Land and Environment Court of New South Wales CITATION : Environment Protection Authority v Lithgow City Council [2007] NSWLEC 695 PROSECUTOR Environment Protection Authority PARTIES : DEFENDANT Lithgow City Council FILE NUMBER(S) : 50046 of 2006; 50047 of 2006 CORAM: Preston CJ KEY ISSUES: Environmental Offences :- sentencing - breach of conditions of environment protection licence - conditions requiring pollution studies and reduction programs - systemic failure in management and operation of premises - failure to prioritise asset management and need for regulatory compliance - conscious decision not to comply for financial reasons - non-compliance continued over lengthy periods - potential for environmental harm - forseeable risk of harm - practical measures to prevent risk of harm - control over causes - prior criminal convictions for breach of condition of an environment protection licence - plea of guilty - contrition and remorse - sentence to achieve retribution, denunciation and deterence (both general and specific) - penalty of fine, orders under s 245 of Protection of the Environment Operations Act 1997 and costs order LEGISLATION CITED: Crimes (Sentencing Procedure) Act 1999 s 3A Protection of the Environment Operations Act 1997 s 64(1), s 241(1), s 245 Axer Pty Limited v Environment Protection Authority (1993) 113 LGERA 357; Bentley v BGP Properties Pty Limited (2006) 145 LGERA 234; Byres v Leichhardt Municipal Council [2006] NSWLEC 82 ; Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683; Environment Protection Authority v Ballina Shire Council (2006) 148 LGERA 278; Environment Protection Authority v Barnes [2006] NSWCCA 246 (17 August 2006); Environment Protection Authority v Lithgow City Council [2003] NSWLEC 425 (18 August 2003); Environment Protection Authority v Sydney Water Corporation [2000] NSWLEC 156 (21 July 2000); CASES CITED: Environment Protection Authority v Waste Recycling and Processing Corporation (2006) 148 LGERA 299; Gittany Constructions Pty Ltd v Sutherland Shire Council (2006) 145 LGERA 189 ; Majury v Sunbeam Corporation Ltd [1974] 1 NSWLR 659; Mill v The Queen (1988) 166 CLR 59; Pearce v The Queen (1998) 199 CLR 610 ; R v McNaughton [2006] NSWCCA 242 (11 August 2006); R v Thomson; R v Houlton (2000) 49 NSWLR 383 ; Veen v The Queen (No 2) (1988) 164 CLR 465 at 477; Weininger v The Queen (2003) 212 CLR 629 DATES OF HEARING: 24 July 2007; 20 August 2007; 24 September 2007; 28 September 2007 DATE OF JUDGMENT: 26 October 2007 PROSECUTOR Mr M Kelly (Solicitor) SOLICITORS Environment Protection Authority LEGAL REPRESENTATIVES: DEFENDANT Mr I Lloyd QC SOLICITORS Pike Pike & Fenwick JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES PRESTON CJ 26 OCTOBER 2007 50046 OF 2006 50047 OF 2006 ENVIRONMENT PROTECTION AUTHORITY V LITHGOW CITY COUNCIL JUDGMENT 1 HIS HONOUR: Lithgow City Council has pleaded guilty to two offences against s 64(1) of the Protection of the Environment Operations Act 1997 by contravening conditions of its environment protection licence in respect of a water treatment plant. The Court's task is to determine the appropriate sentence for the offences. The water treatment plant 2 The Council owns and has operated since 1988 the Oakey Park Water Treatment Plant on Bells Road, Lithgow. Discharges from the water treatment plant are to an adjacent creek called Farmers Creek. Farmers Creek is a part of the Cox's River Catchment that ultimately drains to Lake Burrogorang and Warragamba Dam. 3 Generally, operations at the premises treat raw water in order to produce potable water. Water is extracted from a dam located to the north east of the premises. The Council treats the water by the addition of chemicals to remove suspended solids and then passes the water through sand filters. The resulting water is then disinfected and added to the reticulated water supply of Lithgow. One of the chemicals used in the water treatment at the premises is alum (aluminium sulphate), which is used as a coagulant to remove solids from the raw water. 4 The specific steps in the water treatment process are set out below: (a) Raw water from the dam is gravity fed to the premises through a raw water inlet meter pit. The amount of raw water gravity fed to the premises is measured through this point. (b) The raw water is then pumped into rapid mix tanks where the chemicals, including alum, are added to the water and mixed. (c) The water then passes into flocculation tanks where the flocculation process begins with the water passing through a number of baffles. (d) Water then passes into a clarifier tank that is designed to settle the flocculated solids from the water. A mechanized rake is also used to scrape accumulated sludge on the bottom of the clarifier tank to the sludge off take. (e) Sludge from the clarifier tank is then drained to a sludge pit and pumped to one of the two sludge lagoons. The sludge further separates from the water transferred with the sludge and the supernatant water is designed to be discharged from the sludge lagoons at licensed discharge points. (f) Water from the clarifier tank is then passed through sand filters to remove small particles not able to be removed by the flocculation process. (g) The filtered water is then disinfected by chlorine before being stored in the clear water tank for later reticulation. 5 Over time, as water is filtered through the sand filters, the effectiveness of the sand filters is reduced as the pores in the sand filters become blocked with material. Periodically the sand filters require a backwash. This is where air and water is pushed through the filter in the opposite direction to remove the material blocking the sand filters. The water resulting from this backwash process is discharged to Farmers Creek from the licensed discharge points. 6 The Council holds an Environment Protection Licence No 2396 in respect of the water treatment plant. The licence authorises the Council to discharge waste from the sludge lagoons at the water treatment plant and from the backwash process performed in operating the water treatment plant into Farmers Creek. The conditions of the licence regulate the discharge points, the concentration limits and the volume and mass limits of any discharge. 