A Judicial Review claim against the government's decision to withdraw £100m of credits from a household waste PFI in Cheshire has failed.
Cheshire West & Chester and Cheshire East Councils claimed the department for environment, food and rural affairs used a flawed methodology to assess the merits of Cheshire's 25-year scheme to dispose of around 180,000 tonnes of waste annually.
Both local authorities also said ministers under-estimated benefits which would have accrued from the scheme.
The funding was withdrawn as part of the government's spending review in October 2010. Viridor was the preferred developer for £850m PFI. The firm planned to build a mechanical and biological treatment plant at the former Ineos chemical works at Griffiths Road, Northwich.
Mr Justice Langstaff sitting in the High Court in Leeds dismissed the councils' case on all five counts put to him.
Langstaff ruled that the government had been entitled to consider the national position regarding waste disposal and to take into account estimates on how much public financial support would be needed to meet landfill targets imposed through European legislation.
The Judge decided that the process the government had followed in reaching its decision on which projects to support, was justified. This decision was based partly on the fact that, "the Government decided on a macro-political and macro-economic basis that spending had to be cut significantly and quickly."
Cllr Mike Jones, Conservative leader of Cheshire West & Chester Council, said: "We feel that we were completely justified in asking for a Judicial Review and extremely disappointed that the hearing did not go in our favour.
"In total, around £4.5m of taxpayers' money was spent on a detailed and lengthy procurement process designed to identify a provisional preferred bidder.
"This process – designed to find a vital long-term solution to the disposal of Cheshire's household waste – had just been completed when the funding was withdrawn."
Both authorities have applied for permission to appeal.