RE: Submission on the Proposed National Policy Statement on Urban Development Capacity

Fonterra Co-operative Group Limited 165 Broadway Avenue PALMERSTON NORTH 4414 15 July 2016 NPS Urban Development Ministry for the Environment PO Box 106483 AUCKLAND 1143 Dear Sir / Madam RE: Submission on the Proposed National Policy Statement on Urban Development Capacity Please find attached Fonterra Co-operative Group Limited s (Fonterra) submission on the Proposed National Policy Statement on Urban Development Capacity (NPS). Fonterra supports the Government s objective to provide sufficient residential and business development capacity for the short, medium and long terms. Fonterra, however, is concerned that the NPS as currently drafted does not appropriately address the management of reverse sensitivity effects, provide specific recognition of the different requirements of business land including industrial land or ensure appropriate consultation with the business sector, including industrial operators. The attached submission discusses these concerns and seeks relief that will enable the objectives of the NPS to be better achieved. Fonterra has a number of examples that relate to the issues outlined in this submission. We wish to discuss these with Government. If you require further information in relation to this submission, please do not hesitate to contact me on 027 705 5118 or via email: carolyn.mortland@fonterra.com. Yours sincerely Brigid Buckley Policy and Planning Manager NZ Operations Fonterra Co-operative Group Limited Fonterra Co-operative Group Limited (15 July 2016) 1

FONTERRA CO-OPERATIVE GROUP LIMITED SUBMISSIONS ON THE PROPOSED NATIONAL POLICY STATEMENT ON URBAN DEVELOPMENT CAPACITY To: Minister for the Environment and Building and Housing C/- Ministry for the Environment PO Box 106483 AUCKLAND 1143 E npsurbandevelopment@mfe.govt.nz SUBMITTER: Submitter Type: FONTERRA CO-OPERATIVE GROUP LIMITED (Business/Industry) Contact: Brigid Buckley National Policy and Planning Manager Address for Service: Fonterra Limited 165 Broadway Avenue PALMERSTON NORTH M 027 886 0431 E brigid.buckley@fonterra.com Fonterra Co-operative Group Limited (15 July 2016) 2

1. OVERVIEW 1.1. Fonterra Co-operative Group Limited (Fonterra) generally supports the Proposed National Policy Statement on Urban Development Capacity (NPS) and in particular the Government s objective to provide sufficient residential and business development capacity for the short, medium and long terms. 1.2. Fonterra, however, is concerned that the NPS as currently drafted does not: Appropriately address the management of reverse sensitivity effects; Ensure that industrial land is protected from potential reverse sensitivity effects; Provide specific recognition of the different requirements of business land including industrial land; Ensure appropriate consultation with the business sector, including industrial operators; and Ensure effective coordination between local authorities and infrastructure providers. 1.3. In this submission we have provided: A brief overview of Fonterra s operations and activities (Section 2); and Submission points on the NPS, including proposed amendments (Section 3). 2. BACKGROUND FONTERRA 2.1. Fonterra is a global, co-operatively-owned dairy nutrition company. 2.2. Fonterra is owned by more than 10,500 farmers and their families who together produce approximately 22 billion litres of milk each year. With this milk Fonterra produces more than two million tonnes of dairy ingredients, specialty ingredients and consumer products each year, with 95 per cent of these exported to millions of consumers in approximately 140 countries around the world. 2.3. Fonterra s business is based on sourcing secure, high quality milk and unlocking its natural goodness in ways that add value for our customers and consumers around the world. 2.4. Fonterra is the largest processor of milk in the world and the preferred supplier of dairy ingredients to many of the world s leading food companies. Fonterra is also a market leader with our own consumer dairy brands in New Zealand and Australia, Asia, Africa, the Middle East and Latin America. 2.5. Within New Zealand, Fonterra has 31 dairy manufacturing sites and a number of distribution centres. In total, these sites span across more than 20 territorial authorities, three unitary councils and eight regional councils. Often located in rural communities, these sites contribute substantially to local, regional and national economic and social well-being through employment and the flow-on benefits arising from these significant operations. 2.6. Key components of our success include a healthy environment in which to produce the milk, access to robust energy and transport infrastructure, and an efficient and effective regulatory setting. 2.7. Accordingly we welcome the opportunity to submit on the Government s NPS. Fonterra Co-operative Group Limited (15 July 2016) 3

