Restoration Bonds: Where are we?

The insolvency of Scottish Coal last year rapidly brought to the fore a number of legal issues, not least the inadequacy of restoration bond provision for those open cast sites which were abandoned. The problems arising from these shortfalls is not confined, of course, to one local authority area.

The sheer scale of the shortfall (one estimate puts it at more than £150m) has brought matters into dramatic focus, not least in political terms.

A "bombshell" is said to have dropped. This, however, is hardly the first time there has been a significant shortfall in bonding provision following a corporate insolvency. If we must have an explosive metaphor, "timebomb" is perhaps better.

Restoration bonds have been widely used in Scotland as the mechanism to provide assurance to a planning authority that the environmental consequences of workings will in due course be addressed, come what may. That assurance has often enough proved illusory. The approach to framing and structuring bonding requirements has varied among planning authorities.

Task forces are now deployed, inevitably, on Scottish Coal consequences. Of particular interest will be the outcome of the Scottish Government's Consultation on Opencast Coal Restoration: Effective Regulation. The broad thrust of the consultation document appears to be the exploration of greater uniformity in practice, possible inputs at national and local level, and deployment of proven expertise in assessing the nature and scale of bonding requirements. The effective monitoring of shifts in potential costs over project life is identified as requiring greater emphasis.

We can note the prospect of the consultation outcome being reflected in the NPF3 action programme.

Of some interest is the identification of the possibility of a coal industry guarantee scheme, on the lines of the aggregates industry mutual funds. Restoration costs of coal extraction sites are of a different order from most aggregates sites, but the availability of such facilities might be seen as a proactive response by the industry to identified issues

From a legal perspective, those within planning authorities, or advising operators or landowners may perhaps await developments with some trepidation. The shopping list of needs to be met and risks to be managed promises greater complexity and uncertainty.

And there is the human dimension. As the consultation recognises, there is a political and economic tension between, on the one hand addressing the restoration issue, and the economic conditions in affected localities. Open cast coal operations occur largely in former deep mine coal fields. The demise of that industry had a brutal adverse impact on local communities and economies, which has not been resolved. If the bar to new operations is raised too high, then plainly a door may be closed on local employment opportunities.

None of which assists those who must determine current or imminent planning applications, where bonding requirements must be addressed under current rules and policies. As they are no doubt acutely aware, the temperature of this particular potato has just shot up, with no particular Plan B in sight.

This article featured in Scottish Planner (the journal of RTPI Scotland) March 2014 issue.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.