Court of Appeal judgment on EIA, hydrocarbons and indirect effects 17-02-22

The Court of Appeal today gave judgment in R (Finch) v Surrey CC and Horse Hill Developments [2022] EWCA Civ 187 upholding the judgment of Holgate J. albeit with varied reasons. Sir Keith Lindblom SP gave the main judgment, with whom Lewison LJ agreed but with a dissenting judgment from Moylan LJ on the specifics of the reasons given in the case. As the Senior President explained at the outset:

"1. The basic question in this case is whether, under Directive 2011/92 EU of the European Parliament and of the Council ("the EIA Directive") and the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 ("the EIA regulations"), it was unlawful for a county council, as mineral planning authority, not to require the environmental impact assessment for a project of crude oil extraction for commercial purposes to include an assessment of the impacts of greenhouse gas emissions resulting from the eventual use of the refined products of that oil as fuel. In my view, applying legal principles that are already fully established, it is clear that the county council did not err in law."

He stated applicable general principles, based on established case law at [15] which guided the Court in reaching its decision:

"15. Both in decisions of the Court of Justice of the European Union ("the CJEU") and in those of the domestic courts there is ample authority on the legislation governing environmental impact assessment. The relevant principles are familiar and not controversial. I shall mention only those bearing on the issues we have to decide. There are seven: 

(1) While a broad and purposive approach to the interpretation of the European Union legislation is appropriate, it must always respect the words actually used (see, for example, the judgment of the CJEU in Brussels Hoofdstedelijk Gewest v Vlaams Gewest (The Brussels Airport Co. NV intervening) (Case C-275/09) [2011] Env LR 26, at paragraph 29; the judgment of Lord Sumption in R. (on the application of Buckinghamshire County Council) v Secretary of State for Transport [2014] UKSC 3; [2014] 1 WLR 324, at paragraph 120; and the judgment of Moore-Bick L.J. in R. (on the application of Bateman) v South Cambridgeshire District Council [2011] EWCA Civ 157, at paragraph 19). 

(2) The legislation for environmental impact assessment is directed at a project of development. The concept of a "project" is one to which a broad interpretation should be applied (see the judgment of the CJEU in Aannemersbedrijf PK Kraaijeveld BV v Gedeputeerde Staten van Zuid-Holland (Case C-72/95) [1996] ECR I-5403, at paragraphs 31 and 39, and the first instance judgment in R. (on the application of Catt) v Brighton & Hove City Council [2013] EWHC 977 (Admin), at paragraphs 66 to 72). 

(3) An assessment of the "likely significant effects of the project on the environment" under the EIA Directive extends to the effects of the use of the works as well as their construction (see, for example, the judgments of the CJEU in Commission v Spain (Case C-227/01) [2005] Env LR 20, at paragraphs 48 to 50, holding that a project to expand a railway by constructing additional track must be subject to environmental impact assessment, because the use of the expanded railway was likely to cause significant noise; in Abraham v Wallonia (Case C-2/07) [2008] Env LR 32, at paragraphs 42 to 44, holding that the assessment for the expansion of an airport by works to improve its existing infrastructure, including the widening of the runways, which would enable it to be used more intensely, had to assess not only the impacts of the expansion itself – the works to be carried out – but also of the increased activity resulting from it; and in Ecologistas en Accion - CODA v Ayuntamiento de Madrid (Case C-142/07) [2009] PTSR 458, holding that the impacts of the use of an urban ring road, once improved, must be assessed, and not merely the impacts of the construction works; and the first instance judgment in R. (on the application of Preston) v Cumbria County Council [2019] EWHC 1362 (Admin); [2020] Env. L.R. 3, at paragraphs 46 to 49, holding that the assessment for a proposed temporary discharge pipe for a wastewater treatment plant must include not only the effects of the installation of the pipe but also those of its discharge into a river).

