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Home / News and Insights / Blogs / Planning Act 2008 / 1048: When is burning oil not part of your project?

Mustafa Latif-Aramesh
Partner & Parliamentary Agent

Today’s entry provides a summary of the Supreme Court’s ruling in Finch v Surrey County Council.

Pardon my Finch

A significant judgment has been handed down by the Supreme Court in a 3-2 ruling relating to a project which involved the extraction of oil in Surrey, reversing the 2-1 decision of the Court of Appeal. For context, an EIA must ‘identify, describe, and assess in an appropriate manner, in the light of each individual case, the direct and indirect significant effects of a project’. The key question was whether the GHG emissions which occur as a result of the refinement and burning of the oil extracted should be included in the EIA for the project.

Surrey County Council had initially said that the answer to this question was ‘yes,’ but then changed its mind accepting that an environmental statement which assessed only direct releases of greenhouse gases at the project site over the lifetime of the project and contained no assessment of the impact on climate of the combustion of the oil was just hunky dory.

The Court of Appeal, affirming the High Court’s judgment, had decided the answer was ‘no’ on the basis that the question of whether the combustion emissions are indirect effects of the extraction of the oil, which therefore had to be assessed, depends on whether there was a ‘sufficient causal connection’ between the two, which they saw as a matter of fact and evaluative judgment for the council.

By contrast, the earlier judgment of the High Court (from Mr Justice Holgate) held that ‘the true legal test is whether an effect on the environment is an effect of the development for which planning permission is sought’; he observed that ‘[a]n inevitable consequence may occur after a raw material extracted on the relevant site has passed through one or more developments elsewhere that are not the subject of the application for planning permission and which do not form part of the same “project”‘.

Mr Justice Holgate at the High Court was particularly concerned about EIA becoming unduly onerous in requiring all downstream effects being assessed. Lord Legatt, Lord Kitchin, and Lady Rose emerge from the corner of a room to disagree with them all. They held that the concept of ‘the effects of a project’ within the EIA Regulations is a question of causation (but not the Court of Appeal’s test).

Their Lordships considered that, in this case, there was in fact a strong and inevitable causal connection between the extraction and combustion of the oil. There was no ‘break in the chain’ of causation in refining the oil because ‘the process of refining crude oil does not alter the basic nature and intended use of the commodity’. Perhaps not altogether determinative, but the majority appears to have been swayed by the idea that public participation in environmental decision-making is important, and therefore you should read that into your interpretation of the EIA regulations.

What of the minority (Lord Sales and Lord Richards)? Here are a few extracts:

  • Oil extracted from the Site will have to be refined before it is used. Construction of a refinery would constitute a project listed within Annex I to the EIA Directive for which an EIA would be required. Greenhouse gas emissions from the construction and operation of such a refinery would have to be assessed in the context of an EIA for that project. It would be disproportionate for them to have to be assessed twice, once in the context of an EIA for that project and also in the context of an EIA for the Site. (That may be so, but that still doesn’t address downstream emissions, which would remain unassessed by anyone.)
  • The authority carrying out an EIA in relation to the refinery project, which clearly has the authority under the EIA Directive to determine such matters, might decide that the direct and indirect greenhouse gas emissions of the refinery could be limited or mitigated in an acceptable way. On the other hand, the relevant refinery might already exist, so that no EIA obligation arises in relation to it under the EIA Directive. In such a case, it is difficult to see why the EIA in relation to the oil well should extend to cover the greenhouse gas emissions associated with the operation of a refinery, which is not subject to the EIA regime.
  • … if the refinery in this example were located outside the EU, to construe the EIA Directive as requiring the local authority carrying out an EIA in relation to the oil well to assess the downstream greenhouse gas emissions of the refinery in a third state with a view to (possibly) reaching a decision that would prevent the construction of the oil well and so, to that extent, prevent the supply of oil to that refinery, would be to give the Directive exorbitant jurisdictional effect.

The response from the majority on this point is quite telling:

‘Oil is a very different commodity from, say, iron or steel, which have many possible uses and can be incorporated into many different types of end products used for all sorts of different purposes. In the case of a facility to manufacture steel, it could reasonably be said that the environmental effects of the use of products that the steel will be used to make are not effects of manufacturing the steel. That is because the manufacture of the steel is far from being sufficient to bring about those effects. Such effects will depend on innumerable decisions made “downstream” about how the steel is used and how products made from the steel are used. This indeterminacy regarding future use would also make it impossible to identify any such effects as “likely” or to make any meaningful assessment of them at the time of the decision whether to grant development consent for the construction and operation of the steel factory… [In relation to airport parts,] where a component is manufactured which forms a small part of a much larger object, such as a motor vehicle or aircraft, the view might reasonably be taken that the contribution of the component is not material enough to justify attributing the impact on the environment of the end product to the activity of manufacturing the component part. In any event, the number of motor vehicles or aircraft in which such parts will be incorporated and the use which will subsequently be made of them may be so conjectural that no realistic estimate could be made of GHG emissions arising from such use on which a reasoned conclusion could be based.’

The majority’s response referencing steel raises many questions, and the dismissal of the reference to the ‘project itself’ as an exercise in Kantian metaphysics leaves me wanting a little more. For my money, Mr Justice Holgate’s analysis in the High Court, and Lord Sales forceful rebuttal of the majority (which is perfectly synced with Lethal Bizzle’s ‘Pow’) is quite a compelling read. Lord Sales and Lord Richards mention example after example of why the majority’s reasoning might have perverse effects, why its potentially inconsistent with the drafting of the EIA Directive, the policy papers surrounding the recent amendments, and other European case law.

The minority’s argument that it is in fact constitutionally improper for any downstream effects to be considered in any context seems like a slight overreach to me. Though the minority’s point that requiring two assessments is unduly burdensome seems to take to heart proportionality in contrast to the majority’s shrugging of their shoulders at this requirement (see paragraph 125).

Having said that, there is also a judicial tiff about the interpretation of wider precedents: one such case was the Kilkenny Cheese judgment of the Supreme Court of Ireland. In that case, the question was whether the proposed cheese factory had to include an assessment of indirect environmental impacts (relax, nobody is assessing your bowel movements – the factory was so large that it was assessed that, because of the substantial increase in demand for milk which it would create, it would lead to a significant increase in the number of cattle kept on farms in Ireland. Those cows would have a detrimental impact on the environment, including by substantial production of greenhouse gases).

In that case, the Supreme Court of Ireland followed – oh, look who it is – Mr Justice Holgate’s earlier judgments that the correct test was whether the indirect effects of a project must be effects which the project itself has on the environment. Perhaps in what some might call a ‘mic-drop’ moment, the minority judgment quotes Hamlet via Lord Bingham, noting that law ‘is concerned with rights and freedoms which are of real importance in a modern democracy governed by the rule of law. It does not, as is sometimes mistakenly thought, offer relief from ‘The heartache and the thousand natural shocks that flesh is heir to ’- a slight dig at the attempt to, in the view of the minority, read too much purpose into the EIA Directive.

It’ll be interesting to see how our new EIA overlord, the Environmental Outcomes Report, seeks to endorse or reject the various views of our esteemed judges. The case clearly has implications for gas extraction projects and potentially for a limited number of DCO projects, but given the comments of the majority in at least trying to make clear not all downstream effects need to be included, I would be wary of the shouts of Armageddon (instead, shout ‘uncertainty!’).

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