Planning for Environmental Cleanup Costs in California

What to Know about California Environmental Cleanup Costs

We know the general plan for environmental case closure - investigation, cleanup, and monitoring - and we spoke about how long it takes to get there, but as they say “time is money.” Meaning that we should not only plan in terms of time but also in terms of money.

But the reality is most environmental projects aimed at case closure lurch from one task to another without much financial planning between the consultant and the party responsible for cleanup. In many cases, consultants have no idea what a client’s financial plans are, what their future financial goals are, or what their expectations are regarding the financial path to case closure. When it comes to the client’s budget or financial plans beyond the latest task, the elephant in the room just gets bigger and bigger.

So let’s recognize the elephant and start a conversation. Having a financial aspect to your environmental case closure plan is a positive way for you to take more control of the future. You plan for retirement and you plan for your children's future, why not plan for case closure? Let’s take a look at how financial planning helps you achieve successful case closure beginning with underground storage tank (UST) case closure.

Underground Storage Tank (UST) Case Cost Planning

We propose that the minimum time (best case scenario) for UST case closure is about 6 years. Over that period, the investigation would be completed in the first year and the cleanup would be completed by the second year. Monitoring would begin during the first year and require three additional years of post-cleanup monitoring to be completed. The final year would be spent completing verification monitoring and closure activities. Implementation of the six-year plan would require adherence to the following cost schedule.

Best Case Scenario Underground Storage Tank (UST) Case

Year

1

2

3

4

5

6

Total

Investigation

$60,000

$0

$0

$0

$0

$0

$60,000

Cleanup

$40,000

$20,000

$0

$0

$0

$0

$60,000

Monitoring

$12,000

$12,000

$12,000

$12,000

$12,000

$0

$60,000

Verification

$0

$0

$0

$0

$0

$20,000

$20,000

Closure

$0

$0

$0

$0

$0

$30,000

$30,000

Total

$112,000

$32,000

$12,000

$12,000

$12,000

$50,000

$230,000

 

It's clear a large capital expenditure is necessary for the first year, amounting to 49 percent of the total estimated cost of $230,000 for all six years.

Now, most folks don’t have the cash flow for an unexpected expense of $112,000 in a year, and most folks don’t want to incur that kind of debt. Of course, the UST Cleanup Fund will reimburse a claimant in about six months to a year after the funds are spent, but that can be difficult as well.

Maybe the best strategy is to smooth out the cost schedule while remaining in regulatory compliance. The question is which is more important: cash flow and debt, or the fastest case closure possible (with no guarantees). Consider the cost schedule below.

Underground Storage Tank (UST) Cost Schedule with Smoothing

Year

1

2

3

4

5

6

7

Total

Investigation

$30,000

$30,000

$0

$0

$0

$0

$0

$60,000

Cleanup

$0

$30,000

$30,000

$0

$0

$0

$0

$60,000

Monitoring

$12,000

$12,000

$12,000

$12,000

$12,000

$12,000

$0

$110,000

Verification

$0

$0

$0

$0

$0

$0

$20,000

$20,000

Closure

$0

$0

$0

$0

$0

$0

$30,000

$30,000

Total

$42,000

$72,000

$42,000

$12,000

$12,000

$12,000

$50,000

$242,000

 

For this schedule, the highest cost is incurred in the second year at $72,000, which smooths out the peak cost of the original schedule by $40,000. However, this modest adjustment added one year and $12,000 to the closure. The extra year comes from extending cleanup and completing the three-year post-monitoring requirement. The question remains: is smoothing cash flow worth adding a year and $12,000 to closure? Similar adjustments could tailor the cost schedule in a number of ways that may benefit you.

Solvent Case Cost Planning

IMG 0888Investigation, cleanup, and monitoring of solvent cases are typically more costly and take longer because of the nature of solvents like PCE, and the lack of regulatory policy that standardizes requirements - including closure requirements. It’s more costly because underground solvents are more mobile, solvents take longer to clean up and degrade, and safe levels for solvents, as defined by environmental screening levels (ESLs), are very low.

The cost schedules presented above still apply, as do possible adjustments that smooth out costs, but there is one major addition to the schedule. Solvent case closure is difficult to attain because the cleanup goals are linked to extremely low contaminant concentrations and case closure criteria are very stringent. As a result, cleanup may be followed by several years of mitigation to eliminate the potential for exposure to solvent vapors emanating from contamination left in place. In this situation, natural mechanisms such as biodegradation (e.g., bacteria-consuming contamination) are relied upon to bring contamination levels down further. Monitoring would also be done during mitigation to assess progress. The best-case cost schedule for a solvent site might look like this:

Best Case Scenario Solvent Case

Year

1

2

3

4

5

6

7

8

9

Total

Investigation

$80,000

$0

$0

$0

$0

$0

$0

$0

$0

$80,000

Cleanup

$40,000

$20,000

$0

$0

$0

$0

$0

$0

$0

$60,000

Monitoring

$12,000

$12,000

$12,000

$12,000

$12,000

$12,000

$12,000

$12,000

$0

$96,000

Mitigation

$0

$0

$12,240

$12,240

$12,240

$12,240

$12,240

$12,240

$0

$73,440

Verification

$0

$0

$0

$0

$0

$0

$0

$0

$20,000

$20,000

Closure

$0

$0

$0

$0

$0

$0

$0

$0

$30,000

$30,000

Total

$132,000

$32,000

$24,240

$24,240

$24,240

$24,240

$24,240

$24,240

$50,000

$359,440

 

As with the UST case, the cost schedule can be adjusted to smooth out costs per year, but the mitigation task must continue to maintain protection until low-threat conditions are reached. Let’s smooth out investigation, cleanup, verification, and closure activities and see what that looks like. 

Solvent Cost Schedule with Smoothing

Year

1

2

3

4

5

6

7

8

9

10

11

Total

Investigation

$30,000

$30,000

$0

$20,000

$0

$0

$0

$0

$0

$0

$0

$80,000

Cleanup

$0

$20,000

$40,000

$0

$0

$0

$0

$0

$0

$0

$0

$60,000

Monitoring

$12,000

$12,000

$12,000

$12,000

$12,000

$12,000

$12,000

$12,000

$8,000

$0

$0

$100,000

Mitigation

$0

$0

$0

$12,240

$12,240

$12,240

$12,240

$12,240

$12,240

$0

$0

$73,440

Verification

$0

$0

$0

$0

$0

$0

$0

$0

$0

$20,000

$0

$20,000

Closure

$0

$0

$0

$0

$0

$0

$0

$0

$0

$0

$30,000

$30,000

Total

$42,000

$62,000

$52,000

$44,240

$24,240

$24,240

$24,240

$24,240

$20,240

$20,000

$30,000

$363,440

 

Smoothing added two years of mitigation and soil gas monitoring to the closure process and added $4,000 to the estimate. As before, the question is whether smoothing cash flow is worth adding two years and $4,000 to closure.

As the strategy comparisons show, there are several ways to case closure. The takeaway is that strategic financial planning could tailor your cash flow and debt load to your specific needs while staying in regulatory compliance.

Close

We outlined some cost strategies for the closure of UST and solvent cases and looked at how cost schedules could be planned in a way that may benefit you. We have over 30 years of experience planning and bringing environmental cases to closure. Click the link below to schedule a free consultation to see what we can do for you.