Regulatory Impact Statement

Transcription

1 Regulatory Impact Statement Residual policy decisions concerning regulations for work involving hazardous substances Agency Disclosure Statement This Regulatory Impact Statement (RIS) has been prepared by the Ministry of Business, Innovation and Employment. In March 2015, Cabinet made policy decisions in relation to the new regulations for work involving hazardous substances following public consultation on the discussion document: Developing Regulations to support the new Health and Safety at Work Act. It was agreed that these regulations would largely consolidate existing HSNO requirements into one place and that minor and/or technical changes would be made to those requirements in order to simplify them to the extent possible in the short-term. The regulations would also incorporate changes to codify existing good practice. It was also agreed that exposure draft regulations should be used to test those residual aspects of the regulations for work involving hazardous substances that require additional stakeholder consultation [EGI min (15) 4/12 refers]. This RIS has two parts and is constrained to considering a number of residual policy matters that were tested through consultation on the exposure draft Health and Safety at Work (Hazardous Substances) Regulations Part 1 provides an analysis of proposed storage requirements for higher risk toxic and corrosive substances. It is very difficult to quantify the benefits associated with each option and the effect these options may have on reducing the costs associated with harm (from exposure to hazardous substances) in isolation of other regulatory requirements, and education, engagement, and enforcement activities carried out by WorkSafe. Part 2 provides an analysis of proposed increases to existing fees and the introduction of new fees for authorisations and other hazardous substances related services provided by WorkSafe. The analysis only considers the option of fees set at full cost recovery for the services WorkSafe provides under the hazardous substances regulations. While some fees for administering Part 6 of the Hazardous Substances and New Organisms Act 1996 (which came fully into effect about 2006) have been set below full cost recovery, changes in the regime mean that Cabinet is now being asked to agree to full cost recovery. Fees were originally set by the Environmental Protection Authority (EPA), but its hazardous substances administration functions were delegated to WorkSafe in WorkSafe calculated the proposed fees based on current costs and according to guidelines for public sector fee setting. In calculating the proposed fees, WorkSafe considered the time taken to process the various applications based on: a. previous data for the same or similar processes b. the time spent by the most appropriate staff member c. average pay rates for staff members d. an annual rate of inflation of 2.5 percent for 2016 to

2 For the most part WorkSafe s assessment of the time and technical input needed for its role has been similar to the EPA assessment, apart from a few cases where WorkSafe has recognised the need for greater technical input. A separate regulatory impact statement covers the other policy decisions previously made in relation to these regulations, a copy of which is available at: Signature Gerard Clark Manager Health and Safety Policy Ministry of Business, Innovation and Employment Date 2

3 Part 1: Storage requirements for higher risk toxic and corrosive substances Background 1. Around 150,000 workplaces throughout New Zealand use hazardous substances. A lack of understanding about the harm that can occur is a serious problem with serious consequences. It has been estimated that acute exposure to hazardous substances result in 15 to 60 deaths and 1,200 to 2,500 hospitalisations (work and non-work related) every year. The costs associated with these are estimated to be between $45 and $170 million. In addition, it has been estimated that repeated or continuous exposure to hazardous substances over an extended period result in 438 to 675 deaths every year. The majority of these were attributed to cancer, with associated costs of between $876 million and $1.3 billion per annum Currently, businesses that use hazardous substances need to look to requirements under the Health and Safety at Work Act 2015 and the relevant regulations, transfer notices, group standard approvals, individual substance approvals, and codes of practice made under the Hazardous Substances and New Organisms Act 1996 (the HSNO Act) in order to manage risks to the health and safety of people, property, and the environment effectively. These two legislative regimes have different objectives, which has led to areas of duplication, gaps of coverage, and businesses finding it difficult to understand the interface between the two regimes. 3. Given the challenges in linking harm to hazardous substance exposure, compliance rates with key risk management requirements help provide an understanding of whether businesses that use hazardous substances are undertaking the appropriate actions to keep workers safe. In 2012, an Environmental Protection Authority (EPA) survey of 400 businesses found that 75 per cent were not fully compliant with eight key risk management requirements prescribed under the HSNO Act. This represents significant non-compliance with the HSNO Act, and also indicates that significant harm is likely to be occurring. The complexity and lack of clarity of the current regime is considered an important factor behind the low levels of knowledge about and compliance with the current requirements. 4. Recognising that the current regime for managing hazardous substances is complex and performing poorly, in April 2013, the Independent Taskforce on Workplace Health and Safety recommended that the Government transfer the regulation of work involving hazardous substances from the HSNO Act to the new workplace health and safety legislation. 5. Subsequently, in July 2013 Cabinet decided to transfer the regulation of work involving hazardous substances to the new workplace health and safety legislation [CAB Min (13) 24/13 refers]. 6. In March 2015, Cabinet then made policy decisions in relation to the new regulations for work involving hazardous substances following public consultation on the discussion document: Developing Regulations to support the new Health and Safety at Work Act. 1 Collins, (2005) Hazardous substances Compliance and Enforcement Project: Risk landscape and compliance assessment 3

