Ready steady, flare? The ECJ in Marktgemeinde Straßwalchen limits the scope of ‘commercial’ yet insists on strict cumulation test.

In a judgment undoubtedly with consequences for the fracking industry in the EU, the ECJ held yesterday in Marktgemeinde Straßwalchen, Case C-531/13. Rohöl-Aufsuchungs AG had obtained authorisation to undertake exploratory drilling within the territory of the Marktgemeinde Straßwalchen (Austria)  up to a depth of 4 150 metres, without environmental impact assessment. The Marktgemeinde Straßwalchen and 59 other persons have challenged that decision before the Verwaltungsgerichtshof (Administrative Court).

The EIA Directive‘s key element is that not all projects are subject to mandatory EAI. Only projects listed in Annex I of the Directive are subject to a mandatory EIA. Annex I lists for example crude-oil refineries, thermal and nuclear power stations which fulfill certain production or output thresholds. Projects listed in Annex II of the Directive, are subject to a screening procedure of the Member States. Screening is commonly referred to as the process by which a decision is taken on whether or not an EIA is required for a particular project. The competent authority in the Member States can make this decision either based on a case-by-case examination or by establishing thresholds or criteria, or both.

‘Extraction of petroleum and natural gas for commercial purposes where the amount extracted exceeds 500 tonnes/day in the case of petroleum and 500 000 cubic metres/day in the case of gas’ is included in Annex I, sub 14. However the Court held that exploratory drilling even if by nature it is ‘commercial’ (lest it be carried out purely for research purposes), does not meet the conditions of Annex I entry 14, for that provision links the obligation to conduct an environmental impact assessment to the quantities of petroleum and natural gas earmarked for extraction. Prior to an exploratory drilling operation, the actual presence of hydrocarbons cannot be determined with certainty. An exploratory drilling operation is carried out in order to establish the presence of hydrocarbons and, where they are found, to determine the quantity and ascertain, through a trial production, whether or not a commercial operation is feasible. Thus, it is only on the basis of an exploratory drilling operation that the quantity of hydrocarbons that can be extracted per day can be determined. Moreover, the quantity of hydrocarbons earmarked for extraction in such a trial, as well as its duration, are restricted to the technical needs arising from the objective of establishing the feasibility of a deposit.

No mandatory EIA therefore on the basis of Annex I. However, Annex II, in entry 2 d), includes ‘Deep drillings, in particular:(i) geothermal drilling;(ii) drilling for the storage of nuclear waste material; (iii) drilling for water supplies; with the exception of drillings for investigating the stability of the soil’. Exploratory drilling falls under that entry. With reference to previous case-law, the ECJ emphasises that notwithstanding the discretion enjoyed by national authorities vis-a-vis projects included in Annex II, the characteristics of a project must be assessed, inter alia, in relation to its cumulative effects with other projects. Failure to take account of the cumulative effect of one project with other projects must not mean in practice that they all escape the obligation to carry out an assessment when, taken together, they are likely to have significant effects on the environment. With this approach the ECJ has countered the salami effect: the artificial splitting up of projects which do not individually meet EIA thresholds but which do so on a cumulative basis.

There are roughly 30 probes for gas extraction within the area of the Marktgemeinde Straßwalchen. The ECJ does not take the final decision as to whether an EIA therefore had to be carried out, for that is for the national court to be decided, however it is quite likely that the cumulative effect of these 30 probes does lead to a requirement for EIA (which will have to look beyond municipal borders) once it started being clear that the area concerned is a hotbed for such exploratory drillings.


Burridge v Breckland at the Court of Appeal: of salamis and EIA

In Burridge v Breckland, the Court of Appeal (permission to appeal with the Supreme Court is under consideration) had to consider the all too familiar issue of ‘salami’ projects: developments which singularly do not meet the thresholds to require an EIA but which do when joined together. Splitting needs to be considered carefully, for it may disguise an attempt to circumvent EIA requirements. On the continent, it is referred to as ‘saucisonner’.

In the case at issue, planning permissions was granted, subject to conditions, to Greenshoots Energy Ltd for a biomass renewable energy plant, and for a combined heat and power (‘CHP’) plant on nearby land. The CHP plant would be fuelled by biogas produced by the renewable energy plant.  In an earlier (later amended) stage of the application, the two plants were effectively joined: the CHP plant was moved ‘to have the environmental advantage of moving a part of the installation farther away from the village [ ].’ An underground gas pipeline is to carry the fuel between the two sites.

Appellant requested that the permits be quashed, on the basis that no EIA, indeed not even screening was carried out vis-a-vis the amended scheme.

The ECJ has unequivocally rejected inter alia in Ecologistas en Acción (referred to by the Court of Appeal), the artificial splitting of projects to circumvent EIA requirements:

as the Court has already noted with regard to Directive 85/337, the purpose of the amended directive cannot be circumvented by the splitting of projects and the failure to take account of the cumulative effect of several projects must not mean in practice that they all escape the obligation to carry out an assessment when, taken together, they are likely to have significant effects on the environment within the meaning of Article 2(1) of the amended directive (see, as regards Directive 85/337, Case C-392/96 Commission v Ireland [1999] ECR I‑5901, paragraph 76, and Abraham and Others, paragraph 27). [Case C-142/07 Ecologistas en Acción-CODA v Ayuntamiento de Madrid, [2008] ECR I-6097, paragraph 44]

In the case at issue, the splitting may not have been artificial, but it was certainly a reality. Hence at the least a renewed screening ought to have been carried out.  A consequential further issue related to the impact of the earlier screening, which had been carried out vis-a-vis the unamended, initial application, and which had decided against the need for an EIA. Was this to have any impact on the Court of Appeal’s decision? Here, (the majority of) the CA thankfully adopted the only sensible approach: separation of powers. Even if it might be unlikely that a different screening opinion were to be taken vis-a-vis the amended application, that is for the local authority to consider: not the court.

The two decisions were quashed.

Should the Supreme Court consider the issue, I shall of course revisit in due course.


The ECJ giveth and the ECJ taketh away in environmental impact assessment: Incremental projects subject to further EIA scrunity, but with limited scope for compensation

Two important weeks at the ECJ for those interested in the application of the Environmental Impact Assessment (EIA) Directive. In Case C-244/12 Salzburger Flughaven, the Court on 21 March rebuked Austria for operating a threshold for projects made subject to an EIA, which effectively meant that whole classes of projects (in particular: gradual extensions of small airports) are in advance exempt from EIA. In Case C-420/11 Leth, however, this time concerning Vienna-Schwechat airport, the Court on 14 March all but ruled out (see Hans Vedder for further analysis on the liability front) a Francovich type claim (compensation for a breach of EU law by a Member State) for pecuniary damage (a drop in property value) as a result of an infringement of the EIA Directive.

Ms Leth’s avenues for compensation may not be entirely closed off, however it is clear that the ECJ’s approach to the EIA Directive is one of extreme sympathy for the environment, less so for individuals’ damage as a result of insufficient EIA. As always, plenty of material to distinguish these cases from others (in particular, Leth), however the trend would seem clear.