7 The licence has been varied over time to include the conditions which the Council has contravened, namely conditions U1 and U2. Circumstances of the offences 8 On 9 July 2004, liquid alum and alum sludge polluted Farmers Creek and one of its tributaries. The Environment Protection Authority investigated the pollution incident. In its letter to the Council dated 10 August 2004 reporting on the investigation, the Environment Protection Authority stated that the suspected source was the sludge lagoons at the water treatment plant and then said: "Based on the investigation findings, the EPA requires Council to undertake the following actions: 1. take immediate steps to remove the alum sludge from the tributary and Farmers Creek. The EPA will be revisiting the premises late in August 2004 to ensure the removal of the sludge has occurred. 2. commence investigations into possible pathways for which alum and/or alum sludge is escaping from the sludge lagoons. The EPA requests a report on the findings of the investigation required by point 2 above by no later than 30 September 2004. In addition, a review of previous Annual Returns submitted for environment protection licence 2396 identifies regular non-compliance with the licence discharge volumetric limit and the concentration limit for Total Suspended Solids (TSS). This is of particular concern as the TSS limits specified for licence 2396, particularly for Points 1 and 2, are not consistent with what is achievable with current best practice. In light of this recent incident and the ongoing licence compliance issue raised above, I am of the view that a Pollution Reduction Program (PRP) for the premises is necessary. I have requested that Jason Scarborough of the DEC prepare a draft PRP for the premises for discussions with Council in early October 2004, once the findings of the investigation required by (2) above has been provided to the EPA. As such, we will be contacting Council in October 2004 to discuss the findings of the investigations and what needs to be addressed by PRP." 9 The Environment Protection Authority and the Council subsequently met on 25 August 2004 regarding the discharge of alum/alum sludge and the need to address the cause of the discharge of the alum/alum sludge was discussed. In addition, the Environment Protection Authority advised the Council that the current practice of discharging backwash to waters was no longer considered best practice as alternatives to discharge (such as backwash recycling) were now commonplace. The Carcoar and Blayney water treatment plants were highlighted as examples. 10 On 13 September 2004, the Environment Protection Authority issued a Draft Notice of Variation of Licence to implement pollution reduction programs. In the letter accompanying the Draft Notice of Variation of Licence, the Environment Protection Authority stated: "The EPA has prepared two draft Pollution Reduction Programs (PRP) for your review. The first is a requirement to undertake an options study for an upgrade to the premises that eliminates the need to discharge backwash to waters. The second is a requirement to undertake a permeability investigation of the sludge lagoons where the alum / alum sludge is believed to have leaked from." 11 On 27 September 2004, the Council responded to the Environment Protection Authority stating: "I wish to advise that Council concurs with these draft Pollution Reduction Programs, however, request that the completion dates be extended as Council does not have the financial resources to complete these studies in the current financial year. Council suggests a completion date of 30 October 2005 for both Pollution Reduction Programs". 12 On 11 October 2004, the Environment Protection Authority issued the Notice of Variation of the Licence inserting conditions U1 and U2. Condition U1 required the Council to undertake an upgrade options study for the water treatment plant so that there would be no need to discharge backwash to the waters (condition U1.1). The Council was required to submit the completed options study to the Environment Protection Authority by 31 December 2005 (condition U1.2). 13 Condition U2 required an investigation as to the permeability of the sludge lagoons for the water treatment plant. The investigation was required to examine the works as executed drawings for the sludge lagoons; examine the soils and geology underlying or immediately surrounding the sludge lagoons, particularly in terms of permeability; test to ascertain if leakage is occurring from the sludge lagoons (in situ permeability testing, water balances, tracing, etc); if possible, identify the location(s) where leakage is or may be occurring; and if appropriate, propose measures to eliminate any identified leakage from the sludge lagoons (condition U2.1). The Council was required to submit the report of the permeability investigation to the Environment Protection Authority by 31 December 2004 (condition U2.2). 14 In the letter accompanying the Notice of Variation of the Licence the Environment Protection Authority responded to the Council's request for an extension of time in which to comply with the pollution reduction programs. The Environment Protection Authority stated: "The EPA is prepared to be flexible with the completion date for the Options Study, to 31 December 2005. However, the DEC considers the Permeability Study very important. The presence of alum sludge in the waters around the water treatment plant, most likely originating from the sludge lagoons, gives rise to two possibilities: * Liquid alum has leaked out of the sludge lagoons in sufficient concentrations to flocculate the natural waters and generate a significant amount of sludge. It is therefore likely that a significant aluminium load was released into Farmers Creek that has not been bound up in sludge, and if unaddressed, a repeat is equally likely, or; * The sludge lagoons leak so badly that alum sludge itself has managed to escape from the lagoons into waters. Either case is clearly unacceptable and potentially in breach of the POEO Act and licence 2396. Given that more than three months have elapsed since Council was first advised of the alum within Farmers Creek, this issue needs to be addressed as soon as possible. Accordingly, the EPA is not willing to change the date for the completion of the permeability study, which remains 31 December 2004." 15 The Environment Protection Authority also advised the Council of its right under the Protection of the Environment Operations Act 1997 to appeal against the licence variation notice. The Council did not appeal the licence variation notice. 