UK: Supreme Court decision rules that the grant of planning permission for oil wells in Surrey was unlawful for failing to assess scope 3 emissions

On 20 June 2024, the Supreme Court handed down its long-awaited decision in R (Finch) v Surrey County Council [2024] UKSC 20. A majority of the Supreme Court ruled that the grant of planning permission for oil wells in Surrey was unlawful for failing to assess the downstream greenhouse gas (“GHG”) emissions (i.e., scope 3 emissions), that the Court held would inevitably arise from combustion following refinement of the crude oil extracted. 

The decision has implications for what must be included in environmental impact assessments (“EIAs”) for future planning decisions concerning emissions-intensive projects. 

It also has significant implications for future legal challenges in respect of planning decisions; as the majority observed, “[g]iven the rapidly increasing prominence of issues relating to climate change and GHG emissions, more litigation raising such issues can be expected”. 

Indeed, the decision may even change the course of existing challenges to planning decisions. In the wake of the Finch decision, the new Government has admitted that the decision to approve the new Cumbria coal mine was unlawful and dropped its opposition to the challenge brought by Friends of the Earth and South Lakes Action on Climate Change, who were due to argue at an upcoming hearing that the GHG emissions from using the coal were not properly assessed.

Background

Legislation in the United Kingdom requires an EIA to be carried out before planning permission can be granted for a project which is likely to have significant effects on the environment. The legislation applicable in this case is the Town and Country Planning (Environmental Impact Assessment) Regulations 2017 (the “EIA Regulations”), which implemented European Union Directive 92/11/EU (the “EIA Directive”). An EIA must identify, describe and assess the likely “direct and indirect significant effects” of the project on the environment, including the impact on climate.

In this case, a developer applied to Surrey County Council for planning permission to expand oil production from a well site. Whilst the Council initially considered that the EIA for the project should consider “the global warming potential of the oil and gas that would be produced by the proposed well site”, later the Council changed its mind. It accepted it was sufficient for the developer to assess only direct releases of GHG at the project site over its lifetime (and not the climate impact of the combustion of the oil extracted).

The Council granted planning permission and the claimant, a local resident and campaigner, challenged the Council’s decision. She argued that the decision was unlawful because the EIA was required to include an assessment of the combustion emissions. 

The High Court rejected her challenge, holding that, as a matter of law, scope 3 combustion emissions were not within the legal scope of the EIA Directive and EIA Regulations; alternatively, whether to assess them was a matter of evaluative judgment for the Council, which had given legally valid reasons for deciding not to do so. By a majority, the Court of Appeal upheld the judge’s decision on the second of these grounds. The claimant appealed to the Supreme Court.

Key issues

The central issue before the Supreme Court was whether it was lawful for the Council not to include the scope 3 combustion emissions in the EIA for the proposed project. This turned on whether scope 3 GHG emissions that will occur upon combustion of oil extracted from the project qualified as a likely “effect of the project” on climate.

Supreme Court Decision

By a three-to-two majority, the Supreme Court allowed the appeal. The majority held that the Council’s decision was unlawful because the scope 3 emissions that will occur when the oil produced is burnt as fuel are an effect of the project, so must be considered in the EIA. Lord Leggatt, with whom Lord Kitchin and Lady Rose agreed, gave the majority judgment. Lord Sales, with whom Lord Richards agreed, gave a dissenting judgment. 

As a result, the developer in this case is required to prepare a new EIA which takes into account scope 3 emissions. However, this does not mean the developer will not be able to obtain planning permission for this project. Rather, the information on scope 3 emissions in the EIA will be a factor for the Council to take into account when it reconsiders the developer’s planning application.

The “effects of a project” is a question of causation

Lord Leggatt held that the concept of “the effects of a project” (for the purposes of the EIA Regulations and EIA Directive) is a question of causation. In this case, it was clear there was a sufficient causal link between the project and the resulting emissions. That is because, on the agreed facts, it was not just “likely” but known with certainty that all the oil extracted from the project would inevitably be burnt, thereby releasing GHG into the earth’s atmosphere in a quantity which can readily be estimated (see paragraphs 79–81).

