Coal - Rocky Hill case continues rolling on

Published by MAC on 2019-02-22
Source: Sydney Morning Herald

These residents stopped a coal mine, made history and sent ripples through boardrooms around the world

By Peter Hannam

Sydney Morning Herald

17 February 2019

A NSW court sent shock waves through the nation's mining industry earlier this month when it rejected a coal mine planned in Gloucester, a dairy and beef farming area on the state's mid-north coast. The reason, in part, was the mine's impact on climate change.

That a court had taken into account climate change was lauded as a landmark. But this case is just part of a much bigger picture. All around the world, there is a growing push to use the law to nudge companies and investors to take action to curb global warming – particularly as our politicians are failing to do so.

It's called climate litigation and you can expect to start hearing about it more often.
The view towards the area planned for the Rocky Hill coal mine.

The view towards the area planned for the Rocky Hill coal mine.Credit:Liam Driver
Wrong place, wrong time: what the case was about

Ostensibly, the case was about whether a Rocky Hill open-cut coal mine should be allowed to go ahead.

On February 8, in the NSW Land and Environment Court, Chief Justice Brian Preston handed down his decision in an appeal by Gloucester Resources, a company privately held by Hans Juergen Mende, a German billionaire dubbed the "godfather of coal". Gloucester Resources was fighting an earlier rejection, by a planning commission, of its bid to build a 2.5-million-tonne-a-year coking coal mine.

The judge concluded that an open-cut coal mine "would be in the wrong place at the wrong time".

"Wrong place because an open-cut coal mine in this scenic and cultural landscape, proximate to many people's homes and farms, will cause significant planning, amenity, visual and social impacts," he said.

"Wrong time because the greenhouse gas emissions of the coal mine and its coal product will increase global total concentrations of [those gases] at a time when what is now urgently needed, in order to meet generally agreed climate targets, is a rapid and deep decrease in [those] emissions.

"These dire consequences should be avoided."

Companies need to factor in the burning of their mine’s coal in other countries, the court found.l

Decorative coal? Why the verdict was significant

Law firms quickly recognised the decision as a landmark – not just for its direct effect on the Rocky Hill project, but also for its palling effect on economic sentiment towards fossil-fuel industries.

As lawyers at Corrs Chambers Westgarth put it: "The decision will have wide-reaching consequences and will likely affect the viability of coal and other fossil fuel-dependent industries in Australia.

"The growth in international jurisprudence directly linking fossil fuel developments with climate change may also lead banks and others who would traditionally invest in these industries to consider alternatives."

The judgment reminds companies and investors that fossil fuels carry regulatory risks, not all of which can be anticipated.

Chief Justice Preston included in his reasoning the fact that there must be a carbon budget – a total amount of emissions that can be released – if targets under the Paris Climate Agreement are to be met. And even if the proposed mine was relatively small, it wasn't enough for a company to calculate the direct emissions that come from scraping out 100-million-year-old coal – the fugitive methane, the pollution generated by the digging and transport, and so on; the actual burning of that fuel, wherever it occurred in the world, also had to be taken into account.

"The difference between this case and other coal mine planning appeals [such as those against the Adani project in Queensland] is that the court has accepted that scope 3 emissions from the burning of the mine's coal in other countries should be taken into account in determining environmental impacts," says Sarah Barker, a special counsel dealing with environmental, social and governance risks, adding the emphasis.
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As one lawyer put it, Gloucester Resources mounted "a curious argument" that total emissions would be hard to determine: "Is it 'decorative coal' they are digging up, with no anticipation it will be burned?"

Baker & McKenzie partner Martijn Wilder told clients: "The decision does not necessarily mean the end of any new coal mine approvals in NSW, because it was highly specific to the particular facts of this application."

Still, "a proponent of any new mine in NSW would be well advised to arrange offsets for anticipated greenhouse gas emissions prior to seeking approval for the project. As a commercial matter, there may be questions as to how obtaining these offsets could affect the profitability of the endeavour," Wilder says.

