Any experienced resources developer
is familiar with the sticky complexities of red and green tape governing the
industry. Where bureaucracy or regulation is excessive, business bears the
cost. Meanwhile government shoulders the burden of ensuring resources and
environments are properly managed and protected.
The volume and density of
legislation governing Australia’s resources has developed in response to numerous,
competing demands, over time. The addition of regulatory layers often creates
tensions and contradictions between jurisdictions, different resource types,
new technological developments and which stakeholders, concerns and agendas are
prioritised.
Is there a way out of the
regulatory soup? How might the governance of Australian resources be performed
more efficiently and effectively? Recent research clarifies the problems and is
beginning to offer solutions.
Compliance is costly
Australian government
regulations across all industries cost an estimated $27 billion per
year in
administration and $67 billion per year in compliance, according to a recent
study by Deloitte Access Economics. This is in addition to the even higher
costs associated with administration of and compliance with internal company
rules. The same report estimated these internal regulatory costs at $21 billion
and $134 billion per year, respectively.
Australia’s mining and
extractives industry is no exception to these rules.
Cutting red and green tape has
long been on the industry’s agenda. Poorly thought-out policies and regulation
can lead to duplication, heavy compliance burdens and substantial business
costs. By 2012, 72 per cent of Australian businesses surveyed by the Australian
Chamber of Commerce and Industry reported an increase in regulatory burden
across the two years prior. This is reflected in a shift in workforce roles
from ‘back office workers’ to ‘compliance workers’. In the five years to 2011,
the mining industry’s compliance workforce grew approximately 20 per cent,
amongst the highest increase across all industries studied.
The costs of regulation
leave many contemporary economists calling for greater reliance on competition
through market mechanisms.
But too little regulation also brings costs
Recent studies also remind
us that good regulation is both necessary and desirable. In a study of
world-wide regulation at the beginning of the 21st century, the OECD
reports that market mechanisms are a good way to avoid ‘regulatory capture’,
incentivise consumer welfare and promote public interests. But the study also
finds that strong, targeted regulation remains imperative.
A tape cutting agenda
The Australian Government’s
March 2014 Guide to Regulation takes
cutting red tape as its centrepiece. The Guide
sets out 10 principles for regulators and calls for the implementation of
regulation ‘only when it can be shown to offer an overall net benefit’.
The sentiments concerning
red tape are understandable and efforts to refine regulation for effectiveness
and efficiency are to be commended. At the same time, it is vital that any tape
reduction be performed thoughtfully and in consultation with all affected
groups: business, government and communities. To this end, the Guide helpfully incorporates
consultation and transparency of policy making among its five principles.
But for the mining and
extractives industry, these steps may not be enough to achieve maximum
regulatory efficiency, clarity and effectiveness.
The lay of the regulatory landscape
Regulation of Australia’s
resources is particularly knotty. Australia’s constitutional federal system of
government creates discrepancies between states and territories and the
Commonwealth. The geographic location of resources is also challenging, as many
cross jurisdictions. And resource exploitation occurs within particular
historical, political and economic circumstances. Competing interests further
thicken the regulatory soup, with governments, explorers, producers,
landowners, land occupiers and the general public each bringing their own
values and requirements. Regulators also face the challenges of operationalising
the Council of Australian Government’s Principles of Best Practice Regulation. Much
regulation has been made on a resource-by-resource basis, yet decisions about
individual resources often have flow-on effects for other resources.
Take Australia’s competitive and controversial coal seam gas
industry as an example. CSG is located within sedimentary basins which contain
fossil fuel resources that provide for more than 90% of Australia’s primary
energy production. But these basins also hold the great majority of the
nation’s groundwater, sustain most of Australia’s agricultural production and
rural population centres and support a large portion of endangered riverine and
rangeland ecosystems. The ways in which sedimentary basins are used today will
affect Australian communities tomorrow. The situation is tense and thorny, and
traditional regulation is proving deficient.
The Surat Basin lies beneath
the surface of Queensland and northern New South Wales, stretching over an
estimated 300,000 square kilometres. It is believed to contain the majority of
Australia’s current CSG reserves, as well as offering the main source of Queensland’s
potential LNG export revenue and providing the natural gas supply to Queensland
and other jurisdictions.
The geographic size and
land-use and resource diversity of the basin subject it to ‘an overwhelming
labyrinth of regulation’. Research completed recently by Dr Christine Hastings
for the Melbourne Energy Institute’s Sedimentary Basins Management Initiative
identified at least 23 statutes in New South Wales and at least 30 in
Queensland regulating resource activity in the basin. A company wanting to
exploit a particular resource will need to consult multiple statutes,
regulations, codes, guides and government departments in each jurisdiction
before they know their rights and responsibilities. When we consider that the
average statute runs to hundreds of pages with hundreds of sections, simply
understanding the requirements and interactions of all relevant regulations
becomes a substantial challenge.
A whole of resource approach to regulation
The Sedimentary Basins
Management Initiative is investigating how resource regulation can be more
effective and efficient. Preliminary research suggests that a new perspective
on resource governance is needed: a whole of resource approach.
Taking the sedimentary basin
as its focus (as opposed to a single resource such as water, gas or storage), a
whole of resource approach would help to cut through regulatory complexity. While
the Productivity Commission’s promotion of a ‘one stop shop’ for environmental
approvals was welcomed initially, action has been slow. A shift in perspective—from
one resource to the interactions of many—would facilitate a reshaping of
regulation which better reflects on-ground resource uses and reduces regulatory
tensions and burdens. Streamlining environmental approvals and removing
jurisdictional duplication and overlap achieves efficiency. This must be
balanced with governing Australia’s sedimentary basin resources in an optimal
way for the long-term.
Research and debate
continues. But early findings suggest that openness to new perspectives on how
we conceive resources management in the first place will allow us to evolve out
of a rather primordial regulatory soup.
This article was originally published in: Australian Resources and Investment Magazine, March 2015 Issue.
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