08.07.15

More Costly Regulation for Businesses

Krishna Desai
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More Costly Regulation for Businesses

Regulations creating a system for environmental permits and licences were first passed in 1996, and these created a list of activities for which permission from the Government is required in order to carry out the prescribed activities. After almost 20 years, the Government has finally amended these regulations and the changes have far-reaching effects both for existing businesses and for those businesses which are contemplating entering into certain ventures.

The wide range of sectors covered by these regulations includes all manufacturing; processing; housing, hotel, office, or commercial development; energy generation and transmission; transportation; mining and quarrying.

For the first time, an environmental permit is required to construct and operate a school, a telecommunication tower, a stadium, a veterinary clinic which boards animals, a pet store, a zoo, and a dry-dock. Likewise, an environmental permit is required to build in certain sensitive places like on top of a sand dune and over the sea, a river or a pond, for exploration or prospecting for non-renewable resources (such as oil and gas) and searching for artifacts.

In addition to enlarging the number of new categories of activities, the amended regulations create higher application fees and even higher application fees for proposals which call on the Government to review environmental impact assessment studies. For example, under the 1996 regulations, the application fee was only $1,000 while the revised application fee for most applications now is either $50,000 or $85,000 once a proposal does not require an environmental impact assessment study. If such a study is required, application fees rise to $75,000 or $115,000 depending on the category of activity. This 5,000% to 11,500% increase in application fees is due in part to the Government passing on to the applicants the time spent conducting the review.

The increase in costs does not stop at the application stage, as upon the grant of permits the fee to be paid to collect the permit has also increased from $15,000 to $40,000 (and higher). For certain categories the fee reflects the size of the development, and as an example, the permit for the construction and operation of a hotel of 3,001 rooms is $40,000 plus $225 per room for each room over 3,001 rooms.

However, and not withstanding the increased cost of doing business which the higher fees mean to the specified sectors, the amended regulations have brought other fundamental and far reaching effects.

The new regulations now stipulate that any environmental permit granted before the 1st day of April 2015 shall expire on the 1st day of April 2020 and the permit will need to be renewed by way of an application together with the prescribed renewal fee. Renewal gives the regulator an opportunity to review the business operations and the conditions which previously attached to the grant of the permit. This can be expected to lead to stricter measures which need to be complied with.

With the recent coming into effect of the amended regulations the regulator itself has changed its policy towards businesses which pre-existed the regulations. When the 1996 regulations came into effect on January 1, 2007 all businesses which were carrying out the activities listed as prohibited were 'grandfathered in' and they therefore did not need a permit for the activity to be carried out free from prosecution. Such a 'grandfather' clause is a provision by which an old rule (or in this case, no regulation) continued to apply to existing situations while a new rule (the 1996 regulations) applied to all future cases. Such a provision is often used as a compromise to effect new rules without upsetting a well-established situation. Based on a notice given by the government's National Environment and Planning Agency this grandfathering policy has been eliminated for businesses with ongoing operations which may have environmental impacts and it is said by the regulator that these businesses need to apply for a permit before April 8, 2016, or cease the activity.

These are interesting times for businesses which are already operating at a deficit, or which are at best marginal. Given existing financial constraints and shrinking budget allocations the government seeks to bring about cost recovery for the regulatory service it provides, as it steps up measures for the protection of the environment.