Fuel Marketer News Magazine Fall 2014 by Fuels Market News

Fall Issue 2014

Your Source for News and Information

SHOW ISSUE Digital Marketing at the Dispenser

Joe Petrowski: A Way Forward for America Mobile Payments Changes in US Fuel Choice Three Big Trends Driving Change in Fuels Distribution

PUBLISHER’S NOTE

A note from Gary Bevers CEO & Group Publisher Your Source for News and Information

A Publication of Fuel Marketer News Online 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 Advertising Sales Greg Mosho 115 Tinton Falls Road Farmingdale, NJ 07727 732.610.5735 Mobile gmosho@fmnweb.com

Welcome to the Fall Issue of our Fuel Marketer News print magazine where we cover all things related to fuels. From refinery supply to terminal and bulk plant storage to transportation via pipeline, barge, rail and truck, to wholesale distribution and retail marketing, we cover topics from a high level management overview down to the operational details. If you find our expert columnists, industry news and operational features interesting and valuable, you can find much more online every day in our FMN Web Magazine and our free weekly newsletter. So, don’t wait for the next issue of our print magazine—go to our Web Magazine at www.fuelmarketernews.com to stay connected daily. Today, I am happy to announce that my former editor-in-chief at National Petroleum News, Keith Reid, has joined us as the editorial director for our Online Web Magazine, Email Newsletter, Vendor Marketplace and the Print Magazine that you are reading. In 1999 Keith began working at NPN magazine, where he worked his way up from staff editor to a managing editor to editor-in-chief in 2007. His starting year, he won a prestigious award for his feature on MTBE in a competition with editors from 60 magazines. At NPN, from among hundreds of articles, he notably covered the rise of hypermarket competitors, the move of the Majors out of retail, zone pricing, numerous areas of equipment and technology, legislation and regulation. Keith is a passionate editor, but I would say that to the core, he is a writer. During his tenure at NPN one of his articles on price modeling made it into the official Congressional record. Previously, Keith handled communications for an international trade association where he gained experience with many of the same federal agencies he covers today. While there, he became grounded on how the legislative sausage is made. He also has noted that as the national media spokesman for that industry, his interactions with the national media—including “hit pieces” from The New York Times and Time magazine—showed him what a journalist should not be. “We all have biases,” he told me. “I try to be open about mine. I won’t hide my biases or package the news to avoid any realities that go against my views—big picture or small picture. The audience deserves to be treated like adults who can think for themselves if presented with all sides of the story.” Most recently, he has served as the editor of Fuel Oil News. Prior to that, he wrote for Tobacco Retailer, then took a year away from the industry to edit an international magazine covering the imaging industry before I dragged him back to the world of fuels.

Mailing Address 12320 Barker Cypress Suite 600-203 Cypress, TX 77429

Last, but certainly not least, Keith served in the Army Reserve. In his words, “I served seven years as a cavalry scout NCO instructor at the end of the Cold War. While just a small cog in the big green machine, that was a highlight in my life,” he told me.

www.FuelMarketerNews.com

So please welcome Keith and feel free to reach out to him at kreid@fmnweb.com with comments, questions and suggestions for topics you would like to see covered in the future. Keith and I both believe this is your industry and we’re committed to serving you and providing useful news and information to help you grow and manage your fuel businesses.

TABLE OF CONTENTS 3

Publishers Note

TERMINALS & BULK PLANTS

FUELS & SUPPLY 6

12 A Way Forward for America by Joe Petrowski

16 Three Big Trends Driving Change in Fuels Distribution and Marketing by Doug Haugh

POLICY BRIEF: Killing Coal to Save… What Exactly?

POLICY BRIEF: Fed Up at the Pump Fights Back

A Way Forward for America by Joe Petrowski

Three Big Trends Driving Change in Fuels Distribution and Marketing by Doug Haugh

Winter’s Gasoline Margin Squeeze by Alan Levine

Changes in US Fuel Choice: Does A Fuel Marketer Have a Choice? by Dr. Nancy Yamaguchi

Are Hydrogen Fuel Cell Vehicles Dead On Arrival? by Dr. Barry Stevens

Upcoming OSHA Regulations by Mark Stromme

BUSINESS OPERATIONS 78

Growth in Use of Transactional Risk Insurance by Greg Cushard and Charles Sternberg

Mergers & Acquisitions—Proper Planning Prevents Poor Performance by Fred Whitaker

Financing When You Want It for What You Need and at the Right Rates by Corey Henriksen

Special Supplement

RETAIL OPERATIONS

24 Changes in US Fuel Choice: Does A Fuel Marketer Have a Choice? by Dr. Nancy Yamaguchi

Loyalty Car Wash Programs Create Longevity, Revenue Growth by David Dougherty

Digital Marketing at the Dispenser by Maura Keller

Get Smart about Fleet Card Acceptance in Your Retail Locations by Shane Dyer

38 Loyalty Car Wash Programs Create Longevity, Revenue Growth by David Dougherty

84 Mergers & Acquisitions Proper Planning Prevents Poor Performance by Fred Whitaker

Mobile Payments: Growing Excitement and Establishing Infrastructure by Vladimir Collak Stop Letting Your Back Office Application Run Your Business by Joe Kratochvil

WHOLESALE & FLEET OPERATIONS 60

The Growing DEF Market by Fabricio Cardoso

Cold Filter Plugging Point: Let the Buyer Beware by Everett Osgood

The Silent Thief by Brian Reynolds

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NACS/PEI SPECIAL SUPPLEMENT

NACS/PEI Intro and Table of Contents

100 NACS Show/PEI Schedule of Events at a Glance 102 PEI Rises from the Ashes, with Barely an Interruption FMN Interview with Bob Renkes 104 Fuels Institute: What’s Going On? by John Eichberger 108 Connecting with Conexxus by Maura Keller 114 PRODUCT ROUNDUP 126 INDUSTRY NEWS 142 ADVERTISER’S INDEX

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FUELS & SUPPLY POLICY BRIEF

Killing Coal

to Save...What Exactly? T

he Obama Administration’s most recent announcement (June 2, 2014) of aggressive and unilateral executive action on energy policy— through the EPA—primarily impacts coal and electricity generation. Natural gas should also be impacted indirectly in a positive manner (except for the electrical costs relative to compression) from a demand standpoint as gas replaces coal. Although FMN’s readership is focused on liquid fuels, this latest initiative is instructional on general trends in energy policy under the current administration and its willingness to bypass the legislative branch as needed. Of course, convenience store operators will be directly impacted by any increase in the cost of electricity.

Cap and Trade was, and remains, a non-starter legislatively, and there is virtually no grass roots support of any scale to otherwise push a climate change agenda to the forefront. Nor does this make a great deal of political sense in an election year as it alienates voters in key coal states, and traditionally Democratsupporting unions. However, here we are. As many pundits have stated, this is apparently a personal ideological/legacy issue for the president.

Here are some of the viewpoints being presented by various impacted parties: Gist of the EPA Proposed Rule Nationwide, by 2030, this rule would achieve CO2 emission reductions from the power sector of approximately 30 percent from CO2 emission levels in 2005. This goal is achievable because innovations in the production, distribution and use of electricity are already making the power sector more efficient and sustainable while maintaining an affordable, reliable and diverse energy mix. This proposed rule would reinforce and continue this progress. The EPA projects that, in 2030, the significant reductions in the harmful carbon pollution and in other air pollution, to which this rule would lead, would result in net climate and health benefits of $48 billion to $82 billion. At the same time, coal and natural gas would remain the two leading sources of electricity generation in the US, with each providing more than 30 percent of the projected generation.

American Petroleum Institute API President and CEO Jack Gerard raised concerns over EPA’s newly-proposed regulations on greenhouse gases from existing power plants in a statement today: “This proposal is not consistent with the administration’s own ‘all of the above’ energy strategy. The uncertainty created will have a chilling effect on energy investment that could cost jobs, raise electricity prices and make energy less reliable. The energy sector is already one of the most heavily regulated industries in the United States. Our air is getting cleaner under existing regulations, and carbon emissions are down due to technological advancements developed by the private sector. We can continue to make environmental progress without damaging the economy.”

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FUELS & SUPPLY POLICY BRIEF

Killing Coal ... to Save What Exactly?

American Public Power Association The American

oversaw development of the NRDC proposal. “This is a winning step toward a cleaner, cheaper and healthier 21st Century energy future. It’s time to get moving.”

Public Power Association (Public Power) believes climate change should be addressed but Congress, not EPA, should determine the best framework outside of the Clean Air Act to do so while ensuring affordable, reliable electricity from all fuel sources, including coal and natural gas. The Clean Air Act is ill-suited to regulate CO2 emissions. If the EPA moves forward with regulations that call for too much change too fast, we will likely see unnecessary coal-plant retirements without long-term plans for viable, cost-effective alternatives; higher electricity prices; and potential shortage of electricity supply.

NRDC’s approach, introduced in December 2012, is largely driven by energy efficiency investments and grants states the flexibility to meet the standards in ways that best meet their individual needs, such as accounting for their differing energy mixes.

What’s interesting about these developments is that if climate change is actually linked in some substantial way to human activity, and not just the current cycle in a pattern of solar-influenced warming and cooling as old as the Earth itself, the actual impact of these unilateral American initiatives on climate change is virtually nil.

American Coal Council The US has already invested about $118 billion to improve air quality, reducing conventional emissions of CO2, NOx, and particulate matter by approximately 89% since 1970. Technology development was largely in step with these reductions. In more recent years, US electric utilities have faced a huge number of environmental regulations on all fronts—air, water, and waste—which have contributed to widespread shuttering of existing coal generating capacity. According to the American Coalition for Clean Coal Electricity, EPA’s rules have contributed to the closure of over 300 existing coal units totaling more than 50,000 megawatts of electric generating capacity.

And, if the NRDC’s glowing positive jobs and economic estimates are wrong, and such a centrally dictated, massive disruption in domestic energy production turns out to be harmful then it hurts American competitiveness and individual Americans at the expense of international competitors that lack similar environmental impulses. See below:

Additionally, the regulatory uncertainty caused by the April 2012 precursor to EPA’s currently-proposed GHG (Greenhouse Gas) rule had the effect of stopping development plans for most of the approximately 15 plants that had received a PSD (Prevention of Significant Deterioration) permit but not begun construction, in spite of the exemption EPA included in that proposed rule. When EPA did not propose that rule within a year and instead re-proposed it in 2013 without any exemption for transitional sources, the impact was fully manifested.

The New York Times (With China and India Ravenous for Energy, Coal’s Future Seems Assured – Nov. 12, 2012)— Global demand for coal is expected to grow to 8.9 billion tons by 2016 from 7.9 billion tons this year, with the bulk of new demand—about 700 million tons—coming from China, according to a Peabody Energy study. China is expected to add 240 gigawatts, the equivalent of adding about 160 new coal-fired plants to the 620 operating now, within four years. During that period, India will add an additional 70 gigawatts through more than 46 plants.

In addition to the ongoing impacts of regulation already promulgated by EPA, proceeding down a regulatory path which effectively prohibits the development of new coal generation is extreme and ill-advised. Such a path unnecessarily risks US energy reliability, affordability, security and diversity for virtually no identified benefits.

“If you poke your head outside of the US, coal-fired plants are being built left and right,” said William L. Burns, an energy analyst with Johnson Rice in New Orleans. “Coal is still the cheapest fuel source.”

National Resources Defense Council The first-ever limits on carbon pollution from power plants can save American households and business customers $37.4 billion on their electric bills in 2020 while creating more than 274,000 jobs, a Natural Resources Defense Council analysis shows.

Besides strong demand for thermal coal, which is burned in power plants, use of metallurgical coal or coking coal, used in blast furnaces, is also expected to more than double in China, to about 1.7 billion metric tons by 2016, as the country’s steel mills churn out more steel for automobiles, skyscrapers and export goods, the Peabody study says. n

“Most Americans support curbing dangerous carbon pollution from power plants because it’s the right thing to do. Cleaning up dirty power plants can be a bonanza for public health and a boon for energy efficiency jobs—and save Americans on their electric bills,” said Daniel Lashof, chief operating officer at NextGen Climate America, and senior fellow at NRDC who

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The full FMN editorial can be found at: http://fuelmarketernews.com/?p=6912

FUELS & SUPPLY POLICY BRIEF

Fed Up at the Pump

Fights Back O

ne story that Fuel Marketer News has been covering in recent months is the efforts of the California Independent Oil Marketers Association (CIOMA) to resist the damage about to be inflicted on its members, the state economy and its residents with the ill-considered AB 32 cap-and-trade regulation. The California state law, which includes motor fuels, is expected to add as much as 20 cents to the cost of a gallon of gasoline when it goes into effect on January 1, 2015. This estimate has been recently validated by the state’s Legislative Analyst’s Office that confirmed gas prices will likely increase by 13 to 20 cents per gallon. While California has a strong environmentalist populism, research has consistently shown that support for “being green” tends to taper off when it pulls excessive green from consumers’ wallets. As the association notes, Californians already pay the highest gas prices in the country including some 71 cents per gallon in taxes. A cynic might note that the new initiative, while claiming to be environmental in nature also stands to redistribute a fair amount of raw revenue for state coffers. “Our members are having conversations with California consumers everyday who are surprised to hear that a new fee will increase the cost of a tank of gas come New Year’s Day 2015,” said Jay McKeeman, vice president of government relations and communications for CIOMA,

in a press release. “But they are shocked when we tell them it’s because of a state law, not the gas industry, and the money generated will not go toward greenhouse gas emissions programs and instead into the state’s general fund.” CIOMA has taken a strong role in the Fed Up at the Pump initiative. The campaign was launched on May 23 as a coalition of business owners and employees, consumers and advocates are working to educate and inform California motorists about the coming gasoline price hike. The ultimate goal is to delay or reverse the fuels component of the law.

problems for people who have no money to begin with.” Even higher energy prices will certainly not help the business environment in a state that already sees the flight of companies to other states such as Texas because of over regulation and the rising cost of doing business. Unfortunately, some business sectors simply can’t vote with the moving truck.

While the average Hollywood celebrity or Silicon Valley software tycoon might have no issue with rising gas prices, that is not the case for the average California resident, and most especially those not leading a gilded lifestyle.

“The ag industry in Kern County is getting hit on all sides—a serious lack of water for crops, the lingering recession and now this,” said Beatris Sanders, executive director of the Kern County Farm Bureau, who spoke at the previously referenced Fed Up at the Pump event. “This gas tax is another burden that is making it harder for the agricultural industry to remain sustainable and viable in Kern County.”

“The poor and low-income people we help are barely able to purchase food and clothing, let alone pay more for gas,” Chaplain Loron Hodge, executive director of the Hope Center, a non-profit organization assisting low-income families in Kern County, said during a Fed Up at the Pump event. “We’ve already seen problems with people who don’t have enough money to buy the gas they need to drive here and pick up food and clothing we are giving away for free. An increase in gas prices causes the most

While Fed Up at the Pump has done an excellent job educating Californians about the ramifications of AB 32, the state politicians do not seem to be paying attention. In the most recent developments, Senate pro Tem Darrell Steinberg wrote to Assembly Member Henry Perea denying his bill, AB 69, a legislative hearing. AB 69 would provide for a three-year delay to California Air Resources Board’s (CARB) fuels component within the cap and trade program. n

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FUELS & SUPPLY

A Way Forward for America by Joe Petrowski

eal leaders look forward not backward, and whether Iraq turmoil today is the Republicans’ fault for invading and toppling a secular Sunni leader or the current administration’s squandering of the achievement is immaterial. What do we do now? Boots on the ground or the false hope of “costless” air power are not the solutions.

The 9/11 terrorists were Sunni, and Iran’s record on terrorism is well established. The Mideast is a tumor and the least invasive way to kill a tumor is to cut off the blood supply. Oil revenue is that blood. Oil prices would be much higher today if the United States had not dropped its consumption of energy to 97 quads while domestic production, primarily from shale, has increased to 82 quads (a quad is a quadrillion BTUs and a barrel of oil contains 5.8 million BTUs). We will truly be independent when the current ratio of 85% crosses to over 100%. And with the scheduled closure of coal plants (19 quads) and nuclear’s future (9 quads) uncertain, our dependence may get worse and not better in the interim. What should our leadership do?

We have spent too much treasure and blood, and becoming the “Shia Air Force” and advancing Iran’s interest is not in the US interest. This 3,000-year-old civil war is not subject to coalition building or a charm offensive. The fight today is not about the rightful successor to Mohammad, but about who controls approximately $500 billion of oil revenue to wage jihad and build the caliphate. Either a Shia or Sunni caliphate is bad for America. FMNMagazine

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1 Continue drilling for natural gas— our 28 quads can be doubled in next five years.

Our stated national goal should be to become a net energy exporter where mischief and black swan events actually would help the United States and the dollar relative to the rest of the world, and drive the price of petroleum under $75/barrel, starving whatever beast survives the Mideast insanity. The lower energy prices from enacting the above would: • Stimulate our economy • Hurt Putin’s Russia

• Drain the Mideast swamp

2 Renew the investment tax credit in solar (.5 quads can be 5 quads in five years as panel and installation costs are falling).

3 Some 1.5 quads in wind can easily triple in next five years with investment in the smart grid, which will have the added benefit of saving 10 quads in power transmission.

4 Stop the attack on ethanol. It is currently $1 gallon cheaper than gasoline and supplies 10 quads, and with some legislation on tank and engine liability, we can easily add 5 quads of energy.

• Create jobs and new industries

• Help diffuse the next powder keg (China’s covetous desire in East Asia for the shale and oil fields off of Taiwan, Japan and Vietnam) We can support Jordan, Israel and the Kurds while protecting Americans. We do not need military action, but rather leadership and forward-looking strategic thinking. You cannot reason with evil; it must be destroyed. I am sure there will be some on both sides of the aisle that will find fault with some of the above, but maybe Senator Kerry can come home and bridge the gap between Democrats and Republicans before we try and settle a 3,000 year old blood feud between irrational evil doers.

We do not have a shortage of energy, just leadership, courage and a plan. n

6 Encourage small CHP (combined heat and power projects) that will have an ancillary benefit of eliminating power line loss and securing our energy supplies from catastrophic events whether man made (cyber-attacks, terrorism) or nature (hurricanes, tornadoes, floods, solar flare).

7 Incent the new hydrogen fuel cell technology relying on water and natural gas to produce hydrogen fuel that is cheap, clean and efficient.

Invest in pipelines and replace old cast iron natural gas pipes where we lose more methane than in fracking.

Joe Petrowski Petrowski 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.

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Total US energy production reached 81.7 quadrillion British thermal units (quads) in 2013, enough to satisfy 84% of total US energy demand, which totaled 97.5 quads. Natural gas was the largest domestically produced energy resource for the third year in a row and, together with the other fossil fuels (coal, crude oil, and hydrocarbon gas liquids), accounted for more than three quarters of US energy production. In total, the United States consumed 97.5 quads of energy, 82% of which was fossil fuels. Renewable and nuclear energy made up 10% and 8%, respectively, of US energy consumption. Source: EIA/ Mary Joyce, Ryan Repice

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FUELS & SUPPLY

Three Big Trends Driving Change in Fuels Distribution and Marketing by Doug Haugh

decline in demand

increasing specialization

exploding production

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one

Automotive Light Duty Fuel Demand

First, the biggest trend impacting the US fuels industry at every level is the long-term decline in gasoline demand. Gasoline demand is expected to drop 30 billion gallons—yes, billion. With the average fuel marketer being around 30 million gallons a year, we are looking at the potential demise of 1,000 distributors. The industry, from refining through distribution and on down to the street at retail, has been structured to serve a market that has grown around 1% a year for many decades. A reversal of the gasoline market to one of shrinking demand will remake the entire fuels industry.

Gasoline

Everything Else

Refiners must now count on exporting their way to prosperity. Distributors will consolidate to survive and those survivors must continue to lower costs to grow profitably. Fuel retailing will evolve to where gasoline is increasingly just an important category for many different retail formats, but will cease to be a product that is a reason for a store to exist on its own. We continue to see grocery stores, dollar stores and big box retailers add gasoline as a product line, while the most successful convenience stores are hardly conventional with many having a bigger food business than they do fuel—at least

Source: EIA Energy Outlook Release 2014

from a gross profit perspective. As fuel economy doubles over the next decade or so, both of these product-line views on retailing gasoline will continue to become the norm rather than the exception.

two

U.S. Petroleum Distributors

A second significant trend is the increasing specialization of petroleum marketing companies. When I entered the industry 20 years ago there were nearly 12,000 distributors. Today, there are by most counts around 4,000 left. So consolidation has been a theme in the downstream industry for many years. If we think about it in another way, approximately one distributor per day has been acquired or absorbed by another for the past 15 years. But consolidation today is different than the traditional largely local mergers we have become accustomed to.

In the past few years we have seen the significant growth of petroleum distribution and marketing companies that are either largely or entirely focused on one product line. Companies like Reladyne and PetroChoice have brought significant amounts of private equity into the industry to first consolidate lubricant businesses, and then to invest in growing those lubricant distribution companies into more advanced service providers to industrial, automotive and fleet customers. Similarly we have large retail companies becoming public MLPs (Master Limited Partnership) and then many other retail-focused distributors being acquired by these public companies that have access to large amounts of capital and tax advantages. Mansfield, where I have the pleasure of working, has been focused on consolidating commercial fuels companies while working with firms concentrated on both lubricants and retail fuels marketing. Along similar lines Guttman recently divested their long-time lubricants business to concentrate more on their core fuels business, and TAC Energy sold off their terminals, FMNMagazine

Source: Fuels News

becoming more focused on fuels marketing. Lube-Tech, who worked with Mansfield in Minnesota to acquire Yocum Oil’s lubricant business while selling their fuels business to Mansfield, is another example of specialization at work. It also shows how this trend impacts fuels marketing even when a firm is focused on lubricants. This specialization trend is intimately related to the demand trend. With demand for the largest product category—gasoline— declining, every other product category is directly impacted. Historically, many of the most successful distributors were retail marketers first and they supplied lubricants, diesel and maybe propane because they were there and when their primary product was growing, they could afford to invest in diverse product lines. Now, for many, it is focus or die, and as lubes divisions or commercial fuels businesses are sold off, they become the raw material for other firms to specialize and grow. 17

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FUELS & SUPPLY

Three Big Trends Driving Change in Fuels Distribution and Marketing

markets close by, geographical specialization is much further along. In the Rockies, where you are maybe 300 or more miles to the next closest market of any size, being able to offer a wide selection of products to a smaller population seems to be keeping the traditional marketer who does a little bit of everything stableto-growing for now.

Will the generalist who still provides lubricants, commercial fuel, branded retail fuels marketing, propane and even chemicals or other related product lines survive or thrive in a world of larger, more specialized competitors? The answer so far seems somewhat geographic and demographic. In the Eastern United States, where there is sufficient population density and many

three

U.S. Production of Crude Oil

(Thousand Barrels per Day)

The last big trend driving change in fuels marketing and distribution is newer than the other two, less understood and potentially of even bigger impact overall. That is the trend of exploding US production of crude oil and natural gas. Why would this impact the downstream? Haven’t oil companies been splitting off upstream from downstream like both ConocoPhillips and Marathon’s recent splits? Yes. So far the trend upstream has been arm’s length to downstream distribution and marketing. But can such a fundamental change in the primary supply of our key commodity remain an arm’s length phenomenon for long? I, for one, don’t think so.

Source: EIA

Will we see new large producers like Continental Resources who cannot export crude and are “giving up” big discounts and record crack spreads to downstream refiners, accept being disadvantaged and disconnected from direct demand and stand pat? What about existing refiners that are faced with declining demand but still growing capacity? Will they be confident enough in export growth to continue being comfortable, being largely disconnected from end-use customers? We simply do not know yet how these upstream and refining changes will impact those of us distributing and marketing fuels. I believe we can be sure that changes of that magnitude just upstream of us will be felt, and likely sooner than later. With the pace at which production is growing and refining is expanding, change is surely coming. n

Did You Know

Large majorities of registered voters, both Republican and Democrat,

support producing more oil and natural gas in the United States and say

they would be more likely to vote for candidates who support

development, according to a national American Petroleum Institute poll.

Some 77% support increased production of America’s oil and natural gas

resources, including 92% of Republicans, 80% of Independents and 66%

of Democrats.

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.

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FUELS & SUPPLY

Winter’s Gasoline Margin Squeeze by Alan Levine

The retail gasoline dealer generally suffers sub-par profits on

sales in winter and early spring. Financial markets offer one way to deal with this challenge. “Crack spreads” are measures of profit on gasoline available to refiners and the stress this places on retailers. This article describes the seasonal pattern of gasoline profitability. It also suggests how the retailer might respond to seasonal profit challenges. Profit margins are usually tight in the gasoline business. There’s lots of competition on the street, gasoline is a standard specification commodity and prices are readily available to everyone.

The refiner’s situation is different. Refineries begin spring maintenance and turnaround as winter gives way to spring. Demand for crude oil eases and the price of crude oil eases as well. At the same time, demand for gasoline picks up and the RBOB (Reformulated Blendstock for Oxygenate Blending) price reflects that gain. The difference between the crude oil and gasoline price widens. This difference is the “gasoline crack spread,” generally called the “gas crack.”

The retailer’s challenge has grown in recent years. Gasoline demand has been under pressure in response to changing demographics and emerging interfuel competition.

Seasonal Gasoline Profitability

The Crack Spread

Profit margins respond to seasonal factors too. They start with the refiner who generally plans maintenance in late winter. This takes gasoline refining capability off line. Gasoline consumption relies on storage for supply, supporting the gasoline price.

The gas crack is traded in the futures market. It is constructed by the purchase of one RBOB gasoline contract while at the same time selling one crude oil contract. The contracts are traded on the New York Mercantile Exchange (NYMEX).

The refiner passes the higher gasoline price through to the downstream. The refiner’s profit margin generally grows when wholesale prices increase. No such luck at retail. Consumers resist higher prices, choosing, in many cases, to alter their driving habits. The retailer’s margin is squeezed between higher gasoline costs and lower consumer demand. Typically this happens in the months between November and May.

The retailer could consider offsetting tighter retail margins by using the crack spread. This is a common use of hedging: using futures to minimize the retailer’s exposure to tighter margins. The reason retail margins suffer is precisely because refiners’ margins expand. And retailers, faced with consumer resistance, have no place to turn.

Refineries are back on line by May, strains on gasoline supply tend to ease and prices top out. Retail margins improve as well. The pattern persists into winter. The pattern of weak margins at retail in winter and spring is followed by improvement as summer margins widen with generally softer prices.

Buying the gas crack spread, however, effectively puts the retailer in the same financial position as the refiner. And historical records support the idea of buying the crack spread in late autumn/early winter. With few exceptions, this transaction has proven effective for retailers. Continued

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FUELS & SUPPLY

Winter's Gasoline Margin Squeeze

A similar transaction can be made for dealers selling distillate fuel oil. The distillate fuel oil crack spread is called the “heat crack,” a reminder that heating oil was once the most important component of the distillate fuel oil cut of the barrel. These days, diesel fuel holds sway, but the language has not changed. In the spring, distillate fuel oil prices tend to bottom during the first quarter. They rally through late April. Following a period during which prices soften, prices recover in July and August, moving higher through October. This is also the pattern for the heat crack. Crack spreads are very powerful financial tools. Traders would do well to consider finding qualified advisors before undertaking crack spread trades. They rely on relative movements of crude oil and the two products, gasoline and distillate fuel oil. Moreover, there are times when it may be more advantageous to use Brent crude oil in lieu of West Texas Intermediate (WTI) crude oil for the crude oil leg of the crack spread. And, with the availability of regional crude oil and product futures contracts, more finely directed crack spreads might be indicated. n

Disclaimer: Futures trading involves significant risk and is not suitable

for everyone.

Transactions in securities futures, commodity and index futures, and options on futures carry a high degree of risk. The amount of initial margin is small relative to the value of the futures contract or forex (foreign exchange) positions, meaning that transactions are heavily “leveraged.” A relatively small market movement will have a proportionately larger impact on the funds you have deposited or will have to deposit—this may work against you as well as for you. You may sustain a total loss of initial margin funds and any additional funds deposited with the clearing firm to maintain your position. If the market moves against your position or margin levels are increased, you may be called upon to pay substantial additional funds on short notice to maintain your position. If you fail to comply with a request for additional funds within the time prescribed, your position may be liquidated at a loss and you will be liable for any resulting deficit.

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Alan H. Levine Alan is CEO of Powerhouse, a company offering the Power of Price Protection. He has served the energy industries since 1969 and focused on hedging and price risk management since 1977. He can be reached at alan@powerhouseTL.com or 202.333.5380

What Does That Mean Crack Spreads

Are measures of profit on gasoline available to refiners and the stress this places on retailers.

