Environment Protection Authority v Huntsman Corporation Australia Pty Ltd - [2011] NSWLEC 39

Land and Environment Court

New South Wales

Medium Neutral Citation: Environment Protection Authority v Huntsman Corporation Australia Pty Ltd [2011] NSWLEC 39
Hearing dates: 11 March 2011
Decision date: 18 March 2011
Before: Craig J
Decision:
1. The defendant is convicted of the offence against s 64 of the Protection of the Environment Operations Act 1997, as charged.
2. Pursuant to s 250(1)(e) of the Protection of the Environment Operations Act 1997, the defendant is ordered to pay to Randwick City Council, within 28 days of this order, the sum of $28,000 to be used for the Stormwater Harvesting and Recycling Project at Chifley Sports Reserve, Chifley.
3. The defendant, at his expense, and pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997 must, within 28 days of this order, place a notice in the first 12 pages of the early general news section of the Sydney Morning Herald newspaper and Southern Courier newspaper at a minimum size of 10 cm x 20 cm in the form of Annexure "A".
4. The defendant must, within 35 days of the date of these orders, provide to the prosecutor a complete copy of the page of the Sydney Morning Herald newspaper and Southern Courier newspaper on which the notice referred to in order 3 appears.
5. All future public references by the defendant to its contribution to the Stormwater Harvesting and Recycling Project at Chifley Sports Reserve must be accompanied by the following passage:
"Huntsman Corporation Australia's contribution to the funding of the Stormwater Harvesting and Recycling Project at Chifley Sports Reserve is part of a penalty imposed upon it by the Land and Environment Court of New South Wales after it was convicted of an offence of contravening a condition of its environment protection licence, an offence against s 64(1) of the Protection of the Environment Operations Act 1997."
6. The defendant must pay the prosecutor's costs, as agreed, in the sum of $40,000 within 28 days of this order.
7. Exhibits may be returned.

Catchwords: ENVIRONMENTAL OFFENCES:- sentence - breach of licence condition - s 64(1) Protection of the Environment Operations Act 1997 - offence of low to moderate objective gravity - no actual environmental harm - low risk of human harm - risk of harm reasonably foreseeable - mitigating subjective circumstances - lack of prior convictions - early guilty plea - finding of good character - remorse - co-operation with authorities - application for s 10 CSP Act refused
Legislation Cited: Crimes (Sentencing Procedure) Act 1999
Protection of the Environment Operations Act 1997
Protection of the Environment (Clean Air) Regulation 2010
Cases Cited: Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357
Cameron v The Queen [2002] HCA 6; (2002) 209 CLR 339
Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683
Director-General of the Department of Environment and Climate Change v Rae [2009] NSWLEC 137; (2009) 168 LGERA 121
Environment Protection Authority v Ballina Shire Council [2006] NSWLEC 289; (2006) 148 LGERA 278
Environment Protection Authority v Baiada Poultry Pty Ltd [2008] NSWLEC 280; (2008) 163 LGERA 71
Environment Protection Authority v BlueScope Steel (AIS) Pty Ltd [2004] NSWLEC 400
Environment Protection Authority v Caltex Refineries NSW Pty Ltd [2008] NSWLEC 194
Environment Protection Authority v Lithgow City Council [2007] NSWLEC 695
Environment Protection Authority v Tenterfield Shire Council [2000] NSWLEC 229; (2000) 112 LGERA 173
Environment Protection Authority v Transpacific Industries Pty Ltd; Environment Protection Authority v Transpacific Refiners Pty Ltd [2010] NSWLEC 85
Environment Protection Authority v Unomedical Pty Ltd (No. 3) [2010] NSWLEC 198
Leach v The Queen [2007] HCA 3; (2007) 230 CLR 1
Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357
Plath v Rawson [2009] NSWLEC 178; (2009) 170 LGERA 253
R v Thomson; R v Houlton [2000] NSWCCA 309 (2000) 49 NSWLR 383
The Queen v Olbrich [1999] HCA 54; (1999) 199 CLR 270
Thorneloe v Filipowski [2001] NSWCCA 213; (2001) 52 NSWLR 60
Veen v The Queen (No. 1) [1979] HCA 7; (1979) 143 CLR 458
Category: Principal judgment
Parties: Environment Protection Authority (Prosecutor)
Huntsman Corporation Australia Pty Ltd (Defendant)
Representation: Counsel:
Mr R M Fox (Solicitor) (Prosecutor)
Mr I S Lloyd QC (Defendant)
Solicitors:
Department of Environment, Climate Change and Water (Prosecutor)
Minter Ellison Lawyers (Defendant)

File Number(s): 50035 of 2010

Judgment

The defendant, Huntsman Corporation Australia Pty Ltd, has pleaded guilty to an offence against s 64 of the Protection of the Environment Operations Act 1997 ( the POEO Act ) in that it was the holder of a licence issued under that Act, a condition of which was contravened by a person. The charge avers that the offence occurred at Matraville on 28 October 2009. A plea of guilty having been entered, it is now necessary to determine the sentence appropriate to be imposed upon the defendant for the offence with which it is charged.

The licence held by the defendant under the POEO Act is one that authorises the conduct of nominated activities listed in Schedule 1 to that Act, namely general chemicals storage and soap and detergent production. The condition contravened required the defendant to carry out its licensed activities "in a competent manner". The contravention of this condition on 28 October 2009 led to the emission to the atmosphere of 685kg of ethylene oxide, a toxic gas that, at certain levels of concentration, can lead to acute and chronic ill health impacts on humans.

Section 64 of the POEO Act relevantly provides as follows:

" 64 Failure to comply with condition

(1) Offence

If any condition of a licence is contravened by any person, each holder of the licence is guilty of an offence.

Maximum penalty:

(a) in the case of a corporation - $1,000,000 and in the case of a continuing offence, a further penalty of $120,000 for each day the offence continues ... "

The prosecutor does not, in this case, seek the imposition of a daily penalty.

Background to plant operation

While the defendant carries out its operations on a number of industrial sites within Australia, the plant involved in the present charge is that operated by it at 16-20 Beauchamp Road, Matraville ( the plant ). This plant forms part of the Botany Industrial Park. Within that Park is not only the defendant's plant but also an effluent treatment plant operated by an independent company referred to in the evidence as Qenos.

Qenos operates and controls the effluent treatment plant in the Botany Industrial Park pursuant to an agreement to which the defendant is a party. Indeed, the majority of the common infrastructure in the effluent treatment plant is owned by the defendant.

Effluent from the defendant's plant is conveyed to the Qenos Plant where it is treated and eventually discharged into the sewer system controlled by Sydney Water. The waste stream passing to the effluent treatment plant is monitored by Qenos in its site utilities plant control room. When this monitoring demonstrates that effluent exceeds identified parameters it is diverted from the sewer line into a diversion basin until such time as acceptable levels are achieved. This is to avoid the escape of effluent that exceeds levels of contaminants or pollutants acceptable to Sydney Water.

The production process

The defendant has operated the plant since 1998. The plant at Matraville manufactures a broad range of chemicals in a number of different facilities. The incident giving rise to the offence occurred in the Glycol Ethers plant ( the GE Plant ) that is used for production of a variety of surfactants including detergents and wetting agents. Production within this plant is cyclical.

The process of production in the GE Plant involves combining a catalyst, a mixing agent and ethylene oxide in a reactor. This process results in partial polymerisation of the ethylene oxide and creation of the intended surfactant product. When carried out correctly, this process leaves a relatively benign waste stream.

Crucial to the surfactant production process is delivery of an optimal dose of catalyst to the reactor. The dose of catalyst is critical in order to ensure that all the ethylene oxide is polymerised. The optimal dose required is described as small, being measured in the order of litres per hour. Dosage at that level is achieved by means of a drip feed of catalyst into the reactor.

Catalyst is fed to the reactor by use of an adjustable dosing pump. The pump rate is set by adjustment of a micrometer fixed to the pump which is set manually by plant operators prior to the commencement of each manufacturing run. A dosing pump in good condition will deliver a volumetric flow rate that is said to be "reproducibly and precisely proportional to its micrometer setting."

The flow of catalyst to the reactor is indicated by a flowmeter downstream of the dosing pump. The flowmeter displays the rate of flow of the catalyst by means of a gauge and needle. At the time of the offence, the flowmeter was one that had been installed by the defendant in 2007. That particular flowmeter did not permit operator inspection of a float within it that rises with increasing flow. Rather, the flow was enclosed with a stainless steel tube and the level of a float within it, ordinarily used to permit observation during the course of operations, was transmitted by a system of levers to an external needle on a scale that was able to be read by an operator. External reading of the flow was therefore dependant upon accurate transmission of the float position through this system of levers and the correct operation of the needle on the external scale.

