The threat of legal action has been raised following Defra’s decision to withdraw £217m of funding to waste treatment infrastructure last week, throwing three major projects into doubt.
As Labour accused the Government of throwing the projects into chaos, councils affected held crisis talks and demanded a meeting with resources minister Lord de Mauley.
The projects affected are: Bradford and Calderdale; Merseyside Recycling and Waste Authority and Halton; and North Yorkshire and City of York (details, see below).
The leader of one of the councils hit by Defra’s withdrawal of waste infrastructure credits said he would consider taking the Government to court to recover loses if the project collapsed.
Tim Swift, leader of Calderdale council, one of the authorities involved in the Pennine Resource Recovery Facility which had £62.1m withdrawn, told MRW he feared the authority being liable for losses suffered by waste contractors.
He said all the councils involved were now seeking an urgent meeting with the minister and could demand financial assistance to cover the costs of any aborted projects.
MRW understands senior industry leaders also believe legal action by councils is now likely, although there are doubts as to whether it would be successful.
Nadeem Arshad, a partner at law firm Bevan Brittan, said while legal action following the withdrawal of waste PFI credits in 2011 had failed, action by councils in other areas such as school building PFIs had been successful.
“Yes, I think legal action by the relevant local authorities is possible. As for whether any legal action is successful, that is a more difficult assessment”, he added.
Former Defra and WRAP official Philip Ward, said he would assume the Government had taken legal advice before withdrawing funding. “And any action between the authorities and the bidders will depend on whether the projects proceed or not and the terms of the bidding process”, he told MRW.
Defra announced the withdrawal of funding for the final three PFI waste projects yet to reach financial close last Friday (22 February) after new analysis showed there would be sufficient residual waste treatment capacity to meet 2020 landfill diversion targets.
Councillor Swift said Calderdale was devastated and shocked by the announcement and suggested Defra “doesn’t fully appreciate that a great deal of money has already been committed” to the project.
He said he could not rule out legal action: “We are under an obligation to protect tax payers.”
Councillor Joe DeAsha, chair of Merseyside Recycling and Waste Authority which had £90m of funding withdrawn, said the authority was considering the implications of the announcement.
Environmental Services Association’s policy director Matthew Farrow warned that Defra could have wasted millions of pounds of council and waste firms’ money and that the knock-on effects would undermine private sector confidence in public procurement.
Defra’s director of waste Colin Church took to social media to defend the department’s actions. He said: “Diversion from landfill [is] not always [the] best environmental or economic solution. Depends on material and alternative use”. He asked why central Government funding allocated for landfill diversion should be used for projects not required.
CIWM chief executive Steve Lee called the announcement an “inefficient and inappropriate way to manage the delivery of essential infrastructure” that could damage investor confidence.
Labour shadow environment secretary Mary Creagh, said the Government had caused “chaos”: “These councils are now in limbo – if these waste projects don’t go ahead they will have to completely rethink how they deal with thousands of tonnes of waste.”
The projects hit:
Allerton Waste Recovery Park.
Authorities: North Yorkshire and City of York councils.
A 320,000 tonnes development under a 25-year contract to treat of municipal residual topped up with commercial waste. Project includes a 20,000 tonne MBT, 40,000 tonne AD plant, an EfW incinerator, and a 50,000 tonne IBA processing plant. Councils claim the contract will save them £300m.
Cost: £1.4bn over 25 years.
Allocated Waste Infrastructure Credits (PFI credits) now withdrawn: £65m.
Pennine Resource Recovery Facility, Bowling Back Lane.
Authorities: Bradford and Calderdale councils.
Contractor: Pennine Resource Recovery consortium made up of Skanska, FCC Environment and AECOM.
A proposed MRF and EfW incinerator to treat 193,000 tonnes of residual waste from 20,000 homes over 25 years.
Cost: £300m over 25 year contract period.
Allocated Waste Infrastructure Credits (PFI credits) now withdrawn: £62.1m.
Merseyside and Halton Waste Partnership Resource and Recovery Waste Contract.
Authorities: Merseyside Recycling and Waste Authority and Halton.
Contractor: Preferred bidder yet to be revealed. Tenders received from Sita and Covanta.
Proposals to treat 450,000 tonnes a year of residual waste over 25 years include a plan by Sita for an incinerator in Teeside and by Covanta for a facility in Cheshire.
Cost: Over £1bn.
Allocated Waste Infrastructure Credits (PFI credits) now withdrawn: £90m.