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Rural Counties’ ESJPA Board December 13, 2007 Long-Term Postclosure Maintenance and Corrective Action Financial Assurances for Landfills
Rural Counties’ ESJPA Board December 13, 2007Rural Counties’ ESJPA Board December 13, 2007
Long-Term Postclosure Maintenance and Corrective Action Financial Assurances for Landfills
Long-Term Postclosure Maintenance and Corrective Action Financial Assurances for Landfills
Our LegacyOur Legacy
“We do not inherit the land from our ancestors; we borrow it from our children”
Native American Proverb
“We do not inherit the land from our ancestors; we borrow it from our children”
Native American Proverb
See the FutureSee the FutureHalf of California’s landfills
will close by 2009First landfill will be beyond
30 years PCM in 2021By end of century
unassured PCM costs may be $600M
Half of California’s landfills will close by 2009
First landfill will be beyond 30 years PCM in 2021
By end of century unassured PCM costs may be $600M
Tale of 3 FuturesTale of 3 FuturesStar Trek futureMad Max futureGoldie Locks future
Star Trek futureMad Max futureGoldie Locks future
Goal: Protect Public Health and Safety & Financial Exposure
into the Future
Goal: Protect Public Health and Safety & Financial Exposure
into the Future
Plans Cost Estimates
Financial Demonstrations
Goal: Protect Public Health and Safety & Financial Exposure
into the Future
Goal: Protect Public Health and Safety & Financial Exposure
into the Future
Closure Cost Estimate Closure Cost Estimate DialogueDialogue
Closure/Postclosure Cost Estimate Regulations
Long-term Financial Assurances StudyContractor StudyStaff Report
Closure Cost Estimate Closure Cost Estimate DialogueDialogue
Closure/Postclosure Cost Estimate Regulations
Long-term Financial Assurances StudyContractor StudyStaff Report
Closure Cost Estimate Dialogue
Scope
Closure Cost Estimate Dialogue
Scope Issue: What costs should be
included for environmental control systems?
Objective: Clarify current practice based on current regulations
Stakeholder Workshops
Issue: What costs should be included for environmental control systems?
Objective: Clarify current practice based on current regulations
Stakeholder Workshops
Closure
Closure Cost Estimating Dialogue
Outcomes
Closure Cost Estimating Dialogue
OutcomesRefined Business PracticeFund-as-you-fill ApproachTriage Matrix
Refined Business PracticeFund-as-you-fill ApproachTriage Matrix
Closure
Closure Cost Estimate Dialogue
Outcomes
Closure Cost Estimate Dialogue
OutcomesOperating Potentially
BothClosure
Daily Cover Intermediate Cover Final Cover
Liners Security Plans/Specs
Leachate RCS LFG Monitoring Grading
NPDES Compliance LFG Control Irrigation
Ground Water Monitoring
Erosion Control Cap Drainage
Upgrades to Installed Systems
Structure Removal/Install
Postclosure Land Use
Goal: Protect Public Health and Safety & Financial Exposure
into the Future
Goal: Protect Public Health and Safety & Financial Exposure
into the Future
Closure Cost Estimate Dialogue
Closure/Postclosure Cost Closure/Postclosure Cost Estimate RegulationsEstimate Regulations
Long-term Financial Assurances StudyContractor StudyStaff Report
Closure Cost Estimate Dialogue
Closure/Postclosure Cost Closure/Postclosure Cost Estimate RegulationsEstimate Regulations
Long-term Financial Assurances StudyContractor StudyStaff Report
AB 2296 requirements
AB 2296 requirements
By January 1, 2008, the CIWMB shallAdopt regulations (Phase I)
requiring closure and postclosure maintenance cost estimates to be based on reasonably foreseeable costs the state may incur includingLabor Code (Prevailing Wage)Replacement and repair costs for
longer lived items such as repair of the environmental control systems
