For foreseen liabilities:
- The calculation should typically be based on the maximum potential liability as determined by a risk assessment.
- The calculation should allow for the scenario where a third party needs to complete the works, to provide for cases where the liability is abandoned (this is a requirement of the Extractive Waste Directive).
- The calculation should apply any legally required formulas or default amounts.
- Where the liability is going to change throughout the life of the operation, calculations should take account of the cost profile of the operation.
- For operations where the liability is unlikely to change significantly (e.g. a maximum amount of waste that is permitted to be held at a waste transfer facility), calculations should be based on that maximum amount.
- Contingency may be necessary to provide for the uncertainty in costing complex and remote events, e.g. mobilisation issues or design changes, and for inflation.
- The calculation should not include the assets of the operation (e.g. landfill void space) to offset the amount of the financial provision, to ensure that a sufficient amount will be available to the regulator in the case of insolvency or dissolution.
In some cases a contingency may be included to allow for costs associated with legal fees/penalties and delays.
Calculations may need to be performed by a third party (e.g. as per the Extractive Waste Directive) and may often be verified by a third party or regulator. The extent to which this is done depends on the regulatory requirements and the level of concern about the quality of calculations versus the increasing resource that verification demands. It is important to note that the accuracy of the estimation of maximum potential liability is dependent on the comprehensiveness of the method used and assumptions made.
The following sections provide a summary of typical costs to be covered and resources for the calculation of costs for the main categories of unforeseen liabilities: landfill, mining (including mining waste), transfrontier shipment of waste, and other operations such as non-landfill waste activities and windfarms.