Land and Environment Court New South Wales

• Medium Neutral Citation: Environment Protection Authority v Orica Australia Pty Ltd (the Ammonium Nitrate Solution Spill Incident) [2014] NSWLEC 109
• Hearing dates: 5, 6, 10 and 12 December 2012 and 20 May 2013
• Decision date: 28 July 2014
• Jurisdiction: Class 5
• Before: Pepper J

Decision

See orders at [131].

• Catchwords: ENVIRONMENTAL OFFENCES: breach of licence condition - failure to carry out licenced activities in a competent manner - guilty plea - sentencing principles - whether De Simoni principle applicable - whether totality principle applicable - determination of appropriate penalty.
• Legislation Cited: Crimes (Sentencing Procedure) Act 1999, ss 3A, 21A, 22, 23; Protection of the Environment Operations Act 1997, ss 3, 64, 241, 250(1)
• Cases Cited: Environment Protection Authority v Orica Australia Pty Ltd (the Nitric Acid Air Lift Incident) [2014] NSWLEC 103; Environment Protection Authority v Orica Australia Pty Ltd (the Jackhammer Incident) [2014] NSWLEC 105; R v De Simoni [1981] HCA 31; (1981) 147 CLR 383
• Category: Sentence
• Parties: Environment Protection Authority (Prosecutor); Orica Australia Pty Ltd (Defendant)
• Representation: Mr S Rushton SC and Mr D A Hughes (Prosecutor); Mr T A Game SC, Mr D Jordan SC and Ms K Edwards (Defendant); Office of Environment and Heritage (Prosecutor); Ashurst Lawyers (Defendant)
• File Number(s): 51164 of 2012

Judgment

Orica Pleads Guilty to a Breach of Licence Offence Resulting in the Overflow of Ammonium Nitrate Solution

1 The defendant, Orica Australia Pty Ltd ("Orica"), pleaded guilty to nine charges under the Protection of the Environment Operations Act 1997 ("the POEOA") which were dealt with in seven concurrent sentence proceedings, relating to seven separate pollution incidents occurring between October 2010 and December 2011. Although the proceedings were heard concurrently, it is appropriate that seven separate judgments are produced, that is, one for each discrete incident.

2 The principal sentencing judgment with respect to these seven proceedings summarises all of the charges, outlines in greater detail the conduct of the proceedings, and sets out in full the relevant sentencing principles applicable in this, and the remaining five judgments (Environment Protection Authority v Orica Australia Pty Ltd (the Nitric Acid Air Lift Incident) [2014] NSWLEC 103, "the principal judgment"). Those principles are applied, where relevant, in this judgment, but are expressed only in summary form. It is therefore necessary to read this judgment together with the principal judgment.

3 This judgment concerns the appropriate sentence for an offence that occurred on 7 December 2011 involving the overflow beyond containment systems of a weak ammonium nitrate solution ("WANS") at Orica's Kooragang Island Licensed Premises ("the KI premises") ("the Ammonium Nitrate Solution Spill Incident"). As a result of the offence, about 17.4m3 of WANS overflowed beyond the bunds around the Weak Ammonia Nitrate Solution Mixing Tank ("the WANS Mixing Tank") and soaked into the ground surrounding the Weak Ammonia Nitrate Solution Filtration Plant ("the WANS Filtration Plant").

4 This Incident resulted in one breach of licence condition offence under Orica's Environment Protection Licence Number 828 ("Licence 828") contrary to s 64(1) of the POEOA, by failing to carry out licensed activities in a competent manner.

5 The failure to comply with a licence condition in contravention of s 64(1) of the POEOA is an offence of strict liability.

6 Section 64(1) states:

(1) Offence

If any condition of a licence is contravened by any person, each holder of the licence is guilty of an offence.

Maximum penalty:

(a) in the case of a corporation-$1,000,000 and, in the case of a continuing offence, a further penalty of $120,000 for each day the offence continues...

7 By pleading guilty to the offence, Orica concedes that it failed to comply with licence condition O1.1 in that it failed to carry out licensed activities in a competent manner.

Conduct of the Proceedings

8 The facts giving rise to the offence were not in dispute and were recorded in a Statement of Agreed Facts dated 27 November 2012 and supplemented by additional evidence.

9 As outlined in the principal judgment (at [22]-[23]), this evidence principally comprised two general affidavits of Mr Sean Winstone, who was the Global Executive - Manufacturing for Orica at the time, sworn 6 and 23 November 2012. In those affidavits Mr Winstone deposed to matters relevant to all seven pollution incidents. The general affidavits summarised Orica's manufacturing operations at its KI premises, Orica's Safety, Health and Environment Management System ("SHEMS"), the actions taken by Orica to minimise further environmental incidents at the KI premises, and Orica's commitment to community initiatives.

10 Mr Winstone also gave evidence specifically relevant to the Ammonium Nitrate Solution Spill Incident in an affidavit sworn 3 December 2012. In his affidavit he discussed the Incident, risk management at the WANS Filtration Plant, including the measures in place prior to the Incident to avoid a pollution event occurring, the cause of the Incident and the steps taken after the Incident to prevent recurrence. During the proceedings, Mr Winstone was cross-examined about Orica's operations at the KI premises and about the Incident. As stated in the principal judgment, I found Mr Winstone to be a witness of truth. Where appropriate his evidence will be discussed in further detail below.

