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Scottish Power Generation Ltd, Re Application for Judicial Review [2004] ScotCS 272 (22 December 2004)

OUTER HOUSE, COURT OF SESSION

P1876/03

OPINION OF LORD REED

in petition of

SCOTTISH POWER GENERATION LIMITED

Petitioner;

for

Judicial Review of a decision by

SCOTTISH ENVIRONMENT PROTECTION AGENCY

First Respondent:

________________

Petitioner: Martin QC, Mure; Biggart Baillie

First Respondent: Hodge QC, Howlin; Tods Murray, WS

Second Respondent (Scottish Water): A W D McLean; Dundas & Wilson, CS

22 December 2004

INTRODUCTION
[1] The facts of this case, and the relevant legal provisions, are relatively complex. The central issue can however be described briefly. The petitioner, Scottish Power Generation Ltd ("Scottish Power"), operates Longannet Power Station ("Longannet"). In order to produce electricity, Longannet burns primarily coal, but also what has been described in these proceedings as waste-derived fuel ("WDF"). The WDF burned at Longannet is produced from the sewage emanating from the public sewerage network of the Greater Glasgow area, which is operated by the second respondent, Scottish Water. Longannet is subject to the emission controls applicable to a combustion process, under domestic legislation designed to protect the environment. Different controls apply under that legislation to certain waste incineration plants. Recent European legislation, implemented in domestic law, establishes a more stringent regime for waste incineration plants and "co-incineration plants", the latter expression being defined as meaning:

"any stationary or mobile plant whose main purpose is the generation of energy or production of material products and

- which uses waste as a regular or additional fuel; or

- in which waste is thermally treated for the purpose of disposal".

The first respondent, the Scottish Environment Protection Agency (SEPA), considers that the more stringent regime is applicable to Longannet, on the basis that the power station is a co-incineration plant. The issue between Scottish Power and SEPA is therefore whether Longannet is a co-incineration plant. That issue turns on whether the WDF is "waste", within the meaning of the relevant legislation. Scottish Water has also taken part in these proceedings, and has supported the position of Scottish Power.

[2] The description of the material in question as "waste-derived fuel" might be considered to carry an implication that the material is not itself waste, but a product derived from waste. All parties to these proceedings were nevertheless content to use that description as a convenient expression, without its being intended to carry any such implication. I shall use the same description, without any such implication being intended.

THE FACTS
[3] There is no material dispute as to the relevant facts. All parties were content to refer to the same documents as establishing the material facts and enabling any necessary inferences to be drawn. A few additional matters were clarified by counsel in submissions, and were not disputed. Some samples of the WDF were also produced. It was not suggested that there was any need for further evidence to be given by affidavit or orally.

[4] Scottish Water and its predecessors (hereafter referred to as Scottish Water) have for many years operated a waste water treatment works at Daldowie, in the south-east of Glasgow. Raw sewage is received there from the public sewerage network. It is treated by passing through a sequence of settlement tanks, designed to achieve the settling out from the raw sewage of solid material. Biological treatment is also involved. The purpose of the treatment is to render the treated water, from which the solids have been settled out, sufficiently pure to be discharged into natural watercourses. The remaining sewage sludge comprises approximately 97 per cent water and 3 per cent dry content.

[5] At one time, the sewage sludge produced within the Greater Glasgow area was disposed of at sea. In accordance with the requirements of Directive 91/271/EEC concerning urban waste water treatment, as implemented by the Urban Waste Water Treatment (Scotland) Regulations 1994 (SI 1994 No 2842), this practice had to cease by the end of 1998. Scottish Water sought to establish alternative means of disposal under the Government's Private Finance Initiative ("PFI"). Tenderers for a PFI contract were encouraged to find innovative solutions. To this end, SMW Ltd ("SMW"), a wholly-owned subsidiary of Scottish Power, undertook a study considering the options available for sludge utilisation and disposal. As a result of that study, SMW submitted a proposal to Scottish Water involving the re-use of dried sewage sludge pellets as a co-fuel with coal for combustion within a power station. The proposal involved the development of a sludge treatment centre at Daldowie, adjacent to (but separate from) the waste water treatment works there, which would accept sewage sludge from the waste water treatment works and dry it to form pellets which would then be transported and fed into the fuel system of a power station. It was further proposed that a pumping station and connecting pipeline would be constructed to link the sludge treatment centre with Scottish Water's waste water treatment centre at Shieldhall, on the west side of Glasgow. Sewage sludge would be pumped from Shieldhall via the pipeline to the sludge treatment centre at Daldowie. The entire sewage sludge produced by Greater Glasgow, which until then had been dumped at sea, would thus be dried and used as a fuel.

[6] This proposal combined the expertise available to the Scottish Power group of companies in the water industry with its expertise and facilities in the power generation industry, as was explained in a letter dated 18 May 2004 written by SMW to its solicitors in connection with the present proceedings:

"Scottish Power, an energy company entered the water industry (purchasing Southern Water) with a stated aim of maximising the synergy benefits of being a multi-utility company ... Envisaging the medium term business plans of the group, researches into recovery of fuel from sewage sludge were made with the theme of extracting the maximum benefits of being a multi-utility, ie where a power and water expertise combined deliver novel added benefits. Hence Scottish Powers PFI efforts were based upon this synergy that it can differentiate itself from other wastewater PFI bidders by having this added benefit, it can recover fuel from wastewater for use at Longannet."

[7] In August 1998 SMW applied to SEPA, under section 6 of the Environmental Protection Act 1990, for authorisation to operate "the process ... associated with the proposed sewage sludge dewatering, drying and pelletising plant at the Daldowie Sludge Treatment Centre". The application contained a detailed description of the proposal, and an explanation of the thinking underlying it. Under the heading "Sludge Disposal Options Considered", it explained that sewage sludge could be disposed of by a variety of routes and in a variety of forms, of differing levels of dryness. The options considered had included the disposal of raw sewage sludge by incineration (with or without energy recovery) and by a variety of other means; the disposal of sewage "cake" (i.e. sludge which has been partially dried, in centrifuges) by agricultural use, landfill or energy recovery (by co-firing sewage cake and coal in a power station); and the disposal of pellets (ie cake which had been further dried, by heating, and pelletised) by similar means. A key factor in the assessment was the final volume of material to be handled. Dried sewage sludge pellets offered the most attractive option for disposal, given the reduction in volume once water was removed, and the consequent reduction in transportation requirements. There was also a wider range of re-uses available for dried sewage sludge than for wetter products. This was important because of the need to ensure that there was a means of disposing of the sewage sludge throughout the duration of the PFI contract, which was anticipated to be 25 years. A variety of disposal routes had been considered. The three main options were regarded as agricultural use, landfill or energy recovery. A single route of disposal was not thought to form a secure strategy. The preferred option was to have a "core disposal pathway" which would leave other disposal options available. Complete disposal to agriculture was not regarded as feasible, given the limited land base in the region and the seasonal nature of demand. Landfill was not an adequate solution, as it was impossible to determine that there was sufficient landfill space available: it was preferred as a secondary or emergency option for disposal when all other beneficial uses had been exploited. Energy recovery was therefore considered the most appropriate route.

[8] Three systems for energy recovery were considered: direct drying of raw sewage sludge, followed by co-firing in a coal-fired power station; treatment of raw sewage sludge by anaerobic digestion, then drying of the treated sewage sludge, followed by co-firing in a coal-fired power station; and direct drying of raw sewage sludge, followed by gasification (ie the production of methane from the dried sludge), and on-site power generation. Direct drying of raw sludge was mechanically the simplest option for producing WDF. Little plant modification would be required at Longannet. Given the scale of Longannet, there would not be a significant alteration in existing emissions. The calorific value of the dried sewage sludge would be in the same region as some of the lower-grade coals used at Longannet. The increase in the amount of ash produced by Longannet would be minimal. The second option (digestion, drying and co-firing) had the advantage that the process of digestion produced gas which could then be burned to produce the heat required for the drying process (whereas direct drying required the use of natural gas). On the other hand, the calorific value of the digested pellets would fall below 12-14 MJ/kg, which was the threshold for viable use within the power station, "if the system is to be regarded as beneficial with regard to energy production, rather than just providing a disposal route". There was therefore an operating cost (when compared with the first option) associated with the disposal of digested dried sludge through the power station. The third option resulted in the production of a relatively large amount of ash, with a landfill cost. There was also an operational risk, as the technology was untried. The second and third options also involved higher capital costs than the first option. The first option was therefore preferred. The application stated:

"As the intention of the scheme was to select a disposal route for the sludge produced in Glasgow the first option deals with this the prime issue at the lowest capital and operating cost. In addition the operational risk is lower for option 1."

The proposed process would involve the thickening of incoming sludges, dewatering of the sludge in centrifuges, further drying of the sludge by heat, and storage of the pellets in silos prior to loading into sealed tankers. The proposed plant was designed to treat up to 65,000 tonnes of sewage sludge per annum (the quantity then produced by Scottish Water at Daldowie and Shieldhall being 63,000 tonnes per annum). The WDF would be delivered to Longannet in the tankers, and discharged pneumatically into a storage tank. The WDF would never be open to the atmosphere, and there would be no danger of any moisture getting to it.

[9] SMW's application explained that, as a result of analysing samples of sewage sludge, Scottish Power had produced an indicative specification which the pellets must meet in order to be acceptable as a WDF for co-firing. The criteria included a minimum calorific value of 12 MJ/kg, a maximum moisture content of 12 per cent and a maximum ash content of 36 per cent. The application stated that the resulting product had a calorific value similar to that of a low-grade coal, "emphasising its role as a viable product to be re-used within the Power Station rather than as a waste requiring disposal". In addition to the rejection criteria listed above, Scottish Power had also proposed "trend parameters" relating to the chemical composition of the WDF. These included maximum concentrations of heavy metals. It was proposed that samples of WDF would be routinely analysed at the sludge treatment centre and certified as being within the specified rejection criteria, and would also be analysed there at intervals to indicate compliance with the trend parameters.

[10] The application acknowledged that the key potential contaminants in sewage sludge were heavy metals, deriving principally from manufacturing industry effluents. It was not practical to remove heavy metal contamination from sewage sludge. If an unauthorised discharge or pollution event was known to have led to the reception of contaminated material within an outlying works, then Scottish Water in consultation with SMW could determine whether the contaminated material would be brought into the sludge treatment centre. Known contaminated sludges brought there would be isolated, and could then be dealt with appropriately depending on the circumstances. The contaminated sludge might, for example, be processed as a single entity, then removed and disposed of; or it might be "drip fed" into the system, so as to dilute the levels of contamination.

[11] In its concluding section, the application stated:

"The utilisation of waste products for the generation of electricity is not a new concept.

In this proposed development, Scottish Power intends to utilise the resulting dried granules at its existing generating plant at Longannet. Scottish Power has already carried out successful trials ... proving that this is an economically viable disposal route in Scotland."

[12] Scottish Power also applied to SEPA in August 1998, under section 11(4)(b) of the 1990 Act, for a variation of the existing authorisation of Longannet. That authorisation had originally been issued on 30 April 1993, and had been varied from time to time. It authorised what it described as "a combustion process" falling within Section 1.3 Part A of Schedule 1 to the Environmental Protection (Prescribed Processes and Substances) Regulations 1991 (SI 1991 No 472), as amended. The conditions attached to the authorisation specified emission limits. The application submitted in August 1998 explained that it related to a proposal to co-fire coal and WDF within boiler units 1 and 2 at Longannet. It was proposed that a new storage tank would accommodate the WDF. The WDF would be discharged from air-tight tankers into the storage tank by means of a blower unit. A relief unit would be attached to the storage tank for safe venting to the atmosphere in the event of a pressure build-up within the storage tank, to guard against the risk of explosion. The dust from the WDF could be described as exhibiting slightly explosive qualities which might result in a weak explosion. It was comparable in this respect with coal dust. Additional infrastructure, including a sealed system to transport the WDF to the existing coal mills, would also be developed. Coal and WDF would be ground together in the coal mills to produce a composite fuel. Each of the two boiler units in question (there being four boiler units altogether at Longannet) would be designed to utilise between 5 per cent and 15 per cent WDF by mass. The application stated that the system had been designed so as to be capable of operating at a maximum fuel input of 85 per cent coal and 15 per cent WDF in each of the two co-firing units "to provide the Station with the operational flexibility required to dispose of 100,000 [tonnes] of WDF per annum", thereby allowing "operational flexibility and security of outlet for the fuel". Under normal operating conditions, however, one boiler unit only would co-fire 90 per cent coal and 10 per cent WDF.

[13] The application explained that a specification had been developed for the WDF to ensure that the WDF did not compromise the station's emission limits or the efficiency of the combustion process. The procedures for checking compliance with the rejection criteria and "trend parameters" were explained. In relation to the trend parameters, the application stated:

"Although the trend parameters do not form part of the rejection criteria, they will be routinely monitored in representative batches of WDF and the results documented, to ensure that qualitative trends are identified within the delivered WDF to identify possible breaches of the specification."

The application explained that emissions to the atmosphere of oxides of nitrogen, sulphur dioxide, particulate matter and certain heavy metals were expected to increase as a result of co-firing, but would remain within the station's authorised emission limits. In particular, the predicted emissions of metals in the flue gases from a single co-firing boiler (calculated on the basis that the composite fuel would normally comprise 90 per cent coal and 10 per cent WDF, and at most would compose 85 per cent coal and 15 per cent WDF), compared with emissions from a boiler firing 100 per cent coal, were as follows (in mg/Nm³):

Coal

Co-firing

10% WDF

Co-firing

15% WDF

Zinc

25

61

80

Copper

7

18

23

Nickel

3

4

5

Chromium

1

2

3

Cadmium

1

2

2

Lead

7

21

29

Arsenic

1

1

1

Selenium

9

11

13

Boron

558

543

535

Mercury

24

31

35

There were predicted to be similar changes in the concentrations of heavy metals in the ash produced by the co-firing boiler. It is to be noted that the effect of introducing 10 per cent WDF, in place of coal, was predicted to be an increase in the emissions of zinc, copper, chromium, cadmium and lead, from the co-firing boiler, of between 100 and 200 per cent. There were predicted to be smaller increases in the emissions of nickel, selenium and mercury, no material change in emissions of arsenic, and a slight decrease in emissions of boron. All of the predicted changes became proportionately smaller when the gases or ash produced by the station as a whole were considered, since it was envisaged that only one of the station's four boilers would be used for co-firing at any one time. The application noted that sewage sludge from the treatment of municipal waste waters had been excluded from the scope of Directive 94/67/EC on the incineration of hazardous waste, on the basis that it was not hazardous.

[14] On 11 December 1998 SEPA issued to Scottish Power a notice of variation of the authorisation relating to Longannet, under section 11(8)(b) of the 1990 Act. The notice varied the authorisation, with effect from 15 December 1998, by amending the description of the authorised process and the conditions of the authorisation. In particular, the description was amended so as to state:

"1.1 The Scottish Power combustion process at Longannet Power Station, Kincardine on Forth is used to supply steam for the generation of electricity. It comprises 4 coal fired boilers producing steam ... Two boilers are provided with facilities to co-burn waste derived fuel (WDF) made from dried sewage sludge with coal at a maximum rate of 15 per cent WDF by weight."

The description of the authorised process also set out the arrangements for the delivery and storage of the WDF, as described in Scottish Power's application, and referred to that application as containing a more detailed description of the process. Ten new conditions were inserted in the authorisation, relating to the burning of WDF. They included conditions requiring the periodic analysis of samples of WDF for heavy metals, and the periodic measurement of concentrations of heavy metals in the flue gases and fly ash from the boilers into which WDF was fed, both with and without the feeding of WDF. There were also conditions limiting the amount of WDF burned annually to a maximum of 100,000 tonnes, and limiting the proportion of WDF in the fuel fed into any boiler at any time to a maximum of 15 per cent. The emission limits specified in the authorisation were not altered.

[15] On 21 January 1999 SEPA issued to SMW an authorisation in respect of the sludge treatment centre, under section 6 of the 1990 Act. The authorisation took effect on 31 January 1999. In describing the authorised process, it stated:

"The process operated by SMW Limited at their Daldowie Sludge Drying Centre consists of the drying of undigested, or raw, sewage sludge for use as a solid fuel. This process is described in Section 5.3 of the 1991 Regulations as being the manufacture of a solid fuel from waste by a process involving the use of heat."

The description of the authorised process also set out the arrangements for the storage and export of the WDF, as described in SMW's application, and referred to that application as containing a more detailed description of the process.

[16] On 6 December 1999 SMW entered into a contract with Scottish Water to design, build, finance, operate and maintain a sludge treatment centre at Daldowie, to design and build a purifying station at Shieldhall and a sewer between Shieldhall and Dalmarnock, and to provide sludge treatment services to Scottish Water, over a term of 24 years. Extracts from the contract, and from related contracts (including that between SMW and Scottish Power, discussed below) were produced in the present proceedings. It appears that, under the contract, SMW is paid fees by Scottish Water for the receipt of the sewage sludge at the sludge treatment centre, and for the treatment processes provided there. The contract includes a provision (Schedule 4, Part D, paragraph 1.3) in terms of which SMW is required to:

"deliver not less than 99 per cent of the Thermally Dried Sludge to Scottish Power plc in accordance with and subject to the Scottish Power Offtake Agreement for co-burning with coal in Units 1 & 2 at Longannet power station".

