Finch v Surrey County Council – Supreme Court issues major decision on environmental impact assessment requirements: all’s well that ends well?

Introduction

On 20 June 2024, the Supreme Court announced its decision in R (on the application of Finch on behalf of the Weald Action Group) (Appellant) v Surrey County Council and others (Respondents) [2024] UKSC 20.  By the 3-2 majority judgment, it determined that greenhouse gas emissions arising from the use and combustion of refined products from an oil well site, or downstream emissions, should have been included and assessed in an environmental impact assessment process for planning purposes.  This landmark decision not only has implications for future fossil fuel projects in the UK, but potentially other types of projects with substantial downstream emissions which are capable of assessment or estimation – i.e. certain infrastructure, highways or aviation projects.

UK legal landscape

Under UK legislation an environmental impact assessment (“EIA”) is to be completed and submitted prior to the grant of planning permission for a development project which is likely to have a significant effect on the environment. The Town and Country Planning (Environmental Impact Assessment) Regulations 2017 contains the relevant regime for England. Where applicable, the local planning authority may grant planning permission once it has considered the relevant environmental information (including an environmental statement from the developer). The 2017 Regulations require the EIA to identify, describe and assess the likely significant effects of the development project upon the environment, including climate impacts such as the nature, extent and magnitude of greenhouse gas emissions. The assessment process also includes a public consultation.

Whilst the legislation does not prohibit a local planning authority from ultimately consenting to a development project likely to have a significant impact on the environment, it does require a reasoned conclusion to be reached.

By way of additional context, under the GHG Corporate Accounting and Reporting Standard (otherwise known as the ‘GHG Protocol’), indirect greenhouse gas emissions created by the use of a product and not classified or included in Scope 1 (i.e. direct company emissions) or Scope 2 (i.e. indirect greenhouse gas emissions, from the generation of purchased electricity consumed by an entity) are categorised as Scope 3 emissions. Scope 3 emissions often account for the largest percentage of a organisation’s carbon footprint and include those which the company is responsible for, up and down its supply chain.

Background Facts

The recent Supreme Court decision caught attention since a developer applied to Surrey County Council for planning permission to retain and expand existing onshore oil production from a well site. The proposed project involved the drilling of four new wells and the planned extraction of oil over a 25-year period. A compulsory EIA was mandated for this project and the developer prepared an environmental statement considering the environmental impacts of the “direct releases of greenhouse gases from within the well site boundary resulting from the site’s construction, production, decommissioning and subsequent restoration over the lifetime of the proposed development” [34]. This meant that the EIA did not need to include information on, or an environmental impact assessment of downstream greenhouse gas emissions, such as those emitted once the crude oil was refined and ultimately combusted elsewhere as fuel. Surrey County Council accepted this approach.

Surrey County Council’s decision to grant the development project planning permission in 2019 was therefore made without an assessment or consideration of the greenhouse gas emissions resulting from combustion of the oil product.  The appellant, a local resident campaigner, subsequently applied to judicially review the council’s decision, arguing that it was unlawful.

The High Court rejected this claim in December 2020, considering that the downstream emissions from the use of an end product fell outside of the legal scope of the relevant legislation, such that a developer’s obligation to provide an environmental statement did not necessitate such an assessment. Additionally, there was also discussion about whether the assessment of such emissions was a matter of evaluative judgment for the relevant local planning authority.

In February 2022, the Court of Appeal by majority upheld the Judge’s decision on the second ground, but for a different reason. The Judge deemed it necessary to consider the degree of connection between the development project and its supposed direct or indirect environmental impacts. The Judge noted that the obligation to assess the environmental effects of the project did not include the obligation to assess the environmental effects of consumers (in unknown locations unrelated to the development site) using an end product made in a separate facility from materials supplied from the development itself. The Judge also considered that the question was ultimately a matter of fact and evaluative judgment for the local planning authority, and the council had given valid reasons on this point. The decision was challengeable on public law grounds only.

Following this, the claimant appealed the decision relating to her judicial review application to the Supreme Court. In April 2023, the Supreme Court granted permission for the Office for Environmental Protection (the “OEP”) to intervene in this appeal. In doing so, it was thought that there was a potential opportunity to clarify the law concerning indirect effects under the EIA to help shape and promote good environmental decision-making.

Supreme Court’s Judgment

The Supreme Court allowed the appeal. It held that the local planning authority’s decision was unlawful since emissions occurring when the extracted oil was burnt fell within the scope of the required EIA.

