Environment Protection Authority v BHP Steel

PROSECUTOR: Ms E L Fullerton SC SOLICITORS: Stephen Garrett Environment Protection Authority LEGAL REPRESENTATIVES:

DEFENDANT: Mr M G Craig QC, Ms J M Jagot (barrister) and Ms F A Sinclair (barrister) SOLICITORS: Mallesons Stephen Jaques

JUDGMENT:

• 27 - IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES 50106 of 2002; 50107 of 2002; 50108 of 2002;50109 of 2002; 50110 of 2002 & 50111 of 2002 Lloyd J 17 February 2004 ENVIRONMENT PROTECTION AUTHORITY Prosecutor v BHP STEEL (AIS) PTY LIMITED ACN 000 019 625 Defendant JUDGMENT Introduction 1 The defendant has pleaded guilty to four offences against the Protection of the Environment Operations Act 1997 ("the PEO Act"). Two other charges for offences against that Act have been brought, but the prosecutor offers no evidence in support of them and they are withdrawn. The four remaining offences on which the prosecutor is proceeding are as follows: (1) No. 50106 of 2002: An offence against s 120(1) in that, between 22 October 2001 and 23 October 2001, at or near Port Kembla in the State of New South Wales, it polluted waters. (2) No. 50108 of 2002: An offence against s 64(1) in that, on or about 6 November 2001, at Five Islands Road, Port Kembla in the State of New South Wales, it was the holder of an environment protection licence, a condition of which was contravened by a person. (3) No. 50110 of 2002 : An offence against s 64(1) in that, on or about 23 October 2001, at Five Islands Road, Port Kembla in the State of New South Wales, it was the holder of an environment protection licence, a condition of which was contravened by a person. (4) No. 50111 of 2002 : An offence against s 64(1) in that, on or about 10 November 2001, at Five Islands Road, Port Kembla in the State of New South Wales, it was the holder of an environment protection licence, a condition of which was contravened by a person. 2 The parties have co-operated in the production of a comprehensive statement of agreed facts and two supplementary statements of agreed facts, the latter statements relating to causation. In deference to the thoroughness and care with which these statements were prepared, I can do no better than adopt them in full and append them to this judgment, omitting references to and descriptions of attachments, rather than attempt to restate the facts myself. Additional facts 3 The court also received additional evidence on behalf of the defendant, being an affidavit of Mr A W O'Brien, the Environment Governance Manager for the Industrial Markets of the defendant and member of the defendant's central environment team; and a letter dated 5 February 2004 from Mr L Hockridge, a director of the defendant and the President of Industrial Markets. 4 Mr O'Brien's affidavit outlines the history and operations of the defendant. BHP Limited employs approximately 11,000 employees and comprises four divisions. The defendant is a wholly owned subsidiary of BHP Limited and operates the Port Kembla Steelworks ("the steelworks") where the incident occurred. The steelworks, which produces the bulk of Australia's flat steel products, is the largest industrial site in Australia and has a workforce of approximately 6,300 full time employees and contractors. The Environment Management System of the steelworks has been certified to comply with the ISO 14001 Standard, which specifies the requirements for a structured environmental management system with the overall aim of environmental protection and prevention of pollution in balance with socio-economic needs. To gain certification the defendant was required to demonstrate the incorporation of environment management into its departmental management and to ensure all employees undertook an education program. This education program reinforced the responsibility of employees to obey environmental laws and to be conscious of the need to work in an environmentally acceptable manner. The defendant has also implemented environmental auditing in each department responsible for the operational plant. 5 Mr O'Brien's affidavit also highlights the involvement of the defendant in the local community and its entry into Five Year Pollution Reduction Programs with the prosecutor. To date, the defendant has entered into five of these programs, which seek to retrofit existing operations with pollution control equipment that meets current environmental standards. The defendant has also engaged in other environmental initiatives including the modernisation of its coke ovens and the $94 million Sinter Machine Emission Reduction Project. 6 In the letter from Mr L Hockridge, Director of BlueScope Steel (AIS) Pty Limited (which is the present name of BHP Steel (AIS) Pty Limited) and President of Industrial Markets, the defendant accepts responsibility and expresses regret for the occurrence of the offences. The letter details the defendant's expenditure of resources in investigating the cause of the offences and in implementing specific measures to prevent recurrence of this or similar incidents. Mr Hockridge also refers to the defendant's investment in long-term pollution reduction programs. The parties' submissions 7 Ms E L Fullerton SC, appearing for the prosecutor, relies upon the following submissions. 8 The immediate cause of these offences was the failure of a key process in the coke making and gas processing activities of the defendant's operations, namely, the ongoing production of a recirculated cooling liquid known as flushing liquor. The effective cooling of the coke oven gas was, it is acknowledged, critical for a safe and pollution-free operation. The flushing liquor is sprayed into the system through nozzles. It was the blocking of the sprays by tar carried in the recirculated flushing liquor that progressively infected the system, resulting in both air pollution and water pollution, the latter being added to the flushing liquor to assist in cooling but which could not be recirculated. 9 Ms Fullerton submits that there was considerable harm to the environment. That harm was actual harm. In the case of the water pollution offence it had an acute affect on aquatic life over a period of several days. Reliance was placed on paragraphs 6.1 to 6.6 of the statement of agreed facts. The breach of licence condition offences resulted in air pollution, which not only materially altered ambient air, but also degraded the ambient air so as to attract complaints. Reference was made to the definition of "harm" in the dictionary to the PEO Act: harm to the environment includes any direct or indirect alteration of the environment that has the effect of degrading the environment and, without limiting the generality of the above, includes any act or omission that results in pollution 10 Ms Fullerton conceded, however, that there was no acute impact on health as a consequence of the breach of licence condition offences. 11 It is accepted by the prosecutor that there was some property damage to motor vehicles that was in the form of tar droplets which the defendant cleaned up. 12 The prosecutor accepts that there was no deliberate act or omission on the part of the defendant which gave rise to these offences. The prosecutor also accepts that the defendant took some prompt and effective steps to remedy the impact. The defendant both prior to and in these proceedings demonstrated a commitment to remedying the cause of the incident which gave rise to these offences. 13 Ms Fullerton submits that an element of general deterrence remains a proper factor so as to reinforce the proper obligations on corporations generally when dealing with toxic materials. Moreover, it is submitted that a breach of licence condition offence is equivalent to a breach of trust, which in turn justifies a categorisation of the offence as serious. In this respect reference was made to Environment Protection Authority v Port Kembla Copper Pty Ltd (2001) 115 LGERA 391. 14 The prosecutor tendered a schedule setting out the defendant's previous convictions for environmental offences. In particular, there are twelve previous convictions which relate to the defendant's operations at the Port Kembla steelworks. Out of those twelve previous convictions, however, three arose from one incident and two arose from another incident. None of the previous convictions relate to the kind of incident which has led to the present charges. 