The flowmeter is said to be "a passive observer of flow" enabling an operator to make adjustments to the dosing pump. As the description implies, it is a measure of flow but not a control upon the flow rate through the system.

Once the reaction within the reactor is complete, an alcohol separation column recovers excess alcohol for recycling, with the remaining product and waste stream directed through distillation columns for separation. Once separation has taken place, the waste stream is piped to the effluent treatment plant operated by Qenos. The latter plant is about one kilometre removed from the defendant's plant with the result that up to 45 minutes can elapse before the liquid waste stream is registered and monitored at the effluent treatment plant.

Ethylene oxide is emitted from the defendant's plant

It is necessary to recite events surrounding the emission of ethylene oxide from the defendant's plant on 28 October 2009. These events are those that found the charge to which the defendant has pleaded guilty. Their recitation is founded upon an agreed statement of facts signed by the solicitors for the parties and tendered in evidence before me.

At around 9.00pm on 27 October a production run in the GE Plant commenced. The micrometer on the dosing pump was adjusted to deliver the required catalyst into the reactor. Based upon the catalyst concentration determined by laboratory analysis, the flow rate from the pump was checked against the flowmeter in order to confirm that the actual rate of flow was correct.

At about 9:30pm, following laboratory analysis to establish catalyst concentration, a plant operator made a slight reduction to the catalyst flow. This was done by reading the flowmeter in order to determine the flow rate and then manually adjusting the micrometer on the dosing pump. As this adjustment process was being undertaken, the flowmeter needle became stuck indicating a higher reading of flow rate than was actually occurring. The operator was unaware that this had occurred. By reason of the adjustment made, the actual flow rate was materially lower than it should have been. Logs of catalyst tank levels subsequently inspected reflect a reduced level of catalyst flow following the operator's adjustment at this time.

The low catalyst flow resulted in an incomplete reaction in the reactor within the GE Plant. As a result, unreacted ethylene oxide passed through the alcohol column and was emitted to the atmosphere from a hotwell vent on an elevated emission stack. It was also emitted to the atmosphere at ground level from the waste stream. Some was also trapped in the effluent system. I will return to give a fuller description of these emissions shortly.

The incomplete reaction within the GE Plant caused a low-temperature alarm to be raised in stage 1 and stage 2 of the reactor. The alarm was displayed on the plant operator's control screen. The alarm also had the consequence that injection of ethylene oxide into stage 2 was automatically stopped. However, the injection of that gas into stage 1 of the reactor continued.

The low temperature alarm displayed on the plant operator's control screen was not interpreted as indicating a problem with the flow of catalyst into the reactor. Rather, it was interpreted as reflecting a problem with the start-up of the plant. Consequently, no action was taken manually to stop the injection of ethylene oxide into stage 1 of the process.

At 2.30am on 28 October 2009 a plant technician working at the Qenos waste treatment plant observed high ethylene oxide readings in the waste stream analyser. Personnel working for the defendant were notified. Following this notification, operators at the GE Plant observed readings on the plant control screens indicating that reactor temperatures were abnormal.

Site checks were then carried out by staff at the defendant's plant to establish the level of any emission of ethylene oxide. After checking possible or suspected emission points, ethylene oxide was detected and levels followed "upstream" until it was determined that the source of ethylene oxide in the waste stream was the ethers hotwell vent in the GE Plant.

It was not until 2.50am on 28 October that the flow of ethylene oxide into the reactor was stopped. However, this did not lead to the immediate cessation of gas emission. Rather, the unreacted ethylene oxide within the reactor worked through the plant and continued to be emitted to air and to the waste stream as it was not possible to prevent or divert such emissions at that stage of the process.

Plant operators monitored the ethylene oxide levels by the use of site plant. This showed levels gradually falling over a period of hours. It was not until 4.10am on 28 October that the plant could be restarted. However, once the incident was reported to senior personnel, the plant was voluntarily shut down until the incident could be fully investigated, root cause analysis undertaken and appropriate corrective actions completed.

It is believed that the emission of ethylene oxide occurred between about 1.00am and 4.50am on 28 October. During this time a total of 685kg of ethylene oxide is calculated to have been released, with 475kg being emitted through the vent on the elevated stack and about 210kg passing into the effluent system. Of this 210kg, approximately 140kg is estimated to have evaporated from various locations along the effluent system and emitted to atmosphere at ground level. The remaining 70kg was diverted to the diversion basin at the effluent treatment plant operated by Qenos.

The emission of ethylene oxide from the defendant's plant was reported to the prosecutor at 9.20am on 28 October 2009. This was done in accordance with a condition of the defendant's environment protection licence.

The emission of ethylene oxide on 28 October 2009 is investigated

The defendant carried out an investigation of the emission incident on 28 October and reported the result of that investigation to the prosecutor. It also identified a list of corrective action to be taken which was commented upon and adjusted by the prosecutor.

In its report, the defendant identified that the root cause of ethylene oxide emission was not precisely known. However, it identified likely causes as being:

(i) a faulty flowmeter causing an incorrect indication of catalyst flow which resulted in an incorrect adjustment of the micrometer setting on the catalyst pump causing insufficient catalyst flow to the reactor with a subsequent loss of reaction rate;

(ii) the absence of an automated system both to detect low reaction within stage 1 of the process and thereby stop further injection of ethylene oxide into the reactor;

(iii) failure of the plant technician to recognise the low reaction condition within the reactor and the necessity for such operator, upon recognising the condition, to shut down manually the ethylene oxide feed to stage 1 of the reactor;

(iv) the inadequacy of the existing hazard identification process for the GE Plant by failing to identify "the low reaction scenario.

There are further matters that are agreed between the prosecutor and the defendant as bearing upon the cause of the ethylene oxide emission incident. These include the absence of a secondary or back-up system so as to alert plant operators to low catalyst flow. While there was a direct system for determining catalyst flow in the form of the dosing pump and a direct system for monitoring catalyst flow in the form of the flowmeter, these could not be monitored or operated remotely by plant operators in the plant room. Both were located outside that room.

In 2002, the defendant commissioned an independent consultant to carry out a risk assessment of the GE Plant through a review of instruments critical to the protection of safety, health and the environment. The risk assessment prepared by the consultants identified as a 'moderate risk' an incomplete reaction in the reactor that may, in turn, lead to the emission of ethylene oxide from the alcohol column. Should that occur, the risk assessment further identified "occupational health effects" as a potential consequence of such a release. The risk assessment noted that the risk could be prevented or corrected by a low catalyst flow alarm and low reactor temperature alarm. It was also indicated that such a consequence could be mitigated by a high pressure trip in the alcohol column.

Consequent upon consideration of the risk assessment, the defendant prepared a critical instrument protection system that identified the low catalyst flow alarm as one of two measures to prevent ethylene oxide emissions from the alcohol column. Such an alarm was also identified as a means for protection of safety, health and the environment.

A low flow alarm was operated by the defendant until 2004. However, it was removed in that year for what was described as "operational reasons". Those reasons were that the low flow alarm "was giving false alarms" that were causing confusion amongst plant operators. At the time of removal of that alarm no alternate mechanism was installed to address low flow and its consequences. Moreover, there was no further risk assessment or review of hazards as a consequence of that removal.

A review of the defendant's records reveals that on 22 September 2004 the defendant reported a fault with the catalyst dosing pump related to the adjustment of the micrometer on that pump. On 21 July 2006 the defendant reported a further fault with the catalyst dosing pump related to the rate of flow then being delivered by that pump.

All of these further matters were identified as being relevant to the cause of the emission incident in October 2009.

The licence condition breached and details of the breach alleged

Having described the relevant processes at the defendant's plant and the incident that gave rise to the present charge, it is appropriate to return to the condition breached and the basis upon which that breach is sought to be made out. The relevant condition of the environment protection licence held by the defendant is Condition O1.1 which provides:

" O1 Activities must be carried out in a competent manner

O1.1 Licensed activities must be carried out in a competent manner.

This includes:

(a) the processing, handling, movement and storage of materials and substances used to carry out the activity; and

(b) the treatment, storage, processing, reprocessing, transport and disposal of waste generated by the activity."

