Gloucester Resources (“Rocky Hill”) case

This is an immensely important case involving the first rejection by an Australian court of a coal mine based, in part, on climate change.

In addition to the result, the importance of this case lies in who wrote the judgment and how well it is written.

The trial decision was delivered by the Chief Judge of the New South Wales Land and Environment Court, Brian Preston, who is undoubtedly Australia’s leading environmental jurist (and has been for over a decade).

Preston CJ’s reputation and how well the judgment is written means the decision will be influential for other Australian courts.

An important consequence of the decision is that it is influencing subsequent decisions of the NSW Independent Planning Commissions, which hears applications and objections to coal mines. For instance, in September 2019 the Commission rejected a large coal mine, the Bylong Coal Project, based on similar reasoning on climate change to Preston CJ.

Background

The decision involved an appeal by a mining company, Gloucester Resources Limited (GRL), against refusal in 2017 by the NSW Planning Assessment Commission (PAC) of an application for a coal mine at Rocky Hill in the Gloucester Valley of NSW. The mine was known as the “Rocky Hill Mine Project“.

The mine was proposed to be an open cut coal mine producing 21 million tonnes of coal over a period of 16 years.

The impacts of the mine on climate change were only raised in the appeal because a community group, Groundswell Gloucester Inc, was permitted to intervene in it. The PAC’s refusal of GRL’s application was based on planning grounds (not including climate change). The ultimate decision, therefore, demonstrates the value of third parties in improving decision-making.

A groundbreaking decision

Preston CJ ultimately held that the mine should be refused due to its significant and unacceptable planning, visual and social impacts, which cannot be satisfactorily mitigated. This was the principal reason for refusal, to which avoiding GHG emissions and their likely contribution to adverse impacts of climate change merely added a further reason for refusal of the mine.

Refusing a mine due to visual and social impacts, while unusual for Australian decision-makers, is not truly groundbreaking.

It is Preston CJ’s reasoning on climate change, while not the primary reason for refusing the mine, that is truly groundbreaking.

Rejection of Drug Dealers Defence

Commencing at [422], Preston CJ examined the evidence of climate change before the court, international and national decisions, international agreements and Australian climate policies before rejecting a series of arguments by the mining company (GRL).

It is the third argument rejected by Preston CJ that has particular significance for other litigation against Australian coal mines, particularly in Queensland. Preston CJ stated:

“[534] The third reason GRL advanced for approving the Project was that the GHG emissions of the Project will occur regardless of whether the Project was approved or not, because of market substitution and carbon leakage. On market substitution, Dr Fisher [GRL’s climate expert] suggested that having regard to the limited substitutes for coking coal in steel making and the strong projected demand for coking coal as large countries such as India industrialise and intensify their steel use, “if demand is not met from Australian coal mines, investment will flow to other large coal producers and mines will be developed in countries such as India and Indonesia” …. There will therefore be at least the same amount of GHG emissions, merely coming from those other mines rather than from the Project. …

[538] The market substitution argument is also flawed. There is no certainty that there will be market substitution by new coking coal mines in India or Indonesia or any other country supplying the coal that would have been produced by the Project. …

[539] If approval for the Project in the developed country of Australia were to be refused, on grounds including the adverse effects of the mine’s GHG emissions on climate change, there is no inevitability that developing countries such as India or Indonesia will instead approve a new coking coal mine instead of the Project, rather than following Australia’s lead to refuse a new coal mine. Developed countries such as Australia have a responsibility, including under the Climate Change Convention, the Kyoto Protocol and the Paris Agreement, to take the lead in taking mitigation measures to reduce GHG emissions …

[540] Developing countries might consider that domestic mitigation measures to achieve their nationally determined contributions for reducing GHG emissions should include not approving new development for the exploitation or burning of fossil fuel reserves. Developing countries may be encouraged to take such mitigation measures by developed countries taking the lead in doing so in their countries. Hence, there is no certainty that refusal of consent to the Project will cause a new coal mine in another country to substitute coking coal for the volume lost in the open market by refusal of the Project.

[541] Thirdly, the ability of a new coking coal mine in another country to substitute for any volume of coal lost by refusal of the Project will depend on the market, including the demand and supply of substitute sources of coal and any difference in price between coal from the Project and from other substitute sources, which price difference might affect substitutability. Without any evidence about the existence and effect of these market forces on substitutability, no assumption can be made that there would be market substitution by coal from new coal mines in other countries if the Project were to be refused.

[542] The market substitution assumption was rejected [by the US Court of Appeals] in WildEarth Guardians v US Bureau of Land Management 870 F 3d 1222 (10th Cir, 2017) …

[544] The [US] Court of Appeals also concluded that “the assumption itself is irrational (i.e. contrary to basic supply and demand principles” (at 1236), holding that “it was an abuse of discretion to rely on an economic assumption, which contradicted basic economic principles, as the basis for distinguishing between the no action alternative and the preferred alternative” (at 1237-1238).

