Agenda item 9a Confidential Paper 7.7

South Tees Development Corporation

25 July 2018

The Proposed South Tees Development Corporation (Land at the former steel works, Redcar) Compulsory Purchase Order

Purpose

1. A key priority and responsibility of the Corporation is to secure the comprehensive regeneration of the land within its area ("the Area"). Fundamental to achieving this objective is acquiring the necessary land interests within the Area.

2. As the Board is aware, the Corporation has already entered into discussions with landowners with a view to acquiring their land interests by private negotiation. However, mindful that such negotiations may take some time and may ultimately be unsuccessful, in February 2018 the Corporation made an in-principle resolution to make a compulsory purchase order ("CPO") to acquire any land interests compulsorily should it become necessary.

3. Since February, discussions with landowners have continued in tandem with preparation of the CPO. However, whilst discussions with some landowners are progressing well, it has not yet been possible to acquire the necessary land interests by agreement. Market interest in bringing forward development across the Area is high but the Corporation is concerned that delays in securing land assembly could lead to developers looking elsewhere for land which is more readily available.

4. This paper accordingly seeks authority for the Corporation to proceed to make the CPO and to refer the CPO to Tees Valley Combined Authority ("TVCA") for consent to submit the CPO, once made, to the Secretary of State for confirmation. The extent of the land proposed to be acquired pursuant to the CPO is indicatively shown edged red on the attached map at Appendix 1 ("the Site").

5. It should be noted that the CPO is the method of last resort and private treaty negotiations will continue to acquire land by agreement wherever possible up to and following making of the CPO.

Recommendations and points for decision

6. That the Board:

6.1 authorises the making of the CPO to acquire the necessary land interests in the Site and, as necessary, the creation of new rights, pursuant to sections 201 and 207 of the Localism Act 2011 ("2011 Act") and the Acquisition of Land Act 1981 ("1981 Act") to secure the regeneration of the Area by facilitating the regeneration or development of the Site;

6.2 agrees to authorise the Chief Executive to take all necessary steps to make the CPO and thereafter to continue the process for the confirmation and implementation of the CPO; and

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6.3 agrees to the submission of the CPO to TVCA for consent to submit the CPO, once made, to the Secretary of State for confirmation pursuant to section 207(3) of the 2011 Act.

Details

7. The Vision for the Area

7.1 The Area comprises approximately 4,500 acres and represents an international level opportunity to grow the economy of the Tees Valley and to significantly enhance its profile both as a UK region and a centre for industrial excellence. In terms of new development potential, the available land area principally comprises the Site including the large former SSI and Tata Steel land zones in Redcar, Lackenby, Grangetown and South Bank that were, until recently, at the heart of the steel making industry on Teesside, and Redcar Bulk Terminal. However, the regeneration initiative brings opportunity to, and indeed may rely on, existing major operators within the Area, such as PD Ports and British Steel, and also outside, at neighbouring locations such as Wilton International.

7.2 The Corporation's vision for the Area is enshrined in the South Tees Regeneration Masterplan ("the Masterplan") which went out to consultation in October 2017 and will be formally adopted by the Corporation in September 2018. It envisages transformation of the Area into a hotbed of new industry and enterprise for the Tees Valley which will make a substantial contribution to the sustained economic growth and prosperity of the region and the communities it serves. It sets out the ambition of the Corporation to create up to 20,000 new jobs across the Area in higher skilled sectors and occupations heavily focused on manufacturing innovation and advanced technologies, within a high value, low carbon, diverse and inclusive circular economy. The Vision further extends to realising a telling, positive change in the external perceptions of the Area and the wider Tees Valley to potential inward investors, and to promoting and encouraging environmental improvement and bio-diversity.

7.3 The Masterplan identifies the Area as being a unique environment for industrial use with land suited for, amongst other things, new investment in process and energy sectors. However, the strategy for regeneration of the Area, as set out in the Masterplan, seeks to preserve sufficient flexibility in uses, land allocations and phasing to cater for anticipated changing requirements across the proposed 25-year programme. New infrastructure traversing the Area will be a key priority to unlock delivery of regeneration and represents a major investment proposition which will require and can only be financially supported by delivery in phases.

7.4 The vision for the Area aligns with and is supported by national and local planning policy.

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7.5 The National Planning Policy Framework (“NPPF”) confirms that the development plan continues to be the starting point for determining the acceptability of development. There is a presumption in favour of sustainable development which the NPPF identifies as having three “dimensions”, namely an economic, social and environmental role. It is clear that the regeneration of the Site, being previously-developed land, will contribute to sustainable development in accordance with the NPPF. The regeneration will contribute towards planning for prosperity (an economic role), planning for people through job creation (a social role) and planning for the environment by remediating the land (an environmental role).

7.6 In relation to the economic role, the NPPF encourages use of the planning system “to building a strong, responsive and competitive economy, by ensuring that sufficient land of the right type is available in the right places and at the right time to support growth and requirements, is available to allow growth, including the provision of infrastructure”.

7.7 In relation to the social role, the NPPF encourages the planning system as “supporting strong, vibrant and healthy communities, by providing the supply of housing to meet the needs of present and future generations; and by creating a good quality built environment, with accessible local services that reflect the community’s needs and support its health, social and cultural well-being”.

7.8 And, finally, in relation to the environment, the NPPF states that the planning system should perform the role of "contributing to and protecting and enhancing our natural, built and historic environment; and, as part of this, helping to improve biodiversity, use natural resources prudently, minimise waste and pollution, and mitigate and adapt to climate change including moving to a low carbon economy".

