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Potentially Contaminated Land

Purchasing, developing or selling potentially contaminated land? Find out what the pitfalls are and how to avoid them so that your projects run smoothly and profitably time after time. Nine out of ten times land contamination is not a serious issue, however, are you going to take the chance that it isn’t? The unforeseen risks can potentially bankrupt your business.

Keep on reading to discover more about:

• What potentially contaminated land is and the associated risks to your business;
• What steps you need to take to mitigate potential risk and the entities you need to work with; and
• What the implications are from a cost and management perspective.

Don’t have time to read up on it now? Download our FREE eBook instead!!

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What is Potentially Contaminated Land?

The Victorian Planning Provisions (VPPs) which form part of Planning Schemes under the Planning and Environment Act 1987 defines the term ‘potentially contaminated land’ as ‘land upon which certain past uses (such as mining and industrial) and activities (such as chemical, waste or fuel storage) have occurred. It also includes any activity or event that occurred off the land that may have caused contamination on the land’.

The Environment Protection Act 2017 (EP Act) defines land as ‘contaminated’ if ‘waste or a chemical substance is present on or under the surface of the land at a concentration above background levels and creates a risk of harm to human health or the environment (including contamination to groundwater)’. 

For a substance to exceed the naturally occurring concentrations there must have, at some point in the past, been a ‘pollution’ event or events that explains the presence of the elevated concentrations. The EP Act defines pollution as an ‘emission, discharge, deposit, disturbance or escape of…a solid, liquid or gas (or combination thereof)’.

The definition of ‘contaminated land’ under the EP Act is much broader than just identifying past use, requiring consideration of other environmental aspects and potential impacts to human health and the environment.

The key point in the definition of ‘contaminated’ or ‘contamination’ is the risk of harm. If this doesn’t exist, the definition is not complete. Note that the expression risk of harm is akin to the term ‘hazard’ in that it does not confirm the significance of the risk – only that there is a chance or potential for harm.

Therefore, where land has been defined as ‘potentially contaminated’ under the planning scheme approach, additional investigations would likely be required before a planning decision is made to satisfy the requirements of the EP Act. In practice, a level of analysis, undertaken as part of an environmental site assessment (ESA) for example, will be required to determine the significance of the risk.

What Past Uses or Activities Cause Contamination?

Download our eBook for a list of land uses with high potential for contamination with associated hazardous substances (known as Contaminants of Potential Concern or CoPC) that might be used currently or in the past.

The exact nature of potential contaminants associated with a particular site is site specific. Using this list as a guide, you can think about, or may already know, whether one or more of these activities may have been undertaken on the land or adjacent to the land you own.

You can find out about the potential for contamination on your land by researching its past use via information sources such as:

  • Victoria Unearthed website.
  • Landata aerial photos
  • Sands and McDougall business directories – 1860-1974 from State Library of Victoria.
  • Environment Protection Authority Victoria (EPA) Priority Sites Register – a listing of sites for which EPA has issued remedial notices relating to land and groundwater contamination.

Signs of Contamination

As well as understanding which activities and historical land uses can cause land to become contaminated, you should also look out for certain features or signs that indicate potential contamination. For example, this could include infrastructure on or around the land, unusual odours, or other signs of contamination (download our eBook for more detail).

Relevance to the Development Process

Within the planning system, change of use and redevelopment of land are the primary triggers to consider the potential for contamination and mitigate any risks posed to human health, the environment or amenity. There are various provisions within the planning system that requires a responsible authority, i.e. Council, to take into account any significant effects which it considers the planning proposal might have on the environment or vise versa.

The main scenarios under which a developer will encounter the issue of potentially contaminated land include:

Planning Scheme Amendment

Potentially contaminated land has to be considered in the preparation of Planning Scheme Amendments (PSA) – whether led by a responsible authority or other applicant / proponent.

Subdivision

A planning permit is required to subdivide land and an application for a subdivision will be assessed under the relevant provisions of the planning scheme.

As part of the assessment of the planning proposal (and prior to making a decision), a responsible authority will use a variety of information sources to identify whether land is potentially contaminated.

