Licences and approvals

Financial assurances


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Financial assurance overview and guidance documents

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):

  • amount (including supporting calculations)
  • type/s – if the proposed type is not a bank guarantee, the proposal should include a justification and how risks to EPA are managed through use of the proposed type
  • an overview of the premises and operations
  • an overview of the company
  • any information supporting the environmental track record of the company.

Financial assurance proposals should be sent to financial.assurance@epa.vic.gov.au

Landfill estimates must be assessed by an environmental auditor

EPA now requires an EPA-appointed auditor, as opposed to a ‘suitably qualified person’, to assess landfill financial assurance estimates prepared by duty holders. This requirement, and the assessment form that goes with it, will enable a streamlined, efficient approval process that minimises back and forth between duty holders and EPA.

The Landfill financial assurance calculation assessment form (form F1014) must be completed by an environmental auditor and submitted with duty holder estimates.

EPA will be requesting all active and closed landfills to submit up-to-date estimates using this new process, in stages. EPA will contact operators to let them know when they are required to submit an estimate. We understand this is a new process and we will provide support and time extensions where they are legitimately required.

Common questions related to auditor assessments have been answered below.

If you would like to provide feedback on your needs and how they can be accommodated during this rollout process, or have any questions, contact the financial assurance team on 1300 372 842 (1300 EPA VIC) or financial.assurance@epa.vic.gov.au.

Amending or releasing financial assurances

Duty holders can use Application for amendment or release of financial assurance (form F1002) to apply for an amendment to an existing financial assurance or a release of financial assurance.

Duty holders may apply for an amendment to the amount of financial assurance when there is a change to the environmental conditions underpinning the calculation of the approved financial assurance amount, by contacting EPA via financial.assurance@epa.vic.gov.au.

Applications for release of financial assurance should be submitted after EPA has confirmed the corresponding surrender of the licence or notice revocation.

Applications must be accompanied by sufficient evidence supporting an amendment or release of financial assurance to assist EPA to assess the application as quickly as possible.

Q&A on financial assurances + Expand all Collapse all

  • What activities does financial assurance apply to?

    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.

  • How long do duty holders have to submit their financial assurance?

    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.

  • What should a financial assurance proposal contain?

    Financial assurance proposals should be prepared using the new guidelines and be in a letter style addressing the following components at a minimum:

    • amount (including supporting calculations)
    • type/s – if the proposed type is not a bank guarantee, the proposal should include a justification and how risks to EPA are managed through use of the proposed type
    • an overview of the premises and operations
    • an overview of the company
    • any information supporting the environmental track record of the company.

    Financial assurance proposals should be sent to financial.assurance@epa.vic.gov.au

  • How can EPA duty holders reduce the amount of their financial assurance obligation?

    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:

    • reducing the amount of waste permitted to be stored on their site
    • including licence sub-limits for wastes that are expensive or difficult to treat or dispose
    • nominating amounts of waste or containers that will have storage agreements in place and therefore would be returned to the waste owners if required.

    Landfill operators can reduce their financial assurance amount through progressive rehabilitation of the landfill.

  • What do public entities including local councils need to do to comply with financial assurance requirements?

    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.

  • When can a duty holder use a type other than bank guarantee?

    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.

  • Is insurance considered to be financial assurance?

    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.

  • Is there a mutual fund that duty holders can join?

    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.

Q&A on landfill estimate auditor assessments + Expand all Collapse all

  • Is the auditor required to prepare the estimate or assess the estimate prepared by the duty holder?

    The estimate is to be prepared by the duty holder or their consultant, then assessed by the auditor.

  • Who is responsible for determining the financial assurance amount?

    EPA is responsible for deciding the financial assurance amount. The auditor assessment is a key input to EPA’s decision-making process, however EPA owns this process.

    EPA issues the letter to the duty holder determining the amount and type of the financial assurance.

  • Is the auditor being asked to accept liability for the whole estimate being correct?

