Australian cases raise doubt over whether wind farm assets are chattels or fixtures
Out-Law Analysis | 21 Jan 2021 | 5:22 pm | 8 min. read
ClientEarth had appealed against the decision of Mr Justice Holgate in the High Court to uphold the grant of the Drax Power (Generating Stations) Order 2019 by the secretary of state for business, energy and industrial strategy. In a robust leading judgment by the Senior President of Tribunals, Lord Justice Lindblom, the appeal was dismissed on all of the three grounds on which ClientEarth was given leave to appeal.
ClientEarth has confirmed that it will not appeal the court's decision to the Supreme Court.
The decision is important, as it goes to the heart of how the Overarching National Policy Statement for Energy (EN-1) should be interpreted. The judgment provides much needed clarity on a paragraph in EN-1 that has caused considerable debate in application hearings as to whether or not a promoter should quantify a project's particular contribution to satisfying the need for new energy infrastructure.
In addition, it confirms that EN-1 does not direct the decision maker to ignore CO2 emissions in the planning balance. Rather, EN-1 makes the point that simply because a project may produce CO2 emissions, and it is a type identified in EN-1 as being required, the fact that it produces CO2 emissions is not a reason in itself to refuse development consent. The decision maker must still place the project's CO2 emissions in the planning balance and weigh them against the project's benefits.
Pinsent Masons, the law firm behind Out-Law, acted for Drax Power Ltd throughout the development consent application process. It also supported Drax throughout the judicial review process. We previously reported on the decision of the High Court.
ClientEarth was granted permission to appeal to the Court of Appeal on three grounds:
ClientEarth's main argument was that the policy on need in EN-1 requires an assessment of the particular contribution a project will make to meeting the need for the relevant type of infrastructure - in other words, that a 'quantitative' assessment of need is required for each energy NSIP. ClientEarth argued that EN-1 establishes only a need for particular 'types' of energy infrastructure, and not that any particular project will necessarily contribute towards meeting that need.
The decision goes to the heart of how the Overarching National Policy Statement for Energy should be interpreted, providing much needed clarity.
In forming this line of argument, reliance was placed on EN-1 paragraph 3.2.3, which states: "the weight which is attributed to considerations of need in any give case should be proportionate to the anticipated extent of a project's actual contribution to satisfying the need for a particular type of infrastructure". ClientEarth interpreted these words as meaning that 'quantitative' considerations are an inherent part of the project-specific assessment required under paragraph 3.2.3.
The High Court dismissed this submission at first instance, and the Court of Appeal supported that judgment.
The Court of Appeal restated established case law and said: "As always, it is necessary to undertake the exercise of policy interpretation by construing the language of the relevant policy objectively, in its context, and having regard to its evident purpose".
The last sentence of paragraph 3.2.3 of EN-1, as relied on by ClientEarth, must be read in the context of the rest of EN-1. The court therefore examined parts 2 and 3 of EN-1, which set out the need for "all the types of energy infrastructure" within EN-1's scope. This is compatible not only with the aim to "achieve energy security", but also with that of "dramatically reducing greenhouse gas emissions".
The court found that it was striking that there was no quantitative definition of relevant need anywhere in parts 2 and 3 of EN-1 - indeed, no attempt is made anywhere within the policy statement to describe in quantitative terms either the general need for the types of generating capacity within the scope of EN-1 or a specified need for any particular type. EN-1 expressly states that it would be inappropriate to "set targets for or limits on" different technologies, a deliberate and explicit statement.
Given this context, it is not surprising that paragraph 3.2.3 starts by confirming that "without significant amounts of new large-scale infrastructure, the objectives of [the government's] energy and climate change policy cannot be fulfilled". It is for this reason, according to the court, that the penultimate sentence of paragraph 3.2.3 provides that "substantial weight" should be given to considerations of need.
This then leads onto the final sentence of paragraph 3.2.3, which was controversial between the parties. The court concluded that, while the starting point is that "substantial weight" is to be given to "considerations of need", the weight due to those considerations in a particular case is not immutably fixed - it should be proportionate. To this extent, the secretary of state may determine whether there are reasons in the particular case for departing from the fundamental policy that "substantial weight" is accorded to need. This is a matter of planning judgment, with no prescribed way of performing the task; leaving the decision maker with discretion to decide how best to go about making the judgment required.
The court said: "Properly understood, paragraph 3.2.3 is not in tension with the other policies. It supports them".
"Based, as it is, on the fundamental policy that 'substantial weight' is to be given to the contribution made by projects towards satisfying the established need for energy infrastructure development of the types covered by EN-1, including CCR fossil fuel generation infrastructure, it ensures that the decision-maker takes a realistic, and not an exaggerated, view of the weight to be given to 'considerations of need' in the particular case before him, which should be 'proportionate to' the 'actual contribution' the project is likely to make to 'satisfying the need' for infrastructure of that type. That is its function," the court said.
