Key Point
- If you have or suspect you may have a contaminated land site in NSW you should carefully consider the pros and cons of the proposed new CLM Act amendments.
On 26 June 2008, the long-awaited Contaminated Land Management Amendment Bill 2008 (NSW) (CLM Bill) was tabled in Parliament. The CLM Bill is a major overhaul of the Contaminated Land Management Act 1997 (NSW) (CLM Act) and will have an impact on anyone who has at any time owned or occupied or had impacts on land which could potentially be contaminated. In particular, purchasers, vendors, landlords and tenants would have important new obligations if the CLM Bill is passed into law.
Key changes that will be introduced when the CLM Bill is enacted include:
- replacing the current objective "significant risk of harm test" with a subjective test based on whether the Environment Protection Authority (EPA) considers the contamination is "significant enough to warrant regulation" (SEWR) although the EPA still needs to take into account significant risk of harm criteria before declaring land to be "significantly contaminated land";
- widening the duty to report contamination to circumstances where the person ought reasonably to have known about such contamination (for example, if the person could have reasonably sought advice that would have made the person aware of the contamination);
- deletion of the overarching hierarchy in the list of "appropriate persons";
- a new power for the EPA to order certain persons to conduct a preliminary investigation to identify and investigate the nature and extent of potential contaminants at a specified site;
- replacing investigation and remediation orders with "management orders";
- deletion of the "no knowledge" defence for managers/directors bringing the CLM Act into line with the Protection of Environment and Operations Act 1997 and encouraging a higher degree of due diligence on the part of site owners/lessees/operators;
- a new power for the Minister to enter into offset arrangements with a polluter (for example, provision of community services or the establishment of environmental or resource projects) where, in the opinion of the Minister, it is in the public interest and it would not be practicable to remediate the contamination within a reasonable time;
- a new provision that "a person responsible for contamination" continues to be responsible for the contamination despite a contract or other arrangement which provides that another person is responsible for the harm or contamination; and
- an increase in penalty amounts for failure to comply with management orders or the duty to notify the EPA.
Management of contaminated land
The CLM Bill introduces a new Part 3 entitled "Management of Contaminated Land" that replaces the investigation and remediation provisions contained in the current Part 3 of the CLM Act with preliminary investigation of land and regulation of "significantly contaminated land".
The current approach to managing land authorises the EPA to declare land to be an "investigation area" and then issue an "investigation order" requiring the appropriate person to investigate the contamination. After this, or alternatively, the EPA can declare land to be a remediation site and issue a remediation order requiring remediation of the land.
Under the CLM Bill, the EPA may issue a "preliminary investigation order" requiring a person to conduct a preliminary investigation of land to investigation whether the land is contaminated, the nature and extent of the contamination, and provide the EPA with the information. The EPA may also declare land to be "significantly contaminated land" and issue a "management order" requiring the appropriate person to manage the contamination. The order may require investigation or remediation of the contamination of the land.
New test for contaminated land -- are they really different?
The CLM Bill has done away with the declaration of a "remediation site" and has introduced the new phrase "significantly contaminated land". Unlike the preliminary investigation order, the declaration of land as significantly contaminated land must be gazetted.
Changing the terminology from "remediation site" under the CLM Act to "significantly contaminated land" does not appear to have any practical impacts, other than lessening any stigma that may be tied to land that should be remediated.
The more important difference relates to the new test introduced by the CLM Bill for the determination of contaminated land. The current test is whether the contamination poses a Significant Risk of Harm (SRoH). The proposed new test is whether the EPA considers that the contamination is SEWR. The EPA can declare land as significantly contaminated land if it has reason to believe that it is contaminated, and the contamination is SEWR.
Other than drafting changes, there are no significant differences in the factors that the EPA must consider in determining SRoH vis-à-vis SEWR. What is different though is that while the current SRoH test involves a technical analysis of the criteria to determine whether the EPA, on reasonable grounds, believes that the contamination presents a SRoH to human health or the environment, the proposed new test does not contain a standard for assessing the contamination on a site. The assessment of whether the contamination will be "significant enough" is not defined by any threshold.
Accordingly, it is unclear how the new test will operate in practice and what level of contamination will be required for the contamination to be considered SEWR by the EPA. In other words, it appears that the effect of the proposed amendments are to move away from a more objective based threshold to a more subjective threshold in favour of the EPA.
Management orders and hierarchy of responsibility
Where land is declared to be "significantly contaminated land", the EPA may issue a "management order". This management order comprises the sections under the CLM Act relating to the investigation and remediation provisions.
