Environment Protection Authority v Illawarra Coke Company Pty Limited

LEGISLATION CITED: Protection of the Environment Operations Act 1997 (NSW) s 123(1), s 241(1)

R v Rushby (1977) 1 NSWLR 594 ; CASES CITED: Walden v Hensler (1987) 163 CLR 561

DATES OF HEARING: 21/02/2005 EX TEMPORE JUDGMENT DATE : 02/21/2005

PROSECUTOR: D Samuels (solicitor) SOLICITOR: Stephen Garrett

DEFENDANT: I S Lloyd QC SOLICITORS: Minter Ellison

JUDGMENT:

• 10 - IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

ENVIRONMENT PROTECTION AUTHORITY v ILLAWARRA COKE COMPANY PTY LIMITED [2005] NSWLEC 296 Ex TEMPORE JUDGMENT

1 HIS HONOUR: The defendant, Illawarra Coke Company Pty Limited, has pleaded guilty to a charge that on or about 9 August 2003 at Coalcliff it committed an offence against s 123(1) of the Protection of the Environment Operations Act 1997 (NSW) ("the POEO Act") in that it did pollute waters. The pollutant is said to be waste oil and/or tar naphtha and the waters were an unnamed watercourse leading to Stoney Creek and also Stoney Creek itself which empties into a lagoon at the back of Coalcliff Beach. The operation is licensed by the Environment Protection Authority (the "EPA") for the scheduled activity of coal works.

2 The parties have helpfully agreed on a statement of facts. The facts that I now recite are derived largely from the statement of agreed facts together with some affidavit evidence and some oral evidence.

3 The defendant operates a coking operation at Coalcliff. The operation is licensed by the Environment Protection Authority ("the EPA"_) for the scheduled activity of coal works.

4 The defendant's premises are situated on a terrace approximately halfway up the Illawarra escarpment behind the small coastal suburb of Coalcliff. A small stream called Stoney Creek has its headwaters on top of the escarpment and runs eastward down the escarpment through a large pipe under the coke works before forming a small stream to the west of Lawrence Hargrave Drive and then discharging into the ocean at a lagoon at Coalcliff Beach.

5 On Saturday 9 August 2003 the EPA's south coast office received three complaints from local residents alleging discoloured water and odour emanating from Stoney Creek at Coalcliff. The lagoon was a rosy-pink colour and smelled strongly of a chemical odour like phenol or creosote.

6 The lagoon was inspected by Mr A T Couldridge of the EPA who observed the colour and odour. Mr Couldridge then walked up the creek, saw a dead eel and observed that the colour and odour was more intense as he proceeded higher up the creek.

7 There is a tributary off the main arm of Stoney Creek which Mr Couldridge then followed since it also contained a pink discolouration. This small unnamed tributary continues on the western side of Lawrence Hargrave Drive until it comes to a stormwater drain, called the North Drain, within the defendant's premises.

8 The North Drain is in relatively close proximity to a collection pond within the defendant's premises known as Lake Bradley which collects dirty water from the premises before being discharged into an unused underground coal mine.

9 Mr Couldridge observed that Lake Bradley was filled with a dark brown oily liquid mixture that contained patches of a pink liquid which was similar to, but more intense in colour to, that observed in Stoney Creek and the unnamed tributary. Lake Bradley emitted an odour of the same character that had been observed in Stoney Creek and the unnamed tributary.

10 Mr Couldridge then saw that there was a small overland flow of water and oil entering Lake Bradley on its southern side. He followed this to its source, which was a pipe outlet near what has been described in the evidence as a "grinder house". As I understand it, the grinder house is where coal brought onto the site is ground to a predetermined size and then is sprayed with a sump-oil spray to improve its bulk and density before it is fed into the coke ovens.

11 Mr Couldridge took a water sample from the lagoon at the back of the beach, that was found to contain phenolic compounds and hydrocarbons in the diesel, kerosene and mineral oil ranges. He took a water sample from the unnamed tributary, and that sample was found to contain the same material.

