Landmark ruling will have major impact on oil extraction projects - Douglas Blyth

A landmark decision, in which the Supreme Court ruled that a council’s decision to grant planning consent for an oil extraction project was unlawful, will have significant implications for other projects.

R (on the application of Finch on behalf of the Weald Action Group) v Surrey County Council and others (“Finch”) concerned the challenge of permission which had been granted for the exploitation of an oil well, based upon an environmental impact assessment (EIA that focused upon the emissions at the project site only rather than considering the downstream emissions likely to occur as a result of the eventual burning of the extracted oil).

EIAs require to consider significant direct and indirect effects of a project. 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. 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”. In the circumstances, the Court held that the Council was wrong to limit the scope of the EIA to the emissions expected at the project site only.

Douglas Blyth is a Partner, Addleshaw Goddard (Picture: Renzo Mazzolini)

This decision clarifies the appropriate 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 it from receiving consent, Finch confirms that it will be unlawful for a 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 are uncertain, it seems inevitable that the decision will lead to delays in progressing these types of projects.

The developer argued the EIA’s scope should be confined to GHG emissions released within the site boundary of the project during its lifetime. The Council accepted this approach, however Finch appealed to the Supreme Court, having been unsuccessful in its challenge of the consent in the High Court and the Court of Appeal.

The Town and Country Planning (Environmental Impact Assessment) Regulations 2017 require an EIA to be carried out by the planning authority on any UK project 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 was whether downstream emissions occurring on the combustion of the extracted oil would constitute “direct or indirect … effects of the project”, or whether 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 oil and the GHG emissions resulting from its combustion?

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

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

Douglas Blyth is a Partner, Addleshaw Goddard