10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

FORM 10-Q

_______________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended:  June 30, 2008			Commission File Number:  0-11688
		AMERICAN ECOLOGY CORPORATION
		(Exact Name of Registrant as Specified in Its Charter)
	Delaware			95-3889638
	(State of Incorporation)			(I.R.S. Employer Identification Number)
	Lakepointe Centre I, 300 E. Mallard, Suite 300 Boise, Idaho			83706
	(Address of Principal Executive Offices)			(Zip Code)
			(208) 331-8400
			(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x          No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   o	Accelerated filer    x
Non-accelerated filer   o  (Do not check if smaller reporting company)	Smaller Reporting Company   o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o          No x

The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of July 31, 2008 was 18,251,740.

AMERICAN ECOLOGY CORPORATION

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007	1
	Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007	2
	Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007	3
	Notes to Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	19
PART II.	OTHER INFORMATION
Cautionary Statement		20
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Submission of Matters to a Vote of Security Holders	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
SIGNATURE		23

PART I. FINANCIAL INFORMATION

Item 1.     Financial Statements

AMERICAN ECOLOGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	June 30,
	2008		December 31,
	(unaudited)		2007
Assets
Current Assets:
Cash and cash equivalents	$	18,517	$	12,563
Short-term investments		-		2,209
Receivables, net		31,684		29,422
Prepaid expenses and other current assets		2,999		3,034
Income tax receivable		-		994
Deferred income taxes		1,058		667
Total current assets		54,258		48,889
Property and equipment, net		67,294		63,306
Restricted cash		4,846		4,881
Total assets	$	126,398	$	117,076
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	7,743	$	4,861
Deferred revenue		5,389		4,491
Accrued liabilities		3,781		6,267
Accrued salaries and benefits		2,316		2,613
Income tax payable		38		-
Current portion of closure and post-closure obligations		1,646		803
Current portion of capital lease obligations		10		8
Total current liabilities		20,923		19,043
Long-term closure and post-closure obligations		13,598		14,331
Long-term capital lease obligations		26		27
Deferred income taxes		1,792		577
Total liabilities		36,339		33,978
Contingencies and commitments
Stockholders’ Equity
Common stock $0.01 par value, 50,000 authorized; 18,252 and
18,246 shares issued and outstanding, respectively		183		182
Additional paid-in capital		59,273		58,816
Retained earnings		30,603		24,100
Total stockholders’ equity		90,059		83,098
Total liabilities and stockholders’ equity	$	126,398	$	117,076

See Notes to Consolidated Financial Statements.

1

AMERICAN ECOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Revenue	$	44,516		$	41,267		$	90,735		$	80,231
Transportation costs		19,251			19,760			41,309			36,931
Other direct operating costs		11,687			9,854			22,404			20,133
Gross profit		13,578			11,653			27,022			23,167
Selling, general and administrative expenses		3,732			3,474			7,651			7,073
Operating income		9,846			8,179			19,371			16,094
Other income (expense):
Interest income		111			150			174			361
Interest expense		(3	)		(1	)		(4	)		(2	)
Other		94			48			159			52
Total other income		202			197			329			411
Income before income taxes		10,048			8,376			19,700			16,505
Income tax		3,938			3,292			7,722			6,486
Net income	$	6,110		$	5,084		$	11,978		$	10,019
Earnings per share:
Basic	$	0.34		$	0.28		$	0.66		$	0.55
Dilutive	$	0.33		$	0.28		$	0.66		$	0.55
Shares used in earnings per share calculation:
Basic		18,232			18,216			18,230			18,213
Dilutive		18,295			18,254			18,286			18,254
Dividends paid per share	$	0.15		$	0.15		$	0.30		$	0.30

See Notes to Consolidated Financial Statements.

2

AMERICAN ECOLOGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Six Months Ended June 30,
	2008			2007
Cash Flows From Operating Activities:
Net income	$	11,978		$	10,019
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and accretion		5,671			4,681
Deferred income taxes		824			1,501
Stock-based compensation expense		415			278
Accretion of interest income		(15	)		(107	)
Net loss (gain) on sale of property and equipment		4			(48	)
Changes in assets and liabilities:
Receivables		(2,262	)		(5,277	)
Income tax receivable		994			650
Other assets		35			(1,310	)
Accounts payable and accrued liabilities		(1,320	)		685
Deferred revenue		898			413
Accrued salaries and benefits		(297	)		32
Income tax payable		38			334
Closure and post-closure obligations		(507	)		(274	)
Net cash provided by operating activities		16,456			11,577
Cash Flows From Investing Activities:
Purchases of property and equipment		(7,335	)		(8,551	)
Purchases of short-term investments		(992	)		(18,341	)
Maturities of short-term investments		3,216			20,323
Restricted cash		35			(100	)
Proceeds from sale of property and equipment		11			15
Net cash used in investing activities		(5,065	)		(6,654	)
Cash Flows From Financing Activities:
Dividends paid		(5,475	)		(5,467	)
Proceeds from stock option exercises		23			326
Tax benefit of common stock options		20			201
Other		(5	)		(3	)
Net cash used in financing activities		(5,437	)		(4,943	)
Increase (decrease) in cash and cash equivalents		5,954			(20	)
Cash and cash equivalents at beginning of period		12,563			3,775
Cash and cash equivalents at end of period	$	18,517		$	3,755
Supplemental Disclosures
Income taxes paid	$	5,848		$	3,803
Interest paid		3			2
Non-cash investing and financing activities:
Capital expenditures in accounts payable		2,127			975
Acquisition of equipment with capital leases		6			-

See Notes to Consolidated Financial Statements.

3

AMERICAN ECOLOGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1 – GENERAL

Basis of Presentation

The accompanying unaudited consolidated financial statements include the results of operations, financial position and cash flows of American Ecology Corporation and its wholly-owned subsidiaries (collectively, “AEC” or “the Company”). All material intercompany balances have been eliminated.

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to present fairly, in all material respects, the results of the Company for the periods presented. These consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s 2007 Annual Report on Form 10-K filed with the SEC on February 27, 2008. The results of operations for the three and six months ended June 30, 2008 are not necessarily indicative of results to be expected for the entire fiscal year.

The Company’s Consolidated Balance Sheet as of December 31, 2007 has been derived from the Company’s audited Consolidated Balance Sheet as of that date.

Use of Estimates

The preparation of the Company’s consolidated financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions. Some of these estimates require difficult, subjective or complex judgments about matters that are inherently uncertain. As a result, actual results could differ from these estimates, in some cases materially. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

NOTE 2 – EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS

SFAS 157. In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 applies to other existing accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. While SFAS 157 does not require any new fair value measurements, its application may change the current practice for fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. In February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No. 157, which delays the effective date of SFAS 157 for nonfinancial assets and liabilities to fiscal years beginning after November 15, 2008. The adoption of SFAS 157 for financial assets and liabilities in the first quarter of 2008 had no significant impact on our consolidated financial statements.  We are currently evaluating the impact of SFAS 157 for non-financial assets and liabilities.

SFAS 159. In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), which permits entities to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007 and was adopted by the Company beginning in the first quarter of fiscal 2008. The adoption of SFAS 159 had no impact on our consolidated financial statements.

