HEALTH AND SAFETY AT WORK (MAJOR HAZARD FACILITIES) AMENDMENT REGULATIONS 2016

Transcription

1 In Confidence Office of the Minister for Workplace Relations and Safety The Chair, Cabinet Business Committee HEALTH AND SAFETY AT WORK (MAJOR HAZARD FACILITIES) AMENDMENT REGULATIONS 2016 Proposal 1. It is proposed that Cabinet Business Committee authorise the submission to the Executive Council of the Health and Safety at Work (Major Hazard Facilities) Amendment Regulations 2016 (the Amendment Regulations). Executive summary 2. The Amendment Regulations implement Cabinet s policy decisions of 20 June 2016 to introduce a package of fees and levies for WorkSafe New Zealand s oversight of major hazard facilities and to exempt munitions storage facilities under the control of the New Zealand Defence Force from the Health and Safety at Work (Major Hazard Facilities) Regulations 2016 (MHF Regulations) [CAB-16-MIN-0283 refers] The fees and levies also give effect to Cabinet s decision in July 2013, that the regulator s costs of administering the major hazard facilities regime would be more directly recovered from operators, rather than from the Working Safer Levy that all businesses pay [CAB Min (13) 24/11 refers]. The package of fees and levies for major hazard facilities consists of: a. fees for the five-yearly assessment of safety cases for upper tier facilities (with a higher rate for the initial safety case, then less for renewal) b. annual levies for upper and lower tier major hazard facilities c. a 20 percent reduction on the safety case fees for operators second and subsequent facilities under the same safety management system d. a review of the fees and levies within five years. For the purposes of charging fees and levies, the Amendment Regulations introduce bands to categorise major hazard facilities according to the complexity of their operations simple facilities will pay less than more complex ones, as the former require less service from WorkSafe. The banding approach, combined with refined definitions (during drafting) of what kinds of facilities belong in which band, means that by far the majority of major hazard facilities will pay lower annual levies and have lower safety case fees than were originally proposed in the discussion document. The banding approach has also improved the costing of WorkSafe s services, leading to a reduction of approximately 10 percent in the estimated annual costs that were in the discussion document. The bands are as follows: a. Type 1 will cover simple facilities which only store, repackage or distribute very large quantities of hazardous substances, or use extremely simple or selfcontained processes. Examples include LPG storage and distribution facilities, fuel storage terminals, facilities with very large refrigeration systems, and large water treatment facilities. Petrol stations will not be major hazard facilities. 1

2 b. Type 2 this is the middle band and is designed to capture facilities with some complexity in their operations (eg in addition to storage, they mix or blend hazardous substances but do not use complex processes). Type 2 is also designed to remove any ambiguity from categorisation by capturing all facilities that are not type 1 or type 3. Examples of type 2 facilities are manufacturers of explosives and timber preservatives. c. Type 3 will cover complex facilities which use hazardous substances in complex processes, including chemical reactions or high or low temperatures or pressures. Examples include the Marsden Point oil refinery and the methanol production plant in Taranaki. The amounts for the fees and levies, exclusive of GST, are as follows: a. fees for the initial safety case assessment range from $45,000 to $67,500; the fees for safety case renewal range from $20,000 to $30,000, and b. annual levies for upper tier facilities range from $23,000 to $34,000; annual levies for lower tier facilities range from $12,500 to $18,000. The further refinement of the band definitions in drafting and clarification of the number of facilities of each type has resulted in very minor adjustments to the final fee and levy amounts, as was allowed for in the Cabinet policy decisions of 20 June Background 11. Cabinet agreed to regulations for major hazard facilities in July 2013 [CAB Min (13) 24/11 refers], following the recommendations of the Independent Taskforce on Workplace Health and Safety. Cabinet made further decisions on the MHF regulations in March 2015 and September 2015 [EGI Min (15) 4/13 and CAB-15-MIN-0118 refer] The MHF Regulations aim to prevent, or otherwise mitigate the effects of, catastrophic events at major hazard facilities. These are workplaces which store, use, or process very large amounts of particular hazardous substances, and have the potential to generate catastrophic events that can cause multiple fatalities and widespread injury to workers and others in the surrounding community. Major hazard facilities are generally bulk chemical or fuel storage facilities, chemical manufacturers, or logistics facilities (eg involved in the storage and distribution of LPG). Major hazard facilities are either lower or upper tier facilities depending on whether the quantity of hazardous substances on site meets lower or upper thresholds specified in the MHF Regulations. The lower or upper tier designation determines the facility s regulatory requirements; as upper tier facilities store, use or process larger quantities of hazardous substances than lower tier facilities, the MHF Regulations place greater process safety requirements on them to manage the greater catastrophic risk. Prior to the MHF Regulations coming into effect on 4 April, 2016, there were no specific regulations for major hazard facilities. The MHF Regulations are necessary to provide assurance that operators are adequately controlling the risks associated with major hazard facilities, and that these facilities are appropriately monitored and regulated. When Cabinet agreed to regulations for major hazard facilities in 2013, it also agreed that WorkSafe s costs in relation to major hazard facilities should be recovered from facility operators, rather than through the Working Safer Levy paid by all businesses. This is because the oversight of major hazard facilities is costly, given the specific regulatory requirements and the higher level of oversight from specialist inspectors. The Amendment Regulations 16. The MHF Regulations do not currently contain any fees or levies. In June 2016, following public consultation during April to May 2016, Cabinet made policy decisions on fees and levies for WorkSafe s oversight of major hazard facilities, and also to 2

