Planning authorities must take account of global emissions in approvals for oil and gas fields – Supreme Court
1 July 2024
A detailed summary of the issues and the facts in this case can be found in the Supreme Court’s Press Release. The report below gives a very short account of these followed by a focus on the majority and dissenting judgments. I quote Lord Sales in some detail as the concerns expressed in his dissent will only prevail if Parliament were to legislate for them to do so.
Legal and factual background
In December 2018, the second respondent, Horse Hill Developments Ltd, sought planning permission from the first respondent, Surrey County Council (“the Council”), to retain and expand an existing onshore oil well site and to drill for four new wells, enabling the production of hydrocarbons from six wells over a period of 25 years. The environmental impact assessment for the project had to be carried out under the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (which implemented the Directive 2011/92 EU).
The Council considered the environmental impacts of “the direct releases of greenhouse gases from with the well site boundary resulting from the site’s construction, production, decommissioning and subsequent restoration over the lifetime of the proposed development.” However, it did not assess the environmental impacts of the downstream greenhouse gas emissions that would inevitably result when the oil extracted from the development site was later refined and then used, for example, as fuel. The developer argued that, as regards the impact of the project on climate, the scope of the EIA should be confined to the direct releases of greenhouse gases from within the well site boundary during the lifetime of the project; and that the EIA need not include an assessment of the greenhouse gas emissions that would occur when the oil extracted from the wells was ultimately burnt elsewhere as fuel. The council accepted this approach and granted planning permission for the development on 27 September 2019. The appellant, acting on behalf of a local action group, applied for judicial review of the Council’s decision. Her claim was unsuccessful before the High Court and the Court of Appeal. This was her appeal to the Supreme Court
The question that the Court had to decide was this. Was it unlawful for the Council not to require the environmental impact assessment for a project of crude oil extraction for commercial purposes to include an assessment of the impacts of downstream greenhouse gas emissions resulting from the eventual use of the refined products of the extracted oil?
The Court’s decision
By a three-to-two majority, the Supreme Court allowed the appeal and held that the Council’s
decision was unlawful because the emissions that will occur when the oil produced is burnt as
fuel are within the scope of the EIA required by law.
Lord Leggatt, with whom Lord Kitchin and Lady Rose agreed, gave the majority judgment.
Lord Sales, with whom Lord Richards agreed, dissented.
The Majority Judgment
The majority found that it was an agreed fact that, if the project went ahead, it was not merely likely but inevitable that the oil produced from the well site would be refined and, as an end product, would eventually undergo combustion, and that that combustion will produce greenhouse gas emissions [45]. It was not disputed that these emissions would have a significant impact on climate.
The issue was whether the combustion emissions constituted “direct or indirect … effects of the project”
within the meaning of the EIA Directive and 2017 Regulations. If they did, they should have been
assessed as part of the EIA.
The majority of the Court found that the emissions that would occur on combustion of the oil produced were “effects of the project” because it was known with certainty that, if the project went ahead, all the oil extracted from the ground would inevitably be burnt thereby releasing greenhouse gases into the earth’s atmosphere in a quantity which could readily be estimated [79]–[81].
They found, furthermore, that the EIA Directive does not impose any geographical limit on the scope of the environmental effects of a project that must be assessed. The Council was therefore wrong to confine the EIA in this case to emissions expected to occur at the project site. It was in the very nature of
“indirect” effects that they may occur away from their source [101]–[103]. Moreover, the
impact of greenhouse gas emissions on climate does not depend on where the release occurs
[97].
Lord Leggatt considered the Commission’s 2013 Guidance on Integrating Climate Change and Biodiversity into Environmental Impact Assessment. Under the heading “climate change mitigation” the table lists, as matters to be considered in environmental impact assessments, the following:
“direct GHG emissions”(Scope 1);
“indirect GHG emissions due to increased demand for energy” (Scope 2); and
“indirect GHG emissions caused by any supporting activities or infrastructure that is directly linked to the implementation of the proposed project (eg transport …). (Scope 3)”
Lord Leggatt observed that these categories were not to be considered to be exhaustive of the circumstances in which GHG emissions can occur as indirect effects of a project. The examples given therefore could not be read as somehow cutting down the definition of “indirect effects” given earlier in the 2013 Guidance. Applying that definition, the combustion emissions were “indirect effects” of the project in issue here.
“102. The flaws in the reasons given by the developer and accepted by the council for limiting the scope of the assessment in this way are also in my view plain. The fact that the combustion emissions would emanate from activities beyond the well site boundary which were not themselves part of the project was not a valid reason to exclude them. An impact is not precluded from being an effect of a project by the fact that its immediate source is another activity that occurs away from the project site. As already discussed, it is in the very nature of “indirect” effects that they may occur as a result of a complex pathway involving intermediate activities away from the place where the project is located.
