Environmental Law News Update

The Finch effect: the UK Government will not contest Scottish oil and gas field challenges.

Background

You will have heard of the butterfly effect but it is the Finch effect that last week caused more legal chaos.

As background, in R. (on the application of Finch) v Surrey CC [2024] UKSC 20 the Supreme Court (by a 3:2 majority) held that a local authority, in considering whether to grant planning permission for oil extraction, was required to assess the impact the extracted oil will have on greenhouse gas (‘GHG’) emissions after it has left the site i.e. when it is combusted.

At the beginning of the proceedings, Holgate J. ([2020] EWHC 3566 (Admin)) ruled that the assessment of such GHG emissions – often called “scope 3 emissions” – were incapable of being considered within an environmental impact assessment (‘EIA’). As such, the local authority had been correct in its approach by not taking such impacts into consideration.

Whilst the Court of Appeal affirmed Holgate J.’s decision (by a 2:1 majority), it did so for different reasons ([2022] EWCA Civ 187). The Senior President of Tribunals gave the lead judgment and held that scope 3 emissions were capable of being considered indirect effects of a development and therefore capable of being considered in an EIA. The Senior President held that whether the GHG emissions could be considered in an EIA depended on whether there was a “sufficient causal connection” between the project under consideration and the particular impact on the environment. That assessment, he held, was a matter of judgement for the decision maker.

The Supreme Court, as stated above, disagreed. The majority stated that it would be unsatisfactory if different planning authorities (or even the same authority differently constituted) reached inconsistent decisions when dealing with similar projects: some would take into account the indirect effects, others would not, yet both could be lawful. Instead, the Supreme Court held that it was accepted that the oil extracted would eventually be combusted and in turn this would emit GHG emissions. It was therefore correct to categorise scope 3 emissions as “effects of the project” and, as a result, the EIA must identify, describe and assess those emissions.

Jackdaw and Rosebank

The North Sea Transition Authority – the UK oil and gas regulator – granted consent to Shell’s Jackdaw gas field in June 2022 and Equinor’s Rosebank oil field in September 2023. The consents are being challenged by Judicial Review brought by environmental groups.

Last week the UK Government announced that it would not be challenging the claim and argued that such a decision will “save the taxpayer money”. The Press Release did not explicitly state that its withdrawal was because of the decision in Finch, however, it did say that “guidance is necessary in light of a Supreme Court ruling that has implication for the assessment of new development consents”.

Comment

The Government’s announcement does not bring an end to the Rosebank and Jackdaw litigation given that Shell, Equinor and the regulator have not yet said how they intend to proceed. Certainly, the Anglo-Dutch and Norwegian companies will not welcome the decision. Their possible next moves include:

• Defend the consents and seek to distinguish Finch. Given that five of the nine senior judges involved in the litigation sided with the local authority in Finch (one High Court Judge, two Lord Justices of Appeal and two Justices of the Supreme Court), there may be scope for further argument.
• Capitulate and retreat. They may agree with the Government and consider the decision in Finch leads inevitably to the conclusion that the Jackdaw and Rosebank decisions were unlawful and plan schemes elsewhere.
• Shell and Equinor may take a pragmatic approach and resubmit their applications to the regulator providing an EIA that takes into account the scope 3 emissions.

One thing is for certain: following the Government’s announcement in July, post-Finch, that the Cumbrian coalmine decision had been taken unlawfully owing to a lack of a scope 3 assessment, the Finch effect will continue to have ramifications for a long time.

R. (on the application of Fighting Dirty Ltd) v Environment Agency [2024] EWHC 2029 (Admin)

The case concerned the environmental regulation of sludge from sewage plants when it is spread on farmland. The Sludge (Use in Agriculture) Regulations 1989 regulate the content of sludge and where and how it can be spread. The Environmental Permitting Regulations 2016 control the storage of sludge on agricultural land and storage or use of sludge on non-agricultural land. In the words of an Environment Agency briefing paper, “There are multiple competing regimes and this is creating loopholes/gaps…” A “Sludge Strategy” was so developed.

The Claimants, Fighting Dirty Ltd, wanted to challenge the decision by the Environment Agency to remove the Target Date for implementing the Sludge Strategy, without identifying a replacement Target Date. Fighting Dirty Ltd were fundamentally aggrieved by the potential spreading of toxins through sludge on agricultural land, and so into products we consume. The case was whether the decision to remove the Target Date was reasonable in public law terms.

The Court found that there was no breach of the EA’s duty to act reasonably: the Target Date had become “unachievable” and there was no duty to set a renewed date. The case is interesting on a number of levels. It was heard by Mr Justice Fordham, author of the Judicial Review Handbook, and the judgment provides a striking depth of analysis, in particular addressing the nature and intensity of review which the Courts undertake in such cases. The Claimant’s challenges are also noteworthy, with the decision said to be outside the range of reasonable responses, with unexplained evidential gaps, one which failed to take reasonable steps to acquaint itself with relevant information, and one which failed to take into account an obviously material consideration. We commend the judgment to readers.