Fuel Marketer News Magazine Spring 2016 by Fuels Market News

Spring Issue 2016

Your Source for News and Information

SPECIAL SUPPLEMENT

The E15 Perspective The Rise of the

Machines

Crude Values, Part 1

Sinclair

Turns 100 Can Electric Vehicles Beat Internal Combustion Engines?

SUPPLY, MARKETING, DISTRIBUTION, TRANSPORTATION & LOGISTICS

PUBLISHER’S NOTE

A note from Your Source for News and Information

A Publication of FMN Media, LLC

Gary Bevers CEO & Group Publisher

EDITORIAL STAFF Publisher Gary Bevers gbevers@fmnweb.com Editorial Director Keith Reid kreid@fmnweb.com Managing Editor Tricia Corrigan tricia.corrigan@fmnweb.com Copy Editor Kathy Bevers kbevers@fmnweb.com Columnists and Contributors Betsi Bixbi Greg Cushard Vladimir Collak Shane Dyer John Eichberger Doug Haugh Corey Henriksen Maura Keller Alan H. Levine Joseph H. Petrowski Fred M. Whitaker Dr. Nancy Yamaguchi Editorial Board Ed Burke Lisa Calhoun George A. Overstreet, Jr. Joseph H. Petrowski Art Director Jeff Beene jbeene@fmnweb.com Advertising Sales Greg Mosho 115 Tinton Falls Road Farmingdale, NJ 07727 732.610.5735 Mobile gmosho@fmnweb.com Mailing Address 15201 Mason Road Suite 1000-288 Cypress, TX 77433

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In the the inaugural print issue of Fuel Marketer News, I wrote... “Fuel Marketer News will cover all the news that is relevant to the downstream fuels marketplace. If it burns, combusts or powers a motor, we consider it to be a fuel. And that includes alternative energy sources such as biofuels, CNG, hydrogen and yes, even electricity, if it is ‘pumped’ into a car.” We have stayed true to that course. Whether traditional fossil fuels (gasoline and diesel) or alternative fuels (ethanol, isobutanol, biodiesel, CNG, LPG, hydrogen, and electric)— we strive to thoroughly and objectively cover the information that matters to your business and your customers. At Fuel Marketer News we believe our mission is to provide the broadest editorial coverage on a wide range of fuels and fuelingrelated subjects. We certainly support an “All of the Above” fuel strategy and, in this issue alone, you will see our columnists cover everything from the latest technologies—“The E15 Perspective” “EMV—When should I upgrade?” “The Rise of the Machines” and “Can Electric Vehicles Beat Internal Combustion Engines?”—to some long-running issues such as “Climate Change, Who’s Irrational?” and “Crude Values.”

In the world of automobiles, trucks and fuel there is very little that is new under the sun, but as an industry we do continuously progress. Check out our articles on two old-line companies, Sinclair Oil and Steel Tank, that turned 100 years old this year to see how far they have come since their beginnings. From refinery supply to terminal and bulk plant storage to transportation via pipeline, barge, rail and truck, to wholesale distribution to retail marketing, we will cover it from a high-level management overview down to the operational details. If you think our expert columnists, industry news and operational solution features are interesting and valuable you can find a lot more online every week. So, don’t wait for the next issue of the print magazine. Register for our e-newsletter at www.fuelmarketernews.com to get in the loop as new content gets posted. Registration is free, and the process is short and easy. In 2016 we will continue to work hard to make sure you have every reason to make us your go-to news site for motor fuels marketing, retailing and supply.

TABLE OF CONTENTS

SPECIAL SUPPLEMENT

PUBLISHER’S NOTE

FUELS & SUPPLY

Who Is Irrational In the Climate Change Discussion? by Joe Petrowski

Vendor View: Potential Emerging Energy Policies by Joe O’Brien

Better, Faster, Cheaper? Can Electric Vehicles Beat Internal Combustion Engines? by Doug Haugh

Location, Location, Location: Crude Values, Part 1 by Dr. Nancy Yamaguchi

WHOLESALE & FLEET OPERATIONS

Steel Tank Institute Hits 100 by Keith Reid

A Look at Today’s Cardlock Hardware by Maura Keller

Vendor View: Taking on Water by Paul Nazzaro

MCC Can Help Reduce your “Stress” from Stress Corrosion Cracking Issues by Philip Korosec and Gary Kline

Vendor View: The Numbers Don’t Lie with Manual SIR by Bobby Hayes

52 SPECIAL SUPPLEMENT:

Sinclair Turns 100 and Forges Ahead in its New Century of Operations by Keith Reid

RETAIL OPERATIONS

Marketing Fleet Fueling in the Face of Declining Fuel Prices by Shane Dyer

The E15 Perspective from Those Marketing the Fuel by Maura Keller

EMV—When Should I Upgrade? by Richard Browne

Vendor View: The Letters of the Day are E-P-A by W. Brian Reynolds

BUSINESS OPERATIONS

The Rise of the Machines and the Fourth Industrial Revolution by Vlad Collak

Don’t Leave Hundreds of Thousands of Dollars on the Table Because of Complacency by Corey Henriksen

Bring Out the Best in Your People by Dr. Charlie Cartwright

90 PRODUCT ROUNDUP: Fuel Additives 92 INDUSTRY NEWS 106

ADVERTISER’S INDEX

Sinclair Turns 100 Who Is Irrational In the Climate Change Discussion?

Page

by Joe Petrowski

Better, Faster, Cheaper? Can Electric Vehicles Beat Internal Combustion Engines? by Doug Haugh

Steel Tank Institute Hits 100 by Keith Reid

Location, Location, Location: Crude Values, Part 1

by Dr. NancyYamaguchi

EMV—When Should I Upgrade?

by Richard Browne

FUELS & SUPPLY

by Joe Petrowski

Economists, business people, scientists and public policy makers are chastised as luddites, non-believers, unscientific and worse when we take caution against significant and costly changes in energy policy that demonize hydrocarbons and embrace green energy with religious fervor. Letâ&#x20AC;&#x2122;s deal with the facts and examine the dangers.

Who Is Irrational In the Climate Change Discussion?

“

”

Call me a skeptic but I need to be suspicious (why I have never donated to the Clinton Foundation) when the cure for this “danger” is always among:

It is simply non-numeric and nonprobabilistic and not unscientific to be skeptical of the extrapolated predictions 50 years out. Similarly, it’s not unscientific to be skeptical of their affect and the cure (limiting human advancement and freedom and economic development).

“

1. More government power and control 2. Higher taxes 3. $88 billion subsidies in the U.S. per year for political contributors shaded green ($3,000 per second) and 5 trillion worldwide

Yes, the earth is warming slightly and there is little doubt humans are a contributing factor (in the spirit of full disclosure I like humans and believe in freedom of travel, economic development and moderating the climate using energy). But the extrapolation of global temperatures is extreme and far from “certain.” In fact, the earth has alternately warmed and cooled over 100,000 years and there is some evidence that it may be entering a cooling phase given the growth in the Greenland sheet.

4. Wealth transfer from the United States to third world countries 5. Reliance on compliance from other industrial powers like the Chinese (yeah, that is a real Gucci bag and Rolex watch)

”

It is reasonable to embrace policies to remove particulates, nitrous-oxide and sulfur-dioxide from the air and water ⎯but to spend $200,000 per second worldwide, kill entire industries and arrest economic development and human advancement over a substance that comes out the front end of a human and back end of a farm animal seems simply daffy. To oppose these policies and simultaneously support natural gas, hydrogen efficiency and biofuels, which I do, is not inconsistent.

Development and production of diverse domestic fuels is in the nation’s economic and security interest, and research and development and higher productivity is always beneficial when it originates from the private sector for wealth creation.

Also, humans are not only not the sole cause of warming, but may not even be the greatest influence among volcanoes, methane vents, solar radiation and even bovines and organic decay. Further, in the broad scope of history, cold—rather than heat—has been the greatest threat to humans. And while there are risks to certain third-world countries and coastal inhabitants, there are benefits to much of North America, the USSR and north Asia from increasing growing seasons.

This is not unscientific, but rather pragmatic, common sense from someone who has spent a lifetime forecasting and seeing how policy and laws are made. n

A recent UN report stated that North American agriculture actually produced more oxygen and removed more CO2 than the Amazon rain forest. And as to “certainty”—every decent forecaster knows the danger of certainty of long dated events and the history of scientific certainty. For example: bloodletting, injecting bleach into tumors, the coming ice age, that horse manure production would overwhelm New York City, “Famine 1975,” we will run out of petroleum...and so on. It is simply non-numeric and nonprobabilistic and not unscientific to be skeptical of the extrapolated predictions 50 years out. Similarly, it’s not unscientific to be skeptical of their affect and the cure (limiting human advancement and freedom and economic development). FMNMagazine

Joe Petrowski Joe has had a long career in international commodity trading, energy and retail management and public policy development. In 2005, he was named President and CEO of Gulf Oil LP and elected to the Gulf Oil LP Board of Directors. In October of 2008 he was named CEO of the now combined Gulf Oil and Cumberland Farms whose annual revenues exceed $11 billion and that now operates in 27 states. In September 2013, Petrowski stepped down as CEO of The Cumberland Gulf Group. He is now managing director of Mercantor Partners, a private equity firm investing in convenience and energy distribution. 7

fuelmarketernews.com

FUELS & SUPPLY

VENDOR VIEWPOINT:

Potential Emerging Energy Policies Offer Insight into the Future of Fueling by Joe O’Brien Recent changes in both global and U.S. energy policies have the potential to significantly impact the landscape of retail fuel over the next five to 10 years.

competitive pricing strategies and who incentivize C-store traffic through loyalty programs and engaging multimedia promotions will be in a stronger position to preserve their bottom lines.

The historic Paris climate conference (COP21) in December has set in motion a global commitment to reducing reliance on fossil fuels. In addition, the United States Environmental Protection Agency finalized two key regulations during the last quarter of 2015 that directly affect operations on the forecourt: National Ambient Air Quality Standards and Renewable Fuel Standard volume requirements. These measures represent steps toward long-term, sustainable environmental responsibility. As a result, it is essential that fuel retailers keep an eye on these issues in the short term in order to prepare for their impact. Marketers who align their operations to keep pace with emerging environmental regulations will be best positioned to capitalize on changing consumer demand and minimize costs associated with compliance issues.

Despite the uncertain future facing oil and gas companies, the Paris Agreement will no doubt spur innovation as it drives support for alternative fuels and stricter compliance through equipment design. As an initial step towards that goal, President Obama has assigned funding to support innovation in the energy sector. The proposed fiscal year 2017 Department of Energy budget includes $5.85 billion in discretionary funding for clean energy research and development, which represents a 21% increase from FY 2016. Of that $5.85 billion, over $880 million is earmarked for sustainable transportation technologies that increase the accessibility of domestic renewable fuels. While this represents a meager budget relative to other federal disbursements, it’s a starting point, that, combined with government incentives including federal tax credits and grants for alternative fuels station equipment, signals government financial support for renewable fuels. Marketers who stay abreast of these developments will not only be able to capitalize on government incentives, they can time the introduction of alternative fuels equipment to their forecourts in a competitive manner.

Paris Climate Agreement In December, 195 countries agreed at COP21 to reduce global warming by limiting the increase in the average global temperature to less than 2°C, with a goal of eventually limiting it to 1.5°C. Countries will be required to report progress on their efforts as early as 2018.

RFS Standards

The agreement presents a long-term challenge to fossil fuel companies already grappling with the existing challenges of weak demand for—and overproduction of—oil. According to a recent report by Fortune, oil and gas companies could face stranded carbon assets—oil and gas reserves that companies include in their valuations, but end up never being drilled due to the Paris Agreement. Shaking the foundation of the fossil fuel industry’s profit margins could cause widespread economic repercussions, and will almost certainly impact fuel prices at the pump. If this market volatility occurs, fuel retailers who maintain FMNMagazine

Coincidentally, on the first day of COP21, the U.S. Environmental Protection Agency (EPA) issued its final volume requirements for the Renewable Fuel Standard (RFS). While the final volumes (18.11 billion gallons of biofuels need to be blended into the fuel supply in 2016) are higher than the volume proposed by the EPA in June 2015, they are substantially lower than the 22.25 billion gallons mandated by Congress in 2007. 8

fuelmarketernews.com

FUELS & SUPPLY

Potential Emerging Energy Policies Offer Insight into the Future of Fueling

The RFS remains a highly contentious issue, with entities on both sides filing lawsuits. Independent refiners, including Valero Energy Corp., are challenging the RFS in order to shift the responsibility of meeting the obligations further downstream—from oil refiners to fuel blenders—in order to remove barriers to renewable fuels growth. The American Petroleum Institute (API) filed a lawsuit challenging the EPA’s failure to meet deadlines for the 2014 and 2017 biomass-based diesel volumes and for requiring more cellulosic ethanol in 2016 than exists.

States with non-attainment designations will be required to implement State Implementation Plans in order to bring those areas into compliance. During commentary for the 60 ppb proposal, NACS stated that more stringent ground-level ozone standards could prompt states to require the pricier reformulated gasoline be sold at more gas stations, enforce more stringent Reid Vapor Pressure requirements and possibly retain Stage II recovery requirements where they might otherwise be decommissioned. The EPA is expected to issue nonattainment designations by October 2017.

Keep an Eye Toward the Future

Opponents of the RFS, including the API, continue to argue that blends higher than E10 are unsafe for most vehicles and that the RFS ethanol mandates could saturate the fuel supply with a blend that is incompatible with most vehicles. However, according to a Renewable Fuels Association analysis, E15 compatibility is on the rise, with auto manufacturers explicitly approving E15 in more than 70% of model year 2016 vehicles, which represents a 10% increase in the previous year’s compatibility rate.

Although it is impossible to predict exactly how and when the environmental policy changes and regulations will begin to transform the forecourt in earnest, fuel retailers would be wise to monitor emerging developments over the next few years to gauge their traction. When consumer demand for renewable fuels does take off, it will represent an opportunity to attract new customers and increase market share. Several large retailers have already introduced E15 in anticipation of the growth available in that market.

If the courts rule in favor of the independent refiners to move the onus of RFS compliance to fuel blenders, and the E15 automotive market continues to grow, renewable fuels may soon be able to penetrate the market in a more significant way, creating a shift in consumer demand for ethanol-blended fuels. Without question, the 2017 renewable volume obligations (RVO) will be a key benchmark for the potential growth. The proposed RVOs for 2017 are due March 31 and they must be finalized by the end of November.

With average fuel prices projected to remain low in 2016 and c-stores realizing in-store sales growth, now may be the time to invest in alternative fuels equipment upgrades. Experienced fuel equipment suppliers can be a valuable resource to marketers grappling with strategic equipment acquisitions and compliance requirements. Retailers who collaborate with a trusted fuel equipment supplier to prepare for future demand and compliance mandates will position their sites to remain competitive amid the widespread industry change. n

New NAAQS Regulation In late 2015, the U.S. Environmental Protection Agency lowered the ozone National Ambient Air Quality Standards (NAAQS) from 75 parts per billion (ppb) to 70 ppb. In December 2014, the EPA proposed to lower the NAAQS to between 65 and 70 ppb (the agency also sought feedback on the possibility of lowering NAAQS to 60 ppb). Although many critics questioned the merit of lowering the standard, citing the minimal improvement in public health it would yield and the economic risk it could cause, the 70 ppb rule became binding on December 25, 2015.

Joe O'Brien

Other existing environmental programs such as power plant emissions regulations and the Tier 3 vehicle emissions and fuels standards should help states meet the new standards. That notwithstanding, it is expected the lower standard will increase the number of areas designated as “non-attainment” areas (areas that do not comply with the lower 75 ppb standard). Energy Tomorrow, a project led by the American Petroleum Institute, forecasts that the number of counties that will be considered non-attainment areas could jump from 217 to 958 under the new standard. FMNMagazine

Joe O’Brien is Vice President of Marketing at Source™ North America Corporation. He has more than 20 years experience in the petroleum equipment fuel industry. Contact him at jobrien@sourcena.com.

READ MORE at fuelmarketernews.com 10

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Better, Faster, Cheaper? Can Electric Vehicles Beat Internal Combustion Engines?

FUELS & SUPPLY

“

by Doug Haugh We have probably all heard the tale about the boiled frog. A frog will jump out immediately if dropped into a pot of boiling water, but will sit comfortably and be cooked alive if the water is cold and then very gradually raised to a boil. This tale is starting to feel relevant in the energy business. Major changes in energy consumption are SLOW to materialize. It took us thousands of years to move beyond burning wood as our major energy source. Coal powered the industrial revolution 250 years ago and seems to have peaked in consumption only in the last year. Oil having boomed since that first well in 1869 dominates transportation 150 years later The peaking of coal due to substitution of natural gas—while not dramatic enough for those who want the demise of all fossil fuels—is cold comfort for those working in the collapsing coal business. Yes, this switch to natural gas has been hastened by the focus on reducing greenhouse gases and pollutants, but the much broader driver has been fundamental economics that have made natural gas better, faster and cheaper. The net result is that king coal has lost its best market: power generation. More broadly useful than coal, oil has one of the biggest and best markets— refined fuels. Fuel for transportation is what drives oil’s value. What if we are now seeing not peak oil, in terms of production, but peak oil in terms of demand? What if the biggest and best market for fuels is lost to a new substitute? The glacial pace of change that typically occurs in energy makes such change nearly impossible to see until it has already had a massive impact. Part of this “what if” question may be materializing now. We all know that despite the seemingly endless hype around Tesla, electric cars are currently a non-factor. At less than one tenth of 1% of global car sales last year, it seems clear that the water in this pot is calm and cool. The heat may, however, be turned up soon. When looked at a little more closely, we can begin to see the power of compound growth becoming evident. As depicted below, if the current growth rate of electric vehicles continues, they will account for 35% of the new car market by 2022, according to Bloomberg New Energy Finance.

The Rise of Electric Cars By 2022, electric vehicles will cost the same as their internal-combustion counterparts.That’s the point of lift-off for sales. 500 million vehicles Projected annual sales

400

Cumulative sales

Electric vehicles would account for 35% of all new vehicle sales.

300 200 100 0 2015 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22 ‘23 ‘24 ‘25 ‘26 ‘27 ‘28 ‘29 ‘30 ‘31 ‘32 ‘33 ‘34 ‘34 ‘36 ‘37 ‘38 ‘39 ‘40 Sources: Data compiled by Bloomberg New Energy Finance, Marklines

FMNMagazine

fuelmarketernews.com

”

So what, right? You mean in 25 years a whopping 35% of new cars might—and I stress MIGHT—be electric? Slow as this may seem, the urgent challenge I see for the current oil and fuels markets is that changes on the margins of demand and supply are what drive prices. It is that last barrel or gallon sold that often sets the price for the whole batch. Even bigger than those short-term price changes at the margin are the changes in expectations. It is change in longer-term expectations and not the current reality that drives the value of stocks, assets, reserves and companies.

For proof that changes on the margins of markets can have catastrophic impacts on prices, we need look no further than oil’s crash from $100 to $27 a barrel. This crash that wiped out prices by 75% and trillions in market value was all caused by a 1 – 2% surplus. When the raw numbers are looked at in isolation, 1 to 2 million barrels a day sounds big, but compared to the 90 million-barrels a day in demand it is a tiny amount of the market. Yet this tiny change has been large enough to wreck the world’s largest commodity market. Entire countries are going down, governments are going to fall and trillions in valuations have been lost, all over a 1 – 2% surplus.

FUELS & SUPPLY

So what happens when we reach that perhaps mythical horizon where 35% of new cars are electric? Who knows? I sure don’t, but my point is that it doesn’t matter. What matters is the change in marginal prices and expectations. Coal is still worth a lot (when compared to most other rocks lying in the ground), but coal companies are not. Why? Because they have been deemed to have no future. If liquid fuels begin to lose their primacy in transportation, it won’t be 2040 when trillions will be written down. It will be much sooner, when companies and even countries go tumbling over the edge. Using an average demand of 15 barrels per year, per car, and the current growth rate of 60%, Bloomberg predicts electric cars could cause the same two million-barrel per day surplus we are experiencing today by 2023.

Predicting the Big Crash The amount of oil displaced by electric cars depends on the vehicle sales take-off. Here are three scenarios for rising EV sales. 60% annual growth Current rate of adoption

45% annual growth

30% annual gowth BNEF’s forecast

Forecasted crash

6 million barrels of oil per day 5 4

If growth continues at current rates, oil displacement would reach 2 million barrells per day—the size of the current glut—as early as 2023.

