The Water Act 2003: withdrawal of compensation on the grounds of Serious Damage

The current system for managing water abstractions was introduced in the 1960s and was linked to the use or ownership of land but was not designed to protect the environment. Over recent years, legislation has been updated, reflecting growing recognition of the environmental impacts from abstraction.

The abstraction and impounding licensing system has its legislative basis in the Water Resources Act 1991. Under this system the Environment Agency has powers to vary or revoke abstraction and impoundment licences. Where a licence is revoked or varied without the agreement of the licence holder, the licence holder may be entitled to compensation for loss or damage which he has sustained.

The Water Act 2003, which introduced a number of changes to further the compliance with the Water Framework Directive, contained a power (section 27) to remove the right to compensation in certain circumstances.

Under this provision, where a licence, that is not a time limited licence, is varied or revoked on, or after, 15 July 2012, no compensation will be payable where the Secretary of State is satisfied that the grounds for varying or revoking the licence is to protect the environment from serious damage.

Defra and the Welsh Government have worked closely with the Environment Agency, to develop the consultation. We drew upon provisions in other legislation, literature and relevant environmental protection activities such as the Environment Agency’s Restoring Sustainable Abstraction Programme to inform the development of the consultation.

The impact of an abstraction on the environment depends on a number of factors, including for example the type/rarity of habitat or species affected, the scale and longevity/reversibility of the impacts and how these factors combine in specific cases.  The approach we have developed, therefore, identifies three key principles against which to assess whether the damage is serious for the purposes of section 27.  These principles are:

• Establishing the qualitative nature of the damage.
• Establishing the extent and magnitude of the damage.
• Establishing if the damage is reversible and how long recovery may take

The consultation also set out some worked examples to show how the assessment would be applied in practice.