16 March 2016

Queensland government proposes to upend the management of environmental approvals

The much publicised Queensland Nickel Refinery administration and subsequent restructure of operations appears to have prompted the Queensland government into immediate action to amend the Environmental Protection Act 1994 (Qld). On 15 March 2016, the Minister for the Environment introduced the Environment Protection (Chain of Responsibility) Amendment Bill 2016 (Bill) which is intended to significantly increase the Department of Environment and Heritage Protection’s (DEHP) powers to:

  1. issue to entities (including individuals) environmental protection orders requiring them to conduct activities in relation to sites operated by their “related persons”; and
  2. impose new or change the level of financial assurance solely on the basis that there has been a transfer of an environmental authority if DEHP considers the change necessary or desirable.

The method of requiring related persons to conduct the required activities will be through an environmental protection order (EPO). Non-compliance with an EPO carries significant penalties, including a maximum 5 years imprisonment.

A number of other general amendments have been proposed that appear somewhat unrelated, including removing the protections for individuals in relation to self-incrimination in certain circumstances and increasing the powers of DEHP to enter private land.

Banks, lessors, shareholders and many others to be potentially subject to environmental protection orders

It is proposed that DEHP have powers to issue EPOs against:

  1. related persons of companies; and
  2. related persons of high risk companies,

that have already been issued with an EPO. Related persons of high risk companies (e.g. a company under external administration) can be issued with an EPO even where the high risk company itself is not issued with an EPO or even if the company no longer holds a relevant environmental authority. If the EPO is not complied with, the DEHP may step in, undertake the relevant actions and subsequently, be able to recover its costs, including against the related person.

“Related persons” is defined very broadly and could include financiers, investors, shareholders and joint venture participants. Given the complicated definition of the term, it may be very difficult for many persons to confirm if they are at risk or not. It does not appear it is intended that DEHP be required to consider whether the related entity should be rightfully held accountable to take the actions required by the EPO, nor whether such an order would place the related person in financial distress or at risk of insolvency.

The right to change environmental bonds when nothing has been done wrong

DEHP is proposed to have a general power to impose new or make any change to financial assurance it considers necessary or desirable as a result of the change in the holder of the environmental authority. This is a significant new power without any material limitations. For example, there is no need for a new holder to have taken any illegal or controversial actions nor for there to be a miscalculation or other error by the former holder.

It is not uncommon in other jurisdictions for the amount of environmental bonds to be reviewed as part of the transfer of approvals. This may be possible in Queensland under existing laws in identified circumstances (e.g. where there was a miscalculation of the risk of an activity).

Unless DEHP also introduces a method for giving comfort to potential investors and purchasers as to the risk that DEHP might take adverse action and change financial assurance requirements, the proposed amendments may have unintended consequences.

This is particularly relevant because the Bill restricts the ability to successfully stay the decision unless 85% of the financial assurance requirement is submitted. Any person subject to an adverse decision is likely to need to both negotiate and enter into new financial arrangements (assuming this is possible) whilst seeking to challenge the decision. These will be significant hurdles.

What are the implications?

DEHP already has significant powers to require parent companies to address a number of environmental risks where a subsidiary has not complied with its obligations. The proposed powers in the Bill go beyond the powers that apply in many other jurisdictions and do not align with the general concepts that underpin the Corporations Act 2001 (Cth) and corporations law generally.

If passed in its current form, the Bill will likely introduce new risks that potential developers, land owners, investors and purchasers will need to understand before they will invest.

It will be important for all holders of environmental authorities, from farmers, to resource operators and infrastructure owners to consider the risk that this Bill places on their “related persons”. As the Bill has been sent to committee for review, consideration should be given by interested parties to submitting their views to the Agriculture and Environment Committee.

A copy of the Bill can be accessed here.

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