MEMPHIS unabridged

 

12-06-02

 

COLT INC.

 

A TOTAL SOLUTION

  

DISCLAIMER

 

 

 

OPENING

 

Too often we as processors are perceived as adversaries in our dealings with regulatory agencies. Some of the remarks I will make today may be taken in that light but I assure you they are only made in the context of putting forth a CONCEPT that does address every aspect of solving the scrap tire problem. A processor, the element in the process that invests millions of dollars to become the most viable part of a long term “TOTAL SOLUTION”, we seek only to become your partner, not an adversary. A stable, level playing field is what we seek in order for us to handle the problem NOW and to make the investments that will be required to take it to the next level.

 

  1. There is not a tire-recycling problem in this country!  The problem is getting the money to the right place to solve the problem.

 

  1. The Louisiana program has in fact addressed 100% of the problem by putting the money in the right place.

 

  1. In every state the tire consumer pays for tire recycling every time they leave a scrap tire with a tire dealer. (One way or the other)

 

  1. The tire consumer could be paying as much as $5, in some states, to have their tires recycled.

 

  1. The problem is that sometimes the amount that gets to the processor could be as small as 50 cents of that $5.

 

  1. The scrap tire industry is different from most scrap industries who pay for scrap, collect and process it, then send it to markets who are willing to pay enough to cover the cost of the whole process.

 

  1. Scrap tire processor must be paid a reasonable up front tip fee. In Louisiana the reasonable tip fee is $1.50 per 20 lbs marketed.

 

  1. The reason for a reasonable tip fee is that most markets are negative markets. The price we receive for tire rubber competes with other products used in the same application.

 

  1. For instance, when tire rubber is used for fuel it competes against the price of natural gas, coal, hazardous waste, etc.

 

  1. In civil engineering markets our rubber competes with sand, gravel, light weight aggregates, etc.

 

  1. In some cases it cost more to produce the product from a tire than the market is willing to pay for the product.

 

  1. This goes against the general perception that tire recyclers are double dipping because we get paid up front by the state and are paid again when the tire is delivered to market.

 

    1. To often, the two numbers added together (tip fee and revenue from markets) do not add up to enough to cover the cost of dealing with a scrap tire. The Louisiana program has been a solution to this problem.

 

THE LOUISIANA PROGRAM

 

  1. With the “Louisiana concept” no money exchanges hands until scrap tires are delivered to the proper facility and the tire has been processed and marketed.

 

  1. It controls current generated scrap tires between the dealer and the processor.

 

  1. Although it is still “a work in progress”, it is the most successful tire-recycling program in the country.

 

  1. It is the program that solves 100% of the problem.

 

    1. When compared to other states that collect fees from the tire consumer for tire recycling, Louisiana’s tire consumers enjoy the lowest cost of a total solution than any of those states or Canada.

 

  1. Louisiana is the only state where the money is used to deal with a scrap tire when it leaves the tire dealer and is delivered to markets.

 

  1. In other words they put the money in the “right place”.

 

  1. It is a concept that has the ability to satisfy every aspect of dealing with the scrap tire problem.

 

SEVEN YEARS OF SUCCESS

 

 

 

 

 

 

 

THE CONCEPT

 

The concept MAY NOT BE THE ONLY SOLUTION to the problem—but it does represent the only CONCEPT I’ve seen that has the ABILITY TO SATISFY EVERY ASPECT of the SCRAP TIRE PROBLEM--- this opinion is offered from experiences I’ve had from almost 20 years as a SCRAP TIRE RECYCLER.

 

NOT A NEW CONCEPT

 

  1. I am not suggesting the Louisiana program reinvents the wheel, rather that it is a concept that has been in place for many years.

 

  1. It is a concept that has been successful dealing with a similar problem.

 

Companies like WM & BFI have worked with this concept for years. Cities & counties collect money from citizens who have waste that needs to be recycled or deposed of. The cities or counties contract with a waste company for those services. The waste companies perform those services and are paid with the money paid by the citizen.