15 Mr M G Craig QC, appearing with Ms J M Jagot and Ms F A Sinclair for the defendant, made the following relevant submissions on penalty. (a) The water pollution offence and the three breaches of licence arise from a single incident. The parties are in agreement that the immediate cause of the incident was an accident, involving a physio-chemical reaction in the industrial process for coke making. (b) The parties are in agreement that the incident which gave rise to the offences did not involve any element of deliberate act of commission or of omission on the defendant's part. (c) The harm to the environment by the commission of the offences is agreed. The pollution of waters involved the introduction of contaminated water into Allan's Creek. Approximately 1.4 kilometres of Allan's Creek was affected and a large amount of fish, numbering in the hundreds, was killed. There were signs that the affectation of the incident had been reduced by 8 November 2001. The pollution of waters caused harm that was serious. However, this harm does not approach the worst category of case of harm and should be characterised as falling within the mid range of types and extent of harm. The creek, partly channelised in concrete, passes through the largest industrial site in Australia and is subject to a pollution control licence. Accordingly, it cannot be described as a pristine receiving environment. The duration of the offence and the geographical extent of harm were both relatively confined considering the overall gravity of the incident. The creek showed signs of recovery by 8 November 2001, and recovery was largely achieved by May 2002. (d) The licence condition breaches resulted in no actual harm, other than the visual harm. The potential for harm to human health from the emissions was insignificant and must necessarily be characterised as trivial or de minimis. The word "likely" in s 241(1)(a) of the PEO Act entails a real chance or real possibility, not a remote chance or possibility ( Environment Protection Authority v Anning (1998) 100 LGERA 354 at 359). (e) A plea of guilty entails admission of the essential legal ingredients of the offence admitted by the plea, and no more ( R v O'Neill [1979] 2 NSWLR 582 at 588). The essential legal ingredients of the offences are that the defendant polluted waters and breached its licence by emitting visible emissions from the 7A battery in excess of the limits prescribed. Beyond these ingredients, any facts relied upon by the prosecutor that aggravate the offence must be established by the prosecutor to the ordinary criminal standard, namely beyond a reasonable doubt ( R v O'Neill [1979] 2 NSWLR 582 at 588; Anderson v The Queen (1993) 177 CLR 520 at 536; R v Storey [1998] 1 VR 359 at 369; R v Olbrich (1999) 199 CLR 270 at 281 and 294). (f) The defendant entered pleas of guilty at the earliest opportunity and is therefore entitled to the maximum utilitarian discount ( R v Thomson; R v Houlton (2000) 49 NSWLR 383 at 418; Crimes (Sentencing Procedure) Act 1999 s 22). The Court should extend a further discount, beyond this utilitarian value, for the defendant's genuine contrition and remorse, which is genuinely expressed and evidenced by the whole of the defendant's conduct during and after the incident and throughout the proceedings. (g) The defendant promptly and fully responded to the incident. The prosecutor was notified prior to the offences occurring and the defendant's co-operation with the prosecutor continued thereafter. (h) The defendant has taken both initial and long-term steps to rectify the problem. (i) The defendant agreed to pay the prosecutor's costs of the proceedings. (j) The defendant has continued to work with the prosecutor as evidenced by the agreed position in respect of s 241(1)(b) and (c) of the PEO Act. This resulted in a significant saving of time and cost for the prosecutor and the public resources of the Court. (k) None of the defendant's prior convictions relate to an incident such as the one that caused these offences. Accordingly, there is no pattern of repeated breaches capable of supporting an inference of any systemic failure to take proper precautions. (l) The Court would have regard to the nature and characteristics of the defendant, namely the defendant's commitment to pollution reduction and environmental management. (m) The Court would have regard to the large scale of operations and the inevitability of some environmental accidents, notwithstanding the taking of proper precautions ( Environment Protection Authority v BHP Steel (AIS) Pty Ltd [2000] NSWLEC 19, per Talbot J at [47] and [59]). (n) Since the offence is one of strict liability and there is a secondary deterrent purpose, care must be taken in imposing a penalty lest the offender be made to shoulder an unfair burden of community education ( Walden v Hensler (1987) 163 CLR 561 at 570). (o) The Court would apply the totality principle in sentencing the defendant ( Mill v The Queen (1988) 166 CLR 59 per Wilson, Deane, Dawson, Toohey and Gaudron JJ at 62-63; Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 at 703-704). The offences must be considered as a manifestation of a single event. The aggregate amount of the fine imposed must be 'just and appropriate' to the circumstances, having regard to the fact that all of the offences had a common cause. Conclusions 16 Section 241 of the PEO Act sets out a number of matters which the Court is required to take into consideration in imposing a penalty for an offence against the Act. (a) The extent of the harm caused or likely to be caused to the environment by the commission of the offence. 17 The pollution of waters resulted in actual harm to the environment. The contaminated water, including ammonia, cyanide and phenol, resulted in the death of at least 200 fish and other marine life. While studies carried out by the defendant in May 2002 showed that the number of fish had returned to the levels shown in the defendant's 1995 study, this does not necessarily lead to the conclusion that the damage to the fish stock in the creek had been rectified. Fish populations may have been greater prior to the offence than in 1995. Consequently it is unclear to what extent the pollution has affected the population of fish in the creek over the long term. However, it is clear that the pollution caused considerable immediate harm, evident in the death of fish numbering in the hundreds. 18 The air emissions in breach of the defendant's licence condition also resulted in actual harm to the environment, although to a lesser extent than the pollution of waters. Counsel for the defendant submitted that the potential for harm to human health from the emissions was insignificant, and accordingly there was no actual harm other than visible harm. I have previously noted that the dictionary of the PEO Act defines "harm" as: any direct or indirect alteration of the environment that has the effect of degrading the environment and, without limiting the generality of the above, includes any act or omission that results in pollution. 19 This harm must be caused or likely to be caused by the commission of the offence. In Environment Protection Authority v Anning (1998) 100 LGERA 354 at 359, I interpreted "likely" in s 241(1)(a) of the Act as encompassing a real chance or real possibility, not a remote chance or possibility. Accordingly I conclude that there was only negligible potential harm to human health. However, the air emissions clearly caused an alteration to the ambient air through visible change and odour. This alteration constituted a degrading of the environment and amounted to actual harm to the environment, albeit at a relatively low level. 20 Although the fallout of tar droplets in the emissions landed on vehicles, the defendant rectified this property damage by cleaning the vehicles. Therefore, this damage adds little to the extent of harm caused by the commission of the offences. (b) The practical measures that may be taken to prevent, control, abate or mitigate that harm. 21 The parties made no submissions as to the practical measures that may have been taken to prevent, control, abate or mitigate the harm caused by the offences. However, it was agreed by the parties that there was no deliberate act of commission or of omission on the part of the defendant, in the incident which gave rise to the offences. (c) The extent to which the person who committed the offence could reasonably have foreseen the harm caused or likely to be caused to the environment by the commission of the offence. 22 The parties also made no submissions as to the extent to which the defendant could reasonably have foreseen the harm caused or likely to be caused to the environment by the commission of the offences. (d) The extent to which the person who committed the offence had control over the causes that gave rise to the offence 23 The parties made no submissions as to the extent to which the defendant had control over the causes that gave rise to the offences. The defendant, however, clearly had control over the operations within its facility. As noted above, however, there was no deliberate act of commission or of omission on the part of the defendant, which gave rise to the offences. (e) Whether, in committing the offence, the person was complying with orders from an employer or supervising employee. 