Changes to Queensland’s environmental offset framework

In Brief

Currently environmental offsets in Queensland are governed by an overarching policy (Queensland Government Environmental Offset Policy 2008) and four specific issues policies. As part of the planning reform for Queensland, the government has proposed new environmental offset legislation and a single offsets policy.  The primary objective of the Environmental Offsets Act 2014 and draft regulation is to counterbalance the significant residual impacts of ‘prescribed activities’ on ‘prescribed environmental matters’ (i.e. matters of national, State and local environmental significance) through the use of environmental offsets.  By reference to a ‘significant’ residual impact, the proposed framework closely resembles that currently used by the Commonwealth Department of Environment (DoE) in administering the EPBC Act.  The new draft Environmental Offsets Policy (EOP) accompanying the legislation still upholds environmental offsets as a last resort, preferring development applications to avoid and mitigate impacts before proposing to offset.  The provision of offsets, however, seems more flexible.  It appears that financial offsets are now as acceptable as physical offsets.  Exactly how this will interact with the Commonwealth offsets policy (which only accepts a minimum 90% physical offset) is unclear at this stage, particularly where the assessment is undertaken under the Bilateral Agreement.  Offset requirements (both financial and physical) for prescribed environmental matters are calculated through the use of an online offset area calculator. The acceptance of financial settlement offsets and the factors inherent in the methodology that make them attractive to many businesses may mean that there could be fewer physical offsets into the future.  On the positive side, however, there may be more funding available for coordinated conservation initiatives such as the protection of strategic corridors.

Full Article

Currently environmental offsets in Queensland are governed by an overarching policy (Queensland Government Environmental Offset Policy 2008) and four specific issues policies: vegetation, fisheries, koalas and biodiversity.  In addition, offset policies are triggered by numerous pieces of legislation creating a complex network for proponents and assessors to negotiate.  As part of the planning reform for Queensland, the government has promised a simpler environmental offsets delivery mechanism.  The Environmental Offsets Bill 2014 was introduced into the Queensland Parliament on 13 February 2014 and provides the framework for imposing and managing environmental offsets.  The new Environmental Offsets Act 2014 came into effect on 28 May 2014.  The draft Environmental Offsets Regulation 2014 to support the new framework was released for public consultation and submissions closed on 6 June 2014.  The release of the regulation and supporting guidelines is expected in the next month or two.

The primary objective of the Act

The primary objective of the Environmental Offsets Act 2014 and draft regulation is to counterbalance the significant residual impacts of ‘prescribed activities’ on ‘prescribed environmental matters’ through the use of environmental offsets.  Prescribed activities have been included in Schedule 1 of the new regulation and generally include activities that need approval under other legislation where an offset may be required.  The ‘prescribed environmental matters’ that may require offsets are:

• matters of national environmental significance (MNES) defined by the EPBC Act;
• matters of State environmental significance (MSES) defined by the Queensland State Planning Policy (SPP) State Interest – Biodiversity; and
• matters of local environmental significance (MLES) defined by local government planning instruments.

A ‘significant residual impact’ to prescribed environmental matters is defined in Section 8 of the Environmental Offsets Act 2014 which states it is an adverse impact, whether direct or indirect, of a prescribed activity on all or part of a prescribed environmental matter that—

(a) remains, or will or is likely to remain, (whether temporarily or permanently) despite on-site mitigation measures for the prescribed activity; and

(b) is, or will or is likely to be, significant.

At this point what exactly constitutes ‘significant’ remains undefined. A guideline to determining a ‘significant residual impact’ is currently in development by DEHP.  Further advice on determining the significance of a residual impact can be found in the draft SPP Guideline – Biodiversity, but again this is just a draft.  Refer to my previous article (https://gaiaenviro.com.au/2014/05/new-queensland-spp/ ) for more information about the new Queensland SPP.  If the draft SPP Guideline – Biodiversity is anything to go by, the process of determining significance will closely resemble that currently used by the Commonwealth Department of Environment (DoE) in administering the EPBC Act.  This process is qualitative in all cases except where actions that constitute significant impacts for a particular MNES have been outlined in a recovery plan or similar.  An attempt by the State to provide quantitative guidelines (which has been discussed has an option) is likely to contradict the current DoE methodology and could jeopardise the attainment of accreditation of the State’s assessment processes under the Queensland Bilateral Agreement (refer to my earlier article https://gaiaenviro.com.au/2014/05/bilateral-agreement/ ).  Ultimately we will have to wait for the release of the Guideline to determining a ‘significant residual impact’ before we really know what the term ‘significant’ implies.  In any case, by reference to a ‘significant’ residual impact the proposed offsets framework sets a higher threshold for the types of impacts that must be offset than is currently in place under the existing State offsets policies. This is likely to result in a reduction in the number of environmental matters requiring offsets.

