Environment Protection Authority v Orica Australia Pty Ltd (the Hexavalent Chromium Incident)
[2014] NSWLEC 106
•28 July 2014
Land and Environment Court
New South Wales
Medium Neutral Citation: Environment Protection Authority v Orica Australia Pty Ltd (the Hexavalent Chromium Incident) [2014] NSWLEC 106 Hearing dates: 5, 6, 10 and 12 December 2012 and 20 May 2013 Decision date: 28 July 2014 Jurisdiction: Class 5 Before: Pepper J Decision: See orders at [256].
Catchwords: ENVIRONMENTAL OFFENCES: breach of licence condition causing release of sodium chromate into the atmosphere - failure to report a pollution incident as soon as practicable - guilty pleas - sentencing principles - whether the offence was committed without regard for public safety - application of De Simoni principle - application of totality principle - determination of appropriate sentence. Legislation Cited: Crimes (Sentencing Procedure) Act 1999, ss 3A, 21A, 22, 23
Protection of the Environment Operations Act 1997, ss 3, 64, 148, 174, 241, 250(1)Cases Cited: Connell v Santos New South Wales Pty Ltd [2014] NSWLEC 1
EPA v Caltex Australia Petroleum Pty Limited [2007] NSWLEC 647
Environment Protection Authority v Forbes Shire Council [2014] NSWLEC 26
Environment Protection Authority v Orica Australia Pty Ltd (the Nitric Acid Air Lift Incident) [2014] NSWLEC 103
Environment Protection Authority v Orica Australia Pty Ltd (the Ammonia Incident) [2014] NSWLEC 107
Environment Protection Authority v Ramsey Food Processing Pty Ltd [2010] NSWLEC 23
Environment Protection Authority v Sibelco Australia Ltd [2011] NSWLEC 160
Environment Protection Authority v Unomedical Pty Limited (No 4) [2011] NSWLEC 131
Environment Protection Authority v Waste Recycling and Processing Corp [2006] NSWLEC 419; (2006) 148 LGERA 299
R v De Simoni [1981] HCA 31; (1981) 147 CLR 383Category: Sentence Parties: Environment Protection Authority (Prosecutor)
Orica Australia Pty Ltd (Defendant)Representation: Mr S Rushton SC and Mr D A Hughes (Prosecutor)
Mr T A Game SC, Mr D Jordan SC and Ms K Edwards (Defendant)
Office of Environment and Heritage (Prosecutor)
Ashurst Lawyers (Defendant)
File Number(s): 51019 and 51020 of 2011
INDEX
Topic
Paragraph
Orica Pleads Guilty to Two Environmental Offences Involving the Release of Hexavalent Chromium into the Atmosphere
[1]
Conduct of the Proceedings
[9]
The Kooragang Island Premises Where the Hexavalent Chromium Incident Occurred
[16]
The Operation of the Ammonia Plant at the KI Premises
[23]
The 2011 Ammonia Plant Turnaround
[32]
Orica Employees Responsible for the Ammonia Plant
[48]
The Hexavalent Chromium Incident
[51]
Notification of the Hexavalent Chromium Incident
[70]
Orica's Response to the Incident
[91]
Impact of the Incident Onsite
[113]
Impact of the Incident Offsite
[118]
Other Assessments and Reports in Relation to the Incident
[119]
The Joint Experts' Report
[123]
Start-up Committee
[124]
Orica's Response After the Incident
[127]
Media Coverage of the Incident
[134]
Sentencing Principles
[135]
Objective Circumstances of the Offence
[139]
Nature of the Offence
[139]
Breach of Licence Condition
[140]
Failure to Report
[143]
Statutory Licences - a Breach of Public Trust?
[145]
Maximum Penalties
[147]
Environmental Harm Caused by the Hexavalent Chromium Incident
[150]
Orica's State of Mind at the Time of the Commission of the Offences
[168]
Breach of Licence Condition
[169]
Failure to Report
[175]
Reasons for Offending
[182]
Foreseeability of the Risk of Harm
[184]
Breach of Licence Condition
[185]
Failure to Report
[190]
Practical Measures Available to Orica to Avoid or Mitigate Harm
[191]
Control Over the Causes of the Harm
[199]
Conclusion on Objective Gravity
[201]
Subjective Considerations
[205]
Aggravating Factors
[206]
Prior Criminality
[206]
Was the Offence Committed Without Regard for Public Safety?
[207]
Mitigating Factors
[212]
Prior Criminality
[212]
Good Character
[213]
Likelihood of Re-offending
[214]
Demonstrated Remorse
[217]
Early Guilty Plea
[221]
Assistance to Authorities
[222]
Orica Agreed to Pay the Prosecutor's Costs
[224]
Payment of Clean Up Costs by Orica
[225]
Conclusion on Subjective Considerations
[229]
Sentencing Purposes: Denunciation, Retribution and Deterrence
[230]
Consistency in Sentencing
[238]
Sentencing Trends for Breach of Licence Condition Offences
[239]
Sentencing Trends for Failure to Report Offences
[243]
The Totality Principle
[244]
Conclusion on the Appropriate Penalty for the Hexavalent Chromium Incident
[246]
Environmental Project
[250]
Publication Order
[253]
Costs
[255]
Orders
[256]
Judgment
Orica Pleads Guilty to Two Environmental Offences Involving the Release of Hexavalent Chromium into the Atmosphere
The defendant, Orica Australia Pty Ltd ("Orica"), pleaded guilty to nine charges under the Protection of the Environment Operations Act 1997 ("the POEOA") which were addressed in concurrent sentence proceedings held over 5, 6, 10 and 12 December 2012 and 20 May 2013. Those charges related to seven separate incidents occurring on different dates between October 2010 and December 2011. The prosecutor, the Environment Protection Authority ("EPA"), dealt with all nine charges together in the interests of the efficient use of the parties and the Court's time. Although the proceedings were heard concurrently, it is appropriate that seven separate judgments are produced, that is, one for each discrete incident.
The principal sentencing judgment with respect to these proceedings dealt with the Nitric Acid Air Lift Incident, which occurred on 19 October 2010 (Environment Protection Authority v Orica Australia Pty Ltd(the Nitric Acid Air Lift Incident) [2014] NSWLEC 103, "the principal judgment"). That judgment summarises all of the charges, outlines in greater detail the conduct of the proceedings, and gives a fuller articulation of the relevant sentencing principles than the six subsequent judgments and should be referred to for further detail on the relevant principles and conduct of the proceedings. Those principles are applied in this judgment, but are expressed here only in summary form.
This judgment concerns the determination of the appropriate sentence for a pollution incident that occurred on 8 August 2011, involving the release into the atmosphere of sodium chromate containing hexavalent chromium, during start-up procedures at the Ammonia Plant at Orica's Kooragang Island Licensed Premises ("the KI premises") ("the Hexavalent Chromium Incident"). It resulted in two separate charges:
(a) breach of a licence condition O2.1(b) under Orica's Environment Protection Licence Number 828 ("Licence 828") contrary to s 64(1) of the POEOA, by failing to operate the Ammonia Plant in a proper and efficient manner (matter number 51019 of 2011); and
(b) breach of s 148(2) of the POEOA by failing to report a pollution incident as soon as practicable to the appropriate regulatory authority, namely, the Environment Protection Authority ("the EPA") (matter number 51020 of 2011).
Both are offences of strict liability.
Section 64(1) of the POEOA states:
(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...
At the time of the commission of the offence, s 148 of the POEOA relevantly stated:
148 Pollution incidents causing or threatening material harm to be notified
(1) Kinds of incidents to be notified
This Part applies where a pollution incident occurs in the course of an activity so that material harm to the environment is caused or threatened.
(2) Duty of person carrying on activity to notify
A person carrying on the activity must, as soon as practicable after the person becomes aware of the incident, notify the appropriate regulatory authority of the incident and all relevant information about it.
Section 147 defined "material harm" to mean:
147 Meaning of material harm to the environment
(1) For the purposes of this Part:
(a) harm to the environment is material if:
(i) it involves actual or potential harm to the health or safety of human beings or to ecosystems that is not trivial, or
(ii) it results in actual or potential loss or property damage of an amount, or amounts in aggregate, exceeding $10,000 (or such other amount as is prescribed by the regulations), and
(b) loss includes the reasonable costs and expenses that would be incurred in taking all reasonable and practicable measures to prevent, mitigate or make good harm to the environment.
(2) For the purposes of this Part, it does not matter that harm to the environment is caused only in the premises where the pollution incident occurs.
As stated above, Orica has pleaded guilty to each offence.
Conduct of the Proceedings
The facts pertaining to the commission of the offences were not disputed and were recorded in a Statement of Agreed Facts dated and filed 27 November 2012. These facts were supplemented by additional evidence.
As outlined in the principal judgment (at [22]-[23]), in addition to documentary evidence, this evidence comprised two general affidavits of Mr Sean Winstone, who was the Global Executive - Manufacturing for Orica at the time, sworn 6 and 23 November 2012. In those affidavits Mr Winstone deposed to matters relevant to all seven pollution incidents. The general affidavits summarised Orica's manufacturing operations at its KI premises, Orica's Safety, Health and Environment Management System ("SHEMS"), the actions taken by Orica to minimise further environmental incidents at the KI premises, and Orica's commitment to community initiatives.
Mr Winstone also gave evidence specifically relevant to the Hexavalent Chromium Incident in an affidavit sworn 1 November 2012. In this affidavit, he deposed to the cause of the Incident, the operational procedures in place prior to the Incident and the steps taken since the Incident to prevent its recurrence.
Mr Winstone was cross-examined about Orica's operations at the KI premises generally and specifically about the Incident.
Further, Ms Sherree Woodroffe, Orica's Safety, Health, Environment and Community Manager for the KI premises swore an affidavit on 16 November 2012, the contents of which were also the subject of cross-examination.
At the time of the Incident, Ms Woodroffe had been employed by Orica for approximately seven years and had more than 18 years of experience in environmental and related roles in metallurgical/chemical industries. Prior to her role at Orica's Safety, Health, Environment and Community Manager for the KI premises, she was the Environmental Manager for that site. At the time of the Incident, she was responsible for overseeing and implementing processes to ensure compliance with the requirements of Licence 828, environmental improvements, and occupational work, health and safety compliance. Where relevant her evidence is discussed below.
I found both witnesses to be credible, notwithstanding the EPA's submissions to the contrary. Both gave considered accounts of the Incident and its aftermath. Where appropriate, both readily made concessions against their own interests and the interests of Orica. The cross-examination of each witness did not reveal them to be other than witnesses of truth (see the discussion concerning Mr Winstone's credibility at [24] in the principal judgment).
