Environment Protection Authority v Orica Australia Pty Ltd

Land and Environment Court (NSW)|2012-12-12|Before: Pepper J

Background to the Incident 17In 2004, Orica began a program to upgrade drainage infrastructure in the Ammonia Plant, which involved the replacement of all effluent drainage systems. As part of this upgrade, Orica had identified that underground pipelines should be moved aboveground where possible. The program also identified that pipes which could not be moved aboveground should be placed in dedicated concrete launders to provide secondary containment. The purpose of these changes was to facilitate easier integrity inspections, including maintenance of the pipelines and inspection of the pipelines for corrosion. 18Around June 2011 Orica was proposing to undertake a significant number of modifications to the Ammonia Plant ("the Ammonia Plant Turnaround") during a period in which the Ammonia Plant was to be shut down. 19Excavation work was being undertaken to expose underground ammonia drainage piping. The work was to enable replacement of a section of carbon steel pipeline that was welded to a stainless steel pipeline in the ammonia drainage system. The project was, somewhat ironically, a safety and environmental risk reduction measure to ensure that weld failure did not occur as a result of dissimilar metal corrosion at the site of the weld. 20The work involved excavating a length of Ammonia Drainage Pipeline running east/west on the Ammonia Plant. The Ammonia Drainage Pipeline and associated drainage network is used to recover residual liquid ammonia from vessels prior to major maintenance outages. The Pipeline is isolated from the ammonia-containing vessels by single isolation valves and in the period between major maintenance outages would normally only contain a small amount of residual ammonia vapour. The Pipeline was not designed to have double isolation valves as the pipework in the system was connected to other ammonia storage vessels and was not able to be opened directly into the atmosphere. 21Personnel involved in organising the work understood that the Pipeline was buried in soil and in one location it passed beneath a concrete effluent launder (a concrete trough covered by a steel grate). As the personnel organising the work thought that the Ammonia Drainage Pipeline was located in soil beneath the concrete effluent launder, the work required the removal of the launder to enable hand digging to be undertaken to expose the Ammonia Drainage Pipeline in the soil below. 22The Incident identified that a section of the Ammonia Drainage Pipeline had been encased in concrete as a result of the construction of the concrete effluent drain launder, which was installed years after the Ammonia Drainage Pipeline had been installed. There is no record of the decision to encase this section of the Ammonia Drainage Pipeline in concrete. However, it is suspected that the encasing occurred around 2005-2006, when a series of concrete effluent drains were laid throughout the Ammonia Plant as part of the effluent management improvements. 23Orica had an engineering drawing of the Ammonia Drainage Pipeline which showed its general location. 24Orica kept photos on an electronic project file of the project to improve and update the effluent drains in the Ammonia Plant. The work in 2005 or 2006 to install the concrete effluent drain launder was part of this improvement project. After the Incident, in the course of replying to a s 193 notice issued to Orica by the prosecutor, the Environment Protection Authority ("the EPA"), Orica reviewed the photos kept on the electronic project file. There were approximately 1,240 photos on the project file. 25In the course of reviewing the photos, Orica identified one photo that showed the excavation undertaken to install the concrete effluent launder in 2005 or 2006 over the section of the Ammonia Drainage Pipeline that was sought to be excavated in June 2011. This photo was taken before any concrete for the effluent launder was poured. The photo was taken by the Orica Project Manager overseeing the effluent drain improvement project. 26The Orica employees planning the work to excavate the Ammonia Drainage Pipeline in June 2011 were not aware of the photo. The photo does not indicate that the Ammonia Drainage Pipeline was encased in concrete, however, the photo did give an indication of the approximate depth of the Ammonia Drainage Pipeline. 