THE EFFICIENT USE AND DEVELOPMENT OF NATURAL AND PHYSICAL RESOURCES

It is almost impossible to attend a conference these days that doesn't have the year 2000 in its title. Yours is Towards 2000. I must say my focus, in some respects, is even more short term. `Getting to 1999' might be a more accurate reflection of my concerns. Because as the Minister responsible for overseeing the operation of the RMA, I am acutely aware that the jury is out on the Act's success, and that some of the jurors (if not the judges!) may not be prepared to wait until 2000 before handing down a verdict.

Specifically, I am concerned as Minister for the Environment, that our commitment to better environmental outcomes could well be lost sight of amidst increasingly restive debate about inefficiencies in the Act's administration and some wilfully silly practices and rules instituted in its name. My theme today, then, is that if we do not ensure that the communities whom the Act is supposed to serve can make sense of it, we risk undermining an Act that could provide us with a unique way to sustain our environment and a competitive trading position.

I want to address four aspects of efficiency and practice: section 7(b) and what it means, the value of consultation, rules which have nothing to do with the sustainable management of anything and extreme risk aversion on the part of those who develop plans. Without further ado, let me turn to section 7(b).

In all of Part II of the Resource Management Act section 7(b) stands apart as something of an anomaly. Part II generally underscores the RMA as an environmental statute. If we put aside for the moment the intricacies of section 5 almost all of the rest of Part II relates to environmental matters which are to be regarded as nationally important or to which regard is to be had. The exception is section 7 (b) - an unassuming little subsection, which refers simply to "the efficient use and development of natural and physical resources".

Unassuming as this section might appear it seems to be having an influence on the implementation of the RMA well beyond, what I would argue to be, its intended purpose.

I think it would be fair to say that there are currently two interpretations of the subsection in common usage. Put very simply, one interpretation casts councils in the role of determining what an efficient use of resources might be and drawing up rules and regulations to secure that outcome. The other has councils merely considering the effect their policies and plans have on the efficient use of resources which would occur in the absence of regulatory controls. It seems to me that the chasm between these interpretations is one of the continuing barriers to consistent implementation of the Act, and a major hidden cause of frustration with the Act by resource users who are happy to embrace its environmental goals.

The difference in the interpretations I have described couldn't be more stark. The former interpretation potentially legitimises council involvement in all manner of social and economic planning activity. The latter assumes that markets are inherently better at making allocative decisions and that councils must be vigilant lest their regulatory interventions produce inefficiencies.

The former interpretation goes hand in hand with an interpretation of section 5 (the purpose of the Act) that I have consistently rejected. The latter interpretation by contrast sees section 7(b) linked to the view that section 5 is about enabling people to use resources as they see fit within the safeguards provided by subsections 2(a), (b) and (c).

Given my previous observations on the meaning of section 5, my view on the intended meaning of section 7(b) will come as little surprise to this audience. I am firmly of the view that section 7(b) enjoins councils to consider the impact of their decisions on the efficient use and development of resources. There is a linkage here with the injunction in section 32 to consider the extent to which intervention is necessary to achieve the purpose of the Act, and the costs and benefits of the measures proposed. I therefore reject the view that councils should, or even could, control the use of resources to achieve the efficient use of resources.

I come to this conclusion, not because it supports my previously expressed position on section 5, but because of the way section 7(b) came to be incorporated in the Act.

The Resource Management Bill as introduced to the House in August 1990 included what we now know as section 7(b). This was included in the shopping list of `considerations' and `principles' designed to salve the concerns of every interest group which took the opportunity to comment on the development of the Bill. The concern for the ``efficient use and development of resources'' was, not surprisingly, a Treasury concern. I think it fair to conclude that the Treasury did not promote the inclusion of the clause because they believed that councils had uniquely privileged insights into what constituted an efficient allocation of resources. Rather, the Treasury saw the clause as providing a counter-balance to those over- zealous planners whose regulatory binges could lead to a grossly inefficient allocation of resources.

