Environment Protection Authority v Caltex Refineries Pty Limited
[2005] NSWLEC 761
•12/13/2005
Land and Environment Court
of New South Wales
CITATION: Environment Protection Authority v Caltex Refineries Pty Limited [2005] NSWLEC 761
PARTIES: PROSECUTOR
Environment Protection AuthorityDEFENDANT
Caltex Refineries Pty LimitedFILE NUMBER(S): 50047 of 2005
CORAM: Cowdroy J
KEY ISSUES: Environmental Offences :- creosote spill corroded pipeline - plea of guilty - penalty
LEGISLATION CITED: Crimes (Sentencing Procedure) Act 1999 s 21A(3)(b), s 22A
Protection of the Environment Operations Act 1997 s 120, s 241(1), s 248CASES CITED: Axer Pty Ltd v Environment Protection Authority (2001) 113 LGERA 357;
Cameron v The Queen (2002) 209 CLR 339;
Camilleri’s Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683;
Neil v The Queen (1982) 149 CLR 305;
R v Thomson; R v Houlton (2000) 49 NSWLR 383;
Siganto v The Queen (1998) 194 CLR 656DATES OF HEARING: 13/12/2005
DATE OF JUDGMENT:
12/13/2005EX TEMPORE JUDGMENT DATE: 12/13/2005
LEGAL REPRESENTATIVES: PROSECUTOR
DEFENDANT
A Brosnan (solicitor)
SOLICITORS
Environment Protection Authority
C J Leggat SC
SOLICITORS
Freehills
JUDGMENT:
THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALESCowdroy J
13 December 2005
50047 of 2005
ENVIRONMENT PROTECTION AUTHORITY
ProsecutorJUDGMENTCALTEX REFINERIES PTY LIMITED
Defendant
1 Cowdroy J: By summons filed on 19 September 2005 the defendant was charged with an offence against s 120 of the Protection of the Environment Operations Act 1997 (“the Act”) in that it polluted waters. The pollutant was identified in the summons as creosote, clarified oil and light cycle gas oil. The waters were identified as an unnamed watercourse at Kurnell, known as the CLOR drain and associated wetlands and groundwater.
2 The summons was returnable on 7 November 2005. The defendant pleaded guilty on the first return date and the facts surrounding the offence have been contained in a statement of agreed facts which is exhibit A in these proceedings. Accordingly the Court is required to determine the appropriate penalty arising out of the offence.
3 The defendant conducts the operations of an oil refinery at Kurnell. A steel pipeline, 24 inches in diameter (“the pipeline”) has been installed from a dock adjacent to the oil refinery. It passes through the refinery where it is reduced in diameter to approximately 20 inches. It then travels through the lands of the defendant into adjoining premises which are occupied by Continental Carbon Australia (“Continental Carbon”). The pipeline is used to transfer creosote from the wharf to Continental Carbon. Approximately 600 m of this pipeline are laid underground.
4 On Monday 27 September 2004 at approximately 0750 hours the defendant was notified by Continental Carbon that a leakage had occurred in the underground section of the pipeline. The location of the leak was approximately 25 m outside the southern end of the defendant’s boundary fence, beside an unpaved access road. The leak was confirmed on inspection of the area. Surface staining of the soil and free oil within the CLOR stormwater channel outside the boundary fence were apparent. The oil had also found its way into wetlands outside the defendant’s boundary fence. The Environment Protection Authority were promptly notified and immediate action was taken to contain the spillage of creosote in the stormwater channel.
5 As a result of the discharge, approximately 14,000 L of creosote escaped. Coal tar creosote is a by-product obtained from the high temperature carbonisation of coal. It is a complex combination of hydrocarbons, phenols and heterocyclic oxygen, sulphur and nitrogen compounds which is viscous and practically insoluble in water. Certain compounds in creosote can bioaccumulate in plants and animals. Creosote also contains high levels of polycyclic aromatic hydrocarbons or PAHs, which are toxic and carcinogenic and are classified as hazardous material according to the criteria of the Australian Safety and Compensation Council’s Code of Practice. Creosote is harmful to aquatic life and fish.
