Dutch Council of State further (retroactively) restricts internal netting with nitrogen rights: far-reaching consequences for industry and construction sector

What is internal netting?

With internal netting, for the question of whether a new or modified project at the same location as the existing or permitted activity may have a significant impact on a Natura 2000 area, in short, the existing permitted nitrogen emission at the same location is taken as the reference situation. If there is no increase in nitrogen emission and deposition compared to this reference situation, it could previously be stated with certainty that the new project at the same location has no negative impact on a Natura 2000 area.

This is the case, for example, if on the site of a (former) industrial activity, for which a permit or permission for nitrogen emission has been granted, a new (completely different) industrial activity is realized. The permitted nitrogen emission for the old industrial activity at that location and the expected nitrogen emission at that location by the new industrial activity are offset against each other, as it were. Until the rulings, it was established case law that no permit was required for internal netting, because this netting, in summary, meant that it could be assumed in advance that the negative impact on Natura 2000 areas would not increase.

Internal netting now (almost always) requires a permit

The ABRvS has completely reverted to the previous line in its rulings. Referring to European case law, the ABRvS concludes that this netting may no longer be carried out beforehand. For a new or amended project at the same location, all nitrogen emissions (i.e. also the nitrogen emissions that were previously permitted) must be considered on their own, without taking into account the nitrogen emissions already permitted at that location. A sort of fictitious situation must be presented in which the new or modified project is realized at a location where no nitrogen emissions are permitted at all. If negative impacts on Natura 2000 activities cannot be excluded on the basis of the nitrogen emission, a nature permit is required. This “pre-assessment” may only take into account measures of the new or modified project that actually lead to a reduction in nitrogen emissions.

Based on the above, an amended or new project at the same location will almost always require a nature permit. This is already the case, for example, when there is a (drastic) change in business operations, as a result of which it is no longer possible to speak of one and the same project at one location. However, the (appropriate) assessment of the application for that nature permit may take into account the permitted nitrogen emission at the same location as a so-called 'mitigation' measure. The permitted nitrogen emissions at the same location may therefore still be eliminated, but only in the assessment phase for the question of whether an application for a nature permit can be granted.

Reference situation (with which internal netting is used) restricted

Next, the ABRvS addresses the question of the extent to which permitted nitrogen emissions may be taken into account in that (appropriate) assessment. In summary, it was previously assumed that 100% of the permitted nitrogen emissions at a location could be used for internal netting, irrespective of the question of whether there are any “latent” (unused) nitrogen emission allowances or, for example, a nature permit granted on the basis of the Nitrogen Action Programme (PAS), which has been declared non-binding.

In the decisions, the ABRvS nuances the extent to which permitted nitrogen emissions at the same location in the application for the nature permit may be offset against the nitrogen emissions of the new or modified project. In doing so, the ABRvS distinguishes between internal netting with permitted nitrogen emissions based on a nature permit or internal netting based on permitted nitrogen emissions by an environmental permit granted prior to the designation of the applicable Natura 2000 area.

The nitrogen emission from the new or modified project may be offset against the permitted nitrogen emission from an already granted nature permit if the permitted nitrogen emission is or could have been present at the time of internal netting.

In internal netting with an environmental permit, the consequences attributable to existing components of the licensed activity may be included in the reference situation, insofar as those components have actually been realized and, insofar as they are no longer structurally in use, can be brought back into use without nature permit. This means a considerable restriction of the possibilities for internal netting with environmental permits. Internal netting with parts of an environmental permit that have not (yet) been realized is no longer possible.

Internal netting with parts of an environmental permit that have actually been realized but are no longer structurally in use will, unlike before, be limited to cases where the resumption of the environmentally permitted activity is possible without a nature permit. However, this will not happen easily (anymore), due to the tightening of the nature permit requirement based on these rulings.

The above also means that the province may henceforth draw up policy rules that further limit the extent of the reference situation with which internal netting is used, as is currently already common for external netting. For example, for external netting under most provincial policy rules, such as those of the province of South Holland, only 70% of the actually realized nitrogen emission of the existing activity may be used for the new or modified activity. It cannot be ruled out that a similar framework based on provincial policy will also apply to internal netting.

Permitted nitrogen emission as a mitigating measure

The ABRvS further emphasized that, following on from previous case law, certain safeguards apply when using a “mitigating” measure (in this case: internal netting) in the appropriate assessment for the nature permit.

These requirements are:

1. The benefits of mitigation measures in an appropriate assessment is that those benefits are established at the time of the appropriate assessment (this is generally the case with internal or external netting);
2. It must be assured that the modification or termination of the existing licensed situation has occurred and cannot be resumed; and
3. It must also be ensured that the nature permit or environmental permit from which the reference situation is derived can only be used for the intended (new or modified) project.

These requirements are also suddenly new for internal netting. The ABRvS provides a preliminary view on how the above conditions can be met for internal netting, addressing the following situations: (i) there is an altered project at the same location, (ii) there is an entirely new project at the same location by the same company, or (iii) there is an entirely new project at the same location by another company (use by a third party).

Additionality

The ABRvS also discusses the additionality requirement, as it is already applied in external netting. In this context, the additionality requirement means, in a very summarized manner, that it must be substantiated why (the change or termination of) this authorized nitrogen emission should not be used as an “appropriate” measure to prevent deterioration of Natura 2000 areas.

Henceforth, when applying for a nature permit that involves internal offsetting, the province must assess whether the modification or termination of the old project (and the associated nitrogen emission) should not be used as an appropriate measure, or whether other appropriate measures (will) be taken. If the province decides that internal netting may be included as a mitigating measure in an appropriate assessment, it must justify how the province interprets the discretion it has in the choice of appropriate measures to be taken.

The latter, however, increasingly appears to be a problem in legal practice. After all, the general state of Natura 2000 areas in the Netherlands is in a poor state and there is currently no national or coordinated provincial policy with which improvement is in sight in the short term (through other appropriate measures). This fact already regularly leads to court rulings to the disadvantage of initiators in external netting.

Retroactive effect

Finally, the ABRvS ruled that all of the foregoing applies retroactively, which means that projects for which permit-free internal netting has been applied since 1 January 2020 are suddenly in violation, even if they previously received a so-called “positive refusal decision''. For the sake of legal certainty, the ABRvS sets a transition period for these illegal situations until 1 January 2030, during which no enforcement can take place. Before this deadline, these projects will still have to obtain a nature permit, subject to the frameworks set by the ABRvS in these rulings. If this nature permit has not or cannot be obtained by that deadline, the activity will have to be terminated.

Consequences for business practice

These rulings have a very large impact on all situations in which internal netting is possible or necessary or has already been implemented between 1 January 2020 and 1 January 2025. Very briefly, these rulings provide the following takeaways:

• Internal balancing has been found to require a permit (almost always). This applies retroactively;
• The extent to which internal netting may be done with nitrogen emissions already permitted at the same location has been severely limited. This includes a restriction on netting with latent (unused) nitrogen space resulting from an environmental permit;
• The requirements for internal netting are generally aligned with the (stricter) requirements for external netting. This also means, for example, that the province will have to substantiate why the already authorized nitrogen emissions can be used for netting and whether these nitrogen emissions should not in fact be limited for the purpose of preventing the deterioration of Natura 2000 areas;
• In general, the rulings cast a very heavy additional restriction on internal netting for the purpose of construction activities or new or modified industrial activities.

Do you have questions about what these rulings (may) mean for you? Please feel free to contact Alexandra Danopoulos (+316 39223800 or a.danopoulos@ploum.nl) or Tim Vlug (+31 6 83315984 or t.vlug@ploum.nl).