34 The main point of contention between the parties is whether the incident was foreseeable. I am required to consider under s 241 of the Act:
(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.
35 The prosecutor submits that the risk of harm caused by the commission of the offence was reasonably foreseeable at a fundamental level or general level because where items of the plant are used for the purpose of eliminating odours in a major industrial operation, one must be able to reasonably foresee that a failure to operate such a plant properly and efficiently is likely to cause the emission of odours: citing Environment Protection Authority v Sydney Water Corporation Ltd (1999) 102 LGERA 232 at [68]. The prosecutor submits that the emission of carbonyl sulphide in particular need not be foreseen but rather that incomplete combustion produces a reasonable risk that odorous gases will not be properly destroyed, which was the case here.
36 According to the prosecutor, the harm was also foreseeable at a specific level. In June 2006, Caltex made a conscious decision to divert the sour gases from the HTU to the main refinery flare, thus changing its system for the elimination of highly odorous gases produced as off-gases at its HTU. The reduction of odours at the main flare was dependent on the efficiency of the combustion at the flare which depended inter alia on the steam-to-hydrocarbon ratio remaining in a recognised range. It was reasonably foreseeable that the reduction of the hydrocarbon gas flow to the flare would cause the steam-to-hydrocarbon ratio to increase to a point where it would prevent proper combustion of sour gases at the flare and cause the emission of foul odours.
37 In the cross-examination of Mr Sawtell the prosecutor suggested that the use of the main flare for the purpose of the treatment of off-gases from the HTU to the main flare required the destruction by combustion of the odorous gases to which Mr Sawtell agreed. Mr Sawtell then agreed that if combustion did not work adequately at the flare, then those odours may be emitted from the flare. Mr Sawtell also agreed that if such emissions occurred, then they might cause an impact at ground level.
38 The prosecutor relies on the evidence of Mr John David Court of J D Court and Associates Pty Limited, a private consultant. In short, Mr Court opines that the incident was foreseeable. His evidence can be summarised as follows:
+ Over-steaming at low flaring rates is a known contributor to decreased efficiency of combustion and destruction.
+ The odour complaints recorded during the incident are consistent with exposure of the residents to a mixture of burned and unburned hydrogen sulphide and odorous reduced sulphur compounds although this was not the only gas present or only odorous gas present in what was emitted from the flare.
39 The defendant's evidence is quite to the contrary. Caltex submits that any matters adverse to it may only be taken into account in sentencing if they are proven beyond reasonable doubt. Matters which are favourable to Caltex, however, need only be proved on the balance of probabilities where the defendant bears the onus of proving matters submitted in mitigation: The defendant's evidence is quite to the contrary. Caltex submits that any matters adverse to it may only be taken into account in sentencing if they are proven beyond reasonable doubt. Matters which are favourable to Caltex, however, need only be proved on the balance of probabilities where the defendant bears the onus of proving matters submitted in mitigation: R v Olbrich (1999) 199 CLR 270 at [27].
40 Caltex relies on the evidence of Dr James Garfield Seebold. This evidence should be preferred to that of Mr Court because, according to Caltex, Dr Seebold is an internationally recognised expert on flares and combustion, while Mr Court has only general environmental pollution control expertise. The main arguments of Dr Seebold are as follows:
+ The odour was caused by a mechanism whereby the refinery flare was " over-steamed " which resulted in the quenching of the hydrogen sulphide to sulphur dioxide chemical kinetic combustion reaction, and resulted in an odorifically-significant carbonyl sulphide concentration being generated in and emitted from the flare.
+ In his opinion the diversion of HTU off-gas to the flare was a reasonable course of action to take and that over-steaming would not have been a concern.
+ The incident that occurred at the refinery was a "unique occurrence " and has not occurred to his knowledge anywhere else in the world.
+ There are no reports of studies that demonstrate any odour-producing potential of over-steaming in petroleum refinery elevated flaring of mixtures of hydrocarbon relief gases containing traces of hydrogen sulphide.
41 In the alternative, Caltex submits that the prosecutor has not discharged his burden of proof in relation to the issue of foreseeability. Although the phrase " foreseen the harm " is undefined by the Act, Caltex submits that some guidance can be gleaned from case law. The defendant cites Environment Protection Authority v BHP Steel (AIS) Pty Ltd (2004) 132 LGERA 213; [2004] NSWLEC 37 at 223 [32] in which I stated:
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.
