California Integrated Waste Management Board

California Integrated Waste Management Board

Update On Long-Term Postclosure Maintenance

And Corrective Action Financial Assurances

Activities

Permitting and Compliance CommitteeAgenda Item 2 (Committee Item C)

April 13, 2009

Update On Long-Term Postclosure Maintenance

And Corrective Action Financial Assurances

Activities

Permitting and Compliance CommitteeAgenda Item 2 (Committee Item C)

April 13, 2009

Problem StatementProblem Statement

Postclosure Maintenance is Required Until the Waste No Longer Poses a Threat – Beyond 30 Years

Current Financial Assurances Cover Only the First 30 Years of Postclosure Maintenance

Current Financial Assurance Only Cover Water Quality Corrective Actions

Postclosure Maintenance is Required Until the Waste No Longer Poses a Threat – Beyond 30 Years

Current Financial Assurances Cover Only the First 30 Years of Postclosure Maintenance

Current Financial Assurance Only Cover Water Quality Corrective Actions

Profile of Solid Waste Landfills in CaliforniaProfile of Solid Waste Landfills in California

AB 2296 RequirementsAB 2296 Requirements

Adopt regulations (referred to as Phase I) by January 1, 2008, that specify that closure and postclosure maintenance cost estimates be based on reasonably foreseeable costs the State may occur if it should assume responsibility for those activities due to an owner/operator’s failure to do so;

Conduct a Study by January 1, 2008, to define conditions that potentially affect solid waste landfills and study various financial assurance mechanisms that would protect the State from long-term postclosure maintenance or corrective action costs;

Adopt regulations (referred to as Phase II) by July 1, 2009, to implement the findings of the Study; and

Develop recommendations for needed legislation by July 1, 2009 to implement findings of the Study.

Adopt regulations (referred to as Phase I) by January 1, 2008, that specify that closure and postclosure maintenance cost estimates be based on reasonably foreseeable costs the State may occur if it should assume responsibility for those activities due to an owner/operator’s failure to do so;

Conduct a Study by January 1, 2008, to define conditions that potentially affect solid waste landfills and study various financial assurance mechanisms that would protect the State from long-term postclosure maintenance or corrective action costs;

Adopt regulations (referred to as Phase II) by July 1, 2009, to implement the findings of the Study; and

Develop recommendations for needed legislation by July 1, 2009 to implement findings of the Study.

AB 2296 StudyAB 2296 Study

Composed of Contractor study and Staff Report – completed December 2007Evaluated Financial Assurance

MechanismsDeveloped Financial Exposure ModelDeveloped Simple Risk Screening MethodDirected Staff to Explore Financial

Assurances beyond 30 Years and for Non-Water Corrective Actions

Composed of Contractor study and Staff Report – completed December 2007Evaluated Financial Assurance

MechanismsDeveloped Financial Exposure ModelDeveloped Simple Risk Screening MethodDirected Staff to Explore Financial

Assurances beyond 30 Years and for Non-Water Corrective Actions

Cost Estimate Regulations Summary (Phase I)

Cost Estimate Regulations Summary (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

Update 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

Update Estimates to Reflect ”current costs on a unit basis (unit costs)”

Long-term Financial Assurances

(Phase II) Proposed

Long-term Financial Assurances

(Phase II) ProposedRevise Postclosure Maintenance

Financial Assurance LevelAnnual Incremental Drawdown or First

15 Years After ClosureOptional Step-down in 5X Increments for

Good Performance to a Minimum of 5XExpand Use of Reasonably

Foreseeable Corrective Action Assurances for Non-water Corrective Action

Revise Postclosure Maintenance Financial Assurance LevelAnnual Incremental Drawdown or First

15 Years After ClosureOptional Step-down in 5X Increments for

Good Performance to a Minimum of 5XExpand Use of Reasonably

Foreseeable Corrective Action Assurances for Non-water Corrective Action

Long-term Financial Assurances

(Phase II) Proposed

Long-term Financial Assurances

(Phase II) ProposedAdd 5-year Update for Plans

Closed Between 1988-2003Add Closure Certification Report

Deadline and As-Built CostsRevisions to Trust Fund, Pledge of

Revenue, and InsuranceClarifications to Cost Estimates for

Phased and Premature Closure

Add 5-year Update for Plans Closed Between 1988-2003

Add Closure Certification Report Deadline and As-Built Costs

Revisions to Trust Fund, Pledge of Revenue, and Insurance

Clarifications to Cost Estimates for Phased and Premature Closure

Three Key QuestionsThree Key Questions

1. Is the level of long-term financial assurance sufficient to protect against financial exposure to the State?

2. How to best protect against divestiture defaults?

3. Whether and how to address remaining default exposure?

1. Is the level of long-term financial assurance sufficient to protect against financial exposure to the State?

2. How to best protect against divestiture defaults?

3. Whether and how to address remaining default exposure?

Effect of Currently Proposed Phase II Regulations (8x)

Effect of Currently Proposed Phase II Regulations (8x)

Postclosure Maintenance and Base Corrective Action over 100 years

System Cost = $7,390MDivestiture = $542MDefault = $363M

Postclosure Maintenance and Base Corrective Action over 100 years

System Cost = $7,390MDivestiture = $542MDefault = $363M

Options to Address Divestiture

Options to Address Divestiture

Regulatory (Agenda Item 3)Establish minimum postclosure

assurance level of at least 15XAdd Step-up to 15X Upon Transfer or

SalePossible waiver for buyer with proven

track recordAdd 5X Step-up for lack of continued

performance or enhanced monitoring

Regulatory (Agenda Item 3)Establish minimum postclosure

assurance level of at least 15XAdd Step-up to 15X Upon Transfer or

SalePossible waiver for buyer with proven

track recordAdd 5X Step-up for lack of continued

performance or enhanced monitoring

Options to Address Divestiture

Options to Address Divestiture

Statutory (Agenda Item 4)Keep former owners/operators

liableMake generators liable tooSize pooled fund to cover

Statutory (Agenda Item 4)Keep former owners/operators

liableMake generators liable tooSize pooled fund to cover

Options to Address Remaining Default

Exposure

Options to Address Remaining Default

ExposureFind as Acceptable RiskRaise Assurance Level to Minimize

Exposure and Early DefaultRecommend Statutory Change to

Establish Pooled Fund Sized to Cover

Find as Acceptable RiskRaise Assurance Level to Minimize

Exposure and Early DefaultRecommend Statutory Change to

Establish Pooled Fund Sized to Cover

Corrective Action TypesCorrective Action Types

Base Corrective Action – known and reasonably foreseeable assurances

Major Maintenance – partially covered by reasonably foreseeable assurances

Extraordinary

Base Corrective Action – known and reasonably foreseeable assurances

Major Maintenance – partially covered by reasonably foreseeable assurances

Extraordinary

Pooled Fund OptionsPooled Fund Options

StructureCombined Pooled Fund – both

public and privateSplit Pooled Fund – separate public

and private

StructureCombined Pooled Fund – both

public and privateSplit Pooled Fund – separate public

and private

Pooled Fund OptionsPooled Fund Options

CoverageDefaultsAdd DivestitureAdd Major Maintenance and/or

Extraordinary Corrective ActionAll System Costs

CoverageDefaultsAdd DivestitureAdd Major Maintenance and/or

Extraordinary Corrective ActionAll System Costs

Questions?Questions?