Environment Protection Authority v Sydney Water Corporation

IN THE LAND AND Matter No.: 50077 of 1999 ENVIRONMENT COURT Coram: Lloyd J OF NEW SOUTH WALES Decision date: 21 July 2000

Environment Protection Authority Prosecutor v Sydney Water Corporation Defendant

The defendant, Sydney Water Corporation ("Sydney Water") has pleaded guilty to an offence against the Environmental Offences and Penalties Act 1989 in that it polluted waters with sewage, contrary to s 16(1) of the Clean Waters Act 1970 (NSW). This matter came before the court to decide on an appropriate penalty pursuant to the Environmental Offences and Penalties Act 1989.

The facts which I now describe are derived from an agreed statement of facts and supplemented by affidavit and oral evidence.

On 25 October 1998, a field crew from Sydney Water attended at Helensburgh to investigate a resident's complaint about odour. The crew traced the odour to sewage overflowing from an access chamber (or manhole) on Whitty Road, Helensburgh. The access chamber was located in an overgrown area and the manhole cover (weighing 20-30 kilograms) was half popped off its base when the field crew arrived. The precise duration and volume of the overflow is unknown. The date that the overflow first began is estimated to be on or about 12 October 1998.

The sewage overflow was caused by a "soft blockage/choke", primarily caused by fats and greases in the sewage collecting on fine roots from trees and plants which had grown into the defendant's sewer. In addition to the fats and greases, rags and a child's toy were caught in these roots. The vast majority of the sewage flowing in the pipe upstream of the blockage was not able to flow down the pipe but was forced to surcharge out of the manhole and flow overland down a gully towards a creek known as Camp Creek. Camp Creek commences at Helensburgh and flows into the Hacking river. The creek enters the Hacking River 3.6 km upstream of where that river enters the Royal National Park. Sewage entered the waters of Camp Creek approximately 1.3 km upstream of a weir which is used by the Metropolitan Colliery.

The effects on Camp Creek were serious. The water in the creek was black, indicating septic conditions and it smelt like sewage. Sewage sludge had accumulated on the creek bed and sides. The level of faecal coliforms in the polluted creek-water was very high, up to 130,000 faecal coliforms per hundred millilitres, compared to background levels of 160 faecal coliforms per hundred millilitres. Eels were observed to be dead and floating in the water. According to the evidence of Mr Eren Turak, an environmental scientist for the Environment Protection Authority, macroinvertebrate populations in the creek were compromised by the sewage. Those populations, however, had completely recovered after six months.

Acting on a request from an officer of the National Parks and Wildlife Service on the evening of 27 October 1998, "No Swimming" signs were caused to be placed by Sydney Water at Red Cedar Flat and Audley Weir, within the Royal National Park. The Metropolitan Weir to which I have referred, had acted as a settling basin, preventing any significant contamination of waters downstream of that weir.

Sydney Water conducted a cleanup of Camp Creek. This involved pumping out the polluted waters of the creek at the Metropolitan Weir. The Creek was flushed with potable water and sludge was cleared off the creek bed using brooms, rakes and waterjets. The clean up of the creek was completed on 3 November 1998. The estimated cost of the cleanup was $120,000. There have been no reported ongoing effects upon Camp Creek.

Sydney Water has a classification system for its sewage pipes. Of the 22,000 kilometres of sewers within Sydney Water's control, 37% are classified by it as "critical".

The sewer near Camp Creek is part of the Helensburgh sewerage network which is approximately 18 years old. Sydney Water had classified the Helensburgh sewerage network as a "non-critical" asset, having a very low choke-rate history.

It is difficult to predict where chokes will occur. Sydney Water relies on the choke history of an area when classifying it as critical or non-critical. Other factors, such as risk to public health and potential extent of overflow, are considered in the classification process.

All non-critical sewers, including the Helensburgh network, are subject to what Sydney Water describes as "a reactive maintenance" strategy. In effect, no maintenance or preventative work is carried out on non-critical sewers and Sydney Water simply reacts to overflows when they occur. When a problem such as an overflow occurs, a "corrective maintenance" programme is implemented.