7.9 The local planning authority, Redcar & Cleveland Borough Council ("the Council"), adopted its Local Plan in May 2018. It identifies the regeneration of the Area, through securing inward investment and job creation, as a key priority. It notes in the foreword to the Local Plan that it has been prepared to respond positively to the economic challenges facing the borough, not least the closure of the SSI steelworks.

7.10 At policy LS 4, it sets out the South Tees Spatial Strategy, namely:

"The Council and its partners will aim to: Economy a. deliver significant economic growth and job opportunities through the South Tees Development Corporation and Tees Valley Enterprise Zone at Wilton International and South Bank Wharf; b. support the regeneration of the South Tees Development Corporation area through implementing the South Tees Area Supplementary Planning Document; c. grow the environmental and recycling sector; d. investigate opportunities to create a new energy hub to support offshore wind and sub- sea engineering sectors; e. support the expansion and protection of the port and logistics sector;

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f. improve existing employment areas and provide a range of modern commercial premises that meet contemporary business requirements including the target sectors of the South Tees Area Supplementary Planning Document; g. continue development on general industrial and business estates; h. give the area an identity and make it attractive to inward investment; i. develop the chemical, technology and energy production industries at Wilton International; j. support the existing steel industries and take a lead role in supporting the future regeneration of former steel sites as part of the South Tees Development Corporation; k. enhance the quality and range of services and facilities that serve the needs of those working in the South Tees employment area; l. encourage clean and more efficient industry in the South Tees area to help reduce carbon dioxide emissions and risk of environmental pollution; m. support development related to Sirius Minerals' Polyhalite project; and n. support the extension of the road network to unlock the development potential of South Tees. Connectivity o. improve and maintain access links between the South Tees and the strategic road network; p. support improvements to the strategic and local road networks to support economic growth; q. deliver rail infrastructure improvements to support an increased movement of rail freight; r. investigate the feasibility for providing a new rail halt at Wilton International; s. maintain and improve public transport connectivity with settlements in the borough and beyond; t. support the extension of the road network to unlock the development potential of South Tees; u. maintain and enhance walking and cycling routes from nearby towns to the South Tees employment areas; v. improve access to, and the quality of, broadband internet; Environment w. enhance the environmental quality of employment through well planned boundary treatments; x. secure decontamination and redevelopment of potentially contaminated land; y. protect European sites, and safeguard and improve sites of biodiversity interest particularly along the and the estuary and encourage integrated habitat creation and management; z. enhance the environmental quality of the River Tees and coastline; aa. safeguard and enhance the significance of buildings, sites, settings and areas of heritage and cultural importance during the 'Dorman Long' tower at South Bank Coke Ovens supporting its adaption to enable alternative uses; bb. encourage improvements to access, interpretation and wildlife conservation and biodiversity across the area; cc. support the development of the South Tees District Heating System; and dd. support the development Carbon Capture and Storage to de-carbonise the local economy" 7.11 Policy ED 6 Promoting Economic Growth further provides that "High tech and knowledge driven development should be focused within the South Tees Development Corporation area, at Kirkleatham Business Park and Cleveland Gate Business Park….."

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7.12 The Local Plan states, at paragraph 5.31, that "despite the cessation of steel making at SSI in Redcar, the steel sector continues to be an important part of the local economy, and it is one which the Council wishes to support, alongside other employment opportunities".

7.13 The South Tees Area SPD ("the SPD") was adopted in May 2018. Its objectives are to secure delivery of the vision for the Area in accordance with the Masterplan by:

(a) Ensuring strong alignment with UK Government's Industrial Strategy;

(b) Forming strategic alliances with major operators so that the Tees Valley presents a coordinated, world class offer to the international marketplace;

(c) Prioritising uses connected with advanced manufacturing and advanced and new technologies;

(d) Prioritise and support development uses aligned with a low carbon, circular economy, while delivering redevelopment within a framework of reduced energy costs and waste minimisation; (e) Focusing on highly-skilled employment generating opportunities, which balancing this with the need to create a wide spectrum of job opportunities;

(f) Evaluating redevelopment proposals not only from a direct jobs perspective, but as potential catalysts for job creation across the wider Tees Valley;

(g) Delivering efficient connectivity across the Area through enhanced on-site transport infrastructure and the creation of an integrated and safe transport network, which takes account of the needs of a variety of users and includes sustainable travel measures, to realise optimal functionality;

(h) Delivering redevelopment in a way that provides long term sustainability, reduces pollution, manages the water environment, protects the historic environment, contributes to habitat protection, safeguards biodiversity and enhances green infrastructure, open space and landscape character;

(i) Ensuring the regeneration of the Area makes a major contribution to improving education and skills across the Tees Valley;

(j) Using the regeneration opportunity to strengthen transport connections with Redcar town centre and other urban centres and to deliver economic and community benefits.

7.14 Development Principle STDC1 of the SPD sets out the Council's regeneration priorities to achieve the comprehensive redevelopment of the Area in order to realise an exemplar world class industrial business park.

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7.15 It is established at Development Principle STDC2 that the Council and the Corporation will work in partnership to promote a comprehensive approach to development. Development that has the potential to stymie or prevent further phases of development or to reduce market demand or adversely affect delivery of essential infrastructure will be resisted. Land assembly will be key to achieving a comprehensive development and, as such, where necessary it is established that powers to compulsory acquire land will be used. Whilst compulsory purchase is a measure of last resort, it is considered to be an essential tool to achieve economic growth in the area in a timely manner. It is especially important to ensure that investment opportunities are not lost because of the lack of availability or deliverability of development plots.

