Environmental fines are on the rise: Are you at risk?

With environmental fines climbing ever higher and frequently making headlines in the last year, it’s key that organisations with interests in financed or leased waste sites understand the current outlook, legal trends and make the right provisions to limit their financial and reputational exposure.

Key to this is understanding what is driving environmental fines like the £1.2 million one handed out to Powerday, one of the biggest waste-management companies in the South East for illegal waste storage in April last year(1).

In the main, these new levels of fine are possible because of the Environmental Sentencing Guidelines (2) implemented in July 2014, which have so far driven a rise in total fines relating to waste activities from £383,000 in 2014 to £707,000 in 2015 (3).

The Environmental Sentencing Guidelines allow Criminal Courts to consider the size of the business, culpability, harm resulting from the action and other factors such as repeat offending or effective compliance programmes in their penalties. With the Environment Agency focusing on waste, specifically with issues of illegal waste sites, illegal waste exports, poorly performing sites and mis-description of waste being of particular interest, the degree of site scrutiny has risen. The result has been the numbers of waste prosecutions more than doubling and fine values rose by 26% in 2015.

Supporting this activity is additional Environment Agency funding, including £4.2 million from the Landfill Communities Fund, with a stated aim of expanding regulatory presence (4). In addition, with longer term funding for this Environment Agency work secured until 2020 it is probable that this level of regulation will continue.

So what might this mean to the landlord or financier of waste sites?

Where a permit is in place it is the waste operator who is liable for the results of activities. However there are circumstances where the freeholder or landlord can become liable for environmental damage, even if the freeholder had no knowledge of the pollution.

These liabilities typically fall into two categories: land contamination as a result of activities, and/or of partially or untreated wastes from waste transfer stations or treatment operations.

• Where land condition has been degraded so that the site is no longer suitable for use ground clean-up costs may be incurred. Even if the impact of the contamination is not that significant, it could potentially reduce the asset value of the property.
• Where permit holders cease to trade or the landlord obstructs access to the permitted operations, partially or untreated waste present on site may then become the responsibility of the landlord. This can become a significant burden, both in removal costs but also in Regulator negotiation and legal fees.

So it is worth checking on lease terms and having an up to date contamination assessment done. Groundsure works closely with organisations with interests in financed or tenanted waste sites and in particular on projects where those organisations are looking to limit their financial and reputational exposure.

Groundsure provides simple risk screening services for large portfolios using its national environmental database to enable a more focused risk management on higher risk sites contributing to corporate risk registers and portfolio management. We have a dedicated Projects team who can work with you to find the best risk management solution for you, be it screenings, Phase 1 inspections that enable an assessment of onsite operations and clients or more bespoke services.

To find out more about our services, email projectwork-con@groundsure.com.

References

1. Environment Agency (April 2016) Waste firm ordered to pay more that £1.2 for waste offences. https://www.gov.uk/government/news/waste-firm-ordered-to-pay-more-than-12m-for-waste-offences
2. Sentencing Council (2014) Environmental Offences Definitive Guideline. https://www.sentencingcouncil.org.uk/wp-content/uploads/Final_Environmental_Offences_Definitive_Guideline_web1.pdf
3. The Environmentalist (28 Sept 2016) Fines for Waste Crime Increase by 26%.http://www.environmentalistonline.com/article/fines-waste-crime-increase-26
4. Environment Agency (2016) Regulating the Waste Industry, 2015 Evidence Summary. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/553539/Regulating_the_waste_industry_2015_evidence_sum