Companies will face increased penalties and additional financial obligations under proposed amendments to the NSW land contamination regime.

What has happened?

The NSW Government has recently introduced a bill 1 which proposes substantial amendments to the Contaminated Land Management Act 1997(NSW) (CLM Act).

The key changes include:

  • a new power for the Environment Protection Authority (EPA) to require financial assurance in the form of a bank guarantee or bond to cover management orders, and
  • an increase in the maximum penalty for a company to $1million for a number of offences.

In addition, the EPA has released new draft guidelines 2 on the duty to report contaminated land contained in section 60 of the CLM Act (Duty to Report).

Who needs to know?

All companies:

  • that own land or develop land in New South Wales,
  • whose current or past activities could have caused contamination to land in New South Wales, or
  • that are currently subject to a management order, approved voluntary management proposal or an ongoing maintenance order under the CLM Act.

Changes to the Contaminated Land Regime

Financial Assurance

The Bill grants the EPA a new power, when issuing a new management order, to require the provision of a financial assurance.

The EPA will be able to claim on a financial assurance to recover the reasonable costs or expenses incurred when it carries out remediation work or directs remediation work to be carried out by a third party.

The financial assurance may take the form of a bank guarantee, bond or another appropriate form of security. The amount of the financial assurance:

  • will be determined by the EPA, and
  • cannot exceed the total likely costs of carrying out the remediation action.

The EPA may require the undertaking of an independent assessment of these costs.

This power will not extend to management orders, approved voluntary management proposals or ongoing maintenance orders which are already in force. However, the EPA could revoke existing orders and issue new orders with financial assurance requirements.

The EPA cannot require a person to provide a financial assurance unless it is satisfied that the requirement is justified having regard to:

  • the degree of risk of environmental harm associated with the person’s activities,
  • the remediation work that may be required because of those activities, and
  • the environmental record of the person.

Increased penalties

Passage of the Bill will result in significantly increased maximum penalties for a number of offences under the CLM Act. For a company, the new maximum penalties will be:

  • $1million for a failure to report contamination and $77,000 for each day the offence continues,
  • $1million for a failure to comply with a management order and $66,000 for each day the offence continues,
  • $1million for a failure to comply with a requirement of an authorised officer or the EPA and $66,000 for each day the offence continues, and
  • $1million for providing false and misleading information to the EPA.

In addition, the maximum penalty for directors and officers will be increased to $250,000 where they are liable for breaches under the existing ‘executive liability’ provisions contained in the CLM Act .

New powers for the LEC

The Bill grants the New South Wales Land and Environment Court (LEC) the power to make a range of further orders, in addition to the prescribed penalty, when sentencing for offences against the CLM Act. The further orders may require a company:

  • to publicise an offence or notify specified persons of an offence,
  • to make a financial assurance for restorative work,
  • to pay an additional penalty representing the value of any financial or economic benefit gained by the company as a result of the offence, and
  • to carry out a restoration or enhancement project or for the public benefit.

There is no express monetary cap on the last two of these additional orders.

Enforceable undertakings

The Bill will allow undertakings to be made in relation to contamination, and will give the EPA power to accept and enforce them in the LEC. This power mirrors the EPA’s power under section 253A of the Protection of the Environment Operations Act 1997 (NSW) (POEO Act).

The LEC will have broad discretionary powers, including:

  • to order the person to comply with the undertaking, and
  • to order the person to pay an amount corresponding with any financial benefit received by the person or any loss suffered by another party, and
  • to suspend or revoke any environment protection licence held by the person under the POEO Act.

Draft Reporting Guidelines

Revised reporting criteria

The Duty to Report requires anyone whose activities have contaminated land and an owner of contaminated land to notify the EPA as soon as practicable:

  • if the level of contamination exceeds a level set out in the relevant guidelines adopted by the EPA, and people have or will foreseeably be exposed to the contaminant, or
  • if the contaminant has entered or will foreseeably enter neighbouring land, the atmosphere, groundwater or surface water, and it exceeds a level specified in the guidelines.

Failure to report contamination is an offence and can result in significant fines for both companies and individuals.

The Draft Guidelines set out new and revised levels of land contaminants which will trigger the Duty to Report, by incorporating important changes recently made to the National Environment Protection (Assessment of Site Contamination) Measure (NEPM).

The previous NEPM criteria for investigation levels were subject to criticism on the grounds that not all contaminants were included and the potential exposure pathways for a contaminant, such as vapour, were not taken into account.

In May 2013 the NEPM was amended to include:

  • revised methodology for deriving health investigation levels (HILs) for soil, groundwater and vapour,
  • new HILs and health screening levels (HSLs) for additional contaminants, and
  • information relating to the investigation and assessment of asbestos contamination in soil.

The key changes effected by the Draft Guidelines are as follows:

Asbestos

The Draft Guidelines now outline a requirement to notify of asbestos contamination if:

  • friable asbestos is present in, or on, soil,
  • the concentration is equal to or above the HSL specified in the NEPM, and
  • a person has been, or foreseeability will be, exposed to the asbestos fibres by breathing them into their lungs.

According to the Draft Guidelines, the Duty to Report is not intended to capture sites with non-friable asbestos materials in soils, naturally occurring asbestos, or incidents of illegal asbestos dumping.

Vapour intrusion

Notification of contamination will be required where risks are presented by a vapour inhalation pathway, specifically where:

  • the contaminant reaches and will continue to remain above the HIL, soil vapour HSL or groundwater HSL specified in the NEPM, and
  • a person has, or foreseeably will be, exposed to the contaminant or any by-product of the contaminant.

Air quality

The Draft Guidelines do not contain air quality threshold levels that would trigger the Duty to Report. However, the Draft Guidelines recommend reporting where contamination of soil or groundwater affects air quality and there is a risk of people breathing the air.

Changes to the POEO Act

The Bill also proposes amendments to the POEO Act, including:

  • removing the requirement for the EPA to notify a company that it intends to suspend or revoke an environment protection licence,
  • removing the power of the LEC to stay a decision to suspend or revoke an EPL, and
  • granting the EPA the power to require vehicles transporting waste to install and maintain a GPS tracking device.

What will happen next?

Public consultation on the Draft Guidelines closed on 8 August 2014. Once finalised, the Draft Guidelines will be issued by the EPA and the former guidelines will be revoked.

The Bill has had its second reading speech on 12 August 2014 and is currently awaiting debate in the Legislative Assembly.

Implications

Companies, directors and other affected individuals should track the progress of the Bill and the Draft Guidelines so as:

  • to remain compliant with their obligations under the CLM Act, and
  • to be aware of the new powers granted to the EPA to require financial assurance and accept and enforce undertakings for sites regulated under the CLM Act.

The importance of strict compliance with the Duty to Report is highlighted by the increased penalties for both companies and directors and managers.

Jacki Oliver and John Zorzetto