Port of Hastings decision – what does it mean for electricity planning?

Last month, the Federal Government blocked progress of the Victorian Renewable Energy Terminal – Victoria’s flagship offshore wind support project – on the grounds it posed “clearly unacceptable” risks to biodiversity in the Westernport Bay region. The impact of this decision was magnified by the Victorian Government reportedly being unaware that this ruling was coming.

Below we untangle the regulatory process that led to this decision and consider what it means for energy transition planning.

What is the Victorian Renewable Energy Terminal?

The Victorian Renewable Energy Terminal is a proposal to build a facility within Mornington’s Port of Hastings that would serve as a base of operations for the assembly of offshore wind farms. The terminal would be operated through the Victorian Government-owned Port of Hastings Corporation.

In its Offshore Wind Energy Implementation Statement 3, the Victorian Government described the terminal as “critical to ensure the achievement of at least 2GW of offshore wind generation by 2030”, a target that it enshrined into legislation in November last year. The Federal Government’s ruling has now put that target in doubt.

Figure 1: Concept imagery of Victorian Renewable Energy Terminal at Port of Hastings

Source: Victoria Offshore Wind Energy Implementation Statement 2, p20.

Why did the Federal Government get involved?

The Federal Government has no direct constitutional powers with respect to the environment. Its main regulatory powers are instead derived through the ratification of international treaties related to environmental protection, which are enshrined in the Environment Protection and Biodiversity Conservation Act 1999 (‘EPBC Act’).

Because of this constitutional gap, state jurisdictions have been historically responsible for environmental regulation. They still maintain this role and many areas of environmental regulation (e.g. air and noise pollution) are exclusive state responsibilities.[1] However, other areas of environmental regulation (e.g. biodiversity) are now regulated by both federal and state law.

To manage this regulatory overlap, the Federal Government has – since 2015 – entered into bilateral agreements with each state and territory that allow for a shared environmental assessment process. In other words, state jurisdictions will be responsible for assessing a project’s compliance with both federal (EPBC Act) and state environmental law (various legislation).  The state government will then make a recommendation to the Federal Environment Minister to either accept or reject the proposal.

How does this process work in practice?

Whenever a new project is proposed, the proponent must submit a Referral Form (a preliminary environmental assessment) to the state environmental department so it can determine whether the project might have significant effects on the environment and therefore an Environment Effects Statement (i.e. a comprehensive environmental assessment) is required.

The proponent will also assess whether referral to the EPBC Act is required – it is through this referral that the Federal Environment Minister will decide whether to enforce the bilateral assessment process, sending responsibility back down to the state.

The figure below shows the preliminary environmental assessment that the Port of Hastings Corporation undertook for the Terminal.

Figure 2: Port of Hastings Corporation Referral Form for Victorian Renewable Energy Terminal

Source: Victorian Renewable Energy Terminal Referral Form

The Victorian Government determined from this referral that an Environment Effects Statement was required and was in the process of preparing the Scoping Requirements. This was presumably on the expectation that the Federal Government would enforce the bilateral agreement.

Why didn’t the Federal Government enforce the bilateral agreement?  

No reason was officially given, and the legislation does not clearly state what circumstances the bilateral agreements do not apply to.

But back in 2015 when they were designed, the then Federal Environment Minister Greg Hunt stated the Commonwealth Government would retain responsibility for EPBC assessment when:

• The project is in offshore Commonwealth waters.
• Related to nuclear action.
• State governments are likely to have a significant conflict of interest as the proponent.

It was presumably this last reason that concerned the Federal Environment Minister because the terminal’s proponent – the Port of Hastings Corporation – is owned by the Victorian Government.

The Victorian Government does not have many options for overturning this decision. The Port of Hastings Corporation can submit an amended project that mitigates the “clearly unacceptable” risks to biodiversity identified in the Federal Government’s ruling. While not impossible, it would require exceptional political messaging for the Minister to overturn such a decision.

Even if it was overturned, that is not the end of the regulatory journey. The project would still need to go through Victoria’s Environment Effects Statement consultation, which takes some time.  

What does it mean for electricity planning?

To confuse things further, the Federal Government is currently pursuing reforms to the EPBC Act. These reforms – laid out in the Nature Positive Plan – include replacing the bilateral agreements with an accreditation process. The accreditation process will see state jurisdictions accredited to perform a “single touch” approval of federal and state environmental assessments, so long as state environmental law is as strong as the EPBC Act, and particularly the National Environment Standards.  

The reforms make no mention of when the accreditation process will not apply other than to say: “as accreditation will take time, and not all jurisdictions will seek or continue to satisfy the requirements for accreditation, the Australian Government will continue to play a role in environmental decision-making”.[2] The Government has committed to establishing a federal Environment Protection Agency (EPA) that will be responsible for performing EPBC assessments in the absence of state accreditation.

Either way, it is likely to prove a thorn in the side of governments looking to accelerate the energy transition. For those jurisdictions with government-led transitions (notably Queensland’s Energy and Jobs Plan, Western Australia’s Whole of System Plan, and Victoria’s State Electricity Commission), they will need to navigate the likelihood that government-owned projects that trigger the EPBC Act will probably not be eligible for single-touch approval, contributing to longer and duplicative assessments.  

For private proponents, they will be hoping single-touch approval delivers the promise of streamlined applications. Only last week, the Tasmanian Premier lamented that the private Robbins Island wind farm project was being unnecessarily delayed by slow Federal Government approval, which is weighing up biodiversity risks. This complaint is not without reason – the Independent EPBC Review found that the average timeframe for assessment and approval of resource projects referred to the EPBC Act is over 1000 days.[3]

Then, in a special category of its own, is offshore wind electricity generation.  Because all offshore wind electricity generation projects will be fully or partly located in Commonwealth waters, it will automatically trigger Federal Government responsibility for EPBC assessment, which must occur in addition to jurisdictional environment assessments.

The most advanced offshore wind project – Star of the South in Gippsland, Victoria – shows how complicated this can become. The project was referred in April 2020 and was identified as requiring both an Environment Impact Statement for the Commonwealth and an Environment Effect Statement for Victoria. To avoid duplication, the Commonwealth and Victorian jurisdictions have agreed to coordinate this process (see figure 3 below), with the assessment stage still ongoing (in draft plans, the proponent envisaged assessment to be completed last year and approval around now).

Figure 3: Proposed overview of combined approach to assessment for Star of the South

Source: Scoping Requirements for Star of the South

Conclusion

The Federal Government’s ruling against the Victorian Renewable Energy Terminal could prove to be a complete anomaly. Previous projects in Westernport Bay had been rejected on environmental grounds, so for some this decision was no surprise.

Either way, the decision has shed light on the complicated and lengthy assessment processes projects must go through before construction can even begin. For Victoria, recent decisions to re-establish the State Electricity Commission and invest in offshore wind have, in some ways, had the unintended effect of putting control of their energy transition in the hands of the Federal Environment Minister.

They, along with each other jurisdiction, will be hoping that the Federal Government’s new accreditation process is as streamlined as it comes.

[1] However, states participate in the National Environment Protection Council, which creates some regulatory harmony across jurisdictions.    

[2] Australian Government, ‘Nature Positive Plan’, December 2022, p3.

[3] Professor Graeme Samuel, ‘Independent Review of the EPBC Act’, October 2020, p85.