Significant climate change decision – shifting grounds for the Australian coal sector?

Until a month ago, no coal mine project in Australia had been refused by a decision-maker or Court on the basis of its contribution to global greenhouse gas emissions and climate change. On 8 February 2019 this changed with the significant and controversial judgment of Brian Preston CJ[1] in the NSW Land and Environment Court in the case brought by Gloucester Resources Limited (GRL) against the Minister for Planning’s refusal to grant planning consent for a new coal mine project in the Gloucester Valley (the Project). While climate change was not the only ground for the Court’s decision to uphold the Minister’s refusal, it is a significant case as it is the first where climate change clearly played a significant role in weighing up the negative and positive aspects of the project, tipping the balance towards a refusal.

Proponents of large scale mining and other resource projects will need to review the decision carefully in order to put forward projects that overcome the deficiencies identified by the Court in this case, not just the climate impacts, but visual and social impacts too. Partner Meg Lee comments on the significance of the decision.

Background

Gloucester Resources Limited (GRL) applied to the Minister for Planning for development consent at a site in the Gloucester Valley for an open cut coal mine, known as the Rocky Hill Mine, to produce 21 million tonnes of coal over a period of 16 years.

The Minister referred the project for assessment by the Planning Assessment Commission (PAC) and the Minister subsequently refused consent for the project on the grounds that:

• the use of the land for the coal mine was incompatible with the underlying zoning of the land which was for primary production and environmental management (even though mining was a permissible land use under the relevant State mining policy[2];
• the use of the land for the mine had potential land use conflicts with existing established uses, including rural-residential and tourism;
• the mine would likely have significant residual visual impacts and was not sympathetic to the Gloucester Valley character; and
• the mine was not in the public interest on the basis that any economic or social benefits would be outweighed by the reduction in the residents’ quality of life because of visual, noise and air quality impacts.

Following an appeal to the Land and Environment Court, Preston CJ upheld the Minister’s decision to refuse the mine for some of the same reasons, namely adverse visual impact and adverse impacts on the preferred land uses in the vicinity of the mine. Importantly, however, following submissions made by local group Gloucester Groundswell (Groundswell), Preston also included the following additional reason put simply as follows:

“The construction and operation of the mine, and the transportation and combustion of the coal from the mine, will result in the emission of greenhouse gases, which will contribute to climate change. These are direct and indirect impacts of the mine.”

The costs of this open cut coal mine, exploiting the coal resource at this location in a scenic valley close to town, exceed the benefits of the mine, which are primarily economic and social. Development consent should be refused.”[3]

In summing up at the end of the long judgment Preston CJ commented:

“In short, an open cut coal mine in this part of the Gloucester valley would be in the wrong place at the wrong time. Wrong place because an open cut coal mine in this scenic and cultural landscape, proximate to many people’s homes and farms, will cause significant planning, amenity, visual and social impacts. Wrong time because the GHG emissions of the coal mine and its coal product will increase global total concentrations of GHGs at a time when what is now urgently needed, in order to meet generally agreed climate targets, is a rapid and deep decrease in GHG emissions. These dire consequences should be avoided. The Project should be refused.”[4]

Traditional Planning Grounds

A large part of the judgment is dedicated to an analysis of the evidence for and against the coal mine on ‘traditional’ planning grounds relating to the local policy provisions that supported tourism and farming use of the land, the visual impact of the mine, social impacts and emissions of dust and noise.

Proponents of any large scale resources projects should review the decision and take some lessons on the findings on these points.

Visual Impact

Preston CJ found that the visual impact of the Rocky Hill Coal Project will be high because of the high visual contrast with the surrounding landscape, which he considered would not be satisfactorily ameliorated by the amenity barriers or the revegetation of the amenity barriers, permanent overburden emplacements or rehabilitated post mining landforms.

Preston CJ disagreed with the evidence put for GRL that the bare areas of earth will “appear as ploughed fields in the landscape“, preferring the opposing expert visual impact evidence that the earth and the amount of rock in the overburden will have a different appearance to harrowed or ploughed soil in a field. The size and extent of the exposed earthworks will be greater than any ploughed field. Preston CJ found that the slope, shape, height, length, and width of the amenity barriers and the overburden emplacement areas will have an appearance quite different to and in contrast to the existing landforms and landscape.

