This week's decision by the Secretary of State (SoS) to refuse the application for the Development Consent Order (DCO) for the White Rose Carbon Capture Project came as no surprise in light of the Government's announcements on the closure of the Carbon Capture and Storage (CCS) Commercialisation Programme at the end of last year. That programme would have provided funding to deliver these embryonic projects.
The proposal was for a thermal generating station (including carbon capture and storage facilities), adjacent to Drax Power Station. The decision adds to the uncertainty over the future of CCS as part of UK PLC's looming energy problem. It also highlights the important status of funding in the decision matrix when seeking a DCO that includes compulsory acquisition (CA) powers.
What does the National Policy direct?
The relevant National Policy envisages that developments may be proposed in advance of securing funding:
“Given this requirement to fit a technology which is at a relatively early stage of development, and therefore very costly, it is unlikely that any coal-fired plants will be built in the foreseeable future without financial support for CCS demonstration. However it is possible that developers may wish to submit applications in advance of securing funding. Any decision on a planning application for a new coal-fired generating station should be made independently of any decision on allocation of funding for CCS demonstration. This may mean, therefore, that planning consent could be given to more applications than will be able to secure financial support for CCS demonstration.” (Paragraph 4.7.6, National Policy Statement for Energy (NPS EN-1))
What did the Secretary of State decide?
The SoS considered that paragraph 4.7.6 was no longer engaged. It was clear that no allocation of funding would be made and, because of the lack of funding for the construction and operation of the development, consent should not be granted. There was no available funding and no prospect of funding being provided.
On the face of it there is a clear argument that prospective applications could be made and consent granted even where funding is not available. However, statements by the applicant in response to questions about funding raised during the SoS's decision making period may have strongly influenced the SoS's decision. Those statements included confirmation that the promoters had not identified any alternative sources of funding, and had no funding in place to fund any CA. In considering the need for the development the SoS referred to the NPSs EN-1 and EN-2 as setting out the overall need. She then went on to note that given that the proposed development consisted in an abated plant which would capture most of the CO2 emissions at source, it met the necessary criteria set out at the end of 2015 and which indicated the new direction for UK energy policy.
What lessons does this decision provide for other projects?
The relevance of this decision to the wider infrastructure consenting regime is the importance given by the SoS to funding in the application process where CA powers are engaged.
On the application
The White Rose application had to be accompanied by a funding statement. Such statements must indicate, as per the statutory requirement, "how an order is proposed to be funded". There is more effective departmental guidance for projects seeking CA powers in a DCO to clarify the statutory requirement. The departmental guidance states that the "[funding] statement should provide as much information as possible about the resource implications of both acquiring the land and implementing the project for which the land is required" [emphasis added].
Applicants must be able to demonstrate that:
- adequate funding is likely to be available to enable the compulsory acquisition within the statutory period (minimum 5 years) following the order being made; and
- that the resource implications of a possible acquisition resulting from a blight notice have been taken account of.
Note that the departmental guidance also acknowledges that a project may not be independently financially viable, or that the details cannot be finalised until land can be acquired. Where this applies applicants should provide an indication of how any potential shortfalls are intended to be met, including where other financial contributions, from both the public or private sector, are to be secured and on what terms.
As part of any decision on a DCO the SoS needs to be satisfied that there is a compelling case in the public interest for the land to be acquired compulsorily. The Examining Authority (ExA) noted in its report from August 2015 that most of the CA powers being sought at the start of the examination were unopposed and that it had reduced since then. The ExA's report was submitted prior to the announcement of the closure of the CCS Commercialisation Programme Funding. The Applicant had confirmed during the examination process that if that funding was not received it would be unlikely that other sources of finance would come forward and there were no contingency to cover any shortfall. Despite that the ExA concluded that the SoS could be satisfied that adequate funding is likely to be available to enable CA within the statutory period. Whilst blight was not considered an issue, resources had been made available for this in any event. Crucially it was the post examination events that impacted this decision.
This decision clearly shows that to satisfy the statutory compelling case test in s.122(3) of the Planning Act 2008, the applicant must be able to demonstrate, that:
- it can fund the development – a clear statement to the contrary will be fatal; and
- in the alternative there must be a reasonable prospect of the funds becoming available.
There is an additional impact on failing to meet these tests. This is the grant of CA powers would be unlawful under the Human Rights Act 1998 without the prospect of proper funding being available. For there to be compatibility with interference with human rights there must be a compensation mechanism. Where funding could not be available an application for CA powers will fail.
Clearly applicants for DCOs where CA powers are being sought need a clear evidence base on their strategy for funding. Whilst it is not necessary to have funding in place for the development at the point of application for a DCO (as is evident from other projects such as Hinkley C) satisfying the key statutory tests and the provisions of the guidance are critical. To communicate anything to the contrary will place the decision on the DCO at risk.