About the NSW Minerals Council

Transcription

1 SUBMISSION EPA Risk Based Licensing System November

2 About the NSW Minerals Council The NSW Minerals Council is the leading industry association representing the state s $24.5 billion minerals industry, providing a united voice for our members. Mining has and will continue to be a key economic driver for the state. That s why the NSW Minerals Council works closely with government, industry groups and business and community leaders to foster a sustainable mining industry in NSW. We support the development of a strong and diverse state economy and an effective regulatory framework in which the industry can operate profitably and make a meaningful contribution to the state and the people of NSW. We encourage innovation and leading practice to improve the health and safety of our people and minimise our impacts on the environment. And we talk openly and honestly about mining to help improve the community s understanding of the industry s contribution and how it works. 1

3 Executive Summary The NSW Minerals Council (NSWMC) appreciates the intent of using a risk-based approach in determining the appropriate level of regulation and informing administrative fees. However the NSW Environment Protection Authority s (EPA) proposed risk based licensing system has a number of methodological errors that make it unjust and inequitable and likely to create disproportionately high fee increases for operations that have been subject to regulatory action, including infringement notices, official cautions and formal warnings. The costs and regulation of mining are rising The mining sector is facing new taxes and charges, rising wages, increased operating costs, higher fuel bills, increased global competition, and softer global demand for some of its key products. For example, thermal coal prices have fallen by more than 50 percent in the past five years. Mining projects in Australia are among the most expensive in the world to develop and operate. The reality is that like any industry or business, there is a point at which costs become too high and begin stifling investment and growth. It is crucial that environmental regulations do not impose retrospectively additional obligations, uncertainties and costs on companies that were not contemplated at the time of their approval. Therefore, only enforcement actions from the date of the new scheme s commencement should be included in a licence holder s performance record. The current administrative fees are already inherently risk-based The current administrative fees are based on the type and scale of an activity this is already a riskbased approach to licensing. Under the proposed changes, higher risk, larger scale activities (such as mining, which already pays amongst the highest administrative fees for licences) would be subjected to disproportionate fee increases compared to smaller activities. A clear example of this is the fact that an A performing large-scale mining site would still pay more than five times the licence fee of an E performing largescale composting facility. If the EPA is to introduce an additional risk-based assessment, then the current administrative fee should be made common to all activities. A single risk-based assessment could then be applied to reduce or raise the base administrative fee depending on the licensee s level of risk to the environment. The EPA should thoroughly investigate this type of approach to ensure that the fees more accurately represent both the level of risk and the level of EPA s required regulatory activities. The proposed fee increases are vastly out of proportion with any regulatory actions and their related administrative burden There are a number of methodological problems with the proposed fee structure that make it unjustified and inequitable, such as: The environmental management factors for categories C to E are excessive, and unlikely to reflect the level of increased workload incurred by the EPA. For example, if a licensee with a $50,000 per annum fee were to incur a single Penalty Infringement Notice (PIN) that attracts a penalty of $1,500, this would result in an increase in the administrative fee of $20,000. There is also an automatic tripling in licence fees the year following a successful prosecution, effectively punishing the licence holder twice, once through the prosecution fines, and then again through increased licence fees the following year (and potentially also in subsequent years). 2

