11.COMMITMENTS AND CONTINGENCIES

COMMITMENTS

Leases

The Company leases certain facilities and certain equipment under non-cancelable operating leases for periods ranging from one to 45 years, with renewal options for certain leases. The Company’s total rent expense under operating leases during the years ended December 31, 2014, 2013 and 2012, was $27,466, $30,893 and $19,424, respectively.

As of December 31, 2014, future minimum lease payments, by calendar year, are as follows:


2015	$	17,187
2016		15,621
2017		13,953
2018		10,927
2019		9,021
Thereafter		65,544
	$	132,253

Financial Surety Bonds

The Company uses financial surety bonds for a variety of corporate guarantees. The two largest uses of financial surety bonds are for municipal contract performance guarantees and asset closure and retirement requirements under certain environmental regulations. Environmental regulations require demonstrated financial assurance to meet final capping, closure and post-closure requirements for landfills. In addition to surety bonds, these requirements may also be met through alternative financial assurance instruments, including insurance, letters of credit and restricted asset deposits.

At December 31, 2014 and 2013, the Company had provided customers and various regulatory authorities with surety bonds in the aggregate amount of approximately $342,591 and $304,416, respectively, to secure its asset closure and retirement requirements and $94,385 and $89,196, respectively, to secure performance under collection contracts and landfill operating agreements.

The Company owns a 9.9% interest in a company that, among other activities, issues financial surety bonds to secure landfill final capping, closure and post-closure obligations for companies operating in the solid waste industry. The Company accounts for this investment under the cost method of accounting. There have been no identified events or changes in circumstances that may have a significant adverse effect on the carrying value of the investment. This investee company and the parent company of the investee have written financial surety bonds for the Company, of which $179,204 and $163,187 were outstanding as of December 31, 2014 and 2013, respectively. The Company’s reimbursement obligations under these bonds are secured by a pledge of its stock in the investee company.

Unconditional Purchase Obligations

At December 31, 2014, the Company’s unconditional purchase obligations consist of multiple fixed-price fuel purchase contracts under which it has 8.7 million gallons remaining to be purchased for a total of $29,024. These fuel purchase contracts expire on or before December 31, 2015.

CONTINGENCIES

Environmental Risks

The Company expenses costs incurred to investigate and remediate environmental issues unless they extend the economic useful life of related assets. The Company records liabilities when it is probable that an obligation has been incurred and the amounts can be reasonably estimated. The remediation reserves cover anticipated costs, including remediation of environmental damage that waste facilities may have caused to neighboring landowners or residents as a result of contamination of soil, groundwater or surface water, including damage resulting from conditions existing prior to the Company’s acquisition of such facilities. The Company’s estimates are based primarily on investigations and remediation plans established by independent consultants, regulatory agencies and potentially responsible third parties. The Company does not discount remediation obligations. At December 31, 2014 and 2013, the current portion of remediation reserves was $3,023 and $3,226, respectively, which is included in Accrued liabilities in the Consolidated Balance Sheets. At December 31, 2014 and 2013, the long-term portion of remediation reserves was $725 and $725, respectively, which is included in Other long-term liabilities in the Consolidated Balance Sheets. The Company’s liabilities for remediation reserves were assumed in the R360 acquisition. Any substantial increase in the liabilities for remediation of environmental damage incurred by the Company could have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Legal Proceedings

In the normal course of its business and as a result of the extensive governmental regulation of the solid waste and E&P waste industries, the Company is subject to various judicial and administrative proceedings involving federal, state or local agencies. In these proceedings, an agency may seek to impose fines on the Company or to revoke or deny renewal of an operating permit held by the Company. From time to time, the Company may also be subject to actions brought by special interest or other groups, adjacent landowners or residents in connection with the permitting and licensing of landfills, transfer stations, and E&P waste treatment, recovery and disposal operations, or alleging environmental damage or violations of the permits and licenses pursuant to which the Company operates.

In addition, the Company is a party to various claims and suits pending for alleged damages to persons and property, alleged violations of certain laws and alleged liabilities arising out of matters occurring during the normal operation of the waste management business. Except as noted in the matters described below, as of December 31, 2014, there is no current proceeding or litigation involving the Company or its property that the Company believes could have a material adverse impact on its business, financial condition, results of operations or cash flows.

