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UK GENERATORS: EMBEDDED BENEFITS SUBSIDIES TO BE CUT FOR <100Mw OPERATORS

OFGEM has announced cuts to embedded benefits payable to operators of diesel, biomass and wind generators of under 100Mw, who are seen as key to keeping the grid balanced. The generators often provide back-up power for peak winter demand.

The changes are set to be introduced over 3 years from 2018.

Given the significant impact of this decision we have been approached by clients wishing to judicially review the decision. For further information, or if your business is affected and you wish to discuss your situation, please call Jonathan Green on jng@prospectlaw.co.uk or 020 7947 5354.

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SYSTEMS THINKING, CORPORATE SOCIAL RESPONSIBILITY (CSR) AND CREATING SHARED VALUE (CSV) FOR THE ENERGY INDUSTRY IN THE TWENTY FIRST CENTURY: PART IV

CSR, CSV and their Influence on Corporate Decision Making

In my fourth article I consider ways in which CSR/CSV dynamics can affect corporate decision making in the energy sector, looking in particular at the example of Eni and how it has approached the matter of climate change.

Papua New Guinea is experiencing one of the largest capital investments in its history through the Papua New Guinea Liquified Natural Gas Project. The country must put in place the necessary governance and accountability mechanisms to ensure that the benefits of this investment are captured and fairly distributed among the nation’s stakeholders. At the same time, business needs a working regulatory framework in place.

In addition to making substantial direct investments in local human capital, workforce skills and enterprise development, it is important for the projects success to work with government to strengthen the enabling business environment, improve infrastructure and build capacity on revenue transparency, revenue management and broader development planning and implementation. This is an example of the kind of project that extractives companies are currently involved in across the world. Their project timelines extend over decades, and rely on the communities and countries in which they operate for success.

The sector often operates in isolated, remote areas that lack effective local and national governments and offer few public services. The societal and business imperatives to create shared value are undeniable.

The issue of climate change is of increasing importance for extractives companies, when considering ways in which they can create shared value with society. Otherwise they face the very real possibility of losing their Social License to Operate, as well as revenue as climate change starts to impact on the world. Eni is an example of an energy company which has faced up to the reality of climate change, and the conclusions of the Paris Conference, in order to preserve its viability as a business.

Eni has responded to the climate change challenge with the development of its model for the sustainable development of energy resources, and the company’s new mission: a model able to combine financial solidity and social and environmental sustainability in order to face the dual challenge of maximizing the rising demand for energy and fighting climate change.

This model has focused on cooperation with the countries in which it operates, minimizing risks and the impact of its activities, as well as defining a clear road map towards a low carbon future. Eni has acknowledged the need to limit temperature increases below 2 degrees centigrade, outlining a strategy based on a carbon footprint reduction, low carbon portfolio and a commitment on renewables – while at the same time maximizing access to energy. Development projects for residents in areas of its upstream activity are crucial to the company’s strategy, including economic diversification, health care, access to water, education and infrastructure development.

The old model of CSR is dead. It has been replaced by the idea of the Creation of Shared Value – an idea to drive the very core purpose of companies. The increasing fragility of the nation state is a leitmotif of the twenty first century, as decentralization, devolution, globalization, political deadlock and austerity all combine to reduce the power of national governments to significantly impose their will on development. The opportunities for companies to increase profitability by adopting business models based on the concept of CSV are enormous.

In this blog I have considered the relevance of CSV to governance and accountability issues, and how Eni has responded to the challenges posed to the energy sector in terms of how it creates shared value.

By Mark Jenkins

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Advisory accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Advisory and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

For more information please contact us on 020 7947 5354 or by email on: info@prospectlaw.co.uk.

For a PDF of this blog click here

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SYSTEMS THINKING, CORPORATE SOCIAL RESPONSIBILITY (CSR) AND CREATING SHARED VALUE (CSV) FOR THE ENERGY INDUSTRY IN THE TWENTY FIRST CENTURY: PART III

The Relationship between CSR and CSV, and Ways in which these can add value to Corporate Decision Making

In this third article I look at the relationship between CSR and CSV, and consider ways in which CSV can add value to corporate decision making by energy companies. In my previous article I considered ways in which energy companies can create shared value, move from quantitative to qualitative growth and reorder their relationship with the environment to one based on regenerative activity, rather than the maximisation of profits.

Corporate Shared Value approaches acknowledge trade-offs between short-term profitability and social or environmental goals, focusing on the opportunities for competitive advantage from building social value propositions into corporate strategy.

