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Rural Counties’ ESJPA Board December 13, 2007 Long-Term Postclosure Maintenance and Corrective Action Financial Assurances for Landfills.

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Presentation on theme: "Rural Counties’ ESJPA Board December 13, 2007 Long-Term Postclosure Maintenance and Corrective Action Financial Assurances for Landfills."— Presentation transcript:

1 Rural Counties’ ESJPA Board December 13, 2007 Long-Term Postclosure Maintenance and Corrective Action Financial Assurances for Landfills

2 Our Legacy “We do not inherit the land from our ancestors; we borrow it from our children” Native American Proverb

3 See the Future Half of California’s landfills will close by 2009 First landfill will be beyond 30 years PCM in 2021 By end of century unassured PCM costs may be $600M

4 Tale of 3 Futures Star Trek future Mad Max future Goldie Locks future

5 Goal: Protect Public Health and Safety & Financial Exposure into the Future PlansCost Estimates Financial Demonstrations

6 Goal: Protect Public Health and Safety & Financial Exposure into the Future Closure Cost Estimate Dialogue Closure Cost Estimate Dialogue Closure/Postclosure Cost Estimate Regulations Long-term Financial Assurances Study Contractor Study Staff Report Closure Cost Estimate Dialogue Closure Cost Estimate Dialogue Closure/Postclosure Cost Estimate Regulations Long-term Financial Assurances Study Contractor Study Staff Report

7 Closure Cost Estimate Dialogue Scope Issue: What costs should be included for environmental control systems? Objective: Clarify current practice based on current regulations Stakeholder Workshops Issue: What costs should be included for environmental control systems? Objective: Clarify current practice based on current regulations Stakeholder Workshops Closure

8 Closure Cost Estimating Dialogue Outcomes Refined Business Practice Fund-as-you-fill Approach Triage Matrix Refined Business Practice Fund-as-you-fill Approach Triage Matrix Closure

9 Closure Cost Estimate Dialogue Outcomes OperatingPotentially Both Closure Daily CoverIntermediate CoverFinal Cover LinersSecurityPlans/Specs Leachate RCSLFG MonitoringGrading NPDES ComplianceLFG ControlIrrigation Ground Water MonitoringErosion ControlCap Drainage Upgrades to Installed Systems Structure Removal/Install Postclosure Land Use

10 Goal: Protect Public Health and Safety & Financial Exposure into the Future Closure Cost Estimate Dialogue Closure/Postclosure Cost Estimate Regulations Closure/Postclosure Cost Estimate Regulations Long-term Financial Assurances Study Contractor Study Staff Report Closure Cost Estimate Dialogue Closure/Postclosure Cost Estimate Regulations Closure/Postclosure Cost Estimate Regulations Long-term Financial Assurances Study Contractor Study Staff Report

11 AB 2296 requirements By January 1, 2008, the CIWMB shall Adopt regulations (Phase I) requiring closure and postclosure maintenance cost estimates to be based on reasonably foreseeable costs the state may incur including Labor Code (Prevailing Wage) Replacement and repair costs for longer lived items such as repair of the environmental control systems

12 C/PC Cost Estimate Regulations (Phase I) Clarify Third Party Costs are the State’s Costs Prevailing Wage Caltrans Rates Operator May Justify Alternative Costs Increase Financial Means Test from $10M to $15M Updated Estimates 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 Increase Financial Means Test from $10M to $15M Updated Estimates to Reflect ”current costs on a unit basis (unit costs)”

13 AB 2296 requirements By July 1, 2009, the CIWMB shall Adopt regulations (Phase II) and develop recommendations for needed legislation to implement the findings of the study

14 Goal: Protect Public Health and Safety & Financial Exposure into the Future Closure Cost Estimate Dialogue Closure/Postclosure Cost Estimate Regulations Long-term Financial Assurances Study Long-term Financial Assurances Study Contractor Study Staff Report Closure Cost Estimate Dialogue Closure/Postclosure Cost Estimate Regulations Long-term Financial Assurances Study Long-term Financial Assurances Study Contractor Study Staff Report

