Waste Management 2006 Annual Report Download - page 103

• There are no significant known technical, legal, community, business, or political restrictions or similar
issues that could impair the success of such expansion;
• Financial analysis has been completed, and the results demonstrate that the expansion has a positive
financial and operational impact; and
• Airspace and related costs, including additional closure and post-closure costs, have been estimated based
on conceptual design.
For unpermitted airspace to be initially included in our estimate of remaining permitted and expansion
airspace, the expansion effort must meet all of the criteria listed above. These criteria are evaluated by our field-
based engineers, accountants, managers and others to identify potential obstacles to obtaining the permits. Once the
unpermitted airspace is included, our policy provides that airspace may continue to be included in remaining
permitted and expansion airspace even if these criteria are no longer met, based on the facts and circumstances of a
specific landfill. In these circumstances, continued inclusion must be approved through a landfill-specific review
process that includes approval of the Chief Financial Officer and a review by the Audit Committee of the Board of
Directors on a quarterly basis. Of the 62 landfill sites with expansions at December 31, 2006, 14 landfills required
the Chief Financial Officer to approve the inclusion of the unpermitted airspace. Eight of these landfills required
approval by the Chief Financial Officer because of a lack of community or political support that could impede the
expansion process. The remaining six landfills required approval mainly due to local zoning restrictions or because
the permit application processes would not meet the one or five year requirements, generally due to state-specific
permitting procedures.
Once the remaining permitted and expansion airspace is determined, an airspace utilization factor (AUF) is
established to calculate the remaining permitted and expansion capacity in tons. The AUF is established using the
measured density obtained from previous annual surveys and then adjusted to account for settlement. The amount of
settlement that is forecasted will take into account several site-specific factors including current and projected mix
of waste type, initial and projected waste density, estimated number of years of life remaining, depth of underlying
waste, and anticipated access to moisture through precipitation or recirculation of landfill leachate. In addition, the
initial selection of the AUF is subject to a subsequent multi-level review by our engineering group. Our historical
experience generally indicates that the impact of settlement at a landfill is greater later in the life of the landfill when
the waste placed at the landfill approaches its highest point under the permit requirements.
When we include the expansion airspace in our calculations of remaining permitted and expansion airspace,
we also include the projected costs for development, as well as the projected asset retirement costs related to final
capping, and closure and post-closure of the expansion in the amortization basis of the landfill.
After determining the costs and remaining permitted and expansion capacity at each of our landfills, we
determine the per ton rates that will be expensed through landfill amortization. We look at factors such as the waste
stream, geography and rate of compaction, among others, to determine the number of tons necessary to fill the
remaining permitted and expansion airspace relating to these costs and activities. We then divide costs by the
corresponding number of tons, giving us the rate per ton to expense for each activity as waste is received and
deposited at the landfill. We calculate per ton amortization rates for each landfill for assets associated with each
final capping event, for assets related to closure and post-closure activities and for all other costs capitalized or to be
capitalized in the future. These rates per ton are updated annually, or more often, as significant facts change.
It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure and
post-closure activities, our airspace utilization or the success of our expansion efforts, could ultimately turn out to be
significantly different from our estimates and assumptions. To the extent that such estimates, or related assump-
tions, prove to be significantly different than actual results, lower profitability may be experienced due to higher
amortization rates, higher final capping, closure or post-closure rates, or higher expenses; or higher profitability
may result if the opposite occurs. Most significantly, if our belief that we will receive an expansion permit changes
adversely and it is determined that the expansion capacity should no longer be considered in calculating the
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WASTE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)