California Integrated Waste Management Board Strategic Policy Committee May 12, 2009
Agenda -Questions from Board members
What is the impact of establishing a rolling 30X level of financial assurance on current landfill operators?
How can operators leverage their cash-value mechanisms?
How has the Board considered a postclosure maintenance contingency?
What is the difference between postclosure maintenance and corrective action?
What is the impact of including major maintenance as part of postclosure maintenance or corrective action?
Agenda -Questions From Board members
What is the value of performing risk assessments on a few landfills?
What is the impact of the cost of non-water quality corrective action, including air and major maintenance, on cost?
What was staff’ s basis for assumptions used in financial exposure modeling?
What options are there for a pooled fund and how much would they cost?
Does the Board want to include any triggers in the regulations?
1. What is the impact of establishing a rolling 30X level of financial assurance on current landfill operators?
How long is the Postclosure Maintenance Period?
Federal Subtitle D Regulations
30 years
Can Be Shortened Or Extended by Director
Financial Assurance required throughout Postclosure Maintenance Period
California Law
Minimum 30 years
Until waste no longer poses a threat

1. What is the impact of establishing a rolling 30X level of financial assurance on current landfill operators?
How Long is the Postclosure Maintenance Period?
California Experience
Other States Poll
Postclosure Maintenance Cost Survey
Interstate Technology & Regulatory Council (ITRC)/ Environmental Research and Education Foundation (EREF)
Cal Poly Contract
#1 – Average Annual Postclosure Maintenance Costs
1. What is the impact of establishing a rolling 30X level of financial assurance on current landfill operators?
Costs
Non-Cash Mechanisms
Incremental Fee or Premium – 0.5-1.5%/year
Duration of Revenue Stream
Cash Mechanisms
Differential
Opportunity

1. What is the impact of establishing a rolling 30X level of financial assurance on current landfill operators?
1. What is the impact of establishing a rolling 30X level of financial assurance on current landfill operators?
20 Closed Landfills Use Cash Mechanisms
5 Trust Funds
10 Enterprise Funds
4 Insurance
1 CD
Includes 7 Single Private Landfills

1. What is the impact of establishing a rolling 30X level of financial assurance on current landfill operators?
Adjusted Annual Cost Estimate for Inflation Since Closure
Compared to Current Amount of Demonstration
6 of 20 Have Received Disbursements
Returning to 30X Would Impact
6 Closed Landfills with Cash Mechanisms
Cost an Estimated $2.3 million

2. How can operators leverage their cash-value mechanisms?
Cash
Trust Fund
Enterprise Fund
Sale of Securities

Hybrid
Insurance
Non-cash
Letter of Credit
Surety Bond
Pledge of Revenue
Government Guarantee

Financial Means Test
Corporate Guarantee
Government Financial Test
Federal Certification

#2 – How are Build-up Cash Mechanisms Different?
Most
100% of Assured Amount Required
Fee or premium paid to third party
Other Source of revenue needed to do the work
Trust and Enterprise Fund
Build-up over time
Gold Standard if fully funded
Operator may rely on for assurance and to do the work
Work well for certain activities over finite period
Susceptible to premature closure

2. How can operators leverage their cash-value mechanisms?
Use Interest (Excess Revenue) Given Differential Between Operator Costs and State Costs
Use Combination of Mechanisms to Provide Additional Flexibility
Use Trust Fund as Revenue Source for Pledge of Revenue
2. How can operators leverage their cash-value mechanisms?
3. How has the Board considered a postclosure maintenance contingency?
Other States Survey: Does your state require a reasonable contingency added to the cost of PCM? If so, what amount? e.g., 10%, 20%, etc.
4. What is the difference between postclosure maintenance and corrective action?
Postclosure Maintenance
Regular and Periodic Activities to Monitor and Maintain the Integrity of the Containment and Environmental Control Systems
Listed in Postclosure Maintenance Plan
Repair or replacement of existing items
Add Maintenance of Known Corrective Action

Corrective Action
Active or Passive measures taken to constrain a release of waste, to eliminate its effects, or to prevent or minimize additional releases of waste from a landfill
One time or unanticipated, but reasonably foreseeable
Formal enforcement action

#4 – Postclosure Maintenance or Corrective Action?
Site Security – PCM
Ground Water
Monitoring – PCM
Cleanup – CA
Landfill Gas
Monitoring -PCM
Control -PCM or CA
Drainage/Erosion Control
Repair – PCM
Replacement -PCM or CA
Final Cover
Repair – PCM
Replacement – CA
Slope Stability -PCM or CA
Leachate System
Repair -PCM or CA
Replace – CA
Fire Damage -PCM or CA

5. What is the impact of including major maintenance as part of postclosure maintenance or corrective action?
Option A -Consider as Postclosure Maintenance Item through Phase II Regulations
Option B – Consider as Corrective Action Through Phase II Regulations
Option C – Recommend as a Statutory Change to Address Through Pooled Fund

6. What is the value of performing risk assessments on a few landfills?
Value:
What has been previously done?
How would results be used?
Who and how would select landfills selected?
What risk criteria and methodology would be used?
How much would it cost?
Would the benefit be worth the effort?
6. What is the value of performing risk assessments on a few landfills?
Previous Work:
Landfill Compliance Study (Geosyntec Report)
Landfill Risk Screen Methodology (ICF/CalRecovery)
Financial Exposure Modeling Tool (ICF)
Corrective Action Survey (CIWMB staff)
# 6- Corrective Action Comparison Over 240 Years
# 6- California Landfill Corrective Action Survey – Summary Results
Most Common Corrective Actions
Ground Water (47%)
LFG Migration (29%)
Slope Failure
Surface Water
Liner Issues
Waste Boundaries
Fires (underground and surface)
Erosion

7. What is the Impact of the Cost of Non-water Corrective Action?
One Combined Plan
Release to Water (current requirement)
Non-Water Quality – Top Types from Corrective Action Survey
Release driven (similar to current requirement)
LFG migration
Leachate seep
Event driven (e.g., quake, flood, rain, etc)
Within design criteria for type of LF
Determine most expensive CA type
Separate Plan -Non-Water Quality only
Most Expensive Cost From Water Quality Plan

# 7 – Major Maintenance Analysis Results
System Costs = $700 million over 100 years
Defaults = $95 million
Double Default
Standard Default
Single Private Default
Rural Public Default
Default Resulting From Divestiture

#7 – Extraordinary Corrective Action Analysis
In Addition to Other Corrective Action Costs
Assumed 100% Default
Suggested Frequency Once Every 20 Years
Suggested Cost = $100 million
Not Modeled
System Cost = $500 million over 100 years
8. What was staff’ s basis for assumptions used in financial exposure modeling?
Conceptual Approach:
Consider the Time-Value of Money
49X provides funding indefinitely
Below 30X compounding diminishes, by 15X essential year for year
Increasing above current levels may prompt early defaults especially by single private landfills
Below 15X default resulting from divestiture becomes problematic
5X is the minimum that can be considered financial assurance
Most single private landfills will ultimately permanently default
Some rural public landfills will temporarily default
Some level of default exposure is inevitable regardless of the required level of assurance

8. What was staff’ s basis for assumptions used in financial exposure modeling?
Used constant costs and reduced modeling period from 240 years to 100 years due to uncertainties
Inflation
Differential increases in engineering costs
Rate of replacement of aging containment and environmental cost systems
Changes in solid waste infrastructure
Success of disposal reduction efforts
New technologies
Future design requirements

#8 – How did staff use Modeling Tool to analyze difference levels of assurance?
49X=Perpetual
43X=100 years
30X=48 years
15X=18 years
8X= 9 years*
5X= 5 years
* Current Proposed Phase II regulations

