BioCycle September 2012, Vol. 53, No. 9, p. 50
One day in November 2001, the phone rang, beginning a journey that I never anticipated would extend over such a damnably long time. A woman I did not know introduced herself as Luan Railsback, saying she was a member of the Peoria Environmental Action Committee for the Earth, and, because of our technical expertise about landfills, asked me to fly down from Madison, Wisconsin to help oppose a plan that Peoria was pushing through the legislature to weaken the state’s recycling policies.
Illinois was one of the 22 states that, in the early 1990s, had passed laws prohibiting the landfilling of yard trimmings in order to save dump space, as 15 to 20 percent of the discards buried in landfills were grass, leaves and brush. Later, benefits from supporting a sustainable composting industry and avoiding greenhouse gas emissions were added to the list of reasons to not bury yard trimmings.
Today, as much as one-half of diversion in the U.S. stems from these simple laws and similar practices in other states, once one accounts for source reduction from grasscycling (leaving the grass clippings on the lawn instead of bagging them to be collected for the dump, which does not show up in EPA’s annual waste characterization report). Thus, yard trimmings bans are an incredibly successful and vital pillar holding up America’s recycling future.
By presenting factual responses to the misplaced contentions Peoria used to justify repealing the Illinois law, and by assembling a national coalition of recycling, composting, environmental and labor organizations, which later were led by the U.S. Composting Council, we beat back the attempt to repeal the bans in Illinois, and, later in 2003, in Iowa and then Indiana. Repeals did sneak through in Missouri and Nebraska in 2007, but that was because they happened before we heard the bills were up for debate. Until later events precipitated by the Great Recession in 2008, the yard trimmings bans were in reasonably sound shape because repeal proponents were so loosely organized and poorly supported.
Unfortunately that same year (2008), tectonic changes roiled the waste industry, which ricocheted against composting. In its aftermath, Waste Management (WM), which had previously only loomed like an éminence grise in the shadows, brought forth all of its considerable lobbying muscle to bear down like a blitzkrieg on state capitals. This happened first in Florida in 2010 and Georgia in 2011, where repeals passed, and this year in Michigan, where a repeal bill passed the House and is in the Senate. Make no mistake, we are taking a shellacking because statehouse politics are too often more concerned with campaign contributions and influence when they are brought to bear, as is now happening, than with facts.
To have some context for why composting is threatened now, we need to take a moment to understand the underlying forces that culminated in 2008. Let’s start with fundamentals in the trash industry, in order to intelligently develop effective strategies to defend composting’s place in a sustainable future.
Structurally, the waste industry was very competitive because it had low barriers to entry. There was a time when, with loans from friends and relatives, an individual could buy a trash truck and start soliciting customers, building up from the rolloff business, to driving routes collecting from stores and offices and finally bidding on residential franchises. Moreover, the economies of scale cap out at the metropolitan level, leaving no free market rationale to support national firms, which could, as BFI once boasted, “squish [independent haulers] like a bug.”
That was the situation at the end of the 1980s when WM and BFI’s attempts at collusive pricing crashed and burned in the Cumberland Farms antitrust case. In turn, the white shoe investment firms dropped the giants’ stocks like hot potatoes, which was when WM founder Dean Buntruck had his epiphany on the road to Houston. Buntrock presciently saw that regulations then incubating at EPA (the Subtitle D RCRA rules) would soon shutter the thousands of open dumps that littered the landscape and kept markets competitive. He could see that in the post-Subtitle D world, there would suddenly be huge regulatory barriers to entry into the landfill side of the business. When that happened, an oligopoly could lock down control over the shrinking number of large lined landfills, creating a new opportunity to gain back the elusive market power from independent haulers, who were eating the lunch of would be monopolists with low ball pricing or quality service, or both. And once in control, when the local hauler’s trucks topped out at day’s end, there would no longer be dozens of places to unload. Instead, independents could be price-squeezed at the oligopoly-controlled landfills — charged more than the majors billed their own fleets — until locals could no longer compete.
For the price squeeze to work, however, demand for dumps had to be sufficiently great for the vice to be tightened. Anything like recycling or composting, which diverted significant tonnages from landfills, threatened the model. And with landfills’ high fixed costs, slack demand would otherwise induce members of even the tightest cartel to pass along discounts to their volume customers. Morgan Stanley Dean Witter reported in 1998 and 1999: “… [R]ecycling has long been the enemy of the solid waste industry, stealing volumes otherwise headed for landfills … [But] recycling has reached a saturation point in the U.S. and should therefore not be nearly as large a threat to solid-waste companies going forward … [L]ess recycling should lead to accelerating disposal volumes, which in turn should lead to pricing leverage for landfill operators.”