27Orica identified that the work the subject of the Incident could be completed prior to the Ammonia Plant being shut down as part of the Ammonia Plant Turnaround. It is common practice in the industry to complete as much work as possible outside a turnaround, reserving the turnaround for work that can only be completed at that time. 28The carrying out of the work was contracted to Programmed Facilities Management Pty Ltd pursuant to ongoing maintenance arrangements, who in turn sub-contracted the specific job to GJA Iuliano Pty Ltd, a concreting company. 29On 15 September 2010, a Hazard and Operability study known as a 'HAZOP' study was undertaken. A Plant Modification assessment process was also undertaken, on 3 June 2011. 30The valves that isolated the Ammonia Drainage Pipeline were closed prior to the works commencing. The Ammonia Drainage Pipeline is part of a pipe network that is only used during major maintenance periods to drain residual liquid ammonia from vessels in the Ammonia Plant. After residual liquid ammonia is drained from the vessels, the network of drainage lines, including the Ammonia Drainage Pipeline, is purged and, prior to the completion of the maintenance period, the valves are closed to isolate the pipes from the vessels containing ammonia. The Pipeline was not checked prior to work commencing to confirm the isolation because this was not possible while the Ammonia Plant was operating. 31Orica's incident investigation identified that a valve isolating one of the ammonia-containing vessels ("Vessel 129C") from the Ammonia Drainage Pipeline was not fully sealed, resulting in ammonia liquid being present in the Ammonia Drainage Pipeline. 32The general location of the Ammonia Drainage Pipeline was identified by a combination of hand digging to expose the Pipeline, which was undertaken in soil to the west of the area where the Incident occurred, and the use of a "wand" device. The device was not able to accurately detect the depth of the Pipeline and only detected the general location of the Pipeline at ground level (that is to say, on a horizontal axis). Hand digging in the vicinity of the Ammonia Drainage Pipeline was used to provide additional information as to its location. 33On 17 June 2011 Orica's Ammonia Shift Supervisor issued the following permits for the work giving rise to the Incident (pursuant to a Work Clearance): (a)a cold work permit; and (b)a hot work permit. 34The employees who issued these permits were trained in the KI premises' procedures relevant to the issuing of work permits. 35In addition, a break-in authority was issued by an Ammonia Plant Maintenance Technician who was authorised to issue it. Under the procedure in place at the time of the Incident, authorisation from the KI Site Manager was required before an Orica employee could be authorised to issue break-in authorities. Employees were not authorised until the KI Site Manager was satisfied that they had been properly trained. A break-in authority authorised Orica personnel and contractors to undertake excavation work at the KI premises. 36In order to issue hot and cold work permits and break-in authorities, a risk assessment must be undertaken for the proposed work, including the identification of hazards and risk control measures. All three permits were issued for the first day of work and were extended for subsequent days' work. 37A Job Safety and Environmental Risk Analysis ("JSERA") was also completed prior to the work commencing and was attached to a separate Work Order. 38On 17 June 2011 Mr John Iuliano and Mr Josh Iuliano from GJA Iuliano Pty Ltd carried out the work under the supervision of Mr Peter Young, Technical Assistant, Programmed Facility Management. The JSERA referred to above was prepared by Mr Young. It is common industry practice for a JSERA to be prepared by the person or persons actually carrying out the work, rather than the occupier or owner of the premises where the work is to be carried out. Mr John Iuliano and Mr Josh Iuliano were not involved in the preparation of the JSERA, however, they signed the JSERA acknowledging that they had read and understood it. The information given to both men was to the effect that the Ammonia Drainage Pipeline was in the soil below the concrete drain. 39Mr Winstone deposed in his affidavit sworn 1 November 2012 that Orica provided competency based training on JSERA, and generally on emergency response management. Also, at the time of the Incident, Orica had started to implement, but had not yet completed, a contractor accreditation program to assess the performance of companies undertaking work at the KI premises for Orica. 40Each work task being undertaken by a contractor required the presence of an appropriately accredited person to ensure experienced personnel with knowledge of the KI premises' safety, health and environmental systems were working in the field with the team carrying out the contracted work.