24 This consideration is not relevant. Other considerations 25 The maximum penalty for each offence is, in the case of a corporation, $250,000. This is a reflection of the seriousness with which the legislature views such offences. 26 In the case of a breach of a pollution licence, this Court has frequently said that such a contravention amounts to a breach of public trust. The defendant is given licence to pollute. But the licence is conditional upon it not polluting beyond the permitted level. The defendant is trusted to so carrying on its activities that it will not cause more pollution than the licence allows: (State Pollution Control Commission v Shell Refining (Australia) Pty Ltd, NSWLEC, Cripps J, 20 July 1990, unreported; State Pollution Control Commission v Metropolitan Collieries Limited (No. 2), NSWLEC, Cripps J, 19 October 1990, unreported; State Pollution Control Commission v Australian Iron and Steel Pty Ltd, NSWLEC, Cripps J, 10 October 1991, unreported; State Pollution Control Commission v Broken Hills Proprietary Co Ltd (No. 2) (1991) 74 LGRA 358 per Stein J; State Pollution Control Commission v CSR Ltd (1992) 75 LGRA 1 per Cripps J; Environment Protection Authority v Caltex Refining Company Pty Ltd, NSWLEC, Stein J, July 1994, unreported; Environment Protection Authority v ADI Limited [1999] NSWLEC 14 per Talbot J; Environment Protection Authority v Norco Co-operative Ltd (2000) 108 LGERA 137 per Bignold J; Environment Protection Authority v Softwood Holdings Ltd (2000) 110 LGERA 87 per Bignold J; and Environment Protection Authority v Port Kembla Copper Pty Ltd (2001) 115 LGERA 391 per Pearlman J). 27 In Environment Protection Authority v Capral Aluminium Ltd (NSWLEC, 18 December 1998, unreported) Cowdroy AJ (as he then was) regarded a contravention of a licence as "a most serious matter where the public interest is involved" (at [59]), but declined to adopt the phrase "breach of trust" as it represented an equitable doctrine inappropriate under environmental offences legislation. 28 In the present case Mr Craig QC submits that the breaches of the licence should not be categorised as a breach of public trust. He submits that there was no deliberate act or omission: it was an accident which was unprecedented. Ms Fullerton SC submits that the breaches of the licence justify categorising each of them as a breach of trust so as to be regarded as serious. 29 I share the reservation expressed by Cowdroy AJ in categorising a contravention of a condition of a licence as a breach of trust. Nevertheless, considerations of judicial comity suggest that I should adopt the prevailing view (Michael Realty Pty Ltd v Carr (1975) 2 NSWLR 812 at 820). By undertaking activities permitted by a pollution control licence, the licence holder agrees to do so in accordance with the conditions of such licence. It is not necessary, however, to categorise such a contravention as a breach of public trust in order to conclude that the offence is serious. As noted above, the penalty for the offence shows that the Parliament must have regarded it as serious. It is sufficiently serious to afford the same maximum penalty as the polluting of waters under s 120 of the PEO Act. A contravention of a condition of a licence must, on that account, be regarded as serious. 30 It is relevant that all the offences occurred during a close time frame and were the result of the one incident. Shortly stated, the emulsification of tar and flushing liquor occurred in the No. 10 tar decanter, so that the emulsified tar in the recycled flushing liquor caused blockages in the cooling sprays. The effective cooling of the coke gas is critical to a safe and pollution-free operation. The blockages in the cooling sprays caused the collector mains for the coke gas to become overheated. Fresh water was introduced to the flushing liquor circuit to provide emergency cooling. The volume of water in the system increased beyond the capacity of the No. 10 tar decanter, which started to overflow both tar and contaminated water into the adjacent drain and then to the recovery basin. The recovery basin was not designed to cope with the volume of water required to maintain cooling of the coke gas main and it overflowed into the main drain and Allan's Creek. The gas collector mains warped due to overheating thereby loosening the sets of the connections between the valveboxes/goosenecks and standpipes, so that there were emissions of coke gas into the atmosphere in excess of the number of emissions permitted by the licence. 31 Where a number of offences occur in a close time frame and as a result of one incident, the principle of totality requires the sentencer to fix an appropriate sentence for each offence and to then review the aggregate sentence and consider whether the aggregate is a just and appropriate measure of the total criminality involved; that is, to consider whether the penalties properly reflect the total criminality of the defendant and then make an adjustment accordingly (Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 at 703-4; Postiglione v The Queen (1997) 189 CLR 295 at 308, 340-1; Mill v The Queen (1988) 166 CLR 59 at 62-3). 32 The prosecutor accepts that the defendant entered pleas of guilty at the earliest opportunity. This entitles the defendant in each case to a full discount on penalty of twenty five per cent. The prosecutor submits that the defendant is not entitled to receive any further discount. In so submitting, the prosecutor refers to the defendant's record of prior convictions. In the present case, however, I am prepared to allow a full discount of thirty five per cent, encompassing all relevant matters. Although the defendant has prior convictions, including offences relating to its operation at Port Kembla steelworks, the present offences arose out of an entirely unforeseen and unusual incident. The fact that it was unforeseen and unforeseeable is reflected by the fact that such an incident was previously unknown - it had not previously occurred over decades of steel making. The defendant is also entitled to the additional discount in view of its express statement of contrition and remorse, its co-operation with the prosecutor (including notifying the prosecutor of the incident before any actual pollution occurred), the steps the defendant has taken to rectify the problem, and its long and costly involvement in environmental management and pollution reduction programmes. 33 The most serious of the four offences is the pollution of waters, since that involved actual environmental harm including the death of fish, although the creek appears to have quickly recovered. The breach of licence offences are less serious, including very little actual harm, the only harm being visual together with some tar spotting on cars, which the defendant cleaned up. 34 In my opinion, the offence of pollute waters would attract a penalty of $100,000 which should be discounted by thirty five per cent to about $65,000. Each of the breach of licence condition offences would attract a penalty of $10,000, also discounted by thirty five per cent to about $6,500. Applying the principle of totality, discussed above, the following orders are just and appropriate and reflect the total criminality of the defendant. Orders 35 The formal orders of the Court are as follows:

No. 50106 of 2002 (1) The defendant is convicted of the offence as charged. (2) The defendant must pay a penalty in the sum of $60,000. (3) The defendant must pay the prosecutor's costs in accordance with s 253(2) of the Criminal Procedure Act 1986. No. 50108 of 2002 (1) The defendant is convicted of the offence as charged. (2) The defendant must pay a penalty in the sum of $6,000. (3) The defendant must pay the prosecutor's costs in accordance with s 253(2) of the Criminal Procedure Act 1986. No. 50110 of 2002 (1) The defendant is convicted of the offence as charged. (2) The defendant must pay a penalty in the sum of $3,000. (3) The defendant must pay the prosecutor's costs in accordance with s 253(2) of the Criminal Procedure Act 1986. No. 50111 of 2002 (1) The defendant is convicted of the offence as charged. (2) The defendant must pay a penalty in the sum of $1,500. (3) The defendant must pay the prosecutor's costs in accordance with s 253(2) of the Criminal Procedure Act 1986. No. 50107 of 2002 The Court notes that the prosecutor offers no evidence in support of the charge which is withdrawn. No. 50109 of 2002 The Court notes that the prosecutor offers no evidence in support of the charge which is withdrawn. The exhibits, except for Exhibits A and B, may be returned. I hereby certify that the preceding 35 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice Lloyd.

