Environment Protection Authority v Orica Australia Pty Ltd

The Evaporator Incident 31On 22 March 2011 there were two failures of PV305, commencing at approximately 5.12pm and again at about 5.43pm. At 5.12pm alarms on the DCS activated, indicating that there was a problem with the flow of steam to the Evaporator. At 5.14pm additional alarms activated indicating that there had been an increase in the steam pressure within the Evaporator. 32At 5.15pm, alarms connected with TIC335 activated, indicating that the temperature of the Solution as it exited the Evaporator had increased. A Nitrates Control Room Operator attempted to close PV305 but found that it would not respond to DCS commands. 33The Nitrates Control Room Operator contacted a Process Operator and informed him that he was having trouble controlling PV305. At approximately 5.24pm the Process Operator attended the location of PV305 on the 4th floor adjacent to the Prill Tower and watched PV305 to see if it responded to the Nitrates Control Room Operator's attempts to open and close it via the DCS, but found that it was not moving. 34The Nitrates Control Room Operator contacted Orica's Instrument/Electrical Technician and requested that he inspect PV305. 35During this time the Solution continued to flow into the Evaporator and by 5.35pm the temperature of the Solution at the exit of the Evaporator had increased to 176C. Around this time, the temperature of the Solution inside the Evaporator had increased and was higher than 169C. 36Shortly after being contacted by the Nitrates Control Room Operator, the Instrument/Electrical Technician attended PV305 and found that the Vent of the Positioner was fully blocked with ammonium nitrate preventing air from venting from the valve. This was removed using a fine screwdriver to chip away at the solid ammonium nitrate and by applying contact cleaner to dissolve the ammonium nitrate. The Instrument/Electrical Technician did not remove the Positioner lid on this occasion. 37At approximately 5.37pm the Process Operator observed and heard PSV306 open and release steam, indicating that the pressure of the steam being applied to the Evaporator was 1250kPag and hence the temperature of the steam was approximately 193C. The Process Operator responded by manually isolating the pneumatic air to PV305 by closing a ball valve on the pneumatic air line to PV305. This enabled PV305 to automatically close, thereby cutting off the flow of steam to the Evaporator. 38Shortly afterwards PV305 began responding to commands from the DCS. The Instrument/Electrical Technician did not undertake any further inspections at this stage because the fault finding approach he used when addressing the failure of PV305 was to look for the obvious causes of the failure first and to fix those obvious causes before investigating other potential causes of the failure. 39The flow of steam to the Evaporator was recommenced around 5.40pm. 40At approximately 5.43pm PV305 again became stuck in an open position, and the Nitrates Control Room Operator commenced the shut down of the Plant in order to resolve the problem. At 5.48pm the flow of Solution into the Evaporator was stopped; however, it was not possible to drain the Solution from the Evaporator and therefore some residual Solution in the Evaporator remained. The flow of steam to the Evaporator continued at this time. 41Sometime after 5.43pm but before 6.30pm, the Instrument/Electrical Technician again attended PV305 and removed the components beneath the Positioner lid. These components consisted of a series of ports comprising holes through which air flows in the process of converting electrical signals from the DCS to pneumatic signals, thus enabling PV305 to open and close. If the holes are blocked, air cannot pass through and the DCS is unable to control the opening and closing of PV305. 42The Instrument/Electrical Technician found that solid ammonium nitrate had accumulated within these holes and in particular in and around the relay and I/P converter (the internal components which convert the electrical signals to pneumatic signals) beneath the cover. The Instrument/Electrical Technician cleaned the components and replaced the relay and I/P converter with brand new components. 43Around 5.45pm, Mr Bill George, an operations officer employed by the prosecutor, the Environment Protection Authority ("the EPA"), was driving across Tourle Street Bridge onto Kooragang Island when he observed a fine white coloured cloud ("the Plume"), which was spreading north-west across the Island. 44At 5.53pm Orica's Nitrates Process Engineer contacted the Nitrates Control Room Operator to report a large quantity of fume coming from the Stack. 45Shortly after this the steam pressure in the Evaporator increased, resulting in an increase in the temperature of the steam as follows: (a)at 5.50pm - 163C; and (b)at 6.00pm - 197C. 46At this time, the temperature of the residual ammonium nitrate coating the surfaces of the Evaporator was sufficient to cause dissociation and formation of submicron particles of ammonium nitrate. 47Mr George drove to the source of the Plume, being Orica's KI premises, and observed the following: (a)the Plume was emanating from the Stack adjacent to the Prill Tower at the premises; (b)at the mouth of the Stack the Plume was denser, with steam visibly dispersing and the Plume thinning out and becoming more hazy and white in appearance as it drifted further away; and (c)the Plume extended from ground level to a height of approximately six metres, was approximately 50m in width and formed a constant, unbroken stream that extended approximately 3.5 to 4 kilometres from the Stack. 48Photographs of the Plume were taken by Mr George and a map showing the extent of the Plume was provided to the Court. 49At 6.09pm the flow of steam to the Evaporator was stopped by manually isolating the flow of steam to the Evaporator. At 6.10pm the temperature of the steam being applied to the outside of the Evaporator was still around 197C. 50At approximately 6.15pm, Mr George spoke to security personnel at Orica's reception gates, who directed Mr George's enquiry to the Nitrates Control Room Operator. Mr George enquired about the Plume and was told by the Nitrates Control Room Operator that he could not speak further to Mr George about the matter as he was responding to the Incident. 51By 6.20pm the temperature of the steam being applied to the outside of the Evaporator had dropped to 167C. 52The Nitrates Control Room Operator did not see the Plume as the Control Room has no windows facing the Stack. The Instrument/Electrical Technician did not observe anything out of the ordinary coming from the Stack and the Process Operator did not look at the Stack at any time. 53A chart was adduced plotting the temperature of the steam applied to the Evaporator and the temperature of the Solution at the exit to the Evaporator throughout the Incident. Orica estimated that the temperature inside the Evaporator was between 10 and 15°C below the temperature of the steam applied to the outside of the Evaporator. 54By 6.30pm the Plume had begun to disperse. 55Orica's meteorological data indicated that between 5.30 and 6.30pm on 22 March 2011 the wind was blowing in a roughly westerly direction and was travelling at a speed of between 4 and 6.4km per hour.

