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15 Mar 12
Court ruling on carbon emissions a big win for smaller mines

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An appeal in the NSW Land and Environment Court relating to what was argued were discriminatory environmental conditions being placed on a NSW coal mine has achieved a big win for smaller miners.

The ruling (13 March 2012), which could have had wide ramifications for resources companies across Australia, making some mines financially unviable, found that the Federal Government’s imposition of a carbon tax negated the need to provide additional greenhouse gas offsets.

McCullough Robertson acted for Ulan Coal Mines Limited (UCML) in the appeal against the provisional judgment of Justice Nicola Pain requiring UCML’s coal mine near Mudgee to offset its emissions.

Partner and mining and planning specialist Patrick Holland led our team, which argued that Justice Pain’s stated intention to impose the condition requiring UCML to offset all its Scope 1 Greenhouse Gas emissions was not practical because implementing it would be unlawful and inconsistent with the Commonwealth Government’s Clean Energy Act, more commonly known as the 'Carbon Tax'.

The ruling

The Court agreed with UCML and the Minister for Planning and Infrastructure saying that the imposition of such conditions was both 'unnecessary' and 'not warranted' given that a Carbon Tax would be implemented from 1 July 2012.

This case had the potential to affect the viability of many other NSW mines that are due to come online as it could have forced these mines to offset their carbon emissions even if they didn’t produce the threshold carbon dioxide emissions’ limits to be subject to the requirements of the Clean Energy Act, and hence be required to pay the carbon tax.

The significance

This is a big win, particularly for smaller miners. In fact, had the Court imposed the conditions requiring UCML to offset Scope 1 emissions below the threshold in the Clean Energy Act then it left open the possibility that any development consent for a mine, a commercial building or a school for example could have enabled consent authorities the imposition of a condition requiring Scope 1 emissions to be offset.

Projects that produce less than 25,000 tonnes of carbon dioxide a year and would therefore not be required to pay the Carbon Tax could have been impacted by similar conditions that had not been budgeted for and this could have made many new mines and other resources projects unviable.

Scope 1 emissions come from direct operations, and while Ulan is classified as not a very 'gassy' mine by comparison to other coal mines, it does produce some fugitive methane emissions.

Both UCML and the Minister for Planning argued that offsetting the mine’s Scope 1 emissions was discriminatory, given that other mines in NSW are not subject to such onerous conditions.

The provisional judgment was delivered on November 24, 2011 and final submissions were made on March 13, 2012.

UCML’s approval permits Ulan to double its production from 10 million tonnes to 20 million tonnes a year, and extends its operating life through to 2031, creating $11.9 billion in direct increased economic activity over the life of the mine.

Focus covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. Focus is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.

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