Australian Refined Alloys Pty Limited and the Minister for the En Vironment and Heritage and Anor
[2003] AATA 247
•17 March 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 247
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2002/1279
GENERAL ADMINISTRATIVE DIVISION ) Re Australian Refined Alloys Pty Limited Applicant
Re The Minister for the Environment and Heritage Respondent
Re Exide Australia Pty Limited Joined Party
DECISION
Tribunal Mr RP Handley, Deputy President Date17 March 2003
PlaceSydney
Decision The Tribunal affirms the decision under review.
...............................................
R P Handley
Deputy President
CATCHWORDS
Hazardous Wastes – transboundary movement of hazardous wastes between Australia and New Zealand - regulation of import and export of hazardous wastes – used lead acid batteries and lead scrap – special export permit - necessity to consider Australia’s international obligations in relation to disposal of hazardous wastes – interpretation of “Australia’s public interest” – consideration of the capacity of the Applicant and Joined Party to deal with hazardous wastes – held the Minister was correct in exercising his power to grant the permit – decision of the Respondent affirmed.
Hazardous Waste (Regulation of Exports and Imports) Act 1989 ss 4, 13C, 17(1)(1A)(3)(4)(5), 14, 27, 57
Hazardous Waste (Regulation of Exports and Imports) Amendment Act 1996 s 3
Hazardous Waste (Regulation of Exports and Imports) Bill 1989
Hazardous Waste (Regulation of Exports and Imports) (Waigani Convention) Regulations 1999
Hazardous Waste (Regulation of Exports and Imports) (OEDC Decision) Regulations
The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal
Minister for Immigration and Ethnic Affairs v Maitan (1998) 78 ALR 419
O’Sullivan v Farrer (1989) 168 CLR 210
Queensland Medical Laboratory v Blewett (1988) 84 ALR 615
R v Hunt; ex parte Sean Investments Pty Ltd (1979) 180 CLR 322
Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492
REASONS FOR DECISION
17 March 2003 Mr RP Handley 1. This is an application by Australian Refined Alloys Pty Ltd (“ARA” – the Applicant) for a review of a decision of the Minister for the Environment and Heritage (“the Minister” – the Respondent) made on 7 August 2002 to grant a permit to Exide Australia Pty Ltd (“Exide Australia” – the Joined Party) allowing Exide Australia to export up to 15,000 metric tonnes of waste compromising spent wet automobile and industrial lead sulphuric acid batteries and lead scrap and/or alloy scrap battery componentary to Exide Technologies Ltd of Wellington, New Zealand (“Exide NZ”).
2. At the hearing, Counsel for the Applicant was Neil Williams, SC; the Respondent was represented by Adele Connor, Solicitor, of the Australian Government Solicitor’s Office; and Counsel for the Joined Party, Exide Australia, was John Sackar, QC. The evidence before the Tribunal comprised the documents produced pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (the T Documents) together with documents tendered by the parties. The following witnesses gave evidence: for ARA – Steven Ainsworth and Professor Joshua Gans; for Exide Australia – Brian Smith, Grant Bolitho, Russell Reardon, David Markey and Rhonda Smith.
BACKGROUND
3. Exide Australia and Exide NZ are wholly owned subsidiary companies of Exide Holdings Asia Pty Ltd, a Singapore based company, which is in turn wholly owned by Exide Technologies, a United States Corporation. Exide Technologies has operations in 89 countries. Exide Technologies and three of its subsidiaries filed a petition under Chapter 11 of the United States Bankruptcy Code in April 2002. Exide Australia and Exide NZ are not included in the Chapter 11 proceedings.
4. Exide Australia manufactures automotive batteries at a factory in Adelaide and collects used lead acid batteries (“ULABs”) for recycling. Exide NZ manufactures automotive batteries at a factory at Lower Hutt, near Wellington, New Zealand, and recycles ULABs and other lead scrap at its Wellington recycling plant.. There is no Exide recycling plant in Australia and so Exide Australia exports the ULABs and other lead scrap it collects in Australia to the Wellington plant for processing. Exide NZ then exports recycled lead and polypropylene from its Wellington plant for use in Exide Australia’s battery manufacturing factory in Adelaide. Exide Australia and Exide NZ have common management and operate as a single business unit. Exide Australia states that Exide NZ’s Wellington recycling plant would not be viable without the ULABs imported from Australia because there is an insufficient number of ULABs collected in New Zealand every year. The Wellington plant is the only lead recycling plant in New Zealand.
5. Exide Technologies acquired its Australian and New Zealand businesses on or about 7 August 2000 from Pacific Dunlop Ltd. However, the businesses had been operating since the 1980s. ULABs have been exported by the Australian business to New Zealand since at least 1994 and permits for the trans - Tasman movement of ULABs and other lead scrap have been granted annually since 1 October 1994 – on that date for 10,000 tonnes and annually thereafter for 15,000 tonnes.
6. ARA is the agent for a joint venture of two Australian public companies, Pasminco Ltd (“Pasminco”) and Simsmetal Ltd (“Simsmetal”). ARA was incorporated in 1985 with Pasminco and Simsmetal each holding an equal number of fully paid ordinary shares. ARA has operated since the signing of the Joint Venture Agreement in June 1985. Prior to this, both Pasminco and Simsmetal operated separate ULAB recycling facilities. After signing the Joint Venture Agreement, their recycling facilities were consolidated into two plants operated by ARA, one in Sydney and the other in Melbourne.
7. ARA’s sole business is the recycling of ULABs and other lead based wastes for the recovery of lead, acid and plastic products. ARA is the only company in Australia with the capacity to fully recycle ULABs separating the lead, acid and plastic, and then smelting the lead waste.
8. Exide Australia collects ULABs both from its customers and from scrap dealers. It also purchases ULABs from Simsmetal – 3,865 tonnes in the 18 months from June 2001 to November 2002. The ULABs are packaged into containers together with other factory lead scrap sealed in metal drums. The containers are transported by road to the nearest port, either Adelaide, Brisbane, Melbourne, Perth or Sydney, where they are loaded onto ships bound for the Port of Wellington. From there, they are transported by road to Exide NZ’s recycling plant near Wellington.
9. ARA purchases ULABs from a network of scrap metal dealers, about 70% being purchased from two national dealers. Since 1992, it has significantly increased its plant capacity, in part as a result of $1m being invested in plant facilities between 1998 and 2001. ARA claims that as a result of Exide Australia’s export of ULABs to New Zealand, ARA has been unable to obtain sufficient ULABs to maintain its plants at full production. Consequently, its plant in Melbourne has not been operating on a continuous basis and was shut down for a month from 20 December 2002 until late January 2003.
10. By application dated 26 April 2002 (T3), Exide Australia applied to the Minister for the renewal of its permit to export 15,000 tonnes of lead scrap arisings to New Zealand which was to expire on 7 August 2002. By letter dated 27 March 2002, ARA had written to the Minister advising that they would strongly object to the grant of a new permit. On 2 May 2002, notice of Exide’s application appeared in the Commonwealth Gazette pursuant to s 33 of the Hazardous Waste (Regulation of Exports and Imports) Act 1989 (the “1989 Act”) and, on the same day, Environment Australia wrote to ARA enclosing a copy of the gazetted notice and inviting a detailed written submission (T10). On 3 May 2002, the New Zealand Ministry of Economic Development notified Environment Australia that they consented to the renewal of Exide Australia’s permit (T12).
11. On 16 May 2002, ARA provided a submission opposing the export of ULABs to New Zealand and stating that ARA “now has the capacity to process all lead acid batteries arising in Australia, estimated to be 65,000 tonnes per annum” (T12 p77). On 6 June 2002, Exide Australia provided a written response to the ARA submission (T23). On that day, both Exide Australia and ARA made separate presentations to the Hazardous Waste Technical Group (“HWTG”) to whom Environment Australia had referred the matter for advice. The HWTG then discussed the issues and requested Environment Australia to prepare a draft statement. That draft statement was subsequently revised and adopted by the HWTG on 24 June 2002 (T26).
12. The following are the HWTG’s conclusions:
38. The HWTG concluded that:
(a) ARA could process the ULABs, proposed for export, in Australia.
(b)An effective collection system is likely to continue in Australia whether a permit is granted or not.
(c)If a permit is refused, the effects on the collection and processing of ULABs in New Zealand are uncertain.
(d)The environmental benefits and disbenefits do not differ significantly whether or not a permit is granted.
39.Taking these considerations together, the HWTG concluded that refusing the permit would be consistent with Australia’s obligations under the Basel Convention. Refusal would implement the Article 4.2(d) obligation to reduce the transboundary movement of hazardous wastes to the minimum consistent with the environmentally sound and efficient management of such wastes, if the New Zealand smelter continued to operate on the basis of New Zealand arisings. Even if the New Zealand smelter closed, there would be no increase in transboundary movement.
40.The HWTG noted, however, that there are issues to be considered in view of the submission received from the New Zealand Ministry of Economic Development. These issues are outside the scope of this advice from the HWTG.
