The New South Wales ("NSW") Independent Planning Commission ("IPC"), as the consent authority for state significant development applications in NSW, Australia, has recently considered three coal project applications. One greenfield site application was refused, while two brownfield expansion and continuation projects were approved with conditions. The conditions for one of the projects included a new condition related to Scope 3 emissions (i.e., indirect emissions which occur in the value chain of the project, including upstream and downstream emissions), while the other included a condition to improve energy efficiency and reduce Scope 1 (direct) and Scope 2 (production related indirect) emissions.

The NSW government has since moved to change the law so that conditions related to Scope 3 emissions cannot be included in project consent conditions.

Bylong Project Refused

KEPCO Bylong Australia Pty Ltd made an application to develop and operate an open cut and underground coal mine to recover 124 million tonnes of run-of-mine coal at a combined rate of up to 6.5 million tonnes per annum ("mtpa") for 25 years in the Bylong Valley in NSW (the "Bylong Project"). This is a greenfield site containing substantial productive agricultural land.

While the NSW Department of Planning and Environment produced a final assessment report that recommended approval, the IPC refused the application. It published a 146-page Statement of Reasons for Decision dated September 18, 2019. The refusal reasons included climate change factors as follows:

  • The direct and indirect greenhouse gas ("GHG") emissions will adversely impact the NSW environment, the Bylong Project has not minimised scope 1, 2, and 3 GHG emissions to the greatest extent practicable, and there are no offset measures proposed;
  • The market substitution of the coal argument was rejected, citing the Gloucester Resources Case (see "Australian Court Rejects Proposed Coal Mine in Gloucester Valley, New South Wales," The Climate Report, Spring 2019); and
  • The Bylong Project is not in the public interest because it is contrary to the principles of ecologically sustainable development—namely, intergenerational equity—because the predicted economic benefits would accrue to the present generation, but the long-term environmental, heritage, and agricultural costs will be borne by future generations.

United-Wambo Project Approved

In contrast to the Bylong Project, the IPC approved an application to expand the existing open cut mining operations at the Wambo Coal Mine and to develop a new open cut mine at the adjoining United Coal Mine by a 50/50 joint venture comprising United Collieries Pty Ltd and Wambo Coal Pty Ltd. This is an existing brownfield site in the Hunter Valley. The proposal involves integrating the two open cut operations to extract up to 10 mtpa of run-of-mine coal over a 23-year period.

The approval was given on August 29, 2019, and was accompanied by a 102-page Statement of Reasons for Decision. The reasons included an acknowledgement that Scope 1, 2, and 3 GHG emissions will be minimised as much as practicable.

The applicant submitted that Scope 3 GHG emissions will be minimised because the most likely export destinations for the project's coal will be to countries that are a party to the Paris Agreement or that otherwise have equivalent domestic policies for reducing GHG emissions. The IPC decided to include a consent condition to give effect to this representation, requiring an Export Management Plan to be approved by the Planning Secretary "to ensure that all reasonable and feasible measures are adopted by the Applicant to minimise greenhouse gas emissions identified as Scope 3 emissions in the EIS to the greatest extent practicable." The Planning Secretary may determine in the future to amend the Export Management Plan or determine it is no longer needed.

Rix's Creek South Project Approved

On October 12, 2019, the IPC approved an application by Bloomfield Collieries Pty Ltd ("Bloomfield") to expand and continue open cut coal mining operations at Rix's Creek South Coal mine in the Hunter Valley, NSW, for an additional 21 years, with increased coal production from 2.8 mtpa to 3.6 mtpa (totalling an additional 25 million tonnes of product coal over the project life). The approval was accompanied by a 97-page Statement of Reasons for Decision.

The product coal would be predominately exported to Japan and South Korea (signatories to the Paris Agreement) and to Taiwan (which has developed GHG reduction targets which are enforced by its Greenhouse Gas Reduction and Management Act).

The NSW Department of Planning and Environment recommended approval of the project with conditions, one of which required Bloomfield to take all reasonable steps to improve energy efficiency and to reduce the project's GHG emissions. Bloomfield must prepare and implement an Air Quality and Greenhouse Gas Management Plan to the satisfaction of the Planning Secretary containing best practice management measures to be taken to minimize GHG emissions and to improve energy efficiency. It must report to the Planning Secretary annually on the plan.

The IPC also made the following comments:

  • Market forces in the planned export countries of Japan, South Korea, and Taiwan are likely to lead buyers in those countries to seek coal products which best meet their requirements and minimize associated emissions in order to achieve the relevant domestic emissions reduction targets.
  • The IPC is satisfied with Bloomfield's commitments to minimize Scope 1 and 2 emissions (over which it has direct control) to the greatest extent practicable. The IPC notes that Bloomfield does not have direct control over Scope 3 emissions, but has committed to a range of measures to reduce GHG emissions. The agreed upon conditions are adequate and reasonable for a project of this size and nature, given the current national and state policies.

Related Legislative Proposal

On October 24, 2019, the NSW Minister for Planning introduced a bill into Parliament to prohibit project consent conditions that seek to control Scope 3 GHG emissions or other climate change impacts occurring outside Australia. The bill is the Environmental Planning and Assessment Amendment (Territorial Limits) Bill 2019. It will, if passed, prohibit the imposition of conditions of a development consent that purport to regulate any impact of the development occurring outside Australia. It will also remove the specific requirement in a state environment planning policy to consider downstream GHG emissions in determining whether to approve mining, petroleum production, or extractive industry development applications. This legislation will not retroactively invalidate any conditions previously imposed. It will apply to future projects only.

For the bill to become law, it has to be passed by the Lower and Upper Houses. While the government has a majority in the Lower House, it will need to rely on some independent members in the Upper House for it to be passed if the opposition Labor Party members oppose the bill. It remains to be seen whether those members will support this bill. The Minister is seeking to have the bill passed by year's end

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