Environment Protection Authority v Custom Chemicals Pty Ltd

Environment Protection Authority v Custom Chemicals Pty Ltd - [2016] NSWLEC 146 - NSWLEC 2016 case summary — Zoe

[4]

The events during the offence period

Custom Chemicals has been handling and processing chemicals at the premises since about 1970.
Custom Chemicals had a long standing practice of regularly rinsing out chemical residue from containers in the bunded area on the premises. The chemical laden liquid was washed or drained to a sump, then travelled through an underground pipe to a white plastic holding tank in a pit. Any chemicals rinsed or spilt on the premises, including from the batching process, rainwater collected in the bunded areas, and water from water cooling pipes in batch tanks also drained to the holding tank.
Whenever the holding tank was filled, its contents were discharged by pumping the liquid through a pipe into the nearby pond. Custom Chemicals had been discharging a mixture of chemicals from the holding tank into the pond leading to the creek since about 1990, when the holding tank and pH neutralising system were constructed.
The only monitoring of the liquid in the holding tank prior to pumping it into the pond was of its volume and pH.
In 1990, Custom Chemicals installed equipment to adjust the pH level of the chemical mixture in the holding tank. Either phosphoric acid or alkaline sodium hydroxide (caustic) was added to the holding tank to neutralise the pH of the liquid before it was pumped out into the pond. An automatic dosing system had been installed in about April 2014, but was never fully functional. When the system was operating automatically, the pump would automatically start pumping liquid out of the holding tank when a certain level in the holding tank and a certain pH were reached.
There were two black tanks, one containing phosphoric acid and the other containing sodium hydroxide 50% (caustic), that had pipes leading into the holding tank. The automated dosing system was intended to pump the appropriate dose of acid or caustic from these tanks to the holding tank to neutralise the chemical mixture in the holding tank. However, the automatic pH dosing system was never fully functional. A storm in April 2015 had also broken the connection between the holding tank and the acid tank, affecting the automatic pH adjustment. It was not repaired by 17 June 2015, when a water pollution event occurred.
Instead of the automatic dosing, Custom Chemicals manually monitored the volume and pH levels of the liquid in the holding tank, and adjusted the pH as desired, prior to pumping the liquid into the pond. The pH level of the liquid in the holding tank was measured by a pH probe that was at the end of black cord strung from the top of the holding tank, so that the probe was located in the bottom of the holding tank. The pH probe only measured the pH of the liquid at its location.
There was an air mixing system, by which air was blown through pipes in the holding tank to mix the contents of the holding tank, but that air mixing system had not been properly mixing the contents of the tank for some time.
The inadequacy of the mixing in the holding tank was also due in part to the presence of sludgy odorous sediment at the bottom of the tank. The EPA's tests of different parts of the sludge that had been removed from the holding tank, after the offence occurred on 17 June 2015, showed that the sludge had a pH ranging from 1 (extreme acidity) to 8 (neutral to mildly alkaline).
The lack of proper mixing meant that the liquid in the holding tank had a non-uniform pH, so that the pH being detected by the probe, even if accurate, could not be relied upon as being representative of the pH of the liquid being discharged.
After monitoring the pH measured by the probe in the bottom of the holding tank, Custom Chemicals' employees manually adjusted the pH of the liquid in the holding tank by adding acid or caustic in an attempt to bring the pH of the liquid to between 6.5 and 7.5 (neutral). When the pH meter read between 6.5 and 8, employees had been instructed to pump liquid out of the holding tank and into the pond.
Custom Chemicals had no record of maintenance or calibration of, or repairs to, its equipment relating to the holding tank. As at 17 June 2015, the pH probe had not been calibrated against pH solution in the laboratory for three to five months. The calibration was not adjusted when it was last checked.
Custom Chemicals also had no records of the pH of the liquid in the holding tank or when the liquid was discharged and no records of staff training.
During the offence period, 30 different chemicals (including acids, alkalis and water treatment chemicals) had been rinsed from containers onto the hardstand, drained into the holding tank and discharged into the pond. Custom Chemicals estimated that during the offence period, the following amounts of chemicals were washed or drained to the holding tank: one tonne of water treatment products; 300 kg of sodium hydroxide (50%); 200 kg of chlorine; 300 kg of sulphuric acid (70%); and 500 kg of hydrochloric acid. The contents of the holding tank were regularly pumped out to the pond at the rear of the premises over this period.
Other chemicals were also, from time to time, drained to the holding tank. Containers with residue of spent drycleaning fluid, perchloroethylene, had been rinsed out and drained to the holding tank. In early June 2015, about 10 to 12 old one litre plastic containers of phosphoric acid had deteriorated, resulting in spillage of the contents. This phosphoric acid drained into the holding tank and was discharged into the pond. On the morning of 17 June 2015, a Custom Chemicals employee tipped out "dirty chlorine" from a 15 litre drum into the sump leading to the holding tank. The drum had been half to three quarters full. On the same morning, there had been a spill of 50 to 60 litres of chlorine from a 200 litre container that was being filled in the bunded area, when the container split. The spilt chlorine drained to the holding tank and was pumped into the pond without being neutralised.