The Jackhammer Incident 41At approximately 2.35pm on 17 June 2011, during the process of excavating a section of concrete with a jackhammer, Mr John Iuliano punctured the Ammonia Drainage Pipeline with the tip of the jackhammer. The puncture was approximately 5mm in diameter. The ammonia in the Pipeline was released into the atmosphere under pressure, mainly as flashing gas, with some liquid entrainment. 42It was estimated that approximately 90kg of ammonia was released over the four hours it took to fully isolate the leak.

Response to the Incident 43A worker activated Orica's site alarm signalling that all workers should move to safe houses on the premises, which occurred in accordance with the site's Emergency Response Plan. 44Orica activated emergency "water fogging" mist sprays to create a fog to suppress any ammonia gas escaping from the Ammonia Drainage Pipeline. The fog absorbed the bulk of the ammonia gas. A quantity of the water from the fogging activities, which contained ammonia, was then discharged to the site effluent system. The effluent was retained onsite. A quantity of water was also discharged to the ground in the vicinity of the pollution incident. 45The Ammonia Plant was brought offline and work commenced to reduce the discharge of ammonia from the Ammonia Drainage Pipeline by pumping liquid ammonia from the line to the Ammonia Storage Tank using the Cold Ammonia Export Pump. At the same time, Process Operators also checked isolation valves on the vessels connected to the Ammonia Drainage Pipeline to identify the source of the ammonia in the pipe. They found that the valve on the drain line of Vessel 129C, the Synthesis Gas Compressor Interstage Cooler, was not fully sealed, resulting in liquid ammonia in the Ammonia Drainage Pipeline. Vessel 129C was subsequently depressurised to prevent further discharge of ammonia. 46There was no discharge of liquid outside the pH limits authorised by Licence 828 as a result of the Incident and there was no requirement for environmental remediation. 47Orica personnel took self-contained apparatus equipment and handheld monitors and walked to the site boundary to see if there were any significant ammonia releases likely to travel offsite. Orica sent an employee with a handheld monitor to the road near the Ammonia Plant to check levels of ammonia, which was recorded at 2-3ppm. The location of the road was chosen on the basis that the wind was westerly and blowing towards Stockton. 48At 2.40pm Orica contacted Fire and Rescue NSW to assist in the management of the pollution incident. 49At 2.52pm Orica contacted the nearest potential downwind industrial neighbour to advise them of the Incident. They had not detected any ammonia odour at their premises. 50The first Fire and Rescue truck arrived at 2.55pm. 51Monitoring of the eastern boundary of the KI premises downwind of the Incident area was undertaken with a gas analyser between 3.05pm and 3.20pm, with a maximum concentration of 3ppm detected on the eastern boundary of the plant. This is at the lower level of ammonia odour detection and well below the workplace eight-hour time weighted average exposure standard of 25ppm. 52At 3.15pm the staff who had mustered in buildings downwind of the pollution incident left the safe houses. 53At 3.22pm Orica notified the EPA. 54The remainder of the excavation work was subsequently completed during the shutdown when the Ammonium Plant was offline.

Investigation into the Causes of the Incident 55Following the Incident Orica prepared a report pursuant to its SHEMS to identify the causes of the Incident ("SHE report"). 56The SHE report identified the following direct root causes, namely, that: (a)the presence of the Ammonia Drainage Pipeline in the concrete was unknown. All personnel involved in the job believed that the drain lines would be in the soil underneath the concrete. The methods used to detect underground services did not provide an accurate three dimensional indication of the exact location of underground services; and (b)the activity was allowed to proceed without a fully informed risk assessment being undertaken. 57The SHE report identified the following contributory causes, namely, the: (a)installation of the Ammonia Drainage Pipeline in concrete, which is an unusual practice and made exposure of the pipe for future maintenance activities difficult. This occurred during the 2006 turnaround. Orica was not able to say why the decision to encase it in concrete had been made; and (b)lack of complete details of underground services. The existing drawings did not provide information on the exact location of services, the way services were installed nor their depth, and thus did not include information on the work carried out during the 2006 turnaround.

Joint Experts' Report 58The EPA's expert Dr Derek Griffiths and Orica's expert, Dr Robert Hutchison, both chemical engineers, prepared a joint experts' report in relation to the Incident. The conclusions of the experts were as follows, that: (a)Orica was not carrying out its activities on 17 June 2011 in a competent manner because it caused ammonia gas to be released into the environment; (b)Orica failed to, as it should have done, identify the location of a pressurised underground pipe before issuing an excavation permit. The JSERA undertaken as part of the excavation permit was inadequate because it did not include the scope of the JSERA and did not take into account the uncertainty in the location of the buried Pipeline. The work permits were incorrectly written and allowed unsafe actions to take place under the guise of protection by the permit; (c)the personnel who were undertaking the excavation were incorrectly advised that the Pipeline they were looking for was below a second pipe that had already been exposed. In fact, the pipe was below another pipe. Nor were the personnel informed that there was ammonia in the Pipeline that they were trying to expose; (d)the causes of the failure to carry out the KI licensed activities in a competent manner included that: (i)Orica had failed to adequately train and supervise the personnel involved in the works; (ii)Orica had inadequate records of the depth of the Pipeline even though it had been exposed in 2005/2006 when the concrete launder was installed. This was reinforced when subsequent to the Incident a drawing of the underground pipe configuration and a photo taken at the time of the launder installation were found in the project files; and (iii)Orica had failed to adequately isolate the Pipeline being excavated (according to Dr Griffiths). And Orica had failed to adequately isolate the Pipeline being excavated when its exact depth and location was not known (according to Dr Hutchison); (e)in order to carry out the KI licensed activities in a competent manner, Orica should have: (i)used existing technology, for example 3D ground-penetrating radar, to determine the depth of the Pipeline prior to issuing the work permits, especially given that a jackhammer or concrete saw was to be used to remove the concrete launder; (ii)kept a record of the depth of the Pipeline and the fact that it was encased in concrete when exposed during the installation of the launder; (iii)ensured that the personnel undertaking the excavation were informed of the hazards from the material in the Pipeline they were excavating; and (iv)trained and supervised the personnel issuing the work permits so that permits were correctly issued and took account of the potential hazards in carrying out the work; (f)Orica had complete control over the causes of the Incident. Orica had control over the actions of the relevant personnel and the activities of contractors who were undertaking the excavation; (g)the causes of the Incident related to the failure of Orica to utilise or fully implement its safety management systems adequately; and (h)there were practical measures that Orica should have taken to prevent, control, abate or mitigate harm to the environment. In particular, in addition to the measurements noted above, the experts observed that: (i)when the Incident occurred, Orica initiated its emergency response procedures which worked to prevent any harm to personnel and to stop the emission of ammonia from the excavation site; and (ii)Orica has taken practical measures since the Incident to prevent its recurrence that include: placing the Ammonia Drainage Pipeline in a concrete launder; providing double isolation on the Ammonia Drainage Pipeline; instituting a procedure requiring the use of 3D ground-penetrating radar before excavation work where the location of underground services is unknown; introducing a new procedure requiring the identification and recording of the location of underground services; continuing a program of providing secondary containment to underground pipelines containing environmentally hazardous chemicals; and continuing a program of improving ammonia management throughout the site.

