New Zealand: Dairy Matters: effluent discharges

Last Updated: 16 September 2015
Article by Dan Winfield

In this edition we look at:

  • Big fines now also for "little" offences: a brief look at how fines for minor effluent discharges are on the increase.
  • Effluent discharge fines and low payouts: we consider the level of effluent fines in view of the current low dairy payouts.
  • Can dairy cows discharge effluent?: a heads-up of Forest & Bird's High Court declaration application that could see resource consents needed for all dairy farming.

Big fines now also for "little" offences

Small, one-off dairy effluent discharges do not tend to grab headlines in the same way as the fines of $100,000 to $200,000 fines imposed for serious cases of multiple and on-going dairy effluent discharges. Farmers should take note that higher fines are no longer just for only the really bad, serious or repeat offenders; good operators who have a momentary lapse now also face significant penalties.

Specifically, in a number of recent cases the Courts have noted that the maximum starting point for the least serious category of offending has increased from $30,000 to $40,000. These cases fall into the lowest of the three categories of seriousness, which is reserved for one-off incidents not part of a wider systemic problem, without any significant or lasting environmental harm. A starting point at or near $40,000 applies where effluent did enter surface water, even if no demonstrable damage occurred. Even with the maximum credit that might be applied for good character, remorse and early guilty plea, the end fine for such cases is still frequently over $25,000. If there has been a similarly minor incident in the preceding three years the fine will quickly top the $30,000 mark.

Starting points will be lower where the effluent did not reach surface water, but even for those cases starting points below $20,000 are becoming increasingly rare and end fines significantly below $15,000 are correspondingly rare as a result.

All of these involve offences for which the person being convicted and fined need not have had any negligence or intent, but is held vicariously liable for an employee's or contractor's slipup. Invariably they cannot avoid liability because there were some proactive steps that with hindsight they could have taken which would have avoided the discharge. Examples include better training and monitoring of the employee, increasing the size of storage ponds or requiring staff to monitor irrigators frequently to avoid ponding.

The upshot is that any dairy effluent-related non-compliance should now be treated as a significant incident with potentially serious liability consequences. This trend will not be reversed. Farmers need to be more proactive than ever to ensure that all infrastructure, training, management and systems meet industry best practice for avoiding ponding, runoff and other associated breaches. These costs are likely to be smaller than the steadily increasing fines that would result from even minor non-compliance.

Welcome to Dairy Matters, Duncan Cotterill's update on environmental case law and regulatory developments of interest for the dairy sector.

Effluent discharge fines and low dairy payouts

Many dairy farmers coming up for sentencing now are facing fines in the tens of thousands and some over $100,000 against a background where their business is making a loss due to low dairy payouts. A fine that might have stung a bit two years ago has suddenly become very painful indeed. Sentencing for environmental offending is like any other offending, subject to Section 40 of the Sentencing Act which requires that the Courts have to take into account a defendant's ability to pay a fine when setting the end penalty.

In a number of cases the Courts have been provided with balance sheets showing a dairy farming business that is highly over-leveraged without any reasonable prospect of sufficient income to start rectifying that. These pleas have not fallen on particularly sympathetic judicial ears, with the Courts generally noting that the defendants still appear to have significant equity and an ability to spread fine payments over some time. Further comments have been made to the effect that fines cannot increase and decrease along with the price of milk solids and that, for all the Court knows, there may well be very profitable years ahead.

Responding to falling dairy prices by deferring expenditure to put in place industry best-practice systems and infrastructure for reducing non-compliance risks is not an option, as no-one can count on lower fines due to the lower payouts. If anything, incurring such expenditure now would seem essential to avoid a fine that might prove financially terminal in the current market conditions.

Can dairy cows discharge effluent?

Forest & Bird has asked the High Court to declare that every time a group of dairy cows (or other stock) defecates, this is a "discharge" for the purposes of Section 15(1) of the Resource Management Act, the national freshwater national policy statement, and some specific rules that apply in the Lake Ellesmere Catchment. If the High Court agrees, potentially all dairy farmers nationwide will need to get special resource consents to allow their cows to "do their business", and will have to show that this is not inconsistent with national water quality goals before those consents can be granted. Farmers in the Lake Ellesmere catchment (including the Selwyn/Waihora Groundwater Allocation Zone) will have to jump through a few extra hoops related to contaminant goals for that zone as well, which may make getting such consents very difficult.

The Court is live to the seriousness of the possible ramifications, and has required that all regional councils, the Ministry for the Environment, Federated Farmers and a number of significant dairy industry stakeholders be served, so that they can tell the Court if they want to join in the proceedings. The Court also noted there may be others also affected more than the general public who could potentially join as well.

There are just over four weeks left for other parties to tell the Court if they want to join, so a decision is not imminent. It will be "business" as usual until a decision is released, which is still some months away. However, this is something that should not be taken lightly by those in the dairy industry, due to the serious consequences if the Court were to make the declarations Forest and Bird wants. It seems a co-ordinated well-focused case opposing the declaration is called for. Farmers should take an active interest in this matter and ensure their voice is clearly heard by the Court on this case.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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