Proposals to improve the Dam Safety Scheme
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1 This paper proposes amendments to the Building Act 2004 (the Act) and the Building (Dam Safety) Regulations 2008 (the Regulations) to improve the Dam Safety Scheme (the Scheme).
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2 The Scheme, which is a light-handed risk-management scheme for large dams in New Zealand, was recently the subject of an independent review, prior to taking effect, to determine whether it was fit for purpose. This Review addressed concerns that the current requirements of the Scheme might capture dams for which the impact of failure is low, resulting in unnecessary compliance costs for these dam owners.
3 The Review concluded that while the Scheme is necessary – in terms of protecting human safety, property, infrastructure and the environment, from the risks of a large dam failure – it could be better targeted and made more efficient. The commencement of the Regulations setting out the details of the Scheme was consequently deferred until 1 July 2012, to allow time for Government to consider the Review’s recommendations and make changes to the Scheme.
4 Most, but not all, of the Review’s recommendations are being proposed for implementation. The recommendations that are not favoured relate to reviewing all dam-related legislation, and setting up a central dam safety authority to administer the Scheme. There is a divergence of views on one recommendation regarding the size threshold of dams that should be covered by the Scheme.
5 The proposals in this paper should collectively improve the effectiveness and efficiency of the Scheme, whilst reducing compliance costs. The proposals seek to retain the light-handed nature of the Scheme (whereupon dam owners are primarily responsible for ongoing monitoring of their dam) while enabling regional councils to act if a dam might be unsafe. The proposals fall into two categories:
a. those that better target those dams to be covered by the Scheme – either automatically by virtue of their size, or as required by regional authorities based on risk factors; and
b. those that clarify requirements, so as to improve administration of the Scheme.
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6 Once dams are constructed and commissioned, they require ongoing monitoring, maintenance and repair in order to maintain their integrity. The failure of a dam could result in damage to life, property, infrastructure and the environment. The potential impact of a dam can change over time due to downstream developments.
7 The Scheme, a light-handed risk-management scheme for large dams, seeks to manage these ongoing risks through assessing the risks of individual dams and then ensuring the owners undertake appropriate ongoing monitoring. All regional authorities are responsible for the administration and monitoring of the Scheme in their regions. A summary of requirements of the Scheme is included in Appendix 1.
8 The Scheme was established in 2004 under the Act, but requires Regulations to bring it into effect. These Regulations were promulgated in July 2008, and were due to come into effect in July 2010.
9 Prior to the Scheme coming into effect, concerns were raised that the Scheme may impose unnecessary costs on owners of some low-risk dams, including small dams on farms in remote areas where a dam failure may only impact the dam owner’s land. As a result, the Government agreed to a review of the Scheme [EGI Min (10) 1/12 refers]. The purpose of reviewing the Scheme was to ensure it was 'fit for purpose' – with the costs posed by the Scheme being balanced with the potential risk to human safety.
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Review of the Dam Safety Scheme
10 An independent reviewer was engaged to assess the Scheme. The Review concluded that while the Scheme is necessary – in terms of protecting human safety, property, infrastructure and the environment – improvements could be made to its efficiency and effectiveness, and to reduce overall compliance costs.
11 The Review recommended possible changes to the Scheme. A summary of the Review’s recommendations and commentary by the Department is included in Appendix 2. These recommendations were considered by the Economic Growth and Infrastructure Committee on 2 June 2010. It was agreed that the Scheme should be deferred until 1 July 2012, to allow time for Government to consider the Review’s recommendations and make changes to the Scheme [EGI Min (10) 12/9 refers].
12 The Department subsequently consulted with stakeholders to seek feedback on the Review’s recommendations and how they would apply in practice to the operation and management of dams. Feedback received showed a lack of consensus between large dam owners, and regional authorities on the key recommendations.