8. Delivering the Vision for the Area

8.1 The proposals for the Area as set out in the Masterplan are for industrial uses. This is to mitigate the level of ground remediation required across the Area, minimising conflicts with the many safety restrictions (e.g. various blast zones), and avoiding introducing users that would otherwise conflict with the existing industrial and commercial activities within the area. The proposed remediation strategy:

(a) is based on a do minimum/do necessary approach, to an end-user specification, where there is flexibility in the redevelopment strategy to arrange end user site allocations to minimise conflict with localised, more heavily contaminated areas wherever possible;

(b) does not create a blank canvass for development but rather takes a balanced approach to remediation, applying innovative techniques and solutions to mitigate cost, optimise development configuration and, ultimately, realise a higher level of project viability;

(c) is geared to achieving earliest possible response times on the release of land in line with firm developer interest, so that revenue can be realised as soon as practically possible, working to an overall, co-ordinated vision;

(d) potentially remediates some of the most contaminated locations to the minimum extent necessary for long-term safe-keeping as open space except where localised areas of otherwise valuable real estate may be prejudiced by heavy contamination, for example the Coke Ovens Bi-products Plant at South Bank;

(e) allocates the localised, likely more onerous areas of contamination to later phases of the programme;

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(f) retains the landfill zone as tip facilities, with an end solution involving reshaping, capping, the installation of leachate and gas management measures, and implementation of a structured landscaping scheme with a view to using the area primarily for alternative energy generation including energy from landfill gas thus offering lower cost energy provision to site users as a development incentive.

8.2 Subject to land assembly of the Site, it is envisaged that the first development could be achieved as early as 2019 and that, overall, approximately 2,300 acres of land could be released for redevelopment. The proposed regeneration will, however, be delivered in phases, potentially over a 12-year period designed to produce an acceptable balance between investment and revenue in the earlier years of the regeneration. The proposed strategy identifies the necessity of a balance being struck between the need to incentivise development through early investment in strategic infrastructure improvements and site preparation works and the disposal of land for development.

8.3 While demolition is proceeding across the first four or five years of the programme, development priorities can be focused on other areas. Priorities will be determined having regard to the following:

(a) areas requiring little ground remediation and site preparation;

(b) areas that can best accommodate end user needs;

(c) areas where transport access/egress is presently afforded, even if this is a short-term solution;

(d) developments that can manage, in the early years, with existing on-site infrastructure, to minimise initial investment in new infrastructure;

(e) areas that do not require major demolition.

8.4 The above strategy is underpinned by the objective of prioritising uses connected with advanced manufacturing, advanced and new technologies, alternative energy and energy innovation, and innovation in recycling. The focus is on highly-skilled employment generating opportunities, while balancing this objective with the need to create a wide spectrum of jobs across a range of skill and income levels. Delivering major potential for workforce upskilling and the realisation of an increase in both the mean salary levels and GVA for the Tees Valley economy are further important drivers behind the aspirations that inform and shape the Corporation's vision for the Area.

8.5 As indicated above, the Corporation's aspiration is for the Area, of which the Site forms part, to become a benchmark, world class example of a modern, large-scale industrial park. The redevelopment programme targets a development proposition built from uses that are not in conflict with the traditional market sectors of neighbouring and wider industrial centres in the Tees Valley. The focus is therefore on those development uses that are clearly better suited to the Site, taking cognisance of its setting and attributes; uses that can benefit most optimally for the area’s unique selling points, such as proximity to water and excellent port facilities.

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8.6 The planning policy framework as described above supports an economic led strategy for the future redevelopment of the Site. They provide support for employment operations relating to heavy industry and logistics (e.g., port/port-related uses, metals manufacturing) alongside the provision of necessary supporting infrastructure. Further, they promote renewable energy opportunities for the Area, including the Site, and, on the themes of innovation and new technologies, seek to develop the Area's economy in the energy and recycling sectors.

9. The Site

9.1 The Corporation considers that securing land assembly of the Site, including the acquisition of various rights such as over airspace or underground, is vital to delivering its vision for the Area. The Site comprises approximately 2,300 acres as indicatively shown edged red on the attached map. It includes:

(a) the Redcar iron making complex;

(b) the Lackenby steel making facilities;

(c) the South Bank Coke Ovens;

(d) Redcar Bulk Terminal;

(e) South Bank Wharf;

(f) Grangetown Prairie;

(g) South Gare and Coatham Sands;

(h) Coatham Marsh; and

(i) British Steel.

9.2 A full investigation of ownership of the Site is ongoing and will be completed before the CPO is made. Completion of this work will enable the final extent of the land within the Site and to be included in any CPO to be determined. It is not however expected to change significantly.

9.3 The majority of the Site is held in four different land ownerships – Sahaviriya Steel Industries Plc (in liquidation), Tata Steel Limited, British Steel and Redcar Bulk Terminal Limited. Other landowners include PD Ports Teesport, the Council, Sembcorp, Network Rail, Crown Estates and various owners of relatively small areas across the Site.

