INSIGHT

NSW Court's ruling on climate change raises concerns for coal industry

By Ben Zillmann, Bill McCredie
Energy Environment & Planning Resources

In brief 12 min read

The recent decision of the NSW Land and Environment Court on Gloucester Resources' proposed Rocky Hill Coal Project attracted significant press in the past week, primarily due to the court's comments regarding climate change in the course of its ruling against the mine's approval. Partners Ben Zillmann and Bill McCredie analyse the key features of the decision and its implications.

Key takeaways

  • The court cited the climate change contribution associated with the coal mine, and the burning of the coal produced by the mine, as one of its reasons for refusing the mine. It is a decision all new coal mine or fossil fuel proponents must closely bear in mind, and be prepared to answer similar objections when seeking project approvals.
  • Having said that, the decision must be viewed in context, with the court stating it would have refused this particular mine anyway for reasons other than climate change. The court further stated it was not endorsing a blanket policy position that no new coal mines should be approved on grounds of climate change. Each mine proposal must be considered on its merits.
  • The decision will no doubt embolden the opponents of the coal industry, and sustain (if not increase), climate change-based objections to any future coal projects.
  • The 'carbon leakage principle' remains unsettled after this case, with the Chief Judge reaching a different finding on this point to decisions of other courts in previous similar cases (in particular, the courts in Queensland where the carbon leakage principle has been generally accepted).
  • The fact that the decision was made in relation to a coking coal mine proposal (when the focus of climate change cases has traditionally been on thermal coal mines) makes it clear any coal mine is now at risk to such objections.

The project and decision

The Rocky Hill coal mine planned for the mining of 21 million tonnes of coking coal over 16 years from the Gloucester Valley in NSW. In the scheme of things, it was not a particularly large mine proposal.

The court ruled that the mine should not proceed, citing its inconsistency with other land uses, amenity impacts (noise, dust), visual intrusion and social impacts of the mine as some of the reasons for its decision. However, it is the court's comments about climate change that have attracted the media's attention and prompted descriptions of a 'landmark' decision by some commentators and interest groups. The following comments focus on that aspect of the decision.

The court's comments about climate change

In considering the mine's contribution to climate change, the court had regard to not only the direct emissions of the mining activities, but also the 'scope 3' indirect emissions, being the GHG emissions associated with third-party burning of the coal (which make up the vast majority of emissions associated with the coal).

In respect of climate change, the court observed:

  • It was uncontested by the parties that man-made climate change is real and happening and that global anthropogenic GHG emissions must be reduced in order to meet internationally agreed temperature increase targets of 1.5% to 2%.
  • Both direct and indirect emissions (including scope 3 emissions) should be considered in deciding whether to approve the mine.
  • Having regard to all of the emissions of the project (scope 1, 2 and 3), the mine will make a 'sizeable' contribution to aggregate GHG emissions over the life of the project, and refusing consent to the project would prevent a 'meaningful' amount of GHG emissions. Therefore, approval of the mine is inconsistent with actions required to achieve a peaking of global GHG emissions as soon as possible, and zero net emissions by the second half of the century, which is the globally-agreed goal of the Paris Agreement on climate change (endorsed by the NSW government). The court did acknowledge, however, that the Paris Agreement does not prescribe how the reduction in emissions is to occur (ie it does not ban new coal mines).
  • The fact that the mine was a coking coal mine, rather than thermal coal, was not a justification for its GHG emissions. The miner had argued that coking coal was critical for steel making (with limited ability to make steel through alternative means), and that there would be ongoing global demand for steel. The court concluded that demand for coking coal for steel production could be met by existing Australian mines.
  • The court found there were no specific proposals to offset the emissions for this project, so it could not be assumed they would be abated. Further, it did not accept the miner's argument that emissions reductions should occur where they count most and generate the least economic and social harm (the miner arguing that, given the importance of coal exports to Australia, the costs of not approving the Rocky Hill mine were greater than those associated with other alternatives, such as cost of abatement achieved under the Government's Emissions Reduction Fund).
  • The court did not accept the miner's arguments about market substitutability and 'carbon leakage'. In summary, carbon leakage refers to the situation where, for example, coal that would have been produced by a coal mine that was not approved in Australia is simply 'replaced' by a new mine in another country, with a net result that the same amount of coal is mined and burned (ie there is no reduction in global emissions as a result of refusing the Australian mine, and indeed, the emissions may be greater if the coal mined in another country is of lesser quality), but the economic benefits that would have been associated with the mine transfer from Australia to the other country. The court rejected this on the basis that the miner had failed to establish carbon leakage would actually occur if the Rocky Hill mine was not approved, and that the evidence indicated existing coking coal mines in Australia could meet the relevant global demand. The court also did not accept it was certain or inevitable that other countries would approve a coal mine that would, in effect, replace the production that would have come from the Rocky Hill mine, as other countries were also trying to reduce emissions. Finally, the court considered it wrong in principle to approve a mine that would have unacceptable impacts because a hypothetical and uncertain alternative might have the same unacceptable impacts.