If divesting a site (once a planning permit has been granted for example), vendors are legally required to make any potentially contaminated land site condition information available to prospective purchasers.

Property Due Diligence

Before purchasing land, it is recommended that a purchaser should undertake their own investigations to consider whether past activities, including the use of adjacent land, may have caused contamination at the site and whether this may prevent you from doing certain things to or on the land in the future.

Prior to starting this process, legal advice should be obtained to decide whether it should be undertaken before an offer is made to purchase a property or after an agreement for sale is reached. There are pros and cons to each approach.

Property Leasing

It is important to understand a property’s contamination status prior to the commencement of a lease agreement (as a lessee or lessor) so that an appropriate risk allocation may be achieved and the associated liabilities are clearly established.

Types of assessments associated with a lease agreement include:

  • A baseline contamination investigation prior to the commencement of the lease.
  • A contamination investigation at lease termination, or lease renewal, to compare the site condition against the baseline investigation.

Investigations to inform lease arrangements may range from a visual inspection to a DSI including sampling and analysis of soil and groundwater samples.

Environmental Audit System

Planning proposals involving a sensitive use on potentially contaminated land, require a responsible authority to satisfy itself that the land is suitable for that use via the environmental audit system.

What is a Sensitive Use?

MD 1 defines a sensitive use as ‘a residential use, child care centre, kindergarten, pre-school centre, primary school, even if ancillary to another use’.
The audit system requirement can be triggered by multiple planning provisions including Ministerial Direction No. 1, the Environmental Audit Overlay (EAO) or Clause 13.04-1S of the VPP.

The environmental audit system is legislated by the EP Act and provides for the appointment of independent technical experts, known as ‘environmental auditors’, by the EPA, who are then engaged by the planning proposal applicant (usually the site owner or sometimes by a purchaser) to undertake one or more of the following (amongst other prescribed functions outlined in the EP Act):

  • Preliminary risk screen assessment (PRSA) – an initial desktop-based screening assessment (sometimes with limited soil sampling) to look for possible land contamination. PRSAs relate to a site’s existing or proposed future use. They don’t replace environmental audits, they work out whether there’s a need for an environmental audit and recommend the scope for the environmental audit if it’s required.
  • Environmental audit – a detailed study to assess the nature and extent of the risk of harm to human health or the environment and the suitability of a site for the proposed use.

The decision whether to undertake a PRSA or proceed directly to audit depends on the potential for contamination. A PRSA is generally recommended for low to medium risk sites or where the planning proposal is relatively minor involving modifications to an existing use rather than a change in use.

Proceeding directly to environmental audit for high contamination risk sites (where a new sensitive use is proposed) is generally recommended as there is reasonable certainty an audit will be required and this approach will likely provide the most efficient (and cost-effective) outcome.

An environmental consultant (known as the assessor) maybe involved in the PRSA process through preparing a PSI report that is considered by the auditor in the PRSA. They will definitely be involved in the environmental audit process for the same reason. In effect, the applicant will have to choose and engage two sets of consultant, i.e. the assessor and an auditor. Planning proposal applicants should note here that the environmental audit process is expensive and time consuming (varying from several months to potentially years depending on the degree, extent and type of contamination).

Both a PRSA and environmental audit result in the issue of a formal statement and accompanying report which will be provided to the party that requested the audit, the responsible authority, as well as made publicly available by the EPA on their website.

An environmental audit statement will outline any risks relating to the site and recommendations to manage the risks. The statement and report may be used by the responsible authority to help guide the decision-making process for planning proposals. Any environmental audit conditions / recommendations will be translated into the requirements of a planning permit / approval.

Environmental assessment (including environmental audit if required) is usually undertaken as part of the application process prior to decision. However, an alternative approach is to make the requirement for an environmental audit a condition of a permit as long the responsible authority is satisfied that contamination will not preclude the proposed use.

Generally, development works are not allowed to commence before the completion of an environmental audit (unless a permit condition specifically allows for it, i.e. for predevelopment contamination clean-up (known as remediation) works).