Goals of the Regulation

The draft Environmental Offsets Regulation 2014 proposes to achieve its primary objective through the attainment of the following goals:

• prescribing an Environmental Offsets Policy to achieve standardisation of offset delivery
• specifying national, State and local matters of environmental significance that may require an offset
• specifying activities that may require an environmental offset as a condition of approval
• specifying the method for calculating financial settlement offsets
• providing for different types of legally secured offset area
• providing for the amendment or revocation of environmental offset protection areas
• providing conflict resolution processes associated with decisions made under the Bill
• providing processes for recognising advanced offsets areas

Probably the most influential goal is the development of the Environmental Offsets Policy (EOP), which is where all the crucial details lie.  The draft EOP represents one policy for the delivery of all State and local offsets, as opposed to the current multi-policy approach with varying requirements for offset type, location and management and several different methods for offset calculation.  The single policy provides clear methodology for offset calculation, greater flexibility for offset provision and enables earlier start-up of projects.  Generally speaking, the offset requirements seem easier to satisfy and the provision for financial offsets creates a low risk option for proponents.  It is anticipated that many proponents will take advantage of the transitional provisions.

An interesting goal of the draft Environmental Offsets Regulation 2014 is the provision of conflict resolution processes.  This may be used in scenarios where the proponent and administering agency cannot agree on an offset delivery arrangement within the agreed timeframe.  This is important to proponents because the prescribed action cannot be undertaken until it is determined (via an agreed delivery arrangement) whether they will satisfy the offset condition by means of a proponent-driven offset, a financial settlement offset, or a combination of the two.  Where an agreement is not reached it is proposed that, following an internal review, if the proponent is still dissatisfied they can seek a merit-review through the court system.

The draft Environmental Offsets Policy

Environmental offsets delivered under this framework are to achieve a conservation outcome for the impacted matter(s). This can be achieved by:

• including no more than 10% of the offset as compensatory measures; e.g. education, research etc. that could be delivered through Direct Benefit Management Plans (packaged investments to benefit a prescribed environmental matter, e.g. implementing part of a species recovery plan);
• effectively accounting for and managing the risks of the offset failing to achieve a conservation outcome;
• providing benefits to the impacted prescribed environmental matter that are additional to the requirements of existing legislation;
• being efficient, effective, timely, transparent, and scientifically robust;
• having transparent governance arrangements–including being able to be readily measured, monitored, audited and enforced; and
• providing tangible benefits for the impacted matter, which is located as close as possible to the impact site – in the following order of preference:
  • the same local government area;
  • the same sub-region;
  • the same bioregion; and
  • adjacent bioregion.

One of the things the draft EOP clarifies upfront is that only one offset can be required for any given prescribed environmental matter.  In any project there are still potentially MNES, MSES and MLES, hence there is the opportunity for federal, State and local government offset policies to apply to the same matter and create overlap.  However, the EOP puts restrictions on the imposition of multiple policies. This is supported by the Bill, which prevents the duplication of offset conditions by providing that an administering agency (be it the State or a local government) must not impose an offset condition if the significant residual impact on the prescribed environmental matter relates to an area where there is an existing Commonwealth condition about the same or substantially the same impact and area. There is a similar limitation on a local government imposing an offset condition if there is an existing State offset condition.

The EOP also allows for the development of a self-administered offset code of compliance for certain prescribed activities (Appendix 4).  As this part of the EOP is still in development, it is difficult to ascertain the implications. One can only assume that it may provide a method for proponents to assess their own offset proposals.

The new offset framework still upholds environmental offsets as a last resort, preferring development applications to show how an attempt has been made to avoid and mitigate impacts before proposing to offset.  In proposing an offset, the new framework allows for several types of offsets (some are recognisable from the current framework). Types of offsets include:

1. Proponent driven offset – a physical offset proposed by the proponent and subject to approval of an offset delivery plan. It can include Strategic Offset Investment Corridors (land identified as suitable for management to contribute to connective networks)
2. Advanced offset – where an area of land is identified as being useful for environmental offset purposes in the future and can be registered for use or trade.
3. Staged offset – can be applied where impacts to prescribed environmental matters are staged, therefore allowing offsets to be staged accordingly. This must be outlined in an approved offset strategy.
4. Financial settlement offset – money paid to the administering authority’s Financial Offset Account subject to an amount defined by an offset calculator
5. Environmental offset protection area – a new type of legally secured offset (for large areas with different tenures and land uses) that can be declared by the Minister and managed by an environmental offset agreement.

Offset requirements for prescribed environmental matters are calculated through the use of an online offset area calculator (similar to that used by DoE in the administration of the EPBC Act). The calculator for financial settlement offsets is described in the following section.  The calculator for proponent driven offsets is still in development, but reported to be capable of applying a rapid assessment technique or allowing the user to provide alternative factor scores based on field work.  Field work itself must be undertaken in a manner consistent with the new Habitat Quality Assessment Guideline, which is also still in development but remains similar to the existing ecological equivalence methodology.  The use of the calculator achieves an offset that is of a size and scale proportionate to the significant residual impact on a prescribed environmental matter.

