Scaling up or scaling down during COVID-19: environmental compliance implications for industries

The ripple effect of the COVID-19 pandemic continues to impact the community and companies across Australia and the world. We are all being challenged by the need to adapt quickly to the changing situation. 

In this article, we consider some of the issues and opportunities that arise in relation to environmental compliance in the context of the pandemic.

Why is environmental compliance at risk?

From a corporate perspective, some companies are scaling up to meet increasing demand for critical supplies such as personal protective equipment, medical and other essential products. In this context, operational changes are inevitable and may include increased emissions, operating hours, transport and storage needs and waste. New or amended environmental approvals may be required to authorise those changes, and the increased production may strain the adequacy of existing systems and processes.

Other companies are scaling down production given diminished demand and/or as a result of government imposed restrictions which constrain their capacity to operate ‘normally’. This also presents challenges for ongoing environmental compliance, especially if staff shortages and/or expensive monitoring is required precisely when staff availability and business cash flow are depleted.

What should companies be doing to ensure environmental compliance?

Whilst there are a multitude of issues demanding urgent attention at the moment, one that should be prioritised is compliance with environmental statutory obligations - as upfront planning is essential to avoid or mitigate the risk of liability arising. If they haven’t already, Australian companies need to:

• revisit their environmental management systems to assess whether any reduction (or increase) in the workforce that my be required presents any new risks of environmental harm that require management over and above the company’s usual procedures;
  
  
• revisit all ongoing statutory obligations to determine whether the company will be able to continue to comply during this period of disruption;
  
  
• consider whether procedures need to be adapted to ensure ongoing compliance – e.g. most licences impose regular discharge monitoring requirements. If these depend on manual measurement, alternative technologies which enable automatic measurement may need to be installed;
  
  
• assess whether deadlines under remedial notices such as clean up notices can be met – e.g. deadlines for the completion of contamination investigations, preparation of audit reports and completion of remediation works; and
  
  
• if non-compliance appears unavoidable, consider if:
  
  
  • new or amended approvals or licences are required and whether they can be sought on a temporary basis;
    
    
  • exemptions or extensions can be sought; or
    
    
  • there is one or more defence(s) that may be available in the circumstances.

Will the government or regulators help?

There is no doubt that government and regulators are sympathetic to the difficulties posed by the scale and impact of the COVID-19 pandemic.

However, there is a notable lack of legislative response to date on environmental compliance as compared to other regulatory issues such as town planning (where several States have enacted laws or instruments to authorise or exempt certain conduct that would otherwise be prohibited e.g. deliveries outside permitted hours).

From a policy perspective, some regulators, such as the Victorian EPA, have reassuringly confirmed that they will adopt a proportionate regulatory approach that takes full account of the current COVID-19 circumstances whilst ensuring environmental risks are managed.

The New South Wales EPA has formally acknowledged the COVID-19 situation, confirming that it has regulatory discretion to consider individual circumstances on a case-by-case basis and take into consideration relevant circumstances such as COVID-19 prevention measures.

However, these statements proffer little certainty for companies, and therefore it is imperative that they do not become complacent.

What legal mechanisms are there to avoid liability?

As noted above, where non-compliance is likely or unavoidable, it is important to assess whether there are avenues to (temporarily) fast track amendments or new approvals, or to seek a formal exemption or extension of time. Another key element of any compliance strategy is to understand what defences or other lawful excuses might be available, when, and how they can be invoked.

The relevance of ‘reasonable excuse’

One concept that may be relevant in the current circumstances is that of ‘reasonable excuse’, which operates as a ‘built-in’ defence in some jurisdictions. For example, in New South Wales, a person will not commit the offence of failing to comply with a clean-up notice or management order if the person has a ‘reasonable excuse’ for the non-compliance.[1]

Similarly, in Victoria, a person is only liable for non-compliance with a clean-up notice under the current Environment Protection Act 1970 (Vic) if the contravention arises without ‘reasonable cause’.[2] Similar provisions are available in other contexts or jurisdictions which may be available to justify non‑compliance with investigative or remedial notices.[3]

A similar concept that is relevant to liability under a number of offence provisions is the requirement to take ‘all reasonable and practicable measures’.[4]

Whether or not regulators are prepared to view COVID-19 as a ‘reasonable excuse’ or constraint on what is ‘reasonable and practicable’ will ultimately depend on the specific circumstances of each case, having regard to degree of risk to human health and the environment and the measures that were otherwise in place to achieve compliance.

Emergency exemption or defence

Another mechanism that may be available to avoid liability is an exemption or defence on the basis of an ‘emergency’. Whilst most jurisdictions provide for this in some form, it is not automatic and must generally be sought and approved on a case-by-case basis. This demonstrates why companies need to be on the front-foot in assessing the need for and relevance of the mechanisms for ensuring compliance.

For example, in Victoria, the EPA may grant an emergency approval allowing the discharge, emission or deposit of waste into the environment for the purposes of meeting a temporary emergency or providing temporary relief of a community hardship.[5] Such an approval may only be granted if the EPA is satisfied the activity will not cause long‑term interference with any beneficial use, and can be granted for a maximum period of 120 days. A defence is also available where a discharge, emission or deposit of waste occurred in an emergency to prevent danger to life or limb, so long as the EPA is notified as soon as reasonably practicable.[6]

In New South Wales, the EPA may grant an exemption (with or without conditions) from any provision of the Protection of the Environment Operations Act 1997 (NSW) in an ‘emergency’ which is recognised to include fires, floods and fuel shortages. [7] It’s not yet clear whether the EPA will treat workforce shortages arising from a pandemic as falling within this inclusive range of emergencies. Such an exemption may be granted for a maximum period of five years.

Similar exemptions (and defences) are available in other jurisdictions and may be available to exempt compliance (or incidents of non-compliance) with ongoing conditions of operating licences, although the preconditions and ultimate scope and duration varies.[8] Whether regulators will allow such exemptions or defences to apply to companies changing their operations significantly, to meet reduced or increased demand, remains to be seen.

The importance of preparing now

Absent legislative amendment in each jurisdiction which provides wide-scale or automatic exemptions from compliance with environmental statutory obligations arising from operating licences or remedial notices, companies must assess their non-compliance risks now as part of their continuity planning.

In this article we have touched on the concepts of ‘reasonable excuse’, and the availability of exemptions or defences on the basis of an ‘emergency’, which may be important elements of a company’s compliance strategy during the COVID-19 pandemic.

Of course, in an enforcement context, a company will invariably need to demonstrate to the relevant regulator how COVID-19 has affected operations and how human health and environmental risks have been managed to an acceptable level. For this reason, there will be utility in engaging with regulators early on matters such as how the ‘reasonable excuse’ and ‘emergency’ provisions will be applied in the COVID-19 context, to ensure the adopted compliance strategy is as robust as it can be.

If you would like assistance in assessing compliance risk and formulating an appropriate strategy, or engaging with the relevant regulator, please reach out to one of Corrs’ experts who would be happy to discuss how we can help.

This article is part of our insight series COVID-19: Navigating the implications for business in Australia and beyond. To get notified by email when new COVID-19 insights are released, please subscribe for updates here.