There is also an obligation on a person in management or control of a site for which a PRSA or environmental audit statement has been issued, that they must provide a copy of the statement to any person who’s proposing to become the person in management or control of the site (for example, a potential purchaser).

Further information on the environmental audit system can be found here on the EPA website. The EPA maintains a list of appointed auditors on their website to help with selection of an auditor.

Non-sensitive use

For permit applications relating to land that has been identified as potentially contaminated, the responsible authority must seek appropriate environmental assessment. For uses other than sensitive, i.e. retail or office, industry or warehouse, open space, agriculture, a PSI is generally recommended for sites with high potential for contamination to inform the need for further action, which may include an environmental audit or other alternative assessment / management measure.

Implications for Land Developers

Contaminated land exists in most urbanised areas in the world. Victoria is no exception, particularly in suburbs on or near former industrial or manufacturing sites. Such areas can, unfortunately, be highly contaminated as a result of past activities. In fact, according to CRC CARE, a leading contamination assessment national body, over 160,000 sites nationwide are contaminated due to their industrial background.

Identifying contamination is important because it can cause harm to human health and the environment. Where land is contaminated, the local environment, including the soil, indoor or outdoor air, surface water or groundwater, may be unsafe for site occupants. Immediate and long-term health effects may occur where people are exposed to unacceptable levels of contamination. It can also limit land use potential or increase costs for developers and responsible authorities in terms of investigation and remediation.

The greatest risk to developers in respect to potentially contaminated land is the unforeseen risk. Land may not appear contaminated at the time of purchase for example but is later discovered leading to potentially major implications. Contamination can also potentially impact other nearby sites, meaning that even areas with no prior industrial use could be unfit for development.

A summary of the main risks and liabilities for land developers is provided below. Note that this is indicative only and not meant to be exhaustive.

Business Risks

It is important to consider any business risks that may arise due to land contamination, including commercial, financial or reputational risks. By characterising environmental or potentially contaminated land risks, liabilities can be factored into the development strategy, or inform negotiations for acquisition or divestment.

Commercial

Responsibility for land contamination is generally assigned according to the ‘polluter pays’ principle – this means that the original polluter is liable for any remediation and associated costs caused on and off the source site, regardless of when it was caused. However, contamination is often historical in nature, and the original polluter may no longer exist or be able to be identified. In these cases liability can pass to the current owner.

Investigating and cleaning up contaminated land can be expensive. Purchasers of property should be aware that they will ordinarily be the initial recipient of any EPA Direction, Notice or Order regarding clean-up, regardless of whether they are, in fact, the polluter. In addition, it is the responsibility of the owner to demonstrate that another party was responsible for the contamination and to bring an action against the polluter for compensation after the clean-up order has been complied with.

If you own and decide to sell land where there may be some known contamination, you should specifically disclose this in the contract of sale, including any remediation work that has been carried out together with notices received from any authorities.The purchaser is then fully aware of the condition of the land, what has been done with it in the past and what is required to be done in the future. Should the vendor fail to do that, the purchaser could revoke the contract or claim damages, including remediation costs. It is also an offence to withhold this information and penalties may apply.

Vendors should also be cautious about selling contaminated land without remediating it, as transferring land will not automatically transfer responsibility for waste or contamination left on or in the sold land to the new owner. In order to mitigate this risk, vendors could seek appropriate indemnities in sale contracts, depending on the commercial arrangement between the parties regarding allocation of risk.

Furthermore, in the event that a dispute arises and gets to trial, legal fees can quickly amass to potentially millions of dollars in a worse-case scenario.

Financial

Banks or other lenders may be less willing to lend money to purchasers and property developers for the purposes of purchasing or redeveloping land that is potentially contaminated or classified as contaminated. The property could have diminished resale value. In extreme cases, remediation costs might make a property useless or could result in a financial liability greater than the original property cost or current market value. A lender will make sure they implement a number of safeguards to minimize their risk exposure, which will include carrying out their own due diligence process and getting the borrower to undertake appropriate site assessment prior to purchase.