The Rocky Hill case "is certainly getting attention outside of Australia", says Harro van Asselt, an associate of Stockholm Environment Institute's Oxford Centre and professor of climate law and policy at the University of Eastern Finland.

"Climate litigation is emerging everywhere around the world, meaning that people have an interest in seeing what courts in other countries decide," he says.

The Urgenda case is perhaps the most famous lawsuit to date: 886 Dutch citizens sued their government and ultimately forced it to roughly double its proposed emissions cuts.

But court cases "in countries that are perceived as climate laggards – like Australia – offer hope for environmentalists worldwide", Professor van Asselt says.

This acknowledgment by the judge in Rocky Hill is of great importance.

The Rocky Hill case is also one of very few in which fossil-fuel infrastructure decisions are linked explicitly to their climate impacts. Professor van Asselt likens it to a similar case last year where a judge in the US state of Montana acted to halt the controversial Keystone XL oil pipeline.

"Linking individual fossil fuel projects (or infrastructure such as pipelines) to global emissions and their impacts can be very challenging, as it requires overcoming legal arguments such as 'if we don't produce it, someone else will', or 'once the coal leaves our country, we're not responsible for the fact it gets burned'," he says.

"Given that meeting the Paris Agreement's temperature goals requires leaving a significant portion of fossil fuels in the ground, this acknowledgment by the judge in Rocky Hill is of great importance, not only for Australia but also for other fossil fuel-producing countries where litigation is taking place."

What the mining industry says

The response from the mining industry and the Morrison government has so far been muted.

Gloucester Resources is yet to declare whether it will appeal the decision.

NSW Minerals Council chief Stephen Galilee was quick to dismiss the court outcome as not in "any way a landmark case", and NSW Nationals MP Michael Johnsen prompted accusations of contempt of court for declaring the result "smacked of judicial activism".

Sections of the media have also sought to impugn the independence of Chief Justice Preston, citing his past involvement in helping to establish the Environmental Defenders Office of NSW, which joined the case against the mine, and his recent speeches on climate change.

Such attacks prompted the NSW Bar Association to issue a statement to say it had "the highest regard for the integrity of the judiciary".

Its president, Tim Game SC, said suggestions the chief judge may be biased because of extra-judicial papers on the issue of climate change were "an attack on [his] character and it is troubling".

NSW Attorney-General Mark Speakman declined to weigh in: "As this matter may be subject to an appeal, any comment from me at the moment on the particular case would be inappropriate."

Strong evidence that climate change has caused extreme weather events, such as the floods that recently engulfed Townsville, will aid climate litigation.

'Multi-headed beast': the rise of climate litigation

Even if there were to be a successful appeal, climate litigation is only going to get bigger.

"It's a multi-headed beast that's evolving in a number of directions," says Emma Herd, chief executive of the Investor Group on Climate Change.

"It's happening a lot faster than many people expected."

In Norway, for example, NGOs are challenging the constitutionality of a government decision to license new blocks of the Barents Sea for deep-sea oil and gas extraction.

One reason for the rise in climate litigation is that the science is becoming ever better understood. That provides a deeper and richer evidence base that – unlike much of our parliamentary debate or the shadowy conspiracist corners of the internet – can withstand cross-examination.

Companies know they must account for tighter carbon constraints sooner or later.

Professor van Asselt singles out the advance of "attribution science" – identifying the likelihood of specific extreme weather events (and the damage they cause) being linked to human-driven climate change.

"This development can increase the chances of success for any of the litigation strategies," he says.

In other words, in time there will be a rapid assessment of whether the severe heatwaves that smashed Australia's January heat records, or this month's floods in Queensland, have a climate link. Then it will be up to the courts and insurers to argue it out.

But whether it is the Rocky Hill case, another against Adani's Carmichael mine, or even a new coal-fired power plant, companies know they must account for tighter carbon constraints sooner or later.

"Even if the [Gloucester mine] decision is overturned, companies have to assume it's a potential risk," Ms Herd said.

How directors are handling climate change

Few big economic gatherings now take place without climate risk at the forefront. In the World Economic Forum's Global Risks Report for 2019, extreme weather events topped the worry list for a third consecutive year. Of the top five risks, three were environmental and the other two were data fraud and cyber attacks.