The Kooragang Island Site at Which the Incident Occurred

11 A description of Orica's operations at the KI premises is contained in the principal judgment (at [8]-[13]). Suffice it to say that Orica is the operator of the site at which the Incident occurred, namely, the Ammonium Nitrate Manufacturing Facility ("ANMF"), located at the south eastern end of Kooragang Island near Newcastle. The KI premises are industrial and the nearest residential properties are located at Stockton, at its closest point about 650m away. Stockton is located to the east of the ANMF on the eastern side of the northern arm of the Hunter River.

12 Licence 828 authorises Orica to carry out chemical production activities ("the KI licensed activities") at the KI premises. These include the production of ammonia, ammonium nitrate and nitric acid. Ammoniun nitrate is a key ingredient in the offsite manufacture of explosives used in mining.

13 The events the subject of these proceedings occurred at the ANMF's Weak Ammonium Nitrate Solution Plant ("WANS Plant").

14 Licence 828 relevantly includes Licence Condition O1.1 which provides:

Licensed activities must be carried out in a competent manner. This includes:

(a) the processing, handling, movement and storage of materials and substances used to carry out the activity; and

(b) the treatment, storage, processing, reprocessing, transport and disposal of waste generated by the activity.

15 Orica's breach of condition O1.1 of Licence 828 was particularised in the Amended Summons filed 5 December 2012. In short, Orica failed to carry out its KI licensed activities in a competent manner in that it undertook work that affected the Primary and Secondary Controllers of the Nitrate Plant and the WANS Plant while the WANS Plant was operating, in circumstances where:

(a) the persons who undertook the work were not aware that the WANS Plant was operating;

(b) the Distributed Control System ("DCS") outputs for the WANS Plant were configured to the 'hold' position rather than the 'safe' position;

(c) Orica had inadequate guidelines and processes to allow those carrying out the work to understand the impact of the work on the WANS Plant control systems; and

(d) the work was carried out without appropriate clearance pursuant to Orica's own procedures.

The Management of Waste Ammonium Nitrate Solution Produced at the WANS Plant

16 As a result of the chemical production activities at the ANMF, a quantity of waste ammonium nitrate solution is produced as a normal result of the manufacturing process.

17 The WANS Plant is designed to recover WANS that would otherwise be discharged from the KI premises as effluent under the relevant conditions of Licence 828.

18 The waste ammonium nitrate solution is collected, concentrated and filtered. A part of the process is the removal of materials that contribute to solution turbidity from the waste ammonium nitrate solution. The removal of these materials is carried out at the WANS Filtration Plant. The output from the WANS Filtration Plant is filtered WANS. The WANS is shipped by road tanker for use in another Orica facility in the production of ammonium nitrate emulsion.

19 The WANS Plant is part of the nitrogen effluent reduction project referred to in Mr Winstone's affidavit sworn 6 November 2012, described above. It is, according to Mr Winstone, intended to provide an environmental benefit by reducing the nitrogen load discharged into the Hunter River as a result of the operations at the KI premises pursuant to Licence 828.

20 The WANS Filtration Plant consists of three tanks, the Concentrator Product Tank, the WANS Mixing Tank and the WANS Export Tank, as well as a candle filter with associated pumps and other equipment. The waste ammonium nitrate solution is pumped from the Concentrator Product Tank to the WANS Mixing Tank through the Concentrator Product Transfer Pump.

21 The WANS Filtration Plant is located towards the south eastern corner of the KI premises. It consists of plant and equipment located in two areas, the ammonium nitrate solution tank bund where the Concentrator Product Tank and WANS Export Tank are located, and a building which is located to the east of the ammonium solution tank bund ("the WANS Filtration Building").

22 The WANS Filtration Building is enclosed to the northern, western and southern side and is open on the eastern side. It contains the WANS Filter and the WANS Mixing Tank. The WANS Mixing Tank and the WANS Filter are within a bunded area that is below ground surface level. The WANS Filtration Building is surrounded by a concrete pad on the eastern side of the building. The concrete pad extends approximately five metres before reaching the natural ground comprising of grass and exposed soil.

23 The No 2 Ammonium Nitrate Plant ("ANP2") and the WANS Filtration Plant are controlled using the DCS. This consists of a number of special purpose computers, or "controllers", designed to control critical processes at Orica's KI premises. Using a computer screen, an operator can do a number of tasks including starting and stopping pumps and making other changes to process conditions as required. The actual control is performed automatically by a number of digital process control stations that are interconnected by an ethernet communications network.

24 The DCS (which includes Station 18) controls the WANS Plant as well as parts of ANP2. Station 18 consists of two computer-based controllers.

25 The Primary Controller normally controls ANP2 and the WANS Filtration Plant. If a fault is detected, the Secondary Controller can take over control. The DCS is designed to continue operating despite a single fault occurring in any one component. In the event of a failure, that is, where there is a failure that affects more than one component, all DCS outputs are set to "hold last position" rather than set to turn "off" or "on", including the components that control the WANS Filtration Plant.

26 The WANS Filtration Plant is operated in a continuous batch mode - once one batch of solution is processed, the system automatically starts processing another batch.

27 The WANS Plant is designed to operate automatically with infrequent operator attention. The DCS automatically executes a number of sequential steps, one of which is that when the WANS Mixing Tank level falls below 30%, the waste ammonium nitrate solution starts to feed into the WANS Mixing Tank. The other automatic step is the shutting off of the feed to the Mixing Tank when the Mixing Tank level reaches 60%.

28 The level of the WANS Mixing Tank is measured by two level transmitters. The main transmitter is a guided-wave radar device and is used by the DCS for sequence control including stopping and starting the pump which feeds into the WANS Mixing Tank. The second level transmitter is a backup transmitter, and is a horn type radar device. If the two transmitters disagree, an alarm is generated in the DCS. When the guided-wave radar measures a level above 70%, the DCS trips the pump. There is no high level trip or alarm independent of the DCS.

