Waste Act amendment causes problems with EU funding for construction of incinerators
This year’s amendment of the Waste Act is forcing changes in the scheduling of incinerator projects. Target load start-up tests must be postponed until after the integrated permit is issued. This may give rise to claims by contractors for prolonging the project completion period because of a change in the law.
In Poland there are currently six communal waste incineration plants under construction with EU funding. Under the procedure for settling expenditures with the European Commission, construction costs subject to refinancing must be incurred by the date specified in the contract. Thus any delay in realisation of the project creates a risk of loss of the unspent portion of the grant.
Formalisation of procedure for obtaining RIPOK status
Among other provisions, the Act of 15 January 2015 Amending the Waste Act and Certain Other Acts introduced Art. 38 (3a) and (3b) into the Waste Act of 14 December 2012, effective 6 February 2015. These sections provide that the status of a regional communal waste processing installation (RIPOK) is issued to incinerators upon written application of the operator of the installation, and one of the items that must be enclosed with the application is a copy of the integrated permit issued for the installation.
The concept of regional communal waste processing installations was introduced in the prior Waste Act of 27 April 2001. In order to obtain RIPOK status, a waste management plant must:
- Have a strictly defined processing capacity, sufficient to accept and process waste from an area inhabited by at least 120,000 people
- Meet the requirements for best availability technology as referred to in Art. 143 of the Environmental Protection Law
- Operate in compliance with regulations specifying the permitted type, range and quantity of emissions, and
- Be able to process wastes using one of four methods specified in the Waste Act, including thermal conversion of waste.
The earlier regulations did not specify when an installation obtained RIPOK status, but this status was considered to be obtained at the time the installation was first designated as a regional communal waste processing installation in the province waste management plan and in the resolution of the province legislature on performance of the province waste management plan. Incinerators currently under construction were either included in these documents before construction was launched or, under the interim provisions, should be reflected in the resolution on performance of the province waste management plan.
Following entry into force of the amendment, the procedure for assigning RIPOK status was largely formalised. The following must be enclosed with the application for RIPOK status:
- Documents confirming completion of construction and delivery of the regional communal waste treatment installation for use, as specified in the province waste management plan
- Documents confirming inspections conducted by the province environmental protection inspector, and
- A copy of the waste processing licence or integrated permit.
Waste only to RIPOK—also for purposes of completion tests
Under Art. 9e of the Act on Maintenance of Cleanliness and Order in Communes, an entity collecting communal waste from owners of real estate is required to deliver mixed communal waste only to facilities with RIPOK status. Because that act does not provide for any exceptions to this obligation, waste can be delivered to installations that are under construction for the purpose of conducting completion tests only after the installation has obtained RIPOK status.
In consequence, the environmental authorities currently require an integrated permit for a communal waste incineration facility to be obtained early enough that the contractor can rely on the integrated permit as the basis for performing the part of the work that includes hot start-up tests. Previously the contractor had to ensure that an environmental impact permit was obtained only at the stage of test operation of the incinerator.
The stage of hot start-up tests includes activation of machinery, equipment and installations under the target factor load, i.e. steam, industrial wastewater, and communal waste, with control of the work of the machinery, equipment and installations under dynamic conditions, with verification of the correctness of the construction and technological solutions applied.
Do completion tests constitute “conducting” or “use” of the installation?
Under Art. 201 of the Environmental Protection Law, an integrated permit is required for “conducting” (prowadzenie) certain installations, including communal waste incinerators with a processing capacity exceeding the thresholds set forth in the regulations. And under Environmental Protection Law Art. 76 (1) and (2)(4), obtaining an integrated permit is a condition for putting such a communal waste incinerator into use. These rules qualify the general rule under Environmental Protection Law Art. 180 that if a permit is required, “exploitation” (eksploatacja) of an installation causing release of gas or particles into the air, introduction of wastewater into waters or the earth, or generation of waste is permissible only after the permit is obtained.
