Managing Contaminated Sites

Conclusion

The Department of Planning and Community Development (DPCD), the Environment Protection Authority (EPA) and councils are not effectively managing contaminated sites, and consequently cannot demonstrate that they are reducing potentially significant risks to human health and the environment to acceptable levels.

This is largely because the complex regulatory framework that has evolved to deal with contaminated sites has significant gaps, and key elements lack clarity. In many cases, this has led to a lack of accountability and responsibility, and subsequent inaction.

In this audit we identified a range of cases that demonstrate the adverse consequences that flow from a lack of accountability and clarity, and gaps in the framework. Most notably we identify cases of inaction by responsible entities in dealing with contamination; this inaction being driven in part by an undue emphasis on avoiding legal and financial liability, rather than protecting human health and the environment.

Indeed, Case Study 1 is in itself a case study of significant mismanagement, with the possibility that human health has been impacted as a result. The hope is that this, and the other case studies in Appendix A, are not typical. However, there is little assurance that this is the case.

Past inaction has contributed to the inconsistent interpretation and application of the framework by councils and DPCD. Councils have also contributed to these poor outcomes through their lack of rigour in applying their own internal systems and processes to manage the risks associated with the development and management of contaminated sites.

Significantly, no one entity is accountable for oversight of the effectiveness of the regulatory framework in operation. Further, responsibility for managing the high-risk sites has been neither clearly defined nor accepted by any entity.

High-risk sites are those known to be contaminated, and that pose long-term rather than imminent risks. They include sites where the party responsible for contamination is known or can afford to clean the site (legacy sites), and where the responsible party cannot be identified or insolvency prevents clean-up (orphan sites). For orphan sites not proposed for redevelopment, contamination will remain unmanaged unless the state steps in.

Framework weaknesses have been known for at least 10 years, yet action to systematically address them began only within the last year. While these reviews are a positive initiative, they are being planned in an ad hoc manner and occurring in isolation from one another. This further demonstrates the need for leadership and for effective coordination across the system.

The ability to assess and mitigate health, environmental and financial risks associated with contamination is also being hampered by the lack of complete and reliable information on the number and location of contaminated sites, and the nature and extent of contamination. The responsible entities have been neither proactive nor systematic in obtaining this information. Until this information is known, agencies cannot reliably plan and prioritise actions.

Findings

The contaminated sites regulatory framework

The framework’s regulatory instruments, established and updated over a 20-year period, have evolved separately and have been implemented in an ad hoc basis by the EPA and DPCD in response to specific issues and circumstances.

In several instances, the instruments and their interplay have made the framework unnecessarily complex and unclear. This is particularly so for the Environmental Audit Overlay, Ministerial Direction No.1 for Potentially Contaminated Land and Potentially Contaminated Land: General Practice Note in relation to the requirements for, and guidance around, environmental audits and assessments.

In addition, there are many gaps in the framework—most of which have been known to DPCD and the EPA since at least 2000—that have affected the operation of the framework. These gaps relate primarily to the coverage of the regulatory framework, and the lack of any requirement to report contaminated sites to regulatory agencies; even if risks to human health and the environment are known. Actions to address these gaps only commenced in late 2010.

Governance of the contaminated sites system

Oversight and accountability

With around 100 entities involved in regulating and managing contaminated sites, clear accountability for the development, operation and effectiveness of the overall system is critical. Single point accountability, where one entity oversees the system and processes, and is accountable for its performance, is an effective approach to good governance.

There is, however, no single entity responsible for oversight of the planning and management of potentially contaminated and contaminated sites, or for assessing the effectiveness of the system or framework. The contaminated sites regulatory system operates instead in an uncoordinated way, with each entity managing contamination issues in isolation from the others. As a consequence, there is not a cohesive statewide strategic approach to the planning and management issues associated with potentially contaminated and contaminated sites.

Roles and responsibilities

Clear roles and responsibilities minimise the risk of overlap and duplicated effort. They also establish accountability and attribute responsibility for the success or failure of initiatives. While roles have been established under legislation and the contaminated sites framework, these are not clearly understood or agreed by all stakeholders. In addition, there are gaps in the roles where no agency is accountable or responsible.

The EPA is responsible for regulating contaminated sites where the contamination poses an imminent danger to human health or the environment, and it has issued either a pollution abatement notice or clean-up notice. It also regulates contaminated sites owned or managed by entities that it licenses.

However, there is no agency responsible for oversight of the system in relation to sites that are known to be contaminated and where the risks to human health and the environment may be long-term rather than imminent. Nor does any one entity have oversight of the management of orphan sites.

Issues around the management of orphan sites have been known for at least 11 years, particularly in relation to the lack of responsibility and gaps in the legislation, and there has been a range of recommendations made to address them. Very little action has been taken and many of the issues remain, especially the ongoing risks to human health and the environment.

Risk management

Risk management is fundamental to effective public sector administration. It enables entities to systematically identify and manage risks and opportunities, and also to prioritise actions. Risks can apply at an organisation or statewide level.

For the management of potentially contaminated and contaminated sites, key inputs into managing risks include knowing where these sites are, whether they are contaminated, the extent and type of contamination and the potential impact on human health, the environment or amenity.

There is no systematic approach within the three councils audited, the EPA and across the state public sector generally, to identify and assess the risks from potentially contaminated and contaminated land. Risk management activities are limited and do not take a statewide perspective—even though this is a statewide issue.

An absence of information about contamination across Victoria means that risk management activities are not adequately informed. As a consequence, there is no assurance that the current regulatory approach is the appropriate approach to manage risks associated with site contamination.

Applying the regulatory framework

Across the audited planning authorities (entities that prepare planning scheme amendments) and responsible authorities (entities that make decisions on planning permit applications), processes and systems to assess and approve planning applications do not provide adequate assurance that there is compliance with framework requirements.

Each authority had implemented systems and processes for the assessment and approval of planning applications. However, there were significant variations within and between the councils audited in terms of the consistency, transparency and rigour of the decisions.

Variation in processes between councils largely stem from differences in interpreting the ambiguity or gaps in the framework. The differences within councils were largely due to a lack of rigour in applying internal processes and systems.

Technical capability

One of the key issues in effectively implementing the framework is the lack of guidance under the framework about how responsible and planning authorities should assure themselves that the land is fit for its intended use.

To perform this work effectively and to appropriately inform planning decisions, planning and responsible authorities need to understand the regulatory framework. They also need to reliably comprehend and purposefully deal with the findings and recommendations from environmental site assessments and audits, while also assuring themselves that the assessments and audits are technically sound.

Around 80 per cent of contaminated site issues are being dealt with by councils, as planning and responsible authorities, however, the councils audited did not have the technical capability required to manage the complex issues associated with contaminated sites.

To address gaps in their technical capability, councils rely heavily on legal advice to clarify planning and legal issues. They do this to minimise not just the risk of an incorrect decision, but also to minimise their potential liability associated with potentially contaminated and contaminated sites.

Funding

Addressing contamination can be expensive. There are costs involved in undertaking assessments and audits, and significant costs involved in cleaning up contaminated sites. The majority of these costs are borne by the private sector through the planning processes, driven by commercial interests. However, there are also significant costs to the state and councils. This is particularly so where Crown land or municipal-owned land has been identified as contaminated, or where the state has to step in to clean sites as a last resort—typically for orphan sites.

The aggregate cost to the state and councils for remediation of all contaminated sites is unknown because of the lack of complete and reliable information about contamination. Councils advise that the cost of assessing and cleaning up is more than is available in their budgets, and that the lack of available funding to manage contaminated sites is an impediment to managing the risks.

The state government and councils, however, cannot reliably determine and prioritise their financial liabilities until environmental site assessments of all known sites are completed. Until this is done, they cannot substantiate claims that inadequate resourcing has contributed to historically poor management of contamination issues or inaction around known contaminated sites that pose a risk to human health and the environment.

Adherence to the framework

Effective compliance monitoring and enforcement action should assure the community that those developing or building on contaminated sites adhere to conditions designed to protect human health and the environment.

The framework requires councils and other responsible authorities to undertake compliance monitoring activities for planning scheme amendment provisions and planning permit conditions. Despite this requirement, there is no routine compliance monitoring, and consequently little enforcement activity. This is primarily because these entities have not adequately resourced or prioritised these activities.

Monitoring audit conditions

The main compliance monitoring activities that councils should undertake relate to environmental audit conditions. These conditions must be implemented for the site to be suitable for its proposed use, and typically relate to the development or ongoing management of a site. They include concreting contaminated soil exposed areas or capping contaminated soils on site. Ongoing management conditions include the continued management and monitoring of the groundwater and vapours, or refer to the monitoring and maintenance of equipment to manage contamination issues.