4 7. It was agreed that these regulations would largely consolidate existing HSNO requirements into one place and that minor and/or technical changes would be made to those requirements in order to simplify them to the extent possible in the short-term. The regulations would also incorporate changes to codify existing good practice. 8. It was also agreed that exposure draft regulations should be used to test those residual aspects of the regulations for work involving hazardous substances that require additional stakeholder consultation, including storage requirements for higher hazard toxic and corrosive substances [EGI min (15) 4/12 refers]. Status quo and problem 9. Under the HSNO Act, there are no regulatory requirements covering: the basic storage of higher hazard toxic or corrosive classes of substances; 2 the transit storage of those substances; or the storage of those substances in more significant quantities. This is inconsistent with the current regulatory requirements under the HSNO Act that apply to the storage of flammable or oxidising classes of substances with an equivalent degree of hazard. 10. Such requirements are important for: preventing and minimising the on-site and (potential) off-site effects of an accidental spill or release (e.g. the release of toxic gases in a fire); 3 preventing unintended chemical or physical reactions between incompatible substances; and preventing unauthorised access to higher hazard toxic or corrosive substances. 11. Joint Australian/New Zealand Standard AS/NZS 4452:1997 sets out non-mandatory requirements and recommendations for the storage and handling of toxic substances. Similarly, Australian Standard AS 3780:2008 sets out non-mandatory requirements and recommendations for the storage and handling of corrosive substances. However, it is reasonable to expect that voluntary compliance with these standards would be low (approximately 25%) given the previously mentioned low rates of compliance with HSNO s key risk management requirements. 12. The risks associated with the inferior storage of higher hazard toxic and corrosive substances could be present in up to 5,100 workplaces. This claim is based on the following conservative assumptions: a. nationwide up to 6,800 workplaces could hold significant quantities of higher hazard toxic and corrosive substances; 4 b. of those workplaces it is reasonable to assume that only 25% or 1,700 would meet the core requirements specified in AS/NZS 4452: The status quo is unlikely to compel the duty holders for those 5,100 workplaces to improve their facilities and/or procedures for the storage of higher hazard toxic or corrosive substances. 2 Throughout this RIS any reference made to a higher hazard toxic or corrosive substance means substances that are acutely toxic with a 6.1A, 6.1B, or 6.1C classification and substances that are corrosive to dermal tissue with a class 8.2A,or 8.2B classification 3 In 1984 a fire in ICI s chemical warehouse in Auckland, which involved the combustion of toxic substances, caused injuries to 60 firefighters. 4 This assumes that the number of workplaces (6,800) that currently have a location certificate for the storage of higher hazard flammable or oxidising hazardous substances is equal to the number of workplaces that will require a location certificate for the storage of higher hazard toxic or corrosive substances. This is a very conservative assumption. 4

5 Objectives 14. The objective of this proposal is to minimise harm to workers from exposure to higher hazard toxic or corrosive substances resulting from inadequate storage facilities, procedures, and equipment. 15. In order to achieve this objective, policy options addressing the problems will be assessed against the following criteria: a. Effectiveness: contribution to achievement of the objective. b. Clarity: the duties and obligations of duty holders are clearly set out. c. Proportionality: the degree of regulation is commensurate with risk. d. Cost effectiveness: compliance and transitional costs are minimised. e. Consistency: the core requirements for the storage of toxic or corrosive substances are consistent with the requirements that apply to flammable and oxidising substances with an equivalent degree of hazard. Options analysis Option 1 status quo 16. Continued reliance on non-mandatory requirements and recommendations for the storage and handling of toxic or corrosive substances in AS/NZS 4452:1997 The storage and handling of toxic substances and AS 3780:2008 The storage and handling of corrosive substances is unlikely to compel businesses to ensure they have adequate storage facilities for higher hazard toxic or corrosive substances. 17. This option is not consistent with the objective to minimise harm to workers resulting from inadequate storage of higher hazard toxic or corrosive substances in the workplace. Option 2 codify existing good practice in regulation for the storage of higher hazard toxic and corrosive substances excluding site certification 18. Under this option regulations would be made to prescribe requirements based on the core components of AS/NZS 4452:1997, AS 3780:2008, and the common set of current regulatory requirements that apply to the storage of other hazardous substance classes, to codify good practice for the: a. basic storage of higher hazard toxic or corrosive substances, where they are present at a place in quantities below the threshold for establishing a hazardous substance location; b. basic storage of higher hazard toxic or corrosive substances, where they are present on a farm in quantities below the threshold for establishing a hazardous substance location; c. transit storage of higher hazard toxic or corrosive substances at a transit depot; 5

