Calculate your financial provision
How to calculate your financial provision, what it needs to cover and how to agree it with the Environment Agency.
You must make adequate financial provisions before you begin disposal operations.
Financial provision means you have sufficient funds available for as long as the landfill poses a hazard and to maintain and monitor the site during the aftercare phase.
The financial provision must be:
- sufficient in monetary terms
- secure
- available when needed
Develop a cost profile and expenditure plan
You must develop a cost profile and expenditure plan. These describe how you will:
- put money aside during the operational phase of the site
- spend the money during the aftercare phase once your site is definitely closed
Your expenditure plan must include ongoing costs throughout the aftercare period of the landfill.
For landfills for hazardous and non-hazardous waste you must estimate costs for 60 years after the site has definitely closed unless you can demonstrate that the waste will be stable in a shorter period of time.
For landfills for inert waste you must estimate costs for 3 years after the site has definitely closed.
Aftercare cost estimates for all landfills must also include a contingency sum. This is to make sure that once the 60 or 3 year period is over, you still have funds available for the ongoing management of the site if you need it.
You must calculate provision in ‘today pounds’. This means the value at today’s prices.
You must not discount future expenditure to net present values.
Calculate financial provision: all landfills
When you develop the financial provision for any landfill, you must calculate the aftercare costs for:
- environmental monitoring
- surface water management
- site security
- producing site reports – performance report, surrender report and topographical surveys
- specified events
Environmental monitoring
You must include the cost of monitoring landfill gas within the waste.
You may need to include the costs of monitoring groundwater and surface water around the site. This is based on your conceptual site model and risk assessments.
Your costs must include:
- carrying out the monitoring and sample analysis
- the cost of replacing infrastructure, for example boreholes
Surface water management
Where your site has drains and ditches to manage surface water you must include the cost of clearing and maintaining them.
Site security
If your risk assessments confirm that you need to secure your site to prevent public access, you must include the cost of maintaining gates and fences.
Producing site reports
You must include the cost of:
- your surrender report – excluding any application charge
- performance reports
- topographical surveys
Specified events
You must include your costs for a justified and definable specified event that may result in pollution. The Environment Agency will agree this with you as part of the application process. This will form part or all of the contingency sum.
Calculate financial provision: additional requirements for landfill for hazardous or non-hazardous waste
Your financial provision for landfills for hazardous and non-hazardous waste must include the costs required for all landfills and also for:
- environmental monitoring – off-site monitoring of landfill gas and groundwater quality
- capping
- cap maintenance
- leachate management and monitoring
- landfill gas management and monitoring
Environmental monitoring
You must calculate the cost of installing and maintaining monitoring boreholes outside the perimeter of the landfill for:
- landfill gas
- groundwater quality
The Environment Agency will check that the number of leachate pumps and wells, landfill gas wells and monitoring boreholes you propose are in line with your application and permit.
Capping
You must include costs of:
- capping materials, such as clay or geomembrane
- the surface water drainage layer, such as stone or geocomposite
- protective soils
You only need to include the costs for capping the largest phase of the site.
Cap maintenance
You must include the costs of:
- assessing the effectiveness of the cap, for example a landfill gas walkover survey
- maintaining the cap after the landfill is definitely closed
Leachate management
You must calculate leachate disposal costs and how you have calculated your disposal volumes.
If you treat the leachate, you must include the treatment costs in your proposal. You must also include the cost of maintaining and replacing the leachate treatment plant.
Landfill gas management
You must calculate the cost of landfill gas management. This must include the:
- number of gas wells on site, their replacement frequency and replacement cost
- cost of maintaining and replacing gas-carrier pipework
- cost of maintaining and replacing any engine or flare:
- where a gas engine is the main method of landfill gas control, you must consider the cost of replacing it using a design life of 30 years
- where there is no engine, you must consider the cost of replacing the flare using a design life of 10 years
Contact the Environment Agency if you need help calculating the financial provision for your site. The Environment Agency has templates that you can use to calculate the provision and develop your expenditure plan.
Agree your financial provision
You must agree the financial provision with the Environment Agency when you apply for your environmental permit.
You will need to enter into a financial provision agreement with the Environment Agency.
You must maintain the financial provision throughout the life of the permit.
The financial provision amount assumes you are complying with your permit. You cannot use this money to pay for routine operational or closure costs. You must cover these with the charges you make for accepting waste.
If the Environment Agency considers there is a risk of serious pollution from your site, they may arrange for work to be done to prevent or minimise that risk. They will recover the cost of that work from your financial provision if you do not reimburse them. You will be required to make the financial provision back up to the agreed amount.
Review and change your financial provision
If you plan to change your landfill, you must review the provision to make sure it covers any changes in liability. This will include when you apply to vary to:
- extend the boundary of your site
- increase the final levels of your site
- increase the amount of waste you can accept in any year
- install additional management or monitoring infrastructure
- install a leachate treatment plant
- install a gas utilisation plant or flare
You may want to review the provision if any of your aftercare liabilities change when you definitely close your site.
You must review the provision if you transfer or surrender part of your permit.
If you are receiving a transferred permit, you can accept the existing cost profile and expenditure plan, uprated for inflation, or propose revised ones. You must enter into a new financial agreement with the Environment Agency.
To reassess the amount, or change the type of financial provision, you must apply to change your permit.
Financial provision for closed sites
If you have a closed landfill site and your permit requires financial provision, you must maintain the provision.
If your permit was issued before July 2001 without the requirement to make financial provision, you do not need to put financial provision in place.
If you apply to change (vary) your permit to restart disposal operations, you must put financial provision in place or revise your existing provision.
Types of financial provision
The Environment Agency will accept the following types of financial provision:
- renewable bonds
- cash deposits with the Environment Agency
The Environment Agency will not accept:
- provision in accounts
- parent company guarantees for commercial landfills
- overdrafts
- annually renewed insurance
These do not offer adequate security that the funds will be available when needed.