Contaminated land can detrimentally affect planning and construction schedules leading to significant cost blowouts if not managed correctly. Ideally, site assessment should always be carried out at an early stage during the project lifecycle, otherwise problems can often occur. For example, potential contamination sources may be missed and only discovered later, i.e. during construction. Alternatively, the opportunity to minimise remediation costs can be missed.

For developers, this means that due diligence is paramount. Proper due diligence should ensure that developers understand what an environmental assessment / audit will entail in terms of costs and time spent. If you’ve gathered ample information beforehand, the process should be no cause for concern.

Reputation

Oversights concerning contamination, environmental assessment, or remediation can create considerable complications moving forward. Should you let some of those matters go unresolved or poorly executed, your reputation could suffer a significant blow. As a result, the EPA and responsible authorities might become much less receptive to your applications. Additionally, future contamination inspections for your development land could be considerably more stringent.

Compliance with Legislation

Planning System

Where a responsible authority becomes aware that an occupier is failing to comply with requirements set out in the planning schemes or permit, enforcement procedures are available including planning infringement notices, enforcement orders or prosecution through the magistrates court.

The EPA is responsible for enforcing orders or notices, including those that incorporate environmental audit statement recommendations. Where there is a failure to address matters, this may also constitute a breach of the duty to manage by the person in management or control of the land (see below).

Further information on enforcement in the planning system can be found here.

Workplace Health & Safety

It is the developer’s responsibility to ensure that the development is safe and suitable for its intended use in accordance with the Building Act 1993 and associated regulations. In addition, under the Work Health and  Safety Act 2011, developers also need to consider the welfare of construction workers and contractors operating on potentially contaminated land sites and the management of potentially contaminated waste spoil.

Further information (including a checklist) regarding safe work practices on contaminated land sites can be found in the WorkSafe Victoria Industry Standard.

Environmental Duties

The new EP Act has introduced new obligations for persons that manage or are in control of land that is potentially contaminated relating to managing the potential risks that contamination poses to human health and the environment.

Persons in management or control of land include those who hold a legal interest in the land, such as:

  • an owner, occupier or lessee.
  • a committee of management (or similar).

It may also include persons who hold right of way, use, access or entry onto land (when exercising those rights).

As well as the General Environmental Duty (GED) which applies to all Victorians, the contaminated land duties are:

  • The duty to manage – known contamination will need to be managed; and
  • The duty to notify – to report contamination promptly to the EPA if it has reached certain levels (including groundwater).

If there is the potential for contamination to be present on the land you manage or have control of, this does not automatically mean you are required to undertake a detailed site investigation (DSI) to satisfy the duty to manage. Action under the duty to manage is only expected when you know or should reasonably be expected to know that the land you control or manage is potentially contaminated. A good first step would be to undertake a PSI (possible with some soil sampling) to decide if there is enough evidence to confirm the presence of contamination.

Once a PSI (and if necessary a DSI) has been conducted and the assessment confirms that contamination is present, the person in management or control of the contaminated land must take action to eliminate or minimise the risk of harm to human health and the environment so far as reasonably practicable. This is limited to consideration of the current land use and affected offsite land.

Under the duty to manage, persons in management or control of land must provide information to others who may be affected by the contamination, such as potential purchasers and tenants, or anyone who is likely to become a person in management or control of the land. Failure to disclose this information is an offence and a penalty / prosecution may apply.

Further information is provided in the EPA guideline publication Potentially Contaminated Land: A guide for Business.

Developers have other duties (including the duty to respond to harm, duty to notify of incidents and duties relating to waste) under the EP Act not to pollute land, water and air during construction activities and not to cause or permit an environmental hazard. This means appropriate handling of industrial waste and preventing run-off, or any other uncontrolled movement of contaminated soil or water, from a construction site. Further information is provided in the EPA guideline publication Civil construction, Building and Demolition Guide.

Can I Develop Contaminated Land?

The short answer is yes, you can develop land even if it is contaminated, although the level of investigation (and potentially remediation) will be site-specific, dependent on the type and extent of any contamination. Contaminated land can often be safely used and developed following appropriate remediation, provided any necessary controls to manage residual contamination are implemented.

