California Integrated Waste Management Board Strategic Policy Committee June 10, 2008 Item #15 (Committee Item G): Discussion And Request For Additional

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


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



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



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



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


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



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



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



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?


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



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

How? - PCM FA Options

How? - PCM FA Options

Individual Demonstrations Perpetual (41x Annual Cost Multiplier

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)

Individual Demonstrations Perpetual (41x Annual Cost Multiplier

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


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



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

Burdensome for Closed LFs



Rolling 30-15x Multiplier w/Stepdown

Rewards “Good Actors”

Conduct 5-year PCM review Good maintenance

record No CA during

period Enhanced

monitoring

Rolling 30-15x Multiplier w/Stepdown

Rewards “Good Actors”

Conduct 5-year PCM review Good maintenance

record No CA during

period Enhanced

monitoring

PerspectivesPerspectivesPros: Potential Significant

Reduction in Assured Costs

Develop PCM data and trends

Sufficient for Temporary Defaults

Minimizes Litigation and Moral Hazard

Pros: Potential Significant


Develop PCM data and trends



Cons: Perceived as

Roadblock not Incentive

Questioning connection between PCM and CA

Cons: Perceived as

Roadblock not Incentive

Questioning connection between PCM and CA



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


Consistent with pre-Subtitle D California Law



Pros: Significant


Consistent with pre-Subtitle D California Law



Cons: Some oppose any

extension of FA

Cons: Some oppose any

extension of FA



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

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

Final Cover Repair - PCM Replacement - CA

Slope Stability – PCM or CA

Leachate System Repair – PCM or CA Replace - CA

Fire Damage – PCM or CA

Corrective ActionConceptual OptionsCorrective Action

Conceptual Options

Current SystemPiggyback on WQ CA FASeparate Non-water CA FA

Current SystemPiggyback on WQ CA FASeparate Non-water CA FA

PerspectivesCorrective ActionPerspectivesCorrective Action

Pros Piggy-backing on WQ

FA would provide assurance without additional burden

Source of funding for an additional array of CA

Would increase compliance with current requirements

Pros Piggy-backing on WQ

FA would provide assurance without additional burden

Source of funding for an additional array of CA

Would increase compliance with current requirements

Cons Focus on increasing

compliance on existing FA before doing more

Non-water CA is unforeseeable

May require more frequent replenishment

Cons Focus on increasing

compliance on existing FA before doing more

Non-water CA is unforeseeable

May require more frequent replenishment

Corrective ActionPossible Scope of a CA

Plan

Corrective ActionPossible Scope of a CA

PlanOne combined plan

Release to water (current requirement)Non-WQ release issues - Top types from

Compliance SurveyRelease 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 typeSeparate plan – Non-WQ only

One combined planRelease to water (current requirement)Non-WQ release issues - Top types from

Compliance SurveyRelease 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 typeSeparate plan – Non-WQ only

Follow-up to LTFA StudyFollow-up to LTFA Study

InsuranceTreat insurance FA as true insuranceExisting insurance FA are in reality

GICsPledge of Revenue

Standardize Form

InsuranceTreat insurance FA as true insuranceExisting insurance FA are in reality

GICsPledge of Revenue

Standardize Form

Closure/PCM Plan Updates

Closure/PCM Plan Updates

Update/revision every 5 yearsAt time of permit review/revisionIf no closure permit (1988-2003) –

review every 5 years maximum

Update/revision every 5 yearsAt time of permit review/revisionIf no closure permit (1988-2003) –

review every 5 years maximum

Closure CertificationClosure Certification

As-built costs submitted with closure certification report

Deadline for submittal of report

As-built costs submitted with closure certification report

Deadline for submittal of report

Cost Estimating DialogueCost Estimating Dialogue

Operational vs. Closure CostsAddress premature closure

US EPA requirementGreatest Extent of Closure

Option A - Phased closure approachLargest area open at any timeOption B – Non-phased approachEntire permitted LF less area certified

closed

Operational vs. Closure CostsAddress premature closure

US EPA requirementGreatest Extent of Closure

Option A - Phased closure approachLargest area open at any timeOption B – Non-phased approachEntire permitted LF less area certified

closed

Continue to Develop?Continue to Develop?

A Pooled Fund in the FA mixFund Design Sized to Cover FA Option

BackstopSecondaryPrimary

PCM and/or CACriteria for Optimizing/Ending PCMBMPs to minimize PCM costs

A Pooled Fund in the FA mixFund Design Sized to Cover FA Option

BackstopSecondaryPrimary

PCM and/or CACriteria for Optimizing/Ending PCMBMPs to minimize PCM costs

Possible Pooled Fund Design

Possible Pooled Fund Design

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Millions

43X 30X 30/15X Satus Quo

Unassured Average Annual PCM System Costs for Various Scenarios (100 years)(yellow=exposure; red and orange=probable default)

PerspectivesPooled Fund

PerspectivesPooled Fund

Pros 30-year PCM FA

adequate Reasonable

approach Defaults are rare

Pros 30-year PCM FA

adequate Reasonable

approach Defaults are rare

Cons Pay for Others

Problems Shifts Costs from

Individual LFs to General Rate Payers

May Encourage Moral Hazard

May not cover the costs

Cons Pay for Others

Problems Shifts Costs from

Individual LFs to General Rate Payers

May Encourage Moral Hazard

May not cover the costs

Pursue No Further?Pursue No Further?

Fund-as-you-Fill FA regulationContractor Scoring Model

Fund-as-you-Fill FA regulationContractor Scoring Model

Direction Sought?Direction Sought?

“When you come to a fork in the road, take it.”

Yogi Berra

“When you come to a fork in the road, take it.”

Yogi Berra

Questions?Questions?

Postclosure

Closure

Financial Demon-strations

Corrective Action

Staff WorkshopsStaff Workshops

Feb 2008 – Pooled Fund Model Scenarios Workshop

Mar 2008 – Postclosure Maintenance

Apr 2008 – Corrective Action

Apr 2008 – Follow-up on PCM, CA and PF

May 2008 – 2 Informal Rulemaking Workshops

Feb 2008 – Pooled Fund Model Scenarios Workshop

Mar 2008 – Postclosure Maintenance

Apr 2008 – Corrective Action

Apr 2008 – Follow-up on PCM, CA and PF

May 2008 – 2 Informal Rulemaking Workshops

Next StepsNext Steps

Jun 18 – Informal Rulemaking Workshop

Jul 17 – Informal Rulemaking Workshop

Aug 11 – P&C Request for Rulemaking Direction

Sep (TBD) – Pooled Fund Workshop

Jun 18 – Informal Rulemaking Workshop

Jul 17 – Informal Rulemaking Workshop

Aug 11 – P&C Request for Rulemaking Direction

Sep (TBD) – Pooled Fund Workshop

Documents

California Integrated Waste Management Board Strategic Policy Committee June 10, 2008 Item #15 (Committee Item G): Discussion And Request For Additional