4. Applications and Authorisations to Abstract

Information on water resources position

4.1 The Government proposed that:

• more information should be publicly available on water resources allocation and that the Agency should progressively refine its LEAP process and consult on and make public its abstraction authorisation policies to provide this (4.6).

4.2 It asked for views on:

• the effectiveness of the LEAP process in highlighting and addressing water abstraction issues, on how it might be improved, and on the need for a separate, detailed statement of the Environment Agency's abstraction authorisation policy in each catchment (4.48).

4.3 The proposals to make consultation more effective and to improve the quality and accessibility of information on water resources were widely supported in the responses to the consultation paper. Many respondents emphasised that the current LEAP process would need to be improved or altered, particularly in respect of the added amount of detail which would be necessary for an all-embracing abstraction authorisation policy. Most of those responding on the question felt that such policies would need to be physically separate from LEAPs, although clearly consistent with them in their formulation process and content.

4.4 Several abstractors argued that, in order to avoid wasting resources, abstraction authorisation policies should only be drawn up in catchments which were under significant environmental threat. In addition, many respondents were concerned that the management of authorisations through such a process would not provide adequate protection for abstractors' interests. These concerns related principally to the renewal of time-limited licences and are discussed below.

4.5 The Government considers that there is a clear need for the Environment Agency to develop water resource management plans which are relevant to and accessible by all abstractors, environmental organisations and other groups with an interest. An abstraction authorisation policy, which will be referred to in this paper and henceforward as an Abstraction Management Strategy (AMS) will provide all parties in each catchment with a transparent basis for planning. This will be essential to the management of time-limited licences. Information, interpretation and decision making should be in the public arena even in catchments which currently have plentiful water resources. The Government intends to see that the catchment management process is able to respond effectively and flexibly to new conditions well into the next century.

4.6 The consultation paper proposed that a water resource management statement should be prepared in each catchment every five years. It now appears likely that the forthcoming EC "framework" Directive on water policy will require all member states to prepare river basin management plans on a six-yearly cycle. The Government considers that it would be sensible to establish Abstraction Management Strategies also on a six year cycle, in view of their significance for river basin management.

4.7 The Government has therefore asked the Environment Agency to draw up detailed proposals for developing Abstraction Management Strategies, which would be separate from LEAPs. The detailed form of these Strategies will be a matter for the Environment Agency to establish, in consultation with interested parties. Initially, Abstraction Management Strategies will be produced on a catchment basis every six years.

4.8 The Government has also asked the Agency to ensure that appropriate priority is given to research and development work to further the understanding of the impacts of abstraction upon the environment and to ensure that adequate integrated monitoring arrangements are in place to support this work.

Determining the environmental effects of proposed abstractions

4.9 The Government proposed:

• to place a clear responsibility on applicants to submit an environmental report as part of the formal application for an abstraction licence. The Environment Agency will develop guidance on assessing the environmental effects of a proposed abstraction and will have the discretion to waive this requirement where it considers it to be unnecessary given the nature of the application and the local environmental circumstances. For other types of authorisation, it will be at the Agency's discretion whether an assessment is required from the applicant (4.14); and

• to give the Environment Agency power to demand any additional relevant information it needs in order to determine an application (4.15).

4.10 Respondents commonly supported these views either explicitly or implicitly. The majority of those who addressed the questions directly were in favour of the proposal to place clear responsibility on applicants to submit an environmental report as part of the formal application. Some pointed out that clear Agency guidance on preparation of the reports would be essential and that, where possible, existing information should be pooled and made available on request to assist with the preparation of the reports. Others expressed the view that additional information requested by the Agency under the proposed power should clearly relate to the need for an environmental report.

4.11 There were no outright rejections of the proposals though a few expressed concern about the objectivity and interpretation of the environmental reports. It was suggested that in some cases the reports should be prepared by an independent assessor. It was also suggested that, in the case of abstraction from 'sensitive' catchments, the Agency should consult conservation bodies about the information to be required in an environmental report and that the applicant, too, should consult those bodies prior to making the application. Similarly it was considered by a few that, where an application had previously undergone elements of the planning process necessitating production of an environmental report, environmental reports should not be duplicated in the Agency abstraction process. The Government notes these views, which accord with its general intention that abstraction authorisation procedures should be both transparent and efficient, and will expect the Environment Agency to take them into account in drawing up procedures and guidelines.