 

  1. The money paid for services rendered is not a subsidy. It is the money paid by a citizen for that service.

 

FEE BASED PROGRAMS

 

MOST COMMON STATEMENT FROM THOSE OPPOSED TO FEE BASED PROGRAM IS:

 

“WE DON’T WANT THE GOVERNMENT   INVOLVED IN OUR BUSINESS”.

 

  1. If you’re in the scrap tire processing business, the government is probably involved.

 

  1. I think it’s safe to say that the Louisiana DEQ, with a fee based program, is no more intrusive in our business than any other state agency around the country that regulate scrap tires.

 

  1. The difference is, in Louisiana, there is enough money in the system to pay every one in the program who handles Louisiana tires and also pays for any mandates placed on us by the agency.

 

NOT A SUBSIDY

 

Money paid by the tire consumer to have their tires recycled is not a subsidy

 

The money is paid by the tire consumer for tire recycling; it does not come from other resources in the government.

 

The same money, money paid by the tire consumer, to the tire dealer, for tire recycling, is not called a subsidy if and when the transporter collects it directly from the tire dealer

 

 

  1. Another perceived obstacle to fee-based program is the issue of what they call the “subsidies” and the idea that when it goes away everything the “subsidy” accomplished will go away.

 

  1. There will be a need for tip fees and this program as long as we have four (4) tires on automobiles.

 

  1. Just as long as there is waste, companies like WM & BFI will have to be paid when they collect and dispose of it.

 

TEXAS

 

  1. A study of what happened between 1992 and 1997 in the Texas fee based program would give anyone interested insight as to WHAT NOT TO DO to have a successful fee based program.

 

Texas has been “held out” for years as an example of why a fee based programs don’t work.

 

  1. Because I was a processor early in the program and one of its early casualties, I would like to try and dispel some of the mistruths that I’ve heard now for years.

 

  1. “Processors stacked up the rubber, took the money and ran”.

 

  1. The reason the rubber was stacked up was because TNRCC would not approve markets.

 

  1. This effectively put a lot of processors out of business once they filled up their storage facility.

 

  1. Maybe this is a lesson we can learn in that failed program. The importance of approving markets in a timely manner.

 

  1. All the markets you find on TNRCC web site that are now “approved markets” were in fact markets that were available in 1992 but we could not get TNRCC’s approval in 1992.

 

  1. Rubber I had on my storage facilities was sold three times, only to be nixed by TNRCC.

 

  1. In one instance I delivered two thousand tons to a market approved by TNRCC, land reclamation. After the material had been delivered, and put in place over a couple of acres, TNRCC changed their mind and caused me to pick up the material. The cost to our company was more than $70,000.

 

  1. Another requirement was that 25% of tires processed each month had to come from stockpiles assigned by TNRCC.

 

  1. Some of those stockpiles were hundreds of miles from the processing facility. The tires were in creeks, ravines, rivers, in swamps, etc. You get the idea; you know where you find illegal tire dumps.

 

  1. In a lot of cases the .85 cents we were paid [with no bid process] would not pay the freight to move the tires to the processing facility.

 

  1. The other cost involved came out of the processors pocket. .

 

  1. 15 of the 17 original processors did not survive.

 

  1. The Louisiana program did not have this problem because the agency issued RFP’s as the fund received the money to pay for abatements. The clean up of each stockpile was bid on its own merits.

 

  1. There are a lot more reasons this program failed but the single most important ingredient that was missing was common sense.  

 

CANADA

 

  1. Canada evidently has programs that are working for them!

 

  1. Their program collects as much as $4 from the tire consumer in order to pay for tire recycling.

 

  1. Why do we in this country have a problem with a program that pays its processors who participate in that program enough money so that they are able to reach markets throughout the U.S. and the world?

 

  1. Instead of complaining about a program that works, wouldn’t it make more sense for us to implement programs here in this country that will, not only solve the scrap tire problem in our country but would pay our crumb rubber producers enough so that they can compete not only in the U.S., but will give them the ability to compete around the world.

 

  1. The Louisiana program would in fact give crumb rubber producers in this country the ability to compete in world markets.