The Kooragang Island Premises Where the Hexavalent Chromium Incident Occurred
A description of Orica's operations at the KI premises is contained in the principal judgment (at [8]-[13]). Suffice it to say that Orica is the operator of the site at which the Incident occurred, namely, the Ammonium Nitrate Manufacturing Facility ("ANMF"), located at the south eastern end of Kooragang Island near Newcastle. The KI premises are industrial and the nearest residential properties are located at Stockton, at its closest point about 650m away. Stockton is located to the east of the ANMF on the eastern side of the northern arm of the Hunter River.
To the west of the ANMF are a number of port-related industries including those associated with Kooragang No 2 and No 3 shipping berths. Further still to the west are the suburbs of Mayfield North, Tighes Hill and Carrington.
Licence 828 authorises Orica to carry on chemical production activities ("the KI licensed activities") at the KI premises. These include the production of ammonia and nitric acid, which are used in the manufacture of ammonium nitrate primarily for use in the mining industry.
Orica has operated the ANMF since 1 June 2003, although the ANMF commenced operation in 1969 with the commissioning of the Ammonia Plant, the No 1 Nitric Acid Plant and the No 1 Ammonium Nitrate Plant. The ANMF now comprises one Ammonia Plant, three nitric acid plants, and two ammonium nitrate plants. The plants have all undergone various upgrades since they were originally commissioned.
Licence 828 includes condition O2.1(b) which provides that:
All plant and equipment installed at the premises or used in connection with the licensed activity:
...
(b) must be operated in a proper and efficient manner.
According to the Amended Summons for the first offence, filed 5 December 2012, Orica breached condition O2.1(b) thereby contravening s 64(1) of the POEOA in that it:
i. failed to undertake an appropriate risk assessment to examine the impact of removing the Boiler Feed Water Coil from the primary reformer (High Temperature Shift Converter) during the start-up of the Ammonia Plant
According to the Summons for the second offence, filed on 9 November 2012, Orica, as the corporate person that carried on licensed activities at the KI premises, failed to notify the EPA of a pollution incident that caused or threatened material harm to the environment as soon as practicable after Orica became aware of the Incident on 8 August 2011 at 6.05pm.
The Operation of the Ammonia Plant at the KI Premises
The Incident occurred at the Ammonia Plant within the ANMF at the KI premises. The Ammonia Plant produces ammonia by combining nitrogen from the atmosphere with hydrogen (derived from natural gas and water) under heat and pressure in the presence of a catalyst.
A number of steps are involved in the production of ammonia:
(a) first, "desulphurisation", involving reducing the sulphur content of natural gas by the removal of sulphur compounds;
(b) second, "steam reforming" by mixing desulphurised natural gas with steam at elevated temperatures in order to produce hydrogen gas and carbon monoxide, which (at the time of the Incident) involved passing gas through a primary reformer ("the Primary Reformer 101-B") and a secondary reformer ("103-D") at the Ammonia Plant. After this, heat is recovered to generate or assist in steam generation by a primary waste heat boiler ("101-C") and a secondary waste heat boiler ("102-C");
(c) third, "shift conversion", involving mixing hydrogen gas, carbon monoxide and steam through a shift converter ("104-D") containing a catalyst called Shiftmax 120 ("the HTS Catalyst"), to produce carbon dioxide and more hydrogen gas. The shift converter comprises a high temperature shift converter ("the HTS Converter"), which contains the HTS Catalyst, and a low temperature shift converter (not presently relevant). The HTS Catalyst comprises several chemical compounds, of which one component is a chromium compound called chromium (VI) oxide, which contains hexavalent chromium (also known as chromium VI);
(d) fourth, carbon dioxide is removed from the process gas to leave hydrogen;
(e) fifth, "methanation", whereby traces of carbon monoxide and carbon dioxide are converted back to methane to prevent the poisoning of the ammonia synthesis catalyst; and
(f) sixth, "ammonia synthesis", which involves passing the hydrogen and nitrogen-containing gas across a catalyst to create ammonia.
An important aspect of the ammonia production process is the use of steam. Steam is used to drive large compressors within the Ammonia Plant and is fed into the production process. There are two types of steam:
(a) "saturated steam", or "wet steam", that is in equilibrium with heated water at the same pressure. When saturated steam is cooled it condenses to produce water (at 100°C at standard atmospheric pressure); and
(b) "superheated steam", or "dry steam", which is steam at a higher temperature. When the temperature is reduced this steam will not begin to condense to produce liquid water until it reaches saturation temperature (at 100°C at standard atmospheric pressure).
Other relevant equipment includes:
(a) the Boiler Feedwater System, which uses water to cool various pieces of equipment involved in the ammonia production process. It also recovers heat from the gas streams and transfers it to water being fed into a boiler, thereby assisting in temperature control and heat recovery to assist in steam generation. Relevantly, the water in the Boiler Feedwater System is heated by a number of heat exchangers. Prior to 2011, the boiler feed water was also heated by a flue gas heater located in the Primary Reformer 101-B; and
(b) the SP8 Vent Stack, which is designed to discharge process gases from equipment involved in the production process during start-up and shut-down activities. Relevantly, there are three inlets to the SP8 Vent Stack ("V-1", "V-43" and "V-7").
A diagram indicating the location of this equipment was attached to the Statement of Agreed Facts.
The Ammonia Plant is shut down for maintenance and operational improvements every five years for a period of five to eight weeks, known as a "turnaround". It then goes through a "start-up" process, which involves starting the Plant from cold until the relevant temperatures, pressures, levels and flows, reach their appropriate operational levels. These steps are set out in a document entitled "NH3 Plant start-up critical path" and need not be repeated here.
During the turnaround, Orica typically replaces the HTS Catalyst. Before the new catalyst can remove carbon monoxide, it must undergo a process called "reduction" by applying heat and removing oxygen from the HTS Catalyst and converting the hexavalent chromium within it to trivalent chromium (chromium III). The process is described in the procedural document entitled "HTS Catalyst: Catalyst Reduction Procedure", the contents of which also need not be presently repeated.
A summary of the relevant steps involved in the start-up and HTS Catalyst Reduction Procedure is as follows:
(a) step one involves the warming of equipment such as the Primary Reformer 101-B and 103-D and 104-D by circulating nitrogen gas;
(b) step two involves the introduction of backwarming superheated steam through the HTS Converter to warm the HTS Catalyst. If the HTS Catalyst is new, the warming assists in the reduction process. The steam ultimately vents from the SP8 Vent Stack through a valve ("MOV-24");
(c) step three involves the introduction, once the HTS Catalyst temperature is approaching 100°C, of forward-flowing steam through relevant equipment, namely, the Primary Reformer 101-B and 103-D, 101-C and 102-C (ultimately venting from the SP8 Vent Stack through MOV-24), while simultaneously applying the backwarming steam until the equipment reaches superheated temperatures or the HTS Catalyst bed is above 100°C; and
(d) step four involves the shutting off, once superheated temperatures are reached or the HTS Catalyst bed is above 100°C, of the backwarming steam and introducing a full flow of forward-flowing steam through the Primary Reformer 101-B and 103-D, 101-C, 102-C and the HTS Converter. The steam is directed towards the HTS Converter by closing valve MOV24 and opening a valve called "PIC-8".
These steps were diagrammatically represented in the Statement of Agreed Facts.
The 2011 Ammonia Plant Turnaround
On 17 June 2011, the Ammonia Plant was taken offline for a period of approximately eight weeks in order for Orica to carry out a five-yearly major maintenance turnaround, at a cost of approximately $40 million, and to carry out works relating to an approved capacity increase for the ANMF. The cost of the capacity increase works was in excess of $100 million.
During this maintenance overhaul, sections of the Ammonia Plant were replaced or upgraded to improve productivity, efficiency and environmental performance. The program of works included:
(a) modifications to the Boiler Feed Water Preheat ("BFW Preheat") system. These included removal of one of the heating coils ("the BFW Coil") from the Primary Reformer 101-B and its reassignment to a new location, for use in heating a separate part of the process to improve the efficiency of the Ammonia Plant. The relocation made less heating capacity available to heat the BFW Preheat system; and
(b) the extraction and replacement of the HTS Catalyst.
Prior to carrying out the post-turnaround start-up in August 2011, a Hazard and Operability Study ("HAZOP") was undertaken regarding the reassignment of the BFW Coil.
In his affidavit sworn 1 November 2012, Mr Winstone detailed Orica's six-stage hazard study process that was in place prior to the Incident. Stages one to three involved assessing the project prior to the completion of the final design. Stages four and five involved operational testing of the Plant and equipment prior to commissioning. Stage six is undertaken after commissioning. Each hazard study involved an interdisciplinary team of employees including the project team, process engineers and other engineers and operators.
Other processes were used to assess the proposed Plant design changes, including an operability review and process modelling at all stages of the design to confirm that the change can achieve the required process, safety, health and environmental outcomes.
Mr Winstone described in detail the modification process involved in the 2011 turnaround. He explained that the turnaround included approximately 250 adjustments to the Ammonia Plant, each of which was assessed using Orica's Management of Change process, regardless of whether it was considered minor or major. If major, the Management of Change process requires documentation of the proposed changes and a review of associated hazards. These procedures were applied to every physical change made to the Ammonia Plant, including the reassignment of the BFW Coil.
The engineering concept for the modifications during the Ammonia Plant turnaround was Orica's, although it had engaged Ammonia Casale to do a detailed design of some elements and it sought Ammonia Casale's feedback on other elements of the proposed modifications. Ammonia Casale was not engaged, however, to conduct a review at a level of detail that would have identified the issues that gave rise to the Hexavalent Chromium Incident.
According to Mr Winstone, in planning the 2011 turnaround Orica had not identified that substantially greater volumes of condensate could be generated during the Ammonia Plant start-up process, even though the project team applied the project design and hazard study process to the modification to reassign the BFW Coil. But he also attested to the fact that the project team knew that more condensate could be generated because of an incident during a turnaround in 2006. This had significant implications.
The project team proceeded on the basis that the quantity of condensate would be approximately one tonne per hour, which was similar to the amount generated in 2006 that had resulted in a discharge of hexavalent chromium to the effluent system during start-up. The issue had been identified in the Turnaround Review following the pollution incident in 2006. It was also noted in the Environmental Risk Assessment that control measures were required to ensure no recurrence of such an incident.
The project team implemented processes to manage the expected quantity of condensate. They were:
(a) the HTS Catalyst: Catalyst Reduction Procedure was revised to include an express note regarding the likelihood of condensate generation during the reduction process; and
(b) instructions were included in the Procedure to connect drainage lines and pumps to the boot of the SP8 Vent Stack and to provide enough intermediate bulk containers to collect the condensate (with a capacity five times the 2006 amount of condensate generated) so it could later be transported to an appropriately licensed waste management facility.