[545] There is also a logical flaw in the market substitution assumption. If a development will cause an environmental impact that is found to be unacceptable, the environmental impact does not become acceptable because a hypothetical and uncertain alternative development might also cause the same unacceptable environmental impact. The environmental impact remains unacceptable regardless of where it is caused. The potential for a hypothetical but uncertain alternative development to cause the same unacceptable environmental impact is not a reason to approve a definite development that will certainly cause the unacceptable environmental impacts. In this case, the potential that if the Project were not to be approved and therefore not cause the unacceptable GHG emissions and climate change impacts, some other coal mine would do so, is not a reason for approving the Project and its unacceptable GHG emissions and climate change impacts …”

Variations of the market substitution argument (also known as the “Drug Dealers Defence”) rejected by Preston CJ have been accepted by the Commonwealth Government, the Federal Court and Queensland courts in numerous past cases, including:

• New Acland Coal Mine Case (2017-2018).
• Carmichael Coal Mine Case in the Land Court and Supreme Court of Qld (2015-2016)
• Carmichael Coal Mine cases in the Federal Court (2015-2016)
• Alpha Coal Mine Case (2013-2016)
• Wandoan Coal Mine Case (2011-2012)
• Anvil Hill Coal Mine Case (2007-2008)
• Newlands Coal Mine Case (2007)
• Wildlife Whitsunday Case (2005)

Given this history, Preston CJ’s decision , particularly at [534]-[545], is immensely important for Australian environmental law and the global fight against climate change as the first Australian court to reject a coal mine based on climate change.

Mine not in the public interest

Preston CJ went on to hold that the better reason for rejecting the mine was not its GHG emissions, but the poor environmental and social performance. He concluded, at [556]:

[556] In the case of the Rocky Hill Coal Project, the aggregate GHG emissions over the life of the Project are sizeable, although the Project is not one of the largest coal mines in Australia. The Minister noted that the proposed production of the Rocky Hill mine appears to be about a third of the production of the average coal mine in NSW …. Refusal of consent to the Project would prevent a meaningful amount of GHG emissions, although not the greater GHG emissions that would come from refusal of a larger coal mine. However, the better reason for refusal is the Project’s poor environmental and social performance in relative terms. As I have found elsewhere in the judgment, the Project will have significant and unacceptable planning, visual and social impacts, which cannot be satisfactorily mitigated. The Project should be refused for these reasons alone. The GHG emissions of the Project and their likely contribution to adverse impacts on the climate system, environment and people adds a further reason for refusal. Refusal of the Project will not only prevent the unacceptable planning, visual and social impacts, it will also prevent a new source of GHG emissions. I do not consider the justifications advanced by GRL for approving the Project, notwithstanding its GHG emissions, are made out for the reasons I have given earlier.

Balancing all factors, Preston CJ held that the mine should be rejected as it was not in the public interest:

“[688] I find that the negative impacts of the Project, including the planning impacts on the existing, approved and likely preferred land uses, the visual impacts, the amenity impacts of noise and dust that cause social impacts, other social impacts, and climate change impacts, outweigh the economic and other public benefits of the Project. Balancing all relevant matters, I find that the Project is contrary to the public interest and that the development application for the Project should be determined by refusal of consent to the application.”

Preston CJ concluded:

“[699] In short, an open cut coal mine in this part of the Gloucester valley would be in the wrong place at the wrong time. Wrong place because an open cut coal mine in this scenic and cultural landscape, proximate to many people’s homes and farms, will cause significant planning, amenity, visual and social impacts. Wrong time because the GHG emissions of the coal mine and its coal product will increase global total concentrations of GHGs at a time when what is now urgently needed, in order to meet generally agreed climate targets, is a rapid and deep decrease in GHG emissions. These dire consequences should be avoided. The Project should be refused.”

Appeal discontinued and revised application

On 8 March 2019 the mining company, GRL, served a Notice of Intention to Appeal the refusal of consent for the proposed coal mine.

The filing of the notice gave GRL a further 2 months to consider its position in regard to any appeal. The notice did not state the grounds on which an appeal may be brought.

Shortly before the deadline of 8 May 2019, GRL announced it would not proceed with the appeal.

The fight against the mine many not have ended, however, as GRL can still lodge a revised application to re-start the application process for a slightly different mine on the same location.

Influence on later decisions

An important, wider impact of Preston CJ’s decision is the influence it has had on the NSW Independent Planning Commission, which hears applications and objections to coal mines:

• In August 2019 the Commission refused a 5-year extension to the Dartbrook Coal Mine based on similar reasoning on climate change to Preston CJ.
• In September 2019 the Commission rejected a large coal mine, the Bylong Coal Project, based on similar reasoning on climate change to Preston CJ, including rejecting the “market substitution” argument (see [648]-[697] and [817] of the Commission’s reasons).