Posted on December 20, 2021 by Adriana Kleiss and Lindsay Taylor 3

LEC Upholds IPC Approval of Narrabri Gas Project as Climate Change Litigation Takes Aim at Gas

Debate about the transition away from fossil fuels has recently focused in on plans for increased gas production, with Santos’ Narrabri Gas Project (Project) being a key feature of the NSW Government’s plans for the future of gas production in the state. The Project involves the development of a new coal seam gas field and associated infrastructure, including the construction of up to 850 gas wells over a proposed period of about 25 years.

In response to the Project’s approval by the Independent Panning Commission, community action group Mullaley Gas and Pipeline Accord Inc (MGPA) brought judicial review proceedings in the LEC to challenge the consent.

In this blog, we look at the highlights from the judgment of Preston CJ in Mullaley Gas and Pipeline Accord Inc v Santos NSW (Eastern) Pty Ltd [2021] NSWLEC 110 in which the Chief Judge confirmed the decision of the IPC to approve the Project.

Gas versus coal

The first ground of appeal considered in the case is MGPA’s argument that the IPC, in assessing the likely impacts of the Project under s4.15(b) of Environmental Planning and Assessment Act 1979 (EPA Act), erroneously compared the projected greenhouse gas (GHG) emissions of the Project with the emissions of hypothetical coal projects. MGPA submitted that, in focusing on this comparison, the IPC disabled itself from the relevant consideration of the likely impacts of the Project itself.

In support of this argument, MGPA relied on the decision of Preston CJ in Gloucester Resources Ltd v Minister for Planning [2019] NSWLEC 7 where he held (at [530]) that:

“a consent authority cannot rationally approve a development that is likely to have some identified environmental impact on the theoretical possibility that the environmental impact will be mitigated or offset by some unspecified and uncertain action at some unspecified and uncertain time in the future.”

MGPA argued that the theoretical possibility in this case was that the gas from the Project would displace GHG emissions from coal in energy production.

However, Preston CJ rejected this submission, finding that the IPC’s consideration of the expected emissions advantage of gas compared with coal was just part of its overall evaluation of the acceptability of the impacts of the GHG emissions of the Project. The comparison being made was not between the Project and a hypothetical coal project, but between gas-fired electricity generation and coal-fired electricity generally. Relatively speaking, new gas production was preferable to new coal production from a GHG emissions perspective.

Interestingly, the Chief Judge commented:

“such consideration of the emissions advantage of CSG compared to coal is similar to the consideration of the emissions advantage of renewable energy, such as is generated by wind or solar farms, over fossil fuel energies. The potential for renewable energy to displace fossil fuel electricity generation is a relevant factor to be taken into account in determining the acceptability of a renewable energy project for which development consent is sought, such as a wind farm”. 

It is perhaps difficult to understand the relevant difference between the comparison proposed in Gloucester Resources (an Australian coal mine compared to a hypothetical overseas coal mine of lesser quality) and that proposed by Santos and accepted by the IPC (gas compared to coal); both comparisons assume a greater impact would be caused by a alternative development.

However, it is important to note that Gloucester Resources was heard in the Court’s class 1 merits jurisdiction, and therefore the task of evaluating the impacts of that project ultimately fell to the Court. In contrast, this case was heard in the Court’s review jurisdiction, meaning that MPGA needed to establish that the comparison of gas and coal was legally irrelevant or unreasonable.

Preston CJ did question the wisdom of the comparison, cautioning that even a fossil fuel project with relatively low GHG emissions could be considered to have a significant impact in a cumulative sense.  However, the IPCs consideration of the potential benefits of new gas projects on the overall reduction of GHG emissions in the state was not a legally irrelevant consideration.

Given Preston CJ comments in Gloucester Resources to the effect that it would not be “rational” for a consent authority to find an impacts acceptable on the basis of some theoretical possibility that it could be offset, MGPA might have argued that the IPCs consideration of gas versus coal was legally unreasonable. However, this argument was not advanced and would in any case not have been successful as Preston CJ found that the comparison was only one of the reasons that the IPC found the GHG emissions of the Project to be acceptable.

Downstream emissions condition

Another ground of appeal raised by MGPA was that the IPC, in deciding not to impose a condition of consent requiring downstream (scope 3) emissions of the Project to be minimised, had misconstrued the requirements of clause 14(1) of the Mining SEPP, which required the IPC to consider whether or not any consent for the Project should be issued subject to conditions to ensure that GHG emissions are “minimised to the greatest extent practicable”. 

