Changes to the contaminated  land regime

The ‘contaminated land regime’ contained within Part IIA of the Environmental Protection Act 1990 (Part IIA) will be familiar to many in-house lawyers within business sectors such as manufacturing, minerals, land development, property, waste management, chemicals, petrochemicals and pharmaceuticals, and myriad other businesses whose operations may have impacted the quality of land in the UK.  Long-awaited changes have now been put  to the Westminster Parliament and the National Assembly for Wales1, and these changes are likely to generate renewed activity by the regulators.

The changes are intended to clarify the process for the designation of contaminated land and to promote a risk-based approach to the identification of contaminated land by local authorities. The objective is to provide more certainty to local authorities and landowners and, in doing so, discourage excessive caution and encourage more redevelopment of brownfield land.

The changes are not without their critics, but it is expected that they will survive the legislative process and become law in or around April 2012, triggering a requirement for local authorities to look again at their own contaminated land strategies, and, after what has been a relatively quiet period of Part IIA activity by cash-strapped local authorities, the emphasis on a risk-based approach may generate renewed interest.

The changes therefore provide an opportunity to revisit the contaminated land regime, explore some of the more interesting cases arising from its operation over the past decade, and look ahead to the proposed changes and their implications.

Part IIA in its regulatory context

Despite the fact that the majority of the remediation activities over the past  decade have been the result of voluntary clean-up, compliance with planning conditions on redevelopment, or compliance with other regulatory regimes such as the environmental permitting regime, it is the ‘contaminated land regime’ contained within Part IIA and its associated regulations and statutory guidance that has a notorious reputation, for good reason. The regime imposes retrospective liability, meaning that the actions of companies and individuals many decades ago, long before Part IIA was in force, can still give rise to liabilities today.

Brofiscin Quarry

Take, by way of an example, the Part IIA investigations at Brofiscin Quarry in South Wales. Like many spent quarries, Brofiscin Quarry was used in the 1960s and 1970s as a landfill and took wastes from various sources, including chemical works in nearby Newport. For 30 years the site lay dormant. Then, in 2005, the site was designated a ‘special site’ under Part IIA and the Environment Agency Wales began to look for the ‘appropriate persons’ to pay for the remediation, which was estimated in the press in February 2007 to be ‘up to £100m’2. Burges Salmon LLP was instructed to act for the former owner of the quarry, an elderly lady who had inherited the disused quarry in her father’s will in the 1950s and who had been advised at the time to lease the quarry to waste contractors in return for a modest rent. The news that she was being investigated as a potential ‘appropriate person’ to contribute to the clean-up some thirty years after she sold the quarry came as something of a shock to our client and her family, and the press coverage of the extent of the potential clean-up costs was terrifying.

After reviewing detailed representations on the former owner’s behalf, the Environment Agency Wales agreed not to pursue her and instead pursued negotiations with the other potential ‘appropriate persons’ – namely BP, Veolia and Monsanto – on liability for the costs of the remediation works. The remediation works started at the end of 2011 and are now estimated to be a rather more modest (but by no means insignificant) £1.5m to install an engineered cap to the existing waste, which will remain in situ3.

The Brofiscin Quarry case demonstrates why the contaminated land regime is treated with some degree of trepidation by lawyers, landowners and businesses. The liabilities can be large, the acts that gave rise to the liabilities are often lost in the mists of time, and the regulatory procedure for ascertaining liability can be a long and tortuous one (the six years between the designation of Brofiscin Quarry as a ‘special site’ and the commencement of remediation is by no means exceptional).

A brief recap on the  contaminated land regime

The operation of the contaminated land regime has been set out in some detail in previous In-House Lawyer articles and so we do not intend to repeat the details here. However, to put the recent changes into context, it is worth providing a high-level reminder of the basics of the regime.

The regime is set out in Part IIA, but can only be understood when read alongside the regulations made under Part IIA and, importantly, the statutory guidance issued by the secretary of state, which contains the detail of the operation of the contaminated land regime.

