On purpose: the Ruataniwha land swap & DOC’s ‘net environmental gain’ test

The phrase 'net environmental gain' appears nowhere in the Department of Conservation’s governing legislation. But, in various forms, including ‘no net loss’, ‘net environmental benefit’ or ‘net conservation benefit’, the concept has emerged as an increasingly integral part of environmental policy within New Zealand’s single largest landowner in recent years.  It was the guiding criterion for significant land swaps involving DOC 'stewardship land' including the divestment of DOC land at Crystal Valley to Porter Heights Ski Field to build an alpine lodge and the proposed (now withdrawn) Meridian Mokihinui hydro scheme on the West Coast of the South Island. Drawing on international guidelines, it underpins DOC guidelines on biodiversity offsets, and the principle has been recognised and applied in that context in a number of leading court decisions under the Resource Management Act 1991.So it was noteworthy that a majority of the Court of Appeal (Harrison and Winkelmann JJ, France J dissenting) agreed with the Royal Forest & Bird Protection Society that DOC’s use of ‘net environmental gain’ as a touchstone for a proposed land swap as part of the controversial Ruataniwha dam project was misconceived and invalid in a recent decision Royal Forest and Bird Protection Society of New Zealand Incorporated v Minister of Conservation [2016] NZCA 411.The decision has obvious implications for the use and protection of large parts of the conservation estate New Zealand designated as 'specially protected' under Part 4 of the Conservation Act 1987 (CA), as well as other CA contexts where recourse to statutory purpose is required, such as the granting of concessions.  It also contributes to New Zealand public law jurisprudence on judicial treatment of ‘outside of statutory purpose’ challenges to decision-making which potentially extends beyond the CA context of the particular case.Background to the litigationThe land at issue was a 22 ha area of the Ruahine Forest Park in the Hawkes Bay region. The land is intended to be flooded under the Ruataniwha Water Storage Scheme. This is a proposal (as explained by Harrison J) “to capture and store about 90 million cubic metres of water within a dam to be constructed across the Makaroro River, allowing the irrigation of 25,000 to 30,000 hectares of land on the Ruataniwha Plains.”The 22 ha is designated “conservation park” under the Conservation Act 1987 (shown in purple in the DOC plan below).  DOC staff had assessed the conservation values of the area as “high”, and it was common ground that the land was ecologically “significant”.  Against this background (and as part of a much broader package of environmental mitigation measures approved by a government-appointed Board of Inquiry under the Resource Management Act 1991), the Scheme proponent Hawke’s Bay Regional Investment Company (HBRIC) secured conditional rights to a larger (170 ha) area of farmland in the vicinity (darker green in the plan below) which was offered to, and accepted by, DOC in exchange for the land to be flooded.There is no provision in the CA for specially protected ‘conservation park’ land to be disposed of or exchanged. There is however provision for a lower protection status category of DOC land known as ‘stewardship’ land to be dealt with.  So DOC decided that it would first revoke the conservation park designation of the 22 ha area and declare it ‘stewardship’ land.  Then it would dispose of that land in exchange for the 170 ha block.  The way in which it approached its decision to revoke conservation park status of the 22 ha was the focus of the litigation.Rightly anticipating that the process would come under scrutiny - the Ruataniwha Scheme has been one of the most hotly contested development projects in New Zealand in the last 10  years - DOC commissioned the ecological assessment of the 22 ha mentioned above.  It also commissioned a study of the 170 ha block to be acquired through the exchange. It undertook a careful assessment of the net conservation position that would result from the 22 ha being lost and 170 ha being placed in DOC ownership under statutory protection.  But it’s not clear that DOC directed as much attention to the legal framework as it did to the ecological assessments.Key parts of the documentation recorded the Director-General of DOC’s decisions:To agree…to revoke the purpose of the [22 ha] as a conservation park on the basis that I wish to progress the proposed exchange of the [22 ha] for the [170 ha of farmland the vicinity]To authorise the proposed land exchange under s 16A(1) of the Act on the basis that I am satisfied on the information that the proposed exchange will enhance the conservation values of land managed by the Department and promote the purposes of the Act as required by s16A(2).In the High Court: close to illegal, but not quiteIt wasn’t surprising that in the High Court, judicial eyebrows were raised at the emphasis in the D-G’s decision on the finding that overall, the exchange arrangement would “enhance the conservation values of land managed by the Department”.  That was because the “will it enhance the DOC estate?” test under s16A(2) is an obligation that applies specifically to exchanges of stewardship areas. It is not the test under the statute for the prior decision to revoke the ‘conservation park’ status of the 22 ha.In the High Court, Palmer J said of one of the DOC reports relied upon by the D-G that it “came perilously close to risking the wrong legal test being applied to the revocation decision”.  Ultimately however he (at [79]) “was not satisfied…that the D-G had taken too narrow a view of the revocation decision by applying to it the test for exchange.”Broad or narrow approach to the statutory purpose?A related issue raised by RFB in the High Court concerned the correct approach to identifying the test for revoking the status of conservation park land.Section 18(7) CA confers a general power to vary or revoke the purpose of land held by DOC. The s 18 revocation process requires public notice, with rights of objection and the right to appear in support of submissions.  All of those steps had occurred in this case. But the Act does not specify the basis on which DOC’s ultimate decision to revoke or otherwise should be made.  Following established public law principles, the decision would need to be guided by the relevant statutory purpose.The long title to the CA is:To promote the conservation of New Zealand’s natural and historic resources, and for that purpose to establish a Department of Conservation.But – and this was really the nub of the contest between RFB on the one hand and DOC and HBRIC on the other hand – how should the above statutory purpose, read and understood in light of related statutory provisions (including definitions of “conservation” and other relevant terms) and the legislative history, be interpreted?