[5]

The particular pollution event on 17 June 2015

At about 12.05pm on 17 June 2015, EPA officers were driving past the premises on an unrelated matter when they observed a plume of smoke being emitted from the premises. The EPA contacted Custom Chemicals, which advised that the smoke had resulted from the burning of rubbish. The EPA asked Custom Chemicals to extinguish the fire.
The EPA officers then inspected the premises and observed a liquid discharging from a white pipe leading from the holding tank, through the boundary fence into a pond at the northeast of the premises. The EPA officers made the following observations: 1. the water in the pond was discoloured with a reddish brown hue or film; 2. some of the pond had a milky appearance and contained visible particles; 3. a white film covered the sediment in the bottom of the pond; 4. a whitish scum appeared on the surface of the pond and was particularly evident around the edges; and 5. there was a sour chemical odour in the immediate area of the pond.
The water in the pond flowed towards the creek to the east of the premises. This area was swampy and contained wetland vegetation such as cumbungi and cattail. The creek expanded in width to the east of the premises and flowed southeast towards and under Tomago Road and into a wetland leading to the Hunter River.
The water in the creek downstream of the premises and just upstream of Tomago Road displayed a reddish hue and the bed of the creek at this location was covered in a whitish/greyish filamentous growth or deposit. The water in the creek upstream of the premises appeared clear.
While the EPA officers were at the premises on 17 June 2015, at about 1.00pm, Custom Chemicals' Operations Manager, Mr Eckford, switched off the pump in the holding tank by pushing a button on a control box beside the tank, at which time the discharge from the pipe ceased.
At about 1.00pm on 17 June 2015, the display on the control box showed a reading of pH 5.45, as measured by the probe in the tank. However, an EPA test of the pH of the material in the bottom of the tank on that date measured pH 10.8. The pH reading displayed on the control box was jumping around at the time.
A chemical worker employed by Custom Chemicals, Mr Tolbert, had turned the pump on at about 7.00am on 17 June 2015. The pump was still pumping liquid into the pond at 1.00pm, although it is not known if the pump was running continuously during this period. Mr Tolbert had been verbally instructed by Mr Peter Volegoff, Custom Chemicals' Maintenance Manager, and Mr Eckford to only operate the pump when the control box showed a pH reading of between 6.5 and 7.5. However, the control box was not actually displaying the pH of the liquid that was being pumped out at this time. Mr Tolbert did not know what "pH" meant, but he was capable of reading the numbers displayed on the control box.
The chemical mixture being discharged was never analysed by anyone from Custom Chemicals or on its behalf. Custom Chemicals never sought advice regarding the potential for chemical reactions to occur as a result of the range of chemicals being mixed in the holding tank.
Analysis of samples taken by the EPA on the afternoon of 17 June 2015 indicated that: 1. water in the creek upstream of the premises had a pH of 5.22; 2. liquid in the sump flowing to the holding tank had a pH of 8.2; 3. liquid in the holding tank had a pH of 10.8; 4. liquid discharging from the pipe into the pond at the rear of the premises had a pH of 12.4; and 5. liquid in the pond at the rear of the premises had a pH of 8.1.

[6]

The events after the offence

The EPA issued a verbal clean-up direction to Custom Chemicals on 18 June 2015, followed by a formal clean-up notice under s 91 of the POEO Act on 19 June 2015. This required Custom Chemicals to cease discharging from the premises, remove and store or dispose of polluted water and sediments discharged to the watercourse and store its chemicals in a properly bunded area.
Custom Chemicals undertook the following action in response to the clean-up direction and the clean-up notice given on the afternoon of 18 June 2015 and 19 June 2015. Action Required Action Taken Immediately cease all discharge from the premises that may cause pollution of waters. Custom Chemicals immediately ceased all discharge from the premises by turning off the pump and capping and locking the pipe that led from the holding tank to the pond at the rear of the premises. Immediately pump out and appropriately store and/or dispose all polluted water and sediments that have been discharged from the premises to the unnamed watercourse at the rear of the premises. On 19 June 2015, Custom Chemicals pumped approximately 30,000 litres of water from the pond at the rear of the premises into 1,000 litre intermediate bulk containers ('IBCs'). The contents of the IBCs were transferred to the holding tank and later removed from the premises by Veolia. On 3 and 7 July 2015, Veolia (engaged by Custom Chemicals) removed 50,000 litres of water from the pond at the rear of the premises. By 5pm on Friday 19 June, Custom Chemicals had stored approximately 60% of its chemicals within bunded areas. Custom Chemicals had advised the EPA at the time the notice was given verbally that it would not be possible for this part of the notice to be complied with by the next afternoon. Custom Chemicals contacted the EPA on 19 June 2015 to advise of progress. By 5pm on Friday 19 June 2015, all chemicals stored on the premises must be stored in an appropriately bunded area. The EPA inspected the premises again at 3.10pm that day. By 21 June 2015, all chemicals were stored in bunded areas. By 5pm on Friday 19 June 2015, provide to the EPA in writing a complete inventory of all chemicals stored on the premises and owned or controlled by the occupier. By 11 August 2015, Custom Chemicals provided the EPA with a complete inventory of all chemicals stored on the premises.