Investigation into the Evaporator Incident 56On the morning of 23 March 2011 Mr George informed Mr Hamish Rutherford, an operations officer of the EPA, of his observations of the Plume made the previous afternoon. 57At approximately 9am Mr Rutherford contacted Orica's Kooragang Island Sustainability Manager, Ms Sherree Woodroffe, and informed her of Mr George's observation. He requested that Orica provide a report into the Incident in accordance with Licence 828. 58On 30 March 2011 Orica provided the EPA with a document entitled Report into AN1 Evaporator Incident - Tuesday 22 March 2011 ("the Incident Report"). The Incident Report was prepared in accordance with the requirements of condition R3 of Licence 828 and Pt 5.7 of the POEOA ("duty to notify pollution incidents"). Its findings on the causes of the Incident are described below.

Cause of the Evaporator Incident 59The pneumatic air that operates valves such as PV305 contains traces of moisture, which attract particles of ammonium nitrate present in the atmosphere. This can result in solid ammonium nitrate accumulating in the vent and other components within the valve. The Evaporator Incident occurred following a build-up of solid ammonium nitrate in a component of PV305. 60PV305 became stuck in an open position, rather than its failsafe closed position, as a result of the build-up of ammonium nitrate in the Vent and an internal component of the Positioner. This blockage meant that PV305 could not open or close and thus ceased responding to commands from the DCS. 61As a consequence, the flow of steam to the Evaporator was not able to be adjusted by commands from the DCS in the Nitrates Control Room made by the Nitrates Control Room Operator, thereby causing the Solution in the Evaporator to increase in temperature beyond the dissociation temperature of ammonium nitrate solution. The Incident Report went on to explain the result of the dissociation process, which is detailed below.

The Plume 62When the Solution is heated beyond approximately 169C it begins to vaporise into gaseous ammonia and nitric acid via an endothermic (heat-absorbing) reaction known as dissociation. Not all of the ammonium nitrate immediately vaporises at 169C, rather as the Solution gets hotter, the amount of ammonium nitrate that dissociates into gaseous nitric acid and ammonia increases. Upon cooling, the gaseous ammonia and nitric acid recombine to form white-coloured submicron-sized particles of ammonium nitrate appearing as a visible fume. That air passed through the Scrubber, which could not remove the submicron particles that were subsequently emitted through the Stack. 63Following the first failure of PV305, the Solution in the Evaporator was heated in excess of 169C for a period of between 5 and 10 minutes. The temperature of the Solution in the Evaporator reached between 178C and 183C, causing a quantity of the Solution to dissociate into gaseous ammonia and nitric acid. As these exited the Evaporator with excess steam, they cooled and recombined to form submicron particles of ammonium nitrate, which passed through the Scrubber and were emitted into the atmosphere as fume. 64Following the second failure of PV305, the Solution in the Evaporator was heated in excess of 169C for a period of approximately 24 minutes. The temperature of the Solution in the Evaporator reached a maximum of 197C, causing a further quantity of the Solution in the Evaporator to dissociate into gaseous ammonia and nitric acid. As these exited the Evaporator with excess steam, they cooled and recombined to form submicron particles of ammonium nitrate that passed through the Scrubber and were emitted into the atmosphere, again as visible fume. 65During the second failure of PV305, which was noticed at approximately 5.43pm, even if steam had been shut off more promptly, the temperatures in the Evaporator would almost certainly have reached the point where dissociation of the Solution would have nevertheless occurred, although less solution would have dissociated and subsequently recombined to form submicron particles. 66The Scrubber was not designed to remove submicron-sized particles of ammonium nitrate. As a result, submicron particles were emitted to the atmosphere from the Stack with excess steam from the Evaporator, forming the visible white Plume of ammonium nitrate particulate matter and steam, which was emitted from the Stack for approximately 30 minutes. 67It was not possible to estimate the concentration of the submicron particles of ammonium nitrate in the Plume or to accurately model the extent of its dispersal, as the rate at which the Solution dissociated and recombined was not known.

