4.1. Standing

As a tool of investment appraisal for the public sector, BCA can potentially be applied across different definitions of society such as a local area, state, nation or the world. The choice regarding who has “standing” in a BCA and hence what constitutes the definition of society can be contentious. Although a federal government would usually perform analyses from a national perspective it can be argued that where major impacts spill over national borders, then BCA should be undertaken from a global perspective (Boardman, Greenberg, Vining & Weimer, Reference Boardman, Greenberg, Vining and Weimer2001). For the mining case study projects, impacts that spill over national borders include GHG costs and producer surplus benefits to foreign owners. At the other extreme residents living in the coal mining regions and environmental groups opposing mining have suggested that the BCA should be undertaken at the local level where many of the potential noise, dust and amenity impacts would occur and most of the producer surplus benefits of mining could be ignored. In NSW, the legislative context implies that BCAs be focused on the net benefits to NSW.

Limiting the BCA to give standing only to NSW residents creates a number of difficult issues for implementing the technique. State level analysis is confounded by the interconnected nature of the Australian economy where benefits that accrue at the national level are transferred between the States via the tax system. Specifically, company taxes are collected at the federal level but are dispersed between the States. In addition, net profits accruing to companies from a project are dispersed amongst shareholders or retained and reinvested. Determining the component that accrues to people in a specific geographic region is practically problematic. The problem extends to the cost side of the BCA equation. Resources used in a mining development may be drawn from across state boundaries (and even from overseas suppliers). Identifying the source of input supplies and adjusting accordingly would be a complex task.Footnote ⁸

It is not surprising therefore that Boardman et al. (Reference Boardman, Greenberg, Vining and Weimer2001) advise against conducting BCA at a subnational perspective. Not only can it result in a range of costs and benefits from a project being excluded, thus making BCA a less valuable tool for decision-makers, but from a practical perspective, the task of determining the geographical distribution of benefits and costs is near to impossible. Consequently, for the case studies considered in this paper, the BCAs were undertaken initially at the global level with subsequent consideration of the broad distribution of costs and benefits.

4.2. Definition of the project

How a project is defined has important implications for the identification and valuation of its costs and benefits. Even when a BCA is undertaken from a global perspective, and includes costs and benefits that accrue outside the national border, only the costs and benefits associated with the defined project are relevant.

For the three mining proposals, approval was being sought for the mining of coal and delivery to port for export or to domestic customers. Hence, only the costs and benefits of these activities were relevant. The question arising relates to the scope of GHG emissions to be considered under the project. Coal mining results in the release of “fugitive emissions” when the coal seam is disturbed. The mining operation and the transportation of coal also involve the burning of fossil fuels and hence the emission of GHG. Furthermore, when the coal is burnt – either in steel making or electricity generation – more GHGs are released to the atmosphere. Which of these GHG costs should be included in the BCA? Groups opposing the mining projects considered that GHG emissions associated with the burning of coal should be included in the BCAs (Quiggin, Reference Quiggin2012).

The critical point in addressing this question is that coal is an intermediate good, that is, it is an input to other production processes. These downstream uses of the coal constitute different projects, that themselves may be subject to BCAs. For example, a BCA of a coal-fired electricity generation project would include the cost of coal, labor, land and capital inputs, electricity distribution, and environmental impacts (such as GHG emissions from the burning of coal). The BCA of electricity generation would also include benefits such as the community’s consumers’ surplus from their use of electricity. All of these costs and benefits are relevant considerations in the BCA at this next stage of the production process but not of a BCA of the mining projects.Footnote ⁹

Hence the approach taken was to cost the GHG emissions arising from fugitive emissions at the mine sites as well as the emissions associated with mining and transportation activities, but not the emissions from the burning of coal. The rate per tonne of carbon dioxide equivalent emissions was the carbon tax rate (AUD23) which was assumed to be set to represent the social cost of carbon.

4.3. Financial values and transparency

At the core of the BCAs was the financial analysis of the projects undertaken by/for the proponent. This included projections of capital costs, operating costs, and revenues. This information is commercial-in-confidence and unable to be published in the EA. Consequently, BCA spreadsheets could not be published in the EA and the analysis could not be completely transparent.

