Bloomberg News

Waste Management Sees Growth With EPA Coal-Ash Disposal Rule

August 06, 2014

Waste Management Inc. (WM:US), North America’s largest trash hauler, expects “big growth” in sales from a pending U.S. rule that may require coal-fired power plants to dispose of ash byproduct in engineered landfills, Chief Executive Officer David Steiner said.

The Environmental Protection Agency rule will probably require coal ash pits to be replaced by lined landfills, similar to the landfill requirements for solid waste implemented 30 years ago, Steiner said in an interview at Bloomberg’s Houston bureau. Ash is the byproduct of coal combustion.

The move into handling coal ash is an opportunity for expansion for Houston-based Waste Management, which is shedding its waste-to-energy unit as it moves away from inefficient and less profitable power production amid cheap and volatile electricity prices. About 140 million tons of coal waste are generated by electric utilities each year, more than the 100 million tons of garbage currently handled by Waste Management, Steiner said.

“The utilities see the regulations coming, so we are already starting to get a lot of coal ash,” Steiner said.

About half of coal ash waste is recycled for uses such as road paving, while the rest is placed in pits, he said. While some utilities will opt to continue taking care of their own waste, winning “a fraction” of the market could result in 10 million tons of added sales volume a year, he said.

Ash Regulation

The EPA is deciding whether to regulate coal ash as a special waste under Subtitle C of the Resource Conservation and Recovery Act, subjecting it to hazardous waste regulations, or as a nonhazardous waste under Subtitle D, leaving regulatory authority with the states. The agency is expected to issue a final rule by Dec. 19.

The rule proposal is meant to address coal ash pits that have leaked, contaminating water supplies, such as the February spill at a shuttered Duke Energy Corp. (DUK:US) plant in Eden, North Carolina.

On other subjects, Steiner said the recently announced sale of the company’s waste-to-energy unit, which produces 853 megawatts of electricity from trash, means the company is out of the mass-burn power generation business for good. Under a $1.94 billion deal with Energy Capital Partners announced July 29, Waste Management will continue to sell waste to the firm.

“I’m not an electricity guy and that’s why we sold Wheelabrator,” Steiner said.

Landfill Control

The company will still maintain its landfill-to-gas operation, which produces about 400 megawatts of electricity, Steiner said. Waste Management, which supplies 36 megawatts of power to the grid operated by Electric Reliability Council of Texas Inc., wants to keep control of its own landfills.

Waste Management sees opportunities to grow through small acquisitions, which Steiner referred to as “tuck-in” acquisitions. A merger with a major competitor is not being discussed, and Waste Management doesn’t see synergies that would justify a deal with Veolia Environnement SA (VIE) or Suez Environnement Co. (SEV), both of France. Waste Management currently holds roughly 30 percent of the U.S. trash hauling market, Steiner said.

“We never seriously looked at either of the two,” Steiner said.

Looking Ahead

Steiner said that while it isn’t being discussed at the moment, a deal to take the company private isn’t out of the question. He said Microsoft co-founder Bill Gates’ investment vehicle, Cascade Investment LLC, owns 6 percent of Waste Management’s shares and 26 percent of Phoenix-based Republic Services Inc. (RSG:US), Waste Management’s biggest U.S. competitor.

“By the way, none of them has ever approached us,” Steiner said.

Other growth opportunities are in the waste consulting business, in which Waste Management charges fees to businesses and governments to help them reduce the amount of waste they dump.

“It’s good for us because we can charge them for it,” Steiner said. “It’s good for them, they don’t have as much waste.”

Waste Management also is gaining sales in the oil field, where disposal of drilling waste from hydraulic fracturing in shale formations will generate $250 million to $300 million of revenue this year, he said.

“The shale revolution has been huge for us,” Steiner said.

As for his own future, Steiner, 54, who has been at the company since 2000 and CEO since 2004, said he has been involved in periodic discussions about succession planning and considers Chief Operating Officer James Trevathan and Chief Financial Officer James Fish Jr. to be possible candidates.

There’s no plan for him to step down anytime soon, and Steiner said he wants to stay in his current role as long as he can figure out ways for Waste Management to grow.

“I’m not finished reinventing myself,” he said.

To contact the reporters on this story: Harry R. Weber in Houston at hweber14@bloomberg.net; Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Charlotte Porter, Richard Stubbe


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Companies Mentioned

  • WM
    (Waste Management Inc)
    • $47.35 USD
    • -0.05
    • -0.11%
  • DUK
    (Duke Energy Corp)
    • $74.38 USD
    • 0.90
    • 1.21%
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