13. The HWTG’s advice was referred to relevant departments for their comments. On 7 August 2002, the Minister then decided to grant the permit for the export of a maximum of 15,000 tonnes of ULABs and other scrap lead waste to New Zealand.
14. On 3 September 2002, ARA lodged an application with the Tribunal for a review of this decision as a “person whose interests are affected by the decision” pursuant to s 30(1A) of the Administrative Appeals Tribunal Act 1975.
APPLICABLE LAW
15. The Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal (“the Basel Convention”) was adopted by the States Parties on 22 March 1989 and entered into force on 5 May 1992. Some indication of the object or purpose of the Basel Convention can be ascertained from the obligations imposed upon Parties by Article 4 of the Convention. These include the following:
2. Each Party shall take appropriate measures to:
(a)Ensure that the generation of hazardous wastes and other wastes within it is reduced to a minimum, taking into account social, technological and economic aspects;
(b)Ensure the availability of adequate disposal facilities, for the environmentally sound management of hazardous wastes and other wastes, that shall be located, to the extent possible, within it, whatever the place of their disposal;
(c)Ensure that persons involved in the management of hazardous wastes or other wastes within it take such steps as are necessary to prevent pollution due to hazardous wastes and other wastes arising from such management and, if such pollution occurs, to minimize the consequences thereof for human health and the environment;
(d)Ensure that the transboundary movement of hazardous wastes and other wastes is reduced to the minimum consistent with the environmentally sound and efficient management of such wastes, and is conducted in a manner which will protect human health and the environment against the adverse effects which may result from such movement; …
9.Parties shall take the appropriate measures to ensure that the transboundary movement of hazardous wastes and other wastes only be allowed if:
(a)The State of export does not have the technical capacity and the necessary facilities, capacity or suitable disposal sites in order to dispose of the wastes in question in an environmentally sound and efficient manner; or
(b)The wastes in question are required as a raw material for recycling or recovery industries in the State of import; or
(c)The transboundary movement in question is in accordance with other criteria to be decided by the Parties, provided those criteria do not differ from the objectives of this Convention.
16. Article 11(1) of the Basel Convention permits Parties to enter into bilateral, multilateral, or regional agreements or arrangements regarding transboundary movement of hazardous wastes or other wastes “provided that such agreements or arrangements do not derogate from the environmentally sound management of hazardous wastes and other wastes as required by this Convention”. Moreover, Article 11(2) states that:
The provisions of this Convention shall not affect transboundary movements which take place pursuant to such agreements provided that such agreements are compatible with the environmentally sound management of hazardous wastes and other wastes as required by this Convention.
17. In September 1989, the Hazardous Waste (Regulation of Exports and Imports) Bill 1989 was introduced in the Commonwealth Parliament by the Government. The Act of the same name (the “1989 Act”) received the Royal Assent on 17 January 1990 and took effect on 17 July 1990.
18. Section 17 of the 1989 Act states as follows:
(1A) This section applies if the permit sought by a permit application is a Basel import permit or a Basel export permit.
(1) Subject to this Division, the Minister must grant the permit sought by a permit application if the Minister is satisfied:
(a) that dealing with the hazardous waste concerned in accordance with the import proposals or export proposals would be consistent with the environmentally sound management of the hazardous waste; and
(b) if the permit sought is a Basel export permit authorising the export of hazardous waste to a particular foreign country:
(i) that the competent authority of the country has given written consent to the grant of the permit; and
(ii) that the consent was given in accordance with Article 6 of the Basel Convention; and
(ba) if the permit sought is a Basel export permit—that the hazardous waste will be allowed to be transported through any foreign country through which the waste is proposed to be transported; and
(c) that, having regard to:
(i) the applicant's financial viability; and
(ii) the applicant's previous record in relation to environmental matters; and
(iii) any other relevant matters;
the applicant is a suitable person to be granted a Basel permit; and
(d) that the applicant has appropriate insurance.
19. “Basel import permits” and “Basel export permits” are defined in s 4 as meaning permits under s 17 permitting the import and export, respectively, of hazardous wastes.
20. The grounds on which the Minister may decide not to grant a permit include the following in subsections 17(3), (4) and (5):
(3) The Minister may decide not to grant the permit if the Minister thinks that it would not be in the public interest to grant the permit.
(4) The Minister may decide not to grant the permit if the Minister thinks that:
(a) there is another way in which the hazardous waste could be dealt with; and
(b) dealing with the waste in the other way would not pose a significant risk of injury or damage to human beings or the environment; and
(c) having regard to Australia's international obligations, the waste should be dealt with in the other way rather than in accordance with the import proposals or export proposals
(5) The Minister may decide not to grant the permit if the permit sought is a Basel export permit and the Minister thinks that:
(a) the hazardous waste could be disposed of safely and efficiently by using a facility in Australia; and
(aa) such a disposal would be consistent with the environmentally sound management of the waste; and
(b) having regard to the desirability of using facilities in Australia for the disposal of hazardous waste, the waste should be disposed of by using that facility rather than in accordance with the export proposals.
21. On 30 March 1992, the Council of the Organisation for Economic Co-operation and Development (“OECD”) concluded an arrangement or agreement under Article 11 of the Basel Convention in the form of a decision requiring that Member countries “control transfrontier movements of wastes destined for recovery operations within the OECD area”. Australia and New Zealand are both members of the OECD.
22. On 16 September 1995, the Convention to ban the Importation into Forum Island Countries of Hazardous and Radioactive Wastes and to Control the Transboundary Movement and Management of Hazardous Wastes within the South Pacific Region was adopted at Waigani, Papua New Guinea (the “Waigani Convention”).
23. Both Australia and New Zealand are parties to the Waigani Convention which is an agreement under Article 11 of the Basel Convention. In the Preamble to the Waigani Convention, the Parties resolve “to regulate and facilitate the environmentally sound management” of hazardous wastes. Article 10(1) states that the Parties “shall cooperate with one another, non-Parties and relevant regional and international organisations, to facilitate the availability of adequate treatment and disposal facilities and to improve and achieve the environmentally sound management of hazardous wastes”.
24. The Hazardous Waste (Regulation of Exports and Imports) (Waigani Convention) Regulations 1999 took effect on 1 January 2002 with the stated purpose (Regulation 3) of giving effect to the Waigani Convention “except so far as that the Convention relates to radioactive wastes”.
25. The Hazardous Waste (Regulation of Exports and Imports) Amendment Act 1996 received the Royal Assent on 11 June 1996 and took effect on 11 December 1996. The amendments included a statement of aims in s 3 as follows:
Aims
(2) The aims of this Act are:
(a) to give effect to the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal; and
(b) to give effect to agreements and arrangements of the kind mentioned in Article 11 of that Convention.
26. The Hazardous Waste (Regulation of Exports and Imports) (OECD Decision) Regulations 1996 (“the OECD Regulations”) commenced on 12 December 1996. Regulation 3 states that the “object of the Regulations is to make regulations for section 13C of the Act giving effect to the OECD decision”. Regulation 14 states that within 40 days after receiving an application for a special export permit, the Minister must grant or refuse the permit”. In making such a decision, the Minister must have regard to regulation 16. Subregulations 16(1) - (4) state:
(1) The Minister must not grant a special export permit authorising the export of hazardous waste unless the Minister is satisfied that:
(a) the application for the permit is permitted by regulation 9 to be made; and
(b) dealing with the hazardous waste concerned in accordance with the export proposal would be consistent with the environmentally sound management of the waste; and
(c) the competent authority of the importing country has given written consent to the movement of the waste; and
(d) the waste will undergo a recovery operation in the importing country at a recovery facility that is authorised to carry out recovery operations on waste of that type; and
(e) having regard to the requirements of clause 1 of section IV of Annex I to the OECD Decision (concerning written contracts covering the movement of waste), it is appropriate to grant the permit; and
(f) the waste will be allowed to be transported through any foreign country through which the waste is proposed to be transported; and
(g) the waste will be transported in a way that is consistent with the environmentally sound management of the waste; and
(h) the applicant:
(i) is a suitable person to be granted the permit; and
(ii) has appropriate insurance.
(2)The Minister may refuse to grant the permit if the Minister considers that it is in the public interest to do so.
(3) The Minister may refuse to grant the permit if the Minister is satisfied that:
(a) there is another way in which the hazardous waste could appropriately be dealt with; and
(b) dealing with the waste in that way would not pose significant risk of injury or harm to people or the environment; and
(c) having regard to the desirability of using facilities in Australia for the disposal of hazardous waste, the waste should be disposed of by using that facility rather than according to the export proposal.
(4) The Minister may refuse to grant the permit if the Minister is satisfied that:
(a)the hazardous waste could be disposed of safely and efficiently by using a facility in Australia; and
(b)such a disposal would be consistent with the environmentally sound management of the waste; and
(c)having regard to the desirability of using facilities in Australia for the disposal of hazardous waste, the waste should be disposed of by using that facility rather than according to the export proposal.
A discussion of the application and meaning of the subregulations appears below under the heading Consideration of the Law and Findings.
27. The decision under review is a decision made by the Minister under regulation 14. Section 57 of the 1989 Act permits applications to be made to the Tribunal for the review of such decisions.