The HAZOP for the modifications in 2011 focused on impacts anticipated as a result of the reassignment of the BFW Coil but not the changes that would occur during start-up caused by removing the Coil from its previous role. Although Mr Winstone stated that "thousands of calculations" were performed in planning for the modifications during the 2011 turnaround, the HAZOP did not involve a calculation of the amount of condensate that would be generated by reassigning the Coil for start-up conditions.
Both Orica's Start-Up Procedure and Orica's HTS Catalyst: Catalyst Reduction Procedure contained procedures to manage condensate generation during start-up and catalyst reduction processes. Mr Winstone deposed to the fact that the Start-Up Procedure had been reviewed prior to the restart in August 2011 (most recently on 31 July 2011) to incorporate changes to the Procedure required as a result of the Ammonia Plant modifications. The revisions were assessed by a team of senior engineers and senior operators. They were signed off by the Ammonia Plant Operations Manager. The Process Operators were trained in the new Procedure and the relevant employees inspected all new equipment and systems to discuss the changes, the design and operating changes.
However, because the reassignment of the BFW Coil had not been identified as a source of substantially more condensate, the revisions to the Start-Up Procedure did not incorporate measures to address the additional condensate volume.
At the time of the Incident, there were, according to Mr Winstone, several specific procedures in place to ensure that the Ammonia Plant could be started in an environmentally satisfactory manner (the Ammonia Plant Start-Up Critical Path Procedure; the HTS Catalyst Reduction Procedure; start-up procedures for the large rotating machines; the emergency response plan; and shutdown procedures for the expanded plant).
The Start-Up Procedure recognised that it was possible that steam passing through the Ammonia Plant could condense to form condensate and flow on to the SP8 Vent Stack, that liquid containing hexavalent chromium could be created during start-up, and that if the HTS Catalyst had not yet been reduced, the condensate generated would contain hexavalent chromium from the Catalyst. The Procedure therefore included instructions for the draining of condensate prior to it entering into the HTS Converter, namely:
(a) the checking of drains placed around the bottom of the SP8 Vent Stack for the presence of any condensate formed and if so, the pumping of condensate to a "Clarifier Tank";
(b) the maintaining of backwarming steam through the HTS Converter at the same time as forward-flowing steam was introduced until superheated conditions in the HTS Catalyst beds and inlet were reached or the HTS Catalyst bed was above 100°C;
(c) the opening of the drains in 101-C and 102-C to drain any condensate until a steam flow was established to remove any condensate prior to it reaching the HTS Converter and while backwarming steam was still applied, so that any condensate was vented without contacting the HTS Catalyst; and
(d) the gagging of drains when steam started to replace condensate.
The Catalyst Reduction Procedure recognised the possibility of condensate containing hexavalent chromium being discharged to the SP8 Vent Stack. It included a note that directed the SP8 drain to be fitted with a hose and pump to pump effluent containing hexavalent chromium to the Clarifier Tank.
Orica Employees Responsible for the Ammonia Plant
Orica employees who were relevantly responsible for conducting works at the Ammonia Plant included the KI Site Manager, KI Sustainability Manager, KI Ammonia Plant Manager, Ammonia Plant Commissioning Manager, Ammonia Plant Shift Coordinator, Ammonia Plant Control Room Operator and several Plant Technicians.
In his affidavit sworn 1 November 2012, Mr Winstone deposed to the training given to operators at Orica's Ammonia Plant. This comprised "classroom based instruction and on-the-job assessment of competency". The operators were graded at various competencies. Only highly experienced and properly trained and qualified operators at the more senior Control Room Operation Technician level and above were permitted to operate Orica's computer-based Distributed Control System ("DCS") in the Ammonia Plant Control Room during a start-up.
Mr Winstone also deposed that additional experienced process operators were deployed during the 2011 start-up, which involved double (and in some cases triple) manning of the Ammonia Plant. Furthermore an additional external operator was imported to assist with the condensate recovery that was expected to collect. A commissioning team was also present, consisting of nine experienced process engineers, of which at least two were present at any one time, day or night. A number of other experts were involved, including machine specialists, the HTS Catalyst provider (Sud-Chemie), the process design firm (Ammonia Casale), and the pre-reformer catalyst supplier (Johnson Matthey), to assist with overseeing relevant aspects of the start-up.
The Hexavalent Chromium Incident
On 3 August 2011, preliminary commissioning steps were commenced in the restart of the Ammonia Plant following the turnaround. According to Mr Winstone, on 6 August 2011 the Ammonia Plant started producing its own steam, initiating the planned eight-day process of restarting the Plant.
On 8 August 2011, condensate was discharged from the SP8 Vent Stack into the atmosphere as follows:
(a) a quantity of condensate was vented from the Stack between approximately 6.00 and 6.20pm;
(b) the vented condensate fell in a zone to the south and to the east of the Stack discharge point, which included residential areas of Stockton; and
(c) the condensate contained an estimated total of 1kg of hexavalent chromium. Less than 60g of hexavalent chromium was deposited over Stockton. The direction of the fallout was shown in an aerial photograph attached to the Statement of Agreed Facts.
At 5.39pm on 8 August 2011, the SP8 Vent Stack alarm was triggered indicating to Orica employees in the Ammonia Plant Control Room that there was a problem with the liquid level in the system. At about 5.40pm, an employee acknowledged the sounding of the alarm and promptly directed other employees, including the Ammonia Plant Commissioning Engineer, to increase the draining of the SP8 Vent system.
At 6.05pm, Plant operators and the Ammonia Plant Shift Coordinator were made aware that condensate had been discharged from the Stack when Orica employees and contractors working downwind of the Stack reported "yellow rain" falling from the sky.
In response to the discharge, Orica employees:
(a) immediately undertook steps to ensure the safety of all personnel at the Ammonia Plant in accordance with their emergency response training;
(b) replaced the pump used to drain condensate from the Stack with a larger pump to drain it more quickly, and then pumped the condensate to the Clarifier Tank and into a number of 1,000L bulk containers;
(c) altered the way the gas passed through the Plant and directed the steam flow to enable collection of condensate in a knockout pot ("120F") downstream from PIC-8. This stopped the venting from the Stack at approximately 6.20pm;
(d) shut down the Ammonia Plant at approximately 6.40pm, when it became apparent that condensate was leaking from the bottom of the Stack; and
(e) blocked effluent and other drains to ensure that the condensate was not discharged via the onsite effluent system.
Between 6.30pm and 7.00pm on 8 August 2011, Orica's KI Ammonia Plant Manager was made aware of the Incident and attended to assist in the immediate containment and clean-up of the site.
At about 8.30pm that evening, Ms Woodroffe was notified of the Incident by the Ammonia Plant Manager by telephone.
In her affidavit, Ms Woodroffe stated that although she had left work for the day, she was on call 24 hours per day, seven days per week, in the case of incidents or emergencies outside ordinary business hours. Ms Woodroffe stated that she left a message for Orica's chemist who was undertaking analyses onsite, but she did not attend the site at that time because the Ammonia Plant Manager was managing the issue.
At 10.00pm Ms Woodroffe received a call from the chemist confirming elevated levels of hexavalent chromium in the samples from the effluent system. After relaying this information to the Ammonia Plant Manager, the Plant Manager requested her to attend the KI premises to assist with managing the Incident.
At 10.41pm on 8 August 2011, Ms Woodroffe attended the ANMF to supervise the clean-up and to prevent contaminated effluent from being discharged from the KI premises offsite. She met with the Ammonia Plant Manager to discuss what was required to contain the Incident. They inspected the area around the base of the SP8 Vent Stack to see if condensate was still being discharged to the effluent system. She observed a small trickle of yellow coloured liquid discharging from pipes that drained into the vent system leading to the Stack at the location where operators had installed hoses and a pump to recover the condensate expected to be generated during the restart. She understood this yellow discharge to contain hexavalent chromium as a result of her own experience and the chemist's sample results.
Ms Woodroffe stated that her first priority was to halt further discharge of the liquid from the base of the Stack into the effluent system because she knew there was only a certain amount of onsite storage and once the storage capacity was exceeded, any further effluent would discharge into the Hunter River.
Ms Woodroffe stated that had she discovered that there had been a discharge offsite, she would have immediately notified the EPA. Believing, at this stage, that no such discharge had occurred, her priority was to prevent a discharge of effluent containing hexavalent chromium above the concentration limit specified in Licence 828. She deposed that once the presence of hexavalent chromium in the samples was confirmed by the chemist at about 10.00pm, she believed the Incident needed to be notified to the EPA but that her first priority was to put in place preventative measures to ensure no offsite release of hexavalent chromium.
During the night of 8 August 2011, Orica employees undertook actions to prevent hexavalent chromium from discharging through the effluent system into the Hunter River, including by preventing further flow into the effluent system, taking samples from the effluent system, and pumping effluent from sumps into the Clarifier Tank, Diversion Pond and Demineralised Water Pond.
During this time, the Ammonia Plant Manager carried out an inspection of the site office, the perimeter of the Plant and the site office and car park, to determine the extent of the discharge. Some of the areas inspected were poorly lit. He observed contamination within the site boundary. At 11.44pm on 8 August 2011, the Ammonia Plant Manager left the ANMF.
Over the course of the night of 8 August 2011 and into the early morning of 9 August 2011, Ms Woodroffe took samples from the site effluent system to assess the effectiveness of the actions taken to prevent any water pollution. These samples were delivered to the KI premises laboratory for analysis.
During this time, Ms Woodroffe also inspected various parts of the effluent system, the discharge from the Stack drains and the areas near the Ammonia Plant. Based on sampling results and inspections of the various parts of the effluent system, Ms Woodroffe stated that she was satisfied that contaminated effluent had not been discharged from the KI premises. She also inspected an area downwind of the Ammonia Plant to check for airborne pollution. At the time, the lighting was poor. Ms Woodroffe did not observe any signs of contamination that caused her concern.
Ms Woodroffe was not aware of an analogous incident involving an emission from the top of the Stack, and therefore, did not consider the possibility of such an emission travelling to Stockton.
At 3.30am on 9 August 2011, the laboratory results on the effluent system were returning to levels below the licence concentration limit and Ms Woodroffe was satisfied that the measures undertaken by Orica had contained the release of hexavalent chromium. She "then made a decision to recommence the effluent flow from the KI site", while still maintaining ongoing testing from the laboratory and carrying out further preventative measures. Her primary concern was to prevent a repeat of the discharge into the Hunter River exceeding licence concentration limits that had occurred during the 2006 start-up.
