28 July 2006
Key Points:
The $11 billion Gorgon LNG project still has the strong support of the Commonwealth and State Governments despite the Western Australian Environmental Protection Agency's controversial recommendation that the project should not proceed. However, the project faces further hurdles, which highlight the complexities of Western Australia's environmental approvals system.
The Gorgon Joint Venturers have proposed locating the Gorgon Liquefied Natural Gas development on Barrow Island, a Class 'A' nature reserve. However, the future of the $11 billion project is in question after the Western Australian Environmental Protection Authority ("EPA") recently recommended that the Gorgon project should not be permitted to proceed.
The EPA's recommendation has attracted criticism from industry groups who claim it could deter investors from establishing projects in Western Australia. The Premier, Alan Carpenter, has publicly asserted that the Government will work with the Gorgon Joint Venturers to come to a satisfactory resolution. The Federal Environment Minister, Ian Campbell, has also made public statements in support of the project. However, the emphatic nature of the EPA's recommendation raises the spectre of a legal challenge to any decision to approve the project.
There have been previous occasions on which the EPA has recommended against a proposal and the State Government has approved it, but none involving sites of environmental sensitivity comparable to Barrow Island.
Barrow Island
Barrow Island is a Class 'A' nature reserve, meaning that any development on the island needs to be approved by an Act of the Western Australian Parliament (the Barrow Island Act was enacted in 2003).
The waters around the island are part of the Montebello/Barrow Island Marine Conservation Reserves and in certain areas drilling for petroleum is prohibited. Barrow island and its surrounding waters are habitat for a number of species that are protected under the State Wildlife Conservation Act 1950 (WA) and listed as threatened under the Federal Environmental Protection and Biodiversity Conservation Act 1999 (Cth) ("EPBC Act"). In addition, a particular species, the rare Flatback turtle, is the subject of an international Memorandum of Understanding to which Australia is a signatory. The island and its surrounding waters are also on the Register of National Estate under the Australian Heritage Council Act 2003 (Cth).
The EPA's report and recommendations
While it is unusual for the EPA to recommend against the approval of a project, it is not unprecedented. What was unprecedented about the EPA's report is that it also stated that "if, however, the Government was to decide that the proposal may proceed for other than environmental reasons, a set of strict conditions and governance arrangements would be required" and included a draft framework for environmental conditions.
The EPA's recommendation raises the spectre of judicial review of a decision to approve the project.
The scope of the Ministers' decision
In Western Australia, the Environmental Protection Act 1986 (WA) ("EP Act") requires that, in order to approve a project for implementation, the Minister for the Environment, after receiving the EPA's report, must confer with any other Ministers who are likely to be concerned in the outcome of the proposal (such as the Minister for State Development (the Premier), the Minister for Energy, and the Minister for Planning and Infrastructure) and together they must agree on whether the proposal should be approved under what conditions. If the Ministers cannot agree, the decision is referred to the Governor (effectively the Cabinet).
The object of the EP Act is "the protection of the environment", having regard to certain principles, including the precautionary principle, the principle of intergenerational equity, and the principle of the conservation of biological diversity and ecological integrity. Given that the EPA has found that the Gorgon project is environmentally unacceptable, a decision to approve the Project raises the question whether such a decision is within the scope of the Ministers' powers under the Act.
The requirement that the Minister for the Environment consult with other Ministers suggests that non-environmental factors may be taken into account. As the decision may end up with the Governor, this also suggests that other factors may be considered. However, unlike the EPBC Act, the Ministers (or Governor) are not expressly empowered to look at economic and social factors. While the courts have clearly established that the EPA can only consider environmental factors when assessing a proposal, they have not yet considered the scope of the Ministers' decision. This is new territory.
Appeals against the recommendations
A second ambiguity arises from the appeals process itself. The EP Act allows for appeals to the Minister for the Environment against the EPA's recommendations. Eleven appeals were lodged.
On a strict reading of the EP Act, the Minister's power to respond to appeals is problematic. He can dismiss an appeal. He can remit the proposal to the EPA for further consideration. However, he is not granted a clear power to accept an appeal (and reject the EPA's recommendations). Instead, he is granted the power to "vary" the EPA's recommendations by "changing" the implementation conditions.
Although the EPA has provided a draft framework of conditions that may be applied should the project go ahead, it has implied that even these conditions will not be sufficient to render the Gorgon project environmentally acceptable. Strictly speaking, it has not provided any implementation conditions to be "varied". This ambiguity may present further hurdles to the Joint Venturers.
Conclusion
The unorthodox approach taken by the EPA in this instance, coupled with the ambiguities in the EP Act, has created a great deal of complexity both for the proponents and for the Government in approving the project. We await with interest to see how this complexity will be resolved.
For further information, please contact Tim Macknay and Brad Wylynko.