 

USING THE MONEY

 

PAY ME NOW

 

OR

 

PAY ME MORE LATER

 

  1. The most cost effective place to handle a scrap tire is when it is removed from a tire dealers retail store, not after its been thrown in a ditch.

 

THE TIP FEE?

 

The small tip fee collected in the Louisiana program, on the retail sale of a new tire, pays for every scrap tire in Louisiana weighing up to 500 lbs.

 

  1. The tip fees in Louisiana are: $2- passenger tires, $5-truck tires and $10-off road tires (OTR’s).

 

  1. If you consider what these small tip fees have accomplished, it almost unbelievable.
    1. It has cleaned up all the stockpiles in Louisiana.

 

The program processes tires that do not pay a tip fee:

 

a.       Used tires

b.      Parish collection centers

c.       Tires from automobile salvage yards

d.      Trucking companies

e.       ATV tires

f.        One time clean ups (any one with a few hundred tires)

 

  1. The amount of the tip fee should be determined by what the program needs to accomplish and what you want it to pay for.

 

  1. The tip fee needs to be enough to collect and process scrap tires and to market scrap tire material.

 

  1. I understand that this will depend on your ability to convince your legislators to collect a fee, which will not be easy.

 

  1. But the evidence is there to show your legislators that their constituents are already paying, in most cases, more than your agency will require to solve the problem.

 

  1. Making sure the tire consumer gets what they are paying for should be the main concern of the legislator.

 

  1. The tip fee collected for scrap tire recycling should be placed in a dedicated fund.

 

  1. A dedicated fund will encourage investments of millions of dollars by processors who will solve the problem.

 

  1. In Louisiana, we keep adding Louisiana tires into the program that do not pay a fee or the tip fee is less than what we are paid to process a tire.

 

  1. For example, $5 tip fee collected on truck tire. The reasonable tip fee paid to the processor is an average of $7.50 per truck.

 

  1. $10 tip fee collected on OTR (off the road) tires up to 500 lbs. (includes almost every farm tractor tire). The reasonable tip fee paid to the processor could be as much as $37.50 per tire processed depending on the weight of the tire.

 

  1. I believe it’s possible that this could be part of the problem we’re now having with the fund in Louisiana.

 

  1. This may cause the need for the fee structure in Louisiana to be revisited in the near future.

 

  1. But before we start talking about increasing the tip fee, I believe every effort will be made to get the program under control with the proper management.

 

  1. It will require the full time management of the agency because history shows there are people in the program who will engage in illegal activities in order to exploit the fund.

 

  1. The checks and balances can be accomplished by watching the processor with a simple formula applied to the monthly request for payment.

 

TIRE DEALER

 

  1. Dealer collects money from the tire consumer and sends all of it to the state agency.

 

  1. The tire dealer no longer has to negotiate price with a transporter in order to have their tires removed; they simply pick the person to remove their scrap tires based on the best service and enjoy free tire recycling.

 

  1. I have wondered for a long time why tire dealers, in some states, are not in favor of fee-based programs. It didn’t make since to me because the tire dealers in Louisiana give the most vocal support of anyone involved in this program.

 

  1. Then while talking to the board of director of independent tire dealers of another state I might have found the answer.

 

  1. They were opposed to a bill being presented in the house that would collect a $1 fee on the sale of a new tire. The money was to be used on every thing except dealing with the scrap tire at their store. They did not want a program that would continue to feed that black hole.

 

  1. They understood the Louisiana concept and decided to take it to their membership at the next convention.

 

  1. Their membership voted to pursue the implementation of this concept for their state.

 

  1. Tire dealers do not mind collecting the money that will pay to solve the problem, but they want the money spent to solve the tire problem, not for something else that has nothing to do with tires.     

 

AGENCY

 

HOW SHOULD AN AGENCY BE JUDGED ON THE SUCCESS OF ITS PROGRAM?

 

NOT BY HOW MANY SCRAP TIRE PILES IT   SUCCESSFULLY CLEANS UP YEAR AFTER YEAR?

 

BUT BY HOW EFFECTIVE IT DEALS WITH CURRENT GENERATED SCRAP TIRES SO THAT THERE ARE NO STOCK PILES TO CLEAN UP?

