“End user” combustion emissions – an essential requirement in environmental impact assessments for upstream oil & gas developments?
End-user combustion emissions, and the extent to which these should be considered in the context of industrial developments, have been the subject of recent attention in both the oil and gas industry and the wider media. Environmental campaigners argue that these should be taken into account in assessing the environmental impact of a proposed development; typically regulators and government authorities have adopted a narrower approach. This article discusses two significant cases considering this issue - a recent decision of the Oslo District Court in Norway, and an anticipated decision of the UK Supreme Court.
Norway: The Greenpeace Nordic Association and Others v The State and Energy Ministry, Case No 23-099330TVI (Oslo District Court, 18 January 2024)
This recent Oslo District Court decision has attracted international attention. The court upheld challenges brought by Greenpeace Nordic and National Youth and concluded that the Norwegian Government’s approvals of the plans for development and operation (“PDO”) of three offshore petroleum fields (Breidablikk, Yggdrasil and Tyrving) were invalid, because they did not include an environmental impact assessment of the combustion emissions and climate effects from the end use combustion of the oil and gas intended to be produced from those fields.
The legal basis for the court’s conclusion was an interpretation of the Norwegian Petroleum Act § 4-2 and the Petroleum Regulations § 22a in light of the Norwegian Constitution § 112 and the EU Project Directive (Directive 2011/92/EU (as amended by Directive 2014/52/EU). The Norwegian Petroleum Act sets out the approvals required for offshore oil and gas developments in Norwegian waters, and the process required to obtain these. The final stage of that process is approval of PDOs. The Petroleum Regulations implement the EU Project Directive, including requiring that an environmental impact assessment is carried out as part of the PDO approval process. The Norwegian Constitution § 112 provides (in very general terms) for the protection of the environment.
The challenges brought by Greenpeace Nordic and National Youth focussed on the question of the extent to which combustion emissions from the end use of the oil and gas intended to be produced require to be assessed as part of the impact assessment process, taking account of the requirement of the Norwegian Constitution regarding protection of the environment. The court found that there was a legal requirement to assess combustion emissions at the PDO stage. The court also relied on the Norwegian Supreme Court's plenary judgment of 22 December 2020 (Föreningen Greenpeace Norden and Natur og Ungdom v the Norwegian State represented by the Ministry of Petroleum and Energy, Case No HR-2020-2472-P), which the Oslo District Court interpreted as determining that combustion emissions, including outside Norway, are part of the material scope of the Norwegian Constitution § 112 and that they should be assessed before approving a PDO.
The court also considered a number of separate grounds of challenge: (i) whether the decisions were based on incorrect facts and/or unreasonable forecasts; (ii) whether the authorities had a duty to assess the best interests of children in considering the impact of the proposed development of these offshore oil and gas fields; and (iii) whether the decisions violated the European Convention on Human Rights. The court found that there were not sufficient grounds to conclude that the decisions were invalid on any of these grounds.
In addition to seeking declarations of invalidity, the claimants also sought various injunctions. The court refused the request to suspend the effect of the PDO approvals but granted the request for alternative interim measures. Consequently, the court granted injunctions against the Ministry from issuing any permits that presuppose a valid PDO approval for Breidablikk, Yggdrasil and Tyrving until the validity of the PDO approvals is finally settled. As a result, pending the outcome of further court proceedings or the issue of new, valid, PDO approvals, the Ministry will not be able to issue, for example, the necessary annual production licence to permit production to continue at Breidalblikk beyond the end of 2024; the impact on Yggdrasil and Tyrving is less immediate as neither of those fields have yet entered production. The court also ordered the state to pay the plaintiffs' legal costs in connection with the case.
The Norwegian Ministry of Energy has already announced that an appeal will be filed against the court’s decision and the injunctions. In addition, it is understood that the Ministry will issue new PDO permits that are based on a more detailed impact assessment.
UK: Supreme Court decision awaited in R (on the application of Finch on behalf of Weald Action Group) (Appellant) v Surrey County Council and others (Respondent)
The EU Project Directive has similarly been implemented into UK law, and the question of the extent to which combustion emissions require to be included in an impact assessment has also been raised in challenges brought by environmental campaign groups in the UK courts.