"Climate change is a material financial risk for any resource company – full stop," Minter Ellison's Sarah Barker says. "You have to disclose the impact of that risk on your financial position, your financial performance and your financial prospect in your annual report."

There’s no magic to it. It comes down to 'what is your role as a director?'

But it doesn't end there. Every company has a responsibility to examine the threats posed – a market shift away from fossil fuels, or potential impact from more extreme weather or rising sea levels – and do something about it.

"There's no magic to it. It's first principles for me – it comes down to 'what is your role as a director?' It's to strategise around material risks," Barker said.

John Price, commissioner with the Australian Securities and Investments Commission, highlights a legal opinion in 2016 by Noel Hutley SC that it was "conceivable that directors who fail to consider climate change risks now could be found liable for breaching their duty of care and diligence in the future".

A tanking share price in the wake of a delayed or impartial exposure is a magnet for litigants, as oil giant Exxon is finding to its cost in the US courts. Recognition of climate risks from burning its product by Exxon's own scientists half a century ago is another magnet.

Nor is it merely a private sector concern, as noted last month by the Centre for Policy Development in a discussion paper on directors' duties and climate change.

It found that "despite impediments to enforcement, public sector directors are now increasingly likely to be closely scrutinised and held to account for climate risk management – especially given rising standards demanded of private corporations".

On March 12, the deputy governor of the Reserve Bank of Australia, Guy Debelle, will also weigh in with a speech on climate change and the economy at a public forum hosted by the Centre for Policy Development in Sydney.

How governments are responding

The NSW government has so far had little to say, other than Planning Minister Anthony Roberts, who was "gratified that the Land and Environment Court agreed with his original decision to refuse a mining licence on the grounds that the proposal did not meet environmental and social requirements".

Then again, it could hardly appeal against its own judgement, even if the case was expanded beyond the government's original intent.

Federal Resources Minister Matt Canavan recommended people "should proceed with caution" about over-interpreting a decision "in a lower court and in NSW".

If the histories of tobacco and asbestos litigation are any guide, any attempts to shield companies from climate litigation won't be easy.

Legal scholars such as Ben Boer, an emeritus professor at the University of Sydney, said Senator Canavan was wrong to discount the court, saying it was "a superior court of record on the same level as the Supreme Court of NSW".

"Preston's judgment is very clear indeed," Professor Boer said. "In NSW, Australia and globally, it is certainly a landmark case.

"It does not merely confirm the [Planning] Minister's original refusal of the development consent. It sets out a whole new line of legal reasoning in this area, which will be studied closely by climate change litigators around the world."

Governments can always change the law, of course, but if the histories of tobacco and asbestos litigation are any guide, any attempts to shield companies from climate litigation won't be easy.

Such a move would "transfer liability and cost for climate-related risk from companies to the government and the citizens in the community", Barker says. "That's a really big call."

Of course, owners of fossil fuels – and the governments they lobby – "are not sitting still", Professor van Asselt says.

We can expect more accusations of "green lawfare" and what have been dubbed Strategic Lawsuits Against Public Participation (SLAPPs) in the US.

Professor van Asselt also foresees "drawn-out proceedings with governments and other defendants using every delaying tactic in the book, as is currently happening in the Juliana case in the US" which involves 21 youths (and James Hansen, a former NASA climatologist) suing the US government on behalf of future generations over their right to a stable climate system.

These cases matter in the court of public opinion.

But the appeal by environmental groups to the courts is not just about the odds of winning. Climate litigation is also "one of the most symbolically powerful ways of delegitimising fossil fuels", Professor van Asselt says.

"While individual decisions can be overturned or may not make a big difference in global emissions, these cases matter in the court of public opinion."

As Chief Justice Brian Preston himself noted in a special issue of The Australian Law Journal devoted to Climate Change and the Law, the "territory of climate change litigation is being rapidly mapped".

"[T]he areas of terra incognita are becoming smaller and fewer. This trend is likely to continue."