6 d. storage of larger quantities of higher hazard toxic or corrosive substances at a hazardous substance location, where they are present at a place in quantities equal to or above the threshold for establishing a hazardous substance location; and e. separation of those hazardous substance locations from protected places or public places. 19. Under this option regulations would also be made based on existing segregation requirements in the Hazardous Substances Storage Code (HSNO Code of Practice 16), to ensure that higher hazard toxic or corrosive substances do not come into contact with substances or materials that are incompatible. 20. In relation to the requirement for establishing a hazardous substance location, the following threshold quantities would apply to all workplaces, including farms of not less than 4 ha: a. 10 kg or 10 L of class 6.1A; b. 100 kg or 100 L or class 6.1B; c. 1,000 kg or 1,000 L of class 6.1C; d. 100 kg or 100 L of class 8.2A and 8.2B. 21. The requirement for establishing a hazardous substance location would apply equally to all workplaces including sites where large-scale pest control operations or agrichemical application tasks are being carried out. 22. This option partially meets the objectives and would be consistent with some of the current regulatory requirements that apply to the safe storage of flammable or oxidising substances with an equivalent degree of hazard. Option 3 [Preferred Option] codify existing good practice in regulation for the storage of higher hazard toxic and corrosive substances including site certification 23. This option is the same as option 2 but it would also include a requirement for a person conducting a business or undertaking (PCBU) to obtain a location compliance certificate where higher hazard toxic or corrosive substances are present in quantities equal to or above the threshold for establishing a hazardous substance location. 24. This would ensure that a specialist third-party certifier confirms, before operations commence at the hazardous substance location and throughout the lifetime of the location, that the PCBU has met the prescribed requirements for: a. the provision of information, instruction, and training to workers handling higher hazard toxic or corrosive substances; b. indoor storage cabinets or stores other than indoor storage cabinets; c. separation distances from protected places or public places; 6

7 d. segregation form incompatible substances and materials; e. site plans; f. personal protective equipment; g. signage; h. emergency management; i. clean-up materials and equipment; and j. secondary containment. 25. This would also provide WorkSafe with visibility of these workplaces, because thirdparty certifiers would be required to enter the details into the location compliance certificate register. 26. In relation to the requirement for establishing a hazardous substance location, the following threshold quantities, which are consistent with the current HSNO thresholds that apply to signage, would apply: a. 50 kg or 50 L of class 6.1A; b. 250 kg or 250 L or class 6.1B; c. 1,000 kg or 1,000 L of class 6.1C; d. 50 kg or 50 L of class 8.2A; e. 250 kg or 250 L of class 8.2B. 27. This option would also include higher quantity thresholds for substances present on farms of not less than 4 ha, recognising that more significant quantities of agrichemicals are only likely to be present on a farm at certain times each year. Consequently, in relation to farms, the following threshold quantities would apply: a. 100 kg or 100 L of class 6.1A; b. 500 kg or 500 L or class 6.1B; c. 3,500 kg or 3,500 L of class 6.1C; d. 500 kg or 500 L of class 8.2A; e. 3,500 kg or 3,500 L of class 8.2B. 28. The revised threshold quantities in this option address the concerns raised by a number of industry associations and large organisations involved in large scale pest control operations or agrichemical application tasks about the inconsistency with existing HSNO threshold quantities and the low level at which the proposed threshold quantities for class 6.1A and 6.1B substances would trigger the requirement to establish a hazardous substance location. 7

8 29. The abovementioned threshold quantities would also trigger the requirement for a PCBU to obtain a location compliance certificate. 30. The PCBU would subsequently be required to renew the location compliance certificate at intervals not exceeding 12 months, unless the PCBU applies to WorkSafe for an extension of this time limit. The extension specified by WorkSafe may not exceed 36 months. These intervals are consistent with the intervals that currently apply to location compliance certificates for sites where high-hazard flammable or oxidising classes of substances are present. 31. Under this option a PCBU with management or control of the temporary storage of any class 6.1A, 6.1B, or 6.1C substance associated with the imminent start of a pest control operation or agrichemical application task would be exempt from the requirement to establish a hazardous substance location provided that the basic storage requirements are complied with. 32. Under this option a PCBU with management or control of the transit storage of a class 6.1A, 6.1B, or 6.1C vertebrate toxic agent associated with the imminent start of a pest control operation would be exempt from the requirements that apply to transit depots provided that the basic storage requirements are complied with. 33. This option is the most likely to meet the objectives and would ensure that requirements for the storage of higher hazard toxic and corrosive substances are consistent with current regulatory requirements that apply to the safe storage of flammable or oxidising substances, with an equivalent degree of hazard. 8

