Supreme Court judgment will significantly impact planning decisions for fossil fuel projects

Background

In September 2019, Surrey County Council (SCC) granted planning permission to Horse Hill Developments Ltd to expand an existing onshore oil well site enabling the extraction of oil over a period of 20 years. Pursuant to the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (the Regulations) (which implemented EU Directive 92/11/EU), before granting planning permission, SCC was required to carry out an environmental impact assessment (EIA) so that the environmental impact of the project was taken into account in its decision. An EIA should assess the “direct and indirect significant effects of a project” on the environment, including the climate. SCC restricted the scope of the EIA to the direct release of GHG emissions at the project site over the lifetime of the project and did not include an assessment of the impact of the scope 3 ‘downstream’ GHG emissions (being indirect emissions resulting from a project, such as the use of sold products). The claimant, Ms Finch, applied for judicial review of SCC’s decision on the grounds that its failure to take into account the downstream combustion emissions meant the decision was unlawful. 

Both the High Court and the Court of Appeal dismissed Ms Finch’s challenge. The High Court held that assessment of the combustion emissions was not within the legal scope of the Regulations and alternatively that whether to assess the downstream emissions was a matter of evaluative judgment for SCC, and SCC had a reasonable and lawful basis for excluding the combustion emissions from the EIA. The Court of Appeal upheld the judge’s decision on the basis of the alternative reasoning. Ms Finch appealed to the Supreme Court.

Decision

By a split three-to-two majority, the Supreme Court allowed the appeal. It held that the downstream GHG emissions were “effects of the project” within the meaning of the Regulations and therefore they should have been assessed as part of the EIA.  SCC’s failure to assess the effect on climate of the combustion of the oil produced from the proposed site meant that its decision to grant planning permission was unlawful.

The majority reasoned that the question of what are the “effects of a project” is a question of causation. The Court held that emissions that will occur on combustion of the oil produced are “indirect effects of the project” because, “on the agreed facts, the extraction of the oil is not just a necessary condition of burning it as fuel; it is also sufficient to bring about that result because it is agreed that extracting the oil from the ground guarantees that it will be refined and burnt as fuel.” 

The Supreme Court found that the reasons relied on by SCC for excluding the combustion emissions from consideration and assessing only direct emissions from within the site were flawed. The majority noted that the legislation does not impose a geographical limit on the scope of the environmental effects of a project which must be assessed in an EIA, and there is no justification for limiting the scope of the assessment to effects which are expected to occur at or near the project site. The Supreme Court emphasised that climate change is a global problem precisely because there is no correlation between where GHGs are released and where climate change is felt. This is why the relevance of GHG emissions caused by a project does not depend on where the combustion takes place. The Supreme Court also rejected the second reason relied on by SCC – that the GHG emissions were “outwith the control” of the site operators. “The combustion emissions are manifestly not outwith the control of the site operators. They are entirely within their control. If no oil is extracted, no combustion emissions will occur. Conversely, any extraction of oil by the site operators will in due course result in GHG emissions upon its inevitable combustion.”

In reaching its conclusion, the majority rejected the approach of the High Court judge that, as a matter of law, such combustion emissions were incapable of falling within the scope of the EIA. The judge reached this conclusion on the basis that the source of the GHG emissions would not be the oil as extracted from the ground but an end product which would be made in a separate facility from materials to be supplied from the project site. As discussed further below, the Supreme Court considered that the refining of crude oil does not break the causal connection between the extraction of the oil and its subsequent combustion. Further, a reasonable estimate can readily be made of the emissions that will occur upon its inevitable combustion. 

The Supreme Court also rejected the Court of Appeal’s approach that whether the combustion emissions were “indirect effects” of the project depended on an evaluative judgment by the competent authority as to whether, given the intermediate events that would take place before combustion, there was a “sufficient causal connection” between the extraction of the oil and its eventual combustion. The Supreme Court considered this to be, “a recipe for unpredictable, inconsistent and arbitrary decision-making” by different planning authorities.

Comments

1. This decision will impact planning applications for future oil wells and other fossil fuel projects in the UK by requiring planning authorities to assess scope 3 emissions when deciding whether to grant approval. 
2. The Supreme Court noted that the Regulations do not prevent a competent authority from giving consent for a project which will cause significant harm to the environment. However, this decision puts greater focus on the environmental impact of fossil fuel (and other potentially high-emitting) projects. Environmental assessments are a matter of public record and the Supreme Court emphasised that it is a key democratic function of the EIA to provide the public with information about the impact of the project on the environment, including climate change and the potential contribution to global warming of oil production. Planning authorities are likely to come under increasing public pressure in relation to the environmental impact of fossil fuel projects in light of this decision.
3. Developers will need to consider these issues at the scoping stage and seek to agree with the competent authority the scope of the downstream emissions that can be assessed and scope out those that cannot sensibly be assessed. As the assessment of emissions is done before the planning application is submitted, once the application is submitted, this requirement should not add significant extra time to the decision making process.   
4. What other types of projects may be impacted by this decision?  The High Court judge was concerned about the wider impact of accepting that combustion emissions are environmental effects of the extraction of oil. He drew a comparison with the production of other minerals and raw materials for use in industrial processes. He used the example of the production of steel and it being manufactured to produce parts for motor vehicles which would result in GHG emissions when the vehicles were eventually purchased and driven. If all the GHG emissions generated from these activities had to be assessed, the EIA process would be unduly onerous and unworkable. The Supreme Court rejected this concern; it considered that recognising combustion emissions are effects of producing crude oil did not open the floodgates in the way the judge feared.  The majority sought to make a distinction with oil. “Oil is a very different commodity from, say, iron or steel, which have many possible uses and can be incorporated into many different types of end product used for all sorts of different purposes. In the case of a facility to manufacture steel, it could reasonably be said that environmental effects of the use of products which the steel will be used to make are not effects of manufacturing the steel. That is because the manufacture of the steel is far from being sufficient to bring about those effects. Such effects will depend on innumerable decisions made “downstream” about how the steel is used and how products made from the steel are used. This indeterminacy regarding future use would also make it impossible to identify any such effects as “likely” or to make any meaningful assessment of them at the time of the decision whether to grant development consent for the construction and operation of the steel factory.” It was an agreed fact from the High Court judgment that “it is inevitable that oil produced from the site will be refined and, as an end product, will eventually undergo combustion, and that that combustion will produce GHG emissions.” Therefore, whilst applicants for new development will now have to consider downstream effects, in many cases there will either be no obvious causative link, or if there is, it may well be the case that no meaningful assessment can made of the effects. It would be sensible to scope out downstream effects at scoping stage, or indeed scope in any specific downstream effects and agree the parameters of the assessment with the planning authority.
5. In future, the EIA process is likely to be replaced by environmental outcome reports. Even when these replace EIAs, the assessment of downstream effects may well still be a requirement.