In this edition:
2019: What to watch out for
Building on from a number of initiatives signalled by the Government last year, 2019 looks to be a busy one in the environment and planning space. In the first half of the year we are expecting:
- legislation establishing the Housing and Urban Development Authority (further detail on HUDA is set out in our November update);
- the first stage of the Government's Resource Management Act reform which is intended to address particular issues with resource consenting, monitoring and enforcement processes in the RMA (our earlier summary of the Government's potential RMA reform can be found here). A summary of the latest EDS report on RMA reform is included later in this update.
The first set of National Planning Standards must be approved by the Minister for the Environment by 18 April 2019. Consultation on the Standards closed in August last year. A Ministry for the Environment report and recommendations on the submissions and draft Standards are currently being considered by the Minister, which may result in changes to the draft Standards. Once the Standards have been gazetted, councils will be required to incorporate them into their planning documents.
Depending on how actively this process is managed by councils, this could result in a period of 'limbo' between the changes required under the Standards, and subsequent plan changes to address flow-on consequences (see our July update).
The Government has also announced that it will scrap tenure review (the process where the Crown identifies and transfers land from a Crown pastoral lease to the relevant leaseholder) this year.
The Productivity Commission's draft report on local government funding and financing is due out in June and the final report in November (our earlier summary of the Productivity Commission's inquiry on Local Government Funding and Financing can be found in our November update).
The Government's Three Waters Review findings and policy positions are expected to be released in mid 2019 (further detail of this review can be found here).
Freshwater was a hot topic during the last election with 75% of New Zealanders extremely or very concerned with the pollution of lakes and rivers. The Government intends to make significant progress this year to deliver on its election promise to improve freshwater quality. 2019 will see the beginning of the implementation of the outline two year plan set out in “Essential Freshwater: Healthy Water, Fairly Allocated” which can be found here. A new, more prescriptive, National Policy Statement and National Environmental Standard are proposed for consultation this year with the aim of being in force by 2020. Any business that involves large takes and use of, or significant discharges to, water will potentially be affected.
The Zero Carbon Bill is also likely to be introduced in the first half of the year. This bill intends to bring New Zealand to net zero carbon emissions by 2050 (further detail on the potential contents of this bill is set out in our July update).
In December last year, the Government released the first of two planned tranches of amendments to the New Zealand Emissions Trading Scheme (NZ ETS) following recent public consultation. Those changes as well as a second tranche of amendments to be released in 2019 will culminate in a single bill expected this year amending the Climate Change Response Act 2002 (CCRA). The first tranche of decisions are intended to align the CCRA with the Paris Agreement; enable a cap to be placed on emissions covered by the NZ ETS; and improve the administration and operation of the NZ ETS. The Government's press release can be found here.
The Government has signalled that the second tranche of decisions are expected to cover:
- the use of proceeds from auctions
- a potential price floor
- how decisions to phase down industrial allocation should be made
- further improvements to the compliance and penalties regime
- the broader market governance framework
Consultation on unit supply settings and trigger price levels is expected to happen during 2019.
Please contact one of our experts if you have any questions about any of the proposals detailed above.
Allison Arthur-Young and Kristen Gunnell
Reinventing the RMA – The EDS report on reform of our resource management system
On 12 February 2019, the Environmental Defence Society (EDS) released its report on phase 1 of its resource management reform project (read the full report here). The report provides a first principles look at the way New Zealand's resource management system works and outlines models for reform.
One of the more influential components of the report is its deconstruction of the core functions of a resource management system. The report considers that a resource management system can and should:
- draw environmental bottom lines in the sand and defend them strictly and vigorously against erosion by cumulative human actions
- manage trade-offs between different interests, both above environmental bottom lines and where they are not necessary
- fund and ensure the delivery of public goods (including infrastructure)
- actively manage a transition towards greater levels of social, economic and environmental well-being
- recognise and protect wahi tapu (sacred places) and Maori relationships with key components of the natural world
- take a nuanced approach to public participation that ensures it occurs to the right degree, at the right time and for the right purpose
- resolve disputes in a way that recognises the distinction between public policy disputes and private disputes
- fairly allocate rights to the use of non-private resources
These functions are broader than currently understood by practitioners. Designing a system that performs all eight functions effectively will be no small feat. EDS acknowledges this and uses the report to demonstrate how tangible reform could be achieved. The report poses three possible models for reform.
Model One: The first model envisages a system that remains centred around the RMA, and retains other supporting legislation such as the Local Government Act and the Land Transport Management Act. The greatest innovation of this model is the introduction of an additional layer of legislation - a Spatial Planning Act. This Act would mandate the creation of spatial plans to actively guide resource use choices in a coordinated way. Spatial plans are not a new concept, but gained prominence in 2017 when they featured in the Productivity Commission's Better Urban Planning Report (available here). As EDS envisages, Spatial Plans would be deployed nationally and regionally to harmonise the land use and infrastructure components of urban growth and development.