    No. The auditor declaration has been deliberately drafted to have a very narrow focus on the appropriateness of the closure and aftercare activities. Assumptions and uncertainties highlighted by the auditor will have less reliance placed on them. Any activity where the auditor does not agree with the method or parameters is excluded from the scope of the auditor’s declaration. EPA understands that unit costs are not a core competency of environmental auditors and so unit cost assessments made by the auditor are also excluded from the scope of the declaration.

  • Does the auditor need to review the appropriateness of proposed closure and aftercare activities set out in the rehabilitation plan and aftercare management plan?

    An auditor may rely on the most recent versions of rehabilitation plans for financial assurance purposes in the following instances:

    • licensed landfills 
    • rehabilitation plans developed to fulfil the requirements of a closed landfill’s monitoring, rehabilitation and aftercare pollution abatement notice.

    Auditors may rely on the most recent aftercare management plan as long as it meets the minimum requirements set out in Closed landfill guidelines (publication 1490) or sufficiently justifies deviations.

    If the auditor believes existing plans are inadequate, this would be useful information for EPA to receive. However, auditors are not required to re-assess plans for financial assurance purposes in the circumstances described above.

  • Does the auditor need to do on-site investigations (e.g. to confirm the integrity of existing capping)?

    No. Financial assurance calculation assessments are not intended to identify further regulatory requirements at a landfill. They are about costing known requirements.

  • When can it be assumed that no further work needs to be done on an existing cap?

    If there is no known need for additional work or investigation on an existing cap, such work or investigations need not be included in financial assurance calculations.

  • Should the costing assume third-party rates or the rate the duty holder can secure (e.g. using own equipment, materials)?

    The costing can be based on rates the duty holder can secure, so long as they can provide verifiable evidence that such rates are achievable.

  • What is the standard of capping to be applied to cells that do not yet have an approved final capping design and are not covered by the other guidance provided here?

    If the licence specified a capping standard at the date of cell completion, this standard will apply. Otherwise, the standard at the time of closure applies.

    For closures after 2001, a cap design that complies with the version of the best practice environmental management (BPEM) from that time is the standard that applies.

    For cells closing in future, the cap design needs to be prepared and approved in accordance with licence conditions L22, L25 and L26 (refer to Landfill licensing guideline (publication 1323)).

    Where the duty holder believes a cap standard applies other than what is stated in this guidance, it should be confirmed with EPA before the auditor completes their assessment.

  • Can the auditor have been involved in environmental audits of the site?

    Auditors need to use their own discretion to decide whether performing an assessment would be a conflict of interest with other work they have conducted at a site.

    EPA does not consider there to be an inherent conflict between the performance of audits and financial assurance assessments at a site.

  • What standard of supporting evidence and accuracy will EPA expect?

    Instead of an accuracy standard, EPA is seeking the auditor’s opinion on the quality of the estimate. The auditor should form an opinion as to whether costs and other assumptions in the calculation are reasonable and justified. Professional cost estimation expertise may be beneficial in preparing or assessing costs in calculations but is not required by EPA.

    The auditor should form their view on unit costs for each activity based on:

    1. evidence from the duty holder that unit costs are realistic (e.g. because similar costs/rates have been achieved on previous rehabilitation works on that or similar sites)

    2. their understanding of industry rates (relying on various sources of information, e.g. landfill rehabilitation tender documentation, Rawlinsons Construction Cost Guide).

    The auditor’s assessment comments on each activity should describe the basis of their view.

  • Can the auditor have been involved in preparing the estimate?

    EPA’s general principle of independence that applies across all auditor activities is that auditors must not review or audit their own work or work prepared by their employing company.

  • Should the estimate be based on current cost rates or rates that may apply when the activities are to occur?

    The estimate should be based on present-day cost rates. Future costs are difficult to predict. Financial assurance estimates are intended to be reviewed on a regular basis to keep pace with cost changes.

Page last updated on 26 Feb 2019