01 May 2016

Government Casts a Wider Net for Environmental Compliance

The Queensland Government recently passed the Environmental Protection (Chain of Responsibility) Amendment Act 2016, which commenced operation on 27 April 2016.  The Act amends the Environmental Protection Act 1994 to give the Department of Environment and Heritage Protection (“DEHP“) greater powers to enforce compliance with existing environmental obligations.

Most significantly, new provisions have been inserted into the Environmental Protection Act to enable DEHP to issue environmental protection orders to a person who is related to a company which has failed to comply with its environmental obligations or which is regarded as “high risk” due to the fact that it is in administration, liquidation or receivership.

DEHP has had the power to issue environmental protection orders for many years.  An environmental protection order is a mechanism which can be used by DEHP to require a person to take certain action to comply with the terms of an environmental authority, a management plan, or another aspect of that person’s duties under the Environmental Protection Act.  The problem which DEHP has apparently experienced is that where the person breaching the environmental law is a company which has no assets or which is in receivership, administration or liquidation, the environmental protection order mechanism is effectively rendered useless because the company is unable to comply with the order.  The government has therefore amended the act to enable DEHP to issue environmental protection orders to related persons, which include:

  • a holding company or parent company;
  • the land owner on which the activity has been carried out; and
  • another person who DEHP decides has a “relevant connection” to the company.

DEHP may decide that a person has a relevant connection with the company if the person is capable of significantly benefiting financially from the activity carried out by the company, or if the person has in the previous two years been in a position to influence the company’s conduct in relation to its compliance with the Environmental Protection Act.  This could conceivably include not only directors and managers of the company, but also joint venturers, and possibly financiers of the project.

The inclusion of land owners as a “related person” to whom an environmental protection order can be issued is very significant, but has received little comment in the press.  It brings landlords into the firing line where a tenant who is conducting an activity under an environmental authority fails to comply with its environmental obligations.  There is a variety of businesses which require an environmental authority of some sort to operate, including service stations, panel beaters and so forth.  If, for example, the tenant failed to meet its environmental obligations and went into liquidation, the landlord could be faced with having to bear the cost of environmental audits, remediation and other measures to fix the problem.  Land owners considering entering into a lease with a tenant who proposes to carry on a business using and environmental authority should carefully consider the risk that the tenant may fail to comply with its environmental obligations, and whether some form of security (such as a substantial bond) should be obtained to mitigate the risk of the land owner incurring significant costs as a result.

The changes to the legislation also have potential to impact upon property developers, who may potentially receive an environmental protection order as a result of a breach of an environmental authority by a contractor.  For example, if a contractor breaches its obligations in relation to work being done in rivers or water courses, or in relation to the storage of fuel or other chemicals.

Finally, the companies which conduct businesses under environmental authorities or which involve risk of significant environmental harm should be aware that the effect of the amendments is to remove much of the benefit of corporate structures which insulate the assets of the business from the environmental risk.  Effective risk management therefore becomes even more important.

For more information about this issue and all planning and environment law, please contact our accredited property law specialist and partner, Nigel Hales on 07 4036 9700.

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