6 As a result of the discharge a length of 25 m of the CLOR drain was found to be heavily contaminated with creosote. A lesser concentration extended for approximately 280 m along the drain over a width of approximately 2.5 m. The film was estimated to be 20 mm in thickness. Samples were taken following the discharge.
7 Investigations revealed that the pipeline had been constructed in approximately 1965 and the discharge resulted from corrosion of an underground low point nipple on a valve. The defendant had not installed the pipeline but following the purchase of the refinery in 1990 the defendant inspected above ground portions of the pipeline were inspected. The drawings or diagrams for the pipeline had not shown the presence of the nipple which was located at a low point in the pipeline.
8 An inspection on 8 October 2004 found that the CLOR drain was still heavily contaminated. The pipeline had been exposed at the point of leakage and the valve was removed on that day. Mr Dorrington, an officer of the Environment Protection Authority walked upstream and found a small amount of contamination confined to the northern section of wetland.
9 The Environment Protection Authority required dams to be placed in the drain and a further inspection took place on 12 October 2004. On that day it was found that remediation work was continuing and inspections occurred frequently thereafter, namely on 15 October 2004, 28 October 2004, 8 November 2004 and 2 December 2004.
10 The affidavit of Belinda Catharine Patterson sworn 7 December 2005 establishes that environmental experts, Coffey Geosciences Pty Ltd (“Coffey Geosciences”), were retained to effect the remediation and validation of the site. By 28 February 2005 Coffey Geosciences had prepared a report which verified that the clean-up had been successfully undertaken and the site remediated. They reported that there was no sign of pollution in the drain.
11 Ms Patterson’s affidavit also refers to the environmental concerns of the defendant and of its plans for future environmental regulation. The defendant is proposing to spend an amount of $13.2m for environmental risk reduction in the immediate future. The cost of the clean-up of the discharge is estimated to be not less than $3.2m.
12 The Court is required, pursuant to s 241(1)(a) of the Act, to consider the harm caused or likely to be caused by the offence. The Court is satisfied that the harm was localised. The pollutant was likely to have killed any marine life but there is no evidence of any actual impact on marine life. The CLOR drain has been remediated completely and accordingly the Court is satisfied that there is no lasting environmental harm caused or likely to be caused by the offence.
13 Pursuant to s 241(1)(b) of the Act the Court is required to consider the practical measures that might have been taken to avoid the harm. The defendant had undertaken inspections of the pipeline above ground but it had no knowledge of the existence of the valve and nipple beneath the surface where the discharge occurred. Although the prosecutor submits that a testing regime should have been created for the pipeline, the evidence before the Court is that it was impractical or impossible to hydro test the pipeline or to undertake an intelligent PIG test, which involves the placement of a device in the pipeline which can detect defects. The pipeline appeared to be intact.
14 Accordingly, subject to the matters referred to hereunder, the Court is satisfied that the defendant was unaware that the pipeline had a potential defect.
15 Pursuant to s 241(1)(c) of the Act, the Court is required to determine the foreseeability of the facts giving rise to such offence. On 21 January 2001 a nipple on the pipe above ground corroded. In August 2001 a leakage occurred of the pipe due to corrosion aboveground at an anchor point. These matters suggest that the pipeline, which was 40 years old, was showing signs of obvious deterioration, at least in respect of the pipeline which was above the ground.
16 The record of interview between officers of the Environment Protection Authority and Mr Walters, an officer of the defendant, refers to the state of the corroded nipple of the time of the offence. Mr Walters said in his answers to questions asked of him (see question 45):
- The original fabrication drawing did not show this small nipple and valve. It showed a coupling with a plug welded into it and the note on the drawing which required that all the underground components of that pipe, which this was one, was to be wrapped - coated and wrapped and this was not the case. And this particular connection became very vulnerable to external corrosion because it was not coated or protected and it is the connection that failed and where the leak occurred.