Preston CJ also agreed with the opposing evidence that there was a significant risk that the revegetation strategy would fail due to the aspect, salinity and slope and thereby fail to mitigate the impact.

Noise

The parties’ experts all agreed that the mine would meet the recommended amenity noise levels for each category of residential receiver in both the day time period and the evening period. However, the experts differed in their opinions on the “intrusive” noise impacts.

Ultimately, Preston CJ found that neither the amenity or intrusive noise impacts of the mine were a ground in itself to refuse the project, but that the noise impacts nevertheless do contribute to and form part of the adverse social impacts that in turn are a ground for refusal. This analysis is of potential relevance to the renewable energy sector including wind farms where noise impacts, even though complying with relevant standards, are nevertheless often controversial and a cause of angst in the local communities.

Dust

The Court found, based on evidence of opposing experts, that the cumulative air quality level will comply with the development standard in cl 12AB(4) of the Mining SEPP and therefore that the mine’s cumulative air quality level was not a ground in itself for refusing development application.

However, as with noise impacts, the Court found that the residents’ concerns about the mine’s potential adverse effects on air quality, and the concomitant threat to their health and the health of their family, may have negative social impacts such as concerned residents leaving Gloucester and not being replaced by other people. Further, uses that depend on Gloucester having, and being seen to have, a clean and green environment will also be adversely affected, again leading to negative social impacts.

Social Impacts

Much time was spent in the judgement analysing the social impact evidence of the parties. Preston CJ found that I find that the project would negatively impact on the composition, cohesion and character of the community and local people’s sense of place. He accept the evidence of Dr Askland and Dr Lawrence on the social impacts on community, stating that he found it compelling and that it was corroborated by the evidence of the local people who object to the project.

Importantly, the dependence of the social impact evidence on the other GRL’s experts’ opinions that the project would not have unacceptable visual, acoustic and air quality impacts made the conclusions of the social impact assessment that there would not be social impacts vulnerable to attack given that Preston CJ found that there would in fact be an unacceptable visual impact.

As part of the social impact assessment Preston CJ also considered evidence put about the impact on Aboriginal people. He found that “the project will adversely affect Aboriginal people of the area, by impacting their culture and Country. The impacts are not merely to the individual Aboriginal sites that have already been identified, but also there is the risk that other unidentified Aboriginal sites might be affected. There is also the broader impact on the landscape that is of high spiritual significance to the Aboriginal people.”[5]

Resource location

Importantly, as many resources projects will rely upon the same arguments as GRL in relation to the limited location of the resource, Preston CJ’s response to this is a salient lesson for all resource project proponents.

GRL had submitted that, unlike other types of development, which can be moved elsewhere to avoid or mitigate adverse impacts, the location of a coal mine cannot be changed.

Preson CJ responded that the fact that the coal resource is in the location of the Gloucester valley does not mean that the resource there must be exploited, regardless of the adverse impacts of doing so, stating that “A development that seeks to take advantage of a natural resource must, of course, be located where the natural resource is located. But not every natural resource needs to be exploited. A dam can only be located on a river, but not every river needs to be dammed. The environmental and social impacts of a particular dam may be sufficiently serious as to justify refusal of the dam.”[6]

Climate Change Grounds

Turning now to the more controversial ground for refusal, climate change impacts.

Groundswell was a local group joined to the proceedings who raised climate change grounds as part of its grounds contending that the Rocky Hill Coal Project should be refused because the greenhouse gas (GHG) emissions from the Project would adversely impact upon measures to limit dangerous anthropogenic climate change. Groundswell contended that the effects of carbon in the atmosphere arising from activities in the mine site, and the burning of the coal extracted from the mine (known as Scope 3 emissions), are inconsistent with existing carbon budget and policy intentions to keep global temperature increases to below 1.5º to 2º Celsius (C) above pre-industrial levels and would have a cumulative effect on climate change effects in the long term.

