Recently in the case of Mullaley Gas and Pipeline Accord Inc v Santos NSW (Eastern) Pty Ltd [2021] NSWLEC 110, the Chief Judge of the Land and Environment Court dismissed judicial review proceedings brought by a community action group challenging the Independent Planning Commission’s approval of a coal seam gas project on climate change grounds.

This decision is yet another example of the growing body of climate change litigation in Australia. It demonstrates the obligations of consent authorities to thoroughly consider the Scope 1, Scope 2 and Scope 3 greenhouse gas emissions of mining projects and the compatibility of the project with State and national policies targeting climate change.

Background

On September 30, 2020, the Independent Planning Commission (IPC) determined to approve the Narrabri Gas Project (the Project) involving the construction of a new coal seam gas field with up to 850 gas wells and 425 well pads over its lifetime (approximately 25 years).

As the Project was declared State significant, it was determined pursuant to s 4.36 of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act). The general matters for consideration that apply to State significant development applications are the same as those that apply to other development applications under s 4.15 of the EPA: see s 4.40 of the Act.

The IPC was required to take into account environmental planning instruments including the State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (Mining SEPP). Clause 14 of the Mining SEPP required the IPC to consider an assessment of the greenhouse gas emissions (including downstream emissions) of the Project and whether the Project should be approved subject to conditions to ensure that greenhouse gas emissions are minimised to the greatest extent practicable.

The Project was approved subject to conditions of consent including:

• Condition A9 which prevented Santos from commencing construction until a gas pipeline to deliver gas from the Project to the domestic market is approved and from commencing gas production until the pipeline is constructed and commissioned;
• Condition A12 which permitted mining operations to be conducted at the site until December 31, 2045; and
• Conditions B20 and B21 which required Santos to avoid and mitigate the Scope 1 and Scope 2 greenhouse gas emissions of the Project and to fully offset any Scope 1 and Scope 2 emissions that exceeded forecasts.

Legal Challenge

A community action group, Mullaley Gas and Pipeline Accord Inc (MGPA), brought judicial review proceedings in the Land and Environment Court challenging the IPC’s decision to approve the Project in three key respects:

• First, MGPA argued that the IPC erred in comparing the greenhouse gas emissions from the Project to a hypothetical coal mine and in finding that a strategic justification for the Project was the lower greenhouse emissions produced by coal seam gas compared to coal;
• Second, MGPA argued that the IPC failed to consider imposing a condition of consent regulating the Scope 3 emissions of the Project due to its finding that Santos did not have sufficient control over Scope 3 emissions; and
• Third, MGPA argued that the IPC failed to consider the environmental impacts of constructing the proposed gas pipeline. Although this pipeline was not the subject of the development application, it was essential in order to enable gas from the Project to be transported to the domestic market.

Findings

The Chief Judge of the Land and Environment Court, Justice Preston, dismissed all of MGPA’s grounds of review.

Comparing coal seam gas to coal

In relation to the first ground, Justice Preston found that IPC did not err by taking into account the advantage of coal seam gas compared to coal.

His Honour found that this was only one of the four reasons that the IPC found the greenhouse gas emissions from the Project to be acceptable:

• First, the IPC found that the total greenhouse gas emissions over the Project’s life would be relatively small, both in amount and as a percentage of Australia’s and global greenhouse gas emissions;
• Second, the IPC determined to impose conditions B20 and B21 to require that any exceedance of the predicted Scope 1 and 2 greenhouse gas emissions of the Project be fully offset;
• Third, the IPC found that the extent and impacts of the greenhouse emissions of the Project were justified because of the strategic alignment of the Project with NSW Government policies and Santos had committed to supply all gas generated by the Project to the domestic market; and
• Fourth, the IPC noted the expected greenhouse gas emissions advantage of coal seam gas compared to coal for electricity generation.

In taking the fourth matter into account, Justice Preston found that the IPC did not impermissibly compare the Project to a hypothetical coal project, but rather made a general comparison between the greenhouse gas emissions from gas-fired electricity generation and those of coal-fired electricity generation.

His Honour found that this comparison was a relevant consideration in assessing the potential benefits of carrying out the Project, the particular benefit being any reduction in total greenhouse gas emissions intensity in the energy sector and for NSW generally.

Taking into account Scope 3 emissions

In relation to the second ground, Justice Preston dismissed MGPA’s claim that the IPC did not consider whether a condition should be imposed on the development consent to ensure that Scope 3 emissions were minimised to the greatest extent practicable, as required by cl 14(1) of the Mining SEPP.

While cl 14(2) of the Mining SEPP expressly required the IPC to consider “downstream emissions”, cl 14(1) required the IPC to consider imposing conditions of consent to ensure “greenhouse gas emissions are minimised to the greatest extent practicable”. MGPA argued that the IPC misconstrued cl 14(1) of Mining SEPP as only requiring it to consider imposing conditions of consent to regulate Scope 1 and Scope 2 emissions.

His Honour rejected this argument, finding that this construction was not adopted by the IPC. The IPC did in fact consider whether to impose conditions of consent to ensure that Scope 3 emissions were minimised to the greatest extent practicable, but decided not to do so. The IPC’s reason was that these Scope 3 emissions were outside the direct control of Santos (unlike the Scope 1 and Scope 2 emissions of the Project).

His Honour found that this finding did not represent any misunderstanding or misconstruction of cl 14(1) of the Mining SEPP, nor was it legally unreasonable.

Scope 3 emissions are the emissions from the downstream combustion of the gas derived by the Project by end users. On the material before the IPC, Santos was not shown to have any or sufficient control over these end users and their consumption of the gas from the Project so as to be in a position to comply with a condition of consent to minimise the greenhouse gas emissions by these end users.

Ultimately, His Honour found “The question of whether or not the consent for the Project should be issued subject to conditions to ensure the Scope 3 emissions are minimised to the greatest extent practicable was one about which reasonable minds may differ, so that it was not legally unreasonable to make one decision rather than another”.

Taking into account the proposed pipeline

Finally, in relation to the third ground, Justice Preston found that the IPC was not required to take into account the impacts of the proposed gas pipeline in its assessment of the Project for three key reasons:

• First, His Honour found that there was insufficient certainty as to the route of the proposed pipeline as a number of options were being considered. Without knowing the route of the pipeline and the natural and built environments along that route, it was not possible for the IPC to assess the likely environmental impacts;
• Second, His Honour found that even if the location of the proposed pipeline has been identified, the pipeline did not have a real and sufficient connection to the Project, such that the impacts of the pipeline were impacts of the Project. His Honour considered the example of the pipeline being constructed in a particular route that passed through, and damaged, the habitat of the threatened species. His Honour explained that, while the pipeline would transport gas produced by the Project to market, the mere transportation of the gas product would not require the pipeline to follow that particular route; and
• Third, His Honour found that the imposition of Condition A9, preventing Santos commencing construction of the Project until the gas pipeline has been approved and production until the gas pipeline has been constructed and commissioned, did not establish that the impacts of any such gas pipeline are impacts of the Project.

Orders

His Honour dismissed the summons commencing the proceedings and reserved the decision on costs.