Scope 3 emissions and cumulative impacts clarified in Court’s dismissal of challenge to Santos’ Narrabri Gas Project

The NSW Land and Environment Court (Court) has rejected a challenge to the approval of Santos’ Narrabri Gas Project (Project). [1] The decision develops the law on the assessment and conditioning of Scope 3 or ‘downstream’ greenhouse gas (GHG) emissions and clarifies the requirements for cumulative environmental impact assessments.

The Independent Planning Commission (IPC) approved the Project on 30 September 2020, following an extensive environmental assessment process involving a record 23,000 submissions received during the public consultation period and an unprecedented seven-day public hearing.

The applicant, a community action group, challenged the IPC’s approval of the Project on four grounds, three of which concerned the IPC’s consideration of the projected GHG emissions of the Project. The fourth concerned the cumulative environmental impacts of a transmission pipeline, that would be required to convey gas from the Project to the domestic market, but did not form part of the Project application.

Although the applicant was unsuccessful in each of its arguments, the Court’s decision clarifies the approach to the assessment and conditioning of Scope 3 GHG emissions, insofar as Preston CJ found that:

• it was open to the IPC to compare the emissions advantages of gas-fired power generation over coal-fired power generation, as part of its assessment of the overall environmental impacts of the Project; and
  
  
• a consent authority can impose conditions of consent relating to Scope 3 emissions, but this is not always appropriate. Specifically, where a consent authority is required to consider, under clause 14 of State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (SEPP), whether or not to impose conditions of consent aimed at ensuring that GHG emissions are ‘minimised to the greatest extent practicable’, this includes conditions relating to Scope 3 emissions. However, it may not always be appropriate to condition Scope 3 emissions, particularly where the proponent has no direct control over distribution to, and use of the resource by, end users.

Concerning cumulative impacts, the Court clarified the circumstances in which two projects are sufficiently related to one another such that the assessment of one project requires consideration of the environmental impacts caused by the other.   

The Court found that in circumstances where the Project would connect into one of two transmission pipeline options that were as-yet imprecisely defined, and given the disconnection between the impacts of the Project and a linear infrastructure project hundreds of kilometres away, it was appropriate not to have considered the potential environmental impacts of the pipelines when assessing the Project.

Implications for major projects

The decision is relevant for fossil fuel developments and other major projects, particularly as the Court has now clarified that consent authorities must consider whether to impose a condition relating to Scope 3 emissions as part of the assessment and determination of a project.

Further, the decision clarifies the approach to be taken for the assessment of cumulative impacts for major projects, especially projects which rely upon the construction of major linear infrastructure for their operation, such as a gas transmission pipeline or electricity powerlines.

Findings on GHG emissions

In relation to GHG emissions, the Court made several findings that have general application for future fossil fuel projects, including that:

• the consent authority can consider, as part of its overall environmental assessment, the relative extent of a project’s GHG emissions compared to other projects of a different kind (e.g. gas-fired or renewable energy generation versus coal-fired power generation), but this should not be the only justification for the extent of GHG emissions of a fossil fuel project;
  
  
• the fact that a project might lead to a reduction in overall GHG emissions in NSW is also a relevant matter for consideration;
  
  
• if clause 14 of the SEPP applies, a consent authority must consider and may impose conditions of consent that control, regulate or restrict the Scope 3 GHG emissions of a project;
  
  
• however, a consent authority is not required to impose conditions regulating Scope 3 emissions, and it was not legally unreasonable for the IPC to decide against the imposition of such a condition in the context of the Project; and
  
  
• in some circumstances, the degree of control that the proponent has over Scope 3 emissions will be relevant to considering whether it is appropriate to impose a condition on Scope 3 emissions.

Findings on cumulative impact assessment

In relation to cumulative impacts, the applicant argued that the IPC had failed to consider the environmental impacts of the construction of a proposed transmission pipeline that would transport the gas extracted at Narrabri to the domestic market. At the time consent was granted for the Project, the proponent was considering two potential options for the major pipeline route but a final decision about the preferred pipeline had not yet been made. The Project application did not assess the impacts of either option.  

In light of this, the IPC imposed a condition of consent preventing the proponent from commencing Phase 2 of the Project (gas production) until planning approval had been obtained for the potential pipeline.

In dismissing the applicant’s arguments on this ground, the Court held that the likely impacts of a gas transmission pipeline were not ‘likely impacts’ of the Project that was the subject of the development application (and therefore the environmental impacts of the potential pipeline did not need to be considered as part of the Project assessment) because:

• there was no identifiable and certain ‘other development’ that would cause off-site impacts if the Project were to be approved (ie. the pipeline option had not yet been decided);
  
  
• even if a single pipeline route were capable of identification, the impacts of the pipeline would not have a ‘real and sufficient link’ to the Project (citing Ballina Shire Council v Palm Lake Works Pty Ltd [2020] NSWLEC 41) because the Project did not require a pipeline to be built along a particular route in order to carry out the Project; and
  
  
• the fact that a condition of consent was imposed that referred to the pipeline did not mean that the likely impacts of the pipeline were the likely impacts of the Project.

Mitigating risk

Proponents of fossil fuel developments and other major projects, including those that are to be developed concurrently with linear infrastructure projects, should be aware of the implications of this decision.  

Steps can be taken to improve a project’s environmental assessment in line with the reasoning in this case. This includes:

• ensuring that the justification for the GHG emissions of a project does not rely solely on the argument that the emissions may be lower than those of another project of a different kind or scale;
  
  
• considering what commitments can be made to offsetting or otherwise minimising Scope 3 emissions. In particular, if a proponent of a fossil fuel project is closely related to, or influences control over, the end user(s), consent authorities (particularly the IPC) are likely to expect commitments to minimise Scope 3 emissions or otherwise be emboldened, following this decision, to impose a consent condition designed to minimise such emissions; and
  
  
• having careful regard to the line that has been drawn as to when the likely impacts of one project will be taken to be the likely impacts of another. Appropriate advice should be sought on this issue, noting that a fulsome cumulative impact assessment may be required as part of the environmental impact assessment for a project.