NSW EPA plans to recover proceeds from environmental crime

The NSW Government has signalled its intention to recover financial benefits from non-compliance with environmental laws, becoming the first in Australia to do so.

On 7 September the NSW EPA released its Guidelines on recovering monetary benefits from environmental offenders, and an accompanying Protocol for calculating monetary benefits.

These documents set out the policy on when and how the EPA will ask the Court to order a person whom the EPA has prosecuted successfully to pay the amount of the monetary benefit from that person's non-compliance with an environmental law, and the mechanism by which that amount will be calculated.

In announcing the release of these documents, the NSW Minister for the Environment, the Hon Gabrielle Upton MP, stated that "polluters should not be able to profit from their environmental offences".

Although the power to seek a monetary benefit order has been available for many years, it has not been used before, because of concerns about how the amount of a monetary benefit would be calculated.

The EPA has now developed a standardised approach to calculate and recover monetary benefits. The EPA has said it proposes to seek "monetary benefit orders" in successful criminal prosecutions for environmental offences in the Land and Environment Court.

What is a monetary benefit?

A "monetary benefit" is, essentially, a financial advantage gained from either the failure to spend money on compliance with environmental legislation or from earning profits from committing an environmental offence. In such cases, the offender gains a financial advantage over its competitors who have done the right thing in complying with their environmental obligations.

According to the EPA, a monetary benefit may be obtained through:

• reducing capital costs, such as the costs of equipment, infrastructure and machinery,
• reducing operational costs, such as labour hire, consultants fees, energy costs, training costs and the costs of sampling and analysis of materials,
• obtaining "illegal" profits, including profits earned from operating without a licence or approval, and
• obtaining an "illegal" competitive advantage, including undercutting prices by saving on compliance costs.

The EPA has provided some examples in which a monetary benefit has been obtained by the failure to comply with environmental legislation:

• A quarry exceeds its annual extraction limit set out in its environment protection licence. The additional sales net the offending company $650,000 in profit. The company also avoids the additional $20,000 to amend the licence to authorise the additional extraction amount.
• A landowner operates an illegal waste facility for two years and makes $500,000 in profits by charging for the waste. The landowner also avoids $150,000 in operational costs by not paying for the development consent process, consultancy fees and annual licensing fees. It also fails to install appropriate pollution control measures, avoiding $300,000 in capital costs.
• A waste contractor illegally dumps asbestos waste, avoiding $10,000 in disposal costs.

Once the EPA determines that an offender has gained a monetary benefit, it will begin investigating the benefits obtained. The Guidelines indicate that the EPA will generally gather evidence and engage an independent expert witness to calculate the monetary benefit which hit says the offender has obtained, using the Protocol to do so.

What is a monetary benefit order?

A monetary benefit order is an order imposed by the Court requiring an offender to pay a sum up in the amount of the financial advantage obtained in committing the environmental offence. This amount is in addition to any penalty imposed by a Court for a conviction.

The Court has had power to make monetary benefit order since the predecessor to the Protection of the Environment Operations Act 1997. The power is now in section 249 of that Act, and is very broad. However, the EPA has not sought these orders previously. Now that the EPA has released the Guideline and the Protocol, we can expect it to start seeking these orders.

Section 249 states that the regulations may prescribe a protocol to be used in determining the amount that represents the monetary benefit acquired by the offender or accrued or accruing to the offender. The Environment Minister has indicated that a regulation prescribing the Protocol will be prepared soon.

A monetary benefit order can be sought under a wide range of legislation which the EPA administers.

It is important to note that the amount of this additional penalty is not subject to a maximum limit (unlike a criminal penalty) and cannot be sought in Local Court proceedings.

According to the Guidelines, the EPA will indicate to the offender prior to sentencing whether it intends to seek a monetary benefit order.

When will a monetary benefit order be sought?

The Guideline indicates that the EPA will consider the following circumstances before it determines whether to seek a monetary benefit order:

• the nature of the breach
• the environmental impact of the breach
• the environmental performance of the offender
• the environmental performance of the industry
• the nature of the offender

One of the EPA's stated objectives is to ensure that the best environmental outcome is achieved. The EPA prioritises timely clean-up actions and/or remediation works, which can be achieved, for example, through the issue of clean up notices. According to the Guideline, if a monetary benefit order is likely to restrict an offender's capability to carry out the necessary works, the EPA will be less inclined to seek a monetary benefit order.

A monetary benefit order will generally be sought whenever the EPA is capable of quantifying the financial benefit obtained by the offender and the offender has sufficient funds to pay all or a significant portion of the financial benefit obtained by the crime.

Ultimately it will be the Court which determines whether a monetary benefit order should be imposed, following the conviction of an offender. Depending on the outcomes of the first few cases in which a monetary benefits order is sought, the EPA will consider refining and extending the approach to a wider series of cases and regulatory functions.

If you are concerned that you don’t have all of the requisite licensing and approvals in place or you are currently being investigated by the EPA for an alleged environmental offence, please contact us.