People for the Plains Incorporated v Santos NSW - [2016] NSWLEC 93 - NSWLEC 2016 case summary — Zoe

NSWNSWLEC

People for the Plains Incorporated v Santos NSW

[2016] NSWLEC 93

Land and Environment Court (NSW)|2016-05-18|Before: Moore J, Mr J, Mr P

View original source

At a glance

Source facts

Court

Land and Environment Court (NSW)

Decision date

2016-05-18

Before

Moore J, Mr J, Mr P

Catchwords

193 CLR 72
152 ALR 83
72 ALJR 578 Taylor v The Owners of Strata Plan 11564 & Ors [2014] HCA 9

Source

Original judgment source is linked above.

Catchwords

193 CLR 72152 ALR 8372 ALJR 578 Taylor v The Owners of Strata Plan 11564 & Ors [2014] HCA 9

Judgment (16 paragraphs)

[1]

Introduction

I have earlier explained that I am satisfied that the commercial lucerne cropping activities proposed to be undertaken utilising the near drinking quality water capable of being drawn from the Leewood facility should be regarded as development for a purpose separate from and neither ancillary or subservient to petroleum prospecting. As a consequence, it is necessary to consider how this activity should be regarded in the context of the EP&A Act.

[2]

The requirement for beneficial water use

The use of water from the Leewood facility, in a beneficial fashion, has been mandated by condition that has been imposed pursuant to the PO Act. The power to impose such a condition derives from the provision in that Act which says: 6 Conditions of petroleum titles (1) … (2) Without limiting the generality of subclause (1), conditions imposed by the Minister or prescribed by the regulations may include conditions relating to the following: (a) …, (b) environmental management, protection and rehabilitation, including requiring the holder of the title: (i) to carry out activities or not to carry out activities in order to protect, prevent, control or mitigate harm to the environment, and …

Parties

Applicant/Plaintiff:

People for the Plains Incorporated

Respondent/Defendant:

Santos NSW

Cases Cited (7)

How much of these activities are "prospecting"