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Changes in US Fuel Choice:

Does a fuel marketer have a choice?

by Dr. Nancy Yamaguchi

magine that you started working in the fuel industry twenty years ago, at the age of twenty-five. You are now forty-five, and as you reflect back on your early days, you marvel at what the business looks like today. Now imagine that you want to work for another twenty years, until you are sixty-five. What will the business look like then? Theories abound, naturally, but the only guarantee is that the market will not look like it does today. The US fuel market has gone through astonishing changes, and more are ahead. There is no segment of the market that has been untouched by the sweeping changes since the 1990s. Our domestic and foreign fuel sources and trade patterns have changed. Domestic crude and gas production has begun to climb. The US ethanol industry is the world’s largest. Our refining industry has gone through a major overhaul and now is running at high utilization rates. Storage, transport and terminalling have expanded and shifted their geographic focus and favored modes. Demand for gasoline, the staple food of the US automotive

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diet, has fallen, and it is forecast to continue on its downward slide. Diesel is gaining market share, and the US has become a major exporter of diesel. Environmental regulations have changed the types and qualities of fuels, as well as introducing entirely new products. The economy has suffered through a severe and longlasting recession. Fuel choice has changed dramatically, and it is continuing to change. Do fuel marketers have a choice about fuel choice? Many believe that their choices are irrelevant, dismissing the idea by saying “the Customer is King.” If asked their opinion about the future fuel mix, they may simply say “We will know soon enough.” Yet as we view the evolution and segmentation of the market, we can see that there are many “kings,” and some kings may be capricious in their various fiefdoms. Even if a fuel marketer feels like a leaf floating along the river, it is important to see where the river is flowing.

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Table 1: Two Decades of Changes 1994 – 2014

Gasoline and Diesel changes in volume, grade, production and trade Table 1 provides a look at some key changes in the US gasoline and diesel market over the past two decades, drawn from various data sources published by the US Energy Information Administration. The drop in gasoline demand stands out sharply. Of all major petroleum fuels in the US market, gasoline has been the most important, but it is also the only fuel for which a long-term decline is underway and forecast to continue. Demand of 7,601 thousand barrels per day (kbpd) in 1994 rose to 9,105 kbpd in 2004, but it has fallen to 8,715 kbpd during the first five months of 2014.

(volumes in '000 barrels per day)

Source: Derived from data published by the EIA

kbpd

Figure 1: Premium and midgrade occupy a shrinking share of a shrinking market, 1994-2014

In addition, consumers have been switching away from premium and midgrade gasolines, in part because of high prices and also because of the gradual changing of the fleet and a higher level of consumer awareness. In 1994, regular grade gasoline accounted for 67.7% of gasoline sales. This rose to 82% in 2004, and it is currently averaging 87%. Figure 1 illustrates how premium and midgrade gasolines are occupying a smaller share of a shrinking market. Refinery profitability is reduced not only by the loss of gasoline volume but also by the loss of higher-value high octane grades. The economic relationship between regular gasoline and premium gasoline is no longer as straightforward as it once was. Figure 2 compares the price differential between premium and regular grades on a $/gallon basis, then compares this with the price relationship in percentage terms. Historically, consumers were accustomed to paying 10 to 15 cents per gallon more for premium gasoline. As the nominal cost of gasoline began to rise, the price differential rose also and it has been averaging 33 cents per gallon this year.

This is a noticeable shift, roughly two to three times the price differential that customers had grown to expect, and it is not surprising that sales of premium gasoline have fallen. Yet the second axis on the chart tracks how premium gasoline compares with regular gasoline on a percentage price basis. In the 1990s, the price of premium gasoline was typically 112 – 115% higher than regular gasoline. This percentage began to fall, and over the past decade, the premium gasoline price has been in the range of 107 – 110% of regular gasoline’s price. Thus, although the absolute price differential has widened, octane is actually less valuable than it was in the past. The higher prices seen for highoctane gasoline are commonly attributed to such factors as the high demand for gasoline in the United States, and the perceived difficulty of producing enough highoctane material. But these reasons are losing validity, and ethanol blending is one of the FMNMagazine

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FUELS & SUPPLY

Changes in US Fuel Choice: Does a fuel marketer have a choice?

There has also been a major change in how motor gasoline is produced and finished for sale. In 1994, a mere 10 kbpd of ethanol was blended into gasoline. By 2004, ethanol blending had risen to 202 kbpd, and it is now averaging 854 kbpdâ&#x20AC;&#x201D;very close to the 10% blend wall, given the current demand level of 8,715 kbpd. This widespread use of ethanol has shifted the finalization of gasoline away from refiners toward blenders. In 2005, 27% of US gasoline was finalized by blenders, and the remaining 73% was produced at refineries. By 2014, this relationship had reversed, with refiners blending 23% of the finished gasoline pool and blenders accounting for 77% of finished gasoline.

Figure 2: The Premiumâ&#x20AC;&#x201C;Regular price differential has grown $ per Gal in nominal terms, but shrunk in percentage terms

Premium % of Regular

key factors. With 850 kbpd of high-octane, nonpetroleum-based liquid being blended into gasoline, the octane balance has eased considerably. Consumer demand for premium gasoline has fallen, in part because the fleet is growing more modern and in part because the modern consumer is more educated and more motivated to save on fuel costs. In the future, premium gasoline may become more of a specialty product. The National Association of Convenience Stores has noted this trend, and has raised the question of whether some retailers might eventually switch their underground premium gasoline tanks to diesel, E85 or ethanol.

Gasoline net exports commence The surge in ethanol use, coupled with the rise in refinery utilization occasioned by the rise in domestic crude production, has expanded gasoline production capability. The 854 kbpd of ethanol currently being blended also uplifts certain streams of lower-octane gasoline blendstocks. Imports of gasoline blending components (GBC) have surged, growing from 20 kbpd in 1994, to 451 kbpd in 2004 to 541 kbpd

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Changes in US Fuel Choice: Does a fuel marketer have a choice? viewed with some skepticism, since gasoline demand had been trending downward. However, it is not envisioned as a long-term reversal in the overall downward trend, but instead a restoration of some of the demand that was lost because of the recession. Already, gasoline demand in 2014 is on track to exceed the author’s early forecast.

Diesel demand continues robust, and the United States becomes a major exporter

at present. GBCs often arrive in a form that requires only the last-minute blending of 10% ethanol to qualify as finished motor gasoline. Imports of finished gasoline have nearly vanished, after many years of growth. In fact, it was not all that long ago that some people were concerned about gasoline import dependency. In 1994, the US imported 341 kbpd of finished gasoline, and imports grew to 496 kbpd in 2004. The drop in gasoline demand has caused gasoline imports to plummet to 39 kbpd currently. When finished gasoline alone is considered, the US actually became a net exporter in 2010. However, much of the reduction in gasoline imports was merely a shift to imports of gasoline blending components. A more complete picture of the US gasoline balance can be gained by viewing gasoline, plus gasoline blending components, plus ethanol (ETOH). When net trade volumes of gasoline, GBC and ETOH are viewed in their entirety, the United States was in reality still a slight net importer in 2010. This now appears to be changing, and the United States may truly become a gasoline net exporting market. As the table indicates, during the JanuaryMay 2014 period, the United States exported 21 kbpd of gasoline+GBC+ETOH on a net basis.

“

Theoretically, this should work to moderate gasoline prices. A surplus commodity generally commands a weaker price, assumed to be a function of price minus transport costs to the export market. In this respect, the year 2014

”

When net trade volumes of gasoline, GBC and ETOH are viewed in their entirety, the United States was in reality still a slight net importer in 2010. This now appears to be changing, and the United States may truly become a gasoline net exporting market.

should bring a weakening gasoline price. To an extent, we should also expect a small recovery in demand. At an early meeting of the Society of Independent Gasoline Marketers of America, the author predicted that 2014 gasoline demand would be approximately 44 kbpd above 2013 demand. This prediction was FMNMagazine

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Although gasoline remains the key fuel used in US transport, diesel demand is proving more robust. As Table 1 indicates, diesel demand grew from 3,162 kbpd in 1994 to 4,058 kbpd in 2004, and it is averaging 4,080 kbpd currently. In 1994, the United States was a slight net exporter of diesel, with imports of 203 kbpd and exports of 234 kbpd. Diesel demand continued to grow, and by 2004, the United States was a net importer of diesel, with net imports amounting to 215 kbpd. Several events now have changed this: first, the price shock in 2008, which also contributed to the US recession, and second, the sharp increase in tight oil production, which has caused refinery utilization to rise. Federal law places restrictions on the exports of crude oil, so most of the new output is processed domestically. This also has contributed to the emergence of gasoline exports, as noted above, but it has had a far more dramatic impact on diesel exports. In the January – May period of 2014, the US imported 261 kbpd of diesel while exporting 1,056 kbpd, creating net exports of 795 kbpd—an amount larger than the entire market demand of Germany. Most other major oil consuming countries are more reliant on diesel than on gasoline. OECD Europe (Organization for Economic Cooperation and Development) consumes three times more diesel than gasoline, for example. Having access to these export markets is an immense boon for US refineries. As discussed below, the United States is likely to remain a net exporter of diesel.

FUELS & SUPPLY

Changes in US Fuel Choice: Does a fuel marketer have a choice?

Future fuel choice The Energy Information Agency each year carries out an extensive forecasting exercise known as the Annual Energy Outlook (AEO). The conclusions change each year, naturally, as market conditions and input assumptions change. Critics point out that some of the key input assumptions hinge upon successful implementation of public policies and directives. Therefore, some of the conclusions rest upon a wish list where not all of the wishes will come true. Nonetheless, the AEO is an impressive undertaking, always well worth consideration. Figure 3 presents information on liquid fuels demand from the current forecast. The figure shows how demand is expected to change for key liquid fuels between 2014 and 2034. Over the next twenty years, the AEO expects US gasoline demand to fall by 2.02 million bpd (mmbpd.) The drop in gasoline demand effectively negates the growth in all other key liquid fuels demand, which collectively are forecast to grow by 2.1 mmbpd in the next twenty years. Two of the key competitors against gasoline in the transport fuel sector are E85 and diesel. E85 demand is forecast to grow by 0.29 mmbpd, while 0.66 mmbpd of new diesel demand is expected. Part of the push for raising E85 use is, of course, the national goal of promoting the use of renewable fuels. The RFS (Renewable Fuel Standard) rules are so ambitious that E85 is viewed as one of the best ways to expand ETOH use. Yet despite the public’s desire to promote the use of renewables, economics still play a role in consumer choice, and market adoption of E85 and flexible fuel vehicles has been slow.

What Does That Mean

Figure 3: AEO forecast of liquid fuel volume growth/(decline) between 2014 and 2034

mmbpd

Diesel and E85 prices on Gasoline-Equivalent basis One way to compare fuel costs is on a BTU (British Thermal Unit) fuel equivalent basis. Ethanol has approximately 73.1% of the BTU content found in E10, and diesel has approximately 115.8% of the BTU content of E10. Accordingly, an E10 gasoline price of $3.50/gallon would correspond with an E85 price of $2.56/gallon and a diesel price of $4.05/gallon. Yet even a casual observer of the market could see that the three fuels rarely follow this price relationship. Figure 4 compares the AEO forecast of E85 and diesel relative to E10 during the 2011 – 2040 horizon. In 2011, the E85 price was roughly one and a half times what it should have been to be cost competitive with E10. As the forecast moves forward, E85 prices are forecast to decline relative to E10, but at no time does the E85 meet E10 cost equivalency. At its best, the E85 price is forecast to be $0.15 – 0.17 cents/gallon above the E10 equivalent price. In addition, as time moves on, E85 prices are forecast to rise relative to E10, reaching $0.86/gallon above the E10 equivalent price by the year 2040. Continued

$/gal

Figure 4: E85 is forecast to remain above its E10 gasoline equivalency while diesel is forecast to remain below

kbpd= Thousand Barrels per Day mmbpd= Million Barrels per Day ETOH = Ethanol AEO= Annual Energy Outlook

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FUELS & SUPPLY

Changes in US Fuel Choice: Does a fuel marketer have a choice?

In sharp contrast, diesel prices start out the forecast period at a price well below E10 equivalency—$0.60/gallon below. And despite the relatively strong diesel demand outlook, diesel prices are forecast to weaken relative to E10, falling to $1.24/gallon below the E10 equivalent price by 2040. Therefore, despite that fact that diesel is nominally more expensive than gasoline, it is cheaper on a heatequivalent basis. As noted, the United States is now a net exporter of 0.75 mmbpd of diesel. The forecast increase in domestic diesel demand is only 0.66 mmbpd by 2034. If refinery output remains the same, the US should remain a net exporter of diesel, which at least theoretically should moderate any price increases.

Conclusion: a multitude of kings and queens The fuel market has grown more complex and segmented, and fuel choice is growing more complicated as well. Gasoline demand is falling, and demand for high-octane grades is falling even more precipitously. The E10 blend wall is effectively in place. E15 poses a number of technical and economic issues, and although it is being marketed, it is not yet widely accepted. Many have advocated E85 as the sounder way to raise ethanol use, but a technological and/or price breakthrough may be needed. The E85 price generally is not competitive with E10. E85 is less expensive in the Midwest, nearer to the centers of ETOH production, but the majority of the population lives on the coasts. In many of the more densely populated metropolitan areas, E85 prices are scarcely below E10 prices (sometimes only 2 – 5% below), and the AEO forecast anticipates that E85 prices will remain above their E10 gasoline-equivalent value. E85 demand is nonetheless forecast to grow, as is demand for diesel and LPG (Liquified Petroleum Gas). On a fuel equivalent basis, diesel is highly cost-competitive with E10, though NACS has noted that consumer acceptance has been slow because in nominal terms, diesel remains more expensive than gasoline. This is changing as consumers have gained more experience with the efficiency of diesel engines. Consumer education programs about the benefits of ultra-low-sulfur diesel also have been working to change the outdated image of diesel engines as being heavy polluters. In this article, we have focused mainly on changes within the major motor fuels gasoline, diesel and ethanol in E10 and E85. A number of other fuel sources also will play more major roles in the future, including electricity, LNG, CNG (Compressed Natural Gas) and liquid hydrogen. Their distribution and fueling modes are more specialized, however, so they will have a different set of dynamics to fuel marketers and consumers. The ancient Greek poet Homer wrote: “A multitude of rulers is not a good thing. Let there be one ruler, one king.” Most fuel marketers believe they have little choice about fuel choice—the customer is king, after all. But most now find themselves serving more than one king or queen in more than one kingdom. The great challenge now facing fuel marketers is how to choose the best kingdoms and how to best serve the kings and queens without being beheaded. n FMNMagazine

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Dr. Nancy Yamaguchi 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.

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Are Hydrogen Fuel Cell Vehicles

Dead On Arrival? by Dr. Barry Stevens

The national vision by politicians, economists, industrialists and environmentalists to transition to hydrogen economy by 2030 seems deadlocked, with hydrogen fuel cell vehicles projected to represent a $3 billion market of about 5.9 GW by 2030, according to Lux Research.1

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The dream of fuel cell vehicles powered by hydrogen from zero-carbon sources such as renewable power or nuclear energy comes from estimates that the cost of avoided carbon dioxide would be more than $600 a metric ton—ten times higher than most other technologies under investigation.

Yet today, there are only two fuel cell electric vehicles (FCEV) available in the US market—Honda's FCX Clarity, which is available to lease, and the Mercedes-Benz F-Cell.

Robert Duffer for the Chicago Tribune states, “Fuel cell cars use a stack of cells that combine hydrogen with oxygen in the air to generate electricity, which powers the motor that propels the car. The only emission is water vapor and, with a 300-mile range, can run three or four times longer than the most capable electrics, aside from Tesla’s all-electric Model S, which has a range of 265 miles. The Nissan Leaf has a 75-mile range.”5 Unfortunately, the push to develop a hydrogen economy in the US, which was sparked by the Matsunaga Hydrogen Research, Development, and Development Act of 1990, never gained sufficient traction and political support to overcome major barriers to market entry such as high capital costs and lack of an infrastructure. Capitol Hill’s indifference to FCEVs is underscored by The Department of Energy (DoE) hydrogen and fuel cells budget history from 1990 to 2011.6

DoE Hydrogen and Fuel Cells Budget History: 1990-2011 Total DOE funding for hydrogen and fuel cells: 2002-2011 is $2.5 billion

Mercedes-Benz F-Cell.

Mario Roberto Duran Ortiz

Fuel cells combine the best of electric and gasoline cars without the downsides, the automakers say. They drive like electric cars—quietly, with tons of off-the-line power—but can be refueled just like gasoline-powered cars, writes Jerry Hirsch for the Los Angeles Times.2 In another article for the Los Angeles Times, Jerry Hirsh points out: “…As they (fuel cells) move into production, fuel cell cars should gain a price advantage over vehicles that run on battery power,” and “…Lesser weight and higher energy density of fuel cells also enable them to be used in a wider range of vehicles, from a family sedan to full size trucks to city buses.”3 “BEVs (battery electric vehicles) have a number of significant issues. Unless you are willing to shell-out for Tesla’s Model S, range is still a significant issue. And even if you do opt for the Model S, the battery can take 20 minutes just to reach 50% charge, compared to a few minutes refueling for ICE (internal combustion engine) cars,” states Katie Spence for The Motley Fool.4

Millions of $

350

329.7323.3

EERE Hydrogen Funding

300

EERE Fuel Cell Funding

250

Total DOE Funding for Hydrogen Fuel Initiative

200

SECA Funding

275.2

Combined EERE Hydrogen & Fuel Cell Funding

277.3.

Total DOE Funding for Hydrogen & Fuel Cells 202

150

194.2

133.8 108.6

100 55.7

50 0

319.6

293

29.5 32.2 7.6 9.8

64.5

36.5 36.6 39.5

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Fiscal Year Source: U.S. Department of Energy

Including years 2012 – 2014, the total 25-year DoE budget for hydrogen and fuels research, development, demonstrations and deployment (RDD&D) was about $2.8 billion, an average annual allocation of $112 million. To put this into perspective, the 2014 budget for hydrogen RDD&D of $100 million, i.e., 0.35 percent of the total DoE budget request of $28.4 billion. This falls short of other renewable technologies such as solar, bioenergy and wind technologies, which received allocations of $365 million (1.25 percent), $282 million (0.99 percent) and $144 million (0.51 percent) for FY 2014, respectively. The DoE budget for FY 2014 includes an allocation of $575 million for vehicle technology programs. However, fuel cell R&D is not directly included in the funding profile for these programs. The main emphasis of Vehicle Technologies is battery/energy storage R&D and vehicle technologies deployment. The large increase in expenditures between 2002 and 2011 reflect President Bush’s announcement of a major hydrogen initiative in his 2003 State of the Union address: “Tonight I am proposing $1.2 billion in research funding so that America can lead

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Are Hydrogen Fuel Cell Vehicles Dead On Arrival?

the world in developing clean, hydrogen-powered automobiles. A simple chemical reaction between hydrogen and oxygen generates energy, which can be used to power a car producing only water, not exhaust fumes. With a new national commitment, our scientists and engineers will overcome obstacles to taking these cars from laboratory to showroom so that the first car driven by a child born today could be powered by hydrogen, and be pollution-free.”

Hyundai Tucson

Though marginalized throughout its decades-long history, hydrogen fuel cell vehicles may not be entirely dead on arrival. Today, the media brings a steady stream of discussions, publications and announcements about activity in FCEVs. There are just two fuel cell vehicles available in the US market: Honda’s FCX Clarity, which is available to lease, and the Mercedes-Benz F-Cell. The most recent reverberations come from automakers, such as Toyota, Hyundai, and Honda, with testing and planned production of hydrogen fuel cell vehicles for 2015.

Additionally, Daimler AG, Ford Motor Company and Nissan Motor Co., Ltd. recently announced a cooperative agreement to accelerate the commercialization of fuel cell electric vehicle technology. Even with insufficient support from the federal government, lack of a hydrogen infrastructure, and cost uncertainties, Nissan's Next Generation FCEVs are poking their heads FuelCell Stack, released in 2011 above the radar. In general, automakers see FCEVs as the most judicious path to satisfy stringent zero-emission vehicle mandates set by California and nine other states. California’s zero-emission vehicle (ZEV) mandate requires 15 percent of all new cars sold be emission free by 2025. The ten-state alliance wants about 3.3 million ZEVs on the road by 2025. Without question, the most important barrier to larger scale implementation of low carbon technologies comes down to one factor: the cost of the technology. Fuel cell costs continue to decline significantly for light duty vehicles, with projected volume costs lower by more than 80 percent since 2002 and more than 35 percent since 2008, according to the US Department of Energy.8 The cost per kilowatt (kW) for high volume production of transportation fuel cells moved closer to DoE’s target of $30 per kW where they will be cost-competitive in light duty vehicles.

Projected Fuel Cell Transportation System Costs per kW, Assuming High Volume Production $300

FC system cost ($/kW net)

The Tucson Fuel Cell offers: • A rental price of $499 per month for a 36-month term, with $2,999 down, for customers in the Los Angeles/Orange County region. This includes unlimited free hydrogen refueling. • Driving range up to an estimated 300 miles • Full refueling capability in less than 10 minutes, similar to gasoline

$275/kW

$250

Initial Estimate Balance of Plant ($/kW, including assembly & testing)

$200

Stack ($/kW)

$150 $108/kW $73/kW

$61/kW $51/kW $49/kW $47/kW

$50

• Minimal reduction in daily utility compared with its gasoline counterpart

Target $30/kW

$94/kW

$100

2002

• Instantaneous electric motor torque (221 lb-ft)

2006

2007

2008

2009

2010

2011

2012

2017

Source: U.S. Department of Energy

• Minimal cold-weather effects compared with battery electric vehicles • Reliability and long-term durability • No moving parts within the power-generating fuel cell stack • More than two million durability test miles on Hyundai’s fuel cell fleet since 2000 • Extensive crash, fire and leak testing successfully completed 7 FMNMagazine

In terms of fuel cost, Dr. Robert B. Buxbaum of REB Research writes, “REB Research makes hydrogen generators that produce 75 SLPM (Standard Liter per Minute) of ultra pure hydrogen by steam reforming methanol-water in a membrane reactor. A generator of this type produces 9.5 kg of hydrogen per day, consuming 69 gal of methanol-water. At 80¢/gal for methanol-water, and 10¢/kWh for electricity, the hydrogen costs $2.50/kg., or $5,000 over a 120,000 mile life. This is somewhat cheaper than gasoline, but about twice the dollar per mile cost of a Tesla S if only electric cost is considered. 34

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Are Hydrogen Fuel Cell Vehicles Dead On Arrival?

The hydrogen car is much cheaper on a per-mile basis, though when you include the fact that the battery has only a 120,000-mile life, a 120,000 mile life is short for a luxury car, and very short for a truck or bus.” 9 The DoE Fuel Cell Technology Office released a 74-page report titled “2012 Fuel Cell Technologies Market Report.” The report concludes: The trends for the fuel cell industry were encouraging in 2012. Total fuel cell shipments increased in 2012, in terms of total units and megawatts (MW). Other notable events highlighted include: • Total fuel cell shipments in 2012 increased 34 percent over 2011 and 321 percent over 2008. • Roughly 30,000 fuel cell systems were shipped in 2012, up from around 5,000 shipments in 2008, largely due to Japan’s residential fuel cell program. • The number of megawatts shipped on an annual basis more than doubled between 2008 and 2012, rising from about 60 MW to more than 120 MW. • The projected cost of a transportation fuel cell system was at $47 per kW in 2012 and continues to approach DoE’s target of $30 per kW. • Fuel cell costs continue to decline significantly for light duty vehicles, with projected volume costs lower by more than 80 percent since 2002 and more than 35 percent since 2008. • The Obama Administration implemented new incentives for fuel cell and other advanced technology vehicles when it raised the fuel economy standard in the US to 54.5 mpg for cars and light-duty trucks. • Cumulative global investment in fuel cell companies totaled $853.6 million between 2010 and 2012. This is a significant increase over the $671.4 million invested in fuel cell companies between 2009 and 2011. 10

Another major challenge for FCEVs is a nascent infrastructure to produce, distribute, store, deliver and maintain hydrogen fuel. Today there are only ten public hydrogen-fueling stations in the United States, according to the DoE. California is spending as much as $20 million a year to help bring the number of fueling stations up to 100 within the next five years or so. There should be 28 hydrogen stations spread across California's metropolitan areas by 2015, when all three of these hydrogen models will be for sale. One remaining question is the reliability, power quality, endurance and longevity of mobile fuel cells. Although fuel cells provide electricity at high efficiencies with exceptional environmental sensitivity, their long-term performance and reliability under real world conditions remains largely unanswered. However, according to Fuel Cells 2000, “The material handling sector has provided the fuel cell industry with an early market and technology indicator in the US, with deployments and orders for forklifts and lift trucks inching closer to 5,000. This includes many big name companies with multiple repeat orders, such as BMW, Coca-Cola, Procter & Gamble, Kroger and Lowe’s.” The report further states that fuel cells were found to last longer than batteries, and operated in freezing temperatures as low as -20° F (-29° C).”11

Fuel Cell Systems Shipped by Application, World Markets: 2008-2012

Source: Fuel Cells 2000

Source: U.S. Department of Energy

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Fuel Cells 2000 reports, “Fuel cells last longer than batteries, and also operate in freezing temperatures, which led Walmart, a company that had already tested and deployed several hundred fuel cell forklifts at facilities in Ohio and Ontario, Canada, to choose fuel cell lift trucks for its sustainable refrigerated distribution center in Alberta, Canada. The fuel cell-powered vehicles operate in conditions as low as -20° F (-29° C).

FUELS & SUPPLY

Are Hydrogen Fuel Cell Vehicles Dead On Arrival?

In closing, substantial reduction of fossil fuels from all sectors of the economy by renewable energy and zero-emission vehicles is the Holy Grail of modern society. Zero-emissions vehicles come in two flavors: BEV and FCEV. BEVs longer sales history and wider public-private support give them an apparent competitive advantage over FCEVs. After many decades of false hopes, FCEVs market introduction may be a Hail Mary play by automakers to achieve stringent emission standards. To succeed, FCEVs must address BEVs performance and endurance limitations. High production costs and a relatively nonexistent hydrogenfueling infrastructure may prolong the agony of success or failure. Until automakers sell FCEVs in volume, they are expected to cost more than comparable gasolinepowered and electric vehicles, not including the premium priced Tesla BEV, which is reported by Forbes to have outsold the nearest competitor by more than 30%.12 Public-private investments in building a hydrogen-refueling infrastructure are essential for FCEVs long-term success. In the final analysis, BEVs are an inadequate technology push indifferent to consumer needs and driving patterns. As a technology solution, FCEVs are arising from the dead because the industry believes further Lithium-ion battery advances will not substantially improve the range and performance impediments of electric cars. Will FCEVs and BEVs prosecute a war of attrition? My money is on FCEVs. n

References 1. “The Great Compression: The Future of the Hydrogen Economy,” Lux Research, State of the Market Report, December 11, 2012; http://www.luxresearchinc.com/news-and-events/pressreleases/read/hobbled-high-cost-hydrogen-fuel-cells-will-be-modest-3-billion; https://portal.luxresearchinc.com/research/report_excerpt/12365 2. “CES 2014: Toyota shows off fuel cell car that can also power a home,” Jerry Hirsch, Los Angeles Times, January 6, 2014; http://www.latimes.com/business/autos/la-fi-hy-toyota-fcv-fuel-cell-ces20140106,0,884109.story#ixzz2wi7vjAQx 3. “Fuel cell cars from Toyota, Honda, Hyundai set to debut at auto shows,” Jerry Hirsch, Los Angeles Times, November 17, 2013; http://articles.latimes.com/2013/nov/17/autos/la-fi-hy-fuel-cell-cars-20131117 4. “Toyota’s Hydrogen vs. Tesla’s Batteries: Which Car Will Win?” Katie Spence, The Motley Fool, November 16, 2013; http://www.fool.com/investing/general/2013/11/16/toyotas-hydrogen-vs-teslasbatteries-which-car-wil.aspx 5. “Hydrogen or electric? Showdown over the fuel of the future set for 2014,” Robert Duffer, Chicago Tribune, Jan. 7, 2014; http://cars.chicagotribune.com/fuel-efficient/news/chi-hydrogen-or-electricvehicles 6. “Fuel Cell Technologies Program Record: Historical Fuel Cell and Hydrogen Budgets,” U.S. Department of Energy, Record #: 13004, May 31 2013; http://tinyurl.com/barrystevens1005 7. “Hyundai to offer Tucson Fuel Cell vehicle to LA-area retail customers in spring 2014; Honda, Toyota show latest FCV concepts targeting 2015 launch,” Green Car Congress, November 21, 2013; http://www.greencarcongress.com/2013/11/20131121-fcvs.html 8. “2012 Fuel Cell Technologies Market Report,” U.S. Department of Energy, Fuel Cell Technologies Office, October 2013; https://www1.eere.energy.gov/hydrogenandfuelcells/pdfs/2012_market_report.pdf 9. REB Research Blog, Random thoughts about hydrogen, engineering, business and life by Dr. Robert E. Buxbaum, February 12, 2014; http://www.rebresearch.com/blog/category/automotive 10. U.S. Department of Energy, Fuel Cell Technologies Office, Pathways to Commercial Success: Technologies and Products Supported by the Fuel Cell Technologies Office; https://www1.eere.energy.gov/hydrogenandfuelcells/pdfs/pathways_2013.pdf 11. “The Business Case for Fuel Cells 2013 Reliability, Resiliency & Savings,” Fuel Cells 2000; http://www.fuelcells.org/pdfs/2013BusinessCaseforFuelCells.pdf 12. “Tesla Sales Blow Past Competitors, But With Success Comes Scrutiny,” Mark Rogowsky, Forbes, January 16, 2014; http://www.forbes.com/sites/markrogowsky/2014/01/16/tesla-sales-blow-pastcompetitors-but-with-success-comes-scrutiny/

IN HISTORY:

Dr. Barry Stevens Barry is an accomplished business developer and entrepreneur in technology-driven enterprises. He is the founder and President of TBD America Inc., a global technology business development group serving the private and public sectors in energy, fuels and water industries.