4 The tool does not factor in the implicit level of risk already accounted for in determining the number of administrative fee units for a particular type of activity. Larger scale operations with higher risk are, through the multiplier, effectively being subjected to disproportionately higher fee increases than smaller operations. The tool penalises past prosecutions unfairly. The judicial system undertakes a thorough assessment of all relevant factors in determining an appropriate penalty as a final act in a successful prosecution, including the nature of the incident, deterrence, rectification etc. There is a fundamental principle that, where a successful prosecution has occurred and payment of the resultant fine is completed, no further justification exists for further penalty. EPA s review of the Protection of the Environment Operations Act 1997 (POEO Act) found that stronger incentives are required for industry to improve compliance and environmental performance. However the 5 per cent saving incentive for an A rated site is minimal and disproportionate to the tripling of fees for E rated sites. Even the 1.4-fold increase in fees for C rated sites is a significant 40 per cent increase. One of the aims of the proposed approach is to allow EPA to recover its administrative costs. However the tool does not consider that there are already provisions in the POEO Act for EPA to recover its fees associated with clean-up and prevention notices. It should also be noted that EPA s legal costs are recovered in successful prosecutions, and administrative costs can be recovered through the court s fines. The proposed risk assessment tool is problematic Problems with the risk assessment include: Although the tool claims to be a risk-based tool, it does not adequately determine the level of risk that a mine poses. Rather, it is only able to identify some of the hazards, but without adequately considering the likelihood or severity of any potential impacts in the absence of safeguards, or any operator controls to reduce the likelihood or severity of consequences. It is unclear how the EPA intends to make use of the three risk categories in planning its regulatory activities. Key recommendations NSWMC believes that the potentially significant increases in fees for mining operations under the current proposal are not based on a robust decision-making framework. We believe that: The fee structure should factor in the inherent risk already built into the administrative fee units, and more accurately reflect actual costs of any increased regulatory effort, rather than an arbitrary weighting. Any administrative fees recovered through enforcement (e.g. prosecution charges, penalty notices, POEO Act provisions etc.) should also be deducted from licence fee increases. A maximum cap should be placed on additional licence fees for C, D and E sites. A cap should be placed on the accruement of the environmental management weighting for less significant regulatory actions, including formal warnings, official cautions and penalty infringement notices. Existing enforcement measures are sufficient to address those few circumstances where an environmental incident that requires prosecution occurs, and should therefore be removed from the risk assessment. 3

5 The number of announced and unannounced spot-checks that are not due to any specific compliance concerns should be limited per annum and be relative to the three risk levels. The EPA should be transparent about its funding requirements to allow it to continue to regulate EPL holders. The risk-based framework should be rolled-out through a trial period, to allow any problems to be identified, and environmental management weightings, categories and factors to be finetuned, prior to linking the system to fees. 4

6 Table of Contents EXECUTIVE SUMMARY 2 The costs and regulation of mining are rising 2 The current administrative fees are already inherently risk-based 2 The proposed fee increases are vastly out of proportion with any regulatory actions and their related administrative burden 2 The proposed risk assessment tool is problematic 3 Key recommendations 3 TABLE OF CONTENTS 5 INTRODUCTION 7 COST IMPLICATIONS OF THE PROPOSED RISK-BASED SYSTEM 9 The increases in fees are out of proportion with the nature of a regulatory action 9 The proposed increases in fees relating to past prosecutions are inequitable and unjust 10 A number of minor infractions are not equivalent to a major incident 11 The tool does not adequately place value on risk controls and other environmental management initiatives 11 The severity of penalty notices should be factored into the environmental management weighting 12 Site inspections (site surveys) are insignificant and should be removed 12 The penalty associated with a minor regulatory action should not be counted beyond the first year 12 The penalty associated with a significant regulatory action incurred two years ago is too high 12 Some infractions are unavoidable and are beyond the control of an operator 12 OTHER CONSIDERATIONS IN DEVELOPMENT OF THE FRAMEWORK 13 The tool is unable to identify high risk sites; instead it identifies those with more hazards and/or receptors 13 The proposed fee system creates a conflict of interest between EPA s proactivity in undertaking regulatory enforcement and influencing its own revenue 13 5

7 It is unclear how exactly the EPA intends to make use of the three risk categories in informing its regulatory activities 13 The EPA should look at ways to improve the efficiency of its regulatory activities 14 The framework should be rolled-out through a trial period 14 Only robust and objective information should be made publicly available 14 ANNUAL INDEXATION OF FEES 15 RECOMMENDATIONS 15 6