EVIDENCE
Steven Ainsworth
28. Mr Ainsworth provided affidavits dated 16 December 2002 (A1) and 31 January 2003 (A2). He is a Chartered Accountant with 35 years commercial and financial experience who, since August 1998, has held the position of Senior Business Accountant for ARA. His position requires him to provide financial information to ARA and the joint venture partners, Simsmetal and Pasminco, but he is not on the Board of any of these companies.
29. Mr Ainsworth said he estimated ARA’s capacity for recycling ULABs at 64,800 tonnes per annum for the HWTG review. In his statement of 31 January 2003 (A2), his calculation of a 63,100 tonnes ULAB recycling capacity was based on the production figures for October and November 2002 when ARA’s two plants were operating at full capacity and at 98% mechanical efficiency. However, he said that when analysing these production figures, he also allowed for 25 maintenance days per annum. He checked the figures for accuracy with the Sydney and Melbourne plant managers. Mr Ainsworth confirmed his opinion that the Australian arisings of ULABs are approximately 65,000 – 69,000 tonnes per annum. Although this amount is greater than ARA’s current recycling capacity, the additional ULABs could be broken down by ARA and the excess lead could be processed by arrangement with Pasminco.
30. Mr Ainsworth said it is the capacity of the furnaces at ARA’s two plants which constrains the smelters’ capacity and not the battery breaking facility. ARA last sent excess lead to Pasminco for smelting five years ago. New terms for such an arrangement would have to be negotiated and as to which of Pasminco’s two Australian smelters (Cockle Creek or Port Pirie) the excess lead would be sent. Mr Ainsworth acknowledged that there is presently political controversy over alleged lead pollution from the Cockle Creek smelter.
31. Mr Ainsworth said he estimates that there are 6,000 tonnes of other Australian lead bearing scrap arisings per annum in addition to ULAB arisings. ARA has the capacity to process 3,000 tonnes of other lead scrap arisings per annum. The additional 3,000 tonnes could also be processed by arrangement with Pasminco.
32. Mr Ainsworth agreed that ARA does not have the capacity to process all New Zealand’s ULAB arisings in addition to Australian ULAB arisings, if Exide NZ’s Wellington plant is closed. He said ARA’s management’s view is that if ARA’s challenge to Exide Australia’s permit is successful, the Minister should issue Exide Australia with a permit to export a reduced tonnage of ULABs and other lead scrap to New Zealand, reflecting the amount of ULABs and other scrap lead which ARA does not presently have the capacity to process in Australia which could be processed at Exide NZ’s Wellington recycling plant. It would take ARA time to increase its current recycling capacity commensurate with the total of both Australian and New Zealand ULAB arisings and other lead scrap.
33. Mr Ainsworth said he is aware that Exide Australia and its predecessors have been granted similar export permits since 1994. ARA’s investment decisions were made in the light of this knowledge. The harm to ARA from Exide Australia’s export permit occurs at the point when ARA has to close its plants or reduce its operating as a result of a lack of ULAB feedstock. The current export permit is causing ARA harm.
34. Mr Ainsworth confirmed that Pasminco is currently operating under a Deed of Arrangement. Essentially, the company is now owned by the creditors to whom shares will be issued eventually and the company will be floated on the Stock Market. He said Simsmetal is a company based in Australia operating globally. Mr Ainsworth acknowledged that he did not disclose in his affidavit that in Queensland Simsmetal sells lead scrap to Exide Australia. During the period June 2001 to November 2002, Simsmetal sold 3,865 tonnes of lead scrap to Exide Australia which was exported to New Zealand. ARA has not been able to persuade Simsmetal to do otherwise.
35. Mr Ainsworth was referred to a photocopy of material from Simsmetal’s website as of 2 December 2002 (R1). This refers to Simsmetal’s joint venture with Pasminco in ARA and states that ARA had recorded “increased revenues and profitability … well above the corresponding period” (R1 p4), and continued to provide a satisfactory return on investment. Mr Ainsworth said this statement was based on information ARA supplied to Simsmetal. Similarly, a press release by Simsmetal dated 22 August 2002 refers to the ARA joint venture having “improved earnings” (R2 p3). Mr Ainsworth said that in 2001, ARA’s earnings were adversely affected by the low Australian dollar and the low price of lead quoted in US dollars on the London Metal Exchange (“LME”). ARA’s improved earnings in 2002 were assisted both by a higher price for lead on the LME and greater productivity.
36. Mr Ainsworth was also referred to a Pasminco Media Release dated 31 January 2003 in respect of the quarter ended 31 December 2002 (R3). This states:
Both ARA secondary lead plants have operated smoothly in the December 2002 quarter and at higher levels than for the corresponding periods in 2001. Mechanical availability has been in excess of 97% (R3 p5).
Mr Ainsworth explained that “mechanical availability” referred to the time when the smelters are available to run. He said while ARA had not provided Pasminco with the figure of 97%, ARA had provided financial information to Pasminco which had presumably drawn its own conclusions. Mr Ainsworth acknowledged that ARA’s plants had operated smoothly in 2002 and had increased production over the previous year. He said he is not suggesting that the ARA plants would close if export permits continue to be granted to Exide Australia.
37. Mr Ainsworth said if Exide NZ’s Wellington recycling plant were to close, ARA would only be interested in purchasing the battery breaking aspect of the plant's operation. This would enable ARA to break ULABs and process the acid into gypsum in New Zealand and then export the remaining lead scrap and plastic to Australia (A1 para 38). At ARA’s Australian plants, the majority of the acid drained from the breaking of the ULABs is sent off site to neutralise alkali streams. This is better in environmental terms because it reduces the quantity of gypsum produced which goes into land fill (A2 para 34). Mr Ainsworth did not know whether Exide NZ sent acid off site in the same way.
38. Mr Ainsworth acknowledged that ARA would only collect ULABs if it is commercially viable. ARA has tried increasing the price paid to scrap dealers for ULABs but this has not increased its “feedstock”. He said his projection of 65,000 – 69,000 tonnes per annum of Australian ULAB arisings was intended to cover a number of years. While he would expect there to be some increase in the demand for batteries year by year, against this has to be set off the increasing life of a battery as a result of improving technology.
Brian Smith
39. Mr Smith provided affidavits dated 23 January 2003 (R4) and 10 February 2003 (R5). He has been employed by Exide Australia and its predecessors for approximately 23 years during which time he has held various positions in manufacturing, logistics, distribution and administration. He was appointed to his present position of General Manager, Manufacturing and Purchasing in September 2002. He is responsible for total manufacturing, purchasing and lead sourcing –including Exide Australia’s collection of factory and other scrap – for Exide Australia and Exide NZ in Australia and New Zealand.
40. Mr Smith said while Exide Technologies, the US parent company, had been seeking a buyer for Exide Australia and Exide NZ in the latter part of 2002, he has now been informed by the Acting Chief Executive Officer of Exide Australia and Exide NZ that Exide Technologies has taken the two companies “off the market”. Exide Technologies is no longer in such urgent need of money and it considers the “price will not be right at this time”.
41. Mr Smith said one of Exide NZ’s principal functions is to supply lead to Exide NZ and Exide Australia at a substantially lower price than that current on the LME. Exide NZ has a monopoly in the collection of ULABs in New Zealand. In the year 1 July 2001 to 30 June 2002, Exide NZ recycled 22,700 tonnes of ULABs and lead scrap at its Wellington plant producing 13,561 tonnes of lead. Included in the recycling is between 500 and 1,000 tonnes of ULABs and lead scrap from other Pacific countries. While Exide Australia and Exide NZ made a profit in the 2001/2002 financial year, profitability is substantially down this year.
42. At the current price of lead, if there were no imports of ULABs and lead scrap from Australia, Exide NZ’s Wellington plant would be operating at 50% capacity and would not be profitable. Mr Smith would then advise closure. Exide Australia collects between 15,000 and 20,000 tonnes of ULABs and lead scrap within Australia every year. This year close to 18,000 tonnes is likely to be collected.
43. In his affidavit of 23 January 2003 (R4) Mr Smith states, at paragraph 49, that Exide Australia has:
negotiated with Pasminco a tolling arrangement which gives Exide Australia access to lead at a favourable rate to the market. Exide Australia supplies ARA’s Sydney smelter with about 300 tonne per month of scrap and Pasminco credits Exide Australia for 174.6 tonne lead.
Mr Smith said one tonne of scrap produces about 0.6 tonne lead. In addition to this tolling arrangement, Exide Australia also purchases lead from Pasminco at LME prices.
44. Mr Smith stated that Exide Australia has a similar arrangement with Simsmetal whereby Exide Australia purchases lead from Simsmetal to offset Exide NZ supplying lead from its Wellington recycling plant to another New Zealand battery manufacturer, Century Yuasa Batteries (New Zealand) Ltd (“Century”). In addition, Exide Australia has a tolling arrangement with Simsmetal. Exide Australia supplies “slightly lower” than between 350 and 450 tonnes per month of ULABs and lead scrap to Simsmetal in return for alloyed lead. Finally, Exide Australia also purchases lead from Simsmetal at LME prices.