9 Summary of assessment of options against objectives Component of option Option 1 (status quo) Option 2 Option 3 Component 1: Mandatory set of basic storage requirements based on AS/NZS standards No mandatory basic storage requirements. No costs incurred. All businesses holding higher hazard toxic and corrosive substances, in quantities below the threshold quantities for establishing a hazardous substances location, face costs to meet the mandatory basic storage requirements. Costs same as option 2 as same mandatory basic storage requirements apply. Component 2: A threshold for establishing a hazardous substances location No requirement to have a hazardous substance location. No costs incurred. Low threshold set more businesses required to establish a hazardous substances location than option 3 so costs are higher. Difficult to quantify one-off costs as they will vary site-by-site. High threshold set fewer businesses required to establish a hazardous substances location than option 2 so costs lower. Difficult to quantify one-off costs as they will vary site-by-site. Component 3: Requirement to certify a hazardous substance location No requirement to certify. No costs incurred. No requirement to certify no certification costs incurred. Requirement to certify businesses face additional certification costs estimated at about $4.6m per annum Total costs Workers exposed to excessive risks of harm from higher hazard toxic and corrosive substances due to inadequate storage, procedure and equipment. Not clear whether total costs of option 2 are greater or less than option 3. It depends on whether the extra one-off costs of establishing a hazardous substances location in option 2 outweigh the recurring annual certification costs of option 3. Benefits No compliance costs incurred. Lack of certification may mean compliance is lower than option 3, so workers may be exposed to greater risks of harm (but less risks than the status quo). Certification will lead to greater compliance, so workers will be less exposed to risks of harm than option 2 (and the status quo). Difficult to estimate how much greater compliance will be than option 2 and how much. Overall assessment Status quo results in workers being exposed to excessive risks of harm. While better than status quo, workers may still be exposed to excessive risks of harm. Unclear whether the benefits outweigh costs. Unclear whether benefits of this option outweigh the costs. Benefits likely to be higher than option 2, but difficult to quantify how much higher. Not clear if the costs are lower or higher than option 2. Therefore difficult to judge if this option is more or less cost-effective than option 2. 9

10 Assessment of options against objectives Key: X = the objective is not likely to be met;? = the outcome is unknown; = objective is likely to be met Option Effectiveness Clarity Proportionality Cost effectiveness Consistency Option 1 status quo Continued reliance on non-mandatory standards Option 2 codify existing good practice in regulation for the storage of higher hazard toxic (6.1A, 6.1B, 6.1C) and corrosive (8.2A, 8.2B) substances excluding site certification X X X X X The status quo does not prescribe any requirements for the safe storage of higher hazard toxic and corrosive substances. Not expected to contribute effectively to the achievement of the objective. Unlikely to compel duty holders for the estimated 5,100 workplaces, which have inadequate storage facilities, equipment, or procedures (i.e. does not meet AS/NZS 4452and AS 3780) to upgrade them. Standards are indicative of best practice, and can influence decisions of duty holders, however they are not mandatory. Very light handed response to risks presented by inadequate storage of higher hazard toxic or corrosive substances. Will not impose new compliance costs on the estimated 6,800 workplaces that hold significant quantities of higher hazard toxic and corrosive substances. Status quo not likely to have any effect in reducing costs associated with harm from exposure to hazardous substances. Not consistent with current regulatory requirements that apply to storage of flammable and oxidising substances with an equivalent degree of hazard? X?? Would require the estimated 6,800 workplaces, which hold significant quantities of higher hazard toxic and corrosive substances, to ensure their storage facilities, equipment, and procedures are consistent with good practice. By codifying these requirements in regulation we expect a larger number of workplaces to comply. Does not include a mechanism (site certification) to provide assurance that the storage facilities, equipment, and procedures meet the prescribed requirements. Historically, low levels of compliance monitoring and enforcement by the regulator and inadequate support and guidance for businesses contributed to low compliance levels. Ensures that duty holders are clear about their obligations in relation to the safe storage of higher hazard toxic and corrosive substances. Would only apply to higher hazard toxic and corrosive substances, reflecting the nature of risks arising, and ensuring requirements are commensurate with risks. Organisations involved in large scale agrichemical application tasks and pest control operations raised concerns about threshold quantities that trigger requirement to establish a hazardous substance location. Anticipated that the proposed thresholds for class 6.1A and B substances would capture a far larger number of sites relative to the risk This option is likely to impose costs on the estimated 5,100 workplaces, which have inadequate storage facilities, equipment, or procedures for higher hazard toxic or corrosive substances. This option is also likely to impose one-off costs on a significant number of workplaces (over and above the 5,100 workplaces which have inadequate storage facilities, equipment, or procedures) because of the lower threshold quantities that trigger the requirement to establish a hazardous substance location. One-off costs to improve storage facilities or equipment will be highly variable depending on condition of existing storage facilities or equipment. Most likely one-off costs would be the purchase of toxic or corrosive storage cabinets. Such cabinets retail for between $1,700 and $3,900 depending on size. For some workplaces where far larger quantities Largely consistent with current regulatory requirements that apply to storage of flammable and oxidising substances with an equivalent degree of hazard but excludes site certification. However, does not include site certification or associated requirement to maintain a register of certified sites. On this point, this 10

