Environmental Liability Law reactivated: compulsory financial guarantee for the metal production and transformation sectors

Since the Spanish Environmental Liability Law (Law 26/2007) was published in 2007, the legal framework faced by organisations has undergone significant changes. This law established a new administrative regime for the prevention, avoidance and repair of environmental damage, so organizations that cause environmental damage or threats must take the mandatory measures to prevent them. Also, when the damage has already occurred, it must be repaired, and new damages avoided.

Researcher Lucía Unamunzaga, from IK4-Azterlan Metallurgy Processes, Sustainability and Environment R&D area, takes samples of industry waste

The law establishes that the coordinators of the activities included in its Appendix III must have a financial guarantee that ensures they can face the environmental responsibility inherent in their activity. That is the case of the ferrous and non-ferrous foundries, the steel mills and metal-surface treatment companies affected by the IPPC law. 

After the Environmental Liability Law and its regulations (that would establish the timetable for the constitution of the compulsory financial guarantee) being delayed for several years, the Order APM/1040/2017 was published on October 30th, fixing the date from which the constitution of the financial guarantee is to be set for the activities classified in priority levels 1 and 2.

This means that for many companies the time to pay attention to this subject has come. Regarding customers and collaborators of the IK4-AZTERLAN Metallurgical Research Centre, the ones that fit into the following activity categories are affected by this policy change, all of them tagged as priority level 2:

• Installations for the production of cast iron or steel (primary or secondary fusion), including the corresponding continuous smelting facilities with a capacity of more than 2,5 tons per hour.
• Application of molten metal protection layers with a treatment capacity of more than 2 tons of gross steel per hour.
• Ferrous metal foundries with a production capacity of more than 20 tons per day.

By means of some questions, we will try to answer the most significant issues that companies affected by the actual application of the Environmental Liability Law might be considering.

Waste discharge waterway

What are the deadlines set for the constitution of the compulsory financial guarantee?

• Activities classified with priority level 1 must have a financial guarantee within 1 year from the date of coming into force of this order (deadline set for October 30th 2018).
• Activities classified with priority level 2 must have a financial guarantee within 2 years from the date of coming into force of this order (deadline set for October 30th 2019).

What kind of financial guarantees exist?

• Insurance policy, signed with an insurance company authorized to operate in Spain.
• Endorsement, granted by a financial institution authorized to operate in Spain.
• Technical reserve through endowment of an ad hoc fund, with materialization in financial investments supported by the public sector.

In what cases are the operators exempt from establishing these warranties?

• When they carry out activities that are likely to cause damage whose repair is less than 300,000 euros. 
• Those others whose damage is mild or moderate (cost of repair less than 2 million euros) and that prove to be permanently adhered to an environmental management and auditing system of the European Community, such as EMAS or ISO 14001.

What issues must the financial guarantee cover?

The financial guarantee shall cover the obligations of the activity related to the prevention and avoidance of environmental damage and the primary repair of environmental damage caused by the development of the activity.

How is the amount of the financial guarantee calculated?

The partial development Regulation of Law 26/2007 establishes that the calculation of the amount of the financial guarantee will be set after the Analysis of Environmental Risks of the activity, taken following the methodology described in UNE 150008:2008 standard or any other that could be proven. 

This methodology allows to determine the risk scenarios on which to assess the economic cost of the primary reparation measures and then estimate the amount of the financial guarantee to be contracted, following the criteria established in the Environmental Liability Law’s regulation system.

Is there any tool to facilitate the environmental risk analysis and the calculation of the financial guarantee?

In order to facilitate the implementation of environmental risk analyses, as well as to reduce the cost of their implementation, the Ministry of Agriculture and Fisheries, Food and Environment of Spanish Government has developed different support tools such as environmental risk reporting models. There is a specific reporting model for the foundry industry. 

Likewise, the General Directorate of Environment and Nature Quality and Evaluation of Spanish Government has developed a computer application that allows estimate the Environmental Damage Index associated with each accidental scenario identified by the operator in its environmental risk analysis.

In the same way, for the monetization of the damage, the Ministry openly facilitates the Environmental Responsibility Offer Model that allows to obtain an estimate of the repair cost of the environmental damage caused (cleaning, purification, restocking, …. etc).

Researcher Ander Areitioaurtena sampling particled material comming from industry emissions

How complex is it?

Taking an Environmental Risk Analysis implies a wide range of disciplines that require the participation of a technical team, that knows the different methodologies and tools of application. Because of that, this kind of analysis might be too complex and require a high dedication level by companies.

Once again, in order to respond to the needs of the metal industry, the Environment and Sustainability area of IK4-Azterlan is able to support companies in order to conduct Environmental Risk Analyses that facilitate them comply with the obligations regarding the new modification of the Environmental Liability Law.