USA Waste: From Out Of The Blue, Into The Black

Susan DeGrane

Before USA Waste purchased the Countryside Landfill, located near Grayslake, Ill., methane poured off of the soil un-checked. Dust blew off the rising hill and trucks reeked of garbage.

The townspeople were exasperated with the community menace, according to the mayor of Grayslake, Pat Carey. "When USA Waste came, there were drastic changes. They've taken steps to control odors, though they still have a ways to go there; they've done landscaping; and their spokesman has come out and met with people in the community," he said.

In the last six months, approximately 600 people have toured the landfill. Most of the visitors have come from schools and from the American Association of Retired Persons (AARP)."AARP is an extremely politically active group," said Tim Close, spokesman for the company's Countryside operation. "On one of the tours, a 92-year-old woman told me, 'I've lived in Grayslake all my life. I've never been here before. That was nice.'"

Mayor Carey commends Don Moorehead, USA Waste's chairman of the board and chief development officer, for turning the Countryside facility into a state-of-the-art landfill that serves as a prototype for USA Waste's other nine landfills across the nation.

"It doesn't cost that much more to operate this way. It just takes more planning," said Moorehead.

A Complete Turnaround USA Waste upgraded the landfill with the following additions:

* A methane collection system. Holes were bored through the retired portions of the landfill so that perforated collection pipes can be laid within the layers as the working landfill rises to capture 95 percent of the methane. The gas will be fully enclosed so that local residents will not be aware of the flames.

The collection pipes will run north and south as well as east and west to capture the gas more efficiently. The system also will be vacuum sealed so that the gas is not allowed to build up. "Most landfills with extraction wells control about 75 percent of the gas, as opposed to Countryside's 95 percent," said Moore- head.

* Newly planted trees and prairie grasses. To hold the dust in place and to make the familiar landfill rise appear more natural, USA Waste hired a professional landscape artist who has designed a realistic-looking grassy slope for Countryside's 80 permitted acres and for the additional 120 nonpermitted acres at the site.

* A truck wash. The wash cleans the trucks that have deposited loads in the landfill, keeps excess mud from accumulating on the roadways and helps to eliminate odors.

* Landfill maintenance. The management maintains a small working face of 120 square yards and places an extra-thick layer of topsoil on top of the landfill to control odors. A special cover of topsoil, sand and geosynthetic materials sealed the landfill and routed the methane gas to the flares through a path of least resistance.

* A liner system. USA Waste engineers also developed a liner system for the geologically sound, 160-foot clay base. The liner consists of a protective layer of two feet of sand, a bentonite clay composite layer, a three-foot, compacted, lower-permeability clay layer and several layers of manmade membranes and liners.

Community Involvement Grayslake and several other communities in Lake County, Ill., became involved in negotiating a contract that would allow them to determine what activities would take place at the landfill.

The contract USA Waste holds with these communities through an organization called the Solid Waste Agency of Lake County (SWALCO) contains several provisions that offer leverage and compensation to surrounding communities for having the landfill in their backyard.

USA Waste agreed to pay Grays-lake $2 per ton of its tipping fees, which translates to $25 million over the extended 20-year life span that would come about with the approval of an operating permit, also to be approved by SWALCO. The money will go toward the community's parks, schools and libraries.

As a result of the SWALCO agreement, USA Waste must seek approval from the communities surrounding the landfill before mod ifying its operations to include a transfer station, recycling facility or incinerator.

"We can't stop them from doing anything, necessarily," Carey said. "But as the contract reads, there would be no incinerator, transfer station or recycling facility without our approval. It was an expansion permit that would be approved by SWALCO anyway and we needed to become involved in this agreement to gain control."

USA Waste also agreed to financially guarantee the value of a neighboring housing development called Prairie Crossing. In the event that the property was not of its original value due to the fault of the landfill, USA Waste agreed to purchase the homes.

Moorehead said that the company agreed knowing the full economic brunt of its commitment, but also keeping in mind that all of the improvements at the landfill make it unlikely that USA Waste would have to pay for homes that might lose their value.

"If it doesn't work out, we have the financial ability to stand behind what we've promised," Moorehead said.

USA Waste hired a Chicago-based law firm to obtain a permit to extend the life of the landfill an additional 20 years. "We don't look at this as if we are hiring a firm with extra muscle to push past people who oppose the landfill, because we want to take enough pains to convince them they don't need to oppose the landfill," Moorehead said. "We look at the law firm as a tool to help us through the siting process."

Admiring the concept of Prairie Crossing, a community that was planned to be harmonious with its surrounding natural ecology, Moore-head enlisted the services of the community's landscape architect to redesign the landfill.

"This is where I think we turned opposition into support, because we decided it would be better to make use of the talents of the development's landscape architect rather than fight," Moorehead said. "We were coming to this whole operation with the intention of becoming a part of the community and giving something back to it, which is why we envision the Countryside Landfill as a large, open space that eventually will serve as a common park and a recreational resource for the entire community."

Most landfills have a flat-top, pyramid shape. The request for a permit to expand the 80-acre landfill an additional 120 acres specified 50 feet in height. The landfill architect, William Johnson, requested a higher-than-50-foot rise to accommodate refuse that would be placed in lesser amounts in other portions of the landfill. This would achieve the effect of rolling hills instead of a flat, pyramid shape.

The architectural firm entered the design in an awards competition sponsored by the American Society of Landscape Architecture, said Cathy Deino Blake, project manager for Peter Walker William Johnson and Partners. USA Waste has hired the firm to design another landfill near Seattle that came to the company through the Envirofil merger.

