Site baseline and restoration under IPPC

Industrial permitting in England and Wales is currently in a state of flux as the requirements of the EU’s Integrated Pollution Prevention and Control (“IPPC”) Directive are phased in, replacing the existing Integrated Pollution Control (“IPC”) and Air Pollution Control (“APC”) regimes under Part I of the Environmental Protection Act 1990. Although in many ways the new system is close to the concepts and procedures familiar to those already regulated under IPC and APC, there are also areas of significant change as well as a number of more subtle variations. At the more dramatic end of the scale, whole new sectors, in particular food and drink and intensive farming, will be regulated; certain facilities that previously were only regulated for air emissions will move up to the integrated regime (known as Part A under PPC, and divided into A(1) and A(2)); and landfill sites are being brought over en mass from the waste management licensing regime. In terms of legislation, the key provisions are now the Pollution Prevention and Control (England & Wales) Regulations 2000 (“PPC Regulations”) (already amended several times).

One of the big changes is the requirement for Part A installations and mobile plant that, before a PPC permit can be surrendered, the site must be restored to the condition it was in before the permit was granted and any risks to the environment must be addressed. The concept of site restoration will be familiar to the waste management industry, which has been subject to similar requirements since 1994, but it is new to other areas of industry. One feature that is new even to the waste management industry, however, is that a site report must be submitted as part of the application for a Part A PPC permit. This is to provide a baseline, evidencing the condition of the site prior to the grant of the PPC permit and setting the standard to which pre-surrender remediation must restore it. Thus, the PPC operator is not to be held liable under the PPC Regulations for pre-existing contamination. So far, so good. However, the baseline site report will be a public document and could trigger other regulatory or civil liabilities if it reveals the presence of problematic contamination.

The rest of this article looks in more detail at PPC baseline and surrender requirements as they affect Part A installations and mobile plant (encompassed within the term “installations” from this point onwards in the article for the sake of convenience) other than PPC-regulated landfill sites, which are subject to separate requirements.

Baseline site reports and surrender requirements

The PPC Regulations themselves provide only a very broad brush statement of what is required by way of a baseline site report: it “shall describe the condition of the site of the installation or Part A mobile plant and shall, in particular, identify any substance in, on or under the land which may constitute a pollution risk” (Schedule 4, Part I, paragraph 1(ii)). The significanceof this becomes clearer in the provisions relating to permit surrender in Regulation 19(3). This provides that a surrender application must be accompanied by a further site report, “identifying, in particular, any changes in the condition of the site as described in the site report contained in the application for the permit”, plus details of any remediation works that have already been carried out. The regulator, the Environment Agency for Part A(1) and the local authority for Part A(2), may only except the surrender if it is satisfied that appropriate steps have been taken to:

• avoid any pollution risk resulting from the operation of the Part A installation; and
• return the site to a satisfactory state.

The language of these requirements is broad and largely undefined, perhaps because much of it tracks the wording of the IPPC Directive. “Pollution” is given a wide definition, for example, but the PPC Regulations do not appear to set any materiality criteria in relation to “any pollution risk”. Equally, a “satisfactory state” is undefined. However, a fair amount ofguidance has been produced, or is in the process of being produced, by DEFRA and the Environment Agency to address some of these points. In particular, the Environment Agency publication, “Part A(1) Installations: Guide for Applicants” (Version 2 – December 2000), sets out detailed guidance on the baseline site report in Annex C and a consultation draft of guidance in relation to the site report to be prepared for the purposes of a surrender application (referred to as a “closure site report”) was published in July 2002, with responses requested by 27 September 2002.

