Biodiversity SODAs: a new offsetting pathway for major energy transition projects in NSW

• SODAs provide a new, flexible pathway for proponents of major energy transition projects in NSW to meet their biodiversity offset obligations under the Biodiversity Conservation Act 2016 (NSW) (BC Act) and the EP&A Act.

• By entering into a SODA:

  • the NSW Department of Climate Change, Energy, the Environment and Water (DCCEEW) (through the Environment Agency Head) will be responsible for undertaking particular biodiversity conservation actions specified in the SODA, which must include:

    • the retirement of like-for-like biodiversity credits; and/or

    • the funding of a biodiversity conservation action that would benefit the relevant threatened species or ecological communities;

  • these actions may be carried out in relation to the development as a whole or in stages and must be consistent with the conservation investment strategy that identifies priority investment areas and actions for a region

  • the proponent pays DCCEEW to undertake those actions

  • the proponent’s requirement to retire biodiversity credits under the applicable planning approval would be deemed to be satisfied.

• However, SODAs can only be executed after the relevant planning approval is granted. Therefore, proponents will still need to undertake the same environmental assessment processes to ascertain their biodiversity offset liability.

• A proponent may determine that SODAs are the appropriate offset mechanism for them to comply with biodiversity offset obligations under a planning approval based on several factors, including:

  • that the SODA simplifies the ability to satisfy biodiversity offset requirements under the applicable planning approval by delegating obligations to the Environment Agency Head

  • the SODA has the potential to be a more cost-effective way of satisfying an approval holder’s biodiversity offset obligation than purchasing offsets or paying into the Biodiversity Conservation Fund

  • the SODA mechanism supports the efficacy of the NSW Biodiversity Offset Scheme by maximising biodiversity outcomes in line with the applicable conservation investment strategy.

The introduction of SODAs is a significant step in the NSW Government's broader strategy to integrate biodiversity conservation into major project planning and execution in light of the recommendations of the Final Report of the Independent Review of the Biodiversity Conservation Act 2016 (NSW) (Henry Review) and committed actions under the NSW Plan for Nature. These important documents promote the creation of a new offsets mechanism to maximise strategic biodiversity outcomes and facilitate the development of government priority projects.

A significant number of large-scale energy generation, storage and transmission infrastructure projects must be rapidly developed across the state to achieve the NSW Government’s emissions reduction goals under the Climate Change (Net Zero Future) Act 2023 (NSW) and the infrastructure investment objectives under the EII Act. While such energy transition projects will drive demand for biodiversity credits, there is insufficient supply of the types of credits needed to meet the biodiversity offsetting obligations for these projects. According to the Henry Review, forecasts show the number of credits needed each year through to 2030 will be at least double the number created in 2022-23. Unless alternative approaches are implemented (such as via SODAs), these projects may need to pay into the Biodiversity Conservation Fund, delaying the benefits of restoration actions and increasing compliance costs significantly.

At a critical juncture of state-wide biodiversity decline, SODAs represent a significant opportunity to deliver coordinated investment in NSW biodiversity. SODAs can help address the impending supply constraints by facilitating strategic government action to deliver biodiversity offsets and other conservation actions, as well as reducing the cost of energy transition projects for proponents, taxpayers and consumers.

To ensure the conservation actions delivered under a SODA align with this strategic approach, the Environment Agency Head will be required to carry out such actions in a way that is consistent with the conservation investment strategy for the relevant region. A conservation investment strategy defines the regional priorities for biodiversity protection, habitat connectivity, climate resilience, perpetual conservation outcomes and benefits to landholders. By way of example, the Conservation Investment Strategy for the Central-West Orana REZ published on 13 May 2025 identifies the key strategic conservation priorities in the Central-West Orana region. The Central-West Orana conservation priorities include:

• establishing and restoring vegetation and habitat corridors

• restoring degraded vegetation and habitat

• protecting and managing areas of high-quality vegetation and habitat amongst the highly cleared landscapes of the region.

Below is a high-level overview of the planning approval pathway where the proponent enters into a SODA with the Environment Agency Head.

The first SODA is already being primed. Pursuant to the new requirements under the BC Regulation, the Environment Agency Head gave notice on 9 May 2025 of their intention to enter into a SODA with EnergyCo in respect of the Central West Orana Renewable Energy Zone Transmission Project. With the rollout of renewable energy infrastructure across the five REZs in NSW a key government priority, entering into a SODA can provide a new, flexible pathway for proponents of major projects to meet their biodiversity offset obligations and provide the opportunity for proponents to contribute to strategic biodiversity outcomes.

Proponents considering using a SODA to satisfy their offset obligations under a planning approval should:

• Engage early with DCCEEW, the NSW Department of Planning, Housing and Infrastructure and the relevant consent authority to understand whether the SODA pathway is viable for the project.

• Where an eligible project also requires approval under the Environment Protection and Biodiversity Conservation Act 1999 (Cth), engage early with both the state and federal stakeholders. Early engagement provides an opportunity can help align offset obligations across both jurisdictions through the use of a SODA, where possible.

• Consider the implications of employing a SODA against the other offset mechanisms available to the proponent under the Biodiversity Offset Scheme; and look to incorporate the proposed use of a SODA into its planning application materials (including environmental impact statement and biodiversity development assessment report) and advocate for that appropriately.

A summary of the key eligibility criteria and requirements for entering into a SODA is included in the appendix below to assist proponents in determining whether a SODA is a viable biodiversity offsetting pathway for their project.