Appendices

Appendix A : Compliance Cost Items to Estimate the Amount of Financial Assurance Required for Specific Orders, Approvals, Facilities and Activities

Introduction

This appendix is intended to help Ministry staff and regulated parties estimate the costs associated with compliance activities which can then be used to determine financial assurance amounts. Specific activities, technologies, practices and other cost components are suggested for each type of order or approval or for certain types of facilities that are listed in Section 4. Note that these activities and technologies are defined for cost estimation purposes only. Regulated parties are not obliged to use these specific technologies to comply with their own regulatory requirements. Indeed, regulated parties may use different technologies to produce their own estimates for financial assurance purposes. In any event, the procedures suggested in this appendix can be used to scrutinize and verify estimates provided by proponents.

As discussed in Section 6, at least two key types of costs must be provided for each program activity, facility, technology, etc.

1. Capital and other one-time costs: Costs incurred for the purchase of equipment and installation of equipment, construction of buildings and other site improvements, including the costs for contract services, architect services, construction labour, laboratory testing, project management, etc.; incurred usually once during the project.
2. Recurring or annual costs: Costs for operation, maintenance and monitoring of equipment, buildings and the site, including the costs for labour, materials, ongoing consultant services, monitoring, etc.; expressed on an annual basis.

Financial assurance proposals that specify technologies, cost estimates, appropriate inflation and discounting procedures (where necessary) and financial assurance determinations are the responsibility of the approval applicants or recipients of orders with financial assurance conditions.

Relevant cost estimates are to be provided by the regulated party in their financial assurance proposal documents. However, Ministry staff should review the estimates for completeness, accuracy of computations, reasonableness of technical assumptions and site characteristics used in calculations such as relevant financial parameters and the contaminating life span of a landfill. Ministry staff should keep on file, or have access to, documentation concerning procedures, data, assumptions and computations to show how financial assurance amounts are determined for each financial assurance account.

Financial assurance is not required for landfill sites and other facilities for which a municipality or the Crown is the responsible owner or operator.

A detailed example of the procedures and computations needed to determine financial assurance for a typical landfill subject to Ontario Regulation 232/98 is provided in Appendix H. A spreadsheet template for these calculations in either Microsoft Excel (Corel Quattro Pro accepted) can be obtained from the:

1. Financial Assurance Officer - Environmental Assessment and Approvals Branch, Ministry of the Environment, or
2. Economic Analysis Section, Ministry of Energy.

Users of this Guideline are reminded that the purposes of financial assurance are to ensure that sufficient funds are available to comply with conditions of a regulation, order or approval at some near or distant future point in time, including, but not restricted to, decommissioning, clean-up, rehabilitation and perpetual care.

Financial assurance may not be retained by the government as a penalty. However, financial assurance may be kept by the Ministry until the regulated party has completed (and paid for) all compliance activities or the financial assurance has been used for these purposes. When the Program Director is satisfied that financial assurance is no longer needed for a particular site, facility or purpose, it can be returned to the regulated party.

Cost items that form the basis of financial assurance amounts are identified and discussed for each of the various types of facilities, approvals and orders which were listed in Section 6. To the extent possible, the types of facilities, approvals, etc. are listed below in the same order as in Section 6.

Facilities, approvals and orders where the planning period is less than four years or when there is no known future date for closure, clean-up or remediation expenditures (A.1 - A.12)

A.1 Private Transfer Stations and Private Waste Processing Sites

A.1.1 Financial assurance to be provided for these facilities is equal to the total cost of removing, transporting and disposing of any materials left on site if the owners or operators cease operations for any reason and could not, or would not, clean up the site.

A.1.2 The following items related to a transfer station or waste processing facility must be enumerated or estimated:

1. quantity of total waste allowed on the site that will not be sold or removed prior to closure, in tonnes or cubic metres. Disaggregate by type of waste where possible, e.g., tonnes of contaminated wood;
2. quantity of total materials allowed on the site for which the owner has provided documentation from other parties who will remove said materials at no cost to the Ministry, in tonnes or cubic metres, e.g., tonnes of broken asphalt;
3. the total quantities of all materials noted in a) and b) above must not exceed the maximum quantity or capacity of all materials allowed on the site by the certificate of approval;
4. structures and other items on site that have to be demolished and removed to comply with the certificate of approval;
5. movable equipment items that can and cannot be sold for scrap;
6. security devices that must be installed permanently or temporarily, e.g., metres of perimeter fencing, gates, alarms, etc.;
7. amount of contaminated soil on the site that must be excavated and removed, in tonnes or cubic metres; and
8. distance, in kilometres, to final disposal site(s).

A.1.3 The following cost items should be obtained, determined or estimated:

1. cost per unit or job of any demolition required;
2. unit costs of loading each type of waste, demolition rubble, contaminated soil or equipment that must be sent for disposal, e.g., $/tonne or cubic metre;
3. unit costs of any required treatment activities, e.g., soil decontamination;
4. unit costs of transporting each type of waste, demolition rubble, contaminated soil or equipment that must be sent for disposal, e.g., $/tonne, cubic metre⁄km,
5. unit cost (“tipping fee”) for disposing of each type of waste, demolition rubble, contaminated soil or equipment in an approved disposal site, e.g., $/tonne, cubic metre; and
6. costs of security devices as needed.

These costs must reflect the costs of a third party to undertake all work associated with managing and carrying out the activities listed in A.1.2.

A.1.4 In addition, the following cost items may be relevant for some facilities:

1. management, supervisory, administrative costs, expressed as a percentage of the sum of costs listed in A.1.5. Evidence of the need and percentage used should be provided;
2. contingency costs may be required if the estimates for cost items in A.1.5 are uncertain. Contingency costs are also expressed as a percentage (e.g., 10 to 15% of total costs) of the sum of costs listed in A.1.5;
3. any other activities necessary to implement long-term care provisions, if applicable;
4. any other steps and activities necessary to complete site rehabilitation.

A.1.5 Financial assurance for these facilities must include the sum of:

1. total cost of demolition, where required;
2. total cost of loading all waste, demolition, contaminated soil and equipment on to transport vehicles, e.g., quantity of contaminated wood x unit cost of loading contaminated wood;
3. total cost of transporting all waste, demolition, contaminated soil and equipment to disposal sites, e.g., quantity of contaminated wood × cost per km of transporting contaminated wood × km to disposal site;
4. total cost of disposing all waste, demolition, contaminated soil and equipment in approved disposal sites, e.g., quantity of contaminated wood × unit cost of disposal (i.e., “tipping fee”);
5. total cost of treating any of the wastes prior to final disposal, e.g., quantity of contaminated soil × unit cost of decontamination; and
6. total cost of any security devices or installations required.

A.1.6 If conditions in the certificate of approval require actions to prevent potential off-site contamination arising from operation of the site, the costs of these actions should be estimated. It would be prudent to obtain financial assurance for these actions until the owner provides evidence that the actions have been completed.

A.1.7 Financial assurance for the above-noted cost items should be obtained by the Program Director before the commencement of operations or as otherwise required by the Program Director.

A. 1.8 Procedure to calculate financial assurance (FA) amount (evaluation=first time calculation)/re-evaluation:

• identify list of activities that would be necessary to clean up site;
• obtain cost per unit for each of the listed activities.  Note: two third-party cost quotes are required to substantiate costs used in your FA evaluation/re-evaluation.  Third-party quotes are to be submitted along with your FA calculation;
• multiply cost per unit by the maximum amount of waste stored at site as referenced in your approval;
• add all costs to arrive at a financial assurance subtotal cost;
• calculate 10% of subtotal for project management fees;
• calculate 15% of subtotal for contingency costs; and
• add financial assurance subtotal cost, project management fees and contingency cost to arrive at total FA estimate to be included in FA evaluation/re-evaluation.

A.2 Private Waste Management (Haulage) Systems Which Carry Wastes

A.2.1 In accordance with the document, Guide for Applying for Approval of a Waste Management System, issued November 1999 by the Environmental Assessment and Approvals Branch of the Ministry of the Environment:

1. each biomedical waste hauler is required to provide “an Irrevocable Letter of Credit in the minimum amount of $50,000…” which “…is to be posted with the Ministry of the Environment,” and
2. each PCB waste hauler must provide “An Irrevocable Letter of Credit in the Amount of $100,000…” which “…must be sent to the Director of the Environmental Assessment and Approvals Branch prior to the operations and issuance of a PCB waste management systems.” (sic)

A.2.2 The financial assurance amount for biomedical waste haulers are based on:

1. the sized (dimensions) of the biomedical transportation container utilized, and
2. the number of containers required to reach maximum fleet capacity.

A.2.3 For haulers of any other material (e.g., hazardous subject waste, caustic chemicals) for which financial assurance is deemed necessary (i.e., criteria in Section 4.4 apply), the amount should be equal to 100% of the estimated costs of cleaning up, hauling away and disposing of all debris and any contaminated soil from a spill or upset from the largest vehicle owned by the regulated party (hauler).

A.2.4 Financial assurance is not normally obtained from haulers of biosolids (processed organic wastes and hauled sewage). Financial assurance is not required for sites at which processed organic waste or hauled sewage are spread. Spreading rates and total amount of biosolids received at a given site are limited by the certificate of approval.

A.2.5 Additional costs on which financial assurance amounts for haulers of materials not subject to the Guide for Applying for Approval of a Waste Management System may be based on, but not restricted to:

1. loading all debris and contaminated soil from a spill;
2. transporting debris and soil to the nearest approved disposal site;
3. disposing of all debris and contaminated soil in an approved disposal site;
4. where necessary, the cost of provision of alternate water supplies in accordance with subsection 132 (1) (b), Part XII, EPA;
5. estimates are based on spilling a load of PCBs or biomedical waste from the largest vehicle owned by the regulated party; and
6. compensation for out-of-pocket expenses by damaged parties where authorized.

A.2.6 The procedures and input data for estimating the predetermined financial assurance amounts noted in the Guide for Applying for Approval of a Waste Management System should be reviewed and updated by staff every five years in order to ensure sufficiency of financial assurance and to defend amounts required in appeals.

A.3 Private Used Tire Storage or Disposal Facilities Which Contain More Than 5,000 Tire Units

A.3.1 Financial assurance for these sites is equal to the total costs of loading, transporting and disposing of tires to approved sites or uses.

A.3.2 All cost items and computational steps and procedures for this type of site are similar to those for transfer stations and waste processing facilities listed in A.1.