Two key elements spurred the rapid expansion of motor fuels

(specifically gasoline) that would eclipse kerosene as the focus of the petroleum industry. The first was the development of the

To learn more about TBD America, please visit http://tbdamericainc.com.

Ford Model T in 1908, making the automobile something for the average person, instead of a luxury novelty for the wealthy. The

second was World War I, which prompted an international surge

The opinions expressed in this article are solely those of the author.

in mechanization and helped unify and advance the petroleum

refining infrastructure. Once the ball started rolling, there was no turning back.

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Loyalty Car Wash Programs

Create Longevity, Revenue Growth

by David Dougherty It is true that if customer loyalty were easy

to come by, then every business would be showing successful program retentions and extensive revenue growth year after year. So, how much loyalty is necessary to be successful?

For retail-petroleum or convenience store site owners/operators who offer a car wash, research data suggests that retaining just 5% more of the customer base can mean as much as a 50% gain in revenues*. For most owner/operators, those kinds of numbers make the investment in loyalty programs well worth it.

So, why does loyalty pay so well and how can an operator achieve a level of customer loyalty that ensures success month-in and month-out? It begins with understanding that attaining customer loyalty is not easyâ&#x20AC;&#x201D;but, when achieved, it pays dividends far beyond any month-to-month retention program or a one-time discount coupon offer. Those loyal customers, who can be counted on to return to a business time and again for a product or service, often do it not to save money, but to feel special, feel appreciated or as a convenience for their personal time. Like most aspects of successful businesses, loyalty comes down to bottom-line decisions.

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What a car wash loyalty program needs to do is build and cement a strong, positive feeling about a specific car wash. In fact, in their fast-paced, jam-packed daily schedules, customers have a lot on their minds. They have a lot of businesses and services fighting for their attention. Any cstore operator hoping to secure loyal customers for his car wash must be willing to fight. Fight for their attention, fight for the right to be their choice for a car wash, fight to win their loyalty. There are many paths to creating loyal customers, but it all starts with communication. From the attention garnered by a modern sign that draws potential clients to a certain facility, to the messaging they receive at the entry station, to the very real opportunity to land a return customer with a follow-up ”thank you” email, communication is critical to getting customers’ attention, holding it and re-engaging them in the future.

Give customers a reason to return to your car wash. Start by focusing on keeping the messaging fresh; don’t let things become static, worn out or dated. In order for a loyal customer to return, there must be some tangible payoff, a real benefit. If they are on the other side of town, will they make the effort to return, or will they do what is convenient? When it comes to a loyalty program, the golden rule is: You get out of it what you put into it. Good c-store operators are good at customer satisfaction, which is the foundation of customer loyalty. Customers have to be satisfied before they can become loyal.

Loyalty Needs Communication If a car wash satisfies a customer, that doesn’t automatically mean they will return for future washes. Therefore, operators must create extra incentives to really make sure customers are loyal. Consider offering loyal customers a special car wash lane or providing “loyalty” discount incentives. The nail in the coffin for any c-store operator with a car wash is complacency. In order to create an effective loyalty program, an operator must be willing to go the extra mile to communicate and appeal to customers. Assuming a traffic pattern or catchy sign will keep them lining up outside the bay or tunnel year after year is not a sustainable revenue-growth model.

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RETAIL OPERATIONS Recognizing that every customer wants great service, ease of use and efficiency in their car wash operation, creating a loyalty program that is successful must begin with understanding the customers’ habits, likes and dislikes. Ask yourself: What kind of experience do I need to deliver in order to create a return visit, or even better, a loyal customer who will return every time? Actively working to connect with customers, creating and maintaining relationships, should be the first expectation in starting a loyalty program. The challenge is to choose the correct system for a local market based on demographics and competition, and to constantly monitor customers to make sure that the car wash is on the winning side of the market. Whichever loyalty process is selected, the car wash operator must be clearly focused on it and confident that it is performing well. Change is necessary to keep things fresh, but changing a program or loyalty approach should not be done for the sake of change; it requires having a target or goal from real data or behavioral patterns.

Embrace Technology When it comes to loyalty programs, technology is a friend. From the intuitive nature of the entry station to the online application the driver interfaces with at a website, to a cellular app that reminds them of existing loyalty credits or a free car wash, technology can manifest itself in many forms. Good use of technology starts with hardware that needs to be capable of interfacing with the client in an easy to use, intuitive manner. Ad screens at entry stations can deliver special offers, incentives for loyalty, or possibly even a local business that may reciprocate in a co-branding arrangement. The entry station should also be capable of efficiently assisting the clients through the purchasing process. Ensuring a simple process will help create a positive experience.

“ ”

Loyalty Car Wash Programs Create Longevity, Revenue Growth

Any c-store operator hoping to secure loyal customers for his car wash must be willing to fight. Fight for their attention, fight for the right to be their choice for a car wash, fight to win their loyalty.

Radio-frequency identification technology (RFID) is one of the most exciting paystation advancements of recent years, mainly because it makes the entry process hands-free and no hassle for loyalty program members. An RFID transponder embedded on the driver’s vehicle registers as the driver approaches the wash entrance. An RFID reader captures the driver’s account information and relays it through the pay station’s software system, which will automatically begin the wash process. The client will not even need to roll down the window. This is another means of focusing on generating that positive experience for your clients. Subscription accounts offer clients increased flexibility to match their personal lifestyle and individual wash needs. Subscription-based programs are great incentives for the loyal customer. Set up as a loyalty benefit, this style of account allows the client to have their credit cards automatically charged on a monthly basis in exchange for convenient use at your car wash. This type of program illustrates outstanding use of technology to identify the loyal customer who might be offered the special benefit while delivering a virtually labor-free opportunity to provide specialized treatment and service at the car wash. Direct withdrawal of the funds ensures that little time is needed by the customer to manage the account. This is a win-win for the owner/operator—and the client. A reliable system, offering infinite code variations and tracking abilities that can be used to identify the very best customers

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and to create manageable loyalty programs, is our Wash Access Loyalty System (WALS). A web-based system that provides the data management and technological resources needed to operate a successful loyalty program, WALS compiles real data that can be used to make educated decisions on the tendencies of potentially loyal customers.

Conclusion To provide success for the car wash operating in a competitive petroleumretail and c-store marketplace, making an effort to set up a loyalty program that can attain a 15% to 20% retention rate is well worth the cost and effort. To ensure that once a level of loyalty is achieved and then not squandered, it is up to the operator to initiate direct communication and utilize technology and data to sustain a program. Sustained success and incremental revenue increases are the payoffs for those efforts. n *Based on “The Loyalty Effect,” by Fredrick Retchheld.

David Dougherty David is the Senior Product Manager for In-Bay Automatics at PDQ Manufacturing, Inc., De Pere, WI. PDQ Manufacturing is recognized as the technological leader in vehicle wash systems, providing superior quality, outstanding support, and products that contribute to its customers’ profitability. Brands include LaserWash® and ProTouch® In-Bay Automatic Vehicle Wash Systems, SwingAir® and MaxAir® Dryers, Access® Wash Activation Systems, Cortex and WALS. Products are sold and supported worldwide through an extensive distribution network. For more information, visit www.pdqinc.com or call (800) 227-3373. David can be reached at David.Dougherty@pdqinc.com.

RETAIL OPERATIONS

by Maura Keller

Few words captivate the dispenser technology sector more than the word â&#x20AC;&#x153;change.â&#x20AC;? Anyone with even a casual understanding of the dispenser technology marketplace recognizes that change is constantly afoot. And for the past decade, many petroleum companies, both small and large, have embraced video and audio innovations on the dispenser to communicate with their customers and establish short- and long-term loyalty.

Digital Marketing at the Dispenser

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Making Connections Jay Parsons, senior vice president of digital media and taxi

solutions for VeriFone said that, traditionally, marketing at the pump primarily involved static posters and canned audio that provided a little bit of distraction, but did not really engage consumers in a dynamic way while they fueled their vehicles. “Today, gas station and convenience stores have the ability to securely accept payments at the pump while actively engaging and influencing consumers’ purchasing behavior by delivering user-activated news, entertainment, promotions and targeted messaging in a vivid, dynamic manner,” Parsons said. As Parker Burke, marketing director, media systems at Gilbarco Veeder-Root, explains, video and audio marketing at the pump also started out with pump toppers that sit on top of the dispenser, playing continuous content—identical across fueling positions. “In 2011, Gilbarco moved to large, color displays integrated into the dispenser,” Burke said. “This newer format continues to drive higher consumer engagement, allowing for coupons to be printed via the receipt printer and only activated once fuel starts flowing. Audio and video quality has also continued to evolve with features including couponing, loyalty integration, and Amber alerts.” Indeed, media at the dispenser is no longer necessarily considered “nice to have,” as it has now become a key differentiator for many retailers to not only promote in-store items, but also cross-sell items like car washes, promote loyalty and rewards programs and offer rebates and coupons at the dispenser.

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Applause TV

“Consumers now expect a more interactive, entertaining, and personalized experience at the c-store, and the experience begins for most consumers at the dispenser,” said Cameron Nokes, senior product manager, media and loyalty, at Wayne Fueling Systems. “Consumers respond to impulse buy items like food, beverage, car wash and lottery, as well as to brand and loyalty promotions specific to the retailer.” Pay at the pump also is quickly evolving from a point of payment to a point of customer engagement and commerce enablement that provides opportunities for marketers to deliver a variety of special offers and loyalty incentives that help drive consumers from the pump into the store. With Verifone’s in-dispenser solution, VNET – At the Pump, they typically manage ad sales and delivery of marketproven media content, which can be customized using Verifone’s media content management tool. “Such highly flexible platforms provide valuable capabilities on the backend including geotargeting, dayparting, audience segmentation and a host of custom solutions for advertisers and marketers of all sizes,” Parsons said. “Marketers love this new type of environment because they can count on guaranteed reach and frequency. Most importantly, from their perspective, it delivers measurable results. Retailers are taking advantage of the opportunity to engage consumers, drive traffic into their stores, boost sales and increase loyalty.”

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Digital Marketing at the Dispenser

Conte nt Creat ion When it comes to marketing at the dispenser, the type of content that is communicated visually and audibly is as vital as how it is communicated. For instance, VeriFone’s programming options allow marketers to create programs tailored specifically to their unique needs. They have the option to outsource it to Verifone or manage content on their own through a webbased portal. They can build their own on-screen promotions and printable coupons, and easily control what, when and where content is shown at the dispensers. “Most retailers to date have partnered with experts who specialize in developing programming and marketing programs for on-the-go consumers,” Parsons said. “The retailers value the entertainment and informational content, as well as the nationally funded ads that companies like VeriFone provide as a turn key solution

that engage the consumer and drive instore sales.” Marketers can opt to supply and manage—upload and schedule—the content on their own, or let professional content managers provide the content loop. “The latter consists of entertaining content, including news updates, sports updates, clips from television shows, etc., a localized weather forecast, national ads and site specific promotions,” Burke said. “The loop is updated daily and the mix of content is proven to grab the fueling customers’ attention and drive them inside the store for higher margin purchases.” As Burke explained, the content can be day-parted and customized to fit a particular loyalty member profile. The loyalty integration also welcomes the customer by name and gives them a point status—further enhancing the fueling experience.

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“Who supplies the content depends upon the media product offering,” Nokes said. Wayne offers two distinct products: one offering is a collaboration with Gas Station TV (GSTV) called the inOvationTV media platform in which GSTV supplies the content and builds custom promotions for the retailers, and the second offering is the Wayne iX Media platform in which the retailer (or their 3rd party marketing organization) supplies the content via the Wayne MediaCenter platform. “The retailer controls all aspects of the retail promotional advertisements within the inOvationTV media program model and controls all content throughout the transaction and during fueling with the iX Media platform,” Nokes said. “In either case, Wayne and/or GSTV provide full support to retailers to get the most of the media investment and provide a best in class user experience.” Continued

According to the US Energy Information Administrationâ&#x20AC;&#x2122;s Annual Energy Outlook 2014 Reference case, light-duty vehicle energy consumption made up 63% of all transportation consumption in 2012, but its share is projected to drop to 51% in 2040. Heavy-duty vehicle energy consumption is projected to rise from 18% in 2012 to 28% of the total 13.1 million boe/d (barrels of oil equivalent per day) transportation energy consumption in 2040. The declining share of light-duty vehicles in transportation energy use over time is mainly the result of improvements in vehicle fuel efficiency. Source: EIA/ Trisha Hutchins

RETAIL OPERATIONS

“

Digital Marketing at the Dispenser

A K ey Inves tment Media has become a key differentiator in the industry, and consumers now expect more from the experience at the pump. “Layer that knowledge with the fact that digital media at the dispenser has never been more effective, inciting customers to come into the store—at a double digit percentage rate—and purchase items they otherwise wouldn’t,” Nokes said.

With the inOvationTV media program, Wayne and GSTV subsidize much of the investment for retailers—in essence, requiring a minimal investment from the retailer with the benefits of industry leading content, customized retailer promotions and monthly revenue opportunity for as long as they participate in the program.

”

A large body of research shows that only between 20 and 30 percent of fuel customers enter the store. A typical convenience store has four times the

Burke said media programming also helps c-stores compete against dollar stores, QSRs (Quick Service Restaurant) and drug stores. “The platform helps differentiate the site, enhance the fueling experience, and grab the customer’s attention, reminding them of that cold beverage they should go inside the store and buy,” Burke said. “And while they’re in there, they’ll most likely buy another item, boosting in-store sales.” For marketers that choose to go with the professionally managed option, the media equipment comes at no charge. Burke said the platform has consistently shown a 15 to 20 percent increase in the sales of the promotional items shown on the integrated color display. Many marketers have also experienced an increase in site traffic and thereby fuel volume.

margin for sales inside the store versus the fuel sale, so anything that drives people from the forecourt to the store is a major profit contributor.

Considering the content that engages consumers at the pump can influence their purchasing behavior and increase in-store sales (as well as the fact that the bulk of the content consists of paid advertisements), video marketing at the pump is essentially a profit center—not a cost center. Resulting sales increases can significantly offset the costs associated with the purchase and installation of this type of technology in the petroleum forecourt. That’s why Parsons said it is extremely important to engage consumers while they are on your premises. “A large body of research shows that only between 20 and 30 percent of fuel customers enter the store. A typical convenience store has four times the margin for sales inside the store versus the fuel sale, so anything that drives people from the forecourt to the store is a major profit contributor,” Parsons said. Also, consumer feedback received by gas stations and convenience stores regarding the pump media is extremely favorable and creates a differentiator among competitors. “Additionally, the digital out of home (DOOH) market is booming as marketers seek to more directly engage consumers, rather than rely on abysmal web click-thru rates or trying to ‘outshout’ competitors in the mass media,” Parsons said. “Many gas stations, convenience store chains and other retailers are currently engaged in major upgrade cycles to address card payment compliance issues for PCI (Payment Card Industry) and prepare for the pending EMV (Europay, MasterCard and Visa) liability shift. Rollouts of new payment technologies to support such initiatives can be efficiently and cost-effectively coupled with at the pump integrated marketing systems that provide high quality video entertainment, advertising, merchandising offers and coupons. Retailers that do not embrace this new opportunity will find themselves falling behind their competition.”

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The media enabled Wayne Ovation2

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Digital Marketing at the Dispenser

Mi stake s t o Avoi d With any new technology it takes time to optimize the experience. Retailers and marketers need to customize content for the environment where it is consumed. “Not all dispenser marketing systems are capable of being ‘site aware,’ meaning they do not have an automated system for recognizing the product and pricing contained in store,” Parson said. “Site aware systems are able to deliver more targeted content and can customize calls to action by communicating brand discounts that are relevant to the fuel customer.”

To ensure the best outcome with your dispenser content creation and implementation, there are some key mistakes that marketers need to avoid: • A fueling consumer is typically fueling at the pump for 2 to 2 ½ minutes. Not taking advantage of this idle time is a mistake. Retailers should proactively engage a fueling consumer to drive them inside the store. • Putting too much emphasis on static pump top signs, which do not maximize the idle fueling time and are a hassle to change • Overloading the materials on the dispenser can also divide a consumer’s attention to the point where it becomes mute. For example, loyalty program boxes with flyers, hose signage and “decals” with brand messaging can clutter a dispenser and give off an “unclean” look. • Keeping the content fresh, up-to-date and varied can be a challenge. That’s why many marketers opt for the professional content management solution. • Not investing enough time and/or money into marketing at the dispenser to see tangible results

Making an Educated Decision

When choosing the best dispenser content program, Parsons said marketers and retailers need to understand the total value proposition provided by the different dispenser marketing systems available to them and ask the following questions: • Does the system provide a payment upgrade solution as well as an integrated marketing platform? • Does the system only play video, or is it also capable of supporting merchandising offers and couponing? • Does the content partner understand both the convenience/fueling industry as well the marketing/advertising industry?

Verifone's Lift Retail

The more the retailer and content provider work together on targeted advertising, the more relevant the experience is for the fuel customer and the greater the impact on shopper conversion. As conversion rates increase, national advertisers will increase funding from national advertising and consumer promotion budgets that will drive incremental sales for the retailers.

What Does That Mean DOOH= Digital Out of Home PCI= Payment Card Industry QSR= Quick Service Restaurant

• Does the system integrate easily into my POS system? • Does the company supplying the platform have a solution that not only works in the forecourt, but can provide an in-store solution? • Does the content partner have tools that allow me to customize and plan my marketing communications to the customer in a seamless simple way? Retailers should also look at dispenser marketing in a holistic view. For example, Gilbarco’s Applause TV provides the benefits from enhanced dispenser marketing, but can also be a path to subsidize the hardware costs associated with the EMV upgrade cycle. “The key is to connect the dots between customer behavior and the fueling site’s growth opportunity at a tactical level using the right marketing tools when customers arrive at the fueling site first—at the fuel dispenser,” Nokes said. “Wayne and GSTV both have a tremendous amount of experience marketing at the dispenser and creating the best experience for that retailer’s customer, and we make it a priority every day to help our retail customers achieve their marketing goals.” n

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Digital Marketing at the Dispenser

Newsflash:

Gilbarco Veeder-Root and VeriFone Systems, Inc. join Forces for Digital Marketing at the Dispenser In an announcement that came in on Aug.

13 while the magazine was in production, and after the previous article was finalized, Gilbarco Veeder-Root and VeriFone Systems, Inc. will be collaborating on future fuel dispenser payment platforms to be developed and supplied by VeriFone. The solutions will meet convenience and fuel retailers’ functionality and regulatory needs in an increasingly complex payment ecosystem, as well as offer at-pump media advertising and entertainment.

Gilbarco will become the software and solutions integration lead and sales and service provider for forecourt payment systems developed under the partnership. The companies will work together to

transition the payment electronics in Gilbarco’s global dispenser product lines to VeriFone technology. However, both companies will continue to develop and market their point of sale systems for the petroleum and convenience market independently. In addition, Outcast Media, Gilbarco’s forecourt media business, and Applause TV, Gilbarco’s gas station TV network, will be merged with VeriFone’s digital media and VeriFone Digital Network businesses. “VeriFone’s partnership with Gilbarco, the world’s leading dispenser technology provider, is perfectly aligned with our terminal solutions and commerce enablement strategies and will allow us to offer the best payment and forecourt media solutions on the market to our clients around the globe,” said Paul Galant, CEO of VeriFone. “Our collective expertise and access to consumer insights provide significant business value to our clients, helping them increase sales at the pump and in-store.” “Gilbarco’s leadership in the convenience and petroleum vertical and VeriFone’s expertise in secure payments and media engagement make this an ideal relationship,” said Martin Gafinowitz, president of Gilbarco Veeder-Root. “Gilbarco has the largest installed base of outdoor payment systems in our industry, and combining our deep knowledge of systems and software integration with VeriFone’s broad payment expertise will greatly benefit our customers.” The VeriFone and Gilbarco partnership could create the industry’s largest interactive digital media network. For consumer packaged goods marketers and brand advertisers, VNET today reaches over 95 million monthly consumers within feet of a purchase decision. n FMNMagazine

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RETAIL OPERATIONS

by Shane Dyer

Get Smart about Fleet Card Acceptance in Your Retail Locations I

t’s undeniable that accepting fleet cards into your chain of service stations results in increased sales for both fuel and instore items. There have been numerous studies over the years that have confirmed fleet customers buy more than typical

retail customers. This is because the drivers of those vehicles are also buying deli items and beverages for their lunches, ice for coolers, and other items they may need during the course of their work day.

The real question for petroleum marketers who own and operate retail fueling locations is not whether they should embrace fleet fueling, but how to do it in a manner that maximizes their profits. There are four primary approaches available:

The first is to simply accept any fleet card that your point of sale/credit card processor will allow, and defer fleet opportunities you encounter to one of those options. It’s important to realize that, in taking this approach, you have no control or influence over the customer other than engaging them in some form of a loyalty program that will hopefully bring them back to your stations on a repetitive basis.

You should also understand that the major fleet card issuers are working against your effort to maximize margin by providing advanced price shopping tools that help drive the fleet customer into the lowest priced location. This might be good if you are the price leader in your market, but if not, they will be driving that customer you want to retain into your competitor’s location.

While this option is better than the first we’ve outlined, it still doesn’t maximize your margin or control over the customer. It’s also not a solution for smaller chains since the major fleet card companies only find it justifiable if you have a large number of stores, such as Sheetz, which has a private label program through WEX.

For example, Comdata offers a product which scores how well a driver has “shopped” to find the lowest price of fuel. The fleet manager can then correct a driver’s pattern or habit to ensure the driver is going to the lowest priced location. WEX and others have similar tools. In summary, if you want to control the opportunity, this isn’t the best approach.

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A more active approach is to partner with a major fleet card company to develop a private label fleet card for your company. In this scenario, the fleet card partner will manage all aspects of issuing cards, billing the customer, carrying the receivable, and incurring the bad debt risk. The benefits are that the customer will be locked into using your locations, and you will receive a minor commission on the sale. The customer will also be associating with your brand as your company name will be on the cards.

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For smaller retail chains with less than 100 locations, we find the best solution to be one of the following two options.

3 4

You can partner with a like minded petroleum marketer in your region that has an existing fleet card program in place, collaborate to develop your market, and drive those customers into your location through discounts and other loyalty efforts. Or you can take on the opportunity yourself by creating and marketing your own fleet fueling product. The latter is not as daunting as it might seem. In order to develop your own proprietary card solution, you simply need to engage one of the technology platforms that are available, establish a billing system, and begin selling and managing the customers that you acquire. In this scenario, you are in complete control over the customer and you will be able to maximize your margin since you will not be sharing it with anyone else. The customer will be bound to your locations, and you will be building on your brand identity, not someone elseâ&#x20AC;&#x2122;s. This will also increase the asset value of your business. n

If you have further interest in exploring your options for fleet fueling, feel free to contact Shane Dyer for a complimentary consultation courtesy of Fuel Marketer News.

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Shane Dyer Shane is the President of PowerUp Fleet, Inc. He possesses over 29 yearsâ&#x20AC;&#x2122; 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.

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Mobile Payments: Growing Excitement and Establishing Infrastructure by Vladimir Collak

In 2011, a kid out of Stanford University

landed $30 million funding for his mobile

payments company called Clinkle. Funding

came from the most respected Silicon Valley

venture capitalists and firms including

Andreessen Horowitz, Intel, Intuit, Peter Thiel

(co-founder of PayPal) and others1. By all

accounts, Clinkleâ&#x20AC;&#x2122;s investor pitch was very

impressive, but a pitch is all they had; there

was no product. To this day, after much drama

that included departure of key staff members

and layoffs, the company has yet to publically

launch its service2. How was a company with an unproven technology and an inexperienced

team able to get funding from so many Silicon

Valley luminaries? There is no doubt that the

allure of game-changing mobile payments

technology played a role.

Mobile payments are said to be one of the hottest technology segments right now. Simply looking at the numbers, according to Capgemini, worldwide mobile payment transaction values were expected to be $235 billion in 2013. Thatâ&#x20AC;&#x2122;s up 44% from the previous year. By 2015, that value is expected to climb to approximately $670 billion [3]. The real promise, however, is a potential disruption of a $6.9 trillion industry that represents global payments processed using credit and debit cards10.

RETAIL OPERATIONS Needless to say, companies that can provide solutions in this area can probably do very well. Take Starbucks for instance. Their mobile payments and loyalty programs have been phenomenally successful. In fact, Starbucks’ mobile payments revenue in 2013 was over $1 billion representing more than 6% of their total sales4,5. By the company’s own account, the value added to their brand and thus to its record breaking financial performance by mobile payments and rewards programs cannot be overstated5. One of the reasons these solutions can be so successful with consumers is because they combine both payments and loyalty programs in one easy to use app. By leveraging these technologies, consumers can often collect and redeem points for their purchases in addition to discovering new offers. In turn, retailers gain a better understanding of their customers’ buying habits. While much of this was previously possible without smartphones, mobile payments can offer a more seamless, contextual and essentially “magical” experience. An example of such “magical” experience is the new Open Table app. The app, which was previously only used for restaurant reservations, can now (in select locations) allow consumers to leave a tip and pay for a meal without ever calling for the bill. Think about it. How often have you found yourself impatiently waiting for a bill after your dinner? The vision behind mobile payments does not just stop with restaurants and smartphones either. Imagine your car alerting you when you’re low on fuel and offering a list of closest fueling stations. When you arrive at the station, your car recognizes the specific pump you parked next to and allows you to authorize payment with one simple tap. All you do is lift the nozzle, fill up, drive off and the transaction will automatically be settled. While this vision may not be a reality today, it will certainly be in the near future.

“

”

Even though retail, restaurants, and taxi alternatives are the most cited use cases for mobile payments, they are not the only ones using these technologies. In fact, just about every industry that sells to consumers is currently building or testing mobile payments.

Technologies that will make these experiences possible are already in existence and being tested and deployed today. For now we are simply early in the adoption and maturity cycles; widespread use will take some time. It took the magnetic stripe credit card four decades to get to current adoption. This is partly because much of the infrastructure required for any kind of payment system needs strong network effects. In other words, when more people adopt a technology, the more useful it becomes and the more people will use it. That’s one of the challenges faced by solutions like Google Wallet. The app allows consumers to use their phones to pay at retail locations. Unfortunately, in order to use it, the phone must have a special NRC (Near Field Communication) chip and the retail location must have a contactless reader. Because only some Android phones have the chip and Apple’s iPhone does not ship with it at all, the technology use is essentially non-existent. In fact, some people proclaim that NFC is dead because it’s unclear whether Apple will ever add this technology to its phone. As a result, countless alternative solutions for mobile payments have been developed over time.

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One example is the app from LevelUp that allows retailers to scan a barcode shown on the app. The barcode represents the consumer’s unique account number and lets the retailer settle the transaction with LevelUp systems in the back-end. A barcode scan is precisely the approach Starbucks’ app is taking. Alternatively, VeriFone has a technology which uses sound, undetectable by human ear, to transmit money from a smartphone to a payment terminal, thus eliminating the need for radio frequency technology such as NFC altogether9. Other businesses have developed their own versions of mobile payment applications specific to their use. For instance, companies like Uber and Lyft, which aim to replace traditional taxicabs, simply charge for their fare at the end of the trip based on traveled distance supplied by the driver’s phone GPS. Even though retail, restaurants, and taxi alternatives are the most cited use cases for mobile payments, they are not the only ones using these technologies. In fact, just about every industry that sells to consumers is currently building or testing mobile payments. For instance, Cumberland Farms, a popular

RETAIL OPERATIONS

Mobile Payments: Growing Excitement and Establishing Infrastructure

convenience-store retailer, is using their app to let consumers pay for gas and in the process allowing them to save 10¢ gallon, as well as to collect loyalty points7. Similarly, Gilbarco Veeder-Root reportedly plans to develop a mobile payment solution based on Bluetooth beacons. According to Parker Burke, director of marketing for Gilbarco, this technology will drastically reduce the number of steps that need to be performed before fueling begins, thereby creating a more seamless experience at the pump8. That’s because Bluetooth beacons such as the Apple iBeacon can detect consumer presence not only at the gas station, but also in front of a pump. While it’s clear that mobile payment technologies are in their infancy, while there is a lack of standards and clear winners have yet to emerge, it’s also clear that this new breed of technologies will eventually make inroads with consumers. For now it may still be easier to simply swipe a credit card, but companies like Starbucks have shown that if mobile payment systems provide a seamless experience coupled with loyalty programs, consumers will use them. Ultimately, it will come down to the ease of use and the benefit for consumers. Once someone perfects that formula, the world of mobile payments will change forever. n

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References 1. http://bits.blogs.nytimes.com/2013/06/27/silicon-valley-luminariesbet-on-clinkle-a-payments-start-up/?_php=true&_type=blogs&_r=0 2. http://www.businessinsider.com/inside-story-of-clinkle-2014-4 3. http://news.starbucks.com/uploads/documents/Starbucks_Fiscal_201 3_Annual_Report_-_FINAL.PDF 4. http://www.businessinsider.com/mobile-payments-at-starbucksexplode-in-2013-passing-the-1-billion-mark-2-2014-1#ixzz39HUdKN00 5. http://news.starbucks.com/uploads/documents/Starbucks_Fiscal_201 3_Annual_Report_-_FINAL.PDF 6. http://pay.opentable.com/ 7. https://itunes.apple.com/us/app/cumberland-farmssmartpay/id509328660?mt=8 8. http://c-storeadvisor.gilbarco.com/2014/02/payments-source-articleabout-mobile-pay-beacons-at-gas-stations/#more-784 9. http://www.verifone.com/industries/taxi/way2ride/ 10. http://www.businessinsider.com/mobile-will-shape-commerce-andpayments-2013-10. http://www.creditcards.com/credit-cardnews/history-credit-card-magnetic-stripe-1273.php

Vladimir Collak Vlad 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.

