People for the Plains Incorporated v Santos NSW (Eastern) Pty Ltd

MEAGHER JA: I agree with the orders proposed by Ward JA. I do so for the reasons given by her Honour to which I add the following observations, by way of summary.

Adopting the abbreviations used by her Honour, the underlying proceedings (there were two) were directed to the validity and legal sufficiency of the third respondent's approval of the construction of the Leewood Project (a water treatment plant), which was given on 18 August 2015, and renewed and replaced by a further approval given on 4 December 2015. That plant is proposed to deal with produced water and brine from CSG exploration and appraisal activities undertaken by the first respondent on that assessment lease, on PEL 238 (from which the land in PAL 2 had been excised) and on PPL 3 (which also had been excised from PEL 238 as it originally existed). That produced water includes water already stored on those other titles, being the product of earlier exploration activities, as well as water resulting from further exploration activities to be undertaken on those titles by the first respondent. The Project as approved provides for the centralised treatment of that produced water in a plant constructed on PAL 2. That water is to be transferred to that facility via infrastructure, which includes existing and proposed water and gas flow lines from appraisal wells in PEL 238 and PPL 3.

The approval given in August 2015 in terms permitted the amendment of an earlier Petroleum Operations Plan which had been approved by the third respondent's delegate on 28 August 2014. The conditions to which PAL 2 is subject (specifically conditions 2(a) and (c) in Schedule 2 to the lease as granted) include that activities under the lease be carried out in accordance with an approved POP. The POP approved in August 2014, and amended in August 2015, expressly provided that the treatment and management of produced water from previous and proposed exploration and appraisal activities on PAL 2, PEL 238 and PPL 3 be undertaken in accordance with a Produced Water Management Plan that had been approved in March 2014. That earlier approval was given in accordance with condition 14 of PEL 238, condition 2 of PAL 2, and condition 3 of PPL 3.

As Ward JA notes at [16], the grounds of appeal are directed to the making of two overlapping arguments. The first, in support of the relief sought both in the declaratory proceedings commenced in the Land and Environment Court and in the judicial review proceedings commenced in this Court (and transferred to that Court), is that the “development” constituted by the existing and proposed works in the Leewood Project (which as appears above extend beyond the land in PAL 2) was not correctly characterised as being for the purpose of “petroleum exploration”. For that reason, it is said that cl 6(d) of the Mining SEPP did not apply to it and that as a result the development could not be carried out without development consent. Alternatively it was said that if cl 6(d) does apply, cl 18 of the Mining SEPP nevertheless operates to prevent “waste” (here the produced water and brine from PEL 238 and PPL 3) being brought onto PAL 2 and treated without development consent. Finally the appellant argues that the proper characterisation of the purpose of the proposed water treatment plant was as a waste or resource management facility, with the result said to be that development consent was required under cl 121 of the Infrastructure SEPP.

The second argument, made in support of the relief sought in the judicial review proceedings, is that the construction and operation of the Leewood Project was not “prospecting”; and, accordingly, not an activity able to be conducted under an assessment lease granted under s 33 of the PO Act. For that reason it was said that the third respondent had no power to “approve” the undertaking of such an activity. The appellant argued that the activity proposed for the Leewood treatment facility was properly characterised as waste disposal and not prospecting; and, in addition, that to the extent that activity included the treatment of produced water from CSG production on PPL 3 or exploration activities conducted on PPL 3 or PEL 238, it did not constitute prospecting on PAL 2.

I agree that the appellant’s first argument should be dismissed for the reasons given by Ward JA, which are elaborated on by Payne JA. The purpose of the Leewood Project development was correctly characterised as being petroleum exploration and not (either wholly or in addition) waste or resource disposal or management. The construction and operation of that facility was an activity required to be engaged in to achieve compliance with condition 2 of PAL 2; and directed to the treatment and management of an inevitable product of the activity of prospecting for petroleum which was being conducted on the relevant titles.

Accordingly cl 6(d) of the Mining SEPP applied and the development constituted by that Project did not require development consent under Pt 4, Div 2 of the EP&A Act. Clause 18 of the Mining SEPP does not affect that conclusion because in the circumstances of that “development” and in the language of that provision, the relevant “land” being “used” and on which work was or is to be carried out comprises land within the three petroleum titles. It also follows from the characterisation of the purpose of that development as being petroleum exploration and not waste disposal that cl 121 of the Infrastructure SEPP does not apply to require development consent to be obtained.

The second argument also must be dismissed for the reasons given by Ward JA. It is not necessary to determine whether constructing and operating the Leewood Project was “prospecting” on PAL 2 for the purposes of the PO Act, and accordingly an activity necessarily authorised by the grant of the assessment lease, because that activity (including the treatment and management of water produced from prospecting activity on PEL 238 and PPL 3) was required and regulated by condition 2(a) of PAL 2 by reason of the amended POP. There was no challenge in the underlying proceedings to the validity of condition 2(a). Nor was it suggested that the POP and the amended POP submitted for approval in satisfaction of condition 2(a) were not (by reason of their inclusion of the Leewood Project) a “Petroleum Operations Plan” as that expression is used in that condition.

That being the position, in the exercise of the right to prospect granted by PAL 2, the relevant Santos parties were required by a valid condition of PAL 2 to submit a POP for approval and to carry out those exploration activities in accordance with that approved POP. At the same time the third respondent was required to consider and determine whether to approve any POP submitted in accordance with condition 2(a). In those circumstances the third respondent had authority to approve the amended POP, and in doing so did not fail to take into account as a relevant consideration that the Leewood Project required development consent.

WARD JA: People for the Plains Incorporated (the appellant) has unsuccessfully challenged the validity of approvals granted by delegates of the Secretary of the NSW Department of Industry (the third respondent) under the Petroleum (Onshore) Act 1991 (NSW) (the PO Act) in respect of a project known as the Leewood Produced Water Treatment and Beneficial Reuse Project (the Leewood Project). The appellant maintains that development consent was required for the Leewood Project pursuant to the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act).

The first, second and fourth respondents (to which I will refer collectively as the Santos parties) hold various petroleum titles granted under the PO Act in respect of land in the Narrabri area, on which land they conduct extensive integrated petroleum exploration operations. The Leewood property is located within the area that is subject to a Petroleum Assessment Lease (PAL) granted to the second and fourth respondents (PAL 2). The Leewood Project is the second phase of a project relating to the management of water produced from pilot wells in the course of the Santos parties’ petroleum exploration operations. The two-phase approval process required for the overall project involved, first, approval for the construction of storage ponds at the Leewood property and, second, approval for the construction of a water treatment plant and its integration with the storage ponds on the Leewood property. Only the approval for the second phase is the subject of the present litigation.

The proposed centralised water treatment plant is to treat water and brine produced in the course of the Santos parties’ exploration and appraisal activities (up to 1.5 megalitres per day). The nub of the appellant’s present complaint is that the approval granted for the facility covers the treatment of water and brine produced from operations carried out not only on land within the particular petroleum title in respect of which the PO Act approval was sought and obtained (PAL 2) but also on land falling outside the boundaries of that petroleum title (see T16.46), namely land subject to a petroleum exploration licence (PEL 238) and land subject to a petroleum production licence (PPL 3), those other petroleum titles being held and/or operated by one or more of the Santos parties. Both PAL 2 and PPL 3 cover land excised from PEL 238, the original petroleum title.

In summary, the proposed water treatment facility includes the construction of a water treatment plant (a reverse osmosis desalinisation plant) and a brine treatment plant in order to treat the “produced water” to near drinkable standard so as to enable it to be beneficially reused (beneficial reuse being a condition of the approved operations plan for the relevant petroleum titles). It is proposed that the treated water will be used by the Santos parties both for dust suppression, drilling and construction activities within the respective petroleum titles as part of their petroleum exploration operations (instead of using water obtained from other sources) and for the irrigation of lucerne crops which will be grown over an area of some 97 hectares for commercial agricultural purposes on the Leewood property. The Leewood Project is intended to replace a water treatment plant which had earlier been constructed and operated at another location within the petroleum titles (Bibblewindi) under approvals granted pursuant to conditions of two of those titles (PEL 238 and PAL 2).

The appellant commenced two sets of proceedings seeking to challenge the approval granted on 18 August 2015 for the Leewood Project (the Approval): first, proceedings No 2016/165360 in the Supreme Court in the nature of judicial review proceedings under s 69(1) of the Supreme Court Act 1970 (NSW), in which a declaration was sought that the Approval was invalid and of no effect as well as orders quashing the decisions to grant the Approval and its subsequent renewal in December 2015 (the Transferred Proceedings); second, proceedings (No 2016/165660) in the Land and Environment Court being civil enforcement proceedings under s 123 of the EP&A Act, in which a declaration was sought that the Leewood Project required development consent under the EP&A Act (the L & E Proceedings). The Transferred Proceedings were transferred to the Land and Environment Court and there heard together with the L & E Proceedings.

The primary judge held (People for the Plains Incorporated v Santos NSW (Eastern) Pty Limited [2016] NSWLEC 93) that the proper characterisation of the proposed facilities and their operation, up to and including the operation of the Leewood Project but excluding the lucerne cropping activities, was that they were for the purpose of petroleum exploration prospecting (at [51]) and, adopting a purposive construction of s 33 of the PO Act, concluded that the facilities and their operation (excluding the lucerne cropping facilities) were for a purpose permissible without development consent (at [79]; [102]), dismissing the Transferred Proceedings on that basis. His Honour regarded the lucerne cropping activity, by virtue of its intensity and commercial extent, as constituting a separate and distinct purpose (namely, that of commercial agricultural activity) (at [90]) and held that this required no consent pursuant to the Narrabri Local Environmental Plan 2012 (Narrabri LEP) and was not prohibited by any other planning legislation or instrument (at [97]), on that basis dismissing the challenge brought pursuant to s 123 of the EP&A Act and hence the L & E Proceedings.

Broadly speaking, the appellant’s grounds of appeal address: the validity of the grant of approval under the PO Act for the Leewood Project, which raises an issue as to whether the construction and operation of the Leewood Project is “prospecting” requiring approval under the PO Act and whether the decision-maker exceeded her power to approve the Leewood Project in having misapprehended that the Leewood Project required consent under the EP&A Act and/or that development consent was not required (grounds 1 and 3); and the proper characterisation of the Leewood Project for the purposes of cl 6 of the State Environment Planning Policy (Mining, Petroleum Production and Extractive Industries) 2007 (NSW) (the Mining SEPP) and the question whether the Mining SEPP applies at all due to the operation of cl 18 of the Mining SEPP and/or the operation of the State Environment Planning Policy (Infrastructure) 2007 (NSW) (the Infrastructure SEPP) (ground 2).

The respective notices of contention raise, among other things, issues as to the proper construction of ss 29 and 33 of the PO Act, the meaning of “prospecting” in that Act, and the meaning of “waste” in the Infrastructure SEPP.

For the reasons that follow, I am of the view that cl 6 of the Mining SEPP applied so as to dispense with the need for development consent for the Leewood Project (and was neither displaced by cl 18 of the Mining SEPP nor inconsistent with the Infrastructure SEPP). Therefore, the appeal should be dismissed and it is neither necessary nor appropriate to make a final determination in relation to the more general issues raised in the notices of contention in relation to the construction of the PO Act.

By its further amended notice of appeal, the appellant challenges the primary judge’s decision on the following grounds:

The final ground of appeal (ground 3) was described in the course of oral argument as raising a question of “limit on power” or “excess of power” (T 15.48; 16.12). It is predicated on a finding that the primary judge erred in concluding that the Leewood Project did not require development consent under the EP&A Act.

The Santos parties have filed a notice of contention seeking to affirm the primary decision on the following grounds:

In essence, the Santos parties contend that it is not necessary to determine whether or not the Leewood Project is within the concept of “prospecting” under the PO Act (though they contend that it is) because, even if it is not, it is an activity required and/or regulated by the conditions of the petroleum tenements granted under the PO Act and was within the power of the third respondent to approve under the conditions of those petroleum tenements. They argue that the Leewood Project (as a whole) is to be characterised as development for the purposes of petroleum exploration and therefore permissible without consent pursuant to cl 6 of the Mining SEPP, which they say is not displaced by cl 18 of that SEPP; and that it is therefore unnecessary to determine issues as to the precise scope of the power to prospect under the PO Act (issues which they point out may have implications across a range of projects) (see T 18.15-25).

The third respondent took no position as to whether the decision of the primary judge should be affirmed but advanced submissions concerning the proper construction of the relevant legislation and planning instruments (in accordance with the approach in R v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13 at 35-46; [1980] HCA 13). To that end, the third respondent has filed what it described as being more a list of issues than a conventional notice of contention, those being as follows:

In oral submissions, Senior Counsel for the third respondent, Mr Lancaster SC, also made submissions as to the proper construction of s 23(3) of the PO Act and the scope of the power to impose conditions on a petroleum title, namely that the words “in or in relation to the land” comprised in the petroleum title have a broad ambit (subject to the ordinary limitations on a statutory power to impose conditions) (see T 38.4-29). He argued that the power to impose conditions on the grant of PAL 2 extended at least as far as the imposition of a condition requiring the implementation of works in the nature of “environmental management conditions or mechanisms” not only for that petroleum title but for other petroleum titles that the titleholder may hold (see T 38.26-29).

Before turning to the primary judgment, and the grounds on which it is challenged or sought to be affirmed as the case may be, it is convenient first to set out the relevant legislation and environmental planning instruments and then to provide some further detail as to the chronology of relevant events.

The PO Act makes provision for various types of petroleum title, including, relevantly, an exploration licence (PEL) (dealt with in Pt 3, Div 2, ss 29-32), which confers “the exclusive right, in accordance with the conditions of the licence, to prospect for petroleum on the land comprised in the licence” (s 29); an assessment lease (PAL) (dealt with in Div 3, ss 33-37), which confers “the exclusive right to prospect for petroleum and to assess any petroleum deposit on the land comprised in the lease” (s 33); and a production lease (PPL) (dealt with in Div 5, ss 41-45).

“Petroleum” is defined in s 3(1) of the PO Act as meaning:

The verb to “prospect” is defined in s 3(1) of the PO Act, as in force at the date of the Approval, relevantly, as meaning “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”.

The PO Act contemplates that there may be a succession of different titles held in respect of land falling within an initial PEL: where petroleum is discovered, the relevant area(s) may either be “carved out” of the PEL and become the subject of a PAL (and then ultimately the subject of a PPL) or may be directly made the subject of a PPL without the grant of a PAL.

There is also, in effect, a progression of the activity that may be carried out under the respective titles. Relevantly, both a PEL and a PAL confer the exclusive right to “prospect” for petroleum, the former “on the land comprised in the licence”; the latter “on land within the lease”. The exclusive rights conferred on holders of the respective titles are as follows:

The PO Act also contemplates that there will be a progressive reduction in the area covered by the respective petroleum titles. So, for example, the maximum area comprised in a PEL is 140 blocks (s 30(1)(a)), with a minimum of not less than one block (except in cases where for special reasons the Minister considers a smaller area to be necessary or desirable - s 30(1)(b)); whereas the area comprised in a PAL or PPL must be not more than four blocks (ss 34; 44). The PO Act envisages that a petroleum title may be granted over an area spanning more than one real property title (see, for example, s 36(2) in relation to a PAL).

The (now repealed) s 23 of the PO Act, as it was at the time of the impugned Approval, provided as follows:

A standard condition is that which was imposed as a condition of PAL 2 in the present case, namely that activities under the PAL must only be carried out in accordance with a Petroleum Operations Plan (POP) approved by the Director-General of the Department of Primary Industries.

Section 47 of the PO Act provides as follows:

Thus, if a person is authorised under the PO Act to carry out operations authorised under a petroleum title other than a PPL (i.e., under a PAL or PEL), then nothing in an environmental planning instrument made before the commencement of s 47(2) operates so as to prevent the holder of that petroleum title from carrying out such operations on the land comprised in the title. For present purposes, however, s 47(1) has no application as the relevant environmental planning instruments (see below) were made after the commencement of s 47(2).

The two environmental planning instruments to which reference is made in the present case are the Mining SEPP, which came into operation on gazettal on 16 February 2007, and the Infrastructure SEPP, the relevant provisions of which came into operation on 1 January 2008.

The stated aims of the Mining SEPP are set out in cl 2. Those aims are prefaced by an acknowledgment of “the importance to New South Wales of mining, petroleum production and extractive industries”. The aims of the Mining SEPP include: (a) “to provide for the proper management and development of mineral, petroleum and extractive material resources for the purpose of promoting the social and economic welfare of the State”; and (b) “to facilitate the orderly and economic use and development of land containing mineral, petroleum and extractive material resources”.

Clause 6 of the Mining SEPP dispenses with the need for development consent in relation to the carrying out of development for certain purposes. The term “development” is not defined in the Mining SEPP. The term is, however, defined in s 4 of the EP&A Act as including both “the use of land” and “the carrying out of a work”.

Clause 6 provides as follows:

The relevant clause for present purposes is obviously cl 6(d). “Petroleum” is defined in cl 3 of the Mining SEPP in the same terms as in the PO Act. “Petroleum exploration” is defined in cl 3 of the Mining SEPP as meaning, relevantly, “prospecting pursuant to an exploration licence, assessment lease or production lease” under the PO Act. The terms “exploration” and “prospecting” are defined in cl 3 to include “the taking of samples, and the assessment of deposits, of minerals, petroleum and extractive materials”. There is a separate definition of “petroleum production” in cl 3 which is not necessary to set out here.

Clause 18 of the Mining SEPP (which the appellant contends has paramountcy over cl 6 and which it complains was given no consideration by the primary judge - see T4.18) provides that:

Pausing there, and to anticipate the respective submissions made by the appellant and the Santos parties, the appellant’s argument is that the prohibition in cl 18 means that the Santos parties cannot bring waste from “other land” (which they say encompasses the land the subject of PEL 238 and PPL 3) onto the area the subject of PAL 2 (without development consent in accordance with the Infrastructure SEPP) even if such a use is or may be incidental to petroleum exploration activities permissible without development consent under cl 6 of the Mining SEPP (T 4.37ff); whereas the Santos parties contend that cl 18 does not apply because “other land” in cl 18 must be understood as meaning land other than that on which the Santos parties’ overall integrated development is taking place (i.e., land other than that comprised in the three petroleum titles - PAL 2, PEL 238 and PPL 3).

Clause 5(3) of the Mining SEPP provides that, subject to cl 5(4) (which is not applicable in the present case), if the Policy (i.e., the Mining SEPP) is inconsistent with any other environmental planning instrument, whether made before or after the Policy, the Policy prevails to the extent of the inconsistency. (There is a similar provision in cl 8 of the Infrastructure SEPP but it was not suggested that either was determinative in the present case.)

Clause 7(2)(a) of the Mining SEPP provides, relevantly, that development for the purposes of petroleum production on land (such as the Leewood property) on which development for the purposes of agriculture may be carried out “may be carried out only with development consent”.

The stated aim of the Infrastructure SEPP is to facilitate the effective delivery of infrastructure across the State by, among other things, improving regulatory certainty and efficiency through a consistent planning regime for infrastructure and the provision of services (cl 2). Clause 121(1) of the Infrastructure SEPP, appearing in Div 23 which is headed “[w]aste or resource management facilities”, relevantly provides as follows:

The definition (in cl 120) of “prescribed zone” includes (in (a)) “RU1 Primary Production”, the zoning applicable to the Leewood property. The term “waste or resource management facility” is defined in cl 120 as meaning “a waste or resource transfer station, a resource recovery facility or a waste disposal facility”, the latter two being defined in the same clause as follows:

There is no definition of “waste” in the Infrastructure SEPP (nor is there a definition of that term in the PO Act).

By reference to the definitions of “resource recovery facility” and “waste disposal facility”, the appellant argues that the treatment of produced water from petroleum exploration is within the kind of activity that requires consent under cl 121(1). It submits that the dispensation under cl 6 of the Mining SEPP does not operate to permit a facility for treating waste to be carried out without consent.

An Agreed Statement of Facts was tendered at the hearing below. The Santos parties also relied upon an affidavit of the General Manager Energy NSW of Santos Limited, Mr Peter Mitchley, which was admitted without objection and which was not challenged in cross- examination.

The Santos parties hold and/or operate three petroleum titles under the PO Act in the Narrabri area: an exploration licence (PEL 238), which was granted on 1 September 1980 (over an area of about 9,500km2) and has been renewed at least ten times, now comprising a smaller area of land and excluding the land now within PAL 2 and PPL 3; a production lease (PPL 3) which was granted pursuant to s 42 of the PO Act on 15 December 2003; and an assessment lease (PAL 2), which was granted on 30 October 2007. Each of PAL 2 and PPL 3 is over land within the boundaries of, but excised from, the area originally comprising PEL 238. PAL 2 and PPL 3 are in effect tenement upgrades to the relevant parts of PEL 238.

The first respondent (the applicant for the Approval) is the operator of PEL 238, PAL 2 and PPL 3 and (with the fourth respondent and others) the present titleholder of PPL 3. The second and fourth respondents are the titleholders of PEL 238 and PAL 2.

As noted above, condition 2 of Sch 2 of PAL 2 (made pursuant to s 23(1)(a) of the PO Act as it was at the relevant time), requires that activities must only be carried out in accordance with an approved POP complying with the requirements set out in condition 2(b). It should also be noted that before granting approval of a POP the third respondent is required to comply with Part 5 of the EP&A Act, s 111 of which requires the third respondent to “examine and take into account to the fullest extent possible all matters affecting or likely to affect the environment”.

Again as earlier noted, the Leewood Project is the second phase in a two-phase approval process. For the first phase, a Review of Environmental Factors was submitted on behalf of the titleholders of PAL 2, on or about 18 December 2012 (the Phase 1 REF). The activity proposed in the Phase 1 REF involved the construction of produced water and brine management ponds on the Leewood property (the Leewood ponds), together with associated infrastructure on PAL 2. The Phase 1 REF stated that the proposed activity was permissible without consent and that it required assessment and determination under Pt 5 of the EP&A Act under the conditions of PAL 2 (presumably because the proposed activity involved a change to the previously approved POP). It also noted that approval was required for a POP (and in turn the proposed activity).

The Phase 1 REF also referred to a proposal in the future to construct additional water treatment infrastructure at Leewood to replace the existing Bibblewindi Water Management facility and to treat the produced water and brine to be stored in the Leewood ponds, but stated that the construction and operation of that additional water treatment infrastructure would be subject to further approvals and environmental impact assessment.

On 15 February 2013, PEL 238 was renewed for a further term to 2 August 2016 subject to amended conditions. Schedule 2 to the renewal instrument set out the amended conditions, in which reference was made to three categories of “prospecting operations”, the third of which included “prospecting operations and water management infrastructure required to be carried out in accordance with an approved Produced Water Management Plan under condition [14]” (see (b)).

Condition 14 of the renewed PEL 238 required that, prior to conducting prospecting operations with the potential to generate more than 3 megalitres of produced water per year (as a result of cumulative prospecting operations within the exploration licence area), the licence holder must prepare a Produced Water Management Plan (PWMP). Condition 14 required the licence holder: (a) to prepare a PWMP in consultation with the NSW Office of Water and the Environment Protection Authority (EPA); (b) to ensure that the plan describes among other things the proposed containment and treatment measures for the produced water and the proposed beneficial reuse or disposal methods for the produced water; (c) to have the PWMP approved by the Minister; and (d) to implement and comply with the PWMP. Except where approved under condition 2 or a PWMP under condition 14, produced water was not to be discharged to land (condition 15).

