The Scottish Government

DRAFT: Regulatory Impact Assessment: Water Environment Controlled Activity Regulations

Water Environment Water Services (Scotland) Act 2003

• The Water Framework Directive (EC Directive: 2000/60/EC) established a new framework for European water policy. It aims to maintain the existing quality of the water environment and to achieve 'good status' in all waters by 2015.
• The Directive was transposed into Scots Law in the Water Environment and Water Services (WEWS) Act (2003). While the WEWS act reflects the Directives objective of maintaining and improving the water environment, it recognises that there is an importance in protecting the social and economic interests of those who depend on the water environment too.
• In order to achieve a 'good status' for all water bodies by 2015, a River Basin Management Plan, containing a programme of measures, is required to be published by 2009 and implemented by 2012. In order to inform this plan and allow the programme of measures to be enforced these regulations - the Controlled Activity Regulations - were proposed within the WEWS Act, and are due to be in force by 2005.
• There are 3 key activities which will be subject to this regulatory regime: point source discharges, abstraction and impoundment, and engineering works. At present point source discharges are controlled through the Control of Pollution Act (CoPA) 1974 but there are limited restrictions on abstraction, impoundment and engineering works.
• Regulation of diffuse pollution, a more complex area to define and control, is not considered under these regulations.

Objective

• The regulations set up a framework allowing:

i) SEPA to identify, monitor and control activities which would have an impact on water bodies, and in doing so prevent deterioration of the water environment;

ii) SEPA to introduce and enforce measures under the programme of measures that will be contained in the River Basin Management Plan.

• Work on the River Basin Management Plan has yet to start and the Plan will be consulted on in 2008. Given this, and that there are considerably uncertainties that require to be resolved before the plan is published (such as the definition of 'good status') it is not possible or credible for this RIA to include consideration of the costs and benefits of the River Basin Management Plan. This RIA therefore only considers the costs and benefits that occur in the period prior to the River Basin Management Plan's publication, i.e. up to 2009. However, the extent to which these regulations are implemented will have an impact on the effectiveness of the programme of measures within the River Basin Management Plans, and are therefore crucial to a well informed policy in later years.
• As mentioned above, point source discharges are already regulated under CoPA. The new regulations are unlikely to significantly impact the control of point source discharges in the period to 2009. Therefore this RIA concentrates on the impact of regulating abstractions, impoundments and engineering

Risk Assessment

9. The UK is under an obligation to comply with EU Directives - failure to do so may result in proceedings in the EU Court of Justice.

Options

• There are 3 types of activity covered by the regulations. These are:

i) Point Source: pollution that can be traced back to a single source, for example from a pipe.

ii) Abstraction and Impoundment: activities that remove water from the environment or restrict and control the natural flow of water.

iii) Engineering and building: works which alter the natural channel of the river, reinforce its banks, canalise it or disturb the sediment in a river

• There are several types of control under consideration in these regulations. These are:

i) Registration: activities can be required to be registered, without further action.

ii) General Binding Rules (GBRs): these may either be applied to all activities that impact the water environment or just a sub-section of these activities.

iii) Licensing: operators are required to apply for a licence, which can be generic or tailored to the individual activity and its impact on the local water environment. Generic licenses can be seen as similar to GBRs that only apply to a specific sub-section of activities.

• Four options have been considered. These are:

i) Do nothing

ii) Light Regulation: a framework based on simple GBRs, limited registration, simple and complex licences,

iii) Heavy Regulation: a framework based on wide spread registration, general rules applicable to a sub-section of those registered and some licensing.

iv) Full Regulation: a framework based on licensing across all activities.

• Do nothing: Under a do nothing option, there would be no change in regulations at this stage. Point source pollution would continue to be regulated under the CoPA Act.
• Light Regulation:

i) All users of the water environment would have to conform with some general rules but most would not have to inform SEPA about their activities;

ii) There would be limited registration. Those activities that cumulatively pose a significant risk would be required to register, such as septic tanks and small abstractions;

iii) Medium risk activities would be covered under a Simple Licence - these would normally be generic;

iv) High risk activities would be covered under a Complex Licence with the treatment of these activities dependent on the individual circumstance.