Previous Failures of PV305 68In order to address the issue of the accumulation of ammonium nitrate within components of pneumatic valves at the Plant, Orica had in place a preventative maintenance program since 2003, which involved checking and cleaning these valves (including PV305) every four to seven weeks. These checks were undertaken in accordance with a written maintenance instruction sheet. 69Prior to the Evaporator Incident, the maintenance instruction sheet did not require the internal components of PV305 to be inspected as part of the checks. 70Mr Winstone, in his affidavit of 1 November 2012, deposed to the fact that, in 2005, Orica had replaced the manufacturer's original control valve exhaust vent in order to prevent build-up of solid ammonium nitrate in PV305. He asserted his belief that the design changes had reduced the risk of vent blockage by ammonium nitrate ingress. 71Build up of ammonium nitrate in the components of PV305 caused the valve to fail to respond to controls from the DCS on five occasions between 2005 and 2010. Three of the five occasions occurred in 2005, one occurred in 2007 and one in 2010. PV305 was overhauled after the fourth occasion in 2007. The build-up was identified in the Vent on one occasion, in the Positioner on another, and in the air supply on a third. Details of the location of the blockages were not recorded on the other occasions. Prior to the Incident there had never been any observations of unusual fume emissions from the Stack as a consequence of the five previous failures or at any other time. 72At the time of the Incident there were no written procedures in place detailing how to respond to the failure of PV305 due to blockages of ammonium nitrate. 73Mr Winstone explained in his affidavit that a number of preventative measures had been undertaken since 2005 with respect to the failure of the valve, including the implementation of a maintenance program, the modification of the valve, and further maintenance carried out during routine maintenance turnarounds for the Plant. For example, during the 2008 turnaround the PV305 valve had been inspected and worn parts had been either cleaned, re-machined and reinstalled or new parts installed. 74Nevertheless, it was acknowledged by Orica that there had been five previous failures of PV305, which, as Mr Winstone conceded in cross-examination, meant that the modifications made to the valve, and the maintenance regime, were "inadequate" (T40-40.46). 75Mr Winstone conceded that at the time of the Incident there was no written operating procedure specifically relating to a valve failure due to a blockage of components by ammonium nitrate in PV305. However, there were more general procedures guiding operators of the Plant and operators had been trained to respond generally to high temperature incidents. 76Mr Winstone deposed to the risk management procedures in place at the Plant. He explained that in applying Orica's SHEMS, identification and management of risks were only required at a low level. At the Plant this was directed to two types of risks, first, the inherent risk attached to the manufacture of ammonium nitrate, and second, the site specific risk based on engineering design decisions leading to the specific type and configuration of equipment used. He further explained that these were addressed in the periodic hazard studies undertaken as part of the process known as Hazard Identification and Risk Assessment and Control ("HIRAC"). 77For example, Orica had conducted a HIRAC in 2009 to review the risk of "explosive decomposition/detonation" of ammonium nitrate in the Evaporator. The HIRAC had identified that an elevated temperature in the Plant's Evaporator could result in the ammonium nitrate decomposing or detonating. The HIRAC recognised that a safety control existed to address this risk, namely, the pressure relief valve on the steam system that operated to limit the maximum temperature in the Evaporator. However PV305 was a pressure control valve, not a pressure relief valve, and therefore, it could not provide a safety mechanism for the Evaporator. Further, the HIRAC did not identify as a hazard the malfunctioning of PV305 due to a build up of solid ammonium nitrate leading to a fume release. Mr Winstone conceded that this was because the HIRAC process was directed at identifying major hazards and that while "the fume was a pollution event which should not have occurred ... it was not the type of major hazard that the HIRAC was addressing" (reaffirmed orally at T44.39-45.07). 78Mr Winstone asserted that although the HIRAC did not identify the risk of this Incident, the risk assessment had not completely failed insofar as there was awareness of the risk that PV305 could malfunction due to component blockages by ammonium nitrate and steps were undertaken to address that risk. Nevertheless, he "accept[ed] that there were failings in the maintenance regime and in the documentation of that maintenance" and that "these failings were a cause of the incident". He noted that steps had been taken to address those failings (elaborated upon below).

Joint Experts' Report 79The EPA's expert Dr Derek Griffiths and Orica's expert, Dr Robert Hutchison, both chemical engineers, prepared together a joint experts' report. The conclusions of the experts contained in the report may be summarised as follows, namely, that: (a)on 22 March 2011 Orica was not carrying out the activities contained in condition O1.1 of its Licence competently and so did not prevent the emission of submicron ammonium nitrate particles (fume) from the Stack; (b)Orica failed to carry out its licensed activities in a competent manner in that it: (i)failed to identify that overheating of the Evaporator above the dissociation temperature would generate ammonia and nitric acid in the Evaporator, which would then pass out of the Evaporator, cool and reassociate as an ammonium nitrate fume and be discharged through the Stack; (ii)failed to consider any potential environmental consequences from overheating the Evaporator in the HIRAC study undertaken in 2009, which otherwise may have identified this Incident. The HIRAC study was focused on the potential for a major incident, namely a deflagration in the Evaporator, as required under the major hazard facilities regulations; (iii)did not prevent the Evaporator from overheating, which resulted in the emission of the fume; (iv)did not have PSV306 set at the correct pressure to prevent production of the fume. PSV306 and the vessel it protected, that is the Evaporator, appeared to have been originally designed for higher operating pressures (and the related higher temperature) than are currently used. The set pressure of PSV306 did not appear to have changed from the original set pressure. The set pressure was originally designed for a higher temperature required for fertiliser production. When the change was made to ammonium nitrate for explosives, which requires a lower temperature, the pressure setting was not changed to match the temperature. Further, in the opinion of Dr Griffiths, there was no information available on whether a Management of Change Process was used or not; (v)failed to manage PV305 in that its failure rate was significantly higher than the normal failure rate of a control valve; and (vi)had attempted to protect the valve from ammonium nitrate dust by installing a Weatherhood and a larger vent, but the valve was still failing unacceptably frequently; (c)should have, in order to carry on its licensed activities in a competent manner: (i)identified that overheating the Evaporator would result in a fume being emitted from the Stack and taken action to prevent such an emission. Consequent upon this failure, Orica failed to train the operators as to the effects of overheating and the actions to be taken to stop or minimise the emission in such circumstances; and (ii)set PSV306 to the pressure that corresponded to the dissociation temperature of ammonium nitrate (approximately 700kPag) rather than 1250kPag, which related to protection of the vessel rather than protection of the environment; (d)had complete control over the causes of the events that gave rise to the Incident. Orica had the knowledge that overheating the ammonium nitrate could cause dissociation and re-association to produce fume. Additionally, Orica knew that the Scrubber was not designed to remove fume and knew the setpoint for PSV306; (e)should have taken practical measures to prevent, control, abate or mitigate harm to the environment, namely: (i)when the fume was detected by a person on site, taken immediate action to stop the fume emission occurring. Having said this, the 20 minutes it took for this to occur was considered reasonable by the experts, considering that the operators were not trained in this scenario and had to develop a response based on the appearance of the fume and their general knowledge of the Plant; (ii)Orica should have identified the potential for a high temperature incident in the Evaporator which could result in fume formation. The relevant knowledge was available to Orica. Having identified the potential for fume emission, Orica should have changed the steam pressure protection system to prevent the steam temperature reaching the dissociation temperature and should have developed operating procedures and trained the operators on the actions to take to prevent over-temperature events in the Evaporator and the actions to take if the temperatures became excessive; and (iii)Orica should have changed the setpoint of PSV306 to the appropriate value to prevent dissociation of the ammonium nitrate and should have ensured that the revisions to the operating procedures included the response to a high alarm on TIC335 and the response to "PIC305 fails open (steam to evaporator)". 80The experts noted that since the Incident, Orica has revised its operating procedures, training, the design of PV305 and associated maintenance procedures, but that there were no current plans requiring a change in the PSV306 set pressure to limit temperature. Having said this, the parties noted that the issue of the setpoint of PSV306 was only recently identified by the experts and that Orica was investigating whether it could be implemented.