8 Introduction The NSW Minerals Council (NSWMC) is a major stakeholder in many of the environmental, social, regulatory and economic issues critical to the sustainable development of New South Wales. The industry has a demonstrable record of good environmental management and continuous improvement, in no small part due to co-operative, consultative and constructive approaches towards ensuring balanced development outcomes. NSWMC seeks to ensure that any environmental regulation and policy meets the basic criteria of effectiveness, efficiency and fairness. NSWMC appreciates the intent of using a risk-based approach in determining the appropriate level of regulation and informing the licence administrative fees. This ensures that those creating the need for government regulation bear the costs of that regulation, and those requiring additional regulation due to their environmental performance being required to pay additional fees. However the EPA s proposed risk based licensing system has a number of methodological problems that make it inequitable and likely to create disproportionately high fee increases for operations that have been subject to regulatory action, including prosecutions, infringement notices, official cautions or formal warnings. The mining sector is facing new taxes and charges, rising wages, increased operating costs, higher fuel bills, increased global competition, and softer global demand for some of its key products. For example, thermal coal prices have fallen by more than 50 percent in the past five years. This is in addition to a range of new taxes and charges on mining, including the carbon tax/emissions trading scheme, the mineral resources rent tax, a reduction in the diesel fuel rebate, increased royalties and new State Government levies and charges all of which have made mining projects in Australia among the most expensive in the world to develop and operate. The reality is that like any industry or business, there is a point at which costs become too high and begin stifling investment and growth. It is crucial that environmental regulations do not impose retrospectively additional obligations, uncertainties and costs on companies that were not contemplated at the time of their approval. Therefore, only enforcement actions from the date of the new scheme s commencement should be included in a licence holder s performance record. EPA s risk-based approach is based on EPA s review of the Protection of the Environment Operations Act 1997 (POEO Act), however the proposed approach does not necessarily address the findings: A risk based licensing framework should be adopted to ensure that all licensees receive an appropriate level of regulation based on the level of risk they pose. The EPA s risk assessment approach more closely resembles a high-level hazard identification process, rather than a robust assessment of risk. The tool does not identify the consequences and likelihoods of various possible non-compliance events occurring and requiring regulatory action. Instead, it considers a number of potential hazards, with the level of risk associated with the number of possible exposures to receptors. In addition, the existing administrative licence fees are already inherently risk-based (by considering the type and scale of an activity), forcing mining operations to already pay amongst the highest administrative fees for licences. Therefore, high-risk licensees should already be receiving an appropriate level of regulation based on the level of risk they pose. Stronger incentives are required for industry to improve compliance and environmental performance. The incentives in the proposed tool are much more strongly skewed towards avoiding punishment through increases in fees, rather than rewarding good performance with discounts in fees. EPA s Regulatory Impact Statement mentions that operations may have avoided regulatory action simply out of good luck. This assertion is not backed-up by any evidence. NSWMC believes that strong environmental performance has little to do with luck, 7

9 and more to do with robust environmental management practices and systems. Therefore it is disappointing to see the lack of incentive placed upon the existence of accredited Environmental Management Systems, or other initiatives including capital and operational environmental improvement works, environmental research, resource recovery initiatives, land rehabilitation and pollution reduction programs. The costs borne by the mining industry for these types of environmental management controls are in the order of hundreds of thousands to millions of dollars, and should be rewarded and acknowledged. It should also be noted that millions are already spent by industry on EPA-industry environmental programs including the Upper Hunter Air Quality Monitoring Network (over $2 million installation along with around $350,000 annual maintenance fees), the Hunter River Salinity Trading Scheme ($1.35 million worth of credits purchased since 2004) and the Dust Stop Pollution Reduction Program. The EPA needs to be well equipped to regulate high-risk pollution facilities. If the aim is to be well-equipped (i.e. well-funded), it is unclear why the licence fees under the proposed approach are linked to historical regulatory performance, rather than risk. The community should be provided with increased information about industry environmental performance and EPA regulatory decisions. Publicly available information that relates to industry performance, specifically the risk categories, needs to be robust. It is not entirely clear how and what information will be publicly available. Nevertheless, it is inappropriate for the Level 1, 2 and 3 categories to be referred to as risk categories, since the level of risk has not been rigorously determined. Based on the proposed tool, the three categories should be referred to as significance levels or similar, and public reporting needs to be reconsidered. It should also be noted that EPA regulations already ensure that substantial amounts of environmental performance data is published and available on company websites. 8