Initially, matters requiring determination arise from how various provisions of the PO Act are to be interpreted (including whether any expansive interpretation of any provision is required by the importation of implied words). Only after these matters have been considered does it then become potentially necessary to consider to what extent (if any) the Mining SEPP, the Infrastructure SEPP or the Narrabri LEP are to play any role in resolving the issues requiring resolution in these proceedings.
The first matter to be considered (a matter impacting on matters for further consideration in each of the proceedings here considered) is the extent to which any of the activities of (and works associated with) the Leewood facility can be characterised as being "prospecting" within the meaning of that term in the PO Act.
Characterisation of the Leewood facility and the operations associated with it (on both input and output sides) will determine whether or not it falls within the provision of cl 6(d) of the Mining SEPP, a provision in the following terms: 6 Development permissible without consent Development for any of the following purposes may be carried out without development consent: (a) …, (b) …, (c) …, (d) petroleum exploration, (e) ...
To the extent that the Leewood facility and any of the operations associated with it can be characterised as being for the purposes of prospecting and thus petroleum exploration, cl 6(d) acts to permit such facility and/or operations to be carried out without development consent.
The PO Act sets out what are the rights of holders of exploration licences and of assessment leases. For exploration licences, the rights are set out in s 29 of the Act, a provision in the following terms: 29 Rights of holders of exploration licences The holder of an exploration licence has the exclusive right, in accordance with the conditions of the licence, to prospect for petroleum on the land comprised in the licence.
For holders of assessment leases, the rights are set out in s 33 of the PO Act, a provision which reads: 33 Rights of holders of assessment leases The holder of an assessment lease has the exclusive right to prospect for petroleum and to assess any petroleum deposit on the land comprised in the lease.
These bundles of rights are relevant to what is permitted to the Santos interests for their activities on PEL 238 and PAL 2. The scope of the activities permitted by the right to prospect for petroleum are to be derived from the definition of "prospect" contained in s 3 of the PO Act. This term is defined as meaning: prospect means to carry out works on, or to remove samples from, land for the purpose of testing the quality and quantity of petroleum in the land and the potential to recover petroleum from the land, but does not include any activity declared by the regulations not to constitute prospecting.
There is no activity declared by the Petroleum (Onshore) Regulation 2007 not to constitute prospecting.
Petroleum exploration clearly falls within the concept of prospecting as a consequence of the definition in cl 3(2) of the Mining SEPP, a definition in the following terms: petroleum exploration means prospecting pursuant to an exploration licence, assessment lease or production lease under the Petroleum (Onshore) Act 1991 or exploration pursuant to an exploration permit, retention lease or production licence under the Petroleum (Submerged Lands) Act 1982.
To the extent to which the Leewood facility and its activities are to be characterised as falling within the purpose of prospecting/petroleum exploration, other aspects of matters advanced by the Applicant, in each of the proceedings, may fall away. It is only to the extent that any of those activities are not appropriately so characterised that other issues require consideration. This is because, as earlier observed, cl 6(d) of the Mining SEPP permits development for the purposes of petroleum exploration to be carried out without development consent.
The sole exception to this broad statement is that, to the extent that the activities that may be regarded as falling within prospecting are not to be carried out on PAL 2 (the petroleum title that is the location of the Leewood facility), the question will arise as to the extent which either s 33 of the PO Act should be construed so as to permit the facility on PAL 2 to operate as part of prospecting activities on either of the other petroleum titles held by the Santos interests whether produced water from those activities is proposed to be transported to and dealt with at the Leewood facility.
In this context, it is to be observed that Mr Mitchley deposed that: No water from the wells within PPL 3 has been or is proposed to be transferred to the ponds at Leewood. PPL 3 does not contain a well capable of producing water from a coal seam. No produced water from any petroleum production activities in PPL 3 will be stored or treated at the water treatment facility currently being constructed at Leewood as part of "Leewood Phase 2" without further approvals being obtained.
As consequence, all that requires consideration in these proceedings is the extent to which activities giving rise to produced water, being activities on either PEL 238 or PAL 2, are permitted to be carried out without development consent at or in conjunction with the Leewood facility.
The factual nature of the activities giving rise to significant volumes of produced water are described by Mr Mitchley in the following terms: Coal seam gas wells aim to extract the natural gas (methane) contained in underground coal seams. The coal seams in the Narrabri region that are targeted by coal seam gas exploration and appraisal wells within PEL 238 and PAL 2 are generally between 600 m and 1000 m below ground level. Coal seams can contain large volumes of water and natural gas. Pressure within the coal seam keeps the natural gas trapped, preventing the methane from naturally desorbing from the coal. To assess the potential or to recover methane from a coal seam in the Narrabri region, water must first be pumped out from the coal seam to reduce the pressure. Developing an understanding of the unique relationship between pressure reduction and the resulting natural gas flow from the coal seam over time is essential to assess commercial viability. The water removed from the coal seam is referred to as produced water. As part of the exploration and appraisal activities, the water is pumped from the coal seam by the drilling and operation of pilot wells. Both gas and produced water are brought up the well casing to the surface via pumps and into infrastructure known as a wellhead separator. At the wellhead separator the flow of gas and water is separated and fed into two separate systems of flow lines. One flow line is for the produced water and the other flow line is for the gas from the well. Generation of produced water is a necessary component of exploration and appraisal of coal seam gas. Any coal seam gas operation, whether it is in the exploration, appraisal or production stage will require infrastructure to store, treat and dispose of produced water from the coal seams.