4

SFAS 141 R.  In December 2007, the FASB issued SFAS 141(revised 2007), Business Combinations (“SFAS 141 R”), which establishes principles and requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree in a business combination. SFAS 141 R requires that assets and liabilities, including contingencies, be recorded at the fair value determined on the acquisition date with changes thereafter reflected in results of operations, as opposed to goodwill. Additionally, SFAS 141 R modifies the treatment of restructuring costs associated with a business combination and requires acquisition costs to be expensed as incurred. The statement also provides guidance on disclosures related to the nature and financial impact of the business combination. SFAS 141 R is effective for transactions closing after December 15, 2008 and for fiscal years beginning after December 15, 2008. SFAS 141 R will be adopted for business combinations entered into by the Company after December 31, 2008. Although the Company will continue to evaluate the application of SFAS 141 R, we do not currently believe adoption will have a material impact on our consolidated financial statements.

SFAS 160.  In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51 (“SFAS 160”). This statement establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement is effective prospectively, except for certain retrospective disclosure requirements, for fiscal years beginning after December 15, 2008. This statement will be effective for the Company beginning in the first quarter of 2009. Although the Company will continue to evaluate the application of SFAS 160, we do not currently believe adoption of SFAS 160 will have a material impact on our consolidated financial statements.

SFAS 161.  In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133 (“SFAS 161”).  SFAS 161 expands quarterly disclosure requirements in SFAS 133 about an entity’s derivative instruments and hedging activities.  SFAS is effective for fiscal years beginning after November 15, 2008.  This statement will be effective for the Company beginning in the first quarter of 2009.  Although the Company will continue to evaluate the application of SFAS 161, we do not currently believe the adoption will have a material impact on our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (“SFAS 162”).  SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of non-governmental entities that are presented in conformity with generally accepted accounting principles in the United States.  This statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.  Although the Company will continue to evaluate the application of SFAS 162, we do not currently believe the adoption of SFAS 162 will have a material impact on our consolidated financial statements.

NOTE 3 – CONCENTRATION AND CREDIT RISK

Major Customers. The following customers represented 10% or more of our revenue during the three and six months ended June 30, 2008 and 2007.

	Three Months Ended		Three Months Ended
Customer	June 30, 2008		June 30, 2007
Honeywell International, Inc.		40%		40%
Molycorp, Inc.		6%		12%
	Six Months Ended		Six Months Ended
Customer	June 30, 2008		June 30, 2007
Honeywell International, Inc.		39%		38%

The Company has a long-term contract with Honeywell for transportation, treatment and disposal of hazardous waste for a clean-up project presently estimated to conclude in November 2009.  Receivables from Honeywell represented 48% of our total trade receivables at June 30, 2008 and 50% of total trade receivables at December 31, 2007.  No other customer’s receivable balances exceeded 10% of our total trade receivables at June 30, 2008 or December 31, 2007.

5

Credit Risk Concentration. We maintain most of our cash and short-term investments with Wells Fargo Bank. Substantially all balances are uninsured and are not used as collateral for other obligations. Short-term investments consist of high-quality commercial paper currently with a maximum maturity of approximately three months.

Concentrations of credit risk on accounts receivable are believed to be limited due to the number, diversification and character of the obligors and our credit evaluation process, except for receivables from Honeywell for which significant credit risk exists.  Credit risk on Honeywell receivables is partially mitigated by court orders requiring that Honeywell perform activities covered by our contract. Typically, we have not required customers to provide collateral for such obligations.

NOTE 4 – RECEIVABLES

Receivables were as follows:

	June 30,			December 31,
(in thousands)	2008			2007
Trade	$	30,130		$	28,821
Unbilled revenue		853			613
Other		832			122
		31,815			29,556
Allowance for doubtful accounts		(131	)		(134	)
	$	31,684		$	29,422

NOTE 5 – PROPERTY AND EQUIPMENT

	June 30,			December 31,
(in thousands)	2008			2007
Cell development costs	$	38,661		$	32,492
Land and improvements		8,910			8,858
Buildings and improvements		27,237			26,547
Railcars		17,375			17,375
Vehicles and other equipment		20,675			19,823
Construction in progress		7,907			6,676
		120,765			111,771
Accumulated depreciation and amortization		(53,471	)		(48,465	)
	$	67,294		$	63,306

Depreciation expense for the three months ended June 30, 2008 and 2007 was $2.5 million and $2.1 million, respectively.  Depreciation expense for the six months ended June 30, 2008 and 2007 was $5.1 million and $4.2 million, respectively.

NOTE 6 – RESTRICTED CASH

Restricted cash balances of $4.8 million and $4.9 million at June 30, 2008 and December 31, 2007, respectively, represent funds held in third-party managed trust accounts as collateral for our financial assurance policies for closure and post-closure obligations.  These restricted cash balances are maintained by third-party trustees and are invested in money market accounts.

6

NOTE 7 – LINE OF CREDIT

On June 30, 2008, we entered into a new $15.0 million unsecured revolving line of credit (the “Revolving Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”).  The Revolving Credit Agreement expires on June 15, 2010 and replaced the Company’s expired Amended and Restated Credit Agreement.  Monthly interest only payments are paid based on a pricing grid, under which the interest rate decreases or increases based on our ratio of funded debt to earnings before interest, taxes, depreciation and amortization. We can elect to borrow utilizing the offshore London Inter-Bank Offering Rate (“LIBOR”) plus an applicable spread or the prime rate. The credit agreement contains certain quarterly financial covenants, including a maximum leverage ratio, a maximum funded debt ratio and a minimum required tangible net worth. Pursuant to our credit agreement, we may only declare quarterly or annual dividends if on the date of declaration, no event of default has occurred, or no other event or condition has occurred that would constitute an event of default after giving effect to the payment of the dividend. At June 30, 2008, we were in compliance with all of the financial covenants in the credit agreement.

At June 30, 2008 and December 31, 2007, we had no amounts outstanding on the revolving line of credit. At June 30, 2008 and December 31, 2007, the availability under the line of credit was $11.0 million, with $4.0 million of the line of credit issued in the form of a standby letter of credit utilized as collateral for closure and post-closure financial assurance.

NOTE 8 – CLOSURE AND POST-CLOSURE OBLIGATIONS

Closure and post-closure obligations are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated consistent with SFAS No. 5, Accounting for Contingencies and with the liability calculated in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations. We perform periodic reviews of both non-operating and operating facilities and revise accruals for estimated post-closure, remediation and other costs when necessary. Our recorded liabilities are based on best estimates of future costs and are updated periodically to reflect existing environmental conditions, current technology, laws and regulations, permit conditions, inflation and other factors.

Changes to reported closure and post-closure obligations were as follows:

(in thousands)	Three Months Ended June 30, 2008			Six Months Ended June 30, 2008
Beginning obligation	$	15,279		$	15,134
Accretion expense		308			617
Payments		(447	)		(611	)
Adjustments		104			104
Ending obligation		15,244			15,244
Less current portion		(1,646	)		(1,646	)
Long-term portion	$	13,598		$	13,598

NOTE 9 – INCOME TAXES

As of June 30, 2008 and December 31, 2007, we had no unrecognized tax benefits. We recognize interest assessed by taxing authorities as a component of interest expense. We recognize any penalties assessed by taxing authorities as a component of selling, general and administrative expenses. Interest and penalties for the three and six months ended June 30, 2008 and 2007 were not material.

Our effective income tax rate for the three and six months ended June 30, 2008 was 39.2%, compared to 39.3% for the three and six months ended June 30, 2007.

