Finch succeeds in the Supreme Court, overturning the Court of Appeal decision

The judgment relating to one of the most eagerly anticipated Supreme Court cases was handed down on 20 June 2024; R (on the application of Finch on behalf of the Weald Action Group) v Surrey County Council and others [2024] UKSC 20. It is the first case which has involved an intervention by the Office for Environmental Protection, and is one that practitioners will need to take into account in future decisions.

What are the facts?

It involves an unusual set of facts. An onshore oil extraction planning permission, something which is pretty rare, was challenged on account of its environmental statement (“ES”) omitting the greenhouse gas (“GHG”) emissions when the oil extracted from it is eventually used. The relevant law at the date of the decision (September 2019) is contained within the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (“the EIA Regulations”), designed to implement Directive 2011/92/EU, as amended by Directive 2014/52/EU. The judgment notes that the analysis is not affected by any changes made to English law as a result of Brexit.

The developer, Horse Hill Developments Ltd, applied to Surrey County Council (“the Council”), as the relevant mineral planning authority, for planning permission to retain and extend an existing well site at Horse Hill near Horley (comprising two wells) and drill four new wells, and to extract hydrocarbons from the six wells for commercial production. The plan was to carry out the project over 25 years in six phases, starting with construction works to modify the well site, drill the new wells and install facilities for exporting crude oil from the site, and ending with decommissioning and site restoration. The relevant phase is phase 4, which encompasses the extraction of oil from the wells over 20 years. It is estimated that over this period the total quantity of oil produced could be of the order of 3.3 million tonnes.

Interestingly, the Council considered initially in its scoping opinion that the EIA should include an assessment of the combustion emissions from the oil to be produced and advised the developer that the ES should assess the effect of the project on climate and “should consider, in particular, the global warming potential of the oil and gas that would be produced by the proposed well site.” The developer prepared an ES which did not include this and the Council accepted the justification for it limiting the assessment to only direct releases of GHG at the project site over the lifetime of the project and not including the assessment of the impact on climate of the combustion of the oil. No information about the combustion emissions accompanied the EIA.

The Council officer’s report noted “the proposed development would not give rise to significant impacts on the climate as a consequence of the emissions of greenhouse gases directly attributable to the implementation and operation of the scheme.” The report did not contain any information on impacts on the climate as a consequence of GHG emissions indirectly attributable to the operation of the well site, as no assessment had been made of those effects.

The claimant, a local resident Sarah Finch, who represents an association called the Weald Action Group, challenged the decision to grant planning permission by way of judicial review. Sarah Finch argued that the Council failed to consider the environmental impact of the downstream GHG emissions, also known as ‘scope 3 emissions’, from the eventual use of the refined products extracted from the site, and limited the assessment to just the direct GHG emissions (‘scope 1 and 2 emissions’) which were included from the site’s “construction, production, decommissioning and subsequent restoration”. Ms Finch argued that in failing to consider the "inevitable" scope 3 GHG emissions of a commercial oil production site, the Council had failed in its obligations under the EIA Regulations.

What did the lower Courts hold?

The original application to apply for judicial review was refused on the papers and at a renewed hearing by Lang J, however the Court of Appeal (Lewison LJ) granted permission to proceed with the judicial review and the case returned to the High Court. The grounds of challenge were that:

• The Council had failed to comply with the EIA Directive and EIA Regulations by:
  1. Failing to assess the indirect GHG impacts of the development as a result of the burning of the oil produced by the site; and/or
  2. Failing to take into account the UK’s environmental protection aims of reaching net zero GHG emissions (compared with 1990 baseline) by 2050.
• By omitting the scope 3 GHG emissions, the Council had failed to comply with the EIA Directive and the EIA Regulations and/or erred in its interpretation of paragraph 183 of the National Planning Policy Framework (“NPPF”) and paragraphs 12 and 112 of the Minerals Planning Practice Guidance (“Minerals PPG”).
• Alternatively, the paragraphs of the NPPF and Minerals PPG are unlawful as they do not comply with the EIA Directive obligations, and the erroneous application assisted in the defendant’s decision making.

