Australia: Changes to Environmental Legislation in Commonwealth And New South Wales Law: Are You Ready?

A number of Commonwealth and New South Wales legislative amendments commenced on 1 July 2004. The amendments affect a variety of companies operating in NSW. This article provides a summary of some of the legislative amendments in the environment and planning area.

Mandatory public environmental reporting became a reality in Australia in 1 July 1998 after the entry into force of section 299(1)(f) of the Corporations Act 2001 (Cth). Section 299(1)(f) provides that a director's report for a financial year must, if the entity's operations are subject to particular and significant environmental regulation, provide 'details of the entity's performance in relation to environmental regulation'.

CLERP 9 amendments to the existing requirements

The Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Bill 2003 (Cth) (CLERP 9) came into force on 1 July 2004.

One focus of the amendments is the public disclosure requirements of corporations. An objective identified during the development of CLERP 9 was the need to include in corporate reports information to allow shareholders to make an informed assessment of the operations of a company, its financial position and business strategies.

As a result, the new section 299A requires listed public companies to include in the annual director's report information that shareholders would reasonably require to make an informed assessment of:

• the operations of the company reported on

• the financial position of the company, and

• the company's business strategies and its prospects for future financial years.

What will need to be disclosed under the new requirements?

Section 299A will require listed public companies to report on significant environmental and social matters that could impact a company's future financial prospects. The inclusion of this requirement in the Corporations Act 2001 (Cth) will make environmental issues a key reporting concern for companies and a key corporate governance issue.

Significant environmental issues that may require disclosure could include:

• energy consumption and greenhouse emissions issues

• access to future water resources, and

• increased salinity resulting from a company's activities.

Who do the new reporting requirements apply to?

Section 299A applies to all listed public companies unlike section 299(1)(f) which only applies to a company whose operations are 'subject to any particular and significant environmental regulation' under a Commonwealth, State or Territory law.

What if a company does not comply with the amendments?

Under the current Corporations Act 2001 (Cth) provisions, a director of a company, registered scheme or disclosing entity contravenes the reporting provisions if the director '[fails] to take all reasonable steps to comply'. ASIC may apply to the Federal Court or the Supreme Court of New South Wales for a declaration that the relevant provision has been breached. ASIC may seek either a pecuniary penalty order or a disqualification order.

On 15 June 2004 the Prime Minister launched the Federal Government's latest energy policy white paper, Securing Australia's Energy Future (Energy White Paper).

Establishment of the Australian Energy Regulator and the Australian Energy Market Commission

The Energy White Paper proposed energy market reform through the establishment of a new energy regulator, the Australian Energy Regulator (Energy Regulator). The Regulator will have a budget of $8.4 million in 2004-05 to conduct day-to-day regulation of the natural gas and electricity markets.

In addition, a single rule-making and market development body for electricity and gas markets, the Australian Energy Market Commission (Energy Commission), will be established.

The Trade Practices Act 1974 (Cth) will be amended to establish the Energy Regulator and the Energy Commission. The amending legislation to implement the reforms to the Australian energy market was introduced into Parliament on 17 June 2004 and passed by the Senate, without amendment, on 25 June 2004. The commencement date is yet to be notified.

The powers and functions of the Energy Regulator and Commission are set by the 'National Electricity Law' contained in Schedule 1 of the National Electricity (South Australia) Act 1996 (SA). It is intended that consistent legislation will be implemented in all States and Territories but the duties of the Regulator and Commission may only be imposed by Commonwealth law; and State or Territory.

The Australian Energy Market Bill 2004 (Cth) applies the National Electricity Law, Regulations and Code to offshore areas as part of the uniform scheme of national electricity regulation. Again the commencement date is yet to be notified but is likely to be in line with the Trade Practices Act 1974 (Cth) amendments.