10. Private Treaty Negotiations

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10.1 The Corporation has, and continues, to progress negotiations with existing landowners where relevant with a view to securing agreement on the acquisition of their land interests by private negotiation without the need if possible for compulsory purchase. If any further third-party interests are identified as part of the land ownership investigation then the Corporation will similarly seek to acquire by agreement where possible. Such negotiations will continue alongside the CPO process.

Tata Steel UK Limited ("Tata")

10.2 Tata is a major landowner with a freehold interest in a large part of the Site, some of which is leased to other parties, including SSI. Tata also has the benefit of option and pre-emption agreements over parts of the Site. Although their ownership includes some large land parcels, it is overall fragmented and subject to various cross-rights and covenants in favour of other landowners, including rights of way, rights to use railway tracks, service rights, along with deeds of grant with statutory undertakers and pipelines for various utilities etc.

10.3 Negotiations with Tata have progressed on the basis that both Tata and the Corporation are keen to conclude matters by agreement although Tata acknowledges and understands that the Corporation intends to progress a CPO in parallel with those negotiations. It is anticipated that a legal agreement will be concluded with Tata in autumn 2018 to give effect to the Heads of Terms agreed, with an advance purchase of approximately 136.5 acres due to complete shortly.

10.4 Key work on site investigations and environmental assessments continues to be progressed to understand the nature of the assets and liabilities held by Tata, which are many and varied. As the Board is aware, Tata is contributing towards the cost of these major studies as well as providing their direct knowledge of the Site including the various plant and facilities, utilities and site infrastructure.

Sahaviriya Steel Industries Plc ("SSI")

10.5 SSI (in liquidation) holds major land interests within the Site comprising close to 900 acres, part freehold and part leased from Tata. As the Board is aware, following SSI going in to liquidation in October 2015, these land interests are now managed by South Tees Site Company on behalf of the Official Receiver (OR). Similar to Tata, these land holdings include some large land parcels but overall they are fragmented and subject to various cross-rights and covenants in favour of other site owners including rights of way, rights to use railway tracks, service rights, along with deeds of grant with statutory undertakers and pipelines for various utilities etc. SSI’s acquisition of the land and shares was financed by a consortium of three Thai banks – Siam Commercial Bank, TISCO and Krung Thai ("the Thai Banks").

10.6 The Corporation has been in discussions and negotiations with the OR and the Thai Banks and outline terms have been agreed for acquisition of the land subject to valuation review and development of a suitable contractual structure regarding SSI’s interest in Redcar Bulk Terminal Ltd. It is hoped that a legal agreement will be concluded in autumn 2018.

Redcar Bulk Terminal Limited ("RBT")

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10.7 RBT owns Redcar Bulk Terminal which is the deepest port in England, with a river frontage at the mouth of the Tees and approximately 300 acres of land. It is a vital gateway to the SSI and Tata land as has been evidenced by the extent of investor interest in it as an integral part of the Site. The terminal was the point of entry and processing of bulk materials required by the steelmaking business on adjacent land. When SSI closed, RBT lost approximately 90% of its previous bulk trade and has been a loss-making business for most of the time since then. More recently, trading conditions have improved, but it continues to be largely ad-hoc business, although it is hoped that investment by Sirius Minerals will change this position significantly. SSI in liquidation owns 50% of the shares in RBT which acts as a constraint on its potential.

10.8 The Corporation has been in discussion with RBT with a view to acquiring the terminal by agreement. The Corporation has also been in discussions with SSI in liquidation and Greybull Capital as shareholders of RBT. It is hopeful of concluding the acquisition by agreement of SSI's shares during in autumn 2018. Discussions with Greybull Capital will continue alongside the CPO process.

10.9 The Corporation has also agreed terms with Sirius Minerals (YPPPL) in respect of a proposed JV at RBT and on adjoining land at Bran Sands, the latter being owned by Sirius. Sirius has separately and with the Corporation’s full support entered into a lease and handling agreement with RBT that secures Sirius’ initial interest in RBT.

British Steel Limited ("BSL")

10.10 BSL is also owned by Greybull Capital which acquired the business from Tata Steel. As a part of that transaction, Greybull also acquired RBT. The Corporation strongly supports the continued presence of BSL within the Area as an important industrial asset and employer in the Region. However, BSL owns a large stocking ground, parts of which are under-utilised whilst the site is also severed by a rail line owned by SSI in liquidation, separating it from the adjoining Trunk Road.

10.11 The Corporation is in negotiations with BSL for the acquisition of a part of the stocking ground with a view to acquiring it for redevelopment. At present, the area for acquisition is under discussion. The Corporation has also, more recently, suggested an alternative proposal to BSL for the development of a waste to energy power plant at the site.

PD Teesport Limited ("PDP")

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10.12 PDP are the owners and managers of Teesport as well as the Strategic Harbour Authority. Meetings have taken place between senior management from PDP, the Mayor and CEO from STDC. STDC has been clear that it has no intention or desire to use CPO powers to acquire the main Teesdock estate. However, it does need to research land title issues and as a precaution have CPO powers available to ensure that there are no ransom strips between the Teesdock site and the land the STDC is acquiring. Further meetings are being arranged to build alignment at a strategic level between STDC and PDP.

10.13 PDP also owns the frontage of Redcar Bulk Terminal and leases this wharf to RBT. The current lease comes to an end in 2033 and PDP has indicated to the Corporation that it intends to resume possession of the wharf at that point. This is considered to be a vital piece of infrastructure, the future of which is key to securing investment within the Site and the wider area. It is also evident that the capacity of this part of the river has the potential to be very significantly extended by aligning RBT with the proposed Sirius wharf at Bran Sands. Whilst the Corporation believes that the interests of the Harbour Authority are aligned with its own objectives, it is very concerned at the lack of certainty post-2033.