Model Two: The second model would involve a greater degree of structural change to the existing system. This model proposes to split the RMA into an Environment Act, and a Planning Act, with each absorbing the roles and functions of other related legislation. The infrastructure planning and funding components of the Local Government Act, Land Transport Management Act and the proposed Housing and Urban Development Act would be folded into the Planning Act. The Environment Act would absorb the protective elements of the Fisheries Act, the Forests Act, heritage legislation and the Environmental Reporting Act 2015, uniting them under one common purpose.
Model two makes a number of other proposals for new legislation too, including a new Allocation Act and an integrated Protected Areas and Species Act. It also proposes to overhaul local government arrangements by creating regional level unitary councils responsible for infrastructure and spatial planning, as well as regional level council-controlled organisations that provide water and wastewater services across New Zealand.
Model Three: Model three presents a system that is fundamentally different to the one we have today. It retains some elements of models one and two but goes even further. Model three splits the RMA into two Acts, but along different lines to model two – the first would be an Environmental Protection Act, which would impose and enforce strict bottom lines through the EPA. The second would be a Resource Stewardship Act to facilitate trade-offs above bottom lines and pursue synergies in resource use. Under this model the Local Government Act and Land Transport Management Act would remain and perform the same functions as they do now, but there would be an additional overarching Act above all four statutes – the Environmental Strategy Act. This Act would provide common principles that must be 'given effect to' in all other resource management legislation.
The EDS report does not make any specific recommendations as to a preferred model – that has been left to its Phase 2 workstream, which is already underway. According to the EDS, phase 2 will generate and test a preferred model for reform, while also mapping out a pathway to implementation.
As noted in our November Update, the Government has indicated that it plans to implement its own RMA reform programme this year. We anticipate that the EDS recommendations are likely to be a significant feature of that programme. Likewise, National has indicated its intention to engage in a wholesale reform of the RMA.
The issue of RMA reform will continue to be a political football for some time yet. We will be watching closely over the next 12 months to see whether the reform proposals that rise to the top are fit for purpose, workable and affordable. One of our concerns is that easy political wins may obscure the key issues with the status quo. Existing problems with local government capability and capacity – both to consent and to monitor implementation and effects on the environment – plus the ability for the local construction sector to deliver, will still remain, regardless of how dramatically the RMA is rewritten.
Cameron Law and Tom Stuart
Consent conditions: what not to do …
In the recent decision of Granger v Dunedin City Council  NZEnvC 250, the Environment Court provided a word of warning and a reminder of the importance of ensuring consent conditions are clear and well drafted. In considering a decision by the Dunedin City Council to grant subdivision and land use consents at Papanui Inlet on the Otago Peninsula, the Environment Court decided that only an interim decision was possible due to poorly framed consent conditions.
The activity was non-complying under both the operative and proposed District Plans and was granted consent with conditions by the DCC. The appeal was brought by a group of residents on the grounds that the decision to grant consent failed to protect the outstanding natural landscape and natural character of the coastal environment. While the appellants did not appeal against the conditions of consent, the Court found that the conditions proposed were material to the determination of the appeal.
The Court raised concerns with the adequacy of the wording and validity of a number of consent conditions. The conditions in question were intended to restrict the effects of the subdivision. However, as a result of poor and inadequate drafting, the Court found that it could not be satisfied that it had a proper understanding of the environmental effects of the development. In particular, the Court critiqued the content of the covenant and management plan conditions. Concern was expressed by the Court about expert recommendations on mitigation that were not carried through into the conditions, directions in management plans that focussed on process rather than mitigation outcomes by only requiring matters to be "investigated or surveyed" and the inaccuracy of plans showing covenanted areas. Ultimately, the Court found that it was not able to determine whether or not the application satisfied the non-complying activity tests set out in section 104D of the RMA.
The applicant was directed to propose amendments to all of the subdivision conditions the Court found inadequate and to provide expert evidence confirming the content of the conditions. If the applicant elected not to proceed as directed by the Court by the specified date, the Court advised it would then proceed to issue the final decision. If the applicant did address the matters raised by the Court by the specified date then the Court will issue further directions at that stage. The Court's decision serves as a reminder to all practitioners when drafting consent conditions to ensure that they are clearly drafted to address the effects of the proposal and are enforceable.
Daniel Minhinnick and Lauren Eaton
The message in a bottle:
Aotearoa Water Action Inc v Canterbury Regional Council
In the recent decision of Aotearoa Water Action Incorporated v Canterbury Regional Council  NZHC 3240, the High Court held that Cloud Ocean Water Ltd and Rapaki Natural Resources Ltd could not rely upon existing resource consents for industrial use of groundwater for commercial water bottling.
The two issues for determination were:
- to what extent can the Court consider extrinsic evidence in order to determine the scope of a resource consent
- whether bottled water falls within the definition of "industrial use"
The wider case concerned judicial review of Canterbury Regional Council's decision to grant resource consents to Cloud Ocean and Rapaki to take and use a combined 8.8 million cubic metres of groundwater at a site in Belfast, Canterbury. The Cloud Ocean and Rapaki sites had previously been used for wool scouring and meat processing respectively.
The proceedings in this case related to a preliminary issue that arose as a result of a pleading by Cloud Ocean and Rapaki in their statements of defence that a prior consent granted to a predecessor enabled them to take water for commercial bottling. Thus, they argued, regardless of whether the new consents challenged by way of juridical review are valid, water bottling was still permitted within the scope of their existing consents. Aotearoa Water Action sought a declaration that this was not the case.