13 The Review primarily identified that the current size threshold of a large dam (being three metres in height and 20,000 cubic metres in volume), captured too many lower potential impact dams1, which consequently placed unnecessary compliance costs on the owners of these dams. It therefore recommended that the size threshold be raised to eight metres in height and 50,000 cubic metres in volume (with such dams being called ‘classifiable dams’) – but also that regional authorities be given the power to issue a notice requiring classification of any other large dam if there is reason to believe the dam may put persons at risk (with such dams being called ‘referable dams’).
14 Consultation with stakeholders on these key recommendations identified significant concerns from regional authorities, on two levels. Firstly, that the current threshold already excludes some small dams, they considered to be at-risk, so instead of increasing the size threshold (as recommended in the Review), it should actually be reduced to capture more dams. This would obviously increase (not reduce) compliance costs.
15 Secondly, the size threshold should remain as the only means by which dams are covered by the Scheme. Regional authorities did not want to take on the perceived additional liability associated with having the power to require that a dam be classified. Moreover, if they were given such a power, some regional authorities advised they would likely investigate every dam in their region to assess whether any may put persons at risk, as a means of reducing their liability. The costs of such investigations would need to be met by ratepayers.
16 The Department considered this feedback, and developed an alternative approach that seeks to achieve the same outcome as that of the Review but taking into account the issues raised by regional authorities. These revised proposals were the subject of further consultation with key stakeholders and the reviewer.
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Proposals to narrow the scope of the Scheme
17 The amendments proposed below collectively seek to better target the dams that should be subject to the Scheme due to their size and potential impact. Better targeting ensures the costs imposed by the Scheme are balanced with the potential risks to people and property.
18 It is proposed to amend the Act to introduce ‘classifiable dam’ and ‘referable dam’ categories. These categories of dam will be used to identify the large dams, as presently defined by the Act, that are to be subject to the requirements of the Scheme.
19 A ‘classifiable dam’, which will automatically require classification under the Scheme, will be defined in Regulations as a large dam that is:
a. three or more metres in height; and holds 100,000 or more cubic metres volume of water or other fluid; or
b. is eight or more metres in height, and holds 20,000 or more cubic metres volume of water or other fluid.
20 A ‘referable dam’ will be defined in Regulations as a ‘large dam’ that is not a ‘classifiable dam’. Referable dams may be forwarded for classification under the Scheme, if the potential impact of the dam is considered great enough.
21 It is proposed to amend the Act to give regional authorities the discretion to investigate whether to refer a ‘referable dam’ for classification, where there are reasonable grounds to so. ‘Reasonable grounds’ will be aligned with the existing medium and high potential impact dam grading as prescribed in Schedule 1 of the Regulations.
22 The following diagram illustrates the concept of classifiable dams and referable dams, as a subset of a large dam as currently defined in the Act:
23 Establishing the classifiable dam category to increase the size threshold of dams that would be automatically included in the Scheme results in a significant number of low potential dams being excluded, thus reducing compliance costs for the sector.
24 The proposed definition of classifiable ensures dams that either have a high height or a big capacity are captured by the Scheme. Advice from the reviewer is that an eight metre high and 20,000 cubic metre volume dam has the same risk characteristics as a three metre high and 100,000 cubic metre volume dam. This is also supported by submissions that referred to empirical guidelines from international literature for the likely peak breach outflow from an earth-fill dam based on data from historical earth-fill dam failures.
25 This proposal has been modified from the size threshold of eight metres in height and 50,000 cubic metres in volume recommended in the Review. The proposed dam size threshold has been selected on the basis that it provides a better coverage of high potential impact dams - it captures the majority of the higher risk dams (high and medium potential impact) and does not include many low risk dams.
26 Out of an estimated 1,150 large dams in New Zealand, it is estimated that 712 would become classifiable dams under the proposed approach. This is approximately 40 percent fewer dams than under the current size threshold. At an estimated cost of $3,000 per classification of dam, this should reduce compliance costs by an estimated $1,314,000 to low potential impact dam owners.
