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As of December 31, 2023, we had $16.4 billion of long-term debt, excluding the impacts of accounting for debt issuance costs, discounts and fair value adjustments attributable to terminated interest rate derivatives.
−Removed: We have $3.5 billion of debt that is exposed to changes in market interest rates within the next 12 months comprised primarily of (i) $1.7 billion of short-term borrowings under our commercial paper program;
−Removed: (ii) $1.0 billion of long-term borrowings under our $1.0 billion, two-year, U.S.
−Removed: term credit agreement and (iii) $725 million of tax-exempt bonds with term interest rate periods that expire within the next 12 months.
+Added: We have $2.5 billion of debt that is exposed to changes in market interest rates within the next 12 months comprised primarily of (i) $860 million of short-term borrowings under our commercial paper program and (ii) $1.6 billion of tax-exempt bonds with term interest rate periods that expire within the next 12 months.
We currently estimate that a 100-basis point increase in the interest rates of our outstanding variable-rate debt obligations would increase our 2024 interest expense by $18 million.
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Treasury securities, U.S.
−Removed: agency securities, municipal securities, mortgage- and asset-backed securities, which generally mature over the next nine years, as well as equity securities.
+Added: agency securities, municipal securities, mortgage- and asset-backed securities, which generally mature over the next ten years, as well as equity securities.
Commodity Price Exposure — In the normal course of our business, we are subject to operating agreements that expose us to market risks arising from changes in the prices for commodities such as diesel fuel, electricity (and related renewable energy credits) and recycled materials, including old corrugated cardboard and plastics.
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Accordingly, as the market prices for these commodities increase or decrease, our revenues, operating costs and margins may also increase or decrease.
−Removed: Recycling revenues attributable to yield increased $19 million and $537 million in 2022 and 2021, respectively, as compared with the prior year periods, primarily from higher market prices for recycling commodities in 2021 and the first half of 2022, before the significant downturn in the second half of 2022.
−Removed: Demand for recycled materials strengthened through 2021 and into early 2022, primarily driven by the growth in e-commerce, businesses re-opening, and manufacturers committing to use more recycled content in their packaging.
−Removed: In 2022, we experienced all-time high recycling commodity pricing in the first half of the year to be followed by historically low pricing through the second half of the year, resulting from the slowdown in the global economy, which reduced retail demand and the corresponding need for cardboard packaging to ship retail goods.
−Removed: We expect significant commodity price headwinds to continue into 2023.
−Removed: Average market prices for recycling commodities at the Company’s facilities were approximately 10% lower and 115% higher in 2022 and 2021, respectively, when compared with the prior year periods.
−Removed: Revenue decline from lower commodity pricing was offset by higher pricing in our recycling brokerage business as well as our continued focus on a fee-based pricing model that ensures fees paid by customers cover the cost of processing materials and the impact on our cost structure of managing contamination in the recycling stream.
+Added: Recycling revenues attributable to yield decreased $308 million and increased $19 million in 2023 and 2022, respectively, as compared with the prior year periods.
+Added: With the significant decline in commodity prices that started in the second half of 2022 from their all-time highs and has continued into 2023, we are currently experiencing margin pressures from our commodity-driven businesses.
+Added: Average market prices for single-stream recycled commodities were down 40% and 10% in 2023 and 2022, respectively, as compared to the prior year periods.
Variability in commodity prices can also impact the margins of our business as certain components of our revenue are structured as a pass through of costs, including recycling brokerage and fuel surcharges.
−Removed: The primary drivers of renewable fuel development at our landfills are tax policies, such as the recently expanded federal tax credits for renewable natural gas (“RNG”) production and renewable electricity generation, and federal and state incentive programs, such as the federal Renewable Fuel Standard (“RFS”) program and the California Low Carbon Fuel Standard.
−Removed: At the federal level, oil refiners and importers are required through the RFS program to blend specified volumes of renewable transportation fuels with gasoline or buy credits, referred to as renewable identification numbers (“RINs”), from renewable fuel producers.
−Removed: The Company has invested, and continues to invest, in facilities that capture and convert landfill gas into RNG, and also works with facilities that capture and convert dairy digester gas into RNG, so that we can participate in the program, and the Company has stated its intention to grow its asset base to notably increase its RNG production by 2026.
−Removed: RINs prices generally respond to regulations enacted by the EPA, as well as fluctuations in supply and demand.
−Removed: The value of the RINs associated with RNG is set through a market established by the program.