By January 1, 2008, the CIWMB shallAdopt regulations (Phase I)
requiring closure and postclosure maintenance cost estimates to be based on reasonably foreseeable costs the state may incur includingLabor Code (Prevailing Wage)Replacement and repair costs for
longer lived items such as repair of the environmental control systems
C/PC Cost Estimate Regulations (Phase I)C/PC Cost Estimate
Regulations (Phase I)
Clarify Third Party Costs are the State’s CostsPrevailing WageCaltrans RatesOperator May Justify Alternative Costs
Increase Financial Means Test from $10M to $15M
Updated Estimates to Reflect ”current costs on a unit basis (unit costs)”
Clarify Third Party Costs are the State’s CostsPrevailing WageCaltrans RatesOperator May Justify Alternative Costs
Increase Financial Means Test from $10M to $15M
Updated Estimates to Reflect ”current costs on a unit basis (unit costs)”
AB 2296 requirements
AB 2296 requirements
By July 1, 2009, the CIWMB shallAdopt regulations (Phase II) and
develop recommendations for needed legislation to implement the findings of the study
By July 1, 2009, the CIWMB shallAdopt regulations (Phase II) and
develop recommendations for needed legislation to implement the findings of the study
Goal: Protect Public Health and Safety & Financial Exposure
into the Future
Goal: Protect Public Health and Safety & Financial Exposure
into the Future
Closure Cost Estimate Dialogue
Closure/Postclosure Cost Estimate Regulations
Long-term Financial Long-term Financial Assurances StudyAssurances StudyContractor StudyStaff Report
Closure Cost Estimate Dialogue
Closure/Postclosure Cost Estimate Regulations
Long-term Financial Long-term Financial Assurances StudyAssurances StudyContractor StudyStaff Report
AB 2296 requirements
AB 2296 requirements
By January 1, 2008, the CIWMB shallConduct a study to define the
conditions that potentially affect solid waste landfills identify potential long-term threats to public
health and safety and the environment technologies and engineering controls
designed to mitigate potential risks financial assurance mechanisms that would
protect the state from long-term postclosure and corrective action costs
By January 1, 2008, the CIWMB shallConduct a study to define the
conditions that potentially affect solid waste landfills identify potential long-term threats to public
health and safety and the environment technologies and engineering controls
designed to mitigate potential risks financial assurance mechanisms that would
protect the state from long-term postclosure and corrective action costs
AB 2296 requirements
AB 2296 requirements
Consult with representatives of the League of California Cities, the County Supervisors Association of California, private and public waste services, and environmental organizations
Consult with representatives of the League of California Cities, the County Supervisors Association of California, private and public waste services, and environmental organizations
The Study IsThe Study IsA Major MilestoneA Major MilestonePowerful ToolsTogether meets the study
requirements of AB 2296
A Major MilestoneA Major MilestonePowerful ToolsTogether meets the study
requirements of AB 2296
The Study is NOTThe Study is NOTThe Final AnswerThe Final AnswerA Site-specific Risk
AssessmentA Repeat of the Geosyntec
Landfill StudyDefine End of PCM
The Final AnswerThe Final AnswerA Site-specific Risk
AssessmentA Repeat of the Geosyntec
Landfill StudyDefine End of PCM
Long-term Mechanism Evaluation Results
Long-term Mechanism Evaluation Results
Can Current Mechanisms Assure More Money Longer?
Most mechanisms would require few if any changes
Some mechanisms have built-in limits on how much can be assured
Many mechanisms require periodic renewal
Can Current Mechanisms Assure More Money Longer?
