The decision turns on the wording of s 4.15(1)(b) of the EP&A Act and cl 2.20(1)(c) of the Resources SEPP. The Court made clear that it was not deciding any broader question about climate change. The Court unanimously overturned the NSW Court of Appeal's construction of the EP&A Act as requiring separate, specific consideration of each impact of the development on the locality. The Court confirmed instead that such impacts should still be considered, but as part of the development's likely impacts generally rather than as a separate, mandatory inquiry. Separately, and by majority, the Court confirmed that consent authorities assessing mining, petroleum and extractive industry developments must consider whether conditions should be imposed to minimise Scope 3 emissions “to the greatest extent practicable”.
Snapshot
- The High Court of Australia (Court) unanimously rejected the NSW Court of Appeal’s interpretation of s 4.15(1)(b) of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) as requiring separate, specific consideration of a development's impacts in the locality, confirmingthattheprovision is directed to a development's likely impacts generally, and the reference to the locality is merely descriptive or explanatory of certain kinds of likely impacts (see our earlier blog post on the NSW Court of Appeal’s decision here).
- By a 3-2 majority, the Court held that cl 2.20(1)(c) of the State Environmental Planning Policy (Resources and Energy) 2021 (NSW) (Resources SEPP) imposes a distinct obligation for specific industries in NSW to consider whether conditions should be imposed to minimise all greenhouse gas (GHG) emissions, including Scope 3 emissions, to the greatest extent practicable. Consideration of international regulatory frameworks, such as the Paris Agreement, under cl 2.20(2) will not be sufficient to satisfy the separate obligation under cl 2.20(1)(c).
- The decision is likely to heighten scrutiny of Scope 3 emissions in NSW for mining, petroleum production, and extractive industries, requiring consent authorities to actively consider potential conditions to minimise those emissions in an environmentally responsible manner.
- The implications for other jurisdictions, regulatory frameworks, and industries will require a case by case consideration.
Big takeaways
The decision should not be taken as the Court weighing in on climate change. At its heart, it is a statutory interpretation and traditional judicial review decision relating to particular statutory provisions governing the assessment and decision making process for mining projects in NSW. In short, the Court took the view that, in that context, a reference to GHG emissions in the Resources SEPP includes Scope 1, 2 and 3 emissions, and it was not permissible for the decision maker to discount Scope 3 emissions on the basis that they were accounted for elsewhere. It was held that the omission of Scope 3 emissions from the consent authority’s decision was material, because it accounted for 98% of the GHG emissions from the mining expansion project.
The Court did not deal with the issue raised in the appeal as to whether climate change impacts are capable of being “environmental impacts in the locality”. However, Justice Edelman noted that there is a strong argument that “likely impact” should be broadly interpreted to include any non-trivial contribution to GHG emissions where those gases have impacts on climate change in the natural and built environment.
The key lessons from the decision are not dissimilar to other reviews of statutory decision making – a decision maker must make its decision following an active intellectual process that engages with the applicable statutory requirements for determining a development application. This is not new.
Background
MACH Energy Australia Pty Ltd (MACH) sought development consent for the Mount Pleasant Optimisation Project (Project), which would extend the operational life of the Mount Pleasant Coal Mine by 22 years to 2048 and enable the extraction of an additional 406 million tonnes of coal. The application was assessed as State significant development by the Independent Planning Commission (IPC) as consent authority.
The Project's Environmental Impact Statement (EIS) identified Scope 1, 2 and 3 GHG emissions. Scope 3 emissions, arising predominantly from the downstream combustion of exported coal, comprised approximately 98% of the Project’s total predicted GHG emissions. The IPC imposed conditions addressing Scope 1 and 2 emissions but imposed no conditions directed at Scope 3 emissions. It noted that Scope 3 emissions were “appropriately regulated and accounted for” under the Paris Agreement and international frameworks.
A local environment group, Denman Aberdeen Muswellbrook Scone Healthy Environment Group Inc (DAMSHEG), challenged IPC’s decision to grant the development consent. The Land and Environment Court of NSW (NSW LEC) dismissed the challenge.