None of the three councils audited undertook routine, risk-based compliance monitoring, and as such they could not demonstrate whether statements of audit conditions are being complied with. Compounding this, if the councils wanted to undertake routine risk-based monitoring, their systems are not adequate to support such monitoring. They did not have systems to record audit conditions, and they therefore lacked the basic information required to inform compliance monitoring.

All councils audited acknowledged the need to improve compliance and enforcement activities and procedures associated with contaminated sites. Brimbank City Council and Yarra City Council identified the need for more proactive compliance activities and have indicated that it is an area of high priority, including increasing resources for these activities.

Recommendations

1. The Department of Planning and Community Development, assisted by the Environment Protection Authority and in consultation with councils, should:
   • undertake a systematic and coordinated review of the entire regulatory framework for the management of potentially contaminated and contaminated sites to improve clarity and address gaps, including:
     • the wording, application and use of the Environmental Audit Overlay
     • the application of the framework for planning permits and planning scheme amendments, and the types of use to which it applies
     • the use, content, guidance material and peer review of environmental site assessments
     • establishing mandatory reporting requirements
   • establish processes to capture information about framework and system issues, and processes to address issues in a timely way
   • establish a performance framework to assess the efficiency and effectiveness of the contaminated sites framework and system.
2. The Department of Planning and Community Development should:
   • assume responsibility and accountability for the leadership, coordination and oversight of the contaminated sites framework
   • establish mechanisms and processes to improve the leadership, coordination, oversight and accountability of, and for, the contaminated sites framework and system
   • clarify and communicate responsibilities within the framework so that they are clear and understood.
3. The Environment Protection Authority should:
   • develop mechanisms and processes that enable the identification and recording of contaminated land
   • assess the risks of these sites
   • prioritise high-risk sites and actions to manage the associated risks.
4. Councils, with the support of the Department of Planning and Community Development, should:
   • develop systems to capture ongoing site conditions to inform their compliance monitoring activities around the development, management and clean-up of contaminated sites
   • develop compliance monitoring programs and enforcement processes, consistent with better practice, and perform these activities on a routine basis
   • assess the level of expertise and financial resources required to accurately manage and clean up high-risk sites.

Submissions and comments received

In addition to progressive engagement during the course of the audit, in accordance with section 16(3) of the Audit Act 1994 a copy of this report, or relevant extracts from the report, was provided to the Department of Planning and Community Development, the Environment Protection Authority, Brimbank, Maribyrnong and Yarra city councils, and the Department of Sustainability and Environment with a request for submissions or comments.

Agency views have been considered in reaching our audit conclusions and are represented to the extent relevant and warranted in preparing this report. Their full section 16(3) submissions and comments, however, are included in Appendix B.

1.1 Contaminated sites

Contaminated sites are land, and in most instances groundwater, where chemical and metal concentrations exceed those specified in policies and regulations.

Contamination in Victoria has generally been caused by management practices of earlier generations when environmental regulations were less onerous on polluting activities than is the case now. Common sources of contamination include industrial activities, such as the manufacture of munitions or batteries, mining, chemical storage, landfills, petrol stations and agricultural activities.

Typically, there are three ways in which contamination may affect sites:

• contaminants attach to, or are contained within, the soil
• contaminants leach from the soil into surface or ground waters, which may be static, or migrating onto or off the site
• airborne contaminated gases emanating from contaminants in the soil and groundwater.

1.1.1 Risks from contaminated sites

Depending on the nature and extent of the contamination, and how the site is used, contaminated sites may pose imminent or long-term risks to human health, and the environment.

Sites that pose an imminent risk have concentrations of contaminants that require immediate attention to prevent danger to human health or the environment. Sites that pose a long-term risk have levels of contaminants where exposure over a long period of time is known to result in a risk to human health or the environment.

Human health risks

Human health risks range from minor health problems, such as allergic reactions and hypersensitivity, to serious health problems, such as cancer, respiratory illness, reproductive problems and birth defects. For example, the health risks identified from the high levels of lead contamination at the Ardeer Battery site included potential detrimental impacts on human organs and organ systems.

The risks largely depend on the contaminant and its concentration, the exposure pathway, the level of exposure, and the vulnerability of the exposed population.

Human health risks are more likely to occur where there is a high risk that people will come into contact with contaminants in the soil, groundwater or the vapours these contaminants generate. Ministerial Direction No.1 for Potentially Contaminated Land (MDN-1) has identified that the highest risk of this occurring is with uses of the land identified as sensitive. These include residential use, child care centres, pre-school centres and primary schools.

Environmental risks

Environmental risks from contaminated sites generally result from contaminants leaching into the soil, ground and surface waters. This can lead to the degradation of soil, water and air quality and impact upon their uses.

Contamination of groundwater can prevent it from being used for drinking, irrigation or stock supplies. Contamination of soil can impact upon plant growth, reducing crops and leading to erosion. In other cases, contamination can result in odours making recreational areas unusable, or even affecting the way a place looks by degrading the aesthetic values of an area.

1.1.2 Location and number of contaminated sites

The location and number of contaminated sites in Victoria is not accurately known, as this information is not routinely collated. The most recent desktop assessment, reported in a 1997 ANZAC Fellowship Report for the then Department of Foreign Affairs and Trade, estimated there were around 10 000 contaminated sites in Victoria based on limited industrial site history information.

The location of potentially contaminated and contaminated sites varies, and includes metropolitan, regional and rural areas. Since previous industrial activity is a significant source of contamination, the majority of contaminated sites in metropolitan Melbourne are likely to be concentrated in historically industrial municipalities, such as Brimbank, Maribyrnong, Melbourne, Moreland and Yarra.

In regional and rural Victoria, towns and cities historically involved in gold mining and agricultural activities—such as sheep dipping and the unregulated use of pesticides and herbicides—are likely to have significant numbers of contaminated sites.

1.1.3 Types of contaminated sites

There are two main types of contaminated sites—those that are potentially contaminated and those that are known to be contaminated.

Potentially contaminated sites are sites that may be contaminated due to past waste disposal, industrial, agricultural and commercial uses of the land. While the past use of the land is an indicator of potential contamination, confirmation can only be obtained through sampling of the soil, groundwater or air.

Establishing whether land is contaminated typically occurs when there is a change in the land use to a more sensitive use—for example, from industrial to residential use—through the land use planning system.

Known contaminated sites are sites where a preliminary site assessment or an environmental audit has been undertaken, and has identified contamination. Where contamination has been identified, there may be a requirement to clean-up the site, depending on its intended use and the potential human health and environmental risks. Within this category there are developed and undeveloped sites.

Special categories of known contaminated sites are orphan sites and legacy sites. Orphan sites are those where the party responsible for the contamination is unknown, is insolvent or unable to pay the clean-up costs. Legacy sites are those where the party responsible for the contamination is known, or can afford to clean the site. Typically, these are sites contaminated prior to environmental regulation being introduced in the 1970s and are a legacy of poor industrial, agricultural, waste disposal and commercial practices during this period.

1.2 Regulating contaminated sites

Potentially contaminated and contaminated sites are regulated through a framework that encompasses the Planning and Environment Act 1987 (P&E Act), the Environment Protection Act 1970 (EP Act), and a range of complementary policies, directions and practice notes, and an environmental audit system.

1.2.1 Planning and Environment Act 1987

The provisions of the P&E Act provide the principal mechanisms by which Victoria's broader planning objectives are achieved. Under the P&E Act, councils and the Department of Planning and Community Development (DPCD), on behalf of the Planning Minister, act as:

• responsible authorities—making decisions on planning permit applications, which permit certain land uses or developments
• planning authorities—preparing planning scheme amendments, which zone large areas of land to allow for its redevelopment for a different use, such as from an industrial zone to a residential zone.

DPCD also makes recommendations for the approval of planning scheme amendments for the Minister for Planning's consideration.

Sections 12(2) (b) and 60(1) (e) of the P&E Act require a planning authority, when preparing an amendment to the planning scheme, or a responsible authority, when deciding on a planning permit application, to take into account any significant effects that the amendment or permit might have on the environment or the environment might have on the use or development. This includes site contamination issues.

State Planning Policy Framework

The State Planning Policy Framework (SPPF) comprises general principles for land use and development in Victoria, and details the state's policies for key land use and development activities including settlement, environment, housing, economic development, infrastructure, and particular uses and development. Planning and responsible authorities are required to take account of, and give effect to, the principles and policies contained in the SPPF so that there is integrated decision-making.

