Land and Environment Court of New South Wales CITATION : Environment Protection Authority v Nalco Australia Pty Ltd [2007] NSWLEC 831 PROSECUTOR Environment Protection Authority PARTIES : DEFENDANT Nalco Australia Pty Ltd FILE NUMBER(S) : 50033 of 2007 CORAM: Lloyd J KEY ISSUES: Environmental Offences :- pollute waters - penalty - no actual harm - publication order LEGISLATION CITED: Crimes (Sentencing Procedure) Act 1999, s 3A Protection of the Environment Operations Act 1997, s 120(1), s 241, s 250 Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357; Cabonne Shire Council v Environment Protection Authority (2001) 115 LGERA 304; CASES CITED: Camelleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 ; Environment Protection Authority v Timber Industries [2001] NSWLEC 25; R v Slattery (1996) 90 A Crim R 519 DATES OF HEARING: 18 September 2007 EX TEMPORE JUDGMENT DATE : 18 September 2007 PROSECUTOR Mr R Fox (sol) Environment Protection Authority LEGAL REPRESENTATIVES: DEFENDANT Mr P Holland (sol) Minter Ellison JUDGMENT: - 11 - IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Lloyd J 18 September 2007 LEC No. 50033 of 2007 ENVIRONMENT PROTECTION AUTHORITY v NALCO AUSTRALIA PTY LTD [2007] NSWLEC 831 EX TEMPORE JUDGMENT 1 HIS HONOUR: The defendant has pleaded guilty to an offence that on or about 31 May 2006 at or near Banksmeadow it committed an offence against s 120(1) of the Protection of the Environment Operations Act 1997 ("the POEO Act") in that it polluted waters. The penalty for an offence against s 120(1) was recently increased from a maximum of $250,000 in the case of a corporation to $1 million in the case of a corporation. 2 The question for determination is the appropriate penalty that should now be imposed for that offence. The parties have cooperated in producing a statement of agreed facts. That statement has been supplemented by an affidavit of Mr T De Wolfe who is responsible for all operations and activities of the defendant's plant at Botany. 3 The defendant also relies upon an affidavit of the prosecutor, that of Mr Moreno Julli, an environmental protection officer, who has deposed as to the extent of harm caused by the incident in question. The waters that were polluted were Floodvale Drain at Banksmeadow, which flows to Botany Bay and potentially to Botany Bay. The particular pollutant in this case was ethylene glycol, a clear liquid which the defendant uses to blend with other chemicals to create products for the transport industry. 4 The defendant operates a chemical manufacturing factory at 3 Anderson Street, Banksmeadow. On 31 May 2006 Mr Mark Tannin, a Nalco plant engineer, asked Mr Clifford Pearce, a plant operator, to unload a delivery of ethylene glycol from a tanker truck. Mr Tannin requested Mr Pearce to pump the ethylene glycol from the tanker truck into a storage tank on the property. Mr Pearce connected hoses and a pump from the coupling on the tanker truck to the storage tank with the assistance of a maintenance assistant, Mr Kim Lawrence. 5 Mr Pearce then commenced pumping the ethylene glycol into the storage tank. The product was pumped for about ten minutes and was then stopped for the morning tea break, after which pumping was resumed. At about 11am Mr Pearce turned off the pump to investigate why he could still hear ethylene glycol hitting the bottom of the storage tank as it was being pumped in. He observed ethylene glycol running out of the tank valve to the bund in which the storage tanks were located. The ethylene glycol had then passed through the storage tank valve and four stormwater shut-off valves before exiting the premises and entering Floodvale Drain and then potentially Botany Bay. 6 Mr Pearce had no formal training on the receipt of bulk liquid chemicals into the storage tanks. He had never unloaded ethylene glycol from a tanker truck before. He did not check whether the storage tank valve or any other relevant stormwater valve was closed before commencing pumping. The liquid passed through a number of valves, all of which were in the open position: firstly, a valve at the bottom of the storage tank into which the ethylene glycol was pumped; secondly, a further valve connected by a pipe within the bunded area; thirdly, a valve in the stormwater sump in the bunded area in which the stormwater tank was located, and then finally two further emergency shut-off valves in the stormwater drainage system downstream of this valve. 7 It is estimated that some nine thousand litres of pure ethylene glycol entered Floodvale Drain. It is not known how much if any entered Botany Bay. However, water samples taken at the discharge point of Floodvale Drain into Botany Bay contained high levels of ethylene glycol. At the time the defendant did not have any training manual or standard operating procedure for the receipt of bulk liquids into the storage tanks at its Botany premises. The defendant has a policy - a spill, containment and stormwater management policy - which requires that all stormwater valves must be checked daily by a person who is assigned responsibility for the task. 8 At the time of the offence no specific employee was assigned responsibility for this task. As a consequence various employees of the defendant carried out daily stormwater valve checks on an ad hoc basis. 