Extraterritoriality of Oil Constitutionalism in People v Arctic Oil

On 22 December 2020, the Supreme Court of Norway delivered its judgement in People v Arctic Oil on the interpretation of Article 112 of the Norwegian Constitution on the right to a clean and healthy environment. This case has been in the spotlight as it dwells on conflicts between climate goals and energy policy, and whether oil can be exploited and exported.

The Plaintiffs – a combination of NGOs and citizens – challenged the legality of the Norwegian government’s practice of granting exploratory licenses in the Arctic. Though commentary on the judgement has focused on the State’s human rights obligations in the context of climate change, the primary issue identified by the Court is a constitutional one; the Court commences its decision with stating that the solution for this case is in the realm of separation of powers, or to what extent courts could intervene in judicial and executive activity in order to safeguard the environment. The issue of separation of powers points to a preference for a procedural approach to oil policy, specifically, the role of environment impact assessment, and a reticence of the Court to interfere with the substance of Norwegian strategy to shift slowly from large scale future oil ventures. Another issue that deserves analysis is the extraterritorial application of Art 112, which will be the focus of this comment.

Before reaching the Supreme Court; the case was decided on by the Oslo District Court and Borgarting Court of Appeal. The Oslo District Court dismissed the case on the irrelevance of extraterritoriality, stating “[e]missions of CO2 abroad from oil and gas exported from Norway are irrelevant when assessing whether the Decision entails a violation of Article 112.” Having said that, the District Court broke new ground by observing that Article 112 of the Constitution is a rights bearing provision granting private individuals and organizations the possibility to sue the state when they can show that its policies could damage the environment. Without overruling the District Court’s observation that Article 112 confers rights, the Appeals Court limited the scope of the state’s corresponding obligation by observing that Article 112 sets a very high threshold on citizens to demonstrate that the state violated its duty of care. While narrowing the standard on which the state could be shown to have violated its constitutional obligation to protect citizens from environmental harm, the Court of Appeals interestingly went further than the District Court in expanding the scope of claims: it declared that Article 112 of the Constitution is applicable to emissions generated by the combustion of exported oil and gas, thus bringing into consideration the applicability of the Norwegian Constitution to extraterritorial environmental consequences (para 13).

Extraterritoriality and the Norwegian Constitution

The fact that People v Arctic Oil is not restricted to consequences within Norway is evident from the fact that there are global climate change consequences due to its domestic energy policy. In an earlier article on this forum, the human rights implications due to climate change were analysed. The focus was on the Court of Appeals’ judgement which acknowledged rights-based claims. The Supreme Court ruled against such an interpretation of human rights, dismantling the quest for extending human rights in the field of climate change (para 192). The second crucial international law issue raised before the Supreme Court was the applicability of the Paris Agreement to greenhouse gases emitted by third countries because of burning Norwegian oil. The Court assessed that the Paris Agreement and all climate related international agreements are built upon the principle that each member state is responsible for the emission of greenhouse gases it emits on its territory, stating that there is a “division of responsibilities” between states on the matter (para 159). The Paris Agreement – and other decisions under the United Nations Framework Convention on Climate Change – is based on a ‘producer-based’ model of inventorying greenhouse gases, where states are responsible for emissions due to production rather than consumption activities. There is the third, and in our opinion, the most important one: the applicability of Art 112 for activities outside Norwegian territory. Here, the Supreme Court developed new jurisprudence and ruled in an original manner.

The Court found that Art 112 of The Norwegian Constitution is applicable only in Norway, but left open the possibility for holding the State responsible for violating its duty to provide a clean and healthy environment for combustion of its oil exports when two conditions are met. First, activities that are directly governmental activities or those performed under the control of the Norwegian Government, including when the government fails to implement measures against polluting activities, and second, a direct environmental damage occurs in Norway as a consequence of the activities for which the government is directly or even indirectly responsible. While it may appear that this decision contains the seeds for rights-based climate change lawsuits in future, the Court clarified that the duty to take care under Article 112 does not grant corresponding individual rights to challenge petroleum-related activities (para 78 – 142). Thus, in contrast with the Appeals Court judgment, the Supreme Court narrowed the scope of claims. Notwithstanding, the Court recognised the constitutional right of private parties to being informed of petroleum-related decisions that could have an environmental impact (paras 117 and 281).

Thus, while the judgement precludes direct citizen actions in Norwegian Courts against the extraterritorial effects of oil policy, it creates new protections for Norwegian citizens for the environmental consequences of oil policy. The two conditions to finding the state wanting in satisfying its duty of care under Article 112 limits the applicability of the constitution to activities happening under Norwegian control, and to damages occurring in Norway (para 149). It may appear, therefore, that the Court is reiterating the ‘Not In My Backyard’ mainstay of environmental law. However, it is precisely in deviating from this norm that the judgment is novel. When oil is exploited in Norway, exported to a third country where it is highly likely to be burnt, and which creates greenhouse gases, then these gases could damage the Norwegian environment. The Supreme Court indirectly states that if such a causal chain can be established, then Norway could in principle be responsible for its oil exports. In this cases, the emission of greenhouse gasses by states that import Norwegian oil are not under the control of the Norwegian government. The exploration and exploitation of oil is under the control of the Norwegian government – but here there is no environmental damage, primarily because the exploitation is conducted using renewable energy. Rather, the actions of the Norwegian state satisfy a higher standard of care compared to other countries in their oil exploration and exploitation activities.