 

  1. A program should be judged by how it handles the current generated tires or stopping any tires from being illegally dumped.

 

  1. The problem for our friends at the regulatory agencies is that they have to talk to who ever shows up with ideas on how to solve the problem or make the program better.

 

  1. They get pulled in all directions and it’s easy to be confused by special interest groups and/or those who have their own agenda.

 

  1. Our business looks simple, but in fact is very complicated.

 

  1. I think we’ve learned in the Louisiana program, this is not a program that will operate on automatic pilot.

 

  1. One of the things I think we’ve learned is that there should be a dedicated group within the agency that administers this program. The cost of that group would be paid from the dedicated fund.

 

  1. If a transporter or processor commits fraud, a red flag should show up first at the processor because every thing that happens in the program passes thru the processor.

 

  1. Once that problem is identified, the law and/or rules have to be in place for the agency to deal with the problem.

 

  1. If this concept is implemented properly it should give the agency more money and time to manage scrap tires.

 

  1. For the agency this concept if managed properly, will make your job easier with a lot less aggravation and as an added bonus it will solve the scrap tire problem in your state.  

 

  1. The success of any program “should not” be measured by how many illegally dumped tires are cleaned up from stockpiles, year after year after year.

 

PROCESSOR

 

  1. With the proper checks and balances in place for the processors, it gives the agency an excellent place to watch the program for any problem that might harm the program.

 

  1. In other words, in Louisiana it’s easier to watch four  [4] processors than it is to watch 110 transporters.

 

  1. The Louisiana concept also addresses the problem with processors who build up stockpiles and go out of business.

 

  1. In most programs this causes the need for substantial bonding and/or financial assurance so the agency will have the money to clean up the mess.

 

  1. With the Louisiana concept the money paid by the tire consumer is still in the bank because no money is paid out until tires have been delivered to market. Large bonds and/or financial assurance is not required.

 

  1. If you visit my facility you will not see any tires or shreds stockpiled on site because we are required to deliver our processed material to the market before we are paid.

 

  1. Markets have improved to the point to where we only have enough rubber for 20% of the markets we service. 

 

WHY THE PROCESSOR GETS THE MONEY

 

  1. Largest investor toward a “total solution”.

 

  1. Only entity in the program that can offer an on going “total solution” because of our ability to serve diverse markets.

 

TRANSPORTER

 

This element has to be controlled if you’re going to solve the problem.

 

96.       The Louisiana concept eliminates what we refer to as “the back end” of the problem, illegal dumps and/or stockpiles.

 

CAN TRANSPORTERS BE CONTROLLED WITH ENFORCEMENT?

 

97.       I don’t think they can. A transporter who wants to dump illegally will find a way.

 

98.       California might be a good example of why registration/enforcement will not solve the problems caused by the transporter who does not want to be legal.

 

99.       A recent article in scrap tire news pointed out that 10 out of 23 tire haulers stopped by CHP were not in compliance with California’s waste tire hauler law created in 1993 and placed in effect in 1995. That’s only been seven [7] years.

 

100.   Any one who has dealt with a tire jockey knows they probably just need a little more time to get legal.

 

101.   In the almost 20 years we’ve been in the business, the Louisiana concept is the only way we’ve seen that controls the transporter and controls 100% of the tires.

 

TRANSPORTERS DO HAVE TO BE CONTROLLED.

 

AND

 

THEY CAN BE CONTROLLED WITH MONEY!

 

PAY THE TRANSPORTER ONLY WHEN THEY DELIVER TIRES TO THE PROPER RECYCLING FACILITY.

 

102.   There might be other ways to control a transporter that we don’t know about but we don’t believe there is “an easier” way that will control 100% of the tires.

 

103.   No program needs to eliminate the independent transporters. They have been a part of this process for a long time.

 

104.   Controlling transporters is a big part of addressing the problem “up front”.

 

TIRE JOCKEY

 

105.   Giving money and the tire to someone in a pick up causes most of the problems that have to be addressed by a regulatory agency dealing with scrap tires.

