Court imposes carbon offset condition

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In the recent decision of Hunter Environment Lobby Inc v Minister for Planning [2011] NSWLEC 221, the Land and Environment Court approved the expansion of existing coal mining operations subject to a condition requiring a carbon offset.  Although the Court has not finalised details of the condition, this will be the first time in Australia that a Court has imposed a condition of consent for a climate change offset.

The facts

Ulan Coal Mines Ltd (Ulan), a joint venture between Xstrata Coal and Mitsubishi Development, operates the Ulan Coal Mine (Mine) approximately 40km north east of Mudgee. 

The Mine forms part of an emerging mining complex in the region with neighbouring mines in Moolarben and Wilpinjong.  The three mines are surrounded by large rural properties and bushland, including areas of significant conservation value such as the Goulburn River National Park, Curryall State Conservation Area, Durridgere State Conservation Area and Munghorn Gap Nature Reserve.

The Mine currently operates under at least 27 separate development consents and modifications that permit Ulan to produce up to 10 million tonnes of coal a year.  Ulan currently operates underground mining operations at the Mine, however, it has also previously carried out open cut mining operations.

In September 2008, Ulan lodged an application under Part 3A of the Environmental Planning & Assessment Act, 1979 (EPA Act) seeking approval to:

  • consolidate the existing development consents into a single planning approval for a further 20 years;
  • expand its existing underground mining operations;
  • recommence and expand its open cut mining operations; and
  • increase its production rate from up to 10 million tonnes of coal per annum (Mtpa) (as currently permitted) to 20 Mtpa (Project).

On 15 November 2010, the Minister for Planning and Infrastructure (Minister) approved the application for the Project subject to numerous conditions (Project Approval).

Challenge to the Project Approval

The applicant, Hunter Environment Lobby Inc (HEL), challenged the Project Approval under section 75L of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act).  Section 75L (now repealed) permits an objector the right of appeal in circumstances where the project:

  • would have been designated development but for being a Part 3A project;
  • is not a critical infrastructure project;
  • has not been granted concept plan approval; and
  • has not been the subject of review by the Planning Assessment Commission (PAC). 

In light of these restrictions, such challenges seldom occurred under the (repealed) Part 3A regime.  Ulan did not challenge HEL’s right to bring the proceedings.

The Statement of Facts and Contentions filed by HEL specified twelve grounds upon which it submitted that the Court should refuse approval for the Project.  These included that the Project was inconsistent with the principles of ecologically sustainable development, would significantly and permanently impact groundwater systems, would adversely affect biodiversity and failed to conserve biological diversity and ecological integrity.  Ultimately, HEL was unsuccessful on these contentions. 

Despite the numerous contentions put by HEL, this note focuses on the contention that the Project will exacerbate global anthropogenic climate change and increase Australia’s contributions to greenhouse gas (GHG) concentrations in the atmosphere.  Significantly, the Court imposed a condition of consent requiring Ulan to offset its scope 1 emissions as an appropriate means of mitigating the impacts of the Project.

Submissions relating to anthropogenic climate change and GHG emissions

The original position of HEL was that the Court should refuse approval for the Project on the basis that it will exacerbate global anthropogenic climate change and increase Australia’s GHG emissions.  It was submitted that these impacts are contrary to the principle of inter-generational equity and the conservation of biodiversity and ecological integrity. 

However, by closing submissions HEL no longer sought refusal of the Project application.  Instead HEL sought conditions requiring an offset for scope 1 (direct) and 2 (indirect) emissions as an appropriate means of mitigating the climate change impacts of the Project.  Under these conditions, Ulan would be required to purchase and surrender Gold Standard Certified Emission Reductions (CER) or Australian Carbon Credit Units.  HEL did not press for a condition requiring offsetting measures for scope 3 (by-product of coal burning) emissions which were the largest component of GHG emissions attributable to the Project.  