- The associated reason given that GHG emissions beyond the well site boundary are “outwith the control of the site operators” (see para 36 above) was equally flawed. The combustion emissions are manifestly not outwith the control of the site operators. They are entirely within their control. If no oil is extracted, no combustion emissions will occur. Conversely, any extraction of oil by the site operators will in due course result in GHG emissions upon its inevitable combustion. It is true that the time and place at which the combustion takes place are not within the control of the site operators. But the effect of the combustion emissions on climate does not depend on when or where the combustion takes place. Those factors are irrelevant to the size and significance of the environmental impact.
The judge at first instance concluded that the emissions occurring on combustion could not in law be regarded as effects of the project because what is burnt as fuel would not be the crude oil produced from the well site but an end product made at a separate facility where the oil would be refined. The
Supreme Court rejected this argument. The judge’s concern that the EIA process would be unduly onerous on other projects, such as production of steel which is then used to manufacture parts for use in making motor vehicles or aircraft was, in Lord Leggatt’s veiw, misplaced.
Raw materials such as steel can be put to many possible uses, and the view might reasonably be taken that no meaningful assessment or estimate can be made of what emissions will ultimately result from its use. Oil is a very different commodity. There is no element of conjecture about what will ultimately happen to the oil; refining the oil does not change it into a different type of object (unlike the incorporation of a part in a motor vehicle or aircraft); and a reasonable estimate can readily be made of the emissions that will occur upon its inevitable combustion [112]–[139].
Consequently, the Council’s failure to assess the effect on climate of the combustion of the oil
that would be produced from the proposed well site meant that its decision to grant planning permission for the project was unlawful [174].
The Dissenting Judgment
Lord Sales (with whom Lord Richards agreed) found that the majority’s open ended interpretation of article 3(1) of the EIA Directive would mean that there were “hardly any limits but the sky”’ when it comes to needing to consider downstream effects of any given project.
He referred to the EU’s own Commission Guidance in the context of the EIA Directive amendments:
“237. …Neither the recitals to the 2014 Directive nor the text it introduced into the EIA Directive indicate that it was intended that all downstream or scope 3 greenhouse gas emissions should be included within the concept of “indirect effects” of projects for the purposes of the EIA Directive. As the 2012 Impact Assessment explained, authorities across Member States had not previously regarded them as “indirect effects” of projects “on … climate” within article 3(1) of the EIA Directive .
…The 2013 Guidance only referred to a limited class of emissions as “indirect effects” of projects. If it had been intended that the entirety of the very wide class of scope 3 emissions should also be so regarded, the amendments effected by the 2014 Directive would have made that clear. That would have been necessary in order to ensure a uniform and harmonised approach across Member States in relation to such a fundamental point. It would have constituted a major change of direction and focus for the EIA regime. Instead … the text of the EIA Directive as so amended focused on greenhouse gas emissions arising from the construction and operation of a project itself, together with possible measures for minimising and mitigating such emissions.
- … under the heading “Climate change mitigation: project impacts on climate change”, the guidance states (p 39) that the EIA should include an assessment of the direct greenhouse gas emissions of the project over its lifetime, “eg from on-site combustion of fossil fuels or energy use”, and of emissions “generated or avoided as a result of other activities encouraged by the Project (indirect impacts) eg transport infrastructure: increased or avoided carbon emissions associated with energy use for the operation of the Project; [and] commercial development: carbon emissions due to consumer trips to the commercial zone where the Project is located.” This confirms the Commission’s understanding that the relevant “indirect effects” of a project in relation to greenhouse gas emissions are those relating to the operation of the project itself. There is no reference to all downstream or scope 3 emissions, as one would have expected in this guidance if the Commission regarded these as falling within the scope of the EIA Directive. Instead, at p 38, the guidance referred back to the 2013 Guidance, which as noted above only referred to far more limited aspects of greenhouse gas emissions.”
