California Integrated Waste Management Board Strategic Policy Committee June 10, 2008 Item #15 (Committee Item G): Discussion And Request For Additional Direction On Long-Term Postclosure Maintenance And Corrective Action Financial Assurances For Landfills
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California Integrated Waste Management Board Strategic Policy Committee June 10, 2008
Item #15 (Committee Item G): Discussion And Request For Additional Direction On Long-Term Postclosure Maintenance And Corrective Action Financial Assurances For Landfills. California Integrated Waste Management Board Strategic Policy Committee June 10, 2008. AB 2296 Requirements. - PowerPoint PPT Presentation
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California Integrated Waste Management Board
Strategic Policy CommitteeJune 10, 2008
California Integrated Waste Management Board
Strategic Policy CommitteeJune 10, 2008
Item #15 (Committee Item G):
Discussion And Request For Additional Direction
On Long-Term Postclosure Maintenance
And Corrective Action Financial Assurances For
Landfills
Item #15 (Committee Item G):
Discussion And Request For Additional Direction
On Long-Term Postclosure Maintenance
And Corrective Action Financial Assurances For
Landfills
AB 2296 Requirements
AB 2296 Requirements
The Board shall adopt regulations that Provide for an increase in the initial closure and
postclosure maintenance cost estimates to account for cost overruns due to unforeseeable circumstances, and to provide a reasonable contingency comparable to that which is built into cost estimates for other, similar public works projects
On or before January 1, 2008, require closure and postclosure maintenance costs estimates be based on reasonably foreseeable costs that the state may incur if the state would have to assume responsibility for the closure and postclosure maintenance due to the failure of the owner or operator. Cost estimates shall include
Compliance with the Labor Code Replacement and repair of longer lived items
including , but not limited to, environmental control systems
The Board shall adopt regulations that Provide for an increase in the initial closure and
postclosure maintenance cost estimates to account for cost overruns due to unforeseeable circumstances, and to provide a reasonable contingency comparable to that which is built into cost estimates for other, similar public works projects
On or before January 1, 2008, require closure and postclosure maintenance costs estimates be based on reasonably foreseeable costs that the state may incur if the state would have to assume responsibility for the closure and postclosure maintenance due to the failure of the owner or operator. Cost estimates shall include
Compliance with the Labor Code Replacement and repair of longer lived items
including , but not limited to, environmental control systems
AB 2296 Requirements
AB 2296 Requirements
On or before January 1, 2008, the Board shall conduct a study to define the conditions that potentially affect solid waste landfills, including
Technologies and controls designed to mitigate potential risks in order to identify potential long-term threats to public health and safety and the environment
Study various financial assurance mechanisms that would protect the state from long-term postclosure and corrective action costs in the event that the landfill owner/operator fails to meet its legal obligations to fund postclosure maintenance or corrective action during the postclosure maintenance period
On or before January 1, 2008, the Board shall conduct a study to define the conditions that potentially affect solid waste landfills, including
Technologies and controls designed to mitigate potential risks in order to identify potential long-term threats to public health and safety and the environment
Study various financial assurance mechanisms that would protect the state from long-term postclosure and corrective action costs in the event that the landfill owner/operator fails to meet its legal obligations to fund postclosure maintenance or corrective action during the postclosure maintenance period
AB 2296 Requirements
AB 2296 Requirements
The Board, on or before July 1, 2009, shall adopt regulations and develop recommendations for needed legislation to implement the findings of the study
The Board, on or before July 1, 2009, shall adopt regulations and develop recommendations for needed legislation to implement the findings of the study
AB 2296 Requirements
AB 2296 Requirements
In conducting the study the Board shall consult with representatives of:League of California CitiesCSACPrivate and public waste servicesEnvironmental organizations
In conducting the study the Board shall consult with representatives of:League of California CitiesCSACPrivate and public waste servicesEnvironmental organizations