12 As I have noted, Lake Bradley is part of the dirty water system at the defendant's premises. This part of the dirty water system collects wash water from the grinder house and runoff from the coal handling and storage areas. Lake Bradley is approximately 20 metres by 10 metres in area and is bordered on the west by a rock gabion constructed on top of a concrete wall. The water is then transferred from the lake via pipe to a bore hole leading to the abandoned mine shaft. In respect of this incident oily water was observed to be flowing through an opening in the rock gabion on the top of the concrete wall and then draining to an onsite sump, which then appeared to drain towards the North Drain.

13 As I have said, the source of oil was traced back to the grinder house. It was ascertained that a small valve on an oil sampling pipe in the grinder house was open allowing oil to drain from the oil storage tank. Oil was still flowing at the time it was discovered allowing oil to drain into the dirty water system. The valve was immediately closed. The oil had a strong "tarry" odour like the liquid in Lake Bradley, in the stormwater pipe, in the small unnamed tributary and in Stoney Creek. The sample of oil taken from the valve was found to contain phenolic compounds and hydrocarbons in the diesel, kerosene and mineral oil ranges.

14 On the following morning it was found that the creek - that is Stoney Creek - had cleared up considerably from the previous day although it still had a slight brownish discolouration and the tarry odour was still present. The oil valve in the grinder room having been closed, the operating handle had then been removed. Personnel from the defendant could not explain why the valve on the coal spray oil pipe was open.

15 It seems that the oil in the grinder house storage tanks was filtered and blended sump oil which was contaminated with tar naphtha. Tar naphtha is by-product of an industrial process in Newcastle. The defendant stated that its supplier subsequently informed it that this material was mixed with a batch of the filtered and blended sump oil and delivered to the defendant's premises without its knowledge. The tar naphtha contained phenolic compounds.

16 The defendant does not know who opened the coal spray oil valve in the grinder room. When it became aware of this incident, it drained Lake Bradley which was then isolated from the grinder house drainage. Two vacuum trucks then removed over 100,000 litres from the dirty water system. The defendant estimates that dirty water and oil ceased entering the drain and the unnamed tributary and Stoney Creek late in the afternoon of Saturday 9 August 2003.

17 The defendant, at the prosecutor's request, furnished an incident report on 9 October 2003. The report states, as to the cause of the event, that the oil spill was from an open valve in the grinder building, the oil then entered the dirty water system in the grinder building and followed the dirty water path by gravity to Lake Bradley. The cross-connection between the dirty and clean water system was seepage between Lake Bradley and the drain, that is, the North Drain. This seepage was only possible when the level in Lake Bradley was higher than the normal level.

18 The defendant states that there are two components to this incident. The first is the spill of coal spray oil into the dirty water system. The second component is the cross-connection between the dirty water system and the clean water system. It might be added that there was a third component to this incident, namely the presence of the tar naphtha in the oil the presence of which the defendant was not aware and which it could not have anticipated. As has been observed by Mr I S Lloyd QC, appearing for the defendant, tar naphtha was not ordered by the defendant, it was not known by the defendant to be in the sump oil and it should not have been delivered in the sump oil.

19 The defendant does not know who opened the coal spray oil valve. It is estimated that the amount of contaminated oil entering the system would have been somewhere between 2.2 and 11 litres.

20 Since the incident a number of steps have been taken to prevent any reoccurrence. The grinder building, oil storage area and a road hopper area have now been locked to prevent entry by unauthorised personnel. The valve handle has been removed and the end of the pipe plugged. An automatic valve has been installed in the oil supply pipe from storage tanks to the pump which will only be open when the grinder motor is running and the oil pump is selected.

21 Immediate action was taken at the time to prevent further contamination. The oil spray valve was closed. Lake Bradley was emptied. The surface water to Lake Bradley was redirected elsewhere. Two vacuum trucks removed 100,000 litres of water from the system. As to further preventive actions taken after the event, I have referred to some of them. In addition, a complete wall was built around Lake Bradley and a waterproof liner has now been applied to Lake Bradley.

22 According to the incident report, the defendant states that the valve was not opened by any of its employees and the defendant does not know how and why that valve was opened.

23 As to the environmental harm which occurred, some of the residents of Coalcliff complained of a strong odour on the evening of Friday 8 August 2003 from the creek and the area near the Coalcliff Surf Club. On the morning of 9 August 2003, in addition to the odour, it was observed that the creek had a pink tinge to it and smelled of a chemical coal smell.

