The Horse Hill Ruling: What Now for Fossil Fuel?

Written by Yoshinori Maejima

Introduction

The BBC recently argued that the recent Horse Hill ruling puts “the future of UK fossil
fuel at stake”. This article will give an overview of the ruling, the impact it would have on
the fossil fuel industry, and what hydrocarbon project operators and law firms should do
to prepare for the ruling’s aftermath.

What is the Horse Hill ruling?

The Horse Hill Supreme Court decision, handed down on 20th June 2024, ruled in
favour of the appellant who challenged the Surrey County Council for granting
permission to Horse Hill Developments Ltd to extract crude oil in that area. The court
ruled in favour of the appellant because the EIA (Environmental Impact Assessments),
which was submitted with the council’s initial permission, did not account for
downstream greenhouse gas emissions. Downstream GHG emissions refer to the
greenhouse gases emitted during the combustion, use, and disposal of the crude oil
that would have been produced in Surrey.

This ruling is significant because it changes how the courts may view emissions caused
by the use and combustion of extracted oil. Although the crude oil produced in Surrey
would have to be refined before it could become a combustible product, the ruling
stated that the emissions produced by combusting the final product (refined oil) were a
direct and inevitable effect of crude oil production. The summary of the judgement
stated that “it is not merely likely but inevitable that the oil produced from the well site
will be refined and, as an end product, will eventually undergo combustion, and that that
combustion will produce greenhouse gas emissions”. Therefore, these downstream
impacts of producing crude oil would have to be accounted for by local councils and
regulators in the future.

The ruling recognised that it is wrong to confine the potential environmental impact of
the project to Surrey and that the potential harm caused to the environment is global,
expanding the court’s view on how direct the impact of crude oil extraction must be.
It is worth noting that this ruling primarily concerns onshore hydrocarbon projects (those
that take place on land) rather than offshore hydrocarbon projects (those that take place
on sea). However, it is likely that offshore hydrocarbon projects will also face similar
challenges in English courts in the future.

What impact has it had?

Environmental groups celebrated this decision as it appeared to mark a turning point in
their fight to limit fossil fuel extraction in the UK. The decision recognised the “hidden”
environmental costs of fossil fuel extraction as well as the fact that downstream GHG

emissions affected the entire planet and not solely the site of extraction. This marks yet
another setback for the UK fossil fuels industry in recent years after it suffered from
windfall taxes and the elimination of investment incentives.

This ruling could also support activists’ challenges against the Rosebank project
(managed by Equinor and Ithaca) in the North Sea and the Whitehaven coal project in
Cumbria. Rosebank, a large untapped oil reserve in the North Sea, has previously been
criticised by environmental activists for damaging marine life and preventing the country
from meeting its Net Zero targets. Already, in August 2024, the government chose not
to defend a legal challenge brought by activists against the decision to grant licenses to
Rosebank. The BBC argued that although this was “not the end” for Rosebank’s
operators, it was a significant setback. If the courts rule in favour of the activists
challenging Rosebank, Equinor and Ithaca would need to resubmit their Environmental
Impact Assessment again, which adds significant costs and delays to the project.
Environmental activists are hoping that such methods will eventually make offshore
fossil fuel projects unattractive to investors.

Although this judgement means that local councils would have to consider any potential
downstream GHG emissions when granting permission, this does not outlaw potentially
harmful projects from going forward. It is also unlikely that the concept of downstream
GHG emissions would apply to any other raw materials beyond oil and gas. Although
one could argue that the production of steel would “inevitably” lead to combustion if
used to produce cars and planes, Lord Leggatt stated that this was fundamentally
different to the inevitability of combustion in crude oil production.

How should energy companies and law firms prepare?

As previously mentioned, operators of hydrocarbon projects should prepare for delays
and additional costs as a result of increased litigation by environmental activists who
have become emboldened by the Horse Hill ruling.

The global advisory firm KPMG stated that operators who are currently applying for new
licenses should be prepared to declare the full downstream GHG emissions which
would result from their project. Additionally, developers whose project licenses were
approved prior to the ruling (without having to include the downstream GHG emissions
on their EIA) should ensure their contracts would not put them at a disadvantage after
the Horse Hill ruling and make amendments where necessary.

Despite such challenges to hydrocarbon project operators, law firms focusing on public
law, energy, and climate-related litigation could see this as an opportunity. More
companies will need to seek advice on delays in license approval, reputational
management, and litigation from climate activists. Furthermore, companies would turn
to law firms to ensure their Environmental Impact Assessments comply with the ruling.

Conclusion
This does not mark the end of the fossil fuel industry in the UK. However, combined with
the other pressures from the government and activists, the Horse Hill ruling adds further
challenges to hydrocarbon operators seeking to invest in the UK.

Sources

https://www.supremecourt.uk/cases/docs/uksc-2022-0064-judgment.pdf

https://www.supremecourt.uk/cases/docs/uksc-2022-0064-press-summary.pdf

https://kpmg.com/uk/en/home/insights/2024/07/horse-hill-supreme-court-
decision.html

https://www.kingsleynapley.co.uk/insights/blogs/public-law-blog/supreme-court-
clarifies-the-law-on-downstream-emissions-and-environmental-impact-assessments

https://www.leighday.co.uk/news/news/2024-news/historic-supreme-court-
judgment-rules-planning-permission-for-oil-production-at-horse-hill-surrey-is-unlawful-
and-must-be-overturned/

https://www.bbc.co.uk/news/articles/cx2m8zn95x1o

https://www.bbc.co.uk/news/articles/c255r8yej8ro

https://www.bbc.co.uk/news/articles/cxwwzmn12g9o

https://www.bbc.co.uk/news/science-environment-65965119