While it’s unusual for industry to air its laundry in public, Morgan Stanley did accurately reveal WM’s dependence on lackluster diversion. By 1998, recycling’s expansion had taken a breather, while waste generation moved up. So by 2008, even though real tip fees had flat-lined over the prior decade, demand finally began to tighten for pricing power to cohere. That was like catnip to Waste Management after so many years of painstakingly buying up their competitors with little to show for it.
Lasso The Lost Loads
But then, like when someone yanks away the punch bowl at a party, Lehman Brothers went belly up, the economy tanked, and some wastesheds saw jaw-dropping 25 to 35 percent declines in discards. While the downturn in the construction rolloff business may recover, Credit Suisse and other analysts have concluded after pouring through the numbers that emerging “secular declines in landfill volumes are here to stay.” Examples are the shift away from printed paper to iPads, more light-weighted containers and a second wind for recycling as it moves onto a higher plateau taking on big ticket items such as mixed paper and food scraps, along with materials from apartment dwellers. Here’s why plummeting demand has forced WM’s CEO, David Steiner, to emerge from the shadows to lasso landfills’ lost loads.
Twenty-two years ago, Barron’s published a contrarian piece on then high-flying Waste Management, pointing to the phony accounting it had uncovered on the company’s books that vaporized its reported profits. By 1999, the reverberations from Abe Biloff’s exposé forced WM to take $4.77 billion in write downs and watch a dizzying drop in its stock that plunged 63 percent overnight from $47 to $17 a share. Now, just this August, Barron’s has roared back once again holding forth that Waste Management is “starting to smell a little ripe.” With “[r]evenue, earnings, margins, and cash flow … stagnant for years. … [and p]ricing power scant [in a] no growth business,” the company is propping up its stock with buybacks and increased dividends, even though it has had to boost payout ratios to find the cash. That helps explain why in late July, WM announced a restructuring plan aimed at lowering costs. The reorganization resulted in elimination of about 700 management positions. The current state of affairs is reminiscent of the fate of some past WM CEOs — Buntrock, his hand picked successor Phil Rooney, and the later takeover artists, John Drury and Rod Proto — all walked the plank.
Certainly, it’s easy for us sitting on the outside looking in to snort our indignation at WM for branding a yard trimmings ban as a “corporate welfare program” for composting, as the company’s Midwest V.P. for Public Affairs stated in his May 12, 2012 testimony to Michigan’s Senate and Technology Committee. WM is only grabbing at our yard trimmings in a bald attempt to make their landfill quotas and revive their Wall Street luster. But, the pressure Steiner is under to turn things around must be horrendous. It’s not personal. It’s just business.
Unfortunately, what makes business sense for Waste Management is as devastating for society as it is for composters. For if we were to return yard trimmings back to the landfill, massive volumes of the potent greenhouse gas, methane, will escape as the readily decomposable grass, leaves and brush rot in the ground long before functioning gas collection systems are even installed. That makes a mockery of WM’s claims for “beneficial” landfill-gas-to-energy.
When I began this journey with Luan’s call so long ago, I never contemplated that defending yard trimmings bans would consume the rest of my working life. Composters who want to survive, constructively utilizing the nutrient value in organic discards to restore fertility to depleted soils, will need to understand the unbelievable investor pressure on David Steiner. Then, we’ll need to respond to Waste Management like Mamma grizzlies if we are to protect our own.
Peter Anderson is President of RecycleWorlds Consulting, Executive Director of the Center for a Competitive Waste Industry, and Director of the multi-state Plastic Redesign Project. He has headed the National Recycling Coalition’s Landfill and its Policy Committees, been a member of the Environmental Protection Agency’s Landfill Gas Emission Peer Review Committee, the California Integrated Waste Management Board’s Financial Assurances Committee, the Wisconsin Department of Natural Resources Landfill Leachate Line Task Force and the Sierra Club’s Landfill Gas to Energy Task Force. Most recently, he completed an analysis for the Environmental Protection Agency Region 9 on new composting programs for food waste in comparison to landfilling. He is based in Madison, Wisconsin, and can be reached at email@example.com.