Surety Bond Encyclopedia

Scrap Tire Processor ($10,000) Bond - Statewide in Alabama

Brief Summary

Most processors think of this as a flat license bond. ADEM treats it as financial assurance for closing and cleaning up your site, and it adds up every instrument you post. A surety bond lets you meet that requirement without tying up cash in a trust fund, and Alabama lets you combine more than one bond or instrument per site to reach the total ADEM approves.

Alabama scrap tire processors must post financial assurance for both closure and remediation under Ala. Admin. Code 335-4-8. Each piece has a $20,000 minimum, so ADEM states the minimum for a processor permit is $40,000 in total. A surety bond is one accepted instrument, and Rule 335-4-8-.06 allows more than one trust fund, letter of credit or surety bond per site to make up the required amount.

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How to Apply for a Scrap Tire Processor ($10,000) Bond:

Calculate the remediation figure: $2 per whole tire or $200 per ton of processed material for the maximum your permit allows to be stored, with a $20,000 floor.
Have a third party based closure cost estimate in current dollars, with a $20,000 floor.
Ask ADEM what penal sum it will accept on this bond and how it combines with any other instruments on file.
Use a surety listed in U.S. Treasury Circular 570.
Set up the standby trust fund required for surety bonds.
Submit the bond with the processor permit application filed through AEPACS on ADEM Form 540.

Detailed Information About the Alabama Scrap Tire Processor ($10,000) Bond:

The amount is set by your facility, not by a flat fee

Rule 335-4-8-.03 requires two separate pieces of financial assurance from a permitted Class One, Class Two or Class Three scrap tire processing facility.

**Closure.** The owner or operator keeps a detailed written estimate, in current dollars, of what a third party would charge to close the facility at the point its operation makes closure most expensive. The estimate is adjusted for inflation during the active life of the facility. The minimum is $20,000.

**Remediation.** It equals $2 per whole tire for the maximum number of tires allowed to be stored, or $200 per ton of processed tire material allowed to be stored. The minimum is $20,000.

ADEM's processor guidance puts it plainly: the minimum financial assurance for a processor permit is $40,000.

Combining this bond with other instruments

Rule 335-4-8-.06 lets an owner or operator meet the requirement with more than one financial instrument per site, limited to trust funds, letters of credit and surety bonds. Insurance is an accepted standalone instrument under Rules 335-4-8-.04 and .05 but is not on the list for combining. Before this bond is issued, ask ADEM how it fits with any other instruments on file and what penal sum it should carry.

Surety bond terms ADEM requires

The surety must be listed as an acceptable surety on federal bonds in U.S. Treasury Circular 570.
A closure bond's penal sum must equal the current closure cost estimate.
The owner or operator must set up a standby trust fund to receive any bond proceeds.
The surety can cancel only by certified mail notice sent 120 days in advance.

Who posts it and who is exempt

The permitted processor posts it, with the Alabama Department of Environmental Management as obligee. Owners or operators that are state or federal government entities, whose debts are the debts of the state or the United States, do not have to provide financial assurance.

Permit and fees

Processor permits are applied for through the Alabama Environmental Permitting and Compliance System using ADEM Form 540. Current permit fees are in ADEM Division 1, Fee Schedule I, or by calling ADEM at 334-274-4201.

How the premium is set

The surety prices the bond after reviewing the owner's credit, finances and operating history. Get a quote on the exact penal sum ADEM will accept before you pay.

Eligibility and Requirements for a Alabama Scrap Tire Processor ($10,000) Bond:

Alabama Department of Environmental Management named as obligee.
Closure and remediation financial assurance, each at least $20,000.
Closure estimate adjusted for inflation during the active life of the facility.
Bond cancellable only on 120 days notice by certified mail.
Combined instruments limited to trust funds, letters of credit and surety bonds.

Alabama Scrap Tire Processor ($10,000) Bond FAQs:

Is a $10,000 bond enough for a processor permit?

Not by itself. ADEM states that the minimum financial assurance for a processor permit is $40,000, made up of at least $20,000 for closure and at least $20,000 for remediation. Rule 335-4-8-.06 lets you combine more than one surety bond, trust fund or letter of credit per site to reach the total ADEM approves.

How is the remediation amount calculated?

Under Rule 335-4-8-.03 it equals $2 per whole tire for the maximum number of tires allowed to be stored, or $200 per ton of processed tire material allowed to be stored, and never less than $20,000.

Do government owned processing sites need this bond?

No. Rule 335-4-8-.01 exempts owners or operators that are state or federal government entities whose debts and liabilities are those of the state or the United States.

Can the surety cancel the bond?

Yes, but only by sending notice of cancellation by certified mail 120 days in advance. That gives you time to replace the bond before the gap affects your permit.

Can I use insurance instead of a bond?

Closure insurance and remediation insurance are accepted instruments under Rules 335-4-8-.04 and .05. The rule on combining instruments at one site lists only trust funds, letters of credit and surety bonds.