A management order in respect of significantly contaminated land must specify the appropriate person/s as its subject. Under the CLM Bill, the appropriate persons the EPA can choose from are the same persons identified in the CLM Act, except that the CLM Bill adjusts the description of the first type of appropriate person in line with the SEWR test. The appropriate persons who may be made subject of a management order, whether or not there may be other persons who are also responsible, are:
- a person who is responsible for significant contamination of the land;
- an owner of the land;
- a notional owner of the land.
The hierarchy of persons subject to a management order is retained for this part of the CLM Bill, and should be distinguished from the list of persons upon whom a preliminary investigation order may be issued where there is no hierarchy. As drafted, the EPA would have discretion to issue a management order to an occupier as well of or instead of the polluter of the site.
Consequently, incoming occupiers like tenants should consider obtaining a site assessment report that, depending on the contamination risk profile of the land, can effectively act as a benchmark or snapshot of any contamination on the site at the start of the lease.
The CLM Bill expressly states that a "person responsible for contamination" continues to be responsible for the contamination despite a contract or other arrangement that provides that another person is liable for the contamination. There is no equivalent provision in the CLM Act. While parties will of course remain free to divide up liability on a contractual basis, the language in CLM Bill has sought to clarify the EPA's position in respect of allocation of liability at law.
Do you have to tell the EPA?
Section 60 of the CLM Bill retains the duty of person/s whose activities contaminated the land and of an owner of contaminated land to notify the EPA. The duty arises as soon as practicable after the person becomes aware of the contamination. These provisions in the CLM Bill are generally similar to the CLM Act and the current "Guidelines on Significant Harm from Contaminated Land and the Duty to Report", except that in the CLM Bill, a person is taken to be aware of contamination if the person "ought reasonably to have been aware of the contamination".
Under the Guidelines, suspecting that there might be contamination that presents SRoH or suspecting that known contamination may present a significant risk does not give rise to a duty to report. A person "becomes aware" only when he/she has "actual knowledge or evidence that contamination of which he/she is aware" is presenting a SRoH. Examples of when a person "becomes aware" is when he/she receives a site audit statement or report on samples indicating contamination that poses SRoH. Under the CLM Bill, this interpretation in the Guidelines of when a person "becomes aware" is no longer applicable. The CLM Bill includes a list of factors that are to be taken into account when determining when a person should reasonably have become aware of contamination:
- the person's abilities, including his/her experience, qualifications and training;
- whether the person could reasonably have sought advice that would have made the person aware of the contamination; and
- the circumstances of the contamination.
The practical consequence of this change is that well-resourced organisations could have a positive duty to proactively investigate land so as to uncover past contamination.
If passed into law, a person "becomes aware" of the contamination not just when it has actual knowledge, but when it has constructive knowledge. In practical terms, this broadening of the duty to notify may result in a situation where a company is imputed with knowledge of past activities, with a concomitant obligation to report that activity even though the activity occurred years before the company's actual knowledge.
Doing away with the "but I didn't know" defence
The CLM Act includes a number of statutory defences for directors/managers of a corporation taken to have contravened the CLM Act. The CLM Bill reduces these defences by deleting the "no knowledge of the contravention" defence. This imposes a higher degree of diligence on the part of the director or manager to ensure that the contravention does not occur. Note though that this is consistent with the approach taken recently in other environmental legislation where the "no knowledge" defence has also been removed.
Penalties
A number of the penalties have been increased. For example, the maximum penalties for failure to comply with a management order or duty to notify are increased to $165,000 (currently $137,500) plus daily penalties of $77,000 (currently $66,000) for non-compliance.
Offset arrangements
Under the CLM Bill, if the Minister considers that it would not be practicable to remediate contamination within a reasonable time, he/she may enter into offset arrangements with a person responsible for the contamination of land under which the person provides assistance to communities affected by the contamination. Assistance may take the form of provision of community facilities or community services or the establishment and operation of environmental or resource projects. Businesses with long-tail contaminated land problems where there is currently no reasonably practicable means of remediation may wish to investigate the potential benefits of offset arrangement options.
Contaminated Land Management Regulation 2008
The Department of Environment and Climate Change has also released the draft Regulation to replace the current Contaminated Land Management Regulation 1998 that is due for automatic repeal on 1 September 2008. Amongst other things, the draft Regulation introduces on-the-spot penalty notices for a number of offences under the CLM Act and removes the requirement for notification of contaminated land to be in a prescribed form. Instead, notification is to be given in a manner and form approved by the EPA.
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.