1. 2011 Waste Tire Market Report Ed Boisson May 15, 2012 CALRECYCLE Insert Pictures Here

2. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 2 Energy | Environment | National Security | Health | Critical Infrastructure Outline Methodology Key Findings and Trends Exports Special Report Implications for Market Development

3. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 3 Energy | Environment | National Security | Health | Critical Infrastructure Methodology

4. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 4 Energy | Environment | National Security | Health | Critical Infrastructure Methodology 4 Data Sources Processor, Exporter Surveys TDP Producer Interviews TDF User Survey Landfill Survey Retreader Survey Waste Tire Manifest System Civil Engineering Team Data Disposal Reporting System Third Party Data/Reports Anecdotal Information Consolidated Flow Analysis Follow-Up Conversations CalRecycle Feedback Draft Report Stakeholder Feedback Final Report

5. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 5 Energy | Environment | National Security | Health | Critical Infrastructure Interpreting Results – Things to Remember Use of CA Tires, Not Total Market Size Documented Amount of CA Tires Managed, Not “Generation” Results Generally +/- 10% Accuracy Retreader Buffings Not Counted Diversion Rate Does Not Account for Residuals 5

6. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 6 Energy | Environment | National Security | Health | Critical Infrastructure Key Findings and Trends

7. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 7 Energy | Environment | National Security | Health | Critical Infrastructure Market Snapshot

8. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 8 Energy | Environment | National Security | Health | Critical Infrastructure 2011 Diversion Rate: 88% and Rising!

9. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 9 Energy | Environment | National Security | Health | Critical Infrastructure Reuse Up Expect Flat or Slight Increase in 2012

10. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 10 Energy | Environment | National Security | Health | Critical Infrastructure Crumb Rubber Up Slightly 2012 Trend Uncertain

11. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 11 Energy | Environment | National Security | Health | Critical Infrastructure Civil Engineering Down Growth Expected in 2012 * Based on landfill surveys; not validated by CalRecycle

12. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 12 Energy | Environment | National Security | Health | Critical Infrastructure ADC Up Sharply Expect Flat or Declining in 2012

13. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 13 Energy | Environment | National Security | Health | Critical Infrastructure TDF Down Expect Flat to Slight Increase in 2012

14. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 14 Energy | Environment | National Security | Health | Critical Infrastructure Disposal Down to Record Low* Trend Continuing in 2012 * Chart based on top 5 landfills receiving tires

15. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 15 Energy | Environment | National Security | Health | Critical Infrastructure Exports Special Report

16. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 16 Energy | Environment | National Security | Health | Critical Infrastructure 10-Year Export Trend

17. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 17 Energy | Environment | National Security | Health | Critical Infrastructure Industry Structure and Key Decision Points

18. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 18 Energy | Environment | National Security | Health | Critical Infrastructure Economics* Type of FacilityCapital and Operating Costs Revenue from Product Sales Synopsis Baler/Exporters Low Investment in Equipment Low Operating Costs Rapid Inventory Turnover Currently Strong Pricing Low Costs and Strong Cash Flow = Tolerance of Low Tip Fees Established Processors (Especially Crumb Producers) High Investment in Land, Building, and Equipment Relatively High Operating Costs Slow Inventory Turnover Due to Seasonal Sales High Competition Reducing Sales Revenue Relatively High Costs and Variable Cash Flow = Need for Strong Tip Fees * Generalized,and simplified analysis for illustrative purposes only.

19. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 19 Energy | Environment | National Security | Health | Critical Infrastructure U.S. Exports of Waste Tires and Waste Rubber to Asia, 2002 – 2011* * Source: U.S. International Trade Commission, for Harmonized Tariff Schedule, Section 4004.

20. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 20 Energy | Environment | National Security | Health | Critical Infrastructure U.S. Waste Tire and Rubber Exports vs. Coal Prices * Source: U.S. International Trade Commission and World Bank Price Data.

21. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 21 Energy | Environment | National Security | Health | Critical Infrastructure Industry and Market Impacts Baler/Exporters Expanding Increased Competition for Tires Supply and Tip Fee Pressure for Established Processors Cement Kilns: Shift From TDF Revenues to TDF Costs So Far, Overall, Non-Disposal Markets Not Declining Due to Exports Since 2009, Exports up 6.3 Million PTE and Disposal Down 6.3 Million PTE But Not a Perfectly Efficient Shift Some Processors Disproportionately Impacted Continuing Trend May Reduce Tires Available to Other Market Segments Beginning This Year

22. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 22 Energy | Environment | National Security | Health | Critical Infrastructure How Long Will Export Growth Continue? How High Will it Go? Drivers High International Demand: Growing Industrial Production (Especially in China) High Coal and Oil Prices Renewable Power Regulations/Incentives Forgiving Regulations and/or Enforcement in Some Nations Developing Fuel Conversion Technologies? Attractive Economics Current Pricing for Bales, Shreds and TDF Cheap Ocean Freight “Back Haul” Rates to Asia Simple, Low Investment Export Business Model Maturing Supply Pipeline

23. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 23 Energy | Environment | National Security | Health | Critical Infrastructure Potential Export Constraints and Barriers Maturing of Asian Scrap Tire Generation and Management Could Offset Some Waste Tire Imports Coal/Oil Pricing Could Drop Asian Industrial Production Could Drop A Global Disturbance Could Reduce Cargo Container Availability Importing Nations Could Change Pertinent Laws and/or Enforcement Practices Expanded Sourcing from Other States/Countries Could Dilute Demand for CA Tires Export Market is Notoriously Volatile and Unpredictable

24. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 24 Energy | Environment | National Security | Health | Critical Infrastructure Options to Address Export Issues Strengthen Permitting and Enforcement Implement Incentives to Recycle Waste Tires in California Seek Legislation Requiring Notification of Waste Tire Exports Seek Federal Action to Impose Tariffs Leverage International Waste Export Conventions Encourage Voluntary Certification Programs Accept that Exports May Play a Significant, Continuing Role in California’s Waste Tire Management System

25. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 25 Energy | Environment | National Security | Health | Critical Infrastructure Market Development Implications

26. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 26 Energy | Environment | National Security | Health | Critical Infrastructure Market Development Observations Supply-Related Barriers Growing Tire Supply and Tip Fee Pressures TDA Supply Challenges May Grow as Demand Grows Demand-Related Barriers Persisting Need to Raise Awareness of TDPs and Benefits Need for Documentation on TDP Benefits Need to Promote TDPs Made from California Tires Need for Specifications Calling for/Allowing for TDPs Quality Standards, Best Management Practices Be Cautious About new Crumb Rubber Investments Need to Document Imports, Total Market Size

27. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 27 Energy | Environment | National Security | Health | Critical Infrastructure TBAP Industry Wide Projects Outreach State Agencies Caltrans Product Approval Effort Local Agencies Federal Purchasers Private (Architects) Workshops and Direct Consultations Best Management Practices/Standards Feedstock Conversion Progress Review Annual Market Reports and Incentive/EPR Report Conference, Proposed Venture Vetting

28. © Science Applications International Corporation. All rights reserved. SAIC and the SAIC logo are registered trademarks of Science Applications International Corporation in the U.S. and/or other countries. 28 Energy | Environment | National Security | Health | Critical Infrastructure Q&A and Comments Send written comments on draft report by May 22 to Sally.French@CalRecycle.ca.gov Sally.French@CalRecycle.ca.gov Please insert in the subject line of your e-mail Comments on Tire Market Report Final Report projected for release in July.