Resource Management Update – August 2017

Home Insights Resource Management Update – August 2017

In this edition:

King Salmon update: time to "cover your bases"

Further to our recent April and June updates, the Environment and High Courts continue to wrestle with the application of the High Court's decision in Davidson and the correct approach to assessing applications for resource consents in light of the Supreme Court's decision in King Salmon. Three recent cases, all released within three days of each other, highlight the difficulties the Courts are currently faced with, in the absence of definitive higher authority.

The Environment Court in Pierau v Auckland Council [2017] NZEnvC 90 considered the potential adverse effects of granting consents for a number of music festivals, particularly on a threatened bird species within the surrounding area. The Environment Court held that the approach to s 104 is now "complicated" as a result of conflicting High Court authority in Davidson and Basin Bridge, but opted not to reach a conclusion. It found that under either approach, the same outcome (an unacceptable threat to the bird species, leading to only a partial grant of consent to Mr Pierau) would result.

A similar approach was taken by the High Court in Hokio Trusts v Manawatu-Wanganui Regional Council [2017] NZHC 1355. Hokio Trust appealed the Manawatu-Wanganui Regional Council's decision to grant consent for restoration activities at Lake Horowhenua. Hokio Trust (a s 274 party) appealed, alleging the Environment Court had breached s 8 of the RMA, namely the obligation to "take into account" the principles of the Treaty of Waitangi, in weighing the evidence before it. This gave rise to discussion of the role of Part 2 in light of Davidson. The Council argued that, in accordance with Davidson, the obligation in s 8 had been achieved through the planning documents relevant to the application, such that reference beyond them was unnecessary. 

Thomas J accepted this point, but noted the potential conflict between that approach and Basin Bridge. Without reaching a view on that conflict (as it was unnecessary to do so, the outcome being the same under both), she recorded that the Supreme Court in King Salmon had identified that s 8 had both procedural and substantive implications that decision-makers "must always have in mind", and that Part 2 remained relevant to the inquiry before the Court.

The position is now further complicated as a result of the Environment Court's decision in Save Wanaka Lakefront Reserve Inc v Queenstown Lakes District Council [2017] NZEnvC 88. Save Wanaka appealed against the grant of consent for a watersports facility on the shores of Lake Wanaka, assessed against both an operative and a proposed district plan in the early stages of consideration. Applying Davidson (without submissions to the contrary), the Court held that the proposed plan was "incomplete" in regard to Part 2, enabling a Part 2 assessment of the proposal. 

This calls into question the validity of the Davidson approach for proposed plans, as they will (almost always) be incomplete in regard to Part 2 at the time of assessment. It also raises issues about weighting under a strict Davidson approach to an old existing operative plan (which could be a complete expression of Part 2) and a newly formulated proposed plan, which, although incomplete, may nonetheless be a more current reflection of the community's values. Overemphasis on the former, on the Davidson approach, may result in consenting outcomes that no longer reflect that community view.

Where to from here?
The current approach (evidenced in all three decisions) taken by the Courts is to "cover all bases", assessing consent applications against both s 104(1)(b) and (c) and Part 2, in the hope that the same outcome is reached. While that might appear a sensible approach to adopt while the law remains in a state of flux, a choice will need to be made by the Courts where the different statutory assessments may result in different outcomes. 

Bronwyn Carruthers and Aidan Cameron

Disclosure – Russell McVeagh acted for A Pierau and the R J Davidson Family Trust in the proceedings discussed above.

Lifebuoy for Housing Crisis – new funding models to speed up investment

The Government has made two major announcements on housing infrastructure in a bid to accelerate development amidst relentless demand. This has come off the back of concern that local councils are unable to finance the level of housing infrastructure required, with many councils already close to reaching their debt limits.

Housing Infrastructure Fund
In July 2016, the Government announced a $1 billion housing infrastructure fund, which will provide interest-free loans to councils in high growth areas. Loans under this scheme are solely for investment in roading and water infrastructure, with the intention to fast-track the construction of 60,000 new homes.

Following a call for final proposals in February 2017, the Government has recently announced loans from the Fund to Auckland Council ($300 million), Hamilton City Council ($271.9 million), Waikato District Council ($36.5 million), Tauranga City Council ($229.9 million) and Queenstown District Lakes Council ($49.6 million). The successful councils will be expected to repay the investment through development contributions collected for the assets once the houses are built.

The detail is still to be finalised, but the aim is for the first homes to be consented under the scheme by early 2018, and completed by the end of 2018. The Fund itself has attracted criticism from the Left and Right, around the lack of detail provided (Labour), subsidising development without ensuring actual investment in housing (Greens), and the perceived lack of impact (ACT).