The Ammonium Nitrate Solution Spill Incident

29 On 6 December 2011 at approximately 9.00am, Nitrates Instrument/Electrical Technicians ("the Nitrates I/E Technicians") were undertaking routine testing of instruments in ANP2 pursuant to a work permit. During the routine testing, a problem was identified with the Primary Controller's serial communications card ("the Ethernet Card") on the DCS.

30 The problem resulted in no data being transferred from the Trident Safety System for ANP2 (including the WANS Plant) to the DCS.

31 The Nitrates I/E Technicians switched the DCS from the Primary to the Secondary Controller and the problem appeared to clear. Further investigation was planned for the next day.

32 On 7 December 2011 at 9.44am the Nitrates I/E Technicians reset the Primary Controller on the DCS system to clear the fault identified the previous day. During this process the Etnernet Card that allows the Primary Controller to communicate with the rest of the DCS network was reset without any fault indication, however, the Primary Controller would not reset.

33 The Nitrates I/E Technicians then downloaded a software program to the Primary Controller to attempt to clear the remaining fault. However, the program also downloaded to the Secondary Controller.

34 During this download, the Secondary Controller went on "hold" with the system continuing any operation that was occurring at the time the download occurred. During this time the Primary Controller was still offline. Consequently this resulted in the loss of DCS control for ANP2 and the WANS Filtration Plant.

35 The Nitrates I/E Technicians were not aware that the WANS Filtration Plant was operational at the time that they were undertaking the routine testing in ANP2. The Nitrates I/E Engineer, who was responsible for overseeing the work of the Nitrates I/E Technicians, was aware that the WANS Filtration Plant was operational on the day of the Incident.

36 Around half an hour later the Nitrates Process Operational Console Operator called the Nitrates I/E Technicians reporting multiple system alarms. The Nitrates I/E Technicians advised the Operator that they were working on the problem.

37 At 1.05pm the Nitrates Process Engineer attended the Nitrates Control Room to check the status of the WANS Filtration Plant. The Engineer noticed that there was no indication of the Plant status on the DCS screen.

38 Upon further investigation, it was discovered that the work being conducted on the DCS was affecting the display of operational information in relation to ANP2 and the WANS Filtration Plant.

39 At 1.10pm the Nitrates Process Engineer visited the WANS Filtration Plant and observed pools of liquid outside of the bunded process area on the ground around the WANS Filtration Plant. The Engineer was not aware that functional testing was taking place in ANP2.

40 The Nitrates Process Engineer attempted to stop the Concentrator Product Transfer Pump for the WANS Mixing Tank by using the stop button but was unable to do so. It was later determined that the stop button was connected to the motor circuit through the DCS and could not operate independently of the DCS.

41 The Nitrates Process Technician then unsuccessfully attempted to stop the Concentrator Transfer Pump through the DCS, rather than in the field.

42 At 1.12pm the Nitrates Process Technician isolated the WANS Concentrator Transfer Pump in the ANP2 switch room. This resulted in the overflow from the WANS Mixing Tank ceasing.

43 At 1.35pm the Nitrates Process Technician started to pump the contents of the bund bank into the WANS Mixing Tank.

44 At 1.55pm the Nitrates Plant Manager contacted the Site Manager to advise him of the Incident.

Notification of the Incident to the EPA and Actions Occurring After the Incident

45 Immediately after the Incident, the WANS Plant was shut down until an investigation could be carried out and steps put in place to prevent a recurrence of the Incident.

46 At approximately 1.50pm on 7 December 2011, Mr Winstone called the Environment Protection Authority's ("the EPA") EnviroLine notifying it that there had been an overflow of a bund containing WANS.

47 At approximately 2.40pm on 7 December 2011, EPA Officers Ms Karen Gallagher and Mr Hamish Rutherford arrived at the KI premises.

48 The EPA Officers attended a briefing held in the Nitrates Area Control Room by Mr Winstone. The briefing was also attended by NSW Fire and Rescue's Hazardous Materials team ("Hazmat"), and other Orica staff.

49 The EPA Officers then conducted an inspection of the WANS Filtration Plant. Ms Gallagher observed that:

(a) the concrete pad and the natural ground surrounding the WANS Filtration Plant were wet; and

(b) light rain was falling at the time, however, there was a clear distinction showing where the liquid had spilled from the bunded area, spread to the concrete pad and spread onto the natural ground.

50 The spill area was approximately 30m2.

51 Mr Rutherford, with the assistance of the NSW Fire and Rescue Hazmat officers, collected two soil samples from the wet soil adjacent to the WANS Filtration Plant. He collected a third sample, with the assistance of Orica's Laboratory Analyst, from the liquid remaining in the WANS Filtration Plant bund.

52 On 14 December 2011 the EPA received Orica's Report into Weak Ammonium Nitrate Incident - Wednesday 7 December 2011 as required under condition R3 of Licence 828. In summary, the Report found that:

(a) the Incident involved an overflow of the WANS Mixing Tank into the surrounding secondary containment system;

(b) the secondary containment system subsequently overflowed with the resultant 17.4m3 of 36.3% solution flowing from the bunded process area into the surrounding ground;

(c) the Incident occurred as a result of a failure on the Ethernet Card and the actions implemented to rectify the fault by the Nitrates I/E team. These actions resulted in the Secondary Controller System losing communication with ANP2 and the WANS Filtration Plant;

(d) the actions undertaken to rectify the fault resulted in the equipment within the WANS Filtration Plant "holding their last configuration". This meant that at the time the Concentrator Product Transfer Pump was running, and therefore, continuing to pump solution into the WANS Mixing Tank. The WANS Mixing Tank continued to be filled as the control system did not cease pump operation when the level reached the Tank's high level; and

(e) the Concentrator Product Transfer Pump continued to run for approximately 60 minutes after the high level was reached, resulting in the overflow of the Tank into the surrounding bunded processing area, and subsequently, the overflow from the bunded area.