At the time at which the defendant was charged, by summons, with the offence to which it has pleaded guilty, there were seven grounds upon which it was alleged that the defendant had not carried out its activities in a competent manner. Ultimately, it was only upon three of those grounds that the prosecution proceeded and which are accepted by the defendant as being the basis upon which it has entered its plea of guilty. Those three grounds (using the prosecutor's numbering) are that it:

(i) failed to have secondary or back-up systems to alert plant operators to low catalyst flow;

(ii) failed to recognise and/or act on indicators of low catalyst flow (apparent from plant performance); and

(vi) failed to recognise the importance of systems monitoring low catalyst flow.

The defendant accepts that by reason of its failure to do those things identified in (i), (ii) and (vi) it breached its obligation to carry out its licensed activity in a competent manner. The result of this breach was the escape to atmosphere of ethylene oxide from its Matraville plant.

Ethylene oxide can affect human health

As I have earlier indicated, ethylene oxide is a gas that, at certain levels, can have acute and chronic impacts on human health. The agreed statement of facts tendered by the parties identified the basis upon which that statement was made.

Ethylene oxide is designated as a probable carcinogen by Safe Work Australia and as carcinogenic by the World Health Organisation. It is defined as a principal toxic air pollutant under the Protection of the Environment (Clean Air) Regulation 2010 ( the Clean Air Regulation ). Processes involving principal toxic air pollutants are the subject of special emission limits in the Clean Air Regulation.

Ethylene oxide is also listed as a substance, the emission of which is subject to reporting criteria under the National Environment Protection (National Pollutant Inventory) Measure ( the National Pollutant Inventory ). Substances included in the National Pollutant Inventory have been identified as important because of their possible health and environmental effects.

There are levels prescribed by the Australian Safety and Compensation Council for occupational exposure to ethylene oxide. The relevant criteria for occupational exposure to the gas is 1ppm based on exposure 8 hours per day 5 days per week assuming breaks each day, over a working life. A working life is said to approximate 40 years.

The defendant accepts that it was aware of the environmental and health risks that I have identified.

The defendant's action following the incident of 28 October 2009

As I have earlier indicated, the defendant shut down the GE Plant on the morning of 28 October 2009. It did so in order to investigate the emission that had occurred earlier in the morning and for the purpose of taking corrective measures based upon its investigation.

Operation of the GE Plant did not resume until 13 November 2009. Prior to resumption the following steps were taken:

(i) the control system for the plant was programmed so as to provide an automatic stop of ethylene oxide injection into reactor stage 1 in the event of a low reaction rate occurring within that reactor;

(ii) as a back up to the plant control system identified in (i), the installation of a hard wired system providing for automatic stop of ethylene oxide injection into reactor stage 1 in the event of a low reaction rate, using the plant's emergency shut down system;

(iii) implementation of a documented sign off procedure to ensure that all appropriate plant start-up conditions, including catalyst concentration, are established prior to any injection of ethylene oxide into the reactor;

(iv) provision of further training to plant technicians directed to start up procedure, response to new alarms and identification of low reaction rates; and

(v) the installation of a system to detect catalyst flow and stop ethylene oxide injection following the loss of catalyst flow.

Following the plant restart on 13 November 2009 the following further steps were taken:

(i) the installation of a new variable-speed drive dosing pump for the catalyst feed;

(ii) installation of a new flowmeter connected to a control system, replacing the previous manual flowmeter; and

(iii) provision of an early warning system to detect high levels of ethylene oxide in effluent generated within the plant.

A further step taken by the defendant after November 2009 was the conduct of a process hazard assessment for all of its plant at Matraville. The assessment was first carried out in respect of the GE Plant. Its purpose was to identify any other potential ethylene oxide emission risks and hazards from the operations conducted by the defendant. This assessment was completed in April 2010.

The measure of ethylene oxide release on 28 October 2009

Following the emission incident on 28 October 2009, the defendant engaged a consultant to conduct modelling of the impacts of the emission upon surrounding areas. This was done at the request of the prosecutor.

The modelling that was undertaken was based upon the emission of 475kg of ethylene oxide to atmosphere from the elevated hotwell vent downstream of the alcohol column. This modelling sought to determine the maximum concentration of the ethylene oxide plume over an area of Matraville, approximately 1km from the plant. That area included both residential and industrial development. Based upon the nominated emission figure, the maximum concentration of the plume was about 0.98 ppm over four hours.

No atmospheric modelling was undertaken in respect of the 210kg of ethylene oxide emission that was diverted into the effluent stream of the plant. This was said to be difficult to model and the discharge from the elevated hotwell vent was considered to represent the most concentrated point of release: thus, the 475kg emission was selected for modelling purposes.

Sentencing considerations

The general statutory context in which the sentence in this matter is to be considered is identified in s 3A of the Crimes (Sentencing Prodedure) Act 1999 ( the CSP Act ). The purposes of sentencing there enacted include -

"(a) to ensure that the offender is adequately punished for the offence,

(b) to prevent crime by deterring the offender and other persons from committing similar offences,

...

(e) to make the offender accountable for his or her actions,

(f) to denounce the conduct of the offender, and

(g) to recognise the harm done to the victim of crime and the community."

Section 21A of that same Act requires that both aggravating and mitigating factors identified in the succeeding subsections to that section also be taken into account.

Of particular relevance to the present offence and the imposition of a penalty for it are the provisions of the POEO Act. The objects of that Act are identified in s 3(1). Relevantly, those objects include the following:

"(a) to protect, restore and enhance the quality of the environment in New South Wales, having regard to the need to maintain ecologically sustainable development,

...

(d) to reduce risks to human health and to prevent the degradation of the environment by the use of mechanisms that promote the following:

(i) pollution prevention ...

(ii) the reduction to harmless levels of the discharge of substances likely to cause harm to the environment ...

(e) to rationalise, simplify and strengthen the regulatory framework for environmental protection ... ".

Both the objects expressed in s 3 of the POEO Act and also its operative provisions reflect what has been described as the community adoption of "a stern policy against pollution" ( Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 per Mahoney JA at 359). In that same case, his Honour observed (also at 359):

"The legislative scheme requires that proper, and strict, precautions be taken by those whose activities may cause proscribed pollution."

The fact that the present hearing is a sentencing hearing necessitates attention to the provisions of s 241 of the POEO Act. That section provides as follows:

" 241 Matters to be considered in imposing penalty

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

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

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

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

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

(e) whether, in committing the offence, the person was complying with orders from an employer or supervising employee.

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

It is in the context of these statutory provisions that I approach the determination of the appropriate penalty in this case. It is a determination that must reflect both the objective circumstances and subjective circumstances of the offence ( Veen v The Queen (No. 1) [1979] HCA 7; (1979) 143 CLR 458 at 490). Ultimately the penalty, if one is to be imposed, should be determined by an instinctive synthesis of all the relevant objective and subjective circumstances ( Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 at 359-360).

Lest it be thought that I have reversed the process of considering penalty by referring to these matters, I should record a submission made by the defendant that this case is one attracting the discretion conferred by s 10 of the CSP Act. It is submitted that the circumstances attending the commission of the offence are such that no recording of a conviction is warranted (s 10(1)). In that context reference is made to subsection (3) of the section which provides as follows:

"(3) In deciding whether to make an order referred to in subsection (1), the court is to have regard to the following factors:

(a) the person's character, antecedents, age, health and mental condition,

(b) the trivial nature of the offence,

(c) the extenuating circumstance in which the offence was committed,

(d) any other matter that the court thinks proper to consider."

I accept that s 10 of the CSP Act can, in an appropriate case, be applied to the commission of an environmental offence ( Thorneloe v Filipowski [2001] NSWCCA 213; (2001) 52 NSWLR 60 at [201]). I also accept that the provision is able to be applied to the commission of environmental offences by a corporation. Accepting these as principles, I have nonetheless concluded that the circumstances attending the commission of the offence in this case are not such as to attract the exercise of discretion afforded by s 10 of the CSP Act.

My reasons for reaching this conclusion will be expressed later in this judgment. The facts relevant to consideration of the matters identified in s 10(3) of the CSP Act will be more fully explored as I address matters relevant to the imposition of penalty, particularly those to be considered in the context of s 241 of the POEO Act.

The standard of proof on sentence

For reasons that will shortly be made apparent, I record that in seeking findings that are adverse to the defendant, it is necessary that the prosecutor establish those matters, on evidence before me, beyond reasonable doubt. Relevantly, the only evidence before me upon which any fact adverse to the defendant could be found is contained in the agreed statement of facts to which I have earlier referred.