In particular, on 21-22 June 2023, the UK Supreme Court hearing took place in R (on the application of Finch on behalf of Weald Action Group) (Appellant) v Surrey County Council and others (Respondent) (“Finch”). This case is a challenge to a development consent for an onshore oil and gas development, made on the basis that the relevant environmental impact assessment did not properly consider combustion emissions (i.e. emissions from the combustion of the oil and gas that would be produced from the development once in operation). The issues under consideration are therefore similar to those recently considered in Norway by the Oslo District Court, albeit in an onshore rather than offshore context.
Factual Background
In December 2018, Horse Hill Developments Ltd (“HHDL”) sought planning permission from Surrey County Council (the “Council”) to retain and expand an existing onshore oil well site and to drill for new wells – which would enable the production of hydrocarbons from six wells over 25 years (the “Development”). The total amount of crude oil expected to be extracted in that 25 year period was assessed at approximately 3.3 million tonnes. When the crude oil is brought to the surface, a quantity of natural gas would also be produced, which is intended to be used to provide power for the Development. The crude oil will be taken to refineries for processing, and once refined it can be used by consumers, as, for example, fuel for motor vehicles.
Before planning permission for the Development could be given, the Town and Country Planning (Enviromental Impact Assessment) Regulations 2017 (SI 2017 No. 571) (the “EIA Regulations”) required that an environmental impact assessment (“EIA”) was carried out. That includes a requirement to prepare an environmental statement (“ES”) regarding the likely significant effects of the Development. The ES for the Development did not assess the environmental impacts of the “scope 3” or “downstream” greenhouse gas emissions (these are indirect emissions from the combustion of the produced oil and gas). It did however consider the environmental impacts of the “direct releases of greenhouse gases from the well site boundary resulting from the site’s construction, production, decommissioning and subsequent restoration over the lifetime of the proposed development.”
Following the EIA process, the Council granted planning permission for the Development in September 2019.
Sarah Finch, who lives six miles from the Development site and has objected to drilling at the site since 2013, applied for judicial review of the Council’s decision (for herself and on behalf of Weald Action Group).
Key issues
The main issue raised by the judicial review challenge (as it has now progressed to the UK Supreme Court) is whether a developer’s obligation to prepare an ES describing the likely significant effects of a development (both direct and indirect), should include an assessment of the combustion emissions resulting from the use of the end product originating from the development i.e., in this case, the ultimate use of the crude oil extracted from the Development.
The claimants were unsuccessful before the High Court and the Court of Appeal.
The claimants argued that combustion emissions should have been quantified as part of the EIA process (regardless of whether this is difficult and/or an uncertain exercise) and that an estimate of the combustion emissions from the operation of the Development and from the combustion of refined products resulting from the Development should have been compared to a “metric” for carbon reduction – notably the net zero target at national level. They argued there is no other mechanism by which those emissions can be controlled as a contribution to achieving net zero and that a broad purposive interpretation should be given to the EU Project Directive.
The High Court disagreed. It held that it is well established that applying a broad purposive approach to interpretation does not permit the clearly expressed wording of the legislation to be disregarded and did not accept that there are no other measures in place for assessing and reducing greenhouse gas emissions. Responsibility for the transition to net zero lies with the UK Government and there are a range of measures being pursued to reduce the consumption of oil products.
An EIA should assess both the direct and indirect effects of the development. The EIA Regulations do not require an ES to cover the environmental effects of other developments on a different site unless they form part of the same project, or it is relevant to assess the effect of one development with other projects. Where that approach is taken, an ES is still only undertaken in relation to the effect of the development. The EIA process is concerned with the use of land for development and the effects of that use – it is not directed at environmental effects which result from the consumption or use of an end product: “[an] EIA cannot be required to include effects which go beyond the effects of the project or development”.