16 The Council failed to prepare and submit to the Environment Protection Authority the completed options study for the backwash diversion system by the date required by condition U1, namely 31 December 2005. Such a study was not submitted by the Council to the Environment Protection Authority until 25 May 2006. This failure constituted a breach of condition U1.2 and hence an offence against s 64(1) of the Protection of the Environment Operations Act 1997 in that the Council was a holder of a licence, a condition of which was contravened by the Council. 17 The Council did, however, prepare and submit to the Environment Protection Authority a report of the permeability investigation by the date required by condition U2, namely 31 December 2004. The permeability investigation report was authored by the Department of Commerce on behalf of the Council and was entitled "Oakey Park Water Treatment Plant, Sludge Lagoons Geotechnical Investigation". Qualitative testing results contained in the permeability investigation report disclosed that the permeability of the material in the embankments and the base of the sludge lagoons was between 100 to 1,000 times more permeable than the Environment Protection Authority's typical requirements for these types of structures. 18 After reviewing the permeability investigation report submitted by the Council, the Environment Protection Authority determined that the sludge lagoons were in fact leaking. After first issuing a draft Notice of Variation of Licence on 7 March 2005, the Environment Protection Authority issued a Notice of Variation of Licence dated 29 March 2005 which substituted a new condition U2. 19 The new condition U2 required the Council to undertake the remedial works to the sludge lagoons recommended by the Department of Commerce in the permeability investigation report (condition U2.1). The Council was required to complete the remedial works by 31 December 2005 (condition U2.2). The Council was required to provide a written report to the Environment Protection Authority within 14 days of completing the remedial works specifying the dates the works were completed, the permeability achieved by the works (in metres per second) and documents that demonstrate or certify the permeability achieved by the works (permeability test results, product certification etc) (Condition U2.3). 20 In the letter accompanying the Notice of Variation of Licence, the Environment Protection Authority advised the Council of its right under the Protection of the Environment Operations Act 1997 to appeal the licence variation notice. The Council did not appeal. 21 The Council failed to undertake the remedial works, and hence to submit the report advising of the completed works, by the dates required by condition U2.2, namely 31 December 2005 and 14 days thereafter respectively. Such failure has continued to date. Such failure constitutes a breach of condition U2 and hence also involves an offence against s 64(1) of the Protection of the Environment Operations Act 1997. 22 On 12 December 2006, by way of two summonses, the Environment Protection Authority charged the Council with two offences against s 64(1) of the Protection of the Environment Operations Act 1997. The Council entered pleas of guilty to each of the charges on 30 March 2007. A hearing on sentence commenced on 24 July 2007 but was adjourned on a number of occasions to allow the Council and the Environment Protection Authority to discuss and agree upon orders for remedial works to the sludge lagoons and to the backwash diversion system. Ultimately, the orders were agreed and submitted to the Court on 28 September 2007. 23 In determining the appropriate sentence for each of the offences, the Court is required to take into account both the objective gravity of the offences and the subjective circumstances of the offender. Objective gravity of offences Nature of the Offences 24 The offences involve breaches of conditions of an environment protection licence. The conditions in questions were especially inserted into the Council's environment protection licence to implement pollution reduction programs, in accordance with s 68 of the Protection of the Environment Operations Act 1997, to control and abate the impacts of the operation of the water treatment plant on the environment and to ensure the plant was adopting best practice technology. 25 Condition U1 was designed to control and abate the impacts caused by the discharge of polluted backwash to Farmers Creek by investigating a backwash diversion system so that there would be no need to discharge backwash to Farmers Creek. Condition U2 was designed to, first investigate the permeability of the sludge lagoons and, secondly, take action to line the sludge lagoons to prevent the escape of pollutants such as alum and alum sludge from the lagoons. 26 Conditions U1 and U2 in requiring pollution studies and reduction programs, implemented a precautionary approach and an adaptive management approach. Such licence conditions are an integral part of prudent environmental management and regulation: Environment Protection Authority v Ballina Shire Council (2006) 148 LGERA 278 at 290-291 [74]-[76]. 27 The contraventions of conditions U1 and U2 impede implementation of the precautionary approach and adaptive management approach adopted by the licence and undermine the integrity and effectiveness of the licence. The offences are objectively serious. 28 The circumstances of the offences reveal that the offences were a product of systemic failure in the Council's management and operation of the water treatment plant. The Council failed to prioritise long term asset management and the need for regulatory compliance. The Council failed to allocate the financial and human resources necessary to comply with the conditions of its licence. The fact that the contraventions involve systemic failures and are not an isolated incident increases the objective seriousness of the offences. 