−Removed: Prior to 2022, the EPA has promulgated rules on an annual basis establishing refiners’ obligations to purchase RNG and other cellulosic biofuels under the RFS program;
−Removed: however, the EPA issued a highly anticipated proposed rule in late 2022 setting forth the direction of the RFS program for compliance years 2023 through 2025.
−Removed: Although this proposal delivers on many reforms that benefit the solid waste sector, the EPA’s programmatic shift towards multi-year standards could lead to market uncertainty and volatility in the price of RINs.
−Removed: We continue to advocate for the current administration to implement policies that ensure long term stability for renewable transportation fuels and expand opportunities for the biogas sector to participate in the RFS program.
−Removed: Changes in the RFS market, the structure of the RFS program or RINs prices and demand can and has impacted the financial performance of the facilities constructed to capture and treat the gas.
+Added: We have invested, and continue to invest, in facilities to capture methane produced from the Company’s landfills and convert it into renewable natural gas (“RNG”) and electricity.
+Added: RNG produced from our landfills, as well as dairy biogas, constitute a significant source of fuel allocated to our natural gas collection vehicles.
+Added: The Company’s investment in renewable energy production is guided partly by the EPA’s implementation of the Renewable Fuel Standard (“RFS”) program, which promotes the production and use of renewable transportation fuels.
+Added: Many of our facilities are EPA-registered producers of transportation fuel making compressed and RNG from landfill biogas, which qualifies as a cellulosic biofuel under the RFS program.
+Added: Oil refiners and importers are required through the RFS program to blend specified volumes of various categories of renewable transportation fuels with gasoline or buy credits, referred to as renewable identification numbers (“RINs”), from renewable fuel producers.
+Added: RIN prices generally respond to regulations enacted by the EPA, as well as fluctuations in supply and demand.
+Added: The value of the RINs associated with RNG is set through a market established by the RFS program.
+Added: Prior to 2022, the EPA had promulgated rules on an annual basis establishing refiners’ obligations to purchase RNG and other cellulosic biofuels under the RFS program, which introduced uncertainty and volatility into the renewable fuels and RINs market.
+Added: However, in 2023, the EPA issued a highly anticipated rule establishing biofuel blending volumes under the RFS program for compliance years 2023 through 2025.
+Added: The rule reflected the outsized role of biogas under the program, delivered on many reforms that benefit the solid waste sector, and recognized the continued growth of the market for RNG in vehicle applications.
+Added: However, we cannot be certain that these changes, or the outcome of litigation challenging various aspects of the rule, will ultimately reduce volatility in the RINs market or that future rulemakings will be similarly favorable to our business.
+Added: We continue to advocate for the current federal administration to implement policies that could reduce the potential for volatility in the RINs market and ensure long-term stability for renewable transportation fuels, as changes in the RFS market or the structure of the RFS program can and has impacted the financial performance of the facilities constructed to capture and treat the gas.
Such changes could impact or alter our projected future investments, and such investments may not yield the results anticipated.
−Removed: Currency Rate Exposure — We have operations in Canada as well as certain support functions in India.
+Added: Revenue in our WM Renewable Energy segment declined $73 million and increased $48 million in 2023 and 2022, respectively, as compared to the prior year periods, primarily driven by the fluctuations in energy and RIN market prices.
+Added: The Company’s sustainability growth strategy also is informed by the increased adoption of state and Canadian clean fuel standard programs, utility policies, and voluntary market demand for RNG in transportation and industrial applications.
+Added: Clean fuel standard programs, originally developed in California and subsequently adopted in Oregon and Washington, establish annual carbon intensity benchmarks for transportation fuels that decrease over time.
+Added: These programs operate similar to the RFS program in that certain regulated parties purchase credits from fuel producers, including RNG producers, to meet their carbon intensity obligations.
+Added: Like RINs, clean fuel standard program credit values can fluctuate with policy and market dynamics.
+Added: As such, we are advocating for existing programs to adopt measures to promote stability in credit pricing and for other states to adopt similar programs that incentivize the growth in RNG.
+Added: We also are working closely with stakeholders to encourage the voluntary market for RNG demand, including utility RNG procurement programs, and sustainability protocols, as companies and other customers increasingly look to reduce their greenhouse gas emissions profiles.
+Added: Currency Rate Exposure — Our operations are primarily in the U.S.
+Added: but we also have significant operations in Canada.
+Added: Additionally, we have certain support functions in India.
Where significant, we have quantified and described the impact of foreign currency translation on components of income, including operating revenue and operating expenses.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.