3 2 1 0

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Source: Data compiled by Bloomberg

While this forecast seems possible, there are a lot of assumptions that must come true for that to happen. A big assumption behind the rise of electrics is that batteries will continue to decline in price and improve on energy density. I think an even bigger assumption is that internal combustion (IC) engines will largely stand still at today’s levels of performance. The consumer will always choose better, faster, cheaper. In the case of electric vehicles we have already seen the faster part. We have a four-door sedan blowing the doors off all but the very fastest super cars with sub 3-second 0 – 60 times. If we use that same benchmark of speed and acceleration as your metric, then that same sedan is also cheaper. Not cheap enough for mass market, but far cheaper than the $250,000 Ferrari it matches for speed. This is the challenge the fuels industry now ultimately faces. Unfortunately, it is one I see very little attention and focus on by most. While I am worried that we are not seeing more investment in improving the internal combustion engine, there is good news here as well. We know it is competition that drives advances and improvements. So perhaps now, 100 years

FMNMagazine

fuelmarketernews.com

“

”

While I am worried that we are not seeing more investment in improving the internal combustion engine, there is good news here as well. We know it is competition that drives advances and improvements.

after beating the last competitor, the horse, the internal combustion engine will again move forward. How the internal combustion engine evolves and improves is going to be the biggest factor in how long this proven champion can hold onto the title. So, back to my frog story. It seems that many companies who depend on the internal combustion engine continuing to reign supreme are simply basking in their cool bath for now. A lot of focus is on policy and politics, not on engineering and manufacturing. Maybe the fuels industry that spans both oil and renewable fuels producers can just hope that the current engine manufacturers come up with better internal combustion engines on their own. Hope, however, is not a strategy. Engines and fuels are an integrated system. One will not advance without the other. So, while the renewable fuels industry and traditional fuels industry bicker and sue each other before the EPA, the real competitor

FUELS & SUPPLY

Better, Faster, Cheaper? Can Electric Vehicles Beat Internal Combustion Engines?

continues to evolve at an increasing pace. If EVs replace gasoline, it won’t matter what kind of blend the internal combustion engine is burning because the better, faster, cheaper solution will have replaced it. I have recently found two places where a productive conversation is happening between automotive manufacturers and fuels producers. The first is at The Fuels Institute. This think tank is bringing together bright minds from all three perspectives. Automakers like Toyota and Fiat Chrysler are working with refined fuels manufacturers like Phillips ]66 and renewable fuels producers like Poet to advance the discussion in new and insightful ways. Because of this unique effort and perspective I joined the board of directors of The Fuels Institute this year. The other place where I see focused efforts to advance the internal combustion engine is Clemson University’s International Center for Automotive Research (CUICAR). Located in Greenville, S.C., this 250-acre research center sits next to a massive BMW plant. Leading global OEMs like Michelin and Timken are running labs on site, doing research every day along with most of the world’s largest automakers. Zoran Filipi, who encouragingly has spent much of his career driving advances in internal combustion technology, leads this impressive campus. I am excited to see places like The Fuels Institute and CU-ICAR working to get more juice out of the 100+ year-old champion that is the internal combustion engine. Who will be better, faster, cheaper in the end? Who knows, but one thing is for sure—trillions are on the line. It seems that those making or marketing fuels, renewable or fossil, need to be paying very close attention. Maybe the temperature of the pot will stay calm and cool, maybe not. Either way, I would have my best thermometer front and center on my desk every day. n

FMNMagazine

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Douglas H. Haugh Doug is currently President of Mansfield, a $9 billion industry innovator recently ranked by Information Week as the No.1 technology innovator in Energy & Utilities and the only nationwide provider of fuel supply, biofuels, propane and diesel exhaust fluid. Haugh is a frequent speaker on energy, supply chain technology and entrepreneurship.He can often be found leading general sessions or seminars at many national conferences and conventions. He also blogs on energy issues at: http://thinkingonenergy.com. The opinions expressed there (and here) are his, and not those of Mansfield.

Location, Location, Location: by Dr. Nancy Yamaguchi

Liquids to locations In my last article we explored the idea of oil flows. The theme was that oil, as a liquid, must flow from saturated areas to “dry” areas—that is, from where it is produced to where it is needed. A complex network of rigs, tanks, pipelines, refineries, waterways and so forth, has been built to control the flow. Public policy adds its own overlay to the network. One of the main examples was the U.S. regulation controlling crude oil exports, which we likened to a dam with a spillway. The spillway allowed

exports to Canada, plus exports of certain Alaskan and Californian crudes, plus exports under license. At the end of 2015, the dam was removed. Theoretically, at least, U.S. crude flows will begin to shift so that oils move to their highest-value end uses. Already, some cargoes of light U.S. crudes are heading for Europe, seen as a potential substitute for Nigerian crudes. A pipeline leak in late February caused Shell to declare force majeure on Forcados exports. But 2016 is shaping up to be a year of an oversupplied market, so it remains to be seen whether U.S. exports will be able to compete in Europe.

FMNMagazine

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In this article, we continue our examination of oil flows by focusing more closely on location and crude values. Some insights into crude values can be gained by viewing them according to the maxim used about real estate values: Location, Location, Location. At the most basic and obvious level, crudes must move from distant locations to centers of demand. At the next level, note that many crude oil fields were identified and developed primarily because of their location. At yet another level, the crudes must move to refining centers, which themselves were built because of location factors.

Crude Values, Part 1

Daily movements distract, long term prices define

are perplexed when nothing seems to happen. While the price of crude is a key determinant of refined product prices, refined fuel pricing has its own set of rules and considerations.

Within the fuel business itself, it is natural for participants to follow crude prices and to expect that crude values will influence their sector of business. Yet following crude prices is now becoming almost a daily pastime for people in all walks of life. Crude prices are shaking the global financial markets. Each day when stock markets open, the first order of business seems to be to report on the price movement for oil, and then to speculate where it will go next. Given this frenetic pace, it is a marvel that oil prices are not even more volatile than they already are. People impatiently watch crude prices nudge up and down by mere pennies per barrel, and they expect immediate results to flow through the rest of the commodity market. Consumers may expect immediate revisions to prices at the gas pump, and they

The daily movement of crude spot prices may not have immediate impacts on the daily life of a fuel marketer or purchaser, much less the ordinary consumer. Many submarkets are far removed from the fast pace of the Brent crude spot market. There are other stabilizing factors. For one, many large producers are large consumers as well, and they provide a certain level of built-in production and demand largely shielded from daily spot price movements. Most refining companies hedge their future purchases to protect against price volatility. If, for example, Company A already purchased three months of crude supply from Company B, their economics have already been settled for the transaction.

FMNMagazine

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FUELS & SUPPLY

Location, Location, Location: Crude Values, Part 1

There will always be oil, at a price, and companies and governments dependent on it have elaborate contingency plans to cope with volatility.

Saudi Arabia to become the largest oil producer in the world. The U.S. was already the largest producer of natural gas in the world.

Daily price movements can distract our attention, because it will be the long-term prices that define the market. The question looming now, and the one that makes the market so riveting, is whether or not the low-cost oil producers can outlast a period of low prices and effectively shut in the high cost producers. The ranks and lines of battle and teammates are not at all firm. OPEC is not a monolith. Within its ranks are low-cost producers and relatively high-cost producers as well. Some have the wealth to withstand lean times, while others have immediate or impending cash flow needs. Outside of OPEC, there are oil producers such as Russia, which recently agreed in principle to place a cap on production to reduce global oversupply. Oil revenues are a mainstay of the government’s operating budget, however, and a long-term reduction of those revenues could be devastating to the economy. Many high-cost deepwater developments are on hold, including some in the Gulf of Mexico and some ultra-deepwater finds in Brazil.

Location has been the key to the value of light tight oils from shale plays. First, of course, the fact that the resources are located a mile or so underground would be daunting to any company. Yet if the shale resource had been delineated a mile below, say, the Arabian Desert, would it have been developed? Probably not, because there are so many other lower-cost oils there to be produced first. The location of the U.S. shale deposits, right in the heart of the North American continent, prompted their development.

In the U.S., light tight oils (LTO) from shale plays are being shut in. Like OPEC producers, however, LTO producers are not monoliths. There is tremendous variety among the fields and the companies involved. Finances are strained, and some participants are leaving the market, or at a minimum, making contingency plans about how long certain assets can remain operational under various medium and long-term price regimes. Once again, location will be critical, because shale plays are not equal in productivity, access and profitability.

Location: Shale reserves a mile beneath the U.S., or a mile below the Arabian Desert? Shale play development in the U.S. has had an amazing impact on the global market. By reversing the decades-long slide in U.S. crude production, the Shale Revolution has completely overturned the long-standing market mentality that expected the U.S. to become a steady and insatiable outlet for oil exports from the rest of the world. In the year 2000, the U.S. produced 5822 thousand barrels per day (kbpd) of crude. In 2015, this rose to 9430 kbpd, an increase of 3608 kbpd. To place this in the global perspective, the increase in U.S. supply displaces the output of entire countries within OPEC. According to the OPEC Secretariat, in 2014 Iran produced 3117 kbpd, Iraq produced 3110 kbpd, Kuwait produced 2867 kbpd and Venezuela produced 2682 kbpd. The U.S. now has surpassed Russia and FMNMagazine

Seven Shales instead of Seven Sisters In the 1950s, Enrico Mattei was credited with coining the term “Sette Sorelle,” or “Seven Sisters” to refer to the close association between the seven major international oil companies. At the time, they controlled the majority of global oil reserves. In an interesting parallel, there now are seven major shale basin areas in the United States, and they are responsible for essentially all of the new oil and gas production in the U.S. Where are the seven producing areas, and how much oil do they produce? Is their production changing now that oil prices have dropped? Clearly, there is a concern in the industry that many will not be able to hold out under a regime of lower prices.

Figure 1: Key Tight Oil and Shale Gas Regions

Source: Energy Information Administration (EIA)

Figure 1 provides the EIA’s map showing six main shale play areas: Bakken, Niobrara, Eagle Ford, Permian, Haynesville and Marcellus. A seventh play, the Utica deposits, are not indicated on the map, but they are located alongside and partly underlying the Marcellus formation. While all of the deposits produce both oil and natural gas, the Bakken, Eagle Ford and Permian developments are more oil-based while the Marcellus, Utica and Haynesville deposits are more gas-prone, and the Niobrara is in between. 18

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The Bakken formation is situated along the border of Montana and North Dakota, extending into Canada’s Saskatchewan Province. Canada also produces LTO from this formation. The Niobrara region is mainly in Wyoming and Colorado, with extensions into Nebraska and Kansas. The Permian area covers a large swathe of West Texas plus the southeastern corner of New Mexico. The Eagle Ford region stretches south by southwest in the southern part of Texas, and the geologic structure extends into Mexico. To the northeast of Eagle Ford is the Haynesville area, which is located at the juncture of eastern Texas, northwestern Louisiana and southwestern Arkansas. The Marcellus and Utica formations cover a large portion of Pennsylvania, New York, Ohio and West Virginia.

”

output continued to rise in the first quarter, though at a slower rate. The smaller producing areas, Marcellus, Utica and Haynesville are small producers of LTO, and their output was roughly flat.

Figure 3: LTO Production by Key Shale Region

kbpd

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Because the rigs remaining are so much more productive, U.S. production has not yet fallen as much as might be expected. But the increase in productivity also means that the next wave of closures will have a measurably larger impact on production.

Figure 2 presents the LTO production trend by region, 2007 though the first quarter of 2016, based on data published by the EIA. The growth in output has been dramatic, rising from 1245 kbpd in 2007 to 5325 kbpd in 2015. In the first quarter of 2016, however, production fell by 315 kbpd, to an average of 5010 kbpd so far this year. Was 2015 the peak, and should we expect a steep decline in 2016 and beyond?

Source: Energy Information Administration (EIA) *2016 1st quarter average

Figure 2: U.S. LTO Production by Region: Was 2015 the Peak?

Figure 4 displays shale gas output by area with the cumulative total. Production rose from 15,439 million cubic feet per day (Mcf/d) in 2007 to a peak of 45,035 Mcf/d in 2015, with a slight decline to 44,653 Mcf/d in the first quarter of 2016.

Mcf/d

kbpd

Figure 4: Shale Gas Production by Area

Source: Energy Information Administration (EIA) *2016 1st quarter average

Figure 3 presents the same data with the regions plotted as lines in order to compare production by region. The decline in the first quarter of 2016 is attributed to Eagle Ford, Bakken and Niobrara. The Permian region is the top producer, and its FMNMagazine

Source: Energy Information Administration (EIA) *2016 1st quarter average

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FUELS & SUPPLY

Location, Location, Location: Crude Values, Part 1

Figure 5 displays the same production data broken out by region. Here it can be seen that the Haynesville area already reached its production peak in 2011 – 2012, and gas output has declined since then. The Marcellus region is the main shale gas producer, and its gas output rose sharply until 2015. It has declined slightly in the first quarter of 2016. Eagle Ford is also a significant gas producer, but its gas output also tailed off in the first quarter. The Permian region overtook it to become the second-largest shale gas producer.

Figure 5: Shale Gas Production by Region

Productivity Report accounted for 92% of domestic oil production growth and all of the natural gas production growth between 2011 and 2014. The EIA estimates production from new wells as well as the production from existing wells, designated as “legacy” production. Figure 6 shows the number of drilling rigs at work in the Bakken area along with the average oil production per rig. The number of active rigs peaked at 205 in 2012. Rigs fell to 45 in the first quarter of 2016—the smallest number since 2007. Production per rig, however, has soared. In 2007, average production per rig was 116 barrels per day. The rigs now remaining are producing 735 bpd each.

Source: Energy Information Administration (EIA) *2016 1st quarter average

Comparing Figures 2 and 4 reveals that oil output has fallen more than gas output. Most of the natural gas is being produced near populous areas, and it has become an important component of the overall U.S. natural gas market. It is also expected that the natural gas market may be strengthened by the advent of LNG exports, which commenced in late February 2016 from the Cheniere Energy terminal with a cargo destined for Brazil.

Source: Energy Information Administration (EIA) *2016 1st quarter average

Figure 7 presents drilling productivity data for the Eagle Ford region. The number of rigs peaked at approximately 260 during the 2012 – 2014 years, but they plummeted to 127 in 2015 and 74 during the first quarter of 2016. Production per rig, however, has risen steadily, growing from 35 barrels per rig in 2007 to 715 bbls in 2015, to a preliminary 804 bbls in the first quarter of 2016.

The rising efficiency of shale oil rigs

FMNMagazine

Figure 7: Eagle Ford Rigs and Production per Rig

Rig Count

Production per Rig bpd

There is no doubt that oversupply in the global crude market is affecting U.S. LTO production. Some producers already are being forced to shut in wells. If we look closely, region by region, however, we see an interesting trend across all areas: efficiency is rising. The number of drilling rigs has fallen, and clearly the first rigs to be idled have been the less prolific ones, because production per rig has risen dramatically. In this section, we summarize data published by the EIA in its Drilling Productivity Report for key tight oil and shale gas regions, February 2016. In this report, the EIA uses the well-known rig count data published by Baker Hughes. The EIA estimates changes in oil and gas production for the seven key regions. The wells are not designated oil versus gas, because more than half of the wells produce both simultaneously. Also, the data include production from all formations in the region, not just shale formations. Still, the EIA notes that shale plays the key role in production growth. According to the EIA, the seven regions analyzed in the Drilling

Rig Count

Production per Rig bpd

Mcf/d

Figure 6: Bakken Rigs and Production Per Rig

Source: Energy Information Administration (EIA) *2016 January–March average

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FUELS & SUPPLY Figure 8 shows the data for Haynesville. As noted, Haynesville is gas-oriented, and its production peaked in 2011 – 2012. The rig count fell from 224 in 2010 to 36 in 2015 and an estimated 25 in the first quarter of 2016. Although oil production is small, production per rig climbed from 3 bbls per rig to 26 bbls per rig in 2015 and an estimated 28 bbls per rig in the first quarter of 2016.

Source: Energy Information Administration (EIA) *2016 January–March average

Figure 11 shows the details for the Permian Basin area. The rig count rose to 265 in 2008, fell to 111 in 2009, hit a peak of 536 in 2014, then fell to 276 in 2015 and 199 in the first quarter of 2016. Production per rig has shown strong growth, rising from 60 bbls in 2007 to 355 bbls in 2015 and 421 bbls during the first quarter of 2016.

Figure 9 compares rigs with production per rig for the Marcellus region. Marcellus is the leading shale gas producer, but it also is producing LTO. The number of rigs rose to 131 in 2011 then dropped sharply to 60 in 2015 and an estimated 36 in the first quarter of 2016. Production per rig went from 7 bbls in 2007 to 4 bbls in 2010, then rose to 55 bbls in 2015 and 64 bbls in the first quarter of 2016.

Figure 11: Permian Rigs and Production per Rig

Rig Count

Production per Rig bpd

Figure 9: Marcellus Rigs and Production per Rig

Production per Rig bpd

Rig Count

Source: Energy Information Administration (EIA) *2016 January–March average

Production per Rig bpd

Figure 10: Niobrara Rigs and Production per Rig

Production per Rig bpd

Figure 8: Hanesville Rigs and Production per Rig

Source: Energy Information Administration (EIA) *2016 January–March average Source: Energy Information Administration (EIA) *2016 January–March average

Figure 10 presents the drilling productivity history for the Niobrara area. The rig count has been variable, falling from 116 in 2008 to 52 in 2009, climbing again to 100 in 2014, then falling to 51 in 2015 and 26 in the first quarter of 2016. Production per rig has risen steadily, growing from 34 bbls in 2007 to 597 bbls in 2015 and 728 bbls in the first quarter of 2016. FMNMagazine

Figure 12 displays the trend in the Utica region. The rig count fell from 8 in 2007 to 4 in 2009, then peaked at 40 rigs in 2014. As in other regions, the active rig count has fallen sharply, dropping to 25 in 2015 and 14 in the first quarter of 2016. Productivity per rig was steady at 20 bbls during 20072012, but it rose more than tenfold to 207 bbls in 2015 and is estimated at 295 bbls in the first quarter of 2016. fuelmarketernews.com

FUELS & SUPPLY

Location, Location, Location: Crude Values, Part 1

Rig Count

Production per Rig bpd

Figure 12: Utica Rigs and Production per Rig

Source: Energy Information Administration (EIA) *2016 January–March average

Naturally, in hydraulic fracturing operations, the wells continue to produce after the fracking rigs are gone, and each has its unique production horizon. The drilling productivity data clearly indicate that although the active rig count has plummeted over the past year, productivity per rig has soared. Because the rigs remaining are so much more productive, U.S. production has not yet fallen as much as might be expected. But the increase in productivity also means that the next wave of closures will have a measurably larger impact on production. It has become a waiting game, with the two sides being mainly low-cost producers in the Middle East and higher-cost producers in the U.S. Unconventional oils from oil sands in Canada have even higher costs, and are under even more pressure.

Figure 13: Change in U.S. Quarterly Crude Production, 2013—Q1 2016

Conclusion: Will location hold its value in a downturn? kbpd

Reflecting back on our theme of Location, Location, Location, U.S. producers clearly changed the global oil market. New output from the seven shale play areas propelled the U.S. into its current position as the largest oil producer in the world, surpassing Russia and Saudi Arabia. More than any other factor, this forced Middle Eastern producers to respond, allowing prices to collapse in a bid to regain market share. Middle Eastern resources face a transport hurdle, but they are vast and have low production costs. In contrast, the U.S. shale plays have high production costs, but they have the built-in advantage of being situated in the middle of the world’s largest oil market and the largest refining center. Will the advantageously located resources in the U.S. hold their value in a downturn? So much of this will depend on longterm costs. Some people hope for increased efficiency and cost cutting. But the U.S. industry already was working to reduce production costs even when crude prices were high. Early projects were predicated on $80/b oil prices, later projects believed $50/b would be sufficient, and some hoped that $40/b would be a breakeven point. Location is becoming critical within the shale play areas; the best locations have the highest drilling efficiency. In this article, we have seen that drilling efficiency has increased by leaps and bounds in each one of the seven shale play areas. But this has happened because many of the less-efficient rigs have been idled; additional closures will surely cut deeper into the muscle of the industry. How many can survive, and for how

FMNMagazine

Source: Energy Information Administration (EIA)

long, at $30/b? Despite the fact that many market experts have stated that oil prices have bottomed out and will strengthen during 2016, there is no fundamental reason that they cannot continue to weaken. Figure 13 illustrates the impact of the price collapse by examining the quarterly change in U.S. oil production from 2013 through 2015. Each quarter in 2013 and 2014 saw new production come onstream in the U.S., at least 200 kbpd each quarter, and nearly 500 kbpd in the second quarter of 2014. At the end of 2014, Saudi Arabia announced that it no longer would work to maintain prices by controlling production. Prices collapsed in the first quarter of 2015. But developments were still underway in the U.S., and an additional 227 kbpd of supply was brought onto the market. By the second quarter of 2015, however, the increase in production was only 15 kbpd. In the third quarter of 2015, production fell by 65 kbpd. The cut in production was even more 26

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Dr. Nancy Yamaguchi

significant in the fourth quarter of 2015, when production fell another 116 kbpd. There was a time lag between the drop in oil prices and the shutting in of production. Similarly, there will be a time lag before production can come back onstream, particularly if low prices persist for an extended period of time. The oil business is cyclical, and even though the drilling productivity data shows that the industry has grown more efficient, U.S. LTO production will require maintenance and replenishment. Finally, although it is natural to focus on hard numbers such as oil prices, price differentials and capital costs, we must note that the success of the U.S. oil industry over the past decade has rested on the expertise of its people. The shale boom created and honed a new work force. Just as we described oil as a liquid that wants to flow to its highest-value end use, people will move. An ailing industry may create its own diaspora, and a great deal of the human resource may flow away, taking its knowledge and expertise with it. n

FMNMagazine

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Nancy is an author and petroleum industry expert specializing in the advanced analysis of energy markets. Dr. Yamaguchi is the President of TransEnergy Research Associates, Inc. focusing on a wide spectrum of fuel related issues such as economics and the environment. She possesses a strong interest in global oil industry, including supply, demand, trading trends, as well as transport, refining, product blending, alternative and reformulated fuels, product quality and price behavior. Dr. Yamaguchi can be reached at nyamaguchi@trans-energy.com

Currently we have 137 operating refineries in the U.S. with a capacity of 18.9 million barrels per day (mbpd). But only 90 of those refineries have a capacity in excess of 50,000 b/d, leaving almost 50 refineries that could be classified as “Tea Kettles or “Stills.” With domestic gasoline consumption closing in on 8.5 mbpd and distillate on 2.5 million bpd, the domestic “pull” is closing in on 13 mbpd by 2025 (lubes, jet, kerosene and other chemicals making up the rest). We should see 20 of those 47 smaller refineries shut down, taking 600,000 b/d of capacity off the market. Survivors will be the large East Coast and Gulf Coast refineries, and a few in California and Chicago. The collapsed WTI-Brent spread, and increased pipeline capacity and tighter railroad shipping rules will likely doom small interior tea kettles. Even with only 18.3 mbpd of capacity and total demand for products at 14 mbpd, a 76% capacity utilization should leave both cracks in their historical ranges.

