The polluter pays not always!

The new regime ties in with government planning policy of promoting development of brownfield land. The government's strategy is to promote remediation of unused and derelict sites, by creating a market for them. The contaminated land regime is the stick in persuading developers to act, the planning system provides the carrot.

Land is judged contaminated if it causes "significant harm" (including polluting controlled waters) because of substances in, on or under it, or if there is a "significant possibility" that it may do so.

Who pays?
The new regime gives express responsibilities to local authorities to inspect their areas for contaminated land. If they find any, they must serve a remediation notice on all "appropriate persons".

How do you judge if your company is likely to be deemed an "appropriate person" on whom liability may fall? There are two distinct classes of appropriate persons - Class A and Class B.

a large number of exclusion tests, applied in sequence, which can remove someone from the Class A group. The rationale behind these tests is to exclude those who are less culpable

already included within Class A.

If you are a Class B owner or occupier, you will only have to pay remediation costs if no Class A polluter can be found. You can never be held responsible for polluting controlled waters. In addition, there are tests that may reduce or remove your liability, depending upon the nature of your interest in the land and any particular hardship.

Potentially, the regime can apply to

If you are potentially liable, you may benefit from voluntarily participating in the processes of determining if land is contaminated and deciding what action to take. The government has emphasised the desirability of this, preferring a responsible party to agree to undertake remediation rather than having the local authority serve a remediation notice on them. It is encouraging this by offering exemption from paying landfill tax to those taking voluntary action. This exemption is not available after a remediation notice has been served.

Pragmatic approach
In practice, enforcing authorities' financial constraints will probably lead to a more pragmatic approach. The most likely targets for early action are

Enforcing authorities can carry out the works themselves and then seek to recover their costs from the members of the relevant liability group. They can also impose a financial charge on the land (which appears to take priority over all other, even preexisting, charges); this may be in addition to any Order granted by a court.

You can appeal to the Magistrates' Court (or the Secretary of State in the case of the most polluted "special sites") against a remediation notice issued by the enforcing authorities, but breach of a remediation notice is, in itself, an offence.

Minimising risk
Your strategies for minimising risk vary according to your particular interest in the land.

Due diligence is likely to focus increasingly on former uses of sites, as well as any current contaminating uses. Potential acquirers need to identify any Class A polluters early on in the transaction. To minimise risk, they should resist disclosure against environmental warranties in the sale-purchase agreement unless there is an indemnity against the warranties affected by the disclosures. Otherwise, the warranties' protection will be virtually non-existent. "Comfort letters" provide extremely limited protection, especially if they are couched in terms of the seller's "knowledge" or "belief".

Conclusion
For the companies or individuals caught by the new regime, it provides increased exposure to the potentially heavy costs of contaminated land clean-up. However, the long-standing system for dealing with statutory nuisances already mirrors much of what the new regime covers. Although the new regime does provide the authorities with a stick to enforce the remediation of sites, it is, perhaps, more likely that planning controls will achieve this more effectively. •--

Preventing industrial pollution
Most pollution incidents are avoidable! Guidance notes on various aspects of pollution are produced by the Environment Agency in England and Wales, the Scottish Environment Protection Agency and the Environment and Heritage Service in Northern Ireland.

Guidance note PPG11 gives help on avoiding pollution at industrial sites, including information on

Developing contaminated sites

In a recent technical paper, John Waters, director of Environmental Resources Management and chairman of the Environmental Industry Commission's contaminated land group, said that a key driver to developing more contaminated sites will be the increasing availability of cost-effective environmental insurance and development finance products:

"It is already possible for landowners to cap the potential remediation expense by paying a premium at the site investigation stage. However, to

date, the take up of these specialist products has disappointed the insurance industry. I believe the reason for this has been the fact that funders of developments do not yet understand these products, particularly in the current absence of a clear legislative basis to quantify the financial risks.

"I suspect that we will see the emergence of specialist brokers that will act as an intermediary between the insurers, the funders and the remediation contractor to provide the landowner with a packaged service. This service is already becoming avail-

able in the USA and is acting as the catalyst not only to allow marginal developments on brownfield sites to become viable, but is also breaking the log-jam that can occur in mergers and acquisitions when materially significant contaminated land issues are unearthed at due diligence stage. I also anticipate more speculative purchase of brownfield sites by developers who have accumulated experience of the potentially increased profits that can be obtained by turning impacted sites into properties for beneficial re-uee."

Potentially contaminating uses of land