Managing Environmental Risk in Infrastructure Development



Managing Environmental Risk in Infrastructure Development

Introduction

It is a Defence requirement to comply with Commonwealth environmental legislation including the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act). Significant amendments to the EPBC Act commenced on 19 February 2007. The amendments were wide ranging and impact Defence in its capacity as a landholder, occupier and user.

Purpose

The purpose of this Fact Sheet is to highlight new provisions affecting the liability of Defence as the landholder when engaging contractors to manage infrastructure development contracts. The responsibilities of the contractor and subcontractors are also examined.

Landholder Responsibility

If Defence owns, occupies or leases land, then Defence is a landholder. Defence will be responsible as a landholder for the acts of others on Defence land which cause a significant impact on matters of National Environmental Significance, cause a significant impact on the environment of Commonwealth land or contravene a condition attached to an Approval. Defence will be liable as Landholder if it:

• knew that or was reckless or negligent as to whether persons on its land were breaching the EPBC Act; and

• is found to have been in a position to influence the conduct of that person in relation to the breach of the EPBC Act (for example, under a contract or Lease); and

• failed to take all reasonable steps to prevent the contravention.

Defence may avoid liability as Landholder by demonstrating that all reasonable steps were taken to prevent the contravention. In assessing whether Defence took all reasonable steps a court will have regard to:

• what action, if any, Defence took to ensure the other person had an appropriate system (e.g. an environmental management system) in place for managing the environmental impacts of their activities; and

• what action Defence took upon becoming aware that there was a substantial risk of a breach of the EPBC Act.

This means that Defence as Landholder has a statutory obligation to ensure that its contractors, licensees and lessees:

• have management systems in place to prevent their activities from having a significant impact on the environment on Commonwealth land or on matters of National Environmental Significance;

• obtain and comply with any necessary approvals and conditions of approvals, and Environmental Clearance Certificates (ECCs);

• have response procedures in place to effectively respond to environmental incidents.

Defence as the Landholder must also have systems in place to respond to any environmental incidents on its land whether or not Defence personnel caused the incident (see fact sheet on managing environmental incidents). Defence must also ensure its employees and contractors are informed about the conditions of any approval and ECCs.

Proposals for Infrastructure Development Contracts

The selection of a Contractor with appropriate skills, experience and a sound environmental performance history will be an important step in discharging Defence's landholder liability. With this in mind, requests for proposals for infrastructure development contracts should include:

• a requirement for relevant demonstrated skills and expertise to undertake the Works. Consider whether specialist personnel are required, resource requirements and what limitations should be imposed on the selection and use of subcontractors;

• a demonstration of environmental performance history (including in managing sub-contractors), including of parent companies and directors (where appropriate);

• demonstrated procedures and systems for environmental management and for meeting industry standards.

Contract terms

Defence can take specific steps (in addition to those outlined at paragraph 7 above) to discharge its responsibility for the actions of the Contractor and/or sub-contractors. These include ensuring the contract requirements address the following:

• requiring the Contractor to comply with the EPBC Act and comply with any Approvals relating to the works, including ECCs;

• requiring the Contractor to ensure all subcontractors comply with the EPBC Act and comply with any Approvals relating to the works, including ECCs;

• requiring the development of a contract specific Environmental Management Plan for review by Defence (or its agent, the Contract Administrator) and which:

o is in a form that satisfies Defence that the Contractor has an appropriate system in place to identify and manage environmental risks and in particular EPBC compliance;

o contains a procedure for the review and updating of the Environmental Management Plan;

o requires training and induction for personnel and subcontractors in environmental compliance and performance requirements;

o contains mechanisms to encourage continuous improvement;

o references an appropriate emergency response system and the capacity to implement that system if required; and

o demonstrates procedures for the monitoring of environmental performance and the reporting of incidents or non-compliance with environmental requirements of the contract and Environmental Management Plan, breaches of Statutory Requirements or complaints.