10 Cost implications of the proposed risk-based system NSWMC acknowledges EPA s finding that a risk based licensing framework should be adopted to ensure that all licensees receive an appropriate level of regulation based on the level of risk they pose. Any regulatory fee system that imposes significant costs on an operator must be robust by providing reliable decision making outputs, by being correctly targeted, charging fees proportional to the level of risk, incentivising excellent performance, being fair, being informed by evidence, and transparent. However, the EPA s draft environmental risk tool does not address these requirements, as described below. The increases in fees are out of proportion with the nature of a regulatory action NSWMC believes that the overall level of existing fees paid by the mining industry would be well above the level of administrative burden for the EPA. Therefore the fee structure should more accurately reflect actual costs of any increased regulatory effort rather than an arbitrary number or weighting. The environmental management factors for categories C to E are very high, and unlikely to reflect the level of any increased workload incurred by the EPA. For example, if a licensee with an administrative licence fee of $50,000 were to incur a single Penalty Infringement Notice (PIN) that attracts a penalty of $1,500, this would result in an increase in the administrative fee of $20,000 the following year (1.4x multiplier for a C environmental management category). This increase is out of proportion with the nature of the infraction and any additional workload incurred by the EPA. The increase in licence fee is 13 times the value of the PIN. The effect would be much smaller for a smaller sized operation with a smaller licence fee. Therefore the tool unfairly punishes larger sites for regulatory actions compared with smaller sites. For instance, mining of minerals is subject to a maximum of 850 administrative fee units, whereas composting is subject to a maximum of 50 administrative fee units. This would mean that an A performing largescale mining site would still pay more than five times the licence fee of an E performing large-scale composting facility. And if a large-scale mine and composting facility were to receive an equivalent penalty infringement notice (placing them both in the C environmental management category), the mine s subsequent year s increase in fees would be 17 times the additional payment of the composting facility ($38,420 for the mine versus $2,260 for the composting facility). NSWMC recommendation 1: Any fee changes should accurately reflect the actual costs of increased regulatory effort. The EPA should therefore report annually its enforcement costs, with fees more accurately reflecting costs, through a number of possible options, including: Using additive fee increases, instead of a multiplier. If additive fees are not supported, ensuring that the multipliers better reflect the nature of any regulatory action and any additional workload incurred by the EPA. Placing a cap on the fee increase for categories C, D and E 1. NSWMC recommend the caps to be: - Category C: $5,000 (in equivalent administrative fee units). - Category D: $10,000 (in equivalent administrative fee units). 1 A cap could also be placed on the discount for category A. 9

