Who should read this

  • Financial beneficiaries of Queensland projects that involve an environmentally relevant activity including any company which has a subsidiary involved in Queensland projects carrying out this type of activity.

Things you need to know

  • The Queensland Parliament has passed the Chain of Responsibility Bill.
  • Key amendments were made to the Bill before it was passed as law, reinforcing the need for holding companies and other related persons to take steps to understand and manage their increased exposure to environmental risks.

Late on 21 April 2016, the Queensland Parliament passed the Environmental Protection (Chain of Responsibility) Amendment Act 2016 (Act).

The Act amends the Environmental Protection Act 1994 (Qld) (EP Act) so that an environmental protection order (EPO) enforcing clean up and rehabilitation costs may be issued to a ‘related person’ of a company operating in breach of an environmental authority.   ‘Related person’ is widely defined to include those determined to hold a ‘relevant connection’ – including on the basis of receiving a financial benefit or being in a position to influence compliance.

The Environmental Protection (Chain of Responsibility) Amendment Bill 2016 (Bill) was amended during debate in Parliament last night before it was passed as law.  The primary function of the new law remains.

A key message for holding companies and other related persons is that they must take ‘all reasonable steps’ to ensure environmental compliance and that the operating entity has made adequate provision for clean up costs.

All reasonable steps to ensure compliance

The clear intent of the Act is to expose holding companies and anyone else with a ‘relevant connection’ to the costs of environmental non-compliance.

In deciding whether to issue an EPO to a ‘related person’, the Department of Environment and Heritage Protection (DEHPmay under the Act as passed consider whether the related person took all reasonable steps to ensure the operator both complied and made adequate provision for clean up costs.In doing so, DEHP should have regard to the extent of the company’s ability to influence the operator’s conduct.

We would expect in the resources space that the provision of financial assurance (FA)should be considered by DEHP to be adequate provision for clean up costs.

In short, ‘related persons’ must review their procedures and consider how they would demonstrate if needed that they took ‘all reasonable steps’.

'Significant' financial benefit

The broadest category of ‘related persons’ under the Act remains those that DEHP determines hold a ‘relevant connection’ to the company that caused the harm.

It its original form, the Bill proposed that DEHP could make such a determination where satisfied:

  • the person is capable of benefiting financially, or has benefited financially, from carrying out a relevant activity of the company, or
  • the person is, or has been at any time during the past two years, in a position to influence the company’s compliance with the EP Act.

As passed, the Act has upped the ante such that DEHP must be satisfied that the person has or is capable of “signficiantly benefiting financially”.  While this provides little in the way of certainty, entities such as minority share-holders or short-term beneficiaries of environmentally harmful activities may take some comfort from the intent heralded by the change.

Land owners

The Bill initially proposed to capture all owners of land on which a company carries out or has carried out a relevant activity.

As recognised in the Agriculture and Environment Committee report, this had the potential of holding a vast range of persons accountable for a company’s obligations, or liable for a company’s financial responsibilities, where those persons may not have been in a position to influence or have control over the activities of a company.

Concerned by the Bill were persons with interest in freehold land, native title parties, third party graziers or agriculturalists.

Land owners underlying resources projects (other than related entities of the operator) have been given a reprieve under the Act as passed.  Also let off the hook are those who are capable of or who have significantly benefited financially under an agreement relating to native title or cultural heritage, under a compensation arrangement made pursuant to resources legislation or under a make good agreement pursuant to the Water Act 2000.

FA as condition to grant of stay

Under the Act as passed, a decision about the amount of FA required under an environmental authority may not be stayed by a Court unless at least 75% of the disputed FA amount, as calculated by DEHP, is paid.  This means that a company that disagrees with an FA decision will need to pay 75% of DEHP’s calculated amount while contesting the decision in Court.

2 year review

Interestingly, the Minister must under amendments to the Act review the operation of the new provisions within 2 years of their commencement to determine whether they remain appropriate.

Guidelines

As passed, the Act requires DEHP to consider any relevant statutory guidelines when deciding whether or not to issue an EPO.  The development of guidelines under this provision will be key to industry’s understanding of this new environmental exposure and how best to manage it.