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Focus: Climate change litigation – environmental impact assessment must properly address greenhouse gas emissions

4 December 2006

In brief: In October 2006, we reported on recent developments in climate change litigation and legislation, including a California lawsuit against car manufacturers in relation to the greenhouse gas emissions of their products. Since then, there have been developments in Australian climate change litigation. On 27 November 2006, the NSW Land and Environment Court handed down a landmark decision, finding that the developer of the proposed Anvil Hill coal mine had failed to adequately assess the climate change impacts of the mine. Partner Annette Hughes and Lawyer Julie-Anne Pearce consider the court's decision against the backdrop of an increasing awareness of the legal aspects of climate change.

How does it affect you?

  • This decision may set a significant new standard for future industry and mining developments in NSW, requiring that the global warming impacts of proposed projects be considered and adequately assessed as part of the planning process.
  • It seems likely that the decision will encourage additional climate change litigation in Australia. Certainly, such litigation is increasing worldwide, with the US leading the way. This risk must be managed.
  • There has been and will likely continue to be state and federal legislative action on this topic, some of it related to this case. This highlights the need for a federal approach to the issue of greenhouse gas emissions, for example, implementation of a national carbon trading scheme, to enable stakeholders to more easily manage risk and plan appropriately.
  • Clearly, it serves as a reminder to stakeholders that climate change is an issue which must be carefully considered and managed at multiple levels.

Background

On 19 September 2006, Newcastle environmentalist Peter Gray sought review of decisions made by the Director-General of the Department of Planning (the Director-General) under Part 3A of the Environmental Planning and Assessment Act 1979 (EP&A Act) in respect of the Anvil Hill coal mine in the NSW Upper Hunter. In particular, Mr Gray was seeking a declaration that the Director-General's decision - that the environmental assessment prepared by the developer of the mine, Centennial Hunter Pty Ltd (Centennial), adequately addressed the environmental assessment requirements - was void and without effect (Gray v Minister for Planning & Ors [2006] NSWLEC 720) (Gray).1 The defendants to the proceedings were the Director-General, the Minister for Planning, and Centennial.

The site area of Anvil Hill has a deposit of approximately 150 million tonnes of thermal coal. The proposed open cut mine is forecast to produce up to 10.5 million tonnes of coal per annum, which, it is alleged, when burnt will produce more greenhouse gas pollution than NSW's entire transport sector of more than four million vehicles. It is intended that the mine will operate for 21 years and the coal will be burnt for fuel in power stations in NSW and overseas. About half the coal is intended for export for use as fuel in power stations to produce electricity in Japan. The parties did not dispute the fact that the burning of coal will cause substantial quantities of greenhouse gases to be released into the atmosphere. 

The environmental assessment

Section 75H(1) of the EP&A Act requires the proponent of a project to submit to the Director-General an environmental assessment for approval to carry out the project. On 26 August 2006, Centennial lodged the required assessment with the Director-General. At Appendix 11 of the assessment was a section headed 'Energy and Greenhouse Assessment', which stated, in part:

The Greenhouse Gas and Energy Assessment report for the project has three main sections:

  • An assessment of the energy and greenhouse gas emissions from the proposed Anvil Hill Project in accordance with recognised assessment guidelines;
  • Calculation of energy consumption and greenhouse gas emissions for the proposed Anvil Hill Project for various operational scenarios including maximum annual production, average annual production and the total project;
  • Assessment and identification of where relevant management controls can be utilised to minimise energy use and greenhouse gas emissions and nomination of specific mitigation strategies to achieve this objective.

The assessment of greenhouse gases was conducted principally in accordance with the World Business Council for Sustainable Development and World Resources Institute GHG [greenhouse gas] Protocol 2004 which refers to the assessment of scope 1, 2 and 3 emissions. Scope 1 emissions are direct greenhouse gas emissions which occur from sources that are owned or controlled by the company for example, emissions from combustion in owned or controlled boilers. Scope 2 accounts for greenhouse gas emissions from the generation of purchased electricity consumed by the company. Scope 3 emissions concern all other indirect emissions. These types of emissions are a consequence of the activities of the company, but occur from sources not owned or controlled by the company. An example is the extraction and production of purchased materials.