CSV approaches differ from CSR ones in that, while they share the same basis of doing well by doing good, CSR is about responsibility and CSV is about creating value. CSV creates income by being a better capitalist, rather than being a good corporate citizen.

Professor Michael Porter has said:

“Extractives companies are major sources of income and economic growth. Oil and gas and mining operators, suppliers and related supporting industries represent an estimated five per cent of global gross domestic product. Three of the world’s ten largest companies are extractives companies. Although companies in this sector have a decidedly mixed record on social and environmental issues, they have helped create more vibrant economic development, new businesses, new jobs and opportunities for professional growth, reductions in the disease burden and more effective government. Close to four million people are employed by mining companies alone. ”

Reserves are often found in remote areas with limited economic activity and major societal needs. Operations require massive inflows of capital that often dwarf local economies. Companies and suppliers inevitably have multiple points of interaction with local communities, and yet the huge economic output of the extractives sectors has not always translated into improved social and environmental outcomes for the countries and communities where these companies operate. Nigeria is emblematic of this missed opportunity. Despite the presence of major oil companies in Nigeria since the early 20th century, the country still ranks among the bottom 20 per cent of countries in the HDI and its GDO per capita was 180th in the world in 2013.

Billions of dollars are being lost by extractives companies as a result of community strife, despite extensive community relations programmes.

“The norm is to respond to conflicts by focusing on the visible causes of tension – protects, permit delays, negative media coverage, and demands from local influences – so called on technical risk. Companies spend hundreds of millions on social investment projects even though research shows little correlation between the amount of money spent and the success of company-community relations. Investments based on community wish lists and attempts to placate the loudest voices in a community have led to ever shifting community requests, unilateral projects that have little impact, prioritizing image over outcomes, and missed opportunities for business and community alignment. Companies track dollars disbursed rather than societal outcomes.”

Aligning the business interests of extractives companies with community needs and priorities is the only real solution for companies and communities alike.

Extractives companies need to approach communities in a manner based on shared value. Shared value cannot substitute for shoddy operational performance, environmental damage or poor ethics. However, it offers a shift in purpose for these companies in the places where the resources are extracted.

In this way new businesses are produced, together with more vibrant economic development, new opportunities for professional growth, reductions in the disease burden and more effective government to facilitate the long term development of the community in which the company operates.

Shared value is the next competitive advantage. Competition in extractives will increasingly be determined by the ability to integrate economic and social factors.

In this blog I have looked at ways in which corporates are increasingly formulating their strategy in terms of the creation of shared value, rather than corporate social responsibility. I have also examined the relevance of CSV to business development strategies for the energy sector, especially in terms of mitigating the effects of community strife. In my next article I will consider ways in which CSR/CSV dynamics can affect corporate decision making in the energy sector, looking in particular at the example of Eni and how this company has approached the challenges of climate change.

By Mark Jenkins

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Advisory accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Advisory and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

For more information please contact us on 020 7947 5354 or by email on: info@prospectlaw.co.uk.

For a PDF of this blog click here

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SYSTEMS THINKING, CORPORATE SOCIAL RESPONSIBILITY (CSR) AND CREATING SHARED VALUE (CSV) FOR THE ENERGY INDUSTRY IN THE TWENTY FIRST CENTURY: PART II

In this article I look at the connection between ecological and systems thinking, and why it is that the illusion of perpetual growth is at the heart of the global crisis of affairs. Systems thinking argues for a transition from growth that is quantitative to growth that is qualitative.

To read Part I, please click here

Capra believes that mankind needs to relearn ecological thinking, which he defines as “the science of the relationship between the members of the Earth’s household.” Capra says that biological networks are in the realm of matter and that social networks are in the realm of meaning, which leads to non material outcomes like culture and values. Capra believes that mankind is currently shifting from a machine view of life to one based on networks. In Capra’s systems thinking there is a concept of spontaneous emergence of new order. For this to happen there need to be networks of communication and an openness to outside influence.

Fundamentally, Capra believes that the essential dilemma of our times is the illusion of perpetual growth. He says that the pursuit of this goal is the root cause of the current crisis of global affairs:

 “At the heart of corporate structure is the mandate to maximize returns for shareholders, even if this means sacrificing the well being of employees, the prosperity of local communities and the protection of the planet….the driving force of the systemic crisis is global capitalism-itself a network of financial flows, designed without an ethical framework. It promotes limitless growth and excess consumption, because these fuel profits. Underlying this system is not only economic growth but also corporate growth.”

