Post-Closure Costs: Budgeting The Unknown

Now that most states have adopted Subtitle D regulations, the industry can finally expect to feel the impact of the much anticipated federal rules.

One of the more stringent requirements calls for closure actions, followed by post-closure care for 30 years. Since relatively little is known about closure and post-closure care costs, owners and operators must learn how to prepare a long-term budget for their landfill.

Today's landfill regulations are an outgrowth of past technical and financial liabilities. Without incoming waste, landfill owners and operators of closed sites were often hardpressed to implement closure and post-closure care or corrective actions.

But with Subtitle D, all owners and operators of municipal solid waste landfills are required to implement a financial assurance system. To do so, financial guarantees or reserves must be developed during the operating life of the landfill. These reserves must be able to sufficiently fund closure and postclosure care and corrective action in their entirety.

To asses closure costs, calculate the maximum exposed area of the landfill over its remaining operating life. Also calculate the costs of capping this area. Remember that the final cap must consist of separate erosion and infiltration layers. Alternative final cap systems are permitted if the hydraulic performance is equivalent to the specified federal approach and if it has received state approval.

The maximum exposed area and the capping costs serve as the basis for determining financial reserves for the remaining landfill closure actions.

Post-closure care requires installing a final cover; continuing to operate the leachate management system; maintaining surface water management systems; installing, monitoring and, if necessary, repairing a comprehensive landfill gas management system (over 30 years, 120 separate rounds must be conducted); and conducting a groundwater monitoring program every six months.

If postclosure care has already been implemented, then the set dollar amount should equal the time remaining within the post-closure term.

A significant deterioration of the groundwater quality, for example, may warrant financial assurance to fund the corrective action over its remaining expected life.

For most states, financial assurance must be in place by April 9, 1995. Some states, however, may exceed the federally mandated date. It's important to contact the proper state agency to determine specific state schedules; in some states, an accelerated program has been established.

Financial assurance mechanisms include:

* Trust funds;

* Surety bonds;

* Letters of credit;

* Insurance;

* Corporate financial tests;

* Local government financial tests;

* Corporate guarantees;

* Local government guarantees;

* State-approved mechanisms;

* State assumption of responsibility; and

* Multiple mechanisms.

As with any competitively bid commodity, the level of competition for closure and post-closure activities has considerably increased in recent years. As a result, each activity's unit costs have decreased considerably.

Unit Costs For typical closure unit costs, remember that the cost for certain materials may be highly site-specific. Since a site is the typical source of clay and other materials, the availability of materials on or near the site will have a significant impact on the ultimate cost.

The site's size obviously affects costs, with smaller applications yielding commensurably higher unit costs.

Some of the costs for post-closure care also have decreased in recent years (see table on page 30). Some costs are highly site-specific and depend on the site's prevailing circumstances. For example, the total cost of leachate management may include on-site pre-treatment, on-site full treatment, transportation, sampling and analysis or disposal in a municipal wastewater treatment plant. Costs may vary depending upon whether pretreatment, sampling and analysis are required, the distance of transport and the treatment plant fees.

The final cover, cap maintenance and gas management are the most significant costs associated with post-closure care. The final cover costs amount to 1 to 3 percent of capital costs per year. Under these circumstances, complete replacement of the landfill cap can be anticipated over the 30-year post-closure period.

Gas management systems are more subject to the vagaries of site settlement and the fees are 10 percent of capital cost. Under these circumstances, expect to completely replace the gas management system every 10 years.

Finally, remember the unit costs shown should be compared against individual markets before preparing final cost estimates.

Case Study: Using A Model One way to determine if economies of scale exist for different landfill sizes is to develop cost models to help estimate the total costs of closure and post-closure.

General models were developed assuming relatively uniform site development to accommodate increasing landfill capacities. The following waste receipt rates were determined: 250 tons per day (tpd), 750 tpd, 1,000 tpd, 1,500 tpd and 3,000 tpd. The final cover assumed installing a Subtitle D single composite bottom liner including 2 feet of clay at 10-7 cm/sec hydraulic conductivity, topped off by a 40-mil VLDPE liner.

Placed on top of the cover were 30 inches of drainage and buffer soils, topped off with 6 inches of vegetative soil. To promote a hardy grass cover, the final grade was seeded. A 36-inch deep cover was placed above the clay to protect the clay liner from frost.

Ten percent contingency was assumed for the more speculative nature of post-closure care. Other financial considerations included inflation at 3 percent and a 7 percent discount rate. While some states may allow inflation or discount rates, they do not apply for Subtitle D regulations. Instead, costs should be calculated in "current dollars" with an opportunity for annual adjustment to reflect inflationary and other impacts. In this model, for example, the 3 percent inflation and 7 percent discount provides reserves which are less than those required by Subtitle D. Thus, more money under current reserves may be needed to fund activities for 30 years.

To determine the best financial approach for individual sites, check state requirements.

Closure estimates were developed for five model sites. Individual line items and categories were included for the following closure items: final cover and cap; gas, stormwater and leachate management; gas and groundwater monitoring; security and fencing; demolition; regrading; soil stockpile and inventory; signs; engineering plans, designs and permits, construction and QC/QA; insurance; taxes; fees and permits; bonding; interest; and any contingencies.

Similar line-item cost estimates were prepared for each year during the 30-year post-closure period. Cost items or categories shown on the cost estimates include: final cover and cap; gas, stormwater and leachate management; gas and groundwater monitoring; engineering plans, designs and permits; inspection; certifications and notifications; insurance; taxes; fees and permits; bonding; interest; and contingency.

The Results According to the example, waste receipt ranged from 250 tpd to 3,000 tpd. The size of sites ranged from 23 acres to 127 acres and air space capacity ranged from 1 million tons to 17 million tons of in-place refuse. The site life for all models was 20 years.

The total closure costs were calculated in current dollars and no financial adjustments such as interest, inflation or discount rates were applied. Closure costs ranged from $2 million for the 250 tpd site to $12 million for the 3,000 tpd site.

Average annual postclosure costs ranged from approximately $0.5 million to $1 million for the various landfill sizes. Post-closure costs are applied against the entire 30-year post-closure term. Appropriate inflation and discount rates can then be applied and a net present value can be calculated. The net present value reflects the sum of closure (in current dollars) and post-closure (ad-justed for future inflation, interest and discount rate) totaled together. The net present value in today's dollars can range from $11 million for the smallest site to $28 million for the largest site.

With model ranges from a low waste receipt rate of 250 tpd to 3,000 tpd, net present value ranges from approximately $500,000 an acre for the smallest site down to $200,000 an acre for the largest site. On a per-ton basis, net present value ranges from $8 per ton to $1 per ton.

While considerable economies of scale can be seen in moving from the smallest to the largest site, the impact on landfill tip fees (at $1 per ton) at the largest site for closure and post-closure activities is small. At $8 per ton, there is a more significant impact on the smallest site, which will require raising tipping fees.

Although there have been few ex-periences from which to model closure costs, designing and constructing several hundred advanced landfill caps has already given engineers a database to calculate cost estimates.

Post-closure care estimates are less accurate because advanced Subtitle D composite caps have been in place for approximately five years. It can only be speculated what is required to maintain landfill cap and gas management systems for more than 30 years.

While today's landfill owners and operators scramble to understand, prepare and execute comprehensive closure and post-closure plans, they are breaking ground for future landfill managers.