This letter before action relates to a decision of the Minister announced on 2 August 2013 to approve funding for Prosiect Gwyrdd.

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1 Proposed Claim for Judicial Review 1. To Alun Davies Minister for Natural Resources and Food Tŷ Hywel Bae Caerdydd Caerdydd CF99 1NA This is an Århus Convention claim pursuant to the definition in Annex 1 (5) Waste management: Installations for the incineration of municipal waste with a capacity exceeding 3 tons per hour and/or Installations for the disposal of non-hazardous waste with a capacity exceeding 50 tons per day. 2. The proposed parties The proposed Claimant in this action is Friends of the Earth England, Wales and Northern Ireland. The proposed Defendant is the Minister for Natural Resources and Food of the Welsh Government. 3. Decision under challenge This letter before action relates to a decision of the Minister announced on 2 August 2013 to approve funding for Prosiect Gwyrdd. 4. Details of the matter being challenged The Minister approved more than 4.2 million of funding annually for the next 25 years for Prosiect Gwyrdd. It is considered for the reasons set out below that the approval: Was based on a position adopted by the Welsh Government and Prosiect Gwyrdd that unlawfully favours energy from waste plants and subverts the proximity principle. Failed to have regard to relevant considerations, or give them sufficient weight, including Welsh Government policy. In particular, Prosiect Gwyrdd has overstated the likely amount of residual waste in a way that makes the case for incineration more favourable and that is in direct contradiction to Welsh Government waste policy. The Welsh Government approved the Final Business Case in full knowledge of both of these facts. Failed to consider the scope and diligence of the Prosiect Gwyrdd investigation into the health and environmental impacts of incinerators. The flawed recommendations of that investigation led to a failure of process to acknowledge health and environmental risks. The Welsh Government has approved a project which inadequately considered the health and environmental concerns associated with waste incineration. Was for a type of facility for which the approved facility does not meet the specifications. The proposed facility is a disposal not recovery facility, and it complies with neither Welsh Government funding criteria nor with Welsh Government waste policy.

2 4.1 Unlawful bias Regulation 4(3) of the Public Contracts Regulations 2006 states: Contracting authorities shall (in accordance with Article 2 of the Public Sector Directive) a) treat economic operators equally and non-discriminatorily and b) act in a transparent way. The Welsh Government and Prosiect Gwyrdd have operated in a manner that does not treat potential contractors equally and non-discriminatorily. Welsh Government waste policy repeatedly states that residual waste will be phased out of landfill to high efficiency energy from waste plants. As far back as 2007, Prosiect Gwyrdd noted the benefits and solutions offered by the proposed energy from waste have been recognised. The stipulated contractual period of 25 years specifically favours the economics of large, capital-intensive residual waste infrastructure, to the disadvantage of smaller modular technologies. In addition, the Welsh Government proposes to allow the recycling of incinerator bottom ash and fly ash both of which favour incineration over other residual waste management methods even though this undermines the effectiveness of the Waste Framework Directive (see below), and even though neither Scotland nor England have adopted this approach. The range of technological solutions that entered the procurement process was limited, depriving non-incineration operators of an opportunity to enjoy a fair procurement process. The revenue funding agreed by the Welsh Government is unlawful under State Aid rules, because it is considered that the conditions defining funding as unlawful State Aid are met in this case. 4.2 Failure to have regard to relevant considerations, or give them sufficient weight, including Welsh Government policy It is considered that the Welsh Government s decision to approve the Prosiect Gwyrdd Final Business Case failed to identify: Serial overestimations of the amount of total household waste and/or residual waste projected by Prosiect Gwyrdd over the lifetime of the scheme. For example, in the first year for which data is now available ( ), we estimate that the Prosiect Gwyrdd Final Business Case has already overestimated residual waste arisings by 3.3%. The consistent overestimation has resulted in projected financial savings far in excess of what will likely arise, and could result in Guaranteed Minimum Payments being instigated to compensate the developer for lower than projected residual waste volumes. This would not be a good use of public money, nor would it likely provide value for money. Inconsistency between Welsh Government waste reduction targets and Prosiect Gwyrdd estimations of the amount of total household waste and/or residual waste. Welsh Government waste reduction targets are for annual 1.2% reductions in household waste until 2050; Prosiect Gwyrdd projects residual waste to increase by between 0.38% and 0.69% every year until Inconsistency between Welsh Government statutory recycling targets and the proposed counting of recycling of incinerator bottom ash towards local authority recycling. In particular, the proposed designation of incinerator bottom ash that passes through a recovery operation as recycling may not