9 Immediately after the incident was discovered the defendant notified the EPA and the New South Wales Fire Brigade. Fire Brigade officers constructed three dams in Floodvale Drain to contain the spill. The defendant undertook sampling and testing of Floodvale Drain and Botany Bay to determine the extent and impact of the incident. 10 The defendant coordinated the removal of and lawful disposal of some 800,000 litres of water containing ethylene glycol from Floodvale Drain. According to the evidence of Mr De Wolfe, the sampling and testing of Floodvale Drain and Botany Bay incurred a cost of $1,000. The defendant also incurred a cost of $55,000 in removing the 800,000 litres of water from the drain, and a further $500 in removal of drains constructed by fire brigade officers; a total expenditure of $56,500. 11 The evidence does not disclose any actual harm as a result of the offence, and the potential environmental harm was likely to be minor and transient. Exposure to relatively pure ethylene glycol is of low toxicity to most aquatic organisms. Most of the detected concentrations in Floodvale Drain were diluted below the concentrations toxic to many organisms. It is unlikely that concentrations and volumes of ethylene glycol entering Penrhyn Estuary in Botany Bay would have caused a detectable adverse effect on the estuary environment. 12 Turning to the considerations on the question of penalty. The offence that occurred here is a strict liability offence and is a crime. The purposes of sentencing are set out in s 3A of the Crimes (Sentencing Procedure) Act 1999 and are as follows: (a) to ensure that the offender is adequately punished for the offence, (b) to prevent crime by deterring the offender and other persons from committing similar offences, (c) to protect the community from the offender, (d) to promote the rehabilitation of the offender, (e) to make the offender accountable for his or her actions, (f) to denounce the conduct of the offender, and (g) to recognise the harm done to the victim of the crime and the community. 13 Section 241 of the POEO Act sets out a number of matters that the court is required to take into account in any sentencing exercise of this nature. The first consideration is the extent of harm caused or likely to be caused. In the present case the court is assisted by the evidence of Mr Julli. Ethylene glycol is a hydrocarbon used in a wide range of applications. It is totally miscible in water, is readily biodegradable and does not adsorb to sediments and does not bioaccumulate. 14 According to Mr Merano Julli, Floodvale Drain for most of its exposed length has an earthen base and is fringed by casuarina trees. He considers the drain to be generally of poor quality typical, or somewhat worse, of industrialised catchments. He did not detect any sign of environmental harm such as dead fish, frogs or aquatic invertebrates or in Penrhyn Estuary during his inspection shortly after the event. Ecotoxicity tests did not indicate any significant levels of toxicity in the samples collected from the drain on the day after the event. 15 Mr Julli considers that the level of environmental harm is likely to have been minor and transient and he does not consider that the load of pollutant entering Penrhyn Estuary was likely to have caused detectable adverse effects on the estuary environment. Although no actual harm was caused to the environment and the condition of Floodvale Drain is poor, it is appropriate that the court take into account the likelihood of harm and it is evident from the prompt actions of the defendant that the likelihood was reduced to a minimum. 16 The next consideration is the practical measures that may be taken to prevent, control or mitigate that harm. The defendant does not dispute that the valves in the bunded area where the tank was situated should and could have been locked to ensure that nothing could escape from the bunded area. The defendant also does not dispute the fact that no employee of the defendant had checked that valves in the stormwater system were locked on the day of the offence. 17 The likelihood of harm was in my opinion entirely foreseeable, and it was also entirely foreseeable that leaving the valves open would have led to the escape of the pollutant into the drain and potentially Botany Bay. I note however that measures were taken immediately upon discovering the spill by the defendant: it notified the EPA and the fire brigade and, as I have noted, removed some 800,000 litres of water from the drain at a cost of $56,500. 