42 Mr Court disagrees with Dr Seebold. He relies on the claims in Dr Seebold's report that incomplete combustion can lead to the emission of odouress materials and over-steaming can lead to incomplete combustion. Therefore, he contends, that if these three mechanisms come together, there is a risk of odorous materials. Furthermore, he contends t Mr Court disagrees with Dr Seebold. He relies on the claims in Dr Seebold's report that incomplete combustion can lead to the emission of odouress materials and over-steaming can lead to incomplete combustion. Therefore, he contends, that if these three mechanisms come together, there is a risk of odorous materials. Furthermore, he contends that a basic rule of flaring is to keep the heat of the flare right and avoid incomplete combustion. Mr Court concludes that if you over-steam the flare, the heat can be reduced and the production of odours is foreseeable.
43 I prefer, on the balance of probabilities, the evidence of Dr Seebold who is a recognised expert on flares and combustion and whose evidence of the occurrence I find persuasive. Mr Court, although an eminent pollution expert, has no specific expertise in relation to flare combustion. In my view, the incident was unprecedented and entirely unforeseeable. When I questioned Mr Sawtell he stated to me that the diverted flare was operating acceptably for six months in a variety of weather conditions, up until " all the moons aligned " and there was an adverse outcome. Both of the experts were unable to find any literature that discussed hydrogen sulphide, over-steaming and the production of odour. To the knowledge of Dr Seebold, this incident had not yet occurred in any oil refinery in the world, the industry is not concerned with over-steaming, and that this is preferable to smoke formation.
44 I find the decision of Environment Protection Authority v Sydney Water Corporation of little relevance. On the other hand, the decision in Environment Protection Authority v BHP Steel is of parallel significance.
Control over the cause of the offence
45 The prosecutor submits that Caltex had control over the causes that gave rise to the offence and that it could have taken preventative measures. Caltex also acknowledges that it had control over the causes, but for the reasons above, it submits that it was not foreseeable that the causes would give rise to the offence.
46 I also agree with Caltex on this question. Indeed it did have control over the causes of the offence, but there was no way that it could have known that such causes would produce the incident.
Sentencing Considerations under the Crimes (Sentencing Procedure) Act 1999
47 The Crimes (Sentencing Procedure) Act 1999 (the "Sentencing Act ") outlines the purposes of sentencing at s 3A:
The purposes for which a court may impose a sentence on an offender 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,
(g) to recognise the harm done to the victim of the crime and the community.
48 According to the prosecutor, each of these purposes is applicable to the offence in question. In particular, it argues that a specific deterrent is required because Caltex has a less than optimal prior record. A general deterrent is also needed because a sentence in a case such as this needs to be of sufficient magnitude to change the economic calculus of persons in relation to environmental laws: Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 359-360; Environment Protection Authority v Waste Recycling and Processing Corporation (2006) 148 LGERA 299 at 330.
49 Caltex submits that the entry of a conviction of itself is a powerful act of public censure and it has also agreed with the prosecutor to the making of a publication order in relation to the offence.
50 According to s 21A of the Sentencing Act , the court is to take into account the aggravating factors, mitigating factors and any other subjective or objective factor that affects the relative seriousness of the offence. I will now deal with such of these matters which are of relevance.
Prior record
51 Previous convictions are an aggravating factor under s 21A(2)(d) of the Sentencing Act . The prosecutor points out that Caltex has twenty six prior convictions, four of which have been recorded since 1994 and two of which have been recorded since December 2005.
52 Caltex relies upon the following submissions in relation to its prior record:
o The record is not surprising considering the size, duration and nature of Caltex's operations: Environment Protection Authority v BHP Steel (AIS) Pty Ltd [1999] NSWLEC 197 at [15]-[16]. According to the affidavit of Mr Huizenga, the Kurnell refineries' team operate a complex 52 year old refinery 24 hours a day, seven days a week, 365 days a year.
o The record does not manifest a dangerous propensity or continuing attitude of disobedience of the law: Veen v The Queen (No.2) (1988) 164 CLR 465 at 476-7.
o Caltex is acutely aware of its environmental responsibilities and takes these responsibilities seriously.
o Caltex's prior convictions cannot be used to impose a sentence which is greater than the upper boundary of a proportionate sentence set by the objective gravity of the offence: Veen v The Queen (No.2) at 477.