Measures Taken by Orica to Prevent a Recurrence of the Evaporator Incident 81Mr Winstone gave evidence in his affidavit sworn 1 November 2012 of the practical measures taken since the Incident to prevent a recurrence, including changes to design of equipment, maintenance procedures, operating procedures and training. In summary, Orica has: (a)undertaken a HIRAC review on 1 and 16 June 2011 to identify appropriate controls to be put in place as a result of the Incident; (b)made design changes that included the installation of an additional solenoid valve that works independently of the operators to cease the supply of air to PV305 (thereby closing the valve) if the temperature in the Evaporator reaches a set temperature, and replacing the Positioner within PV305 with a digital smart positioner to provide feedback on valve position for diagnostics and troubleshooting to Orica's technicians; (c)modernised its maintenance procedures by: updating the instructions for the preventative maintenance program in relation to PV305 to require removing and cleaning the positioner lid, including an express requirement to inspect internal components of the Positioner within PV305 every four weeks; ensuring that inspection and clean outs of PV305 occurred every four weeks irrespective of whether the Plant is offline or online; and improving its recording of maintenance work; (d)developed abnormal work instructions (AN1 Dry Section Abnormal Operation Work Instructions) which tell operators what to do if PV305 becomes stuck in the open position and will not respond to DCS commands. This change is to ensure the Evaporator cannot overheat to the point of dissociation if there is a loss of control over PV305 in future; and (e)provided training to technicians and nitrates DCS operators, and other operators, in relation to these changes.

Sentencing Principles 82A discussion of the applicable sentencing principles is set out at [80]-[93] and [168] of the principal judgment, which I adopt in this judgment. 83Section 3A of the Crimes (Sentencing Procedure) Act 1999 ("the CSPA") sets out the purposes of sentencing an offender. Relevant purposes in these proceedings are those contained in ss 3A(a), (b), (c), (e), (f) and (g). 84In addition, s 21A of the CSPA identifies the matters that the Court must take into account when determining the appropriate sentence, including factors in aggravation under s 21A(2) and factors in mitigation under s 21A(3). Relevant potential aggravating factors for this offence are limited to those contained in ss 21A(2)(d) and (g) of the CSPA. Relevant subjective circumstances or mitigating factors are those contained in ss 21A(3)(e), (f), (g), (i), (k) and (m) of the CSPA. These are discussed further below. 85Finally, s 241 of the POEOA further provides legislative direction as to matters that are to be considered in imposing a penalty for offences committed under that Act. Section 241(1) of the POEOA is a list of the objective circumstances of an offence that must be considered by the Court insofar as they are relevant, while s 241(2) of that Act recognises the Court's discretion to consider other matters relevant to the particular circumstances of the proceedings.

Nature of the Offence 86A fundamental consideration of relevance to environmental offences is the degree to which Orica's conduct offends against the legislative objectives. Those objects are found in s 3 of the POEOA. 87The commission of this offence plainly offended against the legislative objects of the POEOA in that it undermined the object of reducing risks to human health and preventing the degradation of the environment by the use of mechanisms that promote pollution prevention, of reducing discharges of harmful substances, and of making progressive environmental improvements, including the reduction of pollution at the source (s 3(d) of the POEOA). 88The nature of the offence of breach of licence has been discussed in the principal judgment (at [103]-[104]). With respect to this offence, given the harmful qualities of ammonia nitrate it is a central requirement that Orica carry out its licensed activities in a competent manner. To do otherwise is contrary to the statutory purpose enshrined in s 3 of the POEOA. 89I agree with the EPA that based on the evidence, Orica's documentary procedures in relation to the heating of ammonium nitrate were inadequate. However, I do not accept that the evidence was in any way misleading. 90The EPA submitted that there was misleading or conflicting information about the temperature limitation to be applied to steam in the Evaporator insofar as the longer version of Orica's "Basis of Safety" document stated that steam that was hotter than 180°C was not to be used to heat the ammonium nitrate, but in a shorter version of the document there was no such requirement. 91While Mr Winstone admitted under cross-examination that there was a conflict between the two documents (T43.35), he was able to provide a explanation for the temperature discrepancy to the effect that one document was directed at disassociation and the other shorter document was directed at decomposition (T44.10-44.35). Furthermore, these documents were not technical instruction manuals for heating ammonium nitrate. They were safety documents designed for an audience with expertise in ammonium nitrate production (T43.20) and the distinction between disassociation and decomposition would be understood by plant personnel who were trained by Orica about the potential for the former and the temperatures at which these processes were likely to occur. Finally, Mr Winstone stated that the shorter version of the "Basis of Safety" document was directed at preventing major incidents involving the heating of ammonium nitrate, such as detonation (T44.25-44.27), although he conceded the "individual equipment risk assessment should have dealt with the issue of dissociation", which it had not (T44.23-44.24). 92Nevertheless, I agree with the EPA that these failings, giving rise as they did to a failure by Orica to carry out its licensed activities in a competent manner, had the very real tendency to erode and diminish the objects of the POEOA.

Statutory Licences - a Breach of Public Trust? 93As discussed in the principal judgment (at [106]-[107]), the EPA submitted that licence holders under the POEOA are licensed to carry out activities that, if mismanaged, have the potential to cause harm to the environment and human health. In Orica's case, the EPA described that potential as "very significant, particularly given the nature of the substances it handles and its proximity to Newcastle city". The EPA submitted that Orica was thereby in a position of public trust, or alternatively a position of privilege, which was breached by the breach of licence condition. 94However for the reasons given in the principal judgment, I do not accept that breach of public trust is a matter than can be taken into account under s 241(2) of the POEOA as a factor increasing the objective gravity of the offence (see at [108]-[111]).