11 Option Effectiveness Clarity Proportionality Cost effectiveness Consistency Option 3 codify existing good practice in regulation for the storage of higher hazard toxic (6.1A, 6.1B, 6.1C) and corrosive (8.2A, 8.2B) substances including site certification The exception to this was largely where a site was required to gain and maintain a location compliance certificate. This ensured that a thirdparty specialist checked the site to ensure that it met the prescribed requirements. This option does not include a site certification component. This option does not include an associated requirement to maintain a register of certified sites. Consequently, WorkSafe will not have visibility of workplaces where significant quantities of higher hazard toxic or corrosive substances are present. Given the lower quantity thresholds associated with this option, it is likely to capture a significant number of workplaces that could be adequately managed through the less onerous basic storage requirements. Would compel the estimated 6,800 workplaces, which hold significant quantities of higher hazard toxic and corrosive substances, to ensure their storage facilities, equipment, and procedures are consistent with good practice. Includes a mechanism (site certification) to provide assurance that the storage facilities, equipment, and procedures meet the prescribed requirements. Includes an associated requirement to maintain a register of certified sites. Consequently, WorkSafe will have visibility of workplaces where significant quantities of higher hazard toxic or corrosive substances are Ensures that duty holders are clear about their obligations in relation to the safe storage of higher hazard toxic and corrosive substances. associated with the quantity of product stored on site. Does not provide alternative (less restrictive) requirements for shortterm bulk storage of agrichemicals or vertebrate toxic agents in advance of application commencing. Would only apply to higher hazard toxic and corrosive substances, reflecting the nature of risks arising, and ensuring requirements are commensurate with risks. Increased threshold quantities for class 6.1A and B substances to ensure that workplaces that present relatively lower risks are not captured by the requirement to establish a hazardous substance location. Higher threshold quantities for farms (not present, one-off costs associated with upgrading storage facilities, example, e.g. ensuring security, ventilation, or secondary containment systems are adequate. Because this option does not include site certification requirements, it will not include ongoing costs associated with the issue and renewal of location compliance certificates. Benefits include avoidance of costs associated with accidental spill/release, or unintended chemical or physical reaction between incompatible substances, including: lost operating costs; costs for injuries and/or fatalities; emergency services response costs; legal costs; costs needed to recommence operations. Difficult to quantify the benefits. Note that when referring to cost effectiveness we are referring to cost effectiveness overall rather than cost effectiveness per firm. This option is likely to impose one-off costs on the estimated 5,100 workplaces which have inadequate storage facilities, equipment, or procedures for higher hazard toxic or corrosive substances. This option is not likely to impose one-off costs on workplaces (over and above the 5,100 workplaces which have inadequate storage facilities, equipment, or procedures) because of the higher threshold quantities that trigger the requirement to establish a hazardous substance location. One-off costs to improve storage facilities or equipment will be highly variable depending on condition of existing storage facilities or equipment. Most likely one-off costs would be the purchase of toxic or corrosive storage option is inconsistent with the current requirements that apply to the storage of flammable and oxidising classes of substances. Consistent with current regulatory requirements that apply to storage of flammable and oxidising substances with an equivalent degree of hazard 11

12 Option Effectiveness Clarity Proportionality Cost effectiveness Consistency present. This option is the most likely to minimise harm to workers resulting from inadequate storage of higher hazard toxic or corrosive substances. However, it is extremely difficult to quantify the benefits directly less than 4 ha), recognising the (short term) need to store more significant quantities of agrichemicals on farms only for specific tasks cabinets. Such cabinets retail for between $1,700 and $3,900 depending on size. For some workplaces where far larger quantities present, one-off costs associated with upgrading storage facilities, example, e.g. ensuring security, ventilation, or secondary attributable to this option. and/or specific times in the containment systems are adequate. Given the higher quantity thresholds associated with this option, it would require only those workplaces where significant quantities of higher hazard toxic or corrosive substances are present to establish a hazardous substance location. By comparison, option 2 is likely to capture a significant number of workplaces that could be adequately managed through the less onerous basic storage requirements. year. Provides alternative (less restrictive) requirements for shortterm bulk storage of agrichemicals or vertebrate toxic agents in advance of application commencing. This option also introduces ongoing costs associated with the issue and renewal of location compliance certificates for estimated 6,800 workplaces, which hold significant quantities of higher hazard toxic and corrosive substances. Costs estimated to be $4.64m per annum, assuming an average cost of $683 to certify each site. Benefits include avoidance of costs associated with accidental spill/release, or unintended chemical or physical reaction between incompatible substances, including: lost operating costs; costs for injuries and/or fatalities; emergency services response costs; legal costs; costs needed to recommence operations. Difficult to quantify the benefits. Note that when referring to cost effectiveness we are referring to cost effectiveness overall, rather than cost effectiveness per firm. 12