A further provision (Schedule 4, Part D, paragraph 2) stipulates:

"Except as otherwise provided in the Agreement the Thermally Dried Sludge shall be treated so that it is suitable without further treatment for use in Longannet Power Station in accordance with and subject to the Scottish Power Offtake Agreement".

The contract also defines (in Schedule 1) the expression "Sludge Specification Limits" as meaning the limits specified in certain tables "as relaxed from time to time by Scottish Power UK plc under the Scottish Power Offtake Agreement". The tables referred to contain, amongst other matters, annual rolling limits in respect of the concentration of heavy metals.

[17] By a letter of offer dated 25 November 1999 and an acceptance dated 20 December 1999, Scottish Power entered into a contract with SMW to purchase all treated sewage sludge granules or pellets produced at the sludge treatment centre in accordance with SMW's contract with Scottish Water, up to a maximum of 70,000 tonnes per annum, for co-burning at Longannet. The contract includes a specification which the sludge granules have to meet, setting limits for the concentration of heavy metals (and other substances) identical to the sludge specification limits stated in SMW's contract with Scottish Water. Scottish Power purchases the WDF at a delivered price of £5.50 per tonne, subject to adjustment according to a number of factors, including the calorific value of the delivered fuel, and the current market value of coal.

[18] The sludge treatment centre was constructed, at a cost of around £65m, and began operation in 2002. Each year it converts around 2.3 million cubic metres of sewage sludge into 55,000 tonnes of WDF, which is then co-fired with coal at Longannet. At the start of the process, the sludge is a malodorous and biologically active liquid with only 3 per cent solid content. It does not undergo digestion processes, which are generally used where sludge is to be disposed of to agriculture or landfill, since digestion would reduce the calorific value. It is screened, to remove debris. A polyelectrolyte solution is added, to assist in the separation of solid and liquid in subsequent processes. The sludge is homogenised in buffer tanks, then pumped to centrifuges. The centrifuges extract much of the liquid, to produce a stream of waste water and a sludge cake of 30 per cent dry content. Most sludge treatment processes in the United Kingdom stop at this stage. At the next stage, the sludge cake is mixed with granules of recycled WDF and then dropped into a drying drum, where the mixture is dried by a hot air stream at a temperature of 450 degrees Celsius. The drum's moving surface prevents the substance from sticking, while a rolling action encourages the formation of granules. The material is retained at this temperature for up to 20 minutes in order to kill germs. As the temperature is above the flash point of the WDF, oxygen levels in the system are reduced to low levels (since the WDF requires oxygen to burn). The oxygen level is monitored. A temperature sensor monitors the temperature of the air and fuel mixture leaving the drum, and computers regulate the burners which heat the air in the drum, so as to maintain the heat input and the dryness of the product at the required level. The dried granules are carried on an airstream to a filter, where they are separated from the drying air and cooled. WDF samples from each of the six dryers are tested after each shift to check for dryness. Composite samples from the day's production are also tested for size and dust content. Each week, composite samples are also tested at off-site laboratories for compliance with the "trend parameters". At the end of the production cycle, the WDF is graded according to the size of the granules. Any material which has been treated inadequately or is the wrong size is returned to the system for reprocessing. Material which fails to meet Longannet's specification in terms of pathogen content, calorific value, granule size or dryness is discarded. WDF which is satisfactory is further cooled and passed via a stream of air to storage silos.

[19] Samples of WDF from the sludge treatment centre were produced in the present proceedings. Two samples were in accordance with Scottish Power's specification. The material consisted of small pellets, which were dark brown in colour, and had a slight but distinct odour. A third sample, which was not in accordance with the specification, consisted of much larger pieces, which were more obviously dried sewage, and had a stronger odour.

[20] The necessary plant and equipment were also installed at Longannet, at a cost of around £6m, and co-firing began. The WDF is transported to Longannet in road tankers suitable for the carriage of volatile products: like other fuels, the WDF requires particular handling and storage conditions to prevent explosion or spontaneous combustion. The WDF is unloaded by pneumatic conveying to storage silos. From the silos, the WDF is conveyed to feeding equipment which is dedicated to feeding Unit 1 or Unit 2 (the two boilers which have been converted to co-fire WDF). It is then mixed with coal. The mixture is then ground in mills to a fine powder, before the mixed fuel is blown into the boiler to generate electricity. The relative proportions of coal and WDF in the mixture are regulated so as to achieve the optimum mixture having regard to the requirements of the station and the output of electricity required from time to time. In practice, Scottish Power normally uses around 10 per cent by weight of WDF in the mixture. As already explained, it is limited to a maximum of 15 per cent by its authorisation. The WDF has an average gross calorific value of 16-17 MJ/kg. The ash produced by burning the mixture of WDF and coal is handled in the same way as ash produced from the combustion of coal alone. Scottish Power has installed odour masking equipment next to the area where the WDF and coal are milled.

[21] An example was produced by Scottish Power in the present proceedings of an analysis of a sample of WDF produced at the sludge treatment centre. The concentrations of certain metals, in parts per million, were as follows:

Zinc

284

Copper

91.4

Lead

84.4

Selenium

1.6

Mercury

0.65

In Scottish Power's application to SEPA the corresponding average figures, for coal fired at Longannet, were as follows:

Zinc

14

Copper

7

Lead

6

Selenium

less than 1

Mercury

less than 1

The typical range of concentrations of the first three of these metals within coals were said to be as follows:

Zinc

5-300

Copper

0.5-50

Lead

2-80

It appears from these figures that the concentrations of zinc, copper and lead found in the sample of WDF were far higher than the average levels found in coals previously fired at Longannet. The figure for zinc was close to the maximum concentration found in typical coals, and the figures for copper and lead were above the maximum concentrations. The corresponding figures for the composite fuel used at Longannet were nevertheless predicted to be below the maximum concentrations (although well above the average levels in coal used there), because the WDF would typically form only 10 per cent of the composite fuel.

[22] In 2000 SMW applied to SEPA for a permit in respect of the sludge treatment centre under the Pollution Prevention and Control Act 1999 and regulation 7 of the Pollution Prevention and Control (Scotland) Regulations 2000 (SSI 2000 No 323), as the 1999 Act and the 2000 Regulations were to become applicable to the sludge treatment centre in place of the 1990 Act and the 1991 Regulations. On 15 January 2003 SEPA issued such a permit to SMW. Paragraph 1.2 of the permit described the permitted activity carried out at the sludge treatment centre as:

"the manufacture of dried sewage sludge granules for use as a fuel which is described in Part A of Section 5.5 of Schedule 1 of the Regulations as making solid fuel from waste by any process involving the use of heat other than making charcoal."

The application and permit were, so far as material, in generally similar terms to the previous application and authorisation under the 1990 Act.

[23] Further notices of variation of the Longannet authorisation were issued by SEPA to Scottish Power from time to time. A variation notice dated 1 February 2001, issued under section 10(2) of the 1990 Act, amended schedule 1 (the description of the authorised process) and replaced all the conditions. In schedule 1, the amended paragraph 1.1 stated that the process was a prescribed process "as it fits the description in section 1.3, paragraph (a), of the 1991 Regulations" As before, the description of the authorised process included a description of the arrangements for delivery and storage of the WDF. The conditions included eleven conditions relating to the burning of WDF. As before, the conditions required the periodic analysis of the WDF for heavy metals, and the periodic measurement of heavy metals in the flue gases and fly ash from the boilers into which WDF was fed, both with and without the feeding of WDF. The conditions also limited, as before, the annual tonnage of WDF burned, and the proportion of WDF burned by any boiler at any time. A further variation notice, dated 9 April 2002, added further conditions relating to the burning of WDF, including a requirement that olfactory assessments be made around the boundary of the coal plant whenever there was WDF present on the bing.

[24] By letter dated 10 October 2002 SEPA wrote to Scottish Power to inform it of a decision which SEPA had taken regarding Directive 2000/76/EC on the incineration of waste and its application to Longannet. The letter stated that SEPA was of the opinion that the directive applied to the use of dried sewage sludge as a fuel at Longannet. The sewage sludge had been discarded by Scottish Water and was therefore waste, within the meaning of Directive 75/442/EEC on waste. The combustion of the dried sewage sludge at Longannet constituted the recovery operation R 1 ("use principally as a fuel or other means of generating energy"), as defined in Directive 75/442. The material was therefore waste up to the point when it was used as fuel. A complete recovery operation did not take place at the sludge treatment centre, and the sewage sludge therefore did not cease to be waste there. Since it did not cease to be waste until it was combusted, Directive 2000/76 applied. SEPA therefore intended to vary the Longannet authorisation so as to require Scottish Power to implement Directive 2000/76 with effect from 28 December 2005.

[25] This intention was reiterated by SEPA in a letter dated 30 July 2003. It stated that, since the incineration of dried sewage sludge at Longannet involved the incineration of waste at an existing waste incineration installation, the Waste Incineration (Scotland) Regulations 2003 (SSI 2003 No 170) and the Waste Incineration Directive (Scotland) Direction 2003 applied. SEPA was therefore bound to include a condition in the Longannet authorisation requiring Scottish Power to make an application for variation of the authorisation, under regulation 3 of the 2003 Regulations, by 31 March 2005.

[26] On 19 November 2003 SEPA issued to Scottish Power a notice of variation of the Longannet authorisation, under section 10(2) of the 1990 Act, with effect from 24 November 2003. SEPA's covering letter stated that the notice of variation had been issued in implementation of paragraph 3 of the 2003 Direction. The variation added the following new condition to the authorisation:

"10.7 By 31 March 2005, the Authorisation Holder shall make an application under Regulation 3(2) of the Waste Incineration (Scotland) Regulations 2003."

This variation notice is challenged in the present proceedings.

[27] I was informed, and it was not disputed, that Longannet is the only power station in the United Kingdom which burns sewage sludge in any form. Incineration, with energy recovery, is however a recognised method of disposing of sewage sludge. I was informed that there is a cement kiln in England which burns sewage sludge in a broadly similar form, and that there are a number of incinerators in England where sewage sludge, dried to a lesser degree, is burned, and where the energy released is used to generate electricity.

THE LEGISLATIVE FRAMEWORK
[28] The legislative framework under which the processes at the sludge treatment centre and Longannet are regulated derives partly from domestic legislation and partly from Community law, and is of some complexity.

1. DOMESTIC LEGISLATION

(1) The Environmental Protection Act 1990
[29] As explained above, Longannet is operated under an authorisation granted by SEPA under the 1990 Act and the 1991 Regulations made under that Act. Section 2(1) of the 1990 Act provides:

"2.-(1) The Secretary of State may, by regulations, prescribe any description of process as a process for the carrying on of which after a prescribed date an authorisation is required under section 6 below."

Section 6 provides:

"6.-(1) No person shall carry on a prescribed process after the date prescribed or determined for that description of process by or under regulations under section 2(1) above ... except under an authorisation granted by the enforcing authority and in accordance with the conditions to which it is subject."

Section 7 provides:

"7.-(1) There shall be included in an authorisation-

...

(b) such conditions as are specified in directions given by the Secretary of State under sub-section (3) below ...

(3) ... the Secretary of State may give directions to the enforcing authorities as to the conditions which are, or are not, to be included in all authorisations, in authorisations of any specified description or in any particular authorisation."

Section 10 provides:

"10.-(1) The enforcing authority may at any time, subject to the requirements of section 7 above ... vary an authorisation and shall do so if it appears to the authority at that time that that section requires conditions to be included which are different from the subsisting conditions.

(2) Where the enforcing authority has decided to vary an authorisation under sub-section (1) above the authority shall notify the holder of the authorisation and serve a variation notice on him.

...

(6) The Secretary of State may, if he thinks fit in relation to authorisations of any description or particular authorisations, direct the enforcing authorities-

(a) to exercise their powers under this section ... in such manner as may be ... specified."

Section 11(1) enables a person carrying on a prescribed process under an authorisation to notify the enforcing authority if he wishes to make a change in the process. Under section 11(2), the enforcing authority must then determine whether the change would involve a substantial change in the manner in which the process is being carried on, and whether it would be likely to vary the conditions of the authorisation as a result of the change, and notify the holder of the authorisation of its determination. Section 11 continues:

"(4) Where the enforcing authority has determined that a proposed change would involve a substantial change that would lead to or require the variation of the conditions of the authorisation, then-

...

(b) the holder of the authorisation shall, if he wishes to proceed with the change, apply in the prescribed form to the enforcing authority for the variation of the conditions of the authorisation.

...

(8) On an application for the variation of the conditions of an authorisation under any provision of this section-

...

(b) if the enforcing authority decides to vary the conditions, it shall serve a variation notice on the holder of the authorisation."

[30] As explained above, Scottish Power was granted an authorisation by SEPA, under section 6 of the 1990 Act, to carry on a combustion process at Longannet, prior to the introduction of co-firing of coal and WDF. In order for co-firing to be introduced, Scottish Power applied for a variation under section 11(4)(b). A variation notice was issued under section 11(8)(b) on 11 December 1998. The authorisation was subsequently further varied, in particular by a variation notice issued under section 10(2) on 1 February 2001. The present proceedings are concerned with the vires of a variation notice issued under section 10(2) on 19 November 2003, purportedly in compliance with a direction issued by the Scottish Ministers under section 10(6). As was also explained above, SMW was granted an authorisation by SEPA, under section 6 of the 1990 Act, to carry on the process of drying undigested sewage sludge for use as a solid fuel, at the sludge treatment centre. That authorisation was subsequently replaced by a permit under the 1999 Act, discussed below.

(2) The Environmental Protection (Prescribed Processes and Substances) Regulations 1991
[31] The 1991 Regulations were made under section 2 of the 1990 Act. Regulation 3 provides:

"3.-(1) Subject to the following provisions of these Regulations, the descriptions of processes set out in Schedule 1 hereto are hereby prescribed pursuant to section 2(1) of the [1990] Act as processes for the carrying on of which after the prescribed date an authorisation is required under section 6.

(2) Schedule 2 has effect for the interpretation of Schedule 1."

[32] In Schedule 1, Chapter 1 is headed "Fuel Production Processes, Combustion Processes (Including Power Generation)". It includes the following:

"Section 1.3 Combustion processes

PART A

(a) Burning any fuel in a combustion appliance with a net rated thermal input of 50 megawatts or more".

Paragraph (c) of Section 1.3 Part A covers the burning in less powerful appliances of "any fuel manufactured from, or comprising, any ... waste", implying that a fuel may comprise waste (within the meaning of the Regulations). Chapter 5 is headed "Waste Disposal and Recycling". It includes the following:

"Section 5.1 Incineration

PART A

...

(c) The destruction by burning of any other waste ... on premises where there is plant designed to incinerate such waste at a rate of one tonne or more per hour.

...

Section 5.3 The production of fuel from waste

PART A

Making solid fuel from waste by any process involving the use of heat other than making charcoal."

[33] Schedule 2 to the 1991 Regulations provides rules for the interpretation of Schedule 1. In particular, rule 4 provides:

"4. Where a process falls within two or more descriptions in Schedule 1, that process shall be regarded as falling only within that description which fits it most aptly ..."

Rule 8 provides:

"8. Where in the course of, or as a process ancillary to, any prescribed process the person carrying on that process uses, treats or disposes of waste at the same location (whether as fuel or otherwise), the use, treatment or disposal of that waste shall ... be regarded as falling within the description of that process, whether the waste was produced by the person carrying on the process or acquired by him for such use, treatment or disposal."

[34] As explained above, the authorisation in force in relation to Longannet describes the process there as fitting the description in paragraph (a) of Section 1.3. The authorisation originally granted in relation to the sludge treatment centre (and subsequently superseded by a permit under the 1999 Act) described the process as one described in Section 5.3.

(3) The Pollution Prevention and Control Act 1999
[35] Sections 1 and 2 of the 1999 Act enable the Secretary of State (or the Scottish Ministers) to make regulations for a variety of purposes connected with environmental pollution. These include, in terms of paragraph 4 of Schedule 1 to the Act:

"Prohibiting persons from operating any installation or plant of any specified description, or otherwise carrying on any activities of any specified description, except

(a) under a permit in force under the regulations, and

(b) in accordance with any conditions to which the permit is subject."

(4) The Pollution Prevention and Control (Scotland) Regulations 2000
[36] The 2000 Regulations were made by the Scottish Ministers under the 1999 Act. They apply to "installations" and mobile plant, the expression "installation" being defined by regulation 2 as including:

"a stationary technical unit where one or more of the activities listed in Part 1 of Schedule 1 are carried out."