Part IIA imposes obligations on local authorities to identify and designate ‘contaminated land’ within their areas. ‘Contaminated land’ has a precise definition, and does not include all land which contains contaminants, but only land where there is a pathway for contaminants to reach sensitive receptors and cause (or give rise to a significant risk of) a certain degree of harm. This ‘source-pathway-receptor’ requirement is known as a contaminant linkage. The definition is discussed in more detail below as it is one of the main components on the recent changes.
If contaminated land fulfils certain criteria then it may be designated as a ‘special site’ and responsibility for that site passes from the local authority to the national environmental regulator (the Environment Agency, the Environment Agency Wales or the Scottish Environmental Protection Agency). The criteria for designation as a ‘special site’ are set out in the Contaminated Land (England) Regulations 2006 (the 2006 Regulations)4 and include the nature of previous operations (for example, former munitions factories or petrochemical refineries would be ‘special sites’) and the impact on the environment (for example, a site that is polluting a drinking water supply would be a ‘special site’). Sometimes there is disagreement between the local authority and the national regulator as to whether the whole or part of a site is a ‘special site’ and this itself can give rise to delay – Burges Salmon LLP acted on the first site to be designated a ‘special site’ in Scotland and it took two years for the Scottish ministers to make a ruling on whether the site was a ‘special site’.
Once land is designated as contaminated land, the local authority must identify legal persons who might be responsible for the costs of the clean-up under Part IIA, known as ‘appropriate persons’. There are two categories: a Class A liability group containing those who ‘caused or knowingly permitted’ the contaminant linkage and a Class B group made up of those with an interest in the property (primarily the current owners or occupiers). In accordance with the ‘polluter pays’ principle, liability is attributed to those in Class A, and it is only in cases where no Class A persons can be found that those in Class B will be made to pay for the remediation. If no Class A or Class B persons can be found then the linkage is known as an ‘orphan linkage’ and the regulatory authority (and therefore ultimately the taxpayer) foots the bill.
Detailed statutory guidance sets out the mechanism for apportioning liability between members of a liability group and there are a number of important exclusion tests. For example, if the site is sold with information about the contaminant linkage, then the purchaser may be liable at the exclusion of the seller (test 3). Equally, if one Class A person has made a payment to another Class A person to fund remediation, then that person may also be excluded (test 2).

A good example of test 3 in action arises from the case of St Leonard’s Court, a former chemicals facility operated by a predecessor of Redland Minerals Ltd. In  the 1980s the site was sold to Crest Nicholson for redevelopment as residential property. In November 2005 both Redland and Crest were served with a remediation notice following the discovery of bromide and bromate in drinking water supplies. Both companies appealed to the  secretary of state claiming that the  other should bear the full costs of the  clean up, with Redland arguing that it  had sold the site with information. The secretary of state held that, while some information had been provided, it had been insufficient in its detail to pass all liability to Crest, and so he apportioned liability between them.

The changes to the  contaminated land regime

The Department for Environment, Food and Rural Affairs (Defra) and the Welsh government (WG) consulted on changes to the contaminated land regime in December 2010. The consultation proposed ‘fine-tuning the existing regime’5 rather than major changes. Following the consultation, the secretary of state produced the following documents6:

The Water Act 2003 (Commencement No 11) Order 2012 (the 2012 Order);
The Contaminated Land (England) (Amendment) Regulations 2012 (the 2012 Regulations); and
Draft Contaminated Land Statutory Guidance under s78YA of Part IIA (the draft Guidance).

The 2012 Regulations and the draft Guidance have been laid before Parliament for approval and, at the time of writing, this process has not been completed. Despite murmurings of discontent from the opposition benches7, we anticipate that the amendments will survive the parliamentary process.

The main thrust of the changes is to the definition and determination of contaminated land.

The 2012 Order

The 2012 Order finally brings into force s86 of the Water Act 2003, changing the definition of contaminated land so that pollution of controlled waters must now be ‘significant’ (or there must be a ‘significant’ possibility of such pollution). From 6 April, contaminated land will be defined as:

‘… any land which appears to the local authority in whose area it is situated to be in such a condition, by reason of substances in, on or under the land, that:

a) significant harm is being caused or there is a significant possibility of such harm being caused; or

b) significant pollution of controlled waters is being caused or there is a significant possibility of such pollution being caused’.