45. Mr Smith stated that both Exide Australia and Exide NZ purchase ULABs from scrap dealers. Exide Australia collects 60% of it arisings from Exide customers and from its Adelaide factory, in the latter case in the form of lead scrap. He estimates that in the year to 30 June 2003, Exide Australia will export close to 11,000 tonnes of ULABs and scrap to New Zealand. In the years 2000/2001 and 2001/2002, Exide Australia exported to New Zealand 9,738 tonnes and 8,918 tonnes respectively. In the 18 months to November 2002, Exide Australia has purchased 3,865 tonnes of ULABs from Simsmetal.
46. Mr Smith said if the Minister’s decision to grant Exide Australia an export permit is overturned, he will recommend closure of the Wellington recycling plant. Exide NZ could not rely for its feedstock on arisings from New Zealand and Pacific countries alone. The smelter needs a continuous feed. Operating at less than full capacity significantly increases costs. If the recycling plant closed, Exide NZ would cease to collect ULABs and lead scrap in New Zealand of about 8,400 tonnes which it now collects except, possibly, to fulfill current tolling arrangements which may or may not continue. If the Wellington lead recycling plant closed, Exide NZ would have to buy lead at the market price for the manufacture of batteries. As a result, the manufacture of batteries might no longer be viable in New Zealand. In the case of Exide Australia, if the Wellington recycling plant closed, it would incur approximately $1.6m in additional costs which could be covered by increasing the price of batteries by about $1 each. Exide Australia’s manufacture of batteries would remain viable but its batteries would be less competitive.
47. Mr Smith said, in his opinion, approximately 75,000 tonnes of arisings per annum are available in Australia and Mr Ainsworth, who arrived at a figure of 65,000 – 69,000 tonnes, underestimated this by failing to take into account all the non-ULAB arisings per annum (R4 para 70). In Mr Smith’s opinion, ARA does not have the capacity to handle all Australian arisings. He noted that, on or about 26 November 2002, the Minister granted Simsmetal a permit to import up to 9,000 tonnes of ULABs from New Zealand in the next year. He understands that the New Zealand Ministry is awaiting the Tribunal’s decision before deciding whether to issue a corresponding export licence.
Grant Bolitho
48. Mr Bolitho provided affidavits dated 23 January 2003 (R6) and 11 February 2003 (R7). He is a Chartered Accountant and has been employed by Exide NZ for 13 years in various managerial roles. He is currently Country Manager for New Zealand, responsible for supervising the manufacturing operations for New Zealand including the recycling and battery manufacturing plants situated near Wellington. His responsibilities also include corporate compliance and finance.
49. Mr Bolitho stated the Wellington recycling plant exists primarily to provide Exide Australia and Exide NZ with an alternative to purchasing lead on the open market from Pasminco or Simsmetal. The continued operation and viability of Exide NZ depends on a variety of factors and, not just on the profitability of Exide NZ in a particular year. These factors include the availability and price of feedstock for the recycling plant, the LME price for lead, the price at which the Australian and New Zealand battery plants can purchase lead from Pasminco and Simsmetal, exchange rates, capital investment requirements, operating costs, the availability of cash for capital expenses and investments, regulatory requirements and the cost of obtaining an export permit from Australia.
50. Mr Bolitho said that smelter returns have been lower in recent years as a result of LME prices. In the financial year ending 30 June 2002, the Wellington recycling plant used 22,700 tonnes ULABs and scrap lead in producing 13,561 tonnes of lead. It supplied 3,830 tonnes to its Wellington battery manufacturing plant, 3,283 tonnes to Century’s battery manufacturing plant in Auckland, and 5,847 tonnes to Exide Australia for use in its battery manufacturing plant in Adelaide (R6 para 33). Thus, currently, 43% of the Wellington recycling plant’s production goes to the Adelaide battery plant at an internal transfer price calculated in Australian dollars. This transfer price has gone down as the New Zealand dollar has increased in value against the Australian dollar.
51. Mr Bolitho said in the year to March 2002, Exide NZ collected 12,650 tonnes of ULABs in New Zealand, and in the nine months to December 2002, 9,850 tonnes. Since January 2002, it has also imported 476 tonnes of ULABs from Fiji, 88 tonnes from Tahiti and 33 tonnes from the Cook Islands. Arrangements are in place to import 750 tonnes from Fiji, 150 tonnes from Tahiti and 50 tonnes from other Pacific Islands over the next 12 months (R6 para 26).
52. Mr Bolitho said the New Zealand feedstock cost for the Wellington recycling plant, delivered to the factory, is considerably less by comparison with Australian feedstock delivered to the factory. The Wellington recycling plant contributed to the profit of Exide NZ in 2001/2002. However, a loss is projected for 2002/2003 as a result of a reduction in the LME price for lead, an increase in environmental compliance requirements and factoring in estimated legal and consulting fees relating to the 2002/2003 export permit.
53. Mr Bolitho said lead produced from recycling is cheaper than that which can be purchased on the open market. Because the price of lead fluctuates, it is difficult to be precise about the point at which it would be necessary to close the Wellington plant. An assessment would need to be made on the then current conditions, including projections for the likely price of lead in the longer term. Mr Bolitho said that since 1994, Exide NZ has spent NZ$4.5m on environmental upgrades on the Wellington recycling plant including the installation of a new furnace doubling the plant’s recycling capacity. Production increased from 7,245 tonnes of lead in 1993/1994 to 13,561 tonnes in 2001/2002. Mr Bolitho acknowledged that capital investment in the Wellington plant was intended to reduce Exide Australia’s reliance on purchasing lead from ARA or its joint venture partners. To the best of his knowledge, Exide NZ has never imported more than 10,000 tonnes of ULABs and scrap lead from Australia. He said that the New Zealand Ministry of Economic Development had spoken to him about Simsmetal’s application for a permit to export up to 9,000 tonnes of ULABs from New Zealand to Australia and both he and Exide NZ opposed this vigorously.
54. Mr Bolitho said the Wellington recycling plant runs a furnace which operates 24 hours per day, seven days a week. It is only shutdown for maintenance - including rebricking every 15 - 18 months, or when there is a failure of the environmental systems or there is insufficient feedstock for the recycling process. If there is insufficient feedstock, the plant is initially switched to standby mode thereby maintaining the furnace at a low heat. If the supply of feedstock continues to be uncertain, the furnace will later be shut down completely. The shutdown of the furnace risks damage to the thermal bricks from cooling.
David Markey
55. Mr Markey provided an affidavit dated 23 January 2003 (R8). He is a Business Consultant providing advice and services in various industries including the battery manufacturing industry. He has a certificate in engineering and a diploma in marketing. From 1989 to 1991, he was General Manager of GNB New Zealand Ltd, a company manufacturing batteries; from 1991 to 1993 he was General Manager of Sales and Marketing for GNB Australia Ltd, and from 1998 to November 2000 he was Operations Manager of Exide Australia. While Operations Manager of Exide Australia, he was responsible for Exide’s ULAB purchases, the export of ULABs to New Zealand and tolling arrangements with Simsmetal and Pasminco. Since leaving Exide’s employment in November 2000, Mr Markey has continued to be responsible for preparing and lodging Exide’s annual applications to the Minister for a permit to export ULABs to New Zealand, including the application at issue in these proceedings.
56. In his affidavit, Mr Markey identified the various sources of lead scrap including ULABs. Exide Australia generated about 1,350 tonnes of lead factory scrap from its Adelaide plant in 2002 which was exported to New Zealand (R8 para 21). He said the average life of a car battery is three years and one month. Even though the technology involved in car batteries has improved in recent years, battery life has not increased since 1995. This is because both the electrical needs of the car and the heat in the engine compartment have increased significantly.
57. Mr Markey estimated the lead waste arisings in Australia as follows:
· Motor vehicles batteries including
trucks, buses, motorcycles and
recreational water craft 68,598 tonnes
· Industrial batteries 7,300 “
· Submarine batteries 312 “
· Exide Australia factory scrap 1,350 “
· Other lead waste processed by ARA 1,570 “
· Export of other lead scrap 3,020 “
TOTAL 82,150 tonnes
The figure of 82,150 tonnes does not include scrap from other sources such as ULABs from farm tractors, forklifts, golf buggies and wheelchairs for which Mr Markey was unable to locate any reliable information. Mr Markey noted that about 15,000 tonnes per annum of non-hazardous lead is exported to India, China and other countries.
Russell Reardon
58. Mr Reardon provided an affidavit dated 23 January 2003 (R9). He is General Manager of Century Yuasa Batteries (New Zealand) Ltd (“Century”), responsible for all New Zealand operations including manufacturing and sales. Century produces about 400,000 batteries a year of which approximately 200,000 are sold in New Zealand and 200,000 are exported to Australia. Century uses about 3,546 tonnes of lead per year in the manufacture of batteries, the majority of which is sourced from Exide NZ’s Wellington recycling plant. Century does not have its own recycling facility either in Australia or New Zealand.
