Downstream effects and Environmental Impact Assessment – the ripple effect of the Supreme Court’s decision in Finch

The decision of the Supreme Court in R (Finch) -v- Surrey County Council and others [2024] UKSC 20 (Finch) has set a clear benchmark for the scope of Environmental Impact Assessment (EIA) undertaken in connection with carbon intensive developments in the UK.

However, the Finch case is not just relevant to projects concerning fossil fuel extraction. It is likely to have wider implications because of what the Supreme Court had to say about the meaning of “effect” and establishing the chain of causation.

Relevant legislation

The EIA Directive confirms that the “extraction of petroleum for commercial purposes where the amount extracted exceeds 500 tonnes per day in the case of oil and 500,000 cubic metres per day in the case of gas” is a project that will require EIA.¹

An EIA should “identify, describe and assess” the “direct and indirect effects of a project” on factors such as “climate”² and should detail whether those effects are likely to be significant - whether adverse or positive in nature.

Case background

In Finch, the developer applied to Surrey County Council for planning permission to retain and expand an existing oil well site and to drill new wells for the commercial production of hydrocarbons.

The developer planned to extract 3.3m tonnes of crude oil from the site over a 20-year period.

Before granting planning permission, the Council issued a scoping opinion that confirmed that the EIA for the project should include an assessment of the combustion emissions from the oil to be produced - referred to as the “downstream” greenhouse gas (GHG) emissions of the project.

The developer’s assessment considered the direct release of GHG emissions from within the site boundary only – the emissions arising from the project’s construction, the production of hydrocarbons and the decommissioning and eventual restoration of the site - and the Council granted planning permission on this basis.

High Court and Court of Appeal

The claimant, on behalf of a local action group, applied for judicial review, challenging the Council’s decision on the basis that the EIA should have included an assessment of the downstream GHG emissions from the refined oil produced because they were a significant indirect effect of the project.

The High Court dismissed the claim on the basis that downstream GHG emissions were not within the scope of the relevant legislation.

It was said that EIA should consider only the effects of the project for which planning permission was sought. This did not include the environmental effects of the use of the end product which would be created in a different location using the oil extracted from the site.

The Court of Appeal upheld the High Court’s decision, but on a different basis.

The majority view of the Court of Appeal was that the decision as to whether the EIA was required to consider the downstream GHG emissions of the project was a question of evaluative judgment for the Council as local planning authority (LPA).

Supreme Court

The Supreme Court held (3:2) that the Council’s failure to assess the effect of the combustion of the oil that would be produced from the project on climate meant that its decision to grant planning permission was unlawful. Key points from the judgement include:

• Causation: An EIA must consider the “effects of a project”, which is a question of causation. The requisite test is whether an effect is “likely” and this needs to be established by evidence, not speculation or conjecture.
  
  In Finch, it was an agreed fact that the extracted oil would be burnt, thereby releasing GHG emissions into the atmosphere in a quantity that could be easily estimated.
  
  The Court of Appeal was wrong to find that there was a break in the chain of causation caused by the refinement process, i.e. between the crude oil produced on the existing oil well site and the emissions caused by the burning of the fuel off-site.

• Methodology: The Court of Appeal’s concerns about the EIA process becoming unduly onerous if downstream indirect effects were to be assessed were misplaced. Oil is a different commodity to a material such as steel, which once refined does not change into another object, and its impact can be more easily assessed.

• Scope: The EIA Directive does not impose a geographical limit on the scope of the environmental effects of a project which must be assessed. The Council was, therefore, wrong to limit the scope of the EIA to the emissions expected to occur at the site. The nature of indirect effects is such that they may occur elsewhere.

• National v Local Policy: The UK’s national policy on the production of gas and oil is relevant to the decision of an LPA on whether to grant permission for a relevant project. However, it does not remove the requirement to assess the environmental impact of the project or to limit the scope of that assessment.

• Dissenting Judgment (Lord Sales): Decisions on planning permission will generally be taken at a local level. However, the emissions caused by the use of extracted oil are dealt with by national policy.
  
  On that basis, it would be constitutionally inappropriate for an LPA to carry out decision making based on its own views of downstream emissions. Further, Lord Sales agreed with the High Court that the formula used in the relevant EIA legislation indicated that an indirect effect must be an effect of the project subject of assessment, which on a natural reading does not include downstream emissions.

Implications

Regarding Finch, the grant of planning permission has been held to be unlawful and the planning application has been remitted to the Council for reconsideration.

For oil and gas projects, the Supreme Court has made a clear finding that downstream GHG emissions are capable of being an indirect effect, which should be included in an EIA where there is a causative link between the project and their creation.

Following Finch, the government confirmed that it would not defend a claim against the granting of planning permission for a coal mining project in Cumbria where the assessment of the downstream GHG emissions of the project were omitted from the developer’s Environmental Statement.

Planning permission for an oil drilling and exploration project has also been quashed in the wake of Finch, after the government and the developer consented to judgement, with the claimant in that case arguing that planning permission could not lawfully be granted without information on downstream emissions being made available to the decision maker.

Depending on the end product and/or use, downstream effects may be relevant to the EIA for other projects. However, there may not always be sufficient evidence to establish causation. Where there is indeterminacy regarding future use, this may make it impossible to identify effects as being “likely” or prevent a meaningful assessment of such effects.

The Supreme Court in Finch appeared to accept that there is an element of evaluative judgement involved in determining the scope of an EIA and that different decision makers, depending on the circumstances, could rationally come to a different view on whether a possible effect is likely and capable of assessment.

For EIA development, developers and LPAs should give careful thought to the chain of causation and whether there is sufficient evidence and a recognised methodology for assessing whether the downstream effects of a project are likely. If so, they should be scoped into the EIA for the project.

¹Article 4 (1) of Directive 2011/92/EU; prior to Brexit, the UK implemented the Directive by way of the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (the 2017 Regulations)

²Article 3(1) of Directive 2011/92/EU