[12]

The actual environmental harm

The discharge of pollutants from the premises on 17 June 2015 resulted in significant actual harm to the environment of the pond and the downstream creek up to Tomago Road. The pollutants were extremely toxic to aquatic life.
The samples taken from the pipe and pond on 17 June 2015 needed to be diluted at least 10,000 times to avoid the acute toxic effects to toxicity test species cladoceran (water flea) Ceriodaphnia dubia, larval fish Malanotaenia duboulayi and bacterium Vibrio fischeri (the pollutant was approximately 3,100 times more toxic than the upstream sample, which was inherently acidic). The samples from the downstream end of the pond on 17 June 2015 needed to be diluted at least 33 times to avoid the acute toxic effects. On 18 June 2015, the sample from the upstream end of the pond needed to be diluted 10,000 times, whilst the sample from the downstream end of the pond needed to be diluted 1,000 times, to avoid the acute toxic effects. The discharges on those dates would have been toxic to a range of aquatic organisms in the pond and creek if they were present.
The sample taken on 17 June 2015 from the creek upstream of the discharge point was toxic to the test species of cladoceran (water flea) Ceriodaphnia dubia and bacterium Vibrio fischeri and needed to be diluted at least 3.3 times to avoid the acute toxic effects to these test species. The sample taken on the same date from the creek downstream of the discharge point near Tomago Road was toxic to the test species of cladoceran (water flea) Ceriodaphnia dubia and bacterium Vibrio fischeri and needed to be diluted at least 3.3 times to avoid the acute toxic effects to these test species.
The discharge of pollutants on 17 June 2015 (including 50-70 litres of chlorine and a highly alkaline liquid with pH 12.4) severely degraded the quality of waters in the affected areas. The discharge of 50-70 litres of chlorine into the pond on 17 June 2015 contributed to the high toxicity of the pond waters. The pond measured a high concentration of 120-300 mg/l free and total chlorine. This grossly high level of chlorine, exceeding the Australian and New Zealand Environment and Conservation Council ('ANZECC') Guidelines' trigger value by up to 100,000 times, would have killed any aquatic life in the pond. The trigger value is the concentration that, if exceeded, has the potential to cause a problem and so trigger a management response. The chlorine concentration was well above that which was reported to be toxic to a wide range of aquatic organisms.
The discharges into the pond on 17 June 2015 caused degradation of the aquatic environment with sufficient intensity that the pond waters were extremely toxic to a range of aquatic organisms. The toxicity of the downstream creek waters decreased with increasing distance from the premises.

[13]

The likely environmental harm

On the basis of the documented cocktail of chemicals discharged into the pond over the offence period, it is most likely that any aquatic organisms present in the affected pond and creek waters over the offence period would have been adversely affected by exposure to the inorganic chemicals in the pollutants discharged from the premises over that period.
The various chemicals in the pollutants likely caused the following effects: 1. acids (hydrochloric acid, sulphuric acid, phosphoric acid, hydrofluoric acid) and alkalis (sodium hydroxide and potassium hydroxide) that were not appropriately neutralised would have caused rapid fluctuations and drastic changes in the pH of the waters, which is detrimental to aquatic biota. Only a small volume of excess concentrated acid or alkali is required to drastically change the pH of water; 2. the abrupt changes in pH of the pollutants and waters due to the introduction of acids and alkalis would have also increased the toxicity of other substances. In particular, salts of aluminium, copper and zinc that are relatively insoluble at ambient pHs dissolve in waters with pH values below 5 and above 8.5. This makes the metals more mobile, bioavailable and toxic to exposed organisms. On 17 June 2015, the concentrations of dissolved aluminium, copper and zinc in the pond water (1.3, 0.6 and 17 mg/l respectively) were high and exceeded the ANZECC Guidelines' trigger values (0.055, 0.0014 and 0.008 mg/l respectively). The high concentrations of these metals mobilised in the pond waters and downstream posed risks to aquatic organisms in those waters; 3. the sodium hypochlorite discharged into the pond over the offence period would have increased the total residual chlorine content of the pond waters. Chlorine is highly toxic to aquatic life. Sodium hypochlorite would have reacted with the many organics in the water treatment chemicals, producing toxic chlorinated organic compounds, which are persistent in the environment. Halogenated (including chlorinated) organic products have varying toxicity to aquatic organisms. Chloroform and other halogenated organic compounds were detected in waters in the main part of the pond and in the downstream end of the pond. The chloroform concentration in the main part of the pond exceeded the ANZECC Guidelines. Chloroform was detected in the creek just upstream of Tomago Road at 0.01 mg/l, which was well below the ANZECC Guidelines. No chloroform was detected in the upstream creek sample; 4. if any aquatic organisms were present, they would likely have been immediately acutely affected upon contact with waters containing the high levels of chlorine that were in the pond. Most organisms exposed to such a high chlorine concentration would not have survived; and 5. the soluble salts from the discharge of acids, alkalis and some water treatment raw chemicals increased the salinity of the pond water. The increased salinity had the potential to adversely affect organisms' osmoregulation function if there were any sensitive organisms in the pond water.
The introduction of chemicals into the pond likely progressively degraded the quality of the waters into the state that it was found on 17 June 2015, as evidenced by the following characteristics of the pond waters: 1. highly toxic to the test species of cladoceran Ceriodaphnia dubia, Rainbowfish Melanotaenia duboulayi and microtox bacterium Vibrio fischeri; 2. pH that was different from the acidic pH (5.2) of the upstream creek water; 3. high electrical conductivity of 3,300 microsiemens ('μS/cm') (much higher than the electrical conductivity of 110 μS/cm (cm) of the upstream creek water); 4. high levels of calcium, potassium and sodium ions as well as phosphorus, sulphur and silicon that were discharged from the premises (much higher than the corresponding concentrations in the upstream creek water); 5. high aluminium, copper and zinc; 6. high chlorine concentration; and 7. presence of chloroform and other halogenated methanes and ethylenes. The ANZECC Guidelines' trigger value for chloroform (0.37 mg/l) was exceeded in the pond waters. This would have caused acute effects on any sensitive aquatic organisms in the pond.
The water quality in the pond and downstream creek was degraded to a point that it would have likely adversely affected any exposed aquatic organisms.
The spill of 10-12 litres of concentrated phosphoric acid on the week commencing 8 June 2015 would have caused the pH of pond waters to drastically and abruptly drop to well below the ANZECC Guidelines' site-specific acceptable pH range of 5-8. This would have caused severe adverse effects on any exposed organisms, including death to any organisms in the pond. This would also have triggered the mobilisation of, and increased the toxicity of, aluminium, copper and zinc.

