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Australian Government Solicitor

 

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Legal Practice Briefing

Number 16

23 February 1995

THE APPLICATION OF THE EPIP ACT TO COMMONWEALTH DECISION-MAKING

The decision of the Federal Court of Australia in Tasmanian Conservation Trust Inc v Minister for Resources Anor(1) ('Gunns case') has important implications for a range of Commonwealth decision-making. In Gunns case the Court set aside a decision of the Minister for Resources to grant a licence to export woodchips because he failed to comply with the requirements of the Environment Protection (Impact of Proposals) Act 1974 ('the EPIP Act').

This Briefing begins with a short introduction to the EPIP Act. It then summarises the decision of Sackville J in Gunns case. Finally, the Briefing reviews the application of the EPIP Act to Commonwealth decisions. Guidance is given as to how to ensure compliance with the EPIP Act in light of the Gunns case.

Three important preliminary points should be noted:

  • The decision in Gunns case has created significant uncertainty in relation to both the interpretation of some provisions in the EPIP Act and how these provisions should be applied by decision-makers. This Briefing presents a cautious approach to these matters based on the current state of the law. Nevertheless, the underlying uncertainty in relation to some issues should be noted.
  • The Minister for Resources has appealed against the decision in Gunns case. It is possible that the decision and reasoning of the Full Court of the Federal Court on appeal may be different to that of Sackville J.
  • This Briefing provides only a general summary of the issues involved. It is not possible to identify all the relevant issues or to set out procedures that will ensure compliance in all cases. As there are serious consequences for the Commonwealth and private parties if decisions are vulnerable to challenge, officers should seek legal advice in relation to any specific issues that arise.
The EPIP Act - An Introduction

The object of the EPIP Act is to ensure, to the greatest extent practicable, that matters affecting the environment to a significant extent are fully examined and taken into account in relation to Commonwealth actions (section 5). The EPIP Act potentially applies to a broad range of Commonwealth actions including the making of decisions, the formulation of proposals, the carrying out of works and other projects and the incurring of expenditure. This Briefing focuses on the application of the EPIP Act to Commonwealth decisions.

Of particular relevance, in light of Gunns case, is the obligation imposed by paragraph 1.2.1 of the Administrative Procedures approved under the EPIP Act ('the Administrative Procedures'). This paragraph requires that, as soon as possible after 'any initiative' has been taken in relation to a 'proposed action', the responsible Minister, or a person on behalf of the Minister, must inform the Department of the Environment, Sport and Territories ('DEST') of the proposed action and must designate a proponent. (A similar obligation is imposed on Commonwealth authorities.)

A 'proposed action' is defined by reference to section 5 of the EPIP Act. It is, essentially, an action which will, or is likely to, affect the environment to a significant extent and which is carried out by, or on behalf of, the Commonwealth, either alone or in association with any other person(2) . Accordingly, the Administrative Procedures effectively require all Commonwealth decision-makers to consider, prior to making a proposed decision, whether that decision will have a significant effect on the environment.

A wide range of decisions will attract the operation of the EPIP Act including those decisions associated with granting approval to export commodities, foreign investment approval and the conduct of defence activities.

A more detailed summary of the obligations imposed by the EPIP Act, in light of the decision in Gunns case, is provided below.

It should also be noted in passing that there is a range of other Commonwealth environmental legislation which may also apply in relevant circumstances but is not discussed in this Briefing (for example the Australian Heritage Commission Act 1975 and the Endangered Species Protection Act 1992).

