Legal Practice Briefing No. 16

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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