A.4 Regulation 352 - Mobile PCB Destruction Facilities

A.4.1 Regulation 352 - Mobile PCB Destruction Facilities, requires that applicants for PCB destruction facility approvals provide the following predetermined amounts of financial assurance:

1. $50,000 for each Class 1 mobile PCB destruction facility waste disposal site; and
2. $50,000 for each Class 2 mobile PCB destruction facility waste management system (hauler).

A.4.2 The costs on which these predetermined amounts are based are not revealed in the regulation. However, a review and verification of these costs should be undertaken, at least, every five years in order to ensure sufficiency of the financial assurance and to verify the financial assurance estimates.

A.5 PCB Storage Sites Established in Accordance with Written Director’s Instructions under Regulation 362 - Waste Management – PCBs

A.5.1 Financial assurance for PCB storage facilities should equal 100% of the total one-time capital costs of removing the total allowable capacity of the PCBs to a licensed destruction facility plus the charges for destroying all of the PCBs in the facility.

A.6 Approvals under Section 53, OWRA Including Private Communal Sewage Systems and Sewage Works in Unorganized or Organized Areas Without a Municipal Government Agency Agreement to Take over the System

A.6.1 The amount of financial assurance required should be equal to 100% of three years of undiscounted operating costs plus 15% of the capital costs sufficient to provide funds for upgrading or clean-up that may be required after a default and for temporary operation by the Ministry until a municipality or another local organization takes over operations.

A.6.2 Key cost items include, but are not restricted to:

1. one-time capital items such as replacement of pipes, pumps and controls; construction of tanks; electrical equipment; construction of structures; installation of all equipment, etc. which are sized appropriately; and
2. recurring, annual operating expenses include labour, power or fuel, chemicals, repair and maintenance expenses and contract expenses for lab work. These costs may be obtained directly from engineering consultants or based on the volume capacity of the facility.

A.7 Approvals under Section 9, EPA

A.7.1 Approvals under section 9, EPA including (but not limited to) those that contain conditions associated with:

1. specific abatement actions that contain deadlines;
2. the storage of subject waste materials from air pollution control equipment;
3. equipment used in the mobile in-situ chemical oxidation process; and
4. back-up control equipment.

A.7.2 Financial assurance should be calculated as follows:

1. for specific abatement actions that contain deadlines, the amount of financial assurance would be 100% of the capital and all recurring costs to implement all abatement requirements;
2. for the storage of subject waste materials from air pollution control equipment, the amount of financial assurance would be 100% of the estimated cost to remove the subject waste from the site and dispose of it in accordance with Ministry standards;
3. for equipment used in the mobile in-situ chemical oxidation process, the amount of financial assurance would be based on the number of sites being operated under the certificate of approval, or some other basis deemed acceptable by the Program Director; and
4. where the compliance projects are to be completed within four years, the amount of financial assurance should be 100% of the estimated one-time (capital) costs of replacing the air pollution control equipment with back-up control equipment that is known to control the emissions in question to an acceptable degree as required by the Program Director.

A.7.3 Cost items should include capital and one-time design and equipment items, appropriate sizing according to gas flows, temperature and other factors that affect capital costs. This information should be provided by engineering consultants that are hired by approval applicants.

A.8 Approvals for Operations Which Discharge into Surface Waters Subject to Section 53, OWRA

A.8.1 Financial assurance can be required to ensure that compliance with the terms and conditions of an approval are achieved by a specified date.

A.8.2 Cost estimates of the required abatement or preventative systems and activities should be provided by the regulated party. If such estimates are not submitted, the Program Director should issue an order to require that the regulated party provide these estimates. The issuing Program Director should confer with the Economic Analysis Section regarding the kind of cost data and other information that should be specified in the order and obtained from the regulated party.

A.8.3 Financial assurance would normally be equal to 100% of the capital costs of implementing the required abatement or prevention systems. If costs are to be incurred over four or more years, the recommended amount of financial assurance is equal to the present value of capital and other one-time costs, plus the total annual recurring costs for the entire period.

A.9 Permits to Take Water under Section 34, OWRA

A.9.1 The amount of financial assurance for a permit to take water should be 100% of the least-cost, technically acceptable method of supplying any parties who are adversely affected, with domestic water by other means, including delivery by truck.

A.9.2 If truck delivery is the basis for cost estimation, water and delivery costs should be estimated for a minimum of two years.

A.9.3 If there is evidence or experience that a new well or pipeline would be the only feasible replacement option, the estimated capital cost of the installation plus two years of undiscounted operating costs should be provided as financial assurance.

A.9.4 The cost items for truck delivery include:

1. the quantity of bottled water to be delivered to each affected party each day or week;
2. the price of the bottled water;
3. the average distance driven for deliveries each week or month; and
4. truck operating costs per km, etc.

A.9.5 Information about activities and cost items for constructing new wells or communal hook-ups to existing systems may be obtained from equipment venders and municipal works departments.

A.10 Orders to Undertake Industrial Abatement Programs under Section 18, EPA

A.10.1 Financial assurance may be required as a condition of an order to ensure that:

1. sufficient funds for compliance are available, and
2. compliance is achieved by the agreed-to deadline.

A.10.2 Cost estimates for abatement or preventative measures ordered should be obtained from the regulated party by voluntary means or by means of conditions in the order served. Staff should refer to:

1. the Ministry Guideline F-14, Economic Analyses of Control Documents on Private Sector Enterprises and Municipal Projects, and
2. the Economic Analysis Section (Ministry of Energy) to help staff define the cost information that should be specified in the order.

A.10.3 The amount of financial assurance should be equal to 100% of the total undiscounted capital cost of abatement or prevention systems necessary to satisfy or complete the conditions of the order. Future contingency costs should also be estimated. If there is more than one technical option available to achieve the requirements of the order, the least-cost option can be used as the basis of the financial assurance amount.

A.10.4 If the implementation period is to extend longer than four years, costs to be incurred in the 5^th and subsequent years may be discounted using the preferred discount rate indicated in Section 6. The financial assurance amount is equal to the sum of all expenditures over the period of installation of equipment and facilities.

A.10.5 Financial assurance provided as a condition of an order for abatement or prevention programs can be used to pay invoices as costs are incurred so that the total financial assurance balance can be reduced as the work is completed. In this context, financial assurance will provide the regulated party with a financial incentive to implement compliance actions in a timely manner. Ministry staff should review financial assurance balances and estimated future expenditures every six months to ensure that remaining financial assurance is sufficient.

A.11 Orders to Require Decommissioning and Remediation of Contaminated Sites

A.11.1 An order that requires decommissioning and remediation of a contaminated site may also include conditions to require financial assurance in the certificate of approval. Financial assurance should be required where one or more of the criteria noted in Section 4.4 paragraph a) of the Guideline apply. It is presumed that such a site will be remediated so that the site may be used for new construction or other purposes.

A.11.2 The amount of financial assurance should be equal to 100% of the one-time capital costs for decommissioning and remediation to bring the site into compliance with the terms and conditions of the order and local zoning by-laws. Cost estimates should be made under the assumption that the work will be carried out by a third party contractor.

A.11.3 The requirement to estimate costs of the above-noted activities and to report them to the Program Director should be specified as conditions in the order.

A.11.4 Cost items associated with decommissioning and rehabilitation include:

1. engineering and design,
2. soil testing,
3. site preparation and security (fencing),
4. excavation, hauling, disposal fees,
5. contaminated soil processing (if necessary), and
6. insurance and inspections.

A.12 Orders Involving Storage of Subject Wastes under Regulation 347

A.12.1 Financial assurance to be provided for these facilities is equal to the total cost of removing, transporting and disposing of any materials left on site if the owners or operators ceased operations for any reason and could not, or would not, clean up the site. For purposes of financial assurance, these types of sites are similar to those noted in A.1 above.

A.12.2 Relevant information items needed to estimate costs include:

1. quantity of total waste allowed on the site, in tonnes or cubic metres. Disaggregate by type of waste where necessary;
2. movable equipment items that can and cannot be sold for scrap;
3. security devices that must be installed permanently or temporarily, e.g., metres of perimeter fencing, gates, alarms, etc.;
4. the amount of contaminated soil on the site, if any, that must be excavated and removed, in tonnes or cubic metres; and
5. distance, in kilometres, to final disposal site(s).

A.12.3 The following cost items should be obtained, determined or estimated:

1. unit costs of loading each type of waste and contaminated soil or equipment that must be sent for disposal, e.g., $⁄tonne or cubic metre;
2. unit costs of any required treatment activities, e.g., soil decontamination;
3. unit costs of transporting each type of waste, contaminated soil or equipment that must be sent for disposal, e.g., $⁄tonne, cubic metre⁄km;
4. unit cost (“tipping fee”) for disposing of each type of waste in an approved disposal site, e.g., $⁄tonne, cubic metre; and
5. costs of security devices, as needed.

These costs must reflect the costs of contracting a third party to undertake all work associated with managing and carrying out the activities listed in A.12.2.

A.12.4 Financial assurance for these facilities must consist of the sum of:

1. total cost of loading all waste, contaminated soil and equipment on to transport vehicles;
2. total cost of transporting all waste, contaminated soil and equipment to disposal sites;
3. total cost of disposing all waste, contaminated soil and equipment in approved disposal sites;
4. total cost of treating any of the wastes prior to final disposal, e.g., quantity of contaminated soil x unit cost of decontamination; and
5. total cost of any security devices or installations needed.

Estimating financial assurance when the planning period is four or more years or when there is a known future date for closure, clean-up or remediation expenditures (A.13 - A.16)

A.13 Private Municipal Waste Landfilling Sites

A.13.1 Financial assurance requirements for private sector landfill sites should follow Ontario Regulation 232/98 - Landfilling Sites when:

1. the site came into existence on or after August 1, 1998 and was intended, at the time it came into existence, to have a total waste disposal volume of more than 40,000 cubic metres and to accept only municipal waste for disposal;
2. the site is being altered, enlarged or extended on or after August 1, 1998 so that, after alteration, the site’s total waste disposal volume will exceed 40,000 cubic metres and will accept only municipal waste for disposal; and
3. where a landfill is subject to Ontario Regulation 232/98, the amount of financial assurance to be provided should be equal to the:
   1. present value, at the estimated date of closure, of the costs of planned closure for the largest area that will require final cover,
   2. present value of post-closure care for the entire area of the site for the entire duration of the contaminating life span of the facility, and
   3. contingency costs for the entire area of the site. A numerical example is presented in Appendix H.

