INSIGHT

NSW Government to prohibit scope 3 greenhouse gas emissions conditions

By Felicity Rourke, Naomi Bergman, Rebecca Hiscock
Climate Change Environment & Planning Mining Resources

In brief 6 min read

Conditions of development consent regulating scope 3 greenhouse gas (GHG) emissions outside Australia will be prohibited under proposed legislation introduced into the NSW Parliament. The draft legislation forms part of a package of measures announced by the Deputy Premier to provide certainty for mining investment, which includes continuing the previously announced review of the Independent Planning Commission (IPC). If passed, the legislation will go some way to alleviating the confusion arising from a number of recent IPC coal mining decisions, but will not provide the much needed clarity on the weight to be given to scope 3 emissions in the assessment process.

Key takeaways

  • While there is an evident need to clarify how scope 3 emissions should be treated in the assessment of coal mining projects following various potentially inconsistent decisions of the IPC this year, the legislation proposed by the NSW Government may not provide the certainty the resources industry is seeking.
  • The proposed legislation does not prevent consent authorities from taking scope 3 emissions into consideration when assessing coal mine proposals, or provide guidance on the weight to be given to climate change impacts in the assessment process.
  • By removing the ability of consent authorities to condition scope 3 emissions, but not explicitly removing scope 3 emissions as a relevant consideration in the assessment of proposals, it is conceivable that future coal mining proposals which would have been found to be acceptable subject to scope 3 conditions being imposed may now end up being refused.

Background – in search of certainty

On 22 October 2019, the Deputy Premier announced a package of measures aimed at providing certainty for mining investment, including:

  1. amending the Environmental Planning and Assessment Act 1979 (EP&A Act) to prohibit approval conditions relating to downstream (ie scope 3) GHG emissions;
  2. removing the specific consideration of downstream emissions in State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (Mining SEPP);
  3. developing a NSW Government policy and guidelines on GHG emissions; and
  4. continuing the existing review of the IPC and its functions.

The Government has now moved to deliver on the first two of these actions through the introduction of the Environmental Planning and Assessment Amendment (Territorial Limits) Bill 2019 (Bill) into the NSW Parliament on 24 October 2019.

The Terms of Reference for the IPC review were released on 19 October 2019, with the review expected to be concluded by December.

The need for reform

The Government's intent for the Bill is unambiguous: to prohibit conditions of consent of the type imposed by the IPC on the United Wambo Coal Project in August this year.

Recent IPC decisions have created an urgent need for clarity on the scope of conditions that can be imposed under NSW planning law and the extent to which scope 3 GHG emissions should be taken into consideration in the assessment of coal mining proposals. Our previous Insight on the IPC decision in relation to the Rix's Creek Continuation Project identifies the different positions recently taken by the IPC.

The Government's intent for the Bill is unambiguous: to prohibit conditions of consent of the type imposed by the IPC on the United Wambo Coal Project in August this year, which would prevent the proponent from exporting coal to countries that are not signatories to the Paris Agreement or do not have similar policies in place to limit GHG emissions.

The Government has further indicated that the proposed changes are intended to help restore NSW law and policy to the situation that existed prior to decision of the Land and Environment Court to refuse consent for the Rocky Hill project earlier this year.

Proposed amendments

While the amendments proposed in the Bill clearly achieve the Government's stated objective of prohibiting scope 3 conditions, the Bill does not prevent consent authorities from taking scope 3 emissions into consideration when assessing coal mine proposals:

  • The Bill removes the mandatory requirement for a consent authority to consider downstream emissions under the Mining SEPP, however, the Mining SEPP will still require an assessment of the 'GHG emissions of the development'. In the absence of any definition of 'GHG emissions' in the Mining SEPP or EP&A Act limiting this term to scope 1 and 2 emissions, it will be a matter for interpretation as to whether scope 3 emissions are properly characterised as being 'GHG emissions of the development', and therefore require assessment.
  • The requirement under the Mining SEPP for the consent authority to consider whether consent should be issued subject to conditions aimed at ensuring GHG emissions are minimised to the greatest extent possible will also remain. The IPC placed significant weight on this requirement in its decision to refuse consent for the Bylong Coal Project last month, as discussed in our previous Insight.
  • The Bill does not propose any amendment to the list of matters consent authorities must consider when assessing a development application under the EP&A Act. In the Rocky Hill case, the court held it was open to it to consider the climate change impacts of the proposed development, including scope 3 emissions, as a result of the general requirement under the EP&A Act to consider the environmental impacts of a development and the public interest. This position remains unchanged.

It is also interesting to note that the proposed amendment to the EP&A Act is limited to conditions relating to impacts occurring outside Australia. It will therefore still be possible for conditions to be imposed regulating scope 3 emissions from coal that will be burned in Australia.

The Bill is not intended to have retrospective effect, and if passed, would only apply to future decisions of the IPC and the court.

It is unclear at this stage whether NSW Labor will support the Bill.

GHG policy and guidelines

The announcement by the Deputy Premier also foreshadows the development of NSW Government policy and guidelines on GHG emissions.

The Mining SEPP requires consideration of GHG emissions having regard to any applicable State or national policies or guidelines. The introduction of clear guidelines as to the weight to be given to scope 3 emissions would therefore be an important step in promoting consistency in the approach taken to their assessment. However, policies and guidelines will not take the place of legislative reform.

The reforms announced by the NSW Government do not presently clarify the confusion that has emerged through recent assessments by the Department of Planning, Industry and Environment and recent IPC decisions as to whether the NSW Climate Change Policy Framework is a relevant consideration under the Mining SEPP.

IPC review

On 19 October 2019, the Minister for Planning and Public Spaces announced a review of the IPC. The continuation of this review has been referred to by the Deputy Premier as one of the Government's proposed measures to provide certainty to the mining industry.

The review's scope… extends to an assessment of whether there is a future role for the IPC at all.  

The review of the IPC was foreshadowed by the Government immediately following the IPC's administrative blunder in publishing its decision on the Rix's Creek Continuation Project ahead of the conclusion of the period for public comment. However, while the media has focussed on the role of the Rix's Creek decision and other recent IPC coal mining decisions as the impetus for the review, the IPC's decision in relation to the Star Casino proposal should not be overlooked as an additional trigger.

The Terms of Reference for the review expressly require consideration of whether the IPC should be maintained. The review's scope, therefore, goes beyond merely considering the IPC's structure and processes, and extends to an assessment of whether there is a future role for the IPC at all.

The NSW Commissioner for Productivity (who has been appointed to undertake the review) may be reluctant to recommend dissolving the IPC completely, given the Government's clear desire to have decisions on State significant developments made by an independent body. However, changes to the IPC's structure, composition and processes are a real possibility as a result of recommendations that may emerge from the review.