Environmental legislation is constantly being reviewed and licensing requirements updated by the authorities. For more information on the impacts of these changes on licensed facilities, please see below.
Frequently Asked Questions on ELRA, CRAMP and Financial Provision
In 2015 ELRA, CRAMP and Financial Provision requirements for EPA licensed facilities were updated. Typical questions AWN Consulting is asked on these topics are outlined here.
1. What is an Environmental Liabilities Risk Assessment1 ?
In simple terms, an Environmental Liabilities Risk Assessment (ELRA) is an assessment of the potential environmental and financial implications of an incident or accident at an Environmental Protection Agency (EPA) licensed facility. Typical incidents include leaks from storage tanks, spillages of chemicals, fires/explosions etc. The potential likelihood and severity of such incidents is assessed in an ELRA.
2. What are Closure Restoration and Aftercare Management Plans (CRAMP)2 ?
For most sites, Closure will mean cessation of production activities followed by the decommissioning, cleaning and rendering safe of the plant. This will include the removal of all raw materials, wastes and other potentially contaminating substances present on site to the satisfaction of the EPA. Clean closure is normally validated by a suitable test programme.
A Restoration and Aftercare Management Plan will be required where:
- contamination of soil or groundwater has occurred at a site during its operational lifetime and the contamination is not successfully remediated during its operational lifetime or
- a facility is of a type that inherently involves a long Aftercare period - such as a Landfill or Extractive Industry.
3. How often do I need to prepare an ELRA or CRAMP for my facility?
Depending on the date your licence was granted, which may impact on the specific conditions imposed in your licence, most licensees will need to prepare an ELRA for the facility once every 3 years. Many licensees are required to update the existing ELRA/CRAMP in line with recently updated guidance. The EPA requires licensees to provide, as part of your Annual Environmental Report, an annual statement of your position with respect to your ELRA, CRAMP and Financial Provision (FP) requirements. Where there has been a significant change in the processes/emissions etc on site, an updated ELRA/Closure Plan will be required.
4. Do I need Financial Provision for both ELRA and CRAMP?
Again this will depend on the date of your licence or the specific wording set out in the conditions of your licence, but in most cases, yes. Most licensees (certainly recent/new licensees) are required to provide a suitable FP instrument to cover both the ELRA and CRAMP FP amounts identified in your most recent assessments.
5. My financial provision requirement has increased this year – why is this?
In 2014, the EPA released an updated guidance document entitled "Guidance on Assessing and Costing Environmental Liabilities" and more recently during 2015 "Guidance on Financial Provision for Environmental Liabilities". These guidance documents replaced earlier 2006 guidance3. It had been found that the 2006 guidance was not sufficiently prescriptive in terms of the methodology used by licensees to assess ELRA and CRAMP liabilities and in the calculation of the required FP amounts. As a result many licensees had insufficient Financial Provision in place.
The new (2014 and 2015) guidance is considerably more prescriptive and requires;
- A site specific assessment of the plausible worst case scenario for Environmental Incidents (rather than median scenarios as had been permitted under the 2006 guidance)
- A far more thorough and transparent assessment of each aspect of the costs involved in completing closure of the facility including sufficient provision for a sudden closure event.
On this basis, AWN Consulting's experience is that the amount of financial provision required by licensed facilities has increased significantly (particularly for licensees who had previously assessed ELRA risks on a median basis). Some FP requirements have more than doubled.
6. I have heard that Insurance and Parent Company Guarantees are no longer considered suitable Financial Provision by the EPA?
The EPA's "Guidance on Financial Provision for Environmental Liabilities" (2015) sets out the approach for determining the most suitable Financial Provision instrument for your facility.
The following FP instruments are detailed in the guidance4:
- Secured Funds;
- On Demand Performance Bonds;
- Charge on Property;
- Insurance; and
- Parent Company Guarantees.
Certain FP instruments are not considered suitable for closure including Insurance products and Parent Company Guarantee. They are suitable for ELRA FP requirements. AWN understands a Parent Company Guarantee has been accepted by the EPA for closure in very limited circumstances to date provided the Parent Company Guarantee meets the EPA's requirements to be Secure, Sufficient and Available when required. Licensees must be able to demonstrate this to the EPA.
7. I have heard that the EPA will expect in excess of €1m for ELRA costs. How can I reduce my FP requirements?
Though a figure of €1m is stated in the 2014 guidance, the EPA have accepted that the prescription of €1m as minimum FP for ELRA may not always be appropriate. The EPA are assessing each report individually and on its own merits.
In terms of reducing FP requirements, it is essential that the necessary mitigation measures are put in place in the short term to reduce the risk of the identified plausible worst case scenario in the ELRA. Closure costs tend to be more difficult to reduce – they are generally fixed costs associated with your specific activity. It is important to note the distinction between the EPA requirement to render the facility safe and the removal of every item of plant/building from site. An effective decommissioning strategy can yield significant savings.
If you want advice on achieving savings on your decommissioning strategy please contact our Environmental Liabilities Risk Assessment specialists:
David Mc Dermott (Associate Director)
Fergal Callaghan (Director)
- Sometimes ELRA risks are referred to as "unknown liabilities".
- Sometimes CRAMP actions/costs are referred to as "known liabilities". The term CRAMP is sometimes replaced by Decommissioning Management Plan or historically Residuals Management Plan – they are all similar terms.
- Guidance on Environmental Liabilities Risk Assessment, Residuals Management Plans and Financial Provision, 2006.
- The EPA has acknowledged that other forms of financial provision may be accepted by the EPA subject to their assessment on a case by case basis.