Introduction

Energy and resources activities such as coal seam gas (CSG) continue to attract significant attention in New South Wales, resulting in a greater number of legal challenges to the regulatory approvals granted to permit these activities. The recent NSW Land and Environment Court (Court) decision of Fullerton Cove Residents Action Group Incorporated v Dart Energy Ltd (No 2) [2013] NSWLEC 38 illustrates such a challenge and demonstrates the importance of proponents conducting an adequate and appropriate assessment of the proposed activity, in accordance with the legislative requirements.

This decision is particularly relevant to proponents whose activities are subject to the requirements of Part 5 of the Environmental Planning and Assessment Act 1979 (EP&A Act) and government authorities responsible for making determinations under Part 5 of that Act.

Background

Justice Pepper’s decision concerned the proceedings commenced by Fullerton Cove Residents Action Group Incorporated (Fullerton) on 24 August 2012, which challenged the validity of the approval granted by the second respondent, Department of Trade and Investment, Regional Infrastructure and Services (Department), to the first respondent, Dart Energy Ltd (Dart Energy).

On 6 June 2008 the Minister for Mineral Resources granted petroleum exploration licence (PEL) 458 to Macquarie Energy Pty Ltd, a wholly owned subsidiary of Apollo Gas Ltd, which in turn is a wholly owned subsidiary of Dart Energy, for the drilling of coal seam gas exploration wells at Fullerton Cove near Newcastle. The Department’s approval was required as a condition of PEL 458 before exploration borehole activities could commence. The approval, which required the Department to comply with the requirements of sections 111 and 112 of the EP&A Act, was sought and subsequently granted by the Department on 1 June 2012. The approval permitted Dart Energy to carry out the drilling of CSG exploration wells through a Pilot Appraisal Exploration Program (Pilot Program). 

Upon commencing the proceedings on 24 August 2012, Fullerton sought an interlocutory injunction to prevent Dart Energy from undertaking the Pilot Program until the substantive matter of the validity of the approval had been determined. On 5 September 2012 the Court granted the interlocutory injunction. The reason given by Fullerton when seeking the interlocutory injunction was that, should Dart begin construction of the Pilot Program (including drilling into the coal seam) prior to the determination of the substantive proceedings (the validity of the approval), then those substantive proceedings would essentially be rendered nugatory.

What was the basis for the challenge?

Fullerton contended that the approval granted by the Department under the Petroleum (Onshore) Act 1991 to carry out the Pilot Program was invalid on several grounds, including that the Department had failed to:

  1. examine and take into account to the fullest extent possible all matters affecting or likely to affect the environment arising from the Pilot Program, breaching section 111 of the EP&A Act; and
  2. require that Dart Energy provide an Environmental Impact Statement (EIS) despite the fact that the Pilot Project is “likely to significantly affect the environment (including critical habitat) or threatened species, populations or ecological communities, or their habitats”, breaching section 112 of the EP&A Act.

Justice Pepper ultimately dismissed the proceedings and found that the Department had acted within its powers and that sections 111 and 112 of the EP&A Act had not been breached, as set out below.

Did the Department comply with its duty to take into account all matters affecting or likely to affect the environment?

Fullerton argued that the Department, in granting approval to Dart Energy to carry out the Pilot Program, breached its duty under section 111 of the EP&A Act by failing to:

  • consider the ESG2 Guidelines (which came into force in March 2012) as a mandatory consideration in assessing the likely impact of the Pilot Program on the environment, as required by clause 228 of the Environmental Planning and Assessment Regulation 2000 (EP&A Regulations);
  • obtain and consider a groundwater assessment;
  •  consider the impact of the Pilot Program on certain birds, amphibians and other threatened of vulnerable species.

Clause 228 of the EP&A Regulations sets out the factors to be taken into account when consideration is being given to the likely impact of an activity on the environment, for the purposes of Part 5 of the EP&A Act. This includes the factors referred to in any guidelines in force for a particular activity under clause 228. Justice Pepper held that the ESG2 Guidelines were not guidelines made by the Director-General of the Department of Planning for the purpose of clause 228. Instead, the ESG2 Guidelines were developed to provide a framework for “industry” to use in assessing the potential environmental impact of an activity. 

Further, Justice Pepper held that there was no specific requirement that the Department have regard to a particular document, namely a groundwater assessment. Her honour found that the Department did, through consideration of other materials (such as the review of environmental factors (REF) and advice from the Interim Independent Expert Scientific Committee on CSG) conduct an assessment of the likely impacts of the Pilot Program on groundwater. Justice Pepper noted that, in essence, Fullerton disagreed with the finding of the Department that the impact on groundwater was acceptable. Her honour held that, as the proceedings were judicial review proceedings and section 111 is found not to be a jurisdictional fact, this finding of the Department is immune from challenge. Jurisdictional facts are conditions that must exist before a statutory power is enlivened.

Similarly in regard to the impact on other threatened and vulnerable species, Justice Pepper found that there was no requirement for the Department to consider these matters to the level of particularity requested by Fullerton, and the finding of the decision of the Department that the impact on fauna would be acceptable, is immune from challenge.

Justice Pepper found that the Department had not failed to take into account to the fullest extent possible all matters affecting or likely to affect the environment arising from the Pilot Program, and therefore the Department had not breached its duty under section 111.

Was an EIS required?

Similarly Justice Pepper found that the Department had not breached its duty under section 112 of the EP&A Act. Her honour determined that the Pilot Project was not likely to significantly affect the environment, (including critical habitat) or threatened species, populations or ecological communities, or their habitats; therefore the Department was not required to obtain an EIS from Dart Energy.

Justice Pepper, in arriving at her decision, made the finding that section 112 of the EP&A Act gives rise to a jurisdictional fact (a question that had previously not been authoritatively decided). The condition that the Pilot Project is likely to significantly affect the environment must exist before the statutory power of the Department, requiring Dart Energy to provide an EIS, is enlivened. Therefore, the Court must place itself in the shoes of the Department, as the decision-maker and consider whether the activity (in this case, the Pilot Program) is likely to significantly affect the environment in accordance with section 112 of the EP&A Act. In doing so, the Court can rely on any evidence before it, including additional expert evidence tendered by the parties.

Implications for Proponents and Government Decision Makers

The finding that section 112 gives rise to a jurisdictional fact, allowing the merits of determining authorities’ decisions to be called into question by third party objectors may result in;

  • less certainty for proponents seeking to rely on the assessment and determination of their proposed activities under Part 5 of the EP&A Act; and
  • more challenges by third party objectors to the validity of those assessments on the basis of fresh evidence.

For government authorities, this decision highlights the importance of appropriately documenting determinations made under Part 5 of the EP&A Act to demonstrate that due process was followed and all relevant factors were considered and in particular, conclusions on whether the project is “likely to significantly affect the environment”.  For proponents, it remains critical that the environmental assessments such as REFs fully address the impacts of the proposed activities in compliance with the EP&A Act and can withstand such challenges.

As a result of this decision, the injunction preventing Dart Energy from undertaking the Pilot Program was lifted. Despite this, Dart Energy announced that it has suspended operations at Fullerton Cove1. This decision followed NSW government announcements in February 2013 to further regulate coal seam gas activities in close proximity to residential areas.