EPA v Incitec Ltd

Land and Environment Court (NSW)|2000-10-20|Before: Sheahan J

CITATION : EPA v Incitec Ltd [2000] NSWLEC 217 PROSECUTOR PARTIES : Environment Protection Authority DEFENDANT Incitec Ltd FILE NUMBER(S) : 50010 of 2000 CORAM: Sheahan J KEY ISSUES: Environmental Offences :- Water pollution - environmental harm - plea of guilty - prior matters - contrition - discounts on sentence Environmental Offences and Penalties Act 1989 s9 LEGISLATION CITED: Clean Waters Act 1970 s 16(1) Crimes (Sentencing Procedure) Act 1999 s 10 Camilleri's Stock Feeds Pty Ltd v EPA (1993) 32 NSWLR 683; EPA v Attard [2000] NSWCCA 242; EPA v Causmag Ore Company Pty Ltd [2000] NSWLEC 205; EPA v Gilmour (2000) 109 LGERA 228; CASES CITED: EPA v Incitec Ltd [2000] NSWLEC 18; EPA v Softwood Holdings Ltd [2000] NSWLEC 201; EPA v Sydney Water Corporation [2000] NSWLEC 156; Newcastle City Council v Reed Constructions Australia Pty Ltd [2000] NSWLEC 208; R v Thomson [2000] NSWCCA 309; Veen v The Queen [No.2] (1988) 164 CLR 465 DATES OF HEARING: 05/09/2000, 12/09/2000 (written submissions), 11/10/2000 (further written submissions) DATE OF JUDGMENT: 10/20/2000

PROSECUTOR Mr M Kelly (Solicitor) Environment Protection Authority LEGAL REPRESENTATIVES: DEFENDANT Mr Ian Lloyd QC (Barrister) Solicitors Minter Ellison

JUDGMENT: IN THE LAND AND Matter No: 50010 of 2000 ENVIRONMENT COURT Coram: Sheahan J OF NEW SOUTH WALES 20 October 2000

ENVIRONMENT PROTECTION AUTHORITY Prosecutor v INCITEC LTD Defendant JUDGMENT The charge

The defendant has pleaded guilty to a charge that, on or about 1 March 1999, at Kooragang Island, near Newcastle in NSW, it polluted waters contrary to s 16(1) of the Clean Waters Act 1970, and, in so doing, committed an offence against the Environmental Offences and Penalties Act 1989 (" EOPA ").

The particulars of the charge are that the defendant " placed in, or otherwise introduced into " the Hunter River " waste having a pH value of less than 6.5 ", in direct breach of its licence conditions.

The maximum penalty for a corporation is a fine of $125,000. [EOPA s 8B(1)(a)].

The court has been greatly assisted by the parties' agreement upon a statement of facts ( Exhibit E1 ), which sets out a chain of relevant events and some of their relevant antecedents.

In fairness to the parties, I should set out the material contents of the Statement of Facts as follows: 1. The Defendant holds a licence number 000828 under the Pollution Control Act which regulates air and water pollution on its premises at Greenleaf Road, Kooragang Island. Under that licence condition W2.8 prohibits discharges from Discharge Point 001 (the Diffuser into the North Arm of the Hunter River) which have a pH outside the range of 6.2 - 9.5. At the premises, the Defendant manufactures ammonia, nitric acid and ammonium nitrate in continuously operating plants.

Most of the Nitric Acid produced at the plant is used on the premises in the manufacture of Ammonia Nitrate. Sunday 28 February 1999 was a scheduled "power down day" and the Ammonia Nitrate Plant was not producing. The night shift staff commenced at 11 pm and they had to start up and commence producing acid from the No 2 Nitric Acid Plant. This acid was being transferred to Storage Tank 3. As the Ammonia Nitrate Plant was off line none of the stored acid was being consumed. The night shift knew that Storage Tank Number 3 was nearly full and they would soon have to divert the produced Nitric Acid to Storage Tank Number 2.

Nitric Acid production continued and the control room attendant who was monitoring the acid plant alerted Terry Powazuk that Storage Tank Number 3 was nearing full capacity. An Incitec employee, Terry Powazuk, as part of his duties as an acid plant operator proceeded to line up the transfer to divert the acid being produced by the Acid Plant away from Storage Tank Number 3 and to go to Storage Tank Number 2.

Inside the bunded area of tanks 1 and 2 is a main vertical isolation valve for acid transfers into the storage tank. Next to that valve is a smaller drain valve that is used to drain or bleed the system and there are two of these drain valves. Tank No. 1 was undergoing maintenance by Transfield. As a result of this ongoing maintenance equipment was stationed in the bunded area. This equipment included welders, electrical leads, and scaffolding. Two compressed breathing air cylinders with breathing apparatus were also supplied by Incitec to the maintenance crew to ensure safety compliance as the maintenance work involved working in a confined space.

About 3.20 am 1 March 1999, Terry Powazuk opened the main vertical isolation valve to commence the acid transfer from No 3 to No 2 tanks. It is the responsibility of the outside operator, Terry Powazuk in this case, to ensure that the necessary drain valves are closed when lining up a transfer of acid. On this occasion he did not see the two drain valves were open. The drain valves are easily visible from the operating platform in the bund used by outside operators to line up a transfer of acid. The drain valves are often closed and he assumed they were closed.