Scope 3 is an optional reporting category that allows for the treatment of all other indirect emissions. Indeed, while Scope 1 and 2 emissions were assessed and included in the environmental assessment, there was no consideration of Scope 3 emissions, such as the potential greenhouse gas emissions from the burning of coal by third parties outside the control of the proponent.

Section 75H(2) of the EP&A Act stipulates that if the Director-General considers that the environmental assessment does not adequately address the environmental assessment requirements, then they may require the proponent to submit a revised environmental assessment. The Director-General required adjustment of the environmental assessment in relation to matters other than the greenhouse gas assessment and, in late August 2006, he accepted the assessment and made it available for public exhibition (in accordance with s 75H(3)).

Mr Gray commenced proceedings on 19 September 2006.

The court's findings

The court rejected Mr Gray's argument that the environmental assessment did not comply with environmental assessment requirements and found that there is no legal 'test' imposed on the Director-General's exercise of judgment in forming a view on the adequacy of the environmental assessment. Furthermore, the court held that Part 3A of the EP&A Act lacks any objective criteria by which to assess the environmental assessment requirements prepared by the Director-General and the proponent's environmental assessment. Accordingly, the court found that there is no statutory indication within Part 3A that the Director-General's subjective judgment is intended to be subject to any legal test such as that proposed by Mr Gray.

However, the court accepted Mr Gray's argument that greenhouse gas emissions from the burning of coal should be considered in the environmental assessment because of the contribution to global warming/climate change. The court stated:

Climate change/global warming is widely recognised as a significant environmental impact to which there are many contributors worldwide but the extent of the change is not yet certain and is a matter of dispute. The fact there are many contributors globally does not mean the contribution from a single large source such as the Anvil Hill Project in the context of NSW should be ignored in the environmental assessment process. The coal intended to be mined is clearly a potential major single contributor to GHG emissions deriving from NSW given the large size of the proposed mine. That the impact from burning the coal will be experienced globally as well as in NSW, but in a way that is currently not able to be accurately measured, does not suggest that the link to causation of an environmental impact is insufficient.

 

The court explained that the key purpose of an environmental assessment is to provide information about the impact of a particular activity on the environment to a decision-maker to enable them to make an informed decision based on adequate information about the environmental consequences of a particular development.

Furthermore, and perhaps most significantly, the court drew the conclusion that the Director-General's failure to take into account ecologically sustainable development (ESD) principles, even though there was no express requirement to do so when considering the adequacy of Centennial's environmental assessment, caused the Director-General's decision to be rendered invalid. In particular, the court rejected the argument made by the Director-General that, because a greenhouse assessment had been required, ESD principles had been taken into account. The court found that simply raising an issue, without analysis of the impact of the activities which potentially contribute in a substantial way to climate change/global warming (namely scope 3 emissions), is unlikely to satisfy a requirement to consider ESD principles, in particular the intergenerational equity and precautionary principles.

Orders

The court ordered that the view formed by the Director-General on 23 August 2006 - that the environmental assessment lodged by Centennial in respect of the Anvil Hill coal mine adequately addressed the Director-General's requirements - was void and without effect.

Potential appeal and legislative intervention

The defendants have the right to appeal to the NSW Supreme Court,2 and, if the decision is appealed, either the Land and Environment Court or the Supreme Court may suspend operation of the orders in the decision pending conclusion of the appeal.3

While it remains to be seen whether the decision will be appealed, recent legislative developments may lessen the impact of the decision. Indeed, it appears that under amendments to the EP&A Act passed by the NSW Parliament on 23 November 2006, the  Minister for Planning Frank Sartor could disregard the court finding and still approve the Anvil Hill coal mine proposal in its current form. The Environmental Planning Legislation Amendment Bill 2006 (the Bill) amends various parts of the EP&A Act including that which concerns the Minister for Planning's power to approve projects (s75J of the EP&A Act).

