Ulan Coal Mines Limited v Minister for Planning and Moolarben Coal Mines Pty Limited

CITATION : Ulan Coal Mines Limited v Minister for Planning and Moolarben Coal Mines Pty Limited [2008] NSWLEC 185

Anderson v Minister for Infrastructure, Planning and Natural Resources (2006) 151 LGERA 229 Belmorgan Property Development Pty Ltd v GPT Re Ltd & Anor (2007) 153 LGERA 450 Cann's Pty Ltd v Commonwealth (1946) 71 CLR 210 Environment Protection Authority v Ballina Shire Council (2006) 148 LGERA 278 Genkem Pty Ltd v Environment Protection Authority (1994) 35 NSWLR 33; 85 LGERA 197 GPT Re Limited v Wollongong City Council (2006) 151 LGERA 116 Hurstville City Council v Renaldo Plus 3 Pty Ltd [2006] NSWCA 248 (8 September 2006) Kindimindi Investments Pty Ltd v Lane Cove Council (2006) 143 LGERA 277 CASES CITED: King Gee Clothing Co Pty Ltd v Commonwealth (1945) 71 CLR 184 Mid Western Community Action Group Inc v Mid-Western Regional Council & Stockland Development Pty Ltd [2007] NSWLEC 411 (18 July 2007) Mison v Randwick Municipal Council (1991) 23 NSWLR 734 Qiu v Minister for Immigration and Ethnic Affairs (1994) 55 FCR 439 Scott v Wollongong City Council (1992) 75 LGRA 112 Telstra Corp Ltd v Hornsby Shire Council (2006) 67 NSWLR 256; 146 LGERA 10 Transport Action Group Against Motorways v Roads and Traffic Authority (1999) 46 NSWLR 598 Warehouse Group (Australia) Pty Ltd v Woolworths Ltd (2005) 141 LGERA 376 Westfield Management Ltd v Perpetual Trustee Company Ltd [2006] NSWCA 245 (8 September 2006) Winn v Director-General of National Parks and Wildlife (2001) 130 LGERA 508