The essential thing is to take a precautionary approach and understand the condition of the land (and all the possible cost and scheduling implications) at an early stage in the project lifecycle. The results can then be used in a cost benefit analysis to plan the way forward in conjunction with early liaison with other stakeholders, i.e. responsible authorities, environmental auditors, the EPA, etc.

In the context of potential contamination risk, key considerations for redevelopment of a site include:

What is the nature of the development?

When undertaking development or construction work on potentially contaminated land, it is important to understand how the development will be designed, constructed and used so that any contamination can be appropriately planned for and managed over the short term and the longer term.

What is known about the contamination status of the land?

A review of existing information and obtaining additional supplementary data to fill information gaps, will assist a developer to understand the contamination status of a proposed development site and enable them to determine if the proposed land use is appropriate and that users of the site will not be exposed to any unacceptable risks arising from contamination during development or into the future.

The main tool to feed into the decision-making procedure is the environmental site assessment process which is generally undertaken iteratively (or phased). As the evidence for contamination increases and becomes more suggestive that a risk of harm exists, the degree of required site assessment will become more extensive (and vise versa).

If contamination is present, will it change the planned development?

If the site is not suitable for its proposed use in its current state, then the developer may choose to select another site (if possible) or choose to implement remedial or contamination management actions to make the site suitable for its intended use. If the profit potential is enough to justify assessment and remediation costs, developing on the land could be worth the investment.

Assessing Potentially Contaminated Land

Site Assessment Process

Since 2015, all states have adopted a standardised, prescribed approach to the assessment of potentially contaminated land, known as the National Environment Protection (Assessment of site Contamination) Measure (ASC NEPM).

The purpose of the ASC NEPM is to establish a nationally consistent approach for the assessment of site contamination; to ensure sound environmental management practices by the community, including regulators, site assessors, site contamination consultants, environmental auditors, landowners, developers and industry parties.

Depending on the proposed use and the results of initial investigations, the assessment of potentially contaminated land may involve both preliminary and detailed site investigations.

Many site assessments proceed in multiple stages or phases due to the complexity of the site and the discovery of unexpected contamination, or as funds become available. A phased investigation allows the results of each stage to be scrutinised and used to devise the next phase of work (or not as the case may be). However, in some cases, i.e. where time is an issue, the preliminary and detailed phases maybe combined into a single phase.

Developers are encouraged to submit the results of each phase to the responsible authority and other stakeholders (i.e. environmental auditor or EPA) at the earliest opportunity for peer review and approval. This may prevent avoidable delays and may indicate that a more comprehensive scope of work, i.e. full intrusive investigation and quantitative risk assessment, is not required, thus avoiding unnecessary works and costs.

The process to assess potentially contaminated land can be divided into two key steps (or phases), each step is summarised in the following sections. It is recommended that you contact an environmental consultant (such as Out-Task Environmental) for more detailed information.

Phase I – Preliminary Site Investigation (PSI)

A NEPM compliant PSI usually involves:

  1. establishing a site history to identify the characteristics of the site (such as the location and layout of the site, the building construction on the site, the geological setting, current and past activities at the site, current and past uses of the site, and heritage considerations); and
  2. inspecting the site; and
  3. interviewing representatives for the site.

Investigations are usually confined to areas where potentially contaminating activities have occurred and involve a site history-based sampling plan. The PSI should consider the possibility of all forms of potential contamination based on past land use. The PSI should be sufficient to identify whether contamination exists on the site. Contamination may not be completely delineated at this stage.

If a thorough PSI shows a history of non-contaminating activities and there is no other evidence or suspicion of contamination, further investigation is not required. Further advice may be sought from EPA as a referral authority.

Phase II – Detailed Site Investigation (DSI)

A detailed investigation is required when the results of PSI are insufficient to enable site management strategies to be devised. Potential or actual contamination will need further evaluation. Potential contamination may have been indicated by the presence of unexpected underground structures (e.g. underground fuel or chemical storage tanks) or by the presence of imported fill (e.g. ash, odorous material or various types of refuse) or staining of soil. Actual contamination (in either soil, soil vapour or groundwater) may have been detected in the form of contaminants which are not naturally occurring or as elements or compounds which are above background levels or exceed the applicable investigation or screening levels.

