Reporting on contamination: proceed with caution
It’s been said that South Africa has some of the best environmental legislation in the world … in principle. However, the vagueness in the National Environmental Management: Waste Act, 2008 (Nemwa) in terms of reporting requirements for contamination levels puts industry between a rock and a hard place.
At a recent client workshop on contaminated land, held by global environmental engineering consultancy Golder Associates, Kenneth Cameron, a director at MacRobert Attorneys who heads the Environmental and Mining Division, said, “‘Contamination’ has a very specific definition in the Act. If we lose sight of that definition, we lose sight of what we’re trying to achieve and the risks inherent in reporting.”
‘Contaminated’ in Nemwa Part 8 of Chapter 4 is defined as: … “the presence in or under any land, site, buildings or structures of a substance or micro-organism above the concentration that is normally present in or under that land, which directly or indirectly affects or may affect the quality of soil or the environment adversely”.
Section 36(5) requires an owner of land that is “significantly contaminated”, or the person undertaking “an activity that caused the land to be significantly contaminated” to notify the Minister of Environmental Affairs and the MEC.
However, government doesn’t appear to have given clarity on what either ‘normal concentration’ or ‘significant’ contamination is. Also, there is seemingly no protection afforded to companies that disclose contamination information under Section 36(5).
“Proceed with extreme circumspection – that’s the message,” says Cameron. “When you consider reporting in terms of section 36(5), the governance red flags must go up … and you have to think very carefully about what you want to achieve as opposed to what you may achieve unwittingly.”
He says that effectively, when reporting in terms of section 36(5), you’re declaring that “the contamination on my property or where I operate exceeds the concentration of what would be considered ‘normal’ for that property or operation. In fact, given the wording of the section, you inherently also report that you exceed that mark by a significant margin.”
“What is normal for that area? Would that be a benchmark? What if the baseline value of your property is already high? Or if it’s been elevated since before you started operating?” Cameron asks.
Industrial operations also require any number of environmental authorisations before they may begin operations, which may include water and waste management licences, environmental management programmes among others.
Cameron questions whether elevated levels of contaminants invariably translate to ‘contamination’ as defined. A water use licence for effluent storage, for example, may state the concentrations of contaminants that need to be monitored and includes the limits that must not be exceeded, even some distance from the dam or earth-cell.
“Is that not a localised norm that has been set? Should I now report that I have contaminated land merely because I know there are elevated levels of monitored substances in the surrounding soil, when I’m still in compliance with the norms set by the licence?” he asks.
Norms or normal values for a property are also not necessarily explicit. Would an ‘Industrial 1’ zoning or a mining right not carry an implicit acknowledgement that an undefined quantity of contaminants may infiltrate topsoil on high activity areas? “Is the site norm not established by all these factors?” he asks. “There is to my mind a substantial difference between ‘contamination’ in the ordinary sense, and the ‘significant’ exceeding of ‘normal’ values.”
He suggests companies also consider the criminal, financial and personal liability implications of reporting under section 36(5).
Criminal offenses and extended personal liability
Cameron points out that certain provisions in the National Environmental Management Act 107 of 1998 attach criminal liability to contamination, such as sections 49A(1)(e) and (f). These provisions virtually mirror the definition of ‘contamination’ in the Nemwa.
He adds that reporting under section 36(5) is an apparent acknowledgement of the significant exceeding of whatever could be deemed acceptable for that site. Such a report therefore arguably also alludes to negligence on the part of the operating entity in principle.
It is also important to note that these violations are part of the suite of transgressions in terms of which directors, managers and employees can be held personally liable for the transgression of the operating company.
“The state therefore created an offence, but defined the offence so subjectively and vaguely that it’s most often virtually impossible to determine whether you’ve committed this offence. Then it imposes a requirement to notify the authorities when you’ve committed the offence. This notice not only exposes the company to substantial potential criminal and financial liabilities, but extends those liabilities to its directors, managers and employees in their personal capacity”.