As acid was being transferred from No 3 to No 2 tank it began escaping into the bunded area via the open drain valves. Terry Powazuk did not observe the escape of acid through the discharge lines submerged in a drain trench inside the bund. The submerged drain line is visible from the operating platform from which the outside operator lines up the transfer of acid.

Contained in the bund sump is an alarm. If the alarm activates it registers in the Control Room. Shortly after acid began spilling into the bund this alarm activated. The Control Room Operator, Alan McCully, accepted the alarm but did not initiate any action because he had too many alarms to deal with, many associated with the start up of the Nitric Acid Plant. This particular alarm was treated with low priority, partially because it could be triggered by rainwater, although there had been no rain that night. As a result, acid continued to leak from the open drain valves into the bunded area.

The acid in the bund began reacting with the equipment left in the bund by the maintenance team and damaged the welding and electrical gear. A Nitrous Oxide (NOX) cloud was emitted as a result of the acid reacting with the equipment left in the bund area. The acid was also corroding the two compressed breathing air cylinders left in the bund. One hour and 20 minutes later, at 4.40am, one of the compressed breathing air cylinders exploded and became airborne. It struck an overhead universal beam and then ruptured 25mm instrument air line. The cylinder then continued travelling through the air for about 100 metres landing on the roadway near the Incitec Control Room. It was this explosion that alerted the Incitec staff. By that time 23.93 tonnes of acid had escaped into the bund.

At 4.46 am Incitec initiated a works emergency and requested Police close the road. The Fire Brigade were notified at 5.08 am and attended. The Fire Brigade left the scene.

At 7.58 am the Fire Brigade were again contacted by Incitec and requested to attend after Incitec staff observed the remaining compressed breathing air cylinder still in the bund. There was a concern that the second compressed breathing air cylinder might explode.

At 8:06am the EPA was notified by Incites that there had been a NOX release into the atmosphere at 4:30am. An EPA officer then attended the premises. No charges have been laid against Incitec in relation to the NOX release into the atmosphere.

Water was added to the acid in the bund in an attempt to lower its concentration and minimise the risk of another explosion from the remaining compressed breathing air cylinder.

The Incitec site has an effluent storage dam. Its holding capacity is 587 cubic metres. On 1 March 1999 this dam was approximately 38% full. It is possible to transfer material in the bund to the effluent dam using the bund sump pump. This material is pumped from the bund drains into the No. 2 NAP Neutralising Pit. A pump in this pit then transfers the effluent to the effluent storage pond.

A decision was made to transfer the effluent in the bund to the effluent storage dam via the No 2 NAP Neutralising Pit so that the acidity of the effluent could be assessed and appropriate disposal arranged. Staff were also dosing the pit with Soda Ash in an attempt to neutralise the acid. The pump in the pit was down on capacity and as a result, some of the effluent flowed to the Nitrates Effluent Pit via an overflow pipe. This would have been of no consequence because effluent will fill this pit and subsequently overflow into the No.1 Ammonia Nitrate Transfer Pit. The effluent can then be transferred to the effluent storage dam from the transfer pit by a pump in that pit. However, some of the effluent from the Nitrates Effluent Pit escaped to the Hunter River via a pipe through the River Valve leading from the transfer pit.

The River Valve underwent maintenance prior to the incident. The most recent was 19 2.99, (sic) 10 days before this incident, in response to a maintenance request made on 18 February 1999 which indicated that - " the valve was "passing - replace urgent."(sic) An inspection of the River Valve was carried out immediately on 19 February 1999 by Michael Muraro, the Ammonium Nitrates Plant Mechanical Engineer. His inspection revealed that the valve was not rotating properly which in his opinion was due to a fault in the valve gear box. He established that the valve could not be closed properly by operating it automatically from the control room, or manually using the hand wheel (which is an ancillary component of the actuator). He further established that the only way to open and close the valve was to physically turn the actuator/gearbox assembly through 90°.

An internal memo was circulated on 19 February 1999 instructing Nitrate Plant Operators that the valve was to be operated manually by the method set out in that memo. Additionally, on 19 February 1999, an internal inspection of the valve was undertaken by Gardner Perrott contracted by Incitec, (these are external contractors who provide industrial services such as high pressure water cleaning, waste disposal etc.) using a fibre optic lens on a flexible lead to view the underground valve. The internal inspection revealed that there was some minor debris inside the valve, including a screw and some barrier tape, which was subsequently removed. This additional information formed the basis of Michael Muraro's conclusions that the valve could manually close and seal properly. The valve was manually closed in accordance with this memo on the day of the incident. After the incident, further extensive investigation was undertaken which involved removing the gearbox/actuator. Testing it revealed that the gearbox/actuator assembly was not faulty. It was not refitted to the valve. In it's place a 'T- Bar' was installed on the valve shaft to allow easier operation. Again a memo, dated 4/3/99, was circulated to advise operators of this change. This lead (sic) to the realisation that the butterfly valve itself must have developed a fault. This previously unknown fault allowed effluent to pass through the River Valve on the day of the incident despite it having been manually closed.