(4) Crucially, an environmental impact assessment must address the particular development under consideration, not some further or different project (see, for example, the Court of Appeal's decision in Preston New Road Action Group and Frackman v Secretary of State for Communities and Local Government [2018] EWCA Civ 9; [2018] Env. L.R. 18, in particular the leading judgment at paragraphs 60 to 73, holding that the environmental impact assessment for the proposed exploration for shale gas was not legally required to include the effects of the potential later commercial extraction by fracking, for which a further planning permission would be required; and the first instance judgment in R. (on the application of Khan) v Sutton London Borough Council [2014] EWHC 3663 (Admin), at paragraphs 121 to 134, holding that the assessment for an energy recovery facility was not legally required to extend to the impact of combined heat and power pipelines running from the application site, which would have to be the subject of another application for planning permission; and cf. Brown v Carlisle City Council [2010] EWCA Civ 523; [2011] Env LR 5, where the environmental statement for the development of a freight distribution centre at an airport did not include, as it should have done, an assessment of the effects of the associated improvements to the airport itself, which were part of the same project but the subject of a separate application for planning permission).

(5) The existence and nature of "indirect", "secondary" or "cumulative" effects will always depend on the particular facts and circumstances of the development under consideration (see the judgment of Sullivan L.J. in Brown, at paragraph 21; and the judgment of Laws L.J. in Bowen-West v Secretary of State for Communities and Local Government [2012] EWCA Civ 321; [2012] Env LR 22, at paragraph 28).

(6) Where an environmental impact assessment has to address the "indirect" effects of a proposed development, it must include a sufficient assessment of such effects (see, for example, the decision of the Court of Appeal in R. (on the application of Squire) v Shropshire Council [2019] EWCA Civ 888; [2019] Env. L.R. 36, at paragraphs 39 and 69 of the leading judgment, holding that the environmental impact assessment for an intensive poultry rearing development was defective because it failed properly to consider the impact of odour and dust produced by poultry manure spread on surrounding farmland).

(7) Establishing what information should be included in an environmental statement, and whether that information is adequate, is for the relevant planning authority, subject to the court's jurisdiction on conventional public law grounds (see the judgment of Sullivan J. in R. (on the application of Blewett) v Derbyshire County Council [2003] EWHC 2775 (Admin); [2004] Env LR 29, at paragraphs 32, 33 and 41). The applicable standard of review has consistently been held to be the "Wednesbury" standard (see the judgment of the Supreme Court in R. (on the application of Friends of the Earth Ltd.) v Heathrow Airport Ltd. [2020] UKSC 52; [2021] PTSR 190, at paragraphs 142 to 145; the judgment of the Court of Appeal in R. (on the application of Plan B Earth) v Secretary of State for Transport [2020] EWCA Civ 214; [2020] PTSR 1446, at paragraphs 136 to 144; the judgment of Coulson L.J. in Gathercole v Suffolk County Council [2020] EWCA Civ 1179; [2021] PTSR 359, at paragraphs 53 to 55; the judgment of Laws L.J. in Bowen-West, at paragraphs 27 to 46; and the judgment of Lang J. in R. (on the application of Friends of the Earth) v North Yorkshire County Council [2016] EWHC 3303 (Admin); [2017] Env LR 22 – otherwise known as Frack Free Ryedale – at paragraphs 21 to 23). The "Wednesbury" standard of review in its modern application has been elucidated by the Divisional Court (Leggatt L.J. as he then was, and Carr J. as she then was) in R. (on the application of the Law Society) v The Lord Chancellor [2018] EWHC 2094 (Admin); [2019] 1 WLR 1649 (at paragraph 98)."