Gunns Case the Facts

In June 1994 the Minister for Resources granted to Gunns Ltd a licence to export woodchips which were to be derived from forests in north-west Tasmania. An environmental impact statement ('EIS') in relation to the Tasmanian woodchip industry had been prepared under the EPIP Act in 1985 ('the 1985 EIS'). The 1985 EIS contemplated the export of woodchips from north-west Tasmania during 1994 but did not deal specifically with the Gunns' proposal. The Minister for Resources decided not to refer the proposed grant of the woodchip licence to DEST under the Administrative Procedures and not to designate a proponent. In making this decision, the Court held that the Minister for Resources did not specifically consider the issue of whether there would be a significant effect on the environment. Instead, he considered a different issue, whether the environmental effects of Gunns' proposal would be consistent with the environmental effects identified in the 1985 EIS. The Tasmanian Conservation Trust Inc brought an action under the Administrative Decisions (Judicial Review) Act 1977 challenging the decision to grant the licence on the basis that the Minister made an error of law in failing to designate a proponent.

Gunns Case the Decision

The Error of Law

SackvilleJ held that the Minister made an error of law in determining that there was no occasion to designate a proponent. The error arose because, the Court held, the Minister applied the wrong test. He 'did not consider whether the proposed action to be undertaken by Gunns affected or would affect the environment to a significant extent. Rather, he addressed the question whether the environmental impact of the proposed action was substantially different from that of proposals previously assessed in the course of preparing the 1985 EIS. It follows that the Minister failed to take account of relevant matters in making his decision not to designate a proponent …'.

The Court held that the Minister for Resources was required by law to consider whether the woodchip operations affected or were likely to affect the environment to a significant extent. It was not sufficient to merely consider whether the effect on the environment had been sufficiently considered by an earlier assessment or was consistent with standards laid down in an earlier document.

Was There an Initative?

The obligation to designate a proponent and refer the matter to DEST arises with the taking of 'any initiative in relation to a proposed action'. InGunns case, it was submitted on behalf of the Minister that the 'only initiative' was the designation of a proponent which led to the 1985EIS. It was further submitted that the granting of the licence in 1994 was not an initiative because it was simply repetitive of earlier actions contemplated in the 1985EIS.

However, Sackville J rejected the argument that no 'initiative' had been taken. Assuming that an 'initiative' must be a Commonwealth action, Sackville J concluded that the consideration by the Minister of the application for an export licence constituted an initiative. The fact that the Commonwealth directed the preparation of the 1985 EIS did not prevent an initiative being taken in 1994.

SackvilleJ conceded that 'there may well be circumstances in which an action or contemplated action by the Minister is so closely related to a previous action, such as the grant of an earlier licence or an earlier direction to designate a proponent, that the later action cannot properly be described as "an initiative in relation to a proposed action" '. However, he held that the events in respect of which the 1985 EIS was prepared were not sufficiently related to the Minister's consideration of Gunns' application for an export licence in 1994 to satisfy this test. Accordingly, these earlier events did not prevent the Minister's actions in 1994 from being characterised as an 'initiative'.

Nevertheless, there may be circumstances where a particular Commonwealth action does not constitute 'an initiative' for the purposes of the Administrative Procedures because it is 'so closely related to a previous action'. In these circumstances, the obligation to designate a proponent and refer the matter to DEST will not arise. (This situation -'the initiative exception' -is discussed in more detail on page 7.)

Significant Effect on the Environment

The decision in Gunns case confirms that it is only action that will, or is likely to, affect the environment to a significant extent that attracts the operation of the EPIP Act. The question of whether an action will affect the environment to a significant extent is a matter for the responsible Minister to determine. However, this decision is itself subject to judicial review. The decision in Gunns case provides some guidance on the considerations which are likely to be relevant to a decision on whether environmental effects will be significant. More detailed guidance on this issue is given on page 5.

Other Aspects of the Decision

Other important features of the decision in Gunns case are as follows:

  • Sackville J considered the 'proposed action' to be the carrying out of the relevant operations by Gunns rather than the granting of the licence by the Minister. It is unclear whether a 'proposed action' must be a Commonwealth action or whether, as Sackville J suggested, it may be the action of a non-Commonwealth entity. In many cases this issue will not materially affect the application of the EPIP Act for example, the environmental impacts attributable to the granting of a licence or permit which allows some private action to proceed will include the environmental impacts of that private action (Australian Conservation Foundation v The Commonwealth (1980) 146 CLR 493 at 545).