Measures Taken by Orica Following the Jackhammer Incident 59Following the Incident, Orica has undertaken to implement the following four corrective actions: (a)first, introducing the use of 3D ground-penetrating radar at the KI premises to locate underground services before excavating in areas where there may be services and hand digging is not possible; (b)second, conducting a review of the system for risk assessment of all pre-turnaround projects and preparatory work prior to scheduling such work; (c)third, reviewing engineering standards for the installation of underground pipe work to minimise the potential for services to be encased in concrete; and (d)fourth, investigating the feasibility of a dossier system to store known information on underground services (for example, photographs and 3D drawings) for all future installations. 60In his affidavit sworn 1 November 2012, Mr Winstone provided further information on the practical steps Orica had implemented to ensure that there would be no recurrence of the Incident. He deposed to placement of the pipe in a concrete launder, double isolation on the Ammonia Drainage Pipeline and the introduction of 3D ground-penetrating radar before the commencement of excavation work in the case of unknown underground services. A revised excavation/break-in authority permit procedure and a new location of underground services procedure were annexed to his affidavit. In cross-examination he conceded that 3D ground-penetrating radar technology had been available at the time of the Incident (T45.26-46.06). However, he went on to state that it was not available at the KI premises as at 17 June 2011 (T63.35-63.46). He further explained that site-wide improvements to ensure best practice in Ammonia Plant management were being carried out, along with a program of providing secondary containment to all underground pipelines containing hazardous chemicals. 61Mr Winstone also noted that with respect to the photograph showing the depth of the pipe, the photograph did not have markings to identify where at the KI premises it was taken or which pipes were shown. He said that, even if the photograph of the excavation of the Ammonia Drainage Pipeline had been located by Orica personnel in 2011, there were no markings to readily identify that the pipe in the photograph was the same pipe as that about to be excavated. He stated that it was not standard procedure to take photographs of previous construction works and that there was no requirement to store such photographs even if taken.

Sentencing Principles 62A discussion of the applicable sentencing principles is set out at [80]-[93] and [168] of the principal judgment, which I adopt in this judgment. 63Suffice it to say that s 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). 64In 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), (g) and (i) 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. Both are discussed further below. 65Finally, 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 66The nature of the offence of breach of licence has been discussed in the principal judgment (at [103]-[104]). 67A 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 and relevantly include the objects found in s 3(a), (c) and (d). 68On behalf of Orica, Mr Winstone conceded in his affidavit that what had occurred was "unacceptable" and agreed that the circumstances giving rise to the Incident did not accord with Orica's procedures for "recording the location of underground services and plant modifications that are relevant to those services". However, the EPA went further and asserted that the offence was very serious because the failures (such as poor record-keeping and personnel training, and the use of older identification technologies instead of the better available technologies) giving rise to the commission of the offence reflected a "half-hearted" attitude to safety by Orica. 69Given the harmful qualities of ammonia, it is a central requirement that Orica carry out its licensed activities in a competent manner. The 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, a reduction in discharges of harmful substances, and the making of progressive environmental improvements, including the reduction of pollution at the source (s 3(d) of the POEOA). 70Nevertheless, for the reasons that follow, the objective seriousness of the offence is not as great as that contended for by the EPA.

Statutory Licences - a Breach of Public Trust? 71As 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 contravened by the breach of licence condition. 72However 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 [108]-[111]).

