California Integrated Waste Management Board February 11, 2009 Long-Term Postclosure Maintenance And Corrective Action AB 2296 Consulting Group Workshop Long-Term Postclosure Maintenance And Corrective Action AB 2296 Consulting Group Workshop 1

AGENDA 10: :15Introductions and General Overview 10:15 – 12:00Dealing with Divestiture Regulatory Add 5X Step-up for lack of continued performance Add Step-up to 15X for new owner/operator with Board waiver Change to 15X minimum for PCM Statutory Keep former owners/operators liable Make generators liable 12:00– 1:00Lunch 1:00 – 2:30Continue Morning Discussions (if necessary) 2:30 – 3:15Status of Pooled Fund Discussions 3:15 – 3:30Wrap Up and Next Steps 10: :15Introductions and General Overview 10:15 – 12:00Dealing with Divestiture Regulatory Add 5X Step-up for lack of continued performance Add Step-up to 15X for new owner/operator with Board waiver Change to 15X minimum for PCM Statutory Keep former owners/operators liable Make generators liable 12:00– 1:00Lunch 1:00 – 2:30Continue Morning Discussions (if necessary) 2:30 – 3:15Status of Pooled Fund Discussions 3:15 – 3:30Wrap Up and Next Steps 2

Managing Long-Term PCM Risk of Landfill System Scenario Assured Risk Unassured Risk Std Rural Publics Sgl Pvt Defaults Divest -itures Total 43X$5,5900$11$26$263$ X4,562$1, X2,9722, X2,1532, $ Status Quo 1,8223, $ in Millions over 100 years 3

How Long Does PCM FA $$ Last? 49X = perpetual 43X = 100 years 30X = 46 years 15X = 18 years 5X = 5 years 49X = perpetual 43X = 100 years 30X = 46 years 15X = 18 years 5X = 5 years 4

What is Current Phase II Reg Proposal? PCM and CA FA required as long as waste poses a threat 30X Annual PCM at start of period Annual Drawdown For First 15 Years 5X Step-downs For Good Performance Every 5 Years Minimum 5X PCM Throughout Period Non-water CA Uses Existing Reasonably Foreseeable CA FA PCM and CA FA required as long as waste poses a threat 30X Annual PCM at start of period Annual Drawdown For First 15 Years 5X Step-downs For Good Performance Every 5 Years Minimum 5X PCM Throughout Period Non-water CA Uses Existing Reasonably Foreseeable CA FA 5

Managing Long-Term PCM Risk of Landfill System ScenarioAssuredRiskUnassuredRiskStdRuralPublicsSglPvtDefaultsDivest-ituresTotal 43X$5,5900$11$26$263$ X4,562$1, X2,9722, X2,1532, $ Status Quo 1,8223, $ in Millions over 100 years 6

What is Effective Multiplier (Likelihood to Step-down)? Refine Exposure between 5X-15X PCM under proposed Phase II regulations Modeled No Corrective Actions during 5-year period Estimated participation in Enhanced Monitoring program during 5-year period Effective Multiplier equals 8X Refine Exposure between 5X-15X PCM under proposed Phase II regulations Modeled No Corrective Actions during 5-year period Estimated participation in Enhanced Monitoring program during 5-year period Effective Multiplier equals 8X 7

Proposed Regulation Impact Defaults/Divestitures (at 8X) ScenarioDefaultsDivestituresTotals PCM$209$433$642 Corrective Action Total $ in Millions over 100 years 8

Divestiture Problem Primarily an Issue for Private Landfills Becomes a Problem when PCM FA <15X Affects Both PCM and CA Exposure Stakeholders Seem to Agree Not to Address Through Pooled Fund Primarily an Issue for Private Landfills Becomes a Problem when PCM FA <15X Affects Both PCM and CA Exposure Stakeholders Seem to Agree Not to Address Through Pooled Fund 9

Types of Divestiture Sell to Another Company for Development or Other Postclosure Land Use Sell/Donate to Public Entity Sell to Another Waste Management Company Change in Control Sell to Company in the Business of Divestiture Sell to Another Company for Development or Other Postclosure Land Use Sell/Donate to Public Entity Sell to Another Waste Management Company Change in Control Sell to Company in the Business of Divestiture 10

Divestiture – Regulatory What? Change to Minimum 15X Add 5X Step-up Provision for lack of continued performance Add Step-up to 15X for New Owners/Operators Waiver provision for proven track record When? During Phase II Rulemaking What? Change to Minimum 15X Add 5X Step-up Provision for lack of continued performance Add Step-up to 15X for New Owners/Operators Waiver provision for proven track record When? During Phase II Rulemaking 11

Change to Minimum 15X Pros: Straightforward Addresses Divestiture Lessens Default Exposure Not Dependent on a Pooled Fund Not Dependent on a Change to Liability Scheme ? Cons Ties up more Operator Resources from Other Uses 15X Not Stringent Enough Some Exposure Remains May Result in Earlier Defaults ? 12

Add 5X Step-up For Lack of Continued Performance Pros: Indirectly Partially Addresses Divestiture Incentivizes Continued Maintenance Minimizes Moral Hazard ? Cons: Limited Effect on Divestiture Some Exposure Remains Enforcement/Litigation Difficulties Penalize for CA Beyond Operator’s Control Timing, Step-up When Funds Are Needed Most ? 13

Add Step-up to 15X for New Owner/Operators with Waiver Pros: Reduces Divestiture Discourages Marginal/Unproven Operators Ensures New Owner/Operator has Adequate Financial Resources? Cons: Not Stringent Enough Some Exposure Remains Increase Price/Affect Sales Doesn’t Address Change in Control ? 14

Add 5X Step-up and Step-up to 15X for New Owner/Operators Pros: Previous Pros Approaches 15X in Addressing Divestiture ? Cons: Previous Cons Convoluted ? 15

Nominal Group Options to Address Divestiture Statutory Keep Former Site Owners and Operators liable (Water Board-like) Make Generators, Arrangers, Transporters also liable (DTSC-like) Statutory Keep Former Site Owners and Operators liable (Water Board-like) Make Generators, Arrangers, Transporters also liable (DTSC-like) 16

Keep Former Site Owners/ Operators Liable Pros: Reduces Divestiture by Solvent Companies Incentive for Increased Due Diligence by Seller Increases Sources of Revenue ? Cons: Doesn’t Address Bankruptcy Increases Litigation Perpetual Liability Local Gov’t is Ultimately Responsible for Protecting PHSE ? 17

Make Generators, Arrangers, Transporters Also Liable Pros: Greatly Expanded Potential Sources of Revenue ? Cons: Lengthy Litigation for Limited Effectiveness Generators Have No Control Over Operation No Manifests Available Timely Resources Doubtful ? 18

Nominal Group Options to Address Divestiture Ballot Name (optional) Representing Regulatory Rank Top Two Choices (mark 1 and 2) Statutory Rank Top Two Choices (mark 1 and 2) Name (optional) Representing Regulatory Rank Top Two Choices (mark 1 and 2) Statutory Rank Top Two Choices (mark 1 and 2) 19

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