Dated: 17 February 2004 ANNEXURE 1 Land and Environment Court Proceedings 50106 to 50111 of 2002 EPA v BHP Steel (AIS) Pty Limited a Statement of Agreed Facts

1. OFFENCES CHARGED 1.1. BHP Steel (AIS) Pty Ltd ("the defendant") was charged with: (a) one offence contrary to s 120(1) of the of the Protection of the Environment Operations Act 1997 ("the Act"), for polluting waters on 23 October 2001, being matter number 50106 of 2002; and (b) five offences contrary to s 64(1) of the Act being the holder of environment protection licence number 6092 ("the licence") when condition 010.1 of that licence was contravened on: · 23 October 2001 in matter number 50110; · 25 October 2001 in matter number 50109; · 28 October 2001 in matter number 50107; · 6 November 2001 in matter number 50108; and · 10 November 2001 in matter number 50111 1.2. The proceedings were commenced on 15 October 2002 and had a first return date on 26 November 2002. On 17 December 2002 the defendant pleaded guilty to the pollution of waters offence, and to three of the five breaches of licence condition offences (matters number 50110, 50108 and 50111). 1.3. On that basis the prosecutor agreed not to seek pleas in relation to matters number 50109 and 50107.
2. BACKGROUND AND RELEVANT PROCESSES 2.1. The defendant holds environment protection licence No 6092 ("the licence") issued under s 55 of the Act for operations at the Port Kembla Steelworks at Five Islands Road Cringila NSW ("the premises"). […] 2.2. One of the activities carried out by the defendant at the premises is the manufacture of coke from coal. Coke is used as fuel for the blast furnaces operated by the defendant. Washed coal is crushed and then baked in coke ovens for about twenty hours to produce coke. There are four operating coke ovens batteries at the premises including the 7A battery. The 7A battery is made up of 50 ovens situated side by side. […] 2.3. During the coke making process each oven is filled with coal which is heated to about 1,000 degrees Celsius. During this process the volatile matter in the coal is driven off yielding gases known as raw coke ovens gas (":the coke gas") which contains by-products such as tar, ammonia (recovered as ammonium sulphate) and fuel gas which are piped for processing. The coke gas leaves each oven at about 600 degrees Celsius via a standpipe and is collected in a common gas system known as a collector main. Valve boxes/goosenecks provide a connection between the standpipe at each individual oven and the collector main. There are two collector mains on the 7A battery each of which collects gas from 25 ovens. […] 2.4. The coke gas is cooled in the valvebox/gooseneck from 600 degrees Celsius to 80 degrees Celsius using a recirculated cooling liquid known as flushing liquor which is sprayed into the valvebox/gooseneck. If the coke gas is not cooled as it enters the collector main, heat would cause damage to the main and associated plant. Flushing liquor contains cyanide, ammonia and phenols, in the order of 120 mg/l, 2800 mg/l and 420 mg/l respectively. In addition to cooling the coke gas the flushing liquor condenses some of the tar vapour contained in the gas to form liquid tar. At 7A battery a portion of the flushing liquor is bled off from the main supply and further pressurised to spray into the valvebox/goosneck during charging of each oven to generate suction on the oven and hence prevent charge emissions. This is known as high pressure aspirating liquor ("HPAL"). 2.5. Most of the tar in the flushing liquor (which condenses the tar vapour given off from the oven) is then removed by tar decanters including a tar decanter herein known as "the No. 10 decanter". The tar decanters separate the tar from the flushing liquor by differential separation based on density, with the tar sinking to the bottom. The tar is then decanted via a tar outlet. The cleaned flushing liquor, which always contains a small quantity of tar in normal operations, is sent to the flushing liquor collector tank, where a portion is then reused in a closed circuit in the process of cooling the coke gas in the coke ovens battery collector main as set out above. Excess flushing liquor is separated and reports to the coke ovens wastewater treatment plant for treatment and recycling in the coke quenching process. If tar is not efficiently decanted, a larger than normal portion of the tar may be carried in the flushing liquor used to cool the coke gas as it leaves the coke oven. […] 2.6. After cooling in the collector main the coke gas is piped to the Coke Ovens Gas Processing Plant ("the gas processing plant"). The primary coolers in this plant further cool the gas from approximately 80 degrees Celsius to approximately 30 degrees Celsius. The coke gas is then pressurised through a turbine system (known as exhausters) before further treatments to remove remaining tar mist, remove ammonia, further cool the gas and then remove remaining benzene from the gas. The resulting clean coke ovens gas is then used as a fuel for various processes within the steelworks. There are four ammonia absorbers at the gas processing plant, numbered 2, 3, 4 and 5. Their function is to remove ammonia from the coke gas. A circulating solution of dilute sulphuric acid and ammonium sulphate in the ammonia absorbers is sprayed via numerous spray headers into the gas flow to remove the ammonia. In the No. 5 ammonia absorber system, after exiting the absorber vessel, the coke gas passes through a primary and secondary acid catch, the function of which is to remove any droplets of solution carried in the gas exiting from the absorber. 2.7. Effective cooling of coke ovens gas is critical to safe operation of the process. The electrical pumps for flushing liquor are backed up by steam driven pumps and a diesel generator. These services protect against electrical failure. The final backup is to introduce fresh water at the coke battery to provide cooling. This water is not able to be recirculated. Upon one flush through the system this water discharges to the No. 10 tar decanter and because the introduced water cannot be recirculated it overflows from the No. 10 tar decanter to the Coke Ovens Recovery Basin ("the recovery basin"). 2.8. The recovery basin is a lined basin. The recovery basin was installed in 1998 to capture spills from the gas processing, coke making and coal preparation plants and hence reduce the incidence of polluted flows from these areas. It consists of two primary basins and a secondary basin which together can retain about 13 megalitres of liquid if the basin is empty. It was installed to meet the requirements of Pollution Reduction Programs 6 and 7. […] Overflows from the recovery basin flow to the Main Drain, licensed discharge point 88 which discharges to Allan's Creek which itself flows into Port Kembla Inner Harbour. […] The recovery basin is equipped with an oil boom near the discharge point in order to minimise any carry over of oily material in the event of an overflow. It is agreed that the existence of the recovery basin as installed represents good practice internationally for the coke making industry. It is agreed that enlargement of the existing recovery basin would provide a greater margin of safety in the event of process upsets and the defendant has agreed to this enlargement.