As a result, effluent with a pH of approximately 1.5 but possibly as low as 1.2 was discharged from Discharge Point 001 for approximately 2.15 hours between about 7am and 9am. The total volume of acidic discharge at this time was likely to have been between 140,000 and 218,000 litres. 1 to 1.5% of this discharge would have consisted of acid which amounts to a discharge of approximately 1.5 hours which occurred from around midday. The lowest pH recorded for this second discharge was between pH 2.5 and pH 3. The approximate total volume of this second discharge was 180,000 litres which would have amounted to a discharge of 1.8 to 2.7 tonnes of acid.

Incitec commenced an internal inquiry to identify the circumstances surrounding the escape of acid into the bund area when it was being transferred from No.3 to No.2 tank. A report was created entitled 'AN Operation Plant Root Cause Analysis - AN Operation Plant Emergency' dated 2 March 1999. At page 7 of the report the root cause of the incident was determined as follows:

' Fundamentally accepted that it is the outside operators' responsibility to bring system on line safely.

This would involve a thorough check of the system for open drains or vents. This was not done'.

The Prosecutor relied also on the following: (i) Affidavit of 12 May 2000, by Taras (" Terry ") Powazuk , the former employee of the defendant most closely implicated in the agreed statement of facts; (ii) Annexure ' V ' (pp 59-69) to the affidavit of 3 February 2000, by Terence John Muir , being the typewritten record of a " Root Cause Analysis " meeting held 2 March 1999; (iii) Affidavit of 13 March 2000, by William Melville George , a Regional Operations Officer with the EPA; (iv) Affidavit of 20 July 2000, by Moreno Julli , Manager of Research and Testing Services with the EPA; and (v) A " Summary of Previous Convictions and Other Matters " ( Exhibit E2 ).
The defendant relied on the following documents (tendered as part of bundle Exhibit D1 ): (i) Statement of Michael Joseph Fletcher , Ammonia Nitrate Operations Team Manager at the defendant's Kooragang Island plant, dated 4 September 2000; (ii) Statement of Christopher James Butler , Safety, Health, Environment and Quality Adviser to the Department at the relevant plant, dated 4 September 2000; (iii) Statement of Keith James Halford , Group Environment Manager of the defendant, dated 5 September 2000; (iv) Statement of Professor Barry Noller , Deputy Director of the National Research Centre for Environmental Toxicology, dated 1 September 2000.
The defendant also tendered an aerial photograph of the site ( Exhibit D2 ), and a letter of commendation sent to the defendant, by the community group known as " Citizens Against Kooragang Abuse ", on 2 September 2000 ( Exhibit D3 ).

As noted above (agreed fact 18), the EPA accepted the defendant's conclusion that the so-called " root cause " of the incident, which is the subject of the charge, was the failure of its then employee Powazuk in not thoroughly checking " the system for open drains or vents ". Mr Lloyd QC, Counsel for the defendant, acknowledged this failure as the " root cause " of the bund incident, which was the first incident in the relevant chain of events.

However, the EPA also relied on the sworn evidence of Powazuk . In pars 12 and 14 of his affidavit dated 12 May 2000, he testified: 12. … In my opinion it was the responsibility of the shut down crew to ensure that the valves were shut before handing the tank back to the production crew. They should have made sure that everything was in working order before they signed it back over to the production crew who would recommission it. I was part of that production crew. Checking those drain valves was within the scope of my duties but those valves had always been shut whenever I had checked them for the production crew. On the morning of 1 March 1999 I did not get to check those valves because I was being interrupted by Allan McCully to do other things. … 14. Over the ten years I was working for Incitec I made numerous verbal requests for a very bright visible marker to be left on any acid or ammonia valves that are left open during a shut down. I was ignored. I made those requests to Steve Hessell, who was Superintendent at the time, to my shift and to the Safety Committee. I made the requests because in the past we had problems with acid leakage due to drains inadvertently being left open.

Mr Kelly also claimed that Fletcher, in his statement (at pp 3-4), to some extent corroborated what Powazuk thought the procedure to be.

The " Root Cause " meeting on 2 March 1999 involved Powazuk, Fletcher, Butler, McCully and others, and its record reports, in respect of McCully , (see Muir Annexure 'V' at 62): … that shortly after transfer to No.2 tank he received a high level alarm for the acid tank sump. It was not ignored but Alan decided to act on it later. The reasons for this decision were that he was starting up No.2 AN plant and was overloaded with alarms, also this sump high level has been activating frequently of late due to activity in the bund associated with the CVE preparations on No.1 tank … Had Alan responded immediately then the acid leak would have been discovered sooner, potentially lessening the effect of the acid loss of containment.