Introducing financial offsets

Financial offsets have been around since offsets began in the 1980’s, but in current policy they are generally not accepted unless the majority of the offset is provided in a physical form.  It appears that financial offsets are now acceptable at the State and local level and can be paid to the administering body to be directed towards the matter impacted.  In current policy the Commonwealth environmental offsets policy only accepts a minimum 90% physical offset.  How this will interact with State policy, particularly in situations where national interests must be addressed through the Bilateral Agreement is unclear.  Nevertheless the draft Queensland EOP clearly provides for the use of financial offsets. 

To accompany the financial offset option, the regulation introduces a calculator. The financial settlement calculation is based on the following formula:

Financial settlement = (total offset area X on-ground cost per ha) + landholder incentive payment + administrative cost

The total offset area for each prescribed environmental matter is calculated by taking the impact area of the prescribed environmental matter, and multiplying it by the relevant “multiplier”—this is capped at a maximum requirement of four times the area of impact on each matter (another point of contention with DoE, which does not cap offset requirements).  The calculator also factors in the potential for co-locating offset requirements where applicable.  Instances where co-locating offsets is not suitable are for different regional ecosystems or species with specific requirements (e.g. cave dwelling bats).  The Financial Settlement Offset Calculation Methodology booklet contains tabulated data to assist in the estimation of on-ground costs and landholder incentive payments.  The on-ground costs per hectare vary with the sub-region and incorporate management costs plus a factor for risk of failure.  There is a sliding scale that can be applied to large offsets, which reflects their economies of scale (i.e. cheaper management costs per additional hectare over a certain size).  The landholder incentive payment varies with the Bioregion, sub-region and LGA, but it represents the cost of the land, i.e. offset area X unimproved land value.  It is set at a minimum of $10,000.  Administrative costs are equivalent to 25% of the total on-ground cost. 

Calculations for offsets for aquatic and marine values are different and generally result in lower payments because there is no landholder incentive.  Financial settlements for koala habitat offsets and protected areas are calculated differently, generally resulting in a higher financial requirement, presumably to further discourage clearing.  For SEQ koala habitat the financial offset is calculated at $230,000 per impact hectare, plus administrative costs and landholder incentive.  The following formula is applied to protected areas:

Financial settlement = impact area in ha X land value X offset ratio (e.g. 10 for National Park) + costs of direct impact to assets/infrastructure (e.g. fences, fire lines etc.)

Tabulated data exists for land value, which is the average unimproved land value for the LGA set at a minimum of $500 per hectare.  Protected area financial offsets are calculated in addition to those for prescribed matters, so if a protected area contains another prescribed environmental matter then a contribution is sought for both areas. In some cases this will more than double the financial settlement offset.

Whilst, at first glance, it may seem expensive for proponents to opt for providing financial settlement offsets as opposed to physical offsets; some businesses may prefer to do this.  It is a fairly simple, quick and risk free process that negates the need to engage in the costly exercise of sourcing offsets and creating management plans and agreements and removes the requirement any long-term commitment to managing an offset area.  Further the application of the sliding scale makes it economical for larger offsets.  For this reason, many well-resourced big companies (which are generally responsible for larger developments requiring larger offsets) may be inclined to opt for financial settlement offsets as opposed to physical offsets.  However, the incorporation of land values in the calculation of the landholder incentive payment is likely to create a disparity between offsets in built-up areas and those in more rural or remote areas.  Development in places like Brisbane, Gold Coast, Sunshine Coast, Redlands, Logan and Moreton Bay will be particularly expensive to offset with a financial settlement.  In these areas it may be more cost-effective to provide a physical offset.  Comparatively, some places in central and western Queensland will be associated with inexpensive financial offset requirements, which may benefit development and industry in these areas (particularly mining and gas).

Concluding thoughts

The acceptance of financial settlement offsets and the factors inherent in the methodology that make them attractive to many businesses may mean that there will be fewer physical offsets into the future, accompanied by less demand for consultants to source offsets and produce management plans.  The idea of offsets has always been dubious in the minds of conservationists and this is based on the reality that remnant forests cannot easily be replaced, at least within the life-span of the fauna displaced by their removal.  It follows, that the thought of providing money in the place of a physical offset is morally reprehensible to the green movement and they are no more supportive of the proposed draft policy.  There is some good to come of the provision of financial offsets and that is that the money may be used by government to develop a stronger and more co-ordinated approach to conservation, particularly through the use of programs like Strategic Offset Investment Corridors and Direct Benefit Management Plans.  The business and industry sector is likely to be pleased with having a single policy that is relatively easy to use, provides more clarification on offset requirements, flexibility in provision of offsets and greater certainty for development.

Of course the Queensland EOP is still in draft with some very important details yet to be finalised.  The accreditation process currently being undertaken by the Commonwealth government for the Queensland Bilateral Agreement is likely to have some impact on the details of the EOP, with particular relevance to the definition of significant impacts, acceptance of financial offsets and use of multipliers in the calculation of offset requirements. In the meantime keep an eye out for the release of the:

• Guideline to determining a ‘significant residual impact’
• Habitat Quality Assessment guideline (detailing field methodology to determine the quality of impact and offset areas)
• Offset Assessment Guide (calculator)
• Self-administered code of compliance