In a ground-breaking ruling, the Supreme Court has determined that “downstream” greenhouse gas (GHG) emissions resulting from the use of extracted oil must be assessed as part of the Environmental Impact Assessment (EIA) for oil drilling projects in the planning process. Tom Jones and Benjamin Liebenberg take a look at the implications of this decision.
Before a developer is allowed to proceed with a project which is likely to have significant effects on the environment, legislation in the United Kingdom and many other countries requires an EIA to be carried out. The case turned on the interpretation of the Environmental Impact Assessment Regulations 2017, and in particular the meaning of “indirect effects”.
This case concerned the granting of planning permission by Surrey County Council for long-term oil production facility at the Horse Hill Well Site. As part of that planning application, Surrey County Council accepted an EIA that only considered the direct releases of GHGs from the site over the lifetime of the site, and not the downstream GHGs that the oil that the site extracts will produce when it is burnt as fuel.
In a majority ruling, the Supreme Court held that such downstream emissions clearly fall within the scope of “indirect effects” that must be evaluated under the EIA Regulations.
Causation is key
The central reasoning focused on the concept of causation. The Court found a causal link between the extraction of crude oil and its ultimate combustion, stating that “but for the extraction of the oil, the oil would stay in the ground and so would not be burnt.” This causal connection was deemed strong enough to require assessment of the resulting emissions as an “indirect effect” under the EIA Regulations.
Rejecting the arguments of the lower courts, the Supreme Court dismissed the notion that intermediate steps such as refining could break the causal chain. As Lord Leggatt stated, leaving such decisions to the evaluative judgment of decision-makers “would be a recipe for unpredictable, inconsistent and arbitrary decision-making.”
In particular, Lord Leggatt (with whom Lord Kitchin and Lady Rose agree) in a majority judgment stated:
In my view, this concern was misplaced. Recognising that combustion emissions are effects of producing crude oil does not open floodgates in the way the judge feared. There are sound reasons for distinguishing examples of the kind he gave, without resorting to the artificial notion that refining crude oil transforms it into something fundamentally different and so breaks the chain of causation between the extraction of the oil and its use.
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 product used for all sorts of different purposes. In the case of a facility to manufacture steel, it could reasonably be said that environmental effects of the use of products which 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.
Implications for Developers
Developers will now be required to assess a much wider range of impacts that their projects may cause, including downstream emissions from the ultimate end use of the extracted resources.
This obligation introduces an additional layer of scrutiny and potential legal challenges for high-carbon projects. As the Court noted, general estimates of combustion emissions are feasible, and the downstream emissions in this case were nearly two times greater than the direct emissions from the drilling operations themselves.
Developers will need to adapt to the new legal landscape by conducting comprehensive assessments of their projects’ full climate impacts, including downstream emissions where causation is sufficient to link any GHG producing events to the original extraction. The increased transparency and public engagement in the decision-making process could prove pivotal in shaping the nation’s energy transition and driving progress towards its climate goals and Net Zero.
For more information or advice on the impact of this ruling on your projects, please contact Tom Jones in our Planning and Commercial Disputes team who will be able to support you.