It is possible, however, that the courts will in future confine proposed action to Commonwealth action. This will make it more difficult for the Commonwealth to rely on the initiative exception. For example, if in Gunns case the proposed action was the granting of the licence by the Minister, then it would not have been possible to suggest that there was no initiative.

  • Sackville J held that the Tasmanian Conservation Trust Inc had standing to challenge the decision of the Minister. On the basis of Gunns case and other recent decisions it is clear that, at least in certain circumstances, community organisations will have standing to challenge Commonwealth actions.

The Appeal

The Minister for Resources has appealed against the decision in Gunns case. Also, a number of other actions have been initiated in the Federal Court alleging a failure to comply with the EPIP Act. It is hoped that the appeal or these actions will assist in clarifying several issues including:

  • whether a 'proposed action' must be a Commonwealth action; and
  • the extent of the 'initiative exception' for example, in what circumstances (if any) will the fact that a 'proposed action' has previously been assessed mean that the obligation to designate a proponent does not arise.
How to Comply with The EPIP Act in Light of Gunns Case

As indicated above, the EPIP Act and the Administrative Procedures apply to a range of Commonwealth actions and decisions. In particular, Gunns case emphasises that the EPIP Act applies to Commonwealth decisions which will, or are likely to, affect the environment to a significant extent, even though the Commonwealth itself will not undertake the relevant activity. A failure to comply with the Administrative Procedures may result in a decision being set aside. There may be some legislation that does not allow environmental factors to be considered in relation to a particular decision, but further legal advice should be sought when such a situation arises.

The application of the Administrative Procedures to the making of relevant Commonwealth decisions may be summarised as follows:

  • Before a decision is made, the decision-maker must specifically consider whether the relevant action will, or is likely to, have a significant effect on the environment. It is not sufficient to merely consider whether the relevant action has previously been assessed. The decision on whether an action is likely to have a significant environmental impact is subject to judicial review and so may be challenged.
  • If the decision-maker decides that the relevant action will not or is not likely to have a significant effect on the environment, the Administrative Procedures impose no further obligations on the decision-maker.
  • If the decision-maker decides that the relevant action will, or is likely to, have a significant effect on the environment, they must, as soon as possible after any initiative has been taken, inform DEST of the proposed action and designate a proponent.
  • If no initiative has been taken in relation to the proposed action then the obligation to inform DEST and designate a proponent does not arise. However the issue of whether there is an 'initiative' is a question of law and is not a matter of opinion for the decision-maker (see page 7).
  • The proponent should generally be the person, Department or authority responsible for the proposed action. The proponent is required to provide certain information to DEST in relation to the proposed action.
  • After the proposed action is referred to DEST, DEST or the Minister for the Environment, Sport and Territories ('the Environment Minister') will then determine the level of assessment that is required. The Minister may require that:
    1. a public environment report ('PER') be prepared, or
    2. an EIS be prepared (an EIS is more detailed than a PER).
  • It is important to note that the designation of a proponent does not necessarily lead to a requirement for a PER or EIS. The level of environmental assessment required is a matter for DEST and the Environment Minister. In determining the level of assessment, they may have regard to a range of factors including the existence of any previous assessment and the public interest. The decision as to the level of assessment required is subject to judicial review and so may be challenged.
  • The Administrative Procedures set out processes that must be followed if the preparation of a PER or an EIS is directed (for example, public consultation processes).
  • The Administrative Procedures make provision for various other matters including:
    1. the granting of exemptions in relation to a proposed action, or a class of proposed actions, in limited circumstances, and
    2. the conduct of enquiries into the environmental aspects of proposed actions (for example, the Shoalwater Bay Commission of Inquiry).
  • At various stages in the assessment process the Environment Minister may make comments, recommendations or suggestions concerning the proposed action to the Minister responsible for the decision. For example, the Environment Minister may recommend that certain conditions be imposed on a proposed action.
  • The Environment Minister is not given the power to veto a proposed action. However, all Ministers, Departments and Commonwealth authorities are obliged to ensure that the outcomes of any environmental assessment including the comments, recommendations or suggestions made by the Environment Minister or his Department are taken into account when relevant decisions are made. Failure to take these matters into account will mean a decision is likely to be set aside if challenged.

