Operating Under the Resource Management Act

presented by DJ Salisbury, Ernst & Young, PO Box 490, Wellington,

at the 1998 New Zealand Petroleum Conference

Abstract

Operating Under the Resource Management Act

What Should Businesses Do?

Summary

Bibliography

Author

Abstract

When moving the third reading of the Resource Management Bill in 1991 the Minister for the Environment stated that:

"The Bill provides us with a framework to establish objectives by a physical bottom line that must not be compromised. Provided that those objectives are met, what people get up to is their own affair. As such, the Bill provides a more liberal regime for developers ... benefits will flow from there being fewer but more targeted interventions."

In practice, the Act has been criticised for creating:

• Increased cost. Costs of obtaining consents to undertake developments have increased significantly.
• Delays. The facilitation of widespread participation in the resource consent process, and wide-ranging discretion for consent authorities, has introduced considerable delays.
• Impediments to resource consents. This includes trivial objections or objections by rival businesses.
• Over-regulation. Rather than creating "a physical bottom line" the Act has resulted in extensive regulation.
• A legalistic environmental regime.

The Act is generally applauded for its environmental objectives - but criticised for its application. The responsibility for this falls on the central government, local authorities and businesses. It is, in part, a function of the learning curve as stakeholders adjust to the new environmental requirements.

So what should businesses wanting the best outcome under the Act do? We recommend that businesses:

• Plan ahead.
• Engage in appropriate consultation.
• Manage public relations.
• Manage the process.
• Be prepared.
• If necessary, pay compensation.
• Implement an Environmental Management System.

This paper will provide an overview of the Act and its objectives, a discussion of what has gone wrong in its implementation and, finally, a discussion of methods for businesses wanting the best outcome under the Act.

Operating Under the Resource Management Act

The Resource Management Act was enacted in 1991. It was part of an ambitious and comprehensive re-write of New Zealand's system for resource management. The Act repealed around 80 Acts and regulations and amended around 55 others. It integrated 15 major pieces of law dealing with the management of natural and physical resources.

The vision for the Act was of an integrated, results based approach to sustainable management of New Zealand's resources. A good statement of that vision is the statement by the Minister of Energy when moving the third reading of the Resource Management Bill:

"In adopting the present formulation of [section 5] the Government has moved to underscore the shift in focus from planning for activities to regulating their effects... Significantly, it is not for those exercising powers under the Bill to promote, control, or to direct... Rather, those who exercise powers under the legislation are referred to a purpose clause that is about sustaining, safeguarding, avoiding, remedying, and mitigating the effects of activities on the environment... The Bill provides us with a framework to establish objectives by a physical bottom line that must not be compromised. Provided that those objectives are met, what people get up to is their own affair. As such, the Bill provides a more liberal regime for developers ... benefits will flow from there being fewer but more targeted interventions."

This vision is believed to be widely supported. The previous systems for resource management in New Zealand were prescriptive. Prescriptive regulation inevitably runs into problems trying to regulate for all occurrences. Trade-offs occur. Results are compromised as process is emphasised over outcome. Proponents of the new system promised integrated, more effective and more targeted planning.

Unfortunately, this vision for the Act has not always been achieved in practise. There have been some serious problems which, because of the importance of the Act, have had a significant impact on businesses in New Zealand. This includes energy sector businesses engaged in activities such as petroleum exploration, production and transmission, and electricity generation.

The problems are evidenced by the growing public criticism of the Act. For instance, numerous articles criticising the Act have appeared in newspapers and journals. Company and industry spokespeople have been publicly critical of the Act. Federated Farmers, a body representing the interests of New Zealand's farmers, has launched a "fighting fund". The fighting fund is available to help members of Federated Farmers deal with threats to their businesses. Resource management issues were a key impetus for the drive to establish the fund.

The current Minister for the Environment, the same Minister who promoted the Act in 1991, has at the time of writing this paper recently commissioned a report to review the operation of the Act. As reported in a New Zealand Press Association release in February 1998, the government is concerned that some local authorities are using the Act as a command-and-control style central planning device, rather than a means to ensure that environmental standards are upheld.

This paper will review the impact of the Act, with particular emphasis on the energy sector. It will address three key matters:

• What is happening in practice?
• What is going wrong?
• What should businesses do?