A.13.2 Costs of planned closure of the largest area that will require final cover at the end or the operating life of a landfill site include, but are not restricted to, the following activities, tasks, and parameters:

1. grading, final cover and landscaping;
2. construction of security fences and associated devices, roads;
3. installation of purge wells, test wells for monitoring leachate;
4. quantity and haul distances of cover material needed;
5. leachate and gas collection and treatment facilities if included in the site closure plan or if specified in the approval;
6. any other required remediation activities.

Financial assurance for planned closure is not required if the filled portions of the site are closed properly within five years, or earlier.

A.13.3 Expected post-closure care, maintenance and monitoring activities over the entire area of the landfill that contains waste plus any buffer areas and lands that contain leachate and/or gas collection and treatment facilities, over the contaminating life span of the site, include, but are not restricted to, the following activities and tasks:

1. security;
2. maintenance of leachate monitoring wells;
3. sample collection, transportation and testing of leachate and off-gasses;
4. care and maintenance of the final cover and landscaping;
5. data reporting and storage of gas and leachate samples;
6. construction and maintenance of any other facilities mandated by an order or approval;
7. operation of vehicles, structures or equipment;
8. consulting charges;
9. replacement of any capital equipment (pipes, pumps, structures, wells, etc.) over the contaminating life span; and
10. labour charges based on person-days or person-years of effort required for each activity, classification of employees needed to do the work.

A.13.4 Financial assurance also includes an additional amount for contingency costs. This contingency cost component is determined by a formula provided in Ontario Regulation 232/98:

F = $0.50 × W × ( I₂ ÷ I₁ )

where,

F

the amount of the financial assurance,

W

the number of tonnes of waste that have been deposited in the landfilling site at the time the amount of financial assurance is calculated,

I₁

the 1997 Annual Average Non-Residential Building Construction Price Index for Toronto, determined with reference to the same base year as is applicable to I₂, as published by Statistics Canada, Catalogue 62-007,

I₂

the most recent Annual Average Non-Residential Building Construction Price Index for Toronto available at the time the amount of the financial assurance is calculated, as published by Statistics Canada, Catalogue 62-007.

As noted, the contingency cost amount is adjusted each year by the tonnes of waste deposited and by the Non-Residential Building Construction Price Index for Toronto.

A.13.5 Financial assurance for a landfill site that has a total waste volume less than 40,000 cubic metres, or has been operating before August 1, 1998 may, at the discretion of the Program Director, be based on technologies and procedures that differ from those specified in Ontario Regulation 232/98. These alternative procedures are noted in A.13.6.

A.13.6 Ontario Regulation 232/98 is the preferred method of calculating financial assurance and is mandatory for sites which have been established on or after August 1, 1998 with a capacity over 40,000 cubic metres. The Program Director has the discretion to require other methods for calculating financial assurance as conditions of a certificate of approval. Therefore, for landfill sites that began operation before August 1, 1998 or are under 40,000 cubic metres capacity, the Program Director may direct that financial assurance be derived from the costs of emergency and planned closure, post-closure and contingency activities described below.

A.13.6.1 Emergency closure means that a site is closed prior to the planned closure date for some reason. For emergency closure estimates, the filled area to be covered and rehabilitated each year is equal to the proportion of the site that is filled each year. Emergency closure costs include, but are not restricted to, the following activities, tasks, and parameters:

1. grading, final cover and landscaping;
2. construction of security fences and associated devices, roads;
3. installation of purge wells, test wells for monitoring leachate;
4. quantity and haul distances of cover material needed; and
5. any other required remediation activities.

Emergency closure amounts may be updated each time financial assurance is reviewed in order to account for the expanded landfill use.

A.13.6.2 Planned closure generally occurs when the landfill reaches approved capacity. The cost estimates are based on the largest area that will require final cover at the end of the operating period of a landfill site. Cost items include, but are not restricted to, the following activities and tasks:

1. grading, final cover and landscaping;
2. construction of security fences and associated devices, roads;
3. installation of purge wells, test wells for monitoring leachate;
4. quantity and haul distances of cover material needed; and
5. any other required remediation activities.

Financial assurance amount for planned closure replaces financial assurance for emergency closure five years before the planned final closure of the site.

A.13.6.3 Expected post-closure care, maintenance and monitoring activities over the entire area of the landfill that contains waste plus any buffer areas and lands that contain leachate and/or gas collection and treatment facilities. The time frame of post-closure care, maintenance and monitoring extends from the date of closure to the end of the contaminating life span of the site. Cost items include, but are not restricted to, the following activities and tasks:

1. security;
2. maintenance of leachate monitoring wells;
3. sample collection, transportation and testing of leachate and off-gasses;
4. care and maintenance of the final cover and landscaping;
5. data reporting and storage of gas and leachate samples;
6. construction and maintenance of any other facilities mandated by an order or approval;
7. operation of vehicles, structures or equipment;
8. consulting charges;
9. replacement of any capital equipment (pipes, pumps, structures, wells, etc.) over the contaminating life span; and
10. labour charges based on person-days or person-years of effort required for each activity, classification of employees needed to do the work.

A.13.6.4 Contingency costs consist of costs of potential leachate and gas collection and treatment facilities. Cost of repairing leaks in an impermeable liner under the landfill may also be included as a contingency as per conditions in the certificate of approval. The amount of financial assurance should equal the estimated one-time capital costs plus at least one year’s operating costs.

A.13.6.5 During the operating life of a landfill, the total financial assurance for sites established before 1998 would be the sum of financial assurance for emergency closure, post-closure care and maintenance and contingency costs.

A.13.6.6 At least five years prior to closure, the total amount of financial assurance should be provided including the sum of planned closure costs, the present value of post-closure care and maintenance costs over the contaminating life span of the site and contingency costs based on leachate and gas collection and treatment and repair of impermeable liners as specified in the certificate of approval.

A.13.7 Irrespective of when the landfill operation began, the minimum contaminating life span for landfills is 25 years for purposes of discounting.

A.13.8 Not withstanding Ontario Regulation 232/98, relevant cost estimates should be updated every three years or as otherwise required by the Program Director.

A.14 Incineration Facilities

A.14.1 Financial assurance for incinerators is for the purpose of funding the decommissioning of the facility. Since decommissioning would take place more than four years after a plant begins operation, financial assurance for the facility would equal the present value of all decommissioning costs.

A.14.2 Decommissioning costs include:

1. removal of all equipment, machinery and fixtures which can be sold;
2. demolition of all structures;
3. loading of all demolition debris and machinery that cannot be sold;
4. transporting all demolition debris to an approved disposal facility;
5. disposal of all demolition debris in an approved facility;
6. decontamination of soil if needed; and
7. removal of contaminated soil to an approved disposal facility.

A.14.3 Cost estimates made at the outset of the facility’s operating life will be very uncertain. Assumptions must be clearly defined. Updates should be made at least every three years or at the direction of the Program Director.

A.15 Approvals under Section 53, OWRA for Industrial and Milling Activities That Generate Tailings or Ash

A.15.1 Financial assurance may be required to finance site closure and rehabilitation of tailings, slag or other waste material storage areas and for long-term care. The amount of financial assurance required should include 100% of the present value (at the time of closure) of the total costs of planned closure and rehabilitation activities, plus costs of long-term monitoring, maintenance and contingency plans as required by the Program Director.

A.15.2 Present value computational procedures are similar to those for landfills. The time period for present value calculations is the contaminating life span of the disposal facility or a time period that is otherwise acceptable to the Program Director.

A.15.3 If the regulated party is a mining company under the authority of the Mining Act, it may have provided financial assurance to the Ministry of Northern Development and Mines (MNDM) to finance the firm’s site closure plan. If a mining operation is issued an order or approval, Ministry of the Environment staff should confer with the “mines group” of MNDM in Sudbury to ensure that sufficient financial assurance has been provided to pay for compliance costs of Ministry of the Environment requirements in addition to the provisions of the site closure plan. If financial assurance for site closure will not cover the costs of Ministry of the Environment requirements, additional financial assurance should be obtained by MNDM.

A.15.4 For disposal of ash, tailings, slag or other solids by non-mining industrial facilities, the amount of financial assurance required should include, but not be restricted to 100% of the present value of:

1. the total costs, at the time of closure, of planned closure and rehabilitation activities as specified in the approval, plus
2. costs of long-term monitoring, maintenance and contingency plans as required by the Program Director.

Present value computational procedures are similar to those for landfills. Spreadsheet templates shown in Appendix H can easily be adapted for this application. The time period for present value calculations is the contaminating life span of the disposal facility or a time period that is specified by the Program Director.

A.15.5 For non-mining industrial facilities that generate piles of ash or other solid waste materials, the activities and cost items of environmentally acceptable management and disposal for these facilities include:

1. site preparation (including area of site, cutting timber from the disposal area, grading and containment works);
2. cover (as needed) grading and re-vegetation of disposal area;
3. construction of containment dams or berms; and
4. long-term monitoring and maintenance of dams, leachate treatment facilities, leachate volumes and quality and ground water quality.

A.15.6 As with landfills, the amount of financial assurance on deposit each year should be increased so that the amount of money accumulated by the time the disposal facility is closed will be sufficient to pay for post-closure care. The quantity and/or area of waste materials that are generated each year should be monitored so that sufficient funds will be available to cover long-term care from the time that the facility closes to the end of the contaminating life span or the time period agreed to by the Program Director.

A.16 Approvals under Section 53, OWRA for Sewage Works That Generate Waste Materials (Sludges) That are Stored and Remain on the Site until and after Decommissioning

A.16.1 Assuming the financial assurance is for the costs of the long-term storage and maintenance of sludges and other waste materials on site, follow procedures for a landfill site subject to Ontario Regulation 232/98.

A.16.2 The financial assurance amount to be provided is equal to the sum of the present values of the total one-time (capital) and recurring costs for:

1. closure;
2. long-term post-closure care; and
3. the financial assurance amount for contingency costs as of the anticipated date of closure, as required by the Program Director, in dollars current at that date.

A.16.3 The time period for present value calculations should be the contaminating life span of the sludge deposits of the disposal facility or a time period that is acceptable to the Program Director.

A.16.4 As with landfills, the amount of financial assurance on deposit each year should be increased so that the amount of money accumulated by the time the disposal facility is closed will be sufficient to pay for post-closure care. The quantity and/or area of waste materials that are generated each year should be monitored so that sufficient funds will be available to cover long-term care from the time that the facility closes to the end of the contaminating life span or the time period agreed to by the Program Director.

A.16.5 If the waste materials are to be removed from the site upon decommissioning, the amount of financial assurance should be based on the costs of loading, hauling and disposing of the waste solids, similar to the costs associated with a transfer or waste processing facility. All relevant clean-up requirements that are to be included should be noted in the certificate of approval.