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RETAIL OPERATIONS

Stop Letting Your Back Office Application

Run Your Business

by Joe Kratochvil

Recently I had the opportunity to participate in a series of

You might ask yourself after hearing this description of a company doing everything right, why they had invited a consultant to their planning sessions? The answer is a simple one, and I suspect you may experience similar issues in your organization: Their corporate back office solution, and the way it was forcing them to conduct day-to-day operations, was becoming the single largest hurdle to continued business growth.

strategic planning sessions with a large petroleum marketer. I was excited to work with this company for several reasons. I had heard good things about this team, and have been tracking their growth for several years. Word in the industry is that they have ambitious goals and solid plans for achieving them. It is with satisfaction that I can say they did not disappoint. The various business unit leaders within this organization comprise one of the most talented, goal-oriented teams Iâ&#x20AC;&#x2122;ve had the pleasure to work with in the last several years. The ownership exhibits a strong dedication to the decision enablement of their team leaders. It was immediately clear that the progressive stance of the internal culture originated from the top down, and was a genuine part of their corporate DNA.

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This is a common problem that slowly builds over time, and typically happens through the best of intentions. As growing companies expand and their operations become more complex, they require enhanced reporting and analytics capabilities to make vital decisions for their business.

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RETAIL OPERATIONS The volatility of the market drives the need for real-time business tools capable of delivering information for on the spot decision making. Typical back office solutions that attempt to address this need offer the seductive mix of being a trusted vendor, the promise of industry knowledge, and a natural desire to solve problems for their clients. The result is often a tangled, ad-hoc sprawl of reactively developed customizations intertwined into the core back office system that inserts frustration into aspects of the business that have nothing to do with accounting. Initially, these customized solutions seem like a good choice for the client’s needs, but as the business continues to grow it becomes apparent that they are not scalable. Gradually your business processes and reporting capabilities grind to halt. Typically, software providers advocate a canned approach to specialized issues allowing them to reach the largest group of their customer base with the least work effort required. This is adequate for the majority of their client base, but as the industry contracts and individual marketers grow, the level of sophistication required to operate larger, often geographically disparate organizations cannot be met without substantial additions to the core system. As the demands of the client business continue to escalate, the various internal unit leaders begin to develop solutions of their own. They pull data out of Their corporate back office the back office system into solution, and the way it was Excel or other one off analysis options, and begin forcing them to conduct the downward slide into the day-to-day operations, hardships of a business was becoming the single strangled by its own growth. The result is a murky pool of largest hurdle to continued inconsistent information, a business growth. reactive rather than proactive posture, and the continuous erosion of confidence in the entire process.

“

”

As I sat listening to this talented group of people explain their issues it was apparent they understood their situation. They correctly identified that the company had outgrown its back office providers’ methodologies and unorganized sprawl across the organization. This vibrant, progressive company was crippled by an accounting solution that had reached into places in the business where it was ineffective at best, and in some instances negatively impacting the day-today operations forcing them into the untenable position of management by spreadsheet. They understood the symptoms of the disease and the diagnosis, but did not have a clear plan of treatment for resolution. The solution to the problem is simple. Understand what your back office software package is supposed to do for your business, and place it back into its rightful position in the corporate

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RETAIL OPERATIONS

Stop Letting Your Back Office Application Run Your Busniess

software portfolio. Your organization

the system operate as designed. If

decision support options that exist outside the

should not be a slave to methodologies

you have a growing sales force and

traditional energy marketer vendor lists. If your

that do not enhance and grow your

they need a scalable, mobile CRM

particular back office vendor balks at the idea of

business. This is no different than finding

(customer relationship management)

integrations between systems, this is a good

the right people resources to fill specific

package, find one that makes sense

indicator of their capabilities. This knowledge

business needs.

for the business. If you have diverse,

presents a strategic opportunity to find a vendor

large scale logistics needs, find a

that understands the growth needs of your

A back office system’s core capabilities

platform that will accommodate your

organization, and embraces those needs through

are to keep a record of the company’s

particular business case. If your

solid integrations. This is one of the foundational

sales and purchase transactions and

leadership team is not getting the

benchmarks for true vendor/ client partnerships.

update the inventory as needed. Invoices,

business intelligence they need to

receipts, and reports can also be

make effective and profitable

Back at our planning session, the team began

produced by the back office system. Let

decisions, explore the various

putting together a technical roadmap that will marry with their strategic goals to technical solutions, and provide capabilities to enable longterm growth. We outlined what each business unit needed, explored what software additions would be required to fulfill those needs, and launched a solid plan that will help the business meet the coming changes. As I shook hands and walked out the door, there is no doubt that this exciting group is headed for continued success. n

Joe Kratochvil Joe is the Founder and Chief Executive Officer of Clear Stone Solutions. He rejoined the Clear Stone team after a two-year hiatus, during which time he accepted the position of President of JPM Resources, after having served as the Director of DELTA (a strategically focused resources team) for Atlas Oil. Before founding Clear Stone Solutions in 2011, he was Heritage Petroleum’s Director of Information Technology. He was responsible for development of the technical vision for the company, in addition to various strategic responsibilities across the organization. During his tenure he developed technology and processes to enable corporate growth in the areas of pricing, logistics, and inventory management providing scalable growth for the organization. Contact: 812.319.5762 or email jkratochvil@clearstonesolutions.net Web: www.clearstonesolutions.net

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WHOLESALE & FLEET OPERATIONS

The Growing DEF Market

What’s Driving Consumption? by Fabricio Cardoso

The North American DEF market is expanding rapidly; it is now almost unrecognizable from the market that emerged

four years ago. Business models have evolved, the supply network is developing quickly and legislation is making increasingly stringent demands on the US and the wider North American market. Below, Fabricio Cardoso, Editor of Integer research’s new “DEF Market Dynamics Report” discusses the DEF market and the reasons behind its continuing growth.

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WHOLESALE & FLEET OPERATIONS Back in 2007, it became possible for medium and heavy-duty vehicles in the United States and Canada to be equipped with Selective Catalytic Reduction (SCR), a technology that would reduce harmful NOx emissions. This technology requires the use of Diesel Exhaust Fluid (DEF), a 32.5 wt% urea solution. In 2010, the Environmental Protection Agency (EPA) introduced even more stringent requirements, which prompted widespread application of SCR throughout the truck market, with most manufacturers immediately implementing this technology into their product portfolios. Navistar was the only OEM that decided against adopting SCR at the time, but eventually converted before 2013 year-end. As of August 2014, almost all new medium and heavy-duty trucks and buses in North America are SCR-equipped.

â&#x20AC;&#x153;

estimates that 15 to 20% of the current truck fleet in the United States meets EPA 2010 standards and is therefore equipped with SCR.

economy standards become mandatory in 2016 and when Phase 2 of the fleetwide CO2 compliance is implemented by 2018.

However, CO2 and fuel economy requirements will lead diesel and DEF to take different directions. Phase 1 of the fleet-wide CO2 compliance, already in place, and voluntary fuel economy standards, are already imposing engines to operate at optimal levels, requiring less diesel and producing less CO2. These operating conditions will have to be even more optimized when the fuel

Under these conditions, diesel consumption is likely to stabilize or even to decline over the next few years. But higher combustion temperatures and air intake in order to ensure better fuel combustion will result in higher NOx emissions, and therefore SCR will have to work harder to achieve the required emissions levels, which will result in increased DEF usage.

Even if the pump network takes some time to develop because of

â&#x20AC;?

the high investment required, the number of DEF pump locations tripled in two years, from 550 in mid-2012 to over 1,700 in June 2014, and is likely to continue growing as this number has not yet reached 5% of the total number of diesel filling stations in the region.

With the wide adoption of SCR comes increased demand for DEF. Typically, DEF dosage requirements range between 3% and 5% of diesel consumption in trucks, with the exact rate varying according to the engine calibration, the aftertreatment strategy, and the vehicle size and weight. With diesel consumption rising in the US by 30% between 2007 and 2013 according to data from the Energy Information Administration (EIA), DEF consumption has been growing, but at a much faster pace as the share of vehicles requiring the urea solution is also increasing. Integer FMNMagazine

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WHOLESALE & FLEET OPERATIONS

The Growing DEF Market

Even though heavier trucks are the main drivers for DEF consumption, pickup trucks, SUV models and other diesel passenger cars and light-duty commercial vehicles are increasingly taking up SCR, meaning that DEF requirements for these sectors are also rising. The diesel vehicle market for passenger cars in North America is marginal but expanding, as diesel cars allow better fuel savings than gasoline and as public opinion towards diesel turns more positive. Another important sector consuming DEF is off-highway equipment, which consists of machinery used in the agricultural, construction, forestry and mining industries. Strict emission requirements for these machines have led to OEMs taking a similar approach to the truck market and making SCR the aftertreatment technology of choice. This has been particularly noticeable since 2013 when Tier 4 Final standards came into force in the region. DEF consumption from off-highway equipment is also likely to increase rapidly in 2017, when flexibility rules run out and total equipment production will have to meet Tier 4 Final standards.

Source: Integer, EPA, NHTSA

DEF is subject to quality requirements that are stricter than for urea used in agriculture. Urea is mainly supplied from nitrogen plants located in the US and Canada. The fact that two thirds of the product is made of water implies logistics has a strong influence on the final cost, which prompts the development of solutionizing facilities next to the main consumption markets. These facilities can produce DEF from concentrated urea solution coming from the same nitrogen plants or from domestically sourced or imported urea prills. DEF supply formats have also been evolving since the productâ&#x20AC;&#x2122;s inception in 2010, when it was Source: Integer

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WHOLESALE & FLEET OPERATIONS

The Growing DEF Market

primarily available in jugs and drums and sold in OEM dealerships and truck stops, as well as in totes—small bulk storage containers of 275 or 330 gallons—which tend to become less important as the market progresses and bulk deliveries become more widespread. DEF is also now available from dispensing pumps at truck stops. Even if the pump network takes some time to develop because of the high investment required, the number of DEF pump locations tripled in two years, from 550 in mid-2012 to over 1,700 in June 2014, and is likely to continue growing as this number has not yet reached 5% of the total number of diesel filling stations in the region.

Fabricio Cardoso Fabricio Cardoso is a Senior Analyst at Integer Research and Editor of “DEF Market Dynamics Report.” Fabricio has several years’ work experience in fuels and biofuels quality, engines and emissions standards. He holds a degree in Chemical Engineering, an MSc in Transport and Sustainable Development and an MBA in Agribusiness.

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These supply formats have been following diverse pricing patterns. DEF prices from truck stops have remained stable over the last two years in the region, with average state prices in the US ranging between $2.60/gal and $2.95/gal during most of 2013 and most of the Canadian pumps selling DEF at CA$0.80/litre ($2.77/gal at August 2014 currency). On the other hand, bulk sales are much more volatile and dependent on urea prices and on the level of competition in a specific area. The DEF supply chain is constantly evolving and is yet to reach maturity. Prices are still looking for direction in an environment that is heavily influenced by other markets including automotive, energy and agriculture. Finally, the regulatory framework set by the government for the different categories of vehicles and equipment is likely to ensure that for the foreseeable future, in North America, SCR and DEF are here to stay. n The information above is based on findings from “DEF Market Dynamics Report.” This is a brand new report from Integer Research developed to bring industry players fully up to speed with DEF market developments that have occurred over the last four years. Covering legislation, DEF demand, supply and pricing, this report provides all the information market players need to make the most profitable business decisions and succeed in this fast paced market. To find out more, please email publications@integer-research.com. FMNMagazine

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WHOLESALE & FLEET OPERATIONS

Cold Filter Plugging Point: Let the Buyer Beware by Everett Osgood

The winter of 2013 – 2014 was one of extremes. Many regions of North America experienced

temperatures below their historical averages.

The images of trucks and automobiles lined up

along highways, unable to progress because of hazardous weather, are still fresh in my mind.

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Although many of these traffic misfortunes were due to road conditions, there were plenty of low temperature operability issues with diesel-powered vehicles last winter as well. Not just in the southerly states that are unaccustomed to getting such cold temperatures, but also in areas that are commonly affected by low temperatures.

Fuel Sampling Study Our company, MidContinental Chemical Company, Inc., is invested in creating additives that solve fuel issues such as winter operability. MCC undertook a sampling study (see sidebar) to learn more about the actual fuel characteristics available at the pump. For winter operability, we took a look at fuel samples and their cold filter plugging point characteristics.

CFPP Testing CFPP (Cold Filter Plugging Point) is an industry standard test method (known as ASTM D6371) for estimating the lowest temperature at which a fuel will give trouble-free flow in certain fuel systems. Bear in mind, the CFPP value is not an assurance of a fuel’s operability at that temperature. Operability is affected by a combination of fuel characteristics and fuel system design. The CFPP of a fuel can be determined using a manual method or an automated method. We do not see much difference in tests run on the same fuel with both methods, and the data discussed in this article were gathered using the manual method. As you might expect, when traveling from north to south in the United States, there are significant differences in the performance of diesel fuels available at retail. Our data was grouped by interstate highways running laterally, starting in the north and working southward—in other words, those well-traveled Interstates generally located in the more northern part of the U.S. (Interstates 94, 90, 80, etc.)

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High and Low CFPP Temperatures by Interstate Highway Chart 1 (next page) shows the broad variance, high to low temperature values as found in the collected samples. There are several specific items that we believe are important to highlight. In the group of I-94 samples collected, one fuel was known to have been treated with a low temperature operability additive. It happens to be the fuel with the lowest CFPP in this group. Other fuels sampled may, or may not, have been treated with an additive to improve its cold flow performance. It was not in our scope to learn beforehand if a given marketer was, or was not, selling treated fuel.

Tips on Diesel Fuel and Cold Weather Operability Everett suggests these practices in regard to winter operability and your diesel-powered vehicle. • Know your suppliers and where they source their diesel fuel. • Ask if the diesel fuel meets specifications of the Truck and Engine Manufacturers Association. • Make sure the fuel meets the current version of ASTM standard D975. • Specify your desired CFPP performance to your diesel supplier. • Use a suitable and quality aftermarket additive if the diesel fuel has not been treated for winter operability. • Keep your fuel storage tanks clean and dry. • Test diesel fuel periodically in cold-weather use.

Although it is a common practice for No. 1 diesel to be blended into No. 2 diesel during fall and winter months, we made no attempt to determine if any of these fuels were blends. (We discuss blending No. 1 diesel with No. 2 diesel below.) In the next three groups of samples, I-90, I-80 and I-70, we were surprised at the number of samples indicating a CFPP value of zero or higher. In the case of I-80, 25% of the samples, and for those collected along I-70, 50% of the samples, were at zero degrees Fahrenheit or higher. (I apologize to those chemists and other technicians who prefer Celsius to Fahrenheit; however, we believe most readers think in terms of Fahrenheit.)

CFPP Temperature Ranges in Select Metropolitan Areas We also discovered what we believe to be significant variances in diesel fuel samples taken in the same metropolitan areas (see Chart 2 CFPP Temperature Ranges in Select Metropolitan Areas, next page). Our assumption was that fuel marketed in a specific metropolitan area comes from the same source points, and that marketers would deliver comparable performance within that geographic market area. There are a number of possible explanations for the performance differences, however, we did not attempt to identify these through our testing.

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Cold Filter Plugging Point: Let the Buyer Beware

Blending No. 1 Diesel Fuel with No. 2 Diesel Fuel The blending of No. 1 diesel fuel with No. 2 diesel fuel is an age-old practice. Unfortunately, it’s a very costly practice as explained below.

Higher costs due to lower availability of Kerosene or No. 1 diesel Kerosene or No. 1 diesel production has continued to decrease over the past decade. Consequently, the cost or price differential between that of No. 2 diesel and No. 1 diesel continues to widen. We know of situations last winter where there was a $0.50 per gallon premium for No. 1 diesel.

Chart 1: High and Low CFPP Temperatures by Interstate Highway

Although it is more common for the blend of these two to be 80% to 90% No. 2 diesel, and 20% to 10% No. 1 diesel, we know of instances last winter where fuel was blended at higher percentages of No. 1 diesel, such as 50 and 80 percent. • A 50/50 blend, with No. 1 diesel fuel being $0.50 per gallon more expensive, equates to a blended diesel fuel that costs $ 0.25 per gallon more than No. 2 diesel. • An 80/20 blend, with No. 1 diesel fuel being $0.50 per gallon more expensive, equates to a blended diesel fuel that costs $0.40 per gallon more than No. 2 diesel. Blended fuel costs can be compared to the cost of No. 2 diesel containing a good cold flow improver additive with “equal to” or “better than” performance. These additives could likely increase the retail price of the fuel by $0.06 to $0.12 per gallon or more, but considerably lower than the cost of these higher percentage No. 1 blends. There is a substantial cost penalty for these high percentage blends of No. 1 and No. 2 diesel. Additionally, there is a BTU penalty, which results in reduced power and lower miles per gallon when blending No.1 with No. 2 diesel. The most cost-effective approach to improving winter operability is the use of cold flow improvers and/or a combination of cold flow improver in a low level blend of No.1 diesel with No. 2 diesel. There are a variety of cold flow improver chemistries available. Not all fuels are equally responsive to each chemistry. In other words, this is not an industry with a “one-size-fits-all” solution for improving low temperature operability of diesel fuel.

Chart 2: Examples of CFPP Temperature Ranges in Select Metropolitan Areas Why? When it comes to cold flow improvers, too much of a good thing can be a bad thing. Based upon the rather wide ranges of CFPP performance found in our samplings, how much cold flow improver is enough? And how much is too much? Overdosing can actually reduce the CFPP performance of the fuel. As you’ve probably gathered by now, mixing blends of diesel fuels, adding aftermarket cold flow improvers, and other practices can have a detrimental effect on the operability of your vehicle and your livelihood. The variability of the performance of retail diesel fuel, based on our study, can be significant by location and region. It is fair to conclude that it is in your best interest to follow the philosophy of “let the buyer beware.” n

Everett Osgood

Use of Aftermarket Additives

Everett (everetto@mcchemical.com) is the Market Manager for Fuel Additives at MidContinental Chemical Company, Inc. He has over 30 years work experience in the petroleum industry with a wide background of responsibilities in sales and marketing positions as well as operations and project management.

Another common practice is the use of aftermarket additives to improve low temperature operability. It is relatively common for a consumer to fill their diesel-powered vehicle with fuel and to also purchase an aftermarket cold flow additive. They pour the additive into the tank while they’re filling up. Unknowingly, that consumer may be doing more harm than good.

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by Brian Reynolds

The Silent Thief This story works best if you start humming the “William Tell Overture” i.e., The Lone Ranger

theme song and imagine the announcer’s baritone voice stating—“A flowing hose

pumping at 8 gallons per minute, a scent of gasoline, and a hearty, ‘HI Flow; there goes my Silver—Away!’ ”

Customers may love this modern day technical Robin Hood also known as meter drift, but

unfortunately this “Masked Marauder” is no friend

of retailers. The thought of giving away gas is more

traumatic than dramatic. Ok—enough of the melodrama. Most retailers give away gas and don’t even know about it. Out of sight, out of mind! Fuel is a product that most people never see. Think about it. It’s a liquid. It is delivered via a truck and unloaded via a hose. The only way to practically acknowledge its very existence is through an automatic tank gauge (ATG) and metered sales. I will save the ATG sermon for another time, but what if the meter for dispensing fuel is in “distress”? The Federal Government guidelines for meter calibration, which focus on accuracy, allow for an acceptable margin of error of +/- 6 cubic inches per 5 gallons of dispensed fuel. This value accommodates (more or less) the mechanical variance of “meter drift.” That amount may sound reasonable, however, any variance that is much greater than zero has a significant financial penalty.

Here are the statistics to keep in mind as to how the metering/dispensing process works. • Fuel is dispensed and metered in cubic inches, then converted to gallons. • There are 231 cubic inches in any 1 gallon of liquid. • There are 1,155 cubic inches in any 5 gallons of liquid.

All meters are built to purposely drift long for the consumers’ benefit. For illustration’s sake, let’s agree that every dispenser, on average, has at least a +1 cubic inch margin of error. (The government allows for a +/- 6 cubic inch margin of error.)

• (231 cu. in. x 5 gallons = 1,155 cu. in.) • Federal guidelines allow for meters/totalizers to be “off” by as much as + or - 6 cubic inches per 5 gallons of product dispensed.

If a 150,000 gallon a month C-Store with 8 hoses averaging 18,750 gallons per month has a single hose off by 1 cubic inch, this represents $50.00 per month in lost inventory. When 8 hoses are off by +1 cubic inch, they represent $400.00 per month in lost fuel inventory!

• So, as a rule of thumb, the amount of slack allowed in a meter is ½%: • 6 cu. in. / 1,155 cu. in. = 0.0052 • 0.0052 x 100 = 0.52% or ½%

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WHOLESALE & FLEET OPERATIONS This +1 cubic inch illustration makes it very easy to do the math to understand that even the best operators may have an average meter calibration greater than 1 cubic inch. So this lesson in physics and mathematics is very interesting, you might say, but who is going to send somebody out every day to verify that the meters are all within tolerance? Today there is a technology known as Continuous Fuel Monitoring (CFM). A sophisticated CFM system has the ability to detect fuel inventory losses such as a short delivery, leaks, incorrect blend ratios, cross-drops, fuel theft and meter drift. CFM technology calculates individual hose flow rates, determines precisely the percentage of loss due to meter drift and does so in an automated fashion, delivering the results quickly to a personal device or workstation display.

Instead of sending out an expensive, labor-intensive technician to check and calibrate every single nozzle, CFM meter drift alerts allow a company to send someone to calibrate only hoses that need calibration. Only CFM provides this unique information. In todayâ&#x20AC;&#x2122;s world of economic uncertainty, savvy retailers are looking for ways to minimize shrink. CFM is a process that eliminates shrink due to human error as well as problematic equipment nuisances. The Silent Thief, meter drift, is a real and easy-to-eliminate enemy for prudent Petroleum Marketers. n

What Does That Mean

CFM= Continuous Fuel Monitoring ATG= Automatic Tank Guage UST= Underground Storage Tank

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Brian Reynolds Brian has been a petroleum marketing professional for over 40 years. He began career as a youth working in a 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.

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TERMINALS & BULKPLANTS

Upcoming OSHA Regulations and Their Impact on Your Business

by Mark Stromme

Occupational Safety and Health Administration

(OSHA) regulations can have a huge effect on a companyâ&#x20AC;&#x2122;s bottom line. OSHAâ&#x20AC;&#x2122;s most recent semiannual regulatory agenda listed three agenda items. Two of these may soon become final rules and could impact the downstream petroleum industry. Another is in the pre-rule stage.

Final Rule Stage Walking Working Surfaces and Personal Fall Protection Systems (Slips, Trips, and Fall Prevention) In 1990, OSHA published a proposed rule to address slip, trip and fall hazards and establish requirements for personal fall protection systems. Slips, trips, and falls are among the leading causes of work-related injuries and fatalities. Due to a slow-moving regulatory process, and issues raised during the public comment period, OSHA withdrew the 1990 proposal noting that it was out-of-date and did not reflect current industry practice or technology. This led to the Agency going back to the drawing board and publishing a second proposed rule in 2010. OSHA expects to finalize that rulemaking in October 2014 (although that date is not set in stone). Continued

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World markets for petroleum and other liquid fuels have entered a period of dynamic change—in both supply and demand. Potential new supplies of oil from tight and shale resources have raised optimism for significant new sources of global liquids. The potential for growth in demand for liquid fuels is focused on the emerging economies of China, India, and the Middle East, while liquid fuels demand in the United States, Europe, and other regions with well-established oil markets seems to have peaked. Source: EIA International Energy Outlook 2014

Bottom Line: This means that the surplus of Oil production here in the US will not necessarily lower the “street” price for transportation fuels as refiners turn to exporting refined products to overseas markets at a higher price.

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TERMINALS & BULKPLANTS

Upcoming OSHA Regulations and Their Impact on Your Business

Some of the major changes include: • Requiring regular inspection of all working-walking surfaces, • Consolidating existing requirements for all ladders used in general industry, • Combining, clarifying, and updating existing requirements (and adding new provisions) for stairs and stairways, • Removing all the existing scaffolding requirements with the exception of the mobile ladder stand requirements (the new rule will require employers to comply with the construction industry standards in 1926, Subpart L, “Scaffolds”), • Providing the ability to choose from several options in providing fall protection, including personal fall protection systems (e.g., travel restraint systems, fall arrest systems, positioning systems) • Explaining when training—and retraining when necessary— would be required, and

Confined Spaces in Construction

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• Adding a new section to Subpart I, “Personal protective equipment,” that would provide criteria for personal fall protection equipment. This section would make the general industry standards consistent with existing construction and maritime standards regulating fall protection, as well as current industry practice, and give clear standards on fall protection PPE to employers.

OSHA’s general industry standard for confined spaces became effective April 15, 1993. However, it does not apply to construction work since confined space entries for construction employees pose conditions that are unique to the industry. That is why OSHA proposed a rule to protect employees from the hazards resulting from exposure to confined spaces in the construction industry. Under the proposed rule, employers would first determine whether there is a confined space at a job site. If there is a confined space, the employer would determine if there are existing or potential hazards in the space. If there are such hazards, the employer then would classify the space according to the physical and atmospheric hazards found in it. The four classifications are:

Complying with these changes could be a significant challenge for downstream petroleum industries. Employers should stay tuned for the final rule to be published in the Federal Register.

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• Isolated-Hazard Confined Space,

When the rule becomes final, any time construction work is done in confined spaces in downstream petroleum facilities, the requirements of the new confined spaces rule would need to be followed.

• Controlled-Atmosphere Confined Space, • Permit-Required Confined Space, and • Continuous System-Permit-Required Confined Space. The proposed requirements for each type of confined space are tailored to control the different types of hazards. When the rule becomes final, any time construction work is done in confined spaces in downstream petroleum facilities, the requirements of the new confined spaces rule would need to be followed. The final rule is expected soon. However, the date of the final rule has been pushed back numerous times, so it can’t be predicted when it will be published in the Federal Register.

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TERMINALS & BULKPLANTS

Pre-rule stage Process Safety Management of Highly Hazardous Chemicals There is one potential rule in OSHA’s prerule stage that would have a major impact on downstream petroleum industries. This is the Process Safety Management (PSM) standard. OSHA originally promulgated the PSM standard in 1992 in response to a number of catastrophic chemical-release incidents that occurred worldwide. The main objective of the PSM standard is to prevent or minimize employee exposure to the hazards associated with uncontrolled releases of highly hazardous chemicals. On August 1, 2013, President Obama signed Executive Order 13650 entitled Improving Chemical Facility Safety and Security. Section 6(e)(ii) of the order

Upcoming OSHA Regulations and Their Impact on Your Business required OSHA to publish, within 90 days, a Request For Information (RFI) designed to identify issues related to modernization of its PSM standard and related standards necessary to meet the goal of preventing major chemical accidents. OSHA identified several topics as potential candidates for rulemaking or enforcement policy changes. Here are a few of OSHA’s recommended changes: • Clarifying the PSM exemption for atmospheric storage tanks,

Wrap up The full impact of these three rules on the oil and gas industry is yet to be determined. However, it is safe to say that the final versions of these rules will have far-reaching effects throughout the industry. Stay tuned for developments on these three rules, and any other additional rules, that could affect your company’s bottom line. n

• Removing the oil- and gas- well drilling and servicing exemption, and • Reviewing the applicability of the PSM to oil- and gas-production facilities. OSHA determined that revisions to its PSM standard may be needed to address issues in coverage. The comments from the RFI were to be analyzed by the end of July 2014. There is much to be done before the rule moves to the proposed rule stage.

