CLEAN HARBORS INC 10-K

ITEM 1. BUSINESS General Clean Harbors, Inc. and its subsidiaries (collectively, "we," "Clean Harbors" or the "Company") is a leading provider of environmental and industrial services throughout North America. We are also the largest re-refiner and recycler of used oil in North America and the largest provider of parts cleaning and related environmental services to commercial, industrial and automotive customers in North America. Everywhere industry meets the environment, we strive to provide eco-friendly products and services that protect and restore North America's natural environment. One of our primary goals as a company is supporting our customers in providing environmentally responsible solutions to further their sustainability goals in today's world. During the first quarter of 2021, we reorganized our Safety-Kleen business. The collection services for waste oil, used oil filters, antifreeze and related items as well as bulk blended oil sales operations were combined with the Safety-Kleen Oil business to form the Safety-Kleen Sustainability Solutions business. Under this structure, Safety-Kleen Sustainability Solutions operations focus on the life-cycle of oil, from the used oil collection services through the ultimate sale and delivery of base and blended oils so that we can more directly manage both sides of the spread in our re-refinery business. We expect this change to continue to drive additional growth in our sustainable lubricant products and related services. Concurrently with this change, we consolidated the Safety-Kleen branches' core service offerings, including containerized waste, parts washer and vacuum services, into the legacy Clean Harbors Environmental Services sales and service operations. We believe this change fosters enhanced cross-selling opportunities within the environmental businesses and increases market presence with small quantity generators of hazardous waste. In restructuring the operations of the Company in this manner, the information that the chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance was changed to conform to this new operating structure of the business. As a result, we reevaluated the identification of our operating segments and concluded that, starting in the first quarter of 2021, we now have two operating segments: (i) the Environmental Services Segment and (ii) the Safety-Kleen Sustainability Solutions Segment. • Environmental Services - Environmental Services segment results are predicated upon the demand by our customers for waste services, waste volumes generated by such services and project work for which waste handling and/or disposal is required. Environmental Services results are also impacted by the demand for planned and unplanned industrial related cleaning and maintenance services at customer sites, environmental cleanup services on a scheduled or emergency basis, including response to national events such as major chemical spills, natural disasters, or other events where immediate and specialized services are required. As a result of the Coronavirus ("COVID-19") pandemic, the business has seen increased demand for response services relative to contagion disinfection, decontamination and disposal. With the addition of the Safety-Kleen branches' core service offerings, including containerized waste disposal, parts washer and vacuum services, the Environmental Services results are further driven by the volumes of waste collected from these customers, the overall number of parts washers placed at customer sites and the demand for and frequency of other offered services. In managing the business and evaluating performance, management tracks the volumes and mix of waste handled and disposed of or recycled, generally through our incinerators, treatment, storage and disposal facilities ("TSDFs") and landfills, the utilization rates of our incinerators, equipment and workforce, including billable hours, and number of parts washer services performed, among other key 1 Table Of Contents metrics. Levels of activity and ultimate performance associated with this segment can be impacted by several factors including overall U.S. GDP, U.S. industrial production, economic conditions in the automotive and manufacturing markets, weather conditions, efficiency of our operations, technology, changing regulations, competition, market pricing of our services, costs incurred to deliver our services and the management of our related operating costs. • Safety-Kleen Sustainability Solutions - Safety-Kleen Sustainability Solutions segment results are impacted by our customers' demand for high-quality, environmentally responsible recycled oil products and their demand for our related service offerings and products. Safety-Kleen Sustainability Solutions offers high quality recycled base and blended oil products to end users including fleet customers, distributors and manufacturers of oil products. Segment results are impacted by overall demand as well as product mix as it relates to these oil products. Segment results are also predicated on the demand for Safety-Kleen Sustainability Solutions' other product and service offerings including collection services for used oil, used oil filters and other automotive fluids. These fluid collections are used as feedstock in our oil re-refining to make our base and blended oil products and our recycled automotive related fluid products or are integrated into the Clean Harbors' recycling and disposal network. In operating the business and evaluating performance, management tracks the volumes and relative percentages of base and blended oil sales along with various pricing metrics associated with the commodity driven margin. Management also tracks the volumes and pricing of used oil and automotive fluid collections. Levels of activity and ultimate performance associated with this segment can be impacted by economic conditions in the automotive services and manufacturing markets, efficiency of our operations, technology, weather conditions, changing regulations, competition and the management of our related operating costs. Costs incurred in connection with the collection of used oil and other raw materials associated with the segment’s oil related products can also be volatile. The overall market price of oil and regulations that change the possible usage of used oil, including the International Maritime Organization's 2020 regulation ("IMO 2020") and other regulations related to the burning of used motor oil as a fuel, impact the premium the segment can charge for used oil collections. Clean Harbors, Inc. was incorporated in Massachusetts in 1980 and our principal executive offices are located in Norwell, Massachusetts. We maintain a website at the following Internet address: http://www.cleanharbors.com. Through a link on this website, we provide free access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after electronic filing with the SEC. Our guidelines on corporate governance, the charters for our board committees, and our code of ethics for members of the board of directors, our chief executive officer and our other senior officers are available on our website. Should it be necessary, any waivers for such policies will also be posted on our website. Our website and the information contained therein or connected thereto are not incorporated by reference into this annual report on Form 10-K. Acquisition of HydroChemPSC On October 8, 2021, we acquired HydroChemPSC, a leading U.S. provider of industrial cleaning, specialty maintenance and utility services, for a cash purchase price of approximately $1.23 billion. The acquisition was financed with net proceeds from our concurrent issuance of $1.0 billion of senior secured term loans with the remaining purchase price being funded through existing cash. The HydroChemPSC business serves customers across a broad range of markets and provides solutions to customers focused on cleaning, maintenance and environmental compliance of essential, mission critical equipment and infrastructure. The acquired operations, including more than 4,500 employees, over 240 service locations and a fleet of specialized vehicles and equipment, expand our existing presence within the industrial services market and enhance the Environmental Services Segment. We believe that the acquired business is a strategic acquisition for Clean Harbors. As stated in Item 8, "Financial Statements and Supplementary Data," our consolidated results of operations for the year ended December 31, 2021 include $166.1 million of direct revenue and $166.4 million of expense attributable to the HydroChemPSC operations, including $12.3 million of incremental depreciation and amortization and $6.0 million of severance and integration costs. Beyond expanding the size and scale of our operations, HydroChemPSC is an established leader in industrial services, with proprietary technology and a manufacturing center dedicated to fabricating tools aimed at reducing costs and increasing efficiency and safety. We expect that the combined company will benefit from (i) enhanced technologies aimed at increasing safety, (ii) incremental waste volumes for processing through Clean Harbors' network of waste disposal facilities, (iii) long-established customer relationships that bring opportunities for cross selling of Clean Harbors' suite of services and (iv) synergistic opportunities within customer service, corporate functions, transportation, real estate, asset rentals and vehicle maintenance. 