When making Commonwealth decisions, the two most significant issues that need to be addressed are:

  • whether the relevant action will have a significant effect on the environment, and
  • if so, whether there is an 'initiative' for the purposes of the Administrative Procedures.

Significant Effect on the Environment

The decision in Gunns case confirms that the decision-maker must specifically address the issue of whether a proposed action is likely to have a significant effect on the environment. This decision (like any other administrative decision) is subject to judicial review and must be made in accordance with administrative law principles. For example, the decision must be made reasonably, on the basis of a correct understanding of the law and after considering all relevant factors and no irrelevant factors.

The decision in Gunns case provides some guidance in relation to the issue of whether there is likely to be a significant impact on the environment:

  • Both site-specific impacts and cumulative and continuing effects can be relevant and the effect of associated infrastructure requirements (including the construction of relevant facilities) must be considered. For example, woodchip operations will impact not only on the forest areas that are harvested but also on areas through which the logs are transported (including port facilities).
  • A judge will 'look to the whole undertaking of which the relevant activity forms part to understand the cumulative and continuing effect of the activity on the environment'(3). . It is not possible to avoid the operation of the EPIP Act by dividing a proposed operation which will have a significant impact on the environment into several smaller operations each of which may not have a significant effect when considered in isolation. For example, the impact of exporting a particular shipment of minerals cannot be assessed in isolation from the relevant mining operations (even if the application for export approval is made after the minerals are mined).
  • If the Commonwealth decision 'promotes and facilitates' or 'encourages' an activity that has a significant effect on the environment then the Commonwealth decision itself may have a significant effect on the environment(4) . For example, the environmental effects of granting a licence to export woodchips will include the environmental effects associated with harvesting the woodchips to be exported.
  • In Gunns case, Sackville J noted that 'significant' in the context of the EPIP Act is used in the sense of 'an important or notable effect on the environment'(5).
  • The fact that relevant operations are continuing in accordance with conditions imposed by State or Commonwealth agencies does not of itself indicate that there is unlikely to be a significant impact on the environment. While the imposition of conditions may reduce environmental impacts, it is necessary to consider whether the impacts are reduced to such an extent that they are not significant.
  • If relevant operations have previously been designated, this suggests they were at one time considered to have a significant impact on the environment. If a decision is now taken not to designate a proponent in respect of those same operations, it would be prudent to address the issue of why they are now considered not to have a significant effect.

It should be noted that section 5A of the EPIP Act provides that a matter will affect the environment to a significant effect if it could threaten with extinction or impede the recovery of a listed native species or ecological community (see the Endangered Species Protection Act 1992).

Any decision on what environmental impacts may be attributable to the making of a decision and the extent of these impacts will require careful evaluation of environmental issues and evidence. In making this decision a Commonwealth decision-maker is not required to consult DEST however, non-consultation may carry the risk of overlooking relevant factors and so give grounds for legal challenge.

The Initiative Exception

It would be prudent to begin with an assumption that each Commonwealth decision is an 'initiative'. Sackville J gave only limited guidance on the circumstances where the initiative exception might apply. However, the following points suggest the initiative exception is likely to be available only in very restricted circumstances:

  • SackvilleJ stated 'too narrow a view of the concept of an "initiative" is likely to curtail unduly the opportunity for an assessment of a particular proposed action'.
  • The decision to designate a proponent is procedural rather than substantive. That is, it does not mean that further environmental assessment is required, rather it means simply that the issue will be considered.

The limited applicability of the initiative exception is demonstrated by the fact that in Gunns case Sackville J rejected the argument that there was no initiative even though the Gunns proposal 'contemplated a quantity of woodchips for export within the overall framework suggested by the [1985] EIS … '. Clearly, the fact that a previous EIS has been prepared or that the operations have been occurring for some time does not of itself mean that there is no 'initiative'.

