Questions arise over government's role in tire contract given to American company

The provincial NDP is raising questions about the Sask. Party’s involvement with a U.S. rubber recycling company gaining a contract held by a Saskatchewan business.

Shercom Industries, a Saskatchewan business that used to handle tire recycling in the province, shut down part of its operations in May 2023 after losing a significant share of the province’s tire recycling contract to American-based Crumb Rubber Manufacturers (CRM) Tire Processing. This led to dozens of layoffs.

After negotiations fell through with the Tire Stewardship of Saskatchewan (TSS), the provincial regulator that manages tire recycling, Shercom lost its exclusive contract in November 2023, and the company shut down its processing facility.

On Tuesday, the provincial NDP released documents showing that former Sask. Party Finance Minster Kevin Doherty was hired as a lobbyist by CRM, which was awarded the contract previously held by Shercom months later.

“Handing this contract to an American company when a Saskatchewan company was already doing the work, well Mr. Speaker, it raises a lot of eyebrows,” NDP Leader Carla Beck said during question period on Tuesday.

According to Beck, Premier Scott Moe claimed he never met with Doherty regarding the contract that ultimately went to the American company. She asked the premier on Tuesday if he had any concerns with the deal.

“In this particular case, Mr. Speaker, there was an RFP [request for proposal] as my understanding that the company she’s referring to didn’t bid on it,” he replied.

In an emailed response to CTV News on Wednesday, Shane Olson, Shercom’s president, said he was extremely disappointed by Moe’s response to the question put forward by Beck.

“The Premier's response clearly identifies how misinformed the Premier is, or worse, that he would deliberately mislead the legislative assembly suggesting that Shercom, a 30 year old Saskatchewan success story, would not participate in the opportunity to secure a stable supply of raw material,” he said.

During question period on Wednesday, Conway brought up the topic again and asked Environment Minister Christine Tell whether or not she met with Doherty on the contract.

“The answer is no,” Tell responded, noting that tire recycling operations for the newly created northern and southern regions were chosen through the RFP.

“The southern processor was chosen through a legitimate, bona fide process,” she said. “This CRM was chosen over a few other proponents that responded to the RFP.”

Conway said Tell contradicted what Moe said on Tuesday in regards to how many applicants for the RFP there were.

“It sounds like there wasn’t one applicant, it sounds like there was more than one,” she said. “People deserve answers on how this deal went down.”

Conway said the Lobbyist Registry showed Doherty started lobbying for CRM in 2022 and asked for clarification on what role he played in “pulling the strings.”

Tell said according to a 2022 annual report by the TSS, the board of directors approved a motion to proceed with negotiating a contract with CRM as the southern processor for the province on June 6, 2022.

“Mr. Doherty was not hired by CRM until November 2022,” she said.

In an emailed statement from Jeff Sterzuk, Doherty’s colleague at Prairie Sky Strategy, he confirmed that Doherty was not contacted by the company until November of 2022, about five months after the awarding of the contract.

“Mr. Doherty has had no involvement whatsoever with the Tire Stewardship of Saskatchewan’s (TSS) decision to have a “southern tire processor,” the statement read. “In addition, he did not have anything to do with the issuing of an RFP for the southern location, the awarding of the RFP to a company in June of 2022 or the negotiation and signing of a contract between the company and TSS.”

Further, Sterzuk said Doherty is a “consultant lobbyist,” not an “in-house lobbyist,” a distinction that would have made it illegal for Doherty to engage in lobbying or advocacy under a rule.

“As consultant lobbyist we are required to register within 10 days of entering into an engagement to lobby and we did that as we always do,” the statement read. 

"Prairie Sky Strategy has always prided itself on following the rules and the law with respect to lobbying activities in every jurisdiction we operate."

Conway said there are many unanswered questions about the deal, and asked why the government chose an out of province company at a time when a Saskatchewan based recycling company existed.

“The Government of Saskatchewan had no involvement in choosing the proponent,” Tell replied. “Obviously, the economics made sense, the investment that was provided to the city of Moose Jaw and surrounding area, and the jobs in southern Saskatchewan.”

Conway asked Tell what the business case was which led to the decision to post the two RFPs.

“The decisions made by the Tire Stewardship of Saskatchewan are exactly that, they’re the ones that decided how to split, how to divide up the province,” Tell replied.

Olson said the TSS initially did not inform Shercom that they were issuing an RFP, and said they received a copy only after they requested it.

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According to Olson, the first page of the RFP excluded Shercom from participating with two statements.

• There is currently a single tire processor in the province (located in Saskatoon) and the TSS is interested in having a second processor(s), ideally in the southern part of the province.
• The TSS, through this RFP, is looking to increase value-added processing in the province with new products and/or new markets and wants to minimize overlap with the offerings (products and markets) of the existing processor in the province.

Olson said Shercom obtained legal counsel and were informed that they were ineligible to submit a bid based on those statements.

“Shercom then raised concerns directly with the Chair of the TSS … The TSS was adamant that the RFP was for information purposes only, and that the TSS would not make any changes without discussion with Shercom first,” Olson said noting that the TSS assured them that Shercom would not be negatively impacted.

Ultimately, the contract was signed by the American company, and Shercom’s processing facility eventually shut down.

Since losing the contract, Olson said Shercom now has to import over one million pounds of crumb rubber every month from their counterparts in BC, Alberta, and Ontario, which comes at a cost to their business model.

“Effectively Shercom is now forced to support the tire recycling programs of the other provinces, while our multi million dollar processing plant has been mothballed,” he said.

- With files from Keenan Sorokan and John Flatters