Capra argues for a shift from quantitative to qualitative growth:

“Qualitative growth enhances the quality of life through regenerative activity- through cooperatives and other forms of ownership focused on supporting life, rather than on maximizing profits.”

This shift from quantitative to qualitative growth is at the heart of current thinking about how to create shared value. Companies can create shared value opportunities in three ways.

First, through the re-conception of products and markets in order to meet social needs while better serving existing markets, accessing new ones and lowering costs through innovation.

Secondly, through the improvement of the quality, quantity, cost and reliability in inputs and distribution while simultaneously acting as a steward for essential natural resources, and driving economic and social development.

Thirdly, by enabling local cluster development in order to ensure reliable local suppliers, a functioning infrastructure of roads and telecommunications, access to talent and an effective and predictable legal system.

In this article I have considered ways in which energy companies can create shared value, move from quantitative to qualitative growth and reorder their relationship with the environment to one based on regenerative activity, rather than the maximization of profits. In Blog 3 I will look at the relationship between Corporate Social Responsibility (CSR) and Creating Social Value (CSV),  and consider how CSV can add value to corporate decision making by energy companies.

By Mark Jenkins

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Advisory accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Advisory and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

For more information please contact us on 020 7947 5354 or by email on: info@prospectlaw.co.uk.

For a PDF of this blog click here

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SYSTEMS THINKING, CORPORATE SOCIAL RESPONSIBILITY (CSR) AND CREATING SHARED VALUE (CSV) FOR THE ENERGY INDUSTRY IN THE TWENTY FIRST CENTURY: PART I

In this first article I look at what is meant by “radical engagement” with society, and also the relevance of Systems Thinking to CSR, and the energy industry.

John Browne, former CEO of BP, estimates the risk for a company having the wrong relationship with society, of neglecting those aspects of their activity that go beyond narrowly legal requirements at about 30 per cent. He advocates a policy of “radical engagement” as the basis for how companies should engage with society, using four main principles:

  • Businesses do well when they have a good understanding of the world around them, and of their place in the world;
  • Businesses need to understand better how to communicate their total contribution to society – activities that make a social contribution should be construed as being part of a company’s central purpose;
  • CSR and sustainability should be “part of the performance contract of a business and evaluated as such”;
  • In an interconnected world it is important not to engage or communicate only when you have to. Business engagement with society should be radical, not grudging and episodic.

One of the issues that has changed in corporate policy making is the notion that profit should be an “outcome”, rather than the goal of commercial life.

The question of “purpose” and “meaning,” and the role of “value” are at the heart of Fritjof Capra’s systems approach. Capra’s work has been heavily influenced by the insights of quantum science, in particular the work of Werner Heisenberg, author of “Physics and Philosophy.” Interviewed about the influence of Heisenberg on his work, Capra said:

“…the exploration of the atomic and subatomic world brought them in contact with a strange and unexpected reality. In their struggle to grasp this new reality, they became painfully aware that their basic concepts and language, indeed their whole way of thinking were inadequate to describe atomic phenomena. The problems were not merely intellectual, but amounted to an intense emotional, and one could even say, existential crisis. It took them a long to overcome this crisis, but in the end they were rewarded with deep insights into the nature of matter and its relation to the human mind.”

Capra’s systems thinking originates in this intellectual crisis of the 1920s. Out of that crisis came the realization that there are no fundamental constituents of matter. Instead everything is a web of connection and interrelationship. Solutions to the world’s current multiple crises cannot be isolated. They must be interconnected.

Capra says:

“The problem of energy cannot be solved by finding cheaper sources of energy. If we had hydrogen fusion right now, or some new energy source that was cheap and safe, all our other problems would only get worse. If you fuel a system that is out of balance, you have just the same system but on steroids. We would damage the rainforests, deplete the ecosphere, pollute the air and increase health problems. In other words, the energy problem is also a health problem and a food problem and a water problem.”

John Browne believes that energy companies must engage radically with society. He believes that profit should be an outcome, rather than the goal of corporate decision making. The systems thinking of Frithjof Capra has much to say in relation to debate about meaning, and purpose. Furthermore, it advocates an approach to strategy that considers energy issues within a wider context than the industry itself.

In my second article I will look at the connection between ecology and systems thinking, and why it is that systems thinkers believe that the illusion of perpetual growth is at the heart of the global crisis of affairs. I will examine the possibility that society needs to transform its understanding about growth from one that is quantitative to one that is qualitative.