Professor P F Greenfield, Professor of Chemical Engineering at The University of Queensland, gave evidence about the Sydney Water sewerage system and its maintenance. Critical sewers are subject to a "preventative maintenance" strategy. This involves a range of activities to detect potential choke sites, the clearance of any partial blockages and improvements to the pipes to prevent future blockages. Such measures include closed circuit television inspection of sewers; the physical inspection of larger sewers; root-cutting within the pipes; chemical cleaning of root infestations; and the sealing of cracks and access chambers.

Professor Greenfield noted that even if the Camp Creek sewer had been classified as "critical", the minimum inspection interval is one inspection (either by physical inspection or by closed circuit television) every ten years. He adds that such an inspection frequency would not be likely to detect the problem that led to the overflow.

Professor Greenfield conceded that the rate of chokes in Sydney Water's sewerage system is increasing. He also stated that it is possible to reduce choke rates to infinitesimal levels, given an adequate level of resources.

Section 16(1) of the Clean Waters Act 1970 states:

Section 17 of the same act provides for licences to be issued to regulate the discharge of pollutants.

Section 9 of the Environmental Offences and Penalties Act (now re-enacted in s 241 of the Protection of the Environment Operations Act 1997) requires the consideration of a number of factors in imposing a penalty. It provides as follows:

(1) In imposing a penalty for an offence against this Act or the regulations, the court is to take into consideration the following (so far as they are relevant):

a) the extent of the harm caused or likely to be caused to the environment by the commission of the offence, b) the practical measures that may be taken to prevent, control, abate or mitigate that harm, c) the extent to which the person who committed the offence could reasonably have foreseen the harm caused or likely to be caused to the environment by the commission of the offence, d) the extent to which the person who committed the offence had control over the causes that gave rise to the offence, e) whether, in committing the offence, the person was complying with orders from an employer or supervising employee, (2) The court may take into consideration other matters that it considers relevant.

Mr C J Leggat, appearing for the prosecutor, submits that the pollution at Camp Creek was widespread and serious. The damage existed for up to six months over a not inconsiderable distance. There was serious ecological disturbance to the creek and risks to human health. Mr Leggat submits that a range of practicable measures may have been taken to prevent, control, abate or mitigate harm to the environment. Sealing of the manhole covers, and preventative inspections of the sewer pipes were just two of the measures that were available to the defendant to prevent the overflow.

Mr Leggat relies upon the observations of Mahoney JA in Axer Pty Limited v Environment Protection Authority (Court of Criminal Appeal, 22 November 1993, unreported):

"...(B)usiness must be arranged and precautions taken so as to ensure that pollution will not occur. Precautions may be costly. The cost of precautions to avoid pollution will no doubt become accepted, in due course, as an ordinary cost of operating in an industry where, absent precautions, pollution may occur... But I believe legislation of this kind contemplates that, in general, the cost of preventing pollution will be absorbed into the costing of the relevant industries and in that way will be borne by the community or by that part of it which uses the product which the industry produces... The fine should be such as will make it worthwhile that the cost of precautions be undertaken... Ordinarily, the fine to be imposed should be such as to make it worthwhile that costs of this kind be incurred."

In Mr Leggat's submission, the harm to the environment was foreseeable and in part the consequence of "intentional negligence" because of a decision by the defendant to react rather than act. Sydney Water's decision to conduct only "reactive" maintenance in the Helensburgh area is, in his submission, a factor to be considered when considering the severity of penalty.

Mr Leggat distinguishes the Helensburgh reactive maintenance strategy from Sydney Water's attitude in a case about the West Camden Sewerage Treatment Plant ( Environment Protection Authority v Sydney Water Corporation [2000] NSWLEC 80):

"The system was regularly inspected. It was bunded in case of leaks, some of it was appropriately alarmed and monitored. Sydney Water had in place a programme of preventative maintenance..."

Mr Leggat raises three objective facts to be considered regarding Sydney Water's conduct as a corporation: (a) the number of Sydney Water employees is falling; (b) the number of chokes are increasing; (c) the return to the financial shareholder (the New South Wales Government) is increasing. The proportional number of employees of Sydney Water has decreased since 1991. That is, the number of employees per thousand properties has fallen from 6.6 employees in 1987 to 3.0 employees per thousand properties in 1998. There is no evidence to show which positions have been shed, nor is there any evidence explaining the role of contractors.

