Victorian Auditor-General’s report
7 December 2011

Managing Contaminated Sites 
Audit summary
Contaminated sites are land, and in most instances groundwater, where chemical and metal concentrations exceed those specified in policies and regulations. 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 in 1997 estimated there were around 10 000 contaminated sites in Victoria.
Contamination in Victoria has generally been caused by the management practices of earlier generations when environmental regulations were less onerous on polluting activities. 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. 
Potentially contaminated and known contaminated sites are regulated through a framework that encompasses the Planning and Environment Act 1987, the Environment Protection Act 1970, and a range of complementary regulatory instruments. Around 80 per cent of situations involving contaminated sites are dealt with through the planning element of the framework, and the remaining 20 per cent are dealt with through the environment protection element.
This audit, first foreshadowed in our 2009–10 Annual Plan, and commenced in March 2011, examined how contaminated and potentially contaminated sites are managed, particularly where a ‘sensitive use’ of the land is involved. 
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
Number	Recommendation	Page	
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.	24	
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.	34	
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.	34	
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.	42	
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.