The Court observed that the issue of the emissions generated abroad by burning Norwegian oil must be analyzed in the context of high demand for oil and gas, competition in energy supply, and trends in global markets (para 234). The court opined that even if Norway would not export oil and gas anymore, other oil producing countries will provide the required fossil fuels. In this respect it demonstrates how it is not violating its transnational duty of care with respect to climate harm. Given that the Court discusses transnational; economic concerns in arriving at its decision, its decision may have been buttressed by a discussion on the comparative environmental benefits of Norway as an oil exporter – it is a stable, democratic and environmentally responsible nation that channels a substantial portion of its oil money in investments in renewable energy. The argument of achieving a transition to renewable energy as part of a state’s environmental initiatives would not, however, feature in a discussion on Article 112 as there is no duty of care to achieve a transition to renewable energy.

Exploration, Environmental Impact Assessment, and Separation of Powers

The appellants’ strategy in People v Arctic Oil was a preventive measure as the licenses granted are only exploratory ones, thus there is no guarantee for the granting of production licenses. This strategy is understandable given the urgency of climate issue. This preventive action was mediated by the separation of powers, and the precautionary approach found in impact assessment.

The Court emphasized that the judiciary cannot interfere with the Storting’s decision to open an area for oil and gas exploration, and therefore would not decide on individual licensing procedures (para 81). The Court reasoned that the principle of separation of powers needs to be respected for individual decisions on licensing as they are inherently linked to political “trade-offs” which are not under the control of the Court. To bring such procedures under constitutional scrutiny would require a very serious breach of the duty to care obligation from Art 112 of the constitution (para 182). But the court held that this threshold is complied with in this case, and impact assessments conducted would speak to such compliance (para 183). When viewed in terms of climate rather than energy policy, the Court considered the issue of reducing emissions to fall within the exclusive competence of government in implementing Norwegian climate policy.

It appears that in assessing whether the Storting has met its constitutional obligations under Article 112 in relation to climate change, the Court assesses whether legislation incorporates a procedure for conducting impact assessments. Per Article 17 of the Public Administration Act, such activities must comply with a general duty to care that informs regulatory decisions. The Court noted that the Public Administration Act does not apply directly to the Storting as it is a legislative rather than administrative body (para 185). Importantly, the Court found that the legal framework in place concerning petroleum activities is sufficient to fulfill its duty of care under Article 112 as impact assessment was prescribed at all levels of national regulation. The Petroleum Act and the subsequent regulations control the procedure regarding opening new areas for petroleum exploration, which includes guidance for conducting EIAs. The European Union Directive 2001/42/EC of the European Parliament and of the Council of 27 June 2001 on the assessment of the effects of certain plans and programmes on the environment (SEA Directive) as implemented in Norwegian law (due to the operation of the European Economic Agreement) imposes a requirement to conduct impact assessment for environmentally hazardous activities, including climate effects (para 185). Here there were two issues: (1) should the impact assessment take into account climate effects at the early exploratory stage in addition to a later stage when production licenses are issued, and (2) should impact assessment include the climate effects of both greenhouse gases emitted in Norway (production emissions) and those emitted in foreign countries burning Norwegian oil (combustion emissions). Here the Court was divided. The majority judgement penned by Judge Berg (supported by ten judges) observed that Norwegian petroleum regulations have to be interpreted in a way that any impact assessment must consider reasonableness and feasibility in taking action to avoid environmental harm, and at the same time adapt to consider climatic effects at a local and global level (para 230). Given that the licenses granted in the Barents Sea are exploratory ones, the impact on the environment would appear if exploitation will be permitted. This would come to light only around 2030 at the earliest in relation to the licenses under consideration before the Court (para 215). The Court found that there no certainty of the existence of commercially viable oil reserves, and such an uncertainty prevails over other aspects of the case regarding possible future impact. Accordingly, the court considered that the stage of issuing exploratory licenses to be early to worry about climate consequences related to the oil activity in the Arctic, as such consequences could appear after the production started (para 216). The exploratory licenses by themselves offer no guarantee that the development and production will be authorized by the State.

The dissenting opinion by Judge Webster (supported by three other judges) is clear that an impact assessment is required on both counts, and as the exploratory licenses were issued without taking into account combustion emissions, this amount to a procedural deficiency for which the licenses should be declared invalid (paras 259 – 275). Per Judge Webster, ‘environmental considerations’ need to be taken into account in the preparation and approval of plans and programmes per the SEA Directive, and though the magnitude of combustion emissions can be assessed only once production is underway, they should be taken into account during the exploratory stage at ‘an overarching level’ (para 274).   

Conclusion

People v Arctic Oil did not ultimately result in a win for citizens and NGOs seeking to prohibit exploration, exploitation and export of oil by Norway found in the Barents sea. There was, however, an expansion in the scope of claims in relation to the constitutionality of oil policy by the Appeals Court and by the Supreme Court in different ways, as pointed out in this article. Notably, the potential for the extraterritorial application of Article 112 was considered, and in a limited way the possibility for challenging legislative and administrative action for violating the constitutional duty of care was left open for direct and indirect governmental action that could affect Norwegian citizens. Further, the role of EIAs for assessing the climatic impacts for local and global oil activities was highlighted, though the impact of oil exploration was considered by the majority opinion to be too premature to take into account while conducting assessments. However, the dissenting opinion found the need to take into account climatic effects of both production and combustion emissions even at the stage of issuing exploratory licenses.