HEL submitted that the power to impose such conditions lay in the scope, purpose and object of the EPA Act.  There is no constraint on the Minister’s power under section 75J(4) to impose “such conditions as the Minister may determine”, provided that the conditions fall within the scope of the statutory power.

The Minister and Ulan (Respondents) opposed the offset condition on the basis that, despite the broad wording of section 75J(4), the Minister’s power to impose conditions is not unfettered.  Having regard to the objects and purposes of the EPA Act, the Respondents argued that the conditions should not be directed to global problems such as climate change.  Further, the proposed conditions were said to be invalid having regard to the planning principles identified in Newbury District Council v Secretary of State for Environment [1981] AC 578.

The Respondents argued that, under an existing condition of the Project Approval, Ulan was already required to implement all reasonable and feasible measures to minimise the release of GHG emissions from the site to the satisfaction of the Director-General.  Further, the proposed conditions were said to be inappropriate on the following bases:

  • Ulan would be deprived of any incentive to reduce its emission like under a carbon pricing mechanism;
  • it would pre-empt the imposition of a national policy;
  • it would be inequitable and would be imposed on the Project alone;
  • it would lead to administrative uncertainty in the future;
  • a threat of serious or irreversible damage and the triggering of the operation of the precautionary principle would be unlikely; and
  • neutralising national climate change emissions and implementing broad climate change objectives are beyond the Australian Government’s commitment to reduce emissions by between 5 per cent and 25 per cent from 2000 levels by 2025.

If the Court required an offset, Ulan argued that the condition should not force the company to buy either a non-existent carbon credit unit or any form of CER as Ulan would be deprived of any flexibility to choose how to offset its emissions. 

Decision

Despite the fact that the scope 1 and 2 emissions of the Project will only represent 0.44 per cent of Australia’s total GHG emissions and 0.0005 per cent of annual global GHG emissions, Justice Pain granted consent to the Project subject to a condition requiring a GHG offset for scope 1 emissions in excess of those estimated in the Ulan’s Environmental Assessment.  The terms of that condition are still being finalised.

In reaching this conclusion, Her Honour applied principles from authorities supporting the fact that the power to impose conditions on Part 3A approvals is not confined in a similar manner as conditions of development consent under Part 4 of the EPA Act, but is not unlimited.  Instead the starting point for consideration of a condition sought to be imposed on an approval is that it must be assessed by reference to the scope and purpose of the relevant statutory power. 

In this circumstance, Her Honour held that since one of the purposes of the EPA Act is for the protection of the environment, the imposition of a condition to address scope 1 emissions attributable to a project under Part 3A, which will be under the direct control of Ulan, is within the Minister’s power. 

Alternatively, even if the Newbury principles apply, the imposition of a condition aiming to ameliorate the environmental impact of a development is for a purpose within the scope of the EPA Act and is for a planning purpose.

That the carbon pricing scheme had not come into effect was not an obstacle to imposing the offset condition, as the proposed condition provided adequate flexibility to respond to changing regulatory regimes and allowed the adoption of a carbon pricing scheme once available.

However, Pain J did not accept that Ulan should be responsible for offsetting its scope 2 emissions.  These emissions were said to be outside Ulan’s control and it was not clear which of the scope 2 emissions Ulan had the ability to minimise.  Further, any such condition would not fairly relate to the development and would remove any incentive for the electricity generator to reduce the production of GHG emissions if Ulan had to offset those emissions.  On this basis, the Court held that the imposition of a condition requiring an offset for scope 2 emissions would be inappropriate.  

Implications

The effect of this decision was foreshadowed in the body of the judgment:

“That this is the first such condition imposed on a coal mine in NSW is not necessarily discriminatory, it is simply the first occasion that has occurred ... As other operating coal mines seek approval to modify or extend their operations, or new coal mines are opened, it would be open to the consent authority which may be the Minister to impose a similar condition.”

Significantly, this decision may provide authority for consent authorities to impose a carbon offset condition in respect of any development consent provided that the emissions directly relate to the development. 


The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


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Christine Covington

Partner. Sydney
+61 2 9210 6428

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