3 17. exempt munitions storage facilities under the control of the New Zealand Defence Force from the MHF Regulations [CAB-16-MIN-0283 refers]. The Amendment Regulations are being made under sections 211 and 215 of the Health and Safety at Work Act Cost recovery fees and levies according to bands Cabinet agreed to the following package of fees and levies: a. fees for the five-yearly assessment of safety cases for upper tier major hazard facilities (with a higher rate for the initial safety case assessment, then less for renewal), banded to distinguish between simple and more complex facilities (eg, simple storage of hazardous substances and complex chemical manufacturing) b. an annual levy for both upper and lower tier major hazard facilities, also further banded within tiers to distinguish between simple and more complex facilities c. a 20 percent discount on the safety case fee for second and subsequent facilities where the same operator has more than one facility, and d. a formal review of the fees and levies after five years, because the costs are likely to be higher at the outset of the regime, and the fees and levies are based on cost estimates and have been set to avoid over-recovery (the review will ensure WorkSafe is recovering actual costs). Cabinet also agreed to the quantum for the fees and levies, noting that the quantum may vary slightly, within the same overall costs, based on the drafting of bands and the number of major hazard facilities in each band. The banding by type within tiers is for the purpose of charging fees and levies, as simple facilities need less service from WorkSafe, and the drafting process has clarified the definitions of each type. This has given greater certainty about the types of facility that fall into each band, making it easy for operators to understand where they sit. The definitions accord with submitters understandings of simple and complex, and are based on the approach taken in several Australian jurisdictions. The definitions of each type are as follows: a. Type 1 will cover simple facilities which only store, repackage or distribute very large quantities of hazardous substances. Type 1 will also cover facilities which use a single hazardous substance contained within a closed circuit or where the hazardous substance is supplied via a simple process and is immediately consumed or diluted. Examples of type 1 facilities include LPG storage and distribution facilities, fuel storage terminals, facilities with very large refrigeration systems, and large water treatment facilities. b. Type 2 will cover middle facilities which do not fit in either Type 1 or 3. These facilities are typically in the business of bucket chemistry, ie they store hazardous substances, but also mix or blend hazardous substances without using complex processes. Examples of these facilities include manufacturers of explosives and timber preservatives. c. Type 3 will cover complex facilities that use hazardous substances in complex processes, including those involving chemical reactions or high or low temperatures or pressures. Examples include the Marsden Point oil refinery and the methanol production plant in Taranaki. The banding approach, combined with better-refined definitions of what kinds of facilities belong in which type, means that: a. nearly 78 percent of existing major hazard facilities will pay a lower annual levy than was originally proposed in the discussion document due to falling into either the middle or lowest charging bands, and 3