13 Consultation 34. Under section 226 of the new Health and Safety at Work Act 2015 the responsible Minister is required to consult those considered appropriate before making regulations (this also reflects the current consultation requirements in section 21 of the Health and Safety in Employment Act 1992). 35. In order to fulfil these requirements, MBIE undertook full public consultation on this proposal from early December 2015 to late February 2016 as part of the process to consult on the draft regulations for work involving hazardous substances. 36. MBIE received 138 written submissions on the exposure draft regulations from: individuals; third-party inspection service providers (test certifiers, cylinder test stations); suppliers (for fuels, explosives, agrichemicals, industrial chemicals); designers (for plant and equipment used to handle, process, or contain hazardous substances and gases under pressure); hazardous substance manufacturers; importers (of hazardous substances and associated plant and equipment); business users of hazardous substances and associated plant and equipment; consultants; academics; industry associations; employer associations; unions; and regional councils. Input was also received from some government agencies including Ministry for the Environment, EPA, WorkSafe New Zealand, New Zealand Defence Force, New Zealand Customs Service, Ministry of Health, Department of Conservation, Ministry for Primary Industries, Maritime New Zealand, and Ministry of Education. 37. In addition to the feedback received from submissions, MBIE also used a specialist guidance group established by WorkSafe New Zealand to test the content of the draft regulations for work involving hazardous substances including this proposal in detail. This group included technical experts as well as worker and industry representatives to ensure a wide range of views were considered. 38. Submitters were broadly in support of these proposals. Recommendation 39. Regulations are required to prevent harm to workers from exposure to higher hazard toxic and corrosive substances resulting from inadequate storage facilities and procedures. Such regulations will be important for: preventing and minimising the onsite and (potential) off-site effects of an accidental release or spill; preventing unintended chemical or physical reactions between incompatible substances; and preventing access to higher hazard substances that are acutely toxic or substances that are corrosive to dermal tissue by persons who should not have access to those substances (unauthorised persons). 40. MBIE recommends regulations for the storage of higher hazard toxic and corrosive substances based on AS/NZS 4452:1997, AS 3780:2008, the Hazardous Substances Storage Code (HSNO Code of Practice 16), and the common set of current regulatory requirements that apply to the storage of flammable and oxidising classes of substances with an equivalent degree of hazard. This would include a requirement for a specialist third-party certifier to confirm, before operations commence at the hazardous substance location and throughout the lifetime of the location, that the 13

14 storage facilities and procedures put in place by the PCBU meet the prescribed requirements. Implementation plan 41. Transitional arrangements for the proposed regulations for the storage of higher hazard toxic and corrosive substances are considered necessary in order to provide sufficient time for: a. businesses to make any necessary changes to their existing storage facilities or procedures; b. a suitable number of qualified individuals or organisations to become authorised by WorkSafe as third-party certifiers for locations where significant quantities of higher hazard toxic and corrosive substances are present; and c. WorkSafe to prepare and release guidance material to support businesses to meet their new obligations for the storage of higher hazard toxic and corrosive substances to businesses. 42. It is proposed that: a. businesses would not have to comply with the requirements for the basic storage of higher hazard toxic and corrosive substances, where they are present in quantities below the threshold for establishing a hazardous substance location, until six months after the date on which the regulations commence; b. businesses would not have to comply with the requirements for the transit storage of higher hazard toxic and corrosive substances at a transit depot until 12 months after the date on which the regulations commence; c. businesses would not have to comply with the requirement to establish a hazardous substance location for the storage of higher hazard toxic and corrosive substances until 18 months after the date on which the regulations commence; and d. where a hazardous substance location has been established, businesses would not have to comply with the requirement to obtain a location compliance certificate until 24 months after the date on which the regulations commence. 43. WorkSafe will assist businesses to transition into the location compliance certificate regime before the 24 months deadline by implementing a phased roll-in approach. This administrative approach will prioritise locations based on the following criteria: a. Existing hazardous substance locations and activities: If a location already requires compliance certification for flammable or oxidising substances, then it will be encouraged to acquire the new compliance certification for the higher hazard toxic and corrosive substances present at the location when it renews its existing certification. This will streamline compliance certifier involvement and reduce costs (e.g. only paying for a single site assessment). 14

15 b. Threshold quantity: Locations holding higher quantities of toxic and corrosive substances and which pose a greater risk, will be encouraged to obtain new compliance certification sooner. c. Hazard: Locations holding the most hazardous toxic and corrosive substances would be required to obtain new compliance certification sooner (e.g. class 6.1A substances would be prioritised over class 6.1B substances). 44. WorkSafe will work with compliance certifiers to provide the required level of training for issuing these new compliance certificates and to meet the anticipated industry demand. This phased approach will be formalised prior to the regulations commencing. 45. WorkSafe will be responsible for raising awareness of these new requirements and producing guidance to ensure that businesses can gain a good understanding of the new requirements. 46. WorkSafe will also be responsible for monitoring and enforcing compliance with the proposed requirements for the storage of higher hazard toxic and corrosive substances. 47. WorkSafe s decision about the right intervention or enforcement action will be specific and proportionate to the context, where non-compliance with the proposed requirements is identified. In some circumstances, the regulator may choose to use higher level enforcement tools where there is a pattern of failure at firm, industry or sector level than it would have chosen for a single instance. In different circumstances, mitigating factors may suggest a lesser response. WorkSafe has recently developed decision-making guidance to drive improvement in the effectiveness and consistency of regulatory practice across WorkSafe. Monitoring, evaluation and review 48. Alongside the implementation of the regulations for work involving hazardous substances, WorkSafe is developing additional reporting mechanisms, including a compliance improvement tool to track how workplace compliance has improved following interactions with WorkSafe. This will enable WorkSafe to assess how businesses working with hazardous substances are lifting their compliance with the new regulations following interactions with WorkSafe. 49. WorkSafe s recent launch of the Healthy Work strategic plan will also be able to provide more contextual information about how hazardous substances compliance and the regulations are contributing to wider workplace health related outcomes. 50. WorkSafe will monitor the following performance measures to help assess the effect of the new regulations for work involving hazardous substances. The results of monitoring over the first two years following commencement will provide the baseline data against which the ongoing performance will be measured: a. the number of hazardous substances notifiable incidents; 15

