Not all types of greenhouse gas emissions need to be given equal weight by the consent authority, according to NSW Court


The NSW Land and Environment Court ruling clarifies what a consent authority should consider with respect to GHG emissions, particularly Scope 3 emissions, when assessing whether or not to approve a project.

The interplay of greenhouse gas emissions and project approvals is once again before the courts, with the NSW Land & Environment Court upholding development approval for a greenhouse gas project despite arguments that the Independent Planning Commission did not adequately take into account greenhouse gases (GHG) project emissions (Mullaley Gas and Pipeline Accord Inc v Santos NSW (Eastern) Pty Ltd [2021] NSWLEC 10 (MGPA vs. Santos)).

The CSG project and Scope 3 (or downstream) emissions

The Independent Planning Commission (CIB) previously approved a development application of national significance for the Santos Narrabri gas project of 850 coal seam gas (CSG), subject to strict conditions on issues such as GHG emissions. The Mullaley Gas and Pipeline Agreement (MGPA), a group of residents and businesses, argued that the IPC’s decision was invalid on four grounds, three of which concerned the IPC’s consideration of the project’s GHG emissions:

  • Field 1 (Taking into account the impacts of GHG emissions) – The IPC misinterpreted section 4.15 (1) (b) of the Environmental Planning and Assessment Act (EP&A law) failing to take into account the environmental impacts of the Project’s GHG emissions and compare them to the benefits of the Project;
  • Soil 2 (downstream emission condition) – The IPC misunderstood or misinterpreted sections 4.15 (1) (a) (i) and (b) of the EP&A law and clause 14 (1) of the national environmental planning policy (mines, oil production and industries extractive) 2007 (Mining SEPP) by failing to impose a condition on the development authorization to regulate downstream GHG emissions (or Scope 3 GHG emissions) because they were outside of Santos’ direct control;
  • Ground 3 (Legally unreasonable decision) – The failure of the IPC to impose a condition on the development authorization to regulate the GHG emissions of Scope 3 was legally unreasonable; and
  • Land 4 (Pipeline impacts) – The IPC did not take into account a relevant issue: the likely environmental impacts of the construction of the proposed transmission pipeline that would transport the project gas to the market.

Taking into account the impacts of GHG emissions

The MGPA suggested that the IPC asked the wrong question when considering the likely impacts of the project on the natural and built environments. However, Santos argued that the project could be justified by comparing the GHG emissions of CSG versus coal, as burning CSG produces lower levels of emissions than burning coal. When reviewing the project, the IPC accepted this argument. Santos Environmental Impact Statement (EIA) also included a greenhouse gas assessment that calculated the direct and indirect GHG emissions associated with the project, including Scope 1 (direct emissions), Scope 2 (indirect emissions) and Scope 3 (other emissions) indirect outside the control of Santos). In examining this question, the IPC compared the potential GHG emissions from the project to emissions from similar coal projects and ultimately concluded that the negative impacts did not outweigh the benefits.

Considering the first ground, Chief Justice Preston said that the purpose of comparing the CPI between coal-fired and gas-fired production “was to assess whether the completion of the project might lead to a reduction in the total. [GHG] in the energy sector and for New South Wales as a whole “and found that the CPI did not err in considering the expected emissions of CSG relative to coal and that it was was a valid part of the assessment process.

Downstream emissions condition

The MGPA suggested that the IPC misunderstood or misinterpreted Clause 14 (1) of the mining PPSE, which says:

“(1) Before granting authorization for development for mining, oil production or extractive industries, the authorizing authority shall consider whether or not the authorization should be granted. issued subject to conditions designed to ensure that development is undertaken in an environmentally sound manner, including conditions to ensure the following:

(a) that impacts on important water resources, including surface and groundwater resources, are avoided or minimized to the extent possible,

(b) that impacts on threatened species and biodiversity are avoided or minimized to the extent possible,

(c) greenhouse gas emissions are minimized as far as possible.

(2) Without limiting subsection (1), in determining an application for development for operation for the purposes of mining, oil production or the extractive industry, the licensing authority shall take into account an assessment of the greenhouse gas emissions (including downstream emissions) of the development, and should do so taking into account any applicable state or national policy, program or directive regarding gas emissions Greenhouse effect.

Santos argued that paragraph 14 (1) (c) does not extend to the requirement for the PIC to determine whether or not consent should be granted subject to conditions minimizing Scope 3 emissions. In addition, although the IPC had an obligation to consider whether conditions should be imposed to minimize Scope 3 emissions, the IPC fulfilled this obligation.

Chief Justice Preston noted that the phrase “GHG emissions” in section 14 (1) “includes all three scopes of emissions, not only direct emissions (Scope 1) but also indirect emissions (Scopes 2). and 3) ”. However, he noted that while all three emission scopes must be taken into account, this does not mean that the result of this consideration will be the same for all types of emissions. The different scopes of emissions, as well as the degree of control of the proponent over indirect emissions, will influence whether conditions of consent are required by clause 14 (1) of the mining PPSE.

In addition, the degree of control that a proponent has over Scope 3 emissions will vary within each project and the degree of control will be assessed by the consent authority on a case-by-case basis. It was found that the IPC considered whether it was necessary to impose conditions to minimize Scope 3 emissions as much as possible, and decided not to do so, finding that Scope 3 emissions were outside Santos’ direct control because the promoter did not have sufficient control over end users and their consumption of produced gas. As such, the IPC could make the decision not to impose restrictions on Scope 3 emissions.

Finally, Preston C.J. found that the IPC’s decision not to impose Scope 3 conditions was not legally unreasonable, particularly where “reasonable minds may differ”. Although the arguments put forward by the MGPA may have supported a decision to impose a condition on Scope 3 emissions, they were not sufficient to establish that the decision not to impose the condition was legally unreasonable.

Emissions from associated projects

The MGPA also argued that the IPC should have taken into account the environmental impact of the pipeline associated with the project (plot 4). At the time consent was granted, the proponent was considering two options for the route of the pipeline and had not made a final decision; the IPC imposed a condition of consent that prevented Santos from starting phase 2 until planning approval was obtained for the pipeline.

Chief Justice Preston felt that the IPC was not required to take into account the likely impacts of any potential pipeline, as those impacts would not form likely impacts on or off the project site. Even if a unique route could have been identified, the impacts of this pipeline would not have had a real and sufficient link with the project.

Take-out for coal or other fossil fuel projects

This judgment clarifies what an authorizing authority should take into account with regard to GHG emissions, in particular Scope 3 emissions, when assessing whether or not to approve a project. There are a number of takeaways that apply to other coal and fossil fuel projects, including:

  • the references to GHGs in clause 14 of the SEPP Minier refer to the three emission perimeters (Scope 1, Scope 2 and Scope 3) but all types of emissions do not need to have the same weight;
  • if clause 14 of the mining SEPP applies, then the consent authority also has the power to impose consent conditions that control, regulate or restrict Scope 3 emissions for that project. However, it is not required to impose conditions on a project and, in certain circumstances, the degree of the promoter’s control over Domain 3 emissions will affect whether the authorizing authority judges appropriate to impose a condition on domain 3 broadcasts;
  • when reviewing a project, the licensing authority may compare the project’s GHG emissions to other types of projects as part of its environmental assessment; and
  • if a project leads to a reduction in overall GHG emissions in NSW, this will also be a relevant consideration for the licensing authority.

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