Maximum Penalty 73The 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 Caused by the Jackhammer Incident 74The 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. 75Section 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". 76The actual and potential environmental harm, including health impacts, caused by the commission of the offence was not a matter of controversy. 77Ammonia is classified as a hazardous substance according to National Occupational Health and Safety Council ("NOHSC") criteria and is a Dangerous Good under the Australian Dangerous Goods Code. 78Chemwatch's Material Safety Data Sheet documents the effects of ammonia exposure on human health. Ammonia is classified as "toxic by inhalation" and "very toxic to aquatic organisms". Identified human health risks include "serious damage to eyes" and "causes burns". However, the nature of any effects from ammonia exposure are concentration dependent. 79The maximum airborne ammonia concentration below which it is believed that nearly all individuals can be exposed for up to one hour without experiencing or developing other than mild transient adverse effects absent perceiving a clearly defined odour, is 25ppm. Similarly, exposures of up to one hour at levels above 150ppm are not believed to result in, or cause, individuals developing irreversible or other serious effects or symptoms that would impair an individual's ability to take protective action. Ammonia is believed to have life-threatening health effects when exposures of above 750ppm are experienced for more than one hour. 80The Jackhammer Incident resulted in the emission into the atmosphere of 90kg of ammonia as a flashing gas with some liquid entrainment occurring over approximately four hours. The following is known about the effects of the Incident: (a)Mr John Iuliano reported feeling liquid on his skin when he ruptured the Ammonia Drainage Pipeline. It is not clear whether this liquid was ammonia or entrained water in effluent launder above the location of the Ammonia Drainage Pipeline. He did not report any adverse health effects; (b)Mr Josh Iuliano reported a stinging sensation in his eyes for a couple of seconds immediately upon the Ammonia Drainage Pipeline being ruptured; (c)hand-held monitoring at the eastern boundary of the KI premises, downwind of the Incident area, was undertaken between 3.05pm and 3.20pm (approximately 40 minutes after the Incident and after water fogging had commenced) with a maximum concentration of 3ppm detected; (d)no employees of Orica reported being exposed to ammonia as a result of the Incident, nor did they report any health effects as a result of the Incident; and (e)Laing O'Rourke, Orica's immediate downwind neighbour at the KI premises was contacted by Orica and it did not report any ammonia odour. 81On 20 June 2011 the EPA received a call to its Environment Line service from a resident of nearby Stockton. The caller expressed concern, having heard the evacuation siren on the afternoon of 17 June 2011 and smelt a strong odour of ammonia shortly after, as to the possible health risks of the Incident. The odour of ammonia was present inside the resident's home. The resident did not experience any physical effects as a result of being exposed to the ammonia smell. 82Another resident of Stockton also noticed the odour on the afternoon of 17 June 2011. The odour made the resident's eyes water, took his breath away and irritated his throat. As a result of the smell he immediately ran into his garage and closed the roller door. He was especially concerned because his wife suffered from chronic obstructive pulmonary disease and she was very susceptible to any airborne irritants. Shortly afterwards, the resident walked to his neighbours to warn them to close their windows. Apart from the initial symptoms he suffered, the resident did not experience any long term physical effects as a result of being exposed to the ammonia smell. 83In this case, the environmental harm concerned actual human harm, as described in the agreed facts, to the two contractors engaged in the works and to a lesser degree, to two residents of nearby Stockton. But as the evidence demonstrates, the harm was of limited scope and of short term nature. 84More significantly, however, there was the potential for serious harm to be caused by the release of ammonia, a hazardous substance, exposure to which can be extremely harmful. 85The EPA also submitted that the concept of environmental harm includes loss of amenity or quality of life and that the activation of the site alarm when the Incident occurred could have led the Stockton community to become anxious, as two residents were, thereby adversely impacting upon the amenity of the residents in that town (see the discussion at [163] in (Environment Protection Authority v Orica Australia Pty Ltd [2014] NSWLEC 106, the Hexavalent Chromium Incident). Accepting that the harm fell within some broader notion of an adverse impact on quality of life, the evidence only establishes that the Incident impacted upon the amenity of two Stockton residents and that any resultant harm of this nature was relatively minimal. 86I therefore find that the commission of the offence caused moderate environmental harm. I do not, however, consider that the harm caused was sufficient for it to constitute an aggravating factor under s 21A(2)(g) of the CSPA. That is to say, the commission of the offence did not cause "substantial" harm.

