29 Apr 2021

Exploring new carbon offset conditions for coal mines

By Claire Smith, Joy Chen

The Independent Planning Commission in NSW has approved Tahmoor Mine extension, with conditions regulating Scope 1 and 2 greenhouse gas emissions.

The Independent Planning Commission (IPC) in NSW has given development consent to the SIMEC Group (SIMEC) for the Tahmoor South Coal Project (SSD 8445), an extension of the existing Tahmoor coal mine.

When SIMEC made a submission to the IPC in February 2021 seeking approval for the Project, it expressed an openness for two Scope 3 offsets conditions. SIMEC proposed two recommended conditions:

  • the preparation of an Export Management Plan, and
  • the investigation of carbon sink options. This included a requirement to, within two years, "prepare a report investigating carbon sink options ... that aim at offsetting the greenhouse gas emissions generated over the life of the development".

On 23 April 2021, the IPC consented to the Project and imposed a number of stringent conditions, including conditions to minimise Scope 1 and 2 greenhouse gas (GHG) emissions but did not impose two Scope 3 conditions offered by SIMEC. The IPC determined that there was limited scope to directly reduce Scope 3 emissions, and that subject to conditions of consent for Scope 1 and 2 emissions, the Project's GHG emissions were acceptable.

Background: SIMEC's Tahmoor operations

SIMEC is an international energy, infrastructure and natural resources business. Its subsidiary, Tahmoor Coal Pty Ltd, operates the Tahmoor Coking Mine, an underground coal mining operation situated in the Southern Highlands Region of New South Wales, approximately 75km south west of Sydney.

In February 2020, SIMEC lodged a submissions report with the Department of Planning, Industry and Environment (DPIE), regarding the Tahmoor South Project, being an extension of underground coal mining at Tahmoor Mine to the south of the existing mining area (the Project). The DPIE undertook an assessment of the Project and prepared an assessment report in December 2020, finding that the project is in the public interest and is approvable. The DPIE then referred the Project to the IPC, as the consent authority, for determination.

IPC Submission and GHG emissions

On 24 February 2021, SIMEC lodged a submission to the IPC seeking approval for the Project. SIMEC considered clause 14(1)(c) of the State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (Mining SEPP) which provides that:

"Before granting consent for development for the purposes of mining, petroleum production or extractive industry, the consent authority must consider whether or not the consent should be issued subject to conditions aimed at ensuring that the development is undertaken in an environmentally responsible manner, including conditions to ensure …

that greenhouse gas emissions are minimised to the greatest extent practicable."

The Submission stated that "Tahmoor Coal is committed to incorporating management and mitigation measures into the Project to reduce Scope 1, Scope 2 and Scope 3 GHG emissions where feasible and practicable". SIMEC suggested that it was open to offsetting Scope 3 greenhouse gas emissions by preparing an Export Management Plan and investigating carbon sink options.

Offsetting Scope 3 emissions: Export Management Plan and Carbon Sink

Scope 3 emissions must be accounted for either in Australia or, if exported, by the relevant countries receiving these coal exports. To that end, SIMEC expressed a willingness to accept a recommended condition requiring them to prepare an Export Management Plan setting out protocols that require them to use all reasonable and feasible measures to ensure that any coal extracted from the development intended for export is only exported to countries that are:

  • parties to the Paris Agreement within the United Nations Framework Convention on Climate Change (Paris Agreement); or
  • countries that the Planning Secretary considers have policies for reducing greenhouse gas emissions which are similar to policies implemented under the Paris Agreement.

The purpose of the Export Management Plan is to ensure that SIMEC adopts all reasonable and feasible measures to minimise Scope 3 emissions to the greatest extent practicable. The recommended condition also includes provisions allowing the Planning Secretary to amend or revoke the Export Management Plan. We note that the IPC has previously imposed a condition of approval on a United Wambo coal mine expansion requiring coal to be exported to countries that were signatories of the Paris Agreement which was widely criticised for being unenforceable because of its extra-territorial application.

