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

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Presentation on theme: "John Lynch, P.E. Palisade Software Miami Users Conference October 25, 2007 www.johnwlynch.com."— Presentation transcript:

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

2 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

3  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

4  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.

5  Estimates for accruing reserves  Tax and cash flow issues  Uncertainties ▪ Need, scope, timing ▪ Regulatory  Dissolution of entities ▪ Trusts, corporations

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

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8  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

9  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

10  Cost Estimating Tools  Lots of detail  Require an engineering design  Not available for most projects  Unit cost  $/acre of cap  $/gallon of stripping

11  Federal Remediation Technologies Roundtable   Means Estimating Guide

12  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

13  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

14  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

15  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

16  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

17  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.

18  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


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