59. Mr Reardon said Century relies on the lead sourced from Exide NZ, which it purchases at between 5% - 8% less than market price in order to remain competitive. Approximately 35% of the cost of a battery is lead. If Century were unable to purchase lead from Exide NZ’s Wellington recycling plant, it would be forced to purchase lead on the open market. In his statement, Mr Reardon said as a result of this, Century might discontinue the manufacture and sale of its budget brand of batteries sold in Australia. The market is very competitive. This might in turn, lead Century to close its New Zealand manufacturing facility. If it did so, up to 65 people would lose their employment.
60. In cross-examination, Mr Reardon confirmed that Century had been approached by SimsPacific about their supplying lead to Century at a competitive price. He said the price offered was not as competitive as that at which Century is currently purchasing lead from Exide NZ but the price was “quite reasonable”..
Christopher Todd and Mark Thomson
61. The Respondent also tendered affidavits from Mr Dodd and Mr Thomson dated 11 January 2003 (R14) and 20 January 2003 (R15) respectively, whose businesses include collecting ULABs under contract from Exide Australia. Exide provide their businesses with empty shipping containers for the ULABs. The ULABs are collected from regular and one-off customers, packed and strapped onto pallets, shrink wrapped with plastic and placed in the containers which, when full, are locked and sealed. Exide then arrange for their collection.
62. Mr Dodd’s scrap salvaging and recycling business is a sole proprietorship in Western Australia employing over 100 people and with a long experience in that industry. Until February 1996, the business supplied ULABs to ARA. Mr Dodds stated:
We had difficulties dealing with ARA however, particularly in the more recent years because it did not always accept our ULABs due to demand requirements. After February 1996 we were verbally advised by it that it did not require any supply. ARA was only prepared to purchase batteries from us if it needed extra supply and on those occasions it asked us to go through one of the big 2 or 3 national dealers, like Simsmetal or Metalcorp. Significantly, Simsmetal are one of ARA’s major shareholders. That created difficulties for us because those scrap dealers were our competitors in the ULAB market, given that we were buying these products from similar sources to them. They also set quotas on collection volumes. Overall, this affected our profit margin and made it less viable for us to collect batteries. Generally, to my knowledge, this also caused the recycling process in Western Australia to remain stagnant during the 1990’s.
…
We have been dealing exclusively with Exide for about 2 years. During that time we have never had any problems with them in their collection of ULABs from us. Our rate of ULAB collection has increased in that time due to Exide making a concerted effort to collect from us and by purchasing them at prices that are commercially viable for us.
I have also been informed by person at garages and workshops I deal with that ARA’s dealers (such as Metalcorp or Simsmetal) are not interested in collecting small volumes of batteries that would be less than 2 pallet loads or 2 tonne of batteries at a time.
63. Mr Dodd stated that he contacted Metalcorp, one of ARA’s dealers, about three or four months ago. The price he was offered for collection of ULABs was significantly less than he is paid by Exide Australia and collection of ULABs at this price would not be commercially viable.
64. Mr Thomson is a sole trader in the wholesale and retail battery business in South Australia with two employees. He started the business about five years ago. He first began collecting the ULABs in April 2002 under contract to Exide Australia and collects four to five containers “or about 80 to 110 tonnes” of ULABs each month for Exide. Neither ARA nor any of its dealers has ever approached him to purchase ULABs.
The Expert Witnesses
65. The Tribunal adopted a Concurrent Evidence approach in hearing the oral evidence of the two expert witnesses.
Professor Joshua Gans
66. ARA’s expert witness, Professor Joshua Gans, is a Professor of Management (Information Economics) at the Melbourne Business School. His employment has been in teaching and research but he has also been engaged as a consultant and expert witness in a variety of industry projects since 1996. In cross-examination, he acknowledged that he has not worked in the manufacturing industry and the preparation of his statement in this matter is the first time he has considered the situation of a recycling company. Professor Gans provided two affidavits, dated 16 December 2002 (A5) and 31 January 2003 (A6).
67. In his affidavit dated 16 December 2002 (A5), Professor Gans stated that the refusal of an export permit or the attaching of conditions to the permit would limit the volume of ULABs transported between Australia and New Zealand. However, if this caused Exide NZ’s Wellington recycling plant to lack sufficient feedstock to remain profitable, it might be shut down. This in turn, could result in ULABs being exported from New Zealand to Australia. However, ARA’s recycling plants do not currently have the capacity to fully process all the ULABs originating in New Zealand in addition to the ULABs available in Australia. In oral evidence, Professor Gans said Mr Ainsworth acknowledged this to him in a telephone call.
68. Professor Gans said that conditions could be attached to the export permit to limit the volume of ULABs being exported to New Zealand to no more than is sufficient to enable the Wellington plant to continue operating efficiently and profitably in the short term. He said it appeared that investment in lead recycling in Australia since 1996 has taken place on the assumption that restrictions would be placed on the export of ULABs. Excess capacity for recycling ULABs in Australia will undermine future investment in recycling.
69. In his affidavit dated 31 January 2003, Professor Gans contended that a restricted permit would result “in a softer impact on the collections industry in Australia but also results in less recycling in Australia than if no permit was granted” (A6 para 24). In New Zealand, the restricted permit would increase the incentives for the collection of ULABs and lead waste there but would result in less recycling taking place than if the current permit is granted.
70. In oral evidence, Professor Gans noted that the remediation costs of closing down the Wellington recycling plant would be substantial and, of course, would not be incurred if the plant was kept in operation, even at a reduced capacity. He expressed his scepticism about the threatened closure given the lack of quantitative information about relevant financial factors. He estimated that the export of 2,712 tonnes of Australian ULABs to New Zealand should keep the plant operating. He acknowledged that in arriving at this estimate, he assumed that it would be possible to scale down the plant's production. In his opinion, the export of between 3,000 and 5,000 tonnes of ULABs and lead scrap to New Zealand should be permitted by the Minister.
Ms Rhonda Smith
71. Exide Australia’s expert witness, Rhonda Smith, is an Economist who is a fractional (0.5) Senior Lecturer at the University of Melbourne and a consultant economist, mainly in relation to competition matters. She was a Commissioner with the Australian Competition and Consumer Commission from November 1995 to November 1998 and previously worked as “an expert witness and adviser to many large Australian companies and to the former Trade Practices Commission and the Prices Surveillance Authority”.. Ms Smith provided an affidavit dated 23 January 2003 (R12).
72. In her affidavit dated 23 January 2003 (R12), Ms Smith stated competition for the collection of lead scrap in Australia will be maintained and the price for ULABs is likely to remain higher if an export permit is granted to Exide Australia. Those supplying ULABs have the choice of supplying to ARA for recycling in Australia or to Exide Australia for export to and recycling in New Zealand. ARA always has the option of offering ULAB suppliers a higher price for ULABs as an incentive to encourage the collection of ULABs for ARA and to discourage them from supplying ULABs to Exide for export. ARA could also reduce its tolling fee to Exide to encourage Exide to export less and process more through ARA’s recycling plants.
73. If Exide Australia is refused an export permit and the Wellington smelter is closed, competition for the collection of lead in Australia is likely to be reduced, the value of scrap used is likely to fall, and the incentive to collect scrap lead will decrease. Although Exide Australia may continue to collect ULABs to supply ARA, the benefit to Exide from recycling are likely to diminish and so Exide would be a less vigorous and effective competitor. With the closure of the Wellington recycling plant, the value of ULABs and scrap lead in New Zealand would be likely to decline and so the incentive to collect scrap lead would diminish. ULABs would no longer be imported for recycling from the Pacific Islands. If a permit is granted to export ULABs from New Zealand to Australia, while ULABs could still be sold in New Zealand, the price paid for ULABs is likely to be lower than in Australia because of the higher freight costs.
74. Ms Smith said the refusal of an export permit to Exide Australia and the closure of Exide NZ’s recycling plant would be likely to give rise to a less competitive collection and recycling environment and declining industry efficiency. “This is unlikely to be consistent with the efficient and environmentally sound management of potentially hazardous ULABs” (R12 Attachment B, Answer to Question 4.10). There is likely to be an increase in uncollected lead waste.
75. If Exide NZ’s recycling plant continued to operate but with decreased capacity utilisation due to diminished supplies of ULABs, this would be likely to increase operating costs and necessitate increased reliance by Exide Australia on the supply of lead by ARA or Pasminco.
76. If ARA’s capacity is insufficient to meet the demand for lead, this may result in further investment by ARA but perhaps only if a significant proportion of new capacity is required. “Given the economies of scale likely to be available to ARA, it is unlikely that in future a new entrant would enter the market to compete” (R12 Attachment B, Answer to Question 11.1).
77. In oral evidence, Ms Smith noted that if a permit is refused, there would still be risks associated with the transportation of additional ULABs from, for example, Perth or Brisbane to one of ARA’s plants in Sydney or Melbourne. Currently, ULABs collected by Exide Australia are shipped in containers from the ports of Perth and Brisbane to New Zealand.
78. Ms Smith also noted that the prices for ULABs offered by ARA to dealers is “much lower” than that offered by Exide. There is some evidence to suggest that ARA could do more to collect ULABs.
