Resource Management Act side agreements: Is it acceptable to purchase approvals?

The Resource Management Act 1991 (“RMA”) sets out the process undertaken by consent authorities (i.e. District and Regional Councils) in relation to applications for resource consents. Such applications are processed on a notified or non-notified basis, which determines the extent of public participation in the process. 

There are two levels of notification, either full public notification or limited notification to adversely affected persons. When determining whether an application is to be notified and to what extent (a decision which is usually delegated to a council officer), the officer must among other aspects consider whether the application will have “more than minor” adverse effects on the environment. However, when evaluating those effects the officer must disregard effects on people who have given their written approval (in addition to a number of other matters). As a result of this test, applicants can avoid notification of an application (to the extent public notification is not required) by obtaining written approval from affected persons. One way of getting this approval is to enter into so called “side agreements”. 

What is a side agreement?

A side agreement is a private arrangement between the applicant and an affected person (who would otherwise have been notified of the application and would have been entitled to participate in the decision-making process). Such agreements are entered into on a private, contractual basis and do not form part of the resource consent process. 

A side agreement allows an applicant to effectively purchase the approval from affected persons, usually by offering a monetary sum which adequately takes into account the effects that person will suffer. In 1998, the then Parliamentary Commissioner for the Environment, Morgan Williams, described it as follows: 

“Side agreements are any agreements entered into to obtain the written approval of an affected person. [They] may avoid notification of an application, seek to mitigate adverse environmental effects, or to realise an opportunity for financial gain.” 

Based on the fact that side agreements are separate from the resource consent process, the officer managing the resource consent application does not need to be informed of the fact that a side agreement has been entered into, let alone its content. This means that the consent authority will have to rely solely on the information provided by the applicant in deciding whether the application should be approved or not. 

What does the Environment Court say?

So far, the Environment Court has acknowledged that side agreements are entered into but has chosen to not interfere with or comment on the ethics of this practice. In BP Oil NZ Ltd v Palmerston North City Council *1995+ NZRMA 504, Judge Treadwell noted that it is of no concern to the Court to investigate whether written approvals from affected persons have been enticed by unconscionable means: 

“[It] is open to a developer in terms of the Act [to pay for consents from affected persons] because a person who considers he may be adversely affected can effectively be compensated for that fear.” 

More recently in Waitakere City Council v Estate Homes Ltd *2007+ 2 NZLR 149, the Supreme Court made the following statement in relation to the ability of applicants to enter into side agreements: 

“There is an obvious alternative to the approach taken by the Council in this case of using the statutory planning consent process ... It would be open, although not necessarily as advantageous to local authorities, for them to proceed by way of side agreements with developers to undertake certain work, and provide where necessary additional land, for an agreed amount of compensation. Such side agreements could be reached prior to consent decisions being taken by the local authorities. This approach would dispense with the need for councils to impose conditions requiring additional services and works, while at the same time committing themselves to payments for the additional element.” 

This topic has been the subject of much debate among lawyers and planners alike and the practice continues to raise qualms about its appropriateness. 

What are the disadvantages?

The disadvantages of side agreements are numerous. Perhaps one of the most significant disadvantages is the fact that these agreements do not have to be entered into on the basis of a resource management purpose, whereas consent conditions (which are imposed as a way to take into account effects on affected persons) are usually imposed as a way to mitigate adverse effects on the environment. 

There is also a general fear of proposals being lazily evaluated when all affected persons have given their written approval. The danger in applications being less vigorously assessed by the consent authority is the increased risk that private interests are given priority, usually at the cost of the purpose of the RMA which is to ensure sustainable management of our natural and physical resources. 

Concerns have also been raised about the potential for financial imbalances between the parties. Such an imbalance can give rise to a couple of situations: 

• The prospect of receiving a financial payout could lead to threats of objections when in actual fact none would be lodged; and
• Affected persons with limited means could be “bullied” into signing side agreements which do not address actual environmental concerns. 

The lack of consideration for adverse effects on the environment and the risk of compromising environmental values also affects future owners of a site, who are unable to take part in the process and gain no benefit from the side agreement. As a result, side agreements effectively only address private interests of the current owner/s. 

Are there any advantages?

As with any private arrangements, there are of course benefits to side agreements as well. One obvious advantage is that based on the voluntary nature of entering into a contract, it is unlikely that an agreement would be entered into unless all parties are satisfied that the monetary sum received justifies the environmental outcome. In actual fact it is simply a transfer of work from the applicant to the party receiving the money (who is then able to undertake any necessary work which remedies the adverse effects). 

In addition, private arrangements at least have the ability to create flexible and innovative compromises. Whilst side agreements usually consist of compensation in the way of money, there is nothing to stop parties from agreeing to more inventive terms which adequately accommodate the concerns of the affected party. This could for instance include a design improvement better tailored to the environment, as noted by the Supreme Court in Waitakere. 

The result of an applicant obtaining written consents from all affected parties is a reduction in processing time of consent applications. This frees up time for the consent authority and allows an officer to spend time on other matters. 

Concluding remarks

Arguably, private arrangements have a place in the resource management process just as they do in other areas of law. The question is what actions the Environment Court and/or consent authorities could or should take in relation to such arrangements and whether there is any ability to control what terms are entered into between parties affected by a resource consent application. To ensure that the purpose of the RMA ultimately continues to be upheld, it is important that these agreements are subject to at least some public scrutiny. Whether the right place for such scrutiny is in the Environment Court is questionable given the current statutory restrictions for this Court to review such agreements. 

If you would like further information please contact Dale Thomas on 07 958 7428.