C/PC Cost Estimate Regulations
Effective February 25, 2008
C/PC Cost Estimate Regulations
Effective February 25, 2008 Clarify Third Party Costs are the State’s
Costs Prevailing Wage Caltrans Rates Operator May Justify Alternative Costs
Require more detail and documentation for cost estimates
Increase Financial Means Test from $10M to $15M
Use 30 year replacement frequency in PCM estimates for longer lived items
Clarify that estimates are to reflect ”current costs on a unit basis (unit costs)”
Clarify Third Party Costs are the State’s Costs Prevailing Wage Caltrans Rates Operator May Justify Alternative Costs
Require more detail and documentation for cost estimates
Increase Financial Means Test from $10M to $15M
Use 30 year replacement frequency in PCM estimates for longer lived items
Clarify that estimates are to reflect ”current costs on a unit basis (unit costs)”
Postclosure
Closure
Financial Demon-strations
Corrective Action
Long-Term PCM and CA Board Direction - Dec 2007
Long-Term PCM and CA Board Direction - Dec 2007
Implement Now Closure Fund-As-You-Fill Permit
Option Committed LF Operator Willing LEA
Water Quality-related Reasonably Foreseeable Corrective Action Financial Assurances Continue to work with SWRCB
and RWQCBs by developing a strategy to increase compliance
Implement Now Closure Fund-As-You-Fill Permit
Option Committed LF Operator Willing LEA
Water Quality-related Reasonably Foreseeable Corrective Action Financial Assurances Continue to work with SWRCB
and RWQCBs by developing a strategy to increase compliance
Long-Term PCM and CA Board Direction - Dec 2007
Long-Term PCM and CA Board Direction - Dec 2007
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
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 Board Direction - Dec 2007
Long-Term PCM and CA Board Direction - Dec 2007
Continue 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 Board Direction - Dec 2007
Long-Term PCM and CA Board Direction - Dec 2007
Pursue 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
Consider the FutureConsider the Future
Seventh Generation Thinking
"In our every deliberation we must consider the impact of our decisions on the next seven generations."
Great Law, Iroquois Confederacy
Seventh Generation Thinking
"In our every deliberation we must consider the impact of our decisions on the next seven generations."
Great Law, Iroquois Confederacy
Phase II Regulations Timeline
Phase II Regulations Timeline
Aug 2008 – Seek Rulemaking Direction
Nov 2008 – 45-Day NoticeJan 2009 – Public HearingFeb-May 2009 – 15-Day Notice(s)Apr-Jun 2009 – Consider AdoptionJul 1, 2009 – AB 2296 Deadline for
Adoption
Aug 2008 – Seek Rulemaking Direction
Nov 2008 – 45-Day NoticeJan 2009 – Public HearingFeb-May 2009 – 15-Day Notice(s)Apr-Jun 2009 – Consider AdoptionJul 1, 2009 – AB 2296 Deadline for
Adoption
Critical JunctureCritical Juncture Landfill System and
Costs Include in Phase II
Rulemaking? Postclosure
Maintenance Corrective Action Other
Continue to Develop? Pursue No Further?
Landfill System and Costs
Include in Phase II Rulemaking? Postclosure
Maintenance Corrective Action Other
Continue to Develop? Pursue No Further?
Landfill ProfilesNumber of Landfills (Total
282)
Landfill ProfilesNumber of Landfills (Total
282)Operator Type and Status by Type
Single-Public-Closed, 27
Single-Public-Active, 27
Single-Private-Closed, 18
Single-Private-Active, 11
Multiple-Public-Closed, 92
Multiple-Public-Active, 66
Multiple-Private-Closed, 6
Multiple-Private-Active, 35
Landfill System CostsLandfill System Costs
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
$20.0
50 100 150 200 240
Years
PCM System Costs over Time (billions)(blue=constant costs; red=costs at equilibrium, i.e. r= - 0.5%)
Average Annual PCM Costs
Average Annual PCM Costs
Landfill Size
Number
Capacity (cy)
Cost
Small 54 <0.5M $50,000
Medium 184 0.5-30M $155,000
Large 44 >30M $1,100,000
Annual PCM Costs for Large Landfills
Annual PCM Costs for Large Landfills
Annual PCM Cost by Landfill CapacityLarge Landfills
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
0 200 400 600 800 1,000 1,200
Million Cu Yd
Annual PCM Cost by Landfill CapacityLarge Landfills
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
0 200 400 600 800 1,000 1,200
Million Cu Yd
Postclosure Maintenance (PCM)
Direction Sought
Postclosure Maintenance (PCM)
Direction SoughtInclude in Phase II RegulationsShould FA be extended beyond 30
years?How? PCM FA Options
Should we establish Reasonable Contingency for PCM?
When should we allow reductions in PCM costs? i.e. Pre-discounting
Include in Phase II RegulationsShould FA be extended beyond 30
years?How? PCM FA Options
Should we establish Reasonable Contingency for PCM?