Conditions 36 and 37 dealt separately with waste management.

On 19 March 2013, the Minister’s delegate, following consideration of the Phase 1 REF, granted approval in respect of the proposed use of the Leewood property. During 2013, the Minister’s delegate also granted approvals for the construction and operation of pilot wells and water and gas flow lines connecting the pilot wells to Leewood pursuant to conditions of PAL 2 and PEL 238. (The Santos parties note that approvals for further pilot wells were granted in 2014.)

On 10 February 2014, a PWMP was submitted to the NSW Department of Industry. Its purpose and scope were explained (cl 1.1) with reference to the requirements of condition 14 of PEL 238. The PWMP stated that it was:

The PWMP proposed that produced water from the exploration and appraisal activities (within PEL 238, PAL 2 and PPL 3) would be transferred via the approved water flow lines to the Leewood facility then under construction. (The Santos parties emphasise that there was a single PWMP that provided for the integrated management of the produced water from the petroleum exploration operations under the respective titles.)

Following the provision by the first respondent of further information that had been requested in relation to the PWMP (see letter 26 February 2014), the Minister’s delegate, by letter dated 4 March 2014, approved the PWMP. The approval was expressed to be in accordance with condition 14 of PEL 238, condition 2 of PAL 2 and condition 3 of PPL 3. The approval letter noted that other activity approvals might be required pursuant to conditions of the respective petroleum titles for construction and operation, among other things, of “related water infrastructure (produced water gathering, storage and treatment facilities)”.

A POP in relation to the phase of the project now the subject of litigation (i.e., the second phase) was submitted in July 2014, the purpose for which was said to be to satisfy the Sch 2 management conditions set out under PAL 2. It was approved on 28 August 2014 (Approved POP).

On 20 March 2015, the first respondent applied to amend the Approved POP, seeking approval for the construction and operation of the Leewood Project.

On 5 June 2015, an REF for the Leewood Project (i.e., phase 2 of the overall project) was submitted (the Phase 2 REF). The Phase 2 REF described the primary objective of the proposed activity as the construction and operation of “a purpose built, centralised water treatment facility outside of the Pilliga State Forest, to treat, manage and beneficially reuse produced water from coal seam gas (CSG) exploration and appraisal activities”. Reference was made to the construction of produced water and brine management ponds that had been constructed at Leewood (pursuant to the March 2013 approval) and it was said (somewhat infelicitously in its reference to the storage of water yet to be produced) that these ponds “store produced water and brine from previous and future exploration and appraisal activities within Petroleum Exploration Licence (PEL) 238, PAL 2 and Petroleum Production Lease 3 (PPL3)”.

Pausing there, the Santos parties emphasise that there was no reference in the Phase 2 REF to storage or treatment of any produced water from petroleum production (as opposed to exploration) operations. They note the evidence of Mr Mitchley in that regard. In his affidavit affirmed 15 March 2016 (filed in the context of a then application by the appellant for injunctive relief based on an apprehended breach), Mr Mitchley deposed that Santos was not currently operating any gas wells within PPL 3 and that all the wells within PPL 3 were either plugged and abandoned, suspended or shut in (at [21]). He further deposed that the drilling and operation of the wells in PPL 3 had resulted in little, if any, water being drawn to the surface (at [32]); that no water from the wells within PPL 3 had been or was proposed to be transferred to the Leewood ponds; that PPL 3 did not contain a well capable of producing water from a coal seam; and that no produced water from any petroleum production activities in PPL 3 would be stored or treated at the Leewood facility without further approvals being obtained (at [23]).

Turning back to the Phase 2 REF, it described the scope of the proposed activity as including: a water treatment plant, including pre-treatment and reverse osmosis plant; a brine treatment plant; a brine distribution manifold and associated piping, to allow water distribution into the water treatment plant and associated return flows to brine storage ponds; a treated water storage tank (5 megalitre capacity); irrigation of treated water at the Leewood property through a managed irrigation system (including a centre pivot and subsurface irrigation system); 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); a small potable water treatment system for water extracted from the licensed bore; other associated infrastructure, including a gas pipeline to fuel the generators; and amelioration of soils within the Leewood irrigation area.

The Phase 2 REF also contained the following statements:

The third respondent placed the Phase 2 REF on public exhibition and invited submissions. Members of the public, including the appellant and its legal advisers, made submissions to the third respondent about the Leewood Project. The third respondent considered the submissions and sought further information from the Santos parties.

On 18 August 2015, following the provision of the requested additional information (and the environmental impact assessment required by s 111 of the EP&A Act), the third respondent approved the amendment of the Approved POP to permit the operation and construction of the Leewood Project (Approval). The Approval was subject to the conditions of Schedule 2 of PAL 2 and the additional conditions set out in the letter of approval. The letter also noted that the project was a scheduled activity under the Protection of Environmental Operations Act 1997 (NSW), requiring the making of a separate application for an environmental production licence (EPL) to be issued.

On 18 September 2015 application was made to the EPA for the variation of the first respondent’s then existing EPL, to allow the construction of the Leewood Phase 2 Water and Brine Treatment Plant. That application was subsequently amended to include the commissioning and operation of the said plant.

On 26 November 2015, the application for a variation of the EPL was approved. This notice of approval indicated that the licence did not authorise the irrigation of treated water at the facility (for which approval it would be necessary for there to be an approved Irrigation Management Plan incorporating surface water, soil and groundwater monitoring and reporting). Also approved on 26 November 2015 was a PWMP dated 19 November 2015 in respect of the Leewood Project.

On 4 December 2015, an amended POP was approved on the basis that it was determined satisfactorily to have addressed conditions relating to the POP in PAL 2 (Renewal). The Renewal thus replaced the August 2015 approval for the purposes of Condition 2 of PAL 2.

On 4 January 2016, the third respondent’s delegate (on the application of the appellant) issued a statement of reasons for the Approval (which the Santos parties maintain is relevant to the scope of what was in fact approved – T 26.39). In that statement, certain “findings on material questions of fact” were recorded, including that:

This second finding is explicable insofar as a distinction was there being drawn between exploration and appraisal activities on the one hand and production activities on the other.

The statement of reasons also recorded that the decision was made because, among other reasons, the project was designed to treat and reuse produced water from exploration and appraisal activities.

The primary judge described the proposed Leewood facility (at [18]-[19]) largely by reference to the Phase 2 REF and described the physical activities that it was said would, subject to the outcome of the proceedings, be undertaken on the three petroleum titles held by the Santos parties. In the course of so doing, his Honour noted (at [20]) that all operational elements of the facility were on PAL 2, as was the pipe to transport the “near-drinking-water quality” water to the irrigated lucerne pasture area on PAL 2. His Honour then addressed the extent to which the activities of and works associated with the Leewood facility could be characterised as “prospecting” (at [21]-[51]).

His Honour accepted (and the appellant does not dispute) that a necessary (or, perhaps more precisely, unavoidable or inevitable) by-product of the CSG prospecting process is the production of water and that this is required to be dealt with in an environmentally appropriate fashion (at [44]).

His Honour concluded, as noted earlier, that each of the uses identified in the Phase 2 REF (as set out at [18] and [45] of his reasons) – other than the fifth and ninth of those listed uses (namely, the irrigation of treated water at the Leewood property and the amelioration of soils within the Leewood irrigation area) – was a use that served the purpose of petroleum prospecting or assessment. However, his Honour expressly left open the possibility that development consent might be required for the future operation of the treated water pipeline should the “potential, anticipated future use” (namely, the transfer of treated water to another location for irrigation by a third party) actually be proposed in respect of it (at [47]).

At [54]-[55], at that stage addressing the issue arising in the Transferred Proceedings as to the validity of the Approval, the primary judge noted the distinction drawn by the appellant between the treatment of water produced by activity on PAL 2 and that in relation to produced water generated from boreholes on PEL 238 and transported by pipe to the Leewood facility. This distinction was said to arise since s 29 of the PO Act applies only to prospecting “on the land comprised in the licence” and therefore, to the extent that activities on PEL 238 comprise “prospecting”, those activities must take place within that petroleum title and are not able to be transferred to another petroleum title held by the Santos interest. His Honour also noted the argument that the rights of the holder of the assessment lease (arising from s 33 of the PO Act) do not permit carryover of prospecting activities on PEL 238 to PAL 2, as the statutory rights under the assessment lease are confined to prospecting, and/or assessment, of petroleum deposits “on the land comprised in” that lease.

His Honour accepted (at [77]) the approach put forward by the third respondent to the effect that s 33 of the PO Act should be construed as conferring on the holder of an assessment lease the exclusive right to prospect for petroleum both on the land comprised in the lease and on the land of any exploration licence from which the lease had been excised, having regard to the fact that the land within PAL 2 had earlier been subject to, but was now excised from, PEL 238. His Honour described this as a purposive construction of the legislation. His Honour also noted (at [78]) the evidence of Mr Mitchley that no produced water from PPL 3 was to be transported to the Leewood facility and did not see the need further to consider the issue as to the validity of the Approval insofar as it extended to the treatment on PAL 2 of produced water from PPL 3.

His Honour concluded (at [79]; [102]) that the facilities (and their operation), excluding the lucerne cropping activities, were on the land for a purpose permissible without development consent as a result of cl 6(d) of the Mining SEPP. His Honour was satisfied that a purposive reading of s 33 of the PO Act operated to permit the Leewood facility to deal with produced water from petroleum exploration activities undertaken by the Santos parties on PEL 238 in addition to produced water generated by petroleum exploration and/or assessment activities undertaken on PAL 2 (at [103]).

Turning to the L & E Proceedings, in which the appellant sought a declaration that development consent was required for the Leewood facility, and limiting his consideration (in light of the earlier findings) to the proposed use of the treated water for commercial lucerne cropping activities, the primary judge addressed the question whether development consent was required for that use of the land pursuant to the Narrabri LEP. His Honour considered that the proposed commercial lucerne cropping activities were a separate and distinct use and fell squarely within the definition of “extensive agriculture” under that LEP (at [95]); and therefore that no consent was required (at [96]; [105]).

Accordingly, the primary judge dismissed both sets of proceedings.

The first ground of appeal raises issues which go both to the proper characterisation of the Leewood Project for the purposes of cl 6 of the Mining SEPP (arising in the L & E Proceedings) and to the question whether the construction and operation of the Leewood Project is “prospecting” under the PO Act (which arises in the Transferred Proceedings). It relates to the findings by his Honour (at [46]; [51]; [102]) that the Leewood Project (other than in respect of irrigation for the lucerne crops) was “prospecting” within the meaning of s 33 of the PO Act and was properly characterised as being for the purpose of petroleum exploration within the meaning of cl 6 of the Mining SEPP. The appellant raises a number of sub-grounds of appeal in this regard.

First, the appellant argues that the primary judge erred (at [46]; [48]; [51]) in “splitting” the Leewood Project into two elements when determining whether it could be properly characterised as “prospecting” or for the purposes of petroleum exploration.

The appellant maintains (and with this the Santos parties agree) that, in characterising and approving a development proposed in an application, the whole of the application (i.e., all of the components of the project as a whole) must be considered, even if part of the activities contemplated by the proposal would not, on their own, require development consent.

The appellant does not contend that the primary judge’s finding as to the lucerne operation being a separate and distinct use was in error. Indeed the appellant’s own submission to the primary judge (at [28]-[32]) was to the effect that the irrigation programme was clearly independent of the petroleum exploration (based on the lucerne yield and having regard to what was said by Meagher JA in Baulkham Hills Shire Council v O’Donnell (1990) 69 LGRA 404 at 409-10 (Baulkham Hills) - see below at [147]). Rather, what the appellant contends is that such a finding should have led to the conclusion that, as a whole, the Leewood Project was not for the purpose of “prospecting” and therefore required development consent.

The Santos parties maintain that the primary judge did view all the components of the project as a whole when identifying (at [45]) the nine “elements” discussed in the Phase 2 REF and did consider the entirety of the activities comprised in the Phase 2 REF (at [36]-[51]) when reaching his conclusion. They accept that the characterisation of the lucerne operation as constituting a separate and distinct purpose because of its size and scale (at [90]) was open to his Honour and has not been shown to involve error (see their submissions at [36]) but they nevertheless contend that the correct characterisation of the Leewood Project is that the purpose of all of the operations, including lucerne production, is that of petroleum exploration.

In any event, the Santos parties submit that, whether or not his Honour erred by impermissibly “splitting” the components of the overall project, the preferable characterisation of the Leewood Project is that its construction and operation are for the purpose of “petroleum exploration” within the meaning of cl 6(d) of the Mining SEPP (considered below).

The appellant next contends that, having, regard to the scheme of the PO Act and the principles expounded in Australians for Sustainable Development v Minister for Planning (2011) 182 LGERA 370; [2011] NSWLEC 33 at [270] (see below at [138]) (Australians for Sustainable Development) the primary judge should have characterised the Leewood Project as a “resource recovery facility” or “waste disposal facility” (as defined in cl 120 of the Infrastructure SEPP), and not as “prospecting”, such that the project would require development consent by reason of cl 121(1) of the Infrastructure SEPP

The appellant refers to the description of the project in the Phase 2 REF (to which I have earlier referred see [56] above). The appellant submits that it does not follow, from the fact that components of the project are uses that serve the purpose of treating produced water, that the Leewood Project (or part thereof) serves only the purpose of “prospecting” or “petroleum exploration” (referring to his Honour’s reasons at [39]).

The appellant argues that fundamental to the reasoning of Preston CJ at LEC in Chamwell Pty Ltd v Strathfield Council (2007) 151 LGERA 400; [2007] NSWLEC 114 (Chamwell), when reaching the conclusion that the use of “roads” and carparking in the development there under consideration was subordinate to the purpose of the supermarket and multi-unit building, was the element of necessity. In that regard, the appellant refers to statements by Preston CJ at LEC that: the purpose of the supermarket could only be achieved by constructing the associated roads (at [29]); the supermarket could not function on the land without the car park and driveways (at [31]); and the two uses were “so comingled in time, place, or circumstances … that in a practical sense one cannot conceive of the one being carried on without the other” (at [40]).

The appellant argues that, here, because produced water necessarily resulting from prospecting activities can be managed in ways that do not require the construction of the Leewood Project (such as through transport to an existing licensed facility for disposal), the prospecting activities can operate without the Leewood Project and hence it is not a necessary component of the prospecting activities but rather it is, and should have been characterised as, development for a related but independent purpose. In support of that argument the appellant puts forward the example of an incinerator or cardboard recycling facility proposed as part of a supermarket development application. The appellant argues that the production of cardboard packaging waste would be an essential, unavoidable and integral part of the operation of a supermarket. Nevertheless, it says that the use of a facility for the purpose of disposing of such waste would be characterised as use for a different and independent purpose to the use of the supermarket itself, since the cardboard could be disposed of or recycled by other means; and, by analogy, so too should the Leewood Project be characterised.

I interpose to note that the Santos parties, in response to the appellant’s reliance on Chamwell for the proposition that in the present case there is no necessity for the water treatment plant and hence it is not for the purposes of prospecting, argue that no statement of legal principle to that effect was established in Chamwell. They submit that it is irrelevant for present purposes that the produced water resulting from the CSG prospecting process could be managed other than by the construction of the Leewood Project or that the prospecting activities could operate without that facility (referring to what was said in Warringah Shire Council v Raffles [1979] 2 NSWLR 299 at 301-303 (Warringah)). (In reply, the appellant argues that Warringah is authority for the proposition that if a particular method of managing produced water can be characterised as being for a “distinct and separate purpose” from petroleum exploration it cannot gain the benefit of cl 6(d) of the Mining SEPP.)

The appellant submits that the appropriate level of generality with which the purpose of the Leewood Project is to be characterised is informed, in part, by the scheme of cascading petroleum titles established by Pt 5 of the PO Act (to which I have earlier referred). The appellant notes that the rights of the titleholder “expand” with the changing nature of the title: from the right of a holder of a PEL or PAL to “prospect” on the land or lease (and, in the case of a PAL, also to “assess”) to the broader rights of the holder of a PPL to “conduct petroleum mining operations in and on the land included in the lease together with the right to construct and maintain on the land such works, buildings, plant, waterways, roads, pipelines, dams, reservoirs, tanks, pumping stations, tramways, railways, telephone lines, electric powerlines and other structures and equipment as are necessary for the full enjoyment of the lease or to fulfil the lessee’s obligations under it” (see s 41 of the PO Act).

The appellant further notes that development for the purposes of petroleum production requires development consent under cl 7(2) of the Mining SEPP and submits that the right to “prospect” which is conferred on the holder of a PEL or PAL under ss 29 and 33 should not be construed at a level of generality so as to be equivalent to the rights granted under s 41 of the PO Act to the holder of a PPL. It argues that the holder of a PEL is not thereby authorised to prospect for petroleum in the extended meaning of that expression under the PO Act (T 3.40). (The Santos parties cavil at this proposition.)

As to the appellant’s assertion that his Honour should have found that the proper characterisation of the Leewood Project was for the purposes of a “waste disposal facility” or “resource recovery facility” (as those terms are defined in cl 120 of the Infrastructure SEPP), the appellant submits that the concept of “waste” as used in the Infrastructure SEPP, though not there defined, should be read in context as referring to “unwanted and unused material, anything left over or superfluous, excess material, or by-product” (citing Director-General, Department of Planning and Infrastructure v Glass Recovery Services Pty Ltd (2015) 207 LGERA 397; [2015] NSWLEC 49 at [75]-[92] (Glass Recovery Services)). It notes that the produced water treated by the Leewood Project was found to be a by-product of past and ongoing “prospecting activities” (see judgment at [44]).

The appellant (though conceding it is not material because this is a private document) also points to the description of water treatment in the Phase 2 REF. The appellant argues that, by reason of the quantity of water to be treated and the sodic/saline quality of the soils on Leewood, as set out in the Phase 2 REF, the Leewood Project would have been designated development had a development application been lodged (referring to the Environment Planning & Assessment Regulations 2000 (NSW), Sch 3, cl 32). It argues that the environmental impacts of the water treatment facility are an important consideration in the task of characterisation (referring in this regard to Penrith City Council v Waste Management Authority (1990) 71 LGRA 376 at 381-382 (Penrith City Council)) and says that, by reason of the character and extent of the Leewood Project, it should have been characterised as a “resources recovery facility” or “waste disposal facility” within the meaning of cl 120 of the Infrastructure SEPP.

The appellant further argues that even if the Leewood Project could be characterised as being related, or ancillary, to the purpose of “prospecting”, it has the independent character of development for the purposes of a “resources recovery facility” or a “waste disposal facility” and hence requires development consent by reason of cl 121(1) of the Infrastructure SEPP (its ground 2(a) of the grounds of appeal).

The Santos parties maintain (for the same reasons as set out in relation to ground 2 of their notice of contention) that the Leewood Project does not serve the independent purpose of a “resource recovery facility” or “waste disposal facility”. Cognisant of the limitations in drawing analogies with other cases, they cite cases where certain development, if considered in isolation, would come within an express definition in an environmental planning instrument but where that development was characterised as being for the purpose of another use (see [41] of their submissions: Canyonleigh Environment Protection Society v Wingecarribee Shire Council (1997) 95 LGERA 294; Momentum Architects Pty Ltd v Hornsby Shire Council (2002) 123 LGERA 207; [2002] NSWLEC 192 (Momentum); Hynes Urban Planners Pty Ltd v Hawkesbury City Council (2003) 123 LGERA 312; [2003] NSWLEC 1) (Hynes)). (As to those authorities, the appellant points out that, in Hynes, sewage works were not part of the development application under consideration and that, in Momentum, the only part which constituted “sewage works” was a storage chamber to regulate flow to the Sydney Water main, which they say was essential and the only way the residential subdivision could be carried out.)

The Santos parties maintain that the treated water is not “waste”. As to the description of the treated water as “medium strength effluent” in the Phase 2 REF (to which the appellant has referred) they say that this is simply an application of the Environmental Guidelines: Use of Effluent by Irrigation, having regard to the Total Dissolved Solids (TDS) content of the treated water, the Guidelines having been applied to compare the constituent elements of the treated water with the use of recycled water for irrigation purposes. They point out that the treated water is of similar TDS quality to the highest quality underlying groundwater (being 631 mg to 1,272 mg/L) and note that the Assessment Report states that the treated water is predicted to be of suitable quality and “generally meets the criteria required for the Australian Drinking Water Guidelines 2011 even though it is acknowledged that the water is not proposed to be used for drinking water (potable) purposes” and confirms compliance with drinking water guidelines with TDS content as “fair quality”.

The Santos parties say that it does not follow, from the classification of the treated water under the guidelines referred to above as “medium strength effluent”, that for characterisation purposes the treated water which is used for irrigation or reuse in the exploration and appraisal operations is “waste”. They also point out that the EPL issued by the EPA does not categorise the Scheduled Activities on the whole of the operations, including Leewood, as activities related to waste.

Related to its response to ground 1(b) of the appeal are the issues raised by the Santos parties’ notice of contention ground 2.

The Santos parties argue that a development may be for the purpose of “petroleum exploration” under cl 6(d) of the Mining SEPP without being “prospecting” for the purposes of the definition in s 3(1) of the PO Act. They argue that the question whether an approval is beyond the scope of rights conferred by the PO Act is separate from that as to whether the Leewood Project is for the purpose of “petroleum exploration” under the Mining SEPP and submit that the appellant’s submissions erroneously conflate the concepts of rights conferred by the PO Act with purpose under the Mining SEPP.

The Santos parties maintain that, properly construed, “prospecting” for petroleum on land comprised in a petroleum title encompasses the carrying out of works on the land for the purposes of testing the quality and quantity of petroleum in, and potential to recover petroleum from, that land. They also argue that the conferral of a right to “prospect” or to “assess” under the PO Act implies the right to do all such things as are necessary in order to exercise that right.

They contend that the Leewood Project falls within this definition of “prospecting”. They emphasise not only that generation of produced water is an unavoidable and integral (and in that sense necessary) component of the exploration and appraisal of CSG, and the CSG operation requires infrastructure to store, treat and dispose of produced water, but also that this is recognised by the imposition of specific conditions on the petroleum titles relating to the management of produced water and in the published guidelines for the preparation of REF’s as part of petroleum exploration activities which require the assessment of management of produced water from pilot wells (incorporating beneficial reuse considerations). (Pausing there, I also note that those guidelines treat the topic of waste management separately from that of management of produced water, suggesting a perceived difference between the two.)

Since the use of water from the project in a beneficial fashion was mandated by a condition imposed on PAL 2 and the proposed irrigation was adopted as a means of implementing that beneficial reuse requirement (see notice of contention ground 1), the Santos parties submit that the whole of the activities contemplated were for the purpose of “prospecting”. (The appellant’s response to such a proposition is that, on that reasoning, the water could equally be used, not just for irrigation, but for any other purpose which requires water, such as a golf course, and says that this is not an outcome envisaged or authorised by the PO Act. The appellant also argues that if the Leewood Project is properly characterised as being for the purpose of “prospecting”, then the irrigation component of the project could be carried out as of right on the petroleum title, giving rise to the possibility that, if the holder of the petroleum title were not the owner of the Leewood property, it would be open to a petroleum titleholder “to choose to use hundreds of hectares of agricultural land, held in fee simple by an unrelated party, for commercial agriculture in the name of prospecting”.)

