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Published on July 4, 2024
Supreme Court rules that planning authorities cannot give permission for oil drilling projects without considering the environmental effects of the oil’s combustion

On 20 June 2024, the Supreme Court handed down its judgment in R (on the application of Finch on behalf of the Weald Action Group) (Appellant) v Surrey County Council and others (Respondents) [2024] UKSC 20, in which it found that downstream emissions are an inevitability of extracting crude oil, and their impact on the environment must therefore be considered at the planning stage.

Facts

In 2019, Surrey County Council (“SCC”) granted planning permission to Horse Hill Developments Limited (“HHDL”), an oil drilling and development company, to add four new wells to its existing site near Gatwick Airport in Surrey.  The sole purpose of these wells was the production of crude oil over a twenty-year period.  It was estimated that the project would produce 3.3 million tonnes of crude oil – which would, when burnt, produce over 10 million tonnes of CO2.

Under EU Directive 2011/92/EU (the “EIA Directive”), as implemented into law by the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (the “EIA Regulations”), an environmental statement assessing the “effects of the project”, is required for any major building or development projects. HHDL, as the developer, therefore conducted its environmental assessment report; in it, it considered the direct greenhouse gas emissions associated with the extraction of the oil at the development site, but did not take into account the environmental impact of the emissions which would be produced as a result of using the product, i.e., the combustion of the oil (referred to as the “downstream emissions”).

The Claimant, Ms Sarah Finch (representing the Weald Action Group), brought a claim against SCC, on the basis that the planning permission should not have been granted as HHDL’s failure to consider the downstream emissions meant that the environmental statement did not meet the requirements of the EIA Directive, and that either:

  1. the SCC had misinterpreted the EIA Regulations in determining that the downstream emissions could be excluded from the assessment of effects of the project; or in the alternative,
  2. if the EIA Regulations allowed for the exclusion of downstream emissions in the assessment, the EIA Regulations were unlawful as they were in conflict with the EIA Directive.

Judicial history

Below is a brief timeline of the case’s journey through the Courts:

15 Jul 2020:The Judge granted permission to apply for Judicial Review, identifying a challenge to national planning policy on the basis that it is not in conformity with EU law.
21 Dec 2020:The High Court ([2020] EWHC 3566)dismissed the claim as the assessment of emissions from future combustion of the oil was “on the basis of law, incapable of falling within the scope to the EIA required by the 2017 Regulations”.  The Claimant appealed.
Nov 2021:At the Court of Appeal ([2022] EWCA Civ 187) hearing, Ms Finch argued that:
– The High Court had an overly narrow interpretation of the regime, which contrasted with established English and EU precedent
– SCC’s reasons to exclude end-use emissions were legally flawed and inconsistent
– Measuring the scope 3 emissions would be possible
– When listing the benefits of using the extracted oil, SCC had failed to weigh these against the damage to the environment
17 Feb 2022:The Court of Appeal, split 2-1, found against Ms Finch.  The majority judgment found that SCC, as the decision-maker, had discretion on whether or not to include the downstream emissions in the “effects of the project” analysis required in the EIA.  Therefore, SCC’s decision was lawful.  Ms Finch again appealed.

Supreme Court judgment, handed down on 20 June 2024

The Supreme Court was unanimous in rejecting the Court of Appeal’s finding that the decision-maker has discretion as to the definition of “effects of the project”. The Supreme Court said that this was a matter of law, and not a matter of judgment to be left to individual authorities – if it were, it would be “a recipe for unpredictable, inconsistent and arbitrary decision-making”, especially “more regrettable” given that issues relating to climate change are “becoming more and more salient in policy-making and public debate”.

On the question of whether the “effects of the project” should include downstream emissions, however, the Court was split.

In his majority judgment, Lord Leggatt (with whom Lady Rose and Lord Kitchin agreed), found that the “effects of the project” was a question of causal connection, and therefore applied the “but for” test. This was met; but for the extraction of the oil, the oil would stay in the ground and therefore could not be burnt. However, Lord Leggatt went one step further, finding that on the facts, it was guaranteed that the oil would be refined and burnt, which is the strongest possible form of causal connection: “an effect is the obverse of a cause”.