A range of factors are likely to be considered by a court when deciding whether a Commonwealth action is 'so closely related to a previous action' that it does not constitute an initiative. In limited circumstances it is possible that if a proposed action has previously been designated and assessed, the granting of an ongoing approval in relation to that proposed action will fall within the 'initiative exception'. However, if this issue arises, further legal advice should be sought.

The most likely circumstances in which the initiative exception will apply is where the relevant operations have previously been given legal authorisation by the Commonwealth and the effect of the proposed decision is merely to allow that which has previously been approved to proceed.

An example may be where a permit to export is granted for a set period or volume, subject to further approvals in respect of, for example, prices relating to individual shipments. The granting of a subsequent approval in respect of price is unlikely to be an 'initiative' provided the relevant operations are occurring in accordance with the original permit proposal. However, it will be necessary to demonstrate that the original approval specifically identified the nature and extent of the operations that are the subject of the proposed decision. If these operations are not entirely consistent with the operations originally approved (for example, if new technology is to be utilised or operations expanded) the initiative exception is unlikely to apply.

In attempting to rely upon the initiative exception, it will not be possible to rely upon 'a previous action' that was not conducted in accordance with the EPIP Act. For example, if approval has previously been given without observing the EPIP Act procedures, it is not now open to a decision-maker to argue that a proposed decision is not an 'initiative' because it is so closely related to this prior approval.

Summary of How to Comply with the EPIP Act

It is important for all Commonwealth officers to be aware of the requirements of the EPIP Act and the Administrative Procedures. Failure to comply with these requirements may result in a decision being set aside. In summary, the following steps need to be observed before a decision is made:

  • The decision-maker must decide whether the action in question will have or is likely to have a significant effect on the environment.
  • If so, the decision-maker must be aware of when an 'initiative' has been taken in relation to the proposed action.
  • As soon as possible after an initiative is taken, a proponent must be designated and the matter referred to DEST.
  • The decision-maker must take into account the outcome of any assessment including any comments, recommendations or suggestions made by DEST or the Environment Minister.

To ensure compliance with the EPIP Act, Commonwealth officers may wish to consult DEST in relation to environmental issues that arise in relation to proposed decisions. The Environmental Protection Agency will be preparing additional guidelines and explanatory material, including on the issue of environmental significance, to assist Departments and authorities in meeting their obligations under the EPIP Act. The Attorney-General's Legal Practice should be consulted in relation to any legal issues arising from the application of the legislation.

This Briefing is based on the Attorney-General's Legal Practice interpretation of the state of the law after the decision in Gunns case. That decision is the subject of an appeal by the Minister for Resources to the Full Court of the Federal Court. Finalisation of that appeal, and of other litigation, may lead to a different interpretation to that set out in this Briefing. The suggestions in this Briefing for ensuring compliance with the EPIP Act are based on a cautious approach designed to achieve compliance with the legislation as currently interpreted in Gunns case, rather than on any contrary view which might be sustained on appeal. A further Briefing will be provided should any important developments occur.

1. Sackville J, 10 January 1995, not yet reported

2. Australian Postal Corporation v Botany Municipal Council (1989) 69 LGRA

3. Kivi v Forestry Commission (1982) 47 LGRA 38, Cited by Sackville J in Gunns case.

4. Australian Conservation Foundation v Minister for Resources (1989) see also Australian Conservation Foundation v The Commonwealth (1980) 146 CLR 493 at 545

5. Citing Drummoyne Municipal Council v Roads and Traffic Authority (1989) 67 LGRA 15

ISSN 1448-4803 (Print)
ISSN 2204-6283 (Online)

The material in this briefing is provided for general information only and should not be relied upon for the purpose of a particular matter. Please contact the Legal Practice before any action or decision is taken on the basis of any of the material in this briefing.

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