In The Queen v Olbrich [1999] HCA 54; (1999) 199 CLR 270, the High Court collected the authorities in Australia for the previous 30 years, directed to the onus and standard of proof to be applied at a sentence hearing. Relevantly, the majority in that case said (at [27]):

" ... we would adopt what was said by the majority in R v Storey [citation omitted] - that a sentencing judge

'may not take facts into account in a way that is adverse to the interests of the accused unless those facts have been established beyond reasonable doubt. On the other hand, if there are circumstances which the judge proposes to take into account in favour of the accused, it is enough if those circumstances are proved on the balance of probabilities'."

In Leach v The Queen [2007] HCA 3; (2007) 230 CLR 1 at [41], the High Court affirmed these principles as to the onus and standard of proof when imposing sentence.

In the course of making its submissions, the prosecutor referred to a number of matters that did not appear to me to have been proved to the requisite standard. By way of example, it referred in its submissions to the affects of ethylene oxide on human health and its likely impacts upon areas of Matraville on 28 October 2009. In so doing, it sought to draw upon observations made by Pepper J in Environment Protection Authority v Unomedical Pty Ltd (No 3) [2010] NSWLEC 198. However, her Honour's observations there contained were founded upon evidence adduced before her (see, for example, [201] and [237]). The only evidence before me as to the affects generally of ethylene oxide upon human health and the likely impact of the discharge of that gas from the defendant's plant on 28 October 2009 is that set out in the agreed statement of facts.

Objective circumstances

Maximum penalty

It is well established that the maximum penalty for an offence is of significance in determining the objective gravity of the offence under consideration. In Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683, Kirby P observed (at 698):

" ... the maximum penalty available for an offence reflects the 'public expression' by parliament of the seriousness of the offence ... . The task of a court is to assess the relative seriousness of the offender's particular offence in relation to a worst case for which the maximum penalty is provided."

As I have earlier recorded, the maximum penalty for an offence against s 64 of the POEO Act by a corporation is $1,000,000. Clearly enough, that maximum penalty is to be considered in the context of a range of circumstances demonstrating the commission of an offence against the section. Nonetheless, the maximum penalty indicates the seriousness with which the legislature regards an offence involving a breach of licensed conditions.

Objective gravity of the offence

The objective gravity of an offence has two principal components: the precise acts or omissions of the offender and the consequences of those acts or omissions ( Environment Protection Authority v Baiada Poultry Pty Ltd [2008] NSWLEC 280; (2008) 163 LGERA 71 at [22]). Relevant to the first of those components, namely the precise acts or omissions of the offender, are the objects of the legislation and nature of the licensed conditions breached.

I have earlier recited the objects of the POEO Act relevant for present purposes (at [50]). By reason of the events of 28 October 2009 that I have earlier described, those objects of the legislation were compromised. The environment on and in the vicinity of the plant was neither protected nor enhanced by the defendant's conduct. There was a potential increased risk to human health by dint of those events and the defendant's admitted failure to conduct its activities in a competent manner undermined the regulatory framework for environment protection.

As the prosecutor submitted, the licensing system created by the POEO Act reflects an important aspect of a precautionary and adaptive management approach to an activity where environmental impacts may result from its operation. The imposition of licence conditions are therefore an integral part of prudent environmental management and regulation ( Environment Protection Authority v Ballina Shire Council [2006] NSWLEC 289; (2006) 148 LGERA 278 at [76]).

Conditions imposed upon an environment protection licence traverse a spectrum of obligations. Some may be seen to be merely procedural, the consequences of non-observance of which are not necessarily adverse to the environment. Others may be regarded as more fundamental in the control of the regulated activity. A condition requiring that the activity be carried out in a competent manner is a condition of the latter kind. Failure to observe the requirement in the present circumstances involved a system based failure.

Evidence was led on behalf of the defendant, indicating that it was part of a multinational group of companies operating facilities of the kind conducted at Matraville both elsewhere in Australia and internationally. Its group revenues for 2010 were said to approximate $9.25 billion. As such, it was a company that can be expected to operate its activities in a competent manner.

With these general observations directed to the seriousness of the offence, it is necessary to heed the statutory direction contained in s 241 of the POEO Act in aid of considering the objective gravity of the offence and thus ultimately arriving at an appropriate penalty.

Environmental harm

As the agreed statement of facts records (at [37]), no actual environmental harm resulted from the commission of this offence. That statement aside, the modelling of the emission plume undertaken at the request of the prosecutor would bear out that agreed fact.

However, the potential for harm cannot be stated in such absolute terms. Nonetheless, the evidence establishes, on the balance of probabilities, that the only potential was a low potential for human harm. So much is recorded, in terms, in [38] of the agreed statement of facts. Despite the efforts on behalf of the prosecutor in the course of submissions to argue otherwise, there was no basis upon which I could find beyond reasonable doubt that the potential harm was greater than is there recorded.

The potential health impacts from inhalation or ingestion of ethylene oxide have earlier been recorded (see [37]) - [39]. However, it must also be recorded that, on the only evidence before me, the level at which those health impacts are likely to be experienced is that reflected in the occupational exposure level stipulated by the Australian Safety and Compensation Council. It will be remembered that such a level is 1 ppm over a working day of 8 hours, 5 days per week and for the working life of someone so exposed. By comparison the modelled level of emission from the incident occurring on 28 October 2009 was 0.98 ppm for a 4 hour period.

While it is true, as the prosecutor submits, that this level did not take account of 210kg of ethylene oxide captured in the effluent waste stream, no evidence was provided as to the likely increase in the modelled level of emission on account of that additional source. Logic would suggest the improbability of any increase being such that the aggregate level would equate to or exceed the occupational exposure level, having regard to the extended time over which the occupational level is postulated.

The prosecutor also sought to sustain its submissions directed to potential harm by reference to the 2005 publication Approved Methods for the Modelling and Assessment of Air Pollutants in New South Wales . A table to that document indicating impact assessment criteria for principal toxic air pollutants indicate potential adverse air quality impact determined by dispersion modelling if the average one hour level of ethylene oxide is greater than 0.0018 ppm. Just how this criterion was to be applied in order to draw any conclusion relevant to the incident at the defendant's plant on 28 October 2009 was not revealed by the evidence. The document seemed to be predicated upon modelling carried out by reference to a nominated methodology. Whether that particular methodology had been utilised for the purpose of the modelling undertaken on behalf of the defendant was not revealed by the evidence.

It was submitted on behalf of the prosecutor that while the occupational criteria may be relevant to assess the potential impact upon workers, it took no account of impact upon those below the working age or upon the elderly. While that may be true, other than the description of the gas as being either a potential or an actual carcinogen, no other evidence was led to indicate the concentration of the gas in the atmosphere and the level of exposure required in order to subject the young or the elderly to potential ill health.

I accept that potential risk of harm is an important factor to be considered in any case that is prosecuted under the POEO Act ( Environment Protection Authority v Lithgow City Council [2007] NSWLEC 695 at [32]. However, in the face of the evidence before me the only conclusion that I am able to reach beyond reasonable doubt is that conceded by the defendant and not contradicted by the prosecutor, namely that there was a low potential for human harm.

I accept the prosecutor's submission that, given the potentially serious health affects from ethylene oxide, the potential harm cannot be trivialised. However, given the limited evidence before me as to the toxicity of ethylene oxide and the fact that dispersion modelling identified the level and extent of emissions, this is not a case in which I am able to conclude that there was "a very real potential for environmental harm" occasioned by the gas emission on 28 October. In this regard, my conclusion is to be contrasted with that reached by Pepper J in Environment Protection Authority v Unomedical Pty Ltd (No 3) [at 237].

Practical measures

I have earlier identified those steps that were taken by the defendant to address the root cause of the incident on 28 October 2009, so far as its investigations could discover that root cause. As will be apparent from the earlier recitation of fact (see [43]), in the time between 28 October and 13 November 2009 when the GE Plant resumed operation, the defendant had not only completed its investigation but undertaken a number of measures designed to avoid the unintended emission of ethylene oxide to atmosphere from those causes that occasioned the offending incident.

The relatively short period of 16 days for this process to be undertaken supports the inference that the measures were practical in that, by description, they would not appear to have been particularly complex or difficult to implement for the operator of an activity of a kind conducted by the defendant. All of the measures taken would appear to be consistent with a need to address the three grounds upon which the defendant acknowledged breach of Condition O1.1 of its environment protection licence. It is not suggested that these were not practical means of so doing.

I find beyond reasonable doubt that the measures identified as having been taken by the defendant following the incident of 28 October 2009 were practical measures that may have been taken by it to prevent control or mitigate the potential harm that arose by the emission of ethylene oxide from its plant.