• Heavy Regulation:

i) All activities that impact the water environment would be covered under a general registration

ii) Medium risk activities would have to comply with general binding rules,

iii) High risk activities would be covered by licensing with treatment of these activities dependent on the individual circumstances.

• Full Licensing: Under this option, all activities which impact on the water environment would be subject to a licence.

Costs and Benefits

• The main sectors to be affected by these regulations will be agriculture, forestry and fishing, construction, electricity & water supply, manufacturing, mining & quarrying. Sewerage & refuse disposal, recreational activities, and transport & communication firms will also be affected.
• The SEPA characterisation report 'Pressures and Impacts' analysed the pressures on water bodies by sector. From this it is possible to predict in more detail where the majority of the impacts of the regulations are likely to fall:

i) Abstractions: the biggest impact is likely to be on energy and supply water sector, agriculture, forestry and fishing; limited impact on sewage and refuse disposal, mining and transport;

ii) Impoundments/flow regulations: the largest impact is likely to be on energy and water supply sector; moderate impact on some other sectors.

iii) Engineering work: the biggest impact is likely to be on water & energy sector and agriculture & fishing sectors; limited impact on other sectors.

• As described above, point source discharges are currently regulated under CoPA. The main sectors that have point source discharges are sewage, agriculture, forestry and fishing.
• Underlying assumptions include:

· The SEPA publication referred to above identified water bodies that were 'at risk' and 'not at risk' of meeting the Water Framework Directive. An 'at risk' water body means that there is a likelihood that the water body will fail to meet environmental objectives. In total 5471 pressures were identified, with 4683 of water bodies identified as being 'at risk'. It is assumed here that the options of full and heavy regulation will capture all these pressures, with light regulation only covering the 'at risk' pressures.

· It is assumed that the majority of SEPA's costs will be recovered through charging to businesses, with a constant proportion of the costs met by Scottish Ministers under all options.

• The main benefits across options are likely to be:

· Prevention of deterioration of the water environment quality;

· Informational benefits.

• Environmental Benefits:

• To 2009, it is expected that any regulations will ensure no deterioration of the existing water environment. Beyond 2009, the implementation of the Water Framework Directive is expected to result in considerable improvements to the water environment, with most water bodies reaching 'good status'. The extend of these improvements will be dependent on the programme of measures, which in turn is informed by these regulations. These regulations are, therefore, a crucial step towards obtaining these environmental benefits.

• There may be environmental benefits prior to 2009 as a result of SEPA's plan to include indicative licence conditions for post-2012 whenever they carry out their review of licences. There are clear informational benefits to business from this as it will allow business a greater time to plan the investment decisions. In some cases business may decide to put the investment in before 2012 in which case this will result in early environmental benefits as well.

• Informational benefits:

· The information collected through these regulations is crucial for informing decision making on the programme of measures beyond 2009, and the ability to achieve a 'good status'. Hence there is a trade-off between the weight of regulation and the amount of information collected - the heavier the regulation the more information will be collected and hence the more informed the Programme of Measures can be. The lighter the regulations the higher the risk that there will be insufficient information to enable the most cost-effective combination of measures to be selected.

• Under a do nothing scenario, no new information will be obtained. Under the light regulation scenario SEPA would expect to gain information on high risk activities, which would cover the 4683 pressures identified as putting the water environment at risk. Under both heavy and full regulation SEPA would gain information on all the activities impacting on the water environment

• The main costs of the regulations are likely to be:

· Cost of regulation, administration and enforcement incurred by SEPA

· Cost of compliance to businesses: financial cost of the charging regime, costs for any additional monitoring and administration costs.

23. SEPA Costs from 2005/6 to 2009/10 are expected to be:

24. The costs shown in the above table only relate to introducing a regulatory regime for abstraction and impoundment, and engineering. They do not include the costs of River Basin Management Planning nor of regulating point source discharges as both of these costs would be incurred irrespective of the Controlled Activities Regulations.