53 Caltex argues that unforeseeable and unusual nature of the incident should incline the Court to allow it an additional discount in consideration of the mitigating factors identified above and the totality principle. Caltex relies upon my decision in Environment Protection Authority v BHP Steel (AIS) Pty Limited at 223 [32]:
Although the defendant has prior convictions…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 steelmaking. The defendant is also entitled to the additional discount in view of its express statement of contr Although the defendant has prior convictions…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 steelmaking. 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 .
54 Caltex submits that there are a number of mitigating factors. These considerations which fall under the category of other relevant matters under s 241(2) of the Act and s 21A(3) of the Sentencing Act, are as follows:
o Caltex has expressed contrition and remorse which can entitle it to a greater discount ( Cameron v The Queen (2002) 209 CLR 339 at [65] and [82]) and lessen the need for special deterrence ( Byres v Leichhardt Municipal Council [2006] NSWLEC 82 at [102]).
o Caltex has fully co-operated with the prosecutor before and after the charge was brought and continues to enjoy good working relationship with the agency.
o Caltex has incurred costs in maintaining the flare firing rate of two tonnes per hour which is estimated to be in the range of $2 million to $4 million per annum.
o Caltex is committed to improved environmental performance and compliance as indicated by the affidavit of Mr Huizenga and the practical measures which Caltex has taken since the incident. This indicates that Caltex is of good character: s 21A(3)(f) of the Sentencing Act.
o Caltex has agreed to pay the prosecutor's costs in these proceedings as agreed or as assessed.
o Together with the prosecutor, Caltex has prepared an agreed statement of facts which has saved the Court time and substantially reduced the length of the hearing: s 23 of the Sentencing Act.
o Caltex was not part of a planned criminal activity: s 21A(3)(b).
55 I take these matters into account and also acknowledge the presence at the sentencing hearing of Mr Bryan Waywell, the general manager of refining and Caltex's general counsel, and Ms Helen Conway, company secretary.
56 I have also read the affidavit of Mr Theodardus Josephus Cornelis Huizenga, refineries manager Kurnell, in which he states that he has given a general direction to assist the prioritisation of activities: namely, Caltex will comply with the law, Caltex will not hurt people or the environment, and only when those priorities are looked after, will Caltex optimise the Kurnell Refineries' financial performance. He describes the measures which Caltex has taken since the incident and are outlined in paras [24]-[26] above. He also expresses a large degree of contrition and remorse stating, 'It is a matter of grave regret that Caltex has committed an offence' and then goes on to express an apology to the Court and the community for causing the odours.
57 In her affidavit Ms Louise Renee Warner, process engineering superintendent, states that the odour was characteristic of flue gas containing combustion products of sulphurous species-flue gas being a general description for vapour effluent from refinery stacks. Caltex relies on her conclusion that the odour which she directly observed was not characteristic of hydrogen sulphide. This observation is also made by Mr Martin Peter Sawtell, area process engineering superintendent, in his affidavit.
Guilty Plea
58 In sentencing, the court must take into account the fact that the defendant has pleaded guilty and when this plea was entered: s 22 of the Sentencing Act.
59 Caltex pleaded guilty to the charge at the earliest possible opportunity. The defendant submits that it is therefore entitled to a full discount reflecting the utilitarian value of the plea: R v Thompson; R v Houlton (2000) 49 NSWLR 383 at 411, which I accept.
60 In R v Thompson, Spigelman CJ set out at 419 a number of guidelines for the weighting to be given to a guilty plea in a state court. I am to quantify the effect of the plea of which can encompass contrition and the utilitarian value of the plea. A discount of ten to twenty five per cent on the sentence is the appropriate range within which the utilitarian value may be assessed and the earlier the plea is entered, the greater the utilitarian value: R v Thompson at 419 [160].
The Parity Principle
61 The maximum penalty for the offence committed by a corporation was raised from $250,000 as and from 1 May 2006 to $1,000,000. The prosecutor submits that the maximum penalty is the expression by parliament of the seriousness of the offence: Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 at 698. It further argues that the recent fourfold increase in the maximum penalty highlights the objective gravity of the offence.
62 Caltex relies on the parity principle and the explanation which I gave in Environment Protection Authority v Nalco Australia Pty Ltd [2007] NSWLEC 831 at [28]: