From Red Tape to Green Gold

Jason Krupp
23 March, 2015

This is the second and final report in The New Zealand Initiative’s series on the mineral estate and the regulatory landscape that surrounds it. The first report, Poverty of Wealth, examined the situation where rural economies, under pressure from ongoing urbanisation and increased global competition, have largely failed to exploit the mineral wealth at their disposal as a means of stemming this decline. The report laid the blame for this at the feet of the onerous and complex regulatory framework that governs the mineral estate in New Zealand, specifically the Resource Management Act (RMA).

The process of seeking planning permission under the RMA is widely recognised to be costly, time consuming, and complicated, with little predictability of outcome. This is particularly concerning for mining ventures - large capital-intensive projects that are inherently risky even before a high degree of regulatory uncertainty is added to the process.

An obvious place to try fix the RMA is at a local government level, as councils are tasked with performing consent assessments under the legislation. A 2013 survey conducted by the Productivity Commission showed 70% of regional, district, city and unitary councils experienced difficulty with the complexity of regulation, and more critically, the struggled with the process amid a lack of guidance from central government. Most councils also struggled to recoup costs of consenting through fees, while more than half found the process of hiring and paying qualified staff a difficulty.

This report, From Red Tape to Green Gold, identifies the source of much of this regulatory gridlock as central government.

Under the design of the RMA, the Ministry for the Environment is supposed to develop National Policy Statements (NPS) and National Environment Standards (NES) on matters that concern the entire country. This, like a tent pole, is supposed to form the basis on which the regional and district policy statements and plans hang. Yet since 1991, only four NPS documents have been drafted, covering electricity

transmission, renewable electricity generation, coastal policy, and freshwater management. In addition there are only five NES documents, covering air quality, sources of human drinking water, telecommunication facilities, electricity transmission, and soil contaminants.

Although this covers a lot of ground, it is equally clear how limited this advice is, particularly in the highly technical and specialised area of mineral extraction, which accounts for close to 10% of New Zealand’s exports in any given year. Central government guidance is also absent in other areas such landscapes of national significance, and ecological offset mechanisms.

 

Recommendations

This report proposes three policy solutions to break through the logjam created by the RMA.

In the short-term, central government should provide a funding stream for local councils to compensate for the costs they incur as consenting agents. This could be done by sharing the royalties from mining developments with local councils, proportional to the costs of consenting. This would act as a significant incentive for local government to welcome development because it does not represent a threat to their balance sheets.

Over the medium-term, central government needs to develop NPS and NES policy documents for the mining industry if it wants to lift sector output. Central government guidance on landscapes of national significance and for ecological compensation frameworks would also go a long way to resolving disputes over land use and conservation before they flare up.

Lastly, there needs to be a long-term commitment from government to modernise the RMA. At the time the RMA was drafted, a hazards-based framework was seen as the best means to promote sustainable management of natural and physical resources. However, international best practice has shifted to a risk-based approach, which delivers better outcomes for the economy and the environment. To illustrate the difference, hazard-based legislation requires developers to carefully account for everything that could possibly go wrong with a project, and put in measures to avoid, remedy and mitigate these. Risk-based legislation does the same, but also takes into account the likelihood of that hazard occurring.

In addition, the approvals process must be made more efficient if we want to attract mining investments to New Zealand. Comparative research shows Australia’s leading mining jurisdictions use a one-stop-shop approach which achieves a consenting turnaround time of six months. In New Zealand it is closer to two years. More importantly, Australia’s leading mining regimes consistently outrank the RMA on measures of environmental protection.

Implemented piecemeal, or as a complete package of reforms, these policies have the potential to shift the dialogue that New Zealanders have over mineral extraction. If the rules are clear and efficient, environmental protections high and the activity respectful, there can be no rational basis to object to efforts to increase mining activity. The benefits from this will accrue to rural economies, and New Zealand as a whole.

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