15 AB 2296 requirements By January 1, 2008, the CIWMB shall Conduct a study to define the conditions that potentially affect solid waste landfills identify potential long-term threats to public health and safety and the environment technologies and engineering controls designed to mitigate potential risks financial assurance mechanisms that would protect the state from long-term postclosure and corrective action costs

16 AB 2296 requirements Consult with representatives of the League of California Cities, the County Supervisors Association of California, private and public waste services, and environmental organizations

17 The Study Is A Major Milestone A Major Milestone Powerful Tools Together meets the study requirements of AB 2296 A Major Milestone A Major Milestone Powerful Tools Together meets the study requirements of AB 2296

18 The Study is NOT The Final Answer The Final Answer A Site-specific Risk Assessment A Repeat of the Geosyntec Landfill Study Define End of PCM The Final Answer The Final Answer A Site-specific Risk Assessment A Repeat of the Geosyntec Landfill Study Define End of PCM

19 Long-term Mechanism Evaluation Results Can Current Mechanisms Assure More Money Longer? Most mechanisms would require few if any changes Some mechanisms have built-in limits on how much can be assured Many mechanisms require periodic renewal

20 Mechanism Evaluation Summary CertaintyAmountLiquidityBurden/Cost Trust FundHighMediumHigh Enterprise FundMedium High Sale of SecuritiesMediumHigh Letter of CreditHigh Low Surety BondHigh MediumLow Pledge of Revenue LowLowMediumMedium Financial Means TestMediumHighMedium Corporate GuaranteeHigh Medium InsuranceMedium High Government Fin. Test MediumHighMedium Government Guarantee High Medium Federal CertificationLow

21 Pledge of Revenue CIWMB staff strongly disagrees with Contractor’s Assessment Contractor suggested improvements include: Ensure “control” over pledged revenue Add eligibility criteria as with other “self- insurance/guarantee” mechanisms Clarify requirements of annual demonstration Seek Legal Opinion on enforceability CIWMB staff strongly disagrees with Contractor’s Assessment Contractor suggested improvements include: Ensure “control” over pledged revenue Add eligibility criteria as with other “self- insurance/guarantee” mechanisms Clarify requirements of annual demonstration Seek Legal Opinion on enforceability

22 State Pooled Fund Working Model Model is a flexible tool for testing variety of scenarios Model designed to allow changes to inputs and assumptions, except for funding constraint (only active LFs make contributions) Addresses uncertainty and variation through probabilistic methods (e.g., Monte Carlo simulation) Uses proxy factors Excel 2003 spreadsheet model Test Case results in Final Report

23 Scenarios that Can be Evaluated with the Working Fund Model PCM and/or CA defaults only All PCM and/or CA costs PCM costs Y years after LF closure PCM costs changing over time Disposal rates changing over time Fund ceiling/floor $$ amount

24 Landfill Characteristics Data Used in Model Owner type Current operational status Permitted capacity Annual rainfall Proximity to urban areas Expected year of closure, if currently open Estimated PCM cost/year (and CA cost estimates) Depth to groundwater Design level

25 Test Case Assumptions, Absent Good Data CA frequency and magnitude Default rates for public sector entities’ LFs

26 Test Case Assumption: CA Occurrence Corrective Action Type Average Number of Corrective Actions Over the Modeling Period per Landfill by Landfill Sizes Small LFMedium LFLarge LF Low Cost Medium Cost5810 High Cost234 Average Number of Corrective Actions by Type and Landfill Size Over the Modeling Period for a Single Landfill

27 Test Case Assumption: CA Frequency Corrective Action Type Average Frequency of Corrective Actions Over the Modeling Period per Landfill by Landfill Sizes Small LFMedium LFLarge LF Low Costevery 24 yearsevery 18 yearsevery 16 years Medium Costevery 48 yearsevery 30 yearsevery 24 years High Costevery 120 years every 80 yearsevery 60 years All Typesevery 14 yearsevery 10 yearsevery 8 years Average Frequency of Corrective Actions by Type and Landfill Size Over the Modeling Period for a Single Landfill

28 Key Inputs: Test Case Default Rates 1%/year for single-owner LFs, both private and public.15% year for private LFs not singly owned.17%/year for public LFs not singly owned LFs with high-cost CAs have double the probability of default 1%/year for event-driven group defaults 1% of defaults are “permanent”