53 On 9 December 2011 a new condition was attached to Licence 828, namely, E4.1, requiring Orica to develop a groundwater monitoring program, which included daily sampling of groundwater in the impacted and surrounding area of the Incident at the KI premises, later reduced to weekly and monthly sampling. Orica implemented such a program pursuant to the condition, from December 2011 onwards.

Causes of the Incident

54 The causes of the Incident are set out in a report entitled Investigation into Overflow from Weak Ammonium Nitrate Solution Tank at Orica Australia's Kooragang Island Nitrates Plant 7th November 2011 prepared by an Independent Engineer, Mr Robert Weiss, of Honeywell Process Solutions ("the Incident Report"). The reference to "7 November 2011" is a typographical error and should read "7 December 2011". The report is dated 24 December 2011 and a copy was provided to the EPA by Orica on 20 January 2012.

55 In summary, the Incident Report concluded that the direct causes of the Incident were:

1. Both primary and secondary controllers in DCS control station STN18 were not operating. Consequently they were unable to sense the high level and shut off either the three-way valve HV 2610 or the Concentrator Product Transfer Pump 17-04J08. the outputs were configured to hold their last values in this situation, rather than to fail to the safe state.

2. There was no means independent of the DCS to sense the high level and shut off the inlet flow. WANS is regarded as non-hazardous and the hazard and risk studies for the project did not identify that one was required.

3. The control room operators could not monitor the level in the WANS mixing tank because the DCS controllers were offline.

4. The plant is located remote from other operations, and the fact that the WANS mixing tank was overflowing was not apparent without deliberately visiting the WANS building. The incident occurred in the time between regular periodic checks of the WANS plant. These normally would have occurred every 2-4 hours once the plant was handed over. However, as the plant was still being commissioned, surveillance was being provided by the process engineer who identified the overflow as part of his periodic surveillance.

5. The AN2 plant was shut down at the time. The technicians working on the DCS control station (identified as one of two "ANP2" control stations) and the control room operator were unaware that it was controlling any currently running plant. In order to rectify a fault identified during trip testing, the instrument technician therefore downloaded both controllers, causing the online controller to go offline. Because the download was being performed in a different location to the control station, it was not immediately apparent to the technician that the controller had gone offline.

6. The scope of the original Permit to Work had progressively changed from testing a trip in the effluent plant to reloading software in a DCS control station that could impact areas other than the SIF under test. This "scope creep" on the permit was not recognised by the Permit Receiver, and consequently he did not seek re-authorisation of the permit in accordance with clause 2.13 of the Permit to Work Model Procedure PW-01A.

7. The detailed work instruction for testing the SIF did not provide any guidance on rectification of faults found and limitations on what could be performed under a testing permit.

8. The WANS plant was new and in the final stages of commissioning. Control had been added to the existing ANP2 control station. Even if permit reauthorisation had been sought, it is not clear that the Permit Issuer would have recognised that the work being performed on the DCS would impact the WANS plant.

9. It was not readily apparent without referring to detailed system documentation what equipment was controlled by the specific DCS control station being worked on.

56 The indirect or underlying causes of the Incident were described as follows:

1. The work on the clearance certificate for trip testing extended beyond the original scope of the clearance such that systems in addition to that being tested were impacted by rectification work.

2. When working on a specific part of the DCS or SIS, it was not readily apparent what process systems would be impacted. Permit issuers rely on the knowledge of the permit receiver who is not necessarily aware of the non-critical systems that may be impacted. Consequently the technician stopped both controllers without realising that it would impact operating plant.

3. The risk criteria for providing SIL-rated and/or independent high level trips did not require such protection for low severity events, and so no independent high level trip was provided.

4. The DCS outputs were configured to hold their last value when both controllers stopped. Although this was the site standard, it was not necessarily appropriate for the WANS plant.

57 Orica agreed with the causes of the Incident identified in the Incident Report, although it submitted that the cause described in paragraph 4 of 4.1 was a contributing factor rather than a direct cause. I accept that operationally this must be so, but ultimately it makes little, if any, difference.

58 In his affidavit sworn 3 December 2012, Mr Winstone deposed to the fact that Orica had commissioned six hazard studies between July 2009 and June 2010, before the WANS Plant was commissioned, and that Orica's SHEMS system applied to the WANS Plant. The SHEMS system required identification of hazards and implementation of appropriate controls to appropriately manage the risk of hazards.

59 Although the hazard studies identified that there was a risk of a spill of WANS from the WANS Mixing Tank, because WANS was considered non-hazardous, the project team responsible for the design and commissioning of the WANS Plant did not consider that independent trip protection was required to prevent overflow. Instead it was determined that the instrumentation and DCS provided sufficient protection.

60 After the hazard studies were completed in June 2010, a number of controls against overflow of the WANS Mixing Tank were implemented. These were described by Mr Winstone in his 3 December 2012 affidavit and it is not necessary to repeat them here. They included the provision of alarms, the provision of a bund around the WANS Mixing Tank having a similar capacity to the Tank, the restriction of the maximum filling level to 60% and pumping time limits. These controls were, however, reliant on the DCS and when the Incident occurred, both the online and offline standby systems were affected, which meant that the overflow protection systems that relied on the DCS did not activate to prevent the Incident.