Maximum Penalty 95The maximum penalty for the commission of the offence pursuant to s 64(1) of the POEOA is $1 million for a corporation. There is a spectrum of offending behaviour covered by a given offence and the imposition of the maximum penalty is necessarily reserved for the worst case for which the penalty is prescribed.

Environmental Harm 96The environmental harm caused by the commission of an offence is, as was stated in the principal judgment (at [116]-[118]), a central consideration in determining the objective gravity of the offence. The concept of harm in the context of environmental offences is broad and includes the potential or risk of harm, not merely actual harm (see the authorities referred to in the principal judgment at [117]). Harm can be direct, indirect or cumulative and activities that contribute incrementally to the gradual deterioration of the environment, even when they cause no discernable direct harm to human interest, must nonetheless be treated seriously. 97Section 241(1)(a) of the POEOA makes it clear that, in sentencing, the Court must consider the "extent of the harm caused or likely to be caused to the environment by the commission of the offence". The POEOA defines "harm to the environment" to include "any direct or indirect alteration of the environment that has the effect of degrading the environment and, without limiting the generality of the above, includes any act or omission that results in pollution". 98The actual and potential environmental harm, including health impacts, caused by the commission of the offence was not a matter of controversy and is discussed below.

Harm to the Environment and Human Health Caused by the Evaporator Incident 99Ammonium nitrate is an environmental pollutant. The Scrubber acts to remove ammonia, nitric acid and nitrogen oxide ("NOx") from the gas stream from the Evaporator prior to discharge of gas to the atmosphere via the Stack. It also removes all but the smallest submicron particles of ammonium nitrate. Therefore, the Plume was comprised primarily of submicron-sized particles of ammonium nitrate emitted with steam as a visible white plume into the atmosphere from the Stack. As stated above, it was not possible to quantify with any accuracy the concentration of the ammonium nitrate emitted in the Plume as a result of the Incident because the rate at which the ammonium nitrate dissociated and recombined to form submicron particles was unknown. 100The intermolecular force between air molecules and ammonium nitrate particulates caused the ammonium nitrate particulates present in the Plume to become suspended in air and form an ammonium nitrate aerosol, that is, a dispersion of fine solid and/or liquid particles suspended in gas. This was the visible white Plume reported by Mr George. 101Newcastle Stevedores Pty Ltd ("Newcastle Stevedores") is a company that conducts stevedoring operations at Mayfield Wharf 4 ("the Wharf"), located on the southern bank of the South Arm of the Hunter River approximately 400m upstream from the KI premises. 102At the time of the Incident, Newcastle Stevedores' employees Mr Jamie Croker, Mr Edward Larsen, Mr Lincoln Mason, Mr Noel Morrissey and Mr Bernard Tasevski (together, "the employees") were working at the Wharf. Mr Phil Watt, the Operations Manager for Newcastle Stevedores, was also present. 103The employees observed the Plume coming across the Hunter River from the KI premises. After discussing their fears concerning the contents of, and any danger posed by, the Plume, they decided to take shelter. The employees took shelter from the Plume indoors for around 30 minutes to an hour. 104Sometime between approximately 6.10pm and 6.40pm the Plume reached the Wharf where the employees had been working. 105Several employees were exposed to the Plume and three employees reported experiencing the following symptoms: (a)eye and throat irritation lasting several hours (two employees) to a night (one employee); (b)headaches; and (c)coughing. 106Due to their small size and lightness, submicron particles of ammonium nitrate can remain in the atmosphere for a period of days depending on atmospheric conditions such as temperature, humidity, moisture levels and the presence of other chemicals. It is therefore likely that some ammonium nitrate particles were deposited on the ground as well as in the Hunter River as a result of the Incident, although the exact proportion is not known nor the precise area over which this would have occurred. 107In water, ammonium nitrate dissociates into ammonium, ammonia and nitrate ions. The parties agreed that the concentrations of those ions deposited into the Hunter River were likely to have been significantly less than the Australian and New Zealand Environment Conservation Council ("ANZECC") guideline values (being the threshold levels for toxicity to flora and fauna) for those substances. It was not in dispute that the concentrations of ions deposited were likely to have been too low to have had a significant impact on aquatic or terrestrial flora and fauna.

Potential Harm to Human Health 108The inhalation of fine particulate matter, such as submicron particles, is known to have adverse health effects on the human respiratory system including: (a)inflammation of the respiratory tract; (b)coughing; (c)exacerbation of asthma symptoms; and (d)chronic obstructive lung disease. 109Such exposure is also known to have negative health impacts on the human cardiovascular system including: (a)increased tendency for blood clotting; (b)increased processes leading to narrowing of arteries; and (c)precipitation of heart attack and/or stroke in susceptible people. 110Short term exposure (hours to days) to fine particulate matter can cause inflammation of the respiratory tract. Less serious health impacts have been observed for exposures over periods of 24 hours while more serious health impacts are expected with long term or acute exposures. Negative impacts of exposure are more commonly seen in the very young or elderly, or those with existing heart or lung conditions. 111Exposure to ammonium nitrate in the form of an aerosol has irritative effects including eye redness, watering and pain on the eye mucosa, coughing, chest pain and shortness of breath. At very high concentrations this can cause actual tissue damage. 112Studies examining the impact of exposure to levels of ammonium nitrate ordinarily found in the atmosphere have found no noticeable effects on lung function or symptoms. 113The parties agreed that the Incident would not have significantly contributed to the risk of adverse health effects from ambient particulate ammonium nitrate matter due to the short exposure time. Furthermore, the adverse health impacts experienced by the three Newcastle Stevedores employees were limited as a result of those employees taking shelter indoors. It was not anticipated that they would suffer any long term health problems arising from the pollution incident. However, it was acknowledged that exposure to the Plume had the potential to exacerbate cough and shortness of breath in asthma sufferers. 114In summary, although there was actual harm occasioned to the three employees by the pollution incident, it was of limited duration due to the limited exposure to the Plume. Nevertheless, exposure to the Plume had the potential to cause more chronic harm for those who were vulnerable due to a pre-existing susceptibility, such as asthma. 115Similarly, in relation to the environment, beyond its immediate impact, the pollution incident would not have significantly contributed to the risk of any adverse effects from ambient particulate matter due to the short exposure time. 116The EPA also submitted that harm includes loss of amenity or quality of life in that the workers were prevented from working and must have suffered apprehension or fear during this time, especially in not knowing what the Plume contained. However, this submission was not, in my opinion, supported by cogent evidence to the requisite criminal standard. 117There was also no evidence to support the EPA's claim that if the wind was blowing more to the southwest the Plume would have engulfed "many houses" or that had the Plume moved through the residential districts to the west or east of the KI premises, it would have resulted in exposure by the young or elderly to ammonium nitrate contaminants. 118Overall I find that the commission of the offence caused moderate environmental harm. However, the harm was not sufficiently "substantial" for it to be an aggravating factor under s 21A(2)(g) of the CSPA.