18 The next consideration is the foreseeability of the risk of harm. I have already referred to this. The offence was not the result of any failure of plant or equipment, it was simply a case of five valves on the defendant's premises being left open. The defendant frankly acknowledges that by failing to check the valves it was reasonably foreseeable that ethylene glycol would flow into the stormwater system if they were left open. 19 The next consideration is the extent to which the person who committed the offence had control over the causes that gave rise to the offence. In this case the defendant concedes that the principal contributing factor to the discharge was its failure by its employees to check stormwater valves on the day of the offence. 20 Other matters are relevant on the question of penalty. The first of those is the objective gravity or seriousness of the offence. The primary factor is the maximum penalty fixed by the parliament, which is a reflection of the seriousness with which the legislature views offences of this nature. Parliament fixes the upper limit because the sentence should never exceed that which can be justified as appropriate or proportionate to the gravity of the crime considered in the light of its objective circumstances. As was stated in Camelleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 at 698, "The maximum penalty for an offence reflects the public expression of parliament of the seriousness of the offence." 21 The next consideration is the subjective circumstances of the offender. In the present case these amount to a number of mitigating factors. Firstly, the defendant has no prior convictions for any similar offence, it is unlikely to reoffend and it has, through its officers, shown genuine remorse. The affidavit of Mr De Wolfe, who is at present overseas, expresses the defendant's regret for the incident and states that significant steps have been taken to ensure that no such incident occurs again. 22 Actions taken subsequent to the incident include the provision of training manuals and standard operating procedures for the receipt of bulk liquids, the engagement of supervision by production supervisors and senior operators; all critical valves and all valve keys have been modified to allow placement of padlocks to ensure valves cannot be opened by unauthorised personnel; and comprehensive training of plant operators and plant engineers in correct procedures for receipt of bulk liquids now occurs. 23 In addition to the affidavit of Mr De Wolfe, two senior representatives of the company are in court, and this in my view demonstrates the seriousness which the defendant views the offence in question. The defendant also promptly reported the incident and took prompt action to contain and clean up the spill. It offered assistance to the EPA and has cooperated with it fully, not only in the clean up but in the provision of an agreed statement of facts in these proceedings. 24 The court is also required to take into account the plea of guilty. I accept that the plea was entered at the earliest opportunity and the defendant is entitled to a full discount on account of that. 25 As to the appropriate sentence, I note that this is a strict liability offence. In Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357, the Court of Criminal Appeal, in a strict liability offence stated, and I quote from Mahoney JA at 359: The legislation does not seek merely to prevent deliberate or negligent pollution. It envisages that, at least in many cases, proper precautions must be taken to ensure that pollution does not occur. Experience has shown that it is not enough merely to take care: accidents will happen. The legislation envisages that in many cases care must be supplemented by positive precautions; business must be arranged and precautions taken so as to ensure that pollution will not occur. 26 As I have said, these remarks were made in the context of a strict liability offence. There is also a need for general deterrence. General deterrence is a major consideration and any penalty must deter not only the offender before the court but also those engaged in similar activities for committing like offences. I am satisfied however that there is little need for specific deterrence in this case. The company - the defendant - has a good environmental record and is in my view not only unlikely to reoffend but has put in place procedures to that end. 27 The defendant has demonstrated its contrition by agreeing to a publication order under s 250(1)(a) of the POEO Act to publicise the offence. It has also agreed to an order under s 250(1)(e) of the POEO Act, to pay a specified amount to a specified environmental organisation for a specified project for the restoration or enhancement of the environment, as allowed by that