It was, he held, important for the issue of the effects of a development to focus on the development project for which consent was sought. In this case, the permission was for the extraction of oil only and did not include the refining of that oil and the creation of usable end products. He rejected the view that the end emissions from the use of the oil which would result from the creation of products following extraction needed to be assessed:

"31. Persuasive though these arguments might seem if one imagines a larger role for environmental impact assessment than the legislation actually provides, they are in my view incorrect. They suggest an interpretation of the legislative scheme which would extend environmental impact assessment beyond the direct and indirect environmental effects "of the proposed development" itself to so-called "end products" far removed from that project, and lacking the kind of connection to it that has been seen as a prerequisite in the relevant case law of the CJEU and the domestic courts.

32. In this legislative context, as the case law shows, the concepts of "the proposed development" and the "project" are generally, and certainly in this case, interchangeable. They must be understood broadly, and realistically (see Frackman, in particular at paragraphs 63 to 68). Here, as is agreed, they must include the commercial activity of extracting crude oil from the site for export to refineries. This understanding corresponds to the relevant type of "project", identified in paragraph 14 of Annex I to the EIA Directive – the "extraction of petroleum and natural gas for commercial purposes …" and, in parallel terms, in paragraph 14 of Schedule 1 to the EIA regulations. It is consistent with the principle in CJEU and domestic authority that a wide interpretation should be applied to the concept of a "project" (see Aannemersbedrijf PK Kraaijeveld BV, at paragraphs 31 and 39, and Catt, at paragraphs 66 to 72). Clearly, both the construction of the oil wells and their use for the extraction of crude oil for commercial purposes come within the uniform concepts of "the proposed development" and "the project" in the legislation, just as the use of the additional runway capacity was held to be part of the project in Abraham, the use of the urban ring road in Ecologistas, and the discharge of treated sewage into the river in Preston. 

33. This broad approach to the interpretation of the terms "the project" – in its double-limbed definition in article 1(2)(a) of the EIA Directive – and "the proposed development" is not predicated simply on the "purpose" of the project, as opposed to its physical and functional character. Naturally, a project is likely to embody the purpose behind it. But as Ms Harriet Townsend submitted for the county council, the "purpose" of a project does not in itself define what the project actually is, nor does it identify the environmental effects of that project requiring assessment under the legislation. References to the "purpose" of particular developments in the legislation and in the authorities should not be misconstrued in that way. Here, the extraction of crude oil for commercial purposes was the essential content and character of the proposed development. That was the project. The ultimate use of the products generated by the subsequent refinement of the crude oil was not part of that project. Nor, indeed, was the refinement process itself, which would be, in its own right, a separate and substantial industrial activity carried out for profit by the companies concerned. Nor were the distribution and sale of the refined products, which would also be separate commercial activities.

 He continued:

"35. In the light of the relevant case law, it cannot be said that Holgate J. adopted too narrow an understanding of the concepts of the "proposed development" and the "project" in the legislation for environmental impact assessment. His interpretation was consistent with a true understanding of the definition of a "project" in article 1(2)(a) as "the execution of construction works or of other installations or schemes" and "other interventions in the natural surroundings and landscape including those involving the extraction of mineral resources", and with the relevant and familiar jurisprudence. There is nothing in his judgment to suggest that he interpreted the term "the proposed development" in the EIA regulations as having a narrower meaning than the case law indicates. Though he did not set out the description of the proposed development given in the county council's decision notice, there is no reason to think he overlooked the obvious fact that the project included the commercial extraction of crude oil for export to refineries. He did not confine his analysis, artificially, to the effects of executing the proposed works themselves – the operational development for which planning permission was required. He clearly had in mind the development in its entirety: its physical form, its use of the land, and how it would function. 

36. Nor did he place an unjustified gloss on the relevant provisions of the EIA Directive and the EIA regulations. On a fair reading of his judgment, he was simply construing the legislation as it is drafted, without resorting to any gloss. This was consistent with the established approach to interpreting the EIA regulations (see Bateman, at paragraph 19). It gave prominence, as it should, to the provisions referring to the environmental effects "of the project" and "of the proposed development", which frame the requirements for environmental impact assessment in the EIA Directive and the EIA regulations and limit the scope of the legislative regime. The judge was right to stress the consistent phrasing of the relevant concepts in those terms. 