27 Establishing the referable dam category reduces the risk that raising the quantitative threshold for the automatic inclusion would result in some medium or high potential impact dams being excluded from the Scheme. Of the remaining 438 dams, it is estimated 10 percent would be high potential impact and 15 percent would be medium potential impact. If regional authorities referred these dams for classification, this would mean approximately 70 additional dams would then be classified under the Scheme. This still results in a 33 percent reduction in the overall number of dams that would be subject to the Scheme compared to the current size threshold, resulting in a saving of $1,141,500 for low potential impact dam owners.
28 The concerns of regional authorities have been addressed under the proposed approach by limiting a regional authority’s discretion to investigate a referable dam for classification, by narrowly defining the reasonable grounds on which they can investigate. This in turn will limit their potential liability, and remove their perceived need to investigate all dams in their region. Because the costs of any investigations undertaken fall on the regional authorities, this should provide an additional discipline on them to ensure they use their discretion in a balanced and moderate manner.
29 It should be noted that since 2004, under the Act, if a dam, small or large, is likely to pose immediate danger to the safety of people, property or the environment, a regional authority can issue a warrant to take action to mitigate the immediate danger posed by the dam, with the owner being liable for the costs of the action.
30 Despite the proposed new threshold better targeting the medium and high risk dams that should be subject to the Scheme, and the new role of regional authorities being limited as a means of reducing their potential liability, regional authorities remain opposed to the proposals, and consider that the Scheme needs to cover more dams and impose greater costs on dam owners. Given the Government’s aim of reducing compliance costs, this view is not supported by the Department.
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Proposals to improve administrative efficiencies
31 The Review also recommended a number of changes to improve the administration of the Scheme.
Defining how to measure a dam
32 There is currently some confusion around the depth measurement of a dam reservoir. Specifying in the Act how dam height is to be measured would remove this confusion and ensure the Act and the Scheme are consistently applied.
33 In line with the recommendation of the Review, it is proposed to amend the Act to specify that dam height is defined as the vertical distance from the top of the dam and measured:
a. in the case of a dam across a stream, from the natural bed of the stream at the lowest downstream outside limit of the dam; or
b. in the case of a dam not across a stream, from the lowest elevation at the outside limit of the dam.
Increase the review period for a Dam Safety Assurance Programme from five to seven years
34 Under the Act, dam owners are required to prepare a dam safety assurance programme (DSAP) and have it verified by a recognised engineer, as defined under section 149 of the Act. Section 146 of the Act requires owners of medium potential impact dams to review their DSAPs:
a. within ten years after the date on which the regional authority approves the DSAP; and
b. at intervals of not more than five years after the first review.
35 The subsequent review period of five years, is the same review period to which high potential impact dams are subject.
36 In line with the recommendation of the Review, it is proposed that the review period for the DSAP be increased from five yearly to seven yearly for medium potential impact dams. This will align the DSAP with the guidelines produced by the New Zealand Society on Large Dams. Compliance costs for the owners of medium potential impact dams will be further reduced, whilst still maintaining an appropriate level of risk management for dams classified as medium potential impact. Reducing the review period has the benefit of balancing the demand of recognised engineers by allowing them to focus their limited resources on higher risk dams.
Complying with the Annual Dam Compliance Certificates
37 Section 150(2)(b) currently requires that dam compliance certificates must state that all procedures in the DSAP have been “fully complied with” during the previous 12 months. Compliance must be confirmed by a category A recognised engineer, as defined in the Regulations, and signed by the dam owner.
38 There are many valid reasons why a DSAP may not be fully compliant that do not impact on the overall safety of the dam. During the consultation process, submitters highlighted that the current strict compliance requirement may result in a risk that DSAPs will be written less rigorously in such a way that avoids compliance requirements.
39 In line with the recommendation of the Review, it is proposed to amend section 150(2)(b) of the Act with a less strict requirement for dam owners to “comply” with criteria and standards of the DSAP, and where necessary, include a list of any non-compliances that warrant corrective action.
40 Removing the requirement for strict compliance and allowing for immaterial non-compliances to be noted, will ensure owners take the appropriate level of responsibility by implementing good practice DSAPs for their dams. This amendment enhances the effectiveness of this element of the Scheme.