4 b. 86 percent of existing upper tier major hazard facilities will pay lower safety case fees than were originally proposed in the discussion document due either to falling into the middle or lowest charging bands, or to being eligible for a multi-site discount in the highest charging band. This result has been achieved through a more nuanced approach to estimating and costing WorkSafe s operational activity (the total estimated annual cost of which has now reduced by approximately 10 percent, ie, approximately $390,000, since the figures provided in the discussion document). It also means the costs fall more accurately where they lie, although there remain some fixed costs for WorkSafe in providing regulatory oversight of all 140 major hazard facilities, regardless of what charging band each facility falls into. The further refinement of the definitions in drafting and the number of facilities of each type has, as allowed for, resulted in very minor adjustments to the final quantum of the fees and levies. The levy increases represent between 1.2 and 4.2 percent of the total levy amounts ($600 is the highest amount but not the highest percentage increase). The drafting refinements had the effect of shifting a number of facilities from the middle band down into the lowest band. The earlier fee and levy amounts were based on the premise of a middle-band-heavy regime but in fact the final result following drafting is lowest-band-heavy instead. The larger numbers of facilities in that costing band means that WorkSafe will need to undertake more activity within it, hence the modest increase. Note that there are some fixed costs for WorkSafe in providing regulatory oversight of about 140 major hazard facilities, regardless of what charging band each facility falls into, and these costs need to be recovered from operators. The final fees and levies are in the tables below, compared with the amounts agreed by Cabinet in June Where there are changes, these are very minor and the amount of change has been indicated. Table 1: Final fees for initial upper tier safety case and 20% multi-facility discount Upper tier initial safety case fee Final quantum Quantum agreed by Cabinet Description of change First safety case Type 1 $45,000 $44,800 $200 (0.45%) increase Type 2 $56,000 $56,000 No change Type 3 $67,500 $67,200 $300 (0.45%) increase 20% discount for operator s second and subsequent facilities Type 1 $36,000 $35,840 $160 (0.45%) increase Type 2 $44,800 $44,800 No change Type 3 $54,000 $53,760 $240 (0.45%) increase Table 2: Final fees for renewal of upper tier safety case and 20% multi-facility discount Upper tier safety case renewal fee Final quantum Quantum agreed by Cabinet First safety case Type 1 $20,000 $20,000 No change Type 2 $25,000 $25,000 No change Type 3 $30,000 $30,000 No change 20% discount for operator s second and subsequent facilities Type 1 $16,000 $16,000 No change Type 2 $20,000 $20,000 No change Type 3 $24,000 $24,000 No change Description of change 4

5 Table 3: Final annual levies for upper and lower tier facilities Annual levy Final quantum Quantum agreed by Description of change Cabinet Lower tier Type 1 $12,500 $12,000 $500 (4.2%) increase Type 2 $15,000 $15,000 No change Type 3 $18,000 $18,000 No change Upper tier Type 1 $23,000 $22,400 $600 (2.7%) increase Type 2 $28,000 $28,000 No change Type 3 $34,000 $33,600 $400 (1.2%) increase Drafting matters The values of fees and levies in the Amendment Regulations are expressed as exclusive of any goods and services tax (GST) payable. GST is currently payable on both the ACC and Working Safer levies, and I have received advice from Treasury and Inland Revenue that the Goods and Services Tax Act 1985 will also apply in respect of the fees and levies for major hazard facilities. I do not consider this will be of concern to industry, given businesses of that size already routinely claim their GST back. In June 2016, Cabinet authorised me to make decisions on detail and to make changes consistent with the policy intent, on any issues arising during the drafting process. I have made changes following feedback from Parliamentary Counsel Office to clarify that, consistent with the policy intent of the MHF Regulations, WorkSafe s designation of major hazard facilities constitutes an authorisation under the Health and Safety at Work Act The only other changes I have made relate to the slight adjustments to the quantum of fees and levies noted above, and the inclusion of provisions authorised by sections 211 to 215 of the Health and Safety at Work Act 2015 necessary for administering the fees and levies (e.g. due dates). Appropriation change In June 2016, Cabinet also agreed to a fiscally neutral appropriation for WorkSafe which will be recovered from major hazard facilities through the new annual levies. The clarification of the banding within tiers has resulted in a further reduction in WorkSafe s expected annual services to be recovered by the new levy and in the expected amount of levy revenue. The reduced amounts are: a. $2.24 million in 2016/17 (part year) down from $2.30 million b. $2.69 million in outyears down from $2.78 million. The changes to appropriation will be reflected in the October Baseline Update. Timing and 28-day rule 33. No waiver of the 28-day rule is sought. The Amendment Regulations will come into force on 1 September Compliance 34. The proposed amendments comply with the: a. principles of the Treaty of Waitangi b. rights and freedoms contained in the New Zealand Bill of Rights Act 1990 and the Human Rights Act 1993 c. principles and guidelines set out in the Privacy Act 1993 d. relevant international standards and obligations 5