Reasonable foreseeability

As I have earlier recorded, the defendant has indicated its awareness of the environmental and health risks of ethylene oxide. It was therefore reasonably foreseeable that harm or potential harm to the environment could be occasioned if appropriate measures were not in place to avoid or arrest the escape of this gas to atmosphere.

The clearest demonstration of the foreseeability of this risk emerges from the risk assessment carried out by the defendant in 2002. It will be remembered that an incomplete reaction within the reactor of the GE Plant was identified as a moderate risk, with the potential consequences of such an occurrence being occupational health effects. The means by which the risk could be addressed was identified and that means included installation of a low flow alarm. Such an alarm was installed but later removed for "operational reasons". No alternate means of addressing the identified risk was devised.

Moreover, acceptance by the defendant of the three grounds upon which it failed to carry out its activities in a competent manner seem to me be relevant to this head of consideration. The failure to have secondary systems to alert plant operators to low catalyst flow; failure to recognise indicators of low catalyst flow and failure to recognise the importance of systems monitoring low catalyst flow are all matters that, so it seems to me, recognise the foreseeability of harm likely to be caused to the environment.

I have earlier set out the result of the defendant's investigation into the "root cause" of the offence. I have no need to repeat that detail. Certainly, one cause is a faulty flowmeter but that does not address the absence of a back up or secondary system designed to address the consequence of that component being faulty. Technician or operator error is also recognised. However, as cases decided in this Court have determined, the likelihood of human error in the conduct of industrial activity must be recognised and appropriate precaution taken in contemplation that error of that kind may occur ( Environment Protection Authority v Tenterfield Shire Council [2000] NSWLEC 229; (2000) 112 LGERA 173 at [32]).

The importance of proper precautions beyond the expectation that employees will take care was the subject of observation by Mahoney JA in Axer Pty Ltd v Environment Protection Authority. There, his Honour 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."

The installation and operation of a low catalyst alarm or some other mechanism either designed to check the correct flow of catalyst into the reactor or, upon incomplete reaction occurring, providing for the flow of ethylene oxide to be stopped, would have been the kind of precautionary steps directed to overcome a problem of technician or operator error.

For these reasons, I am satisfied beyond reasonable doubt that the defendant could reasonably have foreseen harm likely to be caused to the environment by failing to operate the GE Plant in a competent manner.

Control of causes

As the holder of the environment protection licence, the breach of a condition of which is the subject of the present charge, it is apparent that the defendant had control over the causes that gave rise to the offence. It was its failure to carry out the licensed activity in a competent manner that founds the offence.

In its written submissions, the defendant acknowledges that an alarm signal was misinterpreted by a plant operator. This is a reference to the misinterpretation of the low temperature alarm as being an indication of a plant start-up problem rather than a problem occurring as a result of incomplete reaction between ethylene oxide and the catalyst.

It is true, as the defendant submits, that once the elevated level of ethylene oxide in the waste stream was detected by Qenos, action was taken by the defendant to address the consequences of the system malfunction. However, this circumstance does not detract from the fact that the defendant had control of the causes given rise to the commission of the offence, the evidence establishing this circumstance beyond reasonable doubt.

Reasons for commission of the offence

A factor by which the objective seriousness of an offence may be measured are the reasons for its occurrence. Expressed at a level of generality, the present offence occurred by reason of the defendant's failure to operate its surfactants plant in a competent manner. While, as I have held, the potential pollution arising from the offence was foreseeable, it is clear that the offence was not deliberately committed and the defendant gained no commercial advantage from its commission.

Conclusion on objective circumstances

The nature of the offence; the maximum penalty; the potential for harm to the environment, albeit low; the fact that practical measures were able to be taken to prevent harm, coupled with the actions of the defendant in controlling, abating and mitigating that potential harm; the reasonable foreseeability of harm likely to be caused by commission of the offence; the extent to which the defendant had control over the causes giving rise to the offence and the absence of any deliberate action on the part of the defendant committing the offence, including the absence of commercial gain by reason of its commission, are all factors that inform the determination of objective gravity. Having regard to these factors, I conclude that the offence to which the defendant has pleaded guilty is an offence of low to moderate objective seriousness.

Subjective circumstances

When determining the penalty appropriate to be imposed for this offence, I am required to take account of those factors personal to the defendant that both aggravate and mitigate the seriousness with which its conduct should otherwise be considered. So much is required by s 21A(1) of the CSP Act.

Aggravating circumstances

The prosecutor submits that an aggravating factor identified in s 21(a)(2)(i) is open to be found in the present case. It submits that the offence to which the defendant has pleaded guilty was one committed "without regard for public safety".

In propounding this submission, the prosecutor asserts that the events leading to the emission of ethylene oxide on 28 October 2009 should be categorised as something more than "a mere industrial accident." It points to the defendant's awareness of the risks to public health and the environment by the escape of ethylene oxide into the atmosphere. It further points to the removal of the low flow alarm without any further risk assessment and the foreseeability which the defendant had of difficulties in identifying escape of the gas in the very circumstances that occurred on 28 October. The submission concludes that by its actions in removing the low flow alarm and in failing to address other measures that would stop the flow of ethylene oxide into the reactor in the event of incomplete reaction, it exposed the surrounding industrial and residential community to a preventable risk from a known or potential carcinogen.

The difficulty that the prosecutor faces in seeking to sustain this submission is that it bears the onus of establishing beyond reasonable doubt the aggravating factor upon which it relies. That is, it bears such an onus to establish that the defendant did operate the GE Plant in the manner alleged in the charge without regard for public safety. I am not persuaded that it has discharged that onus.

It will be remembered that while the root cause of the offence was not known precisely, it stemmed from a faulty flowmeter that had been installed only two years earlier. There was human error on the part of an operator or technician in interpreting an alarm which had sounded consequent upon incorrect flow of catalyst and there were no back up or secondary systems to arrest the flow of gas of the kind now installed.

However, the detection of high levels of ethylene oxide in effluent was part of the system associated with the operation of the defendant's premises, being one that alerted personnel to the kind of problem which was exposed upon the occurrence of the offence and led to the remedial action taken by the defendant. While the plea itself together with the evidence led demonstrates that measures were able to be taken so as to avoid or mitigate the consequence of the accidental escape of ethylene oxide from the process, the evidence does not bespeak, beyond reasonable doubt, an absence of regard for public safety.

Mitigating factors: prior criminality

The defendant has operated its plant at Matraville, producing surfactants since 1998. In that time it has not been convicted of any environmental offence.

It has been issued with and has paid two penalty infringement notices for breaching its environmental protection licence. The infringement alleged in each case was a breach of s 64(1) of the POEO Act. The event giving rise to the issue of each notice was faulty or failed equipment that, on one occasion, led to the release of ethylene oxide to the atmosphere and on the other occasion resulted in the release of propylene oxide to the atmosphere.

While the two penalty infringement notices must be noticed, they do not amount to conviction of an offence within the meaning of s 21A(3)(e) of the CSP Act. The defendant's clear record is a mitigating factor in accordance with the subsection.

Mitigating factors: good character

There is detailed evidence before me of the significance which the defendant has attached to the operation of its many facilities, showing responsibility for the environment, health and safety. This evidence is in the form of a lengthy affidavit sworn by Stephen Stilliard whose position is Vice President, Asia Pacific, Huntsman Performance Products Division. Mr Stilliard is responsible for the defendant's operations at Matraville. He was not required by the prosecutor to attend Court for cross-examination.

The defendant is incorporated in Australia and forms part of the Huntsman Group of Companies, global manufacturers and marketers of differentiated chemicals used in a wide range of products. The ultimate holding company is Huntsman Corporation, apparently incorporated in the United States of America. It operates manufacturing plants in locations throughout the world and worldwide it has over 11,000 employees.

Throughout its operations, including those in Australia, it has maintained a detailed environment, health and safety program. Its policy is summarised in the following statement:

"Huntsman is committed to achieving excellence in environmental, health and safety (EHS) protection. It is the responsibility of both management and associates to operate safe, clean and efficient facilities in an environmentally and socially responsible manner."

This policy has led to new and more detailed programs that have been applied, amongst others, to its Australian operations. These detailed programs have included the imposition on each facility, including that at Matraville, of at least 40 environment, health and safety standards that include pollution prevention, employee health and safety, community awareness and emergency response. Frequent audits have been carried out within the defendant's Australian facilities to ensure compliance with these standards.

