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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Friends Of The Earth Ltd & Anor, R (on the application of) v Secretary Of State For Environment, Food & Rural Affairs [2001] EWHC Admin 914 (15th November, 2001) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2001/914.html Cite as: [2001] EWHC Admin 914 |
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IN THE HIGH COURT OF JUSTICE
ADMINISTRATIVE COURT
Royal Courts of Justice Strand, London, WC2A 2LL | ||
B e f o r e :
____________________
R (Friends of the Earth Ltd. And Greenpeace Ltd.) Claimant - v - Secretary of State for the Environment, Food and Rural Affairs and Secretary of State for Health Defendant
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Philip Sales & Paul Nicholls (instructed by Solicitors Department for Environment Foods & Rural Affairs & Department of Health for the Defendants)
David Pannick Q.C., Alan Griffiths & Dinah Rose (instructed by Freshfields Bruckhaus Deringer for British Nuclear Fuels Ltd)
____________________
AS APPROVED BY THE COURT
Crown Copyright ©
MR JUSTICE COLLINS:
Most fuel for nuclear reactors is made from enriched uranium oxide. Some of the uranium is during the process converted into plutonium. In addition, waste products are generated. The waste products in time make the fuel less efficient and so it is sent for reprocessing in the course of which the waste products are removed and the plutonium is reclaimed. It then has to be stored or recycled. The reprocessing is carried on at Sellafield in the Thermal Reprocessing Plant (THORP) and the plutonium, which belongs to whichever customer has sent the fuel for reprocessing, has either to be stored or returned to the customer.
It has been known for some time that nuclear reactors can operate efficiently using a fuel called MOX, which is a mixture of plutonium oxide and uranium oxide. The manufacture of MOX enables the reclaimed plutonium to be recycled. This has the advantage of reducing the amount of stored plutonium and saving the use of fresh uranium so that the environmental hazards of mining new uranium can be reduced. In addition, it avoids the need to transport the plutonium back to the customers or for reprocessing in a third country. MOX fuel in the form of what are known as ceramic pellets is said to be less attractive to terrorists and safer than plutonium (which is transported in the form of plutonium oxide powder).
"In reaching its proposed decision, the [EA] has not taken any view on the wider policy issues of plutonium management strategy. The [EA] is concerned about these wider policy issues and considers that major developments at Sellafield are national and international matters and that, given the significant political and economic issues, relevant government departments should be involved in considering the [EA’s] proposed decision”.
"The [EA] received the application from BNFL in November 1996, when construction of the MOX plant was virtually completed and after the capital cost (£300 million) had been incurred. It is unsatisfactory that the [EA] has no powers under the Radioactive Substances Act 1993 to require an application to be submitted for a new plant prior to its construction. The time at which an application is received is crucial to the [EA’s] involvement in the regulation of new plant. The [EA] is dissatisfied that it was unable to consider the full economic case for the MOX plant. It is seeking a change in the legislation to prevent a similar situation occurring in future."
The concern was that the construction costs had to be disregarded in accordance with standard economic practice in assessing the economic case for SMP because by the time the application was made those costs had been incurred and so were what are known as “sunk costs”. It is this disregard which has been said to be unlawful and so to vitiate the decision under attack.
On 11 June 1999 the Secretaries of State then responsible indicated a provisional conclusion in favour of justification of the full operation of SMP but concluded that they needed further consultations on the economic case for it. At the same time, they decided that uranium commissioning could go ahead but without prejudice to the ultimate decision on the justification for SMP. If that decision was unfavourable, BNFL would have to bear the costs of decommissioning. As a result, further consultations took place, the claimants each being at all material times consulted. In the Spring of 2001 the Secretaries of State decided to instruct independent analysts to evaluate BNFL’s updated economic case and A. D. Little (ADL) were accordingly instructed in April 2001. ADL reported in July and on 27 July 2001 a suitably redacted version of their report was published. Friends of the Earth responded in August and on 3 October 2001 the decision now under attack was made by the Secretaries of State. This claim was lodged on 5 October 2001.
The material provisions of Directive 80/836 were Articles 6(a) and 13.
6(a) read:-
"The limitation of individual and collective doses resulting from controllable exposures shall be based on the following general principles: (a) the various types of activity resulting in an exposure to ionising radiation shall have been justified in advance by the advantages they produce ..."
Article 13 provided:-
“1. Each Member State shall ensure that the contribution to the exposure of the population as a whole from each activity is kept to the minimum amount necessitated by that activity, taking account of the principles set out in Article 6(a) and (b).2. The total of all such contributions shall be kept under review ...”
These provisions led Potts J to conclude (at p.368b) that a combination of the Directive and ICRP 60 (to which I will refer shortly) were concerned with justification of particular practices which affected particular individuals in particular circumstances, the type of activity in that case being thermal oxide reprocessing at Sellafield.
"No practice involving exposures to radiation should be adopted unless it produces sufficient benefits to the exposed individuals or to society to offset the radiation detriment it causes (The justification of a practice)".
112(b) and (c) spell out the need for optimisation of protection and individual dose and risk limits. In the light of the wording of the relevant Articles of the Directive and the need to have regard to ICRP 60, as was confirmed by Mr. Advocate General Jacobs in Re Ionising Radiation Protection, ECCommission v Belgium [1993] 2 C.M.L.R. 513 at 524, it is not surprising that Potts J reached the conclusion he did.
"Whereas the Member States in order to ensure compliance with the basic standards, are required to submit certain practices involving a hazard from ionising radiation to a system of reporting and prior authorisation or to prohibit certain practices."
Article 1 defines Practice to mean:-
"a human activity that can increase the exposure of individuals to radiation from an artificial source, or from a natural radiation source where natural radionuclides are processed for their radioactive, fissile or fertile properties, except in the case of an emergency exposure."
Article 2.1 applies the Directive to inter alia “all practices which involve a risk from ionising radiation emanating from an artificial source ..., namely ... the ... processing ... of radioactive substances”. Article 4 deals with authorisation of practices including the operation and decommissioning of any facility of the nuclear fuel cycle. Title IV, under which come Articles 6 to 14, is headed:-
"JUSTIFICATION, OPTIMIZATION AND DOSE LIMITATION FOR PRACTICES."
Article 6 comes under a sub-heading:-
"GENERAL PRINCIPLES."
6.1 reads:-
"Member States shall ensure that all new classes or types of practice resulting in exposures to ionising radiation are justified in advance of being first adopted or first approved by their economic, social or other benefits in relation to the health detriment they may cause."
Article 6.2 allows a review of classes or types of practice “whenever new and important evidence about their efficacy or consequences is acquired”. Article 6.3 requires in addition that Member States ensure that all exposures are kept as low as possible (optimisation) and that the sum of the doses from all relevant practices shall not exceed the dose limits for those exposed to them. Article 14 reads:-
"Each Member State shall take reasonable steps to ensure that the contribution to the exposure of the population as a whole from practices is kept as low as reasonably achievable, economic and social factors being taken into account.The total of all such contributions shall be regularly assessed."
It will be noted that Article 14, unlike the old Article 13 which it replaces, does not refer back to Article 6. Finally, Article 54 reads:-
"This Directive establishes the basic safety standards for the protection of the health of workers and the general public against the dangers arising from ionising radiation with the aim of their uniform implementation by Member States."
"71. In applying the generic test for justification explained above, the Secretaries of State consider that an important factor to be taken into account is the economic benefits to be derived from the particular class or type of practice in question: here, the manufacture of MOX fuel.72. It is clear that there is a significant demand from a range of countries for the manufacture of MOX fuel. MOX manufacturing plants already operate in France and Belgium, and the construction of another in Japan is planned. It appears likely that a MOX manufacturing capacity will be an important adjunct for nuclear fuel processors, such as BNFL, who seek to maintain their market position.
73. The Secretaries of State consider that, as a result, the manufacture of MOX fuel carries economic benefits which are capable of justifying it as a class or type of practice. Overall, the Secretaries of State consider that, given the ability to carry on that type of practice with very minor radiological detriments, the economic benefits are sufficient to justify it.
74. This general conclusion of the Secretaries of State has in part been informed by, and has been tested against, their consideration of the specific prospects of the SMP. They have consulted on BNFL’s business case for the SMP and are satisfied that the operation of the SMP will provide significant economic benefits. This supports their conclusion that the class or type of practice comprising the manufacture of MOX fuel is justified on application of the generic test by the economic benefits it makes it possible to achieve.
75. The main conclusion reached by ADL in its report to the Secretaries of State is that the operation of the SMP would be in the national economic interest, with a net present value (“NPV”) of £216M, when compared to the cost of the SMP not only ahead. The consultants calculated the NPV of operating the SMP at £159M, on a conservative basis, as compared to a loss of £58M if the plant did not operate.
