Is the tide turning on environmental regulation? Assessing the future impact of the OEP

An investigation by the Office for Environmental Protection (OEP) has recently revealed possible breaches by the regulators themselves. The Department for Environment, Food and Rural Affairs (Defra), the Environment Agency (EA) and the Water Services Regulation Authority (Ofwat) are accused of having failed in their statutory duties to produce guidance which upholds legislative requirements and to issue appropriate orders to enforce them. The investigation, which was launched in June 2022, looked at the frequency with which untreated sewage entered the water course through storm overflows (technically known as combined sewer overflows – or CSOs). The three regulators have been given until later this month to respond.

The alleged failings of Defra, the EA and Ofwat

CSOs are relief mechanisms designed to release excess volume from sewerage networks into rivers or the sea which has accumulated, for example, due to run-off entering sewage pipes during heavy rainfall. Helen Venn, the OEP’s Chief Regulatory Officer has explained that untreated sewage should only be discharged from CSOs in exceptional circumstances such as heavy rainfall. However, the regime which has been put in place by the regulators has potentially allowed more regular discharges to occur.

As such, Information Notices have been issued to the three regulators setting out the purported failures which relate to producing guidance which upholds legislative requirements and issuing appropriate orders to enforce them. The public authorities were given two months to provide their substantive responses.

Previous failures to discharge duties  

Leniency on the part of these public authorities in the regulation of CSOs had already been noted by the House of Commons Environmental Audit Committee in its January 2022 report on water quality in rivers. The EA was urged to “review its practices in auditing the self-monitoring of wastewater treatment works by water companies”. The Government Response in May 2022 referenced a review by the Improving Water Company Performance Taskforce set up between Defra, the EA, Ofwat and Water UK in September 2020 to present proposals for reducing the frequency and volume of discharges of untreated sewage. It also highlighted the new requirement under the Environment Act 2021 for water companies to report near real time data on the frequency and duration of discharges from CSOs.

Unfortunately, this is not the only example of failures on the part of environmental regulators.  There have elsewhere been further examples of the EA, Ofwat and Defra failing to fulfil their regulatory duties:

• The EA has been criticised for its purported failure to impose sanctions on farmers for breaches of environmental laws tackling nitrogen pollution. Last year ClientEarth and WWF together brought a legal complaint to the OEP, holding the EA responsible for “an unlawful abdication of its statutory responsibilities”.
• Similarly, this year River Action applied for judicial review against the EA alleging that it was failing to apply the Reduction and Prevention of Agricultural Diffuse Pollution (England) Regulations 2018, otherwise known as ‘the Farming Rules for Water’. Intensive agricultural practices and the spreading of excess organic manure has led to phosphorus pollution and algal blooms, endangering plants and wildlife. In this case the EA has also been accused of falling back on Defra guidance, implying that common practice has superseded the legislation itself.
• Ofwat has been the subject of scrutiny by the Industry and Regulators Committee and has in its report published in March on the regulation of the water industry been found to have prioritised keeping bills low ahead of ensuring sufficient investment by companies in water infrastructure. 
• Defra earlier this year has been found to have failed to complete Post-Implementation Reviews (PIRs) of environmental laws consistently. These are in many cases a legal requirement. Evaluating whether a piece of legislation is operating effectively is crucial for the future development of environmental law. The OEP has highlighted Defra’s unexplained backlog of PIRs and requested further information.  

Rising challenges for regulators 

The failures by these three regulators to fulfil their statutory purpose may at least in part be explained by the limited resources available to them: the National Audit Office has for example, in relation to the EA reported a reduction of 80% in the core grant-in-aid funding enforcement work from £117 million in 2010-2011 to £23 million in 2019-20.

It seems that these reductions in funding may have impacted the frequency of enforcement action taken by regulators. The number of prosecutions and formal cautions against water companies has reduced. Additionally, in the case of the EA, the use of enforcement undertakings (a civil sanction) has increased whereby water companies make a voluntary offer to put right the effects of their offence and the impact on third parties and to endeavour to ensure the offence cannot happen again, which the EA may accept. An enforcement undertaking does not constitute an admission of guilt and where one is accepted, the EA cannot bring a criminal prosecution for the original offence.

Potential outcomes

The OEP was established by the Environment Act 2021. In conducting this investigation, the OEP was fulfilling its role as an environment watchdog holding the government and other public authorities to account in order to help protect and improve the environment.

The OEP’s investigatory powers include: 

• Carrying out investigations in relation to alleged or suspected serious failures by public authorities to comply with environmental law; and
• Serving Information Notices requiring public authorities to provide certain information if it has reasonable grounds for suspecting that there has been a serious failure by a public authority to comply with environmental law.

Depending on the regulators’ responses to the allegations and their willingness to cooperate, the OEP may issue a Decision Notice and could also apply to bring an “environmental review” before the High Court. It remains to be seen whether investigations and potential enforcement action by the OEP will urge regulators to take a harder line against water companies or whether the ability to drive progress is limited without a review of funding allocation.

In the meantime, Defra has reported that through increased monitoring and inspection, regulators will most likely identify further concerns which require attention.

The threat of enforcement action and the potential reputational damage may be enough to incentivise regulators. Companies should therefore be prepared to be monitored more closely as a result.