[14]

The potential environmental harm

Any aquatic organisms in the pond waters would have been adversely affected if they were exposed to various water treatment chemicals discharged from the premises during the offence period. Eight of the identified water treatment chemicals discharged are of particular ecological concern: 1. Sodium Tolyltriazole (not readily biodegradable); 2. Surfynol 104 (a surfactant); 3. Aquatreat AR545 (a polyacrylate) (not readily biodegradable); 4. HEDP, Guardmax HMDTMPA-K6 and PAPEMP (organophosphonates) (not readily biodegradable); 5. Guardmax PMA (a polymalate) (not readily biodegradable); and 6. WTS9-ED40.
Water treatment chemicals Aquatreat AR545, HEDP and Guardmax HMDTMPA-K6 are potentially of concern due to the potential risk of adverse effects that they pose for algae in waters.
The discharge of non-biodegradable water treatment chemicals (Dispelair SE 201P and WTS 4-16) is of concern because such chemicals persist in the environment and may have adverse effects on aquatic organisms.
The hazardous chemicals Guardmax PMA, PAPEMP and WTS 9-ED40 were discharged frequently and/or at relatively high volumes over the offence period. These are potential chemicals of concern as there is no definitive information on their toxicity.
Custom Chemicals' failure to calibrate the pH probe since early 2015 and the improper mixing of the contents of the holding tank meant that harm was potentially caused to the environment by discharges of liquids with extreme pH values into the pond and downstream waters.
The sample collected from the sump leading to the holding tank on 17 June 2015 contained the semi-volatile hexachloroacetone. This chemical is used as a pesticide. This pesticide was not used or stored on the premises.
There was potential for other harmful products to have been formed by the reaction between the many chemicals in the pollutants over the offence period.
Vegetation in the downstream creek/wetland area to the culvert under Tomago Road may also have been affected by the pollutants degrading water quality. The plant discolouration, observed by an EPA officer on 18 June and 2 July 2015, was potentially due to increasing effects (over time) from continuing exposure to the pollutants. Different plants have differing sensitivities to water salinity in mobile chemicals.
Once the creek enters the wetland, it is not clear which path the polluted water would have taken. It is unknown how far the pollutants released as part of this offence travelled. The pollutants may have caused harm to the downstream areas to which they flowed.

[19]

The environmental harm caused

The harm caused or likely to be caused to the environment by the commission of the offence is relevant to the objective seriousness of the offence: s 241(1)(a) of the POEO Act and s 21A(2)(g) of the CSP Act. Commission of the offence in this case caused pollution of the waters of the pond and the downstream creek on every occasion throughout the offence period that the chemical mixture was discharged from the holding tank.
The pollution of waters caused, was likely to cause and had the potential to cause significant harm to the environment, in the ways earlier described in the judgment.
Custom Chemicals submitted that the significance of the environmental harm was reduced by the following matters: 1. although the discharges have caused significant actual harm to the waters of the pond and downstream creek during the offence period, there is no evidence that the harm was likely to continue once the discharges stopped. By reason of the change in the wastewater system on the premises, discharges have now ceased. The potential for long term harm was also addressed by the removal of the polluted liquid in the pond in the period June to July 2015; 2. although there were changes in the water quality of the pond and the nearby creek, the change in water quality is likely to have decreased with increasing distance (and dilution) from the pond and would have extended only to Tomago Road; 3. the extent of the environmental harm was limited to the pond itself, which was an area of water about 20 m long by 5 m wide, and the downstream creek extending around 200 m below the pond to Tomago Road; and 4. the modified state of the receiving environment (particularly the pond) during the offence period would have meant that less environmental harm was actually caused. Custom Chemicals had been discharging chemical mixtures into the pond as part of its business since 1990. This would have affected the organisms and their habitat in the pond and the waters downstream. Furthermore, the quality of waters upstream of the discharge point was also toxic to certain aquatic biota and this would have reduced the likelihood of there being aquatic biota in the creek. As a consequence of these two factors, Custom Chemicals submitted that it is unlikely that there would have been any organisms in the waters to be harmed by Custom Chemicals' discharges during the offence period. This reduces what would otherwise be an aggravating factor, although it does not serve to mitigate Custom Chemicals' conduct.
I accept Custom Chemicals' submissions so far as they go. However, even taking these matters into account, the environmental harm caused or likely to be caused by Custom Chemicals' commission of the offence throughout the offence period still was significant. The number, frequency and repetition of discharges during the offence period; the volume of pollutants discharged during the offence period; the hazardous, dangerous and environmentally harmful nature of the pollutants discharged; the fact that the receiving environment comprised waters, waterways, and wetlands (the contamination of which by the ecotoxic chemicals in the discharges was expressly to be avoided); and the extent of the receiving environment harmed (over 200 m of waterways) means that the environmental harm caused or likely to be caused by the commission of the offence was significant and "substantial" within s 21A(2)(g) of the CSP Act and, hence, an aggravating factor.

