California Integrated Waste Management Board

July 22, 2008

California Integrated Waste Management Board

July 22, 2008

Item #14Discussion And Request For Additional Direction

On Long-Term Postclosure Maintenance

And Corrective Action Financial Assurances For

Landfills

Item #14Discussion And Request For Additional Direction

On Long-Term Postclosure Maintenance

And Corrective Action Financial Assurances For

Landfills

Phase II Group APhase II Group A

Staff shared initial draft language with stakeholders, and will bring revised language to Board in Aug 2008

Five-Year PCM Review (1988-2003 sites)

As-built costs Closure certification report submittal Insurance amendments Pledge of Revenue form

Staff shared initial draft language with stakeholders, and will bring revised language to Board in Aug 2008

Five-Year PCM Review (1988-2003 sites)

As-built costs Closure certification report submittal Insurance amendments Pledge of Revenue form

Phase II Group BPhase II Group B

Staff shared initial draft language with stakeholders, and will bring revised language to Board in Aug 2008

• Reasonable PCM Contingency Grandfather Closed Sites Non-water Corrective Action FA

Piggybacking on Water Board Cost Estimating Dialogue No anticipated reductions in PCM

costs

Staff shared initial draft language with stakeholders, and will bring revised language to Board in Aug 2008

• Reasonable PCM Contingency Grandfather Closed Sites Non-water Corrective Action FA

Piggybacking on Water Board Cost Estimating Dialogue No anticipated reductions in PCM

costs

Group B:PCM Reasonable Contingency

Group B:PCM Reasonable ContingencyStaff Proposing Language

Requiring a 10% Contingency on All PCM Costs

Need Depends on LTFA Option Chosen

Grandfather Closed Sites

Staff Proposing Language Requiring a 10% Contingency on All PCM Costs

Need Depends on LTFA Option Chosen

Grandfather Closed Sites

Group B: Non-Water Quality Corrective Action FA

Group B: Non-Water Quality Corrective Action FA Staff Proposal Addresses

Stakeholders’ Concerns: Simplify – No CA Plan - Use Water

Quality Cost Estimate Establish Schedule for Repayment

When Used Consider Ability to Repay Before

Release of Funds More Guidance Helpful on Current

Regulations

Staff Proposal Addresses Stakeholders’ Concerns:

Simplify – No CA Plan - Use Water Quality Cost Estimate

Establish Schedule for Repayment When Used

Consider Ability to Repay Before Release of Funds

More Guidance Helpful on Current Regulations

Group B:Cost Estimating DialogueGroup B:Cost Estimating Dialogue Staff Proposal Addresses

Stakeholders’ Concerns:Costing for Landfill Gas Control

SystemsOperating vs. Closing Costs

Staff Proposal Addresses Stakeholders’ Concerns:

Costing for Landfill Gas Control Systems

Operating vs. Closing Costs

Phase II Group CPhase II Group C

Explore Further with AB 2296 Consulting Group and bring back to Board in July 2008 for further direction

Consider additional proposalsHow to extend PCM beyond 30

years Individual FA and/or Pooled FundHow much $$$

Explore Further with AB 2296 Consulting Group and bring back to Board in July 2008 for further direction

Consider additional proposalsHow to extend PCM beyond 30

years Individual FA and/or Pooled FundHow much $$$

Extending Financial Assurance

Extending Financial Assurance

How much FA is enough?How much risk should be avoided?What risks can and should be

managed?What are the system costs

associated with avoidable and non-avoidable risk?

How much FA is enough?How much risk should be avoided?What risks can and should be

managed?What are the system costs

associated with avoidable and non-avoidable risk?

How Much Risk Can be Avoided?

How Much Risk Can be Avoided?

Long Term Landfill Postclosure Maintenance Costs

Landfill Owner DefaultsLandfill Owner DivestituresFuture Changes to Landfill DesignFuture Changes to Operation of

Existing/Closed Landfills

Long Term Landfill Postclosure Maintenance Costs

Landfill Owner DefaultsLandfill Owner DivestituresFuture Changes to Landfill DesignFuture Changes to Operation of

Existing/Closed Landfills

Long Term Landfill PCM Costs

Long Term Landfill PCM Costs

1. 15 Years of California Experience Shows No PCM Cost Reductions

2. Industry Study Does Not Have Empirical Data Showing Costs Declining

3. Other State Data Inconclusive4. Modeling Shows That Annual

0.5% Cost Reduction Achieves Equilibrium and Reduces System Costs by 20%

1. 15 Years of California Experience Shows No PCM Cost Reductions

2. Industry Study Does Not Have Empirical Data Showing Costs Declining

3. Other State Data Inconclusive4. Modeling Shows That Annual

0.5% Cost Reduction Achieves Equilibrium and Reduces System Costs by 20%

Potential Landfill Operator Default Types

Potential Landfill Operator Default Types

Standard Default – Operator and Financial Institution, Except Means Test

Single Privates (29) – Most (22) Permanently Default 14 closed 6 operating 2 permitted 7 corporate or publicly assured