Holgate J dismissed the claim on the basis that the inclusion of scope 3 emissions in an EIA was “incapable” of falling under the scope of the EIA Regulations. The Judge held that the GHG emissions from future combustion of the refined oil products were “as a matter of law, incapable of falling within the scope of the [requisite] EIA” (para 126). Holgate J found that the “true legal test” of whether an effect from a proposed development constitutes an indirect likely significant effect “is whether an effect on the environment is an effect of the development for which planning permission is sought” (para 101).

As the use of oil was not the project for which the consent was sought it was considered out of scope of the EIA. He noted that it was impossible to say where the oil produced would be refined or used, and whether this would be in the United Kingdom or abroad. He did however establish (which was an agreed fact in the Supreme Court appeal) that “oil produced from the site will be refined and, as an end product, will eventually undergo combustion, and that that combustion will produce GHG emissions.”

Sarah Finch appealed on the basis that Holgate J’s interpretation of the EIA Regulations was incorrect.

The Court of Appeal dismissed the appeal. At paragraph 15 of the leading judgment, Sir Keith Lindblom (the Senior President of Tribunals), considered the EIA Directive and EIA Regulations in depth and drew out seven relevant principles from them:

1. Firstly, that the approach to interpreting EU legislation is to “respect the words actually used”;
2. The EIA legislation is directed at a “project of development”, which should be interpreted broadly;
3. The “likely significant effects of the project on the environment” under the EIA Directive extends to the effects of the use of the works as well as their construction. It should be noted that Sir Lindblom (paragraph 39) considered these words to be interpreted without the need to add “gloss” or “paraphrase”;
4. An EIA must address the development under construction only;
5. Whether or not “indirect” impacts should be assessed are dependent on the particular facts of the project;
6. If indirect impacts do fall to be assessed, the EIA should include a sufficient assessment of those effects; and
7. Deciding what should be contained within an EIA is for the relevant planning authority to assess.

The Court of Appeal disagreed with Holgate J’s opinion that as a matter of law the combustion emissions were incapable of being regarded as effects on climate requiring assessment under the EIA. The conforming judgments of Sir Lindblom and Lewison LJ were clear that the decision as to whether to include scope 3 emissions within an EIA is a matter for the judgement of the local planning authority determining the application.

The emphasis of the Court of Appeal judgment was on the reasonableness of the Council’s conclusion that as a matter of fact and degree, the GHG emissions should not be considered indirect effects of the project.

Moylan LJ dissented, agreeing with the majority that whether the combustion emissions needed to be assessed was a matter to be determined by the Council, but considering that cogent reasons would be required to exclude those GHG emissions from assessment and that the reasons given by the Council were legally flawed.

What did the Supreme Court conclude?

The Supreme Court, in a three-to-two majority, held that the Council’s conclusion that the GHG emissions were not indirect effects of the project was unlawful. In carrying out an environmental impact assessment of a project for the extraction of oil, the authority was required to assess, as an indirect effect of the project, the environmental effects of greenhouse gas emissions arising from the ultimate combustion of the oil once refined and used as fuel.

The Supreme Court overruled the Court of Appeal’s finding that the question of whether emissions are “direct or indirect” requires an evaluative interpretation by a local planning authority and noted that this would provide for inconsistency in the interpretation of what constitutes an effect as per the EIA Directive (paragraphs 59 and 60 and 321 to 325).

Key findings of the majority Leggatt SCJ’s judgment, to which Lady Rose and Lord Kitchin agreed:

• It was found to be not just likely, but inevitable, that the oil extracted from the site would be refined and the end product be combusted resulting in GHG emissions (see paragraph 45 of the judgment).
• In the great majority of cases, the question of whether something is an effect of a project admits of only one answer and is not a matter of judgment allowing for inconsistent approaches by different authorities (paras. 59-60).
• Whether something is an effect is a question of causation, because an effect is the obverse of a cause (para. 65).
• In the present case, it was not only a “likely” significant effect for EIA purposes, but an inevitable effect (paras. 79-80).
• Leggatt SCJ considered the simple proposition, recorded as an agreed fact, that the combustion of the end product was an inevitable causal effect of the development, and the nature of the “indirect” effects contemplated by the EIA Directive are by their very nature likely to occur away from the source (paragraphs 101-103). Climate change is a global problem, and the relevance of GHG emissions caused by a project does not depend on where the combustion takes place (para. 97). The decision rejected the argument that GHG emissions are “outwith the control” of those operating the site, noting that if they chose not to extract oil, there would be no subsequent GHG emissions (paragraph 103).
• Leggatt SCJ considered the concept of “effects from a project” as outlined in the EIA Regulations to be a question of causation. Three legal tests were identified for determining causation: the “but for” test, the “intervening act” test and the “necessary sufficient test”. The majority decided that this case satisfied all three tests. (paragraph 80).
• The effect can readily be assessed using an established methodology (paragraph 81).
• The existence of the intermediate process of refinement had no significance. It did not alter the basic nature and intended use of the commodity. Since it was inevitable, it did not breach the causal connection between the extraction and use of the oil (paragraph 118).
• There was no floodgates concern. Oil is very different from iron or steel which may have many different uses and be incorporated into many different end products, depending on innumerable downstream decisions, making it impossible to identify which effects are likely, or to assess them (paragraph 121).
• For manufacture of components for use in the construction of cars and airplanes, “the view might reasonably be taken that the contribution is not material enough to justify attributing the eventual impact on that individual component” (paragraph 122).
• Taking account adverse effects on the climate was not inconsistent with national policy requiring great weight to be given to the benefits of petrol extraction (paragraph 150).
• There was nothing inappropriate about an individual planning authority taking into account the effects on climate of GHG emissions from combustion, and this was not something which can only suitably be addressed at a national level (paragraph 147).

Key findings of the dissenting judgment

However, there is more to the story. Although non-binding, a dissenting judgment of the Supreme Court holds considerable weight. Sales SCJ, with whom Lord Richards agreed, although adopting a similar approach to Leggatt SCJ, came to a diametrically opposed conclusion.

Under his interpretation of the EIA Directive, in accordance with EU proportionality rules, there is no intention to place the burden on local planning authorities to consider the scope 3 emissions of a project (paragraph 260) and nothing which requires such an expansive interpretation (which he based on a textual analyses of the EIA Directive and relevant EU and UK case law). He then identifies a number of reasons why it would be better not to do so which are in contrast to the majority reasoning.

What the ramifications of the decision?

As the judgment concludes that downstream, scope 3 emissions are necessary to include within the EIA assessment where there is a direct link between the project and their creation, this could greatly impact the scope of an EIA, in particular for fossil fuel projects.

What is likely to limit the impact of the case in practice is what can reasonably be predicted to be the effects of the development and those downstream impacts. Whilst the Supreme Court proceeded on an assumed certainty all the oil would be burned, in other cases the downstream effects may be harder to identify or not directly linked to the development itself. The range of causative matters to be considered will be broad, but future regulatory controls following the extraction of fossil fuels might be capable of disrupting the causative chain.

Interestingly, the comments relating to the lack of boundaries in which climate change should be assessed may also limit the impact of the judgment. The Horse Hill development was predicted to produce 3.3 million tonnes of oil, the equivalent of 10.6 million tonnes of CO2. When considering the effects of 10.6 million tonnes of CO2 on a global rather than local scale, this may well be considered negligible.

In other cases, attention may turn to how certain the downstream GHG emissions (or other indirect environmental impacts) are from the development; to the point where the EIA assessment of such effects is “negligible” or similar.

The minority judgment, although not binding, will have persuasive authority in containing the application of the decision and will be relevant should a further claim make it to the Supreme Court. Lord Kerr in his 2012 Birkenhead Lecture included the following description of dissenting judgements: “A dissent in a court of last resort is an appeal to the brooding spirit of the law, to the intelligence of a future day, when a later decision may possibly correct the error in which the dissenting judge believes the court to have been betrayed.” 

Until that time, developers will be well-advised to review undetermined applications and in-progress EIAs to establish whether any downstream effects should be assessed prior to a decision being made.

How can Burges Salmon help?

Our Planning & Compulsory Purchase and ESG teams have extensive expertise advising upon the EIA Regulations and the scope and adequacy of environmental statements, having successfully promoted numerous high profile NSIP and TCPA Applications in sectors ranging from renewable energy to road infrastructure.

Please contact Michael Barlow and Victoria Barnes in our ESG team and Alex Minhinick or Sarah Sutherland in our PCP team if you have any queries.