Waste Management 2006 Annual Report Download - page 42

Our Recycling Group purchases recyclable materials processed in our MRFs from various sources, including
third parties and other operating subsidiaries of WMI. The cost per ton of material purchased is based on market
prices and the cost to transport the finished goods to our customers. The price our Recycling Group pays for
recyclable materials is often referred to as a “rebate” and is based upon the price we receive for sales of finished
goods and local market conditions. As a result, higher commodity prices increase our revenues and increase the
rebates we pay to our suppliers.
Other. We provide on-site services, in which we outsource our employees to provide full service waste
management to customers at their plants and other facilities through our Upstream division. Our vertically
integrated waste management operations allow us to provide customers with full management of their waste,
including identifying recycling opportunities, minimizing their waste, determining the most efficient means
available for waste collection and transporting and disposing of their waste.
We also develop, operate and promote projects for the beneficial use of landfill gas through our Waste
Management Renewable Energy Program. Landfill gas is produced naturally as waste decomposes in a landfill. The
methane component of the landfill gas is a readily available, renewable energy source that can be gathered and used
beneficially as an alternative to fossil fuel. The United States Environmental Protection Agency (“EPA”) endorses
landfill gas as a renewable energy resource, in the same category as wind, solar and geothermal resources. We
actively pursue landfill gas beneficial use projects and at December 31, 2006 we were producing commercial
quantities of methane gas at 104 of our solid waste landfills. At 76 of these landfills, the processed gas is delivered to
electricity generators. The electricity is then sold to public utilities, municipal utilities or power cooperatives. At
23 landfills, the gas is delivered by pipeline to industrial customers as a direct substitute for fossil fuels in industrial
processes such as steam boilers, cement kilns and utility plants. At five landfills, the landfill gas is processed to
pipeline-quality natural gas and then sold to natural gas suppliers.
In addition, we rent and service portable restroom facilities to municipalities and commercial customers under
the name Port-O-Let», and provide street and parking lot sweeping services. From time to time, we are also
contracted to construct waste facilities on behalf of third parties.
Competition
The solid waste industry is very competitive. Competition comes from a number of publicly held solid waste
companies, private solid waste companies, large commercial and industrial companies handling their own waste
collection or disposal operations and public and private waste-to-energy companies. We also have competition from
municipalities and regional government authorities with respect to residential and commercial solid waste
collection and solid waste landfills. The municipalities and regional governmental authorities are often able to
offer lower direct charges to the customer for the same service by subsidizing the cost of the service through the use
of tax revenues and tax-exempt financing. Generally, however, municipalities do not provide significant com-
mercial and industrial collection or waste disposal.
We compete for disposal business on the basis of tipping fees, geographic location and quality of operations.
Our ability to obtain disposal business may be limited in areas where other companies own or operate their own
landfills, to which they will send their waste. We compete for collection accounts primarily on the basis of price and
quality of services. Operating costs, disposal costs and collection fees vary widely throughout the geographic areas
in which we operate. The prices that we charge are determined locally, and typically vary by the volume and weight,
type of waste collected, treatment requirements, risk of handling or disposal, frequency of collections, distance to
final disposal sites, the availability of airspace within the geographic region, labor costs and amount and type of
equipment furnished to the customer. We face intense competition based on quality of service and pricing. Under
certain customer service contracts, our ability to increase our prices or pass on cost increases to our customers may
be limited. From time to time, competitors may reduce the price of their services and accept lower margins in an
effort to expand or maintain market share or to successfully obtain competitively bid contracts.
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