The Santos parties refer to the Note to cl 6 of the Mining SEPP (see [31] above), which states that “development to which this clause applies may ... be subject to the environmental assessment and approval requirements of Part 5 of the Act”; and that cl 3 relevantly defines “petroleum exploration” to mean “prospecting pursuant to an exploration licence, assessment lease or production lease under the [PO Act]...”.

They argue that the Leewood Project: was for the purpose of the ongoing exploration, appraisal and evaluation of the CSG hydrocarbon potential in the petroleum titles; would not exist but for those activities; and is part of the overall exploration and appraisal activity program within the respective petroleum titles. They maintain that the treatment of the produced water is an activity which is subsumed in the overall use of the land for petroleum exploration and thus a use for that purpose. As noted earlier, they argue that the installation of works to manage the produced water from the pilot wells, including the method of treatment of the produced water, is part of the works carried out for the purpose of the holder testing the quality and quantity of petroleum in, and the potential to recover petroleum from, the land over which the holder has a petroleum title. They also contend that “development for any of the following purposes” in cl 6 of the Mining SEPP should be given a beneficial construction given the stated aims of that Policy.

The third error identified by the appellant under ground 1 of the grounds of appeal is the finding by the primary judge (at [32]-[33]; [78]) that there was no need to consider whether the treatment of produced water from PPL 3 could be characterised as development for the purposes of “prospecting” on PAL 2, based on the statement by Mr Mitchley (in his affidavit affirmed 15 March 2016) that no produced water from PPL 3 had been or was proposed to be treated at the Leewood facility.

The appellant does not challenge Mr Mitchley’s evidence in this regard. Rather, it challenges the correctness of the primary judge’s determination that, on the basis of this evidence, it was not necessary to consider the treatment at the Leewood Project of produced water from “prospecting” activities on PPL 3 (at [32]-[33]). The appellant notes that in the Phase 2 REF the Leewood Project was described as having the objective of treating produced water from previous and future exploration appraisal activities on PAL 2, PEL 238 and PPL 3. The appellant says that the evidence presented by Mr Mitchley was no more than an expression of the current intent of the Santos parties and that, regardless of the correctness of this evidence, the primary judge erred by elevating it to a status such that it overrode the necessity to consider the entirety of that which the Leewood Project was permitted to do under the Approval in determining whether the Leewood Project was “prospecting”.

The appellant maintains that, despite Mr Mitchley’s statement of the current intent of the parent company of one of the titleholders, if a titleholder were to vary its operations within PPL 3 in the future then the Approval and Renewal would, in terms, permit the Leewood Project to treat and dispose of an unlimited quantity of produced water from PPL 3.

Thus, the appellant submits that his Honour should have considered this approved source of produced water in the characterisation of the Project as “prospecting” and says that this is of particular import in light of his Honour’s interpretation (at [73]) of s 33 of the PO Act (noting that the primary judge considered that there was no need to read further words than he did into the text of s 33 in order to construe it as permitting the treatment and disposal of produced water from PPL 3 as “prospecting” on PAL 2).

The Santos parties contend that, whether or not his Honour erred as alleged in ground 1(c), the treatment of produced water from each of the petroleum titles, including PPL 3, is properly characterised as being for the purposes of petroleum exploration (as asserted in their notice of contention grounds 2 and 5). They also point out that the Approval authorises only the treatment of produced water from prospecting and assessment activities (not from production activities) within PPL 3.

In the alternative, if that part of the Approval that authorised the treatment of water from PPL 3 is held to be invalid, the Santos parties contend that this part is severable. In that regard, the appellant submits that this part of the Approval is too substantial to permit severance and the Santos parties’ alternative submission as to severance should be rejected.

Finally, under ground 1, the appellant contends that the primary judge erred in finding that the treatment and disposal on PAL 2 of produced water from PEL 238 by the Leewood Project was “prospecting” on PAL 2 (at [77]; [79];[103]). The appellant maintains that the text of s 33 of the PO Act, (and, in particular, the phrase “on the land...”) does not permit his Honour reading into the section the words that he did at [73], as follows:

It is submitted that his Honour’s interpretation of s 33 of the PO Act is erroneous in a number of ways.

First, it is said that it ignores the cascading hierarchy of petroleum titles provided for in the PO Act and conflates the distinct rights under the separate titles.

Second, the appellant argues that petroleum titles are limited by their metes and bounds and can only grant a right to “prospect” on the land within the limits of the particular title. The appellant argues that a PAL does not confer the right to carry out works (including to treat produced water) as part of the activity of “prospecting” for petroleum located on “other” land, or to assess the quality and quantity of petroleum on that “other” land. The appellant points to the definition of “prospecting” in s 3 of the PO Act, which refers to the testing of the quality and quantity of petroleum “in the land”. The appellant thus submits that the primary judge erred in finding that the construction and operation of the Leewood Project on PAL 2 in order to treat produced water arising from “prospecting” activities carried on outside the metes and bounds of PAL 2 could be characterised as “prospecting” on the land in PAL 2, such that it was permissible without consent under the cl 6(d) of the Mining SEPP.

The appellant points to other activities for the purpose of “prospecting” on a particular PAL that may be authorised or required to take place outside the metes and bounds of that lease (such as the analysis of samples removed from PAL 2 during “prospecting” activities that might be undertaken in a laboratory in Sydney or the keeping of records or the preparation of reports required by PAL 2 that might be done in an office in Sydney) and submits that it would be nonsensical to suggest that the construction of a laboratory or an office to facilitate those activities (albeit for the purpose of “prospecting”) could be made permissible without consent.

Third, it is submitted that the primary judge’s interpretation fails to take into account the fact that a PAL that has been excised from a PEL may be in different ownership to the PEL. It is submitted that, in such a case, the primary judge’s interpretation of the section would permit the holder of a PAL to conduct prospecting activities on a PEL (from which the PAL has been excised) despite the fact that it may be held by an entirely different entity. The appellant argues that such an interpretation is inconsistent with the express wording of both ss 29 and 33 of the PO Act, which provide the holder of a PEL or PAL, respectively, with the “exclusive right” to prospect for petroleum on the land comprised in the licence or lease.

Fourth, the appellant argues that, insofar as the only justification offered by the primary judge (see [74]) in support of the adoption of a purposive interpretation was to address concerns of the Santos parties that adopting a literal interpretation of s 33 of the PO Act would result in an “unreasonable outcome” (i.e., that a titleholder carrying out petroleum exploration activities on adjacent petroleum titles would be required to construct separate facilities on each title to treat produced water from the activities on each title), there was no such “unreasonable outcome” that would justify the “rewriting” of the PO Act so as to contradict the express words in the PO Act. The appellant says that the more obvious and readily available course to avoid the “unreasonable outcome” put forward by the Santos parties would be for them to apply for development consent for the Leewood Project. It submits that this is the option anticipated and dictated by the legislative framework and that such a result is not “unreasonable”, noting that the evidence before the Land and Environment Court was that the water treatment method was readily “scalable” and that the technology could be readily leased or purchased.

The appellant submits that the primary judge failed to provide any substantive reasoning as to why an ordinary and literal interpretation of s 33 of the PO Act was not satisfactory to achieve the purpose of the section as intended by the legislature and hence failed to justify why it was proper and appropriate to adopt the “purposive interpretation” that he did.

In relation to this appeal ground, the Santos parties rely on their submissions as to the proper construction of “prospecting” in the PO Act (ground 2(a) of their notice of contention). They submit that there is nothing in the PO Act which requires the powers in ss 29 and 33 to be read down so as to limit the operation of a water treatment plant to treating water produced on land within that particular petroleum title. They submit that their construction of the Act is supported by the scheme of the PO Act which allows for a PAL or PPL to be excised from the area of an exploration licence (PO Act, ss 32, 37) (as occurred in this case). They argue that, in the present case, if the appellant is correct they would be required to have two separate water treatment plants and systems in order to satisfy the conditions of PEL 238 and PAL 2 regarding water treatment, each of which must only be on the land to which the relevant title relates. (The appellant rejects such a proposition, pointing to the available alternative of seeking development consent, which they maintain is required on a literal interpretation of the PO Act.)

The Santos parties say that implicit in the appellant’s submissions is the proposition that “prospecting” for the purposes of s 33 of the PO Act and cl 6(d) of the Mining SEPP are the same. They point to the definition of “petroleum exploration” in cl 3 of the Mining SEPP (“prospecting pursuant to an exploration licence, assessment lease or production lease” under the PO Act). They say that it does not follow from this definition, nor from the language of cl 6(d), that cl 6(d) is inapplicable where the project that is being characterised spans several petroleum titles.

They argue that from a land use planning perspective, boundaries such as land titles and tenements are artificial delineations (giving as an example the fact that pilot wells may be on a number of different land titles or tenements). They say that it is necessary to construe the whole of the activities conducted in determining the proper characterisation for planning purposes and that, in the present case, there is physically and operationally no difference between the part of the land that is PAL 2 and the part within PEL 238. They argue that, notwithstanding that “assessment” as well as “exploration” is permitted on PAL 2, the relevant land on which that operation is carried out is the whole of the land. They submit that the tenement boundary is neither relevant nor determinative in the characterisation process and that even if a “narrower” definition of “prospecting” is adopted and the relevant activities comprised in the Leewood Project are not “prospecting” under the PO Act, they may still be characterised as being for the purpose of “petroleum exploration” within the meaning of the Mining SEPP.

In response, the appellant submits that it is both incorrect and redundant to suggest that development could be characterised as serving the purpose of prospecting/petroleum exploration without actually being prospecting and that for a development to gain the benefit of cl 6(d) it must be prospecting. It submits that the use of the Leewood Project for a water treatment plant and irrigation scheme is fundamentally different from the purpose that the Santos parties allege it serves (prospecting) and that in those circumstances the Leewood Project should be considered to serve the overall purpose of prospecting only where it can be demonstrated that it is necessary to that overall purpose – and, therefore, would in any case fall within the definition of prospecting in the PO Act.

The third respondent made submissions on two issues, the first of which was as to the principles by which, on the proper construction of the PO Act, it is to be determined whether the carrying out of works on land is “prospecting” within the meaning of that Act and whether “prospecting” can extend to carrying out works for the purpose of testing the quality and quantity of petroleum in land comprised in another petroleum title held by the holder of the assessment lease.

The third respondent appears to accept that a literal reading of ss 29 and 33 of the PO Act, read with the definition of “prospect” in s 3(1), is that land comprised in a petroleum title cannot encompass the carrying out of works on that land for the purposes of the holder testing the quality and quantity of petroleum in, and the potential to recover petroleum from, other land over which the holder has a petroleum title. However, the third respondent says that such a reading of the Act would produce absurd consequences, identifying those as being that a facility which could be used for prospecting on adjacent petroleum assessment leases would have to be separately constructed on each. It argues that the scheme of the PO Act is that parts of PELs may become such that what was once a single petroleum title may become two petroleum titles.

It says that on the appellant’s construction a facility that was previously validly used in respect of a PEL could no longer be used (in the absence of fresh development consent) to prospect over that part of the PAL or over the balance of the PAL, depending on where the facility was located.

The third respondent argues (notice of contention ground 1) that a reasonably open construction that would avoid such consequences can be achieved by application of s 8(b) of the Interpretation Act 1987 (NSW), namely that a reference to a word or expression in the singular includes a reference to the word or expression in the plural. Thus, it argues that in each of s 29 and s 33 the reference to the holder of an exploration licence or assessment lease can be read in the plural and thus permit the holder to prospect “on the land comprised in” the leases or licences as the case may be. It accepts that such an approach can apply only where the petroleum titles are of the same kind (for example, two or more exploration licences or two or more assessment leases) but submits that, so far as prospecting is concerned, it would be anomalous if a similar approach did not apply where the titleholder has one or more exploration licences and one or more assessment leases given that each kind of title permits prospecting and the scheme of the PO Act is that parts of exploration licences may become assessment leases.