A particular issue relates to assumed coal prices. BCA theory suggests that where markets for commodities are competitive then market prices should be used. International coal markets, on which the production of the case study mines was to be sold are relatively competitive, however, there is not just one price of coal. Coal is a heterogeneous commodity and can have different ash, moisture, calorific value, sulfur content, and other specifications. These factors combine to result in coal price differentiation from project to project as the coal production differed across mines and even from each mine at different stages in the mine’s production history. The case study BCAs therefore relied on the price predictions provided by proponents for the economic analyses, with sensitivity analysis undertaken for higher and lower values.

With different prices used as the basis for different projects and without the ability to always disclose the prices used, difficulties arise in defending the BCAs.

4.4. Valuation of dust and noise impacts

Dust and noise impacts were incorporated into the BCAs based on the outcomes of noise and dust modeling and the use of property values/mitigation costs as value surrogates.

Air quality criteria, relating to total suspended particles (TSP), PM₁₀ and PM_2.5, were developed for the projects that take into consideration the existing background dust levels in a region as well as the dust levels that will arise from a project. These criteria were set at levels to protect against health effects and nuisance dust effects (Department of Environment and Conservation, 2005).

Noise impacts were assessed based on the Industrial Noise Policy (INP) of the NSW Environment Protection Authority (EPA) (2000). The INP provides a framework for establishing project specific noise criteria that would protect the community from excessive intrusive noise and preserve amenity (EPA 2000). If these criteria are exceeded at a noise receiver point then the project is considered to have a noise impact. The extent of the noise impact is defined by the extent to which the noise criteria are exceeded (EPA 2000). A five decibel (dB) or more exceedance is considered a significant impact. A 3–5 dB exceedance is a moderate impact and a 1–2 dB exceedance is a minor exceedance (Resource Strategies Pty Ltd and Helensburgh Coal Pty Ltd, 2010).

Where properties are predicted to be significantly impacted by the noise of a mining project, that is, a five decibel (dB) or more exceedance of noise criteria, or where air quality criteria are predicted to be exceeded, the proponent is required to purchase the affected properties on request of the landowner as a condition of the development consent.Footnote ¹⁰ These acquisition costs are included in the capital costs of the projects. While the impact of a noise or dust nuisance could be expected to impose a cost on affected residents through deterioration in their properties’ values, the cost recorded in the BCA under the approach used is the full value of the property. The implication may be that the approach used results in an overestimation of the costs of noise and dust to residents experiencing “significant” impacts. However, the property price impact does not account for lost consumer surplus associated with the residents’ enjoyment of their home. The willingness to pay for a property may be in excess of the price actually paid (which in an auction setting would reflect the willingness to pay of the second most interested buyer). Hence, the issue becomes one of comparison between the lost consumer surplus and the extent of the compensation paid in excess of the property value impact.

Where properties are predicted to be moderately impacted by noise impacts (i.e., a three to five dB exceedance of noise criteria) noise mitigation measure must be provided by the proponent at the request of the landholder. These measures can include double glazing of windows and installation of air conditioning units. Where such measures mitigate the noise impacts perfectly, then affected residents are no worse off than they were before and no costs additional to the mitigation expenses warrant inclusion in a BCA. However, it is unlikely that mitigation is complete and to the extent that there remain unmitigated impacts, noise costs are not completely reflected in the BCAs. Nevertheless, these residual impacts are not likely to have a material bearing on the outcome of the BCAs.

In terms of air quality impacts that are not sufficiently severe to require the acquisition of the impacted property by the mine proponent, there are no prescribed mitigation measures. Hence, the costs of moderate and low air quality impacts are not incorporated into the BCA through expenditures on mitigation measures. Again, these residual costs are not likely to be material in terms of the overall net benefit outcome.

4.5. Issues in the application of CM

A range of issues arise through the use of CM to estimate the main nonmarket impacts of the mines that were otherwise not accounted for through financial payments. Of particular interest was the extension of the CM technique to cover not just the environmental impacts of the mines. The CM choice sets were designed to include social, cultural as well as environmental changes caused by the mining operations.

Three separate CM applications were developed for the three different mines. While the details provided to the CM survey respondents in each case were different, the basic format of the CM applications remained consistent.