4.12 The consultation paper mentioned, at its paragraph 4.12, the advent of the amended EC Directive on Environmental Impact Assessment and its consequences for some types of proposed new water abstractions. The Government has now issued a consultation paper² on the proposed regulations which will implement the Directive's requirements. The guidelines for the preparation of environmental reports will need to supplement those Regulations. In particular, the guidelines will make it plain that the Agency may require environmental reports even in circumstances not covered by the Directive.

4.13 The Government therefore proposes to bring forward secondary legislation which will require the submission of environmental reports as part of abstraction authorisation applications except where the Environment Agency waives that requirement. The Agency will prepare guidelines for determining the need for environmental reports, taking into account the responses to the consultation paper. The Government will also bring forward legislation, when Parliamentary time allows, to give the Environment Agency power to demand any additional reasonable relevant information it needs in order to determine any application.

4.14 The Government proposed:

• amending the legislation so as to require all abstraction authorisations, regardless of to whom they are issued, to state the broad purpose of the abstraction (4.24); and that

• there should be no explicit requirement for any applicant for an abstraction authorisation to state the land on which the water is to be used (4.35).

4.15 These proposals were generally supported. However, some respondents cautioned that some record of the land to which abstracted water is applied might be needed in order to identify possible concerns about the quality of resulting run-off to nearby watercourses. Others pointed out that it would continue to be desirable for information on irrigated land areas to be available in order to assess irrigation efficiency. The Government considers that provision of that information would not impede the flexibility of use of abstracted water.

4.16 The Government therefore intends to bring forward, when Parliamentary time allows, the legislation necessary to implement these proposals, but providing the Agency with the discretionary power to require information on land areas to which abstracted water is directly applied.

4.17 The Government proposed:

• to require applicants for abstraction authorisations to submit details of the means by which the abstracted water is to be returned - or can be expected to return - to the environment. Where direct discharges to watercourses are involved, their locations will need to be clearly stated (4.33).

4.18 The Government also proposed, in more complex situations:

• to enable suitable agreements to be entered into to ensure that the water resources and environmental impacts of changing operational practices can be adequately managed (4.33).

4.19 These proposals were widely supported by environmental and countryside groups, local authorities and amenity groups. However, certain industries and water companies argued for exemption from the requirement to submit details of how abstracted water will return to the environment. These respondents were concerned that, because of the complexity of their operations, they would incur significant costs providing the information.

4.20 The Government believes the above measures will assist the Environment Agency in the management of water resources. In cases where return of water is complex, the level of detail which is required should be reasonably broad. It is not anticipated this will place significant burdens on applicants. The details covering return of water will be material considerations for the Environment Agency in determining applications. However, the Agency will of course continue to recognise that the reasonable needs of some applicants inevitably rule out direct return to a watercourse and will continue to grant abstraction authorisations where such use is sustainable.

4.21 The Government therefore intends to bring forward the secondary legislation necessary to require applicants for abstraction authorisations to submit details of the means by which the abstracted water is to be returned - or can be expected to return - to the environment. The Government also intends that the Environment Agency should have the power to enter into suitable agreements to ensure that the water resources and environmental impacts of changing operational practices can be adequately managed (see paragraph 9.4 of this paper).

Duration of authorisation

4.22 The Government proposed that:

• without exception, all new water abstraction licences will be granted on a time-limited basis. The other forms of abstraction authorisation set out in this paper should similarly be given on a time-limited basis (4.43).

4.23 Most respondents who expressed a view on the Government's aim to extend the use of time-limited authorisations did not make a distinction between this proposal, to grant all new authorisations on a time-limited basis, and the proposals to attach time limits to existing abstraction licences (consultation paper 7.15, 7.16 and 7.18). The specific issues which relate to the conversion of existing licences are discussed later in this paper.

4.24 Among those who made general comments, there was widespread support for time-limited authorisations. In particular, the principle was enthusiastically welcomed by many environmental bodies, local government respondents and some scientific and professional groups.