Bottom Line With the small marginal refiners gone, the survivors will have more pricing power. The function of the market in the next three years will be to show the small, simple, undercapitalized and out of position refiners the door. After this shakeout we will see a new “golden age of refining” that will not be tempered by new construction or capital improvement. As the French like to say about industry shakeouts “Après les morts. Rolle bon temps” (after the deaths, let the good times roll). Source: Joe Petrowski commentary

STI/SPFA* is a trade association representing fabricators of steel construction products and their suppliers. Member companies produce steel storage tanks, field erected water tanks, pressure vessels and heat exchangers and pipe and pipelines. Their customers are from the petrochemical, power generation, food, pharmaceutical, fuels, wastewater and water transmission industries. FMN recently interviewed Wayne Geyer, Executive Vice-President at STI/SPFA for a look at the steel tank industry going into 2016 and its 100th anniversary. The institute has put together several videos that are accessible at its website: www.steeltank.com. These are certainly worth a visit for those interested in the history of the industry.

by Keith Reid

FMN: This year represents a big anniversary for the institute—100 years. Tell us a little bit about the organization’s history.

Geyer: We formed in 1916 as a

bunch of Midwest boilermakers. Back then, things were mostly riveted instead of welded, and the organization didn’t get really going until the 1930s. By World War II, everything was being welded. There are two companies that were original members and are still members of ours, which I think is pretty incredible. One is Morrison Brothers. Another one is Chicago Boiler, now headquartered in Gurnee, Illinois. There’s not a lot in our history in the first 50 years until we started developing some standards. I think the first one was in 1956. It was the

Midwest ‘56 Standard, where the underground tank fabricators and the oil companies agreed on where the fittings and the flanges needed to be on an underground tank, so they were standardized. You know, today there are no two tanks that are the same. Through the years we’ve gotten bigger. Our biggest claim to fame was when we were asked by the oil companies to come up with underground tank technology that was resistant to external corrosion from soil. That started in late 1969. We worked with U.S. Steel and one of our members in Indianapolis, Kennedy Tank, worked hard on that. The oil companies wanted a national warranty. They wanted to make sure there was a quality program, so that got our licensing technology program started. Really, I think that’s what put us on the map.

FMN: That ties into today’s mission.

Geyer: It seems to have set our direction. We license the fabricators to build technology and our label gets put on their tanks. We have inspectors that go randomly into their shops to inspect them, maybe four times a year. Our inspectors look not only at the tanks they build to our specifications, but they also look at tanks they build to Underwriters Lab (UL) standards that are not necessarily built to STI standards. Part of it, too, is a 3rd party insurance company that provides environmental impairment insurance and warranty insurance. They see our quality program as being very important so we look at a lot of tanks.

*Steel Tank Institute/Steel Plate Fabricators Association

FMNMagazine

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WHOLESALE & FLEET OPERATIONS

Steel Tank Institute Hits 100

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FMN: If you look at our end of the industry—bulk

plants and smaller product terminals—are there any regulatory issues or legislative issues today that are of interest?

It’s pretty significant how many aboveground tanks now are all secondary contained. What drove that were the EPA regulations and the fire codes because what they did was they said if you have a doublewall tank with overfill protection, prevention—you don’t have to have a dyke. That was a huge maintenance issue for tank owners.

Geyer: The EPA with its Spill Prevention, Control and Countermeasure (SPCC) plan—they were modifying that like every two years. That’s kind of settled down now. We have an inspection standard, SP001, that’s been hugely successful. EPA references it a lot, as it refers tank owners to what they can use to verify the integrity of their tanks as required by SPCC. They do SP001 inspections. I’ve also been on a committee in California for about three years now. They’re developing a regulation called APSA— Aboveground Petroleum Storage Act. The goal of this regulation is to let the counties go to the aboveground tank owners and verify that they have a federal SPCC plan. It’s kind of doing the work for the federal government, but they’re going to do it more on the smaller tanks.

FMN: What would you say is the state of the steel

tank industry relative to petroleum today? I imagine your members were getting a lot of work with the fracking explosion, and that’s probably slowed a bit.

Geyer: That has slowed down considerably. Some of our

members in North Dakota changed their shops over to building nothing but oil field tanks and they’ve reverted back to doing UL type aboveground or underground tanks. I’ve talked to people out in the Rocky Mountain area who are generally into oil drilling, but also other industries like mining and things like that. They’ve slowed down, too. Then I’m hearing some of the big engineering firms are laying people off because there isn’t that work for the oil and gas industry or the mining industry. It’s kind of a domino effect. Amongst our members are the people who make the big, heavy-wall pressurized vessels. Some of these go into refineries. In 2014, they were nine months out with their orders. They couldn’t keep up. They were building new shops and—boom! I mean, it just fell off the table in 2015 and they’ve had to scale back. It’s not been real pretty.

I’m not sure if it’s something that will end up being trendy, but I was just talking to one of our members and he said Kern County, California, is getting ready to require all the aboveground tanks to be two-hour fire rated. Even the diesel ones. Kind of related to that, one of the proposals going through Weights and Measures is to limit accumulation of water in underground tanks to 0.25". That’s got to go through their processes and I’m not sure that’s feasible, but worth keeping an eye on.

FMN: What about the industry more broadly?

Geyer: Some of the guys who build the smaller shop-

fabricated tanks are still doing pretty well. I mean, they’re keeping busy. I’ve asked a mix of people. Some have been hit a little bit harder than others, so it’s kind of hard to understand why there’s that differentiation.

FMN: I’ve heard talk of a new aboveground storage

tank (AST) market—high storage capacity generator fueling. Data centers and hospitals, etc.—enough fuel to run for weeks at a time.

Geyer: They’re big tanks—50,000 gallons. They might put in four or five aboveground tanks. A 50,000-gallon tank used to be the biggest tank that would fit on a truck and that’s like a 12' diameter by 60' long. It’s a pretty big monster. FMNMagazine

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WHOLESALE & FLEET OPERATIONS

Steel Tank Institute Hits 100

FMN: How is secondary containment playing out on the steel side of the tank industry?

Geyer: You know, we were probably one of the first ones

to come up with a sump. I’m not sure it was a great idea, but we came up with a steel sump. Let’s see, what did we call it? It was STI86 or something like that. We came up with it in 1986. The idea was to put all your fittings together. I think we worked with Amoco back then. All the fittings could be accessed from one sump, but we’re steel guys, right? So, we made steel sumps. It was a bit heavy. It was a good idea that generated a lot of stimulation and then the next step was the polyethylene sump. Some of our underground standards probably became a little more obsolete when all the secondary containment requirements were put into effect. Today, jacketed underground tanks are the primary tank of interest for steel tanks for petroleum marketers. Aboveground, our niche has been with secondary containment tanks. It’s pretty significant how many aboveground tanks now are all secondary contained. What drove that were the EPA regulations and the fire codes because what they did was they said if you have a double-wall tank with overfill protection, prevention—you don’t have to have a dyke. That was a huge maintenance issue for tank owners. Not to have to deal with that oily water and a dyke.

FMNMagazine

They accept double-wall tanks up to 50,000 gallons without having to have a dyke as long as you have a means to prevent overfill. The fire codes go a little bit further than that, but I think that made it a lot more feasible and made aboveground tanks a lot more popular for the private sector. When I say private sector, again, I’m talking about fleets. Probably some of your bulk plant owners now do double bottoms with their vertical tanks. That ties into these inspections that I talked about. If you have a double-wall tank and you have to verify integrity, which is what SPCC requires, all you have to do is do a little test of that interspace to show both walls are tight and you’re done. If you have a vertical tank with the floor on clay or native soil, you’re going to have to have someone climb inside that tank and take wall thickness readings of the metal, and then you have safety issues.

FMN: What are your thoughts on the corrosion issue

that continues to be discussed with ultra-low sulfur diesel (ULSD) and metal equipment in tanks? What’s so odd is the lack of clear causality from a manufacturer, or region or other specific factors.

Geyer: The whole industry talks about water being bad to

have in a tank. Ethanol kind of sucks up the water, and if it sucks up too much it phases out. That’s pretty well known. Biodiesel tends to suck it up a little bit, too. One of the theories is that in switch loading—where you have the carrier truck delivering E10 and then it goes back and fills up with ULSD—some of the ethanol traces get in the bottom of a

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Steel Tank Institute Hits 100

diesel tank. The hypothesis is acetic acid is a result of a bug called acetobacterium eating the ethanol and using the water as its energy and causing acetic acid to form and then being vaporized. We’re not seeing that in E10 tanks. That’s the thing. I mean, in the Chicago area they’ve had ethanol for 30 years and the steel tanks have always been spotlessly clean from the ethanol. And just about everything we hear about is from underground tanks. Why aren’t we hearing it from aboveground? It’s kind of got people scratching their heads.

FMN: I know the initial study where that theory came

out. My issue was that it was too limited given the potential ramifications.

Geyer: You can’t take that too lightly at all. I think the goal is

to do more laboratory tests to understand what the phenomenon is a little better and hopefully find some solutions to it. I know you can have up to what—5% biodiesel in ultra-low sulfur diesel without even having to mark it. Some people throw that out, but I don’t think that’s been proven to be a cause either. We work pretty closely with the National Biodiesel Board. We try to keep each other aware of what some of the issues are. So, we shall see. It’s still an unknown. It’s still hard to pin that one down.

FMNMagazine

FMN: There is also some grumbling on the

fiberglass side about some recent issues that are hard to explain.

Geyer: I’ve been hearing stuff out of California,

Hawaii and Arizona about plastic tank problems where you have a hard time identifying a common element, but I’m not the one to speak on that. Just seems to be some odd things going on generally these days. n

Wayne Geyer

WHOLESALE & FLEET OPERATIONS

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A Look at Todayâ&#x20AC;&#x2122;s Cardlock Hardware by Maura Keller

Making Inroads with Cardlock Technology Thirty years ago, the concept of pay-at-the-pump technology, especially at unattended

fuel sites, was hard to imagine. Today, cardlock systems are vital components for

larger commercial trucks, offering convenient, accessible and efficient means of fueling a vehicle. And now, thanks to advanced POS/controller technologies, including radio-

frequency identification (RFID) tag systems that identify trucks without cards, cardlock

systems are playing a key role in enhancing fleet control and security.

WHOLESALE & FLEET OPERATIONS

Historically Speaking Cardlock systems originally started as a standalone replacement system for key lock systems that were used for tracking fuel inventories for small fleets and non24/7 fuel locations. As Jeremy Lewis, director of service at Wildco PES in Manchester, New Hampshire, explains, cardlock units were designed to meet the requirements of operators who needed to view individual transactions instead of looking at an electro mechanical totalizer reading every month to determine how much fuel was consumed by a particular vehicle or individual. “Cardlock systems in today’s environment are often interfaced with fleet management software and use multiple methods of authorization, including RFID, Hughes Identification Devices (HID), magnetic stripe cards and Automatic Vehicle Identification (AVI) systems,” Lewis says. Wildco PES is a leading service provider of comprehensive petroleum, sales, maintenance, inspection, testing and construction management services to major oil suppliers, independent retailers, contractors and other private and public sector facilities and clients. It does business in the New England and MidAtlantic regions. Today’s cardlock systems can be connected to several different fleet and retail card-processing networks. In fact, POS/controller technologies from the

Steel Tank Institute Hits 100

cardlock environment have been slowly migrating from proprietary software and proprietary communications protocols to the latest operating systems using TCP/IP communications. New cardlock technologies provide the following advantages: • Remote access to reports and system statuses from any Internet-enabled device • Automatic fuel variance monitoring • Compatibility with multiple payment media (RFID, HID, etc.) • Faster transaction time via TCP/IP communications • Data redundancy—no need to worry about logging every transaction on a journal printer or spending thousands of dollars to pay a technician to reprogram all of your data after a component failure • Mileage and usage tracking across multiple sites • Ability to interface with “retailstyle” dispensers to provide the same experience that most consumers have already experienced at their local gas stations • Automatic Vehicle Identification (AVI) systems allow accurate mileage reporting and maximum security with every refuel According to Kevin DeVinney, director of dispensers and fleet systems at Gilbarco Veeder-Root, cardlock systems are becoming more retail focused in design. FMNMagazine

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“Cardlock system payment terminals used to be manufactured from steel that would be powdercoated to resist rust and corrosion. Manufacturers in the past several years have switched to aluminum and stainless steel payment terminals to reduce or eliminate this concern.”

Jeremy Lewis, Wildco PES

“The operators of cardlocks are now designing fueling facilities that have retail-looking dispensers installed on the islands,” DeVinney says. “These dispensers are also coming with integrated pay-at-pump readers. This allows customers the same fueling experience regardless of where they are fueling.” As DeVinney explains, this helps cardlock operators compete for customers against the traditional retail operators. This move to retail dispensers has also changed the technologies that POS/Controllers must now use to control these fueling operators.

“The biggest change is that now the POS/Controllers must be able to control more sophisticated retail dispensers using pay-at-pump technologies,” DeVinney says.

Gasboy is a turnkey solution provider for fleet management systems and electronic and mechanical petroleum dispensing systems. Gilbarco VeederRoot and the Gasboy brand are wholly owned by the Danaher Corporation.

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WHOLESALE & FLEET OPERATIONS The POS/Controller technologies that Gasboy is now offering include such elements as: • Hardened controllers that have no moving parts and are designed to operate 24/7/365 for the unattended cardlock market • Web-based controller technologies that allow remote access to the cardlock facility to view fueling status, wetstock inventory levels and remote troubleshooting to manage all aspects of the cardlock facility remotely • Real-time information that allows the cardlock operator to receive transactions and alarms as they happen to optimize uptime and profitability of the facility The Gasboy Fleet PLUS system is using all of the latest hardware and software components “This includes using all of the current communication technologies for high speed connections,” DeVinney says. “The data demands at the cardlock facilities are much higher now and require high-speed Ethernet connections to deliver the data in real time. The days of using dial-up technologies are behind us. Real time two-way communication capabilities are necessary in the unattended cardlock market.”

Security and Durability Payment card security is constantly changing. As such, cardlock systems will need to be able to stay current with all of these changing payment card regulations. “For instance, the current EMV (EuroPay MasterCard Visa) regulations—better known as chip cards—that are currently being implemented are causing the

”

A Look at Today’s Cardlock Hardware

“For instance, the current EMV (EuroPay MasterCard Visa) regulations—better known as chip cards—that are currently being implemented are causing the cardlock operators to invest in newer payment terminals that will be able to accept these types of payment cards. Cardlock operators that do not invest in newer equipment to handle these chip cards will not be able to continue to operate.”

Kevin DeVinney, Gilbarco Veeder-Root

cardlock operators to invest in newer payment terminals that will be able to accept these types of payment cards,” DeVinney says. “Cardlock operators that do not invest in newer equipment to handle these chip cards will not be able to continue to operate.” In addition, unattended cardlock facilities are one of the harshest environments that industry experts see in the industry.

“Because there are not any attendants at these facilities, customers sometimes will take out their frustrations of the day on the equipment at these facilities,” DeVinney says. “Security cameras are necessary to try and prevent some of the abuse that happens. But unfortunately, the abuse still does happen. This means that the fueling equipment at the cardlocks must be made to withstand any type of abuse, whether it is manmade or other. FMNMagazine

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Regardless of how durable the equipment, a periodic maintenance schedule should be developed to make sure that the equipment is in good working order.” Lewis says that cardlock systems are engineered to meet the harsh environments that are present in nonretail environments. “Cardlock system payment terminals used to be manufactured from steel that would be powder-coated to resist rust and corrosion,” Lewis says. “Manufacturers in the past several years have switched to aluminum and stainless steel payment terminals to reduce or eliminate this concern.” Cardlock systems were also extremely vulnerable to lightning because of the long serial communication runs that were present for communications between different components in the system. Migrating these communications to TCP/IP with wired or wireless connectivity has greatly reduced this issue.

Staying Connected In terms of network capabilities and interface requirements, today’s cardlock operators want the ability to handle multiple different payment cards. This is a challenge for POS/Controllers since they will need to have connections to multiple different network processors. According to Lewis, cardlock systems today are the most sophisticated forecourt controllers in the industry. All modern cardlock systems support communications with the “retail style” dispensers noted earlier with integrated payment terminals. “Cardlock sites have spent millions of dollars over the past several years to provide the same environment that the average consumer is used to experiencing at their local gas station,” Lewis says.

WHOLESALE & FLEET OPERATIONS

A Look at Today’s Cardlock Hardware

Today’s systems also are capable of supporting up to seven concurrent credit/fleet networks at once, providing loyalty account tracking, supporting local authorized accounts and interfacing to the site’s automatic tank gauge to automatically track any fuel variances.

DeVinney, the Gasboy Fuel Point PLUS system is a completely wireless RFID system that integrates with the Gasboy controllers for complete hands-free fueling. This RFID technology has been installed in over three million vehicles worldwide.

“In addition, cardlock systems must also be able to handle all of the new payment card regulations that are coming now and in the future,” DeVinney says. “Cardlock operators are also requiring systems to be able to integrate with their new types of retail dispensing equipment. And cardlock operators are requiring that the systems must integrate with their back-end accounting systems.”

As DeVinney explains, the customer inserts the nozzle into the tank and fuels without any additional data input required. The system will wirelessly read the vehicle information off of the RFID tag to authorize and dispense fuel. An optional data pass module can be installed on the vehicle as well to collect vehicle odometer, engine hours and diagnostic information.

Medium to large fleets are very dependent on receiving the correct information when a vehicle is being refueled to help track costs, provide taxation information and facilitate timely maintenance. To meet this growing need, several of the cardlock system manufacturers started looking for what was the most important information that a fleet needed.

“This information is also sent wirelessly to the controller and added to the vehicle information that was received from the RFID tag,” DeVinney says. “Because the Fuel Point PLUS system components are completely wireless, the installation is quick and easy. In most cases, these components can be installed on a vehicle in less than 15 minutes.”

“Fleet managers responded by saying that they needed accurate mileage each and every time the vehicle fuels and they need proof that the dispensed fuel went into the vehicle that the driver entered into the system,” Lewis says. “This lead to the birth of AVI systems.” These systems have the capability of reading the mileage, engine hours, fault codes and safety events from the onboard computer when a vehicle is being refueled. Most of these systems also have integrated security features that shut the fuel dispenser down if the nozzle is removed from the fuel tank during the refueling process. “While these systems have a large upfront cost and require periodic maintenance, the return on investment has been proven fleet after fleet,” Lewis says. RFID tag systems are helping identify trucks without cards. According to

As cardlock systems and technology continues to evolve, cardlock operators will need to continue to fight for their customers; cardlock facilities will need to offer the convenience and security that their customers require. “This also will mean that their facilities will need to add alternative fuels—CNG and LPG—to the offering,” DeVinney says. “Payment card regulations will need to be incorporated into the fueling equipment. 40

Lewis advises fuel marketers that they need to remain cognizant of the impact EMV and smartphone technology will have on cardlock operations. The EMV liability shift for unattended payment terminals is effective October 1, 2017. “Many cardlock system operators feel that EMV is going to have little to any effect on the way that their business operates, especially if they are not accepting standard merchant cards,” Lewis says. But the EMV migration in Canada has proven otherwise. Thieves are always looking for the easiest targets to exploit and cardlock sites in Canada have now become the biggest target for skimming devices. “Sites that accept proprietary cards with minimum security are often the biggest targets,” Lewis says. “I believe that most fleet cards will switch to EMV or other secure/tokenized payment methods by 2020.” What’s more, consumers are starting to purchase more items via smartphone apps and near field communications (NFC). Purchases via smartphone applications are often the most secure, because in most cases a token (representation of the consumer’s payment method) is the only item that is transferred between the phone and the fuel controller.

Growth Potential

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And controller hardware and software will need to be upgraded to handle multiple payment networks and retail fueling dispensers.”

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“These tokens have no meaning unless you have the card information that is securely encrypted and stored on a remote server,” Lewis says. “Smartphones can also serve as a way to increase vehicle traffic to cardlock vending sites that sell fuel to fleets and commercial customers by showing current fuel prices, current pump usage and available amenities.” n

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VENDOR VIEWPOINT:

Taking on Water by Paul Nazzaro In February, a team of researchers at the 2016 Ocean Sciences Meeting in New Orleans announced that the damage caused to wetlands, insects and fish by the 2010 BP oil spill is finally on the downswing. It’s been a long road to recovery since the worst accidental spill in the history of our industry left an estimated 4.9 million barrels of oil in the Gulf of Mexico. Who can forget the nightly news clips of the damaged wellhead 42 miles off the Louisiana coast hemorrhaging oil at a rate of 55,000 barrels a day? And who can forget the boatloads of emergency personnel on the surface working tirelessly to contain the contamination?