Most mechanisms would require few if any changes
Some mechanisms have built-in limits on how much can be assured
Many mechanisms require periodic renewal
Mechanism Evaluation Summary
Mechanism Evaluation Summary
Certainty Amount LiquidityBurden/
Cost
Trust Fund High Medium High High
Enterprise Fund Medium Medium High High
Sale of Securities Medium High High High
Letter of Credit High High High Low
Surety Bond High High Medium Low
Pledge of Pledge of RevenueRevenue LowLow LowLow MediumMedium MediumMedium
Financial Means Test
Medium High Medium Medium
Corporate Guarantee
High High Medium Medium
Insurance Medium Medium Medium High
Government Fin. Test
Medium High Medium Medium
Government Guarantee
High High Medium Medium
Federal Certification
Low Low Low Low
Pledge of RevenuePledge of Revenue
CIWMB staff strongly disagrees with Contractor’s Assessment
Contractor suggested improvements include: Ensure “control” over pledged revenue Add eligibility criteria as with other “self-
insurance/guarantee” mechanisms Clarify requirements of annual demonstration Seek Legal Opinion on enforceability
CIWMB staff strongly disagrees with Contractor’s Assessment
Contractor suggested improvements include: Ensure “control” over pledged revenue Add eligibility criteria as with other “self-
insurance/guarantee” mechanisms Clarify requirements of annual demonstration Seek Legal Opinion on enforceability
State Pooled Fund Working Model
State Pooled Fund Working Model
Model is a flexible tool for testing variety of scenarios
Model designed to allow changes to inputs and assumptions, except for funding constraint (only active LFs make contributions)
Addresses uncertainty and variation through probabilistic methods (e.g., Monte Carlo simulation)
Uses proxy factors Excel 2003 spreadsheet model Test Case results in Final Report
Model is a flexible tool for testing variety of scenarios
Model designed to allow changes to inputs and assumptions, except for funding constraint (only active LFs make contributions)
Addresses uncertainty and variation through probabilistic methods (e.g., Monte Carlo simulation)
Uses proxy factors Excel 2003 spreadsheet model Test Case results in Final Report
Scenarios that Can be Evaluated with the Working
Fund Model PCM and/or CA defaults onlyAll PCM and/or CA costsPCM costs Y years after LF closurePCM costs changing over timeDisposal rates changing over timeFund ceiling/floor $$ amount
PCM and/or CA defaults onlyAll PCM and/or CA costsPCM costs Y years after LF closurePCM costs changing over timeDisposal rates changing over timeFund ceiling/floor $$ amount
Landfill Characteristics Data Used in Model
Owner type
Current operational status
Permitted capacity
Annual rainfall
Proximity to urban areas
Expected year of closure, if currently open
Estimated PCM cost/year (and CA cost estimates)
Depth to groundwater
Design level
Test Case Assumptions, Absent Good Data
CA frequency and magnitudeDefault rates for public sector
entities’ LFs
Test Case Assumption: CA Occurrence
Test Case Assumption: CA Occurrence
Corrective Action
Type
Average Number of Corrective Actions Over the Modeling Period per Landfill
by Landfill Sizes
Small LFMedium
LFLarge LF
Low Cost 10 13 15
Medium Cost
5 8 10
High Cost 2 3 4
Average Number of Corrective Actions by Type and Landfill Size
Over the Modeling Period for a Single Landfill
Test Case Assumption: CA Frequency
Test Case Assumption: CA Frequency
Corrective Action Type
Average Frequency of Corrective Actions Over the Modeling Period per Landfill by
Landfill Sizes
Small LF Medium LF Large LF
Low Cost every 24 years
every 18 years
every 16 years
Medium Cost every 48 years
every 30 years
every 24 years
High Cost every 120 years
every 80 years
every 60 years
All Types every 14 years
every 10 years
every 8 years
Average Frequency of Corrective Actions by Type andLandfill Size Over the Modeling Period for a Single Landfill
Key Inputs: Test Case Default Rates
Key Inputs: Test Case Default Rates
1%/year for single-owner LFs, both private and public
.15% year for private LFs not singly owned .17%/year for public LFs not singly owned LFs with high-cost CAs have double the