10.14 PDP leases approximately 300m of derelict timber wharf from the Crown Estates. This wharf has been disused for several decades whilst it and a narrow strip of PDP land stands between the major block of Tata land at South Bank and the river. The Masterplan envisages significant redevelopment of this frontage and the PDP land and wharf are integral to that.

10.15 Whilst it is hoped that the Corporation can conclude agreements with PDP in respect of these key areas of land, discussions to date have failed to resolve the position, so these areas are included on a precautionary basis.

Sembcorp

10.16 The Corporation has signed a Memorandum with Sembcorp that confirms the parties’ desire to work together for the better development of the Corporation Area and Wilton International. The Corporation has a high degree of confidence that various land rights identified as being necessary across land owned by Sembcorp will be acquired by agreement.

Considerations

11. The Corporation's Compulsory Purchase Power

11.1 The Corporation's powers of compulsory acquisition are set out in section 207 of the 2011 Act as applied by The Tees Valley (Combined Authority) Functions Order 2017. Section 207 empowers the Corporation to acquire land within the Area or elsewhere by agreement or to acquire land within the Area or within the TVCA area by compulsory acquisition. These powers must be exercised for the purposes of the Corporation's object of securing the regeneration of the Area or for purposes incidental to those purposes.

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11.2 The Corporation must resolve to formally exercise its compulsory purchase powers before it can make a CPO. Thereafter, following making of the CPO, the Corporation must submit the CPO to the Secretary of State for confirmation. It must also secure the consent of the TVCA before submitting the CPO to the Secretary of State. The final decision on the CPO rests with the Secretary of State who will decide whether to confirm the CPO having considered the justification for the CPO.

11.3 If there are objections to the CPO, then the Corporation will have an opportunity to try and secure their resolution. If withdrawal of the objections cannot be secured, the Secretary of State will decide whether to consider them at a public inquiry, a hearing or by written representation procedure.

11.4 In justifying the CPO, the Corporation must have regard to the factors set out in the Government guidance entitled 'Compulsory purchase process and the Crichel Down Rules' (March 2018) ("Guidance"). It provides that the Corporation must successfully demonstrate that there is a compelling case in the public interest for the compulsory acquisition of the land subject to the CPO. The Corporation must further demonstrate:

(a) how the regeneration is to be funded and demonstrate that funds will be available to complete acquisitions and implement the proposed regeneration scheme within a reasonable timescale after possession is secured;

(b) that there is a reasonable prospect of the proposed scheme being delivered within a reasonable timescale following the CPO;

(c) that the Corporation has first sought to acquire the land by agreement;

(d) that there are no impediments to implementation of the proposed scheme or that any such impediments are capable of being resolved in good time.

11.5 The Guidance does not contain specific guidance on the use of the Corporation's power of compulsory purchase under the 2011 Act but the guidance in section 4 relating to compulsory purchase by urban development corporations under the Local Government, Planning and Land Act 1980 is of assistance. In particular, section 4 states that, in deciding whether to confirm a CPO made by an urban development corporation, the Secretary of State will take into account the statutory objectives of the urban development corporation and consider the following factors:

(a) whether the Corporation has demonstrated that the land is in need of regeneration;

(b) what alternative proposals (if any) have been put forward by the owners of the land or other persons for regeneration;

(c) whether regeneration is on balance more likely to be achieved if the land is acquired by the Corporation;

(d) the recent history and state of the land;

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(e) whether the land is in an area for which the Corporation has a comprehensive regeneration scheme; and

(f) the quality and timescale of both the Corporation's regeneration proposals and any alternative proposals.

12. The Case for the CPO

12.1 The Corporation considers that the use of its compulsory purchase power is fully justified. It has had regard to the matters set out in the Guidance as follows.

Compelling case in the public interest

12.2 The Corporation has considered whether the use of a CPO is justified, having regard to the public benefits of the regeneration of the Site proceeding and the harm to the individual landowners who will be subject to the CPO. The Corporation is of the view that, without a CPO, full land assembly of the Site is unlikely to be achieved and the regeneration and redevelopment of the Site will not be secured or, at best, will be significantly reduced and delayed as redevelopment comes forward in a piecemeal fashion over a long period of time. Consequently, without the CPO, the public benefits associated with the redevelopment of the Site will not be realised or will be much reduced. The Corporation considers therefore that there is a compelling case in the public interest for the Corporation to use its compulsory purchase power.

Funding

12.3 The Corporation has obtained advice from GVA on the likely land acquisition costs. The funds to meet these costs will be met by a combination of direct Government funding, funds provided by TVCA and, if necessary investment funds from infrastructure funds and other investors. The exact mix of this will depend upon the final land values and emerging plans for the phased development of the Site. TVCA have agreed, in principle, to fund certain acquisition costs.

12.4 In addition, it is expected that development on early phases of the Site will fund later phases. Given the investor and market interest in the Site, the Corporation is confident that the regeneration of the Site is capable of being funded to enable it to be delivered within a reasonable timescale.

