Australia: NSW Court of Appeal reaffirms LEC decision to refuse Rio Tinto’s proposed expansion of the Warkworth Coal Mine

On 7 April 2014, the NSW Court of Appeal handed down its decision in Warkworth Mining Limited v Bulga Milbrodale Progress Association Inc [2014] NSWCA 105, which concerned an appeal against the refusal of Rio Tinto's proposed extension of the Mount Thorley Warkworth coal mining operations in the Hunter Valley.

The Court unanimously rejected all 13 grounds of appeal raised by Warkworth Mining Ltd (Warkworth) against the first instance decision in the NSW Land and Environment Court. Most significantly, the Court held that Warkworth's economic modelling was deficient and the primary judge had not made an error of law in deciding that the significant impacts of the mine extension on the Bulga residents and the environment outweighed its economic benefits.

BACKGROUND

Warkworth operates the Warkworth open cut coal mine near the village of Bulga in the Hunter Valley. The mine operated under a 2003 development consent issued by the Minister for Planning and Infrastructure (Minister). The consent imposed a biodiversity offset condition requiring Warkworth to conserve non-disturbance and habitat management areas.

In 2010, Warkworth lodged a major project application seeking approval under Part 3A of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) (Part 3A is no longer in force) to enlarge the Mine and prolong the duration of its operation (Project). This involved clearing around 766ha of endangered ecological communities and removing significant local landforms. On 3 February 2012 the PAC, acting as the Minister's delegate, approved the Project under section 75J of the EPA Act (now repealed) (Approval).

A residents action group brought an objector appeal against the approval under section 75L(3) of the EPA Act (now repealed). In Bulga Milbrodale Progress Association Inc v Minister for Planning and Infrastructure and Warkworth Mining Limited [2013] NSWLEC 48 (LEC Decision), Chief Justice Preston refused the Project and overturned the Approval on the basis that it would have significant and unacceptable impacts on biological diversity, including endangered ecological communities, as well as noise, dust and social impacts. More details about this decision are set out in an earlier Corrs In Brief.

WARKWORTH'S APPEAL

Warkworth challenged the validity of the LEC Decision on 13 grounds, including that the LEC had not dealt with the Project's economic benefits and had taken irrelevant issues into account.

In particular, Warkworth claimed that Chief Justice Preston had denied Warkworth procedural fairness in relation to the following matters:

• background noise levels had been set too high;
• there was insufficient evidence to establish that Project impacts on threatened fauna would be offset by the remote biodiversity areas;
• Chief Justice Preston had used a polycentric approach in his reasoning to discount expert evidence without raising this intention with the parties or the experts;
• Chief Justice Preston's polycentric approach to considering various factors in the decision-making process was a departure from the balancing exercise required under section 75J of the EPA Act; and
• the LEC had failed to deal with the question raised by Warkworth that natural regeneration of the Warkworth Sands Woodland supported an inference that assisted regeneration would be successful, and that the Northern and Southern Biodiversity Areas provided an offset for the Project's clearing of the Warkworth Sands Woodland. Warkworth also claimed this was a constructive failure to exercise jurisdiction.

In addition, Warkworth contended that Chief Justice Preston had made errors of law by:

• failing to consider the Director-General's report and approval recommendations as a 'fundamental element' or 'focal point' of matters considered in the decision-making process;
• failing to have regard to the objects of the Mining Act 1992 (NSW), which are relevant due to the operation of s 39(4) of the Land and Environment Court Act 1979 (NSW);
• failing to determine the public interest by not making findings on the positive aspects of the Project; and
• holding that only an offset of the same ecological community that would be impacted by the Project could be considered in addressing the impacts of the Project.

The Minister also appealed the decision by way of cross-appeal.

COURT OF APPEAL DECISION

Procedural fairness

The Court rejected all of Warkworth's grounds of appeal regarding the denial of procedural fairness.

With regard to the issue of background noise levels, the Court held that Warkworth had failed to adduce appropriate expert evidence and that the LEC had given correct regard to acoustics reports prepared for Bulga. The Court also found that the LEC had correctly considered evidence concerning Project impacts on threatened fauna. Further, the Court rejected Warkworth's arguments on polycentricity. It held that Warkworth's framing of the LEC's reasoning as incorrectly polycentric was without substance, since determining whether an error of law had been made should be done with reference to the LEC's reasons, rather than Chief Justice Preston's description of the approach taken. In any event, the weight given to various matters was for the LEC's discretion and did not depart from the balancing exercise under section 75J of the EPA Act. Finally, the Court found that the LEC had dealt sufficiently with the issue of regeneration, as evidenced by Chief Justice Preston's reference to expert evidence in his reasoning.