probability of default 1%/year for event-driven group defaults 1% of defaults are “permanent”
1%/year for single-owner LFs, both private and public
.15% year for private LFs not singly owned .17%/year for public LFs not singly owned LFs with high-cost CAs have double the
probability of default 1%/year for event-driven group defaults 1% of defaults are “permanent”
Landfill Screening ToolLandfill Screening Tool
Purpose Develop factors and method that are simple to use for quickly
judging the potential relative CA/PCM concern at California landfills
Potential uses of toolcharacterize LF universe
setting priorities
informing FA requirementspooled fund contributions
Purpose Develop factors and method that are simple to use for quickly
judging the potential relative CA/PCM concern at California landfills
Potential uses of toolcharacterize LF universe
setting priorities
informing FA requirementspooled fund contributions
Criteria Governing Factors and Methodology
Criteria Governing Factors and Methodology
Not a site-specific risk assessment Use a limited number of indicator factors Three categories: high, medium, and low Factors must have a quantitative basis and
relate to potential occurrence, duration, and costs of CA and/or PCM
Evaluate the method considering importance/weighting of factors and effect on ranking scores; data from individual landfills were not used in the analysis
Not a site-specific risk assessment Use a limited number of indicator factors Three categories: high, medium, and low Factors must have a quantitative basis and
relate to potential occurrence, duration, and costs of CA and/or PCM
Evaluate the method considering importance/weighting of factors and effect on ranking scores; data from individual landfills were not used in the analysis
Final List of Proxy FactorsFinal List of Proxy Factors
13 factors considered Siting/climate factors:
rainfall intensity Landfill design, construction, and
maintenance: engineering controls (e.g., cap and liner design) permitted capacity
Potential for migration/distance to sensitive receptors:
hydrogeology proximity to urban areas
13 factors considered Siting/climate factors:
rainfall intensity Landfill design, construction, and
maintenance: engineering controls (e.g., cap and liner design) permitted capacity
Potential for migration/distance to sensitive receptors:
hydrogeology proximity to urban areas
Pooled InsurancePooled Insurance
Insurer Concerns: 1-3 year policies possible, not 10 years underwriting costs substantial (> $11 million) moral hazard and credit risk concerns “all risk” problematic immediate full payment problematic right to void coverage desired limits of $100M too high, even with $10M
deductible
Insurer Concerns: 1-3 year policies possible, not 10 years underwriting costs substantial (> $11 million) moral hazard and credit risk concerns “all risk” problematic immediate full payment problematic right to void coverage desired limits of $100M too high, even with $10M
deductible
Goal: Protect Public Health and Safety & Financial Exposure
into the Future
Goal: Protect Public Health and Safety & Financial Exposure
into the Future
Closure Cost Estimate Dialogue
Closure/Postclosure Cost Estimate Regulations
Long-term Financial Long-term Financial Assurances StudyAssurances StudyContractor StudyStaff Report
Closure Cost Estimate Dialogue
Closure/Postclosure Cost Estimate Regulations
Long-term Financial Long-term Financial Assurances StudyAssurances StudyContractor StudyStaff Report
Postclosure
Closure
Financial Demon-strations
Corrective Action
Staff Report ApproachStaff Report Approach
Broader than Requirements of AB 2296
Encompasses Scope of ICF’s Study
Request for Direction Application of New Requirements to Closed
Landfills Implement Now Continue to Develop Pursue No Further
Broader than Requirements of AB 2296
Encompasses Scope of ICF’s Study
Request for Direction Application of New Requirements to Closed
Landfills Implement Now Continue to Develop Pursue No Further
Staff RecommendationsImplement Now
Staff RecommendationsImplement Now
Closure Fund-As-You-Fill Closure Fund-As-You-Fill
Post-30 year FA Demonstration Options
Post-30 year FA Demonstration Options
Plus 11 Years to PCM Cost Estimates
