Environment Protection Authority v Integral Energy Australia Pty Ltd

Environment Protection Authority v Integral Energy Australia Pty Ltd - [2006] NSWLEC 141 - NSWLEC 2006 case summary — Zoe

[14]

8 At around 9pm the Department of Environment and Conservation ("DEC") was advised of the spill by the NSW Fire Brigades HAZMAT Unit ("HAZMAT"). HAZMAT requested that DEC attend the site as the oil had entered the stormwater system. A Regional Operations officer of the EPA, Deborah Cole, arrived at the premises at around 10.45pm on 9 August 2004. 9 The oil spilled from a fin located on a different part of the transformer from an earlier February spill. As the transformer was not bunded, the transformer oil seeped through the surrounding gravel and via the drainage grates located at the bottom of the cable pits into the stormwater system. The oil migrated off the premises through the stormwater system and entered McBarron Creek, which is an open concrete channel lined with some vegetation. The oil was dammed using six floating bunds in McBarron Creek between Culverston Road and its junction with Bow Bowing Canal. The oil was stopped before it reached Bow Bowing Canal. 10 The area in which the transformers are located is surrounded by gravel. Set into the ground between the transformers are rectangular pits with concrete walls. Circular holes cut into the walls of the pit allow pipes containing cables to pass through the pit. These cable pits permit access to the underground cables. In order to avoid water pooling around the transformers and cables, there are drainage conduits in the base of each cable pit. Subsoil drainage in the gravel area drains toward the base of the cable pits and from there to the stormwater system. 11 The stormwater system which collects run-off from the premises then passes underground in a westerly direction past several other premises, turning south-west and under Airds Road, before discharging into McBarron Creek via an open pipe. McBarron Creek then flows into Bow Bowing Canal which later meets the Georges River. 12 The immediate cause of the August spill was the splitting of a cooling fin on transformer No 3. The fin failed due to a combination of fatigue and/or manufacturing defect. Bunding program 13 In 1997/98 and 2002/03 the Defendant conducted an environmental risk assessment in order to determine: (a) substation sites at which it was appropriate to install a bund or upgrade a bund, and (b) a risk ranking (either high, medium or low) for the bunding works by assessing the likelihood and potential consequences of an oil leak occurring at the site. 14 The Minto substation was assigned a high risk ranking by the 2002/03 environmental risk assessment. 15 In the 2003/04 financial year the Defendant began a 10 year substation bunding program. As at June 2004, 172 transformers at 70 substations remained unbunded and 122 further transformers at 43 substations required bund upgrades. As at 27 May 2005, 42 transformers at 19 substations were unbunded, while a further 94 transformers at 34 substations required upgrades to meet current standards. 16 The Defendant's Environmental Management Plan dated December 2003 for 2003/04 recognised discharges from transmission substations as a "high" environmental risk. 17 A document TS035 generated by the Defendant and dated 15 June 2004 recognised the risk associated with deferral or cancellation to be: … non-conformance with legislation. Increasing probability of fines from the NSW EPA if measures are not in place and oil escapes during a failure incident.

[16]

Events prior to the offence date 19 On 28 February 2004 an alarm activated on transformer No 3 indicating a rapid flow of oil. Oil leaked from a split cooling fin resulting in a loss of approximately 3,800 litres of transformer oil. As a result of the split fin, transformer oil discharged onto the concrete foundation of the transformer and then onto the surrounding bitumen roadway. The oil entered into the site's stormwater system from the bitumen driveway on the premises. Spill kits were used around the stormwater drains to reduce the volume of oil that entered the stormwater system. 20 Following the February 2004 incident the bank of fins from which the spill occurred was isolated by closing the valves to that bank, and that bank of fins was removed on 1 March 2004. The fin was visually inspected and a split of that fin was determined to be the source of the oil leak. An internal report prepared by the Defendant concerning the February incident noted that "the split appeared to start just above the spacer/clamp between the fins and extends to the top of the fin. There is a noticeable line running either side of the spacer." The report did not propose checking whether the aluminium cooling fins could be prone to splitting. Nor did it recommend prioritisation of the installation of a bund at the substation, or the installation of temporary bunding. 21 Consideration was given to whether the scheduling of bund works at Minto under the bunding program was appropriate. The bund works were scheduled to take place in September in the 2004/05 financial year program. The Defendant's General Manager Capital Solutions, Rod Howard, determined that this schedule was appropriate and based this decision on the following factors: (a) the bund works at Minto were scheduled to go to the market in September 2004 which was early in the 2004/05 year program (b) his knowledge and experience that there is usually a long lead time for bund works, so disrupting the planned schedule would impact on other projects (c) advice from substation maintenance staff that the event at Minto substation that led to the February incident was considered a random event. 22 The Defendant took the following steps, inter alia, after the February incident: (a) Turned off the valves connecting the radiator bank to the transformer, thereby removing pressure on the radiator bank and the split fin and stopping the oil leak. (b) The radiator bank was removed from the transformer. (c) A signature test was performed on the transformer which confirmed that the transformer was electrically sound and could return to service. (d) The radiator bank was returned to Narellan Depot for investigation. These investigations were undertaken to identify the precise source of the leak. (e) A thorough inspection of all remaining radiator bank fins on the subject transformer and its sister transformer was performed, which confirmed that there were no oil leaks on those fins and no signs of damage or leaks. (f) Investigations were conducted across the Defendant's network to ensure there were no other aluminium radiator fins on power transformers from different manufacturers. (g) Arrangements were made for the disposal of the radiator bank. (h) A verbal request was made for the installation of bunds at Minto (already scheduled to occur in the 2004/05 financial year) to be brought forward. The installation of those bunds was not brought forward for the reasons outlined in par 21 above. The first bund designs for the 2004/05 financial year arrived just prior to the incident on 9 August 2004. 23 The Defendant determined that the incident on 28 February 2004 was a random single event and that minimum potential existed for an incident of that nature to recur. Accordingly, the Defendant determined that removal of the faulty item, rather than a thorough root cause investigation, was the appropriate response to the incident on 28 February 2004. The Defendant's determination to proceed in this manner was based on the fact that this incident was the first incident involving transformer No 3 in the approximately 25 years that it had been in service, and on the comprehensive and specialised experience of the Defendant's personnel who were responsible for making that determination.