What is Happening in Practise?

As noted, the Act has received widespread criticism, in particular from company and industry spokespeople. To the extent that the Act causes problems or costs from a business perspective criticism is to be expected. In addition, some of the criticism may be disregarded as media hype. It is the widespread criticism and extent of the criticism that indicates that the Act has some serious problems.

It is often easy to focus just on the negative particularly as it impacts your business. Before addressing the criticisms, however, it is important to note that the Act has had some significant positive effects. These should be borne in mind in any overall evaluation of the Act and in making any calls for change. For instance, the Ernst & Young "Case Study Assessment of the Impact of the Resource Management Act 1991 on Business" prepared for the Ministry of Commerce reported that of 73 businesses interviewed:

• 58 believed the Act was significant or highly significant in making environmental responsibility a priority for the business;
• 54 believed the Act was significant or highly significant as a risk management incentive;
• 60 believed the Act was significant or highly significant in assisting the business introduce good management practises;
• 26 believed the Act was significant in driving efficiency improvements for the business;
• 44 had experienced a change in project design, activity or location as a result of consultation under the Act (although whether or not the change was significant and/or warranted in meeting the purpose of the Act is not recorded); and
• A general trend noted in the report was that businesses perceived that the Act was a better basis for addressing environmental management than the previous legislation.

However, the Ernst & Young report also noted some serious problems which reinforce general public criticisms of the Act and the writer's own experience in relation to the energy sector.

These problems and criticisms include:

• That while not quantified, most businesses had a sense of significant planning costs. In addition, 40 of the 73 businesses interviewed by Ernst and Young reported that the Act had contributed to some reduction (32) or a great reduction (8) in business profitability. Some of the cost increases experienced under the Act can probably be attributed to more general phenomena. For instance, the introduction of the Act coincided with the trend towards user-pays. Further, the tendency to involve lawyers in the resource consent process and for objections to go through the legal system may reflect the increasing use of litigation in New Zealand's business environment. However, the Act has resulted in the introduction of some costly, and potentially very costly, processes. These costs include:
  • The cost of applications, including expert planning advice, legal advice, environmental consultation, noise specialists, preparing Assessments of Environmental Effects, the costs of the application and the application process itself.
  • Delays experienced because of the application process, particularly on appeal. Such delays can include consent authorities overrunning statutory deadlines, delays caused by requests for further information, delays incurred in going through the hearing process and the time taken to prepare applications, particularly if widespread consultation is involved. A significant cause of delay has been appeals to the Environment Court, with delays of up to two years waiting for appeals to be heard.
  • The costs involved in dealing with objections to resource consents.
  • Increased production costs because of conditions on resource consents.
  • Increased development costs because of delays developing projects.
  • Management time dealing with these issues.

Activities undertaken by the energy sector in New Zealand tend to be high profile. Further, the impact of these activities can be and, under the Act almost as importantly, are often perceived to be very significant. Unfortunately, the combination of these factors means that businesses in the energy sector have experienced some very costly applications and are likely to continue to do so.

• 27 of the 73 businesses interviewed by Ernst and Young believed that their business activities were not treated in the same way as other types of business activities with the same sort of environmental results. Inconsistent treatment by consent authorities and between consent authorities makes business planning difficult and can cause considerable frustration for applicants. The writer is aware of energy businesses that believe their activities have been unfavourably treated, in particular, relative to what are often viewed as traditional New Zealand businesses.
• 23 of the 73 businesses interviewed had experienced objections from trade competitors. This is frequently cited as a major concern under the Act although the writer is not aware of it having occurred in the upstream petroleum industry. In addition, businesses often cite problems with frivolous or vexatious objections. The Act gives a general right to object. While the relevance of issues raised by objectors may be dubious, they all need to be rebutted. Consequently, objections have been used as a means of putting pressure on applicants and, in some instances, extorting payments. This problem has been experienced by businesses in the energy sector. The often high value of energy sector projects and high profile of the sector make it a target for this sort of behaviour.
• 17 of the 73 businesses interviewed believed that the consent authorities did not handle the decision making process well. Problems reported included such matters as:
  • onerous, complex and overly cautious requests for further information;
  • complex and overly onerous conditions on resource consents; and
  • consent authorities taking the requirement for consultation too seriously.
  • In the writers experience, the high profile and technical nature of the energy sector tends to increase this problem for the sector. In addition, the relatively significant impact, or perceived impact, of many energy sector projects may tend to increase this problem for the sector.
• 12 of the 73 businesses interviewed believed that the consent authorities were not adequately meeting their responsibilities; and
• 11 of the 73 businesses interviewed believed that the overall resource consent process was poor.

What is Going Wrong?

There is no single cause of the problems noted being experienced with the Act. Rather, the problems stem from four key sources:

• The scope and structure of the Act;
• Processes introduced under the Act;
• The performance of the consent authorities; and
• The performance of businesses applicants for resource consents.

The Scope and Structure of the Act

As noted previously, the Act integrated 15 major pieces of law, repealed around 80 Acts and regulations and amended around 55 others. It is a very significant and wide reaching piece of legislation. And much of the responsibility for implementing the Act was devolved without ensuring adequate resourcing was available or systems were in place.

The purpose of the Act as set out in section 5 is "to promote the sustainable management of natural and physical resources". Sustainable management is defined to mean:

"managing the use, development, and protection of natural and physical resources in a way, or at a rate, which enables people and communities to provide for their social, economic, and cultural well-being and for their health and safety while:

1. Sustaining the potential of natural and physical resources ... to meet the reasonably foreseeable needs of future generations; and
2. Safeguarding the life-supporting capacity of air, water, soil, and ecosystems; and
3. Avoiding, remedying, or mitigating any adverse effects of activities on the environment."

"Environment" is defined in section 2 to include ecosystems, all natural and physical resources, amenity values, and the social, economic, aesthetic, and cultural conditions which affect these.

The purpose is very ambitious. It is complicated and encompasses a large array of variables. It requires a balancing of many factors which will often be in conflict and not easily measured. It also requires interpretation of some very wide concepts. Before the introduction of the Act over 100 pieces of legislation had attempted to find a balance. The Act passed much of that responsibility in practice to the consent authorities.

In addition to the purpose specified in section 5, the Act contains a series of principles to which persons exercising powers under the Act must have regard.

Section 6 requires that powers must be exercised having regard to matters of national importance, which include:

• The preservation of the natural character of the coastal environment, wetlands, lakes and rivers;
• The protection of outstanding natural features;
• The protection of areas of significant indigenous vegetation;
• The maintenance and enhancement of public access to land along coastal marine areas, lakes and rivers; and
• The relationship of Maori and their culture and traditions with ancestral lands, water, sites, waahi tapu and taonga.

Section 7 requires that powers must be exercised having particular regard to:

• Kaitiakitanga;
• The ethic of stewardship;
• Efficient use and development;
• The maintenance and enhancement of amenity values;
• The intrinsic value of ecosystems;
• The heritage value of sites;
• The maintenance and enhancement of the quality of the environment;
• The finite characteristics of natural and physical resources; and
• The protection of the habitat of trout and salmon.

Finally, section 8 requires that the exercise of powers must take into account the principles of the Treaty of Waitangi. Note that the principles of the Treaty of Waitangi are not conclusively defined in the Resource Management Act or in any other New Zealand legislation.

On paper this is a bewildering array of requirements to impose. It is easy to understand that balancing the conflicting obligations and goals in practice would be very difficult. It is easy to envisage that regardless what the decision made by a consenting authority it will be open to criticism.

Faced with this daunting task, under-resourced, publicly accountable and without sufficient legislative guidance, consent authorities have sometimes behaved in a very cautious manner. Importantly, a key component of this cautious approach can be to take the line of least resistance. Faced with objection to a resource consent lodged by public interest groups the pressure will be to give relatively greater weight to the objections than the matters raised by the applicant(s). Standard voting theory suggests that this outcome should be expected. This may not result in the optimal environmental, social, economic and cultural outcome. It can have a significant impact on individual businesses, causing unnecessary cost and frustration, and preventing development.

In summary, applying the Act requires balancing many factors which will often be in conflict and difficult to measure. Further, the Act was very ambitious in trying to consolidate a large volume of regulation and there were insufficient guidelines and insufficient assistance for implementation. This has caused some serious problems for businesses. Some of these problems have been and are being addressed but the Act, and problems encountered under the Act, remain a serious issue for businesses operating in New Zealand.

