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How may the draft Infrastructure Bill 2014 affect UK projects?

Includes discussion on regulations to purchase community stakes in 5+MW clean energy projects.

 

#The UK Government’s “Infrastructure Bill”[1]Discussion on potential impact of Bill on businesses working on projects in the UK.  Includes commentary on: (i) “deemed discharge” of planning conditions from LPAs; and, (ii) Community electricity rights relating to 5+MW renewable energy projects, both on- and off- shoreMBC Logo

 

General disclaimer: the following constitutes the written view of the author and in no way constitutes actual legal advice or a legal opinion and so no reliance may be placed upon the content hereinafter contained by any reader of this document in any way whatsoever.  In the event that legal advice or opinion is sought, please contact the author of this opinion at the contact details below.  The view below is expressly confined to matters as they stand at 12 June 2014.

Why does the UK Government want to legislate in this arena?

The Infrastructure Bill 2014[2] aims to introduce lean organisational efficiency measures[3] for Government and its departments that will impact on the private sector companies working on UK infrastructure projects, specifically in relation to:

  1. highways,
  2. non-native species and their control (through species control orders),
  3. deemed discharge of planning conditions,
  4. transfer of the responsibility for local land charges register control to Her Majesty’s

 

Land Registry,

  1. transfer of land free from encumbrance to the Homes and Community Agency, and,
  2. a form of community ownership scheme relating to 5+MW renewable energy projects.

 

The Bill had its first reading on the 5th of June 2014 in the House of Lords, and the second reading and debating stage of the Bill will take place on 18 June 2014 in the House of Lords.  If the Bill receives Royal Assent, it could come into force early next year.  It was thought that shale (oil &) gas through fracking, along with geothermal energy schemes, would be included in the draft Bill, however, this area, together with the mooted concept of an associated one off payment for the relevant freehold owner suggested by the shale gas and oil industries for each unique lateral (horizontal) well that extends by more than 200 metres laterally[4], rather than payment for direct access beneath residential homes to the owner of the freehold title, is discussed in a public consultation paper URN 14D/099[5] that was issued by the UK Department for Energy and Climate Change (“DECC”) on 23 May 2014, and that consultation will end on 15 August 2014.  It therefore unlikely in this writer’s view that the Bill will now contain content on shale oil and gas, or geothermal energy projects in the UK, and so separate legislation, if the consultation goes well, may arise in due course.

In summary, the Bill sets out the following:-

HIGHWAYS[6]

The draft legislation sets up “Strategic Highways Companies” (“SHC”) to govern a “Road investment Strategy” as decreed by the Secretary of State for Transport[7], and the relevant Secretary of State can fine/administer/control such SHCs during their lifetime.  For the watchdog set up to oversee the public’s view on public transport, called the Passenger’s Council, or publically, “Passenger Focus”[8], specific drafting has been instilled in the Bill to provide functions for Passenger Focus to investigate and report on if the SHC is achieving its mandate under a Road Investment Scheme.  The Office of Rail Regulation[9] also has a power to monitor in the draft Bill.  Additional transferable powers relating to highways or planning held by the Secretary of State are also drafted into the Bill as being able to be transferred by statutory instrument to SHCs.

INVASIVE NON-NATIVE SPECIES [10]

The Bill sets out the creation of “species control agreements” (“SCA”) if a LPA “considers” (not, N.B., “reasonably believes according to substantive proof”), that non-native species reside on premises, and the SCA is set up with the owner of premises to set up the method of carrying out the species control operation.  The Bill sets out powers of entry under warrant to ascertain whether a species control agreement may be needed.  For companies that have worked on projects with a crested newts study for example, this form of power could delay obtaining a planning pack and/or the build-phase of a project if an opposer to a prospective project reported the potential for the presence of an animal/plant not ordinarily resident in Great Britain may infest a building or part of any premises, dwelling or not.

PLANNING AND LAND  [11]

The Bill incorporates a proposed amendment to the Planning Act 2008 to allow for a planning panel to consist of only two people for deciding on nationally significant infrastructure projects.   Deemed discharge of a condition attaching to a conditional planning consent has also been drafted into the Bill as a new section 74A of the Town and Country Planning Act 1990 and is to be welcomed as an effort to allow the applicant to show evidence of discharge and if for some reason the LPA are behind schedule and provision has been made in a development order for deemed discharge.

TRANSFERRING PUBLIC BUILDINGS TO HOMES & COMMUNITIES AGENCY WITHOUT ENCUMBRANCE[12]

The Government in the Bill have made it easier for transfer of property, rights or liabilities relating to property, to the Homes & Communities Agency under a preferential tax regime (new s.53B of the HCA as inserted by section 21 of the Bill), to allow for tax liability to be waived in relation to such transfer.  The acquisition of land by the Homes and Community Agency, and land vested in or acquired by the Agency, from a mayoral development corporation (MDC under the Housing and Regeneration Act 2008) is to be capable of taking place overriding any easements etc. (presumably any third party rights).

TRANSFERRING RESPONSIBILITY FOR LOCAL LAND CHARGES TO HM LAND REGISTRY[13]

This is relatively self-explanatory and effects the transfer of the local land charges register records to Her Majesty’s Land Registry (“HMLR”) further to Schedule 4 of the Bill.  In addition, further power for HMLR is enabled, including consultancy or advisory services about land or other property, information services about land or other property, and services relating to documents or registers relating to land or other property, in England and Wales.