The change provides welcome clarification but it will not have a major practical impact as, in practice, local authorities were always unlikely to designate sites as contaminated as a result of ‘insignificant’ pollution of controlled waters.

The 2012 Regulations

The 2012 Regulations make minor changes to the 2006 Regulations to bring them up to date, for example, to take into account the revised definition of ‘controlled waters’ in Part IIA, and to tweak the ‘special site’ regime to ensure that such sites accord with protected areas under the Water Framework Directive. There is also a  change in the procedure for appeals  to the secretary of state to streamline  the process.

The draft Guidance

The most substantial change to the regime is to the statutory guidance, which contains the detail of the operation of the contaminated land regime. The draft Guidance replaces Defra Circular 01/2006 and is much shorter and supposedly more user friendly. It now excludes guidance on radioactive contaminated land, which will be contained in a separate document. The draft Guidance provides a clearer steer to local authorities on how they should investigate and identify contaminated sites in their areas including details on risk assessments and prioritisation.

Where sites are actually causing significant harm or significant pollution of controlled waters then there is of course no question that the land is contaminated land under Part IIA.

The more difficult question is how to assess whether there is a ‘significant risk’ of significant harm or significant pollution of controlled waters, and to assist with this process the draft Guidance contains a new categorisation process. Local authorities must start from the assumption that land does not pose a significant risk of significant harm unless there is reason to consider otherwise (supported by robust science-based evidence). Sites where there is an unacceptably high probability of a ‘significant risk’ of significant harm or there is a strong and compelling case that there is a ‘significant risk’ of significant water pollution are classified as Category 1. If there is no risk or the level of risk is low, then the site is classified as Category 4. There are plenty of sites that may not fall into either category, because the evidence is inconclusive or because the state of scientific knowledge is uncertain, in which case the site will fall into either Category 2 (where the site is capable of being determined as contaminated land) or Category 3 (not capable of being determined as contaminated land).

In the response to the consultation Defra and WG indicated that an expert panel would be set up to assist local authorities to determine whether land should be Category 2 or Category 3 and case studies will be published8.

To date, local authorities have often based the assessment, and the standard of remediation required, on generic assessment criteria (GACs) such as the Environment Agency’s soil guideline values. The draft Guidance makes it clear that this is too cautious, and that it is possible in many circumstances to exceed the limits in GACs but remain well within Category 4 of the risk assessment. To assist with the risk-assessment process, Defra and the Environmental Industries Commission have been working on new screening levels for common contaminants and British Geological Survey is to provide technical guidance on background levels of contamination naturally present in certain parts of the UK.

If the land is deemed to be contaminated land, then a notice of designation will be served. However, if the land is not deemed to be contaminated land then local authorities are required to issue a written statement to that effect. This requirement has been added to minimise blight and to prevent local authorities from ‘sitting on  the fence’.

Critics of the contaminated land regime complain that the draft Guidance does not go far enough in its simplification of the designation procedure and, as a result, local authorities will remain wary of designating sites for fear of long and protracted legal and technical challenges, while critics of the reforms complain that it waters down the level of protection for human health and the environment. However, the contaminated land regime is clearly here to stay and its retrospective liability regime remains a big risk, not just for current landowners of brownfield sites, but also for businesses whose historic operations may once have impacted sites in the UK.

By Michael Barlow, partner, and  Simon Tilling, associate,  Burges Salmon LLP.

E-mail: michael.barlow@burges-salmon.com;  simon.tilling@burges-salmon.com.

notes

Scotland is retaining the existing regime.
http://news.bbc.co.uk/1/hi/wales/6355835.stm.
http://www.bbc.co.uk/news/uk-wales-south-east-wales-13768700. 
There are equivalent regulations in Wales and Scotland.
Defra/WG consultation at p4: http://archive.defra.gov.uk/corporate/consult/contaminated-land/101215-contaminated-land-condoc.pdf
Equivalent documents have been produced by WG.
The shadow environment secretary was said to be ‘horrified’ by the proposals:  http://www.guardian.co.uk/society/2012/feb/07/defra-building-polluted-land-guidlines.
Defra and WG response to the consultation: http://archive.defra.gov.uk/corporate/consult/contaminated-land/120208-contaminated-land-summary-responses.pdf.