California Integrated Waste Management Board Strategic Policy Committee June 10, 2008

1. Item #15 (Committee Item G): Discussion And Request For Additional Direction On Long-Term Postclosure Maintenance And Corrective Action Financial Assurances For Landfills California Integrated Waste Management BoardStrategic Policy CommitteeJune 10, 2008

2. 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

3. AB 2296 Requirements • 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

4. AB 2296 Requirements • The Board, on or before July 1, 2009, shall adopt regulations and develop recommendations for needed legislation to implement the findings of the study

5. AB 2296 Requirements • In conducting the study the Board shall consult with representatives of: • League of California Cities • CSAC • Private and public waste services • Environmental organizations

6. 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)”

7. Long-Term PCM and CABoard 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 Closure Postclosure Corrective Action Financial Demon-strations

8. Long-Term PCM and CABoard Direction - Dec 2007 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

9. Long-Term PCM and CABoard Direction - Dec 2007 Continue to Develop – May require additional statutory authority Pooled Fund Working Model Use of Risk Scoring Model

10. Long-Term PCM and CABoard Direction - Dec 2007 Pursue No Further Annuities and GICs for Long-Term FA Demonstrations Umbrella Insurance PCM Period to Mirror Subtitle D

11. Consider 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

12. Phase II Regulations Timeline • Aug 2008 – Seek Rulemaking Direction • Nov 2008 – 45-Day Notice • Jan 2009 – Public Hearing • Feb-May 2009 – 15-Day Notice(s) • Apr-Jun 2009 – Consider Adoption • Jul 1, 2009 – AB 2296 Deadline for Adoption

13. Critical Juncture • Landfill System and Costs • Include in Phase II Rulemaking? • Postclosure Maintenance • Corrective Action • Other • Continue to Develop? • Pursue No Further?

14. Landfill ProfilesNumber of Landfills (Total 282)

15. Landfill System Costs

16. Average Annual PCM Costs

17. Annual PCM Costs for Large Landfills

18. Postclosure Maintenance (PCM) Direction Sought Include in Phase II Regulations • Should 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

19. 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

20. How Long Does PCM Last? • California Experience • Other States Poll • Interstate Technology & Regulatory Council (ITRC)/Environmental Research and Education Foundation (EREF) Approach

21. 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)

22. PCM FA Demonstration Options Perpetual • Plus 11 Multiplier & 20% contingency (or 49x Multiplier) to PCM Cost Estimates • Provides assurance that funds will continue to be available indefinitely for routine PCM

23. 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 Perspectives

24. PCM FA Demonstration Options Rolling 30 • Hold at 30X multiplier until the waste no longer poses a threat • Pays last 30 yrs of PCM

25. 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 Perspectives

26. Rolling 30-15x Multiplier w/Stepdown Rewards “Good Actors” Conduct 5-year PCM review Good maintenance record No CA during period Enhanced monitoring PCM FA Demonstration Options

27. Pros: Potential Significant Reduction in Assured Costs Develop PCM data and trends Sufficient for Temporary Defaults Minimizes Litigation and Moral Hazard Cons: Perceived as Roadblock not Incentive Questioning connection between PCM and CA Perspectives

28. PCM FA Demonstration Options Rolling 30-15X Multiplier w/ Drawdown • Conduct 5 year PCM review • Allow Regular Disbursements/ Reductions to Floor • Except with Cause • Pays first 15 and last 15 yrs of PCM

29. Pros: Significant Reduction in Assured Costs Consistent with pre-Subtitle D California Law Sufficient for Temporary Defaults Minimizes Litigation and Moral Hazard Cons: Some oppose any extension of FA Perspectives

30. PCM FA Demonstration Options Status Quo (30 years) • Conduct 5 year PCM review • Allow Regular Disbursements/ Reductions • Pays first 30 yrs of PCM

31. 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 PerspectivesStatus Quo

32. How Long Will FA $$ Last?SMIF Rate = 4.59%

33. Landfill PCM System CostOver 100 Years

34. PCM Cost Estimate – Reasonable Contingency • Capital Costs only • Similar Public Works Projects • From SWIG proposal • Other States Survey - 5-50% • Grandfather Closed Sites?

35. Reasonable PCM ContingencySurvey 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. *Of the 25 states responding, 60% require a reasonable contingency cost.

36. Corrective Action (CA) Direction Sought Include in Phase II Regulations • Is there a need for Non-water CA FA? • How to Differentiate CA from PCM? • CA FA Options • CA Plan

37. Corrective Action Definitions of Terms • Known CA Costs • Reasonably Foreseeable CA Costs • Extraordinary CA Costs • Extremely Rare Events CA Costs

38. 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

39. California Landfill Compliance Survey - Summary Results Most Common Corrective Actions • Ground Water (47%) • LFG Migration (29%) • Slope Failure • Surface Water • Liner Issues • Waste Boundaries • Fires (Sub-sfc and sfc) • Erosion

40. 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 PCM or CA?

41. Corrective ActionConceptual Options • Current System • Piggyback on WQ CA FA • Separate Non-water CA FA

42. 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 PerspectivesCorrective Action

43. Corrective ActionPossible Scope of a CA Plan • One combined plan • Release to water (current requirement) • Non-WQ release issues - Top types from Compliance Survey • Release 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 type • Separate plan – Non-WQ only

44. Follow-up to LTFA Study • Insurance • Treat insurance FA as true insurance • Existing insurance FA are in reality GICs • Pledge of Revenue • Standardize Form

45. Closure/PCM Plan Updates • Update/revision every 5 years • At time of permit review/revision • If no closure permit (1988-2003) – review every 5 years maximum

46. Closure Certification • As-built costs submitted with closure certification report • Deadline for submittal of report

47. Cost Estimating Dialogue • Operational vs. Closure Costs • Address premature closure • US EPA requirement • Greatest Extent of Closure Option A - Phased closure approach • Largest area open at any time Option B – Non-phased approach • Entire permitted LF less area certified closed

48. Continue to Develop? • A Pooled Fund in the FA mix • Fund Design Sized to Cover FA Option • Backstop • Secondary • Primary • PCM and/or CA • Criteria for Optimizing/Ending PCM • BMPs to minimize PCM costs

49. Possible Pooled Fund Design

50. 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 PerspectivesPooled Fund