Clause 15.06 of the SPPF under the Victoria Planning Provisions refers to soil contamination and the need for potentially contaminated sites to be suitable for their intended future uses and developments, and that contaminated sites are used safely.

The SPFF also requires responsible authorities, when considering permit applications for use of sites known to have been used for industry, mining or storage of chemicals or gas or liquid fuels, to request adequate information from planning applicants on the potential for contamination to have adverse effects on future site uses.

Ministerial Direction No.1 for Potentially Contaminated Land

MDN-1 applies to the rezoning of potentially contaminated land for a sensitive use. MDN-1 defines a sensitive use as:

• residential properties
• child care centres
• pre-school centres
• primary schools
• agriculture or public open space.

Where planning authorities are preparing an amendment that allows a potentially contaminated site to be used for a sensitive use, the planning authority must satisfy itself that the environmental conditions of that site are, or will be, suitable for that use.

To meet the obligations of MDN-1, planning authorities must undertake an environmental audit consistent with the requirements established under section 53X of the EP Act. The environmental audit requirement only applies to residential properties, child care and pre-school centres, and primary schools.

Environmental Audit Overlay

The Environmental Audit Overlay (EAO) is a mechanism that planning and responsible authorities use to gain assurance that land is suitable for a use that may be adversely affected by contamination. The EAO requires that before a sensitive use commences, or before the construction or carrying out of buildings and works in association with a sensitive use commences on a site, the proponent provides this assurance through the environmental audit system.

Potentially Contaminated Land: General Practice Note

Potentially Contaminated Land: General Practice Note provides guidance to planning authorities in identifying and managing potentially contaminated and contaminated sites, in the context of the planning process. The Practice Note was developed to address both potentially contaminated and contaminated site issues for planning permit applications, and to clarify the appropriate level of assessment for permits and scheme amendments associated with contamination issues. It also addresses issues around when to, or when not to, apply the EAO.

1.2.2 Environment Protection Act 1970

The EP Act is Victoria's primary environment protection legislation, with a basic philosophy of preventing pollution and environmental damage by setting environmental quality objectives and establishing programs to meet them.

The EP Act also provides for the statutory appointment of environmental auditors and outlines their responsibilities so that environmental audits of contaminated sites are conducted in accordance with the Environment Protection Authority (EPA) requirements.

The environmental audit system

The EPA administers the environmental audit system, which includes the appointment of environmental auditors to the EPA Contaminated Sites Auditor Panel and the review of audits undertaken.

An environmental audit assesses the nature and extent of harm, or the risk of harm, to the environment posed by an industrial process or activity, waste, substance or noise. Planning and responsible authorities, government agencies and the private sector use the system to provide assurance that potentially contaminated and contaminated sites are suitable for their intended use, or to advise what is required to make a site suitable for its intended use.

Environmental audits must follow relevant EPA environmental audit guidelines and standards, and undertake sampling and analysis of soil, and possibly groundwater, surface water and air. They are conducted by auditors who must demonstrate expertise and extensive experience in contaminated land matters, plus an understanding of the EP Act and associated statutory policies, regulations and guidelines, in order to provide the best assurance available that the site is suitable for its intended use.

Environmental audits result in either a certificate or a statement of environmental audit:

• a certificate is issued for a site when the environmental condition of the land is suitable for any use; it is essentially a clean bill of health for the site
• a statement is issued where, following an audit, an environmental auditor is of the opinion that the land is not suitable for all possible uses, but is suitable for a specific use or development.

A statement of environmental audit may contain conditions relating to the development or ongoing management of the site so that contamination does not adversely impact the use, the users or the environment.

Environmental site assessments

Environmental assessments complement environmental audits, although they are not governed by the EP Act. Environmental assessments are completed by environmental consultants or professionals, and may include anything from a desktop review of the site, to a full site history and soil, groundwater and air sampling and analysis.

The rigour of the site assessment is dependent on the assessor, as there is no certification or established guidelines as to what a site assessment should contain. The National Environment Protection Measure defines a site assessment as a review to determine whether site contamination poses an actual or potential risk to human health and the environment, either on or off the site, to the current or proposed land use. The National Environment Protection Measure sets out recommended processes to undertake site assessments for contamination including preliminary site assessments and risk assessments, however, they are recommended processes and assessors may undertake the assessments differently.

State Environment Protection Policy—Prevention and Management of Contamination of Land

The State Environment Protection Policy—Prevention and Management of Contamination of Land links EPA's environmental audit system and the land use planning system under the P&E Act. The policy provides a statutory framework for protecting people and the environment from the effects of land contamination.

The policy sets in place measures to prevent and manage contamination. It reinforces the requirement of an audit, where a potentially contaminated site may be used for a sensitive use, irrespective of whether the planning decision relates to a planning permit or a planning scheme amendment. It identifies mechanisms so that conditions attached to statements of environmental audit are met.

Figure 1A underscores the complexity of the contaminated sites regulatory framework. It includes the relevant entities, the regulatory instruments for potentially contaminated and contaminated sites, and the situations to which they apply.

Figure 1A

Contaminated sites regulatory system

Note: Dashed coloured lines indicate that the regulatory instrument may apply. Solid colour lines indicate that the instruments do apply. Dark blue lines apply to planning scheme amendments and light blue lines apply to planning permits.

Source: Victorian Auditor-General's Office.

1.3 Managing contaminated sites

Councils, the EPA and DPCD are the key public sector entities responsible for the management of contaminated sites. Private sector environmental auditors and suitably qualified personnel support them in this role.

Councils

Councils, as planning and responsible authorities, are responsible for regulating the planning and development of potentially contaminated and contaminated sites in accordance with the P&E Act. In addition, councils are responsible for managing and developing council owned and managed sites so that they do not result in unacceptable risks to the environment or human health as a result of contamination.

Department of Planning and Community Development

DPCD's main role is to support the ongoing effective operation of the state's planning system. It has two overarching responsibilities that are central to this function:

• monitoring and improving the overall performance of the state's planning system
• providing key statewide planning services essential for maintaining and supporting the effective operation of the system.

To meet its responsibilities, DPCD provides a number of services. These include:

• managing the ongoing development and maintenance of the P&E Act and associated regulations
• managing the Victoria Planning Provisions
• processing amendments to planning schemes
• providing advisory and statutory support services to councils and stakeholders
• supporting the Minister for Planning's role as a planning and responsible authority.

Environment Protection Authority

The EPA is responsible for regulating known contaminated sites under the EP Act. These sites are considered incompatible with their current or approved use without active management to reduce the risk to human health and the environment. It does this through a number of mechanisms:

• developing, administering and managing the audit system, including the appointment of environmental auditors
• investigating contamination in all sites that come to its attention, to determine if further action is required
• issuing and administering clean-up and pollution abatement notices so that these sites are cleaned up to an appropriate level
• developing and administering the Priority Sites Register—a register of known contaminated sites that have been issued with a clean-up notice or pollution abatement notice
• registering and recording a list of all completed environmental audits on its website
• administering the Contaminated Sites Fund—a fund for the management and clean-up of high-risk contaminated sites.

1.4 Audit objective and scope

The audit examined how contaminated and potentially contaminated sites were managed, particularly where a sensitive use of the land is involved.

The audit reviewed the activities of DPCD, the EPA, Brimbank City Council, Maribyrnong City Council and Yarra City Council.

1.4.1 Audit approach

The audit examined whether:

• contaminated sites are managed in accordance with the regulatory framework, as outlined in the provisions of the P&E Act and the EP Act.
• environmental audits are conducted in accordance with the EPA's environmental audit system, and reviewed in a timely manner by appropriately qualified people
• risk-based monitoring of compliance occurs, followed by appropriate enforcement action for non-compliance.

The audit was performed in accordance with the Australian Auditing and Assurance Standards. The total cost of this audit was $390 000.

2.1 Introduction

Victoria's industrial and manufacturing heritage, combined with lower environmental standards for much of the last century, mean that parts of metropolitan Melbourne are contaminated. This is particularly so for suburbs in the inner east, north and west.

Improved environmental standards since the 1970s, and changing demography, increase the pressure to clean up these sites so they can be redeveloped, and to protect the environment. Recognising the need to manage potential human health and environmental risks, successive governments have developed a range of regulatory tools for contaminated sites. Development of specific planning and regulatory instruments started in 1989, in response to concerns with residential developments occurring on contaminated land.

