Australia: NSW Doubles Penalties For Environmental Crime In Major Upheaval Of Environmental Law

Major changes to the environmental protection regime in NSW have passed Parliament unopposed and entered into force, doubling maximum penalties for environmental crime and substantially expanding the investigatory powers of the NSW Environment Protection Authority.

Snapshot

• On 3 April 2024, the Environment Protection Legislation Amendment (Stronger Regulation and Penalties) Act 2024 (EPLA Act) entered into force. The EPLA Act amends the Protection of the Environment Operations Act 1997 (POEO Act) to introduce harsher penalties for breaches of environmental regulations, and to expand the NSW Environment Protection Authority's (EPA) investigatory powers.
• These changes will significantly alter the direction of environmental protection law in NSW, but there was little debate or community consultation before the laws passed Parliament on 21 March 2024. The NSW Government has highlighted that more reforms are likely to follow.
• Companies and individuals should seek advice about the implications of these changes, and how they can mitigate risks while ensuring their operations are compliant.

Background

The EPLA Act was introduced in response to:

• the perceived gaps in the existing regulatory scheme highlighted by the ongoing EPA investigation into asbestos-contaminated mulch found at sites across NSW – the largest investigation in the EPA's history; and
• the NSW Land and Environment Court's (LEC) decision in Bushfire Survivors for Climate Action Incorporate v EPA [2021] NSWLEC 92 (Bushfire Survivors), which ordered the EPA to develop environmental quality objectives, guidelines and policies to ensure environment protection from climate change.

This note provides an overview of the key changes introduced by the EPLA Act, which bolster the EPA's already broad regulatory powers, and highlights concerns associated with the alarming shift in the EPA's regulatory powers.

Key changes

In summary, the EPLA Act:

• significantly increases the maximum penalties for many environmental offences, with some penalties now up to $10 million for corporations;
• increases penalty infringement notice fines for repeat offenders, up to $45,000 for corporations;
• implements specific penalties for small scale illegal dumping on sensitive land, including childcare centres, schools, hospitals, national parks & beaches;
• allows the LEC to ban persons from holding an environment protection licence (EPL);
• removes protected document provisions for voluntary environment audits;
• introduces a waste accreditation scheme to classify and assess waste; and
• allows the EPA to:
  • issue product recalls for materials that may be contaminated with harmful substances;
  • issue public 'name and shame' warning statements about poor environmental practices and performers;
  • issue 'preliminary investigation notices' requiring recipients to assist the EPA with its investigations; and
  • require new clean-up actions in notices.

Maximum Penalties

The EPLA Act increases the maximum penalties for environmental offenses under the POEO Act as follows:

While there is an obvious focus on increasing the penalties that concern asbestos-related offences in light of the EPA's ongoing asbestos investigation, the EPLA Act also dramatically increases penalties applying to all pollution incident offences.

Prohibiting EPL Applications

In order to prohibit 'serious' and 'serial' offenders from applying for an EPL, s 253B of the EPLA Act now allows the LEC to prohibit a person from being involved in a scheduled activity, or from applying for or holding an EPL, for a specified or 'indefinite' period of time if that person is:

• likely to engage again, or continue to engage in, unlawful conduct; or
• not a fit and proper person to hold, or continue to hold, an EPL.

The EPA may also seek that the LEC make such an order.

The EPA already possesses wide ranging powers to refuse, vary, suspend or cancel an EPL, including in circumstances where an applicant is not a fit and proper person or has contravened a condition of an EPL. The new s 253B expands the range of orders which the EPA may seek in enforcement proceedings.

Preliminary Investigation Notices

A new form of environmental protection notice, known as a preliminary investigation notice is introduced to Part 4.1A of the POEO Act.

Under new s 90B, the EPA may issue an owner or occupier of a premises with an oral or written preliminary investigation notice if the EPA reasonably suspects that:

• circumstances may exist or have existed that may pose a potential risk of harm to human health or the environment from a substance or the deposit of waste; or
• a pollution incident may exist or has existed at the premises.

Once a preliminary investigation notice is issued, the recipient must 'assist' the EPA to investigate whether the relevant circumstances exist and determine the nature and extent of the relevant circumstances.

Preliminary investigation notices may compel persons to:

• collect samples of a substance to be tested;
• provide a report to the EPA;
• move substances to a different location (including off the premises);
• restrict access to a substance or location;
• prevent a substance from being removed from the premises; or
• if the person does not comply with the notice, allow the EPA to take actions to comply with the notice.

If a corporation issued with a preliminary investigation notice fails to comply with the notice, the EPA may direct the current or former director(s) or manager(s) of the corporation, or a related body corporate, to carry out the specified actions. That person can recover as a debt the costs of complying with the notice from the person who caused or contributed to the relevant circumstances.

It is an offence to fail to comply with a preliminary investigation notice. An offence is punishable by a penalty of up to $2,000,000 for corporations with a further penalty of $240,000 for each day the offence continues, or up to $500,000 for individuals with a further penalty of $120,000 for each day the offence continues.

This is a dramatic reform that significantly increases the EPA's power to compel a person to assist the EPA's investigatory functions and to require a recipient to pay all or any reasonable costs and expenses incurred by the EPA. The results of a preliminary investigation could be used by the EPA in prosecuting the person to whom it is issued.