In addition, SIMEC advised that "with the objective of going some way to offsetting Scope 3 greenhouse gas emissions, Tahmoor Coal is willing to accept a recommended condition relating to the investigation of carbon sink options". It suggested wording similar or identical to the following:

"Within 2 years of the date of commencement of development under this consent, unless otherwise agreed by the Planning Secretary, the Applicant must prepare a report investigating Carbon Sink options and recommendations for the Development that aim at offsetting the greenhouse gas emissions generated over the life of the Development."

"Carbon sink" was defined as "Forests and other ecosystems that absorb and store carbon for an indefinite period, thereby removing carbon from the atmosphere and offsetting CO2 emissions".

Concerns about Scope 1 emissions

On 31 March 2021, the IPC noted that Scope 1 emissions from the Project's operations would make it one of the most greenhouse gas-intensive coal mines in Australia, and asked the DPIE to consult with SIMEC on further Scope 1 abatement opportunities.

In a response dated 9 April 2021, SIMEC stated that it has investigated several options to abate Scope 1 emissions, including a ventilation air methane plant, in-seam gas drainage, surface to in- seam drilling, and sealing of areas of the mine. However, it concluded that further abatement measures were not viable at this stage.

Nonetheless, SIMEC conceded that if the forecast for Scope 1 and 2 emissions was exceeded, it will investigate mechanisms to address this, such as purchasing carbon credits or planting trees. It suggested the following two conditions being imposed on the Project:

  • within two years of the development consent being granted, SIMEC will commission and prepare a study to determine if there are any reasonable and feasible measures that can be implemented to further reduce the abated Scope 1 and 2 emissions from Tahmoor Mine; and
  • SIMEC must ensure that Tahmoor Mine does not exceed the Scope 1 and 2 emissions forecast. If there are exceedances, SIMEC must explore a mechanism to address the exceedances to the satisfaction of the Planning Secretary.

IPC Determination

On 23 April 2021, the IPC consented to this state significant development application, finding that the Project is strategically justified and is in the public interest, and that the identified impacts can be appropriately managed through the conditions of consent imposed. However, the IPC did not include any Scope 3 offset conditions.

Instead, the IPC focused its conditions upon minimising Scope 1 and 2 GHG emissions within Tahmoor Coal's control. While concluding that those impacts are outweighed by the Project’s benefits, the IPC imposed conditions to "ensure that all reasonable and feasible avoidance and mitigation measures are employed so that greenhouse gas emissions generated by the development are minimised". The greenhouse gas abatement condition included requirements to:

  • within two years, commission and prepare a study to determine whether there are any reasonable and feasible measures to further reduce Scope 1 and 2 GHG emissions and, if so, implement these measures;
  • ensure the development does not exceed maximum Scope 1 and 2 GHG emissions, as set out in Appendix 9 of the Development Consent;
  • monitor and report actual GHG emissions annually; and
  • ensure that any exceedances of the forecast Scope 1 and 2 GHG emissions are offset by a mechanism to address the exceedances.

The IPC considered these conditions imposed as suitable to ensure that all reasonable and feasible efforts are made to reduce the Scope 1 and 2 GHG emissions of the Project, and to ensure the actual impacts of the Project are publicly reported.

Regarding the Project's Scope 3 emissions, which account for more than 70% of the Project's total GHG emissions, the IPC found that there is limited scope to directly reduce these emissions, and did not impose any conditions regarding these Scope 3 emissions. In weighing up the benefits versus the impacts of the proposal, the IPC stated that although the relative GHG emission intensity of the Project is high, in absolute terms the projected total project life GHG emissions are reasonable. Subject to the conditions of consent imposed for Scope 1 and 2 emissions, the IPC found that the Project's GHG emissions are acceptable.

The IPC determination indicates that there is increasing acceptance of the negative impacts of direct GHG emissions to the environment and that adaptive management and monitoring conditions are an appropriate way of regulating this impact.

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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.