29 The continuing nature of the contraventions, over lengthy periods, also increases the seriousness of the offence. The contravention of condition U1 continued from 31 December 2005 to 25 May 2006, a period of 145 days. The contravention of condition U2 continued from 31 December 2005 and is still continuing. Under the agreed orders, the remedial works to the sludge lagoons will be completed by 9 June 2008, nearly 2½ years after the date for compliance. Maximum penalty 30 At the time of commission of the offences, the maximum penalty for an offence against s 64(1) of the Protection of the Environment Operations Act 1997 committed by a corporation was $250,000 and a further daily penalty of $120,000 for continuing offences. Since 1 May 2006, the maximum penalty for a corporation is $1,000,000 and a further daily penalty of $120,000. These high maximum penalties reflect the seriousness of the offence. Objective harmfulness of the offences 31 The extent of the harm caused or likely to be caused to the environment by commission of the offence can increase the seriousness of the offence: Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 at 701 and s 241(1)(a) of the Protection of the Environment Operations Act 1997. 32 In assessing harmfulness, not only actual harm but also the potential risk of harm should be taken into account: Axer Pty Limited v Environment Protection Authority (1993) 113 LGERA 357 at 366, Bentley v BGP Properties Pty Limited (2006) 145 LGERA 234 at 260 and Environment Protection Authority v Waste Recycling and Processing Corporation (2006) 148 LGERA 299 at 325 [145]. 33 In this case, no actual environmental harm has been identified as having resulted from the failure of the Council to comply with each of the licence conditions U1 and U2. 34 Nevertheless, there was a potential for environmental harm by reason of the Council's failure to comply with the licence conditions. This potential particularly existed in relation to the failure to carry out the remedial works to the sludge lagoons required by condition U2. The previous pollution incident whereby liquid alum and alum sludge (alum being used in the sludge lagoons) escaped into nearby waters and the permeability investigation report prepared for the Council, which identified that the permeability of the sludge lagoons was far in excess of that which was ordinarily acceptable, both indicated the potentiality for liquid alum or alum sludge to escape into nearby waters. The agreed statement of facts discloses that alum sludge has the potential to be toxic to most forms of aquatic life in low pH conditions. Such conditions may occur due to acidic runoff in sandstone catchments similar to the Farmers Creek catchment, or when overdosing of alum occurs. State of mind and reasons for committing the offences 35 An offence against s 64(1) of the Protection of the Environment Operations Act 1997 is a strict liability offence and hence mens rea is not an element of the offence. Nevertheless, the state of mind of an offender can have the effect of increasing the seriousness of the offence. A strict liability offence that is committed intentionally or negligently will be objectively more serious than one that is committed unintentionally or non-negligently: Majury v Sunbeam Corporation Ltd [1974] 1 NSWLR 659 at 664; Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 at 700; Gittany Constructions Pty Ltd v Sutherland Shire Council (2006) 145 LGERA 189 at 218 [123]. The more culpable state of mind, the more severe the punishment ought to be: Majury v Sunbeam Corporation Ltd [1974] 1 NSWLR 659 at 664. Culpability turns on the offender's purpose, the extent of the offender's knowledge of the circumstances surrounding the conduct, the conduct itself, its results and the reason for the offender's behaviour. 36 In this case, the Council's failure to comply with the conditions of the environment protection licence was a product of the outdated management practices and organisational structure within the Council and self imposed budgetary constraints. The Council did not give priority to compliance with, including carrying out the works required by, the conditions of the licence or allocate sufficient financial and human resources to enable it to do so. This was a result of a series of deliberate decisions of the Council. 37 The Council had previously made a plea, based on an allegation of inadequate financial resources, for further time to comply with the conditions of the licence (in its letter of 27 September 2004). The Environment Protection Authority did extend the time for compliance with condition U1 which required the Council to submit the options study in relation to the backwash diversion system, from 1 March 2005 to 31 December 2005. This extension was granted on 11 October 2004. Notwithstanding this extension, the Council did not even commence the options study until 31 January 2006, after the date for completion, and did not complete it until 25 May 2006. The Council made a conscious decision not to allocate the financial and human resources necessary to enable the Council to comply with the condition. This deliberate disregard of the condition was made in circumstances where the Council was aware from its own Annual Returns for the licence and had been advised by the Environment Protection Authority that the Council had regularly not complied with the licence conditions regulating the volumetric limit and concentration limit for Total Suspended Solids for the backwash discharge to Farmers Creek and had been further advised that the current backwash system of discharging polluted backwash to Farmer Creek did not reflect current best practice which would avoid such discharge. 38 The Environment Protection Authority did not extend the time for compliance with the original condition U2 which required the Council to submit the permeability investigation report for the sludge lagoons by 31 December 2005. The reason the Environment Protection Authority gave in its letter of 11 October 2004 for not extending the time to submit the permeability investigation report was that the alum/alum sludge which had escaped into the nearby waters was likely to have originated from the sludge lagoons and the permeability of the sludge lagoons needed to be addressed as soon as possible. The Council did comply with the requirement of the first condition U2 to submit the permeability investigation report by 31 December 2004. However, that report showed that the Environment Protection Authority's prediction that alum or alum sludge was escaping into nearby waters from the sludge lagoons was justified. The permeability of the sludge lagoons was revealed in the report to be far in excess of the Environment Protection Authority's standards and needed to be addressed as soon as possible. The new condition U2 required the Council to undertake remedial works to the sludge lagoons by 31 December 2005. 