Special purpose vehicles
The Government has also recently announced another measure to fund housing-related infrastructure, through Crown-owned special purpose vehicles. The first vehicle announced is Crown Infrastructure Partners, which has been re-purposed from the vehicle established to fund the ultra-fast broadband rollout. Crown Infrastructure Partners will fund required housing infrastructure in predominantly greenfield areas in Auckland. Auckland Council had applied for the full $1 billion available through the Housing Infrastructure Fund, but sought the majority of that funding to come through a separate mechanism to avoid its debt ceiling issues. The Government's special purpose vehicle approach addresses that issue.

Through Crown Infrastructure Partners, the Government has pledged to co-invest up to $600 million alongside local councils and private investors. In return, Crown Infrastructure Partners will receive contributions from developers, or from households through a targeted rate or volumetric charging (eg for water). None of these measures are currently provided for in legislation, so amendment to existing regimes will be necessary to give effect to those changes. The special purpose vehicle model provides landowners and developers with accelerated infrastructure timelines, as the debt incurred to fund this infrastructure will appear on the vehicle's balance sheet and will not count towards councils' debt ceilings.

The Government has stated that Crown Infrastructure Partners will "bridge the gap" in funding for roading and water infrastructure for target growth areas in Auckland. This funding will be used to accelerate infrastructure development in the North project (Wainui) and the South project (Paerata, Pukekohe, Drury West and Drury South).

The Minister for Finance, Steven Joyce has said that the special purpose vehicle model is "the next logical step in infrastructure funding", especially for the fastest growing population centres in the next 10 to 30 years, to solve current funding issues. 

Daniel Minhinnick and Lauren Eaton

Ruataniwha Dam – the Supreme Court says no

In a further setback to the Ruataniwha Dam project, the Supreme Court has upheld a Court of Appeal ruling that a decision to revoke the special protected status of conservation land required for the project was unlawful. The appeal by Hawke's Bay Regional Council Investment Company and the Minister of Conservation challenged the Court of Appeal's approach to section 18(7) of the Conservation Act 1987. The decision may have significant implications for the disposal of conservation land going forward.

The Ruataniwha Dam project involves the damming of the Makaroro River, flooding approximately 370 hectares, including 22 hectares of protected forest park land, to create a storage lake capable of irrigating farmland in the nearby Ruataniwha catchment. In order to facilitate the project, the Director-General of Conservation proposed to revoke the conservation park status of the 22 hectares and exchange that land for approximately 170 hectares of private land, which would then be granted protected status.

In a split 3-2 decision, the Supreme Court held that section 18(7) does not give the Minister a general power to do whatever he or she reasonably considers will promote the conservation of New Zealand's natural and historic resources. Any revocation must be assessed by reference to the intrinsic values of the particular resources affected, not merely a "good and proper basis founded in conservation purposes, broadly conceived, for revoking the special protected status of conservation land". Affirming the Court of Appeal's decision, the majority concluded that the special protected status of conservation land may only be revoked if the resources on that land no longer justify protection. If the conservation qualities of the resources are such as to warrant protection against disposal, the land's special protected status cannot be revoked.

In light of the above, the majority held that the decision to revoke the special protected status of the 22 hectares was unlawful, as it was justified solely on the basis of the comparative advantage of the proposed exchange. The Court emphasised that the revocation and exchange decisions are separate processes, and the conflation of these two steps by the Director-General breached the Act's prohibition on the exchange of specially protected land. Contrary to the prescribed legislative scheme, there was no assessment of whether the intrinsic qualities of the land warranted its special protection, despite scientific reports showing it had significant conservation values. The Court considered that the decision was entirely driven by the net benefit to conservation ends to be obtained from the proposed exchange, and was therefore unlawful.

In the wake of this decision, the Minister for Conservation, Maggie Barry, has indicated that the Government will now look to make legislative changes to allow for revocation of protected status and subsequent exchange of conservation land, where the outcome "would be a win for conservation." 

Bronwyn Carruthers and Tom Atkins

High Court leaves the door ajar for RMA controls on fishing

In our February Resource Management Update, we discussed the Environment Court decision of Motiti Rohe Moana Trust v Bay of Plenty Regional Council, where the Trust sought a declaration that it is lawful for the Council to include objectives, policies and rules in its proposed Regional Coastal Environment Plan to control fishing activities within its boundaries (on the grounds of maintaining indigenous biodiversity and recognising and providing for mana whenua interests). The High Court has now issued its decision on appeal from the Environment Court's decision.