At 5.54am on 9 August 2011, Ms Woodroffe left the ANMF, satisfied that the effluent had been managed to prevent hexavalent chromium from discharging from the KI premises through the effluent system. By this time Ms Woodroffe had been awake for 24 hours and although she had intended, when emailing personnel about the status of the Incident, to request someone to contact the EPA to notify them of the Incident, she forgot to do so.
Notification of the Hexavalent Chromium Incident
At 9.50am on 9 August 2011, a resident of Stockton called Orica and was transferred to Ms Woodroffe's mobile phone. The resident advised that she had washed her car at about 8.00pm on 8 August 2011 and put it in the garage and on the morning of 9 August 2011 she noticed that it had spots on it.
Ms Woodroffe said that she was concerned by the call and told the resident that she would arrange for someone to inspect the vehicle. Shortly after the telephone call, she contacted the KI Site Manager to discuss the resident's telephone conversation. It was at this stage that she realised that she had not notified the EPA of the Incident. She enquired with the Manager whether anyone had notified the EPA. The answer was negative.
At 10.28am on 9 August 2011, Ms Woodroffe notified EPA officer Mr Hamish Rutherford of the Incident by telephone. Mr Rutherford was her normal contact for compliance matters and was based at the EPA's Newcastle office.
Ms Woodroffe could not remember the exact words she had used reporting the Incident to Mr Rutherford. She conveyed that there had been an incident during the restart of the Ammonia Plant involving the release of solution containing hexavalent chromium from the base of the Stack into the effluent system. Further, that some aerosol had been released from the top of the Stack and had coated surfaces in the Plant, but that it appeared the release had been contained onsite and that Orica was undertaking further investigations. Ms Woodroffe arranged to contact Mr Rutherford later in the day with an update.
Around the same time, Ms Woodroffe arranged an inspection by an environmental advisor of the vehicle of the resident in Stockton.
In relation to her delay in notifying the EPA of the Incident, Ms Woodroffe reiterated in her affidavit that she had been so consumed with the immediate response to the Incident on the night of 8 August 2011, that she "did not promptly notify the EPA", although she "had intended to do so once [she] was satisfied that the risk of an exceedance of the site [licence hexavalent chromium] concentration limit to the Hunter River had been avoided". Once satisfied of the onsite containment, she had been "so fatigued" that her focus had been on returning home to rest, and therefore, she "forgot to notify the EPA before leaving the KI site and was only reminded" when she received the Stockton resident's phone call. In her affidavit, Ms Woodroffe expressed "regret that [she] had not notified, or put in place steps to have someone else notify the EPA of the incident sooner than 10.30am on 9 August 2011."
In cross-examination, Ms Woodroffe reiterated that she did not call the EPA before she went home to bed around 5.45am in the morning of 9 August 2011, because she was tired and it "just escaped" her mind at this time (T81.26).
Under questioning, Ms Woodroffe conceded that during the inspections on the night of 8 August 2011, she had assumed that there had been no fallout of material beyond the KI premises without in fact checking or inspecting beyond the premises' boundaries. This was because although fallout of material containing hexavalent chromium was observed within the Plant area, fallout was not observed within the boundaries further downwind of the Plant and she therefore believed that it had been contained to the KI premises (T78.48-79.32).
Orally, Ms Woodroffe stated her understanding of Orica's reporting obligations at the time of the Incident to be as follows (T69.22-70.03):
A. So, that we were required to report environmental incidents to the regulator that could cause potential to cause harm to the environment.
Q. Did you have an understanding as - what this, in terms of time, what the substance of that obligation was?
A. I guess once I had information about what was occurring, in terms of the incident, and the potential for what the effects might have been, in terms of, you know, whether there was off-site and risk for people and our neighbours, those sort of things, versus this is a more localised effect.
Q. Was there a legal test that you had in mind?
A. Not a legal test. I guess it was based on my experience both in the role that I had and in previous employment.
Q. What was that understanding?
A. Around reporting it as soon as practical.
Q. In terms of your own understanding of your position, what was your understanding as to who was the person with Orica, the Kooragang Island site, who had that obligation, or people who had that obligation?
A. So I typically reported. But certainly, I understood that we all had an obligation to report those matters. For people like operators and things the arrangement was typically that they would report to their team leader, report to a supervisor or a plant manager, and then I would typically be the person who would report, but not always.
Q. Did you in your mind's eye make any distinction between incidents which may have effects off-site and incidents that were on-site incidents?
A. Perhaps in term of timing of needing to report. Just the urgency of reporting where there's a potential for something to happen off-site, where other people could be affected, would obviously be something you would want to report sooner than things that were localised.
She accepted that she knew that the Incident needed to be reported once positive test results had been returned for hexavalent chromium at levels above the licence limit (T72.28-72.34).
As to Orica's general approach to reporting environmental incidents she gave the following evidence (T72.43-73.04 and 73.24-73.39):
Q. Incidents that were in fact contained - were they reported in the regular course?
A. I can't recall, sort of, specific examples of ones where we'd had them contained. Incidents tend to - you know, they're difficult to contain. Sometimes they tend to have an offsite effect as well as an onsite effect.
Q. But in terms of your ultimate reporting obligations, did you distinguish between offsite and onsite incidents?
A. No. So, I mean, I can use the example of the 7 December incident. I know it postdates all of this, but, you know, very clearly where we're have an incident with a bund, or something like that, overflowing, then that would have been something that, in fact, prior to 8 August, we would have also reported.
...
Q. What connection, if any, did the fact that a Stockton resident spoke to you and informed them of the matters you have set out in your affidavit - what connection, if any, did that have with the fact that you reported the incident?
A. Only in the fact that I contacted Stuart Newman, as part of advising him that we'd received that call. And, at that point in time, we realised that neither - you know, neither myself nor anyone else at the site had actually contacted the EPA. So--
Q. If it were put to you that the only reason you reported the incident was because there had been detection offsite, what would your response to that be?
A. I would refute that. It's not correct at all.
Q. If that suggestion was put to you, would that be your consistent with your own practices?
A. No, it would not be consistent with the practices, to not report things.
However, despite being made aware that there was hexavalent chromium present in the material that had been discharged to the effluent system, and despite that material requiring analysis from the chemist, Ms Woodroffe did not call the EPA when she arrived on site or at any time during the course of the night of 8 August 2011. According to Ms Woodroffe, this was because she did not have sufficient information on whether the quantity of hexavalent chromium exceeded the licence limit for that substance.
Finally, Ms Woodroffe accepted that she had neglected to inform the EPA of the resident's telephone call and the potential for offsite release. This was despite the fact that she and other Orica staff had recognised the risk that the spotting was related to the release from the night before. All that was disclosed by her to EPA at that juncture was "that we had an aerosol emission from the vent stack, and we were investigating its extent" (T81.31-82.29).
Mr Winstone was also specifically cross-examined about the Incident and the following exchange occurred with respect to Orica's SHEMS and Orica's duty to report pollution incidents (T10.12-12.06):
Q. But can I invite your attention back to the table itself. Significant incidents, according to this table, are reportable to the site manager, business manager, group general manager. But, unlike the case which applies in respect to fatal injuries and significant security incidents, there doesn't seem to be any obligation to report matters such as major non-compliances with statutory licences to statutory authorities like the EPA. Do you agree?
A. That's what the document says.
Q. Do you know why it says that?
A. No.
Q. It shouldn't say it, should it?
A. So my understanding - my understanding of the requirements of notification would indicate that that's the case.
Q. That what's the case?
A. That it should - should have a bullet point in there saying that the regulatory authorities should be notified.
Q. Yes, because what this document very much suggests, sir, can I put to you, is that in respect of major non-compliances with statutory licenses - incidents or events notifiable to the relevant statutory authorities - what happens is a mere matter of internal reporting. Correct?
A. That's not the intention.
...
WITNESS: But in answering the question, "And to what other conclusion could you make," you have to read the entire suite of multiple procedures in their entirety, and there's another model procedure called Legal Requirements which requires us - it requires us to comply with the law under all circumstances.
RUSHTON
Q. But where is that referred to in the SHEMS?
A. If we go back to the table of contents on - let me find the right page - page 17, there's a procedure you'll see there which is MPSG004 Legal Requirements, and it's referred to on page 30, and it says there, "All activities shall fully comply" - under key requirement 2.1 it says, "All activities shall fully comply with all applicable legal requirements."
Q. But that says nothing about what they might be, does it?
A. No, it doesn't, but it says--
Q. And the--
A. --we need to comply with the law.
...
Q. Sorry, was there something else you wanted to say?
A. No, I just wanted to point out that there are other parts of the schemes that cover the requirement to notify, as it is a legal requirement.
Q. But your workers might not know one way or the other what the legal requirements are, correct?
A. And further under that it says, "Employees shall be trained in all legal requirements relevant to their responsibilities."
Q. What records do you keep to show that employees have been trained to understand core legal requirements which might apply to the site?
A. I'm not aware of any.
Q. Would you agree with me that it would be reasonable for an employee to assume, if they'd read page 174 of this document, if there was a significant environmental event, their only obligation was to ensure that they report it internally?
A. Reading that in isolation, that may be a conclusion someone draws.
Q. Well, I invite you, then, to draw our attention to any other part of this document which would explain clearly to your employees that they have an obligation beyond reporting to the site manager, business manager or group general manager.
A. Well, apart from what I've just referred to, I don't specifically know of any other part of the document.
Q. Is there any document that you're aware of which clearly spells out who is responsible for reporting environmental incidents to the EPA and in what circumstances?
A. Whether one existed or one exists now?
Q. No, at the time of these incidents, was there a document that recorded who was to report that incident and in what circumstances?
A. Not that I'm aware of.
Mr Winstone was questioned about a record of interview between himself and the EPA on 27 October 2011, wherein he gave the following evidence concerning Orica's obligation to report pollution incidents (T48.02-48.06):
Q. From your knowledge, does Orica have procedures for the reporting of the type of incident that occurred on 8 August 2011 to the EPA?
A. I'm aware there is an old procedure for the Kooragang Island site that deals with reporting.
However, he could not recall which "old procedure" he had been referring to, or what it contained, nor could he recall which procedure was in respect of notification of incidents to the EPA, observing that Orica had about "2,000 procedures for the Kooragang Island site" (T48.00-48.37).
Mr Winstone went on to explain that it was the KI Site Manager, at the time Mr Stewart Newman, who had responsibility for reporting incidents, but that this responsibility could be delegated and "typically" Ms Woodroffe had assumed the obligation to report (T48.48-49.28).
In relation to the paucity of documentation concerning the obligation to report such incidents, Mr Winstone responded as follows (T49.36-49.43):
Q. So that he [Stewart Newman] could delegate that responsibility to any of 165 employees onsite?
A. Correct.
Q. And, because it wasn't documented, nobody would necessarily know, apart from the site manager, Mr Newman himself, who that was.