George was the first EPA officer to attend the site. Attached to his affidavit is a letter of 30 March 1999, sent to the EPA's Newcastle office by Butler , which stated, in part, as follows: 1. INCIDENT SUMMARY …All of the effluent that was coming from the Nitric Acid Plant area was unable to be directed to the effluent containment pond, due to the high volume involved, with some of the effluent passing directly into the effluent drain. At the time the operators were distracted by the plant emergency which required their immediate attention to control the plant and close off the drain valve within the bunded area by preventing further major safety concerns. 2. CORRECTIVE ACTIONS · Valve under manual operation at present - completed · Nitric Acid Plant neutralising pit sump pump cleaned out to gain maximum performance - completed · Air pump to be available on standby - completed · Complete refurbishing of river valve - by 15/4/99 · Modify process to enable visual inspection - by 30/6/99 · Improve access and maintenance for river valve - by 30/6/99
Fletcher states (par 28) that Powazuk: had a history of poor performance at the Plant. He was counselled about his performance and had undertaken re-training over a period of time between 1995 to (sic) 1997. … From 1997 up until the time of the incident on 1 March 1999, he had performed his duties to the required standard.

Various " counselling memos " regarding Powazuk are attached to Fletcher's statement of 4 September 2000. Following the incident leading to this charge, Powazuk and the defendant negotiated the termination of his employment.

The defendant commissioned Lawson and Treloar Pty Ltd (" L&T ") to investigate the impacts of the discharge of the acidic effluent to the river (Document E in Exhibit D1 ). The report details a " conservative approach " to the simulation of conditions at the material time. Noller (doc B4 in Exhibit D1 ) was asked to comment upon the work of L&T, and said (at p 4-5): The impact of nitrate as a nutrient must therefore be considered to be quite limited or insignificant because the dilution gradient is quite rapid and the time frame is simply too short to give rise to an algal bloom which may require in excess of 24 hours to show any bloom generation. Biological uptake by algae and other aquatic biota will also assist in removing nitrate from the water column, ie to denitrify the water. … It can be argued therefore that the effects of the acid component of the discharge are probably negligible beyond 50 m of the mixing zone, when the duration of release is of the limited time frame as occurred on 1 March 1999. … Therefore the impact to the river water and its ecology must be considered as a localised one and not a sustained one.

Noller acknowledged (p4) that his comments " align with those of Moreno Julli " , who concluded in her affidavit: 12. There is no doubt that the acidic discharge into the river was inherently highly toxic to aquatic life. Adding to the potential of the acid discharge to cause environmental harm, would be the likely dissolving of inert heavy metals present in the river sediment. The dissolved metals whilst within the acidic matrix would be highly toxic. This release of toxic metals within the river waters would be a relatively short term event. As the acidic discharge was neutralised by dilution and buffering by the river waters, the soluble heavy metals would be precipitated into less bioavailable forms and be redeposited in the river sediments. 13. Overall I consider that the environmental harm caused by the discharge was likely to have been localised, primarily due to dilution and the neturalising actions of the river waters. Hopefully this zone would be within 50m of the discharge point, but without detailed (and accurate) modeling of the plume dynamics it is not possible to confidently state that this was so. 14. With respect to adverse effects on fish I consider that most fish would have sensed and avoided the plume. Other smaller marine life such as plankton which cannot actively swim away from the plume would have been rapidly killed on exposure. The overall impact on the plankton population in the river system would however have been small, in that a small percentage of all river animals were exposed to the acidic discharge plume. 15. Many sediment dwelling organisms remain in contact with the overlying water (in order to breath (sic) and capture food), and would therefore not be immune from the adverse effects of toxic overlying waters. I am not aware of any recent studies which could provide even basic information on the assemblage of sediment dwelling animals likely to be present around the outfall area, so even qualitative assessments are difficult. However given the toxic nature of the discharge (highly acidic, and likely causing secondary mobilisation of metals), then localised adverse effects were possible on sediment dwelling organisms. Again, these localised effects are not likely to be significant in terms of the overall river system.

The Agreed Statement of Facts reflects such common ground between Noller and Julli when it says, in regard to the question of harm or potential harm: 20. In laboratory ecotoxicological testing acid can be demonstrated as being inherently highly toxic to aquatic life. Adding to the potential of the acid discharge to cause environmental harm, would be the possibility of dissolving of inert heavy metals present in the river sediment. If dissolving occurred, the dissolved metals whilst within the acidic matrix would be highly toxic. This release of toxic metals within the river waters would be a relatively short term event. As the acidic discharge was neutralised by dilution and buffering by the river waters, the soluble heavy metals would be precipitated into less bioavailable forms and be redeposited in the river sediments. There is no evidence that dissolving of inert heavy metals did occur. 21. The environmental harm likely to have been caused by the discharge was likely to have been localised, primarily due to dilution and the neturalising actions of the river waters. In addition, Incitec's multi-port discharge system would have assisted the dilution of the acidic discharge. According to the study carried out by Lawson & Treloar on the acid plume dynamics it is likely that this zone would be within 50m of the discharge point. 22. With respect to adverse effects on fish most fish would probably have sensed and avoided the plume. Other smaller marine life such as plankton which cannot actively swim away from the plume may have been rapidly killed on exposure within the 50m zone. The overall impact on the plankton population in the river system would however have been small, in that a small percentage of all river animals may have been exposed to the acidic discharge plume. Incitec employees observed the river for several days after the incident and saw no evidence of dead aquatic life including fish. The EPA did not receive any reports nor make any observation of dead aquatic life including fish after the incident. 23. Many sediment dwelling organisms remain in contact with the overlying water (in order to breathe and capture food), and would therefore not be immune from the adverse effects of toxic overlying waters. If these localised effects occurred they are not likely to be significant in terms of the overall river system. There was no evidence of any such localised effects occurring. 24. Incitec has a sophisticated system in relation to its discharge apparatus into the Hunter River. Companies often have a single point source where liquid effluent is discharged. Therefore it is concentrated at the point of discharge. The Incitec system consists of a pipe that goes to the bottom of the Hunter River with a number of heads on that to diffuse the discharge into the tidal system. The sole purpose of the system is to minimise the environmental impact of the discharge. The system was modelled by Incitec and approved by the EPA.

