Solid waste companies and local governments faced an array of challenges over the past year. Unlike many recent years, there were no significant disruptions such as the COVID-19 pandemic or China’s National Sword. This provided a measure of much-needed stability to the industry, during a year of significant economic and other changes.
By David Biderman
The past year saw the continuation of many trends for the solid waste industry. Big national companies got bigger. Private equity continues to fund many acquisitions. Federal legislation and regulations affecting the industry were proposed, but as of the date of publication, did not make it over the finish line. Technological advances continue to make the industry more efficient, and New York City made important progress as it moves towards implementing its Commercial Waste Zone (CWZ) program.
In 2023, many of the post-COVID-19 pandemic impacts began to go away, and solid waste companies and local governments could return to a more normalized business environment. Labor costs continue to increase above pre-2020 levels, but not at the near double-digit levels that wages rose in 2021 or 2022. The shortage of chips for trucks of all kinds, including waste and recycling trucks, declined as supply chain issues resolved. In much of the U.S., workers continued to return to the office, and residential volumes declined.
However, not all was rosy on the economic front. The rapid increase in interest rates meant that the era of cheap money, which arguably following the “Great Recession” of 2008-09, has come to an end. This makes it more expensive to borrow money to buy new trucks or equipment, or to fund acquisitions. Although the U.S. economy defied expectations and continues to grow in 2023, some economists are concerned that rising interest rates and elevated inflation will tip the country into a recession in 2024.
Mergers and Acquisitions
On the mergers and acquisition front, 2023 was an active year for the solid waste industry. The largest transaction of the year was Casella’s purchase of solid waste assets in Delaware, Maryland, and Pennsylvania from GFL. The deal, which was reportedly valued at $525 million, was Casella’s largest acquisition in more than a decade, and expands its footprint into new markets in the Mid-Atlantic region. GFL’s sale of these assets was the largest component of a broader divesture plan intended to reduce its debt leverage ratio. GFL also sold assets in Colorado and New Mexico to Republic and assets in Tennessee to WM during Spring 2023 as part of that plan.
Both large and small companies continued to be active purchasers over the past year. While the national companies continued to grow, some of the more active acquirers in 2023 involved smaller, private equity-backed players. CARDS Recycling, a company with operations in five southern plains states, announced 11 transactions in 2023. Coastal Waste & Recycling purchased several companies in Florida. Several solid waste brokers also made major acquisitions last year, with Recycle Track Systems (RTS) buying RecycleSmart Solutions in Canada and Keter Environmental Services merging with Waste Harmonics.
Legislation/Regulation
At the federal level, the solid waste industry is largely awaiting the outcome of several important congressional bills and regulatory proposals. EPA’s PFAS Strategic Roadmap, issued in 2021, has resulted in a series of EPA regulatory actions regarding PFAS. None is more important than whether any PFAS compounds will be considered “hazardous substances” under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), more commonly referred to as “Superfund.” In August 2022, EPA proposed regulating two of the most common PFAS compounds under the CERCLA statute. If this proposal is finalized, landfills that discharged leachate to wastewater treatment facilities or to onsite lagoons could be required to help pay for the cost of remediating Superfund sites contaminated by those PFAS compounds. Unlike most federal laws, Superfund liability is retroactive, joint, and several. This means that a liable party under Superfund could be forced to contribute to the cost of cleaning up a site even though the discharge of PFAS was not illegal at the time of that activity. And, a liable party (known as a “potentially responsible party” or “PRP” in Superfund nomenclature) could be liable for up to the entire cost of a site cleanup. Superfund cleanups cost millions of dollars, and some PRPs have paid more than $100 million to remediate heavily contaminated sites. The Solid Waste Association of North America (SWANA) and the National Waste & Recycling Association (NWRA) have been seeking to persuade EPA and Congress to exempt landfills from the proposed regulation. Other industries have sought similar exemptions, and in May 2023, a series of bills were introduced in Congress by Senator Cynthia Lummis (R-WY), providing exemptions from Superfund liability relating to PFAS. SWANA and NWRA are encouraging action on the landfill bill (S. 1429).
Several bills were introduced in Congress in the fall that have little chance of passing this year, but portions of them could be incorporated into other legislation in 2024 or beyond. For example, the Break Free From Plastic Act was reintroduced in October 2023. This ambitious bill seeks to reduce plastic waste through a variety of provisions, including:
• Establishing a national Extended Producer Responsibility (EPR) program requiring producers of packaging, containers, and food-service products to design, manage, and finance EPR programs
• Launching a nationwide beverage container refund program
• Banning certain single-use plastic products
• Banning single-use plastic carryout bags and placing a fee on other carryout bags
• Establishing minimum recycled content requirements for beverage containers, packaging, and food-service products
The bill would also impose a temporary pause on the permitting new and expanded plastic production facilities. In the current sharply divided, hyper-partisan Congress, it has no chance of passing. However, it is possible that bill advocates will seek to add portions of the bill to other legislation or seek to re-introduce it in a new Congress in 2025.
The “No Time to Waste Act” was introduced in the House and Senate in September 2023. Unlike the Break Free From Plastic Act, both Republicans and Democrats are sponsoring this bill, which focuses on reducing food waste and loss. The No Time to Waste Act would: (1) strengthen federal coordination on food waste issues, (2) establish an Office of Food Waste and Loss at the Department of Agriculture, (3) support public-private partnerships to reduce food waste, and (4) promote a national education and awareness campaign. The bill seeks to help achieve the federal goal of reducing food waste and loss by 50 percent by 2030. The EPA replaced its 1990s era Food Waste Hierarchy with a new “Wasted Food Scale” in October 2023, which for the first time, explicitly identifies anaerobic digestion as an equal to composting in terms of food waste recovery options. In addition, some of the federal grant money to support recycling programs being distributed by EPA will be going to help reduce food waste.
At the state level, in the solid waste and recycling industry, perhaps no issue is more important nationwide than EPR. Although no states enacted new EPR laws during 2023, several states that passed such laws in recent years took important steps implementing them, and other states approved other EPR measures. For example, the Colorado Department of Public Health and Environment (CDPHE) appointed Circular Action Alliance (CAA) to serve as the producer responsibility organization (PRO) in charge of implementing Colorado’s new statewide EPR system. CAA is a non-profit founded by 18 companies in the food, beverage, consumer goods, and retail industries in response to the passage of EPR laws in California, Colorado, Maine, and Oregon. CAA is moving forward with a needs assessment of Colorado recycling infrastructure that will support development of a produced-funded statewide recycling program. In Maine, the first state in the U.S. to enact an EPR law, the Department of Environmental Protection has issued draft regulations and is soliciting comments from the solid waste industry, producers, retailers, and other stakeholders. Oregon conducted stakeholder outreach in 2023 and intends to issue proposed EPR regulation for comment by the end of the year.
At the local level, New York City took significant strides over the past year implementing its Commercial Waste Zone (CWZ) system, enacted in 2019. The CWZ program, delayed by the COVID-19 pandemic, divides New York City into 20 districts and establishes a non-exclusive solid waste franchise system for collecting solid waste and recyclables from commercial customers. Each zone may have up to three franchisees, and there is also a citywide zone for larger containers. Approximately 35 companies submitted bids in response to the City’s RFP in late 2022. In June 2023, the Department of Sanitation (DSNY) notified some of the bidders that they had been preliminarily selected for zones. At a City Council hearing in October, DSNY advised that contracts with the bidders would be finalized soon. Many observers expect the Comptroller’s Office to ratify the agreements with the carters in early 2024. However, many implementation questions remain. It is unclear when the actual transition to the CWZ system will take place, whether DSNY will implement a “pilot zone” for CWZ in late 2024, as DSNY Commissioner Jessica Tisch testified earlier this year, and whether the transition will avoid some of the problems associated with Los Angeles’ transition to a solid waste franchise system in 2017-18, when prices increased substantially for many customers and some waste was not collected for days and weeks at a time.
Innovations in Technology
Technology in collection, processing, and disposal continues to make inroads into the solid waste industry. Most of these technologies provide better visibility for companies and local governments concerning productivity, safety, and operations, or are intended to reduce the industry’s carbon footprint. Examples include x-ray systems at transfer stations and recycling facilities that allow operators to identify dangerous materials in the stream; AI-powered robots that substitute for pickers at material recovery facilities; and improved methane detection systems that allow landfill owners and regulatory agencies to better monitor emissions. Solid waste collection vehicles powered by electricity (EVs) continue to be rolled out in communities throughout the U.S. from coast to coast, with more deliveries anticipated in 2024.
Continued Growth and Success
Solid waste companies and local governments faced an array of challenges over the past year. Unlike many recent years, there were no significant disruptions such as the COVID-19 pandemic or China’s National Sword. This provided a measure of much-needed stability to the industry, during a year of significant economic and other changes. The industry is well-position for continued growth and success in 2024 and years to come. | WA
David Biderman is the President of Biderman Consulting, LLC. and the former Executive Director at the Solid Waste Association of North America (SWANA). He can be reached at (703) 967-2616 or e-mail [email protected].