1. CONVERSION TECHNOLOGIES MARKET IMPACT ASSESSMENT CIWMB Board Meeting September 22, 2004 Susan V. Collins Hilton Farnkopf & Hobson, LLC

2. STUDY OBJECTIVES: Economic and Financial 1.Effects on recycling and composting industries due to increases or decreases in feedstock supply 2.If a tonnage effect, estimate economic gains or losses 3.If a price effect, estimate economic gains or losses

3. STUDY OBJECTIVES: Institutional 1.Effects on hauler contractual relationships 2.Effects on municipal contractual relationships 3.Effects on regional recycling & composting infrastructure 4.Effects of put-or-pay contracts on recycling & composting businesses

4. OVERALL APPROACH Develop key modeling assumptions A financial model was developed to perform calculations Develop baseline projections for recycling and composting Estimate impacts of CT on recycling and composting

5. DATA GATHERING: Quantities and Prices Waste composition (CIWMB Database) Quantities of paper, plastics and organics recycled (in-state and exports) Pricing of recyclables, organics and landfill fees New diversion program plans Jobs and revenues per ton for targeted industries

6. DATA GATHERING: CT Feedstock Facility Proponent Requirements (surveys & interviews) Jurisdictional Requirements (interviews, document review) Composition of Waste Stream Pricing (surveys, interviews, contract review)

7. DATA GATHERING: Institutional Arrangements Municipal contracts with haulers Haulers’ contracts with facilities Recycling facility contracts MRF and landfill throughput and capacity

8. MARKET FINDINGS IN A NUTSHELL Recycling: positive impact Composting/mulching: neutral impact Landfills: negative impact Details, reasons and other possibilities to follow….

9. GENERAL ASSUMPTIONS: Assumed Annual Capacities (tons per year, each region) 20032010 Acid Hydrolysis493, 500822,500 Gasification658,000987,000 Catalytic Cracking16,450 TOTAL1,167,9501,825,950

10. Assumed CT Capacities as a Percentage of Landfill Volumes 20032010 Greater Los Angeles Area 7%11% San Francisco Bay Area 22%33%

11. NET INCREASE IN RECYCLING DUE TO CT SORTING Scenarios assumed in this study: –Net positive impact on recycling due to removal of glass, metal, and some plastics –No re-direction of materials away from current recycling and composting markets because of price differentials (CT is higher cost)

12. CT PRICING & HISTORY No operating facilities in US currently; two in development in 2004 (CA & NY) Development costs of $40 to 70 million Tipping fees of $25 to $65 per ton Specific feedstock requirements with put- or-pay provisions highly likely

13. WHY WOULDN’T PAPER, PLASTICS AND ORGANICS MOVE TO CT? Paper and plastics markets currently have positive prices; CT facilities expect a tipping fee CT prices are competitive with landfill prices, which require no sorting or separate collection

14. PAPER BACKGROUND - EXPORTS California exports paper to 64 countries Four-year growth rates over 60% (1998 to 2002) ALL of the growth in paper exports went to China, and nearly all growth was mixed paper

15. GREEN WASTE TO CT: UNLIKELY Assuming no diversion credit is given for CT, it is unlikely that green waste will be re-directed to CT facilities –Jurisdictions will continue to require diversion credit (composting or ADC) –Contract prices are sometimes significantly lower than gate rates –Sufficient refuse tonnage exists at higher prices for CT to use refuse as feedstock

16. GREEN WASTE TO CT: UNLIKELY, 2 Organics may be re-directed to CT: –If separate collection is changed to co- collection with refuse for cost savings –If tipping fees are similar to landfills, but CT facility is closer (cost savings) –If CT offers reduced rates for organics

17. HOW CT COULD CHANGE INSTITUTIONAL ARRANGEMENTS Municipalities can change arrangements if political will and contract flexibility Contract haulers can use CT, but need authority to do so for some contracted hauling Open Competition and self-haul have most flexibility, but least volume, and least ability to guarantee volumes to a CT operator

18. MUNICIPALITIES LOOKING AT CT City and County of LA, Santa Barbara County, Coachella Valley Benefits: alternative energy source, reduced use of landfills, local alternative, increased diversion through sorting Want to achieve 50% first

19. JOB CREATION/DESTRUCTION UNDER CT SCENARIO Additional MRF sorting positions Additional recovered material CT facility jobs Landfill job losses

20. DIVERSION CREDIT ISSUES 1. No credit or up to 10% credit: no dismantling of recycling and green waste programs 2. Full diversion credit: cost savings from dismantling separate recycling and green waste collection

21. SENSITIVITIES No facilities operating in U.S.; some assumptions based on operating information from facility proponents or independent estimates Market conditions can change quickly; results are very sensitive to market condition assumptions Assumed current diversion activities would continue Number of jobs, revenues per 1,000 tons