July/August 2002
While each state addresses the scrap-tire challenge in its own way, Louisiana and Virginia have found success through different fee-based approaches.
Scrap-tire recycling has made great strides in the past 10 years. In 1991, for instance, only 11 percent of tires discarded in the United States each year were recycled or recovered for energy. By 2001, the scrap-tire recovery rate had grown more than sevenfold to about 78 percent.
State scrap-tire programs have been a major factor—some would say the major factor—behind this impressive growth. Currently, 48 states have some kind of scrap tire-focused legislation/regulation, reports the Rubber Manufacturers Association (Washington, D.C.). These programs principally seek to clean up scrap-tire stockpiles and build markets for recycled rubber.
Of course, all state scrap-tire programs aren’t created equally. Some are well-funded and well-promoted, while others come up short on both counts. Some have accomplished their goals even as others are limping along.
Two of the more noteworthy scrap-tire programs—according to some tire processors—are those in Louisiana and Virginia. Both states have successful programs based on funds collected from tire retailers, but that’s about where their similarities end. Here’s a review of the Louisiana and Virginia programs, with a look at their differences, their successes thus far, and their challenges ahead.
Louisiana—A Processor Focus
As with most state scrap-tire programs, Louisiana’s program begins with a fee paid by consumers on new-tire purchases—$2 per passenger and light-truck tire, $5 per medium-truck tire, and $10 for each off-road tire weighing more than 100 pounds.
These fees are put into a Waste Tire Management Fund, which Louisiana pays out in two ways: First, it pays tire processors in the state $1.50 per 20 pounds of tire weight (equivalent to about one passenger tire) for tires that they pick up from tire retailers, process, and market. Second, the state pays tire processors for cleaning up illegal tire stockpiles, with awards given based on a bidding process. (For a flow chart of Louisiana’s tire program, see page 44.) Notably, the five tire-processing companies in Louisiana are all approved to participate in the state’s tire program, though only four are currently active in the program.
One key feature of Louisiana’s tire program is that haulers do not get paid until they deliver scrap tires to a processor, notes Bill Vincent, CEO of Colt Scrap Tire Centers Inc. (Scott, La.) and chair of ISRI’s tire and rubber division. That feature is crucial, he says, because it creates a disincentive for haulers to illegally dump tires. In most states, Vincent explains, tire retailers pay haulers to cart away their scrap tires. Rather than taking the tires to a processor or approved disposal site, some haulers simply dump the tires in illegal stockpiles. In Louisiana, that doesn’t happen because haulers don’t get any money upfront from retailers for taking their scrap tires. Instead, the haulers only get paid when they deliver the tires to an approved tire processor in the state, Vincent says, boasting that “Louisiana’s concept is the only one that solves every aspect of the tire-disposal problem.”
Since the start of its program in 1995, Louisiana has paid out in excess of $41 million to tire processors, with about $29 million of that total—or 71 percent—going toward processing activities and most of the remainder paying for stockpile cleanups. Most of the payments have occurred since 1998 when the state changed its regulations to require processors to market their recycled rubber to receive funds. Since 1994, Louisiana has identified 857 unauthorized tire stockpiles containing more than 8.8 million tires. Currently—and thanks to its tire program—all stockpiles in the state have reportedly been cleaned up except for six small piles containing only about 500 tires.
Louisiana ensures that everything runs smoothly and legally in its tire program by conducting frequent audits. Using a simple manifest system, the state’s Department of Environmental Quality (Baton Rouge) tracks tires from retail sale to processing and marketing to ensure compliance. Tire retailers send their collected fees to the state’s financial services division. If there are discrepancies, the division bills the tire retailer for additional money. Tire processors, meanwhile, hand in monthly processing facility reports, manifest forms, and weight tickets for review. They also must submit a request-for-payment form after they have successfully marketed the recycled rubber.
Since 1997, Louisiana state auditors have found $1.5 million in unpaid tire-retailer fees and have collected more than $1.2 million of those fees. Also, in addition to doing 100-plus audits each year, the state has conducted 3,400 inspections that yielded more than 375 enforcement actions. In the one instance of fraud conviction, a tire processor had to pay a $650,000 fine.
Overall, though, “there have been very few problems,” says Dennis Duszynski, environmental scientist supervisor for the Department of Environmental Quality. “Each processor has found his own niche,” with most opting to sell their processed rubber for tire-derived fuel and civil-engineering applications.
Virginia—The End-User Angle
Virginia’s tire program is based on a 50-cent tax on every new tire sold in the state. The state collects this money from tire retailers, who are allowed to retain 5 percent of the tax—or 21/2 cents per tire—to cover expenses, resulting in a net tax of 47 1/2 cents.