(c) Potential for significantly different project as a result of adjustment : Ulan submits that by Condition 29 requiring that the size and scope of the mine be limited by reference to such water as may be available, the approval is of a potentially different mine to that described in the Environmental Assessment accompanying the application and Condition 6 of the approval. A lack of water may result in the proponent not carrying out key components of the Project such as one or more of the three open cut mines or the underground mine. A project with some of the mines is a significantly different development to a project with all four mines. A mine which does not extract up to the maximum tonnage of coal from the four mines fixed by condition 6, and hence, not employ the expected number of people or produce the expected revenue for the State based on the above, is also a significantly different development (paragraphs 32 and 33 of Ulan's written pre-hearing submissions and paragraphs 15-19 of Ulan Supplementary Written Submissions on significantly different development). 45 Ulan developed its arguments in both written submissions (pre-hearing and supplementary at the hearing) and oral submissions. 46 Ulan relies on the principles expounded in Mison v Randwick Municipal Council (1991) 23 NSWLR 734 and subsequent consideration of these principles in Winn v Director-General of National Parks and Wildlife (2001) 130 LGERA 508, Kindimindi Investments Pty Ltd v Lane Cove Council (2006) 143 LGERA 277 and MidWestern Community Action Group Inc v Mid-Western Regional Council & Stockland Development Pty Ltd [2007] NSWLEC 411 (18 July 2007). 47 The Minister and Moolarben contest: Ulan's construction of Condition 29; that Condition 29 is uncertain, or lacking finality, or might result in a significantly different project to that for which approval was sought; and that the Condition 29 is outside the power under s 75J of the Act. They have provided written submissions (pre-hearing and at the hearing) and oral submissions. 48 I consider Ulan has not established that Condition 29 is outside power, and hence invalid, on the grounds of lack of certainty or finality or may result in a significantly different development to that for which approval was sought. 49 At the outset, it should be noted that there is no common law principle that an exercise of statutory power must be certain or final in order to be valid: see King Gee Clothing Co Pty Ltd v Commonwealth (1945) 71 CLR 184 at 194-195; Cann's Pty Ltd v Commonwealth (1946) 71 CLR 210 at 227-228; Qiu v Minister for Immigration and Ethnic Affairs (1994) 55 FCR 439 at 447; Genkem Pty Ltd v Environment Protection Authority (1994) 35 NSWLR 33 at 42; 85 LGERA 197 at 205 and Winn v Director-General of National Parks and Wildlife (2001) 130 LGERA 508 at 514 [12]. 50 Rather, a condition will only be invalid, by lacking certainty or finality, if it falls outside the class of conditions which the statute expressly or impliedly permits: Winn v Director-General of National Parks and Wildlife (2001) 130 LGERA 508 at 514 [12]-[15], 519 [34]-[36]; Warehouse Group (Australia) Pty Ltd v Woolworths Ltd (2005) 141 LGERA 376 at 412 [89]; Kindimindi Investments Pty Ltd v Lane Cove Council (2006) 143 LGERA 277 at 292 [55], [57]; GPT Re Limited v Wollongong City Council (2006) 151 LGERA 116 at 146 [90] (appeal dismissed sub nom Belmorgan Property Development Pty Ltd v GPT Re Ltd & Anor (2007) 153 LGERA 450) and Hurstville City Council v Renaldo Plus 3 Pty Ltd [2006] NSWCA 248 (8 September 2006) at [89]-[90]. Where a condition does fall outside what the statute permits, the purported approval is not an approval under the statute at all (assuming the condition is not severable). 51 The relevant question in this case, therefore, is whether Condition 29 falls outside the power to impose conditions that s 75J of the Act expressly or impliedly permits. This involves construction of the section and its application to the circumstances of this particular Project: see Winn v Director-General of National Parks and Wildlife (2001) 130 LGERA 508 at 514 [12], 519 [34]-[36]. 52 In this case, Ulan submits that the condition does fall outside the power to impose conditions for the three reasons I have set out earlier, namely internal illogicality, lack of certainty as to the extent of adjustment of mining operations permitted, and the potentiality for the project to be significantly different from that for which approval was sought and granted. 53 As to the first reason, internal illogicality, Ulan's challenge that Condition 29 is illogical in its terms is not made out on a proper construction of Condition 29. Ulan's argument of illogicality depends on, first, the first phrase in Condition 29 ("the proponent must ensure that it has sufficient water for all stages of the project") mandating that the proponent operate at the maximum levels of production permitted by Condition 6 of the approval for all stages of the Project with the concomitant scale of mining operations that production at these levels entails, and, secondly, that the second phrase of Condition 29 ("and if necessary adjust the scale of mining operations to match its water supply") mandating that the proponent adopt this means of ensuring it has sufficient water for the Project. Only then could the condition require both production at maximum scale and also adjustment to a lesser scale, which is said by Ulan to be the illogicality. Neither construction is sustainable. 