Questions and answers - risk-based licensing
1. Why has the EPA introduced a risk-based licensing system?
A review of the Protection of the Environment Operations Act 1997 undertaken by the EPA found that, while the Act generally continues to meet its objectives, improvements were needed to the licensing framework.
The risk-based licensing system:
- ensures that environment protection licensees receive an appropriate level of regulation based on the level of risk they pose
- provides stronger incentives for licensees to improve compliance and environmental performance
- ensures that the EPA is well equipped to regulate high risk pollution facilities
- ensures that the community is provided with increased information about industry environmental performance and EPA regulatory decisions.
2. Which licences are subject to the risk-based licensing system?
All licences except those issued for the transport of trackable waste are subject to the risk-based licensing system. This is because the risk-based licensing system focuses on premises-based activities.
3. How are the risk assessments being undertaken?
The EPA undertakes a risk assessment for each licensed facility in consultation with the licence holder. The assessment is undertaken using the EPA's risk assessment tool, which assesses site-specific risks, identifies any environmental issues that a licence holder needs to address and determines where the EPA needs to focus its regulatory attention.
4. Are the outcomes of the risk assessments publicly available?
The overall environmental risk level for each licensed premises (level 1, 2 or 3) are made available on the EPA's Public Register as they are determined. This provides the community with more information about the environmental risk and performance of their industrial neighbours. It also provides transparency and insight into the EPA's regulatory decision-making process.
The overall environmental risk level for a licence uses information provided to the EPA in the licence annual return. Annual returns are required to be submitted to the EPA within 60 days of the licence anniversary date.
5. How often will the EPA undertake risk assessments for each licence?
Regulatory priorities will usually be reviewed by the EPA every five years, though may be undertaken more regularly as a result of:
- non-compliances reported in annual returns
- completion of pollution reduction programs (PRPs)
- an environmental incident
- a change in operations at the licensed premises.
Environmental management categories will be assessed every 12 months, in conjunction with the receipt of the annual return, and be based on a licensee's regulatory performance at their premises over a three-year period. Any annual changes in environmental management category associated with the licensed activity could result in a change in the overall environmental licence risk level.
6. Are licensees able to request a review of allocated risk levels?
Licensees are able to request that the EPA review the risk level allocated to their activities. The EPA has developed internal review guidelines (PDF 114KB) to assist licensee request a review. Licensees requesting a review of licence risk levels should contact the local EPA regional office to discuss the matter. Licensees must fill out an application form (DOC 103KB) to formally request a review of Protection of the Environment Operations Act 1997 (POEO Act) licence risk levels.
Note that the existing external review mechanisms (judicial review and merit appeals processes) regarding the EPA's environment protection licensing decisions are also available to licensees.
7. How does the EPA use the results of the risk assessments?
There are three components to the risk assessment process. The first two components consider the day-to-day operations at the site, assessing the environmental media relevant to the premises (air, odour, water, and noise emissions) as well as the pollutant incident risk at the premises. Each environmental media together with the pollutant incident risk are categorised with a High, Moderate or Low priority to assist the EPA focus on high environmental risks. For more detail, refer to the Risk assessment tool.
The third component of the risk assessment determines the licensees' environmental management category. This component considers the licensee's history of compliance at the licensed premises, together with any environmental management systems in place and environmental improvements undertaken by the licensee. An environmental management category A, B, C, D or E will be allocated to licensees for each licence. This category is also be used to calculate the licence administrative fee. For more detail, refer to the Environmental Management Calculation Protocol.
Based on the results from the environmental risk assessment and environmental management category, licensees are allocated an overall environmental risk level for the premises. The risk level guides the EPA's level of regulatory effort for that premises - the higher the risk level, the higher the level of regulatory oversight. For example, a higher risk level may result in more intensive monitoring and reporting obligations.
This ensures that the EPA targets its regulatory effort on those premises that pose the highest risk to the environment.
8. How does the EPA calculate the environmental management category?
In calculating the environmental management category, the EPA takes into account a licensee's regulatory performance at a licenced premises and its environmental systems and practices over a three-year period.
The EPA takes into account:
- a licensee's compliance history and regulatory actions undertaken by the EPA in response to any incidents and non-compliances
- management systems and practices the licensee has in place to control and mitigate environmental risks
- environmental improvement programs initiated by the licensee.
This determines the licensee's environmental management category (A, B, C, D or E), which forms part of calculating licence administrative fees, as well as influencing the risk level for the licence.
The Environmental Management Calculation Protocol sets out the matters and methods the EPA uses to determine a licensee's environmental management category.
9. How often is the environmental management category reassessed?
The environmental management category is assessed annually.