Strictly, the Environment Agency guidance applies only to Part A(1) installations, with DEFRA responsible for producing the equivalent A(2) guidance. However, the dates by which existing A(2) installations falling within some of the earlier sectors to be moved over to PPC are required to apply for a PPC permit have been put back by one year, with the first tranche of these applications now required in April – June 2003. So far, DEFRA has not produced equivalent A(2) guidance1 beyond the more general chapter in its publication “Integrated Pollution Prevention and Control: A Practical Guide” (Edition 2, June 2002). DEFRA has advised that until the A(2) guidance is finalised, the Environment Agency guidance should be used. DEFRA and Environment Agency guidance

Two key points can be drawn from DEFRA and Environment Agency guidance on baseline and surrender requirements

Firstly, PPC baseline and surrender requirements do not take the same kind of risk–based approach found in the contaminated land provisions under Part A(2) of the Environmental Protection Act 1990 (“Contaminated Land Regime”) and also used by the planning system. Specifically, there is no “suitable for use” test for determining the extent of any clean up requirements. Whereas the Contaminated Land Regime takes a more pragmatic line on dealing with the legacy of historic contamination, the policy approach of PPC is that any pollution or deterioration in the condition of the site arising out of the operation of the Part A installation should be rectified by the operator. In other words, this is pure “polluter pays” and the site must, so far as possible, be restored to the condition it was in before the PPC permit was granted, as evidenced by the baseline site report. This difference between PPC and the contaminated land regime approach to assessing sites appears to have led to confusion at least in some of the earlier PPC permit applications, with the Environment Agency complaining that some baseline site reports contained, wrongly, contaminated land risk assessments.

The second point, which follows the logic of the first, is that PPC surrender requirements relate only to pollution or contamination resulting from the operation of the relevant installation. In particular, the PPC Regulations do not have retrospective effect and (except in relation to certain waste management activities) state expressly that pollution will only be treated as having resulted from the operation of the installation if it results from such operation after the date on which the PPC permit was granted. This is clearly of great importance to operators of installations that pre-date the PPC regime. It is also relevant to operators of new installations on brownfield sites. In principle, such operators should not be responsible under the PPC Regulations for historic contamination at their sites, whether resulting from previous activities or from the earlier operation of the current activity, nor indeed for substances migrating onto the site from neighbouring activities.

This raises the evidential question of when and how any contamination present on site at the proposed surrender date came to be there. To an extent, the baseline site report provides the answer to this question. However, any environment consultant with a reasonable instinct for self-preservation will point out that an intrusive investigation can only reveal what is present in the samples that are actually taken and analysed. While the consultant’s skill and judgment may be exercised over factors such as the number and location of samples to be taken, short of digging up the whole site the possibility that hot spots of contamination will evade detection cannot be ruled out. Then again, even if a consultant has made a mistake, the timescales involved between permit application and surrender is such that the normal limitation periods applying to making a claim may have expired.

So, who bears the risk, or at least the burden of proof, if the closure site report reveals something that was not recorded in the baseline site report and which the operator does not consider to have come from the Part A installation? The PPC Regulations do not address this point directly, so there may well be room for argument. Given this, it is perhaps surprising that the guidance from DEFRA and the Environment Agency takes such a hard line. Both state that the operator will be held responsible for any pollution or contamination on the site that was not identified in the baseline site report, “unless the regulator is convinced that the operator cannot reasonably be withheld responsible for it” (emphasis added). This seeks to put the burden of proof squarely on the operator; not only that but it would appear to set a standard of proof which goes beyond the normal civil standard of “the balance of probabilities” and aspires instead to the standard in criminal proceedings of “beyond all reasonable doubt” which, ordinarily, only a prosecutor is required to achieve.

In private, the Environment Agency acknowledges that this is an issue and that there is a debate about how much detail should be required from the baseline site report when the Agency is conscious that the report should not end up being a major cost of an application.

It is possible, however, that the Environment Agency guidance on closure site reports is attempting to find some practical ways around this dilemma. Rather than leaping straight into intrusive investigations, the consultation draft of this guidance emphasises the importance of good environmental management during the lifetime of an installation. In particular, records generated by the maintenance, inspection and monitoring regimes required by the permit conditions must be assessed, amongst other things, in order to determine the potential for pollution to have occurred. If these records can demonstrate that there have been no significant incidents, or perhaps that any incidents were addressed properly and promptly, then the draft guidance suggests that it may not always be necessary to carry out an intrusive investigation. Presumably, the level of confidence that the Environment Agency or local authority has in the current and any previous operators will have a bearing here.