4.25 About a sixth of respondents, mainly from the industrial sector, agriculture and the water industry, were opposed to granting all authorisations on a time-limited basis. Many expressed their concern that the increased uncertainty about the future of the abstraction would increase risks and discourage investment. Many other abstractors accepted the value of time limits in principle, but wanted some or all authorisations to have a duration longer than the fifteen years proposed in the paper.

4.26 As the consultation paper pointed out in its paragraph 4.39, the Environment Agency already issues many new abstraction licences on a time-limited basis. The Government believes that granting all consents and new licences on a time-limited basis would make further important progress towards preventing cases of environmental damage arising in future. Time-limited authorisations reflect actual environmental uncertainty. They send an important message to abstractors and they allow the Environment Agency to manage water resources more effectively. They also increase the opportunities to reallocate resources, creating new opportunities for competition and the use of economic instruments. In the face of possible climate change, it will be increasingly important to have a system which is able to respond to new environmental circumstances.

4.27 The Government therefore confirms that the Environment Agency should issue all new abstraction authorisations on a time-limited basis.

4.28 The Government also proposed that:

• whilst new authorisations should usually be granted for a period of not more than 15 years, there will be a facility for some to extend over longer periods, subject to the Environment Agency being satisfied that all the circumstances justify it. But in order to provide some safeguard for the environment, the Government envisages that the Agency will have the power to set conditions varying these longer-term authorisations in such a way as to reduce the benefit of the abstraction. This power will be exercisable only with a number of years' notice and with a right of appeal, but its exercise will not provide grounds for compensation (4.58).

4.29 The Government sought views on:

• the likely implications for the design and financing of infrastructure or other schemes of the proposed future availability of abstraction authorisations on only a time-limited basis (4.61).

4.30 A number of respondents welcomed the proposed time limits, but felt that the suggested standard duration of fifteen years might still expose the water environment to risk. Many felt that, in order to provide proper protection for the environment, either all or most authorisations should be for periods shorter than fifteen years. Some respondents suggested five or 10 years duration would be more appropriate.

4.31 More respondents were opposed to the proposed fifteen year norm on the grounds it would be too short. Many felt that abstractors would be discouraged from investing in major projects because time limits would increase risk. Some water companies commented that the proposals would encourage infrastructure with a shorter life span, which could increase costs. Some respondents proposed longer periods should be standard for certain types of abstraction - including abstractions for fish farms, winter surplus reservoirs on farms, quarrying and mining, watercress cultivation and hydropower.

4.32 The Government believes that abstraction authorisation for a period of the order of 15 years will generally strike an appropriate balance between environmental protection and abstractors' needs for reasonable certainty. However, the Government does not intend that time limits should be legally prescribed. The criteria by which authorisation periods are decided will depend on a range of factors which the Government would expect to be identified and described in the Agency's Abstraction Management Strategies as they are developed. Those criteria will not necessarily remain static in any catchment. Further information on the impacts of abstraction on the environment (see paragraph 4.8) may lead to changed criteria, as may changing patterns of demand for water resources. And the criteria may also need to be adjusted in the light of experience of trading in abstraction licences.

4.33 The Government does not consider that the level of investment associated with an abstraction should necessarily be the deciding factor in setting the length of the authorisation. But, as proposed in the consultation paper (paragraph 4.57):

longer authorisations will be granted when the applicant is able to demonstrate to the satisfaction of the Agency that:

- the lifetime of the infrastructure inseparably associated with the desired authorisation will extend over the desired period of validity;

- there will be continued need for the service or product associated with that infrastructure throughout the desired period of validity;

- the fullest possible appraisal of likely changes in environmental and economic circumstances which may have a bearing on the acceptability of the abstraction over the desired period of validity has been carried out and shows no significant concerns; and that

- the infrastructure development contributes to sustainable development.

4.34 Although these are stringent tests, the Government envisages that they may be met in a number of cases. Obvious examples may arise in the public water supply sector, provided the need for the authorisation is demonstrated in an Agency-agreed water company Water Resource Plan (which necessarily takes into account the extent to which demand management can reduce the need for additional abstraction). Examples may also arise in industrial processes such as power generation or quarrying. And abstractions associated with navigation interests are also likely to meet the tests with relative ease. But in all these cases, it will be important that the ways in which the tests are met are clearly stated in accessible terms if the projects are to gain general public acceptance - a point which responsible abstractors will already readily appreciate.