However, the NSW Court of Appeal allowed the appeal, holding that s 4.15(1)(b) of the EP&A Act required the IPC to consider the specific effects of climate change on the locality of the mine. While the NSW Court of Appeal found that the IPC had considered the Project’s Scope 3 emissions for the purposes of cl 2.20 of the Resources SEPP, it held that the IPC failed to consider the local environmental impacts that would flow from those Scope 3 emissions contributing to climate change. MACH appealed to the High Court.
Locality is not a separate, mandatory focus: no specific causal inquiry required
The Court unanimously rejected the NSW Court of Appeal's interpretation of s 4.15(1)(b) of the EP&A Act. The Court of Appeal had treated the development's likely impacts “in the locality” as the essential matter with which s 4.15(1)(b) is centrally concerned, such that the Commission had to specifically address local impacts as a distinct, mandatory step separate from its consideration of the development's impacts more generally. The Court held this construction was wrong: s 4.15(1)(b) is directed to the likely impacts of the development as a whole, and the words “in the locality” are simply descriptive of the types of impacts that may require consideration, not a separate matter that elevates local impacts above the development's likely impacts generally.
The Court confirmed that local impacts remain relevant, but the nature and geographic scope of the impacts requiring consideration will depend on the particular development, and may extend beyond the locality to regional, national or global impacts. The Court did not decide whether “in the locality” qualifies only social and economic impacts or environmental impacts as well, considering that question to be immaterial to its construction of the provision. The Court also clarified that the term “likely” in s 4.15(1)(b) means a real, not far-fetched, fanciful or trivial chance of occurring.
The Court also emphasised that, once a likely impact has been identified, the level of specificity at which that impact is considered is ordinarily a matter for the consent authority. A consent authority is not required to separately address every local consequence or sub-issue raised in submissions, provided it has considered the relevant likely impact of the development.
In the context of climate change, the majority held that the IPC’s consideration of the Project's contribution to global GHG emissions and climate change necessarily encompassed consideration of climate change impacts in the locality of the mine. As a result, the IPC had complied with s 4.15(1)(b) and no jurisdictional error was established.
A distinct mandatory obligation: consider conditions to minimise Scope 3 emissions
The majority of the Court (3-2) held that cl 2.20(1)(c) of the Resources SEPP requires a consent authority to engage in an “active intellectual process” to consider whether conditions should be imposed to ensure that all GHG emissions – a term the Court held includes GHG emissions of all scopes, including upstream and downstream Scope 3 emissions – are minimised to the greatest extent practicable.
The obligation is to engage in an “active intellectual process” that grapples with the possibility of conditions on all scopes of emissions; manifesting that process in relation to only a small fraction of a project’s total emissions is not sufficient to discharge it. This guides how consent authorities should discharge the cl 2.20(2) obligation to assess GHG emissions and determine appropriate conditions having regard to applicable policies, programmes and guidelines.
The IPC submitted that Scope 3 emissions were “appropriately regulated and accounted for” at the location of consumption, and accounted for under the relevant nation states’ commitments under the Paris Agreement. The Court rejected this submission, with Beech-Jones J noting that merely considering whether Scope 3 emissions are appropriately regulated or accounted for under an international framework is not the same as considering whether conditions should be imposed to minimise them, and does not discharge the distinct and “much sharper” obligation under the Resources SEPP to do so.
Edelman J separately observed that, while the IPC's consideration of conditions for Scope 1 and 2 emissions was comprehensive, no equivalent conditions were imposed or even discussed for the 98% of emissions falling within Scope 3. The IPC’s own reasons did not support an inference that it had turned its mind to minimisation conditions for those emissions, as it did not identify, assess or reject possible conditions, nor explain why such conditions were unavailable, ineffective or impracticable. The Court ultimately held that the IPC’s failure was material, because there was a realistic possibility that the decision could have been different had the IPC addressed the issue and sought or received further submissions on Scope 3 minimisation conditions.
Two Justices of the Court noted that responsibility for proposing mitigation measures rested principally with MACH as proponent, and the IPC was independently required to consider them. Two Justices further quoted examples of possible minimisation conditions suggested by the NSW Court of Appeal, including requirements relating to coal quality, export destinations, end-use technology or carbon offsets. However, the Court expressly declined to determine whether any such conditions should in fact be imposed, holding that this question remained for the IPC.