Context and relevance

Since the court's decision of 8 February, there has been some commentary claiming it's the first time a court has considered such issues, and that it is a 'landmark ruling' that sets a very high hurdle for any future coal mine to obtain approval.

We think such comments overstate the significance of the decision. Some context is important.

The Rocky Hill case is without doubt a notable ruling in the developing judicial case law on climate change issues. However, it was certainly not the first case to consider climate change issues associated with a new coal mine. Objections to new coal mines on climate change grounds have become relatively common over the past 10 years, and a number of courts have considered these issues previously. It is fair to say that, on the whole, past climate change-based objections to new coal mines have been unsuccessful.

It is also relevant to note that:

  • The Rocky Hill mining approval had already been recommended for refusal by the NSW Department of Planning and Environment, and was then refused by the NSW Planning Assessment Commission following submissions and public meetings (for reasons other than its GHG emissions).
  • The court made it clear that, regardless of the mine's associated GHG emissions, it would not have approved the Rocky Hill mine for a number of other reasons (eg its amenity, visual and social impacts). The project's GHG emissions were another reason supporting the mine's refusal, but were not determinative of the mine's approval.
  • The court did not endorse the 'policy' position argued by the Environmental Defender's Office that no new coal mines or fossil fuel developments should ever be approved due to GHG emissions. Each new proposal must be assessed on its merits, having regard to all its impacts (positive and negative), including its contribution to climate change.
  • The court considered that, in relative terms, due to the mine's other adverse impacts (social, amenity etc), it was rational to refuse this project rather than another mine that may have similar GHG emissions but lesser other environmental, social and economic impacts.

Accordingly, the decision in Rocky Hill should not be taken as a blanket decision that will be fatal to any new coal mine proposal.

Having said that, the comments of the court on this issue will be of concern for the coal mining industry, and, more broadly, the fossil fuel industry. It is a decision that any new coal mine or fossil fuel proponent must closely bear in mind and be prepared to answer similar objections, including addressing and meeting the evidentiary hurdles the court identified in Rocky Hill, but considered were not satisfied by the miner. The decision will no doubt embolden the opponents of the coal industry, and it is expected the flow of climate change-based objections to new coal projects will continue.

Perhaps one of the most surprising aspects of the court's decision was its refusal to accept the carbon leakage arguments of the miner, when the carbon leakage principle has been considered and accepted by courts in previous cases, particularly the Queensland Land Court (whose approach to this issue has been endorsed by the Queensland Court of Appeal). The Chief Judge did not cite those Queensland cases in his consideration of this issue, relying instead on a US case in support of his conclusion. Whether courts in future cases adopt the reasoning of the Chief Judge, or prefer the approach taken to date in Queensland courts on this issue, will no doubt be a key point in any future case.

It was also surprising that the court took the position it did in the context of a coking coal mine proposal. To date, the focus of the climate change cases has been on thermal coal mines (although, not exclusively), the theory being there are more readily available alternatives for electricity generation than for steel making, hence a climate change-based objection had a greater prospect of success against a thermal coal mine. However, this decision makes it clear that any coal mine is at risk to such objections.

The case also poses a question for policy makers in government. The court correctly acknowledged that the Paris Agreement does not commit Australia to any specific means of meeting its commitments under that agreement, and, notably, that it does not prohibit new coal mines. But the court clearly considered the statutory context is such that it permits regard to all emissions associated with a project (including scope 3), and that may be a reason for the court to decide against a project in Australia. The question for government is whether it wants the judiciary making decisions about whether a particular fossil fuel development should proceed based (largely) on emissions that will arise in a third-party steel mill or power station overseas (and actually count towards that foreign country's GHG emissions commitments)? We would argue an issue such as this is more appropriately a decision for policy makers, not the judiciary, and some clear legislative direction on the issue is desirable.