61 Further, at the time of the Incident a procedure was in place that required a "permit to work" for all work on the KI premises, which included the work by the Nitrates I/E Technicians. During the Incident the Nitrates I/E Technicians undertook further work not covered by their work permit without seeking, as required, a new or amended work permit or discussing the change in the scope of work with the permit issuer. This was not in accordance with Orica's procedures in this regard.

62 At the time of the Incident, there were procedures that guided personnel at the KI premises in responding to environmental incidents, including overflow and loss of containment. These procedures were followed by relevant personnel in responding to the Incident.

63 Mr Winstone stated that, as the WANS Plant was still in the commissioning stage at the time of the Incident, there were status updates on the commissioning through group emails to relevant operational parties, project team members and shift operators and meetings. Mr Winstone acknowledged, however, that the above measures were not sufficient to ensure that the Nitrates I/E Technicians conducting the work to rectify the fault that they identified with the Ethernet Card, were aware that the WANS Plant was in fact operating.

64 Training in relation to the WANS Plant was provided to Nitrates operators, but it was not provided to the I/E maintenance teams or the Nitrates I/E Technicians because the WANS Plant was still in the commissioning phase.

65 Mr Winstone accepted that the Permit to Work Procedure, training and other measures put in place to prevent an overflow "were not adequate to prevent the incident" and that these needed to be improved, with additional controls to be implemented.

Actions Taken by Orica to Prevent a Recurrence

66 Orica implemented the "Prior to Restart" actions recommended by Mr Weiss prior to the recommencement of operation of the WANS Filtration Plant, as required by the variation to Licence 828. The completion of these measures was verified by Mr Weiss.

67 Mr Weiss recommended six medium term actions in his Incident Report. Three of these were completed by March 2012 and the remaining actions were being completed in accordance with timeframes agreed to by the EPA.

68 By 3 December 2012, three actions that had already been implemented in accordance with the recommendations were the:

(a) installation of an independent high level trip that was independent of the DCS, designed to stop the pump before the WANS Mixing Tank could overflow;

(b) review of the design of all the drive emergency stops in the WANS Plant to ensure independence from the DCS and changes to ensure full compliance with applicable standards and to ensure that the stop button was functional even if the DCS was offline; and

(c) review of the failure mode of DCS outputs in the WANS Plant to ensure that in the event of failure, the default state did not introduce hazards.

69 Additional steps taken since the Incident to prevent recurrence have, according to Mr Winstone, included training, for example, on the risk of "scope creep" on work permits; on the functionality of the WANS Plant for I/E maintenance personnel; on which systems are controlled by each DCS station; and on the operation of the WANS Plant for Nitrates operators in May 2012 following the completion of the commissioning of the WANS Plant.

70 Moreover, changes to operating and maintenance procedures in accordance with the recommendations of Mr Weiss have been implemented, including: the updating of the template for Safety Instrument Function testing by the Nitrates I/E Engineer; the updating of the "Permit Issuing Guidelines Procedure" for work permits by the Nitrates I/E Engineer to require the permit issuer to consider whether the work being authorised will affect the DCS and whether the area of the Plant controlled by the DCS is online or offline; the creation of a document entitled "Nitrates Control Systems and Interactions", setting out the various plant and equipment controlled by each DCS Control Station (including Station 18); and an upgrade, by an external consultant, to the Permit to Work Procedure that is more consistent with the SHEMS Model Procedure.

71 After the Incident, a review of the failure modes of all DCS outputs across the KI premises was commenced to identify failure modes to determine if they are in accordance with design requirements. A review of the criteria for provision of independent trip protection was undertaken. On the basis of the review, revised criteria were developed to identify the trips that required independence and increased integrity.

72 Finally, all KI premises plant operations have been reviewed to identify the systems that do not meet the revised criteria. Following this review, a report was to be submitted to the EPA, detailing an action plan which set out design work, plant modification assessment and implementation regimes to address each non-compliant system.

Sentencing Principles

73 A discussion of the applicable sentencing principles is set out at [80]-[93] and [168] of the principal judgment, which I adopt in this judgment.

74 Suffice it to say that s 3A of the Crimes (Sentencing Procedure) Act 1999 ("the CSPA") sets out the purposes of sentencing an offender. Relevant purposes in these proceedings are those contained in ss 3A(a), (b), (c), (e), (f) and (g).

75 In addition, s 21A of the CSPA identifies the matters that the Court must take into account when determining the appropriate sentence, including factors in aggravation under s 21A(2) and factors in mitigation under s 21A(3). Relevant potential aggravating factors for this offence are limited to those contained in ss 21A(2)(d), (g) and (i) of the CSPA. Relevant subjective circumstances or mitigating factors are those contained in ss 21A(3)(e), (f), (g), (i), (k) and (m) of the CSPA. Both are discussed further below.

76 Finally, s 241 of the POEOA further provides legislative direction as to matters that are to be considered in imposing a penalty for offences committed under that Act. Section 241(1) of the POEOA is a list of the objective circumstances of an offence that must be considered by the Court insofar as they are relevant, while s 241(2) of that Act recognises the Court's discretion to consider other matters relevant to the particular circumstances of the proceedings.

Objective Circumstances of the Offence

Nature of the Offence

77 The nature of the offence of breach of licence has been discussed in the principal judgment (at [103]-[104]).

78 A fundamental consideration of relevance to environmental offences is the degree to which Orica's conduct offends against the legislative objectives. Those objects are found in s 3 of the POEOA and relevantly include, for present purposes, the objects found in s 3(a), (c) and (d).

