Profits waiting to be reaped

Contaminated sites can offer valuable business opportunities if the risks are properly managed, writes Bryan Johnston.

The continued push to secure an increasing proportion of development on brownfield sites has put the spotlight firmly on the potential pitfalls of reusing land with a legacy of contamination from past industrial uses.

Amid much self-congratulation, the government's target of building 60 per cent of new homes on previously developed land by 2008 was met last year, albeit only in the context of an abysmally low number of housing completions. But brownfield development can only become more difficult as the "easier" sites are used up and remediation standards grow tighter.

On some regeneration schemes, litigation has led to delays and increased costs. In recent years, the courts have been asked to pronounce on liability for remediation work that turns out not to be up to scratch, the adequacy of land condition assessments in connection with new development and the acceptability of homes being occupied where doubts remain over clean-up standards.

"In the past, contaminants have had to have a well-established course before they made a difference. Now the courses don't have to be so strong before potential harm is accepted. So it is vital to establish the condition of a development site before going forward with a proposal," argues Madeleine Duddy of Landmark Information Group, which ran a seminar on the prospects for redevelopment of contaminated sites last month.

"Government policy is to develop brownfield sites, yet people see them as a terrible problem. Some people are actually using them as an excuse for nimby activity," says Phil Crowcroft, director of contaminated land at Entec UK Ltd and formerly national land policy manager at the Environment Agency. But he also warns: "If you think that the Environment Agency will be less than diligent, you will find that it has increasing expectations."

Yet developers and their backers remain keen to realise the potential of brownfield sites. "Brownfield development represents a real business opportunity because it is government policy, new regulations are raising the profile of restoration and tax breaks are available to help cover remediation costs," explains Chris Bray, head of environmental risk management at Barclays Bank. "We should be falling over ourselves to help companies realise their vision for formerly used sites."

Last year Bray's team looked at 5,500 potential problem sites, ranging from residential schemes at former filling stations to major mixed-use projects on former industrial complexes. He calculates that two-thirds of these cases were dealt with within one working day. But five per cent led on to a specialist risk assessment report being commissioned.

Those figures from just one lender illustrate the scale of the problem.

No-one can say with any degree of certainty just how much land in the UK is contaminated by the after-effects of unregulated industrial development.

The National Land Use Database, a valuable source of information on the extent of brownfield land, specifically avoids any reference to the likely presence of contamination.

The Environment Agency reckons that around 300,000ha of the UK - an area the size of Staffordshire - may be affected to some extent by contamination left by past industrial activity. Another agency estimate suggests that there could be anywhere between 5,000 and 20,000 sites in England and Wales that may pose a threat to human health or the wider environment.

In 1999, the Urban Task Force report Towards an Urban Renaissance proposed a raft of measures designed to speed up progress on tackling contaminated sites, including a national campaign aimed at clearing the entire backlog by 2030. Ministers responded cautiously, sticking to a target of reclaiming 17 per cent of all brownfield land by 2010.

In the past, clean-up operations have relied almost entirely on redevelopment of former industrial, mining or waste sites, with enhanced land value often being backed up by injections of public sector regeneration funding.

This approach has produced flagship regeneration schemes such as the Greenwich Millennium Village and Bede Island in Leicester.

Since 1993, well over £100 million has been made available to local authorities to fund reclamation of contaminated sites through supplementary credit approvals. This summer, the European Commission gave approval for regional development agencies, English Partnerships and local authorities to provide grants of up to 100 per cent to developers to remove pollution and decontaminate land or to help businesses relocate for environmental reasons.

Draft government guidance accepts that the presence of contamination affects the viability of different types of development or land use. In one recent appeal decision, deputy prime minister John Prescott accepted that decontamination work at the former Gloucester Cattle Market could only be financed by high-value retail development, even though the proposal did not strictly comply with the PPG6 sequential test (Planning, 31 October, p19).

Ministers are confident that for the most part, land contamination problems will continue to be tackled through the redevelopment process, with issues regarding future uses normally falling within the remit of the planning system to resolve. However, the Environment Act 1995 ushered in a more proactive approach in cases where regulators conclude that some extra pressure needs to be brought to bear on recalcitrant owners.

The act added a new part IIA to the Environmental Protection Act 1990.

This legislation introduces a risk-based approach to identification, assessment and remediation of contaminated sites. It makes clear that the person responsible for causing the pollution is responsible for treating it, even if it started decades ago. Where the polluter is unknown, liability passes to the current owner or occupier.

The act requires local authorities to draw up lists of sites that fall within the statutory definition of contaminated land, which refers to actual or potential "significant harm". While voluntary action on the part of polluters is preferred, councils have powers to serve remediation notices after three months and to enforce them through the courts. Land causing particular problems can be designated as "special sites" for which the Environment Agency acts as lead regulator.

While part IIA offers a potentially powerful fallback tool for local authorities, it has got off to a disappointingly slow start. It came into effect in April 2000, accompanied by statutory guidance in Circular 2/2000.

But draft technical guidance to planning authorities only emerged at the beginning of last year (Planning, 22 February 2002, p3), and is now expected to be appended to the revised PPG23 on planning and pollution control.

The system has shown itself capable of rapid action. In Mirfield, West Yorkshire, Kirklees Metropolitan Council designated a former tar works that was leaking creosote into the River Calder as a special site under the act. The occupiers agreed to clean up the land and installed an interceptor trench to remedy the problem.

However, only 33 sites had been designated by the end of March 2002 under the part IIA regime, of which one-third were special sites. A year later, the total had crept up to around 50. Most local authorities had completed their strategies for inspecting contaminated sites by last year, but in many areas the next stage of inspection has made little headway.

Dr Bill Baker, training adviser to the Chartered Institute of Environmental Health, puts the low level of registration of contaminated sites down to councils' preference for voluntary remediation, motivated by the need to avoid causing anxiety and blight. "It could be argued that the new regime is having the intended overall beneficial environmental effect by encouraging an increase in the number of sites affected by contamination being remediated," he accepts.

The act's liability provisions have certainly helped to get the message across that land contamination is not just a problem for regulatory bodies and prospective developers. Established businesses, lenders and anyone taking on responsibility for a piece of land could find themselves caught by the clean-up requirements.

Recent guidance from the Community Housing Task Force, for example, stresses that land contamination is a major component of environmental risk for organisations contemplating taking over local authority housing stock or getting involved in housing projects under the private finance initiative.

It suggests that councils should commission surveys before tenants are balloted on stock transfer proposals, even if this incurs abortive costs if the vote goes against them.

With the stakes raised, parties need to be certain that the experts they commission to evaluate contamination risks are up to the job. Contaminated land remediation and risk assessment is big business for consultants.

According to market researcher Environmental Data Services Ltd, this market was worth more than £133 million last year. But Baker warns: "The highly variable quality of consultancy services in the contaminated land field is a significant cause of concern."

Inadequate surveys and risk information lead to uncertainties over whether liabilities are covered and may make environmental insurance more costly or impossible to obtain. Land remains blighted and difficult to sell.

Low-grade work could mean that expensive decontamination has to be commissioned after a development is complete. "There is always room for improvement," Crowcroft accepts. "We are constantly seeking to raise standards as a way of making remediation schemes more effective."

One Urban Task Force proposal that the industry has run with is the idea of land condition records (LCRs). Like the proposed "seller's packs" for home buyers, LCRs provide a factual record of known information about a site's condition, giving the various parties to land and development deals access to the same data. But they have been slow to take off, with only 20 or 30 prepared so far. "They are a bit cumbersome and at present buyers aren't specifically asking for them," admits Crowcroft.

Allied to LCRs is an initiative co-ordinated by the Institute of Environmental Management and Assessment to identify "specialists in land condition" (SILCs). Crowcroft sees SILCs as fundamental to raising standards and quality assurance: "They are the first professional qualification related directly to the contaminated land industry." The SILC system, Baker acknowledges, "should provide a higher level of confidence among developers, landowners, funders and regulators in the competence of the consultants they seek to commission".

At least the science behind assessing health risks arising from contaminated sites has been placed on a sounder footing following last year's publication of the contaminated land exposure assessment model. The model and its supporting documentation were developed by DEFRA and the Environment Agency in collaboration with the Department of Health, the Food Standards Agency and the Scottish Environmental Protection Agency.

At the same, a set of soil guideline values (SGVs) is being developed for various land uses, helping to fill a vacuum over the key question of whether the presence of any particular contaminant poses a significant risk to human health or the environment. SGVs indicate "trigger" concentrations of key pollutants for which further investigation and remediation will be required.

While the part IIA regime offers new solutions to the historic legacy of contamination, eternal vigilance on the part of the planning and pollution control systems is the price of preventing fresh outbreaks. This month, a Sussex farmer was fined £900, with costs of £700, after pleading guilty to inadvertently pouring herbicide onto a grass verge next to a ditch leading to a farm pond. More pertinently, he has had to spend £5,000 removing contaminated soil and remediating the pond.

Regulatory action does not always produce an immediate remedy. Last autumn, Herefordshire Council issued an enforcement notice against a paint processing and storage business that posed a risk of leakage into local watercourses.

A year later, appeal inspector Christopher Jarvis backed the council's call for the site to be closed down and cleaned up but extended the period for compliance with the clean-up requirement from 30 days to one year.

Chris Bray accepts that some smaller businesses have yet to fully recognise the risks that they face from contaminated liabilities. But the overall trend is positive, he believes. "At the top end of the market, the more sophisticated operators are more appreciative of the need to have information to satisfy lenders," he says.

Environmental issues, he concedes, can be a drain on cash flow, management time, reputation and ultimately company balance sheets. "But we recognise the opportunities as well as the risks," he adds. "We are risk aware, not risk averse. This is not public relations or an attempt to establish our environmental credentials. It is a mainstream business concern. If we can manage the risk, we can do business."


By Rosie Niven

In May 1984 riot police clashed with striking miners outside the Orgreave coke works in South Yorkshire in what some still remember as the defining moment of the miners' strike. Almost 20 years on, the same piece of land is earmarked for a scheme that its backers hope will deliver major economic, social and environmental benefits to nearby Rotherham and beyond.

The 300ha Orgreave opencast site is to be transformed into a lakeside community that will accommodate around 3,500 homes. Together with a neighbouring site earmarked for a business park to host blue-chip companies such as aircraft manufacturer Boeing, the "Waverley" site forms the largest single source of brownfield land in South Yorkshire.

Apart from its scale, the site has many other assets to tempt home buyers and investors, including easy access to Rotherham, Sheffield and junction 33 of the M1. But with a history of coal mining and associated activity stretching back over 200 years, the site had to undergo a massive programme of decontamination and reclamation before development could begin.

Cleaning up the Orgreave site cost more than £20 million. Developer UK Coal appointed consultancy Babtie to mastermind the decontamination process, which sought to remove tar and heavy metals from the site. The process was entirely funded by the recovery of coal from the site through opencast mining. Since operations began in 1995, more than three million tonnes have been extracted.

To remove the chemicals found on the site, Babtie used a radical decontamination technique that involves creating a protective cell to house contaminated materials. The consultancy created a purpose-built landfill site to accommodate two million cubic metres of soil and used clay left over from opencasting to line the hole with a protective layer of plastic and tough woven material placed on top.

Soil containing the contaminated material was then distributed over the lining and covered with a second layer of protective material. This was followed by the sealing of the cell with non-permeable clay and placing subsoil on top. The contaminants were then left to drain out of the cell and collect at the bottom before being removed under licence from the Environment Agency.

The decontamination has involved the rerouteing of a 1km stretch of the River Rother as part of the process of clearing the legacy of pollution caused by decades of waste from steel and coke working. This includes the creation of a rock chute to act as a resting place for fish and building a water treatment plant using reservoirs to capture water.

With decontamination complete, UK Coal is now drawing up more detailed plans for the lakeside community and consulting with local residents.

A planning application to establish the contours of the scheme has been submitted to Rotherham Metropolitan Borough Council. It is expected that the whole Orgreave site will be ready for development in 2007 once opencast operations cease.

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