3. SUBMISSION 3.1. In this section we have provided specific comments on a number of provisions in the NPS, along with recommended relief. These provisions include: Reverse sensitivity (policy PA3 and the definition of development capacity ); Responsive planning (policies PD2 and PD3); Adequate provision for industrial land (the definition of "business land" and "demand" and policies PA1, PB1 and PB5); Consultation (policies PB4 and PD9); Infrastructure (policies PC1-PC3); and Monitoring assessments (policies PB1 and PB5). 3.2. REVERSE SENSITIVITY Comments 3.2.1. Policy PA3 sets out a number of matters that decision makers are required to recognise, provide for, or have particular regard to, when considering the effects of urban development. The definition of "development capacity" sets out a number of factors that must be taken into account in providing development capacity. 3.2.2. Neither of these provisions addresses the need to manage reverse sensitivity effects. 3.2.3. It is critical that an NPS promoting the development of residential and business land effectively manages reverse sensitivity effects. What is of particular concern to Fonterra is that the Consultation Document identifies the difficulty that industrial operators face in protecting their activities from reverse sensitivity effects. 1 It then goes on to say that the topic is very complex and that addressing it "would require significantly more analysis than has been possible". 2 3.2.4. While Fonterra supports the need to provide sufficient development capacity for residential and business land, this development capacity must be provided in suitable locations that will not constrain existing lawfully established industrial activities. 3.2.5. Fonterra's industrial activities, and in particular its dairy manufacturing sites, are under increasing pressure from residential development. Despite taking all reasonable steps to mitigate effects, certain effects of the manufacturing sites, such as noise and odour, cannot be completely internalised. As such, it is inappropriate for sensitive activities like housing to be located in close proximity to a manufacturing site. 3.2.6. Industrial activities are a critical part of providing effective and efficient urban areas particularly through the economic and employment opportunities they bring to the communities within which they are located. If residential development is provided without consideration for the protection of the industrial activities that support it, then OA1 which is stated below, will not be met. 3.2.7. Objective OA1 states: To support effective and efficient urban areas that enable people and communities to provide for their social, economic and cultural wellbeing. 1 National Policy Statement on Urban Development Capacity Consultation Document, pages 23 and 24. 2 National Policy Statement on Urban Development Capacity Consultation Document, page 24. Fonterra Co-operative Group Limited (15 July 2016) 4

3.2.8. The amendments Fonterra proposes below to the definition of "development capacity" and policy PA3 will ensure that reverse sensitivity effects are appropriately managed. These amendments will also ensure that the Government s objective of providing sufficient development capacity for residential and business demand. Relief sought 3.2.9. Amend the definition of "development capacity" as follows: Development capacity means in relation to residential and business land, the capacity of land for urban development to meet demand, taking into account the following factors: 3.2.10. Amend policy PA3 as follows: the zoning, objectives, policies, rules and overlays that apply to the land; and the provision of adequate infrastructure, existing or likely to exist, to support the development of the land, having regard to the relevant proposed and operative regional policy statements, regional plans and district plans; and any relevant management plans and strategies prepared under other Acts.; and the need to manage reverse sensitivity effects. When considering the effects of urban development, decision-makers must: Recognise and provide for the contribution that urban development will make to the ability for people and communities and future generations to provide for their social, economic and cultural wellbeing. Provide sufficient development capacity, whilst maximising the positive effects of development, and minimising the adverse effects of development, including potential reverse sensitivity effects. Have particular regard to the positive effects of urban development at a national, regional and district scale, as well as its local effects. 3.3. RESPONSIVE PLANNING Comment 3.3.1. Policies PD2 and PD3 propose a number of responsive planning options that enable local authorities to provide for sufficient development capacity. 3.3.2. Policy PD2 requires local authorities to consider all options available to them under the RMA to enable sufficient development capacity to meet residential and business demand, including changes to provisions in plans and regional policy statements regarding the notification of applications for resource consent. 3.3.3. In addition, policy PD3 requires local authorities to consider the following responses: a) In the short term, further enable development through customer-focussed consenting processes and, where appropriate, amending the relevant plans. Fonterra Co-operative Group Limited (15 July 2016) 5