79 It is an unassailable proposition that by failing to operate its plant and equipment in a proper and efficient manner as it was required to do under Licence 828, Orica undermined the objects of the POEOA. It degraded the environment. Its defective production processes led to the potential pollution of groundwater and the Hunter River.

Maximum Penalty

80 The maximum penalty for the commission of the offence pursuant to s 64(1) of the POEOA is $1 million for a corporation. There is a spectrum of offending behaviour covered by a given offence and the imposition of the maximum penalty is necessarily reserved for the worst case for which the penalty is prescribed.

Environmental Harm Caused by the Ammonium Nitrate Solution Spill Incident

81 The environmental harm caused by the commission of an offence is, as was stated in the principal judgment (at [116]-[118]), a central consideration in determining the objective gravity of the offence. The concept of harm in the context of environmental offences is broad and includes the potential or risk of harm, not merely actual harm (see the authorities referred to in the principal judgment at [117]). Harm can be direct, indirect or cumulative and activities that contribute incrementally to the gradual deterioration of the environment, even when they cause no discernable direct harm to human interest, must nonetheless be treated seriously.

82 Section 241(1)(a) of the POEOA makes it clear that, in sentencing, the Court must consider the "extent of the harm caused or likely to be caused to the environment by the commission of the offence". The POEOA defines "harm to the environment" to include "any direct or indirect alteration of the environment that has the effect of degrading the environment and, without limiting the generality of the above, includes any act or omission that results in pollution".

83 The actual and potential environmental harm, including health impacts, caused by the commission of the offence was not a matter of controversy. The parties agreed that, while it was likely that the WANS released by the Incident percolated into the subsurface of the ground and was likely to have reached groundwater, any environmental harm was likely to be insubstantial. The groundwater is located approximately 1.6m below the surface.

84 When WANS dissolves in water it goes through various chemical reactions and forms ammonium/unionised ammonia and nitrate. It was difficult to establish the concentration of these two chemical compounds because it would vary according to a number of factors which were unknown in this case, although it was likely that these chemicals ultimately discharged into the Hunter River.

85 Nonetheless, it was not in dispute that the chemicals would likely disperse laterally and vertically, reducing their concentration before reaching the Hunter River, so that any impact was probably "insignificant in the context of the nature of the substance and the industrialised nature of the locality".

86 I therefore find that the commission of the breach of licence condition offence in this case caused low environmental harm and was not a factor in aggravation under s 21A(2)(g) of the CSPA.

Orica's State of Mind

87 The offence is one of strict liability, which means that mens rea is not an element of the offence. However, the state of mind of an offender at the time of committing an offence is a relevant consideration when imposing a sentence because a strict liability offence that is committed, for example, negligently, will be objectively more serious than one committed accidentally (see the authorities in the principal judgment at [127]).

88 The parties disagreed about whether Orica's state of mind could, conformably with the principle in R v De Simoni [1981] HCA 31; (1981) 147 CLR 383 (at 389), be taken into account with respect to the breach of licence offence under s 64(1) of the POEOA. In the principal judgment I concluded that it could (at [140]-[145]).

89 The EPA submitted that the failures that led to the Incident established that Orica negligently contravened s 64(1) of the POEOA.

90 Having regard to the findings as to the causes of the Incident identified by Mr Weiss in the Incident Report and the concessions made by Mr Winstone in his 3 December 2012 affidavit concerning the failings with respect to trip protection, the Permit to Work Procedures, the communications surrounding the commissioning of the WANS Plant and the training, it may be safely concluded that Orica was negligent in the commission of the offence.

Reasons for Offending

91 In the present case, the offence was not committed for any ulterior reason that would increase its objective seriousness.

Foreseeability of the Risk of Harm

92 The extent to which Orica could have reasonably foreseen the harm caused by the commission of the offence is a relevant objective circumstance (s 241(1)(c) of the POEOA and the authorities referred to at [152] of the principal judgment). It is not necessary that the precise cause of an incident be foreseeable.

93 Orica submitted that in commissioning the WANS Plant, it took several measures to identify and manage the risk associated with the project and any potential overflow of WANS.

94 However, the direct and underlying causes of the Incident identified in the Incident Report demonstrated, in my opinion, that the risk of the harm caused by the WANS overflow was foreseeable. For example, the possible need to install an independent high level trip had been identified prior to commissioning the WANS Plant. And according to Mr Winstone, various hazard studies had identified that there was a risk of a spill of WANS from the WANS Mixing Tank but because WANS was considered essentially non-hazardous, the project team did not implement this measure.

Practical Measures Available to Orica to Avoid or Mitigate Harm

95 Section 241(1)(b) of the POEOA makes it clear that the Court is to consider the "practical measures that may be taken to prevent, control, abate or mitigate" the harm identified in s 241(1)(a).

96 Several practical measures have been taken since the Incident to prevent a recurrence of it. These were set out in the Statement of Agreed Facts and deposed to by Mr Winstone in his 3 December 2012 affidavit. Many of these (such as the installation of an independent high level trip, ensuring that the DCS outputs for the WANS Plant were configured to "safe" rather than "hold', ensuring that all works were authorised by work permits and ensuring that technicians and operators were properly trained), could readily have been implemented prior to the Incident. That many of these steps have been implemented at the WANS Plant since the Incident, reinforces the conclusion there were undoubtedly practical measures available to Orica at the time to avoid or mitigate the harm.