A. Potentially, yes.
Mr Winstone was asked whether he considered whether Orica's failure to report the Incident between 6pm on 8 August 2011 to 10am on 9 August 2011, was consistent with its obligation to report pollution incidents "as soon as practicable". During his record of interview with the EPA on 27 October 2011, he had previously opined that the delay in reporting the Incident to the EPA was within the practicable time afforded to it under statute. However, in cross examination he stated (T50.30-51.03):
A. So, my view was, at the time - and I have reflected on this view significantly since, and I have continued to reflect on this view - is, at the time, given the focus that people were putting to on the site - no, let me - let me just rephrase that. So, that is the answer I gave at the time. At the time, I probably felt that way, given that - my previous experience of reporting to the EPA. I don't agree with that answer now.
Q. Is that because you believe that - as one of the documents I've shown you today - that is, Emergency Response Plan - was that because you believed you could do it, say, within 24 hours?
A. I would say that what I believed is that there was - there was custom and practice where incidents have been reported in that manner.
Q. That is - when you say "in that manner", what are you referring to?
A. Within a 24-hour time frame.
Q. I see.
A. I now don't agree that that was acceptable ...
Finally, Mr Winstone expressly, and forcefully, refuted the suggestion put to him in cross-examination that the reason for the delay in reporting the incident was because Orica took the approach that "if there's a complaint concerning the incident offsite, Orica will report it. But if there's no complaint made from outside ... it won't" (T35.13-35.17). However, he conceded that by late 2011 "we understood that our notification procedures were not appropriate. We understood that. And we were working very hard to put in place better notification procedures at the time" (T37.43-37.45).
During re-examination Mr Winstone stated (T61.26-61.31):
Q. It was put to you yesterday that reporting ...demonstrated that Orica's attitude was only to report if there was a complaint offsite, and you rejected that and you said it should be sooner. And - why did you reject that?
A. Because in - I have, you know, knowledge that there are examples where we have reported where no such complaint has been made.
Orica's Response to the Incident
At about 11.58am on 9 August 2011, two Orica employees went to Stockton to follow up on the call received from the Stockton resident.
At about 12.15pm, two EPA officers, Mr Rutherford and Mr Peter Mathews, attended the Orica site office to investigate the Incident. They observed bright yellow staining colouring surfaces to the southeast of the SP8 Vent Stack, as depicted in photographs before the Court.
At about 2.15pm, the EPA officers proceeded to the Orica temporary carpark on the eastern side of Greenleaf Road, located outside the premises. The EPA officers observed yellow spots on a number of the fences at the temporary carpark. They photographed their observations.
The EPA officers proceeded to inspect an area of north Stockton potentially downwind of the Ammonia Plant. They observed yellow and brown staining in the form of spots at a number of locations, including on buildings, houses, cars, trees and street signs. Again, they photographed what they saw.
From 9 to 12 August 2011, EPA officers took samples at the KI premises and at locations to the north of Stockton, which were sent for EPA laboratory analysis.
Orica engaged experts, Dr Bruce Niven and Mr John Frangos from Toxikos, to advise it on the potential health effects of the hexavalent chromium emission.
At 11.15am on 10 August 2011, Orica reported the Incident to the NSW Department of Health ("NSW Health").
That afternoon, and continuing until 11 August 2011, Orica commenced notification of potentially affected residents in the area of north Stockton downwind of the Ammonia Plant. This involved teams of Orica employees door-knocking residents in the relevant areas. Orica also established a community telephone hotline to provide information on the Incident, manned by Orica employees and an occupational physician, to discuss any health concerns arising from the Incident.
On 11 August 2011, the EPA issued a Notice of Preventive Action to Orica, requiring it to shut down the Ammonia Plant and not to restart it until such time as the EPA was satisfied that it could be operated in an environmentally satisfactory manner. The Plant had not been restarted since its shutdown at approximately 6.40pm on 8 August 2011.
The same day, NSW Health issued a media release about the Incident and describing the potential health effects and risks of hexavalent chromium. Also that day, Orica issued a media release about the Incident.
On 12 August 2011, the EPA issued a Notice of Clean-up Action to Orica, requiring it to carry out certain clean-up works in a prescribed residential area of north Stockton. This included inspection of properties, and removal, and appropriate disposal, of contaminated material within specified timeframes, together with reporting obligations.
The EPA issued another Notice of Preventive Action that day. This Notice required Orica to engage a suitably qualified and experienced independent engineer to undertake an analysis of the Incident, provide recommendations for improvements to the Ammonia Plant to prevent a recurrence, and to prepare a report by 2 September 2011. Orica engaged Mr John Pach, of Johnson Matthey Catalysts, to prepare the report and recommendations.
On 13, 14 and 16 August 2011, NSW Health issued three further media releases about the Incident. These referred to sampling undertaken by the EPA in north Stockton and to the fact that the levels of hexavalent chromium detected in those areas were so low that they did not pose a health risk.
On 14 August 2011, Orica issued another media release, and on 15 August 2011 it issued a community update release, which was also hand delivered to various residences around Stockton. These releases provided updates on the Incident and expressed Orica's regret.
On 15 August 2011, Orica sent a copy of its internal Incident Report to the EPA.
On 17 August 2011, the Director-General of the Department of Premier and Cabinet commissioned a review of the Incident. This review was completed on 30 September 2011.
On 18 August 2011, Orica held a community meeting to discuss the Incident and clean-up measures and arranged for Dr Niven and Mr Frangos to attend to answer questions regarding health impacts of the hexavalent chromium exposure.
On 25 August 2011, the NSW Upper House initiated a Select Committee Inquiry into the Incident. Public hearings commenced on 14 November 2011.
On 1 September 2011, the independent engineer's report by Mr Pach was completed and provided to the EPA in conformity with the EPA's 12 August 2011 Notice of Preventive Action ("the Pach Report"). The Pach Report identified the Incident's immediate technical causes (section 7) and contributory factors (section 8), and made a series of recommendations to prevent a recurrence (section 9). In addition to the repair and remediation of affected features of the Plant, the recommendations included rewriting the operating procedures and training plant operators in the new procedures; making technical improvements to start-up methodology and process design; and installing safeguards such as alarms, to indicate the presence of abnormally high levels of condensate.
On 2 September 2011, the EPA served a Notice of Variation of Orica's Licence 828 to insert a condition requiring Orica to carry out a mandatory environmental audit of the whole of the ANMF pursuant to s 174 of the POEOA.
On 8 November 2011, the EPA commenced these proceedings.
Finally, on 6 February 2012, the Protection of the Environment Legislation Amendment Act 2011 commenced operation. Relevantly, the legislation amended s 148 of the POEOA to require pollution incidents causing or threatening material harm be notified "immediately" rather than "as soon as practicable".
Impact of the Incident Onsite
As noted above, the Incident caused condensate containing hexavalent chromium to be discharged over parts of the KI premises downwind of the SP8 Vent Stack. This led to the deposition of hexavalent chromium on plant and equipment within the affected area, although the majority of the KI premises was not affected. Photographs showing the impact of the fallout at the site were before the Court.
Immediately following the Incident Orica focused on the management of the contaminated effluent, the clean-up of areas affected by the fallout of the condensate, and the health of employees and contractors who may have been exposed to hexavalent chromium. These activities included:
(a) the containment of contaminated effluent onsite and its disposal by Orica to a licensed waste facility; and
(b) the blockage of two stormwater drains to prevent offsite discharge of contaminated stormwater from the affected area. Four vacuum trucks were stationed at the two stormwater points 24 hours per day, every day, to enable transfer of collected stormwater to storage tanks prior to onsite treatment or offsite disposal to a licensed waste facility.
The fallout of condensate deposited on plant and equipment downwind of the SP8 Vent Stack was cleaned up by Orica by the washing of all affected structures using high-pressure water systems and the collection of the contaminated water and its offsite disposal to a licensed waste facility. In addition, soil and other ground surfaces were treated with ferrous chloride to convert the hexavalent chromium into less harmful trivalent chromium (chromium III). The ferrous chloride was subsequently neutralised with hydrated lime. Soil in some affected areas was removed for offsite disposal to a licensed waste facility.
Approximately 27 onsite employees and contractors reported contact with condensate fallout on 8 August 2011. They reported yellow spots on their hands, face, skin, clothing and personal protective equipment ("PPE"). These individuals were instructed to shower and were provided with clean clothes. Access to the affected area was restricted for several days while clean-up activities were undertaken to minimise exposure of workers to hexavalent chromium.
Some workers reported suffering asthma, sore throats, coughing and/or skin irritation. Orica arranged for a number of affected workers to contact medical specialists to have blood and urine tests. The tests did not reveal that any of the workers had elevated hexavalent chromium levels beyond the range expected in the general community.
Impact of the Incident Offsite
As noted above, a small quantity of condensate containing hexavalent chromium was discharged over an area of north Stockton directly downwind of the Ammonia Plant. Again, as reported above, the EPA took samples at various locations in Stockton following the Incident from 9 to 12 August 2011.
Other Assessments and Reports in Relation to the Incident
Several other reports were prepared in relation to the Incident, namely:
(a) a health risk assessment report prepared by NSW Health outlining the risk of possible health effects as a result of the Incident. The parties agreed that the risk of possible health effects was significantly lower than the risks stated in the report because the report was based on incorrectly calculated concentrations per unit area of hexavalent chromium. This report's key findings included that:
(i) "immediate health effects were not expected to occur as a result of the chromium VI release";
(ii) "it is very unlikely that anyone in Stockton will develop cancer as a result of this incident"; and
(iii) exposure "is likely to have occurred only in the part of Stockton that was directly downwind of the Orica plant at the time of the release";
(b) the health risk assessment report, prepared in accordance with relevant international, national, and state best practice guidelines by Mr Frangos and dated 28 August 2011. Again, it was uncontentious that the actual health risk was significantly lower than that stated in his report because it was similarly based on incorrectly calculated concentrations per unit area of hexavalent chromium. Nevertheless, the report's key conclusions were that there was a "negligible health risk to residents of Stockton" from the exposure and "no reason to suspect acute or chronic health risk to residents in Stockton ... [and] no reason to suspect that cancer risks due to this incident would result in an increase above background levels in the general population"; and
(c) an air quality impact assessment report prepared by PAE Holmes dated 14 October 2011. Again, it was not in dispute that due to the original incorrectly calculated concentrations, the actual quantity of hexavalent chromium containing solution discharged as a result of the Incident was significantly lower than that stated in the report. This report was also to be used to inform the health risk assessment prepared by Mr Frangos discussed above. The modelling calculated that approximately 10 to 20kg of hexavalent chromium had been discharged from the SP8 Vent Stack (these were the figures initially incorporated into the EPA and NSW Health media releases). In brief, both concentration scenarios modelled by PAE Holmes (the 10kg and 20kg deposition scenarios) exceeded the EPA's impact assessment criterion for hexavalent chromium compounds.