COMMUNITY ELECTRICITY RIGHT [14]

The Bill has provisioning to allow regulations to be made to enable communities to buy a stake in a renewable energy facility, at least 5+MW in size, onshore or offshore (the community residing closest to e.g. an offshore wind farm), and the Bill allows for a right for the Secretary of State to issue regulations on a right to buy a stake, how to own/transfer a stake, who can operate a community owned facility, who can own the facility operating company, and who will in effect act a watchdog on the community applications for a right to buy a stake in a qualifying renewable energy facility, and how ownership in a qualifying facility is structured.  Schedule 5 of the Bill, relating to “Community Electricity Right Regulations”, are a draft set of regulations that expand a little more on the scope of the main Bill provisions (section 26).

Only totally installed capacity generating 5+MW facilities can have a community “right to buy” power invoked, by qualifying community members, identified according to how old they are, how long the member has been a part of the community in which the qualifying facility is located, and whether the community is one that is the sole community in which the individual resides.  The Bill, in Schedule 5, envisages more prescriptive regulations in due course, legislating upon the kind of renewable energy used, the types of technology to be used, the generation capacity, such as whether the facility is onshore or offshore.  The Bill provides too that expanded facilities that become 5+MW in terms of the total capacity power capable of being generated from the facility, can, as soon as they pass the threshold, be subject to community ownership rights.   “Excepted Facilities” or those facilities that are not qualifying facilities, albeit they satisfy the criteria for a qualifying facility, may be an aspect of the new regulations on this community right.
If the developer of a facility is not also to be the operation and maintenance company then this “Promoter” (as defined in the BIll[15]) will have to be identified and presumably will have to pass certain tests to be a “qualifying” Promoter, although the Bill is silent on this point as yet.

The kinds of stake that a community member could have in a qualifying facility may range from shares in the company that owns the facility to owning an interest in a body such as an LLP that owns the facility, to an equitable interest or beneficial right, to royalties from revenue streams, or a loan[16]These last two items are likely to affect the way that an investor views a 5+MW facility in the UK if the revenue streams are to be shared with members of the local community, or, the facility is to be encumbered to the extent of a charge held over it, other than that of the investor who lent to the owner of the facility to finance its development and construction, however, a qualifying offer is likely to represent a combined price of a set of stakes that is equal to or greater than no more than 5% of the total capital cost to develop the qualifying facility, which may limit the number of community members exercising a right to buy.  The Bill also allows for possible prescription in future regulations for the situation where the number of applications given the number of stakes for a qualifying facility is too high or too low, and, how to dispose of a stake and to whom, and in what limited circumstances a disposal might take place, e.g. the person is no longer a member of the community in which the qualifying 5+MW facility, adjacent to it offshore, or onshore, is located.

Developers (Promoters under the Bill) are not the only renewable energy project lifecycle participants that may be subject to future scrutiny in 5+MW community ownership qualifying facilities, as the Bill also allows for scrutiny on the voting rights on shares in an operator/O&M company, and when shares can be issued in relation to the O&M company, and the Bill even goes on to say limitations may be imposed by the regulation on precisely who can own the O&M company, and which kind of O&M company can be the operator of a community-ownership qualifying facility.

It is likely that the renewable energy sector in the UK will want to fully scrutinise any prescriptive regulations on community buy-in rights in due course.  The level of scrutiny into the Developers (Promoters) and Operators (O&M companies) is to be welcomed in that these parties, along with the owners of the facilities, are placing assets in communities in the United Kingdom that may last well beyond the Contract for Difference and PPA period of e.g. 15-25 years, and comfort in the “team” is something that Sir Michael Latham wrote about, now some 20 years ago[17].

London, 13 June 2014.

 

[1] Or more fully: “ A Bill…To make provision for strategic highways companies and the funding of transport services by land; to make provision for the control of invasive non-native species; to make provision about nationally significant infrastructure projects; to make provision about town and country planning; to make provision about the Homes and Communities Agency and Mayoral development corporations; to make provision about the Greater London Authority so far as it exercises functions for the purposes of housing and regeneration; to make provision about Her Majesty’s Land Registry and local land charges; to make provision for giving members of communities the right to buy stakes in local renewable electricity generation facilities; and for connected purposes” – at p.88/88 of the PDF of the Bill (see FN2 below).

[5] As above at FN4.

[6] Sections 1-15 of the Bill: at pp.1-9 of the Bill (see FN2 above).

[7] The proposer of this Bill is Baroness Kramer, Minister of State for Transport

[10]  Sections 16 of the Bill: at pp.10-19 of the Bill (see FN2 above).

[11] Sections 17-20 of the Bill: at pp.19-20 of the Bill (see FN2 above).

[12] Sections 21-22 of the Bill: pp.22-24 of the Bill (see FN2 above).

[13] Ss.23-25 of the Bill: p.25 of the Bill (see FN2 above).

[14] S.26 of the Bill: p.26 of the Bill (see FN2 above).

[15] Schedule 5, para. 4, p.76 of the Bill (see FN2 above).

[16] Schedule 5, para.7(2), p.78 of the Bill (see FN2 above).

[17] “Constructing the team – “The Latham report”: Final report of the government/industry review of procurement and contractual arrangements in the UK construction industry”, 1994 (Department of the Environment).

View annotations and Citations

 


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