39 Although the Council was aware of the past pollution incident that was likely to have been caused by the sludge lagoons leaking and that caused pollution of the nearby waters, the reported high permeability of the sludge lagoons and the consequential need to take remedial action as soon as possible to prevent future leakage from the sludge lagoons and pollution of nearby waters, it failed to assign priority to taking the required remedial action or to allocating the financial and human resources needed to enable it to take the required remedial action. Such a deliberate disregard of the condition of its licence to carry out works to remedy known deficiencies in the licensed premises, in the knowledge that failure to comply with the condition was likely to cause environmental harm, increases the culpability of the Council for the offence. Foreseeability of and practical measures to prevent risk of harm 40 The extent to which the Council could reasonably have foreseen the harm caused or likely to be caused to the environment by the commission of the offence and the practical measures that could have been taken to prevent, control, abate or mitigate the harm are relevant to the seriousness of the offences: s 241(1)(b) and (c) of the Protection of the Environment Operations Act 1997. 41 Having regard to the past pollution incident, the consequential variations of the licence by inserting new conditions to require pollution studies and reduction programs, the results of the permeability investigation report, and the correspondence and communications between the Environment Protection Authority and the Council concerning the deficiencies in the water treatment plant in relation to the sludge lagoons, the Council could reasonably have foreseen that harm was likely to be caused to the nearby waters by continuing to operate the water treatment plant without undertaking the remedial works required by Condition U2. It was also reasonably foreseeable that the failure to complete the options study in relation to a backwash diversion system as required by Condition U1 would delay the future implementation of the selected option to cease the discharge of polluted backwash to the nearby waters. 42 There were practical measures to prevent that likely harm, namely allocating sufficient financial and human resources to undertake the tasks required by the conditions. The Council subsequently did this, first, when it arranged for the preparation of the options study which was completed on 25 May 2006 and, more recently in 2007, by resolutions to implement a backwash diversion system and to undertake the remedial works the subject of the agreed orders to line the sludge lagoons. Such a commitment by the Council could and should have been done earlier as required by the conditions of the licence. Control over causes 43 As the licence holder, owner and operator of the water treatment plant, the Council had control over the operation of the plant and all equipment therein and was responsible for compliance with all conditions of the licence. The Council had control over the causes that gave rise to the offence. This adds to the culpability of the Council: s 241(1)(d) of the Protection of the Environment Operations Act 1997. Complying with orders 44 The Council, in committing the offences, was not complying with any orders of supervisors: s 241(1)(e) of the Protection of the Environment Operations Act 1997. Subjective circumstances of the offender Prior criminal record 45 The Council has two prior criminal convictions for environmental offences: first, on 22 April 1991, the Council was convicted for a breach of s 16(1) of the Clean Waters Act 1970 and fined $2,000 and, secondly, on 13 August 2003, the Council was convicted for a breach of s 64(1) of the Protection of the Environment Operations Act 1997 for a breach of a condition of an environment protection licence and fined $6,000: Environment Protection Authority v Lithgow City Council [2003] NSWLEC 425 (18 August 2003). 46 Prior criminality cannot be used to impose a sentence which is greater than the upper boundary of a proportionate sentence set by the objective gravity of the offence: Veen v The Queen [No 2] (1988) 164 CLR 465 at 477. Nevertheless, prior criminality can still legitimately take into account in fixing where, within the boundaries set by the objective circumstances, a sentence should lie. Prior criminality is relevant to show whether the offence is an uncharacteristic aberration or whether the offender has manifested a continuing attitude of disobedience to the law. If the latter, the purposes of retribution, deterrence and protection of society may all indicate that a more severe penalty is warranted: Veen v The Queen [No 2] (1988) 164 CLR 465 at 477; Weininger v The Queen (2003) 212 CLR 629 at 640 [32]; R v McNaughton (2006) 66 NSWLR 566 at 572 [18], 574 [26]. 47 Of relevance in this case is that the second of the prior convictions involves the same offence as those presently charged, namely an offence against s 64(1) of the Protection of the Environment Operations Act 1997, for breach of a condition of an environment protection licence. The premises the subject of the environment protection licence in that case were not this water treatment plant, but rather the Lithgow sewerage treatment plant. The licence condition breached was also different to the licence conditions in this case. The licence condition in that case required the Council to perform a toxicity analysis on any algal discharge identified as having a concentration of algae greater than a specified limit. The Council was required to notify the Environment Protection Authority in this event. The Council failed to perform the required toxicity analysis or notify the Environment Protection Authority as required. In the sentencing remarks, Pain J noted the importance of conditions of a licence requiring monitoring and reporting: para 20. Pain J also noted that Council's legal representatives had submitted from the Bar table that they had been instructed by the Mayor and General Manager of the Council to express to the Court the Council's remorse for its actions: para 26. In the circumstances, Pain J did not consider that there was a need for specific deterrence in sentencing: para 24. 