As published by the NSW Treasury, the number of sewer chokes per 100 km has increased since 1991. There is a clear rise in the rate of chokes during the 1990s. Professor Greenfield classifies the increase as "slight". An increase in sewer chokes, however, which is from around 60 per 100 km to around 80 per 100 km, seems to me to be at least significant, and more accurately described as a substantial increase. The evidence discloses that Sydney Water's choke-related overflow performance record has worsened.

During the same period, the rate of return on total assets and the rate of return on shareholder's funds has gradually increased (discounting the initial higher rates of 1991-1992). To put it simply: at the same time that Sydney Water's environmental record for sewers has worsened, its profits have increased.

In detailed submissions Mr B J Preston SC, appearing for the defendant, submits that the harm to the environment was in this case limited to a short-term pulse disturbance with no continuing conditions of adverse water quality.

Mr Preston submits that any practicable measures to prevent or mitigate the harm were taken. Mr Preston argues that allocation of resources to a low risk area such as Helensburgh would be depriving more choke-prone areas of those resources. Mr Preston submits that the extent of the defendant's operations makes it almost impossible to completely eradicate incidents such as this. It would be impossible, in his submission, to completely eradicate choke-related overflows.

Mr Preston further submits that the fact that Sydney Water performs its operations for the benefit of the community should be considered as a mitigating factor in determining the penalty. He relies in this respect on Environment Protection Authority v Orange City Council (Stein J, NSWLEC, 23 June 1995, unreported). Stein J reduced the fine in that case because of the community "service" the defendant council was providing, stating:

"The swimming pool is there as a community benefit, as is the creek and the park in the setting I have described. It is not a business enterprise."

Mr Preston submits that Sydney Water's statutory duty to dispose of effluent and waste water should mitigate the penalty. The fact that Sydney Water is carrying out a public service is also raised.

In Mr Preston's submission, the defendant has no control over the factors which cause chokes, such as tree root growth and its customers placing greases and fats into the sewer. He also argues that the defendant demonstrated contrition through its co-operation with regulatory authorities, its early plea of guilty, and the carrying out of studies and rehabilitation to avoid a repeat of the incident.

Mr Preston finally submits that Sydney Water had virtually no control over its level of resources to be directed to preventative maintenance. It is governed by the State Owned Corporations Act 1989 and the requirement thereunder to produce a dividend to its shareholder, the State Government. Its income is controlled by a pricing structure as determined by the Independent Pricing Tribunal.

I accept the Prosecutor's submission that this is a moderately serious offence. I set out below the considerations to which I have had regard.

(a) the extent of the harm caused or likely to be caused to the environment by the commission of the offence,

The harm caused to the environment at Camp Creek was serious. Aquatic life was severely disturbed and areas of water recreation further downstream became potentially hazardous. The harm lasted for up to six months and an expensive cleanup was necessary. I accept, however, that there has been no permanent or ongoing effect on the environment.

The damage was widespread in terms of the usual impact of sewage overflows. The damage was localised, however, to a relatively small part of the river catchment area due to the position of the weir downstream from the sewage overflow. This weir acted as a holding tank for the bulk of the overflow of sewage and had it not existed, or had it been already full, the harm to the environment downstream was potentially very serious.

(b) the practical measures that may be taken to prevent, control, abate or mitigate that harm,

It is undisputed that Sydney Water, once aware of the overflow at Camp Creek, acted promptly and effectively to clean up the site. Its co-operation with the Prosecutor has been exemplary.

The defendant has submitted that this case is different to previous convictions of Sydney Water because in this case there was no carelessness or failure to take appropriate practical measures. On the contrary, however, this case is a clear example of the opposite. The site was subject to "reactive maintenance" only, whereas earlier cases had at least some degree of "preventative maintenance" or detection systems in place (even though those systems may have failed). In the case of the Camp Creek area, no inspections or works had occurred in the vicinity; and in the absence of any detection systems, the sewage overflow was able to continue undetected for at least two weeks.