7

We file U.S. federal income tax returns with the Internal Revenue Service (“IRS”) as well as income tax returns in various states. We may be subject to examination by the IRS for tax years 2003 through 2007. Additionally, we may be subject to examinations by various state taxing jurisdictions for tax years 2002 through 2007. We are currently not under examination by the IRS or state taxing jurisdictions.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, we are involved in judicial and administrative proceedings involving federal, state or local governmental authorities. Actions may also be brought by individuals or groups regarding the permitting of planned facility expansions, alleged violations of existing permits, or alleged damages suffered from exposure to hazardous substances purportedly released from our operated sites, as well as other litigation. We maintain insurance intended to cover property and damage claims asserted as a result of our operations. Periodically, management reviews and may establish reserves for legal and administrative matters, or fees expected to be incurred in connection therewith. As of June 30, 2008, we did not have any ongoing, pending or threatened legal action that management believes would have a material adverse effect on our financial position, results of operations or cash flows.

NOTE 11 – COMPUTATION OF EARNINGS PER SHARE

(in thousands, except per share data)	Three Months Ended June 30,
	2008				2007
	Basic		Diluted		Basic		Diluted
Net income	$	6,110	$	6,110	$	5,084	$	5,084
Weighted average common
shares outstanding		18,232		18,232		18,216		18,216
Dilutive effect of stock options and
restricted stock				63				38
Weighted average
shares outstanding				18,295				18,254
Earnings per share	$	0.34	$	0.33	$	0.28	$	0.28
Anti-dilutive shares
excluded from calculation				31				153
(in thousands, except per share data)	Six Months Ended June 30,
	2008				2007
	Basic		Diluted		Basic		Diluted
Net income	$	11,978	$	11,978	$	10,019	$	10,019
Weighted average common
shares outstanding		18,230		18,230		18,213		18,213
Dilutive effect of stock options and
restricted stock				56				41
Weighted average
shares outstanding				18,286				18,254
Earnings per share	$	0.66	$	0.66	$	0.55	$	0.55
Anti-dilutive shares
excluded from calculation				88				153

8

NOTE 12 – OPERATING SEGMENTS

We operate within two segments, Operating Disposal Facilities and Non-Operating Disposal Facilities. The Operating Disposal Facilities segment represents facilities currently accepting waste. The Non-Operating Disposal Facilities segment represents facilities that are no longer accepting waste.

Income taxes are assigned to Corporate, but all other items are included in the segment where they originated. Intercompany transactions have been eliminated from the segment information and are not significant between segments.

Summarized financial information concerning our reportable segments is shown in the following tables:

(in thousands)	Operating Disposal Facilities			Non- Operating Disposal Facilities			Corporate			Total
Three months ended June 30, 2008
Revenue	$	44,510		$	6		$	-		$	44,516
Transportation costs		19,251			-			-			19,251
Other direct operating costs		11,476			179			32			11,687
Gross profit		13,783			(173	)		(32	)		13,578
Selling, general
& administration		1,253			-			2,479			3,732
Operating income (loss)		12,530			(173	)		(2,511	)		9,846
Interest income, net		-			-			108			108
Other income		93			-			1			94
Income (loss) before tax		12,623			(173	)		(2,402	)		10,048
Tax expense		-			-			3,938			3,938
Net income (loss)	$	12,623		$	(173	)	$	(6,340	)	$	6,110
Depreciation, amortization & accretion	$	2,749		$	71		$	13		$	2,833
Capital expenditures	$	3,857		$	-		$	14		$	3,871
Total assets	$	99,265		$	58		$	27,075		$	126,398
(in thousands)	Operating Disposal Facilities			Non- Operating Disposal Facilities			Corporate			Total
Three months ended June 30, 2007
Revenue	$	41,261		$	6		$	-		$	41,267
Transportation costs		19,760			-			-			19,760
Other direct operating costs		9,744			110			-			9,854
Gross profit		11,757			(104	)		-			11,653
Selling, general
& administration		1,291			-			2,183			3,474
Operating income (loss)		10,466			(104	)		(2,183	)		8,179
Interest income, net		3			-			146			149
Other income		(18	)		66			-			48
Income (loss) before tax		10,451			(38	)		(2,037	)		8,376
Tax expense		-			-			3,292			3,292
Net income (loss)	$	10,451		$	(38	)	$	(5,329	)	$	5,084
Depreciation, amortization & accretion	$	2,243		$	78		$	9		$	2,330
Capital expenditures	$	4,771		$	2		$	3		$	4,776
Total assets	$	93,363		$	125		$	17,691		$	111,179

9

(in thousands)	Operating Disposal Facilities			Non- Operating Disposal Facilities			Corporate			Total
Six months ended June 30, 2008
Revenue	$	90,725		$	10		$	-		$	90,735
Transportation costs		41,309			-			-			41,309
Other direct operating costs		22,121			251			32			22,404
Gross profit		27,295			(241	)		(32	)		27,022
Selling, general
& administration		2,575			-			5,076			7,651
Operating income (loss)		24,720			(241	)		(5,108	)		19,371
Interest income, net		(1	)		-			171			170
Other income		158			-			1			159
Income (loss) before tax		24,877			(241	)		(4,936	)		19,700
Tax expense		-			-			7,722			7,722
Net income (loss)	$	24,877		$	(241	)	$	(12,658	)	$	11,978
Depreciation, amortization & accretion	$	5,504		$	143		$	24		$	5,671
Capital expenditures	$	7,276		$	9		$	50		$	7,335
Total assets	$	99,265		$	58		$	27,075		$	126,398
(in thousands)	Operating Disposal Facilities			Non- Operating Disposal Facilities			Corporate			Total
Six months ended June 30, 2007
Revenue	$	80,221		$	10		$	-		$	80,231
Transportation costs		36,931			-			-			36,931
Other direct operating costs		19,916			217			-			20,133
Gross profit		23,374			(207	)		-			23,167
Selling, general
& administration		2,587			-			4,486			7,073
Operating income (loss)		20,787			(207	)		(4,486	)		16,094
Interest income, net		7			-			352			359
Other income		(14	)		66			-			52
Income (loss) before tax		20,780			(141	)		(4,134	)		16,505
Tax expense		-			-			6,486			6,486
Net income (loss)	$	20,780		$	(141	)	$	(10,620	)	$	10,019
Depreciation, amortization & accretion	$	4,509		$	155		$	17		$	4,681
Capital expenditures	$	8,543		$	5		$	3		$	8,551
Total assets	$	93,363		$	125		$	17,691		$	111,179

NOTE 13 – SUBSEQUENT EVENT

On July 1, 2008, we declared a quarterly dividend of $0.18 per common share to stockholders of record on July 11, 2008. The dividend was paid out of cash on hand on July 18, 2008 in an aggregate amount of $3.3 million.

10

AMERICAN ECOLOGY CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

American Ecology Corporation, through its subsidiaries, is a hazardous, non-hazardous and radioactive waste services company providing treatment, disposal and transportation services to commercial and government entities including oil refineries and chemical production facilities, manufacturers, electric utilities, steel mills and medical and academic institutions. The majority of the waste received is produced within the United States. We generate revenue from fees charged to treat and dispose of waste at our four fixed disposal facilities located near Grand View, Idaho; Richland, Washington; Beatty, Nevada; and Robstown, Texas. We also manage transportation of waste to our facilities, which contributes significant revenue. We have been in the waste services business for 55 years.

Our customers may be divided into categories to help understand period-to-period changes in our treatment and disposal revenue.  Each of these categories is described in the table below, along with information on the percentage of total treatment and disposal revenues for each category during the three and six months ended June 30, 2008.

