Recent environmental decisions concerning energy & resources projects

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Introduction

This In Brief addresses three recent cases of relevance to Energy & Resources Projects:

  1. Xstrata Coal Queensland Pty Ltd & Ors v Friends of the Earth - Brisbane Co-Op Ltd & Ors, and Department of Environment and Resource Management, a decision of the Land Court of Queensland dated 27 March 2012 recommending approval of 3 mining leases (MLs) and an environmental authority (EA) for an open cut coal mine, despite objections based in part on climate change impacts;
  2. Dual Gas Pty Ltd v Environment Protection Authority & Ors, a decision by the Victorian Civil and Administrative Tribunal (VCAT) dated 29 March 2012 overturning a decision by EPA Victoria to only issue conditional approval for a gassified-coal power plant. The decision only allows the plant to proceed once the Federal 'Contracts for Closure' scheme has locked in the retirement of a matching amount of existing brown coal-fired generating capacity; and
  3. The imposition of a record fine for the offence of causing serious environmental harm by the Mount Isa Magistrates’ court in R v CopperCo Limited (In Liquidation) & Anor.

1. Climate change not a sufficient basis to justify refusal of mining leases and related environmental authority. Limits on Land Court’s ability to act inconsistently with Coordinator-General “stated” conditions.

Background

Xstrata Coal Queensland Pty Ltd, ICRA Wandoan Pty Ltd and Sumisho Coal Australia Pty Ltd (Applicants) applied for three MLs and an EA in respect of an open cut coal mine in Wandoan, approximately 350 kilometres north-west of Brisbane in the Surat Basin (Wandoan Mine).  The applications were made under the Mineral Resources Act 1989 (MRA) and the Environmental Protection Act 1994 (EP Act) respectively.

The Wandoan Mine proposal is for an open-cut, thermal coal mine with an anticipated mine life of in excess of 30 years at a rate of 30 million tonnes per annum ROM Coal.  Coal from the Wandoan Mine is proposed to be crushed, processed and blended on site before being transported by rail for export or domestic use.

The Queensland Coordinator-General declared the mine a significant project for which an environmental impact statement was required under the State Development and Public Works Organisation Act 1971.  A report on the proposed mine recommending approval subject to conditions was then prepared by the Coordinator-General. 

The conditions included “stated” conditions for any draft EA, imposed pursuant to section 49 of the State Development and Public Works Organisation Act 1971, including in respect of noise and groundwater monitoring.

Such “stated” conditions were required to be imposed on the draft EA by the then Department of Environment and

Resource Management (DERM), pursuant to section 210(2) of the EP Act.

A draft EA was issued under the EP Act as well as endorsement Certificates of Application for the ML Applications (MLAs) under s 252 of the MRA.

Following public notice, objections to the MLAs and the application for the EA were lodged by a number of affected landowners and the environmental group, Friends of the Earth (FoE).  Of note, the FoE lodged objections on the basis of impacts associated with climate change. The objects also sought to challenge the noise conditions. The objections were referred to the Land Court on 16 March 2011.

In general terms, the FoE contended that Land Court should recommend refusal of the MLA on the basis that:

  • Scope 3 emissions must be considered when assessing its impact;
  • the public right and interest is prejudiced because of the contribution the mine would make to climate change and ocean acidification; and
  • the mine is not consistent with the principles of ecologically sustainable development.

Objections by FoE

Mineral Resources Act 1989

The FoE’s objections focussed on the consideration of the matters outlined in ss 269(4)(i)-(l) of the MRA and in particular subsection (j) whether “there will be any adverse environmental impact caused by those operations.”  In this respect, the FoE contended that the impacts of “those operations” extended to the impacts of the transportation and use of the coal won (i.e. Scope 3 emissions) which represented approximately 99% of the total GHG emissions from the mine.

The Applicants accepted that the Wandoan Mine would generate GHG emissions and contribute to climate change and ocean acidification, however, they argued that as a matter of statutory construction, Scope 3 emissions are not generated by “those operations” in s 269(4)(j).

The Land Court read “those operations” in the context of the language of s 269(4)(j) which refers to “operations to be carried on under the authority of the proposed mining lease…” and accordingly held that the operations “do not, on a proper reading of the legislation, extend to the transportation of the coal to ports and the burning of coal in power stations overseas.

