Court applies fresh approach to weighing of economic, social and environmental impacts

NATASHA HAMMOND-DEAKIN*

Last week Preston CJ, Chief Judge of the Land and Environment Court handed down a significant judgment on a coal mine extension project. Warkworth Mining Limited, a subsidiary of Rio Tinto, had been granted approval to expand its coal mining operations near the small village of Bulga. The Court’s decision to overturn this approval has attracted considerable attention and concern about its implications.

The case
The Warkworth mine had previously been expanded in 2003. As part of that expansion approval, Warkworth agreed to protect a significant local landform, Saddleback Ridge, which provides a buffer between Bulga village and the mine. Warkworth had also agreed to protect significant remnant vegetation including endangered ecological communities in perpetuity.

In 2009 Warkworth sought approval for a further extension. That extension, which was ultimately challenged by the Bulga Milbrodale Progress Association (the Association) in Bulga Milbrodale Progress Association Inc v Minister for Planning and Infrastructure and Warkworth Mining Limited, would result in the closure and excavation of Wallaby Scrub Road, the clearing of approximately 766 ha of four types of endangered ecological communities protected under threatened species legislation, and the removal of Saddleback Ridge. This extension was approved by the Planning Assessment Commission under delegation from the Planning Minister in 2012. However, following the Association’s challenge, the Court overturned this approval, disapproving the extension due to its significant and adverse impacts on biological diversity, and the adverse noise, dust and social impacts on Bulga.

A polycentric problem
The Court has brought a fresh perspective to the fraught process for decision makers of assessing and determining a project application. The Court stated that the range of interests affected, and the complexity and interdependence of the issues means that decision-making involves a polycentric problem, or a complex network of relationships with interacting points of influence. The resolution of one issue will have repercussions on the other issues, and the other issues may change in nature and scope depending on how the first issue is resolved. This means that the decision maker must determine the relevant matters to be considered in deciding whether or not to approve the project, and also subjectively determine the weight to be given to each matter and balance those weighted matters.

Weighing economic considerations
The Court has analysed for the first time the economic modelling and evidence put forward in support of a large mine. The Court criticised elements of Warkworth’s modelling, in particular Warkworth’s attempt to put a value on non-market elements such as endangered ecological communities and social impacts. The Court stated that economic analysis, such as a cost benefit analysis, is of limited assistance to the decision making process here, which requires consideration and balancing of economic, environmental and social factors. Ultimately the Court found that the economic benefits of the mine were outweighed by the negative impacts on social and environmental factors.

Like-for-like required for biodiversity offsets
The Court has applied NSW government guidelines requiring biodiversity offsets to provide flora and fauna species that are ‘like-for-like’, in that the offset must protect the same species that are being impacted by the development. This is in contrast to the approach increasingly taken by government in accepting biodiversity offsets that do not require such a high standard of protection for threatened species.

Social impacts of open cut coal mines
The Court has for the first time recognised the detrimental social impacts of the noise and dust conditions routinely imposed by the Minister to mitigate the impacts of large mines, in particular conditions providing for the acquisition of properties in the ‘zone of affectation’ most impacted by noise and dust.

What does this mean for future decisions?
This case may prove to have profound implications for the assessment of major developments, and no doubt will be scrutinised closely by industry and lawyers alike. In particular, it is likely that the case will transform the approach taken to, and methodology underpinning, the economic assessment of major projects.

N.B. Warkworth has appealed the Court’s decision.

*Natasha Hammond-Deakin is a Senior Solicitor at EDO NSW

Image by Stephen Bell.
Warkworth by Stephen Bell

Fullerton Cove judgment highlights need for CSG law reform

ELAINE JOHNSON*

Just before the Easter long weekend, the Land and Environment Court dismissed a case brought by residents against Dart Energy’s coal seam gas pilot project in Fullerton Cove near Newcastle. The Court lifted an injunction on drilling that had been in place since September last year, allowing Dart to proceed with drilling their wells. However, five days later, Dart announced that it would suspend its project due to proposed new controls for CSG at State and Federal levels, including the NSW Government’s recent restriction on CSG within 2km of residential areas, and the Commonwealth’s EPBC Act water trigger.

The case
The Fullerton Cove Residents Action Group (FCRAG) brought the case because they were concerned that the Department of Trade and Investment did not consider any groundwater assessment before granting approval for the project. The project site is located on a floodplain, and includes 12 months of continuous gas and water extraction from CSG wells drilled to depths of 800-900 metres.

FCRAG were also concerned that there had not been proper assessment of ecological impacts, given the site is next to the Hunter Estuary Reserve, an internationally listed wetland which is home to many migratory birds. They also argued that a full Environmental Impact Statement (EIS) was required, including mandatory public consultation, which had not been prepared for Dart’s project.

In September 2012, the Court granted an interim injunction against Dart Energy stopping it from drilling the gas wells until the full case was determined. It was the first injunction granted against a CSG company by the NSW Land and Environment Court.

The main case, decided on 28 March 2013, tested the rigour of the assessment process under Part 5 of the Environmental Planning and Assessment Act 1979 (NSW) (EPA Act) for CSG pilot production.

What the Court said
The Court found that the requirement under Part 5 of the EPA Act for the Department to consider environmental effects of the CSG pilot project ‘to the fullest extent possible’ did not include consideration of a groundwater assessment. This was despite the fact that the pilot project included 12 months continuous gas and water extraction, with an option to extend to 2 years.

Justice Pepper found that the Department’s failure to obtain or consider any groundwater assessment before approving the pilot project under Part 5 of the EPA Act did not amount to legal error. In making this finding, her Honour took into account several factors, including that it was a pilot project only, and that the Department had knowledge of the geology of the area generally.

The Court also found that even though no ‘7-part test’ for threatened species and ecological communities was carried out, it was sufficient for the Department to have ‘general regard’ to the 7-part test for threatened species.

Finally, the Court found that this pilot project was not likely to have a significant effect on the environment and therefore no EIS was required.

What does this decision mean for other CSG projects?
Pilot production can have the same kinds of environmental effects as full-scale production, albeit on a smaller scale. The Court’s finding in this case highlights significant problems with leaving the assessment of those impacts up to Part 5 of the EPA Act for CSG pilot projects. This is particularly problematic because most CSG exploration (including pilot production) involving five or fewer wells is assessed under Part 5.

In this case, Dart gained approval for 12 months’ continuous gas and water extraction, with an option to extend up to two years. The Court’s finding that no groundwater assessment is required by Part 5 in such circumstances is significant. It raises serious questions about the effectiveness of the EPA Act in protecting groundwater resources when it comes to CSG pilot production.

The project site is next to the Hunter Estuary Reserve, home to many protected migratory birds, and contained identified endangered ecological communities. The Court’s further finding that it wasn’t necessary for 7-part tests to be carried out for those species and communities also highlights serious deficiencies in the Part 5 environmental assessment process for biodiversity.

The judgment confirms that Part 5 of the EPA Act is unable to properly deal with assessment of CSG pilot projects, particularly when it comes to groundwater. If CSG pilot production can be approved under Part 5 without a groundwater study, it is difficult to see how the community can have any confidence that groundwater impacts are being rigorously assessed, or indeed at all. It is important that the new planning system addresses these deficiencies.

*Elaine Johnson is a Solicitor at EDO NSW

Image: Tawny Sunrise by Su Walker

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