• Should a broad interpretation be adopted? Under that approach, when considering whether to revoke the special protection status for the land, DOC could (or should) step back and take into account what might be the conservation outcome under the ultimate configuration, after the 22 ha has been swapped for other land.
• Or should a narrower interpretation of the statutory purpose be adopted? Under that approach DOC would solely focus on the intrinsic conservation values of the land whose protection status is being considered, without regard to what might happen if the down-graded land is bartered for another block.

In the High Court, Palmer J sided with DOC. At [70]:It would be artificial and inimical to good public administration for public objections and submissions on a revocation, and the revocation decision itself, to be prevented by law from taking into account the merits of the proposed land exchange.  Rather, I consider that doing so may well constitute failing to take into account a relevant consideration which would be contrary to the law of judicial review. In preferring the broad approach, Palmer J relied on a 2007 decision of the New Zealand Supreme Court in Unison Networks Ltd v Commerce Commission, holding that the test for the court is “whether taking into account the proposed land exchange can or cannot be rationally regarded as coming within the statutory purpose…”. He went on to find that:There is nothing in the text of the statute that requires the intrinsic value of a single resource to be preserved or protected if that diminishes conservation purposes in New Zealand more broadly conceived.”In the Court of appeal: the narrower approach affirmedThe majority Court of Appeal took a different view.It regarded Palmer J’s reliance on Unison Networks as misplaced. Whereas in Unison, the Supreme Court was dealing with the legality of “an expert public body exercising broadly expressed powers to achieve economic objectives” this case concerned a situation where, as the legislative history demonstrated, “Parliament has deliberately demarcated separate designations, each being subject to distinct management regimes, to advance the core objectives of the Act”. In a key passage, Harrison J for the majority concluded (at [68]):Once the land crossed the threshold of special protection – in the present case, by way of the Director-General’s declaration and the deeming provisions under s 61 – its designation could only be revoked if its intrinsic values had been detrimentally affected such it did not justify continued preservation and protection; for example, if the park purposes for which it is to be held were undermined by natural or external forces.DOC’s decision to revoke the status of the 22 ha of the Ruahine Forest Park has been set aside. DOC now needs to reconsider the proposed land swap in light of the CA’s judgment.The period for applications for leave to appeal to the Supreme Court runs for 20 working days from 31 August 2016.  At the time of writing no party has publicly indicated an intention to appeal.CommentsFirstly and importantly, the Court of Appeal judgment does not sound the death knell for the “no net loss/net environmental benefit” principle in all DOC policy and decision-making. ‘Net environmental gain’ as a criterion remains relevant to proposals to exchange stewardship areas under s16A of the CA. Nor is there is any obvious reason to think that the judgment impacts on the ongoing application of “no net loss” for biodiversity offset arrangements under the RMA.The decision has most direct impact on proposed land swaps or offset schemes where DOC land under one of the special protection categories is involved.  Revocation and land swap arrangements involving Part 4 CA specially protected land will only be able to go ahead if there is a reasonable basis for downgrading the protection status of the land at issue, having regard to the intrinsic value of that land, and that land only.In practice, it's likely to be a whole lot more difficult for developments which require use of DOC land under special protection to proceed.  This could present planning and development challenges for a range of infrastructure projects such as state highways, transmission lines, electricity generation and large irrigation schemes, as well as other major private developments such as mining proposals in the vicinity of conservation areas.  No doubt some projects under development will be reconfigured to avoid DOC land under special protection altogether.  (That is, after all, the purpose of the protection.)  Absent specific legislative provision, it's conceivable that some projects may not be able to proceed at all.The judgment may also impact on the way DOC handles other parts of its operations, including concessions which, under s17U(3) CA are prohibited "if the proposed activity is contrary to the provisions of this Act or the purposes for which the land concerned is held."A question on the minds of many is whether the judgment signals the end of the road for the Ruataniwha project.  It is probably too early to say.  RFB lawyer and co-counsel before the Court of Appeal Sally Gepp is on record as saying that it is "hard to see how [the project] could proceed" in light of the recent judgment.  A different view, not surprisingly, has been offered by HBRIC chairman Andy Pearce, who has said that "the decision does not spell the end of the Ruataniwha project, and the company is “contemplating our process with DoC”."The possibility of a legislative amendment to broaden the scope for land swaps involving conservation land must be on the cards.  A January 2016 report from the New Zealand Conservation Authority to the Minister of Conservation Net Conservation Benefit Assessments in Land Exchanges focuses on the question of the need for clearer statutory criteria for exchanges involving stewardship land.  It also flags for Ministerial consideration  changes to the statutory framework for revocation/exchange of specially protected land.  At [2.22]:We see no reason why the power to authorise exchanges should not be extended to other categories of conservation land – in particular conservation parks. This would mean, for example, that boundary adjustments to conservation parks could be considered as an exchange, rather than, like the Ruataniwha dam proposal, requiring a revocation of the 'specially protected' status to become stewardship land, so it can then be the subject of an exchange. Given that, in many instances, the boundaries of conservation parks have arisen for historical reasons rather than having been through a particular assessment of conservation values, the Authority considers that enabling you to authorise exchanges, at least for these sorts of boundary adjustments, has potential benefits.So it's clear the issue is being looked at by officials and lawmakers.  This decision will only have heightened attention - and developer pressure - towards legislative reform.Whether Cabinet - already facing political heat for other water-related issues in the Hawkes Bay and other parts of the country -  judges the time as right to take on what would be a bruising environmental stoush heading into election year remains to be seen.

(A version of this post first appeared on RMLA AAG co-convenor Vernon Rive's blog on 9 September 2016. The views expressed are the author's and do not necessarily represent the position of the RMLA.)