[20]

The foreseeability of the risk of harm to the environment

The extent to which Custom Chemicals could reasonably have foreseen the harm caused or likely to be caused to the environment by the commission of the offence is a relevant objective circumstance: s 241(1)(c) of the POEO Act.
Custom Chemicals clearly could have foreseen the harm caused or likely to be caused to the environment by the commission of the offence. Custom Chemicals established and operated since 1990 a waste disposal system that depended on the discharge of the liquid pollutants in the holding tank into the pond and downstream creek. Custom Chemicals used no other means of removing the liquid in the holding tank other than pumping it through the pipe directly into the pond and the downstream creek. The discharge and the effects of the discharge into the pond were at all times in plain view. On the day of the EPA's inspection on 17 June 2015, the pond and the downstream creek were plainly discoloured by pollution caused by discharge from the holding tank.
Custom Chemicals' business was handling and processing chemicals. It had at all times the MSDSs for all the chemicals it used in its business. It knew the purpose of those MSDSs was to warn of the risk the chemicals posed to human health and safety and the environment. The four chemicals discharged in the highest quantities were classified by Safe Work Australia as hazardous and dangerous goods. Ecotoxicity information for these four chemicals included advice to avoid contamination of waterways and that two of the chemicals were harmful to aquatic organisms. The ecotoxicity information in the MSDSs for the water treatment chemicals discharged by Custom Chemicals during the offence period also warned against contaminating various forms of waters and waterways.
Any reasonable person in the position of Custom Chemicals would have foreseen that discharging these chemicals into the pond and downstream creek would cause or was likely to cause harm to the environment. The high foreseeability of the harm caused or likely to be caused to the environment by Custom Chemicals' conduct increases the objective seriousness of the offence.

[21]

Practical measures to prevent harm to the environment

Another factor relevant to the objective seriousness of the offence is the practical measures that may be taken to prevent, control, abate or mitigate harm to the environment by commission of the offence: s 241(1)(b) of the POEO Act.
There were practical measures that Custom Chemicals could and should have taken that would have prevented the pollution of the waters and the harm caused to the environment.
The obvious measure was not to discharge the contents of the holding tank into the pond at any time during the offence period. Instead, the contents of the holding tank should have been pumped out and removed from the premises by an authorised contractor in a tanker, as has been done since the offence was detected in June 2015.
Alternatively, a wastewater treatment plant could have been installed to treat the contents of the holding tank to a standard of quality that was able to be discharged without causing pollution of waters. Custom Chemicals has obtained a quotation for a water treatment plant to pursue this measure.
Custom Chemicals could also have applied for an environment protection licence to authorise any pollution of waters that might occur by discharging the contents of the holding tank into the pond. The application for the environment protection licence would have involved assessment of measures to avoid and to mitigate pollution of waters and any harm to the environment. Any environment protection licence could have included conditions requiring the implementation of these measures to avoid and mitigate harm.
The waste disposal system installed and operated by Custom Chemicals since 1990 was grossly inadequate. Apart from the fundamental defect that it depended on discharging pollutants directly into waters, the system only attempted to control one attribute of the pollutants discharged, namely the pH level. Custom Chemicals only monitored the pH levels of the contents of the holding tank and sought to adjust the pH of the liquid to be between 6.5 and 8.0 before discharging the contents into the pond. Custom Chemicals never tested or analysed the contents of the holding tank before discharge on any occasion and never sought or obtained advice about the potential for chemical reactions to occur as a result of the range of chemicals being mixed in the holding tank.
Even the practices and procedures that Custom Chemicals did adopt to monitor and adjust the pH level of the contents of the holding tank before discharge, were seriously deficient. Monitoring and buffering of the pH was done manually. The automatic pH dosing system installed in April 2014 was never fully functioning. The manual monitoring and dosing practice failed for various reasons, including the failure of the air mixing system, the failure to clean out sludge from the holding tank, the failure to otherwise ensure the contents of the holding tank were properly mixed before measuring the pH level, the failure to regularly calibrate the pH probe, the absence of regular maintenance of the equipment relating to the holding tank, and the absence of records of maintenance and calibration of or repairs to the equipment relating to the holding tank.
Custom Chemicals' training of its staff was extremely inadequate. The chemical worker who had been employed on the site for 12 years and regularly handled chemicals and discharged them from the site had such limited knowledge that he did not know what pH meant, although he was meant to be measuring it. None of Custom Chemicals' staff held relevant qualifications in chemistry or a related field. The chemical mixture being discharged was never analysed by anyone from Custom Chemicals or on its behalf. Custom Chemicals never sought advice regarding the potential for chemical reactions to occur as a result of the range of chemicals being mixed in the holding tank.
Accordingly, other practical measures that could have been implemented were to have improved the waste disposal system and overcome all of these deficiencies in Custom Chemicals' practices and procedures, including the inadequate knowledge and training of the staff.
The ready availability of these practical measures and the complete failure of Custom Chemicals to implement any measures that would have prevented environmental harm, increases the objective seriousness of the offence committed by Custom Chemicals.

