23 Aug 2013

James Price Point environmental approval knocked out - what does this mean for other proposals?

Monday's WA Supreme Court decision overturning the environmental approvals for one of Western Australia's most controversial development proposals – the Browse LNG Precinct at James Price Point north of Broome – raises fundamental questions about Western Australia's environmental assessment process and may mean:

  • proposals currently before the Environmental Protection Authority could be delayed (as the EPA assesses the implications of the decision);
  • a possible re-start for some proposals currently before the EPA (if they are found to suffer the same defect as the Browse approval);
  • recently approved proposals might need to be re-assessed (again, if they suffer the same defect); and
  • proponents will have to actively engage with the EPA to ensure proper conflict of interest procedures are maintained in any future assessments (including exploring the EPA's power to institute independent public inquiries).

In short, proponents will need to assess the validity of the EPA assessment of existing, current and future proposals as a result of The Wilderness Society of WA (Inc) v Minister for Environment [2013] WASC 307.

The James Price Point proposal

In order to assist development of the Browse Basin gas fields, the Government of Western Australia resolved to create an onshore LNG industrial processing precinct. Having narrowed down site selection to James Price Point, on 25 March 2008 the Minister for State Development referred the precinct, as a strategic proposal, to the EPA under the Environmental Protection Act 1986 (WA).

The precinct proposal assessment took four years. On 16 July 2012 the EPA Chairman presented the EPA's report to the Minister for Environment recommending approval. The Minister for Environment approved the precinct on 19 November 2012.

Woodside Energy Ltd, on behalf of the Browse Joint Venture, then sought and obtained EPA approval of the Browse LNG facility, as a derived proposal.

The Wilderness Society and local indigenous Law Boss, Richard Hunter, challenged the assessment and the authorisations.

The problem

The Environmental Protection Act requires EPA members who have a "direct or indirect pecuniary interest in a matter that is before a meeting of the Authority" to disclose that interest, and consequently they must not take part in consideration of or voting on that matter.

The Court (a single judge, the Chief Justice Wayne Martin) held that conflicts arose from the following indirect pecuniary interests:

  • shareholdings in Woodside by two members of the EPA (personally, by spouses and through self-managed superannuation funds); and
  • a third member being employed by a BP company (a subsidiary of BP Plc, which held, through another subsidiary, an interest in the Browse Joint Venture) and having shareholdings in BP Plc (through an employee share scheme).

Given the magnitude of the proposal, the court found that the market price of Woodside and BP Plc shares were likely to be affected by the outcome of the assessment.

The EPA's policy on conflicts of interest

When in September 2009 the potential conflict of interest was first brought to the EPA Chairman's attention, he determined that there was no conflict and that the members could "participate fully in the meeting". This was on the basis that the State, not Woodside, was the proponent of the precinct. He maintained this position until March 2012, when subsequently the Chairman alone took responsibility pursuant to an EPA delegation.

The Chief Justice noted that Woodside was involved in providing information to the EPA on the strategic assessment proposal; Woodside's parent company had a "very significant commercial interest in the approval of the Browse LNG Precinct Proposal"; the EPA was aware that Woodside was running a parallel process in developing its development proposal (for which status as a derived proposal would be sought); and Woodside was recognised as the foundation proponent for the development of the precinct.

After cataloguing an extensive list of EPA meetings in which the conflicted members participated in the strategic proposal's assessment, the Chief Justice held that:

  • the EPA's policies on conflicts "did not accord with the structure and operation" of the EP Act; and
  • the Chairman misconstrued the matter under consideration. Specifically, the Chairman was wrong in viewing Woodside's interests as not being part of the strategic assessment.

An invalid assessment

The Chief Justice concluded that there was no valid assessment of the proposal because "the assessment was undertaken following a process which was directed and controlled by a number of decisions purportedly taken by the EPA, but which were invalid because they were taken at meetings at which a number, often a majority, and on one significant occasion, all of those participating in the decision-making were disqualified from participation by reason of their pecuniary interest in the Proposal."

The Court found, "As a consequence of their pecuniary interest, the affected members of the EPA were not merely disentitled from participation on the relevant portions of the meetings of the EPA, pursuant to s 12 [of the EP Act] they were expressly prohibited from being present or participating in those portions of the meetings." Yet the EPA Chairman, "adopted, in substance, a report which had been prepared during the course of the assessment process which was vitiated by the participation of the disqualified members".

Consequently the EPA's assessment report was invalidated by "an inextricable connection between the actions of the Chairman [in making assessment findings] on 16 July 2012, and the purported actions of the EPA prior to 1 March 2012".

The report being invalid, both the Minister's authorisation of the strategic proposal and Woodside's derived proposal were also invalid.

The consequences of the James Price Point decision on other projects

This case puts a spot light on past, present and future assessment practices and raises questions about the certainty of decision-making in Western Australia.

For the Browse LNG Precinct (if this is to be further pursued by the State, given the Premier's recent statement apologising for the Precinct's failure), it's back to square one. The EPA will have to completely reassess the proposal (without the involvement of the conflicted members and arguably without the involvement of the Chairman).

For the EPA, it's back to basics. This decision may trigger a wholesale review of EPA practices (not just those in respect to conflict of interest).

As a result, proponents who have proposals in the pipeline may find the process delayed as the EPA sorts itself out. Even those proponents with a fresh approval in their hands might find that they are subject to challenge. Either way, they will need to be prepared for what might turn out to be lengthy and expensive delays in their approval process, and be more vigilant to ensure similar mistakes don't vitiate any future approvals.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.