The regulatory framework addresses sites that are potentially contaminated or contaminated, with planning and responsible authorities mainly applying it to sites being redeveloped for sensitive uses. As such, the contamination status of land is assessed only if there is an interest in redeveloping or changing a site's use. The framework applies also to known contaminated sites that the Environment Protection Authority (EPA) has identified, either through its own monitoring activities or notification.

The framework consists of two Acts—the Planning and Environment Act 1987 (P&E Act) and the Environment Protection Act 1970—that are supported by a range of specific planning and regulatory instruments:

• the State Planning Policy Framework—contaminated soils
• Ministerial Direction No.1 for Potentially Contaminated Land (MDN-1)
• an Environment Audit Overlay (EAO)
• Potentially Contaminated Land: General Practice Note (the Practice Note)
• a State Environment Protection Policy—Management of Potentially Contaminated Land
• the Environmental Audit System.

The protection of human health and the environment is a key objective of Victoria's regulatory framework for contaminated sites.

2.2 Conclusion

Elements of the regulatory framework, including the key planning concept of 'sensitive use', the environmental audit overlay and its application, and audits and site assessments, are unclear. In addition, significant gaps exist in the planning and development instruments used to identify and manage potentially contaminated sites, and the legislation as it relates to the management, reporting and clean-up of existing contaminated sites.

This provides little assurance that the framework's key objective is being met. Inaction resulting from known gaps has increased the risk of human health being adversely affected and the probability of environmental damage occurring.

The complexity and lack of clarity of the framework has led directly to divergent interpretations across councils and the Victorian Civil and Administrative Tribunal (VCAT)—an avenue of appeal for planning decisions. Between 2002 and 2010, we identified 25 cases heard by VCAT that highlighted issues with the planning system as it relates to potentially contaminated sites, including:

• questions of interpretation about regulatory instruments as they relate to planning applications
• how regulatory instruments should be applied in planning situations
• roles and responsibilities of EPA
• calling for a review or redrafting of the EAO.

Planning and responsible authorities also need to rely heavily on legal advice to clarify issues relating to the framework, including the use of the framework's tools, their interplay, roles and responsibilities, and liabilities under the framework. Adding to the complexity is council legal advice that conflicts with VCAT interpretations.

The known gaps and a lack of clarity within the regulatory framework, which were identified between 2002 and 2005, persist and the little action taken to address them has been ineffective.

2.3 Clarity and complexity of the framework

The framework's regulatory instruments, established and refined over a 20-year period, have been developed separately and implemented on an ad hoc basis by the EPA and the Department of Planning and Community Development (DPCD) to resolve specific issues or improve clarity.

In several situations, the instruments and their interplay have made the framework unnecessarily complex and unclear. This is particularly so for the EAO, MDN-1 and the Practice Note in relation to the requirements for, and guidance around, environmental audits and assessments.

Environmental Audit Overlay

An overlay applies further planning provisions to a site or area to address a single issue or a related set of issues. An EAO is typically applied to potentially contaminated or contaminated sites, which means an environmental audit is required before any use, construction or building works start.

There are a range of issues associated with the EAO, its application and the tools developed under the framework to provide guidance.

The framework states that the EAO should be applied only after a planning authority has identified whether land is potentially contaminated prior to, or at the time of rezoning. The EAO and the Practice Note are unclear as to how planning authorities identify that the land is contaminated. This lack of clarity has resulted in a range of issues associated with the use of the EAO, including uncertainty about:

• the type of assessment required prior to applying the EAO
• how to apply the EAO—for example, site by site, or on a precinct basis
• whether to apply the EAO or use another tool
• if and when to remove the EAO.

As a consequence, none of the audited agencies have adequately assessed known industrial, and other, potentially contaminated sites available for residential development to inform its decisions about applying an EAO. In addition, each agency interprets and applies the EAO differently, resulting in different outcomes for the same or similar issues.

Ambiguous wording of the EAO in relation to whether it applies to new uses or new and existing uses and the definition of buildings and works, combined with a lack of discretion once it is applied, has caused an increased regulatory burden and substantial costs to proponents—not commensurate with the risks associated with the works and use. Any works, including minor redevelopment works, which are proposed to an existing building where an EAO applies, require an audit. Environmental audits can range in cost from $10 000 to $30 000 for small, uncomplicated sites. Figure 2A provides examples of EAO application.

Figure 2A

Application of the Environmental Audit Overlay

Source: Victorian Auditor-General's Office.

The inconsistent way the agencies included in this audit apply the EAO provides little assurance that, where potentially contaminated sites are used for sensitive uses, the risks to human health and the environment are adequately managed. There is also little assurance that planning authorities are applying the EAO in accordance with the framework's requirements.

Environmental audits and assessments

Environmental audits and assessments are key elements of the regulatory framework. They provide planning and responsible authorities with information on whether, and to what extent, a site is contaminated to inform decisions about the redevelopment of a site.

Audits

The regulatory framework is clear that an environmental audit by an EPA appointed auditor must be undertaken for a planning scheme amendment where there is a change in zoning to allow sensitive uses. Planning and responsible authorities rely on the integrity of the EPA's auditor appointment system and review processes to provide assurance that the audit and auditor has complied with relevant legislation, standards and guidelines and formed appropriate conclusions and recommendations in issuing either a certificate or statement of audit.

However, there is less clarity around the timing of an audit during the planning process. Under MDN-1, planning authorities can approve a delay in undertaking an audit 'under difficult or inappropriate circumstances'. It is unclear what is meant by 'difficult' or 'inappropriate'.

In practice, certificates or statements of audit are not required before planning authorities approve an amendment. The lack of clarity around the timing diminishes transparency around decisions to delay audits, and creates difficulty in determining whether the decision was based on genuine difficult or inappropriate circumstances, or due to pressure that applicants apply due to the holding costs associated with proposed developments.

It also results in limited assurance that the land is suitable for the intended use even though planning approval has been given. This can lead to the poor management of risks to human health and the environment posed by these sites during their development process and can prove costly for developers who have not factored in the required clean-up costs.

Planning and responsible authorities stated that it is difficult, or unreasonable, to request an audit of a planning applicant or developer in the majority of cases prior to giving approval, due to the costs associated with undertaking an audit where no planning assurance can be given that the development will be allowed to proceed. This approach indicates that planning and responsible authorities define potential costs for applicants as 'difficult' or 'inappropriate' when it comes to environmental audits.

Site assessments

There is a lack of clarity and guidance under the framework about whether a site assessment or an audit is required for planning permit applications, and for uses other than those defined as sensitive under MDN-1 for planning scheme amendments. This is significant, because the approach chosen can lead to quite different outcomes given varying levels of rigour in the different assessment options.

Site assessments ranged from a simple desktop site planning history assessment, to a more rigorous assessment including soil and groundwater testing and a detailed site history assessment of past use—leading to varied levels of assurance about the past history and contamination status of the site.

If an assessment is undertaken, there is a lack of clarity and guidance about what form of site assessment a planning or responsible authority should require the applicant to undertake.

Determining whether an assessment is technically adequate rests with the planning or responsible authority. These authorities do not generally have the technical capacity to assess the complex technical issues associated with contaminated sites. This differs from audits, where the expertise and responsibility rests with the auditor.

Under the framework, peer reviews of site assessments by qualified environment professionals are recommended 'where appropriate' to assist planning and responsible authorities to assure themselves of the technical adequacy of a site assessment. However, the framework is unclear about what 'appropriate' is. Site assessments were peer reviewed in an ad hoc and inconsistent manner by the responsible authorities. Given the lack of technical expertise and the ambiguity around what is 'appropriate', it is likely that deficient assessments will not be identified or reviewed.

Sensitive uses

The fundamental objective of the regulatory framework is the protection of human health. Central to this objective is the definition of 'sensitive use' in the planning tools in the framework, which recognises the risk that any contamination will adversely impact upon a use that has been identified as sensitive, including the people associated with the use. Generally, an audit is required for any planning application where there is a change to a sensitive use. This provides assurance that the use of the site will not pose a health risk to any person, particularly children, who uses or comes into contact with the site.

However, little assurance can be given that the framework is achieving its objective of the protection of human health, as the definition of a sensitive use under the framework is narrow and does not address a range of uses that pose a health risk where contamination of the land may be present.

MDN-1 defines 'sensitive use' as residential use, a child care centre, a pre-school centre or a primary school. For these situations, an environmental audit is required to assess the contamination and determine subsequent action in order to protect children who use the site as a result of the development.

Alongside the defined sensitive uses, MDN-1 also identifies public open space and agriculture as uses that planning authorities must 'deliberately satisfy themselves that the environmental conditions of the land are suitable for those uses'. It does not provide guidance to planning authorities on how this should be done.

