An investigation into Australia’s federal environmental offset scheme has found a ‘set and forget’ regulatory approach has led to areas earmarked for conservation being impacted or developed without consequence.

Under the Environmental Protection and Biodiversity Conservation (EPBC) Act, the government approves projects that cause environmental destruction on the basis that the developer will offset this loss by protecting a similar site elsewhere.

However, an investigation by the Australian Conservation Foundation (ACF) published Wednesday has found a severe lack of legal protections of those offset sites leading them to be particularly vulnerable themselves to destruction or development.

“The biodiversity offsetting system under our national environment law is fundamentally flawed and allows for unique ecological communities to be continually chipped away at until there is nothing left,” Brendan Sydes, biodiversity policy adviser with ACF, said in a press release.

“This investigation shows offsetting is not being implemented by the book, with multiple examples of environmental needs being disregarded in favour of commercial interests.”

ACF’s report looked into the legal protections for EPBC projects approved between 2008-12 where an offset was required, and found 70% of approvals granted did not require adequate legal protection of the offset site.

The report examined 218 offset sites, saying it chose this historical timeframe because “in 2024, more than a decade on from the selected time period, failures to create legal protection cannot be excused on the basis the process is underway but not completed”.

ACF’s analysis looked at the legal mechanisms available in the approval requirements, and the outcomes they produced in each case, assessing them against scientific, legally-based principles.

That is, where a project will cause permanent and irreversible destruction to the environment, the offset site must be protected through legal mechanisms that are permanent (forever lasting), and secure (difficult to revoke).

However, the report found only 30% of the projects assessed were adequately legally protected, 48% of them were poorly protected because the protection was not permanent, easily revoked, or not for a conservation purpose.

Some 20% of the offsets were not protected at all, with the approval expiring in 27% of these cases, meaning the likelihood of the offset site ever being protected is very low.

Finally, 36% of cases did not require the approval holder to report publicly or to the government on their progress in protecting their offset site.

“These statistics are representative of an underlying failure to adequately protect offset sites in our national offsetting regime,” the report said.

“These systemic failures are damaging to nature and jeopardise the achievement of the federal government’s nature positive goals.”

PROBLEMS IN THE PILBARA

The report provided examples of prominent companies using loopholes or applying pressure on the government to avoid their offsetting liabilities.

Miner Fortescue Metals Group (FMG) and Roy Hill received three approvals for a mining project and associated infrastructure between April and August 2011 in the Pilbara region of Western Australia.

The approval was conditional on the companies to protect a total of over 18,700 hectares of land.

However, variations to their approval saw those conditions weakened to instead become threat abatement requirements and the option to pay into an approval fund. A decade on, no payments have been made into that fund, according to the report.

Documents obtained by ACF under Freedom of Information Laws said the variations were recommended by the ministry because it would be ‘difficult’ to secure land due to mining tenements in the Pilbara.

Western Australia had the highest rate of offset sites with no legal protections whatsoever, according to the ACF report.

Another example in Western Australia saw a gas company, Latent Petroleum, end up conducting seismic testing within a site originally intended to offset the impacts of its initial gas development project without consequence, due to what the report described as “weak protections and successive failures of the department and the minister”.

The government making approval variations to suit the circumstances of project developers was raised by the report as one of the key issues with the current regulations on offsetting.

It noted that in 33% of cases, the federal environment department approved variations to offset conditions to allow for delays in legal protection.

There were also many instances where post-approval variations saw offset protection requirements weakened to make compliance less onerous for approval holders beyond delays.

“It reveals a disturbing culture of regulatory capture with every single approval variation being made for the benefit of the approval holder, not the environment,” Sydes said.

“Australia’s system of biodiversity offsets is a disgrace and needs a root-and-branch overhaul.”

RECOMMENDATIONS

The findings come as the Albanese government is in the process of reforming the EPBC Act, with legislation to establish a federal environmental protection watchdog, Environment Protection Australia (EPA), and information body, Environment Information Australia, expected to be introduced to Parliament in a matter of weeks.

The report said the EPA needed to be backed up with funding, capacity, and independence for the agency to be effective.

The government is also aware of the issues around biodiversity offsetting under the EPBC ACT, conducting an audit on projects last year, but is refusing to publish its findings.

ACF said any use of offsets must be strictly confined and must be used as a last resort.

“There needs to be a high degree of assurance that legally protected offsets will be delivered prior to approval and before any impact is permitted to proceed,” the report said.

Proponents should be subject to a clear legal obligation to deliver adequate legal protection for offset sites as well.

The EPA, or the department under the reformed EPBC Act, should rule out varying conditions in a way that weakens the protection required or removes the requirement for an offset site, ACF said.

The current offsets register must be expanded to include full details of all offset approval conditions and include information on offset sites and the legal mechanism used to protect the site, the report said.

It also emphasised that if legal protections were under the jurisdictions of state and territory governments, the federal government must limit approval holders to only use mechanisms that offer adequate protection.

A list of such mechanisms should be set out in delegated legislation.

Environmental groups fear that the government’s decision to split its overhaul of the EPBC legislation into tranches, will mean the EPA will be forced to rely on outdated rules in the Act to carry out enforcement, likely meaning it will be less effective.

“With a few limited exceptions the proposal is for the new EPA to administer the EPBC Act in its current form,” Sydes told Carbon Pulse.

The government has not given a clear date set on when the laws underpinning the reforms would be finalised, saying further consultation is needed on the third and final tranche of the reforms due to “substantial issues that require significant work”.

Sydes told Carbon Pulse it was unclear at this stage whether the legal reforms to the EPBC Act would include revisions to variation provisions.

Australia is in the process of developing a Nature Repair Market, under which developers can generate voluntary biodiversity credits. The scheme was legislated last December, with the government winning crucial support from the Greens and independents after agreeing to prevent certificates under the scheme from being used for offsetting purposes.

By Mark Tilly – mark@carbon-pulse.com

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