As a result, the High Court held that the scope of the obligation to prepare an impact assessment does not extend to the environmental effects of consumers using an end product which will be made in a separate facility from materials to be supplied from the development being assessed (in locations which are unknown and unrelated to the development). Therefore, an assessment of emissions from the future combustion of refined oil products said to result from the Development did not require to be included in the ES: “no legal criticism can be made of the [Council’s] focus on the land use and development proposed because that was the “project” which was the subject of the planning application and the related EIA”.
The High Court also rejected the other grounds of challenge – which related to claims that the Council had misinterpreted the National Planning Policy Framework and the Minerals Planning Practice Guidance.
The case was heard by the Court of Appeal in November 2021 and judgment was handed down on 17 February 2022. In its judgment, the Court of Appeal re-iterated that its task is to decide the issues of law and that its consideration cannot extend into the realm of political judgment (which is not the responsibility of the courts).
The single ground of appeal raised four issues:
- Was the High Court wrong to hold that the “true legal test” of whether an impact constitutes an indirect likely significant effect of the development on the environment is whether it is “an effect of the development for which planning permission is sought”?
- Was the High Court wrong to hold that the EIA Regulations are not directed at environmental impacts which result from use consumption or use of the end product?
- Was the High Court wrong to hold that the EU Project Directive and the EIA Regulations do not require the assessment of emissions arising from the combustion of the refined products of the oil which would be extracted by the Development?
- Was the High Court wrong to hold that the Council’s reasons for not requiring an assessment of those emissions were lawful?
On the first issue, the Court of Appeal found that the “true legal test” was not whether a particular environmental impact is “an effect of the development for which planning permission is sought”; instead, the degree of connection required between the development and its putative effects needs to be considered. It was not possible to say that an impact, such as “scope 3” or “end user” greenhouse gas emissions, could never be an environmental effect requiring assessment under the EIA Regulations. The question of whether such emissions were the indirect effect of a particular development required to be assessed on a case by case basis.
On the second issue, the Court of Appeal highlighted that the term “end product” is not a term of art, nor does it appear in the relevant statutory framework. The court acknowledged that environmental effects caused by the use of a by-product of a development under consideration could in some instances be indirect effects under the EIA Regulations, however that does not result in a requirement for an EIA to consider indirect effects resulting from the ultimate consumption of an ‘end product’ in every case.
On the third and fourth issues, the Court of Appeal held that the assessment of “scope 3” or “downstream” emissions and whether they constitute indirect effects was a matter for the judgement of the Council in its capacity as the planning authority (rather than automatically a required assessment under the EIA Regulations). The Court of Appeal held that the Council’s decision that there was not a causal link between the Development and the particular impact on the environment and its decision not to require an additional assessment was reasonable and lawful.
For the reasons above, the Court of Appeal dismissed the appeal.
Issues for the Supreme Court
The matter has now been appealed to the Supreme Court. Various interested parties have also intervened: (i) Friends of the Earth; (ii) Greenpeace Ltd; (iii) The Office for Environmental Protections; and (iv) West Cumbria Mining Ltd.
The main issue for the Supreme Court to determine is whether, under the EU Project Directive and EIA Regulations, it was unlawful for the Council not to require the ES for the Development to include an assessment of the impacts of greenhouse gas emissions resulting from the end use of the refined crude oil (such as for fuel for motor vehicles).
This is a significant case, including for the offshore oil and gas industry, as the Supreme Court’s decision regarding the content and assessment of “end user” emissions in EIA processes will likely be equally relevant to the planning and approval of offshore oil & gas developments. Campaign groups are increasingly taking formal steps through court proceedings to challenge fossil fuel industries. Most attempts in the UK courts have so far been unsuccessful (and many have not been given permission to proceed), but the recent Oslo District Court decision provides an example of a successful argument that combustion emissions must be taken into account, for certain categories of developments at least in the context of the relevant Norwegian legislative framework. The decision from the Supreme Court will be highly anticipated by companies who are or will be applying for planning permission in relation to developments and projects for hydrocarbon extraction both on and offshore.
Article prepared with assistance from Madison Ingram, CMS