Adding to the lack of clarity around the issue of sensitive uses, the Practice Note states that an environmental site assessment is required for public open spaces and agricultural uses if there is insufficient information available to determine whether an audit is required. None of the guidance identifies what is sufficient information.

Non-defined sensitive uses

The regulatory framework does not adequately address the issue where the proposed change in land use is to a non-sensitive use, as defined under the framework, but where there are still potential health and environmental risks associated with the use if contamination is present.

The Practice Note indicates that if the potential for contamination of a site is low to medium where the proposed use is a non-sensitive use, such as a worship centre, playground, open space or retail office, then an environmental audit or assessment is not required. Rather, actions to address potential contamination default back to provisions within the P&E Act, which require planning and responsible authorities to consider the effect of the development on the environment or the effect of the environment on the development.

Human health risks have been identified as a result of vapour intrusion caused by volatile organic compounds, soil contamination and groundwater, which can impact upon the health of users of non-sensitive uses. There is no obvious trigger under the framework that requires an assessment of the contamination status of a site subject to a planning scheme amendment or planning permit application involving a non-sensitive use. However, it is equally as important to consider the hazards of intrusive subsurface vapours that might impact the health of occupants inside a secondary school, worship centre or industrial factory, as would be the case for occupants of a residential building or a primary school.

Planning and responsible authorities have identified a range of issues associated with the narrow definition of a sensitive use as defined under the framework, and have adopted their own approaches to address these issues. Figure 2B highlights these.

Figure 2B

Approaches to managing gaps in the framework associated with the narrow definition of sensitive use

Source: Victorian Auditor-General's Office.

2.4 Gaps in the framework

In addition to the complexities and issues with the framework, there are a range of gaps in the framework—many of which have been known to DPCD and the EPA since at least 2000—that have affected the operation of the framework.

Ministerial Direction No.1 for Potentially Contaminated Land

In some cases, sites that are contaminated or potentially contaminated are not identified before redevelopment or use. MDN-1 only applies to planning scheme amendments to allow for change to a new sensitive use planning zone. This means it only takes effect when there is a change to planning zones from a non-sensitive use, such as industrial, to a sensitive use, such as residential.

MDN-1 does not apply to potentially contaminated land that is already zoned to allow for a sensitive use, such as residential land with current industrial uses. This land still meets the definition of 'potentially contaminated land' under MDN-1, but is not captured in the 'requirement for an audit' if the amendment is not considered to allow a sensitive use to occur for the first time. It also does not apply to planning permit applications associated with a sensitive use, and as a consequence it does not capture the redevelopment of sites where the contamination status of the land may not be suitable for the proposed sensitive use. This is because there is no specific requirement for an audit to be undertaken.

Figure 2C

Case study 4—Department of Planning and Community Development

Source: Victorian Auditor-General's Office.

In the absence of a coordinated effort to address gaps around the framework, and particularly MDN-1, councils have developed specific actions to meet the objectives of the P&E Act. These include Maribyrnong City Council's local policy for contaminated sites, Yarra City Council's application of the EAO over all potentially contaminated sites, which effects both planning scheme amendments and planning permits, and Brimbank City Council's legal advice framework to support decision-making around both amendment and permits associated with potentially contaminated land.

While the councils audited have shown initiative to address the gaps in MDN-1 and others under the regulatory framework, the lack of a systematic, coordinated statewide solution has resulted in varying planning outcomes, regulatory overburden and, at times, significant costs to both council and the proponent not commensurate with the risks posed by the development.

Neither MDN-1, nor any other regulatory instrument under the framework applies to potentially contaminated sites that were zoned to allow a sensitive use before 1989. While the requirements of the Environment Protection Act 1970 apply where there is reason to suspect potential contamination, there is no obvious requirement within the planning tools under the framework for either an audit or site assessment for a redevelopment within a zone that already allows for sensitive use, even though the site has never been assessed for contamination issues. This creates the situation where potential risks to human health, associated with sensitive uses built on contaminated land before 1989, are not being addressed.

Community use sites

A range of community use sites available to the public do not fall under the framework's definition of a sensitive use, which triggers the need for an audit or site assessment to address contamination issues. Types of community use sites that do not fall within the definition include playgrounds, secondary schools and open space, even though those using them are likely to include children—the very group sensitive use processes are designed to protect.

These community use sites can expose people to contaminants or vapours that can result in significant health risks—not any less serious than those from the sensitive uses defined under the framework. For example, a school may be built on contaminated land where vapours from the contaminants may pose a risk to students' health due to long-term exposure. One council audited is currently monitoring vapour levels within a school from neighbouring contaminated land to assess any health risks posed.

There is also no provision within the framework requiring councils to test for contamination at pre-existing community use sites that come within the definition, such as childcare and kindergarten centres that are not currently undergoing redevelopment or licence renewal.

All councils audited identified a duty of care and a due diligence process for existing children's services, but action to address this risk varied from extensive to little or no action, as shown in Figure 2D.

Figure 2D

Due diligence process applied by councils to community use sites

Source: Victorian Auditor-General's Office.

Building and occupancy permits

While the Building Act 1983 and the Building Commission's practice notes oblige building surveyors to satisfy themselves that all requirements of the planning scheme are met prior to issuing a building or occupancy permit, it is unclear when, how and to what extent they must inform themselves about the status of land with respect to contamination before issuing a certificate of occupancy.

Legal advice to Maribyrnong City Council identified this as an issue, and recommended that councils should educate building surveyors on these issues. Other councils have not identified this as an issue and Maribyrnong City Council is yet to follow up on its legal advice.

Ministerial exemptions

The Minister for Education and the Minister for Health are exempt from the planning framework requirements under the P&E Act. This means that they are not required to adhere to the provisions and instruments associated with the P&E Act for contaminated land, even though they may own or manage land used for a sensitive use. This exemption dates back to the early 1980s when the complexity of issues surrounding the development and use contaminated sites were not known or understood.

Mandatory reporting

There are known contaminated sites currently used for a sensitive use (residential), or used by the public (playgrounds and public open space), which pose or potentially pose a risk to human health or the environment.

Not all of these known sites are recorded on the EPA's priority sites register—a register of contaminated sites that the EPA knows about, and has issued clean-up or pollution abatement notices for—and, as such, the community is unaware of the sites' contamination status. This is because there is no requirement for owners, managers, councils or developers to report this to any agency or notify the community—even if the sites pose an imminent human health or environmental risk.

Without the EPA being aware of these sites, it is unable to make an assessment as to whether a clean-up notice is required and, therefore, inclusion on the priority sites register. However, even if the EPA was notified, but the risk was considered long-term rather than imminent, there is no clear requirement under the framework for these sites to be cleaned up or to allocate responsibility for their management.

This is a significant gap, and one that could result in immediate and long-term harm to both human health and the environment through allowable inaction. Figure 2E provides examples of known contaminated sites not reported, and not on any public register.

Figure 2E

Examples of unreported, known contaminated sites

Note:Appendix A contains further information on the five case studies detailed in this report.

Source: Victorian Auditor-General's Office.

In 2007, the EPA estimated that another 10 to 20 instances like Case Study 1 exist across metropolitan Melbourne, where residential properties were built on old private quarries or landfills. These sites have not been further identified, assessed or cleaned up.

Site transactions

Property and title laws do not require the recording of the status of the site in terms of contamination on the title when selling a site, even if contamination is known. This further contributes to the difficulty of obtaining information for prospective buyers around the site status. There is no mechanism in place to inform owners and occupiers of the contamination status of the site following a change of ownership or change of tenant, except via a section 32 notice, which identifies whether an audit of the site has been undertaken.

2.5 Actions to address gaps in the framework

Timely reviews of the effectiveness of regulatory instruments are critical for providing regulators with assurance that the intended objectives are being met. Reviews also provide opportunities to make necessary changes.

Despite DPCD and the EPA knowing since at least 2000 that there were weaknesses with the regulatory framework, there has only been action to address the significant gaps and issues in the framework since late 2010. A number of reviews have now commenced or are planned.

While these reviews are a positive initiative, they are being planned in an ad hoc manner and occurring in isolation of one another. This further demonstrates the need for leadership and for greater coordination across the system.

2.5.1 The Department of Planning and Community Development review of planning tools

The Minister for Planning appointed a Ministerial Advisory Committee in March 2011 to examine the existing planning controls and processes for potentially contaminated sites and make recommendations as appropriate to:

• update and clarify the planning processes and guidelines pertaining to planning for potentially contaminated sites
• amend the planning controls by incorporating greater flexibility to better reflect the intent of the regulatory environmental audit system
• address any other matter that the advisory committee considers will improve planning outcomes.