Removing references to earthquake-prone and flood-prone dams
41 The Act currently requires regional authorities to develop a region-specific policy on earthquake-prone and flood-prone dams, and gives them the ability to request the owners of such dams to review their DSAP to ensure their relevance. The intention behind specifying these dams in the Act was to ensure deficiencies in earthquake or flood-prone dams are addressed.
42 As noted by the Review, it is no longer necessary to refer to earthquake-prone and flood-prone dams in the Act. This is because the amendments proposed in this paper give regional authorities more responsibility for dams in their region, including the discretion to refer a dam for classification. This new power should ensure any risks associated with medium or high impact dams, including deficiencies that could cause a dam to fail in an earthquake, are adequately managed.
43 In line with the recommendation of the Review, it is therefore proposed that all references to earthquake-prone and flood-prone dams be removed from the Act.
44 The proposed amendment does not compromise risk management because any issues with dam safety that arise due to earthquake or flood proneness will be identified during assessment and are required to be noted in the DSAP. These dams will be subject to review requirements appropriate for their classification under the programme – prepare and submit a DSAP to the regional authority, and provide ongoing evidence of implementing surveillance and maintenance procedures in accordance with the approved DSAP through submitting an annual Dam Compliance Certificate, and seek advice from a recognised engineer to certify future, ongoing audits of the DSAP.
Recognised Engineers to report dangerous dams
45 The Act currently requires regional authorities to develop a dangerous dams policy within their regions. The purpose of this policy is to help prevent catastrophic failure of a potentially dangerous dam. The regional authority has functions and powers under the Act, including putting up hoardings, attaching a warning on the dam, and requiring work to be carried out on the dam to reduce or remove danger.
46 In line with the recommendation of the Review, it is proposed to include a provision in the Act that requires a recognised engineer, if during the process of certifying a dam it becomes apparent that the dam is dangerous, to notify the regional council and the dam owner. The notification must be provided in writing within five working days.
47 It is also proposed to include a provision in the Act that requires dam owners to notify the regional council if the owner becomes aware their dam is dangerous.
48 The proposed amendments will ensure regional authorities are notified of dangerous dams in their region, making sure that such dams are then subject to the dangerous dam policy.
Determination of appurtenant structure
49 Under the Regulations, the requirements of appurtenant structures are to be noted in the DSAP. An appurtenant structure is a structure that is integral to the proper functioning of the dam, such as intake towers, powerhouse structures and surge tanks and towers.
50 In line with the recommendation of the Review, it is proposed that the appurtenant structures for each dam be determined by the recognised engineer responsible for certifying the DSAP.
51 The appurtenant structures that need to be subject to the Scheme are different for each dam and therefore difficult to prescribe. A recognised engineer is the most appropriate person to define what structures are appurtenant to the safe operation of each individual dam.
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Review recommendations not adopted
52 In the review of the Scheme, the reviewer also made two other significant recommendations which have not been adopted.
Comprehensive review of all dam-related legislation
53 The Review recommended that legislation, as it applies to dams (including resource consent and building consent legislation) be reviewed as a whole in order to provide effective, clear legislation that reduces compliance costs and provides consistent implementation across the sector.
54 Although the scope of the Review did not include the resource consent and building consent processes required under the Resource Management Act 1991 and the Building Act, the Review noted there is a potential for some overlap between the two Acts and the Scheme.
55 This recommendation is not supported as a major review of the Building Act has only recently been completed. This resulted in the review of the Scheme, the Department developing options to improve the administration of building regulatory functions, including their consolidation across local authorities or centralisation.
56 A review of the Resource Management Act is currently underway. The Resource Management Act is being reviewed with the aim of streamlining and simplifying provisions, and focussing on improving process. The focus on improving process will include the resource consenting process in relation to dams.
Establishment of dam safety authority
57 The Review also recommended that a new central government body (an authority specific to dam safety management) be established to administer and monitor the Scheme to provide a nationwide consistent approach.