It is to be recalled, as I have earlier noted, Mr Mitchley's evidence was not contested and he was not required for cross-examination.
In part, these proceedings require characterisation of some or all of the Leewood project activities and, depending on that characterisation, the appropriate construction to be given to a number of the provisions of the PO Act.
A proper understanding of what Mr Mitchley has set out (as quoted above) makes it clear that the elements of the Leewood project, from and including the wellhead separator through the infrastructure to and from the Leewood facility and as far as the centre pivot and subsurface irrigation structures for lucerne cropping comprise a significant suite of linked engineering works.
At one level, those works are potentially capable of being described in a series of disaggregated elements (and uses) in the fashion set out in the earlier reproduced extract of the June 2015 REF for the Leewood facility.
However, approaching the works, in this fashion, does not reflect the approach set out by Preston CJ in Chamwell Pty Ltd v Strathfield Council [2007] NSWLEC 114; 151 LGERA 400. As His Honour discussed in Chamwell, in planning law, a use must be for a purpose. His Honour observed, at [33]: The fact that the nature of the uses of different components or parts of the development may vary is not necessarily of importance.
After addressing, briefly the specific nature of the proposed development in that instance, His Honour continued: However, the nature of the use needs to be distinguished from the purpose of the use. Uses of different natures can still be seen to serve the same purpose.
After again returning to the specific, His Honour continued: The characterisation of the purpose of a use of land should be done at a level of generality which is necessary and sufficient to cover the individual activities, transactions or processes carried on, not in terms of the detailed activities, transactions or processes.
After further consideration of the specific development, His Honour said, finally, relevant to these proceedings: The characterisation of the purpose of development must also be done in a common sense and practical way.
It is clear, in the context of the broad approach to be derived from the general elements of Chamwell set out above that the water that is to be transported to and dealt with at the Leewood facility (at the least) is water that physically results from the activity of prospecting for petroleum or by the drilling and operation of pilot wells or assessment of what comes from them.
In this context, it matters not whether the prospecting is carried out pursuant to an exploration license (s 29) or an assessment lease (s 33). The water rises to the surface as a necessary physical element of the prospecting process. Having risen to the surface, that necessary by-product of part of the prospecting process is required to be dealt with in an environmentally appropriate fashion.
I have earlier set out nine specific elements discussed in the June 2015 REF for the Leewood facility as being within the scope proposed for the facility. To understand the conclusion I have reached with respect to which of those elements should be regarded as serving the purpose of prospecting as arising from the PO Act, it is appropriate to repeat those elements and identify them by number for the purpose of this discussion: 1. a water treatment plant, including pre-treatment and reverse osmosis plant 2. a brine treatment plant 3. a brine distribution manifold and associated piping, to allow water distribution into the water treatment plant and associated return flows to brine storage ponds 4. a treated water storage tank (five mega litre capacity) 5. irrigation of treated water at the Leewood property through a managed irrigation system (including a centre pivot and subsurface irrigation system) 6. the construction of (and the ability to operate) a treated water pipeline extending to the Leewood property boundary to transfer water to another location for irrigation by a third party (if required) 7. a small potable water treatment system for water extracted from the licensed bore 8. other associated infrastructure, including a gas pipeline to fuel the generators 9. amelioration of soils within the Leewood irrigation area by deep tillage, fertiliser, lime and gypsum in preparation for irrigation.
On a proper Chamwell analysis of the purpose to be served in dealing with the necessarily generated produced water from the exploration and/or assessment activities on PEL 238 and PAL 2, it seems to me that each of (1), (2), (3), (4), (6), (7) and (8) are uses that serve the purpose of petroleum prospecting or assessment.
I do, in this context, add the caveat that, for (6) the present construction of that pipeline can only be so regarded whilst it is merely the construction of such a pipeline for a potential, anticipated future use - identified by the parenthetical notation "(if required)". Should such future use actually be proposed, it may well be necessary to contemplate, consistent with the approach subsequently discussed concerning the commercial lucerne cropping activities on PAL 2, whether or not development consent might be required for the operation of that pipeline - depending on the purpose to be served by that operation.
Items (5) and (9) are matters not serving the purposes of prospecting and/or assessing petroleum resources and, as activities associated with the proposed commercial lucerne cropping activities on PAL 2 require separate later consideration.
Although there might well be a range of potential options to be considered for achieving that necessary outcome of the prospecting process, what is here involved is the activity selected by the Santos interests as being appropriate for that purpose.
Whether or not this has been driven by a mandated requirement put on the Santos interests that there be beneficial reuse attached to the produced water is, it seems to me, irrelevant to the characterisation process of the uses that have been selected to deal with this aspect of the prospecting and/or assessment processes whether under s 29 or s 33 of the PO Act.
Proper characterisation of these facilities (and their operation) up to and including the operation of the Leewood facility (but excluding the lucerne cropping activities) are appropriate to be regarded as being for the purpose of petroleum exploration prospecting.
That conclusion is relevant to both the transferred proceedings and to the LEC proceedings (albeit for different reasons) as discussed in the following sections of this judgment.