An issues and options paper was released for comment in September 2011. This paper identified a range of issues similar to those identified in this report, as they relate to the planning tools for potentially contaminated sites—specifically the EAO, MDN-1 and the concept of 'sensitive use'. A final report is expected to be completed in late 2011 or early 2012.

2.5.2 The Environment Protection Authority review initiatives

The EPA undertook a range of reviews between 2010 and 2011, both directly and indirectly addressing the way it manages known contaminated sites:

• Compliance and Enforcement Review 2010—The review identified a range of issues around how the EPA undertakes its compliance and enforcement activities. All 114 recommendations of the review have been accepted and around 22 of these will have a direct impact on the EPA's management of contaminated sites.
• The EPA's Five-Year Plan 2011–16—The plan identifies objectives, actions and measurable outcomes for the next five years. One of the key actions under the five-year plan is to critically review the EPA's regulatory approach to contaminated sites, including the audit system, tools, procedures, integration with the planning system, and instigation of priority regulatory reforms.
• Internal operational review of contaminated sites management 2011—The review identified 19 key risks associated with the EPA's role and responsibilities, tools, and systems for the management of contaminated sites. It has identified actions where the controls to manage the risks are currently inadequate.
• Review of the State Environment Protection Policy for the Management of Contaminated Land—The Department of Sustainability and Environment and the EPA are jointly undertaking a review of the current function, structure, content, management and effectiveness of statutory policies under the Environment Protection Act 1970, including State Environment Protection Policies. The review itself is not a specific review of the content of the contaminated land State Environment Protection Policies.

No specific time frames or resource plans have been approved for the initiatives relating specifically to contaminated sites.

Recommendation

1. The Department of Planning and Community Development, assisted by the Environment Protection Authority and in consultation with councils, should:
   • undertake a systematic and coordinated review of the entire regulatory framework for the management of potentially contaminated and contaminated sites to improve clarity and address gaps, including:
     • the wording, application and use of the Environmental Audit Overlay
     • the application of the framework for planning permits and planning scheme amendments, and the types of use to which it applies
     • the use, content, guidance material and peer review of environmental site assessments
     • establishing mandatory reporting requirements
   • establish processes to capture information about framework and system issues, and processes to address issues in a timely way
   • establish a performance framework to assess the efficiency and effectiveness of the contaminated sites framework and system.

3.1 Introduction

Contaminated sites are managed by a number of entities through a complex and incomplete framework. This system, in which multiple entities work toward the same objective, requires sound, coherent governance.

To be effective, the governance arrangements need to be underpinned by clearly understood roles and responsibilities, a clear understanding of the risks, and information on how well the system is performing.

3.2 Conclusion

The governance arrangements are undermined by a lack of oversight and accountability for the effective operation of the framework, and undermined by unclear and unknown roles and responsibilities within the framework.

Because no one has been allocated responsibility, and no one is accountable for addressing these weaknesses, we found cases where little meaningful action had taken place to address known contamination.

The health, environmental and financial risks from contamination are potentially significant. However, the ability to adequately assess and mitigate this risk is hampered by a lack of information on the number and location of contaminated sites, and the nature and extent of contamination. The responsible entities have been neither proactive nor systematic in obtaining this information.

The efficient and effective operation of the framework requires single point accountability in order to oversee its performance in managing the risks associated with potentially contaminated and contaminated sites across Victoria. This includes establishing clear responsibilities for the framework's application, review and performance.

3.3 Oversight and accountability

Around 100 public sector entities are involved in regulating and managing contaminated sites. This includes the 79 councils, the Environment Protection Authority (EPA), the Department of Planning and Community Development (DPCD), the Victorian Civil and Administrative Tribunal, and various advisory committees, panels and other bodies.

With the large number of entities involved, clear accountability for the development, operation and effectiveness of the system is critical. Single point accountability, where one entity oversees the system and processes and is accountable for its performance, is an effective approach to good governance.

There is, however, no single entity responsible for overseeing the planning and management of potentially contaminated and contaminated sites, or for assessing the effectiveness of the system or framework. The contaminated sites regulatory system operates instead in an uncoordinated way, with each entity managing contamination issues in isolation of the others. As a consequence, there is no statewide strategic or consistent approach to planning and management issues associated with potentially contaminated and contaminated sites.

The regulatory framework is complex and it relies on the effective coordination of the two key pathways for the assessment and management of potentially contaminated and contaminated sites—one relating to the planning and development system for potentially contaminated sites, governed by the Planning and Environment Act 1987 (P&E Act), and the other relating to known contaminated sites, governed by the Environment Protection Act 1970 (EP Act).

While the framework is intended to deal with the issue of contamination, this is made more challenging because two different state entities administer it, and each report to different ministers. Adding to the complexity is that each element of the framework relies on the other. For example, planning matters rely on tools that the EPA administers under the EP Act, and this has created confusion among planning and responsible authorities about roles and responsibilities. This makes it difficult to establish which entity is responsible for governance of the framework.

This diffusion of oversight needs to be addressed by assigning the responsibility to one entity to be accountable for the regulatory framework, including allocating and clarifying roles and responsibilities.

3.3.1 Clarity of roles and responsibilities

In any system where the stakeholders are working together for a common purpose—in this case preventing and cleaning contamination, and preventing unacceptable risks to human health and the environment—roles and responsibilities should be clearly understood.

Clear roles and responsibilities minimise the risk of overlap and duplicated effort. They also establish accountability and attribute responsibility for the success or failure of initiatives.

While roles have been established under legislation and the contaminated sites framework, these are neither clearly understood nor agreed by all stakeholders. There are also role gaps where no agency is accountable or responsible.

The Department of Planning and Community Development's role

DPCD, through its responses to previous VAGO audit recommendations, has acknowledged its lead role in the monitoring and oversight of the planning system—including the extent to which councils are fulfilling their obligations under the P&E Act in implementing the system.

In addition, DPCD performs a range of other roles in relation to contaminated land. DPCD develops, maintains and disseminates elements of the regulatory framework, including:

• developing and reviewing the Victoria planning provisions for potentially contaminated sites
• developing planning tools, such as the Environment Audit Overlay and Potentially Contaminated Land: General Practice Note
• providing training for planners about potentially contaminated and contaminated site planning responsibilities.

Despite this, DPCD does not consider that its role extends to overseeing and monitoring councils' performance in relation to the effective implementation of the planning framework for potentially contaminated and contaminated sites.

Given the acknowledgement of its role as the overseer of the planning system in the 2009 Discussion Paper on opportunities to modernise the Planning and Environment Act 1989, including the extent to which councils are fulfilling their obligations under the Act, and its responses to past VAGO performance audits, DPCD is the logical agency to fill this accountability void.

The Environment Protection Authority's role

While the role of the EPA in relation to contaminated sites is clearly described within the contaminated sites framework, it is not well understood by the system's stakeholders.

The EPA's role in relation to contaminated sites is to manage the accreditation of environmental auditors and the audit system, and to regulate contaminated sites listed on its priority sites register (PSR). The EPA is not responsible for undertaking environmental assessments or cleaning up contaminated sites.

Confusion has been created among councils and DPCD about the EPA's role. This is partly because of the discretionary nature of the EPA's role under the P&E Act and that it has been inconsistent in performing functions it is not required to perform. This includes undertaking site assessments and participating in site clean-ups, reviewing site assessments that councils and DPCD have sent to it, and commenting on planning referrals.

In a complex arrangement, under the P&E Act, the EPA is a compulsory referral authority if specified under clause 66 of the Planning Scheme. In this situation, the EPA must receive and review planning referrals relating to potentially contaminated land. The referring agency must then follow the EPA's advice.

However, any agency may refer planning applications to the EPA under section 52(1)(c) of the P&E Act, but unless the EPA is acting as a compulsory referral authority, then it is at its discretion whether to review them and provide advice. Agencies do not have to adhere to advice provided in these situations.

When site assessments have been provided to the EPA for review when it is not a compulsory referral authority, its decisions to review are ad hoc and without rationale or guiding criteria, other than consideration of the impact on the environment.

Responsibility for known contaminated sites

The EPA is responsible for regulating contaminated sites where the contamination poses an imminent danger to human health or the environment, and it has issued either a pollution abatement notice or clean-up notice. It also regulates contaminated sites owned or managed by entities that it licenses.

