Queensland’s New Environmental Offsets regime – and what it means for local government offset conditions

On 1 July 2014, the operative provisions of the Environmental Offsets Act 2014 commenced. The Environmental Offsets Act implements a new offsets regime in Queensland and is supported by the Environmental Offsets Regulation 2014, the Queensland Environmental Offsets Policy and amendments to the State Planning Policy. 

In this article, Partner Sarah Macoun and Special Counsel Gemma Chadwick discuss one of the key features of the new offsets regime – the local government’s ability to impose offsets conditions for “matters of local environmental significance”. 

We have previously expressed concern about the proliferation of offsetting requirements (including at a local level) and the impacts of offsetting on housing affordability and issues of intergenerational equity. As outlined in this article, the new offsets regime and the amended State Planning Policy do not diminish these concerns. 

Key Points

• The Environmental Offsets Act allows local governments to prescribe matters of local environmental significance through their planning schemes. 
• There are no real bounds around that power, with the only restriction being that matters of local environmental significance must be different to matters of national or State environmental significance.
• Local governments will be able to impose offsets conditions for matters that are not considered significant at a State or Commonwealth level, which is contrary to the State Government’s commitment to reduce green tape and has the potential to contribute to issues of intergenerational equity and housing affordability. 
• The amendments made to the SPP further elevate the status of matters of local environmental significance, with local government offset conditions now specifically described as part of the overarching State interest of “Biodiversity”. 

Overview of the new Environmental Offsets Regime

There are four fundamental planks to the new offsets regime.

First, an overarching test has been introduced so that an environmental offset condition can only be imposed where a prescribed activity will, or is likely to have, a significant residual impact on a prescribed environmental matter and all reasonable on-site mitigation measures for the prescribed activity have been, or will be, undertaken.¹ This test applies to environmental offsets conditions imposed under several acts including the Sustainable Planning Act 2009, the Vegetation Management Act 1999 and the Environmental Protection Act 1994. 

Second, the Environmental Offsets Act includes provisions seeking to avoid duplication of environmental offset conditions at a Commonwealth, State and local government level.² The intent is that a State or local government is precluded from imposing an environmental offset condition where the Commonwealth has imposed an offset condition for substantially the same environmental matter, for substantially the same impact, in substantially the same area (unless the condition relates to a protected area). The same restriction is intended to apply to local governments where the State has imposed an environmental offset condition.  

Third, the existing five issue-specific offset polices have been replaced by the single Queensland Environmental Offsets Policy.³ The single policy aims to remove the inconsistencies that existed between the old offset policies, simplify offset requirements, and provide flexibility as to how offsets are provided. 

Fourth, the Environmental Offsets Act allows proponents to elect what kind of offset is provided.⁴ The proponent can choose between a proponent driven offset (eg an offset delivered on land owned by a third party) or a financial settlement offset (a financial payment calculated in accordance with a formula in the Policy) or a combination of both. 

The mechanics of the Environmental Offsets Regime

An environmental offset condition can only be imposed if a “prescribed activity” has a significant residual impact on a “prescribed environmental matter”.  

“Prescribed activities” are listed in Schedule 1 of the Environmental Offsets Regulation and include, for instance, development for which an environmental offset may be required under a local planning instrument. 

“Prescribed environmental matters” are listed in Section 10 of the Environmental Offsets Act as any of the following matters prescribed under a regulation to be a prescribed environmental matter:

• A matter of national environmental significance;
• A matter of State environmental significance;
• A matter of local environmental significance.

Matters of national environmental significance (NES) are limited to matters of NES under the Environmental Protection and Biodiversity Conservation Act 1999 (Cth). 

Matters of State environment significance are identified in Schedule 2 of the Environmental Offsets Regulation and include regulated vegetation, connectivity areas, wetlands and watercourses and protected wildlife habitat. 

Matters of local environmental significance⁵ are identified in Section 5 of the Environmental Offsets Regulation as follows: 

“(3)  For section 10(1)(c) of the Act, a matter of local environmental significance for which an environmental offset is required under a local planning instrument is a prescribed environmental matter.