Regulation 6 provides:

"6.-(1) No person shall operate an installation or mobile plant after the prescribed date for that installation or mobile plant, except under and to the extent authorised by a permit granted by SEPA.

(2) In paragraph (1), the 'prescribed date' means the appropriate date set out in or determined in accordance with Schedule 3."

[37] In Part 1 of Schedule 1 (as it stood prior to amendment by the Waste Incineration (Scotland) Regulations 2003), Chapter 1 is headed "Energy Industries". It includes the following:

"Section 1.1: Combustion

PART A

(a) Burning any fuel in a combustion appliance with a net rated thermal input of 50 megawatts or more."

Chapter 5 is headed "Waste Management". It includes the following:

"Section 5.1 Incineration

PART A

...

(b) The incineration of waste, including animal remains, in an incineration plant ... on premises where there is plant used or designed to incinerate waste at a rate of 1 tonne or more per hour.

...

Interpretation of Section 5.1

In this Section-

'incineration of waste' means the incineration by oxidation of waste, with or without recovery of the combustion heat generated ... and includes the incineration of such wastes as regular or additional fuel for any industrial process;

'incineration plant' means any technical equipment used for the incineration of waste;

...

Section 5.5 The production of fuel from waste

PART A

Making solid fuel from waste by any process involving the use of heat other than making charcoal."

[38] Schedule 3 sets out how the "prescribed date" is to be determined. In relation to existing Part A installations (such as Longannet and the sludge treatment centre), a "relevant period" is specified. Where an application for a permit is made before or during the relevant period, the prescribed date is the date when the application is determined. Where no such application is made, the prescribed date is the day after the date on which the relevant period expires. In relation to Section 1.1, Part A, the relevant period ends on 31 March 2006. In relation to Section 5.1, Part A, the relevant period ends on 31 August 2005. In relation to Section 5.5, Part A, the relevant period ended on 31 March 2004.

[39] Schedule 10 amends the 1991 Regulations so as to exclude from their scope a process which is covered by a permit issued under the 2000 Regulations, or which requires such a permit.

[40] As explained above, a permit was issued under the 2000 Regulations in January 2003 in respect of the sludge treatment centre, in which the activity carried on there was stated to be that described in Part A of Section 5.5. From that point, the sludge treatment centre therefore fell outwith the scope of the 1991 Regulations.

(5) The Renewables Obligation (Scotland) Order 2002
[41] Reference was made in parties' submissions to the Renewables Obligation (Scotland) Order 2002 (SSI 2002 No 163). This order, made under sections 32 to 32C of the Electricity Act 1989, imposes an obligation ("the renewables obligation") on all electricity suppliers supplying electricity in Scotland to produce certificates, at annual intervals, showing that specified amounts of electricity generated from renewable sources have been supplied to customers in Great Britain during an earlier twelve month period. Renewable sources include "biomass", which means fuel derived from plant or animal matter, including sewage. A proportion of the renewables obligation can be satisfied by the production of certificates issued in respect of generating stations which have been fuelled partly by fossil fuel (such as coal) and partly by biomass. A supplier can produce a certificate which was originally issued to another supplier in respect of electricity generated from renewable sources by that supplier. There can thus be a trade in certificates. A supplier which fails to produce the requisite certificates must make a payment in default. Such payments are aggregated and then divided amongst the suppliers which have produced certificates, in proportion to the amount of electricity covered by the certificates which each supplier has produced. The certificates thus have a value. The effect of the regime established by the order is accordingly that "biomass", such as WDF, has a value as a fuel used for generating electricity additional to its intrinsic value as a source of energy.

(6) The Waste Incineration (Scotland) Regulations 2003
[42] The 2003 Regulations are intended to implement Directive 2000/76.

[43] Regulation 3, so far as material, provides:

"3.-(1) .... where an existing waste incineration installation or mobile plant is on 31^st December 2004 subject to a permit, the operator shall during the period beginning with 1^st January 2005 and ending with 31^st March 2005 make an application under regulation 13 of the 2000 Regulations for a variation of the conditions of that permit.

(2) ... where an existing waste incineration installation or mobile plant (other than one mentioned in Section 5.1 of Part 1 of Schedule 1 to the 2000 Regulations), is on 31^st December 2004 subject to an authorisation, the operator shall during the period beginning with 1^st January 2005 and ending with 31^st March 2005 make an application in one of the following forms:-

(a) an application for a variation of the conditions of an authorisation under section 11 of the 1990 Act; or

(b) an application for a permit under regulation 7 of the 2000 Regulations."

[44] Regulation 2 defines a number of the expressions used in regulation 3. In particular, it provides:

" 'existing waste incineration installation' means a waste incineration installation or mobile plant which-

(a) in the case of such an installation or mobile plant which is a co-incineration plant, is one which-

(i) is in operation before 28^th December 2002 following the grant of a relevant approval ..."

"Relevant approval" is defined as meaning inter alia an authorisation granted under section 6 of the 1990 Act. Regulation 2 also provides that expressions defined in the 2000 Regulations are to be given the same meaning in the 2003 Regulations.

[45] Regulation 6 inserts into regulation 2 of the 2000 Regulations a definition of the expression "waste incineration installation":

" 'waste incineration installation' means that part of an installation or mobile plant which includes any of the following activities:-

(a) the incineration or co-incineration of waste in an incineration or co-incineration plant falling within paragraphs (a), (b), (c), (d) or (e) of Part A of Section 5.1 of Part 1 of Schedule 1; or

(b) any activity falling within any Section of that Part of that Schedule which is carried out in a co-incineration plant as defined in Section 5.1 of that Part of that Schedule."

[46] Regulation 9 inserts a new Section 5.1 into Part 1 of Schedule 1 to the 2000 Regulations, in substitution for the original Section 5.1:

"SECTION 5.1 -

Incineration and co-incineration of waste

PART A

...

(e) Unless carried out as part of any other Part A activity, the incineration of non-hazardous waste in a co-incineration plant

...

Interpretation of Section 5.1

In this Section

'co-incineration' means the use of wastes as a regular or additional fuel in a co-incineration plant or the thermal treatment of waste for the purposes of disposal in a co-incineration plant;

'co-incineration plant' means any stationary or mobile plant whose main purpose is the generation of energy or production of material products and-

- which uses wastes as a regular or additional fuel; or

- in which waste is thermally treated for the purpose of disposal;

...

'non-hazardous waste' means waste which is not hazardous waste;

'waste' means any solid or liquid waste as defined in Article 1(a) of Directive 75/442/EEC.".

[47] It is a matter of agreement in the present case that the WDF is non-hazardous waste. By virtue of regulation 2(3) of the 2000 Regulations, the reference in the new Section 5.1 to Directive 75/442 is to be interpreted as a reference to the directive as amended.

[48] As explained earlier, the variation notice dated 19 November 2003 requires Scottish Power to make an application under regulation 3(2) of the 2003 Regulations. It therefore proceeds on the basis that Longannet is an existing waste incineration installation (other than one mentioned in Section 5.1 of Part 1 of Schedule 1 to the 2000 Regulations), which is subject to an authorisation. As I understand SEPA's position, SEPA considers that Longannet is (in part, at least) an "existing waste incineration installation", as defined in regulation 2 of the 2003 Regulations, because it is a "waste incineration installation" which is a "co-incineration plant" which was in operation before 28 December 2002 following the grant of an authorisation under section 6 of the 1990 Act. Longannet is considered to be a "waste incineration installation", as defined in regulation 2 of the 2000 Regulations (as amended by regulation 6 of the 2003 Regulations), because it includes activities falling within Part 1 of Schedule 1 (in particular, paragraph (a) of Section 1.1) which are carried out in a "co-incineration plant" as defined in Section 5.1 of Part 1 of Schedule 1. Longannet is considered to be a "co-incineration plant", as defined in Section 5.1 of Part 1 of Schedule 1 to the 2000 Regulations (as substituted by regulation 9 of the 2003 Regulations), because it is a plant whose main purpose is the generation of energy and which uses "waste" as a regular or additional fuel. Longannet is considered to use "waste", as defined in Section 5.1 of Part 1 of Schedule 1 to the 2000 Regulations (as substituted by regulation 9 of the 2003 Regulations), on the basis that the WDF is "waste" as defined in Article 1(a) of Directive 75/442. Longannet is therefore considered to fall within the scope of regulation 3(2) of the 2003 Regulations, since:

(1) it is an existing waste incineration installation, as explained above;

(2) it is not one mentioned in Section 5.1 of Part 1 of Schedule 1 to the 2000 Regulations (as substituted by regulation 9 of the 2003 Regulations), since the incineration of waste there is carried out as part of another Part A activity (in particular, as part of an activity described in paragraph (a) of Section 1.1); and

(3) it is on 31 December 2004 subject to an authorisation.

The step in this reasoning which was challenged at the first hearing in the present proceedings was the proposition that the WDF is "waste", as defined in Article 1(a) of Directive 75/442.

(7) The Waste Incineration Directive (Scotland) Direction 2003
[49] The Waste Incineration Directive (Scotland) Direction 2003 was issued by the Scottish Ministers to SEPA under, inter alia, section 7 of the 1990 Act. It provides:

"SEPA shall, on or before 31^st December 2004, include as a condition in the authorisation (other than an authorisation of an activity mentioned in Section 5.1 of Part 1 of Schedule 1 to the 2000 Regulations) or, as the case may be, the permit of any existing waste incineration installation or mobile plant a requirement that the operator of such an installation or mobile plant make an application in respect of that installation or plant under regulation 3 of the 2003 Regulations."

As explained, earlier, SEPA issued the variation notice dated 19 November 2003 on the basis that it was required to do so by the Direction.

2. COMMUNITY LEGISLATION
[50] It will be necessary at a later stage to consider the relevant Community legislation in considerable detail. At the present stage, it may be helpful merely to mention the provisions which are central to parties' submissions.

(1) Directive 75/442/EEC on waste
[51] The principal EC instrument is Directive 75/442 (as amended). Article 1 defines certain terms. In particular:

"(a) 'waste' shall mean any substance or object in the categories set out in Annex I which the holder discards or intends or is required to discard.

...

(e) 'disposal' shall mean any of the operations provided for in Annex II, A;

(f) 'recovery' shall mean any of the operations provided for in Annex II, B."

Annex I lists a variety of types of material, the final item in the list being:

"Q16 Any materials, substances or products which are not contained in the above categories."

Annex II B lists recovery operations, and includes:

"R1 Use principally as a fuel or other means to generate energy."

(2) Directive 2000/76/EC on the incineration of waste
[52] Directive 2000/76 contains provisions detailing emission limits for "waste incineration and co-incineration plants". For the purposes of the directive, "waste" has the same meaning as in Directive 75/442. Article 3(5) defines "co-incineration plant" as meaning:

"any stationary or mobile plant whose main purpose is the generation of energy or production of material products and:

-which uses wastes as a regular or additional fuel; or

-in which waste is thermally treated for the purpose of disposal."

The directive applies to existing plants as from 28 December 2005.

The submissions

1. THE SUBMISSIONS FOR SCOTTISH POWER
[53] On behalf of Scottish Power, it was submitted that the variation notice at issue, and the antecedent correspondence from SEPA, proceeded on the basis that Longannet fell within the ambit of regulation 3(2) of the 2003 Regulations. Longannet was not however a "waste incineration installation", since the activities carried on there did not include the co-incineration of waste. Since WDF was not "waste" as defined in Article 1(a) of Directive 75/442, it was not "waste" as defined in section 5.1 of Part 1 of Schedule 1 to the 2000 Regulations (as substituted by regulation 9 of the 2003 Regulations). The variation notice was therefore based on an error of law and was ultra vires and should be reduced.

[54] The central question was whether WDF was "waste" when it was used as a fuel in the boilers at Longannet. According to its ordinary meaning, waste was what fell away when one processed a material or an object, and was not the end product which the manufacturing process directly sought to produce: Case C-9/00 Palin Granit Oy and Vehmassalon kansanterveystyön kuntayhtymän hallitus [2002] ECR I -3533 at paragraph 32. The ordinary meaning of "discard" was to throw away as not needed. In the absence of specific Community provisions on proof of the existence of waste, it was for the national court to apply the provisions of its own legal system, while taking care that the objective and effectiveness of Directive 75/442 were not undermined: Joined Cases C-418/97 and C-419/97 ARCO Chemie Nederland Ltd v Minister van Volkhuisvesting, Ruimtelijke Ordening en Milieubeheer [2000] ECR I-4475. The classification of a substance as waste was primarily to be inferred from the actions of the holder of the substance. Did he intend, or was he required, to discard the substance in question? The inter-relationship between discarding, recovery and disposal was not straightforward. The concept of "discard" remained separate form, and primary to, the descriptions of operations of recovery and disposal contained in Annexes IIA and IIB to the directive. Since the decisions of the European Court of Justice in this area were very fact-sensitive, it was important to note the factual circumstances behind decisions, and the facts that were relevant to the present dispute. As observed by Advocate General Jacobs in Case C-129/96 Inter-Environnement Wallonnie ABSL v Région Wallonne [1997] ECR I-7411 at paragraph 80, it might also be useful to consider in this context the considerations set out by the Waste Management Policy Group of the OECD's Environment Directorate's Environment Policy Committee in the Final Guidance Document for Distinguishing Waste from Non-Waste (April 1998; ENV/EPOC/WMP(98)1/REV1).

[55] The relevant factual considerations in the present case were the following. WDF was produced intentionally, as the result of a complex industrial process, and was designed for a particular purpose. The decision by SMW to make WDF resulted from technical, scientific and commercial considerations, and followed trials and experiments into the best way of producing a commercially and environmentally useful product from sewage sludge. The absence of a digestion process at the sludge treatment centre indicated the intention to manufacture a fuel.

[56] WDF was produced in response to a demand in the electricity generating market. Scottish Water required to procure the recovery of as much of its waste water as possible, given the lack of disposal routes under recent legislation. Scottish Power required to find alternatives to coal, particularly as a result of the legislative changes introduced in recent years to encourage the use of non-fossil fuels. The market demand was increased by the fact that the electricity generated by co-burning WDF with coal qualified for renewable obligation certificates under the 2002 Order. Quite apart from the certificates, WDF had an economic value as a cheaper alternative to coal. Scottish Power paid SMW £5.50 per tonne, subject to upward adjustment for inter alia the moisture content and calorific value of the fuel. Thus, as holder of the WDF, SMW obtained an income from each tonne delivered. WDF had earned a place in the normal commercial cycle or chain of utility: see the guidance given as to the application of Directive 75/442 in Scottish Office Environment Department Circular 10/94 (also Department of the Environment Circular 11/94 and Welsh Office Circular 26/94), Annex 2.

[57] The production of WDF was subject to a specification and to quality control and rejection procedures. It also required to meet the standards set for other comparable fuels to be burned in generating stations, such as coal, as regards such matters as handling, calorific value and emissions. As a fuel to be co-burned at Longannet, WDF had been part of the authorisation procedure for the station under the 1990 Act. SEPA had authorised it to be burned, and had imposed the requisite conditions.

[58] The use of WDF had the advantage that it replaced fossil fuels which would otherwise be burnt. This was in line with the policy of EC environmental law, which was to encourage the re-use and recovery of waste as a source of energy. The production of WDF for use as a fuel was preferable, on environmental grounds, to traditional methods of disposal of sewage sludge. WDF could be used in the same way as natural raw materials.

[59] The WDF produced by SMW was certain to be used as a fuel at Longannet. The technical, contractual and economic backgrounds made it imperative that the WDF was burned. The sewage sludge, as received at the sludge treatment centre, was not capable of being burned as a fuel. At the sludge treatment centre, the material suitable for use as a fuel was extracted and processed, with additives added and materials screened out. Various wastes were discarded during the production process. WDF was therefore the product of a completed recovery operation, in terms of Article 3(1)(b)(i) of Directive 75/442 ("the recovery of waste by means of recycling, re-use or reclamation or any other process with a view to extracting secondary raw materials"). When selling WDF to Scottish Power, SMW was not "discarding" it, but was selling it for its certain use for a specific purpose. Scottish Power did not "discard" the fuel, but employed it in its business. For both parties, WDF played a commercial role in the running of their respective businesses. Against this background, WDF was not a waste.

[60] It was not as if the burning of WDF was unregulated. The petitioner was authorised by SEPA to burn WDF at Longannet and had to comply with strict requirements under its authorisation. There would be no regulatory lacuna if WDF were not categorised as waste. Instead, if the variation notice was not reduced, Longannet would be regulated as a waste incineration installation rather than as a power station. As the emission limits applicable to waste incineration were more stringent (due to a difference in the timing of the introduction of such limits in respect of waste incineration and in respect of power generation), Scottish Power would require as a matter of urgency either to incur additional expense, amounting to tens of millions of pounds, in order to instal the equipment necessary to enable Longannet to comply with the emission limits for waste incineration, or alternatively cease buying WDF and instead burn more coal. A cessation of burning WDF at Longannet would neutralise the capital investment made by Scottish Power, SMW and Scottish Water, and it would put an end to an environmentally advantageous end-use of urban waste water.