The reason the IPC gave for not imposing such a condition was that “these [scope 3] emissions are outside the direct control of the Applicant and therefore not able to be reasonably conditioned”. 

This decision is in direct contrast with the 2019 decision of the IPC to approve an expansion of the United and Wambo collieries near Singleton, subject to a condition requiring the mine owners to prepare an export management plan to ensure that the coal would only be exported to countries that are signatories to the Paris agreement, or to countries that have similar policies in place to reduce GHG emissions.

That condition was met with heavy criticism by the Minister for Planning and resulted in the Environmental Planning and Assessment Amendment (Territorial Limits) Bill 2019 which was in part intended to prohibit consent authorities from imposing conditions in order to address impacts of a development which would occur outside the territorial limits of Australia (which would include the burning of Australian coal overseas). The bill has not been passed. 

In this case, Preston CJ agreed with the IPC that it would not be reasonable to impose a condition requiring Santos to minimise downstream emissions that are outside the direct control of Santos, noting that “Santos cannot control the gas consumption patterns of consumers”.  However, Preston CJ did not rule out the possibility that such a condition may be reasonable if sufficient control could be established, noting that:

“there may be a relationship or arrangement between the proponent of the development and the end user of the product of the development that affords the proponent a degree of direction or control over the end user and its consumption of the product. An obvious example is where both the proponent and end user are in the same corporate group, as a result of vertical integration.”

Preston CJ clearly did not want to create a general precedent which would in all cases prohibit consent authorities from imposing conditions to minimise scope 3 emissions, however his Honour’s findings are likely to be influential in limiting the use of such conditions in the future.

Pipeline impacts

Finally, MGPA contended that the IPC failed to consider a relevant matter under s4.15(1)(b) of the EPA Act, being the likely environmental impacts of a transmission pipeline that would be required to transport gas from the Project to the domestic market.

MGPA, in contending the IPC’s breach of s4.15(1)(b), submitted that the impacts of the pipeline had a real and sufficient link with the Project because the development could not proceed without the pipeline, both practically and legally (the IPC had imposed a condition preventing Santos from proceeding with Stage 2 of the Project until a pipeline was approved).

MGPA relied on Preston CJs decision in Ballina Shire Council v Palm Lake Works Pty Ltd [2020] NSWLEC 41 in which he held that the Commissioner who considered the matter at first instance breached s4.15(1)(b) of the EPA Act because she had not considered the likely impacts of road works, which although were not apart of the application before the Court, were required in order to facilitate access to the development site (and were required by a deferred commencement condition imposed on the consent).

In the Palm Lake Works case, Preston CJ held that:

“The phrase “the likely impacts of that development” embraces not only site specific impacts, being impacts of the proposed development on the development site, but also off-site impacts. Off-site impacts can be caused not only by the proposed development impacting adjoining or other land in an area of influence but also by some other development provided that the impacts of that other development have “a real and sufficient link” with the proposed development, such as where the impacts are caused by “some further undertaking that is ‘inextricably involved’ with the proposed development”. 

However, Preston CJ rejected MGPA’s submissions and found that the Palm Lake Works case was distinguishable from the present case. In summary, his Honour’s reasoning was that:

• as the nature and route of the pipeline remained unknown or insufficiently certain, it was not possible for the IPC to assess its likely impacts,
• even if the impacts of an identifiable pipeline were able to be ascertained, such impacts of the pipeline do not have a real and sufficient connection to the Project, so that they could be said to be impacts of the Project, because the Project did not necessarily dictate the route or design of the pipeline, and
• the imposition of the condition of consent preventing Santos commencing Phase 2 of the Project until the pipeline is approved does not, of itself, establish that the impacts of any such gas transmission pipeline have a real and sufficient link to the Project.

The key point that Preston CJ makes is that even where a proposed development requires some other development to be carried out in order for it to operate, that does not necessarily mean that there is a “real and sufficient link” between the impacts of the development proposed, and the impacts of that other development, so that consent cannot be granted to the former without consideration of the latter. It may be that the impacts of that other development simply arise due to its independent design and operation, and not as a result of the principal development.

The decision in Mullaley Gas and Pipeline Accord Inc v Santos NSW (Eastern) Pty Ltd [2021] NSWLEC 110 can be accessed here.

As the NSW Government looks away from coal towards lower emissions alternatives, this case is likely to be just the beginning of the LEC’s consideration of appeals by public interest groups against new gas developments.

If you wish to discuss the above please contact Lindsay Taylor, Senior Partner or Adriana Kleiss, Associate.