By Mark Jenkins

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Advisory accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Advisory and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

For more information please contact us on 020 7947 5354 or by email on: info@prospectlaw.co.uk.

For a PDF of this blog click here

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WHOLESALE ENERGY PRICES: MARCH – APRIL 2017:

In this series of articles, Dominic Whittome covers recent changes to wholesale energy prices.

Crude Oil

Brent fell 10% amid lingering concern about over-supplied oil markets and US output climbing to 9.25 million a day, its highest level since August 2015. Meanwhile, last year’s production accord struck between OPEC, Russia and other non-OPEC nations, which had initially intended to eliminate a 300 million barrel stockpile over a global five-year average (three days of worldwide production), has succeeded in lifting prices and keeping them above $50/bl. However, the price impact has been muted otherwise.

The inventories picture is mixed and reports are also contradictory. Refinery supplies are still rising although offshore inventories are reported to be falling; a sign perhaps that the production cuts agreed last year are taking longer to feed through than ministers bargained. If OPEC and non-OPEC ministers, meeting behind-the-scenes now, do agree to significant further cuts in time for the next Vienna meeting on May 25th then crude could break out of its current $45 to $55/bl price range and head back above $60 or $70/bl. However, the market will first want to see evidence of agreed cuts showing up in refinery inventories before any new price range is established.

Natural Gas

The forward year OTC gas contract fell back 15% over the two month period in the absence of any significant supply issues. However, gas prices will be sensitive to any further heightening of tension in the Korean Peninsula. Although Geo-political risks affect all energy commodities, gas stands to be affected most, perhaps, in light of threats to shipping and the disruption of diverted spot and contracted LNG cargoes destined for European terminals, as well as its link to the Rotterdam oil market.

For the time being, gas prices are also being held back by the declining price of coal, which recently traded below $65/tonne. The falling carbon price has also taken its toll with the EU-ETS contract trading below €4.50/tonne at one stage in April, its lowest level since last summer. Traders have commented on a ‘loss of direction’ in the market, drifting away from supply-specific fundamentals. If so, this could signify gas prices shadowing the crude and petroleum products markets in weeks ahead.

Electricity

Last month saw the first day in which UK coal plants producing zero electricity; a timely reminder of the increasing reliance on renewables, new-build nuclear and interconnector projects in order to fill the impending generation gap as the last of the coal and ageing Advanced Gas-cooled Reactors are taken offline.

Each of these alternatives carry uncertainties in respect of capacity available on the day and construction timescale. Further, the trend towards decentralised grids and the ‘off shoring’ of capacity (i.e. interconnectors) could increase burdens on the balancing system and, as a consequence, the suppliers’ average risk-premium added within long-term power contracts as more producers and traders become adverse to contracting forward. Conceivably this will worsen the current liquidity problems further, with reports of senior traders and trading directors now retreating from forward trading altogether and contenting themselves with the prompt markets only. This would leave industrial prices ever more prone to sudden price corrections, if we assume that forward prices then become more likely to take their cue from the prompt market as a result of little activity in the relevant forward market.

While the election date has sapped chances of any early energy policy announcement, there was little in the market to console fossil-fuel generator or storage investors either, with spark spreads drifting below 4% and weakening intra-day/Red Zone spreads compromising commercial cases for battery storage. However, relevant policy announcements are believed possible a few months after the summer recess, potentially in October or sooner.

By Dominic Whittome

Prospect Law and Prospect Advisory provide legal and business consultancy services for clients involved in the infrastructure, energy and financial sectors.

Prices quoted are indicative and may be based on approximate or readjusted prices, indices or mean levels discussed in the market. No warranty is given to the accuracy of any view, statement or price information made here which readers must verify.

Dominic Whittome is an economist with 25 years of commercial experience in oil & gas exploration, power generation, business development and supply & trading. Dominic has served as an analyst, contract negotiator and Head of Trading with four energy majors (Statoil, Mobil, ENI and EDF). As a consultant, Dominic has also advised government clients (including the UK Treasury, Met Office and Consumer Focus) and various private entities on a range of energy origination, strategy and trading issues.

For more information please contact us on 020 7947 5354 or by email on: info@prospectlaw.co.uk.

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R V RECYCLED MATERIALS SUPPLIES LTD [2017] EWCA CRIM 58: IMPLICATIONS FOR THE REGULATION OF POLLUTING FACILITIES

The recent Court of Appeal decision in R v Recycled Materials Supplies Ltd [2017] EWCA C rim 58 deals with the question of which authority is the appropriate regulator for regulated facilities under the Environmental Permitting (England and Wales) Regulations (EPR).  The 2010 version of the Regulations with amendments was in force at the time of the offences but there are no material differences for present purposes in the current 2016 Regulations.

Generally the regulator is the Environment Agency (EA) in relation to facilities in England and the Natural Resources Body for Wales (NRBW) for facilities in Wales.  These authorities oversee the most heavily polluting facilities, including waste operations.

On the other hand, local authorities are the designated regulators for certain facilities considered to be less polluting, including ‘Part B activities’ which are controlled for air pollution purposes only.  Although the EPR set out rules for determining which body is the appropriate regulator, the position is sometimes less than crystal clear in practice as demonstrated by the Recycled Materials supplies (RMS) case.

Background:

The facts are simple. RMS operates a facility for recycling construction and demolition waste which is crushed and recovered to produce aggregates.  The waste includes brick, tiles and concrete which are not segregated from other materials.  RMS was granted an environmental permit (EP) by the EA to cover the waste operations on their site.  However, the London Borough of Newham (LBN) separately issued a more limited EP for the crushing, grinding and screening of brick, tiles and concrete by means of mobile plant.  Those activities are Part B activities and therefore should fall under local authority control to deal with air pollution.

RMS was prosecuted by LBN for failing to comply with a condition of their EP requiring vehicles transporting aggregates to be fully enclosed.  RMS’s conviction by the Crown Court was overturned by the Court of Appeal on the ground that dual regulation, although possible in some cases, was unlawful in the present circumstances.  The court pointed out that regulatory functions in respect of regulated facilities including waste operations and waste mobile plant are allocated to the EA (or NRBW) under regulations 32(1) and (1A) of the EPR unless they are specifically allocated to local authorities under regulation 32(2), which includes:

  ‘… (b) … Part B mobile plant but not in respect of any of the following regulated facilities carried on ….by means of mobile plant –

(i)         a waste operation (unless it is a Part B activity)  …’

The Court of Appeal accepted that this wording indicates that a waste operation may also be a Part B activity.  However, the local authority would only have the function of issuing an EP if the activity on RMS’s site was a ‘Part B mobile plant which was ‘by the tortuous route of double exceptions’ carrying on a Part B activity. However, the crushing, grinding and screening of brick, tiles and concrete were never carried out as separate activities but always as an integral part of the waste operation on RMS’s site.  For that reason the activity could not be considered a Part B activity and the plant if it was mobile was ‘waste mobile plant’ which is regulated by the EA and not ‘Part B mobile plant’.  Under those circumstances, the EA alone had jurisdiction and the LBN EP was therefore invalid.  It followed that RMS had not committed an offence by failing to comply with a condition in an invalid EP.

The Court of Appeal stated that a defendant prosecuted for breach of a permit condition can challenge the validity of an EP in the course of a criminal trial.  However, they added (without ruling on the point) that there was some force in the argument that any challenge to a permit condition may have to be made through the appeal process set out in the EPR – an appeal to the Secretary of State (DEFRA) in England or the Welsh Ministers in Wales.  Such appeals have to be made within 6 months of the grant of the EP, so it may be too late to wait until the permit holder is prosecuted for failure to comply with a condition.

This case illustrates a number of important points:

  1. If there is more than one EP governing the same activity on a site, one of them may be invalid. Dual regulation is generally frowned on.  An exception contemplated by the EPR is the operation of mobile plant on the site of another regulated facility.  In the event of inconsistency between the requirements of the two permits, the requirements of the EP for the latter prevail.
  2. If any condition of an EP is unduly onerous to the permit holder an appeal should be made promptly. Otherwise, it may be too late to challenge it.
  3. Although not relevant in the present case, the court noted that there is a power for the Secretary of State (or the Welsh Ministers) to make a direction under regulation 33 of the EPR that the regulatory functions of the EA/NRBW shall be exercised by the local authority or vice versa.Such a direction can apply to a single facility or a class of facilities.  The power to make directions has been used where the experience of the ‘other’ regulator is more appropriate to a particular facility.

By Andrew Waite

Andrew Waite is a solicitor and specialist in environmental law, advising on regulatory and liability issues for a broad range of industries.  He defends prosecutions for breaches of environmental legislation, deals with regulatory appeals and civil litigation and advises on environmental issues relating to projects and transactions.  He deals with all the main areas of environmental law including waste, energy, nuclear, contaminated land, pollution controls, environmental permitting, water rights, flooding, climate change and nature conservation.

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

For more information please contact us on 020 7947 5354 or by email on: info@prospectlaw.co.uk.

For a PDF of this blog click here

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PREPARING FOR ACCIDENTS, SPILLS AND DISASTER IN THE UK: PART II

Incidents which cause environmental harm or injury and illness to workers or neighbours can have significant consequences for the companies responsible. Preventing those incidents must, therefore, be a priority, but if they happen they must be managed so as to minimise physical and environmental damage, liabilities and the risk of an adverse regulatory and media response. This new series of articles summarises key issues for companies operating in the UK, with Part II covering dealing with the regulators and investigating officers’ powers to take statements from witnesses

Dealing with the Regulators:

Regulators have wide statutory powers which are most likely to be exercised after an incident.  Employees should understand regulators’ powers and know how to react to regulatory officers, since obstructing a regulatory officer or failing to co-operate without reasonable excuse is usually a criminal offence.  Employees should request evidence of the officer’s identity and authority to investigate, and clarification about which statutory powers are being exercised.

The regulatory officer usually has the power to:

  • enter premises at reasonable times except in an emergency (with a police constable if serious obstruction is anticipated);
  • examine and investigate the premises or anything on the premises;
  • direct that all or part of the premises be left undisturbed for the purposes of the examination or investigation;
  • dismantle or test any article or substance which has caused the incident or is likely to cause harm (but not so as to damage or destroy it unless necessary); and
  • take away any such article or substance for the purposes of examination and presentation as evidence. If working with the police, the regulator also can ask them to obtain a search warrant.  A Justice of the Peace can issue a search warrant if he or she is satisfied that an indictable offence (i.e. an offence triable in the Crown Court) has been committed and there is material on the premises which is likely to be of substantial value in investigating the offence.

Statements

Investigating officers usually have statutory powers to obtain statements from witnesses.  These powers include requiring any person to give any information relevant to the examination or investigation and to sign a declaration of truth of the answers given.  Usually, the employee can nominate another person to be present, which should generally be the company’s lawyer or the “incident manager”.  Generally, no answer given pursuant to such a requirement can be used as evidence against the person giving it in any proceedings, although it can be used as evidence against the employer or another employee.

The investigating officer can also require the production of records which are required to be kept or which the officer needs to see for the purpose of the investigation.  It is important to know what “records” the regulator can request be produced.  Under the Environment Act 1995, for example, this may extend to test results but not to commentary in a report by consultants.  Records protected by legal professional privilege generally do not have to be produced.

Regulators also have powers to obtain some information from individuals without protection against self-incrimination.  Examples include notices to obtain information served under section 71 of the Environmental Protection Act 1990 (possible waste offences) and regulation 60 of the Environmental Permitting (England and Wales) Regulations 2010 (investigations of regulated facilities).  Recipients of such a notice are obliged to provide the information requested even though it may be used in evidence against them in the event of prosecution.  Failure to do so without a reasonable excuse is a criminal offence.

Regulators investigating a possible criminal offence generally request an interview under caution with a senior representative of the company under the Police and Criminal Evidence Act 1984 (PACE) procedures.  Interviews conducted under PACE are taped and can be used in evidence against the interviewee, the company or other employees, directors and managers.  Attendance at a PACE interview is not compulsory.  However, failure to attend risks an adverse inference being drawn from failure to mention something known to the potential interviewee which is later relied on at a trial, or a heavier sentence if the failure to attend is brought to the court’s attention during sentencing.

On the other hand, the company representative who agrees to attend a PACE interview may not have all the relevant information to answer questions, or may inadvertently say something in the interview which provides ammunition to the prosecution.  The alternative is to offer to provide written responses under caution.  This procedure avoids the disadvantages mentioned above and enables the company to set out its version of events in the best light possible.  Some regulators agree to the written response procedure.  Others decline it on the grounds that it does not allow for the same flexibility that a verbal interview would and it allows for the creation of credible but false evidence.  Therefore, it is probably better for the company’s representative to attend the interview, answer any factual questions she or he can answer, and offer to provide other requested information in writing after the interview.  If the regulator objects, the interviewee can rely on the right to silence.  Under those circumstances, it is unlikely that any adverse inference could be drawn.

Prior to attending a PACE interview, it is advisable to ask the regulator for a list of questions or, if that is not forthcoming, a list of the areas to be covered in the interview and the proposed line of questioning.  Regulators are not obligated to provide this information in advance, but sufficient information must be provided to enable the company to understand the nature and circumstances of the offence so that questions can be answered honestly.

Regulators sometimes seek voluntary statements from employees which are subsequently typed up and presented to the employee as a witness statement to be read and signed.  Such a statement is admissible in evidence against the employee who signs it as well as against the company and other employees.

It is obviously beneficial for management and the workforce to know what to do when a regulatory officer calls.  Whenever possible, the officer should be asked to wait for the company’s appropriate “incident manager” and, if the delay will not be too long, the company’s lawyer.  A substitute should be available if the usual incident manager is not available.  Other employees should avoid contact with the regulatory officer if possible and, if approached, direct the officer to the incident manager.  If the officer formally (under a statutory power) requires an employee to give information, the employee should require a suitable person to be present (preferably a lawyer or, in default, the incident manager) and should not answer any questions until then.

As soon as possible the in-house legal team or external lawyers should be asked to attend to monitor the investigation and take a note of everything the officer does and all items removed.  The lawyer should also be present at any interview, whether mandatory or voluntary, to provide advice and to record all questions and answers.  If the employee’s position may prejudice that of the company or vice versa, the employee should have separate legal representation.

In any event, it must be remembered that the regulatory officer (whether statutory powers are used or not) is attending in a formal capacity and is seeking evidence.  Any comment made may be used as evidence against the company.  It is therefore important to be both co-operative with any regulatory investigation and ensure that anything said is factually correct.

Incident Management Plan

An incident needs to be managed properly to minimise impacts on health and safety and on the environment; comply with all applicable legal requirements; satisfy the requirements of the regulatory authorities and demonstrate that the company is maintaining a co-operative approach; minimise liabilities (for example, to employees and neighbours); and manage any adverse public relations and media attention.  For that reason a management plan should be established to:

  • identify members of the incident team;
  • (set out the key emergency actions which are to be taken;
  • establish the company’s response procedures both internally and for dealing with the regulators, neighbours, the press and other third parties; and
  • undertake an internal investigation as soon as possible after the incident. Steps should be taken to gain legal professional privilege for the investigation report if so desired.

While “prevention is better than cure”, many companies will at some point face an EHS incident and should therefore plan ahead to ensure the best possible outcome.

By Andrew Waite

This article was first published in Natural Resources & Environment  (the American Bar Association’s Environment Magazine) Spring Issue 2017.

Andrew Waite is a solicitor and specialist in environmental law, advising on regulatory and liability issues for a broad range of industries.  He defends prosecutions for breaches of environmental legislation, deals with regulatory appeals and civil litigation and advises on environmental issues relating to projects and transactions.  He deals with all the main areas of environmental law including waste, energy, nuclear, contaminated land, pollution controls, environmental permitting, water rights, flooding, climate change and nature conservation.

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Advisory accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article. 

For more information please contact us on 020 7947 5354 or by email on: info@prospectlaw.co.uk.

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PREPARING FOR ACCIDENTS, SPILLS AND DISASTER IN THE UK: PART I

Incidents which cause environmental harm or injury and illness to workers or neighbours can have significant consequences for the companies responsible.  Preventing those incidents must, therefore, be a priority, but if they happen they must be managed so as to minimise physical and environmental damage, liabilities and the risk of an adverse regulatory and media response. This new series of articles summarises key issues for companies operating in the UK, with the first part focusing on prevention and the immediate incident response.

Prevention:

To prevent incidents, management needs to understand the legal obligations affecting their operations including requirements for environmental permits and licences, prohibitions and restrictions on pollution, duties to avoid unduly disturbing neighbours, and duties to protect employees and others.  At the operational level that involves familiarity with permit and licence conditions, as well as procedures which implement both those conditions and general environmental and health and safety (EHS) laws.  That task can seem daunting, and in response, many companies produce bulky EHS manuals with detailed instructions on how to deal with every eventuality.  The problem is that few people have the time to read them.

Brief, clear written instructions on how to avoid EHS incidents are more likely to be effective.  However, clear written instructions alone are rarely sufficient: busy workers may overlook them.  “Tool box” talks are an invaluable way of ensuring that employees know how to: protect the environment, promote health and safety and minimise the company’s risk of liability.  Examples of points to cover in a toolbox talk include which liquid substances should or should not be poured into particular drains and sewers; and what to do and who to report to if equipment or plant is found to be defective, corroded, dangerous or likely to result in unlawful emissions.  A toolbox talk also could cover simple operational procedures to ensure compliance with permit conditions and other legal requirements, and good housekeeping “rules”.  Bold and simple notices may also serve as useful reminders.