3. JULY 2001 TO SEPTEMBER 2001 3.1. Prior to the incident the defendant had embarked on a project to reduce corrosion rates of steel structures in and around the coke quenchers. This project included routine monitoring of sulphate levels in the ammonia still feed. From early July 2001 to the end of September 2001 the results showed a significant rise in sulphate levels in the ammonia still feed. 3.2. Between 10 September and 26 October 2001 higher than normal sulphate levels were also measured in the No. 6 Quencher Basin, as part of the monitoring being undertaken for the corrosion reduction project. 3.3. The monitoring results referred to in paragraphs 3.1 and 3.2 were used only for the purposes of the project to reduce corrosion rates and were not made available for process management.
4. THE INCIDENT 4.1. Tar blockages are experienced from time to time in the sprays which would ordinarily involve tar or other matter carried in the flushing liquor blocking the spray orifice. Such blockages when they occur are diagnosed and cleared by the battery heating operator. 4.2. On 18 October 2001, the HPAL strainer at the 7A battery blocked with tar. A parallel strainer was substituted in accordance with the defendant's standard procedure for this occurrence. 4.3. During the night of 18 October 2001, after the initial blockage referred to in 4.2 above, 14 cooling sprays at the 7A battery blocked with tar and were cleared. On 19, 20 and 21 October 2001 there were further blockages of the 7A battery cooling sprays. The rate of spray blockage was well in excess of the rate previously experienced. The cause of these blockages was not able to be identified at the time. Actions taken by the defendant during this period to respond to the blockages included clearing of sprays as blockages occurred, dismantling and cleaning of the flushing liquor strainer at Gas Processing, calibration of tar decanter interface level detectors, notification of senior operations personnel and steaming out and adjustment of tar weirs on all tar decanters. Additional personnel were called in by the defendant to assist with this work. 4.4. By the afternoon of 21 October [2001] the frequency of spray blockages decreased such that on this date only one blockage was reported. 4.5. At about l.00 am on 22 October 2001 the 7A battery experienced high temperatures in the collector mains indicating an insufficient amount of flushing liquor was reaching the cooling sprays. This was due to a recurrence of tar blockages in the sprays occurring at that time. To prevent overheating, fresh water was bled into the flushing liquor system near the collector main. This did not address the tar blocking the flushing liquor strainers and cooling sprays and the temperature of the collector mains continued to be high as the blockages persisted. 4.6. Around 8.00 am on 22 October 2001 the HPAL strainer at the 7A battery became blocked again due to elevated levels of tar in the flushing liquor. At that time the temperature in the 7A battery was very high indicating a large number of flushing liquor sprays with tar. In response to these problems and according to standard procedure, the backup water supply was used to cool the coke gas in substitution for the recirculating flushing liquor. Although not known at the time emulsification of the tar and liquor in the No. 10 decanter had occurred, meaning that there was poor separation of tar from liquor in the decanter and the increased amount of tar caused blockages of the sprays. 4.7. When fresh water was introduced to the flushing liquor circuit, the volume of water in the system increased beyond the capacity of the No. 10 tar decanter and at around 8.05 am on 22 October 2001 the No. 10 tar decanter started to overflow tar and contaminated water into the adjacent drain which then flowed to the recovery basin. From 8.45 am the level of the recovery basin started to rise. 4.8. Throughout the day on 22 October 2001 operators tried to clean the blocked sprays and strainers on the 7A battery. Around 11.00 am, in the belief that hot liquor may help to clear any remaining blockages of tar, a decision was made to revert to flushing liquor instead of fresh water. This attempt failed as the sprays and strainers reblocked with tar. A similar attempt was made at around 12.15 pm. After each attempt operators reverted to using the back up fresh water supply which, because of the volume, was then discharged to the recovery basin. 4.9. At about 11.00 am on 22 October 2001 the seals around most of the valveboxes/goosenecks on the 7A battery commenced failing due to the abnormally high temperatures. The excessive temperature in the collector mains of the 7A battery caused them to warp which in turn caused the seals to be ineffective. This in time led to the emission of raw coke gas to the atmosphere from multiple valveboxes/ goosenecks. 4.10. At around 2.30 pm on 22 October 2001, an officer from the defendant's Environment Department contacted the Environment Protection Authority ("EPA") to report the incident. At that time the two primary basins of the recovery basin were full and the secondary basin was about 80% full. The defendant advised the EPA that the recovery basin could start to overflow to the Main Drain and Allan's Creek within the next 6 to 8 hours. 4.11. Two conversations occurred between the defendant and the EPA throughout the afternoon of 22 October 2001 about the status of the recovery basin and progress of the incident. 4.12. At around 5.00 pm on 22 October 2001 a yellow plume was emitted from the No. 6 battery coke quencher and there was also fallout of tar droplets. Some of the tar fell on motor vehicles in the vicinity and onto the ground at the defendant's premises and adjacent industrial premises. It was determined that this was caused by tar contamination in the industrial water used for quenching. The quencher was immediately converted by the defendant to fresh water and the discolouration of the plume ceased shortly thereafter. 4.13. While the level in the recovery basin was rising, and prior to commencement of any overflow from the recovery basin, the defendant placed immediately downstream of the oil boom an additional temporary boom made of oil absorbent material. This was done to further minimise carry over of any oily material. There is also an oil boom in the Main Drain upstream of the licensed discharge point to capture any oil floating on the waters flowing down the drain. Additional booms were also placed in the Main Drain on 22nd October and 30th October to minimise carry over of any oily material. 4.14. Throughout 22 October 2001 the defendant continued to strive to mitigate the impact of the tar blockages by taking the following actions: (a) Throughout 22 October [2002] work was continuously carried out to unblock sprays at 7A battery (often requiring revisiting the same spray). Individual sprays were cleared, returned to service but subsequently reblocked. In addition, the strainer on the HPAL system was unblocked in order to allow the higher pressure liquor to be used for cooling of gas and thereby assist in restoring normal operations. (b) So as to provide additional resources, contractors were called in to assist. (c) Between 5.00 pm on Monday 22 October and 1.25 am on Tuesday 23 October [2001], the HPAL system was able to be operated after clean out of the strainers. The higher pressure of the HPAL allowed it to be used in identifying and cleaning out blocked liquor sprays. All liquor sprays on the Battery were individually checked for blockages and cleaned out where blocked. (d) Ovens 80 and 85 on 7A battery were charged for the purpose of reheating the system and the tar and to provide some hot COG in to the Collector Main to ensure that it was able to be kept at a safe pressure. (e) At 6.22 pm pushing, quenching and charging operations resumed at 7A battery to re-establish security of the gas management systems. 4.15. At around 6.18 pm on 22 October 2001 the recovery basin started to overflow contaminated liquid to the Main Drain. The defendant advised the EP A of this occurrence. The overflow peaked at a rate varying between approximately 800 and 1000kl/h and overflowed at this rate for about 10 hours, in the course of which the defendant took liquid samples from a number of points including hourly samples at the Main Drain licensed discharge point. 4.16. From when the recovery basin commenced overflowing, the defendant engaged a vacuum tanker truck to operate to clear any oily material from a number of locations including the surface of the water in front of the aforementioned oil booms. 