7.1 Overview

Section 7.2 defines responsibilities for estimating and providing the information and cost estimates needed to determine the amount of financial assurance required, as described in Section 6. Section 7.3 presents procedures involved in accepting, receiving and handling all forms of financial assurance. Section 7.4 lists the procedures for specific forms of financial assurance. Also note,

  1. If satisfactory financial assurance is not received according to the terms and conditions of the order or approval, the Program Director should take immediate actions such as issuing orders, or even revoking the approval in accordance with Ministry guidelines, procedures and policies and in consultation with Legal Services Branch. Normally, an approval should not be revoked if waste is already on the site. Revoking the approval will remove an important legal authority that the Ministry has to require compliance with other (non-financial assurance) conditions in the approval. If waste is on the site, staff should amend the approval to stop operations or to prohibit waste being brought to the site. Such an amendment should not affect any other conditions in the approval.
  2. If the person to whom the order is directed or the approval is issued is different from the person or firm posting the financial assurance, the Program Director should verify the financial assurance amount and the conditions in the order or approval for which the financial assurance was issued and ensure that this arrangement is appropriate.

A flow chart presented in Appendix F demonstrates the main steps for the proper administration of obtaining and handling financial assurance.

7.2 Responsibilities for estimating relevant costs for financial assurance requirements

7.2.1 Regulated parties are responsible for providing cost estimates for the relevant compliance activities required to fulfill the terms and conditions in the order or approval. If cost estimates are not submitted, the approval proposal and application may be returned to the regulated party.

7.2.2 Ministry of the Environment officials will then review and verify, to the extent possible, estimates submitted by regulated parties. Verification may be accomplished by site visits, calling vendors, reviewing other approval files for landfills and by reviewing the literature in trade magazines.

7.2.3 Appropriate Ministry guidelines, procedures or policies, such as Guideline F-2, Compliance Guideline, should be invoked to aid in resolving any disagreement between the Ministry and the regulated party on financial assurance amounts and any other financial assurance matter.

7.2.4 If the regulated party claims that provision of the financial assurance may cause unemployment or undue financial hardship, an economic or financial analysis should be carried out to verify these claims. This analysis should be completed in accordance with appropriate Ministry guidelines, procedures or policies, such as Guideline F-14, Economic Analyses of Control Documents on Private Sector Enterprises and Municipal Projects.

7.2.5 If cost estimates cannot be agreed to between the regulated party and the Ministry, the Ministry will have final determination of the value of the costs and financial assurance amount.

7.3 Acceptance, receipt and handling of all forms of financial assurance

7.3.1 The financial assurance proposal and financial assurance amount should be submitted initially to the Program Director.

7.3.2 For orders that have financial assurance requirements, copies of all documentation should be sent to the Environmental Assessment and Approvals Branch. For approvals, copies of all documentation should be sent to the relevant Regional and District Offices. In addition, the Program Director should, at the very least, ensure that a copy of the following be sent to the Business and Fiscal Planning Branch for review, retention and record keeping:

  1. The front page of the order or approval;
  2. The signature page or pages of the order or approval;
  3. The pages containing any financial assurance conditions and requirements; and
  4. Any relevant cover letters, communications or information.

7.3.3 The Program Director should ensure that cash and signed originals of financial assurance forms and original supporting documents are delivered to the Business and Fiscal Planning Branch for safekeeping.

7.3.4 The Program Director, the Business and Fiscal Planning Branch and the Environmental Assessment and Approvals Branch should review the original financial assurance amount and documents once they have been obtained from the regulated party to ensure, at a minimum, correct spelling of regulated party’s name and address, consistency of data and estimates and receipt of all required information.

7.3.5 Standard or non-standard, non-cash forms of financial assurance such as letters of credit or surety bonds should only be accepted from financial or other institutions empowered to issue such forms and with business offices or branches located in Ontario. A list of such institutions can be obtained from the Business and Fiscal Planning Branch or from the Ministry of Finance.