Furthermore, in other legislation which regulated oil and emissions, decisions concerning the use of oil and GHGs were outside the scope of local authority powers. Lord Sales considered that it would be “constitutionally inappropriate for a local planning authority to assume practical decision-making authority based on its own views regarding scope 3 or downstream emissions”:
“262. Also, to construe the EIA Directive as requiring this would lead to incoherence. The decision-making processes by authorities deciding on each separate project are not integrated, and so would have a tendency to cut across each other on a potentially determinative issue as is alleged to arise here if each authority made its own assessment of the extent and significance of the same set of greenhouse gas emissions for the project on which it had to decide; all the more so where the projects might be in different Member States. 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 (including by having regard to whatever national policy was applicable in that Member State). But the authority carrying out an EIA in relation to the oil well might reach different conclusions about that (and might not give weight to the national policy of the different Member State of the refinery). The EIA Directive has no mechanism for resolving this sort of difference of view, nor for allocating decision-making authority in relation to such matters, other than by maintaining a focus on the particular project in question and greenhouse gas emissions associated with that project.”
Lord Sales therefore agreed with the approach of the High Court in which the question
is to be determined by a proper interpretation of the EIA Directive as a matter of law [327].
Comment
It is not clear yet what the implications of this ruling will be. However many wind and solar farms have sprung up all over the UK, the fact is that oil and gas accounts for 74% of UK primary energy consumption today and will remain a significant contributor for decades to come. Does this mean that we should give up on drilling gas from the North Sea? As Lord Leggatt said at the outset of the majority judgment,
“This appeal raises a question about whether the greenhouse gas (“GHG”) emissions which will occur when oil extracted from an oil well, after being refined, is burnt as fuel must be included in the EIA required before development consent may be given for the extraction of the oil.”
If it does, then by logical extension every future fossil fuel project has to have an EIA which takes into account its contribution to the global greenhouse gas problem, then the UK will have to stop current oil and gas production.
Here is an extract from one UK North Sea Oil Producer, reacting to the judgment in its Operations and Financial Update of 27 June 2024:
“The UK consumes almost twice as much oil and gas as it produces. This deficit will persist even as the country seeks to reduce its consumption of hydrocarbons. Consequently, every barrel of oil and molecule of gas used but not produced in the UK is imported. Without continued investment in our homegrown oil and gas sector, the gap between UK production and consumption will only widen, to be filled inevitably by imports. These imports worsen our national balance of payments, only deliver jobs and taxes to foreign countries and, typically, have higher production and transportation carbon emissions by the time they get to our shores.
… the choice is not between UK oil and gas or no oil and gas; the choice is UK oil and gas or foreign oil and gas. As was stated in the Supreme Court decision, emissions respect no borders. The oil and gas we do not produce, we still import and consume. Global emissions will be no less because the oil or gas is not produced in the UK.”
There are two sorts of oil wells: wildcat, where there may not be oil or gas, or infill – to extract the deposit, when found, efficiently. If permissions for infill are not granted because of environmental impact the deposit will disappear. So if oil companies can’t expect to do infill in the UK they won’t drill here at all. This will not stop us importing hydrocarbons from Qatar. The UK already imports Liquified Natural Gas that has been produced by fracking in the US – an extraction process that is banned in the UK. Shipping in LNG over thousands of miles is arguably worse than producing our own hydrocarbons.
The global environmental impact of the combustion of oil from a project – Scope 3, as discussed above – has been suggested for the environmental assessment of certain investments – for example a bank having to assess the carbon impact of lending to an oil company. As the Department for Energy Security and Net Zero observes in its 2023 Call for Evidence:
“Calculating Scope 3 emissions can be difficult and complex; they are both the most significant and most challenging source of emissions for businesses to identify, quantify and address.
For this reason there are no imminent plans for insisting on this in the European ESG guidelines on scope 3. And this is not a matter to be decided at local authority level. As Lord Sales said, “scope 3 or downstream greenhouse gas emissions are addressed by central governments at the level of national policy. That is the general position for all Member States, and the UK. Decisions regarding the distribution of greenhouse gas emissions between different sectors of the economy, the striking of a balance between promotion of national economic objectives and reduction of greenhouse gas emissions in various sectors and the rate of transition sector by sector towards the achievement of the 2050 net zero target are all matters of national policy to be determined by central Government.
… These are all “big picture” issues which a local planning authority such as the Council is simply not in a position to address in any sensible way.” [253-4]
And, by way of warning to the many hundreds of claims waiting to be heard by the courts involving climate change, Lord Sales had this to say:
“332. In relation to the attempt in Kilkenny Cheese and in the present case to enlist the EIA Directive in the worthy cause of combating climate change, by seeking to press it into service in relation to requiring EIA in respect of downstream or scope 3 greenhouse gas emissions, it is relevant to bear in mind the cautionary words of Lord Bingham of Cornhill in Brown v Stott [2003] 1 AC 681, 703, quoting from Hamlet in relation to the European Convention on Human Rights:
“The Convention 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 heart-ache and the thousand natural shocks That flesh is heir to.’”.