Importantly, however, the EPA's initial calculations were reviewed and the EPA's calculation of area was found to be incorrect, with the effect that the amount of hexavalent chromium discharged as a result of the Incident had been overestimated. The amount of hexavalent chromium estimated to have been deposited on parts of Stockton was revised from 1.3-1.6kg down to 35-60g.
As a result, the PAE Holmes report was revised using the corrected sampling results. The revised report, dated 15 February 2012, calculated that approximately 1kg of hexavalent chromium had been discharged from the SP8 Vent Stack, resulting in the deposition of an estimated total of 35-60g of hexavalent chromium across areas of north Stockton. The revised PAE Holmes report observed that the revised modelling "further reduces the theoretical risk of any adverse health outcomes associated with [the] release and further supports the previous conclusion of negligible health impacts in Stockton due to [the] release".
On 15 February 2012, the EPA published a media release acknowledging the amended calculations of concentrations in the sampling results and reiterating NSW Health's earlier media release advice that health effects were not expected to occur as a result of the Incident. On the same date, Orica also released a media release to the same effect.
The Joint Experts' Report
The EPA's expert, Dr Derek Griffiths, and Orica's expert, Dr Robert Hutchison, both chemical engineers, prepared a joint experts' report. The report opined that:
(a) Orica primarily failed to operate the Plant and equipment in a proper and efficient manner because Orica failed to undertake an appropriate risk assessment to examine the impact of removing the BFW Coil from the Primary Reformer 101-B. This allowed Orica to start-up the Plant without knowing what the consequences were. There was no Management of Change process employed to assess the impact of the change during start-up;
(b) consequent upon this primary failure were a number of further failures, namely, the:
(i) failure to identify that a much larger quantity of condensate would be generated;
(ii) failure to prepare start-up procedures taking account of the large quantity of condensate;
(iii) failure to include "go/no go" decision points in the Start-Up Procedure with respect to the temperature at which steam could be introduced to the HTS;
(iv) failure to train the operators what to do when the steam temperatures did not reach 100°C; and
(v) failure to follow the Start-Up Procedure prescriptively. For example, Orica did not open the drain valves on 102-C and introduced steam in the HTS when the temperature was significantly below 100°C;
(c) the reason for these failures was Orica not following its own Management of Change process contained in its SHEMS, which required all changes, including process changes, to be risk-assessed prior to implementation. Removal of a heat exchanger would qualify as a change needing risk-assessment;
(d) in order to operate the Plant and equipment in a proper and efficient manner, Orica should have properly risk-assessed the removal of the BFW Coil from its original duty; included "go/no go" decision points in the catalyst reduction and start-up procedures; identified any steps that had to be followed prescriptively; and better documented the start-up activities (for example, by the use of checklists) to facilitate communication of the Plant's status between members of a shift crew and between shift crews. Orica should also have installed a high level trip on the SP8 Vent Stack and/or changed the system for capturing contaminated condensate, although the experts acknowledged that the experience of running the Plant would not have suggested that this latter measure was required;
(e) Orica had control over the causes of the Incident to the extent that Orica had control over the Management of Change process, the design of changes to the Plant and the training of operators;
(f) upon discovering the aerosol emission, Orica took appropriate action to ensure the safety of onsite personnel, diverted contaminated condensate to storage, and, correctly, subsequently abandoned the start-up. Orica also took a large number of follow-up actions to prevent a recurrence; and
(g) there were practical measures that Orica could and should have taken to prevent, control, abate or mitigate harm to the environment. In particular, Orica should have followed its Management of Change procedure, improved the Start-Up Procedure and the start-up documentation, and used and implemented its safety management systems adequately.
Start-up Committee
Following the Incident, the EPA established an interagency Ammonia Plant Restart Committee, comprising representatives from Orica, the EPA, NSW Health, Fire and Rescue NSW, the NSW Police Force, WorkCover, the Newcastle City Council, the Port Stephens Council and the NSW Department of Planning and Infrastructure. The aim of the Committee was to develop and oversee plans for the safe and environmentally satisfactory start-up of the Plant. Its objectives also included to re-build community confidence in Orica's ability to operate the Plant in a safe and environmentally satisfactory way and to give advice to the various representative agencies.
The Committee concentrated on:
(a) technical and engineering works;
(b) ongoing clean-up;
(c) strong community communication;
(d) improved emergency planning; and
(e) independent verification.
The Committee met on eight occasions between 7 September 2011 and 14 December 2011. Orica cooperated fully with the Committee and submitted proposed plant modification and procedural changes for review and approval prior to the restart of the Plant.
Orica's Response After the Incident
Clean-up steps taken by Orica, both onsite and offsite, included:
(a) measures put in place on 9 August 2011 to ensure stormwater from affected areas of the site was not discharged offsite;
(b) cleaning affected plant and equipment, including the entire vent system, followed by testing to confirm the clean-up was effective, in order to prevent discharge of contaminated material during restart activities;
(c) sampling of condensate collected from the SP8 Vent Stack and swab sampling of plant and equipment onsite to confirm the effectiveness of the clean-up measures; and
(d) a significant amount of work in Stockton carried out between 12 August and November 2011, pursuant to the EPA's Notice of Clean-up Action, which included:
(i) approaching and making contact with residents (at 452 dwellings) to give them an opportunity to identify "critical fixtures" and "key areas" of concern on their property;
(ii) where areas of potential contamination were identified, sampling for the presence of hexavalent chromium by an independent laboratory technician;
(iii) offering all residents the option of having their property cleaned, including washing fixtures, draining and removing water tanks, replacing sand in sandpits, and draining and refilling swimming pools (dependant on sample results);
(iv) resampling affected areas after the washing process; and
(v) contacting residents where negative test results were received.
The data for these offsite activities revealed that:
(a) of the 91 dwellings in the inner affected zone, positive contact was made in respect of 87 dwellings, and inspections undertaken for 84 dwellings (three declined). Of the 87, 80 dwellings were washed, and 45 of the 80 houses were contaminated. One contaminated sample contained hexavalent chromium above the laboratory detection limit; and
(b) of the 365 dwellings in the outer affected zone, positive contact was made in respect of 334 dwellings and inspections were undertaken for 319 dwellings (15 declined). Of these, 253 properties were washed and 76 were contaminated. Three contamination samples contained hexavalent chromium above the laboratory detection limit.
In addition, Orica undertook a range of measures to prevent the recurrence of the Incident, to address the recommendations of the report prepared by the independent engineer (Johnson Matthey Catalyst), to incorporate the requirements of the Start-Up Committee and to satisfy the EPA that the Ammonia Plant could be operated in an environmentally satisfactory manner. These actions included:
(a) modifying the Ammonia Plant in accordance with the recommendations of the Johnson Matthey Catalyst report in order to minimise the potential for condensate creation during all phases of operation (whether start-up, shutdown, normal or abnormal operation) by: reinstating the heat exchanger 102-C during start-up and installing a nitrogen gas heating circuit for the HTS Catalyst; modifying the internal bypass on 102-C to eliminate contact with the internal tubes during start-up; improving the removal of condensate generated by modifying the vent system and installing low point drains to remove condensate; installing additional dew point alarms; installing a nitrogen heating circuit for the HTS Converter; and repairing the clamped sections of the SP8 Vent Stack. Each modification was reviewed by an independent engineer to verify satisfactory completion;
(b) preparing "heat and mass balances" for the entire Plant covering all significant stages of operation, verified by the independent engineer;
(c) analysing potential emission hazards, including those from the modifications, using the heat and mass balances to identify any additional controls required, which were reviewed and endorsed by the independent engineer;
(d) reviewing the design criteria for the relevant phases of operation of the Plant, using detailed modelling of the plant;
(e) completing a hazard study of the Ammonia Plant under various operating modes to ensure that risks (health, safety and environmental) have been identified and that, where required, controls have been implemented. This was verified by the Start-up Committee;
(f) revising the start-up process and devising a start-up checklist meeting WorkCover and NSW Health requirements and addressing the recommendations of the Johnson Matthey Catalyst report. These processes now incorporate internal verification steps, each of which must be signed off before the process can progress to the next stage;
(g) revising the emergency management plan for the KI premises and obtaining the approval of WorkCover and Fire and Rescue NSW for the plant. This included modifying the incident response procedures to specifically deal with a scenario involving release of a contaminant into the atmosphere, reinforcing the need to involve emergency services if there is doubt as to whether the incident is an emergency, including the Ministry of Health in the emergency contacts list, and including further detail about the steps to be taken by the Plant Incident Commander upon becoming aware of an incident;
(h) testing the emergency management plan for the KI premises;
(i) retraining staff, plant operators and contractors in the revised start-up and emergency response procedures; and
(j) modifying Orica's procedures to comply with the new reporting obligations introduced by the Protection of the Environment Legislation Amendment Act 2011.
In addition, Orica appointed a Commissioning Manager to oversee restarting the Plant and established a group of internal and independent experts to monitor the accuracy and timeliness of all steps in the start-up process. The internal experts included senior manufacturing personnel from Indonesia and Canada and engineering and safety personnel from Kurri Kurri and Melbourne. The external experts comprised representatives from Kellogg, Johnson Matthey Catalyst, Casale Ammonia, Siemens and Sud Chemie.
Moreover, in their affidavits concerning the Incident, both Mr Winstone and Ms Woodroffe deposed to the new incident notification procedure Orica had established and the training of all relevant staff with respect to the duty to notify the EPA of specific environmental incidents. A copy of the new procedure was annexed to their affidavits. The new procedure emphasised that pollution incidents must now be notified immediately to all relevant authorities.
Finally, Orica reviewed and enhanced its community consultation following the Incident, which included additional community reference group meetings, community newsletters distributed to local residents, offering information sessions for the broader community, and providing information on its website.
In his affidavit dated 1 November 2012, Mr Winstone deposed in extensive detail to the community consultation engaged in by Orica following the Incident. This included holding many reference group meetings and community information sessions, the release of multiple media statements and the issuing of direct notifications to residents. Mr Winstone also outlined Orica's commitment to additional environmental improvement works, as communicated to the Stockton and Fern Bay communities; the establishment of a dedicated KI premises website for members of the public; the introduction of regular site tours of the KI premises; the introduction of a toll-free number for residents to obtain information about the KI premises; the engagement of a specialist company to assist with the development of improvements to its community consultation and engagement program; and the employment of a full time permanent Stakeholder Relations Manager.