79. Ms Smith said a benefit of the present permit system is that the need for a party to apply for a permit annually constrains the behaviour of the party because it is aware that its conduct will be re-examined annually.
80. Ms Smith said ARA seemed to be operating at near capacity in relation to its smelters. Very significant costs may be involved for ARA to increase smelter capacity. In her opinion, there is a real risk that if a permit is not granted, there will be a decrease in the efficiency of the lead recycling industry.
THE ISSUE
81. The issue for the Tribunal to determine is whether the Minister’s decision made on 7 August 2002 to grant a permit to Exide Australia allowing the export to New Zealand of up to 15,000 metric tonnes of ULABs lead scrap over the ensuing 12 months was the correct or preferable decision. This turns on the application of subregulations 16(1) - 16 (4) of the 1996 Regulations. Before considering this, it is appropriate that the Tribunal makes relevant general findings and discusses the evidence.
GENERAL FINDINGS
82. The Tribunal finds that at least 75,000 tonnes per annum of lead arisings are currently generated in Australia, comprising at least 69,000 tonnes of ULABs and at least 6,000 tonnes of other lead scrap. Mr Ainsworth estimated that 65,000 - 69,000 of ULABs were generated annually, with 6,000 tonnes of other lead scrap. Mr Smith estimated total ULAB and other lead arisings at approximately 75,000 tonnes per annum. Mr Markey estimated that at least 76,000 tonnes of ULABs are generated annually together with at least 6,000 tonnes of other lead scrap.
83. The Tribunal finds that at least 13,000 tonnes per annum of ULABs are generated in New Zealand. Mr Bolitho said Exide NZ collected 9,850 tonnes of ULABs in New Zealand in the nine months to December 2002 and had collected 12,650 tonnes of ULABs in New Zealand in the year to March 2002. He also said that in the period since January 2002, Exide NZ had imported 476 tonnes of ULABs from Fiji, 88 tonnes from Tahiti and 33 tonnes from the Cook Islands. Arrangements are in place to increase the importation of ULABs from such Pacific Islands over the next 12 months. The Tribunal therefore estimates that the tonnage of ULABs generated by New Zealand and other Pacific Islands requiring cycling is approximately 14,000 tonnes per annum.
84. Based on Mr Ainsworth’s estimate, the Tribunal finds that ARA currently has a capacity to recycle 63,100 tonnes of ULABs and 3,000 tonnes of other lead scrap per annum in Australia, a total of 66,100 tonnes. ARA is limited by the capacity of its two smelters. Mr Ainsworth said excess lead could be processed by arrangement with Pasminco. However, there is no arrangement with Pasminco currently in place and no specific evidence has been provided as to Pasminco’s facilities and/or capacity.
85. Based on Mr Bolitho’s evidence, the Tribunal finds that Exide NZ has a capacity to recycle at least 22,700 tonnes of ULABs and other lead scrap at its Wellington recycling plant (R6 para 33). This was the tonnage recycled in the period 1 July 2001 to 30 June 2002 including the ULABs and other lead scrap imported from Australia.
86. The ULABs and other lead scrap processed by ARA are collected for it by major suppliers Metalcorp and Simsmetal and a range of other suppliers. This includes 6,337.41 tonnes of ULABs supplied by Exide Australia as part of its tolling arrangements with Pasminco and Simsmetal in the 12 month period 1 July 2001 to 30 June 2002 and 2,970.63 tonnes collected in the six months 1 June 2002 to 30 December 2002. The total collected by ARA in the year to December 2002 was 54,000 tonnes of ULABs and other lead scrap (A3).
87. According to Mr Smith, Exide Australia will collect “close to” 18,000 tonnes of ULABs and other lead scrap in Australia in the current 12 month period. This includes 3,865 tonnes of ULABs purchased from Simsmetal (R4 para 43). Of these 18,000 tonnes, it is likely that more than 10,000 tonnes will be exported to Wellington if the decision under review is affirmed, and more than 6,000 tonnes will be supplied to ARA pursuant to tolling arrangements with Pasminco and Simsmetal.
88. The Tribunal finds that export permits have been granted to Exide Australia and its predecessors since 1994 and that 9,738 tonnes of ULABs and other lead scrap was exported in the period 1 July 2000 to 30 June 2001 and 8,918 tonnes in the period 1 July 2001 to 30 June 2002. Accordingly to Christopher Dodd (R14) and Mark Thomson (R15), the ULABs collected are stacked on pallets which are shrink wrapped in plastic and placed in shipping containers which, when full, are locked and sealed. Other lead scrap is placed in sealed barrels in the shipping containers. There is no evidence over the eight years of shipping ULABs and other lead waste from Australia to New Zealand of there ever being an environmental mishap or problem arising from the transport arrangements.
89. Mr Bolitho’s evidence is that Exide NZ’s Wellington recycling plant produced 13,561 tonnes of lead in the period 1 July 2001 to 30 June 2002. He estimated that 13,992 tonnes will be produced in the period 1 July 2002 to 30 June 2003. The capacity of the plant is 15,000 tonnes. Exide NZ supplied 3,830 tonnes of lead to its Wellington battery manufacturing plant, 3,283 tonnes to Century’s battery manufacturing plant in Auckland, and 5,847 tonnes to Exide Australia for use in its Adelaide battery manufacturing plant. The 43% of its production supplied to the Adelaide plant is at an internal transfer price calculated in Australian dollars.
90. According to Mr Smith (R4 para 46), in the year ended 30 June 2002, Exide Australia obtained 5,981 tonnes lead from the Wellington plant, 1655 tonnes from Simsmetal under tolling arrangements, 2,095 tonnes from Pasminco under tolling and/or metal swap arrangements, and 3,391 and 5,404 tonnes purchased from Simsmetal and Pasminco, respectively, at LME base prices.
91. Mr Reardon gave evidence that Century uses about 3,546 tonnes of lead per annum in its manufacture of batteries, the majority of which is sourced from Exide NZ’s Wellington recycling plant at between 5% - 8% less than market price. He said if Century is forced to cease manufacture of its budget brand of batteries as a result of the closure of the Wellington Plant, this could in turn lead to its closing the whole of its New Zealand manufacturing plant with Century’s 65 employees loosing their jobs (R9 para 8).
92. Mr Bolitho said that Exide NZ is the largest NZ battery manufacturer, with the capacity to manufacture 580,000 batteries annually (R6 para 15). The battery manufacturing division employs 84 people. The lead used in manufacturing is 100% supplied from the Wellington recycling plant. Both Mr Smith and Mr Bolitho said in the evidence that if the Wellington recycling plant were to close and Exide NZ had to purchase lead on the open market for its battery manufacturing plant then the continuing viability of Exide NZ’s battery manufacturing plant would be at risk.
93. Mr Smith gave evidence that if the Minister’s decision to grant the export permit is overturned, he will recommend closure of the Wellington recycling plant which has 87 employees (R6 para 15). Without the ULABs and other lead scrap imported from Australia, which on the Tribunal’s calculations comprise about 44% of its feedstock, Mr Bolitho said the recycling plant would not be financially viable and would be forced to close (R6 para 6.8.1). He said this would have “serious environmental ramifications” for the collection and recycling of ULABs and lead waste in New Zealand (R6 para 67ff) because this would remove the current incentive for collections from rural and more remote provincial areas. According to Mr Smith, denial of an export permit would also constitute a significant disincentive to Exide Australia collecting ULABs in Australia except for the purpose of satisfying tolling or other arrangements with Pasminco and Simsmetal (R4 para 120.7).
94. If Exide NZ’s Wellington recycling plant is closed, there would be no alternative means of recycling ULABs and other lead scrap in New Zealand. The Tribunal notes the evidence of Mr Bolitho (R7 para 4.2 and oral evidence – transcript 11 February 2003 p7) and Mr Smith (R4 para 84 and oral evidence – transcript 10 February 2003, p82) that in late November 2002, Simsmetal was granted a permit by the Minister to import 9,000 tonnes of ULABs and other lead scrap into Australia from New Zealand and has applied to the New Zealand Ministry of Economic Development for an export permit for the same amount. Apparently, the Ministry is awaiting the Tribunal’s decision in the current proceedings before making a decision. If such a permit were to be granted by the New Zealand Government and Simsmetal were to export ULABs and other lead waste to Australia, the result would be that the transboundary movement of hazardous waste would probably not be reduced significantly.
DISCUSSION OF THE LAW
95. The applicable law has been cited above. The Respondent’s decision to issue a permit to Exide Australia was made under regulation 14 of the OECD Regulations and by reference to regulation 16. Subregulation 16(1) states that the Minister must not grant a permit unless satisfied of the matters listed in paragraphs (a) to (h). Subregulations 16(2), (3) and (4) invest the Minister with a discretion to refuse to grant a permit if satisfied of the circumstances there specified.
96. In the current matter, it was not contended that the Minister did not have the power to grant the permit pursuant to subregulation 16(1). Rather, at issue was the application of subregulations 16(2), (3) and (4) and the matters the Minister is required to take into consideration in deciding whether or not to grant the permit. This in turn gave rise to differences between the parties as to the meaning of those subregulations.