However, there is no agency responsible for overseeing or managing sites that are known to be contaminated when the risks to human health and the environment may be long-term rather than imminent, or contaminated sites that pose a risk to human health and the environment that are not known to the EPA. This is because there is no clear requirement:

• for anyone other than contracted EPA appointed environmental auditors to report known contaminated sites to the EPA or any other agency
• to clean-up contaminated sites that do not pose imminent human health or environment risk, even though these risks have been identified
• to assess potentially contaminated sites at high risk of being contaminated due to past activities, unless they are subject to redevelopment—even if these sites are used by the public.

The lack of a responsible agency for these types of contaminated sites means that in some instances, there is an incentive either to do nothing or to react slowly to identify and manage contamination risks. Exacerbating this is the complexity of issues and costs associated with managing the issue.

Figure 3A Case study 1—City of Maribyrnong

Source: Victorian Auditor-General's Office.

Responsibility for orphan sites

Orphan sites are contaminated sites where the party responsible for the contamination is unknown, insolvent, or cannot or will not cover the clean-up costs.

The defining feature is the absence of private interest responsibility for, or ability to, clean or manage the contamination. In market failure-type situations such as this, ordinarily the state assumes responsibility if the site poses an imminent risk to human health or the environment. However, where no imminent risk is identified or the site has not been assessed, sites are managed in an inefficient, ad hoc and inconsistent fashion—and in some cases, not addressed at all. This is partly due to there being no public sector entity is responsible for orphan sites.

Issues around the management of orphan sites have been known for at least 11 years, particularly in relation to the lack of responsibility and gaps in the legislation with a range of recommendations made to address them. However, very little action has been taken. As a consequence, many of the issues remain, especially the potential risks to human health and the environment.

Recommendations were made to ministers on four occasions between 2000 and 2007. These included:

• That an interdepartmental committee be set up to address orphan site issues. This was first raised in 2000, and then again in 2004.
• In 2004, the Minister for the Environment indicated that the issue of mandatory reporting should be investigated.
• In 2006, the EPA briefed the Minster for the Environment and recommended that the EPA convene an interdepartmental committee to examine issues including:
  • changes that may be necessary to the EPA's powers to require clean up and to ensure this occurs efficiently and minimises the risks of orphan sites that may become state liabilities
  • approaches to managing existing orphan sites
  • other strategies to improve management of historical contamination and minimise cost and risk to the state.

To date, none of these recommendations have been adequately addressed. Figure 3B shows the status of the issues identified.

Figure 3B

Identification and resolution of issues associated with orphan sites

Source: Victorian Auditor-General's Office.

3.4 Managing regulatory risks

Risk management is fundamental to effective public sector administration. It enables entities to systematically identify and manage risks and opportunities, and also to prioritise actions. Risks can apply at an organisation or statewide level.

For the management of potentially contaminated and contaminated sites, key inputs into managing risks include knowing where these sites are, whether they are contaminated, the extent and type of contamination and the potential impact on human health, the environment or amenity.

There is no systematic approach within the three councils audited, the EPA and across the state public sector generally to identify and assess the risks from potentially contaminated and contaminated land. Risk management activities are limited and do not take a statewide perspective, even though this is a statewide issue.

An absence of information about contamination across Victoria means that risk management activities are not adequately informed. As a consequence, there is no assurance that the current regulatory approach is the appropriate approach to manage risks associated with site contamination.

3.4.1 Agency approaches to risk management

All agencies had risk management systems and processes in place to identify high‑level corporate and operational risks. However, there was less rigour in the processes to identify and address risks associated with potentially contaminated sites, and variation in how each assesses risks. A key issue identified was the lack of review and evaluation in determining the effectiveness and efficiency of their risk management systems.

Councils' approach to identifying municipal-wide risks from potentially contaminated and contaminated sites was limited, with their focus typically on council-owned and managed sites. Municipality and community-wide risks associated with potentially contaminated and contaminated sites are not generally known.

Figure 3C

Approaches to assessing contamination risks

Source: Victorian Auditor-General's Office.

A further element of the risk management approach is to routinely obtain legal advice when dealing with issues related to potentially contaminated and contaminated sites. The legal advice is sought, in part, because of the complexity of the regulatory framework and associated issues, and is used to inform planning decisions, but also to minimise councils' risk and liabilities associated with potentially contaminated and contaminated sites. For example, Brimbank City Council and Maribyrnong City Council have sought specific and generic legal advice to improve the management of risks, whereas Yarra City Council has sought specific advice in relation to the application of the Environment Audit Overlay.

Councils and the EPA have identified the need to improve the coordination, evaluation and review of risk management processes to better address risks associated with potentially contaminated and contaminated sites. All have recently implemented actions to commence this process.

3.4.2 Information about contaminated sites

Reliable data on the location, number and nature of all potentially contaminated and contaminated sites across the state and within individual municipalities is not available.

Councils, DPCD and the EPA hold a narrow range of information on potentially contaminated and contaminated sites, but do not have effective processes to proactively obtain detailed information about these sites. This is despite issues around contamination being known since at least 1989 following the introduction of Ministerial Direction No.1 for Potentially Contaminated Land.

Figure 3D

Information on contaminated sites

Source: Victorian Auditor-General's Office.

The objective of the regulatory framework is, in part, to prevent and clean contamination, and prevent human health and environmental risks. The absence of reliable and comprehensive information, and the absence of effective processes to obtain information on potentially contaminated and contaminated sites, means this objective is unlikely to be fully met.

3.4.3 Information systems

There is no information management system that integrates data across stakeholders to provide a central repository of information associated with potentially contaminated and contaminated sites, and their risks. Where information is available, it is held within individual public entities and not shared. None of the councils held their information in a central register, even though a range of business units across these organisations dealt with contamination issues.

None of the information systems used within the three councils included complete details on the type and extent of contamination, management strategies or plans attached to sites, ongoing management conditions attached to sites, or risks associated with the contamination. DPCD had no information system to record contaminated sites data in relation to sites for which the Minister for Planning was responsible.

Brimbank and Yarra City councils have taken steps to address information management issues, whereas Maribyrnong City Council is only just starting to address this issue and DPCD is yet to recognise the issue.

Recommendations

2. The Department of Planning and Community Development should:
   • assume responsibility and accountability for the leadership, coordination and oversight of the contaminated sites framework
   • establish mechanisms and processes to improve the leadership, coordination, oversight and accountability of, and for, the contaminated sites framework and system
   • clarify and communicate responsibilities within the framework so that they are clear and understood.
3. The Environment Protection Authority should:
   • develop mechanisms and processes that enable the identification and recording of contaminated land
   • assess the risks of these sites
   • prioritise high-risk sites and actions to manage the associated risks.

4.1 Introduction

Effectively applying the regulatory framework is critical to managing human health and environmental risks. Planning and responsible authorities must understand the framework and the associated planning, legal and technical requirements, and have processes in place to operationalise the requirements. Effective compliance monitoring should also be in place so that planning applicants adhere to the objective and intent of the framework.

4.2 Conclusion

Councils, and the Department of Planning and Community Development (DPCD), as planning and responsible authorities are not effectively applying the regulatory framework. It is inconsistently applied across councils and by DPCD—largely due to a lack of clarity in the framework, and the lack of rigour in applying internal processes and systems.

Councils and DPCD are not checking whether planning applicants and developers are adhering to the framework and imposed conditions. This is due to significant deficiencies in compliance monitoring. This reduces assurance that human health and the environment are being adequately protected in relation to the management of contaminated sites.

4.3 Applying the framework

Across the planning and responsible authorities audited, processes and systems to assess and approve planning applications do not provide adequate assurance that there is compliance with framework requirements.

Each planning and responsible authority had implemented systems and processes for the assessment and approval of planning applications. However, there were significant variations within and between councils in terms of the consistency, transparency and rigour of the decisions.

Variation in process between councils largely stem from differences in interpreting the ambiguity or gaps in the framework; whereas the differences within councils were most often due to a lack of rigour in applying internal processes and systems.

Variations in applying the framework identified throughout this report include:

• applying the Environment Audit Overlay (EAO) across broad areas by Yarra City Council, as opposed to a site-by-site application by Brimbank City Council
• applying the EAO to one site, and not another in similar circumstances
• knowing when a site assessment is required as opposed to an audit for similar applications
• undertaking an audit before planning approval, and in other cases after approval without obvious differences between site circumstances
• knowing whether to use a section 173 agreement or another tool to translate audit conditions to ongoing planning conditions
• obtaining a peer review for some site assessments and not others.

Further undermining the application of the framework is the failure to consistently and transparently document the rationale for decisions. In many instances, it was unclear what considerations had been taken into account to inform decisions.