The court concludes from this evidence that the discharge of diluted nitric acid caused no serious or lasting environmental harm, and only minimal and localised actual environmental harm.

I dealt with this defendant on 17 December 1999 for its first charge matter in this court - an air pollution offence which allegedly occurred on 10 June 1998. See EPA v Incitec Ltd [2000] NSWLEC 18.

The incident with which I am now concerned occurred between those dates, and the two events are unrelated.

In my judgment in the previous matter, I said of Incitec (pars 1-3):

The defendant is a long established company tracing its origins in the chemical industry back to 1862. It is also long established at the relevant location, having begun operations at Kooragang Island near Stockton and Newcastle in 1964.

The company runs large plants and has long experience in making, using and handling dangerous substances, including ammonia.

This is its first appearance in this court on an environmental offence although my attention has been drawn to the issue of three penalty infringement notices, within a three week period in 1996, in respect of incidents relevantly similar to the one involved in these proceedings. 24. In that previous matter, I imposed a fine of $25,000, plus costs of $13,000. The defendant's earlier encounters with the legal system are detailed in Exhibit E2 . Between December 1994 and November 1996, it actually paid a total of six $500 penalties for breaches of Pollution Control licences, and a fine of $1,500 for a " smoky vehicle " matter in North Sydney Local Court.

Mr Lloyd says that this is a " good " record for a company of such size, involved in such industries, and reflects its serious approach to its environmental obligations. He noted in his written submissions dated 5 September 2000 (s 7 on p9) that the company has 15 sites with environmental licences, and employs 1105 people (as at the end of 1998).

Mr Kelly conceded that the defendant's record did not show irresponsibility, or a " dangerous propensity ", but he did not accept that this incident was an " uncharacteristic aberration ". Veen v The Queen [No.2] (1988) 164 CLR 465.

He argued that the holding of a pollution licence heightens the defendant's responsibility to keep the level of discharge within the parameters set by such licence. EPA v Softwood Holdings Ltd [2000] NSWLEC 201 (at par 38).

Butler detailed many of the company's community activities, and its safety, health and environmental activities at Kooragang Island ( Exhibit D1 doc B2), including the implementation of at least some of the measures identified at the " Root Cause " meeting (see Muir Annexure 'V' at p8).

Halford detailed the general corporate initiatives of the company ( Exhibit D1 doc B3), some of which have resulted in its North Queensland sites receiving ISO 14001 certification. A site audit report on Kooragang Island, dated November 1999, is attached to Halford's statement.

The 1999 Annual Report of the company ( Exhibit D1 doc C1) has, as the company's first " value ", the " highest standards of safety, health and care for the environment " (p1), and reports on the company's "comprehensive testing and reporting regime to monitor compliance with licence requirements " (p11).

The letter from the local community group ( Exhibit D3 ) concludes with the following comments: So … we have concluded that Incitec is not trying to delude us and is happy to work with us for the mutual benefit of our communities, your work-force and the Hunter River environment. This unhappily has not been the case with some other firms we have approached, and we are pleased that you have restored our faith in human nature. We intend to use the 'Incitec Approach' as a benchmark in our dealings with industries and planned developments : we will now expect this honesty and openness from all comers.

The evidence indicates the defendant undertook a major and expensive exercise ($50,000 - agreed fact 19) to fix its river valve problem totally after the subject event. As Mr Lloyd says, one repair job had already been done, but another fault occurred, which had an impact largely as a consequence of human error over which, he submitted, no-one could exercise control.

The defendant's " most significant …" submission made was that the acid spill into the river resulted from "a unique and unlikely ever to be repeated coincidence of circumstances ", namely: (i) the one-in-4-year shutdown of the No.1 Ammonium Nitrate Plant, (ii) the failure of Powazuk to close the drain valves, (iii) the reduction in capacity of the Nitrates Effluent Pit pump, and (iv) the failure of the butterfly valve in the river valve.

Mr Lloyd submitted that the seriousness of the offence in this case calls for a penalty only " at the lower end of the scale ", on the following grounds: (i) immediate admissions and investigation, in cooperation with the EPA (ii) charge not possible without defendant's assistance to the Prosecutor (iii) early plea of guilty when charged (iv) only minimal, if any, harm resulted (v) discharge not detected by any member of the public (vi) extensive preventative measures taken expeditiously after the offence (EOPA s 9(b)), such as: (a) a high priority alarm on the relevant bund area (b) repair of effluent pit pump and fitting of a standby pump (c) new " clearance to work " procedures for drain values (d) the extensive repair and replacement of the river valve. (vii) proposed $28M upgrade of the Ammonia Plant during 2001/2002. (viii) low likelihood of a recurrence in view of these measures. (ix) " the unique combination of different factual circumstances that each, in different degrees, causally contributed to the subject event, were in combination incapable of being foreseen " (EOPA s9(c)).
Mr Lloyd made no submissions regarding the possible exercise of the court's discretion pursuant to s 10 of the Crimes (Sentencing Procedure) Act 1999, and the court does not consider it appropriate to invoke it. EPA v Attard [2000] NSWCCA 242.