• SEPA forecast that in the light regulation option there would be approximately:

· x activities that would be covered by the general rules

· a further x activities that would be registered

· an additional x activities that would be licensed, of which approximately half are expected to be simple (i.e. generic) licenses

• In the heavy regulation option SEPA forecasts there would be approximately

· x activities that would be registered

· a further x activities that would be registered and subject to general rules

· a further x activities that would be licensed

• In the full regulation option all activities would be licensed.

25. Costs to businesses: Although the costs to businesses under a do nothing scenario are zero to 2009/10, it is anticipated that beyond 2009/10 the costs maybe higher than with some regulation. One of the purposes of any regulations is to ensure that a good information base is collected in order to create a well informed programme of measures. Without this information it is possible that controls maybe crude and more expensive to implement.

· Under light regulation, only activities that pose a cumulative risk to the water environment would have to register. Therefore under the light regulation options x fewer activities would require registration compared to the heavy regulation option. The full regulation option would involve x more licenses than the heavy regulation option.

· The English RIA estimated that the costs of registering would be low - between approximately £40 and £80. The costs of applying for a license would be higher - normally between £200 and £11,500 depending on the need for an environmental report, professional advice and the sophistication of any metering equipment required. There are likely to be a few large businesses where the costs will be considerably higher than the estimate given above.

26. Costs to Scottish Executive:

· In the longer term, the cost to the Scottish Executive is the risk of failing to achieve 'Good Status' in all water bodies by 2015 (i.e. failure to comply with the Water Framework Directive).: The less information that is collected through the regulations the higher the risk that the programme of measures may not result in 'Good Status' being achieved. It is not possible to quantify this risk but a qualitative assessment is given below:

27. Costs for a typical business: It is difficult to define a 'typical' user of the water environment. Under the do nothing scenario there would be no cost to a typical business prior to the River Basin Management Plan. In the light regulation scenario there would still be no costs for most businesses that impact the water environment. In the heavy regulation scenario all users of the water environment would incur the costs of registering while in the full license option all users would face the costs of obtaining a license.

Equity, Fairness and Small Firms Impact Assessment

28. To be completed

Competition Assessment

29. In a do nothing scenario, it is possible that in the short run Scottish firms may have a competitive advantage in relation to firms in England & Wales who would be subject to a regulatory regime. However this advantage is likely to disappear after 2009 as the programme of measures in this scenario is likely be uninformed and hence there is a high risk that it will be badly targeted. The result is likely to be that some firms may have to comply with stricter than optimal levels of environmental compliance.

30. Over stringent regulation may act as a competitive disadvantage. The issue is what level of regulation provides the appropriate balance between environmental protection and informational benefits on the one hand and the burden placed on users of the water environment on the other. Scotland, as a sparsely population and water rich country is unlikely to suffer a competitive disadvantage from the same standards of environmental protection being demanded across Europe and could see this as a source of comparative advantage.

Enforcement and sanctions

31. SEPA, as the regulatory body will be responsible for enforcement. Provisions are being put in place to enable SEPA to take appropriate action. This is likely to consist of notices, powers of entry, and enforcement through the courts when necessary.

Consultation

32. The drawing up of these regulations has been in partnership with SEPA, other SE departments and key stakeholders. The regulations were subject to the scrutiny of the 'Controlled Activities Regulations: A Consultation' and modified with stakeholder agreement.

Monitoring and Review

33. It is intended to review the regulations within 4 years of implementation.

Summary and Recommendation

34. The recommendation is to take forward the light regulation option. This option is considered to provide the appropriate balance between the burden on water users and the protection of the environment and information benefits that would accrue.

• A do nothing scenario is not considered to be a viable option, as it leaves the SE at risk of failing to comply to WEWS Act in later years, and both SEPA and businesses in a position of uncertainty about the future programme of measures.
• The heavy regulation and full regulation options would both produce greater informational benefits than the light regulation option which could lead to a more informed programme of measures. However, in both options it is considered that the potential additional benefits are outweighed by the additional costs that would result.
• Summary of Options

Declaration

• Contact Point:

Jenna Coull

ERAD-ASD

Scottish Executive Tel: 0131 244 0887

Victoria Quay Fax: 0131 244 0446

EDINBURGH EH6 6QQ Email: Jenna.Coull@scotland.gsi.gov.uk