Environmental Protection Authority chief executive Allan Freeth. Photo: RNZ / Phil Pennington
The Environmental Protection Authority (EPA) says it will end up defaulting on its debt to the Crown if too few developers use the government's fast-track process.
The agency is paying for the set-up costs associated with running the process using a Crown loan it did not want to take out.
It says running the fast-track process is an "uncomfortable fit" for an agency whose purpose is protecting human health and the environment.
The EPA says it has modelled "how much trouble it will be in" financially if applications to use the fast-track route fall short of expectations.
A drop in applications would mean it could not repay the $10 million it was loaned to take on the extra work.
The agency plans to repay the loan over five years using application levies of a few hundred thousand dollars apiece from developers seeking to take advantage of the shortened route to planning approval.
EPA chief executive Allan Freeth told the Environment Committee of MPs a loan was not the agency's preferred option and the EPA had never wanted to run the process at all.
The loan structure was imposed by the government as a consequence of the government wanting the fast-track to pay for itself.
He said his agency's reputation was being tainted by a perception it was involved in fast-track decision making, when in fact an independent panel decided what developments to approve.
"This is not a comfortable for for the EPA at all, and we have branded it separately and we hope that media will report it as "fast-track" not as they have been calling it for a number of years "EPA decisions". My colleagues overseas keep saying, 'Why are you making those decisions?', and we keep saying, 'We're not'."
He said running the fast-track process was an uncomfortable fit for the EPA's because its core mission and purpose was protecting human health and the environment but it had been instructed to do it.
The fast-track allows developments to skip normal consenting hurdles, and override environmental concerns.
Labour MP Glen Bennett asked what would happen if not enough applicants wanted to use the process because it was seen as "dirty".
Freeth said it wasn't his place to comment on how people saw the process but "we've certainly done modelling of if volumes drop just how much trouble we'll be in".
"We've briefed Minister (Chris) Bishop on it."
He said if not enough developers use the fast-track, the agency will be left in debt to the Crown.
"We were clear with the government the loan structure wasn't our preferred option," he said.
"We are very dependent on volume as to whether we can repay the loan within five years or whether we will need to renegotiate with the government of the day."
"Our numbers are looking acceptable for the first month, it's what happens after that."
In response to further questioning by Labour MPs about whether the EPA had an incentive to encourage people to use the fast-track so it could repay the loan, Freeth said it was not up to the EPA to drive applications through - that was up to the government.
The agency's modelling was based on at least 50 applications a year, but the agency could cope with as many as necessary, Freeth said.
The committee heard the EPA is technically insolvent "as of today" as a consequence of start up costs from the fast-track process.
The terms of its loan meant if paid the loan back early because applications exceeded forecasts it would have to repay interest foregone by the Crown, a situation Freeth described as "interesting."
The committee heard that some developers were using standard Resource Management Act process because they wanted to get the community onside.
However Freeth said he didn't have a view on the fast-track's merits.
One lesson learned from the previous fast-track which the Labour-led government installed during the Covid-19 recovery was to levy application fees up front.
Last time, unpaid debts led to the EPA "aggressively" pursuing creditors to the point of making some insolvent, MPs heard.
Application fees of around $250,000 now need to be paid before the process begins.