The penalty imposed must act as a deterrent to the defendant and other participants in industry. Camilleri's Stock Feeds Pty Ltd v EPA (1993) 32 NSWLR 683 (at 701).

I have already dealt with the evidence and submission regarding questions of environmental harm (EOPA s 9(a) ).

In terms of EOPA s9(d) , there is no doubt that the defendant had total control over the plant and personnel involved in the offence charged.

The Prosecutor submits, in the context of the EOPA s9(b) measures referred to in par 34 above, that that " control " extends to the fact that such measures could have been taken prior to the incident founding the charge. Other measures, such as camera monitoring, were rejected on the grounds of cost, and " insufficient priority " was accorded to alarms.

While the " unique combination " of events may not, as such, have been foreseeable, the Prosecutor notes that in the " root cause " report it is recorded that the potential for a significant incident in the acid tank area was actually foreseen (EOPA s9(c)).

Mr Kelly also commented that the cooperative approach of the defendant ceased once the charge was laid, and it was only then that the EPA became aware of the " second " discharge.

Mr Kelly said in his written submissions on 5 September 2000 (s 6):

Full cooperation would have revealed the second discharge at an early stage and explained the reasons for it and any further necessary remedial measures .

Mr Lloyd regards this so-called " second discharge" as just part of the overall discharge, not requiring separate attention by the prosecutor or the court. He says in pars 7-8 of his written submissions of 9 October 2000: 7. … It is prejudicial to the defendant for the prosecution to raise this as an issue for the first time by way of submissions in reply after he hearing. The defendant does not now have the opportunity to present evidence to the Court to explain the low pH release at 12 o'clock on 1 March 1999. Further, it is submitted hat in any event the second release on 1 March 1999 is not the subject of this prosecution and the basis of the principles discussed in De Simoni (1981) 147 CLR 383 should not be taken into account when assessing the appropriate penalty in relation to the first spill.

It is the defendant's submission that there was one single act or omission which gave rise to consequences which continued over a period of time. The defendant notified the EPA of the cause which gave rise to the consequences in relation to the pollution immediately after it became known to it.

I accept Mr Lloyd's submission in this regard, and have drawn no conclusion adverse to the defendant in respect of this " second discharge " in arriving at my decision in this matter.

The Prosecutor submitted that the defendant was not entitled to the " full " discount for its Guilty plea, as it was not entered " at the earliest opportunity ". Mr Lloyd insisted that a defendant is entitled to withhold its plea until all the Prosecutor's evidence is served and it has taken advice [as to which see now the discussion by Bignold J in EPA v Gilmour (2000) 109 LGERA 228 at pars 24ff].

In this case, Mr Lloyd QC advised the defendant to plead guilty only when he was acquainted with the evidence the Prosecutor would be leading on the question of harm (Julli's affidavit).

I invited the parties to lodge further written submissions on this question, and, in the meantime, Talbot J has published judgments in EPA v Causmag Ore Company Pty Ltd [2000] NSWLEC 205 and Newcastle City Council v Reed Constructions Australia Pty Ltd [2000] NSWLEC 208, in both of which His Honour has dealt with the " discount " for pleas of guilty following the Court of Criminal Appeal's " guideline " judgment in R v Thomson [2000] NSWCCA 309.

I have concluded that the defendant is entitled to a substantial discount for the utilitarian value of its pleading guilty at a reasonably early stage of the proceedings.

I also note and agree with the principles Lloyd J followed, in EPA v Sydney Water Corporation [2000] NSWLEC 156, to assess the value of " contrition" where a defendant, as here, relies upon its community activity.

I have, in conformity with Thomson , applied a total discount of approximately 25% for the guilty plea, and the various other matters of cooperation and contrition put on the defendant's behalf . (See Thomson at pars 160ff).

I have also taken into account the defendant's agreement to pay the Prosecutor's costs in the sum of $12,000.

I agree with the Prosecutor that this case falls within, but towards the high point of, the " low to mid " range, namely 10 to 30% of the maximum penalty of $125,000, rather than, as Mr Lloyd suggested, towards the low point of that range.

I have determined that the appropriate fine to impose on this occasion is $25,000.

Accordingly, the formal orders of the court will be: 1. The defendant is convicted of the offence charged in the summons. 2. The defendant is fined $25,000, payable within 28 days. 3. The defendant is ordered to pay the Prosecutor's costs, agreed at $12,000, within 28 days. 4. Exhibit D2 having been returned at the end of the hearing, Exhibit D1 may now be returned, but the Prosecutor's two exhibits ( Exhibit E1 and Exhibit E2 ) should remain in the court file.

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.