Madera County, California Materials Recovery Facility Contract Litigation

The Company’s subsidiary, Madera Disposal Systems, Inc. (“MDSI”) was named in a complaint captioned County of Madera vs. Madera Disposal Systems, Inc., et al, filed in Madera County Superior Court (Case No. MCV 059402) on March 5, 2012, and subsequently transferred to Fresno County Superior Court. Madera County alleges in the complaint that from 2007 through 2010, MDSI breached a contract with the County for the operation of a materials recovery facility by withholding profits from facility operations in excess of those authorized by the contract. The County further alleges that the breach gives the County the unilateral right to terminate all of its contracts with MDSI, including contracts for (1) the collection of residential and commercial waste in the unincorporated parts of the County, (2) operation of the materials recovery facility, (3) operation of the North Fork Transfer Station and (4) operation of the Fairmead Landfill. The County seeks monetary damages of $2,962 from MDSI, plus pre-judgment interest at 10% per annum.

MDSI had been under contract with the County to collect residential and commercial waste and operate the county-owned Fairmead Landfill continuously since at least 1981. In 1993, MDSI contracted with the County to construct and operate a materials recovery facility for the County on the premises of the Fairmead Landfill. After it entered into the materials recovery facility contract, MDSI entered into new contracts with the County for waste collection and landfill operation to run concurrently with the materials recovery facility contract. In 1998, MDSI and the County agreed to extend the terms of the County contracts until November 10, 2012, with MDSI holding a unilateral option to extend the contracts for an additional five-year term.

In March 2011, the County issued a Notice of Default to MDSI under the materials recovery facility contract and gave MDSI 30 days to cure the default. MDSI provided information that it believed demonstrated that it was not in default under the contract and had not withheld profits that it was obligated to deliver to the County under the terms of the contract.

On February 7, 2012, the County issued a Notice of Termination to MDSI terminating all of its contracts effective November 1, 2012. The lawsuit followed on March 5, 2012. MDSI answered the complaint and asserted a claim against the County for wrongful termination of the contracts. On October 31, 2012, MDSI ceased providing services and vacated the County premises. The case is set for trial in Fresno in May 2015.

At this point, the Company is not able to determine the likelihood of any outcome in this matter. The Company disputes Madera County’s right to terminate the MDSI contracts effective November 1, 2012, and seeks damages for the profits lost as a result of the wrongful termination. The Company estimates that the current annual impact to its pre-tax earnings resulting from the termination of MDSI’s contracts with Madera County is approximately $2,300 per year, not including any monetary damages and interest the Court could order MDSI to pay the County.

Hudson Valley, New York TEAM Transportation Workers’ Compensation Trust

In April 2011, the Company acquired Hudson Valley Waste Holding, Inc., County Waste and Recycling Service, Inc., and their subsidiaries (collectively, the “HVC Companies”) from private owners (the “HVC Sellers”) pursuant to a stock purchase agreement dated March 31, 2011 (the “HVC Purchase Agreement”). The HVC Companies are engaged in the solid waste and recycling business in New York’s Hudson Valley. In October 2011, the Company received a letter from the New York State Workers’ Compensation Board (the “WCB”) with respect to the TEAM Transportation Workers’ Compensation Trust (the “TEAM Trust”). The TEAM Trust is a self-insured workers’ compensation program of which certain of the HVC Companies, together with approximately 760 unrelated entities, were participants. The TEAM Trust incurred deficits for a number of years leading up to 2011. In late 2010, trust members elected to close the TEAM Trust and cease all workers’ compensation coverage, effective on January 1, 2011. The October 2011 WCB letter asserted that the TEAM Trust had insufficient funds to cover outstanding claims and liabilities that preceded the trust’s closure and that, based upon the WCB’s preliminary estimates, the HVC Companies’ allocable portion of the underfunding was approximately $866. On December 7, 2011, the WCB determined that the TEAM Trust had demonstrated an inability to properly administer its liabilities, and accordingly, effective February 1, 2012, the WCB assumed the administration and final distribution of the TEAM Trust’s assets and liabilities. In February 2012 the Company notified the HVC Sellers that the failure to disclose the HVC Companies’ liability for the TEAM Trust’s underfunded obligations was a breach by the HVC Sellers of the representations and warranties contained in the HVC Purchase Agreement and that, pursuant to the terms of the HVC Purchase Agreement, the Company was seeking indemnification from the HVC Sellers for any liability that the HVC Companies may have with respect to the underfunding of the TEAM Trust. In March 2012, the HVC Sellers agreed to assume the defense of the matter but denied liability for indemnification under the HVC Purchase Agreement.