Orica's State of Mind 87The 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]). 88The 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]). 89The EPA submitted that the failures that led to the Jackhammer Incident established that Orica was incompetent in its management of the excavation project and that the Court should readily find that the offence was the result of negligence. 90The joint experts' report made a number of findings, accepted by the parties, that in my opinion, result to the requisite degree a finding that the offence was committed negligently. These include: an inadequate JSERA insofar as Orica ought to have known the location of the pipe before work permits were issued; inadequate training of, and supervision by, the permit preparation personnel; inadequate record keeping; inadequate use of existing technology (3D ground-penetrating radar) to determine the depth of the pipe; and inadequate use of its SHEMS.

Reasons for Offending 91In the present case, the offence was not committed for any ulterior reason that would increase its objective seriousness.

Foreseeability of the Risk of Harm 92The extent to which Orica could have reasonably foreseen the harm caused by the commission of the offence 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. 93Orica submitted that in preparing for the excavation of the pipe, it took several measures to identify and manage the risk associated with the excavation of the pipe. These included a series of acts taken in preparation for the excavation of the pipe for the purpose of identifying and controlling risks, including risk to the environment. Several risk assessments were carried out, including the HAZOP study and the excavation break-in authority to accurately identify the location of underground services and pipelines. 94These measures revealed that the pipe was located under the concrete effluent launder installed in around 2005 during drainage upgrade works. Orica then used the wand device, which showed the location of the pipe on a horizontal axis, although it did not indicate its depth. In these circumstances, therefore, it could not easily be said that the Incident and ensuing harm were foreseeable. 95However, Orica accepted that its personnel assumed that the pipe was in soil underneath the concrete. It also accepted that inadequate records were kept of the fact and reason for encasing the pipe in concrete in 2005 or 2006 and that therefore this fact was not known to the personnel undertaking the excavation work in 2011. Orica further accepted that once it was known that the Pipeline was underneath the surface of the concrete launder, a jackhammer should not have been used until additional steps were taken to determine if the Pipeline was in soil underneath the concrete or was encased in the concrete. 96These concessions, combined with the acceptance that 3D ground-penetrating radar and Orica's own records (the photograph showing the depth at which the pipe was located) were available at the time of the excavation to further mitigate against the Incident occurring, make it clear that the risk of harm by Orica's failure to competently carry out the excavation as part of its KI licensed activities was, in my view, foreseeable by Orica.

Practical Measures Available to Orica to Avoid or Mitigate Harm 97Section 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). 98Several practical measures have been taken since the Incident to prevent a recurrence of it. These were set out in the Statement of Agreed Facts and deposed to by Mr Winstone (see above at [59]-[60]). 99These measures included: introducing 3D ground-penetrating radar for use in excavation work; conducting a review of the risk assessment system for all pre-turnaround work prior to scheduling work; reviewing engineering standards for the installation of underground pipe work to minimise the potential for services to be encased in concrete; and investigating the feasibility of a dossier system to store known information on underground services (for example, photographs and 3D drawings) for future construction work. All of these steps could, as was conceded by Orica, have been implemented prior to the Incident. 100In addition, it was agreed that Orica could have: (a)undertaken a full risk assessment prior to commencing the excavation work that adequately considered the risks posed by the lack of knowledge as to the depth of the Ammonia Drainage Pipeline; (b)used adequate equipment, for example 3D ground-penetrating radar, to accurately identify the depth of underground piping; (c)not embedded the Ammonia Drainage Pipeline in concrete during the earlier works; (d)ensured that construction drawings had shown the actual depth of the Ammonia Drainage Pipeline; and (e)given the uncertainty surrounding the depth of the Pipeline, confirmed that the Pipeline was properly depressurised before commencing the excavation work. 101Having noted these steps, I accept Orica's submissions that once gas escaped it acted promptly and responsibly to avoid any further harm. In particular, I agree that its emergency response procedures were promptly implemented and employees were moved to safe houses; the escaped gas was controlled by water fogging which absorbed most of the gas and the liquid effluent from this procedure was contained on the KI premises; that equipment was properly and promptly used to determine the extent of the offsite impact of the Incident; and inquiries were made of Orica's downwind neighbour as to the likely presence of ammonia gas.

Control Over the Causes of the Harm 102The experts agreed and Orica conceded, rightly in my opinion, that it had control over the causes that gave rise to the Jackhammer Incident (s 241(1)(c) of the POEOA).

Conclusion on Objective Gravity 103Orica 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)Orica's 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. 104Having regard to all of the objective factors discussed above, in my opinion, the offence ought to be objectively classified as moderately serious.

Subjective Considerations 105As stated above, determining an appropriate and proportionate sentence, the Court must take into account all factors that are personal to Orica, including factors in aggravation and factors in mitigation.

Prior Criminal History 106As 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 matter into account as an aggravating factor under s 21A(2)(d) of the CSPA.