2 Table Of Contents Health and Safety Health and Safety is our #1 core value. Employees at all levels of our Company share this philosophy, including those joining the Company from HydroChemPSC where health and safety were also a key priority. We are all committed to ensuring our safety goals are met. Our commitment to health and safety benefits all of our stakeholders including our employees, our customers, the community and the environment. Our Safety Starts with Me: Live It 3-6-5 program is a key component in our overall safety approach. This program, along with other targeted safety programs, have enabled us to maintain leading safety metrics. Our key safety metrics are Total Recordable Incident Rate, or "TRIR" and Days Away, Restricted Activity and Transfer Rate, or "DART". For the year ended December 31, 2021, our Company wide TRIR and DART were 1.12 and 0.71, respectively. In order to protect our employees, lower our incident rates and satisfy our customers' demands to retain the best service providers with the lowest TRIR and DART rates, we are fully committed to continuously improving our health and safety performance through ongoing safety initiatives and training as well as technological solutions aimed at keeping all of our employees safe. All employees recognize the importance of protecting themselves, their fellow employees, their customers and all those around them from harm. Our commitment is supported by the Safety Starts with Me: Live It 3-6-5 program, which includes three Safety Philosophies, six Golden Rules of Safety and each employee’s five personal reasons why they choose to be safe at work, on the road and at home. Compliance We regard compliance with applicable regulations as a critical component of our overall operations. We strive to maintain the highest professional standards in our compliance activities. Our compliance staff is responsible for the facilities' permitting and regulatory compliance, compliance training, transportation compliance and related record keeping. To ensure the effectiveness of our regulatory compliance program, our facilities operations are monitored by our compliance staff. Our facilities are frequently inspected and audited by regulatory agencies, as well as by customers. Although our facilities have been cited on occasion for regulatory violations, we believe that each of our facilities is currently in substantial compliance with applicable permit requirements. Strategy Our strategy is to develop and maintain ongoing relationships with a diversified group of customers that have recurring needs for our products and services. We seek to expand market awareness of the breadth of our service offerings to current and future customers through targeted marketing opportunities. We strive to be recognized as the premier supplier of a broad range of value-added environmental services based upon quality, responsiveness, customer service, information technologies and cost effectiveness. We aim to be a resource for our customers everywhere that industry meets the environment. The principal elements of our business strategy in no particular order are: • Cross-Sell Across Businesses - We believe the breadth of our service offerings allows us to provide additional services to existing and new customers in order to continually satisfy our customers' environmental and sustainability objectives. We believe we can provide industrial and field services to customers that traditionally have only used our technical services and provide technical services to customers that use our industrial services, including our expanded customer base from the HydroChemPSC acquisition. At the same time, there are a variety of cross-selling opportunities between our Safety-Kleen branches' core service customers and our traditional Environmental Services waste disposal customers which we hope to expand via our reorganization in the first quarter of 2021. We believe leveraging our ability to cross-sell among and across our segments will drive additional revenue for our Company. • Expand Network through Growth and Technology - We operate and continue to make substantial investments and technological upgrades in an extensive network of hazardous waste management facilities and oil re-refineries, which provide us with significant operating leverage as volumes increase. We also look for opportunities to expand waste handling capacity or waste oil processing at these facilities by modifying the terms of the existing permits, improving technology or, in certain instances, significantly expanding our facilities. For example, in 2021, we began the process of building a new incinerator at our Kimball, Nebraska facility. This incinerator is expected to increase our annual practical capacity by approximately 70,000 tons and is designed using the same world-class air emissions control technology as our El Dorado incinerator. Through selected permit modifications, we can expand the range of treatment services offered to our customers without the significant capital investment necessary to acquire or build new waste management facilities. • Execute Strategic Acquisitions and Divestitures - We actively pursue selective acquisitions with certain services or market sectors where we believe the acquisitions can enhance and expand our business, such as our acquisition of 3 Table Of Contents HydroChemPSC in late 2021. We believe that we can expand existing services through strategic acquisitions in order to generate incremental revenues from existing and new customers and to obtain greater market share. In order to maximize synergies, we rapidly integrate our acquisitions into our existing processes. To complement our acquisition strategy, we regularly review and evaluate our existing operations to determine whether our business model should change through the divestiture of certain businesses. Accordingly, from time to time, we divest certain non-core businesses and reallocate our resources to businesses that we believe better align with our long-term strategic direction. For additional information on our acquisitions and divestitures, see "Acquisitions and Divestitures" below. • Focus on Cost, Pricing and Productivity Initiatives - We continually seek to increase efficiency, reduce costs through enhanced technology, process improvements and strategic expense management and price our goods and services competitively. Additionally, we seek to identify areas in our business where strategic investments in automation, process improvements, tools and employees can serve to increase productivity, efficiency and safety compliance. • Expand Geographic Coverage of Service Offerings - We believe our Environmental Services and Safety-Kleen Sustainability Solutions segments have a competitive advantage due to their vast network of locations across North America, particularly in areas where we maintain service locations at or near a TSDF and our expansive truck and rail transportation network. By opening additional service locations in strategic locations, we believe that we can increase our market share within these segments, which will drive additional waste into our network of facilities and increase overall profitability. Our centrally managed transportation network allows us to provide cost effective transportation throughout our customer base. In addition, our management team continues to assess the competitive landscape in order to identify new business opportunities. • Capture Large-Scale Projects - We monitor for opportunities to quickly respond to the ever changing needs of the marketplace, whether they be from external factors, like the recent need for our decontamination services, changing regulations or customers' needs for large-scale environmental remediation services. We believe we are a national leader in emergency response services. We provide turnkey offsite transportation and landfill or incineration disposal services for soil and other contaminated materials generated from remediation activities. We also assist remediation contractors and project managers with support services including groundwater disposal, waste disposal, roll-off container management and many other related services. We believe this will drive revenue growth as well as incremental waste volume to our existing facilities, thereby increasing utilization and enhancing overall profitability. Acquisitions and Divestitures Acquisitions are an element of our business strategy that involve expansion through the purchase of businesses that complement our existing Company and create opportunities for profitable growth. In 2021, in addition to the acquisition of HydroChemPSC discussed above, we also acquired a privately-owned business for a purchase price of $22.8 million. The acquisition expands the Safety-Kleen Sustainability Solutions segment's network within the south central United States. On June 29, 2021, we signed a definitive agreement with Vertex Energy, Inc. ("Vertex") to acquire certain assets related to Vertex's used motor oil collection and re-refinery business. On January 25, 2022, the parties mutually agreed to terminate the planned acquisition. In connection with the early termination, Vertex paid us a breakup fee of $3.0 million in 2022. In 2020, we acquired a privately-owned business for a purchase price of $8.8 million. The acquisition expands the Safety-Kleen Sustainability Solutions segment's oil re-refining operations to the northeast United States. In 2019, we acquired two privately-owned businesses for a combined purchase price of $25.2 million. One acquisition expands the environmental services and hazardous materials management services of the Environmental Services segment while the second has components included in both the Environmental Services and Safety-Kleen Sustainability Solutions segments. For additional information relating to our acquisition activities during 2021, 2020 and 2019, see Note 4, "Business Combinations," to our consolidated financial statements included in Item 8 of this report. Other business transactions include divestitures based on our ongoing review of portfolio assets to determine the extent to which they are contributing to our objectives and growth strategy. Protecting the Environment and Sustainability Clean Harbors recognizes that sustainability stewardship is a core aspect of our brand and an important part of our responsibility in protecting generations to come through balancing environmental, economic and social concerns. Sustainability 4 Table Of Contents is not only about doing less to harm the earth or consuming less resources, it is also about doing more good and minimizing the cumulative impact of other companies. Our core business is to provide industry, government and the public a wide range of sustainable solutions that protect and restore North America's natural environment. We communicate our sustainability activities and progress across various channels. In February 2021, we issued our inaugural Sustainability Report aligned to the Sustainability Accounting Standards Board framework. A copy of this report can be found at our website. We also have requirements for periodic regulatory reporting to the Environmental Protection Agency ("EPA") and other agencies that are available to the public. We voluntarily provide data to various sustainability reporting organizations, many of which provide subscribers and the public with their rankings or scorecards of companies based on a combination of public and private information. We utilize these formal reporting platforms to inform customers and other stakeholders of our sustainability efforts and we have been pleased to see our efforts to improve the reporting of our sustainable business practices reflected in improved scores from various rating organizations. The improvement in our scores/ranking has been significant over the past few years. For example, in 2021 we received a bronze rating from EcoVadis, a rating agency specialized in assessing environmental performance and corporate social responsibility. We have also improved each of the Environmental, Social and Governance scores that the Institutional Shareholder Services Inc. ("ISS") publishes. As of the end of 2021, our ISS Social score has improved eight points since 2018, with the ISS Governance and ISS Environmental scores improving