Mark Stromme Mark is one of the lead safety editors at J. J. Keller & Associates, Inc. He specializes in OSHA construction and general industry safety and is an authorized OSHA Construction Outreach Trainer. At J. J. Keller Mark researches and develops content for a variety of proprietary products, including training videos, newsletters, handbooks, manuals, and software. His work has also appeared in ISHN, Occupational Health & Safety, Workplace HR & Safety, BIC, EHS Today, Modern Contractor Solutions, and Tow Professional. Mark contributed to the OSHA 5810 – Hazards Recognition and Standards Training for the Oil and Gas industry and speaks frequently to industry groups about safety and regulatory issues. Copyright 2014 J. J. Keller & Associates, Inc.®, PO Box 368, 3003 Breezewood Lane Neenah WI 54957-0368

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BUSINESS OPERATIONS

Growth in Use of

Transactional Risk Insurance by Greg Cushard and Charles Sternberg

he merger and acquisition community is increasingly accepting transactional risk insurance products as strategic alternatives to traditional negotiation tactics. The convenience and gas retailing industry is one of those sectors seeing growth in M&A opportunities. Today, the market demands that financial buyers invest more of their own capital into their investments at closing and use operational gains to drive increases in the EBITDA of individual investments. A financial buyer must prove that its investment thesis yields attractive returns to compete effectively for the monies that fuel this sector.

From an insurance and employee benefits perspective, there are several key processes in place to assist a buyer in achieving its financial objectives. First and foremost is a due diligence process in which financial, legal and operational aspects of the target are closely reviewed to vet the quality of earnings and identify exposures to the targetâ&#x20AC;&#x2122;s financials. Second is the maintenance of a solid relationship with insurance and benefits experts to assist the buyer in identifying ways to reduce expenses and increase EBITDA. The use of portfolio purchasing strategies offers the buyer a significant opportunity to achieve these cost savings while improving the quality of insurance coverage. Further, these processes allow buyers and sellers with reduced appetites for risk to complete transactions.

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Growth in Use of Transactional Risk Insurance

In addition, greater awareness of the applicability of the products available on the part of legal and tax advisors has led to an increase in the use of transactional risk The primary advantages of purchasing insurance. Following their initial Representations and legal contingency insurance include development, transactional risk products Warranties Insurance providing certainty around an unknown such as representations and warranties, legal outcome that could affect deal The most popular of these products is legal contingency, and tax liability representations and warranties (R&W) valuation and preclude the closing of a insurance were not viewed as an attractive insurance. It provides coverage for means of risk transfer to backstop the transaction, transferring the risk of an financial loss associated with an indemnification provided in a purchase adverse judgment to a financially stable unanticipated breach in a representation agreement or to ring-fence an exposure third-party and obtaining legal claims or warranty within the executed purchase with potentially significant impact to the management expertise from an agreement. Eligible transactions include financials of a buyer. Many of the products mergers, acquisitions, mezzanine failed to catch on due to narrow coverage insurance company that includes the financings, and other forms of capital grants, high premiums and high retention review of legal tactics and strategies infusions and divestitures. Policies may be levels. Now, the products are maturing. employed by the defendant. purchased by both the buy-side and the With more than a decade of underwriting sell-side. A sell-side policy provides results and legal precedent to which to indemnification and risk transfer, and defer, insurance companies are now more excess of a retention in the event that the comfortable with broadened coverage seller is sued for an alleged breach of a terms and reduced rates. Finally, the representation or warranty. A buy-side policy also provides underwriting process has become simpler. A cadre of coverage for an alleged breach of a representation or experienced transactional attorneys specializing in litigation, tax warranty, but it is a first-party contract that allows the buyer to liability, product liability and environmental liability has supported claim proceeds directly from the insurer. the products’ growing popularity by reducing the time and cost associated with underwriting. There are several benefits derived from purchasing a representation and warranties policy. From a buyer’s perspective, the policy provides a means to guarantee the collection of the indemnity in the event that the indemnitor is unwilling or unable to pay. The policy also can be used in lieu The sell-side party to a transaction wished to divest itself of the of an escrow or other holdback. As such, it can be structured majority of its c-stores and return the proceeds of the transaction to allow a buyer to offer a more attractive bid to a seller since to its limited partners. The seller’s version of the purchase the seller may receive virtually all of the proceeds of the sale agreement offered zero funds to remain in escrow to pay for at closing. Finally, for both parties to the transaction, the environmental remediation obligations. The seller purchased an policy helps to eliminate post-closing surprises. All this being insurance policy that would indemnify the buyer in the event the said, representations and warranties insurance is not “bad seller defaulted on its financial obligations to the environmental deal insurance” and should not be considered a substitute for remediation contractor. This was unlike a cost cap policy that conducting a thorough due diligence process. would have paid out if the remediation costs exceeded the

first Deal Case Study

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contract. As such, a transaction was completed where it may not have been in the absence of a transactional risk product.

Types of Transactional Risk Insurance Many transactional risk products have gained popularity as the market has matured and the alternative investment community has faced new challenges, including: n Representations and warranties insurance n Tax liability insurance n Legal contingency insurance n Environmental liability insurance

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BUSINESS OPERATIONS

Growth in Use of Transactional Risk Insurance

second Deal Case Study

The use of portfolio purchasing strategies offers the buyer a significant opportunity to achieve these cost savings while improving the quality of insurance coverage. Further, these processes allow buyers and sellers with reduced appetites for risk to complete transactions.

Buy-side party wishes to ensure that the net operating losses (NOLs) incurred by a target company will be available to offset post-closing earnings. The buyer purchases a tax liability policy to provide coverage against a financial loss in the event that a taxing authority disallows the use of the NOLs because of a prior change in control. The policy facilitates the transaction by providing coverage for taxes, interest, fines, defense and gross-up in the event of an adverse ruling.

Legal Contingency Insurance

Buyers and sellers use legal contingency insurance for a broad range of legal issues. The policy is primarily used to put a ring-fence around a known liability or threat of litigation, or to provide financial certainty surrounding an adverse ruling or final adjudication. This is achieved by providing limits of liability thought to meet or exceed the worst possible outcome or providing limits in excess of a retention. Other applications include: • Coverage for legal clawback exposures, or monies owed to another party to a transaction based on an indemnification agreement

Tax Liability Insurance Tax liability insurance provides coverage for unpaid taxes, interest and penalties incurred when a taxing authority successfully challenges a covered tax position. Defense and gross-up costs (income tax on the receipt of insurance proceeds) may be covered as well.

• Successor liability exposures, defined as liabilities incurred as a result of an asset purchase in which liabilities are not assumed • Fraudulent transfer or conveyance exposures (i.e., a pre-bankruptcy transfer of assets for little or no consideration) • Contract issues, inclusive of any action that may be viewed as a breach of contract or financial loss associated with the cancellation of a government contract for nonappropriation of funding

Tax liability insurance is particularly effective in transactions for which there is no clear precedent established by a taxing authority, the amount of a potential tax liability creates a need to transfer the risk to another party, and when it is not possible to obtain a private letter ruling from a taxing authority prior to closing. Current concerns encountered on transactions include: • Will there be taxable cancellation of debt (COD) income? • Will prior interest deductions/net operating losses be challenged?

What Does That Mean

R&W= Representations and Warranties EBITDA= Earnings Before Interest, Taxes, Depreciation and Amortization

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BUSINESS OPERATIONS

Growth in Use of Transactional Risk Insurance

Coverage may be purchased to indemnify the seller (defendant in a legal proceeding) or the buyer. The primary advantages of purchasing legal contingency insurance include providing certainty around an unknown legal outcome that could affect deal valuation and preclude the closing of a transaction, transferring the risk of an adverse judgment to a financially stable third-party and obtaining legal claims management expertise from an insurance company that includes the review of legal tactics and strategies employed by the defendant.

fourth Deal Case Study A buyer wishes to purchase a portfolio of c-stores from a seller. It has been determined and agreed that there are known environmental liabilities that need to be cleaned up by the seller. The buyer is concerned about the unknown liabilities that may exist once the excavation begins. The buyer purchases a preexisting policy to cover any unknown environmental liabilities and purchases a new conditions policy to protect against future unknown occurrences. The policy facilitated a quick close with minimal funds held in escrow.

third Deal Case Study Conclusion A buyer wishes to purchase a portfolio of c-stores from a corporate entity. The senior managers of the entity have been indicted by federal and state authorities for embezzlement and falsely certifying records. Authorities are pursuing the personal assets of the indicted senior managers, but not the assets of the corporate entity. The buyer purchases a legal contingency policy to protect against financial loss should federal or state authorities decide to clawback the entity’s assets at a later date.

Transactional risk products effectively transfer the risk associated with a broad range of liability issues that can effect deal valuation or even block a transaction from being completed. They offer the parties to a transaction some certainty around valuation and quality of earning issues. However, the marketing and underwriting processes inherently involved in purchasing transactional risk products are complex. Lockton advises each of the parties to a transaction to determine when and how transactional risk insurance products best fit within a comprehensive risk management strategy. n

Environmental Liability Insurance Environmental liability insurance is the oldest form of transactional risk insurance. As such, the environmental liability market is characterized by having the largest number of competing insurance providers, the broadest coverage terms, and significant market capacity. Environmental liability policies may be written to provide several first- and third-party insurance coverages, including: • Preexisting, known conditions (remediation cost cap) • Preexisting, unknown conditions (pollution legal liability) • New conditions resulting from the target’s operations (first- and third- party exposures) • Third-party pollution liability incurred while transporting waste • Third-party pollution liability at non-owned disposal sites (NODs), inclusive of coverage for bodily injury, property damage, and remediation costs as a potentially responsible party (PRP) An environmental liability policy may be used to facilitate a deal by providing a buyer with a measure of certainty surrounding these complex liability issues.

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Greg Cushard

Charles Sternberg

Greg is vice president /producer at Lockton, leading a strategy and consulting practice. His practice expertise at Lockton is in high risk energy companies, focusing on corporate insurance brokerage, enterprise risk management, captive insurance consulting, and employee benefits. Cushard’s petroleum and crude oil industry expertise resides with refiners, terminal and storage facility operators, gas and convenience store operators, wholesalers, private fleet haulers, and rail exposures. Contact: gcushard@lockton.com or www.lockton.com

Charles is a vice president and project manager at Lockton. He is a senior level risk management consultant with over twenty years of leadership and management experience. Sternberg is a recognized subject matter expert in insurance due diligence, transactional risk products and portfolio insurance programs. He has participated in over 650 private equity deals as an underwriter, insurance broker and diligence project manager.

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BUSINESS OPERATIONS

Mergers & Acquisitions

Proper Planning Prevents Poor Performance by Fred Whitaker

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BUSINESS OPERATIONS

Everyone loves a deal. Deals are

intellectually challenging, exciting, and provide the allure of dramatic growth. It can take years of hard work to produce the same revenues and profits you get from a great purchase. Yet, the synergy expected from the acquisition often doesnâ&#x20AC;&#x2122;t materialize. In my 23 years of experience, I have found that the preparation entrepreneurs put into their existing operations often gets replaced by the passion for the deal. My point in this article is not to reduce the passion, but rather to insert the same preparation and process that you do for daily operations. Proper planning prevents poor performance!

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For acquisitions, I believe the proper planning has three distinct phases:

1 2 3

Operational Excellence, not only in the target but the acquirer and a plan to continue in both. Due Diligence that is truly diligent. Financials alone are not the totality of due diligence. Our willing suspension of disbelief should be left for action adventure movies. Deal Structuring that works for everyone. Structures should not only focus on how to get the deal done, but how to ensure the future success. Most people in the heat of a deal focus on the structure, but I encourage you to do that after the other two.

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BUSINESS OPERATIONS

Operational Excellence For twenty years, from the dawn of the M&A era in the 1980s to the financial crisis of 2008, the catch phrase for those acquiring was “market share.” Entrepreneurs looked to increase market share through acquiring another favorite cliché, the “bolt-on.” I’ve got a great business; I’ll grow my market share by bolting on one competitor after another. Profits will grow because there will be synergies that cut overhead. Instead, what happened as deals matured and the economy slowed was that many businesses found that the “bolt-ons” didn’t really fit in terms of products and services. Operational issues in the main business and the acquisition were amplified by putting them together; no one took ownership of the deal and the economies of scale didn’t come through. During the last five years, businesses have had to concentrate on their “core” to survive. My observation is that those who acquired well always concentrated on their “core.” If your core is not as operationally excellent as it should be, throwing another business on top of it will not make things better. It will make things worse and potentially destroy what you already have. Only once you are operationally excellent will you and your staff truly have the time to dedicate to integrating an acquisition. Conversely, entrepreneurs often look at competitors in distress or competitors where the operators wish to retire for their acquisition targets. The thought process is that economies of scale and synergy are easier where you can pick up profits in making the target operationally like you, and/or you can run it without the cost of the operator. Interestingly, the flaws in a distressed target often infect the host, and people forget that operating companies need operators to be successful. Ironically, it is often the operator who is leaving who was driving the unique market niche or profitability of the target. Internally, you need a deal champion to take responsibility and be held accountable to the integration.

Mergers & Acquisitions—Proper Planning Prevents Poor Performance Externally, that champion needs to become the mentee of and be trained by the operator leaving, so that much of the value you are buying is harvested. Otherwise you will have staff that never accepts the deal but through a “soft yes,” and your new division will be rudderless. The deal champion has to be the new operator. Another issue in preparation is truly identifying whether the acquisition’s products and services are the same as your core, adjacent to your core or ancillary to your core. Too many acquisitions were considered just “bolt-ons” when what they did was product adjacent or product ancillary. Without “tribal knowledge,” product adjacent and product ancillary acquisitions need the operator to stay in order to be successful and not detrimental to existing operations.

Due Diligence Once you know that you are operationally excellent enough to bring on an acquisition, and you’ve provided for operational issues with a champion, you have to really look at what you are buying. It may appear that I am stating the obvious, but so many deals give too little attention to due diligence. You have to be diligent in your diligence. I have been involved in many deals where all that was looked at were the financial statements and tax returns. A cash flow model was built, a price was offered and accepted and a deal closed, only to find out later the target was a mess and should have been bought at a lower price or not at all. In my due diligence list, financial information is a significant section, but it’s just one of three categories. Legal and operational information are the other two major sections. Items that are out of whack in these sections often have a time bomb effect and can dramatically effect financial performance once the force of the operator’s personality gluing things together is gone. Due diligence is also more than just a list and checking the boxes. I’ve seen people ask for a lot of information then look at half of it. The true value in due diligence is the FMNMagazine

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puzzle pieces you put together and the analysis you undertake with the information. Too often people ignore red flags because they are in love with the deal. They willingly suspend their disbelief. That is great for watching a movie like Pacific Rim or The Mummy, but not in buying a business. Allow the red flags to paint a truer picture of the target, instigate more questions and even encourage you to seek concessions or walk from a bad deal.

Deal Structures That Work for Everyone Now that we are operationally excellent, have a champion to hold accountable and we know all the pitfalls, we can concentrate on deal structure. A deal by its very nature must be a win-win for both sides to feel good. But countervailing interests are hard to bring together. Sellers want to sell stock for capital gains treatment and to walk from liabilities. Buyers want to buy assets so they can depreciate them—giving the seller recapture—and liabilities are left behind with the seller. But bringing these opposing interests together is just one aspect to making a great deal. Any structure should not only merge these interests, but also tie both parties into the success of the business going forward. The classic technique is for the seller to take back note with an earn out component, but it’s not the only way. If you want a seller to consider an asset sale, offer a consulting agreement for prior owner to a new entity combined with a defined benefit plan. While it helps you to have the deductible consulting agreement, it also ties the seller into the continuing operational success. The defined benefit plan element defers income and taxation for the seller, and gets them closer to the capital gain rates they would have had in a stock sale. Sellers are also selling because they don’t want the hassles of being in business, so if you want them to do an asset sale,

BUSINESS OPERATIONS collect the old AR for them. It also keeps you close to the customer you purchased, keeping them from being confused and increasing the likelihood of success. Finally, if you want a seller to do an asset sale, agree to assume some liabilities you might not need operationally. Pick up some favored employees, the warehouse you don’t need, etc. You might not have the cost savings you wanted, but often keeping operations intact will actually help post-closing success. Sometimes a seller will not sell unless they are selling their stock. Often, you need to own the stock for license or supply contract grandfathering. A common technique to provide a buyer asset basis to depreciate in these situations is an Internal Revenue Code 338(h)10 election. It works so well that it often allows a gross up of the purchase price to cover the extra tax burden for the seller. Holding back escrows and balance sheet adjustments are two other tools that can be used to make sure the seller is your partner going forward—avoiding hidden

Mergers & Acquisitions—Proper Planning Prevents Poor Performance

surprises both pre and post close. Some of the purchase price can even be allocated to environmental insurance to protect both buyer and seller. Finally, a great tool to incentivize sellers and reduce risk in stock sale is to break off some of the value into intellectual property licensing. It will reduce the length of good will and keep the seller tied to the ongoing success of the business.

Conclusion

Focus on your own operational excellence and have a champion to keep operational excellence in the target going forward. Be diligent in your due diligence. Then structure your deal to work for both parties, tying both parties into success going forward. With this proper preparation you will substantially reduce the risk of poor performance in your mergers & acquisitions. n

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Fred Whitaker Fred Whitaker is the managing partner of Cummins & White, LLP. He specializes in commercial transactions and corporate governance and has a keen understanding of the petroleum industry. During his career, he was vice president and general counsel of SC Fuels in Orange, California, and later became chief operating officer of their Northwest Division. Whitaker is a member of Society of Independent Gasoline Marketers of America (SIGMA) and California Independent Oil Marketers (CIOMA). Contact: fwhitaker@cwlawyers.com

BUSINESS OPERATIONS

Mergers & Acquisitions—Proper Planning Prevents Poor Performance

Mergers and Acquisitions

LEGAL

OPERATIONAL

a. Compliance i. Permits and government consents required by the Company for the conduct of their respective business operations, including franchise licenses and any other licenses required

a. Employee Benefit and Worker’s Compensation Plans i. Copy of relevant insurance policies ii. Schedule of expenses for the last five years iii. Loss Runs for the last three years showing: 1. The amounts paid to date in respect thereof 2. The current status of such claims 3. The amounts, if any, reserved for such claims

b. Ownership, Buy-sell/Shareholder Agreements i. Corporate record book, Articles, Minutes, By Laws ii. Buy-sell agreements, shareholder agreements, and similar corporate ownership/governance agreements, if any iii. Documents relating to any past ownership interest of the Company in other enterprise iv. Stock transfer ledger of the Company and copies of stock certificates of the Company

b. Labor Information i. Labor wage structure i. Employee grievances for the past two years iii. Schedule of any employment litigation or arbitration proceeding pending or threatened against the Company iv. Employee turnover statistics v. Employee Contracts and list of independent sales persons, consultants or other independent contractors and copies of all agreements

c. Litigation i. A list of all pending or threatened litigation affecting the Company including parties, remedies/damages sought, nature of the action, amount of any insurance and whether any insurer has disclaimed coverage, and a list of all pending or threatened regulatory proceedings affecting the Company

c. Organization i. An organizational chart for management of the Company and the description of number of employees by function ii. Biographies and resumes of senior managers iii. Schedule of officers and directors or other key employees who have recently resigned or been terminated (and reasons for resignation/termination) iv. List of employees by location, department and salary v. Bonus payments for past 2 years vi. Description and itemized schedule of all non-salary “perks” offered to employees vii. Safety Records, meeting minutes, MSDS, HR Training Records Read more page 90

d. Contracts i. Any material supply or requirements contracts to which the Company is party to ii. Open Purchase orders and other similar contracts and commitments iii. Open Contracts relating to capital expenditures in excess of $10,000

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BUSINESS OPERATIONS

Mergers & Acquisitions—Proper Planning Prevents Poor Performance

Mergers and Acquisitions Due Diligence Checklist

FINANCIAL a. Assets i. Fixed Assets Listing/Ledger 1. Any recent appraisals on the fixed assets 2. List of all depreciable property of the Company showing original cost basis, depreciation taken and current depreciated basis 3. Buyer requires an independent appraisal of all fixed assets at an early stage of due diligence at the expense of the Buyer ii. Real Property 1. Copies of deeds with respect to all owned real estate, including copies of title papers, title insurance policies, appraisals, and surveys 2. Certificates of occupancy and length of Company’s occupancy for each facility iii. Accounts Receivable (only used to determine viability of customer base) 1. Copy of current detailed accounts receivable aging and analysis 2. Bad debt reserve calculation 3. Schedule of any material write-down or write-offs during the last five years iv. Inventory 1. Summary of latest inventory run; new work in process, completed goods 2. Working papers for physical inventories and reconciliations for the past two (2) years 3. Physical inventories: most recent results by location 4. Detail of any prepaid inventory at the most recent month end and as of now 5. Description of which costs are included in inventory (invoice cost only, freight, discounts, etc.) 6. Summary of current outstanding POs, by vendor, by delivery month v. Intellectual Property 1. Summary of significant computer software used or acquired by the Company and copies of related licensing agreements vi. Lien of Assets 1. List of any liens on Company’s real estate assets 2. List of any liens on Company’s non-real estate assets vii. Information Systems & Intellectual Property 1. Description and details for all information systems 2. Flow chart for information systems, copies of all licenses for all software 3. Trademark, Trade Name, Copyright, and Patent Registrations FMNMagazine

b. Liabilities i. Accounts Payable and ageing 1. Credit terms for top 10 suppliers 2. Listing of top ten vendors for last two (2) fiscal years and year-to-date ii. Accrued Expenses 1. Description of calculations of major accruals 2. For any “other,” “miscellaneous,” “general” accrued expenses or accounts receivable GL accounts, please provide. c. Financial Statements i. Historical Financial Statements 1. Financial statements for past fiscal year of the Company including balance sheets, income statements, changes in financial position and stockholder’s equity and reports by independent accountants with respect to such statements 2. Review the auditors adjusting entries for the most recent fiscal year; describe any material items. 3. Buyer requests an interview with the current CPA, costs to be borne by Buyer ii. Capital Expenditures 1. Detailed schedule for last 2 years capital expenditures. 2. Planned capital expenditures for next full fiscal/calendar year. d. Taxes & Other i. Copies of the following: 1. Documentation of three (3) years of income tax returns, jurisdictions, payments, audit reports, etc. ii. Property Taxes 1. A description of annual secured and unsecured property taxes, any property tax appeals, proceedings, copies of assessments, statements, payments for the last three (3) years iii. Sales and Excise Taxes 1. Documentation of three (3) years of sales/excise tax returns, jurisdictions, payments, audit reports, etc. iv. General Business Information 1. Any recent general promotional materials with respect to the Company or its business, press releases and articles about the Company 2. Standard product documents including brochures 3. Toward the end of the Due Diligence process, buyer is to be furnished a customer list with recent sales history. n

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The general outlook for motor gasoline is for declining consumption as average new vehicle fuel economy continues to improve. As new cars replace less-efficient older cars, the increase in the average fleet fuel economy is expected to outpace the growth in the driving age population and vehicle miles traveled and put continuing downward pressure on gasoline consumption. Source: Tancred Lidderdale, EIA

Bottom Line: This means that fuel retailers have to continue to grow gallons sold per site or cut their costs to grow revenues.

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BUSINESS OPERATIONS

Financing When You Want It for What You Need and at the Right Rates by Corey Henriksen

Obtaining good financing is crucial to

any downstream petroleum business, whether retail or wholesale. Done poorly, it will force a company out of business. Done well, it will add big dollars positively to the bottom line.

BUSINESS OPERATIONS

There are good reasons for taking financing very seriously right now in growing your business. Historically, interest rates are very low. Properly structured financing provides an interest expense that is a minimal business cost when you look at the possible profit, both short-term and long-term, that the financed opportunity generates. Opportunities for acquisition abound whether they are individual site purchases, troubled asset purchases, consolidator spin offs or major oil company real estate sales. You may be a dealer who is seeking acquisition funding or ground-up construction financing, reorganizing your capital structure to line up long-term financing with long-term assets, seeking a new banking relationship for lines of credit or term loans, or trying to free up equity in assets. You may be a distributor who has the same needs as the dealer cited above. In addition, you may be focused on increasing capacity for fuel purchases through increasing accounts receivable lines. Or in your efforts in building volume and signing up supply agreements, you also may have dealers who need financing for imaging and upgrades.

You need to make sure that your loan request package is in front of the right lender. Some lenders finance real estate only; some finance a combination of real estate and businesses; some finance equipment only while still others focus only on working capital and accounts receivable. In addition, size matters. Not only would you go to different lenders for different types of financing, but also for different loan sizes. Some lenders specialize in single site acquisitions, others in multi-site multi-profit center capitalizations. Some lenders specialize in SBA, while others focus purely on conventional loans. Community banks tend to be more single-asset real estate focused and work within their local area footprint, while national and large regional banks utilize broader-based covenants and structures within a large geographical area.

Lenders: Different Horses for Different Courses The good news is that there are many funding sources looking at downstream petroleum in their continual search for quality loan product. Many lenders are now much more comfortable with financing convenience stores, gas stations and truck stops. As you survey the spectrum of lenders, from commercial banks (whether national, regional or local) to pension funds, insurance companies and specialty lendersâ&#x20AC;&#x201D;keep in mind that â&#x20AC;&#x153;one size does not fit all.â&#x20AC;? FMNMagazine

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BUSINESS OPERATIONS

Financing When You Want It, for What You Need and at the Right Rates

Getting Lenders Interested Once you’ve determined your objectives and the proper lender type for the assets to be financed, then focus on the needs of the particular lenders you plan to approach. As a general rule, any lender, whether it’s a large national institution or your brother-in-law, will look to the following guidelines:

Obtaining good rates and terms for your retail petroleum business is not rocket science—it’s just good common sense (and doing your homework). Prepare a package that explains your business and focuses on what you want to accomplish in obtaining the financing. Determine what’s important to you, whether it is rate, term, guarantees, etc. Explain the nuances of your profit centers, e.g., what happens to profit when prices go up and credit card fees increase. Remember, lenders have to understand your business, or they will not lend.

• Be able to show that you have seasoned experience in operating a downstream retail petroleum business. • Be able to prove up sufficient cash flow to cover the annual debt service (expressed as a debt coverage ratio: usually 1.25 to 1 for gas stations).

“

• Be able to show sufficient asset value of the collateral for the loan (expressed as an LTV ratio: anywhere from 60% to 85% for gas stations). Most importantly, present a story—each transaction is a snowflake. Contrary to the popular belief held by some retail petroleum operators, bankers are people just like us, whether they are loan officers, underwriters or members of the credit committee. They have stacks of packages on their desk, but throughout all the numbers crunching they keep in mind that they are lending to people, whether it’s a large corporate team or a small family business. So make your story personable and memorable.

”

Getting the Good Rates and Good Terms

Determine and then place your package in front of the right lenders with regard to type of financing (equipment vs. real estate) and size of financing (single unit vs. multi-unit multi-profit), etc. Trying to fit a square peg in a round hole will only waste your time and effort. Present a package that addresses each specific lender’s requirements. Do your homework. Research what the lender requires. Address those requirements in your presentation. Give the information to them in an easily manageable format. Prove it up with good books and records. Competition is good. Present your package to a number of qualified lenders. Similarly situated lenders have different appetites and requirements, costs of funds, etc. Lenders are in the business to lend. They will start sharpening their pencils, especially when they realize they are in a beauty contest.

Competition is good. Present your

Excellent financing is available today when you want it, for what you need and at the right rates. With the proper financing in place, your business will fund equity and profit growth for many years to come, whether you are focused on stringent efficiency on a few carefully monitored sites or unbridled expansion into new markets. n

package to a number of qualified lenders. Similarly situated lenders have different appetites and requirements, costs of funds, etc. Lenders are in the business to lend. They will start sharpening their

Corey Henriksen

pencils, especially when they realize

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.

they are in a beauty contest.

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.

READ MORE at fuelmarketernews.com

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BUSINESS OPERATIONS

Financing When You Want It, for What You Need and at the Right Rates

Challenges remain for small business owners seeking credit • 2 in 5 firms reported increasing financing costs.

• Most applicants sought relatively small loans: 90% sought under $1M and 51% under $100K.

• The number of firms reporting being priced out of traditional credit markets increased to 5% in 2013 from 3% in 2012. • Lines of credit and business loans continue to be the most sought after credit products with 70% and 52% of applicants seeking each product respectively. • While 39% of applicants sought credit to cover dayto-day operations, 30% sought credit to expand their business or make capital investments—a significant increase from a year ago.

Source: Small Business Credit Survey, Spring 2014. Federal Reserve Bank of New York

• Applying for credit is time consuming—on average, firms spent 33 hours applying for credit, contacted 3 financial institutions, and submitted 3 credit applications. • 58% of applicants received at least some of the credit they applied for in 2013—not a significant change from 2012. • Experienced and profitable firms typically sought larger loan amounts, had higher approval rates, and faced unchanged or decreasing financing costs.

Did You Know

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US convenience stores reached record in-store sales in 2013, with sales climbing 2.4% to $204 billion. Combined with motor fuels sales of $491.5 billion, overall convenience store sales were $695.5 billion. Among the in-store categories, foodservice drove profits, accounting for 28.9% of gross profit dollars. Packaged beverages were second, accounting for 19.7% of gross profit dollars. While tobacco products constituted 36.4% of in-store revenue dollars, they accounted for only 18.5% of gross margin dollars. Motor fuels continued to drive revenue dollars, but instore sales drove profit dollars. Overall, 70.7% of total sales were motor fuels, but motor fuels only accounted for 35.6% of profit dollars. Motor fuels gross margins were 18.5 cents per gallon before expenses, or 5.3%. Source: NACS State of the Industry Report of 2013

Bottom Line: While in-store sales can bring in the margins, motor fuels sales cannot be discounted from a profit standpoint (despite the headaches associated with the product) and play no small part in bringing consumers to a site.