As I was reflecting on those images, the realization struck that when oil and water mix, oil is always portrayed as the contaminant. While certainly true that large volumes of oil can be catastrophic to aquatic environments—that’s why the EPA requires every major oil storage facility to have an up-to-date Spill Prevention Control and Countermeasure (SPCC) plan—what about when water is the contaminant? The situation may be less concerning to the EPA, but when water enters an oil tank, it can be every bit as damaging to the fuel as oil contamination is to a body of water. In the event of the former, it is important that oil storage facilities have a plan in place—an SPCC equivalent—to combat water contamination and to minimize damage when it occurs. Failing to do so can result in fuel degradation, equipment breakdowns, significant labor and repair costs and lost business. Water is both the most common and most harmful contaminant to distillate fuel. It can get into the fuel during refining, storage, transportation and delivery, and is virtually impossible to eliminate completely. Common scenarios include rainwater seeping in through the roof or vent of a tank, or humid air carrying moisture in during a fuel withdrawal. Once in the tank, water is harmful in the exact opposite way that oil is harmful to water: while oil threatens life in water, water promotes life in petroleum. This air and waterborne microbial life—bacterial cells or fungal spores known in the industry as “bugs”—will live in the water at the bottom of the tank and feed off the hydrocarbons in the fuel at the fuel/water interface. They’ll also consume rubber gaskets, O-rings, hoses, tank linings and coatings in an effort to obtain their mineral content. The waste from this process produces water, sludge, acids and other harmful byproducts. Under the ideal conditions of a warm spring or summer day

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WHOLESALE & FLEET OPERATIONS

Taking on Water

(68°F – 86°F), bacteria can double in population every 20 minutes, forming destructive, gel-like colonies known as biofilms. If not addressed, the proliferation of bugs will clog fuel filters, fuel lines and gauges; corrode pumps, injectors and tank bottoms; cause washers, hoses and connectors to swell and blister; and degrade fuel and cause poor fuel economy. If microbial contamination is detected—either by visual observation of a fuel filter or bottom sample, or by analytical laboratory testing—cleanup can be both difficult and expensive. In all cases, water bottoms should be drained and a biocide should be added to treat the remaining fuel. While in some instances it may only be necessary to filter the treated fuel, more severe cases will require physical removal of floating biofilm or bottom sludge. Depending on the severity of the problem, manual cleaning of the tank may be required before refueling to remove any remaining debris or corrosive byproduct from the interior surface. Good housekeeping is the best and most cost-effective preventative measure against microbial contamination. Water should be drained from storage tanks at least every six months and especially before the start of winter. If all water can’t be removed, the remaining in-tank water should be treated with a water-soluble biocide—also every six months—or the pH level

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of the water should be raised to a level that is less conducive to microbial growth (pH 9.0 or higher). Fuel tanks should be kept at or near capacity to minimize contamination due to the condensation of moist air in the tank. Lastly, tank bottoms should be sampled and analyzed every three to four months. Periodic sampling is an essential part of any preventative program. With a sound maintenance program in place, water will undoubtedly be detected, but microbial growth will not. n

Advanced Fuel Solutions, Inc. (AFS), based in North Andover, Massachusetts, provides fuel quality consulting services and fuel additives designed to keep fleets on the road profitably. For general housekeeping tips and services, or for specific consultation regarding the detection, removal, or prevention of water and microbial contamination (or any other fuel quality issue), contact Advanced Fuel Solutions (www.yourfuelsolution.com) at 978.258.8360 or paulsr@yourfuelsolution.com.

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http://corrosion.ksc.nasa.gov/stresscor.htm Specific Environment

Tensile Stress

Susceptible Alloy

The Stress Corrosion Triangle http://cwst.com/shot-peening/reasons-toshot-peen/stress-corrosion-crackingscc/

It is common for SCC to go undetected prior to failure. It is a failure mode known to exist with handling not only fuel ethanol, but fuel ethanol blends as well, and can lead to catastrophic mechanical failures and product release. According to an American Petroleum Institute (API) research report, API TR 939-D, stress corrosion cracking of steel in contact with fuel ethanol has been observed in user terminals, specifically storage tanks and loading/unloading rack piping prior to blending. In order for companies to know whether internal SCC could be expected in their tanks and pipelines, researchers have been studying the environments that support SCC, metallurgical factors that affect susceptibility to ethanol SCC, stress conditions that promote crack initiation and growth, and the effectiveness of remedial measures. Peace of mind starts at the point of ethanol production. Renewable fuel producers are the first to engineer quality fuel ethanol and the first to protect equipment integrity, which is

relied upon to store and transport fuel ethanol. Ethanol producers have worked side by side with the petroleum industry to assure their products meet ASTM specifications as well as be accepted at all levels of the fuel distribution network. Channels of distribution that receive and store fuel ethanol need the peace of mind that they are getting high quality renewable fuel, and that it will not compromise their pipelines, storage tanks, transfer and loading lines, valves, pumps, etc. The emphasis on transporting fuel ethanol in the existing petroleum pipeline systems is due to the renewable fuel standard (RFS) mandate to increase use of fuel ethanol in transportation fuel. The EPA is estimating that 31-billion gallons of fuel ethanol will be in production by 2022. MCC has a patent on new additive chemistries that are designed specifically to combat stress corrosion cracking while not compromising the quality or performance of fuel ethanol. FMNMagazine

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These additive chemistries are non-hazardous, mobile liquids that work by physically coating the metal surfaces while also neutralizing the effects of trace components, which may be present. Bench testing using ASTM G129 and other extensive tests on fuel ethanol under simulated stress conditions indicate that fissuring and cracking can actually be halted, keeping harmful trace components from compromising the integrity of pipelines, storage tanks, transfer and loading pipes, valves, pumps and other metallurgy to which the fuel ethanol might be exposed. Furthermore, MCCâ&#x20AC;&#x2122;s additive technology has been tested for compatibility with drag-reducing agents and for jet fuel trailback, which would enable the multiproduct pipelines to transport fuel ethanol. MCCâ&#x20AC;&#x2122;s additive chemistries are custom engineered chemical solutions. MCC will work with each customer on an individual basis to develop a solution customized to the situation (climate, pipeline or tank types, product flows, etc.). These new SCC additives complement the full line of customized fuel additive solutions that MCC has provided the fuel industry for over 20 years.

For further information, please contact Gary Kline, garyk@mcchemical.com or Phil Korosec, philk@mcchemical.com 913.390.5556

WHOLESALE & FLEET OPERATIONS

VENDOR VIEWPOINT:

The Numbers Don’t Lie with Manual SIR by Bobby Hayes

Most U.S. commercial

fleets were completely unprepared for the steep increase in fuel prices that began in 2008. The unexpected rise in fuel expenses decimated many operating budgets. As fuel costs continued to climb, organizations unilaterally looked for ways to reduce costs by decreasing overhead and eliminating unnecessary fuel expenses in every instance possible.

Although U.S. fuel prices have recently shown some improved stability, fuel remains a leading expense for any operation. Fuel management and consumption audits performed at the height of the fuel price spike, and which have continued through today, show that fuel inventory losses as a result of unplanned circumstances remain a challenge for many of today’s government, fleet, commercial, bulk and retail fueling operations. If left unchecked, these unaccounted fuel losses can wreak havoc on a fuel site’s bottom line. Due to manual reconciliation’s potential for inaccurate calculations, fueling operations that rely on manual methods to perform Statistical Inventory Reconciliation (SIR) for inventory analysis are at risk of worsening their unaccounted fuel losses. In short, site operators cannot solve the source of the fuel loss if they don’t realize it’s happening simply because their math is off.

All fuel sites are vulnerable to fuel losses, which can result from— among other things—theft, shrinkage, fuel system leaks, short deliveries and meter drift. If these issues are not promptly identified and addressed as part of a reliable reconciliation procedure, the losses can quickly add up and drain an organization’s operating budget. For example, a 2012 audit of Kauai County, Hawaii, fuel costs and consumption showed that the county purchased 154,655 gallons of diesel fuel for fiscal year 2009 – 2010, but fueling system data showed that only 140,294 gallons were dispensed, for a total of 14,361 unaccounted gallons of fuel. With the national average of diesel fuel prices hovering around $2.57 a gallon in 2009, that difference equated to approximately $37,000 worth of unaccounted fuel.

Source: “Audit of Fuel Costs, Consumption and Management” from www.kauai.gov

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WHOLESALE & FLEET OPERATIONS

The Challenge: Manual Reconciliation Is Costly

of column P.” Manual reconciliation calculations are typically executed longhand or with the assistance of a spreadsheet.

The majority of commercial fuel sites continue to practice manual SIR to track and report inventory levels. However, manual inventory tracking and reporting is expensive, tedious and fraught with potential for human error. Manual reconciliation requires vigilance, discipline and tremendous attention to detail from the personnel charged with performing the task. To obtain accurate inventory data via manual reconciliation methods, a site operator must record inventory measurements—which includes every fuel product on site, the amount of water in each product’s tank, the amount of fuel sold or dispensed and the amount of fuel deliveries—every day that the fuel site is in operation. Measurements need to be collected at the same time each day so that no dispensing or deliveries occur between the time when the volume in the tank and the volume dispensed is measured. Once the data is gathered, the fuel site operator must calculate the variance— the difference between the amount of fuel reported being delivered and being dispensed—through formulas that are reminiscent of long-form income tax preparation: “subtract the value of column O from the value of column N to get the value

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Variance is not only a benchmark for the accuracy of inventory data collection, but it is a measure of the overall fitness of a fuel system. Many states require fuel sites report their variance as part of their leak detection documentation. The U.S. Environmental Protection Agency’s (EPA) standard for reconciliation is 1% of a site’s throughput, but many states have tighter regulations than the EPA. For example, fuel sites in Maryland can’t have a variance greater than 50 gallons over eight days. In Connecticut, the total variance must not exceed 0.5% of sales volume. Failure to meet state-mandated variance thresholds typically result in compliance fines and expensive corrective actions, including third-party tank tests. In addition, other variance remediation efforts performed by fuel sites are sometimes misguided and potentially unnecessary expenses. Without data-driven evidence supported through electronic reporting, site operators speculate at the root causes for unacceptable variance levels and, frequently, rely on historical or anecdotal knowledge to guide their corrective actions. Many fuel site operators will pay to calibrate their dispenser meters without knowing for sure if meter drift is the reason for the variance. From the third-party service required to perform the

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WHOLESALE & FLEET OPERATIONS calibration, to the equipment downtime needed to calibrate meters, to the cost of obtaining a Weights and Measures approval, these expenses are costly and sometimes completely unnecessary. In addition, fleets—particularly government fleets—that are unable to quickly “trend” SIR data frequently run out of fuel because they are unable to detect patterns in fuel consumption. A tank void of fuel can lead to submersible pump motor failure, excessive dispenser filter replacement and damage to vehicles from fuel contaminated by the sludge on the bottom of the tank. SIR is also a significant drain on resources needed to gather and calculate the data. Even at small fuel sites, SIR requires daily oversight, which can be particularly burdensome for small staffs; larger operations with multiple sites could require a coordinated team of personnel to perform SIR. In the case of small staffs struggling to cover the duties of coworkers on vacation, employees may not be sufficiently cross-trained to perform SIR accurately or they fail to perform the inventory analysis altogether, causing the site to fail its compliance audit. Manual reconciliation also can be a safety issue—requiring personnel to be in the path of vehicle traffic while collecting inventory data. Data collected through manual SIR is only as good as the personnel and equipment gathering the data. Unfortunately, the tools used to obtain inventory measurements—wooden gauge sticks—aren’t exactly high-tech. The sticks, which are lowered into the tank to measure product levels, provide inconsistent readings (most data recordings are recorded to the nearest 1/8 of an inch). Gauge sticks also are widely misused. Site operators often continue to use deteriorated sticks long after they should have been retired, or modify the stick through mechanical extensions to make measuring easier. And the problems don’t end there. Supply deliveries are especially difficult to evaluate through manual reconciliation because real-time tank gauge and dispenser data reconciliation is nearly impossible. Consistent timing of data collection is essential. Math errors and problems with spreadsheet formulas also increase the opportunity for inaccuracies. In the event a fuel site operator calculates an unacceptable level of variance through manual reconciliation methods, determining the cause of the variance can be cumbersome at best. Oftentimes, it takes 30 to 60 days to simply identify a loss is occurring, and that’s before resources have been assigned to troubleshoot the source of the loss. Imagine the time required to review 30 days of camera footage in order to expose a fuel thief, not to mention the amount of inventory that is lost while the investigation takes place.

An illustration for automating the SIR process, in this case with OPW’s Phoenix® Fuel Management Software

The Solution: Automated Reconciliation Reduces Expenses As commercial and retail fuel site operators look for ways to offset continuously escalating operating costs, they are becoming increasingly educated about the financial vulnerabilities caused by manual SIR practices. A software-based, automated site reconciliation and data management program provides fuel site operators with the tools needed to eliminate the data inaccuracies and expenses resulting from manual statistical inventory analysis. Transferring the data collecting, calculation and reporting tasks from site personnel to a technology-driven solution, reconciliation software packages—such as those available from OPW—offer many benefits in addition to cost savings, error reduction, simplified compliance reporting and improved site safety.

Conclusion: Investing in the Future

As gas prices have demonstrated a measure of stability recently, today’s commercial fleets are looking to make equipment investments that have been delayed since fuel prices began consuming their operating budgets in 2008. Today’s fuel retailers are continuously chasing evolving payment technology and data security standards that require significant capital investments. With expenses continuing to mount, fuel site operators need to carefully monitor their fuel assets. Squandering money through unaccounted fuel losses and costly reconciliation procedures will deplete capital resources needed for future growth. Manual SIR is a dubious process that leads to unnecessary costs for government, commercial, bulk, fleet and retail fuel sites of every size and configuration. By instantly reconciling dispensing and tank gauging data to provide accurate, real-time inventory calculations, OPW is helping to quickly identify the source of fuel losses and reduce management overhead. Fueling operations that adopt a technologydriven reconciliation solution will position themselves to weather future economic challenges with greater ease and prime their site to generate incremental savings for years to come. n

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WHOLESALE & FLEET OPERATIONS

The Numbers Don’t Lie with Manual SIR

Advantages of Automated Reconciliation • Real-time data collection and calculation provides up-to-the-moment inventory information that is both comprehensive and accurate • Centralizes inventory data management, which is especially beneficial to multi-site fueling operations • Can isolate the fuel delivery data from the dispensed data in real time • Programs designed to simultaneously poll multiple TCP/IP-based fuel control systems dramatically reduce data collection times for multi-site fueling operations • Enhanced odometer checking reveals obvious, incorrect mileage entries such as single, sequential or repeated numbers • Multi-level access and security features enable cross-training, accountability and “tiered” access • Electronic archives simplify data retrieval and management • Exported data to third-party database, spreadsheet and fleet maintenance programs for further processing • Versatile reconciliation software packages designed to be compatible with multiple tank gauge brands

Fuel management software, which is used as part of an integrated fuel management solution, can frequently capture return on investment in less than a year. OPW’s Windowsbased Phoenix® Fuel Management Software features more than 60 reporting functions and simplifies reconciliation reporting through automatic and ondemand transaction polling processes.

• Best-in-class reconciliation software packages streamline tank-strapping configuration procedures by eliminating the “double work” of inputting tank-strapping data into the tank gauge and software

Bobby Hayes is the Domestic Sales Manager at OPW Fuel Management Systems in Hodgkins, Illinois. He can be reached at (770) 605-9611 or robert.hayes@opwglobal.com. OPW is a global leader in fully integrated fluid handling, management, monitoring and control solutions for the safe and efficient handling of critical petroleum-derived fluids from the refinery to the commercial and retail points of consumption. It offers Phoenix Fuel Management Software that works with dispensing and tank gauging data to address manual SIR issues. OPW is an operating company within the Fluids segment of Dover Corporation. For more information about OPW, please visit www.opwglobal.com

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Due to falling crude prices, approximately 17,000 oil and gas field workers lost their jobs in 2015. The spot price of WTI crude fell from $100.82/b in February 2014, to $50.58/b in February 2015, to $30.32/b in February 2016. One year ago, at the beginning of April 2015, there were 1028 active rotary rigs in the U.S. This has been slashed to 450 rigs today, according to Baker Hughes. Bottom Line: Oversupply, high inventories and dissension among crude producers have brought oil prices tumbling down. While this offers savings to consumers, it also threatens the viability of the domestic oil and gas industry, leading to the prospect of another supply crunch down the road.

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Sinclair Turns 100 and Forges Ahead In Its New Century of Operations

by Keith Reid

SPECIAL SUPPLEMENT: SINCLAIR TURNS 100

Moving Into a Second Century Harry F. Sinclair

While the company is proud of its long history and iconic dinosaur branding, it doesn’t operate like a dinosaur in today’s dynamic environment. Approximately 5 years ago the company began a major push to revitalize the brand that ranged from overhauling the imaging to repositioning the brand itself.

he dinosaur has long been a cultural icon. It’s been a staple of science fiction entertainment since Arthur Conan Doyle wrote the first dinosaur adventure, The Lost World, in 1912. You had the quirky (and eon blending) 60s TV show the Flintstones, that lovable or hateable (depending on whether you are a child or parent) purple dinosaur and the Jurassic Park franchise, to cite but a few examples. Of course, from the fuel marketing world there is one culturally iconic dinosaur that cannot be ignored—Sinclair’s Dino the dinosaur, which first appeared in 1930 some14 years after Harry F. Sinclair founded the company. “We’re very proud of the fact that we’re one of the longest, continuous oil company brands in existence,” said Jack Barger, Salt Lake City-based Sinclair Oil Corporation’s Vice President, Marketing and Supply. “Being around for 100 years is quite an achievement. [Company Founder] Harry Sinclair was a remarkable guy. He governed over Sinclair from its founding to the late ‘40s, so 30 plus years. Then the last 40 years the company was under the ownership and leadership of Earl Holding, until he passed in 2013. Earl was a remarkable man himself, and his wife Carol is still at the helm. It’s a very, very special family organization and family business.” The company, whose official anniversary fell on May 1, 2016, has a range of activities planned to help celebrate the event. These include: an art contest for children of Sinclair employees during the spring; an employee picnic at Snowbasin Resort in Utah in the summer; a speakers series for employees highlighting historical Sinclair moments; a distributor’s conference in Sun Valley, Idaho, in August; and community-based volunteer events where Sinclair employees will give back in Salt Lake City and in Casper and Sinclair, Wyoming.

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The “Centennial Image Program” involved freshening the image without reinventing the core, traditional elements. For example, Dino the dinosaur remains front and center, but received treatments that modernized the look while giving it more “pop.” The repositioning aspects, as might be expected, presented the true challenge. “We allowed our brand to be used anywhere, and there were really no retail standards,” Barger said. “By virtue of that, we had a very high attrition rate. We had our brand attached to a lot of stations that were at end of life. That put us at risk.” He noted that the repositioning strategy was to begin focusing on recruiting newer, high quality, higher-volume assets to the brand along with the re-branding of existing stores. “As you might imagine, when you make an investment of some significance in retail sites, some sites don’t make the cut,” Barger said. “That is largely for economic reasons, I’d emphasize that. We didn’t establish any requirements to remain a Sinclair-branded station other than meeting our minimum image standards. We said if it makes economic sense to make this investment, and you’re willing to work to keep that standard high, then we’re glad to have you in our family.” The distributor or the retailer is required to fund the rebranding cost. “We work very hard to try to keep those costs at a minimum, but that, quite frankly, has not been a barrier to growing that program,” Barger said. “We’ve added a few hundred high quality sites to the brand, and we’ve lost some sites, unfortunately, to attrition and other things. Today, we sit here with a brand that is alive and well and repositioned in the marketplace. It is a contemporary brand that is able to compete against all of the other major brands.” The gasoline Sinclair markets also underwent an upgrade to Top Tier status. “Many of our major competitors were talking a lot about [gasoline] quality. That was their primary marketing focus. We decided that in order to have parity with the other major brands we needed to be Top Tier as well, so we embarked on that journey about a year and a half ago and have reached that goal throughout our network,” Barger said.

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SPECIAL SUPPLEMENT: SINCLAIR TURNS 100

Distribution and Retail Sinclair currently markets DINOCARE™ TOP TIER™ Gasoline through 400 distributors in 24 states. It supplies more than 1,300 branded stations, primarily located west of the Mississippi River. Sinclair offers both a dealer program and a licensee program. The dealer program is available for retail operations within its supply footprint. These dealers are almost exclusively supplied by Sinclair distributors. Sinclair’s logistical footprint encompasses two refineries located in Wyoming, and a network of crude oil and finished product pipelines and terminals in the Rocky Mountain and midcontinent regions. “We’ve invested in a lot of technology to help us be more responsive from a supply standpoint,” said Barger. “We’ve worked to be more consistently competitive in our pricing strategies.” For retailers outside the market area where Sinclair supplies gasoline, there is an opportunity to participate in the Sinclair Licensing Program. That provides licensees retail brand affinity with use of the internationally known Dino symbol, as well as the benefits that dealers enjoy, including the Sinclair credit card network. These retailers are served by affiliated distributors, who are required to self-source their supply and to distribute a Top Tier gasoline. Licensees are charged a flat $500 a month, per retail site.