Appendix B: Part XII - Financial Assurance, Environmental Protection Act (Sections 131 to 136 and 176)

Definitions, Part XII

131. In this Part,

“approval”

means program approval, certificate of approval or provisional certificate of approval, and includes a permit or approval issued by a Director under the Ontario Water Resources Act, but does not include an approval under Part X of this Act; (“autorisation”)

“bank”

means a bank named in Schedule I or Schedule II to the Bank Act (Canada); (“banque”)

“environmental measures”

means one or more of the measures set out in clauses 132 (1) (a) to (c) or 132 (1.1) (a) to (c); (“mesures d’ordre environnemental”)

“financial assurance”

means one or more of,

1. cash, in the amount specified in the approval, order or certificate of property use,
2. a letter of credit from a bank, in the amount and terms specified in the approval, order or certificate of property use,
3. negotiable securities issued or guaranteed by the Government of Ontario or the Government of Canada in the amount specified in the approval, order or certificate of property use,
4. a personal bond accompanied by collateral security, each in the form, terms and amount specified in the approval, order or certificate of property use,
5. the bond of an insurer licensed under the Insurance Act to write surety and fidelity insurance in the form, terms and amount specified in the approval, order or certificate of property use,
6. a bond of a guarantor, other than an insurer referred to in clause (e), accompanied by collateral security, each in the form, terms and amount specified in the approval, order or certificate of property use,
7. an agreement, in the form and terms specified in the approval, order or certificate of property use, and
8. an agreement, in the form and terms prescribed by the regulations; (“garantie financière”)

“order”

means an order by the Director under this Act, and includes an order, notice, direction, requirement or report made by a Director under the Ontario Water Resources Act, but does not include an order under section 136 (order for performance of environmental measures) of this Act; (“arrêté”)

“works”

means an activity, facility, thing, undertaking or site in respect of which an approval or order is issued. (“travaux”)  R.S.O. 1990, c. E.19, s. 131; 1993, c. 27, Sched.; 1997, c. 19, s. 34; 2001, c. 17, s. 2 (6, 7).

Financial assurance

Approval or order

132. (1) The Director may include in an approval or order in respect of a works a requirement that the person to whom the approval is issued or the order is directed provide financial assurance to the Crown in right of Ontario for any one or more of,

1. the performance of any action specified in the approval or order;
2. the provision of temporary or permanent alternate water supplies to replace those that the Director has reasonable and probable grounds to believe are or are likely to be contaminated or otherwise interfered with by the works to which the approval or order is related; and
3. measures appropriate to prevent adverse effects upon and following the cessation or closing of the works. R.S.O. 1990, c. E.19, s. 132 (1); 2005, c. 12, s. 1 (22).

Certificate of property use

(1.1) The Director may include in a certificate of property use a requirement that the person to whom the certificate is issued provide financial assurance to the Crown in right of Ontario for any one or more of,

1. the performance of any action specified in the certificate of property use;
2. the provision of temporary or permanent alternate water supplies to replace those that the Director has reasonable and probable grounds to believe are or are likely to be contaminated or otherwise interfered with by a contaminant on, in or under the property to which the certificate of property use relates; and
3. measures appropriate to prevent adverse effects in respect of the property to which the certificate of property use relates. 2001, c. 17, s. 2 (8); 2005, c. 12, s. 1 (23).

Changes in amount of financial assurance

(2) A requirement under subsection (1) or (1.1) may provide that the financial assurance may be provided, reduced or released in stages specified in the approval, order or certificate of property use. 2001, c. 17, s. 2 (9).

Amendment of approval, order or certificate of property use

(3) The Director may amend an approval, order or certificate of property use to change a requirement as to financial assurance contained in the approval, order or certificate of property use. 2001, c. 17, s. 2 (9).

Failure to provide financial assurance

133. (1) Failure to provide financial assurance specified in an approval or in accordance with a stage specified in an approval is grounds for revocation of the approval and for an order in writing by the Director prohibiting or restricting the carrying on, operation or use of the works in respect of which the financial assurance is required. R.S.O. 1990, c. E.19,

Idem, order

(2) Failure to provide financial assurance specified in an order or in accordance with a stage specified in an order is grounds for an order in writing by the Director prohibiting or restricting the carrying on, operation or use of the works in respect of which the financial assurance is required. R.S.O. 1990, c. E.19, s. 133 (2).

Same, certificate of property use

(3) Failure to provide financial assurance specified in a certificate of property use or in accordance with a stage specified in a certificate of property use is grounds for an order in writing by the Director prohibiting or restricting the use of the property to which the certificate of property use relates. 2001, c. 17, s. 2 (10).

Return or release of financial assurance

134. (1) Upon request, part or all of the financial assurance given in respect of a works or certificate of property use may be returned or released pursuant to an order in writing by the Director. R.S.O. 1990, c. E.19, s. 134 (1); 2001, c. 17, s. 2 (11).

Grounds for order

(2) The Director may make an order mentioned in subsection (1) if satisfied that the financial assurance returned or released is not required in respect of the works or certificate of property use. R.S.O. 1990, c. E.19, s. 134 (2); 2001, c. 17, s. 2 (12).

Continuation of financial assurance

135. The Director may convert a financial assurance to cash to be held by the Crown to the same purposes as the financial assurance or otherwise realize the financial assurance unless the financial assurance is renewed at least thirty days before it would otherwise expire. R.S.O. 1990, c. E.19, s. 135.

Order for use of financial assurance

136. (1) In the circumstances set out in subsection (2), the Director by order may require the performance of environmental measures for which the Crown holds financial assurance and may require the use of the financial assurance for the performance of the environmental measures. R.S.O. 1990, c. E.19, s. 136 (1).

Basis for order

(2) The Director may make an order mentioned in subsection (1) if the Director has reasonable and probable ground to believe that any environmental measure required by the approval, order or certificate of property use in respect of which the financial assurance was given has not been or will not be carried out in accordance with the requirement. R.S.O. 1990, c. E.19, s. 136 (2); 2001, c. 17, s. 2 (13).

Parties affected

(3) An order under this section shall be directed to,

1. the person to whom the approval, order or certificate of property use was issued or any other person who is bound by the approval, order or certificate of property use; and
2. any person that to the knowledge of the Director has provided the financial assurance for or on behalf of a person referred to in clause (a), or any successor or assignee of a person that to the knowledge of the Director has provided the financial assurance for or on behalf of a person referred to in clause (a). 2001, c. 17, s. 2 (14).

Performance

(4) Upon the issuance of an order by the Director under subsection (1), the Crown may,

1. use any cash;
2. realize any bond or other form of security, and use the money derived therefrom; and
3. enforce any agreement,

provided or obtained as the financial assurance for the performance of the environmental measures and may carry out the environmental measures. R.S.O. 1990, c. E.19, s. 136 (4).

Regulations relating to Part XII

176. (9) The Lieutenant Governor in Council may make regulations relating to Part XII prescribing requirements for financial assurance in respect of the classes of approvals, orders or certificates of property use specified in the regulations. R.S.O. 1990, c. E.19, s. 176 (9); 2001, c. 17, s. 2 (45).

Appendix C: Excerpts from Ontario Regulation 232/98 - Landfilling Sites, Environmental Protection Act

Part I General

Definitions

1. (1) In this Regulation,

“base side slope”

means any portion of the base of the waste fill zone extending from ground surface downward at an angle steeper than one unit vertical to four units horizontal;

“buffer area”

means that part of a landfilling site that is not waste fill area;

“contaminant attenuation zone”

means a three-dimensional zone that,

1. is located on land adjacent to a landfilling site,
2. is in the subsurface or extends into the subsurface, and
3. is used or is intended to be used for the attenuation of contaminants from the landfilling site to levels that will not have an unacceptable impact beyond the boundary of the zone;

“contaminating life span”

means,

1. in respect of a landfilling site, the period of time during which the site will produce contaminants at concentrations that could have an unacceptable impact if they were to be discharged from the site, and
2. in respect of a landfilling site and a contaminant or group of contaminants, the period of time during which the site will produce the contaminant or a contaminant in the group at concentrations that could have an unacceptable impact if they were to be discharged from the site;

“engineered facility”

means anything affixed to or made part of land that is intended to be a functional element or feature of a landfilling site for more than five years and that is created or put in place by human activity;

“maximum waste loading”

means, for a landfilling site, the total waste disposal volume divided by the area of the waste fill area;

“primary leachate collection system”

means the uppermost leachate collection system below the waste fill zone;

“primary liner”

means the uppermost liner below the waste fill zone;

“secondary leachate collection system”

means a leachate collection system located below the primary leachate collection system;

“secondary liner”

means a liner located below the primary liner;

“service life”

means the period of time during which a properly maintained engineered facility will function in accordance with the performance specifications for its design;

“total waste disposal volume”

means, for a landfilling site, the maximum volume of waste, including the volume of any daily or intermediate cover, to be deposited at the site in the space extending from the base of the waste fill zone or the top of any engineered facilities located on the base of the site to the bottom of the final cover;

“unacceptable impact”

means interference with existing or potential reasonable uses of,

1. land,
2. ground water in or under land, or
3. surface water on land;

“waste fill area”

means the area on the surface of a landfilling site beneath which or above which waste is disposed of by landfilling;

“waste fill zone”

means the three-dimensional zone in which waste is disposed of by landfilling.

(2) The definitions in section 1 of Regulation 347 of the Revised Regulations of Ontario, 1990 also apply to this Regulation.

(3)For the purpose of better understanding the definition of “engineered facility” in subsection (1), the following things are examples of common engineered facilities, if they are intended to be functional elements or features of a landfilling site for more than five years:

1. Berms.
2. Drainage ditches.
3. Liners.
4. Covers.
5. Pumps.
6. Facilities to detect, monitor, control, collect, redirect or treat leachate, surface water or ground water.
7. Facilities to detect, monitor, control, collect, redirect, treat, utilize or vent landfill gas. O. Reg. 232/98, s. 1.

Application

2. (1) This Regulation applies to the following landfilling sites:

1. Every landfilling site that comes into existence on or after August 1, 1998 and that is intended at the time it comes into existence to have a total waste disposal volume of more than 40,000 cubic metres and to accept only municipal waste for disposal.
2. Every landfilling site for which an alteration, enlargement or extension is proposed on or after August 1, 1998 that involves an increase in the site’s total waste disposal volume, if the site is intended after the alteration, enlargement or extension to have a total waste disposal volume of more than 40,000 cubic metres and to accept only municipal waste for disposal.

(2) Subsection (1) does not apply with respect to a landfilling site in respect of which an application for a certificate of approval has been received by the Director under Part V of the Act before August 1, 1998, unless the operator or owner of the landfilling site gives written notice to the Director that the operator or owner wants this Regulation to apply.

(3) The notice under subsection (2) must be given before the earlier of the following dates:

1. The date the certificate of approval or provisional certificate of approval is issued.
2. January 1, 1999.

(4) The standards, procedures and requirements set out in this Regulation do not apply to the extent that terms and conditions set out in a certificate of approval or a provisional certificate of approval issued under section 39 of the Act impose different standards, procedures or requirements. O. Reg. 232/98, s. 2.

Part IV Financial Assurance

Contingency Plans

17. (1) The owner and the operator of a landfilling site shall ensure that financial assurance is provided for the contingency plans for the site, including the construction, operation, maintenance and replacement of works required by the contingency plans.

(2) The financial assurance shall be provided in the form of a cash deposit paid to the Director or in such other form, such as a bond, a letter of credit or negotiable securities, as is acceptable to the Director.

(3) Subject to subsection (4), the amount of the financial assurance shall be determined in accordance with the following formula:

F = $0.50 × W × (I₂ ÷ I₁)

where,

F

the amount of the financial assurance,

W

the number of tonnes of waste that have been deposited in the landfilling site at the time the amount of financial assurance is calculated,

I₁

the 1997 Annual Average Non-Residential Building Construction Price Index for Toronto, determined with reference to the same base year as is applicable to I₂, as published by Statistics Canada under the authority of the Statistics Act (Canada),

I₂

the most recent Annual Average Non-Residential Building Construction Price Index for Toronto available at the time the amount of the financial assurance is calculated, as published by Statistics Canada under the authority of the Statistics Act (Canada).

(4) The amount of financial assurance provided shall be updated annually or as otherwise required by the Director.

(5) The financial assurance shall remain in place until a written report is prepared that shows that the financial assurance is no longer required.

(6) The financial assurance may be used by the Director to pay for expenses related to any planned or unplanned closure of the site or to the post-closure care of the site, if the owner fails, on the request of the Director, to perform the work or cover the expenses.

(7) The owner and the operator of a landfilling site shall ensure that any amount of financial assurance used by the Director under subsection (6) is replaced within six months after it is used unless the Director directs otherwise.

(8) Subsection (1) does not apply to require site specific financial assurance if financial assurance for the contingency plans is provided by a group financial assurance plan acceptable to the Director.

(9) Subsection (1) does not apply in respect of a landfilling site owned by a municipality or the Crown.

(10) Subsection (1) does not apply to a landfilling site owned by a forest products company if the waste to be deposited at the site is produced by forest products operations, such as the operations of a lumber mill, sawmill, pulp mill or similar facility, and is predominantly solid, non-hazardous process waste, such as woodwaste, effluent treatment solids, hog fired boiler ash, recycling process rejects, lime mud, grits or dregs. O. Reg. 232/98, s. 17.

Closure And Post-Closure Care

18. (1) The owner and the operator of a landfilling site shall ensure that financial assurance for the closure of the site and the post-closure care of the site is provided in accordance with this section.

(2)The financial assurance shall be provided in the form of a cash deposit paid to the Director or in such other form, such as a bond, a letter of credit or negotiable securities, as is acceptable to the Director.

(3) The amount of the financial assurance shall be the present value at the estimated date of closure, in dollars current at that date, of an amount sufficient to cover the estimated costs for,

1. the planned closure of the largest area that will require final cover at any one time during the operation of the site, including the costs of final cover and landscaping;
2. care and maintenance of the final cover and landscaping for the contaminating life span of the site; and
3. all other expected post-closure care activities for the contaminating life span of the site, including monitoring, analysis and reporting, the design, construction, operation, maintenance and replacement of engineered facilities and the disposal of wastes from the facilities, but not including any additional activities in the contingency plans for the site.

(4) Any determination of the amount of the financial assurance shall be carried out in a manner consistent with Ministry of Environment and Energy Guideline F - 15, Financial Assurance, dated April 1994, and Ministry of Environment and Energy Procedure F - 15 - 1, Procedures for Financial Assurance, dated April 1994, as they may be amended from time to time.

(5) Clause (3) (a) does not apply if part of the site is closed not less often than every five years.

(6) If costs are estimated under subsection (3) for any matter related to leachate from the site, the contaminating life span of the site may not be estimated at less than 25 years from the date waste is last deposited at the site.

(7) The financial assurance may be provided in stages as long as the amount that has been provided is always greater than the minimum amount determined in accordance with the following formula:

A = B (C ÷ D)

where,

A

the minimum amount of financial assurance that must have been provided,

B

the total amount of the financial assurance, as estimated under subsection (3),

C

the amount of waste that has already been deposited at the site,

D

the total amount of waste that will be deposited at the site.

(8) The estimation of costs and the amount of the financial assurance provided shall be updated annually or as otherwise required by the Director.

(9) The financial assurance shall remain in place until a written report is prepared that shows that the financial assurance is no longer required.

(10) The financial assurance may be used by the Director to pay for expenses related to any planned or unplanned closure of the site if the owner fails, on the request of the Director, to perform the work or cover the expenses.

(11) The owner and the operator of a landfilling site shall ensure that any amount of the financial assurance used by the Director under subsection (10) is replaced within six months after it is used unless the Director directs otherwise.

(12) Subsection (1) does not apply in respect of a landfilling site owned by a municipality or the Crown. O. Reg. 232/98, s. 18.

Appendix D : Excerpts from Regulation 352 - Mobile PCB Destruction Facilities, Environmental Protection Act

1. In this Regulation,

“local municipality”

means a city, town, village, township or improvement district;

“mobile PCB destruction facility”

means movable, transportable machinery or equipment that is intended to destroy the chemical structure of PCBs;

“PCB”

means any monochlorinated or polychlorinated biphenyl or any mixture of them or mixture that contains one or more of them;

“PCB equipment”

means equipment designed or manufactured to operate with PCB liquid or to which PCB liquid was added or drums and other containers used for the storage of PCB liquid;

“PCB liquid”

means liquid containing PCBs at a concentration of more than fifty milligrams per kilogram;

“PCB material”

means material containing PCBs at a concentration of more than fifty milligrams per kilogram whether the material is liquid or not;

“PCB waste”

means,

1. PCB equipment,
2. PCB liquid, or
3. PCB material,

but does not include,

4. PCB material or PCB equipment after it has been decontaminated pursuant to guidelines or codes of practice published by the Ministry of the Environment,
5. PCB equipment that is,
   1. an electrical capacitor that has never contained over one kilogram of PCBs,
   2. electrical, heat transfer or hydraulic equipment or a vapour diffusion pump that is being put to the use for which it was originally designed or is being stored for such use by a person who uses the equipment for the purpose for which it was originally designed, or
   3. machinery or equipment referred to in subclause (f) (i), or
6. PCB liquid that is,
   1. at the site of fixed machinery or equipment, the operation of which is intended to destroy the chemical structure of PCBs by using the PCBs as a source of fuel or chlorine for a purpose other than the destruction of PCBs or other wastes and with respect to which a certificate of approval has been issued under section 9 of the Act specifying the manner in which PCB liquid be processed in the machinery or equipment, or
   2. in PCB equipment referred to in subclause (e) (ii). R.R.O. 1990, Reg. 352, s. 1.

8. (1) Every applicant, other than a municipality, for a certificate of approval for a Class 1 mobile PCB destruction facility waste disposal site shall,

1. deposit a sum of money;
2. furnish a surety bond; or
3. furnish personal sureties,

in the amount of $50,000.

(2) Every applicant, other than a municipality, for a certificate of approval for a Class 2 mobile PCB destruction facility waste management system shall,

1. deposit a sum of money;
2. furnish a surety bond; or
3. furnish personal sureties,

in the amount of $50,000 for each mobile PCB destruction facility operating in Ontario.

(3) Where the applicant, during operation of the site or within sixty days after giving the Director notice that the equipment is disassembled and the site is terminated, fails to comply with the Director’s requirements to remove such waste or to carry out such actions as the Director considers necessary to ensure satisfactory maintenance of the equipment or the site, the money, bond or sureties deposited or their proceeds may be used by the Director in carrying out the necessary actions. R.R.O. 1990, Reg. 352, s. 8.

Appendix E: Templates for Standard Non-Cash Forms of Financial Assurance

The following templates can be revised to fit specific circumstances. However, if forms provided by issuing institutions (for example, banks, surety companies) are presented by approval applicants or recipients of orders, these forms should be reviewed by Legal Services Branch and other appropriate Ministry staff to ensure that provisions of Part XII of the Environmental Protection Act, the terms and conditions of the order or approval and the intent of the guideline are preserved and implemented.

The blanks and bold words do not belong in the financial assurance form. The square brackets do not belong in the financial assurance form. Ensure that they are deleted from the final, completed version of the document. For example, this means that if a Ministry official has not provided the titles of one or more positions the words in square brackets and the square brackets “[other appropriate MOE official’s title supplied by MOE]” must be deleted.

The optional addition (*) can be varied to meet the circumstances. For example, the bond should refer to the order or approval and to the waste management system, landfill, sewage works, source of air emissions or any other facility or pollution source that is the subject of the order or approval.

If a standard or non-standard, non-cash financial assurance form is to be accepted instead of cash, the order or approval requiring the provision of the financial assurance should specify that, in the event of a notice of expiry, non renewal or other termination of the security is received or another event happens which impairs the financial assurance, the standard or non-standard financial assurance should be immediately replaced by cash. Some standard or non-standard types of financial assurance such as some surety bonds and insurance policies may not be convertible to cash. Special terms and conditions will be required in the order or approval which will enable the Director to start the closing down and clean-up of the operation in the event the financial assurance is being terminated and start a claim against the issuer of the financial assurance before it terminates.

The surety bond template shown is an example of a surety bond for a waste disposal certificate of approval. With suitable changes, this template can be adapted for other environmental activities and requirements.

If any changes are made to these templates, the issuing bank or other institution must obtain Ministry approval of these changes before it is accepted as financial assurance. The regulated party (the bank’s customer) is normally responsible for obtaining Ministry approval for the issuing institution. Delays can be avoided if a draft of the proposed form is reviewed at an earlier date.

Some operators present letters of credit of a foreign bank guaranteed by an Ontario bank. Frequently the form of documentation is confused and needs careful advance scrutiny.