b) In the medium term, amending the relevant plans and policy statements to provide more development capacity. c) In the long term, providing a broad indication of the location, timing and sequencing of development capacity in order to demonstrate that it will be sufficient. 3.3.4. The responsive planning options proposed in policies PD2 and PD3 predominantly focus on amending relevant plans and regional policy statements, and providing "customer-focused" consenting processes in order to enable local authorities to provide for sufficient development capacity. 3.3.5. Local authorities already have the ability to include rules in their plans regarding notification. However, those decisions are made through the overarching lens of Part 2 and sustainable management. 3.3.6. Fonterra considers that the directives in policy PD2 may lead local authorities to change the notification provisions in their district plans in order to address issues of development capacity without full consideration of Part 2 matters. 3.3.7. A council could, therefore, make changes to their plan to limit the notification of applications for new residential activities to adjoining landowners. This creates a real risk that parties who are affected, and should be notified, lose out on the opportunity to participate in resource consent applications that directly affect them. 3.3.8. For example, if a local authority took such an approach then Fonterra would not be notified of a plan change to rezone land from rural to residential in close proximity to (but not adjoining) one of its manufacturing sites. This could result in significant reverse sensitivity effects that could severely restrict operations at the manufacturing site and the surrounding social and economic benefits the manufacturing sites provide. 3.3.9. There are already examples of number of examples that are related to this issue. Fonterra wishes to discuss these examples with Government. 3.3.10. Fonterra also has reservations regarding references to "customer focused" consenting processes in policies PD2 and PD3. This is an ambiguous term which could be misinterpreted by local authorities. Whilst being customer-focused is important for any service organisation this should not be at the expense of delivering good environmental and social outcomes. Fonterra considers that a more appropriate term would be "efficient". Relief sought 3.3.11. Amend policy PD2 as follows: A local authority must consider all options available to it under the Act to enable sufficient development capacity to meet residential and business demand, including but not limited to: Changes to plans and regional policy statements, including changes to: o o o o Objectives, policies and rules, zoning and the application of those in both existing urban and undeveloped areas; Activity status; and Provisions about the notification of applications for resource consent; Existing overlays, or the introduction of overlays which enable development; and Fonterra Co-operative Group Limited (15 July 2016) 6

o Make them simpler to interpret. Consenting processes that are efficientcustomer focused and coordinated within the local authority; and In granting consent, the conditions of consent imposed. 3.3.12. To address efficiency and coordination issues associated with consent processing, Fonterra considers that Government should provide further guidance 3.3.13. Amend policy PD3 as follows: Local authorities must consider the following responses: In the short term, further enable development through efficientcustomerfocused consenting processes and, where appropriate, amending the relevant plans. In the medium term, amending the relevant plans and policy statements to provide more development capacity. In the long term, providing a broad indication of the location, timing and sequencing of development capacity in order to demonstrate that it will be sufficient. 3.4. ADEQUATE PROVISION FOR INDUSTRIAL LAND Comment 3.4.1. The NPS provides for two types of land: residential and business. 3.4.2. The definition of "business land" in the NPS includes industrial land along with other business activities such as retail, commercial, business and business parks. 3.4.3. Fonterra considers that this broad definition will create issues in practice as it includes a range of activities that are significantly different to each other, and have substantially different location and size requirements. For example, retail activities generally benefit from co-location with residential activities, and can often have small footprints whereas industrial activities are often land extensive. 3.4.4. There is the real risk for conflict between nearby residential and industrial land uses, and even potential conflict between different types of business activity (i.e. retail and industrial activities) if located within close proximity of each other. 3.4.5. In addition, the definition of "demand" and policies PA1, PB1 and PB5 provide minimal recognition of existing business land, and the different types of business land (in particular industrial land) required to enable sufficient development capacity for it. 3.4.6. The focus in the NPS is on enabling sufficient residential and business development capacity. However, in striving to achieve this objective it fails to adequately take into account the need to protect existing business activities, and in particular industrial activities, from the location of new sensitive activities within close proximity. 3.4.7. There are a range of unique factors to consider before redeveloping and developing land for industrial activities. Due to their size, Fonterra's manufacturing sites, in particular, have a number of constraints as to where they can be situated. In order to operate effectively, manufacturing sites require: Fonterra Co-operative Group Limited (15 July 2016) 7