97 Having said this, I accept Orica's submissions that once the Incident was brought to Orica's attention, it acted promptly and competently to ameliorate any further potential harm by the overflow.

Control Over the Causes of the Harm

98 The experts agreed and Orica conceded, rightly in my opinion, that it had control over the causes that gave rise to the Ammonium Nitrate Solution Spill Incident (s 241(1)(c) of the POEOA).

Conclusion on Objective Gravity

99 Orica emphasised the need for proportionality in sentencing and submitted that the offences should, overall, be classified towards the lower range of seriousness given the following considerations:

(a) the consequential environmental harm was minor;

(b) Orica's operations at the KI premises are large, complex and, as chemical processing activities, carry inherent environmental risks;

(c) the offence did not result from any decision to put the environment at risk in order to save money; and

(d) Orica responded promptly and appropriately to the Incident to minimise environmental impacts.

100 Having regard to all of the objective factors discussed above, I agree with Orica's assessment.

Subjective Considerations

101 As stated above, in determining an appropriate and proportionate sentence, the Court must take into account all factors that are personal to Orica, including factors in aggravation and factors in mitigation.

Aggravating Factors

Prior Criminal History

102 As stated in the principal judgment (at [170]-[173]), Orica has a criminal history of environmental offences, including for breach of a condition of an environmental licence in 2005. I take this matter into account as an aggravating factor under s 21A(2)(d) of the CSPA.

Was the Offence Committed Without Regard for Public Safety?

103 The EPA also submitted that a relevant circumstance of aggravation was that the offence was committed without regard for public safety (s 21A(2)(i) of the CSPA). It baldly argued, without more, that the causes which led to the Ammonium Nitrate Solution Spill Incident "demonstrated no regard for public safety".

104 The principles applicable to a finding that an offence was committed without regard for public safety under s 21A(2)(i) of the CSPA were discussed by the Court in the Jackhammer Incident decision (Environment Protection Authority v Orica Australia Pty Ltd [2014] NSWLEC 105 at [108]).

105 As Mr Winstone's evidence established, at the time of the commission of the offence, risk assessments had been undertaken, hazard analyses had been completed, the installation of an independent high level trip had been contemplated but dismissed due to the low hazard potential of a WANS overflow, and there were procedures in place designed to prevent the Incident from occurring. That these measures proved to be inadequate does not, in my view, warrant a conclusion that the offence was committed with the aggravating circumstance of any disregard for public safety. The evidence does not establish this beyond reasonable doubt.

Mitigating Factors

Prior Criminality

106 In light of Orica's environmental antecedents, it cannot be said that Orica does not have any prior criminal record so as to operate as a mitigating factor in determining the imposition of an appropriate sentence (s 21A(3)(e) of the CSPA).

Good Character

107 Orica submitted that the evidence demonstrates it is a good corporate citizen and, more specifically, that its recent investments in environmental improvements and its community consultation and support programs practically demonstrate its good corporate character. For the reasons given in the principal judgment (at [185]-[190]), I agree. I therefore accept that Orica was a corporate person of good character at the date of this offence (s 21A(3)(f) of the CSPA).

Likelihood of Re-offending

108 Orica has undertaken a number of actions to minimise the chance of a similar incident occurring. Orica's examination of the causes of the Incident and its acceptance that these practical measures would have prevented the harm, suggests that the likelihood of future re-offending is greatly reduced and that there are good prospects of rehabilitation. Accordingly, and notwithstanding the further six pollution incidents the subject of this suite of criminal proceedings, I find the likelihood that Orica will re-offend in future to be low, which should be taken into account as a factor in mitigation (s 21A(3)(g) of the CSPA).

Demonstrated Remorse

109 Orica has, in my opinion, demonstrated remorse with respect to the commission of this incident. The affidavits and oral testimony of Mr Winstone expressed regret for the seven pollution incidents generally. Mr Winstone stated that he was "personally very disappointed that the incidents occurred". In addition, Orica tendered a formal letter from the Chairman of the Board of Orica Ltd, the parent company of Orica, wherein the Chairman, Mr Peter Duncan, apologised formally to the Court and to the public for each of the seven incidents. There is clear evidence of Orica's remorse and acceptance of responsibility for its actions, thereby justifying the Court taking this factor into account as a mitigating factor with respect to this offence (s 21A(3)(i) of the CSPA).

Early Guilty Plea

110 Orica pleaded guilty to the charge at the second mention of the matter on 28 November 2012. Orica's early guilty plea should attract the maximum discount of 25% (ss 21A(3)(k) and 22 of the CSPA).

Assistance to Authorities

111 Orica pleaded guilty early, cooperated in preparing a statement of agreed facts, and the parties agreed that Orica had fully cooperated with the EPA's investigation. This assistance must be taken into account as a mitigating factor in Orica's favour (ss 21A(3)(m) and 23 of the CSPA).

Orica Agreed to Pay the Prosecutor's Costs

112 Orica has agreed to pay the EPA's reasonable legal costs. In addition, Orica has agreed to pay the EPA's investigation costs for this incident in the agreed sum of $2,862.17. I take this into account in the determination of the appropriate penalty to be imposed in these proceedings in accordance with the principles set out in the principal judgment (at [209]).

Conclusion on Subjective Considerations

113 The subjective circumstances of Orica operate to mitigate to a reasonable degree the penalty that would otherwise be imposed by the Court and I consider a total discount of 30% appropriate.