two and three points, respectively. While we are proud of the improvements in third-party scoring and rankings, the focus of our program is on tangible improvements that positively impact the environment, our community and our employees. Our overall sustainability program expands our commitment beyond our services and products to include our operations, employees and community. The program focuses on the following key elements: Health and Safety As noted above, Health and Safety is our #1 core value and as such is at the forefront of our sustainability program. Safety is not just the hallmark of our Company but is also at the heart of what we provide to customers. Our programs and procedures focus on delivering services with unparalleled safety to our employees, our customers, local communities and other key stakeholders. Seven of our U.S. sites have been recognized by the U.S. Occupational Safety & Health Administration’s Voluntary Protection Program ("VPP") for their effective safety management systems and low injury and illness rates. To put this accomplishment in context, less than 0.1% of the eight million U.S. workplaces have earned this elite VPP recognition. Human Rights We are committed to fundamental human rights principles and we have a comprehensive Humans Rights Policy to formalize the standards to which we hold ourselves and others accountable. Respect for human rights is essential to our interactions with employees, customers, shareholders and the public at large. Operations/ Customer Solutions Technologies and operational improvements have allowed Clean Harbors to develop initiatives that focus on minimizing the Company’s and our customers’ impact on the environment. As a leading provider of environmental and industrial services throughout North America, we help our customers prevent the release of chemicals and hazardous waste streams into the environment. We also are the leading service provider in the recovery and decontamination of pollutants that have been released. This includes the safe destruction or disposal of hazardous materials in a manner that ensures these materials are no longer a danger to the environment. As an example, to provide an efficient and safe alternative for hazardous waste disposal, Clean Harbors developed and built an incinerator at our El Dorado facility which uses world-class air emissions control technology that meets the most stringent emissions standards under the U.S. Clean Air Act. In 2021, we commenced the permitting and planning for a new hazardous waste incinerator at our Kimball, Nebraska facility, which will also be built to these high standards. When providing these services, we are committed to the recycling, reuse and reclamation of these waste streams whenever possible using a variety of methods more fully explained below in the sections describing our general operations. Many of our branded services exemplify our commitment to sustainability and providing environmental solutions to the marketplace. Where possible, liquids such as solvents, chemicals and used oil are continuously recycled to industry standards and made into useful products. Tolling programs provide a closed-loop process in which the customer’s spent solvents are recycled to precise specifications and returned directly to the customer. Our Safety-Kleen OilPlus ® Program, unique to the oil industry, is designed to help companies manage their oil needs in a more sustainable way. By collecting used motor oil from customers and delivering new re-refined oil products, customers are implementing a closed-loop process for sustainability in the oil industry. Environmental regulations prohibit the disposal of oil in sewers or landfills as improper disposal can lead to widespread environmental problems. Our re-refining process extends the life of crude oil resources, reduces the likelihood of improper oil disposal and is energy efficient as, per the Department of Energy, it can take less energy to recycle used oil than to create new lubricating oil from virgin crude oil. As our customers 5 Table Of Contents respond to the consumer and investor focus on environmental and socially responsible practices, we expect that the use of our re-refined oil products will be one component of their ESG story. We deploy our fleet of trucks, tankers, rail-cars and barges to collect used oil. In 2021, we gathered more than 226 million gallons of used oil in North America and our state-of-the-art processes enable us to fully realize oils' remarkable capacity to be recycled, re-refined and reused. Our plants have re-refined more than 4.1 billion gallons of used oil since their opening, allowing such oils to have a second life as high quality recycled lubricants and avoiding an estimated 32.1 million metric tons of greenhouse gases. This closed loop process, for oil and other sustainable lubricant products, is the main focus of our new Safety-Kleen Sustainability Solutions segment. Clean Harbors instills sustainability within its operations through continuous improvements and well-defined strategic initiatives that show the highest positive impact on the environment, the communities and the economy in which we work and live. Our assets represent one of our largest opportunities to apply environmentally sustainable business practices. Our Asset Refurbishment Program is a comprehensive effort to rebuild key vehicles to "like new" quality while reusing or recycling as much of the material as possible. Our goal every year is to refurbish approximately 100 highly technical vehicles used in our operations, like vacuum trucks, industrial air movers and waste oil trucks. We also have a field repair/refurbishment program for our parts washers. In 2021, we repaired or refurbished approximately 8,500 parts washers in the field, saving transportation to our refurbishment facility. Parts washers that required repairs or refurbishment beyond what could be accomplished in the field were returned to our refurbishment facility. We were able to recondition the majority of these machines and salvaged the components from any machines that were beyond reconditioning. These operations at our refurbishment facility avoid disposing of about 500 tons of metals and plastics annually. Environmental Commitment One of the Company’s sustainability goals is to contribute to a cleaner environment by maximizing energy and water conservation across our organization. Energy usage at our facilities is the focus of our Facility Energy Conservation program, which provides ongoing oversight and recommendations to our facilities to help support their electricity management efforts. We continue to evaluate solar energy as a viable option for our facilities and have built solar arrays at select sites for their ongoing energy needs. Clean Harbors makes fleet energy management a key focus, beginning with ongoing routing reviews by our logistics team to reduce total miles driven. We also evaluate options for reducing fuel costs including routine use of rail and barge transportation, implementation of alternative fuel vehicles and using our Performance Plus ® and EcoPower ® re-refined engine oils throughout our fleet. Clean Harbors is constantly upgrading our truck fleet with the most fuel-efficient systems and parts and has also designed custom, multi-compartment trucks that can be used to collect and deliver oil at the same time, decreasing fuel consumption. As part of our commitment to protecting the environment, we have made the conscious decision to reduce our water usage. In 2022, we will improve our water usage as part of our commitment to baseline key environmental metrics while planning for quantifiable reductions in the future. All of these items above exemplify how we, as a company, are working to minimize our footprint on the environment; however, our environmental commitment extends beyond our internal focus to how we can help other companies minimize their environmental footprint and achieve their sustainability goals. The core of our operations is to provide our customers with environmentally responsible solutions, whether they be our commitment to environmentally conscious services and waste disposal or our re-refined oil offerings. Supply Chain We believe in holding ourselves to high standards for sustainability and human rights practices and have taken efforts to drive sustainable practices through rigorous supply chain oversight. We monitor for practices that are not in line with our corporate vision and work to drive change. Our Vendor Code of Conduct establishes the minimum standards that must be met by all vendors regarding treatment of workers, safety, environmental impact and ethical business practices. Community Engagement Clean Harbors believes that by staying engaged with our customers, communities and other stakeholders, we can contribute to the long-term health of the environment, society and the economy. We are dedicated to being a good neighbor in the communities in which we work. We develop partnerships with key environmental programs to build awareness, while fostering more sustainable business practices. One of our most highly visible public programs for various government and community entities is known as our Household Hazardous Waste service line. Communities trust us to collect paints, solvents, 6 Table Of Contents batteries, fluorescent lamps, pesticides, cleaners and other hazardous materials that otherwise might be improperly disposed of or become dangerous to the communities where they are stored. Our commitment and our business go hand in hand as we work to provide services and products that complement our customers' sustainability plans and hold ourselves and others accountable to environmental, social and corporate governance standards and best practices. Competitive Strengths • Leading Provider of Environmental and Industrial Services - We are a leading provider of environmental and industrial services which provide solutions that help our customers protect the environment. We own nine commercial hazardous waste incinerators, making us the largest operator of such facilities in North America. We are also one of the few industrial services companies with national footprints in both the U.S. and Canada. We have a highly skilled workforce that is trained to safely respond to customer needs across a variety of service lines. We provide multi-faceted, high-quality services to a broad mix of customers. Our vast capabilities, valuable and unique assets, skilled workforce, safety profile and breadth of services as well as our overall size, scale and geographic locations help us attract customers and provide environmentally responsible solutions for our customers. • Integrated Network of Assets - We believe we operate, in the aggregate, the largest number of commercial hazardous waste incinerators, landfills, treatment facilities and TSDFs in North America. We also have a significant fleet