17 His answer to question 50 states, inter alia, as follows:
- Question: And does it show the valve or the nipple that the leak occurred from?
Answer: No it does not because as I explained, the drawing indicates that there was no valve or nipple and somehow, during - the assumption is, and it is an assumption, that the valve and nipple was installed for the hydro test back in 1965 and not in accordance with the drawing. It was left there, obviously, because this drawing infers that it was not to be installed even but someone probably did decide to install it because it may have made the hydro test easier to control and drain the line. However, it obviously should have been removed at that time and the coupling that is shown on this drawing plugged off as is shown in the drawing and note under hear on the drawing says, ‘underground parts of the twenty inch line to be coated and wrapped’. And although the whole line underground was coated and wrapped, this particular connection had not been coated and wrapped and did not comply with this original drawing.
18 It is apparent that the defendant was, from the above evidence, unaware of a presence of a nipple and valve and unaware of any potential risk.
19 The Court is required to consider the control which the defendant had over the offence, as provided by s 241(1)(d) of the Act. The Court is satisfied that the defendant had total control over the pipeline.
20 The defendant entered an early plea of guilty. Accordingly, pursuant to s 22A of the Crimes (Sentencing Procedure) Act 1999 the defendant is entitled to consideration by way of a discount in the penalty: see also R v Thomson; R v Houlton (2000) 49 NSWLR 383.
21 The defendant, through its general manager Mr Edward Matthew Tomp, has expressed remorse and contrition for the offence. In Siganto v The Queen (1998) 194 CLR 656 Gleeson CJ, Gummow J, Hayne J and Callinan J said at 663-4:
- A person charged with a criminal offence is entitled to plead not guilty and defend himself or herself, without thereby attracting the risk of the imposition of a penalty more serious than would otherwise have been imposed. On the other hand, a plea of guilty is ordinarily a matter to be taken into account in mitigation; first, because it is usually evidence of some remorse on the part of the offender, and second, on the pragmatic ground that the community is spared the expense of a contested trial. The extent of the mitigation may vary depending on the circumstances of the case. It is also sometimes relevant to the aspect of remorse that a victim has been spared the necessity of undergoing the painful procedure of giving evidence.
22 It is now recognised that the issue of remorse and contrition are different in Cameron v The Queen (2002) 209 CLR 339 Kirby J said at 359:
- The discount for a plea of guilty to the charge brought against the accused is to be distinguished from a discount for a spontaneous and immediate expression of remorse conducive to reform and for immediate co-operation with investigating police. The latter has always been treated as deserving of such recognition in the sentencing of an accused. In many cases such feelings of repentance will continue and manifest themselves in an early plea of guilty that is adhered to at the trial. Obviously, the timing of any plea of guilty has a large bearing on the credit that should be given to the prisoner.
23 At 360 his Honour said:
- The true foundation for the discount for a plea of guilty is not a reward for remorse or its anticipated consequences but acceptance that it is in the public interest to provide the discount. Nevertheless, where genuine remorse is established to the satisfaction of a sentencing judge, it may be in the public interest to mitigate punishment further as a reinforcement for the prisoner’s resolve to avoid repetition of such conduct in the future and as an example to others.
24 In Camilleri’s Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 Kirby P, as he then was, had regard (at 700) to the issues which might be considered in the calculation of penalty. His Honour noted that the appellant was contrite and remorseful and in accordance with Neil v The Queen (1982) 149 CLR 305 at 315, the Court was prepared to take that matter into consideration.
25 The Court is satisfied in this instance the defendant has been genuinely concerned and disappointed that its pipeline failed.