After considering the different legal tests for causation which might apply, Lord Leggatt found that the facts here met even the most stringent test for causation – the “necessary and sufficient” test. This is because, on the facts agreed by the parties, the extraction of oil is not just a necessary condition of the burning of the fuel, it is also sufficient to bring about that result because it is guaranteed the fuel will be refined and burnt. It was therefore not necessary to go further and consider the meaning of the word “likely”.

The question of the “effects of a project” is not a matter of evaluative judgment for the decision-making body

The Supreme Court unanimously rejected the Court of Appeal’s approach to whether combustion emissions constitute “effects of the project” (which the Court of Appeal said required an “evaluative judgment” about whether there was a sufficiently close causal connection between the extraction of the oil and its eventual combustion, with the effect that decision makers could reasonably differ on whether intermediate steps such as the refining of oil break the chain of causation). Lord Leggatt (writing for the majority) found that this approach would be “a recipe for unpredictable, inconsistent and arbitrary decision-making” and “intolerably vague”.

Lord Sales (in the dissenting judgment) also rejected the “evaluative judgment” reasoning adopted by the Court of Appeal. However, Lord Sales favoured the High Court’s approach and would have held, that scope 3 combustion emissions are, as a matter of law, incapable of falling within the legal scope of the EIA Directive. 

Relevance of UK national planning policy

The Supreme Court also rejected the argument that the UK’s national planning policy (of encouraging domestic production of oil and gas) is relevant to the required scope of the EIA because:

1. it is wrong to interpret the meaning and scope of the (EU) EIA Directive by reference to UK policy and legislation for controlling GHG emissions and regulating petroleum production; and
2. the purpose of the EIA is to ensure that, whatever the decision taken, it is taken with full knowledge and public awareness of the likely significant environmental consequences. In that context, even if the information in the EIA will have no influence on whether the project is permitted to proceed, that does not make it pointless to obtain and assess the information.

Implications 

The decision clarifies the law for planning decision-makers and has implications for existing and future legal challenges in respect of planning decisions. 

Importantly, the Supreme Court:

1. Departed from previous authority in finding that estimating combustion or “scope 3” emissions is not just feasible, but a task that can be “easily performed”.
2. Found that it can be said with “virtual certainty” (at least in this case and on agreed facts) that, once oil has been extracted from the ground, the carbon contained within it will sooner or later be released into the atmosphere as carbon dioxide and so will contribute to global warming. This is true even if only the net increase in GHG emissions is considered. Further, the Court found that leaving oil in the ground in one place does not result in a corresponding increase in production elsewhere (see paragraph 2).
3. Made observations regarding the implications of the decision for different types of activities:
   1. The Court observed that coal need not undergo any intermediate process before it is burnt as fuel. The majority’s reasoning as to the question of causation in relation to combustion emissions from oil therefore appears to apply more broadly to some other developments concerning fossil fuel extraction. 
   2. However, the question of causation may take on a different complexion in the context of developments in other carbon-intensive industries. The Court observed that oil is a very different commodity to, say, iron or steel, which have many different possible uses and may be incorporated into many different types of end product used for all sorts of different purposes. In the case of the manufacture of steel, for example, it could reasonably be said that the environmental effects of the use of the products which the steel will be used to make are not “effects” of manufacturing steel. This is because the indeterminacy regarding future use would make it impossible to identify any such effects as “likely” or to make any meaningful assessment of them at the time of the decision whether to grant development consent for the construction and operation of the steel factory.

Whilst the decision makes clear that EIAs will in certain circumstances need to assess scope 3 emissions, the limits of that reasoning remain to be tested. For example, does the requirement to include an assessment of scope 3 emissions in an EIA extend to all fossil fuel projects, or should the decision be read more narrowly? How does the majority’s reasoning apply to a project where on the facts (unlike the agreed facts in this case) it may not be inevitable that the fossil fuel extracted will be burnt (for example, natural gas used as a chemical feedstock)?