Court dismisses challenge to Narrabri Gas Project consent

The Land and Environment Court of NSW has dismissed an appeal challenging the validity of the grant of development consent for the Narrabri Gas Project (Project).

Snapshot

1. A local community Association Mullaley Gas Pipeline Accord Inc (MGPA) sought judicial review of the development consent on a number of grounds, primarily relating to whether the Independent Planning Commission (IPC) had sufficiently considered and addressed the greenhouse gas (GHG) emissions associated with the Project.
2. The Court dismissed all grounds of appeal, confirming the validity of the development consent.
3. The decision adds to the growing body of climate change litigation case law in New South Wales and highlights community scrutiny of climate change considerations during environmental assessment of projects. The decision also signals the need for consent authorities to undertake a fulsome environmental assessment of projects, having careful regard to the relevant statutory framework.

Background

On 30 September 2020, the IPC granted development consent for the Project.

MGPA sought judicial review of the IPC’s decision to approve the Project on four grounds, namely that:

1. the IPC had misconstrued section 4.15(1)(b) of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) by failing to consider the environmental impacts of the GHG emissions of the Project;
2. the IPC had misunderstood or misconstrued section 4.15(1)(a)(i) and (b) of the EP&A Act and clause 14(1) of the State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (NSW) (Mining SEPP) by failing to impose conditions regulating Scope 3 (downstream) emissions;
3. the IPC’s failure to impose conditions regulating Scope 3 emissions was legally unreasonable; and
4. the IPC failed to consider a relevant matter under section 4.15(1)(b) of the EP&A Act, being the environmental impacts of the proposed transmission pipeline which would convey gas from the Project to domestic markets.

Ground 1: whether the IPC failed to consider the environmental impacts of the Project

MGPA submitted that the IPC had failed to consider the environmental impacts of the Project because it had compared the potential GHG emissions of the Project with the potential GHG emissions of a hypothetical coal project. MGPA argued that this led the IPC to erroneously conclude that the adverse impacts of the Project would not outweigh its benefits.

The IPC had conducted this comparative analysis having regard to the NSW Gas Plan and NSW Energy Package MOU which encourage increasing the supply of gas in New South Wales. The Court noted at [25] that “[t]he IPC considered that the likely extent of emissions resulting from the Project [was] justified because of the strategic alignment of the Project with the NSW Gas Plan and NSW Energy Package MOU”.

The Court rejected this ground, finding that it was acceptable to compare a project’s GHG emissions against a ‘yardstick’, for the purpose of considering whether the impacts were acceptable (at [65]).

The Court went on to note that:

“…the point of the comparison was to assess whether the carrying out of the Project might lead to a reduction in total GHG emissions in the energy sector and for NSW as a whole. If gas produced by the Project were to facilitate gas-fired electricity generation displacing coal-fired electricity generation, a reduction in GHG emissions intensity in the energy sector and for NSW could potentially occur” (at [78]).

The Court also found that the “relative extent” of a project’s GHG emissions was not an irrelevant factor in evaluating environmental impacts (at [67]).

Ground 2: whether the IPC should have imposed a condition in relation to Scope 3 emissions

MGPA’s second ground alleged that the IPC had failed to impose a condition addressing Scope 3 emissions and had therefore misconstrued clause 14(1) of the Mining SEPP.

Clause 14(1)(c) of the Mining SEPP relevantly requires a consent authority to consider whether or not consent should be issued subject to conditions aimed at ensuring a development is undertaken in an environmentally responsible way, including by ensuring that GHG emissions are minimised to the “greatest extent practicable”.

The Court found that while clause 14 requires a consideration of GHG emissions, this does not equate to a consideration of whether any conditions should be imposed to minimise GHG emissions to the greatest extent practicable (at [104]).

The Court went on to say that:

“…The different scopes of the greenhouse gas emissions, whether direct or indirect, and if indirect, the degree of control that the proponent has over the indirect emissions, will influence the consideration required by cl 14(1) of whether the consent should be issued subject to conditions to ensure that greenhouse gas emissions of these different scopes are minimised to the greatest extent practicable” (at [104]).

The Court also applied the findings in the recent Bylong Valley coal mine appeal that consideration of matters under section 4.15 of the EP&A Act can implicitly include a consideration of whether conditions of consent should be imposed to manage impacts of a development.

The IPC had considered whether or not to impose conditions in relation to Scope 3 emissions, but had decided not to do so, as they were outside the direct control of the proponent.