3 be permissible if the ultimate fate of that material is discard. Also, the Final Business Case assumes that incinerator bottom ash will contribute more than 7 percentage points (10%) towards the statutory recycling targets; the Welsh Government assumption is that a 3 percentage point contribution will be made (4%). Inconsistency between Welsh Government waste policy in favour of high efficiency energy from waste facilities (defined as 60% thermal efficiency), and the proposal which has thermal efficiency in the region of 23%. Inconsistency between Prosiect Gwyrdd claims that 100% of the incinerator bottom ash will be recycled within 5 miles of the development, and the technical and practical possibility of achieving this Inconsistency between Welsh Government climate and energy policy in favour of maximising renewable and low-carbon energy generation in Wales, and the proposal which is likely to have a high carbon intensity. UK energy policy wishes the carbon intensity of electricity generation to be in the region of gco2/kwh by In 2008, the carbon intensity of electricity generated by energy from waste plant was 540 gco2/kwh. A larger subsidy has been approved by the Welsh Government for Prosiect Gwyrdd than would be applicable were the waste projections accurate. The possible instigation of Guaranteed Minimum Payments to compensate the developer for lower than projected residual waste volumes. Approval has been given to a project whose projections run directly counter to Welsh Government waste reduction targets. Local authorities may face increased costs as a result of their failing to have budgeted for incinerator bottom ash not being counted towards recycling targets. Residual waste management grant has been awarded to a proposal that does not meet Welsh Government energy efficiency standards. Other electricity generation operators, or sectors other than electricity generation, will be required to make even more severe emissions reduction than would be the case were incineration not the chosen method of residual waste management. The calculations on value for money are flawed. It will be significantly (at least 10%) more difficult for the Prosiect Gwyrdd authorities to meet their statutory recycling targets. In addition, the current Welsh Government consultation on guidance in support of local authority recovery targets undermines the effectiveness of the Waste Framework Directive by: Enabling the classification of incinerator bottom ash that has gone through a reprocessing recovery operation to count towards local authority recycling targets even though there may not be a use for that material and its classification must therefore remain as waste. In addition, the decision to award funding was irrational based on the following grounds (detailed above): Welsh Government policy on residual waste reduction and Prosiect Gwyrdd projections showing a permanent increase in residual waste. Welsh Government policy to permit incinerator bottom ash to count towards recycling targets if it is used as a secondary aggregate in compliance with an agreed quality protocol by the environmental regulator in view of the fact that no such quality protocol exists. This fatally compromises the