11 - Category E: $20,000 (in equivalent administrative fee units). Ensuring that any fees recovered though enforcement (e.g. prosecutions charges, PINs and other POEO Act provisions) are deducted from licence fee increases. A trend of category A performance over more than three years should attract less regulatory intervention, and further reductions in annual fees, similar to a no claim bonus. The proposed increases in fees relating to past prosecutions are inequitable and unjust The judicial system undertakes a thorough assessment of all relevant factors in determining an appropriate penalty as a final act in a successful prosecution, including the nature of the incident, deterrence, rectification etc. There is a fundamental principle that, where a successful prosecution has occurred and payment of the resultant fine is completed, no further justification exists for further penalty. There is no equivalent area in society where a subsequent penalty is brought to bear following service of an enforcement action. A number of aspects relating to the proposed treatment of prosecutions are inequitable and unjustifiable: The automatic three-fold increase in licence fees the year following a successful prosecution is inequitable and unjust, particularly considering that a court s charge has already been determined as the appropriate financial punishment for an infringement. The licence holder is effectively being punished twice, once through the prosecution fines, and then again through increased licence fees the following year. The case study below demonstrates the unfair nature of this approach. Court judgement for a successful prosecution takes into detailed consideration the nature of the infraction and whether the licence holder is cooperative and/or proactive in addressing the incident. The proposed licence fee calculation does not. A court judgement for a successful prosecution usually awards costs associated with enforcement. Therefore it is unclear how a successful prosecution can be deemed a regulatory burden to the EPA. Some of the court s statements describe incidents as causing no actual or potential harm, and unlikely to occur again. Charging additional licence fees is unjustified when a court assesses incidents in this way. Case study: Coal & Allied fined $45,000 for allowing polluted water from its Mt Thorley mine to run into a Hunter River tributary Between February 1 and February 5, 2012, heavy rain produced run-off from Coal & Allied s Hunter Valley Operations visual bund. The run-off was discharged from the mine s boundary, then flowed onto adjacent property owned by Coal & Allied, where it entered a drainage channel and a number of intermittent water bodies before entering the Hunter River. The company pleaded guilty in the Land and Environment Court on August 16 of breaching section 120 (1) of the Protection of the Environment Operations Act In addition to the $45,000 fine, the company was ordered to pay legal costs of $51,000 and print a notice of the decision in a number of publications. The maximum penalty for such an offence is $1 million but the court ruled that: No actual or potential environmental harm was caused by the offence other than short-term potential harm for two or three weeks following the incident. 10

12 It is unlikely that such an incident will recur given the defendant's strong commitment to preventative measures since the incident. Overall, the environmental harm should be assessed as low. Despite the court rulings noted above, Coal & Allied s proactive response to the incident, and $96,000 in fines and EPA legal costs, under the current proposal, the company would be subject to an additional $192,100 in licence fees the following year (as well as increases in fees in the following two years). This is completely out of proportion with the infraction, impact and EPA s likely administrative burden. NSWMC recommendation 2: Existing enforcement measures are sufficient to address those few circumstances where an environmental incident that requires prosecution occurs. Nevertheless if the EPA is insistent on doubly penalising operators for prosecutions, the licence fee should factor in: The court charge amount, including payment of EPA s legal and/or administrative fees. A defendant s level of cooperation and admittance of guilt during a prosecution. The seriousness of a prosecution and likelihood of recurrence, as assessed by the court. Whether the prosecution is Tier 1, 2 or 3. A number of minor infractions are not equivalent to a major incident Official cautions and formal warnings are typically only provided when an incident is very minor. 2 Nevertheless these less significant enforcement actions (including penalty infringement notices) can add up to being equivalent to a prosecution, imposing a three-fold increase in fees. Several minor infractions should not trigger increased licence fees equivalent to an incident that requires prosecution. It should also be noted that receipt of a warning, caution or penalty infringement notice is not an admission of guilt. NSWMC recommendation 3: A cap should be placed on the accruement of the environmental management weighting for less significant regulatory actions, including formal warnings, official cautions and penalty infringement notices. The tool does not adequately place value on risk controls and other environmental management initiatives The tool does not take into consideration a number of actions that companies undertake to control hazards to avoid or reduce the level of risk, or consider the systems that operations put in place to avoid environmental incidents. The Environmental Management score s scope is very limited. For example, no allowance is made for environmental or resource management improvements that have been undertaken by a licensee. This includes capital and operational environmental improvement works, environmental research undertaken, resource recovery initiatives, land rehabilitation, pollution reduction programs (non-incident / non-compliance related) and water / energy saving works. In addition, the value of having a certified Environmental Management System is insignificant, being equivalent to the penalty imposed for a single formal warning. NSWMC recommendation 4: The tool should include further opportunities to reduce the level of risk by considering an operator s control of risks and reduce the environmental management score by considering environmental initiatives that an operation has implemented. 2 NSW EPA 2013, Compliance Policy, p