2. THE SUBMISSIONS FOR SCOTTISH WATER
[61] Scottish Water adopted the arguments of Scottish Power, and added (in their note of argument) some further submissions. In terms of the definition in Directive 75/442, the mark of whether any material was "waste" was the action - actual, intended or required - of the "holder", which must be to "discard" it. The "holder" in respect of any material was defined as "the producer of the waste or the natural or legal person who is in possession of it". The "holder" in the present context was Scottish Power. The attitudes, actions, intentions or requirements of any other party, such as a person who might previously have been a holder of the material, were not directly relevant in assessing whether material was to be regarded as "waste" in the hands of Scottish Power. The concepts of recovery and disposal in Annexes IIA and IIB to the directive were of peripheral interest in deciding whether the material was "discarded" or was to be "discarded" by the "holder" in question.

[62] It would be ridiculous to suggest that Scottish Power "discarded" coal into its boilers. It wanted and needed the coal that it burned. It bought the coal at substantial cost and used it, earning money by selling the resulting electrical output. Its approach to WDF was essentially the same. It needed in particular to find "renewable" fuels as alternatives to coal, as a result of legislative changes introduced in order to encourage the substitution of non-fossil fuels for fossil fuels. Scottish Power was therefore keen that WDF should be manufactured and supplied.

[63] The attitude of Scottish Power as the holder of WDF was to be contrasted with that of others involved in the process whereby WDF came into existence. The individuals and businesses who used the sewerage system were undoubtedly discarding what they put down it. It left them as "waste". Scottish Water was then obliged to dispose of the material. It began to treat the material at its waste water treatment centres, but it required to pay SMW to take the resultant material from it in order that it might be rid of the material. Scottish Water therefore wished to "discard" the material that left its waste water treatment centres. The material in the form of sludge was then received by SMW. SMW had a different attitude to the material. It put the sludge through a series of industrial processes, with the intention of producing not "waste" but a saleable fuel product, which had value to it in a way that the sewage sludge did not. It was undertaking a "recovery procedure", producing a new product: a useful material which could be used to replace other materials. The result was that Scottish Power received delivery not of "waste" but of a completely recovered fuel product, which it treated in the same way as coal.

3. THE SUBMISSIONS FOR SEPA
[64] On behalf of SEPA, it was submitted that WDF was waste and remained waste until it had been burned as fuel for the purpose of generating electricity.

[65] It was accepted that WDF was produced intentionally and, at least for the present, for a specific purpose. It was not disputed that WDF played a commercial role in the running of the respective businesses of Scottish Power and SMW. The WDF was however made to satisfy the requirements of Longannet for WDF, and not for the purpose of satisfying any broader demand; and the requirements of Longannet for WDF were in turn a function of the quantities of sewage sludge available from Scottish Water's treatment works at Daldowie and Shieldhall. The whole of the WDF produced at the sludge treatment centre was used at Longannet, and the whole of the WDF used at Longannet was produced at the sludge treatment centre. It was clear from the applications submitted to SEPA by SMW and Scottish Power that that had been the intention from the outset.

[66] The meaning of "waste" in Article 1 of Directive 75/442 turned on the meaning of the word "discard". That word bore a special meaning. The fact that a processor of a substance obtained an economic benefit from processing the substance did not prevent the substance from being waste. The existence of a market for a substance did not prevent the substance from being waste. Indicators of a substance being discarded, or of an intention to discard, included the following:

(a) if it was undergoing or was intended to undergo a disposal operation set out in Annex IIA of Directive 75/442 or a recovery operation set out in Annex IIB;

(b) if the use of the substance as fuel was a common method of recovering waste; and

[67] In relation to (a), any operations to recover or dispose of waste could involve a number of stages which might involve subjecting the waste to different processes carried out by different operators. In the present case, the relevant recovery operation was listed in Annex IIB as R1: "Use principally as a fuel or other means to generate energy". Drying the sludge and making the pellets were only stages in a recovery operation which was completed once the pellets had been used as a fuel. In relation to (b), burning was a common method of disposing of sewage sludge and recovering energy from it. In relation to (c), sewage sludge (whether dried or not) was generally regarded as waste. It was also necessary, in order to fulfil the aims of the directive, to apply it in such a way as to protect the environment. There was a risk of unforeseen contaminants in urban sewage sludge, since the source of the sludge was aggregated sewage, which might contain all types of contaminants. The presence of such contaminants, and of heavy metals in particular, was unlikely to be detected until after the WDF had been burnt, by which time the pollutants would already have been released to the environment. The typical constituents of WDF in any event included significant concentrations of heavy metals, which were harmful to the environment. The WDF required to be stored in enclosed silos to minimise offensive odours, to prevent windblown dust and to keep the waste dry. If exposed to water, the WDF would absorb it and become re-constituted as sewage. The WDF required controlled disposal or recovery.

[68] It was not inconsistent with the Community's policy of encouraging the recovery of waste, as a source of energy, that the processing, transportation and burning of dried sewage sludge should be regulated in the interests of the protection of the environment. One of the policy aims of Directive 2000/76 was to impose on co-incineration plants the same emission controls as applied to dedicated waste incineration plants.

DISCUSSION
[69] The 2003 Regulations and the 2003 Direction were intended to implement Directive 2000/76, and are therefore to be interpreted, in the context of civil proceedings, so as to achieve that objective: see Case 14/83 Von Colson and Kamann v Land Nordrheim-Westfalen [1984] ECR 1891. They, and the Directive itself, expressly adopt the definition of the term "waste" laid down in Directive 75/442. The issue raised at the first hearing turns on the interpretation and application of that term. Directive 75/442 is therefore the appropriate starting point.

1. DIRECTIVE 75/442
[70] Prior to the Single European Act, the EC Treaty did not make specific provision for a Community environmental policy. The Council nevertheless adopted a series of directives on waste on the basis of Articles 100 and 235 (as then numbered: the corresponding articles in the consolidated version of the Treaty, as amended by the Treaty of Nice, are Articles 94 and 308). The principal of these was Directive 75/442, which was adopted in 1975. It was followed by further directives concerned with toxic and dangerous waste, and with the supervision and control within the Community of the transfrontier shipment of hazardous waste. In 1986 the Single European Act revised the Treaty, introducing (by Article 130r, now Article 174) a specific legal basis for action relating to environmental protection. In 1991 the Council adopted Directive 91/156/EEC, substantially amending Directive 75/442 (which was subsequently further amended by Commission Decision 96/350/EC). It also adopted directives on hazardous waste and on the supervision and control of shipments of waste within, into and out of the Community, replacing the earlier directives on those subjects. Further directives addressing particular issues relating to waste have subsequently been adopted, including, in 1994, Directive 94/76 on the incineration of hazardous waste, and, in 2000, Directive 2000/76 on the incineration of waste. Considered as a whole, current Community legislation on waste can be divided into three main categories: legislation which establishes a general framework within which waste is controlled and managed, in particular Directive 75/442; legislation which concerns particular waste treatment operations, such as Directive 94/67 and Directive 2000/76; and legislation which concerns particular types of waste, such as Directive 94/62/EC on packaging and packaging waste. The definition of "waste" in Directive 75/442 is adopted in other Community legislation and forms the keystone of the Community's legislation on waste.

[71] The principal objectives of Directive 75/442 are indicated by the opening recitals in the preamble:

"[1] Whereas any disparity between the provisions on waste disposal already applicable or in preparation in the various Member States may create unequal conditions of competition and thus directly affect the functioning of the common market; whereas it is therefore necessary to approximate laws in this field, as provided for in Article 100 of the Treaty;

[2] Whereas it seems necessary for this approximation of laws to be accompanied by Community action so that one of the aims of the Community in the sphere of protection of the environment and improvement of the quality of life can be achieved by more extensive rules; whereas certain specific provisions to this effect should therefore be laid down; whereas Article 235 of the Treaty should be invoked as the powers required for this purpose have not been provided for by the Treaty;

[3] Whereas the essential objective of all provisions relating to waste disposal must be the protection of human health and the environment against harmful effects caused by the collection, transport, treatment, storage and tipping of waste;

[4] Whereas recovery of waste and the use of recovered materials should be encouraged in order to conserve natural resources ..."

One objective, therefore, is harmonisation of national laws governing waste disposal, in order to prevent discrepancies between those laws from distorting competition and creating obstacles to trade between Member States. Another objective, described as the essential objective of all provisions relating to waste disposal, is the protection of human health and the environment against harmful effects caused by the collection, transport, treatment, storage and tipping of waste. A further objective is to encourage the recovery of waste, and the use of recovered materials, in order to conserve natural resources. These objectives are inter-related: legislation designed to protect the environment, and requiring the pre-treatment, recovery or recycling of wastes, stimulates trade in waste and waste-processing, and at the same time may distort competition between participants in that trade, and create barriers to that trade, insofar as the legislation is not uniform across the Community.

[72] The recitals in the preamble to Directive 91/156 are also germane, as indicating the objectives of the amendments to Directive 75/442 which were made by that directive. They state at the outset, in the first recital, that "the amendments take as a base a high level of environmental protection". Other recitals include the following:

"[5] Whereas, moreover, any disparity between Member States' laws on waste disposal and recovery can affect the quality of the environment and interfere with the functioning of the internal market;

[6] Whereas it is desirable to encourage the recycling of waste and re-use of waste as raw materials; whereas it may be necessary to adopt specific rules for re-usable waste;

...

[10] Whereas, to ensure a high level of protection and effective control, it is necessary to provide for authorization and inspection of undertakings which carry out waste disposal and recovery;

...

[12] Whereas, in order that waste can be monitored from its production to its final disposal, other undertakings involved with waste, such as waste collectors, carriers and brokers should also be subject to authorization or registration and appropriate inspection".

It appears from the latter recitals, in particular, that one objective is to establish a comprehensive system enabling waste to be monitored from the moment when the substance or object in question becomes waste until the moment when it ceases to be waste.

[73] Article 1 of Directive 75/442 (as amended) defines the terms which are used in the subsequent provisions:

"Article 1

For the purposes of this Directive:

(a) 'waste' shall mean any substance or object in the categories set out in Annex I which the hold discards or intends or is required to discard.

The Commission, acting in accordance with the procedure laid down in Article 18, will draw up, not later than 1 April 1993, a list of wastes belonging to the categories listed in Annex I. This list will be periodically reviewed and, if necessary, revised by the same procedure;

(b) 'producer' shall mean anyone whose activities produce waste ('original producer') and/or anyone who carries out pre-processing, mixing or other operations resulting in a change in the nature or composition of this waste;

(d) 'management' shall mean the collection, transport, recovery and disposal of waste, including the supervision of such operations and after-care of disposal sites;

(e) 'disposal' shall mean any of the operations provided for in Annex II, A;

(f) 'recovery' shall mean any of the operations provided for in Annex II, B;

(g) 'collection' shall mean the gathering, sorting and/or mixing of waste for the purpose of transport."

[74] Paragraph (a) of Article 1 thus defines "waste" by reference, first, to "the categories set out in Annex I". Annex I does not contain any specific reference to sewage, but it begins and ends with two general categories:

"Q1 Production or consumption residues not otherwise specified below.

...

Q16 Any materials, substances or products which are not contained in the above categories."

Any substance or object may therefore potentially constitute waste.

[75] The second sub-paragraph of paragraph (a) refers to a list of wastes to be drawn up by the Commission. Such a list was initially established by Commission Decision 94/3/EC, which was replaced by Commission Decision 2000/532/EC. It is non-exhaustive. The Annex to the decision, which contains the list, begins by stating (in paragraph 1):

"1. The present list is a harmonised list of wastes. It will be periodically reviewed and if necessary revised in accordance with Article 18 of Directive 75/442/EEC. However, the inclusion of a material in the list does not mean that the material is a waste in all circumstances. Materials are considered to be waste only where the definition of waste in Article 1(a) of Directive 75/442/EEC is met."

The list includes, as item 19.08.05, "sludges from treatment of urban waste water".

[76] Since any substance or object may potentially constitute waste, and the list established by the Commission is non-exhaustive, the critical words in the definition provided by Article 1(a) are those defining "waste" as meaning any substance or object "which the holder desires or intends or is required to discard". A holder may be "required to discard" by contract as well as by legislation (ARCO Chemie Nederland, paragraph 86).

[77] The subject of the verb "to discard" is "the holder", defined by paragraph (c) of Article 1 as meaning the "producer" of the waste or the person who is in possession of it. The term "producer" is itself defined by paragraph (b) of Article 1 as meaning the original producer of the waste or anyone who carries out pre-processing, mixing or other operations resulting in a change in the nature or composition of the waste.

[78] The first obligations laid by the directive upon Member States arise from Article 3:

"Article 3

1. Member Stated shall take appropriate measures to encourage:

(a) firstly, the prevention or reduction of waste production and its harmfulness, in particular by:

- the development of clean technologies more sparing in their use of natural resources,

- the technical development and marketing of products designed so as to make no contribution or to make the smallest possible contribution, by the nature of their manufacture, use or final disposal, to increasing the amount or harmfulness of waste and pollution hazards,

- the development of appropriate techniques for the final disposal of dangerous substances contained in waste destined for recovery;

(b) secondly:

(i) the recovery of waste by means of recycling, re-use or reclamation or any other process with a view to extracting secondary raw materials, or

(ii) the use of waste as a source of energy."

In summary, therefore, the first obligation is to encourage a reduction in the production of waste, and the second obligation is to encourage the recovery of such waste as is produced.

[79] The term "recovery" is defined by Article 1(f) as meaning any of the operations provided for in Annex IIB, which (as amended by Commission Decision 96/350) itself states:

"ANNEX IIB

RECOVERY OPERATIONS

NB: This Annex is intended to list recovery operations as they occur in practice. In accordance with Article 4 waste must be recovered without endangering human health and without the use of processes or methods likely to harm the environment.

R 1 Use principally as a fuel or other means to generate energy

R 2 Solvent reclamation/regeneration

R 3 Recycling/reclamation of organic substances which are not used as solvents (including composting and other biological transformation processes)

R 4 Recycling/reclamation of metals and metal compounds

R 5 Recycling/reclamation of other inorganic materials

R 6 Regeneration of acids or bases

R 7 Recovery of components used for pollution abatement

R 8 Recovery of components from catalysts

R 9 Oil re-refining or other reuses of oil

R 10 Land treatment resulting in benefit to agriculture or ecological improvement

R 11 Use of wastes obtained from any of the operations numbered R 1 to R 10

R 12 Exchange of wastes for submission to any of the operations numbered R 1 to R 11

R 13 Storage of wastes pending any of the operations numbered R 1 to R 12 (excluding temporary storage, pending collection, on the site where it is produced)."

[80] In relation to R 1, it is apparent that the word "recovery" is being used in a special sense: R 1 refers to an end use of waste, which involves its destruction. The other operations carried out on waste which are mentioned in Annex IIB and which involve subjecting the waste to some physical change (ie R 2 to R 9) are operations carried out on waste in order to derive from it a substance which can thereafter be used in some further process. That distinction between R 1 and recovery operations in a more usual sense reflects the distinction between Article 3(1)(b)(i) and Article 3(1)(b)(ii). The sense in which R 1, as well as R 2 to R 9, can be regarded as a "recovery" operation, was explained by the European Court of Justice in Case C-228/00 Commission v Germany [2003] ECR I -1439:

"45. It follows from Article 3(1)(b) and the fourth recital of the directive that the essential characteristic of a waste recovery operation is that its principal objective is that the waste serve a useful purpose in replacing other materials which would have had to be used for that purpose, thereby conserving natural resources (Case C-6/00 Abfall Service AG (ASA) v Bundesminister für Umwelt, Jugend und Familie [2002] ECR I -1961, paragraph 69).

46. The combustion of waste therefore constitutes a recovery operation where its principal objective is that the waste can fulfil a useful function as a means of generating energy, replacing the use of a source of primary energy which would have had to have been used to fulfil that function."

[81] It is apparent from Article 3(1)(b), and from the list of operations in Annex IIB, that "waste" is not necessarily without economic value. Indeed, since most if not all waste materials have some economic value somewhere in the world, to define "waste" as material which had no economic value would be destructive of the concept of waste. In addition, since waste which is the subject of recovery must be material which the holder "discards or intends or is required to discard" (otherwise it would not be waste), it appears that the term "discard" in Article 1(a) must be construed in a manner which encompasses such uses of waste as are mentioned in Article 3(1)(b) and in Annex IIB. In particular, since it is apparent from item R 1 in Annex IIB, and from Article 3(1)(b)(ii), that one method of recovery of waste is its use as a fuel to generate energy, it follows that a person who uses waste as a fuel to generate energy must be regarded as "discarding" the waste within the meaning of Article 1(a). It appears from item R 3 that the recycling or reclamation of organic substances is another form of recovery operation, and that the person who recycles waste or reclaims substances from it is also to be regarded as "discarding" the waste. In their submissions, Scottish Power argued that SMW carried out a recovery operation at the sludge treatment centre which was of the kind described in R 3 (or was at least analogous to an operation of the kind described in R 3), in producing WDF from sewage sludge. On that approach, SMW "discard" waste when they produce WDF from sewage sludge. SEPA, on the other hand, maintained that no recovery operation was completed until the WDF was burned at Longannet, that being an operation falling within R 1. On that approach, Scottish Power "discard" waste when they use WDF as a fuel to generate electricity.

