John Lynch, P.E. Palisade Software Miami Users Conference October 25, 2007

John Lynch, P.E.Palisade SoftwareMiami Users ConferenceOctober 25, 2007

www.johnwlynch.com

• Drivers 15 minutes– Regulatory Reporting– Financial Planning– Liability Management

• Techniques & Practices 15 minutes

– Precision & Accuracy– Expert Panels– Resources

• Case Studies 15 Minutes– California Munitions Plant– New Jersey River Sediments PRP– Manufactured Gas Plants 15 Site Portfolio

• Discussion – Q&A 15 Minutes

Need to quantify environmental liability under uncertain conditions “Not understanding the problem is not

an excuse for not having an answer” New accounting rule▪ FIN 47 … Financial Accounting Board

Interpretation Notice▪ Asset Retirement Obligation

Financial Disclosure of Environmental Liabilities Old ….. Potential loss must be

“probable” and can be “reasonably estimated”

New …. Use probabilistic tools FASB Interpretation No.47

Accounting for Conditional Retirement Obligations

The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement.

Estimates for accruing reserves Tax and cash flow issues Uncertainties▪ Need, scope, timing▪ Regulatory

Dissolution of entities▪ Trusts, corporations

Transfer Liability Obligation to Third Party Need legal entity Adequate funding▪ Reliable and credible estimate▪ Secure mechanism▪ Insurance▪ Trust

Reliable Remediation Contractor

Uncertainties Site …. How much, where, what▪ Soils, groundwater, sediment▪ Site characterization … risk vs. remedy▪ Poor use of site characterization data

Contaminants▪ Location, concentration, remedy impact▪ Regulatory status

Technologies … what to do?▪ Will it work▪ How much will it cost

Regulatory Federal (EPA), States (DEP, DEQ, etc.),

Tribes, Fish & Wildlife, Third Parties Superfund … Record of decision (RoD)▪ ARAR Applicable or Relevant and

appropriate requirements? What are they? Classification of Waste▪ RCRA, Listed wastes

Contaminated Media▪ Land ban on disposal

Cost Estimating Tools Lots of detail Require an engineering design Not available for most projects

Unit cost $/acre of cap $/gallon of stripping

Federal Remediation Technologies Roundtable http://www.frtr.gov/ Means Estimating Guide

Lack of historical cost data Inconsistency of remedy selection Not much cost data▪ Insurers have loss/claims data▪ DoD, DoE have good technology cost data.

Regulatory uncertainty is most difficult Evolving standards

Expert panels vs. data Access to data and decision makers

3 to 5 senior technical & regulatory professionals Mid-level support Review documents Identify alternatives▪ Low, medium, high

Use decision tress▪ Probabilities▪ Costs

Run model and “gut test” results

California Munitions Plant Driver…. Insurer needed to establish

reserve WWII Era Munitions Plant▪ Large Site

Multiple Environmental Issues▪ Groundwater …. 3 public water supplies impacted

Perchlorate … environmental – public health standard not established▪ CA, EPA, DOD, USAF

Perchlorate Drinking Water Standard CA and US EPA

Uncertainties MCL – drinking water standard▪ 3 – 30 µg/l (ppb)

Extent of GW contamination▪ Plume footprint

Effectiveness and acceptability of treatment technology▪ RO, biological

River Sediment PRP Trust holding liability Estimate needed to dissolve trust and

distribute assets to heirs▪ Credible estimate for regulatory and other RPs.

Billion dollar remedy Uncertainties▪ Scope … sediment removal for navigation▪ Technologies …▪ Removed material management▪ Capping material▪ Dredging technology

SE Utility’s Manufactured Gas Plants (MGPs) Utility has responsibility for environmental of

15 MGPs …. $75M to $150M. Regulatory Agencies allowed recovery of

environmental costs for a limited time Utility wanted to use an finite risk

environmental cost cap insurance policy to fund the cleanup

Needed an estimate of the cleanup costs Uncertainties▪ Scope .. Soil, Groundwater, Sediments▪ Regulatory … Standards, Technology.

DoD BRAC. Cost Cap Insurance

EU Petroleum Company US legacy holding

Las Vegas Developer Former munitions plant. Cost Cap Policy

Texas refinery Settle suit over cleanup liability