24 There is evidence from Mr M Julli of the EPA who examined the area on Sunday 10 August 2003 and who has described the environmental impact of the incident.

25 Mr Julli states that the discharge of the toxic phenyl tainted waters into the lower sections of Stoney Creek can be viewed as a short term pulse exposure which likely resulted in the death of a large portion of the aquatic life present in the lower 200 metres approximately of the creek, that is below the confluence with the unnamed tributary. He says that he would expect the gudgeon population in the affected creek to recover with the spawning of fish already present upstream, resulting in recruitment of fresh stocks. Marine sourced juvenile recruitment will allow eels to repopulate the creek. Macroinvertebrates will return via drift from upstream areas and normal adult aerial dispersal of the young.

26 The detected phenolic compounds would be expected to have a relatively short environmental persistence with a half life in days. The concentration of contaminants decreased sharply one day after notification of the spill and Mr Julli does not expect there to have been any long term residual chemical persistence in the affected section of Stoney Creek; neither in the water column; nor the sediments.

27 Based on his observations of the lagoon on that day, Mr Julli considers that it would have been highly undesirable for beachgoers, particularly children, to come into contact with water in the lagoon. He also states that although the incident resulted in the killing of virtually all aquatic life in the affected section of Stoney Creek and the discharged chemicals proved extremely hazardous to aquatic life, it is self-evident that the impact was short term.

28 Evidence has been given on behalf of the defendant by Mr R J Wright, the defendant's managing director. He states that since 1996, when he became involved with the defendant's operations at Coalcliff, he has been involved in approximately sixty meetings with the EPA. Those discussions have centred on pollution reduction programs which he has itemised in his affidavit.

29 Mr Wright states that the defendant has spent over $4 million on environmental management projects alone since 1996. He states the defendant takes its obligations seriously and it is continually working to reduce any impacts from the coke works on the local community.

30 Mr Wright, and the defendant, were very upset by this incident and he believes that its immediate response and full cooperation with the EPA is a testament to this. He states that the defendant is very sorry for what occurred and will endeavour to make every effort to ensure that such an incident does not occur again.

31 There is in evidence a newsletter published to the local Coalcliff community in which the incident is briefly described and in which the defendant expresses the defendant's regret and apology to the local community for what occurred.

32 In response to this incident, the defendant took a number of steps to both clean up the pollutants leaked during the incident and to prevent a similar incident from happening again, some of which I have described. The total cost to the defendant in doing that amounts to $86,883.90.

33 Section 241(1) of the POEO Act sets out the matters that the Court is to take into consideration in imposing a penalty for an offence under the Act. I shall consider each relevant consideration in turn.

34 The first consideration is the extent of harm caused or likely to be caused to the environment.

35 The extent of harm caused has been described. Phenolic compounds and hydrocarbons left the defendant's premises and made their way into Stoney Creek. Some local residents smelled a strong odour from the creek and the lagoon at the mouth of the creek and the water there was discoloured. There was some fish kill, namely eels and gudgeons. The incident did not cause any ill health to any humans, although there were complaints from some local residents that I have described. It seems, however, that by the following morning, that is Sunday 10 August 2003, the smell noticed the previous day was much reduced. Moreover, a sample collected the following day was considerably less toxic than those collected the previous day.

36 I accept the fact that this incident can be viewed as a short term pulse exposure which resulted in the death of some aquatic life in the creek. However I also accept that the evidence shows that the population in the affected creek was expected to recover. I also accept the evidence that the detected phenolic compounds would be expected to have a relatively short environmental persistence with a half life in days. That is, the concentration of contaminants decreased sharply one day after notification of the spill, probably primarily due to continued flushing of the creek by the defendant.

37 The next matter to consider is the practical measures that may be taken to prevent, control, abate or mitigate the harm.

38 In my opinion, although a person or persons unknown entered the defendant's premises and opened the valve, the steps taken by the defendant since the incident show that preventive measures could have been taken. They include the simple measure of locking the grinder building in which the valve was located when unattended. The second measure was that taken to remove the valve handle. The third measure was the installation of the automatic valve on the oil supply pipeline from the storage tanks to the pump. The fourth measure was the installation of the impermeable layer in Lake Bradley. These measures perhaps could have been taken beforehand. I accept, however, that it was entirely unforeseen that tar naphtha was in the material that had been delivered by the defendant's supplier for use in its operations. As I previously noted, tar naphtha was not ordered by the defendant, was not known by the defendant to be there and should not have been delivered in that material.

