The impact of annulling the Partial Nitrogen Construction Exemption on energy projects in the Netherlands

Recently, the Dutch Administrative Jurisdiction Division of the Council of State (Afdeling bestuursrechtspraak van de Raad van State, “the Division”) held that the partial Nitrogen Construction Exemption was incompatible with the EU environmental law and therefore must be annulled.

Background of relevant legal question

Over the last couple of decades, the Netherlands struggled with its excessive nitrogen emissions due to the increase of intensive livestock farming. After the Division annulled the Integrated Approach to Nitrogen, also known as the PAS-scheme, due to its incompatibility with the precautionary principle laid down in the Habitats Directive, the Dutch legislator sought a makeshift solution to exempted the construction industry. This allowed construction activities to go ahead. Therefore, the Netherlands adopted on 1 July 2021the so-called partial Nitrogen Construction Exemption (“the partial Exemption”), which is governed by Article 2.9a of the Nature Conservation Act and Article 2.5 of the Nature Conservation Decree. Essentially, the scheme means that nitrogen deposition caused by some specifically designated construction activities no longer needs to be examined and assessed separately. This made it easier to grant permits for construction and infrastructure projects. According to the Dutch legislator, a general partial construction exemption would not cause significant damage to Natura 2000 areas as the total package of measures, together with the autonomous decrease in nitrogen, would largely improve nature on a national 'higher scale' in comparison to the temporary nitrogen effects of activities during the construction phase. In the judgment concerned, the scheme was applied by the respective Ministers when taking decisions on the Porthos project (a CCS-project in the Rotterdam).

Conclusion of the court

Under refence to the case law of the Court of Justice of the European Union (“CJEU”), the Division held that it first must be assessed whether the project is likely to have significant effects on a Natura 2000 site; a so-called preliminary assessment (voortoets). If significant effects cannot be excluded, an appropriate assessment (passende beoordeling) must be made. Both the preliminary assessment and the appropriate assessment must examine the effects of the project on individual Natura 2000 sites. A study of the effects of a plan or project must therefore also cover the construction and implementation phase, if negative effects cannot be ruled out at that stage. In contrast, the Dutch legislator argued that the positive effect of the package of measures and its presumed expected autonomous decrease in nitrogen emissions was so great that the nitrogen deposition caused by the designated construction activities is not significant on a higher scale level. However, the Division ruled explicitly that the aforementioned is not compatible with the Court's case law on Article 6 of the Habitats Directive.

Pursuant to the CJEU’s case law, the Division also held that the precautionary principle plays a very large (if not decisive) role in authorizing projects within the meaning of Article 6(3) of the Habitats Directive. By analogy with paragraph 119 of the PAS-judgment, the Division ruled that, in principle, an average value cannot guarantee that an activity will not have significant effects on any protected site, "since such effects seem to depend, in particular, on the extent and possible intensity of those activities, the possible circumstance that the place where the activities are carried out is in the vicinity of the protected site in question, and special circumstances which may characterize that site, for example, the circumstance of its combination with other nitrogen sources.” Hence, the Habitats Directive precludes a general high scale level assessment on which the partial Exemption was based.

Consequently, the Division ruled in its interlocutory judgment of 2 November 2022 that the partial construction exemption as laid down in the Nature Conservation Act and Decree must be declared inapplicable due to its contravention with Article 6(3) of the EU Habitats Directive. This means that the partial Exemption can no longer be applied to construction projects. However, as Porthos conducted an assessment shortly before the hearing, the Division granted the appellant an additional period of six week to respond to the contents of the investigation report.

Impact on energy project in the Netherlands

To start with, the judgment itself provides that this ruling will lead to a delay in the procedures. In particular because Article 2.5 of the Nature Conservation Decree exempted specially the construction and construction activities for renewable energy generation, utility buildings, and energy infrastructure. Moreover, the partial exemption also covered all of the related transport movements. Furthermore, the Minister indicated in his answering to parliamentary questions following this judgment that this ruling impacts certain granting decisions concerning the development and exploitation of off shore wind farms as these are based on the partial construction exemption following. This ruling, therefore, could highly impact construction projects and its progress.

Nevertheless, it should be observed that this judgment does not result in a general construction stop but the construction project must be assessed trough a so-called preliminary assessment and, if necessary, an appropriate assessment with potential mitigating measures. Alternatively, Article 2.8(4) of the Nature Conservation Act regulates plans or projects that are necessary for imperative reasons of major public interest and for which there are no alternative solutions. For such plans or projects, compensatory measures can be included in the assessment.