Level of investigation

The draft surrender guidance indicates that, in certain circumstances, the closure site report may not need to include intrusive investigations. Equally, the Environment Agency guidance on the baseline site report recommends a phased approach which may stop short of intrusive investigations. Rather confusingly, the Environment Agency’s Guide for Applicants refers to these phases as Phase 1(a), Phase 1(b) and Phase 2, but these do not quite correspond to the usual distinction between a Phase I and Phase II investigation. However, Phase 1(a) is made up of a desk study and site reconnaissance and, as such, broadly corresponds to a Phase I investigation.

In addition to its role in setting a baseline for future remediation, one of the functions of the baseline site report is to provide the regulator with information on the environmental sensitivity of the site. This is relevant to the setting of permit conditions that, in some respects, are required to take into account site–specific factors. In particular, the determination of what amounts to best available techniques must take account of the sensitivity of the local environment. The Phase 1(a) level of the baseline site report addresses both the baseline and the environmental sensitivity considerations. Beyond that, however, the baseline function is the driver and subsequent phases will be increasingly removed from the normal due diligence or contaminated land types of investigation.

Following the Environment Agency guidance, the purpose of subsequent phases of investigation is to home in on contamination which is similar to any substance that is used or may be produced or generated by the operation or presence of the installation rather than seeking to establish equivalent information on the nature and extent of every possible contaminant at the site. Accordingly, where a new installation is being built on a greenfield site, or on a brownfield site where any contamination from former uses is not considered likely to be confused with any contamination resulting from the new installation, it may not be necessary to go beyond Phase 1(a). On the other hand, where an existing installation is moving over to PPC and there is a risk that it or previous activities on that site could have caused contamination of a similar nature to that which could be caused by the current operations, there is a strong incentive to carry out intrusive investigations.

Nevertheless, it is important to bear in mind that the identification of contamination in the baseline site report will not necessarily mean that the operator escapes liability for cleaning it up. On the contrary, it is possible that regulatory action will be triggered by the process since the baseline site report will be a public document. In particular, copies of the report will go to both the Environment Agency and the local authority, one in its role as regulator and the other as statutory consultee, and the Environment Agency and DEFRA guidance is explicit about the possibility that the local authority may then use that information to require action under the Contaminated Land Regime. It is also possible that the Environment Agency could use its powers to serve works notices under Section 161A-D of the Water Resources Act 1991.

Conclusions and tactical considerations

Since the standard of remediation under the Contaminated Land Regime could be significantly lower than the site restoration requirements under the PPC Regulations (unless water pollution is involved, land need only be made “suitable for use” under the Contaminated Land Regime rather than restored to its former condition) and since in some cases the PPC operator may not be the liable person, or not the only liable person, under the Contaminated Land Regime, the question of the level of investigation to be carried out for a PPC baseline report may be influenced by tactical considerations. Put crudely, if the site is heavily contaminated, the choice may be between a lower level of remediation now or a higher level later when the PPC permit comes to be surrendered. Of course, if a site is sufficiently contaminated to trigger remediation requirements under the Contaminated Land Regime, then there may also be the risk of incurring a variety of other civil and regulatory liabilities and it may be advisable to consider voluntary remediation in any event.

A further consideration is the extent to which the baseline site report and subsequent operation of the installation or mobile plant may enhance or detract from the value of the business. There is no provision in the PPC Regulations for apportioning any clean-up liability between past and present operators. Accordingly, any purchaser of a PPC-regulated business will take on the full liability and so may wish to include in its due diligence the carrying out of its own investigation to measure against the PPC baseline. Any question marks over the adequacy of the baseline site report, the origin of any “new” contaminants or the rigour with which the environmental management system has been operated risk being resolved against the seller.

Despite the incentive on the operator to carry out a comprehensive baseline investigation, the surrender of the PPC permit may seem a very long way off. However, the ramifications of the PPC baseline and restoration requirements are likely to impact businesses well before then, whether because of regulatory or commercial interest or because of the advantages of practising good environmental housekeeping throughout the lifetime of the installation. Either way, the baseline site report is likely to be a significant document.

For further information please contact Jenny McKenzie on +44(0) 7367 3082 or at [email protected].