The clause did not survive the select committee stage. The reported back bill had the offending clause struck out -- exactly why I am not sure. I assume the committee believed that the pursuit of efficiency was somehow in conflict with the concept of sustainability.

On this point the Review Group appointed by me in late 1990 seemed to agree with the select committee and the 'efficient use' clause appeared destined for the growing pile of rejected drafts never again to see the light of day. However it reappeared in the Supplementary Order Paper which introduced last minute changes to the Bill. It reappeared not because the Government took a sudden lurch back towards a world of economic and social planning, but to stave off the lobbying of those who would see the environmental purpose of the Act balanced against such matters as; the "reasonable use of private or public property", "maintenance of international competitiveness'', and the "benefits of economic growth". It is ironic now to observe that those most concerned about the excessive ``greenness'' of the Act are indirectly responsible for the provision which, more than any other, provides the basis upon which so much vague regulatory intervention is being founded.

As Minister responsible for the Bill I agreed to the reinstatement of the efficiency clause because, at the time, I considered that it would not deflect the overall thrust of Part II which I had sought to anchor firmly in the relative `objectivity' of biophysical matters. Who, after all, could argue against a desire for the efficient use and development of resources? Common sense would suggest, would it not, that efficiency would be integral to sustainable management.

The concept of efficiency is one we are all familiar with. It has, one would assume, a clearly understood and universal meaning. The Concise Oxford Dictionary describes being efficient as "productive with minimum waste or effort". This seems to accord with the commonplace notion of producing any desired outcome with the least possible inputs (whether they be time, money or energy).

To understand why, in Resource Management Act terms, the idea of efficiency has at least two widely divergent interpretations it may be useful to stray into economic rather than legal territory. Indeed, I rather wish lawyers and jurists would linger in these woods a little longer than they are accustomed to since the economic significance of their actions can be so profound. If we are going to call for efficient outcomes, the first question to ask is `efficient' for whom? Should we be thinking about what is efficient for the individual person or firm using resources, or should we consider what is efficient for the wider community and ultimately for the economy? Are the two necessarily mutually exclusive? Rest assured, I do not intend to present a turgid account of competing economic theories, but it is useful to bring a little economic thinking to bear.

Lay understanding of what efficiency often conflicts with the economist's view. Economists (and I am not one by training) think about efficiency at the macro, or economy-wide, level as optimising the allocation of resources between competing uses such that the economy produces the maximum or welfare from available resources.

The other way to look at efficiency is to look at costs. That is, the allocation that results in the least cost, including opportunity costs of foregone uses can be said to be the most efficient. Hence economists often speak of least cost as the proxy of efficiency.

Of course councils do not try to assess whether any particular use is optimal in the pure economic sense- that is, the use that generates most monetary benefit for least cost. That, I think most councils accept, is beyond both their means and their mandate.

Many councils do, however, allow themselves to speculate on the socio-economic and perceived inter-generational costs and benefits associated with particular uses in a way that goes far beyond their environmental responsibilities. For example, it is common for councils to make judgements about whether it is 'efficient' for rural land to be used for urban purposes or whether new retailing should be allowed outside the existing areas.

The environmental effects of changing resource use are, of course, a legitimate matter for enquiry. But dressing up prejudices about particular uses in environmental garb, and claiming that particular uses are `inefficient' goes beyond the competence of even the most well-informed Council. Neither governments nor councils have the information to make these assessments -- particularly when rapidly changing technologies and environmental practices can render planning wisdom obsolete with breath-taking speed. Councils should, in my view, resist the temptation to pronounce on the efficiency of any particular resource use. Their business is with the effects of any proposed use.