7.3.6 In order for the Ministry to accept financial assurance from companies which reside outside of Canada, the issuing foreign-owned bank, surety or insurance company should have offices in Ontario; an affiliated bank or company which is domiciled in Ontario or the foreign-owned bank should issue paper that would be acceptable to a bank in Ontario. The Ontario institution must provide written acceptance of the obligation to be bound by the form of financial assurance issued outside of Ontario.

7.3.7 The regulated party is responsible for all fees and charges imposed by the issuing financial institution.

7.4 Acceptance, receipt and handling of specific forms of financial assurance

7.4.1 Standard, non-standard and unacceptable forms of financial assurance are described in Section 5.

7.4.2 Any new, non-standard forms of financial assurance (including insurance policies and trusts) should be reviewed by staff in the Legal Services Branch, the Economic Analysis Section and any other staff as requested by the Program Director to determine whether the form is acceptable. During the review and finalization of the wording of a new form of financial assurance, the regulated party is required to provide financial assurance in one of the standard forms listed in Section 5.4.1.

7.4.3 Procedures for accepting, obtaining and handling the following forms of financial assurance are presented in the subsequent sections:

  1. Cash (Section 7.4.4);
  2. Irrevocable letters of credit (Section 7.4.5);
  3. Surety bonds (Section 7.4.6);
  4. Negotiable securities issued by provincial and federal governments (Section 7.4.7);
  5. Agreements, contracts, or other non-standard forms of financial assurance with conditions specified in the order or approval (Section 7.4.8);
  6. Insurance policies (Section 7.4.9);
  7. Marketable securities: stocks and shares (Section 7.4.10);
  8. Any security or collateral accepted by the Program Director (Section 7.4.11); and
  9. Qualified Environmental Trust accompanied by letter of credit (same procedures as irrevocable letters of credit, Section 7.4.5).

7.4.4 Procedures to handle cash

7.4.4.1 Cash refers to cheques and other similar cash equivalents, such as money orders. All cheques should be certified.

7.4.4.2 Cash in the form of currency (dollars) should not be accepted as financial assurance. However, if use of cash is unavoidable, staff should give a receipt to the regulated party and keep a copy of the receipt. Staff should then place the cash in a safety deposit box at a convenient bank branch and call Business and Fiscal Planning Branch for instructions. In no circumstances should currency be accepted in amounts greater than $10,000. If funds are to be received from outside of Canada through an electronic transfer and the value of the transfer is $10,000 or more staff should contact Legal Services Branch to determine whether provisions of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act are applicable to the transaction.

7.4.4.3 Periodic contributions may be made by the regulated party in order to accumulate a fund for long-term care and maintenance of a landfill or a contaminated site. A cash account is readily accessible to the Ministry, does not require interaction with other institutions to retrieve the funds and does not require monitoring of the value or renewal of a time-limited agreement for the financial assurance amount. Non-cash forms of financial assurance (such as letters of credit, surety bonds and negotiable securities guaranteed by government) will normally have to be monitored and increased annually in accordance with a schedule specified in the order or approval.

7.4.4.4 An order or approval should always state that, if an uncertified cheque is provided, the financial assurance is not considered to be accepted by the Ministry until the cheque has cleared the bank.

7.4.4.5 Cheques, money orders and other cash equivalents should be made out to the Ontario Minister of Finance.

7.4.4.6 Cash will be deposited into an interest-bearing account within the Consolidated Revenue Fund (CRF) and administered by the Business and Fiscal Planning Branch in accordance with appropriate financial policies of the Ministry of the Environment and the Government of Ontario guidelines.

7.4.4.7 Cash should not be deposited in the CRF by the Program Director or by Ministry staff from Environmental Assessment and Approvals Branch or Regional Offices. Cash should be deposited only by Business and Fiscal Planning Branch staff. However, if staff (other than Business and Fiscal Planning Branch) receive cash or cheques, staff are to follow the procedure in Section 7.4.4.2 above.

