Abstraction licensing and water quality reforms in draft water Bill

Proposals for reforming the water abstraction licensing system in England and Wales are at the heart of a draft Water Bill published by the Department of the Environment, Transport and the Regions on 6 November. 1 The Bill also contains provisions for regulating the water industry, as well as miscellaneous legislation on contaminated land, pollution from abandoned mines, drinking water and trade effluent.

The draft Bill had been expected in the spring, and the delay in its publication means that there is no hope that it will be introduced in Parliament in the forthcoming session.

Indeed, the draft is far from complete. The main omission - though one that was expected - is any provisions to promote competition in the water industry, on which the DETR consulted in April (ENDS Report 303, pp 44-45 ). Friction in Whitehall over how far to push ahead with competition was one of the main causes of the delay in the Bill's publication (ENDS Report 306, p 35 ).

A fundamental rethink about the structure of the industry has been under way this year, driven in part by last year's tough AMP3 price settlement for 2000-05. The latest restructuring plan is a bid by Glas Cymru to acquire Welsh Water. The company's ownership would pass to members who would not receive dividends, while its operations would be contracted out.

In the light of these and other developments, the DETR says, "further work on options for extending competition in the water industry needs to be undertaken." Any further restructuring proposals will also be examined to ensure that customer interests, drinking water quality and the environment are protected. Conclusions on the need for legislative changes have been promised early next year.

A further hint on the timing of the Bill's introduction is given in the DETR's comments on the use of economic instruments in the water abstraction regime. Responses to a consultation in April are still being considered, and conclusions will be published within six months. Any legislation needed to implement these "could", the paper says, be included in the Bill when it is introduced in Parliament - seemingly putting it into late 2001 at best.

The Bill will implement reforms to the abstraction licensing system on which the Government announced decisions in April 1999 (ENDS Report 291, pp 45-46 ). They will help the Environment Agency implement its proposed catchment abstraction management strategies (ENDS Report 303, pp 46-47 ). Key changes include:

  • Scope of licensing: The Bill will set a water abstraction threshold of 20m 3 for any 24-hour period below which a licence will not be needed, replacing complex licensing arrangements for small abstractors. The effect will be to remove 20,000 of the existing 48,000 licensed abstractors - mostly farmers - from the licensing system, although the Agency will be able to apply to the Secretary of State for a different threshold in particular areas.

    Working in the opposite direction, an estimated 2,000 abstractors will be brought within the licensing system - mainly dewatering operations and farmers using trickle irrigation.

  • Compensation: At present, the right to compensation for revocation or variation of a licence expires once it has not been used for seven years. The period will be cut to four years.

    For new licences, the right to compensation will be scrapped where a variation is made to protect water availability in the source of supply. However, variations cannot be made for this purpose less than 15 years after a licence is granted, and six year's notice will have to be given.

    For existing licences, the entitlement to compensation will be abolished from July 2012 where the Agency satisfies the Secretary of State that revocation or variation is needed to protect waters or wildlife from serious damage.

  • Water resource management schemes: The Agency will be given new powers to require abstractors to enter into enforceable water resource management schemes.

  • Enforcement: The Agency will also gain powers to serve enforcement notices where abstraction takes place without a licence or in breach of licence conditions and is causing or could cause significant environmental damage. Failure to comply with a notice will carry a fine of up to £20,000 in a magistrates' court or an unlimited fine in a higher court, and the Agency will also be able to apply to the High Court for enforcement orders.

    In addition, the maximum fine available to magistrates for an abstraction offence will be raised from £5,000 to £20,000.

  • Bulk supplies: Acting in consultation with water regulator Ofwat, the Agency will be enabled to propose to a water company that it should enter into a bulk supply agreement with another company where it believes this necessary for the proper use of resources. Companies may decline, but the Agency will be able to take refusals into account when considering their applications for abstraction licences or reservoirs.

  • Drought plans: Water undertakers will be obliged to publish drought plans explaining how they will maintain supplies of wholesome water during droughts with the minimal recourse to drought orders or permits. Inquiries into draft plans may be ordered by the Secretary of State, who may also direct that plans be modified.

  • Water conservation: Another new duty on water undertakers will be to further water conservation when they formulate or consider proposals relating to any of their functions.

    According to the DETR's impact assessment of the draft Bill, the main benefits of the legislation will be to secure more sustainable water supplies and protect aquatic habitats damaged or threatened by over-abstraction. 2

    Water supplies are under particular pressure in southern England. Regional water resource strategies due to be published shortly by the Agency are expected to say that there are no more significant or reliable resources in the south available for abstraction during the summer without restriction. And in significant areas of south-east England the existing abstraction regime is "unacceptable", or no water is available for abstraction at any time during the year.