54 The first phrase of Condition 29 does not mandate that the proponent carry out the Project at any particular scale of mining operations. Condition 6 does fix maximum annual levels of production for the four mines and production at these levels would necessarily involve particular scales of mining operations, but there is no requirement that the proponent produce at those maximum levels and nothing less; that is to say, Condition 6 sets, for each year, ceilings, but not floors, for production and, hence, scale of mining operations. Furthermore, other aspects of the approval establish that no minimum level of production is required. At the maximum rates permitted by Condition 6, Moolarben would have to extract 8 x 21 = 168 Mt from the open-cut mines, plus 4 x 21 = 84 Mt from the underground mine, making 252 Mt. The total resource is only 125 Mt. Therefore, Moolarben could not extract at the maximum annual levels permitted for the life of the project. This is shown in the Director-General's report where he summarised the sequence of open-cut mines completing in year 12 and the underground mine completing in year 16 (p 3). 55 Further, there has been a deliberate decision by Moolarben not to mine Open Cut 1 at its maximum rate so that noise and air quality constraints are met. This is set out in the Environment Assessment accompanying the application: "Open Cut 1 has been restricted in operations to 7 Mtpa for the first three years of mining to ensure noise and air quality criteria for the village of Ulan are not breached": p S4-28. 56 Condition 29 also does not mandate that the proponent produce at the maximum annual level for all stages of the Project. The proponent is at liberty to carry out mining operations at a scale that results in production at lesser levels than the annual maximum levels fixed by Condition 6 if it so chooses. 57 The first phrase in Condition 29 is, in fact, an outcome or objective that the Project must achieve. The Condition does not specify all of the various means by which the proponent might achieve this outcome. That is left to the proponent to determine. 58 The most commercially attractive means for Moolarben is to secure a water supply adequate to meet production. If the inflows and bore water flows are as predicted by the model MC 1.6, there will be adequate water supplies even at peak production. If there is not - and the monitoring required by conditions of approval may give advance notice of this - Moolarben must secure water from other sources. The September 2006 Dundon Report contemplated that one other source of water could be other water supply pumping bores that could be located at other sites around the perimeter of the underground mine or in aquifers along Murragamba Valley, down-dip from Moolarben's three open cut mines. Alternatively, Moolarben could endeavour to reach agreement with the Ulan or Wilpinjong mines to obtain water. The fact that Ulan currently has expressed opposition to supplying water to Moolarben does not foreclose the option in the future, perhaps many years later. Further, there is still the Wilpinjong mine as a possible source of water. 59 If, however, additional water supplies cannot be obtained to match the water demand at any particular level of production and scale of mining operations, it would be necessary for Moolarben to reduce the demand for water by a sufficient amount to match the available water supply. 60 The distribution of water demand shows that the two greatest causes of demand are coal handling and preparation (1,000 ML/year) and dust suppression across the open cut and mine infrastructure areas (600 ML/year). A reduction in production by scaling down open cut production, and hence the volume of coal needing to be handled and prepared, can reduce the water demand. Similarly, reducing production in the underground mine (which uses 425 ML/year) will also reduce the volume of coal needing to be handled and prepared. 61 A reduction in production in the open cut mines, and in the underground mine, and a consequential reduction in the volume of coal handled and prepared, is sensibly described as an adjustment in the scale of mining operations. 62 The second phrase of Condition 29, therefore, is merely a specification of one of the means of achieving the outcome or objective specified in the first phrase of Condition 29. That means would only be necessary if other means, notably securing additional water supplies, are not able to be achieved - a fact recognised by the prefatory words in the second phrase "if necessary". 63 Once it is recognised that condition 29 (and indeed no other condition of the approval) requires Moolarben to operate at the maximum scale permitted and that Condition 29 does not mandate that the only means by which Moolarben can balance water supply and demand is to adjust the scale of operations, no illogicality arises. 64 Properly construed, Condition 29 is both logical and responsive to the issue of water supply availability. 65 As to the second reason Ulan advances, namely the lack of certainty as to what might be required to adjust the scale of mining operations to match its water supply, Ulan submits that the words "scale of mining operations" are ambiguous and uncertain. 66 Mere ambiguity or uncertainty of the meaning of words does not necessarily lead to invalidity. Courts try to avoid uncertainty by adopting a construction which gives statutory instruments and decisions practical effect: see, for example, Westfield Management Ltd v Perpetual Trustee Company Ltd [2006] NSWCA 245 (8 September 2006) at [36]-[40] (special leave to appeal was refused but with a qualification on proper approach to construction of conditions: Westfield Management Ltd v Perpetual Trustee Co Ltd [2007] HCA Trans 367 (1 August 2007), p 23), Anderson v Minister for Infrastructure, Planning and Natural Resources (2006) 151 LGERA 229 at 258 [82] and MidWestern Community Action Group Inc v Mid-Western Regional Council and Stockland Development Pty Ltd [2007] NSWLEC 411 (18 July 2007) at [23]. 