across a vast transportation network throughout the U.S. and Canada. Our broad service network enables us to effectively handle a waste stream from its origin through disposal and to efficiently internalize our waste streams and transportation to reduce costs. Our size allows us to leverage our network and increase our profit margins as we can internalize a greater volume of waste in our incinerators, landfills and other disposal facilities. Furthermore, these assets are very difficult to duplicate because, in addition to sizable required capital investments, significant permitting and regulatory approvals would need to be obtained in order for new commercial waste disposal sites to come on-line. As such, these high barriers of entry provide increased value to our network. • Comprehensive Service Capabilities Complementing our Customers Sustainability Goals - Our comprehensive service offerings and product catalog allow us to act as a full service provider of sustainable options for our customers' needs. Not only can our customers rely on Clean Harbors to be part of their sustainability plan, but they can minimize the number of outside vendors utilized and rely on us as "one stop shop" service provider. Our breadth of service offerings creates incremental revenue growth with no one competitor having the portfolio of services that we can provide to our customers. Our workforce is trained to swiftly pivot to fulfill customer needs should markets change or demand shift and our complementary lines of business help keep us steady in turbulent times. • Largest Collector and Recycler of Used Motor Oil - As the largest re-refiner and recycler of used oil in North America, during 2021 and 2020, we returned approximately 196 million and 166 million gallons, respectively, of new re-refined oil, lubricants and byproducts back into the marketplace. In 2021 and 2020, our re-refining process eliminated more than an estimated 2.1 million and 1.7 million metric tons, respectively, of greenhouse gas ("GHG"). For 2021 alone, the estimated GHG's eliminated as a result of our re-refining process has the net carbon benefit equivalent to growing approximately 35 million trees for 10 years or taking over 457,000 passenger cars off the road for one year. • Effective Cost Management - In these times of cost increases due to significant inflationary pressures, we have focused our cost management in order to maintain our overall margins. Our significant scale allows us to maintain low costs through standardized compliance procedures and significant purchasing power. Leveraging our investment in technology and our ability to efficiently utilize logistics and transportation, we can economically direct waste streams to the most efficient facility. We also have the ability to use internal resources to transport and process the substantial majority of all hazardous waste that we manage for our customers. In addition, our Safety-Kleen Sustainability Solutions segment results are significantly impacted by the overall market pricing and product mix associated with base and blended oil products. We manage the pricing on our used oil collection services which allow us to effectively manage the profit spreads inherent in our Safety-Kleen Sustainability Solutions business. • Large and Diversified Customer Base - Our customer portfolio ranges from small companies to Fortune 500 companies and include public and private entities that span multiple industries and business types, including some government entities. This diversification opens opportunities for cross-selling our large portfolio of services and limits our credit exposure to any one customer and potential cyclicality in any one industry. As a percentage of our 2021 revenues, the top ten industries we serviced totaled approximately 79% of revenues and included chemical (16%), general manufacturing (16%), base and blended oils (9%), refineries (9%), automotive (8%), government (6%), utilities (5%), transportation (4%), retail (3%) and construction (3%). 7 Table Of Contents • Stable and Recurring Revenue Base - We have long-standing relationships with our large customers, many of whom have worked with our Company for decades. We will also benefit from the long-standing customer relationships that HydroChemPSC will bring to our business, including many instances where HydroChemPSC operations are embedded in a customer facility (insite locations). Our diversified customer base provides stable and recurring revenues, as a significant portion of our revenues are derived from previously served customers with recurring needs for our services. In addition, there can be a financial burden that accompanies switching hazardous waste disposal providers due to customers' desire to audit disposal facilities prior to their qualification as approved sites and to limit the number of facilities to which their hazardous waste is shipped in order to reduce potential liability under United States and Canadian environmental laws and regulations. We have been selected as an approved vendor by large and small generators of waste because we possess comprehensive collection, recycling, treatment, transportation, disposal and hazardous waste tracking capabilities and have the expertise necessary to comply with applicable environmental laws and regulations. Those customers that have selected us as an approved vendor typically continue to use our services on a recurring basis. • Regulatory Compliance - We continue to make capital investments in our facilities to ensure that they are in compliance with current federal, state, provincial and local regulations. Companies that rely on in-house disposal may find the current regulatory requirements to be too capital intensive or complicated, and may choose to outsource many of their hazardous waste disposal needs. • Proven and Experienced Management Team - Our executive management team provides depth and continuity. Our executive officers collectively have over 200 years of experience and expertise in the environmental and industrial services industries. Our Chief Executive Officer founded our Company in 1980 and, since the Company's formation, has served as both the Chief Executive Officer and Chairman of the Board. This team has the depth of knowledge of both the industry and our operations to be able to quickly pivot in times of change and identify and respond to new market demands. Operations Environmental Services Our Environmental Services business offers an array of services to customers. We collect, transport, treat and dispose of hazardous and non-hazardous waste, including resource recovery, physical treatment, fuel blending, incineration, landfill disposal, wastewater treatment, lab chemical disposal, explosives management and CleanPack ® services. Our CleanPack ® services include the collection, identification, categorization, specialized packaging, transportation and disposal of laboratory chemicals and household hazardous waste. We perform a wide range of industrial maintenance and specialty industrial services and utilize specialty equipment and resources to perform field services at any chosen location on a planned or emergency response basis. We also collect containerized waste and provide parts washer and vacuum services to small quantity generators of hazardous waste. All of these services are designed to protect the environment and address environmental related challenges through the use of innovation and the latest technologies. We provide customers with sustainable solutions that seek to recycle waste materials whenever possible. Technical Services We provide technical services through a network of service centers from which a fleet of vehicles are dispatched to pick up customers' waste either on a predetermined schedule or on demand, and to deliver the waste to permitted facilities, which are usually Company-owned. Our service centers can also dispatch chemists to a customer location for collection of chemical and laboratory waste for disposal. InSite Service ® offerings is a branded on-site/in-plant service delivery program through which we offer a full range of environmental, industrial and waste management services. This signature program is built on safety, quality, efficiency and integrity, and has been offered by Clean Harbors for more than 25 years. By leveraging Clean Harbors' expertise and capabilities, our on-site staff are dedicated to developing the safest, most cost-effective and sustainable solutions to service customers’ needs. As an integral part of our services, we collect industrial waste from customers and transport such waste to and between our facilities for treatment or bulking for shipment to final disposal locations. Customers typically accumulate waste in containers, such as 55-gallon drums, bulk storage tanks or 20-cubic-yard roll-off containers. In providing this service, we utilize a variety of specially designed and constructed tank trucks and semi-trailers as well as third-party transporters, including railroads. We recycle, treat and dispose of hazardous and non-hazardous industrial waste. The waste handled includes substances which are classified as "hazardous" because of their corrosive, ignitable, infectious, reactive or toxic properties and other substances subject to federal, state and provincial environmental regulation. We provide final treatment and disposal services 8 Table Of Contents designed to manage waste which cannot be otherwise economically recycled or reused. The waste that we handle comes in solid, sludge, liquid and gas form. Incineration is the preferred method for the treatment of organic hazardous waste because it effectively destroys the contaminants at high temperatures. High temperature incineration efficiently eliminates organic waste such as herbicides, halogenated solvents, pesticides and pharmaceutical and refinery waste, regardless of form as gas, liquid, sludge or solid. Federal and state incineration regulations require a destruction and removal efficiency of 99.99% for most organic waste. As of December 31, 2021, we had nine active incinerators operating in five incinerator facilities that offer a wide range of technological capabilities to customers. In the United States, we operate one fluidized bed thermal oxidation unit for maximum destruction efficiency of hazardous waste with an estimated annual practical capacity of 58,808 tons and three solids and liquids capable incinerator facilities with a combined estimated annual practical capacity of 377,387 tons. We also operate one hazardous waste liquid injection incinerator in Canada with total annual practical capacity of 125,526 tons. Our incinerator facilities in Kimball, Nebraska; Deer Park, Texas; El Dorado, Arkansas; and Aragonite, Utah, are designed to process liquid organic waste, sludge, solids, soil and debris. Our Deer Park facility has two kilns and a rotary reactor. Our El Dorado facility