The transferred proceedings

I have earlier set out the terms of ss 29 and 33 of the PO Act. It is clear that, for the purposes of the Leewood facility and the associated activities within the scope of my earlier characterisation determination are necessarily compliant with the provisions of s 33 for utilisation of the Leewood facility for the treatment of any produced water generated from boreholes located on PAL 2 as the facility is on this lease.
However, the Applicant contends that this is not the position with respect to produced water generated from boreholes on PEL 238 and transported by pipe to the Leewood facility. This distinction, the Applicant says, arises because s 29 only applies to prospecting for petroleum "on the land comprised in the license". To the extent that activities on PEL 238 comprise prospecting (as I have earlier held), those activities must take place within that petroleum title and are not able to be transferred to another petroleum title held by the Santos interests.
The Applicant says, concomitantly with this, the rights of the holder of the assessment lease arising from the provisions of s 33 of the PO Act do not permit any carryover of prospecting activities on PEL 238 to PAL 2 as the statutory rights under the assessment lease are confined to prospecting for and/or assessment of petroleum deposits "on the land comprised in" that lease.
The Applicant says that produced water from prospecting activities on PEL 238, even though "on the land" for the purposes of land encompassed by PEL 238, cannot be regarded as being within the scope of that which is permitted by the assessment lease for PAL 2.
Both the Santos interests and the Secretary referred to the decision of the High Court in Cooper Brookes (Wollongong) Pty Limited v the Federal Commissioner of Taxation (1981) 147 CLR 297. Several passages in the reasons for decision in that case are relevant to my consideration of the approach to be taken to interpretation of the provisions of s 33 of the PO Act as earlier set out and whether it should be construed with the importation of words not in its express terms.
First, in the judgment of Gibbs CJ, his Honour said (at pp 304 and 305) the following: It is an elementary and fundamental principle that the object of the court, in interpreting a statute, "is to see what is the intention expressed by the words used": River Wear Commissioners v. Adamson (1877) 2 App Cas 743, at p 763. It is only by considering the meaning of the words used by the legislature that the court can ascertain its intention. And it is not unduly pedantic to begin with the assumption that words mean what they say: cf. Cody v. J. H. Nelson Pty. Ltd. (1947) 74 CLR 629, at p 648. Of course, no part of a statute can be considered in isolation from its context - the whole must be considered. If, when the section in question is read as part of the whole instrument, its meaning is clear and unambiguous, generally speaking "nothing remains but to give effect to the unqualified words": Metropolitan Gas Co v Federated Gas Employees' Industrial Union (1925) 35 CLR 449, at p 455 There are cases where the result of giving words their ordinary meaning may be so irrational that the court is forced to the conclusion that the draftsman has made a mistake, and the canons of construction are not so rigid as to prevent a realistic solution in such a case: see per Lord Reid in Connaught Fur Trimmings Ltd v Cramas Properties Ltd (1965) 1 WLR 892, at p 899; (1965) 2 All ER 382, at p 386 . Examples of that sort of case may be found in Maxwell on the Interpretation of Statutes, 12th ed, (1969), at p 228 et seq, and Craies on Statute Law, 7th ed, (1971), at p 520 et seq. However, if the language of a statutory provision is clear and unambiguous, and is consistent and harmonious with the other provisions of the enactment, and can be intelligibly applied to the subject matter with which it deals, it must be given its ordinary and grammatical meaning, even if it leads to a result that may seem inconvenient or unjust. To say this is not to insist on too literal an interpretation, or to deny that the court should seek the real intention of the legislature. The danger that lies in departing from the ordinary meaning of unambiguous provisions is that "it may degrade into mere judicial criticism of the propriety of the acts of the Legislature", as Lord Moulton said in Vacher & Sons Ltd. v. London Society of Compositors (1913) AC 107, at p 130 ; it may lead judges to put their own ideas of justice or social policy in place of the words of the statute. On the other hand, if two constructions are open, the court will obviously prefer that which will avoid what it considers to be inconvenience or injustice. Since language, read in its context, very often proves to be ambiguous, this last mentioned rule is one that not infrequently falls to be applied.