“Exploitation” is defined in the Environmental Protection Law to mean the use of an installation or equipment and maintaining it in operating order. But neither the Environmental Protection Law nor the Construction Law contains a definition of “use” (użytkowanie), “putting into use” (oddanie do użytkowania) or “conducting” an installation. Commentators have attempted to define the concept of “use” under the Environmental Protection Law as “any use of an installation or equipment, using it to achieve an intended effect, not necessarily consistent with the effect which the given installation or equipment was designed and constructed to achieve, whose achievement is furthered by its construction, method of completion, and intended use” (M. Bar et al., Prawo ochrony środowiska. Komentarz (Environmental Protection Law: Commentary), 2nd ed., Warsaw 2014).
It follows from Environmental Protection Law Art. 76 and the foregoing definition that an application should be filed for the entire structure or installation, which justifies the conclusion that until the specific parts of the installation are tested and started up during completion tests, the installation is not being “used” for the purpose of this regulation.
The term “conducting” does not have a statutory definition, but considering the meaning of the word prowadzenie in Polish it should be understood to mean performing or continuing some activity. “Conducting an installation” thus refers to regular activity of the installation, which in the case of an incinerator means conducting the process of neutralisation of waste, including, under the definition, all stages of processing. This term therefore does not cover tests of the functioning of the installation for selected elements of the process.
Start-up of installation
The Environmental Protection Law does not refer at all to the stage of performing tests of the functioning of the installation. In several provisions (e.g. Art. 76, 147, 184 and 188), however, the term “start-up of the installation” is used, confirming the statements in the commentaries that the lack of a definition makes it difficult to determine what “start-up of the installation” is (Z. Bukowski, in J. Ciechanowicz-McLean et al., Prawo ochrony środowiska. Komentarz (Environmental Protection Law: Commentary), Warsaw 2008, p. 182).
Additionally, it follows from Environmental Protection Law Art. 76(3) that the phase of start-up of a new structure is a stage for which the permissible quantities of emissions are not specified in the permit; that is, this stage is not treated as “exploitation” of the installation within the meaning of the Environmental Protection Law, but “start-up of the installation,” as mentioned in other provisions of the Environmental Protection Law, refers to activities undertaken during the period of exploitation, i.e. after the installation is put into use.
This interpretation is supported in particular by Regulation No. 37 of the Minister of Construction and the Construction Materials Industry of 1 August 1975 on Start-up of Projects, which governs the process of realisation of construction projects. Under that regulation, only successful completion of start-up constitutes grounds for putting the project into exploitation.
For the foregoing reasons, under the Waste Act and the Environmental Protection Law, exploitation of certain communal waste incinerators indisputably requires obtaining an integrated permit, but the stage of hot start-up tests is not exploitation and does not require an integrated permit.
Change unintended but problematic
The change in the procedure for granting RIPOK status has fundamentally modified the legal status and scheduling of performance of contracts for construction of communal waste incinerators. Because currently in order for an installation to obtain RIPOK status an application must be filed with enclosures including an integrated permit, start-up tests under the target factor load may be conducted only after obtaining an integrated permit. This in turn forces a shift in the date the tests are conducted as compared to the schedule drawn up on the basis of the regulations existing as of the date of conclusion of the construction contracts for waste incinerators currently being built, which may result in delay of the work.
The change in legal status made by the amending act appears unintentional. Formalising the procedure for granting RIPOK status and regulating the moment when this status may be acquired by an installation is a positive development, because it eliminates doubts concerning who has the initiative in this respect, and also eliminates the risk connected with failure to act by province authorities. But it is hard to find any justification for introducing a requirement that a waste incinerator has to have an environmental permit in place at the stage of conducting start-up tests, as it would have to have during the operational stage. At least the legislative history does not indicate that this was the purpose of introducing these new rules into the Waste Act.
Because a change in law generally provides grounds for a contractor to seek to extend the completion date or demand additional payment, this amendment may have a major impact on relations between municipal companies as investors and the construction companies building incinerators. The consequence of this may in turn impact the settlement of these contracts with the European Commission. It thus appears that there is a need for another legislative intervention to clarify that the obligation to hold the status of a regional communal waste processing installation does not apply to an incinerator at the time of start-up of the newly built installation.
Mirella Lechna, Infrastructure, Transport, and Public Procurement & Public-Private Partnership practices, Wardyński & Partners