The turnaround at the Countryside landfill, just north of Chicago and south of the Wisconsin border, has helped USA Waste become one of the fastest-growing waste management companies in the United States.

Appetite For Acquisition The four-year-old waste management firm has a tremendous appetite for well-managed waste disposal and collection facilities. It is important to evaluate the strong points of an operation that is being considered for acquisition, Moore-head said. In Countryside's case, while the facility was poorly run by its previous owners, the landfill's 160-foot clay base naturally prevented groundwater contamination.

In the beginning, USA Waste consisted of little more than one solid waste landfill, two transfer stations and a small collection operation located near Oklahoma City. The founders of USA Waste, Moorehead and Chris White, had purchased the small firm's facility in 1990 after approving its transfer stations, landfill and collection operation, which served a solid customer base.

Moorehead, the son of a waste management company manager, grew up in Chicago's northern suburbs. Moorehead worked in his father's business in high school, then graduated from the University of Tulsa with a degree in engineering. After briefly working in the insurance field, he returned to Chicago to start a waste management business with his father, called Moorehead & Sons.

"In 18 months, that company was larger than the one my father had managed for his entire career," Moorehead said. "My parents didn't want the company to grow. There were some hurt feelings, but I had to move on."

In 1977, Moorehead left the business and joined Waste Management, where he worked for seven years. In 1984, rather than take another company transfer, Moorehead decided to break away and operate a business of his own.

"It was a sweat equity arrangement. I could become 25 percent owner if I could double the $75,000 a month the company was making to $150,000," Moorehead said. He managed to do that and then some.

He eventually sold that business, started some others and acquired Moorehead & Sons, which was renamed North Shore Waste and later became a part of USA Waste.

USA Waste, headquartered in Dallas, was a publicly owned company from the beginning. Its stocks have approximately doubled in value each year. The company has exhibited a pattern of consistent growth. "I've always been growth oriented," Moorehead said. "I'm not referring to growth that causes problems; I'm referring to the kind of growth that creates value."

Future acquisitions may include nonhazardous waste management operations in regions with the potential for good population densities and steady waste flow, Moorehead said. The company's strategy is still to own landfills that serve localized regions in which transit may be less than 80 miles. Generally, USA Waste is not overly concerned with operating large regional landfills that serve large urban areas and involve long hauls.

USA Waste properties include landfills, transfer stations, recycling facilities, collection operations and a soil remediation facility, but the company also provides contract services for municipalities and regional coops.

A recent merger with Envirofil Inc., another publicly owned waste management company, expanded USA Waste's existing network in the Mid-west and Southwest to four additional states on both coasts. The acquisition makes USA Waste the nation's seventh largest waste management firm, consisting of 10 landfills, 20 collection operations, nine recycling operations and one soil remediation facility.

Due to the acquisition, annual revenues for USA Waste are expected to reach $175 million this year.

Envirofil was one of the company's largest acquisitions in 1993, but there's more to the company's strategy for growth than simply purchasing other waste management firms. Maintaining and developing a strong management team for what seem to be decentralized and autonomous facilities is equally important.

John Drury, the recently appointed chief executive officer of USA Waste (see "Defining Corporate Success" on page 27), is working hard to mesh USA Waste and former Envirofil management.

"My short-term goal is to get out and see as many people as possible, to try to integrate the two companies and make sure the two become one," said Drury. He plans to take back-to-back tours of existing USA Waste facilities and the newly acquired landfills, collection operations and recycling facilities.

Another ingredient to the success of USA Waste is that all along, Moorehead has had a definite vision for the company. "From the time I worked at Waste Management, I thought about becoming a good regional operator and then a multi-regional operator who would develop a national company," said Moore-head. "It becomes a matter of building good regions."

The company's strategy is to provide the strength and capital of a large corporation, but to consider the needs and concerns of the communities served by its landfills and waste-related operations. USA Waste has made itself a hybrid of corporate structure, using the company's financial strength to make improvements that mom-and-pop owners often can't afford.

"We did not go out and talk about the improvements at Countryside until we had started making them," Moorehead said. "That way they could see that we were serious in our commitment to upgrading the landfill.

"We believe that, in the waste business, without community support you're only as good as your last permit," he said.

How do you follow up a 21-year career with Browning-Ferris Industries (BFI) that includes a ten-year stint as president and chief executive officer? In John Drury's case, you take your experience to a growing waste management firm such as Dallas-based USA Waste, where he was recently appointed chief executive officer.

BFI's revenues increased from $727 million to approximately $3 billion under Drury's leadership. After leaving BFI, Drury served as managing director of Sanders Morris Mundy, an investment banking firm specializing in emerging companies with an emphasis on environmental services.

After managing one of the nation's largest waste management firms and leading it through unprecedented growth, Drury has observed that certain characteristics define successful companies, or at least those with potential for success.

For example, according to Drury, the following features make USA Waste a strong publicly-owned company:

* Assets. In the Midwest and Southwest, USA Waste has "a nice base of operations," Drury said. With the acquisition of Envirofil, USA Waste acquired assets along both coasts;

* High return on common equity and increasing stock value that progressively pays higher dividends;

* Healthy cash flows, which are important for expansion; and

* Sound management practices. "USA Waste has a management group that took the company where they said it was going," Drury said.

"I measured USA Waste's success by looking at where it was and where it planned to go," Drury said. "Every year I bench-marked its performance against what management said it was going to do. The company showed an outstanding growth curve, nearly doubling each year."