Warkworth mine - another victim of over-regulation

In brief

The NSW Court of Appeal has upheld the Land and Environment Court's refusal of the proposed Warkworth mine expansion. This case highlights the complexity and onerous nature of the environmental assessment regime for major projects in NSW, which empowers the courts to overturn a project approval despite a project having already undergone three levels of environmental assessment. Partner Jim Parker and Lawyer Naomi Bergman report.

Background

In 2010, Warkworth Mining Limited (Warkworth) lodged a major project application for the expansion of its mine near Bulga in the Hunter Valley in New South Wales. The application included a detailed environmental assessment. In September 2011, Warkworth submitted a Preferred Project Report, which was accompanied by further letters and reports by ecologists in support of the project.

The project was assessed by the Department of Planning and Infrastructure (now P&I), which also commissioned a peer review by an expert ecologist. The Director-General's Assessment Report (DG Report) recommended that the project be approved. On 3 February 2012, following a further independent assessment of the project, the PAC conditionally approved the project.

Appeal to the Land and Environment Court

An association of Bulga residents, the Bulga Milbrodale Progress Association (the Association), appealed against the project's approval. The appeal was commenced in the merits review jurisdiction of the LEC, meaning that the LEC was required to determine afresh whether the project should be approved.

On 15 April 2013, the LEC determined to refuse approval for the expansion project on the basis of the biodiversity and noise impacts of the project.

Significantly, although the Association had raised the issues of biodiversity and noise generally in its contentions, it did not specifically allege that the proposed biodiversity offset package was inadequate with respect to impacts on fauna, nor that the background noise levels adopted for the noise assessment were inadequate. However, the LEC relied on both these matters in determining to refuse the project.

Appeal to the Court of Appeal

Warkworth and the Minister for Planning and Infrastructure appealed the LEC's decision to the NSW Court of Appeal. A merits review decision of the LEC can only be challenged on legal grounds, meaning that Warkworth was not able to challenge the LEC's factual findings but rather, had to identify some legal error in the LEC's decision-making process.

Warkworth alleged that there was procedural unfairness in the LEC's decision-making process, as neither the fauna aspects of the offset package, nor background noise levels were apparently in issue in the LEC proceedings. Warkworth further alleged, among other matters, that the LEC's assessment of the biodiversity offset package and its economic evidence was flawed. Warkworth and the P&I Minister also contended that the LEC did not give sufficient weight to the DG Report.

On 7 April 2014, the Court of Appeal dismissed the appeal. The key findings of the Court of Appeal were as follows:

• The LEC's consideration of the fauna aspects of the offset package and background noise levels did not amount to a denial of procedural fairness.
• The fact that Warkworth did not propose any measures to avoid or mitigate the ecological impacts of the project, but merely proposed to offset those impacts, was relevant to the assessment of the offset package.
• It was open to the LEC to make a finding that five of the proposed offset areas could not be taken into account because they did not contain the same EECs as the areas impacted by the project.
• The DG Report does not have 'prima facie weight' and is not the 'focal point' when determining whether to grant project approval.
• The LEC's finding that Warkworth's economic modelling was inadequate as it failed to recognise the 'polycentric' and interrelated nature of the costs and benefits of the project was not flawed.

Lessons learned

The Warkworth case highlights the current over-regulation of major projects in NSW. The project application for the Warkworth expansion was made in March 2010. It has taken four years for the project to be finally determined. The proponent must now start the process again if it seeks approval to expand the mine.

Notwithstanding multiple environmental assessments by independent experts retained by the proponent, an assessment by P&I, an independent peer review commissioned by P&I, and an independent assessment by the PAC, the LEC has broad powers to re-determine a project application and can refuse a project on the basis of matters not in issue during the preliminary assessment phase, or raised by the parties on appeal.

On appeal, proponents need to positively demonstrate that all impacts of a project are acceptable, whether or not those impacts have been put in issue by objectors or another party. While this will involve additional (and arguably unnecessary) time and cost for the proponents in preparing their evidence, it will be necessary in order to avoid an outcome such as that in the Warkworth case.

Where the LEC determines to refuse a project, the only avenue of challenge available is to identify some legal error in the decision-making process or procedural unfairness in the conduct of the case. It can be very difficult to identify and successfully demonstrate legal error, and at best, a successful appeal will generally result in a re-determination by the LEC.

Law reform

Since the LEC decided to refuse the Warkworth expansion project, the State Government has amended State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (Mining SEPP), which governs the assessment of mining projects in NSW, to elevate economic considerations and resource significance as the primary considerations in assessing projects.

Significantly, neither the LEC's nor the Court of Appeal's decision on the Warkworth expansion project was based on a consideration of the Mining SEPP as recently amended.