By: Kristen Dickey
The waste management industry represents opportunity and growth as experienced and new investors continue to seek landfill acquisitions. While Americans recycle more each year, municipal landfills are continuing to see steady increases in demand. Growth in consumer goods per capita, in addition to extreme weather events, as well as less available land all contribute to the spotlight on landfills. This article provides a brief look at some of the key environmental due diligence considerations associated with landfill acquisitions.
Environmental Compliance: The Permit Lays the Foundation
Landfill operations are regulated by the “Cradle to Grave” environmental waste management laws, the Resource Conservation and Recovery Act (RCRA) under the Solid and Hazardous Waste Rules. Depending on the nature of the waste being accepted, different sections of the regulations will apply and the landfill’s operating permit will reflect the applicable parts of the RCRA. Typically, the state or local environmental regulatory agency will have jurisdiction over the implementation of regulatory requirements of a landfill. Through either permits or regulations, the owner/operator is held responsible for operating and maintaining the waste facility in accordance with the applicable laws. Typically, this includes active monitoring of the subsurface through soil, groundwater, and landfill gas monitoring. It is the permit that sets the tone for environmental requirements, and therein provides insight into potential future liabilities associated with a purchase or sale. Things to consider during a transaction:
- Was the landfill constructed as required? Landfill regulations include specific construction criteria such as liners, slopes, cover, and vegetation. These criteria should be closely reviewed because deficiencies can lead to significant capital expenditures and a permit modification or in some cases, unauthorized releases to the soil and groundwater onsite.
- When does the permit expire? Significant effort or capital investment may be required to renew the permit.
- What level of public engagement is required? You want to be prepared for public comment periods which can, in some instances, be significant and add time to the overall timeline of the permit renewal.
- Does the permit accurately reflect operations? If changes to the previous permit need made to reflect current or planned operations, this typically requires technical review and comment from regulatory agencies and often the public. This can add effort and time to the permit process.
- How much air space remains under the permit? Is the volume approaching the limits of the permit? Will the remaining volume meet your needs as a new owner?
- Is the current operation in compliance with all applicable aspects of its permit? Due diligence should include a thorough review of records such as waste characterization records, manifests, bills of lading, receipts, inspections, soil and groundwater monitoring results, landfill gas data, and publicly available reports of any outstanding compliance violations that have resulting in fines, penalties, or Consent Orders.
- How does the landfill manage loads that show up with unacceptable wastes? Often, permits specifically ban certain wastes from being accepted at a landfill. The list of banned wastes will vary based on the nature of the landfill; however, it is important to verify that banned wastes are not being staged or managed onsite as this is evidence of noncompliance that can be costly to address.
- What closure/post-closure requirements are in place? Financial assurance requirements will be specified in a permit, which should be reviewed and confirmed by any buyer.
Some landfill sites have documented releases to soil or groundwater that are required to be remediated under state or federal cleanup programs. Understanding the nature of the contamination, nature of the remediation program, the parties responsible for the contamination, the estimated life of the cleanup, and the status of the cleanup is critical before purchasing a contaminated site. Some key questions a buyer should consider related to a contaminated landfill site:
- What regulatory program is the site regulated under?
- What is the targeted cleanup? Could the targets change in the future?
- Will the buyer inherit the liabilities associated with the historical contamination?
If the site is in a Superfund program, new purchasers are protected from owner or operator liability under the Superfund law so long as the new purchaser meets the definition of a “bona fide prospective purchaser (BFPP). This BFPP provision states that a purchaser who acquires a Superfund site or other contaminated property after January 11, 2002, and who complies with statutory criteria, will not incur federal Superfund liability as an owner of the property. One example of a threshold criterion that must be satisfied prior to purchase is that a BFPP must perform “all appropriate inquiries” (AAI) concerning environmental conditions at the site. The final rule for AAI, which sets forth standards for satisfying the criterion, became effective on November 1, 2006. Commonly, this is accomplished through the completion of a Phase I environmental site assessment by a qualified environmental professional. Specific information on how to comply with the AAI regulation is available on EPA’s Web site at http://www.epa.gov/brownfields/regneg.htm. (See text box “Criteria for All Appropriate Inquiry”).
The landfill industry is embracing the use of drones to be even more transparent with potential buyers and the regulatory environment. Typically waste sites, particularly landfills, cover large areas of land – some of which due to topography and grading is difficult to navigate in a vehicle or by foot. Not to mention the often unpleasant odors. Drones can efficiently collect images and data in real time that can be used to generate to scale site boundary drawings, counter maps, to make better calculations of acreage, air space and other valuable data for a buyer. Owners use this data to generate 3D models and figures that can enhance data used in Phase I environmental site assessments, environmental permit renews, public meetings and other presentations. Many landfill owners use drone video footage as part of their sales packages. For a relatively small additional expense, a buyer can retain a licensed drone operator and in return gather high quality data that can be used in many aspects of the transaction and post-transaction.
Landfill transactions present unique and often intimidating challenges inherent to the disposal of waste. However, with a thoughtful and comprehensive review of the operations through a lens that considers pre- and post-acquisition factors, the due diligence period for a landfill buyer can identify and quantify in business terms any environmental liabilities. For more information on environmental-related considerations for landfill acquisitions, please contact Kristen Dickey or Bruce Martin.