Holders of NSW environment protection licences (EPLs) face significant changes to regulatory intervention and administrative fees with the introduction of a risk-based licensing framework.

The aim of risk-based licensing is to ensure that all licensees are regulated based on the level of environmental risk they pose.

Introducing a key part of this framework, the Protection of the Environment Operations (General) Amendment (Licensing Fees) Regulation 2014 (Regulation) was published on 2 May 2014. The Regulation establishes a regime whereby annual administrative fees for EPLs are calculated to reflect the environmental risks posed by licensees.

The commencement of the Regulation is staged. Provisions commencing on 1 July 2014 relate to increases to the indexing of fees and fee units. Provisions introducing the risk-based fee calculation commence in 2015 and 2016, with new fees payable from the 2016/17 financial year.

Increases to indexing of fees

On 1 July 2014, provisions of the Regulation commenced to increase:

  • administrative fee units for the purposes of calculating EPL fees;
  • pollutant fee units for the purposes of calculating load-based EPL fees; and
  • fees payable for clean-up notices, prevention notices and noise control notices.

Risk-based regulatory intervention

Site-specific risk assessments of licensed premises will be undertaken by the EPA. The EPA will consider:

  • day-to-day operations at the site, assessing air, odour, water and noise emissions as relevant to the premises;
  • the risk of pollution at the premises; and
  • the licensee's environmental management performance.

Licensees will be allocated an environmental risk level of 1, 2 or 3, with level 3 representing the highest risk.

These risk assessments will inform the type and degree of regulatory intervention by the EPA. A level 3 licensee, may be subject to intensive monitoring and reporting obligations on their licences. Meanwhile, a level 1 licensee may benefit from a reduced regulatory burden.

Both internal and external review mechanisms will be available in relation to the EPA's determination of risk levels.

Further, reviews of risk levels may be triggered, for example, by completing a pollution reduction program or if an environmental incident occurs.

As of May 2014, EPA officers are progressively conducting risk assessments in consultation with current licensees. Determinations of risk levels and their publication on the EPA's Public Register will commence from 1 July 2015.

The EPA provides a risk assessment tool to assist licensees in understanding the risk assessment process.

Risk-based fees

Under the risk-based scheme, administrative fees will be calculated in accordance with the EPA's Environmental Management Calculation Protocol, issued in May 2014 (Protocol).

Currently, administrative fees for EPLs are calculated by multiplying the amount of one administrative fee unit, by the number of units for the activity being authorised or controlled by the EPL (Total Administrative Fee Units). The number of units allocated depends on the nature and size of the activity.

Under the Protocol, additional steps will be added to this process. A licensee will be placed in one of five environmental management categories, A to E, based on the:

  • licensee's compliance history;
  • number and nature of EPA regulatory actions in response to incidents and non-compliance;
  • environmental management systems and practices that the licensee has in place to mitigate environmental risks; and
  • environment improvement programs and works initiated by the licensee.

Each category is allocated an environmental management factor. The Total Administrative Fee Units are multiplied by this factor to calculate the fee payable.

As outlined in the table below, Category A licensees, meeting the highest environmental performance standards in the Protocol, will receive a 5% discount on their fee compared to a Category B licensee.  At the other end of the spectrum, Category E licensees with the lowest environmental performance, will pay double the fee of Category B licensees.

Click here to view table.

A licensee’s environmental management category will be assessed annually. If a licensee has voluntarily completed environmental improvement works in the 12 months prior to assessment, they may be placed in a higher category. Conversely, if there have been pollution incidents or non-compliance with licence obligations, a licensee may be placed in a lower category.

Environmental management categories for licensees will be determined progressively from 1 July 2015. They will be included in the calculation of fees payable in the 2016-2017 financial year. 

Implications for NSW licensees

The introduction of risk-based fees means that:

  • there is potential for higher risk, larger scale activities to be subject to disproportionate fee increases;
  • a licensee that breaches its licence or commits a pollution offence may be both subject to a penalty and required to pay increased licence fees, and the increased licence fee may be much higher than the penalty imposed; and
  • as a result, licensees will have a strong financial incentive to implement environmental management systems to minimise environmental risk.