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Delivering the redevelopment of the Site

12.5 Market interest in the Site has been very strong. In the last two years and in advance of any formal marketing programme, there has already been over 100 development investment enquiries and this significant level of interest continues to grow. Many proposals involve capital investment in the hundreds of millions and single billions of pounds. The types of uses and operations being proposed by potential investors align incredibly well with the Corporation's vison for redevelopment and with the planning policy framework. Proposed uses are very much in step with the aspiration of realising developments in the areas of advanced manufacturing, new and emerging technologies, energy innovation, and the realisation of a low carbon circular economy. They provide a high level of confidence at a very early stage in the life of the Corporation that the market potential exists for realising major employment-generating development in a financially viable manner. The principal areas of interest to date include:

(a) major power generation;

(b) steel and other metals manufacturing;

(c) metals recycling (e.g., aluminium);

(d) special metals compounds production;

(e) automotive manufacturing;

(f) advanced bulk materials processing/manufacture;

(g) component manufacture for offshore energy industries;

(h) large-scale submarine cable manufacture;

(i) oil and gas rig decommissioning/platform refurbishment;

(j) energy innovation and energy storage;

(k) rail-related industries; and

(l) advancements in waste management.

12.6 The Corporation is maintaining a progressive dialogue with potential investors, working collaboratively with such parties to accommodate their development requirements wherever possible and practical, while at the same time ensuring the tenets and principles of the vison for redevelopment and the planning policy framework are not at risk of being compromised. The uses being considered and encouraged (as listed above) are not in conflict with other industrial centres in the Tees Valley.

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12.7 Whilst the Corporation intends to continue to engage with third party investors with a view to concluding any agreements and bringing forward any proposals as soon as may be, it is not intended to make securing such agreements or consents a prerequisite to making any CPO. The Corporation considers land assembly and remediation to be the main barriers to redevelopment of the Site coming forward, matters which the Corporation is best placed to address. The Corporation is confident that, following the Corporation's intervention and given the strong market interest in the Site and the support for delivering the Corporation's vision for the Area, the proposals for regeneration and redevelopment of the Site are deliverable.

Impediments to Delivery

12.8 The Masterplan, which is in accordance with the planning policy framework, sets out a clear vision for the regeneration of the Site. The Corporation considers that it is best placed to facilitate delivery of that vision, having the ability and funding to achieve land assembly and commence remediation of the Site, to allow development proposals to come forward. The Corporation is confident that any impediments to achieving that outcome are capable of being resolved in good time and that there is a reasonable prospect of development proposals being delivered within a reasonable timescale following any CPO.

12.9 One potential impediment to the regeneration of the Site will be the necessity to secure planning permission.

12.10 Any development proposals coming forward on the Site will be consented pursuant to one of two planning consent processes:

(a) developments relating to energy, transport, water, waste water or waste and certain business and commercial developments, meeting or exceeding thresholds set out within Part 3 of the Planning Act 2008 (as amended), will follow the consent process for Nationally Significant Infrastructure Projects (NSIPs). Applications for such developments will be submitted to and determined by the Secretary of State. Where consent is granted for an NSIP, this will take the form of a development consent order. Such an order has the ability to combine the granting of planning permission with a range of other separate consents; and

(b) developments not meeting the NSIP criteria will be determined by the Council, under the Town and County Planning Act 1990 (as amended). Applications may be submitted to the Council that seek either a full and detailed permission or outline permission, which grants permission for the development principle with some, or all, of detailed elements being reserved for consent in a later reserved matters application.

12.11 Under either regime, developments will require screening to establish whether an environmental impact assessment must be undertaken to support the application.

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12.12 It is not necessary for planning permission to have been secured before a CPO is made but there should be no reason why planning permission should not be capable of being secured. Having regard to the adopted planning policy framework against which any applications for planning permission will be determined and the Masterplan which is in accordance with that framework, the Corporation is confident that there is no reason why planning permission should not be secured in a timely fashion.

Other considerations

12.13 The Corporation has further considered the following matters:

(a) Whether it has been demonstrated that the land is in need of regeneration

There can be no doubt that the Site is in need of regeneration. Whilst it was in operational use as a major and successful steelworks for nearly 100 years, it now lies largely vacant and disused. The closure of the steelworks in 2015 has had a significantly detrimental impact on the local community and economy. In addition, the extensive contamination on the Site means that there are significant risks with the Site, as well as significant costs associated with keeping the Site safe. Bringing the Site back into use must therefore be a key priority. It is not an option to do nothing. There is strong and recognised support within Government and the local community for redevelopment of the Site. This is reflected in the adopted Local Plan, the SPD and the Masterplan.

(b) What alternative proposals (if any) have been put forward by the owners of the land or persons for regeneration

So far as the Corporation is aware, no alternative proposals have been put forward for regeneration of the Site. The Corporation considers that the fragmented ownership of the Site and the costs of remediating the Site will continue to act as a barrier to any regeneration proposals being brought forward. It will only be through intervention from the public sector, namely by the Corporation, that regeneration of the Site will be achieved.

(c) Whether regeneration is on balance more likely to be achieved if the land is acquired by the Corporation

As indicated above, the Corporation considers that the fragmented ownership, legacy buildings and the extensive contamination of the Site act as a barrier to the Site being regenerated in a comprehensive and timely manner. Any site assembly and remediation by the private sector is unlikely to occur within a reasonable timeframe. Accordingly, the Corporation’s ability to use compulsory purchase powers to secure site assembly is more likely to achieve regeneration and realise the potential of the Site.