Evidence was led that the Scope 1 and 2 emissions of the Wandoan Mine would equate to approximately 0.08% of annual Australian emissions, which in turn represent approximately 1% of annual global emissions.  In light of this, the Court ultimately held that the adverse environmental impacts of the Scope 1 and 2 emissions of the Wandoan Mine are not significant to justify refusal of the proposed MLs.

Environmental Protection Act 1994

Similar to the consideration of the provisions of the MRA, the Court’s decision focussed on the consideration of activities which fall within the scope of an EA and in particular that an EA is issued for “mining activities” which are defined under the MRA as an activity that is authorised to take place on land to which the mining tenement relates.

The Court held that “in applying the statutory criteria under the EPA, the Court is limited to considering the activities which may be authorised by the environmental authority” and that the “activities which may be carried out under the authority of a mining lease under the MRA do not extend to the transportation and burning of coal in power stations.”

Therefore, the Court did not consider GHGs emitted from, or potential impacts arising from the activities of transporting and using the coal.

Again, while it was accepted by all parties that Scope 1 and 2 emissions from Wandoan Mine will contribute to climate change, the Court ultimately found that the mine’s adverse impact on climate change was not outweighed by the other issues which justify its approval.

Limits on Land Court’s ability to recommend conditions ‘inconsistent’ with Coordinator-General’s conditions

In assessing the objections raised by FoE and affected landowners, the Court was required to consider the scope of its powers to interfere with or to act inconsistently with conditions “stated” in the Coordinator-General’s report.

The Court was specifically required to determine the extent to which it could make recommendations about proposed conditions that dealt with the same subject matter as Coordinator-General “stated” conditions.

It was required to do so because section 222(1)(b) of the EP Act allowed the Court to recommend that the application be 

granted, on stated conditions that were different to the conditions identified in the draft EA, but 222(2)(b) of the EP Act prohibited the Court from recommending conditions that were ‘inconsistent’ with conditions ‘stated’ in the Coordinator-General’s report.

The Court noted that it was not required to determine whether one statute was inconsistent with another, but rather to interpret section 222(2)(b) of the EP Act in the context of the statute as a whole. The Court held that, the word ‘inconsistent’ should be given its ordinary and natural meaning. This led the Court to conclude that “[it] ha[d] power under the EPA to recommend conditions for the draft EA dealing with the same subject matter as conditions imposed by the Coordinator-General, provided that the Court’s recommended conditions [did] not contradict or lack harmony with the Coordinator-General’s conditions.”  

The Court therefore determined that in each instance it would have to assess the consistency of its proposed conditions with those “stated” in the Coordinator-General’s report.

In respect of the noise conditions sought by the objectors, the Court found that it was unable to recommend noise limits that were different to those identified in the Coordinator-General’s report.

The Court also held that it was unable to recommend ground water monitoring conditions for the draft EA that would require a more comprehensive monitoring program for shallow and alluvium aquifers than that provided for by the Coordinator-General’s conditions. The Court held that such conditions would be inconsistent with the Coordinator-General conditions although it did not explain the basis for that finding.  

The Court did however recommend that conditions relating to monitoring of deep aquifers be included in the environmental authority on the basis that there could be no suggestion of any inconsistency since the “stated conditions” did not relate to monitoring of deep aquifers.

Conclusion

In its decision published on 27 March 2012, the Land Court recommended that the MLs and EA be granted subject to certain conditions which were considered not to be inconsistent with the Coordinator-General “stated” conditions.

2. Transitioning to a lower emissions energy sector – approving new power generating projects and new technologies

Background

Dual Gas Pty Ltd v Environment Protection Authority & Ors is a decision of the Victorian Civil and Administrative Tribunal (VCAT) made on 29 March 2012.

The Tribunal was called upon to consider a proposal for the development of a new 600 MWe baseload power station at Morwell, Victoria.  The proposal, called the Dual Gas Demonstration Project (DGDP) involves new technology known as the Integrated Drying and Gassification Combined Cycle technology (IDGCC).

The IDGCC process would, if successful, result in the production of electricity with a lower Green House Gas emission intensity (GEI) than the burning of brown coal, as is done by power stations in the Latrobe Valley.  The process involves the gassification of brown coal under heat and pressure to produce “syngas”.  Syngas is then used as a fuel to generate electricity rather than the conventional burning of brown coal.

The Victorian EPA had issued a conditional works approval under the Environment Protection Act 1970 for a 300 MWe single train IDGCC process rather than the 600 MWe two train station Dual Gas had sought.  Dual Gas appealed this conditional approval.