67 In this case, construction of condition 29 is assisted by the definitions in the approval. The first phrase in condition 29 refers to "the project". That term is defined to be the development described in the Environmental Assessment. It includes the three open cut mines and the underground mine and the associated mine infrastructure. The second phrase in condition 29 refers to "mining operations". That term is defined to include "all coal extraction, processing, and transportation activities carried out on site". 68 The structure of the condition is that the first phrase fixes the principal obligation, while the second phrase fixes a subordinate obligation. Hence, the reference in the second phrase to mining operations must be seen to be those involved in carrying out the project referred to in the first phrase. 69 Hence, an adjustment of the scale of mining operations cannot cause an adjustment of the Project as defined. 70 In the context of the water supply issue, an adjustment of the scale of mining operations refers to those adjustments to aspects of mining operations which create demand for water, such as the production of coal from the open cut mines and underground mine and the handling and preparation of coal so produced. A reduction in production and in the volume of coal handled and prepared involves an adjustment of the scale of mining operations. 71 The words "adjust the scale of mining operations" do not permit the carrying out of mining operations exceeding or otherwise in breach of the permissible outer parameters of what is the project, as defined by the approval and set by the conditions, particularly Conditions 2, 5 and 6 of Schedule 2. They simply allow the carrying out of mining operations within, but not exceeding, those parameters. 72 This construction of Condition 29 is consistent with the admonition that courts should adopt a construction which gives statutory instruments and decisions practical effect by avoiding uncertainty. 73 Ulan also argues that Condition 29 is uncertain because it does not specify the precise way in which Moolarben must adjust its mining operations, that is to say, specify the parameters governing any adjustment. 74 However, the power to grant approval on conditions in s 75J of the Act, neither expressly nor impliedly requires, in order for a condition to be valid, that a condition set the parameters for adjustment of a project to achieve an outcome or an objective specified in the conditions. The power to impose conditions on an approval under Part 3A of the Act is not confined in the manner specified for conditions of development consent under Part 4 of the Act (see sections 80 and 80A of the Act). The power to grant approval under s 75J is expressly stated to be able to be exercised, first, "with such modifications of the project" and, secondly, "on such conditions", as the Minister may determine in both cases. 75 Clearly, the power to impose conditions on an approval under Part 3A is wide. There is no warrant to read that power down by imposing the limitation argued by Ulan that parameters of any adjustment to the Project to meet any outcome or objective specified, must also be specified. 76 In these circumstances, the failure of Condition 29 to specify the permissible parameters for adjustment of the scale of mining operations does not cause the Condition to be outside the class of conditions which s 75J permits. 77 Moreover, Ulan's argument that without such specification of parameters, there is legally unacceptable uncertainty, is not established. Questions of degree are always involved in determining whether a condition is sufficiently uncertain so as to be outside power: Transport Action Group Against Motorways v Roads and Traffic Authority (1999) 46 NSWLR 598 at 629 [117]. 78 Retention of practical flexibility, leaving matters of detail for later determination, and delegation of supervision of some stage or aspect of the development, may all be desirable and be in accordance with the statutory scheme: see Scott v Wollongong City Council (1992) 75 LGRA 112 at 118; Transport Action Group Against Motorways v Roads and Traffic Authority (1999) 46 NSWLR 598 at 629 [117] - 630 [122]; Kindimindi Investments Pty Ltd v Lane Cove Council (2006) 143 LGERA 277 at 292 [55] and Hurstville City Council v Renaldo Plus 3 Pty Limited [2006] NSWCA 248 (8 September 2006) at [89]. 79 In this case, leaving a choice of the means by which the outcome or objective of ensuring sufficient water for all stages of the project is to be met, to the proponent, including the nature and extent of adjustments that should be made, cannot be said to be outside the statutory scheme of Part 3A of the Act and in particular the power under s 75J to grant approval subject to conditions. 80 The scale of the projects subject to approval under Part 3A, which are often complex, extensive and multi-stage projects, make the retention of such flexibility appropriate and inevitable, a point also made in relation to other large scale projects under Part 5 of the Act (see Transport Action Group Against Motorways v Roads and Traffic Authority (1999) 46 NSWLR 598 at 630 [124] - 631 [125]) and under Part 4 (see Kindimindi Investments Pty Ltd v Lane Cove Council (2006) 143 LGERA 277 at 292 [54]). 