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“

”

We’ve added a few hundred high quality sites to the brand, and we’ve lost some sites, unfortunately, to attrition and other things. Today, we sit here with a brand that is alive and well and repositioned in the marketplace. It is a contemporary brand that is able to compete against all of the other major brands.

“We’re quite excited about the reception that our brand is getting in our licensed program,” said Barger. “We’re particularly pleased with the reception as these stations return to markets that we’ve essentially been out of for over 40 years. I expect you are going to see a lot more licensed stations in the East in the coming years.” Barger noted that on the retail side Sinclair does not have fuel volume or facility requirements, such as having a convenience store or not having a service bay. That is similarly the case for the distributors within the Sinclair supply footprint, where a broad range of distributor operations is acceptable. For the licensee side the company is currently emphasizing larger distributors—for now—since they are obligated to self-source their products and fill the retail supply requirements.

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“

SPECIAL SUPPLEMENT: SINCLAIR TURNS 100

Programs

On the payment side, the company states the credit card network boasts extremely competitive card rates and low transaction fees. Additionally, the company offers a proprietary Sinclair credit card that generates a $0.05 discount. Barger noted that a number of retailers add an additional $0.05 to that for a $0.10 discount. “The unique thing about that program is the price changes right at the pump. It’s not a discount that shows up on a statement,” he said. “That’s been incredibly successful for us. We see it as an important loyalty initiative that any Sinclair retailer can leverage and have some success with.”

Sinclair leaves the store side of things up to the retailer. It does not offer any company specific programs though it is a member of Royal Buying Group.

And then there is a big green dinosaur. “We think a primary benefit is the appeal of our brand itself—the fondness that we know consumers have for our brand,” Barger said. “The memories they have as children in Sinclair stations and our dinosaur. And the merchandising over the years—the blowup dinosaurs and dinosaur soap and all this stuff that we’ve done as a brand over so many years. For example, people still remember us fondly in the East from when we were a significant brand a number of decades ago. Some of the highest sales come from states we haven’t been in for 40 years.” n

For mobile payments, the company is working with Houston-based P97 to deploy its DINOPAY™ mobile app at specially equipped stations in 2016. “We’ve done a lot of work behind the scenes in building mobile apps and things that I think are important in today’s economy to position your brand to the younger generation and make your brand accessible and appealing to them,” said Barger.

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”

We’re quite excited about the reception that our brand is getting in our licensed program. We’re particularly pleased with the reception as these stations return to markets that we’ve essentially been out of for over 40 years. I expect you are going to see a lot more licensed stations in the East in the coming years.

What does a retailer get from the Sinclair brand? The flexibility of the program likely appeals to many distributors and retailers, but the company supports its partners with a foundation of network programs.

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DINO: THE SINCLAIR OIL DINOSAUR Dinosaurs first appeared in marketing for Sinclair Oil Corporation in 1930, as part of a campaign to educate customers about the origin of fossil fuels. The Apatosaurus (then thought to be a Brontosaurus) quickly surpassed the Tyrannosaurus rex (T. rex) and Triceratops in popularity, and by 1932, Sinclair had registered “Dino” as a trademark. Today, Dino could be objectively described as one of the most recognized icons in America. Here are some interesting facts about Dino:

1964 New York World’s Fair

Sinclair Oil began using the Apatosaurus in Chicago during the 1933 – 34 Century of Progress World’s Fair. Following that success, Dino reappeared at a popular exhibit in the Texas Centennial Exposition of 1936.

Dino was the premier exhibit at the New York World’s Fair in 1939, as a 70' green dinosaur in Sinclair’s “Dinoland Pavilion.”

He increased his national exposure in 1963 when he made his initial appearance as a 70-foot-long giant balloon in The Macy’s Thanksgiving Day Parade, and appeared every year through 1976. The original balloon became an Honorary Member of the Museum of Natural History in 1975. Dino returned to the 89th Macy’s Thanksgiving Day Parade in 2015 after nearly a 40-year absence and just in time to kick off the company’s 2016 centennial. More than 50 million viewers across the country and more than 3.5 million spectators in the streets of New York City saw Dino fly as a 72-feet-long, 24-feetwide and 36-feet-tall balloon—the size of an actual Apatosaurus—and the only life-size balloon in the parade. Fans can see him again during the 90th Macy’s Thanksgiving Day Parade on Thursday, November 24, 2016.

In 1964, nine large Sinclair dinosaurs were sent down the Hudson River on barges from the Catskill Mountains, where they made their way to the New York World’s Fair. By the end of the World’s Fair, more than 50 million visitors had seen Sinclair Oil’s Dinoland exhibit. Several of those models can still be found across the country.

It took an entire team of paleontologists, engineers and robotics experts three years to build the dinosaurs for the 1964 – 1965 World’s Fair. The dinosaurs were designed by world-renowned wildlife sculptor Louis Paul Jonas, and based on the work of Dr. Barnum Brown, of

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the American Museum of Natural History, and Dr. John H. Ostrom, of Yale University’s Peabody Museum of Natural History.

The dinosaurs traveled by barge 125 miles down the Hudson River to the Dinoland Pavilion at the fair, where approximately 10 million visitors saw them. After the fair, the dinosaurs—their animatronics removed—went on a national tour, which included the 1966 Macy’s Thanksgiving Day Parade.

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Marketing Fleet Fueling in the Face of Declining Fuel Prices

by Shane Dyer As we once again witness a

major cyclical decline in fuel prices, the question arises as to what impact it will have on marketing commercial fleet fueling services.

The most obvious impact is that lower prices will diminish the psychology of fear that drives fleets to implement a fuel purchasing policy in order to avoid slippage. The financial impact of 15% abuse is far less at $1.50 per gallon than it is at $4. As a result, business owners are not as inclined to change programs simply for better control. Employee productivity, reduced labor cost during fueling and reporting services will carry more weight in the decision making process. However, history has shown that in periods of low fuel prices, business owners soften their view on fuel management only to reinstate controls again as prices rise. They need to understand this is not a good approach as it undermines

management’s authority. Remember, the process of adopting and enforcing a fuel purchasing policy is a cultural change for any company. If management relaxes and then hardens their positions with the cyclical price of fuel, employees will determine that management really doesn’t care about that policy. This could actually lead to an increase in abuse. Believe it or not, it’s actually a good idea to adopt and enforce a fuel purchasing policy for the first time when prices are low. It allows business owners to be more forgiving as they work to change the culture to a tighter environment—one that is battle tested and prepared for the time when extremely high fuel prices return. So as you work to educate potential customers on your service, be sure to incorporate these concepts into your approach. Spend less time talking about slippage and more about the benefits of efficiencies and implementing the system as an insurance policy for when fuel prices return to painful levels.

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The second major area we see being impacted is in how the major universal fleet card providers charge for their services. Generically speaking, their revenue comes from a combination of merchant fees (interchange) and cardholder/accountholder fees. When fuel prices were high, these companies made more on the interchange and were able to waive traditional fees in order to acquire or defend accounts. All of that has changed! There has been a major tightening of belts in these companies, including layoffs and restructurings as they prepare to deal with the declining revenue. Their only other method to compensate for the lower interchange revenue is to begin raising the fees they charge their customers. The fact that fees are going to be increased has already been telegraphed in certain earnings calls with investors and most equity analysts are considering this in their financial modeling.

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RETAIL OPERATIONS

Believe it or not, it’s actually a good idea to adopt and enforce a fuel purchasing policy for the first time when prices are low.

We’ve spoken with several fleet managers lately who are noticing that their waived fees have been reinstated. Others are alleging situations where it seems nearly impossible to pay their bills on time in order to avoid late fees. Fleets need to understand that the list of how these fees are being assessed is complex and amounts to substantial revenue for the card issuers. For example, according to Fleetcor’s 2014 10-K report: “We derive a significant portion of our revenue from program fees and charges paid by the users of our cards. Our card programs include a variety of fees and charges associated with transactions, cards, reports, optional services and late payments. We derived approximately 66% of our consolidated revenues from these fees and charges during the year ended December 31, 2014.”1 In 2015 they had “derived approximately 72%” of their consolidated revenues from these fees.2 This implies the revenue related to fees greatly exceeds the interchange revenue. As interchange goes down, fees logically have to go up to cover any shortfall. After all, publicly traded companies are being measured primarily by their earnings.

2 3

Now is as good a time as any, if not better, to implement a fuel purchasing policy backed by a highly controlled, efficient fueling system. Reassess the fees that you think you may—or may not—be charged by a major card issuer. Focus on eliminating potential points of irritation related to fees, for example, eliminating late fees caused by received payments not being processed in time, etc.

In the end, fleets need to understand that there is a true value in implementing a qualified commercial fleet fueling solution for their business, even in times when fuel costs are low. They also need to understand the difference between petroleum wholesalers and those who are simply issuing cards that work in the petroleum wholesaler’s locations, and how that affects their total fueling costs. Finally, they need to be careful when selecting a fleet fueling provider to ensure every potential “non fuel” charge is transparent. Avoid those providers who obscure fees in their credit application with general statements and who don’t clearly delineate each potential charge that will be assessed. With the right knowledge and proper research, a business should be able to find a program that fits their needs and delivers the most value. That value can be related to reduced slippage as a result of system controls, employee efficiencies and increased productivity gained through expedited fueling environments, reporting services, and finally, access to wholesale pricing models. Your job is to help guide them through this process in a consultative manner. n References: 1. Google Inc. (2016). 10-K Report (2014). Retrieved from http://www.sec.gov/ Archives/edgar/data/1175454/000119312515073581/d831300d10k.htm 2. Google Inc. (2016). 10-K Report (2015). Retrieved from http://www.sec.gov/ Archives/edgar/data/1175454/000119312516485752/d18451d10k.htm

As I’ve stated in past articles, the very best place for fleets to purchase fuel is directly from a petroleum wholesale company that owns and operates their own locations and/or are in participation with other wholesalers allowing mutual access for their customers under a resell agreement. These companies enjoy enough revenue on the sale of fuel in these locations to typically avoid the aggressive fees others are assessing who have to live on interchange. Recognizing all of this, as you work to deliver this important message to the fleets, consider the following lines of discussion. FMNMagazine

Shane Dyer Shane is the president of PowerUp Fleet, Inc. He possesses over 32 years’ petroleum automation, operations, and executive management experience with a focus on commercial fleet fueling and cardlock networks. PowerUp Fleet, Inc. provides sales force automation/CRM solutions specific to the petroleum industry along with sales training, sales management and executive consulting services. Contact: (541) 388-5120 or shane@powerupfleet.com and visit PowerUp Fleet at: www.powerupfleet.com 59

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The E15 Perspective from Those Marketing the Fuel

Pull up to fuel stations

throughout the U.S. and you are bound to the standard E10 fuel being offered. But gracing the pumps of stations throughout the Midwest, specifically in the “corn belt,” you will see E15 gasoline available. E15 (15% ethanol, 85% gasoline) has been certified for sale in the U.S. and is slowly gaining ground among petroleum marketers. The argument among those marketers and retailers that have embraced the fuel is that E15 fuel allows them to market a cleaner-burning, higher-octane fuel that can technically be used by more than 200 million cars on the road today (EPA approval for cars 2001 and later), and it can typically cost less than the E10 competitors are selling.

by Maura Keller As Ron Lamberty, senior vice president at the American Coalition for Ethanol (ACE) explains, although there may be an increased interest in the E15 blend, E10 and even E0 will still be around for a long time because although 80 to 85% of cars can use E15, 100 percent of cars can use E0 or E10. “We’re just trying to make E15 available in a lot more locations,” Lamberty said. “The EPA approved E15 for use in all cars and light trucks more than five years ago, and there are only about 200 stations selling it today. Most of those stations are located in the Midwest. The reason most station owners have not offered E15 is they’re either contractually prevented from doing so, or afraid, or both—and both of those things have been created by the oil industry to prevent E15 from gaining a foothold. They’ve spent hundreds of millions of dollars to misinform and scare station owners, and it has worked.” As Lamberty stated, the oil companies are fighting it while the farm industry, mostly the corn producing states, are pushing for it. With the price of corn down, the price of ethanol also has dropped. In addition, the price of gasoline has dropped, so the economic advantage of the E15 is significantly less.

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RETAIL OPERATIONS

According to Dr. Michael Haselkorn, material science and engineering laboratory director at the Golisano Institute for Sustainability at the Rochester Institute of Technology (RIT), the benefits of ethanol are that it is a domestically produced fuel and it produces less emissions than gasoline. The drawbacks are slightly poorer engine performance and lower gas mileage (4% – 5%) as compared to gasoline. Haselkorn was instrumental in selecting the materials to improve the durability of diesel engines fueled with biodiesel, natural gas and biogas from landfills. He also designed ceramic components for diesel engines and hydraulic pumps. At RIT, Haselkorn has developed processes for converting waste grease to biodiesel and cellulosic materials into ethanol. He also has researched the effects of biodiesel additions on the lubrication of engines oils.

“

Ron Lamberty,

American Coalition for Ethanol

Lamberty stresses that everyone who has added E15 is selling more gallons, has increased customer counts and is making more money.

“The biggest drawbacks are probably the fact that your competitors won’t like you very much, you’ll get nasty looks at petroleum marketers’ events, and the company you buy gas from may be unhappy with you,” Lamberty said. “A lot of other fuel retailers will wonder how you did it, because they’ve all heard it couldn’t be done, or it’s illegal, or they thought you would get sued out of business, or they heard it costs way too much to install the equipment you need for E15—and all of those things are lies.”

Kent Satrang, CEO of Petro Serve USA, has 24 stores, 25 percent of which are branded Petro Serve USA. The remaining 75 percent are branded with Cenex and Tesoro. He eagerly offers E15 fuel to his patrons. “Cenex and Tesoro have been more receptive than most ‘Big Oil’ companies to E15 and they say they support ethanol,” Satrang said. “But you have to understand that both companies own multiple oil refineries and it is likely in their best interest financially to come up with programs to sell gasoline and not ethanol. The Renewable Fuel Standards requires that they sell a certain percentage of ethanol through the use of RINS, but they naturally want to sell their own products.”

Liability Concerns

Besides the warranty concerns, the auto companies have not fully embraced E15. However, according to Haselkorn, the E15 studies performed at RIT with Monroe County and the University of Minnesota showed that any car that runs on E-10 would run without any problems on E-15.

“The EPA has certified vehicles in the U.S. fleet made in 2001 or newer, and all Flex Fuel vehicles (vehicles capable of using up to an 85 percent ethanol, 15 percent gasoline mix) are E15 compatible,” Haselkorn said. “One study conducted at Kettering University found no remarkable degradation in fuel systems all the way back to 1995 model years. But the main issue is whether or not your vehicle will be covered under warranty for any damage caused by E15 usage, and in many cases the answer is no. GM and Ford have certified their own vehicles starting with the 2012 and 2013 model years, respectively, so some brand-new cars will have no trouble at all.”

Satrang said the biggest hurdle to growing the E15 market is a lack of a RVP (Reid Vapor Pressure) one-pound waiver from the EPA. “The result is that we can only sell E15 through the cooler weather months,” Satrang said. “Also E15 can only be sold during those months to cars 2001 and newer. It’s hard to understand that a 1995 Ford Pickup can run fine on E10 but it will supposedly have problems with E15.”

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”

“The biggest drawbacks are probably the fact that your competitors won’t like you very much, you’ll get nasty looks at petroleum marketers’ events, and the company you buy gas from may be unhappy with you. A lot of other fuel retailers will wonder how you did it, because they’ve all heard it couldn’t be done, or it’s illegal, or they thought you would get sued out of business, or they heard it costs way too much to install the equipment you need for E15—and all of those things are lies.”

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RETAIL OPERATIONS

”

The E15 Perspective from Those Marketing the Fuel

Kent Satrang, Petro Serve USA

To assist with liability concerns, the ethanol industry has helped Satrang to properly identify E15 by labeling the pump, hose and the nozzle.

“Over the years, if someone came to our pump and put diesel in their gasoline car, we view it is their fault as our pumps are clearly labeled and we don’t pay to have their tank pumped out,” Satrang said. “In the unlikely event that someone driving a 2000 and older car put in six gallons of E15, we would point to our signage and again we would not pay to have their E15 removed from their tank. Misfueling has not been a problem at all.” As far as warranties and older fueling equipment compatibility issues as they relate to E15, the Steel Tank Institute (STI) said that a steel tank is compatible for up to E100 ethanol. Later fiberglass tanks should also be capable of handling the fuel. The State of North Dakota was an early leader in requiring that stations selling ethanol certify the integrity and compatibility of all materials used in underground tanks, pipes and dispensers before mid-grade ethanol blends can be sold.

“Local gas station equipment installers tell me that all glues, adhesives and parts used in gas station infrastructure since 1984 are ethanol compatible,” Satrang said. “North Dakota has had a very successful program to assist retailers to put in UL-approved bio-blender pumps so most E85 sold in our state goes through a special nickel plated pump and all tanks and pipes are certified to be compatible.” Editor’s Note: Bio-blender pumps are used onsite to blend E85 with gasoline to dispense various ratios of ethanol-blended fuel, such as E15, E30 and E85 from one dispenser. Charlie Good, owner of Good & Quick in Nevada, Iowa, said there are no drawbacks in using E15. “The Department of Energy (DOE) tested hundreds of cars and decided to put the starting year as 2001 and newer to use E15,” Good said. “I had a conversation with the DOE official who told me they did not understand why E15 wasn’t being used more. I told her the EPA rules hurt the marketing and use of E15.” FMNMagazine

Good, who also owns an auto repair business, said the benefit in increasing the use of E15 is economic. “It has created thousands of jobs and has eliminated payments to farmers based on production and low commodity prices on corn,” Good said. “And we can fuel our own economy with our own renewable fuels and we will not be beholden to Middle East oil.” And as far as old fueling equipment, Lamberty said that people have to remember that the reason for the interest in E15 is that the UL spec for gasoline dispensers and all the hanging hardware said it was for gasoline and alcohol blends up to 15%. “If a retailer is worried about liability for E15, they should check with their insurance agent, and find that they’re covered just like with any other fuel they sell,” Lamberty said.

Gauging Consumer Interest The most successful E15 marketers have educated their customers on what E15 is, and why they shouldn’t be afraid of it. “Most of the consumer education comes when people try it and none of the predicted horrors ever happen—and then they just keep on using it,” Lamberty said. “But when it comes down to it, people don’t know much about any fuel— they just know it works or it doesn’t.” For marketers interested in selling E15, in addition to getting insights from the American Coalition of Ethanol, each state’s corn grower’s organization and the American Lung Association can help. National groups such as the American Coalition for Ethanol and Growth Energy are very helpful with advice, labeling and promotional ideas. And, as Satrang explains, North Dakota Governor Jack Dalrymple and the state’s Commerce Department have been national leaders to get E15 jump-started and promoted. In fact, North Dakota’s ethanol plant producers formed an Ethanol Council that champions the promotion of E15. “I feel the North Dakota Petroleum Retailers Association’s leadership has been negative towards E15 and ethanol, perhaps because we have oil production in our state,” Satrang said. “Our company has always had the mission of partnering in the Bakken oil fields of western North Dakota with the corn and soybean fields of rural North Dakota to help make our state’s economy be the envy of all 50 states.”

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RETAIL OPERATIONS

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The E15 Perspective from Those Marketing the Fuel

Price Differentials

As far as educating consumers about E15, Petro Serve USA has worked with the North Dakota Ethanol Council and the North Dakota Corn Growers Association on promotional campaigns to educate the customers right at the point of decision, the blender pump.

“We use pump toppers, nozzle talkers and pump wobblers to educate drivers about the benefits of E15,” Satrang said. “Also, we have display monitors in our blender pumps that educate customers in six to ten-second TV spots that run while they fill their cars.” That said, Good sees more and more consumers using E15 but continue to be uninformed due to changing rules and regulations. “An example of this is the vapor pressure rule that the EPA has established, which the makes the fuel illegal for 2001-model year and newer vehicles during the summer driving season, labeling it Flex Fuel only. But then on September 15, it becomes legal for use in 2001 and newer vehicles,” Good said. “This is totally ridiculous.”

”

The positive price difference with E15 over E10 also has consumers noticing this fuel option.

“Most of the consumer education comes when people try it and none of the predicted horrors ever happen—and then they just keep on using it. But when it comes down to it, people don’t know much about any fuel— they just know it works or it doesn’t.”

And this is the reason that more retailers do not sell E15, according to Good. “They might consider E15 where they would not have to put in new tanks,” Good said. “They could take a lower selling product and put in E15, but with the changes, they cannot free up tanks because one day is legal and the next day is illegal. They could get pre-blended E15 from the terminals and not need blender pumps. I have blender pumps so I can offer more blends, which helps increase profits by the blending.”

Ron Lamberty,

American Coalition for Ethanol

“Ethanol always seems to be really competitive in the summer and less competitive in the winter months. Today my wholesale cost of E15 is 3.3 cents cheaper than E10. Last summer, E15 was seven cents lower cost than E10. That’s over 3.5% lower wholesale cost for E15,” Satrang said. “If you can save 3.5% on the cost of E15 and the loss of mileage is only 1%, that’s 2.5% savings that you can stick in your own pocket. That’s why we say choice at the blender pump puts change in your pocket. You choose the best value for your specific car each time you fill.” Fuel marketers can buy E15 from branded suppliers at their large fuel terminals. Because Petro USA has blender pumps, they buy E85 from the ethanol plant and they buy the gasoline from the oil refinery.