The first issue arising involved the establishment of the context for the CM questionnaire. If approval was not granted for the proposals to mine at the three mines under examination, existing operations would be forced to cease for lack of access to the resource. Hence, the implication of the consent legislation is that the property right to the resource lies in the “no-mine” context. The framing of the choice questions in the CM survey problem therefore suggests a willingness-to-accept (WTA) format for respondents: that is, respondents should be asked for their WTA compensation to allow mining to continue and cause additional environmental, social, and cultural damage.

While some applications of CM have used a WTA format (e.g., MacDonald, Morrison & Barnes, Reference MacDonald, Morrison and Barnes2010; Garrod & Willis, Reference Garrod and Willis2000) “in practice there is great difficulty in obtaining correct estimates of WTA for decreases in the level of a public good, because respondents tend to reject the implied property right as implausible” (Mitchell & Carson, Reference Mitchell and Carson1989, p. 52). To be consistent with the recommendations of the NOAA Panel (Arrow et al., Reference Arrow, Solow, Portney, Leamer, Radner and Schuman1993) and to avoid the prospect of respondents making choices without any income or wealth bounds (Mitchell & Carson, Reference Mitchell and Carson1989) the CM applications developed for the three mines were framed in a WTP format. That is, the status quo choice option was described as “mining continuing as currently planned” and used the project description in the EA to detail that scenario. The choice set alternatives provided to respondents involved “new government decisions for the mines” that could include mine cessation, limiting the geographical extent of mining or requiring future mining to avoid areas that are located below or adjacent to significant natural features. The choice scenarios provided to respondents were therefore in terms of WTP to avoid an impact, consistent with a compensating surplus measure of welfare.

The second issue of CM application involved sampling. CM practitioners have to determine the population that may hold values for the attributes under consideration. Recognizing the distance decay function for values reported in the literature (Rolfe & Windle, Reference Rolfe and Windle2012), the geographical extent to which a project impacts people is a key consideration: is the project a local, state or national concern. For example in Australia the National Land and Water Audit CM study (van Bueren & Bennett, Reference van Bueren and Bennett2000) investigated the costs of land and water degradation across Australia and hence the sampling strategy for that study involved the Australian population. In contrast, a study commissioned by the NSW EPA on water reforms and environmental flows in major rivers in NSW (Morrison & Bennett, Reference Morrison and Bennett2004), sampled NSW households as well as households living in the catchments of the major rivers.

For the mining project CM applications, the environmental, social, and cultural impacts involved were not considered by the relevant technical specialists engaged by the proponents to be of national significance. Hence the survey sample was drawn from NSW households only.Footnote ¹¹ Whether this strategy is correct remains a testable hypothesis. To the extent that households outside NSW hold values for the impacts of the mining projects, nonmarket impacts will be understated and project net social benefits overstated.

The third CM application issue concerned the inclusion of mine employment as a CM attribute. In the conventional BCA framework, employment is a cost of production and included in the calculation of producer surplus changes. Where labor resources would otherwise be employed at a lower wage or would be unemployed, a shadow price of labor should be included in the estimation of producer surplus change rather than the actual wage (Boardman et al., Reference Boardman, Greenberg, Vining and Weimer2001). However, what became apparent through successive focus groups undertaken in the design phase of the CM application is that respondents enjoy some value from the continued employment provided for others as a result of mining operations. Conversely, they do not like employment opportunities provided to others being reduced. As identified by Portney (Reference Portney1994, p. 13), the concept of existence values should be interpreted more broadly than just relating to environmental outcomes:

The utility of individuals may therefore be affected by changes in their own well-being as well as changes in the well-being of others (Rolfe & Bennett, Reference Rolfe and Bennett1996). This is consistent with the observed behavior of altruism (Freeman III, Reference Freeman, Champ, Boyle and Brown2003). To the extent that the community hold these altruistic preferences for other people’s employment they represent a positive externality of coal mining projects and should be included in the neoclassical welfare economics trade-off framework.Footnote ¹² This was achieved through the inclusion of an employment impact attribute (number of years the mines would continue to provide a specific level of employment) in the CM choice sets.Footnote ¹³

Other people’s well-being is the focus of another attribute included in the Warkworth Extension Project CM study. Because the proposed mine extension was predicted to have noise and dust impacts that would result in the acquisition of residential dwellings in an adjacent rural village, there was a potential for the CM respondents to feel a loss associated with the disruption to the local community. To account for that a “social fabric” attribute was included in the Warkworth Extension Project CM choice sets (Gillespie Economics, 2009b ).

