Posted on May 14, 2015 by

NSW Coal Seam Gas drilling suspension overturned

The Supreme Court recently decided that the NSW Government’s decision to suspend an approval allowing coal seam gas exploration drilling was invalid. The Court held that:

• a breach of the community consultation requirements in the coal seam gas exploration approval could not, under the relevant legislative scheme, found the Minister’s power to suspend that approval;
• the ‘effective’ community consultation requirements in the approval did not mandate a particular outcome but rather, like most community participation obligations, focused on whether the consultation met the relevant procedural requirements.

Metgasco Limited v Minister for Resources and Energy [2015] NSWSC 453 concerned an application for judicial review by Metgasco Limited (Metgasco) of the Minister for Resources and Energy’s decision (by his delegate) to suspend an approval granted to Metgasco for a gas exploration well in northern NSW. This suspension was based on Metgasco’s lack of community consultation.

Background

In 1996, the Minister granted a petroleum exploration licence (PEL 16) to a predecessor in title to Metgasco.

PEL 16 was renewed by the Minister in February 2013. It contained a condition (condition 8) requiring Metgasco to “engage with the community in relation to the planning for and conduct of prospecting operations authorised under this exploration licence”. This consultation was required to take place in accordance with a document titled “Guideline for community consultation requirements for the exploration of coal and petroleum, including coal seam gas“ (Guideline).

In about March 2013, Metgasco presented a “Category 3” exploration program to the Minister for approval which contained detailed plans for the construction of the Rosella well located on freehold private land within a former gravel quarry site at Bentley NSW. In February 2014, the approval was granted subject to certain conditions (the Activity Approval).

At this time, residents of the Northern Rivers became increasingly concerned about Metgasco’s activities. A camp was established to protest and a large number of letters were written to the Minister opposing the activities of Metgasco.

On 14 May 2014, Metgasco received a letter from the Minister’s delegate notifying it of a decision to suspend the Activity Approval (first decision) on the basis that Metgasco had not complied with Condition 8 of PEL 16.

On 21 May 2014, Metgasco sought a Departmental review of the first decision and  on 3 June 2014 commenced judicial review proceedings.

On 26 June 2014, Metgasco was advised that the Departmental review was complete and the suspension was confirmed (second decision) on essentially the same basis as the reasons set out in the first decision.

Metgasco’s claim

In the proceedings, Metgasco claimed that the decisions had not been made in accordance with the provisions of the Petroleum (Onshore) Act (Act) and that the decision maker had taken into account irrelevant considerations in making the decision to suspend.

The suspension was invalid

The Court held that the first decision was invalid because the statutory regime required procedural fairness to be afforded before an approval could be suspended and this had not occurred.

The second decision was invalid because:

• it purported to confirm a decision that was itself invalid;
• the Activity Approval had been suspended for alleged breach of a condition, when that breach was not capable of founding the suspension power;
• in asserting that a condition requiring ‘effective consultation’ had been contravened,  the decision maker took into account an irrelevant consideration, namely whether the results of the consultation had persuaded those consulted, rather than focusing upon the requisite attributes of the consultation met the prescribed requirements.

Implications

The case highlights the nature of public participation.  While every case will turn on the terms of the particular legislation under consideration, ordinarily community participation rights do not come coupled with the right to the outcome that may be desired by those consulted.