13 The severity of penalty notices should be factored into the environmental management weighting Within the POEO Act, penalty notices are separated into Tier 1, 2 and 3 infringements, representing the severity of the regulatory action. It therefore makes sense to factor this into the licence fee structure, instead of treating all penalty notices as equal. NSWMC recommendation 5: Factor in whether a penalty notice is Tier 1, 2 or 3 in determining an appropriate environmental management weighting. Site inspections (site surveys) are insignificant and should be removed The existence of a site inspection (site surveys) in a particular year would not indicate a trend in EPA regulatory actions in a 3-year period. Sites have no control over site survey inspections, and if occurring in every year, it would certainly not be indicative of a history of poor environmental management performance. The weighting of this category is also so minor and insignificant that it should be removed to avoid misinterpreting a company s performance as indicative of a trend in poor performance. NSWMC recommendation 6: Remove site inspections (site surveys) from the environmental management assessment. The penalty associated with a minor regulatory action should not be counted beyond the first year Minor regulatory actions (such as formal warnings and official cautions) should be treated as such, and therefore not relevant to fee calculations beyond the previous year of occurrence. Such an extended ongoing legacy for minor incidents is unreasonable. NSWMC recommendation 7: Do not count minor regulatory actions (such as formal warnings and official cautions) in years 2 and 3. The penalty associated with a significant regulatory action incurred two years ago is too high The environmental management weightings should be reduced by more than 50% in the 2 nd year. Such an extended ongoing legacy is unreasonable. NSWMC recommendation 8: Reduce the environmental management weighting for the 2 nd year to 25% of the 1 st year s weighting. Some infractions are unavoidable and are beyond the control of an operator The EPA should be aware that some incidents or infractions may be beyond the control of the operator. Examples include: Inaccessibility of an area to allow sampling due to severe weather and related WHS risk (e.g. storm, flood or fire). Loss of a sample by a courier. A licensee should not be penalised for these types of infractions. NSWMC recommendation 9: Infractions beyond the reasonable control of the licensee should not be subject to regulatory action that affects licence fees. 12

14 Other considerations in development of the framework The tool is unable to identify high risk sites; instead it identifies those with more hazards and/or receptors The tool claims to be a risk-based tool, however it does not adequately determine the level of risk that a site poses. A comprehensive AS/NZ ISO risk assessment would evaluate the likelihood that a hazard would result in an environmental consequence. Operator controls would also be factored in to reduce or eliminate the level of risk. The tool is not capable of doing this. Rather, it is only able to identify some of the key hazards and potential environmental impacts. The tool attributes high-risk to a site with a higher number of hazards and/or receptors, rather than determining the likelihood of a particular incident occurring, and its consequences. The tool also omits consideration of any potential environmental risks to soils from chemicals or waste. NSWMC recommendation 10: EPA should be clear about the limited capabilities of its risk tool, and consider calling it a high-level hazard identification tool or similar. The proposed fee system creates a conflict of interest between EPA s proactivity in undertaking regulatory enforcement and influencing its own revenue Companies could be subject to higher licensing fees if the EPA is more proactive in enforcement action. EPA officers could easily increase the rate of minor Penalty Infringement Notices (e.g. minor, insignificant or administrative non-compliances), licence variations, etc. The EPA has already stated that it will increase the number of unannounced spot checks on mines in the Hunter Valley coal fields. 3 The EPA needs to be clear about any revenue targets and be transparent about the likely increases in costs to different industry sectors. The EPA sometimes also takes more than 12 months to issue a regulatory action. If regulatory actions are going to be linked to fees, the EPA needs to be much more prompt in its regulatory activities to allow operators to have a timely preparation for any significant cost liabilities. Any regulatory action that takes the EPA more than one month to address, is considered not significant enough to render worthy of regulatory intervention. NSWMC recommendation 11: The number of announced and unannounced spot-checks that are not due to any specific compliance concerns should be limited per annum and be relative to the three risk levels. NSWMC recommendation 12: The EPA should be transparent about its funding requirements to allow it to continue to regulate EPL holders and undertake and publicise economic modelling to determine the financial impacts to different industry sectors. NSWMC recommendation 13: The EPA should be given not more than one month to issue a regulatory action, following an incident. It is unclear how exactly the EPA intends to make use of the three risk categories in informing its regulatory activities The proposed risk-based approach does not make clear how the risk levels 1, 2 and 3 will be used to inform EPA regulatory activities. NSWMC recommendation 14: The EPA should be clear about how it intends use the three risk levels to inform its regulatory activities. 3 Interview with EPA s Gary Davey on ABC Newcastle radio, 24 September

