More persons and entities, such as related persons or companies, could be required to clean up or pay for compliance or rehabilitation of land under proposed amendments included in the Environmental Protection (Chain of Responsibility) Bill 2016.
What are the changes?
The Bill proposes to implement various mechanisms to prevent and remediate environmental harm by expanding the liability of entities who are related companies, a landowner or another person the Department of Environment and Heritage Protection (DEHP) decides has a relevant connection (generally a financial or management connection) with the company.
The Bill also allows DEHP to impose financial assurance conditions on the transfer of an environmental authority and extends DEHP's cost recovery, investigation and enforcement powers.
Many of the amendments will take effect retrospectively, which is directed at ensuring that companies cannot now change control or structures to avoid the impact of the proposed changes.
How the chain of responsibility laws would work
The "chain of responsibility" amendments are relevant to the circumstances in which an environmental protection order has issued or when a company becomes a "high risk company".
The Bill allows an environmental protection order to be issued to a "related person" of the company and to a related person of a high risk company where the company is undertaking an environmentally relevant activity.
An environmental protection order can require management actions, rehabilitation and restoration actions and bank guarantees or other securities to ensure compliance with the Environmental Protection Act 1994.
The key terms are "related person" and "high risk company":
- a "related person" is a holding company, a landowner or another person DEHP decides has a relevant connection (generally a financial or management connection) with the company. In the Minister's first reading speech it is stated that it is not intended that the chain of responsibility will attach itself to genuine arm’s-length investors, such as merchant bankers or mum-and-dad investors or impact contractors or employees, although this is not carved out in the Bill;
- a "high risk company" is a company in external administration or an associated entity of the company in external administration.
DEHP decides who has a relevant connection with the company based on a broad range of considerations.
In addition to being able to impose any requirement on the related person that could be imposed on the high risk company, the environmental protection order may require a related person to:
- comply with any requirements to secure compliance (including in relation to an environmental authority that is no longer held by the company);
- take action to prevent or minimise environmental harm including from contaminants on land on which the activity has been carried out, regardless of whether the activity was the source of the contaminants;
- rehabilitate or restore land from an environmentally relevant activity or from contaminants regardless of whether the activity was the source of the contaminants;
- give a bank guarantee or other security to secure compliance with the environmental protection order.
Why should I comment on the Bill?
This Bill would introduce potentially far-reaching changes, and may require corporate entities to consider and obtain advice on potential liabilities for prevention and remediation of environmental harm in appropriate circumstances.
The Bill was introduced without proceeding through consultation external to Government, but it has been referred to the Agriculture and Environment Committee to report by 15 April 2016.