[82] Further obligations are imposed on Member States by Article 4:

"Article 4

Member States shall take the necessary measures to ensure that waste is recovered or disposed of without endangering human health and without using processes or methods which could harm the environment, and in particular:

- without risk to water, air, soil and plants and animals,

- without causing a nuisance through noise or odours,

- without adversely affecting the countryside or places of special interest.

Member States shall also take the necessary measures to prohibit the abandonment, dumping or uncontrolled disposal of waste."

It appears from the first paragraph of Article 4, which may be regarded as the core provision of the directive (Case C-494/01, Commission v Ireland, Opinion of Advocate General Geelhoed delivered on 23 September 2004, paragraph 32) that waste must always be either recovered or disposed of. One implication of the second paragraph of Article 4 is that the meaning of the word "discard", as used in the definition of waste, is not confined (as it might be in its ordinary meaning) to "abandonment, dumping or uncontrolled disposal", but extends to recovery and disposal. The waste handling and processing industry, which exists to carry out disposal and recovery operations, is therefore to be regarded as having the intention to "discard" the waste (and is on that basis to be regulated in accordance with the directive), even though it has no intention of abandoning or dumping the waste which it handles or processes.

[83] The term "disposal" is defined by Article 1(e) as meaning any of the operations provided for in Annex IIA, which itself states:

"ANNEX IIA

DISPOSAL OPERATIONS

NB: This Annex is intended to list disposal operations such as they occur in practice. In accordance with Article 4 waste must be disposed of without endangering human health and without the use of processes or methods likely to harm the environment.

D 1 Deposit into or onto land (e.g. landfill, etc.)

D 2 Land treatment (e.g. biodegradation of liquid or sludgy discards in soils, etc.)

D 3 Deep injection (e.g. injection of pumpable discards into wells, salt domes or naturally occurring repositories, etc.)

D 4 Surface impoundment (e.g. placement of liquid or sludgy discards into pits, ponds or lagoons, etc.)

D 5 Specially engineered landfill (e.g. placement into lined discrete cells which are capped and isolated from one another and the environment, etc.)

D 6 Release into a water body except seas/oceans

D 7 Release into seas/oceans including sea-bed insertion

D 8 Biological treatment not specified elsewhere in this Annex which results in final compounds or mixtures which are discarded by means of any of the operations numbered D 1 to D 12

D 9 Physio-chemical treatment not specified elsewhere in this Annex which results in final compounds or mixtures which are discarded by means of any of the operations numbered D 1 to D 12 (e.g. evaporation, drying, calculation, etc.)

D 10 Incineration on land

D 11 Incineration at sea

D 12 Permanent storage (e.g. emplacement of containers in a mine, etc.)

D 13 Blending or mixing prior to submission to any of the operations numbered D 1 to D 12

D 14 Repackaging prior to submission to any of the operations numbered D 1 to D 13

D 15 Storage pending any of the operations numbered D 1 to D 14 (excluding temporary storage, pending collection, on the site where it is produced)."

It appears from items D 10 and D 11 that a distinction can be drawn for the purposes of the directive (as the Court explained in Case 228/00 Commission v Germany and in Case 458/00 Commission v Luxembourg [2003] ECR I-1553) between the incineration of waste, which is a disposal operation, and the use of waste principally as a fuel to generate energy, which is a recovery operation.

[84] Article 6 requires Member States to establish or designate the competent authority or authorities to be responsible for the implementation of the directive. Article 7 provides that the competent authorities are to be required to draw up waste management plans, which are to relate in particular to "the type, quantity and origin of waste to be recovered or disposed of". This is a further indication that all waste must be either recovered or disposed of.

[85] Subsequent articles of the Directive set out the key instruments for achieving the objectives set out in Article 4. Article 8 provides:

"Article 8

Member States shall take the necessary measures to ensure that any holder of waste:

- has it handled by a private or public waste collector or by an undertaking which carries out the operations listed in Annex II A or B, or

- recovers or disposes of it himself in accordance with the provisions of this Directive."

Articles 9 and 10 require that undertakings and establishments carrying out operations specified in Annex IIA or Annex IIB must obtain a permit from the authority established under Article 6. Under Article 12, professional waste collectors, transporters and brokers are to be registered. Articles 13 and 14 make provision for the inspection of operators within this system and for access to their records.

[86] The interpretation of Directive 75/442, and in particular of the meaning of "waste", has been considered on a number of occasions by the European Court of Justice. The earliest decision which requires to be noted is that in Cases C-206/88 and C-207/88, Vessoso and Zanetti [1990] ECR I -1461, which concerned the collection and storage of materials which had been disposed of but which were capable of economic reutilisation. The Court noted that the fourth recital in the preamble to the directive (then in its original version) stressed the importance of encouraging the recovery of waste and the use of recovered materials, and that these matters were dealt with in Articles 1 and 3. It was clear from those provisions that a substance of which its holder disposed might constitute waste within the meaning of the directive even when it was capable of economic reutilisation. The Court concluded (at paragraph 9):

"... the concept of waste within the meaning of Article 1 ... is not to be understood as excluding substances and objects which are capable of economic reutilisation."

The Court further concluded (at paragraph 13):

"... the concept of waste, within the meaning of Article 1 ... does not presume that the holder disposing of a substance or object intends to exclude all economic reutilisation of the substance or object by others."

This decision was followed in a further case, Case C-359/88 Zanetti and Others [1990] ECR I-1509, which was heard along with the two other cases and arose out of similar circumstances.

[87] The same approach was followed by the Court in Case C-422/92, Commission v Germany [1995] ECR I -1097, where the issue was whether the Federal Republic had failed to implement the directive by excluding from the scope of its national law on waste material which was collected on a commercial basis for the purpose of re-cycling or re-use. In his Opinion, Advocate General Jacobs described the directive as establishing "a comprehensive system for waste management", under which Member States must ensure that any holder of waste either recovered or disposed of it himself, or had it handled by a waste collector or by an undertaking which carried out the operations listed in Annex IIA or Annex IIB. He noted that the Court's reasoning in Vessoso and Zanetti applied a fortiori to the amended directive. He concluded (at paragraph 33):

"It is clear therefore that the system of supervision and management established by the Directive is intended to cover all objects and substances discarded by their owner, even if they have a commercial value and are collected commercially for re-cycling or re-use".

The Court repeated what it had said in Zanetti and Others.

[88] The definition of "waste" in the amended directive was considered in Joined Cases C-304/94, C-330/94, C-342/94 and C-224/95 Tombesi and Others [1997] ECR I -3561. Preliminary rulings were sought in a number of cases in which persons had been charged with offences under national laws relating to waste. In the first case, which can be taken as typical, the defendant had been charged with transporting waste without an authorisation, and had argued that the material in question - scrap metal - was not waste.

[89] The Court dealt with the issue briefly, referring to Articles 8, 10 and 12 to 13 of the amended directive, and to Annexes IIA and IIB, and concluding (at paragraph 52):

"It follows that the system of supervision and control established by Directive 75/442, as amended, is intended to cover all objects and substances discarded by their owners, even if they have a commercial value and are collected on a commercial basis for recycling, reclamation or re-use."

[90] Although the approach suggested in that case by Advocate General Jacobs to the definition of waste was not fully endorsed by the Court, there are nevertheless observations in his Opinion which are of assistance in understanding the issues. In particular, at paragraph 50 he said:

"50. The necessary starting point in appraising the arguments is the definition given to the term 'waste' in Article 1(a). That provision states that waste is any substance or object in the categories set out in Annex I which the holder 'discards or intends or is required to discard'. It seems to me that little is to be gained by considering the normal meaning of the term 'discard'. It is clear from the provisions of the Directive, in particular Article 4, Articles 8 to 12 and Annexes IIA and B, that the term 'waste' and the regulatory system of the Directive extend both to substances or objects which are disposed of and to those which are recovered. Thus the term 'discard' employed in the definition of waste in Article 1(a) has a special meaning encompassing both the disposal of waste and its consignment to a recovery operation".

[91] The Advocate General inferred that the scope of the term "waste" therefore depended on what was meant by "disposal operation" and "recovery operation", and that the difficulty in defining "waste" could be overcome by focusing on the treatment operations. It was that inference which was implicitly rejected by the Court. As Advocate General Jacobs observed, the terms "disposal operation" and "recovery operation" were not exhaustively defined by Annexes IIA and IIB; and items might be subjected to an operation described in Annex IIA or Annex IIB without necessarily being waste (eg coal burnt as fuel to generate electricity is subjected to an operation of the kind described in R 1). To define "discarding" a substance solely by reference to whether the substance was subject to a disposal or recovery operation mentioned in Annex IIA or Annex IIB therefore involved an element of circularity, as Advocate General Jacobs recognised (at paragraph 55):

"whether there is 'recovery' depends on whether there is 'waste' which in turn depends on whether there is 'recovery'."

Consequently, that approach did not clarify the meaning of waste (as the Court has subsequently stated: Case C-457/02, Niselli, 11 November 2004, paragraph 36). Advocate General Jacobs also pointed out that there could be particular difficulty in distinguishing between a by-product of an industrial process which was then subjected to a further process, and a production residue (i.e. a product not in itself sought for a subsequent use) which was then subjected to a recovery operation: the latter, but not the former, being "waste" within the meaning of the directive. Several of the subsequent cases have concerned the drawing of that distinction.

[92] Advocate General Jacobs considered these matters further in Inter-Environnement Wallonie. His Opinion in this case, delivered before the Court had given judgment in Tombesi, followed the same approach as his earlier Opinion, seeking to define "waste" by determining whether the material was subjected to a disposal operation or a recovery operation; but, as has been mentioned, that approach was not endorsed by the Court. Another aspect of Advocate General Jacobs's Opinion was however founded on by counsel for Scottish Power. Reference had been made, in the submissions in Inter-Environnement Wallonie, to an OECD discussion document providing guidance on the criteria which might be relevant in distinguishing between waste and non-waste in the context of an OECD decision. The guidance was based on a comparative survey of the relevant law and practice of OECD countries. The criteria included the following:

"11. Is the use of the material as environmentally sound as that of a primary product?

....

14. Does use of the material in a production process cause any increased risks to human health or the environment greater than the use of the corresponding raw material?"

In that regard, Advocate General Jacobs observed:

"79. As regards the sometimes difficult distinction between recovery of waste and direct use of non-waste materials ... it appears that there is general consensus among OECD countries that it is relevant to consider whether the use of a residual product or by-product as a substitute for another material or ingredient is as environmentally sound as that of the material or ingredient which it is replacing; in other words whether it complies with the same standards, regulations and specifications as those applicable to that product ...

80. It seems to me that a similar approach would be appropriate in interpreting the term 'waste' in the Community legislation. The directive seeks to ensure that waste is recovered or disposed of without endangering human health and without using processes or methods which could harm the environment. The notion of waste must therefore be interpreted sufficiently broadly to ensure that any processing of a substance that is undertaken by reason of its nature as waste falls within the regulatory system of the directive. Thus where, owing to the fact that it is a residue, by-product, secondary raw material or other material resulting from an industrial process, a material - or the process which it undergoes - does not meet normal health or environmental requirements or standards, it must be regarded as waste and subject to special regulation under the directive. In so far as a material is wholly interchangeable with another product and requires no additional regulation or supervision beyond that applicable to the product it is replacing, it is unnecessary for it to be classified as waste."

[93] In its judgment in Inter-Environnement Wallonie the Court went somewhat further than in earlier cases in offering guidance as to the distinction between the discarding of waste within the meaning of the directive and the processing of non-waste products:

"26. First of all, it follows from the wording of Article 1(a) of Directive 75/442, as amended, that the scope of the term 'waste' turns on the meaning of the term 'discard'.

27. It is also clear from the provisions of Directive 75/442, as amended, in particular from Article 4, Articles 8 to 12 and Annexes IIA and IIB, that the term 'discard' covers both disposal and recovery of a substance or object.

28. As the Advocate General has pointed out in paragraphs 58 to 61 of his Opinion, the list of categories of waste in Annex I to Directive 75/442, as amended, and the disposal and recovery operations listed in Annexes IIA and IIB to that directive demonstrate that the concept of waste does not in principle exclude any kind of residue, industrial by-product or other substance arising from production processes. This finding is further supported by the list of waste drawn up by the Commission in Decision 94/3.

29. First, Directive 75/442, as amended, applies, as is apparent in particular from Articles 9 to 11, not only to disposal and recovery of waste by specialist undertakings, but also to disposal and recovery of waste by the undertaking which produced them, at the place of production.

30. Second, while Article 4 of Directive 75/442, as amended, provides that waste is to be recovered or disposed of without endangering human health or using processes or methods which could harm the environment, there is nothing in that directive to indicate that it does not apply to disposal or recovery operations forming part of an industrial process where they do not appear to constitute a danger to human health or the environment.

31. Finally, it should be borne in mind that the Court has already held that the definition of waste in Article 1 of Directive 75/442, as amended, is not to be understood as excluding substances and objects which were capable of economic reutilization (Case C-359/88 Zanetti and Others [1990] ECR I-1509, paragraphs 12 and 13; C-422/92 Commission v Germany [1995] ECR I-1097, paragraphs 22 and 23; and Joined Cases C-304/94, C-330/94, C-342/94 and C-224/95 Tombesi and Others [1997] ECR I-3561, paragraphs 47 and 48).

32. It follows from all those considerations that substances forming part of an industrial process may constitute waste within the meaning of Article 1(a) of Directive 75/442, as amended.

33. That conclusion does not undermine the distinction which must be drawn, as the Belgian, German, Netherlands and United Kingdom Governments have correctly submitted, between waste recovery within the meaning of Directive 75/442, as amended, and normal industrial treatment of products which are not waste, no matter how difficult that distinction may be."

[94] The Court's statement that the meaning of the term "waste" depends on the meaning of the term "discard" has been repeated in subsequent cases. Although Directive 75/442 does not provide any decisive criteria for determining whether the holder of a substance intends to "discard" it within the meaning of the directive, the Court has, in subsequent cases, provided a number of indicators from which it may be possible to infer the holder's intent. Some of these cases have concerned the distinction between the recovery of a production residue and the further processing of a by-product. Others, which are more directly relevant to the present case, concern the question whether a substance which was undoubtedly waste at one time has ceased to be waste.

[95] The first case in the latter category is ARCO Chemie Nederland Ltd. Dutch courts had sought preliminary rulings in two cases concerned with materials used as a fuel. One case concerned a by-product of a manufacturing process, known as LUWA-bottoms, which was used as a fuel in the cement industry. The second case concerned wood residues from the construction and demolition sectors delivered in the form of wood chips, which were powdered and then used as a fuel to generate electricity. An electricity company had been granted authorisation to change the operation of its power station so as to transform the wood chips into powder and use it as a fuel. The authorisation stipulated that certain quality specifications had to be agreed in respect of the wood chips, and in particular limits were fixed for the concentrations of certain substances. Reference was again made in the submissions to the OECD document.

[96] In its judgment, the Court began by re-stating, and expanding upon, the principles laid down in Vessoso and Zanetti and Inter-Environnement Wallonnie:

"36. It follows that the scope of the term 'waste' turns on the meaning of the term 'discard': (Case C-129/96 Inter-Environnement Wallonnie ABSL v Région Wallonne ECR I-7411, 7446, paragraph 26).

37. The Court has held that that term must be interpreted in light of the aim of the directive (see, in particular, Joined Cases C-206/88 and C-207/88 Vessoso and Zanetti [1990] ECR I-1461, paragraph 12).

38. In that regard, the third recital in the preamble to Directive 75/442 [in the original, unamended version] states that 'the essential objective of all provisions relating to waste disposal must be the protection of human health and the environment against harmful effects caused by the collection, transport, treatment, storage and tipping of waste.'

39. It should further be pointed out that, pursuant to Article 130(2) of the EC Treaty (now, after amendment, Article 174(2) EC), Community policy on the environment is to aim at a high level of protection and is to be based, in particular, on the precautionary principle and the principle that preventative action should be taken.

40. It follows that the concept of waste cannot be interpreted restrictively."

[97] The Court then considered the first question referred in both cases, namely whether it could be inferred from the mere fact that a substance such as LUWA-bottoms or wood chips underwent an operation referred to in Annex IIB that the substance had been discarded and was therefore to be regarded as waste for the purposes of the directive. The Court answered that question in the negative:

"46. First, as the Court has pointed out in paragraph 36 of this judgment, it follows from the wording of Article 1(a) of the directive that the scope of the term 'waste' turns on the meaning of the term 'discard'.

47. It follows more particularly from Article 4 of the directive and Annexes IIA and IIB thereto that that term includes, in particular, the disposal and the recovery of a substance or an object.