4.17. The defendant continued to take steps to minimising potential overflows from the recovery basin. Alternate storages were found for approximately 2.6 megalitres of liquor within Gas Processing. In addition, attempts were made to continue quenching with industrial water which consumed approximately 1.1 megalitres of water. Both of these quantities of water, totalling 3.7 megalitres, would otherwise have flowed to the recovery basin. On Tuesday 23 October [2001], the overflow level of the recovery basin was raised by approximately 300mm using sandbags. This held back within the recovery basin an additional 3 megalitres of water which was subsequently reused in the coke making process. 4.18. The defendant also introduced additional salt water flow in to the Main Drain to dilute the discharge concentration. In relation to ammonia, cyanide and phenol (see paragraph 6.5 below), this was a mitigative measure that would have been effective to reduce impacts. The introduction of the additional salt water would not have reduced the mass loads of the ammonia, cyanide and phenol. 4.19. Around 9.30 pm on 22 October 2001 EPA officers attended the site and collected liquid samples from the recovery basin, Main Drain and Allan's Creek. They described the odour at the recovery basin on the site as a strong unpleasant coke ovens condensate odour which was "extremely offensive and tarry". They noted a similar smell, though not as strong, at the Main Drain and Allan's Creek. Using torches they saw about 50 dead fish floating in different spots along Allan's Creek. 4.20. Around 11.35 pm on 22 October 2001 quenches from the 7A battery also emitted a yellow plume and fallout of tar droplets. To address this issue the defendant flushed out the quencher basin to remove tar. 4.21. Around 1.25 am on 23 October 2001 one of the collector mains for the 7A battery reverted to using flushing liquor with the other collector main reverting at 4.17 am. Around 4.30 am the No. 10 tar decanter ceased overflowing to the drain. Around this time the rate of the overflow from the recovery basin decreased to between 100 and 150 kl/h until around 7:00 pm on Wednesday 23rd October. From this time, industrial water was able to be used for quenching coke and the overflow decreased to between 50 and 0 kl/h until it ceased at 5:30 am on 24 October. 4.22. During the 35 hours that the recovery basin overflowed into the Main Drain about 11 megalitres of water was discharged, being equivalent to about 5.5 Olympic pools worth. The water contained ammonia, phenols and cyanide at concentrations in excess of licence conditions applicable at the ultimate point of discharge from the main drain (licensed discharge 88) and caused the oily residues and tarry appearance identified in paragraphs 4.24 and 4.25. 4.23. Around 9.00 am on 23 October 2001 a number of EPA officers attended the premises. They collected a number of liquid samples from the recovery basin, Main Drain, Allan's Creek and the Port Kembla Inner Harbour. Two EPA officers also undertook a site inspection by boat of the Port Kembla Inner Harbour and Allan's Creek. During that inspection one of the officers collected liquid samples at 12 different locations. […] In the course of that inspection they observed that water in Allan's Creeks from between 200m west of Springhill Road and 20m west of the Blower Station drain […] was a black brown colour with an oily surface emitting a strong coke ovens odour. 4.24. EPA officers also collected dead fish samples, took photographs and video footage and counted a large number of dead fish in Allan's Creek. They again noted a strong tarry coke ovens odour at the basin and saw dark coloured liquid flowing out of the basin and a black brown residue on the surface of the water downstream of the overflow point. They observed some oily residue on the water downstream of the discharge point and a coke ovens odour emanating from the Main Drain and Allan's Creek. 4.25. […] 4.26. On 26 October 2001 EPA officers inspected the Port Kembla Inner Harbour and Allan's Creek by boat. During the course of that inspection they noted dead fish at the mouth of Allan's Creek, dead fish and two dead eels on the banks of Allan's Creek and some dead fish on the surface of the water of the creek. As part of their inspection they took samples from the same sample locations as on 23 October 2001 and took some photographs […]. 4.27. Once the incident had commenced, the defendant's response to control the process and restore normal operations within the defendant's premises was adequate. It was not appropriate to consider a full shut down of the No. 7A Battery since the time taken to achieve that in a safe manner with minimal environmental impact would have been longer than it took to solve the flushing liquor problem.
5. LICENCE CONDITIONS CONTRAVENED IN THE INCIDENT 5.1. Under the licence the defendant is permitted to discharge liquid pollutants at numbered discharged points. Point 88 is the discharge point for the Main Drain. The licence limits both the type and level of pollutants that may be discharged from that point. From 8.00 pm on 22 October 2001 to around 12.00 pm on 23 October 2001 the discharge from the Main Drain breached the licence limits in respect of concentrations of ammonia, phenols and cyanide, the limits of which were 7.5 mg/l, 0.45 mg/l and 0.30 mg/l respectively. Note that the licence has both concentration and mass discharge limits. The exceedances were in terms of concentration. 5.2. The licence also contains conditions that restrict visible air emissions from the coke ovens batteries. Condition 010.1 of the licence states: The table below sets out in relation to each Coke Ovens Battery the maximum number of valveboxes/goosenecks, main doors, lids and leveller doors from which visible emissions of the coke gas can be emitted at any one time. These limits must not be exceeded at any time. Battery Valveboxes/ Main Doors Lids Leveller Doors Goosenecks Absolute Absolute Absolute Absolute 4 13 8 10 5 5 13 8 12 5 6 20 12 27 7 7A 3 9 8 5

5.3. The number of visible air emissions recorded by the defendant from the valveboxes/goosenecks of the 7A battery indicate the licence limits in condition 010.1 were breached on 51 days from 22 October 2001 to 28 February 2002, including on every day from 23 October 2001 to 13 November 2001 and on a further 29 days between then and 28 February 2002. […] 6. ENVIRONMENTAL HARM i. Water Pollution 6.1. As a result of the incident approximately 11 megalitres of water containing levels of ammonia, phenols and cyanide in excess of the licence conditions flowed from the recovery basin into the Main Drain and from there to Allan's Creek and the Port Kembla Inner Harbour. The water also caused the presence of the oily residues and appearance identified in paragraphs 4.24 and 4.25 above. 6.2. This caused harm to the marine environment of the Main Drain and Allan's Creek. It polluted approximately 1.4kms of Allan's Creek and was responsible for the death of a large number of fish and other aquatic animals including crabs. The dead fish included luderick, bream, tarwhine, sea mullet, flat-tailed mullet, sand whiting, roach, 3-barred porcupine fish, juvenile stars, striped toad fish, juvenile pennant fish, trevally and eels. Around 200 dead fish were counted in one section of Allan's Creek during the morning of 23 October 2001. […] 6.3. On 8 November [2001], an officer from the prosecutor inspected Allan's Creek and did not see any dead fish. He saw ripples on the water which indicated to him that there were some fish in the Creek. 6.4. A survey conducted on behalf of the defendant by Marine Science and Ecology in May 2002 indicated that populations of those fish species measured in the survey had returned to above those recorded at the time of the previous survey in 1995 within 7 months after the incident. Fish populations at the time of the incident are likely to have been higher than in 1995 as action by the defendant since 1995 including Pollution Reduction Programs undertaken to reduce water impacts and accordingly improve the water quality in Allan's Creek would have contributed to an increase in the fish populations. 