Waste Management 2008 Annual Report Download - page 78
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Please find page 78 of the 2008 Waste Management annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Landfill and Environmental Remediation Liabilities — As we accept waste at our landfills, we incur signif-
icant asset retirement obligations, which include liabilities associated with landfill final capping, closure and post-
closure activities. These liabilities are accounted for in accordance with SFAS No. 143, Accounting for Asset
Retirement Obligations and its Interpretations, and are discussed in Note 3 of our Consolidated Financial
Statements. We also have liabilities for the remediation of properties that have incurred environmental damage,
which generally was caused by operations or for damage caused by conditions that existed before we acquired
operations or a site. We recognize environmental remediation liabilities when we determine that the liability is
probable and the estimated cost for the likely remedy can be reasonably estimated.
The following table reflects our landfill liabilities and our environmental remediation liabilities as of
December 31, 2008 and 2007, and summarizes significant changes in these amounts during 2008 (in millions):
Landfill
Environmental
Remediation
December 31, 2007 .......................................... $1,178 $284
Obligations incurred and capitalized ............................ 51 —
Obligations settled ......................................... (72) (38)
Interest accretion .......................................... 77 8
Revisions in cost estimates and interest rate assumptions(a) . . . ........ (13) 49
Acquisitions, divestitures and other adjustments ................... (3) (4)
December 31, 2008 .......................................... $1,218 $299
(a) The significant increase in our environmental remediation liabilities for revisions in cost estimates and interest
rate assumptions is largely related to the decline in the risk-free discount rate used to estimate the present value
of the obligations. The impact of this revision in estimate is discussed further below.
Landfill Costs and Expenses — As disclosed in the Operating Expenses section above, our landfill operating
costs include interest accretion on asset retirement obligations, interest accretion on and discount rate adjustments
to environmental remediation liabilities and recovery assets, leachate and methane collection and treatment, landfill
remediation costs, and other landfill site costs. The following table summarizes these costs for each of the three
years indicated (in millions):
2008 2007 2006
Years Ended
December 31,
Interest accretion on landfill liabilities ............................. $ 77 $ 74 $ 70
Interest accretion on and discount rate adjustments to environmental
remediation liabilities and recovery assets ........................ 41 18 3
Leachate and methane collection and treatment ...................... 69 58 59
Landfill remediation costs ...................................... 17 17 6
Other landfill site costs ........................................ 87 94 100
Total landfill operating costs .................................... $291 $261 $238
The increase in these costs in 2008 can largely be attributed to a significant decline in the risk-free discount rate
that we use to estimate the present value of our environmental remediation liabilities, which is based on the rate for
United States Treasury bonds with a term approximating the weighted-average period until settlement of the
underlying obligations. During the fourth quarter of 2008, we recorded a $33 million charge to “Operating”
expenses, offset in part by a $6 million reduction in “Minority interest” expense, to reduce the discount rate from
4.00% to 2.25%. We recorded an $8 million charge to “Operating” expenses during the fourth quarter of 2007 to
reduce the discount rate from 4.75% to 4.00% and a $6 million decrease in “Operating” expenses during the fourth
quarter of 2006 to increase the discount rate from 4.25% to 4.75%. Additionally, in 2008, our leachate collection
costs were higher in our Eastern Group and Midwest Group due to increased precipitation and operational changes
in these regions.
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