More than 14 years after the Planning Act 2008 was enacted and 5 years after its provisions in relation to reservoirs and water resource transfer schemes came into force, the Government has for the first time finalised a National Policy Statement for Water Resources (the Water NPS). 

Designation of the Water NPS will a be crucial step in delivery of new nationally significant water resources infrastructure – reservoirs, transfer schemes and desalination plants – in England.  Having a designated Water NPS in place will mean that schemes which are in accordance with the Water NPS will benefit from a presumption in favour of granting development consent.  There are approximately 20 identified projects in varying stages of development that will look to obtain development consent over the next few years.

The Water NPS was previously issued in draft in November 2018 and subject to a report by the House of Commons' Environment, Food and Rural Affairs Committee in April 2019.  The Water NPS is likely to be generally welcomed due to the pressing need to get something in place and it contains little of real controversy.  

Need and Water Resource Management Plans (WRMP)

The Water NPS takes the Environment Agency's National Framework for Water Resources estimates for a need of an extra 3.4 billion litres per day (Ml/d) of water capacity in England by 2050 due to population growth, climate change, economic growth and a need to find alternatives for unsustainable abstractions.  Since the 2018 draft, the Government has adopted the National Infrastructure Survey which affirmed the policy suggested by the National Infrastructure Commission that there should be a twin track approach combining both the delivery of additional water supply on the one hand and the reduction of demand on the other and this is reflected in the Water NPS.  

However, the Water NPS then defers to the WRMP process.  Each water company in England & Wales must publish and maintain a WRMP setting out how the company will manage and develop water resources to meet its supply obligations. There is a detailed process for the development of WRMPs involving the Environment Agency, Defra and Ofwat and ultimately, they are approved by the Secretary of State.  It is for the WRMPs to determine which specific options are required to meet need and those plans should identify demand management options and justify their preferred options. 

It is not sensible for all that WRMP process to be second-guessed under the development consent process.  Crucially, the Water NPS therefore provides that if a nationally significant water infrastructure project is included in a WRMP, the 'need' for that project will have been demonstrated in line with Government policy and the applicable statutory requirements, and 'need' will not be revisited as part of the application for development consent, nor will the question of demand management as an alternative to the project.

At least in theory, nationally significant water resources projects could be brought forward which are not included in a WRMP.  Any applicant for development consent for such projects would not benefit from any supporting statement of need in the Water NPS and would have to make out their own case for the need including questions regarding demand management alternatives.  

Applicants must submit statements as part of their development consent applications setting out a clear assessment of their proposals in the context of the WRMPs and summarising the results of the WRMP annual review process.

Economic regulation

A notable addition in the final form Water NPS from the consultation draft is a passage on economic regulation.  This recognises that the economic regulation of water companies is done by a separate process (under OFWAT) over a short time frame (5 yearly business plan) with the possibility (or probability) that nationally significant projects will stretch across more than one 5 yearly business plan.  The Water NPS requires the applicant to include a statement in its development consent application setting out the planned financial arrangements.  Bearing in mind that the need for the project will have been established by the WRMP process and the OFWAT business plan settlement will have established the funding profile, it is curious that the Water NPS also requires that statement to explain "how the proposed infrastructure delivers value for money by reference to the analysis in the [WRMP]".  On the one hand this may be intended to just to provide a summary to the Examination of the analysis already carried out, and a careful applicant will certainly only want to cross refer to such analysis already conducted, but it is potentially an unfortunate requirement in that it does invite repetitious consideration of value for money in the development consent process.  

Environmental Net Gain

By contrast to the other draft NPSs (for example in relation to Energy) published very recently, the Water NPS includes the concept of Environmental Net Gain (ENG), over and above the concept of Biodiversity Net Gain (BNG).  Specifically, an application must be accompanied by a statement setting out how opportunities for wider ENG has been considered and, where appropriate, incorporated into the design of the project.  

What is not clarified however, is how this wider ENG concept should be dealt with in the context where OFWAT settles funding under the business plan process and alongside the requirement elsewhere in the Water NPS to show how it delivers value for money.  In other words, how far does the qualification of "where appropriate" include the 'value for money' test?

What BNG is and how it functions practically is now coming into focus (even if aspects of its mechanics under the Environment Act 2021 remain outstanding) but what comprises the non-BNG bits of ENG is still vague - additional wording has been included in the final form of the Water NPS referring to "reductions in greenhouse gas emissions, reduced flood risk, improvements to air or water quality, or increased access to natural greenspace".  The EFRA Committee recommended that Government provided guidance to applicants on how best to demonstrate that a proposal would deliver ENG, but there remains little guidance in the Water NPS (or the documents to which it refers) as to quite how much ENG a project must deliver (unlike the policy guidance of 10% additionality for BNG).  Presumably the scale of expectation of ENG must be proportionate to the scale and nature of the project, although that is not expressly stated.  

Lastly, presumably aspects that are included in a project for the purposes of securing ENG can comprise associated development and included in the development consent, but that is not expressly stated in the Water NPS.

Effluent Reuse

The EFRA Committee recommended that the NPS should clearly set out the potential for effluent reuse.  Short of amending the Planning Act 2008, Government's hands are slightly tied in that such projects do not meet the criteria not classed as nationally significant infrastructure, but the final form of the Water NPS does go a bit further than the consultation version in recognising the possibility that effluent reuse may be part of a WRMP and either comprise associated development to part of a wider transfer scheme or be appropriate for designated within the development consent process by issue of a direction under section 35 of the Planning Act.  In the latter case, the effluent reuse project would have to establish its own separate needs case and would not benefit from the automatic establishment of need under the Water NPS, even if it is included in a WRMP.