One of the innovative aspects of the new waste management scheme under the Environmental Protection Act 1990 Part II, introduced on 1st May 1994, is its introduction of a financial test for licence applicants. Section 74(3) of the Act provides that an applicant for a waste management licence will not be considered a fit and proper person to hold such a licence if:
Pounds for Promises
Waste Management Paper 4 (1994 edition) makes it clear that the extent of the financial provision which a licence applicant is expected to make depends on the obligations laid down in the licence conditions. Since licence conditions are specially designed to prevent pollution or harm to health by controlling the way waste disposal activities are carried out on each individual site, the financial provision required by the Waste Regulation Authority will vary from site to site depending upon the expense anticipated.
Financial standing requirements primarily provide for expenses which are likely to arise in the normal course of events, such as:
Licence holders will not usually be expected to build up contingency funds to meet remediation costs following unforeseen pollution incidents or to pay compensation to the victims of offsite pollution. However, where licence conditions impose specific obligations in the event of specified occurrences, such as the failure of containment measures leading to the pollution of a watercourse, licence applicants will have to show that they have appropriate plans to meet the costs involved.
Long term liabilities
Waste Management Paper 4 anticipates that whilst "no realistic applicant should have difficulty in providing evidence to the WRA that he is either of sufficient standing or has made appropriate plans to obtain external funding, to meet the immediate obligations of the licence" long term funding to meet post closure obligations in respect of landfill sites will require evidence of more specific provision. This might take the form of:
The private sector, accustomed to raising the money for such expenditure as it arises rather than tying up its funds long term, appears to be reacting very badly to the idea of escrow accounts. Waste operators are rumoured to be lobbying the Department of the Environment to repeal the relevant parts of the law and guidance.
It is doubtful whether the Department will respond to such pressure having introduced the provisions after an extensive consultation period. It will also be aware that long term financial responsibility for landfill sites will soon become a requirement of European law.
Article 17 of the current draft of the landfill directive provides that "at the time of receiving a permit, the operator [shall provide] by whichever means, a financial guarantee or any other equivalent, fixed by the competent authority, whose purpose shall be to cover the estimated costs of the closure procedures and aftercare operations of the landfill. This guarantee shall be kept as long as the operator is in charge of the maintenance and aftercare operations of the site." The directive is likely to be passed in early 1995.
Conclusion
More responsible operators, including those with parent companies which operate in the United States will no doubt learn to live with the financial responsibility requirements in time even if they do not enjoy the monthly trip down to the building society! However the potential for evasion by disaffected and impoverished operators remains considerable and it may be that the guidance provided by WMP4 will have to be made tighter and more emphatic if guaranteed financial provision for each landfill site is to be secured.
Victoria Phillips, Solicitor, Environment Department.
The above is an extract taken from issue 10 of Environment Law Matters January 1995, published on behalf of Nabarro Nathanson.
Detailed specialist advice should be obtained before taking or refraining from any action as a result of the comments made in this article which are only intended as a brief introduction to the particular subject. Nabarro Nathanson is regulated in the conduct of investment business by the Law Society.
For additional information contact Kevin Wheeler, Nabarro Nathanson, tel 071 491 6982.
he has not made financial provision adequate to discharge the obligations arising from the licence; and he either has no intention of making such provision or is in no position to make it.The new requirements bring the UK closer to the more stringent regime operating in the United States under the Resource Conservation and Recovery Act 1976 under which so called financial responsibility requirements have been in place for some years.
Pounds for Promises
Waste Management Paper 4 (1994 edition) makes it clear that the extent of the financial provision which a licence applicant is expected to make depends on the obligations laid down in the licence conditions. Since licence conditions are specially designed to prevent pollution or harm to health by controlling the way waste disposal activities are carried out on each individual site, the financial provision required by the Waste Regulation Authority will vary from site to site depending upon the expense anticipated.
Financial standing requirements primarily provide for expenses which are likely to arise in the normal course of events, such as:
meeting the required standards for site equipment and installation specifications during the preparation of a site; replacing or repairing equipment which fails during the operation of a site; meeting the cost of the phased installation of equipment for drainage and landfill gas control; restoration of the site following closure; supervision and monitoring of the site during the aftercare period (which could last for 30 years or more in the case of landfills).Accidents
Licence holders will not usually be expected to build up contingency funds to meet remediation costs following unforeseen pollution incidents or to pay compensation to the victims of offsite pollution. However, where licence conditions impose specific obligations in the event of specified occurrences, such as the failure of containment measures leading to the pollution of a watercourse, licence applicants will have to show that they have appropriate plans to meet the costs involved.
Long term liabilities
Waste Management Paper 4 anticipates that whilst "no realistic applicant should have difficulty in providing evidence to the WRA that he is either of sufficient standing or has made appropriate plans to obtain external funding, to meet the immediate obligations of the licence" long term funding to meet post closure obligations in respect of landfill sites will require evidence of more specific provision. This might take the form of:
an escrow account into which the licensee will pay income as it is earned from the deposit of waste; an independently held trust fund; a mutual fund set up by a group of landfill operators to take over responsibility for landfills after completion.It appears that the majority of Waste Regulation Authorities see the provision of an escrow account as the most secure means of meeting long term obligations. Many landfill sites were formerly operated by County Councils (of which Waste Regulation Authorities form part) and they were accustomed to making provision for their future liabilities year by year in this way. Waste regulators are also mindful of the fact that they cannot later suspend or revoke a licence which they have granted if the operator turns out to be a man of straw. The EPA's provisions on suspension and revocation of licences permit these steps only where the licence holder is convicted of relevant offences or fails to maintain technically competent personnel at the site.
The private sector, accustomed to raising the money for such expenditure as it arises rather than tying up its funds long term, appears to be reacting very badly to the idea of escrow accounts. Waste operators are rumoured to be lobbying the Department of the Environment to repeal the relevant parts of the law and guidance.
It is doubtful whether the Department will respond to such pressure having introduced the provisions after an extensive consultation period. It will also be aware that long term financial responsibility for landfill sites will soon become a requirement of European law.
Article 17 of the current draft of the landfill directive provides that "at the time of receiving a permit, the operator [shall provide] by whichever means, a financial guarantee or any other equivalent, fixed by the competent authority, whose purpose shall be to cover the estimated costs of the closure procedures and aftercare operations of the landfill. This guarantee shall be kept as long as the operator is in charge of the maintenance and aftercare operations of the site." The directive is likely to be passed in early 1995.
Conclusion
More responsible operators, including those with parent companies which operate in the United States will no doubt learn to live with the financial responsibility requirements in time even if they do not enjoy the monthly trip down to the building society! However the potential for evasion by disaffected and impoverished operators remains considerable and it may be that the guidance provided by WMP4 will have to be made tighter and more emphatic if guaranteed financial provision for each landfill site is to be secured.
Victoria Phillips, Solicitor, Environment Department.
The above is an extract taken from issue 10 of Environment Law Matters January 1995, published on behalf of Nabarro Nathanson.
Detailed specialist advice should be obtained before taking or refraining from any action as a result of the comments made in this article which are only intended as a brief introduction to the particular subject. Nabarro Nathanson is regulated in the conduct of investment business by the Law Society.
For additional information contact Kevin Wheeler, Nabarro Nathanson, tel 071 491 6982.