    The Agency also estimates that it will need to review abstractions affecting around 350 statutorily designated aquatic habitats in England and Wales over the next decade. An as yet unknown proportion of these licences will require modification to ensure that the UK meets its obligations under the EC Directives on habitats and bird conservation.

    Another large chunk of the Bill contains provisions for regulating the water industry which had to be removed from the Utilities Bill earlier this year. They are intended to strengthen protection for consumers and make the regulatory process more open and predictable.

    Ofwat will be placed under a new duty to have regard to guidance on social and environmental matters from the Secretary of State, who will also be enabled to propose new or revised standards of performance for water companies - normally in relation to public health or the environment.

    The draft Bill also contains - or will do so - a wide range of miscellaneous provisions, including:

  • Drinking water: The maximum fine available to magistrates for drinking water offences by water undertakers will be raised from £5,000 to £20,000. The same increase will apply to the offence of failing to provide the Drinking Water Inspectorate with assistance or information during incident investigations.

    Other clauses dealing with drinking water quality will be added later in response to anticipated changes in the industry's structure. In particular, the DWI will be given powers to prosecute anyone who supplied or caused the supply of water unfit for human consumption, such as contractors supplying water on behalf of statutory undertakers, and those supplying water using their pipe networks.

  • Contaminated land: As expected, the Government is to take the opportunity to align the two parts of the definition of contaminated land in the statutory regime for identifying and remediating contaminated sites introduced under the Environment Act 1995 in England and Scotland earlier this year.

    The two parts of the definition impose tests of different degrees of stringency. Land is to be identified as contaminated if, by virtue of substances present in, on or under it, "pollution of controlled waters is being, or is likely to be, caused." But for impacts on other receptors, land is contaminated only where "significant harm is being caused or there is a significant possibility of such harm being caused."

    According to the DETR, the absence of a "significance" test from the water pollution provisions means that an enforcing authority might identify land as contaminated even if very small quantities of pollutants posing a minor risk were entering waters from it. Although there are safeguards in the legislation to prevent unreasonable remediation costs being imposed, there is, the DETR feels, a risk of land being blighted in this way.

    Under a proposed amendment, land could be identified as contaminated in respect of water pollution risks only where "significant pollution of controlled waters is being caused or there is a significant possibility of such pollution being caused."

    The impact of this revised definition on the contaminated land regime is softened only in one place.

    In the provisions dealing with "special sites" - those where more complex contamination is likely by virtue of their past uses, and regulated by the Agency rather than local authorities - the Secretary of State can prescribe in regulations the types of land that may be identified as "special". This was done earlier this year.

    In the existing law, the Secretary of State may, when drafting these regulations, have regard to whether a class of land is in such a condition that "serious pollution of controlled waters would be, or would be likely to be, caused." Under a proposed amendment, the replacement phrase is "serious pollution of controlled waters would or might be caused" - "might" being a less demanding test than "likely to be".

    The amendments also provide for the Secretary of State to issue guidance on when land is to be regarded as contaminated by reference to different types of water pollutants or degrees of water pollution.

  • Coal mine pollution: The Government intends to give the Coal Authority express powers to deal with water pollution from coal mines - presumably only abandoned mines. The Authority is funded by the Department of Trade and Industry to manage and clean up such discharges.

    The legislation is still being drafted, but the aim is to enable the Authority to prevent or deal with water escaping from coal mines onto land or into water; enter land to drill boreholes and install equipment to investigate and deal with minewater posing a serious environmental or health risk; and compulsorily purchase land to prevent or treat minewaters.

    The powers will apply to England and Wales, but discussions are under way with the Scottish Executive on extending similar provisions to Scotland.

  • Trade effluent consents: Another set of as yet undrafted clauses will amend provisions in the Water Industry Act 1991 regulating trade discharges to sewer.

    According to the DETR, there is occasional uncertainty about whether such discharges have to be regulated by sewerage undertakers, and the purpose of the changes will be to remove this. However, it has not explained what problems the changes are intended to address or why it feels the 1991 Act to be inadequate, and so the practical implications remain obscure.

    What the DETR intends is to repeal powers in section 139 of the 1991 Act which enable the Secretary of State to order that discharges other than "trade effluent" should be regulated as trade effluent. A replacement order-making power will enable him to narrow or widen the meaning of "trade effluent" and "trade premises" "in order to protect the environment".

    In doing so, the paper says, he will be able "to make clear whether discharges from particular processes, substances or types of activity to the public sewer are subject to the consenting regime. He can also specify pollution prevention equipment."

    In addition, the DETR intends to repeal section 138(5) of the 1991 Act, which bars the Secretary of State from prescribing as "special category effluent" any discharge which is not "trade effluent". For "special category effluent", the Secretary of State can order sewerage undertakers to ban or impose specified conditions on discharges.

    The net effect, according to the DETR, will be "better regulation of the trade effluent discharge process by bringing under control the discharge of small volumes of potentially harmful substances to the water environment."

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