Nov 2007

Not surprisingly climate change, renewable energy and CO2 emissions have been contentious issues under the RMA. The debate was further fuelled by the Resource Management (Energy and Climate Change) Amendment Act 2004 (2004 Amendment). Starting with the position prior to the 2004 Amendment, this FYI discusses the current situation, recent case law developments, and the implications of the development in 2008 of a National Policy Statement on renewable electricity generation.

The position prior to the 2004 Amendment

In two cases decided in September 2002, the Environment Court confirmed that the global effects of greenhouse gas emissions could be considered under the RMA when consent authorities consider applications to discharge to air (Environmental Defence Society (Inc) v Taranaki Regional Council A184/02 and Environmental Defence Society (Inc) v Auckland Regional Council [2002] 11 NZRMA 492). Both decisions concerned appeals where the imposition of consent conditions was sought by the appellant to offset the "enhanced greenhouse effects " caused by the discharge of emissions that would be unavoidably emitted from proposed combined cycle power stations burning natural gas to make electricity.

In the Auckland Regional Council case, the Court could find nothing in the wording of the relevant provisions of the Act which could limit the application of consideration of effects to within the boundaries of a regional council. In both decisions, however, the Court observed that climate change is an international issue that should be dealt with consistently at a national level, rather than at a regional level or through the resource consent process. It was of the view that this would ensure a consistent approach and guarantee an efficiency that
is compatible with achieving the best environmental, social and economic outcomes. (In each case consent was granted without conditions requiring CO₂ emissions to be minimised.)

The effect of the 2004 Amendment

With the ratification of the Kyoto Protocol and the national nature of Government's newly announced Emissions Trading Scheme (ETS), the issue arises as to the role of local government in addressing climate change. In 2004 Parliament inserted provisions into the RMA limiting local authorities' ability to consider climate change under the RMA because Government planned to deal with carbon emissions with a carbon tax. Subsequently Government dropped the carbon tax proposal and replaced it with the ETS.

The 2004 Amendment clarified the responsibilities of local and central government in relation to the control of greenhouse gas  missions and the fulfilment of obligations under the Kyoto Protocol. Key amendments to the RMA included adding additional considerations that decisionmakers must have "particular regard to":

• the efficiency of the end use of energy;
• the effects of climate change; and
• the benefits to be derived from the use and development of renewable energy.

The key provision inserted by the 2004 Amendment limiting consideration of climate change was a new s104E:

Applications relating to the discharge of greenhouse gases

When considering an application for a discharge permit or coastal permit to do something that would otherwise contravene section 15 or section 15B relating to the discharge into air of greenhouse gases, a consent authority must not have regard to the effects of such a discharge on climate change, except to the extent that the use and development of renewable energy enables a reduction in the discharge into air of greenhouse gases, either –

(a) in absolute terms; or
(b) relative to the use and development of nonrenewable
energy.

Recent case law

The meaning of s104E was recently considered by the High Court in Greenpeace New Zealand v Northland Regional Council [2007] NZRMA 87 (HC). In that case, Mighty River Power was granted consent by the Northland Regional Council to commission its unused facilities at Marsden Point (Marsden B), as a coal-fired power station. The independent panel appointed by the Council concluded that it could not consider climate change.

Greenpeace appealed to the Environment Court against the granting of that consent, but Mighty River applied to that Court to have the appeal struck out so far as it sought to consider climate change. Mighty River argued that because the consent did not involve the use of renewable energy, the s104E exception was inapplicable. It argued that this interpretation was supported by the purpose of the 2004
Amendment, which was to remove considerations of climate change at a local level to allow Government to control the issue nationally.

The Environment Court agreed with Mighty River, holding that the effects of discharges on climate change could only be considered in the context of applications to use or develop renewable energy sources. Greenpeace subsequently appealed that decision to strike out those parts of its Environment Court appeal.

Greenpeace submitted to the High Court that the s104E exception applies to all resource consent applications that involve a discharge of contaminants and harmful substances into the environment regardless of whether the applications are for renewable or nonrenewable projects. Greenpeace argued there is no justification to limit the section to renewable e n e r g y p r o j e c t s , particularly in light of the new mandatory factors that must be taken into account in relation to resource consent applications.