In July 2014, the Company received another letter from the WCB indicating that, based on a forensic accounting firm’s review of the TEAM Trust’s accumulated deficit, the WCB was increasing its estimate of the HVC Companies’ allocable portion of the liability for the TEAM Trust’s underfunding from approximately $866 to approximately $5,000, including accrued interest. The WCB has also alleged that each former member of the TEAM Trust is jointly and severally liable for the entire deficit of the TEAM Trust. To date, the WCB has issued a total of over $32,000 in deficiency assessments to the TEAM Trust members, including the HVC Companies.

On October 14, 2014, the Company commenced an action against the HVC Sellers in the United States District Court for the Northern District of New York alleging breach of contract, negligent misrepresentation, fraud, and common law indemnification for the TEAM deficits assessed by the WCB and for other costs, fees and damages, and for a declaratory judgment enforcing the HVC Sellers’ indemnification obligations to the Company.

Shortly after the lawsuit was filed, the Company and the HVC Sellers commenced settlement discussions, which culminated in the parties entering into a settlement agreement, dated December 17, 2014. Through the settlement agreement, the principal owner among the HVC Sellers agreed to indemnify the Company for any damages it incurs in relation to Team Trust, including prompt payment of any trust-related assessments made by or on behalf of the WCB. In addition, the HVC Sellers have agreed to toll the statute of limitations on claims asserted in the lawsuit until the indemnification obligations are fulfilled and there is no possibility of the Company incurring further liability in relation to the TEAM Trust. In exchange, the Company filed a notice of voluntary dismissal of the lawsuit, without prejudice, on December 19, 2014, and the notice was so-ordered by the court on December 23, 2014. All of the Company’s rights under the HVC Purchase Agreement are acknowledged in the settlement agreement, and are available to the Company in the event there is nonperformance by the HVC Sellers under the settlement agreement.

Lower Duwamish Waterway Superfund Site Allocation Process

The Company’s subsidiary, Northwest Container Services, Inc. (“NWCS”), has been named by the U.S. Environmental Protection Agency, Region 10 (the “EPA”), along with more than 100 others, as a potentially responsible party (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) with respect to the Lower Duwamish Waterway Superfund Site (the “LDW Site”). Listed on the National Priorities List in 2001, the LDW Site is a five-mile stretch of the Duwamish River flowing into Elliott Bay in Seattle, Washington. A group of PRPs consisting of the City of Seattle, King County, the Port of Seattle, and Boeing Company conducted a Remedial Investigation/Feasibility Study for the LDW Site, and on December 2, 2014, the EPA issued its Record of Decision (“ROD”) describing the selected remedy. The EPA estimates the total cleanup costs (in present value dollars) at $342,000, and estimates that it will take seven years to implement the remedy. Implementation will not begin until after the ongoing Early Action Area cleanups have been completed (estimated to be in mid-2015), as well as additional baseline sampling throughout the LDW Site and the preparation of a remedial design, activities that will take a number of years. The ROD also specifies ten years of monitoring following the cleanup, and provides that if the cleanup goals have not been met by the close of this period, then additional remediation activities may be required at that time. In August 2014, NWCS entered into an Alternative Dispute Resolution Memorandum of Agreement with several dozen other PRPs and a neutral allocator to conduct a non-binding allocation of certain past and future response costs allegedly incurred at the LDW Site. The allocation process is designed to develop evidence relating to each PRP’s nexus, if any, to the LDW Site (whether or not that PRP is participating in the allocation process), for the allocator to hear arguments as to how each PRP’s nexus affects the allocation of response costs, and to determine each PRP’s share of the cleanup costs. NWCS is defending itself vigorously in this confidential process and does not anticipate being allocated material liability. The allocation process is currently scheduled to be completed in mid-2018 with the entry of cleanup implementation and cash-out settlement agreements between and amongst the PRPs and the EPA. At this point the Company is not able to determine the likelihood of any outcome in this matter.

Collective Bargaining Agreements

Five of the Company’s collective bargaining agreements have expired or are set to expire in 2015. The Company does not expect any significant disruption in its overall business in 2015 as a result of labor negotiations, employee strikes or organizational efforts.