The key issue before the Environment Court was the interface between the RMA and the Fisheries Act 1996, and particularly the application of s 30(2) of the RMA (which prevents regional councils from controlling the taking, allocation or enhancement of fisheries resources). The Environment Court held that the Council could include controls in the Plan to restrict the taking of fish and fishing methods for purposes other than managing fishing or fishing resources, including on those grounds mentioned earlier.

The Attorney-General, on behalf of the Ministry for Primary Industries, appealed to the High Court, where Whata J considered the tension between s 30(2) of the RMA and a regional council's indigenous biodiversity function pursuant to s 30(1)(ga). The High Court found that a regional council may exercise its functions to manage the effects of fishing that are not directly related to the biological sustainability of the aquatic environment as a resource for fishing needs (which is otherwise addressed via the Quota Management System under the Fisheries Act), and that, notwithstanding s 30(2), a regional council may perform its function under s 30(1)(ga) to maintain indigenous biodiversity within the coastal marine area, but only to the extent strictly necessary to perform that function.

While the High Court's reasoning largely accorded with that of the Environment Court, Whata J did not consider that the declaration correctly captured the correct scope of s 30(2). The Court held that the declaration made did not place clear limits on the extent to which a regional council could control fishing in pursuance of its functions, which could lead to unqualified incursion into the sustainable utilisation of fisheries resources under the Fisheries Act. For that reason, Whata J allowed the Attorney-General's appeal in part, with the declaration set aside and leave reserved to the parties to make submissions on the form of a declaration. In his final decision, Whata J declined to make a formal declaration, as any final declaration on the broad, essentially hypothetical questions posed by the Attorney-General ran the risk of overreach or oversimplification. Instead, Whata J identified that the legality of control in disputed areas will need to be worked out "at the finer grain" through the plan-making process, using his earlier analysis as a reference guide.

In February, we suggested that under the Environment Court’s approach, regional councils would have greater scope to protect marine life through regional coastal plans, which could generate gains for biodiversity and help to address environmental effects of fishing practices in the coastal marine area, but could also increase regulatory costs for the fisheries industry and create significant uncertainty regarding what management system will apply. In the High Court, however, Whata J commented that the ability of regional councils to provide for matters not controlled under the Fisheries Act "does not open the door to carte blanche regional council regulation of the adverse effects of fishing on the aquatic environment", and that primacy must be given to management of the effects of fishing under the Fisheries Act. Any controls in this area are likely to be highly contentious and subject to further challenge through the plan-making process.

Daniel Minhinnick and Rachel Robilliard

Battleground Auckland: transport showdown

On Sunday, within hours of each other, the National and Labour parties announced their proposed transport packages that attempt to address congestion issues in New Zealand's largest city. The announcements come in the wake of a report commissioned by the Employers and Manufacturers Association, which estimated that the economic cost of congestion in Auckland could be as high as $1.9 billion per year. 

National's package provides for an additional $2.6 billion of investment over the next 30 years, and includes a new highway connecting the southern motorway to Mill Road between Drury and Manukau; improvements to the Northwestern Busway; additional funding for the Auckland Manukau Eastern Transport Initiative (AMETI); and two rail projects, namely the electrification of track from Papakura to Pukekohe, and construction of the third main rail line between Westfield and Wiri.

Labour's package proposes new spending of $3.3 billion over the next 20 years, with a much greater focus on rail. That package includes provision for light rail from Wynyard Quarter to Mt Roskill (within four years) extending to the Airport (within the next 10 years) and the North Shore in future; Bus Rapid Transit between the Airport and Howick and the development of key cross-town bus routes; along with electrification and third main rail line projects (extending further south to Papakura), similar to those announced by National. Labour's additional spending will (in part) be funded by a $1 billion scaling back of the Transport Agency's East West Link project, targeted rates and infrastructure bonds, and a regional fuel tax of 10c per litre, which would raise approximately $160 million in additional revenue.

The regional fuel tax, in particular, is likely to be contentious. A fuel tax has long been supported by Auckland's mayor, Phil Goff, whose Council is hard up against its existing debt ceiling and unable to fund further crucial upgrades through borrowing. That policy has been strongly criticised by the Minister for Transport, Simon Bridges, whose Government has repeatedly turned down requests for such a tax, preferring instead to provide case-by-case investment directly through the Transport Agency and special purpose vehicles such as the recently-formed City Rail Link Limited. Opponents of the tax have raised feasibility concerns, citing examples of "gaming" in other jurisdictions where customers travel further to fill up outside the regional boundaries and avoid paying the tax. 

Moving forward, neither party indicated whether their proposals would require the normal statutory approvals for linear infrastructure projects (notices of requirement and regional resource consents) under the Resource Management Act 1991. Labour's proposal for light rail from Wynyard Quarter to Mt Roskill within four years is likely to require some form of bespoke legislative approval or special fast-track approval process, if it is to be both consented and constructed within the four-year proposed timeframe. 

