How Trash Makes Money In The U.S. - YouTube

In 2019, the North American waste management market reached

$208 billion. Strict environmental regulations as

well as a surge in the amount of waste produced is expected to

expand the market even further. By 2027, the waste management

market is expected to grow into a $229 billion industry.

Anytime when I'm going to a landfill I talk to my kids and I

talk to my son and daughters, yucky, you're going to come back

as a smelly. I told them, You smell the trash and I smell

money.

America remains one of the most wasteful countries in the world

generating 239 million tons of garbage every year, about 16 or

1700 pounds per person. While some view it as a threat to our

environment in society, others see it as an opportunity.

It's a profitable industry. It's a difficult industry, but it is

profitable. If done right and I think that is why there are so

many private companies that are involved in waste management.

Thanks to advancements in modern chemistry and the support from

the government landfills have seen astonishing financial

success in recent years. Raking in millions of dollars in

profit. Private solid waste management companies like Waste

Management and Republic Services have shown significant growth

over the last five years.

They've learned how to be best in class businesses. And as they

did that, what you saw was this growth occurring in new customer

growth, new business formation linked with consumerism,

consumer engagement housing, and the garbage industry. Publicly

traded stocks outperformed the market handily between 2015 and

2019. And underpinning it is a meaningful improvement in their

free cash flow conversion.

So how exactly are landfills turning profit out of garbage,

and just how much money can be made.

When people think of landfills, they usually imagine an endless

field of garbage emitting a terrible odor and housing all

manner of pests. But modern sanitary landfills today are

much more nuanced and a lot less smelly.

A modern landfill is a civil engineering marvel. These are

extraordinarily well engineered, they're designed to protect

human health and the environment, and at the same

time, contain and manage the waste that we generate at four

and a half pounds a person per day in United States.

If you walk towards the landfill and there is a smell, that means

they're doing something wrong.

Strict regulations and the work by the EPA have changed

landfills to become more modern and sanitary than ever. The

Solid Waste Disposal Act of 1965, combined with the Resource

Conservation and Recovery Act of 1976 dramatically expanded the

federal government's role in managing waste disposal.

Open dumps where garbage is dropped off without any

protection are now illegal. When waste is brought to a sanitary

landfill, they are disposed into an open section known as the

cell. This cell is protected by a layer of reinforced plastic

known as the liner that prevents any harmful liquids from leaking

out. Any liquid from the waste is collected at the bottom of

the landfill and is removed via a series of pipes gravels and

sand. Meanwhile, above ground trash is constantly compressed

within the cell using bulldozers and other compaction equipment

using daily covers to protect the trash from sun, rain and

pests until the cell reaches its max capacity. Once that happens,

either a new cell begins on top or a final cover is placed over.

The site is then continuously monitored for up to 30 years to

ensure everything is environmentally sound.

There is the potential for the miner system to leak, for

example, over long periods of time, and probably more likely

the cover system. You know, it's just going to be subject to that

settling and weathering and different things. So there's

potential for gas emissions, you want to be monitoring the

landfill as long as there's the potential for gas or liquid

emissions.

Landfills make a majority of their revenue even before the

garbage makes its way to the pile of trash through a tipping

fee or a gate fee landfills charged trucks dropping off

their garbage based on their weight per ton. This fee acts as

the lifeblood of most landfills across the United States.

Shipping fee gets its connotation because the truck

comes in and tips, if you will, it literally tips up. The trash

is driven out of the trailer through what's known as a

walking floor. So tipping is it's your gate rate it's the

price per ton, and that is the principal source of income.

In 2020 municipal solid waste landfills had an average tipping

of $53.72 per ton. That translates to roughly 1.4

million a year in approximate average gross revenue for small

landfills and 43.5 million a year for large landfills just

from gate fees and tipping fees have seen steady growth over the

past four decades. In 1982. The national average tipping fee sat

at $8.07 per ton, or about $23 when adjusted for inflation.

That's nearly a 133% increase in 35 years. Tipping fees vary

widely depending on where the landfill is located. For

instance, the south central region in the US has the lowest

average tipping fee of $39.66 per ton, with some states like

Arkansas reporting a fee as low as $30.53 per ton. On the other

hand, the average tipping fee in the northeast is almost double

that at $68.69 per ton. With states like Delaware reporting a

fee as high as $85 per ton.

There's a list of reasons but at its simplest level, is scarce.

So where tipping fees are the highest, I would venture that

you have extraordinarily dense populations and very few

disposal options. The other difference is, the cost of

building done in western Pennsylvania dealing with rock

formations at very shallow level and I literally go 50 miles west

and go to Ohio, the cost of building a landfill in western

Pennsylvania versus Ohio are dramatically different.

While tipping fees make landfill sound like a risk free business,

they are still quite an expensive investment. It can

cost about 1.1 to $1.7 million just to construct, operate and

close a landfill. And there are financial obligations that must

be met even after the landfill has been closed entirely.

There was a major regulatory change that happened in the 70s

called the Resource Conservation Recovery Act by 1994. Every

landfill that was in service in North America had to adhere to

something called Subtitle D which is the design operation

and then the the lifecycle financial assurance obligations

of managing and overseeing that site for 30 years after closing.

So every business owner, whoever owns the business, they make

money up to the time it's working. Then even after close

up, they have to pay the maintenance fee, which is

around $1 million without making money for 30 years. That's part

of their business operation, so they need to make money upfront.

Today private companies have replaced municipal governments

to own and operate the majority of landfills across the US. In

1988, about 7900 landfills were publicly owned. By 2009, that

number had fallen to about 1900. It's now estimated that more

than half of all municipal solid waste landfills are privately

owned, with the industry controlling 85 to 90% of

permitted capacity.

Landfills are often owned by private companies. And I think

it's because the trend has been to go larger and larger so that

the small neighborhood dump can exist because the regulation in

the sophistication of the design so we're tending to see large

landfills, which would require a lot of investment upfront.

Two private companies, Waste Management and Republic Services

lead the Solid Waste Management sector. Waste Management says it

owns nearly 300 landfills across the US, while Republic Service

syas it operates just over 180 out of the 2627 landfills across

America. Together the two companies have seen staggering

performance in the market. With both companies stock prices

doubling in the past five years.

If you take the Great Recession, and sort of lay the framework of

how to garbage perform post the Great Recession. What what

you'll discover there's a five year window up to 2014 where

they did okay. They were you know they were in the green

matching or slightly outperforming the market but the

significant outperformance begins in 2014 through 2019.

They've learned how to be best in class businesses. And as they

did that, what you saw was this growth occurring in new customer

growth new business formation linked with consumerism,

consumer engagement housing, and the garbage industry public

traded stocks outperformed the market handily between 2015 and

2019. And underpinning it is a meaningful improvement in their

free cash flow conversion.

Some government jurisdictions have also transitioned to a

hybrid ownership in places like Wake County, North Carolina

landfills are owned by the county but operated by GFL

Environmental, a private company.

So if you give it fully privatized, a private company

will try to go through the regulation but they're meant

because they'll be making money. To me the combination of both is

the best choice because that way city has some control over the

landfill company. They will look at only for the profit. But city

also needs to make sure that not only the profit, the

environmental sustainability, environmental cases and people's

life, the key everything is maintained in the right way.

Private companies have also discovered new ways beyond

tipping fees to turn profit out of their garbage. Landfill

mining and reclamation a process of extracting and reprocessing

materials from older landfills is one of them.

Certainly looking at waste as a resource is the best thing for

for the economy. It's the best thing for the environment for

health. Putting metal in a landfill just makes absolutely

no sense. It's just gonna sit in the landfill forever and ever

and ever there'll be some corrosion but but it's pretty

much gonna sit there. Whereas metals are so easy to recover

and recycle, and and save so much money and energy and so

forth.

In 2011, a private scrap metal company contracted with a

nonprofit landfill in Southern Maine to mine precious metals.

In four years, they recovered over 37,000 tons of metal worth

$7.42 million. But it isn't always a success story. In 2017,

the city of Denton, Texas ended their landfill mining program

before could even start after realizing that the benefits

weren't worth its $4.56 million price tag. According to experts,

economics is usually the biggest challenge to make landfill

mining work.

There's virtually no way I can see how that makes money, the

commodity values would have to be at such higher levels than

they are today, whatever it is you're trying to get your hands

on.

However, some experts claim that landfill mining can be

profitable if done correctly. That's because mining can often

recover the most valuable asset of any privately owned landfill,

space.

You get new tipping fee, right? You put the trash back into that

little mined space. So as if you build a new landfill without

buying a new space. So that space gives you lot of money,

when you start backfilling. Many people are mining but they are

not reusing the space. So they are saying, oh, okay, we cannot

make money out of money. Yes, you cannot. But if you do the

operation, right, you're never going to be involved, if you

will always make money.

Modern chemistry has also allowed landfills to be mined

for energy. When trash decays inside a landfill, it produces

methane gas. For decades, regulations have required

landfills to suck out this highly flammable gas and dispose

of it safely. landfill gas to energy projects, however, use

the same gas to produce fuel and generate electricity for profit.

The landfill gas operations that are known as low or medium BTO

which are the predominant form of capture the gas policy a

little but turned into electricity or steam and then

sell it. Those are good return on capital projects.

According to the US Energy Information Administration,

landfill gas generates about 10 point 5 billion kilowatt hours

of electricity every year. That's enough to power roughly

810,000 homes and heat nearly 540,000 homes each year.

It just didn't paper where I was looking at how much electricity

you can generate from landfills compared to how much energy

we're using to produce electricity. And it's like, less

than 1% I mean, it's it's a minor contributer to our heav

demands for energy in the US But it's you know, it's 1%. So

you know, it's, it's helpful It's every everything counts

And if you're going to b attacking the gas for othe

reasons, you might as well g ahead and do that if you know i

it makes sense from an economi standpoint to generat

electricity

But it's also a big investment. Landfill gas to energy projects

can cost over $5 million to build and operate, while revenue

from generating energy and fuel doesn't quite cover the cost,

landfills do benefit greatly from generous subsidies.

Many cities went into that landfill gas to energy because

they get the carbon credits, and they get money from the federal

government. When they are producing the gas and capturing

the gas, they're converting that into electricity. The amount of

gas you're capturing you're reducing the greenhouse gas

emission. That's why government was subsidizing not only for

carbon credits are subsidizing because you're reducing the

greenhouse gas emission pressure on the environment.

The tipping fee combined with various mining techniques and

government subsidies have together transformed the

landfill industry into a booming business.

It's a profitable industry. It's a difficult industry, but it is

profitable done right and I think that is why there are so

many private companies that are involved in waste management.

Solid Waste Management will only continue to expand as long as

there are those who view garbage as a resource rather than waste.

Because when it comes to landfills, one man's trash is

quite literally another man's treasure.

Waste is not a waste but it's a resource. Because if you don't

recycle the plastic if we don't recycle the paper, if we don't

recycle the paper what we are going to do we are going to go

and cut more trees. If we don't recycle the plastic we are going

to go after more bio product from gasoline. If we don't reuse

the electronic material, we are going to keep mining virgin

material. World has limited resource. If we don't reuse and

recycle these, we cannot talk about circular economy. That

will always be a talk in the tabletop discussion.