California Integrated Waste Management Board Update On Long-Term Postclosure Maintenance And Corrective Action Financial Assurances Activities Permitting and Compliance Committee Agenda Item 2 (Committee Item C) April 13, 2009 Update On Long-Term Postclosure Maintenance And Corrective Action Financial Assurances Activities Permitting and Compliance Committee Agenda Item 2 (Committee Item C) April 13, 2009

Problem 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 California

AB 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 Study Composed of Contractor study and Staff Report – completed December 2007 Evaluated Financial Assurance Mechanisms Developed Financial Exposure Model Developed Simple Risk Screening Method Directed Staff to Explore Financial Assurances beyond 30 Years and for Non- Water Corrective Actions Composed of Contractor study and Staff Report – completed December 2007 Evaluated Financial Assurance Mechanisms Developed Financial Exposure Model Developed Simple Risk Screening Method Directed Staff to Explore Financial Assurances beyond 30 Years and for Non- Water Corrective Actions

Cost Estimate Regulations Summary (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 Update 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 Update Estimates to Reflect ”current costs on a unit basis (unit costs)”

Long-term Financial Assurances (Phase II) Proposed Revise Postclosure Maintenance Financial Assurance Level Annual Incremental Drawdown or First 15 Years After Closure Optional Step-down in 5X Increments for Good Performance to a Minimum of 5X Expand Use of Reasonably Foreseeable Corrective Action Assurances for Non- water Corrective Action Revise Postclosure Maintenance Financial Assurance Level Annual Incremental Drawdown or First 15 Years After Closure Optional Step-down in 5X Increments for Good Performance to a Minimum of 5X Expand Use of Reasonably Foreseeable Corrective Action Assurances for Non- water Corrective Action

Long-term Financial Assurances (Phase II) Proposed Add 5-year Update for Plans Closed Between 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 Add 5-year Update for Plans Closed Between 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 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) Postclosure Maintenance and Base Corrective Action over 100 years System Cost = $7,390M Divestiture = $542M Default = $363M Postclosure Maintenance and Base Corrective Action over 100 years System Cost = $7,390M Divestiture = $542M Default = $363M

Options to Address Divestiture Regulatory (Agenda Item 3) Establish minimum postclosure assurance level of at least 15X Add Step-up to 15X Upon Transfer or Sale Possible waiver for buyer with proven track record Add 5X Step-up for lack of continued performance or enhanced monitoring Regulatory (Agenda Item 3) Establish minimum postclosure assurance level of at least 15X Add Step-up to 15X Upon Transfer or Sale Possible waiver for buyer with proven track record Add 5X Step-up for lack of continued performance or enhanced monitoring

Options to Address Divestiture Statutory (Agenda Item 4) Keep former owners/operators liable Make generators liable too Size pooled fund to cover Statutory (Agenda Item 4) Keep former owners/operators liable Make generators liable too Size pooled fund to cover

Options to Address Remaining Default Exposure Find as Acceptable Risk Raise Assurance Level to Minimize Exposure and Early Default Recommend Statutory Change to Establish Pooled Fund Sized to Cover Find as Acceptable Risk Raise Assurance Level to Minimize Exposure and Early Default Recommend Statutory Change to Establish Pooled Fund Sized to Cover

Corrective 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 Options Structure Combined Pooled Fund – both public and private Split Pooled Fund – separate public and private Structure Combined Pooled Fund – both public and private Split Pooled Fund – separate public and private

Pooled Fund Options Coverage Defaults Add Divestiture Add Major Maintenance and/or Extraordinary Corrective Action All System Costs Coverage Defaults Add Divestiture Add Major Maintenance and/or Extraordinary Corrective Action All System Costs

Questions?