37. One must remember that the process of environmental impact assessment is not an end in itself. It is a process with a specific procedure set out in the EIA Directive and the EIA regulations, and it must be carried out in accordance with that procedure. But it is, ultimately, a means of informing and strengthening a larger process, which is the process of determining an application for planning permission for "development" under the planning legislation (see the speech of Lord Hoffmann in R. v North Yorkshire County Council, ex parte Brown [2000] 1 AC 397, at p. 404). The regime is not intended to regulate the environmental effects of economic or commercial activity, or of the use of land, in general. It is only engaged when a grant of "development consent" for a particular project of development is necessary.

38. It is therefore unsurprising, indeed essential, that the legislation for environmental impact assessment explicitly and consistently requires only the assessment of effects "of the proposed development" or "of the project". That assessment is expected to assist the overarching process for "development consent" which it serves, and into which it is integrated – as is conspicuous, for example, in article 5(1)(c) of the EIA Directive and regulation 18(3) of the EIA regulations. To do this, it must be commensurate with the project itself. It is, as Ms Townsend submitted, "project-centric". Logically, this must apply not merely to the "direct … significant effects" of the development but also to significant effects which are "indirect". Therefore, as Mr Richard Moules submitted for the Secretary of State, to determine whether something is an "indirect" effect under the legislation for environmental impact assessment, the decision-making authority must ascertain whether it is truly an effect "of the proposed development". To come within the reach of the legislation, it must be identifiably an effect of the project in hand (see, for example, Frackman, at paragraph 68). 

39. The "direct and indirect significant effects of a project" in article 3(1) of the EIA Directive, the "likely significant effects of the project" in paragraph 5 of Annex IV, the "direct and indirect significant effects of the proposed development" in regulation 4(2) of the EIA regulations and the "likely significant effects of the proposed development" in regulation 18(3)(b) do not need any paraphrase or gloss. In the absence of definitions in the legislation, they must be understood as they are expressed. Substituting terms such as "reasonably foreseeable [effects]" or "attributable [effects]" for the wording actually used is inapt. The concept of "reasonable foreseeability" finds no place in the EIA Directive and the EIA regulations. Nor do the concepts of something being "likely to arise as a result of", or "attributable to", or "an inevitable result of", the proposed development. Nor does the concept of "but for" causation, which would connect a development to events very far along the chain of consequences away from it. Neither the words of the legislation nor the relevant authorities support any of these alternative concepts. 

40. To conclude on this issue: if the "relevant planning authority" acts on a correct understanding of the legislation, the question of whether a particular impact on the environment is truly a "likely significant [effect]" of the proposed development – be it a "direct" or "indirect" effect – is ultimately a matter of fact and evaluative judgment for the authority. 

41. The real question at issue here, therefore, is not the meaning of the concepts of "the project" and "the proposed development" as such, but the meaning of the concept of "effects", and in particular "indirect" effects, of that development. As the judge rightly emphasised (in paragraph 101 of his judgment), what needs to be considered by the decision-making authority is whether a particular environmental impact is "an effect of the development for which planning permission is sought". But this, I think, is not in itself a statement of the "true legal test". To say that the impact, to qualify for assessment, must be an effect of the development is only to pose the question in different terms. What needs to be considered is the necessary degree of connection that is required between the development and its putative effects. 