39 Next is the consideration of 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. It is clear, to me at any rate, that the defendant could have reasonably foreseen the harm to the aquatic life by virtue of an oil spill near Stoney Creek. As to whether the defendant could not have foreseen the spill that occurred in this case, which it says came about by a unique combination of events, I am inclined to agree. That is, the defendant was clearly unaware of the connection between Lake Bradley and the North Drain leading in turn to the unnamed tributary and Stoney Creek.

40 Next is the extent to which the person who committed the offence had control over the causes which gave rise to the offence. I accept that the defendant had no control over whoever it was that opened the spray oil valve. Nevertheless, as I have noted, the defendant had no security systems in place to prevent entry to the grinder building by way of locking it.

41 The next consideration is whether in committing the offence the person was complying with orders from an employer or supervising employee. That is not a relevant factor in the present case.

42 In considering the question of penalty the primary consideration in sentencing is the objective gravity or seriousness of the offence. The actual or likely consequences of a breach may be taken into account in assessing the gravity of the offence. The most important consideration in assessing the objective gravity or seriousness of the offence is the penalty fixed by the legislature which shows the seriousness with which the legislature view offences of this nature; that is, the maximum penalty in this case of $250,000. However, a number of factors highlight the seriousness of the offence in this instance.

43 Firstly, the potential harm to the environment and the actual harm to the environment resulting from what occurred was not of a trivial nature. It could have had some serious consequences, perhaps more serious consequences if, for example, persons or children in particular had been playing in the lagoon behind the beach.

44 The next matter for consideration is the question of general deterrence. That is a major consideration. A penalty for a breach must be sufficient to compel attention to the environmental issues and to ensure that the defendant and others are encouraged to comply with the law and that the environment is not exposed to a risk of harm. For strict liability of offences such as this, however, care must he taken to ensure that the penalty imposed does not cause the offender to shoulder an unfair burden of community education: see Walden v Hensler (1987) 163 CLR 561 at 570.

45 Specific deterrence aims to deter the offender from repeating the environmental offence that has been committed. I think there is little risk of that occurring in the present case. The defendant has, as I have noted, taken specific measures to prevent the offence from being repeated. The defendant has also expressed its contrition and remorse regarding what happened and I accept what has been said on the defendant's behalf by Mr Wright.

46 The principle of even-handedness requires the Court to consider a pattern in sentencing for the particular offence in order to pursue a consistent approach in sentencing. There is, however, always a difficulty in doing this because of the wide divergence of facts and circumstances. I have been referred to a number of cases which are said to be similar to the present one and I accept that they at least do form some sort of guide.

47 Several mitigating factors are also relevant in considering the appropriate penalty, although these are secondary to the factors relating to the seriousness of the offence: see R v Rushby (1977) 1 NSWLR 594 at 593. In this case the defendant has fully cooperated with the prosecutor, entered a plea of guilty at an early stage, taken the steps that I have described to prevent a repetition of the offence at considerable cost to itself, and, although it does not come here with an entirely unblemished record having been the subject of a number of penalty infringement notices, its record is one which having regard to its activities could not be described as being unusually bad. The defendant has been before the Court on two previous occasions, in 1995 and 2002; on those occasions for the emission of offensive odours resulting from its Corrimal plant.

48 In assessing a penalty I have regard to the fact that Mr Wright has identified significant expenditure of $4 million on environmental management of the defendant's operations. I have regard to the fact that it has incurred $86,883 to remedy what occurred in this case. I also have regard to the fact that the defendant has agreed to pay the prosecutor's costs in the sum of $20,000.

49 Bearing in mind all of these factors, it is apparent that a penalty in the low to mid range is called for. That is, a penalty in the order of $60,000 which I reduce by 35 percent to $40,000 to take into account the mitigating factors that I have described.

50 The formal orders of the Court are, therefore, as follows: (1) The defendant is convicted of the offence as charged. (2) The defendant must pay a penalty in the sum of $40,000. (3) The defendant must pay the prosecutor's costs in the agreed sum of $20,000. (4) The exhibits may be returned.

I hereby certify that the preceding 50 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd.

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