Defining best practice for the resources sector in 2020

On 6 August 2019, the Federal Treasurer requested the Productivity Commission examine the regulations affecting the resources sector with a view to identifying best practice as well as how regulatory processes can be improved to reduce unnecessary burdens without diluting environmental and other regulated outcomes.  

On 24 March 2020, the Productivity Commission released its draft report. The draft report examines leading practices, makes a number of draft findings and recommendations and invites written submissions by Friday 5 June 2020. A full copy of the draft report is available on the Productivity Commission’s website.

Significant findings and recommendations

A summary of some of the findings and recommendations in the draft report follows.

Resources information – public access

The coverage of geoscience databases could be improved by all jurisdictions adopting sunset confidentiality periods to allow the public release of exploration or production reports before the end of the relevant tenure.

Project bans

Bans or moratoria on certain types of resources activity such as on‑shore unconventional gas should be replaced with a case by case evaluation approach.

Governments should also weigh the evidence of the costs to the environment, other land users and local communities against the benefits of a project on a specific project or regional basis.

Landholder concerns

Where planned activity will be low impact, early personal engagement between resources companies and landholders can ease potential tensions and be less costly than a negotiated agreement.

A standard template for land access agreements can reduce information asymmetry from which landholders suffer and help to set expectations for landholders and resource companies and improve confidence in the regulatory systems.

The Queensland Land Access Code is held up as a leading practice model in both these aspects.

Low cost dispute resolution methods that take an investigative approach to resolving problems between parties can reduce tensions between landholders and resource companies. The creation and operation of the office of Queensland Land Access Ombudsman is cited as leading practice.

Approvals process including EPBC Act

Unpredictable and lengthy delays at the approval stage are a key frustration with project components.

Environmental impact assessments are often duly broad in scope and do not focus on the issues that matter most.

Project approvals are often conditional on the preparation of management plans or other post approval conditions which give rise to uncertainty as to both what is required and when actual final approval will be obtained. Clear guidance from the regulators on the type and quality of information that post‑approval documentation needs to include can help make the process more efficient. Regulator decisions in the post‑approval stage should be subject to time lines.

The referral process under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) with respect to the nuclear and water triggers is creating unnecessary regulatory burden.

Projects involving rare earth and mineral sands mining, which may involve the mining of naturally occurring radioactive materials, which were ruled out as nuclear actions in the EPBC Act explanatory memorandum, are being treated as nuclear actions requiring Commonwealth environmental approval.

There is already adequate state regulation of these types of projects and additional scrutiny under the EPBC Act is unnecessary and adds significant costs.

Since 2013, coal seam gas and large coal projects expected to have a significant impact on a water resource have been classified as protected matters under the EPBC Act, therefore requiring Commonwealth approval. There is not strong evidence that this trigger has filled a regulatory gap. Instead it has resulted in significant duplicated effort with state and territory regulation.

There is a need for coordination between multiple agencies in respect of assessing and giving approvals. In this respect, it is recommended that the concept of ‘deemed decisions’ be adopted, whereby, an assessment agency’s recommendation to the final decision maker becomes the approval if a decision is not made within statutory timeframes. This is considered a leading‑practice approach to reducing delays.  Deemed decisions should be subject to limited merits review.

There should be greater Commonwealth‑State and intrastate coordination. The EPBC Act should be amended to enable negotiation of bilateral approval agreements.

Rehabilitation

Rehabilitation bonds that cover the full cost of providing rehabilitation offer the highest level of financial assurance for governments and provide companies with full incentives to complete rehabilitation in a timely way.

Conversely, rehabilitation pools can reduce incentives for companies to rehabilitate their sites with the risk that the pool will be insufficient to cover the cost of rehabilitation if a large company does not meet its rehabilitation requirement.

Larger companies should be separate to the pool and covered using rehabilitation bonds. Queensland’s rehabilitation pool model is a good example of a model that should be adopted universally.  

Progressive rehabilitation can lead to better understanding of rehabilitation requirements and ensure that funds are available and reduce the total costs of rehabilitation.

Schemes that allow proponents to meet their offset obligations by paying into a fund can reduce costs for both the companies and governments and create opportunities for better environmental outcomes.

There should be a requirement to notify the regulator when resource sites are placed into care and maintenance.

Governments should work with industry to reopen and rehabilitate legacy abandoned mines with a streamlined approval process and indemnity or exemption against liability for past harm.

Policies

A lack of clarity in policy objectives has led to inconsistent and unpredictable application of regulations across resource projects. For example, with respect to scope 3 emissions, not approving projects or curtailing their exports on the basis of potential greenhouse emissions in destination markets is an ineffective way of reducing global emissions.

There should be early public consultation on new policy proposals, accompanied by clear evidence‑based articulation of why a proposed change is the best way of addressing an issue.  

Employment agreements

Parties should be able to negotiate greenfields enterprise agreements with durations that match the life of the project. Consequently, there should be an amendment to the Fair Work Act 2009 (Cth) to allow an enterprise agreement to apply for the life of a greenfields project.

Community benefits – royalties

Companies should not be required to fund or construct infrastructure that is not associated with their project, although they may volunteer to do this.

Negative effects of resource projects on local communities should be addressed but these communities should not benefit over and above other regional communities from resource royalties. Royalty revenue should be spent wherever community net benefits would be greatest.

Local procurement

Local procurement requirements can be a relatively high cost way of meeting development objectives. Resource companies and governments providing businesses in local communities with the support needed to engage with resource companies is likely to create more enduring benefits.

Native Title Groups

The Australian Government should review the question of whether native title claim groups or holders are the beneficial owner of funds arising from native title agreements made before a native title determination, and, if native title holders are considered to be the beneficial owners of funds, whether applicants and/or claim groups have any duties towards them in receiving and managing funds for their benefit.

Funding, support and expertise for regulation

Governments in each jurisdiction should assess whether regulators are appropriately funded to enable timely processing of applications and effective adoption of a risk‑based regulatory system. Opportunities for enhancing a regulator’s cost recovery processes should be assessed.

Regulators should consult with industry and industry bodies on developing a program of site visits in order to enhance technical expertise.

State and Federal Ministers through the Council of Australian Governments should establish a forum to share leading‑practice initiatives from their jurisdictions.

Information sought from Industry

The Productivity Commission has requested submissions on a number of matters, including:

1. whether there are tenure or licensing requirements which impede investment;
   
   
2. any systematic deficiencies in compliance monitoring and enforcement processes including whether they are adequately resourced and represent good risk‑based regulation;
   
   
3. the effectiveness of resources health and safety legislation across the jurisdictions including whether there should be greater consistency across jurisdictions, and how health and safety approaches in each jurisdiction could be improved;
   
   
4. whether there is scope for greater sharing of resource company infrastructure with communities and whether there are examples of where this has been done effectively;
   
   
5. whether there are barriers unrelated to tax and charity law, to maximising benefits to native title communities from native title funds; and
   
   
6. the advantages and disadvantages of separating regulatory and policy functions and the effectiveness of any other approaches to ensuring regulator accountability.
   
   

If you would like to make a submission on the draft report, the Productivity Commission is accepting written submissions until 5 June, 2020.  

The final report is expected to be handed to the Federal Government for consideration by 7 August 2020.