The third respondent says that a similar result can be produced by two alternative routes (its notice of contention ground 2).

First, it argues for a distributive reading of the sections: that the titleholder has the exclusive right to prospect for petroleum on the land comprised in the licence (s 29) and the land comprised in the lease (s 33); and that the definition of “prospect” is to be read into this right applied across the combined land of the licence and the lease; thus the holder may carry out works on the combined land for the purpose of testing (etc.) petroleum on the combined land. It argues that this is consistent with the fact that the definition of “prospect” does not refer to particular land, but to land generally (and says it is consistent with the approach to pluralising in cases of two petroleum titles of the same kind). The third respondent submits that this does not involve implying any words into the sections or ignoring the definition; rather, it reads the definition into the substantive provisions after the titleholder’s rights to prospect are identified and combined. It says that the same kind of analysis applies if the petroleum titles at issue include, as here, a PPL.

In the alternative, invoking the confirmation by the High Court in Taylor v The Owners-Strata Plan No 11564 (2014) 253 CLR 531; [2014] HCA 9 at [37]-[39] that there may be circumstances in which a purposive construction allows reading a provision as if it contained additional words, the third respondent argues that it is permissible to imply words into ss 29 and 33 along the following lines, using s 33 as an example:

The third respondent argues that the objectives of the PO Act, as gleaned from the second reading speech to the Petroleum (Onshore) Bill 1991 (NSW), NSW Legislative Assembly, Parliamentary Debates (Hansard), 30 April 1991 at 2706 (since express objects were not inserted into the legislation until 2015 with effect from 1 March 2016), include encouraging petroleum exploration and addressing the planning and environmental impacts of petroleum exploration. It submits that those objects are not served by the consequences to which it has pointed of the appellant’s (literal) construction of the relevant sections. In particular, it says that the consequences of the appellant’s construction would tend to discourage and hamper the discovery and development of petroleum resources and increase the impacts on the environment by the replication of works across petroleum titles. It submits that, given those consequences, it is apparent that the legislature inadvertently omitted from consideration the case of works constituting prospecting being used for prospecting across more than one title; and that the way in which the matter would have been dealt with by Parliament can readily be stated, by adopting the approach of pluralising the subject matter of ss 29 and 33. Thus it submits that the test in Jones v Wrotham Park Settled Estates [1980] AC 74 at 105-106, as modified in Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586 at 592; [2000] 2 All ER 109 at 115, is satisfied in the present case.

The third respondent argues that the more limited implication preferred by the primary judge does not fully address the difficulties identified by it and urges the Court to conclude that, where a titleholder holds both a PAL and one or more other petroleum titles permitting prospecting, works may be carried out on the PAL which are for the purpose of testing the quality and quantity of petroleum in the land comprised in the other titles.

The appellant, in response, contends that the third respondent’s proposed alternative interpretations of ss 29 and 33 of the PO Act are too broad in that they contain no geographic limitation or suggestion that titles held in common ownership need to be adjacent. The appellant argues that, on the third respondent’s interpretation of the PO Act, waste from one petroleum title could be brought to another for treatment and disposal on that land even though it may be unrelated and a great distance away, provided that the titles are in the same ownership. The appellant argues that, to the extent this can be considered prospecting, it would permit significant interference with property rights and that Parliament did not intend that a landholder would be subjected not just to the impacts of prospecting on his/her land, but also to the impacts of prospecting on any number of titles within the region.

The appellant also notes that an essential element of the third respondent’s interpretation is that the relevant petroleum titles are held in common and argues out that, since PPL 3 has different ownership from that of PAL 2 and PEL 238, this interpretation could have no application to the Leewood Project (the approval for which permits the treatment of produced water from PPL 3).

As noted above, the parties are in agreement that, when characterising the purpose of a development for planning purposes, the development must be considered as a whole.

In Pathold No 176 Pty Ltd v Minister for Transport Services [2005] NSWLEC 184, Bignold J stated (at [20]) that:

The parties also appear broadly in agreement that the relevant principles to be applied in the characterisation of the Leewood Project’s purpose are as collated by Biscoe J in Australians for Sustainable Development (set out at [146] below). In that case, Biscoe J also noted (at [271]) what was said by Glass JA in Foodbarn Pty Ltd v Solicitor-General (1975) 32 LGRA 157 (Foodbarn) (at 161), namely that:

In the present case, the primary judge certainly identified the component parts of the Leewood Project and in that sense considered the entirety of the project. However, it is difficult to resist the appellant’s contention that his Honour did not characterise the Leewood Project as a whole but instead bifurcated the project into separate parts, determining that one part (up to the crop irrigation component) was permissible without development consent as it was “prospecting” and hence for the purpose of “petroleum exploration” and that a separate and distinct part (the crop irrigation component) was for the purpose of commercial agriculture (permissible under the Narrabri LEP).

The error in that approach, in my opinion, is that it led to a finding that did not address the question whether the Leewood Project, as a whole, was for the purpose of petroleum exploration within the meaning of cl 6(d) of the Mining SEPP. Such a task would have required a determination as to whether the use of the land for crop irrigation (which his Honour found to be a separate and distinct use) was ancillary and subordinate or subservient to the purposes of petroleum exploration (see Foodbarn at 161) or was independent of the use of the land for petroleum exploration purposes (again, see Foodbarn at 161; Baulkham Hills at 409-410, which I consider below).

Therefore, ground 1(a) is made good. However, for the reasons put forward by the Santos parties in relation to the proper characterisation of the Leewood Project for the purposes of cl 6 of the Mining SEPP, nothing turns on this error.

Turning then to ground 1(b), and ground 2 of the Santos parties’ notice of contention, it was recognised (at 383) in Penrith City Council that characterisation of purpose in a planning context is a question of fact and degree.

It is useful at this stage to set out the principles applicable when considering the purpose of development, collated (at [270]) by Biscoe J in Australians for Sustainable Development. They were as follows:

Biscoe J went on (at [272] in Australians for Sustainable Development) to say that a claimed ancillary use must be subordinate to the permissible use, such that the ancillary use can be characterised as an aspect of the overall permissible purpose, referring to the following passages from the judgment of Meagher JA (with whom Samuels AP and Clarke JA concurred) in Baulkham Hills at 409-410:

I will leave aside, for the moment, the meaning of “waste” in the present context (which is also the subject of issues raised in grounds 4-5 of the third respondent’s notice of contention). I note that there was no evidence from which one would draw an inference that, but for the need to treat and beneficially reuse water produced from the petroleum activities, the crop irrigation activities would have been independently pursued. Nor would I draw such an inference having regard to the overall integrated petroleum exploration operations the Santos parties had been pursuing for some time. In those circumstances, the imposition on the grant of PAL 2 of the condition that activities be conducted under an approved POP and the requirement that such a POP deal with the treatment and beneficial reuse of produced water (treated as a separate matter for waste management in the REF Guidelines) lead in my opinion to the conclusion that the proposed water treatment management facilities and irrigation activities were activities proposed to be engaged in for the purpose of satisfying the condition on PAL 2 and therefore for the purposes of enabling the petroleum exploration and appraisal activities to be carried out.

Acceptance by the Santos parties that there were other ways that could have been adopted in order to satisfy the beneficial reuse requirement does not alter the conclusion that the water treatment facilities in the present case were for the purpose of compliance with the requirement for a PWMP meeting the requirements set out in the REF guidelines as to water management. Such a plan for the treatment of the produced water and the beneficial reuse of the treated water was essential for the carrying on by the Santos parties of their petroleum exploration and appraisal or prospecting activities. In that sense, the Leewood Project as a whole was undoubtedly “for the purposes of petroleum exploration”.

If the proper characterisation of the use for crop irrigation, as the appellant contends, were that it is a related but independent use of the land (and not an aspect of the overall purpose of petroleum exploration) then I accept that it could not be said that it was, considered as a whole, development permissible without consent under cl 6 of the Mining SEPP. However, the beneficial reuse of the produced water, following treatment at the facility, was a requirement of the grant of PAL 2 and in that sense was not independent but rather was part, and for the purposes, of the petroleum exploration activities. This is not a case analogous to the bookshop example considered by Meagher JA in Baulkham Hills, since in that example it does not appear that the additional activity of book selling was for the purposes of satisfying a mandatory condition applicable to the book publishing activity.

As noted by the third respondent (referring to Foodbarn at 160-161; Lizzio v Ryde Municipal Council (1983) 155 CLR 211 at 216-217; 223-224; [1983] HCA 22; North Sydney Municipal Council v Hall (1987) 62 LGRA 1 at 5-6; Penrith City Council at 385-387; and Abret Pty Ltd v Wingecarribee Shire Council (2011) 180 LGERA 343; [2011] NSWCA 107 at [54]), the relevant purpose need not be the sole purpose. It is sufficient if that purpose is the dominant purpose and any other purpose is subservient and incidental. That characterisation involves questions of fact and degree and is partly impressionistic. Of course, that is not to say that the process of characterisation is an unfettered evaluation.

As for the argument by the appellant that the Leewood Project should properly have been characterised as a “resource recovery facility” or “waste disposal facility”, or should have been regarded as being both for the purpose of “petroleum exploration” and a “resource recovery facility” or “waste disposal facility”, in my opinion this fails to give appropriate weight to the requirement (under condition 2 of the PAL) that there be an approved plan for the treatment and beneficial reuse of produced water.

Ground 1(b) is not in my opinion made good.

As to the meaning of “waste”, the third respondent made various submissions (grounds 4-5 of its notice of contention) that will be considered in due course in the context of ground 2 of the appeal grounds.

Grounds 1(c) and 1(d) may be considered together.

There is considerable force, in my opinion, in the submission by the appellant that the so-called purposive interpretation of s 33 of the PO Act was not justified having regard to the principles outlined in Cooper Brooks (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 304-305 (Gibbs CJ); 319-321 (Mason and Wilson JJ); [1981] HCA 26. I am not persuaded by the third respondent’s arguments on that issue. Nevertheless, in light of the conclusion I have reached on ground 2 it is not strictly necessary to determine grounds 1(c) and (d) (nor the Santos parties’ contentions as to the proper construction of the right to “prospect” under the PO ACT) and it is not appropriate to do so given the potential for unforeseen ramifications in relation to other projects.

Ground 2 of the notice of appeal identifies as the second main error the finding by the primary judge that cl 6(d) of the Mining SEPP applied to the Leewood Project (or part thereof) so as to make it permissible without the need for development consent under the EP&A Act (at [102]).

The appellant argues that if, as his Honour found, the Leewood Project is properly characterised as “prospecting” then the Infrastructure SEPP nevertheless prevailed over the Mining SEPP such that the Leewood Project still required development consent. It submits that a development that falls within the purview of the Infrastructure SEPP requires development consent irrespective of whether it can also be characterised as “prospecting” or “petroleum exploration” within the meaning of cl 6(d) of the Mining SEPP.

The appellant notes, first, the respective commencement dates of the policy (the Mining SEPP commenced on 16 February 2007 and the Infrastructure SEPP commenced on 1 January 2008). It argues that the Infrastructure SEPP should therefore be taken to have been made with full appreciation of the Mining SEPP. Second, it argues that the Infrastructure SEPP is a more specific instrument, regulating defined classes of infrastructure (such as “waste or resource management facilities”) with detailed provision for such infrastructure. Thus, the appellant argues that, though interrelated parts of a legislative scheme, the Infrastructure SEPP applies in place of the Mining SEPP in the case of the specific classes of infrastructure with which it deals.

