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