[24]

Financial gain

The objective seriousness of an offence may also be increased if the offence was committed for financial gain, such as to make a profit or to save incurring an expense: s 21A(2)(o) of the CSP Act. In this case, Custom Chemicals did not make a profit from its criminal conduct of repeatedly discharging the contents of the holding tank into the pond and thereby polluting waters. However, it did save the expense of taking the practical measures to avoid polluting the waters.
The practical measure that Custom Chemicals has taken since the offence is to pay for an authorised contractor to remove the contents of the storage tank by tanker. Custom Chemicals is now paying an average cost of $4,880 per month to have the contents of the storage tank removed.
Custom Chemicals submitted that it is incurring this cost until a permanent treatment solution is implemented. It submitted that there is no evidence that this cost bears any relationship to what will be the cost of treatment and disposal under a permanent treatment solution. Nevertheless, by discharging the contents of the holding tank into the pond during the offence period rather than paying to have the contents removed by tanker as it has done since the offence, Custom Chemicals obtained a financial benefit by saving having to pay the waste disposal fees of the kind that it has had to pay since the offence: Environment Protection Authority v Wattke [2010] NSWLEC 24 at [57] and Bankstown City Council v Hanna (2014) 205 LGERA 39, [2014] NSWLEC 152 at [80]-[82] and [149]-[150].
Another practical measure that Custom Chemicals could have taken was to install and operate a waste water treatment plant to treat the contents of the holding tank to a standard of quality able to be discharged into the pond without causing pollution of waters. The quotation obtained by Custom Chemicals to supply, install and commission a wastewater treatment plant was $52,500. In addition, there would have been the cost of obtaining approval of the relevant regulatory authorities (such as the local council and/or the EPA) and the costs of operating, maintaining and repairing the wastewater treatment plant. By not installing and operating a wastewater treatment plant, Custom Chemicals has obtained a financial benefit during the offence period by saving having to pay the capital and operating costs of the wastewater treatment plant.
Custom Chemicals submitted that there is no evidence that Custom Chemicals committed the offence for the purpose of avoiding waste disposal costs. However, Custom Chemicals deliberately installed a waste disposal system that did not involve it incurring any costs of properly disposing of wastewater, whether by paying for removal by tanker or the installation and operation of a wastewater treatment plant or otherwise. No practical measures were taken to prevent discharges of the contents of the holding tank into the pond, and thereby polluting waters, and hence Custom Chemicals incurred no expense in taking any such measure. The acts involved in Custom Chemicals' commission of the offence necessarily avoided Custom Chemicals incurring any expense in disposing of the contents of the holding tank. In this way, Custom Chemicals obtained financial gain.

[28]

Remorse for the offence

Custom Chemicals has expressed remorse for the offence: s 21A(3)(i) of the CSP Act.
The early plea of guilty is consistent with Custom Chemicals being remorseful. In addition, Custom Chemicals sought to demonstrate its remorse in four ways (see Environment Protection Authority v Waste Recycling and Processing Corporation (2006) 148 LGERA 299; [2006] NSWLEC 419 at [203]-[214].
First, Custom Chemicals took action immediately upon being directed by the EPA to cease all discharges from the premises that may cause pollution of waters. Within three weeks, Custom Chemicals had complied with the EPA's direction to remove polluted water from the pond. Within three days of the EPA's direction, Custom Chemicals had stored all chemicals on the premises within bunded areas. Although around two months late, Custom Chemicals complied with the EPA's direction to provide a complete inventory of all chemicals stored on the premises.
Second, during the inspection by the EPA on 17 June 2005, Custom Chemicals co-operated with the EPA and disclosed the circumstances of the spills that had occurred earlier in the day, details of its method of operation and details of the chemicals it had used.
Third, Custom Chemicals redesigned the way it deals with wastewater and installed improved pollution control systems. This includes having the wastewater removed from the premises by tanker. These steps were designed to prevent or mitigate the risk of recurrence and indicate a genuine desire to act responsibly.
Fourth, a director of Custom Chemicals, Mr David Volegoff, swore an affidavit and gave evidence in Court expressing regret and remorse for the discharges that occurred at the premises. Mr Volegoff accepted that there were deficiencies in Custom Chemicals' infrastructure and operating practices. He said that Custom Chemicals had undertaken an assessment of its equipment and operating practices and implemented changes to address the deficiencies and ensure compliance with the POEO Act. He said that Custom Chemicals is committed to taking all action necessary to repair any harm occasioned as a result of the offence and to restore the trust of the community and regulatory authority in the future operations of the company. He said Custom Chemicals is committed to ensuring that all of its operations are carried out in an environmentally responsible manner.
Custom Chemicals submitted that its co-operation with the EPA and its agreement for the imposition of various orders also indicated its remorse.
I accept that, collectively, all of these actions and statements speak of Custom Chemicals' genuine remorse for the offence.