The Santos parties submit that no relevant inconsistency between the Mining SEPP and the Infrastructure SEPP arises in the present case (their notice of contention ground 9) on the basis that the Leewood Project is properly characterised as being for the purpose of petroleum exploration, and is not a development for the purpose of “waste or resource management facilities” within the meaning of cl 121(1) of the Infrastructure SEPP (their notice of contention ground 7). They further argue that there is no inconsistency in reading cl 121 of the Infrastructure SEPP so as not to apply to development which is properly characterised for the purpose of “petroleum exploration” under the Mining SEPP. They submit that such an interpretation maintains the unity of the statutory scheme and promotes its underlying purposes. (The appellant agrees that there is no inconsistency in reading cl 121 of the Infrastructure SEPP so as not to apply to development which is properly characterised for the purpose of “petroleum exploration” but contends that this adds further weight to the proposition that the Leewood Project is not properly characterised as “petroleum exploration”.)

The Santos parties point out that the Infrastructure SEPP deals with infrastructure generally across the State and with 26 broad categories of infrastructure (referring to Part 3, Divs 1-26), whereas the Mining SEPP specifically regulates development for the purposes of mining, petroleum production and extractive industry. They argue that reading the Infrastructure SEPP in the manner contended for by the appellant would have the (absurd) result that fundamental elements of mining, such as tailings dams and waste management emplacements and water storage ponds, would be regulated under the Infrastructure SEPP not the Mining SEPP. For the same reasons, they submit that if, despite their contention, there is an inconsistency between the Mining SEPP and the Infrastructure SEPP, then the Mining SEPP prevails.

The Santos parties argue that the reference to other classes of infrastructure illustrates that the Infrastructure SEPP was not intended to apply to classes of infrastructure which are covered by the Mining SEPP. They refer to Div 24 of the Infrastructure SEPP, which relates to “water supply systems” including “water treatment facilities” (for which there is no consent requirement). They point out that a petroleum exploration operation contains different elements, including pilot wells, pipelines, water storage ponds and water treatment facilities and argue that, for characterisation purposes, it would be incorrect to divide the operation up into each separate component part. They submit that the dichotomy between the definition of a “waste disposal facility” (in cl 120) and a “water treatment facility” (in cl 124) under the Infrastructure SEPP highlights the danger of so doing. (In response, the appellant cavils with the proposition that the Mining SEPP is “a more specific instrument”, noting that the Infrastructure SEPP does not just deal with infrastructure generally but sets out carefully defined classes of infrastructure and makes detailed provision for what may take place and where, and emphasises that the Infrastructure SEPP was made after, and with full appreciation of the content of, the Mining SEPP.)

The appellant next argues that the primary judge erred in failing to apply cl 18 of the Mining SEPP (which provides that nothing in the Mining SEPP makes permissible the use of land “for the receipt or disposal of waste brought on to the land from other land”) to the Leewood Project, and should have found that cl 18 applied, such that cl 6(d) of the Mining SEPP in turn did not apply.

The appellant notes that the development for which the Santos parties seek to obtain the benefit of cl 6(d) of the Mining SEPP is the Leewood Project, not the entirety of their petroleum operation. Accordingly, the appellant says that the application of cl 18 of the Mining SEPP should be considered only in relation to the Leewood Project, not the entire operation.

The appellant argues that produced water is “waste”, it being an unwanted by-product of prospecting, assessment or production activities that requires disposal (for which an environment protection licence from the EPA is required), and that it is immaterial for the operation of cl 18 whether or not the receipt and disposal of waste from other land (i.e., PEL 238 and PPL 3) on PAL 2 is ancillary or incidental to other permissible development. Therefore, the appellant contends that cl 6(d) does not permit land in PAL 2 to be used for the receipt or disposal of produced water brought onto the land from PEL 238 or PPL 3. It maintains that the Leewood Project required development consent under the Infrastructure SEPP.

The Santos parties contend that cl 18 of the Mining SEPP does not apply to the Leewood Project. They argue that, to determine what is meant by the words “use of land” and “other land” in cl 18, the “land” on which the receipt or disposal of waste is to occur must first be determined and that, for this purpose, the petroleum operation should be considered in its entirety. They argue that, in a planning context, references to “land” mean the relevant parcel determined according to its use and occupation. They emphasise that the whole of PAL 2, PEL 238 and PPL 3 are operated and regulated as a single petroleum exploration operation (referring to Mr Mitchley’s affidavit at [5]-[57]), noting that the infrastructure for the CSG exploration activities carried out on the petroleum titles is an integrated operation of wells, water and gas pipelines; that both water and gas are produced by the wells and travel via pipelines within the integrated network; and that the produced water is a by-product generated by the whole of this operation.

The Santos parties point out that PAL 2 and PPL 3 are within PEL 238 and are a part of a conversion and upgrade of PEL 238. They submit that the treatment of produced water at Leewood is the treatment of produced water generated on that same “land”, being the integrated CSG exploration activities and that the treatment of the produced water occurs on the same land as that which generated it. They submit that no waste is brought on from “other land”. They also argue that the Leewood Project is located on the same “land” under cl 18 because it is located on the same allotment as the Leewood ponds (construction of which was approved and in respect of which there has been no legal challenge) which store the produced water from the pilot wells. They argue that the Leewood Project treats the water removed from the ponds on the same parcel of land. They note that the whole of the tenements, including Leewood, is operated under one EPL from the EPA, referring to the express reference to Leewood Phase 2 in the description of the premises to which the EPL relates.

Further, and in the alternative, the Santos parties argue that the Leewood Project does not involve the receipt or disposal of “waste”; rather, they say it involves the treatment of the produced water which enables it to be recycled for use in the exploration activities and for irrigation of crops. (As to this, the appellant says that the Leewood Project clearly provides for the receipt and disposal of “waste”, noting that even after treatment, the produced water is considered “medium strength effluent” by the EPA.)

The Santos parties submit that the construction contended for by the appellant would require material characterised as “waste” generated over an integrated large-scale exploration operation not to be transferred across contiguous tenement boundaries and say that this does not promote the underlying purpose or object of the Mining SEPP.

The Santos parties also note that the EPL is in respect of the Scheduled Activity of “Petroleum Exploration, Assessment and Production” under the Protection of the Environment Operations Act 1997 (NSW). Under that Act there are other categories of Scheduled Activity related to “waste” but the EPA has not categorised any activity at Leewood under these categories, despite specifically referring to the Leewood Project in the EPL.

In that regard, the appellant argues that the fact that the EPA has not categorised the Scheduled Activities pertaining to the EPL applying to the Santos parties’ petroleum exploration activities, which include the Project, as activities related to waste is not relevant to the interpretation of the meaning of “waste” within the Infrastructure SEPP or Mining SEPP. The appellant also notes that the EPL has not yet been amended to approve the irrigation and lucerne cropping component of the Leewood Project. The appellant says that this component will attract further load-based licensing fees, primarily in relation to the emission of salts within the treated produced water, and clearly constitutes waste disposal.

The appellant points out in reply that the land the subject of the Approval, and which is approved for use, is Leewood (land owned by the first respondent) and that the waste is brought onto the land from other land, beyond Leewood and beyond PAL 2. It submits that whether or not the receipt of the waste is approved by some other approval does not change the fact that it is received from other land and disposed of at Leewood. It argues that the Santos parties’ attempt to treat “the land” as effectively any title from which the waste originates would defeat entirely the purpose of cl 18 of the Mining SEPP.

The appellant contends that past management and, if it be the case, regulation of the three titles as one “operation” is a management choice by the Santos parties but that, and any past practice of the third respondent, cannot be relied on to alter the proper construction of the legislation. The appellant says that if the reasoning of the Santos parties is accepted, a proposal could be approved for produced water to be brought from anywhere in the State that a titleholder decided to include in a single petroleum operation and says that such an interpretation is not supported by the legislation.

Contrary to the Santos parties’ submission, the appellant says that its construction does not prevent waste being transferred over the boundaries of multiple tenements that comprise an integrated large scale petroleum operation, rather it merely prevents this from occurring without development consent.

The appellant argues that the proper interpretation of the definition of “petroleum exploration” in the Mining SEPP precludes the operation of cl 6(d) where the operation of the Leewood Project spans several petroleum titles. It argues that petroleum exploration is for all intents and purposes equivalent to prospecting and that the boundaries of titles are relevant to prospecting because, under the PO Act, a titleholder has the right to prospect only within the boundaries of the individual title held. It argues that the boundaries of titles are thus also relevant to development for the purposes of petroleum exploration under the Mining SEPP. The appellant submits that, having regard to the limitations applying to the metes and bounds of petroleum titles, cl 6(d) cannot make permissible development that is not properly described as prospecting under the PO Act, even if that development may be related to the purpose of petroleum exploration.

The second issue raised by the third respondent relates to ground 2 of the ground of appeal (namely, the interaction between cl 121(1) of the Infrastructure SEPP and cl 6 of the Mining SEPP and the meaning of “waste” in cl 121(1) of the former and cl 18 of the latter).

The third respondent submits that where there is development both for the purpose of “petroleum exploration” and for the purpose of “waste or resource facilities”, there is an apparent conflict between cl 121(1) of the Infrastructure SEPP, which permits development for the purpose of “waste or resource management facilities”, with consent, on land in a “prescribed zone”, and cl 6 of the Mining SEPP, which provides that development for the purpose of “petroleum exploration” may be carried out without development consent. It submits that this apparent conflict is not resolved by cl 8 of the Infrastructure SEPP or cl 5 of the Mining SEPP (both of which deal with the relationship of the SEPP’s to other environmental planning instruments, largely giving priority to the SEPP’s); nor by s 47(2) of the PO Act, which contemplates the restriction of operations under a petroleum title by SEPP’s made on or after the commencement of that subsection on 16 December 2005, since both SEPP’s were made after that date.

The third respondent argues that the apparent conflict is to be resolved in accordance with s 36(1)(c) of the EP&A Act, which provides that the general presumptions of the law as to when an Act prevails over another Act apply to when one kind of environmental planning instrument prevails over another of the same kind. It is said that, except as a last resort, the apparent conflict is not to be resolved on the basis that the Infrastructure SEPP prevails because it was later in time than and therefore impliedly repealed the Mining SEPP (referring to Sweetwater Action Group Inc v Minister for Planning [2011] NSWLEC 106 at [70]-[75]).

The third respondent submits that, for three reasons, any conflict is to be resolved in favour of cl 6 of the Mining SEPP (its notice of contention ground 3). First, that cl 6 is more emphatic in its terms than cl 121(1) (though it concedes that this is not a strong point). Second, that the Mining SEPP is a more specific instrument than the Infrastructure SEPP, the latter covering many different sectors of industry. Third, that as the effect of a requirement for development consent is to render criminal development without such consent (EP&A Acts 125(1)), any doubt as to the construction should be resolved in favour of a construction which involves a lesser rather than greater requirement to obtain development consent. The third respondent thus submits that if a development is properly to be characterised as falling within both cl 6 of the Mining SEPP and cl 121(1) of the Infrastructure SEPP, the former should prevail and no development consent is required.

As to the meaning of “waste” in the respective SEPP’s, the third respondent argues that the “waste” to which both cl 121(1) of the Infrastructure SEPP and cl 6 of the Mining SEPP refer is solid waste (notice of contention grounds 4 and 5). The third respondent notes that in Glass Recovery Services (at [75]), the Land and Environment Court considered that the starting point in considering what was meant by “waste” in the Infrastructure SEPP was its ordinary meaning, namely “unwanted and unused material, anything left over or superfluous, excess material, by-product …”. The third respondent points out that, unlike other environmental laws, there is no provision in the Infrastructure SEPP to the effect that waste includes “any substance (whether solid, liquid or gaseous)”.