Since commencement of its operations in 1998, the defendant has committed to and implemented various pollution reduction measures in co-operation with the defendant. These measures have included ethylene oxide reduction programs, said to be a key element of the defendant's strategy for the Matraville facility. Improvements implemented by the defendant since commencement of its operations have included a number of measures directed to controlling and detecting the emission of ethylene oxide from its plant.

For a number of years the defendant has been represented on the Botany Industrial Park Community Consultative Committee. That committee has met regularly to discuss community issues directed to the industrial activities carried out upon the Botany Industrial Park.

These matters reflect, in summary form, the detail of some of the evidence that emerges from Mr Stilliard's affidavit. I accept them as demonstrating the defendant to have been a good corporate citizen that has endeavoured to exercise, in a responsible manner, its obligations to protect the environment as well as the health and safety of not only its employees, but those in the community that may be affected by its activities.

In the context of s 21A(3)(f) of the CSP Act, I find the defendant to be a corporation of good character. While so finding, I acknowledge that the weight to be accorded to this factor, given that it arises in the context of the commission of an environmental offence, may not be as great as would be the case for offences of a different kind ( Plath v Rawson [2009] NSWLEC 178; (2009) 170 LGERA 253 at [147] - [148]).

Mitigating factors: remorse and contrition

In his affidavit, Mr Stilliard has expressed, on behalf of the defendant, remorse and regret that ethylene oxide was emitted from its plant on 28 October 2009 in the circumstances earlier described. He indicates that the defendant considers any form of record for breach of an environmental law as being unacceptable to it. As a demonstration of the company's concern to improve its environmental performance, he has identified a program specifically adopted for and directed to improvement of its facility at Matraville. This will involve the commitment of capital expenditure of about $8,000,000 over the next 3 years in order to implement upgrading and improvement works "in the shortest practical time frame".

Mr Stilliard specifies the particular work that is to be undertaken as part of this 3 year project. It is largely directed to increased control upon ethylene oxide emissions. It is a demonstration of the acceptance by the defendant of responsibility for the events of 28 October 2009 and is being implemented to avoid a recurrence of that event and generally to improve the environmental safeguards available at the Matraville facility.

Taking these matters into account, together with the defendant's plea of guilty and steps taken by it immediately following the incident, I am satisfied that the defendant is truly remorseful and that such remorse is to be taken into account when imposing penalty in accordance with s 21A(3)(a) of the CSP Act. As a further demonstration of this remorse, two senior staff members of the defendant from its Matraville facility attended the sentence hearing.

Mitigating factors: plea of guilty

A mitigating factor identified in s 21A(3)(k) is the fact that a plea of guilty has been entered by the defendant "as provided by section 22". Section 22 relevantly provides as follows:

" 22 Guilty plea to be taken into account

(1) In passing sentence for an offence on an offender who has pleaded guilty to the offence, a court must take into account:

(a) the fact that the defendant has pleaded guilty, and

(b) when the defendant pleaded guilty or indicated an intention to plead guilty, and

(c) the circumstances in which the offender an intention to plead guilty,

and may accordingly impose a lesser penalty than it would otherwise have imposed."

The defendant's plea of guilty was entered on the third occasion upon which the proceedings were before the List Judge of this Court. The return date of the prosecutor's summons was 22 October 2010. On that occasion the matter was adjourned to enable the defendant to make submissions to the prosecutor with respect to the particulars of the charge that had been provided. The prosecutor's response to those submissions was received by the defendant four days prior to the date upon which the matter was next listed for mention before the Court, namely 19 November 2010. The prosecutor having indicated that it wished to proceed, the matter was again adjourned to enable the defendant to confer with counsel in relation to the prosecutor's response.

The third mention of the matter occurred on 3 December 2010 when the plea of guilty was entered. It would seem that by that stage the particulars of the charge upon which the prosecutor would proceed had been reduced from those nominated in the summons that had been issued to the defendant. It will be recalled that of the original seven bases upon which the defendant was claimed to have breached the relevant licence condition, only three of those were ultimately relied upon.

In these circumstances, the defendant submitted that it should not be disentitled to the benefit of a full discount for its entry of a plea of guilty ( R v Thomson; R v Houlton [2000] NSWCCA 309; (2000) 49 NSWLR 383). It submits that it acted with due dispatch, properly determining for itself that the basis upon which the prosecutor would proceed could be sustained and seeking counsel's advice on a matter of obvious significance to it.

For its part, the prosecutor did not contend that there was undue delay on the part of the defendant. As the judgment of the Court of Criminal Appeal in Thomson makes clear, a significant element of the discount is an early plea of guilty but the determination as to whether the plea meets that description will vary according to the circumstances of each case (at [121]).

The binding principle relating to the mitigating circumstance of an early plea is articulated by the High Court in Cameron v The Queen [2002] HCA 6; (2002) 209 CLR 339. As the judgments of that Court make clear, the discount for an early plea is to be applied when the plea is entered at the earliest reasonable opportunity in response to the charge that ultimately proceeds (at [23]; [78] - [80]). In the present case, once the basis upon which the charge would proceed had been indicated by the prosecutor, the defendant entered its plea of guilty and did so promptly. Its entry of that plea on the third mention of the matter was, so it seems to me, the first reasonable opportunity for it so to do.

Mitigating factors: assistance to prosecutor

From the time of the incident on 28 October 2009, the defendant has fully co-operated with the prosecutor. It reported the incident, as it was required to do, at 9.20am on that day. It assisted the prosecutor in its investigation and reported its findings upon the incident; it provided personnel to the prosecutor for interview and it provided such documents and information as was sought from it. Ultimately, it co-operated, through its legal advisors, in settling the agreed statement of facts which is the evidentiary foundation for the findings made in the course of this judgment.

For these reasons, the defendant is entitled to have its full and complete co-operation with the prosecutor considered as a mitigating factor in accordance with s 21A(3)(m) of the CPA Act.

The appropriate sentence

The imposition of a sentence serves a number of purposes. As the provisions of s 3A of the CSP Act indicate (see [49]), these purposes include retribution and denunciation, as well as deterrence, both general and specific.

General deterrence

The need for general deterrence when fixing an appropriate penalty is an important consideration in the sentencing process. That penalty must be sufficient to deter others who, by oversight or inadequacy in process systems, run the risk of committing an offence against the POEO Act in the hope that should an oversight or inadequacy be exposed, only nominal penalties will be imposed.

The integrity of the system of licensing an activity that may occasion pollution is fundamental in giving effect to the objectives of the POEO Act. It needs to be made clear to licence holders that conditions attaching to a licence must be observed. The importance of compliance with conditions needs to be emphasised by the imposition of an appropriate penalty that serves to deter those who do not approach compliance with the rigour mandated by the legislation.

Specific deterrence

The prosecutor submits that an important component of penalty in the present case is one for specific deterrence. It so submits on the basis that the defendant has paid two penalty infringement notices, both of which involve breaches of the condition of its licence for failing to maintain and operate plant and equipment in its premises in a proper and efficient manner.

While the defendant acknowledges, as it must, the breach of licence condition, evidenced by the payment of these two penalty infringement notices, it points to the remedial action that it has taken both immediately following the incident on 28 October 2009 and more generally since that time in reviewing the environmental performance of its activities at Matraville. In particular, it points to the specific measures to be taken over the next three years at a cost exceeding $8,000,000 in order to secure a very high level of environmental performance.

There is substance in the defendant's submissions. The extent to which the defendant has committed itself in responding to the events of October 2009 leads me to accept that the likelihood of a recurrence is low. As a consequence, the need to reflect a component for specific deterrence in the penalty is equally low.

Parity

The principle of even-handedness, or parity in sentencing, requires the Court to have regard to the general pattern of sentencing for offences of the kind under consideration. However, care must be taken in undertaking that task. There is inevitable difficulty in attempting to compare the penalty in one case with the penalty in another by reason of the wide divergence of facts and circumstances that will properly inform the penalty in each. A further basis for discrimination in applying other sentences is the prospect that those sentences themselves may be aberrant and therefore not an appropriate basis for determination of the range of appropriate penalties in subsequent cases ( Director-General of the Department of Environment and Climate Change v Rae [2009] NSWLEC 137; (2009) 168 LGERA 121 at [75]).