10. How is the method of calculating licence administrative fees affected by risk-based licensing?
The Protection of the Environment Operations (General) Regulation 2009 prescribes administrative fees for holders of environment protection licences. The method of calculating licence administrative fees incorporates the environmental management category determined for each licence.
11. Why has the EPA changed the way licence administrative fees are calculated?
The incorporation of a licensee's environmental performance and their licence administrative fees provides greater incentives for licensees to improve compliance and environmental performance.
The risk-based licensing system acknowledges the positive practices that licensees have put in place to make environmental improvements, such as environmental management systems, that reduce the likelihood of an environmental incident or non-compliance from occurring. The system incorporates fee reductions for good environmental performers.
12. What incentives are there for licensees to improve their environmental performance?
Lower risk licensees are subject to less regulatory oversight and good environmental performers are subject to lower licence fees. This acts as an incentive for high risk and poor performing licensees to improve their environmental performance.
Some premises will always have inherent risks, due to the nature of activities undertaken. However, if licensees can demonstrate that appropriate controls are in place and that they have a good compliance history, there is an opportunity for red tape reductions, such as less onerous conditions and a reduction in fees.
13. Are licensees recognised for initiating environment improvement measures?
Recognition is given to those licensees who have environmental management systems and practices in place. In addition, recognition is also provided to licensees who can demonstrate environmental improvements using environmental improvement programs.
Refer to the Environmental Management Calculation Protocol for details regarding environmental improvement measures and how they are recognised in the system.
14. Do all licensed premises in NSW receive regulatory oversight regardless of the risks they pose?
All licenced activities continue to be subject to regulatory oversight. There are approximately 2500 environment protection licences in NSW covering a range of activities from agricultural activities such as piggeries through to heavy industry such as oil refineries, chemical manufacture and steel production.
The risk-based framework allows the EPA to prioritise regulatory effort towards those premises that pose the highest risk. This ensures that regulatory effort is applied to premises that pose the greatest risk to human health and the environment. This does not mean lower risk premises do not receive regulatory attention, rather they are subject to licence conditions aimed at preventing environmental impact. The requirements are less onerous than those for higher risk licensees.
Lower risk licensees are stillrequired to have pollution incident response management plans in place and submit annual statements of compliance. The EPA will continue to review all licences at least once every five years and will respond to any identified non-compliances using its compliance and enforcement tools. Licence risk levels for individual licences will be regularly reviewed to ensure that these remain appropriate.
15. How are risks determined for large and complex activities?
Premises that cover large geographical areas such as forestry operations and sites that have linear infrastructure such as large sewage treatment plants, railway systems and road construction may have multiple emission sources using a variety of pollution-control techniques with varying efficiencies. These activities may be determined as higher risk due to the type and complexity of discharges regardless of the controls in place. For more information on how the EPA assesses these activities see Section 4 of the risk assessment tool guidance.
16. Are similar frameworks used by other environmental regulators?
The New South Wales Government is committed to better regulation principles to reduce red-tape and establishing program priorities using a risk-based approach to target compliance efforts towards those who pose the highest risk (Better Regulation Office - Guide to Better Regulation). Through the better regulation principles, the government is also committed to harmonising regulatory frameworks with other jurisdictions.
While the NSW EPA has introduced risk-based licensing, a number of other Australian environmental regulators have also implemented or are in the process of developing similar risk-based approaches. The United Kingdom Environment Agency has had a similar system in place for many years.
17. How does the risk-based licensing system relate to load-based licensing?
The risk-based licensing system is separate from the load-based licensing (LBL) scheme. The EPA commenced a comprehensive review of the load-based licensing (LBL) in 2014 to examine opportunities to improve its efficiency and effectiveness.
For more information on the review of load based licensing scheme go to the Load-based licensing page.
18. How does the risk-based licensing system affect the application fee required to accompany applications for a new licence?
The application fee for new licensees does not consider the environmental management category. The environmental management category is considered in the calculation of the administrative fees after the first licence fee period.
19. What materials are available to better understand the risk-based licensing system?
The EPA has developed guidance materials to assist licensees to be involved in the risk-based licensing system process.
Risk assessment tool and user guide
Refer to the Risk assessment tool for detailed information on the risk-based licensing assessment. A risk assessment tool user guide (PDF 1.3MB) has been developed to assist with the risk assessment process. Users will need to refer to the user guide when using the risk assessment tool.
The EPA has also developed a series of regulatory actions operating procedures to ensure that licensees are aware of the things the EPA considers when choosing an appropriate regulatory response to non-compliance.
20. When will the risk-based licensing system be reviewed?
The EPA will review the risk-based licensing system three years after implementation. The EPA will review the system and results of risk assessments to assess whether any adjustments need to be made.
Page last updated: 01 July 2016