08 Dec 2011

Release of draft EPBC Act environmental offsets policy

by Brad Wylynko, Lara Wilmot

The Draft Environmental Offsets Policy appears to be a step in the right direction, away from the current inconsistent application of offset "ratios"

Increasingly, project approvals are using offsets to compensate for their environmental impact. This has raised issues regarding how offsets are determined, and when they are to be applied. The Australian Government recently released a Draft Environmental Offsets Policy to address these issues.

What are environmental offsets?

Environmental offsets are measures to compensate for the adverse impacts of an action on the environment that cannot be adequately reduced through avoidance or mitigation. Relevantly though, offsets do not reduce the impacts of an action.

The Draft Policy divides offsets into direct and indirect offsets. Direct offsets provide on-ground protection and improved conservation outcomes for the impacted protected matter, and generally provide more certain conservation outcomes than indirect offsets. For example, the rehabilitation of existing vegetation, or the revegetation of degraded land would be a direct offset.

Indirect offsets are other measures that improve knowledge, understanding and management of environmental values, and could include contribution to an education or research program.

When are offsets appropriate?

The Draft Policy will be used in the assessment of actions likely to have a significant impact on matters of national environmental significance under Part 9 of the EPBC Act. Offsets will be considered at the assessment stage (not at the referral stage).

Importantly, not all projects will require offsets, as the Draft Policy will only apply where:

  • all reasonable measures have been taken to avoid and mitigate impacts on matters of national environmental significance;
  • significant impact on matters of environmental significance remains likely; and
  • offsets are appropriate and feasible in the circumstances.

If the decision-maker agrees that an offset can be considered, the proponent is required to submit an offsets proposal which describes the offset and its effect on the protected matter. If appropriate, offset requirements may then be required as a condition of project approval.

What is a suitable offset?

Perhaps most importantly, offsets must "deliver an overall conservation outcome that improves or maintains the viability of the aspect of the environment that is protected by national environment law and affected by the proposed development".

In order to determine suitable offsets, amongst other things, they must:

  • build around direct offsets but may include indirect offsets;
  • proportionately relate to the size and scale of the impacts being offset;
  • be efficient, transparent, proportionate, scientifically robust and reasonable;
  • effectively manage the risks that the offset will not succeed;
  • conform to good governance principles; and
  • be able to be measured, monitored, audited and enforced.

No offset "ratios" are provided in the Draft Policy. Rather, the Draft Policy provides that the scale of the offset will be determined on a case-by-case basis, by considering matters including the:

  • scale and intensity of the impacts;
  • health and status of impacted vegetation communities;
  • presence of impacted species;
  • approach of the relevant State or Territory; and
  • importance of the impacted site in context.

In determining what will be regarded as a suitable offset, government decision-making is to be informed by scientifically robust information, and address the environmental characteristics of the site, including the role of the site and the quality of the environment.

Draft Assessment Guide

In order to quantify the requirements of the Draft Policy, and to ensure its consistent and transparent application, the Government established a Draft Offset Assessment Guide (Appendix 1 to the Policy).

The finalised Assessment Guide will assign points to a proposed action based on the conservation status of the protected matter, and the severity, type and duration of the impact (known as "impact points"). Proponents will then require an equal or greater number of "offsets points" in order to adequately compensate for the impact. Importantly, 75% of the "offset points" must be obtained from direct offsets.

During the consultation period, comments were sought regarding the methodology used in the Assessment Guide, including the relevance of the factors used to influence "impact points", and the requirement for 75% of "offset points" to be derived from direct offsets.

Interaction with State and Territory legislation

Offsets may be required both under State or Territory, and Commonwealth regimes. The Draft Policy clarifies that State or Territory offsets will count towards an EPBC Act offset "to the extent that it compensates for the residual impact to the protected matter identified under the EPBC Act".

Going forward

The Draft Policy appears to be a step in the right direction, away from the current inconsistent application of offset "ratios", and will need to be considered in the future by proponents referring an action under the EPBC Act.


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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.