This type of decision making occurring in the name of section 7(b) of the Act has rather less to do with efficiency than it has to do with the desire for "wise use" of resources. The concept of 'wise use' as contained in section 4 of the Town and Country Planning Act is rather less constraining in its scope and would seem to allow the 'gut feelings' of wise councillors (or their advisers) to prevail over the individual investment decisions of resource users. The criteria for what constitutes 'wise use' always seemed to me to be well-hidden, lurking somewhere in the collective minds of experienced planners and lawyers. It seems that the criteria for efficient use are equally opaque.

One can't help but feel that section 7(b) is used as a familiar crutch on which to rely in confronting countless difficult decisions. It is a provision designed to limit regulatory excess but in practice it is being used to generate the opposite.

My preceding comments relate, in the most part, to the use of land. Land, of course, is held privately and allocated in a market where individuals are free to make investment decisions in the light of the costs they face in obtaining access to the resource. I maintain that public authorities have no role in judging efficient use of land (other than ensuring that resources users are paying the true environmental costs associated with the use of land). However, publicly owned resources are a rather different matter.

Under the Resource Management Act councils do have a statutory role in allocating public resources such as water, coastal space and geothermal energy. Councils are given this role because no market for the allocation of these resources is able to develop in the absence of any established property rights. As these resources are unpriced there is no incentive to use them efficiently - that is, the highest valued uses will not necessarily gain access over lower yielding uses and the quantum of resource used may exceed that needed to undertake the use. In this situation councils clearly must have regard to efficiency. Even so, I am not convinced that councils should make judgements preferring one use over another on the ground of optimising the allocation of resources (economic resource efficiency).

The difficulty in doing so is recognised in the Act by the inclusion of market mechanisms which can be employed to remove the necessity for councils to consider these matters. Coastal tendering, occupation charges and transferable water permits are all mechanisms designed to promote the efficient use and development of resources. Section 7 (b) provides encouragement to those exercising functions under the Act to consider using them.

Case law has yet to provide us with a clear picture of how section 7 (b) should be interpreted. I have not yet seen a decision which deals comprehensively with this provision. It surprises me that a provision potentially so pivotal to the Act hasn't attracted more detailed analysis. Despite what I have said earlier I think there is an acceptance (although I would argue it is mistaken) that we know what efficiency means and it that needs no further analysis.

While the matter has not been comprehensively addressed section 7 (b) is frequently referred to decisions and some useful comments have been made by the Environment Court Judges.

In Swindley v The Waipa District Council (A75/94) the Tribunal considered the need to assess the relative efficiency of various activities identified in a plan when considering a resource consent application. The Tribunal stated: -

``(s)ection 7 (b) requires us to have particular regard to the efficient use of natural and physical resources. In deciding to grant or refuse resource consent for a discretionary activity, consent authorities do not have responsibility for determining the relative efficiency of the use of resources proposed, compared with other possible uses of those resources.''

The case did not, however, address the question of whether efficiency needed somehow to be assessed for activities that were not identified in any way by a plan. Nor did it rule out the prospect that efficiency of uses should be somehow assessed as part of plan preparation.

These unanswered questions appear to have been addressed in Hall v Rodney District Council (A78/95). In this case, involving an appeal to a proposed plan change, the Tribunal stated: -

``We accept that the development would inhibit certain production activities on the land. However we do not accept that this would conflict with the efficient use and development of the land resource, the subject of section 7(b). The Resource Management Act does not set out to direct affirmatively that land must be used in particular ways that are considered to be the best or the most efficient use of that resource. Rather as section 5 (2) implies functionaries acting under the Act are to do so in such a way that enables people to provide for their economic welfare, among other things, while attaining the goals described in paragraphs (a), (b) and (c)....The District Council, and on appeal this Tribunal, are not called on to promote the relative efficiency of the proposed activities on the land with those possible uses of it.''

In New Zealand Suncern Construction Limited v The Auckland City Council the Tribunal briefly considered the issue of whether efficiency should be considered in the context of the individual resource user (or developer) or whether the concept had a wider application. The Tribunal concluded that section 7 (b) could be considered either narrowly (ie in terms of the individual developer) or broadly depending on the circumstances.