The third respondent advances five matters in support of its contention that “waste” in the Infrastructure SEPP means only solid waste: first, that if “waste” referred to waste water there would be a considerable overlap between cl 121(1) and cll 105-107 which deal with sewerage systems; second, that “waste” is not defined relevantly to cl 121(1) (the third respondent says that the reference to “energy generation from waste gases and water treatment” in the definition of “resource recovery facility” in cl 120 is a reference to the generation of energy, i.e., it envisions that gases or water may be produced by the treatment of solid waste); third, that there is express reference to “liquid” waste in cl 122 and that the term “waste water” is used in various of the Standard Instrument definitions which are adopted by cl 5(1) of the Infrastructure SEPP; fourth, it points to aspects of cll 120-123 that are suggestive of solid waste (such as references to “landfill”, “storage”, “compacting” and “putrescible waste”); and, finally, that if “waste” in cl 121(1) referred to liquid waste it would be apt to lead to considerable inconsistency with local environmental plans based on the standard form prescribed pursuant to s 33A of the EP&A Act which contemplates the regulation of “water recycling facilities” and “water treatment facilities” by local environment plans (LEPs).

As to cl 18 of the Mining SEPP, the third respondent again points to language which it suggests is apt to refer to solid waste (referring to the Note to cl 18 and to cll 7(4)(b), 10(3)(h)(i), 15(3), 17(2)(b); and to the fact that there is express reference to waste water in cl 103(h)(i)).

Insofar as the third respondent suggests that Div 23 of the Infrastructure SEPP only deals with solid waste, to the exclusion of liquid, the appellant notes that: a liquid waste disposal depot is included within the division (cl 122); water treatment is included in the definition of “resource recovery facility” (cl 120); and Div 23 is headed “Division 23 [w]aste or resource management facilities”. They submit that this is clear evidence to the contrary (and refer also to Interpretation Act 1987, s 35(l)). As to the third respondent’s submission that if cl 121(1) referred to liquid waste it would be apt to lead to considerable inconsistency with LEPs based on the standard form prescribed pursuant to s 33A of the EP&A Act, the appellant says that it is a purpose of the Infrastructure SEPP to be inconsistent with LEPs.

Ground 2 is not made good.

First, in my opinion, the Leewood Project should be characterised as one which is for the treatment of produced water for the purposes of petroleum exploration; not as one that is for the dominant purpose of a waste disposal or resource recovery facility. While the production of water and brine from the coal seam process is a by-product (and, arguably, an unwanted by-product) of the process, so as to meet the common conception of waste, it is noteworthy that the REF Guidelines treat waste management as a separate issue from water management.

In any event, to the extent that there is an inconsistency between the Mining SEPP and the Infrastructure SEPP in this regard, I am of the opinion that the former would prevail, on the basis that it deals specifically with environmental planning policy in relation to mining, whereas the latter deals (albeit in a specific way) with various classes of infrastructure across the State and is not confined to mining. It is not necessary in those circumstances to determine the third respondent’s contentions in relation to the meaning of “waste” for the purposes of the relevant SEPPs.

As to the operation of cl 18 of the Mining SEPP, I agree with the submission of the Santos parties that the word “land” in cl 18, understood in a planning context, should be read as the land on which the relevant (overall) development is taking place (even though the formal application is in respect of a particular petroleum title).

The appellant submits that the decisions to grant the Approval and the Renewal were made on “false bases” (in that they were made under the misapprehension that development consent was not required and says that, in making these decisions, the respective delegates of the third respondent failed to take into account the relevant consideration that the project required development consent). Thus it is submitted that the primary judge erred in finding that the Transferred Proceedings should be dismissed and should have found that both the Approval and the Renewal were invalid and of no effect. (As noted earlier, the appellant opposes the severance of the Approval from the Renewal.)

The Santos parties say that, if development consent was not required for the Leewood Project, then this ground must fail. They submit that even if, contrary to their contention, development consent was required, the grants of the Approval and Renewal were nevertheless valid (notice of contention ground 10) on the basis that, if development consent was required, then, by their purported compliance with Pt 5 of the EP&A Act, the Minister’s delegate considered the environmental impacts of the Leewood Project before granting the Approval. They argue that if, on the other hand, Pt 5 of the Act did not strictly apply to require this to be done, then the environmental impacts of the Leewood Project were nevertheless not prohibited (i.e., irrelevant) matters for consideration under the PO Act, and consequently the consideration so given by the Minister’s delegate did not invalidate the Approval.

The appellant says that it is clear that the decision-maker here had in mind a regime or scheme of regulation for this activity that was incorrect and thus took into account something that was irrelevant (T 7.47-18.2). It argues that if the third respondent’s delegate had no power to authorise the Leewood Project (because it was not “prospecting”) then the delegate was under a fundamental misapprehension as to the scope of her powers. It argues that the misapprehension was even more fundamental if development consent was required and Pt 5 of the EP&A Act had no application to the assessment of the Leewood Project or Approval. It is submitted that had the delegate properly understood the legislative framework a different decision may have been made. The appellant further argues that if there is no need to rely on the PO Act as a source of authorisation for the Leewood Project then the Approval (and the Renewal to the extent it incorporated the Approval) should not stand.

As to the Santos parties’ submission that the Approval and the Renewal were valid because the third respondent’s delegate considered the environmental impacts of the Leewood Project before granting the Approval, the appellant contends that this misconstrues the appellant's case. The appellant contends that the delegate so misapprehended the scope of her powers that she thought development consent was not required and failed to take into account the relevant consideration that the Leewood Project required development consent, not the environmental impacts of the project. Further, the appellant points out that the environmental assessment requirements under Pt 4 and Pt 5 of the EP&A Act are quite different, and therefore consideration of the environmental assessment as required under Pt 5 would not satisfy the requirement to consider the environmental assessment as required under Pt 4.

The “excess of power” ground of appeal can be disposed of shortly in light of the conclusion in relation to ground 2, on the basis that since development consent was not required there can have been no failure to take that into account.

Finally, by ground 1 of their notice of contention the Santos parties have raised an issue as to the proper construction of the PO Act, namely as to the meaning of “prospecting” under that Act.

The Santos parties note that s 7(1) of the PO Act imposes a conditional prohibition (i.e., that a person “must not prospect for or mine petroleum except in accordance with a petroleum title”), the conditional prohibition being relaxed by, among other things, the scheme of petroleum titles provided for in the PO Act which confer “exclusive right[s]” upon the holder, in accordance with the conditions of that title, to undertake the activities specified. They say that those exclusive rights confer a personal proprietary right and are separate from the rights which the owner of a freehold interest in land may enjoy. They note that there is no express statutory prohibition in the PO legislation on carrying out works which are not “prospecting” or mining for petroleum.

The Santos parties note that petroleum titles under the PO Act are subject to any conditions lawfully imposed under that Act. They point out that, at the relevant time, s 23(1)(a) empowered the Minister to impose conditions with respect to work to be carried out by the holder of the title in or in relation to the land. They argue that such conditions do not expand the rights conferred on a titleholder under the PO Act; rather, they regulate and impose further prohibitions upon their exercise.

The Santos parties argue that, to the extent that the activities comprised in the Leewood Project do not comprise “prospecting”, there is no need to rely upon the PO Act as a source of authorisation to carry out those activities; the only source of such a requirement being Condition 2 of PAL 2, the validity of which was not challenged by the appellant. They submit that if, on the other hand, the activities do constitute “prospecting” under the PO Act, then (for the reasons given in response to the appellant’s first ground of appeal and their other notice of contention grounds) the appellant‘s challenge in the Transferred Proceeding must also fail.

The appellant’s response to the submission that, if the Project is prospecting, then no approval under the PO Act is required (and therefore the Transferred Proceedings disclose no cause of action) is that this is both wrong and that it misstates the appellant’s case. The appellant says that the grant of the Approval affects substantive rights in that, having been authorised under a petroleum title to carry out the operations described in the Approval, those operations were exempted from the operation of the Narrabri LEP. Thus it says the Approval was of practical effect and affected the relationship between the third respondent and the Santos parties (referring to Tasmanian Conservation Trust Inc v Minister for Resources and Gunns Ltd [No 2] (1996) 65 FCR 25; (1996) 90 LGERA 106 at 119).

The appellant submits that the fact that the Leewood Project is an activity required and/or regulated by the conditions of the petroleum tenements granted under the PO Act, such as those referred to in the now repealed s 23 of the PO Act, is irrelevant to the question whether or not the Project requires development consent under the EP&A Act. The appellant argues that the conditions attached to PAL 2 cannot override the scheme of development consent dictated by the EP&A Act and says that they were not intended to do so. The appellant emphasises that the express wording in ss 29 and 33 of the PO Act limits (in the absence of development consent) the operation of a water treatment plant, to the extent it can be considered prospecting, to treatment of water produced on the same title as that on which the plant is located.

The issue raised by the Santos parties’ notice of contention ground 1 is not strictly necessary to determine if (as I consider to be the case) his Honour’s conclusion as to the purpose of the development is correct and the development was permissible without development consent under the Mining SEPP. That is because, as the Santos parties have pointed out, it was a condition of PAL 2 that the activities be carried out in accordance with an approval POP, so approval of the amended POP would have been necessary whether or not the Leewood Project was strictly “prospecting” for the purposes of the definition of that term in the PO Act.

The appeal should be dismissed. The appellant should pay the costs of the first, second and fourth respondents on the basis of the general rule that costs ordinarily follow the event. The third respondent does not seek its costs of the appeal. Thus the orders I propose are as follows:

PAYNE JA: I agree with the reasons of Ward JA and the orders proposed by her Honour. I also agree with Meagher JA’s additional reasons which emphasise that the appellant did not in the proceedings before the primary judge challenge the validity of condition 2 of PAL 2 or allege that the amended POP was not a “Petroleum Operations Plan” for the purposes of condition 2. I have nothing to add in relation to appeal ground 1. I wish only to add some additional remarks about appeal ground 2.

There is no relevant inconsistency between the Mining SEPP and the Infrastructure SEPP which arises in the present case. For the reasons Ward JA explains, the Leewood Project is properly characterised as being for the dominant – in the sense of ruling or prevailing – purpose of petroleum exploration and not for the purpose of waste disposal or resource management facilities.

The provisions of the Mining SEPP and the Infrastructure SEPP may be read harmoniously by reading cl 121 of the Infrastructure SEPP, which relates to waste and resource management facilities, as not applying to development which is properly characterised “for the purpose of petroleum exploration” under the Mining SEPP. The Infrastructure SEPP deals with infrastructure generally and deals, in Pt 3 Divs 1-26, with a large number of identified facilities and projects, not including mining developments.

The Mining SEPP specifically regulates development for the purposes of mining. Such developments often include, for example, dams and water treatment facilities. Reading the Infrastructure SEPP in the manner contended by the appellant would have the result that the Leewood Project would be regulated under the Infrastructure SEPP not the Mining SEPP. This approach would not accord with orthodox principles of interpretation which require potentially conflicting provisions to be read together harmoniously, to the extent possible while maintaining the unity of all the statutory provisions: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 382; [1998] HCA 28 at [70].

I agree with Ward JA that if there is an inconsistency between the Mining SEPP and the Infrastructure SEPP, then the Mining SEPP prevails in this case on the basis that it deals specifically with environmental planning policy in relation to mining.

For the reasons given by Ward JA, cl 18 of the Mining SEPP does not apply to the Leewood Project. To determine what is meant by “use of land” and “other land” in cl 18, the “land” on which the receipt or disposal of waste is to occur must first be identified. For this purpose, the relevant development in its entirety must be considered.

The evidence in the present case is that the Leewood project involves the construction and operation of a water treatment plant to treat produced water and brine in the Leewood Ponds produced by previous and future exploration and appraisal activities. The whole of the three relevant parcels of land are operated and regulated as a single petroleum exploration operation. Water produced is a by-product of the whole of this exploration and appraisal operation. The treatment of produced water at the Leewood Project is the treatment of water generated on the same “land”, being the integrated coal seam gas exploration activities. No waste is brought from “other land”.

The Leewood Project is also located on the same “land” under cl 18 as it is located on the same land as the Leewood Ponds which store the produced water from the pilot wells. The Leewood Project treats the water removed from the ponds on the same parcel of land.

The effect of these conclusions is that development consent was not required and the appellant’s ground 3 must also fail.