4.35 Therefore, the Government expects the Environment Agency to determine the time limit to be applied to each new abstraction authorisation according to criteria to be developed for each catchment as part of the new Abstraction Management Strategies. These criteria will thus be subject to regular review, and will constitute administrative norms.

4.36 Several respondents welcomed the proposals to grant relatively long authorisations in the case of certain major infrastructure projects, but opposed the proposed Environment Agency power to curtail such authorisations. The Government recognises the need to ensure that curtailment can only take place for demonstrable reasons and with adequate notice.

4.37 Therefore, the Government intends that the Environment Agency may include, at its discretion and only in authorisations of more than 15 years' duration, a condition enabling the abstraction to be curtailed by up to a specified volumetric amount. But the curtailment condition will only be exercisable after 15 years from the issue of the authorisation, upon at least six years' notice, and the abstractor will have a right of appeal against exercise when that notice is issued. And the Environment Agency will be able to grant a licence of more than 15 years' duration without a curtailment condition if it considers that to be appropriate.

Renewal of time-limited authorisations

4.38 The Government proposed that:

• in respect of renewal of time-limited authorisations, there will be a presumption of renewal upon expiry unless, as a result of a catchment management process, the Environment Agency places the authorisation on a list of abstractions unlikely to be renewed on the same terms. Renewals will be by a simplified procedure, still requiring advertisement but by the Environment Agency rather than the licence holder (4.53).

4.39 The proposed presumption of renewal was opposed by several groups who felt it would weaken the environmental protection given by time-limited authorisations. But under the proposal, the Agency will inform the abstractor as soon as that presumption can no longer be held and the licence will not be renewed. And the Environment Agency will curtail any time-limited abstraction before the expiry of the authorisation if, exceptionally, the abstraction is causing environmental damage serious enough to justify mid-term curtailment and the compensation payment which may arise as a result.

4.40 Most abstractors welcomed the proposed presumption of renewal. However, many took the view that, even with a presumption of renewal, time-limited authorisations would create unacceptable risks for businesses. A significant number of abstractors felt the catchment management process would not adequately protect their interests.

4.41 As described in paragraph 4.49 and following of the consultation paper, renewals will be managed principally through Abstraction Management Strategies. The Government will expect the Environment Agency to provide notice of likely non-renewal through that process, in such a way that abstractors have at least six years' notice wherever possible. The Government also notes that it is currently open to abstractors to apply for new authorisations for existing abstractions at any time on the understanding that the existing authorisation would be revoked upon grant of a replacement. In that way, it would be open to abstractors to achieve the "rolling time-limited authorisation" which some respondents advocated.

4.42 The Government therefore expects the Environment Agency to develop, as part of its Abstraction Management Strategies, administrative systems which will embody presumption of renewal and which will give abstractors a minimum of six years' notice of likely non-renewal of time-limited authorisations. These arrangements will not be legally binding, although the Government will hold the Environment Agency to account for any significant departure from them. Ministers will, if necessary, give the Agency further guidance on how abstractors' interests should be safeguarded in respect of non-renewal. The Government will bring forward, when Parliamentary time allows, legislation to enable authorisation renewal to proceed by the simplified process envisaged in the consultation paper.

4.43 The Government sought views as to:

• whether the present proposals regarding abstraction authorisation conditions might, if adopted, impede subsequent introduction of economic instruments (4.37); and

• how possible trade in licences might be affected by the existence of a growing number of licences with time limits and renewal determined in the manner discussed and proposed [in the consultation paper] (4.63).

4.44 Some respondents expected the value of a time-limited licence would fall as it neared the date of expiry or renewal. There were mixed views over whether this would be an obstacle to trading. Two respondents commented that the requirement to state the broad purpose of the abstraction could impede licence trading as discussed in Chapter Two of the consultation paper. One respondent argued that there should be a significant period of time before the introduction of economic instruments to allow proper evaluation of the other changes arising out of the Review.

4.45 The Government is carrying out research on the possible role and design of economic instruments, including trading. These issues will be considered as the work is carried forwards.

² Consultation paper: Proposed Water Resources (Environmental Impact Assessment) Regulations. January 1999. Available from Keith Bates, DETR, 3/H18, Ashdown House, 123 Victoria Street, London SW1E 6DE.