Leeds City Council could have to fork out nearly £1m in compensation if its controversial incinerator scheme fails to win planning consent, it has emerged.
Money would be paid to Veolia ES Aurora Ltd, the company the council has chosen to build and operate the electricity-generating incinerator that will burn household waste under a 25-year Private Finance Initiative (PFI) contract.
The contract is due to be signed soon, while the planning application for the project will not be determined until next year.
A council report says that if the scheme is terminated as a result of failure to obtain planning permission “in circumstances where Veolia have used all reasonable endeavours,” the firms gets compensation.
A confidential section of the report, seen by the Yorkshire Evening Post, says the sum would be about £930,000, “which represents the anticipated development costs to Veolia and their contractors, plus any breakage costs associated with forward contracts.”
A spokesman for the firm said the costs were “nowhere near” the figure of £1m.
The project budget includes a fund to help meet the costs of any appeal should planning permission be refused.
The report says: “Once this sum has been exhausted, the costs of any appeal are split 90-10 between the council and Veolia respectively.”
Planning delays could also prove costly for the council.
A decision is expected next spring but a six month delay could land the council with an extra £350,000 a year for the operational life of the contract.
Sarah Covell, of the No 2 Incinerator campaign, said the intention to sign a contract before the planning outcome was known smacked of “putting the cart before the horse.”
A council spokeswoman said: “Veolia are responsible for gaining planning permission.
“They have to demonstrate that they’ve made all reasonable endeavours to submit a sound planning application and secure planning permission before contractual clauses about compensation kick in.
“It’s standard on these types of contracts for compensation to be paid should the applicant be refused planning permission through no fault of their own, as they will clearly incur costs.
“As the planning process will be quite lengthy, it’s in the council’s interests to sign the contract with Veolia prior to planning permission being secured.
“The matter of compensation should Veolia fail to secure planning permission will not compromise the planning process in any way.
“The part of the council which acts as the planning authority is a statutory body which must work independently from the part of the council procuring the incinerator.
“In the eventuality that compensation clauses are invoked, the level of compensation payable is significantly lower than on many other waste contracts of this type as Veolia are funding the project themselves rather than borrowing from the banks.
“The planning authority will consider the planning application purely on planning related matters and will follow all the necessary statutory requirements.”
If the scheme is approved, it will be built on the former wholesale market site in Cross Green and, over the lifetime of the contract, is forecast to save the council £203m in landfill tax charges.
Robert Hunt, Veolia Environmental Services’ Executive Director, said: “Essentially throughout this process we are endeavouring to deliver Leeds City Council’s chosen waste management solution.
“If this solution does not receive planning permission then it is standard practise across the industry to share some of the research and planning costs with our client.
“However, these costs are nowhere near the figure of £1million pounds. I can assure all residents that the £1million figure is a made up figure and is simply untrue.”