Bronwyn Carruthers and Simon Pilkinton

A safer built environment – overhaul of earthquake-prone buildings legislation now operative

On 1 July, a new national regime for the identification, management and strengthening of earthquake-prone buildings took effect with significant implications for territorial authorities and building owners. In certain circumstances, building owners could now be required to undertake and complete seismic strengthening works within as little as seven and a half years from the date a risk is initially identified.

Under the new regime, an Earthquake Prone Building Methodology has been set by the Chief Executive of MBIE. The Methodology requires territorial authorities to identify "potentially earthquake-prone buildings" in their district before carrying out engineering assessments and deciding their final earthquake-prone status. Depending on a building's final status, various remediation and strengthening obligations apply. 

The obligations and timeframes in the new national regime are considerably more onerous than many previous requirements set by territorial authorities themselves. In summary:

  • Depending on the classification of areas as low, medium or high seismic risk, territorial authorities must complete assessments within two and a half years (for "priority buildings") and within 15 years for buildings in low risk areas.
  • Significantly, any earthquake assessments completed prior to the new regime can only be carried over if that original assessment programme aligns with the new Methodology. Similarly, in the majority of cases, previous earthquake-prone building s 124 notices will need be reissued under the new system.
  • Building owners are required to obtain engineering assessments of any "potentially earthquake-prone" buildings, and, if that assessment results in the building being confirmed as "earthquake-prone", owners can be required to undertake seismic strengthening works. For certain "priority buildings", works must be undertaken and completed within as little as seven and a half years of the first notice. A failure to complete required seismic strengthening works is an offence under the Building Act with offenders liable on conviction for a fine of up to $200,000.

The new regime will mean that local authorities and building owners will incur greater costs to identify and strengthen earthquake-prone buildings, within shorter timeframes than previously required. However, the regime will also deliver a safer built environment. With improved safety comes greater confidence, so despite increases in costs, the new regime should provide clear benefits to both building owners and occupiers alike. 

Simon Pilkinton and David Owen

Pressure bottling up on freshwater

The stream of policy announcements leading up to the September election has seen the release of the Green Party's proposed tax on water bottling (with further signalled charges for all other commercial water uses) at its recent campaign launch in Nelson, and a similar announcement from Labour.

Following recent controversy surrounding consenting of bottling plants around the country, the Greens propose a levy of 10 cents per litre to apply to bottlers in relation to the sale and export of water. The tax will apply to untreated bottled water, but is intended to extend eventually to water takes used for flavoured drinks and the alcohol industry, and beyond to irrigation and other commercial uses of freshwater. 

The currently proposed tax will raise approximately $2.7 million a year from foreign exports. It is not clear how much revenue the tax will generate from domestic sales. The revenue would be split equally between local councils and the mana whenua of the area where the water is sourced. In addition, the Greens would prohibit any new grants of consent for water bottling operations, until there is suitable regulation to manage the supply of drinking water. 

The extension of the policy to other commercial water uses would affect New Zealand's substantial agriculture and horticulture industries, especially irrigation-reliant farmers. It could also potentially impact upon hydroelectricity generators, although the policy documents released propose some accommodation for generators in light of the public benefit from their activities.

The Greens' policy has come under fire from Prime Minister Bill English, stating that the development of the proposal has been "rushed" and would have "huge implications right across the productive sector". Nevertheless, the Government has announced that freshwater takes for bottling purposes have been added to the terms of reference for the Water Allocation Technical Advisory Group, which is due to report back to the Government in November, after the election. It also gazetted its tweaks to the National Policy Statement for Freshwater Management, with further minor changes to the amendments announced as part of its Clean Water package in February.

In its recent freshwater policy announcement, Labour has also signalled its intent to charge for the commercial consumption of water, favouring a royalty approach rather than taxes. The royalty would be flexible to reflect the scarcity or abundance of water in different regions, the different quality of water, and its use. 

Labour is also proposing to charge royalties for water exported for profit. The revenue created from the royalties would largely be returned to regional councils. In her statement to media, Jacinda Ardern said she would host a roundtable at Parliament with all affected sectors within her first 100 days in Government to set the royalty. Recent figures quoted by Labour's Environment spokesperson, David Parker, place the rate at between 1 and 2c per 1000 litres for irrigation; and a higher figure of 1c per litre for bottled water.

Freshwater reform remains a hot topic and we expect to see further policy announcements in this area in the lead up to the election. 

Allison Arthur-Young and David Alley

This publication is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.

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