31 Jul 2012
Can Councils Tell Oil and Gas Companies to Keep the Frack Away?
The "anti-fracking" sentiment is gaining momentum within various communities in New Zealand, amid calls for "fracking-free zones" and a national moratorium on the practice. But, in spite of the hype and public pressure, councils must follow the statutory tests in the RMA when considering a consent application. Their ability to rule out fracking in their area is limited, especially for city and district councils.
What is fracking?
Hydraulic fracturing, commonly referred to as fracking, is the creation of fissures in rock formations underground by injecting water, sand and chemicals at high pressure through a well. When the chemicals break down and the fluids are removed, the sand remains to keep the fissures open and increase the flow of gas through the rock and into the well.
Although fracking is not a new activity, public awareness of it is growing and its effects on the environment are increasingly the subject of vigorous debate. The practice is currently under investigation by the Parliamentary Commissioner for the Environment, with her report back to Parliament expected by the end of 2012. In the meantime, what is a reasonable response to the level of public concern about the activity?
How should councils assess consent applications involving fracking?
The environmental component of fracking is generally regulated by regional councils, as the activity involves discharges of fracturing fluid into land. Particular instances of fracking will likely be captured by section 15(1)(d) and possibly sections 15(1)(a) and (b) of the RMA. Therefore, the fracking activity needs a resource consent, unless it is expressly allowed by a rule in a regional plan.
Most regional plans do not have specific rules dealing with discharges of hydraulic fracturing fluid separately from other discharges. In the absence of tailored rules, regional councils therefore consider fracking discharges within the same regulatory framework as other discharges.
Despite some councils and community boards declaring their areas "frack-free", in reality a council has limited discretion in how it can deal with a resource consent application involving fracking. A consent authority is legally obliged to consider any consent application on its merits, and refusal to do so would invite either judicial review or appeal proceedings. In many cases, the individual activities that are undertaken as part of an oil exploration proposal are controlled or restricted discretionary activities.
Processing and notification issues
Councils are obliged to process consent applications received according to RMA timeframes and, despite how appealing such an approach might be, cannot wait for the Parliamentary Commissioner for the Environment's report before making their decisions.
In terms of notification, the high level of public interest in fracking does not mean that particular interest groups are automatically affected persons under the RMA in relation to a resource consent application. The starting point for notification is an effects assessment, and councils need to carefully apply the same notification tests under the RMA that they apply on a daily basis to other consent applications. Members of the public often overlook the fact that, in the absence of evidence of adverse effects, the council may have no power to notify a consent application, regardless of public calls for it to do so.
This also applies to the fear-factor surrounding fracking and the Parliamentary Commissioner for the Environment's investigation into the issue. Neither automatically give rise to special circumstances that warrant public notification. Although public interest can be relevant, it does not determine whether an application should be notified. Without evidence of adverse effects, it may be difficult to justify notification based on special circumstances.
Separating oil exploration proposals into stages
Another growing focus of public interest in oil exploration proposals appears to be the approach where an applicant splits a proposal into stages for consent application purposes, with the last stage being the discharge of hydraulic fracturing fluids into the well.
Although a council must turn its mind to the issue, the power of deferral contained in section 91 of the RMA is discretionary rather than mandatory. That is, the council is to decide whether to defer any given application, with the test being whether deferral would lead to a better overall understanding of all the activities of the proposal as a whole, and the effects of those activities. If the council understands the consent application before it, that test might not be met.
It is also worth noting that the granting of resource consent to establish a ground water monitoring bore does not necessarily give the applicant an easier consenting path for future stages. Such future stages will also need to be considered on their merits.
What effect does a "frack-free" declaration by a territorial or regional authority have?
Territorial authorities are unlikely to have a direct role in the regulation of hydraulic fracturing, so a frack-free declaration by a territorial authority is unlikely to have any legal effect on the ability of an operator to seek consents or carry out the activity.
A frack-free declaration by a regional council would be equally ineffective in light of the council's duty to process resource consent applications, except to the extent that the declaration coincided with the introduction of prohibited activity status for the relevant activities in the council's regional plan. In that case, it would be the prohibited activity status, rather than the frack-free declaration, that would have legal effect.
Before a regional council imposed prohibited activity status, the council would need to be able to show that prohibited activity status is the most appropriate way to achieve the objectives of the regional plan, and ultimately, the purpose of the RMA.
To meet that test, we expect the council would need to have robust evidence of a significant risk of adverse effects on the environment if the activity is allowed to proceed. Mere perceptions of risk which are not well-founded would not suffice. A number of themes can be adopted from relevant case law, which can be summarised as follows:
- the RMA does not require a no risk approach;
- the assessment of risk and likelihood of significant adverse consequences will be a question of fact and degree in the individual circumstances of the case;
- perceptions of effects which lack a sufficient evidential basis are not effects for the purposes of the RMA;
- in assessing risk, decision makers should place greater weight on the expert evidence which is presented to it; and
- decision makers should take into account the availability and reliability of any mechanisms which are intended to address identified risks.
Alternatively, a council might be able to fashion an argument based around the lack of reassuring evidence, in terms of "the risk of acting or not acting if there is uncertain or insufficient information about the subject matter of the policies, rules, or other methods" (RMA section 32(4)(b)).
The report from the Parliamentary Commissioner for the Environment is awaited with interest. In the meantime, local authorities still have to comply with their existing statutory obligations, particularly under the RMA.