Customer Category	Description	% of Treatment and Disposal Revenue (1) for the Three Months Ended June 30, 2008	% of Treatment and Disposal Revenue (1) for the Six Months Ended June 30, 2008
Government	Federal and State government clean-up project waste, typically event business.	30%	23%
Private	Private sector clean-up project waste, typically event business.	25%	26%
Broker	Companies that collect and aggregate waste from their direct customers comprised of both recurring base and event clean-up waste.	23%	25%
Other industry	Category for electric utilities, chemical manufacturers and other industries not included in other categories. Comprised of both recurring base business and event clean-up business.	9%	12%
Rate regulated	Northwest and Rocky Mountain Compact customers paying rate-regulated disposal fees set by the State of Washington, typically recurring base business.	6%	7%
Refinery	Petroleum refinery customers comprising both recurring base and event clean-up business.	4%	4%
Steel	Steel mill customers comprising both recurring base and event clean-up business.	3%	3%
(1) Excludes all transportation service revenue

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A significant portion of our disposal revenue is attributable to discrete waste clean-up projects (“Event Business”) which vary substantially in size and duration.  Approximately 60% and 58% of our treatment and disposal revenues were derived from Event Business for the three and six months ended June 30, 2008, respectively.  The one-time nature of Event Business necessarily creates variability in revenue and earnings. This variability is influenced by funding availability, changes in laws and regulations, government enforcement actions, public controversy, litigation, weather, real estate redevelopment projects and other factors. The types and amounts of waste received from recurring customers (“Base Business”) also vary from quarter to quarter. As a result of this variability, we can experience significant quarter-to-quarter and year-to-year differences in revenue, gross profit, gross margin, operating income and net income. Also, while many large projects are pursued years in advance of work performance, both large and small clean-up project opportunities routinely arise with little prior notice. This uncertainty, which is inherent to the disposal business, is factored into our internal budgeting and externally communicated business outlook statements.  Approximately one quarter of our 2008 revenue budget is comprised of new Event and Base Business from non-specific sources. Our internal budgeting process combines historical experience with identified sales pipeline opportunities and new or expanded service line projections.

Depending on project-specific customer needs and competitive economics, transportation services may be offered at or near our cost to help secure new business. For waste transported by rail from New Jersey (for Honeywell), Pennsylvania (for Chevron/Molycorp) and other locations distant from our Grand View, Idaho facility, transportation-related revenue can account for as much as three-fourths (75%) of total project revenue. While bundling transportation and disposal services reduces overall gross profit as a percentage of total revenue (“gross margin”), this value-added service has allowed us to win multiple projects that we could not otherwise have competed for successfully.  Our acquisition of a Company-owned railcar fleet has reduced transportation expenses previously incurred when we relied solely on railcar operating leases and short-term rentals. The increased waste volumes resulting from projects won through this bundling strategy increases operating leverage and profitability. While waste treatment and other variable costs are project-specific, the contribution to profitability from each new project performed generally increases as overall waste disposal volumes increase.  Management believes that maximizing operating income and earnings per share is a higher priority than maintaining or increasing gross margin.  We will continue to aggressively bid bundled transportation and disposal services based on this income growth strategy.

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Results of Operations

The following table summarizes our results of operations for the three months and six months ended June 30, 2008 and 2007 in dollars and as a percentage of total revenue.

(in thousands, except per	Three Months Ended June 30,												Six Months Ended June 30,
share amounts)	2008			%			2007			%			2008			%			2007			%
Revenue	$	44,516			100.0	%	$	41,267			100.0	%	$	90,735			100.0	%	$	80,231			100.0	%
Transportation costs		19,251			43.2	%		19,760			47.9	%		41,309			45.5	%		36,931			46.0	%
Other direct operating costs		11,687			26.3	%		9,854			23.9	%		22,404			24.7	%		20,133			25.1	%
Gross profit		13,578			30.5	%		11,653			28.2	%		27,022			29.8	%		23,167			28.9	%
Selling, general and
administrative expenses		3,732			8.4	%		3,474			8.4	%		7,651			8.4	%		7,073			8.8	%
Operating income		9,846			22.1	%		8,179			19.8	%		19,371			21.4	%		16,094			20.1	%
Other income (expense):
Interest income		111			0.2	%		150			0.4	%		174			0.2	%		361			0.4	%
Interest expense		(3	)		0.0	%		(1	)		0.0	%		(4	)		0.0	%		(2	)		0.0	%
Other		94			0.3	%		48			0.1	%		159			0.2	%		52			0.1	%
Total other income		202			0.5	%		197			0.5	%		329			0.4	%		411			0.5	%
Income before income taxes		10,048			22.6	%		8,376			20.3	%		19,700			21.8	%		16,505			20.6	%
Income tax		3,938			8.9	%		3,292			8.0	%		7,722			8.6	%		6,486			8.1	%
Net income	$	6,110			13.7	%	$	5,084			12.3	%	$	11,978			13.2	%	$	10,019			12.5	%
Earnings per share:
Basic	$	0.34					$	0.28					$	0.66					$	0.55
Dilutive	$	0.33					$	0.28					$	0.66					$	0.55
Shares used in earnings
per share calculation:
Basic		18,232						18,216						18,230						18,213
Dilutive		18,295						18,254						18,286						18,254
Dividends paid per share	$	0.15					$	0.15					$	0.30					$	0.30

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Revenue - Revenue increased 8% to $44.5 million for the second quarter of 2008, up from $41.3 million for the second quarter of 2007. This increase reflects higher treatment and disposal revenue, partially offset by slightly lower revenue from transportation services on bundled rail transportation and disposal contracts. In the second quarter of 2008, we disposed of 325,000 tons of waste in our landfills, up 18% from the 275,000 tons disposed in the second quarter of 2007. Our average selling price for treatment and disposal services (excluding transportation) for the second quarter of 2008 was 2% higher than in the same quarter last year. This slight increase in average selling price reflects normal variations in service mix that are inherent to the business.

During the second quarter of 2008, treatment and disposal revenue from recurring Base Business was 3% higher than the second quarter of 2007 and comprised 40% of non-transportation revenue, as compared to 47% of non-transportation revenue in the second quarter of 2007. Base Business revenue increased as a result of growth in our broker and other industry categories. Event Business revenue in the second quarter of 2008 increased 37% over the same quarter in 2007, and comprised 60% of non-transportation revenue during the quarter. As discussed further below, this primarily reflects increased treatment and disposal revenue from government clean-up customers and increased shipments from the Honeywell Jersey City private clean-up project.  These increases were partially offset by lower shipments from the Molycorp project in the second quarter of 2008 compared to the same quarter last year.

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The following table summarizes our second quarter 2008 revenue growth (both Base and Event Business) by customer type as compared with the second quarter of 2007.

	Treatment and Disposal Revenue Growth Three Months Ended June 30, 2008 vs. Three Months Ended June 30, 2007
Government	102%
Other industry	10%
Broker	9%
Private	5%
Rate regulated	4%
Refinery	-16%
Steel	-19%

Government clean-up business revenue increased 102% in the second quarter of 2008 compared to the second quarter of 2007. This increase reflects a state funded clean-up project which shipped to our Robstown, Texas facility and increased shipments from the Department of Defense in the second quarter of 2008.  Event Business clean-up work under the U.S. Army Corps of Engineers (“USACE”) contract contributed $2.4 million or 6% of total revenue in the second quarter of 2008, as compared to $3.0 million or 7% of total revenue in the second quarter of 2007. This decrease reflects shipment timing as task orders are completed under our multi-year contract with the USACE.

Our other industry revenue increased 10% in the second quarter of 2008 over the second quarter of 2007. This increase reflects growth over multiple electric utility, chemical manufacturers and other industrial customers.

Our broker business increased 9% in the second quarter of 2008 compared to the same quarter in 2007.  This reflects continued success working with national and smaller regional waste broker companies that do not compete with us for disposal business.

