Permit Holders Face Financial Provision Hurdles When Applying for Variations

Operators in the waste and resources industry are increasingly being asked to provide tangible evidence of their financial provision in respect of their environmental permits when seeking to modify/vary those permits.

Applicable Legislation:

The relevant legislation is the Pollution Prevention and Control (Scotland) Regulations 2012 (“PPC Regulations”) which amended, among other things, the provisions regarding the ‘fit and proper persons’ test. In terms of the PPC Regulations, SEPA may only grant a permit if it is satisfied that the applicant is a fit and proper person and part of assessing that relates to the available financial provision for compliance with a permit, including accounting for the closure and aftercare of a site.

Practical Implications:

Does the fit and proper person test apply?

The PPC Regulations specify that SEPA may grant a permit in respect of a specified waste management activity only if it is satisfied that ’the applicant is a fit and proper person…’ and that requires SEPA to take financial provision into account in relation to certain variations/modifications as well as new permit applications. Variation or modification applications will fall under the requirement for this to be checked where the permit obligations have increased (e.g. changing waste types or increasing volumes of waste on site) or on the transfer of a permit.

Closure and aftercare

Financial provision includes the closure procedures and after care provisions required under a permit, essentially accounting for the ‘worst case scenario’. If it appears to SEPA that the applicant has not made adequate financial provision for these aspects then they must, in terms of the PPC Regulations, conclude that an operator is not a fit and proper person.

Security or equivalent arrangement

The PPC Regulations specify that the applicant needs to make financial provision by way of security or equivalent arrangement (e.g. a bond or guarantee) in relation to landfill sites. SEPA’s current preference appears to be a bank-backed bond but that is not the only option available. In addition, SEPA’s guidance relating to non-landfill activities indicates that financial provision may be demonstrated by way of a credit reference check or where a credit reference check has failed (or is inappropriate) by the provision of evidence from a third party as to its financial standing.

This is something that all operators in the sector should be aware of as it is becoming much more prevalent in relation to variation, modification or transfer applications made in relation to existing PPC permits.

Davidson Chalmers Stewart can assist in the negotiations with SEPA to ensure that the obligation is only enforced where there has in fact been an increase in obligations and that the level of financial provision required is accurate, as well as providing options for the different forms of bond or guarantee.

Please contact Laura Tainsh at laura.tainsh@dcslegal.com for more information or advice on this issue.

Disclaimer
The matter in this publication is based on our current understanding of the law.  The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers Stewart LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.