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By a 3:2 majority the Supreme Court has ruled that when carrying out an Environmental Impact Assessment (EIA), in this case for a proposed oil drilling, the 'downstream' impacts have to be considered in that assessment.

The Supreme Court say that for an oil drilling, that has to include what is going to be done with the oil.

It was agreed that much of it would be burned, so the climate impacts of that use needed to have been considered at the application stage.

As this hadn't been done the consent for the drilling was quashed, and a new broader EIA will have to be carried out before the decision can sensibly be revisited.

What makes the decision noteworthy?

The decision is very remarkable for several reasons.

First, it seemingly trespasses on Parliament's territory; oil consumption is lawful and this decision will do nothing to affect or limit that consumption, save that it will mean that some of the oil we use will have to travel further to get here. Restrictions on the use made of oil may indeed be necessary for combatting climate change, but that is surely a matter of policy for the legislature.

Secondly, it is a massive extension of the ambit of EIA, and whilst climate campaigners will be celebrating, it will apply in any EIA (ie any substantial) development and no doubt provide very fertile ground for future argument before the courts as to what is and is not a 'downstream' effect, how that is to be measured and so on.

In his lead judgment Lord Leggatt said that oil was unique, and that this decision will not open these floodgates, but his discussion of this in the judgment itself shows that this is contentious.

The fact that in dissenting, Lord Sales took the opposite view underlines this. The reasoning would clearly apply to other fossil extraction such as coal, but it will apply with equally compelling force to new road and airport projects.

Logically, housebuilders are, for example, now going to have to consider the climate impacts not just of building houses but also of the occupation of the houses they are building - and assess what they are.

How much carbon is dwelling in a house going to contribute, between heating, lighting, repairs, acquisition of gadgets, use of cars and other transport?

Thirdly, it was a 3:2 decision following a 2:1 decision the other way in the court of appeal. Such a split is always unsatisfactory. In this case four lords of appeal agree with the decision and four disagree (and even then for different reasons), hardly a message of clarity on such an important matter.

Lord Sales gave a powerfully dissenting judgment in the Supreme Court, one that we suspect will eventually prevail, though it is going to take Parliament to legislate for it to do so. In words which will come to be quoted often, and which he himself borrowed from a decision of the Irish Supreme Court, this 'open ended interpretation of article 3(1) would mean that there were “hardly any limits but the sky”' when it comes to needing to consider downstream effects.

This comes at an inconvenient time for our incoming government; no major party wants to be seen to be anti-environment or pro-oil, but all are pro-growth and indeed their plans depend upon growth. This decision is firmly anti-growth; it will add complexity, cost, uncertainty and delay to any major project. Watch this space.

Read the Full Judgment

Key Contact

David Harries

David Harries

Partner | Head of Planning, Environmental, Energy and Regulatory Law

Under David’s leadership, Aaron & Partners’ energy practice has established itself as one of the leading niche players in the industry, with a reputation for high levels of expertise and an exceptionally cost-effective service.

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