Was the Offence Committed Without Regard for Public Safety? 107The EPA also submitted that a relevant circumstance of aggravation was that the offence was committed without regard for public safety (s 21A(2)(i) of the CSPA). According to the EPA, in committing the offence, Orica had, by reason of "its sloppy systems and half-hearted attitude to safety show[ed] a disregard for public safety, and in particular for the safety of John Iuliano and Josh Iuliano." 108The principles applicable to a finding that an offence was committed without regard for public safety were discussed by the Court in Environment Protection Authority v Unomedical Pty Limited (No 4) [2011] NSWLEC 131 (at [73]-[75]): 73 In what is now regarded as a seminal passage, in Elyard v R [2006] NSWCCA 43; (2006) 45 MVR 402 Basten JA opined that (at 12]): 12 It appears from the cases that the factor which has given rise to significant difficulty is para (i) dealing with offences committed "without regard for public safety". There has been limited consideration as to whether this factor involves an objective, or subjective test, and if subjective, what level of conscious or reckless disregard is required on the part of the offender. It may well be that this factor should be understood as encompassing both objective and subjective circumstances. However, the distinction can be helpful in order to avoid the danger of double-counting. Where the offence is of a kind which, objectively or abstractly, reflects a policy of prohibiting conduct which disregards public safety, it will be necessary, in order to engage the aggravating factor, to find some aspect of the specific conduct in question which goes beyond the objective element or underlying policy. 74 The reasoning in Elyard was recently endorsed in Mansour v R [2011] NSWCCA 28 by Price J (with whom James and Hall JJ agreed: at [2] and [3]) who stated that (at [46]): 46 It is well established that a factor should not be taken into account as an aggravating factor under s 21A(2), if it is either an element of the offence for which the offender is being sentenced or an inherent characteristic of that kind of offence: see for example Elyard v Regina [2006] NSWCCA 43; Ward v R [2007] NSWCCA 22; (2007) 168 A Crim R 545. A factor, which is an inherent characteristic of the kind of offence for which the offender is being sentenced, cannot be taken into account as an aggravating factor under s 21A(2), unless its nature or extent in the particular case is unusual. As Simpson J observed in Regina v Yildiz [2006] NSWCCA 97; (2006) 160 A Crim R 218 at [37]: ... But this principle does not mean that the degree to which the "inherent characteristic" exists in relation to a particular offence may not, where it exceeds the norm, be taken into account as an aggravating factor. 75 Thus if disregard for public safety is an inherent characteristic of the kind of offence for which the offender is being sentenced, in the present case s 128(2), it cannot be taken into account because s 21A(2)(i) of the CSPA is not engaged. 109In the present case, it cannot be said that disregard for public safety is an inherent characteristic of an offence against s 64(1) of the POEOA. But this is not the end of the matter. 110Leaving aside any legal issues concerning the ambit of s 21A(2)(i) of the CSPA having regard to the De Simoni principle or whether the phrase "without regard to public safety" is wide enough to pick up matters not already caught by s 241(1)(a) of the POEOA (the extent of the harm caused or likely to be caused by the commission of the offence), in my opinion, the EPA has not proved beyond reasonable doubt that the offence was committed without any regard to public safety. 111Notwithstanding the negligence of Orica in committing the offence, it had nevertheless undertaken a risk assessment of the activity giving rise to the commission of the offence and it had instituted some measures to avoid damage to the Pipeline by the excavation works. While these steps ultimately proved to be inadequate, and notwithstanding that there were, as identified above, measures that could and should have been put in place to avoid or further mitigate against the commission of the offence, these failures cannot sustain a finding to the requisite degree that Orica undertook the excavation works in 2011 without regard to public safety. I therefore reject the application of this aggravating factor.

Prior Criminality 112In light of Orica's environmental antecedents, it cannot be said that Orica does not have any prior criminal record so as to operate as a mitigating factor in determining the imposition of an appropriate sentence (s 21A(3)(e) of the CSPA).

Good Character 113Orica 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 a corporate person of good character at the date of this offence (s 21A(3)(f) of the CSPA).

Likelihood of Re-offending 114Orica 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, suggests that the likelihood of future re-offending is greatly reduced and 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 future to be low, which should be taken into account as a factor in mitigation (s 21A(3)(g) of the CSPA).

Demonstrated Remorse 115Orica 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 116Orica pleaded guilty to the charge at the second mention of the matter on 25 May 2012. Orica's early guilty plea should attract the maximum discount of 25% (ss 21A(3)(k) and 22 of the CSPA).

Assistance to Authorities 117The parties agreed that Orica has cooperated fully with the EPA's investigation into the commission of the offence. This assistance should be taken into account as a factor in Orica's favour (ss 21A(3)(m) and 23 of the CSPA).