“This again allows the marketplace to work by allowing competition between Big Oil and ethanol,” Satrang said. “If I bought both from Big Oil, it would be to their financial benefit to mark up the ethanol they purchase more than they mark up their own gasoline.”

And while some branded oil companies do offer E85 at the fuel terminal, others do not. As Satrang explains, E85 offered by branded oil companies currently is running about 25 cents per gallon higher than buying it directly from an ethanol plant. “Oil companies are not in the business of selling products like ethanol that other companies produce,” Satrang said. “They want to sell petroleum-based products that they refine and market themselves and their prices tend to reflect this.” So if you have sufficient underground tank storage you can buy E15 from the fuel terminals. But most stations do not have enough tanks for this, so E15 is most often a blend of E10 with E85 done through the process of a bio-blender pump. “The other reason for blending at the pump is that it allows for the opportunity of competition between ethanol plants and oil refineries,” Satrang said. “This helps keep prices lower.” n

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by Richard Browne

EMV—When

Should I Upgrade? Gasoline retailers need to develop a plan for EMV on the forecourt. Is 2016 the right time to upgrade gas pumps to EMV?

New requirements to cut down on the

fraudulent use of credit and debit cards, enhanced marketing capabilities, lower maintenance costs and the opportunity to take advantage of tax incentives— including bonus depreciation and Section 179 benefits—are among the main reasons gasoline retailers are looking to implement gas pump upgrades in 2016. Payment cards with magnetic stripes are being rapidly replaced in consumers’ wallets and at point-of-sale (POS) locations nationwide. EMV chip technology has been proven to cut down on fraud, and U.S. retailers in all market segments, from big-box retail to convenience stores, are upgrading their mag-stripe equipment with EMV chipcard POS terminals.

EMV—which stands for EuroPay, MasterCard and Visa—is a global standard for cards equipped with computer chips and technology used to authenticate chip-card transactions. In the wake of large-scale data breaches and increasing rates of credit card fraud, U.S. card issuers are migrating to this new technology to protect consumers and reduce the costs of fraud. “These new and improved cards are being deployed to improve payment security, making it more difficult for fraudsters to successfully counterfeit cards,” said Julie Conroy, research director for retail banking at Aite Company, a financial industry research company. “It’s an important step forward.”1 FMNMagazine

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For merchants and financial institutions, the switch to EMV requires adding new instore technology, internal processing systems and complying with new liability rules. For consumers, it means activating new cards and learning new payment processes. The traditional magnetic stripes on credit and debit cards contain unchanging data. The information in the magnetic stripe gives thieves access to sensitive card and cardholder data necessary to make purchases. Unlike magnetic-stripe cards, the computer chip in EMV cards creates a unique code for each transaction that cannot be used again. Studies show consumers are more worried about credit card fraud than ever before and American financial services companies have followed the lead of their European and Asian counterparts in switching over to these so-called “smart chip” cards, which have been proven to cut down on credit card counterfeiting.

RETAIL OPERATIONS Since more than 50% of gasoline transactions are pay-at-the-pump purchases, the lack of human interaction makes gas pumps a prime target for thieves trying to use stolen or counterfeit credit cards. Data show that in England, where EMV cards replaced the old magnetic-stripe technology in 2004, fraud fell by 33% immediately. When France implemented the new technology in 2005, counterfeit card fraud dropped by 91% and credit card theft declined by 98%. Across the border in Canada, which adopted the EMV technology in 2009, debit card losses fell by 33% from 2009 to 2012, dropping to $39 million annually from $149 million in 2008. “In our market, as consumers became aware of the EMV chip cards and their perceived higher security, they began to favor and look for fueling locations that had EMV card readers,” said Canadian Tire Petroleum President Bruce Allen. Not only do consumers prefer the protection afforded by EMV card technology, U.S. fuel retailers will be footing the bill for credit card fraud by fall of 2017 if they don’t replace their old magnetic stripe readers. Retailers still using magnetic-stripe technology took on responsibility for fraudulent in-store purchases in October 2015, and liability for fraudulent forecourt (pay-at-the-pump) purchases shifts to store owners in October 2017.2 Gasoline retailers who wait until after October 2017 may become responsible for fraudulent credit card purchases made at their pumps; the banks issuing the cards are shifting the liability. That deadline has led gasoline retailers who have not already made the switch to seek the most economical methods to pay for the new technology and match their expenses with their cash flow; that’s where equipment financing comes in. Having an upgrade plan that aligns capital spending for fueling equipment with annual tax limits can provide money-saving tax benefits.

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EMV—When Should I Upgrade?

Data show that in England, where EMV cards replaced the old magnetic-stripe technology in 2004, fraud fell by 33% immediately. When France implemented the new technology in 2005, counterfeit card fraud dropped by 91% and credit card theft declined by 98%.

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For capital spending of up to $500,000 on new or used equipment, 100% of the investment may be deducted in the current year under Section 179. For capital spending of $500,000 to $2 million, bonus depreciation allows 50% of the capital investment to be deducted in the current year. In addition, the Alternative Fuel Infrastructure Tax Credit provides a 30% tax credit for the installation of eligible alternative fueling equipment, but it will expire at the end of the year. This tax credit offers a straight deduction from taxes owed, but it’s only allowed in 2016. Waiting until 2017 could present many challenges for upgrading gas pumps, according to Conexxus, a memberdriven technology association of fuel retailers. Issues include the time it takes to manufacture the new hardware and a dearth of qualified technicians needed to do the actual at-the-pump installations.3

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“There are not enough technicians,” said Conexxus Executive Director Gray Taylor. “I estimate we need 3,000 technicians to do 4.5 million man-hours to install retrofits and pumps. If something goes wrong with a pump nozzle, forget it, you’ll have to fix it yourself.”4 Dispenser manufacturers will have to ramp up production by 150% to keep pace with demand. “That’s going to be a challenge,” he said. “Many dealers will face hardships. Those who lag behind may be at risk of fraud,” Taylor explained. “Our estimates point to a potential increase of 19 basis points as fraudsters seek non-EMV victims to use for passing counterfeit cards, enough to put a retailer out of business. Believe me, we will have store closures.” n References: 1. http://www.creditcards.com/credit-card-news/emvfaq-chip-cards-answers-1264.php 2. https://www.patriotcapitalcorp.com/category/emvinformation-cstore-and-gas-station-owners/ 3. https://www.conexxus.org/ 4. http://www.patriotcapitalcorp.com/gettingapproved/

Richard Browne Richard is Vice President, Marketing, at Patriot Capital. Patriot Capital, a division of State Bank and Trust Company, specializes in enabling entrepreneurs to succeed by providing hassle-free equipment financing in the retail and commercial fueling verticals and other retail and manufacturing industries. Contact: Richard Browne —cell: 404.977.1251 or email: rbrowne@patriotcapitalcorp.com

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VENDOR VIEWPOINT:

by W. Brian Reynolds

THE LETTERS OF THE DAY ARE W

hen I was growing up, my mother used to tell me to study hard and go to college, or I would end up digging ditches or pumping gas for a living! So, what did I do? I went to college and studied geology so I could dig really nice ditches, and I still ended up pumping gas for a living! The pumping gas part of my career hasn’t been too bad of an existence, but depending on the circumstances, digging ditches was sometimes the by-product of something bad, such as a product-line leak. Obviously, leaks are expensive for no other reason than the loss of product, but the truly expensive part of the leak may be the cleanup and potential fines for non-compliance. Throughout the 1980s and ‘90s, we all heard horror stories about the Environmental Protection Agency (EPA) or a State enforcementequivalent issuing fines for what many considered to be “new regulations,” when in fact they might have been non-enforced laws for several years. Heavy-handed environmental enforcement started to occur in the late ‘80s, so by the turn of the century, most of the big problems had been cleaned, removed or replaced with entirely new equipment on site. In recent years, there hasn’t been a lot of talk regarding egregious regulations from the EPA. The industry has gotten used to environmental compliance and today, the standard is adhering to environmental mandates.

E-P-A

In our industry, there is always something going on that you should stay on top of. Planning ahead is easier said than done. With the rapid pace of government growth over the past seven years, guess what? They’re back! It’s our old friends from the EPA, and this time they’ve brought lots of reinforcements.

The EPA continually modifies and releases environmental guidelines for petroleum storage tank systems, operations and maintenance requirements. For example, in the July 15, 2015, Federal Register, EPA published the 2015 underground storage tank (UST) regulation and the 2015 state program approval regulation. The revisions strengthen the 1988 federal underground storage tank regulations by increasing emphasis on properly operating and maintaining UST equipment. One thing I was glad to see in the current EPA material is that statistical inventory reconciliation (SIR) is still one of the approved leak detection methods. I was also relieved to see a detailed description of this common-sense method to further understand that proven concepts will continue to be acceptable.

“SIR can allow the owner or operator of a UST facility to meet leak detection requirements without an extensive outlay of capital, using only the equipment that most facilities have readily at hand—a tank stick and a tank chart used for inventory control.” http://www.epa.gov/sites/production/files/201403/documents/sir.pdf

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RETAIL OPERATIONS

SIR is one of the most effective ways to safeguard against unruly EPA enforcement. There’s nothing better than to proudly present—as evidence to an EPA field agent during a crisis—a good old-fashioned set of complete and up-to-date records made from paper, especially if it’s on recycled paper. Meticulous but fraudulent reports are extremely difficult to produce on demand, so the old adage “the best defense is a good offense” works very well with the EPA, or in other words: it’s actually easier to do it right. You just can’t fake reams upon reams of daily inventory reconciliations and investigators know this. Agents actually love to see a presentation of paper reports because it will prove that as an operator, you have been playing by the rules and without having to look too hard, prove that daily/monthly reconciliation took place.

The biggest downside of the DIY approach to SIR is that you’d better be doing it. The most reliable method for conducting SIR is to use an EPAapproved vendor to do so as a monthly service. This can be done in a cost effective, automated fashion and environmental regulators like it when they know that an approved service provider did the work. Using an EPA-approved service company to provide SIR reports each month along with archived automatic tank gauge (ATG) alerts and alarms will keep a regulator from saying, “Egad!” during a crisis and instead have them saying, “Excellent!” n

Brian Reynolds

FMNMagazine

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Brian has been a petroleum marketing professional for over 40 years. He began his career as a youth working in family owned petroleum marketing company in Cisco, Texas. Reynolds was a pioneer in the field of high volume supermarket fueling. The business model invented has been one of the most copied in high volume supermarket petroleum retailing for the past 20 years. He is currently a major account representative at Simmons Corporation for continuous fuel monitoring, regulatory environmental compliance and automatic tank gauges.

â&#x20AC;&#x153;The end of 2015 marks the completion of the fifth full year of plug-in electric vehicle (PEV) sales to key markets for major automakers. The market for electric vehicles has changed significantly over this time period, but the expected changes during the next five years will be even more impactful to the global automotive and energy industries.â&#x20AC;? Source: Motor Gasoline Consumption Expected To Remain Below 2007 Peak Despite Increase In Travel. Michael Morris, February 23, 2016.

Bottom Line: Navigant notes that this projection is largely based upon government regulations and incentives, combined with improvements in technology that increase range, reduce cost and decrease charging times. Should the government supports weaken, will the technological improvements be enough to still provide a viable market?

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by Vlad Collak

THE RISE OF THE MACHINES AND THE FOURTH INDUSTRIAL REVOLUTION Hollywood has been predicting the

rise of the machines for a long time. You may have seen movies like The Matrix or the The Terminator where machines get intelligent, somehow decide to wage war on humans and we all become nearly extinct. While this doomsday scenario is only science fiction, in the recent years some of the most prominent business leaders and technologists, including Elon Musk, have expressed deep concerns about artificial intelligence (AI). Perhaps the reasons for those concerns are that AI has gotten dramatically smarter over the last couple of decades.

It was previously unthinkable that a computer could win against a world champion of Go (an ancient Chinese game), yet that’s exactly what occurred recently. What is even more remarkable is that the computer (aka AlphaGo) was not really programed to play the game. Instead, it essentially learned to play using its neural network basically mimicking the way humans learn. Like humans, AlphaGo can also constantly improve without being told how to do that. It’s no doubt that AI beating humans in games is quite remarkable. However, can this technology deliver greater benefits to society? Also, where could it lead us—other than a total and complete annihilation of the human race, of course?

BUSINESS OPERATIONS Before I fully explore that, let me quickly summarize where we are today. In the past few decades we essentially digitized what was previously a very analog world. Before, just about everything that existed on a piece of paper can now be found in a digital world. We are all connected through a global network. We have devices in our pockets that enable us to effortlessly communicate with people across the globe. Moreover, we began connecting not just people, but also ordinary physical objects. Soon, every physical object from our cars to homes, household appliances, clothes and even our eye contacts will be online and communicating with us—and each other. This will represent an explosion in the amount of data that will be created. In fact, some predictions are that this digital universe will double in size every year and reach close to 44 trillion gigabytes by 2020. All of this data will need to be stored, and in many cases, analyzed. The big opportunity is that we can uncover hidden patterns, correlations and trends that were previously hidden in plain sight. With this “Big Data” we will be able to better understand our customers, employees and ourselves. While we have certainly been able to do some of this before, the vastness of data that is now being generated and our technological sophistication for analyzing it are unprecedented. In the past (especially in the corporate world), data analysis typically meant looking at some sort of report, decision support system or a spreadsheet and having to figure out patterns manually.

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Soon, every physical object from our cars to homes, household appliances, clothes and even our eye contacts will be online and communicating with us—and each other. This will represent an explosion in the amount of data that will be created.

Today, many companies use Big Data analytics to uncover previously difficult to find patterns. Through the use of data mining we can look for patterns and establish relationships between things and events. For instance, using association algorithms, we can examine if one event is related to another event. We can also classify and group objects or events and by leveraging predictive analytics, we can even forecast the probability of future occurrence of some events. If you have ever Googled an image of a dog, you have experienced this kind of data mining yourself. Google does not manually tag each image—that would take too long. Instead, it uses a form of data mining that allows its search engine to learn the difference between a dog and something else and classify it as such. Most classification algorithms like this employ a form of supervised machine learning. This is where data scientists first train the system by showing it pictures of something and teaching it what that something is. When new pictures are analyzed, the algorithm automatically spots patterns and classifies images by itself. Supervised machine learning can be applied to variety of problems and its algorithms can analyze different types of data. Many companies leverage these techniques to examine their server logs for security breaches or financial transactions for fraud. It used to be that organizations needed to employ statisticians to do this sort of work, but that is no longer the case. The likes of IBM, Google, Microsoft and Amazon have opened up many of their internal machine learning technologies to the public via their respective cloud offerings. There are also many open source tools that IT departments can leverage including Hadoop, Apache Spark and others. FMNMagazine

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While supervised machine learning can be very useful, it’s limited in the amount of “intelligence” it has. To replicate human intelligence, scientists think they need to copy the human brain itself. That technique leverages neural networks which somewhat resemble the synapses in the brain. What’s known as deep learning is an unsupervised form of machine learning that can recognize patterns in data and deduce relationships without having to be programmed with a specific algorithm. Deep learning systems can, for instance, read the entire Wikipedia and learn that Texas and California are states, not cities, all without having to be taught.3 Deep learning algorithms can now win against the masters of Go. As one might imagine, benefits behind Big Data analytics, including supervised and unsupervised machine learning, could be enormous. By analyzing data, companies could better understand their customers, for example. This could lead to better marketing, better customer service and increased operational efficiency. Big Data can answer questions like: “Are customers happy with our services?” “What products or services are they most likely to buy?” “What is the best way to communicate with them?” or “What is the optimal price of my product?” Those questions could not only be answered, but answered at scale. Navistar, a leading commercial vehicle manufacturer, currently monitors their trucks and buses for engine health, fuel consumption and overall performance. It analyzes 20 million records per day and

BUSINESS OPERATIONS leverages the insight to better understand and predict which vehicles may break down and will need maintenance. According to Navistar, the company’s repair and maintenance costs have dropped 30% for the average customer because of the way the company analyzes its data and resolves issues in advance.1 Another company that leverages machine learning is Starwood Hotels. Specifically, they are able to price their hotel rooms according to demand, much like what airlines have been doing for ages. Their system is able to “decide” when to send promotional offers, raise or lower prices, or how long to hold prices at a given rate. Because unused hotel rooms represent missed revenue opportunities, Starwood uses Big Data analytics to essentially determine price and other conditions that can lead to highest occupancy rates.2 At the beginning of the article I posed a question about where I think these new technological advances such as Artificial Intelligence and Big Data analytics may lead us. I believe they will culminate into what may be called a Fourth Industrial Revolution. The first industrial revolution was mechanical. We learned how to create a steam engine to power our tools and machines instead of using human or animal muscles. The second industrial revolution created mass production. Factories and assembly lines were able to produce massive amounts of products, enabling us to manufacture inexpensive cars and everyday objects. The third industrial revolution was the computer age. We digitized everything. Instead of using pen

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The Rise of the Machines and the Fourth Industrial Revolution

The Fourth Industrial Revolution, however, will replace humans as the thinking machines. They will significantly aid in decision-making processes in most cases, or in some cases, will think for us.

and paper, our communication and automation needs were aided by computers. We still had to think, but applications like calculators, spreadsheets and supply chain management tools just made it easier. The Fourth Industrial Revolution, however, will replace humans as the thinking machines. They will significantly aid in decision-making processes in most cases, or in some cases, will think for us. We will not need to drive because self-driving cars will do that for us. We will not need to do mundane tasks like scheduling meetings because virtual assistants will handle that, too. We will not need to learn foreign languages to communicate with each other because natural language translators will seamlessly do that as well. Ordering a cab, booking a flight, buying groceries or doing taxes? Machines will handle all of that. We have some of this today, but it’s not yet seamless. In the future it will be so seamless, so ever-present and natural that it will simply blend into our regular lives like electricity does today. While it all sounds great, we also need to recognize that revolutions tend to be disruptive. With each industrial revolution there were displaced workers and bankrupt businesses. Ultimately, the revolution led to higher productivity, but while the transition was in progress, it was certainly painful for some. Think about what happened to horse-drawn carriages when automobiles entered mass production. It bankrupted many businesses and put many drivers out of work. For those revolutions, displaced workers were manual laborers. In the Fourth Industrial Revolution there will probably be very few jobs intelligent machines could not replace, be it drivers, waiters or even computer programmers. However, as with all previous technological and economic shifts, I have no doubt that the next shift will ultimately be better for society as a whole. The key is not to fear it, but to embrace it wholeheartedly. FMNMagazine

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This change may not happen today. It may not happen tomorrow or in the next 10 years, but it is inevitable. In the meantime, businesses should embrace technologies that are available today—technologies that can improve products and services to ultimately make customers’ lives better. Start taking a look at Big Data now and see if you can leverage it to improve your business today. This change may not happen today. It may not happen tomorrow or in the next 10 years, but it is inevitable. In the meantime, businesses should embrace technologies that are available today—technologies that can improve products and services to ultimately make customers’ lives better. Start taking a look at Big Data now and see if you can leverage it to improve your business today. n References 1. http://blogs.wsj.com/cio/2016/01/06/truck-makernavistar-says-open-data-expands-market-for-analyticsservice/ 2. http://blogs.wsj.com/cio/2015/02/10/starwoodhotels-using-big-data-to-boost-revenue/ 3. http://www.computerworld.com/article/2690856/bigdata/8-big-trends-in-big-data-analytics.html

Vladimir Collak Vladi currently serves as president and CEO of Ignite Media. Ignite builds mobile and web solutions primarily for the Oil & Gas industry that includes clients such as Mansfield Oil, Enbridge, Total Safety, Universal Plant Services and others. Prior to Ignite, he served at FuelQuest as manager of research and development and at Xerox Connect as principal consultant providing technology solutions to clients including Continental Airlines and Equifax. Vladimir holds a Bachelor of Science degree in Information Technology. He also holds an MBA degree from the University of Texas at Tyler. He can be found on his blog at www.collak.net and at vlad@collak.net.

by Corey Henriksen

Don’t Leave Hundreds of Thousands of Dollars on the Table Because of Complacency When your lender says he is giving you the best deal he can on your financing, he can always do better— and will—with sufficient motivation.

Here is what to do ... Supply the motivation Competition is good. Let your lender know that you are going out to the market. Just because you received what you think is a good rate from your current lender, this does not mean that the market is not better than you perceive. You could get an even better rate from other lenders or from your current lender. This is an unprecedented time for financing for our industry. Both short-term and long-term rates are historically low. And, interest rate swaps provide outstanding pricing for longterm fixed-rate in a rising interest rate environment, as well as no prepayment penalties, and the possibility of cash back should you have to terminate the loan early and break the swap. My perspective is that of an attorney and an adviser representing solely petroleum wholesalers and convenience store retailers in securing financing. I help petroleum industry borrowers increase working capital and accounts receivable/inventory lines of credit and obtain acquisition, construction and refinance funding, as well as work out loans that were either securitized in pools or held in portfolio. I am not an economist contemplating “what if’s” or future probabilities; my focus is solely on getting the deal closed at the best possible rates and terms for the petroleum industry borrowers I represent. FMNMagazine

Negotiate hard You gain no benefit by leaving money on the table. As a general statement, a lender credit committee will look at a number of indices in underwriting the loan. As long as you meet the minimum credit committee requirements and pay on time, you are perceived as a good piece of business that they would like to have in their loan portfolio. While a higher yield obtained by the lender is looked upon favorably, it is generally not a determining factor for credit committee approval. The simple reason is that a defaulting credit is a defaulting credit no matter how wonderful the anticipated yield. Therefore, you gain no advantage by leaving money on the table for the lender in the way of a higher yield. In addition, spreads and terms required by credit committees are not set in stone. Lenders who are similarly situated have to compete against each other for “good business loans” and therefore set their credit committee requirements based to some extent on what market rates and terms are at the time of their review. That is why it is so important for you to go out to the market each time, even if you plan to remain with your current lender. Rates and terms change; you will need to educate your current lender so they can align themselves with the market in order to retain your business. 78

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BUSINESS OPERATIONS

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Don’t Leave Hundreds of Thousands of Dollars on the Table Because of Complacency an adviser, then choose only professionals with proven performance and base their fees on success. However, if you want to seek the financing yourself, the following four guidelines are important:

1Prepare a full loan package for the lenders that you will approach,

While a higher yield obtained by the lender is looked upon favorably, it is generally not a determining factor for credit committee approval. The simple reason is that a defaulting credit is a defaulting credit no matter how wonderful the anticipated yield.

and also for your current lender. Every loan officer has stacks of paper on his desk. Don’t assume your current loan officer has all the information that he would need to justify better rates. Anything that you can do to make the loan officer’s job easier will work to your benefit.

