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

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 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

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 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

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

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 In conducting the study the Board shall consult with representatives of: League of California Cities CSAC Private and public waste services Environmental organizations

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)” 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)”

Postclosure Closure Financial Demon- strations Corrective Action Long-Term PCM and CA Board 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

Long-Term PCM and CA Board 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

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

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

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

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 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

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

Landfill Profiles Number of Landfills (Total 282)

Landfill System Costs

Average Annual PCM Costs Landfill SizeNumberCapacity (cy) Cost Small54<0.5M$50,000 Medium M$155,000 Large44>30M$1,100,000

Annual PCM Costs for Large Landfills

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 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

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 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

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

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) 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)

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 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

Perspectives Pros: Most Protective Pay PCM from Interest Earned System Costs are Fully Assured 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

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

Perspectives Pros: Sufficient for Permanent and Temporary Defaults Interest available for PCM 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

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

Perspectives Pros: Potential Significant Reduction in Assured Costs Develop PCM data and trends Sufficient for Temporary Defaults Minimizes Litigation and Moral Hazard 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

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 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

Perspectives Pros: Significant Reduction in Assured Costs Consistent with pre- Subtitle D California Law Sufficient for Temporary Defaults Minimizes Litigation and Moral Hazard 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

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

Perspectives Status Quo Pros 30-year PCM FA is adequate Landfill and costs will stabilize by then Can Extend under Subtitle D Defaults are rare 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

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

Landfill PCM System Cost Over 100 Years

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

Reasonable PCM Contingency Survey 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.

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 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

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

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 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 LTFA Contractor’s StudyCA Survey CA TypeSmall LFMedium LFLarge LF Low Cost Medium Cost58109 High Cost2344 Total

California Landfill Compliance Survey - Summary Results Most Common Corrective Actions 1. Ground Water (47%) 2. LFG Migration (29%) 3. Slope Failure 4. Surface Water 5. Liner Issues 6. Waste Boundaries 7. Fires (Sub-sfc and sfc) 8. Erosion Most Common Corrective Actions 1. Ground Water (47%) 2. LFG Migration (29%) 3. Slope Failure 4. Surface Water 5. Liner Issues 6. Waste Boundaries 7. Fires (Sub-sfc and sfc) 8. Erosion

PCM or CA? 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 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

Corrective Action Conceptual Options Current System Piggyback on WQ CA FA Separate Non-water CA FA Current System Piggyback on WQ CA FA Separate Non-water CA FA

Perspectives Corrective Action 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 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

Corrective Action Possible 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 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

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

Closure/PCM Plan Updates Update/revision every 5 years At time of permit review/revision If no closure permit ( ) – review every 5 years maximum Update/revision every 5 years At time of permit review/revision If no closure permit ( ) – review every 5 years maximum

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

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 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

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 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

Possible Pooled Fund Design

Perspectives Pooled Fund Pros 30-year PCM FA adequate Reasonable approach Defaults are rare 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

Pursue No Further? Fund-as-you-Fill FA regulation Contractor Scoring Model Fund-as-you-Fill FA regulation Contractor Scoring Model

Direction Sought? “When you come to a fork in the road, take it.” Yogi Berra “When you come to a fork in the road, take it.” Yogi Berra

Questions?

Postclosure Closure Financial Demon- strations Corrective Action Staff Workshops Feb 2008 – Pooled Fund Model Scenarios Workshop Mar 2008 – Postclosure Maintenance Apr 2008 – Corrective Action Apr 2008 – Follow-up on PCM, CA and PF May 2008 – 2 Informal Rulemaking Workshops Feb 2008 – Pooled Fund Model Scenarios Workshop Mar 2008 – Postclosure Maintenance Apr 2008 – Corrective Action Apr 2008 – Follow-up on PCM, CA and PF May 2008 – 2 Informal Rulemaking Workshops

Next Steps Jun 18 – Informal Rulemaking Workshop Jul 17 – Informal Rulemaking Workshop Aug 11 – P&C Request for Rulemaking Direction Sep (TBD) – Pooled Fund Workshop Jun 18 – Informal Rulemaking Workshop Jul 17 – Informal Rulemaking Workshop Aug 11 – P&C Request for Rulemaking Direction Sep (TBD) – Pooled Fund Workshop