Media Coverage of the Incident
It was an agreed fact that the Incident was the subject of extensive media coverage.
Sentencing Principles
A discussion of the applicable sentencing principles is set out at [80]-[93] and [168] of the principal judgment, which I adopt here.
Section 3A of the Crimes (Sentencing Procedure) Act1999 ("the CSPA") sets out the purposes of sentencing an offender. Relevant purposes in these proceedings are those contained in ss 3A(a), (b), (c), (e), (f) and (g).
In addition, s 21A of the CSPA identifies the matters that the Court must take into account when determining the appropriate sentence, including factors in aggravation under s 21A(2) and factors in mitigation under s 21A(3). Relevant potential aggravating factors for this offence are limited to those contained in ss 21A(2)(d), (g) and (i) of the CSPA. Relevant subjective circumstances or mitigating factors are those contained in ss 21A(3)(e), (f), (g), (i), (k) and (m) of the CSPA. The factors are discussed further below.
Finally, s 241 of the POEOA further provides legislative direction as to matters that are to be considered in imposing a penalty for offences committed under that Act. Section 241(1) of the POEOA is a list of the objective circumstances of an offence that must be considered by the Court insofar as they are relevant, while s 241(2) of that Act recognises the Court's discretion to consider other matters relevant to the particular circumstances of the proceedings.
Objective Circumstances of the Offence
Nature of the Offence
A fundamental consideration of relevance to environmental offences is the degree to which Orica's conduct offends against the legislative objectives. Those objects are found in s 3 of the POEOA.
Breach of Licence Condition
The nature of the offence of breach of licence has been discussed in the principal judgment (at [103]-[104]). With respect to this offence, given the potentially carcinogenic and very harmful qualities of hexavalent chromium, it is a central requirement that Orica carry out its licensed activities in a proper and efficient manner in accordance with Licence 828 condition O2.1(b). To do otherwise is manifestly contrary to the statutory purpose enshrined in s 3 of the POEOA.
The failure by Orica to operate its plant in an efficient and proper manner contrary to Licence 828, thereby resulting in the release of 1kg of hexavalent chromium, plainly offended against the legislative objects of the POEOA. It undermined the object of reducing risks to human health and preventing the degradation of the environment by the use of mechanisms that promote pollution prevention; of reducing discharges of harmful substances; and of making progressive environmental improvements, including the reduction of pollution at the source (see s 3(d) of the POEOA).
Licence holders are licensed to carry out activities which, if not carried out properly, safely or efficiently, have the potential to cause harm to the environment and human health. In the case of Orica's operations at the KI premises, that potential was very real. The impact of the Hexavalent Chromium Incident threatened not only the health and safety of Orica's employees and contract workers, but also had the potential to adversely affect the health of the residents of Stockton. On any view the objects of the POEOA were undermined by Orica's breach of its licence condition.
Mitigating Factors
Prior Criminality
In light of Orica's environmental antecedents, it cannot be said that Orica does not have any prior criminal record so as to operate as a mitigating factor in determining the imposition of an appropriate sentence in these proceedings (s 21A(3)(e) of the CSPA).
Good Character
Orica submitted that the evidence demonstrates it is a good corporate citizen and, more specifically, that its recent investments in environmental improvements and its community consultation and support programs practically demonstrate its good corporate character. For the reasons given in the principal judgment (at [185]-[190]), I agree. I therefore accept that Orica was a corporate person of good character at the date of these offences (s 21A(3)(f) of the CSPA).
Likelihood of Re-offending
Orica has undertaken a number of actions to minimise the chance of a similar incident occurring. Orica's examination of the causes of the Incident and its acceptance that these practical measures would have prevented the harm, suggests that the likelihood of future re-offending is greatly reduced and that there are good prospects of rehabilitation. Accordingly, and notwithstanding the further six pollution incidents the subject of this suite of criminal proceedings, I find the likelihood that Orica will re-offend in future to be low, which should be taken into account as a factor in mitigation (s 21A(3)(g) of the CSPA).
I make this finding in respect of both offences notwithstanding a submission to the contrary by the EPA in relation to the breach of s 148(2) of the POEOA. The EPA argued that Orica's attitude to reporting as evidenced by the Ammonia Incident meant that unless a substantial penalty was imposed in relation to this Incident that there was a significant chance that it would reoffend.
I reject this submission for several reasons. First, in the Ammonia Incident, Orica was not charged with a breach of s 148(2). Second, as evidenced by the Ammonium Nitrate Solution Incident in December 2011 and the Botany Mercury Incident in September 201, if Orica's attitude to reporting was to be found wanting in August 2011, it had changed by September and December of that year.
Demonstrated Remorse
The affidavits and oral testimony of Mr Winstone expressed regret for the various pollution incidents generally and specifically for the failure of Orica to report the Incident. In his affidavit sworn 1 November 2012, Mr Winstone acknowledged that the delay in notifying the Incident to the EPA after first becoming aware of it around 6pm on 8 August 2011 was "unacceptable" and that Orica "regrets that the Incident was not notified to the EPA sooner". Mr Winstone stated that he was "personally very disappointed that the incidents occurred". In addition, Orica tendered a formal letter from the Chairman of the Board of Orica Ltd, the parent company of Orica, wherein the Chairman, Mr Peter Duncan apologised formally to the Court and to the public for each of the seven incidents.
More specifically, press releases and an Australian Stock Exchange ("ASX") announcement in the days following the Incident included statements of regret by Orica. For example:
(a) the press release dated 11 August 2011 stated that "Orica deeply regrets this incident and we remain committed to the health and safety of our personnel and our neighbours" ;
(b) in the press release dated 14 August 2011 it was said that "Orica regrets this incident";
(c) likewise in the ASX Announcement dated 17 August 2011 Orica stated that "the Company regrets the incident";
(d) the online news from Orica dated 20 August 2011 included statements by Mr Graeme Liebelt, then CEO and Managing Director of Orica, to the effect that "I agree [the recent incidents at KI] are unacceptable. They do not reflect the way we normally do business and I greatly regret them... I am very distressed to see these incidents occur"; and
(e) the press release dated 17 November 2011, said, on behalf of Mr Liebelt, "I want to offer our sincere apologies to all those who have been affected by the August 8 incident".
Finally, in her affidavit sworn 16 November 2012, Ms Woodroffe expressed her "regret that I had not notified, or put in place steps to have someone else notify the EPA of the incident sooner".
In my opinion, and despite the EPA's submission to the contrary, there is unassailable evidence of Orica's remorse and acceptance of responsibility for its actions in committing the offences in order to warrant the Court taking this factor into account in mitigation (s 21A(3)(i) of the CSPA).
Early Guilty Plea
Proceedings were commenced on 9 November 2011, and Orica pleaded guilty to the two charges on 2 March 2012, which was the third mention of the proceedings. In doing so, the utilitarian value of the early guilty plea was not diminished and the guilty pleas should attract a maximum discount of 25% for each of the two offences (ss 21A(3)(k) and 22 of the CSPA).
Assistance to Authorities
The parties agreed that Orica had cooperated fully with the EPA's investigation. This cooperation included:
(a) the participation by 10 Orica employees in interviews with the EPA;
(b) the provision of information and records by Orica in response to 11 notices pursuant to s 193 of the POEOA;
(c) the provision of assistance and full cooperation in response to five notices issued under s 200 of the POEOA; and
(d) the provision of assistance to the EPA to conduct a site inspection.
This assistance must be taken into account as a mitigating factor in Orica's favour (ss 21A(3)(m) and 23 of the CSPA).
Orica Agreed to Pay the Prosecutor's Costs
Orica has agreed to pay the EPA's reasonable legal costs. In addition, Orica has agreed to pay the EPA's investigation costs in the agreed sum of $62,627.40. I take this into account in the determination of the appropriate penalty to be imposed in these proceedings in conformity with the principles set out in the principal judgment (at [209]).
Payment of Clean Up Costs by Orica
The EPA, correctly in my view, submits that the likely substantial clean-up costs incurred by Orica should not be a factor to be considered by the Court in mitigation of the penalty to be imposed on Orica.
In Environment Protection Authority v Sibelco Australia Ltd [2011] NSWLEC 160 Pain J held that (at [101]):
101 The Defendant has spent more than $600,000 on clean-up costs and submits this is a relevant consideration in sentencing relying on Environment Protection Authority v Snowy Hydro Ltd [2008] NSWLEC 264; (2008) 162 LGERA 273. In Environment Protection Authority v Buchanan (No 2) [2009] NSWLEC 31; (2009) 165 LGERA 383 at [118] I took into account the clean-up costs in relation to an individual defendant who lacked financial resources. Here the Defendant is a substantial corporate entity. The fact that large clean-up costs were necessarily incurred because of the lengthy distance of Middle Brook that was affected by sediment is not relevant to my determination of penalty.
I apply her Honour's reasoning to the facts of this case.
The approach is a reflection of the polluter pays principle which is an aspect of ecologically sustainable development ("ESD"). The principles of ESD are enshrined in the objects of the POEOA (s 3(a)).
Conclusion on Subjective Considerations
The subjective circumstances of Orica operate to mitigate to a reasonable degree the penalty that would otherwise be imposed by the Court and I consider a total discount of 30% appropriate.
Sentencing Purposes: Denunciation, Retribution and Deterrence
The imposition of a sentence serves a number of purposes. As identified above, the relevant purposes listed in s 3A of the CSPA also inform the determination of an appropriate sentence. These include: punishment (s 3A(a)); both general and specific deterrence (s 3A(b)); community protection (s 3A(c)); making Orica accountable for its actions (s 3A(e)); denunciation (s 3A(f)); and recognition of the harm done to victims
(s 3A(g)).
The EPA submitted that both specific and general deterrence should be important sentencing considerations in the present case. At a general level, the EPA submitted that any fine imposed should be sufficient to cause others to take the positive precautions necessary to avoid offending.
The EPA submitted that specific deterrence was a significant factor in the circumstances of the present case because of the number of incidents being prosecuted in these consecutive proceedings and because of Orica's prior conviction for an environmental offence in 2005. The EPA contended that these circumstances demonstrated systemic problems in Orica's management and reporting systems, requiring a substantial element of deterrence in the penalty to motivate lasting change within the organisation.
There is no doubt that the sentence imposed by the Court must be sufficient to specifically deter Orica from repeating the conduct that has resulted in the commission of the offence. It must also contain an element of general deterrence to promote the objects of the POEOA and to ensure that other environmental licensees with similar operations and responsibilities do not apprehend that such offences will be treated with relative impunity.
