Australia: Contaminated Land Update

Last Updated: 15 October 2013
Article by Felicity Rourke and Rosemary Bullmore


In this article we highlight the latest developments in the management of contaminated land in NSW, most notably:

  1. the long awaited update to the National Environment Protection Measure (Assessment of Site Contamination) 1999 is now in place; and
  2. recent developments in the Courts regarding the enforcement of contamination and remediation indemnity clauses.

Contamination is a significant issue for landowners and occupiers. The Environmental Protection Authority (EPA) estimated that there are about 30,000 contaminated sites in NSW. However only around 1,000 of these sites are likely to be significantly contaminated, with about half requiring intervention by the EPA. The remainder of the these sites are, in the EPA's view, able to be managed under the planning system when they are rezoned or redeveloped.

Update to the National Environment Protection Measure (Assessment of Site Contamination) 1999

The national guidelines for the assessment of contaminated sites, National Environment Protection Measure (Assessment of Site Contamination) 1999 (NEPM) have been reviewed and updated for the first time since 1999. The review began in 2005 and resulted in the registration of the amendments to the NEPM on 15 May 2013.

In this article we highlight a number of critical changes, the predicted impact of those changes on the costs of site assessment and remediation as a result of the amendments to the NEPM, and the transitional arrangements for sites which are currently undergoing assessment.

The NEPM is the leading national guideline governing the assessment of contaminated sites, which is intended to establish a nationally consistent approach for the assessment of those sites. The NEPM contains guidance on the method for the assessment of contaminated sites as well as technical guidance on site assessment criteria, soil and ground water investigation levels, laboratory analysis, human health risk assessment, ecological investigation levels, health bases investigation levels, community engagement and risk communication.

Relevance of the NEPM in NSW

While the NEPM is made under national legislation, it is given legal effect in NSW in two ways:

  1. Contaminated land management

In NSW, the NEPM is an approved guideline under the Contaminated Land Management Act 1997 (NSW) (CLM Act). As an approved guideline it must be taken into consideration by the EPA when determining whether a site should be declared "significantly contaminated" under the CLM Act. The NEPM is also relevant for accredited site auditors when conducting a site audit and for contaminated land consultants in undertaking investigation, remediation, validation and reporting on contaminated sites.

  1. Planning approval process

The NEPM must be considered by local and state government planning authorities when considering whether a site is suitable for a proposed land use, either in its contaminated state or once it has been remediated, under State Environmental Planning Policy No. 55 – Remediation of Land and Managing Land Contamination: Planning Guidelines.

What are the changes to the NEPM

  1. Change in focus of site investigation will foster a more efficient risk based approach to remediation

A key amendment of the NEPM is a change of scope for the recommended general process for site assessment. This process is now fully risk based for all land uses, which necessitates a more complex site assessment process focused on site specific risks.

The regulatory impact statement (Impact Statement), prepared by the National Environment Protection Council responsible for the amendments to the NEPM, predicts that a more complex site assessment process may increase the costs of that process by up to 10 -15%. However, the perceived benefit is that this process will allow for a targeted risk based approach to remediation which is predicted to result in significant savings in the costs of remediation.

The Impact Statement indicates that previously under the NEPM there had been a focus on remediation of sites to (broadly applicable) investigation or screening levels, rather than undertaking risk based assessment for an individual site. In some cases, this has meant that remediation activities have been undertaken when management actions would have been more efficient and cost effective.

However, the Impact Statement qualifies that it is difficult to predict the direct economic impact of the variation to the NEPM, as the NEPM only deals with the site assessment processes not the management and remediation of those sites.

  1. Update of technical guidance for contaminated site assessment

The revision of the technical guidance for contaminated site assessment has resulted in a revision of the original guidelines and additional guidelines dealing with groundwater. There has also been a significant revision of the approach to the assessment of asbestos contamination.

Amendments to these guidelines include the revision of investigation and screening levels to incorporate the latest guidelines from other jurisdictions and scientific understanding. Health investigation levels have been updated with new internationally peer reviewed hazard assessments and newly refined tolerable impacts. Additional guidance has been provided on screening levels for asbestos and ecological investigation levels for certain contaminants, such as, Arsenic, Chromium (III), Copper, DDT, Lead, Naphthalene, Nickel and Zinc.