48 The fact that the Council, notwithstanding having been convicted and fined for an offence involving breaching a condition of one of its environment protection licences, within two years of being sentenced, again commits the same offences by deliberately failing to comply with conditions of another environment protection licence indicates that a more severe penalty for these offences is warranted to achieve the purposes of retribution and specific deterrence. Plea of guilty 49 The Council pleaded guilty on the first return of the summonses on 30 March 2007. The utilitarian value of the pleas of guilty is high and justifies the full 25% discount on sentence: R v Thomson; R v Houlton (2000) 49 NSWLR 383 at 419. Contrition and remorse 50 The Council has expressed contrition and remorse for the offences it has committed in two ways. 51 First, the Council has taken steps to change the present method of operation at the water treatment plant so that backwash waters will no longer be discharged into Farmers Creek. Under the changes, the backwash water will be directed to a holding tank and back to the plant sludge lagoons. The estimated cost of implementing the backwash diversion project is $245,000. The Council claimed that works on these changes commenced on 19 April 2007. The completion of these works is the subject of the agreed orders to be made under s 245 of the Protection of the Environment Operations Act 1997. 52 Condition U1 of the licence in its current form only requires the Council to prepare and submit an options study. Although this requirement was evidently a precondition to a further variation by the Environment Protection Authority of the licence so as to require the Council to implement the most appropriate option identified in the options study for diversion of the backwash (in the same way that condition U2 initially required a permeability investigation report but then required the carrying out of the remedial works recommended in the permeability investigation report), condition U1 had not been so varied at the time the Council commenced the backwash diversion project. Hence, the Council's actions to undertake the backwash diversion project were voluntarily and not required by the licence. This evidences the Council's contrition and remorse in relation to that offence. 53 The Council has now also, as a result of the discussions initiated at the sentencing hearing, agreed to undertake remedial works for the lining of the sludge lagoons. The Council has accepted a tender to line the sludge lagoons at a cost of $389,052. These works are the subject of the agreed orders to be made under s 245 of the Protection of the Environment Operations Act 1997. These works differ from and are in substitution for the works recommended in the permeability investigation report and the subject of condition U2. Because the Council was already required by the licence to undertake one form of remedial works to line the sludge lagoons, the resolution of the Council to undertake a different form of remedial works to line the sludge lagoons does not exhibit the same degree of voluntariness as the Council's action in relation to the backwash diversion system. Nevertheless, it does evidence an acceptance by the Council of its responsibilities and the need to remedy in substance the on-going contravention of condition U2. 54 Secondly, Mr Andrew Muir, the Group Manager Regional Services at the Council, gave both affidavit and oral evidence. In that evidence, Mr Muir expressed Council's genuine regret for the offences. He stated the steps, past and future, the Council has adopted to avoid repetition of offences. These include a change in personnel responsible for the water treatment plant, improvements in the organisational structure, and improvements to the plant infrastructure. Mr Muir outlined the Council's commitment to environmental protection, including as stated in the Council's Management Plan. 55 The presence of genuine contrition and remorse can lessen the need for special deterrence: Byres v Leichhardt Municipal Council [2006] NSWLEC 82 at [102]. 56 I also note that the Council has agreed to pay the Environment Protection Authority's legal costs of both proceedings in the agreed sum of $20,000. Assistance to authorities 57 The Council has co-operated in the preparation of the agreed statement of facts and the supplementary statement of agreed facts and in agreeing orders under s 245 of the Protection of the Environment Operations Act 1997. The appropriate sentence 58 The purposes of sentencing relevant to these offences and to this offender are retribution and denunciation (s 3A(a), (e), (f) of the Crimes (Sentencing Procedure) Act 1999); deterrence, both specific and general (s 3A(b) of the Crimes (Sentencing Procedure) Act 1999); and restoration and reparation (s 3A(g) of the Crimes (Sentencing Procedure) Act 1999). 59 The purposes of sentencing influence the type of penalties that are appropriate to be imposed. A fine is appropriate to achieve the purposes of retribution, denunciation and deterrence while orders under s 245 of the Protection of the Environment Operations Act 1997 to prevent future harm to the environment and prevent the continuance of the offence are appropriate to achieve specific deterrence and restoration. 60 A fine is necessary to express the community's disapproval of the criminal conduct involved in these offences and of the Council which perpetrated them. The offences committed by the Council are serious for the reasons given in the section on the objective gravity of the crimes. The sentence of the Court needs to ensure the Council is adequately punished for the offences, make the Council accountable for its actions and denounce the conduct of the Council. 61 A fine is also necessary in the circumstances to achieve specific deterrence. The Council was well aware of its on-going responsibility to ensure that its activities are conducted in compliance with environmental laws and applicable environmental protection licences. The Council has twice been convicted and fined for failure to so comply. 62 The second occasion the Council was convicted and fined, for failure to comply with another environment protection licence, was on 18 August 2003, less than a year before the pollution incident on 9 July 2004 in which liquid alum and alum sludge that had escaped from the Council's water treatment plant polluted Farmers Creek. That pollution incident was the catalyst for the variation of the Council's environment protection licence for the water treatment plant by imposing conditions requiring pollution studies and reduction programs. 63 The Council had itself disclosed in its Annual Returns for the licence regular non-compliance with the licence. This fact was one of the grounds relied on by the Environment Protection Authority in initiating the pollution reduction program and was expressly drawn to the Council's attention. 