97. Subregulation 16(2) states:
(2)The Minister may refuse to grant the permit if the Minister considers that it is in the public interest to do so.
ARA submitted that the proper exercise of this public interest discretion requires a consideration of what is in the best interests of Australia. Mr Williams referred the Tribunal to the decision of the Federal Court in Minister for Immigration and Ethnic Affairs v Maitan (1998) 78 ALR 419 at 428, where Beaumont and Gummow JJ, speaking of the discretion to grant a temporary entry permit under the provisions of the Migration Act 1958, interpreted the public interest in terms of “the best interests of Australia”. In the Tribunal’s view, the Court’s interpretation should be understood in the legislative context of the Migration Act 1958 where such issues are specifically referrable to considering the national interest when deciding whether to refuse or grant such an entry permit. The legislative context of the OECD Regulations and the 1989 Act is not the same. The expression “public interest” in subregulation 16(2) must be interpreted in its own legislative context.
98. Mr Sackar referred the Tribunal to the High Court decision in O’Sullivan v Farrer (1989) 168 CLR 210 at 216, where Mason CJ, Brennan, Dawson and Gaudron JJ stated:
the expression “in the public interest”, when used in a statute, classically imports a discretionary value judgment to be made by reference to undefined factual matters, confined only “in so far as the subject matter and the scope and purpose of the statutory enactments may enable ... given reasons to be [pronounced] definitely extraneous to any objects the legislature could have had in view”: Water Conservation and Irrigation Commission (NSW) v Browning [(1947) 74 CLR 492 at 505], per Dixon J.
99. Ms Connor, while agreeing with ARA’s claim “that it is manifestly in the best interests of Australia to promote Australian industry and Australian employment”, noted that “Government policies generally aim to achieve this objective by removing barriers to competition between commercial entities, both nationally and internationally”. In balancing the parties’ competing claims,
the Minister found that refusal of the permit would mean the immediate end of a stable trade that had existed for a number of years which would have complex ramifications. Granting the permit was, by promoting competition, consistent with the Government’s policies to promote Australian industry and Australian employment and consequently, it would not have been in the public interest to refuse the permit (R’s written submissions para 15).
100. In the Tribunal’s opinion, the legislative context in which the expression “in the public interest” is used is one in which the object of the Regulations must be considered. Regulation 3 states:
The objects of these Regulations is to make regulations for section 13C of the Act giving effect to the OECD Decision.
Section 13C of the Act provides for regulations to be made to give effect to Article 11 (of the Basel Convention) arrangements. The OECD decision of 30 March 1992 is such an arrangement. Article 11 recognises that Parties may enter into agreements or arrangements for the transboundary movement of hazardous wastes provided such movements are compatible with the environmentally sound management of hazardous wastes. The object of the 1989 Act stated in s 3 is to regulate the export, import and transit of hazardous waste to ensure that it “is managed in an environmentally sound manner so that human beings and the environment, both within and outside Australia, are protected from the harmful effects of the waste”. The aims of the Act are to give effect to the Basel Convention and Article 11 agreements and arrangements.
101. Thus, it is clear to the Tribunal that the legislation requires that “the public interest” be seen in a broader context than just the Australian public interest, notwithstanding the Minister’s submissions above. That context permits the interests of human beings and the environment of neighbouring countries who may be affected by a decision to be taken into account, in addition to relevant Australian interests.
102. Turning to subregulation 16(3), the parties made submissions to the Tribunal about subparagraph (c). First, the Applicant contended that the words “having regard to” require the decision-maker “to take the matter referred to into account and to give weight to it as a fundamental element in making the determination”. The Applicant relied on R v Hunt; ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 at 329, and Queensland Medical Laboratory v Blewett (1988) 84 ALR 615 at 623 in support of this contention. However, as Mr Sackar pointed out, in Hunt (supra), Mason J went on to explain the costs to which the Permanent Head was required to have regard were “the only matter explicitly mentioned as a matter to be taken into account” [emphasis added] and the scheme of provisions required that, once approved, the proprietor of a nursing home was bound not to exceed the scale of fees fixed by the Permanent Head in relation to the nursing home. This decision was cited by Gummnow J in Blewett (supra) in relation to three specific matters to which the decision-making committee was referred.
103. In the Tribunal’s opinion, the context of regulation 16 is different to that in Hunt (supra) in so far as the Minister, pursuant to the various subregulations, is required to have regard to a variety of matters which, if he/she is satisfied of those matters, must (subregulation (1)) or may (subregulations 16(2), (3) and (4)) lead to the Minister refusing to grant the permit. Thus, in the Tribunal’s view, the words “having regard to” in subregulation 16(3)(c) and, for the same reasons, in subregulation 16(4)(c), should be accorded their ordinary, plain meaning of taking the matters referred to into account.
104. ARA also contended that the words “Australian’s international obligations” in subregulation 16(3)(c) should be construed as meaning those obligations pursuant to the OECD decision and the Basel Convention, under which the OECD decision is an Article 11 arrangement. Both the Minister and Exide Australia disagree and contend that the words “international obligations” should be accorded their plain meaning, there being no indication in the text of the subparagraph to the contrary. The Tribunal notes that in subregulation 23(2) of the OECD Regulations the draftsperson has been more specific in qualifying the words “international obligations” by the addition of the words “in relation to the international movement of hazardous waste (for example, obligations under the Basel Convention and the OECD Decision)”. No such qualification appears in subregulation 16(3)(c) and, therefore, there seems no need to refer to extrinsic material (s 15AB of the Acts Interpretation Act 1901) where the meaning of the words “international obligations” – an expression of broad ambit – is clear and without ambiguity.
105. Nevertheless, if reference is made to the extrinsic materials cited, the Tribunal would reach a similar conclusion. The Explanatory Memorandum to the OECD Regulations states that the purpose of the Regulations is to give effect to the OECD Council Decision “which is intended to secure a high level of environmental protection when hazardous waste is shipped from one country to another, but without unnecessarily burdening trade”.. Referring to regulations 16, 23 and 29, the Explanatory Memorandum states that in considering the criteria to be used in making a decision “the Minister must have regard to our international obligations to reduce transboundary movements of hazardous waste”.
106. By contrast, the Explanatory Memorandum to the 1996 amending Act, which amended s 17 of the 1989 Act – a section empowering the Minister to grant Basel import and export permits – to include provision for the grant of “transit permits”, stated at page 2 that the amendment:
will ensure that Australia’s obligations under the Basel Convention are met and that we will not act contrary to our other international agreements and arrangements.
107. As Ms Connor pointed out, s 17(4) of the 1989 Act gives the Minister a discretion not to grant a Basel permit having considered three matters including in subsection (4)(c) where:
having regard to Australia’s international obligations, the waste should be dealt with in the other way rather than in accordance with the import proposals or export proposals.
108. In the Second Reading Speech for the Bill for the 1989 Act on 6 September 1989, the responsible Minister in the House of Representatives stated that the Bill makes provision for the Minister to take into account various matters when considering an application for an export permit including:
whether there are facilities for the disposal of wastes in Australia which could be used for the disposal of the exports. This ground could be used to make a more viable Australian treatment facilities. It is also consistent with the Basel Convention, which seeks to minimise movements whenever possible. The Minister may also take into account Australia’s international relations, when considering issuing permits …. [Hansard, House of Representatives 6 September 1989, p1062]
109. Thus, the Tribunal concludes that the overwhelming weight of extrinsic material supports the view that the words “Australia’s international obligations” should be given their ordinary meaning, with the consequence that the Minister (and the Tribunal) is not limited to a consideration of obligations arising only under the Basel Convention or pursuant to Article 11 arrangements.
APPLYING THE LAW
110. Although in reviewing this decision, the Tribunal stands in the shoes of the original decision-maker and exercises all the decision-maker’s powers and discretions on the basis of the evidence before it (s 43(1) Administrative Appeals Tribunals Act 1975), the Tribunal has found it useful to approach its review of this matter, first, by considering the conclusions of the HWTG who provided a Statement of Advice (T26) in relation to Exide Australia’s application for a permit and, second, by considering the Minister’s findings on relevant questions of fact that formed the basis of his decision.
111. In its Statement of Advice, the HWTG reached four conclusions. Firstly, “ARA could process the ULABs, proposed for export, in Australia”.. The Tribunal has found that ARA currently has a capacity to process 63,000 tonnes of ULABs and 3,000 tonnes of other lead scrap. It could not therefore process the Australian total of approximately 69,000 tonnes of ULABs and 6,000 tonnes of other lead scrap if the export permit were refused.
112. The second conclusion reached by the HWTG was that an “effective collection system is likely to continue in Australia whether a permit is granted or not”.. The Tribunal finds that if a permit is not granted, the Wellington recycling plant may close. If this occurs, ARA will have a recycling monopoly in Australia and New Zealand, and there is likely to be a less effective and efficient system for the collection of ULABs and scrap because of the lack of competition for ULABs and lead scrap in the market. In so finding, the Tribunal relies on the evidence of Ms Rhonda Smith to this effect. A less effective and efficient collection system may result in more dumping of ULABs and lead scrap.