Appendix F: Flow Charts Showing Financial Assurance Procedures and Responsibilities

Chart F1: Categories of Financial Assurance, According to Degree of Staff Discretion

Financial Assurance (FA) is required – Compulsory (non-discretionary)

• FA is required in every case where specified by Regulation.
  • Ontario Regulation 232/98 – Landfilling Sites
  • Regulation 352 – Mobile PCB Destruction Facilities

Financial Assurance (FA) is required – Discretionary

• FA normally required but Ministry has discretion to not require FA in special cases
  • e.g. Part V Approvals, EPA; Section 53 Approvals, OWRA
  • If FA is not required, reason(s) should be documented
• FA not normally required but Ministry has discretion to require FA where Section 4.4 criteria apply.
  • e.g. Part V Approvals, EPA; Section 53 Approvals, OWRA; Section 9 Approvals, EPA; Section 34 Approvals, OWRA; Section 18 Orders, EPA
  • If FA is required, reason(s) should be documented.

Chart F2: Procedures for Obtaining Financial Assurance and Handling Documents

Is financial assurance (FA) required for an order or approval?

Determined by Program Director (as defined in Appendix J of Guideline). Input from Environmental Assessment and Approvals Branch (EAAB), district offices, Legal Services Branch (LSB), Environmental Sciences and Standards Division (ESSD) and Economic Analysis Section (EAS) as necessary.

If no:

FA is not required. Provide written reasons in order or approval file.

If yes:

1. FA is required. Provide written reasons in order or approval file.
2. 1. FA amount and form, including other conditions in order or approval are determined by regulated party and Program Director using the Guideline. For a standard form (cash, irrevocable letter of credit, surety/performance bond, transferable bonds guaranteed by government), input may be requested from EAAB, District Offices, LSB, Business and Fiscal Planning Branch (BFPB), ESSD and EAS. EAS reviews FA calculations and proposed FA amount.
   2. Relevant requirements for obtaining, reviewing, using and releasing FA should be specified as conditions in order or approval.
3. Program Director issues order or approval to regulated party.
4. In terms of an approval, the regulated party provides the total or partial FA amount to the Program Director no later than prior to the commencement of operations. With respect to an order, the regulated party provides FA as soon as possible to ensure compliance with order. Program Director must review FA amounts and wording of non-cash forms may be verified with LSB, BFPB and EAS.
5. Program Director either:
   • Keeps copies of the order, sends originals to BFPB and sends a copy to EAAB for their information, or
   • Keeps copies of the approval, sends originals to BFPB and sends a copy to District Offices for their information
6. BFPB holds originals for safekeeping, deposits cash, reviews, verifies and records account transactions.
7. Regulated party may begin operations at site or begin compliance activities.

Chart F3: Converting Non-Cash Financial Assurance to Cash and Using Financial Assurance

1. Determine if relevant criteria (Section 8.2) are applicable to justify converting non-cash financial assurance (e.g. letter of credit, surety bond, etc.) to cash and depositing to the Consolidated Revenue Fund account.
   1. If yes, proceed to step 2.
   2. If no, continue monitoring account.
2. Program director (as defined in Appendix J of Guideline) instructs BFPB to demand payment from financial institution. Program Director should provide BFPB supporting documentation for this demand.
3. ADM of Corporate Management Division approves demand package prepared by BFPB. The package explains the rationale for converting non-cash FA to cash. BFPB contacts the financial institution to demand payment. After receiving payment, BFPB deposits the cash in the Consolidated Revenue Fund account.
4. Does the Ministry need to use financial assurance to complete works or remediation activities right away?
   1. If yes, proceed to step 5.
   2. If no, hold funds until:
      • Remedial actions or works are needed, or
      • It is determined that financial assurance may be returned.
5. Program Director issues Section 136 Order to use financial assurance for required works, remediation or tasks.
6. Program Director will instruct BFPB to prepare and send cheque to the appropriate third party. Instruction should be accompanied by supporting documentation (e.g. Financial Assurance Refund/Disbursement Form signed by Regional Director, Section 136 Order, contractor invoices).

Chart F4: Procedures for Returning Financial Assurance

Is financial assurance still required?

• Triggered by periodic review or requested by Regulated Party
• Determined by Program Director (as defined in Appendix J of Guideline). Input from EAAB, district offices and EAS as necessary.

If yes:

FA is still required. Ensure that amount is sufficient and form has been renewed, if necessary. Input from EAS and EAAB as necessary.

If no:

1. FA is no longer required.
2. Program director to arrange for District staff to visit the site in order to verify that the conditions in the order or approval were completely fulfilled.
3. If all the conditions are not satisfied, regulated party is instructed to clean up site. Other enforcement actions may be necessary, including converting non-cash FA accounts to cash and using funds. Steps should be documented. (Refer to Chart F3). Return to step 2.
4. If all the conditions are satisfied, Program Director issues Section 134 Order to release funds. BFPB is instructed to return FA to either regulated party or financial institution.
5. If FA was provided in cash, the Program Director will instruct BFPB to prepare and send cheque to regulated party. Instruction should be accompanied by supporting documentation (e.g. Financial Assurance Refund/Disbursement Form signed by EAAB Director).

Appendix G: List of Planned Landfill Closures and Post-Closure Care Activities

Landfill Areas To Be Closed (Requires Financial Assurance)

Planned Closure Items

• Capping of old landfill
• Clay for cover
• Sign replacement
• Clean-up: litter, debris on and around site
• Fuel tank removal
• Removal of structures
• Repair of leachate seeps
• Final cap application
• Topsoil application
• Seeding finished areas
• Topsoil and seeding
• Drainage ditch construction
• Tree and shrub planting
• Installation of observation wells
• Closure plan
• Repair access road
• Removal of sediment pond

Post-Closure Care Items

• Cap and topsoil repairs
• Cap repair
• Erosion repair
• Grass cutting
• Ditch maintenance
• Leachate collector flushing
• Semi annual inspections and routine maintenance
• Annual monitoring
• Site inspections
• Annual water monitoring, laboratory analyses, report preparation
• Site surface maintenance
• Repair of defective monitoring wells
• Road granular (one-time cost in yr. XXIX)
• Access road repair and snow removal
• Taxes

Appendix H: Spreadsheet Template for Calculating Financial Assurance Amounts for a Typical Landfill Site, According to Ontario Regulation 232/98

Introduction

An Excel spreadsheet example is presented in this Appendix to show, in detail, how to determine financial assurance for a typical private sector landfill operation according to Ontario Regulation 232/98. The spreadsheet template, which may be obtained from the Environmental Assessment and Approvals Branch of the Ministry of the Environment or the Economic Analysis Section in the Ministry of Energy, contains the formulas and algorithms defined below and can be used with little modification to calculate the amounts of financial assurance for closure, post-closure care and maintenance and contingency costs for a particular site.

Financial assurance for a landfill site is intended to secure funds for:

• Closure of the site when the landfill capacity is exhausted.
• Post-closure care costs such as monitoring, analysis and reporting, design, construction, operation, maintenance and replacement of engineered facilities, etc.
• Unexpected contingency costs such as construction, operation, maintenance and replacement of works to collect and process gas or leachate and to repair liner failure or to compensate offsite properties. Compensation is limited to situations where there is statutory authority.

As explained in the Guideline, the amount of financial assurance to be provided must be sufficient to pay the total capital and operating costs of specified closure activities plus the costs of post-closure care over the contaminating life span of the landfill. In addition, there should be a separate financial assurance fund to pay for unexpected contingencies.

Table H1: Closure and Post-Closure Care Activities, Costs, Landfill Specifications and Financial Inputs

In this example, illustrative closure and post-closure care activities are listed in Table H1 along with the estimated one-time capital or annual operating costs (in 2004 dollars) for each activity. Expenditure patterns for different activities can change over time. For example, cost item 1PC in Table H1 increases from $500 to $1,500 and then decreases to $1,250 over the planning period for the landfill because the amount of work needed varies at different stages in the life of the landfill site. Other relevant variables needed for these calculations (i.e., closure, site capacity, annual amount of solid wastes disposed of each year, inflation and discount rates, etc.) are also presented. Closure and post-closure care activities shown in Table H1 can vary based on the characteristics of the landfill.

Estimates of the capital and operating costs for each closure and post-closure item must be provided by landfill owners or operators who are recipients of orders, approvals and/or who are required to comply with Ontario Regulation 232/98 - Landfilling Sites. Ministry of the Environment officials should review and verify these estimates to the extent possible. Verification may be accomplished by site visits, calling vendors, reviewing other approval files for landfills and by reviewing the literature in trade magazines. If cost estimates are not submitted, the approval application and financial assurance proposal will not be reviewed and will be returned to the regulated party.

Estimated costs are presented as an example. Unit costs should be obtained for the site in question and should be incorporated in Table H1. These costs should then be used in Table H2.

Table H2: Financial Assurance Calculation for Landfill Site

Financial Assurance for Closure and Post-Closure Care Costs

Calculating financial assurance for closure and post-closure care costs involves a four-step approach:

Step 1: Derive annual inflation rate using the Annual Average Non-Residential Building Construction Price Index for Toronto (NRCPIT);

Step 2: Inflate costs (using the rate derived in Step 1) to arrive at the total future costs expected to be incurred at and after closure;

Step 3: Discount total future costs back to the year of closure to determine how much financial assurance, net of interest, is required from the regulated party; and

Step 4: Submit the calculated financial assurance amount from Step 3 above according to the accumulated amount of waste deposited each year during the operating period of the landfill.

Using the cost estimates provided in Table H1, Table H2 presents forecasts of closure and post- closure cost items to be incurred each year, starting from the year in which the site is intended to close (2024 in this example). The expected closure year is defined as “year one” of the contaminating life span and “year zero” for discounting purposes. In this example, a 40-year contaminating life span is assumed.

Inflation and discount rates used in this example are 3.4 per cent and 5.23 per cent respectively and represent rates as of February 2004. Sources of inflation and discount rates to be used are defined in the Guideline. Clear references to the actual rates used must be provided in regulated parties’ financial assurance proposal. When needed annual fill rates are to be provided by the proponent. At regular intervals, the financial assurance estimates are to be updated by new price indices and fill rates.

Step 1:

The NRCPIT, published by Statistics Canada, Catalogue 62-007, is used in the following formula to derive the annual inflation rate. Using the most recent (2003) NRCPIT, the inflation rate is calculated to be 3.4%:

Inflation rate = [(Year 2003 NRCPIT − Year 1997 NRCPIT) ÷ Year 1997 NRCPIT] ÷ (number of years in between the two indices + 1) × 100%

= [(123.8 − 100) ÷ 100] ÷ (6 + 1) × 100%

= 3.4%

Step 2:

Once the inflation rate is derived, it is used/applied in the following formula to calculate the value of the total future costs by inflating costs each year from 2004 to year 2024.