64 Yet, notwithstanding its prior convictions for non-compliance with another licence and its regular non-compliance with the current licence, the Council failed to assign the necessary priority and allocate sufficient human and financial resources to ensure full and timely compliance with the environment protection licence. The Council failed to respond adequately and in a timely manner to subsequent information, including from the Environment Protection Authority and in the permeability investigation report, identifying deficiencies in the water treatment plant and the consequential likelihood of environmental harm occurring. 65 Whilst the Council has belatedly resolved to take action to address the known deficiencies in the sludge lagoons, and agreed to orders under s 245 of the Protection of the Environment Operations Act 1997 requiring such action, there is still a need for the sentence to reflect the purpose of specific deterrence. 66 There is also a need for general deterrence. It is well settled that the sentence of the Court needs to be of such magnitude as to change the economic calculus of persons in relation to compliance with environmental laws. The sentence should be such as will make it worthwhile to undertake the cost of precautions to ensure that environmental harm will not occur: Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 359-360; Bentley v BGP Properties Pty Ltd (2006) 145 LGERA 234 at [156], [157]; Environment Protection Authority v Waste Recycling and Processing Corporation (2006) 148 LGERA 299 at [229]. 67 The sentence of the Court must deter those undertaking activities likely to harm the environment, included scheduled premises for which an environmental protection licence is required, to eschew an attitude such as the Council adopted in this case of assigning a lower managerial and budgetary priority to compliance with the environmental protection licence and to taking the precautions required by the licence, than to its other business and government functions. 68 Compliance with environmental laws is not optional; it is not contingent on a person having sufficient funds or sufficient willingness to expend funds to comply with environmental laws. The laws mandate compliance; it is a criminal offence not to comply. Persons must assign first priority to compliance with the laws and arrange their organisational structure, management, human resources and financial resources to ensure that this occurs. 69 In Environment Protection Authority v Sydney Water Corporation [2000] NSWLEC 156 (21 July 2000), Sydney Water pleaded in mitigation for an offence of polluting waters that its financial resources available for maintenance and upgrade of the sewer network was fixed but in an amount that was inadequate to undertake preventative maintenance to ensure that the sewer network would not cause pollution of waters. The financial resources only enabled reactive maintenance. 70 Lloyd J rejected that plea: "[47] Sydney Water has failed, however, to address the fact that it is also bound by the environmental protection regime of this State. Sydney Water is required by law to do what is necessary to protect the environment. As the prosecutor has submitted, the clear obligation to comply with the Clean Waters Act sits above any contractual, commercial or other obligations. [51] In no other sector or industry is such a "reactive maintenance" strategy considered acceptable. The era of unregulated dumping of industrial wastes has long since past. The era of virtually unmitigated overflow of sewerage should similarly cease. I accept the fact that there is no practical possibility of zero sewerage overflows. The environmental laws stipulate, however, that pollution must not occur. In the absence of licence to pollute, Sydney Water must not pollute. It must spend all of its available resources on pollution prevention which, in this case, means preventative maintenance. Dividends or profits are inappropriate if they are coming from a corporation that is breaking the law on a routine basis. The priorities of Sydney Water's management and its shareholder must be re-examined." 71 In assessing the quantum of the fines, the Court needs to have regard to the total penalty imposed upon the Council: see Environment Protection Authority v Barnes [2006] NSWCCA 246 (17 August 2006) at [78], [88]. This can include other orders that might be made by the Court, including costs orders. 72 The Council has incurred and will incur costs in implementing the backwash diversion system and in lining the sludge lagoons. The carrying out and completion of such works will be enforced by an order under s 245 of the Protection of the Environment Operations Act 1997. However, it is likely that the Council would have needed to incur such expenditure in any event in order to ensure that the Council complies with environmental laws generally and the environment protection licence in particular. 73 The Environment Protection Authority's requirement to carry out an options study to implement a backwash diversion system was a necessary preliminary to a requirement to implement the most appropriate option for a backwash diversion system. It was not a question of if, but when, a backwash diversion system would be implemented. The costs of implementing such a system should not be seen to be part of the penalty imposed by the Court for those offences. 74 The requirement under the orders under s 245 of the Protection of the Environment Operations Act 1997 to line the sludge lagoons is a substitution for the current requirement to do likewise under condition U2 of the environment protection licence. Hence, the order is a form of enforcement of substituted performance of an existing legal obligation. It is not an additional penalty for the past breach of the condition. 75 Taking into account the purposes of sentencing, the objective gravity of the offences and the subjective circumstances of the Council, I consider the appropriate fines should be $50,000 for proceedings no 50046 of 2006 (breach of Condition U2), discounted by 25% for the utilitarian value of the plea of guilty to $37,500 and $15,000 for proceedings no 50047 (breach of condition U1), discounted by 25% to $11,250. 