Objectors opposed the project entirely.  In particular, they were opposed to the additions the power station would make to Victoria’s output of Green House Gases (GHG).  The Victorian Climate Change Act 2010 (Climate Change Act) currently commits the Victorian Minister responsible for climate change to achieving a 20% reduction (by 2020), of Victoria’s GHG emissions, below the amount of Victoria’s GHG emissions for the year 2000.  Objectors felt approval would compromise the Government’s ability to meet these targets.

Determination

In the course of the hearing, the Climate Change Act was reviewed by the Victorian Government which then indicated it would repeal the above target in favour of the national target for GHG emissions of 5% below 2000 levels by 2020 and that the national carbon pricing mechanism would be the primary means by which the target would be met.

The regulatory environment relevant to the Tribunal’s eventual conclusions included the:

  • Victorian Environment Protection Act 1970;
  • Victorian Climate Change Act 2010;
  • SEPP (Air Quality Management);
  • the Commonwealth Government’s Contracts for Closure (CFC) program by which it is hoped to retire up to 2,000 MWe of high GEI coal fired capacity by 2020.  Contracts under the program are due to be finalised by 30 June 2010.

A good deal of the Tribunal’s decision dealt with an application of what it referred to as the “integration” principle (i.e., reflecting the integration of triple bottom line considerations of economic, social and environmental issues) as well as the “precautionary” principle and the meaning of terms such as “best practice” and “inconsistency” in the context of the above regulatory regime.

Evidence presented to the Tribunal was that coal fired power stations in the Latrobe Valley contributed about 32% of Victoria’s total GHG emissions annually and 12% nationally.  Evidence from Dual Gas was that the IDGCC process had the potential to replace much of the high GEI electricity generating technology currently in use but that the project relied on the Federal Government’s $23.00 per tonne carbon price to be competitive.

The Tribunal found that without government subsidies and/or a significant increase in the carbon price over time, the DGDP would be of questionable viability at either the 600 or 300 MWe capacity.

In eventually finding that the plant could operate at 600 MWe the Tribunal nonetheless imposed a significant condition requiring that:

“Construction of the works approved by this works approval must not commence until such time as the Australian Government has entered into contracts under its Contracts for Closure program (or through any similar program or commercial agreement) which provide for the closure by 2020 of at least 600 MWe of coal fired electricity generation in Victoria.”

It seems the Tribunal imposed the condition because of a concern that, paradoxically, the DGDP could in fact inhibit the development of new gas fired stations with a lower GEI than coal fired stations and that such a condition was an appropriate precautionary response in the context of the regulatory regime with which it was dealing.

The Tribunal also imposed a “safety net” condition limiting the GEI emissions of the plant to 0.8t CO2 – e/MWh “as generated”, even though the Federal Government and Victorian Government policy positions are now that such emission standards for coal fired generators are unnecessary, in the presence of carbon pricing.

3. Record fine imposed for causing serious environmental harm

In late March 2012, the Mount Isa Magistrates’ Court imposed a record fine in respect of the release of contaminants to waterways.

In 2011, CopperCo Ltd, the former owner of the Lady Annie Mine located approximately120km North-West of Mount Isa, was charged with causing serious environmental harm under the Environmental Protection Act 1994 (EP Act).

After entering a plea of guilty in December 2011, CopperCo Ltd was ordered to pay a $500,000 fine as well as $83,109 in investigation costs.

The offence related to an uncontrolled release of contaminated water into stormwater ponds and surrounding creeks in the wet season of 2009.  The incident occurred soon after receivers had been appointed to handle the affairs of CopperCo Ltd and its subsidiaries including Lady Annie Operations Pty Ltd.

According to the then DERM, the uncontrolled release resulted in the most serious case of water contamination in Queensland’s history. The release led to substantial environmental damage, with an area of contamination extending for more than 50 kilometres and resulting in a level of toxicity which killed freshwater marine life. In addition, there was a possibility that the poor water quality resulting downstream within Saga and Inca creeks might harm livestock

In addition to the fine, CopperCo Ltd had also been required to spend an estimated $11 million on clean up and rehabilitation costs for the site.

Other mines in the region have also been fined for breaches of the EP Act during the 2008-2009 wet season, including MMG Century Limited (fined $130,000), and Ernst Henry Mine (fined $100,000).


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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