Guest Blog: Nutrient neutrality

Nutrient pollution of sensitive habitats has become one of the biggest headaches facing developers as they are forced to mitigate the effects of their activities on wildlife such as wetland birds, fish and insects.

However, the problem also provides an opportunity for landowners, especially those who are prepared to find imaginative ways to provide the important environmental improvements while creating new revenue streams for their own businesses.

Residential development leads to more waste water. In affected areas this means more nutrients such as nitrogen and phosphorous finding their way into protected habitats, where they encourage the growth of algae and certain plants that can starve wildlife of light and oxygen – with potentially disastrous effects on the ecology of sensitive habitats.

The planning issues for developers have resulted from a complex combination of EU-derived UK legislation and case law, with the result that local planning authorities can now only approve a development if they are certain it will give rise to no additional adverse impacts on any protected site which is already in unfavourable condition.

In these areas, planning permission cannot be granted until appropriate mitigation is secured. There is often an insufficient supply of accessible mitigation, and developers have become increasingly frustrated by the lack of a robust response from Government to bring forward solutions. In some areas, such as North Herefordshire or the Solent region, development has effectively been stalled for nearly four years with far reaching consequences for the local economy.

Recently, innovative landowners have started to rise to the challenge and brought forward solutions which aid the conservation of these protected sites and allow developers to get building again.

It is against this background that the resourceful farmer or landowner can find opportunity. While a landowner can achieve a substantial premium on the sale or lease of agricultural land to a developer who commits to rewilding it to mitigate the nutrient impacts of their development, there are other options which are becoming increasingly attractive.

Here are three.

1. Cessation or adaptation of an enterprise

Agriculture is considered by the authorities to be a significant contributor to the pollution of watercourses through the leaching of fertilisers and manure.

Where a particular farm enterprise gives rise to substantial nutrient impacts, such as an intensive pig unit or a dairy operation, its cessation or adaptation can reduce the impact, and generate nutrient credits.

Measuring the reduction in impact is complex and requires careful consideration and appropriate (legal and scientific) due diligence to establish the likely mitigation capacity of the enterprise. Obtaining early advice on tax implications will also be very important for the landowner as they consider the transaction structure to monetise the nutrient credits.

Depending on the type of mitigation being deployed, it may still be possible to maintain agricultural activity at the farm. A landowner would also themselves be able to consider the development opportunities for any farm buildings left redundant on the site by the cessation or reduction in agricultural activity.

1. Creating new wetlands

Historically, wetlands have been drained for agricultural or industrial use. This is not limited to the UK but is a worldwide concern, with some studies estimating that the extent of natural wetlands has declined by 35% since 1970, with agriculture a primary cause.

Natural England identifies the creation of wetlands as a good way to reduce nutrients finding their way to rivers and estuaries, and we have seen private landowners creating wetlands under legal agreements with local planning authorities and selling the nutrient credits to developers. While establishing wetlands can be expensive, they have two other advantages for landowners. Firstly, they do not necessarily limit the agricultural operations on the rest of the landholding; and, secondly, they would also likely generate biodiversity units which can be “stacked” on top of the nutrient credits and sold separately to developers who will have to fulfil the statutory requirement of Biodiversity Net Gain as of November 2023.

1. Septic tank upgrades

The upgrade of septic tanks to package treatment plants to reduce nutrient pollution can mitigate a development elsewhere in the locality by a legal agreement with the local planning authority (often referred to as a Section 106 agreement).

This option can work well on estates with a number of properties using old septic tanks, and is a particularly useful way for landowners to mitigate the impacts of their own developments without affecting any of their other agricultural activities.

It is important to note that, where the mitigation is resulting from the upgrade of multiple septic tanks, careful consideration will need to be given by landowners to not just the legal agreements with the local planning authority but also with the developer as a works contract for the carrying out of the septic tank upgrades may also be required.

Nutrient mitigation is secured by a s106 agreement to bind (in perpetuity) the land which is delivering the environmental improvement. Where a mitigation scheme delivers a significant amount of credits, a legal framework can be created within the s106 agreement to enable the operation of a phosphate (or nitrate) ‘credit bank’ and the allocation of those credits to developers. If biodiversity units are also generated, then landowners will need to consider registering the site on the offsite biodiversity gain register due to be introduced by Government to facilitate the sale of units.

With careful management, while a s106 agreement is being completed with a local planning authority for a scheme that would produce excess credits, the allocation agreements could be worked up with developers. This could help reduce risks associated with the costs of developing the proposals while also providing a bundle of contracts against which a lender may be willing to provide finance for the establishment of the mitigation measures, such as a new wetland.

Harvey Davies is a Solicitor in the Thrings Agriculture team, which supports landowners, farmers, food producers and rural communities. Find out more here.