When should we allow reductions in PCM costs? i.e. Pre-discounting
How Long Does PCM Last?
How Long Does PCM Last?
By the Book: Federal Subtitle D Regulations
30 years Can Be Shortened Or Extended by Director FA required throughout PCM
California Law Minimum 30 years Until waste no longer poses a threat
By the Book: Federal Subtitle D Regulations
30 years Can Be Shortened Or Extended by Director FA required throughout PCM
California Law Minimum 30 years Until waste no longer poses a threat
I II III IV V VI VII VIII
How Long Does PCM Last?
How Long Does PCM Last?
California Experience Other States Poll Interstate Technology & Regulatory
Council (ITRC)/Environmental Research and Education Foundation (EREF) Approach
California Experience Other States Poll Interstate Technology & Regulatory
Council (ITRC)/Environmental Research and Education Foundation (EREF) Approach
w/20% contingency or 49x Multiplier) Rolling 30 (30x Multiplier) Rolling 30-15x Multiplier
w/Stepdown Good maintenance record No CA during period Enhanced monitoring
w/Drawdown Status Quo (30 years)
PCM FA Demonstration Options
PCM FA Demonstration Options
PerpetualPlus 11 Multiplier & 20% contingency (or 49x Multiplier) to PCM Cost EstimatesProvides assurance that funds will continue to be available indefinitely for routine PCM
PerpetualPlus 11 Multiplier & 20% contingency (or 49x Multiplier) to PCM Cost EstimatesProvides assurance that funds will continue to be available indefinitely for routine PCM
PerspectivesPerspectivesPros: Most Protective Pay PCM from
Interest Earned System Costs are
Fully Assured
Pros: Most Protective Pay PCM from
Interest Earned System Costs are
Fully Assured
Cons: Front Loads Costs Ties up Exorbitant
Sums of Money Burdensome for
Closed LFs and LFs nearing Closure
Cons: Front Loads Costs Ties up Exorbitant
Sums of Money Burdensome for
Closed LFs and LFs nearing Closure
PCM FA Demonstration Options
PCM FA Demonstration Options
Rolling 30Hold at 30X multiplier until the waste no longer poses a threatPays last 30 yrs of PCM
Rolling 30Hold at 30X multiplier until the waste no longer poses a threatPays last 30 yrs of PCM
PerspectivesPerspectivesPros: Sufficient for
Permanent and Temporary Defaults
Interest available for PCM
Pros: Sufficient for
Permanent and Temporary Defaults
Interest available for PCM
Cons: Concerned Must
Pay Twice Counting on using
principal for PCM and interest for other Infrastructure
Burdensome for Closed LFs
Cons: Concerned Must
Pay Twice Counting on using
principal for PCM and interest for other Infrastructure
Rolling 30-15X Multiplier w/ DrawdownConduct 5 year PCM reviewAllow Regular Disbursements/ Reductions to FloorExcept with CausePays first 15 and last 15 yrs of PCM
Rolling 30-15X Multiplier w/ DrawdownConduct 5 year PCM reviewAllow Regular Disbursements/ Reductions to FloorExcept with CausePays first 15 and last 15 yrs of PCM
PerspectivesPerspectivesPros: Significant
Reduction in Assured Costs
Consistent with pre-Subtitle D California Law
Sufficient for Temporary Defaults
Minimizes Litigation and Moral Hazard
Pros: Significant
Reduction in Assured Costs
Consistent with pre-Subtitle D California Law
Sufficient for Temporary Defaults
Minimizes Litigation and Moral Hazard
Cons: Some oppose any
extension of FA
Cons: Some oppose any
extension of FA
PCM FA Demonstration Options
PCM FA Demonstration Options
Status Quo (30 years)Conduct 5 year PCM reviewAllow Regular Disbursements/ ReductionsPays first 30 yrs of PCM
Status Quo (30 years)Conduct 5 year PCM reviewAllow Regular Disbursements/ ReductionsPays first 30 yrs of PCM
PerspectivesStatus Quo
PerspectivesStatus Quo
Pros 30-year PCM FA is
adequate Landfill and costs
will stabilize by then
Can Extend under Subtitle D
Defaults are rare
Pros 30-year PCM FA is
adequate Landfill and costs
will stabilize by then
Can Extend under Subtitle D
Defaults are rare
Cons Difficulty extending
FA after Funds are depleted
PCM is unlikely to end at 30 years
Increased Moral Hazard & Litigation
No Financial Test for Divestiture after 30 years
Cons Difficulty extending
FA after Funds are depleted
PCM is unlikely to end at 30 years
Increased Moral Hazard & Litigation
No Financial Test for Divestiture after 30 years
How Long Will FA $$ Last?
