The Coal Ash OpportunityThe Coal Ash Opportunity
January 7, 2015
On December 19, the U.S. Environmental Protection Agency (EPA) published its long-awaited rule for the handling of coal combustion residuals (CCR), more commonly known as coal ash. In this month’s issue, we review coal ash facts and figures and the potential opportunity for the solid waste industry, with the caveat that this is a very abbreviated, bird’s eye view of a very complex issue and its regulation.
The Gist of the Final Rule
On December 19, the EPA ruled that coal ash was to be regulated under Subtitle D of the Resource Conservation and Recovery Act (RCRA), as a non-hazardous material, rather than under Subtitle C (hazardous). The characterization of non-hazardous was largely expected, as declaring it hazardous would have strained or likely outstripped hazardous waste treatment and disposal capacity, as well as discouraged beneficial use (or recycling) of the residue material. Nevertheless, the ruling sets in motion longer-term changes in the way the material will be regarded and managed, opening up incremental service and disposal opportunities for the solid waste industry.
The ruling sets federal minimum criteria for groundwater monitoring and structural integrity of coal ash disposal facilities, both existing and new. The enforcement guidelines on surface impoundments, where “wet” coal ash is typically placed, are likely to curtail and/or close many of these type of disposal sites over time, as the rule requires such facilities to either retrofit to a liner or close within five years. Existing landfills, containing “dry” coal ash, will also be subject to groundwater monitoring, and any new facilities must comply with Subtitle D requirements, primarily liners. New sites will also be subject to location restrictions.
Based on the EPA’s press release, the agency’s primary focus will be on safeguarding and remediating (taking corrective action or cleaning up) leaking surface impoundments, which it considers the greatest risk to the environment, given their frequent proximity to waterways. In addition to groundwater and structural integrity testing and monitoring, the ruling requires public disclosure and transparency of the results and data, which will likely prove a powerful incentive for generators to either remediate and close surface impoundments or change disposal practices.
How Much Coal Ash Is Out There, and Where Is It?
Coal-fired power plants generate roughly 110 million tons of coal ash annually, as of 2012, down from a peak of 136 million tons in 2008. Over time, coal ash is forecast to gradually decline, as more utilities switch to natural gas, but it will remain one of the largest industrial waste streams. Of the total, currently roughly 40 percent is recycled, or beneficially used. Of the remaining 60 percent, roughly 40 percent is placed wet in surface impoundments and 60 percent dry in landfills, the majority (80 percent) of which are on-site.
Given the EPA focus on leaking and structurally high-risk surface impoundments, the amount of past generation of coal ash in storage is of perhaps even greater importance. It is estimated that across the country, there are more than 735 surface impoundments, containing somewhere between 3.1 billion and 3.8 billion tons of coal ash slurry.
Based on recent EPA studies, more than 20 percent of the surface impoundments are considered to be in “poor” condition, while it has identified 50 ponds as posing high risk of a dangerous spill. There are more than 310 landfills, but again, these are unlikely to be a high priority in the near future.
The majority of coal ash disposal sites are in the Midwest, the Southeast and Texas. Although competitive advantages will be very site specific, in general, Waste Management Inc., Republic Services Inc. and Advanced Disposal have an overall disposal footprint most similar to coal ash disposal locations.
Beneficial Use Expected to Rise, and a Possible Bonanza for Environmental Consulting Firms
Given the higher disposal costs inevitable under Subtitle D, beneficial use of coal ash is expected to rise as a percentage of the total, particularly as the uncertainty over the designation is now lifted. In Europe and Japan, recycling percentages of coal ash are reportedly in excess of 90 percent.
That said, not all coal ash residuals are appropriate for recycling. Fly ash, which makes up more than 50 percent of all coal ash, is the most commonly recycled. In addition, the remediation of surface impoundments is more likely to result in residue that must be disposed off-site, by third parties, rather than recycled. As an example, solid waste industry landfills benefitted from the cleanup of both the well-publicized Tennessee Valley Authority and Duke Energy spills.
Initially, the groundwater monitoring, structural integrity studies and reporting requirements should be a boon for environmental consulting firms.
Two, Maybe Three, Pronged Opportunity for Solid Waste Firms
At this early juncture, it is very hard to estimate exactly what proportion of coal ash may be coming off site (and when). That said, it is likely to be a materially incremental positive for the solid waste companies over time.
First, to put the annual generation of CCR’s into perspective, current generation equates to more than 40 percent of the total municipal solid waste (MSW) generated in the U.S. (roughly 250 million tons in 2012, of which 135 million tons was landfilled). Given what is likely to be the eventual curtailing of surface impoundment usage, more coal ash is likely to be disposed off-site. Even if just 10 percent to 20 percent ended up shifting off-site (or 10 million to 20 million tons over time), that would represent a 7 percent to 15 percent increment to total landfill tonnage in the U.S. now.
Obviously, the cumulative coal ash slurry stored in surface impoundments dwarfs those figures, and given the EPA’s previously described focus, we believe a large number of surface impoundments will eventually be remediated or upgraded over time, benefitting large remediation companies like Clean Harbors Inc., but also the solid waste players, as remediation is likely to involve at least some off-site disposal.
Additionally, as generators look at Subtitle D requirements on new facilities, they may decide to outsource the construction and management of those facilities to solid waste companies, even if they keep coal ash disposal management on site.
Assuming tip fees of $15-$40 per ton, several solid waste equity analysts have estimated the potential incremental annual benefit to solid waste companies to be anywhere from just under $200 million to $2 billion. The EPA estimates the total cost of the rule to be between $509 million and $735 million.
Timing Is Everything
The biggest uncertainty is timing. Although sites that are found to be contaminating the groundwater or have structural integrity issues are likely to be remediated or retrofitted sooner, the five-year deadline for unlined surface impoundments to be retrofitted for a liner or closed indicates that this final rule is not likely to be an immediate game changer, though again, it should be a material incremental positive over time.
While any new landfills will have to be Subtitle D compliant, those in place are generally status quo, though with the added precaution of groundwater monitoring. Calling remediation trends and timing is particularly dicey, though coal ash is likely to be a major driver of special waste streams in the future.
In the end, this may end up to be a replay of when Subtitle D was rolled out for solid waste. It probably will take a decade to unfold and take hold.