Downstream emissions may be a constituent of significant environmental impacts of a project if causation can be established. Here it was an agreed fact that, if the project progressed, it was “inevitable” that the oil produced from the site would be refined and eventually undergo combustion (producing greenhouse gas emissions and impacts on the climate). Therefore, although the court considered different variations of the applicable causation test, it was accepted on the agreed facts that there was a strong causal connection.  The EIA did not include the downstream combustion emissions and the reasons for disregarding the effect of these was found to be flawed.

A key question was whether the combustion emissions constituted “direct or indirect … effects of the project” within the meaning of the EIA Directive and 2017 Regulations. If so, they must form part of the EIA assessment. The Supreme Court unanimously rejected and distinguished the earlier Court of Appeal view that this issue necessitates evaluative judgment on whether there is a sufficient causal connection between the oil extraction and its eventual combustion, on which different planning authorities could reasonably take different views. The OEP’s intervention had also reportedly emphasised the importance of avoiding inconsistent decisions by planning authorities and decision-makers under the EIA regime.

Further, the EIA Directive did not impose any location or restrictive geographical limit on the scope of the environmental effects of a project that must be assessed. The local planning authority was therefore incorrect to confine the EIA to expected emissions occurring at the project site during its lifetime only. Lord Leggatt observed that “…Climate change is a global problem precisely because there is no correlation between where GHGs are released and where climate change is felt. Wherever GHG emissions occur, they contribute to global warming. This is also why the relevance of GHG emissions caused by a project does not depend on where the combustion takes place. If an activity is carried on which will inevitably result in significant GHG emissions, people who carry on the activity cannot be heard to say: “These emissions are not effects of our activity because they are occurring far away among people of whom we know nothing …” [97].

The earlier decision had also disregarded the emissions occurring during combustion as an impact of the project, based on the understanding that the fuel burnt as an end product differs from the crude oil produced at the well site (i.e. the end product is made at a separate facility following a refinement process). The developer had raised this, pointing out that the refinery factory would be subject to the EIA. The Supreme Court also rejected this argument on the basis that the expected refinement of crude oil does not alter its basic nature or intended use and it would be “…unreasonable to regard it as breaking the causal connection between the extraction of the oil and its use” [118]. The Supreme Court was therefore unpersuaded that the need to focus on the environmental effects of the project itself affected these conclusions.

Notably, it was agreed that these emissions could be readily estimated using an established methodology (in fact, such information was submitted in a witness statement in support of the council’s position). Lord Leggett considered the estimate for the combustion emissions provided (10.6 million tonnes of CO2 emissions) with the information set out in the EIA (c. 140,958 tonnes of CO2 emissions) [81/82].  Although the EIA had described the effect on the total UK carbon budget to be negligible, it was observed that had these emissions been included in the assessment, “the figure for GHG emissions attributable to the project… could not have been dismissed as “negligible” in that way” [82].

Importantly, there was discussion regarding the possible implications of this conclusion for other projects, for instance, a project producing steel which is subsequently used to manufacture component parts for use in making aircraft or motor vehicles. The concern was that, if the greenhouse gas emissions resulting from the use of the motor vehicles or aircraft were regarded as indirect effects of the steel production, this would effectively open the floodgates and the EIA process would be unduly onerous, wieldy and unworkable. However, on balance, the Supreme Court considered this to be a misplaced concern on the basis that raw materials (like iron or steel) have numerous potential uses, such that it is reasonable that no meaningful assessment or estimate can be made of the resulting emissions arising from its use. However, in the Supreme Court’s view, oil is a “very different commodity” since there is no speculation on its end-use; refinement does not change the oil into a different object type (unlike the incorporation of a component or part in an aircraft/motor vehicle); and reasonable estimates may be made on the emissions from its combustion.

The Supreme Court also rejected arguments that climate change matters should be dealt with at the national rather than local level, and that national planning policy was relevant to the EIA scope as required by the EIA Directive. This was because the UK’s national policy of encouraging domestic production of oil and gas was relevant to the planning authority’s decision on whether to grant the project planning permission. However, this did not dispense with the requirement to assess the environmental impacts of the project or justify limiting the scope of its assessment before making the planning decision. The EIA’s purpose is to ensure that decisions are made with knowledge and public awareness on the likely environmental impacts of the project.

A dissenting observation by Lord Sales was that it would be constitutionally inappropriate for a local planning authority to assume practical decision-making authority based upon its own views regarding downstream emissions and how these should be addressed – this could conflict with central government decision-making and policies at a national level. It would also be contrary to the EU proportionality principle. Lord Sales cautioned that while the EIA Directive, interpreted according to its terms, has a valuable role in relation to mitigating GHG emissions associated with projects for which planning permission is required, it should not be given an artificially wide interpretation to include all downstream and Scope 3 emissions within the scope of its ambit. However, notwithstanding the lengthy dissenting judgment, it was agreed that it is a matter of law whether such emissions constitute an effect to be assessed for EIA purposes and not a matter of evaluative judgment for local planning authorities.

