Contaminated Land Reform: Here Comes The EPA, Owners And Occupiers Beware!

Recent amendments to the Contaminated Land Management Amendment Act 2008 are set to commence on 1 June 2009, dramatically broadening the powers of the EPA and bringing sweeping changes to the responsibilities and potential liability of owners and occupiers. In order to manage potential liability, owners, occupiers, vendors and purchasers will need to seriously consider implementing changes to the approach they take to land transfers, occupation, use and management of land.

What changes will be introduced?

The key changes are:

1. a new power to impose preliminary investigation orders on a broad class of persons, including innocent owners and occupiers, where a site is merely suspected of being contaminated with a declared substance
2. importantly, the EPA is no longer required to believe that contaminated land will present a significant risk of harm prior to subjecting a site to management orders for investigation and remediation
3. the EPA's ability to impose management orders on land that is declared to be significantly contaminated land will apply whenever the EPA has reason to believe that the contamination is significant enough to warrant regulation. This test is extremely vague. No guidance is provided as to how the EPA is to make such an assessment, creating contractual uncertainties for purchasers and vendors as to the future risk of liability
4. these "Management Orders" are a new concept which merges the former investigation and remediation provisions into one combined approach, requiring contamination to be identified, delineated, and then treated or removed from the land
5. new powers introduced to enable the EPA to withdraw approval of a voluntary management proposal or issue an order in response to the unsatisfactory outcome of contamination management, removing the protections in place under the Current Act
6. clarification that more than one individual may be responsible for contamination
7. a significant expansion of the class of persons subject to the powers of the EPA. The hierarchy of people who may be subject to an order (starting with the polluter, followed by landowners) has been maintained with the notable exception that the first category has been broadened to include "a person who is responsible for significant contamination of the land" without the requirement for this person to have principal responsibility for the contamination (as is currently required). This move is supported by the EPA's emphasis on the polluter pays principle. For example, the amendments capture:

Duty to Report Contamination

In April 2009, the Department of Environment and Climate Change released draft guidelines on the duty to report contamination with reference to new clearer, more objective criteria for the triggers that will require persons to report contamination under the CLM Amendment Act.

Onerous notification obligations have been introduced requiring owners and occupiers to report contamination as soon as practicable after they become aware or reasonably ought to have been aware of the contamination, and further imposes increased penalties for failing to notify.

This duty applies to both individuals and corporations with the effect that directors will be liable if their company ought to have known of contamination. It is prudent for companies to re-assess any protocols in place for regular due diligence assessments and other compliance reports. To further emphasise this point, the amendments have increased the penalties for failing to report contamination to $165,000 for a company with a further $77,000 for each day the offences continue.

Submissions closed on 28 April 2009 for the draft guidelines and the Department of Environment and Climate Change anticipates providing a finalised report in the near future (prior to the 1 June commencement date).

Implications

These amendments are significant for land owners and occupiers as they will enable increased regulation and enforcement action by the EPA. There is therefore a greater impetus on occupiers and owners of land, as well as vendors and purchasers, to carefully implement environmental due diligence regimes to minimise risk, escape the intervention of the EPA, or to lessen their own liability.

Former owners and occupiers can still be held responsible for contamination regardless of whether the person has contracted out of that liability, for example, by way of an indemnity clause in a sale contract, therefore particular focus needs to be given to the environmental quality of the land at the transfer stage between vendors and purchasers and tenants and owners.

For purchasers and developers, the uncertainty introduced by the new subjective test of "contamination that is significant enough to warrant regulation" can be cured to some extent by obtaining specialist legal and environmental advice during the due diligence stage of property transactions, particularly those involving former industrial sites which are likely to be subject to contamination in some form as a consequence of their previous use. This due diligence is necessary as the EPA may also have recourse to both the occupier and the owner of the land irrespective of their responsibility for contamination.

Incoming tenants need to be careful when acquiring a business as a going concern, or if they intend to carry on a business that will be using the land for the generation or consumption of the same substances as that which may have caused any pre-existing contamination to the land.

In short, purchasers, vendors and tenants need to be vigilant when dealing with land that is or is potentially contaminated.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.