[32]

Finding 43 There clearly were practical measures which could have taken place in terms of the construction of bunding which would have prevented the oil escaping from the transformer into the stormwater system and off the site. The Defendant was on notice of the necessity for these and indeed recognised that need itself through its own environmental programs. It should however have acted more quickly in implementing the programs given the February 2004 spill and the identification of the need for bunding at the Minto substation, and the identification of the issue as high risk. 44 I do not accept the Prosecutor's submission that the Defendant chose not to implement the bund faster as a business matter and accepted the greater risk of committing an offence. I simply find that as a prudent operator it should have acted more quickly. Having said that I also accept that the Defendant was not acting recklessly when it made the decision not to speed up the construction of the bunding but was weighing up a number of factors including its belief that the February 2004 spill was an isolated incident unlikely to be repeated for the reasons set out in the Defendant's submissions at par 38 - 40 and the agreed facts at par 20. 45 I accept that the Defendant took all the practical measures necessary to reduce environmental harm once the spill had occurred. (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 Prosecutor's submissions 46 The Prosecutor submits that the harm to the environment was foreseeable following the leak which had occurred in February 2004 in the same transformer, after which oil had flowed via the underground stormwater system to McBarron Creek and into Bow Bowing Canal. In any event, the presence of 17,000 litres of oil in each transformer without bunding renders it reasonably foreseeable that oil could escape into a watercourse.

[57]

75 I do not consider however this is a case such as Transgrid where the Court found that there was a complete failure to apply the relevant policies of the corporation to the offences in that case. The defendant in that case, a state owned corporation, was found guilty of polluting watercourses by clearing of vegetation. Vegetation of easements had overgrown and deteriorated to a stage where they became a potential fire hazard. Emergency clearing ensued, however there was a failure to put in place sediment controls to prevent the bare earth from washing into the nearby waterways. It was found by Lloyd J in that case at [109] that the clearing should not have occurred at all in the manner in which it did, and at [108], that the consequences of the clearing were reasonably foreseeable and that the programs and policies in place were not enough where they are not accompanied by actions. Clearly the Defendant in the present case had in place environmental management policies and a program it was implementing to ensure that all transformers were appropriately bunded. Under that program the transformer from which the leak escaped would have been protected by a bund which was to built about one month after the incident giving rise to the offence. While I have held that the harm caused was foreseeable I also accept that the Defendant was taking active steps to correct the circumstances giving rise to this offence. 76 While general deterrence is relevant to consider in the context of statutory authorities I do not consider the circumstances warrant a penalty which takes into account specific deterrence for this Defendant. Evenhandedness 77 Evenhandedness is an important consideration in sentencing. The Defendant referred to a number of cases it said were similar in terms of the objective seriousness of the offence which is low. In Environment Protection Authority v Olex Australia Pty Ltd [2005] NSWLEC 475, the pollutant overflowed into a stormwater drainage system and entered in a creek. This was caused by a faulty sensor alarm, a waste-pit pump failure and an isolation valve in the drainage system not being sealed. There was no actual environmental harm. In Environment Protection Authority v Timber Industries Ltd [2001] NSWLEC 25, run-off from a timber mill discharged into a drainage channel due to faulty repair works. The pollutant did not proceed to a natural watercourse downstream. There was no actual environmental harm and only limited potential harm. In Environment Protection Authority v Excel Fuels Pty Limited [2002] NSWLEC 160, oil was transferred by mistake into a tank already full. The overflow entered the stormwater system and travelled into a creek, causing limited environmental harm. In Environment Protection Authority v Allied Industrial Services Pty Ltd [2005] NSWLEC 501, contaminated liquid escaped and travelled into a creek due to a blockage in the wastewater treatment system, causing limited likely environmental harm. In Environment Protection Authority v Coe Drilling Australia Pty Ltd [2005] NSWLEC 719, drilling works resulted in the discharge of a pollutant into a listed sensitive wetland, resulting in material actual environmental harm. None of these involved a statutory authority. Penalties imposed were in the range of $15,000 to $25,000 after mitigating circumstances were taken into account. The facts of these cases are generally analogous to the matter before me.

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