Garbage

In my last article, I commented that the New South Wales Environmental Protection Agency’s (EPA) belief that industry would finance the infrastructure required for new landfills shows a complete misunderstanding of how the industry operates.

However, before I explain my comment, I need to take us all back into history.

In NSW, managing waste is traditionally and legally an obligation for local governments.

Outside Sydney, most councils or regional organisations of councils run their own landfills. Not so in Sydney. The NSW state government had its own state-owned corporation called Waste Service NSW (WSN), which had a monopoly to operate the transfer stations and putrescible landfills in Sydney. There was even an unwritten “understanding” that no one would get approval for a putrescible landfill, as the EPA would not grant it, and WSN would fight it tooth and nail.

A looming potential lack of space was the subject of many industry discussions between 2000 and 2010, as is referenced in the various reports I quoted in my previous article.

A mining company operating at Woodlawn, near Goulburn, went broke and left behind lots of miners with their entitlements unpaid plus a very large hole in the ground.

Along comes a company called Veolia (then called Collex), which had quite a few domestic waste collection contracts in Sydney. Veolia thought to make a move and get a landfill approved to put the waste it collected into that big hole. It convinced the state government and its relevant agencies that this would be a good idea, as landfill space was on the agenda. What might also have helped was that Veolia said they would pay the miners their outstanding entitlements, if approval was granted. The local community was on board. What politician would say no to that? 

Now the next step: how to get waste from Sydney to Woodlawn? Too many truck movements aren’t liked by any community. So they opted to move it by train. But they needed an agglomeration point (called a transfer station) in Sydney. So Veolia needed to talk to WSN. 

Remember, WSN owned all the transfer stations. WSN couldn’t quite make up its mind, or, as some would put it, didn’t mind letting its “competitor” wait. Time is money. Let them pay and bleed some more. Not an unusual tactic, I might add.

In the end, Veolia made the decision to build its own transfer station near Clyde. Bold move. A transfer station for putrescible waste in Sydney, breaking the monopoly of WSN. Of course, WSN wasn’t happy and refused to co-operate to supply waste to Woodlawn from any of its transfer stations. 

It also fought the approval of the Clyde transfer station. The state government department assessed and approved the Clyde transfer station. Some in the community and WSN didn’t like the decision, so it went off to the Land and Environment Court, where the approval was overturned. In the end, the state government decided to introduce a special bill into parliament to approve the transfer station and overrule the decision of the land and environment court. You can read the Hansard from 5 December 2003 if you are interested.

The rest, as they say, is history. Woodlawn got up and running. Pretty soon it will be the saviour of Sydney’s putrescible waste. But what is important to remember is that it took a  special act of parliament to get a putrescible landfill up and running for Sydney.

But there is another hidden story that is equally important to understand. 

Veolia had spent tens of millions of dollars, some say around $70 million, on this venture. The hidden story is that Veolia’s profit margin was low single digits for many years, recovering from the financial strain. 

Without having a very patient French shareholder, the company would probably have gone bust or been sold. They are reaping the benefits now.

But this is the thing: why would any company go and build a large-scale landfill for putrescible waste for Greater Sydney? It is just too hard. The fight for Woodlawn has been engraved into companies’ memories. There are so many other opportunities to spend your money. This is practically the same for any large landfill, putrescible or not.

To highlight the point I’m making, I’ve set out below a dialogue between an imaginary go-getter business development manager (BD), and an imaginary financial controller (FC), a grey haired gatekeeper before requests for capital go to the finance director and board. Both work for waste management company WM.

BD: “Hi FC, I was wondering whether I could have a few minutes of your time to discuss what I think is a great opportunity for WM?”

FC: “Sure, what’s up?”

BD: “You may have heard there is a lack of landfills coming up for Greater Sydney, and I thought we should build one. They are very profitable, aren’t they?”

FC: “Depends on what you mean by profitable, I guess. Have you got a site in mind?”

BD: “No, not yet, but we can start looking for one straight away”.

FC: “Hmm, any idea how long that’ll take you? Any idea where to look and what to look for?”

BD: “Ah, not yet, I was hoping you could give me some ideas, you have been in this game for quite some time, haven’t you?”

FC: “Well, you can say that, I guess. But you didn’t answer my question: how long do you think it’ll take you?”

BD: “Oh, I reckon 6 months?”

FC raises his eyebrows, looks at BD questioningly.

BD: “Okay, maybe it’ll take 12 months?”

FC says nothing but keeps looking.

BD: “Okay, maybe longer? What do you think?”

FC: “Identifying a potential site is one thing. What about approvals and overcoming community angst?”

BD: “Okay, so maybe one to two  years to find a good site and then 2 to 3 years for approvals?”

FC raises his eyebrows again, but higher.

BD: “Okay, you think it’ll take longer?”

FC: “ Yes”.

BD: “Okay, maybe three to four years?”

FC: “If all goes really well, maybe, but try five to six years as a minimum, likely more. And then, how long do you think it’ll take to build and commission?”

BD: “Oh, I reckon 12 months, right?”

FC: “Try 18 to 24 months, all going well.”

BD: “Okay, but then–” 

FC: “Then you have to find waste to go in. We don’t have enough of our own. Where will you get the waste from?”

BD: “But aren’t we running out of landfills? Wouldn’t all the councils in Sydney be keen to give us their waste?”

FC: “Maybe, but would they sign up to deliver waste to a facility that doesn’t yet exist, at a location not yet known, from a point in time somewhere in the future?”

BD: “Hmm, not sure, but I could get letters of interest or something along those lines. Would that help?”

FC: “How much money do you think you’ll need?”

BD: “Ah, not sure. Maybe a few guys finding sites, doing preliminary site investigations, community consultations and so on. A couple of hundred thousand maybe?”

FC: “You’re kidding, right? Do you know how many expert reports we would need? Not to mention concept designs, detailed designs, vetting of conditions, lawyers to review conditions, and more. You don’t know how long the approval process will be. We may have to go through several iterations of reports. We may not get approval and have to go to court. Try several million dollars.”

BD: “Okay, you think it’ll be possible, though?”

FC: “Look, we have so much going on at the moment. Jim wants new trucks, Don wants a plastic recycling facility. I don’t have enough free cash flow to finance, say, half a million to a million bucks per year for an unknown number of years. All our money is already budgeted for, in fact we have got more projects than money, as usual.”

BD: “But money is cheap at the moment, right? Everyone tells me banks are happy to lend again, right?”

FC: “Mate, interest rates are going up and there is no end in sight to where they may go. Banks will want security. As a minimum they, as well as the board, will want to see where the money is coming from to pay for the development costs and the capital to pay the actual landfill site and engineering of cells and so on. Waste contracts won’t happen until the landfill is approved. We don’t even know what to charge as a gate fee.”

BD: “Oh, ok, that doesn’t sound good then?”

FC: “Sorry mate, I’ve got work to do. Maybe you have an easier idea next time. Nice chatting.”

BD: “But, we need new landfills. What should we do?”

FC: “Don’t know, mate. It’s certainly not in my job description. I am here to make sure we use our money well and I am not going to support a project that sounds like a black hole for money”.

And so ends the imaginary conversation. 

So, how does any big project get financed?

Investment requires a certain amount of certainty. No certainty, no money. Simple.

Back to the beginning. Will industry fund the building of new landfills for Greater Sydney?

I don’t think so.

Let me be more clear: whose job is it to provide essential infrastructure for an essential service?

What seems to have been forgotten is that it was the state government who owned and operated a monopoly for putrescible landfills in Sydney. Then it sold its monopoly to a private company. Yes, you read that right. That is a whole other story that’ll make you cringe. We are not going there today.

Once WSN was sold, who in the state government was left to think about future landfills? Well, there is a small section which looks after the closed landfills, but they have no say in planning or policy making. The EPA, you think? Well, have a look at the EPA’s charter and objectives. There is no word about planning essential infrastructure. 

Could you say the EPA had been given the task or even assumed it?

Maybe you could say that, but as I said before, the EPA has no clue how the market works.

One more thing to add to the confusion. There used to be so-called waste boards. These were like regional organisations of councils for Greater Sydney, the Central Coast, the Illawarra and the MacArthur regions. They were given the task by the state government to look after strategy and planning for waste infrastructure. They all employed different consultants to help them do so. 

They all came up with different ideas and concepts. In other words, a real shemozzle. After a while the government abandoned the waste boards and instituted an organisation called Resource NSW to coordinate this task. But Resource NSW was also dissolved by the Government. The task to plan essential infrastructure was either given to the EPA, but nobody wrote it into anybody’s job description, or it just fell into a black hole. The EPA thinks industry will do it. The industry thinks it’s not their job. Local government is looking to the state government. Confusion all around.

I guess you could call that a failure, couldn’t you?

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  1. Agreed. Large scale infrastructure funding is not simple for companies and impossible in the absence of clear government policy. The latest strategy by the Government calls out the need for a 3 million tonne per year inert landfill for Sydney. That is a very big landfill. Who is doing the planning for it in government? No-one that I know of. Efw can’t help at that scale and timeframe. Nor can better recycling offset all the need. Worse still the govt predicts we run out of inert landfill in Sydney by 2028. That is 6 years away. We need to rapidly drive up the landfill levy to supercharge recycling to reduce demand for landfill but ALSO plan for a new one to replace the landfills we are rapidly filling. Walk and chew gum. But someone has to own the problem. The only obvious person right now is the Minister for Envt.