Australia: Taking sewage seriously - to avoid pollution offences

There are five basic steps water and sewage services operators can take to minimise the risk of committing pollution offences.

Recent cases have identified inadequate environmental management procedures, poorly maintained records and obvious compliance deficiencies within both public and private water and sewage services providers. To minimise costs and risk of environmental and reputational harm, providers of water and sewage services need to spend time and budget up front to ensure that environmental compliance procedures represent best practice, are understood by employees, effectively implemented and regularly updated and improved.

What can water and sewage services operators do to minimise risk?

  1. Identify environmental law compliance requirements and key risk areas;
  2. Develop a best-practice environmental compliance framework that includes operational checks and balances, requirements to clearly document procedures and record any changes to operations or to plant and equipment;
  3. Train employees to know, understand and implement the environmental compliance framework and undertake regular refresher training;
  4. Continuously update and improve the environmental compliance framework; and
  5. Seek legal advice regarding reporting obligations, incident investigation and management, and engaging with the regulator.

April 2017: NSW Land and Environment Court ordered Council to pay $175,000 for sewage spill

Hawkesbury City Council (HC Council) owns and operates a sewage treatment plant in New South Wales and holds an environment protection licence (EPL) for the premises in respect of sewage treatment.

In July 2015, sewage was inadvertently discharged into the ephemeral watercourse in a neighbouring Nature Reserve after a portion of pipework was modified without the changes being documented. Employees operating the plant and equipment were not aware of the changes and could not respond to alter their processes to avoid it.

A similar incident occurred in August 2015. HC Council employees carried out maintenance work of certain plant and equipment including reinstalling parts. No supervisor check or sign off was recorded to confirm that the work had been carried out correctly.

In both cases, HC Council took remedial action and the sewage spill was cleaned up promptly.

The Environment Protection Authority (EPA) prosecuted HC Council for three separate offences under the Protection of the Environment Operations Act 1997 (POEO Act): Pollution of waters, failure to comply with a condition of the EPL and failure to maintain plant and equipment. HC Council pleaded guilty to each offence.

Causes of the incidents

The matter was heard before Pain J in the Land and Environment Court (L&E Court) in March 2017. The L&E Court identified a number of causes of the incidents including:

  • insufficient checks of the plant, equipment and associated systems required by and carried out in accordance with the Operations and Maintenance Manual;
  • no procedure to carry out or check whether modifications to plant and equipment were completed appropriately;
  • insufficient training of employees;
  • insufficient signposts or identification of stormwater connections;
  • insufficient procedures in place for non-work days on the site; and
  • no alarms or notifications made by the plant and equipment when certain levels were met or exceeded inhibiting employees' ability to monitor and react appropriately.

Sentence

The L&E Court found that HC Council failed to carry out sewage treatment activities in a competent manner and this undermined the statutory scheme of the POEO Act which is designed to protect the environment and prevent pollution.

Justice Pain noted that the incidents were in the moderate to high end of the low range of objective seriousness and resulted from obvious deficiencies in HC Council's operating systems, particularly the absence of maintenance checks. HC Council was fined a total penalty of $250,000 which was reduced by 30% to $175,000. The L&E Court took into account HC Council's early guilty pleas and substantial effort to reduce the likelihood of recurrence of the incident.

HC Council was also ordered to pay the EPA's investigation costs and legal fees, pay money towards an environmental initiative in the local government area and publish a statement in two local publications about the offences.

More spills in NSW

The EPA has a number of options when determining to regulate a breach of the POEO Act. For example, it may issue a penalty notice, enter into an enforceable undertaking with the offender or, for more serious offences, like the HC Council example, prosecute. Each of these regulatory options has financial (as well as reputational) consequences for the offender.

Both public authorities and private organisations engaging in wastewater activities in NSW have been subject to recent regulatory action by the EPA for breaches of the POEO Act.

Penalty notice offences

A penalty notice for pollution of waters can attract a penalty of up to $15,000 (for a corporation) for each offence.

Enforceable undertakings

Enforceable undertakings entered into by the EPA with a number of offenders over the last two years have focussed on two key areas:

  • Prevention of future incidents. This includes undertaking physical works and plant upgrades as well as improving environmental compliance systems, including updating practices and procedures and undertaking employee training; and
  • Financial contributions to an environmental project. Financial contributions have ranged from around $25,000 to over $200,000.

Prosecution

Where an offender is found guilty on prosecution, the sentence awarded by a court will depend on a range of factors.

In June 2016 Borg Panels pleaded guilty to polluting waters when a hose discharged effluent into a constructed storm water drainage channel that flowed into a number of local creeks. The judgment noted that Borg Panels "had complete control over the causes that gave rise to the offence." The causes included careless actions of employees, no written policies or procedures that specifically dealt with the activities that led to the incident and insufficient monitoring procedures.

The L&E Court determined that the incident was of low to moderate objective seriousness. It held that the appropriate penalty was $90,000 which it reduced by 35% to $58,500 in light of the subjective circumstances including the defendant's early guilty plea. Borg Panels was also ordered to pay investigation and prosecutor costs and publish a notice informing the public of the offence.

Custom Chemicals was also prosecuted by the EPA in 2016 for breaches of the POEO Act arising from poor processes and procedures. Custom Chemicals pleaded guilty to polluting waters. The company had been "deliberately and repeatedly" pumping liquids containing a chemical mixture from a holding tank into a pond that ultimately flowed into a wetland leading to the Hunter River. The water in the creek downstream of the premises was observed by the EPA to display a reddish hue and the bed of the creek was covered in a whitish/greyish filamentous growth or deposit.

In convicting the defendant, the L&E Court found Custom Chemicals' monitoring procedures were deficient. The incident was held to be of medium objective seriousness and to have occurred on multiple occasions over an extended period of time. The L&E Court fined Custom Chemicals $360,000, the totality of which was to go towards environmental projects. Custom Chemicals was also made to pay investigation and prosecutor costs and publish a notice informing the public of the offence.

Prosecution for sewage spills abroad

A recent, similar UK case involving Thames Water Utilities Limited was decided on 2 February 2017. The key difference to the NSW examples is the substantial quantum of the UK penalty (over 20 million GBP).

Thames Water was charged with 14 offences involving discharge of untreated sewage into the River Thames from four sewage treatment works and a large sewage pumping station. The incidents were widely publicised by local media who noted that the incidents resulted in the death of hundreds of birds and fish.

Thames Water pleaded guilty to all offences and was fined over 20 million GBP. Thames Water is characterised as a "very large organisation". This allowed the court to step outside the standard sentencing range, of 100 GBP to 3 million GBP. The court determined that the impact of the incident was significant enough to warrant a large penalty.

In NSW, in the case of a corporation, the maximum penalty for a water pollution offence under the POEO Act is $1 million (per offence) and, in the case of a continuing offence, a further penalty not exceeding $120,000 for each day the offence continues. A Tier 1 leak or spill that harms or is likely to harm the environment may be subject to a maximum penalty of $5 million for an offence committed wilfully or $2 million for an offence committed negligently. Maximum penalties for environmental offences are rarely awarded in NSW as the NSW cases above demonstrate.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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