81 It must also be remembered that any adjustments to mining operations that might be made pursuant to Condition 29 cannot cause the project to depart from the essential outer parameters set by the definition of the project and the other conditions of the approval, notably Conditions 2, 5 and 6 in Schedule 2 of the approval. 82 As to the third reason Ulan advances, namely that the project might be significantly different to that for which approval was sought, there are two responses, one factual and the other legal. 83 The factual response is that adjustment of the scale of mining operations, so as to operate at less than the maximum production permitted by Conditions 2 and 6, does not effect a significantly different development to that for which approval was sought. 84 Ulan's argument again depends on an assumption that the project for which approval was sought was one that mandated production at the maximum annual levels prescribed, with the concomitant scale of mining operations that production at the maximum annual levels would involve. Only if this assumption is made can Ulan sustain its argument that production at lower annual levels, with a concomitant reduction in the scale of mining operations, involves a different project - the applied for project with maximum prescribed production and concomitant scale of mining operations and the different, adjusted project with lower production and concomitant reduced scale of mining operations. 85 However, Ulan's assumption is factually incorrect. Nowhere in the application or accompanying documents, including the project description, is there an articulation that the project will only ever operate at the maximum levels of production, with the concomitant scale of mining operations and never at any lesser levels or scale. A degree of flexibility was inherent in the description of the proposal and its staging. 86 Hence, the possibility that, if available water supply at any stage of the Project is less than the water demand of the Project at that stage, it might be necessary to adjust the scale of mining operations to reduce the water demand to match the available water supply, does not result in a different project, let alone a significantly different project, to that for which approval was sought. 87 This factual response to Ulan's argument is encapsulated in the following extract in the written submissions of the Minister: "The Water Supply Condition does not have the effect of deferring or delegating the approval of any aspect of the Project. Nor does the Water Supply Condition have the effect of significantly altering the development for which approval was sought. As noted above, the condition does no more than reflect the commercial and practical reality which was inherent in the Project from the time of the application - that Moolarben would need to obtain sufficient water for its proposed mining operations and, if necessary, would have to adjust the scale of its mining operations to reflect the available water at any given time. This contingency was implicitly acknowledged by Moorlarben in its preliminary assessment which accompanied the Pt 3A application and which described Moolarben's strategy for managing groundwater and surface water issues relating to the Project. The application was not for a fixed, precise program of operations and no such application could plausibly be made in respect of a 21-year mining project involving 4 mines. Variation in the scale of operations from time to time, whether because of water supply or any of the other variables affecting mining operations, was always a feature of the application for approval. To the extent that the Water Supply Condition contemplated adjustments to the scale of the mining operations arising because of issues with water supply, this was entirely in keeping with the development as described in the Project. The Water Supply Condition does nothing to alter the character of the development for which approval was sought. Adjustments in the scale of mining operations from time to time will be a matter of degree only. Moreover, given the cap on annual extractions, any adjustment will reduce the environmental impact of the mine. Such adjustments cannot be said to produce a project which 'might bear no sensible comparison to' the project described in the application, as Ulan submits (at paragraph 43). Ulan's suggestion that the condition prescribed a significantly altered development is unsustainable": para 24 of the Minister's submissions. 88 The legal response to Ulan's argument that Condition 29 may result in a significantly different project is that this will only be legally relevant if to do so would take Condition 29 outside power. As noted above, s 75J(4) of the Act expressly empowers the Minister to approve a project "with such modifications of the project…as the Minister may determine". 89 The Minister had power to approve Moorlarben's project with such modifications as the Minister might determine. The project approved by the Minister is not only that specified in Condition 2 and 6, but also the other conditions of approval which might modify the project, including Condition 29. 90 Hence, if Condition 29 could result in the proponent carrying out different mining operations under the Project at a lesser scale, such as by not proceeding with one mine (a construction I have rejected), this could still be said to be a modification of the project. It would therefore be within power. 