'Chain of Responsibility' amendments impose new environmental obligations in Queensland

In brief

The Queensland Parliament has passed the 'Chain of Responsibility' Bill with important amendments prior to enactment. The amending Act establishes a new regime under the State's primary environmental legislation that exposes related bodies corporate, executive officers, financiers, shareholders and a select category of 'related persons' to the receipt of orders from the environmental regulator for those entities to satisfy the environmental obligations of companies operating in Queensland. Partner Bill McCredie, Senior Associate Gobind Kalsi and Paralegal Maggie Shelton report.

What does it mean for you?

The amendments were made to the Bill before it was passed into law and the new Act,¹ which amends the Environmental Protection Act 1994 (Qld), significantly broadens the range of entities and persons that can be exposed to receiving environmental protection orders from the Queensland Department of Environment and Heritage Protection (the EHP). If such orders are issued, recipient entities or persons will become directly liable to satisfy the environmental obligations of a corporate holder of an environmental authority in Queensland.

Failure to comply with an environmental protection order is an offence, and also enables the EHP to recover the costs of addressing the environmental harm from the person or entity issued with the protection order.

Further, under the Act, subject to appeal rights, the EHP will be able to unilaterally impose conditions requiring financial assurance to secure compliance with environmental obligations on:

• the transfer of an environmental authority; or
• where there is no transfer of an environmental authority, but a new entity becomes the holding company (as defined under the Corporations Act 2001 (Cth)) of an entity that is the environmental authority holder.

For more detail regarding the scope of who is a 'related person' of a company that may be issued with an environmental protection order see our earlier Client Update.

Key amendments 

The Queensland Government considered the report of the Agriculture and Environment Committee (the Committee) and the submissions of a number of industry entities and stakeholders.

In response, the Government made five key amendments to the original Bill:

• Related person – amendments to the 'related person' test designed to exempt farmers whose land is the subject of resource authorities (eg mining leases and petroleum leases);
• Financial benefit – amendments designed to protect 'mum and dad investors' have introduced a test of whether a person gains a 'significant' financial benefit and therefore may be determined by EHP to be a 'related person';
• Statutory guidelines – the Government will develop statutory guidelines which must be considered before issuing an environmental protection order to a 'related person';
• Financial assurance – the Government can now impose a condition requiring a financial assurance where there is no transfer of an environmental authority, but a new entity becomes the holding company (as defined under the Corporations Act) of the entity that is the environmental authority holder; and
• Reasonable steps – the Government may now consider whether a 'related person' took all reasonable steps to ensure the company complied with its environmental obligations, and made adequate provision of funds to rehabilitate and restore the land from the effects of any relevant activity carried out by the company.

Amendments to the scope of the 'related person' test

The Government did not adopt the Committee's recommendation that all landowners should not be deemed to be 'related persons' under the Act.

Rather, the Government has made amendments aimed at exempting farmers.

The amendments have the effect that a person who owns land on which a resource activity is carried out (eg mining or coal seam gas) is not a related person unless:

• the person is an 'associated entity' of the company (as defined under the Corporations Act); or
• the person otherwise has a 'relevant connection' such that it would be determined to be a 'related person'.

However, in determining whether a person has a 'relevant connection', the following factors are 'irrelevant':

• a Native Title agreement, Aboriginal cultural heritage or Torres Strait Island cultural heritage agreement; or
• a conduct and compensation agreement, or compensation paid or payable under resource legislation; or
• a 'make good' agreement under the Water Act 2000 (Qld).

Amendments regarding 'significant' financial benefit

There was concern that 'mum-and-dad' investors or a small-scale shareholders could be caught within the scope of the 'related person' test and may be required to satisfy the environmental obligations of the company.

The amendments now provide that a person must gain a significant financial benefit before they satisfy the criteria of who is classified as a 'related person'.

Government will release statutory guidelines to assist with new laws

The Committee also recommended that the Government develop a statutory guideline to provide operators with greater clarity regarding the administration of the provisions of the new law.

The Government accepted this recommendation and introduced amendments to this effect.

The guidelines must be considered in determining whether an environmental protection order will be issued to a 'related person' of the company. The guidelines have not yet been developed.

The guidelines will be critical to the application of the new law.

Government may have regard to 'reasonable steps' taken by a related person

The Act now provides that before issuing an environmental protection order the EHP may consider whether a 'related person' took all reasonable steps to:

• ensure the company complied with its environmental obligations; and
• made provision of funds to rehabilitate and restore the land from the effects of any relevant activity carried out by the environmental authority holder.

When considering whether all reasonable steps were taken, the EHP will have regard to the extent to which the person was in a position to influence the company's conduct.

These considerations may impact upon future financing arrangements for environmentally relevant activities in Queensland.

Amendment of power to impose new conditions requiring financial assurance

As introduced to Parliament, the Bill provided that on the transfer of an environmental authority, the EHP could impose a new condition requiring financial assurance.

This power has been expanded so that it also applies where there is no transfer of the environmental authority, but a new entity becomes the holding company (as defined under the Corporations Act) of the environmental authority holder.

The way forward

Although a number of amendments to the Act have been made prior to passing, related bodies corporate, executive officers, financiers, shareholders and other 'related persons' still have a heightened interest in ensuring companies operating in Queensland satisfy their environmental obligations as there is scope for 'related persons' to become personally liable for the satisfaction of the environmental obligations of the environmental authority holder.