(4) In this section—

…

matter of local environmental significance does not include a matter of national environmental significance or a matter of State environmental significance.”

Matters of Local Environmental Significance

The effect of the Environmental Offsets Regulation is that a matter of local environmental significance cannot include a matter of NES or a matter of State environmental significance. That creates a situation where, by definition, a matter of local environmental significance must be different to a matter of NES or a matter of State environmental significance. That has an unintended consequence. 

During the consultation period for the Environmental Offsets Regulation and Policy, the material on the Department of Environment and Heritage Protection’s website indicated that limitations would apply for offsets in urban areas for certain prescribed activities covered by the State Development Assessment Provisions. For instance, the Environmental Offsets Regulation prescribes certain “regulated vegetation” (eg “of concern” regional ecosystems) to be a matter of state environmental significance except to the extent a prescribed regional ecosystem is located within an urban area.  An urban area exemption also applies to “connectivity areas”. 

What the Environmental Offsets Act and Regulation fail to do is carry through the urban exemption to a local government level. Local governments will be able to use their planning schemes to identify matters for which an environmental offset is required. Those matters could include particular vegetation in an urban area. For example, a local government may require an offset in respect of “of concern” or “least concern” remnant vegetation, which is excluded from the matters of State environment significance listed in Schedule 2 of the Environmental Offsets Regulation. In that way, the State’s urban area exemption (and determination that “least concern” remnant vegetation is not a matter of State environmental significance) could be entirely circumvented at a local level. Further, the mechanism in Section 15 of the Environmental Offsets Act will not necessarily apply because the matter of local environmental significance will be different to the matter of State environmental significance. 

The urban area exemption for connectivity is framed more broadly than the exemption for regulated vegetation. The urban area exemption for connectivity states “However, to the extent a prescribed regional ecosystem is located within an urban area, it is not a matter of State environmental significance.”  In contrast, the regulated vegetation urban area exemption states that “to the extent a prescribed regional ecosystem mentioned in subsections (2) to (4) is located within an urban area, it is not a matter of State environmental significance.”  Subsection (2) to (4) relate to of concern regional ecosystems, prescribed regional ecosystems containing wetlands or essential habitat and prescribed regional ecosystem near watercourses.  Perhaps the intent was that the broad urban area exemption for the “connectivity” would prevent local governments making residual interests (such as “least concern” vegetation) a matter of local environmental significance. However, this is not clear from the Regulation.  Further, the exemption must be read in context so that, properly construed, the broader urban area exemption only relates to the “connectivity” matter of State environmental significance. 

If the true intent was to apply the urban area exemption at a State and Local level, an amendment is required to the Environmental Offsets Act and Regulation to specify that, to the extent an environmental matter is specifically excluded from being a matter of State environmental significance, it cannot be designated as a matter of local environmental significance under a planning scheme.  Further, if the State has considered a category of environmental matter (for instance, regulated vegetation) and determined that particular matters within that category are not of significance (eg “least concern” vegetation) there should be rules preventing or limiting the local government’s ability to seek offsets for those matters.

Changes to the State Planning Policy

The State Planning Policy (SPP) has been amended to coincide with the commencement of the Environmental Offsets Act. The amendments to the SPP also took effect on 1 July 2014.

The State interest of “biodiversity” now includes amended references to matters of local environmental significance. The changes manifest in two ways – the provisions affecting making and amended planning schemes and the Interim Development Assessment Requirements (IDAR).

The SPP has always required local governments to consider matters of national, State and local environmental significance when making or amended a planning scheme. The July 2014 amendments have altered the provisions regarding State environmental significance by:

• removing the old subparagraph 5, which referred to facilitating the protection of state environmental significance utilising the “avoid, mitigate, offset” methodology; and
• replacing it with a new subparagraph 4, that refers to “facilitating the protection and enhancement of matters of state environmental significance”. 