There is no merits appeal pathway for preliminary investigation notices, and the only recourse a recipient might have is the blunt instrument of a Class 4 claim in the LEC seeking judicial review of the EPA's exercise of its functions.

Recall Notices

The EPLA Act also allows the EPA, with the approval of the Minister, to issue a 'recall notice' to any person involved in the supply chain of a substance if, in the EPA's opinion:

• a substance, or its use, poses a potential risk of harm to human health or the environment;
• a substance must comply, but does not comply, with a prescribed standard; or
• environment protection legislation has been contravened.

A recall notice may require a recipient to:

• stop producing and / or supplying the substance;
• take action to recover the substance and return it to a supply chain participant's premises or another specified location;
• sample, test, remediate or dispose of the substance;
• provide information and records to the EPA;
• publish warnings that the substance is being recalled; and / or
• destroy the substance or dispose of it lawfully.

If a corporation issued with a recall notice fails to comply with the notice, the EPA may direct the current or former director(s) or manager(s) of a supply chain participant, or a related body corporate, to carry out the specified actions. The EPA's powers (subject to Ministerial approval) are far-reaching and could have grave legal, commercial, reputational and economic implications for supply chain participants, particularly where:

• a recall notice is not administratively reviewable, and a court in judicial review proceedings is prevented by the amendments from granting a stay; and
• it is an offence to fail to comply with a recall notice punishable by a penalty of $2,000,000 for corporations with a further penalty of $240,000 for each day the offence continues, or $500,000 for individuals with a further penalty of $120,000 for each day the offence continues.

Voluntary Environmental Audits

The EPLA Act removes the protected document provisions for voluntary environmental audits within ss 181-184 of the POEO Act.

Prior to this amendment, documents prepared for the sole purpose of a voluntary environmental audit were protected documents which were inadmissible in administration or enforcement proceedings. Such documents could not be inspected, copied or otherwise obtained by the EPA for any purpose connected with the enforcement of the POEO Act.

With the repeal of these provision, any material prepared whilst carrying out a voluntary environmental audit (the purpose of which is to ensure compliance or improve environmental performance) can now be used in enforcement proceedings, unless another protection (such as legal professional privilege) applies to the document.

Public warning statements

The EPLA Act introduces a new power under s 319B that allows the EPA, acting in the public interest, to issue a 'public statement' identifying and giving warnings or information about:

• substances or activities the EPA reasonably suspects of contributing to a pollution incident;
• an activity the EPA reasonably suspects is being carried out in an environmentally unsatisfactory way;
• any activity, person, substance or other matter the EPA believes is of environmental concern;
• regulatory action against a person;
• complaints received by the EPA in relation to a matter; or
• anything relevant to the administration of the POEO Act or the regulations.

Public warning statements may identify the relevant person, business practice, substance, premises location, and the basis of the EPA's suspicion.

The EPA will not be liable, including for defamation, for any statement made in good faith.

Although it is common for the EPA to publish information on its website in relation to regulatory action, including about launching prosecution, the power to make public warning statements is a substantial expansion in the EPA's ability to make unilateral statements about a business' conduct, so long as the statement is reasonable and in good faith.

Clean-up notices

The EPLA Act expands the definition of 'clean-up action' to include:

• actions required to restore the environment to a state that is as close as possible to the state the environment was in immediately before the pollution incident; and
• carrying out or facilitating specified testing or monitoring, and the provision of that data or reports to the EPA.

The EPA already commonly requires recipients of a clean-up notice to provide monitoring data during the course of a clean-up action, so that compliance with environmental protection laws and notices can be scrutinised.

The expansion of the definition of 'clean-up action' will mean that the EPA can build its case against a recipient by having the person being investigated perform testing and monitoring for the EPA.

Action on climate change

In responding to the LEC's Bushfire Survivors decision, the EPLA Act amends the Protection of the Environment Administration Act 1991 (NSW) to:

• include "taking action in relation to climate change" as an objective of the EPA;
• allow the EPA to enter into arrangements and purchase property in relation to carbon neutrality and achieving net zero emissions; and
• clarify that the EPA's power to create development objectives, guidelines and policies to ensure environment protection extends to ensuring protection from climate change.

You can read our notes in relation to the Bushfires Survivors case here and the EPA's Climate Change Policy and Action Plan here.

Key takeaways

The reforms introduced by the EPLA Act significantly change the landscape of environmental protection in NSW.

Corporations and individuals should:

• anticipate more significant consequences for potential breaches of the POEO Act;
• be aware of the greater level of access to materials available to the EPA, including by virtue of the repeal of protected document provisions;
• be aware of, and understand, their rights in respect of the EPA's new and expansive regulatory powers, including in respect of preliminary investigation notices, recall notices, clean-up notices, and public warning statements;
• consider the EPLA Act's focus on Tier 1 serious offences, and Tier 2 asbestos related offences when seeking to undertake works; and
• anticipate further NSW Government policies and regulations that provide detail on aspects of the EPLA Act, such as the waste accreditation scheme.

If you would like to learn more about how the proposed amendments may impact your business or projects, please contact our team.

By Peter Briggs, Partner, Andrew Mahler, Solicitor and Maddie Gelagin, Paralegal.

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.