6.5. At the Main Drain licensed discharge point, the licence limits for the discharge of the chemicals ammonia, cyanide and phenol were exceeded for at least 15 hours from 8.00 pm on 22 October 2001 to 11.00 am on 23 October 2001. At the height of the incident the concentrations of ammonia, cyanide and phenols discharged to the Main Drain were approximately 7, 6 and 4 times higher than their respective licence limits. […] 6.6. In summary the effect of the discharge of the three chemicals, ammonia, phenols and cyanide were: (a) Ammonia - The discharge of ammonia was responsible either alone, or in combination with the other chemicals and substances discussed below, for the death of the fish and marine life observed by witnesses from 22 to 26 October 2001. Short term exposure to ammonia may cause behavioural changes and death in marine organisms. The Australian and New Zealand Guidelines for Fresh and Marine Water Quality 2000 ("ANZECC guidelines") include guidelines for protecting aquatic ecosystems. The ANZECC Guidelines contain "trigger values", above which further investigation is warranted and below which levels are considered not to adversely affect the receiving waters. The ANZECC trigger level for ammonia at pH 8.4 in marine waters is 0.42 mg/L. The concentration of ammonia in samples taken from Allan's Creek were up to 33. 7 mg/L on 22 October [2001] at 11.25 pm being 80 times the "trigger" level, and up to 13 mg/L at 10.40 am on 23 October 2001 being 31 times higher than the "trigger" level. (b) Cyanide -The cyanide levels discharged to the Main Drain and Allan's Creek would have had adverse effects on the aquatic organisms including fish and crabs present in the affected area of the creek and contributed to the death of those organisms. Cyanide is known to be a harmful chemical to aquatic organisms. The ANZECC "trigger" level for cyanide in marine waters is 0.004 mg/L. The concentrations of cyanide in samples taken from Allan's Creek during the incident were up to 1.31 mg/L on 22 October [2001] at 11.25 pm being 327 times the "trigger" level and up to 0.54 mg/L on 23 October 2001 at 10.40 am being 135 times the "trigger" level. (c) Phenols - The phenols concentrations discharged to the Main Drain and Allan's Creek would have caused adverse effects on aquatic organisms and contributed to the death of fish present in the affected area of the creek. Phenol can be absorbed through the fish membranes causing disruption to the central nervous system. The ANZECC "trigger" level for phenol in marine waters is 0.4 mg/L. The concentrations of phenol in samples taken from Allan's Creek during the incident were up to 1.2 mg/L on 22 October 2001 at 11.25 pm being three times higher than the "trigger" level and up to 0.76 mg/L on 23 October 2001 at 10.46 am being two times higher than the "trigger" level. 6.7. The discharge of residues to Allan's Creek in the course of the incident also polluted the Creek as identified in paragraphs 4.24 and 4.25 above. a) Public Complaints 6.8. Between 22 October 2001 and 29 October 2001 the defendant received 10 odour complaints which reported a strong odour from coke ovens. Of another 35 odour complaints, some identified the odour character as "acrid", "burning coal" or "sulphur". A further 26 complaints related to tar fallout on motor vehicles. The defendant cleaned about 40 cars as a result of the incident. 7. STEPS TAKEN BY THE DEFENDANT SINCE THE INCIDENT TO PREVENT A RECURRENCE 7.1. Steps taken by the defendant since the incident to prevent a recurrence include: 1 Restoration of plant condition · Repair of the No. 5 ammonia absorber acid catches; · Repair of the 7A battery collector mains to reseal each of the connections between the valvebox/gooseneck and the collector main. a Hazard and risk management · Engagement of an external consultant who led an environmental risk assessment of gas processing and coke batteries; · As a consequence of the defendant's participation in the production of a joint statement between its experts and those appointed by the EPA on the question of risk assessments and associated issues and the range of matters discussed and addressed in conferences between these experts, the defendant agrees to work with the EPA to attempt to identify and address any outstanding concerns on the part of the EPA and its risk expert and to work closely with the EPA in respect of environmental risk management at the premises. 2 Process management changes · Introduction of monitoring of the pH and sulphate levels in contaminated water from the final coolers to monitor acid carryover; · Installation of an additional bolt to the flange set or alternate similar locating mechanism that secures the spray headers in on all sprays on the numbers 3, 4 and 5 ammonia absorbers to ensure the sprays are aligned with the gas flow. The modification will be introduced to the number 2 absorber on the next available shutdown at which time all sprays will have been modified; · Implementation of procedures for managing process modifications comprising weekly change management meetings across Gas Processing and the Batteries to co-ordinate and record all changes in a database · Improved manual sampling of the tar level in the No. 10 tar decanter, with associated procedures for all decanters to confirm the tar/liquor interface level indication from the instruments. 3 Capital improvements · Installation of a holding tank system and associated procedures to ensure all gas main condensate to be returned to the process is analysed before it is introduced to the process; · Enlargement of the emergency capacity of the recovery basin, which is now in progress. 4 Other · Creation of additional "process specialist" and "process engineer" roles in Gas Processing in order to improve management of process performance and on process safety; · Introduction of a new organisational model at all levels of the company which emphasises role accountability and ensuring that all aspects of managing the processes and business are adequately recognised and resources. 7.2. Further steps in progress or proposed by the defendant include: · Installation of two conductivity meters to continuously monitor for ionic species in the 2 separate contaminated water streams; · Extensive experimental testing of interactions between process liquids within the Gas Processing plant in order to identify possible impacts should cross contamination occur; · Extensive review of emergency response procedures applicable to the cokemaking operations; · Initiation of a cokemaking technology agreement with a major European steelmaking and engineering firm in order to enhance access to state of the art technical information; · Testing of a supplementary device for monitoring the tar/liquor interface in decanters in a way which will indicate any loss of effectiveness of separation. 36 CO-OPERATION WITH THE PROSECUTOR 7.3. During the incident, on 22 October 2001, the defendant accompanied Mr William Dove and other officers of the EPA around the defendant's site to inspect the effects of the incident and to ensure the prosecutor understood the incident and the steps taken by the defendant to mange the incident. 7.4. On 23 October 2001 the prosecutor requested an incident report in accordance with condition R3.3 of the defendant's licence. The defendant provided a comprehensive incident report on 23 November 2001. 7.5. On 14 February 2002, the defendant was issued with a notice under the POEO Act for information and records in respect of the incident. On 27 March 2002 the defendant supplied extensive information and records in response to this notices. 7.6. On 7 May 2002, the defendant was issued with a notice under the POEO Act for information and records in respect of the incident. On 14 June 2002 the defendant supplied extensive information and records in response to this notice. 7.7. On 5 July 2002, the defendant was issued with a notice under the POEO Act for information and records in respect of the incident. On 19 July 2002 the defendant supplied extensive information and records in response to this notice. 7.8. On 7 August 2002 the defendant hosted a visit to the site by Mr Dove and the prosecutor's expert witness Mr John Court in order to assist them in their fact finding. 7.9. On 3 October 2002, the defendant was issued with a notice under the POEO Act for infoffilation and records in respect of the incident. On 31 October 2002 the defendant supplied extensive infoffilation and records in response to this notice. 7.10. On 3 November 2003, the defendant hosted a visit to its site by legal representatives and experts retained or employed by the prosecutor. 