The Protection of the Environment Operations (General) Amendment (Licensing Fees) Regulation 2014 (Licensing Fees Regulation) will progressively take effect from FY14/15, so that from FY16/17 administrative fees for environment protection licences (EPLs) under the Protection of the Environment Operations Act 1997 (POEO Act) will rise or fall in each reporting period – based on the environmental performance of the licensee.

In each reporting period from FY16/17, the EPA will multiply the licence fee for an EPL by an ‘environmental management factor’ of between 0.95 and 2.0, based on the ‘environmental management category’ of the licensee for that reporting period. The manner in which the ‘environmental management category’ for a licensee is to be determined is not prescribed in the Licensing Fees Regulation itself. Instead, the environmental management categories are to be determined by an Environmental Management Calculation Protocol (Protocol) issued by the EPA (a draft of which is available from the EPA’s website).

The Licensing Fees Regulation provides that the Protocol may be varied by the EPA from time to time by notice published in the Gazette. This creates a degree of risk for the industry because, whilst the EPA will undoubtedly consult before making any changes to the Protocol, the calculation of the environmental management categories may be varied in the future without going through Parliament, as would be required for an amendment to a Regulation.

When will the environmental management factor apply?

Even though the environmental management factor will not apply until 2016, the calculation of the environmental management factor in 2016 will be based on the environmental performance of licensees from FY14/15.

The environmental management factor will not apply to a new licence application or for the transport of trackable wastes.

Environmental management categories

The Protocol explains that the environmental management category for a licensee will be determined based on a ‘total environmental management score’, such that on either end of the spectrum:

  • a very low score will result in a ‘Category A’ determination and an environmental management factor of 0.95 will be applied to the licence fees
  • a very high score will result in a ‘Category E’ determination and an environmental management factor of 2.0 will be applied to the licence fees.

The ‘total environmental management score’ will be calculated based on the following formula:

Click here to view table.

Environmental management score

The total environmental management score will be calculated as the sum of the yearly regulatory score for the previous three reporting years.

Each yearly score will be calculated by multiplying the number of regulatory actions in that year (e.g. successful prosecutions, enforceable undertakings, penalty notices, official cautions, notices etc.) by a specified weighting, based on:

  • the seriousness of the regulatory action (e.g. a successful Tier 1 prosecution will have a higher weighting than a formal warning)
  • the year in which the regulatory action occurred i.e. regulatory actions in the past 12 months will be weighted more heavily than a regulatory action that occurred two or three years prior.

The environmental performance ‘trend’ of a licensee will also be taken into account so that where improvement is demonstrated in the past three years or regulatory actions were isolated events, then those actions may not be included in the environmental management score calculation.

Total environmental management score reduction

The ‘total environmental management score reduction’ will be calculated based on the following formula:

Click here to view table.

The licensee environmental management systems and practices score reduction is achieved where a licensee has implemented environmental management systems and practices. A licensee who has an environmental management system (EMS) certified to ISO 14001 or any other demonstrated equivalent system will achieve the highest score – provided that the licensee has conformed to the EMS or rectified any non-compliances.

To achieve a score reduction for completed environmental improvement works or environmental improvement programs, the works or programs must, most relevantly, be: ‘outside of those required to achieve compliance with legislative requirements under the POEO Act or Regulations or any licence conditions.

Risk-based licence supervision

The Protocol also provides that in each reporting period the EPA will make a risk assessment of an EPL based on:

  • the day-to-day operations at the site, assessing the types of environmental media relevant to the premises (air, odour, water and noise emissions)
  • the pollution incident risk at the premises
  • the environmental management performance of the licensee (as discussed above).

From the risk assessment the EPA will assign a risk level of 1 (being the lowest risk) to 3 (being the highest risk) to each EPL. The risk level will affect the extent of regulatory intervention imposed on an EPL. For example, the Protocol states that a higher risk level may result in ‘more intensive monitoring and reporting obligations.’