NSW EPA seeks feedback on financial assurance policy and guideline

New guidance from the NSW Environment Protection Authority (EPA) may help to determine when financial assurance is likely to be required.

Snapshot

• A new draft Financial Assurance Policy (Draft Policy) sets out the EPA’s risk based approach to requiring financial assurance (typically, only required in relation to medium to high risk activities).
• A new Draft Guideline on Estimating Financial Assurances (Draft Guideline) sets out the EPA’s requirements to provide an independent assessment of costs.
• Submissions on the Draft Policy and Draft Guideline close at 5pm on 14 April 2020.

Who is affected and when?

A number of persons may be affected by the Draft Policy and Draft Guideline, including

• a holder of an environment protection licence (EPL) under the Protection of the Environment Operations Act 1997 (NSW) (or an applicant for a licence);
• a person subject of a management order under the Contaminated Land Management Act 1997 (NSW); and
• a holder of a radiation management licence issued under the Radiation Control Act 1990 (NSW) (or an applicant for a licence).

The Draft Policy applies to financial assurance that may be required under the above regulatory instruments as:

• a condition of a licence or order, which may occur under a new licence or order, or as a licence variation or amendment to an order; or
• a condition of a licence suspension, revocation or surrender.

A risk-based approach

The Draft Policy confirms that the EPA can only require financial assurance when there is justification to do so. The risk based approach is guided by:

• the degree of risk of environmental harm;
• the remediation work that may be required; and
• a person’s environmental record.

The Draft Policy sets out that:

• low risk actions are unlikely to require financial assurance (e.g. operations subject of an EPL that are likely to give rise to no or minor pollution or contamination issues); and
• high risk actions are likely to require financial assurance (e.g. a major pollution or contamination issue).

However, this risk categorisation is stated to be a guide only and does not impact on the EPA’s discretion to require financial assurance.

Clarity on independent assessments

The Draft Guideline sets out the independent cost assessment process. This assessment may be a required under a conditions of a licence or order, and helps the EPA to determine the appropriate amount of financial assurance.

The Draft Guideline provides checklists for undertaking the assessment process and confirms the following two key steps:

• estimating costs, to be undertaken by a licence holder or person subject of a management order (who may also engage a technical specialist); and
• an independent assessment, to be performed by a registered company auditor.

Next steps

To make a submission on the Draft Policy or Draft Guideline, visit the EPA’s consultation website.

Submissions to the public consultation close at 5pm on 14 April 2020.

Please contact us if you have any queries or would like assistance with making a submission on the Draft Policy or Draft Guideline.

By Peter Briggs, Partner, and Tom Dougherty, Senior Associate.

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