Between them, the parties identified three cases of relevance to be considered when determining an appropriate penalty. In Environment Protection Authority v Caltex Refineries NSW Pty Ltd [2008] NSWLEC 194, Lloyd J was required to consider the appropriate penalty to be imposed upon the defendant following a plea of guilty to a charge of breaching a licence condition, contrary to s 64(1) of the POEO Act. An odour described as a "foul sulphurous odour" had been emitted from the defendant's oil refinery for a period of 6 days between 23 December and 29 December 2006. According to the charge, this occurred because of the failure of the defendant to maintain and operate equipment in a proper and efficient condition and manner, contrary to a condition in its environment protection licence. His Honour determined that the breakdown of equipment that caused the emission was not foreseeable and that the offence was of low objective seriousness. The defendant had a number of prior convictions for the commission of environmental offences. The defendant had co-operated in investigating the charge and agreed to pay the prosecutor's costs. His Honour determined the appropriate penalty to be $120,000, reduced to $78,000 by reason of the mitigating circumstances favourable to the defendant.

Breach of an environment protection licence was also the subject of the charge in Environment Protection Authority v BlueScope Steel (AIS) Pty Ltd [2004] NSWLEC 400. By reason of a failure of equipment in the defendant's steel making plant, raw coke oven gas was emitted from its plant over a period of about 3 hours. The escaping contaminants contained hydrogen sulphide, hydrogen cyanide, ammonia and other volatile organic compounds together with solid particles. Of those gases, hydrogen sulphide was said to be the most acutely toxic.

The condition breached in BlueScope Steel was, once again, a condition requiring that plant and equipment be maintained in a proper and efficient condition. Talbot J found (at [59]) that there was no actual environmental harm occasioned by the material that escaped but that it "had the potential to cause mild irritation and potentially lethal consequences". The offence was described as unintended, but the occurrence was not unforeseen. The offence was further described by his Honour (at [63]) as "not in the most serious category, nor is it trivial or inconsequential."

Talbot J recognised a number of mitigating circumstances that weighed in favour of the defendant. They included its co-operation with the prosecutor, the readiness with which it addressed the problem giving rise to the incident and the priority it had given to environmental performance in carrying out its large-scale industrial activities. It also had a record of conviction for prior environmental offences.

In the result, BlueScope Steel was fined $70,000 in addition to payment of the prosecutor's costs, as it had agreed to do. It is not possible to discern from his Honour's reasoning what the gross penalty was nor the discount applied to that figure before determining the net penalty of $70,000.

The third matter calling for consideration under this head is the decision of Pepper J in Environment Protection Authority v Transpacific Industries Pty Ltd; Environment Protection Authority v Transpacific Refiners Pty Ltd [2010] NSWLEC 85. The first defendant was charged with two offences and the second defendant with one offence. One of the two offences with which the first defendant was charged and the offence with which the second defendant was charged was contravention of s 64(1) of the POEO Act. The licence condition in each case prescribed limits upon concentration of specific pollutants able to be emitted from the premises. Those limits were exceeded on each of the occasions which gave rise to the charges brought against the respective defendants.

The Transpacific companies reprocessed used lubrication oil enabling the end product to be used again as a lubricant. The treatment or refining process resulted in the emission of gases that included volatile organic compounds as well as hydrogen sulphide and carbon monoxide. Included among the volatile organic compounds that were emitted was benzene, described as a principal toxic air pollutant. On each of the occasions that led to the two charges, sampling of gaseous emissions from Transpacific's premises indicated levels of volatile organic compounds well in excess of the limit stipulated in the conditions attaching to the environment protection licence. In particular, those emissions contained approximately 31 per cent benzene on each occasion. Notwithstanding this level, it was agreed by the prosecutor that there was no evidence of actual environmental harm.

Having heard competing evidence as to the potential for harm from the measured emissions, her Honour determined (at [38]) that the potential risk of harm "was so minimal as to be negligible." Neither of the defendants had any prior convictions for environmental offences. Taking into account the objective gravity that her Honour had assigned to the commission of the offences, together with the subjective and mitigatory circumstances that applied, her Honour determined that an appropriate penalty for the first offence would be $10,000 and for the second offence $15,000. To each of these prospective penalties a discount of 35 per cent was applied yielding net fines of $6,500 and $9,750 respectively. These fines reflected application of the totality principle as the offences related to the operation of the same premises. The offences occurred while the defendants were endeavouring to modify the facility in an endeavour to achieve the emission limits.

In the present matter, the prosecutor categorises the offence as being of moderate seriousness. It emphasises comparability between circumstances in which the present offence was committed and the circumstances pertaining in both Caltex and BlueScope Steel , perhaps with emphasis on the latter. In my opinion there are difficulties in seeking direct application of the penalties imposed in those cases to that which is appropriate in the present case.

The description of the offence in BlueScope Steel as being of "moderate seriousness" appropriately summarises the manner in which Talbot J described the offence in that case. It yielded a penalty of $70,000. The description by Lloyd J of the offence in "Caltex" was one of "low objective seriousness" yet a penalty of $78,000 was imposed. Each of the defendants in those cases was able to attract similar mitigating circumstances and each had a record of prior convictions for environmental offences.

The defendant identifies as most relevant on the question of parity, the decision of Pepper J in Transpacific . It identifies the absence of actual environmental harm in that case as well as the minimal or low potential for harm arising from the emission of gases beyond the limit stipulated by condition. The defendant also draws attention to the fact that Transpacific had no recorded prior convictions for environmental offences. In respect of all of those matters it identifies their direct comparability with the present case. Indeed, it draws attention to the fact that, on the evidence in Transpacific , the emission of volatile organic compound, particularly benzene, would appear to be at least as significant, if not more significant, than the emission of ethylene oxide in the present case.

Consideration of these three cases demonstrates the need to be discriminating when seeking to apply a statistical approach to penalty derived from those cases. Clearly, none of the three cases is directly comparable to that which I am considering. Different descriptors applied to a particular offence committed against s 64 will no doubt have a bearing upon the determination of the penalty ultimately imposed as will the particular circumstances, both objective and subjective, that pertain in each case.

Clearly, the duration of the emission in the present case is far less than that considered in Caltex : 4 hours compared to 6 days. The duration is closer to that which was the subject of consideration in BlueScope Steel but all the other circumstances brought to bear upon the penalty imposed in that case would seem to involve a higher level of criminality than that which I attribute to the present defendant. As I have earlier indicated, the present offence is of low to moderate objective seriousness: the level of the defendant's criminality, taking into account all factors, is low.

In short, the three cases to which the parties have collectively referred are of only limited assistance in determining the appropriate penalty in the present case. While the facts and circumstances identified in Transpacific may seem closer to those circumstances demonstrated to exist in the present case, there were undoubtedly other considerations that were seen to justify the imposition of penalties at the level imposed for a breach of s 64 of the POEO Act. I do not identify circumstances in the present case that would justify a penalty at that level.

Prosecutor's costs and advertising expenses

The defendant has agreed to pay the prosecutor's costs of these proceedings, agreed in the sum of $40,000. I take account of this fact in imposing the appropriate penalty.

At the request of the prosecutor, the defendant has consented to an order for publication in both a metropolitan newspaper and local newspaper of a notice of its conviction of the offence to which it has pleaded guilty. The making of such an order is authorised by s 250(1)(a) of the POEO Act.

The cost of publishing those notices is to be borne by the defendant. Having regard to the size of the advertisements that the proposed order will stipulate, the cost of publishing those notices will, so I am told, approximate $10,800. The obligation to meet that cost will also be taken into account in the penalty that I fix.

Conclusion as to penalty

Synthesising the objective circumstances of the offence, its objective gravity together with the matters appropriate to be considered by way of mitigation, I consider the appropriate penalty to be $28,000. This figure reflects a discount of 25 per cent for the defendant's plea of guilty as well as a discount for the other mitigating factors I have identified.

Rejection of the submission under s 10 of the CSP Act

I have earlier indicated that I would not accede to the submission made on behalf of the defendant for dismissal of the charge against it pursuant to s 10 of the CSP Act. My detailed discussion of both the objective and subjective circumstances attending the commission of this offence enables me to express in a summary manner the reasons why I do not accede to the submission.

Applying the considerations identified in s 10(3), I do not regard the offence as being trivial in nature nor do I consider the circumstances in which the offence was committed to be extenuating. I have earlier concluded that the offence is of low to moderate objective seriousness. The reasons for reaching this conclusion have been articulated, essentially by reference to those matters calling for consideration under s 241 of the POEO Act.

Founded upon the matters there addressed, it would be illogical and inconsistent to conclude that the offence was trivial in nature. The fact that, by reason of the offence there was potential, albeit low, for environmental harm; the fact that it was necessary to modify equipment and train personnel to address the causes giving rise to the offence, all militate against the offence being categorised as trivial.