Another CM issue relating to attribute selection involved the use of offsets in the management of mining impacts on vegetation. In the Warkworth Extension Project case, the proposal involved clearing areas of EEC to allow for the open-cut mine to be developed. The proponent agreed to offset these impacts by both establishing substitute sites (planting trees and shrubs on adjacent farm land) and purchasing and protecting other stands of the same EEC in the region. In recognition that neither type of offsets provides a perfect substitute for the cleared areas, three vegetation attributes were included in the CM choice sets for the Warkworth study (Gillespie & Bennett, Reference Gillespie and Bennett2012). These were the area of EEC cleared, the areas planted and the area protected. The goal of including all the vegetation attributes was to establish the “exchange rate” between them in terms of the public’s relative values for each. In other words, the idea was to estimate the number of hectares of replanted land that would substitute for one hectare of cleared EEC and so on. With this information the Warkworth Extension Project BCA was able to include the costs associated with the EEC’s cleared and the benefits associated with the offsets proposed.

The CM studies provided estimates of household WTP for unit changes in attribute levels. These values were included in the BCAs by multiplying these unit change values by the predicted level of change between the with and without mining scenarios and aggregating these household WTP estimates to the NSW population. This latter step necessitated assumptions about whether nonrespondents hold the same values as those of respondents included in the sample. Some studies recommend conservative aggregation, by only aggregating WTP values to the proportion of the population given by the questionnaire response rate (see, e.g., Bennett, Reference Bennett2008). However, this may understate community WTP as it assumes that all nonrespondents have a zero WTP. An alternative method has been suggested by Morrison (Reference Morrison2000), who found that approximately one third of nonrespondents hold values similar to questionnaire respondents. van Bueren and Bennett (Reference van Bueren and Bennett2000) support these findings from a follow-up telephone interview with nonrespondents in a CM. Using this approach, extrapolation of the results across all case studies was rounded up to 50% of NSW households.

5.2. Reliance on deontic rules instead of BCA

The case study BCAs identified that the benefits of the projects were greater than the costs and that restrictions on the extent of proposed mining operations would be welfare reducing. Sensitivity testing found that the results were not sensitive to reasonable changes in producer surplus estimates or environmental, social, or cultural costs. The outcome was most sensitive to changes in the assumed coal price.

Nevertheless, the merit PACs for the Metropolitan Coal Project and BSO Project recommended the approval of substantially reduced mining operations. The rationale expressed by the Metropolitan Coal Project PAC was to minimize what it considered to be “unacceptable environmental consequences for significant natural features” (NSW PAC 2009, p. 132). The BSO Project merit PAC considered that “it is no longer a viable proposition for mining to cause more than negligible damage to pristine or near-pristine waterways in drinking water catchments or where these waterways are elements of significant conservation areas or significant river systems” (NSW PAC 2010, p. iv).

The Environmental Assessment Report, prepared by the NSW DP&I, for the Warkworth Extension Project (NSW DP&I 2011b ) and provided to the PAC made reference to the BCA undertaken for the Project and concluded that “on balance, the Department believes that the project’s benefits would outweigh its residual impacts that it is in the public interest and should be approved, subject to stringent conditions” (NSW DP&I 2011b , p. iii). The PAC conditionally approved the Project. However, the decision was appealed to the LEC by the Bulga Milbrodale Progress Associated Incorporated and this appeal was upheld (Bulga Milbrodale Progress Association Inc. v. Minister for Planning and Infrastructure and Warkworth Mining Limited 2013). The judge in that case stated: “I have found … that the Project would have significant and unacceptable impacts on biological diversity, including on endangered ecological communities, noise impacts and social impacts” (Bulga Milbrodale Progress Associated Inc. v. Minster for Planning and Infrastructure and Warkworth Mining Limited 2013, p. 173).

The PAC recommendations for the Metropolitan Coal Project and BSO and the LEC findings for the Warkworth Extension Project were clearly based on a rationale beyond that underpinning the conceptual framework of neoclassical welfare economics, and hence BCA. In welfare economics, the existence of environmental effects per se, even significant ones, is not sufficient justification to reject a coal mine proposal. What is relevant is whether the discounted benefits to society exceed the discounted costs. The application of deontic “rules,” which identify an obligation on the behavior of proponents, such as an obligation not to have “unacceptable” impacts, is outside the trade-off logic of economics and raises issues around what is the threshold impact level for unacceptability.

5.3. PAC comments on choice modeling

The PAC for the Metropolitan Coal Project concluded that nonmarket valuation techniques for estimating environmental costs that are based on community attitudes to protection of significant natural features has potential for use in the EIA process. Notwithstanding, it raised questions about the context statements provided in the CM questionnaires regarding:

1. 1. the relative scope of impacts provided in the CM questionnaire;

2. 2. the validity of the values estimated for the employment attribute.

In making its recommendation for a reduced project scale, the BSO Project merit PAC concluded that:

In coming to this conclusion, the BSO Project merit PAC considered that the CM study provided average unit values for impacts but did not provide sufficiently detailed value estimates to differentiate between the differing quality of natural features across the geographic area to be impacted by the proposed mine. Specifically, the PAC considered that streams in the eastern and southern part of the project area would be of much greater value than those in the rest of the project area. The merit PAC argued that if the upper bound 95% confidence interval for environmental and cultural impacts implicit prices were applied to the eastern and southern part of the project area this would increase the social costs of mining. The potential presence of value interactions where environmental/heritage features occur together was also suggested as potentially further increasing the costs of environmental damage. Other factors suggested as causing an underestimation of environmental costs in the original BCA included a speculated potential future recreation activity in the catchment and uncertainty about the predicted physical consequences of the proposed mining activity (NSW PAC 2010). The BSO Project PAC excluded any consideration of the social value of employment from its calculations.

The BSO Project merit PAC considered that for CM estimates to be relied on in future, the scale at which the studies are undertaken would need to be fine enough to capture significant heterogeneity across a project area in terms of the distribution and/or significance of the natural features (NSW PAC 2010). The BSO Project PAC also raised issues about potential bias in the design of the questionnaire, as it was based on the “proponent’s view of the environmental impacts of the project” (NSW PAC 2010, p. 380). Both these matters raise issues in the practical application of CM in the policy area.

Heterogeneity of physical impacts across a project area could potentially be accommodated by increasing the number of attributes in choice sets or by undertaking separate CM studies for different parts of the mine proposal area that contained features of varying quality. In any CM application, there is a trade-off between the number of attributes included in choice sets (choice complexity) and respondent’s attention to the questionnaire. Most environmental applications of CM include between four and six attributes. Tackling site heterogeneity using increased numbers of attributes would therefore involve potential costs in survey response rate loss or respondent cognition reductions.

The alternative approach to dealing with site heterogeneity involves undertaking separate CM studies for different parts of the mine proposal area that contained features of varying quality. This presents budgetary issues for the proponent and also raises questions regarding the matching of project scope with the scope of the context set out in the CM questionnaire.

With regard to the issue of information bias in the CM questionnaire, all applications of CM rely on the advice of disciplines other than economics regarding the potential impacts of a project or policy. In the coal mine cases, this information came from the consulting firm that was contracted by the proponents to conduct the EAs. Subconsultants were responsible for assessments of subsidence impacts, biodiversity impacts, noise and dust projections, and cultural impacts. The information was therefore based on the analysis of experts in their respective fields. Nevertheless, these studies are commissioned by the proponent and there can be a perception that such assessments are not independent. In the decision-making process, particularly if public submissions are invited and public hearings conducted as part of the merit PAC’s role, a range of alternative views on the impacts of a project can be expressed. However, these alternative views are not available at the time of conducting the CM study for incorporation into an EA. Hence it is difficult to foreshadow them and incorporate varying impact information into split sample analysis. Conflicts over the type and level of the impacts of projects may best be dealt with by the commissioning of CM studies during the decision-making phase of the EA process. This would enable an agreed or independent view of likely impacts to be incorporated.