7.4.4.8 The interest credited to the CRF account shall be at the rate determined in accordance with the Ontario Financing Authority’s Tiered Rate and as specified by relevant Orders in Council.

7.4.5 Irrevocable letters of credit

7.4.5.1 An irrevocable letter of credit is a document issued by a bank on behalf of a customer which guarantees payment by the bank from the account of the customer to representatives of the Ministry.

7.4.5.2 An order or approval which requires financial assurance must include a condition which requires that an automatic renewable clause be included in the letter of credit. The condition should state that the letter of credit will be renewed automatically (with no further documentation) on its expiry date with the same terms and conditions including the condition for renewal. The order or approval must state that, if the letter of credit will not be automatically renewed, the issuing bank must give notice to the Program Director at least 60 days before the expiry date of the letter of credit indicating that the letter of credit will not be renewed.

7.4.5.3 For existing letters of credit which do not have automatic renewal clauses, Ministry staff should monitor the letters of credit to determine the status of the form and ensure that work, for which financial assurance is provided, is completed before the expiry date.

7.4.5.4 If a notice not to renew a letter of credit is given by the issuing bank, an alternative form of financial assurance satisfactory to the Program Director and the Business and Fiscal Planning Branch must be provided to the Program Director at least 30 days before the expiry date of the letter of credit.

7.4.5.5 Letters of credit should be monitored by Ministry staff to ensure that the documents have not expired.

7.4.5.6 If the regulatory instrument is an approval, the identification number and site location should be clearly indicated on the letter of credit. If the regulatory instrument is an order or the facility is not a specific site, then some other clear, unambiguous description or identification should be indicated on a letter of credit, such as the date of the order.

7.4.5.7 Original letter of credit documents are held by the Business and Fiscal Planning Branch.

7.4.5.8 Appendix E provides an example of an irrevocable letter of credit with wording that is acceptable to the Ministry.

7.4.6 Surety bonds

7.4.6.1 Surety bonds consist of agreements or contracts among the guarantor (a surety or bonding firm), the regulated party, and the Crown. The bonds are held in a secure location in the Business and Fiscal Planning Branch.

7.4.6.2 Surety bonds are to be negotiated by the Program Director with the assistance of the Business and Fiscal Planning Branch, the Legal Services Branch and the Economic Analysis Section.

7.4.6.3 For existing surety bonds which do not have automatic renewal clauses, Ministry staff should monitor these bonds to determine the status of the form and ensure that work, for which financial assurance is provided, is completed before the expiry date.

7.4.6.4 Where a surety bond specifies an expiry date, the Program Director should ensure that the surety bond does not expire until after the end of the planning period so that all requirements of the order or approval can be completed. The surety bond must include the provision that the guarantor give notice to the Program Director at least 60 days before the expiry date of the bond indicating that the bond will not be renewed.

7.4.6.5 If a notice not to renew a bond is given by the guarantor, another form of financial assurance satisfactory to the Program Director and the Business and Fiscal Planning Branch must be provided to the Program Director at least 30 days before the expiry date of the surety bond.

7.4.6.6 Surety bonds should be monitored by Ministry staff to ensure they have not expired.

7.4.6.7 Surety bonds are held in a secure location in the Business and Fiscal Planning Branch.

7.4.6.8 Appendix E provides an example of a surety bond with wording acceptable to the Ministry.

7.4.7 Negotiable securities issued by provincial and federal governments

7.4.7.1 Government bonds are issued or guaranteed by the Government of Canada or a provincial government.

7.4.7.2 Government bonds used as financial assurance should have a maturity date of not more than three years from the date on which they are deposited.

The use of government bonds as assurance for a period longer than three years is not encouraged because the value of these bonds could fluctuate according to market conditions. If bonds are used, it will be necessary to monitor their value and to compare current values against the expected amount of money that will be required for decommissioning or clean-up and to require the deposit of additional financial assurance as necessary.

7.4.7.3 Government bonds should not be accepted without review by the Legal Services Branch, the Business and Fiscal Planning Branch and/or the Economic Analysis Section.

7.4.7.4 The Business and Fiscal Planning Branch holds all original financial assurance bonds as well as supporting documents for safekeeping. Bonds must be in bearer form or they must be issued to the Ontario Minister of Finance.

7.4.8 Agreements, contracts or other non-standard forms of financial assurance with conditions specified in the order or approval

7.4.8.1 Agreements, contracts and other non-standard forms of financial assurance may be considered. However, the Program Director should seek the advice of the Legal Services Branch, Economic Analysis Section and Business and Fiscal Planning Branch before accepting these forms of financial assurance.

7.4.8.2 Once the principles and wording in the agreements or contracts are agreed to, the elements should be specified as conditions in the order or approval.

7.4.8.3 Agreements that involve holding of securities by a third party, or bank accounts individually or jointly held by the regulated party, should not be accepted by the Ministry.

7.4.8.4 Guaranteed Investment Certificates (GICs), which are not transferable, should not be accepted as financial assurance unless they are reissued payable to the Ontario Minister of Finance.

7.4.8.5 Regulated party or guarantor should have offices, facilities and assets in Ontario.

Insurance policies

7.4.9.1 Insurance may be considered as financial assurance on a case-by-case basis.

7.4.9.2 An insurance policy is not appropriate for facilities which require long-term care and maintenance such as landfill sites where a fund must be increased over time to pay for future closure, clean-up and long-term care and contingency costs.

7.4.9.3 Insurance policies should only be considered as financial assurance for facilities and activities with planning horizons of less than four years or where the need to incur costs in the future is uncertain. Insurance is not an appropriate form of financial assurance for landfills and long-term disposal facilities where it is certain that costs will be incurred in the future. Insurance may be appropriate for facilities such as waste processing and recycling facilities, transfer stations and sewage treatment plants that will eventually be transferred to a municipality. Insurance policies may also be considered for certain types of orders. Insurance policies offered as financial assurance are subject to the following conditions:

  1. Wording of the policy must be reviewed by the Legal Services Branch;
  2. A policy issued by an insurance company must use the same wording in all subsequent renewals issued;
  3. A policy should be clear and concise with all relevant provisions and commitments included in the policy. Where possible, “side agreements” should be avoided;
  4. Financial assurance should be provided in an acceptable standard form (for example, cash, letter of credit, surety bond, etc.) until the insurance policy is drafted, approved and issued;
  5. Any deductible must be provided by the regulated party as extra financial assurance in an acceptable standard form (for example, cash, letter of credit, surety bond, etc.);
  6. Non-payment of the insurance premium by the regulated party will require replacement of the insurance policy with some other acceptable standard form of financial assurance;
  7. Issuer must give Ministry at least 30 days notice of termination of policy; and
  8. Insurance policies should not be accepted without the review and approval of the Legal Services Branch, the Business and Fiscal Planning Branch and/or the Economic Analysis Section.

7.4.10 Marketable securities: stocks and shares

7.4.10.1 Where marketable securities or other negotiable securities are accepted as financial assurance, the market value of these securities should be at least 20 per cent in excess of the agreed to amount of financial assurance in order to allow for fluctuations in the market prices of these securities. The Business and Fiscal Planning Branch holds all original financial assurance marketable securities as well as supporting documents for safekeeping.

7.4.11 Security or collateral

7.4.11.1 Security or collateral submitted as financial assurance may be considered. However, the Program Director should seek the advice of the Legal Services Branch, Economic Analysis Section and Business and Fiscal Planning Branch before accepting these forms of financial assurance.

7.4.11.2 Holding of securities by a third party, or bank accounts individually or jointly held by the regulated party should not be accepted by the Ministry.

7.4.11.3 Ensure that a procedure is in place so that security or collateral can be realized/obtained from the regulated party.