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Special Supplement

NACS/PEI

Special Supplement

The NACS Show/PEI Annual Conference/PMAA Fall Meeting Oct. 7 – 10, 2014 • Las Vegas Convention Center • Las Vegas, NV

FMN Special Supplement Table of Contents

History of the NACS Show NACS has held an annual meeting every year since its founding in 1961, but it wasn’t until 1976 that the meeting included a full-scale expo, which was part of the meeting every two or three years. The addition of the expo demonstrated to suppliers that convenience stores were the channel of choice to move products.

100 NACS Show/PEI Schedule of Events at a Glance 102 PEI Rises from the Ashes, with Barely an Interruption

In 1993, the annual meeting became the NACS Show. The Petroleum Marketers Association of America (PMAA) has held its Fall Meeting as part of the NACS Show since in 1995 and the Petroleum Equipment Institute (PEI) has held its annual meeting as part of the NACS Show since 2002. In 2012, the NACS Show attracted more than 24,000 industry professionals from 65 countries—all seeking or offering the newest innovations, education and conversations about today’s important industry trends and issues.

FMN Interview with Bob Renkes

104 Fuels Institute: What’s Going On? by John Eichberger

108 Connecting with Conexxus by Maura Keller

114 Product Roundup 126 Industry News

About the event: • It is one of the country’s top 50 trade shows, according to the Trade Show News Network’s Top 250 Trade Shows in the United States. • Participants can choose from more than 65 educational sessions—from foodservice and operations to fuels and category management. • It features more than 390,000 square feet of exhibit space. (Source: National Association of Convenience Stores)

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2014 NACS Show/PEI Schedule of Events at a Glance

Offered below is a schedule of events for both NACS and PEI activities at the show.

Monday, October 6 8:00 a.m. – 5:00 p.m.

Registration—Exhibitor

3:05 p.m. – 3:55 p.m.

NACS Educational Sessions

8:30 a.m. – 9:00 a.m.

Joint Session for Industry Association Executives Breakfast

3:30 p.m. – 5:00 p.m.

PEI Young Executives Discussion Groups

4:10 p.m. – 5:00 p.m.

NACS Educational Sessions

9:00 a.m. – 12:00 p.m. Joint Session for Industry Association Executives Meeting

5:00 p.m. – 5:30 p.m.

NACS New Supplier Member Reception (ticketed event)

1:00 p.m. – 4:00 p.m.

Global Government Affairs Council Meeting

5:00 p.m. – 6:00 p.m.

PEI Young Executives Reception

6:00 p.m. – 7:00 p.m.

NACS/PMAA Salute to State Association Leaders Reception

5:30 p.m. – 7:00 p.m.

NACS Show Kick-Off Party (ticketed event)

5:30 p.m. – 7:30 p.m.

PEI After-Hours Lounge

7:00 p.m. – 10:00 p.m. NACS Supplier Board Reception & Dinner (invitation only)

6:30 p.m. – 9:30 p.m.

PEI President’s Priority Dinner (invitation only)

Tuesday, October 7

7:00 p.m. – 10:00 p.m. NACS Board of Directors & Past Presidents Dinner (invitation only)

7:30 a.m. – 5:30 p.m.

Registration (NACS and PEI)

8:00 a.m. – 10:00 a.m. PEI Board of Directors Meeting

Wednesday, October 8

8:00 a.m. – 8:30 a.m.

PEI 10-Groups Breakfast

7:30 a.m. – 5:30 p.m.

Registration (NACS and PEI)

8:30 a.m. – 9:30 a.m.

NACS Supplier Board Executive Session

7:30 a.m. – 9:00 a.m.

PEI Kick-Off Breakfast: A Kick in the Attitude ($30 in advance)

8:00 a.m. – 8:50 a.m.

NACS Educational Sessions

8:30 a.m. – 10:30 a.m. PEI 10-Groups General Session: Charting the Course through Demographic Change—Ken Gronbach

8:00 a.m. – 11:30 a.m. NACS Cool New Products Preview Room (retailers, wholesalers and distributors only)

9:30 a.m. – 11:00 a.m. NACS Supplier Board/Supplier Member Meeting

8:00 a.m. – 5:30 p.m.

NACS Center

9:30 a.m. – 12:00 p.m. NACS International Committee Meeting

8:00 a.m. – 5:30 p.m.

NACSPAC Lounge

10:00 a.m. – 5:30 p.m. NACS Cool New Products Preview Room (retailers, wholesalers and distributors only)

8:00 a.m. – 11:30 a.m. PEI ICC Testing Center Open 9:05 a.m. – 9:55 a.m.

10:00 a.m. – 5:30 p.m. NACS Center

NACS Educational Sessions

9:15 a.m. – 10:15 a.m. PEI Education

10:00 a.m. – 5:30 p.m. NACSPAC Lounge

10:00 a.m. – 11:15 a.m. NACS General Session Featuring David Freedman

10:45 a.m. – 6:00 p.m. PEI 10-Groups Breakouts (as scheduled by chairmen) 12:00 p.m. – 12:30 p.m. NACS Retail Board ofDirectors/International Committee Lunch (committee/board members only)

10:30 a.m. – 11:30 a.m. PEI Education 11:30 a.m. – 5:30 p.m. EXPO 11:30 a.m. – 5:30 p.m. NACS Cool New Products Preview Room (open to all)

12:30 p.m. – 4:15 p.m. NACS Board of Directors/Retail Member Meeting

12:00 p.m. – 3:30 p.m. PEI ICC Testing Center Open

2:00 p.m. – 2:50 p.m.

NACS Educational Sessions

12:00 p.m. – 4:00 p.m. PEI 1-on-1

2:00 p.m. – 5:00 p.m.

NACS Educational Sessions Bright Ideas From Around the World

5:30 p.m. – 6:45 p.m.

NACS Ga.m.e Day Party

5:30 p.m. – 7:30 p.m.

PEI After-Hours Lounge

2:00 p.m. – 3:30 p.m.

PEI Women FMNMagazine

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Thursday, October 9 7:00 a.m. – 8:30 a.m.

PEI 10-Groups Chairmen Meeting

11:30 a.m. – 5:30 p.m. EXPO

7:30 a.m. – 5:30 p.m.

Registration (NACS and PEI)

12:00 p.m. – 3:30 p.m. PEI ICC Testing Center Open

8:00 a.m. – 8:50 a.m.

NACS Educational Sessions

12:00 p.m. – 4:00 p.m. PEI 1-on-1—LVCC

8:00 a.m. – 5:30 p.m.

NACS Cool New Products Preview Room

5:30 p.m. – 6:45 p.m.

NACSTOBERFEST

8:00 a.m. – 5:30 p.m.

NACS Center

5:30 p.m. – 7:00 p.m.

PEI Industry Reception

8:00 a.m. – 5:30 p.m.

NACSPAC Lounge

Friday, October 10

8:00 a.m. – 11:30 a.m. PEI ICC Testing Center Open

7:30 a.m. – 1:30 p.m.

Registration (NACS and PEI)

8:00 a.m. – 9:00 a.m.

NACS General Session Featuring Robert Gates

8:00 a.m. – 1:30 p.m.

NACS Cool New Products Preview Room

10:00 a.m. – 10:45 a.m. NACS Educational Session

8:00 a.m. – 1:30 p.m.

NACS Center

10:00 a.m. – 11:15 a.m. General Session Featuring Henry Armour and NACS “Ideas 2 Go”

8:00 a.m. – 1:30 p.m.

NACSPAC Lounge

9:00 a.m. – 1:30 p.m.

EXPO

10:15 a.m. – 11:15 a.m. PEI Education

9:30 a.m. – 11:00 a.m. PEI Board of Directors Meeting

8:30 a.m. – 10:30 a.m. NACS Exhibitor Advisory Committee Meeting 8:30 a.m. – 9:45 a.m.

PEI Membership Breakfast and Meeting

9:05 a.m. – 9:55 a.m.

NACS Educational Sessions

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NACS/PEI SPECIAL SUPPLEMENT

An Interview with Bob Renkes, EVP and General Counsel, PEI

PEI Rises from the Ashes with Barely an Interruption This has been an exciting year for the Petroleum Equipment Institute—a bit too exciting. On Feb. 11, 2014, the association suffered a fire at its headquarters. Fortunately, no one was harmed; however, the building was severely damaged. By noon the next day PEI staff had relocated to a temporary space and operations continued to function almost without a glitch. For those unfamiliar, PEI is a trade association whose members manufacture, distribute and service petroleum marketing and liquidhandling equipment. Founded in 1951, PEI represents more than 1,600 member companies located in all 50 states and more than 80 countries. Members include manufacturers, sellers and installers of equipment used in service stations, terminals, bulk plants, fuel, oil and gasoline delivery and similar petroleum marketing operations. It hosts the petroleum equipment pavilion at the PEI/NACS Show and runs its annual meeting in conjunction with the event. Fuel Marketer News interviewed PEI Executive Vice President & General Counsel Bob Renkes to discuss the recovery from the fire, and some of the issues going on in the industry.

FMN: I can’t imagine the personal

shock the staff had when this occurred.

Renkes: No one was hurt and anything can be rebuilt. In fact, it was a good team building exercise. On a personal level, everyone handled the fire differently. Most everyone lost everything they had at the office and what didn’t occur to me is that people who had been here for 35 years lost pictures of parents who were deceased and stuff like that, because they “lived” here. Someone who had been here six months did not call it home but someone who had been here 30 years did.

FMN: Your recovery was

remarkably quick. I’m not sure you missed a beat in continuing your operations.

Renkes: The fire happened at 9:30

that night and we were in temporary quarters at 8:30 the next morning. We had a staff meeting after midnight at a pancake house. Somebody saw the fire on TV and said we could use their offices in the morning because they were on vacation and half of their staff was gone. And then, when we went to the parking lot the next morning to see what was left, the guy from across the parking lot offered us some space so we moved in there within a week. We had members offer their facilities to us. We had vendors that gave us stuff immediately because we pay our bills within four days, and we’ve been doing that forever and they knew we were good for it. FMNMagazine

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We were given furniture by Freeman Decorating (a long time trade show vendor)—they had a truck up here in four days with desks and chairs for us to use as long as we wanted. We had special voice mail so that even though we didn’t have phones, because they melted, incoming calls went into our voicemail or were forwarded to our cell phones. All of our computers were off the ground so the heat did not come down and get them, and the water did not creep up and get them. So, our servers were saved. We back up every night at 4 o’clock in the morning so we were all backed up. The biggest issue, because the way we are [online] nowadays, is that we were still taking orders for stuff that we no longer had to sell. People were ordering “Recommended Practices” and we had lost them all. With our documents, we digitized 180,000 pages that were saved. We learned that fireproof cabinets are better than nonfireproof cabinets, and keeping fireproof cabinets closed is better than keeping them open.

FMN: How is the rebuilding going? Renkes: We saved our money so we knew we could rebuild. We had members offer to write us checks to help with the rebuilding and I told them thank you, but that we were fine. To be adequately financed was important. To have adequate insurance, even though I did not understand it as well as I should have beforehand, was important.

NACS/PEI SPECIAL SUPPLEMENT

FMN:: Is there a bump from all of the shale production? Renkes: The distributors up in Pennsylvania and the Dakotas and

the tank manufacturers are doing well, and the new towns that are being built need convenience stores and grocery stores. But they’ve been getting that bounce for a couple of years now.

FMN: PEI has been out in front on the claims of ultra-low

sulfur diesel causing corrosion issues in the fueling infrastructure. You already developed an initial study; what’s new on that front?

FMN: Could you elaborate on that? I would imagine it is not all that uncommon of an issue.

Renkes: I did a 45-minute presentation to

association people on what it’s like to experience a fire and loss, because most people have not gone through this before. It comes down to the different bundles with the insurance that you have. You have demolition insurance, okay. You have insurance for trees and shrubs; you have it for relocation.

Renkes: EPA has taken the bull by the horns. We were going to do some additional research but EPA had the money in its research funds that they had to spend by September and they wanted to participate. We were wondering how we were going to find a quarter of a million dollars to do the study. Through their partnership with the Postal Service they can test 17 different sites, 34 different tanks—steel and fiberglass, corroding and not corroding—and they have to do it by September. So, we said go ahead. n

Bob Renkes

Fire destroyed the PEI headquarters building, on Feb., 2014

I had guys who asked me (immediately after the fire), “How much insurance do you have?” And I honestly answered, “I don’t know.” And I did not know until a couple of days later that we came out in very solid shape. The agents we’ve had over the years had been regularly increasing us 2% to 5% depending upon the value of the other buildings in the neighborhood. And that only cost an extra $22 per year so, to some extent, we got lucky.

FMN: How is business going for your members?

Renkes: I think, from our numbers and the

business surveys we are conducting, that people are doing okay to pretty good. Consolidation continues to happen and it will likely continue to happen. The big are getting bigger and the bigger are buying better. I think with all of the different things that PEI members could do—LNG, CNG, emergency generators, airports, fueling systems for petroleum marketers and retailers, fueling systems for municipal governments and for the mining industry—if you find your niche and get comfortable in there you can make some money. No one is going broke and that is good. But, our ownership is still aging and they are still looking for ways to transfer ownership.

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NACS/PEI SPECIAL SUPPLEMENT

What’s Going On? Understanding how fuel efficiency standards are implemented and what they mean for fuel consumption is critical.

by John Eichberger

Some significant improvements are still required if the industry is expected to meet the 2016 fuel efficiency requirement of nearly 36 mpg, but there has been considerable progress. It’s the 2025 target of 54.5 mpg that might be more of a challenge.

Fuel demand is a product of fuel efficiency and miles traveled. The federal government has enacted more stringent requirements for overall fleet efficiency. This will contribute to reduced demand for traditional petroleum products and enhance the incentive for automakers to deliver to market advanced systems that will rely on products other than hydrocarbons. How this will translate into market realities remains to be seen, but already some conflicting indicators give us pause.

In understanding the effect of fuel efficiency on fuel demand, it is important to recognize the distinction between the regulatory specification and the anticipated real world performance. On the regulatory side, there are two CAFE standards: one issued by EPA (Environmental Protection Agency) that is calculated as a greenhouse gas (GHG) equivalent fuel economy, and one issued by the National Highway Transportation Safety Administration (NHTSA), which is a pure miles per gallon standard. EPA has issued their GHGEquivalent standard through 2025, but NHTSA is restricted to setting standards in five-year increments. Consequently model year 2022 and later standards are projected only. EPA’s 2025 GHG-Equivalent is a combined 54.5 mpg; NHTSA’s projected combined standard is 49.7 mpg.

CAFE Is on Pace It looks like the automobile industry is on schedule for meeting Corporate Average Fuel Economy (CAFE) standards for model year 2016, having exceeded projections for the past two years. WardsAuto reports that the July fleet economy average was 25.3 mile per gallon—a 2.3% improvement over year prior. Cars sold in July averaged 29.7 mpg and light trucks average 21.1 mpg. In terms of who is leading the charge on fuel efficiency, Asia-Pacific automakers averaged 27.6 mpg compared with 22.7 mpg for domestic and 25.0 mpg for European manufacturers.

Light Duty Vehicle Fuel Efficiency

July 2013 vs 2014 MPG

Source: Congressional Research Service; EPA

Source: WardsAuto

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NACS/PEI SPECIAL SUPPLEMENT

What’s Going On?

Another factor to consider is that the regulated CAFE standard is different from what consumers will see on the label on their car. The CAFE regulation includes various credits, incentives and adjustments available to the automaker and incorporates what is known as 2-cycle testing. In this situation, vehicles are tested to estimate efficiency in urban and rural highway driving. The mpg printed on the label that is affixed to a vehicle, by contrast, uses a 5-cycle testing protocol that adds factors such as high speed/acceleration, high temperature/air conditioning and cold temperature operation. EPA reports that the mpg reported on the label averages 20% to 25% lower than those recorded for CAFE compliance.

However, data contradicts the EIA report and some observers question if the market for gasoline is contracting at all. NACS CSX data seems to support this opinion and shows that same store average monthly gasoline sales through May 2014 have increased 6.7% since 2007. Last year, however, was up 10.8% over 2007. This represents an annualized rate of growth of 0.7%. In addition, OPIS (Oil Price Information Service) recently began tracking consumption data and consistently shows volumes higher than those reported by EIA.

NACS CSX Gasoline Demand

Recent improvements in fuel efficiency have been achieved by incorporating a number of innovations, including mass reduction strategies, implementation of advanced transmission systems (up to nine gears, continuously variable and dual-clutch), hybridization, expansion of diesel variants, cylinder deactivation, stop-start technology, higher compression ratios, smaller turboboosted engines, direct injection and forced induction, and so on. To achieve the EPA GHG-Equivalent standard, automakers can also improve the emissions profile of their internal operations, including cabin climate control and electrical system efficiency improvements. These may not translate directly into more miles per gallon, but they will help satisfy EPA standards.

Source: NACS CSX, through May 2014

Fuel Consumption Unclear

If the detractors to EIA’s forecast are correct, this would have serious repercussions on industry strategies when determining what products to sell and how to preserve customer traffic in a declining fuel demand market. In addition, the current heated debate in Washington concerning the future of the Renewable Fuel Standard would take on a very different tone if demand is increasing rather than disappearing.

These fuel efficiency improvements often are cited as the driving force behind anticipated reduction in gasoline sales and are expected to help drive down consumption. In December 2013, the US Energy Information Administration (EIA) forecast that gasoline sales would decline 14.4% between 2014 and 2025. EIA historic data show that demand already dropped 5.5% from 2007 to 2013. Similarly, in the Fuels Institute’s “Tomorrow’s Vehicles” report, Navigant Research forecasts gasoline demand will drop between 18.5% to 21.8% by 2023.

Consider this: If the annual growth rate reported by CSX companies since 2007 is sustained through 2025, this would equate to a cumulative demand increase of 3.9%. This stands in contrast to the EIA forecast drop of 14.4%. Using EIA’s forecast

Gasoline Demand

and reported gasoline volume for 2013, the difference in annual gasoline consumption is approximately 11 billion gallons to 122.8 billion versus 143.5 billion. Having a better understanding of how fuel efficiency standards are implemented and what they mean for fuel consumption is critical for retailers evaluating where to make investments, for policymakers to evaluate the effect of existing or pending regulations, and for the automobile industry to evaluate how quickly to bring new fuel technologies to market. In this arena, however, many questions have yet to be answered. n

READ MORE at fuelmarketernews.com

Source: EIA

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For more information about the Fuels Institute or how you can get involved, contact John Eichberger, executive director, at jeichberger@fuelsinstitute.org or 703.518.7971. The Fuels Institute Annual Meeting is November 17-19, in Southern California. You are invited to register for this open meeting and we are planning a fantastic agenda. In addition to discussions on key issues facing the transportation fuels

Whatâ&#x20AC;&#x2122;s Going On?

market, we will also be visiting retail facilities that dispense hydrogen and natural gas, as well as visit with experts at Toyota to learn more about advanced vehicle technologies. Registration information will be available in the near future. In the meantime, join the conversation online at Facebook and Twitter. By sharing information and opinions with one another, we can create a sustainable transportation fuels market.

John Eichberger

NACS/PEI SPECIAL SUPPLEMENT

Editorâ&#x20AC;&#x2122;s Note: FMN Will be working to support the efforts of the Fuels Institute. The Fuels Institute is a research-oriented think tank founded and managed by NACS, dedicated to evaluating the market issues related to consumer vehicles and the fuels that power them. We will regularly run materials developed by the institute, as appropriate, for the education of our readers. This piece previously ran in the September 2014 issue of NACS Magazine.

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Connecting with Conexxus by Maura Keller Since

1995 Conexxus, formerly known as Petroleum Convenience Alliance for Technology Standards (PCATS), has been dedicated to the development and implementation of standards, technology innovation and advocacy for the convenience store and petroleum marketplace. As a nonprofit, member-driven technology organization, Conexxus strives to improve profitability by reducing the cost of IT ownership and improving the competitiveness of its members, who collaborate on key present and future industry challenges and innovations.

In 2010, the urgency of data security mandates and realization that technology was playing an ever-increasing role in “regulating” society, PCATS integrated its operations into NACS, in return for assuming the traditional role of NACS Technology Committee. At its most recent annual meeting, the organization announced its rebranding efforts— transitioning from PCATS to Conexxus, to better reflect the increasing importance of connections and technology. The name “Conexxus” encompasses all of the organization’s activities, but most importantly, their dedication to building a community of expertise to solve tomorrow’s challenges as well as today’s.

Fuel Marketer News recently had the opportunity to discuss the rebranding of PCATS with Gray Taylor, executive director of Conexxus, to learn more about these rebranding efforts and what it means to the industry as a whole:

FMN: What is the current state of Conexxus today?

What does the rebranding effort mean for its relationship with NACS?

Taylor: Conexxus is expanding its retailer membership— scoring the highest number of retailers since the start of the recession. The consolidation of technology vendors has impaired our vendor membership, but we have been very successful in replacing traditional vendors with vendors outside our market, seeking to do business with convenience/petroleum retail. Conexxus rebranded this spring in order to recognize the expansion of our mission to include technical advocacy, in support of government relations expertise that NACS brings the industry. Historically, advocacy in Washington, D.C. was confined to regulation, labor, taxation and other “non-tech” topics that adversely impacted our membership. Today, technology is such a fundamental building block of our economy that it is increasingly dominating threats to our industry. Think of what can happen if a large provider of services is allowed to single-handedly dictate how their product is used, on a platform that does not allow competitors to compete. In this very real case, billions of dollars of industry cost are at stake based on highly technical specifications. Our job is to provide NACS with the technology standards and expertise to effectively keep markets open, fair and provide a level playing field for even the smallest retailers in our segment. Continued

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NACS/PEI SPECIAL SUPPLEMENT

“ ”

Connecting with Conexxus

FMN: What is the driving benefit of Conexxus to the

Even the largest player—not intentionally using one of our standards—will benefit from the work we are doing on payments systems and representing the industry to card brands. Where large retailers can tweak payments to reduce costs, we can change the paradigm and that is worth millions of dollars of Taylor: : Connections are the primary benefits of Conexxus. future cost, but not without the support of all of those who will As our industry wrestles with the increasing pace of technology benefit. change (particularly with our customers), we find excellence in Many believe that membership in NACS numbers—the benefit of aggregating does this—and yes, that is part of the the smartest tech people in the industry equation—but Conexxus provides the to unite on a common challenge. This is expertise on these highly complex topics of benefit to all members, whether that We were instrumental, with the hard that feeds NACS’ advocacy expertise. of a vendor trying to break a technical Economic freedom is not free—I wish more log-jam with a new standard, or a work of our members, to relax all kinds companies would understand this and how retailer trying to reduce the unnecessary of mandates related to data security, our mission is a slam-dunk to finance. costs of interchanging data with a trade and have created numerous guides partner. With our community, we that educate the industry on reducing Another challenge we face is the expansion seldom find a challenge that isn’t risk, rather than investing in of mission and staffing required improving shared with another in the group, or a our success. I literally could stay on the road solution to that challenge. certifications that do not. attending payments conferences and regulator sessions on how payments should For suppliers—including fuel and change in America. A lot of the work is merchandise suppliers—our value being done in larger standards bodies, like proposition is simple; where there is X9 (Accredited Standards Committee) and World Wide Web paper, there is money to be saved for all parties. Our store consortium, that requires our staff to lead efforts in these events systems have gotten pretty sophisticated over the past 15 years, so that our industry needs are best realized in policy and macro and suppliers who are not taking advantage of our integration standards. We need more membership to fund these initiatives, standards are leaving money on the table in terms of both sales or we will need to accept a smaller role in shaping our and operating expense. technology future. For the fuels retailer, our device integration work has opened up the “black box” of fuel operations. Technology coming to What have been some of the major successes market today—predicated on the standards work we have that Conexxus has experienced? done—allows the retailer to have systems excellence in both fuel and in-store, something that was not possible when we started Taylor: One key success is data security. We were our work. Further, our chosen architecture of XML running over instrumental, with the hard work of our members, to relax all IP—long before it was accepted as a store architecture—has kinds of mandates related to data security, and have created enabled our industry to “snap on” new innovations like media, numerous guides that educate the industry on reducing risk, real time analysis and even EMV (Europay, MasterCard and Visa). rather than investing in certifications that do not. We saw the future as an industry, and designed for it.

industry, and the various parties involved, including retailers, solution providers and suppliers?

In the case of PCI, we provided the technology expertise to persuade card brands to recognize that smaller merchants did not need to comply with the more complex security benchmarks of stock PCI. This has saved the industry millions of dollars.

FMN: What are the major challenges faced with developing and fielding these standards?

Taylor: : Free riders. There are very few retailers out there not using at least one of our standards. There is not one retailer out there who hasn’t benefitted from the architecture that has developed from our work. There is not one retailer who has not benefitted (and will continue to benefit) from our deep work in card payments, mobile commerce and data security—and that takes investment from the industry to sustain and expand.

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Another success is card payments risk reduction. We successfully drove point-to-point encryption standards in X9 and fast tracked an industry version that effectively takes the value out of card data in our systems. We are also leading the charge for open tokenization and mobile commerce, and have successfully rallied other retail segments to have a single voice of reason for future payments systems—and this will save our industry billions if we are successful. Continued

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“Consumers are among the first to benefit from free trade, and crude oil is no exception. Gasoline costs are tied to a global market, and this study shows that additional exports could help increase supplies, put downward pressure on the prices at the pump, and bring more jobs to America. Access to foreign customers could drive significant investment in US production, helping to strengthen our energy security. Now that the US is poised to become the world’s largest oil producer, the economic case for exports is clear.” Source: API Vice President for Regulatory and Economic Policy Kyle Isakower

Bottom Line: As the US moves within reach of our goal of energy independence, why, you may ask, are we becoming a net exporter of gasoline and diesel fuel? Would domestic fuel prices be even lower if that oil was forced to remain in the United States? Perhaps. But, be careful what you wish for as the disruptions from the well-intentioned price controls of the 1970s caused extreme shortages and price spikes. The operational inefficiencies that typically go with nationalized industrial sectors make a strong argument against that route. Ultimately, these exports should help stabilize volatility and result in overall lower fuel prices than would otherwise exist.

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Connecting with Conexxus

We also have successfully attracted large tech innovators to our market— Qualcomm/Gimbal is one example. Part of our mission is to make our industry attractive, despite it being highly fragmented and decidedly entrepreneurial when compared to the adjacent markets of grocery, drug and dollar. We work hard to make our industry the “first stop” for any innovations around retail by offering integration standards that enable quick deployment. We will be focusing on seeking out the innovators as we move forward as Conexxus.

FMN: What are the major opportunities still left for Conexxus?

Gray Taylor

NACS/PEI SPECIAL SUPPLEMENT

Taylor: : The opportunities are endless and emerge everyday in the consumer

electronics market and in the Washington policy arena. Technology is core to how we will solve problems, comply with regulation and better serve customers, and those topics only get larger each day.

FMN: What is needed by all of the impacted parties to take these efforts to

the next level? Is there a call to action for involvement with these opportunities?

Taylor: : We need all companies in our industry to understand what we do, how we improve their profits, how we secure their freedom of operations and decide that we are worth investing in—because no company in our industry is big enough to change many of the macro forces that will dictate their futures. n

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For more information, visit www.conexxus.org

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PRODUCT

ROUNDUP Afton Chemical is a world leader in diesel performance additives, providing the technology platform and industry insight for leading fuel brands worldwide. Our diesel additives deliver proven performance in off-road and on-road vehicles. And because fuel quality varies around the world, Afton offers solutions for specific regional needs. Our patented Greenclean® Detergent Technology is a fully scalable solution, formulated to help you meet the entire range of your cleanliness challenges—from injector cleanliness, to maximized diesel fuel filterability and everything in between. Afton’s Greenclean® Detergent Technology gives you the ability to go beyond regulatory requirements to support performance claims in the latest fuels and engines in your markets. Afton’s Greenclean® Detergent Technology combined with our expertise in formulation enables us to deliver the supreme diesel performance solution, delivering real world performance that translate into real world benefits. Contact: Chris Ogle 804.788.5800 www.aftonchemical.com

Commander is one of the most comprehensive and technologically advanced petroleum accounting software programs on the market. If you own or operate convenience stores and want a really cost-effective way to manage accounting and departmental non-fuel inventories, Commander’s C-store module will give you the tool to do it.