The Environmental Assessment Report, prepared by the NSW DP&I, for the Warkworth Extension Project (NSW DP&I 2011b ) and provided to the PAC also made reference to the results of the CM study in relation to biodiversity offsets:

5.4. Consideration of BCA by the land and environment court

In the LEC judgment (the Judgment) a number of criticisms were made of the BCA method, its specific application to the Warkworth proposal and the use of CM.

The Judgment incorrectly interpreted the role of BCA in decision-making, identifying that “it does not consider all the relevant matters that need to be considered by an approval authority in determining a project” (Bulga Milbrodale Progress Associated Inc. v. Minster for Planning and Infrastructure and Warkworth Mining Limited 2013, p. 155) and that the BCA “seeks to supplant the Court’s essential task, … , of applying the appropriate weight to the relevant matters” (Bulga Milbrodale Progress Associated Inc. v. Minster for Planning and Infrastructure and Warkworth Mining Limited 2013, p. 169).

The Judgment was also concerned that the BCA approach “confines the court to the economists’ assessment of particularity and value, in a context where there is no evidence available to the Court to assign its value” (Bulga Milbrodale Progress Associated Inc. v. Minster for Planning and Infrastructure and Warkworth Mining Limited 2013, p. 169).

BCA does not purport to consider all the matters that are relevant to a decision-maker or seek to supplant the role of the decision-maker. BCA is concerned with evaluating a project against one of the objectives of the EP&A Act, that is, economic efficiency. It provides a comparison of the present value of aggregate benefits to society, as a result of a project, policy or program, with the present value of the aggregate costs. These costs and benefits are defined and valued based on the welfare economic underpinnings of BCA. In particular, it is the values held by individuals in the society that are relevant, including both market and nonmarket values, not the Court’s values. Provided the present value of aggregate benefits to society exceed the present value of aggregate costs (i.e., a net present value of greater than zero), the project is considered to improve the well-being of society and hence is desirable from an economic efficiency perspective.

Decision-making is multiobjective in nature (Loomis & Helfand, Reference Loomis and Helfand2001; Loomis, Reference Loomis1987; Boardman et al., Reference Boardman, Greenberg, Vining and Weimer2001). Decision-makers should consider the evaluation of a project in terms of economic efficiency alongside the evaluation of a project against other, often overlapping and conflicting objectives. In EA this will inevitably include the results of other technical assessments.

Part of the criticism of BCA in the Judgment was that it failed to consider issues of equity and distributional justice. “These failures to consider adequately intergenerational and intrageneration equity limit the utility of the BCA and CM to the Court for the purposes of evaluating, weighting and balancing the relevant matters to be considered in determining the Project” (Bulga Milbrodale Progress Associated Inc. v. Minster for Planning and Infrastructure and Warkworth Mining Limited 2013, p. 172). “With respect to intergenerational equity, the BCA and CM did not consider adequately, or accord sufficient weight to, this principle of Environmentally Sustainable Development (ESD)” (Bulga Milbrodale Progress Associated Inc. v. Minster for Planning and Infrastructure and Warkworth Mining Limited 2013, p. 171).

Again, this is an inappropriate criticism of BCA because, as identified above, BCA is concerned with a single objective of the EP&A Act and governments, that is, economic efficiency, specifically whether the aggregate benefits of a project exceed the aggregate costs. BCA and its welfare economics foundations are explicitly neutral on the distribution of costs and benefits. While BCA can provide information on who bears the economic efficiency costs and benefits of a project, there is no welfare criterion for determining what is a fair, an equitable or a preferable distribution of costs and benefits. As argued by Sinden and Thampapillai (Reference Sinden and Thampapillai1995, p. 210) “the method can hardly be criticized for something it does not pretend to do.” Matters relating to distributional effects are therefore usually left to the political process (James & Gillespie, Reference James and Gillespie2002). The fact that BCA does not consider equity (and other) issues should not limit the utility of it to decision-makers as a relevant piece of information to consider, alongside other relevant pieces of information, in making a decision.

A particular element that the Judgment identified as being omitted from consideration within the BCA is the “distributive justice” associated with “components of biological diversity, such as the EECs and threatened fauna within the disturbance areas, which would also suffer the burdens of the Project” (Bulga Milbrodale Progress Associated Inc. v. Minster for Planning and Infrastructure and Warkworth Mining Limited 2013, p. 171). However, just as BCA is not concerned with distribution issues it is also not concerned with ethical issues about the rights or feelings of plants and animals. BCA is anthropocentric; so too is the EP&A Act, which is concerned with “all aspects of the surroundings of humans, whether affecting any human as an individual or in his or her social groupings.” The environment generates values for consideration in a BCA only to the extent that humans value it.