When compared to responsible authorities and planning permits, there was greater rigour and transparency around decision-making for the assessment and approval of planning scheme amendments by planning authorities. This is because there are fewer gaps and greater clarity in the framework in relation to planning scheme amendments. There is also a range of high quality standard pro-forma assessment guidelines, checklists, report frameworks and guides for planning scheme amendments, developed by DPCD, which were used consistently by planning authorities.

4.3.1 Technical capability

One of the key issues in effectively implementing the framework is the lack of guidance under the framework about how responsible and planning authorities assure themselves that the land is fit for its intended use.

Around 80 per cent of contaminated site issues are dealt with by councils, as planning and responsible authorities. However, they lack the technical capability to manage the complexity of issues associated with contaminated sites.

To perform this work effectively and to appropriately inform planning decisions, planning and responsible authorities need to be able to understand the regulatory framework. They also need to assure themselves that the assessments and audits are technically sound, and the findings and recommendations are captured appropriately in planning conditions.

To address gaps in their technical capability, councils rely heavily on legal advice to clarify planning and legal issues. They do this to minimise not just the risk of an incorrect decision, but also to minimise their potential liability associated with potentially contaminated and contaminated sites.

Financial resources spent on legal advice and training around contaminated sites have varied from council to council, ranging from $109 000 spent annually on legal fees for Yarra City Council to $240 000 for annual legal advice for Brimbank City Council for day-to-day planning issues.

Another area of technical capability risk for planning and responsible authorities is in the review of environmental site assessments. Apart from there being no guidance on what an assessment should involve, unlike environmental audits, there is no routine review process.

In the absence of in-house expertise, planning and responsible authorities assure themselves in a range of ways, and assessments are undertaken in an ad hoc manner. If there is a lack of certainty about a site assessment, then councils may require that it be peer reviewed. However, there is little guidance as to when this occurs, and if a peer review is required, this often leads to additional costs for the applicant.

Figure 4A Requirements for peer reviews of site assessments

Source: Victorian Auditor-General's Office.

4.3.2 Funding

Addressing contamination can be expensive. There are costs involved in undertaking assessment and audits, and potentially significant costs involved in cleaning up contaminated sites.

The majority of these costs are borne by the private sector through the planning processes, driven by commercial interests. However, there are also potentially significant costs to the state and councils. This is particularly so where Crown land or municipal-owned land has been identified as contaminated, or where the state has to step in to clean sites as a last resort—usually for orphan sites.

The Victorian Government established a contaminated sites fund in 2011 in an effort to address some of the financial resourcing issues. The fund was allocated $5.4 million over four years from the Landfill Levy. Based on historical costs associated with the clean-up of contaminated sites, this allocation is inadequate to clean currently known problem sites:

• The Environment Protection Authority has spent around $2 million on the four high-risk sites identified in Case Study 1.
• Two sites within Brimbank and Maribyrnong have cost in the vicinity of $6.6million to clean up.
• Maribyrnong City Council has spent around $1 million annually for several years to manage one of its high-risk contaminated sites, and it estimates it has spent around $120000 in the past four years on site assessments (not clean-up) associated with property transactions.
• Brimbank City Council has spent large sums annually to deal with 'high-risk' sites. For example, $2.6 million was spent over three years for a single site and $5million since 1997 for another site, because these sites pose risks for human health and the environment.

The potential cost to the state and councils for remediation of all contaminated sites is unknown because of the lack of complete and reliable information about contamination.

Councils advise that the cost of cleaning up is more than is available in their budgets and that the lack of available funding to manage contaminated sites is consequently an impediment to managing the risks.

The state government and councils cannot reliably assess their potential financial liabilities unless they complete environmental site assessments of all their known sites—itself a costly exercise. An initial assessment of the cost of this task for Maribyrnong City Council was between $5 million and $10 million. The lack of assessment has contributed to historically poor management of contamination issues or inaction around known contaminated sites that pose a risk to human health and the environment.

4.4 Adherence to the framework

Effective compliance monitoring and enforcement action should assure the community that those developing or building on contaminated sites adhere to conditions designed to protect human health and the environment.

The framework requires councils and other responsible authorities to undertake compliance monitoring activities for planning scheme amendment provisions and planning permit conditions. Despite this requirement there is no routine compliance monitoring, and consequently little enforcement activity. This is primarily because these entities have not adequately resourced or prioritised these activities.

4.4.1 Compliance and enforcement

The main compliance monitoring activities that councils should undertake relates to environmental audit conditions. A Statement of Environmental Audit typically contains one or more conditions that must be implemented for the site to be suitable for its proposed use. The framework requires that planning and responsible authorities incorporate these conditions into planning scheme amendment provisions or planning permit conditions.

Conditions attached to an audit statement generally relate to the development or ongoing management of a site. In terms of the development, conditions have included concreting contaminated soil exposed areas or capping contaminated soils on site. Ongoing management conditions generally relate to the continued management and monitoring of the groundwater and vapours, or refer to the monitoring and maintenance of equipment to manage contamination issues.

Planning and responsible authorities used a range of tools to attach ongoing management and monitoring conditions to a site, including:

• planning permit conditions
• planning scheme amendment provisions
• planning permit notes
• section 173 agreements—agreements that attach conditions to the property, so that they apply to successive purchasers
• body corporate agreements
• notices of restrictions on plans of subdivision.

Potentially Contaminated Land: General Practice Note recommends section 173 agreements as the most appropriate tool.

Regardless of the method that councils used to record conditions, the value of doing this is limited through poor practices. None of the three councils audited undertook routine, risk-based compliance monitoring, and as such they do not know whether statements of audit conditions are being complied with—even if they are in the form of section 173 agreements.

Compounding this, if the councils wanted to undertake routine risk-based monitoring, their systems do not support it. None of the audited councils had systems to record conditions. They therefore lacked the basic information needed to inform compliance monitoring. This represents obvious risks that compliance with the conditions will not occur. Figure 4B demonstrates an example where conditions were not monitored.

Figure 4B

Case Study 3—City of Yarra

Source: Victorian Auditor-General's Office.

All councils audited acknowledged the need to improve compliance and enforcement activities and procedures associated with contaminated sites. Brimbank City Council and Yarra City Council identified the need for more proactive compliance activities and have indicated that it is an area of high priority, including increasing resources for these activities

Enforcement

Enforcement actions should act as a deterrent by holding offenders accountable. They also present the opportunity to educate and inform the community and industry about appropriate behaviour relating to the use and redevelopment of potentially contaminated and contaminated sites.

If developers or proponents do not comply with requirements set out in planning permit conditions or planning scheme amendment provisions, graduated enforcement actions such as infringement notices, enforcement orders or prosecutions should be undertaken by responsible authorities. However, the lack of compliance monitoring activities associated with contaminated sites has led to no or very limited appropriate and timely enforcement actions.

Notwithstanding that routine compliance monitoring does not occur, councils advised that enforcement around potentially contaminated and contaminated sites is also hampered by a range of issues, including:

• prosecution procedures for non-compliance are slow and cumbersome under the Planning and Environment Act 1987 and the Environment Protection Act 1970, with long delays in accessing VCAT or the Magistrates court. This means that proponents tend to continue undertaking works until the issue is resolved
• councils are hesitant to take proponents to VCAT or court over non-compliance as it is a regulatory burden for compliance enforcement officers. Due to the long delays, the responsible parties have either left the site or finished the project before they can be prosecuted
• difficulty collecting evidence around non-compliance due to a lack of technical capabilities. For example, councils do not have dust monitoring equipment or groundwater monitoring equipment, and therefore are unable to provide evidence of non-compliance in some cases.

Reasons cited for not enforcing non-compliance, such as administrative difficulties and a lack of technical expertise are not adequate, and are within the power of the councils to address. The failure to address this demonstrates the low priority that councils place on compliance and enforcement, even when the risks of non-compliance may be significant.

All councils audited acknowledged the need to improve compliance and enforcement activities and procedures associated with contaminated sites. Brimbank City Council and Yarra City Council identified the need for more proactive compliance activities and have indicated that it is an area of high priority, including increasing resources for these activities.

Recommendation

4. Councils, with the support of the Department of Planning and Community Development, should:
   • develop systems to capture ongoing site conditions to inform their compliance monitoring activities around the development, management and clean-up of contaminated sites
   • develop compliance monitoring programs and enforcement processes, consistent with better practice, and perform these activities on a routine basis
   • assess the level of expertise and financial resources required to accurately manage and clean up high-risk sites.