specializes in the treatment of bulk and containerized hazardous liquids, solids and sludge, and has a hazardous waste incinerator which specializes in high-temperature incineration of regulated waste such as industrial and laboratory chemicals, manufacturing byproducts, fertilizers and other solid and liquid materials that would otherwise be hazardous to the environment and public health if not properly managed. Our facilities in Kimball and Deer Park also have on-site landfills for the disposal of ash produced as a result of the incineration process. Our incinerator facility in Lambton, Ontario, is a liquid injection incinerator designed primarily for the destruction of liquid organic waste. Typical waste streams include wastewater with low levels of organics and other higher concentration organic liquid waste not amenable to conventional physical or chemical waste treatment. Landfills are primarily used for disposal of inorganic waste. In the United States and Canada, we operate seven commercial landfills, six of which are designed and permitted for disposal of hazardous waste and one which is operated for non-hazardous industrial waste disposal. Of our six hazardous waste commercial landfills, four are located in the United States and two are located in Canada. Our non-hazardous landfill is located in the United States. In addition to our seven commercial landfills, we also own and operate, as described above, two non-commercial landfills that only accept waste from our on-site incinerators. As of December 31, 2021, the useful economic lives of our six commercial hazardous waste landfills included approximately 20.3 million cubic yards of remaining capacity. We estimate the useful economic lives of landfills to include permitted airspace and unpermitted airspace that our management believes to be probable of being permitted based on our analysis of various factors. In addition to the capacity included in the useful economic life of these landfills, there are approximately 20.9 million cubic yards of additional unpermitted airspace capacity included in the footprints of these landfills that may ultimately be permitted, although there can be no assurance that this additional capacity will be permitted. As of December 31, 2021, the useful economic life of our non-hazardous industrial landfill included 3.3 million cubic yards of remaining permitted capacity. This facility is located in the United States and has been issued operating permits under Subtitle D of RCRA. Our non-hazardous landfill facility is permitted to accept commercial industrial waste, including waste from demolition and construction. Another waste disposal outlet in our network of facilities are our TSDFs that collect, temporarily store and/or consolidate compatible waste streams for more efficient transportation to final recycling, treatment or disposal destinations. These facilities hold special permits, such as Part B permits under the Resource Conservation and Recovery Act ("RCRA") in the United States, which allow them to process, transfer and dispose of waste through various technologies including recycling, incineration, landfill and wastewater treatment depending on each location's permitted and constructed capabilities. We operate recycling systems for the reclamation and reuse of certain waste, particularly solvent-based waste generated by industrial cleaning operations, metal finishing and other manufacturing processes. Resource recovery involves the treatment of waste using various methods, which effectively remove contaminants from the original material to restore its fitness for its intended purpose and to reduce the volume of waste requiring disposal. We also operate a recycling facility that recycles refinery waste and spent catalyst. The recycled oil and catalysts, depending on market conditions, are sold to third parties. Our wastewater treatment facilities process hazardous and non-hazardous waste through use of physical and chemical treatment methods. With the acquisition of HydroChemPSC, we now have ten wastewater treatment facilities that offer or employ a range of wastewater treatment technologies. These facilities treat a broad range of industrial liquid and semi-liquid waste containing heavy metals, organics and suspended solids. 9 Table Of Contents We also provide total project management services in areas such as chemical packing, on-site waste management, remediation, compliance training and emergency spill response, while leveraging Clean Harbors' network of service centers and environmental capabilities. Our household hazardous waste collection services provide municipalities with a partner for the collection and disposal of household paints, solvents, batteries, fluorescent lamps, pesticides, cleaners and other hazardous materials. Field and Emergency Response Services Our crews and equipment are dispatched on a planned or emergency basis and perform services such as confined space entry for tank cleaning, site disinfecting, decontamination and disposal, including such work for COVID-19 decontamination, large remediation projects, demolition, spill cleanup on land and water, railcar cleaning, hydro excavation, manhole/vault clean outs, product recovery and transfer, scarifying and media blasting, vacuum services and water treatment services. We are also a leader in providing response services for environmental emergencies of any scale from man-made disasters such as oil spills and from natural disasters such as hurricanes. Industrial Services We perform industrial cleaning and maintenance services and specialty industrial services at refineries, mines, upgraders, chemical plants, pulp and paper mills, manufacturing facilities, power generation facilities and other industrial customers throughout North America. Our industrial services crews handle services to support ongoing in-plant cleaning and maintenance services on our customers' mission critical equipment and infrastructure. These services include liquid/dry vacuum, hydro-blasting, dewatering and materials processing, leak detection and repair, water and chemical hauling and steam cleaning. We provide a variety of specialized industrial services including plant outage and turnaround services, specialty cleaning services including chemical cleaning and high and ultra-high pressure water cleaning, daylighting, production services and upstream energy services. With the addition of the HydroChemPSC business into our industrial services operations, we expanded our on-site/in-plant service delivery program for industrial services and are focused on the integration of automation, technology and innovation into the industrial services operations. Safety-Kleen Environmental Core Services Our Safety-Kleen Environmental branches' core service offerings focus on the small quantity waste generators predominately within the automotive, industrial and retail space. We provide containerized waste, parts-washer and vacuum services to a diverse range of customers including automobile repair shops, car and truck dealers, metal fabricators, machine manufacturers, fleet maintenance shops and other automotive, industrial and retail customers. We provide pickup and transportation of hazardous and non-hazardous containerized waste for recycling or disposal, primarily through the Clean Harbors' network of recycling, treatment and disposal facilities. As the largest provider of parts cleaning services in North America, we offer a complete line of specially designed parts washers to customer locations and then deliver recurring service that includes machine cleaning and maintenance and disposal and replenishment of clean solvent or aqueous fluids. Our vacuum services remove solids, residual oily water and sludge and other fluids from customers' oil/water separators, sumps and collection tanks. We also remove and collect waste fluids found at large and small industrial locations, including metal fabricators, auto maintenance providers and general manufacturers. Safety-Kleen Sustainability Solutions Our Safety-Kleen Sustainability Solutions business offerings span the life-cycle of oil and other sustainable lubricant products. Our teams collect used oil which serves as feedstock for our oil re-refineries. In 2021, we collected 226 million gallons of used oil. We can process the used oil collected through our seven re-refineries located in East Chicago, Indiana; Newark, California; Wichita, Kansas; Tacoma, Washington; Fallon, Nevada; Rollinsford, New Hampshire; and Breslau, Ontario. At our facilities, we manufacture, formulate, package, distribute and market high-quality lubricants that provide our customers with a sustainable solution to their oil demands. The used oil collected is processed or re-refined to convert into a variety of products, mostly base and blended lubricating oils, and much smaller quantities of asphalt-like material, glycols and fuels. One of the primary goals of our Safety-Kleen Sustainability Solutions business is to produce and sell high-quality eco-friendly blended oils, which are created by combining our re-refined base and other base oils with performance additives in accordance with our proprietary formulations and American Petroleum Institute licenses. Our Performance Plus ® and EcoPower ® family of products are sold to on- and off-road corporate fleets, government entities, automotive service shops and industrial plants, which are serviced through our internal distribution network, as well as an extensive United States and Canada-wide independent distributor network. We also sell unbranded blended oils to distributors that resell them under their 10 Table Of Contents private label brands. Our OilPlus ® program consists of selling our renewable oil products directly to our end customers. We sell the base oil that we do not blend and sell ourselves to independent blenders/packagers that use it to blend their own branded or private label oils. With 226 million gallons of used oil processed in 2021, we were able to return approximately 196.1 million gallons of new re-refined oil, lubricants and byproducts back into the marketplace helping our customers meet the growing demand for the use of sustainable products in their operations. The used oil can also be processed into recycled fuel oil, or “RFO,” which is then sold to customers such as asphalt plants, industrial plants, pulp and paper companies. The used oil is also processed into vacuum gas oil which can be further re-refined into lubricant base oils or sold directly into the marine diesel oil fuel market. We also collect and either recycle or dispose of related automotive products including antifreeze and oil filters. We sell automotive and industrial products including antifreeze recycled through our collections above, windshield washer fluid, degreasers, glass and floor cleaners, hand cleaners, absorbents, mats and spill kits. Seasonality Our operations may be affected by seasonal