12 Feb 2019

New decision rejects long-standing arguments concerning greenhouse gas emissions

New greenfield mining projects that will create greenhouse gas emissions (and significant modifications to existing mining operations) may now face a higher bar for approval in NSW, and will require much more robust evidence about the impact of their Scope 3 emissions.

The decision by Chief Justice Preston of the New South Wales Land and Environment Court in Gloucester Resources Limited v Minister for Planning [2019] NSWLEC 7 has rejected long-standing arguments concerning the relevance and impact of greenhouse gas emissions from coal mine developments in determining whether or not to approve new projects. Although the Court's decision to reject the mine was primarily based on social and economic considerations, the Court held that the greenhouse gas emissions produced as a result of the mine (which would be a small fraction of global emissions) still have an effect on cumulative global warming, and therefore must be considered by the consent authority.

Given the potential for flow-on ramifications from the decision for other coal mine developments in Australia, there's an even stronger case now for legislative and policy changes to create a consistent approach to the assessment of coal mining developments nationwide.

Gloucester Resources' proposed mine

Notably, Gloucester Resources Limited's (GRL) development application was for a new open cut coal mine to produce coking coal for steel making (previous cases have been concerned with thermal coal mines to produce coal for power generation). The mine would have been located close to the town of Gloucester, and would have produced approximately 21 million tonnes of coal over 16 years.

Applying the relevant New South Wales statutory and policy framework, the Chief Justice stated:

"the Project will yield public benefits, including economic benefits, but it will also have significant negative impacts, including visual amenity, social and climate change impacts and impacts on the existing, approved and likely preferred uses of the land in the vicinity of the Project, all of which are costs of the Project"

The Chief Justice noted that the relevant balancing exercise was a "qualitative" and not "quantitative" exercise and found:

"As I have found elsewhere in the judgment, the Project will have significant and unacceptable planning, visual and social impacts, which cannot be satisfactorily mitigated. The Project should be refused for these reasons alone. [emphasis added] The greenhouse gas emissions of the Project and their likely contribution to the adverse impacts on the climate system, environment and people adds a further reason for refusal".

The standard arguments raised by Gloucester – and rejected by the Court

GRL argued that the mine's effects on climate change were acceptable for a number of reasons, four of which have been long-standing arguments before the courts:

  • that Scope 3 emissions ("downstream" emissions produced when the coal is transported and burnt overseas) should not be considered in determining the application;
  • the emissions only presented a small fraction of global emissions;
  • the emissions would be offset by sinks or other reduction mechanisms; and
  • if the mine was not allowed to go ahead, coal would be sourced from other jurisdictions with lower quality coal and regulatory standards (and therefore even higher emissions).

After reviewing a range of Australian and US decisions, and the Urgenda Foundation decision in the Netherlands, the Chief Justice found against the company on each of these arguments.

Scope 3 emissions must be considered

The Chief Justice found that the terms of the Department Secretary's environmental assessment requirements for the project, and the requirement of the consent authority to take into consideration the likely impacts of the development on the environment under the Environmental Planning and Assessment Act 1979 as well as the Mining State Environmental Planning Policy and other applicable environmental planning instruments, created an environmental assessment framework that required the consent authority to consider the impacts of greenhouse gas emissions – including downstream emissions along with direct and indirect emissions. These policies, along with the requirement to consider the "public interest" which incorporates the principles of ESD, meant that Scope 3 emissions were to be included in the consideration of the mine's impacts.

Local emissions contribute to global warming

Although the Chief Justice acknowledged that the total amount of emissions from the mine would be a small fraction of global emissions, he pointed out that the global problem of climate needs to be addressed by multiple local actions. According to the Chief Justice, there is a causal link for the Project's cumulative greenhouse gas emissions, as they will become part of the global total of greenhouse gas emissions which will affect the climate system and cause climate change impacts. The Chief Justice indicated that all emissions are important, and that climate change will only be averted by the abatement of greenhouse gas emissions which come from myriad individual sources.

Are the Scope 3 emissions offset?

GRL argued that the emissions would be offset by various sinks and reduction mechanisms. The Chief Justice found the offset argument to be speculative and hypothetical, and was not persuaded that there was any evidence before the Court of any specific and certain actions.

If we don't do it, someone else will

Finally, the Chief Justice found that the "market substitution argument" was fraught. He found no certainty that there would be market substitution by new coal mines in any other country supplying coal; all countries around the world are increasingly taking action to reduce greenhouse gas emissions, and there is no inevitability that developing countries will instead approve a new coal mine instead of the project. He found that the potential for hypothetical but uncertain alternative development to the same but certain unacceptable development is not a reason to approve that development.

Coking coal vs thermal coal

GRL also raised an argument that coking coal should be treated differently to thermal coal mines as it was necessary for steel production which was critical to society and there were currently limited substitutes. The Chief Justice rejected this argument on the basis that the current and future demand for coking coal for use in steel production can be met by other coking coal mines, both existing and approved in Australia.

This position, and the Court's position outlined above on the market substitution argument, is inconsistent with Queensland cases relating to thermal coal mines – for example, Hancock Coal Pty Ltd v Kelly and Department of Environment and Heritage Protection (No 4) [2014] QLC 12 (the evidence and findings were not disturbed in subsequent reviews and appeals). The Queensland Courts have accepted arguments that the thermal coal market was demand-driven and that if the new mine was not developed, the same amount of coal would need to be sourced from other mines, potentially in other jurisdictions where the quality of coal was poorer, leading to greater global greenhouse gas emissions.

What this will mean for your coal project

Whether you're seeking approval for new greenfield sites or significant modifications to your existing mining operations in NSW, you will need to be careful to ensure that you have assessed in detail the climate change impacts of your project as well as the other environmental, social and economic impacts, and present the most robust evidence to the consent authority.

It will be interesting to see whether the NSW Government will take steps through legislative or policy changes regarding how Scope 3 emissions are to be assessed for mining projects. This seems prudent given that these issues are more a matter of public policy for Parliament rather than the Courts.

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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.