The DSI should identify the nature of the contamination and delineate its lateral and vertical extent to a sufficient degree that an appropriate level of risk assessment may be undertaken.

Costs and Scheduling

How Much Do Contamination Assessments Cost?

Costs for the investigation of potentially contaminated land will vary depending on the objectives of the assessment as well as the size, condition and nature of the site. Environmental consultants generally provide professional services according to a schedule of rates or lump sum (fixed fee) cost (or a combination of both).

The provision of a lump sum cost is generally only possible where the scope of work entails a PSI, or a tightly specified DSI as scopes of work are generally dictated by facts on ground as they arise which can be difficult to predict.

However, as a starting point, the average cost of a PSI would be around $5,000 (ex GST) – without soil sampling. Inclusive of soil sampling, one should realistically budget for a starting range of between $10,000 to $15,000 (ex GST) dependent on the number of samples collected and required laboratory analytical suite(s).

Be wary of any company that quotes significantly cheaper than that as the investigation could be compromised by the potential for cutting corners potentially leading to serious financial and litigation issues.

Costs increase significantly if a DSI is required as this can involve multiple iterations of fieldwork and associated reporting, i.e. sampling of soil, soil vapour and groundwater. Investigation costs can easily escalate to tens of thousands of dollars for low-level contamination (particularly if groundwater investigation is required) up to potentially hundreds of thousands for highly contaminated sites (exclusive of remediation).

The contamination assessment process is more expensive if the environmental audit system is triggered as the planning proposal applicant has to essentially pay for two sets of fees / costs, i.e. the investigation and the audit processes. Obviously, in these situations it is critical that the site assessor and auditor establish and maintain effective communication channels at an early stage in the project lifecycle so as to ensure smooth progression of the audit, thereby minimizing the potential for delays or rework (with the associated cost implications).

How Long Do Contamination Assessments Take?

Ideally site investigations / assessments should be performed at an early stage in the project lifecycle before any construction or demolition work is done, otherwise the retrospective investigation and management of any unforeseen contamination can have detrimental impacts to timelines and budgets – particularly for time critical tasks. Delays due to unforeseen contamination issues are expensive and include holding charges, down time, unused site facilities, builder variations, etc. Furthermore, if these areas are disturbed, there is a risk of the contamination being spread to otherwise clean areas on site, and this can significantly increase the overall site remediation costs.

Similar to cost, the timeframe to undertake an investigation of potentially contaminated land will vary depending on the objectives of the assessment as well as the size, condition and nature of the site. However, for a PSI for example, one should for allow for at least four to five weeks from start to provision of the deliverable.

For DSIs and environmental audits, adequate additional time needs to be allocated to undertake the required fieldwork, data processing / management, reporting and preparation of audit report. Depending on the scope and objectives, this can add a few weeks, months or even years to the project.

Value of Reputable Environmental Consultants

Even with the standardised approach to the environmental site assessment process, failure to comply with it, i.e. with a poorly designed or executed investigation, could lead to delays in a planning application (or even refusal), incur additional development costs or lead to catastrophic commercial or criminal litigation issues (see case study in our eBook for a worse-case scenario).

Reputable environmental consultants add value. They play an important advisory role in mitigating risk. Nine out of ten times, potentially contaminated land is not an issue or represents a low-level risk that can be managed for an acceptable cost; however, a consultant’s real value is helping clients avoid significant losses associated with unforeseen risk(s).

Therefore, it is important to make an informed choice of consultant. Site assessment should be conducted by professionals who have the relevant qualifications, competencies and experience. Click to download a checklist on what to look for when choosing an environmental consultant.

Finally, it is also essential for recipients of environmental assessment services to recognize that any assessment – even those conducted in accordance with recognised standards – have limitations. Not only should your consultant tell you what they can do, they also need to acknowledge what they can’t by not making false promises. Be wary of snake-oil sellers; they exist in every industry.

Purchasing, selling or developing potentially contaminated land?

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