7.11. The defendant co-operated with the prosecutor during the investigation of the incident and in the preparation of this statement of facts. 7.12. The defendant has agreed to pay the prosecutor's costs as agreed or assessed. 7.13. The defendant pleaded guilty to the charges on 17 December 2002, the second mention date, which the parties accept was the first reasonable opportunity for the defendant to do so. ANNEXURE 2 Land and Environment Court Proceedings 50106 to 50111 of 2002 EPA v BHP Steel (AIS) Pty Limited 37 Supplementary Statement of Agreed Facts 10 Immediate Cause of the Incident 10.1 It is agreed that the following sequence of events led to the incident - (a) Emulsification of tar/liquor occurred in the No. 10 decanter with the decanter ceasing to operate effectively to separate tar from the flushing liquor. (b) This led to emulsified tar being contained in the flushing liquor. The emulsified tar in the flushing liquor caused blockages in the 7A battery cooling sprays, thus causing the collector mains of the 7A battery to become overheated. This risked permanent damage to the collector mains. (c) Fresh water was introduced to provide emergency cooling of the collector mains of the 7A battery. This was introduced in place of the circulating flushing liquor to cool the coke gas. As the volume of fresh water introduced was in excess of the capacity of the flushing liquor system, a surplus of contaminated water overflowed from the No. 10 decanter and from there collected in the recovery basin. The volume of water necessary to maintain cooling of the gas main over a period of 27 hours exceeded the capacity of the recovery basin and from there discharged to the Main Drain and Allan's Creek once the capacity of the recovery basin was exceeded. (d) An attempt to divert a portion of the surplus water through the quenching process to minimise the overflow of contaminated water to Allan's Creek was thwarted because tar had spread through the Industrial Water System which resulted in the yellow quench plume referred to in paragraph 4.12 of the Statement of Agreed Facts. (e) The collector mains on the 7A battery warped due to overheating thereby loosening the seals of the connections between the valveboxes/goosenecks and standpipes, thus permitting emissions of the coke gas to the atmosphere as specified in paragraph 5.3 of the Statement of Agreed Facts. 10.2 The primary or root cause of the emulsification of the tar referred to in 10.1(a) is not agreed. Enquiries and subsequent investigations have enabled the defendant to satisfy itself that the following sequence of events gave rise to the incident: (a) A spray header was installed in the primary acid catch on the No 5 ammonia absorber in the gas processing plant at some time between 1997 and 22 October 2001. The spray header was incorrectly installed - it was aligned so that the liquor sprayed towards the inner sleeve of the primary acid catch rather than the same direction as the gas flow. This caused the spray solution to impinge directly onto the inner sleeve of the primary acid catch. The design plans showed the sprays pointing in the same direction as the gas flow. (b) A combination of erosion and corrosion from this impingement of the spray solution caused the formation over time of a hole in the inner sleeve having approximate dimensions of 30 cm long by 2 cm wide. The formation of a hole resulted in sulphate carryover to the numbers 5 and 6 final coolers, and hence to the No. 10 decanter as part of the process by which the flushing liquor is recirculated. (c) The sulphate circulating in the flushing liquor system reacted with tar chemicals to form a sulphonated compound which acted as a surfactant. (d) The surfactant formed an emulsion in the No. 10 decanter. It is agreed by the prosecutor's expert Mr John Court that this is a possible cause of the emulsification referred to in 10.1(a). 10.3 The prosecutors' expert Mr Court postulated that a more likely cause of the emulsification referred to in 10.1(a) was an unplanned an unauthorised introduction of a surfactant material into the No. 10 Tar Decanter. The defendant's experts do not agree that this is a more likely cause than that described in paragraph 10.2 above. However they do agree surfactant material, in breach of the defendant's work procedures and without the knowledge of the defendant, could have been dumped into a seal pot condensate collection tank and thereby returned to the process with returned gas main condensate. Both the prosecutor and the defendant's experts agree that: (a) it is physically possible for surfactant material to be dumped into a seal pot; (b) emails relating to overseas experience indicate unplanned introduction of surfactants from any source are a potential source of emulsification; and (c) there is no direct evidence linking such an event with the incident. 10.4 The supply of clean flushing liquor to the batteries, in order to provide cooling to the collector mains, is a critical aspect of the cokemaking process. Effective decanter operation in order to achieve efficient separation of liquor from tar and is a key part of the flushing liquor supply. Emulsification interferes with efficient separation in the tar decanters. It is agreed that there are several reasons why emulsification can occur: · Fine solids entrainment from the coke ovens or other sources. · Contamination with mineral oils. · Contamination with detergents or other surfactants (from sources outside the cokemaking plant). · Generation of surfactants within the cokemaking process (eg. Via sulphonation). · Strong ionic solutions (including strong alkali and sulphuric acid). · Other unexplained causes, given the complexity of the coal tar chemistry. ANNEXURE 3

Land and Environment Court Proceedings 50106 to 50111 of 2002 38 EPA v BHP Steel (AIS) Pty Limited Second Supplementary Statement of Agreed Facts 12 Expert Conferencing 12.1 Experts retained by the both the prosecutor and the defendant in the fields of risk assessment and management and chemical engineering engaged in a joint expert conference in accordance with the Land and Environment Court Practice Direction No. 20 (September 2002). The conference was designed to identify the issues between them, in so far as their expertise was directed to analysing the circumstances surrounding the incident which gave rise to the offences the subject of the present proceedings, and to identify where they agreed and disagreed in relation to these issues. The conferences took place over a total of seven days between November 2003 and January 2004. 13 PRP 13.1 Since the conferencing process, the defendant has offered and the EPA has agreed that the defendant will enter into a Pollution Reduction Program with the EPA concerning environmental risk assessment and management at the subject premises designed to extend the process that has already been undertaken by it in evaluating and managing the environmental risks associated with coke ovens batteries and gas processing operations. 14 Visible emissions 14.1 The parties refer to paragraphs 5.1 and 5.2 of the principal statement of agreed facts. The visible emissions exceeded the number limit in the licence as recorded in those paragraphs while the defendant repaired the 7A battery collector mains to reseal each of the connections between the valveneck/goosebox and the collector main as identified in paragraph 7.1 of the principal statement of agreed facts. 14.2 A visible emission cannot be directly related to an emission rate of air pollutants, but exceedances of the visible emission limits in the licence indicates that emissions are higher than normal. 14.3 Coke ovens gas contains compounds which have been classified as known or probable human carcinogens. They include: Benzene - categorised by World Health Organisation's International Agency for Research on Cancer ("IARC") and the USA EPA as carcinogenic to humans; and Polycyclic aromatic hydrocarbons (PAHs) - the USA EPA and IARC have classified BaP as a probable human carcinogen and the State of California has determined that the following compounds, defined as polycyclic organic matter (POM), are carcinogens; benzo(b)fluoranthene, benzo(j)fluoranthene, benzo(k)fluoranthene, benzo(a)pyrene, chrysene, and indeno(I,2,3-cd)pyrene. 14.4 […] 14.5 […] 14.6 The potential to cause harm to the health of residents in the area through exposure to the above emissions was assessed to be negligible and would not be associated with an unacceptable risk to human health.

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