113. The third conclusion reached by the HWTG was that if a permit is refused “the effects on the collection and processing of ULABs are uncertain”.. The Tribunal finds, relying on Mr Bolitho’s and Mr Smith’s evidence discussed above, that if a permit is refused, the Wellington recycling plant may no longer be viable because of lack of feedstock and may therefore close. While ULABs and other lead scrap may continue to be collected in New Zealand after the closure of the Wellington plant, the collection system may be less effective and efficient because the price offered to scrap metal collectors is likely to be less as a result of the additional cost, for example for Simsmetal, if the New Zealand Ministry grants an export permit, of freight of the ULABs and lead scrap to Australia for recycling.
114. The fourth conclusion reached by the HWTG was that the “environmental benefits and disbenefits do not differ significantly whether or not a permit is granted”. The Tribunal finds that if the Wellington recycling plant is closed, the recycling of New Zealand lead arisings will need to be undertaken at ARA’s plants in Australia. This could give rise to the transboundary movement of up to 13,000 tonnes of New Zealand lead arisings by sea to Australia. This could mean an increase in the transboundary movement of this waste, in addition to potentially less effective and efficient collection systems in Australia and New Zealand, bearing in mind that ARA does not currently have the capacity to recycle all the Australian arisings let alone the total of all Australia and New Zealand arisings. In the Tribunal’s view, these consequences are not consistent with the environmentally sound management of hazardous waste and the associated risks support a decision that Exide Australia’s application for a permit should be granted.
115. Turning to the Minister’s findings on relevant issues of fact, the Minister found that if the permit is granted to Exide Australia “both of ARA’s facilities in Australia will continue to be available … although … there will continue to be a severe impact on ARA’s operations” (T p19 para 52). The Tribunal is not satisfied that the impact on ARA is “severe”.. There is an impact to the extent that ARA’s plants are not operating at maximum capacity. Nevertheless, the recent public information made available by the two joint venture partners, Simsmetal and Pasminco, suggests that ARA increased profitability in 2002. The evidence submitted by Exide Australia also suggests ARA could do more to collect ULABs in Australia, in particular persuading Simsmetal not to sell ULABs and lead scrap to Exide Australia in Queensland. In the period June 2001 – November 2002, Exide Australia purchased 3,865 tonnes of ULABs and lead scrap from Simsmetal.
116. The Minister went on to state:
On the basis of the evidence before me, I find that:
(a)granting the permit would result in between 8,000 and 12,000 tonnes of batteries being shipped from Australia to New Zealand; and
(b)refusing the permit would result in no transboundary movement if the Wellington plant stayed open.
However, on the evidence before me, I also find that:
(c)in the absence of a subsidy from the Government of New Zealand, the Wellington smelter is likely to close if a permit is refused;
(d)refusing the permit is likely to result in the export of 12,000 tonnes of batteries from New Zeland if the Wellington plant closes.
Accordingly, I find that, on the available evidence, it is not certain that refusing a permit would reduce the level of transboundary movement of hazardous wastes, and that refusal might result in an increase in such transboundary movement. Given these findings, I am not satisfied that refusal of a permit is an appropriate measure to ensure that the transboundary movement of hazardous wastes and other wastes is reduced to the minimum, as required by Article 4.2(d) of the Basel Convention.
117. Specifically, with regard to subregulations 16(2), (3) and (4), the Minister stated (T p18):
Regulation 16(2)
45. No public interest grounds were identified for refusing the permit (other than any issues arising out of Regulations 16(3) and 16(4)). With reference to the issues arising out of Regulations 16(3) and 16(4) below, the Minister also found that refusal of a permit would mean the immediate end of a stable trade that has existed for a number of years and that the ramifications of this were complex. For this reason and because of his other conclusions, he was not satisfied, for the purposes of subregulation 16(2), that it was in the public interest to refuse the permit.
Regulation 16(3) and 16(4)
46. …
47. …
48. Based on paragraphs 15 - 21 of Annex C, the Minister was satisfied for the purpose of subregulation 16(3) that there is another way in which the hazardous waste could appropriately be dealt with (that is, it could be dealt with by ARA in Australia), and that dealing with the waste in that way would not pose significant risk of injury or harm to people or the environment. For the same reasons, he was satisfied for the purposes of subregulations 16(4) that the hazardous waste could be disposed of safely and efficiently by using a facility in Australia, and that such a disposal would be consistent with the environmentally sound management of the waste.
49. However, the Minister was not satisfied for the purposes of subregulation 16(3) that, having regard to Australia’s international obligations, the waste should be dealt with in that way rather than according to the proposal. Neither was he satisfied for the purposes of subregulation 16(4) that, having regard to the desirability of using facilities in Australia for the disposal of hazardous waste, the waste should be disposed of by using that facility rather than according to the proposal.
118. Referring first to the more general findings made by the Minister quoted in para 116 above, the Tribunal’s view is that the findings are supported by the evidence, noting that there is no evidence to suggest that any form of subsidy might be available from the New Zealand Government to assist the Wellington recycling plant if it were threatened with closure.
119. More specifically, in relation to subregulation 16(2), the Tribunal is not satisfied that it is in the public interest to refuse to grant the permit. The Tribunal finds that both the Australian public interest and that of residents of New Zealand and, more broadly, the Pacific Islands, is that the export permit should be granted and the Wellington recycling plant should continue in operation. This will promote competition in the collection of ULABs and lead scrap and ensure a more effective and efficient system and environmentally sound management of the waste. The refusal of the permit could lead to greater transboundary movements of lead arisings and give rise to a near monopoly for ARA in Australia and New Zealand which, in any event, does not currently have the capacity to recycle the total of lead arisings.
120. With regard to subregulation 16(3), while clearly there is another way of dealing with the hazardous waste, principally the ULABs, as stated above, ARA does not currently have the capacity to recycle all Australian arisings and it is likely that this would result in the stockpiling of ULABs and scrap unless, for example, the ULABs could be broken by ARA and the lead recycled by Pasminco. However, there was no very clear evidence as to this. As to subregulation 16(3)(c) and having regard to Australia’s international obligations, the Tribunal notes that Australia has obligations under the Waigani Convention, an Article 11 arrangement under the Basel Convention. These include co-operating with other State Parties “to facilitate the availability of adequate treatment and disposal facilities and to improve and achieve the environmentally sound management of hazardous wastes” (Article 10(1) Waigani Convention).
121. In the Tribunal’s view, it was reasonable for the Minister to conclude, and the Tribunal also concludes, that having regard to Australia’s international obligations, the Minister’s power should be exercised to grant the permit.
122. Finally, with regard to subregulation 16(4), the Tribunal finds that most of Australia’s ULABs and other lead scrap could be recycled safely and efficiently at ARA’s plants in Australia. However, other factors such as the need for an efficient and effective system of collection for ULABs and other lead scrap, and the desirability of there continuing to be a competing recycling plant in Wellington, New Zealand, capable of processing both Australian and New Zealand arisings and those of Pacific Island States, lead the Tribunal to conclude that the discretion to refuse the grant of the permit should not be exercised.
123. The only outstanding issue is whether the Minister (and the Tribunal) has the power to issue a permit for the export of a lesser tonnage of hazardous waste than that applied for by Exide Australia. The power to grant the permit emanates from regulation 14 of the OECD Regulations. Neither in regulation 14, nor in the empowering provisions of the 1989 Act is there any specific power for the Minister of his/her own motion to vary the application made.
124. Section 14 of the 1989 Act and regulation 10 enable the applicant for a Basel permit to vary an application:
At any time before the Minister grants or refuses a special permit, the applicant may give the Minister a notice stating that the application is varied as set out in the notice (regulation 10(1)).
Holders of a permit may also apply to the Minister to vary a permit (regulation 36 and s 27 of the 1989 Act). However, the Minister’s stated power in relation to an application for a permit is that of either granting or refusing the application (regulation 14(1)).
125. In relation to the matters to be specified in the permit, regulation 18(1)(b)(iii) provides for “the maximum quantity of the waste that may be exported” to be stated. Thus, as Ms Connor pointed out, the tenor of the regulatory mechanism is that of not permitting the Minister to vary the tonnage applied for in accordance with his/her own view of what is reasonable, but merely to refuse the application or grant the permit in terms of the maximum specified by the applicant in the permit application.
126. The Tribunal concludes that the Minister’s decision to grant the export permit was made correctly taking into account relevant matters. The Tribunal, standing in the shoes of the Minister and having regard to the matters set out in regulation 16 of the OECD Regulations, reaches the same decision. The Tribunal therefore affirms the decision under review.
I certify that the 126 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President Handley
Signed: .......................................................................................
AssociateDate/s of Hearing 10, 11, 12 and 14 February 2003
Date of Decision 17 March 2003
Counsel for the Applicant Mr N Williams SC; Mr J Stephenson
Solicitor for the Respondent Ms A Connor
Counsel for the Joined Party Mr J Sackar QC; Mr S O’Meara
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