SMIF Rate = 4.59%
How Long Will FA $$ Last?
SMIF Rate = 4.59%
102
4618
0
50
100
150
200
250
48.8 46 43 40 37 34 31 28 25 22 19 16
Multipliers
Years of Fund Survival
102
4618
0
50
100
150
200
250
48.8 46 43 40 37 34 31 28 25 22 19 16
Multipliers
Years of Fund Survival
Landfill PCM System CostOver 100 Years
Landfill PCM System CostOver 100 Years
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
43X 30X 30/15X Satus Quo
Assured and Unassured 100-year PCM System Cost for Various Scenarios(green=assured; yellow=exposure; red & orange=probable default)
PCM Cost Estimate – Reasonable Contingency
PCM Cost Estimate – Reasonable Contingency
Capital Costs only Similar Public Works Projects
From SWIG proposal Other States Survey - 5-50%
Grandfather Closed Sites?
Capital Costs only Similar Public Works Projects
From SWIG proposal Other States Survey - 5-50%
Grandfather Closed Sites?
Reasonable PCM Contingency
Survey of Other States
Reasonable PCM Contingency
Survey of Other States Does your state require a reasonable
contingency added to the cost of PCM? If so, what amount? e.g., 10%, 20%, etc.
Does your state require a reasonable contingency added to the cost of PCM? If so, what amount? e.g., 10%, 20%, etc.
Reasonable Contingency
0
5
10
15
20
25
0% 5% 10% 12% 15% 20% 25% 50%
Contingency %
# o
f Sta
tes
*Of the 25 states responding, 60% require a reasonable contingency cost.
*Of the 25 states responding, 60% require a reasonable contingency cost.
Corrective Action (CA) Direction Sought
Corrective Action (CA) Direction SoughtInclude in Phase II Regulations Is there a need for Non-water CA
FA?How to Differentiate CA from PCM?CA FA OptionsCA Plan
Include in Phase II Regulations Is there a need for Non-water CA
FA?How to Differentiate CA from PCM?CA FA OptionsCA Plan
Corrective ActionCorrective Action
Definitions of Terms Known CA Costs Reasonably Foreseeable CA Costs Extraordinary CA Costs Extremely Rare Events CA Costs
Definitions of Terms Known CA Costs Reasonably Foreseeable CA Costs Extraordinary CA Costs Extremely Rare Events CA Costs
California Landfill CA Survey - Summary
Comparison
California Landfill CA Survey - Summary
Comparison
Estimated CAs per landfill over 240 years
CA Survey results similar to Pooled Fund model
Actual cost data was rarely available
Corrective actions were grouped based on the nature of the activities
Low Cost CA – Counterintuitive
Many low cost CAs are not being captured via enforcement actions
Estimated CAs per landfill over 240 years
CA Survey results similar to Pooled Fund model
Actual cost data was rarely available
Corrective actions were grouped based on the nature of the activities
Low Cost CA – Counterintuitive
Many low cost CAs are not being captured via enforcement actions
LTFA Contractor’s Study CA Survey
CA Type Small LF Medium LF Large LF
Low Cost 10 13 15 5
Medium Cost 5 8 10 9
High Cost 2 3 4 4
Total 17 24 29 18
California Landfill Compliance Survey -
Summary Results
California Landfill Compliance Survey -
Summary ResultsMost Common Corrective Actions1. Ground Water (47%)2. LFG Migration (29%)3. Slope Failure4. Surface Water5. Liner Issues6. Waste Boundaries7. Fires (Sub-sfc and sfc)8. Erosion
Most Common Corrective Actions1. Ground Water (47%)2. LFG Migration (29%)3. Slope Failure4. Surface Water5. Liner Issues6. Waste Boundaries7. Fires (Sub-sfc and sfc)8. Erosion
PCM or CA?PCM or CA? 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
Site Security - PCM Ground Water
Monitoring - PCM Cleanup - CA
Landfill Gas Monitoring – PCM Control – PCM or CA
Drainage/Erosion Control Repair - PCM Replacement – PCM