16

Agenda item 9a Confidential Paper 7.7

(d) The recent history and state of the land

Until 2015, much of the Site was in operational use as a steelworks. Steel production ended in 2015 but the infrastructure and plant from that use remains largely undisturbed on the Site. The South Tees Site Company is responsible for making sure the infrastructure and plant is kept safe and managing the contamination on the Site (being a COMAH Top Tier site) to ensure that it does not endanger the environment or human health. This is at great cost to the public purse and cannot continue indefinitely. At the same time, the state of the land and buildings (and the extensive and significant contamination) limits the potential uses for the Site and acts as a barrier to its regeneration.

(e) Whether the land is in an area for which the Corporation has a comprehensive regeneration scheme

Securing the redevelopment of the Site is in line with the Corporation's statutory objectives of securing the regeneration of its Area. The Corporation has a clear vision for achieving this outcome as set out in section 7 of this report.

(f) The quality and timescale of both the Corporation's regeneration proposals and any alternative proposals

The redevelopment proposals for the Site have been the subject of a comprehensive master planning exercise which has been consulted upon by the Corporation. It sets out a clear vision for the Area, of which the Site forms part, and the SPD which supports the Masterplan will be a material consideration which underpins future decision making on developments within the Area. This, together with the Corporation achieving land assembly through a CPO, will ensure that any development proposals coming forward on the Site are of good quality and will contribute towards achieving the vision for the Area. The lack of any alternative proposals supports the Corporation's view that, without its intervention, redevelopment of the Site would be much delayed and would only come forward in a suboptimal piecemeal fashion.

Conclusions

12.14 The Corporation considers that the acquisition of all interests in the Site is required to secure the comprehensive redevelopment of the Site to deliver regeneration within the Area. The Corporation is satisfied that, if made, the CPO is in accordance with all statutory requirements and objectives and that there is a compelling case in the public interest for the CPO to facilitate the regeneration of the Site to enable delivery of a high-quality regeneration scheme contributing to the economic and social well-being of the local area.

Other Considerations

17

Agenda item 9a Confidential Paper 7.7

13. CPO Process and Programme

13.1 The CPO process can be lengthy. The following key stages and timescales are likely to apply:

Stage Timescale

Secure TVCA approval to submission of the CPO to the August 2018 Secretary of State for confirmation Make the CPO and serve notice on affected landowners August 2018

Objection period ends (at least 21 days) September 2018

Preparation for the public inquiry and negotiation with September 2018 – April objectors to secure withdrawal of objections 2019

Public inquiry May 2019

Secretary of State decision October 2019

Service of confirmation notices on affected landowners October 2019

Implementation of the CPO and vesting of first land October 2019 - January interests in the Corporation 2020

13.2 If no objections are received or any objections that are received are resolved then it is possible to dispense with the need for a public inquiry. In such circumstances, confirmation and implementation of the CPO could be secured within a quicker timescale to enable vesting of the first land interests in the Corporation late 2018.

14. Special Category Land

Public Open Space

14.1 Part of the land proposed to be acquired by the CPO comprises public open space. The land is owned by Tata and is widely used by the public for recreation purposes, including for walks along the coast, dog walking and other outdoor pursuits. The land is left largely unmanaged by Tata and there is little safeguarding in place to ensure its continued availability and amenity.

18

Agenda item 9a Confidential Paper 7.7

14.2 Compulsory purchase legislation recognises the importance of public open space, which is defined as "any land laid out as a public garden, or used for the purposes of public recreation, or land being a disused burial ground" (section 19(4) of the 1981 Act) and gives it special protection by providing that the compulsory purchase of public open space is subject to special parliamentary procedure unless the Secretary of State gives a certificate confirming his satisfaction that one or more of three conditions have been met. The most appropriate condition to be met in this case is that the public open space is being purchased in order to secure its preservation or to improve its management (section 19(1)(aa) of the 1981 Act). The Guidance states, at paragraph 232, that:

"In some cases, the acquiring authority may wish to acquire land to which section 19 applies…..but do not propose to provided exchange land because, after it is vested in them, the land will continue to be used as open space. Typical examples might be where open space which is privately owned may be subject to development proposals resulting in a loss to the public of open space; or where the local authority wish to acquire part or all of a privately owned common in order to secure its proper management.

"Such purpose might be 'improvement' within the sense of section 226(1(a) of the Town and Country Planning Act 1990, or a purpose necessary in the interests of proper planning (section 226(1)(b)). The land might be neglected or unsightly….perhaps because the owner is unknown and the authority may wish to provide, or to enable provision of, proper facilities. Therefore the acquisition or enabling powers and the specific purposes may vary"

14.3 In tandem with making the CPO, the Corporation proposes to apply to the Secretary of State for a certificate on the grounds set out in section 19(1)(aa) of the 1981 Act that, by acquiring the land, the Corporation will be able to safeguard it and secure its better utilisation as set out in Chapter 9 of the Masterplan.

Statutory Undertakers' Land

14.4 Statutory undertakers (including utility companies and Network Rail) have special protection where a CPO affects their operational land. The Corporation is mindful of the need to negotiate with any statutory undertakers for the acquisition of the necessary land interests or to resolve any objection made by them with a view to concluding any agreement protection agreement or easements which may be required in good time.