(a) large lots away from activities that could cause reverse sensitivity effects and to enable the discharge of processing wastewater to land; (b) sufficient access to water; and (c) to be in close proximity to adequate road and rail transport links. 3.4.8. However, if all business and industrial activities are treated the same, there is the real risk that more sensitive business activities (i.e. retail) could be enabled in close proximity to one of Fonterra's manufacturing sites. 3.4.9. In giving effect to the NPS, local authorities must also provide for the specific requirements of industrial land. This will ensure current industrial activities are not only specifically provided for, but also protected from the establishment of sensitive activities in close proximity to them. 3.4.10. Fonterra supports the Business Land Assessment which is required under PB1 to estimate "the demand for different types and locations of floor area for the local business sectors". However, there needs to be greater direction in the NPS for local authorities to expressly provide for the functional and operational requirements of industrial activities, and policy mechanisms to ensure that reverse sensitivity effects can be avoided or managed. Such an approach will provide flexibility to industrial operators as to what land they redevelop, and what additional land they purchase and develop to meet demand. This greater flexibility will in turn lead to greater investment in industrial land. 3.4.11. To further recognise the functional and operational issues faced by industrial land users, Fonterra considers local authorities in carrying out their Business Land Assessments under PB1 should be required to estimate demand for different types and locations of lot sizes in addition to floor area. This will assist in developing Business Land Assessments that more fully take into account the requirements of industrial land, and enable local authorities to have a better basis on which to determine how to provide for sufficient development capacity. 3.4.12. Amendments to the definition of "demand" and the additional bullet points proposed for PA1 below will further assist in decision-makers providing for the functional and operational requirements of industrial land. 3.4.13. Fonterra also considers there should be greater provision in PB5 as to the range of indicators local authorities must monitor to ensure they are well-informed about the market's response to planning and the specific requirements necessary to develop industrial land. Relief sought 3.4.14. Amend the definition of demand as follows: Demand means: [ ] In relation to business land, the demand for floor area and lot sizes in the short, medium and long terms, having particular regard to: a) the quantum of floor area to meet forecast growth in different sectors; b) the demands of both land extensive and intensive activities; and c) the demand for different locations within the urban area; and d) the demand for different types and locations of lot sizes. 3.4.15. Insert the following bullet points in policy PA1: Fonterra Co-operative Group Limited (15 July 2016) 8

Providing for the functional and operational requirements of different business activities and development, specifically industrial activities. Providing for the outward expansion of different business activities to meet the demands of residential growth. Protection the ability for existing industry to continue operating and expand. 3.4.16. Amend the second bullet point of policy PB1 as follows: A Business Land Assessment that estimates the demand for the different types and locations of floor area and lot size for the local business sectors, and the supply of development capacity to meet that demand, in the short, medium and long terms. 3.4.17. Amend policy PB5 as follows: PB5: To ensure that local authorities are well informed about the market's response to planning, local authorities must monitor a range of indicators on a quarterly basis, or as frequently as possible, including: The relative affordability of housing, including the ratio of house price to income and the relative cost to rent; The increase in house prices and rents; The number of resource and building consents granted relative to the growth in population; Vacancy rates for business land; The increase in land value for business land; The number and type of lots available for different business activities; The number of lots available for business activities that are owned by a single entity; The proximity of business land to residential land; The ratio of the value of land between rural and urban zoned land; and The ratio of the value of improvements to the value of land within the urban area... 3.4.18. Provide detailed guidance on how local authorities should carry out the monitoring under policies PB1 to PB5, including local authorities specifically taking into account the different types of business land. 3.5. CONSULTATION Comment 3.5.1. PB4 requires local authorities when carrying out the Housing and Business Land Assessments to:...consult with infrastructure providers, community and social housing providers, the property development sector, and any other stakeholders as they see fit. Fonterra Co-operative Group Limited (15 July 2016) 9