The provisions relating to local environmental significance have also changed:

• subparagraph 7 previously referred to “considering matters of local environmental significance, where considered appropriate by a local government”; and
• subparagraph 7 now reads “considering the protection of matters of local environmental significance, which may involve provisions for environmental offsets, provided those provisions are consistent with the Environmental Offsets Act”.

The amendments mean local government environmental offsets are now specifically described as part of the State interest of Biodiversity.  Curiously, however, the notion of offsetting is now only mentioned in the SPP in relation to matters of local environmental significance, not matters of State environmental significance.

That change feeds through to the IDAR, which apply to certain development applications⁶ to the extent the SPP has not been appropriately integrated into the planning scheme. The IDAR apply in addition to other relevant requirements of the planning scheme. 

Previously, the IDAR required development to:

• identify any potential significant adverse environmental impacts on matters of state environmental significance; and
• manage the significant adverse environmental impacts on matters of state environmental significance by utilising the “avoid, mitigate, offset” methodology. 

The July 2014 amendments inserted the following introductory paragraph for the IDAR for Biodiversity:

For a development to which a local planning instrument requires an environmental offset:

Any development application requiring an environmental offset under a local planning instrument (including a local government condition to provide an environmental offset) must be consistent with the Environmental Offsets Act 2014.”

An introductory paragraph of that type does not appear in any of the other IDAR sections. The paragraph appears directed at local government planning schemes that include offsets policies made prior to the commencement of the Environmental Offsets Act. Its effect is to ensure that any offset requirements must be consistent with the new offsets regime and that applies until a planning scheme is amended to reflect the SPP, to make any offsets policies consistent with the SPP. That intent is reinforced by the footnotes to the introductory paragraph which note that a local government cannot condition for an environmental offset if the Commonwealth or State impose a condition (or choose not to impose a condition) for the same, or substantially the same, prescribed activity and prescribed environmental matter (a reference to section 15 of the Environmental Offsets Act).  Footnotes are a non-statutory part of the SPP.

The IDAR provisions themselves have been amended to now require development to:

• enhance matters of state environmental significance where possible, and
• identify any potential significant adverse environmental impacts on matters of state environmental significance, and
• manage the significant adverse environmental impacts on matters of state environmental significance by protecting the matters of state environmental significance from, or otherwise mitigating, those impacts.

Again, the IDAR no longer specifically reference “offsetting” in respect of matters of State environmental significance, referring instead to “mitigating”. The concept of “enhancing” a matter of state environmental significance is entirely new.  The term “enhance” is not defined in the SPP, nor is any guidance given in the Policy as what actions would constitute “enhancing” a matter of state environmental significance. 

The consequence of these amendments to the SPP is that local government offset conditions are entrenched at a State interest level. 

Conclusion

The explanatory notes to the Environmental Offsets Bill indicated that the new legislation sought to reduce green tape by reducing the number of environmental matters requiring environmental offsets and focusing resources on matters requiring the most protection. 

To achieve that intent, the Environmental Offsets Act should be amended to place tighter controls around what can be identified as a matter of local environmental significance under a planning scheme.  Without tighter controls, there is the potential for planning schemes to be widely cast to catch any environmental matter not considered significant at a State or Commonwealth level, resulting in more offsets conditions, not less. That has the potential to contribute to issues of intergenerational equity and housing affordability.    

For further information about Queensland’s new offsets regime, please contact our Planning and Environment team.

^{1. Environmental Offsets Act, section 14}

^{2. Environmental Offsets Act, section 15}

^{3. Environmental Offsets Act, sections 12 and 13}

^{4. Environmental Offsets Act, Part 6, Division 2}

^{5. There is a drafting error in that the Schedule to the Environmental Offsets Act still defines matters of local environmental significance by reference to section 10(4).  Section 10(4) appeared in the Environmental Offsets Bill but does not appear in the Environmental Offsets Act.  Section 10(4) of the Bill stated that a matter of local environmental significance means a matter of environmental significance dealt with under a local planning scheme or planning scheme policy made by a local government.} 

^{6. development applications for operational work, a material change of use (other than for a dwelling house) and for reconfiguring a lot that results in more than six lots or lots less than 5 hectares}