In essence, the amendments remove the current pre-requisite to approval of a project requirement (under s75J(1)(b)) that 'the environmental assessment requirements have been complied with'. All that will be required in the future is that an application be made and the Director-General give his report to the Minister for Planning. Consequently, the importance of the environmental assessment and the Director-General's review of that assessment may be minimised.4 The Bill has not yet received the Governor's assent.

Also on the legislative front, Australian Greens senator Christine Milne has indicated that she will look to enshrine the Gray ruling in law this week by resurrecting the idea of a greenhouse 'trigger' for the Commonwealth Environment Protection and Biodiversity Conservation Act 1999 (Cth). It remains to be seen how her efforts will be received, but it seems unlikely that they will succeed.

Implications and developments on a broader scale

If it is allowed to stand, this decision sets a significant new standard for future mining developments in NSW. It requires that the global warming impacts of proposed projects be considered as part of the planning process. Indeed, its implications may extend beyond the mining sector and require all new industry developments to undertake a global warming impact study. It is unclear, however, what depth of analysis of global warming impacts might be required, and what steps to address those impacts might be deemed acceptable. These matters would ultimately determine whether requiring such analysis becomes a true barrier to approval of projects or merely an added cost of project planning and approval. Certainly, some level of greenhouse gas emissions is an inevitable impact of many worthy projects— the key message of the court in this case is that that impact should be properly considered and assessed, rather than overlooked.

At the very least, the judgment is a clear indication that members of the Australian judiciary are prepared to address climate change.5 It seems likely that the decision will serve to encourage additional climate change litigation in Australia. It has certainly placed the issue on the legislative agenda, at both the state and federal level. Clearly, it serves as a reminder to stakeholders that climate change is an issue which must be carefully considered and managed.

More broadly, climate change litigation and legislation is proliferating on an international scale. The United States is leading developments in this area, with more than a dozen lawsuits involving global warming issues currently on the dockets of federal and state courts.6 Earlier this month, environmentalists filed a lawsuit in San Francisco against the Bush administration for failing to produce a required report on global warming's impact on the country's environment, economy and public health. On 29 November 2006, the US Supreme Court heard argument in a case in which 14 states, as well as several cities and environmental groups, are seeking to force the Federal Government to regulate greenhouse gas emissions from automobiles (via the EPA and the Clean Air Act, as we reported in October 2006). Meanwhile, in Europe, the European Commission has decided to open or continue infringement proceedings against Member States which have failed to provide information on their strategies for reducing greenhouse gas emissions. This information is required as part of the European Union's efforts to combat climate change.7

Back in Australia, Prime Minister John Howard has recently announced that he intends to create a joint government-business working group on carbon emissions, signalling that he may be moving towards creating a federally mandated carbon trading system—some five years after NSW put in place a trading scheme. Once emissions trading commences on a national scale (and there is little doubt that this is only a matter of time) it will become easier for corporations to deal with the issue of emissions, for example, reducing emissions by carbon trading and managing risk in contracts and by forward planning.

It appears that climate change litigation and legislation will continue to grow, as governments, industry, environmental advocates and other stakeholders struggle with the challenges presented by climate change and how best to deal appropriately and effectively with its sources.

Footnotes
  1. See the judgment handed down in Gray, .
  2. Section 58, Land and Environment Court Act 1979.
  3. Section 59, Land and Environment Court Act 1979.
  4. Environmental Planning and Assessment Bill 2006.
  5. See also: Australian Conservation Foundation & Ors v Latrobe City Council and Minister for Planning No P 2257/2004 in Victoria in relation to the Hazelwood Mine and Wildlife Preservation Society of Queensland Proserpine/Whitsunday Branch Inc v Minister for the Environment & Heritage & Ors [2006] FCA 736 in relation to two mines in the Bowen Basin.
  6. Justin R. Pidot, (2006) Global Warming in the Courts – An Overview of Current Litigation and Common Legal Issues , Georgetown Environmental Law & Policy Institute, p 1.
  7. 'Commission asks Member States to provide important information in the fight against climate change', Europa Press Release (IP/06/1364), 12 October 2006.

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