The collected money goes into a Waste Tire Trust Fund, which helps pay for stockpile cleanups, regional scrap-tire collection and processing projects, and an end-user reimbursement program.
The end-user reimbursement program—perhaps the centerpiece of Virginia’s tire program—works like this: When a tire retailer has a load of scrap tires picked up by a hauler, the retailer gives the hauler a certificate (essentially a manifest) that specifies the quantity of tires. This certificate has four duplicate pages, with the top white sheet having four signature lines—one each for the tire retailer, tire hauler, tire collector (if necessary), and tire processor. As the certificate moves from retailer to processor, each signs the top white sheet and retains their duplicate copy of the certificate.
When a certificate has all the necessary signatures, it is considered to have value under the Virginia tire program. Completed certificates place a value on Virginia tires of $22.50 per ton for tires originating from a tire retailer and $50 per ton for tires recovered from a certified stockpile in the state, explains Allan Lassiter, manager of Virginia’s waste tire management program in the Department of Environmental Quality (Richmond, Va.).
Notably, completed certificates can only be redeemed by end-users, who present the forms to DEQ and get reimbursed the cash value of the certificates. Still, tire processors—the last ones to sign the certificates—can and do use them in a variety of ways and, at times, share in the proceeds. Processors can use the certificates, for example, as an incentive to entice end-users to purchase recycled rubber.
Emanuel Tire Co., a Baltimore-based tire processor with operations in several states including Virginia, is one company that has made good use of Virginia’s certificate program. Occasionally, after using the certificates to open up a new market, the company can withdraw them as the end-user realizes the advantages of using recycled rubber. That’s exactly what happened when Emanuel Tire sold tire chips as an aggregate in septic-drainage systems. “We used them as an introductory incentive for the septic company to change from using stone to using rubber,” explains Mark Rannie, vice president of Emanuel Tire and president of ISRI’s Scrap Tire Processors Chapter.
One difference between the Louisiana and Virginia tire systems is that Virginia does less auditing. About once a year, Virginia auditors check manifests and weight sheets from all involved parties, verifying the number of tires processed and their origin.
Another difference is that, in contrast to Louisiana, which currently limits the number of tire processors in its program, Virginia’s program has no such limitation and even welcomes out-of-state processors as long as they can prove that their recycled tires came from Virginia. When the state began its reimbursement program in 1994, there was one tire processor in Virginia and two end-users. “Now there are nine processors and 53 end-users in the state,” says Lassiter. In addition, there are five processors in neighboring states that recycle Virginia tires.
Since 1995, Virginia has paid 788 reimbursement claims totaling $14,875,604. The majority of the recycled rubber—61 percent—went into civil-engineering applications (as landfill daily cover, for instance, and aggregate in septic-drainage fields), while 31 percent was consumed as tire-derived fuel and the remainder was used in recycled-content products.
Fixing the Flaws
Though the Louisiana and Virginia tire programs have been successful, they aren’t without their drawbacks and challenges.
Louisiana, for instance, has had to deal with the problem of out-of-state tires entering its system. Ironically, this problem was caused by one of the program’s strengths—the fee that Louisiana tire processors pay to haulers to deliver scrap tires. While this fee encourages haulers to deliver tires for recycling rather than illegally dumping them, it also entices dishonest haulers to introduce out-of-state tires into the system to boost their earnings.
Such transactions recently depleted the Louisiana tire-program fund to the point where it faced a possible shortfall. As of November 2001, the state’s Waste Tire Management Fund had a surplus of $3,462,789. But money began leaving the fund faster than it was being collected. Part of the reason was that Louisiana increased its payment to processors from $1 to $1.50 per 20 pounds of tire weight. At the same time, fees collected from tire retailers weren’t keeping up with the payments to processors, who were unintentionally paying haulers for out-of-state tires. Since February 2001, Louisiana’s tire fund was paying out an average of $241,602 per month more than the fees collected on new tires, according to the Department of Environmental Quality’s March 2002 status report. At that rate, the fund’s surplus was in danger of being depleted by the end of 2002.
The Louisiana legislature responded by passing tougher penalties for any company—hauler, collector, processor, or end-user—that brings out-of-state tires into the Louisiana program. Fraudulent claims of $500 or more can now result in serious repercussions, including up to 10 years of hard labor on top of fines. This legislation reportedly stopped the decline of Louisiana’s tire fund, enabling it to stabilize at around $1 million.