Rural Publics – Temporary Defaults (64) Divestiture – Sell After 30 years PCM, All

Privates (a Few Publics), Start-up Business Permanent Default Rate

Standard Default – Operator and Financial Institution, Except Means Test

Single Privates (29) – Most (22) Permanently Default 14 closed 6 operating 2 permitted 7 corporate or publicly assured

Rural Publics – Temporary Defaults (64) Divestiture – Sell After 30 years PCM, All

Privates (a Few Publics), Start-up Business Permanent Default Rate

System Costs Associated With Risk

System Costs Associated With Risk

A Certain Level of Defaults Will Occur Regardless of the Amount of Individual Financial Assurance

Imposition of a 100-year scenario will likely precipitate an increase in early defaults of Single Private operators

Divestiture Leading to Default Can Be Controlled: Buyer Financial Means Buyer Financial Assurance All Owners Retain Responsibility

A Certain Level of Defaults Will Occur Regardless of the Amount of Individual Financial Assurance

Imposition of a 100-year scenario will likely precipitate an increase in early defaults of Single Private operators

Divestiture Leading to Default Can Be Controlled: Buyer Financial Means Buyer Financial Assurance All Owners Retain Responsibility

Risks Converted to System Costs

Risks Converted to System Costs

Managing Longterm PCM Risk of Landfill System

Managing Longterm PCM Risk of Landfill System

ScenariScenarioo

AssureAssured Riskd Risk

UnassureUnassured Riskd Risk

StdStd Rural Rural PublicPublicss

DefaultsDefaults

Sgl PvtSgl Pvt DivestiturDivestituree

TotalTotal

43X $5,590 0 $11 $26 $263 0 $300

30X 4,562 $1,232 29 26 41 0 96

15X 2,972 2,748 60 26 84 0 170

5X 2,153 2,955 75 26 103 $578 782

Status Quo

1,822 3,172 83 26 0 787 896

$ in Millions over 100 years$ in Millions over 100 years

Option 1 – Individual FA; No Pooled Fund

Option 1 – Individual FA; No Pooled Fund

Step-down/Draw-down Rolling 15Exposure to State=$96-170M over

100 YearsMinimizes Divestiture Defaults10% PCM Contingency if Draw-

down

Step-down/Draw-down Rolling 15Exposure to State=$96-170M over

100 YearsMinimizes Divestiture Defaults10% PCM Contingency if Draw-

down

Option 2 – Individual FA Combined With Pooled

Fund

Option 2 – Individual FA Combined With Pooled

Fund• Step-down/Draw-down Rolling 15• Pooled Fund as Backstop for DefaultsExposure to State Covered by

Fund=$96-170M over 100 yearsStandard DefaultsSingle PrivatesRural Publics

Minimizes Divestiture DefaultsNo PCM Contingency

• Step-down/Draw-down Rolling 15• Pooled Fund as Backstop for DefaultsExposure to State Covered by

Fund=$96-170M over 100 yearsStandard DefaultsSingle PrivatesRural Publics

Minimizes Divestiture DefaultsNo PCM Contingency

Option 3 – Status Quo With Pooled Fund

Option 3 – Status Quo With Pooled Fund

Exposure to State Covered by Fund=$896M over 100 yearsPrivate = 90%Public = 10%

Addresses DefaultsStandard DefaultsSingle PrivatesRural PublicsDivestiture Defaults

No PCM Contingency

Exposure to State Covered by Fund=$896M over 100 yearsPrivate = 90%Public = 10%

Addresses DefaultsStandard DefaultsSingle PrivatesRural PublicsDivestiture Defaults

No PCM Contingency

Option 4 – Pooled Fund with Controlled Divestiture

Option 4 – Pooled Fund with Controlled DivestitureSite History AssessedFinancial Test or Appropriate FAExposure to State Covered by

Fund=From $170M to $896M over 100 years

Addresses DefaultsStandard DefaultsSingle PrivatesRural Publics

No PCM Contingency

Site History AssessedFinancial Test or Appropriate FAExposure to State Covered by

Fund=From $170M to $896M over 100 years

Addresses DefaultsStandard DefaultsSingle PrivatesRural Publics

No PCM Contingency

Next StepsNext Steps

Jul 17 – Informal Rulemaking Workshop

Jul 22 – Board Update and Additional Direction

Aug 11 – P&C Request for Rulemaking Direction

Jul 17 – Informal Rulemaking Workshop

Jul 22 – Board Update and Additional Direction

Aug 11 – P&C Request for Rulemaking Direction