By King & Wood Mallesons

What environmental issues need to be considered?

Environmental considerations are important to proposed developments in Australia and to the continued operation of most projects and ventures. Australia has over 300 Acts (and numerous regulations under those Acts) relating to environmental matters, and more than 80 agencies or authorities at both Federal and State level, so it is a potentially complex area.

Land use and development

Land use is controlled by zoning, which groups land parcels together into broader areas with the aim of ensuring compatible land uses are located together (and incompatible land uses are separated). The most common land zonings are residential, commercial, light industrial, general industrial, rural and public purposes/special uses. Within each zone, land use on a particular land parcel is either permitted with consent, prohibited, exempted, or subject to a special assessment process. The current (and potential future) zoning of land is an important consideration for assessing whether a project has any legal risk.

Land development is usually controlled by local governments (there are over 500 across Australia), but larger developments may also be “called in” for decisions by State Ministers or planning bodies. Whether development is allowed or not is governed by a range of policy guidelines and objectives, but there is usually some discretion involved in the decision making process. Some areas are also subject to special legislative controls which aim to conserve natural, urban, historical and cultural resources by giving them special protected status.

The erection of buildings is primarily regulated by State laws relating to the building code which deals with issues such as fire safety and disabled access. Generally, a technical permit, certificate or licence will be required to be issued before the erection and then occupation of any building.

Environmental impact assessment

Both Federal and State legislation may require an environmental impact assessment of a development or project expansion which might have a significant impact on the environment. The level and complexity of assessment varies based on how significant the impact is likely to be, and can take anywhere from 3 months to 3 years. Common elements of assessments include assessing the potential impact against environmental objectives for the area, requiring detailed descriptions of the project and its impacts, plans for proposed environmental management, and public consultation.

Depending on the jurisdiction and nature of the impact assessment required, third party objectors to developments may gain standing to challenge environmental/development approvals granted to projects during and following assessment. This can cause delay and costs for developments, as well as prejudice its social licence to operate.

Pollution, contamination and environmental harm

All States and Territories in Australia have environmental legislation managing the pollution of air, land and water (surface, marine and groundwater). The nature of the controls and penalties for breach vary, but each jurisdiction regulates at least contamination, pollution and effluents, noise, dust, waste and dangerous goods. Most jurisdictions regulate these issues by requiring potentially polluting developments to obtain a site specific licence to construct and operate the site. The licence then generally sets limits for potential pollutants and requires monitoring and reporting of these limits. Some jurisdictions also regulate clearing of native vegetation and environmental harm generally.

The penalties for offences are significant and include fines and jail sentences, or both. Some offences can be defended on the basis that they occurred as a result of an accident or unforeseeable incident which duly diligent environmental management could not have prevented. However, other offences are “strict liability” offences, where the mere fact that the incident happened, even if it was caused by a contractor, leads to an offence. Directors and managers can also be held personally responsible.

Retrospective liability for the clean-up of contaminated land

Most of the clean-up provisions under State legislation for contaminated land or waters operate retrospectively as well as currently. Liability may potentially be imposed, regardless of fault, for conduct on sites and facilities which are currently occupied, and for past operations which may have been disposed of many years ago. Liability may exist even though at the relevant time the operations were lawful, state-of-the-art technology was used, harmful effects were not recognized and operations had the approval of environmental authorities.

Liability is generally imposed on the polluter, but most jurisdictions also authorise the service of clean-up notices on owners, occupiers and even notional owners (e.g. mortgagees in possession). For example, in circumstances where a polluter is unknown or cannot be located, a landowner may be held liable for historical contamination.


Given the potential for significant environmental liability, corporations in Australia are pursuing various risk management strategies and environmental management programs. Financiers in Australia are now paying particular attention to risks associated with environmental regulation when evaluating credit proposals.

Reporting on environmental regulation of an entity’s operations

If an entity’s operations are subject to any particular and significant environmental regulation, the annual directors’ report for a financial year must give details of the entity’s performance in relation to environmental regulation. Most jurisdictions also have laws requiring public disclosure of the environmental impacts of projects, for example, by way of environmental approvals requiring publication of annual air emission monitoring results.

Australian Government Department of the Environment and Energy:

KWM’s publication, Investing Down Under: Investing in Australian Real Estate – A Guide for Global Investors: