Out-Law Analysis 10 min. read

How new UK laws affect ‘nationally significant infrastructure projects’

Major new legislation recently enacted in the UK will impact developers seeking to deliver ‘nationally significant infrastructure projects’ (NSIPs) in the years ahead.

The Levelling Up and Regeneration Act 2023 (LURA) and the Energy Act 2023 became UK law late last month. In the context of NSIPs, they provide for significant changes – to the assessment of environmental effects; the process for obtaining development consent orders; and a framework for strategic compensation relevant to the offshore wind industry in particular. The NSIPs provisions in the Acts are part of a wider and ongoing reform programme for NSIPs.

While much of the detail of reform has still to emerge via secondary legislation provided for under the Acts, Pinsent Masons has looked at the changes expected to follow in these three important areas.

Environmental outcomes reporting

The LURA provides the government with comprehensive powers to bring forward the new system of environmental outcomes reporting through secondary legislation. EORs are designed to replace the EU-derived environmental assessment processes of strategic environmental assessment (SEA) and environmental impact assessment (EIA), which have been part of the UK’s legal system since the late 1980s.

The EIA system requires, before consent can be granted for certain types of development, an assessment of the likely significant effects of the proposed development on the environment. It is set out in a series of 18 separate EIA regulations in England alone, with Scotland, Wales, and Northern Ireland each having a further suite of EIA regulations. The principles in the regulations are supplemented by a raft of case law built up over decades which adds further nuance and definition to those principles. Streamlining the system is certainly a laudable aim.

Given the existing carbon budget targets and legally binding net zero commitments, we would have expected climate change to be at or near the top of the list of environmental outcomes

The government consulted on moving to a new EORs system in March this year. The consultation was accompanied by a review which highlighted two familiar challenges with the EIA regime: the potentially significant costs to developers of preparing an environmental statement; and a high administrative burden for stakeholders. The reforms aim to tackle both of these issues, whilst ensuring no drop in standards of environmental protection through safeguarding provisions.   

Under the EOR framework, developers will be required to submit an environmental outcomes report. The EOR must be taken into account before consent for certain types of project can be granted.

Alongside this, the LURA introduces the power to make regulations identifying “specified environmental outcomes” relating to environmental protection, covering a wide range of aspects – from protection of the natural environment, to cultural heritage, to landscape considerations. Notably, the “specified environmental outcomes” do not expressly include climate change. The government also resisted proposed amendments which would have required the Secretary of State to have regard to climate change commitments when setting the environmental outcomes. Given the existing carbon budget targets and legally binding net zero commitments, we would have expected climate change to be at or near the top of the list of environmental outcomes.

An EOR must assess 4 core aspects:

  • the extent to which the consent is likely to impact on the delivery of the specified environmental outcomes;
  • any proposals for increasing the extent to which a specified environment outcome is delivered;
  • any proposed steps for avoiding, mitigating, or compensating for the effects of an environmental outcome not being delivered, including assessment of reasonable alternatives; and
  • any proposals about how the environmental impact or mitigation should be monitored or secured.  

These broad concepts will be familiar to developers of NSIP projects. An important difference of the EOR regime is the fact that the project is being assessed against an outcome, rather than identifying whether or not an effect is likely to be significant. Much will therefore depend on how the specified environmental outcomes are drafted.

Having quantifiable, measurable outcomes will provide greater certainty as to the expected environmental standard to be achieved and allow for clearer tracking of whether the outcomes have been met. This is in line with more recent general trends in measuring environmental effects, such as assessing carbon emissions against the national carbon budgets in EIA climate assessments and the 10% biodiversity net gain (BNG) requirements coming into effect for NSIPs by November 2025.

Quantifiable outcomes will need a standardised metric, akin to the BNG metric developed by the government, to avoid those producing EORs taking different approaches. We have already seen significant variances in the way climate effects and carbon use have been assessed in the EIA context. These significant differences in approach can provide fertile ground for legal challenges.

There is also scope for data gathered through monitoring impacts to influence future assessments via a redraft of the environment outcome. This would solve a major issue with the current environmental assessment regimes. Whilst modelling and prediction of effects is becoming more sophisticated, real world data from built, operational, projects is rarely fed back in to the methods of assessment. In some sectors, particularly offshore wind, the predicted impacts are far greater than the data from operational projects would indicate, resulting in over-precautionary and onerous requirements being imposed on project consents.

On the other hand, not all environmental outcomes can be quantified, with effects on landscape and visual resources being a particular example of an environmental effect which could only ever be expressed in a qualitative manner. There will therefore need to be clear guidance for all specified environmental outcomes as to how each of the effects on each environmental receptor will be assessed against the outcome – and what the effect of an adverse conclusion is on the ability to obtain consent.

A further significant change is that the EOR is required to assess the extent to which the consent is likely to impact on the delivery of the environmental outcome, indicating a departure from two longstanding principles of EIA: the need to assess the effects of the whole project, not just the impacts of the part of the development being consented; and the requirement to assess the effects of the project cumulatively with other proposals.

Much of the new regime and how it will operate remains to be fleshed out. All of the following aspects will be the subject of future regulations:

  • the types of projects which will require an EOR;
  • the environmental outcomes against which projects will be assessed;
  • the circumstances in which an EOR is not required where an adequate assessment of the impact on the delivery of the outcome has already been carried out;
  • how any of the assessments are to be carried out;
  • the information to be included in and the content and form of an EOR;
  • how the EOR is to be taken into account by decision-makers;
  • how proposals which are subject to EOR are to be carried out and monitored;
  • whether action is required following receipt of the monitoring output;
  • whether breach of the EOR requirements is to constitute a criminal offence; and
  • transitional arrangements from the existing EIA regime.

These regulations will need to be subject to varying degrees of consultation prior to being made. It will and should take time for the new regime to come into effect in its entirety.

The absence of detail was the subject of considerable criticism from the opposition benches during parliamentary debates, since the regulations covering much of the substance of the EOR regime will not be subject to scrutiny by parliament.

All matters to be addressed in new regulations will significantly influence developers’ consenting strategy and how their proposals are viewed by stakeholders. Care must be taken in drafting the regulations and statutory guidance to ensure that the environmental standards to be achieved are clear and that developers and stakeholders alike understand what is required of them and when. Advance warning of any transitional arrangements will be important to ensure investment in the current pipeline of projects is not interrupted due to uncertainty arising from regime change.

In recent years there has been a significant uptick in the number of legal challenges raised against project consents on environmental grounds. It is imperative that the detail of the regulations and guidance to come is as unambiguous as possible to avoid the EOR regime being a goldmine for those wishing to bring legal challenges against NSIPs. Even if the new regime achieves its aim of shortening lengthy environmental reports, the benefits of this will be undermined if a high proportion of future infrastructure proposals spends years fighting judicial reviews in the courts.

The first of the operational reforms to the NSIP consenting process

The LURA also introduces the first of the proposed operational reforms to the development consent order (DCO) process. The operational reforms were consulted on in July this year and cover three areas: supporting a faster consenting process; strengthening engagement; and more resilient resourcing.

The LURA gives the Secretary of State the power to shorten the examination period from the current standard six months. In its July consultation, the government proposed that the fast track examination period would last four months, with the aim of achieving a final consenting decision within 12 months of application.

The fast track timescale would apply to certain eligible projects. The government plans to introduce a framework to govern how projects can apply for a shorter examination time and set out the eligibility criteria. Applicants for the fast-track examination process are likely to be required to have taken advantage of enhanced pre-application services from certain consultees. The government will identify a number of ‘fast track pilot projects’ to test the ability of projects to meet the fast track quality standards. These projects will be identified taking into account the sector’s suitability for the pilot, the stage of the project, the applicant’s initial assessment of potential project issues, and a commitment from the applicant to provide the necessary resourcing.

The LURA also provides the power for certain statutory consultees to charge fees for providing services in connection with DCO applications. The detail of these fee provisions will be set out in regulations to be published at a later date. The provisions are wide ranging and relate to DCO applications, changes to made DCOs, and any other matter relating to NSIPs. The consultation refers to these as “cost-recovery” provisions, however the legislation itself provides for the power to charge a fee, which means that the funds do not need to be ring-fenced for advice on the specific project.

The detail of the regulations and guidance to come [must be] as unambiguous as possible to avoid the environmental outcomes reporting regime being a goldmine for those wishing to bring legal challenges against NSIPs

The consultation set out three levels of service offer for pre-application advice: basic, which will be the statutory minimum; standard; and enhanced. Enhanced advice is envisaged for complex projects or those seeking to fast-track. Different levels of fee will be charged depending on which of the three levels apply. Those paying for the enhanced service. in particular. will rightly expect high levels of engagement from consultees.

Finally, the LURA provides the basis for making regulations to change the process for determining non-material changes to a DCO. This is the first step in the process for introducing the proposed statutory timeframes for non-material change applications, which is currently expected to be six weeks of the closing date for responses to consultation on the change. The welcome certainty that comes with statutory timeframes for non-material change applications would provide greater confidence for developers bringing forward innovative or efficiency changes to proposals post-consent.

Strategic compensation framework for offshore wind

From a NSIP planning perspective, the main changes brought in by the Energy Act 2023 relate to the offshore wind sector. These seek to tackle the knotty issue of strategic compensation for projects requiring a derogation case under the Habitats Regulations.

To obtain their necessary consents, offshore wind projects will have to satisfy the requirements of the Habitats Regulations assessment/appraisal (HRA) regime, including, in the majority of cases for future projects, delivering compensatory measures for impacts on protected seabird species as part of a “derogation case”. Under the Habitats Regulations, it is the duty of the consenting authority to ensure any compensatory measures pursuant to a derogation case are put in place. For NSIPs, this is the Secretary of State.

The Energy Act provides clarity on how the Secretary of State may discharge their obligations to secure the taking of compensatory measures under the Habitats Regulations. The provisions focus on enabling strategic compensation, including via the establishment of a Marine Recovery Fund. They also specifically make provision for a regulator to play a role in securing compensation for an offshore wind project – or, with the consent of the relevant authority, to designate actions taken by another public authority as discharging their compensation obligations.

It is widely acknowledged that the requirement to secure compensation presents a significant challenge to the delivery of sufficient offshore renewable generating capacity to meet the government’s targets – most notably, of increasing offshore wind generation capacity to 50GW by 2030. As the Energy Bill factsheet for offshore wind explains, the “significant delays” arising in the consenting process are “primarily caused by the complexity of environmental impacts of developments and requirement for novel compensatory measures to be developed”. Designing such compensatory measures “has proved to be challenging, resulting in significant delays to the consenting process whilst packages are developed and agreed”.

The Energy Act also provides for the establishment of a new industry-funded Marine Recovery Fund (MRF). The MRF is to support the delivery of strategic compensatory measures. Developers will have the option of paying into the MRF to discharge their compensation obligations, provided that appropriate compensation measures are available for the MRF to fund. The offshore wind industry has been calling for a strategic approach to compensation measures for some time and the introduction of the MRF in principle is a major step in the right direction.

Secondary legislation is required for the establishment of the MRF. The success of the MRF will depend on the extent to which the regulations provide the required clarity on how the payments into the MRF interact with the consent determination process; and there being sufficient compensatory measures identified, with a strong enough evidence base, for the MRF to fund.

On this second point, The Crown Estate has committed £33 million to deliver research and data projects that support the acceleration of offshore wind deployment by addressing priority species research gaps. The programme is designed to support the MRF.

In its recent request for information, Defra explained that it is working with industry and statutory nature conservation bodies (SNCBs) to identify a library of strategic compensatory measures for projects in English waters. This will give greater certainty to developers and reduce the time and cost associated with identifying suitable measures at a project level. The ability of developers and SNCBs to agree to support a range of deliverable compensatory measures, backed by sufficient evidence, is critical if the MRF is to fulfil its significant potential.

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