On 20 June 2024, the UK Supreme Court delivered a landmark decision in the case of R (Finch) v Surrey County Council, requiring environmental impact assessments (EIAs) for oil and gas projects to include ‘scope 3’ or ‘downstream’ emissions.
This ruling is set to have significant implications for both onshore and offshore developments, potentially reshaping the approval process for major energy projects.
The case centred on a challenge to a development consent for an onshore oil and gas project in Surrey.
The key issue was whether the EIA should have considered emissions resulting from the eventual combustion of refined hydrocarbons produced by the development.
In a split 3-2 decision, the Supreme Court ruled that such ‘downstream’ emissions must be included in EIAs as “effects of the project” under the relevant onshore regulations.
This overturned previous rulings by the High Court and Court of Appeal, which had favoured a narrower interpretation.
The majority view hinged on the concept of causation. The court found a clear causal link between oil extraction and its “inevitable” combustion, constituting “the strongest form of causal connection.” This interpretation brings some ‘scope 3’ emissions firmly within the remit of EIAs for oil and gas developments.
Notably, the court distinguished between oil and other raw materials like steel, which can be transformed into various end products. The Supreme Court considered that oil undergoes minimal change during refinement and is ultimately used for a single purpose – combustion. This specificity strengthened the case for including downstream emissions in EIAs for fossil fuel extraction projects.
The ruling also clarified that geographic considerations should not limit the assessment of emissions. The court held that the impact of greenhouse gases on global warming is independent of where the emissions occur, necessitating their inclusion in the environmental assessment.
It is notable that the Supreme Court’s concern appears to have been directed in large part towards ensuring that the appropriate process was followed, and that full information was available to the public and decision-makers in assessing whether any particular project should be permitted to proceed, commenting that “You can only care about what you know about.”
The court acknowledged that the legislation does not prevent the authority from giving consent for projects which will cause harm to the environment, but must do so with full knowledge of that cost.
This ruling is likely to have significant consequences for the oil and gas industry. Companies applying for planning permission for hydrocarbon extraction projects will need to carefully consider and quantify downstream emissions in their EIA processes.
Its first effects can already be observed with reports of impacts on other onshore developments that were facing similar challenges to the ones made in Finch.
The broader implications of the judgment beyond the energy sector are less clear. While the court drew a distinction between oil and gas extraction and other industries, the principles established may influence EIA requirements across various sectors.
The government’s response to this ruling will be crucial. With ongoing consultations on replacing EIAs with a more streamlined system of environmental outcomes reports (EORs), it remains to be seen how the principles established in this case will be incorporated into any new regulatory framework.
The oil and gas industry in the UK is also grappling with fiscal uncertainties such as the extended Energy Profits Levy and the announcements of the newly elected Labour government to remove investment allowances and issue no new offshore licences.
This ruling adds another layer of complexity to project planning and valuation and may further impact investor confidence risking project delays or reassessments.
As the UK continues to balance its net-zero ambitions with energy security concerns, this Supreme Court decision marks a significant shift in how environmental impacts are assessed and considered in the planning process.
As always in the aftermath of a landmark decision, the full effects of a ruling will only be fully visible with the benefit of time, but it underscores the growing importance of comprehensive emissions assessments and reporting in the energy sector and beyond.
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