29 Landfill Screening Tool Purpose Develop factors and method that are simple to use for quickly judging the potential relative CA/PCM concern at California landfills Potential uses of tool characterize LF universe setting priorities informing FA requirements pooled fund contributions

30 Criteria Governing Factors and Methodology Not a site-specific risk assessment Use a limited number of indicator factors Three categories: high, medium, and low Factors must have a quantitative basis and relate to potential occurrence, duration, and costs of CA and/or PCM Evaluate the method considering importance/weighting of factors and effect on ranking scores; data from individual landfills were not used in the analysis

31 Final List of Proxy Factors 13 factors considered Siting/climate factors: rainfall intensity Landfill design, construction, and maintenance: engineering controls (e.g., cap and liner design) permitted capacity Potential for migration/distance to sensitive receptors: hydrogeology proximity to urban areas

32 Pooled Insurance Insurer Concerns: 1-3 year policies possible, not 10 years underwriting costs substantial (> $11 million) moral hazard and credit risk concerns “all risk” problematic immediate full payment problematic right to void coverage desired limits of $100M too high, even with $10M deductible

33 Goal: Protect Public Health and Safety & Financial Exposure into the Future Closure Cost Estimate Dialogue Closure/Postclosure Cost Estimate Regulations Long-term Financial Assurances Study Long-term Financial Assurances Study Contractor Study Staff Report

34 Postclosure Closure Financial Demon- strations Corrective Action Staff Report Approach Broader than Requirements of AB 2296 Encompasses Scope of ICF’s Study Request for Direction Application of New Requirements to Closed Landfills Implement Now Continue to Develop Pursue No Further

35 Staff Recommendations Implement Now Closure Fund-As-You-Fill

36 Post-30 year FA Demonstration Options Plus 11 Years to PCM Cost Estimates Provides assurance that funds will continue to be available for routine PCM May not require contingency or Pooled Fund Plus 11 Years to PCM Cost Estimates Provides assurance that funds will continue to be available for routine PCM May not require contingency or Pooled Fund

37 Post-30 year FA Demonstration Options Maintain 30-Year PCM Holding at 30- year value until the waste no longer poses a threat Will greatly extend time funds are available for PCM, but not indefinitely if default Maintain 30-Year PCM Holding at 30- year value until the waste no longer poses a threat Will greatly extend time funds are available for PCM, but not indefinitely if default

38 Post-30 year FA Demonstration Options Rolling PCM Allowing reductions initially will lessen impact to operator and extend time funds are available for routine PCM, but not indefinitely Better in tandem with Pooled Fund Rolling PCM Allowing reductions initially will lessen impact to operator and extend time funds are available for routine PCM, but not indefinitely Better in tandem with Pooled Fund

39 Key Issues: Application of New Requirements to Closed Landfills Potential Grandfathering of Closed Landfills In - benefits of some proposals Pooled Fund Out – newly created financial requirements Post-30 FA demonstrations Non-Water Quality Related Reasonably Foreseeable Corrective Action

40 Postclosure Closure Financial Demon- strations Corrective Action Long-Term PCM and CA Staff Requests for Direction Summary Implement Now Closure Fund-As-You-Fill Permit Option Water Quality Related Reasonably Foreseeable Corrective Action Financial Assurances

41 Long-Term PCM and CA Staff Requests for Direction Summary 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

42 Long-Term PCM and CA Staff Requests for Direction Summary Continue to Develop – May require additional statutory authority Pooled Fund Working Model Use of Risk Scoring Model

43 Long-Term PCM and CA Staff Requests for Direction Summary Pursue No Further Annuities and GICs for Long-Term FA Demonstrations Umbrella Insurance PCM Period to Mirror Subtitle D

44 Postclosure Closure Financial Demon- strations Corrective Action Next Steps February 2008 – Pooled Fund Model Scenarios Workshop March 2008 – Informal Workshop for Phase II Rulemaking May/June 2008 – Request for Direction for Phase II Rulemaking (adopt by July 1, 2009) May/June 2008 – July 1, 2009 – Recommendations for Additional Statutory Authority


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