23. Many sediment dwelling organisms remain in contact with the overlying water (in order to breathe and capture food), and would therefore not be immune from the adverse effects of toxic overlying waters. If these localised effects occurred they are not likely to be significant in terms of the overall river system. There was no evidence of any such localised effects occurring.

24. Incitec has a sophisticated system in relation to its discharge apparatus into the Hunter River. Companies often have a single point source where liquid effluent is discharged. Therefore it is concentrated at the point of discharge. The Incitec system consists of a pipe that goes to the bottom of the Hunter River with a number of heads on that to diffuse the discharge into the tidal system. The sole purpose of the system is to minimise the environmental impact of the discharge. The system was modelled by Incitec and approved by the EPA.

20. The court concludes from this evidence that the discharge of diluted nitric acid caused no serious or lasting environmental harm, and only minimal and localised actual environmental harm.

21. I dealt with this defendant on 17 December 1999 for its first charge matter in this court - an air pollution offence which allegedly occurred on 10 June 1998. See EPA v Incitec Ltd [2000] NSWLEC 18.

22. The incident with which I am now concerned occurred between those dates, and the two events are unrelated.

23. In my judgment in the previous matter, I said of Incitec (pars 1-3):

The company runs large plants and has long experience in making, using and handling dangerous substances, including ammonia.

24. In that previous matter, I imposed a fine of $25,000, plus costs of $13,000. The defendant's earlier encounters with the legal system are detailed in Exhibit E2. Between December 1994 and November 1996, it actually paid a total of six $500 penalties for breaches of Pollution Control licences, and a fine of $1,500 for a "smoky vehicle" matter in North Sydney Local Court.

25. Mr Lloyd says that this is a "good" record for a company of such size, involved in such industries, and reflects its serious approach to its environmental obligations. He noted in his written submissions dated 5 September 2000 (s 7 on p9) that the company has 15 sites with environmental licences, and employs 1105 people (as at the end of 1998).

26. Mr Kelly conceded that the defendant's record did not show irresponsibility, or a "dangerous propensity", but he did not accept that this incident was an "uncharacteristic aberration". Veen v The Queen [No.2] [1988] HCA 14; (1988) 164 CLR 465.

27. He argued that the holding of a pollution licence heightens the defendant's responsibility to keep the level of discharge within the parameters set by such licence. EPA v Softwood Holdings Ltd [2000] NSWLEC 201 (at par 38).

28. Butler detailed many of the company's community activities, and its safety, health and environmental activities at Kooragang Island (Exhibit D1 doc B2), including the implementation of at least some of the measures identified at the "Root Cause" meeting (see Muir Annexure `V' at p8).

29. Halford detailed the general corporate initiatives of the company (Exhibit D1 doc B3), some of which have resulted in its North Queensland sites receiving ISO 14001 certification. A site audit report on Kooragang Island, dated November 1999, is attached to Halford's statement.

30. The 1999 Annual Report of the company (Exhibit D1 doc C1) has, as the company's first "value", the "highest standards of safety, health and care for the environment" (p1), and reports on the company's "comprehensive testing and reporting regime to monitor compliance with licence requirements" (p11).

31. The letter from the local community group (Exhibit D3) concludes with the following comments:

So ... we have concluded that Incitec is not trying to delude us and is happy to work with us for the mutual benefit of our communities, your work-force and the Hunter River environment. This unhappily has not been the case with some other firms we have approached, and we are pleased that you have restored our faith in human nature. We intend to use the `Incitec Approach' as a benchmark in our dealings with industries and planned developments : we will now expect this honesty and openness from all comers.

32. The evidence indicates the defendant undertook a major and expensive exercise ($50,000 - agreed fact 19) to fix its river valve problem totally after the subject event. As Mr Lloyd says, one repair job had already been done, but another fault occurred, which had an impact largely as a consequence of human error over which, he submitted, no-one could exercise control.

33. The defendant's "most significant ..." submission made was that the acid spill into the river resulted from "a unique and unlikely ever to be repeated coincidence of circumstances", namely:

(i) the one-in-4-year shutdown of the No.1 Ammonium Nitrate Plant,

(ii) the failure of Powazuk to close the drain valves,

(iii) the reduction in capacity of the Nitrates Effluent Pit pump, and

(iv) the failure of the butterfly valve in the river valve.

34. Mr Lloyd submitted that the seriousness of the offence in this case calls for a penalty only "at the lower end of the scale", on the following grounds:

(i) immediate admissions and investigation, in cooperation with the EPA

(ii) charge not possible without defendant's assistance to the Prosecutor

(v) discharge not detected by any member of the public

(vi) extensive preventative measures taken expeditiously after the offence (EOPA s 9(b)), such as:

(a) a high priority alarm on the relevant bund area

(b) repair of effluent pit pump and fitting of a standby pump

(d) the extensive repair and replacement of the river valve.

(vii) proposed $28M upgrade of the Ammonia Plant during 2001/2002.

(viii) low likelihood of a recurrence in view of these measures.

(ix) "the unique combination of different factual circumstances that each, in different degrees, causally contributed to the subject event, were in combination incapable of being foreseen" (EOPA s9(c)).