91 Accordingly, Ulan has not made out its challenge to the validity of Condition 29 on the grounds that the Condition lacks certainty and finality and would result in a significantly different development to that for which approval was sought. Ulan's challenge to approval as manifestly unreasonable 92 Ulan contends that "the combination of the uncertainty of the water supply for [the Project], leading to and coupled with the acknowledgment that a condition as imprecise and uncertain as Condition 29 was needed to prop up the Part 3A Approval, more than adequately demonstrates that the decision to grant the Part 3A Approval here was a decision that falls within all recognised formula for Wednesbury unreasonableness": para 47 of Ulan's written pre-hearing submissions. 93 I have held that Condition 29 is not so imprecise or uncertain as to be outside power. This removes the second limb of Ulan's argument that the exercise of power to grant approval was manifestly unreasonable. 94 As to the first limb, namely the uncertainty of the water supply, it cannot be said that no reasonable person in the position of the Minister could have granted an approval for the Project having regard to the uncertainty of the water supply. 95 First, the mere existence of uncertainty is not a bar to an administrative decision-maker making a decision to issue an approval for a project. At a basic level, there will always be uncertainty in environmental impact assessment. By its nature, environmental impact assessment involves a prediction of likely future impacts of a project that has not yet occurred on an environment about which there will invariably be imperfect knowledge. Where the environment is to a large extent hidden, such as underground strata and aquifers, the uncertainty is necessarily heightened. Nevertheless, decisions need to be made. The question is whether there is sufficient, credible information upon which to assess the impacts of a project and make a decision. That is a factual question for the decision-maker to answer. 96 Secondly, the degree of uncertainty about water supply was, in the end, not as extreme as Ulan suggests. Through the process of the Director-General's environmental assessment requirements, the IHAP hearing and report, the Mackie Report, and Moolarben's detailed responses thereto, and the Director-General's Environmental Assessment Report, the issue of the availability of water supply to match water demands for the Project was thoroughly canvassed. 97 Uncertainty as to the issue was reduced through this process. The IHAP, represented by Mr Mackie on the groundwater impacts, concluded that "the uncertainty relating to groundwater model predictions" had been reduced, that the revised models were more representative of the underground mining process, that the "predicted groundwater related impacts are considered plausible", and that there were "no outstanding groundwater related issues that might impede development of underground mining". The Director-General in the Environmental Assessment Report to the Minister agreed with the IHAP's conclusions. 98 Thirdly, the Minister's decision responded to the residual uncertainty (the uncertainty as to the water supply may have been reduced but it had not been eliminated). Although the preferred model MC 1.6 predicted that the water supply from inflows to the open cut and underground mines together with pumping from the proposed borefield would provide sufficient water supply for all stages of the Project, there was still a possibility that if the permeabilities were lower, as predicted by model MC 1.9, insufficient water would be able to be obtained from the borefield over the planned mine life. A precautionary approach to this possibility (and the residual uncertainty) was recommended to the Minister by the IHAP and the Director-General. 99 This precautionary approach involved imposing numerous conditions, including requiring monitoring and adaptive management, notably, adjusting the scale of mining operations (and hence the demand for water) to match the available water supply. Such an adaptive management response is a proper approach to deal with uncertainty as to potential impacts: see Telstra Corp Ltd v Hornsby Shire Council (2006) 67 NSWLR 256 at 276 [162]-[165]; 146 LGERA 10 at 46 [162]-[165] and Environment Protection Authority v Ballina Shire Council (2006) 148 LGERA 278 at 290 [74] - 291 [75]. Certainly, put in the language of judicial review, it cannot be said that no reasonable person in the position of the Minister could have considered that an appropriate response to the residual uncertainty as to the supply of water for the Project was to approve the Project on conditions requiring monitoring and adaptive management, including adjusting the scale of mining operations (and hence the demand for water) to match the available water supply. 100 The test for invalidating an exercise of administrative power on the ground of manifest unreasonableness is stringent. The decision of the Minister to approve the Project on conditions, including Condition 29, does not even come close to passing this test. Conclusion and orders 101 Ulan has failed to establish either of the two grounds on which it had challenged the validity of the Minister's approval of the Moolarben Coal Mine Project. Accordingly, Ulan's application should be dismissed. 102 There is no reason in the circumstances of this case that would justify a departure from the usual order as to costs, namely, that costs follow the event. 103 Accordingly, the Court orders:

(2008) 160 LGERA 20

(2006) 151 LGERA 229

(2007) 153 LGERA 450

(1946) 71 CLR 210

(2006) 148 LGERA 278

(1994) 35 NSWLR 33

(2006) 151 LGERA 116

(2006) 143 LGERA 277

(1945) 71 CLR 184

(1991) 23 NSWLR 734

(1994) 55 FCR 439

(2006) 67 NSWLR 256

(1999) 46 NSWLR 598

(2005) 141 LGERA 376

(2001) 130 LGERA 508

[2006] NSWCA 245