Importantly, the Tribunal recorded: -

``efficient use and development of natural and physical resources does not necessarily imply maximum financial yield for a developer.... (however)... they (the Tribunal) also hold that the economic effect on the appellant's development of refusing consent... is not inconsistent with having regard to the efficient use and development of natural and physical resources''.

The cases cited do not provide a definitive interpretation of section 7 (b) however neither do the cases endorse a heavy interventionist interpretation of the provision. Importantly, the Tribunal (now the Environment Court) does accept that section 7 (b) exists, at least in part, to address government failure. That is, to ensure that the inefficiencies (and hence costs) imposed by restrictions on resource use are recognised. Together with the clear reluctance to support an approach which requires the assessment of relative efficiency between uses the Court's findings appear to lean far more towards the intended interpretation.

So much for efficient outcomes what of efficient process?

One of the primary reasons for the Resource Management Law Reform was to streamline processes and make decision making more efficient. There is little doubt that bringing 50-odd statutes together has generated some efficiencies by creating a more integrated, rational, and coherent statutory regime.

However, if you believe many of the letters that land on my desk, far from creating the streamlined system its architect's envisaged, the RMA has resulted in a system in a state of near paralysis.

Such claims are, in my experience, extreme but not wholly inaccurate. Even accounting for the fact that we are still in a transitionary phase and that slower, more considered procedures may have resulted in better environmental outcomes there is no escaping the fact that the reality is falling well short of expectations.

The Government was after a better environment and more efficient processes. We are still some way off being able to judge the benefits in terms of an improved environment. However, the Ministry for the Environment (in conjunction with local Government NZ) is, as I announced at the Local Government Conference, about to embark upon a programme which looks at the processes and compares the performance of councils

This monitoring programme will hopefully tell us what is working well and why, and what is not.

Without wishing to pre-empt this work I thought that I would offer some observations now based on the feedback I am getting.

First, there is unquestionably a lack of clear standards and guidelines which can guarantee the protection of the biophysical bottomline, and on which resource users can rely. As a result of this void, decision-making is less certain and more costly as stakeholders engage in protracted exchanges about the appropriate standards to adopt on a case by case basis.

It is interesting to observe that many who previously argued against hard and fast national standards (presumably in the expectation the locally derived standards would be easier to influence) are now calling for their development. I can only assume that they do so because they have come to realise that the costs of delays can exceed the costs of compliance.

The Government has to accept its share of responsibility for this. Six years after passing the Act we still have no National Environmental Standards nor any National Policy Statements (other than the mandatory Coastal Policy Statement). There are, however, a number in various stages of development. The Ministry for the Environment is, for example, working on national standards in relation to hazardous waste disposal (including dioxins and furans) to land, air and water, and on methodology guidelines for water and air management so that a consistent approach can be taken to setting standards regionally. A range of other practice guidelines have also been prepared over the years. If resource users want more central direction, there will be significant reso urcing requirements for the Ministry for the Environment.

My second observation relates to consultation. Consultation, or rather the requirement for consultation, is often identified as a contributor to inefficiency. Recent experiences with regulatory controls imposed on landowners with inadequate consultation prove precisely the opposite.

Consultation before rules are put in place provides one of the greatest potential opportunities for efficiency gains available. Frankly I am surprised that notwithstanding the fact that consultation is clearly one of the fundamental principles of the RMA many councils, acting I might add on the advice of legal advisers, continue to notify plans with inadequate prior consultation.

Sorting out problems caused by an inadequate and hostile constituency for the rules being proposed before they take effect must save hours and hours of aggravation, expense and bad press that we could all do without.

I have been quick to lay blame on councillors themselves for allowing bad practice to occur. I do not shy away from that criticism but professionals in the legal and resource management fields who work for communities add considerable expense and must shoulder much of this responsibility.