48. As stated in the note preceding the various categories listed in Annexes IIA and IIB, those annexes are intended to list disposal and recovery operations as they occur in practice.

49. However, it does not necessarily follow from the fact that certain methods of disposing of or recovering waste are described in those annexes that any substance treated by one of those methods is to be regarded as waste.

50. Although the descriptions of certain methods make express reference to waste, others are formulated in more abstract terms and, accordingly, may be applied to raw materials which are not waste. Thus category R9 of Annex IIB [prior to amendment by Commission Decision 96/350] entitled 'Use principally as a fuel or other means to generate energy', may apply to fuel oil, gas or kerosene, while category R10, entitled 'Spreading on land resulting in benefit to agriculture or ecological improvement...', may apply to fertilisers.

51. The answer to the first question in both cases should therefore be that it may not be inferred from the mere fact that a substance such as LUWA-bottoms or wood chips undergoes an operation listed in Annex IIB to the directive that that substance has been discarded so as to enable it to be regarded as waste for the purposes of the directive."

[98] The Court next considered whether it was necessary to take into consideration the fact that the substances in question were commonly regarded as waste or the fact that the substances could be recovered in an environmentally responsible manner for use as fuel without substantial treatment. In that regard, the electricity company argued that substances destined to be used in a production process which was the same as, or analogous to, that undergone by primary raw materials should not be regarded as waste, provided that the use of the substances concerned did not have a more adverse effect on human health and the environment than the use of primary raw materials. The Court responded:

"64. As the Court has already pointed out, the method of treatment or use of a substance does not determine conclusively whether or not it is to be classified as waste. What subsequently happens to an object or a substance does not affect its nature as waste, which, in accordance with Article 1(a) of the directive, is defined in terms of the holder discarding it or intending or being required to discard it.

65. Just as the concept of waste is not to be understood as excluding substances and objects which are capable of economic reutilisation (see Vessoso and Zanetti, cited above, paragraph 9), it is not to be understood as excluding substances and objects which are capable of being recovered as fuel in an environmentally responsible manner and without substantial treatment.

66. The environmental impact of the processing of that substance has no effect on its classification as waste. An ordinary fuel may be burnt without regard to environmental standards without thereby becoming waste, whereas substances which are discarded may be recovered as fuel in an environmentally responsible manner and without substantial treatment yet still be classified as waste.

67. As the Court observed in paragraph 30 of the Inter-Environnement Wallonie judgment, cited above, moreover, there is nothing in the directive to indicate that it does not apply to disposal or recovery operations forming part of an industrial process where they do not appear to constitute a danger to human health or the environment.

68. The fact that substances may be recovered as fuel in an environmentally responsible manner and without substantial treatment is, indeed, material to the question whether the use of that substance as fuel should be authorised or encouraged or to the decision as to the degree of control to be exercised.

69. Likewise, although the method of treating a substance has no impact on its nature as waste, it may serve to indicate the existence of waste. If the use of a substance as fuel is a common method of recovering waste, that use may be evidence that the holder has discarded or intends or is required to discard that substance within the meaning of Article 1(a) of the directive.

70. In the absence of specific Community provisions on proof of the existence of waste, it is for the national court to apply the provisions of its own legal system in that regard, while taking care that the objective and effectiveness of the directive are not undermined.

71. As to what is commonly regarded as waste, that element, too, is irrelevant in view of the express definition of waste in Article 1(a) of the directive, but it may also serve to indicate the existence of waste.

72. It follows that the answer to parts (a) and (b) of the second question in Case C-418/97 and parts (b) and (c) of the second question in Case C-419/97 must be that for the purpose of determining whether the use of a substance such as LUWA-bottoms or wood chips as a fuel is to be regarded as constituting discarding, it is irrelevant that those substances may be recovered in an environmentally responsible manner for use as fuel without substantial treatment.

73. The fact that that use as fuel is a common method of recovering waste and the fact that those substances are commonly regarded as waste may be taken as evidence that the holder has discarded those substances or intends or is required to discard them within the meaning of Article 1(a) of the directive. However, whether they are in fact waste within the meaning of the directive must be determined in the light of all the circumstances, regard being had to the aim of the directive and the need to ensure that its effectiveness is not undermined."

As appears from this passage, the classification of material as waste is not dependent on its economic value, its fitness for re-use, its subjection to an operation mentioned in Annex IIA or Annex IIB to the directive, or the fact that it is capable of being used in an environmentally responsible manner. There are on the other hand a number of indicators, some of which were mentioned by the Court in paragraph 73, from which an intention to "discard" within the meaning of the directive can be inferred. It is however necessary to have regard to all the factual circumstances and to the aims of the directive, and to the overall policy (noted in paragraph 39) to aim at a high level of protection of the environment.

[99] The Court made further observations about relevant indicators of an intention to discard, in the context of distinguishing between the subjection of a production residue to a recovery operation, on the one hand, and the further processing of a by-product, on the other hand:

"82. As the Court has already stated in paragraph 51 of this judgment, it may not be inferred from the fact that a substance undergoes an operation referred to in Annex IIB to the directive, such as use as fuel, that that substance has been discarded so as to enable it to be regarded as waste for the purposes of the directive.

83. On the other hand, certain circumstances may constitute evidence that the holder has discarded the substance or intends or is required to discard it within the meaning of Article 1(a) of the directive.

84. That will be the case, in particular, where the substance used is a production residue, that is to say a product not in itself sought for use as fuel.

85. The use of a substance such as LUWA-bottoms as fuel, instead and in place of a normal fuel, is a factor which may give the impression that its user is discarding it, either because he wishes or because he is required to do so.

86. The fact that the substance is a residue for which no use other than disposal can be envisaged may also be regarded as evidence of discarding. That fact gives the impression that the holder of the substance has acquired it for the sole purpose of discarding it, either because he wishes to or because he is required to, for example, under an agreement concluded with the producer of the substance or with another holder.

87. The same will apply where the substance is a residue whose composition is not suitable for the use made of it or where special precautions must be taken when it is used owing to the environmentally hazardous nature of its composition."

[100] A further matter considered by the Court was when, and as a result of what treatment, a waste substance ceased to constitute waste: the central issue in the present case. In that connection, the submissions of the electricity company, as recorded by the Advocate General, bear some similarity to certain of the submissions made in the present case:

"75. Epon considers that the wood chips are the product of a recycling operation. As part of that operation the materials must be ground to a powder as otherwise they cannot be used in the electricity generating station. Therefore, a secondary raw material is produced, that is to say a new substance that no longer constitutes waste. The origin of the substance is irrelevant in that respect. Epon again refers to the OECD and submits that there is a consensus that where a secondary raw material or residue can be used directly in a further process, possibly as a substitute for a primary raw material, it can hardly be regarded as waste. In that respect reference is also made to Inter-Environnement Wallonie in which the court held that a substance was not excluded from the definition of waste merely because it formed an integral part of an industrial production process. However, the end-product of such treatment may - in Epon's view - be regarded not as waste but as a secondary raw material. Even on the criterion of discarding, the conclusion remains the same, as there is no intention to discard in the case of a secondary raw material. That follows from the purpose of Directive 75/442, that is to say the avoidance and reduction of waste. That does not apply to secondary raw materials, such as wood chips.

76. Finally, Epon also submits that it would not be beneficial to the environment to apply the system for the control of waste to secondary raw materials, as that would cause profitability problems for the project to burn wood chips, for example. If secondary raw materials were to be regarded as waste, it would be difficult to invest in recovery of them. Primary fuels would be used instead. However, the only difference between primary and secondary raw materials lies in their origin which is irrelevant to the issue of discarding."

[101] The Court responded as follows:

"94. In that regard, it should first be noted that even where waste has undergone a complete recovery operation which has the consequence that the substance in question has acquired the same properties and characteristics as a raw material, that substance may none the less be regarded as waste if, in accordance with the definition in Article 1(a) of the directive, its holder discards it or intends or is required to discard it.

95. The fact that the substance is the result of a complete recovery operation for the purpose of Annex IIB to the directive is only one of the factors to be taken into consideration for the purpose of determining whether the substance constitutes waste and does not as such permit a definitive conclusion to be drawn in that regard.

96. If a complete recovery operation does not necessarily deprive an object of its classification as waste, that applies a fortiori to an operation during which the objects concerned are merely sorted or pre-treated, such as when waste in the form of wood impregnated with toxic substances is transformed into chips or those chips are reduced to wood powder, and which, since it does not purge the wood of the toxic substances which impregnate it, does not have the effect of transforming those objects into a product analogous to a raw material, with the same characteristics as that raw material and capable of being used in the same conditions of environmental protection.

97. The answer to part (a) of the second question in Case C-419/97 must therefore be that the fact that a substance is the result of a recovery operation within the meaning of Annex IIB to the directive is only one of the factors which must be taken into consideration for the purpose of determining whether that substance is still waste, and does not as such permit a definitive conclusion to be drawn in that regard. Whether it is waste must be determined in the light of all the circumstances, by comparison with the definition set out in Article 1(a) of the directive, that is to say the discarding of the substance in question or the intention or requirement to discard it, regard being had to the aim of the directive and the need to ensure that its effectiveness is not undermined."

[102] A number of points emerge from this passage. First, paragraph 94 introduces the concept of a "complete recovery operation": something which has the consequence that the substance in question has the same properties and characteristics as a raw material. Paragraph 96 draws a distinction between a complete recovery operation and pre-treatment. A substance which is subjected merely to the latter type of operation remains waste. That is consistent with the definition of "producer" in Article 1(b) of Directive 75/442 as "anyone whose activities produce waste ('original producer') and/or anyone who carries out pre-processing, mixing or other operations resulting in a change in the nature or composition of this waste". Secondly, in distinguishing between a complete recovery operation and pre-treatment, the criterion which the Court appears to have applied was to ask whether the operation had the effect of transforming the substance in question into "a product analogous to a raw material, with the same characteristics as that raw material and capable of being used in the same conditions of environmental protection". The transformation of the waste wood into wood chips or powder did not fulfil that criterion, because the operation did not purge the wood of the toxic substances (such as creosote) which impregnated it. Thirdly, the passage contains a reminder that even where waste has undergone a complete recovery operation which has the consequence that the substance in question has acquired the same properties and characteristics as a raw material, that substance may nevertheless be waste if its holder discards it. That is plainly correct: even the product of a recycling operation, such as glass manufactured from broken bottles, or steel manufactured from scrap metal, may be waste if its holder cannot find a market for it. The fact that the substance is the result of a complete recovery operation does not therefore permit a definitive conclusion to be drawn (as the Court stated at paragraph 95).

[103] In his Opinion in the same case, Advocate General Alber referred to the Court's statement in its judgment in Inter-Environnement Wallonie (at paragraph 33) that a distinction must be drawn between waste recovery within the meaning of Directive 75/446 and normal industrial treatment of products which are not waste, no matter how difficult that distinction might be. In that connection, Advocate General Alber observed (at paragraph 64):

"Such a distinction may be drawn only on a case-by-case basis. In doing so, account must be taken of whether all the circumstances of the case warrant or require the inclusion of the relevant substance in the waste management provided for in the Directive."

[104] Under reference to Articles 3 and 4 of Directive 75/442 in particular, and the twelfth recital in the preamble to Directive 91/156 (stating that waste must be monitored from its production to its final disposal). Advocate General Alber noted (at paragraph 67) that "the Community legislature assesses that waste, that is to say substances discarded by their holder, poses a certain threat". The Advocate General continued:

"68. As the Commission rightly submits, the danger typical of waste does not necessarily lie in the nature of the substance itself. It may also lie in the fact that the holder discards that substance and it is consequently abandoned or stored without supervision or control....

69. Where the relevant substance may pose a danger in a particular situation and must therefore be subject to the monitoring provided for in Directive 75/442, that monitoring must remain in place until the disposal or recovery operation has been completed, that is to say the substance is to be regarded as waste until that point. That also applies to a substance such as LUWA-bottoms that may possibly be recovered in a particular operation without harming the environment or human health in any way. That substance too must be subject to the supervision specific to waste until the operation has been completed, as that is the only possible way of ensuring that it will in fact be recovered in such an environmentally sound manner. However, as long as it has to be subject to such monitoring it must be regarded as constituting waste."

Subject to the caveat that, as the Court pointed out, even a substance which is the result of a complete recovery operation and has acquired the same characteristics as a raw material may nevertheless constitute waste if its holder discards it, these observations by the Advocate General appear to be consistent with the judgment of the Court.

[105] Later in his Opinion, Advocate General Alber summarised (at paragraph 109) the circumstances in which a substance which is the result of a recovery operation can be regarded as indistinguishable from a primary raw material and as such is probably (subject to the caveat mentioned above) no longer to be regarded as waste:

"If a waste material is recovered or reprocessed so that a substance is obtained that no longer poses a danger typical of waste and, when used in a normal manufacturing process, does not pollute the environment any more than, but at most in the same way as, a primary raw material, that substance probably is no longer to be regarded as waste in the sense of being subject to control or authorisation for its further use. It is for the national court and the competent authorities to examine whether or not the substance in question presents a danger typical of waste - that is to say one which goes beyond the dangers posed by a comparable primary raw material - so that supervision in accordance with the Directive must continue to be regarded as necessary. Such supervision does not preclude recycling, which constitutes a specific policy objective, and use of such substances as substitutes for primary raw materials. The substance and the recovery operation are subject to the controls provided for in the Directive to avoid harm to human health and the environment."

This approach can be traced back in the case law to the Opinion of Advocate General Jacobs in Inter-Environnement Wallonie, and the consideration there of the OECD discussion document. As was explained above, Advocate General Jacobs suggested (at paragraph 80) that the question should be asked whether the substance in question is "wholly interchangeable with another product and requires no additional regulation or supervision beyond that applicable to the product it is replacing". This approach focuses on the comparability of the substance in question with the raw or primary material for which it is said to be a substitute: comparability, that is to say, with regard to the purposes of the directive, including the protection of human health and the environment. This was also the approach of the Court in ARCO Chemie Nederland (at paragraph 96) to the question whether the substance was the result of a complete recovery operation: to ask whether the substance was "analogous to a raw material, with the same characteristics as that raw material and capable of being used in the same conditions of environmental protection."

[106] In Castle Cement v Environment Agency [2001] EWHC Admin 224, [2001] Env LR 46 Stanley Burnton J. agreed with criticism of this approach as lacking in certainty: what, it was asked, was a danger typical of waste, since any substance might constitute waste; and how did one select the primary raw material with which comparison was to be made, since the substance in question might be comparable with a number of primary raw materials, some of which were more damaging to the environment than others?

[107] Although this approach may in some circumstances be difficult to apply, it nevertheless appears to me to be in accordance with the case law of the Court (in relation to which the judgment in Mayer Parry, discussed below, is also relevant). Although not directly material, I note that the same approach is also adopted by the OECD, as explained below. Moreover, this approach appears to me to be correct in principle. The danger which is typical of waste is a danger of harm to human health or the environment caused by the manner of its disposal. It is that danger which the directive seeks to address, by making waste subject to supervision designed to ensure that it is recovered or disposed of in a manner which is controlled so as to protect human health and the environment. When it is claimed that what was waste has ceased to be waste and has become a material which can and will be used in the same way as a material which is not waste, and that it need therefore no longer be subject to such supervision, it is accordingly correct in principle to consider not only whether the material in question can and will be used without further processing in the same way as a non-waste material, but also whether the material can be used under the same conditions of environmental protection as the non-waste material with which it is otherwise comparable, without any greater danger of harm to human health or the environment.

[108] The subsequent decisions of the Court to which reference was made in submissions can be considered relatively briefly. The ASA case concerned the question whether a particular operation should be classified as the disposal of waste or the recovery of waste under Regulation No. 259/93 on shipments of waste, and is not directly relevant. The Court held (at paragraph 69 of the judgment) that it followed from Article 3(1)(b) of Directive 75/442, and the fourth recital of the preamble ("whereas recovery of waste and the use of recovered materials should be encouraged in order to conserve natural resources"), that the essential characteristic of a waste recovery operation was that its principal objective was that the waste serve a useful purpose in replacing other materials which would have had to be used for that purpose, thereby conserving natural resources. The case is of greater interest, in the present context, for a passage in the Opinion of Advocate General Jacobs:

"88. The test suggested above similarly accommodates a further factor which, although it has not been mentioned by those submitting observations, may in my view be helpful in determining whether the waste is used for a genuine and independent purpose, namely whether the holder of the waste pays for the operation or is paid for it. The Commission effectively suggested this approach in its 1989 Communication, 'A Community strategy for waste management', which sowed the seeds for the Regulation. In its Communication the Commission concludes its discussion on the movement of waste for disposal with the statement: 'The situation is different with waste to be recycled by the recipient. The holder must pay for the final disposal of waste. Where waste is for recycling, the holder of the waste is paid by the recycler.' While that proposition may not be absolute - it appears that in some sectors, such as the solvent recovery market, it is normal practice for the holder to pay the consignee in order to make the recovery operation economically viable - the direction in which payment is made seems to me to be potentially significant."