fluctuations primarily due to weather and budgetary cycles influencing the timing of customers' spending for products and services. Typically during the first and fourth quarters of each year there is less demand for our oil collection, recycling services and environmental services due to lower customer activity levels resulting from the cold weather, particularly in Canada and the northern and midwestern regions of the United States. As a result, reduced volumes of waste are received at our facilities, higher operating costs are realized due to sub-freezing weather and high levels of snowfall and lower volumes of used oil are generated for our collection. Customer factory closings for year-end holidays can also contribute to reduced waste volumes in our network of facilities during this time. In 2021, for various macroeconomic reasons, the effects of seasonality were not as apparent as they have been in prior years. That said, we do anticipate that we may see these seasonal trends again in the future. Geographical Information For the year ended December 31, 2021, we generated $3,271.5 million or 86.0% of our direct revenues in the United States and $534.1 million or 14.0% of our direct revenues in Canada. For the year ended December 31, 2020, we generated $2,706.9 million or 86.1% of our direct revenues in the United States and $437.2 million or 13.9% of our direct revenues in Canada. For additional information about the geographical areas from which our revenues are derived and in which our assets are located, see Note 3, "Revenues," and Note 19, "Segment Reporting," respectively, to our consolidated financial statements included in Item 8 of this report. Competitive Markets Due to the variety of services and products offered, the Company faces competition from companies in various industries, though no one competitor directly competes with our full suite of offerings. Sources of competition vary by locality and by type of service rendered, with competition coming from national and regional industrial and automotive waste services companies and hundreds of privately-owned firms. Veolia North America, US Ecology, Inc., Harsco Corporation, Stericycle, Inc. and Heritage-Crystal Clean are the principal national firms with which we compete. Each of these competitors is able to provide one or more of the environmental services we offer. Under federal and state environmental laws in the United States, generators of hazardous waste remain liable for improper disposal of such waste. Although generators may hire various companies that have the proper permits and licenses, because of the generators' potential liability, they are very interested in the reputation and financial strength of the companies they use for the management of their hazardous waste. We believe that our technical proficiency, safety record, customer service oriented culture and overall reputation are important considerations to our customers in selecting and continuing to utilize our services. We also believe that the depth of our recycling, treatment and disposal capabilities, our ability to collect and transport waste materials efficiently and our pricing are additional significant differentiating factors which create an advantage for us in the market for treatment and disposal services. Competition within our Environmental Services segment varies by locality and type of service rendered. For our landfill and waste services, competitors include several major national and regional environmental services firms, as well as numerous smaller local firms. We believe the availability of skilled, technical and professional personnel, quality of performance, diversity of services, safety record, quality of assets and use of current technologies, as well as price, are the key competitive factors in this service industry. For our industrial, field emergency response and Safety-Kleen branches' core services, competitors vary by locality and by type of service rendered, with competition coming from national and regional service providers and hundreds of privately-owned firms that offer similar services. Envirosystems and Heritage-Crystal Clean in the United States, and CEDA International Corporation and Secure Energy Services in Canada, are the principal national firms with which we compete for this work. There are also several regional and local firms with which we compete. Each of these 11 Table Of Contents competitors is able to provide one or more of the industrial and field services we offer. We believe the availability of specialized equipment and latest technologies, skilled, technical, and professional personnel, quality of performance, diversity of services, safety record and price are the key competitive factors in this industry. For our Safety-Kleen Sustainability Solutions segment, competitors vary by locality and by type of services rendered, with competition coming from Heritage-Crystal Clean, along with many regional and local firms. We believe that geographic coverage, pricing and breadth of services and products, including our ability to produce high quality sustainable lubricants from the used motor oil we collected, are key competitive factors in this industry. With our Safety-Kleen Oil Plus ® closed loop offering, we are competing in certain markets with other North American lubricant distributors. The principal methods of competition for all of our services and products are quality, price, reliability of service rendered or products sold and technical proficiency. We believe that we offer a more comprehensive range of environmental and industrial services than our competitors in major portions of the United States and Canada. Human Capital As of December 31, 2021, we employed approximately 18,300 active full-time employees, of which 1,460 in the United States and 558 in Canada were represented by labor unions. In response to the needs of our business, we also employ temporary and part time employees. As of December 31, 2021, the total of all active employees was approximately 19,100, including over 3,600 previous HydroChemPSC employees. Our human capital objectives focus on the health and safety of our employees, employee development and training and compensation and benefits. Key metrics that management uses to measure these objectives include TRIR, voluntary turnover rates and time to job ready, all of which are monitored at all levels of the organization. We believe that our relationship with our employees is positive and we engage with our employees through periodic employee engagement surveys, and other mechanisms, to continue the development of these relationships. As part of our commitment to employee safety and quality customer service, we have an extensive compliance program and trained environmental, health and safety staff. We continually strive to invest in our employees through training programs, including training specifically aimed at workplace safety and cyber-security. We provide the training and licensing necessary to maintain a skilled and experienced workforce. We also provide competitive compensation and benefit programs, including matching employee contributions towards retirement savings plans and covering annual healthcare cost increases. Resources We have invested significantly in the development of proprietary technologies and also to establish and maintain an extensive knowledge of leading technologies. The acquisition of HydroChemPSC increased this portfolio of leading technologies and innovation, specifically in the industrial services business. We incorporate these technologies into the services we offer and provide to our customers to enhance the service, reduce the time and/or increase the safety of such services. For example, our internally developed proprietary software system, Waste Information Network, electronically tracks each step taken by any particular load of waste in our business, allowing customers assurance and transparency into their waste disposal. As of December 31, 2021, we held a total of 55 U.S. and 18 foreign issued or granted patents (which will expire between 2022 and 2031), one foreign and three U.S. pending patent applications and 108 U.S. and 57 foreign trademark registrations. We also license software and other intellectual property from various third parties. We enter into confidentiality agreements with certain of our employees, consultants and corporate partners, and control access to software documentation and other proprietary information. We believe that we hold adequate rights to all intellectual property used in our business and that we do not infringe upon any intellectual property rights held by other parties. We must obtain and maintain permits and licenses for transportation and industrial needs in both Environmental Services and Safety-Kleen Sustainability Solutions. We are required to obtain federal, state, provincial and local permits or approvals for each of our hazardous waste facilities. These permits and licenses are material to our business operations. Such permits are difficult to obtain and, in many instances, extensive studies, tests and public hearings are required before the approvals can be issued. Our compliance programs are paramount in maintaining these permits and licenses as well. Management of Risks We adhere to a program of risk management policies and practices designed to reduce potential liability, as well as to manage customers' ongoing environmental exposures. This program includes installation of risk management systems at our facilities, such as fire suppression, employee training, environmental consciousness, auditing and policy decisions restricting the types of waste handled. We evaluate all revenue opportunities and decline those that we believe involve unacceptable risks. We dispose of waste at our incinerator, wastewater treatment and landfill facilities, or at facilities owned and operated by other firms that we have audited and approved. We apply established technologies to treatment, storage and recovery of 12 Table Of Contents hazardous waste. We believe our operations are conducted in a safe and prudent manner and in substantial compliance with applicable laws and regulations. Insurance and Financial Assurance Our insurance programs cover the potential risks associated with our multifaceted operations from two primary exposures: direct physical damage and third-party liability. We maintain a casualty insurance program providing coverage for vehicles, employer's liability and commercial general liability in the aggregate amount of $105.0 million, $102.0 million and $102.0 million, respectively, per year, subject to retentions of $1.0 million for employers' liability in the United States and $2.0 million (CAD) in Canada and $2.0 million per occurrence for auto and commercial general liability. Our auto and commercial general liability umbrella policy includes a $5.0 million annual aggregate self-insured