42. In this case, though the project itself was confined to the construction and use of a working well site for the commercial extraction of crude oil for onward transport to refineries, the judge proceeded on the agreed basis that the eventual combustion of the refined products of the oil extracted at the site was "inevitable" – not merely "reasonably foreseeable" or "likely" or "possible", or the potential result of a future project that was itself only "a matter of conjecture" or merely "hypothetical". This being so, the county council had to establish whether, bearing in mind the intermediate stages which would necessarily have to occur before combustion could take place, the greenhouse gas emissions which would be generated in that way were properly to be regarded as "indirect" effects of the proposed development, or not. In the light of the relevant case law, I do not think this was simply a matter of law for the court. It was, I consider, a question for the county council to determine, subject to the scrutiny of the court on public law grounds. And as the relevant case law also makes plain, it is not the court's role in a claim for judicial review to substitute its own view for the planning authority's on a question of this kind (see Plan B Earth, at paragraphs 136 to 144)."

However, the Senior President sounded a note of caution in drawing a distinction between the legal requirements and the judgment of the planning authority having regard to those requirements:

"43. Unlike the judge, while I agree with his interpretation of the relevant provisions of the legislation, I would not say – as he did (in paragraph 126 of his judgment) – that "in the circumstances of this case, the assessment of [greenhouse gas] emissions from the future combustion of refined oil products said to emanate from the development site was, as a matter of law, incapable of falling within the scope of the [environmental impact assessment] required by [the EIA regulations] for the planning application". I do not think it is possible to say that such an impact is legally incapable of being an environmental effect requiring assessment under the legislation. It follows that the outcome of the appeal, in my view, turns not on the legal possibility of a conclusion to that effect, but on the lawfulness of the decision the county council ultimately reached that "scope 3" or "downstream" greenhouse gas emissions were not "indirect significant effects of the proposed development" – a decision which, in his alternative conclusion (at paragraph 132), the judge accepted was lawfully taken in any event."

Further, he rejected the submission that "downstream" greenhouse gas emissions resulting from use of the oil necessarily fell to be assessed:

"66. In the circumstances of this case, the county council's decision not to enlarge the assessment of greenhouse gas emissions to cover "scope 3" or "downstream" emissions as well as those caused by the development itself was legitimate. It had a reasonable and lawful basis for deciding not to insist on such an assessment here – which was that "scope 3" emissions were not, in truth, effects "of the proposed development" it was dealing with. In this case the environmental effects of such emissions could reasonably be seen as far removed from the proposed development itself, and not causally linked to it, because of the series of intervening stages between the extraction of the crude oil and the ultimate generation of those emissions – remote enough, therefore, for the council lawfully to conclude that it did not qualify as one of the "likely significant effects of the proposed development" on the environment.

67. Whether in other cases, in different circumstances involving development for the extraction of hydrocarbons, "downstream" impacts might properly be regarded as "indirect" effects on the environment, so that it would be reasonable and lawful for a local planning authority in those circumstances to require their assessment, is not a question we have to decide. The specifics of such projects will vary greatly from one kind of "fossil fuel" to another. The need for a wider assessment of greenhouse gas emissions may sometimes be appropriate, and possibly not contentious. One can imagine possible scenarios. But I do not think it would be helpful for us to set about inventing examples on hypothetical facts unrelated to the case before us.

68. It can make no difference to this understanding of the legislative regime for environmental impact assessment that the impacts of "downstream" greenhouse gas emissions might not come to be assessed under that regime at some later stage. This might be the only or last opportunity for the impacts of such emissions to be assessed. Or it might not. But as Holgate J. recognised, the legislation is concerned with the development of land and the environmental effects of that development and its operation. It was not conceived as a means of ensuring that every kind of impact on the environment, even an inevitable impact, is sooner or later assessed in an environmental statement regardless of any causal connection with a "proposed development" for which planning permission is sought and an environmental impact assessment required. Where there will or may be some further project which could properly be said to bring about the environmental impacts in question, those effects ought to be assessed at that later stage – as was held by this court in Frackman. But it does not follow that the converse is also true. The fact that a particular impact on the environment will not necessarily be assessed in the course of a decision-making process for another development in the future does not mean it must therefore be made the subject of environmental impact assessment now."

A copy of the judgment can be access via this link: https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWCA/Civ/2022/187.html&query=(Finch)