2 Tailor your loan package to each specific lender’s requirements. Research what each lender wants in the package and how they arrive at their required ratios.

3 Present to the right lenders. Do your homework. Find out who is funding the types of loans that you are seeking. Presenting the package to the wrong lender wastes their time and yours.

4 Present to the right decision-maker in the lender’s hierarchy.

Will negotiating hard negatively impact your current banking relationship? What about checking the marketplace? Your lender expects you to respect him “as a good lender” when, due to market conditions, he needs to reduce lines of credit or check valuations through costly re-appraisals, etc. Your lender should respect you “as a good businessman” to periodically check the marketplace to maintain market rates and terms for your business.

That way your package is not shuffled around from person to person with no decisions being made.

Conclusion

Will you strain the relationship with your current loan officer? Remember that your loan officer wants your business. As a professional, he now understands that he will have to work harder for it. In addition, it is important to note that the latest downturn has created a new normal with regard to layoffs and new hires. The odds of maintaining the same loan officer (or even the specific lender, for that matter) over an extended period of time have diminished greatly. Most likely at some point, you’ll be handed off to another loan officer who has no history of interaction with you, and left with only the foundation of your negotiated transaction to serve as the basis for the ongoing relationship.

Present the package to a number of lenders Present the package to a number of lenders, not just your current lender.

The dollar amounts at stake are very big when it comes to financing. Because of the historical lows in rates today, it is easy to become complacent with what you think is a good rate. Unfortunately, it is human nature that only when your lender knows that he has to be competitive with the marketplace, will he sharpen his pencil to your benefit.

You make your margins in pennies. Obtaining the best rates and terms requires effort, a shift in perspective and a well thought out strategy. Don’t let hundreds of thousands of dollars slip through your fingers due to complacency. n

Corey Henriksen Corey Henriksen is Managing Director of Acquisition and Refinance Capital, Inc., a firm founded for the sole purpose of obtaining numerous capital alternatives for wholesale and retail owners and operators in the petroleum industry. Corey is a member of NACS, SIGMA, CIOMA and WPMA and is a regular speaker on financing for petroleum retailers and wholesalers. Corey can be reached at 949.481.8500 or www.AcqRefCap.com.

I am a believer in surrounding yourself with competent people who are playing to their strengths. If you utilize FMNMagazine

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ADDITIVES

ROUNDUP and industrial lubricants. Afton supports global operations through regional headquarters located in Asia Pacific, EMEAI, Latin America and North America. Afton Chemical Corporation is headquartered in Richmond, Virginia. Advanced Fuel Solutions, Inc. AFS specializes in formulating proprietary performance fuel additives for all fuels, only after we have leveraged our Optimum Discovery customer review. This allows our technical team to introduce the best fuel additives suited for a successful treatment program. AFS offers support to fuel dealers, terminal operators, national and regional fleets on all aspects of fuel management, including buying principles proven to introduce a competitive edge in the marketplace. Beyond the additive chemistry, AFS has a proven track record helping fleets, fuel wholesalers fuel dealers and jobbers operate at maximum levels of customer satisfaction, efficiency and profitability. www.yourfuelsolution.com

Afton Chemical Corporation Afton Chemical Corporation uses its formulation, engineering and marketing expertise to help its customers develop and market fuels and lubricants that reduce emissions, improve fuel economy, extend equipment life, improve operator satisfaction and lower the total cost of vehicle and equipment operation. Afton develops and sells an extensive line of unique additives for gasoline and distillate fuels, driveline fluids, engine oils

www.aftonchemical.com

Biobor Fuel Additives Biobor Fuel Additives has been a worldwide leader in the treatment of diesel, jet fuel and gasoline since 1965. The company’s flagship product, Biobor JF, is a widely used and recommended biocide for diesel and jet fuel, carrying an extensive list of OEM approvals from some of the world’s largest engine manufacturers. Additionally, Biobor produces a full line of diesel conditioners, cold flow improvers, detergents, cetane improvers and lubricity additives solving a wide range of today’s fuel related issues. Fuel retailers across the country use Biobor JF in a regular maintenance program to keep storage tanks free from microbial contamination, while also offering consumer packaged products to diesel and gasoline customers. In addition, bulk treatment programs are available with summer and winter premium diesel additives to offer your customers a premium fuel with added value. www.biobor.com

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FPPF Chemical Co., Inc. FPPF Chemical Co. Inc. is a major U.S. manufacturer of fuel additives, conditioners and treatments, founded in 1975. FPPF’s original diesel fuel additive, “Fuel Power®,” remains a leading year round diesel fuel treatment in the U.S. and Canada. Over the years, as fuels have changed, FPPF’s highly skilled technical personnel have researched and developed many new products to enhance the company’s product line. These include: Lubricity Plus Fuel Power, 8+ Cetane, Killem biocide), Marine Formula, Total Power complete multifunctional additive), Polar Power cold weather diesel fuel treatment), FPPF-4000 cooling system treatment), FPPF Ethanol Gas Treatment and a complete line of aerosol products and cleaners. Technologically advanced biodiesel fuel additives now augment FPPF’s complete line of high-quality products. FPPF Chemical has distributors in all fifty states, Canada, Latin America, Europe and Australia. Virtually every truck stop in North America handles FPPF products. www.FPPF.com

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FUEL ADDITIVES ROUNDUP

Innospec Fuel Specialties Innospec is a global specialty chemicals company focused on bringing innovative new technologies to market combined with a fast and responsive service. To deliver maximum performance, modern engines need the very best fuels. Low quality fuels can compromise vehicle operations. They impact power, increase engine noise and affect fuel economy. Untreated fuels can lead to an excess of corrosion, injector fouling and harmful emissions. But Innospec’s Performance Specialties fuel additives offer a wide range of solutions to upgrade the performance of fuels. We are solely dedicated to fuel and fuel additive technology. Our team is focused on the high performance premium diesel and gasoline markets. Whether a customer is looking to open up new markets, develop new products or optimize performance of a particular type of fuel, our team has the market knowledge, technical expertise and capability to deliver customer and application specific fuel treatments. www.innospecinc.com

We help our customers succeed by providing fuel additive solutions that deliver optimal power, performance, engine and equipment life, fuel economy and reduced emissions backed by trusted industry expertise, rigorous testing processes and global supply. www.Lubrizol.com

www.schaefferoil.com/carbontreat

MidContinental Chemical Co., Inc. MidContinental Chemical Company manufactures and distributes petroleum additives that enhance the performance of fuels and lubricating oils. MCC provides comprehensive additive solutions to the petroleum industry, including refineries, pipeline operators, petroleum terminals, fuel distributors/jobbers, retail fuel marketers, c-store chains, aftermarket product packagers and lube oil and grease manufacturers. www.mcchemical.com

The Lubrizol Corporation The Lubrizol Corporation, a Berkshire Hathaway company, is a technologydriven global company that combines complex, specialty chemicals to optimize the quality, performance and value of customers’ products while reducing their environmental impact. We produce and supply technologies to customers in the global transportation, industrial and consumer markets. These technologies include lubricant additives for engine oils, driveline and other transportation-related fluids and industrial lubricants, as well as additives for gasoline and diesel fuel. Our fuel additive technologies are formulated to meet the demands of new equipment technologies and worldwide environmental legislation. We offer a full range of gasoline, diesel and residual fuel additives that improve fuel system cleanliness, prevent wear and corrosion and improve fuel combustion and flow.

performance. They are also formulated to improve fuel economy, reduce exhaust emissions and increase horsepower. Schaeffer’s CarbonTreat™ Premium Fuel Additive Line is available in summer, winter and all-season formulations, and can be used in any diesel-powered vehicle and in all types of diesel fuel, including low sulfur diesel fuel and biodiesel blends.

Schaeffer Fuel Additives Schaeffer’s Fuel Additives have a reputation for extending engine and component life, increasing fuel economy and improving overall engine efficiency and performance. In particular, Schaeffer’s CarbonTreat™ Premium Fuel Additive Line is specifically designed for high-pressure common rail systems (HPCR), and stand out when compared to other products that offer similar technology but without a complete premium package. Schaeffer’s CarbonTreat™ premium fuel additives are multifunctional ULSD-compliant diesel fuel additives that are highly effective at combating sludge and plugging issues that can impair engine FMNMagazine

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ValvTect Petroleum Products ValvTect Petroleum Products is an industry-leading supplier of high performance diesel, high performance winterized diesel, heating oil and gasoline additives to fuel distributors, truck stops, fleets, marinas, railroads, terminals and refiners nationwide. ValvTect also supplies a complete line of propane gas additives and BlueMoon filters and filtration systems to propane and gas distributors and dealers. Our registered trademarks Diesel Guard, XP+, EA (Energy Additives), BioGuard and ValvTect Marine Fuels represent not only quality fuels sold to millions of consumers but are also supported by marketing programs, in field technical expertise and the most current advanced formulas to meet the demands for the ever-changing fuels that are available. We specialize in providing solutions for you and your customers’ fuel problems at an economical cost. www.valvtect.com

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FUEL MARKETER NEWS

INDUSTRY NEWS Ascentium Capital Welcomes a New Vice President of Sales for the Petroleum Division Ascentium Capital, a leading national commercial lender, announced that Tony Zieglar has joined the company to develop their expanding petroleum finance division. Zieglar brings over 17 years of business financing expertise including nearly 10 years within the petroleum niche. As Vice President of Sales, Zieglar will be responsible for business development efforts within the petroleum division and other specialized niches. Len Baccaro, Senior Vice President of Sales at Ascentium Capital states, “Our strong growth in the petroleum market and the increasing demand for our financing programs have led us to expand our specialized sales force. We are excited to have Zieglar help drive our 2016 sales initiatives.” The company will continue to invest in this niche through industry involvement and participating at manufacturer and vendor events as well as recruiting additional tenured sales personnel. Zieglar comments, “Ascentium is one of the fastest growing providers of equipment and technology financing solutions and has a strong reputation for providing exceptional customer service. I’m extremely excited to be part of the Ascentium Capital team.”

As a direct lender, Ascentium Capital specializes in providing business financing, leasing, and loans for equipment manufacturer and distributor programs, national and regional franchisors, as well as direct to businesses nationwide. The company is backed by the strength of leading investment firms Vulcan Capital and LKCM Capital Group, LLC. n

Couche-Tard Receives Approval to Acquire Shell’s Retail Business in Denmark Alimentation Couche-Tard Inc. announced that it has received approval from the European Commission for its deal to acquire A/S Dansk Shell’s downstream retail business in Denmark, subject to divestment commitments. Completion of the acquisition is expected to occur in May 2016. It will be financed from Couche-Tard’s available cash and existing credit facilities. In March 2015, Couche-Tard announced an agreement with A/S Dansk Shell to acquire its Retail, Commercial Fuels and Aviation businesses in Denmark. Shell’s Danish Retail business comprises 315 sites, of which 225 are full-service stations, 75 are unmanned automated fuel stations and 15 are truck stops. Of the 315 sites, 140 are owned by Shell, 115 are leased from third parties and 60 are dealer-owned. FMNMagazine

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Since then, Couche-Tard has worked closely with the European Commission with the aim of obtaining approval for the transaction as compatible with Europe’s internal market and with the European Economic Area Agreement. Couche-Tard has received approval to retain 131 sites, of which 90 are owned and 41 are leased from third parties. Of these 131 sites, 74 are full-service stations, 49 are unmanned automated fuel stations and 8 are truck stops. Subsequent to this transaction, Couche-Tard’s network in Denmark would include a total of 286 company operated-stores, 153 company-owned and dealer operated and 44 dealer owned and dealer operated. Included therein are 211 unmanned automated sites. Couche-Tard has proposed to divest a mix of both its current sites and Shellbranded stations, including the Shell/7-Eleven network and Shell’s dealer-owned network. In addition, Couche-Tard has proposed to divesting A/S Dansk Shell’s commercial and aviation fuels businesses. Couche-Tard, through its whollyowned indirect Danish subsidiary Statoil Fuel & Retail A/S, has signed an agreement for the sale of the divested assets with DCC Holding A/S, a subsidiary of DCC plc. Pending the customary regulatory approvals, this transaction is expected to close during the second half of fiscal 2017. Until

INDUSTRY NEWS approval and completion of this transaction, Couche-Tard and the divested businesses will continue to operate separately. “Today is a great day for Couche-Tard in Denmark,” said Jacob Schram, CoucheTard’s Group President Europe. “The acquisition from Dansk Shell puts us in a strong position in the Danish market—a core market for Couche-Tard in Europe.” Hans-Olav Høidahl, SVP Scandinavia, Statoil Fuel & Retail said, “Shell operates an attractive network in Denmark. Combining our operations will give us the opportunity to create a winning unmanned offering and develop an unrivalled fullservice and convenience offering in Denmark.” Høidahl continues, “The divestment package allows us to concentrate on operations that are in line with our business model, extending our reach to additional, desirable areas of the market while reducing site overlap.” Plesner, Euclid Law and Oxera have acted as economic advisors to Couche-Tard for this transaction. n

FleetCor to Acquire STP, a Leading Electronic Toll Payment Company FleetCor Technologies, Inc. announced that it has signed a definitive agreement to acquire Serviços e Tecnologia de Pagamentos S.A., from a shareholder group including concessionaires CCR S.A. and Arteris S.A., Raizen Combustiveis S.A. (a joint venture between Shell and Cosan), and others, for approximately $1.05 billion USD. STP, which operates under the brand Sem Parar, is Brazil’s leading electronic toll payments company, with near universal acceptance nationally. Using RFID technology, STP-issued tags and stickers process approximately $2.5 billion USD in toll, parking, and fuel payments annually for over 4.5 million active users. STP also provides cardless fuel payments at an expanding number of Shell sites throughout Brazil. The company has approximately 2,200 employees and is headquartered in Sao Paulo, Brazil. “We have followed STP’s growth and development for many years and are excited to announce this transaction,” said Ron Clarke, Chairman and Chief Executive Officer of FleetCor Technologies, Inc. “We believe that the acquisition will result in substantial synergies as we implement our operating disciplines and consolidate with our other Brazil lines of business.” n

Scully Announces New CEO and Management Team Scully Signal Company, a fluid handling products manufacturing company, has announced the appointment of Eric Kirleis as CEO. Kirleis previously worked at Gefran Corporation, a family owned worldwide industrial sensor and controls manufacturing company in charge of their North American Division. While at Gefran, Kirleis had full profit and loss responsibilities for the division and was instrumental in numerous business and new product development initiatives. Kirleis holds an MBA from Cornell’s Johnson Graduate School of Management.

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INDUSTRY NEWS “I’m excited to be joining Scully and honored to be leading such a historic and valuable brand. I plan to engage Scully’s customer base, strengthen Scully’s role in the marketplace and position the company for significant growth,” said Kirleis. Robert G. Scully, who has served as President and CEO since 1964, will remain Chairman of the Board. “I am pleased to transition the full operational responsibilities to Eric and our new Management Team,” said Scully. “He was the unanimous choice of the Scully family and our Board of Directors. While I will continue in a strategic role in the company, I enthusiastically welcome Eric as our new leader and am confident in his abilities and a bright future for the company. In the year of its 80th Anniversary, Scully Signal Company is making a carefully considered transition to the third generation and remains committed to serving our customers and the industry well into the future.”

manufacturing programs. “I am committed to taking the Scully product offerings to an even higher level of performance in safety, quality, reliability and efficiency for our customers and look forward to contributing to the growth of the company,” she said. Robert (Bob) McGonagle has been with Scully since 2004, and has played a pivotal role in supporting customers and leading the service and sales teams. McGonagle has more than 23 years of experience in the petroleum industry, having served as a Fuels Specialist with the U.S. Air Force. He will continue in his position as Director

Robert Scully has also announced several key additions to the management team. Katrina Scully Ohl is the daughter of Robert Scully and former Director of Marketing, who recently returned to the company, has been named Executive Vice President. She brings 17 years of industry experience and related expertise in customer relations, account management, marketing and communications. She will also continue in her role as a Board Member. “I have a deep appreciation for our customers, suppliers and employees who have allowed us to play an important role in providing safe and efficient fluid handling solutions. I am committed to preserving the family legacy and revitalizing our role as the innovative industry leader.” Beth Bauman joined Scully Signal Company in 2015, and she will be responsible for operations, focusing on product development and manufacturing. Beth, an MIT MSME Graduate Engineer, came from Harvard BioScience where she led global multi-disciplinary product development teams and multi-site manufacturing, quality and logistics organizations. She has led the revitalization of the engineering department, the implementation of the new ERP System and the quality and lean

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of Sales & Service. “As we enter our 80th year serving the Petrochemical industry I look forward to working with our new CEO Eric Kirleis as we continue to provide the industry with the most innovated products on the market,” he said. Founded in 1936 by Francis P. Scully, Scully Signal Company is a third generation, family-owned manufacturing company that engineers and manufactures self-checking fluid detection and delivery systems. Scully equipment and service support is worldrenowned for enabling the reliable and safe transportation and storage of valuable liquid resources. n

INDUSTRY NEWS

Piusi USA to Launch New Fuel Monitoring System Piusi USA, a diesel exhaust fluid equipment and fuel transfer pump company, has created a management system to monitor users, vehicles, and fluid dispensing for non-commercial fuel distribution plants. The MC Box 2.0 is a management system that allows consumers to monitor up to 1,000 users, vehicles, and fluid dispensing for fuel distribution plants. The MC Box 2.0 is directly linked to Piusi’s new Self-Service 2.0 software that makes it simpler than ever to directly monitor accounts. The Self-Service 2.0 software was ultimately created to allow users to react accurately and in a timely manner. The new and improved software allows users to monitor their entire system including tanks, drivers, and vehicles all with a click of a button. The software has been completely redesigned by Piusi to enhance user experience by screening

real-time changes and updates all from the comfort of a user’s computer or tablet. Using the new Self-Service 2.0 software, devices are able to easily communicate through LAN and WiFi, transmitting all information to necessary devices. The software is equipped with OCIO 2.0 level sensors which continuously monitor each tank that are linked to the software. The software displays each tank’s current volume of products including diesel and water levels and has the ability to set alarms and notify users of anything that may be working incorrectly. OCIO 2.0 easily collects and manages identification data of each driver and vehicle linked to the software with ease and simplicity. Additionally, the software displays all details of drivers and enables users to detect and notify drivers of any irregularities they should be made aware of. One of the main goals in Piusi’s new SelfService software was to create a userfriendly experience. Because of this, it is very simple to navigate through the software, allowing users to make the most out of what the software offers. For instance, users are able to conduct

searches directly on the platform by model, delivery number, or driver. The reporting on the platform is remarkable and nothing short of user-friendly. Users are able to create customized graphs with data pulled directly from tanks, liquids, vehicles, or drivers that are managed all with the click of a button. Piusi USA, a fuel management system company, has created the MC Box 2.0 in conjunction with the Self-Service Management software to provide customers with speed and simplicity in regards to the management of their fuel monitoring. n

ExxonMobil Launches Speedpass+ Mobile Payment App with Apple Pay ExxonMobil is now the first major fuel retailer to accept mobile payment at the pump, including Apple Pay, throughout the majority of its U.S. network. The Speedpass+ mobile payment app is now available at more than 6,000 Exxonand Mobil-branded retail stations across the U.S. The app enables customers to authorize a pump for payment securely through the use of cloud-based technology. Customers have the option to select Apple Pay as a default form of payment from within the app. “ExxonMobil wants to make filling up your vehicle even more convenient and the Speedpass+ app has been designed to save you time at the pump,” said Matt Bergeron, Vice President Fuels and Lubricants Marketing at ExxonMobil, “The Speedpass+ app represents the next generation of payment options at our branded stations.” The Speedpass+ mobile payment app is available as a free download, and may also be linked to checking accounts or other major credit and debit cards, including Visa, MasterCard, American Express, Discover and ExxonMobil cards—giving customers choice in how to pay. Customers who select Apple Pay, which is secure and easy to set up, will continue to receive all of the rewards and benefits offered by their credit and debit cards.