Commentary

This decision outlines the extent to which indirect effects and Scope 3 emissions must be assessed as part of the EIA and planning consent process.  Notably, it follows a growing trend towards other environmental activism (including claims, protests and campaigning) and important judicial decisions globally. These include the recent Supreme Court decision in The Manchester Ship Canal Company Ltd (Appellant) v United Utilities Water Ltd (Respondent) (No 2) [2024] UKSC 22, which confirmed that local members of the public or adjacent landowners could potentially pursue nuisance and/or trespass claims against utility companies following the alleged discharge of raw sewage in a watercourse, even if there was no negligence or deliberate misconduct. There’s also the decision from the European Court of Human Rights on the Swiss government’s positive obligations in respect of climate change and human rights (see our recent update). We’re seeing evidence of increasing interest and challenges to specific projects or government strategies, exemplified by Friends of the Earth & Ors v Secretary of State for Energy Security and Net Zero [2024] EWHC 995 (Admin), where the court found that the approach to the UK Government’s climate change plan was unlawful. We have explored in more detail how recent decisions and requirements on public bodies might impact corporate entities involved in high-emitting projects or other reporting and disclosure exercises.

Although the decision relates to an onshore oil well site, it potentially has significant implications for the development of new fossil fuel (including oil, gas and coal mining) projects in the UK and, according to ClientEarth, signals that the impact of such projects can no longer be ignored.  For those projects involving fossil fuels, having to assess their downstream Scope 3 emissions may lead to fewer approvals in practice given their lack of alignment with the UK’s legally binding 2050 net zero goal.

In concluding to allow the appeal however, the Supreme Court was careful to address the scope of its application, particularly for other manufacturing, mineral or industrial process types of development. In addition to this, it is possible that we may see other infrastructure projects impacted by the decision, for example in cases where downstream emissions may be substantial and readily understood or quantified.  Examples could include transportation projects, such as highways projects (where certain road use and information is already gathered as part of the planning process), factories, and aviation projects.

Whilst our view is that the decision is likely to be applied more narrowly in scope than some of the concerns raised in the judgment, the decision will undoubtedly give rise to increased scrutiny and/or challenge around the issues which relate to indirect significant effects, causation, and how best to try and mitigate such indirect risk(s). Professional advisers may now need to consider and advise on Scope 3 emissions in EIAs for relevant projects, including the extent to which such effects are quantifiable and should be subject to assessment/reported.

Further, given that the decision was only recently released, we anticipate that it is likely that local planning authorities will seek to understand the impact of the Supreme Court’s ruling on the live and future planning applications, as well as the level of downstream greenhouse gas emissions to be covered in the environmental statement and planning permission assessment/decision. Developers will also need to understand the requirements on its current and future projects and any EIAs. A core area of the Supreme Court’s focus concerned ensuring that appropriate processes are followed, and that full information is made available to the public and decision-makers when determining whether a particular project is permitted to proceed.

Some industry commentators have observed that whilst climate campaigners are celebrating the decision in this case, it does not provide as much clarity on the legal position as initially anticipated. Instead, the decision could lead to a fertile ground for future disputes before the courts, including what projects are caught, what qualifies as a downstream effect and how this is to be properly measured. Others in industry note that the decision landed at an inconvenient time for the next incoming UK Government, especially since no major party wishes to be viewed as pro-fossil fuels or anti-environment, but instead wish to promote future stability and growth.

We have and will continue to see increasing press and public interest in projects with clear environmental impacts.  Notably, the West Cumbria Mining Ltd (with interest in similar mineral extraction in the Whitehaven coal mine development) made representations in support of the local council and developer. Written submissions from Environmental NGOs (Friends of the Earth and Greenpeace) were provided in support of the appellant.  The OEP, an independent non-departmental public body established under the Environment Act 2021, also made submissions and explained its concern that decisions of the lower courts (if upheld) might adversely impact future sound environmental decision making and protection. We understand that this is the first time the OEP utilised its powers to successfully intervene in a judicial review case and the Supreme Court expressly noted that it found the OEP’s submissions particularly helpful. Based on this recent experience and the feedback from the judiciary, it is possible that this regulator might intervene in more climate-related cases or help build judicial awareness and understanding of the complex interrelationship between projects, the public, the environment/nature, and climate.

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