Treatment and disposal revenue from private clean-up customers increased approximately 5% during the second quarter of 2008 over the same period last year. This reflects increased shipments on the Honeywell Jersey City project and other smaller event projects.  This increase was partially offset by decreased shipments on the Molycorp project which is expected to be completed in September 2008.  The Honeywell Jersey City project contributed 40% of total revenue (including transportation) in both the second quarter of 2008 and 2007, or $17.9 million and $16.4 million, respectively.  Shipments from our bundled transportation and disposal contract with Molycorp contributed 6% of total revenue (including transportation) in the second quarter of 2008, or $2.5 million compared to 12% of total revenue (including transportation) or $4.8 million in the second quarter of 2007.

Rate-regulated business at our Richland, Washington low-level radioactive waste facility increased 4% in the second quarter of 2008 over the second quarter of 2007. Our Richland facility operates under a State-approved revenue requirement and this increase reflects timing for the rate-regulated portion of that facility’s revenue.

Treatment and disposal revenue from refinery customers decreased 16% in the second quarter of 2008 compared to the same quarter in 2007. This decline primarily reflects decreased waste volumes in the second quarter of 2008 by one refinery customer due to refining process changes.  We expect revenue in this category to increase in the future based on initiation of thermal desorption recycling services at our Robstown, Texas facility.

Treatment and disposal revenue from our steel mill customers decreased 19% in the second quarter of 2008 compared to the second quarter of 2007. This decline reflects expiration of a contract with a Midwestern steel mill in December 2007.

Gross Profit. Gross profit for the second quarter of 2008 increased by 17% to $13.6 million, up from $11.7 million in the second quarter of 2007. This increase primarily reflects higher volumes of waste disposed in the second quarter of 2008 as compared to the same period in 2007.  The increase was partially offset by expenses of $104,000 recorded in the second quarter of 2008 related to the closure of the deepwell facility at our non-operating Winona, Texas site. Gross margin was 31% in the second quarter of 2008, up from 28% in the second quarter of 2007.  This gross margin increase reflects reduced transportation revenue which is generally provided as a value-added service with little to no margin.  Excluding transportation revenue, disposal gross margins were 54% in the second quarter of both 2008 and 2007.  

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Selling, General and Administrative (“SG&A”). As a percentage of total revenue, SG&A expense were 8% for both the second quarter of 2008 and 2007. SG&A expenses increased 7% to $3.7 million, up from $3.5 million for the second quarter of 2007. The growth in SG&A expense was due primarily to higher payroll and benefit expenses, stock-based compensation expense, employee performance based bonus compensation and other administrative costs in support of the increased waste volumes received.

Interest income.During the second quarter of 2008, we earned $111,000 of interest income, down from $150,000 in the second quarter of 2007. This decrease reflects a lower average rate of interest earned on investments.

Other expense/income.Other expense/income includes business activities not included in current year ordinary and usual revenue and expenses. In the second quarter of 2008, we recognized $93,000 in royalty income from a previously sold municipal waste landfill in Texas. In the second quarter of 2007, we recognized $48,000 on the sale of property and equipment no longer required in our business.

Income tax expense. Our effective income tax rate for second quarter of 2008 was 39.2%, compared to 39.3% for the second quarter of 2007.

As of June 30, 2008 and December 31, 2007, we had no unrecognized tax benefits. We recognize interest assessed by taxing authorities as a component of interest expense. We recognize any penalties assessed by taxing authorities as a component of selling, general and administrative expenses. Interest and penalties for the three months ended June 30, 2008 and 2007 were not material.

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Revenue - Revenue increased 13% to $90.7 million for the first six months of 2008, up from $80.2 million for the first six months of 2007. This increase reflects higher treatment and disposal revenue and higher revenue from bundled rail transportation and disposal contracts. In the six months ended June 30, 2008, we disposed of 668,000 tons of waste in our landfills, up 23% from 543,000 tons disposed in the first six months of 2007. Our average selling price for treatment and disposal services (excluding transportation) in the first six months of 2008 was 19% lower than in the first six months of 2007. This decline reflects variations in service mix, a higher percentage of direct disposal in the first half of 2008 including a large, non-hazardous soil project shipped to our Beatty, Nevada site from Death Valley National Park and increased shipments from the Honeywell Jersey City project.

During the six months ended June 30, 2008, treatment and disposal revenue from recurring Base Business grew 12% over the same period of 2007 and comprised 42% of non-transportation revenue.  Base Business was 43% of non-transportation revenue for the same period in 2007. Base Business revenue increased as a result of growth in our broker, rate regulated and other industry categories. Event Business revenue in the first half of 2008 increased 21% over the same period in 2007 and was 58% of non-transportation revenue. Event Business was 57% of non-transportation revenue for the first half of 2007. As discussed further below, this primarily reflects increased disposal revenue from our other industry and private clean-up customers including increased shipments from the Honeywell Jersey City project in the first half of 2008.  These diversified revenue increases more than offset the loss of revenue from two large event clean-up projects which were substantially completed in the first quarter of 2007.

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The following table summarizes our revenue growth (both Base and Event Business) by industry customer type for the six months ended June 30, 2008 as compared to the six months ended June 30, 2007.

	Treatment and Disposal Revenue Growth Six Months Ended June 30, 2008 vs. Six Months Ended June 30, 2007
Other industry	68%
Government	26%
Rate regulated	21%
Broker	18%
Private	4%
Refinery	-8%
Steel	-18%

Other industry revenue increased 68% in the first six months of 2008 compared to the same period in 2007. This increase was due primarily to a large polychlorinated biphenyls (“PCB”) waste clean-up for an electric utility customer shipped to our Grand View, Idaho facility and substantially completed in the first quarter of 2008.

Government clean-up business revenue increased 26% in the first six months of 2008 compared to the first six months of 2007.  This increase reflects a state-funded clean-up project which shipped to our Robstown, Texas facility and increased shipments from the Department of Defense in the second quarter of 2008.  Cleanup work under the USACE contract contributed $5.8 million or 6% of total revenue in the first six months of 2008, as compared to $6.0 million or 7% in the first quarter of 2007.

Rate-regulated business at our Richland, Washington low-level radioactive waste facility increased 21% for the six months ended June 30, 2008 compared to the same period in 2007. Our Richland facility operates under a State of Washington approved revenue requirement and this increase reflects timing for the rate-regulated portion of the facility’s revenue.

Our broker business increased 18% in the six months ended June 30, 2008 compared to the same period in 2007 reflecting continued success working with national and smaller regional waste broker companies.

Treatment and disposal revenue from private clean-up customers increased approximately 4% during the six months ended June 30, 2008 compared to the same period in 2007. This increase reflects higher shipments from the Honeywell Jersey City project as well as increased event business awards from multiple smaller projects. The Honeywell project contributed 39% of total revenue (including transportation) for the six months ended June 30, 2008, or $35.3 million, as compared to 38% of total revenue (including transportation), or $30.6 million, for the same period of 2007.  Our bundled transportation and disposal contract with Molycorp, which began in the second quarter of 2007, contributed 7% of total revenue (including transportation), or $6.0 million for the first half of 2008, as compared to 6% of total revenue (including transportation), or $4.8 million for the first half of 2007.  Shipments from the Molycorp project slowed in the second quarter of 2008 consistent with scheduled project completion in September 2008.