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INDUSTRY NEWS In addition, customers can obtain receipts by email, at the pump, or both. With either option, the customer’s purchase history is recorded in the app for easy reference, which is particularly helpful for tracking business expenses. ExxonMobil plans to expand the app’s availability to more than 8,000 branded locations by mid-year. Customers can identify nearby stores enabled for mobile payment from within the app. n

7-Eleven, Inc. Retains NRC Realty & Capital Advisors to Sell 13 Convenience Store Properties In Mass. & N.H. NRC Realty & Capital Advisors, LLC announced that it has been retained again by 7-Eleven, Inc. to coordinate the sale of 13 gasoline stations and/or convenience stores. The sale includes twelve locations in Massachusetts and one in New Hampshire. In announcing the sale, Robbie Radant, 7-Eleven Vice President of Mergers and Acquisitions, said, “This package contains many high quality assets that simply do not fit 7Eleven’s current business model. All of these stores should provide good opportunities for the right buyers.” Lot sizes range from 6,000 square feet to 6.0 acres, while store sizes range from approximately 1,375 square feet to over 7,600 square feet. Nine of the sites being offered are fee-owned properties, and the remaining four are leaseholds. All sites are being sold without 7-Eleven branding. All sites that sell fuel are offered for sale with fuel supply, which would be provided by SEI Fuels, Inc., a 7-Eleven subsidiary. “This sale provides another great opportunity for those already operating in these markets as well as for others looking to enter them,” said Evan Gladstone, Executive Managing Director of NRC. n

Patriot Capital Partners with U.S. Oil To Assist Dealers in Meeting EMV Deadlines Atlanta-based Patriot Capital, a leader in innovative financing solutions for fuel jobbers and retailers, announced a strategic financing relationship with U.S. Oil, a leading fuel distributor. U.S. Oil retailers, whose brands include Shell, Sunoco, BP, ExxonMobil, Phillips 66, Marathon, Clark and CITGO—will have access to a range of dispenser and POS (point of sale) financing programs to upgrade their forecourt and in-store equipment. These programs assist C-Stores in meeting the shift to accept EMV payment at the gas pump and in-store, and also as a means of meeting consumers’ demands for better conveniences and technologies, both in-store and at the pump. FMNMagazine

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INDUSTRY NEWS “Patriot Capital’s ability to provide financing that meets the diverse needs of our dealers and their proven track record of quick financing approvals, competitive financing rates and a strong customer service orientation all contribute to making Patriot Capital a strong partner for C-Store Owners,” said Steve Quinette, V.P. Branded Fuels for U.S. Oil. “The extension of our partnership with Patriot Capital gives our dealers the ability to continue to effectively invest in their businesses.” “Expanding our financing partnership with U.S. Oil is a logic evolution of our long-standing relationship,” said Chris Santy, President, Patriot Capital, a division of State Bank and Trust. “We are flattered to be chosen as a trusted financing partner for products including dispensers, point of sale, ATGs and underground storage tanks.” Patriot Capital, a division of State Bank and Trust Company, specializes in enabling entrepreneurs to succeed by providing access to hassle free equipment financing and SBA loans in the retail and commercial fueling verticals and other manufacturing industries. Working with its customers to enable them to optimize their financing and capital structures, Patriot Capital is the leading provider of capital equipment financing and leasing to NACS (National Association of Convenience Stores), PMAA (Petroleum Marketers Association of America) and SIGMA (Society of Independent Gasoline Marketers of America) members. Member FDIC. U.S. Oil, a division of U.S. Venture, Inc., is recognized by customers and partners for its value-adding approach in the distribution, marketing, trading and operations of fuel and renewable energy products in United States and Canada. n

held retail convenience store chain with 36 locations in Massachusetts and New Hampshire, first began doing business with Pinnacle twenty years ago, in 1996 to automate the processing of paperwork in their convenience stores. Over the years the partnership has expanded beyond first-generation back office to include Point of Sale, Price Book, Customer Loyalty, and Business Intelligence. Honey Farms will soon begin deploying the browser-based Back Office and Home Office platform to further improve operational efficiencies and controls. President/CEO at Honey Farms, David Murdock commented “Pinnacle enables us to optimize processes from Point-ofSale to P&L. We’ve enjoyed a long-term, collaborative partnership with Pinnacle and the result has been a competitive advantage for us.” The software implementation of Manager Workstation (Back Office), Auditor (Home Office), and LoyalPay (self-branded Gift Card) will begin as early as second quarter this year. Ed Freels, Director of Information Systems at Honey Farms noted, “With the need for market responsiveness, Pinnacle’s exclusive focus on our industry, system flexibility, and willingness to listen has made them a good technology partner for Honey Farms.” Bob Johnson, President of The Pinnacle Corporation commented, “It’s great to have the confidence and support from the Honey Farms organization for the last twenty years. It is a privilege to be their partner not only for automation, but also for turning data into a competitive advantage, assisting in their mission to serve the people of Massachusetts and New Hampshire. We look forward to continuing our strong partnership.” n

Honey Farms’ Expands Relationship with the Pinnacle Corporation Honey Farms, Inc. is expanding its relationship with industry leading technology provider The Pinnacle Corporation by adding their Home Office, Back Office, and self-branded Gift Card software. Honey Farms, a privately

SC Fuels Implements Trinium EDI to Connect with Customers and Vendors SC Fuels, one of the largest petroleum distributors in the United States, has recently adopted EDI software from Trinium Technologies. Trinium is a leading provider of business software for fuel marketers and distributors. SC Fuels runs Trinium’s cloud-based fuel management system to manage its unbranded wholesale division. Recently the company deployed Trinium’s EDI Module to improve and streamline communication with its customers and vendors. With Trinium EDI, SC Fuels can now provide automated electronic invoices to its customers. Invoices are electronically sent to DTN, which distributes the invoices directly to the customer’s payables system. SC Fuels has ramped up EDI invoicing with dozens of customers saving the company time and money in producing and sending invoices, along with enabling a more efficient means of receiving invoices on the customer side. EDI is also being used to connect with vendors. A portion of SC Fuels’ orders is delivered by common carriers. Now within Trinium, SC Fuels can send EDI 204 transactions (motor carrier load tenders) to EDI compliant carriers, which automates the order process. The next step is to enable EDI 214’s (transportation carrier shipment status messages), in which delivery data received from the carriers is imported into the Trinium fuel system with no manual intervention. “Trinium has helped us further automate our transaction processing with our customers and vendors. EDI is enabling us to reduce transaction processing time and administrative costs,” said Mike Rohrer, General Manager of Unbranded Wholesale, at SC Fuels. n

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INDUSTRY NEWS

Pinnacle Promotes Drew Mize to President The Pinnacle Corporation, a leading supplier of automation technology to the convenience retail and petroleum industries, announced the promotion of Drew Mize to President. “It’s a pleasure to have worked with Drew at Pinnacle in all the roles he has had with the company, and wonderful to have the breadth of talent within the organization that allows us to continually provide growth opportunities to so many for their individual and collective success,” commented Pinnacle CEO, Bob Johnson. “We look forward to Drew continuing his success at Pinnacle and growing the capabilities of the company.” Mize, 44, brings 21 years of experience providing software technology solutions to the convenience retail and petroleum market. Most recently Drew served as Chief Operating Officer at Pinnacle since 2012; prior to he was VP Product Management & Marketing since 2008,

and VP Retail Solutions when he joined the company in 2005. Bob Johnson, Pinnacle’s founder and President & CEO since 1990, will continue in the role of CEO and chairman of the board. n

New Diesel Exhaust Fluid Nozzle Makes Dispensing More Economical Husky Corporation has introduced a new version of its highly successful “X” family of nozzles for safe and economical dispensing of Diesel Exhaust Fluid (DEF). The X DEF Nozzle contains all of the model’s standard functionality and features, coupled with components compatible with dispensing urea-based DEF, which can be corrosive to aluminum and other materials. The X DEF Nozzle contains 100 percent ISO-recognized DEF-compatible

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components including Stainless Steel spout, polymers and O-ring materials. The nozzle contains an automatic shut-off feature, Husky’s Streamshaper® to reduce splash back, a three-notch hold open clip lever, and a plastic handguard design. Even with those features the X DEF is lighter and less expensive than comparable DEF nozzles. “Many DEF nozzles can be quite expensive because of the materials required to handle it. But we have found a way to bridge the gap with a fully functional version of Husky’s most popular nozzle that reduces the cost to dispense DEF,” said Husky Corporation Product Engineer Roger Wiersma. The Husky X DEF nozzle is made with UL recognized components. It is offered with three-quarter NPT or BSPP thread. It is ideal for retail outlets and commercial customers including vehicle dealerships, repair shops, oil change facilities, fleetservice centers and other locations that regularly dispense DEF from bulk tanks or above ground storage systems. n

SMARTLogix is Now SkyBitz Petroleum Logistics SkyBitz®, a commercial telematics and a wholly owned subsidiary of Telular Corporation, announces that SMARTLogix, a leading provider of petroleum management, inventory and transportation logistics solutions, is now SkyBitz Petroleum Logistics. SMARTLogix, headquartered in Fort Mill, South Carolina, was acquired by SkyBitz in October of 2015. “We are excited to add SMARTLogix as the SkyBitz Petroleum Logistics platform. Through the new SkyBitz organization, SMARTLogix’ customers will immediately benefit from the joint resources of Telular, SkyBitz, and SMARTLogix to provide our customers with a much broader set of products and services,” said Henry Popplewell, President, SkyBitz. “The SmarTruck, SmartLynx, and SmarTank applications are ideal additions to SkyBitz’ growing suite of solutions that offer our customers unmatched opportunities to significantly reduce their operating costs.”

SkyBitz Petroleum Logistics offers petroleum distributors a real-time solution for processing orders, managing dispatch functions, digitally capturing delivery information, and real-time truck, driver, and product GPS tracking. Serving the petroleum logistics markets in North America and Canada, SkyBitz Petroleum Logistics customers are distributors of petroleum products (bulk fuels and lubes, used oil and packaged goods) as well as commercial and transportation fuel end users. “We are thrilled to become part of the SkyBitz business. We share their overall vision of continuous innovation of products and services that can deliver huge operating benefits to our customers. Our combined strengths and technical resources will allow us to accelerate new applications and solutions into the market,” said Rick Martin, founder and former CEO of SMARTLogix and current Senior Vice President, Business Development, Telular. n

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Valero Selects Acumera as Managed Network Provider for Secure Payments Acumera, a provider of Trusted Connections Services for convenience stores, announced the launch of its Processor Connections Service for Valero distributors and dealers. The unique new offering provides a secure connection, remote visibility, backup connectivity for processing payments, and tools to support Payment Card Industry (PCI) compliance. As a part of the service, Valero distributors and dealers gain access to Acumera’s PCI Tools and External Approved Scanning Vendor (ASV) Vulnerability Scans at no additional charge. Acumera’s Chief Security Officer Tabitha Greiner said external scans play a significant role in risk reduction for stores. “Scanning for external vulnerabilities is a critical step in identifying data security threats and preventing breaches,” said Greiner. “By providing these scans as a

INDUSTRY NEWS part of the base package for Valero’s customers, we’re changing the game for a large number of stores that don’t currently have an external scanning resource or are paying a premium for it.” According to Dirk Heinen, Acumera’s CEO, the company is working with a number of payment processors to develop applications and connectivity solutions that are more secure and affordable than the alternatives available today.

availability backup connectivity, and a proprietary Valero Processor Connections App that acts as a secure payment gateway, encrypting data from the store and sending it to the payment processor. n

New ACE Video Illustrates E15 Retail Market Potential

“The convenience store business revolves around the ability to securely and efficiently process customer payments, which is why we are excited to support Valero and committed to providing the most reliable and secure processing options for their customers,” said Heinen. “We’ve worked closely with Valero to create a cost-effective solution that will help its customers address PCI compliance and, more importantly, enhance security.”

In a new animated video geared toward retail fuel station owners, the American Coalition for Ethanol (ACE) is illustrating the market potential of E15. The two minute animation highlights the rapidly growing number of vehicles on the road today that are eligible to use E15, and is posted on the Flex Fuel Forward website, a site designed to share the experience of current E15 and flex fuel retailers with petroleum marketers considering offering new ethanol blends.

The Processor Connections Service includes Acumera’s Merchant Gateway perimeter security device, the Dual WAN Failover App, which provides high-

“The number of vehicles on the road that can use E15 is huge – whether you’re talking about cars that are warrantied for E15, or those that are approved by EPA to

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use E15,” said ACE Senior Vice President and Market Development Director Ron Lamberty. “We wanted to show that ‘math’ to station owners, and we especially wanted to show the E15 market potential compared to premium and diesel – because those are the fuels oil companies usually push when station owners consider changing or expanding their fuel slate.” “In the past few years, as oil companies have limited the fuel grades retailers can offer, and station owners change tanks over to premium or diesel, I feel like we haven’t done enough to make it clear how big the E15 market is,” said Lamberty. “We’ve told people about the E15 opportunity—probably thousands of times. Now we can show them. And if that dramatic difference doesn’t convince them to give E15 a shot, they don’t really want to know…” Watch the video at: https://www.youtube.com/watch?v=yi gbxpDvWzg&feature=youtu.be n

INDUSTRY NEWS

Enmarket Convenience Stores Select PriceAdvantage Fuel Pricing Software to Automate and Execute Faster Fuel Price Changes PriceAdvantage, a fuel price management software company and division of Skyline Products, announced that Enmarket has chosen PriceAdvantage software to automate and accelerate fuel pricing at their 61 convenience stores throughout Georgia, South Carolina, and North Carolina. Enmarket selected PriceAdvantage based on the software’s ability to allow Enmarket to: automatically execute fuel price changes based on store-specific strategies, communicate those price changes to the store’s back office systems, then push those new prices to their POS systems, pumps, and price signs – allowing the fuel retailer to execute faster, more informed price changes. “Enmarket is a market-leading independent retailer that has a reputation for selling high quality, competitively priced gasoline as well as freshly prepared foods and locally sourced food and beverage items,” shared Chip Stadjuhar, President and CEO of Skyline Products. “PriceAdvantage will enable them to maximize their fuel margins with fewer manual processes, allowing them to utilize those man-hours on store operations.”

VP/General Manager at Enmarket. “With PriceAdvantage automations, we now have the ability to make faster, strategic price changes two or three times a day using real-time data. This will allow us to better support our brand promise of competitively priced fuel, fresh choices, and friendly faces.” n

P97 to Launch Next Generation Mobile Commerce App Utilizing Microsoft Azure P97 Networks announces the version 2 release of its flagship PetroZone® mobile app on Windows 10. This new release of the PetroZone® mobile commerce app (V2) brings together Microsoft’s unifying operating system, Windows 10, and Microsoft Azure Service Bus to deliver an innovative mobile payment and digital marketing capability for the retail fuel and convenience store industry. P97’s PetroZone® mobile commerce platform is now supported across Windows 10 devices, including tablets and smartphones, to provide the broadest mobile and cloud connected experience in the industry. Donald Frieden, P97 President and CEO comments, “Today’s consumers are mobile centric – from buying coffee to boarding flights – so they want more access to data and services from the palm of their hand. With PetroZone®, consumers can now find gas, shop prices, and save money at gas stations and cstores with the convenience of their smartphone and the security of Windows 10 and Azure. That’s the power of PetroZone.”

Enmarket selected the PriceAdvantage SaaS solution to leverage the benefits of a cloud service model including the low upfront cost, ease of implementation, and the maintenance and infrastructure cost benefits. The PriceAdvantage pre-built integrations with Enmarket’s current multiple pointof-sale systems allow the chain to be upand-running quickly.

“Performance is non-negotiable for our customers, and is critical to the success of their cloud-driven businesses,” said Nicole Herskowitz, Senior Director Of Product Marketing, Microsoft Azure, Microsoft Corp. “Because of that, we’re pleased to welcome P97 to Microsoft Azure.”

“We know that consumers base purchase decisions on both the price of fuel and the quality of in-store offerings,” stated Houstoun Demere,

P97 utilizes the power of Azure as a service, and multi-factor authentication to deliver a frictionless approach to mobile payments at retail fuel sites and FMNMagazine

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convenience stores; one that is uniquely secure and scalable and designed to support the 150,000+ gas stations and convenience stores in the U.S. market today. n

REG Continues Growth with Agreement to Acquire Sanimax Biodiesel Plant Renewable Energy Group, Inc. announced that it has signed an asset purchase agreement with Sanimax Energy, LLC to acquire Sanimax’s 20 million gallon nameplate capacity biodiesel refinery located in DeForest, Wisc. Under the asset purchase agreement, REG will pay Sanimax approximately $11 million in cash and will issue 500,000 shares of REG common stock in exchange for the biorefinery and related assets. REG will also pay Sanimax up to an additional $5 million in cash over a period of up to seven years after closing based on the volume of biodiesel produced at the plant, which will be re-named REG Madison, LLC. Sanimax operates a grease processing facility at the same location, although that facility is not part of the acquisition. Closing of the transaction is subject to customary closing conditions. “With growing biomass-based diesel volumes in the U.S., REG is continuing its growth as well,” said Daniel J. Oh, REG President and CEO. “This plant will add to our network of lower-cost, lowercarbon intensity, multi-feedstock biorefineries. Having a dependable feedstock supplier co-located next door should provide an opportunity for additional cost savings and logistical advantages. We have done business with Sanimax and the Couture family for many years and look forward to a continuing prosperous relationship.” “This agreement is in line with our business plan to improve focus on our core businesses,” said Martin Couture, Sanimax’s President and CEO. “We are pleased that our biodiesel employees will have an opportunity to pursue their career with an industry leader. This is a reflection of the excellent work they

INDUSTRY NEWS have achieved over the past several years. Sanimax looks forward to continuing its excellent business relationship with REG as a shareholder and a reliable feedstock supplier.” The biorefinery is located just north of Madison, Wisconsin and began production in 2007. Using the same REG patented and proven high free fatty acid processing technology as the Company’s Seneca, IL plant, it produces biodiesel from lower cost feedstocks including yellow grease, rendered animal fats, and inedible corn oil in addition to refined vegetable oils. The facility has both truck and rail capabilities.

Upon closing of the transaction, REG will have 11 active North American biomass-based diesel refineries in seven states (Iowa (3), Illinois (2), Texas (2), Louisiana, Minnesota, Washington and Wisconsin (1 each) with a combined nameplate production capacity of 452 million gallons. n

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ZCL Composites Announces New COO and Provides Update on Pursuit of Value Enhancing Initiatives ZCL Composites Inc. announced that it has appointed Rene Aldana as Chief Operating Officer, effective January 19, 2016. “Rene is a strong and experienced operator who will help ZCL increase efficiency and advance our profitable growth,” said Ron Bachmeier, President & CEO of ZCL. “I am pleased to welcome him aboard.” Aldana has deep experience in management, strategic and tactical leadership, process automation and optimization, operations technologies, talent development, efficiency and productivity improvements, M&A integration and other areas that will benefit ZCL. He was formerly Managing Director and President of Yokogawa Canada, a Calgary-based subsidiary of Yokogawa Electric Corporation, which is active globally in the industrial automation and control (IA), test and measurement, and other businesses segments. Prior to Yokogawa, Aldana worked in successively senior positions for Paris-based Schneider Electric and Telvent, which Schneider Electric acquired in 2011. From 2010 to 2013 he was Vice President of Schneider Electric’s Oil and Gas International Division in Calgary. n

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What Does That Mean

Test Your FMN Acumen

The list below represents acronyms used in this issue of Fuel Marketer News. ACE AI API APSA AST ASTM

American Coalition for Ethanol Artificial Intelligence American Petroleum Institute Aboveground Petroleum Storage Act Aboveground Storage Tank American Society for Testing and Materials ATG Automatic Tank Gauge AVI Automatic Vehicle Identification bbl or /b Oilfield Barrel Bcf/d Billion Cubic Feet per Day (Natural Gas) BP British Petroleum CAFE Corporate Average Fuel Economy CNG Compressed Natural Gas CO2 Carbon Dioxide COP21 Paris Climate Conference December 2015 CRM Customer Relationship Management CU-ICAR Clemson University International Center for Automotive Research DIY Do It Yourself DOE Department of Energy E15 15% Ethanol, 85% Gasoline EIA Energy Information Administration/DOE EMEAI Europe, Middle East, Africa, India

EMV EPA FFV FY HID HPCR IC IT KBPD LNG LPG LTO NAAQS NACS NFC OEM OPEC PEV POS ppb

EuroPay MasterCard Visa U.S. Environmental Protection Agency Flexible-Fuel Vehicle Fiscal Year Hughes Identification Devices High-pressure Common Rail Systems Internal Combustion Information Technology Thousand Barrels per Day Liquefied Natural Gas Liquefied Petroleum Gas Light Tight Oil National Ambient Air Quality Standards National Association of Convenience Stores Near Field Communications Original Equipment Manufacturer Organization of Petroleum Exporting Countries Plug-in Electric Vehicle Point of Sale Parts per Billion

RFID RFS RINS

Radio-frequency Identification Renewable Fuel Standard Renewable Identification Number System RIT Rochester Institute of Technology Renewable Volume Obligations RVO RVP Reid Vapor Pressure SCC Stress Corrosion Cracking SIR Statistical Inventory Reconciliation SPCC Spill Prevention, Control and Countermeasure (EPA) STEO Short-Term Energy Outlook STI Steel Tank Institute STI/SPFA Steel Tank Institute/Steel Plate Fabricators Association T. rex Tyrannosaurus rex TCP/IP Transmission Control Protocol/Internet Protocol UL Underwriters Laboratory ULSD Ultra-low Sulfur Diesel UN United Nations USD United States Dollars UST Underground Storage Tank WTI West Texas Intermediate

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