Key Points:

Effective community consultation requires a quality process; the focus is on the activities, not the results.

The NSW Supreme Court has clarified the requirement for "genuine and effective community consultation" in the NSW Strategic Regional Land Use Policy Delivery Guidelines, "Guidelines for community consultation requirements for the extraction of coal and petroleum, including coal seam gas".

In his decision handed down on 24 April 2015, Justice Button found that the failure of a consultation process to actually persuade the community to support a project is an irrelevant consideration for a decision-maker to take into account in determining whether consultation has been genuine and effective, in accordance with the Guidelines.

Metgasco Limited v Minister for Resources and Energy [2015] NSWSC 453 was an application for judicial review brought by Metgasco successfully seeking a declaration that a decision of the delegate of the NSW Minister for Resources and Energy was not made according to law.

The decision was a purported suspension of Metgasco's operations approved under Petroleum Exploration Licence No 16 (PEL 16) at the Rosella E01 conventional gas exploration well near Casino and Lismore in the NSW Northern Rivers region. The Delegate's reason for the suspension was essentially an alleged failure to comply with the obligation to consult with the community about Metgasco's operations in accordance with the Guideline.

In addition to its challenge on the community consultation issue, Metgasco was also successful on grounds relating to procedural irregularities and statutory construction of the Petroleum (Onshore) Act 1991 (NSW). We do not deal with those reasons here. The most interesting learnings from the case come from the Court's findings in relation to community consultation requirements.

Consultation requirements applying to the project

PEL 16 contains a number of conditions common in exploration licences, including that the licence holder must engage with the community in relation to the planning for and conduct of prospecting operations authorised by the licence. Both PEL 16 and the specific Activity Approval granted under PEL 16 for the construction of the Rosella Well also incorporate a requirement to carry out consultation generally in accordance with the Guidelines. The Guidelines refer to the need for "genuine and effective consultation" and community consultation as "an integral component" of the exploration program.

Community opposition

The local community has expressed significant opposition to the Rosella Well project, including establishing a protest camp and sending a large number of letters to the Minister describing their reasons for opposing the natural gas project together with broader concerns about extraction of coal seam gas.

Consultation program undertaken

The Court reviewed the “Metgasco Community Consultation Program” report dated 17 January 2014. Metgasco describes the community consultation activities it undertook as including:

  • reviews with Metgasco's Community Consultation Group and its endorsement of the Rosella consultation program scope and approach;
  • the opportunity for direct contact with farmers within 2 km of the well;
  • meetings with local councils;
  • advertising in local papers;
  • an information package about the well;
  • interviews on two local radio stations;
  • telephone and email responses to questions raised;
  • a website which had about 1,500 hits on the Rosella community consultation document; and
  • ad-hoc meetings requested by individuals including many who lived well away from the well site.

Alleged inadequacies in consultation

The Delegate provided several specific reasons for the claim that Metgasco had not complied with its community consultation obligations, including that Metgasco had developed a "defeatist attitude" in relation to community consultation.

This should be understood in the context that, as the Delegate observed, there was a protest camp on the property adjoining the Rosella Well and the audience at community consultation events was "often hostile".

Court's findings on consultation requirements

In finding for Metgasco, the Court determined that it is the activities of the person or body engaging in consultation that the Guidelines cover, not the results or persuasive effect of that consultation. The fact that significant stakeholders (in this case, many members of the local community) remain opposed to a project does not preclude a finding that the proponent has undertaken genuine and effective consultation.

The Court found that the Delegate had taken an irrelevant consideration into account in deciding to suspend PEL 16 because the Delegate had had regard to the failure of the consultation process to persuade the community to support the project.

Lessons for proponents

The Court was not required to determine the merits of the consultation process. However, it did find that "the Guidelines are not prescriptive and admit a degree of flexibility depending on the circumstances. They have the tone of constructive suggestions rather than firm commands."

The Regulator's detailed reasons for considering the Rosella Well community consultation process to be inadequate do provide useful guidance for project proponents. "Effective consultation" requires proponents and regulators of resources projects to focus on the nature and quality of the consultation activities. Based on the Regulator's submissions in this case, we suggest that proponents should consider:

  • preparing a detailed community consultation plan;
  • clearly identifying all stakeholders requiring consultation;
  • assigning qualified, experienced and respected representatives to provide the consultation, particularly where a "hostile" audience is likely, and using scientific experts where necessary;
  • providing actions to address specific challenges (eg. the establishment of a particular opposition to the project); and
  • persisting with community consultation despite the consultation not necessarily resulting in persuasion of the community to support the project.

Meeting the challenges of coexistence

This case provides yet another example of the challenges of coexistence between different industries and between industry and community in rural NSW. It demonstrates the importance of early and effective community consultation in any major resources project and provides guidance for proponents and communities.

The Court's decision in Metgasco makes it clear that persuading the community to support a project is not a legally required outcome of the consultation process. Of course, there is still real value in the "social licence to operate", and seeking to gain the support of stakeholders for coexistence wherever possible, even if this is not what the law requires. Coexistence remains a real challenge in NSW resources projects, and meeting this challenge often involves co-ordinated legal, technical, social and environmental solutions.