Wrong place at the wrong time: greenhouse gas emissions contribute to coal mine refusal

Introduction

Gloucester Resources Limited v Minister for Planning [2019] NSWLEC 7

In an Australian first, development consent for a new coal mine was refused by the Land and Environment Court of NSW (the Court) for reasons that included its material greenhouse gas (GHG) emissions and contribution to climate change.

This decision is the latest in a long line of climate change litigation cases, and part of an increasing trend in NSW and Victoria, and internationally, for proceedings to be brought opposing development on the basis of climate change. This represents an additional approval risk of which companies need to be aware and which they need to adequately address in the application and assessment process. The extent to which the Court addressed the issue of climate change on a global scale marks this as a landmark decision which significantly enhances the role of GHG emissions in the assessment of mining, as well as other major developments, in NSW.

On February 8, 2019, the Chief Judge of the Court ruled that the adverse social and environmental impacts of Gloucester Resources Limited’s (GRL) proposed open cut coal mine near Gloucester NSW, known as the Rocky Hill Coal Project, outweighed the public benefits of the Project. Among the multiple reasons given for refusing the application, was that the development would result in GHG emissions which would contribute to climate change.

The Court held that “the Project will have significant and unacceptable planning, visual and social impacts, which cannot be satisfactorily mitigated” and that the “Project should be refused for these reasons alone”.1 This finding of the Project’s “poor environmental and social performance” was held to be “the better reason for refusal.”2

The focus of this article, however, and much of the media surrounding the judgement, is the additional finding that “[t]he GHG emissions of the Project and their likely contribution to adverse impacts on the climate system, environment and people adds a further reason for refusal”.3

The Project was initially refused development consent in 2017 by the consent authority, the Planning Assessment Commission (PAC), for three reasons, including that it was not in the public interest. GRL appealed to the Court on the merits of that decision. A third party objector, Groundswell Gloucester Inc, joined the proceedings to defend the PAC’s decision. Groundswell Gloucester also made the additional contention that the Project was not in the public interest, being contrary to the principles of ecologically sustainable development (ESD) because the GHG emissions of the mine will contribute to climate change.4 The Court was required to make a new decision on the merits of the Project as though it were the standing in the shoes of the PAC as the consent authority.

Requirement to consider GHG emissions and climate change

In NSW, GHG emissions and climate change are mandatory considerations by a consent authority in assessing a major project.

The Environmental Planning and Assessment Act 1979 (NSW) requires a consent authority to consider the “public interest” in determining whether to grant development consent for a project.⁵ The public interest has previously been held to include a consideration of the principles of ESD.⁶ The principles of ESD, specifically, the principle of intergenerational equity and the precautionary principle, have previously been found to require consideration of the impact of a development on climate change.⁷

The consent authority is also required to consider relevant environmental planning instruments. In relation to mining projects, the State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (Mining SEPP) requires the consent authority to consider an assessment of GHG emissions having regard to any applicable State or national policies, programs or guidelines concerning GHG emissions.⁸ Further, one of the aims of the local environmental plan applying to the Gloucester local government area is to recognise the cumulative impacts of climate change.⁹

Power to consider downstream emissions from the Project

While the parties agreed that emissions directly released from the mining operations (known as scope 1) and some indirect emissions released from electricity used for mining operations (known as scope 2), should be considered, GRL disputed whether a component of indirect emissions, being those emissions released from the transport and use of the coal product elsewhere, and potentially in another country (downstream or scope 3 emissions), should be considered.

Preston CJ determined that consideration of the impacts of the environment and the public interest justify considering all emissions, including scope 3 emissions. Further, his Honour found that all of the direct and indirect GHG emissions of the Project would impact on the environment, and would contribute cumulatively to the global total GHG emissions.

Requirement to consider downstream emissions

The requirement for a consent authority to consider an assessment of GHG emissions, includes an assessment of the mining project’s downstream emissions.¹⁰ At issue is how much weight should be given to those considerations. Last year’s challenge to the validity of PAC’s decision to grant development consent to the Wilpinjong mine on the ground that it had failed to consider an assessment of GHG emissions with reference to the Paris Agreement and the NSW Government's targets, was unsuccessful. The Court held in that case that the consent authority had closely considered these matters.¹¹

As the challenge in the Rocky Hill case related to the merits of the decision, rather than legal validity, the Court could decide to what extent downstream emissions should be considered, and benefited from substantial scientific evidence tendered by Groundswell Gloucester. The evidence, accepted by Preston CJ, illustrated that all emissions contribute to climate change. The Court said that developed countries “such as Australia have a responsibility, including under the Climate Change Convention, the Kyoto Protocol and the Paris Agreement, to take the lead in taking mitigation measures to reduce GHG emissions”.¹² His Honour also noted that NSW had endorsed the Paris Agreement and set itself the goal of achieving net zero emissions by 2050.¹³

The Court agreed with Groundswell Gloucester’s submission that approval of the mine would counter the measures being undertaken to limit climate change.¹⁴ This argument was framed around the concept of the “carbon budget”, a commonly used approach to determine the limit of emissions which must be met in order to reduce global temperature rises to a particular temperature, such as the 2 degree limit set by the Paris Agreement. The Court agreed that further fossil fuel extraction from new sources, whether or not in Australia, will almost certainly exceed the relevant carbon budget set by the Paris Agreement.¹⁵

Preston CJ was critical of GRL’s claim that the emissions from the mine may be offset by other emission reductions, without actually identifying what those would be. The Court held that a consent authority cannot approve a development that is likely to have some identified environmental impact on the theoretical possibility that the environmental impact will be mitigated or offset by some unspecified and uncertain action at some unspecified and uncertain time in the future. Further, the consent authority’s role was not to speculate on a meaningful global emissions reduction strategy or consider the reduction of emissions from other sources unrelated to the development.