Further initiatives proposed

The Energy White Paper also identifies a number of initiatives which the Federal Government intends to implement, including:

• applying nationally consistent energy performance ratings to commercial and residential buildings

• introducing mandatory membership requirements to the Greenhouse Challenge for certain companies

• a complete overhaul of the fuel excise system

• development of 'Solar Cities' trials in urban areas to measure the effectiveness of solar energy and energy efficient technologies

• development of a Low Emissions Technology Fund to support industry-led projects to demonstrate low-emission technologies, and

• removal of existing impediments to the commercial development and uptake of renewable technologies.

The New South Wales State Government has imposed sustainability requirements on residential buildings in New South Wales. Through the Building Sustainability Index, or BASIX, residential buildings will be assessed against a range of sustainability indices.

On 1 July 2004 the State Environment Planning Policy (Building Sustainability Index: BASIX) 2004 (NSW) and Environmental Planning and Assessment Amendment (Building Sustainability Index: BASIX) Regulation 2004 (NSW) commenced operation.

Application

The BASIX scheme is to be implemented progressively throughout New South Wales starting in the Sydney metropolitan area. The type of residential development that the scheme applies to, and the targets to be set, will also to be progressively implemented.

The initial stage of BASIX, commenced on 1 July 2004, focuses on the sustainable use of water and energy. Landscape, stormwater and thermal comfort indices are also activated as information relating to these impact water consumption and greenhouse emissions.

The following table details how the scheme is to be implemented throughout New South Wales and the sustainability standards that will apply.

The scheme will be triggered when an application for a development consent, complying development certificate or construction certificate is made. Applicants for development are now responsible for undertaking a BASIX assessment for each residential development proposal as part of the New South Wales development approval process and must obtain a 'BASIX certificate'. The consent to carrying out of the residential development will include a condition that the applicant meet the commitments in the BASIX certificate.

Applicants are required to provide information to the online BASIX assessment tool on the proposed development including, site location, dwelling size, floor area, landscaped area and services. BASIX then provides a score for the proposal according to its potential to consume less potable water or energy compared to the average existing dwelling.

A BASIX certificate is then electronically generated by the Department of Infrastructure, Planning and Natural Resources detailing:

• the nature of the development (which must conform with the development described in the development application)

• the sustainability commitments that will apply to the proposed development, and

• a statement that those commitments comply with the New South Wales Government's sustainability requirements.

The commitments imposed will vary depending on the character and nature of the development.

1 July 2004 marks a significant step in the implementation of the New South Wales Government's package of water law reform.

On 1 July 2004:

• thirty-one published water sharing plans prepared under the Water Management Act 2000 (NSW) come into effect, and

• the new licensing provisions of the Water Management Act 2000 (NSW) commence in areas covered by an operational water sharing plan.

Water sharing plans are a specific type of management plan that can be prepared under the Water Management Act 2000 (NSW). They establish rules for sharing water between environmental needs and a ranges of water uses, including towns, domestic and stock watering and irrigation.

Since 2002, 35 water sharing plans have been gazetted by the Minister for Land and Water Conservation. These plans cover most inland regulated river systems (those rivers which are controlled by major rural storages), some coastal river and inland unregulated river systems and some coastal groundwater systems.

Thirty-one of the 35 water sharing plans that have been gazetted come into effect on 1 July 2004.

New water licensing procedures start from 1 July 2004 in areas covered by an operational water sharing plan, affecting approximately 80 per cent of total water entitlements in New South Wales.

These new water licensing procedures include:

• conversion of licences granted under the Water Act 1912 (NSW) to:

• the listing of all water access licences and approvals on public registers

• new procedures and processes for applying for new licences and approvals

• the issue of water access licence certificates of title, and

• a range of new transactions in water called water dealings.

Significantly, the new water access licences can be traded separately from land, allowing licences to be bought, sold or mortgaged on an open market. Also, they entitle the holder to extract a share of the water that is available for use as rather than a specified volume.

For those areas not covered by an operational water sharing plan, the licensing provisions of the Rivers and Foreshores Improvement Act 1948 (NSW) and the Water Act 1912 (NSW) remain in force.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.