  1. Greater emphasis in community engagement in the process of site assessment

Incorporated into the NEPM is the Assessment of Site Contamination Policy Framework, which includes a number of Assessment of Site Contamination Principles intended as policy guidance for the application of the NEPM. These principles have also been revised.

Principle 7 provides guidance on when community engagement should occur. This Principle now states that community consultation should occur "if a community could reasonably have an interest in the potential site contamination", whereas previously, Principle 7 stated that community engagement should occur "when there are reasonable grounds to expect an impact on the community".

This revision suggests a lower threshold for community consultation, and may meanthat community engagement may be required by the EPA in a broader range of situations and earlier in the process of site assessment than is presently the case.

The subject of community engagement often causes angst for the owners of contaminated sites, as it may require the release of information which may be commercially sensitive or that the site owner would prefer not to disclose due to risk of a negative public perception of their business.

  1. What does it mean for sites already under assessment or undergoing remediation?

It is intended that there will be an in principle 12 month transition period, in which the EPA may allow sites which are currently undergoing assessment to continue that assessment in accordance with the previous version of the NEPM, where that assessment is substantially progressed.

The EPA has indicated that an exemption to apply the revised NEPM will be granted where:

  1. reports were almost complete by 15 May 2013, and
  2. significant additional works and/or cost would be necessary to meet the amended NEPM, and
  3. there are no unacceptable risks associated with applying the earlier version of the NEPM.

Recent developments in the Courts regarding the enforcement of contamination or remediation indemnity clauses

Two recent decisions of Australian courts have highlighted the difficulties and pitfalls ofattempting to enforce indemnity clauses which allocate responsibility for the costs involved in assessing and remediating contaminated land.

Example 1:

The commercial arrangement in this example involved the vendor of the relevant land leasing that land back from the purchaser following the sale of the land.

The contract for the sale of the land included an indemnity clause that the purchaser accepted all responsibility and risk for the contamination at the property up to completion of the sale. The relevant lease, which was entered into following the sale, contained a clause that any contamination caused during the life of the lease was the responsibility of vendor (who was also relevantly the tenant).

Following the sale of the land and during the life of the lease, the land was found to have been contaminated and was subsequently subject to intervention by the EPA. Under the lease, the vendor was responsible for contamination which occurred during the life of the lease. However, the vendor (now tenant) brought proceedings seeking to recover costs of dealing with the contamination from the purchaser under the indemnity clause in the contact for the sale of the land, asserting that the contamination existed prior to completion of the sale.

The vendor was unsuccessful in proving that the land was contaminated prior to the sale of the land, despite having a number of environmental reports which identified that the land was likely to be contaminated. The proceedings were dismissed and the vendor was required to bear all costs associated with the remediation of the land.

This case demonstrates the importance of having satisfactory environmental reports prepared at the time of entering into an indemnity clause in order to then rely on that clause. An indemnity clause will not be effective when the party relying on the indemnity clause cannot prove that the contaminants presently on the land existed at the relevant date – in this case, prior to the completion of the sale.

Example 2:

In this example, also involving a contract for the sale of land, the purchaser sought to enforce a clause which required the vendor to remediate the site to the health investigation levels (HIL) contained in the National Environment Protection (Assessment of Site Contamination) Measure 1999 (prior to its amendment in May 2013). This version of the NEPM did not contain a HIL for groundwater.

After the contacts were exchanged, it was confirmed that the soil and groundwater of the land was contaminated. The vendor was held to be responsible for remediating the contaminated soil at the Site but not the contaminated groundwater, because the version of the NEPM referenced in the clause did not include a HIL for groundwater.

These two examples highlight the importance of:

  1. conducting legal and technical due diligence to establish and understand the history of use of the land, and to form an accurate judgement of the risks associated with any contamination present at that land at a relevant point in time;
  2. seeking expert advice to ensure that the relevant clause deals adequately with the contamination of the land, both in regard to legal drafting and by reference to appropriate technical standards or reports; and
  3. clearly setting out the commercial arrangements between the parties, such as what are the appropriate standards of remediation that are required for the ongoing or proposed use of the land and who is responsible for costs of dealing with the assessment and remediation (if required) of the contamination.

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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Felicity Rourke
Rosemary Bullmore
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