corridor retention as well. We also have workers' compensation insurance with limits established by state statutes. We have pollution liability insurance policies covering potential risks in three areas: as a contractor performing services at customer sites, as a transporter of waste and as a processor of waste at our facilities. The contractor's pollution liability insurance has limits of $20.0 million per occurrence and $25.0 million in the aggregate, covering offsite remedial activities and associated liabilities. For sudden and accidental in-transit pollution liability, our auto liability policy provides the primary $5.0 million per occurrence of transportation pollution insurance. Our pollution liability policies provide an additional $75.0 million per occurrence and $80.0 million in the aggregate for a total of $80.0 million per occurrence and $85.0 million in the aggregate, respectively. A $2.0 million deductible per occurrence applies to this coverage in the United States and Canada. Federal and state regulations require liability insurance coverage for all facilities that treat, store or dispose of hazardous waste. RCRA, the Toxic Substances Control Act and comparable state hazardous waste regulations typically require hazardous waste handling facilities to maintain pollution liability insurance in the amount of $1.0 million per occurrence and $2.0 million in the aggregate for sudden occurrences and $3.0 million per occurrence and $6.0 million in the aggregate for non-sudden occurrences. Our liability insurance coverage meets or exceeds all federal and state regulations. We maintain property insurance on our physical locations valued in excess of $10.0 million covering direct physical damage. We consolidated the insurance on these locations and this policy has a $10.0 million aggregate deductible. We are self-insured for locations not specifically listed on this policy. Our international operations are insured under locally placed insurance policies that are compulsory in a specific country. In addition, we have a global foreign liability policy that will provide excess and difference in condition coverage in international countries. Under our insurance programs, coverage is obtained for catastrophic exposures, cyber security as well as those risks required to be insured by law or contract. It is our policy to retain a significant portion of certain expected losses related primarily to employee benefits, workers' compensation, commercial general and vehicle liability. Provisions for losses expected under these programs are recorded based upon our estimates of the actuarially determined value of the aggregate liability for claims. We believe that policy cancellation terms are similar to those of companies in other industries. Operators of hazardous waste handling and certain other permitted facilities are required by federal, state, provincial and local regulations to provide financial assurance for closure and post-closure care of those facilities should the facilities cease operation. Closure would include the cost of removing the waste stored at a facility which ceased operating and sending the material to another facility for disposal and the cost of performing certain procedures for decontamination of the facility. As of December 31, 2021, our total estimated closure and post-closure costs requiring financial assurance by regulators were $502.4 million for our U.S. facilities and $57.4 million for our Canadian facilities. We have obtained all of the required financial assurance for our facilities through a combination of surety bonds and insurance from qualified insurance companies. Government Regulations While our business has benefited substantially from increased government regulation of hazardous waste transportation, storage and disposal, the environmental services industry itself is the subject of extensive and evolving regulation by federal, state, provincial and local authorities. As noted above, we are required to obtain federal, state, provincial and local permits or approvals for each of our hazardous waste facilities. We have acquired all material operating permits and approvals now required for the current operation of our business and have applied for, or are in the process of applying for, all permits and approvals needed in connection with planned expansion or modifications of our operations. We are constantly monitoring the regulatory environment which is often influenced by changes in leadership at the federal, state, provincial and local levels. We make a continuing effort to anticipate regulatory, political and legal developments 13 Table Of Contents that might affect operations, but are not always able to do so. We cannot predict the extent to which any legislation or regulation that may be enacted or enforced in the future may affect our operations. United States Hazardous Waste Regulation Federal Regulations. The most significant federal environmental laws affecting us are the RCRA, the Comprehensive Environmental Response, Compensation and Liability Act, also known as the "Superfund Act," the Clean Air Act, the Clean Water Act and the Toxic Substances Control Act ("TSCA"). RCRA. RCRA is the principal federal statute governing hazardous waste generation, treatment, transportation, storage and disposal. Pursuant to RCRA, the EPA has established a comprehensive "cradle-to-grave" system for the management of a wide range of materials identified as hazardous waste. States that have adopted hazardous waste management programs with standards at least as stringent as those promulgated by the EPA have been delegated authority by the EPA to administer their facility permitting programs in lieu of the EPA's program. Every facility that treats, stores or disposes of hazardous waste must obtain a RCRA permit from the EPA or an authorized state agency unless a specific exemption exists, and must comply with certain operating requirements ("Part B" permitting process). RCRA also requires that Part B permits contain provisions for required on-site study and cleanup activities, known as "corrective action," including detailed compliance schedules and provisions for assurance of financial responsibility. See Note 9, "Closure and Post-Closure Liabilities," and Note 10, "Remedial Liabilities," to our consolidated financial statements included in Item 8 of this report for a discussion of our environmental liabilities. See "Insurance and Financial Assurance" above for a discussion of our financial assurance requirements. The Superfund Act. The Superfund Act is the primary federal statute regulating the cleanup of inactive hazardous substance sites and imposing liability for cleanup on the responsible parties. It provides for immediate EPA coordinated response and removal actions for hazardous substances released into the environment. It also authorizes the government to respond to the release or threatened release of hazardous substances or to order responsible persons to perform any necessary cleanup. The statute provides for strict and, in certain cases, joint and several liability to the parties involved in the generation, transportation and disposal of hazardous substances for the cost of these responses and for the cost of damages to natural resources. Under the statute, we may be deemed liable as a generator or transporter of a hazardous substance which is released into the environment, or as the owner or operator of a facility from which there is a release of a hazardous substance into the environment. See Note 17, "Commitments and Contingencies," to our consolidated financial statements included in Item 8 of this report for a description of the principal such proceedings in which we are now involved. The Clean Air Act. The Clean Air Act was passed by Congress to control the emissions of pollutants into the air and requires permits to be obtained for certain sources of hazardous air pollutants, such as vinyl chloride or air criteria pollutants, such as carbon monoxide. In 1990, Congress amended the Clean Air Act to require further reductions of air pollutants with specific targets for non-attainment areas in order to meet certain ambient air quality standards. These amendments also require the EPA to promulgate regulations which (i) control emissions of 188 hazardous air pollutants; (ii) create uniform operating permits for major industrial facilities similar to RCRA operating permits; (iii) mandate the phase-out of ozone depleting chemicals; and (iv) provide for enhanced enforcement. The Clean Water Act. This legislation prohibits discharge of pollutants into the waters of the United States without government authorization and regulates the discharge of pollutants into surface waters and sewers from a variety of sources, including disposal sites and treatment facilities. The EPA has promulgated "pretreatment" regulations under the Clean Water Act, which establish pretreatment standards for introduction of pollutants into publicly owned treatment works. In the course of the treatment process, our wastewater treatment facilities generate wastewater, which we discharge to publicly owned treatment works pursuant to permits issued by the appropriate government authorities. We are required to obtain discharge permits and conduct sampling and monitoring programs. TSCA. We operate a network of collection, treatment and field services (remediation) facilities throughout North America whose activities are regulated under provisions of TSCA. TSCA established a national program for the management of substances classified as polychlorinated biphenyls ("PCBs") which include waste PCBs as well as RCRA waste contaminated with PCBs. The rules set minimum design and operating requirements for storage, treatment and disposal of PCB waste. Since their initial publication, the rules have been modified to enhance the management standards for TSCA-regulated operations including the decommissioning of PCB transformers and articles, detoxification of transformer oils, incineration of PCB liquids and solids, landfill disposal of PCB solids, and remediation of PCB contamination at customer sites. Other Regulation Impacting the US Operations Federal Regulations. In addition to regulations specifically directed at our transportation, storage and disposal facilities, there are a number of regulations that may "pass-through" to the facilities based on the acceptance of regulated waste from 14 Table Of Contents affected customer facilities. Each facility that accepts affected waste must comply with the regulations for that waste, facility or industry. Examples of this type of regulation are National Emission Standards for Benzene Waste Operations and National Emissions Standards for Pharmaceuticals Production. Each of our facilities addresses these regulations on a case-by-case basis determined by its requirement to comply with the pass-through regulations. In our transportation operations, we are regulated by the U.S. Department of Transportation, the Federal Railroad Administration, the Federal Aviation Administration and the U.S. Coast Guard, as well as by the regulatory agencies of each state in which we operate or through which our vehicles pass. Health and safety standards under the Occupational Safety and Health Act ("OSHA") are also applicable to all of our operations. State and Local Regulations. Pursuant to the EPA's authorization of RCRA equivalent state run programs, a number of U.S. states have regulatory programs governing the operations and permitting of hazardous waste facilities. Accordingly, the hazardous waste treatment, storage and disposal activities of a number of our facilities are regulated by the relevant state agencies in addition to federal EPA regulation. Some states classify as hazardous certain wastes that are not regulated under RCRA. For example, Massachusetts and California consider used oil as "hazardous waste" while RCRA does not. Accordingly, we must comply with state requirements for handling state regulated waste, and, when necessary, obtain state licenses for treating, storing and disposing of such waste at our facilities. Some states regulate other aspects of our operations, as well. For example, Delaware and New York have set strict regulations regarding the level of volatile organic compounds in parts washer solvents. We endeavor to be and remain in compliance with all applicable state regulations. Our facilities are also regulated pursuant to state statutes, including those addressing clean water and clean air. Local sewer discharge and flammable storage requirements are applicable to certain of our facilities. Our facilities are also subject to local siting, zoning and land use restrictions. We believe that each of our facilities is in substantial compliance with the applicable requirements of federal and state licenses which we have obtained. Once issued, such licenses have maximum fixed terms of a given number of years, which differ from state to state, ranging from three to ten years. The issuing state agency may review or modify a license at any time during its term. We anticipate that once a license is issued with respect to a facility, the license will be renewed at the end of its term if the facility's operations are in compliance with applicable requirements. However, there can be no assurance that regulations governing future licensing will remain static, or that we will be able to comply with such requirements. Regulations by the International Maritime Organization ("IMO") primarily impact shipping businesses, and we continue to monitor the impact of the new IMO regulation for a 0.50% global sulphur cap for marine fuels which began on January 1, 2020 (known as "IMO 2020"). Under the new global cap, ships that traverse the oceans are required to use marine fuels with a sulphur content of no more than 0.50% sulphur, versus the previous cap of 3.50%, in an effort to reduce the amount of sulphur oxide and decrease pollution and greenhouse gas emissions from the global shipping fleet. The shipping industry is the last major transportation sector to utilize fuel with high levels of sulfur, which is the reason the IMO pushed the industry to more closely align with other transport sectors for pollution reduction. Given the disruption to global economies and supply chains, the marine shipping industry, and oil related commodity prices stemming from the COVID-19 pandemic, there are several variables around this regulatory change whereby the impacts of such changes still remain unclear. In particular this lack of clarity applies to our expectation of a significant increase in demand for a broad range of low sulfur distillates including diesel, marine gas oil, marine diesel oil and vacuum gas oil. However, it does seem clear that IMO 2020 has shifted the supply/demand balance for used motor oil, creating a surplus in the market that has materially reduced its value, although the exact amount remains unclear due to other factors affecting used oil markets. We will continue to monitor the impact of IMO 2020 on our business as markets return to more ‘normal’ conditions. Canadian Hazardous Waste Regulation In Canada, the provinces retain control over environmental issues within their boundaries and thus have the primary responsibility for regulating management of hazardous waste. The federal government regulates issues of national scope or where activities cross provincial boundaries. Provincial Regulations. Most of Canada's industrial development and the major part of its population are located in four provinces: Ontario, Quebec, Alberta and British Columbia, each of which have detailed environmental regulations. We operate major waste management facilities in each of these provinces, as well as waste transfer facilities in Nova Scotia and Manitoba. 15 Table Of Contents The main provincial acts dealing with hazardous waste management are: • Ontario—Environmental Protection Act; • Quebec—Environmental Quality Act; • Alberta—Environmental Protection and Enhancement Act; and • British Columbia—Waste Management Act. These pieces of legislation were developed by the provinces independently and, among other things, generally control the generation, characterization, transport, treatment and disposal of hazardous waste. Regulations developed by the provinces under the relevant legislation are also developed independently, but are often quite similar in effect and sometimes in application. For example, there is some uniformity in manifest document design and utilization. Provincial legislation also provides for the establishment of waste management facilities. In this case, the facilities are also controlled by provincial statutes and regulations governing emissions to air, groundwater and surface water and prescribing design criteria and operational guidelines. Waste transporters require a permit to operate under provincial waste management regulations and are subject to the requirements of the Federal Transportation of Dangerous Goods Act, as discussed below. They are required to report the quantities and disposition of materials shipped. Canadian Federal Regulations. The Canadian federal government has authority for those matters which are national in scope and in impact and for Canada's relations with other nations. The main federal laws governing hazardous waste management are: • Canadian Environmental Protection Act (1999) ("CEPA 99"), and • Transportation of Dangerous Goods Act Environment Canada is the federal agency with responsibility for environmental matters and the main legislative instrument is the CEPA 99. This act charges Environment Canada and Health Canada, the Federal agency responsible for the health of individuals, with protection of human health and the environment and seeks to control the production, importation and use of substances in Canada and to control their impact on the environment. The Export and Import of Hazardous Waste and Hazardous Recyclable Material Regulations under CEPA 99 control the export and import of hazardous waste and hazardous recyclable materials. By reference, these regulations incorporate the Transportation of Dangerous Goods Act and Regulations, which address identification, packaging, marking and documentation of hazardous materials during transport. CEPA 99 requires that anyone proposing to export or import hazardous waste or hazardous recyclable materials or to transport them through Canada, must notify the Minister of the Environment and obtain a permit to do so. Section 9 of CEPA 99 allows the federal government to enter into administrative agreements with the provinces and territories for the development and improvement of environmental standards. These agreements represent cooperation towards a common goal rather than a delegation of authority under CEPA 99. To facilitate the development of provincial and territorial agreements, the federal, provincial and territorial governments participate in the Canadian Council of Ministers of the Environment ("CCME"). The CCME comprises the 14 environment ministers from the federal, provincial and territorial governments, who normally meet at least once a year to discuss national environmental priorities and to determine work to be carried out under the auspices of the CCME. Canadian Local and Municipal Regulations. Local and municipal regulations seldom reference direct control of hazardous waste management activities. Municipal regulations and by-laws, however, control such issues as land use designation, access to municipal services and use of emergency services, all of which can have a significant impact on facility operation. Compliance with Environmental Regulations The environmental regulations discussed above require that we remediate contaminated sites, operate our facilities in accordance with enacted regulations, obtain required financial assurance for closure and post-closure care of our facilities should such facilities cease operations and make capital investments in order to keep our facilities in compliance with environmental regulations. As further discussed in Note 9, "Closure and Post-Closure Liabilities," and Note 10, "Remedial Liabilities," to our consolidated financial statements included in Item 8 of this report, we have accrued environmental liabilities as of 16 Table Of Contents December 31, 2021, of $211.0 million. For the years ended December 31, 2021, 2020 and 2019, we spent $15.5 million, $12.4 million and $18.7 million, respectively, to address environmental liabilities. As discussed more fully above under the heading "Insurance and Financial Assurance," we are required to provide financial assurance with respect to certain statutorily required closure, post-closure and corrective action obligations at our facilities. We have placed the required financial assurance primarily through qualified insurance companies. As described in Note 17, "Commitments and Contingencies," to our consolidated financial statements included in Item 8 of this report, we are involved in legal proceedings arising under environmental laws and regulations. Alleged failure to comply with laws and regulations may lead to the imposition of fines or the denial, revocation or delay of the renewal of permits and licenses by government entities. In addition, such government entities, as well as surrounding landowners, may claim that we are liable for environmental damages. Citizens groups have become increasingly active in challenging the grant or renewal of permits and licenses for hazardous waste facilities, and responding to such challenges has further increased the costs associated with establishing new facilities or expanding current facilities. A significant judgment against us, the loss of a significant permit or license or the imposition of a significant fine could have a material effect on our business and future prospects.