58 This recommendation is not supported. In accordance with Cabinet direction [CAB Min (10) 5/3 refers], the Department is currently looking at options to improve the administration of building regulatory functions, including their consolidation across local authorities or centralisation. The aim is to develop a more nationally consistent approach to administering all building regulatory requirements. This broader project will include consideration of building control functions in relation to dams, as well as dam safety management. Advice on the preferred option for improving administration, and how it could be implemented, will be provided to Ministers in April 2011.
59 Although this work could result in future changes to the way the Scheme is administered, it is not recommended that decisions about the Scheme are postponed. This would result in further delays to the commencement of the Scheme, creating uncertainty for industry about whether or not their dams are affected by the revised requirements.
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Monitoring of proposed amendments
60 The Scheme will become effective on 1 July 2012. Following the commencement of the Scheme, the Department will closely monitor the operation of the Scheme to ensure it meet its objectives.
61 It is expected the monitoring will include, but not be limited to:
a. the number of referable dams investigated by regional authorities and/or required to be classified;
b. the proportion of referable dams regional authorities require to be classified that turn out to be low, medium or high impact dams, respectively;
c. the size, by height and volume, of dams that are low, medium or high impact dams; and
d. benchmarking of quality of DSAPs (detailing best practice and shortcomings, based on international experience); with a particular emphasis on dams such as hydro dams where the impact of failure could be particularly substantial.
62 There is currently a degree of imperfection in the information available for determining which large dams should be referable and which should be classifiable. The available information is likely to improve with the operation of the Scheme. This will enable refinements to be made to the Scheme; by changing the split of large dams into the referable and classifiable categories. This paper proposes the definitions of classifiable and referable dams be prescribed in Regulations. Having these definitions in the Act would be an impediment to making future refinements to improve the operation of the Scheme.
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63 The following Departments have been consulted on the proposals in this paper and their views incorporated: The Treasury, Ministry of Economic Development, Department of Internal Affairs, Ministry for Culture and Heritage, Ministry of Agriculture and Forestry, Ministry for the Environment, Ministry of Justice and Te Puni Kokiri.
64 The Ministry of Civil Defence and Emergency Management has been informed of the paper but was unable to provide comment due to involvement in the Christchurch earthquake.
65 The Department of Prime Minister and Cabinet has been informed.
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66 There are no financial implications from the specific proposals set out in this paper. Any costs will be covered from the Department's baseline funding.
67 The benefits and costs associated with the proposals are detailed in the attached Regulatory Impact Statement (RIS).
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68 The proposed amendments are unlikely to raise issues under the New Zealand Bill of Rights Act 1990 or Human Rights Act 1993. A final view will be possible once the legislation has been drafted.
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69 The proposals in this paper involve amendments to the Act and the Building (Dam Safety) Regulations 2008. The amendments proposed to the Act in this paper will be binding on the Crown.
70 The Building Amendment Bill (No 4) has a category 3 priority (to be passed in 2011 if possible) in the 2011 Legislation Programme. If possible, the amendments proposed in this paper could be included in that Bill.
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Regulatory impact analysis
71 Regulatory Impact analysis requirements apply to the proposal in this paper; consequently the Department has prepared a RIS. The Department confirms the principles of the Code of Good Regulatory Practice and the regulatory impact analysis requirements have been complied with.
72 The RIS is attached to this paper as Appendix 3.
73 Alison Geddes, Deputy Chief Executive Sector Capability has reviewed the RIS prepared by the Department and considers the information and analysis summarised in the RIS meets the quality assurance criteria.
74 I have considered the analysis and advice of my officials, as summarised in the attached RIS and I am satisfied that, aside from the risks, uncertainties and caveats already noted in this Cabinet paper, the regulatory proposals recommended in this paper are consistent with our commitments in the Government statement “Better Regulation, Less Regulation”.
75 The RIS was circulated with this Cabinet paper for Departmental consultation.
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76 There are no disability implications associated with these proposals.
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77 The Department has developed a communications plan to communicate with dam owners and other stakeholders, including publicising the requirements of the Scheme and providing suitable support material.