Processes Introduced Under the Act

The Act introduced some key procedural steps that have been criticised by applicants for resource consents. These include:

• The notification procedure. Notice of every application for a resource consent is required to be served on a variety of people including people who are, in the consent authority's opinion, likely to be directly affected by the application. As noted earlier, in practise consent authorities are likely to take a cautious approach and require notification. The service of notices can act as an invitation to object. The outcome for applicants is cost and delay.

In addition, the Act requires that notice of every application for a resource consent is published in a local newspaper unless certain requirements are met. One of the requirements that often arises is that written approval has been obtained from every person that the consent authority believes may be adversely affected by the granting of the resource consent. Again, in practise consent authorities are encouraged to take a cautious approach. It is often not clear who will be adversely affected. Approaching a wide population base can act as a widespread invitation to object. Again, the outcome for applicants is cost and delay.

• The requirement for consent authorities to take into account the principles of the Treaty of Waitangi. The exact nature of this obligation is not very well defined by the Act and has required considerable interpretation by the Courts. In practise the requirement is very difficult to manage. It raises expectation with iwi that the Act, the consent authorities and applicants are not always able to assist with. For instance, petroleum exploration companies may be faced with objections or concerns based on the right to exploit, and manner of exploiting, petroleum resources. The Act raises an expectation that this could be considered but its resolution is outside the scope of the Act. The result is frustration, cost and delays.
• The time constraints imposed by the Act. Practical mechanisms to enforce the time constraints are not available to applicants for resource consents. This means the applicants are reliant on self-enforcement by the consent authorities.
• Further, the time limits can be subject to a degree of discretion. For instance, the time limit for serving submissions on a consent authority is 20 working days. However, the time limit may be waived and the limit extended by the consent authority. Similarly, appeals against decisions of consent authorities are subject to a time limit that may be waived and extended. It may be difficult for larger businesses to enforce the time limits without being accused of using corporate muscle and legal technicalities against objectors.
• Requests for further information. A consent authority may require further information before the hearing of an application for a resource consent. As discussed earlier, the scope and structure of the Act is likely to encourage cautious behaviour by consent authorities. A manifestation of this can be the requirement to provide further information. This may result in delays and cost for applicants.
• The ability for anyone to object to a resource consent and the requirement that all issues raised by objectors must be resolved. This means that dubious, frivolous or vexatious objections can delay the granting of resource consents. For instance, the writer is aware of an objection to a resource consent on the basis of an unrelated civil dispute. The objection creates a delay in the granting of the resource consent and there is no effective mechanism for overcoming it.

Performance of the Consent Authorities

The consent authorities have been criticised for the following:

• Taking a prescriptive approach to the Act. As noted earlier, the vision for the Act was that it should be results based. The consent authorities have been criticised for introducing highly regulated regimes, tacking further regulation to the earlier regimes rather than introducing results focused control;
• Failing to achieve an appropriate balance between the environmental, social, cultural and economic considerations. As noted earlier, this task is very difficult and any decision is likely to be open to criticism. However, businesses have expressed a common concern about environmental and social concerns being overly emphasised at the expense of economic considerations, and managing the use and development of resources rather than just the protection of resources;
• Being overly cautious. This is manifested in unnecessarily declining resource consents or imposing unnecessary or onerous conditions;
• Introducing inappropriate regulation, including regulating for matters not required by the Act and focusing too much on only one or more aspect of the Act's purpose rather than achieving the balance required by the Act;
• A lack of expertise. This relates both to understanding the Act and its impact, and technical expertise involved in giving effect to the Act. This is particularly important to industries such as the energy industry which have a high level technical component;
• A lack of accountability. The Act does not contain practical and effective mechanisms for ensuring accountability by consent authorities. The authorities have been criticised for failing to ensure their own accountability;
• Lack of uniformity. As discussed earlier, inconsistent treatment by consent authorities and between consent authorities has caused some problems and frustrations for businesses.