Groundswell reasoned that because Australia is a party to both the Climate Change Convention and the Paris Agreement, Australia must meet its commitment to keeping the global average temperature rise to the 1.5-2ºC range by reducing their GHG emissions through their Nationally Determined Contributions (NDC). Australia’s NDC is to reduce GHG emissions by 26-28% below 2005 levels by 2030. In turn, the NSW Government has endorsed the Paris Agreement and has set a more ambitious objective to achieve net zero emissions by 2050 (see NSW Climate Change Policy Framework, October 2016, pp 4, 5).

Based on these legal obligations, Groundswell contented that no new coal mine should be approved as to do so makes it difficult to achieve these policy targets and international obligations.

GRL responded to Groundswell’s arguments as follows:

• while it did not disagree with the targets set in the policies cited, it argued that the policies do not go so far as to state that no new coal mine be approved and that the policies do not pre-determine how the greenhouse gas reductions are to occur;
• due to the continued critical role of steel to society, the limited substitutes for using coking coal in primary steel production and the likely demand for coking coal from the Rocky Hill Coal Project, the Rocky Hill Coal Project should be approved, regardless of the associated GHG emissions;
• scope 3 emissions should not be considered in determining GRL’s application for consent for the Rocky Hill Coal Project, because it Australia should not be held accountable for the emissions in other countries from burning Australian coal;
• the GHG emissions of the Project could be offset by other (non-specific) sequestration projects; and
• the GHG emissions of the Project will occur regardless of whether the Project was approved or not, because of market substitution and carbon leakage. In particular, GRL led evidence from Dr Fisher stating that, because Australian coal mines operate to some of the highest environmental standards in the world and regulations ensure a strict recognition and accounting of GHG emissions, and this is not the case in all countries where coal mining occurs (Fisher report, [65]), increased global GHG emissions might occur if this project were not approved.

In responding to each climate argument, Preson CJ found that:

• while agreeing with GRL that the NSW policy does not prescribe the mechanisms by which GHG reductions to achieve zero net emissions by 2050 are to occur, he nevertheless found that the exploitation and burning of a new fossil fuel reserve, which will increase GHG emissions, is not of any assistance in achieving the rapid and deep reductions in GHG emissions that are necessary.
• scope 3 emissions are relevant to be considered and cited numerous prior Australian and international case examples in support of the position that they are a relevant consideration, including a 2004 decision[7] of Justice Morris in VCAT regarding rezoning of land for the (now closed) Hazelwood mine and a 2006 decision[8] in relation to the Anvil Hill mine in the Hunter Valley;
• the direct and indirect GHG emissions of the Rocky Hill Coal Project will contribute cumulatively to the global total GHG emissions. In aggregate, the Scope 1, 2 and 3 emissions over the life of the Project will be at least 37.8Mt CO2-e, a sizeable individual source of GHG emissions. It matters not that this aggregate of the Project’s GHG emissions may represent a small fraction of the global total of GHG emissions;
• further, in response to GRL’s contention that the emissions could be offset by other GHG reduction or sequestration projects, Preston CJ stated:

“I do not accept this reason. It is speculative and hypothetical. There is no evidence before the Court of any specific and certain action to “net out” the GHG emissions of the Project… GRL has not proposed to balance the emissions by sources with removals by sinks..

Where the development will result in GHG emissions, the consent authority must determine the acceptability of those emissions and the likely impacts on the climate system, the environment and people. The consent authority cannot avoid this task by speculating on how to achieve “meaningful emissions reductions from large sources where it is cost-effective and alternative technologies can be brought to bear” (Fisher Report, [13]). Such emissions reductions from other sources are unrelated to the development that is the subject of the development application that the consent authority is required to determine.”