 

106.   This guy removes all possibility of stability needed to make a program successful.

 

107.   It does not create a level playing field when someone who invest millions of dollars to recycle a tire has to compete with someone who invest a few thousand dollars and could care less about where the tire ends up, usually some where in a ditch.

 

WHY THE JOCKEY IS A PROBLEM

 

Enough tire dealers will do business with these guys because of cheap tip fees, it will take enough tires out of the flow to make a difference to the survival of a processor.

 

Cheap tip fees usually means tires go to the ditch.

 

ENFORCEMENT

 

108.   When a tire dealer gives the tires and the money to a tire jockey, the jockey has to make a decision, do I take the tires to a recycler and paiythem the money or do I chose free disposal, the ditch.

 

109.   One problem that we know we have in Louisiana is steady stream of out of state tires.

 

110.   The very thing that solves the problem with Louisiana tires, paying the transporter when they deliver tires to the processor, causes this.

 

111.   Unscrupulous transporters are paid by dealers in other states to pick up their tires and depose of them in a proper legal manner.

 

112.   After they pick up the tires, they create a new manifest showing the tires being generated in Louisiana.

 

113.   When those same tires are delivered to a processor in Louisiana, the transporter is paid again.

 

114.   Of course this is illegal and could be punishable by a new state law that carries sentences of up to 10 years hard labor.

 

115.   It is also a federal offense because the tires cross state lines.

 

116.   The way we have agreed to address this problem is to make the processor more responsible for the tires we except from used tire dealers and transporters.

 

117.   The processor can hold this problem to a minimum by watching the flow of manifest thru their facility. If they are interested in being honest with the program, it is easy to pick out those transporters who comment flagrant violations.

 

118.   The manifest system in place in Louisiana will handle this problem if the manifest are managed properly by the agency.

 

MARKETS

 

MARKETS CAN NOT BE FORCED---THEY HAVE TO EVOLVE

 

WHO SHOULD SPEND THE MONEY TO FIND OR CREATE MARKETS?

 

119.   Processors know what product their equipment will produce. Let us identify the markets we can serve with the product we produce.

 

WHAT MARKETS SHOULD BE APPROVED?

 

120.   I think approving a market should be as simple as, “if it is environmentally safe and someone wants to use it, approve it as a market.

 

121.   The support we need from the regulatory agency is prompt approval of the markets that we find.

 

122.   An agency should take inventory of the different markets that have been approved around the country and get those markets approved for their state, regardless if you have a request from a processor asking for that approval.

 

123.   Up front approved markets will encourage investment in facilities and equipment in your state.

 

ARE THERE MARKETS THAT WILL PAY FOR TIRE RECYCLING WITHOUT A TIP FEE?

 

124.   It’s nice to get together at meetings like Memphis and talk about future markets that will possibility pay for tire recycling without a tip fee. I’ve been doing that for almost 20 years.

 

125.   The solution remains the same, some crazy person invest millions of dollars in a facility and equipment and starts a journey thru obstacles he never though of.

 

126.   After 20 years, I believe the jury is still out as to whether or not there are markets in the future that will pay for tire recycling, crumb rubber is the one mentioned most often.

 

127.   Is crumb rubber the thing that might pay for tire recycling without a tip fee?

 

128.   If it is, why have we lost around 25 crumb plants with several more that could close anytime? 

 

129.   One thing we know for sure is that there are millions of tires that will have to be dealt with while those markets develop, if they ever do develop.

 

130.   As a processor we have to deal with those tires every day, right now, in large quantities.

 

131.   That service requires markets and a reasonable up front tip fee that will handle 100% of the tire processed, residual, wire, etc.

 

132.   In Louisiana that reasonable up front tip fee is $1.50 per PTE (passenger tire equivalent).

 

133.   As regulators we hope you will understand that as soon as those markets are available and we have the choice of selling our product for $180 a ton as opposed to $25 a ton. We will be sending our rubber to the $180 ton market.

 

134.   Of course we will need to invest millions of dollars in more equipment to be able to make a product for a $180 a ton market.