In the present case, I consider that there is a need for both specific and general deterrence for the reasons given in the principal judgment (at [213]-[217]).
Specifically with respect to the failure to report charge, the EPA submitted that general and specific deterrence was particularly important. I agree that those who fail to report environmental incidents must know that they will be punished. Otherwise the commission of the offence will have the tendency to undermine the objectives of the POEOA and hinder the avoidance, or at the very least the mitigation, of serious pollution events by the appropriate regulatory agencies.
However, I do not agree that the need for specific deterrence in relation to this offence is as great as posited by the EPA. This is because I do not accept that the evidence has demonstrated, either with respect to this Incident, or the remaining six incidents, any unfavourable "attitude to reporting" by Orica. Of the nine charges Orica faces across seven sets of proceedings, only one of those is for breach of s 148 of the POEOA.
The imposition of an appropriate sentence additionally serves the purpose of ensuring that retribution and denunciation are properly addressed. The sentence of this Court is a public denunciation of the conduct of Orica and must ensure that Orica is held accountable for its actions and is adequately punished. Accordingly, I also take these elements of sentencing into account.
Consistency in Sentencing
The pattern of sentencing against which the present case falls to be determined is through an examination of the relevant sentencing cases dealing with breach of licence offences pursuant to s 64(1) of the POEOA and failure to notify offences pursuant to s 148 of the POEOA.
Sentencing Trends for Breach of Licence Condition Offences
The pattern of sentencing for breach of licence offences pursuant to s 64(1) of the POEOA was examined in the principal judgment (at [223]) and are relied upon but are not repeated here, other than to note that Orica placed specific reliance on Environment Protection Authority vUnomedical Pty Limited (No 4) [2011] NSWLEC 131 (discussed in the principal judgment at [223(b)]).
Orica submitted that although factually analogous, additional mitigating features in the present proceedings should operate in its favour to cause the Court to impose a lower monetary penalty than the $90,000 fine imposed in Unomedical, including its early guilty plea and its expression of remorse.
The EPA, by contrast, compellingly, in my view, submitted that Unomedical was distinguishable for reasons that did not assist Orica. Relevantly, first, the environmental harm caused by the commission of the offences was more serious and there was no evidence in Unomedical of any impact on quality of life. Second, in Unomedical the defendant had, until the commission of the offence, operated faultlessly (at [130]). Plainly that is not the case with Orica. Third, there was no prospect in Unomedical of the defendant reoffending because it had ceased to operate and surrendered its environment protection license. In the present case, Orica's operations are continuing.
I take both these differences and similarities into account.
Sentencing Trends for Failure to Report Offences
The recent pattern of sentencing for breach of licence offences pursuant to s 148(2) of the POEOA is as follows:
(a) the decision in Environment Protection Authority v Forbes Shire Council [2014] NSWLEC 26 involved the commission of an offence contrary to s 148 of the POEOA. The defendant did not report the pollution incident to the EPA, rather the defendant's neighbour did on the same day that the defendant became aware of the incident. The Court noted that the defendant knew that the EPA was aware of the incident and held that, therefore, the failure to notify could not be said to have resulted in actual or likely harm to the environment. As a result, the level of objective seriousness of the offence was said to be low. In terms of subjective factors, the defendant pleaded guilty early, co-operated at all times with the prosecutor, had no prior convictions for environmental offences, was unlikely to re-offend, and expressed remorse, thereby entitling it to a discount of 30%. The defendant was fined $35,000;
(b) in Connell v Santos New South Wales Pty Ltd [2014] NSWLEC 1, the defendant pleaded guilty to four offences against s 136A(1) of the Petroleum (Onshore) Act 1991, one of which involved a failure to report an incident causing or threatening material harm to the environment under that Act. The delay in reporting was approximately seven months. The environmental harm caused by the failure to report was found to be "at the lower end of the scale of seriousness". The defendant was found to have committed the first offence deliberately with the knowledge of its illegality; the harm was foreseeable; and the defendant carried out measures to mitigate the harm caused after the incident. In terms of subjective factors, the defendant had a prior criminal record, although not in relation to environmental offences, pleaded guilty early and expressed remorse. The offences were committed in circumstances where a corporate takeover had occurred by the defendant of the company, and the defendant had made a conscious decision to report the incident once it had become aware of it, even though it exposed the defendant to criminal charges. All these factors added up to a 30% discount on sentence. The maximum penalty applicable to that offence was $110,000. The fine imposed for the failure to report offence was $21,000, reduced from $30,000;
(c) in Ramsey, the defendant received a fine of $80,000 for a failure to notify offence to which a guilty plea had been entered (in addition to penalties for related pollution of water offences). A publication order and a costs order were also made. In Ramsey, the delay in reporting was four days. An aggravating factor was the deception of an EPA officer when he investigated specific complaints in relation to the Incident. The value of the guilty plea was also reduced as the sentence proceeding was run much like a defended hearing and ran for 11 days. The defendant had a prior water pollution conviction. The Court imposed a fine of $80,000 for the failure to report offence; and
(d) the defendant in EPA v Caltex Australia Petroleum Pty Limited [2007] NSWLEC 647 pleaded guilty to a failure to report offence under s 148 of the POEOA. The defendant did not report the pollution incident to the EPA or the Moree Plains Shire Council, who were the appropriate regulatory authorities. The defendant's Regional Health, Safety, Security and Environment Manager drafted a letter to the EPA, but never sent it as a result of an oversight. He had, however, undertaken extensive internal investigation and caused the defendant to spend over $200,000 on remediation and monitoring of the pollution incident. The Court noted that the more serious issue was not the failure to report the event to the appropriate authorities, but the fact that the defendant's general reporting systems had not uncovered the error. The Court found that the offence fell at the lower end of potential culpability. The defendant pleaded guilty early, showed remorse, was of good corporate character, had incurred substantial costs in remediation, co-operated with the prosecution, used the Court's time efficiently, and agreed to a publication order and the direction of the fine of $15,000 to a nominated environmental restoration project.
The Totality Principle
The totality principle is a relevant consideration when determining an aggregate penalty in sentencing for multiple offences. Although Orica argued that the totality principle should be applied across all seven pollution incidents to cause a downward adjustment to the penalty to be applied in these proceedings, for the reasons given in the principal judgment, I do not agree (at [230]-[249]). I have concluded that each of the seven incidents must be considered separately for sentencing purposes.
However, having regard to the principles set out in the principal judgment concerning the application of the totality principle (at [244]-[245]) I accept that although materially different in character, the two offences comprising the Incident nevertheless arose out of the same continuity of conduct. Thus the totality principle is applicable and an allowance must be made in this regard in determining the appropriate sentencing for the two breaches of the POEOA. The Court must justly and appropriately impose a sentence that reflects the overall total criminality of Orica's conduct in relation to the Incident.
Conclusion on the Appropriate Penalty for the Hexavalent Chromium Incident
Synthesising the objective circumstances of the two offences as mitigated by the subjective circumstances of Orica, and having regard to the existing patterns of sentencing, I consider that the appropriate penalty for each offence is a monetary penalty.
The appropriate penalty for the breach of licence condition offence contrary to s 64(1) of the POEOA is $250,000 discounted by 30% to $175,000.
The appropriate penalty for the failure to report offence committed contrary to s 148 of the POEOA is $70,000, which should be discounted by 30% to arrive at a total of $49,000.
However, these monetary penalties must be adjusted by applying the totality principle. Accordingly, I consider it appropriate to reduce the penalty imposed for the failure to report offence by 25% to $36,750. This produces a total monetary penalty of $211,750 for the Incident.
Environmental Project
As the parties requested, I will order Orica to direct the monetary penalties towards a specified environmental restoration and enhancement project pursuant to s 250(1)(e) of the POEOA, and to pay the EPA's costs associated with monitoring and enforcing the carrying out of this project.
In the circumstances of the present case, I consider such an order to be appropriate. A fulsome description of the specified environmental project is annexed to this judgment at "A".
All future references to Orica's contributions towards this project will be accompanied by a reference, in the prescribed form referred to below, to the payments being part of the penalties imposed on Orica for the commission of the offences.
Publication Order
The parties submitted, and I agree, that it was also appropriate that the orders include a publication order pursuant to s 250(1)(a) of the POEOA.
In making this order, however, it is not the intention of the Court to cause Orica to publish a separate notice to that already required to be published pursuant to the principal judgment (at [261(7) and (8)]).
Costs
Additionally, and as agreed, Orica will be ordered to pay the prosecutor's investigation costs in the agreed amounts and legal costs as agreed or assessed.
Orders
For the reasons given above, the Court orders that:
51019 of 2011
(1) the defendant is convicted of the offence as charged;
(2) pursuant to s 250(1)(e) of the Protection of the Environment Operations Act 1997 the defendant is directed to pay to the NSW Office of Environment and Heritage - National Parks and Wildlife Service, within 28 days of this order, the amount of $175,000, as a contribution to the Stage 2 Restoration of Kooragang Dykes project to address the deterioration of dykes in the Hunter Wetlands National Park. A description of the project is annexed at "A";
51020 of 2011
(3) the defendant is convicted of the offence as charged;
(4) pursuant to s 250(1)(e) of the Protection of the Environment Operations Act 1997, the defendant is directed to pay to the NSW Office of Environment and Heritage - National Parks and Wildlife Service, within 28 days of this order, the amount of $36,750, as a contribution to the Stage 2 Restoration of Kooragang Dykes project to address the deterioration of dykes in the Hunter Wetlands National Park. A description of the project is annexed at "A";
51019 and 51020 of 2011
(5) all future references by the defendant to its funding of the Stage 2 Restoration of Kooragang Dykes project shall be accompanied by the following passage (pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997):
"Orica Australia Pty Limited's contribution to the funding of the Stage 2 Restoration of Kooragang Dykes project is part of a penalty imposed on it by the Land and Environment Court of NSW after it was convicted of offences against
ss 64(1) (breach of licence condition) and 148(2) (failure to report a pollution incident as soon as practicable) of the Protection of the Environment Operations Act 1997 (NSW)."
(6) pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997 the defendant is to publicise a summary of the offences, of the circumstances of the offences and of the orders made against it, in the notice directed to be published at [261(7) and (8)] of the principal judgment, in the form and in the manner prescribed therein;
(7) the defendant is to pay the prosecutor's legal costs as agreed or assessed;
(8) pursuant to s 248(1) of the Protection of the Environment Operations Act 1997, the defendant is to pay the prosecutor's investigation costs in the sum of $65,627.40;
(9) the exhibits are to be returned; and
(10) liberty to restore on seven days' notice for the purpose of amending the form of any of the orders made above.
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Annexure A
Decision last updated: 28 July 2014
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