Waste Management 2006 Annual Report Download - page 62

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 available airspace, we also include the projected
costs for development, as well as the projected asset retirement cost 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
recoverability of the landfill asset, we may be required to recognize an asset impairment. If it is determined that the
likelihood of receiving an expansion permit has become remote, the capitalized costs related to the expansion effort
are expensed immediately.
Environmental Remediation Liabilities — We are subject to an array of laws and regulations relating to the
protection of the environment. Under current laws and regulations, we may have liabilities for environmental
damage caused by our operations, or for damage caused by conditions that existed before we acquired a site. These
liabilities include potentially responsible party (“PRP”) investigations, settlements, certain legal and consultant
fees, as well as costs directly associated with site investigation and clean up, such as materials and incremental
internal costs directly related to the remedy. We provide for expenses associated with environmental remediation
obligations when such amounts are probable and can be reasonably estimated. We routinely review and evaluate
sites that require remediation and determine our estimated cost for the likely remedy based on several estimates and
assumptions.
We estimate costs required to remediate sites where it is probable that a liability has been incurred based on
site-specific facts and circumstances. We routinely review and evaluate sites that require remediation, considering
whether we were an owner, operator, transporter, or generator at the site, the amount and type of waste hauled to the
site and the number of years we were associated with the site. Next, we review the same type of information with
respect to other named and unnamed PRPs. Estimates of the cost for the likely remedy are then either developed
using our internal resources or by third-party environmental engineers or other service providers. Internally
developed estimates are based on:
• Management’s judgment and experience in remediating our own and unrelated parties’ sites;
• Information available from regulatory agencies as to costs of remediation;
• The number, financial resources and relative degree of responsibility of other PRPs who may be liable for
remediation of a specific site; and
• The typical allocation of costs among PRPs.
Asset Impairments — Our long-lived assets, including landfills and landfill expansions, are carried on our
financial statements based on their cost less accumulated depreciation or amortization. However, accounting
standards require us to write down assets or groups of assets if they become impaired. If significant events or
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