The court then went on to review the secretary of state's decision letter and concluded that she had correctly understood and applied the policy in EN-1. The secretary of state acknowledged the presumption in favour of the proposed development, the general need for CCR fossil fuel generation and the fundamental requirement to give substantial weight to need. However, she did not stop there. She then considered whether there were reasons in this particular case for reducing the weight to the proposed development's contribution to need, which was a matter of planning judgment. She decided, as she was entitled to do, that there were no reasons to reduce the weighting as provided for in EN-1.
Accordingly, future applications for energy NSIPs should make the case for why the policy of 'substantial weight' should remain in respect of that particular project's contribution to need, but no quantitative assessment is required.
ClientEarth argued that the secretary of state had erred in her interpretation of EN-1 - particularly paragraph 5.2.2 - by concluding that the proposed development's greenhouse gas emissions were either irrelevant or had no weight.
Paragraph 5.2.2 states: "Government has determined that CO2 emissions are not reasons to prohibit the consenting of projects which use these technologies". ClientEarth claimed that the secretary of state had interpreted this as meaning that a project's greenhouse gas emissions could not be a reason to withhold granting development consent.
In the High Court, Mr Justice Holgate saw no force in ClientEarth's argument. He found that it was plain that the secretary of state did not treat greenhouse gas emissions as irrelevant, nor did she treat them as something to which no weight should be given. He went on to conclude that EN-1 does not preclude greenhouse gas emissions from being a reason for refusal, provided they are not treated as a freestanding reason for refusal.
In the Court of Appeal, ClientEarth submitted that the High Court's interpretation of EN-1 was wrong. It argued that, if greenhouse gas emissions can be given weight in the balance, it must be possible for them to weigh against the grant of consent, whether in combination with other 'adverse impacts' or on their own.
The Court of Appeal dismissed ClientEarth's argument, but also disagreed with the High Court's interpretation. It held that paragraph 5.2.2 of EN-1 does not mean that CO2 emissions are irrelevant or cannot be given due weight; rather that CO2 emissions are not, of themselves, an automatic and insuperable obstacle to consent being given for energy infrastructure identified in EN-1. If they were, then the policy on need would effectively be negated for those types of energy infrastructure which produce CO2.
CO2 emissions should, therefore, be given weight in the planning balance. It is here that the Court of Appeal disagreed with the High Court, saying: "How much weight is for the decision-maker to resolve. It follows that, in a particular case, such weight could be significant, or even decisive, whether with or without another 'adverse impact'".
Although the Court of Appeal disagreed with the High Court's interpretation, it agreed with the High Court that the secretary of state did indeed give CO2 emissions weight - significant adverse weight - and had taken them into account in the balancing exercise alongside other negative impacts and the benefits.
The Court of Appeal's clarification over the meaning of this paragraph is, therefore, helpful for the assessment of projects that give rise to CO2 emissions.
The final ground of appeal submitted by ClientEarth was based on a criticism of the secretary of state's approach to section 104(7) of the Planning Act, which requires the decision maker to balance the "adverse impacts" of the proposed development against its "benefits" to ensure the latter outweigh the former. The essence of its argument was that the secretary of state had failed to do so and had instead, in effect, simply repeated her assessment under section 104(3), which requires the decision maker to decide the application in accordance with any relevant National Policy Statement (NPS).
ClientEarth argued that section 104(7) was there as an extra check on the application of relevant NPSs, such that even a development that accords with the relevant NPSs may nonetheless be refused if, having applied the balancing exercise, its adverse impacts outweigh its benefits. In other words, the duty to decide an application in accordance with the relevant NPSs no longer applies if the section 104(7) balancing exercise concludes that the proposal’s adverse impacts outweigh its benefit. However this ground could only succeed if ClientEarth won on the other two grounds, as it relied on the court ruling that a 'quantitative' assessment of need was required and that the secretary of state had not taken CO2 emissions into account.
As the court rejected the previous two grounds, it also rejected this ground. It found that the secretary of state was entitled to apply substantial weight to the proposed development's contribution to need and bring that into the planning balance, and that she did so weighing it against the significant adverse impacts of greenhouse gas emissions. The secretary of state had "carried out the balancing exercise required, taking into account the considerations relevant to it and giving them lawful weight. No legal error was made".
Editor's note 08/02/2021: We corrected a description of one part of ClientEarth's case and apologise for the error.
29 May 2020
Australian cases raise doubt over whether wind farm assets are chattels or fixtures