Take, for instance, rules being developed in some places to protect significant areas of natural under s.6(c) of the Act. Farmers and landowners are challenging impositions on their right to make reasonable use of their land. Environmental interests are nervous that the debate undermines the valid objectives of s.6(c). From my perspective, it is an inefficient and unproductive debate that doesn't assist winning support for the Act.

When you ask farmers whether they were consulted by councils on the issue of ``recognising and providing for'' the protection of significant vegetation, the answer is usually - ``Well yes, but I didn't understand what it meant to me'' ( ``I was aware of the general issue but no-one shared with me the actual way in which the objective was to be achieved. I certainly didn't see the rules, nor was I asked what a cost effective solution might be''.

What does this mean to those of you in the audience who advise councils? It is clear that many councils are not consulting on the details of what they propose to do in case speculators or landowners jump the gun. I ask you - whether you are the solicitors or technical advisers who advised councils not to share and consult on the detail of proposed rules:
What analysis led you to the conclusion that consultation prior to a rule taking effect would cause irreversible damage?
Did you cost and calculate how real and how big the risk was?
Did you weigh that up against the costs of a council having inaccurate mapping and unreasonable rules?
What weight did you place on the risk of a council alienating the very community it represents?
Did you consider the risk of losing the opportunity for a durable result and generating instead community hostility for the very environmental objectives that the Act seeks to promote?
Did you calculate the environmental risk and loss which could result if the council backs off totally and withdraws the whole plan (not to mention the wasted time and money)?
Or do you all wash your hands and say ``Well, the council didn't have to accept the advice''.
Councils seek expert advice because they don't have it in-house. But they expect the adviser to be aware of community values and people's legitimate expectations, not just the abstract legalities of the Act. No doubt some consultants will reap benefits from now being employed to sort out some of these problems. But this is a hopelessly inefficient way to consult and work with a community. I sometimes wonder if we need to publish national guidelines on how to consult with our fellow citizens and treat them with the respect they deserve as the people whose ultimately pay for this carry-on.

Section 32, its links to Part II [including section 7(b)] and the consultative obligations of the Act all point councils to look beyond blunt rules. Public participation is there for a reason -- to ensure the objectives are the right ones, to ensure that all relevant environmental factors are on the table and to ensure that a council and its community can work in partnership to find the most cost effective way to achieve long term durable environmental results.

I wonder how many of you in this audience, who have recommended that councils should not share the details of their plans before notification, have ever monitored whether the risks you perceived were real, and, if they were real, whether the risks were on a similar scale to the tsunami of submissions and anger now faced by councils? What are the costs and efficiencies of delays in plan preparation as thousands of submitters seek to be heard and resource users are steadily alienated.

My third observation can be simply stated: there are still far too many rules being proposed that have absolutely no plausible foundation in the RMA and have nothing to do with environmental effects. I can illustrate the point very simply be referring to the Ashburton Plan in which we find a mind-numbingly detailed prescription for protecting retailers in the central business district.

Isn't it comforting to know that the good people of Ashburton must proceed in orderly fashion to the fringes of the CBD to find awnings, blinds and curtains, equestrian supplies, sewing machines and spa pools?

Not being old enough to have lived and worked with the Town & Country Planning Act, and believing that central planning got the shove when the Berlin Wall fell, I was left speechless by this one but I understand that those of you with more experience would be only too familiar with the approach.

It's a scandal that people should be trying to peddle this sort of bureaucratic busy-bodying in the name of the RMA. It might as well stand for the Retail Manipulation Act if this sort of nonsense is to be judged valid.

There are other rules that can claim an attenuated connection with the Act but still leave one boggling at how they would ever be seriously defended to long-suffering ratepayers who fund these flights of fancy. Take, as another random example, the proposed Hurunui Plan. This may surprise some of you since this plan has won an award conferred by this Association. It is a good plan and my criticism simply goes to show that the problem I'm talking about is not confined to one or two spectacularly bad examples. After some quite sensible rules, the plan provides that shelter-belts alongside arterial roads can't extend for more than 500 metres without a change in tree species. Again, why in heaven's name do we need this sort of landscape prescription? What's so special about 500 metres (as against 200 or 1000)? What effect does a change of species induce that is so important in terms of sustainable management.

