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Financial assurance was introduced as a regulatory tool following a number of incidents where EPA conducted a cleanup. This is intended to prevent the Victorian community bearing the resulting financial cost.
The Environment Protection (Scheduled Premises) Regulations 2017 specify which scheduled activities must submit financial assurance. These include premises that have licences to conduct prescribed industrial waste management, landfills, bulk storage and container washing.
Three publications were released in 2016 providing guidance to industries requiring financial assurance:
These documents replace Guidelines for determining financial assurances – Schedule 4 premises (publication 456) and Determination of financial assurance for landfills (publication 777).
Updates have recently been made to the following publications that describe how to comply with financial assurance requirements:
All sites that have a licence condition to maintain a financial assurance will be reviewed against the reformed model. EPA will prioritise the implementation based on risk and will work with duty holders to agree to feasible timeframes for submitting a financial assurance.
Financial assurance proposals should be prepared using the guidance documents above and address the following components (at a minimum):
Financial assurance proposals should be sent to financial.assurance@epa.vic.gov.au
The Environment Protection (Scheduled Premises) Regulations 2017 specify which scheduled activities are required to submit financial assurance.
Scheduled activities required to have financial assurance as part of licences are landfills, PIW management (including PIW composting), container washing, and bulk storage facilities.
Additionally, financial assurance can be a requirement of a works approval or pollution abatement notice associated with any of these activities, as well as for contaminated sites requiring long-term management or onsite soil containment.
All sites that have a licence condition to maintain a financial assurance will be required to provide one.
EPA will prioritise this work based on risk and will contact duty holders individually to advise of the required timeframes for submitting a financial assurance. The time permitted will allow sufficient time for the administrative tasks involved in providing the financial assurance.
Financial assurance proposals should be prepared using the new guidelines and be in a letter style addressing the following components at a minimum:
The new calculation guidelines encourage duty holders to minimise risk through providing means to reduce the amount. This can be achieved for PIW management facilities by any combination of the following:
Landfill operators can reduce their financial assurance amount through progressive rehabilitation of the landfill.
For local councils operating landfills, EPA accepts internal financial provisioning to comply with financial assurance requirements. This is to ensure that adequate funds are set aside for closure, rehabilitation, and aftercare costs.
If EPA has requested a calculation of landfill closure, rehabilitation, and aftercare costs, local councils must prepare the requested calculation using EPA guideline 1596 and submit it as evidence that anticipated costs have been appropriately evaluated.
Further, they must follow the Local Government Victoria guideline “Accounting for landfills” that sets out principles-based guidance to comply with the accounting standard and financial reporting requirements for internal provisioning.
EPA expects that it will continue to require bank guarantees as the form of financial assurance in most cases, however other types of financial assurance may occasionally be appropriate. The final Types of FA guideline provides guidance on circumstances where alternative types of financial assurance may be acceptable.
EPA advises duty holders to prepare a proposal describing the proposed financial assurance amount and type/s. If the proposed type of financial assurance is not a bank guarantee, the duty holder must substantiate why the alternative type is justified and how risk to EPA would be mitigated. This should include an overview of premises operations, reference to the criteria in the guideline, financial position of the duty holder, duty holder environmental track record and how the duty holder intends to fund any remedial or rehabilitation works required at the site.
Holding insurance for sudden and accidental events and gradual pollution is prudent for any duty holder; this applies to a range of duty holders beyond those that are required to provide financial assurance.
Insurance is not generally available for anticipated costs such as landfill rehabilitation or disposal of stockpiles of waste, which are required to be addressed under financial assurance requirements. No policies have yet been presented that provide this coverage.
At this stage there are no operating mutual funds available for duty holders to join. EPA is most likely to accept mutual funds as a form of financial assurance when proposed by an industry association.
Page last updated on 25 Jun 2018