[30]

Good corporate character

Custom Chemicals is of good corporate character: s 21A(3)(f) of the CSP Act. Mr Volegoff gave evidence that Custom Chemicals has, since 2007, made charitable donations totalling $1,128,996 to various religious and humanitarian organisations. Unlikelihood of re-offending
Another mitigating circumstance to be taken into account in determining the appropriate sentence is if the offender is unlikely to re-offend: s 21A(3)(g) of the CSP Act. I find that Custom Chemicals is unlikely to re-offend for three reasons.
First, Custom Chemicals is genuinely remorseful for the offence. Second, it has taken effective action to avoid the recurrence of the offence by changing its systems for disposal of wastewater from the premises. Third, Custom Chemicals has agreed to an order directing all of its employees to attend a training course on environmental laws and environmental management. As I have noted earlier, none of Custom Chemicals' employees had the necessary knowledge and training in the applicable environmental laws or environmental management and this lack of knowledge contributed to Custom Chemicals' conduct in discharging pollutants into waters since 1990 and relevantly during the offence period. Custom Chemicals had not taken any action since the offence to rectify this problem. None of its staff have undertaken training since the offence and there was no proposal to do so.
I indicated to the parties that I considered that it would be beneficial for Custom Chemicals' employees to undertake training to improve their knowledge of and performance in environmental management at the premises. The parties agreed and proposed an order that all employees of Custom Chemicals attend a training course conducted by Australian Sustainable Business Group covering: an introduction to and overview of environmental laws, environmental liabilities and environmental management; dangerous goods management and transport; managing site environmental risks; and incident response. Custom Chemicals would need to provide evidence of the satisfactory completion of the training course by all of its employees to the EPA.
I consider that by undertaking this training and improving its knowledge of what is required by law and good environmental management in conducting the business on the premises, Custom Chemicals will be less likely to re-offend.

[32]

Appropriate sentence for the offence

I take into account the objective circumstances of the offence and the subjective circumstances of Custom Chemicals, as I have discussed above.
I take into account the purposes of sentencing in s 3A of the CSP Act. The purposes of punishment, retribution and denunciation are relevant. There is a need for the Court, through the sentence it imposes, to ensure that Custom Chemicals is adequately punished for the offence, to hold it accountable for its actions, and to denounce the conduct of Custom Chemicals, in proportion to the seriousness of the offence.
The sentence also needs to act as a deterrent. The purpose of general deterrence is in this case to ensure that those carrying out activities near waters do not pollute waters, take the necessary precautionary and preventative measures and undertake their activities strictly in accordance with the law. The sentence of the Court must act to deter others carrying out activities near waters from committing like offences to that committed by Custom Chemicals.
In particular, the sentence of the Court should deter those who carry out chemical handling businesses from polluting waters. As the Court of Criminal Appeal stated in Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 at 367: Those who handle dangerous chemicals must be regarded as under a heavy obligation to the rest of the community to do so with the utmost care. This Court should not be seen to send any message other than that."
In the circumstances of this case, having regard to Custom Chemicals' lack of prior convictions, its genuine remorse for the offence, its good corporate character, its actions taken at the time of and following the incident to address the causes of the pollution and to prevent recurrence and its unlikelihood of re-offending, there is no particular need for specific deterrence of Custom Chemicals.
In determining the appropriate penalty, the Court should be consistent with the pattern of sentencing for like offences. I have had regard to the sentences imposed by this Court in other cases, involving pollution of waters, to which the parties have drawn my attention. I have considered the sentences imposed and the objective and subjective circumstances of the offences and the offenders involved that led the Court to impose those particular sentences. The cases include: Environment Protection Authority v Nowra Chemical Manufacturers Pty Ltd [2008] NSWLEC 187; Environment Protection Authority v CSR Building Products Ltd [2008] NSWLEC 224; Environment Protection Authority v Snowy Hydro Ltd (2008) 162 LGERA 273; [2008] NSWLEC 264; Environment Protection Authority v Big River Group Pty Ltd [2011] NSWLEC 80; Environment Protection Authority v Moolarben Coal Operations Pty Ltd [2012] NSWLEC 65; Environment Protection Authority v Moolarben Coal Operations Pty Ltd (No 2) [2012] NSWLEC 80; Environment Protection Authority v Peak Gold Mines Pty Ltd [2013] NSWLEC 158; Environment Protection Authority v Forbes Shire Council [2014] NSWLEC 26; Environment Protection Authority v KBL Mining Ltd [2014] NSWLEC 178; and Environment Protection Authority v Hunter Water Corporation [2016] NSWLEC 76. The sentence that I consider appropriate to be imposed on Custom Chemicals for the offence it committed is not inconsistent with the sentences imposed in those cases, which collectively provide a check or yardstick.
Synthesising all of the relevant objective and subjective circumstances of the offence and this offender, and considering the relevant purposes of sentencing, I consider that the appropriate monetary penalty is $480,000 for the offence against s 120(1) of the POEO Act. This amount should be discounted by 25 per cent for the utilitarian value of the plea of guilty. This makes the amount $360,000.
Both the EPA and Custom Chemicals sought that the amount of the monetary penalty that the Court determined to be appropriate for the offence be paid to a specified organisation or organisations for the purposes of a specified project for the restoration or enhancement of the environment or for general environmental purposes under s 250(1)(e) of the POEO Act, instead of as a fine. The environmental service order agreed between the parties was to pay the Office of Environment and Heritage part of the amount (up to $300,000) as a contribution to the project entitled "Coastal Saltmarsh Protection at Ash Island, Hunter Wetlands National Park". This project involves the restoration of saltmarsh meadow through fencing in order to prevent park users from driving over threatened coastal saltmarsh at Ash Island. Ash Island is located in the middle of the Hunter River, bounded by the northern arm of the Hunter River opposite Tomago and the southern arm of the Hunter River opposite Hexham.
I consider this to be an appropriate project. Custom Chemicals' commission of the offence caused harm to waterways and wetlands in the Tomago area. The proposed project is to restore a wetland (although it is of a different nature to the wetlands at Tomago) in the general vicinity of Tomago. I am satisfied that the project is sufficiently designed and organised and can be implemented to achieve the stated environmental purpose and that there will be appropriate accountability for, and auditing of, the use of the funds and the undertaking of the project. The parties agreed that payment of the amount ordered for this project can be in instalments.
The parties agreed that should the amount of the monetary penalty determined to be appropriate exceed the amount required as contribution to the abovementioned project, the balance should be paid to the NSW Environmental Trust for general environmental purposes pursuant to s 250(1)(e) of the POEO Act. The determined monetary penalty of $360,000 exceeds that required as contribution to the project ($300,000) by $60,000. Therefore, it is appropriate to order Custom Chemicals to pay the Environmental Trust the sum of $60,000, to be used for general environmental purposes.
In addition, Custom Chemicals should be ordered, under s 250(1)(a) of the POEO Act, to publicise the offence (including the circumstances of the offence) and its environmental consequences, the monetary penalty imposed and the other orders made against it. The parties have agreed on the terms of the publication order that should be published in the appropriate newspapers. I have made some minor changes to the wording to reflect my findings and orders. Publicising the apprehension, prosecution and punishment of Custom Chemicals for the offence improves the effectiveness of general deterrence.
As earlier noted, Custom Chemicals should be ordered, pursuant to s 250(1)(f) of the POEO Act, to cause its employees to attend a training course conducted by the Australian Sustainable Business Group.
Custom Chemicals should be ordered, pursuant to s 248 of the POEO Act, to pay the EPA's investigation costs in the agreed amount of $23,567.50.
Finally, Custom Chemicals should be ordered, pursuant to s 257B of the Criminal Procedure Act 1986, to pay to the Registrar of the Court, for payment to the EPA, the EPA's legal costs of the proceedings in the agreed amount of $40,000.

