Waste Management 2015 Annual Report Download - page 82

new regulations increase our operating costs in the future, and we are not able to recapture those costs from our
customers, such regulations could have a material adverse effect on our results of operations.
Our revenues, earnings and cash flows will fluctuate based on changes in commodity prices.
Our recycling operations process for sale certain recyclable materials, including fibers, aluminum and
plastics, which are subject to significant market price fluctuations. The majority of the recyclables that we
process for sale are paper fibers, including old corrugated cardboard and old newsprint. The fluctuations in the
market prices or demand for these commodities, particularly demand from Chinese paper mills, can affect our
operating income and cash flows negatively, such as we experienced in 2015, 2014 and 2013. As we have
increased the size of our recycling operations, we have also increased our exposure to commodity price
fluctuations. The decline in market prices in 2015, 2014 and 2013 for commodities resulted in year-over-year
decreases in revenue of $138 million, $53 million and $79 million, respectively. Additionally, under some
agreements, our recycling operations are required to pay rebates to suppliers. In some cases, if we experience
higher revenues based on increased market prices for commodities, the rebates we pay will also increase. In other
circumstances, the rebates may be subject to a floor, such that as market prices decrease, any expected profit
margins on materials subject to the rebate floor are reduced or eliminated. As we work to revise service
agreements to mitigate the impact of commodity price fluctuations, the potential increase in the cost for recycling
services may make it more difficult for us to win bids and may slow the growth of recycling overall until market
conditions improve.
Fluctuation in energy prices also affects our business, including recycling of plastics manufactured from
petroleum products. Significant variations in the price of methane gas, electricity and other energy-related
products that are marketed and sold by our landfill gas recovery operations can result in corresponding
significant impact to our revenue from yield from such operations. Additionally, we provide specialized disposal
services for oil and gas exploration and production operations through our Energy Services business. Demand for
these services may decrease if drilling activity slows due to changes in oil and gas prices, such as the pronounced
price decreases in late 2014 and 2015. Any of the commodity prices to which we are subject may fluctuate
substantially and without notice in the future.
Changes in regulations applicable to oil and gas drilling and production could adversely affect our Energy
Services business.
Energy Services business demand may also be adversely affected if drilling activity slows due to industry
conditions beyond our control, in addition to changes in oil and gas prices. Changes in laws or government
regulations regarding GHG emissions from oil and gas operations and/or hydraulic fracturing could increase our
customers’ costs of doing business and reduce oil and gas exploration and production by customers. There
remains heightened attention from the public, some states and the EPA to the alleged potential for hydraulic
fracturing to impact drinking water supplies. There is also heightened federal regulatory focus on emissions of
methane that occur during drilling and transportation of natural gas with regulations promulgated in 2012 and
2015 as well as state attention to protective disposal of drilling residuals. Increased regulation of oil and gas
exploration and production and new rules regarding the treatment and disposal of wastes associated with
exploration and production operations could increase our costs to provide oilfield services and reduce our
margins and revenue from such services.
Increasing customer preference for alternatives to landfill disposal could reduce our landfill volumes and
cause our revenues and operating results to decline.
Our customers are increasingly diverting waste to alternatives to landfill disposal, such as recycling and
composting, while also working to reduce the amount of waste they generate. In addition, many state and local
governments mandate diversion, recycling and waste reduction at the source and prohibit the disposal of certain
types of waste, such as yard waste, food waste, and electronics at landfills. Where such organic waste is not
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