• audit protocols for assessment of compliance with the EPBC Act and the Environmental Management Plan;

• the use of and reporting against environmental compliance and performance indicators to assess contractor performance;

• provision for Contractor accountability to Defence for compliance with the EPBC Act and the Environmental Management Plan, including the provision of audits to Defence, performance management and environmental performance assessment;

• requiring the Contractor to ensure all sub-contractors are aware of the Environmental Management Plan and have demonstrated an ability to comply with the Environmental Management Plan;

• requiring the Contractor have procedures in place for managing the selection of subcontractors;

• requiring the Contractor to notify Defence of any latent conditions once it becomes aware of any such conditions;

• measures to rectify any adverse environmental condition caused by the contractor's activities. These measures may include step in rights or rights to direct rectification works; and

• an acknowledgement that the Contractor warrants it has assessed and informed itself of risks assumed under the Contract and for a design and construct contract consider whether it should require that the specification complies with Approvals and the ECC.

Contract administration

Measures available to Defence to demonstrate administration of the contract consistent with its landholder responsibilities include:

• advising the Contractor of any Approvals;

• advising the Contractor of any ECCs that relate to the land or services and requiring the Contractor to advise engaged sub-contractors of relevant Environmental Certificates of Compliance;

• the provision by Defence to the Contractor of all data, documents and information available about the conditions on, in, under or in the vicinity of the site that may be relevant to environmental conditions or risks or the effect of the performance of the works on the environment (for example information on endangered fauna or site contamination) and procedures which have been identified through the Defence Environmental Management System;

• procedures for review of the Environmental Management Plan, including benchmarking;

• keeping the contractor up to date with any additional or changed information on environmental aspects;

• ensuring the Defence Environmental Management System covers contractor activities;

• providing a forum for environmental risks, incidents and performance to be discussed with the contractor; and

• procedures for Defence to respond to non compliance by the contractor.

Proposals for Public Private Partnerships (PPP)

If Defence remains the owner of the land, Defence will have landholder liability and the comments above are relevant. In the case where Defence is not the owner of the land, but rather a PPP arrangement is in place that provides for Defence to lease or occupy the land then Defence will be a landholder under the definition in the EPBC Act and will share liability with the owner of the land. In such circumstances Defence should in addition to the matters addressed above, consider the following:

• The project agreements should require the PPP Company to comply with the EPBC Act and Approvals and ECCs.

• Due diligence material provided to the PPP Company by Defence should include any Approvals for the land, including conditions and any information Defence has about the environmental conditions of the land and adjoining land, matters of National Environmental Significance and environmental risks. Defence should consider procedures to provide the PPP Company with updated information during the term of the agreement.

• Defence will need to be satisfied that the PPP Company has appropriate procedures and systems to manage the environmental effects of its activities. Defence may consider a requirement for an environmental management system or a specific environmental management plan. The adequacy of the environmental management system or environmental management plan will need to be considered by Defence.

These procedures will at least need to address:

• procedures for update and review of environmental management instruments;

• compliance audits;

• provision of audits to Defence; and

• procedures for notification of Defence and relevant authorities in the event of environmental incidents.

The Defence environmental management system will need to address PPP Company risks and response procedures in the event that Defence becomes aware of a potential breach of the EPBC Act by the PPP Company.

Definitions

The following definitions apply for the purposes of this Fact Sheet:

a) Approval: The approval of the Minister for Environment and Water Resources under Chapter 4 of the EPBC Act for the taking of an action which would otherwise be unlawful.

b) Controlled action: An action taken in relation to a Part 3 provision without approval under Part 9.

c) EPBC Act: Environment Protection and Biodiversity Conservation Act 1999 (Cth).

d) Landholder: An owner, lessee or occupier of land.

e) Latent Conditions: Ground conditions on site, excluding ground conditions resulting from inclement weather wherever occurring, which differ materially from those which should have been anticipated by a prudent, competent and experienced contractor if it had informed itself of the risks assumed under the contract.

f) A matter of National Environmental Significance is

i) the ecological character of a declared Ramsar Wetland;

ii) the world heritage values of a declared World Heritage property;

iii) the national heritage values of a National Heritage place;

iv) a listed migratory species;

v) listed threatened species or communities;

vi) the environment in a Commonwealth marine area;

vii) the environment on Commonwealth Land;

viii) the environment in a Commonwealth Heritage place outside the Australian jurisdiction;

ix) a nuclear action; or

x) an action prescribed by the Regulations.

g) Minister: The Minister for Environment and Water Resources.

h) Third party action: An action by a non Defence person including a contractor or other person authorised to be on Defence land.

i) Works: Includes all the contractor's activities to be performed under an ID contract.

Further Information

For further information contact Director Environmental Impact Management, Estate Policy and Environment Branch on (02) 6266 8067

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