F(n+1) = C(n) × (1+i)ⁿ

where,

n

year 0, 1, 2, 3, …, N

year 0

base year = year when project is initiated

N

final year of planning period

F(n+1)

future capital and operating costs in year n+1

C(n)

annual capital and operating costs expended in year n; initial capital and operating costs expended in year n = 0

i

inflation rate derived from NRCPIT

From Table H2, costs are summed across rows to show the total annual expenditures expressed in current dollars. The total future value which is equal to $7,938,588 noted in Column U, “Undiscounted Future Expenditures $’s”.

Step 3:

The discount rate to be used is the most recent monthly rate for Government of Canada Benchmark Bond Yields: Long-Term, as published in the Bank of Canada website. The most recent discount rate as of January 31, 2004 is 5.23%. This rate is used to calculate present values.

Present values are calculated using the “@PV” function of the Quattro Pro or Excel spreadsheet software or the following formula found in Section 6.7.6.5 in the Guideline:

PV Cost(n+1) = Σ(sum of) [F(n) ÷ (1+r)ⁿ]

where,

n

year 0, 1, 2, 3, 4, 5, …, N

year 0

base year: in the case of landfills, year of site closure, when discounting

year N

final year of planning period (or of contaminating life span for landfills)

F(n)

future (inflated) capital and operating costs

PV Cost(n+1)

present value of future capital and operating costs in year n+1

r

discount rate

From Table H2, the total present value for the period from year 2024 to 2063 yields an estimate of $2,958,525 found in Column V, “Closure Year 2024 Expenditures $’s”. At the year of closure, this is the total amount of funds that would have to be deposited in order to generate sufficient compound interest to yield an estimated future amount that would pay for the closure and post-closure care costs of $7,938,588.

Step 4:

Prior to site closure, the closure/post-closure care funds to be paid each year are proportional to the cumulative amount of waste deposited in the site each year and must sum to the total present value of $2,958,525 in year 2023, one year prior to closure. The following formula is used to arrive at the financial assurance payments:

A = B (C ÷ D)

where,

A

the minimum amount of financial assurance that must have been provided;

B

the total amount of financial assurance for closure/post-closure costs;

C

the amount of waste that has already been deposited at the site; and

D

the total amount of waste that will be deposited at the site (equal to site capacity).

Since future NRCPITs are unknown and fill rates are forecasts only, the regulated party is required, at least every three years, to update these rates and use them to recalculate the financial assurance amounts.

During each year within the operating period, the regulated party is required to increase their financial assurance amount according to the Cumulative Financial Assurance Balance for closure and post-closure noted in Column AB.

After site closure, the financial assurance amount will be adjusted each year to account for interest earned and maintenance expenditures incurred. The amount of financial assurance should be reviewed periodically to ensure the financial assurance in place is sufficient to pay for all the anticipated costs. financial assurance amounts may be increased or decreased as the result of these reviews.

Before closure, the Cumulative Financial Assurance Balance schedule for closure and post-closure is found in Column AB and after closure, it is found in Column AC in Table H2.

Financial Assurance for Contingency Costs

Calculating financial assurance for contingency costs consists of one step. The NRCPIT and fill rates are used in the contingency cost formula noted below to arrive at the financial assurance amount for each year prior to closure. After closure, the financial assurance amount for contingencies remains constant throughout the contaminating life span. If a portion or the entire financial assurance amount is used to pay for any planned or unplanned closure of the site or to the post-closure care of the site, the regulated party is required to replace the financial assurance amount within six months.

F = $0.50 × W × (I₂ ÷ I₁)

where,

F

the amount of the financial assurance,

W

the number of tonnes of waste that have been deposited in the landfilling site at the time the amount of financial assurance is calculated,

I₁

the 1997 Annual Average Non-Residential Building Construction Price Index for Toronto, determined with reference to the same base year as is applicable to I₂, as published by Statistics Canada under the authority of the Statistics Act (Canada),

I₂ 

the most recent Annual Average Non-Residential Building Construction Price Index for Toronto available at the time the amount of the financial assurance is calculated, as published by Statistics Canada under the authority of the Statistics Act (Canada).

Total financial assurance amount for contingency costs from year 2004 to 2023 yields an estimate of $37,140 found in Column AD, “FA Accumulated for Contingency Costs”.

Since future NRCPITs are unknown and fill rates are forecasts only, the regulated party is required, at least every three years, to update these rates and use them to recalculate the financial assurance amounts.

Total Financial Assurance

The total annual financial assurance required by the regulated party can be found in the last column, Column AE in Table H2. The total financial assurance required each year is the sum of the cumulative financial assurance balance required for closure and post-closure care plus the cumulative balance required for the contingency fund. For example, in year 2050, the regulated party would have to provide a total financial assurance amount of $2,617,784 which includes $2,580,644 for the closure and post-closure fund and $37,140 for the contingency fund.

At the end of the planning period, any remaining financial assurance may be returned to the regulated party after the Program Director is satisfied that all conditions have been met and no future expenditures are anticipated.

Download Table H2.

Appendix I: Financial Assurance Refund/Disbursement Form

Download the Financial Assurance Refund/Disbursement Form.

Appendix J: Definitions

Definitions

activity

a specific action, e.g., top soil application, installation of a leachate collection or treatment facility, groundwater monitoring, long-term monitoring, storage or security, etc. that is required by a condition of an order or approval.

approval

as defined in section 131 of the EPA (which includes OWRA approvals) – means program approval, certificate of approval or provisional certificate of approval, and includes a permit or approval issued by a Director under the Ontario Water Resources Act, but does not include an approval under Part X of the EPA. Where applicable, approval also refers to certificate of property use issued under section 168.6 of the EPA.

bearer bond

a form of negotiable security issued and payable to anyone with physical possession of that security. Interest and principal are payable to the holder regardless of whom it was originally issued. Coupons are attached to the bond and each coupon represents a single interest payment. The holder submits a coupon, usually semi-annually, to the issuer or paying agent to receive payment. Market trends indicate that bearer bonds are being phased out in favour of registered bonds. Bearer bonds are a form of transferable bonds.

bearer form

also called “negotiable security.” The opposite of registered form. Ownership is determined by physical possession of the security. The holder of the bond is the owner. Physical certificates exist. Bearer or negotiable bonds are desirable for financial assurance because they can be converted to cash very quickly.

Business and Fiscal Planning Branch (BFPB)

the name of this branch may change from time to time. Reference should be made to the Ministry organization chart for the current name.

contaminating life span

as defined in Ontario Regulation 232/98 - Landfilling Sites, as amended from time to time. (The period of time, after closure, in years, from the expected year of closure until the site finally produces contaminants at concentrations that are below levels which have unacceptable health or environmental effects.)

contingency costs

are costs for unexpected activities or equipment installations which may be incurred in the future. The costs could be recurring and/or one-time capital costs for such items as construction, operation, maintenance and replacement of works identified in the regulated parties’ contingency plans.

cost

or a cost item may be a one-time (capital) expenditure or it may be a recurring annual operating expenditure.

cumulative financial assurance balance schedules

the total (or cumulative) amount of financial assurance required each year during the planning period.

date of closure

defined as the first year of the contaminating life span.

Economic Analysis Section (EAS)

a section in the Strategic Policy Branch of the Ministry of Energy which provides economic analytical services to the Ministry of the Environment. The section was originally the Economic Services Branch of the Ministry of the Environment. The name of this group may change from time to time.

environmental measures

as defined in sections 131 and 132 of the EPA.

EPA

refers to Ontario’s Environmental Protection Act.

financial assurance

means one or more of the mechanisms listed in section 131 of the EPA by which one party guarantees or obtains a guarantee of its performance to another party (such as the government). It is not considered a financial penalty.

forms of financial assurance

include standard, non-standard or unacceptable forms. Financial assurance may also be classified as either cash or non-cash forms.

guarantor

a third party, such as a surety company, which will issue a surety bond or a similar type of financial assurance.

impaired financial assurance

means that the sufficiency or accessibility of the financial assurance provided by the regulated party is uncertain in some way. If the financial assurance is in a non-cash form, it may need to be converted to cash to be used by the Ministry to fulfil the terms and conditions in an order or approval.

Indemnification Agreement

one party in a business contract agrees to pay the other party for any losses that the other party incurs in the proposed venture.

inflation rate

the rate at which price levels rise. Nominal or current values expressed in dollars include the effects of inflation. Real values expressed in dollars exclude the inflation rate. Inflation rates are used to inflate future costs to obtain expected future nominal values. Inflation rates are based on construction price indices rather than the consumer price index.

letter of credit

a document issued by a bank which assures that the bank will make available to the beneficiary the amount agreed to by both parties, in compliance with the terms and conditions of the documentary credit agreement. It is a very secure method of ensuring payment.

letter of guarantee

a letter of guarantee is an irrevocable commitment by a bank to pay a business’ debt under certain circumstances.

long-term project

when the planning period of the order or approval is four full years or more and when certain future costs are known to be required.

marketable security

is any security that can be easily converted into cash. Such securities will generally have highly liquid markets allowing the security to be sold at a reasonable price very quickly.

Ministry

refers to the Ontario Ministry of the Environment. The name may change from time to time. Reference should be made to official Government of Ontario publications for the current name.

mitigation measures

measures taken to prevent and ameliorate adverse effects (as defined in the EPA) that relate to this site during the operational period of the site and following closure of the site.

negotiable security

any security in bearer form is a negotiable security. This form can be transferred or delivered to another party without endorsements. Examples include bearer bonds and stock certificates. Negotiable securities differ from registered securities, which require endorsements in order for ownership to be transferred.

non-standard forms of financial assurance

the Program Director, with assistance from Legal Services Branch and Business and Fiscal Planning Branch staff assistance, should consider and review these forms to determine acceptability. The following are examples of non-standard forms of financial assurance:

1. any security or collateral accepted by the Program Director;
2. agreements, contracts or other non-standard forms of financial assurance with conditions stated in the order or approval;
3. insurance policies;
4. Guaranteed Investment Certificates (GICs) reissued payable to the Ontario Minister of Finance;
5. marketable securities (apart from those mentioned in standard forms of financial assurance) or other negotiable securities;
6. Indemnification Agreements;
7. letters of guarantee; and
8. Qualified Environmental Trust accompanied by letter of credit, cash or bond. This form is an agreement made between two parties for the purpose of a tax benefit to the regulated party.

one-time cost items

refer to capital costs or consulting services which are incurred usually once during the planning period. One-time costs include the costs of equipment, installation of machinery and equipment, construction of buildings and other site improvements. Other one-time costs include contract services, architect services, design and engineering, construction or installation costs, laboratory testing, project management fees, etc.

operating period of a landfill

period from the first day of operation until the day that the landfill site closes.

order

as defined in section 131 of the EPA (which includes OWRA orders) – means an order by the Director under the EPA, and includes an order, notice, direction, requirement or report made by a Director under the Ontario Water Resources Act, but does not include an order under section 136 (order for performance of environmental measures) of the EPA. If financial assurance is required on a pesticides matter, Ministry staff would have to include it in a preventative or remedial order under section 17 or 18 of the EPA.