Moreover, the circumstances surrounding the emission of ethylene oxide on 28 October 2009 seem to me to reflect the antithesis of extenuating circumstances. While I have accepted the defendant's submission that its actions were not deliberate, nonetheless it allowed the GE Plant to be operated in the face of an independently commissioned risk assessment identifying the existence of a moderate risk that the events of the kind experienced on 28 October might occur. In the face of that corporate knowledge, the occurrence of an event consistent with the identified risk can hardly be described as an extenuating circumstance. To focus, as the defendant seeks to do in its written submission, upon a faulty flowmeter as the extenuating circumstance, belies the other likely causes that it has identified, namely the necessity to provide for appropriate alarm and provide a mechanism to stop the flow of ethylene oxide in the event of component malfunction.

Type of penalty to be imposed

The prosecutor tendered evidence of a stormwater harvesting and recycling project developed by Randwick City Council for Chifley Sports Reserve at Chifley. The project involves the harvesting of stormwater from a substantial residential catchment, providing a water source for presently degraded sports fields at the Chifley Reserve and, importantly, arresting and treating contaminated stormwater before its discharge into Botany Bay. The total cost of the project is $900,000. Taking account of grants and allocated contributions, there is an existing shortfall in funding the project of $106,000.

In whole or in part satisfaction of the penalty that I determine should be imposed, the prosecutor seeks an order pursuant to s 250(1)(e) of the POEO Act that payment be made to Randwick City Council for the purpose of this project. The defendant does not oppose such an order. Accordingly, I intend to order that the whole of the penalty to be imposed upon the defendant should be paid to Randwick City Council for this project.

Orders

The orders that I make are therefore as follows:

1. The defendant is convicted of the offence against s 64(1) of the Protection of the Environment Operations Act 1997, as charged.

2. Pursuant to s 250(1)(e) of the Protection of the Environment Operations Act 1997, the defendant is ordered to pay to Randwick City Council, within 28 days of this order, the sum of $28,000 to be used for the Stormwater Harvesting and Recycling Project at Chifley Sports Reserve, Chifley.

3. The defendant, at his expense, and pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997 must, within 28 days of this order, place a notice in the first 12 pages of the early general news section of the Sydney Morning Herald newspaper and Southern Courier newspaper at a minimum size of 10 cm x 20 cm in the form of Annexure "A".

4. The defendant must, within 35 days of the date of these orders, provide to the prosecutor a complete copy of the page of the Sydney Morning Herald newspaper and Southern Courier newspaper on which the notice referred to in order 3 appears.

5. All future public references by the defendant to its contribution to the Stormwater Harvesting and Recycling Project at Chifley Sports Reserve must be accompanied by the following passage:

"Huntsman Corporation Australia's contribution to the funding of the Stormwater Harvesting and Recycling Project at Chifley Sports Reserve is part of a penalty imposed upon it by the Land and Environment Court of New South Wales after it was convicted of an offence of contravening a condition of its environment protection licence, an offence against s 64(1) of the Protection of the Environment Operations Act 1997."

6. The defendant must pay the prosecutor's costs, as agreed, in the sum of $40,000 within 28 days of this order.

7. Exhibits may be returned.

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ANNEXURE "A"

Huntsman Corporation Australia Pty Ltd has been convicted in the land and Environment Court for a breach of its environment protection licence on 28 October 2009. Huntsman breached its licence by failing to carry out its licensed activities at its Glycol Ethers Plant at 16-20 Beauchamp Road, Matraville in a competent manner. As a result of Huntsman's failure to carry out its licensed activities in a competent manner, approximately 685kg of a probable carcinogenic gas, ethylene oxide, escaped to the atmosphere. The release of the gas resulted in a low potential for harm to the health of workers and residents in an area of Matraville approximately 1km from the premises. No actual harm to residents or the environment was reported as having resulted from the incident.

Huntsman was prosecuted by the Environment Protection Authority, part of the Department of Environment, Climate Change and Water (DECCW).

Decision last updated: 25 March 2011

Medium Neutral Citation:	Environment Protection Authority v Huntsman Corporation Australia Pty Ltd [2011] NSWLEC 39
Hearing dates:	11 March 2011
Decision date:	18 March 2011
Before:	Craig J
Decision:	1. The defendant is convicted of the offence against s 64 of the Protection of the Environment Operations Act 1997, as charged. 2. Pursuant to s 250(1)(e) of the Protection of the Environment Operations Act 1997, the defendant is ordered to pay to Randwick City Council, within 28 days of this order, the sum of $28,000 to be used for the Stormwater Harvesting and Recycling Project at Chifley Sports Reserve, Chifley. 3. The defendant, at his expense, and pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997 must, within 28 days of this order, place a notice in the first 12 pages of the early general news section of the Sydney Morning Herald newspaper and Southern Courier newspaper at a minimum size of 10 cm x 20 cm in the form of Annexure "A". 4. The defendant must, within 35 days of the date of these orders, provide to the prosecutor a complete copy of the page of the Sydney Morning Herald newspaper and Southern Courier newspaper on which the notice referred to in order 3 appears. 5. All future public references by the defendant to its contribution to the Stormwater Harvesting and Recycling Project at Chifley Sports Reserve must be accompanied by the following passage: "Huntsman Corporation Australia's contribution to the funding of the Stormwater Harvesting and Recycling Project at Chifley Sports Reserve is part of a penalty imposed upon it by the Land and Environment Court of New South Wales after it was convicted of an offence of contravening a condition of its environment protection licence, an offence against s 64(1) of the Protection of the Environment Operations Act 1997." 6. The defendant must pay the prosecutor's costs, as agreed, in the sum of $40,000 within 28 days of this order. 7. Exhibits may be returned.
Catchwords:	ENVIRONMENTAL OFFENCES:- sentence - breach of licence condition - s 64(1) Protection of the Environment Operations Act 1997 - offence of low to moderate objective gravity - no actual environmental harm - low risk of human harm - risk of harm reasonably foreseeable - mitigating subjective circumstances - lack of prior convictions - early guilty plea - finding of good character - remorse - co-operation with authorities - application for s 10 CSP Act refused
Legislation Cited:	Crimes (Sentencing Procedure) Act 1999 Protection of the Environment Operations Act 1997 Protection of the Environment (Clean Air) Regulation 2010
Cases Cited:	Axer Pty Ltd v Environment Protection Authority (1993) 113 LGERA 357 Cameron v The Queen [2002] HCA 6; (2002) 209 CLR 339 Camilleri's Stock Feeds Pty Ltd v Environment Protection Authority (1993) 32 NSWLR 683 Director-General of the Department of Environment and Climate Change v Rae [2009] NSWLEC 137; (2009) 168 LGERA 121 Environment Protection Authority v Ballina Shire Council [2006] NSWLEC 289; (2006) 148 LGERA 278 Environment Protection Authority v Baiada Poultry Pty Ltd [2008] NSWLEC 280; (2008) 163 LGERA 71 Environment Protection Authority v BlueScope Steel (AIS) Pty Ltd [2004] NSWLEC 400 Environment Protection Authority v Caltex Refineries NSW Pty Ltd [2008] NSWLEC 194 Environment Protection Authority v Lithgow City Council [2007] NSWLEC 695 Environment Protection Authority v Tenterfield Shire Council [2000] NSWLEC 229; (2000) 112 LGERA 173 Environment Protection Authority v Transpacific Industries Pty Ltd; Environment Protection Authority v Transpacific Refiners Pty Ltd [2010] NSWLEC 85 Environment Protection Authority v Unomedical Pty Ltd (No. 3) [2010] NSWLEC 198 Leach v The Queen [2007] HCA 3; (2007) 230 CLR 1 Markarian v The Queen [2005] HCA 25; (2005) 228 CLR 357 Plath v Rawson [2009] NSWLEC 178; (2009) 170 LGERA 253 R v Thomson; R v Houlton [2000] NSWCCA 309 (2000) 49 NSWLR 383 The Queen v Olbrich [1999] HCA 54; (1999) 199 CLR 270 Thorneloe v Filipowski [2001] NSWCCA 213; (2001) 52 NSWLR 60 Veen v The Queen (No. 1) [1979] HCA 7; (1979) 143 CLR 458
Category:	Principal judgment
Parties:	Environment Protection Authority (Prosecutor) Huntsman Corporation Australia Pty Ltd (Defendant)
Representation:	Counsel: Mr R M Fox (Solicitor) (Prosecutor) Mr I S Lloyd QC (Defendant) Solicitors: Department of Environment, Climate Change and Water (Prosecutor) Minter Ellison Lawyers (Defendant)
File Number(s):	50035 of 2010