(1981) 147 CLR 297

(1947) 74 CLR 629

(1925) 35 CLR 449

(1937) 56 CLR 337

[1998] HCA 11

Cited By (2)

People for the Plains Incorporated v Santos NSW

The joint judgment of Mason and Wilson JJ relevantly said, commencing at p 320, the following: Generally speaking, mere inconvenience of result in itself is not a ground for departing from the natural and ordinary sense of the language read in its context. But there are cases in which inconvenience of result or improbability of result assists the court in concluding that an alternative construction which is reasonably open is to be preferred to the literal meaning because the alternative interpretation more closely conforms to the legislative intent discernible from other provisions in the statute. There is a similar problem with the related so-called "golden rule" of construction. There are statements of the rule which would confine the courts to the ordinary grammatical sense of the words used unless that produces an absurdity or inconsistency. It is to be noted that Dixon J. in Broken Hill South Ltd v Commissioner of Taxation (NSW) (1937) 56 CLR 337, at p 371 observed that departure from the ordinary grammatical sense is not legitimate unless there is "some obscurity or some inconsistency", though it may be that "obscurity" was intended to be a reference to "absurdity". For the reason already given in the discussion of the literal rule, departure from the ordinary grammatical sense cannot be restricted to cases of absurdity and inconsistency. In some cases in the past these rules of construction have been applied too rigidly. The fundamental object of statutory construction in every case is to ascertain the legislative intention by reference to the language of the instrument viewed as a whole. But in performing that task the courts look to the operation of the statute according to its terms and to legitimate aids to construction. The rules, as D. C. Pearce says in Statutory Interpretation, p 14, are no more than rules of common sense, designed to achieve this object. They are not rules of law. If the judge applies the literal rule it is because it gives emphasis to the factor which in the particular case he thinks is decisive. When he considers that the statute admits of no reasonable alternative construction it is because (a) the language is intractable or (b) although the language is not intractable, the operation of the statute, read literally, is not such as to indicate that it could not have been intended by the legislature. On the other hand, when the judge labels the operation of the statute as "absurd", "extraordinary", "capricious", "irrational" or "obscure" he assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions. Quite obviously questions of degree arise. If the choice is between two strongly competing interpretations, as we have said, the advantage may lie with that which produces the fairer and more convenient operation so long as it conforms to the legislative intention. If, however, one interpretation has a powerful advantage in ordinary meaning and grammatical sense, it will only be displaced if its operation is perceived to be unintended.

