The NSW Land and Environment Court recently considered the issue of whether conditions for carbon offset requirements should be imposed on a major development, in the case of Hunter Environment Lobby Inc v Minister for Planning  NSWLEC 221.
The decision confirms the relevance of environmental issues and principles of ecologically sustainable development when development proposals are considered. It has also opened up the possibility that carbon offset conditions could be imposed on certain developments.
In this eBulletin, we summarise the decision and look at the key findings which may be relevant when it comes to considering environmental issues in development proposals.
- In November 2010, the Minister for Planning (Minister) granted approval under Part 3A (now repealed) of the Environmental Planning & Assessment Act 1979 (NSW) (EP&A Act) to a proposal by Ulan Coal Mines Ltd (Ulan) to expand its coal mine operation and to consolidate its previous separate development consents into a single approval for a further 20 years.
- The Hunter Environment Lobby Inc (HEL) challenged the Minister's approval in the Land and Environment Court of NSW (the Court) because of the environmental impacts of the proposal.
- HEL proposed that additional or amended conditions be imposed on the project, in addition to those already imposed by the Minister, including conditions relating to carbon offsets, groundwater, and biodiversity offsets.
The Court's findings
In considering the conditions proposed by HEL, the Court noted that principles of ecologically sustainable development were a relevant consideration in exercising the Court's "wide" power to impose conditions on Ulan's project approval.
Greenhouse Gas Offset
The Court held that conditions requiring carbon offsets can be imposed in relation to greenhouse gas (GHG) emissions, despite the fact that the Minister's usual policy approach was not to do so. According to the Court, scope 1 emissions (also called direct GHG emissions) "contribute to an environmental impact which has local, regional and global impacts" and therefore, under the EP&A Act, it was reasonable for the Court to impose GHG offset conditions to protect the environment.
It found that scope 1 GHG emissions would occur as a direct consequence of Ulan's project and therefore directly related to the project. The fact that the impacts resulting from these GHG emissions could be felt both within and well beyond NSW did not mean that a condition should not be imposed under State legislation to address this.
On the other hand, the Court found that scope 2 emissions, for example resulting from diesel and electricity use, were not emissions that Ulan could control entirely and so any requirement to offset scope 2 emissions would not fairly relate to the development.
Ultimately, the Court did not impose HEL’s proposed carbon offset conditions. It held that the national carbon pricing scheme (due to commence on 1 July 2012) adequately addresses the issue of GHG emissions. As a "liable entity" under the carbon pricing scheme, Ulan would effectively be required to implement the conditions sought by HEL regarding offsetting scope 1 GHG emissions.
The Court clearly confirmed that the proposal should contain conditions concerning groundwater, for example, to address the issue of baseflow losses. There was no issue as to whether such conditions have a "proper purpose".
Once again, the Court confirmed that conditions concerning biodiversity could legally be imposed. It also observed that, where a project can only proceed through the clearing of native vegetation (including endangered ecological communities), the imposition of conditions requiring offsetting of areas for biodiversity conservation are sanctioned under both Federal and State legislation and have also been allowed by the Court.
Both HEL and Ulan agreed that the Court should apply the Principles for the use of biodiversity offsets in NSW (published by the (then) Department of Environment Climate Change and Water) to the proposed biodiversity offsets for the project proposal. These principles were considered and discussed at length by the Court.
Significance of the decision: be proactive in managing environmental impacts
- The Court ultimately found in favour of Ulan and upheld the Minister's approval, subject to the imposition of a condition relating to groundwater baseflow offset. The Court also made minor changes to the biodiversity conditions, as agreed by Ulan and the Minister, including slight variations to the proposed offset areas.
- Despite this result however, the case does have implications which should be borne in mind when developing projects which have the potential to result in adverse environmental impacts.
- The decision confirms that planning authorities can impose conditions to offset the environmental impacts of a proposal. Environmental issues, and how these issues can be managed, should be a central factor when planning a proposal.
- While the Court was of the view that carbon offset conditions were not necessary in these circumstances because Ulan will be a "liable entity" and therefore caught by the Clean Energy Act 2011 (CE Act), it seems that those developments or facilities which are not caught by the CE Act could still be required to provide carbon offsets via conditions of consent. As such, even though your "facility" might not meet the relevant threshold under the CE Act (and therefore not be caught by the carbon price mechanism), you could still be required to mitigate the effect of direct GHG emissions in any event.1
- Proponents of environmentally significant projects can expect requirements aimed at addressing the impacts of a proposal, including on groundwater, biodiversity and direct GHG emissions to be imposed. However, it is important to note that environmental issues should not be merely addressed through conditions of consent. Instead, these considerations should be integrated into the early stages of the planning process.
- In addition, you should be proactive and engage as early as possible with consent authorities and, for example, the Office of Environment and Heritage to ensure that key environmental impacts, such as carbon, biodiversity, and groundwater are addressed as early as possible in the planning process.
Breellen Warry | Senior Associate - Property, Projects & Infrastructure
1 For further details about the carbon price mechanism and an explanation of "liable entities" and "facilities", please CLICK HERE
All information on this site is of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific legal professional advice. No responsibility for the loss occasioned to any person acting on or refraining from action as a result of any material published can be accepted.