Sentencing Purposes: Denunciation, Retribution and Deterrence

114 The imposition of a sentence serves a number of purposes. As identified above, the relevant purposes listed in s 3A of the CSPA also inform the determination of an appropriate sentence. These include: punishment (s 3A(a)); both general and specific deterrence (s 3A(b)); community protection (s 3A(c)); making Orica accountable for its actions (s 3A(e)); denunciation (s 3A(f)); and recognition of the harm done to victims

115 (s 3A(g)).

116 The EPA submitted that both specific and general deterrence should be important sentencing considerations in the present case. At a general level, the EPA submitted that any fine imposed should be sufficient to cause others to take the positive precautions necessary to avoid offending.

117 The EPA submitted that specific deterrence was a significant factor in the circumstances of the present case because of the number of incidents being prosecuted in these consecutive proceedings and because of Orica's prior conviction for an environmental offence in 2005. The EPA contended that these circumstances demonstrated systemic problems in Orica's management and reporting systems requiring a substantial element of deterrence in the penalty to motivate lasting change within the organisation.

118 There is no doubt that the sentence imposed by the Court must be sufficient to specifically deter Orica from repeating the conduct that has resulted in the commission of the offence, and to contain an element of general deterrence to promote the objects of the POEOA and to ensure that other environmental licensees with similar operations and responsibilities do not apprehend that such offences will be treated with relative impunity.

119 In the present case, I consider that there is a need for both specific and general deterrence for the reasons given in the principal judgment (at [213]-[217]).

120 The imposition of an appropriate sentence additionally serves the purpose of ensuring that retribution and denunciation are properly addressed. The sentence of this Court is a public denunciation of the conduct of Orica and must ensure that Orica is held accountable for its actions and is adequately punished. Accordingly, I also take these elements of sentencing into account.

Consistency in Sentencing

121 As stated in the principal judgment, a relevant consideration in sentencing is the existence of a general pattern of sentencing by the Court for offences such as the offence in question.

122 The pattern of sentencing against which the present case falls to be determined can be established by examining the relevant sentencing cases dealing with breach of licence offences pursuant to s 64(1) of the POEOA. These were examined in the principal judgment (at [223]) and are relied upon but not repeated here.

The Totality Principle

123 The totality principle is a relevant consideration when determining an aggregate penalty in sentencing for multiple offences. Although Orica argued that the totality principle should be applied across all seven pollution incidents to cause a downward adjustment to the penalty to be applied in these proceedings, for the reasons given in the principal judgment, I do not agree (at [230]-[249]). I have concluded that each of the seven incidents must be considered separately for sentencing purposes and the totality principle has no application to this case.

Conclusion on the Appropriate Penalty for the Ammonium Nitrate Solution Spill Incident

124 Synthesising the objective and subjective circumstances of Orica, and the existing patterns of sentencing, I consider that the appropriate penalty for the offence is a monetary penalty.

125 As this offence was at the lower end of the scale, I consider the appropriate penalty for the breach of licence condition contrary to s 64(1) of the POEOA to be $50,000, which should be discounted by 30% to $35,000.

Environmental Project

126 As the parties requested, I will order Orica to direct the monetary penalty towards a specified environmental restoration and enhancement project pursuant to s 250(1)(e) of the POEOA, and to pay the EPA's costs associated with monitoring and enforcing the carrying out of this project.

127 In the circumstances of the present case, I consider such an order to be appropriate. A fulsome description of the specified environmental project is annexed to this judgment at "A".

128 All future references to Orica's contributions towards the projects will be accompanied by a reference, in the prescribed form referred to below, to the payment being part of the penalty imposed on Orica for the commission of this offence.

Publication Order

129 The parties submitted, and I agree, that it was also appropriate that the orders include a publication order pursuant to s 250(1)(a) of the POEOA.

130 In making this order, however, it is not the intention of the Court to cause Orica to publish a separate notice to that already required to be published persuant to the principal judgment (at [261(7) and (8)]).

Costs

131 Additionally, and as agreed, Orica will be ordered to pay the prosecutor's investigation costs in the agreed amounts and legal costs as agreed or assessed.

Orders

132 For the reasons provided above, the Court orders that:

(1) the defendant is convicted of the offence as charged;

(2) pursuant to s 250(1)(e) of the Protection of the Environment Operations Act 1997, the defendant is directed to pay to the City of Newcastle Council, within 28 days of this order, the amount of $35,000 to contribute to the Pitt Street Reserve Public Domain Enhancement project to improve coastal native vegetation, landscaping and bollards in Pitt Street Reserve in South Stockton. A description of the project is annexed at "A";

(3) all future references by the defendant to its funding of the Pitt Street Reserve Public Domain Enhancement project shall be accompanied by the following passage (pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997):

"Orica Australia Pty Limited's contribution to the funding of the Pitt Street Reserve Public Domain Enhancement project is part of a penalty imposed on it by the Land and Environment Court of NSW after it was convicted of an offence against s 64(1) (breach of licence condition) of the Protection of the Environment Operations Act 1997 (NSW)."

(4) pursuant to s 250(1)(a) of the Protection of the Environment Operations Act 1997 the defendant is to publicise a summary of the offence, of the circumstances of the offence and of the orders made against it, in the notice directed to be published at [261(7) and (8)] of the principal judgment, in the form and in the manner prescribed therein;

(5) the defendant is to pay the prosecutor's legal costs as agreed or assessed;

(6) pursuant to s 248(1) of the Protection of the Environment Operations Act 1997, the defendant is to pay the prosecutor's investigation costs in the sum of $2,862.17;

(7) the exhibits are to be returned; and

(8) liberty to restore on seven days' notice for the purpose of amending the form of any of the orders made above.

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Annexure A

Decision last updated: 28 July 2014