[109] The Palin Granit Oy case concerned a question whether stone left over from quarrying, which was stored on site but might be used for certain purposes, was waste. Since the leftover stone was not the product primarily sought by the operator of the quarry (who, on the contrary, sought to limit the quantity produced), the Court considered that it fell in principle into the category of "Residues from raw materials extraction and processing" under head Q11 of Annex I to Directive 75/442. The Court accepted however that such a substance might be regarded not as a residue but as a by-product, which the undertaking did not wish to "discard" but rather to exploit or market. In that regard, the Court stated:

"32. At paragraphs 83-87 of the judgment in ARCO Chemie Nederland, the Court pointed out the importance of determining whether the substance was a production residue, that is to say, a product not in itself sought for a subsequent use. As the Commission observes, in the case at issue in the main proceedings the production of leftover stone is not the applicant's primary objective. The leftover stone is only a secondary product and the undertaking seeks to limit the quantity produced. According to its ordinary meaning, waste is what falls away when one processes a material or an object, and is not the end product which the manufacturing process directly seeks to produce.

33. Therefore, it appears that leftover stone from extraction processes which is not the product primarily sought by the operator of a granite quarry falls, in principle, into the category of 'Residues from raw materials extraction and processing' under head Q11 of Annex I to Directive 75/442.

34. One counter-argument to challenge that analysis is that goods, materials or raw materials resulting from a manufacturing or extraction process, the primary aim of which is not the production of that item, may be regarded not as a residue but as a by-product which the undertaking does not wish to 'discard', within the meaning of the first paragraph of Article 1(a) of Directive 74/442, but intends to exploit or market on terms which are advantageous to it, in a subsequent process, without any further processing prior to reuse.

35. Such an interpretation would not be incompatible with the aims of Directive 75/442. There is no reason to hold that the provisions of Directive 75/442 which are intended to regulate the disposal or recovery of waste apply to goods, materials or raw materials which have an economic value as products regardless of any form of processing and which, as such, are subject to the legislation applicable to those products.

36. However, having regard to the obligation, recalled at paragraph 23 of this judgment, to interpret the concept of waste widely in order to limit its inherent risks and pollution, the reasoning applicable to by-products should be confined to situations in which the reuse of the goods, materials or raw materials is not a mere possibility but a certainty, without any further processing prior to reuse and as an integral part of the production process.

37. It therefore appears that, in addition to the criterion of whether a substance constitutes a production residue, a second relevant criterion for determining whether or not that substance is waste for the purposes of Directive 75/442 is the degree of likelihood that the substance will be reused, without any further processing prior to its reuse. If, in addition to the simple possibility or reusing the substance, there is also a financial advantage to the holder in so doing, the likelihood of reuse is high. In such circumstances the substance in question must no longer be regarded as a burden which its holder seeks to 'discard', but as a genuine product."

That passage was founded on by counsel for Scottish Power in the present case. What was said by the Court was however directed towards the question whether waste has come into existence (and in that context, to the distinction between a production residue and a by-product), rather than to the question whether what was once waste has ceased to be waste.

[110] The judgment is perhaps of greater interest in the present case for some observations by the Court of a more general nature:

"22....[T]he classification of a substance or object as waste is, as the Commission rightly submits, primarily to be inferred from the holder's actions, which depend on whether or not he intends to discard the substances in question. Therefore, the scope of the term 'waste' turns on the meaning of the term 'discard': (Case C-129/96 Inter-Environnement Wallonie [1997] ECR I-7411, 7446, paragraph 26).

....

25. Directive 75/442 does not provide any decisive criteria for determining the intention of the holder to discard a given substance or object. Nevertheless, the Court, which has been asked on a number of occasions for preliminary rulings on whether various substances are to be regarded as waste, has provided a number of indicators from which it may be possible to infer the holder's intend. The classification ... must be made having regard to those factors and in the light of the aims of Directive 75/442."

It appears therefore that "intention", in this context, has to be ascertained objectively, on the basis of the factors mentioned by the Court in the relevant judgments and in the light of the aims of the directive.

[111] Case C-644/00, R (on the application of Mayer Parry Recycling Ltd) v Environment Agency [2003] ECR I-6163 is of greater relevance. The case concerned an undertaking which dealt with waste metal packaging materials by sorting, cleaning, cutting, crushing, separating and baling them, so as to render the materials suitable for use as a feedstock in a furnace in order to produce steel. The undertaking purchased the waste, and sold the processed material to steelmakers. The processed material contained impurities and had a potential pollutant content. One question which arose was whether the materials ceased to be waste when they had been rendered suitable for use as a feedstock, or only when they had been used by a steelmaker to produce steel. A further question was as to the stage at which the materials were "recycled" for the purposes of Directive 94/62/EC on packaging and packaging waste, the expression "packaging waste" being defined for the purposes of that directive as meaning packaging material covered by the definition of waste in Directive 75/442.

[112] The Court dealt first with the question under Directive 94/62. on the basis that that directive was a lex specialis vis-à-vis Directive 75/442. In relation to that question, the Court stated:

"63. It is apparent both from the preambles and from the provisions of Directives 75/442 and 94/62 that recycling is a form of recovery. It follows from Article 3(1)(b) of Directive 75/442 and the fourth recital in its preamble that the essential characteristic of a waste recovery operation is constituted by its principal objective that the waste serve a useful purpose in replacing other materials which would have had to be used for that purpose, thereby enabling natural resources to be conserved (Case C-6/00 ASA [2002] ECR I-1961. paragraph 69). Recycling as a form of recovery must accordingly pursue the same objective.

....

67. Also, the waste may be regarded as recycled only if it has been reprocessed so as to obtain new material or a new product for the original purpose. This means that the waste must be transformed into its original state in order to be useable, where appropriate, for a purpose identical to the original purpose of the material from which it was derived. In other words, metal packaging waste must be regarded as recycled where it has undergone reprocessing in the course of a process designed to produce new material or make a new product possessing characteristics comparable to those of the material of which the waste was composed, in order to be able to be used again for the production of metal packaging.

....

73. By interpreting the definition of recycling in Article 3(7) of Directive 94/62 as meaning that the reprocessing of packaging waste must enable new material or a new product possessing characteristics comparable to those of the material from which the waste was derived to be obtained, a high level of environmental protection is ensured.

74. It is only at that stage that the ecological advantages which led the Community legislature to accord a degree of preference to this form of waste recovery are fully achieved, namely a reduction in the consumption of energy and of primary raw materials (see the 11th recital in the preamble to Directive 94/62).

75. Furthermore, it is also only at that stage that the materials at issue cease to be packaging waste and the various waste controls laid down by the Community legislature accordingly lose their rationale. Since the recycling involves the transformation of the packaging waste into new material or a new product possessing characteristics comparable to those of the material from which the waste was derived, the result of that transformation can no longer be classified as 'packaging waste'."

[113] The observations in paragraph 75, read in the context of what was said in paragraph 73 about environmental protection, are consistent with the approach adopted in the ARCO Chemie Nederland case (at paragraph 96 of the judgment, and at paragraph 109 of the Advocate General' s Opinion): that a recovery operation can be distinguished from pre-processing or other operations which result only in a change in the nature or composition of the waste, in that the former has the effect of transforming the waste into "a product analogous to a raw material, with the same characteristics as that raw material and capable of being used in the same conditions of environmental protection." Thus, whether the recovery operation involves the transformation of the waste into a material analogous to the material from which the waste was derived (ie recycling, as in Mayer Parry) or into a material analogous to a raw material (as was claimed in ARCO Chemie Nederland), in either event the material will cease to be waste, and the waste controls laid down in the Community legislation will lose their rationale, only if the material has the same characteristics as a primary material and is capable of being used in the same conditions of environmental protection.

[114] Applying that approach in the Mayer Parry case, the Court held that the "secondary raw material" (ie the feedstock material) produced by the undertaking had not been recycled, since it contained chemical impurities which had to be removed at the stage when the material was used to produce steel. The waste was recycled only when the feedstock was used by the steelmaker. The Court added, in relation to the question concerning Directive 75/442, that the answer would be no different if the concepts of "recycling" and "waste" referred to in that directive were taken into account. Indeed the Court's statement (at paragraph 75) that it was only when the steel was produced that the material ceased to be packaging waste implies that it was only at that point that the material ceased to be waste within the meaning of Directive 75/442, since the term "packaging waste" in Directive 94/62 is defined by reference to the definition of "waste" in Directive 75/442.

[115] The reasoning of Advocate General Alber in Mayer Parry was to the same effect, and echoed what he had said in his Opinion in ARCO Chemie Nederland:

"166. Moreover, a narrow interpretation is required in order that the packaging waste processed by MPR does not cease to be waste at a time when it still needs to be controlled as waste. It is apparent from the order for reference that, even after processing by MPR, the material contains impurities which call for special storage precautions, as in the case of waste, in order to avoid soil contamination."

[116] The reasoning in Mayer Parry was subsequently followed by the Court on broadly similar facts (concerned with scrap metal), in relation to Directive 75/442 alone, in the Niselli case.

[117] The definition of waste has also been considered in decisions of the English courts, to two which I was referred in the course of submissions. These decisions seek to apply the guidance given by the European Court of Justice to particular fact situations, and do not require to be considered in detail. Castle Cement was concerned with a substance known as Cemfuel, which was produced from waste solvents and was used as a fuel in cement kilns. The waste solvents were processed in a sophisticated and highly controlled manner, requiring a considerable degree of skill, to produce the fuel in accordance with a specification including minimum calorific values and maximum values for numerous metals and compounds. The fuel was used in substitution for fossil fuels. Stanley Burnton J. sought to apply the guidance given by the European Court of Justice, although he was critical of what he perceived to be its lack of clarity. His Lordship also considered the approach proposed by Advocate General Alber in ARCO Chemie Nederland to be inconsistent with the judgment of the Court in that case. Instead, his Lordship focused primarily on the nature of the process by which the fuel was produced: the blending of wastes was not sufficient to cause the constituent parts to cease to be waste, and was properly regarded as "pre-processing, mixing or other operations resulting in a change in the nature or composition of this waste", within the meaning of Article 1(b). His Lordship also noted that the fuel was potentially harmful to the environment and to health, and concluded that the regulation of its use pursuant to the directive was therefore appropriate in order to ensure that the effectiveness of the directive was not undermined.

[118] The case of Attorney-General's Reference (No 5 of 2000) [2001] EWCA Crim 1007, [2002] Env LR 5 is more remote on its facts from the present case. It concerned a condensate which was produced as a result of rendering slaughterhouse waste and offal to produce animal feed and other products. The condensate was collected and spread on farm land. It was malodorous and capable of causing water pollution. The Court of Appeal held that such a substance was capable of being "waste" within the meaning of Directive 75/442. The issues were not analysed in detail.

2. DIRECTIVE 2000/76
[119] It is necessary also to consider Directive 2000/76, albeit more briefly. The Commission presented a proposal for such a directive in October 1998, shortly after the applications were made to SEPA by SMW and Scottish Power to enable WDF to be produced at the sludge treatment centre and used at Longannet. Counsel for SEPA placed particular emphasis upon the explanatory memorandum in which the Commission explained the thinking which lay behind its initiative. Although there may be possible questions as to how and in what circumstances such a document should be used (see eg Schønberg and Frick, "Finishing, refining, polishing: on the use of travaux préparatoires as an aid to the interpretation of Community legislation", (2003) 28 EL Rev 149), no objection was taken by counsel for the other parties to my taking the contents of the explanatory memorandum into account. Since the purpose and meaning of Directive 2000/76 appear to me to be sufficiently clear, for present purposes, from the text of the directive itself, I have not in any event required to rely on the explanatory memorandum. I shall however record what it said, so far as material to the issues in the present case, out of deference to counsel's submission.

[120] In the explanatory memorandum, the Commission explained by way of introduction the problems which the proposed directive was designed to address. They included the following:

"EU legislation currently only covers the incineration of certain hazardous and municipal solid wastes, whereas many other types of waste which have a similar heterogeneous composition and may therefore pose similar potential hazards to the environment are being incinerated.

There is no consistent approach to the regulation of co-incineration of wastes, for example in cement kilns or combustion plants. This has led to increasing amounts of waste going to co-incineration, for which environmental standards may be less stringent than those required for dedicated incinerators."

[121] In section 1.1 the Commission explained the legislative background:

"In June 1989 two Council Directives were adopted to control the emission of certain pollutants from municipal waste incineration plants ...

These Directives have made a considerable contribution to the reduction of emissions of pollutants in the Community. However, their scope is restricted to municipal waste while incineration is increasingly used as a means of treatment for other wastes, such as sewage sludge, clinical waste and tyres.

In 1994 Council Directive 94/67/EC was adopted. This Directive introduces conditions for the operation of plants for incinerating the most hazardous wastes. It imposes more stringent standards for emissions than the 1989 Directives for municipal waste incineration ...

In order to fill the existing gaps the proposed Directive seeks to establish controls on the incineration of most wastes that are not covered by the Directive on hazardous waste incineration (94/67/EC). It will thus address municipal wastes, hazardous wastes excluded from the scope of 94/67/EC, such as waste oil, solvents and clinical waste as well as other non-hazardous wastes. The distinction between hazardous and non-hazardous waste is primarily based on considerations of waste management and handling rather than on incineration characteristics. Non-hazardous wastes may contain components which give rise to hazardous air pollutants upon incineration and which can form many of the same pollutants as found in the incineration of hazardous wastes."

[122] In section 1.2, the Commission considered the co-incineration of wastes:

"Over recent years there has been a significant growth in the co-incineration of wastes in industrial plants. Co-incineration is the incineration of wastes as a regular or additional fuel in plants whose main purpose is the generation of energy or the production of material products. There has been considerable development of the use of certain wastes to provide some of the energy requirements of industrial processes. The most notable are the use of wastes such as tyres, solvent residues and waste oils in cement kilns and the combustion of wastes such as sewage sludge in conventional power plants.

Considerable public concern has been expressed about the control of emissions from co-incineration plants and provisions were included in Council Directive 94/67/EC on hazardous waste incineration to establish emission limits for plants co-incinerating hazardous wastes.

However, co-incineration of non-hazardous wastes is growing and is currently not covered by existing Community legislation. Inadequate controls on co-incineration can give rise to the problems that have been associated with poorly controlled dedicated incineration plants. The proposed Directive seeks to address the existing regulatory gap and to ensure that co-incineration does not represent a loophole allowing lower standards of environmental protection.

In addition, the lack of a coherent system for control of operational conditions or emissions from co-incineration of non-hazardous wastes in the Community can lead to the undesirable practice of transboundary shipments of wastes from areas with stringent controls to areas with lower standards of environmental protection. The proposed Directive establishes a comprehensive methodology to determine the emission limit values and operational parameters for co-incineration plants, which should ensure consistent high levels of environmental protection throughout the EU."

[123] In section 1.3, the Commission explained that the impetus for the proposed directive had arisen in part from concern expressed about emissions of heavy metals, including cadmium, chromium, mercury and lead, and their effects on human health. As was explained above, Scottish Power's application for authorisation to co-fire WDF predicted consequential increases in emissions of cadmium, chromium, mercury and lead (as well as other metals) from the boiler co-firing WDF, even on the assumption that WDF constituted only 10 per cent of the composite fuel. The analysis of a sample of WDF also showed a much higher concentration of lead than the historical figure for coal fired at Longannet.

[124] In section 1.5, the Commission predicted a large increase in the amount of sewage sludge going for incineration.:

"Large increases in the amounts of other wastes going to incineration are also anticipated. The banning of sea dumping of sewage sludge, coupled with increases in production of sludge due to the implementation of the Urban Waste Water Directive, will lead to substantial investment in new incineration capacity in the EU. In the absence of effective controls on polluting emissions, these increases will lead to increased environmental effects."

[125] In section 6, the Commission considered the relationship between the proposed directive and the system of integrated pollution prevention and control established under Directive 96/61/EC (implemented in the United Kingdom by the 1999 Act and the regulations made thereunder, including in particular the 2000 Regulations):

"The prevention and control of pollution from large industrial sources is governed by Council Directive 96/61/EC on Integrated Pollution Prevention and Control (IPPC). The scope of the Directive includes installations for the incineration of waste as defined in Council Directives 89/369/EEC on new municipal waste incineration plants and 89/429/EEC on existing municipal waste incineration plants with a capacity greater than 3 tonnes per hour.

.....

The measures contained in the current Proposal are justified in view of the urgent need to update the existing emission values relating to incineration of municipal waste, to extend their application to other types of waste and co-incineration and to introduce a limit value for dioxin emissions. Full consistency between the IPPC approach and the current Proposal has been achieved by taking care that the proposed emission limit values do not hinder the overall environmental performance of the installations."

It appears therefore that the Commission considered it necessary both to impose stricter emission limits on the incineration of waste and to extend their application so as to cover other types of waste (besides the type of waste already covered by Directive 96/61) and co-incineration as well as incineration.