Ground 3: whether the IPC’s decision not to impose a condition in relation to Scope 3 emissions was “legally unreasonable”

MGPA further argued that the decision not to impose a condition in relation to Scope 3 emissions was “legally unreasonable”. The notion that a decision might be “legally unreasonable” stems from the decision in Minister for Immigration and Citizenship v Li (2013) 249 CLR 332, which established that a decision could be unreasonable where it lacked an “evident and intelligible justification”, without needing to reach the high threshold of Wednesbury unreasonableness.

The Court found that it was open to the IPC to decide not to impose a condition in relation to Scope 3 emissions, for the reasons given in relation to ground 2.

Ground 4: whether the IPC failed to take into account a the impact of a proposed transmission pipeline

MGPA’s final ground of appeal was that the IPC had failed to take into account a relevant consideration in section 4.15(1)(b) of the EP&A Act, being the impact of a proposed transmission pipeline to transport gas from the Project to the domestic market.

The Department of Planning, Industry and Environment’s assessment report for the Project noted that there were two options for the construction of the pipeline. However, there were uncertainties concerning both options. Accordingly, the IPC imposed a condition requiring approval, construction and commissioning of the pipeline before the Project could commence.

The Court found that section 4.15(1) of the EP&A Act required consideration of direct on-site impacts and direct and indirect off-site impacts of a project (at [140]).

The impacts of the pipeline were neither on-site nor off-site impacts, and therefore the IPC was not required to consider the likely impacts of the pipeline in considering whether or not to grant consent for the Project.

The impacts would not be “on-site” as the development application did not seek consent for the construction of the pipeline and did not identify the specific land on which the pipeline was to be constructed.

The impacts were also not “off-site” because there was no “real and sufficient link” between the Project and the pipeline, meaning any impacts of the pipeline would be too remote to be considered impacts of the Project.

Notably, the Court confirmed its decision in Ballina Shire Council v Palm Lake Works Pty Ltd [2020] NSWLEC 41 at [7]-[8] in which the Court held that:

“The critical factor is that there is a connection between the likely impact and the proposed development. This is because the category of relevant matters required to be considered is “the likely impacts of that development”. As Basten JA held in Hoxton Park Residents Action Group Inc v Liverpool City Council (2011) 81 NSWLR 638; [2011] NSWCA 349 at [44]:

‘The impact must be one flowing from the development the subject of the development application: the question is how remote a ‘likely’ impact must be, in order to disqualify it from the scope of the consideration.’

Increasing remoteness in the chain of likely consequences will decrease the significance of an impact. This flows from both the concept of “impact” and the concept of “likely”. As Basten JA held in Hoxton Park Residents Action Group Inc v Liverpool City Council at [46]:

‘Some such limitation must follow from the concept of ‘impact’: as remoteness from the development increases, impact is likely to decrease, until it no longer has practical significance in terms of approving or refusing to approve the application. Further, the likelihood of a particular impact may diminish with remoteness. ‘Likely’ in this context has the meaning of a ‘real chance or possibility’ rather than more probable than not…’”.

The Court also noted that the condition of consent requiring approval of the pipeline prior to the Project commencing was a Grampian condition (as described in Grampian regional Council v Secretary of State for Scotland and City of Aberdeen District Council (1984) SC (HL) 58; [1984] JPL 590.

A Grampian condition prevents a development being commenced until a specified event has taken place. The Court held that a Grampian condition (by itself) does not establish a “real and sufficient link” between the impacts of a Project and the development the subject of the Grampian condition.

Key takeaways

The decision adds to the growing body of climate change litigation in New South Wales.

In particular, the decision highlights ongoing community scrutiny of climate change considerations during environmental assessment of projects. It also demonstrates the need for consent authorities to undertake a fulsome environmental assessment of projects, having careful regard to the relevant statutory framework.

The decision also provides useful guidance in relation to the interpretation of clause 14 of the Mining SEPP and section 4.15(1) of the EP&A Act.

In relation to clause 14 of the Mining SEPP, the Court has indicated that different scope emissions will require different considerations to determine how emissions can be minimised to the greatest extent practicable.

In relation to section 4.15(1) of the EP&A Act, the Court has confirmed that there must be a “real and sufficient link” between a project and off-site impacts in order for those impacts to be considered impacts of the project.

A copy of the judgment can be found here: Mullaley Gas and Pipeline Accord Inc v Santos NSW (Eastern) Pty Ltd [2021] NSWLEC 110

By Peter Briggs, Partner, Daniel Webster, Senior Associate, Brigitte Rheinberger, Solicitor, and Rachel Holland, Graduate.