April 17, 2013
Nothing is more frustrating for Australia’s resources businesses than the inability of governments and their advisers to address the green tape problem.
There’s no lack of talk about the issue.
Unfortunately, little is being done to resolve the problem.
Governments have identified reform in this area as a priority.
The energy white paper states that addressing barriers to approval of major projects is essential in strengthening Australia’s competitiveness and productivity.
The Productivity Commission in 2009 found that duplication, overlap and inconsistent administration of petroleum and pipeline laws imposed significant unnecessary burdens on the sector.
Four years later there has been some progress with the establishment of an offshore regulator for environmental and safety issues. But in offshore Western Australia, we still have five different state and federal bodies reviewing and consulting on environmental requirements.
There are some $200 billion worth of LNG projects under way or being planned for offshore WA, so the problem is real and important in our national efforts to maintain a robust economy and, with it, the standard of living of all Australians.
While a considerable part of the problem relates to overlapping federal and state regulatory processes, a key step to a better environment can be taken by the federal government on its own through dealing with the twin impacts of its Environmental Protection & Biodiversity Conservation and Offshore Petroleum & Greenhouse Gas Storage Acts.
Last year the federal government established the National Offshore Petroleum Safety & Environmental Management Authority (NOPSEMA) under the aegis of the Department of Resources ,Energy & Tourism to oversee offshore development – but it also left the Department of Sustainability, Environment, Water, Population & Communities in the game, regulating the industry under the EPBC Act.
Put simply, the set-up duplicates the regulatory process without significantly improving environmental outcomes.
Two lots of bureaucrats separately assess the same projects – and project developers have to tread the green tape path twice for the same purpose but with no guarantee they will get the same outcome.
This is time-consuming and expensive (for taxpayers as well as companies). It presents an added risk for investors. And it is wholly unnecessary.
For investors, the big three hurdles to success in resource projects are time, cost and risk.
Failure to surmount them can be fatal for developments in the intensely competitive global energy business.
The federal government can, and should, take a big step towards reducing the regulatory problems by accrediting NOPSEMA to approve projects under the EPBC Act.
This will be a major improvement in unravelling green tape for the oil and gas industry, which would also like to see the EPBC Act refined in due course to reduce the amount of time needed for project approval processes.
In not acting, the government lays itself open to a harsh question: in a public debate where the need to improve the nation’s productivity is a constant theme, why does it continue with a process in which duplicated laws and regulation impact on companies through imposing higher compliance costs and affecting project economics?
This is not a debate divorced from the public interest, although it takes place well below the community’s radar, because, in the longer term, the situation must impact on all Australians when it results in resource developments not going ahead or being reduced in size.
Because these developments are an important source of royalty and taxation income for cash-strapped governments confronted by the urgent need to spend more on essential community services.
Meanwhile, governments in Australia don’t have to guess about how they rank in this competition because Canada’s highly-respected Fraser Institute produces an annual league table measuring policy and regulation efficiency in the oil and gas sector in 147 jurisdictions.
Last year the institute found that the regulatory performance of every government in Australia had fallen by comparison with 2011.
The best jurisdiction here, South Australia, ranks 29th. The worst, New South Wales, is 63rd.
Ideally, the federal government should be spearheading the establishment of a “one stop shop” for oil and gas regulation – and a big step in the right direction would be to resolve the duplication for which it is directly responsible.
What is preventing it from doing so?
David Byers is APPEA’s Chief Executive. A shorter version of this article was published in the Australian Financial Review on Wednesday April 17.