Orica's State of Mind 119The offence is one of strict liability, which means that mens rea is not an element of the offence. However, the state of mind of an offender at the time of committing an offence is a relevant consideration when imposing a sentence because a strict liability offence that is committed, for example, negligently, will be objectively more serious than one committed accidentally (see the authorities in the principal judgment at [127]). 120The parties disagreed about whether Orica's state of mind could, conformably with the principle in R v De Simoni [1981] HCA 31; (1981) 147 CLR 383 (at 389), be taken into account with respect to the breach of licence offence under s 64(1) of the POEOA. In the principal judgment I concluded that it could (at [140]-[145]). 121The EPA submitted that the failures that led to the Evaporator Incident established beyond reasonable doubt that Orica was negligent. Having regard to the agreed facts and, in particular, the opinions expressed in the joint experts' report, I readily find that the commission of the offence was the result of Orica's negligence. 122As detailed above, the experts concluded that Orica should have identified the risks and consequences of overheating the Evaporator. It had the technical experience and knowledge to understand the dissociation process and the temperature at which this would occur. It knew that disassociation led to the formation of submicron particles of ammonium nitrate and it knew that the Scrubber could not remove these particles. It ought reasonably to have known, therefore, of the risk of fume emissions of ammonium nitrate. It failed to have PSV306 set at the pressure corresponding to the dissociation temperature of ammonium nitrate rather than the pressure fixed by reference to protection of the vessel. It knew that PV305 was unreliable and its assessment of the environmental risks associated with the ammonium nitrate being heated to 170°C, a temperature at which dissociation occurs, was inadequate, notwithstanding that its staff were trained to respond to an incident involving high temperatures at the Plant and the risk of disassociation of ammonium nitrate and the temperature at which it occurred. 123It is, moreover, clear on the evidence that Orica's documentation and record keeping procedures in relation to the maintenance history of PV305, for example, were inadequate. The pressure valve PV305 had ceased to function on five previous occasions between 2005 and 2010 due to a build up of ammonium nitrate within various components of PV305. Despite Mr Winstone's evidence that modification had been made to the valve in 2005, the fact remains that further failure occurred after that date and no changes were made to the frequency or extent of the routine maintenance programme. 124Orica's training procedures were also inadequate. On the first occasion that the valve failed on 22 March 2011, the operator removed the visible build-up from the vent but no further investigation as to the cause of the failure was undertaken. The operators responsible for responding to the Incident had not been properly trained and there were no written procedures setting out what measures to take if PV305 failed. Accordingly, there was inadequate training of the operators on effects of overheating in the Evaporator and on what steps were to be taken to control consequent emissions. 125Orica's Management of Change Procedures were inadequate. Despite changes to the type of ammonium nitrate manufactured at the Plant, the level at which the release valve was set was never examined. 126Having said this, it must be acknowledged that Orica had, as the 1 November 2012 affidavit of Mr Winstone demonstrates, taken some steps to properly operate and maintain the Evaporator insofar as: (a)at the time of the Incident it had a system in place to measure and release pressure within the Evaporator if required; (b)it had formally recognised and assessed the risk of explosive detonation within the Evaporator in 2009, although it was conceded that the assessment was directed to a major hazard and not to lesser pollution incidents, such as the failure of PV305; (c)a Weatherhood was installed in 2003 to protect PV305 from weather and to a limited extent, from fallout of particles of solid ammonium nitrate; (d)in January 2005, Orica replaced the control valve exhaust vent for the purpose of reducing risk of blockage by ammonium nitrate particles; and (e)a program for preventative inspection and maintenance of the Evaporator was in place, which included inspection of PV305. 127Nonetheless, the nature of the failures and the availability of numerous practical measures that Orica took after the Incident, and could have readily taken before the Incident, reinforce the conclusion that Orica committed the offence negligently.

Reasons for Offending 128In the present case, the offence was not committed for any ulterior reason that would increase its objective seriousness.

Foreseeability of the Risk of Harm 129The extent to which Orica could have reasonably foreseen the harm caused by the commission of the offences is a relevant objective circumstance (s 241(1)(c) of the POEOA and the authorities referred to at [152] of the principal judgment). It is not necessary that the precise cause of an incident be foreseeable. 130In my opinion, the risk of harm was foreseeable. Orica accepted that "it was foreseeable that overheating of the Evaporator, above the dissociation temperature for ammonium nitrate, could cause the emission of submicron sized ammonium nitrate particles". But it was also foreseeable, in my view, that failings in the maintenance regime of PV305 could cause it to become blocked thereby causing the overheating of the Evaporator above dissociation temperature. Ammonium and nitric acid would then cool upon being passed out of the Evaporator, reassociate as an ammonium nitrate fume, and then be discharged through the Stack into the atmosphere. It was therefore foreseeable that a release of ammonium nitrate particulates in this form could pose a risk of harm to the environment and human health, given the known potential of ammonium nitrate to cause harm to the environment and to human safety.