The Council argued that as long as water was taken for industrial use and there were no limiting conditions, it did not matter if the use varied from that identified in the application. The Court considered that, if this were true, the level of detail required by the Council during the resource consent process would be meaningless.
The Court held that extrinsic evidence (such as application documents) could be used to ascertain the scope of a resource consent. Although the Court found that water bottling could be said to be an "industrial" activity, the Court ultimately found that the supporting documents made it clear that the scope of the original resource consents were limited to meat processing and wool scouring respectively.
This decision could have implications for other operators relying on consents for activities that no longer align with the activity description contained within the relevant application documents.
The substantive judicial review proceedings, on the issue of the decision to grant the consents itself, is to take place later this year.
Daniel Minhinnick and Simon Pilkinton
Tax Working Group suggests increased role for environmental taxes
The final report of the Tax Working Group established by the Government to make recommendations on the fairness, balance and structure of the tax system, has been well publicised. But while political debate and media comment have focused on proposals for a capital gains tax, the final report also contains options for increased reliance on environmental taxes. Recommendations include increases in the scope and rate of the existing Waste Disposal Levy (applicable to certain landfills), changes to the NZETS, possible new taxes to address water pollution and water abstraction, and "input-based tax instruments" (including on fertiliser).
Broadening the scope and increasing the rate of the Waste Disposal Levy
The report recommends extending the scope of the Waste Disposal Levy and considering an increase in the rate from the existing level of $10 (plus GST) per tonne. The recommendations follow Associate Minister for the Environment Eugenie Sage indicating last year that any reforms to the Levy will be considered within a broader government work programme to "tackle waste by looking at options to better manage waste going to into landfills, how to improve gathering of data on waste and options to expand product stewardship schemes".
Minister Sage has previously stated that the Levy "will definitely be expanded to all landfills" and that the rate can be expected to increase over time. These comments follow a finding in the 2017 review of the Levy that "the levy is applied to only 11% of New Zealand's 426 known waste disposal facilities" and those facilities "receive an estimated 30% of New Zealand's total waste disposed to the land".
An extension of the Levy to cover all waste disposed of to landfills, and an increase in the rate to (say) $40 per tonne, could see the revenue collected increase from current levels of around $30 million per annum to hundreds of millions of dollars per annum, even after allowing for reductions in volumes of waste. This raises the important question of how revenue from the Levy is spent, and the need to develop recycling and other waste management infrastructure now that options for exporting certain waste materials have been curtailed.
A more "tax-like" Emissions Trading Scheme
Participants in the NZETS will be interested in the recommendation that the scheme be made more "tax-like – specifically, by providing greater guidance on price and auctioning emissions units to raise revenue (as recommended by the Productivity Commission)". However, the Working Group acknowledged that it was "not well placed to take a view on specific ETS settings" and that "[t]he work of the Interim Climate Change Committee and future Climate Commission will be important in ensuring that the ETS establishes a credible and enduring price signal to de-carbonise the New Zealand economy".
Taxes in relation to water pollution and water abstractions
Taxes in relation to water pollution and water abstraction were also considered and the Working Group concluded that tax could have a greater role in addressing water quality and the efficiency of water use. However, the Working Group acknowledged that the use of tax instruments in relation to water would be dependent on whether Māori rights and interests could be adequately addressed. The Working Group recommended that if progress in the near term is not made on implementing "output-based tax instruments" or other regulatory measures then "input-based tax instruments" (including a tax on fertiliser) should be introduced.
Process for reform
The Government response to the recommendations is expected in April 2019, with any required legislation to implement its decisions expected to be introduced in November 2019. Minister of Finance, Grant Robertson, has stated that "no changes arising from the report will be implemented this term [of Government]".
Points for industry to consider
In advance of any public consultation on specific proposals, industry may want to consider the following potential submission points:
- How revenue should be allocated: As the amount of revenue collected from environmental taxes increases, it may be necessary to consider whether existing processes for allocating funds remain fit for purpose (for example, whether Levy revenue can be used to meet waste-related infrastructure needs).
- Implementation time-frames: As with any change to the rate or scope of a tax or levy, sufficient lead time should be allowed for businesses to adjust their arrangements and to reflect the increased costs in their pricing.
- Whether changes will create or increase unintended distortions: Environmental taxes or levies (unlike most taxes) are intended to alter behaviour. But care must be taken to ensure that the behavioural changes are consistent with the intended policy, and do not give an unfair advantage to some businesses relative to others, or incentivise the wrong behaviours.
- Administrative mechanisms: Increases in the scope of, and revenue collected from, the Levy, and the possible introduction of further environmental levies or taxes raise important questions as to how those taxes and levies are administered, and what steps can be taken to minimise compliance costs for businesses. Businesses already have significant compliance obligations in respect of taxes administered by Inland Revenue. A proliferation of specialty environmental or other taxes could add considerably to compliance costs especially if the new taxes are designed and administered by different government agencies.
Brendan Brown and Matt Woolley