The c-stores module allows you to easily manage the following items: inventory at the category level (not item level), sales, cost of goods sold, A/P invoices, A/R by customer, and deposits. It will also provide income statements—for each store or for ad hoc groupings of stores— on demand. COMPAS Commander’s flexible design allows you to quickly adapt to change. If you have c-store software you love, but want to change your home office accounting software, AIMS integrates to all existing c-store software allowing you to use the bestcombined solutions. Contact: David Dorries 318.807.9310 ddorries@aims1.com www.aims1.com

As a proud member of the Petroleum Equipment Institute, Ascentium is committed to the c-store industries and offers competitive financing nationwide. With over 25 years of experience, our consultative approach allows equipment providers to easily sell their products and customers to quickly acquire that leadingedge equipment to take their business to the next level. We provide convenient financing and leasing up to $1.5 million, working capital solutions, credit decisions in as fast as two hours, and pre-approval for a line of credit (financing/promotions based on credit approval). Ascentium’s financing means c-store owners can acquire nearly anything for their business including: dispensers, ground-up products, IT and POS systems, LED upgrades, underground tanks, signage, canopies and more. Ascentium’s 100% FMNMagazine

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Financing Program allows for shipping, taxes and other costs to be bundled into the finance package. This means no or low up-front costs. Call today for a no obligation quote. Visit Ascentium Capital at NACS: Booth 6622. Contact: Len Baccar 281.902.1931 LenBaccaro@AscentiumCapital.com www.AscentiumCapital.com

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 one of the most widely used and recommended biocides 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. Contact: Blake Rampy 800.548.9166 brampy@biobor.com www.biobor.com

NACS/PEI SPECIAL SUPPLEMENT

PRODUCT ROUNDUP

compatibility standards, protecting you and your customers from harmful contamination problems.

As one of the world’s leading manufacturers of safe, reliable DEF equipment, Blue1USA has the right above ground storage solution for any retail requirement offering the best long-term value in the industry. All products are finished in an aesthetically pleasing, glossy white finish, which is perfect for private branding. The compact, narrow footprint is designed for easy, convenient installation so you can remain competitive by offering DEF at the pump. Our systems are compatible for integration with retail dispensers and POS systems. Our weights and measures approved storage and dispensing systems are perfect for card lock locations and unattended fuel sites. Every turn-key system is pre-wired to meet UL-508A and CSA C22.2 electrical standards to enable quick permitting approval and many years of safe operation. Blue1′s sealed systems meet ISO 22241-3, 4 and PEI RP1100 material

Contact: Dave Polak 770.688.1958 dpolak@blue1usa.com www.blue1usa.com

Bottom Line of MN Inc provides gas pump, POS, tank monitor and underground replacement parts for convenience stores, unattended fueling (card locks), bulk fueling, marinas and off-road fueling and commercial sites. If you are looking for a back-ordered, discontinued or a hard to find part—we offer the Free Parts Locating Program to find your part in four business hours. From Ameron to Wayne, above or below ground, current product or obsolete— this free service saves you from

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spending hours making dozens of phone calls looking for items. Contact: Doc Boehme 763.300.2298 info@iamdoc.com www.iamdoc.com

Stanadyne Performance Formula Injector Cleaner is specially formulated with concentrated detergents that prevent deposit build-up in fuel Injectors while increasing cetane and lubricity of the base fuel. Engineered to restore the efficiency of all fuel systems, Performance Formula Injector Cleaner is extremely effective on cleaning Injectors used in high pressure diesel common rail systems. Its high strength detergency helps remove and prevent harmful deposits from building in the injectors with a “one tank” clean up. Periodic use of Performance Formula Injector Cleaner will help avoid fuel

NACS/PEI SPECIAL SUPPLEMENT

system issues while helping restore the performance of your engine to its peak operating efficiency. Contact: Jaime Goncalves Jaime.goncalves@clarcor.com www.stanadyneadditives.com

SmartSight is Comdata’s enhanced fuel site controller solution that offers detailed insight fueling sites through web connectivity and real-time email notifications. SmartSight’s unique web portal provides comprehensive reporting capabilities and allows users to receive up-to-date alerts for dispenser issues, fraud concerns, network performance and transaction information, providing all the data needed to effectively and efficiently manage a fuel site. This robust system provides: PCI compliance; acceptance for fleet, proprietary and retail credit cards; customized card controls and prompting profiles for secure transaction authorization; real-time data, including enhanced diagnostics and remote support capabilities; and ability to use a built-in security camera to mitigate fraudulent activity. Contact: 800.733.3398 www.comdata.com

Cummins & White lawyers advise clients on a wide array of business decisions and draw on the firm’s other disciplines when appropriate to guide clients through complex and diverse business transactions. We work creatively with clients to form new companies, select the appropriate entity, and handle all phases of negotiation through actual implementation of a business plan. Our lawyers take care in helping clients to hone their business expectations within the legal context. We consider industry experience and understanding of the changing marketscape an important aspect of our service, especially in handling mergers, acquisitions and

PRODUCT ROUNDUP

dispositions involving sales of stock, assets and mergers for cash and securities. Our lawyers handle both simple and complex transactions in such areas as information technology, manufacturing, distribution, trucking, petroleum, real estate, health care and agriculture. Our attorneys also work directly with you to provide a solid understanding of the requirements of the Uniform Commercial Code, a law developed to oversee business transactions in the US mostly for product delivery with minimal documentation and secured business financing. Business transactions and contracts are smoothly completed in a time-efficient manner. Contact: Fred M. Whitaker, P.C. 949.852.1800 fwhitaker@cwlawyers.com www.cumminsandwhite.com

Diesel Direct is one of the transportation industry’s largest dedicated national mobile fueling companies, servicing tens of thousands of trucks each day from a fleet of customized fueling trucks. Specializing in mobile fueling and bulk deliveries, Diesel Direct provides fuel services and solutions for local, regional and national truck and equipment fleets. By focusing on using technology and innovation, Diesel Direct has developed a state of the art proprietary on-site fuel management process and system that gives customers accurate and meaningful data to both assist the management of their fuel consumption and meet the needs of continuously evolving business requirements. Additional services offered include DEF replenishment, BARLOC® fleet management technology, fuel additives for enhanced performance, generator fueling services, tank monitoring, business continuity programs, marine fuel and double-wall tanks. Having established a strong presence in the Northeast, Mid-Atlantic, and West Coast their growth continues to penetrate new markets throughout the nation. Contact: Bob Sweeney, Sr. 888.900.7787 info@dieseldirect.com www.dieseldirect.com

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RBP Fuel Additives are formulated to work with the newer fuels on the market and are available to Canada exclusively through Eco Power Industries Inc. With the cost of fuels rising and the price of maintaining a vehicle increasing, drivers are demanding proven methods to save money at the pump and increase the life of their engines. This exclusive line of fuel additives work effectively with all classes of gasoline and diesel fuels, and have proven to reduce fuel consumption, maintenance costs and lessen toxic emissions. Contact: 587.582.3835 admin@ecopowerindustries.com www.rbpfueladditives.ca

Eltomatic A/S was founded in 1978 in the northern part of Denmark. Since the beginning, and through to present day, our main product has been Ex approved encoders. Our motto “Complete solutions between meter and computer” is reflected in our willingness to work together with customers to develop and manufacture the optimal solution. Reliability, complete solutions, cost effectiveness and robustness are our key words, and have brought Eltomatic’s encoders and ancillary to the forefront in the petrochemical industries. We track our encoders back to the very beginning of our company history, which enables us to reproduce any Eltomatic encoder. Main products include: optical and magnetic incremental encoders (with and without microcontrollers); mounting brackets and kits for various solutions; cover solution for flow meters (e.g. LC, B&R and FMC); encoders for vapor recovery and AdBlue; and encoder solutions for mechanical registers and PD meters. The encoder housing is molded in a seawater resistant aluminum alloy and the electronics are molded in, which provides good environmental and shock protection. Contact: Michael Arent Tingleff +45.9824.6166 mat@eltomatic.com www.eltomatic.com

NACS/PEI SPECIAL SUPPLEMENT

PRODUCT ROUNDUP

family owned and operated business that takes pride in its high quality products and customer loyalty.

ET Products offers a line of fuel additives that have been reformulated to offset the negative effects of ultra-low sulfur diesel caused by the hydrotreating process. Our diesel fuel additives offer our customers breakthrough solutions for fuel economy, lower emissions, power restoration and compatibility with biodiesel blends. With new age detergents, lubricity and combustion improvers, rust and corrosion inhibitors, fuel stability and winter operability technologies we make it our business to stay ahead of the times in order to give our customers the most competitive advantage possible. Our goal is to create a partnership with each of our customers by offering a premiere additive package and providing direct access to our fully trained, industry savvy sales and customer service team members. ET Products continues to be a

Contact: 800.325.5746 sales@etproducts.com www.etproducts.com

Flowserve solutions help move, control and protect the flow of materials in critical industries around the world. Flowserve’s PH6-DEF line of true, self-priming diaphragm pumps provide exceptional performance, safety and reliability. All materials are ISO 22241 compliant and assembled here in the United States. Flowserve offers the only fully integrated coupler option through partnership with Micro Matic. Units can be customized into various configurations. Contact: Dave Venning 757.485.8106 or 757.639.5216(mobile)

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FormaShape specializes in creating unique canopy fascia systems that combine lights, color and shape into a low cost, “premium look” canopy image. Our clients range from single site operators to state wide networks as well as national brands in several countries. FormaShape provides original concept design, prototypes, international fabrication and installation. Contact: Bren Steele 250-766-6633 bren.steele@formashape.com www.formashape.com

FPPF Chemical Company, founded in 1975, is one of the leading fuel additive companies in the world—serving oil jobbers, truck stops, distributors, heavyduty parts retailers and the heating oil

NACS/PEI SPECIAL SUPPLEMENT

industry. FPPF has distributors in all 50 states, Canada, Latin America, Europe and Australia. Virtually every truck stop in North America handles FPPF products. FPPF Chemical Company was originally created to fulfill market demand for improved diesel fuel Additives—and introduced Fuel Power, today’s leading year-round diesel fuel treatment. Over the years, FPPF’s highly skilled technical personnel have researched and developed many new products that have been added to the company’s product line. These include: Lubricity Plus Fuel Power, 8+Cetane, Killem (biocide), Total Power (complete multifunctional additive), Polar Power (cold weather diesel fuel treatment), FPPF-4000 (cooling system treatment), FPPF Gas Treatment and a complete line of aerosol products and cleaners. Recently, the most technologically advanced biodiesel fuel additives on the market today now augment FPPF’s complete line of highquality products. Contact: Peter Guerra pguerra@fppf.com www.fppf.com

Has managing your core inventory become an expensive chore? Let Freedom Electronics’ new website, with real time core bank and core list tracking, take the stress out of managing your spare parts inventory. Whether you have a single truck or multiple branches, our 24/7 access, downloadable reporting forms and 1:1 phone support will let you get back to the things that you do best: taking care of your customers. Contact: 800.761.9369 sales@freedomelectronics.com www.FreedomElectronics.com

GEMRIK USA, LLC is a premier designer, manufacturer, and supplier of the popular series of DEF Shelters™ for single and multiple tote DEF storage protection. Constantly evolving, GEMRIK USA is always researching and fine-tuning our

PRODUCT ROUNDUP products, while listening and responding to the marketplace for opportunities to better serve the DEF industry. By taking our highly successful flagship unit, the DEF Shelter™, and enhancing some design characteristics and end user specific needs, we have expanded our line to three unique series: the DEF Shelter330E™, the DEF Shelter330ES™ and the recently introduced DEF Shelter330WS™ series. All series are available in a dual tote configuration. Uniquely designed, any of our DEF Shelter™ “E” series can easily, and affordably, “expand” as your DEF demand increases. Hundreds of units performing flawlessly throughout the U.S. and Canada are a testament to our core values and original vision of providing the DEF industry with the highest quality, most affordable, functional and flexible DEF protection system on the market. Contact: 855.433.3669 rick@gemrikusa.com www.gemrikusa.com

We evaluate sites for development to determine sales potential for either new sites or rebuilds. We bring exceptional retail experience to the table and combine key data to produce a comprehensive report with regard to sales potential. We specialize in c-store, foodservice and fuel analysis along with carwash operations. Our service is a very reasonable priced offering which allows you or your customers to make the best site decisions possible. Our written analysis will provide key insights with regard to your location and the trade area which will help you maximize the site’s potential. Contact: Brad Hoffman 703.919.2430 bhoffman@gmapusa.com www.gmapusa.com

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Hose Master is a leading authority in manufacturing and fabricating metal hose. With more than 80 ASME IX Certified welders, a state of the art forensic laboratory, a team of product specialists and 100% testing of all products, Hose Master guarantees the quality and performance of all of its flex connectors. Hose Master QuickClamp assemblies and accessories make flex connector installations as simple as possible. Offered in a multitude of end connections (including FRP fittings) and custom hose lengths, Hose Master’s FireShield QuickClamp assemblies offer installers the ability to fasten one or both ends of a flex connector within a piping system with minimal use of tools— eliminating timely labor costs and increasing profits. Hose Master’s proprietary “hydroforming” process offers the most flexible products, and UL-listing across the entire FireShield line ensures the most durable, longest lasting, and safest solution for aboveground and underground piping applications. Contact: Anne Marie Petrelli 216.481.2020 petrelliam@hosemaster.com www.hosemaster.com

Innospec is a global specialty chemicals company focused on bringing innovative new technologies to market combined with a fast and responsive service. We serve a range of industries across the world, bringing our products to customers in markets from oilfields, refineries, terminals, fuel distributors, fleets, marine and power stations to personal care and aroma chemicals. Our global team of approximately 1,100 employees spans 20 countries, applying their extensive experience and market understanding to customers’ local needs. Integrating our global footprint with local service capability enables us to supply quality products that meet and anticipate changing market dynamics. Contact: Jim Vrzak 303.792.5554 Jim.Vrzak@innospecinc.com www.STADIS.us.com

NACS/PEI SPECIAL SUPPLEMENT

Keystone Structures, Inc. has been in the business of manufacturing pre-assembled buildings to the Petroleum Industry for over 35 years. At Keystone Structures, Inc. our biggest asset is our reputation for custom manufacturing. We have the ability to transform a customer’s conceptual idea to real life solutions. Utilizing aluminum or steel construction we manufacture any building from the smallest pump island booth to full service convenience stores. Under normal circumstances, the buildings arrive completely assembled. All you have to do is set the building in place, hook up electrical power and the building is ready for use. Our years of experience allow us to work with you on custom requirements to ensure that you get the building you want, not another manufacturer’s standard building.

PRODUCT ROUNDUP

Lubrizol is a pioneering global supplier of chemical additive technologies including additives for fuels and lubricants. Lubrizol offers a full range of gasoline, diesel and residual fuel additives that improve fuel system cleanliness, prevent wear and corrosion and improve the combustion and flow characteristics of refined products. Our fuel additive technologies promote optimal power, performance, engine and equipment life and fuel economy, and help to reduce emissions. Our fuel solutions satisfy the increasingly stringent demands of new equipment technologies and worldwide environmental legislation and concerns. Contact: Shawn Vickers 440.347.4127 shawn.vickers@lubrizol.com www.lubrizol.com

Contact: Tina Hutchison 610.444.9525 Tina.hutchison@psxgroup.com www.keystonestructures.com

Liquid Controls (LC) manufactures highaccuracy positive displacement flowmeters, electronic registers, data management systems and metering accessories. At the Liquid Controls facilities in Lake Bluff, Illinois, LC employees configure these components into complete metering systems. These systems measure, record, and manage the metrological data of gasoline, DEF, diesel, ethanol, and biodiesel transfers. Liquid Controls products are available through a worldwide network of highly trained, full service distributors. Liquid Controls is our Energy and Fuels business unit. Contact: Dan Campion 847.295.1050 dcampion@idexcorp.com www.lcmeter.com

Since 1994, MidContinental Chemical Company, Inc. (MCC) has developed and provided innovative product and service solutions to refineries, pipelines, terminals, jobbers, retail petroleum marketers, commercial customers and aftermarket additive providers. MCC has evolved from a re-seller/distributor to formulator to blender to inventor and manufacturer of chemical products that enhance the performance of motor fuels and lubricating oils. MCC offers a wide range of exceptional additives for products ranging from EPA-compliant gasoline and diesel additives to valueadded/differentiated fuel offerings to API-licensed motor oil additive packages to customized aftermarket products. MCC is dedicated to creating long-term relationships with our clients. Our experienced sales and marketing staff and customer service team will ensure your needs and expectations are met. MCC’s technical and logistics teams skillfully manage manufacturing processes, supplying you with products that adhere to strict quality control and assurance guidelines. Contact: Everett Osgood everetto@mcchemical.com www.mcchemical.com FMNMagazine

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Grow your business by using tools that alleviate the operational “pain points” of c-store and fuel retailing. NACS (The Association for Convenience and Fuel Retailing) provides a variety of solutions to help our members grow their retail businesses and ensure their competitive viability. From research and marketing to human resources support to category management, NACS tools span many cstore functional areas: employee training, discounted payment card processing, business analytics, compliance, human resources hiring and benefits, and foodservice training and certification. Our portfolio of offerings was developed by retailers—for retailers—helping those who wish to stay on the cutting edge of this fast-paced and constantly changing industry. In addition, jobbers can take advantage of NACS benefits to create stronger partnerships with their dealers—driving sales and creating a brighter future for dealers’ businesses and, in turn, their own. When dealers thrive, jobbers benefit. Contact: Douglas Spencer 703.684.3600 dspencer@nacsonline.com www.nacsonline.com/products

NRC Realty & Capital Advisors, LLC provides a full array of real estate and financial advisory services to the convenience store and petroleum industries and specializes in the accelerated sale of commercial and residential real estate. NRC’s breadth of experience in the convenience-store arena includes portfolio evaluation and analysis; refinancing, recapitalization and sale-leaseback financing options; and merger and acquisition advisory services. Since its inception in 1989, NRC has sold more than 15,000 properties. Clients include globally recognized companies in a variety of industries, including petroleum (BP, Shell and Sunoco), convenience stores (7-Eleven, CST Brands and Circle K), financial institutions (GE Capital, StanCorp Mortgage

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Investors and Fifth Third Bank) and industrial (YRC Worldwide). Contact: Dennis Ruben 480.374.1421 dennis.ruben@nrc.com www.nrc.com

OILCO Liquid Handling Systems, based in Monmouth Junction, NJ, USA, manufactures the widest selection of swivel joints in the world for the petroleum, fluid transfer and water treatment industries. Sizes ranging from 2” through 18”, construction materials including carbon steel, stainless steel and aluminum, and a myriad of packing seal configurations are available. Among the extensive line of swivels are several “industry firsts,” including low torque units, hybrid packing chamber applications and heavy duty designs in standard and high pressure variations. OILCO also offers progressive loading arm engineering and design, incorporating the industry’s lightest and most user friendly balancing unit for both top and bottom loading assemblies. All products are manufactured in the USA.

PRODUCT ROUNDUP security standards. Omega ATC maintains strong partnerships with POS system vendors, major oil companies, acquiring banks, card processing companies, consulting firms and industry groups to provide the best possible PCI compliance solutions. Contact: Shekar Swamy 636.557.7777 shekar.swamy@omegasecure.com www.omegasecure.com

Paragon Solutions is a retail design and consulting firm based in Fort Worth, Texas. For over 25 years, Paragon has been helping customers across the country maximize their returns on investment, increase sales/profit margins, and revamp operations through the use of creative design techniques. A large portion of our client base includes convenience stores, truck stops, travel plazas, quick serve restaurants, fast food/fast casual franchises, and other retail establishments. Contact: Michelle Hughes 817.927.7171 mhughes@paragon4design.com www.paragon4design.com

Contact: Kevin Skochil 480.244.6987 kevin@oilco-usa.com www.oilco-usa.com

Omega ATC is a Level 1 certified PCI compliance Managed Security Services Provider. Our solutions are used every day by petroleum marketers, restaurant chains, convenience stores, specialty retailers, and mobile field personnel. Over the last 23 years, we’ve helped more than 200 valued customers simplify systems management, data security, and PCI compliance. Omega offers personalized guidance to every customer by assigning each a Security Strategist to assist in meeting the requirements of PCI data

Patriot Capital is a leading provider of equipment financing/leasing to the retail and commercial petroleum industry. POS systems, dispensers, c-store equipment, car washes, USTs, canopies—we finance virtually all retail and commercial petroleum equipment. Our industry knowledge and customer focus guide us to financial solutions that meet your changing needs, and exceed your expectations. Contact: Chris Santy 877.527.0383 sales@patriotcapitalcorp.com www.patriotcapitalcorp.com

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Performance Ink is your premier manufacturer and supplier of non-OEM replacements parts for the petroleum industry. We offer a wide selection of overlays, keypads, lens, buttons, displays, decals, card readers, doors and other needed replacement parts for your gas pump needs. Call your local Performance Ink distributor or sales rep for more information. Contact: 803-748-1000 sales@performance-ink.com www.performance-ink.com

Established in 1953, PIUSI maintains its legacy of providing solutions and inspiring ingenuity in the development and design of innovative fluid handling equipment for the management and distribution of DEF, gasoline, oil and other fuels. The PIUSI U.S.A. team, located in Fort Lauderdale, FL, caters to the United States, Canada and Latin America markets. This extension of the PIUSI SPA family in the United States devotes time and effort in fortifying the bond between American consumers and Italian ingenuity. PIUSI Fluid handling equipment specializes in pumps, flow meters, nozzles and fluid management systems. Contact: Justin Hart 888.584.1552 Justin.hart@piusiusa.com www.piusiusa.com

Renewable Energy Group, Inc. is a leading North American advanced biofuels producer and developer of renewable chemicals. REG utilizes a nationwide production, distribution and logistics system as part of an integrated value chain model to focus on converting natural fats, oils and greases into advanced biofuels. With 10 active biorefineries across the country, research and development capabilities, and a

NACS/PEI SPECIAL SUPPLEMENT

PRODUCT ROUNDUP designed to store liquids that are classified as class II or class III combustible fluids.

diverse and growing intellectual property portfolio, REG is committed to being a long-term leader in bio-based fuels and chemicals. Contact: www.REGI.com

RBP/Rolling Big Power is the premier luxury truck performance brand. To complement their line of grilles, steps, exhaust systems, wheels, suspensions, and air intake systems, RBP also has an impressive full line of fuel additives that represent a variety of applications for gas and diesel engines from the individual truck owner to fuel stations and any industrial user. RBP is not just a brand— it’s a way of life, and with additives that are designed to clean and add performance in any weather as well as replace necessary fuel components taken from the fuel because of today’s EPA laws. RBP is the must-have additive. Contact: 877.519.9090 info@rollingbigpower.com www.rollingbigpower.com

Roth tanks are among the safest and most reliable on the market. The outer tank is made of leak-proof, weld-free galvanized steel and roll seamed with an oil and fire-resistant seal. It can contain at least 110 percent of the capacity of the inner tank for maximum protection. The inner tank is made of blow-molded, highdensity, seamless polyethylene that is leak proof and will never corrode. And, our compact tanks are available in several different sizes, providing more flexibility for placement in any garage, service station or lube shop. Roth oil tanks exceed the industry standard safety regulations. They are rust resistant inside and out and are designed to prevent spills, leaks and fires caused by defective pipes, couplings or fittings located underneath the tank. Each tank undergoes thorough testing, including ultra-sound and pressure testing, to ensure optimal thickness and sealing as well as certified to UL SU2258 and

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Contact: Joe Brown 888.266.7684 info@roth-usa.com www.rothlubetanks.com

Rovanco Piping Systems, Joliet, IL, is a leading manufacturer of pre-fabricated, pre-insulated piping systems. Rovanco systems are manufactured to exact standards with our patented methods resulting in high-quality, unique products. Rovanco, with a nationwide network of sales representatives and fast delivery turnaround capabilities, has been a leading pre-insulated pipe manufacturer for forty-five years. Rovanco is also a distributor of Rhinoflex Flexible Piping Systems. Contact: 815.741.6700 marketing@rovanco.com www.rovanco.com

NACS/PEI SPECIAL SUPPLEMENT

Simmons has the solution for reconciling a transport load of fuel with every dispenser pumping at full blast! Marketers that use Simmons’ ClearView continuous fuel monitoring can reconcile a fuel delivery and compare with a BOL; detect meter drift; detect dispenser/fuel theft; record ATG alert and alarms; detect leaks and report EPA compliance; and determine which dispensers are off line across the entire chain. Simmons’ TMW-650 features include: PC or wall mounted; simple dashboard graphical displays; phase detection; and real time water detection. Simmons’ clientele includes: The Global 50 (Private and Public), Fortune 500, NACS/SIGMA Members, Jobbers, Consigned Dealers and Municipalities. Contact: Kevin Dockery 972.497.9002 kevin.dockery@simmons-corp.com www.simmons-corp.com

SMARTLOGIX offers real-time wireless inventory control, dispatch and delivery solutions. SMARTANK wireless tank monitors transmit tank levels to a website and integrates with the SMARTLYNX dispatch and forecasting module. SMARTRUCK on-board truck technology provides a real-time paperless dispatch and delivery platform that wirelessly captures all delivery data to feed your billing system. Contact: Todd Ward 803.547.8265 tward@smartlogixinc.com www.smartlogixinc.com

Your steel fuel storage tanks will last indefinitely if properly maintained. With today’s new fuels, that means keeping the water that can contaminate your fuel out of your tank. STI/SPFA has several options to help you with tank maintenance on our website. Get free

PRODUCT ROUNDUP documents from our store, such as “Keeping Water Out of Your Storage Tank” and “R111 Recommended Practice for Storage Tank Maintenance.”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. Contact: 847.438.8265 info@steeltank.com www.steeltank.com

TMS has over 30 years’ experience in the petroleum and propane industries, plus DEF and bio-fuels. Fuel management solutions for the petroleum and propane industries. Specializing in terminal automation systems and design/build for any application. Refinery, bulk, fleet, rail and marine. Automation: software and PLC with support; TMS6000 suite of software products designed to provide enhanced security, control and data management for fluid custody transfer systems in a low cost web enabled application. In house PLC and SCADA design for any fluid transfer control system. Software and PLC Support with 24/7 coverage. Design/Build (including System Integration and PC/PLC Software): facilities and resources in house to design, fabricate, assemble and install. Loading racks, modular skids, tank farms, bulk plants and small terminals. Self-contained PLC, MCC and Computer pre-fabricated structures. Contact: Dave Rajala 416.225.5867, ext. 251 drajala@totalmeter.com

ValvTect Petroleum Products is a leading supplier of high performance diesel, winterized high performance diesel, heating oil and gasoline additives to fuel distributors, truck FMNMagazine

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stops, fleets, marinas, railroads and refiners nationwide. Our registered trademarks Diesel Guard, AgriGuard, BioGuard, ThermoGuard 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 everchanging fuels that are available. We specialize in providing solutions for you and your customers’ ultra-low sulfur diesel and biodiesel problems at an economical cost. Contact: Marvin Griffin 800.728.8258 valvtect@valvtect.com www.valvtect.com

VeriFone is the global leader in secure electronic payment solutions for the Petroleum and Convenience Retail industry. VeriFone provides advanced electronic payment solutions for both the forecourt and inside retail business. VeriFone offers the latest technology in point of sale, media solutions, and back office management. VeriFone is dedicated to providing solutions that meet the unique challenges of any convenience retail environment. VeriFone solutions are designed to address the needs of convenience store owners, while meeting industry requirements and providing an engaging experience for customers. For more information on the latest products and services VeriFone has to offer, visit www.verifone.com. Contact: 800.VERIFONE petrosolutions@verifone.com www.verifone.com

Founded in 1979, Warren Rogers Associates specializes in advanced system diagnostics for the retail petroleum industry. WRA invented continual reconciliation analysis, which provides large, multi-site fuel retailers, c-stores, supermarkets and travel centers, with the most precise fuel monitoring available today. With its

NACS/PEI SPECIAL SUPPLEMENT

PRODUCT ROUNDUP

proprietary PetroNetworkS³ system, WRA has the ability to monitor more than 2.7 millions of gallons of fuel per month. Issues like inaccurate meter calibration, meter drift, slow flow rates, dispenser inactivity, delivery shortages and theft are all rapidly identified in real-time. This continuous and in-depth monitoring by expert analysts averts loss, ultimately protecting valuable fuel inventory while increasing overall efficiency and profitability. It is compatible with most any manufacturer’s automatic tank gauge to provide a more precise accounting of fuel inventory and an additional layer of protection. Warren Rogers Associates NACS/PEI Show booth 6005

highlight of WEH®‘s product range for CNG is the pistol-grip type 1 nozzle TK17—in the design of a common diesel /petrol nozzle. All WEH® CNG products are evidence of the long tradition of excellence engineered into every WEH® product. WEH® has been a pioneer in the field of alternative fuels since 1986. It laid the foundation for the worldwide NGV1 standard by developing a complete range of products for NGV refueling from receptacles, coalescent filters and check valves in vehicles to fueling nozzles, filling hoses, breakaway-couplings and filters for fueling stations with applicable NGV1 certification.

