Landfills One of the Issues

Landfills

One of the issues involved in solid waste disposal, as it relates to landfills, is the fact that safe operating procedures are required long after the landfill has closed. In fact, many of the negative environmental impacts of landfills are linked to closed landfills, rather than operating landfills. Unfortunately, there was not always a mechanism in place to ensure that landfill operators would be able to provide the type of after-care necessary to keep landfills safe for the public. The result was that, in the past, the taxpayers would have to pick up the tab for these closed landfills. At first glance, such a system may seem both equitable and just, given that the public uses landfills. However, landfills are frequently for-profit enterprises, which means that the public is charged, in some manner, for using their services. To require the public to pay for the service twice, and to allow the operator to profit from a landfill without providing adequate aftercare, is neither just, nor is it a sound economic principle. Therefore, the Environmental Protection Agency (EPA) now requires the operators of Municipal Solid Waste (MSW) landfills to demonstrate that they will have the ability to pay for closure, post-closure, and any necessary corrective activities. Federal and state facilities are exempt from this requirement, because of the assumption that they will have the funds to pay for those activities, and also because they are not for-profit enterprises.

Under 40 C.F.R. 258.74, there are several means by which a MSW operator may provide such financial assurance. First, the operator may establish a trust fund, into which he makes annual payments for a specified period of time, and the money is designated for closure, post-closure care, and/or corrective action. The operator can also obtain a surety bond from a surety company, which guarantees that the operator will pay the required costs. In the event that the operator fails to do so, the surety company then assumes responsibility for those costs. When the operator uses a surety company, the surety company makes payments into a standby trust fund, to be used if the operator fails to pay for the costs. Operators may also receive irrevocable standby letters of credit, from an issuing institution that has authority to issue such letters and is subject to federal or state regulation. Operators may also obtain insurance policies equal to the cost estimate for closure and/or post-closure expenses. However, insurance is not sufficient to demonstrate the ability to pay for corrective action, because an operator does not have to prove the ability to pay for corrective action until a problem has occurred, and insurance will not cover a pre-existing problem. Operators can also pass a corporate financial test, in which they demonstrate that they have sufficient assets to cover the costs. To do so, the operators must demonstrate a financial net worth greater than the sum of current cost estimates plus $10 million; they must have U.S. assets worth the current cost estimates; and they must satisfy one of the following three conditions: (1) a current rating for its senior unsubordinated debt of AAA, AA, a, or BBB as issued by Standard and Poor's, or Aaa, Aa, a or Baa as issued by Moodys; (2) a ratio of less than 1.5 comparing total liabilities to net worth; (3) a ratio of greater than.10 comparing the sum of net income plus depreciation, depletion, and amortization, minus $10 million, to total liabilities. (EPA). If the MSW operator is a local government it can prove financial assurance by passing a local government financial test. The bond requirement requires the same rating as corporations. The financial ratio alternative "requires the government not have any outstanding general obligation bonds or only have unrated general obligation bonds, has a ratio of cash plus marketable securities to total expenditures greater than or equal to 0.05, and has a ratio of annual debt service to total expenditures less than or equal to 0.20. In determining these ratios, the government must use Generally Accepted Accounting Principles (GAAP) for governments, and have its financial statements audited by an independent certified public accountant." (EPA). However, governments who are in default on general obligation bonds or that has any oustanding bonds below a certain rating are ineligible. Operators can also receive corporate guarantees from a guarantor, but that guarantor has to be either a parent corporation or principal shareholder of the operator. Furthermore, the guarantor has to meet the conditions of the corporate financial test. MSW operators may also be guaranteed by local governments, as long as those local governments meet the local government test. Individual states can also approve assurance mechanisms, if those states are authorized to implement the MSWLF criteria. Finally, states can assume legal responsibility for a MSWLF's after-care, whether by absolute assumption of that responsibility, or by merely assurring that the funds will be available.

There are many different means by which a MSW can provide financial assurance. In addition, there are several factors that go into determining what a MSW's estimated closing and after-care costs entail. These factors include what type of wastes are handled by the MSW. Some MSWs restrict their wastes to include only non-hazardous materials, even going so far as to limit introduction of non-hazardous items like batteries. Other MSWs deal in hazardous and non-hazardous waste. Furthermore, how the waste is treated at the facility factors into closing costs. For example, many facilities provide for recycling of products, including items like yard waste. While the recycling programs may cost more present-day money, they are likely to reduce closing costs, because the dispose of waste at the time of processing. In addition, the location of a landfill can have a tremendous impact on closing costs. While landfills are not permitted along fault lines or in wetlands, each landfill's environment presents unique challenges for closing and after-care procedures.

Class Presentation

One of the major costs of operating a landfill is incurred after its closing and is composed of the closing, after-care, and corrective action costs.

Many of financial issues linked to solid waste disposal are related to improper landfill closing and after-care management, resulting in taxpayer liability for managing the disposal of hazardous and non-hazardous wastes.

Several factors contribute to the estimated costs of closing and after-care for a landfill, including: size of the landfill, the type of waste processed at the landfill, the type of processing (including recycling), and the physical location of the landfill.