Q&A

How can a development be rejected purely on the basis that it would contribute to climate change? Doesn’t this set a precedent that no mines can now be approved?

The role of the consent authority is to balance the benefits and costs of the development. Where the public costs of a proposed project outweigh its public benefits, the proposed project is likely to be refused. It does not necessarily mean that a new fossil fuel development with less social and environmental impacts than the Rocky Hill Project would not be approved.

In the Rocky Hill case, climate change was only one part of the cost/benefit analysis carried out for GRL’s Project. The Court held that development consent would have been refused because of the Project’s significant and unacceptable planning, visual and social impacts, which could not be satisfactorily mitigated. The GHG emissions of the Project and their likely contribution to adverse impacts on the climate system, the environment, and people added a further reason for refusal.

The Rocky Hill case also demonstrates the significance of obtaining social licence for a major project — while a number of environmental factors (such as noise and dust) were not factors in their own right to justify refusal, they contributed to the finding of significant net social impacts which did justify refusal for consent to the Project.

Climate change and GHG emissions will now need to be taken more seriously, in addition to other environmental, social and economic impacts by proponents in their environmental assessment documents and consent authorities in their balancing exercise.

How can I ensure my development doesn’t get rejected on climate change grounds?

The Court was careful in its long judgement to set out the multiple reasons for refusing consent to the development application. The quote from Preston CJ that has been repeated in the media — “wrong place at the wrong time” — emphasises the broad scope of the reasons for the refusal. The Court held that the Rocky Hill coal mine would be in the wrong place because of the significant planning, amenity, visual and social impacts it would have on the scenic and cultural landscape and its proximity to people’s homes and farms. The mine was proposed at the wrong time because its GHG emissions would increase global total concentrations at the time when “a rapid and deep decrease in GHG emissions” is needed to meet climate targets.¹⁶

Despite this, the judgment does provide insight into approaches which can be taken to minimise the extent to which GHG emissions may be used as a reason to refuse consent for a development.

The “carbon budget” approach provides a mechanism by which the extent of GHG emissions can be characterised. The best strategy would be to incorporate emissions reduction strategies as part of the development itself to either partially reduce the GHG emissions, or completely reduce them, resulting in a carbon neutral project. This could be achieved by incorporating, or investing in, a “carbon sink” such as a forest which removes carbon dioxide from the atmosphere. If it can be shown that the net result of the development does not adversely impact the “carbon budget”, it is likely that a development would not be rejected.

It is also important to be conscious of the downstream emissions which may result from a proposed development.

My development will only have relatively small amounts of GHG emissions, do I still need to be concerned with offsets?

The fact that there are many contributors globally does not mean that the GHG emissions from an individual project should be ignored in the environmental assessment.¹⁷ Preston CJ ruled that the global problem of climate change needs to be addressed by multiple local actions to mitigate emissions by sources and remove GHGs by sinks.

Isn’t a coal mine producing coking coal for steel making in a different category to coal for combustion? Wouldn’t subsequent market demand be inevitably satisfied by another mine?

GRL considered the development vital to meeting the worldwide demand for steel because the coal from the Project would be used to create high quality steel rather than be used as thermal coal to generate electricity (which would generate even more GHG emissions). GRL emphasised that if the mine is rejected, the subsequent market demand for coal will inevitably be satisfied by another country granting approval to a comparable mine. In fact, if this occurred in a country with less regulations, GRL argued the impact of the refusal may increase GHG emissions. Further, unlike thermal coal for electricity generation, there are limited options to substitute coking coal. Groundswell Gloucester put forward evidence on the technological advancements being made to reduce the reliance on coal for the steel making process, and also on structural steel itself.

On the expert evidence before him, Preston CJ held that the GHG emissions of the Project could not be justified by the demand for coking coal in steel production. The demand could be met by supply from other existing operational or approved Australian mines which produce high quality coking coal and which operate to the highest environmental standards, rather than less efficient overseas mining operations (thus rejecting the market substitution argument). His Honour noted that “countries around the world are increasingly taking action to reduce [GHG] emissions in their countries, not only to meet their nationally determined contributions but also to reduce air pollution,” including key countries heavily reliant on coal, such as China, Japan, South Korea and India.¹⁸

Please contact a member of our team if you would like to discuss the implications of this decision on your project and the risks to your business posed by climate change litigation.