#8 – How did staff use Modeling Tool to analyze different levels of assurance?
8. What was staff’ s basis for assumptions used in financial exposure modeling?
Contractor Standard Default Rates:
Single Landfills, Public and Private=1% per year
Multiple Landfills, Private=.17% per year
Multiple Landfills, Public=.15% per year
Group Default from Regional Event=1% per year
Permanent Default=1% of defaults

8. What was staff’ s basis for assumptions used in financial exposure modeling?
Staff Modified Default Rates:
Double-default -simultaneous default by operator and provider = square of standard draft rate
Single Private Landfills (18)=1% per year, 100% of defaults permanent
Rural Public Landfills (64)=1% per year consistent with single landfill default rate
Default Resulting From Divestiture (37)=1% per year for Small Business Start-ups

8. What was staff’ s basis for assumptions used in financial exposure modeling?
All Scenarios:
100 year Modeling Period
42 million tons of waste used to calculate fee
Constant Postclosure Maintenance Costs
Postclosure Maintenance Costs from 282 Plans
10% Fund Fee
1.5-3.5% Fund Interest Rate
$50 million fund cap
0.90 Confidence Interval

9. What options are there for a Pooled Fund and how much would they cost?
Basic – backstop for defaults
Combined (public and private)
Split (public/private)
Enhanced – backstop for defaults including
Basic
Defaults Resulting from Divesture if not addressed separately
Major Maintenance
Extraordinary Corrective Action
Key Considerations
# 9 – Basic Combined Pooled Fund
Estimated Fee:
$0.09 per ton
Cap:
$80 million
# 9 – Landfill Trends Public/Private
# 9 – Basic Split Pooled Fund
Public
Fee – $0.13 / ton
Cap – $30 million
Use of Excess Revenue – $1.5 million per year
Private
Fee – $0.13 / ton
Cap – $50 million

# 9 – Enhanced Combined Pooled Fund
Estimated Fee:
$0.18 per ton
Cap:
$275 million
#9 – Enhanced Split Pooled Fund
Public
Fee – $0.09 per ton
Cap – $30 million
Private
Fee – $0.34 per ton
Cap – $245 million

# 9 – Pooled Fund Key Considerations
Coverage
Definition of Public/Private
Myth of Gift of Public Funds
Use of any Excess Funds
Changes Public/Private Over Time
Administrative Cost
Indemnification of Locals
Fair share

10. Does the Board want to include any triggers in the regulations?
Does the Board want to recognize good performance by reducing financial assurance levels?
Does the Board want to incentivize a Pooled Fund?
# 10 – Does the Board Want to Recognize Good Performance By Reducing Financial Assurance levels?
5X Step-down
5X Step-up for lack of continued performance
Step-up to original level for transfer/sale
with waiver provision
Initial Site-specific Environmental Risk Assessment
Financial Assessment
Participate in Proactive Monitoring
No Corrective Actions
Costs Consistent with Estimates
#10 – Does the Board Want to Incentivize a Pooled Fund?
Include higher financial assurance levels to sunset with enactment of a Pooled Fund and a Board finding
Include intent language in the Final Statement of Reasons (FSOR) to revisit if a Pooled Fund is enacted
Include intent language in the Board Resolution adopting the Phase II regulations, to revisit if a Pooled Fund is enacted
Possible Postclosure Assurance Level Scenarios
Rolling 30X, Add Major Maintenance
Rolling 30X, Recommend Pooled Fund
Rolling 30X, Step-down to 15X with Triggers, Recommend Pooled Fund
Rolling 15X, Recommend Pooled Fund

Possible Corrective Action Financial Assurance Scenarios
Scenario 1
Current Phase II Regulatory Proposal
Recommend Pooled Fund for Defaults
Scenario 2
Most Expensive Water Quality or Replace Final Cover as Assurance Level
Recommend Pooled Fund for Defaults including Major Maintenance
Scenario 3
Site-specific Risk-based Assurance Level
Recommend Pooled Fund for All Defaults and Extraordinary Corrective Action

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