Contact: Bill Jones 800.972.7472 wjones@warrenrogers.com www.warrenrogers.com

Contact: Andreas Willfort 832.331.0021 sales@weh.us www.weh.us

retailers, bulk carriers, and fleet operators rely on our solutions to work smarter, adapt quickly to changing market demands, and improve profitability. Whether you’re looking to reduce inventory carrying costs, lower overall fuel and transportation costs, improve your fuel margins, or manage deliveries more efficiently, we have the solutions! We customize our offerings based on your industry-specific needs. SmartReplenish: You’ll see an immediate improvement in your inventory management. SmartBuy: ensure that you always find the best fuel price. SmartReconcile: improve your business accounting and invoice reconciliation processes. SmartMobile: enable your drivers to communicate more effectively with dispatchers. SmartComply: improve response time and tracking of environmental alarms. Contact: 866.539.5254 info@wexfuelmanagement.com www.WEXFuelManagement.com

WEH Technologies Inc. CNG simple and easy for any operator—like fueling gasoline, but at a better price. The

TelaPoint offers the only web-based suite of applications built specifically for the fuel supply chain. Fuel wholesalers,

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INDUSTRY NEWS Veeder-Root Acquires FuelQuest, Inc.

Gilbarco and VeriFone Join Forces

The Veeder-Root Company has acquired FuelQuest, Inc. located in Houston, Texas. FuelQuest is a recognized software as a service (SaaS) provider for retail and commercial fueling logistics applications. With over 15 years of experience in logistics software development and analytics, FuelQuest will combine with Veeder-Root’s Insite360 Fuel business to provide a best in class, end-to-end solution for controlling wet stock from rack to nozzle.

Gilbarco Veeder-Root, a worldwide leader in retail petroleum technology, and VeriFone Systems, Inc., a global leader in secure electronic payment solutions, have announced that they are partnering to offer next generation forecourt payment solutions and to create the largest atpump interactive digital media network worldwide.

The acquisition demonstrates VeederRoot’s commitment to supporting retail and commercial fueling customers’ desire for increased control of their fuel purchases, deliveries, variance, flow, compliance and managed maintenance needs. “FuelQuest brings valuable SaaS and fuel logistics expertise into Veeder-Root’s Insite360 Fuel services family, enabling us to aggressively accelerate our wet stock management technology roadmap,” said Andrew Hider, President, Veeder-Root. “This expertise, along with Veeder-Root’s market leadership position in automatic tank gauge technology, will provide immediate advantages for any retail or commercial fueling customer looking to improve operational efficiencies in fuel or compliance management.” The combined SaaS businesses should improve the customer experience by offering a full suite of integrated logistics and environmental services. Enabled by Veeder-Root’s industry-leading hardware, this addition to Veeder-Root’s Insite360 Fuel portfolio will allow Veeder-Root to deliver continued enhancements in wet stock management technology development to customers. n

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The two companies will collaborate on future fuel dispenser payment platforms to be developed and supplied by VeriFone. The solutions will meet convenience and fuel retailers’ functionality and regulatory needs in an increasingly complex payment ecosystem, as well as offer at-pump media advertising and entertainment. Gilbarco will become the software and solutions integration lead and sales and service provider for forecourt payment systems developed under the partnership. The companies will work together to transition the payment electronics in Gilbarco’s global dispenser product lines to VeriFone technology. However, both companies will continue to develop and market their point of sale systems for the petroleum and convenience market independently. In addition, Outcast Media, Gilbarco’s forecourt media business, and Applause TV, Gilbarco’s gas station TV network, will be merged with VeriFone’s digital media and VeriFone Digital Network (VNET) businesses. “VeriFone’s partnership with Gilbarco, the world’s leading dispenser technology provider, is perfectly aligned with our terminal solutions and commerce enablement strategies and will allow us to offer the best payment and forecourt media solutions on the market to our clients around the globe,” said Paul FMNMagazine

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Galant, CEO of VeriFone. “Our collective expertise and access to consumer insights provide significant business value to our clients, helping them increase sales at the pump and in-store.” “Gilbarco’s leadership in the convenience and petroleum vertical and VeriFone’s expertise in secure payments and media engagement make this an ideal relationship,” said Martin Gafinowitz, President of Gilbarco VeederRoot. “Gilbarco has the largest installed base of outdoor payment systems in our industry, and combining our deep knowledge of systems and software integration with VeriFone’s broad payment expertise will greatly benefit our customers.” n

WEX Announces Agreement with PriceAdvantage to Provide Fuel Pricing and Inventory Intelligence Solutions WEX Inc., a leading provider of corporate payment solutions, has announced an integration between its WEX Fuel Management TelaPoint solution and PriceAdvantage, a division of Skyline Products, for petroleum operators that leverages real-time fuel inventory and sales information to optimize fuel prices. Tom Wagner, director of WEX Fuel Management, said, “This integrated solution incorporates both WEX’s Fuel Management software to provide inventory levels and PriceAdvantage’s SMART market pricing analysis to provide insight into fuel pricing strategies. It gives fuel retailers a combined solution with the accuracy of WEX TelaPoint and the power of PriceAdvantage.” With access to realtime fuel inventories from WEX Fuel Management, managers of fuel stations

INDUSTRY NEWS

Test Your FMN Acumen

In our industry, we use lots of esoteric acronyms. The list below represents many acronyms used in articles in this issue of Fuel Marketer News.

ATG BEV BOE BTU CFM CFPP CHP CNG CO2 COD COE CRM DEF DoE DOOH EIA EPA

Automatic Tank Gauge Battery Electric Vehicles Barrel of Oil Equivalent British Thermal Unit Continuous Fuel Monitoring Cold Filter Plugging Point Combined Heat and Power Project Compressed Natural Gas Carbon Dioxide Cancellation of Debt (Barrel of) Crude Oil Equivalent Customer Relationship Management Diesel Exhaust Fluid Department of Energy Digital Out of Home Energy Information Administration Environmental Protection Agency

ETOH FCEV GBC GHG ICE kbpd kW LNG LPG M&A MLP mmbpd MW NFC NODs NOLs NOx

What Does That Mean Ethanol Fuel Cell Electric Vehicles Gasoline Blending Components Greenhouse Gases Internal Combustion Engine Thousand Barrels per Day Kilowatt Liquified Natural Gas Liquified Petroleum Gas Mergers & Acquisitions Master Limited Partnership Million Barrels per Day Megawatts Near Field Communication Non-Owned Disposal Sites Net Operation Losses Nitrous Oxide

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NRDC OEM PCI POS PPE PSM QSR R&W RBOB

National Resources Defense Council Original Equipment Manufacturer Payment Card Industry Point of Sale Personal Protective Equipment Process Safety Management Quick Service Restaurant Representations & Warranties Reformulated Blendstock for Oxygenate Blending RFI Request for Information RES Renewable Energy Standards SCR Selective Catalytic Reduction SIGMA Society of Independent Gasoline Marketers of America WTI West Texas Intermediate ZEV Zero Emission Vehicle

INDUSTRY NEWS who use PriceAdvantage can adjust pricing strategies throughout the day based on how many gallons have been sold through a milestone period in the day, such as the morning commute. If volume sales for the day are low at the noon hour, the station manager may decide to adjust fuel prices to be more aggressive during the evening commute and recover the lost volumes. The solution also can be used when sales are high and inventories are low to raise prices in order to make sure there is enough fuel to meet demand until the next delivery. Instead of waiting for fuel volume sales information to be updated the day following the close of business, this integration makes this information available the same day. “Retail establishments, such as convenience stores, thrive when fueled by speed, innovation and knowledge,” said Chip Stadjuhar, CEO of Skyline Products. “This integration provides them with the real-time data and innovative fuel pricing software they need to produce fuel prices quickly and accurately.” n

Wayne Fueling Systems and Intel Transform Electronic Payment Systems for the Fuel Retailer Wayne Fueling Systems, a global provider of fuel dispensing, payment, automation, and control technologies for retail and commercial fuel stations, has announced the launch of a next-generation electronic payment system (EPS) solution in collaboration with Intel Services using its ‘Platform for Retail’ software. The cloudbased solution, benefiting the fuel retail industry, processes electronic payment transactions with additional payment security via tokenization—a secure encryption process—at the fuel dispenser or point-of-sale (POS) and simplifies operations across a network of fueling sites. “Wayne is committed to offering the best solutions for our customers, and we are achieving this by working with the best

technology companies in the world,” says Neil Thomas, Chief Executive Officer, Wayne Fueling Systems. “Applying Intel’s expertise to connect devices through the ‘cloud,’ and offering advanced security and operational efficiencies, is one more way we are changing the industry and improving business.” Wayne’s EPS in the Cloud solution uses Intel Services Platform for Retail software to help fuel retailers deploy industry payment changes across multiple sites virtually instantaneously. The technology, featuring an Intel Atom processor in the Wayne Fusion™ forecourt controller, helps position fuel retailers to meet current and future payment compliance in a quicker and more efficient manner. “Using Intel’s cloud hosted service for Wayne’s EPS in the Cloud solution allows our customers to bring new payment capability to industry much faster, with greater security while meeting payment compliance needs like PCI and EMV,” says Tom Chittenden, Senior Manager, Strategic Initiatives, Wayne Fueling Systems. “With mobile, EMV, PCI, pointto-point encryption, and other new payment technologies, the changes required at the site to stay current can equate to a lot of software upgrades and potential downtime for the location. Deploying payment capability in the cloud allows our customers to make changes to the way payment transactions are handled with less impact to the site.” Furthermore, this cloud-based EPS solution offers an additional level of secured transaction for the customer and the retailer by tokenizing the transactions—a process in which credit card data (user name, card number, and other personal information) is encrypted and a token is used as an identifier for the transaction. And in an effort for the retailer to have access to more actionable data, Wayne’s EPS in the Cloud solution provides a centralized interface for payment transaction logs, reports, and auditing in a single software interface provided by Wayne. The reporting is accessible on demand for a single location or across multiple locations. n

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INDUSTRY NEWS

VP Racing Fuels Introduces Expansion of Financing Program for Branding, Fuel Partners VP Racing Fuels has announced its partnership with Allied Brand Services, LLC (ABS), a specialty finance platform to provide funding in support of imaging and conversion costs incurred by gas station and convenience store dealers that partner with VP in its Retail Branding Program, as well as other VP partners. VP spun off a majority of the equity interest to the Cerminaro Group, LLC, which will independently manage this specialty finance platform. ABS will initially focus on serving the retail petroleum distribution market and has been designated VP’s “Preferred Lending Partner.” ABS provides up to 100% financing for Dealer imaging and conversion loans, including the cost of canopy/signage materials, LED signage, permits, construction and installation. ABS will provide both loan and lease options, as well as offer low monthly payments with up to 60-month terms, minimal upfront costs and competitive interest rates, coupled with a long-term relationship philosophy. “This new financing partnership is just another positive step towards driving value for our VP Branded Dealer and Distributor relationships,” said Alan Cerwick, President of VP Racing Fuels.

to receive the favorable rates and terms offered by ABS.” ABS also intends to partner with original equipment manufacturers to offer comprehensive vendor financing programs on fuel dispenser equipment; credit card readers; POS systems; PCI equipment; and other related in-store equipment. “The primary goal of ABS is to deliver quick responses and superior service, including expert advice on financing terms and structuring,” said Cerminaro. “We will continue to invest to make sure that the ABS financing programs work to our clients’ advantage, by helping them build competitive power and profits.” In addition, ABS is working with VP to develop the ABS/VP “C-Store University” which will offer discounted fees for a range of cross-functional consulting services to VP Branded C-store dealers including operational assessment; primary distribution evaluations; information system analysis; food service reviews; and loss prevention services. n

“A primary objective of VP’s Retail Branding Program is to help gas station and c-store dealers become more competitive and more profitable in great part through a combination of operational savings and new revenue streams,” said Cerwick. “In our model the cost of re-imaging is borne by the dealers, so in keeping with the spirit of our Program, ABS will ensure the loan application process is efficient and the financing terms are competitive.” “This specialty financing program is not restricted to our branding partners,” Cerwick added. “Race fuel distributors, dealers, race tracks and others who partner with VP, as well as non-VP related dealers and distributors are also eligible FMNMagazine

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ADVERTORIAL

This advertorial previously ran in Octane Magazine. FMNMagazine

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ADVERTORIAL

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This advertorial previously ran in Octane Magazine. fuelmarketernews.com

ADVERTORIAL

This advertorial previously ran in Octane Magazine.

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“To cities and towns all across the country, what we’re going to say is, if you make a commitment to buy more advanced vehicles for your community—whether they run on electricity or biofuels or natural gas—we’ll help you cut through the red tape and build fueling stations nearby. And we’ll offer tax breaks to families that buy these cars, companies that buy alternative fuel trucks like the ones that are made right here at Mount Holly. So we’re going to give communities across the country more of an incentive to make the shift to more energy-efficient cars.” President Barack Hussein Obama

Bottom Line: Regardless of the incentives and the CAFE regulations forced on the automobile industry, fossil fuel will overwhelmingly power the vehicles on America’s roads for the foreseeable future. While volumes are expected to drop, there will still be plenty of fuel sold. And the customers will fill up with that fuel, and most of the alternatives being pushed, at the local station.

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INDUSTRY NEWS Additionally, customers benefit from a much lower cost of installation with an above ground storage solution versus an underground tank. “Our customers and partners have told us they expect to see significant cost savings with these larger sizes,” Polak added, “and they know they can count on Blue1’s reputation for proven, reliable systems and support after the sale. Adding the Blue1Max℠ products to our existing mini-bulk systems was a natural next step as part of our strategy to offer the best range of solutions to our customers.” With the rollout of the 3,400 and 5,000gallon systems, Blue1USA offers a line of mini-bulk products that now range from 500 to 5,000 gallons that are turnkey, ULlisted and ISO 22241 compliant. n

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First Data Announces Agreement to Acquire Gyft, a Leading Digital Gift Card Platform for Mobile Devices First Data, a global leader in payment technology and services solutions, has taken a key step to provide consumers with spending flexibility and help businesses grow through the acquisition of Gyft Inc., the Silicon Valley-based company that entered the $100 billion gift card market in 2012 and pioneered the concept of a mobile wallet for gift cards. Gyft is aleading digital platform that enables consumers to buy, send, manage and redeem gift cards using mobile devices. Financial terms of the deal were not disclosed. The transaction is expected to close next month pending Gyft shareholders approval. The power of Gyft is in the mutual benefit it provides to both consumers and merchants. As more consumers upload gift

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cards into mobile wallets on smart phones to check balances or receive offers, and merchants seek new ways to nurture customer engagement, the gift card has been born again, digitally, through Gyft. With more than 200 of the most recognized retailers on its digital gift card platform, Gyft is a mobile wallet accessible by website and as a free app on iPhone and Android devices. The company brings an active and loyal user base of demographic groups such as millennials, who increasingly expect a highly personalized customer experience. Virtual and mobile cards are gaining share rapidly in the near $100 billion U.S. gift card market. Retailers reported that, on average, loads onto digital cards tripled from 2012 to 2013, according to Mercator Advisory Group’s annual survey of retailers. First Data’s research shows that electronic gift card sales grew 71% from 2012 to 2013. Data analytics and management tools enable gift card merchants to send targeted, cost-effective, flexible campaigns directly to new demographic

INDUSTRY NEWS groups—opening new markets that were previously not easily accessible. Gyft’s social media platforms offer retailers meaningful customer interaction and real-time promotions that will drive revenue, encourage social sharing and build brand awareness. Additionally, Gyft operates as a comprehensive engine for bulk gift card sales that can be used for incentive marketing and promotions by employers and businesses. n

Blue1USA Expands DEF Mini-Bulk Systems Product Line Blue1USA, a leading integrated manufacturer of Diesel Exhaust Fluid storage systems and dispensers, has expanded the industry’s most comprehensive DEF mini-bulk solutions with the introduction of its new 3,400 and 5,000 gallon Blue1Max℠ systems. “We developed these new products in response to industry trends and customer demand,” said Dave Polak, Blue1USA CEO, “and we’re getting a high level of interest in them because of the considerable long-term savings and return on investment.” The new systems allow fleet managers to order DEF in larger quantities and benefit from a lower delivered cost per gallon along with peace-of-mind of not having to worry about running out of fluid before their next scheduled delivery. Additionally, customers benefit from a much lower cost of installation with an above ground storage solution versus an underground tank. “Our customers and partners have told us they expect to see significant cost savings with these larger sizes,” Polak added, “and they know they can count on Blue1’s reputation for proven, reliable systems and support after the sale. Adding the Blue1Max℠ products to our existing mini-bulk systems was a natural next step as part of our strategy to offer the best range of solutions to our customers.” With the rollout of the 3,400 and 5,000gallon systems, Blue1USA offers a line of mini-bulk products that now range from 500 to 5,000 gallons that are turnkey, ULlisted and ISO 22241 compliant. n

TouchStar Achieves Strong Growth in Fuel Distribution and Fleet Refueling Industry TouchStar, a multinational provider of logistics and mobility software solutions, has announced that the company has grown its fuel distribution client base in the United States – driven primarily by the addition of two new clients, represented by a large regional fuel and lubricant distributor based in California and a regional fuel distributor located in Mississippi, which both specialize in on-site fleet refueling—expanding on its total global fleet of more than 20,000 vehicles. The fuel distribution software solution, which includes mobility, dynamic dispatching, route planning, and business intelligence reporting applications, allows fuel distributors to decrease costs and increase deliveries per day by eliminating paper tickets and automating processes for drivers, dispatchers, and back office staff. TouchStar’s FuelWare mobility application connects drivers with dispatchers and back office systems, creating an integrated solution for dynamic dispatching, monitoring and managing critical inventory levels, and automatic data capture enabling detailed cost-to-serve reporting. “We’re eager to continue growing within this industry as more distributors realize the benefits that workforce automation can provide to their business,” added Ahmann. “Integration of these technologies through our FleetAtlas Framework allows organizations to achieve their desired business outcomes by becoming much more efficient and gain a return on their investment usually within 12 months.” n

fluid handling equipment, ranging from gasoline pump kits, multi-user management control systems, and turnkey diesel exhaust fluid (DEF) systems. PIUSI USA’s new Ex-50 gasoline pump kit features the first internal “B-Tech” bypass valve that opens at higher pressure. This technical modification to their original design guarantees a consistent flow rate without the possibility of pressure loss. The valve engages when the flow rate decreases due to excess pressure. This system allows PIUSI USA to guarantee a flow rate even when the pump is being used with devices that cause resistance such as a filter, meter, auto nozzle, and extended hoses. PIUSI USA will also be planning product demonstration during this event for both the EX-50 gasoline pump and the new Three25 DEF turnkey system. n

Valero Chooses Acumera to Offer Enhanced Operational Visibility for Branded Marketers Acumera, a leader in Trusted Connection Services for retail organizations has announced it has been selected by Valero to provide wholesale customers with a suite of services to improve operational visibility and fuel inventory management.

PIUSI USA to Premier the First B-Tech Bypass Valve at the 2014 NACS Show

“Valero is committed to providing unparalleled resources for its customers, and our services are a perfect addition to their toolbox,” said Acumera CEO Dirk Heinen. “By securely collecting, connecting and reporting valuable information about networks and devices in real time, these new offerings will give Valero-branded distributors and dealers the real-time insight they need to increase operational efficiency and save money.”

PIUSI USA, a Florida based Italian fuel equipment manufacturer, will be exhibiting at the 2014 NACS Tradeshow October 7-10 in booth 7139. PIUSI USA will be showcasing their signature mix of

As a part of the new relationship with Acumera, Valero will handle front-line support to streamline the integration process for its customers. n

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INDUSTRY NEWS

Heil Trailer and Serva to Form Entrans International, LLC Heil Trailer, owned by American Industrial Partners (AIP), has announced it is now part of EnTrans International, LLC, along with SERVA, also an AIP-owned company. Both Heil Trailer and SERVA will continue to operate under their existing brand names. Market and operational synergies will position EnTrans to be the global leader in its marketplace and place a solid foundation for growth over the long-term. EnTrans will be able to offer its customers the broadest product portfolio in the industry, including a wide variety of hydraulic fracturing equipment, as well as tank trailers used to transport dry bulk, refined petroleum and crude oil. Gary Riley will serve as the Chairman and CEO of EnTrans. Previously, Gary was the CEO of Enovation Controls, a global manufacturer of natural gas compression, transmission and control systems headquartered in Tulsa, OK. Gary has also been a member of the American Industrial Partners Advisory Board since 2006.

Innospec, Its Customers and Suppliers Donate Nearly $80,000 to Support PenFed Foundation Military Heroes Fund Innospec Inc. is proud to be associated with the Pentagon Federal Credit Union Foundation (PenFed Foundation) Military Heroes® Fund, which provides emergency financial assistance to wounded service members and veterans from all wars, including those in Iraq and Afghanistan. In August, Innospec gathered together more than 200 of its customers, suppliers and partners at a fundraising event in Lone Tree, CO. As a result of the generosity of all sponsors, participants and contributors, Innospec was able to make a donation of nearly $80,000 to the PenFed Foundation to support its Military Heroes® Fund.

Randall Swift, currently the CEO of Heil Trailer, will become the President of EnTrans with responsibility for day-to-day commercial activities of both Heil Trailer and SERVA. Joe Haniford, the COO of Heil Trailer, will serve as COO of EnTrans with responsibility for all manufacturing operations. Arty Straehla and Pete Seitz, the founder of SERVA, will continue in their current capacities and each will join the Board of Directors of EnTrans. In addition, Pete Seitz will serve as Special Advisor to the EnTrans CEO. Over the coming years, EnTrans looks to become the best-in-class product provider in both the global hydraulic fracturing equipment industry and the associated over-the-road energy transportation market. n

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“The entire day was inspiring. Innospec is an amazing partner of the PenFed Foundation, working with us to provide service members, veterans and their support networks with the skills and resources they need for a sound and secure financial future,” said Jane E. Whitfield, President and CEO of the PenFed Foundation. “The generosity of Innospec and its business partners has allowed the PenFed Foundation to significantly grow our Military Heroes Fund, which provides emergency financial assistance for wounded, ill, and injured veterans of Operation Iraqi Freedom and Operation Enduring Freedom.” Patrick S. Williams, President and CEO of Innospec said, “We are so proud to be associated with the PenFed Foundation at this important time, as they have recently opened the doors to Defenders Lodge, providing free accommodations to our veterans. It is important that we engage with the communities around us, and contribute when we can to those who are both in need and deserving of our support. We are delighted as well, that our customers and suppliers have been able to join with us in making this contribution, which is a small

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INDUSTRY NEWS acknowledgement to those men and women of our armed forces, who have given so much of their lives to defend us. We are very proud to be associated with the PenFed Foundation and the Military Heroes Fund®.” n

Heartland Launches New American Express Card Acceptance Program for Small Merchants Small merchants in the Heartland Payment Systems network can now say “yes” to many of their customers’ preferred payment choice through a new American Express Card acceptance program. The new settlement program makes it more convenient for merchants to accept American Express Cards. Available to small merchants with an annual charge volume of less than $1 million, the program expands the reach of the American Express network among small merchants.

President Mike Evans made the announcement. The AtlasAnytime portal will become available to all Atlas Oil Company customers in phases throughout the rest of the year. Upon logging in, Atlas customers will have access to all of their documents and information, as well as a calendar of activity on their account, and have the ability to run up-to-the minute reports. In addition, the AtlasAnytime portal will provide direct access to Atlas University, a knowledge database of best practices, tools, resources and frequently asked questions for fuel customers. “Fuel is often our customers’ largest payable, and managing deliveries can be incredibly time sensitive,” said Evans.

The American Express Card Acceptance program features competitive pricing and allows merchants to benefit from an easy onboarding process, in addition to full, onestop payment processing services across major card brands through Heartland, the fifth largest payment processor in the U.S. “The American Express Card Acceptance program is a convenient solution for small merchants and a great way to offer consumers the opportunity to use their American Express Card at more of their favorite local shops,” said Robert Carr, chairman and CEO of Heartland. “Participating in this new settlement program is another way we’re continuing to champion our valued small merchants by helping them grow their customer base.” This arrangement enables a simplified workflow and less back-office management, allowing merchants to focus on marketing, customer service, and all of the other tasks that are critical to running a successful small business. n

Atlas Oil Company Launches AtlasAnytime Portal Taylor, Mich.-based Atlas Oil Company, a national fuel supply, logistics and services company, announced the launch of a new online customer portal called AtlasAnytime. Atlas FMNMagazine

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“We equate the need for access to fuel purchasing information to the service we have all come to expect from an online banking experience. AtlasAnytime gives our customers that level of self-service at their fingertips.” The launch of AtlasAnytime comes just a few months after the company’s implementation of another industry technology platform, Atlas’ FuelOnDemand, which displays real time pricing information on the go. “Today’s customers choose service providers who are the easiest to do business with. By providing unique tools like AtlasAnytime and FuelOnDemand, we are enabling our customers to realize the scope of our capabilities and benefit from our industry expertise at their convenience,” added Evans. n

INDUSTRY NEWS

Cenex® Tank Program Assists Retailers Offering E15 CHS, a leading energy, grains and foods company and the nation’s leading farmerowned cooperative, has announced a new program to better enable some of the 1,400 Cenex® branded locations to meet consumer demand for an E15 ethanol blend. “We are excited to offer a new Cenex® Tank Program, which further demonstrates CHS leadership in renewable fuels and helps keep the Cenex brand at the forefront in meeting consumer demand for ethanol blends,” says Doug Dorfman, CHS vice president— refined fuels. For Cenex retailers wanting to offer E15 in addition to their current gasoline products, the Cenex® Tank Program will cover a significant portion of the cost to purchase and install an additional storage tank for the purpose of offering E15. The Cenex network was among the first in the country to offer mid-level ethanol

blends under its brand and has achieved significant increases in ethanol sales over the last five years, according to Dorfman. “We value our partnership with Cenex retailers and will continue to assist them in their efforts to meet consumer demand for ethanol blends,” says Dorfman. “Supporting ethanol demand also adds value to CHS member owners and farmers.” As the nation’s leading farmer-owned cooperative, CHS is involved in renewable fuels from the farm to the end-user. A longtime, global marketer of ethanol and distillers dried grains with solubles (DDGS), CHS also produces ethanol at a recently acquired plant in Rochelle, Ill. n

PDQ and Dover Foundation Donate $10,000 to Make-AWish® Foundation As part of its ongoing campaign to support the charitable work of organizations that serve local residents, PDQ Manufacturing,

Inc., an industry-leading manufacturer of in-bay automatic vehicle wash systems, announced that it has made a $5,000 donation to the Make-A-Wish® Foundation of Wisconsin. The amount was equaled through a matching-grant initiative created by the Dover Foundation, which is the philanthropic arm of PDQ’s parent company, Dover Corporation, for a total donation of $10,000. The Dover Foundation was created in 2011 as a way to help support not-for-profit organizations, causes and/or projects that benefit the local communities in which its operating companies are located. This is the third consecutive year that PDQ and the Dover Foundation have made a donation to Make-A-Wish of Wisconsin, which grants the wishes of children who have been diagnosed with life-threatening medical conditions. Specifically, this year’s donations will help make the wishes of two ill Wisconsin children come true: Alyssa, a teenager diagnosed with cystic fibrosis, will see her wish of traveling to Italy with her family fulfilled Steven, a three-year-old diagnosed with hypoplastic left heart syndrome, a congenital heart defect, experienced his wish of traveling to the Walt Disney World® Resort with his family “We are pleased that for the third straight year we are able to make this charitable donation to Make-A-Wish of Wisconsin,” said Andrea Brazeau, HR Generalist for PDQ Manufacturing. “The opportunity and ability to give back to the local communities in which we operate is very important to PDQ, Dover Corporation, and its employees, and we consider it an honor to be able to partner with such wellrespected organizations like the Make-AWish Foundation of Wisconsin.” n

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The trucking industry is the lifeblood of the US economy. Nearly 70% of all the freight tonnage moved in the US goes on trucks. Without the industry and our truck drivers, the economy would come to a standstill. To move 9.2 billion tons of freight annually requires nearly three million heavyduty Class 8 trucks and over three million truck drivers. It also takes over 37 billion gallons of diesel fuel to move all of that freight. Simply—without trucks, America stops. Source: American Trucking Association

Bottom Line: The trucking industry is facing a shortage of qualified drivers and nowhere is that more critical than in the fuel hauling business. On top of that, with fuel hauling you have significant and ever-changing regulatory burdens and stiff driver certification requirements. Responsible oversight is one thing; regularly facing issues such as the confusing and conflicting unworkable “hours of operation” rule is another. Sooner or later this means higher freight rates per gallon of fuel delivered and thus sold at the pump.

READ MORE at fuelmarketernews.com

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Afton Chemical

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101

MidContinental Chemical Company, Inc.

Airtab

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Biobor Fuel Additives

NRC Realty & Capital Advisors

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Blue1USA

OILCO

Bottom Line of MN

Omega ATC

117

CLARCOR Stanadyne

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Comdata

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137

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127

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107

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111

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115

Renewable Energy Group

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125

Flowserve

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FormaShape

130 – 133

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140

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72 – 73

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Freedom Electronics

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139

Fuel Marketer News

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Simmons Corporation

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135

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109

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105

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113

The Gorman-Rupp Company

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Steel Tank

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103

Total Meter Services

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Keystone Structures, Inc.

Velocity Vehicle Group

129

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Warren Rogers Associates, Inc.

The Lubrizol Corporation

WEH Technologies, Inc.

128

Matrix Capital Markets Group

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WEX Fuel Management

61, 63, 65

Mercantor Partners

WPMA

119