What did the Court of Appeal find?
The New South Wales Court of Appeal has held in Macquarie Generation v Hodgson [2011] NSWCA 424 that there is no implied condition in Macquarie Generation's environment protection licence issued under the Protection of Environment and Operations Act 1997 (POEO Act) to limit the total amount of CO2 to be emitted into the atmosphere.
This judgment overturns Pain J's decision in the New South Wales Land and Environment Court, Gray and Anor v Macquarie Generation (No. 3) [2011] NSWLEC 3, where her Honour held that the Applicant could bring a claim that:
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Macquarie Generation's licence to burn coal was subject to an implied condition which limited its emissions of CO2; and
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the implied condition, in turn, restrained Macquarie Generation from emitting an amount of CO2 which has harmed or is likely to harm the environment, in contravention of section 115(1) of the POEO Act.
Why did the Court of Appeal find against an implied condition?
The Court of Appeal held that the same test for implying an ad hoc term in a contract also applies to implying conditions in a pollution licence.
A five-fold test should be applied for deciding whether a term should be implied. The implied term must:
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be reasonable and equitable;
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be necessary;
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be so obvious that 'it goes without saying';
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be clear; and
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not contradict any express term of the contract.
The Court of Appeal held that, in this case, the implied condition in contention would actually contradict the licence issued to Macquarie Generation since the licence was one entitling it to burn coal.
The Court of Appeal also rejected the Applicant's argument that the POEO Act automatically incorporated an Environmental Impact Statement (EIS) for a project into the licence. The Court held that the extent of the Environmental Protection Authority's (EPA) duty was to take the EIS into account and that the decision not to incorporate the EIS into the licence was one for the EPA and not for the Court.
Is carbon dioxide a "waste" for the purposes of the POEO Act?
Pain J refrained from summarily dismissing the argument that CO2 emitted by Macquarie Generation was a "waste" under section 115(1) of the POEO Act.
The Court of Appeal decision left open the question of whether CO2 is a "waste" for the purposes of section 115(1) of the POEO Act. The Court held that their rejection of the implied condition meant that they did not have to answer this question.
There is still some uncertainty, then, on whether CO2 is likely to be found to be a "waste" in future proceedings.
Implications of the Court of Appeal Decision
The Court of Appeal's decision provides some certainty to all holders of pollution licences that conditions and limitations on such licences won't be arbitrarily implied. Whether CO2 may be found to constitute a "waste" for the purposes of section 115(1) of the POEO Act in future remains a live question.