Practical Measures Available to Orica to Avoid or Mitigate Harm 131Section 241(1)(b) of the POEOA makes it clear that the Court is to consider the "practical measures that may be taken to prevent, control, abate or mitigate" the harm identified in s 241(1)(a). 132The experts agreed that (as set out above) a range of practical measures could have been taken to prevent the pollution incident occurring. Moreover, consistent with Mr Winstone's evidence, numerous steps have been taken since the Incident in order to prevent a recurrence in future. All of these steps could and should have been taken prior to the Incident. 133Having said this, I accept Orica's submission that once the Incident had occurred, it acted promptly, reasonably and responsibly to ameliorate any further harm. Its response time of 20 minutes to stop the fume of emissions was reasonable given the circumstance that the operators had not been specifically trained in the very scenario that occurred and had to develop a response based on the appearance of the fume and their general knowledge of the Plant.

Control Over the Causes of the Harm 134Section 241(1)(c) of the POEOA makes it clear that the Court is to consider the extent to which Orica had control over the causes of the harm. The experts agreed and Orica correctly conceded that it had control over the causes that gave rise to the Evaporator Incident.

Conclusion on Objective Gravity 135Orica emphasised the need for proportionality in sentencing and submitted that the offence should, overall, be classified towards the "lower to middle range" of seriousness given the following considerations: (a)the consequential environmental harm was not substantial; (b)its operations at the KI premises are large, complex and, as chemical processing activities, carry inherent environmental risks; (c)the offence did not result from any decision to put the environment at risk in order to save money; and (d)Orica responded promptly and appropriately to the Incident to minimise environmental impacts. 136While these contentions are all valid, I nevertheless find, having regard to all of the objective factors surrounding the commission of the offence, particularly the actual, albeit temporary, harm that occurred to the employees, and the potential harm that could have been caused by the Incident, that the offence should be classified in the mid range of seriousness.

Subjective Considerations 137As stated above, determining an appropriate and proportionate sentence for the offence, the Court must take into account all factors that are personal to Orica, including factors in aggravation and factors in mitigation.

Prior Criminality 138As stated in the principal judgment (at [170]-[173]), Orica has a criminal history of environmental offences, including for breach of a condition of an environmental licence in 2005. I take this fact into account as an aggravating factor under s 21A(2)(d) of the CSPA.

Prior Criminality 139In light of Orica's antecedents referred to above, it cannot be said that Orica does not have any prior criminal record so as to operate as a mitigating factor in determining an appropriate sentence (s 21A(3)(e) of the CSPA).

Good Character 140Orica submitted that the evidence demonstrates it is a good corporate citizen and, more specifically, that its recent investments in environmental improvements and its community consultation and support programs practically demonstrate its good corporate character. For the reasons given in the principal judgment (at [185]-[190]), I agree. I therefore accept that Orica was, but for the commission of this offence, a corporate person of good character at the date of this offence (s 21A(3)(f) of the CSPA).

Likelihood of Re-offending 141Orica has undertaken a number of actions to minimise the chance of a similar incident occurring. Orica's examination of the causes of the Incident and its acceptance that these practical measures would have prevented the harm, substantially reduce the likelihood of future re-offending and suggest that there are good prospects of rehabilitation. Accordingly, and notwithstanding the further six pollution incidents the subject of this suite of criminal proceedings, I find the likelihood that Orica will re-offend in the future to be low. I take this into account as a factor in mitigation (s 21A(3)(g) of the CSPA).

Demonstrated Remorse 142Orica has, in my opinion, demonstrated remorse with respect to the commission of this Incident. The affidavits and oral testimony of Mr Winstone expressed regret for the incidents generally. Mr Winstone stated that he was "personally very disappointed that the incidents occurred". In addition, Orica tendered a formal letter from the Chairman of the Board of Orica Ltd, the parent company of Orica, wherein the Chairman, Mr Peter Duncan apologised formally to the Court and to the public for each of the seven incidents. There is clear evidence of Orica's remorse and acceptance of responsibility for its actions thereby justifying the Court taking this factor into account as a mitigating factor with respect to this offence (s 21A(3)(i) of the CSPA).

Early Guilty Plea 143Orica pleaded guilty to the charge at the second mention of the matter on 29 June 2012. 144The proceedings were commenced on 21 March 2012 and it was the EPA who requested an adjournment of the proceedings at the first mention of the matter on 27 April 2012 to allow the EPA time to file further evidence. 145Therefore, Orica's early guilty plea should attract the maximum discount of 25% (ss 21A(3)(k) and 22 of the CSPA).

Assistance to Authorities 146Orica has cooperated fully with the EPA during the course of its investigation into the Evaporator Incident and in the preparation for the hearing of this matter. This cooperation must be taken into account as a mitigating factor in Orica's favour (ss 21A(3)(m) and 23 of the CSPA).

Orica Agreed to Pay the Prosecutor's Costs 147Orica has agreed to pay the EPA's reasonable legal costs, which it may be inferred are likely to be substantial. In addition, Orica has agreed to pay the EPA's investigation costs for this Incident in the agreed sum of $176.73. I take this into account in the determination of the appropriate penalty to be imposed in these proceedings in conformity with the principles stated in the principal judgment (at [209]).

Conclusion on Subjective Considerations 148The subjective circumstances of Orica operate to mitigate to a reasonable degree the penalty that would otherwise be imposed by the Court and I consider a total discount of 30% appropriate.

Sentencing Purposes: Denunciation, Retribution and Deterrence 149The imposition of a sentence serves a number of purposes. As identified above, the relevant purposes listed in s 3A of the CSPA also inform the determination of an appropriate sentence. These include: punishment (s 3A(a)); both general and specific deterrence (s 3A(b)); community protection (s 3A(c)); making Orica accountable for its actions (s 3A(e)); denunciation (s 3A(f)); and recognition of the harm done (s 3A(g)). 150The EPA submitted that both specific and general deterrence should be important sentencing considerations in the present case. At a general level, the EPA submitted that any fine imposed should be sufficient to cause others to take the positive precautions necessary to avoid offending. 151The EPA submitted that specific deterrence was a significant factor in the circumstances of the present case because of the number of incidents being prosecuted in these consecutive proceedings and because of Orica's prior conviction for an environmental offence in 2005. The EPA contended that these circumstances demonstrate systemic problems in Orica's management and reporting systems requiring a substantial element of deterrence in the penalty to motivate lasting change within the organisation. 152There is no doubt that the sentence imposed by the Court must be sufficient to specifically deter Orica from repeating the conduct that has resulted in the commission of the offence in the future, and to contain an element of general deterrence to promote the objects of the POEOA and to ensure that other environmental licensees with similar operations and responsibilities do not apprehend that such offences will be treated with relative impunity. 153In the present case, I consider that there is a need for both specific and general deterrence for the reasons given in the principal judgment (at [213]-[217]). 154The imposition of an appropriate sentence additionally serves the purpose of ensuring that retribution and denunciation are properly addressed. The sentence of this Court is a public denunciation of the conduct of Orica and must ensure that Orica is held accountable for its actions and is adequately punished. Accordingly, I also take these elements of sentencing into account.

