On 6 April 2009, those provisions of the Energy Act 2008 (the "Act") which relate to decommissioning and clean-up of nuclear sites will come into force. These new provisions set out a legislative framework for funded decommissioning programmes which will ensure that operators are responsible for the costs of waste management and decommissioning of new nuclear power stations in England, Wales and Northern Ireland.

It is critical that operators are aware of these provisions as it will be an offence to operate a nuclear site without first having a funded decommissioning programme ("FDP") approved by the Government or to fail to comply with an FDP once it is approved. The financial liability could also extend to parent companies and subsidiaries of the site operator. Exit strategies will also need to take account of the fact that the decommissioning obligations of a site operator will continue until the Secretary of State for Energy and Climate Change ("SoS") explicitly states otherwise, even after the operator ceases to hold a site licence.

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On 6 April 2009, those provisions of the Energy Act 2008 (the "Act") which relate to decommissioning and clean-up of nuclear sites will come into force. These new provisions set out a legislative framework for funded decommissioning programmes which will ensure that operators are responsible for the costs of waste management and decommissioning of new nuclear power stations in England, Wales and Northern Ireland.

It is critical that operators are aware of these provisions as it will be an offence to operate a nuclear site without first having a funded decommissioning programme ("FDP") approved by the Government or to fail to comply with an FDP once it is approved. The financial liability could also extend to parent companies and subsidiaries of the site operator. Exit strategies will also need to take account of the fact that the decommissioning obligations of a site operator will continue until the Secretary of State for Energy and Climate Change ("SoS") explicitly states otherwise, even after the operator ceases to hold a site licence.

Application

Under the Act, an applicant for a nuclear site licence to construct or operate a nuclear power station in England, Wales or Northern Ireland will be required to submit an FDP to the SoS for approval.

An FDP must set out the technical steps for managing and disposing of any hazardous material, as well as for decommissioning and clean-up of the site. It must also include estimates of the costs involved and details of any financial security to be provided in relation to these costs. The SoS is permitted to rely on third party verification of the financial estimates.

The SoS will be entitled to charge a fee to any person who submits an FDP for costs incurred by the SoS in considering the application and obtaining advice in relation to it. The SoS may specify in subsequent regulations how such fees are to be calculated and paid.

Approval

The SoS may approve (with or without modifications or subject to conditions) or reject (giving its reasons for doing so) an FDP, and must act without unreasonable delay in reaching its decision. The SoS must consult with the Health and Safety Executive ("HSE"), the Environment Agency (for sites in England and Wales) and the Department of the Environment for Northern Ireland (for sites in Northern Ireland), and must also allow the operator and persons with obligations under the FDP the opportunity to make written representations regarding any proposed modifications or conditions.

The SoS may request such information and documents as it deems necessary for making its decision from the site operator, any person with obligations under the FDP and any body corporate associated with the site operator (e.g. a parent company).

Use of a nuclear site without having an approved FDP in place will be a criminal offence under the Act.

Modification

An FDP (and any conditions attached to it) may be modified once it has been approved. It is intended that the SoS should have flexibility to amend an FDP where, for example, cost estimates change or decommissioning technologies become more advanced.

A proposal to make a modification must be in writing and can be made by the SoS, the site operator or any other person with obligations under the FDP (provided the operator consents to its proposal). The Act sets out the process that must be followed leading up to the SoS's final decision on the modification proposal. The procedure differs slightly according to whether or not the proposal is made by the SoS.

Alternatively, the SoS will have the power to make regulations which allow the site operator to make modifications without going through the above process. Such regulations may categorise modifications by reference to the cumulative financial effect of a number of modifications over a given period. They might, for example, set out that any operational changes which have a financial impact below a certain amount within a specified period are to be exempt from the above process. The operator is required only to notify the SoS of the planned modifications.

Compliance

The SoS will have the power to review an approved FDP and to request information from the site operator or any other person who has obligations under the FDP. Information may be requested as a means of determining whether the FDP is being complied with now and in the future, and also whether the FDP makes proper provision for technical matters (e.g. decommissioning, treatment of waste and financing). The SoS may order a modification if such information reveals that the FDP is not being properly complied with.

It will be a criminal offence for a site operator or associated person (e.g. a parent company) to fail to comply with its obligations under an FDP, unless they can prove that they exercised due diligence to avoid committing the offence.

Where a person fails to comply with FDP obligations or engages in unlawful conduct which may affect the FDP, the SoS may issue a direction to that person to take steps it considers necessary to comply with the obligation or remedy the unlawful conduct.

Protection of decommissioning funds

The Act ensures that, in the event of the insolvency of the site operator or other person with obligations under an FDP, the monies set aside to cover the decommissioning or clean-up costs remain available for that purpose and are not available to creditors.
Any provision of the Insolvency Act 1986, the Insolvency (Northern Ireland) Order 1989 or any other statute which might prevent or restrict the security being used for its purpose is disapplied.

Continuity of obligations

The obligations of an operator (or former operator) under an FDP remain until the SoS explicitly releases it from its obligations, even if it no longer holds a site licence. The SoS will be able to release the operator from some or all of its obligations under an FDP. In releasing the operator, the SoS may release it from:

  • all of the former site operator's obligations or only specified obligations;
  • its obligations in relation to part of, or the whole site; or
  • its obligations in relation to all nuclear installations on a site, or only to specified installations.

The power to release an operator also applies in relation to any other person with obligations under the FDP as it applies to the site operator.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 25/03/2009.