section. The parties have put before me evidence of a suitable project for just such a purpose; namely a weed management strategy for the Towra Point Nature Reserve at Kurnell. That is in my view an appropriate purpose for a payment to be made under s 250(1)(e) of the POEO Act. 28 In fixing a penalty, I would regard the offence at the lower end of the scale. Applying the principal of parity is difficult in this case because all previous offences against s 120(1) of the POEO Act were committed at a time when the penalty was $250,000. As I have noted the penalty has since been increased. Where a penalty has been increased it is not appropriate to automatically increase any fine by the same proportionate amount. In R v Slattery (1996) 90 A Crim R 519, the Chief Judge of the Criminal Division, Hunt J, said in the Court of Criminal Appeal, at 524: The action of the legislature in almost tripling the maximum sentence for a particular type of offence must be taken by the courts as reflecting community standards in relation to the seriousness of those offences, and the courts are required to give effect to the obvious intention of the Legislature that the existing sentencing patterns are to move in a sharply upward manner. 29 In Environment Protection Authority v Timber Industries [2001] NSWLEC 25, the penalty for an offence against s 120(1) of the POEO Act had been increased from $125,000 to $250,000 - that is a doubling of the penalty - when that case was before the court. The Chief Judge said at [33]: It is to be noted that, upon the enactment of the POEO Act , the maximum penalty for water pollution offences in the case of a corporation was doubled - that is, the maximum penalty was increased from $125,000 to $250,000. That does not mean, however, that the court should simply impose a penalty effectively twice that which the court would have imposed had the offence been committed before the coming in to force of the POEO Act on 1 July 1999. Rather, the proper approach of the Court must be to assess the relative seriousness of the particular offence in relation to a worst case for which the maximum penalty of $250,000 is now provided; that is, the penalty to be imposed is that which correlates upon the scale of penalty set by the legislature from zero to the maximum. 30 That passage was approved by the Court of Criminal Appeal in the subsequent case of Cabonne Shire Council v Environment Protection Authority (2001) 115 LGERA 304. In that case Giles JA, speaking for the court, said at [37]: It does not follow, as the respondent's submissions appeared to suggest, that every offence for which a fine of $X would have been imposed under s 16 of the Clean Waters Act should result in a fine of $2X dollars under s 120 of the Act. Offences of low criminality remain offences of low criminality even if the maximum penalty is increased… 31 In the present case the offence is clearly one of low criminality and the penalty should reflect that fact. In my opinion it is also appropriate that rather than a fine, an order should be made under s 250(1) of the POEO Act, for payment of a specified sum to the particular project that I have described. Accordingly, the following formal orders are made. 1. The defendant is convicted of the offence as charged. 2. Pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997 (NSW) the defendant, having been found guilty of contravening s 120(1) of the Act, must cause a notice in the form annexed to the orders to be placed in the early general news section of the following newspapers in the earliest edition possible after the making of this order and within fourteen days of the date of this order, (i) The Southern Courier and (ii) The Sydney Morning Herald. 3. Pursuant to s 250(1)(e) of the Act, the defendant is to pay to the Parks and Wildlife Group the sum of $50,000 to be used for the implementation of the weed management strategy for Towra Point Nature Reserve. 4. The defendant is to pay the prosecutor's costs in the agreed sum of $10,000. 5. The exhibits may be returned. I note that in fixing the amount of $50,000 I have had in mind what would otherwise have been a penalty of $75,000, which I have reduced by some thirty-five per cent in view of all the mitigating factors which I have described. Is there anything else? HOLLAND: Your Honour, just one question. The National Parks and Wildlife Group, I'm not familiar with it; I always thought it was the National Parks and Wildlife Service. FOX: Now being part of the Department of Environment and Climate Change. HIS HONOUR: They keep changing their name. FOX: Still bearing the logo of the National Parks and Wildlife Service, your Honour. I hereby certify that the preceding 31 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd. Associate ***************** 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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