76 Although care must be taken in comparing sentences for offences in the goal of pursuing consistency in sentencing, I note that in Environment Protection Authority v Ballina Shire Council (2006) 148 LGERA 278, I imposed a fine of $35,000 for an offence against s 64(1) of the Protection of the Environment Operations Act 1997 involving a breach of a licence condition requiring monitoring and reporting. The individual fines, and the aggregate of the fines, are within this range. 77 In addition to a fine, it is appropriate having regard to the Council's failure to implement the remedial works required by the licence conditions in a timely and adequate manner, to make orders under s 245 of the Protection of the Environment Operations Act 1997 compelling the Council to carry out substitute remedial works in a specified time. The orders agreed between the Environment Protection Authority and the Council, which I consider to be appropriate, are as follows: "1. Undertake the following work at the Oakey Park Water Treatment Plant, Lithgow in accordance with the specifications annexed hereto and marked "A": (a) Reline and commission sludge lagoon No 1 by 31 December 2007. (b) Commission Backwash Diversion system to sludge lagoon No 1 and discontinue backwash discharge into Farmers Creek by 3 March 2008. (c) Decommission and dry and remove sludge from lagoon No 2 by 1 April 2008. (d) Reline and recommission sludge lagoon No 2 to enable the commissioning of the Backwash Diversion system to sludge lagoon No 2 by 9 June 2008. 2. Notify Mr Richard Whyte, Regional Manager, Bathurst Climate Change and Environment Protection Group, Department of Environment and Climate Change, PO Box 1388 Bathurst NSW 2795 within 7 days of the completion of each work milestone referred to in paragraphs 1(a) to (d) hereof. 3. Provide a written report to Mr Richard Whyte, Regional Manager, Bathurst Climate Change and Environment Protection Group, Department of Environment and Climate Change, PO Box 1388 Bathurst NSW 2795 within 14 days of the completion of all of the works specified in paragraph 1(a)-(d) hereof that includes: (a) the date the works were completed; (b) the permeability achieved by the works (in metres per second), (c) documents that demonstrate or certify the permeability achieved by the works. ANNEXURE "A" * Excavation of 300mm of unsuitable material from inner surface of sludge lagoons No 1 and No 2. * Council will arrange for the classification and disposal of the sludge and excavated material in accordance with the 'Environmental Guidelines: Assessment, Classification & Management of Liquid & Non-liquid Wastes', Department of Environment and Conservation, 1 July 1999. * Clay is to be imported to the site and tested to ensure a minimum permeability of 1x10-9 m/s. * Placement and construction of clay liner 400mm thick to 100mm above the current floor level. * In-process construction testing of compaction shall be undertaken to demonstrate that the necessary compaction level has been achieved." 78 There should also be an order that the Council pay the legal costs of the Environment Protection Authority in the agreed sum of $20,000. 79 Because there are two offences, which are related in that they both concern breaches by the Council of conditions for pollution studies and reduction programs of the same environment protection licence, it is also relevant to review the aggregate sentence for the two offences and consider whether the aggregate is just and appropriate and reflects the total criminality before the Court: Mill v The Queen (1988) 166 CLR 59 at 62-63 and Pearce v The Queen (1998) 194 CLR 610 at 624 [49]. 80 The aggregate fine is $48,750. This is in addition to the orders under s 245 of the Protection of the Environment Operations Act 1997 and the order for costs. This aggregate penalty is just and appropriate and reflects the total criminality before the Court. No further adjustment needs to be made on account of the totality principle. Orders 81 The Court orders that: 1. Lithgow City Council is convicted of each of the offences in proceedings no 50046 of 2006 and proceedings no 50047 of 2006 with which it is charged. 2. Lithgow City Council is fined $37,500 for the offence in proceedings no 50046 of 2006 and $11,250 in proceedings no 50047 of 2006. 3. Lithgow City Council is to: 1. Undertake the following work at the Oakey Park Water Treatment Plant, Lithgow in accordance with the specifications annexed hereto and marked "A": (a) Reline and commission sludge lagoon No 1 by 31 December 2007. (b) Commission Backwash Diversion system to sludge lagoon No 1 and discontinue backwash discharge into Farmers Creek by 3 March 2008. (c) Decommission and dry and remove sludge from lagoon No 2 by 1 April 2008. (d) Reline and recommission sludge lagoon No 2 to enable the commissioning of the Backwash Diversion system to sludge lagoon No 2 by 9 June 2008. 2. Notify Mr Richard Whyte, Regional Manager, Bathurst Climate Change and Environment Protection Group, Department of Environment and Climate Change, PO Box 1388 Bathurst NSW 2795 within 7 days of the completion of each work milestone referred to in paragraphs 1(a) to (d) hereof. 3. Provide a written report to Mr Richard Whyte, Regional Manager, Bathurst Climate Change and Environment Protection Group, Department of Environment and Climate Change, PO Box 1388 Bathurst NSW 2795 within 14 days of the completion of all of the works specified in paragraph 1(a)-(d) hereof that includes: (a) the date the works were completed; (b) the permeability achieved by the works (in metres per second), (c) documents that demonstrate or certify the permeability achieved by the works. 4. Lithgow City Council is to pay to the Registrar of the Court, for payment to the prosecutor, costs in the sum of $20,000. ANNEXURE "A" · Excavation of 300mm of unsuitable material from inner surface of sludge lagoons No 1 and No 2. · Council will arrange for the classification and disposal of the sludge and excavated material in accordance with the 'Environmental Guidelines: Assessment, Classification & Management of Liquid & Non-liquid Wastes', Department of Environment and Conservation, 1 July 1999. · Clay is to be imported to the site and tested to ensure a minimum permeability of 1x10-9 m/s. · Placement and construction of clay liner 400mm thick to 100mm above the current floor level. · In-process construction testing of compaction shall be undertaken to demonstrate that the necessary compaction level has been achieved. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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