24 June 2024
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Supreme Court ruling: Council's decision to grant planning permission for oil extraction project was unlawful

To The Point
(3 min read)

In a landmark decision in R (on the application of Finch on behalf of the Weald Action Group) v Surrey County Council and others ("Finch"), the Supreme Court has ruled that Surrey County Council's decision to grant planning consent for an oil extraction project was unlawful.
In carrying out its environmental impact assessment ("EIA") of the project, the Council did not consider the impacts of greenhouse gas ("GHG") emissions resulting from the final use of the extracted oil when burnt as fuel ("downstream emissions").
The Court held (by a 3:2 majority) that the Council was wrong to limit the scope of the EIA to emissions expected to occur at the project site only. The Council's decision to grant planning permission for the project must therefore be quashed.

Reasons for the judgment

The developer in this case argued that the scope of the EIA should (in line with previous court rulings in the UK) be confined to the GHG emissions released within the site boundary of the oil extraction project during its lifetime. The Council accepted this approach and granted planning consent. Finch appealed to the Supreme Court (having been unsuccessful in its challenge of the consent in the High Court and then subsequently in the Court of Appeal) on the basis that the EIA ought to have considered downstream emissions occurring on combustion of the oil produced.

The Town and Country Planning (Environmental Impact Assessment) Regulations 2017, which are derived from EU Directive (92/11/EU), require an EIA to be carried out by the planning authority on any UK project which is likely to have significant effects on the environment. The legislation requires the EIA to identify, describe and assess the likely "direct and indirect significant effects of the proposed development" on the environment, including the impact on climate.

The key question for the Supreme Court was whether downstream emissions occurring on the combustion of the extracted oil would constitute "direct or indirect … effects of the project", or whether (in line with previous court rulings) only emissions released within the site boundary of the project would be relevant. The majority of the Court considered this question to be one of causation i.e. was there a causal connection between the extraction of crude oil and the GHG emissions resulting from its combustion?

The parties agreed that if the project went ahead, it was inevitable that oil production from the well site would be refined and eventually undergo combustion. It was also an agreed fact that the combustion emissions would have a significant impact on climate.

Against that background, the Supreme Court held that the extraction of oil at the well site would initiate a causal chain leading to the inevitable combustion of oil and release of GHG emissions.  Accordingly, combustion emissions were "effects of the project" and ought to have been assessed in the Council's EIA.

Why Does it Matter?

In its decision, the Supreme Court distinguished oil from other commodities on the basis that the process of refining crude oil does not alter its basic nature or intended use. This is important for establishing a causal connection when assessing whether downstream emissions constitute "a direct or indirect effect" of a given project.  Based on the inevitability of oil from the site being burned, the consequent GHG emissions were, in the Court's view, "straightforwardly results of the project".

This decision clarifies the scope of EIAs concerning the extraction of oil. Whilst the fact that a project will cause significant harm to the environment does not necessarily prevent the planning authority from granting consent for it to proceed, Finch confirms that it will be unlawful for the UK planning authority to make decisions on oil extraction projects where the EIA fails to adequately consider downstream emissions.

It is anticipated that this decision will lead to similar challenges being taken against other oil extraction projects where the EIA fails to adequately consider downstream emissions. Whilst the long-term implications of Finch on oil extraction projects are uncertain, it seems inevitable that the decision will lead to delays in progressing these types of projects.

Next steps

Addleshaw Goddard has specialist professional advisors within Commercial Disputes dealing with Climate Change Litigation. If you have a query in relation to this landmark decision, please get in touch with one of the key contacts.

To the Point 

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