In the High Court, Justice Williams allowed Greenpeace's appeal against the strike out. He confirmed that the effects of greenhouse gas emissions on climate change are to be considered by regional councils in a limited manner.

After concluding that a reduction in greenhouse gas discharges through the use and development of renewable energy was a relevant matter for the consent authority to consider in any application involving discharges of greenhouse gases to air, the Court concluded that:

"If the application for a discharge permit which otherwise qualifies under section 104E includes no proposal which, if consented to and built, would enable a "reduction in the discharge into air of greenhouse gases" by the "use and development of renewable energy" then that, too, is a factor the consent authority is entitled to take into account in deciding whether to exercise its discretion and grant consent.

… [The s104E exception] provisions give the consent authority power to balance a proposal involving the "use and development of renewable energy" which "enables a reduction in the discharge of greenhouse gases" against the proposal itself which must involve
the "use and development of non-renewable energy" …

… section [104E] enables the consent authority to balance that proposed activity alongside any proposal by the applicant which would effect "reduction in the discharge of greenhouse gases" by an activity which involves the "use and development of renewable energy… relative to the use and development of nonrenewable energy" and to that extent to have regard to climate change."

The effect of these passages (and indeed the decision) is not entirely clear. However, it seems that the Court was of the view that even when an application does not involve renewable energy or reduction in greenhouse gas discharges (as was the case here), the consent authority is not precluded from balancing the discharge proposal against other possible alternatives that may result in a "reduction in the discharge into air of greenhouse gases " by way of the "use and development of renewable energy ". It seems that the Court was of the view that this includes alternatives which may be available even if not to the applicant itself.

Following Justice Williams' decision, Mighty River filed an appeal to the Court of Appeal but it was withdrawn when Mighty River abandoned the Marsden B proposal earlier this year (the Environment Court appeal on the merits did not proceed). However, separate proceedings were subsequently filed by Genesis Energy seeking a declaration that, if granted, will have the effect of reversing the High Court decision.

Court of Appeal declaration

Genesis has a proposal for a gas-fired electricity power station in Rodney. Genesis has asked the Court of Appeal to declare that when a permit to discharge greenhouse gases is sought and the project does not involve renewable energy, that consenting authorities must not consider the effects of greenhouse gases on climate change, and that the benefits of renewable energy and climate protection are not relevant considerations. It also seeks a declaration that regional councils may not make rules that have regard to climate change.

The Auckland Regional Council has joined the proceedings, asserting that national standards on climate change are required to provide guidance to consenting authorities dealing with climate change issues. The ARC is arguing that at present, the absence of these national standards has left a regulatory gap, given that the responsibility for restricting emissions causing climate change has been removed from local authorities. The hearing took place in mid-October and we are awaiting the decision.

Also awaiting the decision is Parliament's Local Government and Environment Select Committee which has delayed the progression of the Green Party's Resource Management (Climate Protection) Amendment Bill until after the case has been decided. The Bill aims to return to regional councils the powers that were removed in 2004. That is, to take climate change into account when considering air discharge permits and when formulating rules in regional plans.

New Zealand Energy Strategy

Government announced in the recent New Zealand Energy Strategy (NZES) launched on 11 October that a National Policy Statement (NPS) under the RMA on renewable electricity generation will be developed in 2008 to give guidance to local authorities when considering energy generation permit applications. Councils have to incorporate a NPS in their regional policy statements and regional and district plans, and must consider a NPS when deciding whether to grant consent applications.

The NPS could be developed for specific types of renewable generation, such as wind and geothermal, and reviewed later to include marine energy, hydro or biomass. The NZES effectively bans new baseload fossil fuel generation investment for the next ten years. The ban is not absolute in that a new gas, oil or coal-fired station may be permitted if it deemed necessary by the Electricity Commission to maintain the security of the country's power supply, but for ordinary growth baseload capacity, new generation opportunities will be
restricted to water, wind, tidal or other renewable resources.

This newsletter is produced by Simpson Grierson. It is intended to provide general information in summary form. The contents do not
constitute legal advice and should not be relied on as such. Specialist legal advice should be sought in particular matters.