OWRA

refers to the Ontario Water Resources Act.

performance bond

a surety bond issued by an insurance or surety company to guarantee satisfactory completion of a project by a contractor.

planning period

depending on the type of order or approval, planning periods for a landfill consist of the time between the day the site starts receiving waste until the end of the contaminating life span. For waste processing or transfer facilities, the planning period extends from the day that the Ministry issues an approval for the facility until the day that the site has completed all required clean-up and remediation procedures. The planning period of an order to implement abatement projects, extends from the day that the Ministry issues an order until the day that all compliance actions are completed to the satisfaction of the Director.

present value

the worth of a future stream of costs (or revenues) in terms of their value at the estimated date of closure.

PV Cost(n+1) = Σ(sum of) [F(n) ÷ (1+r)ⁿ]

where,

n

year 0, 1, 2, 3, 4, 5, …, N

year 0

base year: in the case of landfills, year of site closure, when discounting

year N

final year of planning period (or of contaminating life span for landfills)

F(n)

future (inflated) capital and operating costs

PV Cost(n+1)

present value of future capital and operating costs in year n+1

r

discount rate

For example, the PV of $1,000 in year 10 at a 5% discount rate:

PV Cost(9+1) = $1,000 ÷ (1.05)⁹

= $1,000 ÷ 1.55133

= $645

Program Director

Ministry of the Environment staff member appointed by the Minister of the Environment under section 5 of the EPA or the OWRA as a legislative “director,” and is responsible for administrating different sections of the environmental statues and for developing, issuing and enforcing an order or approval. A Program Director is normally a Ministry of the Environment staff member working for the Environmental Assessment and Approvals Branch or for a Regional Office. The legislative director is not necessarily an administrative director of a branch or region of the Ministry. Investigations and Enforcement Branch has a current list of program directors appointed by the Minister.

recurring costs

refer to costs associated with the operation, maintenance and monitoring of equipment, buildings and the site, including the costs for labour, materials, ongoing consultant services, etc.

registered form

the opposite of bearer form. Ownership does not relate to physical possession of a security, but instead relates to who is registered with the issuer. The issuer or agent records and keeps ownership information such as name and address on file. Registered form bonds are not acceptable for financial assurance purposes, as some bonds require endorsement or power of attorney for the ownership to be transferred.

regulated party

a company, a public agency or a person who is subject to an order, an approval or a regulation and must provide financial assurance or who may be expected to provide financial assurance under an order or approval or who has or intends to apply for an approval.

saleable material

as defined in Regulation 347 - General – Waste Management, refers to municipal waste, hazardous waste or liquid industrial waste, other than used or shredded or chipped tires, transferred by a generator for direct transportation to a site,

1. to be wholly used at the site in an ongoing agricultural, commercial, manufacturing or industrial process or operation used principally for functions other than waste management if the process or operation does not involve combustion or land application of the waste, or
2. to be promptly packaged for retail sale to meet a realistic market demand, or
3. to be offered for retail sale to meet a realistic market demand.

security

a security is an investment instrument, other than an insurance policy or fixed annuity, issued by a corporation, government, or other organization.

short-term project

when the planning period of the order or approval is less than four years and when the need to implement future compliance activities is not certain.

standard forms of financial assurance

are acceptable and do not require Ministry review. The following are standard forms of financial assurance:

1. cash;
2. irrevocable letters of credit;
3. surety bonds; and
4. negotiable securities issued by or guaranteed by provincial or federal government.

surety bond

a bond issued by an entity on behalf of a second party, guaranteeing that the second party will fulfill an obligation or series of obligations to a third party. In the event that the obligations are not met, the third party will recover its losses via the bond. Examples of surety bonds include: performance bond, bid bond, payment bond, etc.

transferable bond

a bond whereby ownership can be transferred from one party to another. Transferable bonds can either be in bearer form or registered form. It should be noted that Government of Canada Savings Bonds are not acceptable for financial assurance purposes, as these bonds are not transferable.

unacceptable forms of financial assurance

the following forms are unacceptable to the Ministry and Ministry staff should not accept or consider them:

1. Guaranteed Investment Certificates (GICs) which are not transferrable;
2. all bonds which are not transferrable;
3. bank accounts held by the regulated party or joint bank accounts held by the Ministry and the regulated party;
4. insurance policies for long-term projects or landfill sites; and
5. guarantees from out-of-province, off-shore firms.

Appendix K: Procedures to Obtain Non-Residential Building Construction Price Index for Toronto (NRCPIT) from Statistics Canada Website

Regulated parties are to follow the instructions noted below to obtain the Annual Average Non-Residential Building Construction Price Index for Toronto (NRCPIT) from the Statistics Canada’s website.

1. Go to the Statistics Canada website. Type “non-residential building construction price index” in the “search the website” box and click once on the search button. Avoid typing any abbreviations in the search box because the search command does not recognize them.
2. To derive the NRCPIT annual average for a desired year, search the list for the first three quarter documents released in the desired year and the last quarter document released in the following year. These release dates are: May, August, November and February.
3. Click once on the documents which have the correct date and “non-residential building construction price index” in the title.
4. When in the document, scroll down to the Non-Residential Building Construction Price Index table and extract the figure for Toronto.
5. Use the four indexes to calculate the annual average. For example, to derive the annual average NRCPIT for 2003, data from the following release dates are used:
   • First quarter 2003 rate is published during mid May (12 - 16), 2003 = 122.2;
   • Second 2003 quarter rate is published during mid August (12 - 16), 2003 = 123.7;
   • Third 2003 quarter rate is published during mid November (12 - 16), 2003 = 124.2; and
   • Fourth 2003 quarter rate is published during mid February (12 - 16), 2004 = 125.2.

     Annual average index = (122.2 + 123.7+ 124.2 + 125.2) ÷ 4 = 123.8

This index will then be used along with the 1997 index to calculate the inflation rate as per the formula noted in Section 6 of the Guideline.

Addendum to financial assurance guideline (F-15): deriving inflation rates and discount rates

Approved procedures for deriving inflation rates, discount rates and O. Reg. 232/98 contingency costs for landfill FA calculations.

The Ministry of the Environment and Climate Change requests that Environmental Compliance Approval (formerly known as Certificate of Approval) applicants and their consultants use the following procedures to derive inflation rates, discount rates and O. Reg. 232/98 contingency costs for financial assurance calculations.

Inflation rates

1. An inflation rate to represent all of Ontario is derived by computing the most recent 10-year averages for the combined Non-Residential Building Construction Price Indices (NRBCPI) for Toronto and for Ottawa-Gatineau (Ontario Part). Statistics Canada has changed the reference year for these indices from 1997 to 2002 (2002 = 100).
2. Obtain the annual NRBCPI for Toronto and the annual NRBCPI for Ottawa-Gatineau (Ontario Part) for the most recent 10-year period. Combine the averages for the two indices to compute the 10-year average Non-Residential Building Construction Price Index for Ontario (NRBCPIO).
3. Compute the year to year annual % changes in the NRBCPIO using the following algorithm:

   ((B - A) / A) × 100

   where B = current year NRBCPIO; A = base year NRBCPIO

4. Compute the average of these year-to-year % changes in these indices over 10 years.

These indices are available from Statistics Canada:

• Toronto = from Table 327-0043 [35535]
• Ottawa-Gatineau (Ontario Part) = from Table 327-0043 [35505]

For example, the 10-year annual average for the combined Toronto and Ottawa-Gatineau NRBCPI for the years 2006-2015 yields a rate of 3.28%, where the index in 2002 = 100.

Discount rates

1. Compute the most recent 10-year annual average of Long Term Government of Canada benchmark bond yields, where Long Term means 30 years. These rates are found at the Bank of Canada website
2. Estimates derived from the 10-year annual average long-term bond rates should be used for calculations during the first 30 years of the post-closure contaminating lifespan (CLS), starting with the year of closure
3. For any period from 31 years after closure, use the inflation rate derived above, plus a constant 3% real, long term discount rate
4. For example, where 2015 is the most recent year for the 10-year average calculations,
   • for calculations during the first 30 years after closure, the most recent 10-year average (2006–2015) discount rate = 3.38%
   • for the remainder of the post-closure period (31+ years), use the 10-year average inflation rate plus a constant 3% real discount rate, e.g. 3.28% + 3% = 6.28%

The higher discount rate during the 31+ year period of the CLS substantially reduces the FA burden to proponents who own sites with contaminating lifespans that are considerably longer than the minimum 25-year period.

Reg. 232/98 contingency costs

As per Reg. 232/98, FA for contingencies is calculated on the basis of total tonnes of waste disposed in a given year using the following formula:

F = $0.5 × W × (I2 ÷ I1)

where:
F = the amount of financial assurance for contingency items
W = number of tonnes of waste that have been deposited at the landfill site at the time the amount of financial assurance is calculated
I2 = most recent annual average Non-Residential Building Construction Price Index for Toronto (NRBCPIT) at the time the FA is calculated. At the time of this update, the most recent annual average (2015) NRBCPIT is 157
I1 = 1997 annual average NRBCPIT = 83.7 (NB: Statistics Canada has changed the reference year for this index to 2002 = 100. When computing the Reg. 232 Contingency FA amount, an equivalent index value for 1997 has been interpolated to use with the new index)

NB: Data and computations for deriving both inflation and discount rates are detailed in the Excel file, "Inflation and Discount Rates for FA Calculations (2006–2015)". To obtain a copy of the Excel file, please contact:

Amanda Fishman, Environmental Economist
Client Services and Permissions Branch
Email: MECPFinancialAssurance@ontario.ca

• Tel: 416-314-7118
• Toll-free: 1-800-461-6290