3.5.2. The second bullet point of PD9 requires local authorities, when developing a future land release and intensification strategy, to: [t]ake into account the views of infrastructure providers, land owners, the property development sector and any other stakeholders as they see fit. 3.5.3. While industrial operators could potentially be considered as part of the "any other stakeholder" provision, local authorities need only consult with those other stakeholders "as they see fit". This means there is no assurance in the NPS that the relevant local authority will consult with key stakeholders when undertaking these critical pieces of work. Local authorities need to be directed to consult and take into account the different views of the business sector. 3.5.4. Consultation allows the business sector to inform local authorities as to the specific measures that need to be taken in order to protect current business activities, and provide for their functional and operational requirements. Industrial operators, like Fonterra are the best placed stakeholders to provide such information and should be consulted. 3.5.5. Fonterra also seeks clarification as to how consultation will take place in practice. In order to effectively implement policies PB4 and PD9, local authorities will need clear guidance from the Ministry as to how local authorities will identify appropriate stakeholders in the "business" sector to consult with. Relief sought 3.5.6. Amend policy PB4 as follows: PB4: In carrying out the assessments required under policy PB1, local authorities must consult with infrastructure providers, community and social housing providers, the property development sector, business sector, and any other stakeholders as they see fit. 3.5.7. Amend the second bullet point of policy PD9 as follows: Consult with and Ttake into account the views of infrastructure providers, land owners, the property development sector, business sector, and any other stakeholders as they see fit; 3.5.8. Provide detailed direction in a Ministry for the Environment guidance document on how local authorities should carry out consultation under policies PB4 and PD9, including a requirement that relevant industrial activities are consulted when residential and business land could potentially cause reverse sensitivity effects. 3.6. INFRASTRUCTURE Comment 3.6.1. Fonterra supports policies PC1-PC3 which promote a co-ordinated approach between local authorities and infrastructure providers to planning decisions, integrated land use and infrastructure planning, and responsive planning processes. 3.6.2. A lack of infrastructure is a common obstacle for the development of industrial land. 3.6.3. As towns and cities grow there is more pressure from residential activities placed on infrastructure. This increased pressure often requires improvements to current infrastructure, and/or the construction of new infrastructure. Fonterra Co-operative Group Limited (15 July 2016) 10

3.6.4. It is important that local authorities work closely with infrastructure providers when providing sufficient development capacity. This will assist in giving infrastructure providers greater awareness of where potential development will take place, and will allow more effectively planning for future infrastructure development to support the residential and business development the NPS promotes. 3.6.5. Fonterra questions how coordination will take place in practice. In order to effectively implement policies PC1-PC3 local authorities will need clear guidance from the Ministry for the Environment as to how local authorities and infrastructure providers will "work together" to ensure coordinated land use planning and infrastructure provision. Relief sought 3.6.6. Retain policies PC1-PC3. 3.6.7. Provide detailed direction in a Ministry for the Environment guidance document on how local authorities should implement policies PC1-PC3 and the coordinated approach with infrastructure, including guidance on: a) which infrastructure operators should be consulted in certain circumstances; b) how consultation will take place and in what capacity; and c) how to address disagreements between local authorities and infrastructure providers on data and projections used in the development of the Housing and Business Land Assessments. 3.7. MONITORING ASSESSMENTS Comment 3.7.1. Under PB1 and PB5 "[l]ocal authorities must have regard to the benefits of publishing" the Housing and Business Land Assessments and the results of local authorities monitoring of a range of indicators. Fonterra considers that local authorities should be required to publish the assessments and monitoring under the NPS, rather than merely have regard to the benefits of publishing them. 3.7.2. Requiring the assessments and monitoring to be published places an appropriate check on the local authorities that they are effectively carrying out the objectives and policies of the NPS. If a local authority decides not to publish its assessments and monitoring, key stakeholders will struggle to determine whether appropriate monitoring is being undertaken by the local authorities and whether key indicators are being taken into account. 3.7.3. The assessments also provide critical information to the industrial, business and development sector as to potential future demand for activities and allows them to forecast with greater clarity the community's needs in the short, medium and long terms. Relief sought 3.7.4. Amend the last sentence of policy PB1 as follows: Local authorities must have regard to the benefits of publishing the assessments under policy PB1. 3.7.5. Amend the last sentence of policy PB5 as follows: Fonterra Co-operative Group Limited (15 July 2016) 11

Local authorities must have regard to the benefits of publishing the results of its monitoring under policy PB5. 3.8. IMPLEMENTATION OF THE NPS Comment 3.8.1. Implementing the NPS will be a complex process. Fonterra therefore strongly supports the creation of a technical working group that includes industrial operators along with local authorities, infrastructure providers and developers that develops guidance material on how the NPS should be given effect to. 4. CONCLUSION 4.1.1. Fonterra recognises the need for sufficient residential and business development capacity. However, reverse sensitivity effects must be taken into account when providing for such development so that residential and business land is located in appropriate areas that do not restrict the operations of often well-established industrial activities. In order to achieve this, effective management of reverse sensitivity effects must be provided for in the NPS. In addition, there needs to be greater direction in the NPS in relation to business land and in particular the specific requirements of industrial land. Fonterra Co-operative Group Limited (15 July 2016) 12