15 The EPA should look at ways to improve the efficiency of its regulatory activities Most businesses at the moment are operating in a cost-constrained environment and are looking at undertaking their activities more efficiently with limited revenue. Similarly, the EPA should be using its resources more effectively in undertaking its regulatory obligations by considering where regulatory action is needed most, prior to seeking revenue increases. For example, the EPA, Department of Planning and Infrastructure (DoPI) and Division of Resources and Energy (DRE) officers could integrate their overlapping regulatory efforts, which are often very similar in nature, to make regulation more efficient and cost-effective. In addition, the risk assessments could initially be completed by the operators, and only reviewed by the EPA to reduce EPA s regulatory burden and associated costs. NSWMC recommendation 15: The EPA should work with DoPI and DRE to streamline any overlapping regulatory efforts. NSWMC recommendation 16: The risk assessment should initially be completed by the operator, for the EPA to review. The framework should be rolled-out through a trial period NSWMC believes that given the significance of the changes and potential commercial implications, the EPA should implement and test the proposed framework on a trial basis, in order to fine tune the design to reflect an appropriate level of cost recovery that reflects regulatory effort. NSWMC recommendation 17: Roll-out the risk-based framework through a trial period, to allow any problems to be identified, financial impacts to different industry sectors to be calculated, and environmental management weightings, categories and factors to be fine-tuned, prior to linking the system to fees. Only robust and objective information should be made publicly available The EPA regulations already ensure that a substantial amount of environmental performance data is published and available on company websites. It is not entirely clear how and what information relating to the risk assessments will be made publicly available. Publicly available information that relates to industry performance needs to be robust and objective. However, it is inappropriate for the Level 1, 2 and 3 categories to be referred to as risk categories, since they are partially subjective, and the level of risk has not been rigorously determined. Based on the proposed tool, the three categories should not be published, or otherwise referred to as significance levels or similar. The A-E environmental management categories have also been subjectively determined by apportioning various weightings. Various problems with the tool have been identified previously to show that it is inequitable. The A-E categories are therefore, in their current form, not reflective of A to E levels of performance that are synonymous with excellent to failure school grade levels. NSWMC recommendation 18: Only robust and objective information should be made publicly available. The three levels and A-E categories are both highly subjective and contain methodological errors in their current form, so should not be made publicly available. 14