Incident response:

If an incident has adverse EHS consequences, the first priority is to minimise its consequences. Also, a decision must be made whether to notify the relevant regulatory authority, and how to deal with regulatory officers if they carry out an investigation. Those issues are likely to affect the regulatory outcome.  Many EHS incidents are strict liability criminal offences (no negligence or intent has to be proved), but the extent of culpability as well as the company’s behaviour after the incident has a profound effect on the authority’s approach (particularly the decision on whether to prosecute) and on the amount of any fine imposed by the courts.  Recent guidance from the courts in the UK, as well as official sentencing guidelines, have markedly increased the normal range of fines with the intention that the punishment should be real.

There is no uniform answer as to whether and when to contact the regulatory authority.  Each case depends on the circumstances including legal and permit requirements.  Generally, except in the most minor incidents, it is safer to report the matter to the local officer of the regulator by e-mail (to ensure that there is a record) and by telephone as soon as possible after the incident.  The initial report should be brief and factual, explaining what has happened and the steps being taken to deal with it.  The incident manager should send it.  Above all, the notification should not accept blame on the part of the company.

Part II will cover dealing with the regulators and investigating officers’ powers to take statements from witnesses.

By Andrew Waite

This article was first published in Natural Resources & Environment  (the American Bar Association’s Environment Magazine) Spring Issue 2017.

Andrew Waite is a solicitor and specialist in environmental law, advising on regulatory and liability issues for a broad range of industries.  He defends prosecutions for breaches of environmental legislation, deals with regulatory appeals and civil litigation and advises on environmental issues relating to projects and transactions.  He deals with all the main areas of environmental law including waste, energy, nuclear, contaminated land, pollution controls, environmental permitting, water rights, flooding, climate change and nature conservation.

Prospect Law and Prospect Advisory provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

For a PDF of this blog click here

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WRITTEN STATEMENT TO PARLIAMENT OF ENERGY SECRETARY GREG CLARK, 27TH MARCH

In a Written Statement to Parliament issued today, 27 March, the Energy Secretary Greg Clark has made the following announcement in relation to the management and decommissioning of twelve nuclear reactor sites in the UK.

1. Termination of NDA contract with Cavendish Fluor Partnership (CFP)

The contract with CFP was for the management and decommissioning of 12 redundant Magnox nuclear power sites. The NDA ran a £6.1 billion tender process in 2012 which resulted in a 14 year contract being awarded to CFP. However, in the statement issued today the Government said it had become clear that “there is a significant mismatch between the work that was specified in the contact as tendered in 2012 and awarded in 2014, and the work that actually needs to be done.”

The statement continues to say that the scale of the additional work “is such that the NDA Board considers that it would amount to a material change to the specification on which bidders were invited in 2012 to tender”.

The NDA is consequently exercising its right to terminate on 2 years’ notice.

The Government in the statement emphasised that the termination “is no reflection on the performance of Cavendish Nuclear or Fluor” and that they will continue to manage the sites for another 2.5 years, during which time the NDA will establish arrangements for a replacement contracting structure to be put in place.

2. Settlement of Outstanding Litigation

In the same statement the Government announced that the NDA has settled outstanding litigation claims against it by Energy Solutions and Bechtel in relation to the 2014 Magnox award. NDA has withdrawn its appeal against the judgment of the High Court of 29 July 2016. The settlements were made without admission of liability on either side, but it was clear the statement said “that this 2012 tender process, which was for a value of up to £6.1 billion, was flawed”.

Because of the amount of the settlement payments and the costs (£76.5 million to Energy Solutions and £8.5m of costs, and $14.8m to Bechtel plus costs of around £462,000) there will be an inquiry into the conduct of the 2012 procurement process and the reasons why the 2014 contract proved unsustainable.

The inquiry will be led by Steve Holliday, the former Chief Executive of National Grid.

We will update on this situation as it develops.

For any immediate enquiries please contact Jonathan Leach on 020 7947 5354 or by email on jrl@prospectlaw.co.uk

Prospect Law provides legal and business consultancy services for clients involved in the infrastructure, energy and financial sectors.

This article remains the copyright property of Prospect Law and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law.

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