Lord Leggatt also dismissed the reasoning of the lower courts regarding causation, which was that the intermediate steps between extraction and combustion of the oil could break the chain of causation. He held that the refining process does not alter the intended use or fundamental nature of the crude oil; its combustion is still a foreseeable consequence. He noted that this may not apply to other commodities which are mined or otherwise extracted; using steel as an example, he distinguished it from crude oil on the basis that steel has many different uses, and therefore the “effects will depend on innumerable decisions made “downstream” about how the steel is used and how products made from the steel are used”. This is not the case for crude oil, which only really has one purpose: combustion.

The Supreme Court found, therefore, that the combustion of oil is an inevitable outcome of its extraction, and so is necessarily an ”effect of the project”. Therefore, the effects of the emissions subsequently produced as a result of using the product should have been considered in the EIA. Further, the Court identified a number of established methodologies to estimate the amount of downstream GHG emissions resulting from the combustion of the extracted oil, so it was feasible for companies to include this in the assessment.

The Court noted at the start of its written decision that “the legislation does not prevent the competent authority from giving development consent for projects which will cause significant harm to the environment.  But it aims to ensure that, if such consent is given, it is given with full knowledge of the environmental cost.”

Lord Sales made the dissenting judgment, with which Lord Richards agreed. He identified a constitutional irregularity in the majority judgment, namely that planning permission for these projects is often taken at local or regional levels (e.g. Surrey County Council), whereas issues regarding greenhouse gas emissions are dealt with on a national level. His judgment was that it would therefore be constitutionally inappropriate for local and regional authorities to make such decisions on greenhouse gas emissions.

Other consideration in the judgment

Some other notable considerations from the Supreme Court in this judgment are:

  • The importance of public involvement to environmental decision-making: Lord Leggatt identified two aims in improving public involvement; increasing the democratic legitimacy of decisions relating to the environment, and educating the public.  On the latter, Lord Leggatt summarised that “You can only care about what you know about”. Further, public participation is an objective not only of the EIA Directive, but is also central to the Aarhaus Convention (which has been codified by subsequent amendments to the EIA Directive).
  • No conflict with national policy:  while national policy encourages domestic oil and gas production, this does not mean that the projects cannot comply with the environmental assessment requirements. The objective of the EIA is to ensure that decisions are made with a full understanding of their environmental impact; as noted above, the Court acknowledges that its judgment will not prevent projects which are very harmful to the environment, but it will make sure that the extent of the harm is fully understood at the planning stage.
  • Geographical scope of the emissions: the Court rejected the idea that an EIA should be limited to emissions occurring at the project’s site. Its reasons for this were bipartite: firstly, the EIA Directive does not impose geographical limits on the assessment of environmental impacts, and secondly, the impact of the emissions on the climate affects the entire globe, not just the location of their release: “[climate change] is a global problem precisely because there is no correlation between where [emissions] are released and where climate change is felt”.

What will this mean for future projects?

This decision will mean that planning applications for future oil wells will require developers to assess downstream emissions in their environmental impact reports, and planning authorities will need to consider these when deciding whether to grant approval. This will need to be conducted at the initial planning stage.

Under the EIA Directive and EIA Regulations, an assessment of the effects on the environment is required for a wide variety of projects, including nuclear power plants, motorways, dams, railways, waste disposal facilities etc. However, given that Lord Leggatt drew a distinction between crude oil, which will inevitably be combusted, and other commodities such as steel which has a variety of further uses, it remains to be seen whether assessment of downstream emissions will be required in projects involving other commodities. The question of causation will again apply, and the developer and planner will need to apply the “but for” test. However, what is certain is that both developers and planning authorities will need to turn their attention to downstream emissions, even if just to consider whether they are inevitable enough to be included in the assessment.

Further, it will be interesting to see the government’s response to the Supreme Court’s judgment. In March 2023, it opened a consultation on proposals to replace the existing system with a new framework.  Following this judgment, the new framework may require a greater assessment of downstream emissions than previously.

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