailed options, including any potential water allocation models, are developed.
Fines imposed under the RMA
The High Court's decision in Calford Holdings Limited and Ronald Thomas Park v Waikato Regional Council CRI 2008-419-94 considered the appropriate level of fines to be imposed following enforcement action under the Resource Management Act 1991 ("RMA").
Calford Holdings Ltd was engaged in converting a property to dairy farming pasture. The necessary resource consents were obtained and the earthworks were subsequently undertaken by various contractors. During the course of the conversion, certain offences under the RMA were committed, constituting a serious breach of the consent conditions. The Waikato Regional Council brought a total of four charges against Calford and its contractors. The Court's approach to sentencing was to select a starting point reflecting the gravity of the offence (in this case $50,000), and to then identify any aggravating or mitigating factors relevant to the offender and adjust the fine accordingly.
The Judge noted that there has been a recent overall increase in the level of fines imposed as an ongoing deterrent toward environmental offending. Calford had not read the resource consent conditions and was therefore considered to have been negligent in the extreme. As soon as Calford was made aware of the breach, a consultant was retained to begin remedial work. However, this had only a minor mitigating effect in the Court's mind, as a consultant should have been retained at the outset to properly supervise the project. Calford was found to be in breach of an obligation to ensure that the project was properly managed and that consent conditions were being complied with and was ultimately fined $33,000. Calford had employed the services of two other parties in relation to the project and they were also found to be responsible, and incurred fines of $24,000 and $10,000.
This case demonstrates the need for all consent holders to read, and be familiar with, the technical requirements of consent conditions and, if necessary, to retain appropriately qualified consultants to ensure compliance. This situation also highlights the importance of negotiating practical and workable conditions at the time your consent is acquired, both for construction periods and day to day operations.
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www.russellmcveagh.com
The publication is intended only to provide a brief summary of the subject covered. It does not constitute legal advice and should not be relied on as such without first obtaining specific professional advice based on your unique circumstances.
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