In brief - taking the path of least resistance and paying into the BCT Fund is often the most expedient but might not always be the preferred option for developers. This article considers some of the options available to proponents of development to satisfy biodiversity offset credit obligations.
Under the NSW Biodiversity Offsets Scheme, a consent authority imposes conditions in a development consent creating a biodiversity offset credit obligation on the proponent of the development.
The consent authority will assess the applicant's Biodiversity Assessment Report against the legal and technical requirements of the Biodiversity Conservation Act 2016 (BC Act), Biodiversity Conservation Regulation 2017 and the Biodiversity Assessment Method and has the discretion to increase or decrease the credit obligation generated by the proponent's Biodiversity Assessment Report.
Once the consent authority has granted the consent including the credit obligation, proponents can satisfy their obligation to offset credits in one of two ways:
1. Find and retire credits - proponents can identify and purchase the required ‘like for like’ credits in the market and then retire those credits. For example, credits could be found by using public registers or through a broker; or
2. Pay into the fund - proponents can use the offsets payment calculator to determine the cost of the credit obligation, and transfer this amount to the Biodiversity Conservation Fund (Fund). The Biodiversity Conservation Trust (BCT) is then responsible for identifying and securing the credit obligation.
Section 6.30 of the Act provides for “Payment as alternative to retirement of biodiversity credits”:
A person who is required under this or any other Act (including under an instrument, approval or agreement) to retire biodiversity credits may satisfy that requirement by instead paying an amount into the Biodiversity Conservation Fund determined in accordance with the offsets payment calculator...
BCT corresponding obligation to secure offsets
Section 6.31 of the BC Act imposes a “Corresponding obligation to secure required biodiversity offsets” on the BCT:
The Biodiversity Conservation Trust is to apply the amount paid into the Biodiversity Conservation Fund under this Division towards securing biodiversity offsets determined in accordance with the regulations in substitution for the relevant number and class of biodiversity credits otherwise required to be retired.
Why not just pay into the Fund?
It’s faster, but more expensive.
The cost of the credit obligation that must be paid by the proponent is determined by the offsets payment calculator. When paying directly into the Fund, the cost of the credit obligation will be increased by a “risk premium” applied to the applicable market credit price. The cost of paying into the Fund will thus always be higher than sourcing and retiring credits at the applicable market price (or other price negotiated with the credit holder). The “risk premium” applied by the BCT represents an amount payable for cost recovery of the BCT in connection with securing offsets as well as a risk management premium to allow for the risk that the BCT cannot find ‘like for like’ credits.
Satisfying credit obligation
When the proponent has completed these steps for all credits that the proponent is required to retire, they can proceed with their activity in accordance with their approval. The consent authority is responsible for ensuring compliance with credit obligations, and any other conditions of the consent or approval.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2024.