• On the carbon leakage argument, Preston CJ found that GRL failed to substantiate, in the evidence before the Court, that this risk of carbon leakage will actually occur if approval for the Rocky Hill Coal Project were not to be granted. Preston CJ considered the evidence of the different experts and noted that although there was some disagreement between the experts on coal demand, the expert evidence did concur that there were other coking coal mines, both existing and approved, in Australia that could meet current and likely future demand for coking coal, including coking coal with the properties of the coal from the Project. This would mean that the demand for coking coal would be met by Australian coking coal of the highest quality in the world from Australian coal mines operating to the highest environmental standards in the world. There is, therefore, unlikely to be a moving of coal mining abroad or carbon leakage.
• On the market substitution argument, the Court found:

There is also a logical flaw in the market substitution assumption. If a development will cause an environmental impact that is found to be unacceptable, the environmental impact does not become acceptable because a hypothetical and uncertain alternative development might also cause the same unacceptable environmental impact. The environmental impact remains unacceptable regardless of where it is caused.

Other Australian Courts have not previously dismissed the market substitution argument with such deftness. In the Carmichael mine appeal the Federal Court and Full Federal Court each found on review that the federal environment Minister had not made an error of law when he had decided that if the Carmichael mine did not go ahead it could well be replaced by coal from another mine [9].

Cost v benefit analysis

Preston CJ also spent significant time in the judgment analysing the cost benefit evidence presented by the parties.

He found that the economic benefits of the Project, assessed by GRL, are uncertain and in any event substantially overstated. The total direct benefits of the project are likely to be much lower than claimed, because less royalties and company income tax will be paid by GRL. The total direct benefits will be in the order of $20 million (in NPV terms) less than those claimed by GRL’s expert. He also concluded that the indirect benefits of the project will be very small, finding that any worker benefits or supplier benefits will be small, perhaps even none, and nowhere near the inflated values assigned by GRL’s expert.

Conversely, Preston CJ found that the total indirect costs of the project are likely to be greater than those assessed by GRL’s expert. Environmental, social and transport related costs are likely to be greater than the low values in GRL’s evidence. There are likely to be indirect costs to other industries, including the agricultural, agri-tourism and tourism industries, but these were not quantified on the evidence.

On balance, the Court found that the negative impacts of the project, including:

• the planning impacts on the existing, approved and likely preferred land uses,
• the visual impacts, the amenity impacts of noise and dust that in turn cause social impacts,
• other social impacts, and
• climate change impacts,

outweigh the economic and other public benefits of the project. Balancing all relevant matters, Preston CJ concluded that the project is contrary to the public interest and that the development application for the project should be determined by refusal of consent to the application.

Shifting grounds for the coal sector?

As Preston’s analysis showed, the relevance of climate change and greenhouse gas contributions of a project has already been well established in other cases, so the coal industry should not be surprised that the Court has again confirmed it is a relevant consideration to any approval decision and that scope 3 emissions are a relevant part of the equation. What is arguably setting a new approach in an Australian court, is the way that Preston CJ dismissed the market substitution arguments.

The Preston judgment does not set a precedent that all new coal mines should be refused on climate change grounds. There is therefore no cause for alarm within the coal sector that all new mines will now be refused. Other mines, in less sensitive locations, with less visual and social impacts (yet the same climate impact), could still be approved by the courts if the balance between negative and positive impacts is tipped the other way.

The judgment has lessons for other resource developers, including the wind sector, in terms of the assessment and mitigation of visual, acoustic and social impacts of their projects. The fact that a proponent can show that a project can comply with relevant acoustic or dust emission standards, but that these “complying” impacts can nevertheless contribute to an unacceptable social impact is something that proponents will need to address in future project approval applications.

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[1] Gloucester Resources Limited v Minister for Planning [2019] NSWLEC 7, at https://www.caselaw.nsw.gov.au/decision/5c59012ce4b02a5a800be47f

[2] State Environmental Planning Policy (Mining Petroleum Production and Extractive Industries) 2007 (Mining SEPP)

[3] See paragraph 8

[4] See paragraph 699

[5] See paragraph 351

[6] See paragraphs 689-691

[7] Australian Conservation Foundation v Minister for Planning (2004) 140 LGERA 100; [2004] VCAT 2029

[8] Gray v Minister for Planning (2006) 152 LGERA 258; [2006] NSWLEC 720

[9]See: ACF v Minister for Environment [2016] FCA 1042, at [155-174] and ACF v Minister for Environment and Energy [2017] FCAFC 134