WHO SHOULD READ THIS
- Holding companies and financial beneficiaries of Queensland projects that involve an environmentally relevant activity.
THINGS YOU NEED TO KNOW
- The Agriculture and Environment Committee has released its report on the Bill, which would expose a ‘related person’ of an operator in Queensland to environmental protection orders and rehabilitation costs.
- The Agriculture and Environment Committee could not agree whether the Bill should be passed even with the amendments proposed in its report.
- The Bill looks likely to pass this week.
Do you have a ‘relevant connection’ to an environmentally relevant activity? Are you a ‘related person’? If so there is work to be done to understand and best manage your increased environmental risk.
With the increasing likelihood that the Environmental Protection (Chain of Responsibility) Amendment Bill 2016 (Bill) will take effect – with or without amendment – as early as this week, ‘related persons’ and anyone who may have a ‘relevant connection’ to an environmentally relevant activity will now have exposure to all environmental risk related to that activity.
The amendments to the Environmental Protection Act 1994 (Qld) (EP Act) proposed by the Bill would expose ‘related persons’ of companies – including those with a ‘relevant connection’ – to Department of Environment and Heritage Protection (DEHP) enforcement of clean-up or rehabilitation costs through an Environmental Protection Order (EPO).
As noted by the Queensland Law Society in its submission to the Queensland Parliament’s Agriculture and Environment Committee (AEC):
As currently drafted, related persons may be made accountable for a company’s obligations, or liable for a company’s financial responsibility, as the person carrying the primary obligation and without it being established that the related person contributed to or was aware of conduct which resulted in the company failing to meet those obligations.
On 15 April 2016, the AEC released its report on the Bill and was unable to agree whether it should be passed, even should its recommendations be adopted. Since then, however, on 18 April 2016, Linc Energy entered voluntary administration. This appears to have spurred a sense of immediacy around the Bill, which looks likely to result in it being passed this week.
In its report, the AEC made a number of recommendations to amend the Bill, but even as amended its primary function would remain. The AEC has expressed support for the intent of the Bill, but it could not agree that the Bill should be passed even with the amendments proposed in its report.
The AEC ran through each category of person or company the subject of DEHP’s new enforcement powers under the Bill:
- the AEC supported the designation of a parent or ‘holding company’ as being a related person of its subsidiary for the purposes of the Bill.
- the AEC recommended that the Bill be amended to let landowners off the hook, recognising as set out in the submission of the Queensland Resources Council (QRC) that there are circumstances where a third party grazier or agriculturalist may be liable even where there is no connection to, influence over or financial interest in the operations that caused the harm to be remediated.
- the broadest category of ‘related persons’ under the Bill are those that DEHP determines holds a ‘relevant connection’ to the company that caused the harm. Under the Bill, DEHP may 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.
The mind races trying to grasp the myriad of unforeseen consequences that this definition could, in theory, sustain. The Bill does provide a list of factors that DEHP may take into account in making a determination that a ‘relevant connection’ exists. These factors are broadly drafted, and are discretionary.
The AEC recommended that the Bill be amended to require the Minister to table in Parliament a statutory guideline that will stipulate the manner in which DEHP will administer the provisions dealing with the issue of EPOs to related persons, including DEHP’s consideration of the listed factors for determining a person’s ‘relevant connection’ to a company. Of course, these guidelines if tabled will need to be carefully reviewed and understood - and may inform your environmental risk mitigation efforts moving forward.
It will become incumbent on holding companies and other ‘related persons’ to better understand and reduce the environmental risks of the relevant operations as well as their exposure to them.
A holding company’s ability, for example, to access information and influence the decision making of its subsidiaries takes on a new light should the Bill be passed. Strategies will need to be established to deal with these matters having regard to director duties and responsibilities and restrictions and limitations under the Corporations Act 2001 (Cth) (Corporations Act), particularly where a holding company is not the only shareholder of a subsidiary.
Submitters also raised concerns about replicated liabilities of executive officers under the Corporations Act. As a point of clarification, the AEC invited the Minister to assure the House that the liabilities and obligations the Bill seeks to impose on executive officers do not duplicate or interfere with responsibilities imposed under the Corporations Act or the Council of Australian Governments principles of executive officer liability.
Notably, the AEC’s recommendations did not include the deletion or paring back of this category of ‘related persons’, despite numerous submissions to that effect.
Environmental Protection Orders
EPOs are a handy enforcement tool for DEHP. They can be a trigger for capex or opex, for one-off works or ongoing remediation and monitoring. Under the Bill, they may be used to require a ‘related person’ to:
- take action to prevent or minimise the risk of serious or material environmental harm
- take action to rehabilitate or restore land because of the environmental harm, or
- give DEHP a bank guarantee or other security to back compliance.
With the important caveat noted above that the AEC could not agree that the Bill should be passed even as amended, the AEC generally agreed with the use of EPOs as an enforcement tool should the Bill become law. However, the AEC did recommend that the Bill be amended so that the administering authority may only issue an EPO to a related person if the authority has also issued an EPO in the same terms to the company, where the company is still in existence.
The AEC remained silent on the Bill allowing DEHP to issue a cost recovery notice to a ‘related person’ who has received an EPO if the person fails to comply and DEHP steps in to carry out the work.
Percentage of FA as condition to grant of stay
The Bill proposes that a decision about the amount of financial assurance (FA) required under an environmental authority may not be stayed by a Court unless at least 85% of the disputed amount of FA, as calculated by DEHP, is paid. This would mean that a company that disagrees with an FA decision would need to front 85% of DEHP’s calculated amount while contesting the decision in Court.
The Association of Mining and Exploration Companies (AMEC) submitted that the rights of companies would be severely curtailed by removing the effectiveness of a Court ordered stay. Similarly, the QRC submitted that this is an onerous position, particularly where a proponent and DEHP are far apart in the calculation and assessment of an appropriate amount of FA, and further, that it assumes the calculations of DEHP will never be incorrect by more than 15%.
The AEC agreed with the submissions of AMEC, the QRC, as well as the Queensland Environmental Law Association and other stakeholders that requiring 85% of the disputed assurance amount of FA to be paid while the matter is heard by a Court is an onerous requirement. Accordingly, the AEC recommended that the Minister direct his department to consult with stakeholders to identify a less onerous percentage than the 85% proposed. While this recommendation recognises certain stakeholder concerns, it does not change the substantive obligation on proponents that is proposed by the Bill.
The AEC noted that a number of submitters raised concerns about the liabilities associated with abandoned mines and the adequacy of the FA framework for ensuring that mines are properly rehabilitated in Queensland. The AEC did not make a recommendation on this aspect of the inquiry. However, as a point of clarification, the AEC invited the Minister to inform the House on the administration of the FA framework by his department. This would include information on the numbers of mining, mineral processing, gas and petroleum sites in Queensland, the numbers of sites against which FA is held, the amount of FA held and the proportion of these sites held by companies deemed ‘high risk’.
Remarkably, the Bill proposes to amend section 476 of the EP Act to provide that self-incrimination is no longer a reasonable excuse for an individual the subject of an investigation into a breach of the EP Act to refuse to answer a question. The Bill does provide that self-incriminating evidence procured in this way should not be used against the individual, but ‘pleading the 5th’ as we have all learnt from US crime dramas is no longer available when fronted by DEHP.
The House will debate the need for any amendments during the second reading of the Bill when Parliament resumes sitting this week on 19, 20 and 21 April 2016.
Despite the far reach of the Bill as highlighted by the AEC report and dissenting stakeholder submissions, Environment Minister Steven Miles hopes to have the Bill passed by the end of the week.