Treatment and disposal revenue from refinery customers decreased 8% in the first six months of 2008 compared to the same period in 2007. This decline primarily reflects decreased waste volumes in the second quarter of 2008 from one refinery customer as a result of a refining process change and timing of maintenance by other refinery customers.  We expect revenue in this category to increase in the future based on initiation of thermal desorption recycling services at our Robstown, Texas facility.

Treatment and disposal revenue from steel mill customers decreased 18% in the first six months of 2008 compared to the same period of 2007. This decline reflects expiration of a contract with a Midwestern steel mill in December 2007.

Gross Profit. Gross profit for the six months ended June 30, 2008 increased by 17% to $27.0 million, up from $23.2 million for the same period of 2007. This increase reflects higher disposal volumes in the first half of 2008 as compared to the same period in 2007. Gross margin was 30% for the six months ended June 30, 2008 as compared to 29% for the six months ended June 30, 2007.  This increase reflects higher operating leverage delivered by increased volume and normal service mix variations.    

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Selling, General and Administrative. As a percentage of total revenue, SG&A expense was 8% for the six months ended June 30, 2008, down from 9% for the same period in 2007. SG&A expenses increased 8% to $7.7 million for the six months ended June 30, 2008, up from $7.1 million for the six months ended June 30, 2007. This increase was due primarily to higher payroll and benefit expenses, stock-based compensation expense, employee performance based bonus compensation and other administrative costs in support of the increased waste volumes received.   The increase also reflects $154,000 of business development expenses related to an acquisition opportunity we are no longer actively pursuing.

Interest income.During the six months ended June 30, 2008, we earned $174,000 of interest income as compared with $361,000 in the same period of 2007. This decrease was due to a lower average rate of interest earned on investments.

Other expense/income. Other expense/income includes business activities not included in current year ordinary and usual revenue and expenses. In the first six months of 2008, we recognized $153,000 in royalty income from a previously sold municipal waste landfill in Texas. In the first six months of 2007, we recognized $48,000 from the sale of property and equipment no longer required in our business.

Income tax expense. Our effective income tax rate for the six months ended June 30, 2008 was 39.2%, compared to 39.3% for the six months ended June 30, 2007.

As of June 30, 2008 and December 31, 2007, we had no unrecognized tax benefits. We recognize interest assessed by taxing authorities as a component of interest expense. We recognize any penalties assessed by taxing authorities as a component of selling, general and administrative expenses. Interest and penalties for the six months ended June 30, 2008 and 2007 were not material.

Critical Accounting Policies

Financial statement preparation requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities. The accompanying consolidated financial statements are prepared using the same critical accounting policies discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Liquidity and Capital Resources

Our principal source of cash is from operations. The $18.5 million in cash at June 30, 2008 was comprised of cash immediately available for operations.

On June 30, 2008, we entered into a $15.0 million unsecured revolving line of credit (the “Revolving Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”).  The Revolving Credit Agreement expires on June 15, 2010 and replaced the Company’s expired Amended and Restated Credit Agreement. The unsecured line-of-credit is available to supplement daily working capital as needed. Monthly interest-only payments are required on outstanding debt levels based on a pricing grid, under which the interest rate decreases or increases based on our ratio of funded debt to earnings before interest, taxes, depreciation and amortization. We can elect to borrow monies utilizing LIBOR plus an applicable spread or the prime rate. The credit agreement contains certain quarterly financial covenants, including a maximum leverage ratio, a maximum funded debt ratio and a minimum required tangible net worth. Pursuant to our credit agreement, we may only declare quarterly or annual dividends if on the date of declaration, no event of default has occurred, or no other event or condition has occurred that would constitute an event of default after giving effect to the payment of the dividend. At June 30, 2008 we were in compliance with all financial covenants in the credit agreement. We have a standby letter of credit to support our closure and post-closure obligation of $4.0 million that expires in September 2008. At June 30, 2008, we had a borrowing capacity of $11.0 million after deducting the outstanding letter of credit, with no borrowings outstanding.

We believe that cash on hand and cash flow from operations will be sufficient to meet our operating cash needs during the next 12 months.

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Operating Activities - For the six months ended June 30, 2008, net cash provided by operating activities was $16.5 million. This reflects net income of $12.0 million, depreciation, amortization and accretion of $5.7 million.  Partially offsetting these sources of cash were increases in receivables of $2.3 million and decreases in accounts payable and accrued liabilities of $1.3 million. The increase in net income is due to the factors discussed above under Results of Operations.  The increase in accounts receivable is partially due to higher disposal and transportation revenue in the six months ended June 30, 2008 as compared to the same period in 2007.  This increase in accounts receivable is also partially attributable to a slight increase in days sales outstanding for the six months ended June 30, 2008 compared to the days outstanding at December 31, 2007.  Days sales outstanding was 67 days as of June 30, 2008, compared to 65 days at December 31, 2007 and 69 days at June 30, 2007.

For the six months ended June 30, 2007, net cash provided by operating activities was $11.6 million.  This reflects net income of $10.0 million, depreciation, amortization and accretion of $4.7 million, changes in deferred taxes of $1.5 million, increases in accounts payable and utilization of our income tax receivable.  Partially offsetting these sources of cash were increases in receivables of $5.3 million and increases in other assets of $1.3 million.

Investing Activities - For the six months ended June 30, 2008, net cash used in investing activities was $5.1 million. Significant transactions affecting cash used in investing activities during the first six months of 2008 include capital expenditures of $7.3 million.  Construction of additional disposal capacity at our Robstown, Texas and Beatty, Nevada facilities and infrastructure for the thermal desorption recycling equipment installed at the Texas facility comprised a significant portion of these expenditures. Partially offsetting cash outflows for capital expenditures were net maturities of short-term investments totaling $2.2 million.

For the six months ended June 30, 2007, net cash used in investing activities was $6.7 million. This included capital expenditures of $8.6 million used primarily to construct a new treatment and storage building at our Beatty, Nevada facility; a new storage building and laboratory at our Robstown, Texas facility; additional disposal capacity at our Robstown, Texas facility and equipment purchases for each of our three hazardous waste facilities. Partially offsetting cash outflows for capital expenditures were net maturities of short-term investments totaling $2.0 million.

Financing Activities - For the six months ended June 30, 2008 and 2007 respectively, net cash used in financing activities was $5.4 million and $4.9 million, respectively. This was primarily attributable to payment of dividends, partially offset by proceeds from stock option exercises and associated tax benefits related to those exercises.

Contractual Obligations and Guarantees

For information on contractual obligations and guarantees, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. There have not been any material changes in the amounts of our contractual obligations and guarantees during the six months ended June 30, 2008.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We do not maintain equities, commodities, derivatives or any other instruments for trading or any other purposes, and do not enter into transactions denominated in currencies other than the U.S. dollar.

We have minimal interest rate risk on investments or other assets. At June 30, 2008, approximately $18.5 million was held in cash or short-term investments at terms ranging from overnight to three months. Together, these items earn interest at the rate of approximately 2% per year.

We are exposed to market risks primarily from changes in interest rates. We do not engage in financial transactions for trading or speculative purposes.

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Item 4. Controls and Procedures

Management of the Company, including the Chief Executive Officer and the Chief Financial Officer of the Company, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of June 30, 2008. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures, including the accumulation and communication of disclosures to the Company’s Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure, are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the SEC.

There were no changes in our internal control over financial reporting that occurred during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Cautionary Statement for Purposes of “Safe Harbor Provisions” of the Private Securities Litigation Reform Act of 1995

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words "may," "could," "would," "should," "believe," "expect," "anticipate," "plan," "estimate," "target," "project," "intend" and similar expressions. These statements include, among others, statements regarding our financial and operating results, strategic objectives and means to achieve those objectives, the amount and timing of capital expenditures, the amount and timing of interest expense, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity.

Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on management's beliefs and assumptions, which in turn are based on currently available information. Important assumptions include, among others, those regarding demand for Company services, expansion of service offerings geographically or through new service lines, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to,a loss of a major customer, compliance with and changes to applicable laws and regulations, access to cost effective transportation services, access to insurance and other financial assurances, loss of key personnel, lawsuits, adverse economic conditions, government funding or competitive pressures, incidents that could limit or suspend specific operations, implementation of new technologies,  limitations on operation of newly installed thermal desorption at our Texas facility, our ability to perform under required contracts, our willingness or ability to pay dividends and our ability to integrate any potential acquisitions..

Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on our forward-looking statements. Although we believe that the expectations reflected in forward-looking statements are reasonable, we cannot guarantee future results or performance. Before you invest in our common stock, you should be aware that the occurrence of the events described in the "Risk Factors" section in  our 2007 Annual Report on Form 10-K filed with the SEC on February 27, 2008 could harm our business, prospects, operating results, and financial condition.

Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of American Ecology Corporation.

Item 1. Legal Proceedings

We are not currently a party to any material pending legal proceedings and are not aware of any claims that could have a materially adverse effect on our financial position, results of operations or cash flows.

Item 1A. Risk Factors.

There have been no material changes in our risk factors from those disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

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Item 4. Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting of Stockholders on May 22, 2008, and transacted the following business:

1) Election of Directors

Nominee	Votes For	Votes Withheld
Victor J. Barnhart	16,362,881	47,957
Joe F. Colvin	16,363,320	47,518
Roy C. Eliff	16,328,101	82,737
Edward F. Heil	16,240,623	170,214
Jeffrey S. Merrifield	16,363,312	47,526
John W. Polling	16,301,094	109,744
Stephen A. Romano	16,240,801	170,036

At a meeting of the new Board of Directors held immediately after the annual stockholder meeting, the board appointed Mr. Stephen A. Romano to continue serving as Chairman of the Board and appointed Jeffrey S. Merrifield to serve as Lead Director. The Board of Directors also made the following committee appointments:

Audit Committee	Compensation Committee	Corporate Governance and Nominating Committee
John W. Poling, Chairman	Roy C. Eliff, Chairman	Jeffrey S. Merrifield, Chairman
Roy C. Eliff	John W. Poling	Edward F. Heil
Victor J. Barnhart	Victor J. Barnhart	Joe F. Colvin

2) Ratification of the Appointment of Moss Adams LLP as Our Independent Registered Public Accountant

Votes For	Votes Against	Abstentions	Broker Non-Voted
16,372,522	22,353	15,962	-

3) Approval of 2008 Stock Option Incentive Plan

Votes For	Votes Against	Abstentions	Broker Non-Voted
11,303,770	1,656,820	20,448	3,429,799

Item 5. Other Information

None.

21

Item 6. Exhibits

10.50	Revolving Credit Agreement between American Ecology Corporation and Wells Fargo Bank, National Association dated as of June 30, 20081
10.64	*2008 Employee Stock Option Incentive Plan2
10.65	* Form of Incentive Stock Option Agreement
10.66	* Form of Non-Qualified Stock Option Agreement
31.1	Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
* Identifies compensation plans or arrangements required to be files as an exhibit hereto. 1 Incoporated by reference from the Registrant’s Form 8-K dated 7-1-2008 2 Incoporated by reference from the Registrant’s Proxy Statement dated 4-9-2008

22

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	American Ecology Corporation
	(Registrant)
Date:  August 1, 2008	/s/ Jeffrey R. Feeler
	Jeffrey R. Feeler Vice President and Chief Financial Officer

 23

EX-10.65

EXHIBIT 10.65

AMERICAN ECOLOGY CORPORATION

FORM OF INCENTIVE STOCK OPTION AGREEMENT

Effective __________________, 2008 (the “Effective Date”), American Ecology Corporation, a Delaware corporation (the “Company”) hereby grants to * (the “Optionee”), an Incentive Stock Option to purchase from the Company, at a price of * per share, * shares of the Company’s authorized and unissued common stock, $0.01 par value per share (the “Common Stock”) subject, however, to the following terms and conditions.

1.           Incentive Stock Option.This stock option is designated as an Incentive Stock Option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).  If, during one taxable year, this stock option and any other Incentive Stock Options granted to you by the Company or its subsidiaries vests for Common Stock with an aggregate fair market value in excess of $100,000, then the stock option, as to the excess, shall be treated as a non-statutory stock option that does not meet the requirements of Section 422 of the Code.  If and to the extent that the stock option fails to qualify as an Incentive Stock Option under the Code, the stock option shall remain outstanding according to its terms as a non-statutory stock option.

2.           Stock Option Plan.  This Stock Option Agreement (the “Agreement”) and the stock option granted herein are made and accepted pursuant to and in accordance with the Company’s 2008 Stock Option Incentive Plan (the “Plan”).  The terms and provisions of the Plan, and any amendments thereto, are incorporated herein by reference.  Unless specifically set forth herein, in the event of any conflict between the provisions of this Agreement and the provisions of the Plan, the provisions of the Plan will prevail.  Unless otherwise stated, all capitalized terms used herein shall have the meanings set forth in the Plan.

3.          Term and Vesting.  The stock option granted herein shall vest and become exercisable as follows, provided the Optionee remains employed by the Company or its subsidiaries through each applicable vesting date:

● 34% of the stock option shall vest on the first anniversary of the Effective Date;

● 33% of the stock option shall vest on the second anniversary of the Effective Date; and

● The final 33% of the stock option shall vest on the third anniversary of the Effective Date.

Subject to the terms of the Plan and your continued employment with the Company or any of its subsidiaries, your stock option will remain exercisable until the tenth anniversary of the Effective Date (the “Expiration Date”).  Upon the date of termination of your employment with the Company and its subsidiaries (a “Termination Date”), your stock option shall remain exercisable (the “Exercise Period”) only in accordance with the following provisions:

(a)           Upon the termination of your employment with the Company or any of its subsidiaries other than as a result of your death or total disability, any vested portion of your stock option shall remain exercisable until the earlier of (i) thirty (30) days after your Termination Date or (ii) the Expiration Date.

(b)           Upon the termination of your employmentwith the Company and its subsidiaries by reason of your death or total disability, any vested portion of your stock option shall remain exercisable until the earlier of: (i) twelve (12) months after your Termination Date or (ii) the Expiration Date.

Any vested and exercisable portion of your stock option that is not so exercised within the applicable Exercise Period shall be forfeited with no further compensation due to you.  Additionally, unless otherwise provided by the Compensation Committee, any portion of your stock option that is not vested or exercisable as of your Termination Date shall be immediately forfeited on such date with no further compensation due to you.

4.             Limitation Upon Transfer.  The stock option granted herein (a) shall be nonassignable and nontransferable by the Optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the Optionee’s domicile at the time of death, (b) during the Optionee’s lifetime, shall be exercisable only by the Optionee, and (c) shall, under no circumstances, be transferable in exchange for consideration.

24

5.            Method of Exercise.  The stock option granted herein may be exercised in whole or in part by tendering to the Company written notice of exercise accompanied by the aggregate purchase price for the shares with respect to which this stock option is being exercised.  The purchase price of shares of Common Stock of the Company acquired upon the exercise of this stock option shall be paid by the Optionee by the delivery of cash or check payable to the order of the Company, or with the consent of the Board of Directors, in whole or in part, Common Stock of the Company valued at fair market value. With the consent of the Board of Directors, the Optionee may request the Company to apply automatically the shares to be received upon the exercise of a portion of the stock option (even though stock certificates have not yet been issued) to satisfy the purchase price for additional portions of the stock option subject to future exercise.