 

135.   The Louisiana concept might not have worked in some states, (3) three years ago because of availability of markets.

 

136.   But markets have improved to the point, thanks to Dana Humphrey and his work with civil engineering applications, to where I believe this program could work in any state.

 

137.   The thing that gave the Louisiana program a chance to evolve was the common sense approach to markets by LDEQ.

 

138.   It would however require a common sense approach to the timely approval of markets by the regulatory agency in each state.

 

139.   The processor is the most viable part of a program that offers “a total solution” because of their ability to serve diverse markets.

 

DIVERSITY OF MARKETS

 

A processor should have at least (5) five markets to insure its ability to deliver product without interruption.

 

The processor should determine the market it wants to pursue because they know what product their equipment will produce.

 

The support needed from state agencies is the timely approval of markets the processor identifies.

 

A few examples of markets that should be standard in every state are: tire derived fuel--- septic systems---embankment fill--- alt.daily cover at landfills--- mulch--- crumb rubber products--- land reclamation--- land fill construction---and more

 

HOW TO ENCOURAGE MARKETS

 

$25 / ton paid to any facility which uses TIRE RUBBER in approved markets.

 

$50 / ton to any facility which reduces TIRE RUBBER into CRUMB RUBBER.

 

NOT PART OF LOUISIANA PROGRAM

 

WHY IT WORKS

 

140.   Everyone gets PAID for what they contribute:

 

    1. TIRE DEALER gets FREE TIRE recycling.
    2. AGENCY PAID to administer program.
    3. Transporter PAID to deliver tires to TIRE RECYCLER
    4. TIRE RECYCLER PAID for cost to HANDLE RECYCLING of TIRE
    5. END USER PAID could be paid for EXTRA cost of using RECYCLED materials.

 

A TOTAL SOLUTION

 

141.   If you put together a program stay focused on the goal, “a total solution”, not a solution that solves one aspect of the problem for special interest groups or someone who is pursuing their own agenda.

 

SUGGESTIONS FOR STABILITY

 

Establish AN ADVISORY GROUP:

 

a.      LEGISLATORS

b.      AGENCY

c.      TIRE DEALER

d.      PROCESSOR

e.      TRANSPORTERS

f.        MARKETS

 

Establish AN ARBITRATION OR HEARING PROCESS FOR THE PROCESSOR BEFORE ANY MONEY CAN BE WITHHELD OR A FACILITY CAN BE SHUT DOWN.

 

142.   “Stability” has to happen in order to encourage investments of millions of dollars to take care of the scrap tire problem.

 

STABILITY IN:

a.      REGULATION

b.      TIRE FLOW

c.      MARKET APPROVAL

d.      PERMITTED PARTICIPANTS

e.      FUNDING

 

IN CLOSING:

 

The Louisiana Independent Tire Dealers Assoc. deserves a lot of the credit for the implementation and success of this program. Over the last seven years, having a good relationship with the agency, they have been available with input that helped solve problems as they came up. The program has had problems in the past, but because the agency included everyone in the program when seeking solutions to those problems, those problems were solved and the program continues to be a work in progress. Many lessons have been learned and more will be learned, as the tire recycling business is very complicated. Because this program represents something that has never been done in this country, a program that solves 100% of scrap tire problem, a lot of industry people are skeptical of this program working. Those same people have not come forward with their on programs, but only put forward those state programs that produce the same results year after year, a large percent of tires in those states still go some where besides recycling. Most of those states continue to gauge the success of their program by how much money they have to spend on abatements.

   

DISHONEST PEOPLE CONTINUE TO LOOK FOR WAYS TO EXTRACT MORE MONEY ILLEGALLY FROM THE FUND. IF THE CHECKS AND BALANCES ARE PUT IN PLACE AND MANAGED PROPERLY BY THE AGENCY, THE BAD ACTORS CAN BE IDENTIFIED, REMOVED FROM THE PROGRAM, AND LOUISIANA CAN CONTINUE TO ENJOY THE MOST SUCCESSFUL TIRE RECYCLING PROGRAM IN THIS COUNTRY.

 

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