Director-General's Report

The Court held that section 75J(2) of the EPA Act did not require a decision maker to consider the Director-General's report and recommendations as a 'fundamental' or 'focal' consideration in deciding applications for project approval. Whilst section 75J(2) required the report to be taken into account, the section did not require the decision-maker to give the report primary weight, implement it, or justify why it should not be followed.

Instead, a decision maker was allowed to balance multiple considerations and choose what weight should be given to particular matters (unless the statute specified otherwise). The Court also emphasised that s75J(2)(a) of the EPA Act requires the Minister (and the judge on appeal) to not only consider the Director-General's report and the recommendation contained therein, but the various material contained within that report. This includes expert and technical reports, submissions and contrasting opinions. The Court held that to give the department's view primary importance, would be an unauthorised interference with Ministerial responsibility. Additionally, the LEC is not limited to considering material before the Minister and it is open to the court to emphasise factors differently to that in the Director-General's report.

In coming to this view, the Court considered the decisions of Zhang v Canterbury City Council 51 NSWLR 589 and R v Hunt; Ex Parte Sean Investments Pty Ltd 180 CLR 322, which Warkworth considered authorities for its claim that a statutory provision was 'fundamental' or 'focal' in the decision making process. The Court disagreed, holding that whether a matter included in statute becomes 'focal' depends – as it did in those cases – on the language of the statutory provision in question.

Mining Act

The Court rejected Warkworth's view that Chief Justice Preston had failed to consider the objects of the Mining Act in support of its application for project approval. The Court held that the operative provisions of the Mining Act do not deal with the grant of development consent for mining activities, which is a separate process distinct from Warkworth's appeal on the Project refusal. The Court held that the requirement that development consent under the EPA Act be obtained prior to the grant of an authority under the Mining Act, was a clear indication of these distinct processes and that the objects and operative provisions of the Mining Act are instead directed towards how mining is to be carried out.

Public interest

The Court disagreed with Warkworth's argument that Chief Justice Preston had failed to correctly consider the positive impacts of the Project in his findings on public interest. The Court took the view that a statutory provision requiring regard to the public interest operates at a high level of generality. It is capable of including principles of Ecologically Sustainable Development and balancing these principles against economic issues.

Endangered Ecological Community Offsets

The Court rejected both of Warkworth's arguments on this point. The Court noted that instead of proposing any avoidance or mitigation measures, Warkworth proposed an offsets package which included five remote biodiversity areas. The relevant endangered ecological communities for which the package was created were not included in any of the offset areas. On reaching his findings, Chief Justice Preston had regard to principle 10 of the Principles for the Use of Biodiversity Offsets in New South Wales and concluded that the offsets package did not include any like-for-like offsetting required by this principle. Warkworth argued that such narrow reasoning was an error of law, firstly, because it was not in the public interest, or alternatively, because the LEC ignored expert submissions that remote offsets did have ecological benefits. The Court held that neither of these arguments constituted errors of law because, as to the first argument, it was open to his Honour to determine the appropriateness and importance of the principles in the decision-making process, and as to the second argument, his Honour simply made a finding of fact based on the evidence before him.

Other grounds

The Court of Appeal rejected all of Warkworth's other grounds of appeal. These included Warkworth's claims that Chief Justice Preston had erred in considering measures of avoidance for managing the Project's adverse impacts on biological diversity and in failing to consider whether the risks of the Warkworth Sands Woodland not regenerating would be mitigated by a new condition of approval proposed by Warkworth involving demonstration that the woodland could be re-established.

IMPLICATIONS

The judgment demonstrates the willingness of the Courts to give equal weight to all issues surrounding major mining projects, and to overturn PAC rulings and the recommendations of the Director-General where economic benefits are not seen to outweigh other factors, including environmental conservation and social impacts.

The decision also supports the proposition that it is open to decision makers to consider the type of economic modelling submitted for mining projects. Accordingly, the valuations given to environmental and community factors can impact whether approval is granted.

Despite the LEC and Court of Appeal decisions, Rio Tinto has since lodged a fresh request with the Department of Planning and Infrastructure for Director-General Requirements to be issued for the Warkworth coal mine continuation project.

Following the repeal of section 75L of the EPA Act, merits based reviews of project approvals by the LEC are now precluded when the application has been made subject to a public hearing by the PAC. A public hearing can occur at any stage of the planning process and becomes more likely where there are in excess of 25 objections to the project. Consequently, third party challenges to major controversial mining projects are now likely to be mostly confined to administrative law appeals (where available).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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