16 b. the number of proactive workplace assessments carried out by WorkSafe targeting higher-risk industries to check compliance with workplace use controls for hazardous substances; c. the number of reactive hazardous substances enforcement interventions carried out by WorkSafe; d. the number of workplaces that are non-compliant with controls for the safe management of hazardous substances; and e. audits of (third-party) compliance certifiers show a progressive reduction in the proportion of non-conformances. 51. Monitoring reports on these measures will be provided: every two months to WorkSafe s Senior Leadership Team; and every six months to the WorkSafe Board. 52. WorkSafe will also report back on: a. the outcomes of targeted hazardous substances projects (the 2016/17 year includes projects covering agrichemical application, metal finishing, and timber treatment); and b. work with partner agencies (for example, the EPA) in the regulation of the hazardous substances regime. 16

17 Part 2: Administrative fees Status quo and problem definition WorkSafe New Zealand s costs for services provided under the hazardous substances regulations are partially funded by the Working Safer levy 53. Under the hazardous substances regime, WorkSafe can authorise individuals and organisations (eg as compliance certifiers), approve equipment, extend the duration of compliance certificates, and exempt businesses from regulatory requirements. This activity costs WorkSafe about $260,000 per year. WorkSafe charges fees for these services. Fees were last set in 2010 by the Environmental Protection Authority (EPA) Some fees were set at levels below full cost recovery, and WorkSafe currently recovers approximately $153,000 of its costs. This is because the Government decided in 2003 that full cost recovery should be phased in, as it was not at that time consistent with the Government s Growth and Innovation Framework [POL Min (03) 19/11 refers]. 55. This approach still remained in 2010 when the EPA last set fees, where the EPA had to balance a set of principles against full cost recovery. Fees set in 2010 a. for authorising compliance certifiers and granting controlled substance licences, only recovered between 15 and 33 percent of the actual cost of providing these services, and b. for some equipment (eg burners) and some exemptions, were set at about 75 percent cost recovery. 56. Cost recovery has now fallen further below the 2010 levels. 57. Further, in July 2013, Cabinet agreed to requiring mandatory auditing on a costrecoverable basis and performance-targeted auditing of compliance certifiers to better manage the compliance certification regime [CAB Min (13) 24/13 refers]. The Health and Safety at Work (Hazardous Substances) Regulations introduce a requirement for WorkSafe to audit compliance certifiers, and a fee for this service. WorkSafe currently audits compliance certifiers, but does not directly recover this cost. During the last six years, the average cost per audit has been approximately $3, As WorkSafe does not fully recover its costs for services provided under the hazardous substances regime, these are being partially subsidised by the Working Safer levy (WSL), by people who are not receiving any direct benefit from the service itself. As applicants derive a private benefit from WorkSafe s services, it is appropriate that these individuals or businesses bear the costs. For example, once authorised, a compliance certifier receives the benefit of providing a chargeable service (eg, issuing compliance certificates). 59. If the fees remain at levels below full cost recovery, WorkSafe s costs will continue to be funded by the Working Safer levy paid by all businesses. 5 At this time, the EPA was the regulator responsible for the hazardous substances regime; in September 2014, the EPA delegated its functions under the hazardous substances regime to WorkSafe. 6 This cost is based on the use of external auditors only. WorkSafe inherited this audit function from the EPA, which only engaged external auditors. The reduced cost of partially conducting the audits internally is reflected in the proposed fee. 17

18 Objectives The proposed fees must recover the costs from those who benefit from WorkSafe s services 60. The objective is to move to full cost recovery of WorkSafe s costs in relation to the services it provides under the hazardous substances regime, and thus avoid subsidisation by the Working Safer levy. This includes fully recovering WorkSafe s costs in relation to audits of compliance certifiers, as decided by Cabinet in Full cost recovery will mean approximately $100,000 per year is freed up for the WSL. This will be factored into future WSL levy-setting, but the amount is too small to make any direct impact on the WSL levy rate 7. Changes since the 2010 EPA review that mean full cost recovery is now warranted 62. There have been changes since the EPA review in 2010 that make it appropriate to move to full cost recovery, rather than any further transition. 63. The main change is to the approximately 80 percent subsidy on the costs of licensing compliance certifiers. The subsidy recognised a shortage of potential applicants and viability issues in the market due to its small size and poor coverage of in some areas (eg pyrotechnics). The full fee was seen as a disincentive for applicants. 64. In 2013, the Government agreed to improvements to the compliance certifier regime to address these concerns, including enabling the regulator to employ or contract compliance certifiers. These changes are being implemented in the new regulations. 65. In 2010, there was a 68 percent subsidy on controlled substances licences (issued to individuals for handling specified substances). The 2010 EPA review noted that the process for these had changed they were now dealt with by the regulator rather than compliance certifiers. The EPA increased the level of cost-recovery in 2010, but considered it was too big a jump to move to full cost recovery at that time. It noted that full cost-recovery should be implemented over time. 66. Most of the other fees were already set at full cost recovery in A few had reduced to 75 percent over time, and, in 2010, the EPA decided this group should revert to 100 percent where it was demonstrated that there had been a change in processing time. 67. In light of these changes and the maturity of the hazardous substances regime since 2004, it is now time to implement a change to full cost recovery. Therefore, MBIE did not consult on a further transitional option. Criteria for analysing cost recovery options 68. The criteria for assessing the options for cost recovery are set out in the following table. These criteria are based on guidelines issued by the Treasury and the Auditor-General. 7 The WSL rate is currently 08c per $100 of payroll, and 01c levy rate generates approximately $10 million. 18

