The Southern California landfill business once turned garbage into gold. Now the industry has lost some of its luster.
The weak economy, increased regulation and recycling and the onset of landfill alternatives--such as hauling garbage out to the hinterlands--are working to trim once-fat profit margins for the capital-intensive business.
In Los Angeles County--where state and industry officials not long ago trumpeted the onset of a "dump crisis" amid a scarcity of landfill space--there is now concern of a landfill surplus in the not too distant future. That would drive down the "tipping" fees that landfills charge to take a ton of garbage.
With the possible exception of Ventura County, other Southern California counties also appear to have plenty of landfill space. In Orange County, where all three dumps are county- owned, dumping volume is down so much that landfill officials have suggested taking in trash from Los Angeles and other counties.
Make no mistake, privately owned landfills can still turn trash into profits--thanks in part to their fees. In Los Angeles County, the average tipping fee is $21.42 a ton, a state survey showed. Among private facilities, the fee is higher, with the Bradley Landfill and Recycling Center in Sun Valley, owned and operated by WMX Technologies Inc. (formerly Waste Management Inc.), charging $33.80 a ton. Some other dumps in outlying areas charge between $25 and $30 a ton.
Although major firms with Southland landfills generally don't break out their profits from waste operations alone, companies such as WMX, Browning-Ferris Industries Inc. and Laidlaw Inc. say they still make money from dumps--although their profit margins have been declining, analysts say.
Prospects of a landfill glut and increased costs from regulation is bad news for WMX and other owners and operators of Los Angeles County's five privately owned dumps, which take in more than half the county's 40,000 tons of trash a day.
Public and private dumps now must pay for high-tech liners as well as extensive recovery systems for the toxic methane gas given off by rotting garbage. They also must set aside trust funds to cover the cost of closing a landfill once it's full.
Federal laws also make dump owners pay for any cleanup that may be required for 30 years after the landfill closes.
"It doesn't work as well as it used to," said Tag Watson, a spokesman for Laidlaw Waste Management Inc., which operates the Chiquita Canyon Landfill in the Santa Clarita Valley. Profits from landfills have "diminished quite significantly" in the last five years, Watson said, because stringent environmental regulations add to the costs.
"Twenty years ago, you or I could just dig a hole in the ground and put garbage in it," Watson said. "But now it's become a real scientific industry."
"It's hard to raise your prices as fast as they make up the new laws," said Phil Arklin, who 23 years ago founded the family-run Palmdale Disposal Co. with his two brothers and an REO Speedwagon truck.
WMX--an industry giant that runs 133 landfills in the United States and Canada and has interests in every aspect of disposal--has spent $35 million over the last five years on new liners and gas recovery systems at its Bradley facility in Sun Valley. It purchased the site for $60 million in 1986.
Analysts see another long-term shift in the industry that will cut into profits: reduced volume because of recycling and reuse of materials.
"We think landfill volumes are going to be under pressure for a number of years," said Mari Bari, an analyst at New York-based Mabon Securities Corp.
Forty-three states, including California, have laws requiring cities to reduce the amount of trash going to landfills, Bari said. Many communities use incentives to encourage residents and businesses to recycle and reduce waste beyond saving soda cans and beer bottles, reducing landfill volumes by 25% to 30%.
In California, environmental regulations and heightened public distrust of landfills make trying to get permits to build a dump expensive, time-consuming and uncertain.
"This has always been a capital-intensive business, and the impact of regulation has been to make it even more so," said Douglas Augenthaler, an analyst at New York investment firm Oppenheimer & Co. "There's no guarantee you can get the permits, and very few people can take that kind of risk."
Earlier this month, Waste Management abandoned plans to build a 6,500-acre dump at the mouth of the Ojai Valley in Ventura County after spending eight years and $13 million trying to win a permit.
The death of that proposed landfill has left Ventura County officials scrambling for alternatives, as one of the county's three operating dumps nears capacity. Like other Southern California counties, Ventura is looking at railway hauling as a possible savior from building a landfill in an urban area.
Riverside County still has decades of landfill space remaining, while San Bernardino County is the site of several gargantuan rail proposals that could supply landfill space for Southern California for decades to come.
In San Diego County, whose five landfills are all publicly owned, there is a move to expand a dump in the fast-growing northern part of the county, and efforts are being made to site a new landfill to take in the area's 5,700 tons of trash a day. Among the options is a privately owned site on an American Indian reservation at the southeast end of the county.
In Orange County, the recession has taken its toll on trash intake, which has dipped to about 11,000 tons a day, down about a third from the 15,000 to 16,000 tons during the booming 1980s.
Volume is down so much that landfill officials have suggested taking in trash from other counties, including Los Angeles and San Diego, for a five-year period in order to meet costs. The proposal would require Orange County to revoke local ordinances banning the importation of trash.
Despite the difficulty in getting permits, some analysts and industry officials said, there may soon be a glut of dump space in Los Angeles County, particularly in the San Fernando Valley area.
The Sunshine Canyon landfill in Sylmar, owned by the country's second-largest solid-waste company, Browning-Ferris, has a permit to reopen, but its expansion is tied up in litigation. Just to the north, near Santa Clarita, an environmental impact report is due in the fall for BKK's proposed 190-million-ton landfill in Elsmere Canyon. Meanwhile, Laidlaw's Chiquita Canyon Landfill near Castaic has capacity left for up to 60 more years.
"I find it hard to argue that Chiquita plus Elsmere plus Sunshine wouldn't be too much for one area," said Alan Purves, market and strategic development manager for Laidlaw.
Throw into the mix three separate rail-haul proposals being developed to carry trash to remote sites in inland California and other states, where pits that dwarf any Los Angeles landfill are ready to take in the county's daily load of trash.
"Everyone is trying to build these rail-haul projects, and if every one of these got built, they won't have enough garbage to make it worth their while," analyst Augenthaler said.
Rail-haul, most agree, will cost more than current landfills and may temporarily give owners of the last surviving landfills the chance to charge a premium. But it won't last long, observers say, and rail-haul and recycling will keep a rein on price increases.
"The market always adjusts," Bari said.
Here are dumps--public and private--in Los Angeles and Orange counties. The three landfills in Orange County are all public landfills owned and operated by the county, accepting waste on a daily basis. LOS ANGELES COUNTY: Lancaster: Waste Management of Lancaster Owner/operator: WMX Technologies Inc. Palmdale: Palmdale Landfill Owner/operator: Palmdale Disposal Co. Burbank: Burbank Landfill Owner/operator: city of Burbank. Glendale: Scholl Canyon Landfill Owner/operator: Sanitation Districts of Los Angeles County* Pomona: Spadra Landfill Owner: Los Angeles County. Operator: Sanitation Districts of Los Angeles County.* West Covina: BKK Landfill Owner/operator: BKK Corp. Whittier: Puente Hills Landfill Owner/operator: Sanitation Districts of Los Angeles County.*
Savage Canyon Landfill Owner/operator: city of Whittier. Calabasas: Calabasas Landfill Owner: Los Angeles County. Operator: Sanitation Districts of Los Angeles County.* Sun Valley: Bradley Landfill and Recycling Center. Owner/operator: WMX Technologies Inc. Santa Clarita: Chiquita Canyon Landfill. Owner: Newhall Land & Fars. Operator: Laidlaw Waste Management. Lakeview Terrace: Lopez Canyon Landfill. Owner/operator: city of Los Angeles.
ORANGE COUNTY Brea: Olinda-Olinda Alpha Landfill. Owner/Operator: Orange County. Irvine: Frank R. Bowerman Landfill. Owner/Operator: Orange County. San Juan Capistrano: Prima Deshecha Landfill. Owner/Operator: Orange County.
* Not a governmental agency