Orica Agreed to Pay the Prosecutor's Costs 118Orica has agreed to pay the EPA's reasonable legal costs. In addition, Orica has agreed to pay the EPA's investigation costs for this incident in the agreed sum of $2,862.17. I take this into account in the determination of the appropriate penalty to be imposed in these proceedings in accordance with the principles discussed in the principal judgment (at [209]).

Conclusion on Subjective Considerations 119The 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 120The 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 to victims 121(s 3A(g)). 122The 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. 123The 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. 124There 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, 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. 125In 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]). 126The 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 127As 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. 128The 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 Unomedical (discussed in the principal judgment at [223(b)]). 129Orica submitted that although factually analogous, additional mitigating features in the present proceedings should operate in its favour to cause the Court to impose a significantly lower monetary penalty than that imposed in Unomedical, including its early guilty plea and its expression of remorse. However, this submission ignores the actual physical harm caused to the contractors and to the two residents of Stockton.

The Totality Principle 130The 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 the totality principle has no application to this case.

Conclusion on the Appropriate Penalty for the Jackhammer Incident 131Synthesising the objective and subjective circumstances of Orica, and the existing patterns of sentencing, I consider that the appropriate penalty for the offence is a monetary penalty. 132As this offence was towards the middle end of the scale, I consider the appropriate penalty for the breach of licence condition contrary to s 64(1) of the POEOA to be $125,000, which should be discounted by 30% to $87,500.

Environmental Project 133As 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. 134In 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". 135All 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 136The 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. 137In 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 138Additionally, and as agreed, Orica will be ordered to pay the prosecutor's investigation costs in the agreed amounts and legal costs as agreed or assessed.

Orders 139For the reasons provided above, the Court orders that: (1)the defendant is convicted of the offence as charged; (2)pursuant to s 250(1)(e) of the Protection of the Environment Operations Act 1997 the defendant is directed to pay to the City of Newcastle Council, within 28 days of this order, the amount of $87,500 to contribute to the Stockton Cycleway Revegetation Works to counteract erosion on the Hunter River foreshore. A description of the project is annexed at "A"; (3)all future references by the defendant to its funding of the Stockton Cycleway Revegetation Works 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 Stockton Cycleway Revegetation Works 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)." (4)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; (5)the defendant is to pay the prosecutor's legal costs as agreed or assessed; (6)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 $65.39; (7)the exhibits are to be returned; and (8)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

Environment Operations Act 1997(NSW)

Orica Pleads Guilty to a Breach of Licence Offence that Occurred When a Worker Ruptured a Pipe With a Jackhammer Causing the Emission of Ammonia 1The defendant, Orica Australia Pty Ltd ("Orica"), pleaded guilty to nine charges under the Protection of the Environment Operations Act 1997 ("the POEOA") which were dealt with in seven concurrent sentence proceedings, relating to seven separate pollution incidents occurring between October 2010 and December 2011. Although the proceedings were heard concurrently, it was appropriate that seven separate judgments are produced, that is, one for each discrete incident. 2The principal sentencing judgment with respect to these seven proceedings summarises all of the charges, outlines in greater detail the conduct of the proceedings, and sets out in full the relevant sentencing principles applicable in this, and the remaining five judgments (Environment Protection Authority v Orica Australia Pty Ltd (the Nitric Acid Air Lift Incident) [2014] NSWLEC 103, "the principal judgment"). Those principles are applied, where relevant, in this judgment, but are expressed only in summary form. It is therefore necessary to read this judgment together with the principal judgment. 3This judgment concerns the appropriate sentence for an offence that occurred on 17 June 2011 when a worker carrying out maintenance work at Orica's Kooragang Island Licensed Premises ("KI premises") ruptured a pipe containing ammonia with a jackhammer ("the Jackhammer Incident"). As a result, ammonia was emitted into the atmosphere. 4This incident resulted in one breach of licence condition offence under Orica's Environment Protection Licence Number 828 ("Licence 828") contrary to s 64(1) of the POEOA, by failing to carry out licensed activities in a competent manner. 5The failure to comply with a licence condition in contravention of s 64(1) of the POEOA is an offence of strict liability. 6Section 64(1) states: (1) Offence If any condition of a licence is contravened by any person, each holder of the licence is guilty of an offence. Maximum penalty: (a) in the case of a corporation-$1,000,000 and, in the case of a continuing offence, a further penalty of $120,000 for each day the offence continues... 7By pleading guilty to the offence, Orica concedes that it failed to comply with licence condition O1.1 in that it failed to carry out licensed activities in a competent manner.

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