Provides assurance that funds will continue to be available for routine PCMMay not require contingency or Pooled Fund
Plus 11 Years to PCM Cost Estimates
Provides assurance that funds will continue to be available for routine PCMMay not require contingency or Pooled Fund
Post-30 year FA Demonstration Options
Post-30 year FA Demonstration Options
Maintain 30-Year PCM
Holding at 30-year value until the waste no longer poses a threatWill greatly extend time funds are available for PCM, but not indefinitely if default
Maintain 30-Year PCM
Holding at 30-year value until the waste no longer poses a threatWill greatly extend time funds are available for PCM, but not indefinitely if default
Post-30 year FA Demonstration Options
Post-30 year FA Demonstration Options
Rolling PCMAllowing reductions initially will lessen impact to operator and extend time funds are available for routine PCM, but not indefinitelyBetter in tandem with Pooled Fund
Rolling PCMAllowing reductions initially will lessen impact to operator and extend time funds are available for routine PCM, but not indefinitelyBetter in tandem with Pooled Fund
Key Issues:Application of New
Requirements to Closed Landfills
Key Issues:Application of New
Requirements to Closed Landfills
Potential Grandfathering of Closed Landfills
In - benefits of some proposalsPooled Fund
Out – newly created financial requirements
Post-30 FA demonstrationsNon-Water Quality Related
Reasonably Foreseeable Corrective Action
Potential Grandfathering of Closed Landfills
In - benefits of some proposalsPooled Fund
Out – newly created financial requirements
Post-30 FA demonstrationsNon-Water Quality Related
Reasonably Foreseeable Corrective Action
Postclosure
Closure
Financial Demon-strations
Corrective Action
Long-Term PCM and CA Staff Requests for Direction
Summary
Long-Term PCM and CA Staff Requests for Direction
SummaryImplement Now Closure Fund-As-You-Fill Permit Option Water Quality Related Reasonably
Foreseeable Corrective Action Financial Assurances
Implement Now Closure Fund-As-You-Fill Permit Option Water Quality Related Reasonably
Foreseeable Corrective Action Financial Assurances
Long-Term PCM and CA Staff Requests for Direction
Summary
Long-Term PCM and CA Staff Requests for Direction
SummaryContinue to Develop – Phase II
regs Issues deferred from Phase I
PCM cost estimate contingency Submittal of as-built costs Insurance Amendments
Improvements to Pledge of Revenue
Post-30 year FA demonstrations Non-water quality related CA Closure Fund-As-You-Fill
through FA demonstrations
Continue to Develop – Phase II regs
Issues deferred from Phase I PCM cost estimate contingency Submittal of as-built costs Insurance Amendments
Improvements to Pledge of Revenue
Post-30 year FA demonstrations Non-water quality related CA Closure Fund-As-You-Fill
through FA demonstrations
Long-Term PCM and CA Staff Requests for Direction
Summary
Long-Term PCM and CA Staff Requests for Direction
SummaryContinue to Develop – May
require additional statutory authority
Pooled Fund Working Model
Use of Risk Scoring Model
Continue to Develop – May require additional statutory authority
Pooled Fund Working Model
Use of Risk Scoring Model
Long-Term PCM and CA Staff Requests for Direction
Summary
Long-Term PCM and CA Staff Requests for Direction
SummaryPursue No Further Annuities and GICs for Long-Term FA
Demonstrations Umbrella Insurance PCM Period to Mirror Subtitle D
Pursue No Further Annuities and GICs for Long-Term FA
Demonstrations Umbrella Insurance PCM Period to Mirror Subtitle D
Postclosure
Closure
Financial Demon-strations
Corrective Action
Next StepsNext Steps
February 2008 – Pooled Fund Model Scenarios Workshop
March 2008 – Informal Workshop for Phase II Rulemaking
May/June 2008 – Request for Direction for Phase II Rulemaking (adopt by July 1, 2009)
May/June 2008 – July 1, 2009 – Recommendations for Additional Statutory Authority
February 2008 – Pooled Fund Model Scenarios Workshop
March 2008 – Informal Workshop for Phase II Rulemaking
May/June 2008 – Request for Direction for Phase II Rulemaking (adopt by July 1, 2009)
May/June 2008 – July 1, 2009 – Recommendations for Additional Statutory Authority