The plurality noted (at [39]) that these three conditions accorded with the statements of principle in Cooper Brookes earlier set out. The plurality also noted that: … the task remains the construction of the words the legislature has enacted. In this respect it may not be sufficient that the modified construction is reasonably open having regard to the statutory scheme because any modified meaning must be consistent with the language in fact used by the legislature.
However, a purposive approach, as I understand the position, may permissibly require incorporation of words if necessary to give effect to the intent of the legislation. It seems to me that this is here the case.
Although dissenting on the outcome in Taylor, the decision of Gageler and Keane JJ observed, relevant to the proposition of an expansive approach to construction, at [66]: Context more often reveals statutory text to be capable of a range of potential meanings, some of which may be less immediately obvious or more awkward than others, but none of which is wholly ungrammatical or unnatural. The choice between alternative meanings then turns less on linguistic fit than on evaluation of the relative coherence of the alternatives with identified statutory objects or policies.
It is in this broad context of statutory construction that I turn to address the question of whether or not the activity here proposed - which I have for the reasons earlier set out, should be regarded as prospecting (until the point of diversion of treated water for the purposes of lucerne crop production) - can only be undertaken with respect to produced water derived solely from the petroleum title upon which the Leewood facility is located. In considering this, as acknowledged in the written submissions on behalf of the Secretary: "It does not appear that there is any case dealing with the question whether the prospecting authorised by an exploration license or an assessment lease can extend to another petroleum title held by the titleholder."
As a consequence, as that element of the Secretary's written submissions continued: "Accordingly, the matter must be approached from first principles."
Doing so, I turn to the second approach advanced on behalf of the Secretary that an appropriate and permissible approach would be to read additional words into the sections to resolve the lacuna said to exist as a consequence of the conversion of elements of PEL 238, by excision, to form PAL 2 and PPL 3.
The example in the written submissions for the Secretary postulated that s 33, a provision that currently reads: The holder of an assessment lease has the exclusive right to prospect for petroleum and to assess any petroleum deposit on the land comprised in the lease. should be construed as if it read, with the addition of implied words in a fashion consistent with Cooper Brookes and Taylor, as follows: The holder of an assessment lease has the exclusive right to prospect for petroleum and to assess any petroleum deposit on the land comprised in the lease or any other petroleum title that permits prospecting or assessment held by the holder.
Consistent with the submissions made by Mr Johnson on such an interpretation, such an approach would be, in my view, entirely unnecessarily expansive as it would permit the aggregation for such purposes of a range of petroleum titles that did not currently have nor, in the past, had had any connection or relationship with each other.
It has always been my understanding that, when taking an expansionary approach to construction, the narrowest imported construction consistent with achieving what is perceived to be the underlying intention of the legislature is to be preferred to the adoption of a wider expansionary approach that might have consequences unnecessary to be addressed in the relevant instance.
The more appropriate course, consistent with the approach advanced on behalf of the Secretary, would be to address, in a purposive fashion, the fact that PEL 238 had previously encompassed, prior to its excision, the area of the other petroleum title here involved - PAL 2. In this context, it would be appropriate to adopt a limited but expansive approach (consistent with that endorsed by the High Court) with respect to the wording of s 33.
Adopting such an approach in the fashion endorsed by the High Court would be to have this section treated as reading, in a purposive fashion: The holder of an assessment lease has the exclusive right to prospect for petroleum on the land comprised in the lease and on the land of any exploration license from which the lease has been excised and to assess any petroleum deposit on the land comprised in the lease.
A construction of this nature, consistent with the approach advocated on behalf of the Secretary, but of a more restricted nature, would address the concerns expressed in the written submissions on behalf of the Santos's interests that: Adopting the literal construction of ss 3 and 33 of the PO Act contended for by the applicant would result in an unreasonable outcome, which the court should strive to avoid. On this interpretation, it would be necessary for a titleholder of adjacent petroleum titles carrying out petroleum exploration activities to construct separate facilities on each title to treat produced water from those activities on each separate title. In this case, in effect, in order to satisfy the conditions of PEL 238 and PAL2 regarding water treatment, this would require two separate water treatment plants and systems, each of which must only be on the land to which the relevant petroleum title relates. The rationale for that approach in terms of environmental protection is not apparent from the applicant's submissions; no such rationale, nor any other support, is to be found in the context or purpose of the PO Act.
It is unnecessary, for the purpose of resolving the issues in these proceedings to take as expansive a view as is that advanced on behalf of the Santos interests or by the Secretary. It is sufficient to take the approach that I have set out concerning a purposive interpretation of s 29 of the PO Act consistent with the approach permitted by Cooper Brookes and Taylor.
Although the more expansive position might potentially be considered to be correct, it is unnecessary for me to reach that conclusion in these proceedings and I decline to do so.
As a result, approaching the matter in this fashion and having proper regard to the fact that the land within PAL 2 had earlier been subject to but now excised from PEL 238, a narrower expanded reading of s 33 of the PO Act is to be preferred.
No further expansive reading is necessary in light of Mr Mitchley's evidence that no produced water from PPL 3 is to be transported to the Leewood facility.