Yet, it is also a criminal violation not to report in terms of section 36(5), “in spite of the Constitutional right against self-incrimination. Therefore, if you elect not to report for fear of unsubstantiated self-incrimination, the company runs the further risk of criminally liability for not doing so in any event, based on the same vague and subjective parameters. This liability risk is likewise also extended to directors, managers and employees in their personal capacity in terms of section 34 of the Nema,” he says.
Subsequent to a notice in terms of section 36(5), the Nemwa provides that the owner or operator is required to have a site assessment conducted “by an independent person, at own cost, and to submit a site assessment report to the Minister or MEC within a period specified in the notice”. Cameron states that this report may subjectively (and possibly incorrectly) come to a conclusion that the site is ‘contaminated’ for purposes of the Nemwa. It becomes virtually impossible to retract an acknowledgement under section 36(5) once a site assessment has been completed.
Under section 40, the ‘contaminated’ property may not be transferred without informing prospective buyers that land is contaminated. One can hardly provide a contamination notification under section 36(5), but fail to notify a potential buyer. Since the obligation to report under section 36(5) falls on both the landowner and the impacting occupant equally, the interplay between landlord and tenant becomes tricky, he says.
If a property is declared a remediation site (a likely consequence of reporting under section 36(5)) the Registrar of Deeds is required to register the property as a remediation site in terms of the Deeds Registries Act. This has substantial implications for the financing industry in respect of secured loans, not to mention instances where the financier also has equity exposure.
Remediation orders must also be executed before property is transferred – as such, any commercial transactions in play are at risk, says Cameron.
Why Part 8 ‘fails’
“In my opinion, Part 8 of the Nemwa is fundamentally flawed,” Cameron says.
“Firstly, it arguably violates the Constitutional right against forced self-incrimination. Other than similar provisions elsewhere, no indemnification is offered in the Nemwa. It simply does not make sense to have to risk compounded criminal sanctions as a direct consequence of assisting the authorities to address environmental issues.”
“Secondly, it fails the test for legality. It is established law that if one cannot determine what, when and how you need to act in terms of legislation with a reasonable degree of certainty, then that legislation could, and should, be set aside. That test is even more pronounced when the provisions carry criminal penalties.
“Environmental legislation is seldom taken on review, because clients want to engage with government in a positive manner. But you can see that in not doing so, we also perpetuate certain risks. In the meantime, we have to deal with the legislation as it stands,” he says.
What is to be done?
“Although dealing with the challenges of Part 8 is not simple”, Cameron says, “I do not propose non-reporting simply because the legislation is vague and confusing. However, proceed with substantial caution and diligence.”
Different owners and industries have different circumstances, risk profiles and risk appetites. As such, there are varying factors to bear in mind when reporting in terms of Section 36(5) is considered. Cameron puts forward the following considerations:
- Understand with “a reasonable degree of certainty what’s going on in the properties in question”;
- Obtain advice on the natural background values inherent to your area or property;
- Whether you’ve exceeded a “norm” and whether that contamination is of legal significance, is a much broader question than can be ascertained by a physical site assessment alone;
- Shareholders and management should be well advised of the potential consequences of both reporting and not reporting. This include criminal implications as well as knock-on personal liability risks in both instances;
- If you suspect that the use of the property in question may fall within the legal norms and boundaries set by authorisations, zoning and other site specific considerations, consider a highly contextualised communication that highlights the conceptual uncertainties of the definition and section 36(5) itself;
- Consider the implications for the occupier or owner and any lease, sale or other legal instrument attached to the use, ownership or financing of the property.
“In any event, obtain legal advice. Be specifically aware that if you obtain legal advice from the relevant authorities, that advice may not protect your company or its directors and managers if it is inaccurate. An environmental specialist that does not appreciate the conceptual and legal challenges of Part 8, will also not do you any favours,” says Cameron.
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