4 Prosiect Gwyrdd Final Business Case assumption that 7 percentage points (10%) of the statutory recycling target may be comprised of incinerator bottom ash. Welsh Government policy on efficiency of energy from waste plants and the proposed development which does not meet the criteria. Welsh Government agreement that 100% of incinerator bottom ash will be recycled within 5 miles of the proposed development when this is practically and technically impossible. In addition, the Welsh Government s decision claimed to have confirmed that the Final Business Case is consistent with Welsh Government Waste Policy, meets all Welsh Government funding criteria and represents Value for Money. It will be clear from the foregoing that the Welsh Government s announcement is not considered acceptable. 4.3 Failure to adequately consider environmental and health concerns Although Prosiect Gwyrdd undertook an Inquiry into the Health and Environmental Concerns associated with Energy from Waste Plants, we believe that the Welsh Government failed to ensure that these impacts were adequately evaluated or that they were fully taken into account when deciding to award the contract. In relation to Persistent Organic Pollutants, the Welsh Government has failed to ensure that priority consideration was given to alternative technologies that do not produce persistent organic pollutants either at all or in such quantities as is likely to be associated with this development. The Inquiry did not consider, or did not consider adequately, the following serious and significant environmental and health concerns: Particulate emissions, which can shorten people s lives. Nitrogen dioxide emissions, which can cause respiratory problems leading to emergency hospitalisation. Persistent Organic Pollutants, including dioxins, furans and PCBs, the reduction and elimination of which the Stockholm Convention requires the Welsh Government to give priority consideration. Greenhouse gas emissions associated with the incineration of waste Other aerial emissions (including acid gases, halogens, volatile organic compounds, carbon monoxide and metals) Fly ash The sustainability of incineration A decision by elected Members to proceed with incineration was made in the absence of full, relevant information. The procurement decision has chosen a technology which should have been excluded from the procurement process by virtue of health and environmental concerns. 4.4 Failure to procure a recovery facility Annex II of the Waste Framework Directive provides a definition of recovery and disposal facilities. Throughout Prosiect Gwyrdd, the procured facility has been described as a waste recovery facility. It is considered that under the definition provided by the Waste Framework Directive and under the calculation made by the Welsh Government in the Collection, Infrastructure and Marketing Plan, the procured facility

5 must be described as a disposal facility. Welsh Government policy is that funding will only be made available to a recovery facility. The Welsh Government has failed to correctly assess the procured facility as a disposal facility. A disposal facility has been procured contrary to Welsh Government policy. The procurement has been based on an unlawful premise that the facility is a recovery facility. Welsh Government waste policy is that energy from waste should be undertaken at a high level of efficiency meaning that a use needs to be found for the waste heat. No use is proposed for the waste heat from this facility. A facility has been procured that contravenes Welsh Government waste policy. 5. Action that the defendant is expected to take The alternative remedy to judicial review is that the following steps are taken: a) To revoke the Minister s decision of 2 August 2013 to approve funding for Prosiect Gwyrdd. b) To commit to a full re-assessment of the Final Business Case. 6. Interested parties A copy of this letter has been sent to Prosiect Gwyrdd. 7. Details of any information and documentation that you should provide with your response You are asked to provide the following information within seven days in accordance with the judicial review pre-action protocol. You are reminded that in responding to this letter you must comply with your duty of candour. This duty requires due diligence in: (a) investigating what material is relevant to this claim; and, (b) disclosing that material where it is relevant or assists the Claimant, including on some as yet unpleaded ground. A failure to comply with the duty of candour when providing your response to this letter may result in costs sanctions. The duty of candour is reinforced by paragraphs 6 and 16(d) of the Judicial Review Pre-Action Protocol which provide that you must enclose any relevant documentation requested by the Claimant with your response and that where you ignore this requirement the court may impose sanctions, for example costs sanctions. Accordingly, in your response, you are asked to confirm that you have investigated what material is relevant to this claim and to disclose that material in or with your response. In addition, we would ask you to ensure that copies of the following documents are provided with your response in compliance with your pre-action disclosure duties:

6 All documentation relating to analyses conducted by the Welsh Government alone or conjointly with Prosiect Gwyrdd to interrogate the waste projections shown in the Final Business Case. This is to determine whether or not the Welsh Government has fully considered the disparity between Prosiect Gwyrdd waste projections and current and historical arisings, and will help determine value for money. All documentation relating to interrogating the variance between Welsh Government policy on waste reduction and the waste projections in the Final Business Case. Please include any document(s) showing that the Final Business Case projections are consistent with Welsh Government waste policy. This is to determine whether or not the Welsh Government has fully considered the contradiction between projected Prosiect Gwyrdd waste arisings and Welsh Government waste projections. All documentation relating to the assessment undertaken by the Welsh Government of the reliability and scope of the Inquiry into the Health and Environmental Concerns undertaken by Prosiect Gwyrdd. This is to determine whether or not the Welsh Government has fully discharged its environmental and health protection duties. All documentation relating to the decision that the procured facility complies with the R1 definition of a recovery facility and with the Welsh Government definition as stated in the Collection, Infrastructure and Marketing Plan. Please include all Prosiect Gwyrdd calculations, including documentation from third parties such as consultants. This is to help determine if the development is a disposal or recovery facility. Whether or not the Welsh Government calculation of a 32-36% conversion efficiency in order to meet the R1 designation includes parasitic load (that energy used for the operation of the facility). This is to help determine whether or not the development meets criteria for Welsh Government funding and/or R1 designation. All documentation that leads to your conclusion that this procurement represents value for money. Please include any assessment made of the efficiency of the proposed facility as compared to other energy from waste facilities. Please also include your assessment of value for money as compared to other types of residual waste treatment, and for contractual periods less than 25 years. This is to verify the Welsh Government s statement that the development represents value for money. All documentation relating to analyses conducted by the Welsh Government testing the veracity of the statement that 100% of the incinerator bottom ash is capable of being recycled within 5 miles of the incinerator, alongside any evidence of contamination of incinerator bottom ash such that it may not be used as replacement for a primary raw material. This is to determine whether or not the Welsh Government has fully considered the disparity between Prosiect Gwyrdd projections/assumptions of recycling of bottom ash and the reality. All assumptions made by the Welsh Government relating to use of incinerator bottom ash as replacement for a primary raw material both in absolute terms and as a proportion of total incinerator bottom ash generated. Data/assumptions on average storage times for incinerator bottom ash before a) use as replacement for a primary raw material b) disposal, and the ultimate fate of incinerator bottom ash as either disposal or replacement for a primary raw material. This is to determine whether or not the Welsh Government gave due consideration to the implications for Prosiect Gwyrdd s business plan and value for money, should 100% of bottom ash not be available for recycling. The end-of-waste protocol put in place by the environmental regulator for incinerator bottom ash, or the anticipated date of publication if the protocol is not yet published. This is to help determine whether or not the recycling of bottom ash is lawful.

7 The percentage of the statutory recycling targets that the Welsh Government proposes to allow to be comprised of incinerator bottom ash. This is to help determine the consequences for the value for money and viability of Prosiect Gwyrdd should 100% of bottom ash not be available for recycling. The protocol put in place by Natural Resources Wales for the testing of hazardous properties of incinerator bottom ash. This is to ensure that the Welsh Government is confident in the ability of the environmental regulator to monitor the toxicity of incinerator bottom ash, and to verify therefore that incinerator bottom ash is lawfully permissible of being recycled. Welsh Government estimation of the actual residual waste arisings for the Prosiect Gwyrdd authorities in , alongside the projection of waste arisings in and the difference between the two figures. This is to help analyse whether or not Prosiect Gwyrdd has overestimated residual waste arisings, and to determine whether or not the Welsh Government has failed to discharge its duty to ensure value for money and consistency with waste policy. Welsh Government funding criteria met by Prosiect Gwyrdd. This is to examine the scope of funding criteria assessed by the Welsh Government. An assessment of the carbon-intensity of electricity production of the facility (gco2/kwh). This is to determine whether or not the energy generation can be classed as low carbon. 8. Alternative Dispute Resolution (ADR) We do not consider that this matter is suitable for an alternative form of resolution. If you disagree please let us have your reasons and your proposals. 9. The address for reply and service of court documents Please use the following address: Gareth Clubb Friends of the Earth Cymru 33 Castle Arcade Balcony Caerdydd CF10 1BY Please also send copies of all correspondence to: Gita Parihar Friends of the Earth England, Wales and Northern Ireland Underwood Street London N1 7JQ 10. Proposed reply date We propose that the Minister responds within seven days of receipt of this letter. As the partner local authorities are poised to sign a contract with the proposed developer it is imperative that the unlawful funding is halted as soon as possible and that no further steps are taken until the Minister is able to revoke his decision and re-assess the evidence before him. In these circumstances and for this reason it is considered that seven days is a reasonable time within which to respond.