In its classification of sewers it was admitted by Sydney Water that it relies on the public to be its "eyes and nose" for detecting problems in non-critical sewers. Little account seems to have been taken of the possibility that pipes close to inaccessible bushland areas could be kept hidden from the eyes and noses of concerned citizens for extended periods. The fact that the relatively inaccessible bushland area of Camp Creek contains a sensitive waterway flowing into a National Park compounds the seriousness of such an oversight.

(c) the extent to which the person who committed the offence could reasonably have foreseen the harm caused or likely to be caused to the environment by the commission of the offence,

As discussed previously, predicting the exact site of potential sewage overflows is virtually impossible. The foreseeability of this particular incident was not high. The prevalence of sewage overflows across the sewage network indicates, however, that there is some degree of foreseeability in a choke occurring anywhere. The low choke history of the Helensburgh area did not mean that there were no chokes at all in the area. Sewage chokes and overflows are widespread; they are not isolated incidents and they cannot be ruled out as possibilities from any part of the sewerage network.

There was, in addition, foreseeability of the level of harm in the event of a sewage overflow into Camp Creek. Due to the relative inaccessibility of the area, it was reasonably foreseeable that a sewage overflow could continue undetected for a much longer time than one closer to more densely populated areas. The foreseeability of potential harm to the waters of the Hacking River, both generally and within the Royal National Park, was also high because of the direct water path and the obvious chance that the weir, if already full, might not have contained any overflow.

(d) the extent to which the person who committed the offence had control over the causes that gave rise to the offence,

Mr C I Barton, Sydney Water's South East Oceans Waste Water Network Manager at the time of the incident, gave evidence regarding Sydney Water's limited control over factors which cause chokes. These factors include tree roots intruding into pipes, fats, greases, foreign materials, pipe materials, ground movement and construction activity by third parties.

It is not possible for sewage chokes to be eliminated completely. I accept that the activities of Sydney Water must be taken as occurring in the "real world" where combinations of the above factors will continue to cause a certain rate of chokes. Within characterisations of what constitutes the "real world", there is a discernible range of acceptable levels of environmental harm. Sydney Water presented its case on the premise that what currently occurs is the benchmark. This attitude is not evident, however, from the written comments of its management, rather from an analysis of the lack of improvement in choke rates, and the increasing return to the shareholder. The prosecutor presented its case on the premise that the Camp Creek incident may have been prevented because of the available techniques of preventative maintenance.

What is clear from the evidence is that Sydney Water is capable of reducing the likelihood of chokes in any given area. Proper pipe materials and construction, regular inspection and maintenance, as well as "cultural" changes to prevent inappropriate materials in the system, will all lead to an overall reduction in chokes. Such an ability to cause a reduction in chokes amounts to a certain degree of control over the causes of sewage overflows.

Whilst the community may not be expected to fund a regime in which every metre of sewer pipe is inspected daily, it is nonetheless imperative that a sensitive waterway such as Camp Creek should never be subjected to such a prolonged sewage overflow.

As is mentioned in one of Sydney Water's educational brochures, there was a time when Sydney's Tank Stream was used as a dumping ground for raw sewage and that behaviour has long since become unacceptable. Similarly, community attitudes towards non-deliberate pollution is evolving. The balance is shifting towards a "real world" in which the community expects an increasingly protected environment. The environmental protection laws are premised on the expectation that, in the absence of a licence, pollution will not occur.

( 2) the court may take into consideration other matters that it considers relevant.

In my opinion, there should be no mitigation in the amount of penalty due to the nature of the defendant's activities. Sydney Water is in a position of public responsibility and its duties must be carried out with proper regard to its all of its obligations, including the need to protect the environment.