[33]

Orders

The Court makes the following orders: 1. The defendant is convicted of the offence against s 120(1) of the Protection of the Environment Operations Act 1997 ('POEO Act') as charged. 2. Pursuant to section 250(1)(a) of the POEO Act, the defendant, at its expense, must, within 28 days of the date of these orders, cause a notice in the form of Annexure "A" to be placed within the first 5 pages of the Sydney Morning Herald and the Newcastle Herald at a minimum size of 10 cm x 18 cm. 3. Within 42 days of the date of these orders, the defendant must provide to the prosecutor a complete copy of the pages of the Sydney Morning Herald and the Newcastle Herald on which the notice appears. 4. Pursuant to section 250(1)(e) of the POEO Act, the defendant is to pay to the Office of Environment and Heritage, in the instalments set out in subparagraphs (a) to (g) below, the amount of $300,000 as contribution to the project entitled "Coastal Saltmarsh Protection at Ash Island, Hunter Wetlands National Park", as described in Annexure "B" to these orders ('the Project'): 1. within 3 months of the date of judgment, the amount of $60,000; 2. within 6 months of the date of judgment, the further amount of $40,000; 3. within 9 months of the date of judgment, the further amount of $40,000; 4. within 12 months of the date of judgment, the further amount of $40,000; 5. within 15 months of the date of judgment, the further amount of $40,000; 6. within 18 months of the date of judgment, the further amount of $40,000; and 7. within 21 months of the date of judgment, the further amount of $40,000. The Court notes that the Office of Environment and Heritage has agreed as part of the project to report to the prosecutor on the outcomes of the project. 1. Any future public references by the defendant to its funding of the Project are to be accompanied by the statement that "Custom Chemicals' contribution was part of a penalty imposed on Custom Chemicals by the Land and Environment Court after it was convicted of an offence against section 120(1) (water pollution) of the Protection of the Environment Operations Act 1997 (NSW)." 2. If, by 3 months from the date of judgment, the Office of Environment and Heritage informs the parties that it has decided not to proceed with the Project, or the amount paid by the defendant to the Office of Environment and Heritage under Order 4 is not fully expended on the Project by 24 months from the date of judgment, then any amount paid under Order 4 but not expended on the Project is to be paid to the NSW Environmental Trust for general environmental purposes. 3. Pursuant to s 250(1)(e) of the POEO Act, the defendant is ordered to pay, within 24 months of the date of judgment, an amount of $60,000 to the NSW Environmental Trust established under the Environmental Trust Act 1998 for general environmental purposes. 4. Pursuant to s 250(1)(f) of the POEO Act, the defendant is to cause, within 3 months of the date of judgment, each of its employees to attend a training course conducted by the Australian Sustainable Business Group ('ASBG') generally in accordance with the proposal described in Annexure "C" to these orders. 5. Within 3 months and 14 days of the date of judgment, the defendant must provide to the EPA: 1. a list of its current employees; 2. a brief report from ASBG on the results of the employees' attendance and competency as assessed in the training course; and 3. in the event that any employee has not passed the competency test, recommendations from ASBG to the defendant for future training that such employees should undertake. 1. Pursuant to s 248 of the POEO Act, the defendant is to pay the EPA's costs and expenses incurred during the investigation of the offence in the amount of $23,567.50. 2. Pursuant to s 257B of the Criminal Procedure Act 1986, the defendant is to pay to the Registrar of the Court, for payment to the prosecutor, the prosecutor's legal costs in the amount of $40,000.

At a glance

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Judgment (34 paragraphs)

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Cases Cited (22)

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