Approaches
There is a range of possible approaches to financial provision for environmental liabilities, and significant variation in implementation internationally, including within the EU. This reflects the variation in the type and number of operators that are subject to the various financial provision systems, the variability in financial provision solutions available, and the resources available for implementation.
For example, a system that covers a small number of very high risk operators may be very restrictive in the types of financial provisions allowed and have a high level of regulator involvement and scrutiny, but this may not be appropriate or practical for large numbers of lower risk operators.
Provision often involves a site specific approach made by an individual operator. Collective provision may also be made. Collective provision is a group financial provision arrangement that an operator can join and pay into and which will pay if the operator defaults on its obligations.
The type of liability may also influence the approach. Site-specific approaches with individual oversight by regulators would not be unusual for landfills and mines given the inevitable and often large closure, restoration and aftercare liabilities involved. However, cover for liabilities from unforeseen incidents across a very large number of facilities might require a broad financial based solution such as the development of a fund or insurance. In these circumstances, the details may be specified more generally with the operator or pool being responsible to ensure it is in place subject to periodic and random checks. A different approach may be required to cover scenarios where the potential liability may extend over a long period of time; for example, well decommissioning, monitoring and aftercare.
These are matters for regulators themselves to determine subject to the relevant legislation. The guidance given here is for information purposes only and is intended to point regulators to the matters that are most significant for consideration.
The European Commission has issued guidance (for example, on financial provision mechanisms for the Geological Storage Directive) but Member States generally have discretion in determining the type of financial provision mechanism acceptable to satisfy EU requirements. Some Member States publish domestic legislation or guidance which sets out the types of mechanisms that are acceptable, in which circumstances, and in some cases may specify the amount. Some regulators may supplement financial provisions with other provisions aimed at restricting the accumulation of liabilities. An example of this is the charging of non-refundable fees for inactive inventory by the Alberta Energy Regulator.