Incoming changes to the NSW environment protection scheme

The Environment Legislation Amendment Bill 2021 has now been passed by both houses of the NSW parliament and is awaiting assent. The Bill amends several pieces of environmental legislation administered by the NSW Environment Protection Authority (EPA) including the Protection of the Environment Operations Act 1997 (POEO Act) and the Contaminated Land Management Act 1997 (CLM Act).

The stated aims of the Bill are to ensure that environmental laws keep pace with evolving criminal behaviours and enforce the polluter‑pays principle. The Bill expands regulatory powers and tools to ensure that those responsible for contamination and pollution can be required to clean it up or manage it into the future.

Some of the key parts of the Bill are set out below, which will have the effect of significantly broadening the EPA’s statutory powers, in particular as against current and former directors of licensed entities, as well as related bodies corporate. The Bill also raises existing penalties for numerous environmental offences.

1. Providing false or misleading information to the EPA – Currently it is an offence under the POEO Act for a person to provide false or misleading information to the EPA in circumstances where the person has been required to provide that information to the EPA, or in limited other circumstances. The new section 167A of the POEO Act will introduce two new general offences of providing false or misleading information to the EPA, whether voluntarily or otherwise. The first is a strict liability offence of providing the EPA with false or misleading information and the second is an offence of knowingly providing the EPA with false or misleading information. The new offence provisions will also be executive liability offences. Those engaging with the EPA should be aware of these new offences as it will be critical that any information provided to the EPA (under compulsion or voluntarily) is true and not misleading. If someone is not sure if information is not false or misleading they should check before providing that information to the EPA. This may include, for example, information provided simply for the EPA’s information (but not required under a statutory notice) or by employees during routine site visits.

2. Extension of the EPA’s clean-up, prevention and prohibition powers –The existing clean-up powers in section 91 of the POEO Act will be significantly extended to persons who are reasonably suspected to have merely contributed to, rather than caused, a pollution incident. A clean-up notice may require a person to carry out clean-up actions to “completely prevent, minimise, remove, disperse, destroy or mitigate pollution resulting or likely to result from the incident irrespective of the nature or extent of the person’s contribution to the incident” . (our emphasis)

The new section 91(4) provides that if a person complies with a clean-up notice but was not the person who caused, or solely caused, the pollution incident they may recover the cost, or part of the cost, of the clean-up from any person who caused or contributed to the incident. However in practice this may be difficult to do, and would involve court proceedings which are costly.

The EPA will also have a new power to issue supplementary clean up, prevention or prohibition notices to current or former directors of the company or related bodies corporate, where a corporation has failed to comply with an initial notice. A director includes any person involved in the management of the affairs of the corporation, so is broader than the definition in the Corporations Act 2001. A former director is not defined, and therefore could potentially include a person who has not held a director position for many years and was not involved in the conduct of the company that led to the notice being issued.

3. The ‘fit and proper person’ test – Currently, the EPA must consider whether a person is ‘fit and proper’ when exercising its licensing functions in the grant, suspension or revocation of an EPL. The proposed amendment to section 83 of the POEO Act will enable the EPA to consider whether related bodies corporate and former and current directors of the licensee and its related bodies corporate are fit and proper persons. For example, the EPA might have regard to multiple and systemic offences of a parent company of the licensee. Again there is no time limitation with respect to former directors.

4. New power to impose covenants on title – The new section 307A of the POEO Act empowers the EPA to register restrictive or public positive covenants on title under section 88E of the Conveyancing Act 1919 to enforce any outstanding licence conditions, including conditions of a surrender, suspension or revocation of an EPL where it has been surrendered. The EPA can do so without any notice to the landowner. Previously the EPA would have required landowner consent to impose a covenant. The EPA will then be able to enforce those conditions against the person it considers most appropriate, whether that be a landowner, lessee or mortgagee, and the conditions will run with the land. This change is intended to assist in long-term management of residual pollution where land changes ownership or occupation over time.

5. Recovery of monetary benefits of crime – The EPA can currently seek a monetary benefit order against a convicted offender in order to deprive the offender of any financial advantage obtained from breaking environmental laws. Monetary benefits are defined as ‘monetary, financial or economic benefits.’ To enhance the EPA’s ability to recover monetary benefits beyond offenders, the new section 167B and Part 8.3A of the POEO Act: (a) make it a strict liability offence for current and former directors, managers and related bodies corporate of a convicted offender to receive monetary benefits from the commission of an offence and (b) allow civil proceedings to be commenced against directors, managers and related bodies corporate of a convicted offender to recover monetary benefits. Importantly, the EPA will not be required to demonstrate some degree of knowledge on the part of the recipient of the monetary benefit that the benefit was accrued as a result of the commission of an offence. In theory a director’s salary or bonus could be captured by these broad provisions.

6. Considering financial capacity when determining financial assurance – Where a person fails to undertake actions required under a licence, order or instrument administered by the EPA, eg due to a lack of financial capacity, or deregisters a company holding the licence or instrument, the government may need to step in to address outstanding environmental liabilities. At present, the EPA cannot consider a regulated person or business’ financial capacity to carry out remediation work, when determining if a financial assurance is required. The amendment to section 299 of the POEO Act will amend the POEO Act and other legislation to expand the matters the EPA is able to consider when requiring a financial assurance to extend to a person’s financial capacity. This is designed to mitigate the risk of significant liabilities being left to the State and innocent landholders.

7. Increase in penalties for particular environmental offences – the amendment to section 66 of the POEO Act increases the maximum penalty for giving a certificate that contains false or misleading information about compliance with the conditions of a licence from $250,000 to $500,000 for a corporation and from $120,000 to $250,000 for an individual. The amendment to section 144AA (2) increases the maximum penalty for knowingly giving false or misleading information about waste from $500,000 to $1,000,000 for a corporation and from $240,000 to $500,000 for an individual. The maximum penalty under section 177 for giving false or misleading information to an auditor will increase from $250,000 to $1,000,000 for a corporation with a further $120,000 a day for continuing offences.

In explaining why it consulted with other government agencies but not with the regulated community in formulating these latest reforms, the EPA said that the changes proposed by the Bill “are aimed at those who deliberately choose to circumvent the law for which there are no effective non-regulatory approaches” and that the Bill is “not adding an additional regulatory burden to the community or compliant businesses”. Nonetheless, current and former company directors, as well as current and former directors of related bodies corporate, should be aware that they may be held responsible for corporate contraventions of environmental law in a broader range of circumstances, and should consider who might be a responsible person given the expansion of certain offences.