I don't wish to labour the point. There are rules which deserve to be laughed out of court. And if they find themselves there, I hope section 7(b) and section 32 will be cited approvingly in support of the contention that they could never have been construed as having anything to do with the sustainable management of natural and physical resources.

My fourth area of concern relates to the incredibly cautious approach taken by many councils. Environmental management is largely about risk management. When the Government passed the Hazardous Substances and new Organisms Act it recognised that the risks involved in introducing a new organism or using a hazardous substance needed to be weighed against the benefits that would accrue from its introduction. To do this you need to be able to assess the risk. Risk assessment therefore became central to the management regime. In the Resource Management Act the concept of risk management is not nearly so explicit. Councils are able to be as risk averse as they like but the consequence of extreme risk averseness is that the status quo prevails over innovation and change (even change for the better).

We have embraced, in my view, a huge amount of regulation aimed at development proposals that have only the very remotest chance of ever eventuating. The risk presented by these development proposals even if they did eventuate is often minimal. Yet the mere possibility provokes a response in the form of plans the size of several telephone directories. I am amazed that tiny settlements in provincial New Zealand continue to be constrained because of the threat that they may explode across the so called "high quality" soils. The risk of this happening in places where the rate of population growth this century can be measured in single figures (and sometimes negative figures at that) must surely be infinitesimal. The risk to the availability of "high quali ty" soils presented by the most likely scenario of a handful of new houses over the life of the plan is equally minimal. Yet many planners persist with such risk averse approaches.

The practice of "zoning in" the status quo and, by implication, "zoning out" anything innovative or novel for fear of the unknown continues undermine a truly effects based approach to the Act.

The extreme caution and the high degree of certainty demanded by many councils is apparent not just in the policies they employ but also in their consideration of resource consents. I am frequently told that the information demanded by councils for resource consents and the lengths and expense applicants must go to to have claims expertly verified (only in many cases to have them reverified by a council offices or their consultants) is unreasonable.

I am not suggesting that I necessarily side with all those who allege over-caution simply because they have been asked for further information. However, I will say that councils should not be asking for information which cannot, or should not, have a material bearing on the application. Nor should they be seeking "expert" verification of matters which, by their very nature can only be resolved by subjective value judgements which are the preserve of councillors themselves.

A lack of information should not be used as an excuse for deferring difficult decisions or seeking endless information in the pursuit of divine wisdom when no such wisdom is to be found.

There is no doubt that caution is warranted when the risks are great or there is a high level of uncertainty - that is what a precautionary approach is all about. But councils must consider the actual risks that confront them, not just theoretical possibilities.

I noted at the outset that the title of this conference is ``Towards 2000''. If that referred to the rules being developed under the Act and the submissions filed in opposition to them, we would be well and truly on track to exceed the target! We should try to make ``Towards 2000'' our target date for a stream-lined, modern system of environmental management -- not a description of the number of rules that apply to each resource user.

I have suggested to you that efficiency and community support for regulatory approaches are matters of national policy significance. Taking sections 7(b) and 32 seriously would help. But when it comes to a practical philosophy of action, it is difficult to be prescriptive from the centre. Indeed, that would run against the grain of the Act. There is an important place for central government to provide guidance, but many of the issues I have raised today require clear-minded local body politicians and professional advisers who have a measure of what any community can realistically be asked to comply with. There's a need for a large measure of common sense. And spelling out what that means is beyond the most ambitious national policy statement. As pra ctitioners you and your colleagues have to make this Act work. If you start by putting yourselves in the shoes of the people whose lives will be governed by it, you shouldn't go too far wrong. If, on the other hand, you are parties to imposing a Kafkaesque world of surreal controls, not only will your handiwork be disowned by the community, but the Act will be as well. That would be a real disaster.