The Saskatoon company that lost a contract for tire recycling for all of Saskatchewan says it refused to bid on an RFP solely for northern tires for reasons of economics and principle.

Shercom Industries underwent a major fire in 2016. In an interview with Western Standard, CEO Mike Richards said the company was asked by then-Environment Minister Scott Moe what was needed to rebuild the $15 million facility.

According to Richards, the company said it needed government backing through a long-term contract that would offer assurance of supply and a "voice at the table in the future of the industry." Richards said neither a ten-year contract nor the other request came to fruition.

The Saskatchewan Scrap Tire Corporation (SSTC) oversaw tire recycling until June 2017. At that point, the Tire Stewardship of Saskatchewan was established as a non-profit corporation by the Retail Council of Canada and the Western Canada Tire Dealers.

TSS gave Shercom a whole-province contract for a few years, then a series of extensions. But in 2021, TSS issued a request for proposal (RFP) for another recycler to enter the province.

Shercom said the RFP "was extremely shocking to us" and that TSS initally told Shercom the RFP was for information-gathering purposes only.

"It was explicitly written that the TSS was looking for a second processor to operate in the southern half of the province," Richards said.

"When we took that to our legal team, our legal team told us that we were not eligible to place a bid on that RFP."

Stevyn Arnt, executive director for TSS, told Western Standard Shercom never expressed such concerns to them. "I . . . don't think that they ever contacted us to get clarity on that," he said.

"I don't really want to get into rehashing something that just went through a provincial review, because they did do a review on the whole RFP."

That RFP gave California-based Crumb Rubber Manufacturing, the largest tire recycler in North America, a contract for southern operations. The company later employed former Sask Party Finance Minister Kevin Doherty as a lobbyist to the province.

Richards says the result benefits neither the economy, nor the environment. He said tire retailers have told him personally that they are "not happy" because "their tire piles are not getting picked up" as a northern processor has not yet been named.

"What you're seeing now is a processor that is shredding big chunks and shipping it out of the province. So they're not crumbing rubber. They're not manufacturing products," Richards said, in contrast to his own company.

"We make parking curbs, we make speed bumps, we make rubber paving. We sell through a distribution network across North America for all of those products."

Former Deputy Minister to the Premier and former Deputy Minister of Environment Cam Swan was appointed to review TSS's procurement practices, assess future needs of tire recycling and processing, and provide advice to the Minister of Environment.

Richards said replacing the SSTC with the TSS did changed little.

"Unelected officials, as well as consultants that were advising that at (South Sask.) Tire Corporation never got removed," Richards said.

"You're looking at a rotten apple that never got taken out of the bushel, and it just continued to rot the bushel until we ended up right back where we were in 2015-16."

Neither the business case for the RFP, nor the provincial review were publicly released. However, after the review was accepted by the TSS board last October, the environment ministry said TSS would pursue a contract with Shercom for the northern part of the province.

However, two years of negotiations with TSS did not leave Shercom confident.

"Even if we had bid on the RFP and were successful, the wording within the RFP made it clear that at any given time TSS could turn off the tap and we would still be without tires," Richards said.

"By submitting an RFP it would have by default admitted that we conceded to having two processors in the province. Both our ethics and our stance on the economies of scale made [it clear] for us to not place a bid on that RFP."

Arnt said they approached Shercom to bid after the RFP closed, but they still refused.

Richards said they never made back the money they invested on tire recycling and that equipment has sat idle since April 2023.

"Some would think that some is better than nothing except for when you need to have a specific threshold of volume for you to see a return on the cost," Richards said.

Now Shercom imports 1.8 million pounds of rubber per month to make its products.

Industry consultant Michael Blumenthal wrote Minister of the Environment Dana Skoropad in October 2022 to say the Saskatchewan market was not big enough to have two processors.

"Today your province has a successful program. Virtually all available scrap tires are collected, processed and rendered into high-value products. This is truly the way scrap tires should be managed, but all-too-often are not," Blumenthal wrote.

The expert warned that installing a second recycler "can seriously jeopardize the stability of the current situation."

"This is a serious mistake. Given the generation rate of scrap tires and the distribution on your population, having two scrap tire companies will likely cause both companies to fail," Blumenthal wrote.

"Should another collector/processor come into Saskatchewan, I had two suggestions for Shercom: drop out of the TSS program or to relocate to a province with a stable program."

On Nov. 8, 2022, Dan Hefferman of Heffco Elastomers in Ontario wrote Skoropad with similar comments. Hefferman's company uses the end product for their own operations.

"Typically it takes a minimum of approximately 3 million Passenger Tire Equivalents ("PTEs") per annum in a region to be sustainable. Saskatchewan currently produces about 1.9 million PTEs," wrote Hefferman.

"Having worked with the past processor based in Assiniboia, I can vouch for the fact that if a second processor is established in the province, it is inevitable that one of them will be pushed out of business."

Ltr-to-CBC-October-23-2020

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