35. Mr Lloyd made no submissions regarding the possible exercise of the court's discretion pursuant to s 10 of the Crimes (Sentencing Procedure) Act 1999, and the court does not consider it appropriate to invoke it. EPA v Attard [2000] NSWCCA 242.

36. The penalty imposed must act as a deterrent to the defendant and other participants in industry. Camilleri's Stock Feeds Pty Ltd v EPA (1993) 32 NSWLR 683 (at 701).

37. I have already dealt with the evidence and submission regarding questions of environmental harm (EOPA s 9(a)).

38. In terms of EOPA s9(d), there is no doubt that the defendant had total control over the plant and personnel involved in the offence charged.

39. The Prosecutor submits, in the context of the EOPA s9(b) measures referred to in par 34 above, that that "control" extends to the fact that such measures could have been taken prior to the incident founding the charge. Other measures, such as camera monitoring, were rejected on the grounds of cost, and "insufficient priority" was accorded to alarms.

40. While the "unique combination" of events may not, as such, have been foreseeable, the Prosecutor notes that in the "root cause" report it is recorded that the potential for a significant incident in the acid tank area was actually foreseen (EOPA s9(c)).

41. Mr Kelly also commented that the cooperative approach of the defendant ceased once the charge was laid, and it was only then that the EPA became aware of the "second" discharge.

42. Mr Kelly said in his written submissions on 5 September 2000 (s 6):

Full cooperation would have revealed the second discharge at an early stage and explained the reasons for it and any further necessary remedial measures.

43. Mr Lloyd regards this so-called "second discharge" as just part of the overall discharge, not requiring separate attention by the prosecutor or the court. He says in pars 7-8 of his written submissions of 9 October 2000:

7. ... It is prejudicial to the defendant for the prosecution to raise this as an issue for the first time by way of submissions in reply after he hearing. The defendant does not now have the opportunity to present evidence to the Court to explain the low pH release at 12 o'clock on 1 March 1999. Further, it is submitted hat in any event the second release on 1 March 1999 is not the subject of this prosecution and the basis of the principles discussed in De Simoni [1981] HCA 31; (1981) 147 CLR 383 should not be taken into account when assessing the appropriate penalty in relation to the first spill.

8. It is the defendant's submission that there was one single act or omission which gave rise to consequences which continued over a period of time. The defendant notified the EPA of the cause which gave rise to the consequences in relation to the pollution immediately after it became known to it.

44. I accept Mr Lloyd's submission in this regard, and have drawn no conclusion adverse to the defendant in respect of this "second discharge" in arriving at my decision in this matter.

The Plea of Guilty and Contrition - what discount?

45. The Prosecutor submitted that the defendant was not entitled to the "full" discount for its Guilty plea, as it was not entered "at the earliest opportunity". Mr Lloyd insisted that a defendant is entitled to withhold its plea until all the Prosecutor's evidence is served and it has taken advice [as to which see now the discussion by Bignold J in EPA v Gilmour [2000] NSWLEC 144; (2000) 109 LGERA 228 at pars 24ff].

46. In this case, Mr Lloyd QC advised the defendant to plead guilty only when he was acquainted with the evidence the Prosecutor would be leading on the question of harm (Julli's affidavit).

47. I invited the parties to lodge further written submissions on this question, and, in the meantime, Talbot J has published judgments in EPA v Causmag Ore Company Pty Ltd [2000] NSWLEC 205 and Newcastle City Council v Reed Constructions Australia Pty Ltd [2000] NSWLEC 208, in both of which His Honour has dealt with the "discount" for pleas of guilty following the Court of Criminal Appeal's "guideline" judgment in R v Thomson [2000] NSWCCA 309.

48. I have concluded that the defendant is entitled to a substantial discount for the utilitarian value of its pleading guilty at a reasonably early stage of the proceedings.

49. I also note and agree with the principles Lloyd J followed, in EPA v Sydney Water Corporation [2000] NSWLEC 156, to assess the value of "contrition" where a defendant, as here, relies upon its community activity.

50. I have, in conformity with Thomson, applied a total discount of approximately 25% for the guilty plea, and the various other matters of cooperation and contrition put on the defendant's behalf . (See Thomson at pars 160ff).

51. I have also taken into account the defendant's agreement to pay the Prosecutor's costs in the sum of $12,000.

52. I agree with the Prosecutor that this case falls within, but towards the high point of, the "low to mid" range, namely 10 to 30% of the maximum penalty of $125,000, rather than, as Mr Lloyd suggested, towards the low point of that range.

53. I have determined that the appropriate fine to impose on this occasion is $25,000.

54. Accordingly, the formal orders of the court will be:

1. The defendant is convicted of the offence charged in the summons.

2. The defendant is fined $25,000, payable within 28 days.

3. The defendant is ordered to pay the Prosecutor's costs, agreed at $12,000, within 28 days.

4. Exhibit D2 having been returned at the end of the hearing, Exhibit D1 may now be returned, but the Prosecutor's two exhibits (Exhibit E1 and Exhibit E2) should remain in the court file.

Environmental Offences and Penalties Act 1989

(Sentencing Procedure) Act 1999

(2000) 109 LGERA 228

At a glance

Court

Decision date

Before

Source

Judgment (141 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (11)

Cited By (1)