The Judgment was also critical of aspects of the application of BCA to the Warkworth Extension Project. The Judgment considered that there “are nonmarket values that have either not been, or have been inadequately been, taken into consideration in the BCA, including impacts of noise and dust, impacts on amenity values and ecosystem services” (Bulga Milbrodale Progress Associated Inc. v. Minster for Planning and Infrastructure and Warkworth Mining Limited 2013, p. 168). Part of this criticism related to the Judgment’s differing views on the level of biophysical impacts of the project, for example, noise, dust, and amenity from those of the experts who framed the EA.

5.5. Consideration of choice modeling by the land and environment court

The LEC judgment also leveled criticism at the CM study for:

1. 1. limiting the sample frame to NSW instead of surveying Australian households with the Judgment suggesting that the environmental impacts of the mine expansion are of similar national significance to the protection of iconic natural areas in Australia such as the Franklin–Gordon Rivers in Tasmania and the Daintree Rainforest in Queensland;

2. 2. aggregating four EECs into one EEC attribute – a common approach in CM to address impacts on vegetation that is of similar conservation importance (e.g., Blamey, Rolfe, Bennett & Morrison, Reference Blamey, Rolfe, Bennett and Morrison2000) and avoid cognitive burden associated specification of a large number of attributes in CM questionnaires;

3. 3. having an upper level for the impacts on the EEC attribute that is higher than the area that will actually be cleared by the project – which is a deliberate part of the CM design to ensure that the ultimate level of impact of a project, which is unknown at the time the questionnaire is implemented, is within the attribute level range;

4. 4. providing inadequate information on the EECs, which partly reflects the amalgamation of the EECs into one attribute but also limitations in the amount of information that can be incorporated into CM questions. With respect to this last issue, follow-up questions to respondents indicated that they considered the information provided to them was sufficient and understandable;

5. 5. not asking respondents what they were prepared to pay – when a direct WTP question is not a component of CM;

6. 6. having an upper level of the cost attribute ($625) that did not relate to the costs of the project – when theoretically it should not be related to the costs of the project but should reflect a level of disposable income that few people are willing to give up.

These criticisms largely indicate an unfamiliarity/misunderstanding of the CM method, although future applications of CM in EIA would benefit from considering different sample frames.

Ultimately the BCA and CM results were considered by the Court as having little value for decision-making.

5.6. Policy response

The decisions of the PACs, and in particular the LEC, in relation to mining proposals have led the NSW Government to prepare the State Environmental Planning Policy (Mining, Petroleum Production and Extractive Industries) Amendment (Resource Significance) 2013. The key aim of the Policy is to redirect the decision-makers to place more emphasis on the economic benefits arising from coal mining: “The primary purpose of the proposed SEPP is to ensure that where mineral resources are demonstrated to be significant to the State, they are given greater consideration in the assessment of development applications” (NSW DP&I 2013a , p. 1). In considering the significance of the resource, the consent authority must have regard to, among other things, the economic benefits, both to the State and the region from development of the resource. The matters taken to be relevant for consideration of the economic benefits are:

• ∙ “employment generation;

• ∙ expenditure, including capital investment;

• ∙ the payment of royalties to the State” (NSW DP&I, 2013b , p. 3).

However, giving greater weight to these matters runs contrary to the foundations of welfare economics which is concerned with consideration of all the economic costs and benefits of projects, not just some of them. It also has a distinct State and regional focus, ignoring costs and benefits that may accrue at the national level. It would be sufficient for decision-makers to recognize BCA as a valid tool for examining the economic efficiency of projects and use the results of the BCAs along with their considerations of evidence relating to other objectives of public policy. In this respect, it is noted that the Policy explanation (NSW DP&I, 2013c ) states that the significance of the resource is not the only factor in the decision-making process and that environmental, social, and economic impacts must also be considered. Hence BCA may continue to play a role in assessing the economic impacts of projects alongside separate consideration of the significance of the resource as defined above.