John Lynch, P.E. Palisade Software Miami Users Conference October 25, 2007 www.johnwlynch.com • • • • Drivers 15 minutes – Regulatory Reporting – Financial Planning – Liability Management Techniques & Practices 15 minutes – Precision & Accuracy – Expert Panels – Resources Case Studies 15 Minutes – California Munitions Plant – New Jersey River Sediments PRP – Manufactured Gas Plants 15 Site Portfolio Discussion – Q&A 15 Minutes Need to quantify environmental liability under uncertain conditions “Not understanding the problem is not an excuse for not having an answer” New accounting rule ▪ FIN 47 … Financial Accounting Board Interpretation Notice ▪ Asset Retirement Obligation Financial Disclosure of Environmental Liabilities Old …..Potential loss must be “probable” and can be “reasonably estimated” New …. Use probabilistic tools FASB Interpretation No.47 Accounting for Conditional Retirement Obligations The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Estimates for accruing reserves Tax and cash flow issues Uncertainties ▪ Need, scope, timing ▪ Regulatory Dissolution of entities ▪ Trusts, corporations Transfer Liability Obligation to Third Party Need legal entity Adequate funding ▪ Reliable and credible estimate ▪ Secure mechanism ▪ Insurance ▪ Trust Reliable Remediation Contractor Uncertainties Site …. How much, where, what ▪ Soils, groundwater, sediment ▪ Site characterization … risk vs. remedy ▪ Poor use of site characterization data Contaminants ▪ Location, concentration, remedy impact ▪ Regulatory status Technologies … what to do? ▪ Will it work ▪ How much will it cost Regulatory Federal (EPA), States (DEP, DEQ, etc.), Tribes, Fish & Wildlife, Third Parties Superfund … Record of decision (RoD) ▪ ARAR Applicable or Relevant and appropriate requirements? What are they? Classification of Waste ▪ RCRA, Listed wastes Contaminated Media ▪ Land ban on disposal Cost Estimating Tools Lots of detail Require an engineering design Not available for most projects Unit cost $/acre of cap $/gallon of stripping Federal Remediation Technologies Roundtable http://www.frtr.gov/ Means Estimating Guide Lack of historical cost data Inconsistency of remedy selection Not much cost data ▪ Insurers have loss/claims data ▪ DoD, DoE have good technology cost data. Regulatory uncertainty is most difficult Evolving standards Expert panels vs. data Access to data and decision makers 3 to 5 senior technical & regulatory professionals Mid-level support Review documents Identify alternatives ▪ Low, medium, high Use decision tress ▪ Probabilities ▪ Costs Run model and “gut test” results California Munitions Plant Driver…. Insurer needed to establish reserve WWII Era Munitions Plant ▪ Large Site Multiple Environmental Issues ▪ Groundwater …. 3 public water supplies impacted Perchlorate … environmental – public health standard not established ▪ CA, EPA, DOD, USAF Perchlorate Drinking Water Standard CA and US EPA Uncertainties MCL – drinking water standard ▪ 3 – 30 µg/l (ppb) Extent of GW contamination ▪ Plume footprint Effectiveness and acceptability of treatment technology ▪ RO, biological River Sediment PRP Trust holding liability Estimate needed to dissolve trust and distribute assets to heirs ▪ Credible estimate for regulatory and other RPs. Billion dollar remedy Uncertainties ▪ Scope … sediment removal for navigation ▪ Technologies … ▪ Removed material management ▪ Capping material ▪ Dredging technology SE Utility’s Manufactured Gas Plants (MGPs) Utility has responsibility for environmental of 15 MGPs …. $75M to $150M. Regulatory Agencies allowed recovery of environmental costs for a limited time Utility wanted to use an finite risk environmental cost cap insurance policy to fund the cleanup Needed an estimate of the cleanup costs Uncertainties ▪ Scope .. Soil, Groundwater, Sediments ▪ Regulatory … Standards, Technology. DoD BRAC. Cost Cap Insurance EU Petroleum Company US legacy holding Las Vegas Developer Former munitions plant. Cost Cap Policy Texas refinery Settle suit over cleanup liability