In Virginia’s program—as in many other state scrap-tire programs, notes Lassiter—one problem is that tire retailers are exploiting the program’s fee structure. While Virginia collects from retailers a 50-cent tax on each new tire sold, for example, retailers charge consumers anywhere from $1.50 to $2 per tire as a “disposal fee” on their old tires. The retailers pay 80 cents to $1 per tire to haulers to remove the old tires then keep the rest of the disposal fee for themselves. Not surprisingly, such practices have led to court cases, with citizens in Florida and Texas suing because the so-called disposal fee exceeds the retailer’s actual disposal costs and/or state tire taxes. These cases are still pending.
Aside from these issues, the Louisiana and Virginia tire programs could face problems simply because of their fee-based structures, asserts Michael Blumenthal of the Rubber Manufacturers Association (Washington, D.C.). In his view, state tire programs built on what he calls “subsidies” can collapse once the subsidies end. If states want to encourage tire recycling, Blumenthal suggests, they’d do better to offer one-time grants to end-users to allow them to buy equipment or “do whatever testing is necessary to get up and running so they can use tire-derived material.”
Bill Vincent of Colt Scrap Tire Centers disagrees, asserting that the Louisiana approach “is not a subsidy, it’s a fee paid by citizens for the proper recycling of a tire.” Tire fees, he argues, are no different than the many other fees that citizens pay to have their city, county, or state address communal problems, including—for example—the fee people pay for trash pickup.
Another important argument for tire fees, Vincent asserts, is that many end-uses for scrap tires continue to be “negative” markets—that is, they aren’t economically viable yet—so recyclers must have some kind of financial support on the front end to help build those markets.
Vincent is also a vocal opponent of grants of any kind, arguing that “when you pay people upfront, they sometimes don’t end up using the amount of rubber they say they’ll use.” Instead, he prefers programs that pay processors or end-users based only on the scrap tires that they actually process or use.
Another problem with grants, Vincent says, is that they can lead to claims of unfair competition, even lawsuits, as has happened with some grants under California’s tire program.
In Vincent’s view, Louisiana’s program avoids such problems. “In Louisiana, the difference is that the money has solved the tire problem because it goes to the right place—it goes to the processors,” he says.
Fees, grants, loans, taxes, or a so-called free-market approach—whichever a state prefers, they all represent different paths toward the same goal of resolving the scrap-tire problem. While tire recycling still faces its share of challenges—and while no state tire program is perfect—there’s no denying the market’s great progress in the past decade or its inevitable growth in the future.
Building the Ideal Program
The existing state scrap-tire programs are as varied as the states themselves, taking diverse approaches and including different elements to boost tire recycling and eliminate stockpiles. But what if you could take the best of these programs to create an ideal state scrap-tire regime?
To Bill Vincent of Colt Scrap Tire Centers Inc. (Scott, La.), these are the essential points of an effective tire program:
• Seek input from all entities involved by establishing an advisory group made up of the appropriate state regulatory agency, tire retailers, tire processors, and end-users. Stay focused on the goal of finding a total solution, not one that solves one aspect of the problem for a special-interest group.
• Charge a fee to consumers on retail sales of new tires. Suggested fee amount: $2.50 per passenger tire, $10 per truck tire, and $20 for larger tires up to 500 pounds. The fee should be collected by the same state agency that collects other fees for the state. Collected fees should be put in a dedicated scrap-tire recycling fund.
• Pay all parties for what they contribute to the tire-recycling process. The tire retailer should be paid a percentage of the fee for reporting to the proper state agency. The state agency that collects the fee should retain a percentage to administer the program and clean up stockpiles. Tire processors should be paid $150 per ton of processed tires delivered to an end-market (this money would enable processors to pay haulers to deliver tires to their recycling centers). Processors that further reduce tire rubber to crumb rubber and other components to be sold to markets should be paid an additional $50 per ton. End-users should be paid $35 per ton for using scrap-tire rubber in an approved market.
• Make sure the program includes an arbitration or hearing process, led by the advisory group, to help resolve any problems that arise.
Michael Blumenthal of the Rubber Manufacturers Association (Washington, D.C.) prefers state programs based on a free-market approach such as those in California, Florida, Georgia, Illinois, Iowa, Maryland, Minnesota, and South Carolina. His tire-program wish list would include the following elements:
• Establish a limited-term fee and fund, with states collecting the fee at the point of car registration. Collected fees should be deposited in a fund dedicated to scrap-tire programs.
• Spend the fund on market development, stockpile cleanups, and public education.
• Enforce existing regulations.
• License all entities, such as tire haulers and processors.
(For more information on state scrap-tire legislation and regulations, visit www.rma.org/scraptires and click on Legislation.) •
Margie Bell is a writer based in Arlington, Va.
While each state addresses the scrap-tire challenge in its own way, Louisiana and Virginia have found success through different fee-based approaches.