The EPA has powers to manage financial risks from environmental liabilities under the Protection of the Environment Operations Act 1997, the Contaminated Land Management Act 1997, the Radiation Control Act 1990 and the Plastic Reduction and Circular Economy Act 2021. This includes the power to require a responsible person or company (a responsible party) to provide a financial assurance to secure and guarantee funding for certain actions that are required by their regulatory instrument (for example a licence, management order or action plan).
A financial assurance is a bank guarantee or surety bond provided to us by regulated people or companies, to ensure that if pollution or contamination of the environment occurs, those responsible pay the costs of clean-up or remediation. For example, a financial assurance may be required for the rehabilitation of a former major industrial site or for the ongoing management and monitoring of a containment cell.
A financial assurance is not a penalty for contravention of environmental legislation.
We will keep a financial assurance until the responsible party has satisfactorily completed the actions that it applies to, when it will be returned.
If there is a failure to satisfactorily complete the actions, we can use the financial assurance to fund any necessary actions. The financial assurance can also be used to recover and pay for our costs and expenses.
We will give notice of our intention to call on the financial assurance and consider any written objections.
People and companies that have given a financial assurance are still responsible for carrying out the actions required by their regulatory instrument.
We may also require an independent assessment of the costs of the actions that a financial assurance is required for.
The Financial Assurance Policy (PDF 1.2MB) and Guideline on Estimating Financial Assurances (PDF 2.3MB) were developed after public consultation in 2020. See the Consultation Report (PDF 451KB).
Financial assurance policy
The policy outlines when and how we will require a financial assurance.
Financial assurance is not mandatory, we take a risk-based approach using a Risk Categorisation tool to decide if the level of risk of environmental harm, the remediation or other work that may be required, the environmental record or the financial capacity of the regulated party justifies the need for a financial assurance.
Generally, financial assurance requirements will only be applied to activities that pose a higher risk of creating environmental liabilities. The Risk Categorisation is a guide only and a determination will depend on individual circumstances.
Guideline on estimating financial assurances
The guideline provides a transparent and consistent method for estimating the financial assurances covering
- when an independent cost assessment is required
- the requirements for undertaking the independent cost assessment
- how to prepare and assess the cost estimate.
The cost assessment informs but may not determine the final amount of the financial assurance required.
The guideline is intended to be used by
- people and companies regulated under the Contaminated Land Management Act 1997, the Protection of the Environment Operations Act 1997, the Radiation Control Act 1990 and the Plastic Reduction and Circular Economy Act 2021
- environmental consultants who are involved in developing a cost estimate for a responsible party
- financial auditors who provide an independent assessment of the cost estimate
- EPA officers.