76. ADL’s assessment took account of the possibility of various adverse events, such as delays to the delivery schedule, loss of some anticipated orders and more extreme events, including a major interruption to the SMP’s operations or an early shut down. For reasons of prudence, ADL did not consider unexpected but possible events which could benefit the SMP, such as an interruption to competitors’ operations.
77. ADL also left out of account in its calculation the benefits which would flow from operation of the SMP from BNFL’s other businesses, including nuclear fuel reprocessing. The Secretaries of State consider that these additional economic benefits, although difficult to quantify with any precision, are also likely to be substantial.
86. In assessing the economic issues and the NPV of operating the SMP, the Secretaries of State consider that it is appropriate and consistent with the justification test in the 1996 Directive to focus on the present circumstances, both on the costs of operating the SMP in the future and on the present assessments of available commercial opportunities. The Secretaries of State do not consider it appropriate to deduct BFNL’s sunk costs from the consultants’ calculation of the NPV of the SMP - which costs were themselves incurred at a time when a different assessment of commercial opportunities may have been made.
87. Further, the Secretaries of State consider that the class or type of practice consisting of the manufacture of MOX fuel will support potentially significant levels of employment. This is illustrated by the assessment in the ADL report that the operation of the SMP is likely to support up to 480 jobs in total in West Cumbria."
"60. In the preliminary conclusions of the review, it was proposed that applicants might be encouraged to apply for an authorisation under RSA 93 at an early stage in a project so that justification could be considered fully, before major capital investment had taken place. If an authorisation was given, the developer could proceed with construction of the plant confident that its subsequent operation would be allowed, providing that extant safety and environmental standards were met. At the same time, justification would have been considered without the need to take account of any substantial sunk costs. Early application for authorisation would also strengthen application of the ALARA principle by ensuring that waste disposal considerations were addressed at the design stage of the plant in a transparent manner. Until now, this has been achieved through contacts between the regulators under the memoranda of understanding between them. Staged procedures are already used by N11 for licensing nuclear sites.62. In the light of these responses, the Government proposes a flexible approach. For major projects, it is expected that developers will make early applications for disposal authorisations. This would be at about the same time that they seek full planning permission for the project, although it would be determined separately. The regulators would then be able t decide on authorisations before major commitments of money and effort had been made. If the regulators are content, the authorisations could be granted containing conditions which if met at specified stages should lead to approval to start operations in due course when the plant is built and commissioned. For some projects - e.g. a power station of the same design as one already built - the design may be well developed at the outset and, if the site has no unusual features, the authorisation may need no further amendment. In other cases, the design may evolve as the project progresses and decisions will be needed about whether to revise or vary the authorisation. If significant changes are made to the conditions in the authorisation, further public consultations will be undertaken and, in any event, application documents, authorisations and all relevant correspondence will be placed on the public record. Legislation is not necessary in order to introduce a system of early authorisations under RSA 93. The procedure will be available under existing legislation for any applicants who choose this route. They will not be required to do so, but the greater certainty it could provide will give applicants an incentive to apply early in the process in appropriate cases. Further guidance will be given in the revised and updated version of Radioactive Substances Act 1960, a guide to the administration of the Act."
This expects that an application will be made at the earliest possible stage, in which case the capital costs of construction will normally be included in the assessment of economic benefit. This is supported by the EA’s concerns which I have already set out in Paragraph 5 above. Finally, he refers to the comments in the Directive issued by the Commission. These are not, of course in any way binding: they are designed to assist those who have to apply the Directive. Under Article 6, this is said:-
"Determination of the justification of any new classes or types of practice is the duty of the Member State. It should take place before the introduction of the class or type of practice and as early as possible to reduce the influence of the already incurred costs in balancing economic and social factors against health detriment."
There has been much debate before me as to the meaning of that second sentence. I think I must assume that the Commission is aware of and recognises that Member States will apply a fundamental principle of economics that sunk costs will be left out of account when assessing the economic benefits of a proposed course of action. It is difficult to see how otherwise the already incurred costs can influence the balancing exercise. If Lord Lester’s construction is correct, they cannot, since timing will be irrelevant. Equally, if Mr. Pannick’s primary submission that such capital costs should always be left out of account is correct, they cannot. It is only if the approach adopted by the Secretaries of State in their decision is correct that there can be an influence. However, the sentence is far from clear and it would be dangerous to construe the Article by reference to the somewhat obscure views of the commission’s commentator.
In the circumstances and for the reasons given, this application fails and must be dismissed.