A minority of the Court (Gageler CJ and Jagot J) considered that the IPC did not breach cl 2.20(1)(c) of the Resources SEPP. The minority held that the IPC had considered the minimisation of all GHG emissions, including Scope 3 emissions, within the broader framework of applicable international, national and State policies, and the conditions imposed were sufficient to satisfy cl 2.20(1)(c).
What remains unresolved?
The Court did not decide whether climate change impacts are capable of constituting environmental impacts "in the locality” for the purposes of s 4.15(1)(b) of the EP&A Act, as it did not have the benefit of scientific evidence before it and the question was unnecessary to resolve the appeal. However, Edelman J noted that it would be necessary to consider any non-trivial contribution to greenhouse gases where those gases have impacts on climate change in the natural and built environments generally or in the locality.
The Court also did not decide on the conditions the IPC must consider to minimise Scope 3 emissions. Importantly, the Court did not refuse the approval of the Project; rather, it found that the development consent was invalid as it had not been made according to law.
Following the dismissal of MACH’s appeal, the matter will return to the NSW LEC to consider appropriate relief under the Land and Environment Court Act 1979 (NSW). The NSW LEC may make orders to suspend the development consent or conditionally validate it subject to specific terms of compliance. Such specific terms of compliance may include requiring the decision-making process, or a part of it, to be carried out again, with due regard to Scope 3 emissions minimisation conditions.
Since the development application the subject of this appeal was determined, s 4.15(1)(b) of the EP&A Act has been amended and now refers to the "significant likely impacts" of a development, rather than simply its "likely impacts" (see our blog post on the amendments here). The Court's reasoning in this decision was directed at the provision as it stood at the relevant time and did not consider the "significant" qualifier. Whether, and to what extent, the Court's construction of "likely impacts" (including its rejection of a separate locality-based inquiry) continues to apply under the amended wording is not addressed by the decision and remains an open question.
Key takeaways
The Court’s decision highlights the following key matters for decision makers and proponents:
- Consent authorities must clearly record their consideration of Scope 3 emissions minimisation conditions: Where planning instruments require consideration of emissions reduction conditions, decision-makers must expressly engage with that question, including with respect to Scope 3 emissions, even if they ultimately conclude that no additional conditions are warranted. The consideration of international or national regulatory frameworks that account for or regulate Scope 3 emissions is a separate obligation and without more, will not be sufficient to discharge the obligation to consider emissions reduction conditions.
- Locality is not a separate, mandatory focus: In NSW, the focus of s 4.15(1)(b) of the EP&A Act is the development's likely impacts, which may be local, national or global in character depending on the nature of the project. Local impacts may ultimately still fall under the umbrella of likely impacts for a specific development; they simply are not assessed through a separate inquiry divorced from the development's likely impacts as a whole. A consent authority is not required to conduct a specific causal inquiry tracing a development's impacts to the specific locality in order to satisfy the provision. Proponents should be mindful of this scope when preparing an EIS.
- For projects subject to the Resources SEPP: Proponents in mining, petroleum production, and extractive industries should expressly address potential conditions directed to minimising Scope 3 emissions and explain why any particular condition is or is not practicable, rather than relying on international accounting frameworks as a substitute for this analysis.
- Increased scrutiny of decision-makers: The lessons from this decision are not dissimilar to other reviews of statutory decision-making.A decision-maker must make its decision following an active intellectual process that engages with the relevant statutory requirements.A significant part of the decision was dedicated to considering whether the IPC had done so in relation to the Resources SEPP criteria, applying a high degree of scrutiny to the IPC’s reasoning and whether it had applied all relevant statutory criteria and appropriately documented its decision-making process.
- Applicability to other statutory provisions: Whether or how this decision can be applied to other statutory provisions will depend on the drafting and context of those provisions. The decision should not be taken as a watershed moment, but it is a useful reminder of the rigour required in statutory decision-making processes.
Could there be more litigation as a result?
Climate change litigation is not going away, and it will continue to evolve as science advances and legislation changes. The Court’s decision, however, is not changing the law on climate change in NSW and more broadly across Australia.
What’s next?
Watch for the NSW LEC's decision on relief, which will determine the practical consequences for the Project, including whether the decision-making process, or a part of it, is ordered to be carried out again, and how the LEC seeks to remedy the IPC’s failure to consider Scope 3 minimisation conditions.
State and Territory governments may also use this opportunity to amend environmental assessment laws, to clarify the scope of GHG considerations for future development applications.
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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