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Australia – Record Penalty For Environmental Harm.

 31 August, 2012

 

Legal News & Analysis – Asia Pacific – Australia – Environment 

 

Department of Environment and Resource Management v ACN 076289097 (formerly Lady Annie Operations)

 

Introduction

 

On 29 March 2012, the Mount Isa Magistrates Court delivered its judgment in the case of Department of Environment and Resource Management v ACN 076289097 (formerly Lady Annie Operations). In finding the former operators of the Lady Annie mine guilty of unlawfully causing serious environmental harm, the Magistrate ordered the external administrators of the former operator, Lady Annie Operations, to pay what is to date the largest fine ever imposed under the Environmental Protection Act 1994 (Qld) (“EP Act“).

 

Background

 

The Lady Annie Mine, located north-west of Mount Isa, is an open pit copper mine in close proximity to the Saga Creek which is a tributary of the Buckley and Georgina Rivers.

 

Because copper deposits are not normally found in pure form (but instead as mineral bearing ores), they require considerable processing before the valuable metal component can be extracted. The Lady Annie Mine produces copper by using what is commonly referred to as the “heap leach process”, whereby crushed copper-bearing ore is mixed with large quantities of sulphuric acid. The resultant “leachate” is a liquid mixture consisting of dissolved copper and various other heavy metals, and is highly acidic. Once the leachate is produced in this manner it is collected and then further processed to extract the target copper.

 

The heap leach process is conducted in purpose-built ponds that are designed to prevent contaminants from escaping into the surrounding environment. Large stormwater ponds located below the process ponds collect any contaminated stormwater runoff; the idea being that if the process ponds ever reach capacity, they would overflow into the stormwater ponds, rather than discharging into Saga Creek.

 

The incident

 

During late 2008 and early 2009, it had become evident to the mine operator that the structural integrity of the stormwater and leachate process ponds was compromised, and had resulted in the stormwater ponds becoming heavily contaminated with leachate. This meant that not only was there a real risk of pond failure, but also that any discharge from the system would have serious environmental consequences.

 

It is unclear whether the structural issues were due to faulty workmanship or simply the result of natural processes, but in any case, government compliance officers instructed the mine operator to seek expert geotechnical advice as soon as possible, in order to rectify the structural issues.

 

After unprecedented rainfall during late January and early February 2009, the structurally compromised stormwater system was simply unable to cope with the additional load. As a result, nearly 448 megalitres of leachate-contaminated stormwater was discharged from the Lady Annie system into Saga Creek and other tributaries of the Buckley River. The reported effects were far-reaching with contamination extending 52km downstream of the mine, causing the death of thousands of fish and crabs and presenting a serious health risk to livestock.

 

The decision

 

The defendant operator entered an early guilty plea to a charge of serious environmental harm. Magistrate Madsen took this and the company’s otherwise unblemished environmental history, its notable assistance and cooperation with the Department in investigating the incident, and nearly $11 million of extensive remedial work into account when handing down his decision. However, the sheer size and impact of the contravention outweighed those mitigating factors, and the Magistrate ordered the external administrators of the former mine to pay $500,000 plus costs.

 

This is, to date, the largest fine ever imposed under the EP Act.

 

Magistrate Madsen emphasised the significance of the impact to downstream landholders and water users, given the potential risk of harm to livestock and human health. He found that they had suffered a significant and irreversible impact, notwithstanding the operator’s ongoing efforts in working with the affected landholders. Notably, the Magistrate gave special consideration to:

 

  • the failure by the mine operators to take action; and
  • impacts on indigenous cultural heritage. 

 

Failure to take action

 

Magistrate Madsen was critical of the operator’s failure to take decisive action and consult with a geotechnical engineer in a timely fashion, finding that “where risks were identified, the proper action should have been taken to remedy those flaws.” He considered that “the public would naturally expect that mining activities are conducted with a significant degree of sophistication, care, and control” and that the mine operator was expected to do so in this instance. Furthermore, the failure to take decisive action was significant because of the relative ease with which the identified risks could have been managed.

 

It is interesting to note that, despite the significant penalty, individual executive officers were not held liable for the failure to take the appropriate action (the EP Act has executive officer liability provisions). It’s not apparent from the Magistrate’s decision whether the role of the executive officers was ever investigated.

 

Impacts on indigenous cultural heritage

 

The Magistrate placed particular emphasis on the impact to the traditional owners of the land.

 

Traditional owners from the Indjalandji-Dhidhanu and Kalkadoon people gave crucial evidence on the importance of the Buckley River and its tributaries to the indigenous people of that region. In particular, they emphasised their reluctance to engage in traditional hunting and cultural practices because of the risk of contamination to food sources and culturally important sites.

 

Magistrate Madsen considered the impact on cultural values to be a fundamental consequence of the harm to the receiving environment. He said that it was “an understatement to suggest that the impact was not insignificant” and that “nothing in the way of penalty could adequately punish the defendant for those impacts.”

 

This is one of the first examples where specific emphasis has been placed upon the impact to indigenous cultural values as a consequence of environmental pollution and it may be a trend that we see repeated in future cases. 

 

Lessons

 

  • This is the largest financial penalty ever imposed under EP Act.
  • The initial failure to take action and engage geotechnical experts was a fundamental error by the mine operators. Had the other mitigation measures not been taken, the penalty incurred may have been much greater, or possibly even resulted in individual executive officers being held liable.
  • The specific emphasis on the impact to the cultural values and customs of traditional owners is something that has not been previously considered in detail in environmental pollution cases. In future, we may see a greater emphasis by the courts on these impacts when dealing with cases involving environmental harm.

 

  

For further information, please contact:

 

John Briggs, Partner, Ashurst

john.briggs@ashurst.com

 

Wade Micke, Ashurst

wade.micke@ashurst.com

 

 

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