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78 The Minister for Building and Construction recommends the Committee:
1. note the Government agreed to a review of the Dam Safety Scheme (the Scheme) prior to its implementation to ensure the Scheme was fit for purpose [EGI Min (10) 1/12 refers].
2. note the commencement of the Building (Dam Safety) Regulations 2008 (the Regulations) were deferred until 1 July 2012 to allow time for Government to consider the Review’s recommendations and make the necessary changes to the Scheme [EGI Min (10) 12/9 refers].
3. note the Department of Building and Housing is currently developing options to improve the administration of all building regulatory functions, including functions relating to dams and dam safety management.
4. note that although this work could result in future changes to the way the Scheme is administered, it is not recommended that decisions about the Scheme are postponed because this would result in further delays to, and uncertainty about, the Scheme.
5. agree to amend the Building Act 2004 (the Act) to introduce the concept of a ‘classifiable dam’ and ‘referable dam’ for the purposes of the Scheme.
6. agree the definition of a ‘classifiable dam’ be prescribed in the Regulations as a large dam that:
i. is three or more metres in height; and holds 100,000 or more cubic metres volume of water or other fluid; or
ii. is eight or more metres in height, and holds 20,000 or more cubic metres volume of water or other fluid.
7. note that the size threshold of a ‘classifiable dam’ was modified from eight metres in height and 50,000 cubic metres in volume, as recommended in the review of the Scheme, to the definition proposed in recommendation 6 (above).
8. note that the size threshold in recommendation 6 (above) provides the best balance of capturing high and medium potential impact dams, while excluding many low potential impact dams.
9. agree the definition of a ‘referable dam’ be prescribed in the Regulations as a large dam that is not a classifiable dam.
10. agree to amend the Act to give regional authorities the discretion to investigate and refer a referable dam for classification where there are reasonable grounds to do so.
11. agree that ‘reasonable grounds’ be prescribed in the Regulations and align with the existing provisions for the potential impact grading prescribed in Schedule 1 of the Regulations.
12. agree to amend the Act to specify that dam height is defined as the vertical distance from the top of the dam and measured:
i. in the case of a dam across a stream, from the natural bed of the stream at the lowest downstream outside limit of the dam; or
ii. in the case of a dam not across a stream, from the lowest elevation at the outside limit of the dam.
13. agree to amend the Act to increase the review period for the Dam Safety Assurance Programme to an interval of not more than seven years for medium potential impact dams.
14. agree to amend section 150(2)(b) of the Act by removing the requirement for a dam owner to have “fully complied with” the criteria and standards of the Dam Safety Assurance Programme, and replacing it with the less strict requirement to “comply” with criteria and standards of the Dam Safety Assurance Programme, and where necessary, include a list of any non-compliances that warrant corrective action.
15. agree to remove all references to “earthquake-prone dams” and “flood-prone dams” from the Act.
16. agree to amend the Act to require a recognised engineer, if during the process of certifying a dam it becomes apparent that a dam is dangerous, to notify the regional authority and the dam owner. The notification must be provided in writing within five working days.
17. agree to amend the Act to require dam owners to notify the regional authority if the owner becomes aware their dam is dangerous.
18. agree to amend the Act to require the recognised engineer to determine the appurtenant structures for each dam, for the purposes of the Dam Safety Assurance Programme.
19. agree that the Minister for Building and Construction has delegated authority to approve amendments to correct any minor errors, omissions and inconsistencies that may be identified, where no new policy matters arise.
20. note the Building Amendment Bill (No 4) has a category 3 priority (to be passed in 2011 if possible) on the 2011 Legislation Programme.
21. invite the Minister for Building and Construction to issue drafting instructions to Parliamentary Counsel Office to draft amendments to the Act to give effect to the proposals.
Hon Maurice Williamson
Building and Construction
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Under the Building Act, the owner of a large dam is required to classify the dam as having a low, medium or high potential impact (PIC). The different classifications refer to the potential impact of a failure of the dam on persons, property, and the environment.