19 Table 1: Criteria for analysing cost recovery options Criteria Rationale Approach to the analysis Fairness between fee and levy payers Effectiveness Financial impact on users Efficient implementation Transparency The fees should fairly reflect the service provided to individuals and businesses, and not be charged to others who do not benefit from those services The fees need to support the policy intent of full and direct cost recovery The proposed fees must not impose an unreasonable financial burden on individuals or businesses It needs to be cost effective to implement the proposed fees and they must work for both fee payers and the regulator The basis and costings for any proposed fees should be clear to fee payers This is a key factor, as we are seeking to address the problem of all businesses subsidising the costs of the services WorkSafe provides to individuals and businesses under the hazardous substances regime We are looking at the impact on achieving the policy outcome related to cost recovery We are looking at the reasonableness of fees for those who would have to pay. This includes consideration of the financial impact on individuals and businesses of any fees. We are looking at the feasibility of establishing fees and how they will work This includes visibility of charging costs directly to individuals and businesses 69. Fairness between fee or levy payers is a key consideration, as the problem for resolution is the subsidisation of WorkSafe s services by Working Safer levy payers. Further, Cabinet has previously agreed to audits of compliance certifiers conducted on a cost-recoverable basis. 70. The proposed fees also meet further transparency requirements due to public consultation on exposure draft Health and Safety at Work (Hazardous Substances) Regulations which contained the fees, and was accompanied by commentary on the fees. 71. The proposed fees fit within the legal authority to charge fees provided by sections 211(1)(k)(xiii) and 211(1)(w) of the Health and Safety at Work Act. 72. As noted above, WorkSafe calculated the proposed fees considering the time taken to process applications, taking account of previous experience, the time taken by the most appropriate staff, average staff pay rates, and 2.5 percent annual inflation for 2016 to The Hazardous Substances team within WorkSafe s Certifications, Approvals and Registrations (CAR) Team determined time requirements for each application type based on retrospective actual time recording data (supplied by the EPA for the 2012/13 and 2013/14 financial years), and estimated time for process steps recorded in recently updated process pathways. Both approaches produced highly consistent time estimates. Salary midpoints were obtained from Corporate Services to determine the cost of each staff member s time when involved in processing a hazardous substance application. WorkSafe also increased the figures to provide full cost recovery. 19

20 Consultation MBIE released exposure draft Health and Safety at Work (Hazardous Substances) Regulations which contained proposed fees set at full cost recovery 74. In December 2015, MBIE released an exposure draft of the Health and Safety at Work (Hazardous Substances) Regulations which contained the proposed fees 8. These fees are in Table 2 below, compared with the current fees and showing the percentage increase to reach full cost recovery. Table 2: Proposed fees for WorkSafe's services Activity Who pays Proposed fee ($NZ GST excl.) Authorisations of individuals and organisations Application for authorisation as a compliance certifier Application to vary the conditions of compliance certifier authorisation Renewal of compliance certifier authorisation Application for controlled substance licence Application for approval as a test station Recognised inspection agency Recognised inspection agency (renewal) * This includes a maintenance fee (see Table 3) Audit of compliance certifiers Cost of audit Hourly rate for audits for each hour exceeding eight hours Approval of equipment Application for approval of a dispenser Application for approval of a vaporiser Application for approval of a burner Compliance certifier Compliance certifier Compliance certifier Current fee effective from 01/10/2010 ($NZ GST incl.) $721 (5 years) $ (1 year)* $ (5 years)* Proposed fee % increase above EPA 2009/10 fees (GST excl.) 50% (5 years) $361 $ % $507 (5 years) $207 (1 year)* $ (5 years)* -19% Individuals $174 $ % Test station $ Inspection agency Inspection agency Compliance certifier Compliance certifier $757 $ % $396 $345 32% $ $ Business $456 $345 52% Business $456 $345 52% Business $456 $ % 8 The fees were inclusive of GST in the consultation, but will be GST exclusive in the regulations. 20