[126] Turning to the directive itself, the thinking underlying it appears from the recitals in the preamble. The opening recitals are concerned with the reduction of levels of emissions of a number of pollutants (including heavy metals), in accordance inter alia with international obligations undertaken by the Community and Article 174 of the EC Treaty:

"(7) Therefore, a high level of environmental protection and human health protection requires the setting and maintaining of stringent operational conditions, technical requirements and emission limit values for plants incinerating or co-incinerating waste within the Community. The limit values set should prevent or limit as far as practicable negative effects on the environment and the resulting risks to human health."

A further concern appears to be the need for a harmonisation of national laws governing the incineration or co-incineration of waste, so as to avoid distortions of competition and obstacles to trade:

"(9) In its Resolution of 24 February 1997 the Council also underlines the importance of Community criteria concerning the use of waste, the need for appropriate emission standards to apply to incineration facilities, the need for monitoring measures to be envisaged for existing incineration plants, and the need for the Commission to consider amending Community legislation in relation to the incineration of waste with energy recovery in order to avoid large-scale movements of waste for incineration or co-incineration in the Community.

(10) It is necessary to set strict rules for all plants incinerating or co-incinerating waste in order to avoid transboundary movements to plants operating at lower costs due to less stringent environmental standards."

A further concern appears to be a rationalisation of the scope of Community legislation so as to cover the incineration or co-incineration of waste in general, and not only the incineration of municipal waste and hazardous waste:

"(12) Council Directive 96/61/EC sets out an integrated approach to pollution prevention and control in which all the aspects of an installation's environmental performance are considered in an integrated manner. Installations for the incineration of municipal waste with a capacity exceeding 3 tonnes per hour and installations for the disposal or recovery of hazardous waste with a capacity exceeding 10 tonnes per day are included within the scope of the said Directive.

(13) Compliance with the emission limit values laid down by this Directive should be regarded as a necessary but not sufficient condition for compliance with the requirements of Directive 96/61/EC.....

(15) Council Directives 89/369/EEC and 89/429/EEC on the prevention and reduction of air pollution from municipal waste incineration plants have contributed to the reduction and control of atmospheric emissions from incineration plants. More stringent rules should now be adopted and those Directives should accordingly be repealed.

(16) The distinction between hazardous and non-hazardous waste is based principally on the properties of waste prior to incineration or co-incineration but not on differences in emissions. The same emission limit values should apply to the incineration or co-incineration of hazardous and non-hazardous waste but different techniques and conditions of incineration or co-incineration and different monitoring measures upon reception of waste should be retained.

.....

(22) A single text on the incineration of waste will improve legal clarity and enforceability. There should be a single directive for the incineration and co-incineration of hazardous and non-hazardous waste taking fully into account the substance and structure of Council Directive 94/67/EC of 16 December 1994 on the incineration of hazardous waste. Therefore Directive 94/67/EC should also be repealed."

A further concern appears to be to close a potential loophole, whereby controls over pollution caused by the burning of waste at dedicated incineration plants might be avoided if the waste were co-incinerated at installations which had another primary purpose:

"(27) The co-incineration of waste in plants not primarily intended to incinerate waste should not be allowed to cause higher emissions of polluting substances in that part of the exhaust gas volume resulting from such co-incineration than those permitted for dedicated incineration plants and should therefore be subject to appropriate limitations."

[127] The objectives of the directive are explicitly stated in Article 1:

"The aim of this Directive is to prevent or to limit as far as practicable negative effects on the environment, in particular pollution by emissions into air, soil, surface water and groundwater, and the resulting risks to human health, from the incineration of waste. This aim shall be met by means of stringent operational conditions and technical requirements, through setting emission limit values for waste incineration and co-incineration plants within the Community and also through meeting the requirements of Directive 75/442/EEC."

[128] Article 2(1) states that the directive covers incineration and co-incineration plants. Article 3(1) defines "waste" as meaning "any solid or liquid waste as defined in Article 1(a) of Directive 75/442/EEC." Article 3(5) defines "co-incineration plant", as mentioned earlier, as meaning:

"any stationary or mobile plant whose main purpose is the generation of energy or production of material products and:

-which uses wastes as a regular or additional fuel; or

-in which waste is thermally treated for the purpose of disposal".

[129] The subsequent articles establish a system of controls over plants where waste is incinerated or co-incinerated, covering inter alia the emission of heavy metals. Special provision is made for large combustion plants co-incinerating waste.

[130] It appears from the foregoing that one of the objectives, and effects, of the directive is to address a regulatory gap, whereby the co-incineration of non-hazardous waste was not previously subject to control under Community legislation on waste incineration. Even if that activity were regulated under national law, differences between national laws could result in distortions of competition and obstacles to trade, which the directive also seeks to address. If a power station uses "wastes" (as defined in Directive 75/442) as a regular or additional fuel, it therefore falls (in part, at least) within the definition of "co-incineration plant" and comes within the scope of the directive. It will do so whether the use of the waste as fuel meets the criteria for categorisation under Directive 75/442 as a recovery operation, or is more aptly categorised under that directive as a disposal operation.

3. GUIDANCE DOCUMENTS
[131] In addition to the Community legislation itself, reference was also made by counsel for Scottish Power to two guidance documents: one, a circular published by the Scottish Office, the Welsh Office and the Department of the Environment in 1994, and the other published by the OECD in 1998.

[132] The Government circular was published at a time when the only significant judgments issued by the Court were those in Vessoso and Zanetti and Zanetti and Others. The guidance has largely been overtaken by the subsequent judgments, and in particular by the important judgment in ARCO Chemie Nederland.

[133] The member countries of the OECD have entered into a number of agreements, in the form of OECD decisions, relating to the control of transfrontier movements of waste. Since there is a considerable overlap between the member countries of the OECD and the Member States of the European Union, it is to be expected that the OECD decisions and the corresponding Community legislation may be mutually influential. Nevertheless, the OECD decisions do not form part of Community law. The OECD Final Guidance Document for Distinguishing Waste from Non-Waste, to which reference was made by counsel for Scottish Power, is intended to provide guidance in the context of the OECD decisions, and is not therefore directly relevant to the interpretation of Directive 75/442. Like the earlier discussion document discussed by Advocate General Jacobs in Inter-Environnement Wallonie, the final document (which was cited in submissions, and referred to in the Opinion of Advocate General Alber, in ARCO Chemie Nederland) mentions (at paragraph 22) considerations which can also be found in the case law of the Court, including the following:

"h) Is the use of the material as environmentally sound as that of a primary product?

i) Does the use of the material in a production process cause any increased risks to human health or the environment greater than the use of the corresponding raw material?"

Paragraph 43, concerned with the question when a waste ceases to be waste, equally bears some resemblance to the case law of the Court:

"43 A waste ceases to be a waste when a recovery, or another comparable, process eliminates or sufficiently diminishes the threat posed to the environment by the original material (waste) and yields a material of sufficient beneficial use. In general the recovery of a material (waste) will have taken place when:

(a) it requires no further processing by a Table 2.B operation;

AND

(b) the recovered material can and will be used in the same way as material which has not been defined as waste;

AND

It is however the case law of the Court itself which appears to me to be relevant, rather than the OECD document.

SUMMARY AND CONCLUSIONS
[134] From the foregoing discussion of the Community legislation and the case law of the European Court of Justice, it appears to me that the relevant principles of Community law are sufficiently clear to enable a decision to be reached without it being necessary to make a preliminary reference to the Court. That was also a matter of agreement between the parties to the proceedings, although their agreement is not of course binding upon the court.

[135] Since any material is capable of constituting "waste" within the meaning of Article 1(a) of Directive 75/442, in the event that it is discarded, whether it constitutes waste depends not on the nature of the material itself but on whether it is "discarded" within the meaning of that provision. "Discard", in this context, has a special meaning. It encompasses such uses of waste as are mentioned in Article 3(1)(b) and Annexes IIA and IIB. It includes in particular the use of waste as a means of generating electricity, replacing the use of a primary fuel such as coal which would otherwise have been used for that purpose. It also includes the recycling of waste and the reclamation from it of substances which are intended for re-use. It follows that waste may be of economic value, and that its holder may be said to "discard" it notwithstanding that he puts it to some commercially valuable use.

[136] Directive 75/442 does not provide any decisive criteria for determining whether the holder of a substance intends to "discard" it within the meaning of the directive. Decisions must be taken on the basis of the circumstances of individual cases, and in the light of the aims of the directive, foremost among which is the protection of human health and the environment. The Court has indicated in its case law a number of factors from which it may be possible to infer whether the holder intends to "discard" the material in question. Most of these factors have been identified in cases concerned with the distinction between a production residue and a by-product, and have reflected that context: for example, whether the material is produced intentionally; whether further processing is required before the material can be used; and whether the material is certain to be used. Other factors which have been mentioned are of a more general nature: for example, whether the material is commonly regarded as waste; and whether, if it is used as fuel, its use as fuel is a common method of recovering waste. Since the status of a material has to be assessed on the basis of a comprehensive assessment of the circumstances of the particular case, it follows that none of the factors mentioned is conclusive in itself. The fact, for example, that a material is produced intentionally, requires no further processing before it can be used, and is certain to be used, cannot be taken in isolation as determinative of its status.

[137] In a case where there is no doubt that a material was at one time waste, and the question is whether it has ceased to be waste, the evaluation required is different to some extent; but it is still directed towards deciding whether the material is "discarded", that decision being taken on the basis of the circumstances of the individual case, and in the light of the aims of the directive. The danger which is typical of waste is a danger of harm to human health or the environment caused by the manner of its disposal. The directive seeks to address that danger by making waste subject to supervision designed to ensure that it is recovered or disposed of in a manner which is controlled so as to protect human health and the environment. Once a material has been classified as waste, it therefore remains subject to that supervision at least until that objective has been achieved. It is only then that the material may cease to be waste within the meaning of the directive. When it is claimed that what was waste has ceased to be waste as the result of a complete recovery operation, and has become a material which can and will be used in the same way as a material which is not waste, and that it need therefore no longer be subject to such supervision, it is accordingly necessary to assess whether that claim is well-founded. That assessment requires consideration not only of whether the material in question can and will be used without further processing in the same way as a non-waste material, but also of whether the material can be used under the same conditions of environmental protection as the non-waste material with which it is otherwise comparable, without any greater danger of harm to human health or the environment. Other factors, including some of those mentioned above, may also be relevant in considering whether waste has been subjected to a recovery operation or merely to pre-treatment. One factor mentioned by Advocate General Jacobs is the direction in which payment is made: whether the person carrying on what is claimed to be a recovery operation pays for the operation or is paid for it.

[138] In the present case, there is no doubt that the sewage sludge received by SMW at the sludge treatment centre is "waste" within the meaning of Directive 75/442. Scottish Power however maintain that the operation carried out at the sludge treatment centre is a complete recovery operation, which has the effect that the waste becomes a material which is not waste, but can and will be used in the same way as coal.

[139] It appears however that the WDF cannot be used under the same conditions of environmental protection as the coal which would otherwise be used at Longannet, or without any greater danger of harm to human health or the environment. The environmental risks involved in the burning of WDF are reflected in the conditions governing the use of WDF (and also in the description of the authorised process, so far as relating to delivery and storage) contained in the authorisation of the process at Longannet: notably, those relating to the concentrations of heavy metals and other substances in the WDF and in the flue gases and fly ash from the boilers burning WDF, and those relating to odour control. Those conditions have been considered necessary even in the context of other conditions - also designed to protect the environment - limiting the combustion of WDF at Longannet both as a proportion of the total fuel and as an annual tonnage. The nature of the environmental risks has been explained above. The WDF itself, and its emissions, contain a higher concentration of heavy metals than the coal that would otherwise be burned at Longannet. It also has the potential to contain higher levels of contamination, for example following a pollution event affecting the sewage sludge from which the WDF is produced (although that danger should not be exaggerated, given the mixing of effluent streams at the waste water treatment works and the resultant dilution effect). The WDF also has an odour: although that too should not be exaggerated, it has resulted in the installation of odour masking equipment at Longannet. Contact between the WDF and moisture has to be avoided in order to prevent the WDF absorbing water, in which event it would become a less dry form of sewage sludge. In these circumstances, the processing of the sewage sludge into WDF cannot be regarded as a complete recovery operation, and therefore does not alter its status as "waste" within the meaning of Directive 75/442.

[140] That conclusion is supported by a number of other factors. First, it appears to me that the operation which takes place at the sludge treatment centre does not fall within any of the categories listed in Annex IIB of Directive 75/442, including in particular category R3 ("Recycling/reclamation of organic substances..."); nor does it appear to me to be analogous to any such operation. It is clear that the sewage sludge is not recycled; and there is no distinct substance reclaimed from the sludge by extracting moisture from it and forming it into pellets. If one asks what is recovered from the sludge, the answer is, energy; and if one asks how it is recovered, the answer is, by burning. Although the parties do not appear to be in agreement as to whether the sewage sludge is capable of being used as fuel from the outset, it is clear that it is capable of being burnt, with energy being recovered from it, from the stage when it has been sufficiently dried to constitute sewage cake. The operation carried out at the sludge treatment centre dries the sewage sludge to a greater extent so as to reduce its volume and concentrate its calorific value, thereby rendering the sewage sludge easier to transport and more viable (economically and technologically) as a co-fuel at Longannet. The sewage sludge is however destined for burning as a fuel from the moment it is received at the sludge treatment centre; and the operation which it undergoes there merely facilitates its use as a fuel by drying and pelletising it to prepare it for burning. The operation is most aptly regarded as a form of pre-treatment falling within Article 1(b) of the directive:

"pre-processing, mixing or other operations resulting in a change in the nature or composition of the waste."

This conclusion is consistent with the fact that SMW is paid by Scottish Water for carrying out the operation at the sludge treatment centre. It is also consistent with the fact that, as it seems to me, sewage sludge would generally be considered to be waste, whatever its moisture level, and with the fact that the burning of dried sewage sludge as a fuel is a recognised method of disposing of waste.

[141] Secondly, the establishment and operation of the sludge treatment centre, and the use of the WDF produced there at Longannet, were from the outset envisaged, in combination, as an integrated means of enabling the Scottish Power group of companies to secure the PFI contract which was available for the disposal of Greater Glasgow's sewage sludge, as a result of Scottish Water's need to establish a new means of disposal in order to comply with the legislation giving effect to Directive 91/271. Although the treatment of the sewage sludge is designed specifically to render it economically viable for use as a fuel, it remains the case that the use of the treated sewage sludge as such a fuel is, as was stated in SMW's August 1998 application to SEPA, "an economically viable disposal route". That the primary purpose of the burning of WDF at Longannet is to enable Scottish Water's sewage sludge to be disposed of is reflected in the design of the co-firing system at Longannet so as provide what was described in Scottish Power's application to SEPA as "the operational flexibility required to dispose of 100,000 [tonnes] of WDF per annum". These matters are not however critical to my conclusion, which would be the same even if the WDF were traded as a commodity in an open market.

[142] The contrary arguments largely depend on giving "discard" its ordinary meaning. Scottish Power do not have the intention to "discard" the WDF, in the ordinary sense of the word. They pay for it, and use it for commercial purposes in order to generate electricity and to obtain renewable energy certificates. It is apparent, however, that "discard" has a special meaning in the context of Directive 75/442. In consequence, the fact that the WDF has an economic value to Scottish Power, and the fact that it is produced to their specification, are not inconsistent with its being "discarded" and, in consequence, constituting waste. Equally, the argument that a material ceases to be "waste" when it is transferred to a holder who intends to put it to a beneficial use is inconsistent with the approach adopted by the European Court of Justice (eg in the cases of ARCO Chemie Nederland and Mayer Parry).

[143] Nor is there merit in the argument that to classify the WDF as waste, if it has the consequence that the WDF does not continue to be burned at Longannet, is inconsistent with the policy, reflected in Directive 75/442, of encouraging the recovery of waste material rather than its disposal. The directive seeks to encourage the recovery of waste, but also to regulate the process by which recovery is achieved to the extent necessary to protect the environment. The effect of classifying the WDF as waste is not to prevent its being recovered by being used as a fuel to generate electricity; but it is to prevent that operation (or any other operation involving the WDF) taking place without the necessary precautions also being taken to protect the environment. In particular, one consequence of classifying the WDF as waste is to bring any power station using the WDF as a co-fuel within the ambit of Directive 2000/76, in accordance with the intention that that directive should ensure stricter control over emissions of heavy metals and other pollutants from all power stations where waste is used as fuel.

[144] It follows that the court must refuse to grant the declarator sought by Scottish Power that the WDF is not waste as defined by Article 1(a) of Directive 75/442 (as amended). So far as concerns the other orders sought, however, it was indicated at the first hearing that Scottish Power wished to consider a number of issues which might be pursued at a second hearing. In the circumstances, the case will be put out for a By Order hearing so that discussion can take place as to whether those issues are to be pursued; if so, as to the procedure to be followed; and as to the appropriate form of any order to be pronounced at the present stage.