26 The defendant has also co-operated throughout with the prosecutor. The offence was reported within 1 hour and 40 minutes of the occurrence and as soon as it became known to the defendant. The defendant has also agreed to pay the costs of the prosecutor. Voluminous evidence was tendered concerning the steps it is taking for its environmental program and the substantial expenditure which is to be made in respect of those matters.
27 The Court was concerned to know of any measures taken by the defendant in relation to the subject pipeline to avoid a similar occurrence, as little evidence was adduced concerning its current state. On this issue, Mr Edward Tomp gave oral evidence. He explained that the pipeline is still in existence and that it is impossible to examine the underground installation of the pipeline without excavating the whole length of the pipe.
28 Mr Tomp said that there were two low points on the pipeline which were underground and at which the nipples had been inserted for the purpose of its initial testing at the time of the installation of the pipeline. One nipple had been capped but the other, which failed, had been overlooked following the initial testing. The original loss investigation report prepared for the company states:
- Clearly it is human error that has caused this nipple/valve configuration to fail forty years after installation. It is either design practice of the day or oversight on the part of the field crews that allowed this situation to occur. The root cause identified is solely mechanical/equipment failure which isn’t truly the root cause, only the result of earlier error.
29 The Court was also concerned to know what steps have been taken to prevent a possible recurrence. Mr Tomp verified that the pipeline had been constructed by the defendant’s predecessor and did not meet the standards of the defendant. He said that a new pipeline is to be installed.
30 The loss investigation report contains a matter of concern. It states:
- The source of the leak was found readily as the nipple, on observation. There is no speculation as to the reasons the line was constructed as it was some forty years ago. However, it does cause the reader to wonder if there are potentially other sections on the line that could have been or may be constructed with a similar nipple and valve configuration.
31 Those observations were apparently made because the technical drawings of the pipeline do not reflect the manner in which it was constructed. Mr Tomp stated that only the low points are likely to fail and that those points have both been inspected and rectified.
32 The defendant bears a heavy onus to ensure compliance with the environmental regulation because of the hazardous nature of the materials which it handles. Had the defendant properly discharged its responsibilities it should have at least, in the Court’s view, inspected the low points which it has now readily identified as being prone to failure. That course seems to have been totally overlooked. No inspection was made of any underground section of the pipe and the possibility of underground failure was not even considered. To this extent, the defendant is clearly responsible for the discharge.
33 In Axer Pty Ltd v Environment Protection Authority (2001) 113 LGERA 357 Mahoney JA referred to the need for businesses to take steps to ensure their activities complied with the requirements. He said at 359:
- The legislation does not seek merely to prevent deliberate or negligent pollution. It envisages that, at least in many cases, proper precautions must be taken to ensure that pollution does not occur. Experience has shown that it is not enough merely to take care: accidents will happen. The legislation envisages that in many cases care must be supplemented by positive precautions; business must be arranged and precautions taken so as to ensure that pollution will not occur.
34 The Court is satisfied that the defendant’s conduct did not arise out of any planned criminal activity as of the type referred to in s 21A(3)(b) of the Crimes (Sentencing Procedure) Act 1999. The Court takes into consideration the early plea of guilty and the fact that the environmental harm is virtually non-existent. Nevertheless, the responsibility imposed on the defendant in handling dangerous chemicals requires the highest degree of care.
35 The maximum penalty prescribed for this offence is $250,000. The Court considers that the appropriate penalty is the sum of $60,000. However, the Court will reduce that penalty by 25% to $45,000 in view of the early plea of guilty. The defendant is to pay the legal costs of the prosecutor and the cost of investigations.
36 The Court makes the following orders:
- 1. The defendant is convicted of the offence as charged.
2. The defendant is fined the sum of $45,000.
3. The defendant is to pay the legal costs of the prosecutor in the amount of $27,607.
4. The defendant is to pay the prosecutor’s costs of investigation pursuant to s 248 of the Protection of the Environment Operations Act 1997 in the amount of $8,733.
5. The exhibits be returned except exhibit A.
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