16 Annual indexation of fees NSWMC is supportive of the approach to provide annual indexation of fees, in order to ensure that those creating the need for government regulation bear the costs of that regulation, rather than imposing the cost burden to the general community (through the tax system). NSWMC also agree that Wage Price Index (WPI) is a more accurate measure of EPA s increasing costs than Consumer Price Index (CPI). Recommendations NSWMC believes that significant increases in fees for mining operations are likely to result from the current proposal. These are unjust and inequitable. Since the current administrative fees are already inherently risk-based, an additional risk assessment is unjustified. A single risk assessment should apply to a base administrative fee level common to all operations in NSW, rather than the two-stage approach that the EPA is proposing. Ultimately, we believe that the fee structure should be reviewed and made more reasonable. Our specific recommendations are: NSWMC recommendation 1: Any fee changes should accurately reflect the actual costs of increased regulatory effort. The EPA should therefore report annually its enforcement costs, with fees more accurately reflecting costs through a number of possible options, including: Using additive fee increases, instead of a multiplier. If additive fees are not supported, ensuring that the multipliers better reflect the nature of any regulatory action and any additional workload incurred by the EPA. Placing a cap on the fee increase for categories C, D and E 4. NSWMC recommend the caps to be: - Category C: $5,000 (in equivalent administrative fee units). - Category D: $10,000 (in equivalent administrative fee units). - Category E: $20,000 (in equivalent administrative fee units). Ensuring that any fees recovered though enforcement (e.g. prosecutions charges, PINs and other POEO Act provisions) are deducted from licence fee increases. A trend of category A performance over more than three years should attract less regulatory intervention, and further reductions in annual fees, similar to a no claim bonus. NSWMC recommendation 2: Existing enforcement measures are sufficient to address those few circumstances where an environmental incident that requires prosecution occurs. Nevertheless if the EPA is insistent on doubly penalising operators for prosecutions, the licence fee should factor in: The court charge amount, including payment of EPA s legal and/or administrative fees. A defendant s level of cooperation and admittance of guilt during a prosecution. 4 A cap could also be placed on the discount for category A. 15

17 The seriousness of a prosecution and likelihood of recurrence, as assessed by the court. Whether the prosecution is Tier 1, 2 or 3. NSWMC recommendation 3: A cap should be placed on the accruement of the environmental management weighting for less significant regulatory actions, including formal warnings, official cautions and penalty infringement notices. NSWMC recommendation 4: The tool should include further opportunities to reduce the level of risk by considering an operator s control of risks and reduce the environmental management score by considering environmental initiatives that an operation has implemented. NSWMC recommendation 5: Factor in whether a penalty notice is Tier 1, 2 or 3 in determining an appropriate environmental management weighting. NSWMC recommendation 6: Remove site inspections (site surveys) from the environmental management assessment. NSWMC recommendation 7: Do not count minor regulatory actions (such as formal warnings and official cautions) in years 2 and 3. NSWMC recommendation 8: Reduce the environmental management weighting for the 2 nd year to 25% of the 1 st year s weighting. NSWMC recommendation 9: Infractions beyond the reasonable control of the licensee should not be subject to regulatory action that affects licence fees. NSWMC recommendation 10: EPA should be clear about the limited capabilities of its risk tool, and consider calling it a high-level hazard identification tool or similar. NSWMC recommendation 11: The number of announced and unannounced spot-checks that are not due to any specific compliance concerns should be limited per annum and be relative to the three risk levels. NSWMC recommendation 12: The EPA should be transparent about its funding requirements to allow it to continue to regulate EPL holders and undertake and publicise economic modelling to determine the financial impacts to different industry sectors. NSWMC recommendation 13: The EPA should be given not more than one month to issue a regulatory action, following an incident. NSWMC recommendation 14: The EPA should be clear about how it intends to use the three risk levels to inform its regulatory activities. NSWMC recommendation 15: The EPA should work with DoPI and DRE to streamline any overlapping regulatory efforts. NSWMC recommendation 16: The risk assessment should initially be completed by the operator, for the EPA to review. NSWMC recommendation 17: Roll-out the risk-based framework through a trial period, to allow any problems to be identified, financial impacts to different industry sectors to be calculated, and environmental management weightings, categories and factors to be fine-tuned, prior to linking the system to fees. 16

18 NSWMC recommendation 18: Only robust and objective information should be made publicly available. The three levels and A-E categories are both highly subjective and contain methodological errors in their current form, so should not be made publicly available. 17