6.           Disqualifying Disposition.  If your dispose of any shares of Common Stock acquired upon the exercise of this stock option within two years from the Effective Date or one year after such shares were acquired pursuant to the exercise of this stock option (either disposition, a “Disqualifying Disposition”), you acknowledge and agree that you shall notify the Company in writing of such disposition.  Any notice of a Disqualifying Disposition must be given within 30 days of such disposition.

7.           Registration of Stock.  Notwithstanding any of the provisions of this Agreement, the stock option granted herein will not be exercisable, in whole or in part, unless (a) all shares issuable on the exercise thereof have been registered under the Securities Act of 1933, as amended (the “1933 Act”), or (b) the Company shall have received an opinion of its counsel that registration under the 1933 Act and all other applicable securities laws is not required in connection with such issuance.  The Optionee further agrees that all shares acquired under the exercise of the stock option granted hereunder will not be sold or transferred unless such shares have been registered for resale under the 1933 Act or unless the Company shall receive an opinion of counsel satisfactory to it that such shares may be resold without registration under the 1933 Act.

8.            Successors of Company and Optionee.  This Agreement shall inure to the benefit of and be binding upon the Company and the Optionee and their respective heirs, legal representatives, successors and assigns, subject to the restrictions on assignability and transferability set forth herein.

9.           Adjustments.  The number of shares of Common Stock and prices per share contained herein shall be proportionately adjusted from time to time as and when provided in the Plan.

10.           Taxes.  Optionee shall be responsible to make appropriate provisions for all taxes required to be paid in connection with the stock option granted herein and the exercise thereof.

[Signature Page Follows]

25

IN WITNESS WHEREOF, this Agreement has been executed this * day of *, 2008.

	AMERICAN ECOLOGY CORPORATION
By:	Jeffery R. Feeler
Its:	Vice President & Chief Financial Officer
	OPTIONEE
	Name: Address: SS#:	* * *

  26

EX-10.66

EXHIBIT 10.66

AMERICAN ECOLOGY CORPORATION

FORM OF NON-STATUTORY STOCK OPTION AGREEMENT

Effective __________________, 2008 (the “Effective Date”), American Ecology Corporation, a Delaware corporation (the “Company”) hereby grants to * (the “Optionee”), a non-statutory stock option to purchase from the Company, at a price of * per share, * shares of the Company’s authorized and unissued common stock, $0.01 par value per share (the “Common Stock”) subject, however, to the following terms and conditions.

1.  Stock Option Plan.  This Stock Option Agreement (the “Agreement”) and the stock option granted herein are made and accepted pursuant to and in accordance with the Company’s 2008 Stock Option Incentive Plan (the “Plan”).  The terms and provisions of the Plan, and any amendments thereto, are incorporated herein by reference.  Unless specifically set forth herein, in the event of any conflict between the provisions of this Agreement and the provisions of the Plan, the provisions of the Plan will prevail.  Unless otherwise stated, all capitalized terms used herein shall have the meanings set forth in the Plan.

2.  Term and Vesting.  The stock option granted herein shall vest and become exercisable in full on the day prior to the date of the regular Annual Meeting of Stockholders following the Effective Date (the “Vesting Date”), provided the Optionee has attended at least 75% of the regularly scheduled meetings of the Board of Directors, in person or by phone, between the Effective Date and the Vesting Date.  If the Optionee does not attend at least 75% of the regularly scheduled meetings of the Board of Directors between the Effective Date and the Vesting Date, this stock option shall be forfeited without having vested. Notwithstanding anything to the contrary in the Plan, the vested stock option may be exercised in whole or in part beginning on the Vesting Date and continuing until and including the day prior to the tenth anniversary of the Effective Date, notwithstanding the fact that Optionee’s service with the Company has terminated.

3.  Limitation Upon Transfer.  The stock option granted herein (a) shall be nonassignable and nontransferable by the Optionee, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the Optionee’s domicile at the time of death, (b) during the Optionee’s lifetime, shall be exercisable only by the Optionee, and (c) shall, under no circumstances, be transferable in exchange for consideration.

4.  Method of Exercise.  The stock option granted herein may be exercised in whole or in part by tendering to the Company written notice of exercise accompanied by the aggregate purchase price for the shares with respect to which this stock option is being exercised.  The purchase price of shares of Common Stock of the Company acquired upon the exercise of this stock option shall be paid by the Optionee by the delivery of cash or check payable to the order of the Company, or with the consent of the Board of Directors, in whole or in part, Common Stock of the Company valued at fair market value. With the consent of the Board of Directors, the Optionee may request the Company to apply automatically the shares to be received upon the exercise of a portion of the stock option (even though stock certificates have not yet been issued) to satisfy the purchase price for additional portions of the stock option subject to future exercise.

5.  Registration of Stock.  Notwithstanding any of the provisions of this Agreement, the stock option granted herein will not be exercisable, in whole or in part, unless (a) all shares issuable on the exercise thereof have been registered under the Securities Act of 1933, as amended (the “1933 Act”), or (b) the Company shall have received an opinion of its counsel that registration under the 1933 Act and all other applicable securities laws is not required in connection with such issuance.  The Optionee further agrees that all shares acquired under the exercise of the stock option granted hereunder will not be sold or transferred unless such shares have been registered for resale under the 1933 Act or unless the Company shall receive an opinion of counsel satisfactory to it that such shares may be resold without registration under the 1933 Act.

6.  Successors of Company and Optionee.  This Agreement shall inure to the benefit of and be binding upon the Company and the Optionee and their respective heirs, legal representatives, successors and assigns, subject to the restrictions on assignability and transferability set forth herein.

27

7.  Adjustments.  The number of shares of Common Stock and prices per share contained herein shall be proportionately adjusted from time to time as and when provided in the Plan.

8.  Taxes.  Optionee shall be responsible to make appropriate provisions for all taxes required to be paid in connection with the stock option granted herein and the exercise thereof.

IN WITNESS WHEREOF, this Agreement has been executed this * day of *, 2008.

                                                                                                                                         
60;                AMERICAN ECOLOGY CORPORATION

                                                                            ____________________________________

                                                                              By:  Jeffery R. Feeler

                                                                              Its:   Vice President & Chief Financial Officer

       OPTIONEE

                                                                            ____________________________________

Name:                                *

Address:                                *

*

SS#:                                *

28

EX-31.1

EXHIBIT 31.1

AMERICAN ECOLOGY CORPORATION

CERTIFICATIONS PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Stephen A. Romano, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Ecology Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 1, 2008	/s/ Stephen A. Romano
	Stephen A. Romano President and Chief Executive Officer

29

EX-31.2

EXHIBIT 31.2

AMERICAN ECOLOGY CORPORATION

CERTIFICATIONS PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Jeffrey R. Feeler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Ecology Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  August 1, 2008	/s/ Jeffrey R. Feeler
	Jeffrey R. Feeler Vice President and Chief Financial Officer

30

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of American Ecology Corporation (the “Company”) for the quarterly period ended June 30, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Stephen A. Romano and Jeffrey R. Feeler, Chief Executive Officer and Chief Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date:  August 1, 2008	/s/ Stephen A. Romano
	Stephen A. Romano Chief Executive Officer
	/s/ Jeffrey R. Feeler
	Jeffrey R. Feeler Chief Financial Officer

31