Consistency in Sentencing 155As stated in the principal judgment, a relevant consideration in sentencing is the existence of a general pattern of sentencing by the Court for offences such as the offence in question, or the so-called 'parity principle'. 156The pattern of sentencing against which the present case falls to be determined can be established by examining the relevant sentencing cases dealing with breach of licence offences pursuant to s 64(1) of the POEOA. These were examined in the principal judgment (at [223]) and are relied upon but not repeated here, other than to note that Orica placed specific reliance on Environment Protection Authority v Unomedical Pty Limited (No 4) [2011] NSWLEC 131 (discussed in the principal judgment at [223(b)]). 157Unomedical (No 4) concerned an offence of contravening s 128(2) of the POEOA, which requires an occupier of licensed premises to carry on any activity, or operate any plant, in or on the premises so as to minimise air pollution where no emissions standard or rate was prescribed for the relevant air impurity. The maximum penalty was $1 million. The Court concluded that the offence was of low objective gravity and the harm was not substantial. The mitigating factors, including the defendant's lack of prior convictions, good character, assistance to authorities, and unlikelihood of re-offending, all operated to mitigate the ultimate penalty. However, Unomedical had not pleaded guilty nor expressed remorse. A discount of only 15% was applied. The Court imposed a fine of $90,000, made a publication order and ordered costs payable in the amount of $140,000 (at [97]-[112] and [157]-[158] of Unomedical). 158Orica submitted that although factually analogous, additional mitigating features in the present proceedings should operate in its favour to cause the Court to impose a lower monetary penalty than the $90,000 imposed in Unomedical, including its early guilty plea and its expression of remorse. This submission ignores, however, the actual physical harm occasioned to the Orica employees by the commission of the offence.

The Totality Principle 159The totality principle is a relevant consideration when determining an aggregate penalty in sentencing for multiple offences. Although Orica argued that the totality principle should be applied across all seven pollution incidents to cause a downward adjustment to the penalty to be applied in these proceedings, for the reasons given in the principal judgment, I do not agree (at [230]-[249]). I have concluded that each of the seven incidents must be considered separately for sentencing purposes and that the totality principle has no application to this case.

Conclusion on the Appropriate Penalty for the Evaporator Incident 160Synthesising the objective and subjective circumstances of Orica, and having regard to the existing patterns of sentencing, the appropriate penalty for the offence is a monetary penalty. 161Having regard to the objective seriousness of the offence and the applicable subjective factors, I consider the appropriate penalty for the breach of licence condition contrary to s 64(1) of the POEOA to be $175,000, which should be discounted by 30% to $122,500.

Environmental Project 162As the parties requested, I will order Orica to direct the monetary penalty towards a specified environmental restoration and enhancement project pursuant to s 250(1)(e) of the POEOA, and to pay the EPA's costs associated with monitoring and enforcing the carrying out of this project. 163In the circumstances of the present case, I consider such an order to be appropriate. A fulsome description of the specified environmental project is annexed to this judgment at "A". 164All future references to Orica's contribution towards this project will be accompanied by a reference, in the prescribed form referred to below, to the payment being part of the penalty imposed on Orica for the commission of this offence.

Publication Order 165The parties submitted, and I agree, that it was also appropriate that the orders include a publication order pursuant to s 250(1)(a) of the POEOA. 166In making this order, however, it is not the intention of the Court to cause Orica to publish a separate notice to that already required to be published persuant to the principal judgment (at [261(7) and (8)]).

Costs 167Additionally, and as agreed, Orica will be ordered to pay the EPA's investigation costs in the agreed amount and its legal costs as agreed or assessed.

Orders 168For the reasons provided above, the Court orders that:

50283 of 2012 (1)the charge against the defendant is dismissed.

50284 of 2012 (2)the charge against the defendant is dismissed.

50282 of 2012 (3)the defendant is convicted of the offence as charged; (4)pursuant to s 250(1)(e) of the Protection of the Environment Operations Act 1997 the defendant is directed to pay to the NSW Office of Environment and Heritage, within 28 days of this order, the amount of $122,500 to contribute to the Lower Hunter Particle Compositional Study to determine the composition and source of ambient particle concentrations near the major port and industries in Newcastle. A description of the project is annexed at "A"; (5)all future references by the defendant to its funding of the Lower Hunter Particle Compositional Study shall be accompanied by the following passage (pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997): "Orica Australia Pty Limited's contribution to the funding of the Lower Hunter Particle Compositional Study is part of a penalty imposed on it by the Land and Environment Court of NSW after it was convicted of an offence against s 64(1) (breach of licence condition) of the Protection of the Environment Operations Act 1997 (NSW)." (6)pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997 the defendant is to publicise a summary of the offence, of the circumstances of the offence and of the orders made against it, in the notice directed to be published at [261(7) and (8)] of the principal judgment, in the form and in the manner prescribed therein; (7)the defendant is to pay the prosecutor's legal costs as agreed or assessed; (8)pursuant to s 248(1) of the Protection of the Environment Operations Act 1997, the defendant is to pay the prosecutor's investigation costs in the sum of $176.73; (9)the exhibits are to be returned; and (10)liberty to restore on seven days' notice for the purpose of amending the form of any of the orders made above.

Annexure A DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 July 2014