Hazelwood Power Station operators sentenced for air pollution offences

By Meg Lee and Luke Denham

The Victorian Supreme Court last week sentenced four companies a total of $380,000 for 12 air pollution offences arising from the 2014 Hazelwood mine fire, the largest and longest mine fire ever to occur in the Latrobe Valley.

In handing down fines of $95,000 for each company[1], the court noted that the fire resulted in health, financial and psychological impacts on the Morwell community and that a large number of people were exposed to the air pollution that occurred as a result of the fire.

Background

The fines follow a guilty verdict by the jury that heard the case brought by EPA Victoria in July 2019 against Hazelwood Pacific Pty Ltd, Australian Power Partners B.V., Hazelwood Churchill Pty Ltd and National Power Australia Investments Ltd. The four companies operated the mine in partnership, as the Hazelwood Power Partnership, alongside the Hazelwood Power Corporation. Each of the four companies was found guilty by the jury on all three charges under sections 41(1)(a), (b) and (e), and because of section 62C of the Environment Protection Act 1970 (Vic) (EP Act), by:

• polluting the atmosphere so as to make it noxious, poisonous, or offensive;
• polluting the atmosphere so as to make it harmful to health, welfare, safety or property; and
• polluting the atmosphere so as to make it detrimental to any beneficial use.

Sentencing considerations

The court commented that the three offences committed by each offender all relate to the same pollution, being the smoke emitted by the mine fires, but reflect different consequences or harm caused by the pollution. This is relevant because, under the EP Act, offenders are sentenced according to the objective seriousness or gravity of the offences, as determined by their culpability and degree of responsibility for the pollution as well as the resulting harm.

Importantly, the evidence established a relationship between the undertaking of mining brown coal at Hazelwood and the smoke emitted from the mine caused by the fires of February 2014. The sentencing judge, Justice Keogh, stated that he was satisfied beyond reasonable doubt that the offenders are deemed, under section 62C of the EP Act, to have polluted the environment as a result of the emission of smoke from the mine premises resulting from the mine fires. Section 62C of the EP Act ‘deems’ an occupier of a premises to have caused any pollution that is emitted from the premises and thereby relieves the prosecutor from needing to prove causation.

The court then considered whether, absent the deeming provision of section 62C of the EP Act, the offenders were also responsible for ‘causing or permitting’ the pollution solely in reliance on the section 41 offence provisions. On this point, the court stated that this required more than just proof that the offenders’ conduct was a necessary cause of the pollution: ‘It is relevant to consider whether the pollution was a natural consequence of the acts of the offenders.’[2]

Importantly, the court found that, to prove causation under the section 41 offence provisions, it is not necessary that the offenders’ acts were the sole, main, direct or immediate cause of the pollution. However, it did find that it is relevant to consider whether any other acts, events or circumstances were ordinary occurrences, or something extraordinary.

Ultimately, the court was not satisfied beyond reasonable doubt that, absent the deeming provision, the offenders caused the pollution in any one or more of the three ways alleged.

Justice Keogh noted that the fire conditions on 10 February 2014 were ‘extreme and exceptional’ and directly contributed to the conditions at the mine. The court heard that coal dust caused by erosion at the mine was ‘highly combustible’ at the time of the fire.

While there had been some wetting down of the exposed brown coal to try to minimise the fire risk, the court heard that the wind and heat soon dried off the coal again. Importantly, the court found that there was no evidence of any inadequacy in the reticulation system servicing the mine batters. The court was satisfied that the companies attended the spot fires with tankers and other firefighting equipment very soon after they ignited and that the workers in attendance were all well trained in fighting coal fires. Nevertheless, despite the efforts to control and extinguish the fire, within a very short space of time it was uncontrollable.

Prosecutors argued that the pollution was contributed to by inadequate staffing levels, a sub-standard reticulation system and the failure to clear vegetation.

However, Justice Keogh rejected this, observing that once the fire took hold in the mine, the Hazelwood operators did everything they could to try to contain the fire. Further, once the fire was extinguished, the mine operators quickly prepared a proposal to improve the response to the risk of fire at the mine. These findings led to the conclusion that the operators did not ‘cause’ the pollution absent the deeming provision and also operated to mitigate the penalty imposed.

In assessing the fine, Justice Keogh took into account the companies’ remorse and the financial contributions they had made to the surrounding community in the previous years, including donations of $650,000 to three community groups including the Gippsland Emergency Relief Fund, and an estimated $500,000 each year in sponsorships to local community organisations.

Ultimately, the court found that the culpability and responsibility of the offenders was at the lower end of the applicable penalty range. For the purpose of the penalty provision under section 43 of the EP Act, the maximum penalty for each offence was $346,464.

Reaction to the decision

Some residents of the Latrobe Valley expressed disappointment with the sentence, wanting to see a much higher penalty. Environment Victoria's Dr Nick Aberle said that the fines highlighted the need for stronger environmental protection regulations. Significantly higher penalties will also be available to the EPA once the new provisions commence next year.

EPA CEO Dr Cathy Wilkinson acknowledged residents’ disappointment and efforts, but stated that the EPA was pleased that the companies had been held to account. She viewed the result as a ‘vindication for the local community [and] a vindication for the environment’ but warned polluters that ‘EPA will continue to pursue maximum penalties when holding polluters to account’.

Related OHS proceedings

Publication of the hearing and the verdict was suppressed until a verdict was delivered in a separate prosecution, brought by WorkSafe Victoria, of a related entity over breaches of the Occupational Health and Safety Act 2004 (Vic) (OHS Act) regarding the same incident.

In sentencing for those breaches, also on Tuesday, the Hazelwood Power Corporation was fined $1.25 million for five breaches of sections 21(1) and (2)(c) of the OHS Act for failing, so far as reasonably practicable, to provide employees a safe working environment. The company was fined a further $310,000 for the remaining five charges under section 23(1) of the OHS Act, for failing to ensure persons other than employees were not exposed to health and safety risks.

The changing EPA landscape

The handling of the mine fire by the EPA and the significant differential between OHS penalties and EPA penalties were some of the key reasons for the review of the EPA. The significant amendments to the EP Act that have resulted from the review were due to commence on 1 July 2020; however, the introduction has been delayed by the COVID-19 pandemic to allow industry more time to get ready for the changes. The changes include a significant shift in focus to include positive obligations on companies, similar to those in the OHS regime, to identify and manage risks of harm to human health and the environment arising from pollution, as well as new duties to respond to incidents and to notify the EPA of certain incidents and contamination.

The new provisions will therefore be much more likely to lead to the early identification of risks and, should an incident similar to the Hazelwood fire occur under the new regime, the EPA would have an increased number of charges it will be able to bring against any such company relating not just to the crime of pollution, but to the breaches for failing to identify and manage risk. Indeed, the court commented that the section 41 offences are ‘outcome based, not risk based’.[3]  The offence being ‘to pollute’ the atmosphere, the culpability and degree of responsibility of the offenders must be assessed against the outcome which occurred, and not against the failure to take adequate steps to reduce the risks. Under the new regime, this will no longer be the case and companies will need to ensure they put adequate systems in place to identify and reduce foreseeable risks that arise from their operations.

Our expertise

Hall & Wilcox has extensive experience advising and representing clients in relation to contaminated land management, pollution incidents and EPA prosecutions. Please do not hesitate to contact Meg Lee to discuss the implications of this decision or your company’s preparedness for the new EP Act regime.

[1] Director of Public Prosecutions v Hazelwood Pacific Pty Ltd (Sentence) [2020] VSC 279 (19 May 2020).
[2] Ibid [85].
[3] Ibid [104].