Performance of Businesses

The Resource Management Act introduced a new paradigm for resource management in New Zealand - and a significant change in the business landscape. Therefore, the skills and approach required to manage this area are fundamentally different. Not all businesses have recognised this and responded appropriately. In particular, businesses have been slow to:

• Recognise and adopt industry best practises. This includes New Zealand and international best practises;
• Implement effective environmental management systems;
• Integrate environmental planning into general business strategic planning; and
• Implement environmental reporting processes to record the business impact of the Act.

Further, businesses have not always worked to assist consenting authorities by making it as easy as possible for them to implement effective plans and grant resource consents requested.

What Should Businesses Do?

There are a variety of key responses for businesses:

1. Planning: As noted, the issues and pressures under the Act are usually known or can be predicted. Because of the difficulties operating under the Act and the pressure on consent authorities it is likely to be much more difficult to resolve issues after they arise than ensuring that they do not arise. Therefore applicants should plan and be pro-active in addressing any potential issues. Manage the process - don't be managed by it. The applicant should be prepared and plan for contingencies that may arise. Importantly, businesses should not commit to a tight time frame within allowing adequate time for and properly planning for resource consents. Finally, the impact of the Act on general business activities should be recognised and, where appropriate, environmental planning integrated with general business strategic planning. This is particularly important for resource intensive industries, such as upstream oil and gas, which have an ongoing need for resource consents.
2. Manage Public Relations: The Acts processes encourage public awareness and participation. Therefore, businesses need to be very conscious of the public perception of their activities. Importantly for businesses the media can be a powerful tool to manipulate the resource consent process and outcome. Interest groups are often very good at managing the media. Therefore, businesses need to carefully manage their public relations and their relationship with the media.
3. Good Consultation: The Act requires some consultation and, importantly, permits anyone to object to an application for a resource consent. Effective consultation is therefore critical. Minor issues should not be allowed to disrupt a consent application because of poor consultation. The general public, and in particular, interest groups are becoming increasingly aware of their rights and opportunities under the Act. The business applicant needs to manage that. Consultation should probably occur from the outset of planning for a resource consent so that those consulted have a sense of, and are, involved through the whole process - not just once the plans for a development are refined and an application for a resource consent lodged.
4. Compensation: It may be appropriate and pragmatic to pay compensation to objectors or potential objectors to resource consent applications. In the extreme some objections can amount to extortion, and businesses have complained of this. But nevertheless it may occur, and should be planned for. Plan for the occurrence, plan how to manage it, and be aware of the consequences, in particular, any precedents that may become public.
5. Environmental Management Systems: Introducing and operating an environmental management system will make it easier to identify, quantify and mitigate/avoid the environmental impact of business operations. It will reassure the consent authorities and public that the business is environmentally aware and focused on its environmental performance. In addition, it may introduce beneficial business systems, including important systems for managing the businesses risks.
6. Specific Statutory Responses: There are a number of specific provisions that can assist businesses in operating under the Act. For example, Part VIII of the Act provides for designations which confer a statutory right to acquire an interest over land held in private ownership for public works. This status is available to companies such as gas and electricity network companies that meet all of the statutory criteria.

A further response that may be appropriate in some circumstances is to seek a change to the specific regulations in the relevant district or regional plan.

Summary

The introduction of the Resource Management Act and the move from a centralised prescriptive approach to environmental management to a decentralised results based approach was a significant change in New Zealand's environmental and commercial landscape. Unfortunately, the vision for the Act of fewer more targeted interventions in business activities has not always been achieved in practise in the past. The vision for the Act remains widely supported. The consent authorities, government agencies and people operating under the Act are working towards achieving the vision. However, significant business challenges remain in operating under the Act. Businesses in the upstream oil and gas industry in particular need to address these challenges.

Bibliography

Ernst & Young September 1997. Case Study Assessment of the Impact of the Resource Management Act on Business, Final Report. Report for the Ministry of Commerce.

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Author

David Salisbury is a Senior Manager with Ernst & Young's Energy Consulting Group located in Wellington, New Zealand. David specialises in providing strategic advice. David previously worked for Fletcher Challenge Energy Limited where, among other responsibilities, he managed an environmental and land access group for Fletcher Challenge Energy Taranaki Limited. David holds an LLB and a Bachelor of Commerce and Administration (economics major), both from Victoria University of Wellington.

Last modified: 22 October 2002