6 e. the LAC Guidelines on Process and Content of Legislation, on the grounds that I have met the statutory consultation requirements in s.217(1) of the Health and Safety at Work Act, as I have consulted with all persons and organisations I consider appropriate, having regard to the content of the Amendment Regulations. Regulations Review Committee 35. There are no grounds for the Regulations Review Committee to draw the proposed regulations to the attention of the House. Certification by Parliamentary Counsel 36. Subject to recommendation 6, the Parliamentary Counsel Office certifies that these regulations are in order for submission to Cabinet. Regulatory Impact Analysis 37. A regulatory impact statement was prepared in accordance with the necessary requirements and was submitted to Cabinet in June The regulatory impact statement has been published. Publicity 38. Stakeholders will be advised when these regulations have been authorised. Given the tight timeframe for implementing the fees and levies, it is important that stakeholders have as much information as possible about the fees and levies before they come into effect. To this end, MBIE will publish on its website this paper and the related policy paper [EGI-16-SUB-0137 refers]. Consultation 39. WorkSafe and the Treasury have been involved throughout the development of these fees and levies. The following agencies were consulted on this paper: Inland Revenue, Ministry for the Environment, Ministry of Justice, Accident Compensation Corporation, Environmental Protection Authority, the Treasury and WorkSafe. The Department of Prime Minister and Cabinet has been informed. 6

7 Recommendations I recommend that the Cabinet Business Committee: 1. note that on 20 June 2016, Cabinet agreed to fees and levies for WorkSafe New Zealand s oversight of major hazard facilities [CAB-16-MIN-0283 refers]; 2. note that the Health and Safety at Work (Major Hazard Facilities) Amendment Regulations 2016 give effect to the decisions referred to in paragraph 1 above; 3. note that in order for regulations to be made, section 217(1) of the Health and Safety at Work Act 2015 requires affected parties to have been consulted before regulations can be made; 4. note the advice of the Minister for Workplace Relations and Safety that this consultation requirement has been met; 5. note that the clarifications of the band definitions and the greater certainty about the numbers of facilities in each band has resulted in very minor changes to the final quantum of the fees and levies; 6. note that the changes are consistent with Cabinet s agreement to a quantum of fees and levies that may vary slightly, within the same overall costs, based on the drafting of categories and the number of facilities within each category; 7. note the changes to appropriation needed to reflect the reduced expected levy revenue, to $2.24 million in 2016/17 (part year) and $2.69 million in outyears, which will be reflected in the October Baseline Update; 8. agree that further drafting changes may be made, in line with the policy and in order to ensure the Parliamentary Counsel Office's quality assurance standards are met, prior to submitting these regulations to Cabinet; 9. authorise the submission to the Executive Council of the Health and Safety at Work (Major Hazard Facilities) Amendment Regulations 2016; 10. note that the Health and Safety at Work (Major Hazard Facilities) Amendment Regulations 2016 come into force on 1 September Authorised for lodgement Hon Michael Woodhouse Minister for Workplace Relations and Safety 7