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California Integrated Waste Management Board July 22, 2008

Item #14 Discussion And Request For Additional Direction On Long-Term Postclosure Maintenance And Corrective Action Financial Assurances For Landfills. California Integrated Waste Management Board July 22, 2008. Phase II Group A.

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California Integrated Waste Management Board July 22, 2008

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  1. Item #14 Discussion And Request For Additional Direction On Long-Term Postclosure Maintenance And Corrective Action Financial Assurances For Landfills California Integrated Waste Management BoardJuly 22, 2008

  2. Phase II Group A Staff shared initial draft language with stakeholders, and will bring revised language to Board in Aug 2008 • Five-Year PCM Review (1988-2003 sites) • As-built costs • Closure certification report submittal • Insurance amendments • Pledge of Revenue form

  3. Phase II Group B Staff shared initial draft language with stakeholders, and will bring revised language to Board in Aug 2008 • Reasonable PCM Contingency • Grandfather Closed Sites • Non-water Corrective Action FA Piggybacking on Water Board • Cost Estimating Dialogue • No anticipated reductions in PCM costs

  4. Group B:PCM Reasonable Contingency • Staff Proposing Language Requiring a 10% Contingency on All PCM Costs • Need Depends on LTFA Option Chosen • Grandfather Closed Sites

  5. Group B: Non-Water Quality Corrective Action FA Staff Proposal Addresses Stakeholders’ Concerns: • Simplify – No CA Plan - Use Water Quality Cost Estimate • Establish Schedule for Repayment When Used • Consider Ability to Repay Before Release of Funds • More Guidance Helpful on Current Regulations

  6. Group B:Cost Estimating Dialogue Staff Proposal Addresses Stakeholders’ Concerns: • Costing for Landfill Gas Control Systems • Operating vs. Closing Costs

  7. Phase II Group C Explore Further with AB 2296 Consulting Group and bring back to Board in July 2008 for further direction • Consider additional proposals • How to extend PCM beyond 30 years • Individual FA and/or Pooled Fund • How much $$$

  8. ExtendingFinancialAssurance • How much FA is enough? • How much risk should be avoided? • What risks can and should be managed? • What are the system costs associated with avoidable and non-avoidable risk?

  9. How Much Risk Can be Avoided? • Long Term Landfill Postclosure Maintenance Costs • Landfill Owner Defaults • Landfill Owner Divestitures • Future Changes to Landfill Design • Future Changes to Operation of Existing/Closed Landfills

  10. Long Term Landfill PCM Costs • 15 Years of California Experience Shows No PCM Cost Reductions • Industry Study Does Not Have Empirical Data Showing Costs Declining • Other State Data Inconclusive • Modeling Shows That Annual 0.5% Cost Reduction Achieves Equilibrium and Reduces System Costs by 20%

  11. Potential Landfill Operator Default Types • Standard Default – Operator and Financial Institution, Except Means Test • Single Privates (29) – Most (22) Permanently Default • 14 closed • 6 operating • 2 permitted • 7 corporate or publicly assured • Rural Publics – Temporary Defaults (64) • Divestiture – Sell After 30 years PCM, All Privates (a Few Publics), Start-up Business Permanent Default Rate

  12. System Costs Associated With Risk • A Certain Level of Defaults Will Occur Regardless of the Amount of Individual Financial Assurance • Imposition of a 100-year scenario will likely precipitate an increase in early defaults of Single Private operators • Divestiture Leading to Default Can Be Controlled: • Buyer Financial Means • Buyer Financial Assurance • All Owners Retain Responsibility

  13. Risks Converted to System Costs

  14. Managing Longterm PCM Risk of Landfill System $ in Millions over 100 years

  15. Option 1 – Individual FA; No Pooled Fund • Step-down/Draw-down Rolling 15 • Exposure to State=$96-170M over 100 Years • Minimizes Divestiture Defaults • 10% PCM Contingency if Draw-down

  16. Option 2 – Individual FA Combined With Pooled Fund • Step-down/Draw-down Rolling 15 • Pooled Fund as Backstop for Defaults • Exposure to State Covered by Fund=$96-170M over 100 years • Standard Defaults • Single Privates • Rural Publics • Minimizes Divestiture Defaults • No PCM Contingency

  17. Option 3 – Status Quo With Pooled Fund • Exposure to State Covered by Fund=$896M over 100 years • Private = 90% • Public = 10% • Addresses Defaults • Standard Defaults • Single Privates • Rural Publics • Divestiture Defaults • No PCM Contingency

  18. Option 4 – Pooled Fund with Controlled Divestiture • Site History Assessed • Financial Test or Appropriate FA • Exposure to State Covered by Fund=From $170M to $896M over 100 years • Addresses Defaults • Standard Defaults • Single Privates • Rural Publics • No PCM Contingency

  19. Next Steps • Jul 17 – Informal Rulemaking Workshop • Jul 22 – Board Update and Additional Direction • Aug 11 – P&C Request for Rulemaking Direction

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