With almost two hundred onshore windfarms now operating in Scotland, and with aggregate capacity approaching four Gigawatts (GW) this has undoubtedly been an exciting phase in the renewables revolution. Another four GW has received planning consent and there are a further 3.7 GW in the planning system. Windfarms have undoubtedly brought jobs and economic benefits to local economies and have been a tremendous income generator for landowners at a time when pressure for diversification has been acute for farm and estate businesses.
It is important to ensure, however, that hidden costs are not accumulated. No windfarm development has come to an end yet in Scotland but inevitably there will be sites that become less economic or where repowering is not achievable. These windfarms are likely to be dismantled. Who pays for the dismantling and restoration?
It is vital for landowners and other interested parties to consider now what provision has been made for safeguarding property should a windfarm lease come to an end whether naturally, following a breach by, or on the insolvency of, the developer. The best policy for landowners is to insist on a robust restoration provision in the lease with the developer being bound to put in place a bond or other form of financial guarantee or fund in terms agreed with the landowner, whether the restoration provision is a joint provision in favour of the planning authority and the landowner or not.
Developers are generally willing to provide restoration bonding or reinstatement accounts for larger wind development but often argue that it is for the planning authority to review these and for the landowner to simply accept what is negotiated with the planners. This applies not only to the quantum of the bond/account sum but also to the detailed terms.
Important questions to ask are:-
(i) has the restoration provision been set at a level that truly reflects the potential cost of restoration and with provision for regular review to ensure suitable protection is offered for the life of the windfarm? The actual costs of removing turbines and making good damage may well exceed bonding levels in place for some wind developments in Scotland very substantially (by up to five to ten times);
(ii) is the landowner a party to the restoration provision and what restrictions apply on the landowner's ability to make a claim? Many developers exclude landowner participation leaving the landowner dependent on third parties in the restoration process.
(iii) is the period of the restoration provision sufficiently lengthy? Often bonds have a limited life and the landowner needs to ensure that he has sufficient notice of the bond's expiry so that action can be taken to secure restoration before the bond has gone.
(iv) who determines when the restoration provision can be discharged – the planning authority, landowner or (preferably) both?
Considerable pressure is applied to landowners to accept bond/restoration provisions which do not afford full protection to landowners.
The collapse of Scottish Coal illustrates the dangers to landowners of over reliance being placed on restoration provision where the landowner is effectively excluded from the bonding process. Following the collapse, independent mining engineers estimated potential restoration liabilities in East Ayrshire at £161m. Bond coverage available was only £28.6m. Doubts have been expressed as to whether full recovery could be made from even these limited bonds. The Report of the Independent Review of Regulation of Opencast Coal Operations in East Ayrshire of January 2014 highlighted"major and persistent failings" in the way that restoration plans were scrutinised, monitored and enforced. The Council's processes for calculating and monitoring restoration guarantee bonds were described as"wholly deficient and defective", opportunities to take specialist independent advice were lost (even though the developers concerned were committed to paying for the planning authority to obtain such advice), there was a lack of awareness amongst senior managers of the environmental damage which could be wreaked by operators and there was inadequate supervision and direction throughout the organisation.
It can be hoped that lessons have been learned and that we will not see a repeat of the coal debacle. We are aware, however, of built windfarm sites where the original estimated restoration sum is likely to be wholly inadequate and no action has been taken to ensure that existing bonding levels have been reviewed. Landowners have to review what action can be taken to protect their position and take action. There is a serious risk that very substantial liabilities are being deferred for a future day of reckoning.