NSW Court of Appeal clarifies the assessment of climate change impacts from mining projects

The NSW Court of Appeal has dealt a critical blow to a proposed new coal mine in the Bylong Valley by dismissing an appeal made by the proponent after it unsuccessfully applied to the Land and Environment Court to overturn the IPC's decision to refuse the Project. 

In reaching its decision, the Court of Appeal rejected various allegations from the proponent that the IPC had made legal errors in its assessment of whether the proponent had minimised its Scope 3 greenhouse gas (GHG) emissions to the greatest extent practicable.

The Bylong Coal Project

In 2019, the IPC refused an application made by KEPCO Bylong Australia Pty Ltd (KEPCO) for a state significant development approval to construct and operate a new open-cut coal mine known as the "Bylong Coal Project" in the Bylong Valley located northeast of Mudgee, NSW. The Project was expected to recover 121 million tonnes of coal over a period of up to 29 years.

One of the reasons for refusal of the Project by the IPC was that KEPCO's proposal had not minimised its Scope 3 emissions to the greatest extent possible. Like most coal mining projects, the majority (98%) of the estimated GHG emissions from the Project were "Scope 3", being those emissions from coal transportation and the combustion of the product coal, and were estimated to be 203 million tonnes of carbon dioxide-equivalent. KEPCO had proposed to develop an Energy and Greenhouse Gas Management Plan that would set out measures to minimise GHG Scope 1 and 2 emissions from the development; however it did not put forward measures for minimising Scope 3 emissions.

Key points

• The Court of Appeal decision concerned narrow legal points regarding the statutory requirements of the consent authority in assessing the environmental management of a mining project. This type of appeal is known as a "judicial review of the decision". KEPCO was not entitled to a "merits review" appeal because a public hearing had been held prior to the IPC making its determination. Where available, a merits review appeal involves consideration by the Court of the overall merits of the Project, and whether the consent authority made the correct factual decision.
• Where a proponent does not propose any measures to reduce Scope 3 emissions, a consent authority will not necessarily make a legal error under 14(1)(c) of the State Environmental Planning Policy (Mining, Petroleum and Extractive Industries) 2007 (Mining SEPP) if it concludes that the proponent had not minimised GHG emissions. Such a conclusion reached by the IPC in this case was not (as KEPCO argued) an indication that the IPC had made an error by considering the effects of GHG emissions rather than considering whether the effects could be addressed by conditions.
• The consent authority has a discretion to determine the scope of the policies, programs and guidelines that it has consideration to when considering and assessment of GHG emissions (including Scope 3 emissions). This may include NSW Climate Change Policy Framework (CCP Framework), which contains policy statements concerning meeting Australia's commitments under the Paris Agreement and the ambition to achieve net-zero emissions by 2050.
• The IPC acted reasonably in finding that there was "no evidence" before it that could support KEPCO's argument that it would secure an inferior, alternative source of coal if the Project was refused.

The assessment of GHG emissions in NSW: Clause 14 of the Mining SEPP

The Court of Appeal rejected various allegations made by KEPCO regarding errors that had been made by the IPC in its assessment of Scope 3 emissions in accordance with Clause 14 of the Mining SEPP.

Clause 14 of the Mining SEPP broadly concerns natural resource management and environmental management of mining, petroleum production or extractive industry development. With respect to GHG emissions for coal mining projects, clause 14 specifically requires that:

• before granting consent the consent authority (in this case, the IPC) must consider whether the consent should be issued subject to conditions aimed at ensuring that greenhouse gas emissions are minimised to the greatest extent practicable (subclause (1)(c));and
• in determining a development application, the consent authority (again, the IPC in this case) must consider an assessment of greenhouse gas emissions (including Scope 3 emissions) of the development and must do so having regard to any applicable State or national policies, programs or guidelines concerning greenhouse gas emissions (subclause 2).

The requirement to consider conditions to minimise GHG emissions

One of the reasons for the rejection of the Project by the IPC was that KEPCO had failed to develop strategies to minimise scope 3 emissions, noting in particular that a commitment to develop an energy and greenhouse gas management plan to reduce GHG emissions only related to Scope 1 and 2 emissions, and not Scope 3 emissions.

In rejecting various arguments made by KEPCO regarding alleged legal errors by the primary judge and the IPC, the Court of Appeal provided the following clarifications regarding the obligation in subclause (1)(c):

• the obligation to consider potential conditions of consent to minimise GHG emissions arises as part of the decision-making process in determining whether to grant consent. The obligation does not arise if/when the consent authority decides to grant consent; and
• if a proponent does not propose measures to minimise its Scope 3 emissions, the consent authority will not necessarily make a legal error in carrying out its requirement in Clause 14(1)(c) of the Mining SEPP. KEPCO unsuccessfully argued that the IPC had misunderstood its obligation in Clause 14(1)(c) by assessing the effects of GHG emissions rather than carrying out its actual obligation, which was to consider whether those effects could be adequately addressed by conditions. The Court of Appeal rejected this argument, and found that "if there were a valid distinction between assessing assessments of GHG emissions and assessing GHG emissions, the former being mandatory and the latter not, it is clear that the Commission undertook the former exercise…The IPC did consider whether there were conditions that could address the GHG emissions but found that none had been proposed, and that this is what the IPC meant when it said that "the proponent had not minimised GHG emissions".

The requirement to have regard to applicable policies and guidelines concerning GHG emissions

Another allegation of legal error made by the IPC and put forward by KEPCO concerned the consideration of the IPC of the CCP Framework, which states that the NSW Government endorses the Paris Agreement, and will take action that is consistent with the level of effort to achieve Australia's commitments under it (i.e. to limit the increase in global temperatures to below 2 degrees). It also says that its aspirational emissions savings objective is to achieve net-zero emissions by 2050.  

KEPCO argued that that the IPC had misconstrued its obligation with respect to its obligation to have regard to applicable policies and guidelines GHG emissions because the CCP Framework was not an "applicable" policy. The Court of Appeal disagreed and found that the IPC has a discretion to consider which policies are applicable, and therefore the IPC did not make a legal error in determining that the CCP Framework was applicable. In any event, even if it wasn't applicable for the purposes of Clause 14(2) of the Mining SEPP, there is nothing in that clause that prevents the IPC from considering it.

Rejection of alternative source of coal argument

KEPCO also alleged that the IPC had failed to engage with its argument that if the Project is not approved, then KEPCO would need to secure an alternative source of coal which may be of an inferior quality and may lead to poorer environmental outcomes. As part of its application, KEPCO had submitted letters from the President and CEO of KEPCO Australia Pty Ltd, an entity related to the applicant, as well as from its planning consultant which outlined this argument.

The Court of Appeal rejected this argument, finding that the IPC had considered the letters put forward by KEPCO, and it was open to the IPC to find that the letters lacked detail and therefore were not capable of leading to a factual conclusion that KEPCO would need to find an alternative, inferior source of coal if the Project was refused.

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