19

Agenda item 9a Confidential Paper 7.7

15. Overriding Third Party Rights and Restrictive Covenants

15.1 Any land acquired by the Corporation may be subject to third party rights and restrictive covenants which limit or prohibit regeneration and thereafter use of that land for its intended purpose. In this respect, the Corporation will be able to rely on its power in section 203 of the Housing and Planning Act 2016 ("2016 Act") to overcome such rights and restrictive covenants. The section provides that, a person may (i) carry out building or maintenance work on land or (ii) use land, even if it involves interference with a relevant third party right or interest or breach of a restriction on use if the land has been acquired (compulsorily or by agreement) by the Corporation, planning permission is in place and the building or maintenance work relates to the purpose for which the land was acquired. Compensation for any interference or breach may be payable pursuant to section 204 of the 2016 Act. It should be noted that there are some circumstances where the power is not available; for instance, in the case of rights vested in statutory undertakers.

16. Financial Implications

16.1 There are two key areas of financial exposure in progressing any CPO:

• the cost of progressing the CPO process; and

• the quantum of compensation payment to which affected parties will be entitled following compulsory purchase.

16.2 The cost of the CPO process will include legal and counsel fees, professional fees, including advice on compensation and any expert evidence required to justify the CPO, land referencing fees, costs of any public inquiry, costs of securing compromise agreements with any objectors to the CPO and costs of complying with any statutory requirements, including advertisement costs.

16.3 The most significant potential cost is the potential compensation payable to landowners for their land interests. If negotiations to acquire by private treaty fail to secure the acquisition of the various land interests then the land will be acquired through a General Vesting Declaration ("GVD") or by service of a Notice to Treat/Notice of Entry. A person wishing to claim compensation must make a reference to the Lands Chamber (Upper Tribunal) within 6 years from the date on which possession of the land is taken or in the case of a GVD when it becomes effective.

17. Blight

17.1 The making and submission of a CPO to the Secretary of State creates statutory blight and a blight notice may be served by the occupier of a business with a rateable value of less than £36,000 requiring the Corporation to purchase their land under certain circumstances, reflecting their inability to sell their property on the open market because of the CPO. The Corporation considers the likelihood of a successful blight notice to be low.

20

Agenda item 9a Confidential Paper 7.7

18. Human Rights Implications and Public Sector Equality Duty

18.1 The Human Rights Act 1998 incorporated into domestic law the European Convention on Human Rights ("ECHR"). The ECHR includes provisions in the form of the Articles, which aim to protect the rights of the individual. Section 6 of the Human Rights Act 1998 prohibits public authorities from acting in a way which is incompatible with rights protected by the ECHR.

18.2 In progressing with any CPO, the Corporation will need to consider the impact of the CPO on human rights. The ECHR places direct obligations on public bodies such as the Corporation to demonstrate that the use of compulsory purchase powers is in accordance with the law, is in the public interest, and that the use of the such powers is proportionate to the ends being pursued. In particular, the Corporation should have regard to the provisions of Article 1 of the First Protocol and Articles 6 and 8 to the ECHR.

18.3 Article 1 of the First Protocol of the ECHR states that “every natural or legal person is entitled to peaceful enjoyment of his possessions” and that “no one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by the law and by the general principles of international law….”. Whilst the owners of the land comprised in the CPO may be deprived of their property if the CPO is confirmed and thereafter implemented, this will be done in accordance with the law.

18.4 Article 6 of the ECHR further provides that: “in determining his civil rights and obligations ….everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law”. The Article 6 rights will be met by the procedures for objection and confirmation to the CPO, the right to bring a legal challenge in the High Court under the Acquisition of Land Act 1981 and the right to have any claim for compensation determined by the Lands Chamber (Upper Tribunal).

18.5 The Corporation will need to be satisfied, before making the CPO, that the CPO strikes a fair balance between the public interest in seeing the regeneration proceed (which is unlikely to happen in the absence of the CPO) and the private rights which will be affected by the CPO.

18.6 In addition, in making any CPO, the Corporation will need to mindful of its public sector equality duty (section 149 of the Equality Act 2010), which requires public bodies to have due regard to the need to eliminate discrimination, advance equality of opportunity and foster good relations between different people when carrying out their activities. In particular, the Corporation will need to consider its equality duty in its decision making and endeavour to understand how different people with protected characteristics will be affected by its activities.

Conclusions

21

Agenda item 9a Confidential Paper 7.7

19. The redevelopment of the Site is a key priority and necessary to securing the regeneration of the Area. However, the fragmented ownership of the Site and the need for the Site to be remediated are barriers to its redevelopment. Intervention by the Corporation by the making of a CPO to secure land assembly and implementation of a remediation strategy on the Site will remove these barriers and facilitate delivery of the Corporation's vision for the Site as set out in the Masterplan. It will further provide greater certainty that land assembly can be achieved within a reasonable timescale which will enable the Corporation to capitalise on the proposals presently coming forward from third party investors.

20. The Corporation is satisfied that, if made, the CPO will be in accordance with all statutory requirements and objectives and that there is a compelling case in the public interest for the CPO.

Appendices:

Appendix 1 - Draft CPO Map

Jonathan Bretherton

22

Agenda item 9a Confidential Paper 7.7

APPENDIX 1

DRAFT CPO MAP – to be tabled at meeting

23

Redcar Teesside Works - Referencing Map

2 1

3

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Registered Ownership

Un-registered Land

Title Redcar Teesside Works - Referencing Map

Date: Version Number: 01 May 2018 2.0

This map is based upon Ordnance Survey Scale material with the permission of Ordnance 1:8000 @A0 Survey on behalf of the Controller of Her Majesty's Stationery Office © Crown copyright and database rights 2018