Sydney Water is entrusted with the sole ownership and control of the sewage networks in the Sydney Region. In this way it can be likened to local councils who are entrusted with similar responsibilities and duties:

Against these considerations is the fact that the defendant is the Council of a local government area which itself has a responsibility to enforce and institute proceedings for offences arising under the Clean Waters Act... The defendant should thus be setting an example for others, rather than itself committing a breach of that Act. ( Environment Protection Authority -v- Lake Macquarie City Council , Lloyd J, 4 February 1999, [1999] NSWLEC 4, unreported, [at 35])

The Court takes into account the responsibilities of Council to enforce environmental law within its area, and the senior positions of trust and relevant responsibility occupied by the Council officers... ( Environment Protection Authority -v- Bega Valley Shire Council, Sheahan J, NSWLEC, 14 August 1998, unreported, [at 29-30]).

The defendant has a responsible role to play in the public interest. It is reasonable to expect that it, particularly having regard to its status as a state owned corporation, adopt preventative measures in circumstances where the potential harm to the environment is manifest to itself and to the public in general... The remedy was in its own hands. ( Environment Protection Authority v Sydney Water Corporation Ltd, (1999) 102 LGERA 232 )

In addition to its public responsibilities, Sydney Water is constituted as an independent statutory corporation. It is a commercial enterprise. Whilst it has a highly important public role, Sydney Water cannot be given special exemptions simply because its shareholder, the state government, is not private. It must be responsible for its actions or omissions, at least to the same degree as any other business is subject to the environmental protection laws of this State.

The defendant has presented its case on an assumption that the current level of its resources directed at prevention and maintenance is fixed and may not be increased. This situation is purportedly caused by the statutory framework within which "its hands are tied"- with no means to independently control its income and expenditure.

Sydney Water has failed, however, to address the fact that it is also bound by the environmental protection regime of this State. Sydney Water is required by law to do what is necessary to protect the environment. As the prosecutor has submitted, the clear obligation to comply with the Clean Waters Act sits above any contractual, commercial or other obligations.

Sydney Water clearly has surplus funds. At the same time, the rate of chokes is increasing.

Sydney Water has stated that it is committed to environmental protection, citing as an indication of this a voluminous Environmental Impact Statement prepared in support of an application for a pollution control licence for sewage overflows. It should be noted that Sydney Water had no such licence at the time of the Camp Creek incident, unlike its sewage treatment plant operations, which are duly licensed.

It seems to me that Sydney Water has, to use a colloquial expression, failed to put its money where its mouth is. If Sydney Water was so wholly determined to protect the environment it would allocate any surplus funds to the implementation of preventative measures. At a bare minimum, dividend levels should be significantly reduced until such time as choke rates start to significantly decrease.

In no other sector or industry is such a "reactive maintenance" strategy considered acceptable. The era of unregulated dumping of industrial wastes has long since past. The era of virtually unmitigated overflow of sewage should similarly cease. I accept the fact that there is no practical possibility of zero sewerage overflows. The environmental laws stipulate, however, that pollution must not occur. In the absence of a licence to pollute, Sydney Water must not pollute. It must spend all of its available resources on pollution prevention which, in this case, means preventative maintenance. Dividends or profits are inappropriate if they are coming from a corporation that is breaking the law on a routine basis. The priorities of Sydney Water's management and its shareholder must be re-examined.

Section 22 of the Crimes (Sentencing Procedure) Act 1999 requires that I take into account the defendant's early plea of guilty. I accept that Sydney Water's conduct has been exemplary in the conduct of this case. I accept, however, Mr Leggat's submission that the likelihood of conviction was very high in this case since Sydney Water is the sole owner and operator of the Helensburgh sewerage system. In this instance I give little weight to the defendant's guilty plea.

Moreover, the behaviour of Sydney Water does not demonstrate contrition. Its decision to designate the relevant area to "reactive maintenance" amounts to an abandonment of its statutory duties to prevent pollution. Sydney Water's failure to alter its behaviour and to devote surplus funds to preventative measures instead of towards a return to its shareholder cannot be consistent with a contrite attitude.

Having regard to the principle of even-handedness, and the requirement for a fine to act as both a specific and a general deterrent, I am of the view that a penalty of $40,000 is appropriate in this case.

1. The defendant is convicted of the offence as charged.
2. The defendant is fined the sum of $40,000 for the offence.
3. The defendant must pay the prosecutor's costs as agreed at $25,522.
4. The exhibits may be returned.

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